As filed with the Securities and Exchange Commission on April 28, 1995
File No. 811-8014
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 2 [X]
TOTAL RETURN PORTFOLIO
(Exact Name Of Registrant As Specified In Charter)
24 Federal Street
Boston, Massachusetts 02110
(Address Of Principal Executive Offices)
Registrant's Telephone Number, Including Area Code: (617) 482-8260
H. Day Brigham, Jr.
24 Federal Street, Boston, Massachusetts 02110
(Name and Address of Agent for Service)
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EXPLANATORY NOTE
This Registration Statement, as amended, has been filed by the
Registrant pursuant to Section 8(b) of the Investment Company Act of 1940,
as amended. However, interests in the Registrant have not been registered
under the Securities Act of 1933, as amended (the "1933 Act"), because
such interests will be issued solely in private placement transactions
that do not involve any "public offering" within the meaning of Section
4(2) of the 1933 Act. Investments in the Registrant may be made only by
investment companies, common or commingled trust funds, organizations or
trusts described in Sections 401(a) or 501(a) of the Internal Revenue Code
of 1986, as amended, or similar organizations or entities that are
"accredited investors" within the meaning of Regulation D under the 1933
Act. This Registration Statement, as amended, does not constitute an offer
to sell, or the solicitation of an offer to buy, any interests in the
Registrant.
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PART A
Responses to Items 1 through 3 and 5A have been omitted pursuant
to Paragraph 4 of Instruction F of the General Instructions to Form N-1A.
ITEM 4. GENERAL DESCRIPTION OF REGISTRANT
Total Return Portfolio (the "Portfolio") is a diversified,
open-end management investment company which was organized as a trust
under the laws of the State of New York on May 1, 1992. Interests in the
Portfolio are issued solely in private placement transactions that do not
involve any "public offering" within the meaning of Section 4(2) of the
Securities Act of 1933, as amended (the "1933 Act"). Investments in the
Portfolio may be made only by U.S. and foreign investment companies,
common or commingled trust funds, organizations or trusts described in
Sections 401(a) or 501(a) of the Internal Revenue Code of 1986, as amended
(the "Code"), or similar organizations or entities that are "accredited
investors" within the meaning of Regulation D under the 1933 Act. This
Registration Statement, as amended, does not constitute an offer to sell,
or the solicitation of an offer to buy, any "security" within the meaning
of the 1933 Act.
The Portfolio's investment objective is to seek for its investors
a high level of total return, consisting of relatively predictable income
in conjunction with capital appreciation, consistent with prudent
management and preservation of capital. The Portfolio's investment
objective is nonfundamental and may be changed when authorized by a vote
of the Trustees of the Portfolio without obtaining the approval of the
investors in the Portfolio.
Additional information about the investment policies of the
Portfolio appears in Part B. The Portfolio is not intended to be a
complete investment program, and a prospective investor should take into
account its objectives and other investments when considering the purchase
of interests in the Portfolio. The Portfolio cannot assure achievement of
its investment objective.
How the Portfolio Invests Its Assets
The Portfolio seeks to achieve its investment objective by
investing principally in dividend-paying common stocks with the potential
to increase dividends in the future. The Portfolio concentrates its
investments in common stocks of public utilities ("utility stocks"),
principally electric, gas and telephone companies. Accordingly, the
Portfolio invests at least 25% of its total assets, and may invest up to
100% of its total assets, in utility stocks. The Portfolio may also
invest in preferred stocks and may hold non-income-producing securities.
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The Portfolio may from time to time invest in fixed-income debt
securities when the Portfolio's investment adviser ("BMR" or the
"Investment Adviser") believes that their total return potential is
consistent with the Fund's objective. The Portfolio may invest its cash
reserves in high quality money market securities, which include securities
of the U.S. Government and its agencies or instrumentalities maturing in
one year or less, commercial paper, and bankers' acceptances and
certificates of deposit of domestic banks or savings and loan associations
having total assets of $1 billion or more. The Portfolio may also invest
in longer-term debt securities that at the time of purchase are rated Aaa,
Aa or A by Moody's Investors Service, Inc. ("Moody's"), or AAA, AA or A by
Standard & Poor's Ratings Group ("S&P"), Fitch Investors Service, Inc.
("Fitch") or Duff & Phelps, Inc. ("Duff"), or that at the time of purchase
are issued, guaranteed, backed or secured by the U.S. Government or any of
its agencies or instrumentalities. The Portfolio currently intends to
limit its investments in fixed-income debt securities to 20% or less of
its net assets. Subject to such limitation, the Portfolio may invest up
to 10% of its net assets in fixed-income debt securities that at the time
of purchase are rated investment grade (i.e., rated Baa or higher by
Moody's, or BBB or higher by S&P, Fitch or Duff) or below investment
grade. Debt securities rated below Baa or BBB are commonly known as "junk
bonds".
In view of the Portfolio's policy of concentrating its
investments in utility stocks, an investment in interests of the Portfolio
should be made with an understanding of the characteristics of the public
utility industry and the potential risks of such an investment.
Industry-wide problems include the effects of fluctuating economic
conditions, energy conservation practices, environmental regulations, high
capital expenditures, construction delays due to pollution control and
environmental considerations, uncertainties as to fuel availability and
costs, increased competition in deregulated sectors of the industry, and
difficulties in obtaining timely and adequate rate relief from regulatory
commissions. If applications for rate increases are not granted or are not
acted upon promptly, the market prices of and dividend payments on utility
stocks may be adversely affected. The Portfolio's policy of concentrating
in utility stocks is a fundamental policy and may not be changed unless
authorized by a vote of the investors in the Portfolio. Other investors in
the Portfolio may alone or collectively acquire sufficient voting
interests in the Portfolio to change this fundamental policy.
The Portfolio may invest in securities issued by foreign
companies (including American Depository Receipts and Global Depository
Receipts). Such investments may be subject to various risks such as
fluctuations in currency and exchange rates, foreign taxes, social,
political and economic conditions in the countries in which such companies
operate, and changes in governmental, economic or monetary policies both
here and abroad. There may be less publicly available information about a
foreign company than about a comparable domestic company. Because the
securities markets in many foreign countries are not as developed as those
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in the United States, the securities of many foreign companies are less
liquid and their prices are more volatile than securities of comparable
domestic companies. In order to hedge against possible variations in
foreign exchange rates pending the settlement of foreign securities
transactions, the Portfolio may buy or sell foreign currencies, foreign
currency futures and options, and forward foreign currency exchange
contracts.
The Portfolio may invest a significant portion of its assets in
the securities of real estate investment trusts ("REITs"), which are
affected by conditions in the real estate industry, interest rate changes
and, in the case of REITs investing in health care facilities, events
affecting the health care industry.
The Portfolio may also enter into repurchase agreements with
respect to securities of the U.S. Government and its agencies or
instrumentalities with the seller of such securities, usually a bank.
Under a repurchase agreement, the seller agrees to repurchase the
securities at the Portfolio's cost plus interest within a specified time
(normally one day). Repurchase agreements involve a risk that the value of
the securities subject to the repurchase agreement may decline to an
amount less than the repurchase price and that, in the event of the
seller's bankruptcy or insolvency, the Portfolio may be prevented from
disposing of such securities. The Portfolio will comply with the
collateralization policies of the Securities and Exchange Commission (the
"Commission"), which policies require that the Portfolio or its custodian
obtain actual or constructive possession of the collateral and that the
market value of the securities held as collateral be marked to the market
daily and at least equal the repurchase price during the term of the
agreement. The Portfolio intends that the total of its investments, if
any, in repurchase agreements maturing in more than 7 days and other
illiquid securities will not exceed 15% of its net assets.
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 enhance return, to hedge
against fluctuations in securities prices, interest rates or currency
exchange rates, or as a substitute for the purchase or sale of securities
or currencies. The Portfolio's transactions in derivative instruments may
include the purchase or sale of futures contracts on securities (such as
U.S. Government securities), securities indices, other indices, other
financial instruments or currencies; options on futures contracts;
exchange-traded options on securities, indices or currencies; and forward
foreign currency exchange contracts. The Portfolio's transactions in
derivative instruments involve a risk of loss or depreciation due to
unanticipated adverse changes in securities prices, interest rates, the
other financial instruments' prices or currency exchange rates, the
inability to close out a position or default by the counterparty. The
loss on derivative instruments (other than purchased options) may exceed
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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 may write (sell) covered call and put options on
securities, currencies and indices with respect to up to 50% of its net
assets, as measured by the aggregate value of the securities underlying
such written call and put options. If a written covered call option is
exercised, the Portfolio will be unable to realize further price
appreciation on the underlying securities and portfolio turnover will
increase, resulting in higher brokerage costs. The Portfolio may purchase
call and put options on any securities in which the Portfolio may invest
or options on any securities index composed of securities in which the
Portfolio may invest. The Portfolio does not intend to purchase an option
on any security if, after such transaction, more than 5% of its net
assets, as measured by the aggregate of all premiums paid for all such
options held by the Portfolio, would be so invested.
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, 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.
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 Portfolio
may also use forward contracts to shift its exposure to foreign currency
exchange rate changes from one currency to another.
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Leverage Through Borrowing. The Portfolio may from time to time increase
its ownership of portfolio securities above the amounts otherwise possible
by borrowing from banks on an unsecured basis at fixed or variable rates
of interest and investing the borrowed funds. The Investment Adviser
currently anticipates that the Portfolio will incur borrowings for the
purpose of acquiring additional income-producing securities when it is
believed that the interest payable with respect to such borrowings will be
exceeded by (a) the income payable on the securities acquired with such
borrowings or (b) the anticipated total return (a combination of income
and appreciation) on such securities. Such borrowings might be made, for
example, when short-term interest rates fall below the yields available
from the securities acquired with the borrowed funds or the total return
anticipated from such securities.
The Portfolio is required to maintain asset coverage of at least
300% with respect to such borrowings, which means that the Portfolio may
borrow an amount up to 50% of the value of its net assets (not including
such borrowings). The Portfolio may be required to dispose of securities
held by it on unfavorable terms if market fluctuations or other factors
reduce such asset coverage to less than 300%.
Leveraging will exaggerate any increase or decrease in the market
value of the securities held by the Portfolio. Money borrowed for
leveraging will be subject to interest costs which may or may not exceed
the income from the securities purchased. The Portfolio may also be
required to maintain minimum average balances in connection with such
borrowing or to pay a commitment or other fee to maintain a line of
credit; either of these requirements will increase the cost of borrowing
over the stated interest rate. Unless the income and appreciation, if any,
on assets acquired with borrowed funds exceeds the cost of borrowing, the
use of leverage will diminish the investment performance of the Portfolio
compared with what it would have been without leverage.
The Portfolio will not always borrow money for additional
investments. The Portfolio's willingness to borrow money for investment
purposes, and the amount it will borrow, will depend on many factors, the
most important of which are the investment outlook, market conditions and
interest rates. Successful use of a leveraging strategy depends on the
Investment Adviser's ability to predict correctly interest rates and
market movements, and there is no assurance that a leverage strategy will
be successful during any period in which it is employed. The average
daily loan balance for the fiscal year ended December 31, 1994 was
$3,137,134 and the average daily interest rate was 5.96%.
Lending of 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 would be required to be secured continuously by collateral in cash,
cash equivalents or U.S. Government securities held by the Portfolio's
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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. The Portfolio would have the right to call a loan and obtain the
securities loaned at any time on five business days' notice. During the
existence of a loan, the Portfolio will continue to receive the equivalent
of the interest or dividends 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. The Portfolio would not 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 the giving or withholding of their
consent on a material matter affecting the investment. As with other
extensions of credit there are risks of delay in recovery or even loss of
rights in the securities loaned if the borrower of the securities fails
financially. However, the loans would be made only to organizations deemed
by the Portfolio's management to be of good standing and, when, in the
judgment of the Portfolio's management, the consideration which can be
earned from securities loans of this type justifies the attendant risk. If
the management of the Portfolio decides to make securities loans, it is
intended that the value of the securities loaned would not exceed 30% of
the Portfolio's total assets.
Investment Restrictions. The Portfolio has adopted certain fundamental
investment restrictions which are enumerated in detail in Part B and which
may not be changed unless authorized by an investor vote. Except for such
enumerated restrictions and as otherwise indicated in this Part A, the
investment objective and policies of the Portfolio are not fundamental
policies and accordingly may be changed by the Trustees without obtaining
the approval of the investors in the Portfolio. The Portfolio's investors
will receive written notice thirty days prior to any change in the
investment objective of the Portfolio. If any changes were made, the
Portfolio might have an investment objective different from the objective
which an investor considered appropriate at the time of its initial
investment.
An investment in the Portfolio entails the risk that the
principal value of Portfolio interests and the income earned thereon may
not increase or may decline. The Portfolio's investments in equity
securities are subject to the risk of adverse developments affecting
particular companies or industries and the stock market generally. The
lowest investment grade, lower rated and comparable unrated debt
securities in which the Portfolio may invest will have speculative
characteristics in varying degrees. While such securities may have some
quality and protective characteristics, these characteristics can be
expected to be offset or outweighed by uncertainties or major risk
exposures to adverse conditions. Lower rated and comparable unrated
securities are subject to the risk of an issuer's inability to meet
principal and interest payments on the securities (credit risk) and may
also be subject to price volatility due to such factors as interest rate
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sensitivity, market perception of the creditworthiness of the issuer and
general market liquidity (market risk). Lower rated and comparable
unrated securities are also more likely to react to real or perceived
developments affecting markets and credit risk than are more highly rated
securities, which react primarily to movements in the general level of
interest rates. The Portfolio may retain defaulted securities in its
portfolio when such retention is considered desirable by the Investment
Adviser. In the case of a defaulted security, the Portfolio may incur
additional expenses seeking recovery of its investment. In the event the
rating of a security held by the Portfolio is down-graded, the Investment
Adviser will consider disposing of such security, but is not obligated to
do so.
ITEM 5. MANAGEMENT OF THE PORTFOLIO
The Portfolio is organized as a trust under the laws of the State
of New York. The Portfolio intends to comply with all applicable Federal
and state securities laws.
Investment Adviser. The Portfolio engages 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,
BMR manages the Portfolio's investments and affairs. 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:
AVERAGE DAILY NET ANNUALIZED FEE RATE
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, 1994, the Portfolio had net assets of
$505,566,892. For the fiscal year ended December 31, 1994, the Portfolio
paid BMR advisory fees equivalent to 0.74% of the Portfolio's average
daily net assets for such year.
BMR also furnishes for the use of the Portfolio office space and
all necessary office facilities, equipment and personnel for servicing the
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investments of the Portfolio. The Portfolio is responsible for the payment
of all expenses other than those expressly stated to be payable by BMR
under the investment advisory agreement.
BMR places the portfolio security transactions of the Portfolio
for execution with many broker-dealers firms and uses its best efforts to
obtain execution of such transactions at prices which are advantageous to
the Portfolio and at reasonably competitive commission rates. Subject to
the foregoing, BMR may consider sales of shares of other investment
companies sponsored by BMR or Eaton Vance as a factor in the selection of
broker-dealer firms to execute portfolio transactions.
Timothy O'Brien has acted as the portfolio manager of the
Portfolio since January, 1995. Mr. O'Brien joined Eaton Vance as a Vice
President on April 25, 1994. Prior to joining Eaton Vance, he served as a
Vice President of Loomis, Sayles & Co.
BMR or Eaton Vance acts as investment adviser to investment
companies and various individual and institutional clients with assets
under management of approximately $15 billion. Eaton Vance is a
wholly-owned subsidiary of Eaton Vance Corp., a publicly held holding
company. Eaton Vance Corp., through its subsidiaries and affiliates,
engages in investment management and marketing activities, fiduciary and
banking services, oil and gas operations, real estate investment,
consulting and management, and development of precious metals properties.
ITEM 6. CAPITAL STOCK AND OTHER SECURITIES
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. Under the Declaration of Trust, the Trustees are authorized to
issue interests in the Portfolio. Each investor is entitled to a vote in
proportion to the amount of its investment in the Portfolio. Investments
in the Portfolio may not be transferred, but an investor may withdraw all
or any portion of its investment at any time at net asset value. Investors
in the Portfolio will each be liable for all obligations of the Portfolio.
However, the risk of an investor in the Portfolio 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.
The Declaration of Trust provides that the Portfolio will
terminate 120 days after the complete withdrawal of any 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 the treatment
of the Portfolio as a partnership for Federal income tax purposes.
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Investments in the Portfolio have no preemptive or conversion
rights and are fully paid and nonassessable, except as set forth above.
The Portfolio is not required and has no current intention to hold annual
meetings of investors, but the Portfolio may hold special meetings of
investors when in the judgment of the Trustees it is necessary or
desirable to submit matters for an investor vote. Changes in fundamental
policies or restrictions will be submitted to investors for approval. The
investment objective and all nonfundamental investment policies of the
Portfolio may be changed by the Trustees of the Portfolio without
obtaining the approval of the investors in the Portfolio. Investors have
under certain circumstances (e.g., upon application and submission of
certain specified documents to the Trustees by a specified number of
investors) the right to communicate with other investors in connection
with requesting a meeting of investors for the purpose of removing one or
more Trustees. Any Trustee may be removed by the affirmative vote of
holders of two-thirds of the interests in the Portfolio.
Information regarding pooled investment entities or funds which
invest in the Portfolio may be obtained by contacting Eaton Vance
Distributors, Inc., 24 Federal Street, Boston, MA 02110 (617) 482-8260.
Smaller investors in the Portfolio may be adversely affected by the
actions of larger investors in the Portfolio. For example, if a large
investor withdraws from the Portfolio, the remaining investors may
experience higher pro rata operating expenses, thereby producing lower
returns. Additionally, the Portfolio may become less diverse, resulting in
increased portfolio risk, and experience decreasing economies of scale.
However, this possibility exists as well for historically structured funds
which have large or institutional investors.
As of March 31, 1995, EV Traditional Total Return Fund controlled
the Portfolio by virtue of owning approximately 87.8% of the outstanding
voting securities of the Portfolio.
The net asset value of the Portfolio is determined each day on
which the New York Stock Exchange (the "Exchange") is open for trading
("Portfolio Business Day"). This determination is made each Portfolio
Business Day as of the close of regular trading on the Exchange (currently
4:00 p.m., New York time) (the "Portfolio Valuation Time").
Each investor in the Portfolio may add to or reduce its
investment in the Portfolio on each Portfolio Business Day as of 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 interest 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
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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.
The Portfolio will allocate at least annually among its investors
its net investment income, net realized capital gains, and any other items
of income, gain, loss, deduction or credit. The Portfolio's net investment
income consists of all income accrued on the Portfolio's assets, less all
actual and accrued expenses of the Portfolio determined in accordance with
generally accepted accounting principles.
Under the anticipated method of operation of the Portfolio, the
Portfolio will not be subject to any Federal income tax (see Part B, Item
20). However, each investor in the Portfolio will take into account its
allocable share of the Portfolio's ordinary income and capital gain in
determining its Federal income tax liability. The determination of each
such share will be made in accordance with the governing instruments of
the Portfolio, which are intended to comply with the requirements of the
Code and the regulations promulgated thereunder.
It is intended that the Portfolio's assets and income will be
managed in such a way that an investor in the Portfolio which seeks to
qualify as a RIC under the Code will be able to satisfy the requirements
for such qualification.
ITEM 7. PURCHASE OF INTERESTS IN THE PORTFOLIO
Interests in the Portfolio are issued solely in private placement
transactions that do not involve any "public offering" within the meaning
of Section 4(2) of the 1933 Act. See "General Description of Registrant"
above.
An investment in the Portfolio will be made without a sales load.
All investments received by the Portfolio will be effected as of the next
Portfolio Valuation Time. The net asset value of the Portfolio is
determined at the Portfolio Valuation Time on each Portfolio Business Day.
The Portfolio will be closed for business and will not determine its net
asset value on the following business holidays: New Year's Day,
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Presidents' Day, Good Friday (a New York Stock Exchange holiday), Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The
Portfolio's net asset value is computed in accordance with procedures
established by the Portfolio's Trustees.
The Portfolio's net asset value is determined by Investors Bank &
Trust Company (as custodian and agent for the Portfolio) in the manner
authorized by the Trustees of the Portfolio. The net asset value is
computed by subtracting the liabilities of the Portfolio from the value of
its total assets. Securities listed on securities exchanges or in the
NASDAQ National Market are valued at closing sales prices or, if there are
no sales, at the mean between the closing bid and asked prices therefor on
such exchanges. For further information regarding the valuation of the
Portfolio's assets, see Part B, Item 19.
There is no minimum initial or subsequent investment in the
Portfolio. The Portfolio reserves the right to cease accepting investments
at any time or to reject any investment order.
The placement agent for the Portfolio is Eaton Vance
Distributors, Inc. ("EVD"). The principal business address of EVD is 24
Federal Street, Boston, Massachusetts 02110. EVD receives no compensation
for serving as the placement agent for the Portfolio.
ITEM 8. REDEMPTION OR DECREASE OF INTEREST
An investor in the Portfolio may withdraw all (redeem) or any
portion (decrease) of its interest in the Portfolio if a withdrawal
request in proper form is furnished by the investor to the Portfolio. All
withdrawals will be effected as of the next Portfolio Valuation Time. The
proceeds of a withdrawal will be paid by the Portfolio normally on the
Portfolio Business Day the withdrawal is effected, but in any event within
seven days. The Portfolio reserves the right to pay the proceeds of a
withdrawal (whether a redemption or decrease) by a distribution in kind of
portfolio securities (instead of cash). The securities so distributed
would be valued at the same amount as that assigned to them in calculating
the net asset value for the interest (whether complete or partial) being
withdrawn. If an investor received a distribution in kind upon such
withdrawal, the investor could incur brokerage and other charges in
converting the securities to cash. The Portfolio has filed with the
Commission a notification of election on Form N-18F-1 committing to pay in
cash all requests for withdrawals by any investor, limited in amount with
respect to such investor during any 90 day period to the lesser of (a)
$250,000 or (b) 1% of the net asset value of the Portfolio at the
beginning of such period.
Investments in the Portfolio may not be transferred.
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The right of any investor to receive payment with respect to any
withdrawal may be suspended or the payment of the withdrawal proceeds
postponed during any period in which the Exchange is closed (other than
weekends or holidays) or trading on the Exchange is restricted or, to the
extent otherwise permitted by the 1940 Act, if an emergency exists, or
during any other period permitted by order of the Commission for the
protection of investors.
ITEM 9. PENDING LEGAL PROCEEDINGS
Not applicable.
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PART B
ITEM 10. COVER PAGE.
Not applicable.
ITEM 11. TABLE OF CONTENTS.
PAGE
General Information and History . . . . . . . . . . . . . . . . . . B- 1
Investment Objectives and Policies . . . . . . . . . . . . . . . . . B- 1
Management of the Portfolio . . . . . . . . . . . . . . . . . . . . B- 7
Control Persons and Principal Holder of Securities . . . . . . . . . B-11
Investment Advisory and Other Services . . . . . . . . . . . . . . . B-11
Brokerage Allocation and Other Practices . . . . . . . . . . . . . . B-14
Capital Stock and Other Securities . . . . . . . . . . . . . . . . . B-17
Purchase, Redemption and Pricing of Securities . . . . . . . . . . . B-18
Tax Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-19
Underwriters . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-21
Calculation of Performance Data . . . . . . . . . . . . . . . . . . B-22
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . B-22
ITEM 12. GENERAL INFORMATION AND HISTORY.
Not applicable.
ITEM 13. INVESTMENT OBJECTIVES AND POLICIES.
Part A contains additional information about the investment
objective and policies of the Total Return Portfolio (the "Portfolio").
This Part B should be read in conjunction with Part A. Capitalized terms
used in this Part B and not otherwise defined have the meanings given them
in Part A.
The investment objective of the Portfolio is to seek for its
investors a high level of total return, consisting of relatively
predictable income in conjunction with capital appreciation, consistent
with prudent management and preservation of capital. The Portfolio seeks
to achieve its investment objective by investing principally in dividend-
paying common stocks with the potential to increase dividends in the
future.
Leverage Through Borrowing
The practice of leveraging to enhance investment return may be
viewed as a speculative activity. Leveraging will exaggerate any increase
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or decrease in the market value of the securities held by the Portfolio.
Money borrowed for leveraging will be subject to interest costs which may
or may not exceed the dividends for the securities purchased. The
Portfolio may also be required to maintain minimum average balances in
connection with such borrowing or to pay a commitment or other fee to
maintain a line of credit; either of these requirements will increase the
cost of borrowing over the stated interest rate.
The Portfolio and the other investment companies managed by BMR
or Eaton Vance Management participate in a Line of Credit Agreement (the
"Credit Agreement") with Citibank N.A. ("Citibank"). Citibank agrees, in
the Credit Agreement, to consider requests from the Portfolio and such
other investment companies that Citibank make advances ("Advances") to the
Portfolio and such other investment companies from time to time. The
aggregate amount of all such Advances to all such borrowers will not
exceed $120,000,000, $100,000,000 of which is a discretionary facility and
$20,000,000 a committed facility. The Portfolio has currently determined
that its borrowings under the Credit Agreement will not exceed, at any one
time outstanding, the lesser of (a) 1/3 of the current market value of
the net assets of the Portfolio or (b) $60,000,000 (the "Amount Available
to the Portfolio"). The Portfolio is obligated to pay to Citibank, in
addition to interest on Advances made to it, a quarterly fee on the
average daily unused portion of the Amount Available to the Portfolio at
the rate of 1/4 of 1% per annum. The Credit Agreement may be terminated
by Citibank or the borrowers at any time upon 30 days' prior written
notice. The Portfolio expects to use the proceeds of the Advances
primarily for leveraging purposes. As at December 31, 1993, the Portfolio
had no outstanding loans pursuant to the Credit Agreement.
The Portfolio, like many other investment companies, can, also
borrow money for temporary extraordinary or emergency purposes. Such
borrowings may not exceed 5% of the value of the Portfolio's total assets
when the loan is made. The Portfolio may pledge up to 10% of the lesser of
cost or value of its total assets to secure such borrowings.
The ability of the Portfolio to borrow could be partially or
entirely curtailed in the event that the Credit Control Act of 1969 were
to be invoked and the Federal Reserve Board were to limit or prohibit
certain extensions of credit. This Act empowers the Federal Reserve Board,
when authorized by the President, to regulate directly the costs and
allocation of funds in the credit market.
Risks Associated With Derivative Instruments
Entering into a derivative instrument involves a risk that the
applicable market will move against the Portfolio's position and that the
Portfolio will incur a loss. For derivative instruments other than
purchased options, this loss may exceed the amount of the initial
investment made or the premium received by the Portfolio. Derivative
instruments may sometimes increase or leverage the Portfolio's exposure to
a particular market risk. Leverage enhances the Portfolio's exposure to
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the price volatility of derivative instruments it holds. The Portfolio's
success in using derivative instruments to hedge portfolio assets depends
on the degree of price correlation between the derivative instruments and
the hedged asset. Imperfect correlation may be caused by several factors,
including temporary price disparities among the trading markets for the
derivative instrument, the assets underlying the derivative instrument and
the Portfolio assets. Over-the-counter ("OTC") derivative instruments
involve an enhanced risk that the issuer or counterparty will fail to
perform its contractual obligations. Some derivative instruments are not
readily marketable or may become illiquid under adverse market conditions.
In addition, during periods of market volatility, a commodity exchange may
suspend or limit trading in an exchange-traded derivative instrument,
which may make the contract temporarily illiquid and difficult to price.
Commodity exchanges may also establish daily limits on the amount that the
price of a futures contract or futures option can vary from the previous
day's settlement price. Once the daily limit is reached, no trades may be
made that day at the price beyond the limit. This may prevent the
Portfolio from closing out positions and limiting its losses. The staff
of the Securities and Exchange Commission ("Commission") takes the
position that purchased OTC options, and assets used as cover for written
OTC options, are subject to the Portfolio's 15% limit on illiquid
investments. The Portfolio's ability to terminate OTC derivative
instruments may depend on the cooperation of the counterparties to such
contracts. The Portfolio expects to purchase and write only exchange-
traded options until such time as the Portfolio's management determines
that the OTC options market is sufficiently developed and the Portfolio
has amended its prospectus so that appropriate disclosure is furnished to
prospective and existing shareholders. For thinly traded derivative
instruments, the only source of price quotations may be the selling dealer
or counterparty. In addition, certain provisions of the Internal Revenue
Code of 1986, as amended ("Code"), limit the extent to which the Portfolio
may purchase and sell derivative instruments. The Portfolio will engage
in transactions in futures contracts and related options only to the
extent such transactions are consistent with the requirements of the Code
for maintaining the qualification of the Fund as a regulated investment
company for Federal income tax purposes. see "Taxes."
Asset Coverage for Derivative Instruments
Transactions using forward contracts, futures contracts and
options (other than options that the Portfolio has purchased) expose the
Portfolio to an obligation to another party. The Portfolio will not enter
into any such transactions unless it owns either (1) an offsetting
("covered") position in securities, currencies, or other options or
futures contracts or forward contracts, or (2) cash, receivables and
short-term debt securities with a value sufficient at all times to cover
its potential obligations not covered as provided in (1) above. The
Portfolio will comply with Commission guidelines regarding cover for these
instruments and, if the guidelines so require, set aside cash, U.S.
B - 3
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Government securities or other liquid, high-grade debt securities in a
segregated account with its custodian in the prescribed amount.
Assets used as cover or held in a segregated account cannot be
sold while the position in the corresponding forward contract, futures
contract or option is open, unless they are replaced with other
appropriate assets. As a result, the commitment of a large portion of the
Portfolio's assets to cover or segregated accounts could impede portfolio
management or the Portfolio's ability to meet redemption requests or other
current obligations.
Limitations on Futures Contracts and Options
If the Portfolio has not complied with the 5% CFTC test set forth
in the Fund's prospectus, to evidence its hedging intent, the Portfolio
expects that, on 75% or more of the occasions on which it takes a long
futures or option on futures position, it will have purchased or will be
in the process of purchasing, equivalent amounts of related securities at
the time when the futures or options position is closed out. However, in
particular cases, when it is economically advantageous for the Portfolio
to do so, a long futures or options position may be terminated (or an
option may expire) without a corresponding purchase or securities.
The Portfolio may enter into futures contracts, and options on
futures contracts, traded on an exchange regulated by the CFTC and on
foreign exchanges, but, with respect to foreign exchange-traded futures
contracts an options on such futures contracts, only if the Investment
Adviser determines that trading on each such foreign exchange does not
subject the Portfolio to risks, including credit and liquidity risks, that
are materially greater than the risks associated with training on CFTC-
regulated exchanges.
In order to hedge its current or anticipated portfolio positions,
the Portfolio may use futures contracts on securities held in its
portfolio or on securities with characteristics similar to those of the
securities held by the Portfolio. If, in the opinion of the Investment
Adviser, there is a sufficient degree of correlation between price trends
for the securities held by the Portfolio and futures contracts based on
other financial instruments, securities indices or other indices, the
Portfolio may also enter into such futures contracts as part of its
hedging strategy.
All call and put options on securities written by the Portfolio
will be covered. This means that, in the case of a call option, the
Portfolio will own the securities subject to the call option or an
offsetting call option so long as the call option is outstanding. In the
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<PAGE>
case of a put option, the Portfolio will own an offsetting put option or
will have deposited with its custodian cash or liquid, high-grade debt
securities with a value at least equal to the exercise price of the put
option. The Portfolio may only write a put option on a security that it
intends ultimately to acquire for its investment portfolio.
Portfolio Turnover
The portfolio turnover rate of the Portfolio is likely to exceed
100%, but under normal conditions is not likely to exceed 250%. A 100%
turnover rate occurs if all of the securities held by the Portfolio are
sold and either repurchased or replaced 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. See "Brokerage
Allocation and Other Practices" for a discussion of the Portfolio's
brokerage practices. The portfolio turnover rates of the Portfolio,
exclusive of transactions in securities whose maturities at the time of
acquisition were one year or less, for the period from the start of
business, October 28, 1993, to December 31, 1993 and for the fiscal year
ended December 31, 1994, were 16% and 107%, respectively.
Investment Restrictions
Whenever an investment policy or investment restriction set forth
in Part A or this Part B 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 Portfolio's
acquisition of such security or other asset. Accordingly, any later
increase or decrease resulting from a change in values, assets or other
circumstances will not compel the Portfolio to dispose of such security or
other asset.
The Portfolio has adopted the following investment restrictions
which may not be changed without the approval of the holders of a
"majority of the outstanding voting securities" of the Portfolio which as
used in this Part B means the lesser of (a) 67% or more 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 Investment Company Act of 1940 (the "1940 Act"). The
Portfolio may not:
(1) With respect to 75% of its total assets, invest more than 5%
of its total assets in the securities of any one issuer or purchase more
than 10% of the outstanding voting securities of any one issuer, except
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<PAGE>
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities and except securities of other investment companies;
(2) Borrow money or issue senior securities except as permitted
by the Investment Company Act of 1940;
(3) Purchase securities on margin (but the Portfolio 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 Portfolio of
initial, maintenance or variation margin in connection with all types of
options and futures contract transactions is not considered the purchase
of securities 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) Make an investment in any one industry if such investment
would cause investments in such industry to exceed 25% of the Portfolio's
total assets (taken at market value) except that the Portfolio will
concentrate at least 25% of its investments in utility stocks (i.e.,
principally electric, gas and telephone companies);
(6) Purchase or sell real estate, although it may purchase and
sell securities which are secured by real estate and securities of
companies which invest or deal in real estate;
(7) Purchase or sell physical commodities or contracts for the
purchase or sale of physical commodities; or
(8) Make loans to any person except by (a) the acquisition of
debt securities and making portfolio investments, (b) entering into
repurchase agreements and (c) lending portfolio securities.
The Portfolio has adopted the following nonfundamental investment
policies which may be changed by the Trustees of the Portfolio with or
without the approval of the Portfolio's other investors. As a matter of
nonfundamental policy, the Portfolio may not: (a) 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 eligible for resale pursuant to Rule 144A of the
Securities Act of 1933 that the Board of Trustees, or its delegate,
determines to be liquid, based upon the trading markets for the specific
security; (b) purchase warrants in excess of 5% of its net assets, of
which 2% may be warrants which are not listed on the New York or American
Stock Exchange; (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,
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and unless no more than 25% of its net assets (taken at current value) is
held as collateral for such sales at any one time. (It is the present
intention of management to make such sales only for the purpose of
deferring realization of gain or loss for Federal income tax purposes);
(d) purchase securities of any issuer which, including predecessors, has
not been in continuous operation for at least three years, except that 5%
of its total assets (taken at market value) may be invested in certain
issuers not in such continuous operation but substantially all of whose
assets are (i) securities of one or more issuers which have had a record
of three years' continuous operation or (ii) assets of an independent
division of an issuer which division has had a record of three years'
continuous operation; provided, however, that exempted from this
restriction are U.S. Government securities, securities of issuers which
are rated by at least one nationally recognized statistical rating
organization, municipal obligations and obligations issued or guaranteed
by any foreign government or its agencies or instrumentalities; (e)
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 Portfolio or is a member, officer, director or trustee
of any investment adviser of the Portfolio, if after the purchase of the
securities of such issuer by 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 of securities together own beneficially
more than 5% of such shares or securities or both (all taken at market
value); (f) purchase oil, gas or other mineral leases or purchase
partnership interests in oil, gas or other mineral exploration or
development programs; and (g) invest more than 5% of its net assets in the
securities of foreign issuers. (For purposes of restriction (g), U.S.
dollar-denominated ADRs and GDRs traded on a U.S. exchange shall not be
deemed foreign securities.)
It is contrary to the present policy of the Portfolio, which
policy may be changed without investor approval, to purchase any voting
security of any electric or gas utility company (as defined by the Public
Utility Holding Company Act of 1935) if as a result it would then hold
more than 5% of the outstanding voting securities of such company.
In order to permit the sale in certain states of shares of
certain open- end investment companies which are investors in the
Portfolio, the Portfolio may adopt policies more restrictive than the
policies described above. Should the Portfolio determine that any such
policy is no longer in the best interests of the Portfolio and its
investors, it will revoke such policy.
ITEM 14. MANAGEMENT OF THE PORTFOLIO
The Trustees and officers of 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
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noted, the business address of each Trustee and officer is 24 Federal
Street, Boston, Massachusetts 02110, which is also the address of the
Portfolio's investment adviser, Boston Management and Research ("BMR" or
the "Investment Adviser"), which is a wholly-owned subsidiary of Eaton
Vance Management ("Eaton Vance"); of Eaton Vance's parent, Eaton Vance
Corp. ("EVC"); and of BMR's and Eaton Vance's trustee, Eaton Vance, Inc.
("EV"). Eaton Vance and EV are both wholly-owned subsidiaries of EVC.
Those Trustees who are "interested persons" of the Portfolio, BMR, Eaton
Vance, EVC or EV, as defined in the 1940 Act, by virtue of their
affiliation with any one or more of the Portfolio, BMR, Eaton Vance, EVC
or EV, are indicated by an asterisk(*).
TRUSTEES OF THE PORTFOLIO
M. DOZIER GARDNER (61), President and Trustee*
President and Chief Executive Officer of BMR, Eaton Vance, EVC and EV, and
Director of EVC and EV. Director, Trustee and officer of various
investment companies managed by Eaton Vance or BMR.
LANDON T. CLAY (69), Vice President and Trustee*
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 (63), Trustee
President of Dwight Partners, Inc. (a corporate relations and
communications company) founded in 1988; Chairman of the Board of
Newspapers of New England, Inc. since 1983. Director or Trustee of various
investment companies managed by Eaton Vance or BMR.
Address: Clover Mill Lane, Lyme, New Hampshire 03768
JAMES B. HAWKES (53), Vice President and Trustee*
Executive Vice President of BMR, Eaton Vance, EVC and EV, and a Director
of EVC and EV. Director, Trustee and officer of various investment
companies managed by Eaton Vance or BMR.
SAMUEL L. HAYES, III (59), 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 (59), Trustee
President and Director, United Asset Management Corporation, a holding
company owning institutional investment management firms. Chairman,
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President and Director, The Regis Fund, Inc. (mutual fund). Director or
Trustee of various investment companies managed by Eaton Vance or BMR.
Address: One International Place, Boston, Massachusetts 02110
JOHN L. THORNDIKE (68), Trustee
Director, Fiduciary Company Incorporated. Director or Trustee of various
investment companies managed by Eaton Vance or BMR.
Address: 175 Federal Street, Boston, Massachusetts 02110
JACK L. TREYNOR (64), 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 PORTFOLIO
EDWIN W. BRAGDON (72), Vice President
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
A. WALKER MARTIN (49), 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 (50), Treasurer
Vice President of BMR, Eaton Vance and EV. Officer of various other
investment companies managed by Eaton Vance or BMR.
THOMAS OTIS (63), Secretary
Vice President and Secretary of BMR, Eaton Vance, EVC and EV. Officer of
various investment companies managed by Eaton Vance or BMR.
WILLIAM J. AUSTIN, JR. (43), Assistant Treasurer
Assistant Vice President of BMR, Eaton Vance and EV. Officer of various
investment companies managed by Eaton Vance or BMR.
JANET E. SANDERS (59), 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 (32), 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,
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The Boston Company (1991-1993) and Registration Specialist, Fidelity
Management & Research Co. (1986-1991). Mr. Murphy was elected Assistant
Secretary of the Portfolio on March 27, 1995.
Messrs. Thorndike (Chairman), Hayes and Reamer are members of the
Special Committee of the Board of Trustees. The Special Committee's
functions include a continuous review of the Portfolio's contractual
relationship with the Investment Adviser, making recommendations to the
Trustees regarding the compensation of those Trustees who are not members
of the Investment Adviser's organization, and making recommendations to
the Trustees regarding candidates to fill vacancies, as and when they
occur, in the ranks of those Trustees who are not "interested persons" of
the Portfolio or the Investment Adviser.
Messrs. Treynor (Chairman) and Dwight are members of the Audit
Committee of the Board of Trustees. The Audit Committee's functions
include making recommendations to the Trustees regarding the selection of
the independent accountants, and reviewing with such accountants and the
Treasurer of the Portfolio matters relative to accounting and auditing
practices and procedures, accounting records, internal accounting
controls, and the functions performed by the custodian and transfer agent
of the Portfolio.
[This space intentionally left blank]
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The fees and expenses of those Trustees who are not members of
the Eaton Vance organization (the noninterested Trustees) are paid by the
Portfolio. (The Trustees who are members of the Eaton Vance organization
receive no compensation from the Portfolio.) During the fiscal year ended
December 31, 1994, the Trustees of the Portfolio earned the following
compensation in their capacities as Trustees from the Portfolio and the
other funds in the Eaton Vance fund complex:
<TABLE>
<CAPTION>
Aggregate Retirement Total Compensation
Compensation Benefit Accrued from Trust and
Name from Portfolio from Fund Complex Fund Complex(1)
---- -------------- ----------------- ------------------
<S> <C> <C> <C>
Donald R.
Dwight $4,119(2) $8,750 $135,000
Samuel L.
Hayes, III 4,079(3) 8,865 142,500
Norton H.
Reamer 4,002 -0- 135,000
John L.
Thorndike 4,140 -0- 140,000
Jack L.
Treynor 4,247 -0- 140,000
(1) The Eaton Vance fund complex consists of 201 registered investment companies or series thereof.
(2) Includes $331 of deferred compensation.
(3) Includes $334 of deferred compensation.
</TABLE>
Trustees of the Portfolio who are not affiliated with BMR may
elect to defer receipt of all or a percentage of their annual fees in
accordance with the terms of a Trustees Deferred Compensation Plan (the
"Plan"). Under the Plan, an eligible Trustee may elect to have his
deferred fees invested by the Portfolio in the shares of one or more funds
in the Eaton Vance Family of Funds, and the amount paid to the Trustees
under the Plan will be determined based upon the performance of such
investments. Deferral of Trustees' fees in accordance with the Plan will
have a negligible effect on the Portfolio's assets, liabilities, and net
income per share, and will not obligate the Portfolio to retain the
services of any Trustee or obligate the Portfolio to pay any particular
level of compensation to the Trustee.
The Portfolio's Declaration of Trust provides that it will
indemnify its Trustees and officers against liabilities and expenses
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incurred in connection with litigation in which they may be involved
because of their offices with the Portfolio, unless, as to liability to
the Portfolio or its investors, it is finally adjudicated that they
engaged in willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in their offices, or unless with respect
to any other matter it is finally adjudicated that they did not act in
good faith in the reasonable belief that their actions were in the best
interests of the Portfolio. In the case of settlement, such
indemnification will not be provided unless it has been determined by a
court or other body approving the settlement or other disposition, or by a
reasonable determination, based upon a review of readily available facts,
by vote of a majority of noninterested Trustees or in a written opinion of
independent counsel, that such officers or Trustees have not engaged in
wilful misfeasance, bad faith, gross negligence or reckless disregard of
their duties.
ITEM 15. CONTROL PERSONS AND PRINCIPAL HOLDER OF SECURITIES
As of March 31, 1995, EV Traditional Total Return Fund (the
"Traditional Fund"), EV Classic Total Return Fund (the "Classic Fund") and
Eaton Vance Equity-Income Trust each owned approximately 87.8%, 5.7% and
5.3%, respectively, of the value of the outstanding interests in the
Portfolio. Because the Traditional Fund controls the Portfolio, the
Traditional Fund may take actions without the approval of any other
investor. The Traditional Fund, the Classic Fund and Eaton Vance Equity-
Income Trust have informed the Portfolio that whenever they are requested
to vote on matters pertaining to the fundamental policies of the
Portfolio, they will hold a meeting of shareholders and will cast their
vote as instructed by their shareholders. It is anticipated that any other
investor in the Portfolio which is an investment company registered under
the 1940 Act would follow the same or a similar practice. The Traditional
Fund and the Classic Fund are series of Eaton Vance Total Return Trust, a
Massachusetts business trust. Eaton Vance Total Return Trust and Eaton
Vance Equity-Income Trust are mutual funds -- open-end management
investment companies.
ITEM 16. INVESTMENT ADVISORY AND OTHER SERVICES
Investment Adviser. The Portfolio engages BMR as its investment
adviser pursuant to an Investment Advisory Agreement dated October 28,
1993. The Investment Adviser or Eaton Vance acts as investment adviser to
investment companies and various individual and institutional clients with
combined assets under management of approximately $15 billion.
The Investment Adviser manages the investments and affairs of the
Portfolio subject to the supervision of the Portfolio's Board of Trustees.
The Investment Adviser furnishes to the Portfolio investment research,
advice and supervision, furnishes an investment program and will determine
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 the Investment Adviser to pay the
salaries and fees of all officers and Trustees of the Portfolio who are
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members of the Investment Adviser's organization and all personnel of the
Investment Adviser performing services relating to research and investment
activities. The Portfolio is responsible for all expenses not expressly
stated to be payable by the Investment Adviser 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 for 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 the Investment Adviser's organization,
and (xvii) such non-recurring items as may arise, including expenses
incurred in connection with litigation, proceedings and claims and the
obligation of the Portfolio to indemnify its Trustees, officers and
investors with respect thereto.
Under the 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 above the annual fee is reduced as follows:
AVERAGE DAILY NET ANNUALIZED FEE RATE
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%
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<PAGE>
As at December 31, 1994, the Portfolio had net assets of
$505,566,892. For the fiscal year ended December 31, 1994, the Portfolio
paid BMR advisory fees of $4,106,857 (equivalent to 0.74% of the
Portfolio's average daily net assets for such year). For the period from
the Portfolio's start of business, October 28, 1993, to the fiscal year
ended December 31, 1993, the Portfolio paid BMR advisory fees of $841,228
(equivalent to 0.74% (annualized) of the Portfolio's average daily net
assets for such period).
The Investment Advisory Agreement with BMR remains in effect
until February 28, 1996. It may be continued indefinitely thereafter so
long as such continuance after February 28, 1996 is approved at least
annually (i) by the vote of a majority of the Trustees who are not
interested persons of the Portfolio or of the Investment Adviser cast in
person at a meeting specifically called for the purpose of voting on such
approval and (ii) by the Board of Trustees 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, 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
the Investment Adviser may render services to others and engage in other
business activities and may permit other fund clients and other
corporations and organizations to use the words "Eaton Vance" or "Boston
Management and Research" in their names. The Agreement also provides that
the Investment Adviser 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.
BMR is a wholly-owned subsidiary of Eaton Vance. Eaton Vance and
EV are both wholly-owned subsidiaries of EVC. BMR and Eaton Vance are both
Massachusetts business trusts, and EV is the trustee of BMR and Eaton
Vance. The Directors of EV are Landon T. Clay, H. Day Brigham, Jr., M.
Dozier Gardner, James B. Hawkes, and Benjamin A. Rowland, Jr. The
Directors of EVC consist of the same persons and John G.L. Cabot and Ralph
Z. Sorenson. Mr. Clay is chairman and Mr. Gardner is president and chief
executive officer of EVC, BMR, Eaton Vance and EV. All of the issued and
outstanding shares of Eaton Vance and EV are owned by EVC. All of the
issued and outstanding shares of BMR are owned by Eaton Vance. All shares
of the outstanding Voting Common Stock of EVC are deposited in a Voting
Trust, which expires on December 31, 1996, the Voting Trustees of which
are Messrs. Clay, Brigham, Gardner, Hawkes and Rowland. The Voting
Trustees have unrestricted voting rights for the election of Directors of
EVC. All of the outstanding voting trust receipts issued under said Voting
Trust are owned by certain of the officers of BMR and Eaton Vance who are
also officers and Directors of EVC and EV. As of March 31, 1995, Messrs.
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<PAGE>
Clay, Gardner and Hawkes each owned 24% of such voting trust receipts, and
Messrs. Rowland and Brigham owned 15% and 13%, respectively, of such
voting trust receipts. Messrs. Clay, Gardner, Hawkes and Otis are officers
or Trustees of the Portfolio and are members of the EVC, BMR, Eaton Vance
and EV organizations. Messrs. Austin, Bragdon, Martin, Murphy and O'Connor
and Ms. Sanders are officers of the Portfolio and are members of the BMR,
Eaton Vance and EV organizations. BMR will receive the fees paid under the
Investment Advisory Agreement.
Eaton Vance owns all of the stock of Energex Corporation, which
is engaged in oil and gas operations. EVC owns all of the stock of
Marblehead Energy Corp. (which is engaged in oil and gas operations) and
77.3% of the stock of Investors Bank & Trust Company, custodian of the
Portfolio, which provides custodial, trustee and other fiduciary services
to investors, including individuals, employee benefit plans, corporations,
investment companies, savings banks and other institutions. In addition,
Eaton Vance owns all of the stock of Northeast Properties, Inc., which is
engaged in real estate investment, consulting and management. EVC owns all
of the stock of Fulcrum Management, Inc. and MinVen Inc., which are
engaged in the development of precious metal properties. 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 Portfolio, Investors Bank & Trust Company. It is Eaton Vance's opinion
that the terms and conditions of such transactions were not and will not
be influenced by existing or potential custodial or other relationships
between the Portfolio and such banks.
Custodian. Investors Bank & Trust Company ("IBT"), 24 Federal
Street, Boston, Massachusetts (a 77.3% owned subsidiary of EVC) acts as
custodian for the Portfolio. IBT has the custody of all the Portfolio's
assets, maintains the general ledger of the Portfolio, and computes the
daily net asset value of interests in the Portfolio. 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 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 Portfolio net assets, and a portion of the fee relates to activity
charges, primarily the number of portfolio transactions. These fees are
then reduced by a credit for cash balances of the particular investment
company at the custodian equal to 75% of the 91-day, U.S. Treasury Bill
auction rate applied to the particular investment company's average daily
collected balances for the week. In view of the ownership of EVC in IBT,
the Portfolio is treated as a self-custodian pursuant to Rule 17f-2 under
the 1940 Act, and the Portfolio's investments held by IBT as custodian are
thus subject to additional examinations by the Portfolio's independent
accountants as called for by such Rule. For the fiscal year ended December
31, 1994, the Portfolio paid IBT $159,872.
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<PAGE>
Independent Accountants. Coopers & Lybrand L.L.P., One Post
Office Square, Boston, Massachusetts, are the independent accountants of
the Portfolio, providing audit services, tax return preparation, and
assistance and consultation with respect to the preparation of filings
with the Securities and Exchange Commission.
ITEM 17. BROKERAGE ALLOCATION AND OTHER PRACTICES
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
broker-dealer firms. BMR uses its best efforts to obtain execution of
portfolio security transactions at prices which are advantageous to the
Portfolio and (when a disclosed commission is being charged) at reasonably
competitive commission rates. In seeking such execution, BMR will use its
best judgment in evaluating the terms of a transaction, and will give
consideration to various relevant factors, including without limitation
the size and type of the transaction, the general execution and
operational capabilities of the executing broker-dealer, the nature and
character of the market for the security, the confidentiality, speed and
certainty of effective execution required for the transaction, the
reputation, reliability, experience and financial condition of the broker-
dealer, the value and quality of the services rendered by the
broker-dealer in other transactions, and the reasonableness of the
commission, if any. Transactions on United States stock exchanges and
other agency transactions involve the payment by the Portfolio of
negotiated brokerage commissions. Such commissions vary among different
broker-dealer firms, and a particular broker- dealer may charge different
commissions according to such factors as the difficulty and size of the
transaction and the volume of business done with such broker-dealer.
Transactions in foreign securities usually involve the payment of fixed
brokerage commissions, which are generally higher than those in the United
States. There is generally no stated commission in the case of securities
traded in the over-the-counter markets, but the price paid or received by
the Portfolio usually includes an undisclosed dealer markup or markdown.
In an underwritten offering the price paid by the Portfolio includes a
disclosed fixed commission or discount retained by the underwriter or
dealer. Although commissions on portfolio security transactions will, in
the judgment of BMR, be reasonable in relation to the value of the
services provided, commissions exceeding those which another firm might
charge may be paid to broker-dealers who were selected to execute
transactions on behalf of the Portfolio and BMR's other clients for
providing brokerage and research services to BMR.
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<PAGE>
As authorized in Section 28(e) of the Securities Exchange Act of
1934, a broker or dealer who executes a portfolio transaction on behalf of
the Portfolio may receive a commission which is in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction if BMR determines in good faith that such commission was
reasonable in relation to the value of the brokerage and research services
provided. This determination may be made on the basis of either that
particular transaction or on the basis of overall responsibilities which
BMR and its affiliates have for accounts over which they exercise
investment discretion. In making any such determination, BMR will not
attempt to place a specific dollar value on the brokerage and research
services provided or to determine what portion of the commission should be
related to such services. Brokerage and research services may include
advice as to the value of securities, the advisability of investing in,
purchasing, or selling securities, and the availability of securities or
purchasers or sellers of securities; furnishing analyses and reports
concerning issuers, industries, securities, economic factors and trends,
portfolio strategy and the performance of accounts; effecting securities
transactions and performing functions incidental thereto (such as
clearance and settlement); and the "Research Services" referred to in the
next paragraph.
It is a common practice 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's 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 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.
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<PAGE>
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 and execute portfolio security transactions at advantageous prices
and at reasonably competitive commission rates, BMR 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
securities of other investment companies sponsored by BMR or Eaton Vance.
This policy is not inconsistent with a rule of the National Association of
Securities Dealers, Inc., which rule provides that no firm which is a
member of the Association shall favor or disfavor the distribution of
shares of any particular investment company or group of investment
companies on the basis of brokerage commissions received or expected by
such firm from any source.
Securities considered as investments for the Portfolio may also
be appropriate for other investment accounts managed by BMR or its
affiliates. BMR will attempt to allocate equitably portfolio security
transactions among the Portfolio and the portfolios of its other
investment accounts whenever decisions are made to purchase or sell
securities by the Portfolio and one or more of such other accounts
simultaneously. In making such allocations, the main factors to be
considered are the respective investment objectives of the Portfolio and
such other accounts, the relative size of portfolio holdings of the same
or comparable securities, the availability of cash for investment by the
Portfolio and such accounts, the size of investment commitments generally
held by the Portfolio and such accounts and the opinions of the persons
responsible for recommending investments to the Portfolio and such
accounts. While this procedure could have a detrimental effect on the
price or amount of the securities available to the Portfolio from time to
time, it is the opinion of the Trustees of the Portfolio that the benefits
available from the BMR organization outweigh any disadvantage that may
arise from exposure to simultaneous transactions.
For the fiscal year ended December 31, 1994, and for the period
from the start of business, October 28, 1993, to December 31, 1993, the
Portfolio paid brokerage commissions of $1,997,260 and $382,786,
respectively, on portfolio security transactions, of which amounts
approximately $1,509,827 and $211,594, respectively, was paid in respect
of portfolio security transactions aggregating approximately $718,689,809
and $126,205,010, respectively, to firms which provided some Research
Services to BMR or its affiliates (although many of such firms may have
been selected in any particular transaction primarily because of their
execution capabilities).
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<PAGE>
ITEM 18. CAPITAL STOCK AND OTHER SECURITIES
Under the Portfolio's Declaration of Trust, the Trustees are
authorized to issue interests in the Portfolio. Investors are entitled to
participate pro rata in distributions of taxable income, loss, gain and
credit of the Portfolio. Upon dissolution of the Portfolio, the Trustees
shall liquidate the assets of the Portfolio and apply and distribute the
proceeds thereof as follows: (a) first, to the payment of all debts and
obligations of the Portfolio to third parties including, without
limitation, the retirement of outstanding debt, including any debt owed to
holders of record of interests in the Portfolio ("Holders") or their
affiliates, and the expenses of liquidation, and to the setting up of any
reserves for contingencies which may be necessary; and (b) second, then in
accordance with the Holders' positive Book Capital Account balances after
adjusting Book Capital Accounts for certain allocations provided in the
Declaration of Trust and in accordance with the requirements described in
Treasury Regulations Section 1.704-1(b)(2)(ii)(b) (2). Notwithstanding the
foregoing, if the Trustees shall determine that an immediate sale of part
or all of the assets of the Portfolio would cause undue loss to the
Holders, the Trustees, in order to avoid such loss, may, after having
given notification to all the Holders, to the extent not then prohibited
by the law of any jurisdiction in which the Portfolio is then formed or
qualified and applicable in the circumstances, either defer liquidation of
and withhold from distribution for a reasonable time any assets of the
Portfolio except those necessary to satisfy the Portfolio's debts and
obligations or distribute the Portfolio's assets to the Holders in
liquidation. Interests in the Portfolio have no preference, preemptive,
conversion or similar rights and are fully paid and nonassessable, except
as set forth below. Interests in the Portfolio may not be transferred.
Certificates representing an investor's interest in the Portfolio are
issued only upon the written request of a Holder.
Each Holder is entitled to vote in proportion to the amount of
its interest in the Portfolio. Holders do not have cumulative voting
rights. The Portfolio is not required and has no current intention to hold
annual meetings of Holders but the Portfolio will hold meetings of Holders
when in the judgment of the Portfolio's Trustees it is necessary or
desirable to submit matters to a vote of Holders at a meeting. Any action
which may be taken by Holders may be taken without a meeting if Holders
holding more than 50% of all interests entitled to vote (or such larger
proportion thereof as shall be required by any express provision of the
Declaration of Trust of the Portfolio) consent to the action in writing
and the consents are filed with the records of meetings of Holders.
The Portfolio's Declaration of Trust may be amended by vote of
Holders of more than 50% of all interests in the Portfolio at any meeting
of Holders or by an instrument in writing without a meeting, executed by a
majority of the Trustees and consented to by the Holders of more than 50%
of all interests. The Trustees may also amend the Declaration of Trust
(without the vote or consent of Holders) to change the Portfolio's name or
the state or other jurisdiction whose law shall be the governing law, to
supply any omission or cure, correct or supplement any ambiguous,
B - 19
<PAGE>
defective or inconsistent provision, to conform the Declaration of Trust
to applicable Federal law or regulations or the requirements of the
Internal Revenue Code, or to change, modify or rescind any provision
provided such change, modification or rescission is determined by the
Trustees to be necessary or appropriate and to not have a materially
adverse effect on the financial interests of the Holders. No amendment of
the Declaration of Trust which would change any rights with respect to any
Holder's interest in the Portfolio by reducing the amount payable thereon
upon liquidation of the Portfolio may be made, except with the vote or
consent of the Holders of two-thirds of all interests. References in the
Declaration of Trust and in Part A or this Part B to a specified
percentage of, or fraction of, interests in the Portfolio, means Holders
whose combined Book Capital Account balances represent such specified
percentage or fraction of the combined Book Capital Account balance of
all, or a specified group of, Holders.
The Portfolio may merge or consolidate with any other
corporation, association, trust or other organization or may sell or
exchange all or substantially all of its assets upon such terms and
conditions and for such consideration when and as authorized by the
Holders of (a) 67% or more of the interests in the Portfolio present or
represented at the meeting of Holders, if Holders of more than 50% of all
interests are present or represented by proxy, or (b) more than 50% of all
interests, whichever is less. The Portfolio may be terminated (i) by the
affirmative vote of Holders of not less than two- thirds of all interests
at any meeting of Holders or by an instrument in writing without a
meeting, executed by a majority of the Trustees and consented to by
Holders of not less than two-thirds of all interests, or (ii) by the
Trustees by written notice to the Holders.
The Portfolio is organized as a trust under the laws of the State
of New York. Investors in the Portfolio will be held personally liable for
its obligations and liabilities, subject, however, to indemnification by
the Portfolio in the event that there is imposed upon an investor a
greater portion of the liabilities and obligations of the Portfolio than
its proportionate interest in the Portfolio. The Portfolio intends to
maintain fidelity and errors and omissions insurance deemed adequate by
the Trustees. Therefore, the risk of an investor incurring financial loss
on account of investor liability is limited to circumstances in which both
inadequate insurance exists and the Portfolio itself is unable to meet its
obligations.
The Declaration of Trust further provides that obligations of the
Portfolio are not binding upon the Trustees individually but only upon the
property of the Portfolio and that the Trustees will not be liable for any
action or failure to act, but nothing in the Declaration of Trust protects
a Trustee against any liability to which he would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of his office.
ITEM 19. PURCHASE, REDEMPTION AND PRICING OF SECURITIES
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<PAGE>
Interests in the Portfolio are issued solely in private placement
transactions that do not involve any "public offering" within the meaning
of Section 4(2) of the Securities Act of 1933. See "Purchase of Interests
in the Portfolio" and "Redemption or Decrease of Interest" in Part A.
Securities listed on securities exchanges or in the NASDAQ
National Market are valued at closing sales prices or, if there are no
sales, at the mean between the closing bid and asked prices therefor on
such exchanges. Unlisted securities are valued at the mean between the
latest available bid and asked prices. An option or futures contract is
valued at the last sale price, as quoted on the principal exchange or
board of trade on which such option or contract is traded or, in the
absence of a sale, the mean between the last bid and asked prices.
Short-term obligations, maturing in sixty days or less,are valued at
amortized cost, which is believed to represent fair value. Securities for
which market quotations are unavailable, including any security the
disposition of which is restricted under the Securities Act of 1933, will
be appraised at their fair value as determined in good faith by or at the
direction of the Trustees.
ITEM 20. TAX STATUS
The Portfolio has been advised by tax counsel that, provided the
Portfolio is operated at all times during its existence in accordance with
certain organizational and operational documents, the Portfolio should be
classified as a partnership under the Internal Revenue Code of 1986, as
amended (the "Code"), and it should not be a "publicly traded partnership"
within the meaning of Section 7704 of the Code. Consequently, the
Portfolio does not expect that it will be required to pay any Federal
income tax.
Under Subchapter K of the Code, a partnership is considered to be
either an aggregate of its members or a separate entity depending upon the
factual and legal context in which the question arises. Under the
aggregate approach, each partner is treated as an owner of an undivided
interest in partnership assets and operations. Under the entity approach,
the partnership is treated as a separate entity in which partners have no
direct interest in partnership assets and operations. The Portfolio has
been advised by tax counsel that, in the case of a Holder that seeks to
qualify as a regulated investment company ("RIC") under the Code, the
aggregate approach should apply, and each such Holder should accordingly
be deemed to own a proportionate share of each of the assets of the
Portfolio and to be entitled to the gross income of the Portfolio
attributable to that share for purposes of all requirements of Sections
851(b) and 852(b)(5) of the Code. Further, the Portfolio has been advised
by tax counsel that each Holder that seeks to qualify as a RIC should be
deemed to hold its proportionate share of the Portfolio's assets for the
period the Portfolio has held the assets or for the period the Holder has
been an investor in the Portfolio, whichever is shorter. Investors should
consult their tax advisors regarding whether the entity or the aggregate
approach applies to their investment in the Portfolio in light of their
particular tax status and any special tax rules applicable to them.
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<PAGE>
In order to enable a Holder that is otherwise eligible to qualify
as a RIC, the Portfolio intends to satisfy the requirements of Subchapter
M of the Code relating to sources of income and diversification of assets
as if they were applicable to the Portfolio and to allocate and permit
withdrawals in a manner that will enable a Holder which is a RIC to comply
with those requirements. The Portfolio will allocate at least annually to
each Holder 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 in a manner intended to comply with the Code and
applicable Treasury regulations. Tax counsel has advised the Portfolio
that the Portfolio's allocations of taxable income and loss should have
"economic effect" under applicable Treasury regulations.
To the extent the cash proceeds of any withdrawal (or, under
certain circumstances, such proceeds plus the value of any marketable
securities distributed to an investor) ("liquid proceeds") exceed a
Holder's adjusted basis of his interest in the Portfolio, the Holder will
generally realize a gain for Federal income tax purposes. If, upon a
complete withdrawal (redemption of the entire interest), the Holder's
adjusted basis of his interest exceeds the liquid proceeds of such
withdrawal, the Holder will generally realize a loss for Federal income
tax purposes. The tax consequences of a withdrawal of property (instead
of or in addition to liquid proceeds) will be different and will depend on
the specific factual circumstances. A Holder's adjusted basis of an
interest in the Portfolio will generally be the aggregate prices paid
therefor (including the adjusted basis of contributed property and any
gain recognized on such contribution), increased by the amounts of the
Holder's distributive share of items of income (including interest income
exempt from Federal income tax) and realized net gain of the Portfolio,
and reduced, but not below zero, by (i) the amounts of the Holder's
distributive share of items of Portfolio loss, and (ii) the amount of any
cash distributions (including distributions of interest income exempt from
Federal income tax and cash distributions on withdrawals from the
Portfolio) and the basis to the Holder of any property received by such
Holder other than in liquidation, and (iii) the Holder's distributive
share of the Portfolio's nondeductible expenditures not properly
chargeable to capital account. Increases or decreases in a Holder's share
of the Portfolio's liabilities may also result in corresponding increases
or decreases in such adjusted basis. Distributions of liquid proceeds in
excess of a Holder's adjusted basis in its interest in the Portfolio
immediately prior thereto generally will result in the recognition of gain
to the Holder in the amount of such excess.
The Portfolio's transactions in options and futures contracts
will be subject to special tax rules that may affect the amount, timing
and character of its items of income, gain or loss and hence the
allocations of such items to investors. For example, certain positions
held by the Portfolio on the last business day of each taxable year will
be marked to market (i.e., treated as if closed out on such day), and any
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resulting gain or loss will be treated as 60% long-term and 40% short-term
capital gain or loss. Certain positions held by the Portfolio that
substantially diminish the Portfolio's risk of loss with respect to other
positions in its portfolio may constitute "straddles," which are subject
to tax rules that may cause deferral of Portfolio losses, adjustments in
the holding period of Portfolio securities and conversion of short-term
into long-term capital losses.
Income from transactions in options and futures contracts derived
by the Portfolio with respect to its business of investing in securities
will qualify as permissible income for its Holders that are RICs under the
requirement that at least 90% of a RIC's gross income each taxable year
consist of specified types of income. However, income from the dispo-
sition by the Portfolio of options and futures contracts held for less
than three months will be subject to the requirement applicable to those
Holders that less than 30% of a RIC's gross income each taxable year
consist of certain short-term gains ("Short-Short Limitation").
If the Portfolio satisfies certain requirements, any increase in
value of a position that is part of a "designated hedge" will be offset by
any decrease in value (whether realized or not) of the offsetting hedging
position during the period of the hedge for purposes of determining
whether the Holders that are RICs satisfy the Short-Short Limitation.
Thus, only the net gain (if any) from the designated hedge will be
included in gross income for purposes of that limitation. The Portfolio
will consider whether it should seek to qualify for this treatment for its
hedging transactions. To the extent the Portfolio does not so qualify, it
may be forced to defer the closing out of options and futures contracts
beyond the time when it otherwise would be advantageous to do so, in order
for Holders that are RICs to continue to qualify as such.
The Portfolio may be subject to foreign withholding taxes with
respect to income on certain foreign securities. These taxes may be
reduced or eliminated under the terms of an applicable U.S. income tax
treaty. The anticipated extent of the Portfolio's investment in foreign
securities is such that it is not expected that an investor that is a RIC
will be eligible to pass through to shareholders foreign taxes paid by the
Portfolio and allocated to a RIC, so that shareholders of such a RIC will
not be entitled to take any foreign tax credits or deductions for foreign
taxes paid by the Portfolio and allocated to the RIC. Certain foreign
exchange gains and losses realized by the Portfolio and allocated to an
investor will be treated as ordinary income and losses. Certain uses of
foreign currency and investment by the Portfolio in certain "passive
foreign investment companies" may be limited or a tax election may be
made, if available, in order to enable any investor that is a RIC to
maintain its qualification as a RIC or avoid imposition of a tax on such
an investor.
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<PAGE>
An entity that is treated as a partnership under the Code, such
as the Portfolio, is generally treated as a partnership under state and
local tax laws, but certain states may have different entity
classification criteria and may therefore reach a different conclusion.
Entities that are classified as partnerships are not treated as separate
taxable entities under most state and local tax laws, and the income of a
partnership is considered to be income of partners both in timing and in
character. The laws of the various states and local taxing authorities
vary with respect to the status of a partnership interest under state and
local tax laws, and each holder of an interest in the Portfolio is advised
to consult his own tax adviser.
The foregoing discussion does not address the special tax rules
applicable to certain classes of investors, such as tax-exempt entities,
insurance companies and financial institutions. Investors 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 Portfolio.
ITEM 21. UNDERWRITERS
The placement agent for the Portfolio is Eaton Vance
Distributors, Inc., which receives no compensation for serving in this
capacity. Investment companies, common and commingled trust funds and
similar organizations and entities may continuously invest in the
Portfolio.
ITEM 22. CALCULATION OF PERFORMANCE DATA
Not applicable.
ITEM 23. FINANCIAL STATEMENTS
The following financial statements included herein have been
included in reliance upon the report of Coopers & Lybrand L.L.P.,
independent accountants, as experts in accounting and auditing.
Portfolio of Investments as of December 31, 1994
Statement of Assets and Liabilities as of December 31, 1994
Statement of Operations for the fiscal year ended December 31,
1994
Statement of Changes in Net Assets for the fiscal year ended
December 31, 1994 and for the period from the start of business,
October 28, 1993, to December 31, 1993
B - 24
<PAGE>
Supplementary Data for the fiscal year ended December 31, 1994
and for the period from the start of business, October 28, 1993,
to December 31, 1993
Notes to Financial Statements
Report of Independent Accountants
B - 25
<PAGE>
- ------------------------------------------------------------------------------
TOTAL RETURN PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMMON STOCKS -- 93.4%
- -------------------------------------------------------------------------------------------------
NAME OF COMPANY SHARES VALUE
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
ELECTRIC UTILITIES -- 62.1%
American Electric Power Co. Inc. 200,000 $ 6,575,000
Baltimore Gas & Electric Co. 150,000 3,318,750
Carolina Power & Light Co. 750,000 19,968,750
Central & South West Corp. 479,994 10,859,864
Central Louisiana Electric Co. 326,800 7,720,650
Cinergy Corp. 1,250,250 29,224,594
Dominion Resources, Inc. 200,000 7,150,000
DPL Inc. 950,000 19,475,000
DQE, Inc. 400,000 11,850,000
Duke Power Co. 270,000 10,293,750
FPL Group, Inc. 560,000 19,670,000
General Public Utilities Corp. 320,000 8,400,000
IPALCO Enterprises, Inc. 350,000 10,500,000
Kansas City Power & Light Co. 181,900 4,251,913
LG & E Energy Corp. 125,000 4,609,375
New England Electric System 100,000 3,212,500
NIPSCO Industries, Inc. 400,000 11,900,000
Northern States Power Co. Minn. 322,800 14,203,200
Norweb Ord PLC 200,000 2,690,940
Ohio Edison Co. 200,000 3,700,000
PacifiCorp 583,200 10,570,500
PECO Energy Co. 200,000 4,900,000
Pinnacle West Capital Corp. 300,000 5,925,000
Portland General Corp. 350,000 6,737,500
Public Service Co. of New Mexico<F2> 565,300 7,348,900
Southern Co. 1,072,460 21,449,200
Teco Energy, Inc. 410,000 8,251,250
Union Electric Co. 346,500 12,257,438
United Illuminating Co. 110,200 3,250,900
Western Resources, Inc. 200,000 5,725,000
Wisconsin Energy Corp. 689,650 17,844,694
------------
$313,834,668
------------
OIL & GAS -- 5.4%
Amoco Corp. 165,000 $ 9,755,625
BP Prudhoe Bay Rty Tr Unit Ben Int. 437,000 7,429,000
Mobil Corp. 120,000 10,110,000
------------
$ 27,294,625
------------
REITS -- 18.5%
Apartment Investment & Management Co. Class A 200,000 $ 3,450,000
Associated Estates Realty Corp. 200,000 4,200,000
Avalon Properties, Inc. 165,000 $ 3,795,000
Bay Apartment Communities 213,400 4,294,675
Bradley Real Estate Trust 72,750 1,109,437
Cali Realty Corp. 150,000 2,400,000
Camden Properties Trust SBI 200,000 4,975,000
Columbus Realty Trust 140,000 2,590,000
Developers Diversified Realty Corp. 170,000 5,312,500
Duke Realty Investments, Inc. 40,000 1,130,000
Equity Residential Properties Trust 80,000 2,400,000
Health Care Property Investors, Inc. 140,000 4,217,500
Healthcare Realty Trust 350,000 7,350,000
LTC Properties, Inc. 490,000 6,492,500
Macerich Co. 175,000 3,740,625
Meditrust Sh Ben Int. 100,000 3,025,000
Mid America Apartment Communities, Inc. 164,500 4,400,375
Nationwide Health Properties, Inc. 320,000 11,440,000
Oasis Residential, Inc. 225,000 5,512,500
Post Properties Inc. 100,000 3,150,000
Simon Property Group, Inc. 150,000 3,637,500
Southwestern Property Trust, Inc. 180,000 2,205,000
Sun Communities Inc. 110,000 2,475,000
------------
$ 93,302,612
------------
TELEPHONE UTILITIES -- 6.9%
Ameritech Corp. 380,000 $ 15,342,500
Bell Atlantic Corp. 100,000 4,975,000
Southern New England
Telecommunications 50,000 1,606,250
Southwestern Bell Corp. 150,000 6,056,250
Tele Danmark A/S<F2> 63,000 1,606,500
Telecom Corp. New Zealand Ltd. ADR 100,000 5,137,500
------------
$ 34,724,000
------------
OTHER -- 0.5%
British Sky Broadcasting Group PLC ADR<F2> 25,000 $ 600,000
Sonat Inc. 71,000 1,988,000
------------
$ 2,588,000
------------
TOTAL COMMON STOCKS
(identified cost, $455,294,874) $471,743,905
----------------
<CAPTION>
- -------------------------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCK -- 2.0%
- -------------------------------------------------------------------------------------------------
SHARES VALUE
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Freeport McMoRan Copper & Gold 40,000 $ 830,000
Kenetech Corp., 8.25s 200,000 3,075,000
Philippines Long Distance Telephone, 7s 112,000 6,062,000
------------
$ 9,967,000
------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(identified cost, $10,549,225) $ 9,967,000
------------
<CAPTION>
- -------------------------------------------------------------------------------------------------
CONVERTIBLE BONDS -- 0.1%
- -------------------------------------------------------------------------------------------------
FACE AMOUNT
(000 OMITTED)
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
IDB Communications Group, Inc.,
5s, 8/15/03 (identified cost, $858,750) $1,000 $ 762,500
------------
- -------------------------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 1.5%
- -------------------------------------------------------------------------------------------------
U.S. Treasury Bill, 0s, 3/5/95<F1>
(identified cost, $7,696,456) $7,780 $ 7,703,600
------------
- -------------------------------------------------------------------------------------------------
SHORT-TERM OBLIGATIONS -- 1.5%
- -------------------------------------------------------------------------------------------------
CXC Inc., 5.95s, 1/3/95 $3,499 $ 3,497,265
American Express Credit Corp.,
5.80s, 1/5/95 4,294 4,290,541
------------
TOTAL SHORT-TERM OBLIGATIONS, AT
AMORTIZED COST $ 7,787,806
------------
TOTAL INVESTMENTS -- 98.5%
(identified cost, $482,187,111) $497,964,811
OTHER ASSETS, LESS LIABILITIES -- 1.5% 7,602,081
------------
NET ASSETS -- 100.0% $505,566,892
------------
------------
<FN>
<F1>Collateral for futures held at December 31, 1994 (see Note 6)
<F2>Non-income producing security
</FN>
</TABLE>
The accompanying notes are an integral part
of the financial statements
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
--------------------------------------------------------------------------------------------------
December 31, 1994
--------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS:
Investments, at value (Note 1A)
(identified cost, $482,187,111) $497,964,811
Cash 2,597
Receivable for investments sold 8,994,384
Dividends receivable 2,364,639
Receivable for daily variation margin on financial
futures contracts 975,000
Deferred organization expenses (Note 1E) 16,027
Foreign tax reclaim receivable 25,565
Interest receivable 29,754
------------
Total assets $510,372,777
LIABILITIES:
Payable for investments purchased $4,775,774
Trustees fees payable 5,160
Custodian fee payable 8,403
Accrued expenses 16,548
----------
Total liabilities 4,805,885
------------
NET ASSETS applicable to investors' interest in Portfolio $505,566,892
------------
------------
SOURCES OF NET ASSETS:
Net proceeds from capital contributions and withdrawals $491,941,692
Unrealized appreciation of investments and open futures
contracts (computed on the basis of identified cost) 13,625,200
------------
Total net assets $505,566,892
------------
------------
</TABLE>
The accompanying notes are an integral part of the financial statements
<PAGE>
FINANCIAL STATEMENTS (Continued)
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
----------------------------------------------------------------------------------------------
For the Year Ended December 31, 1994
----------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME:
Dividend income $ 32,158,717
Interest income 1,330,065
-------------
Total income $ 33,488,782
Expenses --
Investment adviser fee (Note 3) $ 4,106,857
Compensation of trustees not members of the
investment adviser's organization
(Note 3) 20,687
Custodian fee (Note 3) 159,872
Interest expense 187,106
Commitment fee 143,450
Audit and legal fees 46,657
Printing and postage fees 14,129
Amortization of deferred organizational expenses
(Note 1E) 4,197
Miscellaneous 19,841
-----------
Total expenses 4,702,796
-------------
Net investment income $ 28,785,986
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) (identified cost basis) --
Investment transactions $(21,035,623)
Financial futures contracts 5,883,625
------------
Net realized loss on investments and financial
futures (identified cost basis) $(15,151,998)
Change in unrealized appreciation on investments and
financial futures contracts (89,492,365)
------------
Net realized and unrealized loss on investments (104,644,363)
-------------
Net decrease in net assets resulting from
operations $ (75,858,377)
-------------
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
-----------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------
1994 1993<F1>
----------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations --
Net investment income $ 28,785,986 $ 5,227,429
Net realized loss on investment transactions and
financial futures contracts (15,151,998) (3,109,783)
Decrease in unrealized appreciation of investments (89,492,365) (31,858,504)
------------- -------------
Net decrease in net assets resulting from
operations $ (75,858,377) $ (29,740,858)
------------- -------------
Capital transactions --
Contributions $ 97,021,559 $ 700,057,818
Withdrawals (152,162,876) (33,850,394)
------------- -------------
Increase (decrease) in net assets resulting from
capital transactions $ (55,141,317) $ 666,207,424
------------- -------------
Total increase (decrease) in net assets $(130,999,694) $ 636,466,566
NET ASSETS:
At beginning of period 636,566,586 100,020
------------- -------------
At end of period $ 505,566,892 $ 636,566,586
------------- -------------
------------- -------------
<FN>
<F1>For the period from the start of business, October 28, 1993, to December 31, 1993.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
SUPPLEMENTARY DATA
-----------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------------
1994 1993<F2>
----------------- -----------------
<S> <C> <C>
RATIOS (As a percentage of average net assets):
Expenses 0.85% 0.91%<F1>
Net investment income 5.22% 4.57%<F1>
PORTFOLIO TURNOVER 107% 16%
LEVERAGE ANALYSIS:
Amount of debt outstanding at end of period (000's
omitted) -- --
Average daily balance of debt outstanding during
period (000 omitted) $ 3,137 $15,452
<FN>
<F1>Computed on an annualized basis.
<F2>For the period from the start of business, October 28, 1993, to December 31, 1993.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements
<PAGE>
------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994
----------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES
Total Return Portfolio (the Portfolio) is registered under the Investment
Company Act of 1940 as a diversified open-end investment company which was
organized as a trust under the laws of the State of New York on May 1, 1992. The
Declaration of Trust permits the Trustees to issue beneficial interests in the
Portfolio. Investment operations began on October 28, 1993, with the acquisition
of net assets of $668,641,088 in exchange for an interest in the Portfolio by
one of the Portfolio's investors. The following is a summary of significant
accounting policies of the Portfolio. The policies are in conformity with
generally accepted accounting principles.
A. INVESTMENT VALUATIONS -- Securities listed on securities exchanges or in the
NASDAQ National Market are valued at closing sales prices or, if there has been
no sale, at the mean between the closing bid and asked prices. Unlisted
securities are valued at the mean between the latest available bid and asked
prices. Options and financial futures contracts are valued at the last sale
price, as quoted on the principal exchange or board of trade on which such
options or contracts are traded or, in the absence of a sale, the mean between
the last bid and asked prices. Short-term obligations, maturing in 60 days or
less, are valued at amortized cost, which approximates value. Securities for
which market quotations are unavailable are appraised at their fair value as
determined in good faith by or at the direction of the Trustees.
B. INCOME TAXES -- The Portfolio is treated as a partnership for federal tax
purposes. No provision is made by the Portfolio for federal or state taxes on
any taxable income of the Portfolio because each investor in the Portfolio is
ultimately responsible for the payment of any taxes. Since some of the
Portfolio's investors are regulated investment companies that invest all or
substantially all of their assets in the Portfolio, the Portfolio normally must
satisfy the applicable source of income and diversification requirements (under
the Code) in order for its investors to satisfy them. The Portfolio will
allocate at least annually among its investors each investors' distributive
share of the Portfolio's net investment income, net realized capital gains, and
any other items of income, gain, loss, deduction or credit.
C. OPTION ACCOUNTING PRINCIPLES -- Upon the writing of a covered call option, an
amount equal to the premium received by the Portfolio is included in the
Statement of Assets and Liabilities as a liability. The amount of the liability
is subsequently marked-to-market to reflect the current market value of the
option written in accordance with the Portfolio's policies on investment
valuations discussed above. Premiums received from writing call options which
expire are treated as realized gains. Premiums received from writing call
options which are exercised or are closed are added to or offset against the
proceeds or amount paid on the transaction to determine the realized gain or
loss. The Portfolio, as writer of a call option, may have no control over
whether the underlying securities may be sold and, as a result, bears the market
risk of an unfavorable change in the price of the securities underlying the
written option.
D. FINANCIAL FUTURES CONTRACTS -- Upon the entering of a financial futures
contract, the Portfolio is required to deposit an amount ("initial margin")
either in cash or securities equal to a certain percentage of the purchase price
indicated in the financial futures contract. Subsequent payments are made or
received by the Portfolio ("margin maintenance") each day, dependent on the
daily fluctuations in the value of the underlying security, and are recorded for
book purposes as unrealized gains or losses by the Portfolio. When the Portfolio
enters into a closing transaction, the Portfolio will realize for book purposes
a gain or loss equal to the difference between the value of the financial
futures contract to sell and the financial futures contract to buy. The
Portfolio's investment in financial futures contracts is designed only to hedge
against anticipated future changes in interest rates, security prices, commodity
prices or currency exchange rates. Should interest rates, security prices,
commodity prices or currency exchange rates move unexpectedly, the Portfolio may
not achieve the anticipated benefits of the financial futures contracts and may
realize a loss.
E. DEFERRED ORGANIZATION EXPENSES -- Costs incurred by the Portfolio in
connection with its organization are being amortized on the straight-line basis
over five years.
F. OTHER -- Investment transactions are accounted for on the date the
investments are purchased or sold. Dividend income is recorded on the ex-
dividend date. Realized gains and losses on the sale of investments are
determined on the identified cost basis.
------------------------------------------------------------------------------
(2) INVESTMENT TRANSACTIONS
Purchases and sales of investments, other than short-term obligations,
aggregated $574,395,813 and $620,810,869, respectively.
-----------------------------------------------------------------
(3) INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
The investment adviser fee is earned by Boston Management and Research (BMR), a
wholly-owned subsidiary of Eaton Vance Management (EVM), as compensation for
manage- ment and investment advisory services rendered to the Portfolio. The fee
is based upon a percentage of average daily net assets. For the year ended
December 31, 1994, the fee was equivalent to 0.74% of the Portfolio's average
net assets for such period and amounted to $4,106,857. Except as to Trustees of
the Portfolio who are not members of EVM's or BMR's organization, officers and
Trustees receive remuneration for their service to the Portfolio out of such
investment adviser fee. Investors Bank & Trust Company (IBT), an affiliate of
EVM and BMR, serves as custodian of the Portfolio. Pursuant to the custodian
agreement, IBT receives a fee reduced by credits which are determined based on
the average daily cash balances the Portfolio maintains with IBT. Certain of the
officers and Trustees of the Portfolio are officers and directors/trustees of
the above organizations.
-------------------------------------------------------------------------------
(4) LINE OF CREDIT
The Portfolio participates with other portfolios and funds managed by BMR and
EVM and its affiliates in a $120 million unsecured line of credit agreement with
a bank. The line of credit consists of a $20 million committed facility and a
$100 million discretionary facility. The Portfolio expects to use the proceeds
of the advances primarily for leveraging purposes. Borrowings by the Portfolio
under the Credit Agreement will not exceed the lesser of 1/3 of the market value
of the net assets of the Portfolio or $60,000,000. Interest is charged to each
portfolio based on its borrowings at an amount above either the bank's adjusted
certificate of deposit rate, a variable adjusted certificate of deposit rate, or
a federal funds effective rate. In addition, a fee computed at an annual rate of
1/4 of 1% on the $20 million committed facility and on the daily unused portion
of the $100 million discretionary facility is allocated among the participating
funds and portfolios at the end of each quarter. The average daily loan balance
for the year ended December 31, 1994 was $3,137,134 and the average interest
rate was 5.96%. The maximum borrowings outstanding at any month end during the
year ended December 31, 1994, was $26,083,000.
-------------------------------------------------------------------------------
(5) FEDERAL INCOME TAX BASIS OF INVESTMENTS
The cost and unrealized appreciation/depreciation in value of the investments
owned at December 31, 1994, as computed on a federal income tax basis, are as
follows:
Aggregate cost $482,915,174
------------
------------
Gross unrealized appreciation $ 28,239,363
Gross unrealized depreciation 13,189,726
------------
Net unrealized appreciation $ 15,049,637
------------
------------
----------------------------------------------------------------------------
(6) FINANCIAL INSTRUMENTS
The Portfolio may trade in financial instruments with off-balance sheet risk in
the normal course of its investing activities to assist in managing exposure to
various market risks. These financial instruments include written options,
forward foreign currency exchange contracts, and financial futures contracts and
may involve, to a varying degree, elements of risk in excess of the amounts
recognized for financial statement purposes. The notational or contractual
amounts of these instruments represent the investment the Portfolio has in
particular classes of financial instruments and does not necessarily represent
the amounts potentially subject to risk. The measurement of the risks associated
with these instruments is meaningful only when all related and off-setting
transactions are considered.
A summary of obligations under these financial instruments at December 31,
1994 is as follows:
NET
FUTURES CONTRACT UNREALIZED
EXPIRATION DATE CONTRACTS POSITION DEPRECIATION
- --------------- --------- -------- ------------
3/95 600 S&P 500 Futures Short $2,152,500
At December 31, 1994, the Portfolio has sufficient cash and/or securities to
cover margin requirements on open futures contracts.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Trustees and Investors of Total Return Portfolio:
We have audited the accompanying statement of assets and liabilities of Total
Return Portfolio, including the portfolio of investments, as of December 31,
1994, the related statement of operations for the year then ended and the
statement of changes in net assets and supplementary data for the year ended
December 31, 1994, and for the period from the start of business, October 28,
1993, to December 31, 1993. These financial statements and supplementary data
are the responsibility of the Portfolio's management. Our responsibility is to
express an opinion on these financial statements and supplementary data based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and supplementary
data are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1994 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and supplementary data referred to
above present fairly, in all material respects, the financial position of Total
Return Portfolio as of December 31, 1994, the results of its operations for the
year then ended, and the changes in its net assets and the supplementary data
for the year ended December 31, 1994, and for the period from the start of
business, October 28, 1993, to December 31, 1993, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
February 3, 1995
<PAGE>
PART C
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(A) FINANCIAL STATEMENTS
The Financial statements called for by this Item are included in Part
B and listed in Item 23 hereof.
(B) EXHIBITS
1. Declaration of Trust dated May 1, 1992, filed as Exhibit No. 1 to
the original Registration Statement and incorporated herein by
reference.
2. By-Laws of the Registrant dated May 1, 1992, filed as Exhibit No.
2 to the original Registration Statement and incorporated herein
by reference.
5. Investment Advisory Agreement between the Registrant and Boston
Management and Research dated October 28, 1993, filed as Exhibit
No. 5 to Amendment No. 1 and incorporated herein by reference.
6. Placement Agent Agreement with Eaton Vance Distributors, Inc.
dated October 28, 1993, filed as Exhibit No. 6 to Amendment No. 1
and incorporated herein by reference.
8. Custodian Agreement with Investors Bank & Trust Company dated
October 28, 1993, filed as Exhibit No. 8 to Amendment No. 1 and
incorporated herein by reference.
13. Investment representation letter of Eaton Vance Total Return
Trust, on behalf of EV Traditional Total Return Fund, filed as
Exhibit No. 13 to the original Registration Statement and
incorporated herein by reference.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
Not applicable.
C - 1
<PAGE>
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
(1) (2)
NUMBER OF
TITLE OF CLASS RECORD HOLDERS
-------------- --------------
Interests
as of March 31, 1995 5
ITEM 27. INDEMNIFICATION
Reference is hereby made to Article V of the Registrant's
Declaration of Trust, filed as an Exhibit to the original Registration
Statement and incorporated herein by reference.
The Trustees and officers of the Registrant and the personnel of
the Registrant's investment adviser are insured under an errors and
omissions liability insurance policy. The Registrant and its officers are
also insured under the fidelity bond required by Rule 17g-1 under the
Investment Company Act of 1940.
ITEM 28. BUSINESS AND OTHER CONNECTIONS
To the knowledge of the Portfolio, none of the trustees or
officers of the Portfolio's investment adviser, except as set forth on its
Form ADV as filed with the Securities and Exchange Commission, is engaged
in any other business, profession, vocation or employment of a substantial
nature, except that certain trustees and officers also hold various
positions with and engage in business for affiliates of the investment
adviser.
ITEM 29. PRINCIPAL UNDERWRITERS
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, 24
Federal Street, Boston, MA 02110 and 89 South Street, Boston, MA 02111,
and its transfer agent, The Shareholder Services Group, Inc., 53 State
Street, Boston, MA 02104, with the exception of certain corporate
documents and portfolio trading documents which are in the possession and
custody of the Registrant's investment adviser at 24 Federal Street,
Boston, MA 02110. The 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 the Registrant's investment
adviser.
C - 2
<PAGE>
ITEM 31. MANAGEMENT SERVICES
Not applicable.
ITEM 32. UNDERTAKINGS
Not applicable.
C - 3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Investment Company Act of
1940, the Registrant has duly caused this Amendment No. 2 to the
Registration Statement on Form N-1A to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Boston, the
Commonwealth of Massachusetts on this 27th day of April, 1995.
TOTAL RETURN PORTFOLIO
By /s/ M. Dozier Gardner
------------------------
M. Dozier Gardner
President
C - 4
<PAGE>
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION OF EXHIBIT
1. Declaration of Trust dated May 1, 1992, filed as Exhibit No. 1 to
the original Registration Statement and incorporated herein by
reference.
2. By-Laws of the Registrant dated May 1, 1992, filed as Exhibit No.
2 to the original Registration Statement and incorporated herein
by reference.
5. Investment Advisory Agreement between the Registrant and Boston
Management and Research dated October 28, 1993, filed as Exhibit
No. 5 to Amendment No. 1 and incorporated herein by reference.
6. Placement Agent Agreement with Eaton Vance Distributors, Inc.
dated October 28, 1993, filed as Exhibit No. 6 to Amendment No. 1
and incorporated herein by reference.
8. Custodian Agreement with Investors Bank & Trust Company dated
October 28, 1993, filed as Exhibit No. 8 to Amendment No. 1 and
incorporated herein by reference.
13. Investment representation letter of Eaton Vance Total Return
Trust, on behalf of EV Traditional Total Return Fund, filed as
Exhibit No. 13 to the original Registration Statement and
incorporated herein by reference.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000912751
<NAME> TOTAL RETURN PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<INVESTMENTS-AT-COST> 482,187,111
<INVESTMENTS-AT-VALUE> 497,964,811
<RECEIVABLES> 12,389,342
<ASSETS-OTHER> 16,027
<OTHER-ITEMS-ASSETS> 2,597
<TOTAL-ASSETS> 510,372,777
<PAYABLE-FOR-SECURITIES> 4,775,774
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 30,111
<TOTAL-LIABILITIES> 4,805,885
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 491,941,692
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 13,625,200
<NET-ASSETS> 505,566,892
<DIVIDEND-INCOME> 32,158,717
<INTEREST-INCOME> 1,330,065
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</TABLE>
