<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 31, 1996
1933 ACT FILE NO. 2-90946
1940 ACT FILE NO. 811-4015
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 32 [X]
REGISTRATION STATEMENT [X]
UNDER
THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 35 [X]
EATON VANCE MUTUAL FUNDS TRUST [X]
---------------------------------------------------------------------
(FORMERLY EATON VANCE GOVERNMENT OBLIGATIONS TRUST)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
24 FEDERAL STREET, BOSTON, MASSACHUSETTS 02110
----------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
617-482-8260
-------------------------------------
(REGISTRANT'S TELEPHONE NUMBER)
ALAN R. DYNNER
24 FEDERAL STREET, BOSTON, MASSACHUSETTS 02110
--------------------------------------
(NAME AND ADDRESS OF AGENT FOR SERVICE)
It is proposed that this filing will become effective pursuant to rule 485
(check appropriate box):
[] immediately upon filing pursuant [X] on March 1, 1997 pursuant to
to paragraph (b) paragraph (a)(1)
[] on (date) pursuant to paragraph (b) [ ] 75 days after filing pursuant to
paragraph (a)(2)
[] 60 days after filing [ ] on (date) pursuant
pursuant to paragraph (a)(1) to paragraph (a)(2).
If appropriate, check the following box:
[] this post effective amendment designates a new effective date for a
previously filed post-effective amendment.
High Income Portfolio and Strategic Income Portfolio have also executed
this Registration Statement.
The Registrant has filed a Declaration pursuant to Rule 24f-2 and on May
24, 1996 filed its "Notice" as required by that Rule for the series of the
Registrant with a fiscal year end of March 31, 1996, on February 23, 1996
filed its "Notice" for the series of the Registrant with a fiscal year end of
December 31, 1995 and on December 23, 1996 filed its "Notice" for the series
of the Registrant with a fiscal year end of October 31, 1996. Registrant
continues its election to register an indefinite number of shares of
beneficial interest pursuant to Rule 24f-2.
- ------------------------------------------------------------------------------
This Amendment to the registration statement on Form N-1A consists of the
following documents and papers:
Cross Reference Sheet required by Rule 481(a) under the Securities Act of
1933
Part A--The Prospectuses of:
EV Classic Strategic Income Fund
EV Marathon Strategic Income Fund
Part B--The Statements of Additional Information of:
EV Classic Strategic Income Fund
EV Marathon Strategic Income Fund
Part C--Other Information
Signatures
Exhibit Index Required by Rule 483(b) under the Securities Act of 1933
Exhibits
This Amendment is not intended to amend the Prospectus and Statement of
Additional Information of any series of the Registrant not identified above.
<PAGE>
EATON VANCE MUTUAL FUNDS TRUST
EV CLASSIC STRATEGIC INCOME FUND
EV MARATHON STRATEGIC INCOME FUND
CROSS REFERENCE SHEET
ITEMS REQUIRED BY FORM N-1A
---------------------------
PART A
ITEM NO. ITEM CAPTION PROSPECTUS CAPTION
- ------- ------------ -------------------------------
1. ............ Cover Page Cover Page
2. ............ Synopsis Shareholder and Fund Expenses
3. ............ Condensed Financial The Fund's Financial
Information Highlights; Performance
Information
4. ............ General Description of The Fund's Investment
Registrant Objective; Investment
Policies and Risks;
Organization of the Fund and
the Portfolio
5. ............ Management of the Fund Management of the Fund and the
Portfolio
5A............. Management's Discussion of Not Applicable
Fund Performance
6. ............ Capital Stock and Other Organization of the Fund and
Securities the Portfolio; Reports to
Shareholders; The Lifetime
Investing Account/
Distribution Options;
Distributions and Taxes
7. ............ Purchase of Securities Valuing Fund Shares;
Being Offered Distribution Plan; How to Buy
Fund Shares; The Lifetime
Investing Account/
Distribution Options; The
Eaton Vance Exchange
Privilege; Eaton Vance
Shareholder Services
8. ............ Redemption or Repurchase How to Redeem Fund Shares
9. ............ Pending Legal Proceedings Not Applicable
PART B STATEMENT OF ADDITIONAL
ITEM NO. ITEM CAPTION INFORMATION CAPTION
- ------ -------- -------------------------------
10. ............ Cover Page Cover Page
11. ............ Table of Contents Table of Contents
12. ............ General Information and Other Information
History
13. ............ Investment Objectives and Additional Information about
Policies Investment Policies;
Investment Restrictions
14. ............ Management of the Fund Trustees and Officers; Fees and
Expenses
15. ............ Control Persons and Control Persons and Principal
Principal Holders of Holders of Securities
Securities
16. ............ Investment Advisory and Investment Adviser and
Other Administrator; Distribution
Services Plan; Custodian; Independent
Accountants; Fees and
Expenses; Other Information
17. ............ Brokerage Allocation and Not Applicable
Other
Practices
18. ............ Capital Stock and Other Other Information
Securities
19. ............ Purchase, Redemption and Determination of Net Asset
Pricing of Securities Value; Principal Underwriter;
Being Offered Service for Withdrawal;
Distribution Plan; Fees and
Expenses
20. ............ Tax Status Taxes
21. ............ Underwriters Principal Underwriter; Fees and
Expenses
22. ............ Calculation of Performance Investment Performance;
Data Performance Information
23. ............ Financial Statements Financial Statements
<PAGE>
PART A
INFORMATION REQUIRED IN A PROSPECTUS
EV CLASSIC
STRATEGIC INCOME FUND
- ------------------------------------------------------------------------------
EV CLASSIC STRATEGIC INCOME FUND (THE "FUND") IS A MUTUAL FUND SEEKING A HIGH
LEVEL OF INCOME BY INVESTING IN A GLOBAL PORTFOLIO CONSISTING PRIMARILY OF HIGH
GRADE DEBT SECURITIES. THE FUND INVESTS ITS ASSETS IN STRATEGIC INCOME PORTFOLIO
(THE "PORTFOLIO"), A NON-DIVERSIFIED OPEN-END INVESTMENT COMPANY HAVING THE SAME
INVESTMENT OBJECTIVE AS THE FUND, RATHER THAN BY DIRECTLY INVESTING IN AND
MANAGING ITS OWN PORTFOLIO OF SECURITIES. THE PORTFOLIO'S INVESTMENT ADVISER
WILL INVEST IN A VARIETY OF INCOME PRODUCING SECURITIES, INCLUDING THOSE OF
BELOW INVESTMENT GRADE QUALITY. THE VALUE OF FUND SHARES WILL FLUCTUATE BECAUSE
OF CHANGES IN CURRENCY EXCHANGE RATES, CREDIT QUALITY AND INTEREST RATES, AND
OTHER FACTORS. THE FUND IS A SERIES OF EATON VANCE MUTUAL FUNDS TRUST (THE
"TRUST").
Shares of the Fund are not deposits or obligations of, or guaranteed or endorsed
by, any bank or other insured depository institution, and are not federally
insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board
or any other government agency. Shares of the Fund involve investment risks,
including fluctuations in value and the possible loss of some or all of the
principal investment.
This Prospectus is designed to provide you with information you should know
before investing. Please retain this document for future reference. A
Statement of Additional Information dated March 1, 1997 for the Fund, as
supplemented from time to time, has been filed with the Securities and
Exchange Commission and is incorporated herein by reference. This Statement of
Additional Information is available without charge from the Fund's principal
underwriter, Eaton Vance Distributors, Inc. (the "Principal Underwriter"), 24
Federal Street, Boston, MA 02110 (telephone (800) 225-6265). The Portfolio's
investment adviser is Boston Management and Research (the "Investment
Adviser"), a wholly-owned subsidiary of Eaton Vance Management, and Eaton
Vance Management is the administrator (the "Administrator") of the Fund and
the Portfolio. The offices of the Investment Adviser and the Administrator are
located at 24 Federal Street, Boston, MA 02110.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
PAGE PAGE
<S> <C> <C> <C>
Shareholder and Fund Expenses ......................... 2 How to Redeem Fund Shares ......................... 13
The Fund's Financial Highlights ........................ 3 Reports to Shareholders ........................... 14
The Fund's Investment Objective ........................ 4 The Lifetime Investing Account/Distribution
Investment Policies and Risks .......................... 4 Options .......................................... 14
Organization of the Fund and the Portfolio ............. 7 The Eaton Vance Exchange Privilege ................. 15
Management of the Fund and the Portfolio ............... 9 Eaton Vance Shareholder Services ................... 16
Distribution Plan ..................................... 10 Distributions and Taxes ............................ 17
Valuing Fund Shares ................................... 11 Performance Information ............................ 18
How to Buy Fund Shares ................................ 12 Appendix ........................................... 19
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
PROSPECTUS DATED MARCH 1, 1997
<PAGE>
SHAREHOLDER AND FUND EXPENSES
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
-------------------------------------------------------------------------------------------------------
<S> <C>
Sales Charges Imposed on Purchases of Shares None
Sales Charges Imposed on Reinvested Distributions None
Fees to Exchange Shares None
Contingent Deferred Sales Charge Imposed on Redemptions During the First Year (as
a percentage of redemption proceeds exclusive of all reinvestments and capital
appreciation in the account) 1.00%
<CAPTION>
ANNUAL FUND AND ALLOCATED PORTFOLIO OPERATING EXPENSES (as a percentage of average daily net assets)
-------------------------------------------------------------------------------------------------------
<S> <C>
Investment Adviser Fee 0.54%
Rule 12b-1 Distribution (and Service) Fees 1.00%
Other Expenses (including the Portfolio's administration fee of .15%) (after
expense allocation) 0.84%
----
Total Operating Expenses (after allocation) 2.38%
====
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
An investor would pay the following expenses (including a contingent
deferred sales charge in the case of redemption during the first year
after purchase) on a $1,000 investment, assuming (a) 5% annual return
and (b) redemption at the end of each period: $34 $74 $127 $272
</TABLE>
NOTES:
The table and Example summarize the aggregate expenses of the Fund and the
Portfolio and are designed to help investors understand the costs and expenses
they will bear, directly or indirectly, by investing in the Fund. Information
for the Fund is based on its expenses for the most recent fiscal year, except
that the Rule 12b-1 Distribution (and Service) Fees are estimated. Absent an
expense allocation, Other Expenses and Total Operating Expenses would have been
7.17% and 8.71%, respectively.
The Example should not be considered a representation of past or future expenses
and actual expenses may be greater or less than those shown. Federal regulations
require the Example to assume a 5% annual return, but actual return will vary.
For further information regarding the expenses of both the Fund and the
Portfolio, see "The Fund's Financial Highlights", "Management of the Fund and
the Portfolio" and "How to Redeem Fund Shares". A long-term shareholder in the
Fund may pay more than the economic equivalent of the maximum front-end sales
charge permitted by a rule of the National Association of Securities Dealers,
Inc. See "Distribution Plan".
No contingent deferred sales charge is imposed on (a) shares purchased more than
one year prior to redemption, (b) shares acquired through the reinvestment of
dividends and distributions or (c) any appreciation in value of other shares in
the account (see "How to Redeem Fund Shares"), and no such charge is imposed on
exchanges of Fund shares for shares of one or more other funds listed under "The
Eaton Vance Exchange Privilege". In the Example above, expenses would be $10
less in the first full year if there was no redemption.
The Portfolio's monthly advisory fee has two components, a fee based on daily
net assets and a fee based on daily gross income, as set forth in the fee
schedule on page 9.
The Fund invests in the Portfolio and, at times, in another registered
investment company. Other investment companies with different distribution
arrangements and fees are investing in the Portfolio and others may do so in the
future. See "Organization of the Fund and the Portfolio".
<PAGE>
THE FUND'S FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following information should be read in conjunction with the audited
financial statements included in the Fund's annual report to shareholders
which is incorporated by reference into the Statement of Additional
Information in reliance upon the report of Coopers & Lybrand L.L.P.,
independent accountants, as experts in accounting and auditing. Further
information regarding the performance of the Fund is contained in its annual
report to shareholders which may be obtained without charge by contacting the
Principal Underwriter.
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-----------------------------------
1996 1995++ 1994*++
------- ---------- ----------
<S> <C> <C> <C>
NET ASSET VALUE, beginning of year $11.330 $ 9.750 $ 10.000
------- ---------- ----------
INCOME (LOSS) FROM OPERATIONS:
Net investment income $ 0.804 $ 1.021 $ 0.348
Net realized and unrealized gain
(loss) on investments 0.865 0.559 (0.495)
------- ---------- ----------
Total income (loss) from operations $ 1.669 $ 1.580 $ (0.147)
------- ---------- ----------
LESS DISTRIBUTIONS:
From net investment income $(0.804) $ -- $ (0.103)
In excess of net investment income(3) (0.105) -- --
------- ---------- ----------
Total distributions $(0.909) $ -- $ (0.103)
------- ---------- ----------
NET ASSET VALUE, end of year $12.090 $ 11.330 $ 9.750
======= ========== ==========
TOTAL RETURN(1) 15.09% 16.21% (1.41%)
RATIOS/SUPPLEMENTAL DATA**:
Net assets, end of period (000's omitted) $ 1,693 $ 11 $ 10
Ratio of net expenses to average net assets(2) 2.38% 0.90% 0.76%+
Ratio of net investment income to
average daily net assets 7.08% 9.84% 7.74%+
** For the years ended October 31, 1996 and 1995 and for the period from the start of
business, May 25, 1994, to October 31, 1994, the operating expenses of the Fund
reflect an allocation of expenses to the Administrator. Had such action not been
taken, net investment gain (loss) per share and the ratios would have been as
follows:
NET INVESTMENT INCOME GAIN (LOSS) PER SHARE $ 0.085 $ (13.000) $ (6.900)
======= ========== ==========
RATIOS (As a percentage of average net assets):
Expenses(2) 8.71% 131.85% 160.83%+
Net investment gain (loss) 0.75% (121.12%) (152.33%)+
<FN>
+ Computed on an annualized basis.
++ Per share amounts have been computed using average shares outstanding during the
period.
(1) Total return is calculated assuming a purchase at the net asset value on the first day
and a sale at the net asset value on the last day of each period reported.
Distributions, if any, are assumed to be reinvested at the net asset value on the
payable date. Total return is calculated on a non-annualized basis.
(2) Includes the Fund's share of Strategic Income Portfolio's allocated expenses.
(3) The Fund has followed the Statement of Position (SOP) 93-2: Determination, Disclosure
and Financial Statement Presentation of Income, Capital Gain, and Return of Capital
Distribution by Investment Companies. The SOP requires that differences in the
recognition or classification of income between the financial statements and tax
earnings and profits that result in temporary over-distributions for financial
statement purposes, are classified as distributions in excess of net investment
income or accumulated net realized gains.
* For the period from the start of business, May 25, 1994, through October 31, 1994.
</FN>
</TABLE>
<PAGE>
THE FUND'S INVESTMENT OBJECTIVE
- --------------------------------------------------------------------------------
THE FUND'S INVESTMENT OBJECTIVE IS A HIGH LEVEL OF INCOME BY INVESTING IN A
GLOBAL PORTFOLIO CONSISTING PRIMARILY OF HIGH GRADE DEBT SECURITIES. The
Investment Adviser will allocate investments among different countries,
currencies and credits, including those of below investment grade quality, based
on the perception of the most favorable markets and issuers, the relative yield
and appreciation potential of a particular country's securities and the
relationship of a country's currency to the U.S. dollar. Changes in exchange
rates for the foreign currencies in which the investments and forward contracts
are denominated may adversely affect the value of Fund shares. The Fund's
investment objective may be changed by the Trustees of the Trust without
shareholder approval.
INVESTMENT POLICIES AND RISKS
- ------------------------------------------------------------------------------
THE FUND CURRENTLY SEEKS ITS OBJECTIVE BY INVESTING IN STRATEGIC INCOME
PORTFOLIO (THE "PORTFOLIO"), WHICH IS ITSELF AN OPEN-END INVESTMENT COMPANY
HAVING THE SAME INVESTMENT OBJECTIVE AS THE FUND. The Portfolio, in turn,
invests primarily in a portfolio of high grade debt securities of issuers
located anywhere in the world.
The Investment Adviser adjusts the Portfolio's investments and engages in active
management techniques to take advantage of differences in interest rates and
currency exchange rates in markets around the world, and other differences among
countries and markets. By allocating the Portfolio's assets actively among
issuers in different countries, and among securities denominated in different
currencies, the Investment Adviser attempts to achieve a higher level of current
income than might be available from a portfolio invested only in the securities
of one country or denominated in one currency. This strategy requires the
Investment Adviser to identify countries and currencies where the Portfolio's
investments will outperform comparable investments in other countries and
currencies and in many cases to predict changes in economies, markets, political
conditions, and other factors. The success of this strategy will, of course,
involve the risk that the Investment Adviser's predictions may be untimely or
incorrect. The Investment Adviser also seeks to identify markets and securities
which appear to be undervalued and make investments to profit from increases in
value.
The Portfolio will invest primarily in high grade debt securities. "high grade"
debt securities include securities issued or guaranteed as to principal or
interest by the U.S. Government or any of its agencies or instrumentalities, and
debt securities, rated at least A by Standard & Poor's Ratings Group, Moody's
Investors Service, Inc. or Duff & Phelps Inc., of foreign governmental and
private issuers. They may also include commercial paper or other short-term debt
instruments rated in one of the two highest short-term ratings by any of those
rating services (or by Fitch Investors Service, Inc.), and certificates of
deposit and bankers' acceptances issued or guaranteed by, or time deposits
maintained at, banks having total assets of more than $500 million and
determined by the Investment Adviser to be of comparable credit quality to
short-term securities with those ratings. An unrated security will be considered
to be a high grade security if the Investment Adviser determines that it is of
comparable quality to any of the securities described above. In making such
determinations, the Adviser will consider any rating of the issuer of unrated
securities.
The Portfolio may invest the remainder of its assets in lower-rated debt
securities, although less than 35% of the Portfolio's assets will be invested in
securities rated below BBB-/Baa3 (commonly referred to as "junk bonds").
Lower-rated securities generally offer higher current yields and appreciation
potential than do higher-rated securities, but are subject to greater risks.
Securities in the lower categories are considered to be of poor standing
and predominantly speculative; securities in the lowest rating categories may be
in default and are generally regarded by the rating agencies as having extremely
poor prospects of ever attaining any real investment standing. The values of
lower-rated fixed income securities generally fluctuate more than those of
higher-rated fixed-income securities.
In lieu of having the Portfolio invest in lower-rated debt securities, the Fund
may invest up to 35% of its assets in High Income Portfolio ("HI Portfolio"), a
separate registered investment company advised by the Investment Adviser. The
investment objective of HI Portfolio is to provide a high level of current
income and it may invest in the same types of debt securities (with the same
risks) as the Portfolio. HI Portfolio normally invests at least 65% of its
assets in debt securities of the lowest investment grade, lower-rated
obligations and unrated obligations; at least 80% of its net assets in
fixed-income securities, including convertible securities; and up to 20% of its
net assets in common stocks and other equity securities when consistent with its
objective or acquired as part of a unit combined fixed-income and equity
securities. The Fund will not invest in the HI Portfolio when such Portfolio is
not so invested. Foreign investments of HI Portfolio may not exceed 25% of total
assets. HI Portfolio may purchase and sell derivative instruments similar to
those described in this Prospectus, except for swaps. At January 31, 1997, HI
Portfolio had % of its assets invested in high yield, high risk bonds, and % of
its net assets were in default. For more detailed information about the risks
associated with investing in lower-rated securities, see "Additional Risk and
Investment Information" below.
The income producing securities in which the Portfolio invest may have fixed,
variable or floating interest rates, constitute a broad mix of asset classes,
and may include convertible bonds, securities of real estate investment trusts
and natural resource companies, stripped debt obligations, closed-end investment
companies (that invest primarily in debt securities the Portfolio could invest
in), preferred, preference and convertible stocks, equipment lease certificates,
equipment trust certificates, conditional sales contracts and debt obligations
collateralized by, or representing interests in pools of, mortgages and other
types of loans ("asset-backed obligations"). The Portfolio may invest a portion
of its assets in fixed and floating rate loans and loan interests. The Portfolio
will normally invest in securities of issuers located in at least three
different countries (which may include the United States), and will not normally
invest more than 25% of its assets in securities of issuers located in a single
foreign country or denominated in any single foreign currency, except the U.S.
dollar. Nevertheless, through "Active Management Strategies" discussed below,
the entire Fund may be exposed to foreign currency risks. For temporary
defensive purposes, the Portfolio may hold all or any portion of its assets in
securities of issuers located in the United States and in cash or money market
instruments. It is impossible to predict when, or for how long, the Portfolio
will engage in such strategies.
THE MARKET VALUE OF THE PORTFOLIO'S (AND HI PORTFOLIO'S) INVESTMENTS WILL CHANGE
IN RESPONSE TO CHANGES IN CURRENCY EXCHANGE AND INTEREST RATES, CREDIT QUALITY
CHANGES OF ISSUERS AND OTHER FACTORS. Changes in the values of portfolio
securities will not affect interest income derived from those securities, but
will affect the Fund's net asset value. See "Additional Risk and Investment
Information" below.
ACTIVE MANAGEMENT TECHNIQUES
CURRENCY AND OTHER DERIVATIVE INSTRUMENTS. The Portfolio may purchase or sell
derivative instruments (which are instruments that derive their value from
another instrument, security, index or currency) to 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 be in the U.S. or
abroad and may include the purchase or sale of futures contracts on securities,
securities indices, other indices, other financial instruments or currencies;
options on futures contracts; exchange-traded and over-the-counter options on
securities, indices or currencies; forward foreign currency exchange contracts;
and interest rate and currency swaps. 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;
default by the counterparty; imperfect correlation between a position and the
desired hedge; tax constraints on closing out positions; and portfolio
management constraints on securities subject to such transactions. The loss on
derivative instruments (other than purchased options) may substantially exceed
the Portfolio's initial investment in these instruments. In addition, the
Portfolio may lose the entire premium paid for purchased options that expire
before they can be profitably exercised by the Portfolio. The Portfolio incurs
transaction costs in opening and closing positions in derivative instruments.
There can be no assurance that the Investment Adviser's use of derivative
instruments will be advantageous to the Portfolio.
To the extent that the Portfolio enters into futures contracts, options on
futures contracts and options on foreign currencies traded on an exchange
regulated by the Commodity Futures Trading Commission ("CFTC"), in each case
that are not for bona fide hedging purposes (as defined by the CFTC), the
aggregate initial margin and premiums required to establish these positions
(excluding the amount by which options are "in-the-money") may not exceed 5% of
the liquidation value of the Portfolio's investments, 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 or 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. In addition, the
Portfolio may purchase forward contracts for non-hedging purposes when the
Investment Adviser anticipates that the foreign currency will appreciate in
value.
SECURITIES LOANS, REPURCHASE AGREEMENTS, FORWARD COMMITMENTS AND REVERSE
REPURCHASE AGREEMENTS. The Portfolio may lend its portfolio securities to
broker-dealers and may enter into repurchase agreements. These transactions must
be fully collateralized at all times, but involve some risk to the Portfolio if
the other party should default on its obligations and the lender is delayed or
prevented from recovering the collateral. The Portfolio may also purchase or
sell securities for future delivery by means of "forward commitments."
The Portfolio may also enter into "reverse" repurchase agreements which
generally involve the sale of securities held and an agreement to repurchase the
securities at an agreed-upon price, date, and interest payment. The Portfolio
can invest the cash it receives or use it to meet redemption requests. Reverse
repurchase agreements and forward commitments to purchase securities may
increase the overall investment exposure of the Portfolio and involve investment
leverage. Use of investment leverage may increase the amount of any losses
incurred by the Portfolio in the case of adverse changes in market conditions or
the failure of the issuer of a security or financial instrument to meet its
obligations. The Portfolio may also enter into reverse repurchase agreements as
a hedge against a possible decline in the value of the foreign currency in which
a debt security is denominated by converting the foreign currency cash proceeds
from the sale of the debt security into U.S. dollars.
ADDITIONAL RISK AND INVESTMENT INFORMATION
INVESTMENTS IN FOREIGN SECURITIES. Because foreign securities involve foreign
currencies, the values of the assets of the Portfolio (and HI Portfolio) and
their net investment income available for distribution may be affected favorably
or unfavorably by changes in currency exchange rates and exchange control
regulations. There may be less information publicly available about a foreign
issuer than about a U.S. issuer, and foreign issuers are not generally subject
to accounting, auditing, and financial reporting standards and practices
comparable to those in the United States. The willingness and ability of
sovereign issuers to pay principal and interest on government securities depends
on various economic factors, including among others the issuer's balance of
payments, overall debt level, and cash flow considerations related to the
availability of tax or other revenues to satisfy the issuer's obligations. The
securities of some foreign issuers are less liquid and at times more volatile
than securities of comparable U.S. issuers. Foreign brokerage commissions and
fees are also generally higher than in the United States. Foreign settlement
procedures and trade regulations may involve certain risks (such as delay in the
payment or delivery of securities or in the recovery of the assets held abroad)
and expenses not present in the settlement of domestic investments. Investments
may include securities issued by the governments of lesser-developed countries,
which are sometimes referred to as "emerging markets", and other issuers located
in such countries. As a result, the Portfolio may be exposed to greater risk and
will be more dependent on the Investment Adviser's ability to assess such risk
than if the Portfolio invested solely in more developed countries.
In addition, there may be a possibility of nationalization or expropriation of
assets, imposition of currency exchange controls, confiscatory taxation,
political or financial instability, armed conflict and diplomatic developments
which could affect the values of a Portfolio's investments in certain foreign
countries. Legal remedies available to investors in certain foreign countries,
including remedies available in bankruptcy proceedings, may be more limited than
those available with respect to investments in the United States or in other
foreign countries. The laws of some foreign countries may limit a Portfolio's
ability to invest in securities of certain issuers located in those foreign
countries. Special tax considerations apply to foreign securities.
INVESTING IN LOWER-RATED SECURITIES. Lower quality debt securities are subject
to the risk of an issuer's inability to meet principal and interest payments on
the obligations (credit risk) and may also be subject to price volatility due to
such factors as interest rate 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 market and credit risk than are prices of
higher-rated securities, which react primarily to movements in the general level
of interest rates. The Portfolio (and HI Portfolio) may invest a substantial
portion of their assets in lower-rated securities issued in connection with
mergers, acquisitions, leveraged buy-outs, recapitalizations and other highly
leveraged transactions, which pose a higher risk of default or bankruptcy of the
issuer than other fixed-income securities particularly during periods of
deteriorating economic conditions and contraction in the credit markets. The
Portfolio (and HI Portfolio) may also invest in debt securities not paying
current income in anticipation of possible future income or capital
appreciation. The issuer of such securities may be in bankruptcy or undergoing a
debt restructuring or reorganization. Defaulted securities may be retained. In
the case of a defaulted security, the Portfolio (or HI Portfolio) may incur
additional expense seeking recovery of its investment. In the event the rating
of a security held by the Portfolio (or HI Portfolio) is downgraded, causing the
Fund to have indirectly 35% or more of its total assets in securities rated
below investment grade, the Investment Adviser will (in an orderly fashion
within a reasonable period of time) dispose of such securities of the Portfolio
(or reduce the Fund's investment in HI Portfolio as it deems necessary in order
to comply with this limitation. See the Appendix to this Prospectus for the
asset composition of the Portfolio for the fiscal year ended October 31, 1996.
For a description of securities ratings, see the Statement of Additional
Information.
INTEREST RATE RISK. The value of Fund shares will reflect the value of the
Fund's interest in the Portfolio (which in turn, reflects the underlying value
of the Portfolio's assets and liabilities), and any interest in HI Portfolio and
will change in response to interest rate fluctuations. When interest rates
decline, the value of debt securities held by the Portfolio can be expected to
rise. Conversely, when interest rates rise, the value of debt securities held by
the Portfolio can be expected to decline.
OTHER PRACTICES. The Portfolio may at times invest in so-called "zero-coupon"
bonds (deferred interest bonds) and "payment-in-kind" bonds. Zero-coupon bonds
are issued at a significant discount from their principal amount and interest is
paid only at maturity rather than at intervals during the life of the security.
Payment-in-kind bonds allow the issuer, at its option, to make current interest
payments on the bonds either in cash or in additional bonds. The values of
zero-coupon bonds and payment-in-kind bonds are subject to greater fluctuation
in response to changes in market interest rates than bonds which pay interest in
cash currently. Because these instruments allow an issuer to avoid the need to
generate cash to meet current interest payments, they may involve greater credit
risks than bonds paying interest currently. Even though such bonds do not pay
current interest in cash, a Portfolio is nonetheless required to accrue interest
income on such investments and the Fund is required to distribute its share of
such amounts at least annually to shareholders. Thus, a Portfolio could be
required at times to liquidate other investments to obtain cash in order to
enable the Fund to satisfy its distribution requirements.
The Portfolio may hold up to 15% of net assets in illiquid securities, including
securities legally restricted as to resale, and securities eligible for resale
pursuant to Rule 144A under the Securities Act of 1933. Rule 144A securities
may, however, be treated as liquid by the Investment Adviser pursuant to
procedures adopted by the Trustees, which require consideration of factors such
as trading activity, availability of market quotations and number of dealers
willing to purchase the security. Rule 144A securities may increase illiquidity
if qualified institutional buyers become uninterested in purchasing such
securities.
The Portfolio may also temporarily borrow up to 5% of the value of its total
assets to satisfy redemption requests or settle securities transactions. Certain
securities held by the Portfolio may permit the issuer at its option to "call",
or redeem, its securities. If an issuer were to redeem securities held by the
Portfolio during a time of declining interest rates, the Portfolio may not be
able to reinvest the proceeds in securities providing the same investment return
as the securities redeemed.
NON-DIVERSIFIED STATUS. As a "non-diversified" investment company, the Portfolio
may invest, with respect to 50% of its total assets, more than 5%, (but not more
than 25%) of its total assets in securities of any one issuer, other than U.S.
government securities. The Portfolio is likely to invest a greater percentage of
its assets in the securities of a single issuer than would a diversified fund.
Therefore, the Portfolio is more susceptible to any single adverse or political
occurence or development affecting issuers in which the Portfolio invests. HI is
diversified.
INVESTMENT RESTRICTIONS. The Fund, the Portfolio have adopted certain
fundamental investment restrictions and policies which are enumerated in detail
in the Statement of Additional Information and which may not be changed unless
authorized by a shareholder vote or an investor vote, respectively. Except for
such enumerated restrictions and as otherwise indicated in this Prospectus, the
investment objective and policies of the Fund and the Portfolio are not
fundamental policies and accordingly may be changed by the Trustees of the Trust
and the affected Portfolio without obtaining the approval of the Fund's
shareholders or the investors of the Portfolio, as the case may be.
ORGANIZATION OF THE FUND AND THE PORTFOLIO
- ------------------------------------------------------------------------------
THE FUND IS A NON-DIVERSIFIED SERIES OF EATON VANCE MUTUAL FUNDS TRUST, A
BUSINESS TRUST ESTABLISHED UNDER MASSACHUSETTS LAW PURSUANT TO A DECLARATION OF
TRUST DATED MAY 7, 1984, AS AMENDED. THE TRUST IS A MUTUAL FUND - AN OPEN-END
MANAGEMENT INVESTMENT COMPANY. The Trustees of the Trust are responsible for the
overall management and supervision of its affairs. The Trust may issue an
unlimited number of shares of beneficial interest (no par value per share) in
one or more series (such as the Fund). Each share represents an equal
proportionate beneficial interest in the Fund. When issued and outstanding, the
shares are fully paid and nonassessable by the Trust and redeemable as described
under "How to Redeem Fund Shares". Shareholders are entitled to one vote for
each full share held. Fractional shares may be voted proportionately. Shares
have no preemptive or conversion rights and are freely transferable. In the
event of the liquidation of the Fund, shareholders are entitled to share pro
rata in the net assets of the Fund available for distribution to shareholders.
THE PORTFOLIO (AND HI 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. Each Portfolio, as well as the Trust, intends to comply with all
applicable federal and state securities laws. Each Portfolio's Declaration of
Trust, as amended, provides that the Fund and other entities permitted to invest
in the Portfolio (e.g., other U.S. and foreign investment companies, and common
and commingled trust funds) will each be liable for all obligations of the
Portfolio. However, the risk of the Fund incurring financial loss on account of
such liability is limited to circumstances in which both inadequate insurance
exists and a Portfolio itself is unable to meet its obligations. Accordingly,
the Trustees of the Trust believe that neither the Fund nor its shareholders
will be adversely affected by reason of the Fund investing in the Portfolios.
The Trustees of the Trust have considered the advantages and disadvantages of
investing the assets of the Fund in the Portfolios, as well as the advantages
and disadvantages of the two-tier format. The Trustees believe that the
structure offers opportunities for substantial growth in the assets of the
Portfolios affords the potential for economies of scale for the Fund, and may
over time result in lower expenses for a fund.
Whenever the Fund as an investor in a Portfolio is requested to vote on matters
pertaining to the Portfolio (other than the termination of the Portfolio's
business, which may be determined by the Trustees of the Portfolio without
investor approval), the Fund will hold a meeting of Fund shareholders and will
vote its interest in the Portfolio for or against such matters proportionately
to the instructions to vote for or against such matters received from Fund
shareholders. The Fund shall vote shares for which it receives no voting
instructions in the same proportion as the shares for which it receives voting
instructions. Other investors in a Portfolio may alone or collectively acquire
sufficient voting interests in the Portfolio to control matters relating to the
operation of the Portfolio, which may require the Fund to withdraw its
investment in the Portfolio or take other appropriate action. Any such
withdrawal could result in a distribution "in kind" of portfolio securities (as
opposed to a cash distribution from a Portfolio). If securities are distributed,
the Fund could incur brokerage, tax or other charges in converting the
securities to cash. In addition, the distribution in kind may result in a less
diversified portfolio of investments or adversely affect the liquidity of the
Fund. Notwithstanding the above, there are other means for meeting shareholder
redemption requests, such as borrowing.
The Fund may withdraw (completely redeem) all its assets from either Portfolio
at any time if the Board of Trustees of the Trust determines that it is in the
best interest of the Fund to do so. In the event the Fund withdraws all of its
assets from both Portfolios, or the Board of Trustees of the Trust determines
that the investment objective of the Portfolios are no longer consistent with
the investment objective of the Fund, such Trustees would consider what action
might be taken, including investing the assets of the Fund in another pooled
investment entity or retaining an investment adviser to manage the Fund's assets
in accordance with its investment objective. The Fund's investment performance
may be affected by a withdrawal of all its assets from a Portfolio.
In addition to selling an interest to the Fund, a Portfolio may sell interests
to other affiliated and non-affiliated mutual funds or institutional investors.
Such investors will invest in a Portfolio on the same terms and conditions and
will pay a proportionate share of the Portfolio's expenses. However, the other
investors investing in a Portfolio are not required to sell their shares at the
same public offering price as the Fund due to variations in sales commissions
and other operating expenses. Therefore, investors in the Fund should be aware
that these differences may result in differences in returns experienced by
investors in the various funds that invest in a Portfolio. Such differences in
returns are also present in other mutual fund structures, including funds that
have multiple classes of shares. Information regarding other pooled investment
entities or funds which invest in a Portfolio may be obtained by contacting the
Principal Underwriter, 24 Federal Street, Boston, MA 02110, (617) 482-8260.
MANAGEMENT OF THE FUND AND THE PORTFOLIO
- ------------------------------------------------------------------------------
THE PORTFOLIO ENGAGES BOSTON MANAGEMENT AND RESEARCH ("BMR"), A WHOLLY-OWNED
SUBSIDIARY OF EATON VANCE MANAGEMENT ("EATON VANCE"), AS ITS INVESTMENT ADVISER.
EATON VANCE, ITS AFFILIATES AND ITS PREDECESSOR COMPANIES HAVE BEEN MANAGING
ASSETS OF INDIVIDUALS AND INSTITUTIONS SINCE 1924 AND MANAGING INVESTMENT
COMPANIES SINCE 1931. BMR's expertise in the management of fixed-income
securities ranges from government obligations, high-grade corporate and
municipal securities, foreign debt and bank loan interests to higher yielding
instruments. BMR's fixed-income division is armed with the research and
technical ability to gain immediate access to interest rate data around the
world.
Acting under the general supervision of the Board of Trustees of the Portfolio,
BMR manages the Portfolio's investments and affairs, and furnishes for the use
of the Portfolio office space and all necessary office facilities, equipment and
personnel for servicing the investments of the Portfolio. Under its investment
advisory agreement with the Portfolio, BMR receives a monthly advisory fee equal
to the aggregate of
(a) a daily asset based fee computed by applying the annual asset rate
applicable to that portion of the total daily net assets in each
Category as indicated below, plus
(b) a daily income based fee computed by applying the daily income rate
applicable to that portion of the total daily gross income (which
portion shall bear the same relationship to the total daily gross income
on such day as that portion of the total daily net assets in the same
Category bears to the total daily net assets on such day) in each
Category as indicated below:
<TABLE>
<CAPTION>
ANNUAL DAILY
CATEGORY DAILY NET ASSETS ASSET RATE INCOME RATE
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 up to $500 million 0.275% 2.75%
2 $500 million but less than $1 billion 0.250% 2.50%
3 $1 billion but less than $1.5 billion 0.225% 2.25%
4 $1.5 billion but less than $2 billion 0.200% 2.00%
5 $2 billion but less than $3 billion 0.175% 1.75%
6 $3 billion and over 0.150% 1.50%
</TABLE>
Total daily gross income is the total gross investment income, exclusive of
capital gains and losses on investments and before deduction of expenses, earned
each day by the Portfolio.
As of October 31, 1996, the Portfolio had net assets of $132,406,799. For the
fiscal year ended October 31, 1996, the Portfolio paid BMR advisory fees
equivalent to 0.54% of the Portfolio's average daily net assets for such year.
HI Portfolio also engages BMR to act as its investment adviser pursuant to a fee
schedule similar to but slightly higher than the above. For the fiscal year
ended March 31, 1997, BMR paid advisory fees equivalent to % of HI Portfolio's
average daily net assets. The portion of the Fund's assets invested in the HI
Portfolio will be subject to such Portfolio's advisory fee, but will not be
subject to Strategic Income Portfolio's advisory or administration fee, or a
Fund advisory fees.
BMR OR EATON VANCE ACTS AS INVESTMENT ADVISER TO INVESTMENT COMPANIES AND
VARIOUS INDIVIDUAL AND INSTITUTIONAL CLIENTS WITH ASSETS UNDER MANAGEMENT OF
OVER $17 BILLION. Eaton Vance is a wholly-owned subsidiary of Eaton Vance Corp.,
a publicly-held holding company which through its subsidiaries and affiliates
engages in investment management, administration and marketing activities.
Mark S. Venezia has acted as the portfolio manager of the Portfolio since it
commenced operations. He has been a Vice President of Eaton Vance since 1987
and of BMR since 1992. Hooker Talcott, Jr. has acted as portfolio manager of
the HI Portfolio since it commenced operations. Mr. Talcott has been a Vice
President of Eaton Vance since 1987 and of BMR since 1992. Michael Weilheimer
is the co-portfolio manager and has been a Vice President of Eaton Vance since
1992.
The Portfolio (and HI Portfolio) believes that most of the obligations which it
will acquire will be normally traded on a net basis (without commission) through
broker-dealers and banks acting for their own account. Such firms attempt to
profit from such transactions by buying at the bid price and selling at the
higher asked price of the market, and the difference is customarily referred to
as the spread. In selecting firms which will execute portfolio transactions, BMR
judges their professional ability and quality of service and uses its best
efforts to obtain execution at prices which are advantageous and at reasonably
competitive spreads. Subject to the foregoing, BMR may consider sales of shares
of the Fund or of other investment companies sponsored by BMR or Eaton Vance as
a factor in the selection of firms to execute portfolio transactions. The Fund,
the Portfolios and BMR have adopted Codes of Ethics relating to personal
securities transactions. The Codes permit Eaton Vance personnel to invest in
securities (including securities that may be purchased or held by the Portfolio)
for their own accounts, subject to certain pre-clearance, reporting and other
restrictions and procedures contained in such Codes.
The Portfolio also engages BMR as its administrator under an administration
agreement. Under the administration agreement, BMR is responsible for reviewing
and supervising the provision of custody services to the Portfolio and making
related reports and recommendations to the Board of Trustees of the Portfolio;
for providing certain valuation, legal, accounting and tax services in
connection with investments with foreign issuers or guarantors, investments
denominated in foreign currencies and transactions in derivative instruments;
and for such other special services as the Board may direct. BMR also furnishes
the office facilities and personnel necessary for providing these services. As
compensation for these services, BMR receives a monthly administration fee at an
annual rate of .15% of the Portfolio's average daily net assets. For the fiscal
year ended October 31, 1996, the Portfolio paid BMR administration fees
equivalent to 0.15% of the Portfolio's average daily net assets for such year.
The Trust has retained the services of Eaton Vance to act as Administrator of
the Fund. The Trust has not retained the services of an investment adviser since
the Trust seeks to achieve the investment objective of the Fund by investing the
Fund's assets in the Portfolio. As Administrator, Eaton Vance provides the Fund
with general office facilities and supervises the overall administration of the
Fund. For these services, Eaton Vance currently receives no compensation. The
Trustees of the Trust may determine, in the future, to compensate Eaton Vance
for such services.
The Portfolio and the Fund, as the case may be, will each be responsible for all
of its respective costs and expenses not expressly stated to be payable by BMR
under the investment advisory agreements and the administration agreement, by
Eaton Vance under the administrative services agreement, or by the Principal
Underwriter under the distribution agreement.
DISTRIBUTION PLAN
- -------------------------------------------------------------------------------
THE FUND FINANCES DISTRIBUTION ACTIVITIES AND HAS ADOPTED A DISTRIBUTION PLAN
(THE "PLAN") PURSUANT TO RULE 12B-1 UNDER THE INVESTMENT COMPANY ACT OF 1940
(THE "1940 ACT"). Rule 12b-1 permits a mutual fund, such as the Fund, to finance
distribution activities and bear expenses associated with the distribution of
its shares provided that any payments made by the fund are made pursuant to a
written plan adopted in accordance with the Rule. The Plan is subject to, and
complies with, the sales charge rule of the National Association of Securities
Dealers, Inc. (the "NASD Rule"). The Plan is described further in the Statement
of Additional Information, and the following is a description of the salient
features of the Plan. The Plan provides that the Fund, subject to the NASD Rule,
will pay sales commissions and distribution fees to the Principal Underwriter
only after and as a result of the sale of shares of the Fund. On each sale of
Fund shares (excluding reinvestment of distributions) the Fund will pay the
Principal Underwriter amounts representing (i) sales commissions equal to 6.25%
of the amount received by the Fund for each share sold and (ii) distribution
fees calculated by applying the rate of 1% over the prime rate then reported in
The Wall Street Journal to the outstanding balance of Uncovered Distribution
Charges (as described below) of the Principal Underwriter. The Principal
Underwriter currently expects to pay to a financial service firm (an "Authorized
Firm") (a) sales commissions (except on exchange transactions and reinvestments)
at the time of sale equal to .75% of the purchase price of the shares sold by
such Firm, and (b) monthly sales commissions approximately equivalent to 1/12 of
.75% of the value of shares sold by such Firm and remaining outstanding for at
least one year. The Plan is designed to permit an investor to purchase Fund
shares through an Authorized Firm without incurring an initial sales charge and
at the same time permit the Principal Underwriter to compensate Authorized Firms
in connection with the sale of Fund shares.
THE NASD RULE REQUIRES THE FUND TO LIMIT ITS ANNUAL PAYMENTS OF SALES
COMMISSIONS AND DISTRIBUTION FEES TO AN AMOUNT NOT EXCEEDING .75% OF THE FUND'S
AVERAGE DAILY NET ASSETS FOR EACH FISCAL YEAR. Under its Plan, the Fund accrues
daily an amount at the rate of 1/365 of .75% of the Fund's net assets, and pays
such accrued amounts monthly to the Principal Underwriter. The Plan requires
such accruals to be automatically discontinued during any period in which there
are no outstanding Uncovered Distribution Charges under the Plan. Uncovered
Distribution Charges are calculated daily and, briefly, are equivalent to all
unpaid sales commissions and distribution fees to which the Principal
Underwriter is entitled under the Plan less all contingent deferred sales
charges theretofore paid to the Principal Underwriter. The Eaton Vance
organization may be considered to have realized a profit under the Plan if at
any point in time the aggregate amounts of all payments made to the Principal
Underwriter pursuant to the Plan, including any contingent deferred sales
charges, have exceeded the total expenses theretofore incurred by such
organization in distributing shares of the Fund. Total expenses for this purpose
will include an allocable portion of the overhead costs of such organization and
its branch offices.
Because of the NASD Rule limitation on the amount of sales commissions and
distribution fees paid during any fiscal year, a high level of sales of Fund
shares during the initial years of the Fund's operations would cause a large
portion of the sales commissions attributable to a sale of Fund shares to be
accrued and paid by the Fund to the Principal Underwriter in fiscal years
subsequent to the year in which such shares were sold. This spreading of sales
commissions payments under the Plan over an extended period would result in the
incurrence and payment of increased distribution fees under the Plan.
During the fiscal year ended October 31, 1996, the Fund paid or accrued sales
commissions under the Plan equivalent to .75% of the Fund's average daily net
assets for such year. As at October 31, 1996, the outstanding Uncovered
Distribution Charges of the Principal Underwriter calculated under the Plan
amounted to approximately $90,000 (which amount was equivalent to 5.3% of the
Fund's net assets on such day).
THE PLAN ALSO AUTHORIZES THE FUND TO MAKE PAYMENTS OF SERVICE FEES TO THE
PRINCIPAL UNDERWRITER, AUTHORIZED FIRMS AND OTHER PERSONS IN AMOUNTS NOT
EXCEEDING .25% OF THE FUND'S AVERAGE DAILY NET ASSETS FOR EACH FISCAL YEAR. The
Trustees of the Trust have initially implemented this provision of the Plan by
authorizing the Fund to make monthly service fee payments to the Principal
Underwriter in amounts not expected to exceed .25% of the Fund's average daily
net assets for any fiscal year. The Fund accrues the service fee daily at the
rate of 1/365 of .25% of the Fund's net assets. The Principal Underwriter
currently expects to pay to an Authorized Firm (a) a service fee (except on
exchange transactions and reinvestments) at the time of sale equal to .25% of
the purchase price of the shares sold by such Firm, and (b) monthly service fees
approximately equivalent to 1/12 of .25% of the value of shares sold by such
Firm and remaining outstanding for at least one year. During the first year
after a purchase of Fund shares, the Principal Underwriter will retain the
service fee as reimbursement for the service fee payment made to the Authorized
Firm at the time of sale. As permitted by the NASD Rule, all service fee
payments are made for personal services and/or the maintenance of shareholder
accounts. Service fees are separate and distinct from the sales commissions and
distribution fees payable by the Fund to the Principal Underwriter, and as such
are not subject to automatic discontinuance when there are no outstanding
Uncovered Distribution Charges of the Principal Underwriter. For the fiscal year
ended October 31, 1996, the Fund paid or accrued service fees under the Plan
equivalent to 0.22% (annualized) of the Fund's average daily net assets.
The Principal Underwriter may, from time to time, at its own expense, provide
additional incentives to Authorized Firms which employ registered
representatives who sell the Fund's shares and/or shares of other funds
distributed by the Principal Underwriter. In some instances, such additional
incentives may be offered only to certain Authorized Firms whose representatives
sell or are expected to sell significant amounts of shares. In addition, the
Principal Underwriter may from time to time increase or decrease the sales
commissions payable to Authorized Firms.
The Fund may, in its absolute discretion, suspend, discontinue or limit the
offering of its shares at any time. In determining whether any such action
should be taken, the Fund's management intends to consider all relevant factors,
including without limitation the size of the Fund, the investment climate and
market conditions, the volume of sales and redemptions of Fund shares, and the
amount of Uncovered Distribution Charges of the Principal Underwriter. The Plan
may continue in effect and payments may be made under the Plan following any
such suspension, discontinuance or limitation of the offering of Fund shares;
however, the Fund is not contractually obligated to continue the Plan for any
particular period of time. Suspension of the offering of Fund shares would not,
of course, affect a shareholder's ability to redeem shares.
VALUING FUND SHARES
- ------------------------------------------------------------------------------
THE FUND VALUES ITS SHARES ONCE ON EACH DAY THE NEW YORK STOCK EXCHANGE (THE
"EXCHANGE") IS OPEN FOR TRADING, as of the close of regular trading on the
Exchange (normally 4:00 p.m. New York time). The Fund's net asset value per
share is determined by its custodian, Investors Bank & Trust Company ("IBT"),
(as agent for the Fund) in the manner authorized by the Trustees of the Trust.
Net asset value is computed by dividing the value of the Fund's total assets,
less its liabilities, by the number of shares outstanding. Because the Fund
invests its assets in an interest in the Portfolio (and at times in HI Portfolio
as well), the Fund's net asset value will reflect the value of its interest in
the Portfolios (which, in turn, reflects the underlying value of the Portfolios'
assets and liabilities).
Authorized Firms must communicate an investor's order to the Principal
Underwriter prior to the close of the Principal Underwriter's business day to
receive that day's net asset value per Fund share. It is the Authorized Firms'
responsibility to transmit orders promptly to the Principal Underwriter.
Each Portfolio's net asset value is also determined as of the close of regular
trading on the Exchange by IBT (as custodian and agent for the Portfolio) in the
manner authorized by the Trustees of the Portfolio. Net asset value is computed
by subtracting the liabilities of a Portfolio from the value of its total
assets. Most debt securities are valued on the basis of market valuations
furnished by pricing services. For further information regarding the valuation
of a Portfolio's assets, see "Determination of Net Asset Value" in the Statement
of Additional Information.
SHAREHOLDERS MAY DETERMINE THE VALUE OF THEIR INVESTMENT BY MULTIPLYING THE
NUMBER OF FUND SHARES OWNED BY THE CURRENT NET ASSET VALUE PER SHARE.
HOW TO BUY FUND SHARES
- ------------------------------------------------------------------------------
SHARES OF THE FUND MAY BE PURCHASED FOR CASH OR MAY BE ACQUIRED IN EXCHANGE FOR
SECURITIES. Investors may purchase shares of the Fund through Authorized Firms
at the net asset value per share of the Fund next determined after an order is
effective. An Authorized Firm may charge its customers a fee in connection with
transactions executed by that Firm. The Fund may suspend the offering of shares
at any time and may refuse an order for the purchase of shares.
An initial investment in the Fund must be at least $1,000. Once an account has
been established, the investor may send investments of $50 or more at any time
directly to the Fund's transfer agent (the "Transfer Agent") as follows: First
Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123. The
$1,000 minimum initial investment is waived for Bank Automated Investing
accounts, which may be established with an investment of $50 or more. See "Eaton
Vance Shareholder Services".
In connection with employee benefit or other continuous group purchase plans
under which the average initial purchase by a participant of the plan is $1,000
or more, the Fund may accept initial investments of less than $1,000 on the part
of an individual participant. In the event a shareholder who is a participant of
such a plan terminates his or her participation in the plan, his or her shares
will be transferred to a regular individual account. However, such account will
be subject to the right of redemption by the Fund as described below under "How
to Redeem Fund Shares."
ACQUIRING FUND SHARES IN EXCHANGE FOR SECURITIES. IBT, as escrow agent, will
receive securities acceptable to Eaton Vance, as Administrator, in exchange for
Fund shares at their net asset value as determined above. The minimum value of
securities (or securities and cash) accepted for deposit is $5,000. Securities
accepted will be sold on the day of their receipt or as soon thereafter as
possible. The number of Fund shares to be issued in exchange for securities will
be the aggregate proceeds from the sale of such securities, divided by the
applicable net asset value per Fund share on the day such proceeds are received.
Eaton Vance will use reasonable efforts to obtain the then current market price
for such securities but does not guarantee the best available price. Eaton Vance
will absorb any transaction costs, such as commissions, on the sale of
securities.
Securities determined to be acceptable should be transferred via book entry or
physically delivered, in proper form for transfer, through an Authorized Firm,
together with a completed and signed Letter of Transmittal in approved form
(available from Authorized Firms), as follows:
IN THE CASE OF BOOK ENTRY:
Deliver through Depository Trust Co.
Broker #2212
Investors Bank & Trust Company
For A/C EV Classic Strategic Income Fund
IN THE CASE OF PHYSICAL DELIVERY:
Investors Bank & Trust Company
Attention: EV Classic Strategic Income Fund
Physical Securities Processing Settlement Area
89 South Street
Boston, MA 02111
Investors who are contemplating an exchange of securities for shares of the
Fund, or their representatives, must contact Eaton Vance to determine whether
the securities are acceptable before forwarding such securities. Eaton Vance
reserves the right to reject any securities. Exchanging securities for Fund
shares may create a taxable gain or loss. Each investor should consult his or
her tax adviser with respect to the particular federal, state and local tax
consequences of exchanging securities for Fund shares.
IF YOU DON'T HAVE AN AUTHORIZED FIRM, EATON VANCE CAN RECOMMEND ONE.
HOW TO REDEEM FUND SHARES
- ------------------------------------------------------------------------------
A SHAREHOLDER MAY REDEEM FUND SHARES IN ONE OF THREE WAYS -- BY MAIL, BY
TELEPHONE OR THROUGH AN AUTHORIZED FIRM. The redemption price will be based on
the net asset value per Fund share next computed after a redemption request is
received in the proper form as described below.
REDEMPTION BY MAIL: Shares may be redeemed by delivering to the Transfer Agent,
First Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123,
during its business hours a written request for redemption in good order, plus
any share certificates with executed stock powers. Good order means that all
relevant documents must be endorsed by the record owner(s) exactly as the shares
are registered and the signature(s) must be guaranteed by a member of either the
Securities Transfer Association's STAMP program or the New York Stock Exchange's
Medallion Signature Program, or certain banks, savings and loan institutions,
credit unions, securities dealers, securities exchanges, clearing agencies and
registered securities associations as required by a regulation of the Securities
and Exchange Commission (the "Commission") and acceptable to the Transfer Agent.
In addition, in some cases, good order may require the furnishing of additional
documents such as where shares are registered in the name of a corporation,
partnership or fiduciary.
REDEMPTION BY TELEPHONE: Shares may be redeemed by telephone provided the
investor has not disclaimed in writing the use of the privilege. Such
redemptions can be effected by calling the Transfer Agent at 800-262-1122,
Monday through Friday, 9:00 a.m. to 4:00 p.m. (Eastern Standard Time). The
proceeds of a telephone redemption may be no greater than the maximum amount
established by the Principal Underwriter (currently $50,000) and may be mailed
only to the account address of record. Shares held by corporations, trusts or
certain other entities, or subject to fiduciary arrangements, may not be
redeemed by telephone. Neither the Fund, the Principal Underwriter nor the
Transfer Agent will be responsible for the authenticity of redemption
instructions received by telephone, provided that reasonable procedures to
confirm that instructions communicated by telephone are genuine have been
followed. Telephone instructions will be tape recorded. In times of drastic
economic or market changes, a telephone redemption may be difficult to
implement.
REDEMPTION THROUGH AN AUTHORIZED FIRM: To sell shares at their net asset value
through an Authorized Firm (a repurchase), a shareholder can place a repurchase
order with the Authorized Firm, which may charge a fee. The value of such shares
is based upon the net asset value calculated after the Principal Underwriter, as
the Fund's agent, receives the order. It is the Authorized Firm's responsibility
to transmit promptly repurchase orders to the Principal Underwriter. Throughout
this Prospectus, the word "redemption" is generally meant to include a
repurchase.
Within seven days after receipt of a redemption request in good order by the
Transfer Agent, the Fund will make payment in cash for the net asset value of
the shares as of the date determined above, reduced by the amount of any
applicable contingent deferred sales charge (described below) and any federal
income tax required to be withheld. Although the Fund normally expects to make
payment in cash for redeemed shares, the Trust, subject to compliance with
applicable regulations, has reserved the right to pay the redemption price of
shares of the Fund, either totally or partially, by a distribution in kind of
readily marketable securities withdrawn by the Fund from the Portfolio. The
securities so distributed would be valued pursuant to the Portfolio's valuation
procedures. If a shareholder received a distribution in kind, the shareholder
could incur brokerage or other charges in converting the securities to cash.
If shares were recently purchased, the proceeds of redemption will not be sent
until the check (including a certified or cashier's check) received for the
shares purchased has cleared. Payment for shares tendered for redemption may be
delayed up to 15 days from the purchase date when the purchase check has not yet
cleared. Redemptions may result in a taxable gain or loss.
Due to the high cost of maintaining small accounts, the Fund reserves the right
to redeem accounts with balances of less than $750. Prior to such a redemption,
shareholders will be given 60 days' written notice to make an additional
purchase. However, no such redemptions would be required by the Fund if the
cause of the low account balance was a reduction in the net asset value of Fund
shares. No contingent deferred sales charge will be imposed with respect to such
involuntary redemptions.
CONTINGENT DEFERRED SALES CHARGE. Shares redeemed within the first year of their
purchase (except shares acquired through the reinvestment of distributions)
generally will be subject to a contingent deferred sales charge ("CDSC") equal
to 1% of the net asset value of the redeemed shares. This CDSC is imposed on any
redemption the amount of which exceeds the aggregate value at the time of
redemption of (a) all shares in the account purchased more than one year prior
to the redemption, (b) all shares in the account acquired through reinvestment
of distributions, and (c) the increase, if any, in the value of all other shares
in the account (namely those purchased within the year preceding the redemption)
over the purchase price of such shares. Redemptions are processed in a manner to
maximize the amount of redemption proceeds which will not be subject to a CDSC.
That is, each redemption will be assumed to have been made first from the exempt
amounts referred to in clauses (a), (b) and (c) above, and second through
liquidation of those shares in the account referred to in clause (c) on a
first-in-first out basis. As described under "Distribution Plan", the CDSC will
be paid to the Principal Underwriter or the Fund.
In calculating the CDSC upon the redemption of Fund shares acquired in an
exchange for shares of a fund currently listed under "The Eaton Vance Exchange
Privilege," the purchase of shares acquired in the exchange is deemed to have
occurred at the time of the original purchase of the exchanged shares.
No CDSC will be imposed on Fund shares which have been sold to Eaton Vance or
its affiliates, or to their respective employees or clients. The CDSC will also
be waived for shares redeemed (1) pursuant to a Withdrawal Plan (see "Eaton
Vance Shareholder Services"), (2) as part of a distribution from a retirement
plan qualified under Section 401, 403(b) or 457 of the Code, or (3) as part of a
minimum required distribution from other tax-sheltered retirement plans.
REPORTS TO SHAREHOLDERS
- ------------------------------------------------------------------------------
THE FUND WILL ISSUE TO ITS SHAREHOLDERS SEMI-ANNUAL AND ANNUAL REPORTS
CONTAINING FINANCIAL STATEMENTS. Financial statements included in annual reports
are audited by the Fund's independent accountants. Shortly after the end of each
calendar year, the Fund will furnish all shareholders with information necessary
for preparing federal and state income tax returns.
THE LIFETIME INVESTING ACCOUNT/DISTRIBUTION OPTIONS
- ------------------------------------------------------------------------------
AFTER AN INVESTOR MAKES AN INITIAL PURCHASE OF FUND SHARES, THE TRANSFER AGENT,
WILL SET UP A LIFETIME INVESTING ACCOUNT FOR THE INVESTOR ON THE FUND'S RECORDS.
This account is a complete record of all transactions between the investor and
the Fund which at all times shows the balance of shares owned. The Fund will not
issue share certificates except upon request.
At least quarterly, shareholders will receive a statement showing complete
details of any transaction and the current share balance in the account. THE
LIFETIME INVESTING ACCOUNT ALSO PERMITS A SHAREHOLDER TO MAKE ADDITIONAL
INVESTMENTS IN SHARES BY SENDING A CHECK FOR $50 OR MORE to the Transfer Agent.
Any questions concerning a shareholder's account or services available may also
be directed by telephone to EATON VANCE SHAREHOLDER SERVICES at 800-225-6265,
extension 2, or in writing to the Transfer Agent, First Data Investor Services
Group, P.O. Box 5123, Westborough, MA 01581-5123 (Please provide the name of the
shareholder, the Fund and the account number).
THE FOLLOWING DISTRIBUTION OPTIONS WILL BE AVAILABLE TO ALL LIFETIME INVESTING
ACCOUNTS and may be changed as often as desired by written notice to the Fund's
dividend disbursing agent, First Data Investor Services Group, P.O. Box 5123,
Westborough, MA 01581-5123. The currently effective option will appear on each
account statement.
Share Option -- Dividends and capital gains will be reinvested in additional
shares.
Income Option -- Dividends will be paid in cash, and capital gains will be
reinvested in additional shares.
Cash Option -- Dividends and capital gains will be paid in cash.
The Share Option will be assigned if no other option is specified.
Distributions, including those reinvested, will be reduced by any withholding
required under the federal income tax laws.
If the Income Option or Cash Option has been selected, dividend and/or capital
gains distribution checks which are returned by the United States Postal Service
as not deliverable or which remain uncashed for six months or more will be
reinvested in the account in shares at the then current net asset value.
Furthermore, the distribution option on the account will be automatically
changed to the Share Option until such time as the shareholder selects a
different option.
DISTRIBUTION INVESTMENT OPTION. In addition to the distribution options set
forth above, dividends and/or capital gains may be invested in additional shares
of another Eaton Vance fund. Before selecting this option, a shareholder should
obtain a prospectus of the other Eaton Vance fund and consider its objectives
and policies carefully.
"STREET NAME" ACCOUNTS. If shares of the Fund are held in a "street name"
account with an Authorized Firm, all recordkeeping, transaction processing and
payments of distributions relating to the beneficial owner's account will be
performed by the Authorized Firm, and not by the Fund and its Transfer Agent.
Since the Fund will have no record of the beneficial owner's transactions, a
beneficial owner should contact the Authorized Firm to purchase, redeem or
exchange shares, to make changes in or give instructions concerning the account,
or to obtain information about the account. The transfer of shares in a "street
name" account to an account with another dealer or to an account directly with
the Fund involves special procedures and will require the beneficial owner to
obtain historical purchase information about the shares in the account from the
Authorized Firm. Before establishing a "street name" account with an investment
firm, or transferring the account to another investment firm, an investor
wishing to reinvest distributions should determine whether the firm which will
hold the shares allows reinvestment of distributions in "street name" accounts.
THE EATON VANCE EXCHANGE PRIVILEGE
- ------------------------------------------------------------------------------
Shares of the Fund currently may be exchanged for shares of one or more other
funds in the Eaton Vance Classic Group of Funds or Eaton Vance Money Market
Fund, which are distributed subject to a CDSC (or equivalent early withdrawal
charge). Shares of the Fund may also be exchanged for shares of Eaton Vance
Prime Rate Reserves, which are subject to an early withdrawal charge. Any such
exchange will be made on the basis of the net asset value per share of each fund
at the time of exchange. Exchange offers are available only in states where
shares of the fund being acquired may legally be sold.
Each exchange must involve shares which have a net asset value of at least
$1,000. The exchange privilege may be changed or discontinued without penalty.
Shareholders will be given sixty (60) days' notice prior to any termination or
material amendment of the exchange privilege. The Fund does not permit the
exchange privilege to be used for "Market Timing" and may terminate the exchange
privilege for any shareholder account engaged in Market Timing activity. Any
shareholder account for which more than two round-trip exchanges are made within
any twelve month period will be deemed to be engaged in Market Timing.
Furthermore, a group of unrelated accounts for which exchanges are entered
contemporaneously by a financial intermediary will be considered to be engaged
in Market Timing.
The Transfer Agent makes exchanges at the next determined net asset value after
receiving an exchange request in good order (see "How to Redeem Fund Shares").
Consult the Transfer Agent for additional information concerning the exchange
privilege. Applications and prospectuses of the other funds are available from
Authorized Firms or the Principal Underwriter. The prospectus for each fund
describes its investment objectives and policies, and shareholders should obtain
a prospectus and consider these objectives and policies carefully before
requesting an exchange.
No CDSC is imposed on exchanges. For purposes of calculating the CDSC upon the
redemption of shares acquired in an exchange, the purchase of shares acquired in
one or more exchanges is deemed to have occurred at the time of the original
purchase of the exchanged shares.
Shares of the funds listed above may be exchanged for Fund shares on the basis
of the net asset value per share of each fund at the time of the exchange, but
subject to any restrictions or qualifications set forth in the current
prospectus of any such fund.
Telephone exchanges are accepted by the Transfer Agent provided the investor has
not disclaimed in writing the use of the privilege. To effect such exchanges,
call the Transfer Agent at 800-262-1122, Monday through Friday, 9:00 A.M. to
4:00 P.M. (Eastern Standard Time). Shares acquired by telephone exchange must be
registered in the same name(s) and with the same address as the shares being
exchanged. Neither the Fund, the Principal Underwriter nor the Transfer Agent
will be responsible for the authenticity of exchange instructions received by
telephone, provided that reasonable procedures to confirm that instructions
communicated are genuine have been followed. Telephone instructions will be tape
recorded. In times of drastic economic or market changes, a telephone exchange
may be difficult to implement. An exchange may result in a taxable gain or loss.
EATON VANCE SHAREHOLDER SERVICES
- ------------------------------------------------------------------------------
THE FUND OFFERS THE FOLLOWING SERVICES, WHICH ARE VOLUNTARY, INVOLVE NO EXTRA
CHARGE, AND MAY BE CHANGED OR DISCONTINUED WITHOUT PENALTY AT ANY TIME. Full
information on each of the services described below and an application, where
required, are available from Authorized Firms or the Principal Underwriter. The
cost of administering such services for the benefit of shareholders who
participate in them is borne by the Fund as an expense to all shareholders.
INVEST-BY-MAIL -- FOR PERIODIC SHARE ACCUMULATION: Once the $1,000 minimum
investment has been made, checks of $50 or more payable to the order of EV
Classic Strategic Income Fund may be mailed directly to the Transfer Agent,
First Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123 at
any time -- whether or not dividends are reinvested. The name of the
shareholder, the Fund and the account number should accompany each investment.
BANK AUTOMATED INVESTING -- FOR REGULAR SHARE ACCUMULATION: Cash investments of
$50 or more may be made automatically each month or quarter from a shareholder's
bank account. The $1,000 minimum initial investment and small account redemption
policy are waived for these accounts.
WITHDRAWAL PLAN: A shareholder may draw on shareholdings systematically with
monthly or quarterly checks in an aggregate amount that does not exceed
annually 12% of the account balance at the time the plan is established. Such
amount will not be subject to a CDSC. See "How to Redeem Fund Shares". A
minimum deposit of $5,000 in shares is required.
REINVESTMENT PRIVILEGE: A shareholder who has redeemed shares may reinvest, with
credit for any CDSCs paid on the redeemed shares, any portion or all of the
redemption proceeds (plus that amount necessary to acquire a fractional share to
round off the purchase to the nearest full share) in shares of the Fund,
provided that the reinvestment is effected within 60 days after such redemption,
and the privilege has not been used more than once in the prior 12 months.
Shares are sold to a reinvesting shareholder at the next determined net asset
value following timely receipt of a written purchase order by the Principal
Underwriter or by the Fund (or by the Fund's Transfer Agent). To the extent that
any shares are sold at a loss and the proceeds are reinvested in shares of the
Fund (or other shares of the Fund are acquired) within the period beginning 30
days before and ending 30 days after the date of the redemption some or all of
the loss generally will not be allowed as a tax deduction. Shareholders should
consult their tax advisers concerning the tax consequences of reinvestments.
TAX-SHELTERED RETIREMENT PLANS: Shares of the Fund are available for purchase
in connection with certain tax-sheltered retirement plans.
Detailed information concerning these plans, including certain exceptions to
minimum investment requirements, and copies of the plans are available from the
Principal Underwriter. This information should be read carefully and
consultation with an attorney or tax adviser may be advisable. The information
sets forth the service fee charged for retirement plans and describes the
federal income tax consequences of establishing a plan. Participant accounting
services (including trust fund reconciliation services) will be offered only
through third party recordkeepers and not by the Principal Underwriter. Under
these plans, all distributions will be automatically reinvested in additional
shares.
DISTRIBUTIONS AND TAXES
- ------------------------------------------------------------------------------
SUBSTANTIALLY ALL OF THE INVESTMENT INCOME ALLOCATED TO THE FUND BY A PORTFOLIO,
LESS THE FUND'S DIRECT AND ALLOCATED EXPENSES, WILL BE DECLARED DAILY AS A
DISTRIBUTION TO FUND SHAREHOLDERS OF RECORD AT THE TIME OF DECLARATION. Such
distributions, whether taken in cash or reinvested in additional shares, will
ordinarily be paid on the twenty-second day of each month or the next business
day thereafter. Daily distribution crediting will commence on the day that
collected funds for the purchase of Fund shares are available at the Transfer
Agent. The Fund's net realized capital gains, if any, consist of the net
realized capital gains allocated to the Fund by a Portfolio for tax purposes,
after taking into account any available capital loss carryovers; the Fund's net
realized capital gains, if any, will be distributed at least once a year,
usually in December. Shareholders will receive timely federal income tax
information relating to all distributions made by the Fund during the calendar
year.
Distributions of the Fund from net investment income, net short-term capital
gains and certain net foreign exchange gains are taxable to shareholders as
ordinary income, whether paid in cash or reinvested in additional shares of the
Fund. The Fund's distributions will generally not qualify to any significant
extent for any dividends-received deduction available to corporate shareholders.
Certain distributions, if declared in October, November or December and paid the
following January, will be taxable to shareholders as if received on December 31
of the year in which they are declared.
Capital gains, if any, realized on sales of investments and on options and
futures transactions during the fiscal year, which ends on October 31, will be
offset by any capital losses, including any capital loss carryovers, and will be
distributed annually, usually in December, in compliance with the distribution
requirements of the Code. Distributions that the Fund designates as from its
long-term capital gains are taxable to shareholders as long-term capital gains,
whether paid in cash or additional shares of the Fund and regardless of the
length of time Fund shares have been owned by the shareholder. If shares are
purchased shortly before the record date of such a distribution, the shareholder
will pay the full price for the shares and then receive some portion of the
price back as a taxable distribution.
Income (possibly including in some cases, capital gains) realized by a Portfolio
from certain investments may be subject to foreign income or other foreign taxes
and the Fund may make an election under Section 853 of the Code that would allow
Fund shareholders to claim a credit or deduction on their federal income tax
returns for (and treat as additional amounts distributed to them) their pro rata
portion of the Fund's allocated share of qualified taxes paid by the Portfolio
to foreign countries. This election may be made annually only if more than 50%
of the assets of the Fund, including its allocable share of the Portfolio
assets, at the close of the Fund's taxable year consists of stock or securities
in foreign corporations. The Fund will send a written notice of any such
election (not later than 60 days after the close of its taxable year) to each
shareholder indicating the amount to be treated as the shareholder's
proportionate share of such taxes. Availability of foreign tax credits or
deductions for shareholders is subject to certain additional restrictions and
limitations under the Code.
The Fund intends to qualify as a regulated investment company under the Code and
to satisfy all requirements necessary to be relieved of federal taxes on income
and gains it distributes to shareholders. In satisfying these requirements, the
Fund will treat itself as owning its proportionate share of Portfolio assets and
as entitled to the income of each Portfolio properly attributable to such share.
As a regulated investment company under the Code, the Fund does not pay federal
income or excise tax to the extent that it distributes to shareholders its net
investment income and net realized capital gains in accordance with the timing
requirements imposed by the Code. As partnerships under the Code, the Portfolios
also do not pay federal income or excise tax.
Shareholders should consult their own tax advisers with respect to the local,
state, federal and foreign tax consequence of investing in the Fund.
PERFORMANCE INFORMATION
- ------------------------------------------------------------------------------
FROM TIME TO TIME, THE FUND MAY ADVERTISE ITS YIELD AND/OR AVERAGE ANNUAL TOTAL
RETURN. The Fund's current yield is calculated by dividing the net investment
income per share earned during a recent 30-day period by the maximum offering
price per share (net asset value) of the Fund on the last day of the period and
annualizing the resulting figure. The Fund's average annual total return is
determined by computing the average annual percentage change in value of $1,000
invested at the maximum public offering price (net asset value) for specified
periods, assuming reinvestment of all distributions. The average annual total
return calculation assumes a complete redemption of the investment and the
deduction of any applicable CDSC at the end of the period. The Fund may publish
annual and cumulative total return figures from time to time. The Fund may also
quote total return for the period prior to commencement of operations which
would reflect the Portfolio's total return (or that of its predecessor) adjusted
to reflect any applicable Fund sales charge.
The Fund may also publish total return figures which do not take into account
any CDSC which may be imposed upon redemptions at the end of the specified
period. Any performance figure which does not take into account the CDSC would
be reduced to the extent such charge is imposed upon a redemption.
Investors should note that the investment results of the Fund will fluctuate
over time, and any presentation of the Fund's current yield or total return for
any prior period should not be considered as a representation of what an
investment may earn or what the Fund's yield or total return may be in any
future period. If the expenses of the Fund or a Portfolio are allocated to Eaton
Vance, the Fund's performance will be higher.
The following chart reflects the annual investment returns of the Fund for one
year periods ending October 31 and does not take into account the CDSC which
investors may bear. The total return for the period prior to the Fund's
commencement of operations on May 24, 1994 reflects the total return of the
Portfolio (or that of its predecessor) which had different operating expenses.
<PAGE>
5 Year Average Annual Total Return -- 6.64%
1991(1) ............................................................... 7.97%
1992 .................................................................. (1.45)%
1993 .................................................................. 10.51%
1994 .................................................................. (5.33)%
1995 .................................................................. 16.20%
1996* ................................................................. 15.09%
* If a portion of the Fund's expenses had not been allocated to the
Administrator, the Fund would have had lower returns.
(1)For the period from the start of business, November 26, 1990 to
October 31, 1991.
<PAGE>
APPENDIX
STRATEGIC INCOME PORTFOLIO
ASSET COMPOSITION INFORMATION
FOR FISCAL YEAR ENDED OCTOBER 31, 1996
PERCENT OF
NET ASSETS
----------
Debt Securities -- Moody's Rating
Aaa ............................................. 36.7%
Aa1 ............................................. 11.3
Aa2 ............................................. 11.2
A1 .............................................. 7.9
A3 .............................................. 2.7
B1 .............................................. 12.0
B2 .............................................. 0.8
B3 .............................................. 1.6
Baa3 ............................................ 14.3
Unrated ......................................... 1.5
-----
Total ........................................... 100.0%
The chart above indicates the weighted average composition for the fiscal year
ended October 31, 1996 with the debt securities rated by Moody's separated into
the indicated categories. The weighted averages indicated above were calculated
on a dollar weighted basis and were computed as at the end of each month during
the period. The chart does not necessarily indicate what the composition of the
Portfolio will be in the current and subsequent fiscal years.
For the description of Moody's ratings of debt securities, see Appendix to the
Statement of Additional Information.
<PAGE>
[logo] EV CLASSIC STRATEGIC INCOME FUND
- --------------------------------------------------------------------------------
PROSPECTUS
MARCH 1, 1997
EV CLASSIC
STRATEGIC INCOME FUND
24 FEDERAL STREET
BOSTON, MA 02110
- --------------------------------------------------------------------------------
INVESTMENT ADVISER AND ADMINISTRATOR OF STRATEGIC INCOME PORTFOLIO
INVESTMENT ADVISER OF HIGH INCOME PORTFOLIO
Boston Management and Research, 24 Federal Street, Boston, MA 02110
ADMINISTRATOR OF EV CLASSIC STRATEGIC INCOME FUND
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 89 South Street, Boston, MA 02111
TRANSFER AGENT
First Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123
(800) 262-1122
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P., One Post Office Square, Boston, MA 02109
C-SIP
<PAGE>
PART A
INFORMATION REQUIRED IN A PROSPECTUS
EV MARATHON
STRATEGIC INCOME FUND
- ------------------------------------------------------------------------------
EV MARATHON STRATEGIC INCOME FUND (THE "FUND") IS A MUTUAL FUND SEEKING A HIGH
LEVEL OF INCOME BY INVESTING IN A GLOBAL PORTFOLIO CONSISTING PRIMARILY OF
HIGH GRADE DEBT SECURITIES. THE FUND INVESTS ITS ASSETS IN STRATEGIC INCOME
PORTFOLIO (THE "PORTFOLIO"), A NON-DIVERSIFIED OPEN-END INVESTMENT COMPANY
HAVING THE SAME INVESTMENT OBJECTIVE AS THE FUND, RATHER THAN BY DIRECTLY
INVESTING IN AND MANAGING ITS OWN PORTFOLIO OF SECURITIES. THE PORTFOLIO'S
INVESTMENT ADVISER WILL INVEST IN A VARIETY OF INCOME PRODUCING SECURITIES,
INCLUDING THOSE OF BELOW INVESTMENT GRADE QUALITY. THE VALUE OF FUND SHARES
WILL FLUCTUATE BECAUSE OF CHANGES IN CURRENCY EXCHANGE RATES, CREDIT QUALITY
AND INTEREST RATES, AND OTHER FACTORS. THE FUND IS A SERIES OF EATON VANCE
MUTUAL FUNDS TRUST (THE "TRUST").
Shares of the Fund are not deposits or obligations of, or guaranteed or
endorsed by, any bank or other insured depository institution, and are not
federally insured by the Federal Deposit Insurance Corporation, the Federal
Reserve Board or any other government agency. Shares of the Fund involve
investment risks, including fluctuations in value and the possible loss of
some or all of the principal investment.
This Prospectus is designed to provide you with information you should know
before investing. Please retain this document for future reference. A
Statement of Additional Information dated March 1, 1997 for the Fund, as
supplemented from time to time, has been filed with the Securities and
Exchange Commission and is incorporated herein by reference. This Statement of
Additional Information is available without charge from the Fund's principal
underwriter, Eaton Vance Distributors, Inc. (the "Principal Underwriter"), 24
Federal Street, Boston, MA 02110 (telephone (800) 225-6265). The Portfolio's
investment adviser is Boston Management and Research (the "Investment
Adviser"), a wholly-owned subsidiary of Eaton Vance Management, and Eaton
Vance Management is the administrator (the "Administrator") of the Fund and
the Portfolio. The offices of the Investment Adviser and the Administrator are
located at 24 Federal Street, Boston, MA 02110.
- ------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE PAGE
<S> <C> <C> <C>
Shareholder and Fund Expenses .......................... 2 How to Redeem Fund Shares .......................... 13
The Fund's Financial Highlights ....................... 3 Reports to Shareholders ............................ 15
The Fund's Investment Objective ........................ 4 The Lifetime Investing Account/Distribution
Investment Policies and Risks .......................... 4 Options .......................................... 15
Organization of the Fund and the Portfolio ............. 7 The Eaton Vance Exchange Privilege ................. 16
Management of the Fund and the Portfolio ............... 9 Eaton Vance Shareholder Services ................... 16
Distribution Plan ...................................... 10 Distributions and Taxes ............................ 17
Valuing Fund Shares .................................... 11 Performance Information ............................ 18
How to Buy Fund Shares ................................. 12 Appendix ........................................... 20
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
PROSPECTUS DATED MARCH 1, 1997
<PAGE>
SHAREHOLDER AND FUND EXPENSES
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
-------------------------------------------------------------------------------------------------------
<S> <C>
Sales Charges Imposed on Purchases of Shares None
Sales Charges Imposed on Reinvested Distributions None
Fees to Exchange Shares None
Range of Declining Contingent Deferred Sales Charges Imposed on Redemptions
During the First Five Years (as a percentage of redemption proceeds exclusive
of all reinvestments and capital appreciation in the account) 3.00%-0%
ANNUAL FUND AND ALLOCATED PORTFOLIO OPERATING EXPENSES (as a
percentage of average daily net assets)
-------------------------------------------------------------------------------------------------------
Investment Adviser Fee 0.54%
Rule 12b-1 Distribution (and Service) Fees 0.92%
Other Expenses (including the Portfolio's administration fee of 0.15%) 0.71%
---
Total Operating Expenses 2.17%
---
---
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
An investor would pay the following contingent deferred
sales charge and expenses on a $1,000 investment, assuming
(a) 5% annual return and (b) redemption at the end of each
period: $52 $88 $116 $250
An investor would pay the following expenses on the same
investment, assuming (a) 5% annual return and (b) no
redemptions: $22 $68 $116 $250
</TABLE>
NOTES:
The table and Example summarize the aggregate expenses of the Fund and the
Portfolio and are designed to help investors understand the costs and expenses
they will bear, directly or indirectly, by investing in the Fund. Information
for the Fund is based on its expenses for the most recent fiscal year.
The Example should not be considered a representation of past or future
expenses and actual expenses may be greater or less than those shown. Federal
regulations require the Example to assume a 5% annual return, but actual
annual return will vary. For further information regarding the expenses of
both the Fund and the Portfolio, see "The Fund's Financial Highlights,"
"Management of the Fund and the Portfolio" and "How to Redeem Fund Shares". A
long-term shareholder in the Fund may pay more than the economic equivalent of
the maximum front-end sales charge permitted by a rule of the National
Association of Securities Dealers, Inc. See "Distribution Plan".
No contingent deferred sales charge is imposed on (a) shares purchased more
than four years prior to redemption, (b) shares acquired through the
reinvestment of distributions or (c) any appreciation in value of other shares
in the account (see "How to Redeem Fund Shares"), and no such charge is
imposed on exchanges of Fund shares for shares of one or more other funds
listed under "The Eaton Vance Exchange Privilege".
The Portfolio's monthly advisory fee has two components, a fee based on daily
net assets and a fee based on daily gross income, as set forth in the fee
schedule on page 9.
The Fund invests in the Portfolio and, at times, in another registered
investment company. Other investment companies with different distribution
arrangements and fees are investing in the Portfolio and others may do so in
the future. See "Organization of the Fund and the Portfolio".
<PAGE>
THE FUND'S FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------
The following information should be read in conjunction with the audited
financial statements included in the Fund's annual report to shareholders
which is incorporated by reference into the Statement of Additional
Information in reliance upon the report of Coopers & Lybrand L.L.P.,
independent accountants, as experts in accounting and auditing. Further
information regarding the performance of the Fund is contained in its annual
report to shareholders which may be obtained without charge by contacting the
Principal Underwriter.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
------------------------------------------------------------------------------------
1996 1995 1994++++ 1993 1992 1991++
------------- ------------- ------------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of year $ 8.500 $ 8.290 $ 9.410 $ 9.120 $ 9.920 $ 10.000
------------ ------------ ------------ ----------- ----------- -----------
INCOME FROM OPERATIONS:
Net investment income $ 0.655 $ 0.726 $ 0.645 $ 0.239 $ 0.816 $ 0.786
Net realized and unrealized gain
(loss) on investments 0.858 0.167 (1.135) 0.683 (0.943) (0.022)+++
------------ ------------ ------------ ----------- ----------- -----------
Total income (loss) from
operations $ 1.513 $ 0.893 $ (0.490) $ 0.922 $ (0.127) $ 0.764
------------ ------------ ------------ ----------- ----------- -----------
LESS DISTRIBUTIONS:
From net investment income $(0.655) $(0.361) $ (0.343) $ (0.632) $ (0.673) $ (0.786)
In excess of net investment income(2) (0.048) -- -- -- -- --
From tax return of capital -- (0.322) (0.290) -- -- --
From paid-in capital -- -- -- -- -- (0.058)
------------ ------------ ------------ ----------- ----------- -----------
Total distributions $ (0.703) $ (0.683) $ (0.633) $ (0.632) $ (0.673) $ (0.844)
------------ ------------ ------------ ----------- ----------- -----------
NET ASSET VALUE -- end of year $ 9.310 $ 8.500 $ 8.290 $ 9.410 $ 9.120 $ 9.920
============ ============ ============ =========== =========== ===========
TOTAL RETURN(1) 18.48% 11.34% (5.33%) 10.51% (1.45%) 7.97%
RATIOS/SUPPLEMENTAL DATA (to average
daily net assets):
Expenses* 2.17% 2.18% 2.00% 1.99% 1.95% 2.11%+
Net investment income 7.38% 7.85% 7.24% 7.53% 8.20% 8.24%+
PORTFOLIO TURNOVER** -- -- 55% 55% 56% 20%
NET ASSETS AT END OF PERIOD (000's
omitted) $129,671 $150,767 $233,139 $381,227 $533,253 $589,182
* Includes the Fund's share of Strategic Income Portfolio's allocated expenses for the years ended October 31, 1996 and
1995, and for the period from March 31, 1994 to October 31, 1994.
** Portfolio Turnover represents the rate of portfolio activity for the period while the Fund was making investments
directly in securities. The portfolio turnover rate for the period since the Fund transferred substantially all of its
investable assets to the Portfolio is shown in the Portfolio's financial statements, which are included in the Fund's
annual report to shareholders.
+ Computed on an annualized basis.
++ For the period from the start of business, November 26, 1990, to October 31, 1991.
+++ The per share amount is not in accord with the net realized and unrealized gain for the period due to the timing of the
sales of Fund shares and the amount of per-share realized and unrealized gains and losses at such time.
++++ Per share amounts have been calculated using the monthly average share method which more approximately presents the per
share data for the period, since the use of the undistributed method does not accord with the results of operations.
(1) Total investment return is calculated assuming a purchase at the net asset value on the first day and a sale at the net
asset value on the last day of each period reported. Distributions, if any, are assumed to be reinvested at the net
asset value on the payable date. Total return is calculated on a non-annualized basis.
(2) The Funds have followed the Statement of Position (SOP) 93-2: Determination, Disclosure and Financial Statement
Presentation of Income, Capital Gain, and Return of Capital Distribution by Investment Companies. The SOP requires that
differences in the recognition or classification of income between the financial statements and tax earnings and profits
that result in temporary over-distributions for financial statement purposes, are classified as distributions in excess
of net investment income or accumulated net realized gains.
</TABLE>
<PAGE>
THE FUND'S INVESTMENT OBJECTIVE
- -------------------------------------------------------------------------------
THE FUND'S INVESTMENT OBJECTIVE IS A HIGH LEVEL OF INCOME BY INVESTING IN A
GLOBAL PORTFOLIO CONSISTING PRIMARILY OF HIGH GRADE DEBT SECURITIES. The
Investment Adviser will allocate investments among different countries,
currencies and credits, including those of below investment grade quality, based
on the perception of the most favorable markets and issuers, the relative yield
and appreciation potential of a particular country's securities and the
relationship of a country's currency to the U.S. dollar. Changes in exchange
rates for the foreign currencies in which the investments and forward contracts
are denominated may adversely affect the value of Fund shares. The Fund's
investment objective may be changed by the Trustees of the Trust without
shareholder approval.
INVESTMENT POLICIES AND RISKS
- ------------------------------------------------------------------------------
THE FUND CURRENTLY SEEKS ITS OBJECTIVE BY INVESTING IN STRATEGIC INCOME
PORTFOLIO ( THE "PORTFOLIO"), WHICH IS ITSELF AN OPEN-END INVESTMENT COMPANY
HAVING THE SAME INVESTMENT OBJECTIVE AS THE FUND. The Portfolio, in turn,
invests primarily in a portfolio of high grade debt securities of issuers
located anywhere in the world.
The Investment Adviser adjusts the Portfolio's investments and engages in active
management techniques to take advantage of differences in interest rates and
currency exchange rates in markets around the world, and other differences among
countries and markets. By allocating the Portfolio's assets actively among
issuers in different countries, and among securities denominated in different
currencies, the Investment Adviser attempts to achieve a higher level of current
income than might be available from a portfolio invested only in the securities
of one country or denominated in one currency. This strategy requires the
Investment Adviser to identify countries and currencies where the Portfolio's
investments will outperform comparable investments in other countries and
currencies and in many cases to predict changes in economies, markets, political
conditions, and other factors. The success of this strategy will, of course,
involve the risk that the Investment Adviser's predictions may be untimely or
incorrect. The Investment Adviser also seeks to identify markets and securities
which appear to be undervalued and make investments to profit from increases in
value.
The Portfolio will invest primarily in high grade debt securities. "high grade"
debt securities include securities issued or guaranteed as to principal or
interest by the U.S. Government or any of its agencies or instrumentalities and
debt securities, rated at least A by Standard & Poor's Ratings Group, Moody's
Investors Service, Inc. or Duff & Phelps Inc., of foreign governmental and
private issuers. They may also include commercial paper or other short- term
debt instruments rated in one of the two highest short-term ratings by any of
those rating services (or by Fitch Investors Service, Inc.), and certificates of
deposit and bankers' acceptances issued or guaranteed by, or time deposits
maintained at, banks having total assets of more than $500 million and
determined by the Investment Adviser to be of comparable credit quality to
short-term securities with those ratings. An unrated security will be considered
to be a high grade security if the Investment Adviser determines that it is of
comparable quality to any of the securities described above. In making such
determinations, the Adviser will consider any rating of the issuer of unrated
securities.
The Portfolio may invest the remainder of its assets in lower-rated debt
securities, although less than 35% of the Portfolio's assets will be invested
in securities rated below BBB-/Baa3 (commonly referred to as "junk bonds").
Lower-rated securities generally offer higher current yields and appreciation
potential than do higher-rated securities, but are subject to greater risks.
Securities in the lower categories are considered to be of poor standing and
predominantly speculative; securities in the lowest rating categories may be
in default and are generally regarded by the rating agencies as having
extremely poor prospects of ever attaining any real investment standing. The
values of lower-rated fixed income securities generally fluctuate more than
those of higher-rated fixed-income securities.
In lieu of having the Portfolio invest in lower-rated debt securities, the Fund
may invest up to 35% of its assets in High Income Portfolio ("HI Portfolio"), a
separate registered investment company advised by the Investment Adviser. The
investment objective of HI Portfolio is to provide a high level of current
income and it may invest in the same types of debt securities (with the same
risks) as the Portfolio. HI Portfolio normally invests at least 65% of its
assets in debt securities of the lowest investment grade, lower-rated
obligations and unrated obligations; at least 80% of its net assets in
fixed-income securities, including convertible securities; and up to 20% of its
net assets in common stocks and other equity securities when consistent with its
objective or acquired as part of a unit combining fixed- income and equity
securities. The Fund will not invest in the HI Portfolio when such Portfolio is
not so invested. Foreign investments of HI Portfolio may not exceed 25% of total
assets. HI Portfolio may purchase and sell derivative instruments similar to
those described in this Prospectus, except for swaps. At January 31, 1997, HI
Portfolio had % of its assets invested in high yield, high risk bonds, and % of
its net assets were in default. For more detailed information about the risks
associated with investing in lower- rated securities, see "Additional Risk and
Investment Information" below.
The income producing securities in which the Portfolio invest may have fixed,
variable or floating interest rates, constitute a broad mix of asset classes,
and may include convertible bonds, securities of real estate investment trusts
and natural resource companies, stripped debt obligations, closed-end investment
companies (that invest primarily in debt securities the Portfolio could invest
in), preferred, preference and convertible stocks, equipment lease certificates,
equipment trust certificates, conditional sales contracts and debt obligations
collateralized by, or representing interests in pools of, mortgages and other
types of loans ("asset-backed obligations"). The Portfolio may invest a portion
of its assets in fixed and floating rate loans and loan interests. The Portfolio
will normally invest in securities of issuers located in at least three
different countries (which may include the United States), and will not normally
invest more than 25% of its assets in securities of issuers located in a single
foreign country or denominated in any single foreign currency, except the U.S.
dollar. Nevertheless, through "Active Management Strategies" discussed below,
the entire Fund may be exposed to foreign currency risks. For temporary
defensive purposes, the Portfolio may hold all or any portion of its assets in
securities of issuers located in the United States and in cash or money market
instruments. It is impossible to predict when, or for how long, the Portfolio
will engage in such strategies.
THE MARKET VALUE OF THE PORTFOLIO'S (AND HI PORTFOLIOS) INVESTMENTS WILL
CHANGE IN RESPONSE TO CHANGES IN CURRENCY EXCHANGE AND INTEREST RATES, CREDIT
QUALITY CHANGES OF ISSUERS AND OTHER FACTORS. Changes in the values of
portfolio securities will not affect interest income derived from those
securities, but will affect the Fund's net asset value. See "Additional Risk
and Investment Information" below.
ACTIVE MANAGEMENT TECHNIQUES
CURRENCY AND OTHER DERIVATIVE INSTRUMENTS. The Portfolio may purchase or sell
derivative instruments (which are instruments that derive their value from
another instrument, security, index or currency) to 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 be in the U.S. or
abroad and may include the purchase or sale of futures contracts on securities,
securities indices, other indices, other financial instruments or currencies;
options on futures contracts; exchange-traded and over-the- counter options on
securities, indices or currencies; forward foreign currency exchange contracts;
and interest rate and currency swaps. 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;
default by the counterparty; imperfect correlation between a position and the
desired hedge; tax constraints on closing out positions; and portfolio
management constraints on securities subject to such transactions. The loss on
derivative instruments (other than purchased options) may substantially exceed
the Portfolio's initial investment in these instruments. In addition, the
Portfolio may lose the entire premium paid for purchased options that expire
before they can be profitably exercised by the Portfolio. The Portfolio incurs
transaction costs in opening and closing positions in derivative instruments.
There can be no assurance that the Investment Adviser's use of derivative
instruments will be advantageous to the Portfolio.
To the extent that the Portfolio enters into futures contracts, options on
futures contracts and options on foreign currencies traded on an exchange
regulated by the Commodity Futures Trading Commission ("CFTC"), in each case
that are not for bona fide hedging purposes (as defined by the CFTC), the
aggregate initial margin and premiums required to establish these positions
(excluding the amount by which options are "in-the-money") may not exceed 5% of
the liquidation value of the Portfolio's investments, 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 or 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. In addition, the
Portfolio may purchase forward contracts for non-hedging purposes when the
Investment Adviser anticipates that the foreign currency will appreciate in
value.
SECURITIES LOANS, REPURCHASE AGREEMENTS, FORWARD COMMITMENTS AND REVERSE
REPURCHASE AGREEMENTS. The Portfolio may lend its portfolio securities to
broker-dealers and may enter into repurchase agreements. These transactions must
be fully collateralized at all times, but involve some risk to the Portfolio if
the other party should default on its obligations and the lender is delayed or
prevented from recovering the collateral. The Portfolio may also purchase or
sell securities for future delivery by means of "forward commitments."
The Portfolio may also enter into "reverse" repurchase agreements which
generally involve the sale of securities held and an agreement to repurchase the
securities at an agreed-upon price, date, and interest payment. The Portfolio
can invest the cash it receives or use it to meet redemption requests. Reverse
repurchase agreements and forward commitments to purchase securities may
increase the overall investment exposure of the Portfolio and involve investment
leverage. Use of investment leverage may increase the amount of any losses
incurred by the Portfolio in the case of adverse changes in market conditions or
the failure of the issuer of a security or financial instrument to meet its
obligations. The Portfolio may also enter into reverse repurchase agreements as
a hedge against a possible decline in the value of the foreign currency in which
a debt security is denominated by converting the foreign currency cash proceeds
from the sale of the debt security into U.S. dollars.
ADDITIONAL RISK AND INVESTMENT INFORMATION
INVESTMENTS IN FOREIGN SECURITIES. Because foreign securities involve foreign
currencies, the values of the assets of the Portfolio (and HI Portfolio) and
their net investment income available for distribution may be affected favorably
or unfavorably by changes in currency exchange rates and exchange control
regulations. There may be less information publicly available about a foreign
issuer than about a U.S. issuer, and foreign issuers are not generally subject
to accounting, auditing, and financial reporting standards and practices
comparable to those in the United States. The willingness and ability of
sovereign issuers to pay principal and interest on government securities depends
on various economic factors, including among others the issuer's balance of
payments, overall debt level, and cash flow considerations related to the
availability of tax or other revenues to satisfy the issuer's obligations. The
securities of some foreign issuers are less liquid and at times more volatile
than securities of comparable U.S. issuers. Foreign brokerage commissions and
fees are also generally higher than in the United States. Foreign settlement
procedures and trade regulations may involve certain risks (such as delay in the
payment or delivery of securities or in the recovery of assets held abroad) and
expenses not present in the settlement of domestic investments. Investments may
include securities issued by the governments of lesser-developed countries,
which are sometimes referred to as "emerging markets", and other issuers located
in such countries. As a result, the Portfolio may be exposed to greater risk and
will be more dependent on the Investment Adviser's ability to assess such risk
than if the Portfolio invested solely in more developed countries.
In addition, there may be a possibility of nationalization or expropriation of
assets, imposition of currency exchange controls, confiscatory taxation,
political or financial instability, armed conflict and diplomatic developments
which could affect the values of a Portfolio's investments in certain foreign
countries. Legal remedies available to investors in certain foreign countries,
including remedies available in bankruptcy proceedings, may be more limited than
those available with respect to investments in the United States or in other
foreign countries. The laws of some foreign countries may limit a Portfolio's
ability to invest in securities of certain issuers located in those foreign
countries. Special tax considerations apply to foreign securities.
INVESTING IN LOWER-RATED SECURITIES. Lower quality debt securities are subject
to the risk of an issuer's inability to meet principal and interest payments on
the obligations (credit risk) and may also be subject to price volatility due to
such factors as interest rate sensitivity, market perception of the
creditworthiness of the issuer and general market liquidity (market risk). The
prices of lower-rated and comparable unrated securities are also more likely to
react to real or perceived developments affecting market and credit risk than
are prices of higher-rated securities, which react primarily to movements in the
general level of interest rates. The Portfolio (and HI Portfolio) may invest a
substantial portion of their assets in lower-rated securities issued in
connection with mergers, acquisitions, leveraged buy- outs, recapitalizations
and other highly leveraged transactions, which pose a higher risk of default or
bankruptcy of the issuer than other fixed-income securities particularly during
periods of deteriorating economic conditions and contraction in the credit
markets. The Portfolio (and HI Portfolio) may also invest in debt securities not
paying current income in anticipation of possible future income or capital
appreciation. The issuer of such securities may be in bankruptcy or undergoing a
debt restructuring or reorganization. Defaulted securities may be retained. In
the case of a defaulted security, the Portfolio (or HI Portfolio) may incur
additional expense seeking recovery of its investment. In the event the rating
of a security held by the Portfolio (or HI Portfolio) is downgraded, causing the
Fund to have indirectly 35% or more of its total assets in securities rated
below investment grade, the Investment Adviser will (in an orderly fashion
within a reasonable period of time) dispose of such securities of the Portfolio
(or reduce the Fund's investment in HI Portfolio) as it deems necessary in order
to comply with this limitation. See the Appendix to this Prospectus for the
asset composition of the Portfolio for the fiscal year ended October 31, 1995.
For a description of securities ratings, see the Statement of Additional
Information.
INTEREST RATE RISK. The value of Fund shares will reflect the value of the
Fund's interest in the Portfolio (which in turn, reflects the underlying value
of the Portfolio's assets and liabilities), and any interest in HI Portfolio and
will change in response to interest rate fluctuations. When interest rates
decline, the value of debt securities held by the Portfolio (and HI Portfolio)
can be expected to rise. Conversely, when interest rates rise, the value of debt
securities held by the Portfolio (and HI Portfolio) can be expected to decline.
OTHER PRACTICES. The Portfolio may at times invest in so-called "zero-coupon"
bonds (deferred interest bonds) and "payment-in-kind" bonds. Zero-coupon bonds
are issued at a significant discount from their principal amount and interest is
paid only at maturity rather than at intervals during the life of the security.
Payment-in-kind bonds allow the issuer, at its option, to make current interest
payments on the bonds either in cash or in additional bonds. The values of
zero-coupon bonds and payment-in-kind bonds are subject to greater fluctuation
in response to changes in market interest rates than bonds which pay interest in
cash currently. Because these instruments allow an issuer to avoid the need to
generate cash to meet current interest payments, they may involve greater credit
risks than bonds paying interest currently. Even though such bonds do not pay
current interest in cash, a Portfolio is nonetheless required to accrue interest
income on such investments and the Fund is required to distribute its share of
such amounts at least annually to shareholders. Thus, a Portfolio could be
required at times to liquidate other investments to obtain cash in order to
enable the Fund to satisfy its distribution requirements.
The Portfolio may hold up to 15% of net assets in illiquid securities, including
securities legally restricted as to resale, and securities eligible for resale
pursuant to Rule 144A under the Securities Act of 1933. Rule 144A securities
may, however, be treated as liquid by the Investment Adviser pursuant to
procedures adopted by the Trustees, which require consideration of factors such
as trading activity, availability of market quotations and number of dealers
willing to purchase the security. Rule 144A securities may increase illiquidity
if qualified institutional buyers become uninterested in purchasing such
securities.
The Portfolio may also temporarily borrow up to 5% of the value of its total
assets to satisfy redemption requests or settle securities transactions. Certain
securities held by the Portfolio may permit the issuer at its option to "call",
or redeem, its securities. If an issuer were to redeem securities held by the
Portfolio during a time of declining interest rates, the Portfolio may not be
able to reinvest the proceeds in securities providing the same investment return
as the securities redeemed.
NON-DIVERSIFIED STATUS. As a "non-diversified" investment company, the Portfolio
may invest, with respect to 50% of its total assets, more than 5% (but not more
than 25%) of its total assets in securities of any one issuer, other than U.S.
government securities. The Portfolio is likely to invest a greater percentage of
its assets in the securities of a single issuer than would a diversified fund.
Therefore, the Portfolio is more susceptible to any single adverse or political
occurence or development affecting issuers in which the Portfolio invests. HI
Portfolio is diversified.
INVESTMENT RESTRICTIONS. The Fund, the Portfolio (and HI Portfolio) have adopted
certain fundamental investment restrictions and policies which are enumerated in
detail in the Statement of Additional Information and which may not be changed
unless authorized by a shareholder vote or an investor vote, respectively.
Except for such enumerated restrictions and as otherwise indicated in this
Prospectus, the investment objective and policies of the Fund and a Portfolio
are not fundamental policies and accordingly may be changed by the Trustees of
the Trust and the affected Portfolio without obtaining the approval of the
Fund's shareholders or the investors of the Portfolio, as the case may be.
ORGANIZATION OF THE FUND AND THE PORTFOLIO
- ------------------------------------------------------------------------------
THE FUND IS A NON-DIVERSIFIED SERIES OF EATON VANCE MUTUAL FUNDS TRUST, A
BUSINESS TRUST ESTABLISHED UNDER MASSACHUSETTS LAW PURSUANT TO A DECLARATION OF
TRUST DATED MAY 7, 1984, AS AMENDED. THE TRUST IS A MUTUAL FUND - AN OPEN- END
MANAGEMENT INVESTMENT COMPANY. The Trustees of the Trust are responsible for the
overall management and supervision of its affairs. The Trust may issue an
unlimited number of shares of beneficial interest (no par value per share) in
one or more series (such as the Fund). Each share represents an equal
proportionate beneficial interest in the Fund. When issued and outstanding, the
shares are fully paid and nonassessable by the Trust and redeemable as described
under "How to Redeem Fund Shares". Shareholders are entitled to one vote for
each full share held. Fractional shares may be voted proportionately. Shares
have no preemptive or conversion rights and are freely transferable. In the
event of the liquidation of the Fund, shareholders are entitled to share pro
rata in the net assets of the Fund available for distribution to shareholders.
THE PORTFOLIO (AND HI 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. Each Portfolio, as well as the Trust, intends to comply with all
applicable federal and state securities laws. Each Portfolio's Declaration of
Trust, as amended, provides that the Fund and other entities permitted to invest
in the Portfolio (e.g., other U.S. and foreign investment companies, and common
and commingled trust funds) will each be liable for all obligations of the
Portfolio. However, the risk of the Fund incurring financial loss on account of
such liability is limited to circumstances in which both inadequate insurance
exists and a Portfolio itself is unable to meet its obligations. Accordingly,
the Trustees of the Trust believe that neither the Fund nor its shareholders
will be adversely affected by reason of the Fund investing in the Portfolios.
The Trustees of the Trust have considered the advantages and disadvantages of
investing the assets of the Fund in the Portfolios, as well as the advantages
and disadvantages of the two-tier format. The Trustees believe that the
structure offers opportunities for substantial growth in the assets of the
Portfolios, affords the potential for economies of scale for the Fund, and may
over time result in lower expenses for a Fund.
Whenever the Fund as an investor in a Portfolio is requested to vote on matters
pertaining to the Portfolio (other than the termination of the Portfolio's
business, which may be determined by the Trustees of the Portfolio without
investor approval), the Fund will hold a meeting of Fund shareholders and will
vote its interest in the Portfolio for or against such matters proportionately
to the instructions to vote for or against such matters received from Fund
shareholders. The Fund shall vote shares for which it receives no voting
instructions in the same proportion as the shares for which it receives voting
instructions. Other investors in a Portfolio may alone or collectively acquire
sufficient voting interests in the Portfolio to control matters relating to the
operation of the Portfolio, which may require the Fund to withdraw its
investment in the Portfolio or take other appropriate action. Any such
withdrawal could result in a distribution "in kind" of portfolio securities (as
opposed to a cash distribution from a Portfolio). If securities are distributed,
the Fund could incur brokerage, tax or other charges in converting the
securities to cash. In addition, the distribution in kind may result in a less
diversified portfolio of investments or adversely affect the liquidity of the
Fund. Notwithstanding the above, there are other means for meeting shareholder
redemption requests, such as borrowing.
The Fund may withdraw (completely redeem) all its assets from either or both
Portfolios at any time if the Board of Trustees of the Trust determines that it
is in the best interest of the Fund to do so. In the event the Fund withdraws
all of its assets from both Portfolios, or the Board of Trustees of the Trust
determines that the investment objective of the Portfolios are no longer
consistent with the investment objective of the Fund, such Trustees would
consider what action might be taken, including investing the assets of the Fund
in another pooled investment entity or retaining an investment adviser to manage
the Fund's assets in accordance with its investment objective. The Fund's
investment performance may be affected by a withdrawal of all its assets from a
Portfolio.
In addition to selling an interest to the Fund, each Portfolio may sell
interests to other affiliated and non-affiliated mutual funds or institutional
investors. Such investors will invest in a Portfolio on the same terms and
conditions and will pay a proportionate share of the Portfolio's expenses.
However, the other investors investing in a Portfolio are not required to sell
their shares at the same public offering price as the Fund due to variations in
sales commissions and other operating expenses. Therefore, investors in the Fund
should be aware that these differences may result in differences in returns
experienced by investors in the various funds that invest in a Portfolio. Such
differences in returns are also present in other mutual fund structures,
including funds that have multiple classes of shares. Information regarding
other pooled investment entities or funds which invest in a Portfolio may be
obtained by contacting the Principal Underwriter, 24 Federal Street, Boston, MA
02110, (617) 482-8260.
MANAGEMENT OF THE FUND AND THE PORTFOLIO
- ------------------------------------------------------------------------------
THE PORTFOLIO ENGAGES BOSTON MANAGEMENT AND RESEARCH ("BMR"), A WHOLLY-OWNED
SUBSIDIARY OF EATON VANCE MANAGEMENT ("EATON VANCE"), AS ITS INVESTMENT ADVISER.
EATON VANCE, ITS AFFILIATES AND ITS PREDECESSOR COMPANIES HAVE BEEN MANAGING
ASSETS OF INDIVIDUALS AND INSTITUTIONS SINCE 1924 AND MANAGING INVESTMENT
COMPANIES SINCE 1931. BMR's expertise in the management of fixed- income
securities ranges from government obligations, high-grade corporate and
municipal securities, foreign debt and bank loan interests to higher yielding
instruments. BMR's fixed-income division is armed with the research and
technical ability to gain immediate access to interest rate data around the
world.
Acting under the general supervision of the Board of Trustees of the Portfolio,
BMR manages the Portfolio's investments and affairs, and furnishes for the use
of the Portfolio office space and all necessary office facilities, equipment and
personnel for servicing the investments of the Portfolio. Under its investment
advisory agreement with the Portfolio, BMR receives a monthly advisory fee equal
to the aggregate of
(a) a daily asset based fee computed by applying the annual asset rate
applicable to that portion of the total daily net assets in each
Category as indicated below, plus
(b) a daily income based fee computed by applying the daily income rate
applicable to that portion of the total daily gross income (which
portion shall bear the same relationship to the total daily gross
income on such day as that portion of the total daily net assets in
the same Category bears to the total daily net assets on such day) in
each Category as indicated below:
ANNUAL DAILY
CATEGORY DAILY NET ASSETS ASSET RATE INCOME RATE
----------------------------------------------------------------------------
1 up to $500 million 0.275% 2.75%
2 $500 million but less than $1 billion 0.250% 2.50%
3 $1 billion but less than $1.5 billion 0.225% 2.25%
4 $1.5 billion but less than $2 billion 0.200% 2.00%
5 $2 billion but less than $3 billion 0.175% 1.75%
6 $3 billion and over 0.150% 1.50%
Total daily gross income is the total gross investment income, exclusive of
capital gains and losses on investments and before deduction of expenses,
earned each day by the Portfolio.
As of October 31, 1996, the Portfolio had net assets of $132,406,799. For the
fiscal year ended October 31, 1996, the Portfolio paid BMR advisory fees
equivalent to 0.54% of the Portfolio's average daily net assets for such year.
HI Portfolio also engages BMR to act as its investment adviser pursuant to a fee
schedule similar to but slightly higher than the above. For the fiscal year
ended March 31, 1997, BMR paid advisory fees equivalent to % of HI Portfolio's
average daily net assets. The portion of the Fund's assets invested in the HI
Portfolio will be subject to such Portfolio's advisory fee, but will not be
subject to Strategic Income Portfolio's advisory or administration fee, or a
Fund advisory fee.
BMR OR EATON VANCE ACTS AS INVESTMENT ADVISER TO INVESTMENT COMPANIES AND
VARIOUS INDIVIDUAL AND INSTITUTIONAL CLIENTS WITH ASSETS UNDER MANAGEMENT OF
OVER $17 BILLION. Eaton Vance is a wholly-owned subsidiary of Eaton Vance Corp.,
a publicly-held holding company which through its subsidiaries and affiliates
engages primarily in investment management, administration and marketing
activities. The Principal Underwriter is a wholly-owned subsidiary of Eaton
Vance.
Mark S. Venezia has acted as the portfolio manager of the Portfolio since it
commenced operations. He has been a Vice President of Eaton Vance since 1987 and
of BMR since 1992. Hooker Talcott, Jr. has acted as portfolio manager of the HI
Portfolio since it commenced operations. Mr. Talcott has been a Vice President
of Eaton Vance since 1987 and of BMR since 1992. Michael Weilheimer is the
co-portfolio manager and has been a Vice President of Eaton Vance since 1992.
The Portfolio (and HI Portfolio) believes that most of the obligations which it
will acquire will normally be traded on a net basis (without commission) through
broker-dealers and banks acting for their own account. Such firms attempt to
profit from such transactions by buying at the bid price and selling at the
higher asked price of the market, and the difference is customarily referred to
as the spread. In selecting firms which will execute portfolio transactions, BMR
judges their professional ability and quality of service and uses its best
efforts to obtain execution at prices which are advantageous and at reasonably
competitive spreads. Subject to the foregoing, BMR may consider sales of shares
of the Fund or of other investment companies sponsored by BMR or Eaton Vance as
a factor in the selection of firms to execute portfolio transactions. The Fund,
the Portfolios and BMR have adopted Codes of Ethics relating to personal
securities transactions. The Codes permit Eaton Vance personnel to invest in
securities (including securities that may be purchased or held by the Portfolio)
for their own accounts, subject to certain pre-clearance, reporting and other
restrictions and procedures contained in such Codes.
The Portfolio also engages BMR as its administrator under an administration
agreement. Under the administration agreement, BMR is responsible for reviewing
and supervising the provision of custody services to the Portfolio and making
related reports and recommendations to the Board of Trustees of the Portfolio;
for providing certain valuation, legal, accounting and tax services in
connection with investments with foreign issuers or guarantors, investments
denominated in foreign currencies and transactions in derivative instruments;
and for such other special services as the Board may direct. BMR also furnishes
the office facilities and personnel necessary for providing these services. As
compensation for these services, BMR receives a monthly administration fee at an
annual rate of .15% of the Portfolio's average daily net assets. For the fiscal
year ended October 31, 1996, the Portfolio paid BMR administration fees
equivalent to 0.15% of the Portfolio's average daily net assets for such year.
The Trust has retained the services of Eaton Vance to act as Administrator of
the Fund. The Trust has not retained the services of an investment adviser since
the Trust seeks to achieve the investment objective of the Fund by investing the
Fund's assets in the Portfolios. As Administrator, Eaton Vance provides the Fund
with general office facilities and supervises the overall administration of the
Fund. For these services, Eaton Vance currently receives no compensation. The
Trustees of the Trust may determine, in the future, to compensate Eaton Vance
for such services.
The Portfolios and the Fund, as the case may be, will each be responsible for
all of its respective costs and expenses not expressly stated to be payable by
BMR under the investment advisory agreements and the administration agreement,
by Eaton Vance under the administrative services agreement, or by the Principal
Underwriter under the distribution agreement.
DISTRIBUTION PLAN
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THE FUND FINANCES DISTRIBUTION ACTIVITIES AND HAS ADOPTED A DISTRIBUTION PLAN
(THE "PLAN") PURSUANT TO RULE 12B-1 UNDER THE INVESTMENT COMPANY ACT OF 1940
(THE "1940 ACT"). Rule 12b-1 permits a mutual fund, such as the Fund, to finance
distribution activities and bear expenses associated with the distribution of
its shares provided that any payments made by the fund are made pursuant to a
written plan adopted in accordance with the Rule. The Plan is subject to, and
complies with, the sales charge rule of the National Association of Securities
Dealers, Inc. (the "NASD Rule"). The Plan is described further in the Statement
of Additional Information, and the following is a description of the salient
features of the Plan. The Plan provides that the Fund, subject to the NASD Rule,
will pay sales commissions and distribution fees to the Principal Underwriter
only after and as a result of the sale of shares of the Fund. On each sale of
Fund shares (excluding reinvestment of distributions) the Fund will pay the
Principal Underwriter amounts representing (i) sales commissions equal to 4.5%
of the amount received by the Fund for each share sold and (ii) distribution
fees calculated by applying the rate of 1% over the prime rate then reported in
The Wall Street Journal to the outstanding balance of Uncovered Distribution
Charges (as described below) of the Principal Underwriter. The Principal
Underwriter currently expects to pay sales commissions (except on exchange
transactions and reinvestments) to a financial services firm (an "Authorized
Firm") at the time of sale equal to 3.5% of the purchase price of the shares
sold by such Firm. The Principal Underwriter will use its own funds (which may
be borrowed from banks) to pay such commissions. Because the payment of the
sales commissions and distribution fees to the Principal Underwriter is subject
to the NASD Rule described below, it will take the Principal Underwriter a
number of years to recoup the sales commissions paid by it to Authorized Firms
from the payments received by it from the Fund pursuant to the Plan.
THE NASD RULE REQUIRES THE FUND TO LIMIT ITS ANNUAL PAYMENTS OF SALES
COMMISSIONS AND DISTRIBUTION FEES TO AN AMOUNT NOT EXCEEDING .75% OF THE FUND'S
AVERAGE DAILY NET ASSETS FOR EACH FISCAL YEAR. Under its Plan, the Fund accrues
daily an amount at the rate of 1/365 of .75% of the Fund's net assets, and pays
such accrued amounts monthly to the Principal Underwriter. The Plan requires
such accruals to be automatically discontinued during any period in which there
are no outstanding Uncovered Distribution Charges under the Plan. Uncovered
Distribution Charges are calculated daily and, briefly, are equivalent to all
unpaid sales commissions and distribution fees to which the Principal
Underwriter is entitled under the Plan less all contingent deferred sales
charges theretofore paid to the Principal Underwriter. The Eaton Vance
organization may be considered to have realized a profit under the Plan if at
any point in time the aggregate amounts of all payments received by the
Principal Underwriter from the Fund pursuant to the Plan, including any
contingent deferred sales charges, have exceeded the total expenses theretofore
incurred by such organization in distributing shares of the Fund. Total expenses
for this purpose will include an allocable portion of the overhead costs of such
organization and its branch offices.
Because of the NASD Rule limitation on the amount of sales commissions and
distribution fees paid during any fiscal year, a high level of sales of Fund
shares during the initial years of the Fund's operations would cause a large
portion of the sales commissions attributable to a sale of Fund shares to be
accrued and paid by the Fund to the Principal Underwriter in fiscal years
subsequent to the year in which such shares were sold. This spreading of sales
commissions payments under the Plan over an extended period would result in the
incurrence and payment of increased distribution fees under the Plan.
During the fiscal year ended October 31, 1996, the Fund paid or accrued sales
commissions under the Plan equivalent to .75% of the Fund's average daily net
assets. As at October 31, 1996, the outstanding Uncovered Distribution Charges
of the Principal Underwriter on such day calculated under the Plan amounted to
approximately, $18,063,000 (which amount was equivalent to 13.9% of the Fund's
net assets on such day).
THE PLAN ALSO AUTHORIZES THE FUND TO MAKE PAYMENTS OF SERVICE FEES TO THE
PRINCIPAL UNDERWRITER, AUTHORIZED FIRMS AND OTHER PERSONS IN AMOUNTS NOT
EXCEEDING .25% OF THE FUND'S AVERAGE DAILY NET ASSETS FOR EACH FISCAL YEAR. The
Trustees of the Trust have initially implemented this provision of the Plan by
authorizing the Fund to make quarterly payments of service fees to the Principal
Underwriter and Authorized Firms in amounts not expected to exceed .25% of the
Fund's average daily net assets for any fiscal year based on the value of Fund
shares sold by such persons and remaining outstanding for at least twelve
months. As permitted by the NASD Rule, such payments are made for personal
services and/or the maintenance of shareholder accounts. Service fees are
separate and distinct from the sales commissions and distribution fees payable
by the Fund to the Principal Underwriter, and as such are not subject to
automatic discontinuance when there are no outstanding Uncovered Distribution
Charges of the Principal Underwriter. For the fiscal year ended October 31,
1996, the Fund paid or accrued service fees equivalent to .17% of the Fund's
average daily net assets.
The Principal Underwriter may, from time to time, at its own expense, provide
additional incentives to Authorized Firms which employ registered
representatives who sell the Fund's shares and/or shares of other funds
distributed by the Principal Underwriter. In some instances, such additional
incentives may be offered only to certain Authorized Firms whose representatives
sell or are expected to sell significant amounts of shares. In addition, the
Principal Underwriter may from time to time increase or decrease the sales
commissions payable to Authorized Firms.
The Fund may, in its absolute discretion, suspend, discontinue or limit the
offering of its shares at any time. In determining whether any such action
should be taken, the Fund's management intends to consider all relevant
factors, including without limitation the size of the Fund, the investment
climate and market conditions, the volume of sales and redemptions of Fund
shares, and the amount of Uncovered Distribution Charges of the Principal
Underwriter. The Plan may continue in effect and payments may be made under
the Plan following any such suspension, discontinuance or limitation of the
offering of Fund shares; however, the Fund is not contractually obligated to
continue the Plan for any particular period of time. Suspension of the
offering of Fund shares would not, of course, affect a shareholder's ability
to redeem shares.
VALUING FUND SHARES
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THE FUND VALUES ITS SHARES ONCE ON EACH DAY THE NEW YORK STOCK EXCHANGE (THE
"EXCHANGE") IS OPEN FOR TRADING, as of the close of regular trading on the
Exchange (normally 4:00 p.m. New York time). The Fund's net asset value per
share is determined by its custodian, Investors Bank & Trust Company ("IBT"),
(as agent for the Fund) in the manner authorized by the Trustees of the Trust.
Net asset value is computed by dividing the value of the Fund's total assets,
less its liabilities, by the number of shares outstanding. Because the Fund
invests its assets in an interest in the Portfolio (and at times in HI Portfolio
as well), the Fund's net asset value will reflect the value of its interest in
the Portfolios (which, in turn, reflects the underlying value of the Portfolios'
assets and liabilities).
Authorized Firms must communicate an investor's order to the Principal
Underwriter prior to the close of the Principal Underwriter's business day to
receive that day's net asset value per Fund share. It is the Authorized Firms'
responsibility to transmit orders promptly to the Principal Underwriter.
Each Portfolio's net asset value is also determined as of the close of regular
trading on the Exchange by IBT (as custodian and agent for the Portfolio) in the
manner authorized by the Trustees of the Portfolio. Net asset value is computed
by subtracting the liabilities of a Portfolio from the value of its total
assets. Most debt securities are valued on the basis of market valuations
furnished by pricing services. For further information regarding the valuation
of a Portfolio's assets, see "Determination of Net Asset Value" in the Statement
of Additional Information.
SHAREHOLDERS MAY DETERMINE THE VALUE OF THEIR INVESTMENT BY MULTIPLYING
THE NUMBER OF FUND SHARES OWNED BY THE CURRENT NET ASSET VALUE PER SHARE.
HOW TO BUY FUND SHARES
- ------------------------------------------------------------------------------
SHARES OF THE FUND MAY BE PURCHASED FOR CASH OR MAY BE ACQUIRED IN EXCHANGE
FOR SECURITIES. Investors may purchase shares of the Fund through Authorized
Firms at the net asset value per share of the Fund next determined after an
order is effective. An Authorized Firm may charge its customers a fee in
connection with transactions executed by that Firm. The Fund may suspend the
offering of shares at any time and may refuse an order for the purchase of
shares.
An initial investment in the Fund must be at least $1,000. Once an account has
been established the investor may send investments of $50 or more at any time
directly to the Fund's transfer agent (the "Transfer Agent") as follows: First
Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123. The
$1,000 minimum initial investment is waived for Bank Automated Investing
accounts, which may be established with an investment of $50 or more. See "Eaton
Vance Shareholder Services".
In connection with employee benefit or other continuous group purchase plans
under which the average initial purchase by a participant of the plan is
$1,000 or more, the Fund may accept initial investments of less than $1,000 on
the part of an individual participant. In the event a shareholder who is a
participant of such a plan terminates participation in the plan, his or her
shares will be transferred to a regular individual account. However, such
account will be subject to the right of redemption by the Fund as described
below under "How to Redeem Fund Shares."
ACQUIRING FUND SHARES IN EXCHANGE FOR SECURITIES. IBT, as escrow agent, will
receive securities acceptable to Eaton Vance, as Administrator, in exchange
for Fund shares at their net asset value as determined above. The minimum
value of securities (or securities and cash) accepted for deposit is $5,000.
Securities accepted will be sold on the day of their receipt or as soon
thereafter as possible. The number of Fund shares to be issued in exchange for
securities will be the aggregate proceeds from the sale of such securities,
divided by the applicable net asset value per Fund share on the day such
proceeds are received. Eaton Vance will use reasonable efforts to obtain the
then current market price for such securities, but does not guarantee the best
available price. Eaton Vance will absorb any transaction costs, such as
commissions, on the sale of the securities.
Securities determined to be acceptable should be transferred via book entry or
physically delivered, in proper form for transfer, through an Authorized Firm,
together with a completed and signed Letter of Transmittal in approved form
(available from Authorized Firms), as follows:
IN THE CASE OF BOOK ENTRY:
Deliver through Depository Trust Co.
Broker #2212
Investors Bank & Trust Company
For A/C EV Marathon Strategic Income Fund
IN THE CASE OF PHYSICAL DELIVERY:
Investors Bank & Trust Company
Attention: EV Marathon Strategic Income Fund
Physical Securities Processing Settlement Area
89 South Street
Boston, MA 02111
Investors who are contemplating an exchange of securities for shares of the
Fund, or their representatives, must contact Eaton Vance to determine whether
the securities are acceptable before forwarding such securities. Eaton Vance
reserves the right to reject any securities. Exchanging securities for Fund
shares may create a taxable gain or loss. Each investor should consult his or
her tax adviser with respect to the particular federal, state and local tax
consequences of exchanging securities for Fund shares.
IF YOU DON'T HAVE AN AUTHORIZED FIRM, EATON VANCE CAN RECOMMEND ONE.
HOW TO REDEEM FUND SHARES
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A SHAREHOLDER MAY REDEEM FUND SHARES IN ONE OF THREE WAYS -- BY MAIL, BY
TELEPHONE OR THROUGH AN AUTHORIZED FIRM. The redemption price will be based on
the net asset value per Fund share next computed after a redemption request is
received in the proper form as described below.
REDEMPTION BY MAIL: Shares may be redeemed by delivering to the Transfer Agent,
First Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123,
during its business hours a written request for redemption in good order, plus
any share certificates with executed stock powers. Good order means that all
relevant documents must be endorsed by the record owner(s) exactly as the shares
are registered and the signature(s) must be guaranteed by a member of either the
Securities Transfer Association's STAMP program or the New York Stock Exchange's
Medallion Signature Program, or certain banks, savings and loan institutions,
credit unions, securities dealers, securities exchanges, clearing agencies and
registered securities associations as required by a regulation of the Securities
and Exchange Commission (the "Commission") and acceptable to the Transfer Agent.
In addition, in some cases, good order may require the furnishing of additional
documents such as where shares are registered in the name of a corporation,
partnership or fiduciary.
REDEMPTION BY TELEPHONE: Shares may be redeemed by telephone provided the
investor has not disclaimed in writing the use of the privilege. Such
redemptions can be effected by calling the Transfer Agent at 800-262-1122,
Monday through Friday, 9:00 a.m. to 4:00 p.m. (Eastern Standard Time). The
proceeds of a telephone redemption may be no greater than the maximum amount
established by the Principal Underwriter (currently $50,000) and may be mailed
only to the account address of record. Shares held by corporations, trusts or
certain other entities, or subject to fiduciary arrangements, may not be
redeemed by telephone. Neither the Fund, the Principal Underwriter nor the
Transfer Agent will be responsible for the authenticity of redemption
instructions received by telephone, provided that reasonable procedures to
confirm that instructions communicated by telephone are genuine have been
followed. Telephone instructions will be tape recorded. In times of drastic
economic or market changes, a telephone redemption may be difficult to
implement.
REDEMPTION THROUGH AN AUTHORIZED FIRM: To sell shares at their net asset value
through an Authorized Firm (a repurchase), a shareholder can place a repurchase
order with the Authorized Firm, which may charge a fee. The value of such shares
is based upon the net asset value calculated after the Principal Underwriter, as
the Fund's agent, receives the order. It is the Authorized Firm's responsibility
to transmit promptly repurchase orders to the Principal Underwriter. Throughout
this Prospectus, the word "redemption" is generally meant to include a
repurchase.
Within seven days after receipt of a redemption request in good order by the
Transfer Agent, the Fund will make payment in cash for the net asset value of
the shares as of the date determined above, reduced by the amount of any
applicable contingent deferred sales charge (described below) and any federal
income tax required to be withheld. Although the Fund normally expects to make
payment in cash for redeemed shares, the Trust, subject to compliance with
applicable regulations, has reserved the right to pay the redemption price of
shares of the Fund, either totally or partially, by a distribution in kind of
readily marketable securities withdrawn by the Fund from the Portfolio. The
securities so distributed would be valued pursuant to the Portfolio's valuation
procedures. If a shareholder received a distribution in kind, the shareholder
could incur brokerage or other charges in converting the securities to cash.
If shares were recently purchased, the proceeds of redemption will not be sent
until the check (including a certified or cashier's check) received for the
shares purchased has cleared. Payment for shares tendered for redemption may be
delayed up to 15 days from the purchase date when the purchase check has not yet
cleared. Redemptions may result in a taxable gain or loss.
Due to the high cost of maintaining small accounts, the Fund reserves the right
to redeem accounts with balances of less than $750. Prior to such a redemption,
shareholders will be given 60 days' written notice to make an additional
purchase. However, no such redemptions would be required by the Fund if the
cause of the low account balance was a reduction in the net asset value of Fund
shares. No contingent deferred sales charge will be imposed with respect to such
involuntary redemptions.
CONTINGENT DEFERRED SALES CHARGE. Shares redeemed within the first four years of
their purchase (except shares acquired through the reinvestment of
distributions) generally will be subject to a contingent deferred sales charge
("CDSC"). This CDSC is imposed on any redemption the amount of which exceeds the
aggregate value at the time of redemption of (a) all shares in the account
purchased more than four years prior to the redemption, (b) all shares in the
account acquired through reinvestment of distributions, and (c) the increase, if
any, in the value of all other shares in the account (namely those purchased
within the four years preceding the redemption) over the purchase price of such
shares. Redemptions are processed in a manner to maximize the amount of
redemption proceeds which will not be subject to a CDSC. That is, each
redemption will be assumed to have been made first from the exempt amounts
referred to in clauses (a), (b) and (c) above, and second through liquidation of
those shares in the account referred to in clause (c) on a first-in-first-out
basis. As described under "Distribution Plan", the CDSC will be paid to the
Principal Underwriter or the Fund. Any CDSC which is required to be imposed on
share redemptions will be made in accordance with the following schedule:
YEAR OF REDEMPTION
AFTER PURCHASE CDSC
- -------------------------------------------------------------
First 3.0%
Second 2.5%
Third 2.0%
Fourth 1.0%
Fifth and following 0.0%
In calculating the CDSC upon the redemption of Fund shares acquired in an
exchange for shares of a fund currently listed under "The Eaton Vance Exchange
Privilege", the CDSC schedule applicable to the shares at the time of purchase
will apply and the purchase of shares acquired in the exchange is deemed to have
occurred at the time of the original purchase of the exchanged shares.
No CDSC will be imposed on Fund shares which have been sold to Eaton Vance or
its affiliates, or to their respective employees or clients. The CDSC will be
waived for shares redeemed (1) pursuant to a Withdrawal Plan (see "Eaton Vance
Shareholder Services") or (2) as part of a required distribution from a tax-
sheltered retirement plan. The charge will also be waived on redemptions of
shares purchased on or after January 27, 1995 following the death of all
beneficial owners of such shares, provided the redemption is requested within
one year of death (a death certificate and other applicable documents may be
required). In addition, shares acquired as a result of a merger or liquidation
of another Eaton Vance sponsored fund will have a CDSC imposed at the same rate
as would have been imposed in the prior fund.
THE FOLLOWING EXAMPLE ILLUSTRATES THE OPERATION OF THE CDSC. ASSUME THAT
AN INVESTOR PURCHASES $10,000 OF THE FUND'S SHARES AND THAT 16 MONTHS
LATER THE VALUE OF THE ACCOUNT HAS GROWN THROUGH INVESTMENT PERFORMANCE
AND REINVESTMENT OF DIVIDENDS TO $12,000. THE INVESTOR THEN MAY REDEEM UP
TO $2,000 OF SHARES WITHOUT INCURRING A CDSC. IF THE INVESTOR SHOULD
REDEEM $3,000 OF SHARES, A CHARGE WOULD BE IMPOSED ON $1,000 OF THE
REDEMPTION. THE RATE WOULD BE 2.5% BECAUSE THE REDEMPTION WAS MADE IN THE
SECOND YEAR AFTER THE PURCHASE WAS MADE AND THE CHARGE WOULD BE $25.
REPORTS TO SHAREHOLDERS
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THE FUND WILL ISSUE TO ITS SHAREHOLDERS SEMI-ANNUAL AND ANNUAL REPORTS
CONTAINING FINANCIAL STATEMENTS. Financial statements included in annual reports
are audited by the Fund's independent accountants. Shortly after the end of each
calendar year, the Fund will furnish all shareholders with information necessary
for preparing federal and state tax returns.
THE LIFETIME INVESTING ACCOUNT/DISTRIBUTION OPTIONS
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AFTER AN INVESTOR MAKES AN INITIAL PURCHASE OF FUND SHARES, THE TRANSFER AGENT
WILL SET UP A LIFETIME INVESTING ACCOUNT FOR THE INVESTOR ON THE FUND'S RECORDS.
This account is a complete record of all transactions between the investor and
the Fund which at all times shows the balance of shares owned. The Fund will not
issue share certificates except upon request.
At least quarterly, shareholders will receive a statement showing complete
details of any transaction and the current share balance in the account. THE
LIFETIME INVESTING ACCOUNT ALSO PERMITS A SHAREHOLDER TO MAKE ADDITIONAL
INVESTMENTS IN SHARES BY SENDING A CHECK FOR $50 OR MORE to the Transfer Agent.
Any questions concerning a shareholder's account or services available may be
directed by telephone to EATON VANCE SHAREHOLDER SERVICES at 800-225-6265,
extension 2, or in writing to the Transfer Agent, First Data Investor Services
Group, P.O. Box 5123, Westborough, MA 01581-5123 (Please provide the name of the
shareholder, the Fund and the account number).
THE FOLLOWING DISTRIBUTION OPTIONS WILL BE AVAILABLE TO ALL LIFETIME INVESTING
ACCOUNTS and may be changed as often as desired by written notice to the Fund's
dividend disbursing agent, First Data Investor Services Group, P.O. Box 5123,
Westborough, MA 01581-5123. The currently effective option will appear on each
account statement.
SHARE OPTION -- Dividends and capital gains will be reinvested in additional
shares.
INCOME OPTION -- Dividends will be paid in cash, and capital gains will be
reinvested in additional shares.
CASH OPTION -- Dividends and capital gains will be paid in cash.
The SHARE OPTION will be assigned if no other option is specified.
Distributions, including those reinvested, will be reduced by any withholding
required under the federal income tax laws.
If the INCOME OPTION or CASH OPTION has been selected, dividend and/or capital
gains distribution checks which are returned by the United States Postal Service
as not deliverable or which remain uncashed for six months or more will be
reinvested in the account in shares at the then current net asset value.
Furthermore, the distribution option on the account will be automatically
changed to the SHARE OPTION until such time as the shareholder selects a
different option.
DISTRIBUTION INVESTMENT OPTION. In addition to the distribution options set
forth above, dividends and/or capital gains may be invested in additional shares
of another Eaton Vance fund. Before selecting this option, a shareholder should
obtain a prospectus of the other Eaton Vance fund and consider its objectives
and policies carefully.
"STREET NAME" ACCOUNTS. If shares of the Fund are held in a "street name"
account with an Authorized Firm, all recordkeeping, transaction processing and
payments of distributions relating to the beneficial owner's account will be
performed by the Authorized Firm, and not by the Fund and its Transfer Agent.
Since the Fund will have no record of the beneficial owner's transactions, a
beneficial owner should contact the Authorized Firm to purchase, redeem or
exchange shares, to make changes in or give instructions concerning the account,
or to obtain information about the account. The transfer of shares in a "street
name" account to an account with another dealer or to an account directly with
the Fund involves special procedures and will require the beneficial owner to
obtain historical purchase information about the shares in the account from the
Authorized Firm. Before establishing a "street name" account with an investment
firm, or transferring the account to another investment firm, an investor
wishing to reinvest distributions should determine whether the firm which will
hold the shares allows reinvestment of distributions in "street name" accounts.
THE EATON VANCE EXCHANGE PRIVILEGE
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Shares of the Fund currently may be exchanged for one or more other funds in the
Eaton Vance Marathon Group of Funds (including Class I shares of any EV Marathon
Limited Maturity fund) or Eaton Vance Money Market Fund, which are distributed
subject to a CDSC. Shares of the Fund may also be exchanged for shares of Eaton
Vance Prime Rate Reserves, which are subject to an early withdrawal charge. Any
such exchange will be made on the basis of the net asset value per share of each
fund at the time of exchange. Exchange offers are available only in states where
shares of the fund being acquired may legally be sold.
Each exchange must involve shares which have a net asset value of at least
$1,000. The exchange privilege may be changed or discontinued without penalty.
Shareholders will be given sixty (60) days' notice prior to any termination or
material amendment of the exchange privilege. The Fund does not permit the
exchange privilege to be used for "Market Timing" and may terminate the exchange
privilege for any shareholder account engaged in Market Timing activity. Any
shareholder account for which more than two round-trip exchanges are made within
any twelve month period will be deemed to be engaged in Market Timing.
Furthermore, a group of unrelated accounts for which exchanges are entered
contemporaneously by a financial intermediary will be considered to be engaged
in Market Timing.
The Transfer Agent makes exchanges at the next determined net asset value after
receiving an exchange request in good order (see "How to Redeem Fund Shares").
Consult the Transfer Agent for additional information concerning the exchange
privilege. Applications and prospectuses of the other funds are available from
Authorized Firms or the Principal Underwriter. The prospectus for each fund
describes its investment objectives and policies, and shareholders should obtain
a prospectus and consider these objectives and policies carefully before
requesting an exchange.
No CDSC is imposed on exchanges. For purposes of calculating the CDSC upon the
redemption of shares acquired in an exchange, the CDSC schedule applicable to
the shares at the time of purchase will apply and the purchase of shares
acquired in one or more exchanges is deemed to have occurred at the time of the
original purchase of the exchanged shares, except that time during which shares
are held in an Authorized Firm fund will not be credited toward completion of
the CDSC period. For the CDSC or early withdrawal charge schedule applicable to
the Fund, Eaton Vance Prime Rate Reserves and Class I shares of any EV Marathon
Limited Maturity Fund, see "How to Redeem Fund Shares". The CDSC schedule or
early withdrawal charge schedule applicable to the other EV Marathon funds is
5%, 5%, 4%, 3%, 2%, or 1% in the event of a redemption occurring in the first,
second, third, fourth, fifth or sixth year, respectively, after the original
share purchase.
Shares of the funds listed above may be exchanged for Fund shares on the basis
of the net asset value per share of each fund at the time of the exchange, but
subject to any restrictions or qualifications set forth in the current
prospectus of any such fund.
Telephone exchanges are accepted by the Transfer Agent provided that the
investor has not disclaimed in writing the use of the privilege. To effect such
exchanges, call the Transfer Agent at 800-262-1122, Monday through Friday, 9:00
A.M. to 4:00 P.M. (Eastern Standard Time). Shares acquired by telephone exchange
must be registered in the same name(s) and with the same address as the shares
being exchanged. Neither the Fund, the Principal Underwriter nor the Transfer
Agent will be responsible for the authenticity of exchange instructions received
by telephone; provided that reasonable procedures to confirm that instructions
communicated are genuine have been followed. Telephone instructions will be tape
recorded. In times of drastic economic or market changes, a telephone exchange
may be difficult to implement. An exchange may result in a taxable gain or loss.
EATON VANCE SHAREHOLDER SERVICES
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THE FUND OFFERS THE FOLLOWING SERVICES, WHICH ARE VOLUNTARY, INVOLVE NO EXTRA
CHARGE, AND MAY BE CHANGED OR DISCONTINUED WITHOUT PENALTY AT ANY TIME. Full
information on each of the services described below and an application, where
required, are available from Authorized Firms or the Principal Underwriter.
The cost of administering such services for the benefit of shareholders who
participate in them is borne by the Fund as an expense to all shareholders.
INVEST-BY-MAIL -- FOR PERIODIC SHARE ACCUMULATION: Once the $1,000 minimum
investment has been made, checks of $50 or more payable to the order of EV
Marathon Strategic Income Fund may be mailed directly to the Transfer Agent,
First Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123
at any time -- whether or not distributions are reinvested. The name of the
shareholder, the Fund and the account number should accompany each investment.
BANK AUTOMATED INVESTING -- FOR REGULAR SHARE ACCUMULATION: Cash investments of
$50 or more may be made automatically each month or quarter from a shareholder's
bank account. The $1,000 minimum initial investment and small account redemption
policy are waived for these accounts.
WITHDRAWAL PLAN: A shareholder may draw on shareholdings systematically with
monthly or quarterly checks in an aggregate amount that does not exceed annually
12% of the account balance at the time the Plan is established. Such amount will
not be subject to a CDSC. See "How to Redeem Fund Shares". A minimum deposit of
$5,000 in shares is required.
REINVESTMENT PRIVILEGE: A shareholder who has redeemed shares may reinvest, with
credit for any CDSC paid on the redeemed shares, any portion or all of the
redemption proceeds (plus that amount necessary to acquire a fractional share to
round off the purchase to the nearest full share) in shares of the Fund,
provided that the reinvestment is effected within 60 days after such redemption,
and the privilege has not been used more than once in the prior 12 months.
Shares are sold to a reinvesting shareholder at the next determined net asset
value following timely receipt of a written purchase order by the Principal
Underwriter or by the Fund (or by the Fund's Transfer Agent). To the extent that
any shares are sold at a loss and the proceeds are reinvested in shares of the
Fund (or other shares of the Fund are acquired) within the period beginning 30
days before and ending 30 days after the date of redemption some or all of the
loss generally will not be allowed as a tax deduction. Shareholders should
consult their tax advisers concerning the tax consequences of reinvestments.
TAX-SHELTERED RETIREMENT PLANS: Shares of the Fund are available for purchase
in connection with the following tax-sheltered retirement plans:
--Pension and Profit Sharing Plans for self-employed individuals,
corporations and non-profit organizations;
--Individual Retirement Account Plans for individuals and their non-
employed spouses; and
--403(b) Retirement Plans for employees of public school systems,
hospitals, colleges and other non-profit organizations meeting certain
requirements of the Internal Revenue Code of 1986, as amended (the
"Code").
Detailed information concerning these plans, including certain exceptions to
minimum investment requirements, and copies of the plans are available from the
Principal Underwriter. This information should be read carefully and
consultation with an attorney or tax adviser may be advisable. The information
sets forth the service fee charged for retirement plans and describes the
federal income tax consequences of establishing a plan. Participant accounting
services (including trust fund reconciliation services) will be offered only
through third party recordkeepers and not by the Principal Underwriter. Under
these plans, all distributions will be automatically reinvested in additional
shares.
DISTRIBUTIONS AND TAXES
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SUBSTANTIALLY ALL OF THE INVESTMENT INCOME ALLOCATED TO THE FUND BY A PORTFOLIO,
LESS THE FUND'S DIRECT AND ALLOCATED EXPENSES, WILL BE DECLARED DAILY AS A
DISTRIBUTION TO FUND SHAREHOLDERS OF RECORD AT THE TIME OF DECLARATION. Such
distributions, whether taken in cash or reinvested in additional shares, will
ordinarily be paid on the last day of each month or the next business day
thereafter. Daily distribution crediting will commence on the day that collected
funds for the purchase of Fund shares are available at the Transfer Agent. The
Fund's net realized capital gains, if any, consist of the net realized capital
gains allocated to the Fund by a Portfolio for tax purposes, after taking into
account any available capital loss carryovers; the Fund's net realized capital
gains, if any, will be distributed at least once a year, usually in December.
Shareholders of the Fund will receive timely federal income tax information
relating to all distributions made by the Fund during the calendar year.
Distributions of the Fund from net investment income, net short-term capital
gains and certain net foreign exchange gains are taxable to shareholders as
ordinary income, whether paid in cash or reinvested in additional shares of the
Fund. The Fund's distributions will generally not qualify to any significant
extent for any dividends-receiving deductions available to corporate
shareholders.
Certain distributions, if declared in October, November or December and paid the
following January, will be taxable to shareholders as if received on December 31
of the year in which they are declared.
Capital gains, if any, realized on sales of investments and on options and
futures transactions during the fiscal year, which ends on October 31, will be
offset by any capital losses, including any capital loss carryovers, and will be
distributed annually, usually in December, in compliance with the distribution
requirements of the Code. Distributions that the Fund designates as from its
long-term capital gains are taxable to shareholders as long-term capital gains,
whether paid in cash or additional shares of the Fund and regardless of the
length of time Fund shares have been owned by the shareholder. If shares are
purchased shortly before the record date of such a distribution, the shareholder
will pay the full price for the shares and then receive some portion of the
price back as a taxable distribution.
Income (possibly including, in some cases, capital gains) realized by a
Portfolio from certain investments may be subject to foreign income or other
foreign taxes and the Fund may make an election under Section 853 of the Code
that would allow Fund shareholders to claim a credit or deduction on their
federal income tax returns for (and treat as additional amounts distributed to
them) their pro rata portion of the Fund's allocated share of qualified taxes
paid by the Portfolio to foreign countries. This election may be made annually
only if more than 50% of the assets of the Fund, including its allocable share
of the Portfolio assets, at the close of the Fund's taxable year consists of
stock or securities in foreign corporations. The Fund will send a written notice
of any such election (not later than 60 days after the close of its taxable
year) to each shareholder indicating the amount to be treated as the
shareholder's proportionate share of such taxes. Availability of foreign tax
credits or deductions for shareholders is subject to certain additional
restrictions and limitations under the Code.
The Fund intends to qualify as a regulated investment company under the Code and
to satisfy all requirements necessary to be relieved of federal taxes on income
and gains it distributes to shareholders. In satisfying these requirements, the
Fund will treat itself as owning its proportionate share of Portfolio assets and
as entitled to the income of each Portfolio properly attributable to such share.
As a regulated investment company under the Code, the Fund does not pay federal
income or excise tax to the extent that it distributes to shareholders its net
investment income and net realized capital gains in accordance with the timing
requirements imposed by the Code. As a partnerships under the Code, the
Portfolios also do not pay federal income or excise tax.
Shareholders should consult their own tax advisers with respect to the local,
state, federal and foreign tax consequences of investing in the Fund.
PERFORMANCE INFORMATION
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FROM TIME TO TIME, THE FUND MAY ADVERTISE ITS YIELD AND/OR AVERAGE ANNUAL TOTAL
RETURN. The Fund's current yield is calculated by dividing the net investment
income per share earned during a recent 30-day period by the maximum offering
price per share (net asset value) of the Fund on the last day of the period and
annualizing the resulting figure. The Fund's average annual total return is
determined by computing the average annual percentage change in value of $1,000
invested at the maximum public offering price (net asset value) for specified
periods, assuming reinvestment of all distributions. The average annual total
return calculation assumes a complete redemption of the investment and the
deduction of any applicable CDSC at the end of the period. The Fund may also
publish annual and cumulative total return figures from time to time.
The Fund may also publish total return figures which do not take into account
any CDSC which may be imposed upon redemptions at the end of the specified
period. Any performance figure which does not take into account the CDSC would
be reduced to the extent such charge is imposed upon a redemption.
Investors should note that the investment results of the Fund will fluctuate
over time, and any presentation of the Fund's yield or total return for any
prior period should not be considered as a representation of what an investment
may earn or what the Fund's yield or total return may be in any future period.
If the expenses of the Fund or a Portfolio are allocated to Eaton Vance, the
Fund's performance will be higher.
The following chart reflects the annual investment returns of the Fund for one
year periods ending October 31 and does not take into account the CDSC which
investors may bear.
5 YEAR AVERAGE ANNUAL TOTAL RETURN -- 6.34%
1991(1) ............................................................... 7.97%
1992 .................................................................. (1.45)%
1993 .................................................................. 10.51%
1994 .................................................................. (5.33)%
1995 .................................................................. 11.34%
1996* ................................................................. 18.48%
* If a portion of the Fund's expenses had not been allocated to the
Administrator, the Fund would have had lower returns.
(1) For the period from the start of business, November 20, 1990 to October
31, 1991
<PAGE>
APPENDIX
STRATEGIC INCOME PORTFOLIO
ASSET COMPOSITION INFORMATION
FOR FISCAL YEAR ENDED OCTOBER 31, 1996
PERCENTAGE OF
NET ASSETS
--------
Debt Securities -- Moody's Rating
Aaa .............................................. 36.7%
Aa1 .............................................. 11.3
Aa2 .............................................. 11.2
A1 ............................................... 7.9
A3 ............................................... 2.7
B1 ............................................... 12.0
B2 ............................................... 0.8
B3 ............................................... 1.6
Baa3 ............................................. 14.3
Unrated .......................................... 1.5
----
Total ............................................ 100.0%
The chart above indicates the weighted average composition for the fiscal year
ended October 31, 1996 with the debt securities rated by Moody's separated into
the indicated categories. The weighted averages indicated above were calculated
on a dollar weighted basis and were computed as at the end of each month during
the period. The chart does not necessarily indicate what the composition of the
Portfolio or the Portfolio and High Income Portfolio will be in the current and
subsequent fiscal years.
For the description of Moody's ratings of debt securities, see Appendix to the
Statement of Additional Information.
<PAGE>
[logo]
EV MARATHON
STRATEGIC INCOME
FUND
PROSPECTUS
MARCH 1, 1997
EV MARATHON
STRATEGIC INCOME FUND
24 FEDERAL STREET
BOSTON, MA 02110
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INVESTMENT ADVISER AND ADMINISTRATOR OF STRATEGIC INCOME PORTFOLIO
INVESTMENT ADVISER OF HIGH INCOME PORTFOLIO
Boston Management and Research, 24 Federal Street, Boston, MA 02110
ADMINISTRATOR OF EV MARATHON STRATEGIC INCOME FUND
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 89 South Street, Boston, MA 02111
TRANSFER AGENT
First Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123
(800) 262-1122
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P., One Post Office Square, Boston, MA 02109
M-SIP
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL INFORMATION
March 1, 1997
EV CLASSIC STRATEGIC INCOME FUND
24 Federal Street
Boston, Massachusetts 02110
(800) 225-6265
This Statement of Additional Information consists of two parts. Part I
provides information about EV Classic Strategic Income Fund (the "Fund"), the
Portfolio's and certain other series of Eaton Vance Mutual Funds Trust (the
"Trust"). Part II provides information solely about the Fund and the Portfolios.
Where appropriate, Part I includes cross-references to the relevant sections of
Part II that provide additional Fund-specific information. This Statement of
Additional Information is sometimes referred to as the "SAI."
TABLE OF CONTENTS
Page
PART I
Additional Information about Investment Policies ...................... 1
Investment Restrictions ............................................... 8
Trustees and Officers ................................................. 9
Investment Adviser and Administrator .................................. 11
Custodian ............................................................. 14
Service for Withdrawal ................................................ 15
Determination of Net Asset Value ...................................... 15
Investment Performance ................................................ 15
Taxes ................................................................. 17
Portfolio Security Transactions ....................................... 19
Other Information ..................................................... 21
Independent Accountants ............................................... 22
Financial Statements .................................................. 22
Appendix .............................................................. 23
PART II
Fees and Expenses ..................................................... a-1
Principal Underwriter ................................................. a-1
Distribution Plan ..................................................... a-2
Performance Information ............................................... a-3
Control Persons and Principal Holders of Securities ................... a-4
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY THE FUND'S PROSPECTUS DATED MARCH 1, 1997, AS SUPPLEMENTED FROM
TIME TO TIME, WHICH IS INCORPORATED HEREIN BY REFERENCE. THIS STATEMENT OF
ADDITIONAL INFORMATION SHOULD BE READ IN CONJUNCTION WITH SUCH PROSPECTUS, A
COPY OF WHICH MAY BE OBTAINED WITHOUT CHARGE BY CONTACTING EATON VANCE
DISTRIBUTORS, INC. (THE "PRINCIPAL UNDERWRITER") (SEE BACK COVER FOR ADDRESS AND
PHONE NUMBER).
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART I
Capitalized terms used in this SAI and not otherwise defined have the
meanings given them in the Fund's Prospectus. The Fund is subject to the same
investment policies as those of the Portfolio.
ADDITIONAL INFORMATION ABOUT INVESTMENT POLICIES
INCOME PRODUCING SECURITIES
Included in the income producing securities in which the Portfolio may
invest are preferred and preference stocks, convertible bonds, securities of
real estate investment trusts and natural resource companies, stripped debt
obligations, closed-end investment companies (that invest primarily in debt
securities the Portfolio could invest in), equipment lease certificates,
equipment trust certificates and conditional sales contracts. Preference stocks
are stocks that have many characteristics of preferred stocks, but are typically
junior to an existing class of preferred stocks. Securities of real estate
investment trusts, such as debentures, are affected by conditions in the real
estate industry and interest rates. Securities of natural resource companies are
subject to price fluctuation based upon inflationary pressures and demand for
natural resources. Stripped debt obligations are comprised of principal only or
interest only obligations. The value of closed-end investment company
securities, which are generally traded on an exchange, is affected by demand for
those securities regardless of the demand for the underlying portfolio assets.
Equipment lease certificates are debt obligations secured by leases on equipment
(such as railroad cars, airplanes or office equipment), with the issuer of the
certificate being the owner and lessor of the equipment. The issuers of
equipment lease certificates tend to be industrial, transportation and leasing
companies. Equipment trust certificates are debt obligations secured by an
interest in property (such as railroad cars or airplanes), the title of which is
held by a trustee while the property is being used by the borrower. Conditional
sales contracts are agreements under which the seller of property continues to
hold title to the property until the purchase price is fully paid or other
conditions are met by the buyer. The Portfolio has no current intention of
investing more than 5% of its total assets in any of these types of securities.
HI Portfolio may also invest in all of the foregoing.
The Portfolio (and HI Portfolio) may purchase fixed-rate bonds which have a
demand feature allowing the holder to redeem the bonds at specified times. These
bonds are more defensive than conventional long-term bonds (protecting to some
degree against a rise in interest rates) while providing greater opportunity
than comparable intermediate term bonds, since a Portfolio may retain the bond
if interest rates decline. By acquiring these kinds of bonds a Portfolio obtains
the contractual right to require the issuer of the bonds to purchase the
security at an agreed upon price, which right is contained in the obligation
itself rather than in a separate agreement or instrument. Since this right is
assignable only with the bond, a Portfolio will not assign any separate value to
such right. A Portfolio may also purchase floating or variable rate obligations
and warrants when such warrants are part of a unit with other securities.
The Portfolio's (and HI Portfolio's) investments in high yield, high risk
obligations rated below investment grade, which have speculative
characteristics, bear special risks. They are subject to greater credit risks,
including the possibility of default or bankruptcy of the issuer. The value of
such investments may also be subject to a greater degree of volatility in
response to interest rate fluctuations, economic downturns and changes in the
financial condition of the issuer. These securities generally are less liquid
than higher quality securities. During periods of deteriorating economic
conditions and contractions in the credit markets, the ability of such issuers
to service their debt, meet projected goals or obtain additional financing may
be impaired. Each Portfolio will take such action as it considers appropriate in
the event of anticipated financial difficulties default or bankruptcy of either
the issuer of any such obligation or of the underlying source of funds for debt
service. Such action may include retaining the services of various persons and
firms (including affiliates of the Investment Adviser) to evaluate or protect
any real estate, facilities or other assets securing any such obligation or
acquired by each Portfolio as a result of any such event. A Portfolio will incur
additional expenditures in taking protective action with respect to portfolio
obligations in default and assets securing such obligations.
The Portfolio may invest in obligations of domestic and foreign companies in
the group consisting of the banking and the financial services industries.
Companies in the banking industry include U.S. and foreign commercial banking
institutions (including their parent holding companies). Companies in the
financial services industry include finance companies, diversified financial
services companies and insurance and insurance holding companies. Companies
engaged primarily in the investment banking, securities, investment advisory or
investment company business are not deemed to be in the financial services
industry for this purpose. The securities held by the Portfolio may be affected
by economic or regulatory developments in or related to such industries.
Sustained increases in interest rates can adversely affect the availability and
cost of funds for an institution's lending activities, and a deterioration in
general economic conditions could increase the institution's exposure to credit
losses.
A bank from whom a Portfolio acquires a loan participation interest may be
treated as a co-issuer for tax diversification purposes to the extent that the
Portfolio does not have direct recourse against the borrower of the underlying
loan and is therefore relying on the credit of such bank. For industry
concentration purposes, the Investment Adviser will consider all relevant
factors in determining the issuer of a loan interest, including: the credit
quality of the borrower, the amount and quality of the collateral, the terms of
the loan agreement and the other relevant agreements (including inter- creditor
agreements), the degree to which the credit of such interpositioned person was
deemed material to the decision to purchase the loan interest, the interest rate
environment, and general economic conditions applicable to the borrower and such
interpositioned person.
MORTGAGE ROLLS
The Portfolio may enter into mortgage "dollar rolls" in which the Portfolio
sells mortgage-backed securities for delivery in the current month and
simultaneously contracts to repurchase substantially similar (same type, coupon
and maturity) securities on a specified future date. During the roll period, the
Portfolio foregoes principal and interest paid on the mortgage-backed
securities. The Portfolio is compensated by the difference between the current
sales price and the lower forward price for the future purchase (often referred
to as the "drop") as well as by the interest earned on the cash proceeds of the
initial sale. A "covered roll" is a specific type of dollar roll for which there
is an offsetting cash position or a cash equivalent security position which
matures on or before the forward settlement date of the dollar roll transaction.
The Portfolio will only enter into covered rolls. Covered rolls are not treated
as a borrowing or other senior security and will be excluded from the
calculation of the Portfolio's borrowings and other senior securities.
LENDING OF PORTFOLIO SECURITIES
Each Portfolio may seek to increase its income by lending portfolio
securities to broker-dealers or other institutional borrowers. Under present
regulatory policies of the Securities and Exchange Commission, such loans are
required to be secured continuously by collateral in cash, cash equivalents or
U.S. Government securities held by the Portfolio's custodian and maintained on a
current basis at an amount at least equal to the market value of the securities
loaned, which will be marked to market daily. Cash equivalents include
certificates of deposit, commercial paper and other short-term money market
instruments. A Portfolio would have the right to call a loan and obtain the
securities loaned at any time on up to five business days' notice. During the
existence of a loan, a Portfolio will continue to receive the equivalent of the
interest paid by the issuer on the securities loaned and will also receive a fee
or all of a portion of the interest on investment of the collateral, if any.
However, a Portfolio may pay lending fees to such borrowers. A Portfolio would
not have the right to vote any securities having voting rights during the
existence of a loan, but would call the loan in anticipation of an important
vote to be taken among holders of the securities or the giving or withholding of
their consent on a material matter affecting the investment. As with other
extensions of credit there are risks of delay in recovery or even loss of rights
in the securities by the Investment Adviser to be of good standing and when the
consideration which can be earned from securities loans of this type justifies
the attendant risk. Securities lending involves administration expenses,
including finders' fees. The financial condition of the borrower will be
monitored by the Investment Adviser on an ongoing basis. If the Investment
Adviser determines to make securities loans, it is not intended that the value
of the securities loaned would exceed 30% of the Portfolio's total assets. As of
the present time, the Trustees of neither Portfolio have made a determination to
engage in this activity, and have no present intention of making such a
determination during the current fiscal year.
FOREIGN INVESTMENTS
Since foreign companies are not subject to uniform accounting, auditing and
financial reporting standards, practices and requirements comparable to those
applicable to U.S. companies, there may be less publicly available information
about a foreign company than about a domestic company. Volume and liquidity in
most foreign bond markets is less than in the United States and securities of
some foreign companies are less liquid and more volatile than securities of
comparable U.S. companies. Fixed commissions on foreign stock exchanges are
generally higher than negotiated commissions on U.S. exchanges, although each
Portfolio endeavors to achieve the most favorable net results on its portfolio
transactions. There is generally less government supervision and regulation of
securities exchanges, broker-dealers and listed companies than in the United
States. Mail service between the United States and foreign countries may be
slower or less reliable than within the United States, thus increasing the risk
of delayed settlements of portfolio transactions or loss of certificates for
portfolio securities. A Portfolio may be required to pay for securities before
delivery. In addition, with respect to certain foreign countries, there is the
possibility of expropriation or confiscatory taxation, political or social
instability, or diplomatic developments which could affect a Portfolio's
investments in those countries. Moreover, individual foreign economies may
differ favorably or unfavorably from the U.S. economy in such respects as growth
of gross national product, rate of inflation, capital reinvestment, resource
self-sufficiency and balance of payments position.
FOREIGN CURRENCY TRANSACTIONS
The value of the assets of a Portfolio as measured in U.S. dollars may be
affected favorably or unfavorably by changes in foreign currency exchange rates
and exchange control regulations. Currency exchange rates can also be affected
unpredictably by intervention by U.S. or foreign governments or central banks,
or the failure to intervene, or by currency controls or political developments
in the U.S. or abroad. A Portfolio may conduct its foreign currency exchange
transactions on a spot (i.e., cash) basis at the spot rate prevailing in the
foreign currency exchange market or through entering into swaps, forward
contracts, options or futures on currency. In spot transactions, foreign
exchange dealers do not charge a fee for conversion, but they do realize a
profit based on the difference (the "spread") between the prices at which they
are buying and selling various currencies. Thus, a dealer may offer to sell a
foreign currency to a Portfolio at one rate, while offering a lesser rate of
exchange should the Portfolio desire to resell that currency to the dealer.
Currency swaps require maintenance of a segregated account as described
under "Asset Coverage Requirements" below. The Portfolio will not enter into any
currency swap unless the credit quality of the unsecured senior debt or the
claims-paying ability of the other party thereto is considered to be investment
grade by the Investment Adviser.
The Portfolio may enter into forward foreign currency exchange contracts in
several circumstances. First, when the Portfolio enters into a contract for the
purchase or sale of a security denominated in a foreign currency, or when the
Portfolio anticipates the receipt in a foreign currency of dividend or interest
payments on such a security which it holds, the Portfolio may desire to "lock
in" the U.S. dollar price of the security or the U.S. dollar equivalent of such
dividend or interest payment, as the case may be. By entering into a forward
contract for the purchase or sale, for a fixed amount of dollars, of the amount
of foreign currency involved in the underlying transactions, the Portfolio will
attempt to protect itself against an adverse change in the relationship between
the U.S. dollar and the subject foreign currency during the period between the
date on which the security is purchased or sold, or on which the dividend or
interest payment is declared, and the date on which such payments are made or
received.
Additionally, when management of the Portfolio believes that the currency of
a particular foreign country may suffer a substantial decline against the U.S.
dollar, it may enter into a forward contract to sell, for a fixed amount of
dollars, the amount of foreign currency approximating the value of some or all
of the securities held by the Portfolio denominated in such foreign currency.
The precise matching of the forward contract amounts and the value of the
securities involved will not generally be possible because the future value of
such securities in foreign currencies will change as a consequence of market
movements in the value of those securities between the date on which the
contract is entered into and the date it matures. The precise projection of
short-term currency market movements is not possible, and short-term hedging
provides a means of fixing the dollar value of only a portion of the Portfolio's
foreign assets. The Portfolio generally will not enter into a forward contract
with a term of greater than one year.
RISKS ASSOCIATED WITH DERIVATIVE INSTRUMENTS
Entering into a derivative instrument involves a risk that the applicable
market will move against a 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 a
Portfolio's exposure to a particular market risk. Leverage enhances a
Portfolio's exposure to the price volatility of derivative instruments it holds.
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 a Portfolio's
assets. Over-the-counter ("OTC") derivative instruments involve an enhanced risk
that the issuer or counterparty will fail to perform its contractual
obligations. Some derivative instruments are not readily marketable or may
become illiquid under adverse market conditions. In addition, during periods of
market volatility, a commodity exchange may suspend or limit trading in an
exchange-traded derivative instrument, which may make the contract temporarily
illiquid and difficult to price. Commodity exchanges may also establish daily
limits on the amount that the price of a futures contract or futures option can
vary from the previous day's settlement price. Once the daily limit is reached,
no trades may be made that day at a price beyond the limit. This may prevent a
Portfolio from closing out positions and limiting its losses. The staff of the
Commission takes the position that certain purchased OTC options, and assets
used as cover for written OTC options, are subject to each Portfolio's 15% limit
on illiquid investments. A Portfolio's ability to terminate OTC derivative
instruments may depend on the cooperation of the counterparties to such
contracts. For thinly traded derivative instruments, the only source of price
quotations may be the selling dealer or counterparty. In addition, certain
provisions of the Code, limit the extent to which a Portfolio may purchase and
sell derivative instruments. Each 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".
LIMITATIONS ON FUTURES CONTRACTS AND OPTIONS
Each Portfolio may enter into futures contracts (and options thereon) traded
on a foreign exchange if it is determined by the Investment Adviser that trading
on such exchange does not subject the Portfolio to risks, including credit and
liquidity risks, that are materially greater than the risks associated with
trading on United States exchanges regulated by the CFTC.
A Portfolio will only write a put option on a security which it intends to
ultimately acquire for its portfolio. The Portfolio does not intend to purchase
any options 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.
INTEREST RATE AND CURRENCY SWAPS
Interest rate swaps involve the exchange by the Portfolio with another party
of their respective commitments to pay or receive interest, e.g., an exchange of
fixed rate payments for floating rate payments. Currency swaps involve the
exchange of their respective rights to make or receive payments in specified
currencies. The Portfolio will only enter into interest rate swaps on a net
basis, i.e., the two payment streams are netted out with the Portfolio receiving
or paying, as the case may be, only the net amount of the two payments. If the
other party to an interest rate swap defaults, the Portfolio's risk of loss
consists of the net amount of interest payments that the Portfolio is
contractually entitled to receive. In contrast, currency swaps usually involve
the delivery of the entire payment stream in one designated currency in exchange
for the entire payment stream in the other designated currency. Therefore, the
entire principal value of a currency swap is subject to the risk that the other
party to the swap will default on its contractual delivery obligations. The net
amount of the excess, if any, of the Portfolio's obligations over its
entitlements will be maintained in a segregated account by the Portfolio's
custodian. The Portfolio will not enter into any interest rate or currency swap
unless the credit quality of the unsecured senior debt or the claims-paying
ability of the other party thereto is considered to be investment grade by the
Investment Adviser. If there is a default by the other party to such a
transaction, the Portfolio will have contractual remedies pursuant to the
agreements related to the transaction. The swap market has grown substantially
in recent years with a large number of banks and investment banking firms acting
both as principals and as agents utilizing standardized swap documentation. As a
result, the swap market has become relatively liquid in comparison with the
markets for other similar instruments which are traded in the interbank market.
REVERSE REPURCHASE AGREEMENTS
Each Portfolio may enter into reverse repurchase agreements. Under a reverse
repurchase agreement, a Portfolio temporarily transfers possession of a
portfolio instrument to another party, such as a bank or broker-dealer, in
return for cash. At the same time, a Portfolio agrees to repurchase the
instrument at an agreed upon time (normally within seven days) and price, which
reflects an interest payment. A Portfolio may enter into such agreements when it
is able to invest the cash acquired at a rate higher than the cost of the
agreement, which would increase earned income. A Portfolio could also enter into
reverse repurchase agreements as a means of raising cash to satisfy redemption
requests without the necessity of selling portfolio assets.
When a Portfolio enters into a reverse repurchase agreement, any
fluctuations in the market value of either the securities transferred to another
party or the securities in which the proceeds may be invested would affect the
market value of the Portfolio's assets. As a result, such transactions may
increase fluctuations in the market value of the Portfolio's assets. While there
is a risk that large fluctuations in the market value of the Portfolio's assets
could affect the Fund's net asset value per share, this risk is not
significantly increased by entering into reverse repurchase agreements, in the
opinion of the Investment Adviser. Because reverse repurchase agreements may be
considered to be the practical equivalent of borrowing funds, they constitute a
form of leverage. If the Portfolio reinvests the proceeds of a reverse
repurchase agreement at a rate lower than the cost of the agreement, entering
into the agreement will lower the Fund's yield. Reverse repurchase agreements
will be included within "borrowings" contained in the Fund's investment
restriction (2) set forth below.
ASSET COVERAGE REQUIREMENTS
Transactions involving reverse repurchase agreements, swaps, forward
contracts or futures contracts and options (other than options that the
Portfolio has purchased) expose a Portfolio to an obligation to another party. A
Portfolio will not enter into any such transactions unless it owns either (1) an
offsetting ("covered") position in securities or other options, forward
contracts or futures contracts, or (2) cash or liquid securities (including
equities and debt) with a value sufficient at all times to cover its potential
obligations not covered as provided in (1) above. Each Portfolio will comply
with Commission guidelines regarding cover for these instruments and, if the
guidelines so require, set aside cash or liquid securities in a segregated
account with its custodian in the prescribed amount. The securities in the
segregated account will be marked to market daily.
Assets used as cover or held in a segregated account cannot be sold while
the position requiring coverage or segregation is outstanding unless they are
replaced with other appropriate assets. As a result, the commitment of a large
portion of a Portfolio's assets to segregated accounts or to cover could impede
portfolio management or the Portfolio's ability to meet redemption requests or
other current obligations.
PORTFOLIO TURNOVER
Neither Portfolio cannot accurately predict its portfolio turnover rate, but
it is anticipated that the annual turnover rate will generally not exceed 100%
(excluding turnover of securities having a maturity of one year or less). A 100%
annual turnover rate would occur, for example, if all the securities held by a
Portfolio were replaced in a period of one year. A high turnover rate (such as
100% or more) necessarily involves greater expenses to a Portfolio and may
result in the realization of substantial net short-term capital gains. The
Portfolio may engage in active short-term trading to benefit from yield
disparities among different issues of securities or among the markets for fixed
income securities of different countries, to seek short-term profits during
periods of fluctuating interest rates, or for other reasons. Such trading will
increase the Portfolio's rate of turnover and may increase the incidence of net
short-term capital gains allocated to the Fund by the Portfolio which, upon
distribution by the Fund, are taxable to Fund shareholders as ordinary income.
INVESTMENT RESTRICTIONS
The following investment restrictions of the Fund are designated as
fundamental policies and as such cannot be changed without the approval of the
holders of a majority of the Fund's outstanding voting securities, which as used
in this SAI means the lesser of (a) 67% of the shares of the Fund present or
represented by proxy at a meeting if the holders of more than 50% of the shares
are present or represented at the meeting or (b) more than 50% of the shares of
the Fund. Accordingly, the Fund may not:
(1) Purchase any security (other than securities issued or guaranteed by the
U.S. Government or any of its agencies or instrumentalities) if such purchase,
at the time thereof, would cause 25% or more of the Fund's total assets (taken
at market value) to be invested in the securities of issuers in any single
industry, provided that the electric, gas and telephone utility industries shall
be treated as separate industries for purposes of this restriction;
(2) Borrow money or issue senior securities except as permitted by the
Investment Company Act of 1940;
(3) Purchase securities on margin (but the Fund may obtain such short-term
credits as may be necessary for the clearance of purchases and sales of
securities). The deposit or payment by the Fund of initial, maintenance or
variation margin in connection with all types of options and futures contract
transactions is not considered the purchase of a security on margin;
(4) Underwrite or participate in the marketing of securities of others,
except insofar as it may technically be deemed to be an underwriter in selling a
portfolio security under circumstances which may require the registration of the
same under the Securities Act of 1933;
(5) Purchase or sell real estate, although it may purchase and sell
securities which are secured by real estate and securities of companies which
invest or deal in real estate;
(6) Purchase or sell physical commodities or futures contracts for the
purchase or sale of physical commodities, provided that the Fund may enter into
all types of futures and forward contracts on currency, securities and
securities, economic and other indices and may purchase and sell options on such
futures contracts; or
(7) Make loans to any person, except by (a) the acquisition of debt
instruments and making portfolio investments, (b) entering into repurchase
agreements, and (c) lending portfolio securities.
Notwithstanding the investment policies and restrictions of the Fund, the
Fund may invest all of its investable assets in an open-end management
investment company with substantially the same investment objective, policies
and restrictions as the Fund.
The Portfolio has adopted substantially the same fundamental investment
restrictions as the foregoing investment restrictions adopted by the Fund; such
restrictions cannot be changed without the approval of a "majority of the
outstanding voting securities" of the Portfolio.
The Fund and the Portfolio have adopted the following investment policies
which may be changed by the Trust with respect to the Fund without approval by
the Fund's shareholders or by the Portfolio with respect to the Portfolio
without approval by the Fund or its other investors. As a matter of
nonfundamental policy, the Fund and 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 with a maturity longer than
seven days. Restricted securities for the purposes of this limitation do not
include securities eligible for resale pursuant to Rule 144A under the
Securities Act of 1933 and commercial paper issued pursuant to Section 4(2) of
said Act that the Board of Trustees of the Trust or the Portfolio, or their
delegate, determines to be liquid; (b) make short sales of securities or
maintain a short position, unless at all times when a short position is open it
owns an equal amount of such securities or securities convertible into or
exchangeable, without payment of any further consideration, for securities of
the same issue as, and equal in amount to, the securities sold short, and unless
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); (c) purchase or retain in its
portfolio any securities issued by an issuer any of whose officers, directors,
trustees or security holders is an officer or Trustee of the Trust or is a
member, officer, director or trustee of any investment adviser of the Trust or
the Portfolio if after the purchase of the securities of such issuer by the Fund
or the Portfolio one or more of such persons owns beneficially more than 1/2 of
1% of the shares or securities or both (all taken at market value) of such
issuer and such persons owning more than 1/2 of 1% of such shares of securities
together own beneficially more than 5% of such shares or securities or both (all
taken at market value); and (d) purchase warrants with a value in excess of 5%
of net assets, or warrants which are not listed on the New York or American
Stock Exchange with a value in excess of 2% of its net assets. The Portfolio has
no current intention during the current year of engaging in short sales. In
addition, the Portfolio has a policy that it may not invest in other investment
companies except as permitted by the Act.
HI Portfolio has substantially the same fundamental and nonfundamental
policies as the Fund and the Portfolio except that HI Portfolio has the
following additional fundamental policy: With respect to 75% of total assets of
the Portfolio, the Portfolio may not purchase any security if such purchase, at
the time thereof, would cause more than 5% of the total assets of the Portfolio
(taken at market value) to be invested in the securities of a single issuer, or
cause more than 10% of the total outstanding voting securities of such issuer to
be held by the Portfolio, except obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities and except securities of other
investment companies.
Whenever an investment policy or investment restriction set forth in the
Prospectus or this SAI states a maximum percentage of assets that may be
invested in any security or other asset, or describes a policy regarding quality
standards, such percentage limitation or standard shall be determined
immediately after and as a result of the Fund's or a Portfolio's acquisition of
such security or asset. Accordingly, any later increase or decrease resulting
from a change in values, assets or other circumstances, other than a subsequent
rating change below investment grade made by a rating service, will not compel
the Fund or a Portfolio, as the case may be, to dispose of such security or
other asset. Notwithstanding the foregoing, under normal market conditions the
Fund and the Portfolio must take actions necessary to comply with the policy of
investing at least 65% of total assets in debt securities. Moreover, the Fund
and each Portfolio must always be in compliance with the borrowing policy set
forth above.
TRUSTEES AND OFFICERS
The Trustees and officers of the Trust and the Portfolio are listed below.
Except as indicated, each individual has held the office shown or other offices
in the same company for the last five years. Unless otherwise noted, the
business address of each Trustee and officer is 24 Federal Street, Boston,
Massachusetts 02110, which is also the address of the Portfolio's investment
adviser, Boston Management and Research ("BMR"), a wholly-owned subsidiary of
Eaton Vance Management ("Eaton Vance"); Eaton Vance's parent, Eaton Vance Corp.
("EVC"); and of BMR's and Eaton Vance's trustee, Eaton Vance, Inc. ("EV"). Eaton
Vance and EV are both wholly-owned subsidiaries of EVC. Those Trustees who are
"interested persons" of the Trust, as defined in the 1940 Act, by virtue of
their affiliation with any one or more of the Trust, the Portfolio, BMR, Eaton
Vance, EVC, or EV, are indicated by an asterisk(*).
TRUSTEES OF THE TRUST AND THE PORTFOLIO
M. DOZIER GARDNER (63), President and Trustee of the Trust*
Vice Chairman of BMR, Eaton Vance, EVC and EV, and a Director of EVC and EV.
Director, Trustee and officer of various investment companies managed by Eaton
Vance or BMR.
JAMES B. HAWKES (55), President of the Portfolio, Vice President of the Trust
and Trustee*
President and Chief Executive Officer, 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 (65), Trustee
President of Dwight Partners, Inc. (a corporate relations and communications
company) founded in 1988; Chairman of the Board of Newspapers of New England,
Inc., since 1983. Director or Trustee of various investment companies managed
by Eaton Vance or BMR.
Address: Clover Mill Lane, Lyme, New Hampshire 03768
SAMUEL L. HAYES, III (62), Trustee
Jacob H. Schiff, Professor of Investment Banking, at Harvard University Graduate
School of Business Administration. Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: Harvard University Graduate School of Business Administration,
Soldiers Field Road, Boston, Massachusetts 02163
NORTON H. REAMER (61), Trustee
President and Director, United Asset Management Corporation, a holding company
owning institutional investment management firms. Chairman, President and
Director, UAM Funds (mutual funds). Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: One International Place, Boston, Massachusetts 02110
JOHN L. THORNDIKE (70), Trustee
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 (67), Trustee
Investment Adviser and Consultant. Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: 504 Via Almar, Palos Verdes Estates, California 90274
OFFICERS OF THE TRUST AND THE PORTFOLIO
WILLIAM H. AHERN, JR. (37), Vice President of the Trust
Assistant Vice President of Eaton Vance and BMR. Officer of various investment
companies managed by Eaton Vance or BMR. Mr. Ahern was elected Vice
President of the Trust on June 19, 1995.
MARK VENEZIA (47), Vice President of the Portfolio
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
H. DAY BRIGHAM, JR. (71), Vice President of the Trust
Chairman of the Management Committee, Vice President of Eaton Vance, BMR, EVC
and EV, and a Director of EVC and EV. Director or Trustee and officer of
various investment companies managed by Eaton Vance or BMR. Mr. Brigham was
elected Vice President of the Trust on June 19, 1995.
MICHAEL B. TERRY (54), Vice President of the Trust
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR. Mr. Terry was elected Vice
President of the Trust on December 17, 1990.
JAMES L. O'CONNOR (51), Treasurer
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
THOMAS OTIS (65), Secretary
Vice President and Secretary of BMR, Eaton Vance, EVC and EV. Officer of various
investment companies managed by Eaton Vance or BMR.
JANET E. SANDERS (61), Assistant Secretary
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
A. JOHN MURPHY (34), Assistant Secretary
Assistant Vice President of BMR, Eaton Vance and EV since March 1, 1994;
employee of Eaton Vance since March 1993. Officer of various investment
companies managed by Eaton Vance or BMR. (State Regulations Supervisor, The
Boston Company, 1991-1993 and Registration Specialist, Fidelity Management &
Research Co., 1986-1991). Mr. Murphy was elected Assistant Secretary of the
Trust and the Portfolio on March 27, 1995.
JOHN P. RYNNE (54), Assistant Secretary of the Trust
Corporate Controller and Vice President of EVC. Vice President of Eaton Vance,
EVD and BMR, and Treasurer of Energex Corporation. Mr. Rynne was elected an
officer of the Trust on June 19, 1995.
ERIC G. WOODBURY (39), Assistant Secretary
Vice President of Eaton Vance since February 1993; formerly, associate attorney
at Dechert, Price & Rhoades and Gaston & Snow. Officer of various investment
companies managed by Eaton Vance or BMR. Mr. Woodbury was elected Assistant
Secretary of the Trust and the Portfolio on June 19, 1995.
Messrs. Hayes (Chairman), Reamer and Thorndike are members of the Special
Committee of the Board of Trustees of the Trust and of the Portfolio. The
purpose of the Special Committee is to consider, evaluate and make
recommendations to the full Board of Trustees concerning (i) all contractual
arrangements with service providers to the Fund, including administrative
services, transfer agency, custodial and fund accounting and distribution
services, and (ii) all other matters in which Eaton Vance or its affiliates has
any actual or potential conflict of interest with the Fund or its shareholders.
The Nominating Committee is comprised of four Trustees who are not
"interested persons" as that term is defined under the Investment Company Act of
1940 ("noninterested Trustees"). The Committee has four-year staggered terms,
with one member rotating off the Committee to be replaced by another
noninterested Trustee of the Trust. The purpose of the Committee is to recommend
to the Board nominees for the position of noninterested Trustee and to assure
that at least a majority of the Board of Trustees is independent of Eaton Vance
and its affiliates.
Messrs. Treynor (Chairman) and Dwight are members of the Audit Committee of
the Board of Trustees of the Trust and of the Portfolio. The Audit Committee's
functions include making recommendations to the Trustees regarding the selection
of the independent accountants, and reviewing with such accountants and the
Treasurer of the Trust and of the Portfolio matters relative to trading and
brokerage policies and practices, accounting and auditing practices and
procedures, accounting records, internal accounting controls, and the functions
performed by the custodian and transfer agent of the Trust and of the Portfolio.
Trustees of the Portfolio who are not affiliated with the Investment Adviser
may elect to defer receipt of all or a percentage of their annual fees in
accordance with the terms of a Trustees Deferred Compensation Plan (the "Plan").
Under the Plan, an eligible Trustee may elect to have his deferred fees invested
by the Portfolio in the shares of one or more funds in the Eaton Vance Family of
Funds, and the amount paid to the Trustees under the Plan will be determined
based upon the performance of such investments. Deferral of Trustees' fees in
accordance with the Plan will have a negligible effect on the Portfolio's
assets, liabilities, and net income per share, and will not obligate the
Portfolio to retain the services of any Trustee or obligate the Portfolio to pay
any particular level of compensation to the Trustee. Neither the Fund nor the
Portfolio has a retirement plan for its Trustees.
The fees and expenses of those Trustees of the Trust and the Portfolio who
are not members of the Eaton Vance organization (the noninterested Trustees) are
paid by the Fund (and the other series of the Trust) and the Portfolio,
respectively. For the compensation received by the noninterested Trustees of the
Trust and the Portfolio, see "Fees and Expenses" in Part II.
The noninterested Trustees of HI Portfolio are the same persons as those of
the Portfolio and M. Dozier Gardner and James B. Hawkes are the only interested
Trustees. The Committee structure and compensation policies of HI Portfolio are
identical to that of the Portfolio.
INVESTMENT ADVISER AND ADMINISTRATOR
The Portfolio engages BMR as investment adviser pursuant to an Investment
Advisory Agreement. BMR or Eaton Vance acts as investment adviser to investment
companies and various individual and institutional clients with combined assets
under management of over $17 billion.
Eaton Vance, its affiliates and its predecessor companies have been managing
assets of individuals and institutions since 1924 and managing investment
companies since 1931. They maintain a large staff of experienced fixed-income
and equity investment professionals to service the needs of their clients. The
fixed-income division focuses on all kinds of taxable investment- grade and
high-yield securities, tax-exempt investment-grade and high-yield securities,
foreign debt, and U.S. Government securities. The equity division covers stocks
ranging from blue chip to emerging growth companies.
Eaton Vance and its affiliates act as adviser to over 150 mutual funds,
individual and various institutional accounts, including corporations,
hospitals, retirement plans, universities, foundations and trusts. Eaton Vance
mutual funds feature international equities, domestic equities, municipal bonds
and tax-free U.S. government and corporate bonds. Lloyd George Management, an
investment management firm based in Hong Kong, has advised Eaton Vance's
international equity funds since 1992. Founded in 1991, Lloyd George is
headquartered in Hong Kong with offices in London and Mumbai, India. It has
established itself as a leader in investment management in Asian equities and
other global markets. Lloyd George features an experienced team of investment
professionals that began working together in the mid-1980's. Lloyd George
analysts cover East Asia, the India subcontinent, Russia and Eastern Europe,
Latin America, Australia and New Zealand from offices in Hong Kong, London and
Mumbai, India. Together Eaton Vance and Lloyd George manage over $18 billion in
assets. Eaton Vance mutual funds are distributed by Eaton Vance Distributors
both within the United States and offshore.
Eaton Vance Distributors believes that an investment professional can
provide valuable services to you to help you reach your investment goals.
Meeting investment goals requires time, objectivity and investment savvy. Before
making an investment recommendation, a representative can help you carefully
consider your short- and long-term financial goals, your tolerance for
investment risk, your investment time frame, and other investments you may
already own. Your professional investment representatives are knowledgeable
about financial markets, as well as the wide range of investment opportunities
available. A representative can provide you with tailored financial advice and
help you decide when to buy, sell or persevere with your investments.
BMR manages the investments and affairs of the Portfolio subject to the
supervision of the Portfolio's Board of Trustees. BMR furnishes to the Portfolio
investment research, advice and supervision, furnishes an investment program and
determines what securities will be purchased, held or sold by the Portfolio and
what portion, if any, of the Portfolio's assets will be held uninvested. The
Investment Advisory Agreement requires BMR to pay the salaries and fees of all
officers and Trustees of the Portfolio who are members of the BMR organization
and all personnel of BMR performing services relating to research and investment
activities. The Portfolio is responsible for all expenses not expressly stated
to be payable by BMR under the Investment Advisory Agreement, including, without
implied limitation, (i) expenses of maintaining the Portfolio and continuing its
existence, (ii) registration of the Portfolio under the 1940 Act, (iii)
commissions, fees and other expenses connected with the acquisition, holding and
disposition of securities and other investments, (iv) auditing, accounting and
legal expenses, (v) taxes and interest, (vi) governmental fees, (vii) expenses
of issue, sale and redemption of interests in the Portfolio, (viii) expenses of
registering and qualifying the Portfolio and interests in the Portfolio under
federal and state securities laws and of preparing and printing registration
statements or other offering statements or memoranda for such purposes and for
distributing the same to investors, and fees and expenses of registering and
maintaining registrations of the Portfolio and of the Portfolio's placement
agent as broker-dealer or agent under state securities laws, (ix) expenses of
reports and notices to investors and of meetings of investors and proxy
solicitations therefor, (x) expenses of reports to governmental officers and
commissions, (xi) insurance expenses, (xii) association membership dues, (xiii)
fees, expenses and disbursements of custodians and subcustodians for all
services to the Portfolio (including without limitation safekeeping of funds,
securities and other investments, keeping of books, accounts and records, and
determination of net asset values, book capital account balances and tax capital
account balances), (xiv) fees, expenses and disbursements of transfer agents,
dividend disbursing agents, investor servicing agents and registrars for all
services to the Portfolio, (xv) expenses for servicing the accounts of
investors, (xvi) any direct charges to investors approved by the Trustees of the
Portfolio, (xvii) compensation and expenses of Trustees of the Portfolio who are
not members of BMR's organization, and (xviii) such non-recurring items as may
arise, including expenses incurred in connection with litigation, proceedings
and claims and any legal obligation of the Portfolio to indemnify its Trustees,
officers and investors with respect thereto to the extent not covered by
insurance.
For a description of the compensation that the Portfolio pays BMR under the
Investment Advisory Agreement, see the Fund's current Prospectus. As of October
31, 1996, the Portfolio had net assets of $132,406,799. For the fiscal years
ended 1996, 1995 and for the period from the start of business March 1, 1994 to
October 31, 1994, the Portfolio paid BMR advisory fees of $744,744, $992,620 and
$1,004,670, respectively, (equivalent to 0.54%, 0.55% and 0.49%, respectively,
(annualized) of the Portfolio's average daily net assets for such period).
The Investment Advisory Agreement with BMR remains in effect until February
28, 1998. It may be continued indefinitely thereafter so long as such
continuance after February 28, 1998 is approved at least annually (i) by the
vote of a majority of the Trustees of the Portfolio who are not interested
persons of the Portfolio or of BMR cast in person at a meeting specifically
called for the purpose of voting on such approval and (ii) by the Board of
Trustees of the Portfolio or by vote of a majority of the outstanding voting
securities of the Portfolio. The Agreement may be terminated at any time without
penalty on sixty (60) days' written notice by the Board of Trustees of either
party, or by vote of the majority of the outstanding voting securities of the
Portfolio, and the Agreement will terminate automatically in the event of its
assignment. The Agreement provides that BMR may render services to others and
engage in other business activities and may permit other fund clients and other
corporations and organizations to use the words "Eaton Vance" or "Boston
Management and Research" in their names. The Agreement also provides that BMR
shall not be liable for any loss incurred in connection with the performance of
its duties, or action taken or omitted under that Agreement, in the absence of
willful misfeasance, bad faith, gross negligence in the performance of its
duties or by reason of its reckless disregard of its obligations and duties
thereunder, or for any losses sustained in the acquisition, holding or
disposition of any security or other investment.
The investment advisory agreement of HI Portfolio with BMR is substantially
the same as that of the Portfolio. With respect to assets of the Fund invested
in HI Portfolio, BMR's monthly fee is equal to the aggregate of
(a) a daily asset based fee computed by applying the annual asset rate
applicable to that portion of the total daily net assets in each
Category as indicated below, plus
(b) a daily income based fee computed by applying the daily income rate
applicable to that portion of the total daily gross income (which
portion shall bear the same relationship to the total daily gross income
on such day as that portion of the total daily net assets in the same
Category bears to the total daily net assets on such day) in each
Category as indicated below:
ANNUAL DAILY
CATEGORY DAILY NET ASSETS ASSET RATE INCOME RATE
------------------------------------------------------------------------------
1 up to $500 million 0.300% 3.00%
2 $500 million but less than $1 billion 0.275% 2.75%
3 $1 billion but less than $1.5 billion 0.250% 2.50%
4 $1.5 billion but less than $2 billion 0.225% 2.25%
5 $2 billion but less than $3 billion 0.200% 2.00%
6 $3 billion and over 0.175% 1.75%
For the fiscal years ended March 31, 1996, 1995 and 1994, HI advisory fees
equaled %, .63% and .64%, respectively of average daily net assets.
The Portfolio has also engaged BMR to act as its Administrator under an
Administration Agreement. The Administration Agreement with BMR remains in
effect until February 28, 1998 and shall continue in full force and effect
indefinitely thereafter, but only so long as such continuance is approved at
least annually (i) by the Trustees of the Portfolio and (ii) by the vote of a
majority of those Trustees of the Portfolio who are not interested persons of
the Portfolio or of the Administrator. Under the Administration Agreement, BMR
is obligated to (a) review and supervise the provision of all domestic and
foreign custodial services to the Portfolio, and to make such reports and
recommendations to the Board of Trustees of the Portfolio concerning the
provision of such services as the Board deems appropriate; (b) provide to the
Portfolio certain valuation, legal, accounting and tax assistance and services
in connection with the Portfolio's (i) investments in (A) securities,
obligations and commercial paper that are denominated in foreign currencies or
the European Currency Unit ("ECU"), or that are issued or guaranteed by foreign
entities, (B) certificates of deposit and bankers' acceptances issued or
guaranteed by, or time deposits maintained at, foreign banks or foreign branches
of U.S. banks, and (C) participation interests in loans by U.S. or foreign banks
that are made to foreign borrowers or that are denominated in foreign currencies
or the ECU; and (ii) transactions in derivative instruments, including
instruments indexed to foreign exchange rates, forward foreign currency exchange
contracts, put and call options on foreign currencies, futures contracts and
options on such contracts, and interest rate and currency swaps; and (c) provide
to the Portfolio such other special administrative services as the Board from
time to time shall instruct BMR to furnish under the Administration Agreement.
In return for these special services, the Portfolio pays BMR as compensation
under the Administration Agreement a monthly fee in the amount of .0125%
(equivalent to .15% annually) of the average daily net assets of the Portfolio.
For the fiscal year ended October 31, 1996, 1995 and for the period from the
start of business March 1, 1994, to October 31, 1994, the Portfolio paid BMR
administration fees of $208,657, $273,545 and $284,828, respectively.
The Portfolio will be responsible for all costs and expenses not expressly
stated to be payable by BMR under the Administration Agreement. Such costs and
expenses to be borne by the Portfolio include, without limitation, the fees and
expenses of the Portfolio's custodian and transfer agent, including those
incurred for determining the Portfolio's net asset value and keeping the
Portfolio's books; expenses of pricing and valuation services; membership dues
in investment company organizations; brokerage commissions and fees;
registration of the Portfolio under the 1940 Act; expenses of reports to
investors, proxy statements, and other expenses of investor's meetings;
insurance premiums; printing and mailing expenses; interest, taxes and
governmental fees; legal and accounting expenses; compensation and expenses of
Trustees not affiliated with BMR; and investment advisory and administration
fees. The Portfolio will also bear expenses incurred in connection with
litigation in which the Portfolio is a party and the legal obligation the
Portfolio may have to indemnify its officers and Trustees with respect thereto.
As indicated in the Prospectus, Eaton Vance serves as administrator of the
Fund but currently receives no compensation for providing administrative
services to the Fund. Under its Administrative Services Agreement with the Fund,
Eaton Vance has been engaged to administer the Fund's affairs, subject to the
supervision of the Trustees of the Trust, and shall furnish for the use of the
Fund office space and all necessary office facilities, equipment and personnel
for administering the affairs of the Fund. For additional information about the
Administrator, see "Fees and Expenses" in Part II.
IBT Trust Company (Cayman), Ltd. maintains HI Portfolio's principal office
and certain of its records and provides administrative assistance in
connection with meetings of its Trustees and interestholders.
The Fund pays all of its own expenses including, without limitation, (i)
expenses of maintaining the Fund and continuing its existence, (ii) registration
of the Trust under the 1940 Act, (iii) commissions, fees and other expenses
connected with the purchase or sale of securities and other investments, (iv)
auditing, accounting and legal expenses, (v) taxes and interest, (vi)
governmental fees, (vii) expenses of issue, sale, repurchase and redemption of
shares, (viii) expenses of registering and qualifying the Fund and its shares
under Federal and state securities laws and of preparing and printing
prospectuses for such purposes and for distributing the same to shareholders and
investors, and fees and expenses of registering and maintaining registrations of
the Fund and of the Fund's principal underwriter, if any, as broker-dealer or
agent under state securities laws, (ix) expenses of reports and notices to
shareholders and of meetings of shareholders and proxy solicitations therefor,
(x) expenses of reports to governmental officers and commissions, (xi) insurance
expenses, (xii) association membership dues, (xiii) fees, expenses and
disbursements of custodians and subcustodians for all services to the Fund
(including without limitation safekeeping of funds, securities and other
investments, keeping of books and accounts and determination of net asset
values), (xiv) fees, expenses and disbursements of transfer agents, dividend
disbursing agents, shareholder servicing agents and registrars for all services
to the Fund, (xv) expenses for servicing shareholder accounts, (xvi) any direct
charges to shareholders approved by the Trustees of the Trust, (xvii)
compensation and expenses of Trustees of the Trust who are not members of the
Eaton Vance organization, and (xviii) such non-recurring items as may arise,
including expenses incurred in connection with litigation, proceedings and
claims and the obligation of the Trust to indemnify its Trustees and officers
with respect thereto.
BMR is a wholly-owned subsidiary of Eaton Vance. Eaton Vance and EV are both
wholly-owned subsidiaries of EVC. BMR and Eaton Vance are both Massachusetts
business trusts, and EV is the trustee of BMR and Eaton Vance. The Directors of
EV are Landon T. Clay, Thomas E. Faust, 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. Hawkes
is president and chief executive officer of EVC, BMR, Eaton Vance and EV. All of
the issued and outstanding shares of Eaton Vance and EV are owned by EVC. All of
the issued and outstanding shares of BMR are owned by Eaton Vance. All shares of
the outstanding Voting Common Stock of EVC are deposited in a Voting Trust which
expires on December 31, 1997, the Voting Trustees of which are Messrs. Clay,
Faust, 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
January 31, 1996, Messrs. Clay, Gardner and Hawkes each owned 24% of such voting
trust receipts, and Messrs. Rowland and Faust, owned 15% and 13%, respectively,
of such voting trust receipts. Messrs. Gardner, Woodbury, Murphy, Gardner, Clay,
Faust, Otis, Venezia, O'Connor, Ahern and Rynne and Ms. Sanders who are officers
or Trustees of the Trust and/or the Portfolio, are also members of the EVC, BMR,
Eaton Vance and EV organizations. BMR will receive the fees paid under the
Investment Advisory Agreement and the Administration Agreement.
EVC owns all of the stock of Energex Energy Corporation, which engages in
oil and gas exploration and development operations. In addition, Eaton Vance
owns all the stock of Northeast Properties, Inc., which is engaged in real
estate investment, consulting and management. EVC owns all the stock of Fulcrum
Management, Inc. and MinVen, Inc., which are engaged in precious metal mining,
venture investment and management. EVC also owns 24% of the Class A shares of
Lloyd George Management (B.V.I.) Limited, a registered investment adviser. Eaton
Vance, BMR, EVC and EV may also enter into other businesses.
EVC and its affiliates and their officers and employees from time to time
have transactions with various banks, including the custodian of the Fund and
the Portfolios, Investors Bank & Trust Company. It is Eaton Vance's opinion that
the terms and conditions of such transactions were not and will not be
influenced by existing or potential custodial or other relationships between the
Fund or the Portfolios and such banks.
CUSTODIAN
Investors Bank & Trust Company ("IBT"), 89 South Street, Boston,
Massachusetts acts as custodian for the Fund and each Portfolio. IBT has the
custody of all cash and securities representing the Fund's interest in the
Portfolios, has custody of all the Portfolios' assets, maintains the general
ledger of the Portfolios and the Fund and computes the daily net asset value of
interests in the Portfolios and the net asset value of shares of the Fund. In
such capacity it attends to details in connection with the sale, exchange,
substitution, transfer or other dealings with the Portfolios' investments,
receives and disburses all funds and performs various other ministerial duties
upon receipt of proper instructions from the Fund and the Portfolios. IBT
charges custody fees which are competitive within the industry. The fees for the
Portfolios relate to 1) bookkeeping and valuation services provided at an annual
rate, 2) activity charges based upon the volume of investment related
transactions, and 3) reimbursement of out-of-pocket expenses. These fees are
then reduced by a credit for cash balances of the Portfolios at the custodian
equal to 75% of the 91-day, U.S. Treasury Bill auction rate applied to the
Portfolios' average daily collected balances. The fee for the Fund relates to
bookkeeping and valuation services and is based upon a percentage of the Fund's
net assets. IBT also provides services in connection with the preparation of
shareholder reports and the electronic filing of such reports with the
Commission for which it receives a separate fee. Landon T. Clay, a Director of
EVC and an officer, Trustee or Director of other entities in the Eaton Vance
organization, owns approximately 13% of the voting stock of Investors Financial
Services Corp., the holding company parent of IBT. Management believes that such
ownership does not create an affiliated person relationship between the Fund or
either Portfolio and IBT under the Act.
SERVICE FOR WITHDRAWAL
The Transfer Agent will send to the shareholder regular monthly or quarterly
payments of any permitted amount designated by the shareholder (see "Eaton Vance
Shareholder Services -- Withdrawal Plan" in the Fund's current Prospectus) based
upon the value of the shares held. The checks will be drawn from share
redemptions and hence, are a return of principal. Income dividends and capital
gains distributions in connection with withdrawal accounts will be credited at
net asset value as of the record date for each distribution. Continued
withdrawals in excess of current income will eventually use up principal,
particularly in a period of declining market prices. A shareholder may not have
a withdrawal plan in effect at the same time he or she has authorized Bank
Automated Investing or is otherwise making regular purchases of Fund shares. The
shareholder, the Transfer Agent or the Principal Underwriter will be able to
terminate the withdrawal plan at any time without penalty.
DETERMINATION OF NET ASSET VALUE
The net asset value of the shares of the Fund is determined by IBT (as agent
and custodian for the Fund) in the manner described under "Valuing Fund Shares"
in the Fund's current Prospectus. The net asset value of the Portfolio is also
computed by IBT (as agent and custodian for the Portfolio) by subtracting the
liabilities of the Portfolio from the value of its total assets. IBT Fund
Services (Canada) Inc. determines the net asset value of HI Portfolio. The Fund
and the Portfolios will be closed for business and will not price their
respective shares or interests on the following business holidays: New Year's
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
Debt securities (other than mortgage-backed, "pass-through" securities and
short-term obligations maturing in sixty days or less), including listed
securities and securities for which price quotations are available and forward
contracts, will normally be valued on the basis of market valuations furnished
by pricing services. Mortgage-backed "pass-through" securities are valued using
a matrix pricing system which takes into account closing bond valuations, yield
differentials, anticipated prepayments and interest rates. Financial futures
contracts listed on commodity exchanges and exchange-traded options are valued
at closing settlement prices. Over-the-counter options are valued at the mean
between the bid and asked prices provided by dealers. Short-term obligations and
money market securities maturing in sixty days or less are valued at amortized
cost which approximates value. Non-U.S. dollar denominated short-term
obligations maturing in sixty days or less are valued at amortized cost as
calculated in the base currency and translated into U.S. dollars at the current
exchange rate. Investments for which market quotations are unavailable are
valued at fair value using methods determined in good faith by or at the
direction of the Trustees of the Portfolio.
The value of all assets and liabilities expressed in foreign currencies will
be converted into U.S. dollar values at the mean between the buying and selling
rates of such currencies against U.S. dollars last quoted on one of the
principal markets for such currencies. Generally, trading in foreign securities,
derivative instruments and currencies is substantially completed each day at
various times prior to the time a Portfolio calculates its net asset value. If
an event materially affecting the values of such securities, instruments or
currencies occurs between the time such values are determined and the time net
asset value is calculated, such securities, instruments or currencies may be
valued at fair value.
Each investor in a Portfolio, including the Fund, may add to or reduce its
investment in the Portfolio on each day the New York Stock Exchange (the
"Exchange") is open for trading ("Portfolio Business Day") as of the close of
regular trading on the Exchange (the "Portfolio Valuation Time"). The value of
each investor's interest in a Portfolio will be determined by multiplying the
net asset value of the Portfolio by the percentage, determined on the prior
Portfolio Business Day, which represented that investor's share of the aggregate
interests in the Portfolio on such prior day. Any additions or withdrawals for
the current Portfolio Business Day will then be recorded. Each investor's
percentage of the aggregate interest in a Portfolio will then be recomputed as a
percentage equal to a fraction (i) the numerator of which is the value of such
investor's investment in the Portfolio as of the Portfolio Valuation Time on the
prior Portfolio Business Day plus or minus, as the case may be, the amount of
any additions to or withdrawals from the investor's investment in the Portfolio
on the current Portfolio Business Day and (ii) the denominator of which is the
aggregate net asset value of the Portfolio as of the Portfolio Valuation Time on
the prior Portfolio Business Day plus or minus, as the case may be, the amount
of the net additions to or withdrawals from the aggregate investment in the
Portfolio on the current Portfolio Business Day by all investors in the
Portfolio. The percentage so determined will then be applied to determine the
value of the investor's interest in a Portfolio for the current Portfolio
Business Day.
INVESTMENT PERFORMANCE
Average annual total return is determined by multiplying a hypothetical
initial purchase order of $1,000 by the average annual compound rate of return
(including capital appreciation/depreciation, and dividends and distributions
paid and reinvested) for the stated period and annualizing the results. The
calculation assumes that all distributions are reinvested at net asset value on
the reinvestment dates during the period, and a complete redemption of the
investment and, if applicable, the deduction of the contingent deferred sales
charge at the end of the period. For further information concerning the total
return of the Fund, see "Performance Information" in Part II.
Yield is computed pursuant to a standardized formula by dividing the net
investment income per share earned during a recent 30-day period by the maximum
offering price per share on the last day of the period and annualizing the
resulting figure. Net investment income per share is calculated from the yields
to maturity of all debt obligations held by a Portfolio based on prescribed
methods, reduced by accrued Fund expenses for the period, with the resulting
number being divided by the average daily number of Fund shares outstanding and
entitled to receive distributions during the period. This yield figure does not
reflect the deduction of any contingent deferred sales charges (if applicable)
imposed upon certain redemptions at the rates set forth under "How to Redeem
Fund Shares" in the Fund's current Prospectus. For the yield of the Fund, see
"Performance Information" in Part II.
The Principal Underwriter may publish to Authorized Firms the Fund's
distribution rate and/or its effective distribution rate. The Fund's
distribution rate is computed by dividing the most recent monthly distribution
per share annualized, by the current net asset value per share. The Fund's
effective distribution rate is computed by dividing the distribution rate by the
ratio (the days in a year divided by the accrual days of the monthly period)
used to annualize the most recent monthly distribution and reinvesting the
resulting amount for a full year on the basis of such ratio. The effective
distribution rate will be higher than the distribution rate because of the
compounding effect of the assumed reinvestment. Investors should note that the
Fund's yield is calculated using a standardized formula, the income component of
which is computed from the yields to maturity of all debt obligations held by a
Portfolio based on prescribed methods (with all purchases and sales of
securities during such period included in the income calculation on a settlement
date basis), whereas the distribution rate is based on the Fund's last monthly
distribution, which tends to be relatively stable and may be more or less than
the amount of net investment income and short-term capital gain actually earned
by the Fund during the month. See "Distributions and Taxes" in the Fund's
current Prospectus. For the Fund's distribution rate and effective distribution
rate, see "Performance Information" in Part II.
The Fund's total return may be compared to various domestic, international
and global securities indices, such as the Commodity Research Bureau Futures
Price Index. The Fund's yield may also be compared to the yields of other
fixed-income securities, such as U.S. Treasuries, mortgage-backed securities,
and corporate bonds or other securities comparable to the securities held by a
Portfolio as reported by various independent sources (such as Bloomberg L.P.).
In making such comparisons, the Fund may provide information concerning the
nature of such indices or securities. This information may be used in
advertisements and in information furnished to present or prospective
shareholders. The Fund's performance may differ from that of other investors in
the Portfolio, including other investment companies.
Evaluations of the Fund's performance (including rankings) made by
independent sources, e.g., Lipper Analytical Services, Inc., CDA/Wiesenberger
and Morningstar, Inc., may be used in advertisements and in information
furnished to present or prospective shareholders. In addition, information
showing the effects of compounding interest may be included in advertisements
and other material furnished to present and prospective shareholders.
Compounding is the process of earning interest on principal plus interest that
was earned earlier. Interest can be compounded annually, semi-annually,
quarterly or daily. Examples of compounding will be used for illustration
purposes only.
The Fund may also provide investors and prospective investors with
information on the Fund's duration and duration's relationship to the stability
or volatility of a security's price. The Fund may also provide information
concerning the diversification of the Portfolios (on such basis as country of
issuer's origin, industry sector or security type), as well as the allocation of
securities held by the Portfolios across various rating categories. In addition,
information on the Portfolios' turnover rate may be provided to investors and
prospective investors.
Information used in advertisements and materials furnished to present and
prospective investors may include statements or illustrations relating to the
appropriateness of certain types of securities and/or mutual funds to meet
specific financial goals. Such information may address:
-- cost associated with aging parents;
-- funding a college education (including its actual and estimated cost);
-- health care expenses (including actual and projected expenses);
-- long-term disabilities (including the availability of, and coverage
provided by, disability insurance); and
-- retirement (including the availability of social security benefits,
the tax treatment of such benefits and statistics and other
information relating to maintaining a particular standard of living
and outliving existing assets).
Such information may also address different methods for saving money and the
results of such methods, as well as the benefits of investing in equity
securities. Such information may describe: the potential for growth; the
performance of equities as compared to other investment vehicles; and the value
of investing as early as possible and regularly, as well as staying invested.
The benefits of investing in equity securities by means of a mutual fund may
also be included (such benefits may include diversification, professional
management and the variety of equity mutual fund products).
Information in advertisements and materials furnished to present and
prospective investors may include profiles of different types of investors
(i.e., investors with different goals and assets) and different investment
strategies for meeting specific financial goals. Such information may provide
hypothetical illustrations which include: results of various investment
strategies; performance of an investment in the Fund over various time periods;
and results of diversifying assets among several investments with varying
performance. Information in advertisements and materials furnished to present
and prospective investors may also include quotations (including editorial
comments) and statistics concerning investing in securities, as well as
investing in particular types of securities and the performance of such
securities.
Eaton Vance Distributors believes that an investment professional can
provide valuable services to you to help you reach your investment goals.
Meeting investment goals requires time, objectivity and investment savvy. Before
making an investment recommendation, a representative can help you carefully
consider your short- and long-term financial goals, your tolerance for
investment risk, your investment time frame, and other investments you may
already own. Your professional investment representatives are knowledgeable
about financial markets, as well as the wide range of investment opportunities
available. A representative can help you decide when to buy, sell or persevere
with your investments. A professional investment representative can provide you
with tailored financial advice. Information about investment professionals may
appear in sales literature and advertisements used by the Fund.
The Fund may provide information about Eaton Vance, its affiliates and other
investment advisers to the funds in the Eaton Vance Family of Funds in sales
material or advertisements provided to investors or prospective investors. Such
material or advertisements may also provide information on the use of investment
professionals by such investors.
TAXES
FEDERAL INCOME TAXES
Each series of the Trust is treated as a separate entity for federal income
tax purposes. The Fund has elected to be treated, has qualified, and intends to
continue to qualify each year as a regulated investment company ("RIC") under
the Code. Accordingly, the Fund intends to satisfy certain requirements relating
to sources of its income and diversification of its assets and to distribute all
of its net investment income and net realized capital gains in accordance with
the timing requirements imposed by the Code, so as to avoid any federal income
or excise tax to the Fund. The Fund so qualified for its fiscal year ended
October 31, 1995. (see the Notes to Financial Statements incorporated by
reference into this SAI). Because the Fund invests substantially all of its
assets in the Portfolios, the Portfolios normally must satisfy the applicable
source of income and diversification requirements in order for the Fund to
satisfy them. Each Portfolio will allocate at least annually among its
investors, including the Fund, each investor's distributive share of the
Portfolio's net taxable and tax-exempt (if any) investment income, net realized
capital gains, and any other items of income, gain, loss, deduction or credit.
For purposes of applying the requirements of the Code regarding qualification as
a RIC, the Fund will be deemed (i) to own its proportionate share of each of the
assets of a Portfolio and (ii) to be entitled to the gross income of a Portfolio
attributable to such share.
In order to avoid federal excise tax, the Code requires that the Fund
distribute by December 31 of each calendar year at least 98% of its ordinary
income (not including tax-exempt income) for such year, at least 98% of the
excess of its realized capital gains over its realized capital losses, generally
computed on the basis of the one-year period ending on October 31 of such year,
after reduction by any available capital loss carryforwards, and 100% of any
income from the prior year (as previously computed) that was not paid out during
such year and on which the Fund paid no federal income tax. Under current law,
provided that the Fund qualifies as a RIC for federal income tax purposes and
the Portfolios are treated as a partnership for Massachusetts and federal tax
purposes, neither the Fund nor a Portfolio is liable for any income, corporate
excise or franchise tax in the Commonwealth of Massachusetts.
A Portfolio's transactions in options, futures contracts and forward
contracts will be subject to special tax rules that may affect the amount,
timing and character of Fund distributions to shareholders. For example, certain
positions held by a Portfolio on the last business day of each taxable year will
be marked to market (i.e., treated as if closed out on such day), and any
resulting gain or loss will generally be treated as 60% long-term and 40%
short-term capital gain or loss. Certain positions held by a Portfolio that
substantially diminish the Portfolio's risk of loss with respect to other
positions in its portfolio may constitute "straddles," which are subject to tax
rules that may cause deferral of Portfolio losses, adjustments in the holding
periods of Portfolio securities and conversion of short-term into long-term
capital losses. A Portfolio may make certain elections to mitigate adverse
consequences of these tax rules and may have to limit its activities in options,
futures contracts and forward contracts in order to enable the Fund to maintain
its qualification as a RIC.
The Portfolio may be subject to foreign withholding or other foreign taxes
with respect to income (possibly including, in some cases, capital gains)
derived from foreign securities. These taxes may be reduced or eliminated under
the terms of an applicable U.S. income tax treaty. Since it is expected that
more than 50% of the value of the total assets of the Fund taking into account
its allocable share of the Portfolios' total assets, at the close of any taxable
year may consist of securities issued by foreign corporations, the Fund may be
eligible to pass through to shareholders their proportionate shares of foreign
taxes paid by the Fund, with the result that shareholders would include such
proportionate shares in income subject to federal income tax and would be
entitled to take a foreign tax credit or deduction for such foreign taxes,
subject to certain limitations. Certain foreign exchange gains and losses
realized by the Fund will be treated as ordinary income and losses. Certain uses
of foreign currency, foreign currency options, futures and forward contracts,
and interest rate and currency swaps, and investment by the Portfolios in
certain "passive foreign investment companies" may be limited or a tax election
may be made, if available, in order to preserve the Fund's qualification as a
RIC and/or avoid imposition of a tax on the Fund.
A Portfolio's investment in zero coupon, deferred interest and payment in
kind securities will cause it to realize income prior to the receipt of cash
payments with respect to these securities. Such income will be allocated daily
to interests in a Portfolio, and in order to distribute its proportionate share
of this income and avoid a tax payable by the Fund, the Portfolio may be
required to liquidate portfolio securities that it might otherwise have
continued to hold in order to generate cash that the Fund may withdraw from the
Portfolio for subsequent distribution to Fund shareholders.
The appropriate tax accounting for dollar rolls is also uncertain in some
respects, and the Portfolio's use of such rolls may accordingly be limited in
order to preserve the Fund's qualification as a RIC.
Investments in lower-rated or unrated securities may present special tax
issues for a Portfolio and hence for the Fund to the extent actual or
anticipated defaults may be more likely with respect to such securities. Tax
rules are not entirely clear about issues such as when a Portfolio may cease to
accrue interest, original issue discount, or market discount; when and to what
extent deductions may be taken for bad debts or worthless securities; how
payments received on obligations in default should be allocated between
principal and income; and whether exchanges of debt obligations in a workout
context are taxable.
The Fund's distributions of taxable net investment income, the excess of net
short-term capital gain over net long-term capital loss and certain foreign
exchange gains earned by a Portfolio and allocated to the Fund are taxable to
shareholders of the Fund as ordinary income whether received in cash or
reinvested in additional shares. Only a small portion, if any, of such
distributions of net investment income made by the Fund may qualify for the
dividends-received deduction for corporations, subject to applicable limitations
under the Code. The Fund's distributions of the excess of net long-term capital
gain over net short-term capital loss (including any capital losses carried
forward from prior years) earned by a Portfolio and allocated to the Fund are
taxable to shareholders of the Fund as long-term capital gains, whether received
in cash or in additional shares and regardless of the length of time their
shares of the Fund have been held.
Any loss realized upon the redemption or exchange of shares of the Fund with
a tax holding period of 6 months or less will be treated as a long-term capital
loss to the extent of any distribution of net long-term capital gains with
respect to such shares. All or a portion of any loss realized upon a taxable
disposition of Fund shares may be disallowed under "wash sale" rules if other
shares of the Fund are purchased (whether through the reinvestment of
distributions or otherwise) within 30 days before or after such disposition.
Special tax rules apply to Individual Retirement Accounts ("IRAs") and other
retirement plans, and persons investing through such plans should consult their
tax advisers for more information. The deductibility of contributions to IRAs
may be restricted or eliminated for particular shareholders.
Amounts paid by the Fund to individuals and certain other shareholders who
have not provided the Fund with their correct taxpayer identification number and
certain certifications required by the Internal Revenue Service ("IRS"), as well
as shareholders with respect to whom the Fund has received notification from the
IRS or a broker, may be subject to "backup" withholding of federal income tax
from the Fund's taxable dividends and distributions and the proceeds of
redemptions (including repurchases and exchanges), at a rate of 31%. An
individual's taxpayer identification number is generally his or her social
security number.
Non-resident alien individuals, foreign corporations and certain other
foreign entities generally will be subject to a U.S. withholding tax at a rate
of 30% on the Fund's distributions from its ordinary income and the excess of
its net short-term capital gain over its net long-term capital loss, unless the
tax is reduced or eliminated by an applicable tax treaty. Distributions from the
excess of the Fund's net long-term capital gain over its net short-term capital
loss received by such shareholders and any gain from the sale or other
disposition of shares of the Fund generally will not be subject to U.S. federal
income taxation, provided that non-resident alien status has been certified by
the shareholder. Different U.S. tax consequences may result if the shareholder
is engaged in a trade or business in the United States, is present in the United
States for a sufficient period of time during a taxable year to be treated as a
U.S. resident, or fails to provide any required certifications regarding status
as a non-resident alien investor. Foreign shareholders should consult their tax
advisers regarding the U.S. and foreign tax consequences of an investment in the
Fund.
The Fund had qualified to do business in the Commonwealth of Pennsylvania
and, therefore, was subject to the Pennsylvania foreign franchise and corporate
net income tax in respect of its business activities in Pennsylvania. The amount
of such taxes was $28,080 for the fiscal year ended October 31, 1994. In 1995,
however, the Fund took actions to cease doing business in Pennsylvania and does
not intend to pay Pennsylvania foreign franchise and corporate net income tax in
Pennsylvania. Accordingly, Fund shareholders should consult their tax advisers
regarding the applicability of Pennsylvania local and county personal property
taxes.
The foregoing discussion does not address the special tax rules applicable
to certain classes of investors, such as retirement plans, tax-exempt entities,
insurance companies and financial institutions. Shareholders should consult
their own tax advisers with respect to special tax rules that may apply in their
particular situations, as well as the state, local or foreign tax consequences
of investing in the Fund.
PORTFOLIO SECURITY TRANSACTIONS
Decisions concerning the execution of portfolio security transactions,
including the selection of the market and the executing firm, are made by BMR.
BMR is also responsible for the execution of transactions for all other accounts
managed by it.
BMR places the portfolio security transactions of each Portfolio and of all
other accounts managed by it for execution with many firms. BMR uses its best
efforts to obtain execution of portfolio security transactions at prices which
are advantageous to a Portfolio and at reasonably competitive spreads or (when a
disclosed commission is being charged) at reasonably competitive commission
rates. In seeking such execution, BMR will use its best judgment in evaluating
the terms of a transaction, and will give consideration to various relevant
factors, including without limitation the size and type of the transaction, the
nature and character of the market for the security, the confidentiality, speed
and certainty of effective execution required for the transaction, the general
execution and operational capabilities of the executing firm, the reputation,
reliability, experience and financial condition of the firm, the value and
quality of the services rendered by the firm in this and other transactions, and
the reasonableness of the spread or commission, if any. The debt securities and
obligations purchased and sold by a Portfolio are generally traded in the
domestic or foreign over-the-counter markets on a net basis (i.e. without
commission) through broker-dealers and banks acting for their own account rather
than as brokers, or otherwise involve transactions directly with the issuer of
such obligations. Such firms attempt to profit from such transactions by buying
at the bid price and selling at the higher asked price of the market for such
obligations, and the difference between the bid and asked price is customarily
referred to as the spread. A Portfolio may also purchase debt securities from
domestic and foreign underwriters, the cost of which may include undisclosed
fees and concessions to the underwriters. Transactions in foreign obligations
usually involve the payment of fixed brokerage commissions when executed on
foreign securities exchanges, which commissions are generally higher than those
in the United States. 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 firms who were selected to execute transactions on behalf of the
Portfolio and BMR's other clients for providing brokerage and research services
to BMR.
As authorized in Section 28(e) of the Securities Exchange Act of 1934, a
broker or dealer who executes a portfolio transaction on behalf of a 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 and of the
advisers of investment companies, institutions and other investors to receive
research, statistical and quotation services, data, information and other
services, products and materials which assist such advisers in the performance
of their investment responsibilities ("Research Services") from broker-dealer
firms which execute portfolio transactions for the clients of such advisers and
from third parties with which such broker-dealers have arrangements. Consistent
with this practice, BMR receives Research Services from many broker-dealer firms
with which BMR places the Portfolio transactions and from third parties with
which these broker-dealers have arrangements. These Research Services include
such matters as general economic and market reviews, industry and company
reviews, evaluations of securities and portfolio strategies and transactions 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
Portfolios is not reduced because BMR receives such Research Services. BMR
evaluates the nature and quality of the various Research Services obtained
through broker-dealer firms and attempts to allocate sufficient commissions to
such firms to ensure the continued receipt of Research Services which BMR
believes are useful or of value to it in rendering investment advisory services
to its clients.
Subject to the requirement that BMR shall use its best efforts to seek and
execute portfolio security transactions at advantageous prices and at reasonably
competitive spreads or commission rates, BMR is authorized to consider as a
factor in the selection of any firm with whom portfolio orders may be placed the
fact that such firm has sold or is selling shares of the Fund or of other
investment companies sponsored by BMR or Eaton Vance. This policy is not
inconsistent with a rule of the National Association of Securities Dealers,
Inc., which rule provides that no firm which is a member of the Association
shall favor or disfavor the distribution of shares of any particular investment
company or group of investment companies on the basis of brokerage commissions
received or expected by such firm from any source.
Securities considered as investments for the Portfolios may also be
appropriate for other investment accounts managed by BMR or its affiliates. BMR
will attempt to allocate equitably portfolio security transactions among a
Portfolio and the portfolios of its other investment accounts purchasing
municipal obligations whenever decisions are made to purchase or sell securities
by a 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 a 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 a Portfolio from time to time, it is
the opinion of the Trustees of the Trust and the Portfolios that the benefits
available from the BMR organization outweigh any disadvantage that may arise
from exposure to simultaneous transactions.
BROKERAGE
For the fiscal year ended October 31, 1996, the Portfolio paid brokerage
commissions of $23,792 on portfolio security transactions aggregating
$245,268,131 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). For the fiscal
year ended October 31, 1995, the Portfolio paid brokerage commissions of $11,700
with respect to portfolio transactions. Of this amount, approximately $11,357
was paid in respect of portfolio security transactions aggregating approximately
$148,774,532 to firms which provided some research services to BMR's
organization. For the period from the start of business, March 1, 1994 to
October 31, 1994, the Portfolio paid foreign brokerage commissions on its
portfolio security transactions amounting to $6,875.
OTHER INFORMATION
The Trust changed its name from Eaton Vance Government Obligations Trust on
July 10, 1995. On October 31, 1995, the Fund was reorganized as a series of the
Trust. Prior thereto, the Fund was a series of Eaton Vance Investment Fund, Inc.
Eaton Vance, pursuant to its agreement with the Trust, controls the use of the
words "Eaton Vance" and "EV" in the Fund's name and may use the words "Eaton
Vance" or "EV" in other connections and for other purposes.
As permitted by Massachusetts law, there will normally be no meeting of
shareholders for the purpose of electing Trustees unless and until such time as
less than a majority of the Trustees of the Trust holding office have been
elected by shareholders. In such an event the Trustees then in office will call
a shareholders' meeting for the election of Trustees. Except for the foregoing
circumstances and unless removed by action of the shareholders in accordance
with the Trust's By-laws, the Trustees shall continue to hold and may appoint
successor Trustees.
The Trust's Amended and Restated Declaration of Trust may be amended by the
Trustees when authorized by vote of a majority of the outstanding voting
securities of the Trust and any other outstanding series of shares, the
financial interests of which are affected by the amendment. The Trustees may
also amend the Declaration of Trust without the vote or consent of shareholders
to change the name of the Trust or any series or to make such other changes as
do not have a materially adverse effect on the financial interests of
shareholders or if they deem it necessary to conform it to applicable Federal or
state laws or regulations. The Trust or any series or class thereof may be
terminated by: (1) the affirmative vote of the holders of not less than
two-thirds of the shares outstanding and entitled to vote at any meeting of
shareholders of the Trust or the appropriate series or class thereof, or by an
instrument or instruments in writing without a meeting, consented to by the
holders of two-thirds of the shares of the Trust or a series or class thereof,
provided, however, that, if such termination is recommended by the Trustees, the
vote of a majority of the outstanding voting securities of the Trust or a series
or class thereof entitled to vote thereon shall be sufficient authorization; or
(2) by means of an instrument in writing signed by a majority of the Trustees,
to be followed by a written notice to shareholders stating that a majority of
the Trustees has determined that the continuation of the Trust or a series or a
class thereof is not in the best interest of the Trust, such series or class or
of their respective shareholders.
The Declaration of Trust further provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law; but nothing in the
Declaration of Trust protects a Trustee against any liability to which he would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of his
office. In addition, the By-Laws of the Trust provide that no natural person
shall serve as a Trustee of the Trust after the holders of record of not less
than two-thirds of the outstanding shares have declared that he be removed from
office either by declaration in writing filed with the custodian of the assets
of the Trust or by votes cast in person or by proxy at a meeting called for the
purpose. The By-laws further provide that under certain circumstances the
shareholders may call a meeting to remove a Trustee and that the Trust is
required to provide assistance in communicating with shareholders about such a
meeting. The By-Laws also provide that the Trustees shall promptly call a
meeting of shareholders for the purpose of voting upon a question of removal of
a Trustee when requested so to do by the record holders of not less than 10 per
centum of the outstanding shares.
In accordance with the Declaration of Trust of each Portfolio, there will
normally be no meetings of the investors for the purpose of electing Trustees
unless and until such time as less than a majority of the Trustees holding
office have been elected by investors. In such an event the Trustees of a
Portfolio then in office will call an investors' meeting for the election of
Trustees. Except for the foregoing circumstances and unless removed by action of
the investors in accordance with a Portfolio's Declaration of Trust, the
Trustees shall continue to hold office and may appoint successor Trustees.
The Declaration of Trust of each Portfolio provides that no person shall
serve as a Trustee if investors holding two-thirds of the outstanding interests
have removed him from that office either by a written declaration filed with the
Portfolios' custodian or by votes cast at a meeting called for that purpose. The
Declaration of Trust further provides that under certain circumstances the
investors may call a meeting to remove a Trustee and that the Portfolio is
required to provide assistance in communicating with investors about such a
meeting.
Each Portfolio's Declaration of Trust provides that the Portfolio will
terminate 120 days after the complete withdrawal of the Fund or any other
investor in the Portfolio, unless either the remaining investors by unanimous
vote at a meeting of such investors, or a majority of the Trustees of the
Portfolio, by written instrument consented to by all investors, agree to
continue the business of the Portfolio. This provision is consistent with
treatment of the Portfolio as a partnership for federal income tax purposes. The
right to redeem can be suspended and the payment of the redemption price
deferred when the Exchange is closed (other than for customary weekend and
holiday closings), during periods when trading on the Exchange is restricted as
determined by the Commission, or during any emergency as determined by the
Commission which makes it impracticable for a Portfolio to dispose of its
securities or value its assets, or during any other period permitted by order of
the Commission for the protection of investors.
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P., One Post Office Square, Boston, Massachusetts
02109, are the independent accountants for the Fund and the Portfolio providing
audit services, tax return preparation, and assistance and consultation with
respect to the preparation of filings with the Commission. Deloitte & Touche,
Grand Cayman, Cayman Islands, British West Indies, are the independent certified
public accountants of the HI Portfolio.
FINANCIAL STATEMENTS
The financial statements of the Fund and the Portfolio, which are included
in the Fund's annual report to shareholders, are incorporated by reference into
this SAI and have been so incorporated in reliance on the report of Coopers &
Lybrand L.L.P., independent accountants, as experts in accounting and auditing.
A copy of the Fund's most recent Annual Report accompanies this SAI.
Registrant incorporates by reference the audited financial information for
the Fund's listed below and for the Portfolio for the fiscal year ended October
31, 1996 as previously filed electronically with the Securities and Exchange
Commission:
EV Classic Strategic Income Fund
(Accession No. 0000928816-96-000386)
EV Marathon Strategic Income Fund
(Accession No. 0000928816-96-000387)
<PAGE>
APPENDIX
DESCRIPTION OF SECURITIES RATINGS(1)
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S CORPORATE BOND RATINGS:
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as
"gilt-edged". Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuations of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risk appear somewhat larger than in Aaa securities.
A: Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa: Bonds which are rated Baa are considered as medium grade obligations,
(i.e., they are neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present, but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba: Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safe-guarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal
or interest.
Ca: Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
NOTE: Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa through B in its corporated bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
SHORT-TERM DEBT
Moody's short-term debt ratings are opinions of the ability of issuers to repay
punctually promissory obligations not having an original maturity in excess of
one year.
Issuers rated PRIME-1 or P-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1 or P-1
repayment ability will often be evidenced by many of the following
characteristics:
-- Leading market positions in well established industries.
-- High rates of return on funds employed.
-- Conservative capitalization structure with moderate reliance on debt and
ample asset protection.
-- Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
-- Well established access to a range of financial markets and assured
sources of alternate liquidity.
Issuers rated PRIME-2 or P-2 (or supporting institutions) have a strong ability
for repayment of senior short-term debt obligations. This will normally be
evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
DESCRIPTION OF STANDARD & POOR'S RATINGS GROUP'S CORPORATE BOND RATINGS:
INVESTMENT GRADE
AAA: Debt rated AAA has the highest rating assigned by S&P's to a debt
obligation. Capacity to pay interest and repay principal is extremely strong.
AA: Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the higher rated issues only in small degree.
A: Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than bonds in higher rated categories.
BBB: Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
SPECULATIVE GRADE
Debt rated BB, B, CCC, CC, and C is regarded as having predominantly speculative
characteristics with respect to capacity to pay interest and repay principal. BB
indicates the least degree of speculation and C the highest. While such debt
will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major exposures to adverse conditions.
BB: Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB- rating.
B: Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal.
The B rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BB or BB- rating.
CCC: Debt rated CCC has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal.
The CCC rating category is also used for debt subordinated to senior debt that
is assigned an actual or implied B or B- rating.
CC: The rating CC is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC debt rating.
C: The rating C is typically applied to debt subordinated to senior debt which
is assigned an actual or implied CCC- debt rating. The C rating may be used to
cover a situation where a bankruptcy petition has been filed, but debt service
payments are continued.
C1: The Rating C1 is reserved for income bonds on which no interest is being
paid.
D: Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless Standard & Poor's believes that
such payments will be made during such grace period. The D rating also will be
used upon the filing of a bankruptcy petition if debt service payments are
jeopardized.
PLUS (+) OR MINUS (-): The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
NR: Bonds may lack a S&P's rating because no public rating has been requested,
because there is insufficient information on which to base a rating, or because
S&P's does not rate a particular type of obligation as a matter of policy.
COMMERCIAL PAPER
A: S&P's commercial paper rating is a current assessment of the likelihood of
timely payment of debt considered short-term in the relevant market.
A-1: This highest category indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus (+) sign designation.
A-2: Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1".
A-3: Issues carrying this designation have adequate capacity for timely payment.
They are, however, more vulnerable to the adverse effects of changes in
circumstances than obligations carrying the higher designations.
FITCH INVESTORS SERVICE, INC.
INVESTMENT GRADE BOND RATINGS
AAA: Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.
AA: Bonds considered to be investment grade and of very high credit quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated "AAA". Because bonds rated in the "AAA" and
"AA" categories are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally rated "F-1+".
A: Bonds considered to be investment grade and of high credit quality. The
obligors ability to pay interest and repay principal is considered to be strong,
but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB: Bonds considered to be investment grade and of satisfactory credit quality.
The obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances, however, are
more likely to have adverse impact on these bonds, and therefore, impair timely
payment. The likelihood that the ratings of these bonds will fall below
investment grade is higher than for bonds with higher ratings.
HIGH YIELD BOND RATINGS
BB: Bonds are considered speculative. The obligor's ability to pay interest and
repay principal may be affected over time by adverse economic changes. However,
business and financial alternatives can be identified which could assist the
obligor in satisfying its debt service requirements.
B: Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic activity throughout the
life of the issue.
CCC: Bonds have certain identifiable characteristics which, if not remedied,
may lead to default. The ability to meet obligations requires an advantageous
business and economic environment.
CC: Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C: Bonds are in imminent default in payment of interest or principal.
DDD, DD, AND D: Bonds are in default of interest and/or principal payments. Such
bonds are extremely speculative and should be valued on the basis of their
ultimate recovery value in liquidation or reorganization of the obligor. "DDD"
represents the highest potential for recovery on these bonds, and"D" represents
the lowest potential for recovery.
PLUS (+) OR MINUS (-): The ratings from AA to C may be modified by the addition
of a plus or minus sign to indicate the relative position of a credit within the
rating category.
NR: Indicates that Fitch does not rate the specific issue.
CONDITIONAL: A conditional rating is premised on the successful completion of
a project or the occurrence of a specific event.
INVESTMENT GRADE SHORT-TERM RATINGS
Fitch's short-term ratings apply to debt obligations that are payable on demand
or have original maturities of generally up to three years, including commercial
paper, certificates of deposit, medium-term notes, and municipal and investment
notes.
F-1+: Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1: Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated
"F-1+".
F-2: Good Credit Quality. Issues assigned this rating have a satisfactory
degree of assurance for timely payment, but the margin of safety is not as
great as the "F-1+" and "F-1" categories.
F-3: Fair Credit Quality. Issues assigned this rating have characteristics
suggesting that the degree of assurance for timely payment is adequate, however,
near-term adverse changes could cause these securities to be rated below
investment grade.
DUFF & PHELPS
INVESTMENT GRADE BOND RATINGS
AAA: Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
AA+, AA, AND AA-: High credit quality. Protection factors are strong. Risk is
modest but may vary slightly from time to time because of economic conditions.
A+, A, AND A-: Protection factors are average but adequate. However, risk
factors are more variable and greater in periods of economic stress.
BBB+, BBB, AND BBB-: Below average protection factors but still considered
sufficient for prudent investment. Considerable variability in risk during
economic cycles.
HIGH YIELD BOND RATINGS
BB+, BB, AND BB-: Below investment grade but deemed likely to meet obligations
when due. Present or prospective financial protection factors fluctuate
according to industry conditions or company fortunes. Overall quality may move
up or down frequently within this category.
B+, B, AND B-: Below investment grade and possessing risk that obligations will
not be met when due. Financial protection factors will fluctuate widely
according to economic cycles, industry conditions and/or company fortunes.
Potential exists for frequent changes in the rating within this category or into
a higher or lower rating grade.
CCC: Well below investment grade securities. Considerable uncertainty exists as
to timely payment of principal interest or preferred dividends. Protection
factors are narrow and risk can be substantial with unfavorable economic/
industry conditions, and/or with unfavorable company developments.
Preferred stocks are rated on the same scale as bonds but the preferred rating
gives weight to its more junior position in the capital structure. Structured
Financings are also rated on this scale.
COMMERCIAL PAPER/CERTIFICATES OF DEPOSIT
CATEGORY 1: TOP GRADE
DUFF 1 PLUS: Highest certainty of timely payment. Short-term liquidity including
internal operating factors and/or ready access to alternative sources of funds,
is outstanding, and safety is just below risk-free U.S.
Treasury short-term obligations.
DUFF 1: Very high certainty of timely payment. Liquidity factors are excellent
and supported by good fundamental protection factors. Risk factors are minor.
DUFF 1 MINUS: High certainty of timely payment. Liquidity factors are strong
and supported by good fundamental protection factors. Risk factors are very
small.
CATEGORY 2: GOOD GRADE
DUFF 2: Good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing funding needs may enlarge total
financing requirements, access to capital markets is good. Risk factors are
small.
CATEGORY 3: SATISFACTORY GRADE
DUFF 3: Satisfactory liquidity and other protection factors qualify issue as to
investment grade. Risk factors are larger and subject to more variation.
Nevertheless timely payment is expected.
No ratings are issued for companies whose paper is not deemed to be of
investment grade.
* * * *
NOTES:
(1) The ratings indicated herein are believed to be the most recent ratings
available at the date of this Statement of Additional Information for the
securities listed. Ratings are generally given to securities at the time of
issuance. While the rating agencies may from time to time revise such
ratings, they undertake no obligation to do so, and the ratings indicated do
not necessarily represent ratings which would be given to these securities
on the date of the Portfolio's fiscal year end.
Bonds which are unrated expose the investor to risks with respect to capacity to
pay interest or repay principal which are similar to the risks of lower- rated
bonds. The Portfolio is dependent on the Investment Adviser's judgment, analysis
and experience in the evaluation of such bonds.
Investors should note that the assignment of a rating to a bond by a rating
service may not reflect the effect of recent developments on the issuer's
ability to make interest and principal payments.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EV CLASSIC STRATEGIC INCOME FUND.
The Fund became a series of the Trust on October 31, 1995.
FEES AND EXPENSES
ADMINISTRATOR
As stated under "Investment Adviser and Administrator" in Part I of this
SAI, the Administrator currently receives no compensation for providing
administrative services to the Fund. For the fiscal years ended October 31,
1996, 1995 and for the period from the start of business, May 25, 1994, to
October 31, 1994, $61,756, $13,723 and $7,345, respectively, of the Fund's
operating expenses were allocated to the Administrator.
DISTRIBUTION PLAN
During the fiscal year ended October 31, 1996, the Principal Underwriter
paid to Authorized Firms sales commissions of $807 on sales of Fund shares.
During the same period, the Fund made sales commission payments under the Plan
to the Principal Underwriter aggregating $7,225. As at October 31, 1996, the
outstanding Uncovered Distribution Charges of the Principal Underwriter
calculated under the Plan amounted to approximately $90,000 (which was
equivalent to 5.3% of the Fund's net assets on such date). During the fiscal
year ended October 31, 1996, the Fund paid or accrued service fees under the
Plan aggregating $2,216 of which $263 was paid to Authorized Firms and the
balance of which was retained by the Principal Underwriter.
PRINCIPAL UNDERWRITER
For the fiscal year ended October 31, 1996 there were no repurchase
transactions.
TRUSTEES
The fees and expenses of those Trustees of the Trust and of the Portfolio
who are not members of the Eaton Vance organization (the noninterested Trustees)
are paid by the Fund (and the other series of the Trust) and the Portfolio,
respectively. (The Trustees of the Trust and the Portfolio who are members of
the Eaton Vance organization receive no compensation from the Fund or the
Portfolio.) During the fiscal year ended October 31, 1996, the noninterested
Trustees of the Trust and the Portfolio received the following compensation in
their capacities as Trustees from the Fund and the Portfolio, and, for the year
ended December 31, 1996, earned the following compensation in their capacities
as Trustees of the funds in the Eaton Vance fund complex (1):
<TABLE>
<CAPTION>
AGGREGATE AGGREGATE TOTAL COMPENSATION
COMPENSATION COMPENSATION FROM TRUST AND
NAME FROM FUND FROM PORTFOLIO FUND COMPLEX
---- ------------ -------------- --------------
<S> <C> <C> <C>
Donald R. Dwight .............................. $0 $1,668(2) $142,500(4)
Samuel L. Hayes, III .......................... 0 1,846(3) 153,750(5)
Norton H. Reamer .............................. 0 1,783 142,500
John L. Thorndike ............................. 0 1,885 147,500
Jack L. Treynor ............................... 0 1,850 147,500
<FN>
(1) The Eaton Vance fund complex consists of 228 registered investment companies or series thereof.
(2) Includes $647 of deferred compensation.
(3) Includes $689 of deferred compensation.
(4) Includes $42,500 of deferred compensation.
(5) Includes $37,500 of deferred compensation.
</FN>
</TABLE>
PRINCIPAL UNDERWRITER
Under the Distribution Agreement the Principal Underwriter acts as principal
in selling shares of the Fund. The expenses of printing copies of prospectuses
used to offer shares to Authorized Firms or investors and other selling
literature and of advertising is borne by the Principal Underwriter. The fees
and expenses of qualifying and registering and maintaining qualifications and
registrations of the Fund and its shares under federal and state securities laws
is borne by the Fund. In addition, the Fund makes payments to the Principal
Underwriter pursuant to its Distribution Plan as described in the Fund's current
Prospectus; the provisions of the Fund's Distribution Plan relating to such
payments are included in the Distribution Agreement. The Distribution Agreement
is renewable annually by the Trust's Board of Trustees (including a majority of
its Trustees who are not interested persons of the Trust and who have no direct
or indirect financial interest in the operation of the Fund's Distribution Plan
or the Distribution Agreement), may be terminated on sixty days' notice either
by such Trustees or by vote of a majority of the outstanding voting securities
of the Fund or on six months' notice by the Principal Underwriter and is
automatically terminated upon assignment. The Principal Underwriter distributes
Fund shares on a "best efforts" basis under which it is required to take and pay
for only such shares as may be sold.
The Fund has authorized the Principal Underwriter to act as its agent in
repurchasing shares at the rate of $2.50 for each repurchase transaction handled
by the Principal Underwriter. The Principal Underwriter estimates that the
expenses incurred by it in acting as repurchase agent for the Fund will exceed
the amounts paid therefor by the Fund. For the amount paid by the Fund to the
Principal Underwriter for acting as repurchase agent, see "Fees and Expenses" in
this Part II.
DISTRIBUTION PLAN
The Distribution Plan (the "Plan") is described in the Prospectus and is
designed to meet the requirements of Rule 12b-1 under the 1940 Act and the NASD
Rule. The purpose of the Plan is to compensate the Principal Underwriter for its
distribution services and facilities provided to the Fund by paying the
Principal Underwriter sales commissions and a separate distribution fee in
connection with sales of Fund shares. The following supplements the discussion
of the Plan contained in the Fund's Prospectus.
The amount payable by the Fund to the Principal Underwriter pursuant to the
Plan as sales commissions and distribution fees with respect to each day will be
accrued on such day as a liability of the Fund and will accordingly reduce the
Fund's net assets upon such accrual, all in accordance with generally accepted
accounting principles. The amount payable on each day is limited to 1/365 of
.75% of the Fund's net assets on such day. The level of the Fund's net assets
changes each day and depends upon the amount of sales and redemptions of Fund
shares, the changes in the value of the investments held by the Portfolio, the
expenses of the Fund and the Portfolio accrued and allocated to the Fund on such
day, income on portfolio investments of the Portfolio accrued and allocated to
the Fund on such day, and any dividends and distributions declared on Fund
shares. The Fund does not accrue possible future payments as a liability of the
Fund or reduce the Fund's current net assets in respect of unknown amounts which
may become payable under the Plan in the future because the standards for
accrual of such a liability under accounting principles have not been satisfied.
The Plan provides that the Fund will receive all CDSCs and will make no
payments to the Principal Underwriter in respect of any day on which there are
no outstanding Uncovered Distribution Charges of the Principal Underwriter.
CDSCs and accrued amounts will be paid by the Fund to the Principal Underwriter
whenever there exist Uncovered Distribution Charges under the Fund's Plan.
Periods with a high level of sales of Fund shares accompanied by a low level
of early redemptions of Fund shares resulting in the imposition of CDSCs will
tend to increase the time during which there will exist Uncovered Distribution
Charges of the Principal Underwriter. Conversely, periods with a low level of
sales of Fund shares accompanied by a high level of early redemptions of Fund
shares resulting in the imposition of CDSCs will tend to reduce the time during
which there will exist Uncovered Distribution Charges of the Principal
Underwriter.
In calculating daily the amount of Uncovered Distribution Charges,
distribution charges will include the aggregate amount of sales commissions and
distribution fees theretofore paid plus the aggregate amount of sales
commissions and distribution fees which the Principal Underwriter is entitled to
be paid under the Plan since its inception. Payments theretofore paid or payable
under the Plan by the Fund to the Principal Underwriter and CDSCs theretofore
paid or payable to the Principal Underwriter will be subtracted from such
distribution charges; if the result of such subtraction is positive, a
distribution fee (computed at 1% over the prime rate then reported in The Wall
Street Journal) will be computed on such amount and added thereto, with the
resulting sum constituting the amount of outstanding Uncovered Distribution
Charges with respect to such day. The amount of outstanding Uncovered
Distribution Charges of the Principal Underwriter calculated on any day does not
constitute a liability recorded on the financial statements of the Fund.
The amount of Uncovered Distribution Charges of the Principal Underwriter at
any particular time depends upon various changing factors, including the level
and timing of sales of Fund shares, the nature of such sales (i.e., whether they
result from exchange transactions, reinvestments or from cash sales through
Authorized Firms), the level and timing of redemptions of Fund shares upon which
a CDSC will be imposed, the level and timing of redemptions of Fund shares upon
which no CDSC will be imposed (including redemptions involving exchanges of Fund
shares pursuant to the exchange privilege which result in a reduction of
Uncovered Distribution Charges), changes in the level of the net assets of the
Fund, and changes in the interest rate used in the calculation of the
distribution fee under the Plan.
As currently implemented by the Trustees, the Plan authorizes payments of
sales commissions, distribution fees and service fees to the Principal
Underwriter which may be equivalent, on an aggregate basis during any fiscal
year of the Fund, to 1% of the Fund's average daily net assets for such year.
For the sales commissions and service fee payments made by the Fund and the
outstanding Uncovered Distribution Charges of the Principal Underwriter, see
"Fees and Expenses -- Distribution Plan" in this Part II. The Fund believes that
the combined rate of all these payments may be higher than the rate of payments
made under distribution plans adopted by other investment companies pursuant to
Rule 12b-1. Although the Principal Underwriter will use its own funds (which may
be borrowed from banks) to pay sales commissions at the time of sale, it is
anticipated that the Eaton Vance organization will profit by reason of the
operation of the Plan through an increase in the Fund's assets (thereby
increasing the advisory fee payable to BMR by the Portfolio) resulting from sale
of Fund shares and through the amounts paid to the Principal Underwriter,
including CDSCs, pursuant to the Plan. The Eaton Vance organization may be
considered to have realized a profit under the Plan if at any point in time the
aggregate amounts theretofore received by the Principal Underwriter pursuant to
the Plan and from CDSCs have exceeded the total expenses theretofore incurred by
such organization in distributing shares of the Fund. Total expenses for this
purpose will include an allocable portion of the overhead costs of such
organization and its branch offices, which costs will include without limitation
leasing expense, depreciation of building and equipment, utilities,
communication and postage expense, compensation and benefits of personnel,
travel and promotional expense, stationery and supplies, literature and sales
aids, interest expense, data processing fees, consulting and temporary help
costs, insurance, taxes other than income taxes, legal and auditing expense and
other miscellaneous overhead items. Overhead is calculated and allocated for
such purpose by the Eaton Vance organization in a manner deemed equitable to the
Fund.
Pursuant to Rule 12b-1, the Plan has been approved by the Fund's initial
sole shareholder (Eaton Vance) and by the Board of Trustees of the Trust,
including the Rule 12b-1 Trustees. The Plan continues in effect through and
including April 28, 1996, and shall continue in effect indefinitely thereafter
for so long as such continuance is approved at least annually by the vote of
both a majority of (i) the Trustees of the Trust who are not interested persons
of the Trust and who have no direct or indirect financial interest in the
operation of the Plan or any agreements related to the Plan (the "Rule 12b-1
Trustees") and (ii) all of the Trustees then in office, and the Distribution
Agreement contains a similar provision. The Plan and Distribution Agreement may
be terminated at any time by vote of a majority of the Rule 12b-1 Trustees or by
vote of a majority of the outstanding voting securities of the Fund. The
provisions of the Plan relating to payments of sales commissions and
distribution fees to the Principal Underwriter are also included in the
Distribution Agreement between the Trust on behalf of the Fund and the Principal
Underwriter. Under the Plan, the President or a Vice President of the Trust
shall provide to the Trustees for their review, and the Trustees shall review at
least quarterly, a written report of the amount expended under the Plan and the
purposes for which such expenditures were made. The Plan may not be amended to
increase materially the payments described therein without approval of the
shareholders of the Fund, and all material amendments of the Plan must also be
approved by the Trustees as required by Rule 12b-1. So long as the Plan is in
effect, the selection and nomination of Trustees who are not interested persons
of the Trust shall be committed to the discretion of the Trustees who are not
such interested persons.
The Trustees of the Trust believe that the Plan will be a significant factor
in the expected growth of the Fund's assets, and will result in increased
investment flexibility and advantages which have benefited and will continue to
benefit the Fund and its shareholders. Payments for sales commissions and
distribution fees made to the Principal Underwriter under the Plan will
compensate the Principal Underwriter for its services and expenses in
distributing shares of the Fund. Service fee payments made to the Principal
Underwriter and Authorized Firms under the Plan provide incentives to provide
continuing personal services to investors and the maintenance of shareholder
accounts. By providing incentives to the Principal Underwriter and Authorized
Firms, the Plan is expected to result in the maintenance of, and possible future
growth in, the assets of the Fund. Based on the foregoing and other relevant
factors, the Trustees of the Trust have determined that in their judgment there
is a reasonable likelihood that the Plan will benefit the Fund and its
shareholders.
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return on
a hypothetical investment of $1,000 in the Fund from November 26, 1990 through
October 31, 1996 and for the one-year period ended October 31, 1996. The total
return for the period prior to the Fund's commencement of operations on May 25,
1994 reflects the Portfolio's total return (or that of its predecessor) adjusted
to reflect any applicable Fund CDSC. The total return for such prior period has
not been adjusted to reflect the Fund's distribution fees and certain other
expenses. If such an adjustment were made, the performance would be lower.
<TABLE>
<CAPTION>
VALUE BEFORE VALUE AFTER TOTAL RETURN TOTAL RETURN AFTER
DEDUCTING DEDUCTING BEFORE DEDUCTING CDSC DEDUCTING CDSC
INVESTMENT INVESTMENT AMOUNT OF CDSC ON CDSC ON -------------------------- --------------------------
PERIOD DATE INVESTMENT 10/31/96 10/31/96 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------- ------------ ----------- --------------- --------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of the
Fund 11/26/90 $1,000 $1,488.84 $1,488.84 48.88% 6.94% 48.88% 6.94%
5 Years
Ended
10/31/96 10/31/91 $1,000 $1,378.84 $1,378.84 37.88% 6.64% 37.88% 6.64%
1 Year
Ended
10/31/96* 10/31/95 $1,000 $1,150.88 $1,140.88 15.09% 15.09% 14.09% 14.09%
<FN>
- ----------
*If a portion of the Fund's expenses had not been subsidized, the Fund would have had lower returns.
</FN>
</TABLE>
The Fund's yield for the 30-day period ended October 31, 1996 was 6.67%. If
a portion of the Fund's expenses had not been allocated to the Administrator,
the Fund would have had a lower yield.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As at December 2, 1996, the Trustees and officers of the Trust, as a group,
owned in the aggregate less than 1% of the outstanding shares of the Fund. As of
December 2, 1996, the following shareholder owned of record the percentage of
outstanding shares indicated after its name: MLPF&S for the Sole Benefit of its
customers, Jacksonville, FL 32246 (8.4%). In addition, as of such date, the
following shareholder owned beneficially and of record the percentage of
outstanding shares indicated after its name: River Distributing Co., Inc., Eagle
Bay, NY (76.5%).
<PAGE>
[logo] EV CLASSIC STRATEGIC INCOME FUND
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
MARCH 1, 1997
EV CLASSIC
STRATEGIC INCOME FUND
24 FEDERAL STREET
BOSTON, MA 02110
- --------------------------------------------------------------------------------
INVESTMENT ADVISER AND ADMINISTRATOR OF STRATEGIC INCOME PORTFOLIO
INVESTMENT ADVISER OF HIGH INCOME PORTFOLIO
Boston Management and Research, 24 Federal Street, Boston, MA 02110
ADMINISTRATOR OF EV CLASSIC STRATEGIC INCOME FUND
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 89 South Street, Boston, MA 02111
TRANSFER AGENT
First Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123
(800) 262-1122
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P., One Post Office Square, Boston, MA 02109
C-SISAI
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL INFORMATION
March 1, 1997
EV MARATHON STRATEGIC INCOME FUND
24 Federal Street
Boston, Massachusetts 02110
(800) 225-6265
This Statement of Additional Information consists of two parts. Part I
provides information about EV Marathon Strategic Income Fund (the "Fund"), the
Portfolio's and certain other series of Eaton Vance Mutual Funds Trust (the
"Trust"). Part II provides information solely about the Fund and the Portfolios.
Where appropriate, Part I includes cross-references to the relevant sections of
Part II that provide additional Fund-specific information. This Statement of
Additional Information is sometimes referred to as the "SAI."
TABLE OF CONTENTS
Page
PART I
Additional Information about Investment Policies ....................... 1
Investment Restrictions ................................................ 8
Trustees and Officers .................................................. 9
Investment Adviser and Administrator ................................... 11
Custodian .............................................................. 14
Service for Withdrawal ................................................. 15
Determination of Net Asset Value ....................................... 15
Investment Performance ................................................. 15
Taxes .................................................................. 17
Portfolio Security Transactions ........................................ 19
Other Information ...................................................... 21
Independent Accountants ................................................ 22
Financial Statements ................................................... 22
Appendix ............................................................... 23
PART II
Fees and Expenses ...................................................... a-1
Principal Underwriter .................................................. a-2
Distribution Plan ...................................................... a-2
Performance Information ................................................ a-4
Control Persons and Principal Holders of Securities .................... a-4
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY THE FUND'S PROSPECTUS DATED MARCH 1, 1997, AS SUPPLEMENTED FROM
TIME TO TIME, WHICH IS INCORPORATED HEREIN BY REFERENCE. THIS STATEMENT OF
ADDITIONAL INFORMATION SHOULD BE READ IN CONJUNCTION WITH SUCH PROSPECTUS, A
COPY OF WHICH MAY BE OBTAINED WITHOUT CHARGE BY CONTACTING EATON VANCE
DISTRIBUTORS, INC. (THE "PRINCIPAL UNDERWRITER") (SEE BACK COVER FOR ADDRESS AND
PHONE NUMBER).
FOR EDGAR FILING PURPOSES ONLY: REGISTRANT INCORPORATES BY REFERENCE FOR
EV MARATHON STRATEGIC INCOME FUND THE PART I FOUND IN THE STATEMENT OF
ADDITIONAL INFORMATION OF EV CLASSIC STRATEGIC INCOME FUND CONTAINED IN THIS
AMENDMENT.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EV MARATHON STRATEGIC INCOME FUND.
The Fund became a series of the Trust on October 31, 1995.
FEES AND EXPENSES
ADMINISTRATOR
As stated under "Investment Adviser and Administrator" Part I of this SAI,
the Fund's Administrator currently receives no compensation for providing
administrative services to the Fund. Prior to March 1, 1994 (when the Fund
transferred substantially all of its assets to the Portfolio in exchange for an
interest in the Portfolio), the Fund retained Eaton Vance as its administrator
under its Administration Agreement (which is no longer in effect) for which
Eaton Vance received a monthly administration fee at an annual rate of .15% of
the Fund's average daily net assets. For the period November 1, 1993 to March 1,
1994, the Fund paid Eaton Vance administration fees of $182,735.
DISTRIBUTION PLAN
During the fiscal year ended October 31, 1996, the Principal Underwriter
paid to Authorized Firms sales commissions of $118,170 on sales of Fund shares.
During the same period, the Fund made sales commission payments under the Plan
to the Principal Underwriter aggregating $1,028,723 and the Principal
Underwriter received approximately $76,000 in CDSCs imposed on early redeeming
shareholders. These sales commissions and CDSCs paid to the Principal
Underwriter reduced Uncovered Distribution Charges under the Plan. As at October
31, 1996, the outstanding Uncovered Distribution Charges of the principal
Underwriter calculated under the Plan amounted to approximately $18,063,000
(which was equivalent to 13.9% of the Fund's net assets on such date). During
the fiscal year ended October 31, 1996, the Fund paid or accrued service fees
under the Plan aggregating $231,933 of which $229,952 was paid to Authorized
Firms and the balance of which was retained by the Principal Underwriter.
PRINCIPAL UNDERWRITER
The Fund has authorized the Principal Underwriter to act as its agent in
repurchasing shares at the rate of $2.50 for each repurchase transaction handled
by the Principal Underwriter. The Principal Underwriter estimates that the
expenses incurred by it in acting as repurchase agent for the Fund will exceed
the amounts paid therefor by the Fund. For the fiscal year ended October 31,
1996, the Fund paid the Principal Underwriter $6,415.00 for repurchase
transactions handled by the Principal Underwriter (being $2.50 for each such
transaction).
TRUSTEES
The fees and expenses of those Trustees of the Trust and of the Portfolio
who are not members of the Eaton Vance organization (the noninterested Trustees)
are paid by the Fund (and the other series of the Trust) and the Portfolio,
respectively. (The Trustees of the Trust and the Portfolio who are members of
the Eaton Vance organization receive no compensation from the Trust or the
Portfolio.) During the fiscal year ended October 31, 1996, the noninterested
Trustees of the Trust and the Portfolio received the following compensation in
their capacities as Trustees from the Fund and the Portfolio, and, for the year
ended December 31, 1996, earned the following compensation in their capacities
as Trustees of the funds in the Eaton Vance fund complex (1):
AGGREGATE AGGREGATE TOTAL COMPENSATION
COMPENSATION COMPENSATION FROM TRUST AND
NAME FROM FUND FROM PORTFOLIO FUND COMPLEX
---- --------- -------------- ------------
Donald R. Dwight .... $687 $1,668(2) $142,500(4)
Samuel L. Hayes, III 625 1,846(3) 153,750(5)
Norton H. Reamer .... 619 1,783 142,500
John L. Thorndike ... 634 1,885 147,500
Jack L. Treynor ..... 679 1,850 147,500
(1) The Eaton Vance fund complex consists of 228 registered investment companies
or series thereof.
(2) Includes $647 of deferred compensation.
(3) Includes $689 of deferred compensation.
(4) Includes $42,500 of deferred compensation.
(5) Includes $37,500 of deferred compensation.
PRINCIPAL UNDERWRITER
Under the Distribution Agreement the Principal Underwriter acts as principal
in selling shares of the Fund. The expenses of printing copies of prospectuses
used to offer shares to Authorized Firms or investors and other selling
literature and of advertising is borne by the Principal Underwriter. The fees
and expenses of qualifying and registering and maintaining qualifications and
registrations of the Fund and its shares under federal and state securities laws
is borne by the Fund. In addition, the Fund makes payments to the Principal
Underwriter pursuant to its Distribution Plan as described in the Fund's current
Prospectus; the provisions of the Fund's Distribution Plan relating to such
payments are included in the Distribution Agreement. The Distribution Agreement
is renewable annually by the Trust's Board of Trustees (including a majority of
its Trustees who are not interested persons of the Trust and who have no direct
or indirect financial interest in the operation of the Fund's Distribution Plan
or the Distribution Agreement), may be terminated on sixty days' notice either
by such Trustees or by vote of a majority of the outstanding voting securities
of the Fund or on six months' notice by the Principal Underwriter and is
automatically terminated upon assignment. The Principal Underwriter distributes
Fund shares on a "best efforts" basis under which it is required to take and pay
for only such shares as may be sold.
The Fund has authorized the Principal Underwriter to act as its agent in
repurchasing shares at the rate of $2.50 for each repurchase transaction handled
by the Principal Underwriter. The Principal Underwriter estimates that the
expenses incurred by it in acting as repurchase agent for the Fund will exceed
the amounts paid therefor by the Fund. For the amount paid by the Fund to the
Principal Underwriter for acting as repurchase agent, see "Fees and Expenses" in
this Part II.
DISTRIBUTION PLAN
The Distribution Plan (the "Plan") is described in the Prospectus and is
designed to meet the requirements of Rule 12b-1 under the 1940 Act and the NASD
Rule. The purpose of the Plan is to compensate the Principal Underwriter for its
distribution services and facilities provided to the Fund by paying the
Principal Underwriter sales commissions and a separate distribution fee in
connection with sales of Fund shares. The following supplements the discussion
of the Plan contained in the Fund's Prospectus.
The amount payable to the Principal Underwriter pursuant to the Plan as
sales commissions and distribution fees with respect to each day will be accrued
on such day as a liability of the Fund and will accordingly reduce the Fund's
net assets upon such accrual, all in accordance with generally accepted
accounting principles. The amount payable on each day is limited to 1/365 of
.75% of the Fund's net assets on such day. The level of the Fund's net assets
changes each day and depends upon the amount of sales and redemptions of Fund
shares, the changes in the value of the investments held by the Portfolio, the
expenses of the Fund and the Portfolio accrued and allocated to the Fund on such
day, income on portfolio investments of the Portfolio accrued and allocated to
the Fund on such day, and any dividends and distributions declared on Fund
shares. The Fund does not accrue possible future payments as a liability of the
Fund or reduce the Fund's current net assets in respect of unknown amounts which
may become payable under the Plan in the future because the standards for
accrual of such a liability under accounting principles have not been satisfied.
The Plan provides that the Fund will receive all CDSCs and will make no
payments to the Principal Underwriter in respect of any day on which there are
no outstanding Uncovered Distribution Charges of the Principal Underwriter.
CDSCs and accrued amounts will be paid by the Fund to the Principal Underwriter
whenever there exist Uncovered Distribution Charges under the Fund's Plan.
Periods with a high level of sales of Fund shares accompanied by a low level
of early redemptions of Fund shares resulting in the imposition of CDSCs will
tend to increase the time during which there will exist Uncovered Distribution
Charges of the Principal Underwriter. Conversely, periods with a low level of
sales of Fund shares accompanied by a high level of early redemptions of Fund
shares resulting in the imposition of CDSCs will tend to reduce the time during
which there will exist Uncovered Distribution Charges of the Principal
Underwriter.
In calculating daily the amount of Uncovered Distribution Charges,
distribution charges will include the aggregate amount of sales commissions and
distribution fees theretofore paid plus the aggregate amount of sales
commissions and distribution fees which the Principal Underwriter is entitled to
be paid under the Plan since its inception. Payments theretofore paid or payable
under the Plan by the Fund to the Principal Underwriter and CDSCs theretofore
paid or payable to the Principal Underwriter will be subtracted from such
distribution charges; if the result of such subtraction is positive, a
distribution fee (computed at 1% over the prime rate then reported in The Wall
Street Journal) will be computed on such amount and added thereto, with the
resulting sum constituting the amount of outstanding Uncovered Distribution
Charges with respect to such day. The amount of outstanding Uncovered
Distribution Charges of the Principal Underwriter calculated on any day does not
constitute a liability recorded on the financial statements of the Fund.
The amount of Uncovered Distribution Charges of the Principal Underwriter at
any particular time depends upon various changing factors, including the level
and timing of sales of Fund shares, the nature of such sales (i.e., whether they
result from exchange transactions, reinvestments or from cash sales through
Authorized Firms), the level and timing of redemptions of Fund shares upon which
a CDSC will be imposed, the level and timing of redemptions of Fund shares upon
which no CDSC will be imposed (including redemptions involving exchanges of Fund
shares pursuant to the exchange privilege which result in a reduction of
Uncovered Distribution Charges), changes in the level of the net assets of the
Fund, and changes in the interest rate used in the calculation of the
distribution fee under the Plan.
As currently implemented by the Trustees, the Plan authorizes payments of
sales commissions and distribution fees to the Principal Underwriter and service
fees to the Principal Underwriter and Authorized Firms which may be equivalent,
on an aggregate basis during any fiscal year of the Fund, to 1% of the Fund's
average daily net assets for such year. For the sales commissions and service
fee payments made by the Fund and the outstanding Uncovered Distribution Charges
of the Principal Underwriter, see "Fees and Expenses -- Distribution Plan" in
this Part II. The Fund believes that the combined rate of all these payments may
be higher than the rate of payments made under distribution plans adopted by
other investment companies pursuant to Rule 12b-1. Although the Principal
Underwriter will use its own funds (which may be borrowed from banks) to pay
sales commissions at the time of sale, it is anticipated that the Eaton Vance
organization will profit by reason of the operation of the Plan through an
increase in the Fund's assets (thereby increasing the advisory fee payable to
BMR by the Portfolio) resulting from sale of Fund shares and through the amounts
paid to the Principal Underwriter, including CDSCs, pursuant to the Plan. The
Eaton Vance organization may be considered to have realized a profit under the
Plan if at any point in time the aggregate amounts theretofore received by the
Principal Underwriter pursuant to the Plan and from CDSCs have exceeded the
total expenses theretofore incurred by such organization in distributing shares
of the Fund. Total expenses for this purpose will include an allocable portion
of the overhead costs of such organization and its branch offices, which costs
will include without limitation leasing expense, depreciation of building and
equipment, utilities, communication and postage expense, compensation and
benefits of personnel, travel and promotional expense, stationery and supplies,
literature and sales aids, interest expense, data processing fees, consulting
and temporary help costs, insurance, taxes other than income taxes, legal and
auditing expense and other miscellaneous overhead items. Overhead is calculated
and allocated for such purpose by the Eaton Vance organization in a manner
deemed equitable to the Fund.
The Plan continues in effect through and including April 28, 1997, and shall
continue in effect indefinitely thereafter for so long as such continuance is
approved at least annually by the vote of both a majority of (i) the Trustees of
the Trust who are not interested persons of the Trust and who have no direct or
indirect financial interest in the operation of the Plan or any agreements
related to the Plan (the "Rule 12b-1 Trustees") and (ii) all of the Trustees
then in office, and the Distribution Agreement contains a similar provision. The
Plan and Distribution Agreement may be terminated at any time by vote of a
majority of the Rule 12b-1 Trustees or by a vote of a majority of the
outstanding voting securities of the Fund. The provisions of the Plan relating
to payments of sales commissions and distribution fees to the Principal
Underwriter are also included in the Distribution Agreement between the Trust on
behalf of the Fund and the Principal Underwriter. Pursuant to Rule 12b-1, the
Plan has been approved by the Fund's initial sole shareholder (Eaton Vance) and
by the Board of Trustees of the Trust, including the Rule 12b-1 Trustees. Under
the Plan, the President or a Vice President of the Trust shall provide to the
Trustees for their review, and the Trustees shall review at least quarterly, a
written report of the amount expended under the Plan and the purposes for which
such expenditures were made. The Plan may not be amended to increase materially
the payments described therein without approval of the shareholders of the Fund,
and all material amendments of the Plan must also be approved by the Trustees as
required by Rule 12b-1. So long as the Plan is in effect, the selection and
nomination of Trustees who are not interested persons of the Trust shall be
committed to the discretion of the Trustees who are not such interested persons.
The Trustees believe that the Plan will be a significant factor in the
expected growth of the Fund's assets, and will result in increased investment
flexibility and advantages which has benefited and will continue to benefit the
Fund and its shareholders. Payments for sales commissions and distribution fees
made to the Principal Underwriter under the Plan will compensate the Principal
Underwriter for its services and expenses in distributing shares of the Fund.
Service fee payments made to the Principal Underwriter and Authorized Firms
under the Plan provide incentives to provide continuing personal services to
investors and the maintenance of shareholder accounts. By providing incentives
to the Principal Underwriter and Authorized Firms, the Plan is expected to
result in the maintenance of, and possible future growth in, the assets of the
Fund. Based on the foregoing and other relevant factors, the Trustees have
determined that in their judgment there is a reasonable likelihood that the Plan
will benefit the Fund and its shareholders.
PERFORMANCE INFORMATION
The table below indicates the cumulative and average total return on a
hypothetical investment of $1,000 in the Fund covering the life of the Fund from
November 26, 1990 through October 31, 1996 and for the one-year period ended
October 31, 1996.
<TABLE>
<CAPTION>
VALUE OF VALUE OF
INVEST- INVEST-
MENT BEFORE MENT AFTER TOTAL RETURN BEFORE TOTAL RETURN AFTER
DEDUCTING THE DEDUCTING THE DEDUCTING THE CDSC DEDUCTING THE CDSC**
INVESTMENT INVESTMENT AMOUNT OF CDSC ON CDSC** ON ------------------------ ------------------------
PERIOD DATE INVESTMENT 10/31/96 10/31/96 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ------------------- ----------- ------------ --------------- -------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of the
Fund* 11/26/90 $1,000 $1,468.48 $1,468.48 46.85% 6.69% 46.85% 6.69%
5 Years Ended
10/31/96 10/31/91 $1,000 $1,360.00 $1,360.00 36.00% 6.34% 36.00% 6.34%
1 Year Ended
10/31/96 10/31/95 $1,000 $1,184.83 $1,154.83 18.48% 18.48% 15.48% 15.48%
- ----------
*Investment operations began on November 26, 1990.
**No CDSC is imposed on certain redemptions. See the Fund's current Prospectus.
</TABLE>
The Fund's yield for the 30-day period ended October 31, 1996 was 6.81%.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As at December 2, 1996, the Trustees and officers of the Trust, as a group,
owned in the aggregate less than 1% of the outstanding shares of the Fund. As of
December 2, 1996, Merrill Lynch, Pierce, Fenner & Smith, Inc., Jacksonville, FL
was the record owner of approximately 34.5% of the outstanding shares, which
were held on behalf of its customers who are the beneficial owners of such
shares, and as to which it had voting power under certain limited circumstances.
To the knowledge of the Trust, no other person owned of record or beneficially
5% or more of the Fund's outstanding shares as of such date.
<PAGE>
[LOGO]
EV MARATHON
STRATEGIC INCOME
FUND
STATEMENT OF ADDITIONAL INFORMATION
MARCH 1, 1997
EV MARATHON
STRATEGIC INCOME FUND
24 FEDERAL STREET
BOSTON, MA 02110
- -------------------------------------------------------------------------------
INVESTMENT ADVISER AND ADMINISTRATOR OF STRATEGIC INCOME PORTFOLIO
INVESTMENT ADVISER OF HIGH INCOME PORTFOLIO
Boston Management and Research, 24 Federal Street, Boston, MA 02110
ADMINISTRATOR OF EV MARATHON STRATEGIC INCOME FUND
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 89 South Street, Boston, MA 02111
TRANSFER AGENT
First Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123
(800) 262-1122
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P., One Post Office Square, Boston, MA 02109
M-SISAI
<PAGE>
PART C
OTHER INFORMATION
ITEM 24: FINANCIAL STATEMENTS AND EXHIBITS
(A) FINANCIAL STATEMENTS
INCLUDED IN PART A:
FOR EV CLASSIC STRATEGIC INCOME FUND:
Financial Highlights for the period from the start of business,
May 24, 1994 through October 31, 1994 and for the two years
ended October 31, 1996.
FOR EV MARATHON STRATEGIC INCOME FUND:
Financial Highlights for the period from the start of business,
November 26, 1990, through October 31, 1991, and for the five
years ended October 31, 1996.
INCLUDED IN PART B:
INCORPORATED BY REFERENCE TO THE ANNUAL REPORTS FOR THE FUNDS,
EACH DATED OCTOBER 31, 1996, FILED ELECTRONICALLY PURSUANT TO
SECTION 30(B)(2) OF THE INVESTMENT COMPANY ACT OF 1940 ARE THE
FOLLOWING:
For:
EV Classic Strategic Income Fund (Accession
No. 00009228816-96-000386)
EV Marathon Strategic Income Fund (Accession
No. 00009228816-96-000387)
The Financial Statements for the above-referenced Funds for
the time periods set forth in the Funds' Annual Reports dated
October 31, 1996 include:
Statement of Assets and Liabilities
Statement of Operations
Statements of Changes in Net Assets
Financial Highlights
Notes to Financial Statements
Independent Auditors Report
For:
Strategic Income Portfolio
The Financial Statements for the above-referenced Portfolio for
the time period set forth in the Funds' Annual Reports dated
October 31, 1996 include:
Portfolio of Investments
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Supplementary Data
Notes to Financial Statements
Independent Auditors Report
<TABLE>
<CAPTION>
(B) EXHIBITS:
<S> <C>
(1)(a) Amended and Restated Declaration of Trust dated August 17, 1993 filed as Exhibit (1)(a)
to Post-Effective Amendment No. 23 and incorporated herein by reference.
(b) Amendment to Declaration of Trust dated July 10, 1995 filed as Exhibit (1)(b) to Post-
Effective Amendment No. 23 and incorporated herein by reference.
(c) Amendment and Restatement of Establishment and Designation of Series dated October 23,
1995 filed as Exhibit (1)(c) to Post-Effective Amendment No. 26 and incorporated herein
by reference.
(d) Amendment and Restatement of Establishment and Designation of Series of Shares dated
May 7, 1996 filed as Exhibit (1)(d) to Post-Effective Amendment No. 30 and incorporated
herein by reference.
(e) Establishment and Designation of Classes of Shares of Beneficial Interest dated
November 18, 1996 filed as Exhibit (1)(e) to Post-Effective Amendment No. 31 and
incorporated herein by reference.
(2)(a) By-Laws (As Amended November 3, 1986) filed as Exhibit (2)(a) to Post-Effective
Amendment No. 23 and incorporated herein by reference.
(b) Amendment to By-Laws of Eaton Vance Government Obligations Trust dated December 13,
1993 filed as Exhibit (2)(b) to Post-Effective Amendment No. 23 and incorporated herein
by reference.
(3) Not applicable
(4) Not applicable
(5)(a) Investment Advisory Agreement with Eaton Vance Management for Eaton Vance Short-Term
Treasury Fund dated February 4, 1991 filed as Exhibit (5)(a) to Post-Effective
Amendment No. 23 and incorporated herein by reference.
(b) Investment Advisory Agreement with Eaton Vance Management for Eaton Vance Tax Free
Reserves dated August 15, 1995 filed as Exhibit (5)(b) to Post-Effective Amendment No.
25 and incorporated herein by reference.
(6)(a)(1) Distribution Agreement with Eaton Vance Distributors, Inc. for Eaton Vance Government
Obligations Trust (now EV Traditional Government Obligations Fund) dated July 9, 1984
filed as Exhibit (6)(a)(1) to Post-Effective Amendment No. 23 and incorporated herein
by reference.
(2) Distribution Agreement with Eaton Vance Distributors, Inc. for Eaton Vance Short-Term
Treasury Fund dated February 4, 1991 as Amended and Restated February 25, 1991 filed as
Exhibit (6)(a)(2) to Post-Effective Amendment No. 23 and incorporated herein by
reference.
(3) Amended Distribution Agreement with Eaton Vance Distributors, Inc. for EV Classic
Government Obligations Fund dated January 27, 1995 filed as Exhibit (6)(a)(3) to Post-
Effective Amendment No. 22 and incorporated herein by reference.
(4) Distribution Agreement with Eaton Vance Distributors, Inc. for EV Marathon Government
Obligations Fund dated October 28, 1993 filed as Exhibit (6)(a)(3) to Post-Effective
Amendment No. 2 and incorporated herein by reference.
(5) Distribution Agreement with Eaton Vance Distributors, Inc. for EV Marathon High Income
Fund dated July 31, 1995 filed as Exhibit (6)(a)(5) to Post-Effective Amendment No. 25
and incorporated herein by reference.
(6) Distribution Agreement with Eaton Vance Distributors, Inc. for EV Classic High Income
Fund dated July 31, 1995 filed as Exhibit (6)(a)(6) to Post-Effective Amendment No. 25
and incorporated herein by reference.
(7) Distribution Agreement with Eaton Vance Distributors, Inc. for EV Classic Strategic
Income Fund dated August 15, 1995 filed as Exhibit (6)(a)(7) to Post-Effective
Amendment No. 24 and incorporated herein by reference.
(8) Distribution Agreement with Eaton Vance Distributors, Inc. for EV Marathon Strategic
Income Fund dated August 15, 1995 filed as Exhibit (6)(a)(8) to Post-Effective
Amendment No. 24 and incorporated herein by reference.
(9) Distribution Agreement between Eaton Vance Cash Management Fund and Eaton Vance
Distributors, Inc. dated August 15, 1995, filed as Exhibit (6)(a)(9) to Post-Effective
Amendment No. 25 and incorporated herein by reference.
(10) Distribution Agreement with Eaton Vance Distributors, Inc. for Eaton Vance Liquid
Assets Fund dated August 15, 1995 filed as Exhibit (6)(a)(10) to Post-Effective
Amendment No. 25 and incorporated herein by reference.
(11) Distribution Agreement with Eaton Vance Distributors, Inc. for Eaton Vance Money Market
Fund dated August 15, 1995 filed as Exhibit (6)(a)(11) to Post-Effective Amendment No.
25 and incorporated herein by reference.
(12) Distribution Agreement between Eaton Vance Tax Free Reserves and Eaton Vance
Distributors, Inc. dated August 15, 1995 filed as Exhibit (6)(a)(12) to Post-Effective
Amendment No. 25 and incorporated herein by reference.
(13) Distribution Agreement with Eaton Vance Distributors, Inc. for EV Marathon Tax-Managed
Growth Fund dated March 20, 1996 filed as Exhibit (6)(a)(13) to Post-Effective
Amendment No. 28 and incorporated herein by reference.
(14) Distribution Agreement with Eaton Vance Distributors, Inc. for EV Traditional Tax-
Managed Growth Fund dated March 20, 1996 filed as Exhibit (6)(a)(14) to Post-Effective
Amendment No. 28 and incorporated herein by reference.
(15) Distribution Agreement with EV Distributors, Inc. for EV Classic Tax-Managed Growth
Fund dated May 7, 1996 filed as Exhibit (6)(a)(15) to Post-Effective Amendment No. 30
and incorporated herein by reference.
(b) Selling Group Agreement between Eaton Vance Distributors, Inc. and Authorized Dealers
filed as Exhibit (6)(b) to the Registration Statement of Eaton Vance Growth Trust Post-
Effective Amendment No. 61 and incorporated herein by reference.
(c) Schedule of Dealer Discounts and Sales Charges filed as Exhibit (6)(c) to the
Registration Statement of Eaton Vance Growth Trust Post-Effective Amendment No. 59 and
incorporated herein by reference.
(7) The Securities and Exchange Commission has granted the Registrant an exemptive order
that permits the Registrant to enter into deferred compensation arrangements with its
independent Trustees. See in the Matter of Capital Exchange Fund, Inc., Release No.
IC-20671 (November 1, 1994).
(8)(a) Custodian Agreement with Investors Bank & Trust Company dated October 15, 1992 filed as
Exhibit (8) to Post-Effective Amendment No. 23 and incorporated herein by reference.
(b) Amendment to Custodian Agreement with Investors Bank & Trust Company dated October 23,
1995 filed as Exhibit (8)(b) to Post-Effective Amendment No. 27 and incorporated herein
by reference.
(9)(a) Amended Administrative Services Agreement between Eaton Vance Mutual Funds Trust (on
behalf of each of its series) and Eaton Vance Management dated July 31, 1995, with
attached schedules (including Amended Schedule A dated October 23, 1995) under Rule
8b-31 under the Investment Company Act of 1940, as amended, filed as Exhibit (9)(a) to
Post-Effective Amendment No. 24 and incorporated herein by reference.
(b) Transfer Agency Agreement dated June 7, 1989 filed as Exhibit 9(d) to the Registration
Statement of Eaton Vance Growth Trust Post-Effective Amendment No. 59 and incorporated
herein by reference.
(c) Amendment to Transfer Agency Agreement dated February 1, 1993 filed as Exhibit 9(e) to
the Registration Statement of Eaton Vance Growth Trust Post-Effective Amendment No. 59
and incorporated herein by reference.
(d) Amended Schedule A to Administrative Services Agreement dated May 7, 1996 filed as
Exhibit (9)(d) to Post-Effective Amendment No. 30 and incorporated herein by reference.
(10) Not applicable
(11)(a) Consents of Independent Accountants for Classic Strategic Income Fund filed herewith.
(b) Consents of Independent Accountants for Marathon Strategic Income Fund filed herewith.
(13) Not applicable
(14)(a) Vance, Sanders Profit Sharing Retirement Plan for Self-Employed Persons with Adoption
Agreement and instructions filed as Exhibit No. 14(1) to Post-Effective Amendment #22
on Form N-1 under the Securities Act of 1933 (File No. 2-28471) and incorporated herein
by reference.
(b) Eaton & Howard, Vance Sanders Defined Contribution Prototype Plan and Trust with
Adoption Agreements (1) Basic Profit-Sharing Retirement Plan, (2) Basic Money Purchase
Pension Plan, (3) Thrift Plan Qualifying as Profit Sharing Plan, (4) Thrift Plan
Qualifying as Money Purchase Plan, (5) Integrated Profit Sharing Retirement Plan, (6)
Integrated Money Purchase Pension Plan filed as Exhibit 14(2) to Post-Effective
Amendment No. 22 on Form N-1 under the Securities Act of 1933 (File No. 2-28471) and
incorporated herein by reference.
(c) Individual Retirement Custodial Account (Form 5305-A) and Investment Instruction Form
filed as Exhibit 14(3) to Post-Effective Amendment No. 22 on Form N-1 under the
Securities Act of 1933 (File No. 2-28471) and incorporated herein by reference.
(d) Eaton & Howard, Vance Sanders Variable Pension Prototype Plan and Trust with Adoption
Agreement filed as Exhibit 14(b) to Post-Effective Amendment No. 22 on Form N-1 under
the Securities Act of 1933 (File No. 2-28471) and incorporated herein by reference.
(15)(a) Service Plan for Eaton Vance Government Obligations Fund (now EV Traditional Government
Obligations Fund) dated July 7, 1993 filed as Exhibit (15)(a) to Post-Effective
Amendment No. 23 and incorporated herein by reference.
(b) Distribution Plan pursuant to Rule 12b-1 under the Investment Company Act of 1940 for
Eaton Vance Short-Term Treasury Fund dated February 4, 1991 as Amended and Restated
February 25, 1991 filed as Exhibit (15)(b) to Post-Effective Amendment No. 23 and
incorporated herein by reference.
(c) Amended Distribution Plan for EV Classic Government Obligations Fund pursuant to Rule
12b-1 under the Investment Company Act of 1940 dated January 27, 1995 filed as Exhibit
(15)(c) to Post-Effective Amendment No. 22 and incorporated herein by reference.
(d) Distribution Plan for EV Marathon Government Obligations Fund pursuant to Rule 12b-1
under the Investment Company Act of 1940 dated October 28, 1993 filed as Exhibit (15)
(d) to Post-Effective Amendment No. 23 and incorporated herein by reference.
(e) Distribution Plan for EV Marathon High Income Fund pursuant to Rule 12b-1 under the
Investment Company Act of 1940 dated June 19, 1995 filed as Exhibit (15)(e) to Post-
Effective Amendment No. 25 and incorporated herein by reference.
(f) Distribution Plan for EV Classic High Income Fund pursuant to Rule 12b-1 under the
Investment Company Act of 1940 dated June 19, 1995 filed as Exhibit (15)(f) to Post-
Effective Amendment No. 25 and incorporated herein by reference.
(g) Distribution Plan for EV Classic Strategic Income Fund pursuant to Rule 12b-1 under the
Investment Company Act of 1940 dated June 19, 1995 filed as Exhibit (15)(g) to Post-
Effective Amendment No. 24 and incorporated herein by reference.
(h) Distribution Plan for EV Marathon Strategic Income Fund pursuant to Rule 12b-1 under
the Investment Company Act of 1940 dated June 19, 1995 filed as Exhibit (15)(h) to
Post-Effective Amendment No. 24 and incorporated herein by reference.
(i) Distribution Plan for Eaton Vance Liquid Assets Fund pursuant to Rule 12b-1 under the
Investment Company Act of 1940 dated June 19, 1995 filed as Exhibit (15)(i) to Post-
Effective Amendment No. 25 and incorporated herein by reference.
(j) Distribution Plan for Eaton Vance Money Market Fund pursuant to Rule 12b-1 under the
Investment Company Act of 1940 dated June 19, 1995 filed as Exhibit (15)(j) to Post-
Effective Amendment No. 25 and incorporated herein by reference.
(k) Distribution Plan for EV ---Marathon ---Tax-Managed Growth Fund pursuant to Rule 12b-1
under the Investment Company Act of 1940, dated March 20, 1996, filed as Exhibit (15)
(k) to Post-Effective Amendment No. 28 and incorporated herein by reference.
(l) Service Plan for EV Traditional Tax-Managed Growth Fund dated March 20, 1996 filed as
Exhibit (15)(l) to Post-Effective Amendment No. 28 and incorporated herein by
reference.
(m) Distribution Plan for EV Classic Tax-Managed Growth Fund pursuant to Rule 12b-1 under
the Investment Company Act of 1940 dated August 1, 1996 filed as Exhibit (15)(m) to
Post-Effective Amendment No. 30 and incorporated herein by reference.
(16) Schedules for Computation of Performance Quotations filed herewith.
(17)(a) Power of Attorney for Eaton Vance Mutual Funds Trust dated July 11, 1995 filed as
Exhibit (17)(a) to Post-Effective Amendment No. 23 and incorporated herein by
reference.
(b) Power of Attorney for Government Obligations Portfolio dated June 19, 1995 filed as
Exhibit (17)(b) to Post-Effective Amendment No. 23 and incorporated herein by
reference.
(c) Power of Attorney for High Income Portfolio dated June 19, 1995 filed as Exhibit (17)
(c) to Post-Effective Amendment No. 23 and incorporated herein by reference.
(d) Power of Attorney for Strategic Income Portfolio dated August 7, 1995 filed as Exhibit
(17)(d) to Post-Effective Amendment No. 24 and incorporated herein by reference.
(e) Power of Attorney for Cash Management Portfolio dated August 7, 1995 filed as Exhibit
(17)(e) to Post-Effective Amendment No. 25 and incorporated herein by reference.
(f) Power of Attorney for Tax-Managed Growth Portfolio dated October 23, 1995 filed as
Exhibit (17)(f) to Post-Effective Amendment No. 26 and incorporated herein by
reference.
(18) Multiple Class Plan for Institutional Shares dated November 18, 1996 filed as Exhibit
(18) to Post-Effective Amendment No. 31 and incorporated herein by reference.
</TABLE>
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Not applicable
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
<TABLE>
<CAPTION>
(1) (2)
TITLE OF CLASS NUMBER OF RECORD HOLDERS
Shares of beneficial interest without par value as of December 2, 1996
<S> <C>
Eaton Vance Short-Term Treasury Fund 65
EV Classic Government Obligations Fund 871
EV Marathon Government Obligations Fund 3,400
EV Traditional Government Obligations Fund 9,551
EV Classic High Income Fund 341
EV Marathon High Income Fund 15,779
EV Classic Strategic Income Fund 18
EV Marathon Strategic Income Fund 5,554
EV Classic Tax-Managed Growth Fund 377
EV Marathon Tax-Managed Growth Fund 2,874
EV Traditional Tax-Managed Growth Fund 1,178
Eaton Vance Cash Management Fund 2,184
Eaton Vance Liquid Assets Fund 578
Eaton Vance Money Market Fund 626
Eaton Vance Tax Free Reserves 177
</TABLE>
ITEM 27. INDEMNIFICATION
Article IV of the Trust's Amended and Restated Declaration of Trust, dated
August 17, 1993 permits Trustee and officer indemnification by By-law,
contract and vote. Article XI of the By-laws contains indemnification
provisions. Registrant's Trustees and officers are insured under a standard
mutual fund errors and omissions insurance policy covering insured by reason
of negligent errors and omissions committed in their capacities as such.
The distribution agreements of the Trust also provide for reciprocal
indemnity of the principal underwriter, on the one hand, and the Trustees and
officers, on the other.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Reference is made to the information set forth under the captions
"Investment Adviser and Administrator" or "Investment Adiviser" in the
Statements of Additional Information which information is incorporated herein
by reference.
<PAGE>
ITEM 29. PRINCIPAL UNDERWRITERS
(A) Registrant's principal underwriter, Eaton Vance Distributors, Inc., a
wholly-owned subsidiary of Eaton Vance Management, is the principal
underwriter for each of the investment companies named below:
<TABLE>
<S> <C>
EV Classic California Municipals Fund EV Classic New Jersey Municipals Fund
EV Classic Connecticut Municipals Fund EV Classic New York Limited Maturity
EV Classic Florida Insured Municipals Fund Municipals Fund
EV Classic Florida Limited Maturity EV Classic New York Municipals Fund
Municipals Fund EV Classic Pennsylvania Limited Maturity
EV Classic Florida Municipals Fund Municipals Fund
EV Classic Government Obligations Fund EV Classic Pennsylvania Municipals Fund
EV Classic Greater China Growth Fund EV Classic Senior Floating-Rate Fund
EV Classic Growth Fund EV Classic Strategic Income Fund
EV Classic High Income Fund EV Classic Special Equities Fund
EV Classic Information Age Fund EV Classic Stock Fund
EV Classic Investors Fund EV Classic Tax-Managed Growth Fund
EV Classic Massachusetts Limited Maturity EV Classic Total Return Fund
Municipals Fund EV Marathon Alabama Municipals Fund
EV Classic National Limited Maturity EV Marathon Arizona Municipals Fund
Municipals Fund EV Marathon Arkansas Municipals Fund
EV Classic National Municipals Fund EV Marathon Asian Small Companies Fund
<PAGE>
EV Marathon California Limited Maturity EV Marathon South Carolina Municipals Fund
Municipals Fund EV Marathon Special Equities Fund
EV Marathon California Municipals Fund EV Marathon Stock Fund
EV Marathon Colorado Municipals Fund EV Marathon Tax-Managed Growth Fund
EV Marathon Connecticut Limited Maturity EV Marathon Tennessee Municipals Fund
Municipals Fund EV Marathon Texas Municipals Fund
EV Marathon Connecticut Municipals Fund EV Marathon Total Return Fund
EV Marathon Emerging Markets Fund EV Marathon Virginia Municipals Fund
EV Marathon Florida Insured Municipals Fund EV Marathon West Virginia Municipals Fund
EV Marathon Florida Limited Maturity EV Marathon Worldwide Health Sciences Fund
Municipals Fund EV Traditional Alabama Municipals Fund
EV Marathon Florida Municipals Fund EV Traditional Arizona Municipals Fund
EV Marathon Georgia Municipals Fund EV Traditional Arkansas Municipals Fund
EV Marathon Gold & Natural Resources Fund EV Traditional Asian Small Companies Fund
EV Marathon Government Obligations Fund EV Traditional California Limited Maturity
EV Marathon Greater China Growth Fund Municipals Fund
EV Marathon Greater India Fund EV Traditional California Municipals Fund
EV Marathon Growth Fund EV Traditional Colorado Municipals Fund
EV Marathon Hawaii Municipals Fund EV Traditional Connecticut Limited Maturity
EV Marathon High Income Fund Municipals Fund
EV Marathon High Yield Municipals Fund EV Traditional Connecticut Municipals Fund
EV Marathon Information Age Fund EV Traditional Emerging Markets Fund
EV Marathon Investors Fund EV Traditional Florida Insured Municipals Fund
EV Marathon Kansas Municipals Fund EV Traditional Florida Limited Maturity
EV Marathon Kentucky Municipals Fund Municipals Fund
EV Marathon Louisiana Municipals Fund EV Traditional Florida Municipals Fund
EV Marathon Maryland Municipals Fund EV Traditional Georgia Municipals Fund
EV Marathon Massachusetts Limited Maturity EV Traditional Government Obligations Fund
Municipals Fund EV Traditional Greater China Growth Fund
EV Marathon Massachusetts Municipals Fund EV Traditional Greater India Fund
EV Marathon Michigan Limited Maturity EV Traditional Growth Fund
Municipals Fund EV Traditional Hawaii Municipals Fund
EV Marathon Michigan Municipals Fund EV Traditional High Yield Municipals Fund
EV Marathon Minnesota Municipals Fund Eaton Vance Income Fund of Boston
EV Marathon Mississippi Municipals Fund EV Traditional Information Age Fund
EV Marathon Missouri Municipals Fund EV Traditional Investors Fund
EV Marathon National Limited Maturity EV Traditional Kansas Municipals Fund
Municipals Fund EV Traditional Kentucky Municipals Fund
EV Marathon National Municipals Fund EV Traditional Louisiana Municipals Fund
EV Marathon New Jersey Limited Maturity EV Traditional Maryland Municipals Fund
Municipals Fund EV Traditional Massachusetts Municipals Fund
EV Marathon New Jersey Municipals Fund EV Traditional Michigan Limited Maturity
EV Marathon New York Limited Maturity Municipals Fund
Municipals Fund EV Traditional Michigan Municipals Fund
EV Marathon New York Municipals Fund EV Traditional Minnesota Municipals Fund
EV Marathon North Carolina EV Traditional Mississippi Municipals Fund
Municipals Fund EV Traditional Missouri Municipals Fund
EV Marathon Ohio Limited Maturity Eaton Vance Municipal Bond Fund L.P.
Municipals Fund EV Traditional National Limited Maturity
EV Marathon Ohio Municipals Fund Municipals Fund
EV Marathon Oregon Municipals Fund EV Traditional National Municipals Fund
EV Marathon Pennsylvania Limited Maturity EV Traditional New Jersey Limited Maturity
Municipals Fund Municipals Fund
EV Marathon Pennsylvania Municipals Fund EV Traditional New Jersey Municipals Fund
EV Marathon Rhode Island Municipals Fund EV Traditional New York Limited Maturity
EV Marathon Strategic Income Fund Municipals Fund
<PAGE>
EV Traditional New York Municipals Fund EV Traditional Texas Municipals Fund
EV Traditional North Carolina Municipals Fund EV Traditional Total Return Fund
EV Traditional Ohio Limited Maturity EV Traditional Virginia Municipals Fund
Municipals Fund EV Traditional West Virginia Municipals Fund
EV Traditional Ohio Municipals Fund EV Traditional Worldwide Health Sciences
EV Traditional Oregon Municipals Fund Fund, Inc.
EV Traditional Pennsylvania Municipals Fund Eaton Vance Cash Management Fund
EV Traditional Rhode Island Municipals Fund Eaton Vance Liquid Assets Fund
EV Traditional South Carolina Municipals Fund Eaton Vance Money Market Fund
EV Traditional Special Equities Fund Eaton Vance Prime Rate Reserves
EV Traditional Stock Fund Eaton Vance Short-Term Treasury Fund
EV Traditional Tax-Managed Growth Fund Eaton Vance Tax Free Reserves
EV Traditional Tennessee Municipals Fund Massachusetts Municipal Bond Portfolio
</TABLE>
(B)
<TABLE>
<CAPTION>
(1) (2) (3)
NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICE
BUSINESS ADDRESS* WITH PRINCIPAL UNDERWRITER WITH REGISTRANT
----------------- -------------------------- ---------------
<S> <C> <C>
James B. Hawkes Vice President and Director Vice President and Trustee
William M. Steul Vice President and Director None
Wharton P. Whitaker President and Director None
Chris Berg Vice President None
Kate Bradshaw Vice President None
Susan W. Bukima Vice President None
Jeffrey W. Butterfield Vice President None
David B. Carle Vice President None
James S. Comforti Vice President None
Raymond Cox Vice President None
Mark P. Doman Vice President None
Alan R. Dynner Vice President None
James Foley Vice President None
Michael A. Foster Vice President None
William M. Gillen Vice President None
Hugh S. Gilmartin Vice President None
Perry D. Hooker Vice President None
Brian Jacobs Senior Vice President None
Thomas P. Luka Vice President None
John Macejka Vice President None
Timothy D. McCarthy Vice President None
Joseph T. McMenamin Vice President None
Morgan C. Mohrman Senior Vice President None
James A. Naughton Vice President None
Mark D. Nelson Vice President None
Linda D. Newkirk Vice President None
James L. O'Connor Vice President Treasurer
Thomas Otis Secretary and Clerk Secretary
George D. Owen, II Vice President None
F. Anthony Robinson Vice President None
Jay S. Rosoff Vice President None
Benjamin A. Rowland, Jr. Vice President, None
Treasurer and Director
John P. Rynne Vice President None
Kevin Schrader Vice President None
George V.F. Schwab, Jr. Vice President None
Cornelius J. Sullivan Vice President None
David M. Thill Vice President None
Chris Volf Vice President None
Sue Wilder Vice President None
<FN>
- ----------
Address is 24 Federal Street, Boston, MA 02110
</FN>
</TABLE>
(C) Not applicable
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
All applicable accounts, books and documents required to be maintained by
the Registrant by Section 31(a) of the Investment Company Act of 1940 and the
Rules promulgated thereunder are in the possession and custody of the
Registrant's custodian, Investors Bank & Trust Company, 89 South Street,
Boston, MA 02111 and its transfer agent, First Data Investor Services Group,
4400 Computer Drive, Westborough, MA 01581, with the exception of certain
corporate documents and portfolio trading documents which are in the
possession and custody of Eaton Vance Management, 24 Federal Street, Boston,
MA 02110. Certain corporate documents of High Income Portfolio (the "HI
Portfolio") are also maintained by IBT Trust Company (Cayman), Ltd., The Bank
of Nova Scotia Building, P.O. Box 501, George Town, Grand Cayman, Cayman
Islands, British West Indies, and certain investor account, HI Portfolio and
the Registrant's accounting records are held by IBT Fund Services (Canada)
Inc., 1 First Canadian Place, Kingstreet West, Suite 2800, P.O. Box 231,
Toronto, Ontario, Canada M5X 1C8. Registrant is informed that all applicable
accounts, books and documents required to be maintained by registered
investment advisers are in the custody and possession of Eaton Vance
Management.
ITEM 31. MANAGEMENT SERVICES
Not applicable
ITEM 32. UNDERTAKINGS
The Registrant undertakes to furnish to each person to whom a prospectus
is delivered a copy of the latest annual report to shareholders, upon request
and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, and the
Investment Company Act of 1940, the Registrant has duly caused this Post-
Effective Amendment to its Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Boston, and the
Commonwealth of Massachusetts, on the 26th day of December, 1996.
EATON VANCE MUTUAL FUNDS TRUST
By: /s/ M. DOZIER GARDNER
-------------------------------------
M. DOZIER GARDNER, President
Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment to the Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
President, Principal
Executive Officer and
/s/ M. DOZIER GARDNER* Trustee December 26, 1996
- ------------------------------------
M. DOZIER GARDNER
Treasurer and Principal
Financial and Accounting
/s/ JAMES L. O'CONNOR* Officer December 26, 1996
- ------------------------------------
JAMES L. O'CONNOR
/s/ JAMES B. HAWKES* Vice President, Trustee December 26, 1996
- ------------------------------------
JAMES B. HAWKES
DONALD R. DWIGHT* Trustee December 26, 1996
- ------------------------------------
DONALD R. DWIGHT
SAMUEL L. HAYES, III* Trustee December 26, 1996
- ------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee December 26, 1996
- ------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee December 26, 1996
- ------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee December 26, 1996
- ------------------------------------
JACK L. TREYNOR
*By: /s/ H. DAY BRIGHAM, JR.
--------------------------------
H. DAY BRIGHAM, JR.
As Attorney-in-fact
</TABLE>
<PAGE>
SIGNATURES
Strategic Income Portfolio has duly caused this Amendment to the
Registration Statement on Form N-1A of Eaton Vance Mutual Funds Trust (File
No. 2-90946) to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Boston, and the Commonwealth of Massachusetts, on
the 26th day of December, 1996.
STRATEGIC INCOME PORTFOLIO
By: /s/ M. DOZIER GARDNER
-------------------------------------
M. DOZIER GARDNER, President
This Amendment to the Registration Statement on Form N-1A of Eaton Vance
Mutual Funds Trust (File No. 2-90946) has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
Trustee, President and
Principal Executive
/s/ M. DOZIER GARDNER* Officer December 26, 1996
- ------------------------------------
M. DOZIER GARDNER
Treasurer and Principal
Financial and Accounting
/s/ JAMES L. O'CONNOR* Officer December 26, 1996
- ------------------------------------
JAMES L. O'CONNOR
/s/ JAMES B. HAWKES* Trustee December 26, 1996
- ------------------------------------
JAMES B. HAWKES
DONALD R. DWIGHT* Trustee December 26, 1996
- ------------------------------------
DONALD R. DWIGHT
SAMUEL L. HAYES, III* Trustee December 26, 1996
- ------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee December 26, 1996
- ------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee December 26, 1996
- ------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee December 26, 1996
- ------------------------------------
JACK L. TREYNOR
*By: /s/ H. DAY BRIGHAM, JR.
--------------------------------
H. DAY BRIGHAM, JR.
As Attorney-in-fact
</TABLE>
<PAGE>
SIGNATURES
High Income Portfolio has duly caused this Amendment to the Registration
Statement on Form N-1A of Eaton Vance Mutual Funds Trust (File No. 2-90946) to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Hamilton, Bermuda on the 18th day of December, 1996.
HIGH INCOME PORTFOLIO
By: /s/ M. DOZIER GARDNER
-------------------------------------
M. DOZIER GARDNER, President
This Amendment to the Registration Statement on Form N-1A of Eaton Vance
Mutual Funds Trust (File No. 2-90946) has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
President and Principal
/s/ M. DOZIER GARDNER Executive Officer December 18, 1996
- ------------------------------------
M. DOZIER GARDNER
Treasurer and Principal
Financial and Accounting
JAMES L. O'CONNOR* Officer December 18, 1996
- ------------------------------------
JAMES L. O'CONNOR
JAMES B. HAWKES* Trustee December 18, 1996
- ------------------------------------
JAMES B. HAWKES
DONALD R. DWIGHT* Trustee December 18, 1996
- ------------------------------------
DONALD R. DWIGHT
SAMUEL L. HAYES, III* Trustee December 18, 1996
- ------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee December 18, 1996
- ------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee December 18, 1996
- ------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee December 18, 1996
- ------------------------------------
JACK L. TREYNOR
*By: /s/ M. DOZIER GARDNER
--------------------------------
M. DOZIER GARDNER
As Attorney-in-fact
</TABLE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
PAGE IN SEQUENTIAL
EXHIBIT NO. DESCRIPTION NUMBERING SYSTEM
- ----------- ----------- ----------------
<S> <C> <C>
(11)(a) Consents of Independent Accountants for Classic Strategic Income Fund.
(11)(b) Consents of Independent Accountants for Marathon Strategic Income Fund.
(16) Schedules for Calculations of Performance Quotations.
</TABLE>
<PAGE>
EXHIBIT 11(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the use in this Post-Effective Amendment No. 32 to the
Registration Statement of Eaton Vance Mutual Funds Trust (1933 Act File No.
2-90946) on behalf of EV Classic Strategic Income Fund of our report dated
December 2, 1996, relating to EV Classic Strategic Income Fund, and of our
report dated December 2, 1996, relating to Strategic Income Portfolio, which
reports are included in the Annual Report to Shareholders for the year ended
October 31, 1996, which is incorporated by reference in the Statement of
Additional Information, which is part of such Registration Statement.
We also consent to the reference to our Firm under the heading "The
Fund's Financial Highlights" in the Prospectus and under the captions
"Independent Accountants" and "Financial Statements" in the Statement of
Additional Information of the Registration Statement.
Boston, Massachusetts Coopers & Lybrand, L.L.P.
December 26, 1996
<PAGE>
EXHIBIT 11(b)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the use in this Post-Effective Amendment No. 32 to the
Registration Statement of Eaton Vance Mutual Funds Trust (1933 Act File No.
2-90946) on behalf of EV Marathon Strategic Income Fund of our report dated
December 2, 1996, relating to EV Marathon Strategic Income Fund, and of our
report dated December 2, 1996, relating to Strategic Income Portfolio, which
reports are included in the Annual Report to Shareholders for the year ended
October 31, 1996, which is incorporated by reference in the Statement of
Additional Information, which is part of such Registration Statement.
We also consent to the reference to our Firm under the heading "The
Fund's Financial Highlights" in the Prospectus and under the captions
"Independent Accountants" and "Financial Statements" in the Statement of
Additional Information of the Registration Statement.
Boston, Massachusetts Coopers & Lybrand L.L.P.
December 26, 1996
<PAGE>
Exhibit 16
EV CLASSIC STRATEGIC INCOME FUND
CALCULATION OF YIELD
For the 30 days ended 10/31/96:
Interest Income Earned: $12,173
Plus
----------
Equal Gross Income: $12,173
Minus Expenses: $2,940
----------
Equal Net Investment Income: $9,233
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 139,202
----------
Equal Net Investment Income Earned Per Share: $0.0663
Maximum Offering Price Per Share 10/31/96: $12.09
30 Day Yield*: 6.67%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0663/$12.09)+1) -1]
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EV CLASSIC STRATEGIC INCOME FUND
The table below indicates the total return (capital changes plus reinvestment of all distributions) on a hypothetical investment of
$1,000 in the Fund covering the period from November 26, 1990 through October 31, 1996 and for the 1 and 5 year periods ended
October 31, 1996. Total return for the period prior to the Fund's commencement of operations is for the Portfolio (or its
predecessor) adjusted for the Fund's sales charge.
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC BEFORE DEDUCTING CDSC AFTER DEDUCTING CDSC
PERIOD DATE ON 10/31/96 ON 10/31/96 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 11/26/90 $1,488.84 $1,488.84 48.88% 6.94% 48.88% 6.94%
5 YEARS ENDED
10/31/96 10/31/91 $1,378.84 $1,378.84 37.88% 6.64% 37.88% 6.64%
1 YEAR ENDED
10/31/96 10/31/95 $1,150.88 $1,140.88 15.09% 15.09% 14.09% 14.09%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC *
Cumulative total return is calculated using the following formula:
T = ( ERV / P ) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC **
P = an initial investment of $1,000
* The average annual total return not including the CDSC is calculated based on the ending investment value
before deducting the CDSC.
** The cumulative total return not including the CDSC is calculated based on the ending investment value before
deducting the CDSC.
</TABLE>
<PAGE>
EV MARATHON STRATEGIC INCOME FUND
CALCULATION OF YIELD
For the 30 days ended 10/31/96:
Interest Income Earned: $957,695
Plus
----------
Equal Gross Income: $957,695
Minus Expenses: $223,065
----------
Equal Net Investment Income: $734,630
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 14,104,481
----------
Equal Net Investment Income Earned Per Share: $0.0521
Maximum Offering Price Per Share 10/31/96: $9.31
30 Day Yield*: 6.81%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0521/$9.31)+1) -1]
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EV MARATHON STRATEGIC INCOME FUND
The table below indicates the total return (capital changes plus reinvestment of all distributions) on a hypothetical investment of
$1,000 in the Fund covering the period from November 26, 1990 through October 31, 1996 and for the 1 and 5 year periods ended
October 31, 1996.
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC BEFORE DEDUCTING CDSC AFTER DEDUCTING CDSC
PERIOD DATE ON 10/31/96 ON 10/31/96 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 11/26/90 $1,468.48 $1,468.48 46.85% 6.69% 46.85% 6.69%
5 YEARS ENDED
10/31/96 10/31/91 $1,360.00 $1,360.00 36.00% 6.34% 36.00% 6.34%
1 YEAR ENDED
10/31/96 10/31/95 $1,184.83 $1,154.83 18.48% 18.48% 15.48% 15.48%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC *
Cumulative total return is calculated using the following formula:
T = ( ERV / P ) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC **
P = an initial investment of $1,000
* The average annual total return not including the CDSC is calculated based on the ending investment value
before deducting the CDSC.
** The cumulative total return not including the CDSC is calculated based on the ending investment value before
deducting the CDSC.
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 6
<NAME> EV CLASSIC STRATEGIC INCOME FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 1,607
<INVESTMENTS-AT-VALUE> 1,681
<RECEIVABLES> 56
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,737
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 44
<TOTAL-LIABILITIES> 44
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,593
<SHARES-COMMON-STOCK> 140
<SHARES-COMMON-PRIOR> 1
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (9)
<ACCUMULATED-NET-GAINS> 35
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 74
<NET-ASSETS> 1,693
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 84
<EXPENSES-NET> 15
<NET-INVESTMENT-INCOME> 69
<REALIZED-GAINS-CURRENT> 34
<APPREC-INCREASE-CURRENT> 73
<NET-CHANGE-FROM-OPS> 176
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (69)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (9)
<NUMBER-OF-SHARES-SOLD> 142
<NUMBER-OF-SHARES-REDEEMED> (9)
<SHARES-REINVESTED> 6
<NET-CHANGE-IN-ASSETS> 1,426
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 76
<AVERAGE-NET-ASSETS> 976
<PER-SHARE-NAV-BEGIN> 11.330
<PER-SHARE-NII> 0.804
<PER-SHARE-GAIN-APPREC> 0.865
<PER-SHARE-DIVIDEND> 0.804
<PER-SHARE-DISTRIBUTIONS> 0.105
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 12.090
<EXPENSE-RATIO> 2.38
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 5
<NAME> EV MARATHON STRATEGIC INCOME FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 122,880
<INVESTMENTS-AT-VALUE> 130,725
<RECEIVABLES> 22
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 130,747
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,076
<TOTAL-LIABILITIES> 1,076
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 135,297
<SHARES-COMMON-STOCK> 13,932
<SHARES-COMMON-PRIOR> 17,745
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (2,003)
<ACCUMULATED-NET-GAINS> (11,467)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 7,844
<NET-ASSETS> 129,671
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 11,898
<EXPENSES-NET> 1,788
<NET-INVESTMENT-INCOME> 10,110
<REALIZED-GAINS-CURRENT> 9,539
<APPREC-INCREASE-CURRENT> 3,748
<NET-CHANGE-FROM-OPS> 23,397
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 10,110
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 749
<NUMBER-OF-SHARES-SOLD> 802
<NUMBER-OF-SHARES-REDEEMED> 5,224
<SHARES-REINVESTED> 609
<NET-CHANGE-IN-ASSETS> (21,095)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,788
<AVERAGE-NET-ASSETS> 137,039
<PER-SHARE-NAV-BEGIN> 8.50
<PER-SHARE-NII> 0.655
<PER-SHARE-GAIN-APPREC> 0.858
<PER-SHARE-DIVIDEND> (0.655)
<PER-SHARE-DISTRIBUTIONS> (0.048)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 9.31
<EXPENSE-RATIO> 2.17
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 120,286
<INVESTMENTS-AT-VALUE> 125,214
<RECEIVABLES> 4,255
<ASSETS-OTHER> 19
<OTHER-ITEMS-ASSETS> 2,972
<TOTAL-ASSETS> 132,460
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 53
<TOTAL-LIABILITIES> 53
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 124,489
<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> 7,918
<NET-ASSETS> 132,407
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 13,181
<EXPENSES-NET> 1,199
<NET-INVESTMENT-INCOME> 11,982
<REALIZED-GAINS-CURRENT> 9,573
<APPREC-INCREASE-CURRENT> 3,821
<NET-CHANGE-FROM-OPS> 25,376
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (20,176)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 745
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,199
<AVERAGE-NET-ASSETS> 138,983
<PER-SHARE-NAV-BEGIN> 0.000
<PER-SHARE-NII> 0.000
<PER-SHARE-GAIN-APPREC> 0.000
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 0.000
<EXPENSE-RATIO> 0.86
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
