<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 21, 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. 34 [X]
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 37 [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
pursuant to paragraph (b) to paragraph (a)(1)
[X] on May 1, 1997 pursuant [ ] 75 days after filing
to paragraph (b) pursuant to paragraph (a)(2)
[ ] 60 days after filing [ ] on (date) pursuant
pursuant to paragraph (a)(1) to paragraph (a)(2).
If appropriate, check the following box:
[ ] this post effective amendment designates a new effective date for a
perviously filed post- effective amendment.
Cash Management Portfolio and Government Obligations Portfolio have also
executed this Registration Statement.
CALCULATION OF REGISTRATION FEE
================================================================================
PROPOSED PROPOSED
AMOUNT OF MAXIMUM AGGREGATE AMOUNT OF
TITLE OF SECURITIES SHARES BEING OFFERING PRICE MAXIMUM REGISTRATION
BEING REGISTERED REGISTERED PER SHARE OFFERING PRICE FEE
- --------------------------------------------------------------------------------
Shares of Beneficial
Interest 4,745,836 $10.88(1) $51,634,696(2) $0
================================================================================
(1) Computed under Rule 457(d) on the basis of the maximum aggregate offering
price per share at the close of business on April 11, 1997.
(2) Registrant elects to calculate the maximum aggregate offering price
pursuant to Rule 24e-2 for those series with a fiscal year end of December
31, 1996. $1,578,398,514 of shares were redeemed during the fiscal year
ended December 31, 1996. $1,526,763,816 of shares were used for reductions
pursuant to Paragraph (c) of Rule 24f-2 during such fiscal year.
$51,634,698 of shares redeemed are being used for the reduction of the
registration fee in this Amendment.
The Registrant has filed a Declaration pursuant to Rule 24f-2 and on May
24, 1996 filed its "Notice" as required by that Rule for the series of the
Registrant with a fiscal year end of March 31, 1996, on February 20, 1997
filed its "Notice" for the series of the Registrant with a fiscal year end of
December 31, 1996 and on December 23, 1996 filed its "Notice" for the series
of the Registrant with a fiscal year end of October 31, 1996. Registrant
continues its election to register an indefinite number of shares of
beneficial interest pursuant to Rule 24f-2.
================================================================================
<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 Combined Prospectus of:
Eaton Vance Cash Management Fund
Eaton Vance Liquid Assets Fund
Eaton Vance Money Market Fund
Eaton Vance Tax Free Reserves
The Prospectuses of:
EV Classic Government Obligations Fund
EV Marathon Government Obligations Fund
EV Traditional Government Obligations Fund
Eaton Vance Short-Term Treasury Fund
Part B--The Statements of Additional Information of:
Eaton Vance Cash Management Fund
Eaton Vance Liquid Assets Fund
Eaton Vance Money Market Fund
Eaton Vance Short-Term Treasury Fund
Eaton Vance Tax Free Reserves
EV Classic Government Obligations Fund
EV Marathon Government Obligations Fund
EV Traditional 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 CASH MANAGEMENT FUND
EATON VANCE LIQUID ASSETS FUND
EATON VANCE MONEY MARKET FUND
EATON VANCE TAX FREE RESERVES
ITEMS REQUIRED BY FORM N-1A
PART A
ITEM NO. ITEM CAPTION PROSPECTUS CAPTION
- ------ ------------ -------------------------------
1. ............ Cover Page Cover Page
2. ............ Synopsis Shareholder and Fund Expenses
3. ............ Condensed Financial The Funds' Financial
Information Highlights; Yield Information
4. ............ General Description of The Funds' Investment
Registrant Objectives; How the Funds
Invest their Assets;
Organization of the Funds and
the Portfolio
5. ............ Management of the Fund Management of the Funds and the
Portfolio
5A............. Management's Discussion of Not Applicable
Fund Performance
6. ............ Capital Stock and Other Organization of the Funds and
Securities the Portfolio; Reports to
Shareholders; The Lifetime
Investing Account/
Distribution Options;
Distributions and Taxes
7. ............ Purchase of Securities Valuing Fund Shares;
Being Offered Distribution Plans; How to
Buy Fund Shares; The Lifetime
Investing Account/
Distribution Options; The
Eaton Vance Exchange
Privilege; Eaton Vance
Shareholder Services
8. ............ Redemption or Repurchase How to Redeem Fund Shares
9. ............ Pending Legal Proceedings Not Applicable
PART B STATEMENT OF ADDITIONAL
ITEM NO. ITEM CAPTION INFORMATION CAPTION
- ------ ------------ -------------------------------
10. ............ Cover Page Cover Page
11. ............ Table of Contents Table of Contents
12. ............ General Information and Other Information
History
13. ............ Investment Objectives and Additional Information about
Policies Investment Policies;
Additional Investment
Information (Tax Free
Reserves only); Investment
Restrictions
14. ............ Management of the Fund Trustees and Officers; Fees and
Expenses
15. ............ Control Persons and Control Persons and Principal
Principal Holders of Holders of Securities
Securities
16. ............ Investment Advisory and Investment Adviser and
Other Services Administrator; Distribution
Plan (for Liquid Assets and
Money Market Funds only);
Custodian; Independent
Accountants; Fees and
Expenses
17. ............ Brokerage Allocation and Portfolio Security
Other Practices Transactions; Fees and
Expenses
18. ............ Capital Stock and Other Other Information
Securities
19. ............ Purchase, Redemption and Determination of Net Asset
Pricing of Securities Value; Principal Underwriter;
Being Offered Service for Withdrawal;
Distribution Plan (for Liquid
Assets and Money Market Funds
only); Fees and Expenses
20. ............ Tax Status Taxes
21. ............ Underwriters Principal Underwriter; Fees and
Expenses
22. ............ Calculation of Performance Calculation of Yield Quotations;
Data Yield Information
23. ............ Financial Statements Financial Statements
<PAGE>
EATON VANCE MUTUAL FUNDS TRUST
CROSS REFERENCE SHEET FOR
EV CLASSIC GOVERNMENT OBLIGATIONS FUND
EV MARATHON GOVERNMENT OBLIGATIONS FUND
EV TRADITIONAL 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
Information Highlights; 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 Fund Shares;
Being Offered Distribution Plan (for
Classic and Marathon Funds);
Service Plan (for Traditional
Fund); How to Buy Fund
Shares; The Lifetime
Investing Account/
Distribution Options; The
Eaton Vance Exchange
Privilege; Eaton Vance
Shareholder Services
8. ............ Redemption or Repurchase How to Redeem Fund Shares
9. ............ Pending Legal Proceedings Not Applicable
PART B STATEMENT OF ADDITIONAL
ITEM NO. ITEM CAPTION INFORMATION CAPTION
- ------ ------------ -------------------------------
10. ............ Cover Page Cover Page
11. ............ Table of Contents Table of Contents
12. ............ General Information and Other Information
History
13. ............ Investment Objectives and Additional Information about
Policies Investment Policies;
Investment Restrictions
14. ............ Management of the Fund Trustees and Officers; Fees and
Expenses
15. ............ Control Persons and Control Persons and Principal
Principal Holders of Holders of Securities
Securities
16. ............ Investment Advisory and Investment Adviser and
Other Services Administrator; Distribution
Plan (for Classic and
Marathon Funds); Service Plan
(for Traditional Fund);
Custodian; Independent
Accountants; Fees and
Expenses
17. ............ Brokerage Allocation and Portfolio Security
Other Practices Transactions; Fees and
Expenses
18. ............ Capital Stock and Other Other Information
Securities
19. ............ Purchase, Redemption and Determination of Net Asset
Pricing of Securities Value; Principal Underwriter;
Being Offered Service for Withdrawal;
Services for Accumulation
(for Traditional Fund);
Distribution Plan (for
Classic and Marathon Funds);
Service Plan (for Traditional
Fund); Fees and Expenses
20. ............ Tax Status Taxes
21. ............ Underwriters Principal Underwriter; Fees and
Expenses
22. ............ Calculation of Performance Investment Performance;
Data Performance Information
23. ............ Financial Statements Financial Statements
<PAGE>
EATON VANCE MUTUAL FUNDS TRUST
CROSS REFERENCE SHEET FOR
EATON VANCE SHORT-TERM TREASURY 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
Information Highlights; Performance
Information
4. ............ General Description of The Fund's Investment
Registrant Objective; Investment
Policies and Risks;
Organization of the Fund
5. ............ Management of the Fund Management of the Fund
5A............. Management's Discussion of Not Applicable
Fund Performance
6. ............ Capital Stock and Other Organization of the Fund;
Securities Reports to Shareholders; The
Lifetime Investing Account/
Distribution Options;
Distributions and Taxes
7. ............ Purchase of Securities Valuing Fund Shares;
Being Offered Distribution Plan; How to Buy
Fund Shares; The Lifetime
Investing Account/
Distribution Options; The
Eaton Vance Exchange
Privilege; Eaton Vance
Shareholder Services
8. ............ Redemption or Repurchase How to Redeem Fund Shares
9. ............ Pending Legal Proceedings Not Applicable
PART B STATEMENT OF ADDITIONAL
ITEM NO. ITEM CAPTION INFORMATION CAPTION
- ------ ------------ -------------------------------
10. ............ Cover Page Cover Page
11. ............ Table of Contents Table of Contents
12. ............ General Information and Other Information
History
13. ............ Investment Objectives and Investment Objective and
Policies Policies; Investment
Restrictions
14. ............ Management of the Fund Trustees and Officers
15. ............ Control Persons and Control Persons and Principal
Principal Holders of Holders of Securities
Securities
16. ............ Investment Advisory and Investment Adviser;
Other Services Distribution Plan; 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 Distribution Plan
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
EATON VANCE CASH MANAGEMENT FUND
EATON VANCE LIQUID ASSETS FUND
EATON VANCE MONEY MARKET FUND
EATON VANCE TAX FREE RESERVES
- ------------------------------------------------------------------------------
EATON VANCE CASH MANAGEMENT FUND ("Cash Fund"), EATON VANCE LIQUID ASSETS FUND
("Liquid Assets Fund") and EATON VANCE MONEY MARKET FUND ("Money Market Fund")
are diversified money market funds seeking high income consistent with
preservation of capital and maintenance of liquidity. EATON VANCE TAX FREE
RESERVES ("Tax Free Reserves") is a diversified money market fund seeking high
income exempt from regular federal income tax consistent with preservation of
capital and maintenance of liquidity. The Cash, Liquid Assets and Money Market
Funds invest all of their assets in Cash Management Portfolio (the "Portfolio"),
a separate, diversified investment company with the same investment objective,
rather than investing in and managing their own portfolio of securities. Tax
Free Reserves invests directly in its own portfolio of money market instruments.
Each Fund is a series of Eaton Vance Mutual Funds Trust (the "Trust").
AN INVESTMENT IN A FUND IS NOT GUARANTEED OR FEDERALLY INSURED BY THE U.S.
GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD
OR ANY OTHER GOVERNMENT AGENCY. SHARES OF A FUND ARE NOT OBLIGATIONS OR DEPOSITS
OF, OR GUARANTEED OR ENDORSED BY, ANY BANK OR OTHER INSURED DEPOSITORY
INSTITUTION. THERE IS NO ASSURANCE THAT A FUND WILL BE ABLE TO MAINTAIN A STABLE
NET ASSET VALUE OF $1.00 PER SHARE. SHARES OF EACH FUND INVOLVE INVESTMENT
RISKS, INCLUDING FLUCTUATIONS IN VALUE AND THE POSSIBLE LOSS OF SOME OR ALL OF
THE PRINCIPAL INVESTMENT.
This Prospectus is designed to provide you with information you should know
before investing. Please retain this document for future reference. A
Statement of Additional Information dated May 1, 1997 for each Fund, as
supplemented from time to time, has been filed with the Securities and
Exchange Commission (the "Commission") and is incorporated herein by
reference. The Statements of Additional Information are available without
charge from the Funds' principal underwriter, Eaton Vance Distributors, Inc.,
24 Federal Street, Boston, MA 02110 (telephone (800) 225-6265). TAX FREE
RESERVES IS NOT AVAILABLE FOR PURCHASE IN ALL STATES. CONTACT THE PRINCIPAL
UNDERWRITER OR YOUR BROKER FOR INFORMATION.
- ------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE PAGE
<S> <C> <C> <C>
Shareholder and Fund Expenses ................ 2 How to Buy Fund Shares ....................................... 12
The Funds' Financial Highlights .............. 4 How to Redeem Fund Shares .................................... 13
The Funds' Investment Objectives ............. 7 Reports to Shareholders ...................................... 15
How the Funds Invest their Assets............. 7 The Lifetime Investing Account/Distribution Options .......... 15
Organization of the Funds and the Portfolio .. 9 The Eaton Vance Exchange Privilege ........................... 16
Management of the Funds and the Portfolio .... 10 Eaton Vance Shareholder Services ............................. 17
Distribution Plans ........................... 11 Distributions and Taxes ...................................... 18
Valuing Fund Shares .......................... 12 Yield Information ............................................ 19
</TABLE>
- -------------------------------------------------------------------------------
PROSPECTUS DATED MAY 1, 1997
<PAGE>
SHAREHOLDER AND FUND EXPENSES
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
- -----------------------------------------------------------------------------------------------------------------------
CASH LIQUID ASSETS MONEY MARKET TAX FREE
FUND FUND FUND RESERVES
<S> <C> <C> <C> <C>
Sales Charges Imposed on Purchases of Shares None None None None
Sales Charges Imposed on Reinvested Distributions None None None None
Fees to Exchange Shares None None None None
Range of Declining Contingent Deferred Sales Charges
Imposed on Redemption during the First Seven Years
(as a percentage of redemption proceeds exclusive
of all reinvestments and capital appreciation in
the account) None 5.0% - 0% 5.0% - 0% None
<CAPTION>
ANNUAL FUND (AND ALLOCATED PORTFOLIO) OPERATING EXPENSES (as a percentage of average net assets)
- ------------------------------------------------------------------------------------------------------------------------
CASH LIQUID ASSETS MONEY MARKET TAX FREE
FUND FUND FUND RESERVES
<S> <C> <C> <C> <C>
Investment Adviser Fee 0.50% 0.50% 0.50% 0.13%*
Rule 12b-1 Distribution (and/or Service) Fees -- 0.25 0.81 --
Interest Expense -- -- -- 0.02
Other Expenses 0.24 0.38 0.42 ** 0.20
---- ---- ---- ----
Total Operating Expenses 0.74% 1.13% 1.73%** 0.35%*
==== ==== ==== ====
- ----------
*After reduction by Investment Adviser.
**After expense reduction.
EXAMPLES
An investor would pay the following contingent deferred sales charge and expenses on a $1,000 investment, assuming 5% annual
return and redemption at the end of each period:
<CAPTION>
CASH LIQUID ASSETS MONEY MARKET TAX FREE
FUND FUND FUND RESERVES
<S> <C> <C> <C> <C>
1 Year N/A $ 62 $ 68 N/A
3 Years N/A 76 94 N/A
5 Years N/A 82 114 N/A
10 Years N/A 137 204 N/A
An investor would pay the following expenses on the same investment, assuming 5% annual return and no redemptions:
CASH LIQUID ASSETS MONEY MARKET TAX FREE
FUND FUND FUND RESERVES
1 Year $ 8 $ 12 $ 18 $ 4
3 Years 24 36 54 13
5 Years 41 62 94 22
10 Years 92 137 204 49
</TABLE>
NOTES:
The tables and Examples summarize the aggregate expenses of the Funds and the
Portfolio and are designed to help investors understand the costs and expenses
they will bear, directly or indirectly, by investing in the Funds. Information
for the Funds is based on their expenses for the most recent fiscal year. Absent
an expense allocation, Other Expenses and Total Operating Expenses would have
been 0.45% and 1.76%, respectively, for the Money Market Fund. Absent a fee
reduction, the Investment Adviser Fee and Total Operating Expenses would have
been 0.50% and 0.72%, respectively, for Tax Free Reserves.
THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. Federal
regulations require the Examples to assume a 5% annual return, but actual annual
return will vary. For further information regarding the expenses of both the
Funds and the Portfolio, see "The Funds" Financial Highlights", "Management of
the Funds and the Portfolio" and "How to Redeem Fund Shares". A long-term
shareholder in the Money Market Fund may pay more than the economic equivalent
of the maximum front-end sales charge permitted by a rule of the National
Association of Securities Dealers, Inc. See "Distribution Plans".
In the case of the Liquid Assets and Money Market Funds, no contingent deferred
sales charge is imposed on (a) shares purchased more than six years prior to
redemption, (b) shares acquired through the reinvestment of distributions or (c)
any appreciation in value of other shares in the account (see "How to Redeem
Fund Shares"), and no such charge is imposed on exchanges of Fund shares for
shares of one or more other funds listed under "The Eaton Vance Exchange
Privilege".
The Cash, Liquid Assets, and Money Market Funds invest exclusively in the
Portfolio. Other investment companies with different distribution arrangements
and fees may invest in the Portfolio and others may do so in the future. See
"Organization of the Funds and the Portfolio".
<PAGE>
THE FUNDS' FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------
The following information should be read in conjunction with the audited
financial statements that appear in each Fund's annual report to shareholders.
Each Fund's financial statements have been audited by Coopers & Lybrand L.L.P.,
independent accountants, as experts in accounting and auditing. The financial
statements and the report of independent accountants are incorporated by
reference into the Statement of Additional Information. Further information
regarding the performance of the Funds, is contained in their annual reports to
shareholders which may be obtained without charge by contacting the Principal
Underwriter.
<TABLE>
<CAPTION>
CASH FUND
-----------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991+ 1990+ 1989+ 1988+ 1987+
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE --
Beginning of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
INCOME FROM
OPERATIONS:
Net investment
income $ 0.0470 $ 0.0522 $ 0.0345 $ 0.0251 $ 0.0306 $ 0.0537 $ 0.0755 $ 0.0846 $ 0.0688 $ 0.0607
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
From net
investment
income $(0.0470) $(0.0522) $(0.0345) $(0.0251) $(0.0306) $(0.0537) $(0.0755) $(0.0846) $(0.0688) $ (0.0607)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
NET ASSET VALUE --
End of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
TOTAL RETURN(1) 4.82% 5.35% 3.49% 2.54% 3.14% 5.51% 7.82% 8.87% 7.12% 6.23%
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
year (000's
omitted) $151,691 $155,251 $111,622 $112,200 $161,986 $195,488 $250,658 $246,220 $174,842 $257,607
Expenses as a
percentage of
average daily
net assets(2) 0.74% 0.74% 0.84% 0.67% 0.76% 0.75% 0.71% 0.71% 0.72% 0.66%
Net invesment
income as a
percentage of
average daily
net assets(2) 4.70% 5.22% 3.40% 2.51% 3.09% 5.44% 7.54% 8.46% 6.92% 6.03%
Note: Certain of the per share amounts have been compiled using average shares outstanding.
(See footnotes on page 6)
<CAPTION>
MONEY MARKET FUND
YEAR ENDED DECEMBER 31,
----------------------------------
1996 1995*
------------ ------------
<S> <C> <C>
NET ASSET VALUE -- Beginning of period $ 1.00 $ 1.00
-------- --------
INCOME FROM OPERATIONS:
From net investment income $ 0.0370 $ 0.0312
Less distributions:
From net investment income $(0.0370) $(0.0312)
-------- --------
NET ASSET VALUE -- End of year $ 1.00 $ 1.00
======== ========
TOTAL RETURN(1) 3.77% 3.17%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000 omitted) $31,250 $12,951
Expenses as a percentage of average daily net assets(2) 1.73% 1.68%
Net investment income as a percentage of average daily net
assets(2) 3.70% 4.19%
For the periods indicated, the operating expenses of the
Fund reflect an allocation of expenses to the Administrator.
Had such action not been taken, net investment income per
share and the ratios would have been as follows:
NET INVESTMENT INCOME PER SHARE $ 0.0367 $ 0.0300
------------ ------------
RATIOS: (As a percentage of average net assets)(2)
Expenses 1.76% 1.85%
Net investment income 3.66% 4.03%
(See footnotes on page 6)
</TABLE>
<PAGE>
THE FUNDS' FINANCIAL HIGHLIGHTS (CONTINUED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TAX FREE RESERVES
-----------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991+
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE --
Beginning of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ---------- ---------- ---------- ---------- ----------
INCOME FROM OPERATIONS:
Net investment income $ 0.030316 $ 0.034693 $ 0.023548 $ 0.018399 $ 0.023468 $ 0.038797
---------- ---------- ---------- ---------- ---------- ----------
LESS DISTRIBUTIONS:
From net investment income $(0.030316) $(0.034693) $(0.023548) $(0.018399) $(0.023468) $(0.038797)
---------- ---------- ---------- ---------- ---------- ----------
NET ASSET VALUE --
End of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ========== ========== ==========
TOTAL RETURN(1) 3.08% 3.53% 2.36% 1.86% 2.36% 3.92%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000's omitted) $23,355 $23,912 $29,021 $60,247 $44,337 $47,140
Interest expense to average net assets 0.02% 0.05% 0.05% 0.07% 0.06% 0.09%
Net other expenses to average net assets(3) 0.33% 0.34% 0.47% 0.62% 0.53% 0.49%
Net other expenses to average net assets after
custodian fee reduction(3) 0.27% -- -- -- -- --
Net investment income to average net assets 3.04% 3.47% 2.27% 1.82% 2.34% 3.92%
<CAPTION>
1990+ 1989+ 1988+ 1987+
<S> <C> <C> <C> <C>
NET ASSET VALUE --
Beginning of year $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ---------- ---------- ----------
INCOME FROM OPERATIONS:
Net investment income $ 0.051929 $ 0.055218 $ 0.047113 $ 0.039484
---------- ---------- ---------- ----------
LESS DISTRIBUTIONS:
From net investment income $(0.051929) $(0.055218) $(0.047113) $(0.039484)
---------- ---------- ---------- ----------
NET ASSET VALUE --
End of year $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ==========
TOTAL RETURN(1) 5.30% 5.67% 4.80% 4.01%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000's omitted) $53,753 $26,745 $73,855 $78,369
Interest expense to average net assets 0.05% 0.26% 0.08% 0.07%
Net other expenses to average net assets(3) 0.70% 0.82% 0.76% 0.75%
Net other expenses to average net assets after
custodian fee reduction(3) -- -- -- --
Net investment income to average net assets 5.19% 5.60% 4.70% 3.96%
For the periods indicated, the operating expenses of the Fund were reduced either by a reduction of the investment
adviser fee, an allocation of expenses to the investment adviser, or both. Had such actions not been taken, net
investment income per share and the ratios would have been as follows:
NET INVESTMENT
INCOME PER SHARE $ 0.026626 $ 0.030291 $ 0.018948 $ 0.016668 $ 0.020133 $ 0.034647
========== ========== ========== ========== ========== ==========
RATIOS (As a percentage of average net assets):
Other expenses(3) 0.69% 0.73% 0.87% 0.82% 0.92% 0.91%
========== ========== ========== ========== ========== ==========
Other expenses after custodian fee
reduction(3) 0.63% -- -- -- -- --
========== ========== ========== ========== ========== ==========
Net investment income 2.66% 3.02% 1.88% 1.65% 2.01% 3.50%
========== ========== ========== ========== ========== ==========
NET INVESTMENT
INCOME PER SHARE $ 0.050052 $ 0.054822 $ 0.008966
========== ========== ==========
RATIOS (As a percentage of average net assets):
Other expenses(3) 0.85% 0.85% 0.81%
========== ========== ==========
Other expenses after custodian fee
reduction(3) -- -- --
========== ========== ==========
Net investment income 5.04% 5.57% 3.90%
========== ========== ==========
</TABLE>
From time to time it has been necessary for Tax Free Reserves to borrow from
banks as a temporary measure to facilitate the orderly sale of portfolio
securities to accommodate redemption requests. The following table summarizes
such temporary borrowings:
<TABLE>
<CAPTION>
AVERAGE DAILY AVERAGE WEEKLY AVERAGE AMOUNT
AMOUNT OF BALANCE OF BALANCE OF OF DEBT
YEAR ENDED DEBT OUTSTANDING DEBT OUTSTANDING SHARES OUTSTANDING PER SHARE
DECEMBER 31, AT END OF YEAR DURING YEAR DURING YEAR DURING YEAR
<S> <C> <C> <C> <C>
1987+ $ -- $1,312,000 68,850,770 $0.019
1988+ 166,000 1,401,000 72,897,174 0.019
1989+ 82,000 1,825,000 52,596,221 0.035
1990+ -- 192,000 31,243,924 0.006
1991+ -- 379,000 31,686,707 0.012
1992 -- 367,000 38,904,763 0.009
1993 2,428,000 285,000 48,697,998 0.006
1994 6,117,000 440,145 40,463,382 0.011
1995 1,266,000 279,586 51,107,215 0.005
1996 -- 116,757 61,730,866 0.002
(See footnotes on page 6)
</TABLE>
<PAGE>
THE FUNDS' FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LIQUID ASSETS FUND
------------------------------------------------------------------------------------------------------------
YEAR ENDED
DECEMBER 31, YEAR ENDED MARCH 31,
--------------------------------------- ------------------------------------------------------------------
1996 1995 1994 1993* 1993+ 1992+ 1991+ 1990+ 1989+ 1988+
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE --
Beginning of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
INCOME FROM OPERATIONS:
Net investment
income $ 0.0432 $ 0.0505 $ 0.0328 $ 0.0113 $ 0.0217 $ 0.0415 $ 0.0621 $ 0.0726 $ 0.0632 $ 0.0477
LESS DISTRIBUTIONS:
From net
investment
income $(0.0432) $(0.0505) $(0.0328) $(0.0113) $(0.0217) $(0.0415) $(0.0621) $(0.0726) $(0.0632) $(0.0477)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
NET ASSET VALUE --
End of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
TOTAL RETURN(1) 4.41% 5.16% 3.29% 1.14% 2.35% 4.38% 6.50% 7.59% 6.37% 4.46%
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
year
(000's omitted) $ 19,910 $ 34,026 $118,599 $ 10,566 $ 18,553 $ 9,145 $ 19,996 $ 21,601 $ 10,705 $ 13,105
Expenses as a
percentage of
average daily
net assets(2) 1.13% 0.91% 0.94% 1.49% 0.92% 1.23% 1.68% 2.08% 1.71% 1.42%
Net investment
income as a
percentage of
average daily
net assets(2) 4.31% 5.11% 3.55% 1.66%++ 2.33% 4.30% 6.23% 7.20% 6.24% 5.82%
For the periods indicated, the operating expenses of the Fund reflect an
allocation of expenses to the Administrator. Had such actions not been taken,
net investment income per share and the ratios would have been as follows:
NET INVESTMENT INCOME PER SHARE $ 0.0092 $ 0.0171 $ 0.0372 $ 0.0570 $ 0.0687 $ 0.0559 $ 0.0374
-------- -------- -------- -------- -------- -------- --------
RATIOS: (As a percentage of average net assets)(2)
Expenses 1.80%++ 1.42% 1.73% 2.19% 2.47% 2.43% 3.16%
======== ======== ======== ======== ======== ======== ========
Net investment income 1.35%++ 1.85% 3.80% 5.72% 6.81% 5.52% 4.08%
======== ======== ======== ======== ======== ======== ========
FOOTNOTES:
*For the period from the start of business, April 5, 1995 to December 31, 1995.
**For the nine months ended December 31, 1993. The Fund changed its fiscal year end from March 31 to December 31,
effective June 14, 1993.
+Audited by the Funds' previous auditors.
++Computed on an annualized basis.
(1)Total return is calculated assuming a purchase at the net asset value on the first day and a sale at the net
asset value on the last day of each period reported. Distributions, if any, are assumed to be reinvested at the
net asset value on the payable date. Total return is computed on a non-annualized basis.
(2)Includes Money Market Fund's, Cash Fund's and Liquid Assets Fund's share of the Portfolio's allocated expenses
for the periods from April 5, 1995, May 2, 1994 and May 2, 1994, to December 31, 1995, December 31, 1994 and
December 31, 1994, respectively.
(3)The expense ratios for the year ended December 31, 1996 have been adjusted to reflect a change in reporting
requirements. The new reporting guidelines require Tax Free Reserves to increase its expense ratio by the effect
of any expense offset arrangements with its service providers. The expense ratios for each of the periods ended
on or before December 31, 1995 have not been adjusted to reflect this change.
</TABLE>
<PAGE>
THE FUNDS' INVESTMENT OBJECTIVES
- -------------------------------------------------------------------------------
THE INVESTMENT OBJECTIVE OF CASH MANAGEMENT FUND, LIQUID ASSETS FUND and MONEY
MARKET FUND is to provide as high a rate of income as may be consistent with
preservation of capital and maintenance of liquidity. The investment objective
of TAX FREE RESERVES is to provide a means whereby investors may earn as high a
rate of income exempt from regular federal income tax as may be consistent with
the preservation of capital and maintenance of liquidity. The investment
objective and policies of each Fund may be changed by the Trustees without a
vote of shareholders; as a matter of policy, the Trustees would not materially
change the investment objective of a Fund without shareholder approval. EACH
FUND SEEKS TO MAINTAIN A CONSTANT NET ASSET VALUE OF $1 PER SHARE, ALTHOUGH
THERE CAN BE NO ASSURANCE IT WILL BE ABLE TO DO SO.
The Cash Fund and Tax Free Reserves are offered to shareholders in exchange for
their shares in the Eaton Vance Traditional Group of Funds. The Money Market
Fund offers its shares to shareholders exchanging their shares from the Eaton
Vance Marathon and Eaton Vance Classic Groups of Funds. (The Money Market Fund
may not be a suitable investment for investors who do not intend to use it as an
exchange vehicle.) The Liquid Assets Fund is currently closed to new
investments, whether by exchange or initial subscription.
The Funds cannot eliminate risk of loss or assure achievement of their
investment objectives. None of the Funds is a complete investment program, and
prospective investors should take into account their objectives and other
investments when considering the purchase of Fund shares.
HOW THE FUNDS INVEST THEIR ASSETS
- --------------------------------------------------------------------------------
CASH FUND, LIQUID ASSETS FUND, AND MONEY MARKET FUND
Each of these Funds seeks its objective by investing all of its assets in the
Portfolio, which is itself an open-end investment company. The Portfolio invests
in the following types of high quality, U.S. dollar-denominated money market
instruments of domestic and foreign issuers:
o U.S. GOVERNMENT SECURITIES: marketable securities issued or guaranteed as to
principal or interest by the U.S. Government or by its agencies or
instrumentalities. Some of these securities are backed by the full faith and
credit of the U.S. Government; others are backed only by the credit of the
agency or instrumentality issuing the securities.
o PRIME COMMERCIAL PAPER: high-grade, short- term obligations issued by banks,
corporations, and other issuers.
o CORPORATE OBLIGATIONS: high-grade, short- term obligations other than prime
commercial paper.
o BANK CERTIFICATES OF DEPOSIT (CDS): negotiable certificates issued against
funds deposited in a commercial bank for a definite period of time and
earning a specified return.
o BANKERS' ACCEPTANCES: negotiable drafts or bills of exchange, which have
been "accepted" by a bank, means, in effect, that the bank has
unconditionally agreed to pay the face value of the instrument on maturity.
Investments are described further below under "All Funds -- Selection of
Investments." The Portfolio may invest without limit in securities of finance
companies or in securities of banks and thrift institutions (and their holding
companies) whenever yield differentials or money market conditions indicate that
such a concentration of the Portfolio's investments may be desirable.
The Portfolio may invest without limit in U.S. dollar-denominated obligations of
foreign issuers, including foreign banks. Such investments involve special
risks. These include future unfavorable political and economic developments,
possible withholding taxes, seizure of foreign deposits, interest limitations or
other governmental restrictions which might affect payment of principal or
interest. Additionally, there may be less public information available about
foreign banks and their branches. Foreign branches of foreign banks are not
regulated by U.S. banking authorities, and generally are not bound by
accounting, auditing and financial reporting standards comparable to U.S. banks.
Although the Portfolio's investment adviser carefully considers these factors
when making investments, the Portfolio does not limit the amount of its assets
which can be invested in one type of instrument or in any foreign country.
TAX FREE RESERVES
Tax Free Reserves seeks to achieve its objective by investing in a diversified
portfolio of high quality obligations, including bonds, notes and commercial
paper, issued by or on behalf of states, territories and possessions of the
United States and their political subdivisions, agencies and instrumentalities,
and the District of Columbia, the interest from which is exempt from regular
federal income tax. The Fund may acquire stand-by commitments with respect to
portfolio securities and, with respect to 10% of net assets, may purchase shares
of unaffiliated investment companies with the same objective. Investments are
described further below under "All Funds -- Selection of Investments".
The Fund is designed for those institutional and individual investors who seek
to earn tax-free income and to avoid fluctuation in the value of their
investment while at the same time having the flexibility to liquidate and
withdraw funds at any time. By combining the assets of shareholders, the Fund
can provide yields normally available through investment in tax-free money
market instruments of large denominations, and can obtain the benefits of
diversification and liquidity through investment in the obligations of many
issuers with various maturities.
A portion of the dividends paid by the Fund may be subject to federal income
tax, and dividends may be subject to state and local taxes. As a matter of
fundamental policy which may not be changed unless authorized by shareholder
vote, the Fund may not purchase any securities which would cause more than 20%
of the value of its total assets to be invested in securities the interest on
which is not exempt from federal income tax.
Interest income from certain types of municipal obligations may be subject to
the federal alternative minimum tax (the "AMT"). On December 31, 1996, the Fund
did not hold any of such obligations in its portfolio. Distributions to
corporate investors of certain interest income may also be subject to the AMT.
ALL FUNDS -- SELECTION OF INVESTMENTS
The Portfolio and Tax Free Reserves will invest only in U.S. dollar-denominated
money market instruments meeting credit criteria which the Trustees believe
present minimal credit risk, and that are (i) short-term obligations rated in
one of the two highest short-term ratings categories by at least two nationally
recognized rating services (or, if only one rating service has rated the
security, by that service), or (ii) unrated securities determined by the
investment adviser to be of comparable quality. For a description of the
instruments and ratings see the "Appendix" in the Statement of Additional
Information. Each of the Portfolio and Tax Free Reserves will maintain a
dollar-weighted average maturity of 90 days or less and will not invest in
securities with remaining maturities of more than 397 days. The Portfolio and
Tax Free Reserves may invest in variable or floating-rate securities some of
which provide for periodic recovery of principal on demand. Under certain
conditions, these securities may be deemed to have remaining maturities equal to
the time remaining until the next interest adjustment date or the date on which
principal can be recovered on demand. The Portfolio will not invest more than 5%
(determined at the time of investment) of its total assets in securities rated
below the highest applicable rating category, nor will it purchase securities of
any issuer if, immediately thereafter, more than 5% of the Portfolio's total
assets would be invested in securities of that issuer. The Portfolio and Tax
Free Reserves follow investment and valuation policies designed to maintain a
stable net asset value of $1 per Fund share, although there is no assurance that
these policies will be successful.
Considerations of liquidity and preservation of capital mean that the Portfolio
or Tax Free Reserves may not necessarily invest in money market instruments
paying the highest available yield at a particular time. Consistent with their
investment objectives, the Portfolio and Tax Free Reserves will attempt to
maximize yields by portfolio trading and by buying and selling portfolio
investments in anticipation of or in response to changing economic and money
market conditions and trends. The Portfolio and Tax Free Reserves may also
invest to take advantage of what their investment advisers believe to be
temporary disparities in yields of different segments of the money market or
among particular instruments within the same segment of the market. These
policies, as well as the relatively short maturities of obligations purchased by
the Portfolio and Tax Free Reserves, may result in frequent changes in their
portfolios. The Portfolio and Tax Free Reserves will not usually pay brokerage
commissions in connection with the purchase or sale of portfolio securities.
OTHER PRACTICES. The Portfolio and Tax Free Reserves may lend their portfolio
securities to broker-dealers and may enter into repurchase agreements. These
transactions must be fully collateralized at all times, but involve some risk to
the lender if the other party should default on its obligations or if the lender
is delayed or prevented from recovering the collateral. The Portfolio and Tax
Free Reserves may also purchase securities on a when-issued basis and for future
delivery by means of "forward commitments." A segregated account will be
maintained to cover such purchase obligations. In addition, the Portfolio may
temporarily borrow up to 5% of the value of its total assets to satisfy
redemption requests or settle securities transactions.
An investment in a Fund is subject to interest rate risk and credit risks of the
issuers of the money market instruments. EACH FUND'S INCOME WILL FLUCTUATE AND
NET ASSET VALUE UNDER CERTAIN CIRCUMSTANCES COULD CHANGE. If any changes were
made in a Fund's investment objective, the Fund may no longer be appropriate to
certain investors. Investments and restrictions thereon are further described in
the Statements of Additional Information.
ORGANIZATION OF THE FUNDS AND THE PORTFOLIO
- --------------------------------------------------------------------------------
EACH 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 Funds). Each share represents an equal
proportionate beneficial interest in a Fund. When issued and outstanding, the
shares are fully paid and nonassessable by the Trust and redeemable as described
under "How to Redeem Fund Shares". 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 have no
preemptive or conversion rights and are freely transferable. In the event of the
liquidation of a Fund, shareholders are entitled to share pro rata in the net
assets of that Fund available for distribution to shareholders.
THE PORTFOLIO IS ORGANIZED AS A TRUST UNDER THE LAWS OF THE STATE OF NEW YORK
AND INTENDS TO BE TREATED AS A PARTNERSHIP FOR FEDERAL TAX PURPOSES. The
Portfolio, as well as the Trust, intends to comply with all applicable federal
and state securities laws. The Portfolio's Declaration of Trust provides that
the Cash, Liquid Assets and Money Market Funds and other entities permitted to
invest in the Portfolio (e.g., other U.S. and foreign investment companies, and
common and commingled trust funds) will each be liable for all obligations of
the Portfolio. However, the risk of a Fund incurring financial loss on account
of such liability is limited to circumstances in which both inadequate insurance
exists and the Portfolio itself is unable to meet its obligations. Accordingly,
the Trustees of the Trust believe that neither the Funds nor their shareholders
will be adversely affected by reason of the Funds investing in the Portfolio.
The Trustees of the Trust have considered the advantages and disadvantages of
investing the assets of the Cash, Liquid Assets and Money Market Funds 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, affords the potential for economies of
scale for each Fund and may over time result in lower expenses for a Fund.
In addition to selling an interest to a 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 a 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. Such differences in returns are also present in other mutual
fund structures, including funds that have multiple classes of shares.
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 a Fund as an investor in the Portfolio is requested to vote on matters
pertaining to the Portfolio (other than the termination of the Portfolio's
business, which may be determined by the Trustees of the Portfolio without
investor approval), the Fund will hold a meeting of Fund shareholders and will
vote its interest in the Portfolio for or against such matters proportionately
to the instructions to vote for or against such matters received from Fund
shareholders. A Fund shall vote shares for which it receives no voting
instructions in the same proportion as the shares for which it receives voting
instructions. Other investors in the Portfolio may alone or collectively acquire
sufficient voting interests in the Portfolio to control matters relating to the
operation of the Portfolio, which may require the Fund to withdraw its
investment in the Portfolio or take other appropriate action. Any such
withdrawal could result in a distribution "in kind" of portfolio securities (as
opposed to a cash distribution from the Portfolio). If securities are
distributed, a Fund could incur brokerage, tax or other charges in converting
the securities to cash. In addition, the distribution in kind may result in a
less diversified portfolio of investments or adversely affect the liquidity of
the Fund. Notwithstanding the above, there are other means for meeting
shareholder redemption requests, such as borrowing.
A 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 a Fund withdraws all of its assets
from the Portfolio, or the Board of Trustees of the Trust determines that the
investment objective of the Portfolio is no longer consistent with the
investment objective of the Fund, 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. A 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.
Tax Free Reserves' investment policies include a fundamental investment
provision to permit the Fund to invest its assets in an open-end management
investment company having substantially the same investment policies and
restrictions as the Fund. The Board of Trustees may implement the new investment
policy at any time additional funds investing in the other investment company
become available. This structure is commonly referred to as "master-feeder."
Although each Fund offers only its own shares of beneficial interest, it is
possible that a Fund might become liable for a misstatement or omission in this
Prospectus regarding another Fund because the Funds use this combined
Prospectus. The Trustees of the Trust have considered this factor in approving
the use of a combined Prospectus.
MANAGEMENT OF THE FUNDS AND THE PORTFOLIO
- --------------------------------------------------------------------------------
THE PORTFOLIO ENGAGES BOSTON MANAGEMENT AND RESEARCH ("BMR"), A WHOLLY-OWNED
SUBSIDIARY OF EATON VANCE MANAGEMENT ("EATON VANCE"), AS ITS INVESTMENT ADVISER.
TAX FREE RESERVES ENGAGES EATON VANCE AS ITS INVESTMENT ADVISER. EATON VANCE,
ITS AFFILIATES AND ITS PREDECESSOR COMPANIES HAVE BEEN MANAGING ASSETS OF
INDIVIDUALS AND INSTITUTIONS SINCE 1924 AND MANAGING INVESTMENT COMPANIES SINCE
1931.
Acting under the general supervision of the Board of Trustees of the Portfolio,
BMR manages the Portfolio's investments and affairs. BMR also furnishes for the
use of the Portfolio office space and all necessary office facilities, equipment
and personnel for servicing the investments of the Portfolio. Under its
investment advisory agreement with the Portfolio, BMR receives a monthly
advisory fee of 1/24 of 1% (equivalent to 0.50% annually) of the average daily
net assets of the Portfolio. For the fiscal year ended December 31, 1996, the
Portfolio paid BMR advisory fees equivalent to 0.50% of the Portfolio's average
daily net assets for such year.
Eaton Vance, acting under the general supervision of the Trustees of the Trust,
manages Tax Free Reserves' investments and affairs. Eaton Vance also furnishes
for the use of Tax Free Reserves office space and all necessary office
facilities, equipment and personnel for servicing the investments of the Fund.
Under its investment advisory agreement with Tax Free Reserves, Eaton Vance
receives a monthly advisory fee of 1/24 of 1% (equivalent to 0.50% annually) of
average monthly net assets of the Fund. For the fiscal year ended December 31,
1996, the Fund paid Eaton Vance advisory fees equivalent to 0.13% of the Fund's
average daily net assets for such year. Absent a fee reduction, the Fund would
have paid Eaton Vance advisory fees equivalent to 0.50% of average daily net
assets.
BMR OR EATON VANCE ACTS AS INVESTMENT ADVISER TO INVESTMENT COMPANIES AND
VARIOUS INDIVIDUAL AND INSTITUTIONAL CLIENTS WITH ASSETS UNDER MANAGEMENT OF
OVER $17 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.
Michael B. Terry has acted as the portfolio manager of the Portfolio since it
commenced operations. He has been a Vice President of Eaton Vance since 1984 and
of BMR since 1992.
William H. Ahern has acted as the portfolio manager of Tax Free Reserves since
1989. He has been an employee of Eaton Vance since 1989 and an Assistant Vice
President since 1994.
Money market instruments are often acquired directly from the issuers thereof or
otherwise are normally traded on a net basis (without commission) through
broker-dealers and banks acting for their own account. Such firms attempt to
profit from such transactions by buying at the bid price and selling at the
higher asked price of the market, and the difference is customarily referred to
as the spread. In selecting firms which will execute portfolio transactions, BMR
and Eaton Vance judge such executing firms' professional ability and quality of
service and use their best efforts to obtain execution at prices which are
advantageous and at reasonably competitive spreads. Subject to the foregoing,
BMR and Eaton Vance may consider sales of shares of the Funds or of other
investment companies sponsored by BMR or Eaton Vance as a factor in the
selection of firms to execute portfolio transactions. The Funds, 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 or Tax Free
Reserves) 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 Cash, Liquid Assets and Money Market Funds. The Trust has not retained the
services of an investment adviser for these Funds since the Trust seeks to
achieve the investment objective of each such Fund by investing its assets in
the Portfolio. As Administrator, Eaton Vance provides each such Fund with
general office facilities and supervises the overall administration of the
Funds. For these services, Eaton Vance currently receives no compensation. The
Trustees of the Trust may determine, in the future, to compensate Eaton Vance
for such services.
The Portfolio and the Funds, as the case may be, will each be responsible for
all of its respective costs and expenses not expressly stated to be payable by
BMR under the investment advisory agreement, by Eaton Vance under the investment
advisory or administrative services agreements, or by the Principal Underwriter
under the distribution agreements.
DISTRIBUTION PLANS
- --------------------------------------------------------------------------------
The Eaton Vance Money Market Fund has adopted a Distribution Plan ("Plan")
pursuant to Rule 12B-1 under the Investment Company Act of 1940 ("1940 Act").
UNDER THE PLAN, THE FUND MAY PAY 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 FUND SHARES. The Plan provides that the
Fund may use such fees to compensate the Principal Underwriter for sales
commissions paid by it to financial services firms ("Authorized Firms") on the
sale of Fund shares and for interest expenses. 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 shares sold by such Firms. Contingent deferred sales
charges paid to the Principal Underwriter will be used to reduce amounts owed to
it. With respect to Money Market Fund shares acquired as a result of an exchange
from one or more funds in the Eaton Vance Classic Group of Funds, the Principal
Underwriter currently expects to pay monthly sales commissions to an Authorized
Firm approximately equivalent to 1/12 of .75% of the value of such shares sold
by such Firm and remaining outstanding for at least one year from the date of
original purchase of the EV Classic fund shares. Because payments to the
Principal Underwriter by the Fund are limited, uncovered distribution charges
(sales commissions paid by the Principal Underwriter plus interest, less
contingent deferred sales charges received by it) may exist indefinitely. During
the fiscal year ended December 31, 1996, the Money Market Fund paid fees under
the Plan equivalent to .75% of the Fund's average daily net assets. As of
December 31, 1996, uncovered distribution charges amounted to approxomately
$2,714,000 (equivalent to 8.7% of the Fund's net assets). For more information,
see "Distribution Plan" in the Statement of Additional Information.
THE PLAN ALSO AUTHORIZES THE MONEY MARKET FUND TO MAKE PAYMENTS OF SERVICE FEES
TO THE PRINCIPAL UNDERWRITER, AUTHORIZED FIRMS AND OTHER PERSONS IN AMOUNTS NOT
EXCEEDING .25% OF THE MONEY MARKET FUND'S AVERAGE DAILY NET ASSETS FOR EACH
FISCAL YEAR. The Trustees of the Trust have authorized the Money Market Fund to
make quarterly service fee payments of .15% of the Fund's average daily net
assets for each fiscal year based on the value of Fund shares sold by such
persons and remaining outstanding for at least twelve months (including in such
holding period the prior holding of any EV Marathon or EV Classic fund shares
exchanged for Fund shares). The Trustees may increase these payments at any
time. Service fee payments are made for personal services and/or the maintenance
of shareholder accounts. During the fiscal year ended December 31, 1996, the
Fund paid or accrued service fees under the Plan equivalent to .06% of the
Fund's average daily net assets for such year.
EATON VANCE LIQUID ASSETS FUND has also adopted a Distribution Plan pursuant to
Rule 12b-1 under the 1940 Act. The Liquid Assets Plan authorizes payments of
service fees to the Principal Underwriter, Authorized Firms and other persons of
.25% of the Fund's average daily net assets each year. The Trustees have
authorized the Fund to pay service fees of up to .25% per annum of the Fund's
average daily net assets based on the value of Fund shares sold and remaining
outstanding for at least one year. For the fiscal year ended December 31, 1996,
the Fund made payments under the Plan to the Principal Underwriter and
Authorized Firms equivalent to .25% of the Fund's average daily net assets.
With respect to all Funds, the Principal Underwriter may, from time to time, at
its own expense, provide additional incentives to Authorized Firms which employ
registered representatives who sell a Fund's shares and/or shares of other funds
distributed by the Principal Underwriter. In some instances, such additional
incentives may be offered only to certain Authorized Firms whose representatives
sell or are expected to sell significant amounts of shares. In addition, the
Principal Underwriter may from time to time increase or decrease the sales
commissions payable to Authorized Firms.
A Fund may, in its absolute discretion, suspend, discontinue or limit the
offering of its shares at any time. In determining whether any such action
should be taken, a Fund's management intends to consider all relevant factors,
including (without limitation) the size of the Fund, the investment climate and
market conditions, the volume of sales and redemptions of Fund shares and (if
applicable) the amount of Uncovered Distribution Charges of the Principal
Underwriter. A distribution plan may continue in effect and payments may be made
under the plan following any such suspension, discontinuance or limitation of
the offering of Fund shares; however, the Fund is not contractually obligated to
continue the plan for any particular period of time. Suspension of the offering
of Fund shares would not, of course, affect a shareholder's ability to redeem
shares.
VALUING FUND SHARES
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EACH FUND VALUES ITS SHARES ONCE ON EACH DAY THE NEW YORK STOCK EXCHANGE (THE
"EXCHANGE") IS OPEN FOR TRADING, as of the close of regular trading on the
Exchange (normally 4:00 p.m. New York time). Each Fund's net asset value per
share is determined by its custodian, Investors Bank & Trust Company ("IBT"),
(as agent for the Fund) in the manner authorized by the Trustees of the Trust.
Net asset value per share is computed by dividing the value of a Fund's total
assets, less its liabilities, by the number of shares outstanding. The net asset
value of each of the Cash, Liquid Assets and Money Market Funds will reflect the
value of its interest in the Portfolio (which, in turn, reflects the underlying
value of the Portfolio's assets and liabilities). The Portfolio's net asset
value is also determined as of the close of regular trading on the Exchange by
IBT (as custodian and agent for the Portfolio) in the manner authorized by the
Trustees of the Portfolio. Net asset value is computed by subtracting the
liabilities of the Portfolio from the value of its total assets.
The investments of the Portfolio and of the Funds are valued at amortized cost
according to a Securities and Exchange Commission rule. The Portfolio and the
Funds will not normally have unrealized gains or losses so long as they value
their investments by the amortized cost method.
HOW TO BUY FUND SHARES
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INVESTORS MAY PURCHASE SHARES OF A FUND THROUGH AUTHORIZED FIRMS AT THE NET
ASSET VALUE PER SHARE OF THE FUND NEXT DETERMINED AFTER AN ORDER IS EFFECTIVE.
An Authorized Firm may charge its customers a fee in connection with
transactions executed by that Firm. Any Fund may suspend the offering of shares
at any time and may refuse an order for the purchase of shares. As of the date
of this Prospectus, shares of Liquid Assets Fund are not being offered.
An initial investment in a Fund must be at least $1,000. Once an account has
been established the investor may send investments of $50 or more at any time.
The $1,000 minimum initial investment is waived for Bank Automated Investing
accounts, which may be established with an investment of $50 or more. See "Eaton
Vance Shareholder Services".
BY MAIL: The Account Application form which accompanies this prospectus should
be completed, signed and mailed with a check, Federal Reserve Draft, or other
negotiable bank draft, drawn on a U.S. bank and payable in U.S. dollars, to the
order of the relevant Fund and mailed to the Fund's Transfer Agent (the
"Transfer Agent") as follows: First Data Investor Services Group, P.O. Box 5123,
Westborough, MA 01581-5123. Additional purchases may be made at any time through
the same mail procedure. (Please provide the shareholder name and account
number.)
BY WIRE: Investors may purchase shares by requesting their bank to transmit
immediately available funds (Federal Funds) by wire to:
ABA #011001438
Federal Reserve Bank of Boston A/C Investors Bank & Trust Company
Further Credit Eaton Vance [name of] Fund A/C # [Insert your account
number -- see below]
Upon making an initial investment by wire, you must first telephone the Order
Department of the Funds 800-225-6265 (extension 3) to advise of your action and
to be assigned an account number. Failure to call will delay the order. The
Account Application form which accompanies this Prospectus must be promptly
forwarded to the Transfer Agent, at the above address. Additional investments
may be made at any time through the same wire procedure. The Funds' Order
Department must be advised by telephone of each transmission.
Transactions in money market instruments normally require immediate settlement
in federal funds. The Funds intend at all times to be as fully invested as is
feasible in order to maximize earnings. Accordingly, purchase orders will be
executed at the net asset value next determined after their receipt by a Fund
only if the Fund has received payment in cash or in Federal Funds. If remitted
in other than the foregoing manner, such as by money order or personal check,
purchase orders will be executed as of the close of business on the second
Boston business day after receipt. Information on how to procure a Federal
Reserve Draft or to transmit federal funds by wire is available at banks. A bank
may charge for these services.
In connection with employee benefit or other continuous group purchase plans,
the Cash and Money Market Funds may accept initial investments of less than
$1,000 on the part of an individual participant. In the event a shareholder who
is a participant of such a plan terminates participation in the plan, his or her
shares will be transferred to a regular individual account. However, such
account will be subject to the right of redemption by the Fund as described
below under "How to Redeem Fund Shares."
HOW TO REDEEM FUND SHARES
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A SHAREHOLDER MAY REDEEM A FUND'S SHARES IN SEVERAL WAYS. The redemption price
will be based on the net asset value per Fund share next computed after a
redemption request is received in the proper form as described below.
REDEMPTION BY MAIL: Shares may be redeemed by delivering to the Transfer Agent,
First Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123,
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 Fund, the Principal Underwriter nor the
Transfer Agent will be responsible for the authenticity of redemption
instructions received by telephone, provided that reasonable procedures to
confirm that instructions communicated by telephone are genuine have been
followed. Telephone instructions will be tape recorded. In times of drastic
economic or market changes, a telephone redemption may be difficult to
implement.
CHECKWRITING: Shareholders of Cash Fund and Tax Free Reserves with
uncertificated shares may redeem shares by check. Boston Safe Deposit and Trust
Company ("Boston Safe") will provide such shareholders with special forms of
checks drawn on Boston Safe. These checks may be made payable by the shareholder
to the order of any person in any amount of $500 or more. A shareholder will
continue to be entitled to distributions paid on shares until the check is
presented to Boston Safe for payment. If the amount of the check is greater than
the value of the shares held in the shareholder's account for which the Fund has
collected payment, the check will be returned and the shareholder may be subject
to extra charges. The shareholder will be required to execute signature cards
and will be subject to Boston Safe's rules and regulations governing such
checking accounts. There is no charge to shareholders for this service. This
service may be terminated or suspended at any time by a Fund or Boston Safe.
WIRE TRANSFER TO A BANK ACCOUNT: Shareholders with uncertificated shares (for
which the Fund has collected payment) who have given complete written
authorization in advance may request that redemption proceeds of $1,000 or more
be wired directly to their bank account. The bank designated may be any bank in
the United States. The request may be made by letter or telephone to the
Transfer Agent at 800-262-1122. However, shareholders holding certificates for
shares in a Fund must return such certificates in properly endorsed form
requesting redemption prior to being eligible to have redemption proceeds wired
directly to their bank account.
Redemption proceeds, less any applicable CDSC and the amount of any federal
income tax required to be withheld, will be wired on the next business day
following receipt of the redemption request. The shareholder will be required to
pay any costs of such transaction. Each Fund may suspend or terminate this wire
transfer procedure.
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 those
shares is based upon the net asset value calculated after the Principal
Underwriter, as the Fund's agent, receives the order. It is the Authorized
Firm's responsibility to transmit promptly repurchase orders to the Principal
Underwriter. Throughout this Prospectus, the word "redemption" is generally
meant to include a repurchase.
Within seven days after receipt of a redemption request in good order by the
Transfer Agent, the relevant Fund will make payment in cash for the net asset
value of the shares as of the date determined above, reduced by the amount of
any applicable contingent deferred sales charges (described below) and any
federal income tax required to be withheld. Although each Fund normally expects
to make payment in cash for redeemed shares, the Trust, subject to compliance
with applicable regulations, has reserved the right to pay the redemption price
of shares of the Fund, either totally or partially, by a distribution in kind of
readily marketable securities (which for some Funds would be withdrawn by it
from the Portfolio). The securities so distributed would be valued pursuant to
the Portfolio's or Tax Free Reserves' valuation procedures. If a shareholder
received a distribution in kind, the shareholder could incur brokerage or other
charges in converting the securities to cash.
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. If the net asset value of Fund shares is not maintained at $1.00 per
share or if a contingent deferred sales charge (described below) is imposed on
the redemption, a redemption may result in a taxable gain or loss.
Due to the high cost of maintaining small accounts, each Fund reserves the right
to redeem accounts with balances of less than $750. Prior to such a redemption,
shareholders will be given 60 days' written notice to make an additional
purchase. However, no such redemption would be required by the Fund if the cause
of the low account balance was a reduction in the net asset value of Fund
shares. No contingent deferred sales charge will be imposed with respect to such
involuntary redemptions.
CONTINGENT DEFERRED SALES CHARGE -- CASH FUND AND TAX FREE RESERVES. Shares of
the Fund acquired in an exchange for shares of an Eaton Vance Traditional Fund
subject to a contingent deferred sales charge ("CDSC") will be subject to the
CDSC applicable to the exchanged shares at the time of their purchase, unless
such redemption is in connection with another exchange for shares subject to
such a charge.
CONTINGENT DEFERRED SALES CHARGE -- LIQUID ASSETS AND MONEY MARKET FUNDS. Shares
redeemed within the first six years of their purchase (except shares acquired
through the reinvestment of distributions) generally will be subject to a CDSC.
This CDSC is imposed on any redemption the amount of which exceeds the aggregate
value at the time of redemption of (a) all shares in the account purchased more
than six years prior to the redemption, (b) all shares in the account acquired
through reinvestment of distributions, and (c) the increase, if any, in the
value of all other shares in the account (namely those purchased within the six
years preceding the redemption) over the purchase price of such shares.
Redemptions are processed in a manner to maximize the amount of redemption
proceeds which will not be subject to a CDSC. That is, each redemption will be
assumed to have been made first from the exempt amounts referred to in clauses
(a), (b) and (c) above, and second through liquidation of those shares in the
account referred to in clause (c) on a first-in-first-out basis. As described
under "Distribution Plans," the CDSC will be paid to the Principal Underwriter
or the relevant Fund. Any CDSC which is required to be imposed on share
redemptions will be made in accordance with the following schedule:
YEAR OF REDEMPTION
AFTER PURCHASE CDSC
- --------------------------------------------------------------------
First or Second 5%
Third 4%
Fourth 3%
Fifth 2%
Sixth 1%
Seventh and following 0%
In calculating the CDSC upon the redemption of Liquid Assets or Money Market
Fund shares acquired in an exchange for shares of a fund in the Eaton Vance
Marathon Group of Funds or the Eaton Vance Classic Group of Funds (see "The
Eaton Vance Exchange Privilege" below), the CDSC schedule applicable to the
shares at the time of purchase will apply and the purchase of Fund shares
acquired in the exchange is deemed to have occurred at the time of the original
purchase of the exchanged shares. See "The Eaton Vance Exchange Privilege" for
the CDSC schedules applicable to Fund shares acquired in an exchange.
No CDSC will be imposed on any Fund's shares which have been sold to Eaton Vance
or its affiliates, or to their respective employees or clients. The CDSC will
also be waived for shares redeemed (1) pursuant to a Withdrawal Plan (see "Eaton
Vance Shareholder Services"), (2) as part of a required distribution from a
tax-sheltered retirement plan or (3) following the death of all beneficial
owners of such shares, provided the redemption is requested within one year of
death (a death certificate and other applicable documents may be required). In
addition, shares acquired as a result of a merger or liquidation of another
Eaton Vance sponsored fund will have a CDSC imposed at the same rate as would
have been imposed in the prior fund.
THE FOLLOWING EXAMPLE ILLUSTRATES THE OPERATION OF THE CDSC. ASSUME THAT AN
INVESTOR PURCHASES $10,000 OF THE MONEY MARKET FUND'S SHARES AND THAT 25
MONTHS LATER THE VALUE OF THE ACCOUNT HAS GROWN THROUGH THE REINVESTMENT OF
DIVIDENDS TO $11,000. THE INVESTOR THEN MAY REDEEM UP TO $1,000 OF SHARES
WITHOUT INCURRING A CDSC. IF THE INVESTOR SHOULD REDEEM $2,000 OF SHARES, A
CDSC WOULD BE IMPOSED ON $1,000 OF THE REDEMPTION. THE RATE WOULD BE 4%
BECAUSE THE REDEMPTION WAS MADE IN THE THIRD YEAR AFTER THE PURCHASE WAS MADE
AND THE CDSC WOULD BE $40.
REPORTS TO SHAREHOLDERS
- -------------------------------------------------------------------------------
EACH FUND WILL ISSUE TO ITS SHAREHOLDERS SEMI-ANNUAL AND ANNUAL REPORTS
CONTAINING FINANCIAL STATEMENTS. Financial statements included in annual reports
are audited by the Fund's independent accountants. Shortly after the end of each
calendar year, each Fund will furnish its shareholders with information
necessary for preparing federal and state tax returns. Consistent with
applicable law, duplicate mailings of shareholder reports and certain other Fund
information to shareholders residing at the same address may be eliminated.
THE LIFETIME INVESTING ACCOUNT/DISTRIBUTION OPTIONS
- --------------------------------------------------------------------------------
AFTER AN INVESTOR MAKES AN INITIAL PURCHASE OF FUND SHARES, THE TRANSFER AGENT
WILL SET UP A LIFETIME INVESTING ACCOUNT FOR THE INVESTOR ON THE FUND'S RECORDS.
This account is a complete record of all transactions between the investor and
the Fund which at all times shows the balance of shares owned. All shares are
held in non-certificate form by the Funds' Transfer Agent for the account of the
shareholder, and the Fund will not issue share certificates.
At least quarterly, shareholders will receive a statement showing complete
details of any transaction and the current balance in the account. THE LIFETIME
INVESTING ACCOUNT ALSO PERMITS A SHAREHOLDER TO MAKE ADDITIONAL INVESTMENTS IN
SHARES BY SENDING A CHECK FOR $50 OR MORE to 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 the account number).
THE FOLLOWING DISTRIBUTION OPTIONS WILL BE AVAILABLE TO ALL LIFETIME INVESTING
ACCOUNTS and may be changed as often as desired by written notice to the Funds'
dividend disbursing agent, First Data Investor Services Group, P.O. Box 5123,
Westborough, MA 01581-5123. The currently effective option will appear on each
account statement.
SHARE OPTION -- All distributions will be reinvested in additional shares.
CASH OPTION -- All distributions will be paid in cash.
The SHARE OPTION will be assigned if no other option is specified.
Distributions, including those reinvested, will be reduced by any withholding
required under federal income tax laws.
If the CASH OPTION has been selected, distribution checks which are returned by
the United States Postal Service as not deliverable or which remain uncashed for
six months or more will be reinvested in the account in shares at the then
current net asset value. Furthermore, the distribution option on the account
will be automatically changed to the SHARE OPTION until such time as the
shareholder selects a different option.
DISTRIBUTION INVESTMENT OPTION. In addition to the distribution options set
forth above, distributions may be invested in additional shares of another Eaton
Vance fund. Before selecting this option, a shareholder should obtain a
prospectus of the other Eaton Vance fund and consider its objectives and
policies carefully.
"STREET NAME" ACCOUNTS. If shares of a Fund are held in a "street name" account
with an Authorized Firm, all recordkeeping, transaction processing and payments
of distributions relating to the beneficial owner's account will be performed by
the Authorized Firm, and not by the Fund and its Transfer Agent. Since the Fund
will have no record of the beneficial owner's transactions, a beneficial owner
should contact the Authorized Firm to purchase, redeem or exchange shares, to
make changes in or give instructions concerning the account, or to obtain
information about the account. The transfer of shares in a "street name" account
to an account with another Authorized Firm or to an account directly with the
Fund involves special procedures and will require the beneficial owner to obtain
historical purchase information about the shares in the account from the
Authorized Firm. Before establishing a "street name" account with an 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 CASH FUND and TAX FREE RESERVES currently may be exchanged for shares
of any fund in the Eaton Vance Traditional Group of Funds and Eaton Vance
Short-Term Treasury Fund. Shares of Cash Fund or Tax Free Reserves acquired
under the exchange privilege which have not previously been subject to payment
of a sales charge may be exchanged for shares of a Fund with a sales charge only
upon payment of the appropriate charge. These offers are available only in
states where shares of the fund being acquired may legally be sold.
LIQUID ASSETS and MONEY MARKET FUND shares currently may be exchanged for shares
of one or more funds in the Eaton Vance Marathon Group of Funds (currently any
of the EV Marathon funds) which are subject to a CDSC. Such shares may also be
exchanged for Eaton Vance Prime Rate Reserves, which are subject to an early
withdrawal charge. If Fund shares were acquired in exchange for shares of one or
more funds in the Eaton Vance Classic Group of Funds, such shares may be
exchanged only for shares of one or more funds in the Eaton Vance Classic Group
of Funds. Exchanges are made on the basis of the net asset value per share of
each fund at the time of the exchange. Exchange offers are available only in
states where shares of the fund being acquired may be legally sold.
Each exchange must involve shares which have a net asset value of at least
$1,000. The exchange privilege may be changed or discontinued without penalty.
Shareholders will be given sixty (60) days' notice prior to any termination or
material amendment of the exchange privilege. The Funds do not permit the
exchange privilege to be used for "Market Timing" and may terminate the
exchange privilege for any shareholder account engaged in Market Timing
activity. Any shareholder account for which more than two round-trip exchanges
are made within any twelve month period will be deemed to be engaged in Market
Timing. Furthermore, a group of unrelated accounts for which exchanges are
entered contemporaneously by a financial intermediary will be considered to be
engaged in Market Timing.
The Transfer Agent makes exchanges at the next determined net asset value after
receiving an exchange request in good order (see "How to Redeem Fund Shares").
The Transfer Agent may require additional documentation if shares are registered
in the name of a corporation, partnership or fiduciary. Applications and
prospectuses of the other funds are available from Authorized Firms or the
Principal Underwriter. The prospectus for each fund describes its investment
objectives and policies and shareholders should obtain a prospectus and consider
these objectives and policies carefully before requesting an exchange.
No CDSC is imposed on exchanges. For purposes of calculating the CDSC upon
redemption of Fund shares acquired in an exchange, the purchase of shares
acquired in one or more exchanges is deemed to have occurred at the time of the
original purchase of the exchanged shares. Cash Fund or Tax Free Reserves shares
acquired in an exchange for EV Traditional fund shares subject to a CDSC will
remain subject to such charge as in effect at the time the exchanged shares were
purchased. Liquid Assets and Money Market Fund shares acquired as the result of
an exchange from an EV Marathon fund will be subject to the CDSC schedule set
forth under "How to Redeem Fund Shares" above, except Fund shares acquired as
the result of an exchange from EV Marathon Strategic Income Fund, Eaton Vance
Prime Rate Reserves or Class I shares of any EV Marathon Limited Maturity
Municipals Fund will be subject to a declining charge of 3.0%-0%. Fund shares
acquired as the result of an exchange from an EV Classic fund will be subject to
a CDSC of 1% in the event of redemption within one year from the date of their
original purchase.
Shares of the funds in the Eaton Vance Marathon and Eaton Vance Classic Groups
of Funds may be exchanged for Money Market Fund shares on the basis of the net
asset value per share of each fund at the time of the exchange, but subject to
any restrictions or qualifications set forth in the current prospectus of any
such fund.
Telephone exchanges are accepted by the Transfer Agent, provided 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 a Fund, the Principal Underwriter nor the Transfer
Agent will be responsible for the authenticity of exchange instructions received
by telephone; provided that reasonable procedures to confirm that instructions
communicated are genuine have been followed. Telephone instructions will be tape
recorded. In times of drastic economic or market changes, a telephone exchange
may be difficult to implement. As long as the net asset value of Fund shares is
maintained at $1.00 per share, an exchange will not result in a taxable gain or
loss.
EATON VANCE SHAREHOLDER SERVICES
- ------------------------------------------------------------------------------
THE FUNDS OFFER THE FOLLOWING SERVICES, WHICH ARE VOLUNTARY, INVOLVE NO EXTRA
CHARGE, AND MAY BE CHANGED OR DISCONTINUED WITHOUT PENALTY AT ANY TIME. Full
information on each of the services described below and an application, where
required, are available from Authorized Firms or the Principal Underwriter. The
cost of administering such services for the benefit of shareholders who
participate in them is borne by the Funds as an expense to all shareholders.
INVEST-BY-MAIL -- FOR PERIODIC SHARE ACCUMULATION: Once the $1,000 minimum
investment has been made, checks of $50 or more payable to the order of the Fund
being purchased may be mailed directly to the Transfer Agent, First Data
Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123 at any time
- -- whether or not distributions are reinvested. The name of the shareholder, the
Fund and the account number should accompany each investment.
BANK AUTOMATED INVESTING -- FOR REGULAR SHARE ACCUMULATION: Cash investments of
$50 or more may be made automatically each month or quarter from a shareholder's
bank account. The $1,000 minimum initial investment and small account redemption
policy are waived for these accounts.
WITHDRAWAL PLAN: A shareholder may draw on Cash Fund or Tax Free Reserves
shareholdings systematically with monthly or quarterly checks in any amount.
Monthly or quarterly withdrawals of Liquid Assets and Money Market Fund
shareholdings may also be made, provided the aggregate amount of the withdrawals
does not exceed annually 12% of the account balance at the time the plan was
established (such amount will not be subject to a CDSC). See "How to Redeem Fund
Shares". A minimum deposit of $5,000 in shares is required.
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 shares of a 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 a Fund (or by the Fund's Transfer Agent). To the extent that
any shares of a Fund are sold at a loss and the proceeds are reinvested in Fund
shares (or other Fund shares are acquired) within the period beginning 30 days
before and ending 30 days after the date of redemption, some or all of the loss
generally will not be allowed as a tax deduction. Shareholders should consult
their tax advisers concerning the tax consequences of reinvestments.
TAX-SHELTERED RETIREMENT PLANS: Shares of the Cash and Money Market Funds 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
- ------------------------------------------------------------------------------
EACH FUND DECLARES DIVIDENDS DAILY AND PAYS DIVIDENDS MONTHLY FROM ITS NET
INVESTMENT INCOME. The net investment income of each of Cash, Liquid Assets and
Money Market Fund consists of net investment income allocated to the Fund by the
Portfolio, less the Fund's direct and allocated expenses. Long-term capital
gains, if any, allocated to a Fund will be distributed at least annually.
Each Fund intends to qualify as a regulated investment company under the
Internal Revenue Code of 1936, as amended (the "Code"), and to satisfy all
requirements necessary to be relieved of federal taxes on income and gains it
distributes to shareholders. As a partnership for federal tax purposes, the
Portfolio does not pay federal taxes. Each Fund will distribute substantially
all of its ordinary income and capital gain net income on a current basis.
All distributions from Cash, Liquid Assets and Money Market Fund (and taxable
distributions from Tax Free Reserves, if any) are taxable to shareholders as
ordinary income, except that distributions of net long-term capital gains, if
any, are taxable to shareholders as such regardless of the length of time the
shareholder has held the shares. Distributions will be taxable as described
whether received in cash or as additional shares through reinvestment in a Fund.
Each Fund will provide its shareholders annually with tax information notices
and Forms 1099 to assist in the preparation of their federal and state tax
returns for the prior calendar year's distributions, proceeds from the
redemption or exchange of Fund shares, and federal income tax (if any) withheld
by the Transfer Agent. Shareholders should consult their tax advisers about the
effect of Fund distributions on their particular tax status and any state or
local taxes that may apply.
TAX FREE RESERVES. Distributions designated by Tax Free Reserves as "exempt-
interest dividends" may be excluded from shareholders' gross income for federal
income tax purposes. Exempt interest dividends are includable in the tax base
for shareholders who receive social security or railroad retirement benefits and
may affect the taxability of such benefits. In addition, exempt interest
dividends generally constitute a tax preference item under the federal
alternative minimum tax provisions and may be taxable for state and local tax
purposes.
Other distributions from Tax Free Reserves may be taxable to shareholders as
ordinary income or long-term capital gains. Distributions of income from
repurchase agreements, original issue discount and certain market discount will
be taxable to shareholders as ordinary income. However, the Fund's taxable
distributions, if any, will be insubstantial compared to exempt interest
dividends.
Shareholders should consult their own tax advisers to determine the effect of
exempt interest dividends on their particular tax situation, including liability
for state and local taxes. The Fund will report annually to shareholders with
respect to net tax exempt income earned in each state.
As a regulated investment company under the Code, a Fund does not pay federal
income or excise taxes to the extent that it distributes to shareholders its net
investment income and net realized capital gains in accordance with the timing
requirements imposed by the Code. As a partnership under the Code, the Portfolio
does not pay federal income or excise taxes.
YIELD INFORMATION
- ------------------------------------------------------------------------------
FROM TIME TO TIME A FUND MAY ADVERTISE ITS "YIELD" AND "EFFECTIVE YIELD." Both
yield figures are based on historical earnings and are not intended to indicate
future performance. The "yield" of a Fund refers to the income generated by an
investment in the Fund over a seven-day period (which period will be stated in
the advertisement). This income is then "annualized." That is, the amount of
income generated by the investment during that week is assumed to be generated
each week over a 52-week period and is shown as a percentage of the investment.
The "effective yield" is calculated similarly but, when annualized, the income
earned by an investment in the Fund is assumed to be reinvested. The "effective
yield" will be slightly higher than the "yield" because of the compounding
effect of this assumed reinvestment. A taxable-equivalent yield is computed by
using the tax-exempt yield figure and dividing by 1 minus the tax rate.
<PAGE>
[logo]
THE EV
MONEY MARKET
FUNDS
EATON VANCE CASH MANAGEMENT FUND
EATON VANCE LIQUID ASSETS FUND
EATON VANCE MONEY MARKET FUND
EATON VANCE TAX FREE RESERVES
PROSPECTUS
MAY 1, 1997
THE EV
MONEY MARKET FUNDS
24 FEDERAL STREET
BSOTON, MA 02110
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INVESTMENT ADVISERS AND ADMINISTRATOR
Boston Management and Research, Eaton Vance Management, 24 Federal Street,
Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Bsoton, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 89 South Street, Boston, MA 02111
TRANSFER AGENT
First Data Investors 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
MMFP
<PAGE>
PART A
INFORMATION REQUIRED IN A PROSPECTUS
EV CLASSIC
GOVERNMENT OBLIGATIONS FUND
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EV CLASSIC GOVERNMENT OBLIGATIONS FUND (THE "FUND") IS A MUTUAL FUND SEEKING A
HIGH CURRENT RETURN, BY INVESTING IN SECURITIES ISSUED, GUARANTEED OR OTHERWISE
BACKED BY THE U.S. GOVERNMENT AND ENGAGING IN ACTIVE MANAGEMENT STRATEGIES. THE
FUND INVESTS ITS ASSETS IN GOVERNMENT OBLIGATIONS PORTFOLIO (THE "PORTFOLIO"), A
DIVERSIFIED OPEN-END INVESTMENT COMPANY HAVING THE SAME INVESTMENT OBJECTIVE AS
THE FUND, RATHER THAN BY DIRECTLY INVESTING IN AND MANAGING ITS OWN PORTFOLIO OF
SECURITIES. 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 May 1, 1997 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.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
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PAGE PAGE
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Shareholder and Fund Expenses ......................... 2 How to Buy Fund Shares ............................ 11
The Fund's Financial Highlights ....................... 3 How to Redeem Fund Shares ......................... 12
The Fund's Investment Objective ....................... 4 Reports to Shareholders ........................... 13
Investment Policies and Risks ......................... 4 The Lifetime Investing Account/Distribution Options 14
Organization of the Fund and the Portfolio ............ 8 The Eaton Vance Exchange Privilege ................ 14
Management of the Fund and the Portfolio .............. 9 Eaton Vance Shareholder Services .................. 15
Distribution Plan ..................................... 10 Distributions and Taxes ........................... 16
Valuing Fund Shares ................................... 11 Performance Information ........................... 17
</TABLE>
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PROSPECTUS DATED MAY 1, 1997
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SHAREHOLDER AND FUND EXPENSES
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<TABLE>
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SHAREHOLDER TRANSACTION EXPENSES
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<S> <C>
Sales Charges Imposed on Purchases of Shares None
Sales Charges Imposed on Reinvested Distributions None
Fees to Exchange Shares None
Contingent Deferred Sales Charges Imposed on Redemptions During the First Year
(as a percentage of redemption proceeds exclusive of all reinvestments and
capital appreciation in the account) 1.00%
ANNUAL FUND AND ALLOCATED PORTFOLIO OPERATING EXPENSES (as a percentage of
average daily net assets)
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Investment Adviser Fee 0.75%
Rule 12b-1 Distribution (and Service) Fees 1.00%
Other Expenses (including Interest and Securities Lending Expenses of 0.70%) 1.03%
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Total Operating Expenses 2.78%
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EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
An investor would pay the following expenses (including a contingent deferred
sales charge in the case of redemption during the first year after purchase) on
a $1,000 investment, assuming (a) 5% annual return and (b) redemption at the end
of each period: $38 $86 $147 $311
</TABLE>
NOTES:
The table and Example summarize the aggregate expenses of the Fund and the
Portfolio and are designed to help investors understand the costs and expenses
they will bear, directly or indirectly, by investing in the Fund. Information
for the Fund is based on its expenses for the most recent fiscal year.
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. Federal regulations
require the Example to assume a 5% annual return but actual annual return will
vary. For further information regarding the expenses of both the Fund and the
Portfolio see "The Fund's Financial Highlights", "Management of the Fund and the
Portfolio" and "How to Redeem Fund Shares." A long-term shareholder in the Fund
may pay more than the economic equivalent of the maximum front-end sales charge
permitted by a rule of the National Association of Securities Dealers, Inc. See
"Distribution Plan".
No contingent deferred sales charge is imposed on (a) shares purchased more than
one year prior to redemption, (b) shares acquired through the reinvestment of
distributions or (c) any appreciation in value of other shares in the account
(see "How to Redeem Fund Shares"), and no such charge is imposed on exchanges of
Fund shares for shares of one or more other funds listed under "The Eaton Vance
Exchange Privilege". In the Example above, expenses would be $10 less in the
first year if there was no redemption.
The Fund Expense computation and the Examples include 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, its Total
Operating Expenses as a percentage of average daily net assets would have been
2.08%, and contingent deferred sales charges and expenses incurred on a $1,000
investment for one, three, five and ten years would have been $31, $65, $112 and
$241, respectively (assuming redemption) and $21, $65, $112 and $241,
respectively (assuming no redemption).
The Fund invests exclusively in the Portfolio. Other investment companies with
different distribution arrangements and fees are investing in the Portfolio and
others may do so in the future. See "Organization of the Fund and the
Portfolio".
<PAGE>
THE FUND'S FINANCIAL HIGHLIGHTS
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The following information should be read in conjunction with the audited
financial statements that appear in the Fund's annual report to shareholders.
The Fund's financial statements have been audited by Coopers & Lybrand L.L.P.,
independent accountants, as experts in accounting and auditing. The financial
statements and the report of independent accountants are incorporated by
reference into the Statement of Additional Information. Further information
regarding the performance of the Fund is contained in its annual report to
shareholders which may be obtained without charge by contacting the Principal
Underwriter.
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YEAR ENDED DECEMBER 31,
----------------------------------------
1996 1995 1994 1993*
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NET ASSET VALUE, beginning of year $ 9.490 $ 8.980 $ 9.940 $10.000
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INCOME FROM OPERATIONS:
Net investment income $ 0.613 $ 0.609 $ 0.626 $ 0.107
Net realized and unrealized gain
(loss) on investments (0.300) 0.520 (0.876) (0.051)
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Total income (loss) from
operations $ 0.313 $ 1.129 $(0.250) $ 0.056
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LESS DISTRIBUTIONS:
From net investment income $(0.613) $(0.609) $(0.626) $(0.107)
In excess of net investment
income(3) 0.000 (0.010) (0.084) (0.009)
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Total distributions $(0.613) $(0.619) $(0.710) $(0.116)
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NET ASSET VALUE, end of year $ 9.190 $ 9.490 $ 8.980 $ 9.940
======= ======= ======= =======
TOTAL RETURN(1) 3.49% 12.94% (2.54)% 0.34%
RATIOS/SUPPLEMENTAL DATA:
Ratio of interest expense to
average net assets(2) 0.70% 0.71% 0.57% 0.54%+
Ratio of other expenses to average
net assets(2) 2.08% 2.11% 2.15% 2.31%+
Ratio of net investment income to
average net assets 6.66% 6.57% 6.60% 5.45%+
Net Assets at end of period
(000's omitted) $30,153 $42,038 $39,586 $17,441
+Computed on an annualized basis.
(1)Total investment return is calculated assuming a purchase at the net asset
value on the first day and a sale at the net asset value on the last day of
each period reported. Distributions, if any, are assumed to be reinvested at
the net asset value on the payable date. Total return is not computed on an
annualized basis.
(2)Includes the Fund's share of the Portfolio's allocated expenses.
(3)The Fund has followed the Statement of Position (SOP) 93-2: Determination,
Disclosure and Financial Statement Presentation of Income, Capital Gain, and
Return of Capital Distribution by Investment Companies. The SOP requires that
differences in the recognition or classification of income between the
financial statements and tax earnings and profits that result in temporary
over-distributions for financial statement purposes, are classified as
distributions in excess of net investment income or accumulated net realized
gains.
*For the period from the start of business, November 1, 1993, to December 31,
1993.
<PAGE>
THE FUND'S INVESTMENT OBJECTIVE
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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
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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 40.0% of its net
assets invested in FNMA Mortgage-Backed Certificates, approximately 40.0% 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 December 31, 1996, 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 Securities and Exchange Commission takes the position that
purchased OTC options, assets used as cover for written OTC options, and certain
other derivative instruments (and securities) are subject to the Portfolio's 15%
limit on illiquid investments. The Portfolio's ability to terminate OTC
derivative instruments may depend on the cooperation of the counterparties to
such instruments. For thinly traded derivative securities and contracts, the
only source of price quotations may be the selling dealer or counterparty.
To the extent that the Portfolio enters into futures contracts, options on
futures contracts and options on foreign currencies traded on an exchange
regulated by the Commodity Futures Trading Commission ("CFTC"), in each case
that are not for bona fide hedging purposes (as defined by the CFTC), the
aggregate initial margin and premiums required to establish these positions
(excluding the amount by which options are "in-the-money") may not exceed 5% of
the liquidation value of the Portfolio's portfolio, after taking into account
unrealized profits and unrealized losses on any contracts the Portfolio has
entered into.
SHORT SALES AGAINST-THE-BOX. The Portfolio may sell securities short 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). Under
current tax law, short sales against-the-box enable the Portfolio to hedge its
exposure to securities that it holds without selling the securities and
recognizing gains. A short sale against-the-box requires that the short seller
absorb certain costs so long as the position is open. In a short sale against-
the-box, the short seller is exposed to the risk of being forced to deliver
appreciated securities to close the position if the borrowed security is called
in, causing a taxable gain to be recognized. The Portfolio expects normally to
close its short sales against-the-box by delivering newly acquired securities.
The Portfolio's ability to utilize short sales may be limited if proposed tax
legislation is enacted. No 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 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
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THE FUND IS A DIVERSIFIED SERIES OF EATON VANCE MUTUAL FUNDS TRUST, A BUSINESS
TRUST ESTABLISHED UNDER MASSACHUSETTS LAW PURSUANT TO A DECLARATION OF TRUST
DATED MAY 7, 1984, AS AMENDED. The Trustees of the Trust are responsible for the
overall management and supervision of its affairs. The Trust may issue an
unlimited number of shares of beneficial interest (no par value per share) in
one or more series (such as the Fund). Each share represents an equal
proportionate beneficial interest in the Fund. When issued and outstanding, the
shares are fully paid and nonassessable by the Trust and redeemable as described
under "How to Redeem Fund Shares". 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 have no
preemptive or conversion rights and are freely transferable. In the event of the
liquidation of the Fund, shareholders are entitled to share pro rata in the net
assets of the Fund available for distribution to shareholders.
THE PORTFOLIO IS ORGANIZED AS A TRUST UNDER THE LAWS OF THE STATE OF NEW YORK
AND INTENDS TO BE TREATED AS A PARTNERSHIP FOR FEDERAL TAX PURPOSES. The
Portfolio, as well as the Trust, intends to comply with all applicable federal
and state securities laws. The Portfolio's Declaration of Trust provides that
the Fund and other entities permitted to invest in the Portfolio (e.g., other
U.S. and foreign investment companies, and common and commingled trust funds)
will each be liable for all obligations of the Portfolio. However, the risk of
the Fund incurring financial loss on account of such liability is limited to
circumstances in which both inadequate insurance exists and the Portfolio itself
is unable to meet its obligations. Accordingly, the Trustees of the Trust
believe that neither the Fund nor its shareholders will be adversely affected by
reason of the Fund investing in the Portfolio.
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,
affords 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.
In addition to selling an interest to the Fund, the Portfolio may sell interests
to other affiliated and non-affiliated mutual funds or institutional investors.
Such investors will invest in the Portfolio on the same terms and conditions and
will pay a proportionate share of the Portfolio's expenses. However, the other
investors investing in the Portfolio are not required to sell their shares at
the same public offering price as the Fund due to variations in sales
commissions and other operating expenses. Therefore, investors in the Fund
should be aware that these differences may result in differences in returns
experienced by investors in the various funds that invest in the Portfolio. Such
differences in returns are also present in other mutual fund structures,
including funds that have multiple classes of shares. 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
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THE PORTFOLIO ENGAGES BOSTON MANAGEMENT AND RESEARCH ("BMR"), A WHOLLY-OWNED
SUBSIDIARY OF EATON VANCE MANAGEMENT ("EATON VANCE"), AS ITS INVESTMENT ADVISER.
EATON VANCE, ITS AFFILIATES AND ITS PREDECESSOR COMPANIES HAVE BEEN MANAGING
ASSETS OF INDIVIDUALS AND INSTITUTIONS SINCE 1924 AND MANAGING INVESTMENT
COMPANIES SINCE 1931.
Acting under the general supervision of the Board of Trustees of the Portfolio,
BMR manages the Portfolio's investments and affairs. BMR also furnishes for the
use of the Portfolio office space and all necessary office facilities, equipment
and personnel for servicing the investments of the Portfolio. Under its
investment advisory agreement with the Portfolio, BMR receives a monthly
advisory fee of .0625% (equivalent to .75% annually) of the average daily net
assets of the Portfolio up to $500 million. On net assets of $500 million and
over the annual fee is reduced as follows:
ANNUALIZED FEE RATE
AVERAGE DAILY NET ASSETS FOR THE MONTH (FOR EACH LEVEL)
$500 million but less than $1 billion 0.6875%
$1 billion but less than $1.5 billion 0.6250%
$1.5 billion but less than $2 billion 0.5625%
$2 billion but less than $3 billion 0.5000%
$3 billion and over 0.4375%
As at December 31, 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
OVER $17 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 has been a Vice President of Eaton Vance and of BMR
since 1993.
BMR places the portfolio transactions of the Portfolio with many broker-dealer
firms and uses its best efforts to obtain execution of such transactions at
prices which are advantageous to the Portfolio. Subject to the foregoing, BMR
may consider sales of shares of the Fund or of other investment companies
sponsored by BMR or Eaton Vance as a factor in the selection of broker-dealer
firms to execute portfolio transactions. The Fund, the Portfolio and BMR have
adopted Codes of Ethics relating to personal securities transactions. The Codes
permit Eaton Vance personnel to invest in securities (including securities that
may be purchased or held by the Portfolio) for their own accounts, subject to
certain pre-clearance, reporting and other restrictions and procedures contained
in such Codes.
The Trust has retained the services of Eaton Vance to act as Administrator of
the Fund. The Trust has not retained the services of an investment adviser since
the Trust seeks to achieve the investment objective of the Fund by investing the
Fund's assets in the Portfolio. As Administrator, Eaton Vance provides the Fund
with general office facilities and supervises the overall administration of the
Fund. For these services, Eaton Vance currently receives no compensation. The
Trustees of the Trust may determine, in the future, to compensate Eaton Vance
for such services.
The Portfolio and the Fund, as the case may be, will each be responsible for all
of its respective costs and expenses not expressly stated to be payable by BMR
under the investment advisory agreement, by Eaton Vance under the administrative
services agreement, or by the Principal Underwriter under the distribution
agreement.
DISTRIBUTION PLAN
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The Fund has adopted a Distribution Plan ("Plan") pursuant to Rule 12b-1 under
the Investment Company Act of 1940 ("1940 Act"). Under the Plan, the Fund may
pay 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 Fund shares. The Plan provides that the Fund may use such fees
to compensate the Principal Underwriter for sales commissions paid by it to
financial services firms ("Authorized Firms") on the sale of Fund shares and for
interest expenses. The Principal Underwriter currently pays to a financial
service firm (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 Fund shares, the Principal Underwriter will retain
sales commission payments made by the Fund as reimbursement for the sales
commissions paid to an Authorized Firm at the time of sale. Contingent deferred
sales charges paid to the Principal Underwriter will be used to reduce amounts
owed to it. Because payments to the Principal Underwriter by the Fund are
limited, uncovered distribution charges (sales commissions paid by the Principal
Underwriter plus interest, less contingent deferred sales charges received by
it) may exist indefinitely. During the fiscal year ended December 31, 1996, the
Fund paid sales commissions under the Plan equivalent to .75% of the Fund's
average daily net assets. As of December 31, 1996, the outstanding uncovered
distribution charges on such day amounted to approximately $7,495,000
(equivalent to 24.9% of the Fund's net assets). For more information, see
"Distribution Plan" in the Statement of Additional Information.
The Plan also authorizes the Fund to make payments of service fees to the
Principal Underwriter, Authorized Firms and other persons in amounts not
exceeding .25% of the Fund's average daily net assets for personal services
and/or the maintenance of shareholder accounts. The Principal Underwriter
currently expects to pay to an Authorized Firm (a) a service fee (except on
exchange transactions and reinvestments) at the time of sale equal to .25% of
the purchase price of the shares sold by such Firm, and (b) monthly service fees
approximately equivalent to 1/12 of .25% of the value of shares sold by such
Firm and remaining outstanding for at least one year. During the first year
after a purchase of Fund shares, the Principal Underwriter will retain the
service fee as reimbursement for the service fee payment made to Authorized
Firms at the time of sale. For the fiscal year ended December 31, 1996, the Fund
paid or accrued service fees equivalent to .25% of the Fund's average daily net
assets for such year.
The Principal Underwriter may, from time to time, at its own expense, provide
additional incentives to Authorized Firms which employ registered
representatives who sell Fund shares and/or shares of other funds distributed by
the Principal Underwriter. In some instances, such additional incentives may be
offered only to certain Authorized Firms whose representatives sell or are
expected to sell significant amounts of shares. In addition, the Principal
Underwriter may from time to time increase or decrease the sales commissions
payable to Authorized Firms.
The Fund may, in its absolute discretion, suspend, discontinue or limit the
offering of its shares at any time. In determining whether any such action
should be taken, the Fund's management intends to consider all relevant factors,
including without limitation the size of the Fund, the investment climate and
market conditions, the volume of sales and redemptions of Fund shares and the
amount of uncovered distribution charges of the Principal Underwriter. The Plan
may continue in effect and payments may be made under the Plan following any
such suspension, discontinuance or limitation of the offering of Fund shares;
however, the Fund is not contractually obligated to continue the Plan for any
particular period of time. Suspension of the offering of Fund shares would not,
of course, affect a shareholder's ability to redeem shares.
VALUING FUND SHARES
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THE FUND VALUES ITS SHARES ONCE ON EACH DAY THE NEW YORK STOCK EXCHANGE (THE
"EXCHANGE") IS OPEN FOR TRADING, as of the close of regular trading on the
Exchange (normally 4:00 p.m. New York time). The Fund's net asset value per
share is determined by its custodian, Investors Bank & Trust Company ("IBT"),
(as agent for the Fund) in the manner authorized by the Trustees of the Trust.
Net asset value is computed by dividing the value of the Fund's total assets,
less its liabilities, by the number of shares outstanding. Because the Fund
invests its assets in an interest in the Portfolio, the Fund's net asset value
will reflect the value of its interest in the Portfolio (which in turn, reflects
the underlying value of the Portfolio's assets and liabilities).
Authorized Firms must communicate an investor's order to the Principal
Underwriter prior to the close of the Principal Underwriter's business day to
receive that day's net asset value per Fund share. It is the Authorized Firms'
responsibility to transmit orders promptly to the Principal Underwriter.
The Portfolio's net asset value is also determined as of the close of regular
trading on the Exchange by IBT (as custodian and agent for the Portfolio) in the
manner authorized by the Trustees of the Portfolio. Net asset value is computed
by subtracting the liabilities of the Portfolio from the value of its total
assets. Mortgage-backed "pass-through" securities are valued through use of a
matrix pricing system which takes into account closing bond valuations, yield
differentials, anticipated prepayments and interest rates. For further
information regarding the valuation of the Portfolio's assets, see
"Determination of Net Asset Value" in the Statement of Additional Information.
SHAREHOLDERS MAY DETERMINE THE VALUE OF THEIR INVESTMENT BY MULTIPLYING THE
NUMBER OF FUND SHARES OWNED BY THE CURRENT NET ASSET VALUE PER SHARE.
HOW TO BUY FUND SHARES
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SHARES OF THE FUND MAY BE PURCHASED FOR CASH OR MAY BE ACQUIRED IN EXCHANGE FOR
SECURITIES. Investors may purchase shares of the Fund through Authorized Firms
at the net asset value per share of the Fund next determined after an order is
effective. An Authorized Firm may charge its customers a fee in connection with
transactions executed by that Firm. The Fund may suspend the offering of shares
at any time and may refuse an order for the purchase of shares.
An initial investment in the Fund must be at least $1,000. Once an account has
been established the investor may send investments of $50 or more at any time
directly to the Fund's transfer agent (the "Transfer Agent") as follows: First
Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123. The
$1,000 minimum initial investment is waived for Bank Automated Investing
accounts, which may be established with an investment of $50 or more. See "Eaton
Vance Shareholder Services".
In connection with employee benefit or other continuous group purchase plans,
the Fund may accept initial investments of less than $1,000 on the part of an
individual participant. In the event a shareholder who is a participant of such
a plan terminates participation in the plan, shares will be transferred to a
regular individual account. However, such account will be subject to the right
of redemption by the Fund as described under "How to Redeem Fund Shares."
ACQUIRING FUND SHARES IN EXCHANGE FOR SECURITIES. IBT, as escrow agent, will
receive securities acceptable to Eaton Vance, as Administrator, in exchange for
Fund shares at their net asset value as determined above. The minimum value of
securities (or securities and cash) accepted for deposit is $5,000. Securities
accepted will be sold on the day of their receipt or as soon thereafter as
possible. The number of Fund shares to be issued in exchange for securities will
be the aggregate proceeds from the sale of such securities, divided by the
applicable net asset value per Fund share on the day such proceeds are received.
Eaton Vance will use reasonable efforts to obtain the then current market price
for such securities, but does not guarantee the best available price. Eaton
Vance will absorb any transaction costs, such as commissions, on the sale of the
securities.
Securities determined to be acceptable should be transferred via book entry or
physically delivered, in proper form for transfer, through an Authorized Firm,
together with a completed and signed Letter of Transmittal in approved form
(available from Authorized Firms), as follows:
IN THE CASE OF BOOK ENTRY:
Deliver through Depository Trust Co.
Broker #2212
Investors Bank & Trust Company
For A/C EV Classic Government Obligations Fund
IN THE CASE OF PHYSICAL DELIVERY:
Investors Bank & Trust Company
Attention: EV Classic Government Obligations Fund
Physical Securities Processing Settlement Area
89 South Street
Boston, MA 02111
Investors who are contemplating an exchange of securities for shares of the
Fund, or their representatives, must contact Eaton Vance to determine whether
the securities are acceptable before forwarding such securities. Eaton Vance
reserves the right to reject any securities. Exchanging securities for Fund
shares may create a taxable gain or loss. Each investor should consult his or
her tax adviser with respect to the particular federal, state and local tax
consequences of exchanging securities for Fund shares.
IF YOU DON'T HAVE AN AUTHORIZED FIRM, EATON VANCE CAN RECOMMEND ONE.
HOW TO REDEEM FUND SHARES
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A SHAREHOLDER MAY REDEEM FUND SHARES IN ONE OF THREE WAYS -- BY MAIL, BY
TELEPHONE OR THROUGH AN AUTHORIZED FIRM. The redemption price will be based on
the net asset value per Fund share next computed after a redemption request is
received in the proper form as described below.
REDEMPTION BY MAIL: Shares may be redeemed by delivering to the Transfer Agent,
First Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123,
during its business hours a written request for redemption in good order, plus
any share certificates with executed stock powers. Good order means that all
relevant documents must be endorsed by the record owner(s) exactly as the shares
are registered and the signature(s) must be guaranteed by a member of either the
Securities Transfer Association's STAMP program or the New York Stock Exchange's
Medallion Signature Program, or certain banks, savings and loan institutions,
credit unions, securities dealers, securities exchanges, clearing agencies and
registered securities associations as required by a regulation of the Commission
and acceptable to the Transfer Agent. In addition, in some cases, good order may
require the furnishing of additional documents such as where shares are
registered in the name of a corporation, partnership or fiduciary.
REDEMPTION BY TELEPHONE: Shares may be redeemed by telephone provided the
investor has not disclaimed in writing the use of the privilege. Such
redemptions can be effected by calling the Transfer Agent at 800-262-1122,
Monday through Friday, 9:00 a.m. to 4:00 p.m. (Eastern Standard Time). The
proceeds of a telephone redemption may be no greater than the maximum amount
established by the Principal Underwriter (currently $50,000) and may be mailed
only to the account address of record. Shares held by corporations, trusts or
certain other entities, or subject to fiduciary arrangements, may not be
redeemed by telephone. Neither the Fund, the Principal Underwriter nor the
Transfer Agent will be responsible for the authenticity of redemption
instructions received by telephone, provided that reasonable procedures to
confirm that instructions communicated by telephone are genuine have been
followed. Telephone instructions will be tape recorded. In times of drastic
economic or market changes, a telephone redemption may be difficult to
implement.
REDEMPTION THROUGH AN AUTHORIZED FIRM: To sell 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 Principal Underwriter, as
the Fund's agent, receives the order. It is the Authorized Firm's responsibility
to transmit promptly repurchase orders to the Principal Underwriter. Throughout
this Prospectus, the word "redemption" is generally meant to include a
repurchase.
Within seven days after receipt of a redemption request in good order by the
Transfer Agent, the Fund will make payment in cash for the net asset value of
the shares as of the date determined above, reduced by the amount of any
applicable contingent deferred sales charges (described below) and any federal
income tax required to be withheld. Although the Fund normally expects to make
payment in cash for redeemed shares, the Trust, subject to compliance with
applicable regulations, has reserved the right to pay the redemption price of
shares of the Fund, either totally or partially, by a distribution in kind of
readily marketable securities withdrawn by the Fund from the Portfolio. The
securities so distributed would be valued pursuant to the Portfolio's valuation
procedures. If a shareholder received a distribution in kind, the shareholder
could incur brokerage or other charges in converting the securities to cash.
If shares were recently purchased, the proceeds of a redemption will not be sent
until the check (including a certified or cashier's check) received for the
shares purchased has cleared. Payment for shares tendered for redemption may be
delayed up to 15 days from the purchase date when the purchase check has not yet
cleared. Redemptions may result in a taxable gain or loss.
Due to the high cost of maintaining small accounts, the Fund reserves the right
to redeem accounts with balances of less than $750. Prior to such a redemption,
shareholders will be given 60 days' written notice to make additional purchases.
However, no such redemption would be required by the Fund if the cause of the
low account balance was a reduction in the net asset value of Fund shares. No
contingent deferred sales charge will be imposed with respect to such
involuntary redemptions.
CONTINGENT DEFERRED SALES CHARGE. Shares redeemed within the first year of their
purchase (except shares acquired through the reinvestment of distributions)
generally will be subject to a contingent deferred sales charge ("CDSC") equal
to 1% of the net asset value of the redeemed shares. This CDSC is imposed on any
redemption the amount of which exceeds the aggregate value at the time of
redemption of (a) all shares in the account purchased more than one year prior
to the redemption, (b) all shares in the account acquired through reinvestment
of distributions, and (c) the increase, if any, of value in the other shares in
the account (namely those purchased within the year preceding the redemption)
over the purchase price of such shares. Redemptions are processed in a manner to
maximize the amount of redemption proceeds which will not be subject to a CDSC.
That is, each redemption will be assumed to have been made first from the exempt
amounts referred to in clauses (a), (b) and (c) above, and second through
liquidation of those shares in the account referred to in clause (c) on a
first-in-first out basis. As described under "Distribution Plan", the CDSC will
be paid to the Principal Underwriter or the Fund.
In calculating the CDSC upon the redemption of Fund shares acquired in an
exchange for shares of a fund currently listed under "The Eaton Vance Exchange
Privilege," the purchase of Fund shares acquired in the exchange is deemed to
have occurred at the time of the original purchase of the exchanged shares.
No CDSC will be imposed on Fund shares which have been sold to Eaton Vance or
its affiliates, or to their respective employees or clients. The CDSC will also
be waived for shares redeemed (1) pursuant to a Withdrawal Plan (see "Eaton
Vance Shareholder Services"), (2) as part of a distribution from a retirement
plan qualified under Section 401, 403(b) or 457 of the Internal Revenue Code of
1986, as amended (the "Code"), or (3) as part of a minimum required distribution
from other tax-sheltered retirement plans.
REPORTS TO SHAREHOLDERS
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THE FUND WILL ISSUE TO ITS SHAREHOLDERS SEMI-ANNUAL AND ANNUAL REPORTS
CONTAINING FINANCIAL STATEMENTS. Financial statements included in annual reports
are audited by the Fund's independent accountants. Shortly after the end of each
calendar year, the Fund will furnish all shareholders with information necessary
for preparing federal and state tax returns.
THE LIFETIME INVESTING ACCOUNT/DISTRIBUTION OPTIONS
- --------------------------------------------------------------------------------
AFTER AN INVESTOR MAKES AN INITIAL PURCHASE OF FUND SHARES, THE TRANSFER AGENT
WILL SET UP A LIFETIME INVESTING ACCOUNT FOR THE INVESTOR ON THE FUND'S RECORDS.
This account is a complete record of all transactions between the investor and
the Fund which at all times shows the balance of shares owned. The Fund will not
issue share certificates except upon request.
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 the account number).
THE FOLLOWING DISTRIBUTION OPTIONS WILL BE AVAILABLE TO ALL LIFETIME INVESTING
ACCOUNTS and may be changed as often as desired by written notice to the Fund's
dividend disbursing agent, First Data Investor Services Group, P.O. Box 5123,
Westborough, MA 01581-5123. The currently effective option will appear on each
account statement.
SHARE OPTION -- Dividends and capital gains will be reinvested in additional
shares.
INCOME OPTION -- Dividends will be paid in cash, and capital gains will be
reinvested in additional shares.
CASH OPTION -- Dividends and capital gains will be paid in cash.
The SHARE OPTION will be assigned if no other option is specified.
Distributions, including those reinvested, will be reduced by any withholding
required under federal income tax laws.
If the INCOME OPTION or CASH OPTION has been selected, dividend and/or capital
gains distribution checks which are returned by the United States Postal Service
as not deliverable or which remain uncashed for six months or more will be
reinvested in the account in shares at the then current net asset value.
Furthermore, the distribution option on the account will be automatically
changed to the SHARE OPTION until such time as the shareholder selects a
different option.
DISTRIBUTION INVESTMENT OPTION. In addition to the distribution options set
forth above, dividends and/or capital gains may be invested in additional shares
of another Eaton Vance fund. Before selecting this option, a shareholder should
obtain a prospectus of the other Eaton Vance fund and consider its objectives
and policies carefully.
"STREET NAME" ACCOUNTS. If shares of the Fund are held in a "street name"
account with an Authorized Firm, all recordkeeping, transaction processing and
payments of distributions relating to the beneficial owner's account will be
performed by the Authorized Firm, and not by the Fund and its Transfer Agent.
Since the Fund will have no record of the beneficial owner's transactions, a
beneficial owner should contact the Authorized Firm to purchase, redeem or
exchange shares, to make changes in or give instructions concerning the account,
or to obtain information about the account. The transfer of shares in a "street
name" account to an account with another Authorized Firm or to an account
directly with the Fund involves special procedures and will require the
beneficial owner to obtain historical purchase information about the shares in
the account from the Authorized Firm. Before establishing a "street name"
account with an Authorized Firm, or transferring the account to another
Authorized Firm, an investor wishing to reinvest distributions should determine
whether the Firm which will hold the shares allows reinvestment of distributions
in "street name" accounts.
THE EATON VANCE EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
Shares of the Fund currently may be exchanged for shares of one or more other
funds in the Eaton Vance Classic Group of Funds or Eaton Vance Money Market
Fund, which are distributed subject to a CDSC (or equivalent early withdrawal
charge), on the basis of the net asset value per share of each fund at the time
of the exchange. Exchange offers are available only in states where shares of
the fund begin acquired may be legally sold.
Each exchange must involve shares which have a net asset value of at least
$1,000. The exchange privilege may be changed or discontinued without penalty.
Shareholders will be given sixty (60) days' notice prior to any termination or
material amendment of the exchange privilege. The Fund does not permit the
exchange privilege to be used for "Market Timing" and may terminate the exchange
privilege for any shareholder account engaged in Market Timing activity. Any
shareholder account for which more than two round-trip exchanges are made within
any twelve month period will be deemed to be engaged in Market Timing.
Furthermore, a group of unrelated accounts for which exchanges are entered
contemporaneously by a financial intermediary will be considered to be engaged
in Market Timing.
The Transfer Agent makes exchanges at the next determined net asset value after
receiving an exchange request in good order (see "How to Redeem Fund Shares").
Consult the Transfer Agent for additional information concerning the exchange
privilege. Applications and prospectuses of other funds are available from
Authorized Firms or the Principal Underwriter. The prospectus for each fund
describes its investment objectives and policies, and shareholders should obtain
a prospectus and consider these objectives and policies carefully before
requesting an exchange.
No CDSC is imposed on exchanges. For purposes of calculating the CDSC upon the
redemption of shares acquired in an exchange, the purchase of shares acquired in
one or more exchanges is deemed to have occurred at the time of the original
purchase of the exchanged shares.
Shares of the other funds in the Eaton Vance Classic Group of Funds (and shares
of Eaton Vance Money Market Fund acquired as the result of an exchange from an
EV Classic fund) may be exchanged for Fund shares on the basis of the net asset
value per share of each fund at the time of the exchange, but subject to any
restrictions or qualifications set forth in the current prospectus of any such
fund.
Telephone exchanges are accepted by the Transfer Agent provided the investor has
not disclaimed in writing the use of the privilege. To effect such exchanges,
call the Transfer Agent at 800-262-1122 Monday through Friday, 9:00 a.m. to 4:00
p.m. (Eastern Standard Time). Shares acquired by telephone exchange must be
registered in the same name(s) and with the same address as the shares being
exchanged. Neither the Fund, the Principal Underwriter nor the Transfer Agent
will be responsible for the authenticity of exchange instructions received by
telephone, provided that reasonable procedures to confirm that instructions
communicated are genuine have been followed. Telephone instructions will be tape
recorded. In times of drastic economic or market changes, a telephone exchange
may be difficult to implement. An exchange may result in a taxable gain or loss.
EATON VANCE SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------
THE FUND OFFERS THE FOLLOWING SERVICES, WHICH ARE VOLUNTARY, INVOLVE NO EXTRA
CHARGE, AND MAY BE CHANGED OR DISCONTINUED WITHOUT PENALTY AT ANY TIME. Full
information on each of the services described below and an application, where
required, are available from Authorized Firms or the Principal Underwriter. The
cost of administering such services for the benefit of shareholders who
participate in them is borne by the Fund as an expense to all shareholders.
INVEST-BY-MAIL -- FOR PERIODIC SHARE ACCUMULATION: Once the $1,000 minimum
investment has been made, checks of $50 or more payable to the order of EV
Classic Government Obligations Fund may be mailed directly to the Transfer
Agent, First Data Investor Services Group, P.O. Box 5123, Westborough, MA
01581-5123 at any time -- whether or not distributions are reinvested. The name
of the shareholder, the Fund and the account number should accompany each
investment.
BANK AUTOMATED INVESTING -- FOR REGULAR SHARE ACCUMULATION: Cash investments of
$50 or more may be made automatically each month or quarter from the
shareholder's bank account. The $1,000 minimum initial investment and small
account redemption policy are waived for these accounts.
WITHDRAWAL PLAN: A shareholder may draw on shareholdings systematically with
monthly or quarterly checks in an aggregate amount that does not exceed
annually 12% of the account balance at the time the plan is established. Such
amount will not be subject to a CDSC. See "How to Redeem Fund Shares". A
minimum deposit of $5,000 in shares is required.
REINVESTMENT PRIVILEGE: A shareholder who has redeemed shares may reinvest, with
credit for any CDSC paid on the redeemed shares, any portion or all of the
redemption proceeds (plus that amount necessary to acquire a fractional share to
round off the purchase to the nearest full share) in shares of the Fund,
provided that the reinvestment is effected within 60 days after such redemption
and the privilege has not been used more than once in the prior 12 months.
Shares are sold to a reinvesting shareholder at the next determined net asset
value following timely receipt of a written purchase order by the Principal
Underwriter or by the Fund (or by the Fund's Transfer Agent). To the extent that
any shares of the Fund are sold at a loss and the proceeds are reinvested in
shares of the Fund (or other shares of the Fund are acquired) within the period
beginning 30 days before and ending 30 days after the date of the redemption,
some or all of the loss generally will not be allowed as a tax deduction.
Shareholders should consult their tax advisers concerning the tax consequences
of reinvestments.
TAX-SHELTERED RETIREMENT PLANS: Shares of the Fund are available for purchase in
connection with certain tax-sheltered retirement plans. Detailed information
concerning these plans, including certain exceptions to minimum investment
requirements, and copies of the plans are available from the Principal
Underwriter. This information should be read carefully and consultation with an
attorney or tax adviser may be advisable. The information sets forth the service
fee charged for retirement plans and describes the federal income tax
consequences of establishing a plan. Participant accounting services (including
trust fund reconciliation services) will be offered only through third party
recordkeepers and not by the Principal Underwriter. Under all plans, dividends
and distributions will be automatically reinvested in additional shares.
DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
SUBSTANTIALLY ALL OF THE INVESTMENT INCOME ALLOCATED TO THE FUND BY THE
PORTFOLIO, LESS THE FUND'S DIRECT AND ALLOCATED EXPENSES, WILL BE DECLARED DAILY
AS A DISTRIBUTION TO FUND SHAREHOLDERS OF RECORD AT THE TIME OF DECLARATION AND
WILL GENERALLY BE TAXABLE TO SHAREHOLDERS AS ORDINARY INCOME, WHETHER TAKEN IN
CASH OR REINVESTED IN ADDITIONAL SHARES. Such distributions, whether taken in
cash or reinvested in additional shares, will ordinarily be paid on the
twenty-second day of each month or the next business day thereafter. Daily
distribution crediting will commence on the 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.
Shareholders will receive annually tax information notices and Forms 1099 to
assist in the preparation of their federal and state tax returns for the prior
calendar year's distributions, proceeds from the redemption or exchange of Fund
shares, and federal income tax (if any) withheld by the Fund's Transfer Agent.
In order to qualify as a regulated investment company under the Code, the Fund
must satisfy certain requirements relating to the sources of its income, the
distribution of its income, and the diversification of its assets. In satisfying
these requirements, the Fund will treat itself as owning its proportionate share
of each of the Portfolio's assets and as entitled to the income of the Portfolio
properly attributable to such share.
As a regulated investment company under the Code, the Fund does not pay federal
income or excise taxes to the extent that it distributes to shareholders its net
investment income and net realized capital gains in accordance with the timing
requirements imposed by the Code. As a partnership under the Code, the Portfolio
does not pay federal income or excise taxes.
Shareholders should consult with their tax advisers concerning the applicability
of state, local or other taxes to an investment in the Fund.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
FROM TIME TO TIME, THE FUND MAY ADVERTISE ITS YIELD AND/OR AVERAGE ANNUAL TOTAL
RETURN. The Fund's current yield is calculated by dividing the net investment
income per share earned during a recent 30-day period by the maximum offering
price per share (net asset value) of the Fund on the last day of the period and
annualizing the resulting figure. The Fund's average annual total return is
determined by computing the average annual percentage change in value of $1,000
invested at the maximum public offering price (net asset value) for specified
periods, assuming reinvestment of all distributions. 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 quote total return for the period prior to commencement of operations
which would reflect the Portfolio's total return (or that of its predecessor)
adjusted to reflect any applicable Fund sales charge.
The Fund may also publish total return figures which do not take into account
any CDSC which may be imposed upon redemptions at the end of the specified
period. Any performance figure which does not take into account the CDSC would
be reduced to the extent such charge is imposed upon a redemption.
Investors should note that the investment results of the Fund will fluctuate
over time, and any presentation of the Fund's yield, or total return for any
prior period should not be considered as a representation of what an investment
may earn or what the Fund's yield or total return may be in any future period.
The following chart reflects the annual investment returns of the Fund for one
year periods ending December 31 and does not take into account any sales charge
which investors may bear. The total return for the period prior to the Fund's
commencement of operations on November 1, 1993 reflects the total return of the
Portfolio (or that of its predecessor) which had different operating expenses.
5 Year Average Annual Total Return -- 5.43%
10 Year Average Annual Total Return -- 7.48%
1987 4.17%
1988 7.46%
1989 13.21%
1990 8.97%
1991 14.42%
1992 5.29%
1993 8.59%
1994 (2.54%)
1995 12.94%
1996 3.49%
<PAGE>
[logo] EV CLASSIC GOVERNMENT
OBLIGATIONS FUND
- -----------------------------------------------------------------------------
PROSPECTUS
MAY 1, 1997
EV CLASSIC GOVERNMENT
OBLIGATIONS FUND
24 FEDERAL STREET
BOSTON, MA 02110
- -----------------------------------------------------------------------------
INVESTMENT ADVISER OF GOVERNMENT OBLIGATIONS PORTFOLIO
Boston Management and Research, 24 Federal Street, Boston, MA 02110
ADMINISTRATOR OF EV CLASSIC GOVERNMENT OBLIGATIONS FUND
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 89 South Street, Boston, MA 02111
TRANSFER AGENT
First Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123
(800) 262-1122
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P., One Post Office Square, Boston, MA 02109
C-GOP
<PAGE>
PART A
INFORMATION REQUIRED IN A PROSPECTUS
EV MARATHON
GOVERNMENT OBLIGATIONS FUND
- --------------------------------------------------------------------------------
EV MARATHON GOVERNMENT OBLIGATIONS FUND (THE "FUND") IS A MUTUAL FUND SEEKING
A HIGH CURRENT RETURN, BY INVESTING IN SECURITIES ISSUED, GUARANTEED OR
OTHERWISE BACKED BY THE U.S. GOVERNMENT AND ENGAGING IN ACTIVE MANAGEMENT
STRATEGIES. THE FUND INVESTS ITS ASSETS IN GOVERNMENT OBLIGATIONS PORTFOLIO
(THE "PORTFOLIO"), A DIVERSIFIED OPEN-END INVESTMENT COMPANY HAVING THE SAME
INVESTMENT OBJECTIVE AS THE FUND, RATHER THAN BY DIRECTLY INVESTING IN AND
MANAGING ITS OWN PORTFOLIO OF SECURITIES. 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 May 1, 1997 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>
PAGE PAGE
<S> <C> <C> <C>
Shareholder and Fund Expenses ......................... 2 How to Buy Fund Shares ............................ 11
The Fund's Financial Highlights ....................... 3 How to Redeem Fund Shares ......................... 12
The Fund's Investment Objective ....................... 4 Reports to Shareholders ........................... 14
Investment Policies and Risks ......................... 4 The Lifetime Investing Account/Distribution Options 14
Organization of the Fund and the Portfolio ............ 8 The Eaton Vance Exchange Privilege ................ 15
Management of the Fund and the Portfolio .............. 9 Eaton Vance Shareholder Services .................. 15
Distribution Plan ..................................... 10 Distributions and Taxes ........................... 16
Valuing Fund Shares ................................... 10 Performance Information ........................... 17
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
PROSPECTUS DATED MAY 1, 1997
<PAGE>
SHAREHOLDER AND FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
SHAREHOLDER TRANSACTION EXPENSES
- -------------------------------------------------------------------------------------------------------
<S> <C>
Sales Charges Imposed on Purchases of Shares None
Sales Charges Imposed on Reinvested Distributions None
Fees to Exchange Shares None
Range of Declining Contingent Deferred Sales Charges Imposed on Redemptions
During the First Seven Years (as a percentage of redemption proceeds exclusive
of all reinvestments and capital appreciation in the account) 5.00%-0%
ANNUAL FUND AND ALLOCATED PORTFOLIO OPERATING EXPENSES (as a percentage of average daily net assets)
- -------------------------------------------------------------------------------------------------------
Investment Adviser Fee 0.75%
Rule 12b-1 Distribution (and Service) Fees 0.90%
Other Expenses (including Interest and Securities Lending Expenses of 0.70%) 0.94%
---- ----
Total Operating Expenses 2.59%
====
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
An investor would pay the following contingent deferred sales
charge and expenses on a $1,000 investment, assuming (a) 5%
annual return and (b) redemption at the end of each period: $76 $121 $158 $292
An investor would pay the following expenses on the same
investment, assuming (a) 5% annual return and (b) no redemptions: $26 $ 81 $138 $292
</TABLE>
NOTES:
The table and Example summarize the aggregate expenses of the Fund and the
Portfolio and are designed to help investors understand the costs and expenses
they will bear, directly or indirectly, by investing in the Fund. Information
for the Fund is based on its expenses for the most recent fiscal year.
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. Federal
regulations require the Example to assume a 5% annual return but actual annual
return will vary. For further information regarding the expenses of both the
Fund and the Portfolio see "The Fund's Financial Highlights", "Management of
the Fund and the Portfolio" and "How to Redeem Fund Shares". A long-term
shareholder in the Fund may pay more than the economic equivalent of the
maximum front-end sales charge permitted by a rule of the National Association
of Securities Dealers, Inc. See "Distribution Plan".
No contingent deferred sales charge is imposed on (a) shares purchased more
than six years prior to redemption, (b) shares acquired through the
reinvestment of distributions or (c) any appreciation in value of other shares
in the account (see "How to Redeem Fund Shares"), and no such charge is
imposed on exchanges of Fund shares for shares of one or more other funds
listed under "The Eaton Vance Exchange Privilege".
The Fund Expense computation and the Example include 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 1.89%, and contingent deferred sales charges and
expenses incurred on a $1,000 investment for one, three, five and ten years
would have been $69, $99, $122 and $221, respectively (assuming redemption),
and $19, $59, $102 and $221, respectively (assuming no redemption).
The Fund invests exclusively in the Portfolio. Other investment companies with
different distribution arrangements and fees are investing in the Portfolio
and others may do so in the future. See "Organization of the Fund and the
Portfolio."
<PAGE>
THE FUND'S FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following information should be read in conjunction with the audited
financial statements that appear in the Fund's annual report to shareholders.
The Fund's financial statements have been audited by Coopers & Lybrand L.L.P.
independent accountants, as experts in accounting and auditing. The financial
statements and the report of independent accountants are incorporated by
reference into the Statement of Additional Information. Further information
regarding the performance of the Fund is contained in its annual report to
shareholders which may be obtained without charge by contacting the Principal
Underwriter.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------
1996 1995 1994 1993*
---- ---- ---- -----
<S> <C> <C> <C> <C>
NET ASSET VALUE, beginning of year $ 9.500 $ 8.990 $ 9.930 $10.000
------- ------- ------- -------
INCOME FROM OPERATIONS:
Net investment income $ 0.631 $ 0.640 $ 0.658 $ 0.126
Net realized and unrealized gain (loss)
on investments (0.307) 0.520 (0.865) (0.062)
------- ------- ------- -------
Total income (loss) from operations $ 0.324 $ 1.160 $(0.207) $ 0.064
------- ------- ------- -------
LESS DISTRIBUTIONS:
From net investment income $(0.631) $(0.635) $(0.658) $(0.126)
In excess of net investment income(3) (0.003) (0.015) (0.075) (0.008)
------- ------- ------- -------
Total distributions $(0.634) $(0.650) $(0.733) $(0.134)
------- ------- ------- -------
NET ASSET VALUE, end of year $ 9.190 $ 9.500 $ 8.990 $ 9.930
======= ======= ======= =======
TOTAL RETURN(1) 3.62% 13.29% (2.09)% 0.25%
RATIOS/SUPPLEMENTAL DATA:
Ratio of interest expense to average net
assets(2) 0.70% 0.71% 0.60% 0.54%+
Ratio of net expenses to average net
assets(2) 1.89% 1.84% 1.83% 2.06%+
Ratio of net investment income to
average net assets 6.83% 6.81% 6.91% 5.83%+
NET ASSETS AT END OF YEAR (000's omitted) $120,383 $117,165 $85,935 $20,951
</TABLE>
+ Computed on an annualized basis.
(1) Total investment return is calculated assuming a purchase at the net asset
value on the first day and a sale at the net asset value on the last day of
each period reported. Distributions, if any, are assumed to be reinvested at
the net asset value on the payable date. Total return is not computed on an
annualized basis.
(2) Includes the Fund's share of the Portfolio's allocated expenses.
(3) The Fund has followed the Statement of Position (SOP) 93-2: Determination,
Disclosure and Financial Statement Presentation of Income, Capital Gain, and
Return of Capital Distribution by Investment Companies. The SOP requires
that differences in the recognition or classification of income between the
financial statement and tax earnings and profits that result in temporary
over-distributions for financial statement purposes, are classified as
distributions in excess of net investment income or accumulated net realized
gains.
* For the period from the start of business, November 1, 1993, to
December 31, 1993.
<PAGE>
THE FUND'S INVESTMENT OBJECTIVE
- --------------------------------------------------------------------------------
THE FUND'S INVESTMENT OBJECTIVE IS TO REALIZE A HIGH CURRENT RETURN. The Fund
currently seeks to meet its investment objective by investing its assets in
the Government Obligations Portfolio (the "Portfolio"), a separate registered
investment company which has the same investment objective and policies as the
Fund. 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 40.0% of its net assets
invested in FNMA Mortgage-Backed Certificates, approximately 40.0% 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 December
31, 1996, 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 Securities and Exchange Commission
takes the position that purchased OTC options, assets used as cover for
written OTC options, and certain other derivative instruments (and securities)
are subject to the Portfolio's 15% limit on illiquid investments. The
Portfolio's ability to terminate OTC derivative instruments may depend on the
cooperation of the counterparties to such instruments. For thinly traded
derivative securities and contracts, the only source of price quotations may
be the selling dealer or counterparty.
To the extent that the Portfolio enters into futures contracts, options on
futures contracts and options on foreign currencies traded on an exchange
regulated by the Commodity Futures Trading Commission ("CFTC"), in each case
that are not for bona fide hedging purposes (as defined by the CFTC), the
aggregate initial margin and premiums required to establish these positions
(excluding the amount by which options are "in-the-money") may not exceed 5%
of the liquidation value of the Portfolio's portfolio, after taking into
account unrealized profits and unrealized losses on any contracts the
Portfolio has entered into.
SHORT SALES AGAINST-THE-BOX. The Portfolio may sell securities short 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). Under
current tax law, short sales against-the-box enable the Portfolio to hedge its
exposure to securities that it holds without selling the securities and
recognizing gains. A short sale against-the-box requires that the short seller
absorb certain costs so long as the position is open. In a short sale against-
the-box, the short seller is exposed to the risk of being forced to deliver
appreciated securities to close the position if the borrowed security is
called in, causing a taxable gain to be recognized. The Portfolio expects
normally to close its short sales against-the-box by delivering newly-acquired
securities. The Portfolio's ability to utilize short sales may be limited if
proposed tax legislation is enacted. No 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 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
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THE FUND IS A DIVERSIFIED SERIES OF EATON VANCE MUTUAL FUNDS TRUST, A BUSINESS
TRUST ESTABLISHED UNDER MASSACHUSETTS LAW PURSUANT TO A DECLARATION OF TRUST
DATED MAY 7, 1984, AS AMENDED. The Trustees of the Trust are responsible for the
overall management and supervision of its affairs. The Trust may issue an
unlimited number of shares of beneficial interest (no par value per share) in
one or more series (such as the Fund). Each share represents an equal
proportionate beneficial interest in the Fund. When issued and outstanding, the
shares are fully paid and nonassessable by the Trust and redeemable as described
under "How to Redeem Fund Shares". 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 have no
preemptive or conversion rights and are freely transferable. In the event of the
liquidation of the Fund, shareholders are entitled to share pro rata in the net
assets of the Fund available for distribution to shareholders.
THE PORTFOLIO IS ORGANIZED AS A TRUST UNDER THE LAWS OF THE STATE OF NEW YORK
AND INTENDS TO BE TREATED AS A PARTNERSHIP FOR FEDERAL TAX PURPOSES. The
Portfolio, as well as the Trust, intends to comply with all applicable federal
and state securities laws. The Portfolio's Declaration of Trust provides that
the Fund and other entities permitted to invest in the Portfolio (e.g., other
U.S. and foreign investment companies, and common and commingled trust funds)
will each be liable for all obligations of the Portfolio. However, the risk of
the Fund incurring financial loss on account of such liability is limited to
circumstances in which both inadequate insurance exists and the Portfolio
itself is unable to meet its obligations. Accordingly, the Trustees of the
Trust believe that neither the Fund nor its shareholders will be adversely
affected by reason of the Fund investing in the Portfolio.
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, affords 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.
In addition to selling an interest to the Fund, the Portfolio may sell
interests to other affiliated and non-affiliated mutual funds or institutional
investors. Such investors will invest in the Portfolio on the same terms and
conditions and will pay a proportionate share of the Portfolio's expenses.
However, the other investors investing in the Portfolio are not required to
sell their shares at the same public offering price as the Fund due to
variations in sales commissions and other operating expenses. Therefore,
investors in the Fund should be aware that these differences may result in
differences in returns experienced by investors in the various funds that
invest in the Portfolio. Such differences in returns are also present in other
mutual fund structures, including funds that have multiple classes of shares.
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
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THE PORTFOLIO ENGAGES BOSTON MANAGEMENT AND RESEARCH ("BMR"), A WHOLLY-OWNED
SUBSIDIARY OF EATON VANCE MANAGEMENT ("EATON VANCE"), AS ITS INVESTMENT
ADVISER. EATON VANCE, ITS AFFILIATES AND ITS PREDECESSOR COMPANIES HAVE BEEN
MANAGING ASSETS OF INDIVIDUALS AND INSTITUTIONS SINCE 1924 AND MANAGING
INVESTMENT COMPANIES SINCE 1931.
Acting under the general supervision of the Board of Trustees of the
Portfolio, BMR manages the Portfolio's investments and affairs. BMR also
furnishes for the use of the Portfolio office space and all necessary office
facilities, equipment and personnel for servicing the investments of the
Portfolio. Under its investment advisory agreement with the Portfolio, BMR
receives a monthly advisory fee of .0625% (equivalent to .75% annually) of the
average daily net assets of the Portfolio up to $500 million. On net assets of
$500 million and over the annual fee is reduced as follows:
ANNUALIZED FEE RATE
AVERAGE DAILY NET ASSETS FOR THE MONTH (FOR EACH LEVEL)
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$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
OVER $17 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 has been a Vice President of Eaton Vance and of BMR
since 1993.
BMR places the portfolio transactions of the Portfolio with many broker-dealer
firms and uses its best efforts to obtain execution of such transactions at
prices which are advantageous to the Portfolio. Subject to the foregoing, BMR
may consider sales of shares of the Fund or of other investment companies
sponsored by BMR or Eaton Vance as a factor in the selection of broker-dealer
firms to execute portfolio transactions. The Fund, the Portfolio and BMR have
adopted Codes of Ethics relating to personal securities transactions. The
Codes permit Eaton Vance personnel to invest in securities (including
securities that may be purchased or held by the Portfolio) for their own
accounts, subject to certain pre-clearance, reporting and other restrictions
and procedures contained in such Codes.
The Trust has retained the services of Eaton Vance to act as Administrator of
the Fund. The Trust has not retained the services of an investment adviser
since the Trust seeks to achieve the investment objective of the Fund by
investing the Fund's assets in the Portfolio. As Administrator, Eaton Vance
provides the Fund with general office facilities and supervises the overall
administration of the Fund. For these services, Eaton Vance currently receives
no compensation. The Trustees of the Trust may determine, in the future, to
compensate Eaton Vance for such services.
The Portfolio and the Fund, as the case may be, will each be responsible for
all of its respective costs and expenses not expressly stated to be payable by
BMR under the investment advisory agreement, by Eaton Vance under the
administrative services agreement, or by the Principal Underwriter under the
distribution agreement.
DISTRIBUTION PLAN
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The Fund has adopted a Distribution Plan ("Plan") pursuant to Rule 12b-1 under
the Investment Company Act of 1940 ("1940 Act"). Under the Plan, the Fund may
pay 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 Fund shares. The Plan provides that the Fund may use such fees
to compensate the Principal Underwriter for sales commissions paid by it to
financial services firms ("Authorized Firms") on the sale of Fund shares and for
interest expenses. 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 shares sold
by such Firms. Contingent deferred sales charges paid to the Principal
Underwriter will be used to reduce amounts owed to it. Because payments to the
Principal Underwriter by the Fund are limited, uncovered distribution charges
(sales commissions paid by the Principal Underwriter plus interest, less
contingent deferred sales charges received by it) may exist indefinitely. During
the fiscal year ended December 31, 1996, the Fund paid fees under the Plan
equivalent to .75% of the Fund's average daily net assets. As of December 31,
1996, uncovered distribution charges amounted to approximately $4,334,000
(equivalent to 3.6% of the Fund's net assets). For more information, see
"Distribution Plan" in the Statement of Additional Information.
The Plan also authorizes the Fund to make payments of service fees to the
Principal Underwriter, Authorized Firms and other persons in amounts not
exceeding .25% of the Fund's average daily net assets for personal services
and/or the maintenance of shareholder accounts. This fee is paid quarterly in
arrears based on the value of Fund shares sold by such persons and remaining
outstanding for at least twelve months. For the fiscal year ended December 31,
1996, the Fund paid or accrued service fees equivalent to .15% of the Fund's
average daily net assets for such year.
The Principal Underwriter may, from time to time, at its own expense, provide
additional incentives to Authorized Firms which employ registered
representatives who sell Fund shares and/or shares of other funds distributed
by the Principal Underwriter. In some instances, such additional incentives
may be offered only to certain Authorized Firms whose representatives sell or
are expected to sell significant amounts of shares. In addition, the Principal
Underwriter may from time to time increase or decrease the sales commissions
payable to Authorized Firms.
The Fund may, in its absolute discretion, suspend, discontinue or limit the
offering of its shares at any time. In determining whether any such action
should be taken, the Fund's management intends to consider all relevant
factors, including without limitation the size of the Fund, the investment
climate and market conditions, the volume of sales and redemptions of Fund
shares, and the amount of Uncovered Distribution Charges of the Principal
Underwriter. The Plan may continue in effect and payments may be made under
the Plan following any such suspension, discontinuance or limitation of the
offering of Fund shares; however, the Fund is not contractually obligated to
continue the Plan for any particular period of time. Suspension of the
offering of Fund shares would not, of course, affect a shareholder's ability
to redeem shares.
VALUING FUND SHARES
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THE FUND VALUES ITS SHARES ONCE ON EACH DAY THE NEW YORK STOCK EXCHANGE (THE
"EXCHANGE") IS OPEN FOR TRADING, as of the close of regular trading on the
Exchange (normally 4:00 p.m. New York time). The Fund's net asset value per
share is determined by its custodian, Investors Bank & Trust Company ("IBT"),
(as agent for the Fund) in the manner authorized by the Trustees of the Trust.
Net asset value is computed by dividing the value of the Fund's total assets,
less its liabilities, by the number of shares outstanding. Because the Fund
invests its assets in an interest in the Portfolio, the Fund's net asset value
will reflect the value of its interest in the Portfolio (which in turn,
reflects the underlying value of the Portfolio's assets and liabilities).
Authorized Firms must communicate an investor's order to the Principal
Underwriter prior to the close of the Principal Underwriter's business day to
receive that day's net asset value per Fund share. It is the Authorized Firms'
responsibility to transmit orders promptly to the Principal Underwriter.
The Portfolio's net asset value is also determined as of the close of regular
trading on the Exchange by IBT (as custodian and agent for the Portfolio) in
the manner authorized by the Trustees of the Portfolio. Net asset value is
computed by subtracting the liabilities of the Portfolio from the value of its
total assets. Mortgage-backed "pass-through" securities are valued through use
of a matrix pricing system which takes into account closing bond valuations,
yield differentials, anticipated prepayments and interest rates. For further
information regarding the valuation of the Portfolio's assets, see
"Determination of Net Asset Value" in the Statement of Additional Information.
SHAREHOLDERS MAY DETERMINE THE VALUE OF THEIR INVESTMENT BY MULTIPLYING
THE NUMBER OF FUND SHARES OWNED BY THE CURRENT NET ASSET VALUE PER SHARE.
HOW TO BUY FUND SHARES
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SHARES OF THE FUND MAY BE PURCHASED FOR CASH OR MAY BE ACQUIRED IN EXCHANGE
FOR SECURITIES. Investors may purchase shares of the Fund through Authorized
Firms at the net asset value per share of the Fund next determined after an
order is effective. An Authorized Firm may charge its customers a fee in
connection with transactions executed by that Firm. The Fund may suspend the
offering of shares at any time and may refuse an order for the purchase of
shares.
An initial investment in the Fund must be at least $1,000. Once an account has
been established the investor may send investments of $50 or more at any time
directly to the Fund's transfer agent (the "Transfer Agent") as follows: First
Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123. The
$1,000 minimum initial investment is waived for Bank Automated Investing
accounts, which may be established with an investment of $50 or more. See
"Eaton Vance Shareholder Services".
In connection with employee benefit or other continuous group purchase
plans, the Fund may accept initial investments of less than $1,000 on the
part of an individual participant. In the event a shareholder who is a
participant of such a plan terminates participation in the plan, shares will be
transferred to a regular individual account. However, such account will be
subject to the right of redemption by the Fund as described under "How to Redeem
Fund Shares".
ACQUIRING FUND SHARES IN EXCHANGE FOR SECURITIES. IBT, as escrow agent, will
receive securities acceptable to Eaton Vance, as Administrator, in exchange
for Fund shares at their net asset value as determined above. The minimum
value of securities (or securities and cash) accepted for deposit is $5,000.
Securities accepted will be sold on the day of their receipt or as soon
thereafter as possible. The number of Fund shares to be issued in exchange for
securities will be the aggregate proceeds from the sale of such securities,
divided by the applicable net asset value per Fund share on the day such
proceeds are received. Eaton Vance will use reasonable efforts to obtain the
then current market price for such securities, but does not guarantee the best
available price. Eaton Vance will absorb any transaction costs, such as
commissions, on the sale of the securities.
Securities determined to be acceptable should be transferred via book entry or
physically delivered, in proper form for transfer, through an Authorized Firm,
together with a completed and signed Letter of Transmittal in approved form
(available from Authorized Firms), as follows:
IN THE CASE OF BOOK ENTRY:
Deliver through Depository Trust Co.
Broker #2212
Investors Bank & Trust Company
For A/C EV Marathon Government Obligations Fund
IN THE CASE OF PHYSICAL DELIVERY:
Investors Bank & Trust Company
Attention: EV Marathon Government Obligations Fund
Physical Securities Processing Settlement Area
89 South Street
Boston, MA 02111
Investors who are contemplating an exchange of securities for shares of the
Fund, or their representatives, must contact Eaton Vance to determine whether
the securities are acceptable before forwarding such securities. Eaton Vance
reserves the right to reject any securities. Exchanging securities for Fund
shares may create a taxable gain or loss. Each investor should consult his or
her tax adviser with respect to the particular federal, state and local tax
consequences of exchanging securities for Fund shares.
IF YOU DON'T HAVE AN AUTHORIZED FIRM, EATON VANCE CAN RECOMMEND ONE.
HOW TO REDEEM FUND SHARES
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A SHAREHOLDER MAY REDEEM FUND SHARES IN ONE OF THREE WAYS -- BY MAIL, BY
TELEPHONE OR THROUGH AN AUTHORIZED FIRM. The redemption price will be based on
the net asset value per Fund share next computed after a redemption request is
received in the proper form as described below.
REDEMPTION BY MAIL: Shares may be redeemed by delivering to the Transfer
Agent, First Data Investor Services Group, P.O. Box 5123, Westborough, MA
01581-5123, during its business hours a written request for redemption in good
order, plus any share certificates with executed stock powers. Good order
means that all relevant documents must be endorsed by the record owner(s)
exactly as the shares are registered and the signature(s) must be guaranteed
by a member of either the Securities Transfer Association's STAMP program or
the New York Stock Exchange's Medallion Signature Program, or certain banks,
savings and loan institutions, credit unions, securities dealers, securities
exchanges, clearing agencies and registered securities associations as
required by a regulation of the Commission and acceptable to the Transfer
Agent. In addition, in some cases, good order may require the furnishing of
additional documents such as where shares are registered in the name of a
corporation, partnership or fiduciary.
REDEMPTION BY TELEPHONE: Shares may be redeemed by telephone provided the
investor has not disclaimed in writing the use of the privilege. Such
redemptions can be effected by calling the Transfer Agent at 800-262-1122,
Monday through Friday, 9:00 a.m. to 4:00 p.m. (Eastern Standard Time). The
proceeds of a telephone redemption may be no greater than the maximum amount
established by the Principal Underwriter (currently $50,000) and may be mailed
only to the account address of record. Shares held by corporations, trusts or
certain other entities, or subject to fiduciary arrangements, may not be
redeemed by telephone. Neither the Fund, the Principal Underwriter nor the
Transfer Agent will be responsible for the authenticity of redemption
instructions received by telephone, provided that reasonable procedures to
confirm that instructions communicated by telephone are genuine have been
followed. Telephone instructions will be tape recorded. In times of drastic
economic or market changes, a telephone redemption may be difficult to
implement.
REDEMPTION THROUGH AN AUTHORIZED FIRM: To sell 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
Principal Underwriter, as the Fund's agent, receives the order. It is the
Authorized Firm's responsibility to transmit promptly repurchase orders to the
Principal Underwriter. Throughout this Prospectus, the word "redemption" is
generally meant to include a repurchase.
Within seven days after receipt of a redemption request in good order by the
Transfer Agent, the Fund will make payment in cash for the net asset value of
the shares as of the date determined above, reduced by the amount of any
applicable contingent deferred sales charges (described below) and any federal
income tax required to be withheld. Although the Fund normally expects to make
payment in cash for redeemed shares, the Trust, subject to compliance with
applicable regulations, has reserved the right to pay the redemption price of
shares of the Fund, either totally or partially, by a distribution in kind of
readily marketable securities withdrawn by the Fund from the Portfolio. The
securities so distributed would be valued pursuant to the Portfolio's
valuation procedures. If a shareholder received a distribution in kind, the
shareholder could incur brokerage or other charges in converting the
securities to cash.
If shares were recently purchased, the proceeds of a redemption will not be sent
until the check (including a certified or cashier's check) received for the
shares purchased has cleared. Payment for shares tendered for redemption may
be delayed up to 15 days from the purchase date when the purchase check has
not yet cleared. Redemptions may result in a taxable gain or loss.
Due to the high cost of maintaining small accounts, the Fund reserves the
right to redeem accounts with balances of less than $750. Prior to such a
redemption, shareholders will be given 60 days' written notice to make
additional purchases. However, no such redemption would be required by the
Fund if the cause of the low account balance was a reduction in the net asset
value of Fund shares. No contingent deferred sales charge will be imposed with
respect to such involuntary redemptions.
CONTINGENT DEFERRED SALES CHARGE. Shares redeemed within the first six years
of their purchase (except shares acquired through the reinvestment of
distributions) generally will be subject to a contingent deferred sales charge
("CDSC"). This CDSC is imposed on any redemption the amount of which exceeds
the aggregate value at the time of redemption of (a) all shares in the account
purchased more than six years prior to the redemption, (b) all shares in the
account acquired through reinvestment of distributions, and (c) the increase,
if any, in the value of all other shares in the account (namely those
purchased within the six years preceding the redemption) over the purchase
price of such shares. Redemptions are processed in a manner to maximize the
amount of redemption proceeds which will not be subject to a CDSC. That is,
each redemption will be assumed to have been made first from the exempt
amounts referred to in clauses (a), (b) and (c) above, and second through
liquidation of those shares in the account referred to in clause (c) on a
first-in-first-out basis. As described under "Distribution Plan," the CDSC
will be paid to the Principal Underwriter or the Fund. Any CDSC which is
required to be imposed on share redemptions will be made in accordance with
the following schedule:
YEAR OF REDEMPTION
AFTER PURCHASE CDSC
- ------------------------------------------------------------------------
First or Second 5%
Third 4%
Fourth 3%
Fifth 2%
Sixth 1%
Seventh and following 0%
In calculating the CDSC upon the redemption of Fund shares acquired in an
exchange for shares of a fund currently listed under "The Eaton Vance Exchange
Privilege", the CDSC schedule applicable to the shares at the time of purchase
will apply and the purchase of shares acquired in the exchange is deemed to
have occurred at the time of the original purchase of the exchanged shares.
No CDSC will be imposed on Fund shares which have been sold to Eaton Vance or
its affiliates, or to their respective employees or clients. The CDSC will
also be waived for shares redeemed (1) pursuant to a Withdrawal Plan (see
"Eaton Vance Shareholder Services"), (2) as part of a required distribution
from a tax-sheltered retirement plan, or (3) following the death of all
beneficial owners of such shares, provided the redemption is requested within
one year of death (a death certificate and other applicable documents may be
required). In addition, shares acquired as a result of a merger or liquidation
of another Eaton Vance sponsored fund will have a CDSC imposed at the same
rate as would have been imposed in the prior fund.
THE FOLLOWING EXAMPLE ILLUSTRATES THE OPERATION OF THE CDSC. ASSUME THAT
AN INVESTOR PURCHASES $10,000 OF THE FUND'S SHARES AND THAT 16 MONTHS
LATER THE VALUE OF THE ACCOUNT HAS GROWN THROUGH INVESTMENT PERFORMANCE
AND REINVESTMENT OF DISTRIBUTIONS TO $12,000. THE INVESTOR THEN MAY REDEEM
UP TO $2,000 OF SHARES WITHOUT INCURRING A CDSC. IF THE INVESTOR SHOULD
REDEEM $3,000 OF SHARES, A CDSC WOULD BE IMPOSED ON $1,000 OF THE
REDEMPTION. THE RATE WOULD BE 5% BECAUSE THE REDEMPTION WAS MADE IN THE
SECOND YEAR AFTER THE PURCHASE WAS MADE AND THE CDSC WOULD BE $50.
REPORTS TO SHAREHOLDERS
- --------------------------------------------------------------------------------
THE FUND WILL ISSUE TO ITS SHAREHOLDERS SEMI-ANNUAL AND ANNUAL REPORTS
CONTAINING FINANCIAL STATEMENTS. Financial statements included in annual
reports are audited by the Fund's independent accountants. Shortly after the
end of each calendar year, the Fund will furnish all shareholders with
information necessary for preparing federal and state tax returns.
THE LIFETIME INVESTING ACCOUNT/DISTRIBUTION OPTIONS
- --------------------------------------------------------------------------------
AFTER AN INVESTOR MAKES AN INITIAL PURCHASE OF FUND SHARES, THE TRANSFER AGENT
WILL SET UP A LIFETIME INVESTING ACCOUNT FOR THE INVESTOR ON THE FUND'S
RECORDS. This account is a complete record of all transactions between the
investor and the Fund which at all times shows the balance of shares owned.
The Fund will not issue share certificates except upon request.
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 the account number).
THE FOLLOWING DISTRIBUTION OPTIONS WILL BE AVAILABLE TO ALL LIFETIME INVESTING
ACCOUNTS and may be changed as often as desired by written notice to the
Fund's dividend disbursing agent, First Data Investor Services Group, P.O.
Box 5123, Westborough, MA 01581-5123. The currently effective option will
appear on each account statement.
Share Option -- Dividends and capital gains will be reinvested in additional
shares.
Income Option -- Dividends will be paid in cash, and capital gains will be
reinvested in additional shares.
Cash Option -- Dividends and capital gains will be paid in cash.
The Share Option will be assigned if no other option is specified.
Distributions, including those reinvested, will be reduced by any withholding
required under federal income tax laws.
If the Income Option or Cash Option has been selected, dividend and/or capital
gains distribution checks which are returned by the United States Postal
Service as not deliverable or which remain uncashed for six months or more
will be reinvested in the account in shares at the then current net asset
value. Furthermore, the distribution option on the account will be
automatically changed to the Share Option until such time as the shareholder
selects a different option.
DISTRIBUTION INVESTMENT OPTION. In addition to the distribution options set
forth above, dividends and/or capital gains may be invested in additional
shares of another Eaton Vance fund. Before selecting this option, a
shareholder should obtain a prospectus of the other Eaton Vance fund and
consider its objectives and policies carefully.
"STREET NAME" ACCOUNTS. If shares of the Fund are held in a "street name"
account with an Authorized Firm, all recordkeeping, transaction processing and
payments of distributions relating to the beneficial owner's account will be
performed by the Authorized Firm, and not by the Fund and its Transfer Agent.
Since the Fund will have no record of the beneficial owner's transactions, a
beneficial owner should contact the Authorized Firm to purchase, redeem or
exchange shares, to make changes in or give instructions concerning the account,
or to obtain information about the account. The transfer of shares in a "street
name" account to an account with another Authorized Firm or to an account
directly with the Fund involves special procedures and will require the
beneficial owner to obtain historical purchase information about the shares in
the account from the Authorized Firm. Before establishing a "street name"
account with an Authorized Firm, or transferring the account to another
Authorized Firm, an investor wishing to reinvest distributions should determine
whether the Firm which will hold the shares allows reinvestment of distributions
in "street name" accounts.
THE EATON VANCE EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
Shares of the Fund currently may be exchanged for shares of one or more other
funds in the Eaton Vance Marathon Group of Funds (including Class I shares of
any EV Marathon Limited Maturity Fund), or Eaton Vance Money Market Fund,
which are subject to a CDSC. Shares of the Fund may also be exchanged for
shares of Eaton Vance Prime Rate Reserves, which are subject to an early
withdrawal charge, and shares of a money market fund sponsored by an
Authorized Firm and approved by the Principal Underwriter (an "Authorized Firm
fund"). Any such exchange will be made on the basis of the net asset value per
share of each fund at the time of the exchange. Exchange offers are available
only in states where shares of the fund being acquired may be legally sold.
Each exchange must involve shares which have a net asset value of at least
$1,000. The exchange privilege may be changed or discontinued without penalty.
Shareholders will be given sixty (60) days' notice prior to any termination or
material amendment of the exchange privilege. The Fund does not permit the
exchange privilege to be used for "Market Timing" and may terminate the
exchange privilege for any shareholder account engaged in Market Timing
activity. Any shareholder account for which more than two round-trip exchanges
are made within any twelve month period will be deemed to be engaged in Market
Timing. Furthermore, a group of unrelated accounts for which exchanges are
entered contemporaneously by a financial intermediary will be considered to be
engaged in Market Timing.
The Transfer Agent makes exchanges at the next determined net asset value
after receiving an exchange request in good order (see "How to Redeem Fund
Shares"). Consult the Transfer Agent for additional information concerning the
exchange privilege. Applications and prospectuses of other funds are available
from Authorized Firms or the Principal Underwriter. The prospectus for each
fund describes its investment objectives and policies, and shareholders should
obtain a prospectus and consider these objectives and policies carefully
before requesting an exchange.
No CDSC is imposed on exchanges. For purposes of calculating the CDSC upon
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 the Eaton
Vance Marathon Group of Funds (except EV Marathon Strategic Income Fund, Eaton
Vance Prime Rate Reserves and Class I shares of any EV Marathon Limited
Maturity Fund), see "How to Redeem Fund Shares". The CDSC or early withdrawal
charge schedule applicable to EV Marathon Strategic Income Fund, Eaton Vance
Prime Rate Reserves and Class I shares of any EV Marathon Limited Maturity
Fund is 3%, 2.5%, 2% or 1% in the event of a redemption occurring in the
first, second, third or fourth year, respectively, after the original share
purchase.
Shares of the funds listed above may be exchanged for Fund shares on the basis
of the net asset value per share of each fund at the time of the exchange, but
subject to any restrictions or qualifications set forth in the current
prospectus of any such fund.
Telephone exchanges are accepted by the Transfer Agent provided the investor
has not disclaimed in writing the use of the privilege. To effect such
exchanges, call the Transfer Agent at 800-262-1122, Monday through Friday,
9:00 a.m. to 4:00 p.m. (Eastern Standard Time). Shares acquired by telephone
exchange must be registered in the same name(s) and with the same address as
the shares being exchanged. Neither the Fund, the Principal Underwriter nor
the Transfer Agent will be responsible for the authenticity of exchange
instructions received by telephone, provided that reasonable procedures to
confirm that instructions communicated are genuine have been followed.
Telephone instructions will be tape recorded. In times of drastic economic or
market changes, a telephone exchange may be difficult to implement. An
exchange may result in a taxable gain or loss.
EATON VANCE SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------
THE FUND OFFERS THE FOLLOWING SERVICES, WHICH ARE VOLUNTARY, INVOLVE NO EXTRA
CHARGE, AND MAY BE CHANGED OR DISCONTINUED WITHOUT PENALTY AT ANY TIME. Full
information on each of the services described below and an application, where
required, are available from Authorized Firms or the Principal Underwriter.
The cost of administering such services for the benefit of shareholders who
participate in them is borne by the Fund as an expense to all shareholders.
INVEST-BY-MAIL -- FOR PERIODIC SHARE ACCUMULATION: Once the $1,000 minimum
investment has been made, checks of $50 or more payable to the order of EV
Marathon Government Obligations Fund may be mailed directly to the Transfer
Agent, First Data Investor Services Group, P.O. Box 5123, Westborough, MA
01581-5123 at any time -- whether or not distributions are reinvested. The
name of the shareholder, the Fund and the account number should accompany
each investment.
BANK AUTOMATED INVESTING -- FOR REGULAR SHARE ACCUMULATION: Cash investments
of $50 or more may be made automatically each month or quarter from the
shareholder's bank account. The $1,000 minimum initial investment and small
account redemption policy are waived for these accounts.
WITHDRAWAL PLAN: A shareholder may draw on shareholdings systematically with
monthly or quarterly checks in an aggregate amount that does not exceed
annually 12% of the account balance at the time the plan is established. Such
amount will not be subject to a CDSC. See "How to Redeem Fund Shares". A
minimum deposit of $5,000 in shares is required.
REINVESTMENT PRIVILEGE: A shareholder who has redeemed shares may reinvest,
with credit for any CDSC paid on the redeemed shares, any portion or all of
the redemption proceeds (plus that amount necessary to acquire a fractional
share to round off the purchase to the nearest full share) in shares of the
Fund, provided that the reinvestment is effected within 60 days after such
redemption and the privilege has not been used more than once in the prior 12
months. Shares are sold to a reinvesting shareholder at the next determined
net asset value following timely receipt of a written purchase order by the
Principal Underwriter or by the Fund (or by the Fund's Transfer Agent). To the
extent that any shares of the Fund are sold at a loss and the proceeds are
reinvested in shares of the Fund (or other shares of the Fund are acquired)
within the period beginning 30 days before and ending 30 days after the date
of the redemption, some or all of the loss generally will not be allowed as a
tax deduction. Shareholders should consult their tax advisers concerning the
tax consequences of reinvestments.
DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
SUBSTANTIALLY ALL OF THE INVESTMENT INCOME ALLOCATED TO THE FUND BY THE
PORTFOLIO, LESS THE FUND'S DIRECT AND ALLOCATED EXPENSES, WILL BE DECLARED
DAILY AS A DISTRIBUTION TO FUND SHAREHOLDERS OF RECORD AT THE TIME OF
DECLARATION AND WILL GENERALLY BE TAXABLE TO SHAREHOLDERS AS ORDINARY INCOME,
WHETHER TAKEN IN CASH OR REINVESTED IN ADDITIONAL SHARES. Such distributions,
whether taken in cash or reinvested in additional shares, will ordinarily be
paid on the fifteenth day of each month or the next business day thereafter.
Daily distribution crediting will commence on the 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 Internal Revenue Code of 1986, as amended (the "Code")
for one or more designated classes of activities involving mixed straddles.
The Portfolio is required to accrue original issue discount on zero coupon and
certain other securities and has elected to accrue market discount on debt
obligations which are purchased at a market discount. While enhancing the
Fund's current return, such accrual will also accelerate the Fund's
recognition of interest income, distributions of which will be taxable as
ordinary income. Furthermore, because the Fund seeks to stabilize monthly
distribution payments and the Portfolio has elected mixed straddle accounting
under the Code, it is possible that a portion of the Fund's aggregate
distributions during any year will be treated as a return of capital for tax
purposes, rather than taxable distributions of dividends or capital gains. The
Fund will inform the shareholders after the end of each year what portion, if
any, of such distributions constitutes a return of capital for tax purposes.
Shareholders will receive annually tax information notices and Forms 1099 to
assist in the preparation of their federal and state tax returns for the prior
calendar year's distributions, proceeds from the redemption or exchange of
Fund shares, and federal income tax (if any) withheld by the Fund's Transfer
Agent.
In order to qualify as a regulated investment company under the Code, the Fund
must satisfy certain requirements relating to the sources of its income, the
distribution of its income, and the diversification of its assets. In
satisfying these requirements, the Fund will treat itself as owning its
proportionate share of each of the Portfolio's assets and as entitled to the
income of the Portfolio properly attributable to such share.
As a regulated investment company under the Code, the Fund does not pay
federal income or excise taxes to the extent that it distributes to
shareholders its net investment income and net realized capital gains in
accordance with the timing requirements imposed by the Code. As a partnership
under the Code, the Portfolio does not pay federal income or excise taxes.
Shareholders should consult with their tax advisers concerning the
applicability of state, local or other taxes to an investment in the Fund.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
FROM TIME TO TIME, THE FUND MAY ADVERTISE ITS YIELD AND/OR AVERAGE ANNUAL
TOTAL RETURN. The Fund's current yield is calculated by dividing the net
investment income per share earned during a recent 30-day period by the
maximum offering price per share (net asset value) of the Fund on the last day
of the period and annualizing the resulting figure. The Fund's average annual
total return is determined by computing the average annual percentage change
in value of $1,000 invested at the maximum public offering price (net asset
value) for specified periods, assuming reinvestment of all distributions. 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 quote total return for the period prior to
commencement of operations which would reflect the Portfolio's total return
(or that of its predecessor) adjusted to reflect any applicable Fund sales
charge.
The Fund may also publish total return figures which do not take into account
any CDSC which may be imposed upon redemptions at the end of the specified
period. Any performance figure which does not take into account the CDSC would
be reduced to the extent such charge is imposed upon a redemption.
Investors should note that the investment results of the Fund will fluctuate
over time, and any presentation of the Fund's yield or total return for any
prior period should not be considered as a representation of what an
investment may earn or what the Fund's yield or total return may be in any
future period.
The following chart reflects the annual investment returns of the Fund for one
year periods ending December 31 and does not take into account any sales
charge which investors may bear. The total return for the period prior to the
Fund's commencement of operations on November 1, 1993 reflects the total
return of the portfolio (or that of its predecessor) which had different
operating expenses.
5 Year Average Annual Total Return -- 5.60%
10 Year Average Annual Total Return -- 7.57%
1987 4.17%
1988 7.46%
1989 13.21%
1990 8.97%
1991 14.42%
1992 5.29%
1993 8.50%
1994 (2.09%)
1995 13.29%
1996 3.61%
<PAGE>
[Logo]
EATON VANCE
===============
Mutual Funds
EV MARATHON GOVERNMENT
OBLIGATIONS FUND
- --------------------------------------------------------------------------------
PROSPECTUS
MAY 1, 1997
EV MARATHON GOVERNMENT
OBLIGATIONS FUND
24 FEDERAL STREET
BOSTON, MA 02110
- --------------------------------------------------------------------------------
INVESTMENT ADVISER OF GOVERNMENT OBLIGATIONS PORTFOLIO
Boston Management and Research, 24 Federal Street, Boston, MA 02110
ADMINISTRATOR OF EV MARATHON GOVERNMENT OBLIGATIONS FUND
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 89 South Street, Boston, MA 02111
TRANSFER AGENT
First Data Investor Services Group, 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
M-GOP
<PAGE>
PART A
INFORMATION REQUIRED IN A PROSPECTUS
EV TRADITIONAL
GOVERNMENT OBLIGATIONS FUND
- ------------------------------------------------------------------------------
EV TRADITIONAL GOVERNMENT OBLIGATIONS FUND (THE "FUND") IS A MUTUAL FUND SEEKING
A HIGH CURRENT RETURN, BY INVESTING IN SECURITIES ISSUED, GUARANTEED OR
OTHERWISE BACKED BY THE U.S. GOVERNMENT AND ENGAGING IN ACTIVE MANAGEMENT
STRATEGIES. THE FUND INVESTS ITS ASSETS IN GOVERNMENT OBLIGATIONS PORTFOLIO (THE
"PORTFOLIO"), A DIVERSIFIED OPEN-END INVESTMENT COMPANY HAVING THE SAME
INVESTMENT OBJECTIVE AS THE FUND, RATHER THAN BY DIRECTLY INVESTING IN AND
MANAGING ITS OWN PORTFOLIO OF SECURITIES. 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 May 1, 1997 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>
PAGE PAGE
<S> <C> <C> <C>
Shareholder and Fund Expenses ......................... 2 How to Buy Fund Shares ............................ 10
The Fund's Financial Highlights ....................... 3 How to Redeem Fund Shares ......................... 13
The Fund's Investment Objective ....................... 4 Reports to Shareholders ........................... 14
Investment Policies and Risks ......................... 4 The Lifetime Investing Account/Distribution Options 14
Organization of the Fund and the Portfolio ............ 8 The Eaton Vance Exchange Privilege ................ 15
Management of the Fund and the Portfolio .............. 9 Eaton Vance Shareholder Services .................. 16
Service Plan .......................................... 10 Distributions and Taxes ........................... 17
Valuing Fund Shares ................................... 10 Performance Information ........................... 18
</TABLE>
- ------------------------------------------------------------------------------
PROSPECTUS DATED MAY 1, 1997
<PAGE>
SHAREHOLDER AND FUND EXPENSES
- ------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES
- ------------------------------------------------------------------------------
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) 3.75%
Sales Charges Imposed on Reinvested Distributions None
Fees to Exchange Shares None
ANNUAL FUND AND ALLOCATED PORTFOLIO OPERATING EXPENSES
(as a percentage of average daily net assets)
- ------------------------------------------------------------------------------
Investment Adviser Fee 0.75%
Other Expenses (including Service Plan Fees and
Interest and Securities Lending Expenses of 0.70%) 1.11%
----
Total Operating Expenses 1.86%
====
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
An investor would pay
the following maximum
initial sales charge and
expenses on a $1,000
investment, assuming
(a) 5% annual return and
(b) redemption at the end
of each period: $56 $94 $134 $247
NOTES:
The table and Example summarize the aggregate expenses of the Fund and the
Portfolio and are designed to help investors understand the costs and expenses
they will bear, directly or indirectly, by investing in the Fund. Information
for the Fund is based on its expenses for the most recent fiscal year.
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. Federal regulations
require the Example to assume a 5% annual return but actual annual return will
vary. For further information regarding the expenses of both the Fund and the
Portfolio see "The Fund's Financial Highlights", "Management of the Fund and the
Portfolio" and "Service Plan".
No sales charge is payable at the time of purchase on investments of $1 million
or more. However, a contingent deferred sales charge of 1% will be imposed on
such investments in the event of certain redemptions within 12 months of
purchase. See "How to Buy Fund Shares" and "How to Redeem Fund Shares".
The Fund Expense computation and the Examples include 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, respectively.
The Fund invests exclusively in the Portfolio. Other investment companies with
different distribution arrangements and fees are investing in the Portfolio and
others may do so in the future. See "Organization of the Fund and the
Portfolio".
<PAGE>
THE FUND'S FINANCIAL HIGHLIGHTS
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The following information should be read in conjunction with the audited
financial statements that appear in the Fund's annual report to shareholders.
The Fund's financial statements have been audited by Coopers & Lybrand L.L.P.,
independent accountants, as experts in accounting and auditing. The financial
statements and the report of independent accountants are incorporated by
reference into the Statement of Additional Information. The financial highlights
for the fiscal year ended December 31, 1987, presented herein, was audited by
other auditors whose report dated January 15, 1988, expressed an unqualified
opinion on such financial highlights. Further information regarding the
performance of the Fund is contained in its annual report to shareholders which
may be obtained without charge by contacting the Principal Underwriter.
- ------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987+
-------- -------- -------- -------- -------- -------- ------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
beginning of year $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 $ 0.810 $ 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 (0.340) 0.603 (1.029) 0.105 (0.388) 0.4395 (0.1485) 0.2745 (0.2960) (0.6610)
------- ------- ------- ------- ------- -------- -------- -------- -------- --------
Total income
(loss) from
operations $ 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 $(0.810) $(0.810) $(0.805) $(0.919) $(1.006) $(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 $(0.810) $(0.810) $(0.836) $(0.925) $(1.007) $(1.1100) $(1.1100) $(1.1125) $(1.1400) $(1.2950)
------- ------- ------- ------- ------- -------- -------- -------- -------- --------
NET ASSET VALUE, end
of year $10.680 $11.020 $10.420 $11.480 $11.380 $11.8000 $11.3700 $11.5200 $11.2300 $11.5400
======= ======= ======= ======= ======= ======== ======== ======== ======== ========
TOTAL RETURN(1) 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 1.16%* 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 7.59% 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) $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 $ 7,00 6$ 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.
(1) Total investment return is calculated assuming a purchase at the net asset value on the first day and a sale at the net
asset value on the last day of each period reported. Distributions, if any, are assumed to be reinvested at the net asset
value on the payable date. Total return is not computed on an annualized basis.
(2) Portfolio Turnover represents the rate of portfolio activity for the period while the Fund was making investments
directly in securities. The portfolio turnover for the period since the Fund transferred substantially all of its
investable assets to the Portfolio is shown in the Portfolio's financial statements which are included in the Fund's
Statement of Additional Information.
(3) The Leverage Analysis is for the period prior to the date the Fund transferred substantially all of its investable assets
to the Portfolio. For subsequent periods, the leverage analysis is shown in the Portfolio's financial statements which
are included in the Fund's Statement of Additional Information.
(4) The Fund has followed the Statement of Position (SOP) 93-2: Determination, Disclosure and Financial Statement
Presentation of Income, Capital Gain, and Return of Capital Distribution by Investment Companies. The SOP requires that
differences in the recognition or classification of income between the financial statements and tax earnings and profits
that result in temporary over-distributions for financial statement purposes, are classified as distributions in excess
of net investment income or accumulated net realized gains.
</TABLE>
<PAGE>
THE FUND'S INVESTMENT OBJECTIVE
- ------------------------------------------------------------------------------
THE FUND'S INVESTMENT OBJECTIVE IS TO REALIZE A HIGH CURRENT RETURN. The Fund
currently seeks to meet its investment objective by investing its assets in the
Government Obligations Portfolio (the "Portfolio"), a separate registered
investment company which has the same investment objective and policies as the
Fund. 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 40.0% of its net
assets invested in FNMA Mortgage-Backed Certificates, approximately 40.0% 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 December 31, 1996, 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 Securities and Exchange Commission takes the position that
purchased OTC options, assets used as cover for written OTC options, and certain
other derivative instruments (and securities) are subject to the Portfolio's 15%
limit on illiquid investments. The Portfolio's ability to terminate OTC
derivative instruments may depend on the cooperation of the counterparties to
such instruments. For thinly traded derivative securities and contracts, the
only source of price quotations may be the selling dealer or counterparty.
To the extent that the Portfolio enters into futures contracts, options on
futures contracts and options on foreign currencies traded on an exchange
regulated by the Commodity Futures Trading Commission ("CFTC"), in each case
that are not for bona fide hedging purposes (as defined by the CFTC), the
aggregate initial margin and premiums required to establish these positions
(excluding the amount by which options are "in-the-money") may not exceed 5% of
the liquidation value of the Portfolio's portfolio, after taking into account
unrealized profits and unrealized losses on any contracts the Portfolio has
entered into.
SHORT SALES AGAINST-THE-BOX. The Portfolio may sell securities short 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). Under
current tax law, short sales against-the-box enable the Portfolio to hedge its
exposure to securities that it holds without selling the securities and
recognizing gains. A short sale against-the-box requires that the short seller
absorb certain costs so long as the position is open. In a short sale against-
the-box, the short seller is exposed to the risk of being forced to deliver
appreciated securities to close the position if the borrowed security is called
in, causing a taxable gain to be recognized. The Portfolio expects normally to
close its short sales against-the-box by delivering newly-acquired securities.
The Portfolio's ability to utilize short sales may be limited if proposed tax
legislation is enacted. 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 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). Each share represents an equal
proportionate beneficial interest in the Fund. When issued and outstanding, the
shares are fully paid and nonassessable by the Trust and redeemable as described
under "How to Redeem Fund Shares". 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 have no
preemptive or conversion rights and are freely transferable. In the event of the
liquidation of the Fund, shareholders are entitled to share pro rata in the net
assets of the Fund available for distribution to shareholders.
THE PORTFOLIO IS ORGANIZED AS A TRUST UNDER THE LAWS OF THE STATE OF NEW YORK
AND INTENDS TO BE TREATED AS A PARTNERSHIP FOR FEDERAL TAX PURPOSES. The
Portfolio, as well as the Trust, intends to comply with all applicable federal
and state securities laws. The Portfolio's Declaration of Trust provides that
the Fund and other entities permitted to invest in the Portfolio (e.g., other
U.S. and foreign investment companies, and common and commingled trust funds)
will each be liable for all obligations of the Portfolio. However, the risk of
the Fund incurring financial loss on account of such liability is limited to
circumstances in which both inadequate insurance exists and the Portfolio itself
is unable to meet its obligations. Accordingly, the Trustees of the Trust
believe that neither the Fund nor its shareholders will be adversely affected by
reason of the Fund investing in the Portfolio.
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,
affords 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.
In addition to selling an interest to the Fund, the Portfolio may sell interests
to other affiliated and non-affiliated mutual funds or institutional investors.
Such investors will invest in the Portfolio on the same terms and conditions and
will pay a proportionate share of the Portfolio's expenses. However, the other
investors investing in the Portfolio are not required to sell their shares at
the same public offering price as the Fund due to variations in sales
commissions and other operating expenses. Therefore, investors in the Fund
should be aware that these differences may result in differences in returns
experienced by investors in the various funds that invest in the Portfolio. Such
differences in returns are also present in other mutual fund structures,
including funds that have multiple classes of shares. 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
OVER $17 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 has been a Vice President of Eaton Vance and BMR since
1993.
BMR places the portfolio transactions of the Portfolio with many broker-dealer
firms and uses its best efforts to obtain execution of such transactions at
prices which are advantageous to the Portfolio. Subject to the foregoing, BMR
may consider sales of shares of the Fund or of other investment companies
sponsored by BMR or Eaton Vance as a factor in the selection of broker-dealer
firms to execute portfolio transactions. The Fund, the Portfolio and BMR have
adopted Codes of Ethics relating to personal securities transactions. The Codes
permit Eaton Vance personnel to invest in securities (including securities that
may be purchased or held by the Portfolio) for their own accounts, subject to
certain pre-clearance, reporting and other restrictions and procedures contained
in such Codes.
The Trust has retained the services of Eaton Vance to act as Administrator of
the Fund. The Trust has not retained the services of an investment adviser since
the Trust seeks to achieve the investment objective of the Fund by investing the
Fund's assets in the Portfolio. As Administrator, Eaton Vance provides the Fund
with general office facilities and supervises the overall administration of the
Fund. For these services, Eaton Vance currently receives no compensation. The
Trustees of the Trust may determine, in the future, to compensate Eaton Vance
for such services.
The Portfolio and the Fund, as the case may be, will each be responsible for all
of its respective costs and expenses not expressly stated to be payable by BMR
under the investment advisory agreement, by Eaton Vance under the administrative
services agreement, or by the Principal Underwriter under the distribution
agreement.
SERVICE PLAN
- ------------------------------------------------------------------------------
In addition to advisory fees and other expenses, the Fund pays service fees
pursuant to a Service Plan (the "Plan") designed to meet the requirements of
Rule 12b-1 under the Investment Company Act of 1940 and the service fee
requirements of the sales charge rule of the National Association of Securities
Dealers, Inc. THE PLAN PROVIDES THAT THE FUND MAY MAKE SERVICE FEE PAYMENTS FOR
PERSONAL SERVICES AND/OR THE MAINTENANCE OF SHAREHOLDER ACCOUNTS TO THE
PRINCIPAL UNDERWRITER, FINANCIAL SERVICES FIRMS ("AUTHORIZED FIRMS") AND OTHER
PERSONS IN AMOUNTS NOT EXCEEDING .25% OF THE FUND'S AVERAGE DAILY NET ASSETS FOR
ANY FISCAL YEAR. The Trustees of the Trust have initially implemented the Plan
by authorizing the Fund to make quarterly service fee payments to the Principal
Underwriter and Authorized Firms in amounts not expected to exceed .25% of the
Fund's average daily net assets for any fiscal year based on the value of Fund
shares sold by such persons and remaining outstanding for at least twelve
months. During the fiscal year ended December 31, 1996, the Fund paid or accrued
service fees under the Plan equivalent to .19% of the Fund's average daily net
assets for such year. The Plan is described further in the Statement of
Additional Information.
VALUING FUND SHARES
- ------------------------------------------------------------------------------
THE FUND VALUES ITS SHARES ONCE ON EACH DAY THE NEW YORK STOCK EXCHANGE (THE
"EXCHANGE") IS OPEN FOR TRADING, as of the close of regular trading on the
Exchange (normally 4:00 p.m. New York time). The Fund's net asset value per
share is determined by its custodian, Investors Bank & Trust Company ("IBT"),
(as agent for the Fund) in the manner authorized by the Trustees of the Trust.
Net asset value is computed by dividing the value of the Fund's total assets,
less its liabilities, by the number of shares outstanding. Because the Fund
invests its assets in an interest in the Portfolio, the Fund's net asset value
will reflect the value of its interest in the Portfolio (which in turn, reflects
the underlying value of the Portfolio's assets and liabilities).
Authorized Firms must communicate an investor's order to the Principal
Underwriter prior to the close of the Principal Underwriter's business day to
receive that day's net asset value per Fund share and the public offering price
based thereon. It is the Authorized Firms' responsibility to transmit orders
promptly to the Principal Underwriter.
The Portfolio's net asset value is also determined as of the close of regular
trading on the Exchange by IBT (as custodian and agent for the Portfolio) in the
manner authorized by the Trustees of the Portfolio. Net asset value is computed
by subtracting the liabilities of the Portfolio from the value of its total
assets. Mortgage-backed "pass-through" securities are valued through use of a
matrix pricing system which takes into account closing bond valuations, yield
differentials, anticipated prepayments and interest rates. For further
information regarding the valuation of the Portfolio's assets, see
"Determination of Net Asset Value" in the Statement of Additional Information.
SHAREHOLDERS MAY DETERMINE THE VALUE OF THEIR INVESTMENT BY MULTIPLYING THE
NUMBER OF FUND SHARES OWNED BY THE CURRENT NET ASSET VALUE PER SHARE.
HOW TO BUY FUND SHARES
- ------------------------------------------------------------------------------
SHARES OF THE FUND MAY BE PURCHASED FOR CASH OR MAY BE ACQUIRED IN EXCHANGE FOR
SECURITIES. Investors may purchase shares of the Fund through Authorized Firms
at the effective public offering price, which price is based on the effective
net asset value per share plus the applicable sales charge. The Fund receives
the net asset value, while the sales charge is divided between the Authorized
Firm and the Principal Underwriter. An Authorized Firm may charge its customers
a fee in connection with transactions executed by that Firm. The Fund may
suspend the offering of shares at any time and may refuse an order for the
purchase of shares.
The sales charge may vary depending on the size of the purchase and the number
of shares of Eaton Vance funds the investor may already own, any arrangement to
purchase additional shares during a 13-month period or special purchase
programs. Complete details of how investors may purchase shares at reduced sales
charges under a Statement of Intention, Right of Accumulation, or various
employee benefit plans are available from Authorized Firms or the Principal
Underwriter.
The current sales charges and dealer commissions are:
<TABLE>
<CAPTION>
SALES CHARGE AS SALES CHARGE AS DEALER COMMISSION
PERCENTAGE OF PERCENTAGE OF AS PERCENTAGE OF
AMOUNT OF PURCHASE OFFERING PRICE AMOUNT INVESTED OFFERING PRICE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000 3.75% 3.90% 4.00%
$50,000 but less than $100,000 2.75% 2.83% 3.00%
$100,000 but less than $250,000 2.25% 2.30% 2.50%
$250,000 but less than $500,000 1.75% 1.78% 2.00%
$500,000 but less than $1,000,000 1.25% 1.27% 1.50%
$1,000,000 or more 0.00%* 0.00%* See Below**
*No sales charge is payable at the time of purchase on investments of $1 million or more. 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. Such
purchases made before January 1, 1997 will be subject to a CDSC of 0.50% in the event of such redemptions.
**A commission on sales of $1 million or more will be paid as follows: 1.00% on sales 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>
The Principal Underwriter may at times allow discounts up to the full sales
charge. During periods when the discount includes the full sales charge,
Authorized Firms may be deemed to be underwriters as that term is defined in the
Securities Act of 1933. The Principal Underwriter may, from time to time, at its
own expense, provide additional incentives to Authorized Firms which employ
registered representatives who sell Fund shares and/or shares of other funds
distributed by the Principal Underwriter. In some instances, such additional
incentives may be offered only to certain Authorized Firms whose representatives
sell or are expected to sell significant amounts of shares.
An initial investment in the Fund must be at least $1,000. Once an account has
been established the investor may send investments of $50 or more at any time
directly to the Fund's transfer agent (the "Transfer Agent") as follows: First
Data Investor Services Group, 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".
Shares of the Fund may be sold at net asset value to current and retired
Directors and Trustees of Eaton Vance funds, including the Portfolio; to clients
and current and retired officers and employees of Eaton Vance, its affiliates
and other investment advisers of Eaton Vance sponsored funds; to registered
representatives and employees of Authorized Firms 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. Shares may also be
issued at net asset value (1) in connection with the merger of an investment
company with the Fund, (2) to investors making an investment as part of a fixed
fee program whereby an entity unaffiliated with the investment adviser provides
multiple investment services, such as management, brokerage and custody 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") ("Eligible Plans") and "rabbi trusts." The Fund's
Principal Underwriter may pay commissions to Authorized Firms who initiate and
are responsible for purchases of shares of the Fund by Eligible Plans of up to
1.00% of the amount invested in such shares.
No sales charge is payable at the time of purchase where the amount invested
represents redemption proceeds from a mutual fund unaffiliated wih Eaton Vance
if the redemption occurred no more than 60 days prior to the purchase of Fund
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.
ACQUIRING FUND SHARES IN EXCHANGE FOR SECURITIES. IBT, as escrow agent, will
receive securities acceptable to Eaton Vance, as Administrator, in exchange for
Fund shares at the applicable public offering price as determined above. The
minimum value of securities (or securities and cash) accepted for deposit is
$5,000. Securities accepted will be sold on the day of their receipt or as soon
thereafter as possible. The number of Fund shares to be issued in exchange for
securities will be the aggregate proceeds from the sale of such securities,
divided by the applicable public offering price per Fund share on the day such
proceeds are received. Eaton Vance will use reasonable efforts to obtain the
then current market price for such securities, but does not guarantee the best
available price. Eaton Vance will absorb any transaction costs, such as
commissions, on the sale of the securities.
Securities determined to be acceptable should be transferred via book entry or
physically delivered, in proper form for transfer, through an Authorized Firm,
together with a completed and signed Letter of Transmittal in approved form
(available from Authorized Firms), as follows:
IN THE CASE OF BOOK ENTRY:
Deliver through Depository Trust Co.
Broker #2212
Investors Bank & Trust Company
For A/C EV Traditional Government Obligations Fund
IN THE CASE OF PHYSICAL DELIVERY:
Investors Bank & Trust Company
Attention: EV Traditional Government Obligations Fund
Physical Securities Processing Settlement Area
89 South Street
Boston, MA 02111
Investors who are contemplating an exchange of securities for shares of the
Fund, or their representatives, must contact Eaton Vance to determine whether
the securities are acceptable before forwarding such securities. Eaton Vance
reserves the right to reject any securities. Exchanging securities for Fund
shares may create a taxable gain or loss. Each investor should consult his or
her tax adviser with respect to the particular federal, state and local tax
consequences of exchanging securities for Fund shares.
STATEMENT OF INTENTION AND ESCROW AGREEMENT. If the investor, on an application,
makes a Statement of Intention to invest a specified amount over a
thirteen-month period, then out of the initial purchase (or subsequent purchases
if necessary) 5% of the dollar amount specified on the application shall be held
in escrow by the escrow agent in the form of shares (computed to the nearest
full share at the public offering price applicable to the initial purchase
hereunder) registered in the investor's name. All income dividends and capital
gain distributions on escrowed shares will be paid to the investor or to the
investor's order. When the minimum investment so specified is completed, the
escrowed shares will be delivered to the investor. If the investor has an
accumulation account the shares will remain on deposit under the investor's
account.
If total purchases under this Statement of Intention are less than the amount
specified, the investor will promptly remit to the Principal Underwriter any
difference between the sales charge on the amount specified and on the amount
actually purchased. If the investor does not within 20 days after written
request by the Principal Underwriter or the Authorized Firm pay such difference
in sales charge, the escrow agent will redeem an appropriate number of the
escrowed shares in order to realize such difference. Full shares remaining after
any such redemption together with any excess cash proceeds of the shares so
redeemed will be delivered to the investor or to the investor's order by the
escrow agent.
If total purchases made under this Statement are large enough to qualify for a
lower sales charge than that applicable to the amount specified, all
transactions will be computed at the expiration date of this Statement to give
effect to the lower charge. Any difference in sales charge will be refunded to
the investor in cash, or applied to the purchase of additional shares at the
lower charge if specified by the investor. This refund will be made by the
Authorized Firm and by the Principal Underwriter. If at the time of the
recomputation an Authorized Firm other than the original firm is placing the
orders, the adjustment will be made only on those shares purchased through an
Authorized Firm then handling the investor's account.
IF YOU DON'T HAVE AN AUTHORIZED FIRM, EATON VANCE CAN RECOMMEND ONE.
HOW TO REDEEM FUND SHARES
- ------------------------------------------------------------------------------
A SHAREHOLDER MAY REDEEM FUND SHARES IN ONE OF THREE WAYS -- BY MAIL, BY
TELEPHONE OR THROUGH AN AUTHORIZED FIRM. The redemption price will be based on
the net asset value per Fund share next computed after a redemption request is
received in the proper form as described below.
REDEMPTION BY MAIL: Shares may be redeemed by delivering to the Transfer Agent,
First Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123,
during its business hours a written request for redemption in good order, plus
any share certificates with executed stock powers. Good order means that all
relevant documents must be endorsed by the record owner(s) exactly as the shares
are registered and the signature(s) must be guaranteed by a member of either the
Securities Transfer Association's STAMP program or the New York Stock Exchange's
Medallion Signature Program, or certain banks, savings and loan institutions,
credit unions, securities dealers, securities exchanges, clearing agencies and
registered securities associations as required by a regulation of the Commission
and acceptable to the Transfer Agent. In addition, in some cases, good order may
require the furnishing of additional documents such as where shares are
registered in the name of a corporation, partnership or fiduciary.
REDEMPTION BY TELEPHONE: Shares may be redeemed by telephone provided the
investor has not disclaimed in writing the use of the privilege. Such
redemptions can be effected by calling the Transfer Agent at 800-262-1122,
Monday through Friday, 9:00 a.m. to 4:00 p.m. (Eastern Standard Time). The
proceeds of a telephone redemption may be no greater than the maximum amount
established by the Principal Underwriter (currently $50,000) and may be mailed
only to the account address of record. Shares held by corporations, trusts or
certain other entities, or subject to fiduciary arrangements, may not be
redeemed by telephone. Neither the Fund, the Principal Underwriter nor the
Transfer Agent will be responsible for the authenticity of redemption
instructions received by telephone, provided that reasonable procedures to
confirm that instructions communicated by telephone are genuine have been
followed. Telephone instructions will be tape recorded. In times of drastic
economic or market changes, a telephone redemption may be difficult to
implement.
REDEMPTION THROUGH AN AUTHORIZED FIRM: To sell 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 Principal Underwriter, as
the Fund's agent, receives the order. It is the Authorized Firm's responsibility
to transmit promptly repurchase orders to the Principal Underwriter. Throughout
this Prospectus, the word "redemption" is generally meant to include a
repurchase.
Within seven days after receipt of a redemption request in good order by the
Transfer Agent, the Fund will make payment in cash for the net asset value of
the shares as of the date determined above, reduced by any federal income tax
required to be withheld. Although the Fund normally expects to make payment in
cash for redeemed shares, the Trust, subject to compliance with applicable
regulations, has reserved the right to pay the redemption price of shares of the
Fund, either totally or partially, by a distribution in kind of readily
marketable securities withdrawn by the Fund from the Portfolio. The securities
so distributed would be valued pursuant to the Portfolio's valuation procedures.
If a shareholder received a distribution in kind, the shareholder could incur
brokerage or other charges in converting the securities to cash.
If shares were recently purchased, the proceeds of a redemption will not be sent
until the check (including a certified or cashier's check) received for the
shares purchased has cleared. Payment for shares tendered for redemption may be
delayed up to 15 days from the purchase date when the purchase check has not yet
cleared. Redemptions may result in a taxable gain or loss.
Due to the high cost of maintaining small accounts, the Fund reserves the right
to redeem accounts with balances of less than $750. Prior to such a redemption,
shareholders will be given 60 days' written notice to make additional purchases.
However, no such redemption would be required by the Fund if the cause of the
low account balance was a reduction in the net asset value of Fund shares.
If shares have been purchased at net asset value with no initial sales charge by
virtue of the purchase having been in the amount of $1 million or more and are
redeemed within 12 months of purchase, a CDSC of 1% will be imposed on such
redemption. (Such purchases made before January 1, 1997 will be subject to a
CDSC of 0.50% in the event of certain redemptions made within 12 months of
purchase.) If shares have been purchased at net asset value because the amount
invested represents redemption proceeds from a mutual fund unaffiliated with
Eaton Vance (as described under "How to Buy Fund Shares") and are redeemed
within 12 months of purchase, a CDSC of 0.50% will be imposed on such
redemption. The CDSC will be imposed on an amount equal to the lesser of the
current market value or the original purchase price of the shares redeemed.
Accordingly, no CDSC will be imposed on increases in account value above the
initial purchase price, including any distributions that have been reinvested in
additional shares. In determining whether a CDSC is applicable to a redemption
it will be assumed that redemptions are made first from any shares in the
shareholder's account that are not subject to a CDSC. The CDSC will be retained
by the Principal Underwriter.
The CDSC is waived for redemptions involving certain liquidation, merger or
acquisition transactions involving other investment companies. If a shareholder
reinvests redemption proceeds in accordance with the conditions set forth under
"Eaton Vance Shareholder Services -- Reinvestment Privilege," the shareholder's
account will be credited with the amount of any CDSC paid on such redeemed
shares.
REPORTS TO SHAREHOLDERS
- ------------------------------------------------------------------------------
THE FUND WILL ISSUE TO ITS SHAREHOLDERS SEMI-ANNUAL AND ANNUAL REPORTS
CONTAINING FINANCIAL STATEMENTS. Financial statements included in annual reports
are audited by the Fund's independent accountants. Shortly after the end of each
calendar year, the Fund will furnish all shareholders with information necessary
for preparing federal and state tax returns. Consistent with applicable law,
duplicate mailings of shareholder reports and certain other Fund information to
shareholders residing at the same address may be eliminated.
THE LIFETIME INVESTING ACCOUNT/DISTRIBUTION OPTIONS
- ------------------------------------------------------------------------------
AFTER AN INVESTOR MAKES AN INITIAL PURCHASE OF FUND SHARES, THE TRANSFER AGENT
WILL SET UP A LIFETIME INVESTING ACCOUNT FOR THE INVESTOR ON THE FUND'S RECORDS.
This account is a complete record of all transactions between the investor and
the Fund which at all times shows the balance of shares owned. The Fund will not
issue share certificates except upon request.
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 FIRST 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 the account number).
THE FOLLOWING DISTRIBUTION OPTIONS WILL BE AVAILABLE TO ALL LIFETIME INVESTING
ACCOUNTS and may be changed as often as desired by written notice to the Fund's
dividend disbursing agent, First Data Investor Services Group, P.O. Box 5123,
Westborough, MA 01581-5123. The currently effective option will appear on each
account statement.
SHARE OPTION -- Dividends and capital gains will be reinvested in additional
shares.
INCOME OPTION -- Dividends will be paid in cash, and capital gains will be
reinvested in additional shares.
Cash Option -- Dividends and capital gains will be paid in cash.
The SHARE OPTION will be assigned if no other option is specified.
Distributions, including those reinvested, will be reduced by any withholding
required under federal income tax laws.
If the INCOME OPTION or CASH OPTION has been selected, dividend and/or capital
gains distribution checks which are returned by the United States Postal Service
as not deliverable or which remain uncashed for six months or more will be
reinvested in the account in shares at the then current net asset value.
Furthermore, the distribution option on the account will be automatically
changed to the SHARE OPTION until such time as the shareholder selects a
different option.
DISTRIBUTION INVESTMENT OPTION. In addition to the distribution options set
forth above, dividends and/or capital gains may be invested in additional shares
of another Eaton Vance fund. Before selecting this option, a shareholder should
obtain a prospectus of the other Eaton Vance fund and consider its objectives
and policies carefully.
"STREET NAME" ACCOUNTS. If shares of the Fund are held in a "street name"
account with an Authorized Firm, all recordkeeping, transaction processing and
payments of distributions relating to the beneficial owner's account will be
performed by the Authorized Firm, and not by the Fund and its Transfer Agent.
Since the Fund will have no record of the beneficial owner's transactions, a
beneficial owner should contact the Authorized Firm to purchase, redeem or
exchange shares, to make changes in or give instructions concerning the account,
or to obtain information about the account. The transfer of shares in a "street
name" account to an account with another Authorized Firm or to an account
directly with the Fund involves special procedures and will require the
beneficial owner to obtain historical purchase information about the shares in
the account from the Authorized Firm. Before establishing a "street name"
account with an Authorized Firm, or transferring the account to another
Authorized Firm, an investor wishing to reinvest distributions should determine
whether the Firm which will hold the shares allows reinvestment of distributions
in "street name" accounts.
THE EATON VANCE EXCHANGE PRIVILEGE
- ------------------------------------------------------------------------------
Shares of the Fund currently may be exchanged for shares of any of the following
funds: Eaton Vance Cash Management Fund, Eaton Vance Income Fund of Boston,
Eaton Vance Municipal Bond Fund L.P., Eaton Vance Tax Free Reserves and any fund
in the Eaton Vance Traditional Group of Funds on the basis of the net asset
value per share of each fund at the time of the exchange (plus, in the case of
an exchange made within six months of the date of purchase of shares subject to
an initial sales charge, an amount equal to the difference, if any, between the
sales charge previously paid on the shares being exchanged and the sales charge
payable on the shares being acquired). Exchange offers are available only in
states where shares of the fund being acquired may be legally sold.
Each exchange must involve shares which have a net asset value of at least
$1,000. The exchange privilege may be changed or discontinued without penalty.
Shareholders will be given sixty (60) days' notice prior to any termination or
material amendment of the exchange privilege. The Fund does not permit the
exchange privilege to be used for "Market Timing" and may terminate the exchange
privilege for any shareholder account engaged in Market Timing activity. Any
shareholder account for which more than two round-trip exchanges are made within
any twelve month period will be deemed to be engaged in Market Timing.
Furthermore, a group of unrelated accounts for which exchanges are entered
contemporaneously by a financial intermediary will be considered to be engaged
in Market Timing.
Shares of the Fund which are subject to a CDSC may be exchanged into any of the
above funds without incurring the CDSC. The shares acquired in an exchange may
be subject to a CDSC upon redemption. For purposes of computing the CDSC payable
upon redemption of shares acquired in an exchange, the holding period of the
original shares is added to the holding period of the shares acquired in the
exchange.
The Transfer Agent makes exchanges at the next determined net asset value after
receiving an exchange request in good order (see "How to Redeem Fund Shares").
Consult the Transfer Agent for additional information concerning the exchange
privilege. Applications and prospectuses of other funds are available from
Authorized Firms or the Principal Underwriter. The prospectus for each fund
describes its investment objectives and policies, and shareholders should obtain
a prospectus and consider these objectives and policies carefully before
requesting an exchange.
Shares of certain other funds for which Eaton Vance acts as investment adviser
or administrator may be exchanged for Fund shares on the basis of the net asset
value per share of each fund at the time of the exchange (plus, in the case of
an exchange made within six months of the date of purchase of shares subject to
an initial sales charge, an amount equal to the difference, if any, between the
sales charge previously paid on the shares being exchanged and the sales charge
payable on the Fund shares being acquired). Any such exchange is subject to any
restrictions or qualifications set forth in the current prospectus of any such
fund.
Telephone exchanges are accepted by the Transfer Agent provided that the
investor has not disclaimed in writing the use of the privilege. To effect such
exchanges, call the Transfer Agent at 800-262-1122, Monday through Friday, 9:00
a.m. to 4:00 p.m. (Eastern Standard Time). Shares acquired by telephone exchange
must be registered in the same name(s) and with the same address as the shares
being exchanged. Neither the Fund, the Principal Underwriter nor the Transfer
Agent will be responsible for the authenticity of exchange instructions received
by telephone, provided that reasonable procedures to confirm that instructions
communicated are genuine have been followed. Telephone instructions will be tape
recorded. In times of drastic economic or market changes, a telephone exchange
may be difficult to implement. An exchange may result in a taxable gain or loss.
EATON VANCE SHAREHOLDER SERVICES
- ------------------------------------------------------------------------------
THE FUND OFFERS THE FOLLOWING SERVICES, WHICH ARE VOLUNTARY, INVOLVE NO EXTRA
CHARGE, AND MAY BE CHANGED OR DISCONTINUED WITHOUT PENALTY AT ANY TIME. Full
information on each of the services described below and an application, where
required, are available from Authorized Firms or the Principal Underwriter. The
cost of administering such services for the benefit of shareholders who
participate in them is borne by the Fund as an expense to all shareholders.
INVEST-BY-MAIL -- FOR PERIODIC SHARE ACCUMULATION: Once the $1,000 minimum
investment has been made, checks of $50 or more payable to the order of EV
Traditional Government Obligations Fund may be mailed directly to the Transfer
Agent, First Data Investor Services Group, P.O. Box 5123, Westborough, MA
01581-5123 at any time -- whether or not distributions are reinvested. The name
of the shareholder, the Fund and the account number should accompany each
investment.
BANK AUTOMATED INVESTING -- FOR REGULAR SHARE ACCUMULATION: Cash investments of
$50 or more may be made automatically each month or quarter from the
shareholder's bank account. The $1,000 minimum initial investment and small
account redemption policy are waived for these accounts.
STATEMENT OF INTENTION: Purchases of $50,000 or more made over a 13-month
period are eligible for reduced sales charges. See "How to Buy Fund Shares --
Statement of Intention and Escrow Agreement".
RIGHT OF ACCUMULATION: Purchases may qualify for reduced sales charges when the
current market value of holdings (shares at current offering price), plus new
purchases, reaches $50,000 or more. Shares of the Eaton Vance funds listed under
"The Eaton Vance Exchange Privilege" may be combined under the Statement of
Intention and Right of Accumulation.
WITHDRAWAL PLAN: A shareholder may draw on shareholdings systematically with
monthly or quarterly checks in an amount specified by the shareholder. A minimum
deposit of $5,000 in shares is required. The maintenance of a withdrawal plan
concurrently with purchases of additional shares would be disadvantageous
because of the sales charge included in such purchases.
REINVESTMENT PRIVILEGE: A shareholder who has redeemed shares may reinvest at
net asset value any portion or all of the redemption proceeds (plus that amount
necessary to acquire a fractional share to round off the purchase to the nearest
full share) in shares of the Fund, or, provided that the shares redeemed have
been held for at least 60 days, in shares of any of the other funds offered by
the Principal Underwriter subject to an initial sales charge, provided that the
reinvestment is effected within 60 days after such redemption and the privilege
has not been used more than once in the prior 12 months. Shares are sold to a
reinvesting shareholder at the next determined net asset value following timely
receipt of a written purchase order by the Principal Underwriter or by the fund
the shares of which are to be purchased (or by such fund's transfer agent). The
privilege is also available to shareholders of the funds listed under "The Eaton
Vance Exchange Privilege" who wish to reinvest such redemption proceeds in
shares of the Fund. If a shareholder reinvests redemption proceeds within the
60-day period, the shareholder's account will be credited with the amount of any
CDSC paid on such redeemed shares. To the extent that any shares of the Fund are
sold at a loss and the proceeds are reinvested in shares of the Fund (or other
shares of the Fund are acquired) within the period beginning 30 days before and
ending 30 days after the date of the redemption, some or all of the loss
generally will not be allowed as a tax deduction. Shareholders should consult
their tax advisers concerning the tax consequences of reinvestments.
TAX-SHELTERED RETIREMENT PLANS: Shares of the Fund are available for purchase in
connection with certain tax-sheltered retirement plans. Detailed information
concerning these plans, including certain exceptions to minimum investment
requirements, and copies of the plans are available from the Principal
Underwriter. This information should be read carefully and consultation with an
attorney or tax adviser may be advisable. The information sets forth the service
fee charged for retirement plans and describes the federal income tax
consequences of establishing a plan. Participant accounting services (including
trust fund reconciliation services) will be offered only through third party
recordkeepers and not by the Principal Underwriter. Under all plans,
distributions will be automatically reinvested in additional shares.
DISTRIBUTIONS AND TAXES
- ------------------------------------------------------------------------------
SUBSTANTIALLY ALL OF THE INVESTMENT INCOME ALLOCATED TO THE FUND BY THE
PORTFOLIO, LESS THE FUND'S DIRECT AND ALLOCATED EXPENSES, WILL BE DECLARED DAILY
AS A DISTRIBUTION TO FUND SHAREHOLDERS OF RECORD AT THE TIME OF THE DECLARATION
AND WILL GENERALLY BE TAXABLE TO SHAREHOLDERS AS ORDINARY INCOME, WHETHER TAKEN
IN CASH OR REINVESTED IN ADDITIONAL SHARES. Such distributions, whether taken in
cash or reinvested in additional shares, will ordinarily be paid on the
fifteenth day of each month or the next business day thereafter. Daily
distribution crediting will commence on the 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 shares of the Fund cannot be taken into
account for purposes of determining gain or loss on a redemption or exchange of
the shares before the 91st day after their purchase to the extent a sales charge
is reduced or eliminated in a subsequent acquision of shares of the Fund or of
another fund pursuant to the Fund's reinvestment or exchange privilege. Any
disregarded amounts will result in an adjustment to the shareholder's tax basis
in some or all of any other shares acquired.
Shareholders will receive annually tax information notices and Forms 1099 to
assist in the preparation of their federal and state tax returns for the prior
calendar year's distributions, proceeds from the redemption or exchange of Fund
shares, and federal income tax (if any) withheld by the Fund's Transfer Agent.
In order to qualify as a regulated investment company under the Code, the Fund
must satisfy certain requirements relating to the sources of its income, the
distribution of its income, and the diversification of its assets. In satisfying
these requirements, the Fund will treat itself as owning its proportionate share
of each of the Portfolio's assets and as entitled to the income of the Portfolio
properly attributable to such share.
As a regulated investment company under the Code, the Fund does not pay federal
income or excise taxes to the extent that it distributes to shareholders its net
investment income and net realized capital gains in accordance with the timing
requirements imposed by the Code. As a partnership under the Code, the Portfolio
does not pay federal income or excise taxes.
Shareholders should consult with their tax advisers concerning the applicability
of state, local or other taxes to an investment in the Fund.
PERFORMANCE INFORMATION
- ------------------------------------------------------------------------------
FROM TIME TO TIME, THE FUND MAY ADVERTISE ITS YIELD AND/OR AVERAGE ANNUAL TOTAL
RETURN. The Fund's current yield is calculated by dividing the net investment
income per share earned during a recent 30-day period by the maximum offering
price per share of the Fund on the last day of the period and annualizing the
resulting figure. The Fund's average annual total return is determined by
computing the average annual percentage change in value of $1,000 invested at
the maximum public offering price (which includes the maximum sales charge) for
specified periods, assuming reinvestment of all distributions. The Fund may also
publish annual and cumulative total return figures from time to time.
The Fund may also furnish total return calculations based on investments at
various sales charge levels or at net asset value. Any performance data which is
based on the Fund's net asset value per share would be lower if a sales charge
were taken into account. The Fund's performance may be compared in publications
to the performance of various indices and investments for which reliable data is
available, and to averages, performance rankings, or other information prepared
by recognized mutual fund statistical services.
Investors should note that the investment results of the Fund will fluctuate
over time, and any presentation of the Fund's yield or total return for any
prior period should not be considered as a representation of what an investment
may earn or what the Fund's yield or total return may be in any future period.
The following chart reflects the annual investment returns of the Fund for one
year periods ending December 31 and does not take into account any sales charge
which investors may bear.
5 Year Average Annual Total Return -- 6.07%
10 Year Average Annual Total Return -- 7.81%
1987 4.17%
1988 7.47%
1989 13.21%
1990 8.96%
1991 14.42%
1992 5.29%
1993 9.26%
1994 (2.03%)
1995 13.97%
1996 4.52%
<PAGE>
[logo]
EV TRADITIONAL
GOVERNMENT
OBLIGATIONS FUND
PROSPECTUS
MAY 1, 1997
EV TRADITIONAL GOVERNMENT
OBLIGATIONS FUND
24 FEDERAL STREET
BOSTON, MA 02110
- -------------------------------------------------------------------------------
INVESTMENT ADVISER OF GOVERNMENT OBLIGATIONS PORTFOLIO
Boston Management and Research, 24 Federal Street, Boston, MA 02110
ADMINISTRATOR OF EV TRADITIONAL GOVERNMENT OBLIGATIONS FUND
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 89 South Street, Boston, MA 02111
TRANSFER AGENT
First Data Investor Services Group, 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
T-GOP
<PAGE>
PART A
INFORMATION REQUIRED IN A PROSPECTUS
EATON VANCE SHORT-TERM
TREASURY FUND
- --------------------------------------------------------------------------------
EATON VANCE SHORT-TERM TREASURY FUND (THE "FUND") IS A MUTUAL FUND SEEKING
CURRENT INCOME AND LIQUIDITY, BY INVESTING EXCLUSIVELY IN U.S. TREASURY
OBLIGATIONS. THE FUND IS A SERIES OF EATON VANCE MUTUAL FUNDS TRUST.
Shares of the Fund are not deposits or obligations of, or guaranteed or
endorsed by, any bank or other insured depository institution, and are not
federally insured by the Federal Deposit Insurance Corporation, the Federal
Reserve Board or any other government agency. Shares of the Fund involve
investment risks, including fluctuations in value and the possible loss of
some or all of the principal investment.
This Prospectus is designed to provide you with information you should know
before investing. Please retain this document for future reference. A
Statement of Additional Information dated May 1, 1997 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 Fund's investment adviser is Eaton Vance Management (the
"Investment Adviser"), which is located at the same address.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE PAGE
<S> <C> <C> <C>
Shareholder and Fund Expenses ..................... 2 How to Buy Fund Shares ............................ 6
The Fund's Financial Highlights ................... 3 How to Redeem Fund Shares ......................... 7
The Fund's Investment Objective ................... 4 Reports to Shareholders ........................... 8
Investment Policies and Risks ..................... 4 The Lifetime Investing Account/Distribution Options 8
Organization of the Fund .......................... 5 The Eaton Vance Exchange Privilege ................ 9
Management of the Fund ............................ 5 Eaton Vance Shareholder Services .................. 10
Distribution Plan ................................. 6 Distributions and Taxes ........................... 10
Valuing Fund Shares ............................... 6 Performance Information ........................... 11
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
PROSPECTUS DATED MAY 1, 1997
<PAGE>
<TABLE>
<CAPTION>
SHAREHOLDER AND FUND EXPENSES
- ---------------------------------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES
- ---------------------------------------------------------------------------------------------------------
<S> <C>
Sales Charges Imposed on Purchases of Shares None
Sales Charges Imposed on Reinvested Distributions None
Fees to Exchange Shares None
<CAPTION>
ANNUAL FUND OPERATING EXPENSES (as a percentage of average daily net assets)
- ---------------------------------------------------------------------------------------------------------
<S> <C>
Investment Adviser Fee (after fee reduction) 0.17%
Rule 12b-1 Distribution Fees 0.25%
Other Expenses 0.19%
----
Total Operating Expenses (after reduction) 0.61%
====
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
An investor would pay the following expenses on a $1,000
investment, assuming (a) 5% annual return and (b) redemption at
the end of each period: $6 $20 $34 $76
</TABLE>
NOTES:
The table and Example summarize the aggregate expenses of the Fund and are
designed to help investors understand the costs and expenses they will bear,
directly or indirectly, by investing in the Fund. Information for the Fund is
based on its expenses for the most recent fiscal year. Absent a reduction of
the Investment Adviser Fee, expenses of the Fund would have been the following
percentage of average daily net assets: Investment Adviser Fee would have been
0.31% and Total Operating Expenses would have been 0.76%.
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. Federal
regulations require the Example assume a 5% annual return, but actual return
will vary. For further information regarding the expenses of the Fund, see
"The Fund's Financial Highlights", "Management of the Fund" and "How to Redeem
Fund Shares". A long-term shareholder in the Fund may pay more than the
economic equivalent of the maximum front-end sales charge permitted by a rule
of the National Association of Securities Dealers, Inc. See "Distribution
Plan".
The Fund's monthly advisory fee has two components, a fee based on daily net
assets and a fee based on daily gross income, as set forth in the fee schedule
on page 5.
<PAGE>
THE FUND'S FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
The following information should be read in conjunction with the audited
financial statements that appear in the Fund's annual report to shareholders.
The Fund's financial statements have been audited by Coopers & Lybrand
independent accountants, as experts in accounting and auditing. The financial
statements and the report of independent accountants are incorporated by
reference into the Statement of Additional Information. Further information
regarding the performance of the Fund is contained in its annual report to
shareholders which may be obtained without charge by contacting the Principal
Underwriter.
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991++
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of
year ............................ $61.43 $57.52 $55.58 $54.30 $52.64 $ 50.18
------ ------ ------ ------ ------ --------
INCOME FROM OPERATIONS:
Net investment income ........... $ 2.88 $ 3.47 $ 1.80 $ 1.34 $ 1.61 $ 2.15
Net realized and unrealized
gain (loss) on investments .... -- 0.44 0.14 (0.06) 0.05 0.31
------ ------ ------ ------ ------ --------
Total income from
operations .................. $ 2.88 $ 3.91 $ 1.94 $ 1.28 $ 1.66 $ 2.46
------ ------ ------ ------ ------ --------
LESS DISTRIBUTIONS:
From net investment income ...... $(1.42) -- -- -- -- --
------- ------ ------ ------ ------ --------
NET ASSET VALUE, end of year ...... $62.89 $61.43 $57.52 $55.58 $54.30 $ 52.64
------ ------ ------ ------ ------ --------
TOTAL RETURN(1) ................... 4.69% 6.80% 3.49% 2.36% 3.15% 4.90%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year
(000's omitted) ................ $2,004 $1,915 $1,175 $1,743 $4,917 $100,976
Ratio of net expenses to
average daily net assets*(2).... 0.61% 0.62% 0.84% 0.60% 0.60% 0.60%+
Ratio of net expenses to
average net assets after
custodian fee reduction* ....... 0.60% 0.60% --
Ratio of net investment
income to average daily net
assets* ........................ 4.65% 5.25% 2.97% 2.48% 3.01% 4.66%+
*The operating expenses of the Fund reflect a reduction of the investment adviser fee and/or an allocation of
expenses to the Investment Adviser. Had such action not been taken, net investment income per share and the
ratios would have been as follows:
NET INVESTMENT INCOME PER SHARE ... $ 2.80 $ 3.29 $ 1.56 $ 1.28 $ 1.56 $ 2.07
====== ====== ====== ====== ====== ========
RATIOS (as a percentage of
average daily net assets):
Expenses(2) ................... 0.76% 0.87% 1.23% 0.70% 0.70% 0.78%+
====== ====== ====== ====== ====== ========
Expenses after custodian
fee reduction ............... 0.75% 0.87%
====== ====== ====== ====== ====== ========
Net investment income ......... 4.50% 4.98% 2.58% 2.38% 3.11% 4.49%+
====== ====== ====== ====== ====== ========
</TABLE>
Note: Certain of the per share amounts have been computed using the average
shares outstanding method.
+Computed on an annualized basis.
++Period from the date of initial public offering, February 4, 1991, to
December 31, 1991. For the period from the start of business, January 11,
1991, to February 3, 1991, net investment income aggregating $0.18 per share
($367) was earned by the Fund. The financial highlights for the period were
audited by the Fund's previous auditors.
(1)Total return is calculated assuming a purchase at the net asset value on the
first day and a sale at the net asset value on the last day of each period
reported. Distributions, if any, are assumed to be reinvested at the net
asset value on the payable date. Total return is computed on a non-annualized
basis.
(2)The expense ratios for the years ended December 31, 1996 and 1995 have been
adjusted to reflect a change in reporting requirements. The new reporting
guidelines require the Portfolio to increase its expense ratio by the effect
of any expense offset arrangements with its service providers. The expense
ratios for each of the periods ended on or before December 31, 1994 have not
been adjusted to reflect this change.
<PAGE>
THE FUND'S INVESTMENT OBJECTIVE
- -------------------------------------------------------------------------------
Eaton Vance Short-Term Treasury Fund is a no-load diversified mutual fund
which continuously offers its shares of beneficial interest to the public. The
Fund's investment objective is to seek current income and liquidity. The Fund
invests exclusively in U.S. Treasury obligations (bills, notes and bonds) with
a remaining maturity of up to five years and will maintain a dollar weighted
average portfolio maturity of not more than one year. The Fund provides
shareholders ease of investment and redemption by allowing direct purchases,
checkwriting, same-day wire purchases and redemptions, and access through
broker-dealers. No commissions or redemption fees are charged on Fund
purchases or redemptions.
INVESTMENT POLICIES AND RISKS
- -------------------------------------------------------------------------------
The Fund invests exclusively in U.S. Treasury obligations with a remaining
maturity of up to five years. U.S. Treasury obligations include the following
(which differ in their interest rates, maturities and times of issuance): U.S.
Treasury bills (maturities of one year or less), U.S. Treasury notes
(maturities of one to ten years) and U.S. Treasury bonds (generally maturities
of greater than ten years). The Fund invests in U.S. Treasury notes and bonds
only to the extent that their remaining maturity is five years or less. U.S.
Treasury bills, notes and bonds, are supported by the full faith and credit of
the United States.
The Fund will maintain a dollar weighted average portfolio maturity of not
more than one year. In measuring the dollar weighted average portfolio
maturity of the Fund, the Fund will use the concept of "duration." Duration
represents the dollar weighted average maturity of expected cash flows (i.e.,
interest and principal payments) on one or more debt obligations, discounted
to their present values. The duration of an obligation is generally equal to
or less than its stated maturity and is related to the degree of volatility in
the market value of the obligation. Maturity measures only the time until a
debt security provides its final payment; it takes no account of the pattern
of a security's payments over time. Duration takes both interest and principal
payments into account and, thus, in the Investment Adviser's opinion, is a
more accurate measure of a debt security's longevity.
The net asset value of the Fund's shares will change in response to interest
rate fluctuations. When interest rates decline, the value of a portfolio
primarily invested in debt securities can be expected to rise. Conversely,
when interest rates rise, the value of a portfolio primarily invested in debt
securities can be expected to decline. However, a shorter maturity is
generally associated with a lower level of market value volatility.
Accordingly, the Investment Adviser expects that the net asset value of the
Fund's shares normally will fluctuate significantly less than that of a
longer-term bond fund since the dollar weighted average portfolio maturity of
the Fund will not exceed one year.
The Fund has adopted certain fundamental investment restrictions and policies
which are enumerated in detail in the Statement of Additional Information and
which may not be changed unless authorized by a shareholder vote. Except for
such enumerated restrictions and policies, the investment objective and
policies of the Fund are not fundamental policies and accordingly may be
changed by the Trustees without obtaining the approval of the Fund's
shareholders. The Trustees, however, intend to submit any material change in
the investment objective to shareholders for their approval.
The shareholders have authorized the Fund to invest its assets in an open-end
management investment company having substantially the same investment
policies and restrictions as the Fund. The Board of Trustees, should it
implement the new investment policy, would invest the assets of the Fund in
the Short-Term Treasury Portfolio (the "Portfolio"). The Portfolio is a trust
which, like the Fund, would be registered as an open-end management investment
company under the Investment Company Act of 1940 (the "Act"). It is
anticipated that the Fund, by investing its assets in the Portfolio, would be
in a position to realize certain benefits from an increase in the size of the
underlying investment portfolio. There can be no assurance that these
anticipated benefits would be realized. This policy has not been implemented
given the current asset size of the Fund and the lack of other investment
vehicles available to invest in the Portfolio. Conversion to this two-tier
investment structure may, however, become attractive in the future. This
structure is commonly referred to as "master-feeder".
ORGANIZATION OF THE FUND
- --------------------------------------------------------------------------------
THE FUND IS A DIVERSIFIED SERIES OF EATON VANCE MUTUAL FUNDS TRUST (THE
"TRUST"), A BUSINESS TRUST ESTABLISHED UNDER MASSACHUSETTS LAW PURSUANT TO A
DECLARATION OF TRUST DATED MAY 7, 1984, AS AMENDED. The Trustees of the Trust
are responsible for the overall management and supervision of its affairs. The
Trust may issue an unlimited number of shares of beneficial interest (no par
value per share) in one or more series (such as the Fund). Each share represents
an equal proportionate beneficial interest in the Fund. When issued and
outstanding, the shares are fully paid and nonassessable by the Trust and
redeemable as described under "How to Redeem Fund Shares". 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 have no preemptive or conversion rights and are freely
transferable. In the event of the liquidation of the Fund, shareholders are
entitled to share pro rata in the net assets of the Fund available for
distribution to shareholders. Eaton Vance Management may be deemed a control
person of the Fund because as of March 31, 1997 it was the record owner of
approximately 81.07% of Fund shares.
MANAGEMENT OF THE FUND
- --------------------------------------------------------------------------------
THE FUND ENGAGES EATON VANCE MANAGEMENT ("EATON VANCE") AS ITS INVESTMENT
ADVISER. EATON VANCE, ITS AFFILIATES AND ITS PREDECESSOR COMPANIES HAVE BEEN
MANAGING ASSETS OF INDIVIDUALS AND INSTITUTIONS SINCE 1924 AND MANAGING
INVESTMENT COMPANIES SINCE 1931. Eaton Vance or its affiliates act as
investment adviser to investment companies and various individual and
institutional clients with assets under management of over $17 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. Michael
B. Terry has acted as the portfolio manager since January, 1991. He has been a
Vice President of Eaton Vance since 1984.
Acting under the general supervision of the Board of Trustees of the Trust,
Eaton Vance manages the Fund's investments and affairs. Under its investment
advisory agreement with the Trust on behalf of the Fund, Eaton Vance receives
a monthly advisory fee equal to the aggregate of: (a) a daily asset based fee
computed by applying the annual asset rate applicable to that portion of the
total daily net assets in each Category as indicated below, plus (b) a daily
income based fee computed by applying the daily income rate applicable to that
portion of the total daily gross income (which portion shall bear the same
relationship to the total daily gross income on such day as that portion of
the total daily net assets in the same Category bears to the total daily net
assets on such day) in each Category as indicated below:
<TABLE>
<CAPTION>
ANNUAL DAILY
CATEGORY DAILY NET ASSETS ASSET RATE INCOME RATE
- -------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
1 up to $20 million 0.150% 1.50%
2 $20 million but less than $40 million 0.200% 2.00%
3 $40 million but less than $500 million 0.250% 2.50%
4 $500 million but less than $1 billion 0.225% 2.25%
5 $1 billion but less than $1.5 billion 0.200% 2.00%
6 $1.5 billion but less than $2 billion 0.190% 1.90%
7 $2 billion but less than $3 billion 0.180% 1.80%
8 $3 billion and over 0.170% 1.70%
</TABLE>
Total daily gross income is the total investment income, exclusive of capital
gains and losses and before deduction of expenses, earned each day by the
Fund. As at December 31, 1996, the Fund had net assets of $2,003,887. For the
fiscal year ended December 31, 1996, Eaton Vance would have earned, absent a
fee reduction, advisory fees equivalent to 0.31% of the Fund's average daily
net assets for such year.
Eaton Vance also furnishes for the use of the Fund office space and all
necessary office facilities, equipment and personnel for servicing the
investments of the Fund and has arranged for certain members of the Eaton
Vance organization to serve without salary as officers or Trustees of the
Trust. The Fund is responsible for the payment of all expenses other than
those expressly stated to be payable by Eaton Vance under the investment
advisory agreement or by the Principal Underwriter under the distribution
agreement.
Most of the obligations which the Fund will acquire for its portfolio will
normally be traded on a net basis (without commission) through broker-dealers
and banks acting for their own account. Such firms attempt to profit from such
transactions by buying at the bid price and selling at the higher asked price
of the market, and the difference is customarily referred to as the spread. In
selecting firms which will execute Fund portfolio transactions Eaton Vance
judges their professional ability and quality of service and uses its best
efforts to obtain execution at prices which are advantageous to the Fund and
at reasonably competitive spreads. Subject to the foregoing, Eaton Vance may
consider sales of shares of the Fund or of other investment companies
sponsored by Eaton Vance as a factor in the selection of firms to execute
portfolio transactions. The Fund and Eaton Vance 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 Fund) for their own accounts, subject to certain pre-clearance,
reporting and other restrictions and procedures contained in such Codes.
DISTRIBUTION PLAN
- --------------------------------------------------------------------------------
In addition to advisory fees and other expenses, the Fund pays for certain
expenses pursuant to a Distribution Plan (the "Plan") designed to meet the
requirements of Rule 12b-1 under the 1940 Act. THE PLAN PROVIDES THAT THE FUND
WILL PAY THE PRINCIPAL UNDERWRITER A QUARTERLY DISTRIBUTION FEE EQUAL TO .25%
ON AN ANNUAL BASIS OF THE FUND'S AVERAGE DAILY NET ASSETS. The Principal
Underwriter may pay up to the entire amount of the distribution fee to
financial service firms (including banking institutions) (an "Authorized
Firm") and their employees, or to employees of the Principal Underwriter and
its affiliates for providing distribution services to the Fund or services to
shareholders. During the fiscal year ended December 31, 1996, the Fund paid
the Principal Underwriter distribution fees under the Plan equivalent to .25%
of the Fund's average daily net assets for such year. To the extent that the
distribution fee is not paid to Authorized Firms and other persons, the
Principal Underwriter may use such fee for its expenses of distribution of
Fund shares. If such fees exceed its expenses, the Principal Underwriter will
realize a profit from these arrangements.
VALUING FUND SHARES
- --------------------------------------------------------------------------------
THE FUND VALUES ITS SHARES TWICE EACH DAY THE NEW YORK STOCK EXCHANGE (THE
"EXCHANGE") IS OPEN FOR TRADING, AT NOON AND AS OF THE CLOSE OF REGULAR
TRADING ON THE EXCHANGE (NORMALLY 4:00 P.M. NEW YORK TIME). The Fund's net
asset value per share is determined by its custodian, Investors Bank & Trust
Company ("IBT"), (as agent for the Fund) in the manner authorized by the
Trustees of the Trust. Net asset value is computed by dividing the value of
the Fund's total assets, less its liabilities, by the number of shares
outstanding. Debt securities will normally be valued on the basis of market
valuations provided by a pricing service. Other assets are valued at fair
value using methods determined in good faith by the Trustees.
The net asset value so determined is effective for orders received by the
Principal Underwriter prior to the next price determination. It is each
Authorized Firm's responsibility to transmit orders promptly to the Principal
Underwriter.
SHAREHOLDERS MAY DETERMINE THE VALUE OF THEIR INVESTMENT BY MULTIPLYING
THE NUMBER OF FUND SHARES OWNED BY THE CURRENT NET ASSET VALUE PER SHARE.
HOW TO BUY FUND SHARES
- --------------------------------------------------------------------------------
SHARES OF THE FUND ARE SOLD WITHOUT A SALES CHARGE AT THE NET ASSET VALUE PER
SHARE NEXT DETERMINED AFTER THE RECEIPT OF A PURCHASE ORDER AS DESCRIBED
BELOW. The minimum initial purchase of shares is $5,000. Once an account has
been established the investor may send additional investments of $500 or more
at any time. An Authorized Firm may charge its customers a fee in connection
with transactions executed by that Firm. The Fund reserves the right to reject
an order for the purchase of its shares or to limit or suspend, without prior
notice, the offering of its shares.
PURCHASES THROUGH AUTHORIZED FIRMS: Investors may purchase shares of the Fund
through Authorized Firms, which include financial service firms with whom the
Principal Underwriter has agreements.
BY MAIL: The Account Application form which accompanies this Prospectus should
be completed, signed and mailed with a check, Federal Reserve Draft, or other
negotiable bank draft, drawn on a U.S. bank and payable in U.S. dollars, to
the order of Eaton Vance Short-Term Treasury Fund and mailed to the Fund's
transfer agent (the "Transfer Agent"), First Data Investor Services Group,
P.O. Box 5123, Westborough, MA 01581-5123.
Additional purchases may be made at any time through the same mail procedure.
(Please provide the shareholder name and account number.)
BY WIRE: Investors may also purchase shares by requesting their bank to
transmit immediately available funds (Federal Funds) by wire to:
ABA #011001438
Federal Reserve Bank of Boston
A/C Investors Bank & Trust Company
Further Credit Eaton Vance Short-Term Treasury Fund
A/C # [Insert your account number -- see below]
Upon making an initial investment by wire, you must first telephone the Fund
Order Department at 800-225-6265 (extension 3) to advise of your action and to
be assigned an account number. Failure to call will delay the order. The
Account Application form which accompanies this Prospectus must be promptly
forwarded to the Transfer Agent, at the above address. Additional investments
may be made at any time through the same wire procedure. The Fund Order
Department must be advised by telephone of each transmission.
Transactions in the U.S. Treasury obligations in which the Fund invests
require immediate settlement in Federal Funds. The Fund intends at all times
to be as fully invested as is feasible in order to maximize its earnings.
Accordingly, purchase orders will be executed at the net asset value next
determined after their receipt by the Fund only if the Fund has received
payment in cash or in Federal Funds. If remitted in other than the foregoing
manner, such as by money order or personal check, purchase orders will be
executed as of the close of business on the second Boston business day after
receipt. Information on how to procure a Federal Reserve Draft or transmit
Federal Funds by wire is available at banks. A bank may charge a fee for these
services.
In connection with employee benefit or other continuous group purchase plans,
the Fund may accept initial investments of less than $5,000 on the part of an
individual participant. In the event a shareholder who is a participant of
such a plan terminates participation in the plan, his or her shares will be
transferred to a regular individual account. However, such account will be
subject to the right of redemption by the Fund as described below under "How
to Redeem Fund Shares."
HOW TO REDEEM FUND SHARES
- --------------------------------------------------------------------------------
A SHAREHOLDER MAY REDEEM FUND SHARES IN SEVERAL WAYS. The redemption price
will be based on the net asset value per Fund share next computed after a
redemption request is received in the proper form as described below.
REDEMPTION BY MAIL: Shares may be redeemed by delivering to the Transfer
Agent, First Data Investor Services Group, P.O. Box 5123, Westborough, MA
01581-5123, 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 Fund, the Principal Underwriter nor the
Transfer Agent will be responsible for the authenticity of redemption
instructions received by telephone, provided that reasonable procedures to
confirm that instructions communicated by telephone are genuine have been
followed. Telephone instructions will be tape recorded. In times of drastic
economic or market changes, a telephone redemption may be difficult to
implement.
CHECKWRITING: Shareholders with uncertified shares may redeem shares by check.
Boston Safe Deposit and Trust Company ("Boston Safe") will provide such
shareholders with special forms of checks drawn on Boston Safe. These checks
may be made payable by the shareholder to the order of any person in any
amount of $500 or more. A shareholder will continue to be entitled to
distributions paid on shares until the check is presented to Boston Safe for
payment. If the amount of the check is greater than the value of the shares
held in the shareholder's account, for which the Fund has collected payment,
the check will be returned and the shareholder may be subject to extra
charges. The shareholder will be required to execute signature cards and will
be subject to Boston Safe's rules and regulations governing such checking
accounts. There is no charge to shareholders for this service. This service
may be terminated or suspended at any time by the Fund or Boston Safe.
WIRE TRANSFER TO A BANK ACCOUNT: Shareholders with uncertified shares (for
which the Fund has collected payment) who have given complete written
authorization in advance may request that redemption proceeds of $1,000 or
more be wired directly to their bank account. The bank designated may be any
bank in the United States. The request may be made by letter or telephone to
the Fund Order Department at 800-225-6265 (extension 3). Proceeds of
redemption requests received before noon on any business day will be wired
that same day, if so requested by the shareholder. Redemption requests
received between noon and 4:00 p.m. on any business day will be processed at
4:00 p.m. and the proceeds will be wired on the next business day. The
shareholder may be required to pay any costs of such transaction; however, no
such costs are currently charged. The Fund may suspend or terminate the
expedited payment procedure upon at least 30 days.
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
Principal Underwriter, as the Fund's agent, receives the order. It is the
Authorized Firm's responsibility to transmit promptly repurchase orders to the
Principal Underwriter. Throughout this Prospectus, the word "redemption" is
generally meant to include a repurchase.
Payment will normally be made by check within one business day after receipt
of the redemption request and must, in any event, be made within seven days of
such receipt, unless expedited payment has been authorized by the Fund after
request by the shareholder.
If shares were recently purchased by check, the proceeds of redemption (or
repurchase) will not be sent until the check (including a certified or
cashier's check) received for the shares purchased has cleared. Payment for
shares tendered for redemption may be delayed up to 15 days from the purchase
date when the purchase check has not yet cleared. The value of shares redeemed
or repurchased may be more or less than their cost depending on portfolio
performance during the period they were owned. Redemptions and repurchases of
shares are taxable events on which shareholders may realize a gain or a loss.
REPORTS TO SHAREHOLDERS
- --------------------------------------------------------------------------------
THE FUND WILL ISSUE TO ITS SHAREHOLDERS SEMI-ANNUAL AND ANNUAL REPORTS
CONTAINING FINANCIAL STATEMENTS. Financial statements included in annual
reports are audited by the Fund's independent accountants. Shortly after the
end of each calendar year, the Fund will furnish its shareholders with
information necessary for preparing federal and state tax returns.
THE LIFETIME INVESTING ACCOUNT/DISTRIBUTION OPTIONS
- --------------------------------------------------------------------------------
AFTER AN INVESTOR MAKES AN INITIAL PURCHASE OF FUND SHARES, THE TRANSFER AGENT
WILL SET UP A LIFETIME INVESTING ACCOUNT FOR THE INVESTOR ON THE FUND'S
RECORDS. This account is a complete record of all transactions between the
investor and the Fund which at all times shows the balance of shares owned.
The Fund will not issue share certificates except upon request.
At least quarterly shareholders will receive a statement showing complete
details of any transaction and the current share balance in the account. THE
LIFETIME INVESTING ACCOUNT ALSO PERMITS A SHAREHOLDER TO MAKE ADDITIONAL
INVESTMENTS IN SHARES BY SENDING A CHECK FOR $500 OR MORE to 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 the account number).
THE FOLLOWING DISTRIBUTION OPTIONS WILL BE AVAILABLE TO ALL LIFETIME INVESTING
ACCOUNTS and may be changed as often as desired by written notice to the
Fund's dividend disbursing agent, First Data Investor Services Group, P.O. Box
5123, Westborough, MA 01581-5123. The currently effective option will appear
on each account statement.
Share Option -- Dividends and capital gains will be reinvested in additional
shares.
Income Option -- Dividends will be paid in cash, and capital gains will be
reinvested in additional shares.
Cash Option -- Dividends and capital gains will be paid in cash.
The Share Option will be assigned if no other option is specified.
Distributions, including those reinvested, will be reduced by any withholding
required under federal income tax laws.
If the Income Option or Cash Option has been selected, dividend and/or capital
gains distribution checks which are returned by the United States Postal
Service as not deliverable or which remain uncashed for six months or more
will be reinvested in the account in shares at the then current net asset
value. Furthermore, the distribution option on the account will be
automatically changed to the Share Option until such time as the shareholder
selects a different option.
"STREET NAME" ACCOUNTS. If shares of the Fund are held in a "street name"
account with an Authorized Firm, all recordkeeping, transaction processing and
payments of distributions relating to the beneficial owner's account will be
performed by the Authorized Firm, and not by the Fund and its Transfer Agent.
Since the Fund will have no record of the beneficial owner's transactions, a
beneficial owner should contact the Authorized Firm to purchase, redeem or
exchange shares, to make changes in or give instructions concerning the
account, or to obtain information about the account. The transfer of shares in
a "street name" account to an account with another Authorized Firm or to an
account directly with the Fund involves special procedures and will require
the beneficial owner to obtain historical purchase information about the
shares in the account from the Authorized Firm. Before establishing a "street
name" account with an 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 Eaton Vance Cash
Management Fund on the basis of the next determined net asset value per share
of each fund after receiving an exchange request in good order (see "How to
Redeem Fund Shares"). Exchange offers are available only in states where
shares of Eaton Vance Cash Management Fund may be legally sold. The prospectus
for Eaton Vance Cash Management Fund describes its investment objective and
policies, and shareholders should obtain a prospectus and consider the
objective and policies carefully before requesting an exchange.
Each exchange must involve shares with an aggregate net asset value of at
least $1,000. The exchange privilege may be changed or discontinued without
penalty. Shareholders will be given sixty (60) days' notice prior to any
termination or material amendment of the exchange privilege. The Fund does not
permit the exchange privilege to be used for "Market Timing" and may terminate
the exchange privilege for any shareholder account engaged in Market Timing
activity. Any shareholder account for which more than two round-trip exchanges
are made within any twelve month period will be deemed to be engaged in Market
Timing. Furthermore, a group of unrelated accounts for which exchanges are
entered contemporaneously by a financial intermediary will be considered to be
engaged in Market Timing.
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 retain the same registration. Neither the Fund, the
Principal Underwriter nor the Transfer Agent will be responsible for the
authenticity of exchange instructions received by telephone, provided that
reasonable procedures to confirm that instructions communicated are genuine
have been followed. Telephone instructions will be tape recorded. In times of
drastic economic or market changes, a telephone exchange may be difficult to
implement. An exchange may result in a taxable gain or loss.
EATON VANCE SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------
THE FUND OFFERS THE FOLLOWING SERVICES, WHICH ARE VOLUNTARY, INVOLVE NO EXTRA
CHARGE, AND MAY BE CHANGED OR DISCONTINUED WITHOUT PENALTY AT ANY TIME. Full
information on each of the services described below and an application, where
required, are available from Authorized Firms or the Principal Underwriter.
The cost of administering such services for the benefit of shareholders who
participate in them is borne by the Fund as an expense to all shareholders.
INVEST-BY-MAIL -- FOR PERIODIC SHARE ACCUMULATION: Once the $5,000 minimum
investment has been made, checks of $500 or more payable to the order of Eaton
Vance Short-Term Treasury Fund may be mailed directly to the Transfer Agent,
First Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123
at any time -- whether or not distributions are reinvested. The name of the
shareholder, the Fund and the account number should accompany each investment.
TAX-SHELTERED RETIREMENT PLANS: Shares of the Fund are available for purchase
in connection with certain tax-sheltered retirement plans: Detailed
information concerning these plans, including certain exceptions to minimum
investment requirements, and copies of the plans are available from the
Principal Underwriter. This information should be read carefully and
consultation with an attorney or tax adviser may be advisable. The information
sets forth the service fee charged for retirement plans and describes the
federal income tax consequences of establishing a plan. Participant accounting
services (including trust fund reconciliation services) will be offered only
through third party recordkeepers and not by the Principal Underwriter. Under
all plans, distributions will be automatically reinvested in additional
shares.
DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
The Fund has elected to be treated, has qualified and intends to continue to
qualify each year as a regulated investment company under the Internal Revenue
Code of 1986, as amended (the "Code"). Accordingly, the Fund intends to
satisfy certain requirements relating to sources of its income and
diversification of its assets and to distribute a sufficient amount of its
investment company taxable income so as to effect such qualification. The Fund
may also distribute part or all of its net investment income and realized
capital gains in accordance with the timing requirements imposed by the Code,
so as to reduce or avoid federal income or excise tax to the Fund.
The Fund distributes its net investment income and capital gains to
shareholders as dividends annually to the extent required for the Fund to
qualify as a regulated investment company under the Code and generally to
avoid federal income or excise tax to the Fund. Under current law, the Fund
intends on its tax return to treat as a distribution of investment company
taxable income and net capital gain the portion of redemption proceeds paid to
redeeming shareholders that represents the redeeming shareholders' portion of
the Fund's undistributed investment company taxable income and net capital
gain. This practice, which involves the use of equalization accounting, will
have the effect of reducing the amount of income and gains that the Fund is
required to distribute as dividends to shareholders in order for the Fund to
avoid federal income tax and excise tax. This practice may also reduce the
amount of distributions required to be made to nonredeeming shareholders and
defer the recognition of taxable income by such shareholders. However, since
the amount of any undistributed income will be reflected in the value of the
Fund's shares, the total return on a shareholder's investment will not be
reduced as a result of the Fund's distribution policy. Investors who purchase
shares shortly before the record date of a distribution will pay the full
price for the shares and then receive some portion of the price back as a
taxable distribution.
Distributions of taxable net investment income are taxable to shareholders as
ordinary income, whether paid in cash or additional shares of the Fund.
Capital gains, if any, realized by the Fund on sales of investments during the
Fund's taxable year, which ends on December 31, will be offset by any capital
loss carryovers and will usually be distributed after the close of such
taxable year, in compliance with the distribution requirements of the Code.
Distributions from net long-term capital gain included therein are taxable to
shareholders as such, whether paid in cash or reinvested in additional shares
of the Fund and regardless of the length of time Fund shares have been owned
by the shareholder. Distributions from net short-term capital gain included
therein are taxable to shareholders as ordinary income, whether paid in cash
or reinvested in additional shares of the Fund. Certain distributions declared
by the Fund in October, November or December and paid the following January
will be taxable to shareholders as if received on December 31 of the year in
which they are declared. Shareholders should consult their own tax advisors
with respect to special tax rules, such as Section 1258 of the Code, that may
apply in their particular situations.
Shareholders will receive one or more Forms 1099 to assist in the preparation
of their federal and state tax returns for the prior calendar year's
distributions, proceeds from the redemption or exchange of Fund shares, and
federal income tax (if any) withheld by the Transfer Agent.
As a regulated investment company under the Code, the Fund does not pay
federal income or excise taxes to the extent that it distributes to
shareholders its net investment income and net realized capital gains in
accordance with the timing requirements imposed by the Code. For the taxable
year ended December 31, 1996, the Fund did not incur any federal income or
excise taxes although it may incur such taxes in the future if management
determines that retention of some income or gains is appropriate. Under
current law, provided that the Fund qualifies as a regulated investment
company for federal income tax purposes, the Fund is not liable for any
income, corporate excise or franchise tax in the Commonwealth of
Massachusetts. The Fund incurred no state tax liability in respect of its
taxable year ended December 31, 1996.
STATE, LOCAL AND FOREIGN TAXES
Distributions of the Fund which are derived from interest on obligations of
the U.S. Government will be exempt from personal and/or corporate income taxes
in most states. The Fund will inform shareholders of the proportion of its
distributions which are derived from interest on such obligations.
Shareholders should consult their tax advisers concerning the applicability of
state, local, or other taxes to an investment in the Fund.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
FROM TIME TO TIME, THE FUND MAY ADVERTISE ITS YIELD AND/OR AVERAGE ANNUAL
TOTAL RETURN. The Fund's current yield is calculated by dividing the net
investment income per share earned during a recent 30-day period by the
maximum offering price per share (net asset value) of the Fund on the last day
of the period and annualizing the resulting figure. Yield should not be
considered the equivalent of dividends. The Fund's average annual total return
is determined by computing the average annual percentage change in value of
$1,000 invested at the maximum public offering price (net asset value) for
specified periods ending with the most recent calendar quarter, assuming
reinvestment of all distributions. The average annual total return calculation
assumes a complete redemption of the investment. The Fund may also publish
annual and cumulative total return figures from time to time.
Investors should note that the investment results of the Fund will fluctuate
over time, and any presentation of the Fund's current yield or total return
for any prior period should not be considered a representation of what an
investment may earn or what the Fund's yield or total return may be in any
future period. If the expenses of the Fund are paid by Eaton Vance, the Fund's
performance will be higher.
<PAGE>
[Logo]
EATON VANCE
===============
Mutual Funds
EATON VANCE
SHORT-TERM
TREASURY FUND
PROSPECTUS
MAY 1, 1997
EATON VANCE SHORT-TERM
TREASURY FUND
24 FEDERAL STREET
BOSTON, MA 02110
- --------------------------------------------------------------------------------
INVESTMENT ADVISER
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 89 South Street, Boston, MA 02111
TRANSFER AGENT
First Data Investor Services Group, 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
TYP
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL INFORMATION
May 1, 1997
EATON VANCE CASH MANAGEMENT FUND
24 Federal Street
Boston, Massachusetts 02110
(800) 225-6265
This Statement of Additional Information consists of two parts. Part I
provides information about Eaton Vance Cash Management Fund (the "Fund"), Cash
Management Portfolio (the "Portfolio") and certain other series of Eaton Vance
Mutual Funds Trust (the "Trust"). Part II provides information solely about
the Fund. Where appropriate, Part I includes cross-references to the relevant
sections of Part II that provide additional, Fund-specific information. This
Statement of Additional Information is sometimes referred to herein as the
"SAI."
TABLE OF CONTENTS
Page
PART I
Additional Information about Investment Policies ...................... 2
Investment Restrictions ............................................... 4
Trustees and Officers ................................................. 5
Investment Adviser and Administrator .................................. 7
Custodian ............................................................. 9
Service for Withdrawal ................................................ 10
Determination of Net Asset Value ...................................... 10
Calculation of Yield Quotations ....................................... 11
Taxes ................................................................. 11
Portfolio Security Transactions ....................................... 12
Other Information ..................................................... 13
Independent Accountants ............................................... 14
Financial Statements .................................................. 15
Appendix .............................................................. 16
PART II
Fees and Expenses ..................................................... a-1
Investment Restrictions ............................................... a-1
Principal Underwriter ................................................. a-1
Yield Information ..................................................... a-2
Control Persons and Principal Holders of Securities ................... a-2
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY THE FUND'S PROSPECTUS DATED MAY 1, 1997, AS SUPPLEMENTED FROM
TIME TO TIME, WHICH IS INCORPORATED HEREIN BY REFERENCE. THIS STATEMENT OF
ADDITIONAL INFORMATION SHOULD BE READ IN CONJUNCTION WITH SUCH PROSPECTUS, A
COPY OF WHICH MAY BE OBTAINED WITHOUT CHARGE BY CONTACTING EATON VANCE
DISTRIBUTORS, INC. (THE "PRINCIPAL UNDERWRITER") (SEE BACK COVER FOR ADDRESS
AND PHONE NUMBER).
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART I
This Part I provides information about the Fund, certain other series of
the Trust and the Portfolio. Capitalized terms used in this SAI and not
otherwise defined have the meanings given them in the Fund's Prospectus. The
Fund is subject to the same investment policies as those of the Portfolio. The
Fund currently seeks to achieve its objective by investing in the Portfolio.
ADDITIONAL INFORMATION ABOUT INVESTMENT POLICIES
MONEY MARKET INSTRUMENTS. The Portfolio will invest only in those U.S. dollar
denominated money market securities and corporate obligations determined by
the Trustees of the Portfolio to present minimal credit risks and which are at
the time of acquisition rated by the requisite number of nationally recognized
statistical rating organizations in one of the two highest applicable rating
categories or, in the case of an instrument not so rated, of comparable
quality as determined by the Trustees. At such time or times as the Trustees
deem appropriate and in the best interests of the Portfolio, assets of the
Portfolio may be invested in certificates of deposit of federally insured
banks and/or U.S. Government and agency obligations. The Portfolio intends to
limit its investments to money market instruments maturing in 397 calendar
days or less and to maintain a dollar-weighted average maturity of not more
than 90 days. In addition, Rule 2a-7 promulgated under the 1940 Act provides
that the Portfolio (so long as it uses the amortized cost method of valuing
its securities or holds itself out to investors as a money market fund) may
not acquire a Second Tier Security (as defined in the Rule) if, immediately
after such acquisition: (a) more than 5% of its total assets (taken at
amortized cost) would be invested in securities which, when acquired by the
Portfolio (either initially or upon any subsequent rollover) were Second Tier
Securities; or (b) more than the greater of 1% of its total assets (taken at
amortized cost) or $1,000,000 would be invested in securities issued by a
single issuer which, when acquired by the Portfolio (either initially or upon
any subsequent rollover) were Second Tier Securities.
The Portfolio may invest in U.S. Government money market obligations,
which are debt securities issued or guaranteed by the U.S. Treasury, including
bills, certificates of indebtedness, notes and bonds, or by an agency or
instrumentality of the U.S. Government established under the authority of an
act of Congress. Not all U.S. Government obligations are backed by the full
faith and credit of the United States. For example, securities issued by the
Federal Farm Credit Bank or by the Federal National Mortgage Association are
supported by the agency's right to borrow money from the U.S. Treasury under
certain circumstances. Securities issued by the Tennessee Valley Authority are
supported only by the credit of the agency. There is no guarantee that the
U.S. Government will support these types of securities, and therefore they
involve more risk than "full faith and credit" government obligations.
OBLIGATIONS OF U.S. AND FOREIGN BANKS. Investments may be made in U.S.
dollar-denominated time deposits, certificates of deposit and bankers'
acceptances of U.S. banks and their branches located outside of the U.S., of
U.S. branches of foreign banks, and foreign branches of foreign banks. The
Portfolio may also invest in U.S. dollar-denominated securities issued or
guaranteed by other domestic or foreign issuers, including domestic and
foreign corporations or other business organizations, foreign governments and
foreign government agencies or instrumentalities, and domestic and foreign
financial institutions, including but not limited to savings and loan
institutions, insurance companies, mortgage bankers and real estate investment
trusts, as well as banks.
The obligations of foreign branches of U.S. banks may be general
obligations of the parent bank in addition to the issuing branch, or may be
limited by the terms of a specific obligation and by governmental regulation.
Payment of interest and principal upon these obligations may also be affected
by governmental action in the country of domicile of the branch (generally
referred to as sovereign risk). In addition, evidences of ownership of
portfolio securities may be held outside of the U.S. and the Portfolio may be
subject to the risks associated with the holding of such property overseas.
Various provisions of federal law governing the establishment and operation of
domestic branches do not apply to foreign branches of domestic banks.
The obligations of U.S. branches of foreign banks may be general
obligations of the parent bank in addition to the issuing branch, or may be
limited by the terms of a specific obligation and by federal and state
regulation as well as by governmental action in the country in which the
foreign bank has its head office.
The obligations of foreign issuers also involve certain additional risks,
including the risks of adverse political, social and economic developments,
the imposition of withholding taxes on interest income, seizure or
nationalization of foreign deposits, exchange controls, and the adoption of
foreign governmental restrictions which might adversely affect the payment of
principal and interest on such obligations. Foreign issuers may be subject to
less governmental regulation and supervision than U.S. issuers. Foreign
issuers also generally are not bound by uniform accounting, auditing and
financial reporting requirements comparable to those applicable to domestic
issuers.
In connection with its investments in bank obligations and instruments
secured thereby, the Portfolio will invest in certificates of deposit and
bankers' acceptances if they are obligations of a domestic bank or a savings
and loan association having total assets of $1,000,000,000 or more.
REPURCHASE AGREEMENTS. Repurchase agreements are transactions in which the
Portfolio purchases a security and simultaneously commits to resell that
security to the seller at an agreed upon price on an agreed upon date within a
number of days (usually not more than seven) from the date of purchase. The
resale price reflects the purchase price plus an agreed upon market rate of
interest which is unrelated to the coupon rate or maturity of the purchased
security. A repurchase agreement involves the obligation of the seller to pay
the agreed upon price, which obligation is in effect secured by the value (at
least equal to the amount of the agreed upon resale price and marked to market
daily) of the underlying security. The Portfolio may enter into a repurchase
agreement with respect to any security in which the Portfolio is authorized to
invest even though the underlying security matures in more than 397 calendar
days. Other than for federal tax purposes, whether a repurchase agreement is
the purchase and sale of a security or a collateralized loan has not been
definitively established. This might become an issue in the event of the
bankruptcy of the other party to the transaction. While it does not presently
appear possible to eliminate all risks from these transactions (particularly
the possibility of a decline in the market value of the underlying securities,
as well as delay and costs to the Portfolio in connection with bankruptcy
proceedings), it is the policy of the Portfolio to enter into repurchase
agreements only with those member banks of the Federal Reserve System and
primary dealers in U.S. Government securities whose creditworthiness has been
reviewed and found satisfactory by the Investment Adviser.
REVERSE REPURCHASE AGREEMENTS. The Portfolio may also enter into reverse
repurchase agreements, although as of the date of this SAI there was no
intention to do so. Under a reverse repurchase agreement, the Portfolio
temporarily transfers possession of a portfolio instrument to another party,
such as a bank or broker-dealer, in return for cash. At the same time, the
Portfolio agrees to repurchase the instrument at an agreed upon time (normally
within seven days) and price, which reflects an interest payment. The
Portfolio expects that it will enter into reverse repurchase agreements when
it is able to invest the cash so acquired at a rate higher than the cost of
the agreement, which would increase the income earned by the Portfolio. The
Portfolio could also enter into reverse repurchase agreements as a means of
raising cash to satisfy redemption requests without the necessity of selling
portfolio instruments.
When the Portfolio enters into a reverse repurchase agreement, any
fluctuations in the market value of either the securities transferred to
another party or the securities in which the proceeds may be invested would
affect the market value of the Portfolio's assets. As a result, such
transactions may increase fluctuations in the market value of the Portfolio's
assets (although not affecting the amortized cost value of its assets used in
determining the Fund's net asset value per share). While there is a risk that
large fluctuations in the market value of the Portfolio's assets could affect
the Fund's net asset value per share, this risk is not significantly increased
by entering into reverse repurchase agreements, in the opinion of the
Portfolio's Investment Adviser. Because reverse repurchase agreements may be
considered to be the practical equivalent of borrowing funds, they constitute
a form of leverage. If the Portfolio reinvests the proceeds of a reverse
repurchase agreement at a rate lower than the cost of the agreement, entering
into the agreement will lower the Fund's yield.
While BMR does not consider reverse repurchase agreements to involve a
traditional borrowing of money, reverse repurchase agreements will be included
within the aggregate limitation on "borrowings" contained in the Fund's
investment restriction (3) set forth below. The Portfolio does not intend to
purchase securities for investment while temporary borrowings (described in
the investment restriction (3) set forth below) in excess of 5% of its total
assets are outstanding.
LENDING OF PORTFOLIO SECURITIES. The Portfolio may seek to increase its
income by lending portfolio securities. Under present regulatory policies,
including those of the Board of Governors of the Federal Reserve System, and
the Commission, such loans may be made to member firms on the Exchange, and
would be required to be secured continuously by collateral in cash or cash
equivalents maintained on a current basis at an amount equal to the market
value of the securities loaned. The Portfolio would have the right to call a
loan and obtain the securities loaned at any time on five days' notice. During
the existence of a loan, the Portfolio would continue to receive the
equivalent of the interest or dividends paid by the issuer on the securities
loaned and would also receive the interest on investment of the collateral.
The Portfolio would not, however, have the right to vote any securities having
voting rights during the existence of the loan, but would call the loan in
anticipation of an important vote to be taken among holders of the securities
or of the giving or withholding of their consent on a material matter
affecting the investment. As with other extensions of credit there are risks
of delay in recovery or even loss of rights in the collateral should the
borrower of the securities fail financially. However, the loans would be made
only to firms deemed by the Portfolio's management to be of good standing, and
when, in the judgment of the Portfolio's management, the consideration which
can be earned currently from securities loans of this type justifies the
attendant risk. Securities lending involves administration expenses, including
finders' fees. If the management of the Portfolio determines to make
securities loans, it is not intended that the value of the securities loaned
would exceed 30% of the Portfolio's total assets, or that the payments
received on such loans, including amounts received during the existence of a
loan on account of interest and dividends on the securities loaned, would
exceed in the aggregate 10% of the Portfolio's annual gross income (without
offset for realized capital gains) unless counsel for the Portfolio determines
that such amounts are qualifying income under federal income tax provisions
applicable to regulated investment companies.
ASSET COVERAGE REQUIREMENTS. Transactions involving reverse repurchase
agreements expose the Portfolio to an obligation to another party. The
Portfolio will not enter into any such transactions unless it owns cash or
liquid securities with a value sufficient at all times to cover its potential
obligations. The Portfolio will comply with the regulations and policies
promulgated by the Commission regarding asset coverage for these instruments
and, if the guidelines so require, set aside cash or liquid securities in a
segregated account with its custodian in the prescribed amount. The securities
in the segregated account will be marked to market daily.
Assets held in a segregated account cannot be sold while the position
requiring segregation is outstanding unless they are replaced with other
appropriate assets. As a result, the commitment of a large portion of the
Portfolio's assets to segregated accounts could impede portfolio management or
the Portfolio's ability to meet redemption requests or other current
obligations.
OTHER INVESTMENT POLICIES. Although the Portfolio usually intends to hold
securities purchased until maturity, at which time they will be redeemable at
their full principal value plus accrued interest, it may, at times, engage in
short-term trading to attempt to take advantage of yield variations in the
short-term market. The Portfolio may also sell portfolio securities prior to
maturity based on a revised evaluation of the creditworthiness of the issuer
or to meet redemptions of Fund shares. In the event there are unusually heavy
redemption requests due to changes in interest rates or otherwise, the
Portfolio may have to sell a portion of its investment portfolio at a time
when it may be disadvantageous to do so. However, the Portfolio believes that
its ability to borrow funds to accommodate redemption requests may mitigate in
part the necessity for such portfolio sales during these periods.
The rate of return to shareholders of the Fund will vary with the general
levels of interest rates applicable to the money market instruments in which
the Portfolio invests on behalf of the Fund. The rate will also be affected by
the level of the Fund's operating expenses, which expenses (because of
expenditures under its distribution plan) are expected to be higher than those
of most other money market funds.
INVESTMENT RESTRICTIONS
The Portfolio has adopted the following fundamental investment
restrictions that cannot be changed without the approval of a "majority of the
outstanding voting securities" of the Portfolio, which as used in this SAI
means the lesser of (a) 67% of the outstanding voting securities of the
Portfolio present or represented by proxy at a meeting if the holders of more
than 50% of the outstanding voting securities of the Portfolio are present or
represented at the meeting or (b) more than 50% of the outstanding voting
securities of the Portfolio. The term "voting securities" as used in this
paragraph has the same meaning as in the 1940 Act. Whenever the Trust is
requested to vote on a change in the fundamental investment restrictions of
the Portfolio, the Trust will hold a meeting of Fund shareholders and will
cast its vote as instructed by the shareholders. Accordingly, the Portfolio
will not:
(1) With respect to 75% of its total assets, invest more than 5% of its
total assets taken at current market value in the securities of any one issuer
or purchase more than 10% of the outstanding voting securities of any one
issuer other than obligations issued or guaranteed by the U.S. Government or
its agencies or instrumentalities and except securities of other investment
companies;
(2) Purchase securities on margin;
(3) Borrow money or issue senior securities except as permitted by the
Investment Company Act of 1940;
(4) Underwrite securities issued by other persons;
(5) Purchase any securities which would cause more than 25% of the market
value of its total assets at the time of such purchase to be invested in the
securities of issuers having their principal business activities in the same
industry, provided that there is no limitation in respect to investments in
obligations issued or guaranteed by the U.S. Government or its agencies or
instrumentalities, or in certificates of deposit or bankers' acceptances and
provided further, that for purposes of this limitation, finance companies as a
group, banks and bank holding companies as a group and utility companies as a
group will not be considered single industries;
(6) Buy or sell real estate, commodities, or commodity contracts unless
acquired as a result of ownership of securities; or
(7) Make loans to any person except by (a) the acquisition of debt
instruments and making portfolio investments, (b) entering into repurchase
agreements or (c) lending portfolio securities.
For the fundamental policies of the Fund, see "Investment Restrictions" in
Part II.
The Fund and the Portfolio have each adopted the following investment
policies which may be changed with respect to the Fund by the Trustees of the
Trust without approval of the Fund's shareholders or with respect to the
Portfolio by the Trustees of the Portfolio without the approval of the Fund or
its other investors. As a matter of nonfundamental policy, neither the Fund
nor the Portfolio may: (a) purchase or retain securities of any issuer if 5%
of the issuer's securities are owned by those officers and Trustees of the
Portfolio or the investment adviser of the Portfolio who own individually more
than 1/2 of 1% of the issuer's securities; (b) make short sales except where,
because of ownership of other securities, it has the right to obtain
securities equivalent in kind and amount to those sold; (c) write or purchase
or sell any put or call options or combinations thereof; or (d) knowingly
purchase a security which is subject to legal or contractual restrictions on
resale or for which there is no readily available market or enter into a
repurchase agreement maturing in more than seven days if, as a result thereof,
more than 10% of its total assets (taken at current value) would be invested
in such securities. (The Portfolio may not be able to liquidate such
securities when deemed most advantageous.) Securities determined to be liquid
by the Board of Trustees of the Trust or the Portfolio, or its delegate,
pursuant to procedures adopted by the Trustees shall not be subject to
restriction (d).
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; of Eaton Vance's parent, Eaton Vance
Corp. ("EVC"); and of BMR's and Eaton Vance's trustee, Eaton Vance, Inc.
("EV"). Eaton Vance and EV are both wholly-owned subsidiaries of EVC. Those
Trustees who are "interested persons" of the Trust 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 (63), President and Trustee*
Vice Chairman of BMR, Eaton Vance, EVC and EV, and a Director of EVC and EV.
Director, Trustee and officer of various investment companies managed by
Eaton Vance or BMR.
JAMES B. HAWKES (55), Vice President and Trustee*
President and Chief Executive Officer of BMR, Eaton Vance, EVC and EV, and a
Director of EVC and EV. Director, Trustee and officer of various investment
companies managed by Eaton Vance or BMR.
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 at Harvard University
Graduate School of Business Administration. Director or Trustee of various
investment companies managed by Eaton Vance or BMR.
Address: Harvard University Graduate School of Business Administration,
Soldiers Field Road, Boston, Massachusetts 02163
NORTON H. REAMER (61), Trustee
President and Director, United Asset Management Corporation (a holding company
owning institutional investment management firms); Chairman, President and
Director, UAM Funds (mutual funds). Director or Trustee of various
investment companies managed by Eaton Vance or BMR.
Address: One International Place, Boston, Massachusetts 02110
JOHN L. THORNDIKE (70), Trustee
Former Director of Fiduciary Company Incorporated. Director or Trustee of
various investment companies manged by Eaton Vance or BMR.
Address: 175 Federal Street, Boston, Massachusetts 02110
JACK L. TREYNOR (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
WILLIAM H. AHERN, JR. (37), Vice President of the Trust
Assistant Vice President of Eaton Vance and BMR. Officer of various investment
companies managed by Eaton Vance or BMR. Mr. Ahern was elected Vice
President of the Trust on June 19, 1995.
MICHAEL B. TERRY (54), Vice President
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.
THOMAS OTIS (65), Secretary
Vice President and Secretary of BMR, Eaton Vance, EVC and EV. Officer of
various investment companies managed by Eaton Vance or BMR.
JANET E. SANDERS (61), 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 (34), Assistant Secretary
Assistant Vice President of BMR, Eaton Vance and EV since March 1, 1994;
employee of Eaton Vance since March 1993. State Regulations Supervisor, The
Boston Company (1991-1993). Officer of various investment companies managed
by Eaton Vance or BMR. Mr. Murphy was elected Assistant Secretary of the
Trust and the Portfolio on March 27, 1995.
JOHN P. RYNNE (54), Assistant Secretary of the Trust
Corporate Controller and Vice President of EVC. Vice President of Eaton Vance,
EVD and BMR, and Treasurer of Energex Energy Corporation. Mr. Rynne was
elected Assistant Secretary of the Trust on June 19, 1995.
ERIC G. WOODBURY (39), Assistant Secretary
Vice President of Eaton Vance since February 1993; formerly, associate at
Dechert, Price & Rhoads. Officer of various investment companies managed by
Eaton Vance or BMR. Mr. Woodbury was elected Assistant Secretary of the
Trust and the Portfolio on June 19, 1995.
Messrs. 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 services, transfer
agency, custodial and fund accounting and distribution services, and (ii) all
other matters in which Eaton Vance or its affiliates has any actual or
potential conflict of interest with the Fund, 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. For the compensation earned by the noninterested
Trustees, see "Fees and Expenses" in Part II.
INVESTMENT ADVISER AND ADMINISTRATOR
The Portfolio engages BMR as investment adviser pursuant to an Investment
Advisory Agreement dated April 29, 1994. BMR or Eaton Vance acts as investment
adviser to investment companies and various individual and institutional
clients with combined assets under management of over $17 billion.
Eaton Vance, its affiliates and its predecessor companies have been
managing assets of individuals and institutions since 1924 and managing
investment companies since 1931. They maintain a large staff of experienced
fixed-income and equity investment professionals to service the needs of their
clients. The fixed-income division focuses on all kinds of taxable investment-
grade and high-yield securities, tax-exempt investment-grade and high-yield
securities, and U.S. Government securities. The equity division covers stocks
ranging from blue chip to emerging growth companies.
Eaton Vance and its affiliates act as adviser to over 150 mutual funds,
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 $18 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 obligation of the Portfolio to indemnify its
Trustees, officers and investors with respect thereto to the extent not
covered by insurance.
For a description of the compensation that the Portfolio pays BMR under
the Investment Advisory Agreement, see the Fund's current Prospectus. As at
December 31, 1996, the Portfolio had net assets of $191,660,070. For the
fiscal years ended December 31, 1996 and 1995 and for the period from the
start of business, May 2, 1994, to December 31, 1994, the Portfolio paid BMR
advisory fees of $939,313, $965,361 and $597,131, respectively (equivalent to
0.50% (annualized) 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 (60) days' written
notice by the Board of Trustees of either party, or by vote of the majority of
the outstanding voting securities of the Portfolio, and the Agreement will
terminate automatically in the event of its assignment. The Agreement provides
that BMR may render services to others. The Agreement also provides that BMR
shall not be liable for any loss incurred in connection with the performance
of its duties, or action taken or omitted under that Agreement, in the absence
of willful misfeasance, bad faith, gross negligence in the performance of its
duties or by reason of its reckless disregard of its obligations and duties
thereunder, or for any losses sustained in the acquisition, holding or
disposition of any security or other investment.
As indicated in the Prospectus, Eaton Vance serves as administrator of the
Fund, but currently receives no compensation for providing administrative
services to the Fund. Under its agreement with the Fund, Eaton Vance has been
engaged to administer the Fund's affairs, subject to the supervision of the
Trustees of the Trust, and shall furnish for the use of the Fund office space
and all necessary office facilities, equipment and personnel for administering
the affairs of the Fund.
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 Landon T. Clay, M. Dozier Gardner, James B. Hawkes and
Benjamin A. Rowland, Jr. The Directors of EVC consist of the same persons and
John G. L. Cabot and Ralph Z. Sorenson. Mr. Clay is chairman, Mr. Gardner is
vice chairman and 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 which expires on December 31, 1997, the
Voting Trustees of which are Messrs. Clay, Gardner, Hawkes, Rowland and Thomas
E. Faust, Jr. 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 April 30, 1997, Messrs. Clay, Gardner and Hawkes each owned 24% of such
voting trust receipts, and Messrs. Rowland and Faust owned 15% and 13%,
respectively, of such voting trust receipts. Messrs. Gardner, Hawkes and Otis
are officers or Trustees of the Fund and/or the Portfolio and are members of
the EVC, BMR, Eaton Vance and EV organizations. Messrs. Ahern, Murphy,
O'Connor, Rynne, Terry and Woodbury and Ms. Sanders, are officers of the Trust
and/or the Portfolio and are also members of the BMR, Eaton Vance and EV
organizations.
EVC owns all of the stock of Energex Energy Corporation, which engages in
oil and gas exploration and development. In addition, Eaton Vance owns all of
the stock of Northeast Properties, Inc., which is engaged in real estate
investment. EVC also owns 22% 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 Fund and the Portfolio. IBT has the custody
of all cash and securities representing the Fund's interest in the Portfolio,
has custody of all the Portfolio's assets, maintains the general ledger of the
Portfolio and the Fund, and computes the daily net asset value of interests in
the Portfolio and the net asset value of shares of the Fund. In such capacity
it attends to details in connection with the sale, exchange, substitution,
transfer or other dealings with the Portfolio's investments, receives and
disburses all funds and performs various other ministerial duties upon receipt
of proper instructions from the Fund and the Portfolio. IBT charges fees which
are competitive within the industry. A portion of the fee relates to custody,
bookkeeping and valuation services and is based upon a percentage of Fund and
Portfolio net assets and a portion of the fee relates to activity charges,
primarily the number of portfolio transactions. These fees are then reduced by
a credit for cash balances of the particular investment company at the
custodian equal to 75% of the 91-day, U.S. Treasury Bill auction rate applied
to the particular investment company's average daily collected balances for
the week. Landon T. Clay, a Director of EVC and an officer, Trustee or
Director of other entities in the Eaton Vance organization, owns approximately
13% of the voting stock of Investors Financial Services Corp., the holding
company parent of IBT. Management believes that such ownership does not create
an affiliated person relationship between the Fund or the Portfolio and IBT
under the 1940 Act. IBT also provides services in connection with the
preparation of shareholder reports and the electronic filing of such reports
with the Commission, for which it receives a separate fee.
SERVICE FOR WITHDRAWAL
The Transfer Agent will send to the shareholder regular monthly or
quarterly payments of any permitted amount designated by the shareholder (see
"Eaton Vance Shareholder Services -- Withdrawal Plan" in the Fund's current
Prospectus) based upon the value of the shares held. The checks will be drawn
from share redemptions and hence, 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, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day. The valuation of the
instruments held by the Portfolio at amortized cost is permitted in accordance
with Rule 2a-7 under the 1940 Act (the "Rule") and certain procedures
established by the Trustees of the Trust and the Portfolio thereunder.
The amortized cost of an instrument is determined by valuing it at cost
originally and thereafter accreting any discount or amortizing any premium
from its face value at a constant rate until maturity, regardless of the
effect of fluctuating interest rates on the market value of the instrument.
Although the amortized cost method provides certainty in valuation, it may
result at times in determinations of value that are higher or lower than the
price the Portfolio would receive if the instruments were sold. Consequently,
changes in the market value of instruments held by the Portfolio during
periods of rising or falling interest rates will not be reflected either in
the computation of net asset value of the Portfolio or in the daily
computation of its net investment income.
The procedures of the Fund and the Portfolio are designed to facilitate,
to the extent reasonably possible, the maintenance of the Fund's price per
share, as computed for the purpose of distribution and redemption of shares,
at $1.00. These procedures include review of the Portfolio's holdings by the
Trustees, at such intervals as they may deem appropriate, to determine whether
the Portfolio's net asset value calculated by using readily available market
quotations deviates from the valuation based on amortized cost, and, if so,
whether such deviation may result in material dilution or is otherwise unfair
to existing interest holders. In the event the Trustees determine that such a
deviation exists, they will take such corrective action as they consider to be
necessary or appropriate, which action could include the sale of instruments
held by the Portfolio prior to maturity (to realize capital gains or losses);
the shortening of average portfolio maturity; withholding dividends;
redemption of shares in kind; or establishing a net asset value per share by
using readily available market quotations.
Since the net investment income of the Fund is declared as a dividend each
time such income is determined, the net asset value per share of the Fund
remains at $1.00 per share immediately after such determination and dividend
declaration. It is expected that the Fund's net investment income will be
positive each time it is determined. However, if because of realized losses on
sales of portfolio investments, a sudden rise in interest rates, default by an
issuer of a portfolio security, or for any other reason the net investment
income of the Portfolio determined at any time is a negative amount, the
Portfolio will offset such amount allocable to each then interest holder's
account from dividends accrued with respect to such account. If at the time of
payment of a dividend (either at the regular dividend payment date, or, in the
case of an interest holder who is withdrawing all or substantially all of its
interest in an account, at the time of redemption), such negative amount
exceeds an interest holder's accrued dividends, the Portfolio will reduce the
interest by treating the interest holder as having contributed to the capital
of the Portfolio that amount of its interest which represents the amount of
the excess. Each shareholder is deemed to have agreed to such contribution in
these circumstances by his or her investment in the Fund.
Should the Portfolio incur or anticipate any unusual or unexpected
significant expense, loss or depreciation which would affect
disproportionately the Fund's net investment income for a particular period,
the Trustees would at that time consider whether to adhere to its daily
dividend policy or to revise it in the light of the then prevailing
circumstances. Such expenses, losses or depreciation may nevertheless result
in a shareholder's receiving no dividends for the period during which the
shares are held and in receiving upon redemption a price per share lower than
the purchase price of such shares.
CALCULATION OF YIELD QUOTATIONS
From time to time, the Fund quotes a current yield based on a specific
seven calendar day period which is calculated by first dividing the net change
in the value of an account having a balance of one share at the beginning of
the period by the value of the account at such time to determine the seven day
base period return, and then multiplying such return by 365/7 with the
resulting yield figure carried to at least the nearest hundredth of one
percent. The net change in account value is determined by the value of
additional shares purchased with dividends declared on the original share and
dividends declared on both the original share and any such additional shares,
but does not include any realized gains or losses from the sales of securities
or any unrealized appreciation or depreciation on portfolio securities. In
addition to the current yield, the Fund also quotes an effective yield based
on a specific seven day period, carried to at least the nearest hundredth of
one percent, computed by determining the net change, exclusive of capital
changes, in the value of a hypothetical preexisting account having a balance
of one share at the beginning of the period, and dividing the difference by
the value of the account at the beginning of the base period to obtain the
base period return, and then compounding the base period return by adding 1,
raising the sum to a power equal to 365 divided by 7, and subtracting 1 from
the result, according to the following formula: Effective yield = [(Base
period return +1)365/7]-1.
Yields will fluctuate from time to time and are not necessarily
representative of future results. A shareholder should remember that yield is
a function of the type and quality of the instruments held by the Portfolio.
For information concerning the current and effective yield of the Fund, see
"Yield Information" in Part II.
TAXES
Each series of the Trust is treated as a separate entity for federal
income tax purposes. In order to qualify each year as a regulated investment
company ("RIC") under the Code, the Fund intends to satisfy certain
requirements relating to sources of income, diversification of assets, and
distribution of income and gains. So long as the Fund qualifies as a RIC for
tax purposes, it will not be subject to federal income tax on income and gains
paid to shareholders in the form of dividends. In the unlikely event that the
Fund fails to so qualify, it would be subject to federal income tax at
corporate rates and all distributions from earnings and profits would be
taxable to shareholders as ordinary income. In order to requalify for taxation
as a RIC, the Fund might be required to recognize unrealized gains, pay
substantial taxes and interest, and make certain distributions.
Because the Fund invests substantially all of its assets in the Portfolio,
the Portfolio also intends to satisfy the source of income and diversification
requirements under the Code. The Portfolio will allocate at least annually to
each investor its distributive share of the Portfolio's net investment
income, net realized capital gains and any other items of income, gain, loss,
deduction or credit. The Portfolio will make allocations to the Fund and will
make moneys available for withdrawal at times and in amounts sufficient to
enable the Fund to satisfy the distribution requirements under the Code.
If the Fund fails to distribute substantially all of its ordinary income
and capital gain net income on a current basis, plus any retained amounts from
the preceding year, the Fund will be subject to a 4% federal excise tax on the
undistributed amounts. The Fund may treat distributions paid in January but
declared in October, November or December of the preceding year as paid by the
Fund on December 31 of that preceding year. As a result, shareholders must
report such distributions on their federal income tax returns for the
preceding year.
The Portfolio may be subject to foreign withholding taxes with respect to
investments in certain foreign securities. The Fund will not be eligible to
pass through to shareholders their proportionate share of foreign taxes paid
by the Portfolio and allocated to the Fund. However, such taxes may be
deducted from the Fund's net investment income.
If a shareholder sells, redeems or otherwise disposes of Fund shares at a
loss within six months of purchase, such loss will be treated as long-term
capital loss to the extent of any long-term capital gain dividends received.
In addition, all or a portion of any loss realized in the event of a sale,
redemption or other disposition of Fund shares will be disallowed if the
shareholder purchases other Fund shares within 30 days of the disposition
(before or after).
The Fund may be required by federal law to withhold and remit to the U.S.
Treasury 31% of the dividends and other distributions paid to any individual
shareholder who fails to furnish the Fund with a correct taxpayer
identification number (generally the individual's social security number), who
has underreported dividends or interest income, or who fails to certify to the
Fund that he or she is not subject to such withholding. The Fund is also
generally required to withhold on certain distributions made to non-resident
aliens and foreign entities.
Special tax rules apply to Individual Retirement Accounts ("IRAs"), tax-
exempt organizations and to other special classes of shareholders including
foreign shareholders. All shareholders should consult their own tax advisers
with respect to the foreign, U.S. federal, state and local tax consequences of
investing in the Fund.
PORTFOLIO SECURITY TRANSACTIONS
Decisions concerning the execution of portfolio security transactions,
including the selection of the market and the executing firm, are made by BMR.
BMR is also responsible for the execution of transactions for all other
accounts managed by it.
BMR places the portfolio security transactions of the Portfolio and of all
other accounts managed by it for execution with many firms. BMR uses its best
efforts to obtain execution of portfolio security transactions at prices which
are advantageous to the Portfolio and at reasonably competitive spreads or
(when a disclosed commission is being charged) at reasonably competitive
commission rates. In seeking such execution, BMR will use its best judgment in
evaluating the terms of a transaction, and will give consideration to various
relevant factors, including without limitation the size and type of the
transaction, the nature and character of the market for the security, the
confidentiality, speed and certainty of effective execution required for the
transaction, the general execution and operational capabilities of the
executing firm, the reputation, reliability, experience and financial
condition of the firm, the value and quality of the services rendered by the
firm in this and other transactions, and the reasonableness of the commission
or spread, if any. The money market instruments purchased and sold by the
Portfolio are generally traded in the over-the-counter market on a net basis
(i.e., without commission) through dealers and banks acting for their own
accounts rather than as brokers and the Portfolio may also acquire such
investments directly from the issuers. Firms acting for their own account
attempt to profit from such transactions by buying at one price and selling at
a higher price, and the difference between such prices is customarily referred
to as the spread which generally is not disclosed. While it is anticipated
that the Portfolio will not pay significant brokerage commissions in
connection with such portfolio security transactions, on occasion it may be
necessary or appropriate to purchase or sell a security through a broker on an
agency basis, in which case the Portfolio will incur a brokerage commission.
Although spreads or commissions paid on portfolio security transactions will,
in the judgment of BMR, be reasonable in relation to the value of the services
provided, spreads or commissions exceeding those which another firm might
charge may be paid to firms who were selected to execute transactions on
behalf of the Portfolio and BMR's other clients for providing brokerage and
research services to BMR.
As authorized in Section 28(e) of the Securities Exchange Act of 1934, a
broker or dealer who executes a portfolio transaction on behalf of the
Portfolio may receive a commission which is in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction if BMR determines in good faith that such compensation was
reasonable in relation to the value of the brokerage and research services
provided. This determination may be made on the basis of either that
particular transaction or on the basis of overall responsibilities which BMR
and its affiliates have for accounts over which they exercise investment
discretion. In making any such determination, BMR will not attempt to place a
specific dollar value on the brokerage and research services provided or to
determine what portion of the compensation should be related to such services.
Brokerage and research services may include advice as to the value of
securities, the advisability of investing in, purchasing, or selling
securities, and the availability of securities or purchasers or sellers of
securities; furnishing analyses and reports concerning issuers, industries,
securities, economic factors and trends, portfolio strategy and the
performance of accounts; effecting securities transactions and performing
functions incidental thereto (such as clearance and settlement); and the
"Research Services" referred to in the next paragraph.
It is a common practice of the investment advisory industry for the
advisers of investment companies, institutions and other investors to receive
research, statistical and quotation services, data, information and other
services, products and materials which assist such advisers in the performance
of their investment responsibilities ("Research Services") from broker-dealer
firms which execute portfolio transactions for the clients of such advisers
and from third parties with which such broker-dealers have arrangements.
Consistent with this practice, BMR receives Research Services from many
broker-dealer firms with which BMR places the Portfolio transactions and from
third parties with which these broker-dealers have arrangements. These
Research Services include such matters as general economic and market reviews,
industry and company reviews, evaluations of securities and portfolio
strategies and transactions, recommendations as to the purchase and sale of
securities and other portfolio transactions, financial, industry and trade
publications, news and information services, pricing and quotation equipment
and services, and research oriented computer hardware, software, data bases
and services. Any particular Research Service obtained through a broker-dealer
may be used by BMR in connection with client accounts other than those
accounts which pay commissions to such broker-dealer. Any such Research
Service may be broadly useful and of value to BMR in rendering investment
advisory services to all or a significant portion of its clients, or may be
relevant and useful for the management of only one client's account or of a
few clients' accounts, or may be useful for the management of merely a segment
of certain clients' accounts, regardless of whether any such account or
accounts paid commissions to the broker-dealer through which such Research
Service was obtained. The advisory fee paid by the Portfolio is not reduced
because BMR receives such Research Services. BMR evaluates the nature and
quality of the various Research Services obtained through broker-dealer firms
and attempts to allocate sufficient commissions to such firms to ensure the
continued receipt of Research Services which BMR believes are useful or of
value to it in rendering investment advisory services to its clients.
Subject to the requirement that BMR shall use its best efforts to seek to
execute portfolio security transactions at advantageous prices and at
reasonably competitive spreads or commission rates, BMR is authorized to
consider as a factor in the selection of any broker-dealer firm with whom
portfolio orders may be placed the fact that such firm has sold or is selling
shares of the Fund or of other investment companies sponsored by BMR or Eaton
Vance. This policy is not inconsistent with a rule of the National Association
of Securities Dealers, Inc. (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 participate 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.
During the fiscal year ended December 31, 1996, the purchases and sales of
portfolio investments were with the issuer or with major dealers in money
market instruments acting as principal. The cost of securities purchased from
underwriters includes a disclosed, fixed underwriting commission or
concession, and the prices for which securities are purchased from and sold to
dealers usually include an undisclosed dealer mark-up or mark-down. For the
fiscal years ended December 31, 1996 and 1995 and for the period from the
start of business, May 2, 1994, to December 31, 1994, the Portfolio paid no
brokerage commissions on portfolio security transactions.
OTHER INFORMATION
The Trust changed its name from Eaton Vance Government Obligations Trust
on July 10, 1995. On September 1, 1995, the Fund was reorganized as a series
of the Trust. Prior thereto, the Fund was a series of Eaton Vance Liquid
Assets Trust. Eaton Vance, pursuant to its agreement with the Trust, controls
the use of the words "Eaton Vance" in the Fund's name and may use the words
"Eaton Vance" or "EV" in other connections and for other purposes.
As permitted by Massachusetts law, there will normally be no meeting of
shareholders for the purpose of electing Trustees unless and until such time
as less than a majority of the Trustees of the Trust holding office have been
elected by shareholders. In such an event the Trustees then in office will
call a shareholders' meeting for the election of Trustees. Except for the
foregoing circumstances and unless removed by action of the shareholders in
accordance with the Trust's By-laws, the Trustees shall continue to hold and
may appoint successor Trustees.
The Declaration of Trust may be amended by the Trustees when authorized by
vote of a majority of the outstanding voting securities of the Trust, the
financial interests of which are affected by the amendment. The Trustees may
also amend the Declaration of Trust without the vote or consent of
shareholders to change the name of the Trust or any series or to make such
other changes as do not have a materially adverse effect on the financial
interests of shareholders or if they deem it necessary to conform it to
applicable federal or state laws or regulations. The Trust'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. 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
interests have removed him from that office either by a written declaration
filed with the Portfolio's custodian or by votes cast at a meeting called for
that purpose. The Declaration of Trust further provides that under certain
circumstances the investors may call a meeting to remove a Trustee and that
the Portfolio is required to provide assistance in communicating with
investors about such a meeting.
The 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 and Lybrand L.L.P., One Post Office Square, Boston, Massachusetts,
are the independent accountants for the Fund and the Portfolio, providing
audit services, tax return preparation, and assistance and consultation with
respect to the preparation of filings with the Commission.
FINANCIAL STATEMENTS
The audited financial statements of, and the report of independent
accountants for, the Funds and the Portfolio appear in the Funds' most recent
annual report to shareholders and are incorporated by reference into this SAI.
A copy of the annual report accompanies this SAI.
Registrant incorporates by reference the audited financial information for
the Funds and the Portfolio listed below for the fiscal year ended December
31, 1996 as previously filed electronically with the Commission:
Eaton Vance Cash Management Fund
Eaton Vance Liquid Assets Fund
Eaton Vance Money Market Fund
Cash Management Portfolio
(Accession No. 0000928816-97-000050)
<PAGE>
APPENDIX
MOODY'S INVESTORS SERVICE, INC.
DESCRIPTION OF RATINGS OF CORPORATE DEBT
MOODY'S SHORT-TERM DEBT RATINGS
Moody's short-term debt ratings are opinions of the ability of issuers to
repay punctually senior debt obligations which have an original maturity not
exceeding one year. Obligations relying upon support mechanisms such as
letters-of-credit and bonds of indemnity are excluded unless explicitly rated.
Moody's employs three designations, all judged to be investment grade, to
indicate the relative repayment ability of issuers. The two highest
designations are as follows:
PRIME-1 -- Issuers (or supporting institutions) rated Prime-1 or (P-1)
have a superior ability for repayment of senior short-term debt obligations.
P-1 repayment ability will often be evidenced by many of the following
characteristics:
o Leading market positions in well-established industries.
o High rates of return on funds employed.
o Conservative capitalization structure with moderate reliance on debt and
ample asset protection.
o Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
o Well-established access to a range of financial markets and assured
sources of alternate liquidity.
PRIME-2 -- Issuers (or supporting institutions) rated Prime-2 or (P-2)
have a strong ability for repayment of senior short-term obligations. This
will normally be evidenced by many of the characteristics cited above, but to
a lesser degree. Earnings trends and coverage ratios, while sound, may be more
subject to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternate liquidity is
maintained.
MOODY'S BOND RATINGS
Aaa -- Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred
to as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such issues.
Aa -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long term risks appear somewhat larger than in Aaa
securities.
STANDARD & POOR'S RATINGS GROUP
DESCRIPTION OF RATINGS OF CORPORATE DEBT
S&P'S COMMERCIAL PAPER RATLNGS
A Standard & Poor's Commercial Paper Rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more
than 365 days.
Ratings are graded into several categories, ranging from "A-1" for the
highest quality obligations to "D" for the lowest. The two highest rating
categories are as follows:
"A-1" This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to Possess extremely strong
safety characteristics are denoted with a plus sign ( + ) designation.
"A-2" Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1".
S&P'S CORPORATE DEBT RATINGS
AAA -- Debt rated "AAA" has the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely strong.
AA -- Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
Note: The AA rating may be modified by the addition of a plus or minus
sign to show the relative standing within this category.
DUFF & PHELPS CREDIT RATING CO.
DESCRIPTION OF RATINGS OF CORPORATE DEBT
DUFF & PHELPS COMMERCLAL PAPER RATLNGS
Duff & Phelps' commercial paper ratings are consistent with the short-term
rating criteria utilized by money market participants. The ratings, in effect,
apply to all obligations with maturities (when issued) or under one year.
The distinguishing feature of Duff & Phelps' commercial paper ratings is
the refinement of the traditional "1" category. The majority of commercial
paper issuers carry the highest short-term rating yet significant quality
differences within that tier do exist. As a consequence, Duff & Phelps has
incorporated gradations of "1+ " (one plus) and "1-" (one minus), to assist
investors in recognizing those differences. The Duff 2 and Duff 3 categories
have not been similarly refined but could be at some later date.
CATEGORY 1: TOP GRADE
DUFF 1+ -- Highest certainty of timely payment. Short-term liquidity,
including internal operating factors and/or ready access to alternative
sources of funds, is clearly outstanding, and safety is just below risk-free
U.S. Treasury short-term obligations.
DUFF 1 -- Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection factors. Risk factors
are minor.
DUFF 1- -- High certainty of timely payment. Liquidity factors are strong
and supported by good fundamental protection factors. Risk factors are very
small.
CATEGORY 2: GOOD GRADE
DUFF 2--Good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing internal funds needs may enlarge
total financing requirements, access to capital markets is good. Risk factors
are small.
DUFF & PHELPS' BOND RATINGS
AAA -- Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
AA+ AA Aa -- High credit quality. Protection factors are strong. Risk is
modest but may vary slightly from time to time because of economic conditions.
FITCH INVESTORS SERVICE, INC.
DESCRIPTION OF RATINGS OF CORPORATE DEBT
FITCH'S SHORT-TERM DEBT RATINGS
Fitch's short-term ratings apply to debt obligations that are payable on
demand or have original maturities of generally up to three years, including
commercial paper, certificates of deposit, medium-term notes, and municipal
and investment notes.
The short-term rating places greater emphasis than a long-term rating on
the existence of liquidity necessary to meet the issuer's obligations in a
timely manner.
Fitch short-term ratings are as follows:
F-1+ -- Exceptionally Strong Credit Quality. Issues assigned this rating
are regarded as having the strongest degree of assurance for timely payment.
F-1 -- Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated
"F-1+".
F-2 -- Good Credit Quality. Issues assigned this rating have a
satisfactory degree of assurance for timely payment, but the margin of safety
is not as great as for issues assigned "F-1+" and "F-1" ratings.
FITCH'S INVESTMENT GRADE BOND RATINGS
AAA -- Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest and
repay principal, which is unlikely to be affected by reasonably foreseeable
events.
AA -- Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated "AAA". Because bonds rated
in the "AAA" and "AA" categories are not significantly vulnerable to
foreseeable future development, short-term debt of these issuers is generally
rated "F-1+".
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EATON VANCE CASH MANAGEMENT FUND.
The Fund became a series of the Trust on September 1, 1995.
FEES AND EXPENSES
INVESTMENT ADVISER
Prior to the close of business April 29, 1994, (when the Fund transferred
substantially all of its assets to the Portfolio in exchange for an interest
in the Portfolio), the Fund retained Eaton Vance as its investment adviser.
For the period from January 1, 1994, to May 1, 1994, the Fund paid Eaton Vance
advisory fees of $180,479 (equivalent to .50% (annualized) of the Fund's
average daily net assets for such period).
TRUSTEES
The fees and expenses of the noninterested Trustees of the Trust and of
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 Fund
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):
AGGREGATE AGGREGATE TOTAL COMPENSATION
COMPENSATION COMPENSATION FROM TRUST AND
NAME FROM FUND FROM PORTFOLIO FUND COMPLEX
---- --------- -------------- ------------
Donald R. Dwight $696 $2,101 $145,000(2)
Samuel L. Hayes, III 628 2,270 157,500(3)
Norton H. Reamer 620 2,180 145,000
John L. Thorndike 641 2,308 150,000(4)
Jack L. Treynor 686 2,299 150,000
- --------------
(1) The Eaton Vance fund complex consists of 212 registered investment
companies or series thereof.
(2) Includes $45,000 of deferred compensation.
(3) Includes $20,429 of deferred compensation.
(4) Includes $28,125 of deferred compensation.
INVESTMENT RESTRICTIONS
The Fund and the Portfolio have adopted the same fundamental investment
restrictions which are enumerated in detail in Part I of this SAI. The Fund's
investment restrictions are designated as fundamental policies and as such
cannot be changed without the approval of the holders of a majority of the
Fund's outstanding voting securities, which as used in this SAI means the
lesser of (a) 67% of the shares of the Fund present or represented by proxy at
a meeting if the holders of more than 50% of the shares are present or
represented at the meeting or (b) more than 50% of the shares of the Fund.
Notwithstanding the investment policies and restrictions of the Fund, the
Fund may invest its assets in an open-end management investment company with
substantially the same investment objective, policies and restrictions as the
Fund. When so invested, the Fund's investment restrictions shall be construed
to be consistent with those of the Portfolio, to the extent applicable.
PRINCIPAL UNDERWRITER
Although the Fund generally distributes its own shares, the Fund has
entered into a Distribution Contract with the Principal Underwriter, a wholly-
owned subsidiary of Eaton Vance, to permit the Fund to distribute its shares
through the Principal Underwriter when in the opinion of the Trustees it will
be in the best interest of the Fund to do so. Shares of the Fund may be
purchased directly from the Fund except in those states where they are
distributed through the Principal Underwriter.
Under the Distribution Agreement with the Principal Underwriter, the
Trust, on behalf of the Fund has agreed to pay all fees and expenses in
connection with the registration of its shares with the Commission as well as
fees and expenses in connection with registering and maintaining registrations
of the Fund and of its shares under the various state "blue-sky" laws. The
Principal Underwriter pays all expenses of preparing, printing and
distributing advertising and sales literature and all prospectuses and
shareholders' reports used in the distribution of Fund shares. The Contract
provides that the Principal Underwriter will accept orders at net asset value
only, as no sales commission or load is charged to the investor. The
Distribution Contract is renewable annually by the Trust's Board of Trustees
(including a majority of the noninterested Trustees), may be terminated on six
months' notice by either party, and is automatically terminated upon
assignment.
The Fund reserves the right to suspend or limit the offering of shares to
the public at any time.
YIELD INFORMATION
The Fund's annualized current and effective yields for the seven-day
period ending December 31, 1996 were 4.86% and 4.98%, respectively.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of March 31, 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
of March 31, 1997, Eaton Vance Distributors, Inc., Boston, MA 02110 was the
record owner of approximately 21.5% of the outstanding shares of the Fund and
Saturn & Co., a nominee of Investors Bank & Trust Company, was the record
owner of approximately 30.9% of the outstanding shares of the Fund, which it
held on behalf of its custody and trust clients. To the knowledge of the
Trust, no other person owned of record or beneficially 5% or more of the
Fund's outstanding shares as of such date.
<PAGE>
[Logo]
EATON VANCE
===============
Mutual Funds
EATON VANCE
CASH MANAGEMENT
FUND
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1997
EATON VANCE CASH
MANAGEMENT FUND
24 FEDERAL STREET
BOSTON, MA 02110
- --------------------------------------------------------------------------------
INVESTMENT ADVISER OF CASH MANAGEMENT PORTFOLIO
Boston Management and Research, 24 Federal Street, Boston, MA 02110
ADMINISTRATOR OF EATON VANCE CASH MANAGEMENT FUND
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 89 South Street, Boston, MA 02111
TRANSFER AGENT
First Data Investor Services Group, 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
CMSAI
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL INFORMATION
May 1, 1997
EATON VANCE LIQUID ASSETS FUND
24 Federal Street
Boston, Massachusetts 02110
(800) 225-6265
This Statement of Additional Information consists of two parts. Part I
provides information about Eaton Vance Liquid Assets Fund (the "Fund"), Cash
Management Portfolio (the "Portfolio") and certain other series of Eaton Vance
Mutual Funds Trust (the "Trust"). Part II provides information solely about the
Fund. Where appropriate, Part I includes cross-references to the relevant
sections of Part II that provide additional, Fund-specific information. This
Statement of Additional Information is sometimes referred to herein as the
"SAI".
TABLE OF CONTENTS Page
PART I
Additonal Information about Investment Policies ..................... 2
Investment Restrictions ............................................. 4
Trustees and Officers ............................................... 5
Investment Adviser and Administrator ................................ 7
Custodian ........................................................... 9
Service for Withdrawal .............................................. 10
Determination of Net Asset Value .................................... 10
Calculation of Yield Quotations ..................................... 11
Taxes ............................................................... 11
Portfolio Security Transactions ..................................... 12
Other Information ................................................... 13
Independent Accountants ............................................. 14
Financial Statements ................................................ 15
Appendix ............................................................ 16
PART II
Fees and Expenses ................................................... a-1
Investment Restrictions ............................................. a-1
Principal Underwriter ............................................... a-2
Distribution Plan ................................................... a-2
Yield Information ................................................... a-3
Control Persons and Principal Holders of Securities ................. a-3
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY THE FUND'S PROSPECTUS DATED MAY 1, 1997, AS SUPPLEMENTED FROM
TIME TO TIME, WHICH IS INCORPORATED HEREIN BY REFERENCE. THIS STATEMENT OF
ADDITIONAL INFORMATION SHOULD BE READ IN CONJUNCTION WITH SUCH PROSPECTUS, A
COPY OF WHICH MAY BE OBTAINED WITHOUT CHARGE BY CONTACTING EATON VANCE
DISTRIBUTORS, INC. (THE "PRINCIPAL UNDERWRITER") (SEE BACK COVER FOR ADDRESS AND
PHONE NUMBER).
FOR EDGAR FILING PURPOSES ONLY: REGISTRANT INCORPORATES BY REFERENCE FOR
EATON VANCE LIQUID ASSETS FUND THE PART I FOUND IN THE STATEMENT OF ADDITIONAL
INFORMATION OF EATON VANCE CASH MANAGEMENT FUND CONTAINED IN THIS AMENDMENT.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EATON VANCE LIQUID ASSETS FUND. The
Fund became a series of the Trust on September 1, 1995.
FEES AND EXPENSES
INVESTMENT ADVISER
Prior to the close of business, April 29, 1994 (when the Fund transferred
substantially all of its assets to the Portfolio in exchange for an interest in
the Portfolio), the Fund retained Eaton Vance as its investment adviser. For the
period from January 1, 1994, to May 1, 1994, the Fund paid Eaton Vance advisory
fees of $80,319 (equivalent to 0.50% (annualized) of the Fund's average daily
net assets for such period).
DISTRIBUTION PLAN
During the fiscal year ended December 31, 1996, the Principal Underwriter
received approximately $169,000 in CDSCs imposed on early redeeming
shareholders. These CDSC payments reduced Uncovered Distribution Charges under
the Plan. As at December 31, 1996, the outstanding Uncovered Distribution
Charges of the Principal Underwriter calculated under the Plan amounted to
approximately $2,080,000 (which amount was equivalent to 10.4% of the Fund's net
assets on such day). For the fiscal year ended December 31, 1996, the Fund made
service fee payments under the Plan aggregating $83,422, of which $81,801 was
paid to Authorized Firms and the balance of which was retained by the Principal
Underwriter.
TRUSTEES
The fees and expenses of the noninterested Trustees of the Trust and of 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):
AGGREGATE AGGREGATE TOTAL COMPENSATION
COMPENSATION COMPENSATION FROM TRUST AND
NAME FROM FUND FROM PORTFOLIO FUND COMPLEX
---- --------- -------------- ------------
Donald R. Dwight $35 $2,101 $145,000(2)
Samuel L. Hayes, III 31 2,270 157,500(3)
Norton H. Reamer 31 2,180 145,000
John L. Thorndike 32 2,308 150,000(4)
Jack L. Treynor 34 2,299 150,000
- ----------
(1) The Eaton Vance fund complex consists of 212 registered investment companies
or series thereof.
(2) Includes $45,000 of deferred compensation.
(3) Includes $20,429 of deferred compensation.
(4) Includes $28,125 of deferred compensation.
INVESTMENT RESTRICTIONS
The following investment restrictions are designated as fundamental policies
and as such cannot be changed without the approval of the holders of a majority
of the Fund's outstanding voting securities, which as used in this SAI means the
lesser of (a) 67% of the shares of the Fund present or represented by proxy at a
meeting if the holders of more than 50% of the shares are present or represented
at the meeting or (b) more than 50% of the shares of the Fund. Accordingly, the
Fund will not:
(1) With respect to 75% of its total assets, invest more than 5% of its
total assets taken at current market value in the securities of any one issuer
or purchase more than 10% of the outstanding voting securities of any one issuer
other than obligations issued or guaranteed by the U.S. Government or any of its
agencies or instrumentalities and except securities of other investment
companies. The 5% restriction does not apply to or limit the Fund's investments
in certificates of deposit, bankers' acceptances or time deposits of banking and
thrift institutions;
(2) Purchase securities on margin (but the Fund may obtain such short-term
credits as may be necessary for the clearance of purchases and sales of
securities);
(3) Borrow money or issue senior securities, except as permitted by the
1940 Act;
(4) Underwrite securities issued by other persons, except insofar as it may
technically be deemed to be an underwriter under the Securities Act of 1933 in
selling or disposing of a portfolio security;
(5) Purchase any security if, as a result of such purchase, more than 25% of
the Fund's total assets (taken at current value) would be invested in the
securities of issuers having their principal business activities in the same
industry; provided that there is no limitation with respect to (a) investments
by the Fund in certificates of deposit, bankers' acceptances or time deposits of
banking and thrift institutions or (b) obligations issued or guaranteed by the
U. S. Government or any of its agencies or instrumentalities; and provided
further that banking and thrift institutions and their holding companies as a
group, finance companies as a group and utility companies as a group will not be
considered single industries;
(6) Purchase or sell real estate, although it may purchase and sell
securities which are secured by interests in real estate and securities of
issuers which invest or deal in real estate;
(7) Purchase or sell physical commodities or contracts for the repurchase
or sale of physical commodities; or
(8) Make loans to other persons, except by (a) the acquisition of money
market instruments, debt securities and other obligations in which the Fund is
authorized to invest in accordance with its investment objective and policies,
(b) entering into repurchase agreements and (c) lending its portfolio
securities.
Notwithstanding the investment policies and restrictions of the Fund, the
Fund may invest its assets in an open-end management investment company with
substantially the same investment objective, policies and restrictions as the
Fund. When so invested, the Fund's investment restrictions shall be construed to
be consistent with those of the Portfolio, to the extent applicable.
PRINCIPAL UNDERWRITER
Under the Distribution Agreement the Principal Underwriter acts as principal
in selling shares of the Fund. The expenses of printing copies of prospectuses
used to offer shares to Authorized Firms or investors and other selling
literature and of advertising is borne by the Principal Underwriter. The fees
and expenses of qualifying and registering and maintaining qualifications and
registrations of the Fund and its shares under federal and state securities laws
are borne by the Fund. In addition, the Fund makes payments to the Principal
Underwriter pursuant to its Distribution Plan as described in the Fund's current
Prospectus; the provisions of the 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 Fund's Distribution Plan or the Distribution Agreement), may be terminated
on sixty days' notice either by such Trustees or by vote of a majority of the
outstanding voting securities of the Fund or on six months' notice by the
Principal Underwriter and is automatically terminated upon assignment. The
Principal Underwriter distributes Fund shares on a "best efforts" basis under
which it is required to take and pay for only such shares as may be sold.
DISTRIBUTION PLAN
The Distribution Plan (the "Plan") is described in the Prospectus and is
designed to meet the requirements of Rule 12b-1 under the 1940 Act and the NASD
Rule.
On June 14, 1993, the Fund revised the Plan to provide that all CDSCs will
be paid to the Fund whenever there exist no outstanding uncovered distribution
charges of the Principal Underwriter with the Principal Underwriter being
entitled to receive all CDSCs paid or payable with respect to any day on which
there exist outstanding uncovered distribution charges.
The amount of uncovered distribution charges of the Principal Underwriter is
computed daily. Briefly, such charges are equivalent to all unpaid sales
commissions and distribution fees to which the Principal Underwriter would be
entitled under the original plan less all CDSCs theretofore paid to the
Principal Underwriter. The amount of uncovered distribution charges of the
Principal Underwriter at any particular time depends upon various changing
factors, including the level and timing of sales of Fund shares, the nature of
such sales (i.e., whether they result from exchange transactions or from cash
sales through Authorized Firms), the level and timing of redemptions of Fund
shares upon which a CDSC will be imposed, the level and timing of redemptions of
Fund shares upon which no CDSC will be imposed (including redemptions involving
exchanges of Fund shares pursuant to the exchange privilege which result in a
reduction of uncovered distribution charges) and changes in the level of the net
assets of the Fund. Periods with a high level of sales of Fund shares
accompanied by a low level of early redemptions of Fund shares resulting in the
imposition of CDSCs will tend to increase the time during which there will exist
uncovered distribution charges of the Principal Underwriter.
The Plan continues 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. 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 therein without
approval of the shareholders of the Fund and the Trustees. So long as the Plan
is in effect, the selection and nomination of noninterested Trustees shall be
committed to such Trustees. The Trustees have determined that in their judgment
there is a reasonable likelihood that the Plan will benefit the Fund and its
shareholders.
YIELD INFORMATION
The Fund's annualized current and effective yields for the seven-day period
ended December 31, 1996 were 4.96% and 5.09%, respectively.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of March 31, 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 of
March 31, 1997, Merrill Lynch, Pierce, Fenner & Smith, Inc., Jacksonville, FL
was the record owner of approximately 10.4% of the outstanding shares of the
Fund, which it held on behalf of its customers who are the beneficial owners of
such shares, and as to which it had voting power under certain limited
circumstances. To the knowledge of the Trust, no other person owned of record or
beneficially 5% or more of the Fund's outstanding shares as of such date.
<PAGE>
[Logo]
EATON VANCE
===============
Mutual Funds
EATON VANCE
LIQUID ASSETS FUND
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL
INFORMATION
MAY 1, 1997
EATON VANCE
LIQUID ASSETS FUND
24 FEDERAL STREET
BOSTON, MA 02110
- --------------------------------------------------------------------------------
INVESTMENT ADVISER OF CASH MANAGEMENT PORTFOLIO
Boston Management and Research, 24 Federal Street, Boston, MA 02110
ADMINISTRATOR OF EATON VANCE LIQUID ASSETS FUND
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 89 South Street, Boston, MA 02111
TRANSFER AGENT
First Data Investor Services Group, 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
LXSAI
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL INFORMATION
May 1, 1997
EATON VANCE MONEY MARKET FUND
24 Federal Street
Boston, Massachusetts 02110
(800) 225-6265
This Statement of Additional Information consists of two parts. Part I
provides information about Eaton Vance Money Market Fund (the "Fund"), Cash
Management Portfolio (the "Portfolio") and certain other series of Eaton Vance
Mutual Funds Trust (the "Trust"). Part II provides information solely about
the Fund. Where appropriate, Part I includes cross-references to the relevant
sections of Part II that provide additional, Fund-specific information. This
Statement of Additional Information is sometimes referred to herein as the
"SAI".
TABLE OF CONTENTS Page
PART I
Additional Information about Investment Policies ................ 2
Investment Restrictions ......................................... 4
Trustees and Officers ........................................... 5
Investment Adviser and Administrator ............................ 7
Custodian ....................................................... 9
Service for Withdrawal .......................................... 9
Determination of Net Asset Value ................................ 10
Calculation of Yield Quotations ................................. 10
Taxes ........................................................... 11
Portfolio Security Transactions ................................. 12
Other Information ............................................... 13
Independent Accountants ......................................... 15
Financial Statements ............................................ 15
Appendix ........................................................ 16
PART II
Fees and Expenses ............................................... a-1
Investment Restrictions ......................................... a-1
Principal Underwriter ........................................... a-2
Distribution Plan ............................................... a-2
Yield Information ............................................... a-4
Control Persons and Principal Holders of Securities ............. a-4
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY THE FUND'S PROSPECTUS DATED MAY 1, 1997, AS SUPPLEMENTED FROM
TIME TO TIME, WHICH IS INCORPORATED HEREIN BY REFERENCE. THIS STATEMENT OF
ADDITIONAL INFORMATION SHOULD BE READ IN CONJUNCTION WITH SUCH PROSPECTUS, A
COPY OF WHICH MAY BE OBTAINED WITHOUT CHARGE BY CONTACTING EATON VANCE
DISTRIBUTORS, INC. (THE "PRINCIPAL UNDERWRITER") (SEE BACK COVER FOR ADDRESS
AND PHONE NUMBER).
FOR EDGAR FILING PURPOSES ONLY: REGISTRANT INCORPORATES BY REFERENCE FOR
EATON VANCE MONEY MARKET FUND THE PART I FOUND IN THE STATEMENT OF ADDITIONAL
INFORMATION OF EATON VANCE CASH MANAGEMENT FUND CONTAINED IN THIS AMENDMENT.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EATON VANCE MONEY MARKET FUND. The
Fund became a series of the Trust on September 1, 1995.
FEES AND EXPENSES
ADMINISTRATOR
As stated under "Investment Adviser and Administrator" in Part I of this
SAI, the Administrator currently receives no compensation for providing
administrative services to the Fund. For the fiscal year ended December 31,
1996 and for the period from the start of business, April 5, 1995, to December
31, 1995, $8,579 and $17,405 of expenses related to the operation of the Fund
were allocated to the Administrator.
DISTRIBUTION PLAN
During the fiscal year ended December 31, 1996, the Principal Underwriter
paid to Authorized Firms sales commissions of $75,367 on sales of shares of
the Fund. During the same period, the Fund made sales commission payments
under the Plan to the Principal Underwriter aggregating $186,355 and the
Principal Underwriter received approximately $284,000 in CDSCs imposed on
early redeeming shareholders. These sales commissions and CDSC payments
reduced Uncovered Distribution Charges under the Plan. As of December 31,
1996, the outstanding Uncovered Distribution Charges of the Principal
Underwriter calculated under the Plan amounted to approximately $2,714,000.
During the fiscal year ended December 31, 1996, the Fund made service fee
payments under the Plan aggregating $13,086, of which $13,062 was paid to
Authorized Firms and the balance of which was paid to the Principal
Underwriter.
PRINCIPAL UNDERWRITER
The Fund has authorized the Principal Underwriter to act as its agent in
repurchasing shares at the rate of $2.50 for each repurchase transaction
handled by the Principal Underwriter. The Principal Underwriter estimates that
the expenses incurred by it in acting as repurchase agent for the Fund will
exceed the amounts paid therefor by the Fund. For the fiscal year ended
December 31, 1996, the Fund paid the Principal Underwriter $627.50 for
repurchase transactions handled by the Principal Underwriter.
TRUSTEES
The fees and expenses of the noninterested Trustees of the Trust and of
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 Fund
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):
AGGREGATE AGGREGATE TOTAL COMPENSATION
COMPENSATION COMPENSATION FROM TRUST AND
NAME FROM FUND FROM PORTFOLIO FUND COMPLEX
---- --------- -------------- ------------
Donald R. Dwight $35 $2,101 $145,000(2)
Samuel L. Hayes, III 31 2,270 157,500(3)
Norton H. Reamer 31 2,180 145,000
John L. Thorndike 32 2,308 150,000(4)
Jack L. Treynor 34 2,299 150,000
- ----------
(1) The Eaton Vance fund complex consists of 212 registered investment
companies or series thereof.
(2) Includes $45,000 of deferred compensation.
(3) Includes $20,429 of deferred compensation.
(4) Includes $28,125 of deferred compensation.
INVESTMENT RESTRICTIONS
Certain investment restrictions of the Fund are designated as fundamental
policies and as such cannot be changed without the approval of the holders of
a majority of the Fund's outstanding voting securities, which as used in this
SAI means the lesser of (a) 67% of the shares of the Fund present or
represented by proxy at a meeting if the holders of more than 50% of the
shares are present or represented at the meeting or (b) more than 50% of the
shares of the Fund. Accordingly, the Fund will not:
(1) With respect to 75% of its total assets, invest more than 5% of its
total assets taken at current market value in the securities of any one issuer
or purchase more than 10% of the outstanding voting securities of any one
issuer other than obligations issued or guaranteed by the U.S. Government or
any of its agencies or instrumentalities and except securities of other
investment companies. The 5% restriction does not apply to or limit the Fund's
investments in certificates of deposit, bankers' acceptances or time deposits
of banking and thrift institutions;
(2) Purchase securities on margin (but the Fund may obtain such short-term
credits as may be necessary for the clearance of purchases and sales of
securities);
(3) Borrow money or issue senior securities, except as permitted by the
Investment Company Act of 1940;
(4) Underwrite securities issued by other persons, except insofar as it
may technically be deemed to be an underwriter under the Securities Act of
1933 in selling or disposing of a portfolio security;
(5) Purchase any security if, as a result of such purchase, more than 25%
of the Fund's total assets (taken at current value) would be invested in the
securities of issuers having their principal business activities in the same
industry; provided that there is no limitation with respect to (a) investments
by the Fund in certificates of deposit, bankers' acceptances or time deposits
of banking and thrift institutions or (b) obligations issued or guaranteed by
the U.S. Government or any of its agencies or instrumentalities; and provided
further that banking and thrift institutions and their holding companies as a
group, finance companies as a group and utility companies as a group will not
be considered single industries;
(6) Purchase or sell real estate, although it may purchase and sell
securities which are secured by interests in real estate and securities of
issuers which invest or deal in real estate;
(7) Purchase or sell physical commodities or contracts for the repurchase
or sale of physical commodities; or
(8) Make loans to other persons, except by (a) the acquisition of money
market instruments, debt securities and other obligations in which the Fund is
authorized to invest in accordance with its investment objective and policies,
(b) entering into repurchase agreements and (c) lending its portfolio
securities.
Notwithstanding the investment policies and restrictions of the Fund, the
Fund may invest its assets in an open-end management investment company with
substantially the same investment objective, policies and restrictions as the
Fund. When so invested, the Fund's investment restrictions shall be construed
to be consistent with those of the Portfolio, to the extent applicable.
PRINCIPAL UNDERWRITER
Under the Distribution Agreement the Principal Underwriter acts as
principal in selling shares of the Fund. The expenses of printing copies of
prospectuses used to offer shares to Authorized Firms or investors and other
selling literature and of advertising is borne by the Principal Underwriter.
The fees and expenses of qualifying and registering and maintaining
qualifications and registrations of the Fund and its shares under federal and
state securities laws are borne by the Fund. In addition, the Fund makes
payments to the Principal Underwriter pursuant to its Distribution Plan as
described in the Fund's current Prospectus; the provisions of the 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 Fund's Distribution Plan
or the Distribution Agreement), may be terminated on sixty days' notice either
by such Trustees or by vote of a majority of the outstanding voting securities
of the Fund or on six months' notice by the Principal Underwriter and is
automatically terminated upon assignment. The Principal Underwriter
distributes Fund shares on a "best efforts" basis under which it is required
to take and pay for only such shares as may be sold.
DISTRIBUTION PLAN
The Plan is 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 Plan is to
compensate the Principal Underwriter for its distribution services and
facilities provided to the Fund.
The Plan provides that the Fund will pay sales commissions and
distribution fees to the Principal Underwriter only after and as a result of
the sale of shares of the Fund. On each sale of Fund shares (excluding
reinvestment of distributions) the Fund will pay the Principal Underwriter
amounts representing (i) sales commissions equal to 6.25% of the amount
received by the Fund for each share sold and (ii) distribution fees calculated
by applying the rate of 1% over the prime rate then reported in the Wall
Street Journal to the outstanding balance of uncovered distribution charges
(as described below) of the Principal Underwriter.
The amount payable by the Fund to the Principal Underwriter pursuant to
the Plan as sales commissions and distribution fees with respect to each day
will be accrued on such day as a liability of the Fund and will accordingly
reduce the Fund's net assets upon such accrual, all in accordance with
generally accepted accounting principles. The amount payable by the Fund on
each day is limited to 1/365 of .75% of the Fund's net assets on such day.
The level of the Fund's net assets changes each day and depends upon the
amount of sales and redemptions of Fund shares, the changes in the value of
the investments held by the Portfolio, the expenses of the Fund and the
Portfolio accrued and allocated to the Fund on such day, income on portfolio
investments of the Portfolio accrued and allocated to the Fund on such day,
and any dividends and distributions declared on Fund shares. The Fund does not
accrue possible future payments as a liability of the Fund or reduce the
Fund's current net assets in respect of unknown amounts which may become
payable under the Plan in the future because the standards for accrual of such
a liability under accounting principles have not been satisfied.
The Plan provides that the Fund will receive all CDSCs and will make no
payments to the Principal Underwriter in respect of any day on which there are
no outstanding uncovered distribution charges of the Principal Underwriter.
CDSCs and accrued amounts will be paid by the Fund to the Principal
Underwriter whenever there exist Uncovered Distribution Charges.
In calculating daily the amount of uncovered distribution charges,
distribution charges will include the aggregate amount of sales commissions
and distribution fees theretofore paid plus the aggregate amount of sales
commissions and distribution fees which the Principal Underwriter is entitled
to be paid under the Plan since its inception. Payments theretofore paid and
payable under the Plan by the Fund to the Principal Underwriter and CDSCs
theretofore paid or payable to the Principal Underwriter will be subtracted
from such distribution charges; if the result of such subtraction is positive,
a distribution fee (computed at 1% over the prime rate then reported in The
Wall Street Journal) will be computed on such amount and added thereto, with
the resulting sum constituting the amount of outstanding uncovered
distribution charges with respect to such day. The amount of outstanding
uncovered distribution charges of the Principal Underwriter calculated on any
day does not constitute a liability recorded on the financial statements of
the Fund.
The amount of uncovered distribution charges of the Principal Underwriter
at any particular time depends upon various changing factors, including the
level and timing of sales of Fund shares, the nature of such sales (i.e.,
whether they result from exchange transactions, reinvestments or from cash
sales through Authorized Firms), the level and timing of redemptions of Fund
shares upon which a CDSC will be imposed, the level and timing of redemptions
of Fund shares upon which no CDSC will be imposed (including redemptions
involving exchanges of Fund shares pursuant to the exchange privilege which
result in a reduction of uncovered distribution charges), changes in the level
of the net assets of the Fund, and changes in the interest rate used in the
calculation of the distribution fee under the Plan. Periods with a high level
of sales of Fund shares accompanied by a low level of early redemptions of
Fund shares resulting in the imposition of CDSCs will tend to increase the
time during which there will exist uncovered distribution charges of the
Principal Underwriter.
Currently, payments of sales commissions and distribution fees and of
service fees may equal .90% of the Fund's average daily net assets per annum.
For actual payments made by the Fund and the outstanding uncovered
distribution charges of the Principal Underwriter, see "Fees and Expenses --
Distribution Plan" in this Part II. The Fund believes that the combined rate
of all these payments may be higher than the rate of payments made under
distribution plans adopted by other investment companies pursuant to Rule
12b-1. Although the Prinicpal Underwriter will use its own funds (which may be
borrowed from banks) to pay sales commissions at the time of sale, it is
anticipated that the Eaton Vance organization will profit by reason of the
operation of the Plan through an increase in the Fund's assets (thereby
increasing the advisory fee payable to BMR by the Portfolio) resulting from
sales of Fund shares and through the amounts paid to the Principal
Underwriter, including CDSCs, pursuant to the Plan. The Eaton Vance
organization may be considered to have realized a profit under the Plan if at
any point in time the aggregate amounts theretofore received by the Principal
Underwriter pursuant to the Plan and from CDSCs have exceeded the total
expenses theretofore incurred by such organization in distributing shares of
the Fund. Total expenses for this purpose will include an allocable portion of
the overhead costs of such organization and its branch offices, which costs
will include without limitation leasing expense, depreciation of building and
equipment, utilities, communication and postage expense, compensation and
benefits of personnel, travel and promotional expense, stationery and
supplies, literature and sales aids, interest expense, data processing fees,
consulting and temporary help costs, insurance, taxes other than income taxes,
legal and auditing expense and other miscellaneous overhead items. Overhead is
calculated and allocated for such purpose by the Eaton Vance organization in a
manner deemed equitable to the Fund.
The Plan continues 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 Plan
and Distribution Agreement may be terminated at any time by vote of a majority
of the Rule 12b-1 Trustees, or by a vote of a majority of the outstanding
voting securities of the Fund. The 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 therein without approval of the shareholders
of the Fund 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 of the Trust believe that the Plan will be a significant
factor in the expected growth of the Fund's assets, and will result in
increased investment flexibility and advantages which have benefited and will
continue to benefit the Fund and its shareholders. Payments for sales
commissions and distribution fees made to the Principal Underwriter under the
Plan will compensate the Principal Underwriter for its services and expenses
in distributing shares of the Fund. Service fee payments made to the Principal
Underwriter and Authorized Firms under the Plan provide incentives to provide
continuing personal services to investors and the maintenance of shareholder
accounts. By providing incentives to the Principal Underwriter and Authorized
Firms, the Plan is expected to result in the maintenance of, and possible
future growth in, the assets of the Fund. Based on the foregoing and other
relevant factors, the Trustees of the Trust have determined that in their
judgment there is a reasonable likelihood that the Plan will benefit the Fund
and its shareholders.
YIELD INFORMATION
The Fund's annualized and current effective yields for the seven-day
period ended December 31, 1996 were 3.85% and 3.93%, respectively.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of March 31, 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
of March 31, 1997, BR&R Investment Company LLC, Baton Rouge, LA was the record
owner of approximately 10.6% of the outstanding shares of the Fund. To the
knowledge of the Trust, no person owned of record or beneficially 5% of more
of the Fund's outstanding shares as of such date.
<PAGE>
[Logo]
EATON VANCE
===============
Mutual Funds
EATON VANCE
MONEY MARKET FUND
STATEMENT OF ADDITIONAL
INFORMATION
MAY 1, 1997
EATON VANCE MONEY MARKET FUND
24 FEDERAL STREET
BOSTON, MA 02110
- -------------------------------------------------------------------------------
INVESTMENT ADVISER OF CASH MANAGEMENT PORTFOLIO
Boston Management and Research, 24 Federal Street, Boston, MA 02110
ADMINISTRATOR OF EATON VANCE MONEY MARKET FUND
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 89 South Street, Boston, MA 02111
TRANSFER AGENT
First Data Investor Services Group, 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
MMFSAI
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL INFORMATION
May 1, 1997
EATON VANCE TAX FREE RESERVES
24 Federal Street
Boston, Massachusetts 02110
(800) 225-6265
- ----------------------------------------------------------------------------
TABLE OF CONTENTS Page
Additional Investment Information ............................ 2
Investment Restrictions ...................................... 3
Trustees and Officers ........................................ 4
Control Persons and Principal Holders of Securities .......... 5
Investment Adviser ........................................... 6
Custodian .................................................... 7
Service for Withdrawal ....................................... 8
Determination of Net Asset Value ............................. 8
Calculation of Yield Quotations .............................. 8
Taxes ........................................................ 9
Principal Underwriter ........................................ 10
Portfolio Security Transactions .............................. 10
Other Information ............................................ 12
Independent Accountants ...................................... 13
Financial Statements ......................................... 13
Appendix ..................................................... 14
- ---------------------------------------------------------------------------
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY THE CURRENT PROSPECTUS OF EATON VANCE TAX FREE RESERVES (THE
"FUND") DATED MAY 1, 1997, AS SUPPLEMENTED FROM TIME TO TIME, WHICH IS
INCORPORATED HEREIN BY REFERENCE. THIS STATEMENT OF ADDITIONAL INFORMATION
SHOULD BE READ IN CONJUNCTION WITH SUCH PROSPECTUS, A COPY OF WHICH MAY BE
OBTAINED WITHOUT CHARGE BY CONTACTING EATON VANCE DISTRIBUTORS, INC. (THE
"PRINCIPAL UNDERWRITER") (SEE BACK COVER FOR ADDRESS AND PHONE NUMBER).
<PAGE>
Capitalized terms used in this Statement of Additional Information ("SAI")
and not otherwise defined have the meanings given them in the Fund's Prospectus.
ADDITIONAL INVESTMENT INFORMATION
The Fund's assets will consist principally of the following:
(1) Floating or variable rate tax-exempt instruments, which provide for
interest rate adjustments at specified intervals. Rate adjustments on such
securities are usually set at the issuer's discretion, in which case the Fund
would normally have the right to resell the security to the issuer or its agent.
Alternatively, rate revisions may be determined in accordance with a prescribed
formula or other contractual procedure. The Fund may also acquire put options in
combination with the purchase of underlying securities. Such put options would
give the Fund the right to require the issuer or some other person to purchase
the underlying security at an agreed upon price. Interest income generated by
certain securities on which the Fund holds a put option may not qualify as
tax-exempt interest.
(2) Tax-exempt notes which are rated at the time of purchase within the
highest grade assigned by Moody's Investors Service, Inc. ("Moody's") (MIG-1),
or within the highest grade assigned by Standard & Poor's Ratings Group ("S&P")
(SP-1), or within the highest grade assigned by Fitch Investors Service, Inc.
("Fitch") (FIN-1).
(3) Project Notes, which are instruments sold by the Department of Housing
and Urban Development but issued by a state or local housing agency, and secured
by the full faith and credit of the United States. Due to changes in the federal
income tax law enacted in the Deficit Reduction Act of 1984, Project Notes
issued on or after June 19, 1984 must satisfy several new requirements to
maintain their tax-exempt status.
(4) Tax-exempt bonds which are rated at the time of purchase within the two
highest grades assigned by Moody's (Aaa or Aa) or S&P (AAA or AA) or Fitch (AAA
or AA).
(5) Tax-exempt commercial paper rated in the highest grade by such rating
services (Prime-1 or A-1 or F-1+, respectively).
(6) Cash.
For a description of the instruments and ratings listed above, see the
Appendix.
The Fund anticipates being at all times as fully invested as possible in
tax-exempt bonds and notes; however, there may be occasions when, as a result of
maturities of portfolio securities or sales of Fund shares or in order to meet
anticipated redemption requests, or the unavailability of suitable tax-exempt
investments, the Fund may hold cash which is not earning income or invest in
taxable short-term obligations including U.S. Government obligations,
interest-bearing obligations of banks (such as certificates of deposit and
bankers' acceptances), repurchase agreements (see the Appendix for description
of risk), and commercial paper.
With respect to 10% of its net assets, the Fund may also purchase shares of
unaffiliated investment companies consistent with the restrictions of the 1940
Act, as amended. Such investments are subject to adverse developments affecting
the mutual fund industry. In addition, investors indirectly pay the fees of two
investment company service providers.
Some tax-exempt securities may be purchased on a "when-issued" basis. If so,
the Fund generally will not pay for the securities or start earning interest on
them until the securities are received, which may take as long as 45 days. In
order to invest its assets immediately, while awaiting delivery of securities
purchased on a when-issued basis, the Fund will normally attempt to invest in
high-grade short-term debt securities that offer same-day settlement and
earnings. The commitment to purchase a security for which payment is not made at
that time may be deemed a separate security. The value of the when-issued
securities on the delivery date may be less than their cost, effecting an
immediate loss to the Fund. Thus, the purchase of securities on a when-issued
basis may be considered an aggressive investment practice involving some risk.
The Fund does not intend to make such commitments for speculative purposes, but
only to accomplish the goal of the Fund, i.e., to invest in tax-exempt
securities. When the Fund commits to purchase a security on a when-issued basis,
the Fund will always have cash or liquid securities sufficient to cover its
commitments. If the Fund determines it is necessary to sell the when-issued
security before delivery, any gain or loss will not be tax-exempt. The Fund has
no specific limit on the amount of securities which may be purchased on a
when-issued basis.
The Fund may acquire "stand-by commitments" with respect to portfolio
obligations. Under a stand-by commitment, the Fund obligates a broker, dealer or
bank to repurchase, at the Fund's option, specified securities at a specified
price and, in this respect, stand-by commitments are comparable to put options.
The exercise of a stand-by commitment therefore is subject to the ability of the
seller to make payment on demand. The Fund will acquire stand-by commitments
solely to facilitate portfolio liquidity and does not intend to exercise its
rights thereunder for trading purposes. The Fund may pay for stand-by
commitments if such action is deemed necessary, thus increasing to a degree the
cost of the underlying obligation and similarly decreasing such security's yield
to investors.
The Fund may purchase securities at a price which would result in a yield to
maturity lower than that generally offered by the seller at the time of purchase
when the Fund can simultaneously acquire the right to sell the securities back
to the issuer or its agent at an agreed-upon price at any time during a
specified period or on a certain date. Such a right is generally known as a
"put."
INVESTMENT RESTRICTIONS
The following investment restrictions of the Fund are designated as
fundamental policies and as such cannot be changed without the approval of a
majority of the Fund's outstanding voting securities, which as used in this SAI
means the lesser of (a) 67% of the shares of the Fund present or represented by
proxy at a meeting if the holders of more than 50% of the shares are present or
represented at the meeting or (b) more than 50% of the shares of the Fund.
As a matter of fundamental investment policy, the Fund may not:
(1) With respect to 75% of its total assets, invest more than 5% of the
value of its total assets in the securities of any one issuer, except for
obligations issued or guaranteed by the United States Government, its agencies
or instrumentalities and except securities of other investment companies;
(2) Borrow money or issue senior securities except as permitted by the
Investment Company Act of 1940;
(3) Purchase securities on margin;
(4) Underwrite securities issued by other persons;
(5) Buy or sell real estate, although it may purchase and sell securities
which are secured by real estate and securities of companies which invest or
deal in real estate, physical commodities, or commodity contracts relating to
physical commodities unless acquired as a result of ownership of securities;
(6) Make loans, except by (a) the purchase of debt instruments and making
portfolio investments, (b) entering into repurchase agreements or (c) lending
portfolio securities;
(7) Purchase any securities which would cause more than 25% of the value of
its total assets at the time of such purchase to be invested in the securities
of issuers having their principal business activities in the same industry,
provided that there is no limitation in respect to investments in tax-exempt
notes or bonds or other obligations issued or guaranteed by the U.S. Government
or its agencies or instrumentalities, or in certificates of deposit or bankers'
acceptances; or
(8) Purchase any securities which would cause more than 20% of the value of
its total assets at the time of such purchase to be invested in securities the
interest on which is not exempt from federal income tax.
Notwithstanding the investment policies and restrictions of the Fund, the
Fund may invest all of its investable assets in an open-end management
investment company with substantially the same investment objective, policies
and restrictions as the Fund.
The Fund has adopted the following nonfundamental investment policies which
may be changed by the Trustees of the Fund without approval of the Fund's
shareholders. As a matter of nonfundamental investment policy, the Fund may not:
(a) purchase or retain securities of any issuer if 5% of the issuer's securities
are owned by those officers and Trustees of the Fund or officers and trustees of
its investment adviser who own individually more than 1/2 of 1% of the issuer's
securities; (b) make short sales except where, because of the ownership of other
securities, it has the right to obtain securities equivalent in kind and amount
to those sold; write or purchase or sell any put or call options or combinations
thereof, except that it may acquire rights to resell tax-exempt securities at an
agreed upon price and at or within an agreed upon time; or (c) invest more than
10% of net assets in investments which are not readily marketable, including
restricted securities and repurchase agreements maturing in more than seven
days. Restricted securities for the purposes of this limitation do not include
securities eligible for resale pursuant to Rule 144A of the Securities Act of
1933 and commercial paper issued pursuant to Section 4(2) of said Act that the
Board of Trustees of the Trust or its delegate, determine to be liquid, based
upon the trading markets for the specific security.
For the purpose of the Fund's investment restrictions, the issuer of a
tax-exempt security is deemed to be the entity (public or private) ultimately
responsible for the payment of principal and interest on the security.
TRUSTEES AND OFFICERS
The Trustees and officers of the Trust are listed below. Except as
indicated, each individual has held the office shown or other offices in the
same company for the last five years. Unless otherwise noted, the business
address of each Trustee and officer is 24 Federal Street, Boston, Massachusetts
02110, which is also the address of Eaton Vance; Eaton Vance's wholly-owned
subsidiary, Boston Management and Research ("BMR"), Eaton Vance's parent, Eaton
Vance Corp. ("EVC") and of Eaton Vance's and BMR's trustee, Eaton Vance, Inc.
("EV"). Eaton Vance and EV are both wholly-owned subsidiaries of EVC. Those
Trustees who are "interested persons" of the Trust, as defined in the 1940 Act
by virtue of their affiliation with any one or more of Eaton Vance, BMR, EVC or
EV, are indicated by an asterisk (*).
M. DOZIER GARDNER, (63) President and Trustee*
Vice Chairman of BMR, Eaton Vance, EVC and EV, and a Director of EVC and EV.
Director, Trustee and officer of various investment companies managed by Eaton
Vance or BMR.
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
JAMES B. HAWKES, (55) Vice President and Trustee*
President and Chief Executive Officer of Eaton Vance, BMR, EVC and EV, and a
Director of EVC and EV. Director or Trustee and officer of various investment
companies managed by Eaton Vance or BMR.
SAMUEL L. HAYES, III, (62) Trustee
Jacob H. Schiff Professor of Investment Banking at Harvard University Graduate
School of Business Administration. Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: Harvard University Graduate School of Business Administration,
Soldiers Field Road, Boston, Massachusetts 02134.
NORTON H. REAMER, (61) Trustee
President and Director, United Asset Management Corporation (a holding company
owning institutional investment management firms); Chairman, President and
Director, UAM Funds (mutual funds). Director and Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: One International Place, Boston, Massachusetts 02110
JOHN L. THORNDIKE, (70) Trustee
Former Director of Fiduciary Company Incorporated. Director and Trustee of
various investment companies managed by Eaton Vance or BMR.
Address: 175 Federal Street, Boston, Massachusetts 02110
JACK L. TREYNOR, (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
WILLIAM H. AHERN, JR. (37) Vice President
Assistant Vice President of Eaton Vance and BMR. Officer of various investment
companies managed by Eaton Vance or BMR. Mr. Ahern was elected Vice
President of the Trust on June 19, 1995.
MICHAEL B. TERRY (54), Vice President
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 Eaton Vance, BMR and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
THOMAS OTIS, (65) Secretary
Vice President and Secretary of Eaton Vance, BMR, EVC and EV. Officer of various
investment companies managed by Eaton Vance or BMR.
JANET E. SANDERS, (61) Assistant Treasurer and Assistant Secretary
Vice President of Eaton Vance, BMR and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
A. JOHN MURPHY, (34) Assistant Secretary
Assistant Vice President of BMR and Eaton Vance 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 of the Trust on March 27,
1995.
JOHN P. RYNNE (54), Assistant Secretary
Corporate Controller and Vice President of EVC. Vice President of Eaton Vance,
EVD and BMR, and Treasurer of Energex Energy Corporation. Mr. Rynne was
elected Assistant Secretary of the Trust on June 19, 1995.
ERIC G. WOODBURY (39) Assistant Secretary
Vice President of Eaton Vance since February 1993; formerly, associate at
Dechert, Price & Rhoads. Officer of various investment companies managed by
Eaton Vance or BMR. Mr. Woodbury was elected Assistant Secretary of the
Trust on June 19, 1995.
Messrs. Hayes (Chairman), Reamer and Thorndike are members of the Special
Committee of the Board of Trustees of the Trust. The purpose of the Special
Committee is to consider, evaluate and make recommendations to the full Board of
Trustees concerning (i) all contractual arrangements with service providers to
the Fund, including administrative services, transfer agency, custodial and fund
accounting and distribution services, and (ii) all other matters in which Eaton
Vance or its affiliates has any actual or potential conflict of interest with
the Fund or its shareholders.
The Nominating Committee of the Board of Trustees of the Trust 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. The Audit Committee's functions include
making recommendations to the Trustees regarding the selection of the
independent certified public 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.
The fees and expenses of the noninterested Trustees of the Trust are paid by
the Fund (and the other series of the Trust). (The Trustees of the Trust who are
members of the Eaton Vance organization receive no compensation from the Fund).
During the fiscal year ended December 31, 1996, the noninterested Trustees of
the Trust earned the following compensation in their capacities as Trustees from
the Fund and the funds in the Eaton Vance fund complex:
AGGREGATE TOTAL COMPENSATION
COMPENSATION FROM TRUST AND
NAME FROM FUND FUND COMPLEX(1)
- ---- --------- ---------------
Donald R. Dwight ..................... $ 780 $145,000(2)
Samuel L. Hayes, III ................. 984 157,500(3)
Norton H. Reamer ..................... 926 145,000
John L. Thorndike .................... 1,010 150,000(4)
Jack L. Treynor ...................... 952 150,000
- ----------
(1) The Eaton Vance fund complex consists of 212 registered investment companies
or series thereof.
(2) Includes $45,000 of deferred compensation.
(3) Includes $20,429 of deferred compensation.
(4) Includes $28,125 of deferred compensation.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As at March 31, 1997, the Trustees and officers of the Fund, as a group,
owned in the aggregate less than 1% of the outstanding shares of the Fund. As of
March 31, 1997, Saturn & Co., a nominee of Investors Bank & Trust Company, was
the record owner of approximately 31.9% of the outstanding shares of the Fund,
which it held on behalf of its custody and trust clients. In addition, as of the
same date, the following shareholders held of record the percentage of
outstanding shares of the Fund indicated after their names: James Campisi, c/o
The Newport Group, Heathrow, FL (30.2%) and Peter S. Cahill TTEE Peter S. Cahill
Revocable Trust U/A DTD 8/4/94, c/o The Newport Group, Heathrow, FL (22.8%). To
the knowledge of the Trust, no other person owned of record or beneficially 5%
or more of the Fund's outstanding shares as of such date.
INVESTMENT ADVISER
The Trust on behalf of the Fund engages Eaton Vance as investment adviser
for the Fund pursuant to an Investment Advisory Agreement dated August 15, 1995.
Eaton Vance or its affiliates act as investment adviser to investment companies
and various individual and institutional clients with combined assets under
management of over $17 billion.
Eaton Vance, its affiliates and its predecessor companies have been managing
assets of individuals and institutions since 1924 and managing investment
companies since 1931. They maintain a large staff of experienced fixed-income
and equity investment professionals to service the needs of their clients. The
fixed-income division focuses on all kinds of taxable investment-grade and
high-yield securities, tax-exempt investment-grade and high-yield securities,
and U.S. Government securities. The equity division covers stocks ranging from
blue chip to emerging growth companies.
Eaton Vance and its affiliates act as adviser to over 150 mutual funds, 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
$18 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.
Under the investment advisory agreement Eaton Vance receives a monthly
advisory fee of 1/24 of 1% (equivalent to 1/2 of 1% annually) of average monthly
net assets of the Fund. As at December 31, 1996, the Fund had net assets of
$23,354,736. For the fiscal years ended December 31, 1996, 1995 and 1994, Eaton
Vance would have earned, absent a fee reduction, advisory fees of $308,030,
$255,933 and $204,513, respectively. To enhance the net income of the Fund,
Eaton Vance made a reduction of its fee for the fiscal years ended December 31,
1996, 1995 and 1994 in the amount of $226,940, $200,851 and $162,287,
respectively.
Eaton Vance manages the investments and affairs of the Fund, subject to the
supervision of the Trust's Board of Trustees. Eaton Vance furnishes for the use
of the Fund office space and all necessary office facilities, equipment and
personnel for servicing the investments of the Fund, and compensates all
officers and Trustees of the Trust who are members of the Eaton Vance
organization and all personnel of Eaton Vance performing services relating to
research and investment activities. The Fund has agreed to pay all expenses not
expressly stated to be payable by Eaton Vance under the Investment Advisory
Agreement, including, without limitation, (i) expenses of maintaining the Fund
and continuing its existence, (ii) 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, (iv) auditing, accounting and
legal expenses, (v) taxes and interest, (vi) governmental fees, (vii) expenses
of issue, sale, repurchase and redemption of shares, (viii) expenses of
registering and qualifying the Fund and its shares under federal and state
securities laws and of preparing and printing prospectuses for such purposes and
for distributing the same to shareholders, (ix) expenses of reports and notices
to shareholders and of meetings of shareholders and proxy solicitations
therefor, (x) expenses of reports to governmental officers and commissions, (xi)
insurance expenses, (xii) association membership dues, (xiii) fees, expenses and
disbursements of custodians and subcustodians for all services to the Fund
(including without limitation safekeeping of funds and securities, keeping of
books and accounts and determination of net asset values), (xiv) fees, expenses
and disbursements of transfer agents, dividend disbursing agents, shareholder
servicing agents and registrars for all services to the Fund, (xv) expenses for
servicing shareholder accounts, (xvi) any direct charges to shareholders
approved by the Trustees, (xvii) compensation and expenses of Trustees not
affiliated with Eaton Vance, and (xviii) such non-recurring items as may arise,
including expenses incurred in connection with litigation, proceedings and
claims and any obligation of the Fund to indemnify the Trust's Trustees and
officers with respect thereto, to the extent not covered by insurance.
The Fund is responsible for all expenses for servicing shareholder accounts,
and Eaton Vance performs on behalf of the Fund various functions which relate to
the administration and servicing of existing shareholder accounts without being
reimbursed by the Fund for its costs in connection therewith. It is possible
that Eaton Vance may, in the future, request that the Trustees of the Trust take
action to have the Fund reimburse Eaton Vance for its costs in performing these
services. These services include functions which are primarily administrative
and clerical in nature, and include such matters as handling communications from
shareholders with respect to their accounts and the processing of liquidation
and exchange requests received from dealers or shareholders with respect to such
accounts. If any such request for reimbursement is made, the Trustees of the
Trust intend to review the specific nature and costs of these services prior to
approving any such reimbursement.
The Investment Advisory Agreement with Eaton Vance 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 cast in person at a
meeting specifically called for the purpose of voting on such approval and (ii)
by the Board of Trustees of the Trust or by vote of a majority of the
outstanding voting securities of the Fund. The Agreement may be terminated at
any time without penalty on sixty (60) days' written notice by the Board of
Trustees of either party or by vote of the majority of the outstanding voting
securities of the Fund, and the Agreement will terminate automatically in the
event of its assignment. The Agreement provides that Eaton Vance may render
services to others. The Agreement also provides that, in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of obligations or
duties under the Agreement on the part of Eaton Vance, Eaton Vance shall not be
liable to the Fund or to any shareholder for any act or omission in the course
of or connected with rendering services or for any losses sustained in the
purchase, holding or sale of any security.
Eaton Vance and EV are both wholly-owned subsidiaries of EVC. BMR is a
wholly-owned subsidiary of Eaton Vance. Eaton Vance and BMR are both
Massachusetts business trusts, and EV is the trustee of Eaton Vance and BMR.
The Directors of EV are Landon T. Clay, M. Dozier Gardner, James B. Hawkes and
Benjamin A. Rowland, Jr. The Directors of EVC consist of the same persons and
John G. L. Cabot and Ralph Z. Sorenson. Mr. Clay is chairman, Mr. Gardner is
vice chairman and Mr. Hawkes is president and chief executive officer of EVC,
Eaton Vance, BMR and EV. All of the issued and outstanding shares of Eaton
Vance and EV are owned by EVC. All of the issued and outstanding shares of BMR
are owned by Eaton Vance. All shares of the outstanding Voting Common Stock of
EVC are deposited in a Voting Trust which expires December 31, 1997, the
Voting Trustees of which are Messrs. Clay, Gardner, Hawkes, Rowland and Thomas
E. Faust, Jr. The Voting Trustees have unrestricted voting rights for the
election of Directors of EVC. All of the outstanding voting trust receipts
issued under said Voting Trust are owned by certain of the officers of Eaton
Vance and BMR who are also officers or officers and Directors of EVC and EV.
As of April 30, 1997, Messrs. Clay, Gardner and Hawkes each owned 24% of such
voting trust receipts, and Messrs. Rowland and Faust owned 15% and 13%,
respectively, of such voting trust receipts. Messrs. Gardner, Hawkes and Otis,
who are officers or Trustees of the Trust are members of the EVC, Eaton Vance,
BMR and EV organizations. Messrs. Ahern, Murphy, O'Connor, Rynne and Woodbury
and Ms. Sanders, who are officers of the Trust, are also members of the Eaton
Vance, BMR and EV organizations.
EVC owns all of the stock of Energex Energy Corporation which engages in oil
and gas exploration and development. In addition, Eaton Vance owns all the stock
of Northeast Properties, Inc., which is engaged in real estate investment. EVC
also owns 22% of the Class A shares of Lloyd George Management (B.V.I.) Limited,
a registered investment adviser. EVC owns all of the stock of Fulcrum
Management, Inc. and MinVen, Inc., which are engaged in precious metal mining
venture investment and management. Eaton Vance, BMR, EVC and EV may also enter
into other businesses.
EVC and its affiliates and their officers and employees from time to time
have transactions with various banks, including the Fund's custodian, 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 and such banks.
CUSTODIAN
IBT acts as custodian for the Fund. IBT has the custody of all cash and
securities of the Fund, maintains the Fund's general ledger and computes the
daily per share net asset value. In such capacity it attends to details in
connection with the sale, exchange, substitution, transfer or other dealings
with the Fund's investments, receives and disburses all funds and performs
various other ministerial duties upon receipt of proper instructions from the
Fund. IBT charges fees which are competitive within the industry. A portion of
the fee relates to custody, bookkeeping and valuation services and is based upon
a percentage of Fund net assets and a portion of the fee relates to activity
charges, primarily the number of portfolio transactions. These fees are then
reduced by a credit for the Fund's cash balances at the custodian equal to 75%
of the 91-day, U.S. Treasury Bill auction rate applied to the Fund's average
daily collected balances. Landon T. Clay, a Director of EVC and an officer,
Trustee or Director of other entities in the Eaton Vance organization, owns
approximately 13% of the voting stock of Investors Financial Services Corp., the
holding company parent of IBT. Management believes that such ownership does not
create an affiliated person relationship between the Fund and IBT under the 1940
Act. IBT also provides services in connection with the preparation of
shareholder reports and the electronic filing of such with the Commission, for
which it receives a separate fee.
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 Fund's current Prospectus) based
upon the value of the shares held. Payments from the proceeds of shares redeemed
to make withdrawal payments may exceed the amounts of distributions paid on Fund
shares and, to that extent, will reduce, or even exhaust, a shareholder's
investment. A shareholder may not have a withdrawal plan in effect at the same
time he or she has authorized Bank Automated Investing or is otherwise making
regular purchases of Fund shares. The shareholder, the Transfer Agent or the
Principal Underwriter may terminate the withdrawal plan at any time without
penalty.
DETERMINATION OF NET ASSET VALUE
The Fund's use of the amortized cost method to value its portfolio
securities was originally permitted by an exemptive order dated October 6, 1981,
issued by the Commission under the 1940 Act. The Fund has ceased to rely on such
order and relies on Rule 2a-7 promulgated under said Act as the basis for using
the amortized cost method to value its securities. Rule 2a-7 requires that the
Fund limit its investments, including puts and repurchase agreements, to those
U.S. dollar-denominated instruments which the Trustees determine present minimal
credit risks and which are, at the time of acquisition, rated by the requisite
number of nationally recognized statistical rating organizations in one of the
two highest applicable rating categories or, in the case of any instrument that
is not so rated, of comparable quality as determined by the Trustees of the
Trust. The Rule also requires the Fund to maintain a dollar-weighted average
portfolio maturity (not more than 90 days) appropriate to its objective of
enabling the Fund to maintain a stable net asset value of $1.00 per Fund share.
In addition, the Rule precludes the purchase of any instrument with a remaining
maturity of more than 397 calendar days. Should the disposition of a portfolio
security result in a dollar-weighted average portfolio maturity of more than 90
days, the Fund will invest its available cash in such a manner as to reduce such
maturity to 90 days or less as soon as reasonably practicable.
The Fund will be closed for business and will not price its shares on the
following business holidays: New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
CALCULATION OF YIELD QUOTATIONS
From time to time, the Fund quotes a current yield based on a specific seven
calendar day period which is calculated by first dividing the net change in the
value of an account having a balance of one share at the beginning of the period
by the value of the account at such time to determine the seven day base period
return, and then multiplying such return by 365/7 with the resulting yield
figure carried to at least the nearest hundredth of one percent. The net change
in account value is determined by the value of additional shares purchased with
dividends declared on the original share and dividends declared on both the
original share and any such additional shares, but does not include any realized
gains or losses from the sales of securities or any unrealized appreciation or
depreciation on portfolio securities. In addition to the current yield, the Fund
also quotes an effective yield based on a specific seven day period carried to
at least the nearest hundredth of one percent, computed by determining the net
change, exclusive of capital changes, in the value of a hypothetical preexisting
account having a balance of one share at the beginning of the period, and
dividing the difference by the value of the account at the end of the base
period to obtain the base period return, and then compounding the base period
return by adding 1, raising the sum to a power equal to 365 divided by 7, and
subtracting 1 from the result, according to the following formula:
Effective yield = [(Base period return +1) 365/7]-1: A taxable-equivalent yield
is computed by using the tax-exempt yield figure and dividing by 1 minus the tax
rate.
The Fund's annualized current and effective yields for the seven-day period
ending December 31, 1996 were 3.19% and 3.24%, respectively. The
taxable-equivalent current and effective yields for that same period were 4.62%
and 4.73% (assuming a tax rate of 31%). Yields will fluctuate from time to time
and are not necessarily representative of future results. A shareholder should
remember that yield is a function of the type and quality of the instruments in
the Fund's portfolio.
TAXES
Each series of the Trust is treated as a separate entity for federal income
tax purposes. In order to qualify each year as a regulated investment company
("RIC") under the Code, the Fund intends to satisfy certain requirements
relating to sources of income, diversification of assets, and distribution of
income and gains. So long as the Fund qualifies as a RIC for tax purposes, it
will not be subject to federal income tax on income and gains paid to
shareholders in the form of dividends. In the unlikely event that the Fund fails
to so qualify, it would be subject to federal income tax at corporate rates and
all distributions from earnings and profits, including distributions of exempt
interest, would be taxable to shareholders as ordinary income. In order to
requalify for taxation as a RIC, the Fund might be required to recognize
unrealized gains, pay substantial taxes and interest, and make certain
distributions.
If the Fund fails to distribute substantially all of its ordinary income and
capital gain net income on a current basis, plus any retained amounts from the
preceding year, the Fund will be subject to a 4% federal excise tax on the
undistributed amounts. The Fund may treat distributions paid in January but
declared in October, November or December of the preceding year as paid by the
Fund on December 31 of that preceding year. As a result, shareholders must
report such distributions on their federal income tax returns for the preceding
year.
The Fund's investment in securities issued at a discount and certain other
obligations will require the Fund to accrue and distribute income not yet
received. In order to generate cash sufficient to make the required
distributions, the Fund may sell securities that it would otherwise have
continued to hold.
The Fund will be qualified to pay exempt-interest dividends so long as, at
the end of each quarter of the Fund's taxable year, at least 50% of the Fund's
assets consists of obligations the interest on which is exempt from federal
income tax. That portion of any indebtedness incurred or continued by a
shareholder in order to purchase or carry shares in the Fund which corresponds
to the portion of total Fund distributions (excluding capital gains dividends)
that are exempt interest dividends is not deductible by the shareholder. Exempt
interest dividends attributable to interest received on certain "private
activity bonds" or industrial development bonds will not be tax exempt to any
shareholders who are "substantial users" (or persons related to "substantial
users") of the facilities financed by such bonds.
If a shareholder sells, redeems or otherwise disposes of Fund shares at a
loss within six months of purchase, such loss will be disallowed for federal
income tax purposes to the extent of any exempt interest dividends received. In
addition, any allowed loss will be treated as long-term capital loss to the
extent of any long-term capital gain dividends received; and all or a portion of
any loss realized will be disallowed if the shareholder purchases other Fund
shares within 30 days of the disposition (before or after).
The Fund may be required by federal law to withhold and remit to the U.S.
Treasury 31% of the taxable dividends and other distributions paid to any
individual shareholder who fails to furnish the Fund with a correct taxpayer
identification number (generally the individual's social security number), who
has underreported dividends or interest income, or who fails to certify to the
Fund that he or she is not subject to such withholding. The Fund is also
generally required to withhold on certain distributions made to non-resident
aliens and foreign entities.
Part or all of any interest on indebtedness incurred or continued by a
shareholder to purchase or carry shares of the Fund is not deductible for
federal income tax purposes. Further, entities or persons who are "substantial
users" (or persons related to "substantial users") of facilities financed by
certain private activity obligations and industrial development bonds should
consult their tax advisers before purchasing shares of the Fund. "Substantial
user" is generally a "non-exempt person" who regularly uses in a trade or
business a part of a facility financed from the proceeds of industrial
development bonds or private activity obligations.
Shareholders should consult their own tax advisers with respect to the
federal, state and local tax consequences of investing in the Fund.
PRINCIPAL UNDERWRITER
Although the Fund generally distributes its own shares, the Trust on behalf
of the Fund has entered into a Distribution Contract with the Principal
Underwriter, a wholly-owned subsidiary of Eaton Vance, to permit the Fund to
distribute its shares through the Principal Underwriter when in the opinion of
the Trustees it will be in the best interest of the Fund to do so. Shares of the
Fund may be purchased directly from the Fund except in those states where they
are distributed through the Principal Underwriter.
Under the Distribution Agreement with the Principal Underwriter, the Fund
has agreed to pay all fees and expenses in connection with the registration of
its shares with the Commission as well as fees and expenses in connection with
registering and maintaining registrations of the Fund and of its shares under
the various state "blue-sky" laws. The Principal Underwriter pays all expenses
of preparing, printing and distributing advertising and sales literature and all
prospectuses and shareholders' reports used in the distribution of Fund shares.
The Contract provides that the Principal Underwriter will accept orders at net
asset value only, as no sales commission or load is charged to the investor.
Eaton Vance, the Fund's adviser, makes quarterly distribution assistance
payments to selected broker/dealer firms or institutions who were instrumental
in the acquisition of shareholders for the Fund, or who performed services with
respect to shareholder accounts. Payments by Eaton Vance are made with respect
to accounts aggregating at least $1,000,000 in size only and determined and paid
in arrears by applying a rate of up to 2/10 of 1% per annum on the aggregate
average net asset value of the excess over $1,000,000 in such accounts during
the preceding quarter. The exact rate per annum used in calculating such
payments, the minimum aggregate net asset value required for eligibility for
such payments, and the factors in selecting the broker/ dealer firms or
institutions to whom they will be made will be determined from time to time by
Eaton Vance. Such payments are made by Eaton Vance and not the Fund, and do not
constitute a distribution plan subject to Rule 12b-1 under the 1940 Act.
The Fund reserves the right to suspend or limit the offering of shares to
the public at any time.
The Distribution Contract is renewable annually by the Trust's Board of
Trustees (including a majority of the noninterested Trustees), may be terminated
on six months' notice by either party, and is automatically terminated upon
assignment.
PORTFOLIO SECURITY TRANSACTIONS
Decisions concerning the execution of Fund portfolio security transactions,
including the selection of the market and the executing firm, are made by Eaton
Vance. Eaton Vance is also responsible for the execution of transactions for all
other accounts managed by it.
Eaton Vance places the portfolio security transactions of the Fund and of
all other accounts managed by it for execution with many firms. Eaton Vance uses
its best efforts to obtain execution of portfolio security transactions at
prices which are advantageous to the Fund and (when a disclosed commission is
being charged) at reasonably competitive commission rates. In seeking such
execution, Eaton Vance will use its best judgment in evaluating the terms of a
transaction, and will give consideration to various relevant factors, including
without limitation the size and type of the transaction, the general execution
and operational capabilities of the executing firm, the nature and character of
the market for the security, the confidentiality, speed and certainty of
effective execution required for the transaction, the reputation, reliability,
experience and financial condition of the firm, the value and quality of the
services rendered by the firm in this and other transactions, and the
reasonableness of the spread or commission, if any. Municipal obligations
purchased and sold by the Fund are generally traded in the over-the-counter
market on a net basis (i.e., without commission) through broker-dealers and
banks acting for their own account rather than as brokers, or otherwise involve
transactions directly with the issuer of such obligations. Such firms attempt to
profit from such transactions by buying at the bid price and selling at the
higher asked price of the market for such obligations, and the difference
between the bid and asked price is customarily referred to as the spread. The
Fund may also purchase municipal obligations from underwriters, the cost of
which may include undisclosed fees and concessions to the underwriters. While it
is anticipated that the Fund will not pay significant brokerage commissions in
connection with such portfolio security transactions, on occasion it may be
necessary or appropriate to purchase or sell a security through a broker on an
agency basis, in which case the Fund will incur a brokerage commission. Although
spreads or commissions on portfolio security transactions will, in the judgment
of Eaton Vance, be reasonable in relation to the value of the services provided,
spreads or commissions exceeding those which another firm might charge may be
paid to firms who were selected to execute transactions on behalf of the Fund
and Eaton Vance's other clients for providing brokerage and research services to
Eaton Vance.
As authorized in Section 28(e) of the Securities Exchange Act of 1934, a
broker or dealer who executes a portfolio transaction on behalf of the Fund may
receive a commission which is in excess of the amount of commission another
broker or dealer would have charged for effecting that transaction if Eaton
Vance determines in good faith that such compensation was reasonable in relation
to the value of the brokerage and research services provided. This determination
may be made on the basis of either that particular transaction or on the basis
of overall responsibilities which Eaton Vance and its affiliates have for
accounts over which they exercise investment discretion. In making any such
determination, Eaton Vance will not attempt to place a specific dollar value on
the brokerage and research services provided or to determine what portion of the
commission should be related to such services. Brokerage and research services
may include advice as to the value of securities, the advisability of investing
in, purchasing, or selling securities, and the availability of securities or
purchasers or sellers of securities; furnishing analyses and reports concerning
issuers, industries, securities, economic factors and trends, portfolio strategy
and the performance of accounts; effecting securities transactions and
performing functions incidental thereto (such as clearance and settlement); and
the "Research Services" referred to in the next paragraph.
It is a common practice of the investment advisory industry and of the
advisers of investment companies, institutions and other investors to receive
research, statistical and quotation services, data, information and other
services, products and materials which assist such advisers in the performance
of their investment responsibilities ("Research Services") from broker-dealers
which execute portfolio transactions for the clients of such advisers and from
third parties with which such broker-dealers have arrangements. Consistent with
this practice, Eaton Vance receives Research Services from many firms with which
Eaton Vance places the Fund's portfolio transactions and from third parties with
which these broker-dealers have arrangements. These Research Services include
such matters as general economic and market reviews, industry and company
reviews, evaluations of securities and portfolio strategies and transactions,
and recommendations as to the purchase and sale of securities and other
portfolio transactions, financial, industry and trade publications, news and
information services, pricing and quotation equipment and services, and research
oriented computer hardware, software, data bases and services. Any particular
Research Service obtained through a broker-dealer may be used by Eaton Vance in
connection with client accounts other than those accounts which pay commissions
to such broker-dealer. Any such Research Service may be broadly useful and of
value to Eaton Vance in rendering investment advisory services to all or a
significant portion of its clients, or may be relevant and useful for the
management of only one client's account or of a few clients' accounts, or may be
useful for the management of merely a segment of certain clients' accounts,
regardless of whether any such account or accounts paid commissions to the
broker-dealer through which such Research Service was obtained. The advisory fee
paid by the Fund is not reduced because Eaton Vance receives such Research
Services. Eaton Vance evaluates the nature and quality of the various Research
Services obtained through broker-dealer firms and attempts to allocate
sufficient commissions to such firms to ensure the continued receipt of Research
Services which Eaton Vance believes are useful or of value to it in rendering
investment advisory services to its clients.
Subject to the requirement that Eaton Vance shall use its best efforts to
seek and execute portfolio security transactions at advantageous prices and at
reasonably competitive spreads or commission rates, Eaton Vance is authorized to
consider as a factor in the selection of any firm with whom portfolio orders may
be placed the fact that such firm has sold or is selling shares of the Fund or
of other investment companies sponsored by Eaton Vance. This policy is not
inconsistent with a rule of the National Association of Securities Dealers, Inc.
(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.
Municipal obligations considered as investments for the Fund may also be
appropriate for other investment accounts managed by Eaton Vance or its
affiliates. Whenever decisions are made to buy or sell securities by the Fund
and one or more of such other accounts simultaneously, Eaton Vance 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 Fund will not participate 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
Eaton Vance 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
Fund from time to time, it is the opinion of the Trustees of the Trust that the
benefits from the Eaton Vance organization outweigh any disadvantage that may
arise from exposure to simultaneous transactions.
During the fiscal year ended December 31, 1996 the purchases and sales of
portfolio investments were with the issuer or with major dealers in money market
instruments acting as principal. The cost of securities purchased from
underwriters includes a disclosed, fixed underwriting commission or concession,
and the prices for which securities are purchased from and sold to dealers
usually include an undisclosed dealer mark-up or mark-down. The Fund paid no
brokerage commissions during 1996, 1995 or 1994.
OTHER INFORMATION
The Trust changed its name from Eaton Vance Government Obligations Trust on
July 10, 1995. On September 1, 1995, the Fund was reorganized as a series of the
Trust. Prior thereto, the Fund was a separate Massachusetts business trust.
Eaton Vance, pursuant to its agreement with the Trust, controls the use of the
words "Eaton Vance" in the Fund's name and may use the words "Eaton Vance" or
"EV" in other connections and for other purposes.
As permitted by Massachusetts law, there will normally be no meetings of
shareholders for the purpose of electing Trustees unless and until such time as
less than a majority of the Trustees of the Trust holding office have been
elected by shareholders. In such an event the Trustees then in office will call
a shareholders' meeting for the election of Trustees. Except for the foregoing
circumstances and unless removed by action of the shareholders in accordance
with the Trust's by-laws, the Trustees shall continue to hold office and may
appoint successor Trustees.
The Declaration of Trust may be amended by the Trustees when authorized by
vote of a majority of the outstanding voting securities of the Trust, the
financial interests of which are affected by the amendment. The Trustees may
also amend the Declaration of Trust without the vote or consent of shareholders
to change the name of the Trust or any series or to make such other changes as
do not have a materially adverse effect on the financial interests of
shareholders or if they deem it necessary to conform it to applicable federal or
state laws or regulations. The Trust'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. 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.
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 Fund to
dispose of its securities or value its assets, or during any other period
permitted by order of the Commission for the protection of investors.
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P., One Post Office Square, Boston, Massachusetts, are
the Fund's independent accountants, providing audit services, tax return
preparations, and assistance and consultation with respect to the preparation of
filings with the Commission.
FINANCIAL STATEMENTS
The audited financial statements of, and the report of independent
accountants for the Fund appear in the Fund's most recent annual report to
shareholders and are incorporated by reference into this SAI. A copy of the
annual report accompanies this SAI.
Registrant incorporates by reference the audited financial information for
the Fund for the fiscal year ended December 31, 1996 as previously filed
electronically with the Commission (Accession No. 0000950156-97-000156).
<PAGE>
APPENDIX
Some of the terms used in this SAI are described below.
Description of permitted Fund investments:
(1) Project Notes (PNs) are auctioned by the Department of Housing and Urban
Development on behalf of local government authorities to finance urban renewal
and low income housing projects. They are backed by the full faith and credit
of the U.S. Government.
(2) Other Tax-Exempt Notes are issued by or on behalf of states and their
political subdivisions, agencies and instrumentalities for a variety of
short-term needs. These include but are not limited to:
Tax and/or Revenue Anticipation Notes: (TANs, RANs, TRANs) are generally
issued to finance seasonal working capital needs in anticipation of various
taxes or revenues, and payable from these specific future revenues.
Additionally, most TANs, RANs and TRANs are general obligations of the
issuing entity.
Bond Anticipation Notes: (BANs) are issued to provide interim financing
until long-term financing can be arranged. In most cases, the long-term
bonds, then provide the funds to pay off the BANs. Additionally, most BAN's
may be general obligations of the issuing entity.
Construction Loan Notes: (CLNs) are issued primarily by housing agencies to
provide interim construction financing. After completion, most projects
receive permanent financing through the Federal National Mortgage
Association (FNMA) or the Government National Mortgage Association (GNMA);
others are financed by the issuance of long-term bonds. In either case, the
permanent financing provides the "take-out" for the holder of the notes.
Federal Grant Anticipation Notes: (FANs, GANs) are issued to provide interim
financing, most often for water and sewer projects, in anticipation of
matching federal grants. Additionally, most FAN's and GAN's may be general
obligations of the issuing entity.
Temporary Notes: (TNs) are short-term general obligations issued for
various purposes.
(3) Tax-Exempt Bonds are issued by or on behalf of states and their political
subdivisions, agencies and instrumentalities for longer term capital needs and
generally have original maturities of longer than one year. They are usually
classified as either General Obligations or Revenue Bonds.
Revenue Bonds are secured by the revenues derived from a particular facility
or class of facilities or from some other specific revenue source or in the case
of industrial development bonds, by the earnings of the private enterprise whose
facility is being financed.
There are also a variety of hybrid and special types of municipal
obligations. Some tax-exempt bonds are additionally secured by insurance, bank
credit agreements, or escrow accounts.
While most tax-exempt bonds pay a fixed rate of interest, others are
variable rate instruments whose interest rates are adjusted at specified
intervals (weekly, monthly, semi-annually, etc.).
Most tax-exempt bonds have a fixed final maturity date; however, some have
"put" or "'demand" features that allow early redemption by the bondholder.
(4) Tax-Exempt Commercial Paper consists of unsecured obligations of state or
local governments or instrumentalities which are payable from available funds of
the issuer. These obligations are often backed by a bank letter of credit or
supported by a tender agreement permitting the holder to resell the obligation
to the issuer's agent. Maturities range from one day to 270 days.
(5) Taxable Commercial Paper consists of promissory notes of corporations,
usually with a bank line of credit, with maturities ranging from one day to 270
days.
(6) U.S. Government, Agency and Instrumentality Obligations are as follows: U.S.
Government obligations are issued by the Treasury and include bills,
certificates of indebtedness, notes, and bonds. Agencies and instrumentalities
of the U.S. Government are established under the authority of an act of Congress
and include, but are not limited to, the Government National Mortgage
Association, the Tennessee Valley Authority, the Bank for Cooperatives, the
Farmers Home Administration, Federal Home Loan Banks, Federal Intermediate
Credit Banks, Federal Land Banks, and the Federal National Mortgage Association.
(7) Floating or Variable Rate Obligations normally provide that the holder can
demand payment of the obligation on short notice at par with accrued interest
and which are frequently secured by letters of credit or other credit support
arrangements provided by banks. To the extent that such letters of credit or
other arrangements constitute an unconditional guarantee of the issuer's
obligations, the banks may be treated as the issuer of a security for the
purpose of complying with the diversification requirements set forth in Section
5(b) of the Investment Company Act and Rule 5b-2 thereunder.
(8) Repurchase Agreements involve purchase of debt securities of the U.S.
Treasury, or a Federal agency, Federal instrumentality or Federally created
corporation. At the same time the Fund purchases the security it resells it to
the vendor (a member bank of the Federal Reserve System or recognized securities
dealer), and is obligated to redeliver the security to the vendor on an
agreed-upon date in the future. The resale price is in excess of the purchase
price and reflects an agreed upon market rate unrelated to the coupon rate on
the purchased security. Such transactions afford an opportunity for the Fund to
earn, at no market risk, a return on cash which is only temporarily available.
The Fund's risk is in the ability of the vendor to pay an agreed-upon sum upon
the delivery date, and the Fund believes the risk is limited to the difference
between the market value of the security and the repurchase price provided for
in the repurchase agreement. However, in the event of bankruptcy or insolvency
proceedings affecting the vendor of the security which is subject to the
repurchase agreement, the Fund's ability to dispose of such underlying security
may be impaired.
(9) Certificates of Deposit are certificates issued against funds deposited in a
commercial bank, are for a definite period of time, earn a specified rate of
return, and are normally negotiable.
(10) Bankers' Acceptances are short-term credit instruments used to finance the
import, export, transfer or storage of goods. They are termed "accepted" when a
bank guarantees their payment at maturity.
DESCRIPTION OF AVAILABLE QUALITY RATINGS
(1) MOODY'S INVESTORS SERVICE, INC.
RATINGS OF TAX-EXEMPT NOTES
RATINGS: Moody's rating for state and municipal short term obligations will be
designated Moody's Investment Grade or (MIG). Such rating recognizes the
differences between short term credit risk and long term risk. Factors affecting
the liquidity of the borrower and short term cyclical elements are critical in
short term ratings, while other factors of major importance in bond risk, long
term secular trends for example, may be less important over the short run.
A short term rating may also be assigned on an issue having a demand
feature, variable rate demand obligation (VRDO). Such ratings will be designated
as VMIG SG or if the demand feature is not rated, NR. A short term rating on
issues with demand features are differentiated by the use of the VMIG symbol to
reflect such characteristics as payment upon periodic demand rather than fixed
maturity dates and payment relying on external liquidity. Additionally,
investors should be alert to the fact that the source of payment may be limited
to the external liquidity with no or limited legal recourse to the issuer in the
event the demand is not met.
RATINGS OF COMMERCIAL PAPER
Moody's Commercial Paper ratings are opinions of the ability of issuers to repay
punctually promissory obligations not having an original maturity in excess of
nine months.
PRIME-1: Issuers (or supporting institutions) rated Prime-1 (P-1) have a
superior ability for repayment of senior short-term debt obligations.
RATINGS OF TAX-EXEMPT BONDS
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge". Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks somewhat larger than in Aaa securities.
(2) STANDARD & POOR'S RATINGS GROUP
RATINGS OF TAX-EXEMPT BONDS
AAA: Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA: Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the highest rated issues only in small degree.
NOTE RATING SYMBOLS ARE AS FOLLOWS:
SP-1: Very strong or strong capacity to pay principal and interest. Those issues
determined to possess overwhelming safety characteristics will be given a plus
sign (+) designation.
RATINGS OF COMMERCIAL PAPER
Standard & Poor's commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more than
365 days.
A: Standard & Poor's commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more than
365 days.
A-1: This highest category indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.
(3) FITCH INVESTORS SERVICE, INC.
INVESTMENT GRADE BOND RATINGS
AAA: Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.
AA: Bonds considered to be investment grade and of very high credit quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated "AAA". Because bonds rated in the "AAA" and
"AA" categories are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally rated "F-1+".
PLUS (+) OR MINUS (-): The ratings from AA to C may be modified by the addition
of a plus or minus sign to indicate the relative position of a credit within the
rating category,
NR: Indicates that Fitch does not rate the specific issue.
CONDITIONAL: A conditional rating is premised on the successful completion of
a project or the occurrence of a specific event.
INVESTMENT GRADE SHORT-TERM RATINGS
Fitch's short-term ratings apply to debt obligations that are payable on demand
or have original maturities of up to three years, including commercial paper,
certificates of deposit, medium-term notes, and municipal and investment notes.
F-1+: Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
TAX-EXEMPT INVESTMENT NOTE RATINGS
The ratings on tax-exempt notes, with maturities generally up to three years,
reflect Fitch's current appraisal of the degree of assurance of timely payment,
whatever the source.
FIN-1: Notes regarded as having the strongest degree of assurance for timely
payment.
PLUS (+): Plus signs may be used in the "FIN-1" category to indicate relative
standing. The note ratings will usually correspond with bond ratings, although
certain security enhancements or market access may mean that notes will not
track bonds.
DEMAND BOND OR NOTE RATINGS
Certain demand securities empower the holder at his option to require the
issuer, usually through a remarketing agent, to repurchase the security upon
notice at par with accrued interest. This is also referred to as a put option.
The ratings of the demand provision may be changed or withdrawn at any time
if, in Fitch's judgment, changing circumstances warrant such action. Fitch
demand provision ratings carry the same symbols and related definitions as its
short-term ratings.
* * * * * * * *
Investors should note that the assignment of a rating to a bond by a rating
service may not reflect the effect of recent developments on the issuer's
ability to make interest and principal payments
<PAGE>
[Logo]
EATON VANCE
===============
Mutual Funds
EATON VANCE
TAX FREE
RESERVES
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1997
EATON VANCE
TAX FREE RESERVES
24 FEDERAL STREET
BOSTON, MA 02110
- --------------------------------------------------------------------------------
INVESTMENT ADVISER
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 89 South Street, Boston, MA 02111
TRANSFER AGENT
First Data Investor Services Group, 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
TRSAI
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL INFORMATION
May 1, 1997
EV CLASSIC GOVERNMENT OBLIGATIONS FUND
24 Federal Street
Boston, Massachusetts 02110
(800) 225-6265
This Statement of Additional Information consists of two parts. Part I
provides information about EV Classic Government Obligations Fund (the "Fund"),
Government Obligations Portfolio (the "Portfolio") and certain other series of
Eaton Vance Mutual Funds Trust (the "Trust"). Part II provides information
solely about the Fund. Where appropriate, Part I includes cross-references to
the relevant sections of Part II that provide additional, Fund-specific
information. This Statement of Additional Information is sometimes referred to
herein as the "SAI."
TABLE OF CONTENTS Page
PART I
Additional Information about Investment Policies .................. 1
Investment Restrictions ........................................... 5
Trustees and Officers ............................................. 7
Investment Adviser and Administrator .............................. 9
Custodian ......................................................... 11
Service for Withdrawal ............................................ 11
Determination of Net Asset Value .................................. 12
Investment Performance ............................................ 12
Taxes ............................................................. 14
Portfolio Security Transactions ................................... 16
Other Information ................................................. 18
Independent Accountants ........................................... 19
Financial Statements .............................................. 19
PART II
Fees and Expenses ................................................. a-1
Principal Underwriter ............................................. a-1
Distribution Plan ................................................. a-2
Performance Information ........................................... a-3
Control Persons and Principal Holders of Securities ............... a-4
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY THE FUND'S PROSPECTUS DATED MAY 1, 1997, AS SUPPLEMENTED FROM
TIME TO TIME, WHICH IS INCORPORATED HEREIN BY REFERENCE. THIS STATEMENT OF
ADDITIONAL INFORMATION SHOULD BE READ IN CONJUNCTION WITH SUCH PROSPECTUS, A
COPY OF WHICH MAY BE OBTAINED WITHOUT CHARGE BY CONTACTING EATON VANCE
DISTRIBUTORS, INC. (THE "PRINCIPAL UNDERWRITER") (SEE BACK COVER FOR ADDRESS AND
PHONE NUMBER).
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART I
This Part I provides information about the Fund, certain other series of the
Trust and the Portfolio. Capitalized terms used in this SAI and not otherwise
defined have the meanings given 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
$120,000,000. 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 .15% on each Lender's unused commitment. The Portfolio expects to use the
proceeds of the Advances primarily for leveraging purposes. As at December 31,
1996, the Portfolio had no outstanding balance. The average daily loan balance
for the fiscal year ended December 31, 1996, under the Credit Agreement (and
predecessor contract) was $549,560 and the average daily interest rate was
6.79%.
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.
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, futures contracts and options (other than options that the Portfolio
has purchased) expose the Portfolio to an obligation to another party. The
Portfolio will not enter into any such transactions unless it owns either (1) an
offsetting ("covered") position in securities, currencies, or other options,
futures contracts or forward contracts, or (2) cash or liquid securities with a
value sufficient at all times to cover its potential obligations not covered as
provided in (1) above. 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
would occur if all of the securities held by the Portfolio were sold and either
repurchased or replaced twice within one year. High portfolio turnover involves
correspondingly greater brokerage commissions and other transaction costs, which
will be borne directly by the Portfolio. It may also result in the realization
of capital gains. The Portfolio pays brokerage commissions in connection with
futures transactions and the writing of options and effecting of closing
purchase or sale transactions, as well as for purchases and sales of portfolio
securities. See "Portfolio Security Transactions" for a discussion of the
Portfolio's brokerage practices.
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
Investment Company Act of 1940;
(3) Purchase securities on margin (but the Fund may obtain such short-term
credits as may be necessary for the clearance of purchases and sales of
securities). The deposit or payment by the Fund of initial or maintenance margin
in connection with futures contracts or related options transactions is not
considered the purchase of a security on margin;
(4) Underwrite or participate in the marketing of securities of others,
except insofar as it may technically be deemed to be an underwriter in selling a
portfolio security under circumstances which may require the registration of the
same under the Securities Act of 1933;
(5) Purchase or sell real estate, although it may purchase and sell
securities which are secured by real estate and securities of companies which
invest or deal in real estate;
(6) Purchase or sell physical commodities or contracts for the purchase or
sale of physical commodities;
(7) Make loans to any person except by (a) the acquisition of debt
instruments and making portfolio investments, (b) entering into repurchase
agreements and (c) lending portfolio securities; or
(8) Buy investment securities from or sell them to any of its officers or
Trustees of the Trust, the investment adviser or its underwriter, as principal;
however, any such person or concerns may be employed as a broker upon customary
terms.
Notwithstanding the investment policies and restrictions of the Fund, the
Fund may invest its assets in an open-end management investment company with
substantially the same investment objective, policies and restrictions as the
Fund.
The Portfolio has adopted substantially the same fundamental investment
restrictions as the foregoing investment restrictions adopted by the Fund; such
restrictions cannot be changed without the approval of a "majority of the
outstanding voting securities" of the Portfolio.
The Fund and the Portfolio have adopted the following nonfundamental
investment policies which may be changed by the Trust with respect to the Fund
without approval by the Fund's shareholders or by the Portfolio with respect to
the Portfolio without the approval of the Fund or its other investors. As a
matter of nonfundamental policy, neither the Fund nor the Portfolio may: (a)
purchase put or call options on U.S. Government securities if after such
purchase more than 5% or its net assets, as measured by the aggregate of the
premiums paid for such options held by the Fund or the Portfolio, would be so
invested; (b) purchase any put options, long futures contracts, or call options
on a futures contract if at the date of such purchase realized net losses from
such transactions during the fiscal year to date exceed 5% of its average net
assets during such period; (c) make short sales of securities or maintain a
short position, unless at all times when a short position is open it owns an
equal amount of such securities or securities convertible into or exchangeable,
without payment of any further consideration, for securities of the same issue
as, and equal in amount to, the securities sold short, and unless not more than
25% of its net assets (taken at current value) is held as collateral for such
sales at any one time; (d) 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; of Eaton Vance's parent, Eaton Vance
Corp. ("EVC"); and of BMR's and Eaton Vance's trustee, Eaton Vance, Inc. ("EV").
Eaton Vance and EV are both wholly-owned subsidiaries of EVC. Those Trustees who
are "interested persons" of the Trust 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 (63), President and Trustee*
Vice Chairman of BMR, Eaton Vance, EVC and EV, and a Director of EVC and EV.
Director, Trustee and officer of various investment companies managed by Eaton
Vance or BMR.
JAMES B. HAWKES (55), Vice President and Trustee*
President and Chief Executive Officer of BMR, Eaton Vance, EVC and EV and a
Director of EVC and EV. Director, Trustee and officer of various investment
companies managed by Eaton Vance or BMR. Mr. Hawkes was elected Vice President
and Trustee of the Trust on December 16, 1991.
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 at Harvard University Graduate
School of Business Administration. Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: Harvard University Graduate School of Business Administration,
Soldiers Field Road, Boston, Massachusetts 02163
NORTON H. REAMER (61), Trustee
President and Director, United Asset Management Corporation (a holding company
owning institutional investment management firms). Chairman, President and
Director, UAM Funds (mutual funds). Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: One International Place, Boston, Massachusetts 02110
JOHN L. THORNDIKE (70), Trustee
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. Ms. Schiff was elected Vice
President of the Trust on February 24, 1992.
WILLIAM H. AHERN, JR. (37), Vice President of the Trust
Assistant Vice President of Eaton Vance and BMR. Officer of various investment
companies managed by Eaton Vance or BMR. Mr. Ahern was elected Vice
President of the Trust on June 19, 1995.
MICHAEL B. TERRY (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.
MARK S. VENEZIA (47), Vice President of the Portfolio
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
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.
THOMAS OTIS (65), Secretary
Vice President and Secretary of BMR, Eaton Vance, EVC and EV. Officer of various
investment companies managed by Eaton Vance or BMR.
JANET E. SANDERS (61), 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 (34), Assistant Secretary
Assistant Vice President of BMR, Eaton Vance and EV since March 1, 1994;
employee of Eaton Vance since March 1993. Officer of various investment
companies managed by Eaton Vance or BMR. State Regulations Supervisor, The
Boston Company (1991-1993). Mr. Murphy was elected Assistant Secretary of the
Trust and the Portfolio on March 27, 1995.
JOHN P. RYNNE (54), Assistant Secretary of the Trust
Corporate Controller and Vice President of EVC. Vice President of Eaton Vance,
EVD and BMR, and Treasurer of Energex Energy Corporation. Mr. Rynne was
elected an officer of the Trust on June 19, 1995.
ERIC G. WOODBURY (39), Assistant Secretary
Vice President of 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 of the Trust
and the Portfolio 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
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 of the Trust. The purpose of the
Committee is to recommend to the Board nominees for the position of
noninterested Trustee and to assure that at least a majority of the Board of
Trustees is independent of Eaton Vance and its affiliates.
Messrs. Treynor (Chairman) and Dwight are members of the Audit Committee of
the Board of Trustees of the Trust and of the Portfolio. The Audit Committee's
functions include making recommendations to the 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. For the compensation received by the noninterested
Trustees, see "Fees and Expenses" in Part II.
INVESTMENT ADVISER AND ADMINISTRATOR
The Portfolio engages BMR as its investment adviser pursuant to an
Investment Advisory Agreement dated October 28, 1993. BMR or Eaton Vance acts as
investment adviser to investment companies and various individual and
institutional clients with combined assets under management of over $17 billion.
Eaton Vance, its affiliates and its predecessor companies have been managing
assets of individuals and institutions since 1924 and managing investment
companies since 1931. They maintain a large staff of experienced fixed-income
and equity investment professionals to service the needs of their clients. The
fixed-income division focuses on all kinds of taxable investment-grade and
high-yield securities, tax-exempt investment-grade and high-yield securities,
and U.S. Government securities. The equity division covers stocks ranging from
blue chip to emerging growth companies.
Eaton Vance and its affiliates act as adviser to over 150 mutual funds, 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
$18 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 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 (60) days' written notice by the Board of
Trustees of either party, or by vote of the majority of the outstanding voting
securities of the Portfolio, and the Agreement will terminate automatically in
the event of its assignment. The Agreement provides that BMR may render services
to others. The Agreement also provides that BMR shall not be liable for any loss
incurred in connection with the performance of its duties, or action taken or
omitted under that Agreement, in the absence of willful misfeasance, bad faith,
gross negligence in the performance of its duties or by reason of its reckless
disregard of its obligations and duties thereunder, or for any losses sustained
in the acquisition, holding or disposition of any security or other investment.
As indicated in the Prospectus, Eaton Vance serves as administrator of the
Fund, but currently receives no compensation for providing administrative
services to the Fund. Under its agreement with the Trust on behalf of the Fund,
Eaton Vance has been engaged to administer the Fund's affairs, subject to the
supervision of the Trustees of the Trust, and shall furnish for the use of the
Fund office space and all necessary office facilities, equipment and personnel
for administering the affairs of the Fund.
The Fund pays all of its own expenses including, without limitation, (i)
expenses of maintaining the Fund and continuing its existence, (ii) 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 Landon T. Clay, M. Dozier Gardner, James B. Hawkes and
Benjamin A. Rowland, Jr. The Directors of EVC consist of the same persons and
John G. L. Cabot and Ralph Z. Sorenson. Mr. Clay is chairman, Mr. Gardner is
vice chairman and 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 which expires on December 31, 1997, the
Voting Trustees of which are Messrs. Clay, Gardner, Hawkes and Rowland and
Thomas E. Faust, Jr. 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 April 30, 1997, Messrs. Clay, Gardner and Hawkes each owned 24% of such
voting trust receipts, and Messrs. Rowland and Faust owned 15% and 13%,
respectively, of such voting trust receipts. Messrs. Gardner, Hawkes and Otis
are officers or Trustees of the Trust and/or the Portfolio and are members of
the EVC, BMR, Eaton Vance and EV organizations. Messers. Ahern, Murphy,
O'Connor, Rynne, Terry, Venezia and Woodbury and Ms. Sanders and Ms. Schiff
are officers or Trustees of the Trust and/or the Portfolio and are also
members of the BMR, Eaton Vance and EV organizations.
EVC owns all of the stock of Energex Energy Corporation, which is engaged in
oil and gas exploration and development. In addition, Eaton Vance owns all the
stock of Northeast Properties, Inc., which is engaged in real estate investment.
EVC also owns 22% 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 Fund and the Portfolio. IBT has the custody of
all cash and securities representing the Fund's interest in the Portfolio, has
custody of all the Portfolio's assets, maintains the general ledger of the
Portfolio and the Fund and computes the daily net asset value of interests in
the Portfolio and the net asset value of shares of the Fund. In such capacity,
it attends to details in connection with the sale, exchange, substitution,
transfer or other dealings with the Portfolio's investments, receives and
disburses all funds and performs various other ministerial duties upon receipt
of proper instructions from the Fund and the Portfolio. IBT charges fees which
are competitive within the industry. A portion of the fee relates to custody,
bookkeeping and valuation services and is based upon a percentage of Fund and
Portfolio net assets and a portion of the fee relates to activity charges,
primarily the number of portfolio transactions. These fees are then reduced by a
credit for cash balances of the particular investment company at the custodian
equal to 75% of the 91-day, U.S. Treasury Bill auction rate applied to the
particular investment company's average daily collected balances for the week.
Landon T. Clay, a Director of EVC and an officer, Trustee or Director of other
entities in the Eaton Vance organization, owns approximately 13% of the voting
stock of Investors Financial Services Corp., the holding company parent of IBT.
Management believes that such ownership does not create an affiliated person
relationship between the Fund or the Portfolio and IBT under the 1940 Act.
IBT also provides services in connection with the preparation of shareholder
reports and the electronic filing of such reports with the Commission for which
it receives a separate fee.
SERVICE FOR WITHDRAWAL
The Transfer Agent will send to the shareholder regular monthly or quarterly
payments of any permitted amount designated by the shareholder (see "Eaton Vance
Shareholder Services -- Withdrawal Plan" in the Fund's current Prospectus) based
upon the value of the shares held. The checks will be drawn from share
redemptions and hence, 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, 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 by multiplying a hypothetical
initial purchase order of $1,000 by the average annual compound rate of return
(including capital appreciation/depreciation, and distributions paid and
reinvested) for the stated period and annualizing the result. The calculation
assumes that all distributions are reinvested at net asset value on the
reinvestment dates during the period, and either (i) the deduction of the
maximum sales charge from the initial $1,000 purchase order, or (ii) a complete
redemption of the investment and, if applicable, the deduction of a CDSC at the
end of the period. For further information concerning the total return of the
Fund, see "Performance Information" in Part II.
Yield is computed pursuant to a standardized formula by dividing net
investment income per share earned during a recent thirty-day period by the
maximum offering price (including, if applicable, the maximum initial sales
charge) per share on the last day of the period and annualizing the resulting
figure. Net investment income per share is calculated from the yields to
maturity of all obligations held by the Portfolio based on prescribed methods,
reduced by accrued Fund expenses for the period with the resulting number being
divided by the average daily number of Fund shares outstanding and entitled to
receive distributions during the period. The yield figure does not reflect the
deduction of any CDSCs (if applicable) imposed on certain redemptions at the
rate set forth under "How to Redeem Fund Shares" in the Fund's current
Prospectus. Yield calculations assume the current initial sales charge (if
applicable) set forth under "How to Buy Fund Shares" in the Fund's current
Prospectus. (Actual yield may be affected by variations in sales charges on
investments.) For the yield of the Fund, see "Performance Information" in Part
II.
The Principal Underwriter may publish to Authorized Firms the Fund's
distribution rate and/or its effective distribution rate. The Fund's
distribution rate is computed by dividing the most recent monthly distribution
per share annualized, by the current net asset value per share or, where
applicable, the maximum public offering price per share (which includes the
maximum initial sales charge). The Fund's effective distribution rate is
computed by dividing the distribution rate by the ratio (the days in a year
divided by the accrual days of the monthly period) used to annualize the most
recent monthly distribution and reinvesting the resulting amount for a full year
on the basis of such ratio. The effective distribution rate will be higher than
the distribution rate because of the compounding effect of the assumed
reinvestment. Investors should note that the Fund's yield is calculated using a
standardized formula the income component of which is computed from the yields
to maturity of all obligations held by the Portfolio based on prescribed methods
(with all purchases and sales of securities during such period included in the
income calculation on a settlement date basis), whereas the distribution rate is
based on the Fund's last monthly distribution which tends to be relatively
stable and may be more or less than the amount of net investment income and
short-term capital gain actually earned by the Fund during the month.
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 Fund may provide information about Eaton Vance, its affiliates and other
investment advisers to the funds in the Eaton Vance Family of Funds in sales
material or advertisements provided to investors or prospective investors. Such
material or advertisements may also provide information on the use of investment
professionals by such investors.
TAXES
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 RIC under the Code. Accordingly, the Fund
intends to satisfy certain requirements relating to sources of its income and
diversification of its assets and to distribute all of its net investment income
and net realized capital gains (after reduction by any available capital loss
carryforwards) in accordance with the timing requirements imposed by the Code,
so as to avoid any federal income or excise tax to the Fund. The Fund so
qualified for its taxable year ended December 31, 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
satisfy them. The Portfolio will allocate at least annually among its investors,
including the Fund, each investor's distributive share of the Portfolio's net
investment income, net realized capital gains, and any other items of income,
gain, loss, deduction or credit. The Portfolio will make allocations to the Fund
in accordance with the Code and applicable regulations and will make moneys
available for withdrawal at appropriate times and in sufficient amounts to
enable the Fund to satisfy the tax distribution requirements that apply to the
Fund and that must be satisfied in order to avoid federal income and/or excise
tax on the Fund. For purposes of applying the requirements of the Code regarding
qualification as a RIC, the Fund will be deemed (i) to own its proportionate
share of each of the assets of the Portfolio and (ii) to be entitled to the
gross income of the Portfolio attributable to such share.
In order to avoid federal excise tax, the Code requires that the Fund
distribute (or be deemed to have distributed) by December 31 of each calendar
year at least 98% of its ordinary income (not including tax-exempt income) for
such year, at least 98% of the excess of its realized capital gains over its
realized capital losses, generally computed on the basis of the one-year period
ending on October 31 of such year, after reduction by any available capital loss
carryforwards, and 100% of any ordinary income and capital gains from the prior
year (as previously computed) that was not paid out during such year and on
which the Fund paid no federal income tax. Under current law, provided that the
Fund qualifies as a RIC for federal income tax purposes and the Portfolio is
treated as a partnership for Massachusetts and federal tax purposes, neither the
Fund nor the Portfolio is liable for any income, corporate excise or franchise
tax in the Commonwealth of Massachusetts.
The Portfolio's transactions in foreign currency, foreign currency
denominated debt securities, payables and receivables denominated in a foreign
currency, options and futures on foreign currency and forward foreign currency
exchange contracts are subject to special tax rules that may convert capital
gain or loss into ordinary income or loss and may affect the amount, timing and
character of the Portfolio's income or loss and hence of allocations and/ or
distributions to the Fund's shareholders.
Positions held by the Portfolio which consist of one or more debt securities
and one or more listed options or futures contracts which substantially diminish
the risk of loss of the Portfolio with respect to such debt securities will be
treated as "mixed straddles" for federal income tax purposes. Such straddles are
ordinarily subject to the provisions of Section 1092 of the Code, the operation
of which can result in deferral of losses, adjustments in the holding periods of
the Portfolio's debt securities and conversion of short-term capital losses into
long-term capital losses. The operation of these rules can be mitigated or
eliminated by means of various elections which are available to the Portfolio
for federal income tax purposes.
To eliminate the application of these rules, the Portfolio has elected mixed
straddle accounting for one or more designated classes of activities involving
mixed straddles. Under this method of accounting, figures are derived for
aggregate short-term and long-term capital gains and losses associated with all
positions in a mixed straddle account on a daily basis. Specifically, gains and
losses are computed for all positions disposed of on a given day, and all
outstanding positions on such day are marked to market (subject to subsequent
adjustments to reflect the gain or loss realized thereby). Gains and losses from
all positions in debt securities in the account are netted, as are gains and
losses from all positions in options and futures. If the two resulting figures
both represent net gains or net losses, the net gain or loss attributable to the
debt securities is treated as short-term capital gain or loss, and the net gain
or loss attributable to the options and futures contracts is treated as 60%
long-term and 40% short-term capital gain or loss. Alternatively, if the
resulting figures represent a net gain and a net loss, the two figures are
further netted to arrive at a single figure for the day. This figure is treated
as 60% long-term and 40% short-term capital gain or loss unless it reflects the
fact that the net gain or loss from the debt securities outweighed the net gain
or loss from the options and futures, in which case this figure is treated as
short-term capital gain or loss.
On the last business day of the taxable year the annual account net gain or
loss for each mixed straddle account is determined by netting the daily net
gains or losses for each business day during the taxable year. (The annual
account net gain or loss is adjusted to take into account any interest and
carrying charges incurred in connection with positions in the account which were
required to be capitalized.) Annual account net gains or losses are then netted
for all mixed straddle accounts to yield the total annual account net gain or
loss. This figure is subject to an overall limitation such that no more than 50%
of it will be treated as long-term capital gain and no more than 40% of it will
be treated as short-term capital loss.
The Portfolio may make other tax elections with respect to mixed straddles
which do not properly belong in any of its mixed straddle accounts.
In the absence of a mixed straddle election, futures or currency forward
contracts entered into by the Portfolio and listed nonequity options written or
purchased by the Portfolio (including options on debt securities, options on
futures contracts, options on securities indexes and options on broad-based
stock indexes, but possibly excluding certain foreign currency-related options,
futures or forward contracts) will be governed by Section 1256 of the Code.
Absent a tax election to the contrary, gain or loss attributable to the lapse,
exercise or closing out of any such position will be treated as 60% long-term
and 40% short-term capital gain or loss, and on the last trading day of the
Portfolio's taxable year all outstanding Section 1256 positions will be marked
to market (i.e., treated as if such positions were closed out at their closing
price on such day), and any resulting gain or loss will be recognized as 60%
long-term and 40% short-term capital gain or loss. Under certain circumstances,
entry into a futures contract to sell a security or the purchase of a put option
with respect to a security may constitute a short sale for federal income tax
purposes, causing an adjustment in the holding period of the underlying security
or a substantially identical security held by the Portfolio.
The Portfolio will monitor its transactions in options, futures contracts
and forward contracts in order to enable the Fund to maintain its qualification
as a RIC for federal income tax purposes.
The Portfolio's investment in securities acquired at a market discount, or
zero coupon and certain other securities with original issue discount will cause
it to realize income prior to the receipt of cash payments with respect to these
securities. Such income will be allocated daily to interests in the Portfolio
and, in order to enable the Fund to distribute its proportionate share of this
income and avoid a tax payable by the Fund, the Portfolio may be required to
liquidate portfolio securities that it might otherwise have continued to hold in
order to generate cash that the Fund may withdraw from the Portfolio for
subsequent distribution to Fund shareholders.
Redemptions (including exchanges) of Fund shares are taxable transactions.
Any loss realized upon the redemption or exchange of shares of the Fund with a
tax holding period of 6 months or less will be treated as a long-term capital
loss to the extent of any distribution of net long-term capital gains with
respect to such shares. All or a portion of a loss realized upon a taxable
disposition of Fund shares may be disallowed under "wash sale" rules if other
Fund shares are purchased (whether through reinvestment of dividends or
otherwise) within a period beginning 30 days before and ending 30 days after the
disposition. Any disallowed loss will result in an adjustment to the
shareholder's tax basis in some or all of the other shares acquired.
Distributions by the Fund may reduce the net asset value of the Fund's
shares. Should a distribution reduce the net asset value below a shareholder's
cost basis, such distribution would be taxable to the shareholder even though,
from an investment standpoint, it may constitute a return of a portion of the
purchase price. Therefore, investors should consider the tax implications of
buying shares immediately before a distribution. Certain distributions declared
in October, November or December and paid the following January will be taxed to
shareholders as if received on December 31 of the year in which they are
declared.
Distributions of the Fund will not qualify for the dividends received
deduction available to certain corporations under the Code. A state income (and
possibly local income and/or intangible property) tax exemption is generally
available to the extent the Fund's distributions are derived from interest on
(or, in the case of intangibles taxes, the value of its assets is attributable
to) certain U.S. Government obligations, provided in some states that certain
thresholds for holdings of such obligations and/or reporting requirements are
satisfied. The Fund will inform shareholders of the proportion of its
distributions which are derived from interest on such obligations. Shareholders
are urged to consult their tax advisers regarding the proper treatment of such
portion of their distributions for state and local income tax purposes.
Special tax rules apply to Individual Retirement Accounts ("IRAs") and to
other retirement plans, and persons investing through such plans should consult
their tax advisers for more information. The deductibility of contributions to
IRAs may be restricted or eliminated for particular shareholders.
Amounts paid by the Fund to individuals and certain other shareholders who
have not provided the Fund with their correct taxpayer identification number and
certain certifications required by the Internal Revenue Service (the "IRS"), as
well as shareholders with respect to whom the Fund has received notification
from the IRS or a broker, may be subject to "backup" withholding of federal
income tax from the Fund's taxable dividends and distributions and the proceeds
of redemptions (including repurchases and exchanges) at a rate of 31%. An
individual's taxpayer identification number is generally his or her social
security number.
Non-resident alien individuals, foreign corporations and certain other
foreign entities generally will be subject to a U.S. withholding tax at a rate
of 30% on the Fund's distributions from its ordinary income and the excess of
its net short-term capital gain over its net long-term capital loss, unless the
tax is reduced or eliminated by an applicable tax treaty. Distributions from the
excess of the Fund's net long-term capital gain over its net short-term capital
loss received by such shareholders and any gain from the sale or other
disposition of shares of the Fund generally will not be subject to U.S. federal
income taxation, provided that non-resident alien status has been certified by
the shareholder. Different U.S. tax consequences may result if the shareholder
is engaged in a trade or business in the United States, is present in the United
States for a sufficient period of time during a taxable year to be treated as a
U.S. resident, or fails to provide any required certifications regarding status
as a non-resident alien investor. Foreign shareholders should consult their tax
advisers regarding the U.S. and foreign tax consequences of an investment in the
Fund.
The foregoing discussion does not describe many of the special tax rules
applicable to certain classes of investors, such as IRAs and other retirement
plans, tax-exempt entities, insurance companies and financial institutions.
Shareholders should consult their own tax advisers with respect to these or
other special tax rules that may apply in their particular situations, as well
as the state, local or foreign tax consequences of investing in the Fund.
PORTFOLIO SECURITY TRANSACTIONS
Decisions concerning the execution of portfolio security transactions,
including the selection of the market and the executing firm, are made by BMR.
BMR is also responsible for the execution of transactions for all other accounts
managed by it.
BMR places the portfolio security transactions of the Portfolio and of all
other accounts managed by it for execution with many firms. BMR uses its best
efforts to obtain execution of portfolio security transactions at prices which
are advantageous to the Portfolio and at reasonably competitive spreads or (when
a disclosed commission is being charged) at reasonably competitive commission
rates. In seeking such execution, BMR will use its best judgment in evaluating
the terms of a transaction, and will give consideration to various relevant
factors, including without limitation the size and type of the transaction, the
nature and character of the market for the security, the confidentiality, speed
and certainty of effective execution required for the transaction, the general
execution and operational capabilities of the executing firm, the reputation,
reliability, experience and financial condition of the firm, the value and
quality of the services rendered by the firm in this and other transactions, and
the reasonableness of the commission or spread, if any. The debt securities and
obligations purchased and sold by the Portfolio are generally traded in the
domestic over-the-counter markets on a net basis (i.e. without commission)
through broker-dealers and banks acting for their own accounts rather than as
brokers, or otherwise involve transactions with the issuer of such obligations.
Such firms attempt to profit from such transactions by buying at the bid price
and selling at the higher asked price of the market for such obligations, and
the difference between the bid and asked price is customarily referred to as the
spread. The Portfolio may also purchase such obligations from domestic
underwriters, the cost of which may include undisclosed fees and concessions to
the underwriters. Although spreads or commissions paid on portfolio security
transactions will, in the judgment of BMR, be reasonable in relation to the
value of the services provided, spreads or commissions exceeding those which
another firm might charge may be paid to firms who were selected to execute
transactions on behalf of the Portfolio and BMR's other clients for providing
brokerage and research services to BMR.
As authorized in Section 28(e) of the Securities Exchange Act of 1934, a
broker or dealer who executes a portfolio transaction on behalf of the Portfolio
may receive a commission which is in excess of the amount of commission another
broker or dealer would have charged for effecting that transaction if BMR
determines in good faith that such compensation was reasonable in relation to
the value of the brokerage and research services provided. This determination
may be made on the basis of either that particular transaction or on the basis
of overall responsibilities which BMR and its affiliates have for accounts over
which they exercise investment discretion. In making any such determination, BMR
will not attempt to place a specific dollar value on the brokerage and research
services provided or to determine what portion of the compensation should be
related to such services. Brokerage and research services may include advice as
to the value of securities, the advisability of investing in, purchasing, or
selling securities, and the availability of securities or purchasers or sellers
of securities; furnishing analyses and reports concerning issuers, industries,
securities, economic factors and trends, portfolio strategy and the performance
of accounts; effecting securities transactions and performing functions
incidental thereto (such as clearance and settlement); and the "Research
Services" referred to in the next paragraph.
It is a common practice of the investment advisory industry for the advisers
of investment companies, institutions and other investors to receive research,
statistical and quotation services, data, information and other services,
products and materials which assist such advisers in the performance of their
investment responsibilities ("Research Services") from broker-dealer firms which
execute portfolio transactions for the clients of such advisers and from third
parties with which such broker-dealers have arrangements. Consistent with this
practice, BMR receives Research Services from many broker-dealer firms with
which BMR places the Portfolio transactions and from third parties with which
these broker-dealers have arrangements. These Research Services include such
matters as general economic and market reviews, industry and company reviews,
evaluations of securities and portfolio strategies and transactions,
recommendations as to the purchase and sale of securities and other portfolio
transactions, financial, industry and trade publications, news and information
services, pricing and quotation equipment and services, and research oriented
computer hardware, software, data bases and services. Any particular Research
Service obtained through a broker-dealer may be used by BMR in connection with
client accounts other than those accounts which pay commissions to such
broker-dealer. Any such Research Service may be broadly useful and of value to
BMR in rendering investment advisory services to all or a significant portion of
its clients, or may be relevant and useful for the management of only one
client's account or of a few clients' accounts, or may be useful for the
management of merely a segment of certain clients' accounts, regardless of
whether any such account or accounts paid commissions to the broker-dealer
through which such Research Service was obtained. The advisory fee paid by the
Portfolio is not reduced because BMR receives such Research Services. BMR
evaluates the nature and quality of the various Research Services obtained
through broker-dealer firms and attempts to allocate sufficient commissions to
such firms to ensure the continued receipt of Research Services which BMR
believes are useful or of value to it in rendering investment advisory services
to its clients.
Subject to the requirement that BMR shall use its best efforts to seek to
execute portfolio security transactions at advantageous prices and at reasonably
competitive spreads or commission rates, BMR is authorized to consider as a
factor in the selection of any broker-dealer firm with whom portfolio orders may
be placed the fact that such firm has sold or is selling shares of the Fund or
of other investment companies sponsored by BMR or Eaton Vance. This policy is
not inconsistent with a rule of the National Association of Securities Dealers,
Inc. (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.
For the fiscal years ended December 31, 1994, 1995 and 1996, the Portfolio
paid no brokerage commissions on portfolio security transactions.
OTHER INFORMATION
The Trust changed its name from Eaton Vance Government Obligations Trust on
July 10, 1995. Eaton Vance, pursuant to its agreement with the Trust, controls
the use of the words "Eaton Vance" and "EV" in the Fund's name and may use the
words "Eaton Vance" or "EV" in other connections and for other purposes.
As permitted by Massachusetts law, there will normally be no meetings of
shareholders for the purpose of electing Trustees unless and until such time as
less than a majority of the Trustees of the Trust holding office have been
elected by shareholders. In such an event the Trustees then in office will call
a shareholders' meeting for the election of Trustees. Except for the foregoing
circumstances and unless removed by action of the shareholders in accordance
with the Trust's by-laws, the Trustees shall continue to hold office and may
appoint successor Trustees.
The Declaration of Trust may be amended by the Trustees when authorized by
vote of a majority of the outstanding voting securities of the Trust, the
financial interests of which are affected by the amendment. The Trustees may
also amend the Declaration of Trust without the vote or consent of shareholders
to change the name of the Trust or any series or to make such other changes as
do not have a materially adverse effect on the financial interests of
shareholders or if they deem it necessary to conform it to applicable federal or
state laws or regulations. The Trust'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. 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 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 are incorporated by reference into this SAI.
A copy of the annual report accompanies this SAI.
Registrant incorporates by reference the audited financial information for
the Funds listed below and for the Portfolio for the fiscal year ended December
31, 1996 as previously filed electronically with the Commission:
EV Classic Government Obligations Fund
Government Obligations Portfolio
(Accession No. 0000950156-97-000269)
EV Marathon Government Obligations Fund
Government Obligations Portfolio
(Accession No. 0000950156-97-000270)
EV Traditional Government Obligations Fund
Government Obligations Portfolio
(Accession No. 0000950156-97-000266)
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EV CLASSIC GOVERNMENT OBLIGATIONS
FUND. The Fund became a series of the Trust on September 27, 1993.
FEES AND EXPENSES
DISTRIBUTION PLAN
During the fiscal year ended December 31, 1996, the Principal Underwriter
paid to Authorized Firms sales commissions of $211,862 on sales of shares of the
Fund. During the same period, the Fund made sales commission payments under the
Plan to the Principal Underwriter aggregating $265,319 and the Principal
Underwriter received approximately $6,200 in CDSCs which were imposed on early
redeeming shareholders. These sales commissions and CDSC payments reduced
Uncovered Distributions Charges under the Plan. As at December 31, 1996, the
outstanding Uncovered Distritubion Charges of the Principal Underwriter
calculated under the Plan amounted to approximately $7,495,000 (which amount was
equivalent to 24.9% of the Fund's net assets on such day). During the fiscal
year ended December 31, 1996, the Fund made service fee payments to the
Principal Underwriter and Authorized Firms aggregating $88,548 of which $70,150
was paid to Authorized Firms and the balance of which was retained by the
Principal Underwriter.
PRINCIPAL UNDERWRITER
The Fund has authorized the Principal Underwriter to act as its agent in
repurchasing shares at the rate of $2.50 for each repurchase transaction handled
by the Principal Underwriter. The Principal Underwriter estimates that the
expenses incurred by it in acting as repurchase agent for the Fund will exceed
the amounts paid therefor by the Fund. For the fiscal year ended December 31,
1996, the Fund paid the Principal Underwriter $1,115.00 for repurchase
transactions handled by the Principal Underwriter.
TRUSTEES
The fees and expenses of those Trustees of the Trust and of the Portfolio
who are not members of the Eaton Vance organization (the noninterested Trustees)
are paid by the Fund (and the other series of the Trust) and the Portfolio,
respectively. (The Trustees of the Trust and 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):
AGGREGATE AGGREGATE TOTAL COMPENSATION
COMPENSATION COMPENSATION FROM TRUST AND
NAME FROM FUND FROM PORTFOLIO FUND COMPLEX
- ---- --------- -------------- ------------
Donald R. Dwight $35 $3,897(2) $145,000(5)
Samuel L. Hayes, III 31 3,894(3) 157,500(6)
Norton H. Reamer 31 3,784 145,000
John L. Thorndike 32 3,971(4) 150,000(7)
Jack L. Treynor 34 4,077 150,000
- ------------
(1) The Eaton Vance fund complex consists of 212 registered investment companies
or series thereof.
(2) Includes $1,593 of deferred compensation.
(3) Includes $700 of deferred compensation.
(4) Includes $957 of deferred compensation.
(5) Includes $45,000 of deferred compensation.
(6) Includes $20,429 of deferred compensation.
(7) Includes $28,125 of deferred compensation.
PRINCIPAL UNDERWRITER
Under the Distribution Agreement the Principal Underwriter acts as principal
in selling shares of the Fund. The expenses of printing copies of prospectuses
used to offer shares to Authorized Firms or investors and other selling
literature and of advertising is borne by the Principal Underwriter. The fees
and expenses of qualifying and registering and maintaining qualifications and
registrations of the Fund and its shares under federal and state securities laws
is borne by the Fund. In addition, the Fund makes payments to the Principal
Underwriter pursuant to its Distribution Plan as described in the Fund's current
Prospectus; the provisions of the Fund's Distribution Plan relating to such
payments are included in the Distribution Agreement. The Distribution Agreement
is renewable annually by the Trust's Board of Trustees (including a majority of
its Trustees who are not interested persons of the Trust and who have no direct
or indirect financial interest in the operation of the Fund's Distribution Plan
or the Distribution Agreement), may be terminated on sixty days' notice either
by such Trustees or by vote of a majority of the outstanding voting securities
of the Fund or on six months' notice by the Principal Underwriter and is
automatically terminated upon assignment. The Principal Underwriter distributes
Fund shares on a "best efforts" basis under which it is required to take and pay
for only such shares as may be sold.
DISTRIBUTION PLAN
The Plan is 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 Plan is to
compensate the Principal Underwriter for its distribution services and
facilities provided to the Fund.
The Plan provides that the Fund will pay sales commissions and distribution
fees to the Principal Underwriter only after and as a result of the sale of
shares of the Fund. On each sale of Fund shares (excluding reinvestment of
distributions) the Fund will pay the Principal Underwriter amounts representing
(i) sales commissions equal to 6.25% of the amount received by the Fund for each
share sold and (ii) distribution fees calculated by applying the rate of 1% over
the prime rate then reported in The Wall Street Journal to the outstanding
balance of uncovered distribution charges (as described below) of the Principal
Underwriter.
The amount payable by the Fund to the Principal Underwriter pursuant to the
Plan as sales commissions and distribution fees with respect to each day will be
accrued on such day as a liability of the Fund and will accordingly reduce the
Fund's net assets upon such accrual, all in accordance with generally accepted
accounting principles. The amount payable on each day by the Fund is limited to
1/365 of .75% of the Fund's net assets on such day. The level of the Fund's net
assets changes each day and depends upon the amount of sales and redemptions of
Fund shares, the changes in the value of the investments held by the Portfolio,
the expenses of the Fund and the Portfolio accrued and allocated to the Fund on
such day, income on portfolio investments of the Portfolio accrued and allocated
to the Fund on such day, and any dividends and distributions declared on Fund
shares. The Fund does not accrue possible future payments as a liability of the
Fund or reduce the Fund's current net assets in respect of unknown amounts which
may become payable under the Plan in the future because the standards for
accrual of such a liability under accounting principles have not been satisfied.
The Plan provides that the Fund will receive all CDSCs and will make no
payments to the Principal Underwriter in respect of any day on which there are
no outstanding uncovered distribution charges of the Principal Underwriter.
CDSCs and accrued amounts will be paid by the Fund to the Principal Underwriter
whenever there exist uncovered distribution charges.
In calculating daily the amount of uncovered distribution charges,
distribution charges will include the aggregate amount of sales commissions and
distribution fees theretofore paid plus the aggregate amount of sales
commissions and distribution fees which the Principal Underwriter is entitled to
be paid under the Plan since its inception. Payments theretofore paid or payable
under the Plan by the Fund to the Principal Underwriter and CDSCs theretofore
paid or payable to the Principal Underwriter will be subtracted from such
distribution charges; if the result of such subtraction is positive, a
distribution fee (computed at 1% over the prime rate then reported in The Wall
Street Journal) will be computed on such amount and added thereto, with the
resulting sum constituting the amount of outstanding uncovered distribution
charges with respect to such day. The amount of outstanding uncovered
distribution charges of the Principal Underwriter calculated on any day does not
constitute a liability recorded on the financial statements of the Fund.
The amount of uncovered distribution charges of the Principal Underwriter at
any particular time depends upon various changing factors, including the level
and timing of sales of Fund shares, the nature of such sales (i.e., whether they
result from exchange transactions, reinvestments or from cash sales through
Authorized Firms), the level and timing of redemptions of Fund shares upon which
a CDSC will be imposed, the level and timing of redemptions of Fund shares upon
which no CDSC will be imposed (including redemptions of Fund 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 Fund, and changes in the
interest rate used in the calculation of the distribution fee under the Plan.
Periods with a high level of sales of Fund shares accompanied by a low level of
early redemptions of Fund shares resulting in the imposition of CDSCs will tend
to increase the time during which there will exist uncovered distribution
charges of the Principal Underwriter.
Currently, payments of sales commissions, distribution fees and of service
fees may equal 1% of the Fund's average daily net assets per annum. For the
sales commission and service fee payments made by the Fund and the outstanding
uncovered distribution charges of the Principal Underwriter, see "Fees and
Expenses -- Distribution Plan" in this Part II. The Fund believes that the
combined rate of all these payments may be higher than the rate of payments made
under distribution plans adopted by other investment companies pursuant to Rule
12b-1. Although the Principal Underwriter will use its own funds (which may be
borrowed from banks) to pay sales commissions at the time of sale, it is
anticipated that the Eaton Vance organization will profit by reason of the
operation of the Plan through an increase in the Fund's assets (thereby
increasing the advisory fee payable to BMR by the Portfolio) resulting from sale
of Fund shares and through the amounts paid to the Principal Underwriter,
including CDSCs, pursuant to the Plan. The Eaton Vance organization may be
considered to have realized a profit under the Plan if at any point in time the
aggregate amounts theretofore received by the Principal Underwriter pursuant to
the Plan and from CDSCs have exceeded the total expenses theretofore incurred by
such organization in distributing shares of the Fund. Total expenses for this
purpose will include an allocable portion of the overhead costs of such
organization and its branch offices, which costs will include without limitation
leasing expense, depreciation of building and equipment, utilities,
communication and postage expense, compensation and benefits of personnel,
travel and promotional expense, stationery and supplies, literature and sales
aids, interest expense, data processing fees, consulting and temporary help
costs, insurance, taxes other than income taxes, legal and auditing expense and
other miscellaneous overhead items. Overhead is calculated and allocated for
such purpose by the Eaton Vance organization in a manner deemed equitable to the
Fund.
Pursuant to Rule 12b-1, the Plan has been approved by the Fund's initial
sole shareholder (Eaton Vance) and by the Board of Trustees of the Trust,
including the Rule 12b-1 Trustees. The Plan continues in effect from year to
year so long as such continuance is approved at least annually by the vote of
both a majority of (i) the Trustees of the Trust who are not interested persons
of the Trust and who have no direct or indirect financial interest in the
operation of the Plan or any agreements related to the Plan (the "Rule 12b-1
Trustees") and (ii) all of the Trustees then in office, and the Distribution
Agreement contains a similar provision. The Plan and Distribution Agreement may
be terminated at any time by vote of a majority of the Rule 12b-1 Trustees or by
a vote of a majority of the outstanding voting securities of the Fund. The 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 therein without
approval of the shareholders of the Fund 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 of the Trust believe that the Plan will be a significant factor
in the expected growth of the Fund's assets, and will result in increased
investment flexibility and advantages which have benefited the Fund and will
continue to benefit the Fund and its shareholders. Payments for sales
commissions and distribution fees made to the Principal Underwriter under the
Plan will compensate the Principal Underwriter for its services and expenses in
distributing shares of the Fund. Service fee payments made to the Principal
Underwriter and Authorized Firms under the Plan provide incentives to provide
continuing personal services to investors and the maintenance of shareholder
accounts. By providing incentives to the Principal Underwriter and Authorized
Firms, the Plan is expected to result in the maintenance of, and possible future
growth in, the assets of the Fund. Based on the foregoing and other relevant
factors, the Trustees have determined that in their judgment there is a
reasonable likelihood that the Plan will benefit the Fund and its shareholders.
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return on
a hypothetical investment of $1,000 in the Fund covering the 1-, 5- and 10- year
periods ended December 31, 1996. The total return for the period prior to the
Fund's commencement of operations on November 1, 1993 reflects the Portfolio's
total return (or that of its predecessor) adjusted to reflect any applicable
Fund CDSC. Total return for this time period has not been adjusted to reflect
the Fund's distribution and/or service fees and certain other expenses. If such
an adjustment were made, the performance would have been lower.
<TABLE>
VALUE OF A $1,000 INVESTMENT
<CAPTION>
VALUE VALUE
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 12/31/96 ON 12/31/96 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------------- ----------- ---------- ----------- ----------- ------------ ------------ ------------ ------------
<C> <C> <C> <C> <C> <C> <C> <C> <C>
10 Years Ended
12/31/96 12/31/86 $1,000 $2,057.81 $2,057.81 105.78% 7.48% 105.78% 7.48%
5 Years Ended
12/31/96 12/31/91 $1,000 $1,302.34 $1,302.34 30.23% 5.42% 30.23% 5.42%
1 Year Ended
12/31/96 12/31/95 $1,000 $1,034.90 $1,025.22 3.49% 3.49% 2.52% 2.52%
Past performance is not indicative of future results. Investment return and principal value will fluctuate; shares, when
redeemed, may be worth more or less than their original cost.
- ------------
*No CDSC is imposed on certain redemptions. See the Fund's current Prospectus.
</TABLE>
For the thirty-day period ended December 31, 1996, the yield of the Fund was
4.74%.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As at March 31, 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
March 31, 1997, Merrill Lynch, Pierce, Fenner & Smith, Inc., Jacksonville, FL
was the record owner of approximately 33.10% of the outstanding shares, which it
held on behalf of its customers who are the beneficial owners of such shares,
and as to which it had voting power under certain limited circumstances. To the
knowledge of the Trust, no other person owned of record or beneficially 5% or
more of the Fund's outstanding shares as of such date.
<PAGE>
[Logo]
EATON VANCE
===============
Mutual Funds
EV CLASSIC GOVERNMENT
OBLIGATIONS FUND
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL
INFORMATION
MAY 1, 1997
EV CLASSIC GOVERNMENT
OBLIGATIONS FUND
24 FEDERAL STREET
BOSTON, MA 02110
- --------------------------------------------------------------------------------
INVESTMENT ADVISER OF GOVERNMENT OBLIGATIONS PORTFOLIO
Boston Management and Research, 24 Federal Street, Boston, MA 02110
ADMINISTRATOR OF EV CLASSIC GOVERNMENT OBLIGATIONS FUND
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 89 South Street, Boston, MA 02111
TRANSFER AGENT
First Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123
(800) 262-1122
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand, L.L.P., One Post Office Square, Boston, MA 02109
C-GOSAI
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL INFORMATION
May 1, 1997
EV MARATHON GOVERNMENT OBLIGATIONS FUND
24 Federal Street
Boston, Massachusetts 02110
(800) 225-6265
This Statement of Additional Information consists of two parts. Part I
provides information about EV Marathon Government Obligations Fund (the "Fund"),
Government Obligations Portfolio (the "Portfolio") and certain other series of
Eaton Vance Mutual Funds Trust (the "Trust"). Part II provides information
solely about the Fund. Where appropriate, Part I includes cross-references to
the relevant sections of Part II that provide additional, Fund-specific
information. This Statement of Additional Information is sometimes referred to
herein as the "SAI."
TABLE OF CONTENTS Page
PART I
Additional Information about Investment Policies ................. 1
Investment Restrictions .......................................... 6
Trustees and Officers ............................................ 7
Investment Adviser and Administrator ............................. 9
Custodian ........................................................ 11
Service for Withdrawal ........................................... 12
Determination of Net Asset Value ................................. 12
Investment Performance ........................................... 13
Taxes ............................................................ 14
Portfolio Security Transactions .................................. 17
Other Information ................................................ 18
Independent Accountants .......................................... 19
Financial Statements ............................................. 20
PART II
Fees and Expenses ................................................ a-1
Principal Underwriter ............................................ a-1
Distribution Plan ................................................ a-2
Performance Information .......................................... a-3
Control Persons and Principal Holders of Securities .............. a-4
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY THE FUND'S PROSPECTUS DATED MAY 1, 1997, AS SUPPLEMENTED FROM
TIME TO TIME, WHICH IS INCORPORATED HEREIN BY REFERENCE. THIS STATEMENT OF
ADDITIONAL INFORMATION SHOULD BE READ IN CONJUNCTION WITH SUCH PROSPECTUS, A
COPY OF WHICH MAY BE OBTAINED WITHOUT CHARGE BY CONTACTING EATON VANCE
DISTRIBUTORS, INC. (THE "PRINCIPAL UNDERWRITER") (SEE BACK COVER FOR ADDRESS AND
PHONE NUMBER).
FOR EDGAR FILING PURPOSES ONLY: REGISTRANT INCORPORATES BY REFERENCE FOR
EV MARATHON GOVERNMENT OBLIGATIONS FUND THE PART I FOUND IN THE STATEMENT OF
ADDITIONAL INFORMATION OF EV CLASSIC GOVERNMENT OBLIGATIONS FUND CONTAINED IN
THIS AMENDMENT.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EV MARATHON GOVERNMENT OBLIGATIONS
FUND. The Fund became a series of the Trust on September 27, 1993.
FEES AND EXPENSES
DISTRIBUTION PLAN
During the fiscal year ended December 31, 1996, the Principal Underwriter
paid to Authorized Firms sales commissions of $686,972 on sales of shares of the
Fund. During the same period, the Fund made sales commission payments under the
Plan to the Principal Underwriter aggregating $884,912 and the Principal
Underwriter received approximately $566,000 in CDSCs imposed on early redeeming
shareholders. These sales commissions and CDSC payments reduced Uncovered
Distribution Charges under the Plan. As at December 31, 1996, the outstanding
Uncovered Distribution Charges of the Principal Underwriter calculated under the
Plan amounted to approximately $4,334,000 (which amount was equivalent to 3.6%
of the Fund's net assets on such day). During the fiscal year ended December 31,
1996, the Fund made service fee payments to the Principal Underwriter and
Authorized Firms aggregating $170,149 of which $169,741 was paid to Authorized
Firms and the balance of which was retained by the Principal Underwriter.
PRINCIPAL UNDERWRITER
The Fund has authorized the Principal Underwriter to act as its agent in
repurchasing shares at the rate of $2.50 for each repurchase transaction handled
by the Principal Underwriter. The Principal Underwriter estimates that the
expenses incurred by it in acting as repurchase agent for the Fund will exceed
the amounts paid therefor by the Fund. For the fiscal year ended December 31,
1996, the Fund paid the Principal Underwriter $2,687.50 for repurchase
transactions handled by the Principal Underwriter.
TRUSTEES
The fees and expenses of those Trustees of the Trust and of the Portfolio
who are not members of the Eaton Vance organization (the noninterested Trustees)
are paid by the Fund (and the other series of the Trust) and the Portfolio,
respectively. (The Trustees of the Trust and of the Portfolio who are members of
the Eaton Vance organization receive no compensation from the Trust or the
Portfolio.) During the fiscal year ended December 31, 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):
AGGREGATE AGGREGATE TOTAL COMPENSATION
COMPENSATION COMPENSATION FROM TRUST AND
NAME FROM FUND FROM PORTFOLIO FUND COMPLEX
- ---- --------- -------------- ------------
Donald R. Dwight $696 $3,897(2) $145,000(5)
Samuel L. Hayes, III 628 3,894(3) 157,500(6)
Norton H. Reamer 620 3,784 145,000
John L. Thorndike 641 3,971(4) 150,000(7)
Jack L. Treynor 686 4,077 150,000
- ------------
(1) The Eaton Vance fund complex consists of 212 registered investment companies
or series thereof.
(2) Includes $1,593 of deferred compensation.
(3) Includes $700 of deferred compensation.
(4) Includes $957 of deferred compensation.
(5) Includes $45,000 of deferred compensation.
(6) Includes $20,429 of deferred compensation.
(7) Includes $28,125 of deferred compensation.
PRINCIPAL UNDERWRITER
Under the Distribution Agreement the Principal Underwriter acts as principal
in selling shares of the Fund. The expenses of printing copies of prospectuses
used to offer shares to Authorized Firms or investors and other selling
literature and of advertising is borne by the Principal Underwriter. The fees
and expenses of qualifying and registering and maintaining qualifications and
registrations of the Fund and its shares under federal and state securities laws
is borne by the Fund. In addition, the Fund makes payments to the Principal
Underwriter pursuant to its Distribution Plan as described in the Fund's current
Prospectus; the provisions of the Fund's Distribution Plan relating to such
payments are included in the Distribution Agreement. The Distribution Agreement
is renewable annually by the Trust's Board of Trustees (including a majority of
its Trustees who are not interested persons of the Trust and who have no direct
or indirect financial interest in the operation of the Fund's Distribution Plan
or the Distribution Agreement), may be terminated on sixty days' notice either
by such Trustees or by vote of a majority of the outstanding voting securities
of the Fund or on six months' notice by the Principal Underwriter and is
automatically terminated upon assignment. The Principal Underwriter distributes
Fund shares on a "best efforts" basis under which it is required to take and pay
for only such shares as may be sold.
DISTRIBUTION PLAN
The Plan is 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 Plan is to
compensate the Principal Underwriter for its distribution services and
facilities provided to the Fund.
The Plan provides that the Fund will pay sales commissions and distribution
fees to the Principal Underwriter only after and as a result of the sale of
shares of the Fund. On each sale of Fund shares (excluding reinvestment of
distributions) the Fund will pay the Principal Underwriter amounts representing
(i) sales commissions equal to 5% of the amount received by the Fund for each
share sold and (ii) distribution fees calculated by applying the rate of 1% over
the prime rate then reported in The Wall Street Journal to the outstanding
balance of uncovered distribution charges (as described below) of the Principal
Underwriter).
The amount payable to the Principal Underwriter pursuant to the Plan as
sales commissions and distribution fees with respect to each day will be accrued
on such day as a liability of the Fund and will accordingly reduce the Fund's
net assets upon such accrual, all in accordance with generally accepted
accounting principles. The amount payable on each day is limited to 1/365 of
.75% of the Fund's net assets on such day. The level of the Fund's net assets
changes each day and depends upon the amount of sales and redemptions of Fund
shares, the changes in the value of the investments held by the Portfolio, the
expenses of the Fund and the Portfolio accrued and allocated to the Fund on such
day, income on portfolio investments of the Portfolio accrued and allocated to
the Fund on such day, and any dividends and distributions declared on Fund
shares. The Fund does not accrue possible future payments as a liability of the
Fund or reduce the Fund's current net assets in respect of unknown amounts which
may become payable under the Plan in the future because the standards for
accrual of a liability under such accounting principles have not been satisfied.
The Plan provides that the Fund will receive all CDSCs and will make no
payments to the Principal Underwriter in respect of any day on which there are
no outstanding uncovered distribution charges of the Principal Underwriter.
CDSCs and accrued amounts will be paid by the Fund to the Principal Underwriter
whenever there exist uncovered distribution charges under the Fund's Plan.
In calculating daily the amount of uncovered distribution charges,
distribution charges will include the aggregate amount of sales commissions and
distribution fees theretofore paid plus the aggregate amount of sales
commissions and distribution fees which the Principal Underwriter is entitled to
be paid under the Plan since its inception. Payments theretofore paid or payable
under the Plan by the Fund to the Principal Underwriter and CDSCs theretofore
paid or payable to the Principal Underwriter will be subtracted from such
distribution charges; if the result of such subtraction is positive, a
distribution fee (computed at 1% over the prime rate then reported in The Wall
Street Journal) will be computed on such amount and added thereto, with the
resulting sum constituting the amount of outstanding uncovered distribution
charges with respect to such day. The amount of outstanding uncovered
distribution charges of the Principal Underwriter calculated on any day does not
constitute a liability recorded on the financial statements of the Fund.
The amount of uncovered distribution charges of the Principal Underwriter at
any particular time depends upon various changing factors, including the level
and timing of sales of Fund shares, the nature of such sales (i.e., whether they
result from exchange transactions, reinvestments or from cash sales through
Authorized Firms), the level and timing of redemptions of Fund shares upon which
a CDSC will be imposed, the level and timing of redemptions of Fund shares upon
which no CDSC will be imposed (including redemptions of Fund 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 Fund, and changes in the
interest rate used in the calculation of the distribution fee under the Plan.
Periods with a high level of sales of Fund shares accompanied by a low level of
early redemptions of Fund shares resulting in the imposition of CDSCs will tend
to increase the time during which there will exist uncovered distribution
charges of the Principal Underwriter.
Currently, payments of sales commissions and distribution fees and of
service fees may equal 1% of the Fund's average daily net assets per annum. For
the sales commissions and service fee payments made by the Fund and the
outstanding uncovered distribution charges of the Principal Underwriter, see
"Fees and Expenses -- Distribution Plan" in this Part II. The Fund believes that
the combined rate of all these payments may be higher than the rate of payments
made under distribution plans adopted by other investment companies pursuant to
Rule 12b-1. Although the Principal Underwriter will use its own funds (which may
be borrowed from banks) to pay sales commissions at the time of sale, it is
anticipated that the Eaton Vance organization will profit by reason of the
operation of the Plan through an increase in the Fund's assets (thereby
increasing the advisory fee payable to BMR by the Portfolio) resulting from sale
of Fund shares and through the amounts paid to the Principal Underwriter,
including CDSCs, pursuant to the Plan. The Eaton Vance organization may be
considered to have realized a profit under the Plan if at any point in time the
aggregate amounts theretofore received by the Principal Underwriter pursuant to
the Plan and from CDSCs have exceeded the total expenses theretofore incurred by
such organization in distributing shares of the Fund. Total expenses for this
purpose will include an allocable portion of the overhead costs of such
organization and its branch offices, which costs will include without limitation
leasing expense, depreciation of building and equipment, utilities,
communication and postage expense, compensation and benefits of personnel,
travel and promotional expense, stationery and supplies, literature and sales
aids, interest expense, data processing fees, consulting and temporary help
costs, insurance, taxes other than income taxes, legal and auditing expense and
other miscellaneous overhead items. Overhead is calculated and allocated for
such purpose by the Eaton Vance organization in a manner deemed equitable to the
Fund.
The Plan continues in effect from year to year so long as such continuance
is approved at least annually by the vote of both a majority of (i) the Trustees
of the Trust who are not interested persons of the Trust and who have no direct
or indirect financial interest in the operation of the Plan or any agreements
related to the Plan (the "Rule 12b-1 Trustees") and (ii) all of the Trustees
then in office, and the Distribution Agreement contains a similar provision. The
Plan and Distribution Agreement may be terminated at any time by vote of a
majority of the Rule 12b-1 Trustees or by a vote of a majority of the
outstanding voting securities of the Fund. The 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 therein without approval of the
shareholders of the Fund 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 believe that the Plan will be a significant factor in the
expected growth of the Fund's assets, and will result in increased investment
flexibility and advantages which have benefited the Fund and will continue to
benefit the Fund and its shareholders. Payments for sales commissions and
distribution fees made to the Principal Underwriter under the Plan will
compensate the Principal Underwriter for its services and expenses in
distributing shares of the Fund. Service fee payments made to the Principal
Underwriter and Authorized Firms under the Plan provide incentives to provide
continuing personal services to investors and the maintenance of shareholder
accounts. By providing incentives to the Principal Underwriter and Authorized
Firms, the Plan is expected to result in the maintenance of, and possible future
growth in, the assets of the Fund. Based on the foregoing and other relevant
factors, the Trustees have determined that in their judgment there is a
reasonable likelihood that the Plan will benefit the Fund and its shareholders.
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return on
a hypothetical investment of $1,000 in the Fund covering the 1-, 5- and 10- year
periods ended December 31, 1996. The total return for the period prior to the
Fund's commencement of operations on November 1, 1993 reflects the Portfolio's
total return (or that of its predecessor) adjusted to reflect any applicable
Fund CDSC. Total return for this time period has not been adjusted to reflect
the Fund's distribution and/or service fees and certain other expenses. If such
adjustments were made, the performance would have been lower.
<TABLE>
VALUE OF A $1,000 INVESTMENT
<CAPTION>
VALUE BEFORE VALUE AFTER TOTAL RETURN BEFORE TOTAL RETURN AFTER
DEDUCTING THE DEDUCTING THE DEDUCTING THE CDSC DEDUCTING THE CDSC*
INVESTMENT INVESTMENT AMOUNT OF CDSC ON CDSC* ON ------------------------ -------------------------
PERIOD DATE INVESTMENT 12/31/96 12/31/96 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ------------ ---------- ---------- ------------- ------------- ----------- --------- ------------ ----------
<C> <C> <C> <C> <C> <C> <C> <C> <C>
10 Years
ended
12/31/96 12/31/86 $1,000 $2,074.48 $2,074.48 107.45% 7.57% 107.45% 7.57%
5 Years
ended
12/31/96 12/31/91 $1,000 $1,312.92 $1,294.98 31.29% 5.60% 29.50% 5.31%
1 Year
ended
12/31/96 12/31/95 $1,000 $1,036.16 $ 987.79 3.62% 3.62% (1.22)% (1.22)%
Past performance is not indicative of future results. Investment return and principal value will fluctuate; shares, when
redeemed, may be worth more or less than their original cost.
- ------------
* No CDSC is imposed on certain redemptions. See the Fund's current Prospectus.
</TABLE>
For the thirty-day period ended December 31, 1996, the yield of the Fund was
4.86%.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As at March 31, 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
March 31, 1997, Merrill Lynch, Pierce, Fenner & Smith, Inc., Jacksonville, FL
was the record owner of approximately 14.67% of the outstanding shares, which it
held on behalf of its customers who are the beneficial owners of such shares,
and as to which it had voting power under certain limited circumstances. To the
knowledge of the Trust, no other person owned of record or beneficially 5% or
more of the Fund's outstanding shares as of such date.
<PAGE>
[Logo]
EATON VANCE
===============
Mutual Funds
EV MARATHON GOVERNMENT
OBLIGATIONS FUND
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL
INFORMATION
MAY 1, 1997
EV MARATHON GOVERNMENT
OBLIGATIONS FUND
24 FEDERAL STREET
BOSTON, MA 02110
- --------------------------------------------------------------------------------
INVESTMENT ADVISER OF GOVERNMENT OBLIGATIONS PORTFOLIO
Boston Management and Research, 24 Federal Street, Boston, MA 02110
ADMINISTRATOR OF EV MARATHON GOVERNMENT OBLIGATIONS FUND
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 89 South Street, Boston, MA 02111
TRANSFER AGENT
First Data Investor Services Group, 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
M-GOSAI
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL INFORMATION
May 1, 1997
EV TRADITIONAL GOVERNMENT OBLIGATIONS FUND
24 Federal Street
Boston, Massachusetts 02110
(800) 225-6265
This Statement of Additional Information consists of two parts. Part I
provides information about EV Traditional Government Obligations Fund (the
"Fund"), Government Obligations Portfolio (the "Portfolio") and certain other
series of Eaton Vance Mutual Funds Trust (the "Trust"). Part II provides
information solely about the Fund. Where appropriate, Part I includes
cross-references to the relevant sections of Part II that provide additional,
Fund-specific information. This Statement of Additional Information is sometimes
referred to herein as the "SAI".
TABLE OF CONTENTS
Page
PART I
Additional Information about Investment Policies ................... 1
Investment Restrictions ............................................ 6
Trustees and Officers .............................................. 7
Investment Adviser and Administrator ............................... 9
Custodian .......................................................... 11
Service for Withdrawal ............................................. 12
Determination of Net Asset Value ................................... 12
Investment Performance ............................................. 13
Taxes .............................................................. 14
Portfolio Security Transactions .................................... 17
Other Information .................................................. 18
Independent Accountants ............................................ 19
Financial Statements ............................................... 20
PART II
Fees and Expenses .................................................. a-1
Services For Accumulation .......................................... a-1
Principal Underwriter .............................................. a-2
Service Plan ....................................................... a-3
Performance Information ............................................ a-4
Control Persons and Principal Holders of Securities ................ a-4
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY THE FUND'S PROSPECTUS DATED MAY 1, 1997, AS SUPPLEMENTED FROM
TIME TO TIME, WHICH IS INCORPORATED HEREIN BY REFERENCE. THIS STATEMENT OF
ADDITIONAL INFORMATION SHOULD BE READ IN CONJUNCTION WITH SUCH PROSPECTUS, A
COPY OF WHICH MAY BE OBTAINED WITHOUT CHARGE BY CONTACTING EATON VANCE
DISTRIBUTORS, INC. (THE "PRINCIPAL UNDERWRITER") (SEE BACK COVER FOR ADDRESS AND
PHONE NUMBER).
FOR EDGAR FILING PURPOSES ONLY: REGISTRANT INCORPORATES BY REFERENCE FOR
EV TRADITIONAL GOVERNMENT OBLIGATIONS FUND THE PART I FOUND IN THE STATEMENT
OF ADDITIONAL INFORMATION OF EV CLASSIC GOVERNMENT OBLIGATIONS FUND CONTAINED
IN THIS AMENDMENT.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EV TRADITIONAL GOVERNMENT
OBLIGATIONS FUND. The Fund changed its name from Eaton Vance Traditional
Government Obligations Fund to EV Traditional Government Obligations Fund on
September 27, 1993.
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
The Fund has authorized the Principal Underwriter to act as its agent in
repurchasing shares at the rate of $2.50 for each repurchase transaction handled
by the Principal Underwriter. The Principal Underwriter estimates that the
expenses incurred by it in acting as repurchase agent for the Fund will exceed
the amounts paid therefor by the Fund. For the fiscal year ended December 31,
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.
TRUSTEES
The fees and expenses of those Trustees of the Trust and of the Portfolio
who are not members of the Eaton Vance organization (the noninterested Trustees)
are paid by the Fund (and the other series of the Trust) and the Portfolio,
respectively. (The Trustees of the Trust and the Portfolio who are members of
the Eaton Vance organization receive no compensation from the Trust or the
Portfolio.) During the fiscal year ended December 31, 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):
AGGREGATE AGGREGATE TOTAL COMPENSATION
COMPENSATION COMPENSATION FROM TRUST AND
NAME FROM FUND FROM PORTFOLIO FUND COMPLEX
- ---- --------- -------------- ------------
Donald R. Dwight ........... $ 696 $3,897(2) $145,000(5)
Samuel L. Hayes, III ....... 628 3,894(3) 157,500(6)
Norton H. Reamer ........... 620 3,784 145,000
John L. Thorndike .......... 641 3,971(4) 150,000(7)
Jack L. Treynor ............ 686 4,077 150,000
- ------------
(1) The Eaton Vance fund complex consists of 212 registered investment companies
or series thereof.
(2) Includes $1,593 of deferred compensation.
(3) Includes $700 of deferred compensation.
(4) Includes $957 of deferred compensation.
(5) Includes $45,000 of deferred compensation.
(6) Includes $20,429 of deferred compensation.
(7) Includes $28,125 of deferred compensation.
SERVICES FOR ACCUMULATION
The following services are voluntary, involve no extra charge other than the
sales charge included in the offering price, and may be changed or discontinued
without penalty at any time.
INTENDED QUANTITY INVESTMENT -- STATEMENT OF INTENTION. If it is anticipated
that $50,000 or more of Fund shares and shares of the other continuously offered
open-end funds listed under "The Eaton Vance Exchange Privilege" in the current
Prospectus of the Fund will be purchased within a 13-month period, a Statement
of Intention should be signed so that shares may be obtained at the same reduced
sales charge as though the total quantity were invested in one lump sum. Shares
held under Right of Accumulation (see below) as of the date of the Statement
will be included toward the completion of the Statement. The Statement
authorizes the Transfer Agent to hold in escrow sufficient shares (5% of the
dollar amount specified in the Statement) which can be redeemed to make up any
difference in sales charge on the amount intended to be invested and the amount
actually invested. Execution of a Statement does not obligate the shareholder to
purchase or the Fund to sell the full amount indicated in the Statement, and
should the amount actually purchased during the 13-month period be more or less
than that indicated on the Statement, price adjustments will be made. For sales
charges and other information on quantity purchases, see "How to Buy Fund
Shares" in the Fund's current Prospectus. Any investor considering signing a
Statement of Intention should read it carefully.
RIGHT OF ACCUMULATION -- CUMULATIVE QUANTITY DISCOUNT. The applicable sales
charge level for the purchase of Fund shares is calculated by taking the dollar
amount of the current purchase and adding it to the value (calculated at the
maximum current offering price) of the shares the shareholder owns in his
account(s) in the Fund and in the other continuously offered open-end funds
listed under "The Eaton Vance Exchange Privilege" in the current Prospectus of
the Fund for which Eaton Vance acts as investment adviser or administrator at
the time of purchase. The sales charge on the shares being purchased will then
be at the rate applicable to the aggregate investment. For example, if the
shareholder owned shares valued at $30,000 in EV Traditional California
Municipals Fund, and purchased an additional $20,000 of Fund shares, the sales
charge for the $20,000 purchase would be at the rate of 2.75% of the offering
price (2.83% of the net amount invested) which is the rate applicable to single
transactions of $50,000. For sales charges on quantity purchases, see "How to
Buy Fund Shares" in the Fund's current Prospectus. Shares purchased (i) by an
individual, his or her spouse and their children under the age of twenty-one,
and (ii) by a trustee, guardian or other fiduciary of a single trust estate or a
single fiduciary account, will be combined for the purpose of determining
whether a purchase will qualify for the Right of Accumulation and if qualifying,
the applicable sales charge level.
For any such discount to be made available, at the time of purchase a
purchaser or his or her Authorized Firm must provide the Principal Underwriter
(in the case of a purchase made through an Authorized Firm) or the Transfer
Agent (in the case of an investment made by mail) with sufficient information to
permit verification that the purchase order qualifies for the accumulation
privilege. Corfirmation of the order is subject to such verification. The Right
of Accumulation privilege may be amended or terminated at any time as to
purchases occurring thereafter.
PRINCIPAL UNDERWRITER
Shares of the Fund may be continuously purchased at the public offering
price through certain Authorized Firms which have agreements with the Principal
Underwriter. The Principal Underwriter is a wholly-owned subsidiary of Eaton
Vance. The public offering price is the net asset value next computed after
receipt of the order, plus, where applicable, a variable percentage (sales
charge) depending upon the amount of purchase as indicated by the sales charge
table set forth in the Fund's current Prospectus (see "How to Buy Fund Shares").
Such table is applicable to purchases of the Fund alone or in combination with
purchases of the other funds offered by the Principal Underwriter, made at a
single time by (i) an individual, or an individual, his or her spouse and their
children under the age of twenty-one, purchasing shares for his or their own
account; and (ii) a trustee or other fiduciary purchasing shares for a single
trust estate or a single fiduciary account.
The table is also presently applicable to (1) purchases of Fund shares,
alone or in combination with purchases of any of the other funds offered by the
Principal Underwriter through one dealer aggregating $50,000 or more made by any
of the persons enumerated above within a thirteen-month period starting with
first purchase pursuant to a written Statement of Intention, in the form
provided by the Principal Underwriter, which includes provisions for a price
adjustment depending upon the amount actually purchased within such period (a
purchase not made pursuant to such Statement may be included thereunder if the
Statement is filed within 90 days of such purchase); or (2) purchases of the
Fund pursuant to the Right of Accumulation and declared as such at the time of
purchase.
Subject to the applicable provisions of the 1940 Act, the Fund may issue
shares at net asset value in the event that an investment company (whether a
regulated or private investment company or a personal holding company) is merged
or consolidated with or acquired by the Fund. Normally no sales charges will be
paid in connection with an exchange of Fund shares for the assets of such
investment company.
Shares may be sold at net asset value to any officer, director, trustee,
general partner or employee of the Fund, the Portfolio or any investment company
for which Eaton Vance or BMR acts as investment adviser, any investment
advisory, agency, custodial or trust account managed or administered by Eaton
Vance or by any parent, subsidiary or other affiliate of Eaton Vance, or any
officer, director or employee of any parent, subsidiary or other affiliate of
Eaton Vance. The terms "officer," "director," "trustee," "general partner" or
"employee" as used in this paragraph include any such person's spouse and minor
children, and also retired officers, directors, trustees, general partners and
employees and their spouses and minor children. Shares of the Fund may also be
sold at net asset value to registered representatives and employees of certain
Authorized Firms and to such persons' spouses and children under the age of 21
and their beneficial accounts.
The Trust reserves the right to suspend or limit the offering of shares of
the Fund to the public at any time.
The Principal Underwriter acts as principal in selling shares of the Fund
under the Distribution Agreement with the Trust on behalf of the Fund. The
expenses of printing copies of prospectuses used to offer shares to Authorized
Firms or investors and other selling literature and of advertising are borne by
the Principal Underwriter. The fees and expenses of qualifying and registering
and maintaining qualifications and registrations of the Fund and its shares
under federal and state securities laws are borne by the Fund. The Distribution
Agreement is renewable annually by the Board of Trustees of the Trust (including
a majority of its Trustees who are not interested persons of the Principal
Underwriter or the Trust), may be terminated on six months' notice by either
party, and is automatically terminated upon assignment. The Principal
Underwriter distributes Fund shares on a "best efforts" basis under which it is
required to take and pay for only such shares as may be sold. The Principal
Underwriter allows Authorized Firms discounts from the applicable public
offering price which are alike for all Authorized Firms. However, the Principal
Underwriter may allow, upon notice to all Authorized Firms with whom it has
agreements, discounts up to the full sales charge during the periods specified
in the notice. See "How to Buy Fund Shares" in the Fund's current Prospectus for
the discounts allowed to Authorized Firms. During periods when the discount
includes the full sales charge, such Authorized Firms may be deemed to be
underwriters as that term is defined in the Securities Act of 1933. See "Fees
and Expenses" in this Part II for the sales charge paid to the Principal
Underwriter and Authorized Firms.
See the Statement of Assets and Liabilities in the Fund's Financial
Statements for a specimen price make-up sheet showing the computation of maximum
offering price per share as at December 31, 1996.
SERVICE PLAN
The Trust on behalf of the Fund has adopted a Service Plan (the "Plan")
designed to meet the service fee requirements of the revised sales charge rule
of the National Association of Securities Dealers, Inc. (Management believes
service fee payments are not distribution expenses governed by Rule 12b-1 under
the 1940 Act, but has chosen to have the Plan approved as if that Rule were
applicable.) The following supplements the discussion of the Plan contained in
the Fund's Prospectus.
The Plan remains in effect from year to year, provided such continuance is
approved by a vote of both a majority of (i) those Trustees who are not
interested persons of the Trust and who have no direct or indirect financial
interest in the operation of the Plan or any agreements related to it (the
"Noninterested Trustees") and (ii) all of the Trustees then in office, cast in
person at a meeting (or meetings) called for the purpose of voting on this Plan.
The Plan may be terminated any time by vote of the Noninterested Trustees or by
a vote of a majority of the outstanding voting securities of the Fund. The Plan
has been approved by the Board of Trustees of the Trust, including the
Noninterested Trustees.
Under the Plan, the President or a Vice President of the Trust shall provide
to the Trustees for their review, and the Trustees shall review at least
quarterly, a written report of the amount expended under the Plan and the
purposes for which such expenditures were made. The Plan may not be amended to
increase materially the payments described herein without approval of the
shareholders of the Fund, and all material amendments of the Plan must also be
approved by the Trustees of the Trust as prescribed by Rule 12b-1. So long as
the Plan is in effect, the selection and nomination of Trustees who are not
interested persons of the Trust shall be committed to the discretion of the
Trustees who are not such interested persons. The Trustees have determined that
in their judgment there is a reasonable likelihood that the Plan will benefit
the Fund and its shareholders. For the service fees paid by the Fund under the
Plan see "Fees and Expenses" in this Part II.
PERFORMANCE INFORMATION
The table below indicates the total return (capital changes plus
reinvestment of all distributions) on a hypothetical investment of $1,000 in the
Fund covering the 1-, 5- and 10-year periods ended December 31, 1996.
<TABLE>
VALUE OF A $1,000 INVESTMENT
<CAPTION>
TOTAL RETURN EXCLUDING TOTAL RETURN INCLUDING
VALUE OF MAXIMUM SALES CHARGE MAXIMUM SALES CHARGE
INVESTMENT AMOUNT OF INVESTMENT --------------------------- ---------------------------
INVESTMENT PERIOD DATE INVESTMENT* ON 12/31/96 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
----------------- ---------- ----------- ----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
10 Years Ended 12/31/96 12/31/86 $952.62 $2,041.92 112.13% 7.81% 104.19% 7.40%
5 Years Ended 12/31/96 12/31/91 $962.48 $1,292.13 34.25% 6.07% 29.21% 5.26%
1 Year Ended 12/31/96 12/31/95 $962.44 $1,005.94 4.52% 4.52% 0.59% 0.59%
Past performance is not indicative of future results. Investment return and principal value will fluctuate and shares, when
redeemed, may be worth more or less than their original cost.
- --------------
*Initial investment less the maximum sales charge of 3.75%.
</TABLE>
For the 30-day period ended December 31, 1996, the yield of the Fund was
5.71%.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As at March 31, 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
March 31, 1997, Merrill Lynch, Pierce, Fenner & Smith, Inc., Jacksonville, FL
was the record owner of approximately 17.57% of the outstanding shares, which it
held on behalf of its customers who are the beneficial owners of such shares,
and as to which it had voting power under certain limited circumstances. To the
knowledge of the Trust, no other person owned of record or beneficially 5% or
more of the Fund's outstanding shares as of such date.
<PAGE>
[Logo]
EATON VANCE
===============
Mutual Funds
EV TRADITIONAL GOVERNMENT
OBLIGATIONS FUND
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL
INFORMATION
MAY 1, 1997
EV TRADITIONAL GOVERNMENT
OBLIGATIONS FUND
24 FEDERAL STREET
BOSTON, MA 02110
- --------------------------------------------------------------------------------
INVESTMENT ADVISER OF GOVERNMENT OBLIGATIONS PORTFOLIO
Boston Management and Research, 24 Federal Street, Boston, MA 02110
ADMINISTRATOR OF EV TRADITIONAL GOVERNMENT OBLIGATIONS FUND
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 89 South Street, Boston, MA 02111
TRANSFER AGENT
First Data Investor Services Group, 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
T-GOSAI
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL INFORMATION
May 1, 1997
EATON VANCE SHORT-TERM TREASURY FUND
24 Federal Street
Boston, Massachusetts 02110
(800) 225-6265
- --------------------------------------------------------------------------------
TABLE OF CONTENTS Page
Investment Restrictions ..................................... 2
Trustees and Officers ....................................... 3
Control Persons and Principal Holders of Securities ......... 5
Investment Adviser .......................................... 5
Custodian ................................................... 7
Determination of Net Asset Value ............................ 7
Investment Performance ...................................... 7
Taxes ....................................................... 8
Principal Underwriter ....................................... 9
Distribution Plan ........................................... 10
Portfolio Security Transactions ............................. 10
Other Information ........................................... 12
Independent Accountants ..................................... 13
Financial Statements ........................................ 13
- --------------------------------------------------------------------------------
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY THE PROSPECTUS OF EATON VANCE SHORT-TERM TREASURY FUND (THE
"FUND") DATED MAY 1, 1997, AS SUPPLEMENTED FROM TIME TO TIME, WHICH IS
INCORPORATED HEREIN BY REFERENCE. THIS STATEMENT OF ADDITIONAL INFORMATION
SHOULD BE READ IN CONJUNCTION WITH SUCH PROSPECTUS, A COPY OF WHICH MAY BE
OBTAINED WITHOUT CHARGE BY CONTACTING EATON VANCE DISTRIBUTORS, INC. (THE
"PRINCIPAL UNDERWRITER") (SEE BACK COVER FOR ADDRESS AND PHONE NUMBER).
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information ("SAI") provides information about
Eaton Vance Short-Term Treasury Fund (the "Fund"). Capitalized terms used in
this SAI and not otherwise defined herein have the meanings given them in the
Prospectus.
INVESTMENT RESTRICTIONS
The following investment restrictions are designated as fundamental policies
and as such cannot be changed without the approval of the holders of a majority
of the Fund's outstanding voting securities, which as used in this Statement of
Additional Information means the lesser of (a) 67% of the shares of the Fund
present or represented by proxy at a meeting if the holders of more than 50% of
the shares are present or represented at the meeting or (b) more than 50% of the
shares of the Fund.
As a matter of fundamental investment policy, the Fund may not:
(1) With respect to 75% of its total assets, invest more than 5% of its
total assets in the securities of a single issuer, or purchase more than 10% of
the outstanding voting securities of a single issuer, except obligations issued
or guaranteed by the U.S. Government, its agencies or instrumentalitites and
except securities of other investment companies;
(2) Borrow money or issue senior securities except as permitted by the
Investment Company Act of 1940;
(3) Underwrite or participate in the marketing of securities of others,
except insofar as it may technically be deemed to be an underwriter in selling a
portfolio security under circumstances which may require the registration of the
same under the Securities Act of 1933;
(4) Purchase or sell real estate, although it may purchase and sell
securities which are secured by real estate and securities of companies which
invest or deal in real estate;
(5) Purchase or sell physical commodities or futures contracts for the
purchase or sale of physical commodities, provided that the Fund may enter into
all types of futures and forward contracts on currency, securities and
securities, economic and other indices and may purchase and sell options on such
futures contracts;
(6) Make loans to any person, except by (a) the acquisition of debt
securities and making portfolio investments, (b) entering into repurchase
agreements or (c) lending portfolio securities;
(7) Purchase securities on margin (but the Fund may obtain such short-term
credits as may be necessary for the clearance of purchases and sales of
securities). The deposit or payment by the Fund of initial, maintenance or
variation margin in connection with all types of options and futures contract
transactions is not considered the purchase of a security on margin; or
(8) Invest 25% or more of its total assets in any single industry (provided
there is no limitation with respect to obligations issued or guaranteed by the
U.S. Government or any of its agencies or instrumentalities).
Notwithstanding the investment policies and restrictions of the Fund, the
Fund may invest its assets in an open-end management investment company with
substantially the same investment objective, policies and restrictions as the
Fund.
The Fund has adopted the following nonfundamental investment policies which
may be changed by the Trustees of the Trust without approval by the Fund's
shareholders. As a matter of nonfundamental policy, the Fund may not: (a) invest
more than 15% of its net assets in investments which are not readily marketable,
including restricted securities and repurchase agreements with a maturity longer
than seven days. Restricted securities for the purposes of this limitation do
not include securities eligible for resale pursuant to Rule 144A under the
Securities Act of 1933 and commercial paper issued pursuant to Section 4(2) of
said Act that the Board of Trustees of the Trust, or their delegate, determines
to be liquid; (b) purchase put or call options on securities if after such
purchase more than 5% of its net assets, as measured by the aggregate of the
premiums paid for such options, would be invested in such options; (c) make
short sales of securities or maintain a short position, unless at all times when
a short position is open the Fund owns an equal amount of such securities or
securities convertible into or exchangeable, without payment of any further
consideration, for securities of the same issue as, and equal in amount to, the
securities sold short, and unless not more than 25% of the Fund's net assets
(taken at current value) is held as collateral for such sales at any time. (The
Fund will make such sales only for the purpose of deferring realization of gain
or loss for federal income tax purposes); or (d) purchase or retain in its
portfolio any securities issued by an issuer any of whose officers, directors,
trustees or security holder is an officer or Trustee of the Trust or is a
member, officer, director or trustee of any investment adviser of the Fund, if
after the purchase of the securities of such issuer by the Fund one or more of
such persons owns benefically more than 1/2 of 1% of the shares of securities or
both (all taken at market value) of such issuer and such persons owning more
than 1/2 of 1% of such shares or securities together own benefically more than
5% of such shares or securities or both (all taken at market value).
The Fund has no current intention during the coming year of lending
portfolio securities, entering into futures or options contracts, investing in
other investment companies or engaging in short sales. The Fund has the
authority, pending the investment of uninvested cash in Treasury obligations, to
invest up to 5% of its assets in repurchase agreements with respect to U.S.
Treasury obligations; however, the Fund has no current intention to exercise
that authority.
Whenever an investment policy or investment restriction set forth in the
Prospectus or this Statement of Additional Information states a maximum
percentage of assets that may be invested in any security or other asset, such
percentage limitation shall be determined immediately after and as a result of
the Fund's acquisition of such security or asset. Accordingly, any later
increase or decrease resulting from a change in values, assets or other
circumstances, will not compel the Fund to dispose of such security or other
asset. Notwithstanding the foregoing, the Fund must always be in compliance with
the borrowing policy set forth above.
TRUSTEES AND OFFICERS
The Trustees and officers of the Trust are listed below. Except as
indicated, each individual has held the office shown or other offices in the
same company for the last five years. Unless otherwise noted, the business
address of each Trustee and officer is 24 Federal Street, Boston, Massachusetts
02110, which is also the address of the Fund's Investment Adviser, Eaton Vance;
of Eaton Vance's wholly-owned subsidiary, Boston Management and Research
("BMR"); of Eaton Vance's parent, Eaton Vance Corp. ("EVC"); and of Eaton
Vance's and BMR's trustee, Eaton Vance, Inc. ("EV"). Eaton Vance and EV are both
wholly-owned subsidiaries of EVC. Those Trustees who are "interested persons" of
the Trust, as defined in the 1940 Act, by virtue of their affiliation with any
one or more of Eaton Vance, BMR, EVC or EV, are indicated by an asterisk(*).
M. DOZIER GARDNER (63), President and Trustee*
Vice Chairman of Eaton Vance, BMR, EVC and EV and a Director of EVC and EV.
Director or Trustee and officer of various investment companies managed by
Eaton Vance or BMR.
JAMES B. HAWKES (55), Vice President and Trustee*
President and Chief Executive Officer of Eaton Vance, BMR, EVC and EV and a
Director of EVC and EV. Director or Trustee and officer of various investment
companies managed by Eaton Vance or BMR. Mr. Hawkes was elected Vice President
and Trustee of the Trust on December 16, 1991.
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 (61), Trustee
President and Director, United Asset Management Corporation (a holding company
owning institutional investment management firms); Chairman, President and
Director, UAM Funds (mutual funds). Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: One International Place, Boston, Massachusetts 02110
JOHN L. THORNDIKE (70), Trustee
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
WILLIAM H. AHERN, JR. (37), Vice President
Assistant Vice President of Eaton Vance, BMR and EV. Officer of various
investment companies managed by Eaton Vance or BMR. Mr. Ahern was elected
Vice President of the Trust on June 19, 1995.
MICHAEL B. TERRY (54), Vice President
Vice President of Eaton Vance, BMR and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
JAMES L. O'CONNOR (52), Treasurer
Vice President of Eaton Vance, BMR and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
THOMAS OTIS (65), Secretary
Vice President and Secretary of Eaton Vance, BMR, EVC and EV. Officer of various
investment companies managed by Eaton Vance or BMR.
JANET E. SANDERS (61), Assistant Treasurer and Assistant Secretary
Vice President of Eaton Vance, BMR and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
A. JOHN MURPHY (34), Assistant Secretary
Assistant Vice President of Eaton Vance, BMR 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 of the Trust on
March 27, 1995.
JOHN P. RYNNE (54), Assistant Secretary
Corporate Controller and Vice President of EVC. Vice President of Eaton Vance,
EV, EVD and BMR, and Treasurer of Energex Energy Corporation. Mr. Rynne was
elected Assistant Secretary of the Trust on June 19, 1995.
ERIC G. WOODBURY (39), Assistant Secretary
Vice President of Eaton Vance, BMR and EV 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 of the Trust on June 19, 1995.
Messrs. Hayes (Chairman), Reamer and Thorndike are members of the Special
Committee of the Board of Trustees of the Trust. The purpose of the Special
Committee is to consider, evaluate and make recommendations to the full Board of
Trustees concerning (i) all contractual arrangements with service providers to
the Fund, including administrative, 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 Nominating Committee of the Board of Trustees of the Trust 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. The Audit Committee's functions include
making recommendations to the Board 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.
The fees and expenses of the noninterested Trustees of the Trust are paid by
the Fund (and the other series of the Trust). (The Trustees of the Trust who are
members of the Eaton Vance organization receive no compensation from the Fund.)
During the fiscal year ended December 31, 1996, the noninterested Trustees of
the Trust earned the following compensation in their capacities as Trustees from
the Fund and the funds in the Eaton Vance fund complex(1):
AGGREGATE TOTAL COMPENSATION
COMPENSATION FROM TRUST AND
NAME FROM FUND FUND COMPLEX
- ---- --------- ------------
Donald R. Dwight ....................... $ 854(2) $145,000(5)
Samuel L. Hayes, III ................... 1,052(3) 157,500(6)
Norton H. Reamer ....................... 992 145,000
John L. Thorndike ...................... 1,080(4) 150,000(7)
Jack L. Treynor ........................ 1,027 150,000
- ----------
(1) The Eaton Vance fund complex consists of 212 registered investment companies
or series thereof.
(2) Includes $375 of deferred compensation.
(3) Includes $119 of deferred compensation.
(4) Includes $375 of deferred compensation.
(5) Includes $55,000 of deferred compensation.
(6) Includes $20,429 of deferred compensation.
(7) Includes $28,125 of deferred compensation.
Trustees of the Trust who are not affiliated with the Investment Adviser may
elect to defer receipt of all or a percentage of their annual fees in accordance
with the terms of a Trustees Deferred Compensation Plan (the "Trustees" Plan").
Under the Trustees' Plan, an eligible Trustee may elect to have his deferred
fees invested by the Trust in the shares of one or more funds in the Eaton Vance
Family of Funds, and the amount paid to the Trustees under the 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 Fund's assets, liabilities, and net income per share, and will not
obligate the Trust to retain the services of any Trustee or obligate the Trust
to pay any particular level of compensation to the Trustee. The Trust does not
have a retirement plan for its Trustees.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of March 31, 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 of
March 31, 1997, Eaton Vance owned 81.07% of the outstanding shares of the Fund;
Eaton Vance is a Massachusetts business trust and a wholly-owned subsidiary of
EVC. In addition, as of the same date, the following shareholder owned of record
the percentage of the Fund's outstanding shares indicated after its name;
Plasma-Therm Inc., St. Petersburg, FL (6.01%). To the Trust's knowledge, no
other person owned of record or beneficially 5% or more of the Fund's
outstanding shares as of such date.
INVESTMENT ADVISER
The Fund engages Eaton Vance as its investment adviser pursuant to an
Investment Advisory Agreement dated February 4, 1991. Eaton Vance or its
affiliates act as investment adviser to investment companies and various
individual and institutional clients with combined assets under management of
over $17 billion.
Eaton Vance, its affiliates and its predecessor companies have been managing
assets of individuals and institutions since 1924 and managing investment
companies since 1931. They maintain a large staff of experienced fixed-income
and equity investment professionals to service the needs of their clients. The
fixed-income division focuses on all kinds of taxable investment-grade and
high-yield securities, tax-exempt investment-grade and high-yield securities,
and U.S. Government securities. The equity division covers stocks ranging from
blue chip to emerging growth companies.
Eaton Vance and its affiliates act as adviser to over 150 mutual funds, 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's staff includes 11 highly qualified investment
professionals who manage U.S. $1.3 billion. Lloyd George analysts cover East
Asia, the India subcontinent, Russia and Eastern Europe, Latin America,
Australia and New Zealand from offices in Hong Kong, London and Mumbai. Together
Eaton Vance and Lloyd George manage over $18 billion in assets. Eaton Vance
mutual funds are distributed by 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 provide you with tailored financial advice and
help you decide when to buy, sell or persevere with your investments.
Eaton Vance manages the investments and affairs of the Fund subject to the
supervision of the Trust's Board of Trustees. Eaton Vance furnishes to the Fund
investment advice and assistance, administrative services, office space,
equipment and personnel, and has arranged for certain members of the Eaton Vance
organization to serve without salary as officers or Trustees of the Trust.
For a description of the compensation that the Fund pays Eaton Vance under
its Investment Advisory Agreement, see the Fund's current Prospectus. As at
December 31, 1996, the Fund had net assets of $2,003,887. For the fiscal years
ended December 31, 1996 and 1995, Eaton Vance would have earned, absent a fee
reduction, advisory fees of $184,614 and $139,640, respectively, (equivalent to
0.31% of the Fund's average daily net assets for each such year). To enhance the
net income of the Fund, Eaton Vance made a reduction of its advisory fee in the
amount of $85,061 and $122,471 for the years ended December 31, 1996 and 1995,
respectively. For the fiscal year ended December 31, 1994, Eaton Vance would
have earned, absent a fee reduction, advisory fees of $42,301 (equivalent to
0.22% of the Fund's average daily net assets for such year). To enhance the net
income of the Fund, Eaton Vance made a reduction of its fee in the full amount
and was allocated a portion of the Fund's operating expenses in the amount of
$31,702.
The Investment Advisory Agreement with Eaton Vance continues in effect from
year to year so long as such continuance is approved at least annually (i) by
the vote of a majority of the noninterested Trustees cast in person at meeting
specifically called for the purpose of voting on such approval and (ii) by the
Board of Trustees of the Trust or by vote of a majority of the outstanding
voting securities of the Fund. The Agreement may be terminated at any time
without penalty on sixty (60) days' written notice by the Board of Trustees of
either party, or by vote of the majority of the outstanding voting securities of
the Fund, and the Agreement will terminate automatically in the event of its
assignment. The Agreement provides that Eaton Vance may render services to
others and may permit other fund clients and other corporations and
organizations to use the words "Eaton Vance" in their names. The Agreement also
provides that, in the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of obligations or duties under the Agreement on
the part of Eaton Vance, Eaton Vance shall not be liable to the Fund or to any
shareholder for any act or omission in the course of or connected with rendering
services or for any losses sustained in the purchase, holding or sale of any
security.
The Fund will be responsible for all costs and expenses not expressly stated
to be payable by Eaton Vance under the Investment Advisory Agreement or by the
Principal Underwriter under its Distribution Agreement with the Fund. Such costs
and expenses to be borne by the Fund include, without limitation, the fees and
expenses of the Fund's custodian and transfer agent, including those incurred
for determining the Fund's net asset value and keeping the Fund's books;
expenses of pricing and valuation services; the cost of share certificates;
membership dues in investment company organizations; brokerage commissions and
fees; fees and expenses of registering its shares; expenses of reports to
shareholders, proxy statements, and other expenses of shareholders' meetings;
insurance premiums; printing and mailing expenses; interest, taxes and corporate
fees; legal and accounting expenses; compensation and expenses of Trustees not
affiliated with Eaton Vance; and investment advisory fees. The Fund will also
bear expenses incurred in connection with litigation in which the Fund is a
party and any legal obligation the Fund may have to indemnify the Trust's
officers and Trustees with respect thereto, to the extent not covered by
insurance.
Eaton Vance and EV are both wholly-owned subsidiaries of EVC. BMR is a
wholly-owned subsidiary of Eaton Vance. Eaton Vance and BMR are both
Massachusetts business trusts, and EV is the trustee of Eaton Vance and BMR.
The Directors of EV are Landon T. Clay, M. Dozier Gardner, James B. Hawkes,
and Benjamin A. Rowland, Jr. The Directors of EVC consist of the same persons
and John G. L. Cabot and Ralph Z. Sorenson. Mr. Clay is chairman, Mr. Gardner
is vice chairman and Mr. Hawkes is president and chief executive officer of
EVC, Eaton Vance, BMR and EV. All of the issued and outstanding shares of
Eaton Vance and EV are owned by EVC. All of the issued and outstanding shares
of BMR are owned by Eaton Vance. All shares of the outstanding Voting Common
Stock of EVC are deposited in a Voting Trust which expires on December 31,
1997, the Voting Trustees of which are Messrs. Clay, Gardner, Hawkes, Rowland
and Thomas E. Faust, Jr. The Voting Trustees have unrestricted voting rights
for the election of Directors of EVC. All of the outstanding voting trust
receipts issued under said Voting Trust are owned by certain of the officers
of Eaton Vance and BMR who are also officers and Directors of EVC and EV. As
of April 30, 1997, Messrs. Clay, Gardner and Hawkes each owned 24% of such
voting trust receipts, and Messrs. Rowland and Faust owned 15% and 13%,
respectively, of such voting trust receipts. Messrs. Gardner, Hawkes and Otis
who are officers or Trustees of the Trust, are also members of the EVC, Eaton
Vance, BMR and EV organizations. Messrs. Ahern, Murphy, O'Connor, Rynne, Terry
and Woodbury and Ms. Sanders are officers of the Trust and are also members of
the Eaton Vance, BMR and EV organizations.
EVC owns all of the stock of Energex Energy Corporation, which engages in
oil and gas exploration and development. In addition, Eaton Vance owns all of
the stock of Northeast Properties, Inc., which is engaged in real estate
investment. EVC owns all of the stock of Fulcrum Management, Inc. and MinVen,
Inc., which are engaged in precious metal mining venture investment and
management. EVC also owns 22% of the Class A shares of Lloyd George Management
(B.V.I.) Limited, a registered investment adviser. EVC, Eaton Vance, BMR and EV
may also enter into other businesses.
EVC and its affiliates and their officers and employees from time to time
have transactions with various banks, including the Fund's custodian, 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 and such banks.
CUSTODIAN
IBT acts as custodian for the Fund. IBT has the custody of all cash and
securities of the Fund, maintains the Fund's general ledger, and computes the
daily per share net asset value. In such capacity it attends to details in
connection with the sale, exchange, substitution, transfer or other dealings
with the Fund's investments, receives and disburses all funds and performs
various other ministerial duties upon receipt of proper instructions from the
Fund. IBT charges fees which are competitive within the industry. A portion of
the fee relates to custody, bookkeeping and valuation services and is based upon
a percentage of the Fund's net assets and a portion of the fee relates to
activity charges, primarily the number of portfolio transactions. These fees are
then reduced by a credit for cash balances of the particular investment company
at the custodian equal to 75% of the 91-day, U.S. Treasury Bill auction rate
applied to the particular investment company's average daily collected balances
for the week. Landon T. Clay, a Director of EVC and an officer, Trustee or
Director of other entities in the Eaton Vance organization, owns approximately
13% of the voting stock of Investors Financial Services Corp., the holding
company parent of IBT. Management believes that such ownership does not create
an affiliated person relationship between the Fund and IBT under the 1940 Act.
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.
DETERMINATION OF NET ASSET VALUE
The Fund's net asset value is determined by IBT (as agent for the Fund) in
the manner described under "Valuing Fund Shares" in the Fund's current
Prospectus. The Fund will be closed for business and will not price its shares
on the following business holidays: New Year's Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.
INVESTMENT PERFORMANCE
The Fund's average annual total return is determined by multiplying a
hypothetical initial purchase order of $1,000 by the average annual compound
rate of return (including capital appreciation/depreciation, and distributions
paid and reinvested) for the stated period and annualizing the result. The
calculation assumes that all distributions are reinvested at net asset value on
the reinvestment dates during the period, and a complete redemption of the
investment at the end of the period.
The Fund's yield is computed pursuant to a standardized formula by dividing
its net investment income per share earned during a recent thirty-day period by
the net asset value per share on the last day of the period and annualizing the
resulting figure. Net investment income per share is calculated from the yields
to maturity of all debt obligations in the Fund's portfolio based on prescribed
methods, reduced by accrued Fund expenses for the period, with the resulting
number being divided by the average daily number of Fund shares outstanding and
entitled to receive dividends during the period. For the thirty-day period ended
December 31, 1996, the yield of the Fund was 4.85%. If a portion of the expenses
related to the operation of the Fund had not been allocated to the Investment
Adviser, the Fund would have had a lower yield.
The table below indicates the total return (capital changes plus
reinvestment of all distributions) on a hypothetical investment of $1,000 in the
Fund covering the period from the date of the initial public offering, February
4, 1991, to December 31, 1996, and the one- and five-year periods ended December
31, 1996.
<TABLE>
VALUE OF A $1,000 INVESTMENT
<CAPTION>
VALUE OF TOTAL RETURN
INVESTMENT INVESTMENT AMOUNT OF INVESTMENT --------------------------------------
PERIOD DATE INVESTMENT ON 12/31/95 CUMULATIVE ANNUALIZED
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Life of the
Fund** 2/4/91* $1,000.00 $1,281.57 28.16% 4.29%
5 Years Ended
12/31/96 12/31/91 $1,000.00 $1,221.70 22.17% 4.09%
1 Year Ended
12/31/96** 12/31/95 $1,000.00 $1,046.93 4.69% 4.69%
Past performance is not indicative of future results. Investment return and principal value will fluctuate; shares, when
redeemed, may be worth more or less than their original cost.
- ------------
*Date of the initial public offering (February 4, 1991).
**If a portion of the expenses of the Fund had not been subsidized, the Fund would have had lower returns.
</TABLE>
The Fund's yield and total return may be compared to the Consumer Price
Index and various domestic, international and global securities indices. The
Fund's yield and total return and comparisons with these indices may be used in
advertisements and in information furnished to present or prospective
shareholders.
In addition, evaluations of the Fund's performance or rankings of mutual
funds (which include the Fund) made by independent sources may be used in
advertisements and in information furnished to present or prospective
shareholders.
The Fund may provide information about Eaton Vance, its affiliates and other
investment advisers to the funds in the Eaton Vance Family of Funds in sales
material or advertisements provided to investors or prospective investors. Such
material or advertisements may also provide information on the use of investment
professionals by such investors.
Information used in advertisements and in materials furnished to present and
prospective shareholders may include statements or illustrations relating to the
appropriateness of types of securities and/or mutual funds which may be employed
to meet specific financial goals. Such 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).
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 a
sufficient amount of its investment company taxable income so as to effect such
qualification. The Fund may also distribute part or all of its net investment
income and net realized capital gains in accordance with the timing requirements
imposed by the Code, so as to reduce or avoid any federal income or excise tax
to the Fund. The Fund qualified as a RIC under the Code for its taxable year
ended December 31, 1996.
In order to avoid federal excise tax, the Code requires the Fund distribute
(or be deemed to have distributed) by December 31 of each calendar year at least
98% of its ordinary income (not including tax-exempt income) for such year, at
least 98% of the excess of its realized capital gains over its realized capital
losses, generally computed on the basis of the one-year period ending on October
31 of such year, after reduction by any available capital loss carryforwards,
and 100% of any income or capital gains from the prior year (as previously
computed) that was not paid out during such year and on which the Fund paid no
federal income tax. Under current law, provided the Fund qualifies as a RIC for
federal tax purposes, the Fund is not liable for any income, corporate excise or
franchise tax in the Commonwealth of Massachusetts.
The Fund's distributions of taxable net investment income and of excess of
net short-term capital gain over net long-term capital loss are taxable to
shareholders as ordinary income whether paid in cash or reinvested in additional
shares. Distributions of the excess of net long-term capital gain over net
short-term capital loss (reduced by any capital losses carried forward from
prior years) are taxable to shareholders as long-term capital gains, whether
received in cash or in additional shares and regardless of the length of time
their shares of the Fund have been held. Distributions made by the Fund will not
qualify for the dividends-received deduction for corporations.
Under the Code, the redemption or exchange of shares of a regulated
investment company normally results in capital gain or loss if such shares are
held as capital assets. Section 1258 of the Code recharacterizes all or a
portion of any capital gain from the disposition or other termination of a
position held as part of a "conversion transaction" as ordinary income.
Conversion transactions include, among other things, certain transactions which
are marketed or sold as producing a capital gain. Investors should consult their
own tax advisers concerning whether Section 1258 may apply to their transactions
in Fund shares.
Any loss realized upon the redemption or exchanges of shares of the Fund
with a tax holding period of 6 months or less will be treated as a long-term
capital loss to the extent of any distribution of net long-term capital gains
with respect to such shares. In addition, a loss realized on a redemption or
other disposition of Fund shares may be disallowed under certain "wash sale"
rules if other shares of the Fund are acquired within a period beginning 30 days
before and ending 30 days after the date of such redemption or other
disposition. Any disallowed loss will result in an adjustment to the
shareholder's tax basis in some or all of the other shares acquired.
Amounts paid by the Fund to individuals and certain other shareholders who
have not provided the Fund with their correct taxpayer identification number and
certain certifications required by the Internal Revenue Service ("IRS"), as well
as shareholders with respect to whom the Fund has received notification from the
IRS or a broker, may be subject to "backup" withholding of federal income tax
from the Fund's taxable dividends and distributions and the proceeds of
redemptions (including repurchases and exchanges), at a rate of 31%. An
individual's taxpayer identification number is generally his or her social
security number.
Non-resident alien individuals, foreign corporations and certain other
foreign entities generally will be subject to a U.S. withholding tax at a rate
of 30% on the Fund's distributions from its ordinary income and the excess of
its net short-term capital gain over its net long-term capital loss, unless the
tax is reduced or eliminated by an applicable tax treaty. Distributions from the
excess of the Fund's net long-term capital gain over its net short-term capital
loss received by such shareholders and any gain from the sale or other
disposition of shares of the Fund generally will not be subject to U.S. federal
income taxation, provided that non-resident alien status has been certified by
the shareholder. Different U.S. tax consequences may result if the shareholder
is engaged in a trade or business in the United States, is present in the United
States for a sufficient period of time during a taxable year to be treated as a
U.S. resident, or fails to provide any required certifications regarding status
as a non-resident alien investor. Foreign shareholders should consult their tax
advisers regarding the U.S. and foreign tax consequences of an investment in the
Fund.
Special tax rules apply to Individual Retirement Accounts ("IRAs") and to
other retirement plans and persons investing through such plans should consult
their tax advisers for more information.
The foregoing discussion does not address the special tax rules applicable
to certain classes of investors, such as retirement plans, tax-exempt entities,
insurance companies and financial institutions. Shareholders should consult
their own tax advisers with respect to special tax rules that may apply in their
particular situations, as well as the state, local or foreign tax consequences
of investing in the Fund.
PRINCIPAL UNDERWRITER
Under the Distribution Agreement the Principal Underwriter acts as principal
in selling shares of the Fund. The expenses of printing copies of prospectuses
used to offer shares to Authorized Firms or investors and other selling
literature and of advertising is borne by the Principal Underwriter. The fees
and expenses of qualifying and registering and maintaining qualifications and
registrations of the Fund and its shares under federal and state securities laws
are borne by the Fund. In addition, the Fund makes payments to the Principal
Underwriter pursuant to its Distribution Plan as described in the Fund's current
Prospectus. The 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 Fund's
Distribution Plan or the Distribution Agreement), may be terminated on sixty
days' notice either by such Trustees or by vote of a majority of the outstanding
voting securities of the Fund or on six months' notice by the Principal
Underwriter, and is automatically terminated upon assignment. The Principal
Underwriter distributes Fund shares on a "best efforts" basis under which it is
required to take and pay for only such shares as may be sold.
DISTRIBUTION PLAN
The Distribution Plan (the "Plan") is described in the Prospectus and is
designed to meet the requirements of Rule 12b-1 under the 1940 Act. The
following supplements the discussion of the Plan contained in the Prospectus.
The Plan continues in effect from year to year, for so long as such
continuance is approved 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 it (the "Rule
12b-1 Trustees") and (ii) all of the Trustees then in office, cast in person at
a meeting (or meetings) called for the purpose of voting on this Plan. The Plan
may be terminated at any time by vote of the Rule 12b-1 Trustees or by a vote of
a majority of the outstanding voting securities of the Fund. The Plan 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 amount to be spent for the services described
therein without approval of the shareholders of the Fund 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 shareholders.
During the fiscal year ended December 31, 1996, the Fund paid $137,462 in
distribution fees to the Principal Underwriter and the Principal Underwriter in
turn paid $55,825 of this amount to Authorized Firms or others as described in
the Prospectus and used the balance of $81,637 to compensate employees of the
Principal Underwriter and its affiliates and to defray part of its expenses
associated with distributing shares of the Fund.
PORTFOLIO SECURITY TRANSACTIONS
Decisions concerning the execution of Fund portfolio security transactions,
including the selection of the market and the executing firm, are made by Eaton
Vance. Eaton Vance is also responsible for the execution of transactions for all
other accounts managed by it.
Eaton Vance places the portfolio security transactions of the Fund and of
all other accounts managed by it for execution with many firms. Eaton Vance uses
its best efforts to obtain execution of portfolio security transactions at
prices which are advantageous to the Fund and (when a disclosed commission is
being charged) at reasonably competitive commission rates. In seeking such
execution, Eaton Vance will use its best judgment in evaluating the terms of a
transaction, and will give consideration to various relevant factors including
without limitation the size and type of the transaction, the general execution
and operational capabilities of the executing firm, the nature and character of
the market for the security, the confidentiality, speed and certainty of
effective execution required for the transaction, the reputation, reliability,
experience and financial condition of the firm, the value and quality of
services rendered by the firm in other transactions, and the reasonableness of
the commission or spread, if any. The U.S. Treasury bills, notes and bonds
purchased and sold by the Fund are generally traded in the over-the-counter
market on a net basis (i.e., without commission) through dealers and banks
acting for their own account rather than as brokers, and the Fund may also
acquire such obligations in the periodic auctions of the U.S. Treasury. Firms
acting for their own account attempt to profit from such transactions by buying
at the bid price and selling at a higher asked price for such obligations, and
the difference between such prices is customarily referred to as the spread.
While it is anticipated that the Fund will not pay significant brokerage
commissions in connection with such portfolio security transactions, on occasion
it may be necessary or appropriate to purchase or sell a security through a
broker on an agency basis, in which case the Fund will incur a brokerage
commission. Although spreads or commissions on portfolio security transactions
will, in the judgment of Eaton Vance, be reasonable in relation to the value of
the services provided, spreads or commissions exceeding those which another firm
might charge may be paid to firms who were selected to execute transactions on
behalf of the Fund and Eaton Vance's other clients for providing brokerage and
research services to Eaton Vance.
As authorized in Section 28(e) of the Securities Exchange Act of 1934, a
broker or dealer who executes a portfolio transaction on behalf of the Fund may
receive a commission which is in excess of the amount of commission another
broker or dealer would have charged for effecting that transaction if Eaton
Vance determines in good faith that such compensation was reasonable in relation
to the value of the brokerage and research services provided. This determination
may be made on the basis of either that particular transaction or on the basis
of overall responsibilities which Eaton Vance and its affiliates have for
accounts over which they exercise investment discretion. In making any such
determination, Eaton Vance will not attempt to place a specific dollar value on
the brokerage and research services provided or to determine what portion of the
commission should be related to such services. Brokerage and research services
may include advice as to the value of securities, the advisability of investing
in, purchasing, or selling securities, and the availability of securities or
purchasers or sellers of securities; furnishing analyses and reports concerning
issuers, industries, securities, economic factors and trends, portfolio strategy
and the performance of accounts; effecting securities transactions and
performing functions incidental thereto (such as clearance and settlement); and
the "Research Services" referred to in the next paragraph.
It is a common practice in the investment advisory industry for the advisers
of investment companies, institutions and other investors to receive research,
statistical and quotation services, data, information and other services,
products and materials which assist such advisers in the performance of their
investment responsibilities ("Research Services") from broker-dealers which
execute portfolio transactions for the clients of such advisers and from third
parties with which such broker-dealers have arrangements. Consistent with this
practice, Eaton Vance receives Research Services from many broker-dealer firms
with which Eaton Vance places the Fund's portfolio transactions and from third
parties with which these broker-dealers have arrangements. These Research
Services include such matters as general economic and market reviews, industry
and company reviews, evaluations of securities and portfolio strategies and
transactions, recommendations as to the purchase and sale of securities and
other portfolio transactions, financial, industry and trade publications, news
and information services, pricing and quotation equipment and services, and
research oriented computer hardware, software, data bases and services. Any
particular Research Service obtained through a broker-dealer may be used by
Eaton Vance in connection with client accounts other than those accounts which
pay commissions to such broker-dealer. Any such Research Service may be broadly
useful and of value to Eaton Vance in rendering investment advisory services to
all or a significant portion of its clients, or may be relevant and useful for
the management of only one client's account or of a few clients' accounts, or
may be useful for the management of merely a segment of certain clients'
accounts, regardless of whether any such account or accounts paid commissions to
the broker-dealer through which such Research Service was obtained. The advisory
fee paid by the Fund is not reduced because Eaton Vance receives such Research
Services. Eaton Vance evaluates the nature and quality of the various Research
Services obtained through broker-dealer firms and attempts to allocate
sufficient commissions to such firms to ensure the continued receipt of Research
Services which Eaton Vance believes are useful or of value to it in rendering
investment advisory services to its clients.
Subject to the requirement that Eaton Vance shall use its best efforts to
seek to execute Fund portfolio security transactions at advantageous prices and
at reasonably competitive commission rates or spreads, Eaton Vance is authorized
to consider as a factor in the selection of any broker-dealer firm with whom
Fund portfolio orders may be placed the fact that such firm has sold or is
selling shares of the Fund or of other investment companies sponsored by Eaton
Vance. This policy is not inconsistent with a rule of the National Association
of Securities Dealers, Inc. (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 Fund may also be appropriate
for other investment accounts managed by Eaton Vance or its affiliates. Whenever
decisions are made to buy or sell securities by the Fund and one or more of such
other accounts simultaneously, Eaton Vance 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 Fund will not participate 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 Eaton
Vance 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
Fund from time to time, it is the opinion of the Trustees of the Trust and the
Fund that the benefits from the Eaton Vance organization outweigh any
disadvantage that may arise from exposure to simultaneous transactions.
During the fiscal year ended December 31, 1996, the Fund's purchases and
sales of portfolio securities were with major dealers in U.S. Treasury
obligations. The prices for which securities are purchased from and sold to such
dealers usually include an undisclosed dealer spread. For the fiscal years ended
December 31, 1996, 1995 and 1994, the Fund paid no brokerage commissions on
portfolio security transactions.
PORTFOLIO TURNOVER
The Fund cannot accurately predict its portfolio turnover rate, but it is
anticipated that the annual turnover rate will generally not exceed 25%
(excluding maturity of securities). The Fund engages in portfolio trading
(including short-term trading) if it believes that a transaction including all
costs will help in achieving its investment objective either directly by
increasing income or indirectly by enhancing the Fund's net asset value.
OTHER INFORMATION
The Trust changed its name from Eaton Vance Government Obligations Trust on
July 10, 1995. Eaton Vance, pursuant to its agreement with the Trust, controls
the use of the Fund's name and may use the words "Eaton Vance" in other
connections and for other purposes. EVC may require the Fund to cease using such
words in its name if EVC or Eaton Vance or any other subsidiary or affiliate of
EVC ceases to act as investment manager of the Fund.
As permitted by Massachusetts law, there will normally be no meetings of
shareholders for the purpose of electing Trustees unless and until such time as
less than a majority of the Trustees holding office have been elected by
shareholders. In such an event the Trustees then in office will call a
shareholders' meeting for the election of Trustees. Except for the foregoing
circumstances and unless removed by action of the shareholders in accordance
with the Trust's By-Laws, the Trustees shall continue to hold office and may
appoint successor Trustees.
The Trust's Declaration of Trust may be amended by the Trustees when
authorized by vote of a majority of the outstanding voting securities of the
Trust, the financial interests of which are affected by the amendment. The
Trustees may also amend the Declaration of Trust without the vote or consent of
shareholders to change the name of the Trust or any series or to make such other
changes as do not have a materially adverse effect on the financial interests of
shareholders or if they deem it necessary to conform it to applicable federal or
state laws or regulations. The Trust'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 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. 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.
The right to redeem can be suspended and the payment of the redemption price
deferred when the Exchange is closed (other than for customary weekend and
holiday closings), during periods when trading on the Exchange is restricted as
determined by the Commission, or during any emergency as determined by the
Commission which makes it impracticable for the Fund to dispose of its
securities or value its assets, or during any other period permitted by order of
the Commission for the protection of investors.
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P., One Post Office Square, Boston, Massachusetts are
the Fund's independent accountants, providing audit services, tax return
preparation, and assistance and consultation with respect to the preparation of
filings with the Securities and Exchange 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 are incorporated by reference into this SAI.
A copy of the annual report accompanies this SAI.
Registrant incorporates by reference the audited financial information for
the Fund for the fiscal year ended December 31, 1996 as previously filed
electronically with the Commission (Accession No. 0000950156-97-000157).
<PAGE>
[Logo]
EATON VANCE
===============
Mutual Funds
EATON VANCE
SHORT-TERM
TREASURY FUND
STATEMENT OF ADDITIONAL
INFORMATION
MAY 1, 1997
EATON VANCE SHORT-TERM
TREASURY FUND
24 FEDERAL STREET
BOSTON, MA 02110
- --------------------------------------------------------------------------------
INVESTMENT ADVISER
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 89 South Street, Boston, MA 02111
TRANSFER AGENT
First Data Investor Services Group, 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
TYSAI
<PAGE>
PART C
OTHER INFORMATION
ITEM 24: FINANCIAL STATEMENTS AND EXHIBITS
(A) FINANCIAL STATEMENTS
INCLUDED IN PART A:
FOR THE FUNDS LISTED BELOW ARE "FINANCIAL HIGHLIGHTS" FROM THE
DATE INDICATED TO THE FISCAL YEAR ENDED DECEMBER 31, 1996:
Eaton Vance Cash Management Fund (from January 1, 1987)
Eaton Vance Liquid Assets Fund (from the start of business May
28, 1987)
Eaton Vance Money Market Fund (from start of business April 5,
1995)
Eaton Vance Tax Free Reserves (from January 1, 1987)
Eaton Vance Short-Term Treasury Fund (from start of business
February 4, 1991)
EV Classic Government Obligations Fund (from start of business
November 1, 1993)
EV Marathon Government Obligations Fund (from start of
business November 1, 1993)
EV Traditional Government Obligations Fund (from January 1,
1987)
INCORPORATED BY REFERENCE INTO PART B ARE THE FINANCIAL STATEMENTS
CONTAINED IN THE ANNUAL REPORTS FOR THE FOLLOWING FUNDS, EACH
DATED DECEMBER 31, 1996 (WHICH WERE PREVIOUSLY FILED
ELECTRONICALLY PURSUANT TO SECTION 30(B)(2) OF THE INVESTMENT
COMPANY ACT OF 1940):
Eaton Vance Cash Management Fund
Eaton Vance Liquid Assets Fund
Eaton Vance Money Market Fund
(Accession No. 0000928816-97-000050)
EV Classic Government Obligations Fund
(Accession No. 0000950156-97-000269)
EV Marathon Government Obligations Fund
(Accession No. 0000950156-97-000270)
EV Traditional Government Obligations Fund
(Accession No. 0000950156-97-000266)
Eaton Vance Short-Term Treasury Fund
(Accession No. 0000950156-97-000157)
Eaton Vance Tax Free Reserves
(Accession No. 0000950156-97-000156)
The financial statements contained in each Fund's annual report
include:
Portfolio of Investments (for Short-Term Treasury Fund
and Tax Free Reserves only)
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 CASH MANAGEMENT PORTFOLIO AND GOVERNMENT
OBLIGATIONS PORTFOLIO, WHICH ARE CONTAINED IN THE ANNUAL REPORTS
DATED DECEMBER 31, 1996 FOR THE CORRESPONDING FUNDS: Portfolio of
Investments Statement of Assets and Liabilities Statement of
Operations Statement of Changes in Net Assets Supplementary Data
Notes to Financial Statements Report of Independent Accountants
(B) EXHIBITS:
(1)(a) Amended and Restated Declaration of Trust dated August 17, 1993
filed as Exhibit (1)(a) to Post-Effective Amendment No. 23 and
incorporated herein by reference.
(b) Amendment to Declaration of Trust dated July 10, 1995 filed as
Exhibit (1)(b) to Post- Effective Amendment No. 23 and
incorporated herein by reference.
(c) Amendment and Restatement of Establishment and Designation of
Series of Shares dated May 7, 1996 filed as Exhibit (1)(d) to
Post-Effective Amendment No. 30 and incorporated herein by
reference.
(d) Establishment and Designation of Classes of Shares of Beneficial
Interest dated November 18, 1996 filed as Exhibit 1(e) to
Post-Effective Amendment No. 31 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.
(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 herewith.
(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 herewith.
(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 herewith.
(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 herewith.
(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 herewith.
(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 herewith.
(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 herewith.
(b) Selling Group Agreement between Eaton Vance Distributors, Inc. and
Authorized Dealers filed as Exhibit (6)(b) to the Registration
Statement of Eaton Vance Growth Trust Post- Effective Amendment
No. 61 and incorporated herein by reference.
(c) Schedule of Dealer Discounts and Sales Charges filed as Exhibit
(6)(c) to the Registration Statement of Eaton Vance Growth Trust
Post-Effective Amendment No. 59 and incorporated herein by
reference.
(7) The Securities and Exchange Commission has granted the Registrant
an exemptive order that permits the Registrant to enter into
deferred compensation arrangements with its independent Trustees.
See in the Matter of Capital Exchange Fund, Inc., Release No. IC-
20671 (November 1, 1994).
(8)(a) Custodian Agreement with Investors Bank & Trust Company dated
October 15, 1992 filed as Exhibit (8) to Post-Effective Amendment
No. 23 and incorporated herein by reference.
(b) Amendment to Custodian Agreement with Investors Bank & Trust
Company dated October 23, 1995 filed as Exhibit (8)(b) to
Post-Effective Amendment No. 27 and incorporated herein by
reference.
(9)(a) Amended Administrative Services Agreement between Eaton Vance
Mutual Funds Trust (on behalf of each of its series) and Eaton
Vance Management dated July 31, 1995, with attached schedules
(including Amended Schedule A dated May 7, 1996) filed as Exhibit
(9)(a) to Post-Effective Amendment No. 24 and incorporated herein
by reference.
(b) Transfer Agency Agreement dated June 7, 1989 filed as Exhibit 9(d)
to 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) Opinion of Counsel filed herewith.
(11)(a) Consent of Independent Accountants for Eaton Vance Cash Management
Fund, Eaton Vance Liquid Assets Fund and Eaton Vance Money Market
Fund filed herewith.
(b) Consent of Independent Accountants for EV Classic Government
Obligations Fund filed herewith.
(c) Consent of Independent Accountants for EV Marathon Government
Obligations Fund filed herewith.
(d) Consent of Independent Accountants for EV Traditional Government
Obligations Fund filed herewith.
(e) Consent of Independent Accountants for Eaton Vance Short-Term
Treasury Fund filed herewith.
(f) Consent of Independent Accountants for Eaton Vance Tax Free
Reserves filed herewith.
(13) Not applicable
(14)(a) Vance, Sanders Profit Sharing Retirement Plan for Self-Employed
Persons with Adoption Agreement and instructions filed as Exhibit
No. 14(1) to Post-Effective Amendment #22 on Form N-1 under the
Securities Act of 1933 (File No. 2-28471) and incorporated herein
by reference.
(b) Eaton & Howard, Vance Sanders Defined Contribution Prototype Plan
and Trust with Adoption Agreements (1) Basic Profit-Sharing
Retirement Plan, (2) Basic Money Purchase Pension Plan, (3) Thrift
Plan Qualifying as Profit Sharing Plan, (4) Thrift Plan Qualifying
as Money Purchase Plan, (5) Integrated Profit Sharing Retirement
Plan, (6) Integrated Money Purchase Pension Plan filed as Exhibit
14(2) to Post-Effective Amendment No. 22 on Form N-1 under the
Securities Act of 1933 (File No. 2-28471) and incorporated herein
by reference.
(c) Individual Retirement Custodial Account (Form 5305-A) and
Investment Instruction Form filed as Exhibit 14(3) to
Post-Effective Amendment No. 22 on Form N-1 under the Securities
Act of 1933 (File No. 2-28471) and incorporated herein by
reference.
(d) Eaton & Howard, Vance Sanders Variable Pension Prototype Plan and
Trust with Adoption Agreement filed as Exhibit 14(b) to
Post-Effective Amendment No. 22 on Form N-1 under the Securities
Act of 1933 (File No. 2-28471) and incorporated herein by
reference.
(15)(a) Service Plan for Eaton Vance Government Obligations Fund (now EV
Traditional Government Obligations Fund) dated July 7, 1993 filed
as Exhibit (15)(a) to Post-Effective Amendment No. 23 and
incorporated herein by reference.
(1) Amendment to Service Plan for Eaton Vance Mutual Funds Trust on
behalf of EV Traditional Government Obligations Fund adopted June
24, 1996 filed herewith.
(b) Distribution Plan pursuant to Rule 12b-1 under the Investment
Company Act of 1940 for Eaton Vance Short-Term Treasury Fund dated
February 4, 1991 as Amended and Restated February 25, 1991 filed
as Exhibit (15)(b) to Post-Effective Amendment No. 23 and
incorporated herein by reference.
(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 herewith.
(c) Amended Distribution Plan for EV Classic Government Obligations
Fund pursuant to Rule 12b-1 under the Investment Company Act of
1940 dated January 27, 1995 filed as Exhibit (15)(c) to
Post-Effective Amendment No. 22 and incorporated herein by
reference.
(1) Amendment to Amended Distribution Plan for Eaton Vance Mutual
Funds Trust on behalf of EV Classic Government Obligations Fund
adopted June 24, 1996 filed herewith.
(d) Distribution Plan for EV Marathon Government Obligations Fund
pursuant to Rule 12b-1 under the Investment Company Act of 1940
dated October 28, 1993 filed as Exhibit (15) (d) to Post-Effective
Amendment No. 23 and incorporated herein by reference.
(1) Amendment to Distribution Plan for Eaton Vance Mutual Funds Trust
on behalf of EV Marathon Government Obligations Fund adopted June
24, 1996 filed herewith.
(e) Distribution Plan for EV Marathon High Income Fund pursuant to
Rule 12b-1 under the Investment Company Act of 1940 dated June 19,
1995 filed as Exhibit (15)(e) to Post- Effective Amendment No. 25
and incorporated herein by reference.
(f) Distribution Plan for EV Classic High Income Fund pursuant to Rule
12b-1 under the Investment Company Act of 1940 dated June 19, 1995
filed as Exhibit (15)(f) to Post- Effective Amendment No. 25 and
incorporated herein by reference.
(g) Distribution Plan for EV Classic Strategic Income Fund pursuant to
Rule 12b-1 under the Investment Company Act of 1940 dated June 19,
1995 filed as Exhibit (15)(g) to Post- Effective Amendment No. 24
and incorporated herein by reference.
(h) Distribution Plan for EV Marathon Strategic Income Fund pursuant
to Rule 12b-1 under the Investment Company Act of 1940 dated June
19, 1995 filed as Exhibit (15)(h) to Post-Effective Amendment No.
24 and incorporated herein by reference.
(i) Distribution Plan for Eaton Vance Liquid Assets Fund pursuant to
Rule 12b-1 under the Investment Company Act of 1940 dated June 19,
1995 filed as Exhibit (15)(i) to Post- Effective Amendment No. 25
and incorporated herein by reference.
(1) Amendment to Distribution Plan for Eaton Vance Mutual Funds Trust
on behalf of Eaton Vance Liquid Assets Fund adopted June 24, 1996
filed herewith.
(j) Distribution Plan for Eaton Vance Money Market Fund pursuant to
Rule 12b-1 under the Investment Company Act of 1940 dated June 19,
1995 filed as Exhibit (15)(j) to Post- Effective Amendment No. 25
and incorporated herein by reference.
(1) Amendment to Distribution Plan for Eaton Vance Mutual Funds Trust
on behalf of Eaton Vance Money Market Fund adopted June 24, 1996
filed herewith.
(k) Distribution Plan for EV ---Marathon ---Tax-Managed Growth Fund
pursuant to Rule 12b-1 under the Investment Company Act of 1940
dated March 20, 1996 filed as Exhibit (15)(k) to Post-Effective
Amendment No. 28 and incorporated herein by reference.
(l) Service Plan for EV Traditional Tax-Managed Growth Fund dated
March 20, 1996 filed as Exhibit (15)(l) to Post-Effective
Amendment No. 28 and incorporated herein by reference.
(m) Distribution Plan for EV Classic Tax-Managed Growth Fund pursuant
to Rule 12b-1 under the Investment Company Act of 1940 dated
August 1, 1996 filed as Exhibit (15)(m) to Post-Effective
Amendment No. 30 and incorporated herein by reference.
(16) Schedules for Computation of Performance Quotations filed
herewith.
(17)(a) Power of Attorney for Eaton Vance Mutual Funds Trust dated July
11, 1995 filed as Exhibit (17)(a) to Post-Effective Amendment No.
23 and incorporated herein by reference.
(b) Power of Attorney for Government Obligations Portfolio dated June
19, 1995 filed as Exhibit (17)(b) to Post-Effective Amendment No.
23 and incorporated herein by reference.
(c) Power of Attorney for High Income Portfolio dated June 19, 1995
filed as Exhibit (17) (c) to Post-Effective Amendment No. 23 and
incorporated herein by reference.
(d) Power of Attorney for Strategic Income Portfolio dated August 7,
1995 filed as Exhibit (17)(d) to Post-Effective Amendment No. 24
and incorporated herein by reference.
(e) Power of Attorney for Cash Management Portfolio dated August 7,
1995 filed as Exhibit (17)(e) to Post-Effective Amendment No. 25
and incorporated herein by reference.
(f) Power of Attorney for Tax-Managed Growth Portfolio dated October
23, 1995 filed as Exhibit (17)(f) to Post-Effective Amendment No.
26 and incorporated herein by reference.
(18) Multiple Class Plan for Institutional Shares dated November 18,
1996 filed as Exhibit (18) to Post-Effective Amendment No. 31 and
incorporated herein by reference.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Not applicable
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
(1) (2)
TITLE OF CLASS NUMBER OF RECORD HOLDERS
Shares of beneficial interest without par value as of March 31, 1997
Eaton Vance Short-Term Treasury Fund 64
EV Classic Government Obligations Fund 3,424
EV Marathon Government Obligations Fund 3,333
EV Traditional Government Obligations Fund 9,108
EV Classic High Income Fund 409
EV Marathon High Income Fund 16,194
EV Classic Strategic Income Fund 23
EV Marathon Strategic Income Fund 5,484
EV Classic Tax-Managed Growth Fund 3,736
EV Marathon Tax-Managed Growth Fund 6,424
EV Traditional Tax-Managed Growth Fund 2,602
Eaton Vance Cash Management Fund 2,166
Eaton Vance Liquid Assets Fund 521
Eaton Vance Money Market Fund 878
Eaton Vance Tax Free Reserves 177
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 Adiviser" in the
Statements of Additional Information which information is incorporated herein
by reference.
ITEM 29. PRINCIPAL UNDERWRITERS
(A) Registrant's principal underwriter, Eaton Vance Distributors, Inc., a
wholly-owned subsidiary of Eaton Vance Management, is the principal
underwriter for each of the investment companies named below:
EV Classic Florida Limited Maturity Municipals Fund
EV Classic Government Obligations Fund
EV Classic Greater China Growth Fund
EV Classic Growth Fund
EV Classic High Income Fund
EV Classic Information Age Fund
EV Classic Investors Fund
EV Classic Massachusetts Limited Maturity Municipals Fund
EV Classic National Limited Maturity Municipals Fund
EV Classic National Municipals Fund
EV Classic New York Limited Maturity Municipals Fund
EV Classic Pennsylvania Limited Maturity Municipals Fund
EV Classic Senior Floating-Rate Fund
EV Classic Strategic Income Fund
EV Classic Special Equities Fund
EV Classic Stock Fund
EV Classic Tax-Managed Growth Fund
EV Classic Total Return Fund
EV Marathon Alabama Municipals Fund
EV Marathon Arizona Municipals Fund
EV Marathon Arkansas Municipals Fund
EV Marathon Asian Small Companies Fund
EV Marathon California Limited Maturity Municipals Fund
EV Marathon California Municipals Fund
EV Marathon Colorado Municipals Fund
EV Marathon Connecticut Limited Maturity Municipals Fund
EV Marathon Connecticut Municipals Fund
EV Marathon Emerging Markets Fund
EV Marathon Florida Insured Municipals Fund
EV Marathon Florida Limited Maturity Municipals Fund
EV Marathon Florida Municipals Fund
EV Marathon Georgia Municipals Fund
EV Marathon Government Obligations Fund
EV Marathon Greater China Growth Fund
EV Marathon Greater India Fund
EV Marathon Growth Fund
EV Marathon Hawaii Municipals Fund
EV Marathon High Income Fund
EV Marathon High Yield Municipals Fund
EV Marathon Information Age Fund
EV Marathon Investors Fund
EV Marathon Kansas Municipals Fund
EV Marathon Kentucky Municipals Fund
EV Marathon Louisiana Municipals Fund
EV Marathon Maryland Municipals Fund
EV Marathon Massachusetts Limited Maturity Municipals Fund
EV Marathon Massachusetts Municipals Fund
EV Marathon Michigan Limited Maturity Municipals Fund
EV Marathon Michigan Municipals Fund
EV Marathon Minnesota Municipals Fund
EV Marathon Mississippi Municipals Fund
EV Marathon Missouri Municipals Fund
EV Marathon National Limited Maturity Municipals Fund
EV Marathon National Municipals Fund
EV Marathon New Jersey Limited Maturity Municipals Fund
EV Marathon New Jersey Municipals Fund
EV Marathon New York Limited Maturity Municipals Fund
EV Marathon New York Municipals Fund
EV Marathon North Carolina Municipals Fund
EV Marathon Ohio Limited Maturity Municipals Fund
EV Marathon Ohio Municipals Fund
EV Marathon Oregon Municipals Fund
EV Marathon Pennsylvania Limited Maturity Municipals Fund
EV Marathon Pennsylvania Municipals Fund
EV Marathon Rhode Island Municipals Fund
EV Marathon Strategic Income Fund
EV Marathon South Carolina Municipals Fund
EV Marathon Special Equities Fund
EV Marathon Stock Fund
EV Marathon Tax-Managed Growth Fund
EV Marathon Tennessee Municipals Fund
EV Marathon Texas Municipals Fund
EV Marathon Total Return Fund
EV Marathon Virginia Municipals Fund
EV Marathon West Virginia Municipals Fund
EV Marathon Worldwide Developing Resources Fund
EV Marathon Worldwide Health Sciences Fund
EV Traditional Alabama Municipals Fund
EV Traditional Arizona Municipals Fund
EV Traditional Arkansas Municipals Fund
EV Traditional Asian Small Companies Fund
EV Traditional California Limited Maturity Municipals Fund
EV Traditional California Municipals Fund
EV Traditional Colorado Municipals Fund
EV Traditional Connecticut Limited Maturity Municipals Fund
EV Traditional Connecticut Municipals Fund
EV Traditional Emerging Growth Fund
EV Traditional Emerging Markets Fund
EV Traditional Florida Insured Municipals Fund
EV Traditional Florida Limited Maturity Municipals Fund
EV Traditional Florida Municipals Fund
EV Traditional Georgia Municipals Fund
EV Traditional Government Obligations Fund
EV Traditional Greater China Growth Fund
EV Traditional Greater India Fund
EV Traditional Growth Fund
EV Traditional Hawaii Municipals Fund
EV Traditional High Yield Municipals Fund
Eaton Vance Income Fund of Boston
EV Traditional Information Age Fund
EV Traditional Investors Fund
EV Traditional Kansas Municipals Fund
EV Traditional Kentucky Municipals Fund
EV Traditional Louisiana Municipals Fund
EV Traditional Maryland Municipals Fund
EV Traditional Massachusetts Municipals Fund
EV Traditional Michigan Limited Maturity Municipals Fund
EV Traditional Michigan Municipals Fund
EV Traditional Minnesota Municipals Fund
EV Traditional Mississippi Municipals Fund
EV Traditional Missouri Municipals Fund
Eaton Vance Municipal Bond Fund L.P.
EV Traditional National Limited Maturity Municipals Fund
EV Traditional National Municipals Fund
EV Traditional New Jersey Limited Maturity Municipals Fund
EV Traditional New Jersey Municipals Fund
EV Traditional New York Limited Maturity Municipals Fund
EV Traditional New York Municipals Fund
EV Traditional North Carolina Municipals Fund
EV Traditional Ohio Limited Maturity Municipals Fund
EV Traditional Ohio Municipals Fund
EV Traditional Oregon Municipals Fund
EV Traditional Pennsylvania Municipals Fund
EV Traditional Rhode Island Municipals Fund
EV Traditional South Carolina Municipals Fund
EV Traditional Special Equities Fund
EV Traditional Stock Fund
EV Traditional Tax-Managed Growth Fund
EV Traditional Tennessee Municipals Fund
EV Traditional Texas Municipals Fund
EV Traditional Total Return Fund
EV Traditional Virginia Municipals Fund
EV Traditional West Virginia Municipals Fund
EV Traditional Worldwide Developing Resources Fund
EV Traditional Worldwide Health Sciences Fund, Inc.
Eaton Vance Cash Management Fund
Eaton Vance Liquid Assets Fund
Eaton Vance Money Market Fund
Eaton Vance Prime Rate Reserves
Eaton Vance Short-Term Treasury Fund
Eaton Vance Tax Free Reserves
Massachusetts Municipal Bond Portfolio
(B)
<TABLE>
<CAPTION>
(1) (2) (3)
NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICE
BUSINESS ADDRESS* WITH PRINCIPAL UNDERWRITER WITH REGISTRANT
------------------ -------------------------- --------------------
<S> <C> <C>
James B. Hawkes Vice President and Director Vice President and Trustee
William M. Steul Vice President and Director None
Wharton P. Whitaker President and Director None
Chris Berg Vice President None
Kate Bradshaw Vice President None
David B. Carle Vice President None
James S. Comforti Vice President None
Raymond Cox Vice President None
Mark P. Doman Vice President None
Alan R. Dynner 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 Secretary
George D. Owen, II Vice President None
F. Anthony Robinson Vice President None
Jay S. Rosoff Vice President None
Benjamin A. Rowland, Jr. Vice President, None
Treasurer and Director
John P. Rynne Vice President None
Kevin Schrader Vice President None
George V.F. Schwab, Jr. Vice President None
Cornelius J. Sullivan Vice President None
David M. Thill Vice President None
Chris Volf Vice President None
Sue Wilder Vice President None
</TABLE>
- ----------
*Address is 24 Federal Street, Boston, MA 02110
(C) Not applicable
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
All applicable accounts, books and documents required to be maintained by
the Registrant by Section 31(a) of the Investment Company Act of 1940 and the
Rules promulgated thereunder are in the possession and custody of the
Registrant's custodian, Investors Bank & Trust Company, 89 South Street,
Boston, MA 02111 and its transfer agent, First Data Investor Services Group,
4400 Computer Drive, Westborough, MA 01581, with the exception of certain
corporate documents and portfolio trading documents which are in the
possession and custody of Eaton Vance Management, 24 Federal Street, Boston,
MA 02110. Certain corporate documents of High Income Portfolio (the "HI
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 HI Portfolio
and the Registrant's accounting records are held by IBT Fund Services (Canada)
Inc., 1 First Canadian Place, Kingstreet West, Suite 2800, P.O. Box 231,
Toronto, Ontario, Canada M5X 1C8. Registrant is informed that all applicable
accounts, books and documents required to be maintained by registered
investment advisers are in the custody and possession of Eaton Vance
Management.
ITEM 31. MANAGEMENT SERVICES
Not applicable
ITEM 32. UNDERTAKINGS
The Registrant undertakes to furnish to each person to whom a prospectus
is delivered a copy of the latest annual report to shareholders, upon request
and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, and the
Investment Company Act of 1940, the Registrant certifies that it meets all
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 18th day of April, 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.
SIGNATURE TITLE DATE
--------- ----- ----
President, Principal
Executive Officer and
/s/ M. DOZIER GARDNER Trustee April 18, 1997
- --------------------------------
M. DOZIER GARDNER
Treasurer and Principal
Financial and Accounting
/s/ JAMES L. O'CONNOR Officer April 18, 1997
- --------------------------------
JAMES L. O'CONNOR
/s/ JAMES B. HAWKES Vice President, Trustee April 18, 1997
- --------------------------------
JAMES B. HAWKES
DONALD R. DWIGHT* Trustee April 18, 1997
- --------------------------------
DONALD R. DWIGHT
SAMUEL L. HAYES, III* Trustee April 18, 1997
- --------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee April 18, 1997
- --------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee April 18, 1997
- --------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee April 18, 1997
- --------------------------------
JACK L. TREYNOR
*By: /s/ M. DOZIER GARDNER
----------------------------
M. DOZIER GARDNER
As Attorney-in-fact
<PAGE>
SIGNATURES
Cash Management Portfolio has duly caused this Amendment to the
Registration Statement on Form N-1A of Eaton Vance Mutual Funds Trust (File
No. 2-90946) to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Boston, and the Commonwealth of Massachusetts, on
the 18th day of April, 1997.
CASH MANAGEMENT PORTFOLIO
By: /s/ M. DOZIER GARDNER
-------------------------------------
- -----
M. DOZIER GARDNER, President
This Amendment to the Registration Statement on Form N-1A of Eaton Vance
Mutual Funds Trust (File No. 2-90946) has been signed below by the following
persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
Trustee, President and
Principal Executive
/s/ M. DOZIER GARDNER Officer April 18, 1997
- --------------------------------
M. DOZIER GARDNER
Treasurer and Principal
Financial and Accounting
/s/ JAMES L. O'CONNOR Officer April 18, 1997
- --------------------------------
JAMES L. O'CONNOR
/s/ JAMES B. HAWKES Trustee April 18, 1997
- --------------------------------
JAMES B. HAWKES
DONALD R. DWIGHT* Trustee April 18, 1997
- --------------------------------
DONALD R. DWIGHT
SAMUEL L. HAYES, III* Trustee April 18, 1997
- --------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee April 18, 1997
- --------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee April 18, 1997
- --------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee April 18, 1997
- --------------------------------
JACK L. TREYNOR
*By: /s/ M. DOZIER GARDNER
----------------------------
M. DOZIER GARDNER
As Attorney-in-fact
<PAGE>
SIGNATURES
Government Obligations Portfolio has duly caused this Amendment to the
Registration Statement on Form N-1A of Eaton Vance Mutual Funds Trust (File
No. 2-90946) to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Boston, and the Commonwealth of Massachusetts, on
the 18th day of April, 1997.
GOVERNMENT OBLIGATIONS PORTFOLIO
By: /s/ M. DOZIER GARDNER
-------------------------------------
M. DOZIER GARDNER, President
This Amendment to the Registration Statement on Form N-1A of Eaton Vance
Mutual Funds Trust (File No. 2-90946) has been signed below by the following
persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
Trustee, President and
Principal Executive
/s/ M. DOZIER GARDNER Officer April 18, 1997
- --------------------------------
M. DOZIER GARDNER
Treasurer and Principal
Financial and Accounting
/s/ JAMES L. O'CONNOR Officer April 18, 1997
- --------------------------------
JAMES L. O'CONNOR
/s/ JAMES B. HAWKES Trustee April 18, 1997
- --------------------------------
JAMES B. HAWKES
DONALD R. DWIGHT* Trustee April 18, 1997
- --------------------------------
DONALD R. DWIGHT
SAMUEL L. HAYES, III* Trustee April 18, 1997
- --------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee April 18, 1997
- --------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee April 18, 1997
- --------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee April 18, 1997
- --------------------------------
JACK L. TREYNOR
*By: /s/ M. DOZIER GARDNER
----------------------------
M. DOZIER GARDNER
As Attorney-in-fact
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
PAGE IN SEQUENTIAL
EXHIBIT NO. DESCRIPTION NUMBERING SYSTEM
- ----------- ----------- ----------------
<S> <C> <C>
(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).
(6)(a)(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).
(6)(a)(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).
(6)(a)(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.
(6)(a)(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.
(6)(a)(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.
(6)(a)(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.
(10) Opinion of Counsel.
(11)(a) Consent of Independent Accountants for Eaton Vance Cash Management Fund, Eaton
Vance Liquid Assets Fund and Eaton Vance Money Market Fund.
(11)(b) Consent of Independent Accountants for EV Classic Government Obligations Fund.
(11)(c) Consent of Independent Accountants for EV Marathon Government Obligations Fund.
(11)(d) Consent of Independent Accountants for EV Traditional Government Obligations Fund.
(11)(e) Consent of Independent Accountants for Eaton Vance Short-Term Treasury Fund.
(11)(f) Consent of Independent Accountants for Eaton Vance Tax Free Reserves.
(15)(a)(1) Amendment to Service Plan for Eaton Vance Mutual Funds Trust on behalf of EV
Traditional Government Obligations Fund adopted June 24, 1996.
(15)(b)(1) Amendment to Distribution Plan for Eaton Vance Mutual Funds Trust on behalf of
Eaton Vance Short-Term Treasury Fund adopted June 24, 1996.
(15)(c)(1) Amendment to Amended Distribution Plan for Eaton Vance Mutual Funds Trust on behalf
of EV Classic Government Obligations Fund adopted June 24, 1996.
(15)(d)(1) Amendment to Distribution Plan for Eaton Vance Mutual Funds Trust on behalf of EV
Marathon Government Obligations Fund adopted June 24, 1996.
(15)(i)(1) Amendment to Distribution Plan for Eaton Vance Mutual Funds Trust on behalf of
Eaton Vance Liquid Assets Fund adopted June 24, 1996.
(15)(j)(1) Amendment to Distribution Plan for Eaton Vance Mutual Funds Trust on behalf of
Eaton Vance Money Market Fund adopted June 24, 1996.
(16) Schedules for Calculations of Performance Quotations.
</TABLE>
<PAGE>
EXHIBIT (6)(a)(1)
EATON VANCE MUTUAL FUNDS TRUST
DISTRIBUTION AGREEMENT
(CLASSIC FUNDS)
AGREEMENT effective November 1, 1996 between EATON VANCE MUTUAL FUNDS
TRUST, a Massachusetts business trust having its principal place of business in
Boston in the Commonwealth of Massachusetts, hereinafter called the "Trust," on
behalf of each of its series listed on Schedule A (the "Funds"), and EATON VANCE
DISTRIBUTORS, INC., a Massachusetts corporation having its principal place of
business in said Boston and formerly named EV Distributors, Inc., hereinafter
sometimes called the "Principal Underwriter."
IN CONSIDERATION of the mutual promises and undertakings herein
contained, the parties hereto agree:
1. The Trust grants to the Principal Underwriter the right to purchase
shares of the Fund upon the terms hereinbelow set forth during the term of this
Agreement. While this Agreement is in force, the Principal Underwriter agrees to
use its best efforts to find purchasers for shares of the Fund.
The Principal Underwriter shall have the right to buy from the Fund the
shares needed, but not more than the shares needed (except for clerical errors
and errors of transmission) to fill unconditional orders for shares of the Fund
placed with the Principal Underwriter by financial service firms or investors as
set forth in the current Prospectus relating to shares of the Fund. The price
which the Principal Underwriter shall pay for the shares so purchased shall be
equal to the price paid by investors upon purchasing such shares. The Principal
Underwriter shall notify Investors Bank & Trust Company, Custodian of the Fund
("IBT"), and First Data Investor Services Group, Transfer Agent of the Fund
("First Data"), or a successor transfer agent, at the end of each business day,
or as soon thereafter as the orders placed with it have been compiled, of the
number of shares and the prices thereof which the Principal Underwriter is to
purchase as principal for resale. The Principal Underwriter shall take down and
pay for shares ordered from the Fund on or before the eleventh business day
(excluding Saturdays) after the shares have been so ordered.
The right granted to the Principal Underwriter to buy shares from the
Fund shall be exclusive, except that said exclusive right shall not apply to
shares issued in connection with the merger or consolidation of any other
investment company or personal holding company with the Fund or the acquisition
by purchase or otherwise of all (or substantially all) the assets or the
outstanding shares of any such company, by the Fund; nor shall it apply to
shares, if any, issued by the Fund in distribution of income or realized capital
gains of the Fund payable in shares or in cash at the option of the shareholder.
2. The shares may be resold by the Principal Underwriter to or through
financial service firms having agreements with the Principal Underwriter, and to
investors, upon the following terms and conditions.
The public offering price, i.e., the price per share at which the
Principal Underwriter or financial service firm purchasing shares from the
Principal Underwriter may sell shares to the public, shall be equal to the net
asset value at which the Principal Underwriter is to purchase the shares.
<PAGE>
The net asset value of shares of the Fund shall be determined by the
Trust or IBT, as the agent of the Fund, as of the close of regular trading on
the New York Stock Exchange on each business day on which said Exchange is open,
or as of such other time on each such business day as may be determined by the
Trustees of the Trust, in accordance with the methodology and procedures for
calculating such net asset value authorized by the Trustees. The Trust may also
cause the net asset value to be determined in substantially the same manner or
estimated in such manner and as of such other time or times as may from time to
time be agreed upon by the Trust and Principal Underwriter. The Trust will
notify the Principal Underwriter each time the net asset value of the Fund's
shares is determined and when such value is so determined it shall be applicable
to transactions as set forth in the current Prospectus and Statement of
Additional Information (hereafter the "Prospectus") relating to the Fund's
shares.
No shares of the Fund shall be sold by the Fund during any period when
the determination of net asset value is suspended pursuant to the Declaration of
Trust, except to the Principal Underwriter, in the manner and upon the terms
above set forth to cover contracts of sale made by the Principal Underwriter
with its customers prior to any such suspension, and except as provided in the
last paragraph of paragraph 1 hereof. The Trust shall also have the right to
suspend the sale of the Fund's shares if in the judgment of the Trust conditions
obtaining at any time render such action advisable. The Principal Underwriter
shall have the right to suspend sales at any time, to refuse to accept or
confirm any order from an investor or financial service firm, or to accept or
confirm any such order in part only, if in the judgment of the Principal
Underwriter such action is in the best interests of the Fund.
3. The Trust agrees that it will, from time to time, but subject to the
necessary approval of the Fund's shareholders, take such steps as may be
necessary to register the Fund's shares under the federal Securities Act of
1933, as amended from time to time (the "1933 Act"), to the end that there will
be available for sale such number of shares as the Principal Underwriter may
reasonably be expected to sell. The Trust agrees to indemnify and hold harmless
the Principal Underwriter and each person, if any, who controls the Principal
Underwriter within the meaning of Section 15 of the 1933 Act against any loss,
liability, claim, damages or expense (including the reasonable cost of
investigating or defending any alleged loss, liability, claim, damages or
expense and reasonable counsel fees incurred in connection therewith), arising
by reason of any person acquiring any shares of the Fund, which may be based
upon the 1933 Act or on any other statute or at common law, on the ground that
the Registration Statement or Prospectus, as from time to time amended and
supplemented, includes an untrue statement of a material fact or omits to state
a material fact required to be stated therein or necessary in order to make the
statements therein not misleading, unless such statement or omission was made in
reliance upon, and in conformity with, information furnished in writing to the
Trust in connection therewith by or on behalf of the Principal Underwriter;
provided, however, that in no case (i) is the indemnity of the Trust in favor of
the Principal Underwriter and any such controlling person to be deemed to
protect such Principal Underwriter or any such controlling person against any
liability to the Trust or the Fund or its security holders to which such
Principal Underwriter or any such controlling person would otherwise be subject
by reason of willful misfeasance, bad faith, or gross negligence in the
performance of its duties or by reason of its reckless disregard of its
obligations and duties under this Agreement, or (ii) is the Trust or the Fund to
be liable under its indemnity agreement contained in this paragraph with respect
to any claim made against the Principal Underwriter or any such controlling
person unless the Principal Underwriter or any such controlling person, as the
case may be, shall have notified the Trust in writing within a reasonable time
after the summons or other first legal process giving information of the nature
of the claim shall have been served upon the Principal Underwriter or such
controlling person (or after such Principal Underwriter or such controlling
person shall have received notice of such service on any designated agent), but
failure to notify the Trust of any such claim shall not relieve it from any
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<PAGE>
liability which the Fund may have to the person against whom such action is
brought otherwise than on account of its indemnity agreement contained in this
paragraph. The Trust shall be entitled to participate, at the expense of the
Fund, in the defense, or, if the Trust so elects, to assume the defense of any
suit brought to enforce any such liability, but if the Trust elects to assume
the defense, such defense shall be conducted by counsel chosen by it and
satisfactory to the Principal Underwriter or controlling person or persons,
defendant or defendants in the suit. In the event the Trust elects to assume the
defense of any such suit and retains such counsel, the Principal Underwriter or
controlling person or persons, defendant or defendants in the suit, shall bear
the fees and expenses of any additional counsel retained by them, but, in case
the Trust does not elect to assume the defense of any such suit, the Fund shall
reimburse the Principal Underwriter or controlling person or persons, defendant
or defendants in the suit, for the reasonable fees and expenses of any counsel
retained by them. The Trust agrees promptly to notify the Principal Underwriter
of the commencement of any litigation or proceedings against it or any of its
officers or Trustees in connection with the issuance or sale of any of the
Fund's shares.
4. The Principal Underwriter covenants and agrees that, in selling the
shares of the Fund, it will use its best efforts in all respects duly to conform
with the requirements of all state and federal laws relating to the sale of such
shares, and will indemnify and hold harmless the Trust and each of its Trustees
and officers and each person, if any, who controls the Trust within the meaning
of Section 15 of the 1933 Act, against any loss, liability, damages, claim or
expense (including the reasonable cost of investigating or defending any alleged
loss, liability, damages, claim or expense and reasonable counsel fees incurred
in connection therewith), arising by reason of any person acquiring any shares
of the Fund, which may be based upon the 1933 Act or any other statute or at
common law, on account of any wrongful act of the Principal Underwriter or any
of its employees (including any failure to conform with any requirement of any
state or federal law relating to the sale of such shares) or on the ground that
the registration statement or Prospectus, as from time to time amended and
supplemented, includes an untrue statement of a material fact or omits to state
a material fact required to be stated therein or necessary in order to make the
statements therein not misleading, insofar as any such statement or omission was
made in reliance upon, and in conformity with information furnished in writing
to the Fund in connection therewith by or on behalf of the Principal
Underwriter, provided, however, that in no case (i) is the indemnity of the
Principal Underwriter in favor of any person indemnified to be deemed to protect
the Fund or any such person against any liability to which the Fund or any such
person would otherwise be subject by reason of willful misfeasance, bad faith,
or gross negligence in the performance of its or his duties or by reason of its
or his reckless disregard of its obligations and duties under this Agreement, or
(ii) is the Principal Underwriter to be liable under its indemnity agreement
contained in this paragraph with respect to any claim made against the Fund or
any person indemnified unless the Trust or such person, as the case may be,
shall have notified the Principal Underwriter in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon the Trust, the Fund or upon such
person (or after the Trust or such person shall have received notice of such
service on any designated agent), but failure to notify the Principal
Underwriter of any such claim shall not relieve it from any liability which it
may have to the Fund or any person against whom such action is brought otherwise
than on account of its indemnity agreement contained in this paragraph. The
Principal Underwriter shall be entitled to participate, at its own expense, in
the defense, or, if it so elects, to assume the defense of any suit brought to
enforce any such liability, but if the Principal Underwriter elects to assume
the defense, such defense shall be conducted by counsel chosen by it and
satisfactory to the Trust, or to its officers or Trustees, or to any controlling
person or persons, defendant or defendants in the suit. In the event that the
Principal Underwriter elects to assume the defense of any such suit and retains
such counsel, the Fund or such officers or Trustees or controlling person or
persons, defendant or defendants in the suit, shall bear the fees and expenses
of any additional counsel retained by them or the Trust, but, in case the
Principal Underwriter does not elect to assume the defense of any such suit, it
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<PAGE>
shall reimburse the Fund, any such officers and Trustees or controlling person
or persons, defendant or defendants in such suit, for the reasonable fees and
expenses of any counsel retained by them or the Trust. The Principal Underwriter
agrees promptly to notify the Trust of the commencement of any litigation or
proceedings against it in connection with the issue and sale of any of the
Fund's shares.
Neither the Principal Underwriter nor any financial service firm nor
any other person is authorized by the Trust to give any information or to make
any representations, other than those contained in the Registration Statement or
Prospectus filed with the Securities and Exchange Commission (the "Commission")
under the 1933 Act, (as said Registration Statement and Prospectus may be
amended or supplemented from time to time), covering the shares of the Fund.
Neither the Principal Underwriter nor any financial service firm nor any other
person is authorized to act as agent for the Trust or the Fund in connection
with the offering or sale of shares of the Fund to the public or otherwise. All
such sales made by the Principal Underwriter shall be made by it as principal,
for its own account. The Principal Underwriter may, however, act as agent in
connection with the repurchase of shares as provided in paragraph 6 below, or in
connection with "exchanges" between investment companies for which the Principal
Underwriter acts as Principal Underwriter or for which an affiliate of the
Principal Underwriter acts as investment adviser.
5(a). The Fund will pay, or cause to be paid -
(i) all the costs and expenses of the Fund, including fees and
disbursements of its counsel, in connection with the preparation and filing of
any required Registration Statement and/or Prospectus under the 1933 Act, or the
Investment Company Act of 1940, as amended from time to time (the "1940 Act"),
covering its shares and all amendments and supplements thereto, and preparing
and mailing periodic reports to shareholders (including the expense of setting
up in type any such Registration Statement, Prospectus or periodic report);
(ii) the cost of preparing temporary and permanent share
certificates (if any) for shares of the Fund;
(iii) The cost and expenses of delivering to the Principal
Underwriter at its office in Boston, Massachusetts, all shares of the Fund
purchased by it as principal hereunder; and
(iv) all the federal and state (if any) issue and/or transfer
taxes payable upon the issue by or (in the case of treasury shares) transfer
from the Fund to the Principal Underwriter of any and all shares of the Fund
purchased by the Principal Underwriter hereunder.
(b) The Principal Underwriter agrees that, after the Prospectus (other
than to existing shareholders of the Fund) and periodic reports have been set up
in type, it will bear the expense of printing and distributing any copies
thereof which are to be used in connection with the offering of shares of the
Fund to financial service firms or investors. The Principal Underwriter further
agrees that it will bear the expenses of preparing, printing and distributing
any other literature used by the Principal Underwriter or furnished by it for
use by financial service firms in connection with the offering of the shares of
the Fund for sale to the public and any expenses of advertising in connection
with such offering. The Fund agrees to pay the expenses of registration and
maintaining registration of its shares for sale under federal and state
securities laws, and, if necessary or advisable in connection therewith, of
qualifying the Trust or the Fund as a dealer or broker, in such states as shall
be selected by the Principal Underwriter and the fees payable to each such state
for continuing the qualification therein until the Principal Underwriter
notifies the Trust that it does not wish such qualification continued.
-4-
<PAGE>
(c) In addition, the Trust agrees, in accordance with the Fund's
Distribution Plan (the "Plan"), adopted pursuant to Rule 12b-1 under the 1940
Act with respect to shares, to make certain payments as follows. The Principal
Underwriter shall be entitled to be paid by the Fund a sales commission equal to
an amount not exceeding 6.25% of the price received by the Fund for each sale of
shares (excluding reinvestment of dividends and distributions), such payment to
be made in the manner set forth in this paragraph 5. The Principal Underwriter
shall also be entitled to be paid by the Fund a separate distribution fee
(calculated in accordance with paragraph 5(d)), such payment to be made in the
manner set forth and subject to the terms of this paragraph 5.
(d) The sales commissions and distribution fees referred to in
paragraph 5(c) shall be accrued and paid by the Fund in the following manner.
The Fund shall accrue daily an amount calculated at the rate of .75% per annum
of the daily net assets of the Fund, which net assets shall be computed as
described in paragraph 2. The daily amounts so accrued throughout the month
shall be paid to the Principal Underwriter on the last day of each month. The
amount of such daily accrual, as so calculated, shall first be applied and
charged to all unpaid sales commissions, and the balance, if any, shall then be
applied and charged to all unpaid distribution fees. No amount shall be accrued
with respect to any day on which there exist no outstanding uncovered
distribution charges of the Principal Underwriter. The amount of such uncovered
distribution charges shall be calculated daily. For purposes of this
calculation, distribution charges of the Principal Underwriter shall include (a)
the aggregate of all sales commissions which the Principal Underwriter (and
Prior Principal Underwriter) has been paid pursuant to this paragraph (d) (and
pursuant to paragraph (d) of the Prior Agreements) plus all sales commissions
which it is entitled to be paid pursuant to paragraph 5(c) (and pursuant to
paragraph 5(c) of the Prior Agreements) since inception of the Prior Agreements
through and including the day next preceding the date of calculation, and (b) an
amount equal to the aggregate of all distribution fees referred to below which
the Principal Underwriter (and Prior Principal Underwriter) has been paid
pursuant to this paragraph (d) (and pursuant to paragraph (d) of the Prior
Agreements) plus all such fees which it is entitled to be paid pursuant to
paragraph 5(c) (and pursuant to paragraph 5(c) of the Prior Agreements) since
inception of the Prior Agreements through and including the day next preceding
the date of calculation. From this sum (distribution charges) there shall be
subtracted (i) the aggregate amount paid or payable to the Principal Underwriter
(and Prior Principal Underwriter) pursuant to this paragraph (d) (and pursuant
to paragraph (d) of the Prior Agreements) since inception of the Prior
Agreements through and including the day next preceding the date of calculation
and (ii) the aggregate amount of all contingent deferred sales charges paid or
payable to the Principal Underwriter (and Prior Principal Underwriter) since
inception of the Prior Agreements through and including the day next preceding
the date of calculation. If the result of such subtraction is a positive amount,
a distribution fee [computed at the rate of 1% per annum above the prime rate
(being the base rate on corporate loans posted by at least 75% of the nation's
30 largest banks) then being reported in the Eastern Edition of The Wall Street
Journal or if such prime rate is not so reported such other rate as may be
designated from time to time by vote or other action of a majority of (i) those
Trustees of the Trust who are not "interested persons" of the Trust (as defined
in the 1940 Act) and have no direct or indirect financial interest in the
operation of the Plan or any agreements related to it (the "Rule 12b-1
Trustees") and (ii) all of the Trustees then in office] shall be computed on
such amount and added to such amount, with the resulting sum constituting the
amount of outstanding uncovered distribution charges of the Principal
Underwriter with respect to such day for all purposes of this Agreement. If the
result of such subtraction is a negative amount, there shall exist no
outstanding uncovered distribution charges of the Principal Underwriter with
respect to such day and no amount shall be accrued or paid to the Principal
Underwriter with respect to such day. The aggregate amounts accrued and paid
pursuant to this paragraph (d) during any fiscal year of the Fund shall not
exceed .75% of the average daily net assets of the Fund for such year.
-5-
<PAGE>
(e) The Principal Underwriter shall be entitled to receive all
contingent deferred sales charges paid or payable with respect to any day on
which there exist outstanding uncovered distribution charges of the Principal
Underwriter. The Fund shall be entitled to receive all remaining contingent
deferred sales charges paid or payable by shareholders with respect to any day
on which there exist no outstanding uncovered distribution charges of the
Principal Underwriter, provided that no such sales charge which would cause the
Fund to exceed the maximum applicable cap imposed thereon by paragraph (2) of
subsection (d) of Section 26 of Article III of the Rules of Fair Practice of the
National Association of Securities Dealers, Inc. shall be imposed.
(f) The persons authorized to direct the disposition of monies paid or
payable on behalf of the Fund pursuant to the Plan or this Agreement shall be
the President or any Vice President of the Trust. Such persons shall provide to
the Trust's Trustees and the Trustees shall review, at least quarterly, a
written report of the amounts so expended and the purposes for which such
expenditures were made.
(g) In addition to the payments to the Principal Underwriter provided
for in paragraph 5(d), the Fund may make payments of service fees to the
Principal Underwriter, Authorized Firms and other persons. The aggregate of such
payments during any fiscal year of the Fund shall not exceed .25% of the Fund's
average daily net assets for such year.
6. The Trust hereby authorizes the Principal Underwriter to repurchase,
upon the terms and conditions set forth in written instructions given by the
Trust to the Principal Underwriter from time to time, as agent of the Fund and
for its account, such shares of the Fund as may be offered for sale to the Fund
from time to time.
(a) The Principal Underwriter shall notify in writing IBT and First
Data at the end of each business day, or as soon thereafter as the repurchases
in each pricing period have been compiled, of the number of shares repurchased
for the account of the Fund since the last previous report, together with the
prices at which such repurchases were made, and upon the request of any officer
or Trustee of the Trust shall furnish similar information with respect to all
repurchases made up to the time of the request on any day.
(b) The Trust reserves the right to suspend or revoke the foregoing
authorization at any time; unless otherwise stated, any such suspension or
revocation shall be effective forthwith upon receipt of notice thereof by an
officer of the Principal Underwriter, by telegraph or by written instrument from
an officer of the Trust duly authorized by its Trustees. In the event that the
authorization of the Principal Underwriter is, by the terms of such notice,
suspended for more than twenty-four hours or until further notice, the
authorization given by this paragraph 6 shall not be revived except by action of
a majority of the Trustees of the Trust.
(c) The Principal Underwriter shall have the right to terminate the
operation of this paragraph 6 upon giving to the Trust thirty (30) days' written
notice thereof.
(d) The Trust agrees to authorize and direct IBT to pay, for the
account of the Fund, the purchase price of any shares so repurchased against
delivery of the certificates in proper form for transfer to the Fund or for
cancellation by the Fund.
-6-
<PAGE>
(e) The Principal Underwriter shall receive no commission in respect of
any repurchase of shares under the foregoing authorization and appointment as
agent, except for any sales commission, distribution fee or contingent deferred
sales charges payable under paragraph 5.
(f) The Trust agrees that the Fund will reimburse the Principal
Underwriter, from time to time on demand, for any reasonable expenses incurred
in connection with the repurchase of shares of the Fund pursuant to this
paragraph 6.
7. If, at any time during the existence of this Agreement, the Trust
shall deem it necessary or advisable in the best interests of the Fund that any
amendment of this Agreement be made in order to comply with the recommendations
or requirements of the Commission or other governmental authority or to obtain
any advantage under Massachusetts or federal tax laws, and shall notify the
Principal Underwriter of the form of amendment which it deems necessary or
advisable and the reasons therefor, and, if the Principal Underwriter declines
to assent to such amendment, the Trust may terminate this Agreement forthwith by
written notice to the Principal Underwriter. If, at any time during the
existence of its agreement upon request by the Principal Underwriter, the Trust
fails (after a reasonable time) to make any changes in its Declaration of Trust,
as amended, or in its methods of doing business which are necessary in order to
comply with any requirement of federal law or regulations of the Commission or
of a national securities association of which the Principal Underwriter is or
may be a member, relating to the sale of the shares of the Fund, the Principal
Underwriter may terminate this Agreement forthwith by written notice to the
Trust.
8. The term "net asset value" as used in this Agreement with reference
to the shares of the Fund shall have the same meaning as used in the Declaration
of Trust, as amended, and calculated in the manner referred to in paragraph 2
above.
9(a). The Principal Underwriter is a corporation in the United States
organized under the laws of Massachusetts and holding membership in the National
Association of Securities Dealers, Inc., a securities association registered
under Section 15A of the Securities Exchange Act of 1934, as amended from time
to time, and during the life of this Agreement will continue to be so resident
in the United States, so organized and a member in good standing of said
Association. The Principal Underwriter will comply with the Trust's Declaration
of Trust and By-Laws, and the 1940 Act and the rules promulgated thereunder,
insofar as they are applicable to the Principal Underwriter.
(b) The Principal Underwriter shall maintain in the United States and
preserve therein for such period or periods as the Commission shall prescribe by
rules and regulations applicable to it as Principal Underwriter of an open-end
investment company registered under the 1940 Act such accounts, books and other
documents as are necessary or appropriate to record its transactions with the
Fund. Such accounts, books and other documents shall be subject at any time and
from time to time to such reasonable periodic, special and other examinations by
the Commission or any member or representative thereof as the Commission may
prescribe. The Principal Underwriter shall furnish to the Commission within such
reasonable time as the Commission may prescribe copies of or extracts from such
records which may be prepared without effort, expense or delay as the Commission
may by order require.
10. This Agreement shall continue in force indefinitely until
terminated as in this Agreement above provided, except that:
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<PAGE>
(a) this Agreement shall remain in effect through and including April
28, 1997 (or, if applicable, the next April 28 which follows the day on which
the Fund has become a party hereto by amendment of Schedule A subsequent to
April 28, 1997), and shall continue in full force and effect indefinitely
thereafter, but only so long as such continuance is specifically approved at
least annually (i) by the vote of a majority of the Trustees of the Trust who
are not "interested persons" of the Trust and who have no direct or indirect
interest in the operation of the Plan or this Agreement (the "Rule 12b-1
Trustees") cast in person at a meeting called for the purpose of voting on such
approval, and (ii) by the Trustees of the Trust or by vote of a majority of the
outstanding voting securities of the Fund;
(b) this Agreement may be terminated at any time by vote of a majority
of the Rule 12b-1 Trustees or by vote of a majority of the outstanding voting
securities of the Fund on not more than sixty (60) days' notice to the Principal
Underwriter. The Principal Underwriter shall be entitled to receive all
contingent deferred sales charges paid or payable with respect to any day
subsequent to the termination of this Agreement;
(c) the Principal Underwriter shall have the right to terminate this
Agreement on six (6) months' written notice thereof given in writing to the
Fund;
(d) the Trust shall have the right to terminate this Agreement
forthwith in the event that it shall have been established by a court of
competent jurisdiction that the Principal Underwriter or any director or officer
of the Principal Underwriter has taken any action which results in a breach of
the covenants set out in paragraph 9 hereof; and
(e) additional series of the Trust will become parties hereto upon
approval by the Trustees of the Trust and amendment of Schedule A.
11. In the event of the assignment of this Agreement by the Principal
Underwriter, this Agreement shall automatically terminate.
12. Any notice under this Agreement shall be in writing, addressed and
delivered, or mailed postage paid, to the other party, at such address as such
other party may designate for the receipt of such notices. Until further notice
to the other party, it is agreed that the record address of the Trust and that
of the Principal Underwriter, shall be 24 Federal Street, Boston, Massachusetts
02110.
13. The services of the Principal Underwriter to the Fund hereunder are
not to be deemed to be exclusive, the Principal Underwriter being free to (a)
render similar service to, and to act as principal underwriter in connection
with the distribution of shares of, other series of the Trust or other
investment companies, and (b) engage in other business and activities from time
to time.
14. The terms "vote of a majority of the outstanding voting
securities," "assignment" and "interested persons," when used herein, shall have
the respective meanings specified in the 1940 Act, subject, however, to such
exemptions as may be granted by the Commission by any rule, regulation or order.
-8-
<PAGE>
15. The Principal Underwriter expressly acknowledges the provision in
the Trust's Declaration of Trust limiting the personal liability of the
shareholders of the Fund or the Trustees of the Trust. The Principal Underwriter
hereby agrees that it shall have recourse to the Trust or the Fund for payment
of claims or obligations as between the Trust or the Fund and the Principal
Underwriter arising out of this Agreement and shall not seek satisfaction from
the shareholders or any shareholder of the Trust or from the Trustees or any
Trustee of the Trust. The Fund shall not be responsible for obligations of any
other series of the Trust.
16. The term "Prior Principal Underwriter" means Eaton Vance
Distributors, Inc., a separate Massachusetts corporation that has served as
principal underwriter prior to the effective date of this Agreement. All
references in this Agreement to the "Prior Agreements" shall mean the
distribution agreements referenced on Schedule A hereto between the Trust on
behalf of the Fund and the Prior Principal Underwriter. Such references shall
not be applicable to any additional series of the Trust which becomes a Fund
hereunder by amendment of Schedule A hereafter.
17. This Agreement shall amend, replace and be substituted for the
Prior Agreements as of the opening of business on November 1, 1996, and this
Agreement shall be effective as of such time. The outstanding uncovered
distribution charges of the Prior Principal Underwriter calculated under the
Prior Agreements as of the close of business on October 31, 1996 shall be the
outstanding uncovered distribution charges of the Principal Underwriter
calculated under this Agreement as of the opening of business on November 1,
1996.
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement
on the 18th day of October, 1996.
EATON VANCE MUTUAL FUNDS TRUST
By /s/ M. Dozier Gardner
------------------------
President
EATON VANCE DISTRIBUTORS, INC.
By /s/ H. Day Brigham, Jr.
------------------------
Vice President
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<PAGE>
SCHEDULE A
----------
EATON VANCE MUTUAL FUNDS TRUST
DISTRIBUTION AGREEMENT
(CLASSIC FUNDS)
EFFECTIVE NOVEMBER 1, 1996
--------------------------
Name of Fund Inception Date of Prior Agreements
------------ ----------------------------------
EV Classic Government Obligations Fund October 28, 1993/January 27, 1995 EV
Classic High Income Fund January 27, 1995/August 1, 1995 EV Classic Strategic
Income Fund* March 1, 1994/January 27, 1995/
November 1, 1995
EV Classic Tax-Managed Growth Fund June 24, 1996
- ----------------------
*This fund is a successor in operations to a fund which was reorganized,
effective October 1, 1995, and the outstanding uncovered distribution charges of
the predecessor fund were assumed by the above fund.
<PAGE>
EXHIBIT (6)(a)(2)
EATON VANCE MUTUAL FUNDS TRUST
DISTRIBUTION AGREEMENT
(MARATHON FUNDS)
AGREEMENT effective November 1, 1996 between EATON VANCE MUTUAL FUNDS
TRUST, a Massachusetts business trust having its principal place of business in
Boston in the Commonwealth of Massachusetts, hereinafter called the "Trust," on
behalf of each of its series listed on Schedule A (the "Funds"), and EATON VANCE
DISTRIBUTORS, INC., a Massachusetts corporation having its principal place of
business in said Boston and formerly named EV Distributors, Inc., hereinafter
sometimes called the "Principal Underwriter."
IN CONSIDERATION of the mutual promises and undertakings herein
contained, the parties hereto agree:
1. The Trust grants to the Principal Underwriter the right to purchase
shares of the Fund upon the terms hereinbelow set forth during the term of this
Agreement. While this Agreement is in force, the Principal Underwriter agrees to
use its best efforts to find purchasers for shares of the Fund.
The Principal Underwriter shall have the right to buy from the Fund the
shares needed, but not more than the shares needed (except for clerical errors
and errors of transmission) to fill unconditional orders for shares of the Fund
placed with the Principal Underwriter by financial service firms or investors as
set forth in the current Prospectus relating to shares of the Fund. The price
which the Principal Underwriter shall pay for the shares so purchased shall be
equal to the price paid by investors upon purchasing such shares. The Principal
Underwriter shall notify Investors Bank & Trust Company, Custodian of the Fund
("IBT"), and First Data Investor Services Group ("First Data"), or a successor
transfer agent, at the end of each business day, or as soon thereafter as the
orders placed with it have been compiled, of the number of shares and the prices
thereof which the Principal Underwriter is to purchase as principal for resale.
The Principal Underwriter shall take down and pay for shares ordered from the
Fund on or before the eleventh business day (excluding Saturdays) after the
shares have been so ordered.
The right granted to the Principal Underwriter to buy shares from the
Fund shall be exclusive, except that said exclusive right shall not apply to
shares issued in connection with the merger or consolidation of any other
investment company or personal holding company with the Fund or the acquisition
by purchase or otherwise of all (or substantially all) the assets or the
outstanding shares of any such company, by the Fund; nor shall it apply to
shares, if any, issued by the Fund in distribution of income or realized capital
gains of the Fund payable in shares or in cash at the option of the shareholder.
2. The shares may be resold by the Principal Underwriter to or through
financial service firms having agreements with the Principal Underwriter, and to
investors, upon the following terms and conditions.
The public offering price, i.e., the price per share at which the
Principal Underwriter or financial service firm purchasing shares from the
Principal Underwriter may sell shares to the public, shall be equal to the net
asset value at which the Principal Underwriter is to purchase the shares.
<PAGE>
The net asset value of shares of the Fund shall be determined by the
Trust or IBT, as the agent of the Fund, as of the close of regular trading on
the New York Stock Exchange on each business day on which said Exchange is open,
or as of such other time on each such business day as may be determined by the
Trustees of the Trust, in accordance with the methodology and procedures for
calculating such net asset value authorized by the Trustees. The Trust may also
cause the net asset value to be determined in substantially the same manner or
estimated in such manner and as of such other time or times as may from time to
time be agreed upon by the Trust and Principal Underwriter. The Trust will
notify the Principal Underwriter each time the net asset value of the Fund's
shares is determined and when such value is so determined it shall be applicable
to transactions as set forth in the current Prospectus and Statement of
Additional Information (hereafter the "Prospectus") relating to the Fund's
shares.
No shares of the Fund shall be sold by the Fund during any period when
the determination of net asset value is suspended pursuant to the Declaration of
Trust, except to the Principal Underwriter, in the manner and upon the terms
above set forth to cover contracts of sale made by the Principal Underwriter
with its customers prior to any such suspension, and except as provided in the
last paragraph of paragraph 1 hereof. The Trust shall also have the right to
suspend the sale of the Fund's shares if in the judgment of the Trust conditions
obtaining at any time render such action advisable. The Principal Underwriter
shall have the right to suspend sales at any time, to refuse to accept or
confirm any order from an investor or financial service firm, or to accept or
confirm any such order in part only, if in the judgment of the Principal
Underwriter such action is in the best interests of the Fund.
3. The Trust agrees that it will, from time to time, but subject to the
necessary approval of the Fund's shareholders, take such steps as may be
necessary to register the Fund's shares under the federal Securities Act of
1933, as amended from time to time (the "1933 Act"), to the end that there will
be available for sale such number of shares as the Principal Underwriter may
reasonably be expected to sell. The Trust agrees to indemnify and hold harmless
the Principal Underwriter and each person, if any, who controls the Principal
Underwriter within the meaning of Section 15 of the 1933 Act against any loss,
liability, claim, damages or expense (including the reasonable cost of
investigating or defending any alleged loss, liability, claim, damages or
expense and reasonable counsel fees incurred in connection therewith), arising
by reason of any person acquiring any shares of the Fund, which may be based
upon the 1933 Act or on any other statute or at common law, on the ground that
the Registration Statement or Prospectus, as from time to time amended and
supplemented, includes an untrue statement of a material fact or omits to state
a material fact required to be stated therein or necessary in order to make the
statements therein not misleading, unless such statement or omission was made in
reliance upon, and in conformity with, information furnished in writing to the
Trust in connection therewith by or on behalf of the Principal Underwriter;
provided, however, that in no case (i) is the indemnity of the Trust in favor of
the Principal Underwriter and any such controlling person to be deemed to
protect such Principal Underwriter or any such controlling person against any
liability to the Trust or the Fund or its security holders to which such
Principal Underwriter or any such controlling person would otherwise be subject
by reason of willful misfeasance, bad faith, or gross negligence in the
performance of its duties or by reason of its reckless disregard of its
obligations and duties under this Agreement, or (ii) is the Trust or the Fund to
be liable under its indemnity agreement contained in this paragraph with respect
to any claim made against the Principal Underwriter or any such controlling
person unless the Principal Underwriter or any such controlling person, as the
case may be, shall have notified the Trust in writing within a reasonable time
after the summons or other first legal process giving information of the nature
of the claim shall have been served upon the Principal Underwriter or such
controlling person (or after such Principal Underwriter or such controlling
person shall have received notice of such service on any designated agent), but
failure to notify the Trust of any such claim shall not relieve it from any
liability which the Fund may have to the person against whom such action is
2
<PAGE>
brought otherwise than on account of its indemnity agreement contained in this
paragraph. The Trust shall be entitled to participate, at the expense of the
Fund, in the defense, or, if the Trust so elects, to assume the defense of any
suit brought to enforce any such liability, but if the Trust elects to assume
the defense, such defense shall be conducted by counsel chosen by it and
satisfactory to the Principal Underwriter or controlling person or persons,
defendant or defendants in the suit. In the event the Trust elects to assume the
defense of any such suit and retains such counsel, the Principal Underwriter or
controlling person or persons, defendant or defendants in the suit, shall bear
the fees and expenses of any additional counsel retained by them, but, in case
the Trust does not elect to assume the defense of any such suit, the Fund shall
reimburse the Principal Underwriter or controlling person or persons, defendant
or defendants in the suit, for the reasonable fees and expenses of any counsel
retained by them. The Trust agrees promptly to notify the Principal Underwriter
of the commencement of any litigation or proceedings against it or any of its
officers or Trustees in connection with the issuance or sale of any of the
Fund's shares.
4. The Principal Underwriter covenants and agrees that, in selling the
shares of the Fund, it will use its best efforts in all respects duly to conform
with the requirements of all state and federal laws relating to the sale of such
shares, and will indemnify and hold harmless the Trust and each of its Trustees
and officers and each person, if any, who controls the Trust within the meaning
of Section 15 of the 1933 Act, against any loss, liability, damages, claim or
expense (including the reasonable cost of investigating or defending any alleged
loss, liability, damages, claim or expense and reasonable counsel fees incurred
in connection therewith), arising by reason of any person acquiring any shares
of the Fund, which may be based upon the 1933 Act or any other statute or at
common law, on account of any wrongful act of the Principal Underwriter or any
of its employees (including any failure to conform with any requirement of any
state or federal law relating to the sale of such shares) or on the ground that
the registration statement or Prospectus, as from time to time amended and
supplemented, includes an untrue statement of a material fact or omits to state
a material fact required to be stated therein or necessary in order to make the
statements therein not misleading, insofar as any such statement or omission was
made in reliance upon, and in conformity with information furnished in writing
to the Fund in connection therewith by or on behalf of the Principal
Underwriter, provided, however, that in no case (i) is the indemnity of the
Principal Underwriter in favor of any person indemnified to be deemed to protect
the Fund or any such person against any liability to which the Fund or any such
person would otherwise be subject by reason of willful misfeasance, bad faith,
or gross negligence in the performance of its or his duties or by reason of its
or his reckless disregard of its obligations and duties under this Agreement, or
(ii) is the Principal Underwriter to be liable under its indemnity agreement
contained in this paragraph with respect to any claim made against the Fund or
any person indemnified unless the Trust or such person, as the case may be,
shall have notified the Principal Underwriter in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon the Trust, the Fund or upon such
person (or after the Trust or such person shall have received notice of such
service on any designated agent), but failure to notify the Principal
Underwriter of any such claim shall not relieve it from any liability which it
may have to the Fund or any person against whom such action is brought otherwise
than on account of its indemnity agreement contained in this paragraph. The
Principal Underwriter shall be entitled to participate, at its own expense, in
the defense, or, if it so elects, to assume the defense of any suit brought to
enforce any such liability, but if the Principal Underwriter elects to assume
the defense, such defense shall be conducted by counsel chosen by it and
satisfactory to the Trust, or to its officers or Trustees, or to any controlling
person or persons, defendant or defendants in the suit. In the event that the
Principal Underwriter elects to assume the defense of any such suit and retains
such counsel, the Fund or such officers or Trustees or controlling person or
persons, defendant or defendants in the suit, shall bear the fees and expenses
3
<PAGE>
of any additional counsel retained by them or the Trust, but, in case the
Principal Underwriter does not elect to assume the defense of any such suit, it
shall reimburse the Fund, any such officers and Trustees or controlling person
or persons, defendant or defendants in such suit, for the reasonable fees and
expenses of any counsel retained by them or the Trust. The Principal Underwriter
agrees promptly to notify the Trust of the commencement of any litigation or
proceedings against it in connection with the issue and sale of any of the
Fund's shares.
Neither the Principal Underwriter nor any financial service firm nor
any other person is authorized by the Trust to give any information or to make
any representations, other than those contained in the Registration Statement or
Prospectus filed with the Securities and Exchange Commission (the "Commission")
under the 1933 Act (as said Registration Statement and Prospectus may be amended
or supplemented from time to time), covering the shares of the Fund. Neither the
Principal Underwriter nor any financial service firm nor any other person is
authorized to act as agent for the Trust or the Fund in connection with the
offering or sale of shares of the Fund to the public or otherwise. All such
sales made by the Principal Underwriter shall be made by it as principal, for
its own account. The Principal Underwriter may, however, act as agent in
connection with the repurchase of shares as provided in paragraph 6 below, or in
connection with "exchanges" between investment companies for which the Principal
Underwriter acts as Principal Underwriter or for which an affiliate of the
Principal Underwriter acts as investment adviser.
5(a). The Fund will pay, or cause to be paid -
(i) all the costs and expenses of the Fund, including fees and
disbursements of its counsel, in connection with the preparation and filing of
any required Registration Statement and/or Prospectus under the 1933 Act or the
Investment Company Act of 1940, as amended from time to time (the "1940 Act"),
covering its shares and all amendments and supplements thereto, and preparing
and mailing periodic reports to shareholders (including the expense of setting
up in type any such Registration Statement, Prospectus or periodic report);
(ii) the cost of preparing temporary and permanent share
certificates (if any) for shares of the Fund;
(iii) the cost and expenses of delivering to the Principal
Underwriter at its office in Boston, Massachusetts, all shares of the Fund
purchased by it as principal hereunder; and
(iv) all the federal and state (if any) issue and/or transfer
taxes payable upon the issue by or (in the case of treasury shares) transfer
from the Fund to the Principal Underwriter of any and all shares of the Fund
purchased by the Principal Underwriter hereunder.
(b) The Principal Underwriter agrees that, after the Prospectus and
periodic reports have been set up in type, it will bear the expense of printing
and distributing any copies thereof which are to be used in connection with the
offering of shares of the Fund to financial service firms or investors. The
Principal Underwriter further agrees that it will bear the expenses of
preparing, printing and distributing any other literature used by the Principal
Underwriter or furnished by it for use by financial service firms in connection
with the offering of the shares of the Fund for sale to the public and any
expenses of advertising in connection with such offering. The Fund agrees to pay
4
<PAGE>
the expenses of registration and maintaining registration of its shares for sale
under federal and state securities laws, and, if necessary or advisable in
connection therewith, of qualifying the Trust or the Fund as a dealer or broker,
in such states as shall be selected by the Principal Underwriter and the fees
payable to each such state for continuing the qualification therein until the
Principal Underwriter notifies the Trust that it does not wish such
qualification continued.
(c) In addition, the Trust agrees, in accordance with the Fund's
Distribution Plan (the "Plan"), adopted pursuant to Rule 12b-1 under the 1940
Act with respect to shares, to make certain payments as follows. The Principal
Underwriter shall be entitled to be paid by the Fund a sales commission equal to
an amount not exceeding that set forth on Schedule A hereto of the price
received by the Fund for each sale of shares (excluding reinvestment of
dividends and distributions), such payment to be made in the manner set forth in
this paragraph 5. The Principal Underwriter shall also be entitled to be paid by
the Fund a separate distribution fee (calculated in accordance with paragraph
5(d)), such payment to be made in the manner set forth and subject to the terms
of this paragraph 5.
(d) The sales commissions and distribution fees referred to in
paragraph 5(c) shall be accrued and paid by the Fund in the following manner.
The Fund shall accrue daily an amount calculated at the rate of .75% per annum
of the daily net assets of the Fund, which net assets shall be computed as
described in paragraph 2. The daily amounts so accrued throughout the month
shall be paid to the Principal Underwriter on the last day of each month. The
amount of such daily accrual, as so calculated, shall first be applied and
charged to all unpaid sales commissions, and the balance, if any, shall then be
applied and charged to all unpaid distribution fees. No amount shall be accrued
with respect to any day on which there exist no outstanding uncovered
distribution charges of the Principal Underwriter. The amount of such uncovered
distribution charges shall be calculated daily. For purposes of this
calculation, distribution charges of the Principal Underwriter shall include (a)
the aggregate of all sales commissions which the Principal Underwriter (and
Prior Principal Underwriter) has been paid pursuant to this paragraph (d) (and
pursuant to paragraph (d) of the Prior Agreements) plus all sales commissions
which it is entitled to be paid pursuant to paragraph 5(c) (and pursuant to
paragraph 5(c) of the Prior Agreements) through and including the day next
preceding the date of calculation, and (b) an amount equal to the aggregate of
all distribution fees referred to below which the Principal Underwriter (and
Prior Principal Underwriter) has been paid pursuant to this paragraph (d) (and
pursuant to paragraph (d) of the Prior Agreements) plus all such fees which it
is entitled to be paid pursuant to paragraph 5(c) (and pursuant to paragraph
5(c) of the Prior Agreements) through and including the day next preceding the
date of calculation. From this sum (distribution charges) there shall be
subtracted (i) the aggregate amount paid or payable to the Principal Underwriter
(and Prior Principal Underwriter) pursuant to this paragraph (d) through and
including the day next preceding the date of calculation and (ii) the aggregate
amount of all contingent deferred sales charges paid or payable to the Principal
Underwriter (and Prior Principal Underwriter) since the inception of the Prior
Agreements through and including the day next preceding the date of calculation.
If the result of such subtraction is a positive amount, a distribution fee
[computed at the rate of 1% per annum above the prime rate (being the base rate
on corporate loans posted by at least 75% of the nation's 30 largest banks) then
being reported in the Eastern Edition of The Wall Street Journal or if such
prime rate is not so reported such other rate as may be designated from time to
time by vote or other action of a majority of (i) those Trustees of the Trust
who are not "interested persons" of the Trust (as defined in the 1940 Act) and
have no direct or indirect financial interest in the operation of the Plan or
any agreements related to it and (ii) all of the Trustees then in office] shall
be computed on such amount and added to such amount, with the resulting sum
5
<PAGE>
constituting the amount of outstanding uncovered distribution charges of the
Principal Underwriter with respect to such day for all purposes of this
Agreement. If the result of such subtraction is a negative amount, there shall
exist no outstanding uncovered distribution charges of the Principal Underwriter
with respect to such day and no amount shall be accrued or paid to the Principal
Underwriter with respect to such day. The aggregate amounts accrued and paid
pursuant to this paragraph (d) during any fiscal year of the Fund shall not
exceed .75% of the average daily net assets of the Fund for such year.
(e) The Principal Underwriter shall be entitled to receive all
contingent deferred sales charges paid or payable with respect to any day on
which there exist outstanding uncovered distribution charges of the Principal
Underwriter. The Fund shall be entitled to receive all remaining contingent
deferred sales charges paid or payable by shareholders with respect to any day
on which there exist no outstanding uncovered distribution charges of the
Principal Underwriter, provided that no such sales charge which would cause the
Fund to exceed the maximum applicable cap imposed thereon by paragraph (2) of
subsection (d) of Section 26 of Article III of the Rules of Fair Practice of the
National Association of Securities Dealers, Inc. shall be imposed.
(f) The persons authorized to direct the disposition of monies paid or
payable on behalf of the Fund pursuant to the Plan or this Agreement shall be
the President or any Vice President of the Trust. Such persons shall provide to
the Trust's Trustees and the Trustees shall review, at least quarterly, a
written report of the amounts so expended and the purposes for which such
expenditures were made.
(g) In addition to the payments to the Principal Underwriter provided
for in paragraph 5(d), the Fund may make payments of service fees to the
Principal Underwriter, Authorized Firms and other persons. The aggregate of such
payments during any fiscal year of the Fund shall not exceed .25% of the Fund's
average daily net assets for such year.
6. The Trust hereby authorizes the Principal Underwriter to repurchase,
upon the terms and conditions set forth in written instructions given by the
Trust to the Principal Underwriter from time to time, as agent of the Fund and
for its account, such shares of the Fund as may be offered for sale to the Fund
from time to time.
(a) The Principal Underwriter shall notify in writing IBT at the end of
each business day, or as soon thereafter as the repurchases in each pricing
period have been compiled, of the number of shares repurchased for the account
of the Fund since the last previous report, together with the prices at which
such repurchases were made, and upon the request of any officer or Trustee of
the Trust shall furnish similar information with respect to all repurchases made
up to the time of the request on any day.
(b) The Trust reserves the right to suspend or revoke the foregoing
authorization at any time; unless otherwise stated, any such suspension or
revocation shall be effective forthwith upon receipt of notice thereof by an
officer of the Principal Underwriter, by telegraph or by written instrument from
an officer of the Trust duly authorized by its Trustees. In the event that the
authorization of the Principal Underwriter is, by the terms of such notice,
suspended for more than twenty-four hours or until further notice, the
authorization given by this paragraph 6 shall not be revived except by action of
a majority of the Trustees of the Trust.
(c) The Principal Underwriter shall have the right to terminate the
operation of this paragraph 6 upon giving to the Trust thirty (30) days' written
notice thereof.
6
<PAGE>
(d) The Trust agrees to authorize and direct IBT to pay, for the
account of the Fund, the purchase price of any shares so repurchased against
delivery of the certificates in proper form for transfer to the Fund or for
cancellation by the Fund.
(e) The Principal Underwriter shall receive no commission in respect of
any repurchase of shares under the foregoing authorization and appointment as
agent, except for any sales commission, distribution fee or contingent deferred
sales charges payable under paragraph 5.
(f) The Trust agrees that the Fund will reimburse the Principal
Underwriter, from time to time on demand, for any reasonable expenses incurred
in connection with the repurchase of shares of the Fund pursuant to this
paragraph 6.
7. If, at any time during the existence of this Agreement, the Trust
shall deem it necessary or advisable in the best interests of the Fund that any
amendment of this Agreement be made in order to comply with the recommendations
or requirements of the Commission or other governmental authority or to obtain
any advantage under Massachusetts or federal tax laws, and shall notify the
Principal Underwriter of the form of amendment which it deems necessary or
advisable and the reasons therefor, and, if the Principal Underwriter declines
to assent to such amendment, the Trust may terminate this Agreement forthwith by
written notice to the Principal Underwriter. If, at any time during the
existence of its agreement upon request by the Principal Underwriter, the Trust
fails (after a reasonable time) to make any changes in its Declaration of Trust,
as amended, or in its methods of doing business which are necessary in order to
comply with any requirement of federal law or regulations of the Commission or
of a national securities association of which the Principal Underwriter is or
may be a member, relating to the sale of the shares of the Fund, the Principal
Underwriter may terminate this Agreement forthwith by written notice to the
Trust.
8. The term "net asset value" as used in this Agreement with reference
to the shares of the Fund shall have the same meaning as used in the Declaration
of Trust, as amended, and calculated in the manner referred to in paragraph 2
above.
9(a). The Principal Underwriter is a corporation in the United States
organized under the laws of Massachusetts and holding membership in the National
Association of Securities Dealers, Inc., a securities association registered
under Section 15A of the Securities Exchange Act of 1934, and during the life of
this Agreement will continue to be so resident in the United States, so
organized and a member in good standing of said Association. The Principal
Underwriter will comply with the Trust's Declaration of Trust and By-Laws, and
the 1940 Act and the rules promulgated thereunder, insofar as they are
applicable to the Principal Underwriter.
(b) The Principal Underwriter shall maintain in the United States and
preserve therein for such period or periods as the Commission shall prescribe by
rules and regulations applicable to it as Principal Underwriter of an open-end
investment company registered under the 1940 Act such accounts, books and other
documents as are necessary or appropriate to record its transactions with the
Fund. Such accounts, books and other documents shall be subject at any time and
from time to time to such reasonable periodic, special and other examinations by
the Commission or any member or representative thereof as the Commission may
prescribe. The Principal Underwriter shall furnish to the Commission within such
reasonable time as the Commission may prescribe copies of or extracts from such
records which may be prepared without effort, expense or delay as the Commission
may by order require.
7
<PAGE>
10. This Agreement shall continue in force indefinitely until
terminated as in this Agreement above provided, except that:
(a) this Agreement shall remain in effect through and including April
28, 1997 (or, if applicable, the next April 28 which follows the day on which
the Fund has become a party hereto by amendment of Schedule A subsequent to
April 28, 1997), and shall continue in full force and effect indefinitely
thereafter, but only so long as such continuance after April 28, 1997 is
specifically approved at least annually (i) by the vote of a majority of the
Trustees of the Trust who are not "interested persons" (as defined in Section
2(a)(19) of the 1940 Act) of the Trust and who have no direct or indirect
interest in the operation of the Plan or this Agreement (the "Rule 12b-1
Trustees") cast in person at a meeting called for the purpose of voting on such
approval, and (ii) by the Trustees of the Trust or by vote of a majority of the
outstanding voting securities (as defined in Section 2(a)(42) of the 1940 Act)
of the Fund;
(b) this Agreement may be terminated at any time by vote of a majority
of the Rule 12b-1 Trustees or by vote of a majority of the outstanding voting
securities of the Fund on not more than sixty days' notice to the Principal
Underwriter. The Principal Underwriter shall be entitled to receive all
contingent deferred sales charges paid or payable with respect to any day
subsequent to the termination of this Agreement;
(c) the Principal Underwriter shall have the right to terminate
this Agreement on six (6) months' written notice thereof given in writing to
the Fund;
(d) the Trust shall have the right to terminate this Agreement
forthwith in the event that it shall have been established by a court of
competent jurisdiction that the Principal Underwriter or any director or officer
of the Principal Underwriter has taken any action which results in a breach of
the covenants set out in paragraph 9 hereof; and
(e) additional series of the Trust will become parties hereto upon
approval by the Trustees of the Trust and amendment of Schedule A.
11. In the event of the assignment (as defined in Section 2(a)(4) of
the 1940 Act) of this Agreement by the Principal Underwriter, this Agreement
shall automatically terminate.
12. Any notice under this Agreement shall be in writing, addressed and
delivered, or mailed postage paid, to the other party, at such address as such
other party may designate for the receipt of such notices. Until further notice
to the other party, it is agreed that the record address of the Trust and that
of the Principal Underwriter, shall be 24 Federal Street, Boston, Massachusetts
02110.
13. The services of the Principal Underwriter to the Fund hereunder are
not to be deemed to be exclusive, the Principal Underwriter being free to (a)
render similar services to, and to act as principal underwriter in connection
with the distribution of shares of, other series of the Trust or investment
companies, and (b) engage in other business and activities from time to time.
14. The terms "vote of a majority of the outstanding voting
securities," "assignment" and "interested persons," when used herein, shall have
the respective meanings specified in the 1940 Act, subject, however, to such
exemptions as may be granted by the Commission by any rule, regulation or order.
8
<PAGE>
15. The Principal Underwriter expressly acknowledges the provision in
the Trust's Declaration of Trust limiting the personal liability of the
shareholders of the Fund or the Trustees of the Trust. The Principal Underwriter
hereby agrees that it shall have recourse to the Trust or the Fund for payment
of claims or obligations as between the Trust or the Fund and the Principal
Underwriter arising out of this Agreement and shall not seek satisfaction from
the shareholders or any shareholder of the Trust or from the Trustees or any
Trustee of the Trust. The Fund shall not be responsible for obligations of any
other series of the Trust.
16. The term "Prior Principal Underwriter" means Eaton Vance
Distributors, Inc., a separate Massachusetts corporation that has served as
principal underwriter prior to the effective date of this Agreement. All
references in this Agreement to the "Prior Agreements" shall mean the
distribution agreements referenced on Schedule A hereto between the Trust on
behalf of the Fund and the Prior Principal Underwriter. Such references shall
not be applicable to any additional series of the Trust which becomes a Fund
hereunder by amendment of Schedule A hereafter.
17. This Agreement shall amend, replace and be substituted for the
Prior Agreements as of the opening of business on November 1, 1996, and this
Agreement shall be effective as of such time. The outstanding uncovered
distribution charges of the Prior Principal Underwriter calculated under the
Prior Agreements as of the close of business on October 31, 1996 shall be the
outstanding uncovered distribution charges of the Principal Underwriter
calculated under this Agreement as of the opening of business on November 1,
1996.
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement
on the 18th day of October, 1996.
EATON VANCE MUTUAL FUNDS TRUST
By /s/ M. Dozier Gardner
---------------------------
President
EATON VANCE DISTRIBUTORS, INC.
By /s/ H. Day Brigham, Jr.
---------------------------
Vice President
9
<PAGE>
SCHEDULE A
----------
EATON VANCE MUTUAL FUNDS TRUST
DISTRIBUTION AGREEMENT
(MARATHON FUNDS)
EFFECTIVE NOVEMBER 1, 1996
--------------------------
Name of Fund Sales Commission Inception Date of Prior Agreements
------------ ---------------- ----------------------------------
EV Marathon Government 5.0% October 28, 1993
Obligations Fund
EV Marathon High 5.0% August 1, 1986/July 7, 1993/
Income Fund August 1, 1995
EV Marathon Strategic 4.5% November 20, 1990/July 7, 1993/
Income Fund November 1, 1995
EV Maarathon Tax-Managed 5.0% March 20, 1996
Growth Fund
<PAGE>
EXHIBIT (6)(a)(3)
EATON VANCE MUTUAL FUNDS TRUST
DISTRIBUTION AGREEMENT
----------------------
(TRADITIONAL FUNDS)
AGREEMENT effective November 1, 1996 between EATON VANCE MUTUAL FUNDS
TRUST, hereinafter called the "Trust," a Massachusetts business trust having its
principal place of business in Boston in the Commonwealth of Massachusetts, on
behalf of each of its series listed on Schedule A (the "Funds") and EATON VANCE
DISTRIBUTORS, INC., a Massachusetts corporation having its principal place of
business in said Boston and formerly named EV Distributors, Inc., hereinafter
sometimes called the "Principal Underwriter."
IN CONSIDERATION of the mutual promises and undertakings herein
contained, the parties hereto agree:
1. The Trust grants to the Principal Underwriter the right to purchase
shares of the Fund upon the terms hereinbelow set forth during the term of this
Agreement. While this Agreement is in force, the Principal Underwriter agrees to
use its best efforts to find purchasers for shares of the Fund.
The Principal Underwriter shall have the right to buy from the Fund the
shares needed, but not more than the shares needed (except for clerical errors
and errors of transmission) to fill unconditional orders for shares of the Fund
placed with the Principal Underwriter by financial service firms or investors as
set forth in the current Prospectus relating to shares of the Fund. The price
which the Principal Underwriter shall pay for the shares so purchased shall be
the net asset value used in determining the public offering price on which such
orders were based. The Principal Underwriter shall notify Investors Bank & Trust
Company, Custodian of the Fund ("IBT"), and First Data Investor Services Group,
Transfer Agent of the Fund ("First Data"), or a successor transfer agent, at the
end of each business day, or as soon thereafter as the orders placed with it
have been compiled, of the number of shares and the prices thereof which the
Principal Underwriter is to purchase as principal for resale. The Principal
Underwriter shall take down and pay for shares ordered from the Fund on or
before the eleventh business day (excluding Saturdays) after the shares have
been so ordered.
The right granted to the Principal Underwriter to buy shares from the
Fund shall be exclusive, except that said exclusive right shall not apply to
shares issued in connection with the merger or consolidation of any other
investment company or personal holding company with the Fund or the acquisition
by purchase or otherwise of all (or substantially all) the assets or the
outstanding shares of any such company, by the Fund; nor shall it apply to
shares, if any, issued by the Fund in distribution of income or realized capital
gains of the Fund payable in shares or in cash at the option of the shareholder.
2. The shares may be resold by the Principal Underwriter to or through
financial service firms having agreements with the Principal Underwriter, and to
investors, upon the following terms and conditions.
<PAGE>
The public offering price, i.e., the price per share at which the
Principal Underwriter or financial service firm purchasing shares from the
Principal Underwriter may sell shares to the public, shall be the public
offering price as set forth in the current Prospectus relating to said shares,
but not to exceed the net asset value at which the Principal Underwriter is to
purchase the shares, plus a sales charge not to exceed 7.25% of the public
offering price (the net asset value divided by .9275). If the resulting public
offering price does not come out to an even cent, the public offering price
shall be adjusted to the nearer cent.
The Principal Underwriter may also sell shares at the net asset value
at which the Principal Underwriter is to purchase such shares, provided such
sales are not inconsistent with the provisions of Section 22(d) of the
Investment Company Act of 1940, as amended from time to time (the "1940 Act"),
and the rules thereunder, including any applicable exemptive orders or
administrative interpretations or "no-action" positions with respect thereto.
The net asset value of shares of the Fund shall be determined by the
Trust or IBT, as the agent of the Fund, as of the close of regular trading on
the New York Stock Exchange on each business day on which said Exchange is open,
or as of such other time on each such business day as may be determined by the
Trustees of the Trust, in accordance with the methodology and procedures for
calculating such net asset value authorized by the Trustees. The Trust may also
cause the net asset value to be determined in substantially the same manner or
estimated in such manner and as of such other time or times as may from time to
time be agreed upon by the Trust and Principal Underwriter. The Trust will
notify the Principal Underwriter each time the net asset value of the Fund's
shares is determined and when such value is so determined it shall be applicable
to transactions as set forth in the current Prospectus and Statement of
Additional Information (hereafter the "Prospectus") relating to the Fund's
shares.
No shares of the Fund shall be sold by the Fund during any period when
the determination of net asset value is suspended pursuant to the Declaration of
Trust, except to the Principal Underwriter, in the manner and upon the terms
above set forth to cover contracts of sale made by the Principal Underwriter
with its customers prior to any such suspension, and except as provided in the
last paragraph of paragraph 1 hereof. The Trust shall also have the right to
suspend the sale of the Fund's shares if in the judgment of the Trust conditions
obtaining at any time render such action advisable. The Principal Underwriter
shall have the right to suspend sales at any time, to refuse to accept or
confirm any order from an investor or financial service firm, or to accept or
confirm any such order in part only, if in the judgment of the Principal
Underwriter such action is in the best interests of the Fund.
3. The Trust covenants and agrees that it will, from time to time, but
subject to the necessary approval of the Fund's shareholders, take such steps as
may be necessary to register the Fund's shares under the federal Securities Act
of 1933, as amended from time to time (the "1933 Act"), to the end that there
will be available for sale such number of shares as the Principal Underwriter
may reasonably be expected to sell. The Trust covenants and agrees to indemnify
and hold harmless the Principal Underwriter and each person, if any, who
controls the Principal Underwriter within the meaning of Section 15 of the 1933
Act against any loss, liability, claim, damages or expense (including the
reasonable cost of investigating or defending any alleged loss, liability,
claim, damages or expense and reasonable counsel fees incurred in connection
therewith), arising by reason of any person acquiring any shares of the Fund,
which may be based upon the 1933 Act or on any other statute or at common law,
on the ground that the Registration Statement or Prospectus, as from time to
time amended and supplemented, includes an untrue statement of a material fact
or omits to state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading, unless such statement or
omission was made in reliance upon, and in conformity with, information
2
<PAGE>
furnished in writing to the Trust in connection therewith by or on behalf of the
Principal Underwriter; provided, however, that in no case (i) is the indemnity
of the Trust in favor of the Principal Underwriter and any such controlling
person to be deemed to protect such Principal Underwriter or any such
controlling person against any liability to the Trust or the Fund or its
security holders to which such Principal Underwriter or any such controlling
person would otherwise be subject by reason of willful misfeasance, bad faith,
or gross negligence in the performance of its duties or by reason of its
reckless disregard of its obligations and duties under this Agreement, or (ii)
is the Trust or the Fund to be liable under its indemnity agreement contained in
this paragraph with respect to any claim made against the Principal Underwriter
or any such controlling person unless the Principal Underwriter or any such
controlling person, as the case may be, shall have notified the Trust in writing
within a reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon the Principal
Underwriter or such controlling person (or after such Principal Underwriter or
such controlling person shall have received notice of such service on any
designated agent), but failure to notify the Trust of any such claim shall not
relieve it from any liability which the Fund may have to the person against whom
such action is brought otherwise than on account of its indemnity agreement
contained in this paragraph. The Trust shall be entitled to participate, at the
expense of the Fund, in the defense, or, if the Trust so elects, to assume the
defense of any suit brought to enforce any such liability, but if the Trust
elects to assume the defense, such defense shall be conducted by counsel chosen
by it and satisfactory to the Principal Underwriter or controlling person or
persons, defendant or defendants in the suit. In the event the Trust elects to
assume the defense of any such suit and retains such counsel, the Principal
Underwriter or controlling person or persons, defendant or defendants in the
suit, shall bear the fees and expenses of any additional counsel retained by
them, but, in case the Trust does not elect to assume the defense of any such
suit, the Fund shall reimburse the Principal Underwriter or controlling person
or persons, defendant or defendants in the suit, for the reasonable fees and
expenses of any counsel retained by them. The Trust agrees promptly to notify
the Principal Underwriter of the commencement of any litigation or proceedings
against it or any of its officers or Trustees in connection with the issuance or
sale of any of the Fund's shares.
4. The Principal Underwriter covenants and agrees that, in selling the
shares of the Fund, it will use its best efforts in all respects duly to conform
with the requirements of all state and federal laws relating to the sale of such
shares, and will indemnify and hold harmless the Trust and each of its Trustees
and officers and each person, if any, who controls the Trust within the meaning
of Section 15 of the 1933 Act, against any loss, liability, damages, claim or
expense (including the reasonable cost of investigating or defending any alleged
loss, liability, damages, claim or expense and reasonable counsel fees incurred
in connection therewith), arising by reason of any person acquiring any shares
of the Fund, which may be based upon the 1933 Act or any other statute or at
common law, on account of any wrongful act of the Principal Underwriter or any
of its employees (including any failure to conform with any requirement of any
state or federal law relating to the sale of such shares) or on the ground that
the registration statement or Prospectus, as from time to time amended and
supplemented, includes an untrue statement of a material fact or omits to state
a material fact required to be stated therein or necessary in order to make the
statements therein not misleading, insofar as any such statement or omission was
made in reliance upon, and in conformity with information furnished in writing
to the Trust in connection therewith by or on behalf of the Principal
Underwriter, provided, however, that in no case (i) is the indemnity of the
Principal Underwriter in favor of any person indemnified to be deemed to protect
the Fund or any such person against any liability to which the Fund or any such
person would otherwise be subject by reason of willful misfeasance, bad faith,
or gross negligence in the performance of its or his duties or by reason of its
or his reckless disregard of its obligations and duties under this Agreement, or
(ii) is the Principal Underwriter to be liable under its indemnity agreement
contained in this paragraph with respect to any claim made against the Fund or
any person indemnified unless the Trust or such person, as the case may
3
<PAGE>
be, shall have notified the Principal Underwriter in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon the Trust, the Fund or upon such
person (or after the Trust, the Fund or such person shall have received notice
of such service on any designated agent), but failure to notify the Principal
Underwriter of any such claim shall not relieve it from any liability which it
may have to the Fund or any person against whom such action is brought otherwise
than on account of its indemnity agreement contained in this paragraph. The
Principal Underwriter shall be entitled to participate, at its own expense, in
the defense, or, if it so elects, to assume the defense of any suit brought to
enforce any such liability, but if the Principal Underwriter elects to assume
the defense, such defense shall be conducted by counsel chosen by it and
satisfactory to the Trust, or to its officers or Trustees, or to any controlling
person or persons, defendant or defendants in the suit. In the event that the
Principal Underwriter elects to assume the defense of any such suit and retains
such counsel, the Fund or such officers or Trustees or controlling person or
persons, defendant or defendants in the suit, shall bear the fees and expenses
of any additional counsel retained by them or the Trust, but, in case the
Principal Underwriter does not elect to assume the defense of any such suit, it
shall reimburse the Fund, any such officers and Trustees or controlling person
or persons, defendant or defendants in such suit, for the reasonable fees and
expenses of any counsel retained by them or the Trust. The Principal Underwriter
agrees promptly to notify the Trust of the commencement of any litigation or
proceedings against it in connection with the issue and sale of any of the
Fund's shares.
Neither the Principal Underwriter nor any financial service firm nor
any other person is authorized by the Trust to give any information or to make
any representations, other than those contained in the Registration Statement or
Prospectus filed with the Securities and Exchange Commission (the "Commission")
under the 1933 Act (as said Registration Statement and Prospectus may be amended
or supplemented from time to time), covering the shares of the Fund. Neither the
Principal Underwriter nor any financial service firm nor any other person is
authorized to act as agent for the Trust or the Fund in connection with the
offering or sale of shares of the Fund to the public or otherwise. All such
sales made by the Principal Underwriter shall be made by it as principal, for
its own account. The Principal Underwriter may, however, act as agent in
connection with the repurchase of shares as provided in paragraph 6 below, or in
connection with "exchanges" between investment companies for which the Principal
Underwriter (or an affiliate thereof) acts as principal underwriter or
investment adviser.
5(a). The Fund will pay, or cause to be paid -
(i) all the costs and expenses of the Fund, including fees and
disbursements of its counsel, in connection with the preparation and filing of
any required Registration Statement and/or Prospectus under the 1933 Act, or the
1940 Act, covering its shares and all amendments and supplements thereto, and
preparing and distributing periodic reports to shareholders (including the
expense of setting up in type any such Registration Statement, Prospectus or
periodic report);
(ii) the cost of preparing temporary and permanent share
certificates (if any) for shares of the Fund;
(iii) the cost and expenses of delivering to the Principal
Underwriter at its office in Boston, Massachusetts, all shares of the Fund
purchased by it as principal hereunder;
(iv) all the federal and state (if any) issue and/or transfer
taxes payable upon the issue by or (in the case of treasury shares) transfer
from the Fund to the Principal Underwriter of any and all shares of the Fund
purchased by the Principal Underwriter hereunder;
4
<PAGE>
(v) the fees, costs and expenses of the registration or
qualification of shares of the Fund for sale in the various states, territories
or other jurisdictions (including without limitation the registering or
qualifying the Fund as a broker or dealer or any officer of the Fund as agent or
salesman in any state, territory or other jurisdiction); and
(vi) all payments to be made by the Fund pursuant to any
written plan approved in accordance with Rule 12b-1 under the 1940 Act or any
written service plan.
(b) The Principal Underwriter agrees that, after the Prospectus (other
than to existing shareholders of the Fund) and periodic reports have been set up
in type, it will bear the expense of printing and distributing any copies
thereof which are to be used in connection with the offering of shares of the
Fund to financial service firms or investors. The Principal Underwriter further
agrees that it will bear the expenses of preparing, printing and distributing
any other literature used by the Principal Underwriter or furnished by it for
use by financial service firms in connection with the offering of the shares of
the Fund for sale to the public and any expenses of advertising in connection
with such offering.
(c) The Principal Underwriter shall be entitled to receive all
contingent deferred sales charges imposed in accordance with the Prospectus on
early redemptions of Fund shares.
6. The Trust hereby authorizes the Principal Underwriter to repurchase,
upon the terms and conditions set forth in written instructions given by the
Trust to the Principal Underwriter from time to time, as agent of the Fund and
for its account, such shares of the Fund as may be offered for sale to the Fund
from time to time.
(a) The Principal Underwriter shall notify in writing IBT and First
Data, at the end of each business day, or as soon thereafter as the repurchases
in each pricing period have been compiled, of the number of shares repurchased
for the account of the Fund since the last previous report, together with the
prices at which such repurchases were made, and upon the request of any officer
or Trustee of the Trust shall furnish similar information with respect to all
repurchases made up to the time of the request on any day.
(b) The Trust reserves the right to suspend or revoke the foregoing
authorization at any time; unless otherwise stated, any such suspension or
revocation shall be effective forthwith upon receipt of notice thereof by an
officer of the Principal Underwriter, by telegraph or by written instrument from
an officer of the Trust duly authorized by its Trustees. In the event that the
authorization of the Principal Underwriter is, by the terms of such notice,
suspended for more than twenty-four hours or until further notice, the
authorization given by this paragraph 6 shall not be revived except by action of
a majority of the Trustees of the Trust.
(c) The Principal Underwriter shall have the right to terminate the
operation of this paragraph 6 upon giving to the Trust thirty (30) days' written
notice thereof.
(d) The Trust agrees to authorize and direct IBT, to pay, for the
account of the Fund, the purchase price of any shares so repurchased against
delivery of the certificates in proper form for transfer to the Fund or for
cancellation by the Fund.
(e) The Principal Underwriter shall receive no commission in respect of
any repurchase of shares under the foregoing authorization and appointment as
agent, except contingent deferred sales charges.
5
<PAGE>
(f) The Trust agrees that the Fund will reimburse the Principal
Underwriter, from time to time on demand, for any reasonable expenses incurred
in connection with the repurchase of shares of the Fund pursuant to this
paragraph 6.
7. If, at any time during the existence of this Agreement, the Trust
shall deem it necessary or advisable in the best interests of the Fund that any
amendment of this Agreement be made in order to comply with the recommendations
or requirements of the Commission or other governmental authority or to obtain
any advantage under Massachusetts or federal tax laws, and shall notify the
Principal Underwriter of the form of amendment which it deems necessary or
advisable and the reasons therefor, and, if the Principal Underwriter declines
to assent to such amendment, the Trust may terminate this Agreement forthwith by
written notice to the Principal Underwriter. If, at any time during the
existence of this Agreement upon request by the Principal Underwriter, the Trust
fails (after a reasonable time) to make any changes in its Declaration of Trust,
as amended, or in its methods of doing business which are necessary in order to
comply with any requirement of federal law or regulations of the Commission or
of a national securities association of which the Principal Underwriter is or
may be a member, relating to the sale of the shares of the Fund, the Principal
Underwriter may terminate this Agreement forthwith by written notice to the
Trust.
8(a). The Principal Underwriter is a corporation in the United States
organized under the laws of Massachusetts and holding membership in the National
Association of Securities Dealers, Inc., a securities association registered
under Section 15A of the Securities Exchange Act of 1934, as amended from time
to time, and during the life of this Agreement will continue to be so resident
in the United States, so organized and a member in good standing of said
Association. The Principal Underwriter covenants that it and its officers and
directors will comply with the Trust's Declaration of Trust and By-Laws, and the
1940 Act and the rules promulgated thereunder, insofar as they are applicable to
the Principal Underwriter.
(b) The Principal Underwriter shall maintain in the United States and
preserve therein for such period or periods as the Commission shall prescribe by
rules and regulations applicable to it as Principal Underwriter of an open-end
investment company registered under the 1940 Act such accounts, books and other
documents as are necessary or appropriate to record its transactions with the
Fund. Such accounts, books and other documents shall be subject at any time and
from time to time to such reasonable periodic, special and other examinations by
the Commission or any member or representative thereof as the Commission may
prescribe. The Principal Underwriter shall furnish to the Commission within such
reasonable time as the Commission may prescribe copies of or extracts from such
records which may be prepared without effort, expense or delay as the Commission
may by order require.
9. This Agreement shall continue in force indefinitely until
terminated as in this Agreement above provided, except that:
(a) this Agreement shall continue in effect through and including April
28, 1997 (or, if applicable, the next April 28 which follows the day on which
the Fund has become a party hereto by amendment of Schedule A subsequent to
April 28, 1997), and shall continue in full force and effect indefinitely
thereafter, but only so long as such continuance is specifically approved at
least annually (i) by the vote of a majority of the Trustees of the Trust who
are not interested persons of the Trust or of the Principal Underwriter cast in
person at a meeting called for the purpose of voting on such approval, and (ii)
by the Trustees of the Trust or by vote of a majority of the outstanding voting
securities of the Fund;
6
<PAGE>
(b) that either party shall have the right to terminate this Agreement
on six (6) months' written notice thereof given in writing to the other; and
(c) additional series of the Trust will become parties hereto upon
approval by the Trustees of the Trust and amendment of Schedule A.
10. In the event of the assignment of this Agreement by the
Principal Underwriter, this Agreement shall automatically terminate.
11. Any notice under this Agreement shall be in writing, addressed and
delivered, or mailed postage paid, to the other party, at such address as such
other party may designate for the receipt of such notices. Until further notice
to the other party, it is agreed that the record address of the Trust and that
of the Principal Underwriter, shall be 24 Federal Street, Boston, Massachusetts
02110.
12. The services of the Principal Underwriter to the Fund hereunder are
not to be deemed to be exclusive, the Principal Underwriter being free to (a)
render similar services to, and to act as principal underwriter in connection
with the distribution of shares of, other series of the Trust or other
investment companies, and (b) engage in other business and activities from time
to time.
13. The terms "vote of a majority of the outstanding voting
securities," "assignment" and "interested persons," when used herein, shall have
the respective meanings specified in the 1940 Act, subject, however, to such
exemptions as may be granted by the Commission by any rule, regulation or order.
14. The Principal Underwriter expressly acknowledges the provision in
the Trust's Declaration of Trust limiting the personal liability of the
shareholders of the Fund or the Trustees of the Trust. The Principal Underwriter
hereby agrees that it shall have recourse only to the assets of the Fund for
payment of claims or obligations as between the Trust on behalf of the Fund, and
the Principal Underwriter arising out of this Agreement and shall not seek
satisfaction from any shareholders of the Trust or from the Trustees or any
Trustee of the Trust. The Fund shall not be responsible for obligations of any
other series of the Trust.
15. All references in this Agreement to the "Prior Agreements" shall
mean the Distribution Agreement dated March 20, 1996 between the Trust on behalf
of the Fund and the Prior Principal Underwriter, Eaton Vance Distributors, Inc.,
a separate Massachusetts corporation that has served as principal underwriter of
the Trust prior to the effective date of this Agreement. Such references shall
not be applicable to any additional series of the Trust which becomes a Fund
hereunder by amendment of Schedule A hereafter.
7
<PAGE>
16. This Agreement shall replace and be substituted for the Prior
Agreements as of the opening of business on November 1, 1996, and this Agreement
shall be effective as of such time.
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement
the 18th day of October, 1996.
EATON VANCE MUTUAL FUNDS TRUST
By /s/ M. Dozier Gardner
--------------------------
President
EATON VANCE DISTRIBUTORS, INC.
By /s/ H. Day Brigham, Jr.
--------------------------
Vice President
8
<PAGE>
SCHEDULE A
----------
EATON VANCE MUTUAL FUNDS TRUST
DISTRIBUTION AGREEMENT
(TRADITIONAL FUNDS)
EFFECTIVE NOVEMBER 1, 1996
--------------------------
Name of Fund Inception Date of Prior Agreements
------------ ----------------------------------
EV Traditional Government Obligations Fund July 9, 1984
EV Traditional Tax-Managed Growth Fund March 20, 1996
Eaton Vance Short-Term Treasury Fund February 4, 1991
<PAGE>
EXHIBIT (6)(a)(4)
EATON VANCE MUTUAL FUNDS TRUST
DISTRIBUTION AGREEMENT
ON BEHALF OF EATON VANCE CASH MANAGEMENT FUND
AGREEMENT effective November 1, 1996 between EATON VANCE MUTUAL FUNDS
TRUST, a Massachusetts business trust having its principal place of business in
Boston in the Commonwealth of Massachusetts, hereinafter called the "Trust," on
behalf of Eaton Vance Cash Management Fund (the "Fund"), and EATON VANCE
DISTRIBUTORS, INC., a Massachusetts corporation having its principal place of
business in said Boston and formerly named EV Distributors, Inc., hereinafter
sometimes called the "Distributor."
That in consideration of the mutual covenants herein contained, it is
agreed that:
1. Appointment as Distributor. The Trust on behalf of the Fund hereby
appoints the Distributor as a general distributor of shares of beneficial
interest of the Fund (the "shares"). Nothing herein shall be construed to
prevent the Trust from employing other general distributors of the shares or to
prohibit the Fund from acting as distributor of its shares.
2. Distributions by Distributor. The Distributor will have the right to
obtain subscriptions for and to sell shares as agent of the Fund. The
Distributor shall be under no obligation to effectuate any particular amount of
sales of shares or to promote or make sales except to the extent the Distributor
deems advisable.
3. Sales Price. All subscriptions and sales of shares by the
Distributor hereunder shall be at the net asset value of the shares in
accordance with the provisions of the Trust's Declaration of Trust, By-Laws and
the current Prospectus of the Fund. No commission or other compensation for
selling or obtaining subscriptions for shares shall be paid on any such sale or
subscription.
4. Repurchase of Shares. The Distributor may act as agent for
the Fund in connection with the repurchase of shares by the Fund upon the
terms and conditions set forth in the then current Prospectus of the Fund.
5. Rules of NASD, etc. The Distributor will conform to the Rules of
Fair Practice of the National Association of Securities Dealers, Inc. and the
sale of securities laws of any jurisdiction in which it sells, directly or
indirectly, any shares. The Distributor agrees to make timely filings of any
sales literature relating to the Fund and intended for distribution to
prospective investors with the Securities and Exchange Commission in Washington,
D.C., and the National Association of Securities Dealers, Inc., as the same may
be required, and also with such other regulatory authorities as may be required.
The Distributor also agrees to furnish to the Fund sufficient copies of any
agreements or plans it intends to use in connection with any sales of shares in
adequate time for the Fund to file and clear them with the proper authorities,
if the same is necessary, before they are put in use, and not to use them until
so filed and cleared.
<PAGE>
6. Cooperation by Fund. The Trust on behalf of the Fund agrees to
execute such papers and to do such acts and things as shall from time to time be
reasonably requested by the Distributor for the purpose of qualifying and
maintaining qualification of the shares for sale under the so-called "Blue Sky"
laws of any state or territory or for maintaining the registration of the Trust
and of the shares of the Fund under the Securities Act of 1933, as amended from
time to time (the "1933 Act") and the Investment Company Act of 1940, as amended
from time to time (the "1940 Act"), to the end that there will be available for
sale from time to time such number of shares as the Distributor may reasonably
be expected to sell. The Trust will advise the Distributor promptly of (i) any
action of the Securities and Exchange Commission (the "Commission") or any
authorities of any state or territory, of which it may be advised, affecting
registration or qualification of the Trust and of the shares of the Fund, or
rights to offer the shares for sale, and (ii) the happening of any event which
makes untrue any statement, or which requires the making of any change, in the
registration statement or Prospectus in order to make the statements therein not
misleading.
7. The Distributor as Independent Contractor. The Distributor shall be
an independent contractor and neither the Distributor nor any of its officers or
employees as such is or shall be deemed an employee of the Trust. The
Distributor is responsible for its own conduct and the employment, control and
conduct of its agents and employees and for injury to such agents or employees
or to others through its agents or employees. The Distributor assumes full
responsibility for its agents and employees under applicable statutes and agrees
to pay all employer taxes thereunder.
The Distributor will maintain at its own expense insurance against
public liability in such an amount as the Trustees of the Trust may from time to
time reasonably request.
8. Expenses. The Fund will pay (or enter into arrangements providing
that others than the Distributor will pay) all fees and expenses in connection
with the preparation and filing of any registration statements and Prospectuses,
all amendments thereto, under the 1933 Act, or the 1940 Act covering the issue
and sale of shares of the Fund and in connection with the preparation and
issuance of certificates for shares of the Fund, and fees and expenses in
connection with registering and maintaining registrations of the Fund and of its
shares under state securities laws. The Fund will also pay any issue taxes or,
in the case of shares redeemed, any initial transfer taxes and will pay all
expenses of preparing and setting in type, Prospectuses of the Fund and of
printing and distributing Fund Prospectuses sent annually to existing
shareholders. The Distributor will pay all expenses of preparing, printing, and
distributing advertising and sales literature and all Prospectuses and
shareholder reports used by the Distributor and by others in the sale of Fund
shares.
9. Indemnification of Fund. The Distributor agrees to indemnify and
hold harmless the Trust and each person who has been, is or may hereafter be an
officer or Trustee of the Trust against expenses reasonably incurred by any of
them in connection with any claim or in connection with any action, suit or
proceeding to which any of them may be a party, which arises out of or is
alleged to arise out of any misrepresentation or omission to sate a material
fact, or out of any alleged misrepresentation or omission to state a material
fact, on the part of the Distributor or any agent or employee of the Distributor
or any other person for whose acts the Distributor is responsible or is alleged
to be responsible, unless such misrepresentation or omission was made in
2
<PAGE>
reliance upon written information furnished by the Fund. The term "expenses"
include amounts paid in satisfaction of judgments or in settlements made with
the Distributor's consent. The foregoing rights of indemnification shall be in
addition to any other rights to which the Trust or any such officer or Trustees
may be entitled as a matter of law.
10. Effective Date, Termination and Amendment. This Agreement shall
become effective on the date of its execution and shall remain in full force
until April 28, 1997 and from year to year thereafter so long as its continuance
is specifically approved at least annually (a) by vote of a majority of the
outstanding voting securities of the Fund or by the Trustees of the Trust, and
(b) by a majority of the Trustees of the Trust who are not interested persons of
the Trust or of the Distributor, by vote cast in person at a meeting called for
the purpose of voting on such approval; provided, however, that this Agreement
may at any time be terminated without the payment of any penalty (1) by vote of
the Trustees of the Trust or by vote of a majority of the outstanding voting
securities of the Fund on 60 days' written notice to the Distributor, (2)
immediately and automatically in the event of its assignment, and (3) by the
Distributor on 60 days' written notice to the Trust. Any notice under this
Agreement shall be given in writing, addressed and delivered, or mailed
postpaid, to the other party at any office of such party.
This Agreement may be amended at any time by mutual consent of the
parties, provided that such consent on the part of the Trust shall have been
approved (a) by vote of a majority of the outstanding voting securities of the
Fund or by vote of the Trustees of the Trust, and (b) by a majority of the
Trustees of the Trust who are not interested persons of the Trust or of the
Distributor, by vote cast in person at a meeting called for the purpose of
voting on such approval.
11. Use of Name. In the event of the termination of this Agreement the
Fund will, upon the written request of the Distributor, forthwith, or as soon as
may be practicable, delete from its name the words "Eaton Vance" or "Eaton &
Howard," "Vance Sanders," or any approximation thereof.
12. Certain Definitions. The terms "interested person," "vote of a
majority of the outstanding voting securities", "assignment" and "specifically
approved at least annually" when used in this Agreement, shall have the
respective meanings specified in the 1940 Act and the Rules and Regulations
thereunder, subject, however, to such exemptions as may be granted by the
Securities and Exchange Commission under said Act.
13. Limitation of Liability. The Distributor expressly acknowledges the
provision in the Trust's Declaration of Trust limiting the personal liability of
shareholders of the Fund or the Trustees of the Trust, and the Distributor
hereby agrees that it shall have recourse to the Trust or the Fund for the
payment of claims or obligations as between the Distributor and the Trust or the
Fund arising out of this Agreement and shall not seek satisfaction of any such
obligation from the shareholders or any shareholder of the Trust or from the
Trustees or any Trustee of the Trust.
14. This Agreement shall replace and be substituted for the
distribution agreement dated September 1, 1995 between the Trust on behalf of
the Fund and the prior principal underwriter, Eaton Vance Distributors, Inc., a
separate Massachusetts corporation that has served as principal underwriter of
the Trust prior to the effective date of this Agreement as of the opening of
business on November 1, 1996, and this Agreement shall be effective as of such
time.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement
on the 18th day of October, 1996.
EATON VANCE MUTUAL FUNDS TRUST (on behalf of EATON
VANCE CASH MANAGEMENT FUND)
By /s/ M. Dozier Gardner
----------------------------
President
EATON VANCE DISTRIBUTORS, INC.
By /s/ H. Day Brigham, Jr.
----------------------------
Vice President
4
<PAGE>
EXHIBIT (6)(a)(5)
EATON VANCE MUTUAL FUNDS TRUST
DISTRIBUTION AGREEMENT
ON BEHALF OF
EATON VANCE LIQUID ASSETS FUND
AGREEMENT effective November 1, 1996 between EATON VANCE MUTUAL FUNDS
TRUST, a Massachusetts business trust having its principal place of business in
Boston in the Commonwealth of Massachusetts, hereinafter called the "Trust," on
behalf of Eaton Vance Liquid Assets Fund (the "Fund"), and EATON VANCE
DISTRIBUTORS INC., a Massachusetts corporation having its principal place of
business in said Boston and formerly named EV Distributors, Inc., hereinafter
sometimes called the "Principal Underwriter."
IN CONSIDERATION of the mutual promises and undertakings herein
contained, the parties hereto agree:
1. The Trust grants to the Principal Underwriter the right to purchase
shares of the Fund upon the terms hereinbelow set forth during the term of this
Agreement. While this Agreement is in force, the Principal Underwriter agrees to
use its best efforts to find purchasers for shares of the Fund.
The Principal Underwriter shall have the right to buy from the Fund the
shares needed, but not more than the shares needed (except for clerical errors
and errors of transmission) to fill unconditional orders for shares of the Fund
placed with the Principal Underwriter by financial service firms or investors as
set forth in the current Prospectus relating to shares of the Fund. The price
which the Principal Underwriter shall pay for the shares so purchases shall be
equal to the price paid by investors upon purchasing such shares. The Principal
Underwriter shall notify Investors Bank & Trust Company, Custodian of the Fund
("IBT"), and First Data Investor Services Group, Transfer Agent of the Fund
("First Data"), or a successor transfer agent, at the end of each business day,
or as soon thereafter as the orders placed with it have been compiled, of the
number of shares and the prices thereof which the Principal Underwriter is to
purchase as principal for resale. The Principal Underwriter shall take down and
pay for shares ordered from the Fund on or before the eleventh business day
(excluding Saturdays) after the shares have been so ordered.
The right granted to the Principal Underwriter to buy shares from the
Fund shall be exclusive, except that said exclusive right shall not apply to
shares issued in connection with the merger or consolidation of any other
investment company or personal holding company with the Fund or the acquisition
by purchase or otherwise of all (or substantially all) the assets or the
outstanding shares of any such company, by the Fund; nor shall it apply to
shares, if any, issued by the Fund in distribution of income or realized capital
gains of the Fund payable in shares or in cash at the option of the shareholder.
2. The shares may be resold by the Principal Underwriter to or through
financial service firms having agreements with the Principal Underwriter, and to
investors, upon the following terms and conditions.
<PAGE>
The public offering price, i.e., the price per share at which the
Principal Underwriter or financial service firm purchasing shares from the
Principal Underwriter may sell shares to the public, shall be equal to the net
asset value at which the Principal Underwriter is to purchase the shares.
The net asset value of shares of the Fund shall be determined by the
Trust or IBT, as the agent of the Fund, as of the close of regular trading on
the New York Stock Exchange on each business day on which said Exchange is open,
or as of such other time on each such business day as may be determined by the
Trustees of the Trust, in accordance with the methodology and procedures for
calculating such net asset value authorized by the Trustees. The Trust may also
cause the net asset value to be determined in substantially the same manner or
estimated in such manner as of such other time or times as may from time to time
be agreed upon by the Trust and Principal Underwriter. The Trust will notify the
Principal Underwriter each time the net asset value of the Fund's shares is
determined and when such value is so determined, it shall be applicable to
transactions as set forth in the current Prospectus and Statement of Additional
Information (hereafter the "Prospectus") relating to the Fund's shares.
No shares of the Fund shall be sold by the Fund during any period when
the determination of net asset value is suspended pursuant to the Declaration of
Trust, except to the Principal Underwriter, in the manner and upon the terms
above set forth to cover contracts of sale made by the Principal Underwriter
with its customers prior to any such suspension, and except as provided in the
last paragraph of paragraph 1 hereof. The Trust shall also have the right to
suspend the sale of the Fund's shares if in the judgment of the Trust conditions
obtaining at any time render such action advisable. The Principal Underwriter
shall have the right to suspend sales at any time, to refuse to accept or
confirm any order from an investor or financial service firm, or to accept or
confirm any such order in part only, if in the judgment of the Principal
Underwriter such action is in the best interests of the Fund.
3. The Trust agrees that it will, from time to time, but subject to the
necessary approval of the Fund's shareholders, take such steps as may be
necessary to register the Fund's shares under the federal Securities Act of
1933, as amended from time to time (the "1933 Act"), to the end that there will
be available for sale such number of shares as the Principal Underwriter may
reasonably be expected to sell. The Trust agrees to indemnify and hold harmless
the Principal Underwriter and each person, if any, who controls the Principal
Underwriter within the meaning of Section 15 of the 1933 Act against any loss,
liability, claim, damages or expense (including the reasonable cost of
investigating or defending any alleged loss, liability, claim, damages or
expense and reasonable counsel fees incurred in connection therewith), arising
by reason of any person acquiring any shares of the Fund, which may be based
upon the 1933 Act or on any other statute or at common law, on the ground that
the Registration Statement or Prospectus, as from time to time amended and
supplemented, includes an untrue statement of a material fact or omits to state
a material fact required to be stated therein or necessary in order to make the
statements therein not misleading, unless such statement or omission was made in
reliance upon, and in conformity with, information furnished in writing to the
Trust in connection therewith by or on behalf of the Principal Underwriter;
provided, however, that in no case (i) is the indemnity of the Trust in favor of
the Principal Underwriter and any such controlling person to be deemed to
protect such Principal Underwriter or any such controlling person against any
liability to the Trust or the Fund or its security holders to which such
Principal Underwriter or any such controlling person would otherwise be subject
by reason of willful misfeasance, bad faith, or gross negligence in the
performance of its duties or by reason of its reckless disregard of its
obligations and duties under this Agreement, or (ii) is the Trust or the Fund to
be liable under its indemnity agreement contained in this paragraph with respect
to any claim made against the Principal Underwriter or any such controlling
person unless the Principal Underwriter or such controlling person, as the case
may be, shall have notified the Trust in writing within a reasonable time after
the summons or other first legal process giving information of the nature of the
2
<PAGE>
claim shall have been served upon the Principal Underwriter or upon such
controlling person (or after such Principal Underwriter or such controlling
person shall have received notice of such service on any designated agent), but
failure to notify the Trust of any such claim shall not relieve it from any
liability which the Fund may have to the person against whom such action is
brought otherwise than on account of its indemnity agreement contained in this
paragraph. The Trust shall be entitled to participate, at the expense of the
Fund, in the defense, or, if the Trust so elects, to assume the defense of any
suit brought to enforce any such liability, but if the Trust elects to assume
the defense, such defense shall be conducted by counsel chosen by it and
satisfactory to the Principal Underwriter or controlling person or persons,
defendant or defendants in the suit. In the event the Trust elects to assume the
defense of any such suit and retains such counsel, the Principal Underwriter or
controlling person or persons, defendant or defendants in the suit, shall bear
the fees and expenses of any additional counsel retained by them, but, in case
the Trust does not elect to assume the defense of any such suit, the Fund shall
reimburse the Principal Underwriter or controlling person or persons, defendant
or defendants in the suit, for the reasonable fees and expenses of any counsel
retained by them. The Trust agrees promptly to notify the Principal Underwriter
of the commencement of any litigation or proceedings against it or any of its
officers or Trustees in connection with the issuance or sale of any of the
Fund's shares.
4. The Principal Underwriter covenants and agrees that, in selling the
shares of the Fund, it will use its best efforts in all respects duly to conform
with the requirements of all state and federal laws relating to the sale of such
securities, and will indemnify and hold harmless the Trust and each of its
Trustees and officers and each person, if any, who controls the Trust within the
meaning of Section 15 of the 1933 Act, against any loss, liability, damages,
claim or expense (including the reasonable cost of investigating or defending
any alleged loss, liability, damages, claim or expense and reasonable counsel
fees incurred in connection therewith), arising by reason of any person
acquiring any shares of the Fund, which may be based upon the 1933 Act or any
other statute or at common law, on account of any wrongful act of the Principal
Underwriter or any of its employees (including any failure to conform with any
requirement of any state or federal law relating to the sale of such securities)
or on the ground that the Registration Statement or Prospectus, as from time to
time amended and supplemented, includes an untrue statement of a material fact
or omits to state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading, insofar as any such
statement or omission was made in reliance upon, and in conformity with
information furnished in writing to the Fund in connection therewith by or on
behalf of the Principal Underwriter, provided, however, that in no case (i) is
the indemnity of the Principal Underwriter in favor of any person indemnified to
be deemed to protect the Fund or any such person against any liability to which
the Fund or any such person would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of its or his
duties or by reason of its or his reckless disregard of its obligations and
duties under this Agreement, or (ii) is the Principal Underwriter to be liable
under its indemnity agreement contained in this paragraph with respect to any
claim made against the Fund or any person indemnified unless the Trust or such
person, as the case may be, shall have notified the Principal Underwriter in
writing within a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been served upon the
Trust, the Fund or upon such person (or after the Trust, the Fund or such person
shall have received notice of such service on any designated agent), but failure
to notify the Principal Underwriter of any such claim shall not relieve it from
any liability which it may have to the Fund or any person against whom such
action is brought otherwise than on account of its indemnity agreement contained
in this paragraph. The Principal Underwriter shall be entitled to participate,
at its own expense, in the defense, or, if it so elects, to assume the defense
of any suit brought to enforce any such liability, but if the Principal
Underwriter elects to assume the defense, such defense shall be conducted by
counsel chosen by it and satisfactory to the Trust, or to its officers or
Trustees, or to any controlling person or persons, defendant or defendants in
the suit. In the event that the Principal Underwriter elects to assume
3
<PAGE>
the defense of any such suit and retains such counsel, the Fund or such officers
or Trustees or controlling person or persons, defendant or defendants in the
suit, shall bear the fees and expenses of any additional counsel retained by
them or the Trust, but, in case the Principal Underwriter does not elect to
assume the defense of any such suit, it shall reimburse the Fund, any such
officers and Trustees or controlling person or persons, defendant or defendants
in such suit, for the reasonable fees and expenses of any counsel retained by
them or the Trust. The Principal Underwriter agrees promptly to notify the Trust
of the commencement of any litigation or proceedings against it in connection
with the issue and sale of any of the Fund's shares.
Neither the Principal Underwriter nor any financial service firm nor
any other person is authorized by the Trust to give any information or to make
representations, other than those contained in the Registration Statement or
Prospectus filed with the Securities and Exchange Commission (the "Commission")
under the 1933 Act (as said Registration Statement and Prospectus may be amended
or supplemented from time to time), covering the shares of the Fund. Neither the
Principal Underwriter nor any financial service firm nor any other person is
authorized to act as agent for the Trust or the Fund in connection with the
offering or sale of shares of the Fund to the public or otherwise. All such
sales made by the Principal Underwriter shall be made by it as principal, for
its own account. The Principal Underwriter may, however, act as agent in
connection with the repurchase of shares as provided in paragraph 6 below, or in
connection with "exchanges" between investment companies for which the Principal
Underwriter acts as Principal Underwriter or for which an affiliate of the
Principal Underwriter acts as investment adviser.
5(a). The Fund will pay, or cause to be paid -
(i) all the costs and expenses of the Fund, including fees and
disbursements of its counsel, in connection with the preparation and filing of
any required Registration Statement and/or Prospectus under the 1933 Act or the
Investment Company Act of 1940, as amended from time to time (the "1940 Act"),
covering its shares and all amendments and supplements thereto, and preparing
and mailing periodic reports to shareholders (including the expense of setting
up in type any such Registration Statement, Prospectus or periodic report);
(ii) the cost of preparing temporary and permanent stock
certificates (if any) for shares of the Fund;
(iii) the cost and expenses of delivering to the Principal
Underwriter at its office in Boston, Massachusetts, all shares of the Fund
purchased by it as principal hereunder; and
(iv) all the federal and state (if any) issue and/or transfer
taxes payable upon the issue by or (in the case of treasury shares) transfer
from the Fund to the Principal Underwriter of any and all shares of the Fund
purchased by the Principal Underwriter hereunder.
(b) The Principal Underwriter agrees that, after the Prospectus (other
than to existing shareholders of the Fund) and periodic reports have been set up
in type, it will bear the expense of printing and distributing any copies
thereof which are to be used in connection with the offering of shares of the
Fund to financial service firms or investors. The Principal Underwriter further
agrees that it will bear the expenses of preparing, printing and distributing
any other literature used by the Principal Underwriter or furnished by it for
use by financial service firms in connection with the offering of shares of the
Fund for sale to the public and any expenses of advertising in connection with
such offering. The Fund agrees to pay the expenses of registration and
4
<PAGE>
maintaining registration of the shares for sale under federal and state
securities laws, and, if necessary or advisable in connection therewith, of
qualifying the Trust or the Fund as a dealer or broker, in such states as shall
be selected by the Principal Underwriter and the fees payable to each such state
for continuing the qualification therein until the Principal Underwriter
notifies the Trust that it does not wish such qualification continued.
(c) The persons authorized to direct the disposition of monies paid or
payable on behalf of the Fund pursuant to the Distribution Plan (the "Plan") or
this Agreement shall be the President or any Vice President of the Trust. Such
persons shall provide to the Trust's Trustees and the Trustees shall review, at
least quarterly, a written report of the amounts so expended and the purposes
for which such expenditures were made.
6. The Trust hereby authorizes the Principal Underwriter to repurchase,
upon the terms and conditions set forth in written instructions given by the
Trust to the Principal Underwriter from time to time, as agent of the Fund and
for its account, such shares of the Fund as may be offered for sale to the Fund
from time to time.
(a) The Principal Underwriter shall notify in writing IBT and First
Data at the end of each business day, or as soon thereafter as the repurchases
in each pricing period have been compiled, of the number of shares repurchased
for the account of the Fund since the last previous report, together with the
prices at which such repurchases were made, and upon the request of any officer
or Trustee of the Trust shall furnish similar information with respect to all
repurchases made up to the time of the request on any day.
(b) The Trust reserves the right to suspend or revoke the foregoing
authorization at any time; unless otherwise stated, any such suspension or
revocation shall be effective forthwith upon receipt of notice thereof by an
officer of the Principal Underwriter, by telegraph or by written instrument from
an officer of the Trust duly authorized by its Trustees. In the event that the
authorization of the Principal Underwriter is, by the terms of such notice,
suspended for more than twenty-four hours or until further notice, the
authorization given by this paragraph 6 shall not be revived except by action of
a majority of the Trustees of the Trust.
(c) The Principal Underwriter shall have the right to terminate the
operation of this paragraph 6 upon giving to the Trust thirty (30) days' written
notice thereof.
(d) The Trust agrees to authorize and direct IBT to pay, for the
account of the Fund, the purchase price of any shares so repurchased against
delivery of the certificates in proper form for transfer to the Fund or for
cancellation by the Fund.
(e) The Principal Underwriter shall receive no commission in respect of
any repurchase of shares under the foregoing authorization and appointment as
agent, except for any contingent deferred sales charges.
(f) The Trust agrees that the Fund will reimburse the Principal
Underwriter, from time to time on demand, for any reasonable expenses incurred
in connection with the repurchase of shares of the Fund pursuant to this
paragraph 6.
5
<PAGE>
7. If, at any time during the existence of this Agreement, the Trust
shall deem it necessary or advisable in the best interests of the Fund that any
amendment of this Agreement be made in order to comply with the recommendations
or requirements of the Commission or other governmental authority or to obtain
any advantage under Massachusetts or federal tax laws, and shall notify the
Principal Underwriter of the form of amendment which it deems necessary or
advisable and the reasons therefor, and, if the Principal Underwriter declines
to assent to such amendment, the Trust may terminate this Agreement forthwith by
written notice to the Principal Underwriter. If, at any time during the
existence of its agreement upon request by the Principal Underwriter, the Trust
fails (after a reasonable time) to make any changes in its Declaration of Trust,
as amended, or in its methods of doing business which are necessary in order to
comply with any requirement of federal law or regulations of the Commission or
of a national securities association of which the Principal Underwriter is or
may be a member, relating to the sale of the shares of the Fund, the Principal
Underwriter may terminate this Agreement forthwith by written notice to the
Trust.
8. The term "net asset value" as used in this Agreement with reference
to the shares of the Fund shall have the same meaning as used in the Declaration
of Trust, as amended, and calculated in the manner referred to in paragraph 2
above.
9(a). The Principal Underwriter is a corporation in the United States
organized under the laws of Massachusetts and holding membership in the National
Association of Securities Dealers, Inc., a securities association registered
under Section 15A of the Securities Exchange Act of 1934 as amended from time to
time, and during the life of this Agreement will continue to be so resident in
the United States, so organized and a member in good standing of said
Association. The Principal Underwriter will comply with the Trust's Declaration
of Trust and By-Laws, and the 1940 Act and the rules promulgated thereunder,
insofar as they are applicable to the Principal Underwriter.
(b) The Principal Underwriter shall maintain in the United States and
preserve therein for such period or periods as the Commission shall prescribe by
rules and regulations applicable to it as Principal Underwriter of an open-end
investment company registered under the 1940 Act such accounts, books and other
documents as are necessary or appropriate to record its transactions with the
Fund. Such accounts, books and other documents shall be subject at any time and
from time to time to such reasonable periodic, special and other examinations by
the Commission or any member or representative thereof as the Commission may
prescribe. The Principal Underwriter shall furnish to the Commission within such
reasonable time as the Commission may prescribe copies of or extracts from such
records which may be prepared without effort, expense or delay as the Commission
may by order require.
10. This Agreement shall continue in force indefinitely until
terminated as in this Agreement above provided, except that:
(a) this Agreement shall remain in effect through and including April
28, 1997 and shall continue in full force and effect indefinitely thereafter,
but only so long as such continuance is specifically approved at least annually
(i) by the vote of a majority of the Trustees of the Trust who are not
"interested persons" (as defined in Section 2(a)(19) of the 1940 Act) of the
Trust and who have no direct or indirect interest in the operation of the Plan
or this Agreement (the "Rule 12b-1 Trustees") cast in person at a meeting called
for the purpose of voting on such approval, and (ii) by the Trustees of the
Trust or by vote of a majority of the outstanding voting securities of the Fund;
6
<PAGE>
(b) this Agreement may be terminated at any time by vote of a majority
of the Rule 12b-1 Trustees or by vote of a majority of the outstanding voting
securities of the Fund on not more than sixty (60) days' notice to the Principal
Underwriter;
(c) the Principal Underwriter shall have the right to terminate this
Agreement on six (6) months' written notice thereof given in writing to the
Fund; and
(d) the Trust shall have the right to terminate this Agreement
forthwith in the event that it shall have been established by a court of
competent jurisdiction that the Principal Underwriter or any director or officer
of the Principal Underwriter has taken any action which results in a breach of
the covenants set out in paragraph 9 hereof.
11. In the event of the assignment of this Agreement by the Principal
Underwriter, this Agreement shall automatically terminate.
12. Any notice under this Agreement shall be in writing, addressed and
delivered, or mailed postage paid, to the other party, at such address as such
other party may designate for the receipt of such notices. Until further notice
to the other party, it is agreed that the record address of the Trust, and that
of the Principal Underwriter, shall be 24 Federal Street, Boston, Massachusetts
02110.
13. The services of the Principal Underwriter to the Fund hereunder are
not to be deemed to be exclusive, the Principal Underwriter being free to (a)
render similar services to, and to act as principal underwriter in connection
with the distribution of shares of, other series of the Trust or other
investment companies, and (b) engage in other businesses and activities from
time to time.
14. The terms "vote of a majority of the outstanding voting
securities," "assignment" and "interested persons," when used herein, shall have
the respective meanings specified in the 1940 Act, subject, however, to such
exemptions as may be granted by the Commission by any rule, regulation or order.
15. The Principal Underwriter expressly acknowledges the provision in
the Trust's Declaration of Trust limiting the personal liability of the
shareholders of the Fund or the Trustees of the Trust. The Principal Underwriter
hereby agrees that it shall have recourse to the Trust or the Fund for payment
of claims or obligations as between the Trust or the Fund and the Principal
Underwriter arising out of this Agreement and shall not seek satisfaction from
the shareholders or any shareholder of the Trust or from the Trustees or any
Trustee of the Trust. The Fund shall not be responsible for obligations of any
other series of the Trust.
16. The term "Prior Principal Underwriter" means Eaton Vance
Distributors, Inc., a separate Massachusetts corporation that has served as
principal underwriter of the Trust prior to the effective date of this
Agreement. All references in this Agreement to the "Prior Agreement" shall mean
the Distribution Agreement dated September 1, 1995 between the Trust on behalf
of the Fund and the Prior Principal Underwriter (which succeeded agreements
dated November 20, 1989 and June 14, 1993).
17. This Agreement shall replace and be substituted for the Prior
Agreement as of the opening of business on November 1, 1996, and this Agreement
shall be effective as of such time. The outstanding uncovered distribution
charges of the Prior Principal Underwriter as of the close of business on
October 31, 1996 shall be the outstanding uncovered distribution charges of the
Principal Underwriter as of the opening of business on October 1, 1996.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement
on the 18th day of October, 1996.
EATON VANCE MUTUAL FUNDS TRUST
(on behalf of EATON VANCE LIQUID
ASSETS FUND)
By /s/ M. Dozier Gardner
-------------------------
President
EATON VANCE DISTRIBUTORS, INC.
By /s/ H. Day Brigham, Jr.
-------------------------
Vice President
8
<PAGE>
EXHIBIT (6)(a)(6)
EATON VANCE MUTUAL FUNDS TRUST
DISTRIBUTION AGREEMENT
ON BEHALF OF EATON VANCE MONEY MARKET FUND
AGREEMENT effective November 1, 1996 between EATON VANCE MUTUAL FUNDS
TRUST, a Massachusetts business trust having its principal place of business in
Boston in the Commonwealth of Massachusetts, hereinafter called the "Trust," on
behalf of Eaton Vance Money Market Fund (the "Fund"), and EATON VANCE
DISTRIBUTORS, INC., a Massachusetts corporation having its principal place of
business in said Boston and formerly named EV Distributors, Inc., hereinafter
sometimes called the "Principal Underwriter."
IN CONSIDERATION of the mutual promises and undertakings herein
contained, the parties hereto agree:
1. The Trust grants to the Principal Underwriter the right to purchase
shares of the Fund upon the terms hereinbelow set forth during the term of this
Agreement. While this Agreement is in force, the Principal Underwriter agrees to
use its best efforts to find purchasers for shares of the Fund.
The Principal Underwriter shall have the right to buy from the Fund the
shares needed, but not more than the shares needed (except for clerical errors
and errors of transmission) to fill unconditional orders for shares of the Fund
placed with the Principal Underwriter by financial service firms or investors as
set forth in the current Prospectus relating to shares of the Fund. The price
which the Principal Underwriter shall pay for the shares so purchased shall be
equal to the price paid by investors upon purchasing such shares. The Principal
Underwriter shall notify Investors Bank & Trust Company, Custodian of the Fund
("IBT") and First Data Investor Services Group, Transfer Agent of the Fund
("First Data"), or a successor transfer agent, at the end of each business day,
or as soon thereafter as the orders placed with it have been compiled, of the
number of shares and the prices thereof which the Principal Underwriter is to
purchase as principal for resale. The Principal Underwriter shall take down and
pay for shares ordered from the Fund on or before the eleventh business day
(excluding Saturdays) after the shares have been so ordered.
The right granted to the Principal Underwriter to buy shares from the
Fund shall be exclusive, except that said exclusive right shall not apply to
shares issued in connection with the merger or consolidation of any other
investment company or personal holding company with the Fund or the acquisition
by purchase or otherwise of all (or substantially all) the assets or the
outstanding shares of any such company, by the Fund; nor shall it apply to
shares, if any, issued by the Fund in distribution of income or realized capital
gains of the Fund payable in shares or in cash at the option of the shareholder.
2. The shares may be resold by the Principal Underwriter to or through
financial service firms having agreements with the Principal Underwriter, and to
investors, upon the following terms and conditions.
<PAGE>
The public offering price, i.e., the price per share at which the
Principal Underwriter or financial service firm purchasing shares from the
Principal Underwriter may sell shares to the public, shall be equal to the net
asset value at which the Principal Underwriter is to purchase the shares.
The net asset value of shares of the Fund shall be determined by the
Trust or IBT, as the agent of the Fund, as of the close of regular trading on
the New York Stock Exchange on each business day on which said Exchange is open,
or as of such other time on each such business day as may be determined by the
Trustees of the Trust, in accordance with the methodology and procedures for
calculating such net asset value authorized by the Trustees. The Trust may also
cause the net asset value to be determined in substantially the same manner or
estimated in such manner and as of such other time or times as may from time to
time be agreed upon by the Trust and Principal Underwriter. The Trust will
notify the Principal Underwriter each time the net asset value of the Fund's
shares is determined and when such value is so determined it shall be applicable
to transactions as set forth in the current Prospectus and Statement of
Additional Information (hereafter the "Prospectus") relating to the Fund's
shares.
No shares of the Fund shall be sold by the Fund during any period when
the determination of net asset value is suspended pursuant to the Declaration of
Trust, except to the Principal Underwriter, in the manner and upon the terms
above set forth to cover contracts of sale made by the Principal Underwriter
with its customers prior to any such suspension, and except as provided in the
last paragraph of paragraph 1 hereof. The Trust shall also have the right to
suspend the sale of the Fund's shares if in the judgment of the Trust conditions
obtaining at any time render such action advisable. The Principal Underwriter
shall have the right to suspend sales at any time, to refuse to accept or
confirm any order from an investor or financial service firm, or to accept or
confirm any such order in part only, if in the judgment of the Principal
Underwriter such action is in the best interests of the Fund.
3. The Trust agrees that it will, from time to time, but subject to the
necessary approval of the Fund's shareholders, take such steps as may be
necessary to register the Fund's shares under the federal Securities Act of
1933, as amended from time to time (the "1933 Act"), to the end that there will
be available for sale such number of shares as the Principal Underwriter may
reasonably be expected to sell. The Trust agrees to indemnify and hold harmless
the Principal Underwriter and each person, if any, who controls the Principal
Underwriter within the meaning of Section 15 of the 1933 Act against any loss,
liability, claim, damages or expense (including the reasonable cost of
investigating or defending any alleged loss, liability, claim, damages or
expense and reasonable counsel fees incurred in connection therewith), arising
by reason of any person acquiring any shares of the Fund, which may be based
upon the 1933 Act or on any other statute or at common law, on the ground that
the Registration Statement or Prospectus, as from time to time amended and
supplemented, includes an untrue statement of a material fact or omits to state
a material fact required to be stated therein or necessary in order to make the
statements therein not misleading, unless such statement or omission was made in
reliance upon, and in conformity with, information furnished in writing to the
Trust in connection therewith by or on behalf of the Principal Underwriter;
provided, however, that in no case (i) is the indemnity of the Trust in favor of
the Principal Underwriter and any such controlling person to be deemed to
protect such Principal Underwriter or any such controlling person against any
liability to the Trust or the Fund or its security holders to which such
Principal Underwriter or any such controlling person would otherwise be subject
by reason of willful misfeasance, bad faith, or gross negligence in the
performance of its duties or by reason of its reckless disregard of its
obligations and duties under this Agreement, or (ii) is the Trust or the Fund to
be liable under its indemnity agreement contained in this paragraph with respect
to any claim made against the Principal Underwriter or any such controlling
person unless the Principal Underwriter or any such controlling person, as the
case may be, shall have notified the Trust in writing within a reasonable time
after the summons or other first legal process giving information of the nature
2
<PAGE>
of the claim shall have been served upon the Principal Underwriter or such
controlling person (or after such Principal Underwriter or such controlling
person shall have received notice of such service on any designated agent), but
failure to notify the Trust of any such claim shall not relieve it from any
liability which the Fund may have to the person against whom such action is
brought otherwise than on account of its indemnity agreement contained in this
paragraph. The Trust shall be entitled to participate, at the expense of the
Fund, in the defense, or, if the Trust so elects, to assume the defense of any
suit brought to enforce any such liability, but if the Trust elects to assume
the defense, such defense shall be conducted by counsel chosen by it and
satisfactory to the Principal Underwriter or controlling person or persons,
defendant or defendants in the suit. In the event the Trust elects to assume the
defense of any such suit and retains such counsel, the Principal Underwriter or
controlling person or persons, defendant or defendants in the suit, shall bear
the fees and expenses of any additional counsel retained by them, but, in case
the Trust does not elect to assume the defense of any such suit, the Fund shall
reimburse the Principal Underwriter or controlling person or persons, defendant
or defendants in the suit, for the reasonable fees and expenses of any counsel
retained by them. The Trust agrees promptly to notify the Principal Underwriter
of the commencement of any litigation or proceedings against it or any of its
officers or Trustees in connection with the issuance or sale of any of the
Fund's shares.
4. The Principal Underwriter covenants and agrees that, in selling the
shares of the Fund, it will use its best efforts in all respects duly to conform
with the requirements of all state and federal laws relating to the sale of such
shares, and will indemnify and hold harmless the Trust and each of its Trustees
and officers and each person, if any, who controls the Trust within the meaning
of Section 15 of the 1933 Act, against any loss, liability, damages, claim or
expense (including the reasonable cost of investigating or defending any alleged
loss, liability, damages, claim or expense and reasonable counsel fees incurred
in connection therewith), arising by reason of any person acquiring any shares
of the Fund, which may be based upon the 1933 Act or any other statute or at
common law, on account of any wrongful act of the Principal Underwriter or any
of its employees (including any failure to conform with any requirement of any
state or federal law relating to the sale of such shares) or on the ground that
the Registration Statement or Prospectus, as from time to time amended and
supplemented, includes an untrue statement of a material fact or omits to state
a material fact required to be stated therein or necessary in order to make the
statements therein not misleading, insofar as any such statement or omission was
made in reliance upon, and in conformity with information furnished in writing
to the Fund in connection therewith by or on behalf of the Principal
Underwriter, provided, however, that in no case (i) is the indemnity of the
Principal Underwriter in favor of any person indemnified to be deemed to protect
the Fund or any such person against any liability to which the Fund or any such
person would otherwise be subject by reason of willful misfeasance, bad faith,
or gross negligence in the performance of its or his duties or by reason of its
or his reckless disregard of its obligations and duties under this Agreement, or
(ii) is the Principal Underwriter to be liable under its indemnity agreement
contained in this paragraph with respect to any claim made against the Fund or
any person indemnified unless the Trust or such person, as the case may be,
shall have notified the Principal Underwriter in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon the Trust, the Fund or upon such
person (or after the Trust, the Fund or such person shall have received notice
of such service on any designated agent), but failure to notify the Principal
Underwriter of any such claim shall not relieve it from any liability which it
may have to the Fund or any person against whom such action is brought otherwise
than on account of its indemnity agreement contained in this paragraph. The
Principal Underwriter shall be entitled to participate, at its own expense, in
the defense, or, if it so elects, to assume the defense of any suit brought to
enforce any such liability, but if the Principal Underwriter elects to assume
the defense, such defense shall be conducted by counsel chosen by it and
satisfactory to the Trust, or to its officers or Trustees, or to any controlling
person or persons, defendant or defendants in the suit. In the event that the
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<PAGE>
Principal Underwriter elects to assume the defense of any such suit and retains
such counsel, the Fund or such officers or Trustees or controlling person or
persons, defendant or defendants in the suit, shall bear the fees and expenses
of any additional counsel retained by them or the Trust, but, in case the
Principal Underwriter does not elect to assume the defense of any such suit, it
shall reimburse the Fund, any such officers and Trustees or controlling person
or persons, defendant or defendants in such suit, for the reasonable fees and
expenses of any counsel retained by them or the Trust. The Principal Underwriter
agrees promptly to notify the Trust of the commencement of any litigation or
proceedings against it in connection with the issue and sale of any of the
Fund's shares.
Neither the Principal Underwriter nor any financial service firm nor
any other person is authorized by the Trust to give any information or to make
any representations, other than those contained in the Registration Statement or
Prospectus filed with the Securities and Exchange Commission (the "Commission")
under the 1933 Act, (as said Registration Statement and Prospectus may be
amended or supplemented from time to time), covering the shares of the Fund.
Neither the Principal Underwriter nor any financial service firm nor any other
person is authorized to act as agent for the Trust or the Fund in connection
with the offering or sale of shares of the Fund to the public or otherwise. All
such sales made by the Principal Underwriter shall be made by it as principal,
for its own account. The Principal Underwriter may, however, act as agent in
connection with the repurchase of shares as provided in paragraph 6 below, or in
connection with "exchanges" between investment companies for which the Principal
Underwriter acts as Principal Underwriter or for which an affiliate of the
Principal Underwriter acts as investment adviser.
5(a). The Fund will pay, or cause to be paid -
(i) all the costs and expenses of the Fund, including fees and
disbursements of its counsel, in connection with the preparation and filing of
any required Registration Statement and/or Prospectus under the 1933 Act, or the
Investment Company Act of 1940, as amended from time to time (the "1940 Act"),
covering its shares and all amendments and supplements thereto, and preparing
and mailing periodic reports to shareholders (including the expense of setting
up in type any such Registration Statement, Prospectus or periodic report);
(ii) the cost of preparing temporary and permanent share
certificates (if any) for shares of the Fund;
(iii) The cost and expenses of delivering to the Principal
Underwriter at its office in Boston, Massachusetts, all shares of the Fund
purchased by it as principal hereunder; and
(iv) all the federal and state (if any) issue and/or transfer
taxes payable upon the issue by or (in the case of treasury shares) transfer
from the Fund to the Principal Underwriter of any and all shares of the Fund
purchased by the Principal Underwriter hereunder.
(b) The Principal Underwriter agrees that, after the Prospectus and
periodic reports have been set up in type, it will bear the expense of printing
and distributing any copies thereof which are to be used in connection with the
offering of shares of the Fund to financial service firms or investors. The
Principal Underwriter further agrees that it will bear the expenses of
preparing, printing and distributing any other literature used by the Principal
Underwriter or furnished by it for use by financial service firms in connection
with the offering of the shares of the Fund for sale to the public and any
expenses of advertising in connection with such offering. The Fund agrees to pay
the expenses of registration and maintaining registration of its shares for sale
4
<PAGE>
under federal and state securities laws, and, if necessary or advisable in
connection therewith, of qualifying the Trust or the Fund as a dealer or broker,
in such states as shall be selected by the Principal Underwriter and the fees
payable to each such state for continuing the qualification therein until the
Principal Underwriter notifies the Trust that it does not wish such
qualification continued.
(c) In addition, the Trust agrees, in accordance with the Fund's
Distribution Plan (the "Plan"), adopted pursuant to Rule 12b-1 under the 1940
Act with respect to shares, to make certain payments as follows. The Principal
Underwriter shall be entitled to be paid by the Fund a sales commission equal to
an amount not exceeding 6.25% of the price received by the Fund for each sale of
shares (excluding reinvestment of distributions), such payment to be made in the
manner set forth in this paragraph 5. The Principal Underwriter shall also be
entitled to be paid by the Fund a separate distribution fee (calculated in
accordance with paragraph 5(d)), such payment to be made in the manner set forth
and subject to the terms of this paragraph 5.
(d) The sales commissions and distribution fees referred to in
paragraph 5(c) shall be accrued and paid by the Fund in the following manner.
The Fund shall accrue daily an amount calculated at the rate of .75% per annum
of the daily net assets of the Fund, which net assets shall be computed as
described in paragraph 2. The daily amounts so accrued throughout the month
shall be paid to the Principal Underwriter on the last day of each month. The
amount of such daily accrual, as so calculated, shall first be applied and
charged to all unpaid sales commissions, and the balance, if any, shall then be
applied and charged to all unpaid distribution fees. No amount shall be accrued
with respect to any day on which there exist no outstanding uncovered
distribution charges of the Principal Underwriter. The amount of such uncovered
distribution charges shall be calculated daily. For purposes of this
calculation, distribution charges of the Principal Underwriter shall include (a)
the aggregate of all sales commissions which the Principal Underwriter (and
Prior Principal Underwriter) has been paid pursuant to this paragraph (d) (and
pursuant to paragraph (d) of the Prior Agreement) plus all sales commissions
which it is entitled to be paid pursuant to paragraph 5(c) (and pursuant to
paragraph 5(c) of the Prior Agreement) since inception of the Prior Agreement
through and including the day next preceding the date of calculation, and (b) an
amount equal to the aggregate of all distribution fees referred to below which
the Principal Underwriter (and Prior Principal Underwriter) has been paid
pursuant to this paragraph (d) (and pursuant to paragraph (d) of the Prior
Agreement) plus all such fees which it is entitled to be paid pursuant to
paragraph 5(c) (and pursuant to paragraph 5(c) of the Prior Agreement) since
inception of the Prior Agreement through and including the day next preceding
the date of calculation. From this sum (distribution charges) there shall be
subtracted (i) the aggregate amount paid or payable to the Principal Underwriter
(and Prior Principal Underwriter) pursuant to this paragraph (d) (and pursuant
to paragraph (d) of the Prior Agreement) since inception of the Prior Agreement
through and including the day next preceding the date of calculation and (ii)
the aggregate amount of all contingent deferred sales charges paid or payable to
the Principal Underwriter (and Prior Principal Underwriter) since inception of
the Prior Agreement through and including the day next preceding the date of
calculation. If the result of such subtraction is a positive amount, a
distribution fee [computed at the rate of 1% per annum above the prime rate
(being the base rate on corporate loans posted by at least 75% of the nation's
30 largest banks) then being reported in the Eastern Edition of The Wall Street
Journal or if such prime rate is not so reported such other rate as may be
designated from time to time by vote or other action of a majority of (i) those
Trustees of the Trust who are not "interested persons" of the Trust (as defined
in the 1940 Act) and have no direct or indirect financial interest in the
operation of the Plan or any agreements related to it (the "Rule 12b-1
Trustees") and (ii) all of the Trustees then in office] shall be computed on
such amount and added to such amount, with the resulting sum constituting the
5
<PAGE>
amount of outstanding uncovered distribution charges of the Principal
Underwriter with respect to such day for all purposes of this Agreement. If the
result of such subtraction is a negative amount, there shall exist no
outstanding uncovered distribution charges of the Principal Underwriter with
respect to such day and no amount shall be accrued or paid to the Principal
Underwriter with respect to such day. The aggregate amounts accrued and paid
pursuant to this paragraph (d) during any fiscal year of the Fund shall not
exceed .75% of the average daily net assets of the Fund for such year.
(e) The Principal Underwriter shall be entitled to receive all
contingent deferred sales charges paid or payable with respect to any day on
which there exist outstanding uncovered distribution charges of the Principal
Underwriter. The Fund shall be entitled to receive all remaining contingent
deferred sales charges paid or payable by shareholders with respect to any day
on which there exist no outstanding uncovered distribution charges of the
Principal Underwriter, provided that no such sales charge which would cause the
Fund to exceed the maximum applicable cap imposed thereon by paragraph (2) of
subsection (d) of Section 26 of Article III of the Rules of Fair Practice of the
National Association of Securities Dealers, Inc. shall be imposed.
(f) The persons authorized to direct the disposition of monies paid or
payable on behalf of the Fund pursuant to the Plan or this Agreement shall be
the President or any Vice President of the Trust. Such persons shall provide to
the Trust's Trustees and the Trustees shall review, at least quarterly, a
written report of the amounts so expended and the purposes for which such
expenditures were made.
(g) In addition to the payments to the Principal Underwriter provided
for in paragraph 5(d), the Fund may make payments of service fees to the
Principal Underwriter, Authorized Firms and other persons. The aggregate of such
payments during any fiscal year of the Fund shall not exceed .25% of the Fund's
average daily net assets for such year.
6. The Trust hereby authorizes the Principal Underwriter to repurchase,
upon the terms and conditions set forth in written instructions given by the
Trust to the Principal Underwriter from time to time, as agent of the Fund and
for its account, such shares of the Fund as may be offered for sale to the Fund
from time to time.
(a) The Principal Underwriter shall notify in writing IBT and First
Data at the end of each business day, or as soon thereafter as the repurchases
in each pricing period have been compiled, of the number of shares repurchased
for the account of the Fund since the last previous report, together with the
prices at which such repurchases were made, and upon the request of any officer
or Trustee of the Trust shall furnish similar information with respect to all
repurchases made up to the time of the request on any day.
(b) The Trust reserves the right to suspend or revoke the foregoing
authorization at any time; unless otherwise stated, any such suspension or
revocation shall be effective forthwith upon receipt of notice thereof by an
officer of the Principal Underwriter, by telegraph or by written instrument from
an officer of the Trust duly authorized by its Trustees. In the event that the
authorization of the Principal Underwriter is, by the terms of such notice,
suspended for more than twenty-four hours or until further notice, the
authorization given by this paragraph 6 shall not be revived except by action of
a majority of the Trustees of the Trust.
(c) The Principal Underwriter shall have the right to terminate the
operation of this paragraph 6 upon giving to the Trust thirty (30) days' written
notice thereof.
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<PAGE>
(d) The Trust agrees to authorize and direct IBT to pay, for the
account of the Fund, the purchase price of any shares so repurchased against
delivery of the certificates in proper form for transfer to the Fund or for
cancellation by the Fund.
(e) The Principal Underwriter shall receive no commission in respect of
any repurchase of shares under the foregoing authorization and appointment as
agent, except for any sales commission, distribution fee or contingent deferred
sales charges payable under paragraph 5.
(f) The Trust agrees that the Fund will reimburse the Principal
Underwriter, from time to time on demand, for any reasonable expenses incurred
in connection with the repurchase of shares of the Fund pursuant to this
paragraph 6.
7. If, at any time during the existence of this Agreement, the Trust
shall deem it necessary or advisable in the best interests of the Fund that any
amendment of this Agreement be made in order to comply with the recommendations
or requirements of the Commission or other governmental authority or to obtain
any advantage under Massachusetts or federal tax laws, and shall notify the
Principal Underwriter of the form of amendment which it deems necessary or
advisable and the reasons therefor, and, if the Principal Underwriter declines
to assent to such amendment, the Trust may terminate this Agreement forthwith by
written notice to the Principal Underwriter. If, at any time during the
existence of its agreement upon request by the Principal Underwriter, the Trust
fails (after a reasonable time) to make any changes in its Declaration of Trust,
as amended, or in its methods of doing business which are necessary in order to
comply with any requirement of federal law or regulations of the Commission or
of a national securities association of which the Principal Underwriter is or
may be a member, relating to the sale of the shares of the Fund, the Principal
Underwriter may terminate this Agreement forthwith by written notice to the
Trust.
8. The term "net asset value" as used in this Agreement with reference
to the shares of the Fund shall have the same meaning as used in the Declaration
of Trust, as amended, and calculated in the manner referred to in paragraph 2
above.
9(a). The Principal Underwriter is a corporation in the United States
organized under the laws of Massachusetts and holding membership in the National
Association of Securities Dealers, Inc., a securities association registered
under Section 15A of the Securities Exchange Act of 1934, as amended from time
to time, and during the life of this Agreement will continue to be so resident
in the United States, so organized and a member in good standing of said
Association. The Principal Underwriter will comply with the Trust's Declaration
of Trust and By-Laws, and the 1940 Act and the rules promulgated thereunder,
insofar as they are applicable to the Principal Underwriter.
(b) The Principal Underwriter shall maintain in the United States and
preserve therein for such period or periods as the Commission shall prescribe by
rules and regulations applicable to it as Principal Underwriter of an open-end
investment company registered under the 1940 Act such accounts, books and other
documents as are necessary or appropriate to record its transactions with the
Fund. Such accounts, books and other documents shall be subject at any time and
from time to time to such reasonable periodic, special and other examinations by
the Commission or any member or representative thereof as the Commission may
prescribe. The Principal Underwriter shall furnish to the Commission within such
reasonable time as the Commission may prescribe copies of or extracts from such
records which may be prepared without effort, expense or delay as the Commission
may by order require.
7
<PAGE>
10. This Agreement shall continue in force indefinitely until
terminated as in this Agreement above provided, except that:
(a) this Agreement shall remain in effect through and including April
28, 1997, and shall continue in full force and effect indefinitely thereafter,
but only so long as such continuance is specifically approved at least annually
(i) by the vote of a majority of the Rule 12b-1 Trustees cast in person at a
meeting called for the purpose of voting on such approval, and (ii) by the
Trustees of the Trust or by vote of a majority of the outstanding voting
securities of the Fund;
(b) this Agreement may be terminated at any time by vote of a majority
of the Rule 12b-1 Trustees or by vote of a majority of the outstanding voting
securities of the Fund on not more than sixty (60) days' notice to the Principal
Underwriter. The Principal Underwriter shall be entitled to receive all
contingent deferred sales charges paid or payable with respect to any day
subsequent to the termination of this Agreement;
(c) the Principal Underwriter shall have the right to terminate this
Agreement on six (6) months' written notice thereof given in writing to the
Fund; and
(d) the Trust shall have the right to terminate this Agreement
forthwith in the event that it shall have been established by a court of
competent jurisdiction that the Principal Underwriter or any director or officer
of the Principal Underwriter has taken any action which results in a breach of
the covenants set out in paragraph 9 hereof.
11. In the event of the assignment (as defined in Section 2(a)(4) of
the 1940 Act) of this Agreement by the Principal Underwriter, this Agreement
shall automatically terminate.
12. Any notice under this Agreement shall be in writing, addressed and
delivered, or mailed postage paid, to the other party, at such address as such
other party may designate for the receipt of such notices. Until further notice
to the other party, it is agreed that the record address of the Trust and that
of the Principal Underwriter, shall be 24 Federal Street, Boston, Massachusetts
02110.
13. The services of the Principal Underwriter to the Fund hereunder are
not to be deemed to be exclusive, the Principal Underwriter being free to (a)
render similar service to, and to act as principal underwriter in connection
with the distribution of shares of, other series of the Trust or other
investment companies, and (b) engage in other business and activities from time
to time.
14. The terms "vote of a majority of the outstanding voting
securities," "assignment" and "interested persons," when used herein, shall have
the respective meanings specified in the 1940 Act, subject, however, to such
exemptions as may be granted by the Commission by any rule, regulation or order.
15. The Principal Underwriter expressly acknowledges the provision in
the Trust's Declaration of Trust limiting the personal liability of the
shareholders of the Fund or the Trustees of the Trust. The Principal Underwriter
hereby agrees that it shall have recourse to the Trust or the Fund for payment
of claims or obligations as between the Trust or the Fund and the Principal
Underwriter arising out of this Agreement and shall not seek satisfaction from
the shareholders or any shareholder of the Trust or from the Trustees or any
Trustee of the Trust. The Fund shall not be responsible for obligations of any
other series of the Trust.
8
<PAGE>
16. The term "Prior Principal Underwriter" means Eaton Vance
Distributors, Inc., a separate Massachusetts corporation that has served as
principal underwriter prior to the effective date of this Agreement. All
references in this Agreement to the "Prior Agreement" shall mean the
Distribution Agreement dated September 1, 1995 between the Trust behalf of the
Fund and the Prior Principal Underwriter.
17. This Agreement shall replace and be substituted for the Prior
Agreement as of the opening of business on November 1, 1996, and this Agreement
shall be effective as of such time. The outstanding uncovered distribution
charges of the Prior Principal Underwriter calculated under the Prior Agreement
as of the close of business on October 31, 1996 shall be the outstanding
uncovered distribution charges of the Principal Underwriter calculated under
this Agreement as of the opening of business on November 1, 1996.
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement
on the 18th day of October, 1996.
EATON VANCE MUTUAL FUNDS TRUST
(on behalf of EATON VANCE MONEY
MARKET FUND)
By /s/ M. Dozier Gardner
----------------------------
President
EATON VANCE DISTRIBUTORS, INC.
By /s/ H. Day Brigham, Jr.
----------------------------
Vice President
9
<PAGE>
EXHIBIT (6)(a)(7)
EATON VANCE MUTUAL FUNDS TRUST
DISTRIBUTION AGREEMENT
ON BEHALF OF EATON VANCE TAX FREE RESERVES FUND
AGREEMENT effective November 1, 1996 between EATON VANCE MUTUAL FUNDS
TRUST, a Massachusetts business trust having its principal place of business in
Boston in the Commonwealth of Massachusetts, hereinafter called the "Trust," on
behalf of Eaton Vance Tax Free Reserves (the "Fund"), and EATON VANCE
DISTRIBUTORS, INC., a Massachusetts corporation having its principal place of
business in said Boston and formerly named EV Distributors, Inc., hereinafter
sometimes called the "Distributor."
That in consideration of the mutual promises and undertakings herein
contained, the parties hereto agree as follows:
1. Appointment as Distributor. The Trust on behalf of the Fund hereby
appoints the Distributor as a general distributor of shares of beneficial
interest of the Fund (the "shares"). Nothing herein shall be construed to
prevent the Trust from employing other general distributors of the shares or to
prohibit the Fund from acting as distributor of its shares and the Fund reserves
the right to sell its shares to investors upon applications received by the Fund
or its agents.
2. Distributions by Distributor. The Distributor will have the right to
obtain subscriptions for and to sell shares as agent of the Fund. The
Distributor shall be under no obligation to effectuate any particular amount of
sales of shares or to promote or make sales except to the extent the Distributor
deems advisable. Nothing herein shall be deemed to obligate the Distributor to
register or qualify as a broker or dealer in any state, territory or other
jurisdiction in which it is not now registered or qualified or to maintain its
registration or qualification in any state, territory or other jurisdiction in
which it is now registered or qualified.
3. Sales Price. All subscriptions and sales of shares by the
Distributor hereunder shall be at the applicable net asset value of the shares
in accordance with the provisions of the current Prospectus of the Fund. No
commission or other compensation for selling or obtaining subscriptions for
shares shall be paid by the Fund or charged as apart of the subscription or
selling price on any such sale or subscription.
4. Repurchase of Shares. The Distributor may act as agent for the Fund
in connection with the repurchase of shares by the Fund upon the terms and
conditions set forth in the then current Prospectus of the Fund. The Fund will
reimburse the Distributor for any reasonable expenses incurred by the
Distributor in connection with any such repurchase of shares for the account of
the Fund.
5. Cooperation by Fund. The Trust on behalf of the Fund agrees to
execute such papers and to do such acts and things as shall from time to time be
reasonably requested by the Distributor for the purpose of registering or
qualifying and maintaining registration or qualification of the shares for sale
under the so-called "Blue Sky" laws of any state or territory or for maintaining
the registration of the Trust and of the shares of the Fund under the Securities
Act of 1933, as amended from time to time (the "1933 Act"), and the Investment
Company Act of 1940, as amended from time to time (the "1940 Act"),
<PAGE>
to the end that there will be available for sale from time to time such number
of shares as the Distributor may reasonably be expected to sell. The Trust will
advise the Distributor promptly of (i) any action of the Securities and Exchange
Commission (the "Commission") or any authorities of any state or territory, of
which it may be advised, affecting registration or qualification of the Trust
and of the shares of the Fund, or rights to offer the shares for sale, and (ii)
the happening of any event which makes untrue any statement, or which requires
the making of any change, in the registration statement or Prospectus in order
to make the statements therein not misleading. The Fund shall make available to
the Distributor such copies of its currently effective Prospectus and of all
information, financial statements and other papers as the Distributor shall
reasonable request in connection with the distribution of shares of the Fund.
6. The Distributor as Independent Contractor. The Distributor shall be
an independent contractor and neither the Distributor nor any of its officers or
employees as such, is or shall be deemed an employee of the Trust. The
Distributor is responsible for its own conduct and the employment, control and
conduct of its agents and employees and for injury to such agents or employees
or to others through its agents or employees. The Distributor assumes full
responsibility for its agents and employees under applicable statutes and agrees
to pay all employer taxes thereunder.
7. Representation. The Distributor is not authorized by the Fund to
give any information or to make any representations other than those contained
in the registration statement or Prospectus filed with the Commission under the
1933 Act (as said registration statement and Prospectus may be amended from time
to time) or contained in shareholder reports or other material that may be
prepared by or on behalf of the Fund for the Distributor's use. Nothing herein
shall be construed to prevent the Distributor from preparing and distributing
sales literature or other materials as it may deem appropriate.
8. Expenses Payable by the Fund. The Fund shall pay all fees and
expenses in connection with (a) the preparation and filing of any registration
statement and Prospectus under the 1933 Act or the 1940 Act and amendments
thereto, (b) the registration or qualification of shares for sale in the various
states, territories or other jurisdictions (including without limitation the
registering or qualifying the Trust or the Fund as a broker or dealer or any
officer of the Trust as agent or salesman in any state, territory or other
jurisdiction), (c) the preparation and distribution of any report or other
communication to shareholders of the Fund in their capacity as such, and (d) the
preparation and distribution of any Prospectuses sent to existing shareholders
of the Fund. The Fund shall also defray all expenses and make all payments
pursuant to any written plan approved in accordance with Rule 12b-1 under the
1940 Act in connection with the distribution of its shares.
9. Expenses Payable by the Distributor. Except as other specified in
any written plan approved under Rule 12b-1 as referred to in Section 8 hereof,
the Distributor or its parent will defray expenses of (a) printing and
distributing any Prospectuses or reports prepared for its use in connection with
the offering of the shares for sale to the public (other than to existing
shareholders of the Fund), (b) any other literature used by the Distributor in
connection with such offering, and (c) any advertising in connection with such
offering.
10. Indemnification of the Distributor. The Trust agrees to indemnify
and hold harmless the Distributor and each of its directors and officers and
each person, if any, who controls the Distributor within the meaning of Section
15 of the 1933 Act against any loss, liability, claim, damages or expense
(including the reasonable cost of investigating or defending any alleged loss,
liability, claim, damages or expense and reasonable counsel fees incurred in
connection therewith), arising by reason of any person acquiring any shares of
the Fund, based upon the ground that the registration statement, Prospectus,
shareholder reports or other information filed or made public by the Fund, as
2
<PAGE>
from time to time amended and supplemented, include an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein not misleading arising under
the 1933 Act, or any other statute or the common law, provided, however, that
the Trust does not agree to so indemnify the Distributor or hold it harmless to
the extent that such statement or omission was made in reliance upon, and in
conformity with, information furnished in writing to the Trust in connection
therewith by or on behalf of the Distributor; and provided, further, that in no
case (i) is the indemnity of the Trust in favor of the Distributor or any person
indemnified to be deemed to protect the Distributor or any such person against
any liability to the Trust or the Fund or its security holders to which the
Distributor or any controlling person would otherwise be subject by reason of
willful misfeasance, bad faith, or gross negligence in the performance of its
duties or by reason of its reckless disregard of its obligations and duties
under this Agreement, or (ii) is the Trust or the Fund to be liable under its
indemnity agreement contained in this paragraph with respect to any claim made
against the Distributor or any person indemnified unless the Distributor or such
person, as the case may be, shall have notified the Trust in writing of such
claim within a reasonable time after the summons or other first written
notification giving information of the nature of the claim shall have been
served upon the Distributor or such person (or after the Distributor or such
person shall have received notice of such service on any designated agent), but
failure to notify the Trust of any such claim shall not relieve it from any
liability which the Fund may have to the Distributor or any person against whom
such action is brought otherwise than on account of its indemnity agreement
contained in this paragraph. The Trust shall be entitled to participate, at the
expense of the Fund, in the defense, or, if the Trust so elects, to assume the
defense of any suit brought to enforce any such claim, but if the Trust elects
to assume the defense, such defense shall be conducted by counsel chosen by it
and satisfactory to the Distributor or such person or persons, defendant or
defendants in the suit. In the event the Trust elects to assume the defense of
any such suit and retains such counsel, the Distributor, such officers or
directors or such controlling person or persons, defendant or defendants in the
suit, shall bear the fees and expenses of any additional counsel retained by
them, but, in case the Trust does not elect to assume the defense of any such
suit, the Fund shall reimburse the Distributor, such officers or directors or
such controlling person or persons, defendant or defendants in the suit, for the
reasonable fees and expenses of any counsel retained by them. The Trust agrees
promptly to notify the Distributor of the commencement of any litigation or
proceedings against it or any of its officers or dealers in connection with the
issuance or sale of any of the Fund's shares.
11. Indemnification of the Trust. The Distributor agrees that, in
selling the shares of the Fund it will indemnify and hold harmless the Trust and
each of its Trustees and officers and each person, if any, who controls the
Trust within the meaning of Section 15 of the 1933 Act, against any loss,
liability, damages, claim or expense (including the reasonable cost of
investigating or defending any alleged loss, liability, damages, claim or
expense and reasonable counsel fees incurred in connection therewith), arising
by reason of any person acquiring any shares of the Fund, based upon the 1933
Act or any other statute or common law, alleging any wrongful act of the
Distributor or any of its employees or alleging that the registration statement,
prospectus, shareholder reports or other information filed or made public by the
Fund, as from time to time amended, include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
in order to make the statements therein not misleading, insofar as any such
statement or omission was made in reliance upon, and in conformity with
information furnished in writing to the Fund by or on behalf of the Distributor,
provided, however, that in no case (i) is the indemnity of the Distributor in
favor of the Fund or any person indemnified to be deemed to protect the Fund or
any such person against any liability to which the Fund or any such person would
otherwise be subject by reason of willful misfeasance, bad faith, or gross
negligence in the performance of its duties or by reason of its reckless
disregard of its obligations and duties under this Agreement, or (ii) is the
Distributor to be liable under its indemnity agreement contained in this
paragraph with respect to any claim made against the Fund or any person
3
<PAGE>
indemnified unless the Trust or such person, as the case may be, shall have
notified the Distributor in writing of such claim within a reasonable time after
the summons or other first written notification giving information of the nature
of the claim shall have been served upon the Trust, the Fund or upon such person
(or after the Trust, the Fund or such person shall have received notice of such
service on any designated agent), but failure to notify the Distributor of any
such claim shall not relieve it from any liability which it may have to the Fund
or any person against whom such action is brought otherwise than on account of
its indemnity agreement contained in this paragraph. In the case of any such
notice to the Distributor, the Distributor shall be entitled to participate, at
its own expense, in the defense, or, if it so elects, to assume the defense of
any suit brought to enforce any such claim, but if the Distributor elects to
assume the defense, such defense shall be conducted by counsel chosen by the
Distributor and satisfactory to the Trust or to its officers or Trustees and to
any controlling person or persons, defendant or defendants in the suit. In the
event that the Distributor elects to assume the defense of any such suit and
retains such counsel, the Fund or such officers or Trustees or such controlling
persons, defendant or defendants in the suit, shall bear the fees and expense of
any additional counsel retained by them or the Trust, but, in case the
Distributor does not elect to assume the defense of any such suit, it shall
reimburse the Fund, any such officers and Trustees or controlling person or
persons, defendant or defendants in such suit, for the reasonable fees and
expenses of any counsel retained by them or the Trust. The Distributor agrees
promptly to notify the Trust of the commencement of any litigation or
proceedings against it in connection with the issue and sale of any of the
Fund's shares.
12. Effective Date, Termination and Amendment. This Agreement shall
become effective on the date stated above and (unless terminated as herein
provided) shall remain in full force and through and including until April 28,
1997 and shall remain in full force and effect indefinitely thereafter so long
as such continuance after April 28, 1997 is specifically approved at least
annually (a) by vote of a majority of the outstanding voting securities of the
Fund or by the Trustees of the Trust, and (b) by vote of a majority of the
Trustees of the Trust who are not interested persons of the Trust or of the
Distributor, cast in person at a meeting called for the purpose of voting on
such approval. This Agreement may at any time be terminated without the payment
of any penalty (1) by vote of the Trustees of the Trust or by vote of a majority
of the outstanding voting securities of the Fund on 60 days' written notice to
the Distributor, (2) automatically in the event of its assignment, and (3) by
the Distributor on 60 days' written notice to the Trust. Any notice under this
Agreement shall be given in writing, addressed and delivered, or mailed
postpaid, to the other party at any office of such party.
This Agreement may be amended at any time by a writing signed by both
parties hereto, provided that no amendment of this Agreement shall be effective
until approved (a) by vote of a majority of the outstanding voting securities of
the Fund or by vote of the Trustees of the Trust, and (b) by a majority of the
Trustees of the Trust who are not interested persons of the Trust or of the
Distributor, by vote cast in person at a meeting called for the purpose of
voting on such approval.
13. Certain Definitions. The terms "interested person," "vote of a
majority of the outstanding voting securities" and "assignment" when used in
this Agreement, shall have the respective meanings specified in the 1940 Act,
subject, however, to such exemptions as may be granted by the Commission by any
rule, regulation or order.
14. This Agreement shall replace and be substituted for the
distribution agreement dated September 1, 1995 between the Trust on behalf of
the Fund and the prior principal underwriter, Eaton Vance Distributors, Inc., a
separate Massachusetts corporation that has served as principal underwriter of
the Trust prior to the effective date of this Agreement as of the opening of
business on November 1, 1996, and this Agreement shall be effective as of such
time.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement
on the 18th day of October, 1996.
EATON VANCE MUTUAL FUNDS
TRUST (on behalf of EATON VANCE
TAX FREE RESERVES)
By /s/ M. Dozier Gardner
----------------------------
President
EATON VANCE DISTRIBUTORS, INC.
By /s/ H. Day Brigham, Jr.
----------------------------
Vice President
5
<PAGE>
EXHIBIT 10
----------
EATON VANCE MANAGEMENT
24 Federal Street
Boston, MA 02110
(617) 482-8260
April 21, 1997
Eaton Vance Mutual Funds Trust
24 Federal Street
Boston, MA 02110
Gentlemen:
Eaton Vance Mutual Funds Trust (the "Trust") is a Massachusetts
business trust created under a Declaration of Trust dated May 7, 1984 executed
and delivered in Boston, Massachusetts and currently operating under an Amended
and Restated Declaration of Trust dated August 17, 1993 (the "Declaration of
Trust"). I am of the opinion that all legal requirements have been complied with
in the creation of the Trust, and that said Declaration of Trust is legal and
valid.
The Trustees of the Trust have the powers set forth in the Declaration
of Trust, subject to the terms, provisions and conditions therein provided. As
provided in the Declaration of Trust, the interest of shareholders is divided
into shares of beneficial interest without par value, and the number of shares
that may be issued is unlimited. The Trustees may from time to time issue and
sell or cause to be issued and sold shares for cash or for property. All such
shares, when so issued, shall be fully paid and nonassessable by the Trust.
By votes duly adopted, the Trustees of the Trust have authorized the
issuance of shares of beneficial interest, without par value. The Trust intends
to register under the Securities Act of 1933, as amended, 4,745,836 of its
shares of beneficial interest with Post-Effective Amendment No. 34 to its
Registration Statement on Form N-1A (the "Amendment") with the Securities and
Exchange Commission.
I have examined originals, or copies, certified or otherwise identified
to my satisfaction, of such certificates, records and other documents as I have
deemed necessary or appropriate for the purpose of this opinion, including the
Declaration of Trust and votes adopted by the Trustees. Based upon the
foregoing, and with respect to Massachusetts law (other than the Massachusetts
Uniform Securities Act), only to the extent that Massachusetts law may be
applicable and without reference to the laws of the other several states or of
the United States of America, I am of the opinion that under existing law:
1. The Trust is a trust with transferable shares of beneficial interest
organized in compliance with the laws of The Commonwealth of Massachusetts, and
the Declaration of Trust is legal and valid under the laws of The Commonwealth
of Massachusetts.
<PAGE>
Eaton Vance Investment Trust
April 21, 1997
Page 2
2. Shares of beneficial interest registered by the Amendment may be legally
and validly issued in accordance with the Declaration of Trust upon receipt by
the Trust of payment in compliance with the Declaration of Trust and, when so
issued and sold, will be fully paid and nonassessable by the Trust.
I am a member of the Massachusetts bar, and I hereby consent to the
filing of this opinion with the Securities and Exchange Commission as an exhibit
hereto.
Very truly yours,
/s/ Eric G. Woodbury
-------------------------------------------
Eric G. Woodbury
Vice President, Eaton Vance Management
<PAGE>
EXHIBIT 99.11(a)
CONSENT OF INDEPENDENT ACCOUTANTS
We consent to the use in this Post-Effective Amendment No. 34 to the
Registration Statement of Eaton Vance Mutual Funds Trust (1933 Act File No.
2-90946) on behalf of Eaton Vance Cash Management Fund, Eaton Vance Liquid
Assets Fund and Eaton Vance Money Market Fund of our report dated January 31,
1997 relating to such Funds, and of our report dated January 31, 1997 relating
to Cash Management Portfolio, which reports are included in the Annual Report
to Shareholders for the year ended December 31, 1996 and 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 Funds"
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.
April 18, 1997
Boston, Massachusetts
<PAGE>
EXHIBIT 99.11(b)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the use in this Post-Effective Amendment No. 34 to the
Registration Statement of Eaton Vance Mutual Funds Trust (1933 Act File No. 2-
90946) on behalf of EV Classic Government Obligations Fund of our report dated
January 31, 1997 relating to such 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 and
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.
April 18, 1997
Boston, Massachusetts
<PAGE>
EXHIBIT 99.11(c)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the use in this Post-Effective Amendment No. 34 to the
Registration Statement of Eaton Vance Mutual Funds Trust (1933 Act File No. 2-
90946) on behalf of EV Marathon Government Obligations Fund of our report
dated January 31, 1997 relating to such 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 and 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.
April 18, 1997
Boston, Massachusetts
<PAGE>
EXHIBIT 99.11(d)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the use in this Post-Effective Amendment No. 34 to the
Registration Statement of Eaton Vance Mutual Funds Trust (1933 Act File No. 2-
90946) on behalf of EV Traditional Government Obligations Fund of our report
dated January 31, 1997 relating to such 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 and 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.
April 18, 1997
Boston, Massachusetts
<PAGE>
EXHIBIT 99.11(e)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the use in this Post-Effective Amendment No. 34 to the
Registration Statement of Eaton Vance Mutual Funds Trust (1933 Act File No. 2-
90946) on behalf of Eaton Vance Short-Term Treasury Fund of our report dated
February 3, 1997 relating to such Fund, which report is included in the Annual
Report to Shareholders for the year ended December 31, 1996 and 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.
April 18, 1997
Boston, Massachusetts
<PAGE>
EXHIBIT 99.11(f)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the use in this Post-Effective Amendment No. 34 to the
Registration Statement of Eaton Vance Mutual Funds Trust (1933 Act File No. 2-
90946) on behalf of Eaton Vance Tax Free Reserves of our report dated January
31, 1997 relating to such Fund, which report is included in the Annual Report
to Shareholders for the year ended December 31, 1996 and 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.
April 18, 1997
Boston, Massachusetts
<PAGE>
EXHIBIT 99.15(a)(1)
EATON VANCE MUTUAL FUNDS TRUST
AMENDMENT TO
SERVICE PLAN
ON BEHALF OF
EV TRADITIONAL GOVERNMENT OBLIGATIONS FUND
Whereas Eaton Vance Distributors, Inc. (the "prior principal
underwriter") has served as the Principal Underwriter of Trust shares prior to
the effective date of this Amendment, and whereas Eaton Vance Distributors, Inc.
(currently named EV Distributors, Inc.) a separate Massachusetts corporation
(the "successor principal underwriter") is succeeding to the business of the
prior principal underwriter on November 1, 1996, the Trust hereby amends its
Service Plan of the above fund, by substituting the successor principal
underwriter for the prior principal underwriter in the Plan effective November
1, 1996.
ADOPTED: June 24, 1996
<PAGE>
EXHIBIT 99.15(b)(1)
EATON VANCE SHORT-TERM TREASURY FUND
AMENDMENT TO
DISTRIBUTION PLAN
Whereas Eaton Vance Distributors, Inc. (the "prior principal
underwriter") has served as the Principal Underwriter of Trust shares prior to
the effective date of this Amendment, and whereas Eaton Vance Distributors, Inc.
(currently named EV Distributors, Inc.) a separate Massachusetts corporation
(the "successor principal underwriter") is succeeding to the business of the
prior principal underwriter on November 1, 1996, the Trust hereby amends its
Distribution Plan of the above fund, by substituting the successor principal
underwriter for the prior principal underwriter in the Plan effective November
1, 1996.
ADOPTED: June 24, 1996
<PAGE>
EXHIBIT 99.15(c)(1)
EATON VANCE MUTUAL FUNDS TRUST
AMENDMENT TO
AMENDED DISTRIBUTION PLAN
ON BEHALF OF
EV CLASSIC GOVERNMENT OBLIGATIONS FUND
Whereas Eaton Vance Distributors, Inc. (the "prior principal
underwriter") has served as the Principal Underwriter of Trust shares prior to
the effective date of this Amendment, and whereas Eaton Vance Distributors, Inc.
(currently named EV Distributors, Inc.) a separate Massachusetts corporation
(the "successor principal underwriter") is succeeding to the business of the
prior principal underwriter on November 1, 1996, the Trust hereby amends its
Amended Distribution Plan of the above fund, by substituting the successor
principal underwriter for the prior principal underwriter in the Plan effective
November 1, 1996. The uncovered distribution charges as of the close of business
on October 31, 1996 shall be the uncovered distribution charges of the successor
principal underwriter as of the opening of business on November 1, 1996.
ADOPTED: June 24, 1996
<PAGE>
EXHIBIT 99.15(d)(1)
EATON VANCE MUTUAL FUNDS TRUST
AMENDMENT TO
DISTRIBUTION PLAN
ON BEHALF OF
EV MARATHON GOVERNMENT OBLIGATIONS FUND
Whereas Eaton Vance Distributors, Inc. (the "prior principal
underwriter") has served as the Principal Underwriter of Trust shares prior to
the effective date of this Amendment, and whereas Eaton Vance Distributors, Inc.
(currently named EV Distributors, Inc.) a separate Massachusetts corporation
(the "successor principal underwriter") is succeeding to the business of the
prior principal underwriter on November 1, 1996, the Trust hereby amends its
Distribution Plan of the above fund, by substituting the successor principal
underwriter for the prior principal underwriter in the Plan effective November
1, 1996. The uncovered distribution charges as of the close of business on
October 31, 1996 shall be the uncovered distribution charges of the successor
principal underwriter as of the opening of business on November 1, 1996.
ADOPTED: June 24, 1996
<PAGE>
EXHIBIT 99.15(i)(1)
EATON VANCE MUTUAL FUNDS TRUST
AMENDMENT TO
DISTRIBUTION PLAN
ON BEHALF OF
EATON VANCE LIQUID ASSETS FUND
Whereas Eaton Vance Distributors, Inc. (the "prior principal
underwriter") has served as the Principal Underwriter of Trust shares prior to
the effective date of this Amendment, and whereas Eaton Vance Distributors, Inc.
(currently named EV Distributors, Inc.) a separate Massachusetts corporation
(the "successor principal underwriter") is succeeding to the business of the
prior principal underwriter on November 1, 1996, the Trust hereby amends its
Distribution Plan of the above fund, by substituting the successor principal
underwriter for the prior principal underwriter in the Plan effective November
1, 1996. The uncovered distribution charges as of the close of business on
October 31, 1996 shall be the uncovered distribution charges of the successor
principal underwriter as of the opening of business on November 1, 1996.
ADOPTED: June 24, 1996
<PAGE>
EXHIBIT 99.15(j)(1)
EATON VANCE MUTUAL FUNDS TRUST
AMENDMENT TO
DISTRIBUTION PLAN
ON BEHALF OF
EATON VANCE MONEY MARKET FUND
Whereas Eaton Vance Distributors, Inc. (the "prior principal
underwriter") has served as the Principal Underwriter of Trust shares prior to
the effective date of this Amendment, and whereas Eaton Vance Distributors, Inc.
(currently named EV Distributors, Inc.) a separate Massachusetts corporation
(the "successor principal underwriter") is succeeding to the business of the
prior principal underwriter on November 1, 1996, the Trust hereby amends its
Distribution Plan of the above fund, by substituting the successor principal
underwriter for the prior principal underwriter in the Plan effective November
1, 1996. The uncovered distribution charges as of the close of business on
October 31, 1996 shall be the uncovered distribution charges of the successor
principal underwriter as of the opening of business on November 1, 1996.
ADOPTED: June 24, 1996
<PAGE>
EATON VANCE LIQUID ASSETS FUND
Quotation of Yield
For the seven day period ending December 31, 1996
The value of an account with a beginning balance of one share equal to $1.00
grew to $1.000949270. The differeence of $0.000949270 is the Base Period Return.
Dividing the Base Period Return by the beginning value of $1.00 and multiplying
by (366/7) gives a yield of 4.96%.
Adding 1 to the Base Period Return and taking this to the power of (366/7) and
subtracting 1 gives an effective yield 5.09%.
<PAGE>
EATON VANCE CASH MANAGEMENT FUND
Quotation of Yield
For the seven day period ending December 31, 1996
The value of an account with a beginning balance of one $1.00 grew to
$1.000929345. The difference of $0.000929345 is the Base Period Return. Dividing
the Base Period Return by the beginning value of $1.00 and multiplying by
(366/7) gives a yield of 4.86%.
Adding 1 to the Base Period Return and taking this to the power of (366/7) and
subtracting 1 gives an effective yield of 4.98%.
<PAGE>
EATON VANCE MONEY MARKET FUND
Quotation of Yield
For the seven day period ending December 31, 1996
The value of an account with a beginning balance of one share equal to $1.00
grew to $1.000736663. The difference of $0.000736663 is the Base Period Return.
Dividing the Base Period Return by the beginning value of $1.00 and multiplying
by (366/7) gives a yield of 3.85%.
Adding 1 to the Base Period Return and taking this to the power of (366/7) gives
an effective yield of 3.93%.
<PAGE>
EATON VANCE TAX FREE RESERVES
Quotation of Yield
For the seven day period ending December 31, 1996
The value of an account with a beginning balance of one share equal to $1.00
grew to $1.00060920. The differerence of $0.000609220 is the Base Period Return.
Dividing the Base Period Return by the beginning value of $1.00 and multiplying
by (366/7) gives a yield of 3.19%.
Adding 1 to the Base Period Return and taking this to the power of (366/7) and
subtracting 1 gives an effective yield of 3.24%.
Taking the current yield of 3.19% and dividing by 1 minus the tax rate (assuming
a tax rate of 31%) gives a taxable equivalent current yield of 4.62% (3.19%/.69)
Dividing the taxable equivalent yield by (366/7), adding 1 , taking this to the
power of (366/7) and subtracting 1 gives a taxable equivalent effective yield of
4.73%
<PAGE>
EXHIBIT 99.16
<TABLE>
INVESTMENT PERFORMANCE -- EV CLASSIC GOVERNMENT OBLIGATIONS FUND
The table below indicates the total return (capital changes plus reinvestment of all distributions) on a hypothetical investment of
$1,000 in the Fund covering the 1, 5, and 10 year periods ended December 31, 1996. Total return for the period prior to the
Fund's commencement of operations is for the Portfolio (or its predecessor) adjusted for the Fund's sales charge.
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
PERIOD DATE ON 12/31/96 ON 12/31/96 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
10 YEARS ENDED
12/31/96 12/31/86 $2,057.81 $2,057.81 105.78% 7.48% 105.78% 7.48%
5 YEARS ENDED
12/31/96 12/31/91 $1,302.34 $1,302.34 30.23% 5.42% 30.23% 5.42%
1 YEAR ENDED
12/31/96 12/31/95 $1,034.90 $1,025.22 3.49% 3.49% 2.52% 2.52%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC *
Cumulative total return is calculated using the following formula:
T = (ERV / P) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC **
P = an initial investment of $1,000
* The average annual total return not including the CDSC is calculated based the ending investment value
before deducting the CDSC.
** The cumulative total return not including the CDSC is calculated based the ending investment value before
deducting the CDSC.
</TABLE>
<PAGE>
EV CLASSIC GOVERNMENT OBLIGATIONS FUND
30-DAY AND TAX EQUIVALENT YIELD CALCULATIONS
For the 30 days ended 12/31/96:
Interest Income Earned: $190,120
Plus Dividend Income Earned:
--------
Equal Gross Income: $190,120
Minus Expenses: $ 70,787
--------
Equal Net Investment Income: $119,333
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 3,309,498
---------
Equal Net Investment Income Earned Per Share: $0.0361
Net Asset Value Per Share 12/31/96: $9.22
30 Day Yield*: 4.74%
*Yields calculated on a bond equivalent rate as follows:
6
2[(($0.0361 / $9.22)+1)-1]
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EV MARATHON GOVERNMENT OBLIGATIONS FUND
The table below indicates the total return (capital changes plus reinvestment of all distributions) on a hypothetical investment of
$1,000 in the Fund covering the 1, 5, and 10 year periods ended December 31, 1996. Total return for the period prior to the
Fund's commencement of operations is for the Portfolio (or its predecessor) adjusted for the Fund's sales charge.
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
PERIOD DATE ON 12/31/96 ON 12/31/96 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
10 YEARS ENDED
12/31/96 12/31/86 $2,074.48 $2,074.48 107.45% 7.57% 107.45% 7.57%
5 YEARS ENDED
12/31/96 12/31/91 $1,312.92 $1,294.98 31.29% 5.60% 29.50% 5.31%
1 YEAR ENDED
12/31/96 12/31/95 $1,036.16 $987.79 3.62% 3.62% -1.22% -1.22%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC *
Cumulative total return is calculated using the following formula:
T = (ERV / P) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC **
P = an initial investment of $1,000
* The average annual total return not including the CDSC is calculated based the ending investment value
before deducting the CDSC.
** The cumulative total return not including the CDSC is calculated based the ending investment value before
deducting the CDSC.
</TABLE>
<PAGE>
EV MARATHON GOVERNMENT OBLIGATIONS FUND
CALCULATION OF YIELD
For the 30 days ended 12/31/96:
Interest Income Earned: $751,554
Plus Dividend Income Earned:
---------
Equal Gross Income: $751,554
Minus Expenses: $268,912
---------
Equal Net Investment Income: $482,642
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 13,063,941
----------
Equal Net Investment Income Earned Per Share: $0.0369
Net Asset Value Per Share 12/31/96: $9.22
30 Day Yield*: 4.86%
*Yields calculated on a bond equivalent rate as follows:
6
2[(($0.0369 / $9.22)+1)-1]
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EV TRADITIONAL GOVERNMENT OBLIGATIONS FUND
The table below indicates the total return (capital changes plus reinvestment of all distributions) on a hypothetical investment of
$1,000 in the Fund covering the 1, 5, and 10 year periods ended December 31, 1996.
<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 12/31/96 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
10 YEARS ENDED
12/31/96 12/31/86 $952.62 $2,041.92 112.13% 7.81% 104.19% 7.40%
5 YEARS ENDED
12/31/96 12/31/91 $962.48 $1,292.13 34.25% 6.07% 29.21% 5.26%
1 YEAR ENDED
12/31/96 12/31/95 $962.44 $1,005.94 4.52% 4.52% 0.59% 0.59%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000 **
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period
Cumulative total return is calculated using the following formula:
T = (ERV / P) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period
P = an initial investment of $1,000 ***
* Initial investment less the current maximum sales charge of 3.75%.
** The average annual total return including the sales charge is calculated based on an initial investment of $1,000 less the
maximum initial sales charge of 3.75%.
*** The cumulative total return including the sales charge is calculated based on an initial investment of $1,000 less
maximum initial sales charge of 3.75%.
</TABLE>
<PAGE>
EV TRADITIONAL GOVERNMENT OBLIGATIONS FUND
CALCULATION OF YIELD
For the 30 days ended 12/31/96:
Interest Income Earned: $1,919,458
Plus Dividend Income Earned:
----------
Equal Gross Income: $1,919,458
Minus Expenses: $ 414,557
----------
Equal Net Investment Income: $1,504,901
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 28,756,736
----------
Equal Net Investment Income Earned Per Share: $0.0523
Net Asset Value Per Share 12/31/96: $11.13
30 Day Yield*: 5.71%
*Yields calculated on a bond equivalent rate as follows:
6
2[(($0.0523 / $11.13)+1)-1]
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EATON VANCE SHORT TERM TREASURY FUND
The table below indicates the total return (capital changes plus reinvestment of all distributions) on a hypothetical investment of
$1,000 in the Fund covering the period from February 4, 1991 through December 31, 1996 and for the 1 and 5 year periods ended
December 31, 1996.
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF
INVESTMENT INVESTMENT INVESTMENT TOTAL RETURN
PERIOD DATE ON 12/31/96 CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C>
LIFE OF
FUND 02/04/91 $1,281.57 28.16% 4.29%
5 YEARS ENDED
12/31/96 12/31/91 $1,221.70 22.17% 4.09%
1 YEAR ENDED
12/31/96 12/31/95 $1,046.93 4.69% 4.69%
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
</TABLE>
<PAGE>
EATON VANCE SHORT TERM TREASURY FUND
CALCULATION OF YIELD
For the 30 days ended 12/31/96:
Interest Income Earned: $248,186
Plus Dividend Income Earned:
--------
Equal Gross Income: $248,186
Minus Expenses: $ 25,040
--------
Equal Net Investment Income: $223,146
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 887,299
--------
Equal Net Investment Income Earned Per Share: $0.2515
Maximum Offering Price Per Share 12/31/96: $62.91
30 Day Yield*: 4.85%
*Yields calculated on a bond equivalent rate as follows:
6
2[(($0.2515 / $62.91)+1)-1]
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000745463
<NAME> EATON VANCE MUTUAL FUNDS TRUST
<SERIES>
<NUMBER> 10
<NAME> EATON VANCE CASH MANAGEMENT FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 150,456
<INVESTMENTS-AT-VALUE> 150,456
<RECEIVABLES> 4,282
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 154,738
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,047
<TOTAL-LIABILITIES> 3,047
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 151,691
<SHARES-COMMON-STOCK> 151,691
<SHARES-COMMON-PRIOR> 155,251
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 151,691
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 6,670
<EXPENSES-NET> 205
<NET-INVESTMENT-INCOME> 6,465
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (6,465)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 614,893
<NUMBER-OF-SHARES-REDEEMED> (622,879)
<SHARES-REINVESTED> 4,426
<NET-CHANGE-IN-ASSETS> (3,560)
<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> 205
<AVERAGE-NET-ASSETS> 137,612
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.047
<PER-SHARE-GAIN-APPREC> 0.000
<PER-SHARE-DIVIDEND> (0.047)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.74
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000745463
<NAME> EATON VANCE MUTUAL FUNDS TRUST
<SERIES>
<NUMBER> 11
<NAME> EATON VANCE LIQUID ASSETS FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 19,999
<INVESTMENTS-AT-VALUE> 19,999
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 7
<TOTAL-ASSETS> 20,006
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 96
<TOTAL-LIABILITIES> 96
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 19,910
<SHARES-COMMON-STOCK> 19,910
<SHARES-COMMON-PRIOR> 34,026
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 19,910
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 1,207
<EXPENSES-NET> 135
<NET-INVESTMENT-INCOME> 1,072
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,072)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 49
<NUMBER-OF-SHARES-REDEEMED> (14,826)
<SHARES-REINVESTED> 661
<NET-CHANGE-IN-ASSETS> (14,116)
<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> 135
<AVERAGE-NET-ASSETS> 24,862
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.043
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (0.043)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 1.13
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000745463
<NAME> EATON VANCE MUTUAL FUNDS TRUST
<SERIES>
<NUMBER> 12
<NAME> EATON VANCE MONEY MARKET FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 21,205
<INVESTMENTS-AT-VALUE> 21,205
<RECEIVABLES> 10,288
<ASSETS-OTHER> 23
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 31,516
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 265
<TOTAL-LIABILITIES> 265
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 31,250
<SHARES-COMMON-STOCK> 31,250
<SHARES-COMMON-PRIOR> 12,951
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 31,250
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 1,201
<EXPENSES-NET> 283
<NET-INVESTMENT-INCOME> 918
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (918)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 474,121
<NUMBER-OF-SHARES-REDEEMED> (456,313)
<SHARES-REINVESTED> 491
<NET-CHANGE-IN-ASSETS> (18,298)
<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> 291
<AVERAGE-NET-ASSETS> 24,847
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.037
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (0.037)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 1.73
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000745463
<NAME> EATON VANCE MUTUAL FUNDS TRUST
<SERIES>
<NUMBER> 9
<NAME> EATON VANCE TAX FREE RESERVES
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 23268
<INVESTMENTS-AT-VALUE> 23268
<RECEIVABLES> 549
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 45
<TOTAL-ASSETS> 23862
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 507
<TOTAL-LIABILITIES> 507
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 23371
<SHARES-COMMON-STOCK> 23371
<SHARES-COMMON-PRIOR> 23912
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (17)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 23355
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2049
<OTHER-INCOME> 0
<EXPENSES-NET> 176
<NET-INVESTMENT-INCOME> 1874
<REALIZED-GAINS-CURRENT> 3
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 1877
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1236
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 164100
<NUMBER-OF-SHARES-REDEEMED> (165898)
<SHARES-REINVESTED> 1236
<NET-CHANGE-IN-ASSETS> (558)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 308
<INTEREST-EXPENSE> 12
<GROSS-EXPENSE> 438
<AVERAGE-NET-ASSETS> 61713
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.030
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (0.030)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.35
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000745463
<NAME> EATON VANCE MUTUAL FUNDS TRUST
<SERIES>
<NUMBER> 3
<NAME> EV CLASSIC 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> 31418
<INVESTMENTS-AT-VALUE> 30279
<RECEIVABLES> 61
<ASSETS-OTHER> 9
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 30349
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 196
<TOTAL-LIABILITIES> 196
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 33795
<SHARES-COMMON-STOCK> 3280
<SHARES-COMMON-PRIOR> 4429
<ACCUMULATED-NII-CURRENT> (45)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (2458)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (1139)
<NET-ASSETS> 30153
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 2797
<EXPENSES-NET> 444
<NET-INVESTMENT-INCOME> 2353
<REALIZED-GAINS-CURRENT> (548)
<APPREC-INCREASE-CURRENT> (809)
<NET-CHANGE-FROM-OPS> 995
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2344)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 639
<NUMBER-OF-SHARES-REDEEMED> (1937)
<SHARES-REINVESTED> 149
<NET-CHANGE-IN-ASSETS> (11885)
<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> 444
<AVERAGE-NET-ASSETS> 35343
<PER-SHARE-NAV-BEGIN> 9.49
<PER-SHARE-NII> 0.613
<PER-SHARE-GAIN-APPREC> (0.300)
<PER-SHARE-DIVIDEND> (0.613)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.19
<EXPENSE-RATIO> 0.70
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000745463
<NAME> EATON VANCE MUTUAL FUNDS TRUST
<SERIES>
<NUMBER> 2
<NAME> EV MARATHON 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> 119944
<INVESTMENTS-AT-VALUE> 120825
<RECEIVABLES> 339
<ASSETS-OTHER> 9
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 121173
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 790
<TOTAL-LIABILITIES> 790
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 124657
<SHARES-COMMON-STOCK> 13096
<SHARES-COMMON-PRIOR> 12337
<ACCUMULATED-NII-CURRENT> (320)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (4836)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 882
<NET-ASSETS> 120383
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 9327
<EXPENSES-NET> 1262
<NET-INVESTMENT-INCOME> 8065
<REALIZED-GAINS-CURRENT> (1364)
<APPREC-INCREASE-CURRENT> (2417)
<NET-CHANGE-FROM-OPS> 4283
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (8065)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (37)
<NUMBER-OF-SHARES-SOLD> 4138
<NUMBER-OF-SHARES-REDEEMED> (3724)
<SHARES-REINVESTED> 344
<NET-CHANGE-IN-ASSETS> 3218
<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> 1262
<AVERAGE-NET-ASSETS> 117997
<PER-SHARE-NAV-BEGIN> 9.50
<PER-SHARE-NII> 0.631
<PER-SHARE-GAIN-APPREC> (0.307)
<PER-SHARE-DIVIDEND> (0.631)
<PER-SHARE-DISTRIBUTIONS> (0.003)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.19
<EXPENSE-RATIO> 0.70
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</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>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 4
<NAME> EATON VANCE SHORT TERM TREASURY FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 2,331
<INVESTMENTS-AT-VALUE> 2,330
<RECEIVABLES> 4
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 2
<TOTAL-ASSETS> 2,336
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 332
<TOTAL-LIABILITIES> 332
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,004
<SHARES-COMMON-STOCK> 32
<SHARES-COMMON-PRIOR> 32
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 2,004
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3,171
<OTHER-INCOME> 0
<EXPENSES-NET> 359
<NET-INVESTMENT-INCOME> 2,812
<REALIZED-GAINS-CURRENT> 9
<APPREC-INCREASE-CURRENT> (12)
<NET-CHANGE-FROM-OPS> 2,810
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,983
<NUMBER-OF-SHARES-REDEEMED> (2,983)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 89
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 185
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 452
<AVERAGE-NET-ASSETS> 60,425
<PER-SHARE-NAV-BEGIN> 61.43
<PER-SHARE-NII> 2.88
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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