<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 25, 1997
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 [X]
POST-EFFECTIVE AMENDMENT NO. 36 [X]
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 39 [X]
EATON VANCE MUTUAL FUNDS TRUST
----------------------------------------------------
(FORMERLY EATON VANCE GOVERNMENT OBLIGATIONS TRUST)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
24 FEDERAL STREET, BOSTON, MASSACHUSETTS 02110
----------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
617-482-8260
-------------------------------------
(REGISTRANT'S TELEPHONE NUMBER)
ALAN R. DYNNER
24 FEDERAL STREET, BOSTON, MASSACHUSETTS 02110
--------------------------------------
(NAME AND ADDRESS OF AGENT FOR SERVICE)
It is proposed that this filing will become effective pursuant to Rule 485
(check appropriate box):
[ ] immediately upon filing [ ] on (date) pursuant to
pursuant to paragraph (b) paragraph (a)(1)
[X] on August 1, 1997 [ ] 75 days after filing pursuant to
pursuant to paragraph (b) paragraph (a)(2)
[ ] 60 days after filing [ ] on (date) pursuant to
pursuant to paragraph (a)(1) paragraph (a)(2).
If appropriate, check the following box:
[ ] this post effective amendment designates a new effective date for a
perviously filed post-effective amendment.
High Income Portfolio has also executed this Registration Statement.
The Registrant has filed a Declaration pursuant to Rule 24f-2 and on May
15, 1997 filed its "Notice" as required by that Rule for the series of the
Registrant with a fiscal year end of March 31, 1997, on February 20, 1997
filed its "Notice" for the series of the Registrant with a fiscal year end of
December 31, 1996 and on December 23, 1996 filed its "Notice" for the series
of the Registrant with a fiscal year end of October 31, 1996. Registrant
continues its election to register an indefinite number of shares of beneficial
interest pursuant to Rule 24f-2.
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<PAGE>
This Amendment to the registration statement on Form N-1A consists of the
following documents and papers:
Cross Reference Sheet required by Rule 481(a) under the Securities Act
of 1933
Part A--The Prospectuses of:
EV Classic High Income Fund
EV Marathon High Income Fund
Part B--The Statements of Additional Information of:
EV Classic High Income Fund
EV Marathon High 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
CROSS REFERENCE SHEET FOR
EV CLASSIC HIGH INCOME FUND
EV MARATHON HIGH INCOME FUND
ITEMS REQUIRED BY FORM N-1A
PART A
ITEM NO. ITEM CAPTION PROSPECTUS CAPTION
- ------ -------- -------------------------------
1. ............ Cover Page Cover Page
2. ............ Synopsis Shareholder and Fund Expenses
3. ............ Condensed Financial The Fund's Financial
Information Highlights; Performance
Information
4. ............ General Description of The Fund's Investment
Registrant Objective; Investment
Policies and Risks;
Organization of the Fund and
the Portfolio
5. ............ Management of the Fund Management of the Fund and the
Portfolio
5A............. Management's Discussion of Not Applicable
Fund Performance
6. ............ Capital Stock and Other Organization of the Fund and
Securities the Portfolio; Reports to
Shareholders; The Lifetime
Investing Account/
Distribution Options;
Distributions and Taxes
7. ............ Purchase of Securities Valuing Fund Shares;
Being Offered Distribution Plan; 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
Certified Public Accountants;
Fees and Expenses
17. ............ Brokerage Allocation and Portfolio Security
Other Transactions; Fees and
Practices Expenses
18. ............ Capital Stock and Other Other Information
Securities
19. ............ Purchase, Redemption and Determination of Net Asset
Pricing of Securities Value; Principal Underwriter;
Being Offered Service for Withdrawal;
Distribution Plan; Fees and
Expenses
20. ............ Tax Status Taxes
21. ............ Underwriters Principal Underwriter; Fees and
Expenses
22. ............ Calculation of Performance Investment Performance;
Data Performance Information
23. ............ Financial Statements Financial Statements
<PAGE>
PART A
INFORMATION REQUIRED IN A PROSPECTUS
EV CLASSIC
HIGH INCOME FUND
- --------------------------------------------------------------------------------
EV CLASSIC HIGH INCOME FUND (THE "FUND") IS A MUTUAL FUND SEEKING TO PROVIDE A
HIGH LEVEL OF CURRENT INCOME. THE FUND INVESTS ITS ASSETS IN HIGH INCOME
PORTFOLIO (THE "PORTFOLIO"), A DIVERSIFIED OPEN-END INVESTMENT COMPANY HAVING
THE SAME INVESTMENT OBJECTIVE AS THE FUND, RATHER THAN BY DIRECTLY INVESTING IN
AND MANAGING ITS OWN PORTFOLIO OF SECURITIES. THE FUND IS A SERIES OF EATON
VANCE MUTUAL FUNDS TRUST (THE "TRUST").
THE PORTFOLIO SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY INVESTING UP TO
100% OF ITS ASSETS IN LOWER-RATED BONDS, COMMONLY KNOWN AS "JUNK BONDS", THAT
ENTAIL GREATER RISKS, INCLUDING DEFAULT, THAN THOSE OF HIGHER-RATED
SECURITIES. INVESTORS SHOULD CAREFULLY CONSIDER THESE RISKS AND INVEST FOR THE
LONG TERM. SEE "THE FUND'S INVESTMENT OBJECTIVE" AND "INVESTMENT POLICIES AND
RISKS."
Shares of the Fund are not deposits or obligations of, or guaranteed or endorsed
by, any bank or other insured depository institution, and are not federally
insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board
or any other government agency. Shares of the Fund involve investment risks,
including fluctuations in value and the possible loss of some or all of the
principal investment.
This Prospectus is designed to provide you with information you should know
before investing. Please retain this document for future reference. A Statement
of Additional Information dated August 1, 1997 for the Fund, as supplemented
from time to time, has been filed with the Securities and Exchange Commission
(the "Commission") and is incorporated herein by reference. This Statement of
Additional Information is available without charge from the Fund's principal
underwriter, Eaton Vance Distributors, Inc. (the "Principal Underwriter"), 24
Federal Street, Boston, MA 02110 (telephone (800) 225-6265). The Portfolio's
investment adviser is Boston Management and Research (the "Investment Adviser"),
a wholly-owned subsidiary of Eaton Vance Management, and Eaton Vance Management
is the administrator (the "Administrator") of the Fund. The offices of the
Investment Adviser and the Administrator are located at 24 Federal Street,
Boston, MA 02110.
- ------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<TABLE>
PAGE PAGE
<S> <C> <C> <C>
Shareholder and Fund Expenses .......................... 2 How to Redeem Fund Shares .......................... 11
The Fund's Financial Highlights ........................ 3 Reports to Shareholders ............................ 12
The Fund's Investment Objective ........................ 4 The Lifetime Investing Account/Distribution Options 12
Investment Policies and Risks .......................... 4 The Eaton Vance Exchange Privilege ................. 13
Organization of the Fund and the Portfolio ............. 7 Eaton Vance Shareholder Services ................... 14
Management of the Fund and the Portfolio ............... 8 Distributions and Taxes ............................ 15
Distribution Plan ...................................... 9 Performance Information ............................ 15
Valuing Fund Shares .................................... 10 Appendix A ......................................... 17
How to Buy Fund Shares ................................. 10 Appendix B ......................................... 19
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
PROSPECTUS DATED AUGUST 1, 1997
<PAGE>
SHAREHOLDER AND FUND EXPENSES
- -------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES
- -------------------------------------------------------------------------------
Sales Charges Imposed on Purchases of Shares None
Sales Charges Imposed on Reinvested Distributions None
Fees to Exchange Shares None
Contingent Deferred Sales Charges Imposed on
Redemption during the First Year (as a
percentage of redemption proceeds exclusive of
all reinvestments and capital
appreciation in the account) 1.00%
ANNUAL FUND AND ALLOCATED PORTFOLIO OPERATING EXPENSES (as a
percentage of average daily net assets)
- -------------------------------------------------------------------------------
Investment Adviser Fee 0.61%
Rule 12b-1 Distribution (and Service) Fees 1.00%
Other Expenses (after expense allocation) 0.13%
----
Total Operating Expenses (after expense allocation) 1.74%
====
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------- ------ ------- ------- --------
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: $28 $55 $94 $205
NOTES:
The table and Example summarize the aggregate expenses of the Fund and the
Portfolio and are designed to help investors understand the costs and expenses
they will bear, directly or indirectly, by investing in the Fund. Information
for the Fund is based on its expenses for the most recent fiscal year. Absent an
allocation of expenses to the Administrator, Other Expenses would have been
0.68% and Total Operating Expenses would have been 2.29%.
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. Federal regulations
require the Example to assume a 5% annual return, but actual annual return will
vary. For further information regarding the expenses of the Fund and the
Portfolio, see "The Fund's Financial Highlights", "Management of the Fund and
the Portfolio" and "How to Redeem Fund Shares". A long-term shareholder in the
Fund may pay more than the economic equivalent of the maximum front-end sales
charge permitted by a rule of the National Association of Securities Dealers,
Inc. See "Distribution Plan".
No contingent deferred sales charge is imposed on (a) shares purchased more than
one year prior to redemption, (b) shares acquired through the reinvestment of
distributions or (c) any appreciation in value of other shares in the account
(see "How to Redeem Fund Shares") and no such charge is imposed on exchanges of
Fund shares for shares of one or more other funds listed under "The Eaton Vance
Exchange Privilege". In the Example above, expenses would be $10 less in the
first year if there was no redemption.
The Portfolio's monthly advisory fee has two components, a fee based on daily
net assets and a fee based on daily gross income, as set forth in the fee
schedule on page 9.
The Fund invests exclusively in the Portfolio. Other investment companies and
investors with different distribution arrangements and fees are investing in the
Portfolio and others may do so in the future. See "Organization of the Fund and
the Portfolio".
<PAGE>
THE FUND'S FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
The following information should be read in conjunction with the audited
financial statements that appear in the Fund's annual report to shareholders.
The Fund's financial statements have been audited by Deloitte & Touche LLP,
independent certified public accountants, as experts in accounting and
auditing. The Fund's financial statements and the independent auditors' report
are incorporated by reference into the Statement of Additional Information.
Further information regarding the performance of the Fund is contained in the
Fund's annual report to shareholders which may be obtained without charge by
contacting the Principal Underwriter.
- ------------------------------------------------------------------------------
YEAR ENDED MARCH 31,
----------------------------------
1997 1996 1995*
-------- -------- -------
NET ASSET VALUE, beginning of year $ 9.650 $ 9.430 $10.000
-------- -------- -------
INCOME FROM OPERATIONS:
Net investment income $ 0.878 $ 0.888 $ 0.735
Net realized and unrealized gain (loss)
on investments 0.181 0.225 (0.544)
-------- -------- -------
Total income from operations $ 1.059 $ 1.113 $ 0.191
-------- -------- -------
LESS DISTRIBUTIONS:
From net investment income $ (0.869) $ (0.888) $ (0.735)
In excess of net investment income(1) -- (0.005) (0.026)
-------- -------- -------
Total distributions $ (0.869) $ (0.893) $ (0.761)
-------- -------- -------
NET ASSET VALUE, end of year $ 9.840 $ 9.650 $ 9.430
======== ======== ========
TOTAL RETURN(2) 11.44% 12.25% 1.89%
RATIOS/SUPPLEMENTAL DATA**:
Net assets, end of year (000 omitted) $17,292 $ 7,614 $ 2,076
Ratio of net expenses to average daily
net assets (3) 1.74% 1.69% 2.04%+
Ratio of net investment income to
average daily net assets 8.88% 9.17% 9.17%+
** For the periods indicated, the operating expenses of the Fund reflect an
allocation of expenses to the Administrator. Had such action not been taken,
net investment income per share and the ratios would have been as follows:
NET INVESTMENT INCOME PER SHARE $ 0.823 $ 0.738 $ 0.482
======== ======== ========
RATIOS (As a percentage of average daily net assets):
Expenses(3) 2.29% 3.24% 5.20%+
Net investment income 8.32% 7.62% 6.01%+
* For the period from the start of business, June 8, 1994, to March 31, 1995.
+ Computed on an annualized basis.
(1) The Fund has followed the Statement of Position (SOP) 93-2: Determination,
Disclosure and Financial Statement Presentation of Income, Capital Gain, and
Return of Capital Distribution by Investment Companies. The SOP requires
that differences in the recognition or classification of income between the
financial statements and tax earnings and profits that result in temporary
over-distributions for financial statement purposes, are classified as
distributions in excess of net investment income or accumulated net realized
gains.
(2) Total return is calculated asuming a purchase at the net asset value on the
first day and a sale at the net asset value on the last day of each period
reported. Distributions, if any, are assumed to be reinvested at the net
asset value on the payable date. Total return is computed on a
non-annualized basis.
(3) Includes the Fund's share of the Portfolio's allocated expenses.
<PAGE>
THE FUND'S INVESTMENT OBJECTIVE
- -------------------------------------------------------------------------------
THE FUND'S INVESTMENT OBJECTIVE IS TO PROVIDE A HIGH LEVEL OF CURRENT INCOME.
The Fund currently seeks to meet its investment objective by investing its
assets in the High Income Portfolio (the "Portfolio"), a separate registered
investment company which has the same investment objective and policies as the
Fund. The Portfolio seeks to invest a significant portion of its assets in
high-yielding, high risk, fixed-income securities (commonly referred to as
"junk-bonds") to achieve this objective. The Fund's and the Portfolio's
investment objectives are nonfundamental and may be changed when authorized by a
vote of the Trustees of the Trust or the Portfolio, respectively, without
obtaining the approval of the Fund's shareholders or the investors in the
Portfolio, as the case may be. The Trustees of the Trust have no present
intention to change the Fund's objective and intend to submit any proposed
material change in the investment objective to shareholders in advance for their
approval. The Fund may not be appropriate for investors who cannot assume the
greater risk of capital depreciation or loss inherent in seeking higher yields.
INVESTMENT POLICIES AND RISKS
- --------------------------------------------------------------------------------
The Portfolio normally is invested as follows:
o at least 80% of its net assets in fixed- income securities, including
convertible securities; and
o up to 20% of its net assets in common stocks and other equity securities
when consistent with its objective or acquired as part of a unit combining
fixed-income and equity securities.
THE PORTFOLIO WILL NORMALLY INVEST AT LEAST 65% OF ITS ASSETS IN THE LOWEST
INVESTMENT GRADE AND LOWER RATED OBLIGATIONS (RATED BAA OR LOWER BY MOODY'S
INVESTORS SERVICE, INC. ("MOODY'S") OR BBB OR LOWER BY STANDARD & POOR'S RATINGS
GROUP ("S&P")) AND UNRATED OBLIGATIONS. For a description of Moody's and S&P's
ratings of fixed-income securities, see Appendix A to this Prospectus. Unrated
bonds are generally regarded as being speculative and expose the investor to
risks with respect to the issuer's capacity to pay interest and repay principal
which are similar to the risks of lower rated bonds. At March 31, 1997, the
Portfolio had approximately 93.7% of its assets invested in high yield, high
risk bonds that were rated lower than investment grade or unrated. See Appendix
B to this Prospectus for the Portfolio's asset composition information for the
most recent fiscal year of the Fund.
The Portfolio invests a substantial portion of its assets in high yield, high
risk securities issued in connection with mergers, acquisitions, leveraged
buy-outs, recapitalizations and other highly leveraged transactions. These
securities are subject to substantially greater credit risks than some of the
other fixed-income securities in which the Portfolio may invest. These credit
risks include the possibility of default or bankruptcy of the issuer. These
securities are less liquid than other fixed-income securities. During periods of
deteriorating economic conditions and contraction in the credit markets, the
ability of issuers of such securities to service their debt, meet projected
goals, or obtain additional financing may be impaired. For more detailed
information about the risks associated with investing in such securities, see
"Risk Considerations" below.
The Portfolio may also invest a portion of its assets in debt securities that
are not paying current income in anticipation of the receipt of possible future
income or capital appreciation. Interest and/or principal payments thereon could
be in arrears when such securities are acquired, and the issuer may be in
bankruptcy or undergoing a debt restructuring or reorganization. Such securities
may be unrated or the lowest rated obligations (rated C by Moody's or D by S&P).
Bonds rated C by Moody's are regarded as having extremely poor prospects of ever
attaining any real investment standing. Bonds rated D by S&P are in payment
default or a bankruptcy petition has been filed and debt service payments are
jeopardized. The Portfolio may retain defaulted obligations in its portfolio
when such retention is considered desirable by the Investment Adviser. The
Portfolio may also acquire other securities issued in exchange for such
obligations or issued in connection with the debt restructuring or
reorganization of the issuers, or where such acquisition, in the judgment of the
Investment Adviser, may enhance the value of such obligations or would otherwise
be consistent with the Portfolio's investment policies.
Although the Investment Adviser considers security ratings when making
investment decisions, it performs its own credit and investment analysis and
does not rely primarily on the ratings assigned by the rating services. In
evaluating the quality of a particular issue, whether rated or unrated, the
Investment Adviser will normally take into consideration, among other things,
the issuer's financial resources and operating history, its sensitivity to
economic conditions and trends, the ability of its management, its debt maturity
schedules and borrowing requirements, and relative values based on anticipated
cash flow, interest and asset coverages, and earnings prospects. Because of the
greater number of investment considerations involved in investing in high yield,
high risk bonds, the achievement of the Portfolio's objective depends more on
the Investment Adviser's judgment and analytical abilities than would be the
case if the Portfolio were investing primarily in securities in the higher
rating categories.
When the Investment Adviser believes that it is appropriate to do so, for
defensive purposes, such as during abnormal market or economic conditions, more
than 35% of the Portfolio's assets may be temporarily invested in securities
rated A or better by Moody's or S&P. All or a portion of the Portfolio's assets
may be invested temporarily in cash or short-term obligations including, but not
limited to, certificates of deposit, commercial paper, short-term notes,
obligations issued or guaranteed by the U.S. Government or any of its agencies
or instrumentalities and repurchase agreements.
FIXED-INCOME OBLIGATIONS. The fixed-income securities in which the Portfolio may
invest include preferred and preference stocks and all types of debt obligations
of both domestic and foreign issuers, such as bonds, debentures, notes,
equipment lease certificates, equipment trust certificates, conditional sale
contracts, commercial paper, and obligations issued or guaranteed by the U.S.
Government, any state or territory of the United States, any foreign government
or any of their respective political subdivisions, agencies or
instrumentalities. Debt securities may bear fixed, fixed and contingent,
variable or floating rates of interest. Investments in foreign securities may
not exceed 25% of total assets.
The Portfolio may also invest a portion of its assets in loan interests, which
are interests in amounts owed by a corporate, governmental or other borrower to
lenders or lending syndicates. Loan interests purchased by the Portfolio may
have a maturity of any number of days or years, may be secured or unsecured, and
may be of any credit quality. Loan interests, which may take the form of
participation interests in, assignments of or novations of a loan, may be
acquired from U.S. and foreign banks, insurance companies, finance companies or
other financial institutions which have made loans or are members of a lending
syndicate or from the holders of loan interests. Loan interests involve the risk
of loss in case of default or bankruptcy of the borrower and, in the case of
participation interests, involve the risk of insolvency of the agent lending
bank or other financial intermediary.
The Portfolio may hold up to 15% of its net assets in illiquid securities.
Illiquid securities include securities legally restricted as to resale such as
commercial paper issued pursuant to Section 4(2) of the Securities Act of 1933
and securities eligible for resale pursuant to Rule 144A thereunder. Section 4
(2) and 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. As of June
30, 1997, more than 14% of the Portfolio's assets were invested in liquid 144A
securities.
INVESTMENT PRACTICES
DERIVATIVE INSTRUMENTS. The Portfolio may purchase or sell derivative
instruments (which are instruments that derive their value from another
instrument, security, index or currency) to hedge against fluctuations in
interest rates, securities prices or currency exchange rates, to change the
duration of the Portfolio's fixed income portfolio or as a substitute for the
purchase or sale of securities or currency. Options may be written to enhance
income. The Portfolio's transactions in derivative instruments may include the
purchase or sale of futures contracts on securities, (such as U.S. Government
securities), indices, other financial instruments (such as certificates of
deposit, Euro-dollar time deposits, and economic indices) or currencies; options
on futures contracts; exchange-traded options on securities, indices or
currencies; and forward contracts to purchase or sell currencies. All of the
Portfolio's transactions in derivative instruments involve a risk of loss or
depreciation due to: unanticipated adverse changes in interest rates, securities
prices or currency exchange rates; the inability to close out a position; tax
constraints on closing out positions; default by the counterparty; imperfect
correlation between a position and the desired hedge; and portfolio management
constraints on disposing of securities subject to such transactions. The loss on
derivative instruments (other than purchased options) may substantially exceed
the Portfolio's initial investment in these instruments. In addition, the
Portfolio may lose the entire premium paid for purchased options that expire
before they can be profitably exercised by the Portfolio. The Portfolio incurs
transaction costs in opening and closing positions in derivative instruments.
There can be no assurance that the Investment Adviser's use of derivative
instruments will be advantageous to the Portfolio.
The Portfolio's success in using derivative instruments to hedge portfolio
assets depends on the degree of price correlation between the derivative
instrument and the hedged asset. Imperfect correlation may be caused by several
factors, including temporary price disparities among the trading markets for the
derivative instrument, the assets underlying the derivative instrument and the
Portfolio's assets.
The Portfolio may write (sell) covered call and put options only with respect to
up to 25% of its net assets. To the extent that the Portfolio enters into
futures contracts, options on futures contracts and options on foreign
currencies traded on an exchange regulated by the Commodity Futures Trading
Commission (the "CPTC"), in each case that are not for bona fide hedging
purposes (as defined by the CFTC), the aggregate initial margin and premiums
required to establish these positions (excluding the amount by which options are
"in-the-money") may not exceed 5% of the liquidation value of the Portfolio's
portfolio, after taking into account unrealized profits and unrealized losses on
any contacts the Portfolio has entered into. The Portfolio did not engage in
such transactions during the fiscal year ended March 31, 1997, and there is no
assurance that it will engage in such transactions in the future.
RISK CONSIDERATIONS
Investors should carefully consider their ability to assume the risks of owning
shares of a mutual fund that invests in below investment grade debt obligations
(commonly referred to as "junk bonds") before making an investment in the Fund.
The lower ratings of certain securities held by the Portfolio reflect a greater
possibility that adverse changes in the financial condition of an issuer, or in
general economic conditions, or both, or an unanticipated rise in interest
rates, may impair the ability of the issuer to make payments of interest and
principal. The inability (or perceived inability) of issuers to make timely
payment of interest and principal would likely make the values of securities
held by the Fund more volatile and could limit the Portfolio's ability to sell
its securities at prices approximating the values the Portfolio has placed on
such securities. It is possible that legislation may be adopted in the future
limiting the ability of certain financial institutions to purchase such
securities; such legislation may adversely affect the liquidity of such
securities. In the absence of a liquid trading market for securities held by it,
the Portfolio may be unable at times to establish the fair market value of such
securities.
The rating assigned to a security by a rating agency does not reflect an
assessment of the volatility of the security's market value or of the liquidity
of an investment in the securities. Credit ratings are based largely on the
issuer's historical financial condition and the rating agency's investment
analysis at the timing of rating, and the rating assigned to any particular
security is not necessarily a reflection of the issuer's current financial
condition. Credit quality in the high yield, high risk bond market can change
from time to time, and recently issued credit ratings may not fully reflect the
actual risks posed by a particular high yield security.
While the Investment Adviser will attempt to reduce the risks of investing in
lower rated or unrated securities through active portfolio management,
diversification, credit analysis and attention to current developments and
trends in the economy and the financial markets, there can be no assurance that
a broadly diversified portfolio of such securities would substantially lessen
the risks of defaults brought about by an economic downturn or recession.
The net asset value of shares of the Fund will change in response to
fluctuations in prevailing interest rates and changes in the value of the
securities held by the Portfolio. When interest rates decline, the value of
securities already held by the Portfolio can be expected to rise. Conversely,
when interest rates rise, the value of existing portfolio security holdings can
be expected to decline. Changes in the credit quality of issuers of debt
obligations held by the Portfolio will affect the principal value (and possibly
the income earned) on such obligations. In addition, the values of such
securities are affected by changes in general economic conditions and business
conditions affecting the specific industries of their issuers. Changes by
recognized rating services in their ratings of any fixed-income security and in
the ability of an issuer to make payments of interest and principal may also
affect the value of these investments. The Portfolio will not dispose of a
security solely because its rating is reduced below its rating at the time of
purchase, although the Investment Adviser will monitor the investment to
determine whether continued investment in the security will assist in meeting
the Portfolio's investment objective.
Interest and/or principal payments on securities in default may be in arrears
when such securities are acquired, and the issuer may be in bankruptcy or
undergoing a debt restructuring or reorganization. In order to enforce its
rights in the event of a default under such securities, the Portfolio may be
required to take possession of and manage assets securing the issuer's
obligation on such securities, which may increase the Portfolio's operating
expenses and adversely affect the Portfolio's net asset value.
Certain securities held by the Portfolio may permit the issuer at its option to
"call", or redeem, its securities. If an issuer were to redeem securities held
by the Portfolio during a time of declining interest rates, the Portfolio may
not be able to reinvest the proceeds in securities providing the same investment
return as the securities redeemed. In addition, the Portfolio may temporarily
borrow up to 5% of the value of its total assets to satisfy redemption requests
or settle securities transactions.
Loan interests generally are not rated by any nationally recognized rating
service and are, at present, not readily marketable and may be subject to
contractual restrictions on resale. An investment in restricted securities may
involve relative greater risk and cost to the Portfolio because of their
illiquidity. Moreover, liquid Rule 144A securities may increase the level of
Portfolio illiquidity to the extent qualified institutional buyers become
uninterested in purchasing such securities.
Fixed-income securities that the Portfolio may invest in also include zero
coupon bonds, deferred interest bonds and bonds on which the interest is payable
in kind ("PIK bonds"). Zero coupon and deferred interest bonds are debt
obligations which are issued at a significant discount from face value. While
zero coupon bonds do not require the periodic payment of interest, deferred
interest bonds provide for a period of delay before the regular payment of
interest begins. PIK bonds are debt obligations which provide that the issuer
thereof may, at its option, pay interest on such bonds in cash or in the form of
additional debt obligations. Such investments may experience greater volatility
in market value due to changes in interest rates than debt obligations which
make regular payments of interest. The Portfolio will accrue income on such
investments for tax and accounting purposes, in accordance with applicable law,
the Fund's share of which income is distributable to shareholders. Because no
cash is received at the time such income is accrued, the Portfolio may be
required to liquidate other portfolio securities to enable the Fund to satisfy
its distribution obligations.
Investing in foreign securities may represent a greater degree of risk than
investing in domestic securities, because of the possibility of exchange rate
fluctuations, less publicly-available financial and other information, more
volatile and less liquid markets, less securities regulation, higher brokerage
costs, imposition of foreign withholding and other taxes, war, expropriation or
other adverse governmental actions.
THE FUND AND THE PORTFOLIO HAVE ADOPTED CERTAIN FUNDAMENTAL INVESTMENT
RESTRICTIONS WHICH ARE ENUMERATED IN DETAIL IN THE STATEMENT OF ADDITIONAL
INFORMATION AND WHICH MAY NOT BE CHANGED UNLESS AUTHORIZED BY A SHAREHOLDER
VOTE AND AN INVESTOR VOTE, RESPECTIVELY. EXCEPT FOR SUCH ENUMERATED
RESTRICTIONS AND AS OTHERWISE INDICATED IN THIS PROSPECTUS, THE INVESTMENT
OBJECTIVE AND POLICIES OF THE FUND AND THE PORTFOLIO ARE NOT FUNDAMENTAL
POLICIES AND ACCORDINGLY MAY BE CHANGED BY THE TRUSTEES OF THE TRUST AND THE
PORTFOLIO WITHOUT OBTAINING THE APPROVAL OF THE FUND'S SHAREHOLDERS OR THE
INVESTORS IN THE PORTFOLIO, AS THE CASE MAY BE.
ORGANIZATION OF THE FUND AND THE PORTFOLIO
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THE FUND IS A DIVERSIFIED SERIES OF EATON VANCE MUTUAL FUNDS TRUST, A BUSINESS
TRUST ESTABLISHED UNDER MASSACHUSETTS LAW PURSUANT TO A DECLARATION OF TRUST
DATED MAY 7, 1984, AS AMENDED. The Trustees of the Trust are responsible for the
overall management and supervision of its affairs. The Trust may issue an
unlimited number of shares of beneficial interest (no par value per share) in
one or more series (such as the Fund). Each share represents an equal
proportionate beneficial interest in the Fund. When issued and outstanding, the
shares are fully paid and nonassessable by the Trust and redeemable as described
under "How to Redeem Fund Shares". There are no annual meetings of shareholders,
but special meetings may be held as required by law to elect Trustees and
consider certain other matters. Shareholders are entitled to one vote for each
full share held. Fractional shares may be voted proportionately. Shares have no
preemptive or conversion rights and are freely transferable. In the event of the
liquidation of the Fund, shareholders are entitled to share pro rata in the net
assets of the Fund available for distribution to shareholders.
Effective March 31, 1998, the Trustees of the Trust have approved restructuring
the Fund whereby it will become the Class C shares of Eaton Vance High Income
Fund. Another fund with the same investment objective and policies that also
invests in the Portfolio will become Class B. It is anticipated that this
restructuring will reduce Fund operating expenses, thereby enhancing long-term
returns and improving operational flexibility. The conversion to the
multiple-class structure will not be a taxable transaction or change the value
or cost basis of existing shareholders' investments. Likewise, the conversion
will not materially change shareholder voting rights. It is possible that some
shareholders could, in the future, receive different distributions of realized
capital gains that would be the case if the restructuring did not occur. This
result could occur because allocation of the Portfolio's current unrealized
capital gains will be different under multiple- class accounting rules than has
been the case under the partnership accounting of the current structure. The
actual realization of capital gains in the future remains uncertain and depends
not only on the Investment Adviser's decisions but also on the fluctuating
market valuation of specific securities. Because capital gains distributions
reduce the net asset value of a fund's shares, the effect of such a distribution
change is to alter current tax obligations and tax obligations upon redemption
(by the same amount).
The Trustees of the Trust have considered the advantages and disadvantages of
investing the assets of the Fund in the Portfolio, as well as the advantages and
disadvantages of the two-tier format. The Trustees believe that the structure
offers opportunities for substantial growth in the assets of the Portfolio,
affords the potential for economies of scale for the Fund (at least when the
assets of the Portfolio exceed $500 million) and may over time result in lower
expenses for the Fund.
THE PORTFOLIO IS ORGANIZED AS A TRUST UNDER THE LAWS OF THE STATE OF NEW YORK
AND INTENDS TO BE TREATED AS A PARTNERSHIP FOR FEDERAL TAX PURPOSES. In addition
to selling an interest to the Fund, the Portfolio may sell interests to other
affiliated and non-affiliated mutual funds or institutional investors. Such
investors will invest in the Portfolio on the same terms and conditions and will
pay a proportionate share of the Portfolio's expenses. However, the other
investors investing in the Portfolio are not required to sell their shares at
the same public offering price as the Fund due to variations in sales
commissions and other operating expenses. Therefore, these differences may
result in differences in returns experienced by investors in the various funds
that invest in the Portfolio. Such differences in returns are also present in
other mutual fund structures, including funds that have multiple classes of
shares. Information regarding other pooled investment entities or funds which
invest in the Portfolio may be obtained by contacting the Principal Underwriter,
24 Federal Street, Boston, MA 02110, (617) 482-8260.
Whenever the Fund as an investor in the Portfolio is requested to vote on
matters pertaining to the Portfolio (other than the termination of the
Portfolio's business, which may be determined by the Trustees of the Portfolio
without investor approval), the Fund will hold a meeting of Fund shareholders
and will vote its interest in the Portfolio for or against such matters
proportionately to the instructions to vote for or against such matters received
from Fund shareholders. The Fund shall vote shares for which it receives no
voting instructions in the same proportion as the shares for which it receives
voting instructions. Other investors in the Portfolio may alone or collectively
acquire sufficient voting interests in the Portfolio to control matters relating
to the operation of the Portfolio, which may require the Fund to withdraw its
investment in the Portfolio or take other appropriate action. Any such
withdrawal could result in a distribution "in kind" of portfolio securities (as
opposed to a cash distribution from the Portfolio). If securities are
distributed, the Fund could incur brokerage, tax or other charges in converting
the securities to cash. In addition, the distribution in kind may result in a
less diversified portfolio of investments or adversely affect the liquidity of
the Fund. Notwithstanding the above, there are other means for meeting
shareholder redemption requests, such as borrowing.
The Fund may withdraw (completely redeem) all its assets from the Portfolio at
any time if the Board of Trustees of the Trust determines that it is in the best
interest of the Fund to do so. In the event the Fund withdraws all of its assets
from the Portfolio, or the Board of Trustees of the Trust determines that the
investment objective of the Portfolio is no longer consistent with the
investment objective of the Fund, the Trustees would consider what action might
be taken, including investing the assets of the Fund in another pooled
investment entity or retaining an investment adviser to manage the Fund's assets
in accordance with its investment objective. The Fund's investment performance
may be affected by a withdrawal of all its assets (or the assets of another
investor in the Portfolio) from the Portfolio.
MANAGEMENT OF THE FUND AND THE PORTFOLIO
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THE PORTFOLIO ENGAGES BOSTON MANAGEMENT AND RESEARCH ("BMR"), A WHOLLY-OWNED
SUBSIDIARY OF EATON VANCE MANAGEMENT ("EATON VANCE"), AS ITS INVESTMENT ADVISER.
EATON VANCE, ITS AFFILIATES AND ITS PREDECESSOR COMPANIES HAVE BEEN MANAGING
ASSETS OF INDIVIDUALS AND INSTITUTIONS SINCE 1924 AND MANAGING INVESTMENT
COMPANIES SINCE 1931.
Acting under the general supervision of the Board of Trustees of the Portfolio,
BMR manages the Portfolio's investments and affairs. BMR also furnishes for the
use of the Portfolio office space and all necessary office facilities, equipment
and personnel for servicing the investments of the Portfolio. Under its
investment advisory agreement with the Portfolio, BMR receives a monthly
advisory fee equal to the aggregate of
(a) a daily asset based fee computed by applying the annual asset rate
applicable to that portion of the total daily net assets in each
Category as indicated below, plus
(b) a daily income based fee computed by applying the daily income rate
applicable to that portion of the total daily gross income (which
portion shall bear the same relationship to the total daily gross income
on such day as that portion of the total daily net assets in the same
Category bears to the total daily net assets on such day) in each
Category as indicated below:
ANNUAL DAILY
CATEGORY DAILY NET ASSETS ASSET RATE INCOME RATE
- --------------------------------------------------------------------------------
1 up to $500 million 0.300% 3.00%
2 $500 million but less than $1 billion 0.275% 2.75%
3 $1 billion but less than $1.5 billion 0.250% 2.50%
4 $1.5 billion but less than $2 billion 0.225% 2.25%
5 $2 billion but less than $3 billion 0.200% 2.00%
6 $3 billion and over 0.175% 1.75%
As of March 31, 1997, the Portfolio had net assets of $706,711,462. For the
fiscal year ended March 31, 1997, the Portfolio paid BMR advisory fees
equivalent to 0.61% of the Portfolio's average daily net assets for such year.
BMR OR EATON VANCE ACTS AS INVESTMENT ADVISER TO INVESTMENT COMPANIES AND
VARIOUS INDIVIDUAL AND INSTITUTIONAL CLIENTS WITH ASSETS UNDER MANAGEMENT OF
OVER $17 BILLION. Eaton Vance is a wholly-owned subsidiary of Eaton Vance Corp.,
a publicly-held holding company which through its subsidiaries and affiliates
engages primarly in investment management and marketing activities. The
Principal Underwriter is a wholly-owned subsidiary of Eaton Vance.
Hooker Talcott, Jr. has acted as the portfolio manager of the Portfolio since
it commenced operations. Mr. Talcott has been a Vice President of Eaton Vance
since 1987 and of BMR since 1992. Michael Weilheimer is the co-portfolio
manager and has been a Vice President of Eaton Vance since 1992.
BMR places the portfolio transactions of the Portfolio for execution with many
broker-dealer firms. Fixed-income securities are normally traded on a net basis
(without commission) through broker-dealers and banks acting for their own
account. Such firms attempt to profit from such transactions by buying at the
bid price and selling at the higher asked price of the market, and the
difference is customarily referred to as the spread. In selecting firms to
execute portfolio transactions, BMR judges their professional ability and
quality of service and uses its best efforts to obtain execution at prices which
are advantageous to the Portfolio and at reasonably competitive spreads. Subject
to the foregoing, BMR may consider sales of shares of the Fund or of other
investment companies sponsored by BMR or Eaton Vance as a factor in the
selection of firms to execute portfolio transactions. The Fund, the Portfolio
and BMR have adopted Codes of Ethics relating to personal securities
transactions. The Codes permit Eaton Vance personnel to invest in securities
(including securities that may be purchased or held by the Portfolio) for their
own accounts, subject to certain pre-clearance, reporting and other restrictions
and procedures contained in such Codes.
The Trust has retained the services of Eaton Vance to act as Administrator of
the Fund. The Trust has not retained the services of an investment adviser since
the Trust seeks to achieve the investment objective of the Fund by investing its
assets in the Portfolio. As Administrator, Eaton Vance provides the Fund with
general office facilities and supervises the overall administration of the Fund.
For these services Eaton Vance currently receives no compensation. The Trustees
of the Trust may determine, in the future, to compensate Eaton Vance for its
services.
The Portfolio and the Fund, as the case may be, will each be responsible for all
respective costs and expenses not expressly stated to be payable by BMR under
the investment advisory agreement, by Eaton Vance under the administrative
services agreement, or by the Principal Underwriter under the distribution
agreement.
DISTRIBUTION PLAN
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The Fund has adopted a Distribution Plan ("Plan") pursuant to Rule 12b-1 under
the Investment Company Act of 1940 ("1940 Act"). UNDER THE PLAN, THE FUND PAYS
THE PRINCIPAL UNDERWRITER A FEE, ACCRUED DAILY AND PAID MONTHLY, AT AN ANNUAL
RATE NOT EXCEEDING .75% OF ITS AVERAGE DAILY NET ASSETS TO FINANCE THE
DISTRIBUTION OF FUND SHARES. The Plan provides that the Fund may use such fees
to compensate the Principal Underwriter for sales commissions paid by it to
financial services firms ("Authorized Firms") on the sale of Fund shares and for
interest expenses. The Principal Underwriter currently expects to pay to
Authorized Firms (a) sales commissions (except on exchange transactions and
reinvestments) at the time of sale equal to .75% of the purchase price of the
shares sold by such Firm and (b) monthly sales commissions approximately
equivalent to 1/12 of .75% of the value of shares sold by such Firm and
remaining outstanding for at least one year. During the first year after a
purchase of Fund shares, the Principal Underwriter will retain the sales
commission as reimbursement for the sales commissions made to Authorized Firms
at the time of sale. Contingent deferred sales charges paid to the Principal
Underwriter will be used to reduce amounts owed to it. Because payments to the
Principal Underwriter by the Fund are limited, uncovered distribution charges
(sales commissions paid by the Principal Underwriter plus interest, less the
above fees and contingent deferred sales charges received by it) may exist
indefinitely. During the fiscal year ended March 31, 1997, the Fund paid or
accrued fees under the Plan equivalent to .75% of the Fund's average daily net
assets. As of March 31, 1997, uncovered distribution charges amounted to
approximately $1,471,000 (equivalent to 8.5% of the Fund's net assets). For more
information, see "Distribution Plan" in the Statement of Additional Information.
THE PLAN ALSO AUTHORIZES THE FUND TO MAKE PAYMENTS OF SERVICE FEES TO THE
PRINCIPAL UNDERWRITER, AUTHORIZED FIRMS AND OTHER PERSONS IN AMOUNTS NOT
EXCEEDING .25% OF THE FUND'S AVERAGE DAILY NET ASSETS FOR PERSONAL SERVICES
AND/OR THE MAINTENANCE OF SHAREHOLDER ACCOUNTS. The Principal Underwriter
currently expects to pay to an Authorized Firm (a) a service fee (except on
exchange transactions and reinvestments) at the time of sale equal to .25% of
the purchase price of the shares sold by such Firm, and (b) monthly service fees
approximately equivalent to 1/12 of .25% of the value of shares sold by such
Firm and remaining outstanding for at least one year. During the first year
after a purchase of Fund shares, the Principal Underwriter will retain the
service fee as reimbursement for the service fee payment made to the Authorized
Firm at the time of sale. For the fiscal year ended March 31, 1997, the Fund
paid or accrued service fees equivalent to .25% of the Fund's average daily net
assets for such year.
The Principal Underwriter may, from time to time, at its own expense, provide
additional incentives to Authorized Firms which employ registered
representatives who sell Fund shares and/or shares of other funds distributed by
the Principal Underwriter. In some instances, such additional incentives may be
offered only to certain Authorized Firms whose representatives sell or are
expected to sell significant amounts of shares. In addition, the Principal
Underwriter may from time to time increase or decrease the sales commissions
payable to Authorized Firms.
The Fund may, in its absolute discretion, suspend, discontinue or limit the
offering of its shares at any time. In determining whether any such action
should be taken, the Fund's management intends to consider all relevant factors,
including (without limitation) the size of the Fund, the investment climate and
market conditions, the volume of sales and redemptions of Fund shares, and the
amount of uncovered distribution charges of the Principal Underwriter. The Plan
may continue in effect and payments may be made under the Plan following any
such suspension, discontinuance or limitation of the offering of Fund shares;
however, the Fund is not contractually obligated to continue the Plan for any
particular period of time. Suspension of the offering of Fund shares would not,
of course, affect a shareholder's ability to redeem shares.
VALUING FUND SHARES
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THE FUND VALUES ITS SHARES ONCE ON EACH DAY THE NEW YORK STOCK EXCHANGE (THE
"EXCHANGE") IS OPEN FOR TRADING, as of the close of regular trading on the
Exchange (normally 4:00 p.m. New York time). The Fund's net asset value per
share is determined by IBT Fund Services (Canada) Inc., (as agent for the Fund)
in the manner authorized by the Trustees of the Trust. IBT Fund Services
(Canada) Inc. is a subsidiary of Investors Bank & Trust Company ("IBT"), the
Fund's and the Portfolio's custodian. Net asset value is computed by dividing
the value of the Fund's total assets, less its liabilities, by the number of
shares outstanding. Because the Fund invests its assets in an interest in the
Portfolio, the Fund's net asset value will reflect the value of its interest in
the Portfolio (which, in turn, reflects the underlying value of the Portfolio's
assets and liabilities).
Authorized Firms must communicate an investor's order to the Principal
Underwriter prior to the close of the Principal Underwriter's business day to
receive that day's net asset value per Fund share. It is the Authorized Firms'
responsibility to transmit orders promptly to the Principal Underwriter.
The Portfolio's net asset value is also determined as of the close of regular
trading on the Exchange by IBT Fund Services (Canada) Inc. (as agent for the
Portfolio), in the manner authorized by the Trustees of the Portfolio. Net asset
value is computed by subtracting the liabilities of the Portfolio from the value
of its total assets. Fixed-income securities (other than short-term
obligations), will normally be valued on the basis of market valuations
furnished by a pricing service.
SHAREHOLDERS MAY DETERMINE THE VALUE OF THEIR INVESTMENT BY MULTIPLYING THE
NUMBER OF FUND SHARES OWNED BY THE CURRENT NET ASSET VALUE PER SHARE.
HOW TO BUY FUND SHARES
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SHARES OF THE FUND MAY BE PURCHASED FOR CASH OR MAY BE ACQUIRED IN EXCHANGE FOR
ACCEPTABLE SECURITIES. Investors may purchase shares of the Fund through
Authorized Firms at the net asset value per share of the Fund next determined
after an order is effective. An Authorized Firm may charge its customers a fee
in connection with transactions executed by that Firm. The Fund may suspend the
offering of shares at any time and may refuse an order for the purchase of
shares.
An initial investment in the Fund must be at least $1,000. Once an account has
been established, the investor may send investments of $50 or more at any time
directly to the Fund's transfer agent (the "Transfer Agent") as follows: First
Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123. The
$1,000 minimum initial investment is waived for Bank Automated Investing
accounts, which may be established with an investment of $50 or more. See "Eaton
Vance Shareholder Services".
In connection with employee benefit or other continuous group purchase plans,
the Fund may accept initial investments of less than $1,000 on the part of an
individual participant. In the event a shareholder who is a participant of such
a plan terminates participation in the plan, his or her shares will be
transferred to a regular individual account. However, such account will be
subject to the right of redemption by the Fund as described under "How to Redeem
Fund Shares."
ACQUIRING FUND SHARES IN EXCHANGE FOR SECURITIES. IBT, as escrow agent, will
receive securities acceptable to Eaton Vance, as Administrator, in exchange for
Fund shares at their net asset value as determined above. The minimum value of
securities (or securities and cash) accepted for deposit is $5,000. Securities
accepted will be sold on the day of their receipt or as soon thereafter as
possible. The number of Fund shares to be issued in exchange for securities will
be the aggregate proceeds from the sale of such securities, divided by the
applicable net asset value per Fund share on the day such proceeds are received.
Eaton Vance will use reasonable efforts to obtain the then current market price
for such securities but does not guarantee the best available price. Eaton Vance
will absorb any transaction costs, such as commissions, on the sale of the
securities.
Securities determined to be acceptable should be transferred via book entry or
physically delivered, in proper form for transfer, through an Authorized Firm,
together with a completed and signed Letter of Transmittal in approved form
(available from Authorized Firms), as follows:
IN THE CASE OF BOOK ENTRY: IN THE CASE OF PHYSICAL DELIVERY:
Deliver through Depository Trust Co. Investors Bank & Trust Company
Broker #2212 Attention: EV Classic High Income Fund
Investors Bank & Trust Company Physical Securities Processing
For A/C EV Classic High Income Fund Settlement Area
200 Clarendon Street
Boston, MA 02116
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 Commission regulation and
acceptable to the Transfer Agent. In addition, in some cases, good order may
require the furnishing of additional documents such as where shares are
registered in the name of a corporation, partnership or fiduciary.
REDEMPTION BY TELEPHONE: Shares may be redeemed by telephone provided the
investor has not disclaimed in writing the use of the privilege. Such
redemptions can be effected by calling the Transfer Agent at 800-262-1122,
Monday through Friday, 9:00 a.m. to 4:00 p.m. (Eastern Standard Time). The
proceeds of a telephone redemption may be no greater than the maximum amount
established by the Principal Underwriter (currently $50,000) and may be mailed
only to the account address of record. Shares held by corporations, trusts or
certain other entities, or subject to fiduciary arrangements, may not be
redeemed by telephone. Neither the Fund, the Principal Underwriter nor the
Transfer Agent will be responsible for the authenticity of redemption
instructions received by telephone, provided that reasonable procedures to
confirm that instructions communicated by telephone are genuine have been
followed. Telephone instructions will be tape recorded. In times of drastic
economic or market changes, a telephone redemption may be difficult to
implement.
REDEMPTION THROUGH AN AUTHORIZED FIRM: To sell shares at their net asset value
through an Authorized Firm (a repurchase), a shareholder can place a repurchase
order with the Authorized Firm, which may charge a fee. The value of such shares
is based upon the net asset value calculated after the Principal Underwriter, as
the Fund's agent, receives the order. It is the Authorized Firm's responsibility
to transmit promptly repurchase orders to the Principal Underwriter. Throughout
this Prospectus, the word "redemption" is generally meant to include a
repurchase.
Within seven days after receipt of a redemption request in good order by the
Transfer Agent, the Fund will make payment in cash for the net asset value of
the shares as of the date determined above, reduced by the amount of any
applicable contingent deferred sales charges (described below) and any federal
income tax required to be withheld. Although the Fund normally expects to make
payment in cash for redeemed shares, the Trust, subject to compliance with
applicable regulations, has reserved the right to pay the redemption price of
shares of the Fund, either totally or partially, by a distribution in kind of
readily marketable securities withdrawn by the Fund from the Portfolio. The
securities so distributed would be valued pursuant to the Portfolio's valuation
procedures. If a shareholder received a distribution in kind, the shareholder
could incur brokerage or other charges in converting the securities to cash.
If shares were recently purchased, the proceeds of a redemption will not be sent
until the check (including a certified or cashier's check) received for the
shares purchased has cleared. Payment for shares tendered for redemption may be
delayed up to 15 days from the purchase date when the purchase check has not yet
cleared. Redemptions may result in a taxable gain or loss.
Due to the high cost of maintaining small accounts, the Fund reserves the right
to redeem accounts with balances of less than $750. Prior to such a redemption,
shareholders will be given 60 days' written notice to make an additional
purchase. However, no such redemption would be required by the Fund if the cause
of the low account balance was a reduction in the net asset value of Fund
shares. No contingent deferred sales charge will be imposed with respect to such
involunatry redemptions.
CONTINGENT DEFERRED SALES CHARGE. Shares redeemed within the first year of their
purchase (except shares acquired through the reinvestment of distributions)
generally will be subject to a contingent deferred sales charge ("CDSC") equal
to 1% of the net asset value of redeemed shares. This CDSC is imposed on any
redemption the amount of which exceeds the aggregate value at the time of
redemption of (a) all shares in the account purchased more than one year prior
to the redemption, (b) all shares in the account acquired through reinvestment
of distributions, and (c) the increase, if any, in the value of the other shares
in the account (namely those purchased within the year preceding the redemption)
over the purchase price of such shares. Redemptions are processed in a manner to
maximize the amount of redemption proceeds which will not be subject to a CDSC.
That is, each redemption will be assumed to have been made first from the exempt
amounts referred to in clauses (a), (b) and (c) above, and second through
liquidation of those shares in the account referred to in clause (c) on a
first-in-first out basis.
In calculating the CDSC upon the redemption of Fund shares acquired in an
exchange for shares of a fund currently listed under "The Eaton Vance Exchange
Privilege," the purchase of Fund shares acquired in the exchange is deemed to
have occurred at the time of the original purchase of the exchanged shares.
No CDSC will be imposed on Fund shares which have been sold to Eaton Vance or
its affiliates, or to their respective employees or clients. The CDSC will also
be waived for shares redeemed (1) pursuant to a Withdrawal Plan (see "Eaton
Vance Shareholders Services"), (2) as part of a distribution from a retirement
plan qualified under Section 401, 403(b) or 457 of the Internal Revenue Code of
1986, as amended (the "Code"), or (3) as part of a minimum required distribution
from other tax-sheltered retirement plans.
REPORTS TO SHAREHOLDERS
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THE FUND WILL ISSUE TO ITS SHAREHOLDERS SEMI-ANNUAL AND ANNUAL REPORTS
CONTAINING FINANCIAL STATEMENTS. Financial statements included in annual reports
are audited by the Fund's independent certified public accountants. Shortly
after the end of each calendar year, the Fund will furnish all shareholders with
information necessary for preparing federal and state income tax returns.
THE LIFETIME INVESTING ACCOUNT/DISTRIBUTION OPTIONS
- --------------------------------------------------------------------------------
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 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 Authorized Firm or to an account
directly with the Fund involves special procedures and will require the
beneficial owner to obtain historical purchase information about the shares in
the account from the Authorized Firm. Before establishing a "street name"
account with an Authorized Firm, or transferring the account to another
Authorized Firm, an investor wishing to reinvest distributions should determine
whether the Authorized Firm which will hold the shares allows reinvestment of
distributions in "street name" accounts.
THE EATON VANCE EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
Shares of the Fund 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
subject to a CDSC (or equivalent early withdrawal charge), on the basis of the
net asset value per share of each fund at the time of the exchange. Exchange
offers are available only in states where shares of the fund being acquired may
be legally sold.
Each exchange must involve shares which have a net asset value of at least
$1,000. The exchange privilege may be changed or discontinued without penalty.
Shareholders will be given sixty (60) days' notice prior to any termination or
material amendment of the exchange privilege. The Fund does not permit the
exchange privilege to be used for "Market Timing" and may terminate the exchange
privilege for any shareholder account engaged in Market Timing activity. Any
shareholder account for which more than two round-trip exchanges are made within
any twelve month period will be deemed to be engaged in Market Timing.
Furthermore, a group of unrelated accounts for which exchanges are entered
contemporaneously by a financial intermediary will be considered to be engaged
in Market Timing.
The Transfer Agent makes exchanges at the next determined net asset value after
receiving an exchange request in good order (see "How to Redeem Fund Shares").
Consult the Transfer Agent for additional information concerning the exchange
privilege. Applications and prospectuses of other funds are available from
Authorized Firms or the Principal Underwriter. The prospectus for each fund
describes its investment objectives and policies, and shareholders should obtain
a prospectus and consider these objectives and policies carefully before
requesting an exchange.
No CDSC is imposed on exchanges. For purposes of calculating the CDSC upon the
redemption of shares acquired in an exchange, the purchase of shares acquired in
one or more exchanges is deemed to have occurred at the time of the original
purchase of the exchanged shares.
Shares of the other funds in the Eaton Vance Classic Group of Funds (and shares
of Eaton Vance Money Market Fund acquired as the result of an exchange from an
EV Classic fund) may be exchanged for Fund shares on the basis of the net asset
value per share of each fund at the time of the exchange, but subject to any
restrictions or qualifications set forth in the current prospectus of any such
fund.
Telephone exchanges are accepted by the Transfer Agent provided that the
investor has not disclaimed in writing the use of the privilege. To effect such
exchanges, call the Transfer Agent at 800-262-1122, Monday through Friday, 9:00
a.m. to 4:00 p.m. (Eastern Standard Time). Shares acquired by telephone exchange
must be registered in the same name(s) and with the same address as the shares
being exchanged. Neither the Fund, the Principal Underwriter nor the Transfer
Agent will be responsible for the authenticity of exchange instructions received
by telephone, provided that reasonable procedures to confirm that instructions
communicated are genuine have been followed. Telephone instructions will be tape
recorded. In times of drastic economic or market changes, a telephone exchange
may be difficult to implement. An exchange may result in a taxable gain or loss.
EATON VANCE SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------
THE FUND OFFERS THE FOLLOWING SERVICES, WHICH ARE VOLUNTARY, INVOLVE NO EXTRA
CHARGE, AND MAY BE CHANGED OR DISCONTINUED WITHOUT PENALTY AT ANY TIME. Full
information on each of the services described below and an application, where
required, are available from Authorized Firms or the Principal Underwriter. The
cost of administering such services for the benefit of shareholders who
participate in them is borne by the Fund as an expense to all shareholders.
INVEST-BY-MAIL -- FOR PERIODIC SHARE ACCUMULATION: Once the $1,000 minimum
investment has been made, checks of $50 or more payable to the order of EV
Classic High 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 the
shareholder's bank account. The $1,000 minimum initial investment and small
account redemption policy are waived for these accounts.
WITHDRAWAL PLAN: A shareholder may draw on shareholdings systematically with
monthly or quarterly checks in an aggregate amount that does not exceed
annually 12% of the account balance at the time the plan is established. Such
amount will not be subject to a CDSC. See "How to Redeem Fund Shares". A
minimum deposit of $5,000 in shares is required.
REINVESTMENT PRIVILEGE: A shareholder who has redeemed shares may reinvest, with
credit for any CDSC paid on the redeemed shares, any portion or all of the
redemption proceeds (plus that amount necessary to acquire a fractional share to
round off the purchase to the nearest full share) in shares of the Fund,
provided that the reinvestment is effected within 60 days after such redemption,
and the privilege has not been used more than once in the prior 12 months.
Shares are sold to a reinvesting shareholder at the next determined net asset
value following timely receipt of a written purchase order by the Principal
Underwriter or by the Fund (or by the Fund's Transfer Agent). To the extent that
any shares of the Fund are sold at a loss and the proceeds are reinvested in
shares of the Fund (or other shares of the Fund are acquired) within the period
beginning 30 days before and ending 30 days after the date of the redemption,
some or all of the loss generally will not be allowed as a tax deduction.
Shareholders should consult their tax advisers concerning the tax consequences
of reinvestments.
TAX-SHELTERED RETIREMENT PLANS: Shares of the Fund are available for purchase in
connection with certain tax-sheltered retirement plans. Detailed information
concerning these plans, including certain exceptions to minimum investment
requirements, and copies of the plans are available from the Principal
Underwriter. This information should be read carefully and consultation with an
attorney or tax adviser may be advisable. The information sets forth the service
fee charged for retirement plans and describes the federal income tax
consequences of establishing a plan. Participant accounting services (including
trust fund reconciliation services) will be offered only through third party
recordkeepers and not by the Principal Underwriter. Under all plans,
distributions will be automatically reinvested in additional shares.
DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
SUBSTANTIALLY ALL OF THE INVESTMENT INCOME ALLOCATED TO THE FUND BY THE
PORTFOLIO, LESS THE FUND'S DIRECT AND ALLOCATED EXPENSES, WILL BE DECLARED DAILY
AS A DISTRIBUTION TO FUND SHAREHOLDERS OF RECORD AT THE TIME OF DECLARATION.
Such distributions, whether taken in cash or reinvested in additional shares,
will ordinarily be paid on the twenty-second day of each month or the next
business day thereafter. The Fund anticipates that for tax purposes the entire
distribution, whether paid in cash or reinvested in additional shares of the
Fund, will constitute income to its shareholders. Shareholders reinvesting the
monthly distribution should treat the amount of the entire distribution as the
tax cost basis of the additional shares acquired by reason of such reinvestment.
Daily distribution crediting will commence on the business day after collected
funds for the purchase of Fund shares are available at the Transfer Agent.
Certain distributions if declared by the Fund in October, November or December
and paid the following January will be taxable to shareholders as if received on
December 31 of the year in which they are declared.
Distributions of the Fund which are derived from net investment income, net
short-term capital gains and certain foreign exchange gains are taxable to
shareholders as ordinary income, whether received in cash or reinvested in
additional shares. Only a small portion, if any, of such distributions may be
eligible for the dividends-received deduction for corporations subject to
certain limitations.
Capital gains, if any, realized on sales of investments and on options and
futures transactions during the fiscal year, which ends on March 31, will be
offset by capital losses, including any capital loss carryovers, and will
usually be distributed with the Fund's first monthly distribution paid after the
close of such fiscal year. However, the Fund could make additional distributions
of capital gains in any year in order to comply with the distribution
requirements of the Code. Distributions that the Fund designates as long-term
capital gains are taxable to shareholders as long-term capital gains, whether
received in cash or reinvested in additional shares of the Fund and regardless
of the length of time Fund shares have been owned by the shareholder. If shares
are purchased shortly before the record date of such a distribution, the
shareholder will pay the full price for the shares and then receive some portion
of the price back as a taxable distribution.
Shareholders will receive annually tax information notices and Forms 1099 to
assist in the preparation of their federal and state tax returns for the prior
calendar year's distributions, proceeds from the redemption or exchange of Fund
shares, and federal income tax (if any), withheld therefrom.
The Fund intends to qualify as a regulated investment company under the Code and
to satisfy all requirements necessary to avoid paying federal income taxes on
the part of its investment company taxable income (consisting generally of net
investment income and net short-term capital gains) and net capital gains that
it distributes to shareholders. In satisfying these requirements, the Fund will
treat itself as owning its proportionate share of each of the Portfolio's assets
and as entitled to the income of the Portfolio properly attributable to such
share.
As a regulated investment company under the Code, the Fund does not pay federal
income or excise taxes to the extent that it distributes to shareholders
substantially all of its ordinary income and net realized capital gain net
income in accordance with the timing requirements imposed by the Code. As a
partnership under the Code, the Portfolio does not pay federal income or excise
taxes.
Shareholders should consult with their tax advisers concerning the applicability
of state, local or other taxes to an investment in the Fund.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
FROM TIME TO TIME, THE FUND MAY ADVERTISE ITS YIELD AND/OR AVERAGE ANNUAL TOTAL
RETURN. The Fund's current yield is calculated by dividing the net investment
income per share earned during a recent 30-day period by the maximum offering
price per share (net asset value) of the Fund on the last day of the period and
annualizing the resulting figure. The Fund's average annual total return is
determined by computing the average annual percentage change in value of $1,000
invested at the maximum public offering price (net asset value) for specified
periods, assuming reinvestment of all distributions. The average annual total
return calculation assumes a complete redemption of the investment and the
deduction of any applicable CDSC at the end of the period. The Fund may also
publish annual and cumulative total return figures from time to time.The Fund
may quote total return for the period prior to commencement of operations which
would reflect the Portfolio's total return (and that of its predecessor)
adjusted to reflect any applicable Fund sales charge.
The Fund may publish total return figures which do not take into account any
CDSC which may be imposed upon redemptions at the end of the specified period.
Any performance figure which does not take into account the CDSC would be
reduced to the extent such charge is imposed upon a redemption.
Investors should note that the investment results of the Fund will fluctuate
over time, and any presentation of the Fund's current yield or total return for
any prior period should not be considered as a representation of what an
investment may earn or what the Fund's yield or total return may be in any
future period. If the expenses of the Fund or the Portfolio are allocated to
Eaton Vance, the Fund's performance will be higher.
The following chart reflects the annual investment returns of the Fund for one
year periods ending March 31 and does not take into account any sales charge
which investors may bear. The total return for the period prior to the Fund's
commencement of operations on June 8, 1994 reflects the total return of the
Portfolio (or that of its predecessor) which had different operating expenses.
5 Year Average Annual Total Return - 9.70%
10 Year Average Annual Total Return - 8.30%
1988 1.52%
1989 11.58%
1990 (8.14%)
1991 (2.84%)
1992 38.21%
1993 13.41%
1994 10.28%
1995* 1.56%
1996* 12.25%
1997* 11.44%
* If a portion of the Fund's expenses had not been allocated to the
Administrator, the Fund would have had lower returns.
<PAGE>
APPENDIX A
DESCRIPTION OF MOODY'S CORPORATE BOND RATINGS:
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as
"gilt-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 fluctuation 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.
SECURITIES IN WHICH THE PORTFOLIO MAY INVEST WILL INCLUDE THOSE IN THE FOLLOWING
CATEGORIES:
Baa: Bonds which are rated Baa are considered as medium-grade obligations,
(i.e., they are neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba: Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate, and thereby not well safeguarded
during both good and bad times and 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 to B. The modifier 1 indicates that the company 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 company ranks in the
lower end of its generic rating category.
DESCRIPTION OF S&P'S CORPORATE DEBT RATINGS:
INVESTMENT GRADE
AAA: Debt rated AAA has the highest rating assigned by S&P's. Capacity to pay
interest and repay principal is extremely strong.
AA: Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the higher rated issues only in small degree.
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.
SECURITIES IN WHICH THE PORTFOLIO MAY INVEST WILL INCLUDE THOSE IN THE FOLLOWING
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, on balance, as predominantly
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. BB indicates the lowest degree of
speculation and C the highest degree of speculation. While such debt will likely
have some quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
BB: Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB- rating.
B: Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB or BB-
rating.
CCC: Debt rated CCC has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The CCC rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
B or B- rating.
CC: The rating CC is typically applied to debt subordinated to senior debt
that 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: Indicates that no public rating has been requested, because there is
insufficient information on which to base a rating, or because Standard & Poor's
does not rate a particular type of obligation as a matter of policy.
NOTES: Debt which is unrated exposes the investor to risks with respect to
capacity to pay interest or repay principal which are similar to the risks of
lower-rated speculative obligations. The Portfolio is dependent on the
Investment Adviser's judgment, analysis and experience in the evaluation of such
debt.
Investors should note that the assignment of a rating to a bond by a rating
service may not reflect the effect of recent developments on the issuer's
ability to make interest and principal payments.
<PAGE>
APPENDIX B
HIGH INCOME PORTFOLIO
ASSET COMPOSITION INFORMATION
FOR THE PERIOD ENDED MARCH 31, 1997
PERCENT OF
NET ASSETS
----------
Preferred Stocks and Other Equity Securities .............. 2.0%
Short-Term Obligations .................................... 2.8%
Debt Securities -- Moody's Rating
Ba .................................................... 8.1%
B1 .................................................... 12.4%
B2 .................................................... 24.8%
B3 .................................................... 39.9%
Caa ................................................... 7.0%
Unrated ............................................... 3.0%
-----
Total ................................................. 100.0%
The chart above indicates the weighted average composition of the securities
held by the Portfolio for the fiscal year ended March 31, 1997, with the debt
securities rated by Moody's separated into the indicated categories. The
weighted average indicated above was calculated on a dollar weighted basis and
was computed as at the end of each month during the year. The charge does not
necessarily indicate what the composition of the Portfolio will be in the
current and subsequent fiscal years.
For a description of Moody's ratings of fixed-income securities, see Appendix A
to this Prospectus.
<PAGE>
[LOGO]
EATON VANCE
- -------------------
Mutual Funds
EV CLASSIC HIGH INCOME FUND
- --------------------------------------------------------------------------------
PROSPECTUS
AUGUST 1, 1997
EV CLASSIC
HIGH INCOME FUND
24 FEDERAL STREET
BOSTON, MA 02110
- --------------------------------------------------------------------------------
INVESTMENT ADVISER OF HIGH INCOME PORTFOLIO
Boston Management and Research, 24 Federal Street, Boston, MA 02110
ADMINISTRATOR OF EV CLASSIC HIGH INCOME FUND
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 200 Clarendon Street, Boston, MA 02116
TRANSFER AGENT
First Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123
(800) 262-1122
AUDITORS
Deloitte & Touche LLP, 125 Summer Street, Boston, MA 02110
C-HIP
<PAGE>
Part A
Information Required in a Prospectus
EV MARATHON
HIGH INCOME FUND
- -------------------------------------------------------------------------------
EV MARATHON HIGH INCOME FUND (THE "FUND") IS A MUTUAL FUND SEEKING TO PROVIDE A
HIGH LEVEL OF CURRENT INCOME. THE FUND INVESTS ITS ASSETS IN HIGH INCOME
PORTFOLIO (THE "PORTFOLIO"), A DIVERSIFIED OPEN-END INVESTMENT COMPANY HAVING
THE SAME INVESTMENT OBJECTIVE AS THE FUND, RATHER THAN BY DIRECTLY INVESTING IN
AND MANAGING ITS OWN PORTFOLIO OF SECURITIES. THE FUND IS A SERIES OF EATON
VANCE MUTUAL FUNDS TRUST (THE "TRUST").
THE PORTFOLIO SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY INVESTING UP TO
100% OF ITS ASSETS IN LOWER-RATED BONDS, COMMONLY KNOWN AS "JUNK BONDS", THAT
ENTAIL GREATER RISKS, INCLUDING DEFAULT, THAN THOSE OF HIGHER-RATED
SECURITIES. INVESTORS SHOULD CAREFULLY CONSIDER THESE RISKS AND INVEST FOR THE
LONG TERM. SEE "THE FUND'S INVESTMENT OBJECTIVE" AND "INVESTMENT POLICIES AND
RISKS."
Shares of the Fund are not deposits or obligations of, or guaranteed or endorsed
by, any bank or other insured depository institution, and are not federally
insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board
or any other government agency. Shares of the Fund involve investment risks,
including fluctuations in value and the possible loss of some or all of the
principal investment.
This Prospectus is designed to provide you with information you should know
before investing. Please retain this document for future reference. A Statement
of Additional Information dated August 1, 1997 for the Fund, as supplemented
from time to time, has been filed with the Securities and Exchange Commission
(the "Commission") and is incorporated herein by reference. This Statement of
Additional Information is available without charge from the Fund's principal
underwriter, Eaton Vance Distributors, Inc. (the "Principal Underwriter"), 24
Federal Street, Boston, MA 02110 (telephone (800) 225-6265). The Portfolio's
investment adviser is Boston Management and Research (the "Investment Adviser"),
a wholly-owned subsidiary of Eaton Vance Management, and Eaton Vance Management
is the administrator (the "Administrator") of the Fund. The offices of the
Investment Adviser and the Administrator are located at 24 Federal Street,
Boston, MA 02110.
- ------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<TABLE>
PAGE PAGE
<S> <C> <C> <C>
Shareholder and Fund Expenses ......................... 2 How to Redeem Fund Shares ......................... 11
The Fund's Financial Highlights ....................... 3 Reports to Shareholders ........................... 12
The Fund's Investment Objective ....................... 4 The Lifetime Investing Account/Distribution Options 13
Investment Policies and Risks ......................... 4 The Eaton Vance Exchange Privilege ................ 13
Organization of the Fund and the Portfolio ............ 7 Eaton Vance Shareholder Services .................. 14
Management of the Fund and the Portfolio .............. 8 Distributions and Taxes ........................... 15
Distribution Plan ..................................... 9 Performance Information ........................... 15
Valuing Fund Shares ................................... 10 Appendix A ........................................ 17
How to Buy Fund Shares ................................ 10 Appendix B ........................................ 19
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
PROSPECTUS DATED AUGUST 1, 1997
<PAGE>
SHAREHOLDER AND FUND EXPENSES
- -------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES
- -------------------------------------------------------------------------------
Sales Charges Imposed on Purchases of Shares None
Sales Charges Imposed on Reinvested Distributions None
Fees to Exchange Shares None
Range of Declining Contingent Deferred Sales
Charges Imposed on Redemptions during the First
Seven Years (as a percentage of redemption
proceeds exclusive of all reinvestments and
capital appreciation in the account) 5.00%-0%
ANNUAL FUND AND ALLOCATED PORTFOLIO OPERATING EXPENSES (as a percentage of
average daily net assets)
- -------------------------------------------------------------------------------
Investment Adviser Fee 0.61%
Rule 12b-1 Distribution (and Service) Fees 0.95
Other Expenses 0.21
----
Total Operating Expenses 1.77%
====
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
An investor would pay the following
contingent deferred sales charge
and expenses on a $1,000
investment, assuming (a) 5%
annual return and (b) redemption
at the end of each period: $68 $96 $116 $208
An investor would pay the following
expenses on the same investment,
assuming (a) 5% annual return and
(b) no redemptions: $18 $56 $ 96 $208
NOTES:
The table and Example summarize the aggregate expenses of the Fund and the
Portfolio and are designed to help investors understand the costs and expenses
that they will bear, directly or indirectly, by investing in the Fund.
Information for the Fund is based on its expenses for the most recent fiscal
year.
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. Federal regulations
require the Example to assume a 5% annual return, but actual return will vary.
For further information regarding the expenses of the Fund and the Portfolio see
"The Fund's Financial Highlights", "Management of the Fund and the Portfolio"
and "How to Redeem Fund Shares". A long-term shareholder in the Fund may pay
more than the economic equivalent of the maximum front-end sales charge
permitted by a rule of the National Association of Securities Dealers, Inc. See
"Distribution Plan".
No contingent deferred sales charge is imposed on (a) shares purchased more than
six years prior to the redemption, (b) shares acquired through the reinvestment
of distributions or (c) any appreciation in value of other shares in the account
(see "How to Redeem Fund Shares"), and no such charge is imposed on exchanges of
Fund shares for shares of one or more other funds listed under "The Eaton Vance
Exchange Privilege".
The Portfolio's monthly advisory fee has two components, a fee based on daily
net assets and a fee based on daily gross income, as set forth in the fee
schedule on page 9.
The Fund invests exclusively in the Portfolio. Other investment companies and
investors with different distribution arrangements and fees are investing in the
Portfolio and others may do so in the future. See "Organization of the Fund and
the Portfolio".
THE FUND'S FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
The following information should be read in conjunction with the audited
financial statements that appear in the Fund's annual report to shareholders.
The Fund's financial statements have been audited by Deloitte & Touche LLP,
independent certified public accountants, as experts in accounting and
auditing. The Fund's financial statements and the independent auditors' report
are incorporated by reference into the Statement of Additional Information.
Further information regarding the performance of the Fund is contained in the
Fund's annual report to shareholders which may be obtained without charge by
contacting the Principal Underwriter.
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
----------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
beginning of year $ 7.100 $ 6.920 $ 7.450 $ 7.480 $ 7.380 $ 6.120 $ 7.430 $ 9.230 $ 9.330 $10.380
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
INCOME (LOSS) FROM
OPERATIONS:
Net investment
income $ 0.652 $ 0.665 $ 0.671 $ 0.697 $ 0.767 $ 0.825 $ 0.973 $ 1.053 $ 1.054 $ 1.041
Net realized and
unrealized gain
(loss) on
investments 0.120 0.189 (0.507) 0.047 0.170 1.356 (1.187) (1.708) (0.023) (0.916)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total income
(loss) from
operations $ 0.772 $ 0.854 $ 0.164 $ 0.744 $ 0.937 $ 2.181 $(0.214) $(0.655) $ 1.031 $ 0.125
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
From net
investment
income $(0.646) $(0.665) $(0.671) $(0.697) $(0.767) $(0.825) $(0.973) $(1.078) $(1.038) $(1.030)
In excess of net
investment
income(1) (0.006) (0.009) (0.023) (0.077) (0.070) (0.096) (0.123) (0.067) (0.093) (0.095)
From realized
capital gains -- -- -- -- -- -- -- -- -- (0.050)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total
distributions $(0.652) $(0.674) $(0.694) $(0.774) $(0.837) $(0.921) $(1.096) $(1.145) $(1.131) $(1.125)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
NET ASSET VALUE, end
of year $ 7.220 $ 7.100 $ 6.920 $ 7.450 $ 7.480 $ 7.380 $ 6.120 $ 7.430 $ 9.230 $ 9.330
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
TOTAL RETURN(2) 11.37% 12.80% 2.51% 10.28% 13.41% 38.21% (2.84)% (8.14)% 11.58% 1.52%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of
year
(000 omitted) $598,273 $496,966 $439,171 $399,259 $332,854 $252,967 $170,655 $214,075 $268,080 $231,648
Ratio of net
expenses to
average
daily net
assets(3) 1.77% 1.78% 1.78% 1.82% 2.09% 2.19% 2.37% 2.20% 2.19% 2.02%
Ratio of net
investment
income
to average daily
net assets 8.97% 9.38% 9.52% 9.09% 10.31% 12.00% 14.54% 12.12% 11.28% 10.89%
PORTFOLIO TURNOVER(4) -- -- 11% 96% 91% 82% 57% 53% 57% 59%
Notes:
(1) The Fund has followed the Statement of Position (SOP) 93-2: Determination,
Disclosure and Financial Statement Presentation of Income, Capital Gain, and
Return of Capital Distribution by Investment Companies. The SOP requires
that differences in the recognition or classification of income between the
financial statements and tax earnings and profits that result in temporary
over-distributions for financial statement purposes, are classified as
distributions in excess of net investment income or accumulated net realized
gains.
(2) Total return is calculated assuming a purchase at the net asset value on the first day and a sale at the net asset value on
the last day of each period reported. Distributions, if any, are assumed to be reinvested at the net asset value on the
payable date. Total Return is computed on a non-annualized basis.
(3) Includes the Fund's share of the Portfolio's allocated expenses.
(4) Portfolio turnover represents the rate of portfolio activity for the period while the Fund was making investments directly
in securities. The portfolio turnover for the period since the Fund transferred substantially all of its investable assets
to the Portfolio is shown in the Portfolio's financial statements which are included in the Fund's Annual Report.
</TABLE>
THE FUND'S INVESTMENT OBJECTIVE
- -------------------------------------------------------------------------------
THE FUND'S INVESTMENT OBJECTIVE IS TO PROVIDE A HIGH LEVEL OF CURRENT INCOME.
The Fund currently seeks to meet its investment objective by investing its
assets in the High Income Portfolio (the "Portfolio"), a separate registered
investment company which has the same investment objective and policies as the
Fund. The Portfolio seeks to invest a significant portion of its assets in
high-yielding, high risk, fixed-income securities (commonly referred to as
"junk-bonds"), to achieve this objective. The Fund's and the Portfolio's
investment objectives are nonfundamental and may be changed when authorized by a
vote of the Trustees of the Trust or the Portfolio, respectively, without
obtaining the approval of the Fund's shareholders or the investors in the
Portfolio, as the case may be. The Trustees of the Trust have no present
intention to change the Fund's objective and intend to submit any proposed
material change in the investment objective to shareholders in advance for their
approval. The Fund may not be appropriate for investors who cannot assume the
greater risk of capital depreciation or loss inherent in seeking higher yields.
INVESTMENT POLICIES AND RISKS
- --------------------------------------------------------------------------------
The Portfolio normally is invested as follows:
o at least 80% of its net assets in fixed- income securities, including
convertible securities; and
o up to 20% of its net assets in common stocks and other equity securities
when consistent with its objective or acquired as part of a unit combining
fixed-income and equity securities.
THE PORTFOLIO WILL NORMALLY INVEST AT LEAST 65% OF ITS ASSETS IN THE LOWEST
INVESTMENT GRADE AND LOWER RATED OBLIGATIONS (RATED BAA OR LOWER BY MOODY'S
INVESTORS SERVICE, INC. ("MOODY'S") OR BBB OR LOWER BY STANDARD & POOR'S RATINGS
GROUP ("S&P")) AND UNRATED OBLIGATIONS. For a description of Moody's and S&P's
ratings of fixed-income securities, see Appendix A to this Prospectus. Unrated
bonds are generally regarded as being speculative and expose the investor to
risks with respect to the issuer's capacity to pay interest and repay principal
which are similar to the risks of lower rated bonds. At March 31, 1997, the
Portfolio had approximately 93.7% of its assets invested in high yield, high
risk bonds that were rated lower than investment grade or unrated. See Appendix
B to this Prospectus for the Portfolio's asset composition information for the
most recent fiscal year of the Fund.
The Portfolio invests a substantial portion of its assets in high yield, high
risk securities issued in connection with mergers, acquisitions, leveraged
buy-outs, recapitalizations and other highly leveraged transactions. These
securities are subject to substantially greater credit risks than some of the
other fixed-income securities in which the Portfolio may invest. These credit
risks include the possibility of default or bankruptcy of the issuer. These
securities are less liquid than other fixed-income securities. During periods of
deteriorating economic conditions and contraction in the credit markets, the
ability of issuers of such securities to service their debt, meet projected
goals, or obtain additional financing may be impaired. For more detailed
information about the risks associated with investing in such securities, see
"Risk Considerations" below.
The Portfolio may also invest a portion of its assets in debt securities that
are not paying current income in anticipation of the receipt of possible future
income or capital appreciation. Interest and/or principal payments thereon could
be in arrears when such securities are acquired, and the issuer may be in
bankruptcy or undergoing a debt restructuring or reorganization. Such securities
may be unrated or the lowest rated obligations (rated C by Moody's or D by S&P).
Bonds rated C by Moody's are regarded as having extremely poor prospects of ever
attaining any real investment standing. Bonds rated D by S&P are in payment
default or a bankruptcy petition has been filed and debt service payments are
jeopardized. The Portfolio may retain defaulted obligations in its portfolio
when such retention is considered desirable by the Investment Adviser. The
Portfolio may also acquire other securities issued in exchange for such
obligations or issued in connection with the debt restructuring or
reorganization of the issuers, or where such acquisition, in the judgment of the
Investment Adviser, may enhance the value of such obligations or would otherwise
be consistent with the Portfolio's investment policies.
Although the Investment Adviser considers security ratings when making
investment decisions, it performs its own credit and investment analysis and
does not rely primarily on the ratings assigned by the rating services. In
evaluating the quality of a particular issue, whether rated or unrated, the
Investment Adviser will normally take into consideration, among other things,
the issuer's financial resources and operating history, its sensitivity to
economic conditions and trends, the ability of its management, its debt maturity
schedules and borrowing requirements, and relative values based on anticipated
cash flow, interest and asset coverages, and earnings prospects. Because of the
greater number of investment considerations involved in investing in high yield,
high risk bonds, the achievement of the Portfolio's objective depends more on
the Investment Adviser's judgment and analytical abilities than would be the
case if the Portfolio were investing primarily in securities in the higher
rating categories.
When the Investment Adviser believes that it is appropriate to do so, for
defensive purposes, such as during abnormal market or economic conditions, more
than 35% of the Portfolio's assets may be temporarily invested in securities
rated A or better by Moody's or S&P. All or a portion of the Portfolio's assets
may be invested temporarily in cash or short-term obligations including, but not
limited to, certificates of deposit, commercial paper, short-term notes,
obligations issued or guaranteed by the U.S. Government or any of its agencies
or instrumentalities and repurchase agreements.
FIXED-INCOME OBLIGATIONS. The fixed-income securities in which the Portfolio may
invest include preferred and preference stocks and all types of debt obligations
of both domestic and foreign issuers, such as bonds, debentures, notes,
equipment lease certificates, equipment trust certificates, conditional sale
contracts, commercial paper, and obligations issued or guaranteed by the U.S.
Government, any state or territory of the United States, any foreign government
or any of their respective political subdivisions, agencies or
instrumentalities. Debt securities may bear fixed, fixed and contingent,
variable or floating rates of interest. Investments in foreign securities may
not exceed 25% of total assets.
The Portfolio may also invest a portion of its assets in loan interests, which
are interests in amounts owed by a corporate, governmental or other borrower to
lenders or lending syndicates. Loan interests purchased by the Portfolio may
have a maturity of any number of days or years, may be secured or unsecured, and
may be of any credit quality. Loan interests, which may take the form of
participation interests in, assignments of or novations of a loan, may be
acquired from U.S. and foreign banks, insurance companies, finance companies or
other financial institutions which have made loans or are members of a lending
syndicate or from the holders of loan interests. Loan interests involve the risk
of loss in case of default or bankruptcy of the borrower and, in the case of
participation interests, involve the risk of insolvency of the agent lending
bank or other financial intermediary.
The Portfolio may hold up to 15% of its net assets in illiquid securities.
Illiquid securities include securities legally restricted as to resale such as
commercial paper issued pursuant to Section 4(2) of the Securities Act of 1933
and securities eligible for resale pursuant to Rule 144A thereunder. Section 4
(2) and 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. As of June
30, 1997, more than 14% of the Portfolio's assets were invested in liquid 144A
securities.
INVESTMENT PRACTICES
DERIVATIVE INSTRUMENTS. The Portfolio may purchase or sell derivative
instruments (which are instruments that derive their value from another
instrument, security, index or currency) to hedge against fluctuations in
interest rates, securities prices or currency exchange rates, to change the
duration of the Portfolio's fixed income portfolio or as a substitute for the
purchase or sale of securities or currency. Options may be written to enhance
income. The Portfolio's transactions in derivative instruments may include the
purchase or sale of futures contracts on securities, (such as U.S. Government
securities), indices, other financial instruments (such as certificates of
deposit, Eurodollar time deposits, and economic indices) or currencies; options
on futures contracts; exchange-traded options on securities, indices or
currencies; and forward contracts to purchase or sell currencies. All of the
Portfolio's transactions in derivative instruments involve a risk of loss or
depreciation due to: unanticipated adverse changes in interest rates, securities
prices or currency exchange rates; the inability to close out a position; tax
constraints on closing out positions; default by the counterparty; imperfect
correlation between a position and the desired hedge; and portfolio management
constraints on disposing of securities subject to such transactions. The loss on
derivative instruments (other than purchased options) may substantially exceed
the Portfolio's initial investment in these instruments. In addition, the
Portfolio may lose the entire premium paid for purchased options that expire
before they can be profitably exercised by the Portfolio. The Portfolio incurs
transaction costs in opening and closing positions in derivative instruments.
There can be no assurance that the Investment Adviser's use of derivative
instruments will be advantageous to the Portfolio.
The Portfolio's success in using derivative instruments to hedge portfolio
assets depends on the degree of price correlation between the derivative
instrument and the hedged asset. Imperfect correlation may be caused by several
factors, including temporary price disparities among the trading markets for the
derivative instrument, the assets underlying the derivative instrument and the
Portfolio's assets.
The Portfolio may write (sell) covered call and put options only with respect to
up to 25% of its net assets. To the extent that the Portfolio enters into
futures contracts, options on futures contracts and options on foreign
currencies traded on an exchange regulated by the Commodity Futures Trading
Commission (the "CFTC"), in each case that are not for bona fide hedging
purposes (as defined by the CFTC), the aggregate initial margin and premiums
required to establish these positions (excluding the amount by which options are
"in-the-money") may not exceed 5% of the liquidation value of the Portfolio's
portfolio, after taking into account unrealized profits and unrealized losses on
any contacts the Portfolio has entered into. The Portfolio did not engage in
such transactions during the fiscal year ended March 31, 1997, and there is no
assurance that it will engage in such transactions in the future.
ADDITIONAL RISK CONSIDERATIONS
Investors should carefully consider their ability to assume the risks of owning
shares of a mutual fund that invests in below investment grade debt obligations
(commonly referred to as "junk bonds") before making an investment in the Fund.
The lower ratings of certain securities held by the Portfolio reflect a greater
possibility that adverse changes in the financial condition of an issuer, or in
general economic conditions, or both, or an unanticipated rise in interest
rates, may impair the ability of the issuer to make payments of interest and
principal. The inability (or perceived inability) of issuers to make timely
payment of interest and principal would likely make the values of securities
held by the Fund more volatile and could limit the Portfolio's ability to sell
its securities at prices approximating the values the Portfolio has placed on
such securities. It is possible that legislation may be adopted in the future
limiting the ability of certain financial institutions to purchase such
securities; such legislation may adversely affect the liquidity of such
securities. In the absence of a liquid trading market for securities held by it,
the Portfolio may be unable at times to establish the fair market value of such
securities.
The rating assigned to a security by a rating agency does not reflect an
assessment of the volatility of the security's market value or of the liquidity
of an investment in the securities. Credit ratings are based largely on the
issuer's historical financial condition and the rating agency's investment
analysis at the timing of rating, and the rating assigned to any particular
security is not necessarily a reflection of the issuer's current financial
condition. Credit quality in the high yield, high risk bond market can change
from time to time, and recently issued credit ratings may not fully reflect the
actual risks posed by a particular high yield security.
While the Investment Adviser will attempt to reduce the risks of investing in
lower rated or unrated securities through active portfolio management,
diversification, credit analysis and attention to current developments and
trends in the economy and the financial markets, there can be no assurance that
a broadly diversified portfolio of such securities would substantially lessen
the risks of defaults brought about by an economic downturn or recession.
The net asset value of shares of the Fund will change in response to
fluctuations in prevailing interest rates and changes in the value of the
securities held by the Portfolio. When interest rates decline, the value of
securities already held by the Portfolio can be expected to rise. Conversely,
when interest rates rise, the value of existing portfolio security holdings can
be expected to decline. Changes in the credit quality of issuers of debt
obligations held by the Portfolio will affect the principal value (and possibly
the income earned) on such obligations. In addition, the values of such
securities are affected by changes in general economic conditions and business
conditions affecting the specific industries of their issuers. Changes by
recognized rating services in their ratings of any fixed-income security and in
the ability of an issuer to make payments of interest and principal may also
affect the value of these investments. The Portfolio will not dispose of a
security solely because its rating is reduced below its rating at the time of
purchase, although the Investment Adviser will monitor the investment to
determine whether continued investment in the security will assist in meeting
the Portfolio's investment objective.
Interest and/or principal payments on securities in default may be in arrears
when such securities are acquired, and the issuer may be in bankruptcy or
undergoing a debt restructuring or reorganization. In order to enforce its
rights in the event of a default under such securities, the Portfolio may be
required to take possession of and manage assets securing the issuer's
obligation on such securities, which may increase the Portfolio's operating
expenses and adversely affect the Portfolio's net asset value.
Certain securities held by the Portfolio may permit the issuer at its option to
"call", or redeem, its securities. If an issuer were to redeem securities held
by the Portfolio during a time of declining interest rates, the Portfolio may
not be able to reinvest the proceeds in securities providing the same investment
return as the securities redeemed. In addition, the Portfolio may temporarily
borrow up to 5% of the value of its total assets to satisfy redemption requests
or settle securities transactions.
Loan interests generally are not rated by any nationally recognized rating
service and are, at present, not readily marketable and may be subject to
contractual restrictions on resale. An investment in restricted securities may
involve relative greater risk and cost to the Portfolio because of their
illiquidity. Moreover, liquid Rule 144A securities may increase the level of
Portfolio illiquidity to the extent qualified institutional buyers become
uninterested in purchasing such securities.
Fixed-income securities that the Portfolio may invest in also include zero
coupon bonds, deferred interest bonds and bonds on which the interest is payable
in kind ("PIK bonds"). Zero coupon and deferred interest bonds are debt
obligations which are issued at a significant discount from face value. While
zero coupon bonds do not require the periodic payment of interest, deferred
interest bonds provide for a period of delay before the regular payment of
interest begins. PIK bonds are debt obligations which provide that the issuer
thereof may, at its option, pay interest on such bonds in cash or in the form of
additional debt obligations. Such investments may experience greater volatility
in market value due to changes in interest rates than debt obligations which
make regular payments of interest. The Portfolio will accrue income on such
investments for tax and accounting purposes, in accordance with applicable law,
the Fund's share of which income is distributable to shareholders. Because no
cash is received at the time such income is accrued, the Portfolio may be
required to liquidate other portfolio securities to enable the Fund to satisfy
its distribution obligations.
Investing in foreign securities may represent a greater degree of risk than
investing in domestic securities, because of the possibility of exchange rate
fluctuations, less publicly-available financial and other information, more
volatile and less liquid markets, less securities regulation, higher brokerage
costs, imposition of foreign withholding and other taxes, war, expropriation or
other adverse governmental actions.
THE FUND AND THE PORTFOLIO HAVE ADOPTED CERTAIN FUNDAMENTAL INVESTMENT
RESTRICTIONS WHICH ARE ENUMERATED IN DETAIL IN THE STATEMENT OF ADDITIONAL
INFORMATION AND WHICH MAY NOT BE CHANGED UNLESS AUTHORIZED BY A SHAREHOLDER
VOTE, AND AN INVESTOR VOTE, RESPECTIVELY. EXCEPT FOR SUCH ENUMERATED
RESTRICTIONS AND AS OTHERWISE INDICATED IN THIS PROSPECTUS, THE INVESTMENT
OBJECTIVE AND POLICIES OF THE FUND AND THE PORTFOLIO ARE NOT FUNDAMENTAL
POLICIES AND ACCORDINGLY MAY BE CHANGED BY THE TRUSTEES OF THE TRUST AND THE
PORTFOLIO WITHOUT OBTAINING THE APPROVAL OF THE FUND'S SHAREHOLDERS OR THE
INVESTORS IN THE PORTFOLIO, AS THE CASE MAY BE.
ORGANIZATION OF THE FUND AND THE PORTFOLIO
- --------------------------------------------------------------------------------
THE FUND IS A DIVERSIFIED SERIES OF EATON VANCE MUTUAL FUNDS TRUST A BUSINESS
TRUST ESTABLISHED UNDER MASSACHUSETTS LAW PURSUANT TO A DECLARATION OF TRUST
DATED MAY 7, 1984, AS AMENDED. The Trustees of the Trust are responsible for the
overall management and supervision of its affairs. The Trust may issue an
unlimited number of shares of beneficial interest (no par value per share) in
one or more series (such as the Fund). Each share represents an equal
proportionate beneficial interest in the Fund. When issued and outstanding, the
shares are fully paid and nonassessable by the Trust and redeemable as described
under "How to Redeem Fund Shares". There are no annual meeting of shareholders,
but special meetings may be held as required by law to elect Trustees and
consider certain other matters. Shareholders are entitled to one vote for each
full share held. Fractional shares may be voted proportionately. Shares have no
preemptive or conversion rights and are freely transferable. In the event of the
liquidation of the Fund, shareholders are entitled to share pro rata in the net
assets of the Fund available for distribution to shareholders.
Effective March 31, 1998, the Trustees of the Trust have approved changing the
name of the Fund to Eaton Vance High Income Fund and restructuring the Fund to
become Class B shares. Another fund with the same investment objective and
policies that also invests in the Portfolio will become Class C. It is
anticipated that this restructuring will reduce Fund operating expenses, thereby
enhancing long-term returns and improving operational flexibility. The
conversion to the multiple-class structure will not be a taxable transaction or
change the value or cost basis of existing shareholders' investments. Likewise,
the conversion will not materially change shareholder voting rights. It is
possible that some shareholders could, in the future, receive different
distributions of realized capital gains than would be the case if the
restructuring did not occur. This result could occur because allocation of the
Portfolio's current unrealized capital gains will be different under multiple-
class accounting rules than has been the case under the partnership accounting
of the current structure. The actual realization of capital gains in the future
remains uncertain and depends not only on the Investment Adviser's decisions but
also on the fluctuating market valuation of specific securities. Because capital
gains distributions reduce the net asset value of a fund's shares, the effect of
such a distribution change is to alter current tax obligations and tax
obligations upon redemption (by the same amount).
The Trustees of the Trust have considered the advantages and disadvantages of
investing the assets of the Fund in the Portfolio, as well as the advantages and
disadvantages of the two-tier format. The Trustees believe that the structure
offers opportunities for substantial growth in the assets of the Portfolio,
affords the potential for economies of scale for the Fund (at least when the
assets of the Portfolio exceed $500 million) and may over time result in lower
expenses for the Fund.
THE PORTFOLIO IS ORGANIZED AS A TRUST UNDER THE LAWS OF THE STATE OF NEW YORK
AND INTENDS TO BE TREATED AS A PARTNERSHIP FOR FEDERAL TAX PURPOSES. In addition
to selling an interest to the Fund, the Portfolio may sell interests to other
affiliated and non-affiliated mutual funds or institutional investors. Such
investors will invest in the Portfolio on the same terms and conditions and will
pay a proportionate share of the Portfolio's expenses. However, the other
investors investing in the Portfolio are not required to sell their shares at
the same public offering price as the Fund due to variations in sales
commissions and other operating expenses. Therefore, these differences may
result in differences in returns experienced by investors in the various funds
that invest in the Portfolio. Such differences in returns are also present in
other mutual fund structures, including funds that have multiple classes of
shares. Information regarding other pooled investment entities or funds which
invest in the Portfolio may be obtained by contacting the Principal Underwriter,
24 Federal Street, Boston, MA 02110, (617) 482-8260.
Whenever the Fund as an investor in the Portfolio is requested to vote on
matters pertaining to the Portfolio (other than the termination of the
Portfolio's business, which may be determined by the Trustees of the Portfolio
without investor approval), the Fund will hold a meeting of Fund shareholders
and will vote its interest in the Portfolio for or against such matters
proportionately to the instructions to vote for or against such matters received
from Fund shareholders. The Fund shall vote shares for which it receives no
voting instructions in the same proportion as the shares for which it receives
voting instructions. Other investors in the Portfolio may alone or collectively
acquire sufficient voting interests in the Portfolio to control matters relating
to the operation of the Portfolio, which may require the Fund to withdraw its
investment in the Portfolio or take other appropriate action. Any such
withdrawal could result in a distribution "in kind" of portfolio securities (as
opposed to a cash distribution from the Portfolio). If securities are
distributed, the Fund could incur brokerage, tax or other charges in converting
the securities to cash. In addition, the distribution in kind may result in a
less diversified portfolio of investments or adversely affect the liquidity of
the Fund. Notwithstanding the above, there are other means for meeting
shareholder redemption requests, such as borrowing.
The Fund may withdraw (completely redeem) all its assets from the Portfolio at
any time if the Board of Trustees of the Trust determines that it is in the best
interest of the Fund to do so. In the event the Fund withdraws all of its assets
from the Portfolio, or the Board of Trustees of the Trust determines that the
investment objective of the Portfolio is no longer consistent with the
investment objective of the Fund, the Trustees would consider what action might
be taken, including investing the assets of the Fund in another pooled
investment entity or retaining an investment adviser to manage the Fund's assets
in accordance with its investment objective. The Fund's investment performance
may be affected by a withdrawal of all its assets (or the assets of another
investor in the Portfolio) from the Portfolio.
MANAGEMENT OF THE FUND AND THE PORTFOLIO
- --------------------------------------------------------------------------------
THE PORTFOLIO ENGAGES BOSTON MANAGEMENT AND RESEARCH ("BMR"), A WHOLLY-OWNED
SUBSIDIARY OF EATON VANCE MANAGEMENT ("EATON VANCE"), AS ITS INVESTMENT ADVISER.
EATON VANCE, ITS AFFILIATES AND ITS PREDECESSOR COMPANIES HAVE BEEN MANAGING
ASSETS OF INDIVIDUALS AND INSTITUTIONS SINCE 1924 AND MANAGING INVESTMENT
COMPANIES SINCE 1931.
Acting under the general supervision of the Board of Trustees of the Portfolio,
BMR manages the Portfolio's investments and affairs. BMR also furnishes for the
use of the Portfolio office space and all necessary office facilities, equipment
and personnel for servicing the invesments of the Portfolio. Under its
investment advisory agreement with the Portfolio, BMR receives a monthly
advisory fee equal to the aggregate of
(a) a daily asset based fee computed by applying the annual asset rate
applicable to that portion of the total daily net assets in each
Category as indicated below, plus
(b) a daily income based fee computed by applying the daily income rate
applicable to that portion of the total daily gross income (which
portion shall bear the same relationship to the total daily gross income
on such day as that portion of the total daily net assets in the same
Category bears to the total daily net assets on such day) in each
Category as indicated below:
ANNUAL DAILY
CATEGORY DAILY NET ASSETS ASSET RATE INCOME RATE
- -------------------------------------------------------------------------------
1 up to $500 million 0.300% 3.00%
2 $500 million but less than $1 billion 0.275% 2.75%
3 $1 billion but less than $1.5 billion 0.250% 2.50%
4 $1.5 billion but less than $2 billion 0.225% 2.25%
5 $2 billion but less than $3 billion 0.200% 2.00%
6 $3 billion and over 0.175% 1.75%
As of March 31, 1997, the Portfolio had net assets of $706,711,462. For the
fiscal year ended March 31, 1997, the Portfolio paid BMR advisory fees
equivalent to 0.61% of the Portfolio's average daily net assets for such year.
BMR OR EATON VANCE ACTS AS INVESTMENT ADVISER TO INVESTMENT COMPANIES AND
VARIOUS INDIVIDUAL AND INSTITUTIONAL CLIENTS WITH ASSETS UNDER MANAGEMENT OF
OVER $17 BILLION. Eaton Vance is a wholly-owned subsidiary of Eaton Vance Corp.,
a publicly-held holding company which through its subsidiaries and affiliates
engages primarily in investment management and marketing activities. The
Principal Underwriter is a wholly-owned subsidiary of Eaton Vance.
Hooker Talcott, Jr. has acted as the portfolio manager of the Portfolio since
it commenced operations. Mr. Talcott has been a Vice President of Eaton Vance
since 1987 and of BMR since 1992. Michael Weilheimer is the co-portfolio
manager and has been a Vice President of Eaton Vance since 1992.
BMR places the portfolio transactions of the Portfolio for execution with many
broker-dealer firms. Fixed-income securities are normally traded on a net basis
(without commission) through broker-dealers and banks acting for their own
account. Such firms attempt to profit from such transactions by buying at the
bid price and selling at the higher asked price of the market, and the
difference is customarily referred to as the spread. In selecting firms to
execute portfolio transactions, BMR judges their professional ability and
quality of service and uses its best efforts to obtain execution at prices which
are advantageous to the Portfolio and at reasonably competitive spreads. Subject
to the foregoing, BMR may consider sales of shares of the Fund or of other
investment companies sponsored by BMR or Eaton Vance as a factor in the
selection of firms to execute portfolio transactions. The Fund, the Portfolio
and BMR have adopted Codes of Ethics relating to personal securities
transactions. The Codes permit Eaton Vance personnel to invest in securities
(including securities that may be purchased or held by the Portfolio) for their
own accounts, subject to certain pre-clearance, reporting and other restrictions
and procedures contained in such Codes.
The Trust has retained the services of Eaton Vance to act as Administrator of
the Fund. The Trust has not retained the services of an investment adviser since
the Trust seeks to achieve the investment objective of the Fund by investing its
assets in the Portfolio. As Administrator, Eaton Vance provides the Fund with
general office facilities and supervises the overall administration of the Fund.
For these services Eaton Vance currently receives no compensation. The Trustees
of the Trust may determine, in the future, to compensate Eaton Vance for its
services.
The Portfolio and the Fund, as the case may be, will each be responsible for all
respective costs and expenses not expressly stated to be payable by BMR under
the investment advisory agreement, by Eaton Vance under the administrative
services agreement, or by the Principal Underwriter under the distribution
agreement.
DISTRIBUTION PLAN
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The Fund has adopted a Distribution Plan ("Plan") pursuant to Rule 12b-1 under
the Investment Company Act of 1940 ("1940 Act"). UNDER THE PLAN, THE FUND PAYS
THE PRINCIPAL UNDERWRITER A FEE, ACCRUED DAILY AND PAID MONTHLY, AT AN ANNUAL
RATE NOT EXCEEDING .75% OF ITS AVERAGE DAILY NET ASSETS TO FINANCE THE
DISTRIBUTION OF FUND SHARES. The Plan provides that the Fund may use such fees
to compensate the Principal Underwriter for sales commissions paid by it to
Authorized Firms on the sale of Fund shares and for interest expenses. The
Principal Underwriter uses its own funds to pay sales commissions (except on
exchange transactions and reinvestments) to Authorized Firms at the time of sale
equal to 4% of the purchase price of the shares sold by such Firms. Contingent
deferred sales charges paid to the Principal Underwriter will be used to reduce
amounts owed to it. Because payments to the Principal Underwriter by the Fund
are limited, uncovered distribution charges (sales commissions paid by the
Principal Underwriter plus interest, less the above fees and contingent deferred
sales charges received by it) may exist indefinitely. During the fiscal year
ended March 31, 1997, the Fund paid fees under the Plan equivalent to .75% of
the Fund's average daily net assets. As of March 31, 1997, uncovered
distribution charges amounted to approximately $17,708,000 (equivalent to 3.0%
of the Fund's net assets). For more information, see "Distribution Plan" in the
Statement of Additional Information.
THE PLAN ALSO AUTHORIZES THE FUND TO MAKE PAYMENTS OF SERVICE FEES TO THE
PRINCIPAL UNDERWRITER, AUTHORIZED FIRMS AND OTHER PERSONS IN AMOUNTS NOT
EXCEEDING .25% OF THE FUND'S AVERAGE DAILY NET ASSETS FOR PERSONAL SERVICES
AND/OR THE MAINTENANCE OF SHAREHOLDER ACCOUNTS. This fee is paid quarterly in
arrears based on the value of Fund shares sold by such persons and remaining
outstanding for at least twelve months. For the fiscal year ended March 31,
1997, the Fund paid or accrued service fees equivalent to .20% of the Fund's
average daily net assets for such year.
The Principal Underwriter may, from time to time, at its own expense, provide
additional incentives to Authorized Firms which employ registered
representatives who sell Fund shares and/or shares of other funds distributed by
the Principal Underwriter. In some instances, such additional incentives may be
offered only to certain Authorized Firms whose representatives sell or are
expected to sell significant amounts of shares. In addition, the Principal
Underwriter may from time to time increase or decrease the sales commissions
payable to Authorized Firms.
The Fund may, in its absolute discretion, suspend, discontinue or limit the
offering of its shares at any time. In determining whether any such action
should be taken, the Fund's management intends to consider all relevant factors,
including (without limitation) the size of the Fund, the investment climate and
market conditions, the volume of sales and redemptions of Fund shares, and the
amount of uncovered distribution charges of the Principal Underwriter. The Plan
may continue in effect and payments may be made under the Plan following any
such suspension, discontinuance or limitation of the offering of Fund shares;
however, the Fund is not contractually obligated to continue the Plan for any
particular period of time. Suspension of the offering of Fund shares would not,
of course, affect a shareholder's ability to redeem shares.
VALUING FUND SHARES
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THE FUND VALUES ITS SHARES ONCE ON EACH DAY THE NEW YORK STOCK EXCHANGE (THE
"EXCHANGE") IS OPEN FOR TRADING, as of the close of regular trading on the
Exchange (normally 4:00 p.m. New York time). The Fund's net asset value per
share is determined by IBT Fund Services (Canada) Inc., (as agent for the Fund)
in the manner authorized by the Trustees of the Trust. IBT Fund Services
(Canada) Inc. is a subsidiary of Investors Bank & Trust Company ("IBT"), the
Fund's and the Portfolio's custodian. Net asset value is computed by dividing
the value of the Fund's total assets, less its liabilities, by the number of
shares outstanding. Because the Fund invests its assets in an interest in the
Portfolio, the Fund's net asset value will reflect the value of its interest in
the Portfolio (which, in turn, reflects the underlying value of the Portfolio's
assets and liabilities).
Authorized Firms must communicate an investor's order to the Principal
Underwriter prior to the close of the Principal Underwriter's business day to
receive that day's net asset value per Fund share. It is the Authorized Firms'
responsibility to transmit orders promptly to the Principal Underwriter.
The Portfolio's net asset value is also determined as of the close of regular
trading on the Exchange by IBT Fund Services (Canada) Inc. (as agent for the
Portfolio), in the manner authorized by the Trustees of the Portfolio. Net asset
value is computed by subtracting the liabilities of the Portfolio from the value
of its total assets. Fixed-income securities (other than short-term
obligations), will normally be valued on the basis of market valuations
furnished by a pricing service.
SHAREHOLDERS MAY DETERMINE THE VALUE OF THEIR INVESTMENT BY MULTIPLYING THE
NUMBER OF FUND SHARES OWNED BY THE CURRENT NET ASSET VALUE PER SHARE.
HOW TO BUY FUND SHARES
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SHARES OF THE FUND MAY BE PURCHASED FOR CASH OR MAY BE ACQUIRED IN EXCHANGE FOR
ACCEPTABLE SECURITIES. Investors may purchase shares of the Fund through
Authorized Firms at the net asset value per share of the Fund next determined
after an order is effective. An Authorized Firm may charge its customers a fee
in connection with transactions executed by that Firm. The Fund may suspend the
offering of shares at any time and may refuse an order for the purchase of
shares.
An initial investment in the Fund must be at least $1,000. Once an account has
been established, the investor may send investments of $50 or more at any time
directly to the Fund's transfer agent (the "Transfer Agent") as follows: First
Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123. The
$1,000 minimum initial investment is waived for Bank Automated Investing
accounts, which may be established with an investment of $50 or more. See "Eaton
Vance Shareholder Services".
In connection with employee benefit or other continuous group purchase plans,
the Fund may accept initial investments of less than $1,000 on the part of an
individual participant. In the event a shareholder who is a participant of such
a plan terminates participation in the plan, his or her shares will be
transferred to a regular individual account. However, such account will be
subject to the right of redemption by the Fund as described under "How to Redeem
Fund Shares."
ACQUIRING FUND SHARES IN EXCHANGE FOR SECURITIES. IBT, as escrow agent, will
receive securities acceptable to Eaton Vance, as Administrator, in exchange for
Fund shares at their net asset value as determined above. The minimum value of
securities (or securities and cash) accepted for deposit is $5,000. Securities
accepted will be sold on the day of their receipt or as soon thereafter as
possible. The number of Fund shares to be issued in exchange for securities will
be the aggregate proceeds from the sale of such securities, divided by the
applicable net asset value per Fund share on the day such proceeds are received.
Eaton Vance will use reasonable efforts to obtain the then current market price
for such securities but does not guarantee the best available price. Eaton Vance
will absorb any transaction costs, such as commissions, on the sale of the
securities.
Securities determined to be acceptable should be transferred via book entry or
physically delivered, in proper form for transfer, through an Authorized Firm,
together with a completed and signed Letter of Transmittal in approved form
(available from Authorized Firms), as follows:
IN THE CASE OF BOOK ENTRY: IN THE CASE OF PHYSICAL DELIVERY:
Deliver through Depository Trust Co. Investors Bank & Trust Company
Broker #2212 Attention: EV Marathon High Income Fund
Investors Bank & Trust Company Physical Securities Processing
For A/C EV Marathon High Income Fund Settlement Area
200 Clarendon Street
Boston, MA 02116
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 Commission regulation and
acceptable to the Transfer Agent. In addition, in some cases, good order may
require the furnishing of additional documents such as where shares are
registered in the name of a corporation, partnership or fiduciary.
REDEMPTION BY TELEPHONE: Shares may be redeemed by telephone provided the
investor has not disclaimed in writing the use of the privilege. Such
redemptions can be effected by calling the Transfer Agent at 800-262-1122,
Monday through Friday, 9:00 a.m. to 4:00 p.m. (Eastern Standard Time). The
proceeds of a telephone redemption may be no greater than the maximum amount
established by the Principal Underwriter (currently $50,000) and may be mailed
only to the account address of record. Shares held by corporations, trusts or
certain other entities, or subject to fiduciary arrangements, may not be
redeemed by telephone. Neither the Fund, the Principal Underwriter nor the
Transfer Agent will be responsible for the authenticity of redemption
instructions received by telephone, provided that reasonable procedures to
confirm that instructions communicated by telephone are genuine have been
followed. Telephone instructions will be tape recorded. In times of drastic
economic or market changes, a telephone redemption may be difficult to
implement.
REDEMPTION THROUGH AN AUTHORIZED FIRM: To sell shares at their net asset value
through an Authorized Firm (a repurchase), a shareholder can place a repurchase
order with the Authorized Firm, which may charge a fee. The value of such shares
is based upon the net asset value calculated after the Principal Underwriter, as
the Fund's agent, receives the order. It is the Authorized Firm's responsibility
to transmit promptly repurchase orders to the Principal Underwriter. Throughout
this Prospectus, the word "redemption" is generally meant to include a
repurchase.
Within seven days after receipt of a redemption request in good order by the
Transfer Agent, the Fund will make payment in cash for the net asset value of
the shares as of the date determined above, reduced by the amount of any
applicable contingent deferred sales charges (described below) and any federal
income tax required to be withheld. Although the Fund normally expects to make
payment in cash for redeemed shares, the Trust, subject to compliance with
applicable regulations, has reserved the right to pay the redemption price of
shares of the Fund, either totally or partially, by a distribution in kind of
readily marketable securities withdrawn by the Fund from the Portfolio. The
securities so distributed would be valued pursuant to the Portfolio's valuation
procedures. If a shareholder received a distribution in kind, the shareholder
could incur brokerage or other charges in converting the securities to cash.
If shares were recently purchased, the proceeds of a redemption will not be sent
until the check (including a certified or cashier's check) received for the
shares purchased has cleared. Payment for shares tendered for redemption may be
delayed up to 15 days from the purchase date when the purchase check has not yet
cleared. Redemptions may result in a taxable gain or loss.
Due to the high cost of maintaining small accounts, the Fund reserves the right
to redeem accounts with balances of less than $750. Prior to such a redemption,
shareholders will be given 60 days' written notice to make an additional
purchase. However, no such redemption would be required by the Fund if the cause
of the low account balance was a reduction in the net asset value of Fund
shares. No contingent deferred sales charge will be imposed with respect to such
involunatry redemptions.
CONTINGENT DEFERRED SALES CHARGE. Shares redeemed within the first six years of
their purchase (except shares acquired through the reinvestment of
distributions) generally will be subject to a contingent deferred sales charge
("CDSC"). This CDSC is imposed on any redemption the amount of which exceeds the
aggregate value at the time of redemption of (a) all shares in the account
purchased more than six years prior to the redemption, (b) all shares in the
account acquired through reinvestment of distributions, and (c) the increase, if
any, in the value of the other shares in the account (namely those purchased
within the six years preceding the redemption) over the purchase price of such
shares. Redemptions are processed in a manner to maximize the amount of
redemption proceeds which will not be subject to a CDSC. That is, each
redemption will be assumed to have been made first from the exempt amounts
referred to in clauses (a), (b) and (c) above, and second through liquidation of
those shares in the account referred to in clause (c) on a first-in-first out
basis. 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
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First or Second 5%
Third 4%
Fourth 3%
Fifth 2%
Sixth 1%
Seventh and following 0%
In calculating the CDSC upon the redemption of Fund shares acquired in an
exchange for shares of a fund currently listed under "The Eaton Vance Exchange
Privilege", the CDSC schedule applicable to the shares at the time of purchase
will apply and the purchase of shares acquired in the exchange is deemed to have
occurred at the time of the original purchase of the exchanged shares.
No CDSC will be imposed on Fund shares which have been sold to Eaton Vance or
its affiliates, or to their respective employees or clients. The CDSC will also
be waived for shares redeemed (1) pursuant to a Withdrawal Plan (see "Eaton
Vance Shareholder Services"), (2) as part of a required distribution from a
tax-sheltered retirement plan or (3) following the death of all beneficial
owners of such shares, provided the redemption is requested within one year of
death (a death certificate and other applicable documents may be required). In
addition, shares acquired as a result of a merger or liquidation of another
Eaton Vance sponsored fund will have a CDSC imposed at the same rate as would
have been imposed in the prior fund.
THE FOLLOWING EXAMPLE ILLUSTRATES THE OPERATION OF THE CDSC. ASSUME THAT AN
INVESTOR PURCHASES $10,000 OF THE FUND'S SHARES AND THAT 16 MONTHS LATER THE
VALUE OF THE ACCOUNT HAS GROWN THROUGH INVESTMENT PERFORMANCE AND REINVESTMENT
OF DISTRIBUTIONS TO $12,000. THE INVESTOR THEN MAY REDEEM UP TO $2,000 OF
SHARES WITHOUT INCURRING A CDSC. IF THE INVESTOR SHOULD REDEEM $3,000 OF
SHARES, A CDSC WOULD BE IMPOSED ON $1,000 OF THE REDEMPTION. THE RATE WOULD BE
5% BECAUSE IT WAS THE SECOND YEAR AFTER THE PURCHASE WAS MADE AND THE CDSC
WOULD BE $50.
REPORTS TO SHAREHOLDERS
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THE FUND WILL ISSUE TO ITS SHAREHOLDERS SEMI-ANNUAL AND ANNUAL REPORTS
CONTAINING FINANCIAL STATEMENTS. Financial statements included in annual reports
are audited by the Fund's independent certified public accountants. Shortly
after the end of each calendar year, the Fund will furnish all shareholders with
information necessary for preparing federal and state 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 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 Authorized Firm or to an account
directly with a Fund involves special procedures and will require the beneficial
owner to obtain historical purchase information about the shares in the account
from the Authorized Firm. Before establishing a "street name" account with an
Authorized Firm, or transferring the account to another Authorized Firm, an
investor wishing to reinvest distributions should determine whether the
Authorized Firm which will hold the shares allows reinvestment of distributions
in "street name" accounts.
THE EATON VANCE EXCHANGE PRIVILEGE
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Shares of the Fund currently may be exchanged for shares of one or more other
funds in the Eaton Vance Marathon Group of Funds (including Class I shares of
any EV Marathon Limited Maturity Fund) or Eaton Vance Money Market Fund, which
are subject to a CDSC. Shares of the Fund may also be exchanged for shares of
Eaton Vance Prime Rate Reserves, which are subject to an early withdrawal
charge, and shares of a money market fund sponsored by an Authorized Firm and
approved by the Principal Underwriter (an "Authorized Firm fund"). Any such
exchange will be made on the basis of the net asset value per share of each fund
at the time of the exchange. Exchange offers are available only in states where
shares of the fund being acquired may be legally sold.
Each exchange must involve shares which have a net asset value of at least
$1,000. The exchange privilege may be changed or discontinued without penalty.
Shareholders will be given sixty (60) days' notice prior to any termination or
material amendment of the exchange privilege. The Fund does not permit the
exchange privilege to be used for "Market Timing" and may terminate the exchange
privilege for any shareholder account engaged in Market Timing activity. Any
shareholder account for which more than two round-trip exchanges are made within
any twelve month period will be deemed to be engaged in Market Timing.
Furthermore, a group of unrelated accounts for which exchanges are entered
contemporaneously by a financial intermediary will be considered to be engaged
in Market Timing.
The Transfer Agent makes exchanges at the next determined net asset value after
receiving an exchange request in good order (see "How to Redeem Fund Shares").
Consult the Transfer Agent for additional information concerning the exchange
privilege. Applications and prospectuses of other funds are available from
Authorized Firms or the Principal Underwriter. The prospectus for each fund
describes its investment objectives and policies, and shareholders should obtain
a prospectus and consider these objectives and policies carefully before
requesting an exchange.
No CDSC is imposed on exchanges. For purposes of calculating the CDSC upon the
redemption of shares acquired in an exchange, the CDSC schedule applicable to
the shares at the time of purchase will apply and the purchase of shares
acquired in one or more exchanges is deemed to have occurred at the time of the
original purchase of the exchanged shares except that time during which shares
are held in an Authorized Firm fund will not be credited toward completion of
the CDSC period. For the CDSC schedule applicable to the Eaton Vance Marathon
Group of Funds (except Eaton Vance Prime Rate Reserves and Class I shares of any
EV Marathon Limited Maturity Fund), see "How to Redeem Fund Shares". The CDSC or
early withdrawal charge schedule applicable to Eaton Vance Prime Rate Reserves
and Class I shares of any EV Marathon Limited Maturity Fund is 3%, 2.5%, 2% or
1% in the event of a redemption occurring in the first, second, third or fourth
year, respectively, after the original share purchase.
Shares of the funds listed above may be exchanged for Fund shares on the basis
of the net asset value per share of each fund at the time of the exchange, but
subject to any restrictions or qualifications set forth in the current
prospectus of any such fund.
Telephone exchanges are accepted by the Transfer Agent provided 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 the EV
Marathon High 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 the
shareholder's bank account. The $1,000 minimum initial investment and small
account redemption policy are waived for these accounts.
WITHDRAWAL PLAN: A shareholder may draw on shareholdings systematically with
monthly or quarterly checks in an aggregate amount that does not exceed
annually 12% of the account balance at the time the plan is established. Such
amount will not be subject to a CDSC. See "How to Redeem Fund Shares". A
minimum deposit of $5,000 in shares is required.
REINVESTMENT PRIVILEGE: A shareholder who has redeemed shares may reinvest, with
credit for any CDSC paid on the redeemed shares, any portion or all of the
redemption proceeds (plus that amount necessary to acquire a fractional share to
round off the purchase to the nearest full share) in shares of the Fund,
provided that the reinvestment is effected within 60 days after such redemption,
and the privilege has not been used more than once in the prior 12 months.
Shares are sold to a reinvesting shareholder at the next determined net asset
value following timely receipt of a written purchase order by the Principal
Underwriter or by the Fund (or by the Fund's Transfer Agent). To the extent that
any shares of the Fund are sold at a loss and the proceeds are reinvested in
shares of the Fund (or other shares of the Fund are acquired) within the period
beginning 30 days before and ending 30 days after the date of the redemption,
some or all of the loss generally will not be allowed as a tax deduction.
Shareholders should consult their tax advisers concerning the tax consequences
of reinvestments.
DISTRIBUTIONS AND TAXES
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SUBSTANTIALLY ALL OF THE INVESTMENT INCOME ALLOCATED TO THE FUND BY THE
PORTFOLIO, LESS THE FUND'S DIRECT AND ALLOCATED EXPENSES, WILL BE DECLARED DAILY
AS A DISTRIBUTION TO FUND SHAREHOLDERS OF RECORD AT THE TIME OF DECLARATION.
Such distributions, whether taken in cash or reinvested in additional shares,
will ordinarily be paid on the fifteenth day of each month or the next business
day thereafter. The Fund anticipates that for tax purposes the entire
distribution, whether paid in cash or reinvested in additional shares of the
Fund, will constitute income to its shareholders. Shareholders reinvesting the
monthly distribution should treat the amount of the entire distribution as the
tax cost basis of the additional shares acquired by reason of such reinvestment.
Daily distribution crediting will commence on the business day after collected
funds for the purchase of Fund shares are available at the Transfer Agent.
Certain distributions, if declared by the Fund in October, November or December
and paid the following January, will be taxable to shareholders as if received
on December 31 of the year in which they are declared.
Distributions of the Fund which are derived from net investment income, net
short-term capital gains and certain foreign exchange gains are taxable to
shareholders as ordinary income, whether received in cash or reinvested in
additional shares. Only a small portion, if any, of such distributions may be
eligible for the dividends-received deduction for corporations subject to
certain limitations.
Capital gains, if any, realized on sales of investments and on options and
futures transactions during the fiscal year, which ends on March 31, will be
offset by capital losses, including any capital loss carryovers, and will
usually be distributed with the Fund's first monthly distribution paid after the
close of such fiscal year. However, the Fund could make additional distributions
of capital gains in any year in order to comply with the distribution
requirements of the Internal Revenue Code of 1986, as amended (the "Code").
Distributions that the Fund designates as long-term capital gains are taxable to
shareholders as long-term capital gains whether received in cash or additional
shares of the Fund and regardless of the length of time Fund shares have been
owned by the shareholder. If shares are purchased shortly before the record date
of such a distribution, the shareholder will pay the full price for the shares
and then receive some portion of the price back as a taxable distribution.
Shareholders will receive annually tax information notices and Forms 1099 to
assist in the preparation of their federal and state tax returns for the prior
calendar year's distributions, proceeds from the redemption or exchange of Fund
shares, and federal income tax (if any) withheld therefrom.
The Fund intends to qualify as a regulated investment company under the Code and
to satisfy all requirements necessary to avoid paying federal income taxes on
the part of its investment company taxable income (consisting generally of net
investment income and net short-term capital gains) and net capital gains that
it distributes to shareholders. In satisfying these requirements, the Fund will
treat itself as owning its proportionate share of each of the Portfolio's assets
and as entitled to the income of the Portfolio properly attributable to such
share.
As a regulated investment company under the Code, the Fund does not pay federal
income or excise taxes to the extent that it distributes to shareholders
substantially all of its ordinary income and net realized capital gain net
income in accordance with the timing requirements imposed by the Code. As a
partnership under the Code, the Portfolio does not pay federal income or excise
taxes.
Shareholders should consult with their tax advisers concerning the applicability
of state, local or other taxes to an investment in the Fund.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
FROM TIME TO TIME, THE FUND MAY ADVERTISE ITS YIELD AND/OR AVERAGE ANNUAL TOTAL
RETURN. The Fund's current yield is calculated by dividing the net investment
income per share earned during a recent 30-day period by the maximum offering
price per share (net asset value) of the Fund on the last day of the period and
annualizing the resulting figure. The Fund's average annual total return is
determined by computing the average annual percentage change in value of $1,000
invested at the maximum public offering price (net asset value) for specified
periods, assuming reinvestment of all distributions. The average annual total
return calculation assumes a complete redemption of the investment and the
deduction of any applicable CDSC at the end of the period. The Fund may also
publish annual and cumulative total return figures from time to time.
The Fund may 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.
The following chart reflects the annual investment returns of the Fund for one
year periods ending March 31 and does not take into account any sales charge
which investors may bear.
5 Year Average Annual Total Return - 10.00%
10 Year Average Annual Total Return - 8.45%
1988 1.52%
1989 11.58%
1990 (8.14%)
1991 (2.84%)
1992 38.21%
1993 13.41%
1994 10.28%
1995 2.51%
1996 12.80%
1997 11.37%
<PAGE>
APPENDIX A
DESCRIPTION OF MOODY'S CORPORATE BOND RATINGS:
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as
"gilt-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 fluctuation 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.
SECURITIES IN WHICH THE PORTFOLIO MAY INVEST WILL INCLUDE THOSE IN THE FOLLOWING
CATEGORIES:
Baa: Bonds which are rated Baa are considered as medium-grade obligations,
(i.e., they are neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba: Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate, and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal
or interest.
Ca: Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
NOTE: Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa to B. The modifier 1 indicates that the company 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 company ranks in the
lower end of its generic rating category.
DESCRIPTION OF S&P'S CORPORATE DEBT RATINGS:
INVESTMENT GRADE
AAA: Debt rated AAA has the highest rating assigned by S&P's. Capacity to pay
interest and repay principal is extremely strong.
AA: Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the higher rated issues only in small degree.
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.
SECURITIES IN WHICH THE PORTFOLIO MAY INVEST WILL INCLUDE THOSE IN THE FOLLOWING
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 for bonds in higher rated categories.
SPECULATIVE GRADE
Debt rated BB, B, CCC, CC and C is regarded, on balance, as predominantly
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. BB indicates the lowest degree of
speculation and C the highest degree of speculation. While such debt will likely
have some quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
BB: Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB- rating.
B: Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB or BB-
rating.
CCC: Debt rated CCC has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The CCC rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
B or B- rating.
CC: The rating CC is typically applied to debt subordinated to senior debt
that 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: Indicates that no public rating has been requested, because there is
insufficient information on which to base a rating, or because Standard & Poor's
does not rate a particular type of obligation as a matter of policy.
NOTES: Debt which is unrated exposes the investor to risks with respect to
capacity to pay interest or repay principal which are similar to the risks of
lower-rated speculative obligations. The Portfolio is dependent on the
Investment Adviser's judgment, analysis and experience in the evaluation of such
debt.
Investors should note that the assignment of a rating to a bond by a rating
service may not reflect the effect of recent developments on the issuer's
ability to make interest and principal payments.
<PAGE>
APPENDIX B
HIGH INCOME PORTFOLIO
ASSET COMPOSITION INFORMATION
FOR THE FISCAL YEAR ENDED MARCH 31, 1997
PERCENT OF
NET ASSETS
----------
Preferred Stocks and Other Equity Securities .............. 2.0%
Short-term Obligations .................................... 2.8%
Debt Securities -- Moody's Rating
Ba .................................................... 8.1%
B1 .................................................... 12.4%
B2 .................................................... 24.8%
B3 .................................................... 39.9%
Caa ................................................... 7.0%
Unrated ............................................... 3.0%
------
Total ................................................. 100.0%
The chart above indicates the weighted average composition of the securities
held by the Portfolio for the fiscal year ended March 31, 1997, with the debt
securities rated by Moody's separated into the indicated categories. The
weighted average indicated above was calculated on a dollar weighted basis and
was computed as at the end of each month during the fiscal year. The chart does
not necessarily indicate what the composition of the Fund's portfolio will be in
the current and subsequent fiscal years.
For a description of Moody's ratings of fixed-income securities, see Appendix A
to this Prospectus.
<PAGE>
[LOGO]
EATON VANCE
- -------------------
Mutual Funds
EV MARATHON
HIGH INCOME
FUND
PROSPECTUS
AUGUST 1, 1997
EV MARATHON
HIGH INCOME FUND
24 FEDERAL STREET
BOSTON, MA 02110
- --------------------------------------------------------------------------------
INVESTMENT ADVISER OF HIGH INCOME PORTFOLIO
Boston Management and Research, 24 Federal Street, Boston, MA 02110
ADMINISTRATOR OF EV MARATHON HIGH INCOME FUND
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 200 Clarendon Street, Boston, MA 02116
TRANSFER AGENT
First Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123
(800) 262-1122
AUDITORS
Deloitte & Touche LLP, 125 Summer Street, Boston, MA 02110
M-HIP
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL INFORMATION
August 1, 1997
EV CLASSIC HIGH INCOME FUND
24 Federal Street
Boston, Massachusetts 02110
(800) 225-6265
This Statement of Additional Information consists of two parts. Part I
provides information about EV Classic High Income Fund (the "Fund"), High Income
Portfolio (the "Portfolio") and certain other series of Eaton Vance Mutual Funds
Trust (the "Trust"). Part II provides information solely about the Fund. Where
appropriate, Part I includes cross-references to the relevant sections of Part
II that provide additional, Fund-specific information. This Statement of
Additional Information is sometimes referred to herein as the "SAI."
TABLE OF CONTENTS Page
PART I
Additional Information about Investment Policies ................... 2
Investment Restrictions ............................................ 6
Trustees and Officers .............................................. 7
Investment Adviser and Administrator .............................. 9
Custodian .......................................................... 11
Service for Withdrawal ............................................. 12
Determination of Net Asset Value ................................... 12
Investment Performance ............................................. 13
Taxes .............................................................. 14
Principal Underwriter .............................................. 15
Portfolio Security Transactions .................................... 16
Other Information .................................................. 17
Independent Certified Public Accountants ........................... 19
Financial Statements ............................................... 19
PART II
Fees and Expenses .................................................. a-1
Distribution Plan .................................................. a-2
Performance Information ............................................ a-3
Control Persons and Principal Holders of Securities ................ a-4
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY THE FUND'S PROSPECTUS DATED AUGUST 1, 1997, AS SUPPLEMENTED FROM
TIME TO TIME, WHICH IS INCORPORATED HEREIN BY REFERENCE. THIS STATEMENT OF
ADDITIONAL INFORMATION SHOULD BE READ IN CONJUNCTION WITH SUCH PROSPECTUS, A
COPY OF WHICH MAY BE OBTAINED WITHOUT CHARGE BY CONTACTING EATON VANCE
DISTRIBUTORS, INC. (THE "PRINCIPAL UNDERWRITER") (SEE BACK COVER FOR ADDRESS AND
PHONE NUMBER).
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART I
This Part I provides information about the Fund, certain other series of the
Trust and the Portfolio. Capitalized terms used in this SAI and not otherwise
defined have the meanings given them in the Fund's Prospectus. The Fund is
subject to the same investment policies as those of the Portfolio. The Fund
currently seeks to achieve its objective by investing in the Portfolio.
ADDITIONAL INFORMATION ABOUT INVESTMENT POLICIES
OTHER FIXED-INCOME SECURITIES
Included in the fixed-income securities in which the Portfolio may invest
are preferred, preference and convertible stocks, equipment lease certificates,
equipment trust certificates and conditional sales contracts. Preference stocks
are stocks that have many characteristics of preferred stocks, but are typically
junior to an existing class of preferred stocks. Equipment lease certificates
are debt obligations secured by leases on equipment (such as railroad cars,
airplanes or office equipment), with the issuer of the certificate being the
owner and lessor of the equipment. Equipment trust certificates are debt
obligations secured by an interest in property (such as railroad cars or
airplanes), the title of which is held by a trustee while the property is being
used by the borrower. Conditional sales contracts are agreements under which the
seller of property continues to hold title to the property until the purchase
price is fully paid or other conditions are met by the buyer.
The Portfolio may purchase fixed-rate bonds which have a demand feature
allowing the holder to redeem the bonds at specified times. These bonds are more
defensive than conventional long-term bonds (protecting to some degree against a
rise in interest rates) while providing greater opportunity than comparable
intermediate term bonds, since the Portfolio may retain the bond if interest
rates decline. By acquiring these kinds of bonds the Portfolio obtains the
contractual right to require the issuer of the bonds to purchase the security at
an agreed upon price, which right is contained in the obligation itself rather
than in a separate agreement or instrument. Since this right is assignable only
with the bond, the Portfolio will not assign any separate value to such right.
The Portfolio may also purchase floating or variable rate obligations, which it
would anticipate using as short-term investments pending longer term investment
of its funds.
CONCENTRATION
Although there is no current intention to do so, the Portfolio may invest up
to 25% of its assets in securities of issuers in each of the electric, gas and
telephone utility industries if, in the opinion of the Investment Adviser, the
relative return available from such securities and the relative risk,
marketability, quality or availability of securities of issuers in such industry
justifies such an investment. The value of such investments may be affected to a
greater degree by adverse developments in such industries. Industry-wide
problems include the effects of fluctuating economic conditions, energy
conservation practices, environmental regulations, high capital expenditures,
construction delays due to pollution control and environmental considerations,
uncertainties as to fuel availability and costs, increased competition in
deregulated sectors of such industries and difficulties in obtaining timely and
adequate rate relief from regulatory commissions. If applications for rate
increases are not granted or are not acted upon promptly, the market prices of
and interest or dividend payments on utility securities may be adversely
affected.
LOAN INTERESTS
A loan in which the Portfolio may acquire a loan interest (a "Loan
Interest") is typically originated, negotiated and structured by a U.S. or
foreign commercial bank, insurance company, finance company or other financial
institution (the "Agent") for a lending syndicate of financial institutions. The
Agent typically administers and enforces the loan on behalf of the other lenders
in the syndicate. In addition, an institution, typically but not always the
Agent (the "Collateral Bank"), holds collateral (if any) on behalf of the
lenders. These Loan Interests may take the form of participation interests in,
assignments of or novations of a loan during its secondary distribution, or
direct interests during a primary distribution. Such Loan Interests may be
acquired from U.S. or foreign banks, insurance companies, finance companies or
other financial institutions who have made loans or are members of a lending
syndicate or from other holders of Loan Interests. The Portfolio may also
acquire Loan Interests under which the Portfolio derives its rights directly
from the borrower. Such Loan Interests are separately enforceable by the
Portfolio against the borrower and all payments of interest and principal are
typically made directly to the Portfolio from the borrower. In the event that
the Portfolio and other lenders become entitled to take possession of shared
collateral, it is anticipated that such collateral would be held in the custody
of a Collateral Bank for their mutual benefit. The Portfolio may not act as an
Agent, a Collateral Bank, a guarantor or sole negotiator or structurer with
respect to a loan.
The investment adviser will analyze and evaluate the financial condition of
the borrower in connection with the acquisition of any Loan Interest. The
Investment Adviser also analyzes and evaluates the financial condition of the
Agent and, in the case of Loan Interests in which the Portfolio does not have
privity with the borrower, those institutions from or through whom the Portfolio
derives its rights in a loan (the "Intermediate Participants"). From time to
time the Investment Adviser and its affiliates may borrow money from various
banks in connection with their business activities. Such banks may also sell
interests in loans to or acquire such interests from the Portfolio or may be
Intermediate Participants with respect to loans in which the Portfolio owns
interests. Such banks may also act as Agents for loans in which the Portfolio
owns interests.
In a typical loan the Agent administers the terms of the loan agreement. In
such cases, the Agent is normally responsible for the collection of principal
and interest payments from the borrower and the apportionment of these payments
to the credit of all institutions which are parties to the loan agreement. The
Portfolio will generally rely upon the Agent or an Intermediate Participant to
receive and forward to the Portfolio its portion of the principal and interest
payments on the loan. Furthermore, unless under the terms of a participation
agreement the Portfolio has direct recourse against the borrower, the Portfolio
will rely on the Agent and the other members of the lending syndicate to use
appropriate credit remedies against the borrower. The Agent is typically
responsible for monitoring compliance with covenants contained in the loan
agreement based upon reports prepared by the borrower. The seller of the Loan
Interest usually does, but is often not obligated to, notify holders of Loan
Interests of any failures of compliance. The Agent may monitor the value of the
collateral and, if the value of the collateral declines, may accelerate the
loan, may give the borrower an opportunity to provide additional collateral or
may seek other protection for the benefit of the participants in the loan. The
Agent is compensated by the borrower for providing these services under a loan
agreement, and such compensation may include special fees paid upon structuring
and funding the loan and other fees paid on a continuing basis. With respect to
Loan Interests for which the Agent does not perform such administrative and
enforcement functions, the Portfolio will perform such tasks on its own behalf,
although a Collateral Bank will typically hold any collateral on behalf of the
Portfolio and the other lenders pursuant to the applicable loan agreement.
A financial institution's appointment as Agent may usually be terminated in
the event that it fails to observe the requisite standard of care or becomes
insolvent, enters Federal Deposit Insurance Corporation ("FDIC") receivership,
or, if not FDIC insured, enters into bankruptcy proceedings. A successor Agent
would generally be appointed to replace the terminated Agent, and assets held by
the Agent under the loan agreement should remain available to holders of Loan
Interests. However, if assets held by the Agent for the benefit of the Portfolio
were determined to be subject to the claims of the Agent's general creditors,
the Portfolio might incur certain costs and delays in realizing payment on a
loan interest, or suffer a loss of principal and/or interest. In situations
involving Intermediate Participants similar risks may arise.
Purchasers of Loan interests depend primarily upon the creditworthiness of
the borrower for payment of principal and interest. If the Portfolio does not
receive scheduled interest or principal payments on such indebtedness, the
Portfolio could be adversely affected. Loans that are fully secured offer the
Portfolio more protections than an unsecured loan in the event of non-payment of
scheduled interest or principal. However, there is no assurance that the
liquidation of collateral from a secured loan would satisfy the borrower's
obligation, or that the collateral can be liquidated. Indebtedness of borrowers
whose creditworthiness is poor involves substantially greater risks, and may be
highly speculative. Borrowers that are in bankruptcy or restructuring may never
pay off their indebtedness, or may pay only a small fraction of the amount owed.
Direct indebtedness of developing countries will also involve a risk that the
governmental entities responsible for the repayment of the debt may be unable,
or unwilling, to pay interest and repay principal when due.
The Portfolio limits the amount of total assets that it will invest in any
one issuer or in issuers within the same industry. See Investment Restrictions
(1) and (5) below. For purposes of these restrictions, the Portfolio generally
will treat the borrower as the "issuer" of a Loan Interest held by the
Portfolio. In the case of loan participations where the Agent or Intermediate
Participant serves as financial intermediary between the Portfolio and the
borrower, the Portfolio, in appropriate circumstances, will treat both the Agent
or Intermediate Participant and the borrower as "issuers" for the purposes of
determining whether the Portfolio has invested more than 5% of its total assets
in a single issuer. Treating a financial intermediary as an issuer of
indebtedness may restrict the Portfolio's ability to invest in indebtedness
related to a single intermediary, or a group of intermediaries engaged in the
same industry, even if the underlying borrowers represent many different
companies and industries.
FOREIGN INVESTMENTS
Investing in foreign issuers involves certain special considerations,
including those set forth below, which are not typically associated with
investing in U.S. issuers. Since investments in foreign issuers may involve
currencies of foreign countries, and since the Portfolio may temporarily hold
funds in bank deposits in foreign currencies during completion of investment
programs, the Portfolio may be affected favorably or unfavorably by changes in
currency rates and in exchange control regulations and may incur costs in
connection with conversions between various currencies.
Since foreign companies are not generally subject to uniform accounting,
auditing and financial reporting standards, practices and requirements
comparable to those applicable to U.S. companies, there may be less publicly
available information about a foreign company than about a domestic company.
Foreign stock markets, while growing in volume of trading activity, have
substantially less volume than the Exchange, and securities of some foreign
companies are less liquid and more volatile than securities of comparable U.S.
companies. Similarly, volume and liquidity in most foreign bond markets is less
than in the United States and, at times, volatility of price can be greater than
in the United States. Fixed commissions on foreign stock exchanges are generally
higher than negotiated commissions on U.S. exchanges, although the Portfolio
endeavors to achieve the most favorable net results on its portfolio
transactions. There is generally less government supervision and regulation of
stock exchanges, brokers and listed companies than in the United States. Mail
service between the United States and foreign countries may be slower or less
reliable than within the United States, thus increasing the risk of delayed
settlements of portfolio transactions or loss of certificates for portfolio
securities. In addition, with respect to certain foreign countries, there is the
possibility of expropriation or confiscatory taxation, political or social
instability, or diplomatic developments which could affect the Portfolio's
investments in those countries. Moreover, individual foreign economies may
differ favorably or unfavorably from the U.S. economy in such respects as growth
of gross national product, rate of inflation, capital reinvestment, resource
self-sufficiency and balance of payments position.
FORWARD FOREIGN CURRENCY EXCHANGE TRANSACTIONS
The Portfolio may enter into forward foreign currency exchange contracts. A
forward foreign currency exchange contract involves an obligation to purchase or
sell a specific currency at a future date, which may be any fixed number of days
from the date of the contract agreed upon by the parties, at a price set at the
time of the contract. These contracts are traded in the interbank market
conducted directly between currency traders (usually large commercial banks) and
their customers. A forward contract generally has no deposit requirement, and no
commissions are charged at any stage for trades.
At the maturity of a forward contract the Portfolio may either accept or
make delivery of the currency specified in the contract or, at or prior to
maturity, enter into a closing transaction involving the purchase or sale of an
offsetting contract. Closing transactions with respect to forward contracts are
usually effected with the currency trader who is a party to the original forward
contract.
The Portfolio does not intend to enter into forward foreign currency
exchange contracts to protect the value of its portfolio securities on a regular
continuous basis, and will not do so if, as a result, the Portfolio will have
more than 15% of the value of its total assets committed to the consummation of
such contracts. The Portfolio also will not enter into such forward contracts or
maintain a net exposure to such contracts where the consummation of the
contracts would obligate the Portfolio to deliver an amount of foreign currency
in excess of the value of the securities held by the Portfolio's or other assets
denominated in that currency. Under normal circumstances, consideration of the
prospect for currency parities will be incorporated into the long-term
investment decisions made with regard to overall diversification strategies.
However, the Portfolio believes that it is important to have the flexibility to
enter into such forward contracts when it determines that the best interests of
the Portfolio will be served. The Portfolio generally will not enter into a
forward contract with a term of greater than one year.
OPTIONS ON SECURITIES
An options position may be closed out only on an options exchange which
provides a secondary market for an option of the same series. Although the
Portfolio will generally purchase or write only those options for which there
appears to be an active secondary market, there is no assurance that a liquid
secondary market on an exchange will exist for any particular option, or at any
particular time. For some options, no secondary market on an exchange may exist.
In such event, it might not be possible to effect closing transactions in
particular options, with the result that the Portfolio would have to exercise
its options in order to realize any profit and would incur transaction costs
upon the sale of underlying securities pursuant to the exercise of put options.
If the Portfolio as a covered call option writer is unable to effect a closing
purchase transaction in a secondary market, it will not be able to sell the
underlying security until the option expires or it delivers the underlying
security upon exercise.
Reasons for the absence of a liquid secondary market on an exchange include
the following: (i) there may be insufficient trading interest in certain
options; (ii) restrictions may be imposed by an exchange on opening transactions
or closing transactions or both; (iii) trading halts, suspensions or other
restrictions may be imposed with respect to particular classes or series of
options or underlying securities; (iv) unusual or unforeseen circumstances may
interrupt normal operations on an exchange; (v) the facilities of an exchange or
the Options Clearing Corporation ("OCC") may not at all times be adequate to
handle current trading volume; or (vi) one or more exchanges could, for economic
or other reasons, decide or be compelled at some future date to discontinue the
trading of options (or a particular class or series of options), in which event
the secondary market on that exchange (or in that class or series of options)
would cease to exist, although outstanding options on that exchange that had
been issued by the OCC as a result of trades on that exchange would continue to
be exercisable in accordance with their terms.
There is no assurance that higher than anticipated trading activity or other
unforeseen events might not, at times, render certain of the facilities of the
OCC inadequate, and thereby result in the institution by an exchange of special
procedures which may interfere with the timely execution of customers' orders.
FUTURES CONTRACTS
All futures contracts entered into by the Portfolio are traded on exchanges
or boards of trade that are licensed and regulated by the CFTC. The Portfolio
may purchase and write call and put options on futures contracts which are
traded on a U.S. exchange or board of trade.
The Portfolio will engage in futures and related options transactions for
bona fide hedging or non-hedging purposes as defined in or permitted by CFTC
regulations. The Portfolio will determine that the price fluctuations in the
futures contracts and options on futures used for hedging purposes are
substantially related to price fluctuations in securities held by the Portfolio
or which it expects to purchase. Except as stated below, the Portfolio's futures
transactions will be entered into for traditional hedging purposes -- i.e.,
futures contracts will be sold to protect against a decline in the price of
securities that the Portfolio owns, or futures contracts will be purchased to
protect the Portfolio against an increase in the price of securities it intends
to purchase. The Portfolio will engage in transactions in futures contracts and
related options only to the extent such transactions are consistent with the
requirements of the Code for maintaining the qualification of the Fund as a
regulated investment company for federal income tax purposes (see "Taxes").
ASSET COVERAGE FOR DERIVATIVE INSTRUMENTS
Transactions using forward contracts, futures contracts and options (other
than options that the Portfolio has purchased) expose the Portfolio to an
obligation to another party. The Portfolio will not enter into any such
transactions unless it owns either (1) an offsetting ("covered") position in
securities, currencies, or other options, futures contracts or forward
contracts, or (2) cash or liquid securities (such as readily marketable
obligations and money market instruments) with a value sufficient at all times
to cover its potential obligations not covered as provided in (1) above. The
Portfolio will comply with Commission guidelines regarding cover for these
instruments and, if the guidelines so require, set aside cash, U.S. Government
securities or other liquid, high grade debt 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 maintained by the Portfolio's custodian cannot be sold while
the position in the corresponding forward contract, futures contract or option
is open, unless they are replaced with other appropriate assets. As a result,
the commitment of a large portion of the Portfolio's assets to cover or
segregated accounts could impede portfolio management or the Portfolio's ability
to meet redemption requests or other current obligations.
LENDING PORTFOLIO SECURITIES
The Portfolio may seek to increase its income by lending portfolio
securities to broker-dealers or other institutional borrowers. Under present
regulatory policies of the Commission, such loans are required to be secured
continuously by collateral in cash, cash equivalents or U.S. Government
securities held by the Portfolio's custodian and maintained on a current basis
at an amount at least equal to the market value of the securities loaned, which
will be marked to market daily. Cash equivalents include certificates of
deposit, commercial paper and other short-term money market instruments. The
Portfolio would have the right to call a loan and obtain the securities loaned
at any time on up to five business days' notice. During the existence of a loan,
the Portfolio will continue to receive the equivalent of the interest paid by
the issuer on the securities loaned and will also receive a fee or all of a
portion of the interest on investment of the collateral, if any. However, the
Portfolio may pay lending fees to such borrowers. The Portfolio would not have
the right to vote any securities having voting rights during the existence of a
loan, but would call the loan in anticipation of an important vote to be taken
among holders of the securities or the giving or withholding of their consent on
a material matter affecting the investment. As with other extensions of credit
there are risks of delay in recovery or even loss of rights in the securities
loaned if the borrower of the securities fails financially. However, the loans
would be made only to organizations deemed by the Portfolio's management to be
of good standing and when, in the judgment of the Portfolio's management, the
consideration which can be earned from securities loans of this type, net of
administrative expenses and any finder's fees, justifies the attendant risk. The
financial condition of the borrower will be monitored by the Investment Adviser
on an ongoing basis. If the Investment Adviser determines to make securities
loans, it is not intended that the value of the securities loaned would exceed
30% of the Portfolio's total assets. As of the present time, the Trustees of the
Portfolio have not made a determination to engage in this activity, and have no
present intention of making such a determination during the current fiscal year.
PORTFOLIO TURNOVER
The Portfolio cannot accurately predict its portfolio turnover rate, but it
is anticipated that the annual turnover rate will generally not exceed 100%
(excluding turnover of securities having a maturity of one year or less). A 100%
annual turnover rate would occur, for example, if all the securities held by the
Portfolio were replaced once in a period of one year. A high turnover rate (100%
or more) necessarily involves greater expenses to the Portfolio.
For the fiscal years ended March 31, 1997 and 1996, the portfolio turnover
rates of the Portfolio were 78% and 88%, respectively.
Securities may be sold in anticipation of a market decline (a rise in
interest rates) or purchased in anticipation of a market rise (a decline in
interest rates) and later sold. In addition, a security may be sold and another
purchased at approximately the same time to take advantage of what the Portfolio
believes to be a temporary disparity in the normal yield relationship between
the two securities. Yield disparities may occur for reasons not directly related
to the investment quality of particular issues or the general movement of
interest rates, such as changes in the overall demand for or supply of various
types of fixed-income securities or changes in the investment objectives of
investors. Such trading may be expected to increase the portfolio turnover rate
and the expenses incurred in connection with such trading. The Portfolio
anticipates that its annual portfolio turnover rate will generally exceed 100%
(excluding turnover of securities having a maturity of one year or less).
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. As a matter of fundamental policy, the Fund may not:
(1) With respect to 75% of total assets of the Fund, purchase any security
if such purchase, at the time thereof, would cause more than 5% of the total
assets of the Fund (taken at market value) to be invested in the securities of a
single issuer, or cause more than 10% of the total outstanding voting securities
of such issuer to be held by the Fund, except obligations issued or guaranteed
by the U.S. Government, its agencies or instrumentalities and except securities
of other investment companies;
(2) Borrow money or issue senior securities except as permitted by the
1940 Act;
(3) Purchase securities on margin (but the Fund may obtain such short-term
credits as may be necessary for the clearance of purchases and sales of
securities). The deposit or payment by the Fund of initial, maintenance or
variation margin in connection with all types of options and futures contract
transactions is not considered the purchase of a security on margin;
(4) Underwrite or participate in the marketing of securities of others,
except insofar as it may technically be deemed to be an underwriter in selling a
portfolio security under circumstances which may require the registration of the
same under the Securities Act of 1933;
(5) Purchase any security if such purchase, at the time thereof, would cause
more than 25% of the Fund's total assets to be invested in any single industry,
provided that the electric, gas and telephone utility industries shall be
treated as separate industries for purposes of this restriction and further
provided that there is no limitation with respect to obligations issued or
guaranteed by the U.S. Government or any of its agencies or instrumentalities.
(6) Purchase or sell real estate, although it may purchase and sell
securities which are secured by real estate and securities of companies which
invest or deal in real estate;
(7) Purchase or sell physical commodities or contracts for the purchase or
sale of physical commodities; or
(8) Make loans to any person except by (i) the acquisition of debt
securities and making portfolio investments, (ii) entering into repurchase
agreements or (iii) lending portfolio securities.
Notwithstanding the investment policies and restrictions of the Fund, the
Fund may invest all of its investable assets in an open-end management
investment company with substantially the same investment objective, policies
and restrictions as the Fund.
The Portfolio has adopted substantially the same fundamental investment
restrictions as the foregoing investment restrictions adopted by the Fund; such
restrictions cannot be changed without the approval of a "majority of the
outstanding voting securities" of the Portfolio.
The Fund and the Portfolio have adopted the following investment policies
which may be changed with respect to the Fund by the Trustees of the Trust
without approval by the Fund's shareholders or with respect to the Portfolio by
the Trustees of the Portfolio without approval by the Fund or its other
investors. As a matter of nonfundamental policy, neither the Fund nor the
Portfolio may (a) invest more than 15% of its net assets in investments which
are not readily marketable, including restricted securities and repurchase
agreements maturing in more than seven days. Restricted securities for the
purposes of this limitation do not include securities eligible for resale
pursuant to Rule 144A under the Securities Act of 1933 and commercial paper
issued pursuant to Section 4(2) of said Act that the Board of Trustees of the
Trust or the Portfolio, or its delegate, determines to be liquid; (b) make short
sales of securities or maintain a short position, unless at all times when a
short position is open the Fund owns an equal amount of such securities or
securities convertible into or exchangeable, without payment of any further
consideration, for securities of the same issuer as, and equal in amount to, the
securities sold short, and unless not more than 25% of the Fund's net assets
(taken at current value) is held as collateral for such sales at any one time.
(The Fund will make such sales only for the purpose of deferring realization of
gain or loss for federal income tax purposes.); or (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 the
Portfolio or is a member, officer, director or trustee of an investment adviser
of the Trust or the Portfolio, if after the purchase of the securities of such
issuer by the Fund or the Portfolio one or more of such persons owns
beneficially more than 1/2 of 1% of the shares or securities or both (all taken
at market value) of such issuer and such persons owning more than 1/2 of 1% of
such shares or securities together own beneficially more than 5% of such shares
or securities or both (all taken at market value).
Whenever an investment policy or investment restriction set forth in the
Prospectus or this SAI states a maximum percentage of assets that may be
invested in any security or other asset, or describes a policy regarding quality
standards, such percentage limitation or standard shall be determined
immediately after and as a result of the Fund's or the Portfolio's acquisition
of such security or asset. Accordingly, any later increase or decrease resulting
from a change in values, assets or other circumstances, or any subsequent rating
change will not compel the Fund or the Portfolio, as the case may be, to dispose
of such security or other asset. Notwithstanding the foregoing, under normal
market conditions the Portfolio must take actions necessary to comply with the
policy of investing at least 65% of total assets in the lowest investment grade
and lower rated and unrated debt obligations. Moreover, the Fund and Portfolio
must always be in compliance with the borrowing policies set forth above.
TRUSTEES AND OFFICERS
The Trustees and officers of the Trust and the Portfolio are listed below.
Except as indicated, each individual has held the office shown or other offices
in the same company for the last five years. Unless otherwise noted, the
business address of each Trustee and officer is 24 Federal Street, Boston,
Massachusetts 02110, which is also the address of the Investment Adviser, BMR, a
wholly-owned subsidiary of Eaton Vance; of Eaton Vance's parent, Eaton Vance
Corp. ("EVC"); and of BMR's and Eaton Vance's trustee, Eaton Vance, Inc. ("EV").
Eaton Vance and EV are both wholly-owned subsidiaries of EVC. Those Trustees who
are "interested persons" of the Trust or the Portfolio, as defined in the 1940
Act, by virtue of their affiliation with BMR, Eaton Vance, EVC or EV, are
indicated by an asterisk(*).
TRUSTEES OF THE TRUST AND THE PORTFOLIO
M. DOZIER GARDNER (64), President and Trustee*
Vice Chairman of BMR, Eaton Vance, EVC and EV, and Director of EVC and EV.
Director or Trustee and officer of various investment companies managed by
Eaton Vance or BMR.
DONALD R. DWIGHT (66), Trustee
President of Dwight Partners, Inc. (a corporate relations and communications
company); Chairman of the Board of Newspapers of New England, Inc. Director
or Trustee of various investment companies managed by Eaton Vance or BMR.
Address: Clover Mill Lane, Lyme, New Hampshire 03768
JAMES B. HAWKES (55), Vice President and Trustee*
President and Chief Executive Officer of BMR, Eaton Vance, EV and EVC and a
Director of EV and EVC. Director, Trustee and officer of various investment
companies managed by Eaton Vance or BMR. Mr. Hawkes was elected Trustee of the
Trust on December 16, 1991.
SAMUEL L. HAYES, III (62), Trustee
Jacob H. Schiff Professor of Investment Banking, Harvard University Graduate
School of Business Administration. Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: Harvard University Graduate School of Business Administration,
Soldiers Field Road, Boston, Massachusetts 02163
NORTON H. REAMER (61), Trustee
President and Director, United Asset Management Corporation (a holding company
owning institutional investment management firms); Chairman, President and
Director, UAM Funds (mutual funds). Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: One International Place, Boston, Massachusetts 02110
JOHN L. THORNDIKE (70), Trustee
Former Director of Fiduciary Company Incorporated. Director or Trustee of
various investment companies managed by Eaton Vance or BMR.
Address: 175 Federal Street, Boston, Massachusetts 02110
JACK L. TREYNOR (67), Trustee
Investment Adviser and Consultant. Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: 504 Via Almar, Palos Verdes Estates, California 90274
OFFICERS OF THE TRUST AND THE PORTFOLIO
WILLIAM H. AHERN, JR. (38), Vice President of the Trust
Vice President of BMR and Eaton Vance. Officer of various investment companies
managed by Eaton Vance or BMR. Mr. Ahern was elected Vice President of the
Trust on June 19, 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. Mr. Rynne was elected an officer 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.
JAMES L. O'CONNOR (52), Treasurer
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
ALAN R. DYNNER (56), Secretary
Vice President and Chief Legal Officer of BMR, Eaton Vance, EVC and EV since
November 1, 1996. Previously, he was a Partner of the law firm of Kirkpartrick
& Lockhart LLP, New York and Washington, D.C., and was Executive Vice
President of Neuberger & Berman Management, Inc., a mutual fund management
company. Officer of various investment companies managed by Eaton Vance or
BMR. Mr. Dynner was elected Secretary on June 23, 1997.
JANET E. SANDERS (61), Assistant Treasurer and Assistant Secretary
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
A. JOHN MURPHY (34), Assistant Secretary
Assistant Vice President of BMR, Eaton Vance and EV since March 1, 1994;
employee of Eaton Vance since March 1993. State Regulations Supervisor, The
Boston Company (1991 - 1993). Officer of various investment companies managed
by Eaton Vance or BMR. Mr. Murphy was elected Assistant Secretary of the Trust
on March 27, 1995 and of the Portfolio on June 19, 1995.
ERIC G. WOODBURY (40), Assistant Secretary
Vice President of BMR, Eaton Vance and EV since February 1993; formerly,
associate attorney at Dechert, Price & Rhoads. Mr. Woodbury was elected
Assistant Secretary of the Trust and the Portfolio on June 19, 1995. Officer
of various investment companies managed by Eaton Vance or BMR.
Messrs. Hayes (Chairman), Reamer and Thorndike are members of the Special
Committee of the Board of Trustees of the Trust and of the Portfolio. The
purpose of the Special Committee is to consider, evaluate and make
recommendations to the full Board of Trustees concerning (i) all contractual
arrangements with service providers to the Fund and the Portfolio, including
investment advisory (Portfolio only), administrative, transfer agency,
custodial, fund accounting and distribution services, and (ii) all other matters
in which Eaton Vance or its affiliates has any actual or potential conflict of
interest with the Fund, the Portfolio or investors therein.
The Nominating Commitee of the Board of Trustees of the Trust and the
Portfolio is comprised of four Trustees who are not "interested persons" as that
term is defined by the 1940 Act ("noninterested Trustees"). The Committee has
four-year staggered terms, with one member rotating off the Committee to be
replaced by another noninterested Trustee. 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 certified public accountants, and reviewing matters relative
to trading and brokerage policies and practices, accounting and auditing
practices and procedures, accounting records, internal accounting controls, and
the functions performed by the custodian, transfer agent and dividend disbursing
agent of the Trust and of the Portfolio.
Trustees of the Portfolio who are not affiliated with the Investment Adviser
may elect to defer receipt of all or a percentage of their annual fees in
accordance with the terms of a Trustees Deferred Compensation Plan (the
"Trustees" Plan"). Under the Trustees' Plan, an eligible Trustee may elect to
have his deferred fees invested by the Portfolio in the shares of one or more
funds in the Eaton Vance Family of Funds, and the amount paid to the Trustees
under the Trustees' Plan will be determined based upon the performance of such
investments. Deferral of Trustees' fees in accordance with the Trustees' Plan
will have a negligible effect on the Portfolio's assets, liabilities, and net
income per share, and will not obligate the Portfolio to retain the services of
any Trustee or obligate the Portfolio to pay any particular level of
compensation to the Trustee. Neither the Portfolio nor the Trust has a
retirement plan for its Trustees.
The fees and expenses of the noninterested Trustees of the Trust and the
Portfolio are paid by the Fund (and the other series of the Trust) and the
Portfolio, respectively. For the compensation earned by the noninterested
Trustees, see "Fees and Expenses" in Part II.
INVESTMENT ADVISER AND ADMINISTRATOR
The Portfolio engages BMR as investment adviser pursuant to an Investment
Advisory Agreement dated May 31, 1994. BMR or Eaton Vance acts as investment
adviser to investment companies and various individual and institutional clients
with combined assets under management of over $17 billion.
Eaton Vance, its affiliates and its predecessor companies have been managing
assets of individuals and institutions since 1924 and managing investment
companies since 1931. They maintain a large staff of experienced fixed-income
and equity investment professionals to service the needs of their clients. The
fixed-income division focuses on all kinds of taxable investment-grade and
high-yield securities, tax-exempt investment-grade and high-yield securities,
and U.S. Government securities. The equity division covers stocks ranging from
blue chip to emerging growth companies.
Eaton Vance and its affiliates act as adviser to over 150 mutual funds, and
individual and various institutional accounts, including corporations,
hospitals, retirement plans, universities, foundations and trusts. Eaton Vance
mutual funds feature international equities, domestic equities, tax-free
municipal bonds, and U.S. government and corporate bonds. Lloyd George
Management has advised Eaton Vance's international equity funds since 1992.
Founded in 1991, Lloyd George is headquartered in Hong Kong with offices in
London and Mumbai, India. It has established itself as a leader in investment
management in Asian equities and other global markets. Lloyd George features an
experienced team of investment professionals that began working together in the
mid-1980s. Lloyd George analysts cover East Asia, the India subcontinent, Russia
and Eastern Europe, Latin America, Australia and New Zealand from offices in
Hong Kong, London and Mumbai. Together Eaton Vance and Lloyd George manage over
$18 billion in assets. Eaton Vance mutual funds are distributed by the Principal
Underwriter both within the United States and offshore.
The Principal Underwriter believes that an investment professional can
provide valuable services to you to help you reach your investment goals.
Meeting investment goals requires time, objectivity and investment savvy. Before
making an investment recommendation, a representative can help you carefully
consider your short-term and long-term financial goals, your tolerance for
investment risk, your investment time frame, and other investments you may
already own. Your professional investment representatives are knowledgeable
about financial markets, as well as the wide range of investment opportunities
available. A representative can provide you with tailored financial advice and
help you decide when to buy, sell or persevere with your investments.
BMR manages the investments and affairs of the Portfolio subject to the
supervision of the Portfolio's Board of Trustees. BMR furnishes to the Portfolio
investment research, advice and supervision, furnishes an investment program and
determines what securities will be purchased, held or sold by the Portfolio and
what portion, if any, of the Portfolio's assets will be held uninvested. The
Investment Advisory Agreement requires BMR to pay the salaries and fees of all
officers and Trustees of the Portfolio who are members of the BMR organization
and all personnel of BMR performing services relating to research and investment
activities. The Portfolio is responsible for all expenses not expressly stated
to be payable by BMR under the Investment Advisory Agreement, including, without
implied limitation, (i) expenses of maintaining the Portfolio and continuing its
existence, (ii) registration of the Portfolio under the 1940 Act, (iii)
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 at March
31, 1997, the Portfolio had net assets of $706,711,462. For the fiscal years
ended March 31, 1997 and 1996, and for the period from the Portfolio's start of
business, June 1, 1994 to March 31, 1995, the Portfolio paid BMR advisory fees
of $3,683,894 $3,094,793, and $2,260,748, respectively (equivalent to 0.61%,
0.63% and 0.64% annualized of the Portfolio's average daily net assets for each
such period).
The Investment Advisory Agreement with BMR continues in effect from year to
year so long as such continuance is approved at least annually (i) by the vote
of a majority of the noninterested Trustees of the Portfolio cast in person at a
meeting specifically called for the purpose of voting on such approval and (ii)
by the Board of Trustees of the Portfolio or by vote of a majority of the
outstanding voting securities of the Portfolio. The Agreement may be terminated
at any time without penalty on sixty (60) days' written notice by the Board of
Trustees of either party, or by vote of the majority of the outstanding voting
securities of the Portfolio, and the Agreement will terminate automatically in
the event of its assignment. The Agreement provides that BMR may render services
to others. The Agreement also provides that BMR shall not be liable for any loss
incurred in connection with the performance of its duties, or action taken or
omitted under that Agreement, in the absence of willful misfeasance, bad faith,
gross negligence in the performance of its duties or by reason of its reckless
disregard of its obligations and duties thereunder, or for any losses sustained
in the acquisition, holding or disposition of any security or other investment.
IBT Trust Company (Cayman), Ltd. maintains the Portfolio's principal
office and certain of its records and provides administrative assistance in
connection with meetings of the Portfolio's Trustees and interestholders.
As indicated in the Prospectus, Eaton Vance serves as Administrator of the
Fund, but currently receives no compensation for providing administrative
services to the Fund. Under its agreement with the Fund, Eaton Vance has been
engaged to administer the Fund's affairs, subject to the supervision of the
Trustees of the Trust, and shall furnish for the use of the Fund office space
and all necessary office facilities, equipment and personnel for administering
the affairs of the Fund.
The Fund pays all of its own expenses including, without limitation, (i)
expenses of maintaining the Fund and continuing its existence, (ii) its pro rata
share of the Trust's registration under the 1940 Act, (iii) commissions, fees
and other expenses connected with the purchase or sale of securities and other
investments, (iv) auditing, accounting and legal expenses, (v) taxes and
interest, (vi) governmental fees, (vii) expenses of issue, sale, repurchase and
redemption of shares, (viii) expenses of registering and qualifying the Fund and
its shares under federal and state securities laws and of preparing and printing
prospectuses for such purposes and for distributing the same to shareholders and
investors, and fees and expenses of registering and maintaining registrations of
the Fund and of the Fund's principal underwriter, if any, as broker-dealer or
agent under state securities laws, (ix) expenses of reports and notices to
shareholders and of meetings of shareholders and proxy solicitations therefor,
(x) expenses of reports to governmental officers and commissions, (xi) insurance
expenses, (xii) association membership dues, (xiii) fees, expenses and
disbursements of custodians and subcustodians for all services to the Fund
(including without limitation safekeeping of funds, securities and other
investments, keeping of books and accounts and determination of net asset
values), (xiv) fees, expenses and disbursements of transfer agents, dividend
disbursing agents, shareholder servicing agents and registrars for all services
to the Fund, (xv) expenses for servicing shareholder accounts, (xvi) any direct
charges to shareholders approved by the Trustees of the Trust, (xvii)
compensation and expenses of Trustees of the Trust who are not members of the
Eaton Vance organization, and (xviii) such non-recurring items as may arise,
including expenses incurred in connection with litigation, proceedings and
claims and any legal obligation of the Trust to indemnify its Trustees and
officers with respect thereto, to the extent not covered by insurance.
BMR is a wholly-owned subsidiary of Eaton Vance. Eaton Vance and EV are
both wholly-owned subsidiaries of EVC. BMR and Eaton Vance are both
Massachusetts business trusts, and EV is the trustee of BMR and Eaton Vance.
The Directors of EV are Landon T. Clay, M. Dozier Gardner, James B. Hawkes,
and Benjamin A. Rowland, Jr. The Directors of EVC consist of the same persons
and John G. L. Cabot and Ralph Z. Sorenson. Mr. Clay is chairman, Mr. Gardner
is vice chairman and Mr. Hawkes is president and chief executive officer of
EVC, BMR, Eaton Vance and EV. All of the issued and outstanding shares of
Eaton Vance and EV are owned by EVC. All of the issued and outstanding shares
of BMR are owned by Eaton Vance. All shares of the outstanding Voting Common
Stock of EVC are deposited in a Voting Trust which expires on December 31,
1997, the Voting Trustees of which are Messrs. Clay, Gardner, Hawkes and
Rowland and Thomas E. Faust, Jr. The Voting Trustees have unrestricted voting
rights for the election of Directors of EVC. All of the outstanding voting
trust receipts issued under said Voting Trust are owned by certain of the
officers of BMR and Eaton Vance who are also officers or officers and
Directors of EVC and EV. As of July 31, 1997, Messrs. Clay, Gardner and Hawkes
each owned 24% of such voting trust receipts, and Messrs. Rowland and Faust
owned 15% and 13%, respectively, of such voting trust receipts. Messrs.
Dynner, Gardner and Hawkes are officers or Trustees of the Trust and/or the
Portfolio and are members of the EVC, BMR, Eaton Vance and EV organizations.
Messrs. Ahern, Murphy, O'Connor, Rynne, Terry and Woodbury and Ms. Sanders are
officers of the Trust and/or the Portfolio and are also members of the BMR,
Eaton Vance and EV organizations.
Eaton Vance owns all the stock of Northeast Properties, Inc., which is
engaged in real estate investment. EVC also owns 22% of the Class A shares of
Lloyd George Management (B.V.I.) Limited, a registered investment adviser. EVC
owns all the stock of Fulcrum Management, Inc. and MinVen, Inc., which are
engaged in the precious metal mining venture investment and management. EVC,
BMR, Eaton Vance and EV may also enter into other businesses.
EVC and its affiliates and their officers and employees from time to time
have transactions with various banks, including the custodian of the Fund and
the Portfolio, IBT. It is Eaton Vance's opinion that the terms and conditions of
such transactions were not and will not be influenced by existing or potential
custodial or other relationships between the Fund or the Portfolio and such
banks.
CUSTODIAN
IBT acts as custodian for the Fund and the Portfolio. IBT has the custody of
all cash and securities representing the Fund's interest in the Portfolio and
has custody of all the Portfolio's assets. Its subsidiary, IBT Fund Services
(Canada) Inc., One First Canadian Place, King Street West, Toronto, Ontario,
Canada, maintains the general ledger of the Portfolio and the Fund and computes
the daily net asset value of interests in the Portfolio and the net asset value
of shares of the Fund. In its capacity as custodian, IBT attends to details in
connection with the sale, exchange, substitution, transfer or other dealings
with the Portfolio's investments, receives and disburses all funds and performs
various other ministerial duties upon receipt of proper instructions from the
Fund and the Portfolio. IBT charges custody fees which are competitive within
the industry. A portion of the fee relates to custody, bookkeeping and valuation
services and is based upon a percentage of the Fund and Portfolio net assets,
and a portion of the fee relates to activity charges, primarily the number of
portfolio transactions. These fees are then reduced by a credit for cash
balances of the particular investment company at the custodian equal to 75% of
the 91-day, U.S. Treasury Bill auction rate applied to the particular investment
company's average daily collected balances for the week. Landon T. Clay, a
Director of EVC and an officer, Trustee or Director of other entities in the
Eaton Vance organization, owns approximately 13% of the stock of Investors
Financial Services Corp., the holding company parent of IBT. Management believes
that such ownership does not create an affiliated person relationship between
the Fund or the Portfolio and IBT under the 1940 Act.
IBT also provides services in connection with the preparation of shareholder
reports and the electronic filing of such reports with the Commission, for which
it receives a separate fee.
SERVICE FOR WITHDRAWAL
The Transfer Agent will send to the shareholder regular monthly or quarterly
payments of any permitted amount designated by the shareholder (see "Eaton Vance
Shareholder Services -- Withdrawal Plan" in the Fund's current Prospectus) based
upon the value of the shares held. The checks will be drawn from share
redemptions and, hence, although they are a return of principal, may require the
recognition of a taxable gain or loss. Income dividends and capital gains
distributions in connection with withdrawal accounts will be credited at net
asset value as of the record date for each distribution. Continued withdrawals
in excess of current income will eventually use up principal, particularly in a
period of declining market prices. A shareholder may not have a withdrawal plan
in effect at the same time he/she has authorized Bank Automated Investing or is
otherwise making regular purchases of Fund shares. The shareholder, the Transfer
Agent or the Principal Underwriter will be able to terminate the withdrawal plan
at any time without penalty.
DETERMINATION OF NET ASSET VALUE
The net asset value of the Portfolio 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. Fixed-income securities (other than
short-term obligations), will normally be valued on the basis of market
valuations furnished by a pricing service. The pricing service uses information
with respect to transactions in bonds, quotations from bond dealers, market
transactions in comparable securities, various relationships between securities,
and yield to maturity in determining value. Securities listed on securities
exchanges or in the NASDAQ National Market are valued at closing sale prices.
Unlisted or listed securities for which closing sale prices are not available
are valued at the mean between the latest bid and asked prices. Short-term
obligations maturing in sixty days or less are valued at amortized cost, which
approximates market. Other assets are valued at fair value using methods
determined in good faith by or at the direction of the Trustees of the
Portfolio. The Fund and the Portfolio will be closed for business and will not
price their respective shares or interests on the following business holidays:
New Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day.
Each investor in the Portfolio, including the Fund, may add to or reduce its
investment in the Portfolio on each day the Exchange is open for trading
("Portfolio Business Day") as of the close of regular trading on the Exchange
(the "Portfolio Valuation Time"). The value of each investor's interest in the
Portfolio will be determined by multiplying the net asset value of the Portfolio
by the percentage, determined on the prior Portfolio Business Day, which
represented that investor's share of the aggregate interests in the Portfolio on
such prior day. Any additions or withdrawals for the current Portfolio Business
Day will then be recorded. Each investor's percentage of the aggregate interest
in the Portfolio will then be recomputed as a percentage equal to a fraction (i)
the numerator of which is the value of such investor's investment in the
Portfolio as of the Portfolio Valuation Time on the prior Portfolio Business Day
plus or minus, as the case may be, the amount of any additions to or withdrawals
from the investor's investment in the Portfolio on the current Portfolio
Business Day and (ii) the denominator of which is the aggregate net asset value
of the Portfolio as of the Portfolio Valuation Time on the prior Portfolio
Business Day plus or minus, as the case may be, the amount of the net additions
to or withdrawals from the aggregate investment in the Portfolio on the current
Portfolio Business Day by all investors in the Portfolio. The percentage so
determined will then be applied to determine the value of the investor's
interest in the Portfolio for the current Portfolio Business Day.
INVESTMENT PERFORMANCE
Average annual total return is determined by multiplying a hypothetical
initial purchase order of $1,000 by the average annual compound rate of return
(including capital appreciation/depreciation, and distributions paid and
reinvested) for the stated period and annualizing the result. The calculation
assumes that all distributions are reinvested at net asset value on the
reinvestment dates during the period, and a complete redemption of the
investment and, if applicable, the deduction of the CDSC at the end of the
period. For further information regarding the total return of the Fund, see
"Performance Information" in the Fund's Part II.
Yield is computed pursuant to a standardized formula by dividing net
investment income per share earned during a recent thirty-day period by the
maximum offering price (net asset value) per share on the last day of the period
and annualizing the resulting figure. Net investment income per share is
calculated from the yields to maturity of all debt obligations held by the
Portfolio based on the market value of such obligations and from dividends from
equity securities based on stated annual rates, exclusive of special or extra
distributions, reduced by accrued Fund expenses for the period with the
resulting number being divided by the average daily number of Fund shares
outstanding and entitled to receive dividends during the period. This yield
figure does not reflect the deduction of any CDSC which is imposed upon certain
redemptions at the rates set forth under "How to Redeem Fund Shares" in the
Fund's current Prospectus. For information concerning the yield of the Fund, see
"Performance Information" in the Fund's Part II.
The Principal Underwriter may also publish to Authorized Firms the Fund's
distribution rate and/or its effective distribution rate. The Fund's
distribution rate is computed by dividing the most recent monthly distribution
per share annualized, by the current net asset value per share. The Fund's
effective distribution rate is computed by dividing the distribution rate by the
ratio (the days in a year divided by the accrual days of the monthly period)
used to annualize the most recent monthly distribution and reinvesting the
resulting amount for a full year on the basis of such ratio. The effective
distribution rate will be higher than the distribution rate because of the
compounding effect of the assumed reinvestment. Investors should note that the
Fund's yield is calculated using a standardized formula the income component of
which is computed from the yields to maturity of all debt obligations held by
the Portfolio based on the market value of such obligations and from dividends
from equity securities based on stated annual rates, exclusive of special or
extra distributions, (with all purchases and sales of securities during such
period included in the income calculation on a settlement date basis), whereas
the distribution rate is based on the Fund's last monthly distribution which
tends to be relatively stable and may be more or less than the amount of net
investment income and short-term capital gain actually earned by the Fund during
the month.
The Fund's total return may be compared to related indices, such as the
Consumer Price Index, and various domestic securities indicies, which may be
used in advertisements and in information furnished to present or prospective
shareholders. The Fund's performance may differ from that of other investors in
the Portfolio, including the other investment companies.
The Fund may provide information about Eaton Vance, its affiliates and other
investment advisers to the funds in the Eaton Vance Family of Funds in sales
material or advertisements provided to investors or prospective investors. Such
material or advertisements may also provide information on the use of investment
professionals by such investors.
Information showing the effects of compounding interest may be included in
advertisements and other material furnished to present and prospective
shareholders. Compounding is the process of earning interest on principal plus
interest that was earned earlier.
Evaluations of the Fund's performance including ratings and 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. Information, charts and
illustrations relating to inflation and the effects of inflation on the dollar
may be included in advertisements and other material furnished to present and
prospective shareholders.
Information, charts and illustrations showing comparative historical
information of high-yielding bonds as represented by The First Boston High Yield
Index over 10-year U.S. Treasury bonds may be used in advertisements and other
material furnished to present or prospective shareholders. The First Boston High
Yield Index is an unmanaged index of 713 high-yielding securities. The principal
and interest of U.S. Treasury bonds are guaranteed by the United States
Government, while high yield bonds, sometimes referred to as "junk bonds", are
of lower quality than investment-grade bonds and U.S. Government securities.
Rates are given for illustrative purposes only and are not meant to imply or
predict actual results of an investment in the Fund.
Information used in advertisements and materials furnished to present and
prospective investors may include statements or illustrations relating to the
appropriateness of certain types of securities and/or mutual funds to meet
specific financial goals. Such information may address:
-- cost associated with aging parents;
-- funding a college education (including its actual and estimated
cost);
-- health care expenses (including actual and projected
expenses);
-- long-term disabilities (including the availability of, and
coverage provided by, disability insurance); and
-- retirement (including the availability of social security benefits,
the tax treatment of such benefits and statistics and other
information relating to maintaining a particular standard of living
and outliving existing assets).
Such information may also address different methods for saving money and the
results of such methods, as well as the benefits of investing in bond funds.
The Fund may provide information about Eaton Vance, its affiliates and other
investment advisers to the funds in the Eaton Vance Family of Funds in sales
material or advertisements provided to investors or prospective investors. Such
material or advertisements may also provide information on the use of investment
professionals by such investors.
TAXES
Each series of the Trust is treated as a separate entity for federal income
tax purposes. The Fund has elected to be treated and intends to qualify each
year, as a regulated investment company ("RIC") under the Code. Accordingly, the
Fund intends to satisfy certain requirements relating to sources of its income
and diversification of its assets and to distribute substantially all of its
ordinary income and net income in accordance with the timing requirements
imposed by the Code, so as to maintain its RIC status and to avoid paying any
federal income or excise tax. The Fund so qualified for its fiscal year ended
March 31, 1997. Because the Fund invests substantially all of its assets in the
Portfolio, the Portfolio normally must satisfy the applicable source of income
and diversification requirements in order for the Fund to also satisfy these
requirements. The Portfolio will allocate at least annually among its investors,
including the Fund, each investor's distributive share of the Portfolio's net
taxable and tax-exempt (if any) investment income, net realized capital gains,
and any other items of income, gain, loss, deduction or credit. For purposes of
applying the requirements of the Code regarding qualification as a RIC, the Fund
(i) will be deemed to own its proportionate share of each of the assets of the
Portfolio and (ii) will be entitled to the gross income of the Portfolio
attributable to such share.
In order to avoid incurring a federal excise tax obligation, the Code
requires that the Fund distribute (or be deemed to have distributed) by December
31 of each calendar year at least 98% of its ordinary income for such year, at
least 98% of its capital gain net income which is the excess of its realized
capital gains over its realized capital losses), generally computed on the basis
of the one-year period ending on October 31 of such year, after reduction by (i)
any available capital loss carryforwards and (ii) 100% of any income from the
prior year (as previously computed) that was not paid out during such year and
on which the Fund paid no federal income tax. Under current law, provided that
the Fund qualifies as a RIC and the Portfolio is treated as a partnership for
Massachusetts and federal tax purposes, neither the Fund nor the Portfolio
should be liable for any income, excise or franchise tax in the Commonwealth of
Massachusetts.
The Portfolio's transactions in options, futures contracts and forward
contracts will be subject to special tax rules that may affect the amount,
timing and character of the Fund's distributions to shareholders. For example,
certain positions held by the Portfolio on the last business day of each taxable
year will be "marked to market" (i.e., treated as if closed out on such day),
and any resulting gain or loss will generally be treated as 60% long-term and
40% short-term capital gain or loss. Certain positions held by the Portfolio
that substantially diminish the Portfolio's risk of loss with respect to other
positions in its portfolio may constitute "straddles," which are subject to tax
rules that may cause deferral of Portfolio losses, adjustments in the holding
periods of Portfolio securities, and conversion of short-term capital losses
into long-term capital losses. The Portfolio may have to limit its activities in
options, futures contracts and forward contracts in order to enable the Fund to
maintain its status.
The Portfolio may be subject to foreign income tax withholding or other
foreign taxes with respect to income (possibly including, in some cases, capital
gains) arising from certain transactions in foreign securities. These taxes may
be reduced or eliminated under the terms of an applicable tax convention between
certain countries and the U.S. It is not expected that more than 50% of the
value of the total assets of the Fund, taking into account its allocable share
of the Portfolio's total assets at the close of any taxable year, of the Fund,
will consist of securities issued by foreign corporations. Accordingly under the
Code, the Fund will not be eligible to pass through to its shareholders their
proportionate share of any foreign tax credits or deductions for foreign taxes
paid by the Portfolio and allocated to the Fund. Certain foreign exchange gains
and losses realized by the Fund will be treated as ordinary income and losses.
Certain uses of foreign currency and foreign currency options, futures and
forward contracts and investment by the Portfolio in certain "passive foreign
investment companies" ("PFICs") may be limited or a tax election may be made, if
available, in order to seek to preserve the Fund's qualification as a RIC and/or
avoid imposition of an income tax on the Fund.
The Portfolio's investment in zero coupon and certain securities will cause
it to realize income prior to the receipt of cash payments with respect to these
securities. Such income will be allocated daily to interests in the Portfolio
and, in order to enable the Fund to distribute its proportionate share of this
income and avoid a tax payable by the Fund, the Portfolio may be required to
liquidate securities that it might otherwise have continued to hold in order to
generate cash that the Fund may withdraw from the Portfolio to make
distributions to Fund shareholders.
Investments in lower-rated or unrated securities may present special tax
issues for the Portfolio (and, hence, for the Fund) to the extent that the
issuers of these securities default on their obligations pertaining thereto. The
Code is not entirely clear regarding the federal income tax consequences of the
Fund's taking certain positions in connection with ownership of such distressed
securities. For example, the Code is unclear regarding: (i) when the Portfolio
may cease to accrue interest, original issue discount, or market discount; (ii)
when and to what extent deductions may be taken for bad debts or worthless
securities; (iii) how payments received on obligations in default should be
allocated between principal and income; and (iv) whether exchanges of debt
obligations in a workout context are taxable.
Any loss realized upon the sale or exchange of shares of the Fund with a tax
holding period of 6 months or less will be treated as a long-term capital loss
to the extent of any distribution treated as long-term capital gains with
respect to such shares. All or a portion of any loss realized upon a taxable
disposition of Fund shares may be disallowed under "wash sale" rules if other
shares of the Fund are purchased (whether through the reinvestment of
distributions or otherwise) within 30 days before or after such disposition.
Amounts paid by the Fund to individuals and certain other shareholders who
have not provided the Fund with their correct taxpayer identification number
("TIN") and certain certifications required by the Internal Revenue Service (the
"IRS"), as well as shareholders with respect to whom the Fund has received
certain information from the IRS or a broker, may be subject to "backup"
withholding of federal income tax arising from the Fund's dividends and other
distributions as well as the proceeds of redemption transactions (including
repurchases and exchanges), at a rate of 31%. An individual's TIN is generally
his or her social security number.
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 convention. 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 arise if: (i) the
shareholder is engaged in a trade or business in the United States, (ii) the
shareholder is present in the United States for a sufficient period of time
during a taxable year to be treated as a U.S. resident, (generally 180 days or
more); or (iii) the shareholder fails to provide any required certifications
regarding its status as a non-resident alien investor. Foreign shareholders
should consult their tax advisers regarding the U.S. and foreign tax
consequences of an investment in the Fund.
The foregoing discussion does not address the special tax rules applicable
to certain classes of investors, such as retirement plans, tax-exempt entities,
insurance companies and financial institutions. Shareholders should consult
their own tax advisers with respect to special tax rules that may apply in their
particular situations, as well as the state, local, and, where applicable,
foreign tax consequences of investing in the Fund.
PRINCIPAL UNDERWRITER
Under the Distribution Agreement, the Principal Underwriter acts as
principal in selling shares of the Fund. The expenses of printing copies of
prospectuses used to offer shares to Authorized Firms or investors and other
selling literature and of advertising is borne by the Principal Underwriter. The
fees and expenses of qualifying and registering and maintaining qualifications
and registrations of the Fund and its shares under federal and state securities
laws are borne by the Fund. In addition, the Fund makes payments to the
Principal Underwriter pursuant to its Distribution Plan as described in the
Fund's current Prospectus; the provisions of the Plan relating to such payments
are included in the Distribution Agreement. The Distribution Agreement is
renewable annually by the Trust's Board of Trustees (including a majority of the
noninterested Trustees who have no direct or indirect financial interest in the
operation of the Fund's Distribution Plan or the Distribution Agreement), may be
terminated on sixty days' notice either by such Trustees or by vote of a
majority of the outstanding voting securities of the Fund or on six months'
notice by the Principal Underwriter and is automatically terminated upon
assignment. The Principal Underwriter distributes Fund shares on a "best
efforts" basis under which it is required to take and pay for only such shares
as may be sold. For the amount paid to the Principal Underwriter for acting as
repurchase agent, see "Fees and Expenses" in Part II.
PORTFOLIO SECURITY TRANSACTIONS
Decisions concerning the execution of portfolio security transactions,
including the selection of the market and the executing firm, are made by BMR.
BMR is also responsible for the execution of transactions for all other accounts
managed by it.
BMR places the portfolio security transactions of the Portfolio and of all
other accounts managed by it for execution with many firms. BMR uses its best
efforts to obtain execution of portfolio security transactions at prices which
are advantageous to the Portfolio and (when a disclosed commission is being
charged) at reasonably competitive commission rates. In seeking such execution,
BMR will use its best judgment in evaluating the terms of a transaction, and
will give consideration to various relevant factors including without limitation
the size and type of the transaction, the general execution and operational
capabilities of the executing firm, the nature and character of the market for
the security, the confidentiality, speed and certainty of effective execution
required for the transaction, the reputation, reliability, experience and
financial condition of the firm, the value and quality of services rendered by
the firm in other transactions, and the reasonableness of the commission or
spread, if any. Transactions on United States stock exchanges and other agency
transactions involve the payment by the Portfolio of negotiated brokerage
commissions. Such commissions vary among different executing firms, and a
particular firm may charge different commissions according to such factors as
the difficulty and size of the transaction and the volume of business done with
the broker-dealer. Transactions in foreign securities usually involve the
payment of fixed brokerage commissions, which are generally higher than those in
the United States. There is generally no stated commission in the case of
securities traded in the over-the-counter markets, but the price paid or
received by the Portfolio usually includes an undisclosed dealer markup or
markdown. In an underwritten offering, the price paid by the Portfolio often
includes a disclosed fixed commission or discount retained by the underwriter or
dealer. Although commissions paid on portfolio security transactions will, in
the judgment of BMR, be reasonable in relation to the value of the services
provided, commissions exceeding those which another firm might charge may be
paid to firms who were selected to execute transactions on behalf of the
Portfolio and BMR's other clients for providing brokerage and research services
to BMR.
As authorized in Section 28(e) of the Securities Exchange Act of 1934, a
broker or dealer who executes a portfolio transaction on behalf of the Portfolio
may receive a commission which is in excess of the amount of commission another
broker or dealer would have charged for effecting that transaction if BMR
determines in good faith that such compensation was reasonable in relation to
the value of the brokerage and research services provided. This determination
may be made on the basis of either that particular transaction or on the basis
of overall responsibilities which BMR and its affiliates have for accounts over
which they exercise investment discretion. In making any such determination, BMR
will not attempt to place a specific dollar value on the brokerage and research
services provided or to determine what portion of the commission should be
related to such services. Brokerage and research services may include advice as
to the value of securities, the advisability of investing in, purchasing, or
selling securities, and the availability of securities or purchasers or sellers
of securities; furnishing analyses and reports concerning issuers, industries,
securities, economic factors and trends, portfolio strategy and the performance
of accounts; effecting securities transactions and performing functions
incidental thereto (such as clearance and settlement); and the "Research
Services" referred to in the next paragraph.
It is a common practice in the investment advisory industry for the advisers
of investment companies, institutions and other investors to receive research,
statistical and quotation services, data, information and other services,
products and materials which assist such advisers in the performance of their
investment responsibilities ("Research Services") from broker-dealers which
execute portfolio transactions for the clients of such advisers and from third
parties with which such broker-dealers have arrangements. Consistent with this
practice, BMR receives Research Services from many broker-dealer firms with
which BMR places the portfolio transactions and from third parties with which
these broker-dealers have arrangements. These Research Services include such
matters as general economic and market reviews, industry and company reviews,
evaluations of securities and portfolio strategies and transactions,
recommendations as to the purchase and sale of securities and other portfolio
transactions, financial, industry and trade publications, news and information
services, pricing and quotation equipment and services, and research oriented
computer hardware, software, data bases and services. Any particular Research
Service obtained through a broker-dealer may be used by BMR in connection with
client accounts other than those accounts which pay commissions to such
broker-dealer. Any such Research Service may be broadly useful and of value to
BMR in rendering investment advisory services to all or a significant portion of
its clients, or may be relevant and useful for the management of only one
client's account or of a few clients' accounts, or may be useful for the
management of merely a segment of certain clients' accounts, regardless of
whether any such account or accounts paid commissions to the broker-dealer
through which such Research Service was obtained. The advisory fee paid by the
Portfolio is not reduced because BMR receives such Research Services. BMR
evaluates the nature and quality of the various Research Services obtained
through broker-dealer firms and attempts to allocate sufficient commissions to
such firms to ensure the continued receipt of Research Services which BMR
believes are useful or of value to it in rendering investment advisory services
to its clients.
Subject to the requirement that BMR shall use its best efforts to seek to
execute portfolio security transactions at advantageous prices and at reasonably
competitive commission rates or spreads, BMR is authorized to consider as a
factor in the selection of any broker-dealer firm with whom portfolio orders may
be placed the fact that such firm has sold or is selling shares of the Fund or
of other investment companies sponsored by BMR or Eaton Vance. This policy is
not inconsistent with a rule of the National Association of Securities Dealers,
Inc. (the "NASD"), which rule provides that no firm which is a member of the
NASD shall favor or disfavor the distribution of shares of any particular
investment company or group of investment companies on the basis of brokerage
commissions received or expected by such firm from any source.
Securities considered as investments for the Portfolio may also be
appropriate for other investment accounts managed by BMR or its affiliates.
Whenever decisions are made to buy or sell securities by the Portfolio and one
or more of such other accounts simultaneously, BMR will allocate the security
transactions (including "hot" issues) in a manner which it believes to be
equitable under the circumstances. As a result of such allocations, there may be
instances where the Portfolio will not participate in a transaction that is
allocated among other accounts. If an aggregated order cannot be filled
completely, allocations will generally be made on a pro rata basis. An order may
not be allocated on a pro rata basis where, for example: (i) consideration is
given to portfolio managers who have been instrumental in developing or
negotiating a particular investment; (ii) consideration is given to an account
with specialized investment policies that coincide with the particulars of a
specific investment; (iii) pro rata allocation would result in odd-lot or de
minimis amounts being allocated to a portfolio or other client; or (iv) where
BMR reasonably determines that departure from a pro rata allocation is
advisable. While these aggregation and allocation policies could have a
detrimental effect on the price or amount of the securities available to the
Portfolio from time to time, it is the opinion of the Trustees of the Trust and
the Portfolio that the benefits from the BMR organization outweigh any
disadvantage that may arise from exposure to simultaneous transactions.
For the fiscal years ended March 31, 1997 and 1996, the Portfolio paid no
brokerage commissions on portfolio transactions. During the period from the
start of business, June 1, 1994 to March 31, 1995, the Portfolio paid brokerage
commissions of $3,684 on portfolio security transactions, of which $569 was paid
in respect of portfolio security transactions aggregating approximately $206,198
to firms which provided some research services to Eaton Vance (although many of
such firms may have been selected in any particular transaction primarily
because of their execution capabilities).
OTHER INFORMATION
The Trust changed its name from Eaton Vance Government Obligations Trust on
July 10, 1995. On August 1, 1995, the Fund was reorganized as a series of the
Trust. Prior thereto, the Fund was a series of Eaton Vance High Income Trust.
Eaton Vance, pursuant to its agreement with the Trust, controls the use of the
words "Eaton Vance" and "EV" in the Fund's name and may use the words "Eaton
Vance" and "EV" in other connections and for other purposes.
As permitted by Massachusetts law, there will normally be no meetings of
shareholders for the purpose of electing Trustees unless and until such time as
less than a majority of the Trustees of the Trust holding office have been
elected by shareholders. In such an event, the Trustees then in office will call
a shareholders' meeting for the election of Trustees. Except for the foregoing
circumstances and unless removed by action of the shareholders in accordance
with the Trust's by-laws, the Trustees shall continue to hold office and may
appoint successor Trustees.
The Trust's Declaration of Trust may be amended by the Trustees when
authorized by vote of a majority of the outstanding voting securities of the
Trust, the financial interests of which are affected by the amendment. The
Trustees may also amend the Declaration of Trust without the vote or consent of
shareholders to change the name of the Trust or any series or to make such other
changes (such as reclassifying series or classes of shares or restructuring the
Trust) as do not have a materially adverse effect on the financial interests of
shareholders or if they deem it necessary to conform it to applicable federal or
state laws or regulations. The Trust or any series or class thereof may be
terminated by: (1) the affirmative vote of the holders of not less than
two-thirds of the shares outstanding and entitled to vote at any meeting of
shareholders of the Trust or the appropriate series or class thereof, or by an
instrument or instruments in writing without a meeting, consented to by the
holders of two-thirds of the shares of the Trust or a series or class thereof,
provided, however, that, if such termination is recommended by the Trustees, the
vote of a majority of the outstanding voting securities of the Trust or a series
or class thereof entitled to vote thereon will be sufficient authorization; or
(2) by means of an instrument in writing signed by a majority of the Trustees,
to be followed by a written notice to shareholders stating that a majority of
the Trustees has determined that the continuation of the Trust or a series or a
class thereof is not in the best interest of the Trust, such series or class or
of their respective shareholders.
Under Massachusetts law, if certain conditions prevail, shareholders of a
Massachusetts business trust (such as the Trust) could be deemed to have
personal liability for the obligations of the Trust. Numerous investment
companies registered under the 1940 Act have been formed as Massachusetts
business trusts, and management is not aware of an instance where such liability
has been imposed. The Trust's Declaration of Trust contains an express
disclaimer of liability on the part of the Fund shareholders and the Trust's
By-laws provide that the Trust shall assume the defense on behalf of any Fund
shareholders. (The Declaration of Trust also contains provisions limiting the
liability of a series or class to that series or class.) Moreover, the Trust's
By-laws also provide for indemnification out of the property of the Fund of any
shareholder held personally liable solely by reason of being or having been a
shareholder for all loss or expense arising from such liability. The assets of
the Fund are readily marketable and will ordinarily substantially exceed its
liabilities. In light of the nature of the Fund's business and the nature of its
assets, management believes that the possibility of the Fund's liability
exceeding its assets, and therefore the shareholder's risk of personal
liability, is extremely remote.
In accordance with the Declaration of Trust of the Portfolio, there will
normally be no meetings of the investors for the purpose of electing Trustees
unless and until such time as less than a majority of the Trustees holding
office have been elected by investors. In such an event the Trustees of the
Portfolio then in office will call an investors' meeting for the election of
Trustees. Except for the foregoing circumstances and unless removed by action of
the investors in accordance with the Portfolio's Declaration of Trust, the
Trustees shall continue to hold office and may appoint successor Trustees.
The Declaration of Trust of the Portfolio provides that no person shall
serve as a Trustee if investors holding two-thirds of the outstanding interest
have removed him from that office either by a written declaration filed with the
Portfolio custodian or by votes cast at a meeting called for that purpose. The
Declaration of Trust further provides that under certain circumstances the
investors may call a meeting to remove a Trustee and that the Portfolio is
required to provide assistance in communicating with investors about such a
meeting.
The Portfolio's Declaration of Trust provides that the Fund and other
entities permitted to invest in the Portfolio (e.g., other U.S. and foreign
investment companies, and common and commingled trust funds) will each be liable
for all obligations of the Portfolio. However, the risk of the Fund incurring
financial loss on account of such liability is limited to circumstances in which
both inadequate insurance exists and the Portfolio itself is unable to meet its
obligations. Accordingly, the Trustees of the Trust believe that neither the
Fund nor its shareholders will be adversely affected by reason of the Fund
investing in the Portfolio.
The Portfolio's Declaration of Trust provides that the Portfolio will
terminate 120 days after the complete withdrawal of the Fund or any other
investor in the Portfolio, unless either the remaining investors, by unanimous
vote at a meeting of such investors, or a majority of the Trustees of the
Portfolio, by written instrument consented to by all investors, agree to
continue the business of the Portfolio. This provision is consistent with
treatment of the Portfolio as a partnership for federal income tax purposes.
The right to redeem shares of the Fund can be suspended and the payment of
the redemption price deferred when the Exchange is closed (other than for
customary weekend and holiday closings), during periods when trading on the
Exchange is restricted as determined by the Commission, or during any emergency
as determined by the Commission which makes it impracticable for the Portfolio
to dispose of its securities or value its assets, or during any other period
permitted by order of the Commission for the protection of investors.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Deloitte & Touche LLP, 125 Summer Street, Boston, Massachusetts, are the
independent certified public accountants of the Fund, providing audit services,
tax return preparation, and assistance and consultation with respect to the
preparation of filings with the Commission. Deloitte & Touche, Grand Cayman,
Cayman Islands, British West Indies, are the independent certified public
accountants of the Portfolio.
FINANCIAL STATEMENTS
The audited financial statements of, and the independent auditors' report
for, the Fund and the Portfolio appear in the Fund's most recent annual report
to shareholders and are incorporated by reference into this SAI. A copy of the
annual report accompanies this SAI.
Registrant incorporates by reference the audited financial information for
the Funds and the Portfolio listed below for the fiscal year ended March 31,
1997, as previously filed electronically with the Commission:
EV Classic High Income Fund
High Income Portfolio
(Accession No. 0000950109-97-004451)
EV Marathon High Income Fund
High Income Portfolio
(Accession No. 0000950109-97-004454)
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EV CLASSIC HIGH INCOME FUND. The
Fund became a series of the Trust on August 1, 1995.
FEES AND EXPENSES
ADMINISTRATOR
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 March 31, 1997
and 1996 and for the period from the start of business, June 1, 1994, to March
31, 1995, $67,984, $79,084 and $37,087, respectively, of the Fund's operating
expenses were allocated to the Administrator.
DISTRIBUTION PLAN
During the fiscal year ended March 31, 1997, the Principal Underwriter paid
to Authorized Firms sales commissions of $44,157 on sales of Fund shares. During
the same period, the Fund paid or accrued sales commissions under the Plan
aggregating $90,450, and the Principal Underwriter received approximately
$15,000 in CDSCs which were imposed on early redeeming shareholders. These
payments reduced uncovered distribution charges under the Plan. As at March 31,
1997, the outstanding uncovered distribution charges of the Principal
Underwriter calculated under the Plan amounted to approximately $1,471,000.
During the fiscal year ended March 31, 1997, the Fund made service fee payments
to the Principal Underwriter and Authorized Firms aggregating $30,259, of which
$14,689 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 March 31, 1997,
the Fund paid the Principal Underwriter $332.50 for repurchase transactions
handled by the Principal Underwriter.
TRUSTEES
The fees and expenses of the noninterested Trustees of the Trust and of the
Portfolio are paid by the Fund (and the other series of the Trust) and the
Portfolio, respectively. (The Trustees of the Trust and of the Portfolio who are
members of the Eaton Vance organization receive no compensation from the Fund or
the Portfolio.) During the fiscal year ended March 31, 1997, the noninterested
Trustees of the Trust and the Portfolio earned the following compensation in
their capacities as Trustees from the Fund, the Portfolio and the funds in the
Eaton Vance fund complex(1):
AGGREGATE AGGREGATE TOTAL COMPENSATION
COMPENSATION COMPENSATION FROM TRUST AND
NAME FROM FUND FROM PORTFOLIO FUND COMPLEX
- ---- --------- -------------- ------------
Donald R. Dwight ..... $35 $4,190(2) $145,000(5)
Samuel L. Hayes, III . 31 4,200(3) 155,000(6)
Noton H. Reamer ...... 31 4,064 145,000
John L. Thorndike .... 32 4,267(4) 148,750(7)
Jack L. Treynor ...... 35 4,390 150,000
- ----------
(1) The Eaton Vance fund complex consists of 213 registered investment companies
or series thereof.
(2) Includes $1,846 of deferred compensation.
(3) Includes $707 of deferred compensation.
(4) Includes $2,120 of deferred compensation.
(5) Includes $47,187 of deferred compensation.
(6) Includes $19,062 of deferred compensation.
(7) Includes $55,276 of deferred compensation.
DISTRIBUTION PLAN
The Plan is designed to meet the requirements of Rule 12b-1 under the 1940
Act and the sales charge rule of the NASD. The purpose of the Plan is to
compensate the Principal Underwriter for its distribution services and
facilities provided to the Fund.
The Plan provides that the Fund will pay sales commissions and distribution
fees to the Principal Underwriter only after and as a result of the sale of
shares of the Fund. On each sale of Fund shares (excluding reinvestment of
distributions) the Fund will pay the Principal Underwriter amounts representing
(i) sales commissions equal to 6.25% of the amount received by the Fund for each
share sold and (ii) distribution fees calculated by applying the rate of 1% over
the prime rate then reported in The Wall Street Journal to the outstanding
balance of uncovered distribution charges (as described below) of the Principal
Underwriter.
The amount payable by the Fund to the Principal Underwriter pursuant to the
Plan as sales commissions and distribution fees with respect to each day will be
accrued on such day as a liability of the Fund and will accordingly reduce the
Fund's net assets upon such accrual, all in accordance with generally accepted
accounting principles. The amount payable on each day by the Fund is limited to
1/365 of .75% of the Fund's net assets on such day. The level of the Fund's net
assets changes each day and depends upon the amount of sales and redemptions of
Fund shares, the changes in the value of the investments held by the Portfolio,
the expenses of the Fund and the Portfolio accrued and allocated to the Fund on
such day, income on portfolio investments of the Portfolio accrued and allocated
to the Fund on such day, and any 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 Plan.
In calculating daily the amount of uncovered distribution charges,
distribution charges will include the aggregate amount of sales commissions and
distribution fees theretofore paid plus the aggregate amount of sales
commissions and distribution fees which the Principal Underwriter is entitled to
be paid under the Plan since its inception. Payments theretofore paid or payable
under the Plan by the Fund to the Principal Underwriter and CDSCs theretofore
paid or payable to the Principal Underwriter will be subtracted from such
distribution charges; if the result of such subtraction is positive, a
distribution fee (computed at 1% over the prime rate then reported in The Wall
Street Journal) will be computed on such amount and added thereto, with the
resulting sum constituting the amount of outstanding uncovered distribution
charges with respect to such day. The amount of outstanding uncovered
distribution charges of the Principal Underwriter calculated on any day does not
constitute a liability recorded on the financial statements of the Fund.
The amount of uncovered distribution charges of the Principal Underwriter at
any particular time depends upon various changing factors, including the level
and timing of sales of Fund shares, the nature of such sales (i.e., whether they
result from exchange transactions, reinvestments or from cash sales through
Authorized Firms), the level and timing of redemptions of Fund shares upon which
a CDSC will be imposed, the level and timing of redemptions of Fund shares upon
which no CDSC will be imposed (including redemptions of Fund shares pursuant to
the exchange privilege which result in a reduction of uncovered distribution
charges), changes in the level of the net assets of the Fund, and changes in the
interest rate used in the calculation of the distribution fee under the Plan.
Periods with a high level of sales of Fund shares accompanied by a low level of
early redemptions of Fund shares resulting in the imposition of CDSCs will tend
to increase the time during which there will exist uncovered distribution
charges of the Principal Underwriter.
Currently, payments of sales commissions and distribution fees and of
service fees may equal 1% of the Fund's average daily net assets per annum. For
the actual payments made by the Fund and the outstanding uncovered distribution
charges of the Principal Underwriter, see "Fees and Expenses -- Distribution
Plan" in this Part II. The Fund believes that the combined rate of all these
payments may be higher than the rate of payments made under distribution plans
adopted by other investment companies pursuant to Rule 12b-1. Although the
Principal Underwriter will use its own funds (which may be borrowed from banks)
to pay sales commissions and service fees at the time of sale, it is anticipated
that the Eaton Vance organization will profit by reason of the operation of the
Plan through an increase in the Fund's assets (thereby increasing the advisory
fee payable to BMR by the Portfolio) resulting from sale of Fund shares and
through the amounts paid to the Principal Underwriter, including 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
paid to the Principal Underwriter under the Plan, and from CDSCs, have exceeded
the total expenses theretofore incurred by such organization in distributing
shares of the Fund. Total expenses for this purpose will include an allocable
portion of the overhead costs of such organization and its branch offices, which
costs will include without limitation leasing expense, depreciation of building
and equipment, utilities, communication and postage expense, compensation and
benefits of personnel, travel and promotional expense, stationery and supplies,
literature and sales aids, interest expense, data processing fees, consulting
and temporary help costs, insurance, taxes other than income taxes, legal and
auditing expense and other miscellaneous overhead items. Overhead is calculated
and allocated for such purpose by the Eaton Vance organization in a manner
deemed equitable to the Fund.
The Plan continues in effect from year to year for so long as such
continuance is approved at least annually by the vote of both a majority of (i)
the noninterested Trustees of the Trust who have no direct or indirect financial
interest in the operation of the Plan or any agreements related to the Plan (the
"Rule 12b-1 Trustees") and (ii) all of the Trustees then in office, and the
Distribution Agreement contains a similar provision. The Plan and Distribution
Agreement may be terminated at any time by vote of a majority of the Rule 12b-1
Trustees or by a vote of a majority of the outstanding voting securities of the
Fund. The Plan requires quarterly Trustees review of a written report of the
amount expended under the Plan and the purposes for which such expenditures were
made. The Plan may not be amended to increase materially the payments described
therein without approval of the shareholders of the Fund and the Trustees. So
long as the Plan is in effect, the selection and nomination of the noninterested
Trustees shall be committed to the discretion of such Trustees.
The Trustees of the Trust believe that the Plan will be a significant factor
in the expected growth of the Fund's assets, and will result in increased
investment flexibility and advantages which have benefited and will continue to
benefit the Fund and its shareholders. Payments for sales commissions and
distribution fees made to the Principal Underwriter under the Plan will
compensate the Principal Underwriter for its services and expenses in
distributing shares of the Fund. Service fee payments made to the Principal
Underwriter and Authorized Firms under the Plan provide incentives to provide
continuing personal services to investors and the maintenance of shareholder
accounts. By providing incentives to the Principal Underwriter and Authorized
Firms, the Plan is expected to result in the maintenance of, and possible future
growth in, the assets of the Fund. Based on the foregoing and other relevant
factors, the Trustees of the Trust have determined that in their judgment there
is a reasonable likelihood that the Plan will benefit the Fund and its
shareholders.
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return on
a hypothetical investment of $1,000 in the Fund covering the 1-, 5- and 10-year
periods ended March 31, 1997. The total return for the period prior to the
Fund's commencement of operations on June 8, 1994 reflect the Portfolio's total
return (or that of its predecessor) adjusted to reflect any applicable Fund
CDSC. Total return for this time period has not been adjusted to reflect the
Fund's distribution and/or service fees and certain other expenses. If such
adjustments were made, the performance would have been lower.
<PAGE>
VALUE OF A $1,000 INVESTMENT
<TABLE>
<CAPTION>
VALUE OF VALUE OF
INVESTMENT INVESTMENT
BEFORE AFTER TOTAL RETURN BEFORE TOTAL RETURN AFTER
DEDUCTING DEDUCTING DEDUCTING THE CDSC DEDUCTING THE CDSC*
INVESTMENT INVESTMENT AMOUNT OF THE CDSC THE CDSC* ------------------------- -----------------------
PERIOD DATE INVESTMENT ON 3/31/97 ON 3/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
------ ---- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
10 Years Ended
3/31/97** 3/31/88 $1,000 $2,220.08 $2,220.08 122.01% 8.30% 122.01% 8.30%
5 Years Ended
3/31/97** 3/31/92 $1,000 $1,588.87 $1,588.87 58.89% 9.70% 58.89% 9.70%
1 Year Ended
3/31/97** 3/31/96 $1,000 $1,114.35 $1,104.35 11.44% 11.44% 10.44% 10.44%
Past performance is not indicative of future results. Investment return and principal value will fluctuate; shares, when
redeemed, may be worth more or less than their original cost.
- ----------
* No CDSC is imposed on certain redemptions. See the Fund's current Prospectus.
** If a portion of the Fund's expenses had not been subsidized, the Fund would have had lower returns.
</TABLE>
For the thirty-day period ended March 31, 1997, the yield of the Fund was
7.14%. If a portion of the Fund's expenses had not been allocated to Eaton
Vance, the Fund would have had a lower yield.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of June 30, 1997, the Trustees and officers of the Trust, as a group,
owned in the aggregate less than 1% of the outstanding shares of the Fund. As of
June 30, 1997, Merrill Lynch, Pierce, Fenner & Smith, Inc. New Brunswick, NJ was
the record owner of approximately 29.8% of the outstanding shares, which were
held on behalf of its customers who are the beneficial owners of such shares,
and as to which it had voting power under certain limited circumstances. To the
knowledge of the Trust, no other person owned of record or beneficially 5% or
more of the Fund's outstanding shares on such date.
<PAGE>
[LOGO]
EATON VANCE
- -------------------
Mutual Funds
EV CLASSIC HIGH INCOME FUND
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
AUGUST 1, 1997
EV CLASSIC
HIGH INCOME FUND
24 FEDERAL STREET
BOSTON, MA 02110
- --------------------------------------------------------------------------------
INVESTMENT ADVISER OF HIGH INCOME PORTFOLIO
Boston Management and Research, 24 Federal Street, Boston, MA 02110
ADMINISTRATOR OF EV CLASSIC HIGH INCOME FUND
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 200 Clarendon Street, Boston, MA 02116
TRANSFER AGENT
First Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123
(800) 262-1122
AUDITORS
Deloitte & Touche LLP, 125 Summer Street, Boston, MA 02110
C-HISAI
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL INFORMATION
August 1, 1997
EV MARATHON HIGH INCOME FUND
24 Federal Street
Boston, Massachusetts 02110
(800) 225-6265
This Statement of Additional Information consists of two parts. Part I
provides information about EV Marathon High Income Fund (the "Fund"), High
Income Portfolio (the "Portfolio") and certain other series of Eaton Vance
Mutual Funds Trust (the "Trust"). Part II provides information solely about the
Fund. Where appropriate, Part I includes cross-references to the relevant
sections of Part II that provide additional, Fund-specific information. This
Statement of Additional Information is sometimes referred to herein as the
"SAI".
TABLE OF CONTENTS
Page
PART I
Additional Information about Investment Policies ...................... 2
Investment Restrictions ............................................... 6
Trustees and Officers ................................................. 7
Investment Adviser and Administrator .................................. 9
Custodian ............................................................. 11
Service for Withdrawal ................................................ 12
Determination of Net Asset Value ...................................... 12
Investment Performance ................................................ 13
Taxes ................................................................. 14
Principal Underwriter ................................................. 15
Portfolio Security Transactions ....................................... 16
Other Information ..................................................... 17
Independent Certified Public Accountants .............................. 19
Financial Statements .................................................. 19
PART II
Fees and Expenses ..................................................... a-1
Distribution Plan ..................................................... a-2
Performance Information ............................................... a-3
Control Persons and Principal Holders of Securities ................... a-4
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY THE FUND'S PROSPECTUS DATED AUGUST 1, 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 HIGH INCOME FUND THE PART I FOUND IN THE STATEMENT OF ADDITIONAL
INFORMATION OF EV CLASSIC HIGH INCOME FUND CONTAINED IN THIS AMENDMENT.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EV MARATHON HIGH INCOME FUND. The
Fund became a series of the Trust on August 1, 1995.
FEES AND EXPENSES
DISTRIBUTION PLAN
During the fiscal year ended March 31, 1997, the Principal Underwriter paid
to Authorized Firms sales commissions of $3,889,686 on sales of Fund shares.
During the same period, the Fund made payments under the Plan to the Principal
Underwriter aggregating $4,169,802, and the Principal Underwriter received
approximately $1,289,000 in CDSCs imposed on early redeeming shareholders. These
payments reduced uncovered distribution charges under the Plan. As at March 31,
1997 the outstanding uncovered distribution charges of the Principal Underwriter
calculated under the Plan amounted to approximately $17,708,000. During the
fiscal year ended March 31, 1997, the Fund made service fee payments to the
Principal Underwriter and Authorized Firms aggregating $1,016,419 of which
$1,010,359 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 March 31, 1997,
the Fund paid the Principal Underwriter $12,092.50 for repurchase transactions
handled by the Principal Underwriter.
TRUSTEES
The fees and expenses of the noninterested Trustees of the Trust and of the
Portfolio are paid by the Fund (and the other series of the Trust) and the
Portfolio, respectively. (The Trustees of the Trust and the Portfolio who are
members of the Eaton Vance organization receive no compensation from the Fund or
the Portfolio.) During the fiscal year ended March 31, 1997, the noninterested
Trustees of the Trust and the Portfolio earned the following compensation in
their capacities as Trustees from the Fund, the Portfolio and the funds in the
Eaton Vance fund complex(1):
AGGREGATE AGGREGATE TOTAL COMPENSATION
COMPENSATION COMPENSATION FROM TRUST AND
NAME FROM FUND FROM PORTFOLIO FUND COMPLEX
- ---- --------- -------------- ------------
Donald R. Dwight ....... $693 $4,190(2) $145,000(5)
Samuel L. Hayes, III ... 629 4,200(3) 155,000(6)
Norton H. Reamer ....... 626 4,060 145,000
John L. Thorndike ...... 644 4,267(4) 148,750(7)
Jack L. Treynor ........ 692 4,390 150,000
- ------------
(1) The Eaton Vance fund complex consists of 213 registered investment companies
or series thereof.
(2) Includes $1,846 of deferred compensation.
(3) Includes $707 of deferred compensation.
(4) Includes $2,120 of deferred compensation.
(5) Includes $47,187 of deferred compensation.
(6) Includes $19,062 of deferred compensation.
(7) Includes $55,276 of deferred compensation.
DISTRIBUTION PLAN
The Plan is designed to meet the requirements of Rule 12b-1 under the 1940
Act and the sales charge rule of the NASD. The purpose of the Plan is to
compensate the Principal Underwriter for its distribution services and
facilities provided to the Fund.
The Plan provides that the Fund will pay sales commissions and distribution
fees to the Principal Underwriter only after and as a result of the sale of
shares of the Fund. On each sale of Fund shares (excluding reinvestment of
distributions) the Fund will pay the Principal Underwriter amounts representing
(i) sales commissions equal to 5% of the amount received by the Fund for each
share sold and (ii) distribution fees calculated by applying the rate of 1% over
the prime rate then reported in The Wall Street Journal to the outstanding
balance of uncovered distribution charges (as described below) of the Principal
Underwriter.
The amount payable by the Fund to the Principal Underwriter pursuant to the
Plan as sales commissions and distribution fees with respect to each day will be
accrued on such day as a liability of the Fund and will accordingly reduce the
Fund's net assets upon such accrual, all in accordance with generally accepted
accounting principles. The amount payable on each day by the Fund is limited to
1/365 of .75% of the Fund's net assets on such day. The level of the Fund's net
assets changes each day and depends upon the amount of sales and redemptions of
Fund shares, the changes in the value of the investments held by the Portfolio,
the expenses of the Fund and the Portfolio accrued and allocated to the Fund on
such day, income on portfolio investments of the Portfolio accrued and allocated
to the Fund on such day, and any distributions declared on Fund shares. The Fund
does not accrue possible future payments as a liability of the Fund or reduce
the Fund's current net assets in respect of unknown amounts which may become
payable under the Plan in the future because the standards for accrual of a
liability under such accounting principles have not been satisfied.
The Plan provides that the Fund will receive all CDSCs and will make no
payments to the Principal Underwriter in respect of any day on which there are
no outstanding uncovered distribution charges of the Principal Underwriter.
CDSCs and accrued amounts will be paid by the Fund to the Principal Underwriter
whenever there exist uncovered distribution charges under the Plan.
In calculating daily the amount of uncovered distribution charges,
distribution charges will include the aggregate amount of sales commissions and
distribution fees theretofore paid plus the aggregate amount of sales
commissions and distribution fees which the Principal Underwriter is entitled to
be paid under the Plan since its inception. Payments theretofore paid or payable
under the Plan by the Fund to the Principal Underwriter and CDSCs theretofore
paid or payable to the Principal Underwriter will be subtracted from such
distribution charges; if the result of such subtraction is positive, a
distribution fee (computed at 1% over the prime rate then reported in The Wall
Street Journal) will be computed on such amount and added thereto, with the
resulting sum constituting the amount of outstanding uncovered distribution
charges with respect to such day. The amount of outstanding uncovered
distribution charges of the Principal Underwriter calculated on any day does not
constitute a liability recorded on the financial statements of the Fund.
The amount of uncovered distribution charges of the Principal Underwriter at
any particular time depends upon various changing factors, including the level
and timing of sales of Fund shares, the nature of such sales (i.e., whether they
result from exchange transactions, reinvestments or from cash sales through
Authorized Firms), the level and timing of redemptions of Fund shares upon which
a CDSC will be imposed, the level and timing of redemptions of Fund shares upon
which no CDSC will be imposed (including redemptions of Fund shares pursuant to
the exchange privilege which result in a reduction of uncovered distribution
charges), changes in the level of the net assets of the Fund, and changes in the
interest rate used in the calculation of the distribution fee under the Plan.
Periods with a high level of sales of Fund shares accompanied by a low level of
early redemptions of Fund shares resulting in the imposition of CDSCs will tend
to increase the time during which there will exist uncovered distribution
charges of the Principal Underwriter.
Currently, payments of sales commissions and distribution fees and of
service fees may equal 1% of the Fund's average daily net assets per annum. For
actual payments made by the Fund and the outstanding uncovered distribution
charges of the Principal Underwriter, see "Fees and Expenses -- Distribution
Plan" in this Part II. The Fund believes that the combined rate of all of 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 the sale of Fund shares and through amounts
paid to the Principal Underwriter, including CDSCs pursuant to the Plan. The
Eaton Vance organization may be considered to have realized a profit under the
Plan if at any point in time the aggregate amounts theretofore received by the
Principal Underwriter pursuant to the Plan and from CDSCs have exceeded the
total expenses theretofore incurred by such organization in distributing shares
of the Fund. Total expenses for this purpose will include an allocable portion
of the overhead costs of such organization and its branch offices, which costs
will include without limitation leasing expense, depreciation of building and
equipment, utilities, communication and postage expense, compensation and
benefits of personnel, travel and promotional expense, stationery and supplies,
literature and sales aids, interest expense, data processing fees, consulting
and temporary help costs, insurance, taxes other than income taxes, legal and
auditing expense and other miscellaneous overhead items. Overhead is calculated
and allocated for such purpose by the Eaton Vance organization in a manner
deemed equitable to the Fund.
The Plan continues in effect from year to year for so long as such
continuance is approved at least annually by the vote of both a majority of (i)
the noninterested Trustees of the Trust who have no direct or indirect financial
interest in the operation of the Plan or any agreement related to the Plan (the
"Rule 12b-1 Trustees") and (ii) all of the Trustees then in office, and the
Distribution Agreement contains a similar provision. The Plan and Distribution
Agreement may be terminated at any time by vote of a majority of the Rule 12b-1
Trustees or by a vote of a majority of the outstanding voting securities of the
Fund. The Plan requires quarterly Trustee review of a written report of the
amount expended under the Plan and the purposes for which such expenditures were
made. The Plan may not be amended to increase materially the payments described
therein without approval of the shareholders of the Fund and the Trustees. So
long as the Plan is in effect, the selection and nomination of the noninterested
Trustees shall be committed to the discretion of such Trustees.
The Trustees of the Trust believe that the Plan will be a significant factor
in the expected growth of the Fund's assets, and will result in increased
investment flexibility and advantages which have benefited and will continue to
benefit the Fund and its shareholders. Payments for sales commissions and
distribution fees made to the Principal Underwriter under the Plan will
compensate the Principal Underwriter for its services and expenses in
distributing shares of the Fund. Service fee payments made to the Principal
Underwriter and Authorized Firms under the Plan provide incentives to provide
continuing personal services to investors and the maintenance of shareholder
accounts. By providing incentives to the Principal Underwriter and Authorized
Firms, the Plan is expected to result in the maintenance of, and possible future
growth in, the assets of the Fund. Based on the foregoing and other relevant
factors, the Trustees of the Trust have determined that in their judgment there
is a reasonable likelihood that the Plan will benefit the Fund and its
shareholders.
PERFORMANCE INFORMATION
The table below indicates the cummulative and average annual total return on
a hypothetical investment of $1,000 in the Fund covering the 1-, 5-, and 10-year
periods ended March 31, 1997.
VALUE OF A $1,000 INVESTMENT
<TABLE>
<CAPTION>
VALUE OF VALUE OF
INVESTMENT INVESTMENT
BEFORE AFTER TOTAL RETURN TOTAL RETURN
DEDUCTING DEDUCTING BEFORE DEDUCTING THE CDSC AFTER DEDUCTING THE CDSC
INVESTMENT INVESTMENT AMOUNT OF THE CDSC THE CDSC* ------------------------ ------------------------
PERIOD DATE INVESTMENT ON 3/31/97 ON 3/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
------ ---- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
10 Years
Ended 3/31/97 3/31/88 $1,000 $2,250.41 $2,250.41 125.04% 8.45% 125.04% 8.45%
5 Years
Ended 3/31/97 3/31/92 $1,000 $1,610.68 $1,591.11 61.07% 10.00% 59.11% 9.73%
1 Year
Ended 3/31/97 3/31/96 $1,000 $1,113.67 $1,063.67 11.37% 11.37% 6.37% 6.37%
Past performance is not indicative of future results. Investment return and principal value will fluctuate; shares, when
redeemed, may be worth more or less than their original cost.
- ----------
*No CDSC is imposed on certain redemptions. See the Fund's current Prospectus.
</TABLE>
For the thirty-day period ended March 31, 1997, the yield of the Fund was
8.65%.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of June 30, 1997, the Trustees and officers of the Trust, as a group,
owned in the aggregate less than 1% of the outstanding shares of the Fund. As of
June 30, 1997, Merrill Lynch, Pierce, Fenner & Smith, Inc., New Brunswick, NJ
was the record owner of approximately 26.5% 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]
EATON VANCE
- -------------------
Mutual Funds
EV MARATHON
HIGH INCOME
FUND
STATEMENT OF ADDITIONAL INFORMATION
AUGUST 1, 1997
EV MARATHON
HIGH INCOME FUND
24 FEDERAL STREET
BOSTON, MA 02110
INVESTMENT ADVISER OF HIGH INCOME PORTFOLIO
Boston Management and Research, 24 Federal Street, Boston, MA 02110
ADMINISTRATOR OF EV MARATHON HIGH INCOME FUND
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 200 Clarendon Street, Boston, MA 02116
TRANSFER AGENT
First Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123
(800) 262-1122
AUDITORS
Deloitte & Touche LLP, 125 Summer Street, Boston, MA 02110
M-HISAI
<PAGE>
PART C
OTHER INFORMATION
ITEM 24: FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS
INCLUDED IN PART A:
FOR EV CLASSIC HIGH INCOME FUND:
Financial Highlights for the fiscal years ended March 31,
1997 and 1996 and for the period from the start of business,
June 8, 1994 through March 31, 1995.
FOR EV MARATHON HIGH INCOME FUND:
Financial Highlights for the ten years ended March 31, 1997.
INCORPORATED BY REFERENCE INTO PART B ARE THE FINANCIAL STATEMENTS
CONTAINED IN THE ANNUAL REPORTS FOR THE FOLLOWING FUNDS, EACH DATED
MARCH 31, 1997 (WHICH WERE PREVIOUSLY FILED ELECTRONICALLY PURSUANT
TO SECTION 30(b)(2) OF THE INVESTMENT COMPANY ACT OF 1940):
EV Classic High Income Fund (Accession No. 0000950109-97-004451)
EV Marathon High Income Fund (Accession No. 0000950109-97-004454)
The financial statements in each Fund's annual report include:
Statement of Assets and Liabilities
Statement of Operations
Statements of Changes in Net Assets
Financial Highlights
Notes to Financial Statements
Independent Auditors' Report
ALSO INCORPORATED BY REFERENCE INTO PART B ARE THE FOLLOWING FINANCIAL
STATEMENTS OF HIGH INCOME PORTFOLIO, WHICH ARE CONTAINED IN THE
FUNDS' ANNUAL REPORTS DATED MARCH 31, 1997:
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
(b) EXHIBITS:
(1)(a) Amended and Restated Declaration of Trust dated August 17,
1993 filed as Exhibit (1)(a) to Post-Effective Amendment No.
23 and incorporated herein by reference.
(b) Amendment to Declaration of Trust dated July 10, 1995 filed
as Exhibit (1)(b) to Post- Effective Amendment No. 23 and
incorporated herein by reference. (c) Amendment and
Restatement of Establishment and Designation of Series of
Shares dated May 7, 1996 filed as Exhibit (1)(d) to
Post-Effective Amendment No. 30 and incorporated herein by
reference.
(d) Establishment and Designation of Classes of Shares of
Beneficial Interest dated November 18, 1996 filed as Exhibit
1(e) to Post-Effective Amendment No. 31 and incorporated
herein by reference.
(2)(a) By-Laws (As Amended November 3, 1986) filed as Exhibit
(2)(a) to Post-Effective Amendment No. 23 and incorporated
herein by reference.
(b) Amendment to By-Laws dated December 13, 1993 filed as
Exhibit (2)(b) to Post-Effective Amendment No. 23 and
incorporated herein by reference.
(3) Not applicable
(4) Not applicable
(5)(a) Investment Advisory Agreement with Eaton Vance Management
for Eaton Vance Short-Term Treasury Fund dated February 4,
1991 filed as Exhibit (5)(a) to Post-Effective Amendment No.
23 and incorporated herein by reference.
(b) Investment Advisory Agreement with Eaton Vance Management
for Eaton Vance Tax Free Reserves dated August 15, 1995
filed as Exhibit (5)(b) to Post-Effective Amendment No. 25
and incorporated herein by reference.
(6)(a)(1) Distribution Agreement between Eaton Vance Mutual Funds
Trust (on behalf of its Classic series) and Eaton Vance
Distributors, Inc. effective November 1, 1996 (with attached
Schedule A effective November 1, 1996) filed as Exhibit No.
(6)(a)(1) to Post-Effective Amendment No. 34 and
incorporated herein by reference.
(2) Distribution Agreement between Eaton Vance Mutual Funds
Trust (on behalf of its Marathon series) and Eaton Vance
Distributors, Inc. effective November 1, 1996 (with attached
Schedule A effective November 1, 1996) filed as Exhibit
(6)(a)(2) to Post- Effective Amendment No. 34 and
incorporated herein by reference.
(3) Distribution Agreement between Eaton Vance Mutual Funds
Trust (on behalf of its Traditional series) and Eaton Vance
Distributors, Inc. effective November 1, 1996 (with attached
Schedule A effective November 1, 1996) filed as Exhibit No.
(6)(a)(3) to Post- Effective Amendment No. 34 and
incorporated herein by reference.
(4) Distribution Agreement between Eaton Vance Mutual Funds
Trust, on behalf of Eaton Vance Cash Management Fund, and
Eaton Vance Distributors, Inc. effective November 1, 1996
filed as Exhibit No. (6)(a)(4) to Post-Effective Amendment
No. 34 and incorporated herein by reference.
(5) Distribution Agreement between Eaton Vance Mutual Funds
Trust, on behalf of Eaton Vance Liquid Assets Fund, and
Eaton Vance Distributors, Inc. effective November 1, 1996
filed as Exhibit No. (6)(a)(5) to Post-Effective Amendment
No. 34 and incorporated herein by reference.
(6) Distribution Agreement between Eaton Vance Mutual Funds
Trust, on behalf of Eaton Vance Money Market Fund, and Eaton
Vance Distributors, Inc. effective November 1, 1996 filed as
Exhibit No. (6)(a)(6) to Post-Effective Amendment No. 34 and
incorporated herein by reference.
(7) Distribution Agreement between Eaton Vance Mutual Funds
Trust, on behalf of Eaton Vance Tax Free Reserves, and Eaton
Vance Distributors, Inc. effective November 1, 1996 filed as
Exhibit No. (6)(a)(7) to Post-Effective Amendment No. 34 and
incorporated herein by reference.
(b) Selling Group Agreement between Eaton Vance Distributors,
Inc. and Authorized Dealers filed as Exhibit (6)(b) to the
Registration Statement of Eaton Vance Growth Trust Post-
Effective Amendment No. 61 and incorporated herein by
reference.
(7) The Securities and Exchange Commission has granted the
Registrant an exemptive order that permits the Registrant to
enter into deferred compensation arrangements with its
independent Trustees. See in the Matter of Capital Exchange
Fund, Inc., Release No. IC-20671 (November 1, 1994).
(8)(a) Custodian Agreement with Investors Bank & Trust Company
dated October 15, 1992 filed as Exhibit (8) to
Post-Effective Amendment No. 23 and incorporated herein by
reference.
(b) Amendment to Custodian Agreement with Investors Bank & Trust
Company dated October 23, 1995 filed as Exhibit (8)(b) to
Post-Effective Amendment No. 27 and incorporated herein by
reference.
(9)(a) Amended Administrative Services Agreement between Eaton
Vance Mutual Funds Trust (on behalf of each of its series)
and Eaton Vance Management dated July 31, 1995, with
attached schedules (including Amended Schedule A dated May
7, 1996) filed as Exhibit (9)(a) to Post-Effective Amendment
No. 24 and incorporated herein by reference.
(b) Transfer Agency Agreement dated June 7, 1989 filed as
Exhibit 9(d) to Post-Effective Amendment No. 65 to the
Registration Statement of Eaton Vance Growth Trust (File
Nos. 2-22019, 811-1241) and incorporated herein by
reference.
(c) Amendment to Transfer Agency Agreement dated February 1,
1993 filed as Exhibit 9(e) to Post-Effective Amendment No.
65 to the Registration Statement of Eaton Vance Growth Trust
(File Nos. 2-22019, 811-1241) and incorporated herein by
reference.
(10) Not applicable
(11)(a) Consent of Independent Auditors for EV Classic High Income
Fund filed herewith.
(b) Consent of Independent Auditors for EV Marathon High Income
Fund filed herewith.
(c) Consent of Independent Auditors for High Income Portfolio
filed herewith.
(13) Not applicable
(14)(a) Vance, Sanders Profit Sharing Retirement Plan for
Self-Employed Persons with Adoption Agreement and
instructions filed as Exhibit No. 14(1) to Post-Effective
Amendment #22 on Form N-1 under the Securities Act of 1933
(File No. 2-28471) and incorporated herein by reference.
(b) Eaton & Howard, Vance Sanders Defined Contribution Prototype
Plan and Trust with Adoption Agreements (1) Basic
Profit-Sharing Retirement Plan, (2) Basic Money Purchase
Pension Plan, (3) Thrift Plan Qualifying as Profit Sharing
Plan, (4) Thrift Plan Qualifying as Money Purchase Plan, (5)
Integrated Profit Sharing Retirement Plan, (6) Integrated
Money Purchase Pension Plan filed as Exhibit 14(2) to
Post-Effective Amendment No. 22 on Form N-1 under the
Securities Act of 1933 (File No. 2-28471) and incorporated
herein by reference.
(c) Individual Retirement Custodial Account (Form 5305-A) and
Investment Instruction Form filed as Exhibit 14(3) to
Post-Effective Amendment No. 22 on Form N-1 under the
Securities Act of 1933 (File No. 2-28471) and incorporated
herein by reference.
(d) Eaton & Howard, Vance Sanders Variable Pension Prototype
Plan and Trust with Adoption Agreement filed as Exhibit
14(b) to Post-Effective Amendment No. 22 on Form N-1 under
the Securities Act of 1933 (File No. 2-28471) and
incorporated herein by reference.
(15)(a) Service Plan for Eaton Vance Government Obligations Fund
(now EV Traditional Government Obligations Fund) dated July
7, 1993 filed as Exhibit (15)(a) to Post-Effective Amendment
No. 23 and incorporated herein by reference.
(1) Amendment to Service Plan for Eaton Vance Mutual Funds Trust
on behalf of EV Traditional Government Obligations Fund
adopted June 24, 1996 filed as Exhibit No. (15)(a)(1) to
Post-Effective Amendment No. 34 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.
(1) Amendment to Distribution Plan for Eaton Vance Mutual Funds
Trust on behalf of Eaton Vance Short-Term Treasury Fund
adopted June 24, 1996 filed as Exhibit No. (15)(b)(1) to
Post-Effective Amendment No. 34 and incorporated herein by
reference.
(c) Amended Distribution Plan for EV Classic Government
Obligations Fund pursuant to Rule 12b-1 under the Investment
Company Act of 1940 dated January 27, 1995 filed as Exhibit
(15)(c) to Post-Effective Amendment No. 22 and incorporated
herein by reference.
(1) Amendment to Amended Distribution Plan for Eaton Vance
Mutual Funds Trust on behalf of EV Classic Government
Obligations Fund adopted June 24, 1996 filed as Exhibit No.
(15)(c)(1) to Post-Effective Amendment No. 34 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.
(1) Amendment to Distribution Plan for Eaton Vance Mutual Funds
Trust on behalf of EV Marathon Government Obligations Fund
adopted June 24, 1996 filed as Exhibit No. (15)(d) (1) to
Post-Effective Amendment No. 34 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.
(1) Amendment to Distribution Plan for Eaton Vance Mutual Funds
Trust on behalf of Eaton Vance Liquid Assets Fund adopted
June 24, 1996 filed as Exhibit No. (15)(i)(1) to Post-
Effective Amendment No. 34 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.
(1) Amendment to Distribution Plan for Eaton Vance Mutual Funds
Trust on behalf of Eaton Vance Money Market Fund adopted
June 24, 1996 filed as Exhibit No. (15)(j)(1) to Post-
Effective Amendment No. 34 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
June 23, 1997, filed as Exhibit No. (17)(a) to
Post-Effective Amendment No. 35 and incorporated herein by
reference.
(b) Power of Attorney for Government Obligations Portfolio dated
April 22, 1997 filed herewith.
(c) Power of Attorney for High Income Portfolio dated February
14, 1997 filed herewith.
(d) Power of Attorney for Strategic Income Portfolio dated April
22, 1997 filed herewith.
(e) Power of Attorney for Cash Management Portfolio dated April
22, 1997 filed herewith.
(f) Power of Attorney for Tax-Managed Growth Portfolio dated
October 23, 1995 filed as Exhibit (17)(f) to Post-Effective
Amendment No. 26 and incorporated herein by reference.
(18) Multiple Class Plan for Institutional Shares dated November
18, 1996 filed as Exhibit (18) to Post-Effective Amendment
No. 31 and incorporated herein by reference.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Not applicable
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
(1) (2)
TITLE OF CLASS NUMBER OF RECORD HOLDERS
Shares of beneficial interest without par value as of June 30, 1997
Eaton Vance Short-Term Treasury Fund 67
EV Classic Government Obligations Fund 3,309
EV Marathon Government Obligations Fund 3,318
EV Traditional Government Obligations Fund 8,806
EV Classic High Income Fund 443
EV Marathon High Income Fund 16,388
EV Classic Strategic Income Fund 39
EV Marathon Strategic Income Fund 5,421
EV Classic Tax-Managed Growth Fund 4,458
EV Marathon Tax-Managed Growth Fund 10,298
EV Traditional Tax-Managed Growth Fund 3,915
Eaton Vance Cash Management Fund 2,174
Eaton Vance Liquid Assets Fund 475
Eaton Vance Money Market Fund 777
Eaton Vance Tax Free Reserves 183
ITEM 27. INDEMNIFICATION
Article IV of the Trust's Amended and Restated Declaration of Trust permits
Trustee and officer indemnification by By-law, contract and vote. Article XI of
the By-laws contains indemnification provisions. Registrant's Trustees and
officers are insured under a standard mutual fund errors and omissions insurance
policy covering insured by reason of negligent errors and omissions committed in
their capacities as such.
The distribution agreements of the Trust also provide for reciprocal
indemnity of the Principal Underwriter, on the one hand, and the Trustees and
officers, on the other.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Reference is made to the information set forth under the captions
"Investment Adviser and Administrator" or "Investment Adiviser" in the
Statements of Additional Information which information is incorporated herein by
reference.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Registrant's principal underwriter, Eaton Vance Distributors, Inc., a
wholly-owned subsidiary of Eaton Vance Management, is the principal
underwriter for each of the investment companies named below:
Eaton Vance Growth Trust Eaton Vance Mutual Funds Trust
Eaton Vance Income Fund of Boston Eaton Vance Prime Rate Reserves
Eaton Vance Investment Trust Eaton Vance Special Investment Trust
Eaton Vance Municipals Trust EV Classic Senior Floating-Rate Fund
Eaton Vance Municipals Trust II EV Traditional Worldwide Health
Eaton Vance Municipal Bond Fund L.P. Sciences Fund, Inc.
(b)
<TABLE>
<CAPTION>
(1) (2) (3)
NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICE
BUSINESS ADDRESS* WITH PRINCIPAL UNDERWRITER WITH REGISTRANT
------------------ -------------------------- --------------------
<S> <C> <C>
James B. Hawkes Vice President and Director Vice President and Trustee
William M. Steul Vice President and Director None
Wharton P. Whitaker President and Director None
Chris Berg Vice President None
Kate Bradshaw Vice President None
David B. Carle Vice President None
Daniel C. Cataldo 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 Secretary
James Foley Vice President None
Michael A. Foster Vice President None
William M. Gillen Senior Vice President None
Hugh S. Gilmartin Vice President None
Perry D. Hooker Vice President None
Brian Jacobs Senior Vice President None
Thomas P. Luka Vice President None
John Macejka Vice President None
Timothy D. McCarthy Vice President None
Joseph T. McMenamin Vice President None
Morgan C. Mohrman Senior Vice President None
James A. Naughton Vice President None
Mark D. Nelson Vice President None
Linda D. Newkirk Vice President None
James L. O'Connor Vice President Treasurer
Thomas Otis Secretary and Clerk None
George D. Owen, II Vice President None
F. Anthony Robinson Vice President None
Jay S. Rosoff Vice President None
Benjamin A. Rowland, Jr. Vice President, Treasurer and Director None
Stephen M. Rudman Vice President None
John P. Rynne Vice President Assistant Secretary
Kevin Schrader Vice President None
George V.F. Schwab, Jr. Vice President None
Cornelius J. Sullivan Vice President None
John M. Trotsky Vice President None
David M. Thill Vice President None
Chris Volf Vice President None
Sue Wilder Vice President None
- ----------
*Address is 24 Federal Street, Boston, MA 02110
</TABLE>
(c) Not applicable
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
All applicable accounts, books and documents required to be maintained by
the Registrant by Section 31(a) of the Investment Company Act of 1940 and the
Rules promulgated thereunder are in the possession and custody of the
Registrant's custodian, Investors Bank & Trust Company, 200 Clarendon Street,
16th Floor, Mail Code ADM27, Boston, MA 02116 and its transfer agent, First Data
Investor Services Group, 4400 Computer Drive, Westborough, MA 01581, with the
exception of certain corporate documents and portfolio trading documents which
are in the possession and custody of Eaton Vance Management, 24 Federal Street,
Boston, MA 02110. Certain corporate documents of the Portfolio are also
maintained by IBT Trust Company (Cayman), Ltd., The Bank of Nova Scotia
Building, P.O. Box 501, George Town, Grand Cayman, Cayman Islands, British West
Indies, and certain investor accounts and HI Portfolio and the Registrant's
accounting records are held by IBT Fund Services (Canada) Inc., 1 First Canadian
Place, Kingstreet West, Suite 2800, P.O. Box 231, Toronto, Ontario, Canada M5X
1C8. Registrant is informed that all applicable accounts, books and documents
required to be maintained by registered investment advisers are in the custody
and possession of Eaton Vance Management.
ITEM 31. MANAGEMENT SERVICES
Not applicable
ITEM 32. UNDERTAKINGS
The Registrant undertakes to furnish to each person to whom a prospectus is
delivered a copy of the latest annual report to shareholders, upon request and
without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, and the
Investment Company Act of 1940, the Registrant certifies that it meets all
requirements for effectiveness of this Amendment to the Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused
this Post-Effective Amendment to its Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Boston, and
the Commonwealth of Massachusetts, on the 21st day of July, 1997.
EATON VANCE MUTUAL FUNDS TRUST
By: /s/ M. DOZIER GARDNER
-------------------------------------------
M. DOZIER GARDNER, President
Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment to the Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
President, Principal
Executive Officer and
/s/ M. DOZIER GARDNER Trustee July 21, 1997
- --------------------------------------
M. DOZIER GARDNER
Treasurer and Principal
Financial and Accounting
/s/ JAMES L. O'CONNOR Officer July 21, 1997
- --------------------------------------
JAMES L. O'CONNOR
/s/ JAMES B. HAWKES Vice President, Trustee July 21, 1997
- --------------------------------------
JAMES B. HAWKES
DONALD R. DWIGHT* Trustee July 21, 1997
- --------------------------------------
DONALD R. DWIGHT
SAMUEL L. HAYES, III* Trustee July 21, 1997
- --------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee July 21, 1997
- --------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee July 21, 1997
- --------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee July 21, 1997
- --------------------------------------
JACK L. TREYNOR
*By: /s/ ALAN R. DYNNER
----------------------------------
ALAN R. DYNNER
As Attorney-in-fact
</TABLE>
<PAGE>
SIGNATURES
High Income Portfolio has duly caused this Amendment to the Registration
Statement on Form N-1A of Eaton Vance Mutual Funds Trust (File No. 2-90946) to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Boston, and the Commonwealth of Massachusetts, on the 21st day of July,
1997.
HIGH INCOME PORTFOLIO
By: /s/ M. DOZIER GARDNER
------------------------------------------
M. DOZIER GARDNER, President
This Amendment to the Registration Statement on Form N-1A of Eaton Vance
Mutual Funds Trust (File No. 2-90946) has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
Trustee, President and
Principal Executive
/s/ M. DOZIER GARDNER Officer July 21, 1997
- --------------------------------------
M. DOZIER GARDNER
Treasurer and Principal
Financial and Accounting
/s/ JAMES L. O'CONNOR Officer July 21, 1997
- --------------------------------------
JAMES L. O'CONNOR
/s/ JAMES B. HAWKES Trustee July 21, 1997
- --------------------------------------
JAMES B. HAWKES
DONALD R. DWIGHT* Trustee July 21, 1997
- --------------------------------------
DONALD R. DWIGHT
SAMUEL L. HAYES, III* Trustee July 21, 1997
- --------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee July 21, 1997
- --------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee July 21, 1997
- --------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee July 21, 1997
- --------------------------------------
JACK L. TREYNOR
*By: /s/ ALAN R. DYNNER
----------------------------------
ALAN R. DYNNER
As Attorney-in-fact
</TABLE>
<PAGE>
<TABLE>
EXHIBIT INDEX
<CAPTION>
PAGE IN SEQUENTIAL
EXHIBIT NO. DESCRIPTION NUMBERING SYSTEM
- ----------- ----------- ------------------
<S> <C> <C>
(11)(a) Consent of Independent Auditors for EV Classic High
Income Fund.
(11)(b) Consent of Independent Auditors for EV Marathon High
Income Fund.
(11)(c) Consent of Independent Auditors for High Income
Portfolio.
(16) Schedules for Computation of Performance Quotations.
(17)(b) Power of Attorney for Government Obligations Portfolio
dated April 22, 1997.
(17)(c) Power of Attorney for High Income Portfolio dated February 14, 1997.
(17)(d) Power of Attorney for Strategic Income Portfolio dated April 22, 1997.
(17)(e) Power of Attorney for Cash Management Portfolio dated April 22, 1997.
</TABLE>
<PAGE>
EXHIBIT (11)(a)
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 36 to the
Registration Statement of Eaton Vance Mutual Funds Trust (1933 Act File No.
2-90946) on behalf of EV Classic High Income Fund of our report dated May 9,
1997 relating to such Fund, which report is included in the Annual Report to
Shareholders for the year ended March 31, 1997 and incorporated by reference in
the Statement of Additional Information, which is part of such Registration
Statement.
We also consent to the reference to our Firm under the heading "The Fund's
Financial Highlights" in the Prospectus and under the captions "Independent
Certified Public Accountants" and "Financial Statements" in the Statement of
Additional Information of the Registration Statement.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
July 21, 1997
Boston, Massachusetts
<PAGE>
EXHIBIT (11)(b)
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 36 to the
Registration Statement of Eaton Vance Mutual Funds Trust (1933 Act File No.
2-90946) on behalf of EV Marathon High Income Fund of our report dated May 9,
1997 relating to such Fund, which report is included in the Annual Report to
Shareholders for the year ended March 31, 1997 and incorporated by reference in
the Statement of Additional Information, which is part of such Registration
Statement.
We also consent to the reference to our Firm under the heading "The Fund's
Financial Highlights" in the Prospectus and under the captions "Independent
Certified Public Accountants" and "Financial Statements" in the Statement of
Additional Information of the Registration Statement.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
July 21, 1997
Boston, Massachusetts
<PAGE>
EXHIBIT (11)(c)
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Post-Effective Amendment No.
36 to the Registration Statement of Eaton Vance Mutual Funds Trust (1933 Act
File No. 2-90946) on behalf of EV Classic High Income Fund and EV Marathon High
Income Fund of our report relating to High Income Portfolio dated May 9, 1997,
in the Statement of Additional Information, which is part of such Registration
Statement.
/s/ Deloitte & Touche
DELOITTE & TOUCHE
July 21, 1997
Grand Cayman, Cayman Islands
British West Indies
<PAGE>
<TABLE>
EXHIBIT 16
INVESTMENT PERFORMANCE -- EV CLASSIC HIGH INCOME FUND
The table below indicates the total return (capital changes plus reinvestment of all distributions) on a hypothetical investment of
$1,000 in the Fund covering the 1, 5, and 10 year periods ended March 31, 1997. Total return for the period prior to the
Fund's commencement of operations is for the Portfolio (or its predecessor) adjusted for the Fund's sales charge.
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
PERIOD DATE ON 03/31/97 ON 03/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
10 YEARS ENDED
03/31/97 03/31/87 $2,220.08 $2,220.08 122.01% 8.30% 122.01% 8.30%
5 YEARS ENDED
03/31/97 03/31/92 $1,588.87 $1,588.87 58.89% 9.70% 58.89% 9.70%
1 YEAR ENDED
03/31/97 03/31/96 $1,114.35 $1,104.35 11.44% 11.44% 10.44% 10.44%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC *
Cumulative total return is calculated using the following formula:
T = ( ERV / P ) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC **
P = an initial investment of $1,000
* The average annual total return not including the CDSC is calculated based the ending investment value
before deducting the CDSC.
** The cumulative total return not including the CDSC is calculated based the ending investment value before
deducting the CDSC.
</TABLE>
<PAGE>
Exhibit 16
EV CLASSIC HIGH INCOME FUND
CALCULATION OF YIELD
For the 30 days ended 3/31/97:
Interest Income: $147,729
Plus Dividend Income: $0
---------
Equal Gross Income $147,729
Minus Expenses: $44,812
---------
Equal Net Investment Income: $102,917
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends 1,783,042
---------
Equal Net Investment Income Earned Per Share $0.0577
Net Asset Value Per Share 3/31/97 $9.8400
30 Day Yield* 7.14%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0577/$9.84)+1) -1]
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EV MARATHON HIGH INCOME FUND
The table below indicates the total return (capital changes plus reinvestment of all distributions) on a hypothetical investment of
$1,000 in the Fund covering the 1, 5, and 10 year periods ended March 31, 1997.
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
PERIOD DATE ON 03/31/97 ON 03/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
10 YEARS ENDED
03/31/97 03/31/87 $2,250.41 $2,250.41 125.04% 8.45% 125.04% 8.45%
5 YEARS ENDED
03/31/97 03/31/92 $1,610.68 $1,591.11 61.07% 10.00% 59.11% 9.73%
1 YEAR ENDED
03/31/97 03/31/96 $1,113.67 $1,063.67 11.37% 11.37% 6.37% 6.37%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC *
Cumulative total return is calculated using the following formula:
T = ( ERV / P ) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC **
P = an initial investment of $1,000
* The average annual total return not including the CDSC is calculated based the ending investment value
before deducting the CDSC.
** The cumulative total return not including the CDSC is calculated based the ending investment value before
deducting the CDSC.
</TABLE>
<PAGE>
Exhibit 16
EV MARATHON HIGH INCOME FUND
CALCULATION OF YIELD
For the 30 days ended 3/31/97:
Interest Income: $5,045,133
Plus Dividend Income: $0
----------
Equal Gross Income $5,045,133
Minus Expenses: $816,321
----------
Equal Net Investment Income $4,228,812
Divided by Average daily number of
outstanding that were entitled
to receive dividend 82,729,230
----------
Equal Net Investment Income Earned Per Share $0.0511
Net Asset Value Per Share 3/31/97 $7.2200
30 Day Yield: 8.65%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0511/$7.22)+1) -1]
<PAGE>
EXHIBIT 17(B)
POWER OF ATTORNEY
We, the undersigned officers and Trustees of Government Obligations
Portfolio, a New York trust, do hereby severally constitute and appoint Alan R.
Dynner, James B. Hawkes and Eric G. Woodbury, or any of them, to be true,
sufficient and lawful attorneys, or attorney for each of us, to sign for each of
us, in the name of each of us in the capacities indicated below, any and all
amendments (including post-effective amendments) to the Registration Statement
on Form N-1A filed by Eaton Vance Mutual Funds Trust with the Securities and
Exchange Commission in respect of shares of beneficial interest and other
documents and papers relating thereto.
IN WITNESS WHEREOF we have hereunto set our hands on the dates set
opposite our respective signatures.
Signature Title Date
--------- ----- ----
President, Principal
/s/ M. Dozier Gardner Executive Officer and April 22, 1997
- -------------------------- Trustee
M. Dozier Gardner
Treasurer and
/s/ James L. O'Connor Principal Financial April 22, 1997
- -------------------------- and Accounting
James L. O'Connor Officer
/s/ Donald R. Dwight Trustee April 22, 1997
- --------------------------
Donald R. Dwight
/s/ James B. Hawkes Trustee April 22, 1997
- --------------------------
James B. Hawkes
/s/ Samuel L. Hayes, III Trustee April 22, 1997
- --------------------------
Samuel L. Hayes, III
/s/ Norton H. Reamer Trustee April 22, 1997
- --------------------------
Norton H. Reamer
/s/ John L. Thorndike Trustee April 22, 1997
- --------------------------
John L. Thorndike
/s/ Jack L. Treynor Trustee April 22, 1997
- -------------------------------
Jack L. Treynor
<PAGE>
EXHIBIT 17(C)
POWER OF ATTORNEY
We, the undersigned officers and Trustees of High Income Portfolio, a
New York trust, do hereby severally constitute and appoint Alan R. Dynner, James
B. Hawkes and Eric G. Woodbury, or any of them, to be true, sufficient and
lawful attorneys, or attorney for each of us, to sign for each of us, in the
name of each of us in the capacities indicated below, any and all amendments
(including post-effective amendments) to the Registration Statement on Form N-1A
filed by Eaton Vance Mutual Funds Trust with the Securities and Exchange
Commission in respect of shares of beneficial interest and other documents and
papers relating thereto.
IN WITNESS WHEREOF we have hereunto set our hands, in Hamilton, Bermuda,
on the dates set opposite our respective signatures.
Signature Title Date
--------- ----- ----
President, Principal
Executive Officer and
/s/ M. Dozier Gardner Trustee February 14, 1997
- --------------------------
M. Dozier Gardner
Treasurer and Principal
/s/ James L. O'Connor Financial and Accounting February 14, 1997
- -------------------------- Officer
James L. O'Connor
/s/ Donald R. Dwight Trustee February 14, 1997
- --------------------------
Donald R. Dwight
/s/ James B. Hawkes Trustee February 14, 1997
- --------------------------
James B. Hawkes
/s/ Samuel L. Hayes, III Trustee February 14, 1997
- --------------------------
Samuel L. Hayes, III
- -------------------------- Trustee
Norton H. Reamer
/s/ John L. Thorndike Trustee February 14, 1997
- --------------------------
John L. Thorndike
/s/ Jack L. Treynor Trustee February 14, 1997
- --------------------------
Jack L. Treynor
<PAGE>
EXHIBIT 17(C)
POWER OF ATTORNEY
We, the undersigned officers and Trustees of High Income Portfolio, a
New York trust, do hereby severally constitute and appoint Alan R. Dynner, James
B. Hawkes and Eric G. Woodbury, or any of them, to be true, sufficient and
lawful attorneys, or attorney for each of us, to sign for each of us, in the
name of each of us in the capacities indicated below, any and all amendments
(including post-effective amendments) to the Registration Statement on Form N-1A
filed by Eaton Vance Mutual Funds Trust with the Securities and Exchange
Commission in respect of shares of beneficial interest and other documents and
papers relating thereto.
IN WITNESS WHEREOF we have hereunto set our hands, in Hamilton, Bermuda,
on the dates set opposite our respective signatures.
Signature Title Date
--------- ----- ----
President, Principal
Executive Officer and
- ------------------------------ Trustee
M. Dozier Gardner
Treasurer and Principal
- ------------------------------ Financial and Accounting
James L. O'Connor Officer
- ------------------------------ Trustee
Donald R. Dwight
- ------------------------------ Trustee
James B. Hawkes
- ------------------------------ Trustee
Samuel L. Hayes, III
/s/ Norton H. Reamer * Trustee April 23, 1997
- ------------------------------
Norton H. Reamer
- ------------------------------ Trustee
John L. Thorndike
- ------------------------------ Trustee
Jack L. Treynor
*Executed in Frankfurt, Germany
<PAGE>
EXHIBIT 17(D)
POWER OF ATTORNEY
We, the undersigned officers and Trustees of Strategic Income Portfolio,
a New York trust, do hereby severally constitute and appoint Alan R. Dynner,
James B. Hawkes and Eric G. Woodbury, or any of them, to be true, sufficient and
lawful attorneys, or attorney for each of us, to sign for each of us, in the
name of each of us in the capacities indicated below, any and all amendments
(including post-effective amendments) to the Registration Statement on Form N-1A
filed by Eaton Vance Mutual Funds Trust with the Securities and Exchange
Commission in respect of shares of stock and other documents and papers relating
thereto.
IN WITNESS WHEREOF we have hereunto set our hands on the dates set
opposite our respective signatures.
Signature Title Date
--------- ----- ----
President, Principal
/s/ James B. Hawkes Executive Officer and April 22, 1997
- -------------------------- Trustee
James B. Hawkes
Treasurer and
/s/ James L. O'Connor Principal Financial April 22, 1997
- -------------------------- and Accounting
James L. O'Connor Officer
/s/ Donald R. Dwight Trustee April 22, 1997
- --------------------------
Donald R. Dwight
/s/ Samuel L. Hayes, III Trustee April 22, 1997
- --------------------------
Samuel L. Hayes, III
/s/ Norton H. Reamer Trustee April 22, 1997
- --------------------------
Norton H. Reamer
/s/ John L. Thorndike Trustee April 22, 1997
- --------------------------
John L. Thorndike
/s/ Jack L. Treynor Trustee April 22, 1997
- --------------------------
Jack L. Treynor
<PAGE>
EXHIBIT 17(E)
POWER OF ATTORNEY
We, the undersigned officers and Trustees of Cash Management Portfolio,
a New York trust, do hereby severally constitute and appoint Alan R. Dynner,
James B. Hawkes and Eric G. Woodbury, or any of them, to be true, sufficient and
lawful attorneys, or attorney for each of us, to sign for each of us, in the
name of each of us in the capacities indicated below, any and all amendments
(including post-effective amendments) to the Registration Statement on Form N-1A
filed by Eaton Vance Mutual Funds Trust with the Securities and Exchange
Commission in respect of shares of beneficial interest and other documents and
papers relating thereto.
IN WITNESS WHEREOF we have hereunto set our hands on the dates set
opposite our respective signatures.
Signature Title Date
--------- ----- ----
President, Principal
/s/ M. Dozier Gardner Executive Officer and April 22, 1997
- -------------------------- Trustee
M. Dozier Gardner
Treasurer and
/s/ James L. O'Connor Principal Financial April 22, 1997
- -------------------------- and Accounting
James L. O'Connor Officer
/s/ Donald R. Dwight Trustee April 22, 1997
- --------------------------
Donald R. Dwight
/s/ James B. Hawkes Trustee April 22, 1997
- --------------------------
James B. Hawkes
/s/ Samuel L. Hayes, III Trustee April 22, 1997
- --------------------------
Samuel L. Hayes, III
/s/ Norton H. Reamer Trustee April 22, 1997
- --------------------------
Norton H. Reamer
/s/ John L. Thorndike Trustee April 22, 1997
- --------------------------
John L. Thorndike
/s/ Jack L. Treynor Trustee April 22, 1997
- ---------------------------------
Jack L. Treynor
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 8
<NAME> EV CLASSIC HIGH INCOME FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 17279
<INVESTMENTS-AT-VALUE> 17489
<RECEIVABLES> 68
<ASSETS-OTHER> 13
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 17570
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 278
<TOTAL-LIABILITIES> 278
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 17139
<SHARES-COMMON-STOCK> 1757
<SHARES-COMMON-PRIOR> 1150
<ACCUMULATED-NII-CURRENT> 7
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (64)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 210
<NET-ASSETS> 17292
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 1216
<EXPENSES-NET> 131
<NET-INVESTMENT-INCOME> 1085
<REALIZED-GAINS-CURRENT> (24)
<APPREC-INCREASE-CURRENT> 160
<NET-CHANGE-FROM-OPS> 1222
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1075
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1478
<NUMBER-OF-SHARES-REDEEMED> 567
<SHARES-REINVESTED> 57
<NET-CHANGE-IN-ASSETS> 968
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (82)
<OVERDISTRIB-NII-PRIOR> 2
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 199
<AVERAGE-NET-ASSETS> 12225
<PER-SHARE-NAV-BEGIN> 9.65
<PER-SHARE-NII> 0.878
<PER-SHARE-GAIN-APPREC> 0.181
<PER-SHARE-DIVIDEND> 0.869
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.84
<EXPENSE-RATIO> 1.74
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 7
<NAME> EV MARATHON HIGH INCOME FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 589139
<INVESTMENTS-AT-VALUE> 600277
<RECEIVABLES> 1546
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 601823
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3550
<TOTAL-LIABILITIES> 3550
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 660682
<SHARES-COMMON-STOCK> 82808
<SHARES-COMMON-PRIOR> 76995
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 2060
<ACCUMULATED-NET-GAINS> (71487)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 11138
<NET-ASSETS> 598273
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 55979
<EXPENSES-NET> 6105
<NET-INVESTMENT-INCOME> 49874
<REALIZED-GAINS-CURRENT> (3890)
<APPREC-INCREASE-CURRENT> 13832
<NET-CHANGE-FROM-OPS> 59816
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 49874
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 447
<NUMBER-OF-SHARES-SOLD> 24378
<NUMBER-OF-SHARES-REDEEMED> 13725
<SHARES-REINVESTED> 2122
<NET-CHANGE-IN-ASSETS> 101307
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (69625)
<OVERDISTRIB-NII-PRIOR> 2265
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 6105
<AVERAGE-NET-ASSETS> 556252
<PER-SHARE-NAV-BEGIN> 7.10
<PER-SHARE-NII> 0.652
<PER-SHARE-GAIN-APPREC> 0.120
<PER-SHARE-DIVIDEND> 0.646
<PER-SHARE-DISTRIBUTIONS> 0.006
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 7.22
<EXPENSE-RATIO> 1.77
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 686684
<INVESTMENTS-AT-VALUE> 697462
<RECEIVABLES> 18515
<ASSETS-OTHER> 18
<OTHER-ITEMS-ASSETS> 17
<TOTAL-ASSETS> 716012
<PAYABLE-FOR-SECURITIES> 9255
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 46
<TOTAL-LIABILITIES> 9300
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 695933
<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> 10778
<NET-ASSETS> 706711
<DIVIDEND-INCOME> 60
<INTEREST-INCOME> 64033
<OTHER-INCOME> 0
<EXPENSES-NET> 4009
<NET-INVESTMENT-INCOME> 60084
<REALIZED-GAINS-CURRENT> (4057)
<APPREC-INCREASE-CURRENT> 13402
<NET-CHANGE-FROM-OPS> 69429
<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> 195364
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3684
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4009
<AVERAGE-NET-ASSETS> 599770
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0.67
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
