<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 30, 1997
1933 ACT FILE NO. 2-90946
1940 ACT FILE NO. 811-4015
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933 [X]
POST-EFFECTIVE AMENDMENT NO. 38 [X]
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 41 [X]
EATON VANCE MUTUAL FUNDS TRUST
----------------------------------------------------
(FORMERLY EATON VANCE GOVERNMENT OBLIGATIONS TRUST)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
24 FEDERAL STREET, BOSTON, MASSACHUSETTS 02110
----------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
617-482-8260
-------------------------------------
(REGISTRANT'S TELEPHONE NUMBER)
ALAN R. DYNNER
24 FEDERAL STREET, BOSTON, MASSACHUSETTS 02110
--------------------------------------
(NAME AND ADDRESS OF AGENT FOR SERVICE)
It is proposed that this filing will become effective pursuant to Rule 485
(check appropriate box):
[ ] immediately upon filing [ ] on (date) pursuant
pursuant to paragraph (b) to paragraph (a)(1)
[X] on November 1, 1997 [ ] 75 days after filing pursuant to
pursuant to paragraph (b) paragraph (a)(2)
[ ] 60 days after filing [ ] on December 31, 1997 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
previously filed post-effective amendment.
Title of Securities being registered: Shares of Beneficial Interest
Strategic Income Portfolio and Tax-Managed Growth Portfolio have also
executed this Registration Statement.
================================================================================
<PAGE>
This Amendment to the registration statement on Form N-1A consists of the
following documents and papers:
Cross Reference Sheet required by Rule 481(a) under the Securities Act of
1933
Part A--The Prospectuses of:
Eaton Vance Strategic Income Fund
Eaton Vance Tax-Managed Growth Fund
Part B--The Statements of Additional Information of:
Eaton Vance Strategic Income Fund
Eaton Vance Tax-Managed Growth Fund
Part C--Other Information
Signatures
Exhibit Index Required by Rule 483(b) under the Securities Act of 1933
Exhibits
This Amendment is not intended to amend the Prospectus and Statement of
Additional Information of any series of the Registrant not identified above.
<PAGE>
EATON VANCE MUTUAL FUNDS TRUST
CROSS REFERENCE SHEET FOR
EATON VANCE STRATEGIC INCOME FUND
EATON VANCE TAX-MANAGED GROWTH 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; The Tax-Managed
Mutual Fund Advantage (Tax-
Managed Growth Fund only);
Investment Policies and
Risks; Organization of the
Fund and the Portfolio
5. ............ Management of the Fund Management of the Fund and the
Portfolio
5A............. Management's Discussion of Not Applicable
Fund Performance
6. ............ Capital Stock and Other Organization of the Fund and
Securities the Portfolio; Reports to
Shareholders; The Lifetime
Investing Account/
Distribution Options;
Distributions and Taxes
7. ............ Purchase of Securities Valuing Shares; Distribution
Being Offered and Service Plans; How to Buy
Shares; The Lifetime
Investing Account/
Distribution Options; The
Eaton Vance Exchange
Privilege; Eaton Vance
Shareholder Services
8. ............ Redemption or Repurchase How to Redeem Shares
9. ............ Pending Legal Proceedings Not Applicable
<PAGE>
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
15. ............ Control Persons and Control Persons and Principal
Principal Holders of Holders of Securities
Securities
16. ............ Investment Advisory and Investment Adviser and
Other Services Administrator; Service Plan -
Class A Shares; Distribution
Plans - Class B and Class C
Shares; Custodian;
Independent Accountants
17. ............ Brokerage Allocation and Portfolio Security Transactions
Other Practices
18. ............ Capital Stock and Other Other Information
Securities
19. ............ Purchase, Redemption and Determination of Net Asset
Pricing of Securities Value; Principal Underwriter;
Being Offered Services for Accumulation -
Class A Shares; Service for
Withdrawal; Service Plan -
Class A Shares; Distribution
Plans - Class B and Class C
Shares
20. ............ Tax Status Taxes
21. ............ Underwriters Principal Underwriter
22. ............ Calculation of Performance Investment Performance
Data
23. ............ Financial Statements Financial Statements
<PAGE>
PART A
INFORMATION REQUIRED IN A PROSPECTUS
EATON VANCE
STRATEGIC INCOME FUND
- --------------------------------------------------------------------------------
EATON VANCE STRATEGIC INCOME FUND (THE "FUND") IS A MUTUAL FUND SEEKING A HIGH
LEVEL OF INCOME AND TOTAL RETURN BY INVESTING IN A GLOBAL PORTFOLIO CONSISTING
PRIMARILY OF HIGH GRADE DEBT SECURITIES. THE FUND INVESTS ITS ASSETS IN
STRATEGIC INCOME PORTFOLIO (THE "PORTFOLIO"), A NON-DIVERSIFIED OPEN-END
INVESTMENT COMPANY HAVING THE SAME INVESTMENT OBJECTIVE AS THE FUND, RATHER THAN
BY DIRECTLY INVESTING IN AND MANAGING ITS OWN PORTFOLIO OF SECURITIES. THE
PORTFOLIO'S INVESTMENT ADVISER WILL INVEST IN A VARIETY OF INCOME PRODUCING
SECURITIES, INCLUDING THOSE OF BELOW INVESTMENT GRADE QUALITY. THE VALUE OF FUND
SHARES WILL FLUCTUATE BECAUSE OF CHANGES IN CURRENCY EXCHANGE RATES, CREDIT
QUALITY AND INTEREST RATES, AND OTHER FACTORS. THE FUND IS A SERIES OF EATON
VANCE MUTUAL FUNDS TRUST (THE "TRUST").
Shares of the Fund are not deposits or obligations of, or guaranteed or endorsed
by, any bank or other insured depository institution, and are not federally
insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board
or any other government agency. Shares of the Fund involve investment risks,
including fluctuations in value and the possible loss of some or all of the
principal investment.
This Prospectus is designed to provide you with information you should know
before investing. Please retain this document for future reference. A
Statement of Additional Information dated November 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 and the Portfolio. The offices of the Investment
Adviser and the Administrator are located at 24 Federal Street, Boston, MA
02110.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE PAGE
<S> <C><C> <C>
Shareholder and Fund Expenses ......................... 2 How to Redeem Shares .............................. 15
The Fund's Financial Highlights ...................... 4 Reports to Shareholders ........................... 17
The Fund's Investment Objective ....................... 5 The Lifetime Investing Account/Distribution
Investment Policies and Risks ......................... 5 Options ......................................... 17
Organization of the Fund and the Portfolio ............ 9 The Eaton Vance Exchange Privilege ................ 18
Management of the Fund and the Portfolio .............. 10 Eaton Vance Shareholder Services .................. 18
Distribution and Service Plans ........................ 11 Distributions and Taxes ........................... 19
Valuing Shares ........................................ 12 Performance Information ........................... 20
How to Buy Shares ..................................... 13 Appendix .......................................... 22
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
PROSPECTUS DATED NOVEMBER 1, 1997
SHAREHOLDER AND FUND EXPENSES
- --------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
<S> <C> <C> <C>
Sales Charge Imposed on Purchases 4.75% None None
Sales Charges Imposed on Reinvested Distributions None None None
Fees to Exchange Shares None None None
Maximum Contingent Deferred Sales Charge None 5.00% 1.00%
ANNUAL FUND AND ALLOCATED PORTFOLIO OPERATING EXPENSES (as a percentage of average daily net assets)
- -----------------------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
Management Fees 0.69% 0.69% 0.69%
Rule 12b-1 Distribution and/or Service Fees 0.00% 0.92% 1.00%
Other Expenses 0.56% 0.56% 0.56%
--- --- ---
Total Operating Expenses 1.25% 2.17% 2.25%
==== ==== ====
EXAMPLE
An investor would pay the following expenses and, in the case of Class A shares, maximum initial sales
charge, or in the case of Class B and Class C shares, the applicable contingent deferred sales charge on a
$1,000 investment, assuming (a) 5% annual return and (b) redemption at the end of each period:
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
1 Year $ 60 $ 52 $ 33
3 Years $ 85 $ 88 $ 70
5 Years $113 $116 $121
10 Years $191 $250 $259
An investor would pay the following expenses on the same investment, assuming (a) 5% annual return and (b) no
redemptions:
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
1 Year $ 60 $ 22 $ 23
3 Years $ 85 $ 68 $ 70
5 Years $113 $116 $121
10 Years $191 $250 $259
</TABLE>
NOTES:
The table and Example summarize the aggregate expenses of the Portfolio and each
Class of shares of the Fund and are designed to help investors understand the
costs and expenses they will bear, directly or indirectly, by investing in the
Fund. Information for Class B is for the most recent fiscal year. Information
for Class A shares is estimated. Information for Class C shares is also
estimated based upon the most recent fiscal year of its predecessor fund
adjusted for the multiple-class structure. Management Fees include investment
advisory and administration fees paid by the Portfolio of 0.54% and 0.15%,
respectively.
The Fund offers three classes of shares. Class A shares are sold subject to a
sales charge imposed at the time of purchase. No sales charge is payable at the
time of purchase on investments in Class A shares of $1 million or more.
However, a contingent deferred sales charge ("CDSC") of 1.00% will be imposed on
such investments in the event of certain redemptions within 12 months of
purchase. Class B shares are sold subject to a declining contingent deferred
sales charge ("CDSC") (5% maximum) if redeemed within six years of purchase and
Class C shares are sold subject to a 1% CDSC if redeemed within one year of
purchase. The CDSC does not apply in certain circumstances. See "How to Buy
Shares" and "How to Redeem Shares".
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. Federal regulations
require the Example to assume a 5% annual return, but actual return will vary.
Long-term holders of Class B and Class C may pay more than the economic
equivalent of the maximum front-end sales charge permitted by a rule of the
National Association of Securities Dealers, Inc. For further information
regarding the expenses of the Fund and the Portfolio, see "The Fund's Financial
Highlights", "Management of the Fund and the Portfolio", "Distribution and
Service Plans" and "How to Redeem Shares".
For Class A shares sold by Authorized Firms and remaining outstanding for at
least one year, the Fund will pay service fees not exceeding 0.25% per annum of
the Class A average daily net assets. The Fund expects to begin making service
fee payments during the quarter ending January 31, 1999. After such date, Other
Expenses will be higher. See "Distribution and Service Plans".
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 10.
The Fund invests in the Portfolio and, at times, in another registered
investment company. Other investors with different distribution arrangements and
fees may invest in the Portfolio. See "Organization of the Fund and the
Portfolio".
<PAGE>
THE FUND'S FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following information should be read in conjunction with the financial
statements that appear in the Fund's semi-annual and annual reports to
shareholders. The Fund's annual financial statements have been audited by
Coopers & Lybrand L.L.P., independent accountants, as experts in accounting and
auditing. The annual financial statements and the report of independent
accountants and the unaudited semi-annual financial statements are incorporated
by reference into the Statement of Additional Information. Further information
regarding the performance of the Fund is contained in its annual and semi-annual
reports to shareholders which may be obtained without charge by contacting the
Principal Underwriter. The financial information for each of the periods
presented in the Fund's Financial Highlights are for the Fund prior to
reclassification of its shares as Class B shares on November 1, 1997.
Information for Class A and Class C shares is not presented because these
classes did not exist prior to November 1, 1997. The Financial Highlights for
Class A and Class C shares will differ from the Financial Highlights for Class B
shares due to the different fees imposed on Class A and Class C shares.
<TABLE>
<CAPTION>
STRATEGIC INCOME FUND -- CLASS B SHARES
-------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, 1997 -------------------------------------------------------------------
(UNAUDITED) 1996 1995 1994++++ 1993 1992 1991++
-------------- ---- ---- -------- ---- ---- ------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of year $ 9.310 $ 8.500 $ 8.290 $ 9.410 $ 9.120 $ 9.920 $ 10.000
-------- -------- -------- -------- -------- -------- --------
INCOME FROM OPERATIONS:
Net investment income $ 0.330 $ 0.655 $ 0.726 $ 0.645 $ 0.239 $ 0.816 $ 0.786
Net realized and unrealized gain (loss)
on investments 0.251 0.858 0.167 (1.135) 0.683 (0.943) (0.022)+++
-------- -------- -------- -------- -------- -------- --------
Total income (loss) from operations $ 0.581 $ 1.513 $ 0.893 $ (0.490) $ 0.922 $ (0.127) % 0.764
-------- -------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
From net investment income $ (0.330) $ (0.655) $ (0.361) $(0.343) $ (0.632) $ (0.673) $ (0.786)
In excess of net investment income(2) (0.061) (0.048) -- -- -- -- --
From tax return of capital -- -- (0.322) (0.290) -- -- --
From paid-in capital -- -- -- -- -- -- (0.058)
-------- -------- -------- -------- -------- -------- --------
Total distributions (0.391) $ (0.703) $ (0.683) $ (0.633) $ (0.632) $ (0.673) $ (0.844)
-------- ------- ------- ------- ------- ------- -------
NET ASSET VALUE -- end of year $ 9.500 $ 9.310 $ 8.500 $ 8.290 $ 9.410 $ 9.120 $ 9.920
======== ======== ======== ======== ======== ======== ========
TOTAL RETURN(1) 6.29% 18.48% 11.34% (5.33%) 10.51% (1.45%) 7.97%
RATIOS/ SUPPLEMENTAL DATA (to average daily net assets):
Expenses* 2.14%+ 2.17% 2.18% 2.00% 1.99% 1.95% 2.11%+
Net investment income 7.03%+ 7.38% 7.85% 7.24% 7.53% 8.20% 8.24%+
PORTFOLIO TURNOVER** -- -- -- 55% 55% 56% 20%
NET ASSETS AT END OF YEAR (000's omitted) $129,007 $129,671 $150,767 $233,139 $381,227 $533,253 $589,182
*Includes the Fund's share of the Portfolio's allocated expenses for the years ended October 31, 1996 and
1995, and for the period from March 31, 1994 to October 31, 1994.
**Portfolio Turnover represents the rate of portfolio activity for the period while the Fund was making
investments directly in securities. The portfolio turnover rate for the period since the Fund transferred
substantially all of its investable assets to the Portfolio is shown in the Portfolio's financial
statements, which are included in the Fund's annual report to shareholders.
+Computed on an annualized basis.
++For the period from the start of business, November 26, 1990, to October 31, 1991.
+++The per share amount is not in accord with the net realized and unrealized gain for the period due to the
timing of the sales of Fund shares and the amount of per-share realized and unrealized gains and losses at
such time.
++++Per share amounts have been calculated using the monthly average share method which more approximately
presents the per share data for the period, since the use of the undistributed method does not accord with
the results of operations.
(1)Total return is calculated assuming a purchase at the net asset value on the first day and a sale at the
net asset value on the last day of each period reported. Distributions, if any, are assumed to be
reinvested at the net asset value on the payable date. Total return is computed on a non-annualized basis.
(2)The Fund has followed the Statement of Position (SOP) 93-2: Determination, Disclosure and Financial
Statement Presentation of Income, Capital Gain, and Return of Capital Distribution by Investment
Companies. The SOP requires that differences in the recognition or classification of income between the
financial statements and tax earnings and profits that result in temporary over-distributions for
financial statement purposes, are classified as distributions in excess of net investment income or
accumulated net realized gains.
</TABLE>
<PAGE>
THE FUND'S INVESTMENT OBJECTIVE
- --------------------------------------------------------------------------------
THE FUND'S INVESTMENT OBJECTIVE IS A HIGH LEVEL OF INCOME AND TOTAL RETURN BY
INVESTING IN A GLOBAL PORTFOLIO CONSISTING PRIMARILY OF HIGH GRADE DEBT
SECURITIES. The Investment Adviser will allocate investments among different
countries, currencies and credits, including those of below investment grade
quality, based on the perception of the most favorable markets and issuers, the
relative yield and appreciation potential of a particular country's securities
and the relationship of a country's currency to the U.S. dollar. Changes in
exchange rates for the foreign currencies in which the investments and forward
contracts are denominated may adversely affect the value of Fund shares. The
Fund's investment objective may be changed by the Trustees of the Trust without
shareholder approval.
INVESTMENT POLICIES AND RISKS
- --------------------------------------------------------------------------------
THE FUND CURRENTLY SEEKS ITS OBJECTIVE BY INVESTING IN STRATEGIC INCOME
PORTFOLIO ( THE "PORTFOLIO"), WHICH IS ITSELF AN OPEN-END INVESTMENT COMPANY
HAVING THE SAME INVESTMENT OBJECTIVE AS THE FUND. The Portfolio, in turn,
invests primarily in a portfolio of high grade debt securities of issuers
located anywhere in the world.
The Investment Adviser adjusts the Portfolio's investments and engages in active
management techniques to take advantage of differences in interest rates and
currency exchange rates in markets around the world, and other differences among
countries and markets. By allocating the Portfolio's assets actively among
issuers in different countries, and among securities denominated in different
currencies, the Investment Adviser attempts to achieve a higher level of current
income than might be available from a portfolio invested only in the securities
of one country or denominated in one currency. This strategy requires the
Investment Adviser to identify countries and currencies where the Portfolio's
investments will outperform comparable investments in other countries and
currencies and in many cases to predict changes in economies, markets, political
conditions, and other factors. The success of this strategy will, of course,
involve the risk that the Investment Adviser's predictions may be untimely or
incorrect. The Investment Adviser also seeks to identify markets and securities
which appear to be undervalued and make investments to profit from increases in
value.
The Portfolio will invest primarily in high grade debt securities. "High grade"
debt securities include securities issued or guaranteed as to principal or
interest by the U.S. Government or any of its agencies or instrumentalities and
debt securities, rated at least A by Standard & Poor's Ratings Group, Moody's
Investors Service, Inc. or Duff & Phelps Inc., of foreign governmental and
private issuers. They may also include commercial paper or other short-term debt
instruments rated in one of the two highest short-term rating categories by any
of those rating services (or by Fitch Investors Service, Inc.), and certificates
of deposit and bankers' acceptances issued or guaranteed by, or time deposits
maintained at, banks having total assets of more than $500 million and
determined by the Investment Adviser to be of comparable credit quality to
short-term securities with those ratings. An unrated security will be considered
to be a high grade security if the Investment Adviser determines that it is of
comparable quality to any of the securities described above. In making such
determinations, the Adviser will consider any rating of the issuer of unrated
securities.
The Portfolio may invest the remainder of its assets in lower-rated debt
securities, although less than 35% of the Portfolio's assets will be invested in
securities rated below BBB-/Baa3 (commonly referred to as "junk bonds").
Lower-rated securities generally offer higher current yields and appreciation
potential than do higher-rated securities, but are subject to greater risks.
Securities in the lower categories are considered to be of poor standing and
predominantly speculative; securities in the lowest rating categories may be in
default and are generally regarded by the rating agencies as having extremely
poor prospects of ever attaining any real investment standing. The values of
lower-rated fixed income securities generally fluctuate more than those of
higher-rated fixed-income securities.
In lieu of having the Portfolio invest in lower-rated debt securities, the Fund
may invest up to 35% of its assets in High Income Portfolio ("HI Portfolio"), a
separate registered investment company advised by the Investment Adviser. The
investment objective of HI Portfolio is to provide a high level of current
income and it may invest in the same types of debt securities (with the same
risks) as the Portfolio. HI Portfolio normally invests at least 65% of its
assets in debt securities of the lowest investment grade, lower-rated
obligations and unrated obligations; at least 80% of its net assets in
fixed-income securities, including convertible securities; and up to 20% of its
net assets in common stocks and other equity securities when consistent with its
objective or acquired as part of a unit combining fixed-income and equity
securities. The Fund will not invest in the HI Portfolio when such Portfolio is
not so invested. Foreign investments of HI Portfolio may not exceed 25% of total
assets. HI Portfolio may purchase and sell derivative instruments similar to
those described in this Prospectus, except for swaps. At March 31, 1997, HI
Portfolio had 95.5% of its assets invested in high yield, high risk bonds, and
held no obligations in default. For more detailed information about the risks
associated with investing in lower-rated securities, see "Additional Risk and
Investment Information" below.
The income producing securities in which the Portfolio invests may have fixed,
variable or floating interest rates, constitute a broad mix of asset classes,
and may include convertible bonds, securities of real estate investment trusts
and natural resource companies, stripped debt obligations, closed-end investment
companies (that invest primarily in debt securities the Portfolio could invest
in), preferred, preference and convertible stocks, equipment lease certificates,
equipment trust certificates, conditional sales contracts and debt obligations
collateralized by, or representing interests in pools of, mortgages and other
types of loans ("asset-backed obligations"). The Portfolio may invest a portion
of its assets in fixed and floating rate loans and loan interests. The Portfolio
will normally invest in securities of issuers located in at least three
different countries (which may include the United States), and will not normally
invest more than 25% of its assets in securities of issuers located in a single
foreign country or denominated in any single foreign currency, except the U.S.
dollar. Nevertheless, through "Active Management Strategies" discussed below,
the entire Fund may be exposed to foreign currency risks. For temporary
defensive purposes, such as during abnormal market or economic conditions, the
Portfolio may hold all or any portion of its assets in securities of issuers
located in the United States and in cash or money market instruments. It is
impossible to predict when, or for how long, the Portfolio will engage in such
strategies.
THE MARKET VALUE OF THE PORTFOLIO'S (AND HI PORTFOLIO'S) INVESTMENTS WILL CHANGE
IN RESPONSE TO CHANGES IN CURRENCY EXCHANGE AND INTEREST RATES, CREDIT QUALITY
CHANGES OF ISSUERS AND OTHER FACTORS. Changes in the values of portfolio
securities will not affect interest income derived from those securities, but
will affect the Fund's net asset value. See "Additional Risk and Investment
Information" below.
ACTIVE MANAGEMENT TECHNIQUES
CURRENCY AND OTHER DERIVATIVE INSTRUMENTS. The Portfolio may purchase or sell
derivative instruments (which are instruments that derive their value from
another instrument, security, index or currency) to enhance return, to hedge
against fluctuations in securities prices, interest rates or currency exchange
rates, or as a substitute for the purchase or sale of securities or currencies.
The Portfolio's transactions in derivative instruments may be in the U.S. or
abroad and may include the purchase or sale of futures contracts on securities,
securities indices, other indices, other financial instruments or currencies;
options on futures contracts; exchange-traded and over-the-counter options on
securities, indices or currencies; forward foreign currency exchange contracts;
and interest rate and currency swaps. The Portfolio's transactions in derivative
instruments involve a risk of loss or depreciation due to: unanticipated adverse
changes in securities prices, interest rates, the other financial instruments'
prices or currency exchange rates; the inability to close out a position;
default by the counterparty; imperfect correlation between a position and the
desired hedge; tax constraints on closing out positions; and portfolio
management constraints on securities subject to such transactions. The loss on
derivative instruments (other than purchased options) may substantially exceed
the Portfolio's initial investment in these instruments. In addition, the
Portfolio may lose the entire premium paid for purchased options that expire
before they can be profitably exercised by the Portfolio. The Portfolio incurs
transaction costs in opening and closing positions in derivative instruments.
There can be no assurance that the Investment Adviser's use of derivative
instruments will be advantageous to the Portfolio.
The Portfolio will only enter into equity swaps and over-the-counter options
contracts with counterparties whose credit quality or claims paying ability are
considered to be investment grade by the Investment Adviser. In addition, at the
time of entering into a transaction, the Portfolio's credit exposure to any one
counterparty will be limited to 5% or less of the net assets of the Portfolio.
The Portfolio's investment in illiquid assets, which generally will include
equity swaps and over-the-counter options, may not represent more than 15% of
net assets at the time any such illiquid assets are acquired.
To the extent that the Portfolio enters into futures contracts, options on
futures contracts and options on foreign currencies traded on an exchange
regulated by the Commodity Futures Trading Commission ("CFTC"), in each case
that are not for bona fide hedging purposes (as defined by the CFTC), the
aggregate initial margin and premiums required to establish these positions
(excluding the amount by which options are "in-the-money") may not exceed 5% of
the liquidation value of the Portfolio's investments, after taking into account
unrealized profits and unrealized losses on any contracts the Portfolio has
entered into.
Forward contracts are individually negotiated and privately traded by currency
traders and their customers. A forward contract involves an obligation to
purchase or sell a specific currency (or basket of currencies) for an agreed
price at a future date, which may be any fixed number of days from the date of
the contract. The Portfolio may engage in cross-hedging by using forward
contracts in one currency (or basket of currencies) to hedge against
fluctuations in the value of securities denominated in a different currency if
the Investment Adviser determines that there is an established historical
pattern or correlation between the two currencies (or the basket of currencies
and the underlying currency). Use of a different foreign currency magnifies the
Portfolio's exposure to foreign currency exchange rate fluctuations. The
Portfolio may also use forward contracts to shift its exposure to foreign
currency exchange rate changes from one currency to another. In addition, the
Portfolio may purchase forward contracts for non-hedging purposes when the
Investment Adviser anticipates that the foreign currency will appreciate in
value.
SECURITIES LOANS, REPURCHASE AGREEMENTS, FORWARD COMMITMENTS AND REVERSE
REPURCHASE AGREEMENTS. The Portfolio may lend its portfolio securities to
broker-dealers and may enter into repurchase agreements. These transactions must
be fully collateralized at all times, but involve some risk to the Portfolio if
the other party should default on its obligations and the lender is delayed or
prevented from recovering the collateral. The Portfolio may also purchase or
sell securities for future delivery by means of "forward commitments."
The Portfolio may also enter into "reverse" repurchase agreements which
generally involve the sale of securities held and an agreement to repurchase the
securities at an agreed-upon price, date, and interest payment. The Portfolio
can invest the cash it receives or use it to meet redemption requests. Reverse
repurchase agreements and forward commitments to purchase securities may
increase the overall investment exposure of the Portfolio and involve investment
leverage. Use of investment leverage may increase the amount of any losses
incurred by the Portfolio in the case of adverse changes in market conditions or
the failure of the issuer of a security or financial instrument to meet its
obligations. The Portfolio may also enter into reverse repurchase agreements as
a hedge against a possible decline in the value of the foreign currency in which
a debt security is denominated by converting the foreign currency cash proceeds
from the sale of the debt security into U.S. dollars.
ADDITIONAL RISK AND INVESTMENT INFORMATION
INVESTMENTS IN FOREIGN SECURITIES. Because foreign securities involve foreign
currencies, the values of the assets of the Portfolio (and HI Portfolio) and
their net investment income available for distribution may be affected favorably
or unfavorably by changes in currency exchange rates and exchange control
regulations. There may be less information publicly available about a foreign
issuer than about a U.S. issuer, and foreign issuers are not generally subject
to accounting, auditing, and financial reporting standards and practices
comparable to those in the United States. The willingness and ability of
sovereign issuers to pay principal and interest on government securities depends
on various economic factors, including among others the issuer's balance of
payments, overall debt level, and cash flow considerations related to the
availability of tax or other revenues to satisfy the issuer's obligations. The
securities of some foreign issuers are less liquid and at times more volatile
than securities of comparable U.S. issuers. Foreign brokerage commissions and
fees are also generally higher than in the United States. Foreign settlement
procedures and trade regulations may involve certain risks (such as delay in the
payment or delivery of securities or in the recovery of assets held abroad) and
expenses not present in the settlement of domestic investments. Investments may
include securities issued by the governments of lesser-developed countries,
which are sometimes referred to as "emerging markets", and other issuers located
in such countries. As a result, the Portfolio may be exposed to greater risk and
will be more dependent on the Investment Adviser's ability to assess such risk
than if the Portfolio invested solely in more developed countries.
In addition, there may be a possibility of nationalization or expropriation of
assets, imposition of currency exchange controls, confiscatory taxation,
political or financial instability, armed conflict and diplomatic developments
which could affect the values of a Portfolio's investments in certain foreign
countries. Legal remedies available to investors in certain foreign countries,
including remedies available in bankruptcy proceedings, may be more limited than
those available with respect to investments in the United States or in other
foreign countries. The laws of some foreign countries may limit a Portfolio's
ability to invest in securities of certain issuers located in those foreign
countries. Special tax considerations apply to foreign securities.
INVESTING IN LOWER-RATED SECURITIES. Lower quality debt securities are subject
to the risk of an issuer's inability to meet principal and interest payments on
the obligations (credit risk) and may also be subject to price volatility due to
such factors as interest rate sensitivity, market perception of the
creditworthiness of the issuer and general market liquidity (market risk). The
prices of lower-rated and comparable unrated securities are also more likely to
react to real or perceived developments affecting market and credit risk than
are prices of higher-rated securities, which react primarily to movements in the
general level of interest rates. The Portfolio (and HI Portfolio) may invest a
substantial portion of their assets in lower-rated securities issued in
connection with mergers, acquisitions, leveraged buy-outs, recapitalizations and
other highly leveraged transactions, which pose a higher risk of default or
bankruptcy of the issuer than other fixed-income securities particularly during
periods of deteriorating economic conditions and contraction in the credit
markets. The Portfolio (and HI Portfolio) may also invest in debt securities not
paying current income in anticipation of possible future income or capital
appreciation. The issuer of such securities may be in bankruptcy or undergoing a
debt restructuring or reorganization. Defaulted securities may be retained. In
the case of a defaulted security, the Portfolio (or HI Portfolio) may incur
additional expense seeking recovery of its investment. In the event the rating
of a security held by the Portfolio (or HI Portfolio) is downgraded, causing the
Fund to have indirectly 35% or more of its total assets in securities rated
below investment grade, the Investment Adviser will (in an orderly fashion
within a reasonable period of time) dispose of such securities of the Portfolio
(or reduce the Fund's investment in HI Portfolio) as it deems necessary in order
to comply with this limitation. See the Appendix to this Prospectus for the
asset composition of the Portfolio for the fiscal year ended October 31, 1996.
For a description of securities ratings, see the Statement of Additional
Information.
INTEREST RATE RISK. The value of Fund shares will reflect the value of the
Fund's interest in the Portfolio (which in turn, reflects the underlying value
of the Portfolio's assets and liabilities), and any interest in HI Portfolio and
will change in response to interest rate fluctuations. When interest rates
decline, the value of debt securities held by the Portfolios can be expected to
rise. Conversely, when interest rates rise, the value of debt securities held by
the Portfolios can be expected to decline.
OTHER PRACTICES. The Portfolio may at times invest in so-called "zero-coupon"
bonds (deferred interest bonds) and "payment-in-kind" bonds. Zero-coupon bonds
are issued at a significant discount from their principal amount and interest is
paid only at maturity rather than at intervals during the life of the security.
Payment-in-kind bonds allow the issuer, at its option, to make current interest
payments on the bonds either in cash or in additional bonds. The values of
zero-coupon bonds and payment-in-kind bonds are subject to greater fluctuation
in response to changes in market interest rates than bonds which pay interest in
cash currently. Because these instruments allow an issuer to avoid the need to
generate cash to meet current interest payments, they may involve greater credit
risks than bonds paying interest currently. Even though such bonds do not pay
current interest in cash, a Portfolio is nonetheless required to accrue interest
income on such investments and the Fund is required to distribute its share of
such amounts at least annually to shareholders. Thus, a Portfolio could be
required at times to liquidate other investments to obtain cash in order to
enable the Fund to satisfy its distribution requirements.
The Portfolio may hold up to 15% of net assets in illiquid securities, including
securities legally restricted as to resale 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. Rule 144A securities may, however,
be treated as liquid by the Investment Adviser pursuant to procedures adopted by
the Trustees, which require consideration of factors such as trading activity,
availability of market quotations and number of dealers willing to purchase the
security. Rule 144A securities may increase illiquidity if qualified
institutional buyers become uninterested in purchasing such securities.
The Portfolio may also temporarily borrow up to 5% of the value of its total
assets to satisfy redemption requests or settle securities transactions. Certain
securities held by the Portfolio may permit the issuer at its option to "call",
or redeem, its securities. If an issuer were to redeem securities held by the
Portfolio during a time of declining interest rates, the Portfolio may not be
able to reinvest the proceeds in securities providing the same investment return
as the securities redeemed.
NON-DIVERSIFIED STATUS. As a "non-diversified" investment company, the Portfolio
may invest, with respect to 50% of its total assets, more than 5% (but not more
than 25%) of its total assets in securities of any one issuer, other than U.S.
government securities. The Portfolio is likely to invest a greater percentage of
its assets in the securities of a single issuer than would a diversified fund.
Therefore, the Portfolio is more susceptible to any single adverse or political
occurence or development affecting issuers in which the Portfolio invests. HI
Portfolio is diversified.
INVESTMENT RESTRICTIONS. The Fund, the Portfolio (and HI Portfolio) have adopted
certain fundamental investment restrictions and policies which are enumerated in
detail in the Statement of Additional Information and which may not be changed
unless authorized by a shareholder vote or an investor vote, respectively.
Except for such enumerated restrictions and as otherwise indicated in this
Prospectus, the investment objective and policies of the Fund and a Portfolio
are not fundamental policies and accordingly may be changed by the Trustees of
the Trust and the affected Portfolio without obtaining the approval of the
Fund's shareholders or the investors of the Portfolio, as the case may be.
ORGANIZATION OF THE FUND AND THE PORTFOLIO
- --------------------------------------------------------------------------------
THE FUND IS A NON-DIVERSIFIED SERIES OF EATON VANCE MUTUAL FUNDS TRUST, A
BUSINESS TRUST ESTABLISHED UNDER MASSACHUSETTS LAW PURSUANT TO A DECLARATION OF
TRUST DATED MAY 7, 1984, AS AMENDED. The Trustees of the Trust are responsible
for the overall management and supervision of its affairs. The Trust may issue
an unlimited number of shares of beneficial interest (no par value per share) in
one or more series (such as the Fund). The Trustees of the Trust have divided
the shares of the Fund into multiple classes, including Class A, Class B and
Class C shares. Each class represents an interest in the Fund, but is subject to
different expenses, rights and privileges. See "Distribution and Service Plans"
and "How to Buy Shares." The Trustees have the authority under the Declaration
of Trust to create additional classes of shares with differing rights and
privileges. As a result of a reorganization with separate series of the Trust,
the Fund commenced offering Class B and C shares on November 1, 1997. The Fund
also commenced offering Class A shares on that date.
When issued and outstanding, the shares are fully paid and nonassessable by the
Trust and redeemable as described under "How to Redeem Shares". There are no
annual meetings of shareholders, but special meetings may be held as required by
law to elect Trustees and consider certain other matters. Shareholders are
entitled to one vote for each full share held. Fractional shares may be voted
proportionately. Shares of the Fund will be voted together except that only
shareholders of a particular class may vote on matters affecting only that
class. Shares have no preemptive or conversion rights and are freely
transferable. In the event of the liquidation of the Fund, shareholders of each
class are entitled to share pro rata in the net assets attributable to that
class available for distribution to shareholders.
The Trustees of the Trust have considered the advantages and disadvantages of
investing the assets of the Fund in the Portfolios, as well as the advantages
and disadvantages of the two-tier format. The Trustees believe that the
structure offers opportunities for growth in the assets of the Portfolios, may
afford the potential for economies of scale for the Fund, (at least when the
assets of a Portfolio exceed $500 million) and may over time result in lower
expenses for the Fund.
THE PORTFOLIO (AND HI PORTFOLIO) ARE ORGANIZED AS TRUSTS UNDER THE LAWS OF THE
STATE OF NEW YORK AND INTEND TO BE TREATED AS PARTNERSHIPS FOR FEDERAL TAX
PURPOSES. In addition to selling an interest to the Fund, each Portfolio may
sell interests to other affiliated and non-affiliated mutual funds or
institutional investors. Such investors will invest in a Portfolio on the same
terms and conditions and will pay a proportionate share of the Portfolio's
expenses. However, the other investors investing in a Portfolio are not required
to sell their shares at the same public offering price as the Fund due to
variations in sales commissions and other operating expenses. Therefore, these
differences may result in differences in returns experienced by investors in the
various funds that invest in a Portfolio. Information regarding other pooled
investment entities or funds which invest in a Portfolio may be obtained by
contacting the Principal Underwriter, 24 Federal Street, Boston, MA 02110, (617)
482-8260.
Whenever the Fund as an investor in a Portfolio is requested to vote on matters
pertaining to the Portfolio (other than the termination of the Portfolio's
business, which may be determined by the Trustees of the Portfolio without
investor approval), the Fund will hold a meeting of Fund shareholders and will
vote its interest in the Portfolio for or against such matters proportionately
to the instructions to vote for or against such matters received from Fund
shareholders. The Fund shall vote shares for which it receives no voting
instructions in the same proportion as the shares for which it receives voting
instructions. Other investors in a Portfolio may alone or collectively acquire
sufficient voting interests in the Portfolio to control matters relating to the
operation of the Portfolio, which may require the Fund to withdraw its
investment in the Portfolio or take other appropriate action. Any such
withdrawal could result in a distribution "in kind" of portfolio securities (as
opposed to a cash distribution from a Portfolio). If securities are distributed,
the Fund could incur brokerage, tax or other charges in converting the
securities to cash. In addition, the distribution in kind may result in a less
diversified portfolio of investments or adversely affect the liquidity of the
Fund. Notwithstanding the above, there are other means for meeting shareholder
redemption requests, such as borrowing.
The Fund may withdraw (completely redeem) all its assets from either or both
Portfolios at any time if the Board of Trustees of the Trust determines that it
is in the best interest of the Fund to do so. In the event the Fund withdraws
all of its assets from both Portfolios, or the Board of Trustees of the Trust
determines that the investment objective of the Portfolios are no longer
consistent with the investment objective of the Fund, 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 a Portfolio) from a 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. BMR's expertise in the management of fixed-income
securities ranges from government obligations, high-grade corporate and
municipal securities, foreign debt and bank loan interests to higher yielding
instruments. BMR's fixed-income division is armed with the research and
technical ability to gain immediate access to interest rate data around the
world.
Acting under the general supervision of the Board of Trustees of the Portfolio,
BMR manages the Portfolio's investments and affairs. 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:
<TABLE>
<CAPTION>
ANNUAL DAILY
CATEGORY DAILY NET ASSETS ASSET RATE INCOME RATE
- -----------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
1 up to $500 million 0.275% 2.75%
2 $500 million but less than $1 billion 0.250% 2.50%
3 $1 billion but less than $1.5 billion 0.225% 2.25%
4 $1.5 billion but less than $2 billion 0.200% 2.00%
5 $2 billion but less than $3 billion 0.175% 1.75%
6 $3 billion and over 0.150% 1.50%
</TABLE>
Total daily gross income is the total gross investment income, exclusive of
capital gains and losses on investments and before deduction of expenses, earned
each day by the Portfolio.
As of October 31, 1996, the Portfolio had net assets of $132,406,799. For the
fiscal year ended October 31, 1996, the Portfolio paid BMR advisory fees
equivalent to 0.54% of the Portfolio's average daily net assets for such year.
HI Portfolio also engages BMR to act as its investment adviser pursuant to a fee
schedule similar to but slightly higher than the above schedule. For the fiscal
year ended March 31, 1997, the HI Portfolio paid BMR advisory fees equivalent to
0.61% of HI Portfolio's average daily net assets for such year. The portion of
the Fund's assets invested in the HI Portfolio will be subject to such
Portfolio's advisory fee, but will not be subject to Strategic Income
Portfolio's advisory or administration fee, or a Fund advisory fee.
BMR OR EATON VANCE ACTS AS INVESTMENT ADVISER TO INVESTMENT COMPANIES AND
VARIOUS INDIVIDUAL AND INSTITUTIONAL CLIENTS WITH ASSETS UNDER MANAGEMENT OF
APPROXIMATELY $20 BILLION. Eaton Vance is a wholly-owned subsidiary of Eaton
Vance Corp., a publicly-held holding company which through its subsidiaries and
affiliates engages primarily in investment management, administration and
marketing activities. The Principal Underwriter is a wholly-owned subsidiary of
Eaton Vance.
Mark S. Venezia has acted as the portfolio manager of the Portfolio since it
commenced operations. Mr. Venezia is a Vice President of Eaton Vance and of
BMR. Hooker Talcott, Jr. has acted as portfolio manager of the HI Portfolio
since it commenced operations. Mr. Talcott is a Vice President of Eaton Vance
and of BMR. Michael Weilheimer, co-portfolio manager of the
HI Portfolio since January 1, 1997, is a Vice President of Eaton Vance and
BMR. Mr. Talcott and Mr. Weilheimer also manage other Eaton Vance portfolios.
The Portfolio (and HI Portfolio) believes that most of the obligations which it
will acquire will normally be traded on a net basis (without commission) through
broker-dealers and banks acting for their own account. Such firms attempt to
profit from such transactions by buying at the bid price and selling at the
higher asked price of the market, and the difference is customarily referred to
as the spread. In selecting firms which will execute portfolio transactions, BMR
judges their professional ability and quality of service and uses its best
efforts to obtain execution at prices which are advantageous and at reasonably
competitive spreads. Subject to the foregoing, BMR may consider sales of shares
of the Fund or of other investment companies sponsored by BMR or Eaton Vance as
a factor in the selection of firms to execute portfolio transactions. The Fund,
the Portfolios and BMR have adopted Codes of Ethics relating to personal
securities transactions. The Codes permit Eaton Vance personnel to invest in
securities (including securities that may be purchased or held by the
Portfolios) for their own accounts, subject to certain pre-clearance, reporting
and other restrictions and procedures contained in such Codes.
The Portfolio also engages BMR as its administrator under an administration
agreement. Under the administration agreement, BMR is responsible for reviewing
and supervising the provision of custody services to the Portfolio and making
related reports and recommendations to the Board of Trustees of the Portfolio;
for providing certain valuation, legal, accounting and tax services in
connection with investments with foreign issuers or guarantors, investments
denominated in foreign currencies and transactions in derivative instruments;
and for such other special services as the Board may direct. BMR also furnishes
the office facilities and personnel necessary for providing these services. As
compensation for these services, BMR receives a monthly administration fee at an
annual rate of .15% of the Portfolio's average daily net assets. For the fiscal
year ended October 31, 1996, the Portfolio paid BMR administration fees
equivalent to .15% of the Portfolio's average daily net assets for such year.
The Trust has retained the services of Eaton Vance to act as Administrator of
the Fund. The Trust has not retained the services of an investment adviser since
the Trust seeks to achieve the investment objective of the Fund by investing its
assets in the Portfolios. As Administrator, Eaton Vance provides the Fund with
general office facilities and supervises the overall administration of the Fund.
For these services, Eaton Vance currently receives no compensation. The Trustees
of the Trust may determine, in the future, to compensate Eaton Vance for such
services.
The 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 and the administration agreement, by Eaton
Vance under the administrative services agreement, or by the Principal
Underwriter under the distribution agreement.
DISTRIBUTION AND SERVICE PLANS
- -------------------------------------------------------------------------------
The Trust has adopted a Service Plan (the "Class A Plan") for the Fund's Class A
shares that is designed to meet the service fee requirements of the sales charge
rule of the National Association of Securities Dealers, Inc. THE CLASS A PLAN
PROVIDES THAT CLASS A MAY MAKE SERVICE FEE PAYMENTS FOR PERSONAL SERVICES AND/OR
THE MAINTENANCE OF SHAREHOLDER ACCOUNTS TO THE PRINCIPAL UNDERWRITER, FINANCIAL
SERVICE FIRMS ("AUTHORIZED FIRMS") AND OTHER PERSONS IN AMOUNTS NOT EXCEEDING
.25% OF ITS AVERAGE DAILY NET ASSETS FOR ANY FISCAL YEAR. The Trustees of the
Trust have initially implemented the Class A Plan by authorizing Class A to make
quarterly service fee payments to the Principal Underwriter and Authorized Firms
in amounts not expected to exceed .25% of its average daily net assets for any
fiscal year which is based on the value of Class A shares sold by such persons
and remaining outstanding for at least twelve months.
The Trust has also adopted Distribution Plans ("Class B Plan" and "Class C
Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940 ("1940
Act") for the Fund's Class B and Class C shares. Each Plan is designed to permit
an investor to purchase shares through a financial service firm (an "Authorized
Firm") without incurring an initial sales charge and at the same time permit the
Principal Underwriter to compensate Authorized Firms in connection therewith.
UNDER SUCH PLANS, CLASS B AND CLASS C EACH PAYS THE PRINCIPAL UNDERWRITER A FEE,
ACCRUED DAILY AND PAID MONTHLY, AT AN ANNUAL RATE NOT EXCEEDING .75% OF ITS
AVERAGE DAILY NET ASSETS TO FINANCE THE DISTRIBUTION OF ITS SHARES. Such fees
compensate the Principal Underwriter for sales commissions paid by it to
Authorized Firms on the sale of Class B and Class C shares and for interest
expenses. Under the Class B Plan, the Principal Underwriter uses its own funds
to pay sales commissions (except on exchange transactions and reinvestments) to
Authorized Firms at the time of sale equal to 4% of the purchase price of the
Class B shares sold by such Firms. Under the Class C Plan, the Principal
Underwriter currently expects to pay to an Authorized Firm (a) sales commissions
(except on exchange transactions and reinvestments) at the time of sale equal to
.75% of the purchase price of the shares sold by such Firm, and (b) monthly
sales commissions approximately equivalent to 1/12 of .75% of the value of
shares sold by such Firm and remaining outstanding for at least one year. During
the first year after a purchase of Class C shares, the Principal Underwriter
will retain the sales commission as reimbursement for the sales commissions paid
to Authorized Firms at the time of sale. CDSCs paid to the Principal Underwriter
will be used to reduce amounts owed to it. Because payments to the Principal
Underwriter under the two Plans are limited, uncovered distribution charges
(sales commissions paid by the Principal Underwriter plus interest, less the
above fees and CDSCs received by it) may exist indefinitely. During the fiscal
year ended October 31, 1996, Class B (which was then a separate series fund)
paid or accrued sales commissions equivalent to .75% of average daily net
assets. As at October 31, 1996, the outstanding uncovered distribution charges
of the Principal Underwriter on such day calculated under the Class B Plan
amounted to approximately $18,063,000 (equivalent to 13.9% of net assets on such
day).
THE CLASS B AND CLASS C PLANS ALSO AUTHORIZE EACH CLASS TO MAKE PAYMENTS OF
SERVICE FEES TO THE PRINCIPAL UNDERWRITER, AUTHORIZED FIRMS AND OTHER PERSONS IN
AMOUNTS NOT EXCEEDING .25% OF ITS AVERAGE DAILY NET ASSETS FOR PERSONAL
SERVICES, AND/OR THE MAINTENANCE OF SHAREHOLDER ACCOUNTS. Under the Class B
Plan, this fee is paid quarterly in arrears based on the value of Class B shares
sold by such persons and remaining outstanding for at least twelve months. Under
the Class C Plan, the Principal Underwriter currently expects to pay to an
Authorized Firm (a) a service fee (except on exchange transactions and
reinvestments) at the time of sale equal to .25% of the purchase price of the
Class C shares sold by such Firm, and (b) monthly service fees approximately
equivalent to 1/12 of .25% of the value of Class C shares sold by such Firm and
remaining outstanding for at least one year. During the first year after a
purchase of Class C shares, the Principal Underwriter will retain the service
fee as reimbursement for the service fee payment made to Authorized Firms at the
time of sale. For the fiscal year ended October 31, 1996, Class B paid or
accrued service fees under its Plan equivalent to .17% of 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 Trust may, in its absolute discretion, suspend, discontinue or limit the
offering of one or more of its classes of its shares at any time. In determining
whether any such action should be taken, the Trust's management intends to
consider all relevant factors, including (without limitation) the size of the
Fund or class, the investment climate and market conditions, the volume of sales
and redemptions of shares, and, in the case of Class B and Class C shares, the
amount of uncovered distribution charges of the Principal Underwriter. The Plan
may continue in effect and payments may be made under the Plan following any
such suspension, discontinuance or limitation of the offering of shares;
however, there is no contractual obligation to continue any Plan for any
particular period of time. Suspension of the offering of shares would not, of
course, affect a shareholder's ability to redeem shares.
VALUING SHARES
- --------------------------------------------------------------------------------
THE FUND VALUES ITS SHARES ONCE EACH DAY THE NEW YORK STOCK EXCHANGE (THE
"EXCHANGE") IS OPEN FOR TRADING, as of the close of regular trading on the
Exchange (normally 4:00 p.m. New York time). Each Class's net asset value per
share is determined by the Trust's custodian, Investors Bank & Trust Company
("IBT"), (as agent for the Trust) in the manner authorized by the Trustees of
the Trust. The net asset value of each Class is computed by dividing the value
of that Class's pro rata share of the Fund's total assets, less its liabilities,
by the number of shares of that Class outstanding. Because the Fund invests its
assets in an interest in the Portfolio (and at times in HI Portfolio as well),
each Class's net asset value will reflect the value of the Fund's interest in
the Portfolios (which, in turn, reflects the underlying value of the Portfolios'
assets and liabilities).
Authorized Firms must communicate an investor's order to the Principal
Underwriter prior to the close of the Principal Underwriter's business day to
receive that day's net asset value per share and, for Class A shares, the public
offering price based thereon. It is the Authorized Firms' responsibility to
transmit orders promptly to the Principal Underwriter.
Each Portfolio's net asset value is also determined as of the close of regular
trading on the Exchange by IBT (as custodian and agent for the Portfolio) based
on market or fair value in the manner authorized by the Trustees of the
Portfolio. Net asset value is computed by subtracting the liabilities of a
Portfolio from the value of its total assets. Most debt securities are valued on
the basis of market valuations furnished by pricing services.
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 SHARES
- --------------------------------------------------------------------------------
SHARES OF THE FUND MAY BE PURCHASED FOR CASH OR MAY BE ACQUIRED IN EXCHANGE FOR
ACCEPTABLE SECURITIES. Class A shares are purchased at the effective public
offering price, which price is based on the effective net asset value per share
plus the applicable sales charge. The sales charge is divided between the
Authorized Firm and the Principal Underwriter. Class B and Class C shares are
purchased at the net asset value per share next determined after an order is
effective. An Authorized Firm may charge its customers a fee in connection with
transactions executed by that Firm. The Trust may suspend the offering of shares
at any time and may refuse an order for the purchase of shares.
An initial investment must be at least $1,000. Once an account has been
established the investor may send investments of $50 or more at any time
directly to the Trust's transfer agent (the "Transfer Agent") as follows: First
Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123. The
$1,000 minimum initial investment is waived for Bank Automated Investing
accounts, which may be established with an investment of $50 or more. See "Eaton
Vance Shareholder Services".
In connection with employee benefit or other continuous group purchase plans,
the Trust may accept initial investments of less than $1,000 on the part of an
individual participant. In the event a shareholder who is a participant of such
a plan terminates participation in the plan, his or her shares will be
transferred to a regular individual account. However, such account will be
subject to the right of redemption by the Trust as described below under "How to
Redeem Shares".
CLASS A SHARES. The sales charge may vary depending on the size of the purchase
and the number of Class A shares of Eaton Vance funds the investor may already
own, any arrangement to purchase additional shares during a 13- month period or
special purchase programs. Complete details of how investors may purchase shares
at reduced sales charges under a Statement of Intention or Right of Accumulation
are available from Authorized Firms or the Principal Underwriter.
The current sales charges and dealer commissions are:
<TABLE>
<CAPTION>
SALES CHARGE SALES CHARGE DEALER COMMISSION
AS PERCENTAGE OF AS PERCENTAGE OF AS PERCENTAGE OF
AMOUNT OF PURCHASE OFFERING PRICE AMOUNT INVESTED OFFERING PRICE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Less than $25,000 4.75% 4.99% 4.50%
$25,000 but less than $100,000 4.50 4.71 4.25
$100,000 but less than $250,000 3.75 3.90 3.50
$250,000 but less than $500,000 3.00 3.09 2.75
$500,000 but less than $1,000,000 2.00 2.04 2.00
$1,000,000 or more 0.00* 0.00* See Below**
</TABLE>
*No sales charge is payable at the time of purchase on investments of $1
million or more. A CDSC of 1% will be imposed on such investments in the event
of certain redemptions within 12 months of purchase.
**A commission on sales of $1 million or more will be paid as follows: 1.00% on
amounts of $1 million or more but less than $3 million; plus 0.50% on amounts
from $3 million but less than $5 million; plus 0.25% on amounts of $5 million
or more. Purchases of $1 million or more will be aggregated over a 12-month
period for purposes of determining the commission to be paid.
The Principal Underwriter may at times allow discounts up to the full sales
charge. During periods when the discount includes the full sales charge,
Authorized Firms may be deemed to be underwriters as that term is defined in the
Securities Act of 1933.
Class A shares may be sold at net asset value to current and retired Directors
and Trustees of Eaton Vance funds, including the Portfolio; to clients and
current and retired officers and employees of Eaton Vance, its affiliates and
other investment advisers of Eaton Vance sponsored funds; to registered
representatives and employees of Authorized Firms and bank employees who refer
customers to registered representatives of Authorized Firms; to officers and
employees of IBT and the Transfer Agent; and to such persons' spouses and
children under the age of 21 and their beneficial accounts. Class A shares may
also be issued at net asset value (1) in connection with the merger of an
investment company or series thereof with the Fund, (2) to investors making an
investment as part of a fixed fee program whereby an entity unaffiliated with
the Investment Adviser provides multiple investment services, such as
management, brokerage and custody, and (3) to investment advisors, financial
planners or other intermediaries who place trades for their own accounts or the
accounts of their clients and who charge a management, consulting or other fee
for their services; clients of such investment advisors, financial planners or
other intermediaries who place trades for their own accounts if the accounts are
linked to the master account of such investment advisor, financial planner or
other intermediary on the books and records of the broker or agent; and
retirement and deferred compensation plans and trusts used to fund those plans,
including, but not limited to, those defined in Section 401(a), 403(b) or 457 of
the Internal Revenue Code of 1986, as amended (the "Code") and "rabbi trusts".
The Trust's Principal Underwriter may pay commissions to Authorized Firms who
initiate and are responsible for purchases of Class A shares of the Fund by
Eligible Plans of up to 1.00% of the amount invested in such shares.
No sales charge is payable at the time of purchase where the amount invested
represents redemption proceeds from a mutual fund unaffiliated with Eaton Vance
if the redemption occurred no more than 60 days prior to the purchase of Class A
shares and the redeemed shares were potentially subject to a sales charge. A
CDSC of 0.50% will be imposed on such investments in the event of certain
redemptions within 12 months of purchase and the Authorized Firm will be paid a
commission on such sales of 0.50% of the amount invested.
STATEMENT OF INTENTION AND ESCROW AGREEMENT. If the investor, on an application,
makes a Statement of Intention to invest a specified amount over a thirteen
month period in Class A shares, then out of the initial purchase (or subsequent
purchases if necessary) 5% of the dollar amount specified on the application
shall be held in escrow by the escrow agent in the form of such shares (computed
to the nearest full share at the public offering price applicable to the initial
purchase hereunder) registered in the investor's name. All income dividends and
capital gains distributions on escrowed shares will be paid to the investor or
to the investor's order. When the minimum investment so specified is completed,
the escrowed shares will be delivered to the investor. If the investor has an
accumulation account the shares will remain on deposit under the investor's
account.
If total purchases under this Statement of Intention are less than the amount
specified, the investor will promptly remit to the Principal Underwriter any
difference between the sales charge on the amount specified and on the amount
actually purchased. If the investor does not within 20 days after written
request by the Principal Underwriter or the Authorized Firm pay such difference
in sales charge, the escrow agent will redeem an appropriate number of the
escrowed shares in order to realize such difference. Full shares remaining after
any such redemption together with any excess cash proceeds of the shares so
redeemed will be delivered to the investor or to the investor's order by the
escrow agent.
If total purchases made under this Statement are large enough to qualify for a
lower sales charge than that applicable to the amount specified, all
transactions will be computed at the expiration date of this Statement to give
effect to the lower charge. Any difference in sales charge will be refunded to
the investor in cash, or applied to the purchase of additional shares at the
lower charge if specified by the investor. This refund will be made by the
Authorized Firm and by the Principal Underwriter. If at the time of the
recomputation an Authorized Firm other than the original Firm is placing the
orders, the adjustment will be made only on those shares purchased through the
Firm then handling the investor's account.
ACQUIRING FUND SHARES IN EXCHANGE FOR SECURITIES. IBT, as escrow agent, will
receive securities acceptable to Eaton Vance, as Administrator, in exchange for
Fund shares. The minimum value of securities (or securities and cash) accepted
for deposit is $5,000. Securities accepted will be sold on the day of their
receipt or as soon thereafter as possible. The number of Fund shares to be
issued in exchange for securities will be the aggregate proceeds from the sale
of such securities, divided by the applicable net asset value of Class B and C
shares or public offering price of Class A shares on the day such proceeds are
received. Eaton Vance will use reasonable efforts to obtain the then current
market price for such securities, but does not guarantee the best available
price. Eaton Vance will absorb any transaction costs, such as commissions, on
the sale of the securities.
Securities determined to be acceptable should be transferred via book entry or
physically delivered, in proper form for transfer, through an Authorized Firm,
together with a completed and signed Letter of Transmittal in approved form
(available from Authorized Firms), as follows:
<TABLE>
<CAPTION>
IN THE CASE OF BOOK ENTRY: IN THE CASE OF PHYSICAL DELIVERY:
<S> <C>
Deliver through Depository Trust Co. Investors Bank & Trust Company
Broker #2212 Attention: Eaton Vance Strategic Income Fund (and Class)
Investors Bank & Trust Company Physical Securities Processing Settlement Area
For A/C Eaton Vance Strategic Income Fund (and Class) 200 Clarendon Street
Boston, MA 02116
</TABLE>
Investors who are contemplating an exchange of securities for shares, or their
representatives, must contact Eaton Vance to determine whether the securities
are acceptable before forwarding such securities. Eaton Vance reserves the right
to reject any securities. Exchanging securities for shares may create a taxable
gain or loss. Each investor should consult his or her tax adviser with respect
to the particular federal, state and local tax consequences of exchanging
securities.
IF YOU DON'T HAVE AN AUTHORIZED FIRM, EATON VANCE CAN RECOMMEND ONE.
HOW TO REDEEM SHARES
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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 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 Trust, the Principal Underwriter nor the
Transfer Agent will be responsible for the authenticity of redemption
instructions received by telephone, provided that reasonable procedures to
confirm that instructions communicated by telephone are genuine have been
followed. Telephone instructions will be tape recorded. In times of drastic
economic or market changes, a telephone redemption may be difficult to
implement.
REDEMPTION THROUGH AN AUTHORIZED FIRM: To sell shares at their net asset value
through an Authorized Firm (a repurchase), a shareholder can place a repurchase
order with the Authorized Firm, which may charge a fee. The value of such shares
is based upon the net asset value calculated after the Principal Underwriter, as
the Trust'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 Trust will make payment in cash for the net asset value of
the shares as of the date determined above, reduced by the amount of any
applicable CDSC (described below) and any federal income tax required to be
withheld. While normally payments will be made in cash for redeemed shares, the
Trust, subject to compliance with applicable regulations, has reserved the right
to pay the redemption price of shares of the Fund, either totally or partially,
by a distribution in kind of readily marketable securities withdrawn from the
Portfolio. The securities so distributed would be valued pursuant to the
Portfolio's valuation procedures. If a shareholder received a distribution in
kind, the shareholder could incur brokerage or other charges in converting the
securities to cash.
If shares were recently purchased, the proceeds of a redemption will not be sent
until the check (including a certified or cashier's check) received for the
shares purchased has cleared. Payment for shares tendered for redemption may be
delayed up to 15 days from the purchase date when the purchase check has not yet
cleared. Redemptions may result in a taxable gain or loss.
Due to the high cost of maintaining small accounts, the Trust reserves the right
to redeem accounts with balances of less than $750. Prior to such a redemption,
shareholders will be given 60 days' written notice to make an additional
purchase. However, no such redemption would be required by the Trust if the
cause of the low account balance was a reduction in the net asset value of
shares. No CDSC will be imposed with respect to such involuntary redemptions.
CONTINGENT DEFERRED SALES CHARGE. Each class of shares is subject to a CDSC on
certain redemptions. The CDSC is calculated based on the lower of the net asset
value at the time of purchase or the time of redemption. Shares acquired through
the reinvestment of distributions are exempt. Redemptions are made first from
shares in the account which are not subject to a CDSC.
In calculating a CDSC upon the redemption of shares acquired in an exchange, the
shares are deemed to have been acquired at the time of the original purchase of
the exchanged shares and, in the case of Class B shares, the CDSC schedule
applicable to the exchanged shares will apply to the acquired shares. No CDSC is
imposed on shares sold to Eaton Vance or its affiliates, or to their respective
employees or clients. Shares acquired as the result of a merger or liquidation
of another Eaton Vance sponsored fund generally will be subject to the same CDSC
rate imposed by the prior fund.
CLASS A SHARES. If Class A shares are purchased at net asset value because the
purchase amount is $1 million or more, they will be subject to a 1% CDSC if
redeemed within 12 months of purchase. If Class A shares are purchased at net
asset value because the amount invested represents redemption proceeds from an
unaffiliated mutual fund (as described under "How to Buy Shares"), they will be
subject to a .50% CDSC if redeemed within 12 months of purchase.
CLASS B SHARES. Class B shares will be subject to the following CDSC schedule:
YEAR OF REDEMPTION
AFTER PURCHASE CDSC
- -------------------------------------------------------------------------------
First or Second 5%
Third 4%
Fourth 3%
Fifth 2%
Sixth 1%
Seventh and following 0
The Class B CDSC is waived for redemptions (1) pursuant to a Withdrawal Plan
(see "Eaton Vance Shareholder Services"), (2) as part of a required minimum
distribution from a tax-sheltered retirement plan, or (3) following the death of
all beneficial owners of shares, provided the redemption is requested within one
year of death (a death certificate and other applicable documents may be
required).
CLASS C SHARES. Class C Shares will be subject to a 1% CDSC if redeemed within
12 months of purchase. The Class C CDSC is waived for redemptions (1) pursuant
to a Withdrawal Plan (see "Eaton Vance Shareholder Services"), (2) as part of a
distrubution from a retirement plan qualified under Section 401, 403(b) or 457
of the Code, or (3) as part of a required minimum distribution from other
tax-sheltered retirement plans.
REPORTS TO SHAREHOLDERS
- --------------------------------------------------------------------------------
THE FUND WILL ISSUE TO ITS SHAREHOLDERS SEMI-ANNUAL AND ANNUAL REPORTS
CONTAINING FINANCIAL STATEMENTS. Financial statements included in annual reports
are audited by the Fund's independent accountants. Shortly after the end of each
calendar year, the Fund will furnish all shareholders with information necessary
for preparing federal and state tax returns. Consistant with applicable law,
duplicate mailings of shareholder reports and certain other Fund information to
shareholders residing at the same address may be eliminated.
THE LIFETIME INVESTING ACCOUNT/DISTRIBUTION OPTIONS
- --------------------------------------------------------------------------------
AFTER AN INVESTOR MAKES AN INITIAL PURCHASE OF SHARES, THE TRANSFER AGENT WILL
SET UP A LIFETIME INVESTING ACCOUNT FOR THE INVESTOR ON THE TRUST'S RECORDS.
This account is a complete record of all transactions which at all times shows
the balance of shares owned. The Trust will not issue share certificates except
upon request.
At least quarterly, shareholders will receive a statement showing complete
details of any transaction and the current balance in the account. THE LIFETIME
INVESTING ACCOUNT ALSO PERMITS A SHAREHOLDER TO MAKE ADDITIONAL INVESTMENTS IN
SHARES BY SENDING A CHECK FOR $50 OR MORE to the Transfer Agent.
Any questions concerning a shareholder's account or services available may be
directed by telephone to EATON VANCE SHAREHOLDER SERVICES at 800-225-6265,
extension 2, or in writing to the Transfer Agent, First Data Investor Services
Group, P.O. Box 5123, Westborough, MA 01581-5123 (please provide the name of the
shareholder, the Fund and Class and the account number).
THE FOLLOWING DISTRIBUTION OPTIONS WILL BE AVAILABLE TO ALL LIFETIME INVESTING
ACCOUNTS and may be changed as often as desired by written notice to the Trust's
dividend disbursing agent, First Data Investor Services Group, P.O. Box 5123,
Westborough, MA 01581-5123. The currently effective option will appear on each
account statement.
Share Option -- Dividends and capital gains will be reinvested in additional
shares.
Income Option -- Dividends will be paid in cash, and capital gains will be
reinvested in additional shares.
Cash Option -- Dividends and capital gains will be paid in cash.
The Share Option will be assigned if no other option is specified.
Distributions, including those reinvested, will be reduced by any withholding
required under the federal income tax laws.
If shareholder communications are returned by the United States Postal Service
or other delivery service as not deliverable, the distribution option on the
account will be automatically changed to the Share Option until such time as the
shareholder selects a different option. No interest will accrue on amounts
represented by uncashed distribution or redemption checks.
DISTRIBUTION INVESTMENT OPTION. In addition to the distribution options set
forth above, dividends and/or capital gains may be invested in additional shares
of another Eaton Vance fund. Before selecting this option, a shareholder should
obtain a prospectus of the other Eaton Vance fund and consider its objectives
and policies carefully.
"STREET NAME" ACCOUNTS. If shares are held in a "street name" account with an
Authorized Firm, all recordkeeping, transaction processing and payments of
distributions relating to the beneficial owner's account will be performed by
the Authorized Firm, and not by the Trust and its Transfer Agent. Since the
Trust will have no record of the beneficial owner's transactions, a beneficial
owner should contact the Authorized Firm to purchase, redeem or exchange shares,
to make changes in or give instructions concerning the account, or to obtain
information about the account. The transfer of shares in a "street name" account
to an account with another Authorized Firm or to an account directly with the
Trust involves special procedures and will require the beneficial owner to
obtain historical purchase information about the shares in the account from the
Authorized Firm. Before establishing a "street name" account with an Authorized
Firm, or transferring the account to another Authorized Firm, an investor
wishing to reinvest distributions should determine whether the Authorized Firm
which will hold the shares allows reinvestment of distributions in "street name"
accounts.
THE EATON VANCE EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
Shares of the Fund currently may be exchanged for shares of the same class of
one or more other funds in the Eaton Vance Group of Funds. Class A shares may
also be exchanged for shares of Eaton Vance Cash Management Fund, Eaton Vance
Income Fund of Boston, Eaton Vance Municipal Bond Fund L.P., and Eaton Vance Tax
Free Reserves. Class B shares may also be exchanged for shares of Eaton Vance
Prime Rate Reserves, which are subject to an early withdrawal charge, or shares
of Eaton Vance Money Market Fund, which are subject to a CDSC, and shares of a
money market fund sponsored by an Authorized Firm and approved by the Principal
Underwriter (an "Authorized Firm fund"). Class C shares may also be exchanged
for shares of Eaton Vance Money Market Fund. Any such exchange will be made on
the basis of the net asset value per share of each fund/class at the time of
exchange (plus, in the case of an exchange made within six months of the date of
purchase of Class A shares subject to an initial sales charge, an amount equal
to the difference, if any, between the sales charge previously paid on the
shares being exchanged and the sales charge payable on the shares being
acquired). Exchange offers are available only in states where shares of the fund
being acquired may legally be sold. Exchanges are subject to any restrictions or
qualifications set forth in the current prospectus of any such fund.
Each exchange must involve shares which have a net asset value of at least
$1,000. The exchange privilege may be changed or discontinued without penalty.
Shareholders will be given sixty (60) days' notice prior to any termination or
material amendment of the exchange privilege. The Trust does not permit the
exchange privilege to be used for "Market Timing" and may terminate the exchange
privilege for any shareholder account engaged in Market Timing activity. Any
shareholder account for which more than two round-trip exchanges are made within
any twelve month period will be deemed to be engaged in Market Timing.
Furthermore, a group of unrelated accounts for which exchanges are entered
contemporaneously by a financial intermediary will be considered to be engaged
in Market Timing.
The Transfer Agent makes exchanges at the next determined net asset value after
receiving an exchange request in good order (see "How to Redeem Shares").
Consult the Transfer Agent for additional information concerning the exchange
privilege. Applications and prospectuses of other funds are available from
Authorized Firms or the Principal Underwriter. The prospectus for each fund
describes its investment objectives and policies, and shareholders should obtain
a prospectus and consider these objectives and policies carefully before
requesting an exchange.
No CDSC is imposed on exchanges. For purposes of calculating the CDSC upon the
redemption of shares acquired in an exchange, the CDSC schedule applicable to
the shares at the time of purchase will apply and the purchase of shares
acquired in one or more exchanges is deemed to have occurred at the time of the
original purchase of the exchanged shares except that time during which shares
are held in an Authorized Firm fund will not be credited toward completion of
the CDSC period. For the CDSC schedule applicable to Class B shares (except
Prime Rate Reserves and Class B shares of the Limited Maturity Funds), see "How
to Redeem Shares". The CDSC or early withdrawal charge schedule applicable to
Prime Rate Reserves and Class B shares of the Limited Maturity Funds is 3%,
2.5%, 2% and 1% in the event of a redemption occurring in the first, second,
third, or fourth year, respectively, after the original share purchase.
Telephone exchanges are accepted by the Transfer Agent provided that the
investor has not disclaimed in writing the use of the privilege. To effect such
exchanges, call the Transfer Agent at 800-262-1122, Monday through Friday, 9:00
A.M. to 4:00 P.M. (Eastern Standard Time). Shares acquired by telephone exchange
must be registered in the same name(s) and with the same address as the shares
being exchanged. Neither the Trust, the Principal Underwriter nor the Transfer
Agent will be responsible for the authenticity of exchange instructions received
by telephone, provided that reasonable procedures to confirm that instructions
communicated are genuine have been followed. Telephone instructions will be tape
recorded. In times of drastic economic or market changes, a telephone exchange
may be difficult to implement. An exchange may result in a taxable gain or loss.
EATON VANCE SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------
THE TRUST OFFERS THE FOLLOWING SERVICES, WHICH ARE VOLUNTARY, INVOLVE NO EXTRA
CHARGE, AND MAY BE CHANGED OR DISCONTINUED WITHOUT PENALTY AT ANY TIME. Full
information on each of the services described below and an application, where
required, are available from Authorized Firms or the Principal Underwriter. The
cost of administering such services for the benefit of shareholders who
participate in them is borne by the applicable Fund or Class as an expense to
all shareholders.
INVEST-BY-MAIL -- FOR PERIODIC SHARE ACCUMULATION: Once the $1,000 minimum
investment has been made, checks of $50 or more payable to the order of the Fund
and specifying the Class being purchased may be mailed directly to the Transfer
Agent, First Data Investor Services Group, P.O. Box 5123, Westborough, MA
01581-5123 at any time -- whether or not distributions are reinvested. The name
of the shareholder, the Fund and Class and the account number should accompany
each investment.
BANK AUTOMATED INVESTING -- FOR REGULAR SHARE ACCUMULATION: Cash investments of
$50 or more may be made automatically each month or quarter from a shareholder's
bank account. The $1,000 minimum initial investment and small account redemption
policy are waived for these accounts.
WITHDRAWAL PLAN: A shareholder may draw on shareholdings systematically with
monthly or quarterly checks. For Class B and Class C shares, any such
withdrawals may not in the aggregate exceed 12% annually of the account balance
at the time the plan is established. Such amount will not be subject to the
Class B or Class C CDSC. See "How to Redeem Shares". A minimum deposit of $5,000
in shares is required. The maintenance of a withdrawal plan concurrently with
purchases of additional Class A shares would be disadvantageous because of the
sales charge included in such purchase.
STATEMENT OF INTENTION: Purchases of $25,000 or more of Class A shares made
over a 13-month period are eligible for reduced sales charges. See "How to Buy
Shares -- Statement of Intention and Escrow Agreement".
RIGHT OF ACCUMULATION: Purchases may qualify for reduced sales charges on Class
A shares when the current market value of holdings (shares at current offering
price), plus new purchases, reaches $25,000 or more. Class A shares of the Eaton
Vance funds listed under "The Eaton Vance Exchange Privilege" may be combined
under the Statement of Intention and Right of Accumulation.
REINVESTMENT PRIVILEGE: A shareholder who has redeemed shares may reinvest, with
credit for any CDSCs paid on the redeemed shares, any portion or all of the
redemption proceeds (plus that amount necessary to acquire a fractional share to
round off the purchase to the nearest full share) in the same shares (or for
Class A shares in Class A shares of any other Eaton Vance fund), provided that
the reinvestment is effected within 60 days after such redemption, and the
privilege has not been used more than once in the prior 12 months. Shares are
sold to a reinvesting shareholder at the next determined net asset value
following timely receipt of a written purchase order by the Principal
Underwriter or by the Trust (or by the Trust's Transfer Agent). To the extent
that any shares are sold at a loss and the proceeds are reinvested in shares (or
other shares are acquired) within the period beginning 30 days before and ending
30 days after the date of redemption, some or all of the loss generally will not
be allowed as a tax deduction. Shareholders should consult their tax advisers
concerning the tax consequences of reinvestments.
TAX-SHELTERED RETIREMENT PLANS: Class A and Class C shares of the Fund are
available for purchase in connection with certain tax-sheltered retirement
plans. Detailed information concerning these plans, including certain exceptions
to minimum investment requirements, and copies of the plans are available from
the Principal Underwriter. This information should be read carefully and
consultation with an attorney or tax adviser may be advisable. The information
sets forth the service fee charged for retirement plans and describes the
federal income tax consequences of establishing a plan. Participant accounting
services (including trust fund reconciliation services) will be offered only
through third party recordkeepers and not by the Principal Underwriter. Under
all plans, dividends and distributions will be automatically reinvested in
additional shares.
DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
SUBSTANTIALLY ALL OF THE INVESTMENT INCOME ALLOCATED TO THE FUND BY A PORTFOLIO,
LESS THE FUND'S DIRECT AND ALLOCATED EXPENSES AND CLASS-SPECIFIC EXPENSES, WILL
BE DECLARED DAILY AS A DISTRIBUTION TO SHAREHOLDERS OF RECORD AT THE TIME OF
DECLARATION. Distributions on Class A shares, whether taken in cash or
reinvested in additional shares, will ordinarily be paid on the last day of each
month or the next business day thereafter. Distributions on Class B shares will
ordinarily be paid on the fifteenth day of each month or the next business day
thereafter. Distributions on Class C shares will ordinarily be paid on the
twenty-second of each month or the next business day thereafter. The Fund's net
realized capital gains, if any, consist of the net realized capital gains
allocated to the Fund by a Portfolio for tax purposes, after taking into account
any available capital loss carryovers; the Fund's net realized capital gains, if
any, will be distributed at least once a year, usually in December. Shareholders
of the Fund will receive timely federal income tax information relating to all
distributions made by the Fund during the calendar year. Daily distribution
crediting will commence on the business day after collected funds for the
purchase of Fund shares are available at the Transfer Agent.
Distributions of the Fund from net investment income, net short-term capital
gains and certain net foreign exchange gains are taxable to shareholders as
ordinary income, whether received in cash or reinvested in additional shares of
the Fund. The Fund's distributions will generally not qualify to any significant
extent for any dividends-received deductions available to corporate
shareholders.
Certain distributions, if declared in October, November or December and paid the
following January, will be taxable to shareholders as if received on December 31
of the year in which they are declared.
Capital gains, if any, realized on sales of investments and on options and
futures transactions during the fiscal year, which ends on October 31, will be
offset by any capital losses, including any capital loss carryovers, and will be
distributed annually, usually in December, in compliance with the distribution
requirements of the 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.
Income realized by a Portfolio from certain investments and allocated to the
Fund may be subject to foreign income or other foreign taxes and the Fund may
make an election under Section 853 of the Code that would allow Fund
shareholders to claim a credit or deduction on their federal income tax returns
for (and treat as additional amounts distributed to them) their pro rata portion
of the Fund's allocated share of qualified taxes paid by the Portfolio to
foreign countries. This election may be made annually only if more than 50% of
the assets of the Fund, including its allocable share of the Portfolio assets,
at the close of the Fund's taxable year consists of stock or securities in
foreign corporations. The Fund will send a written notice of any such election
(not later than 60 days after the close of its taxable year) to each shareholder
indicating the amount to be treated as the shareholder's proportionate share of
such taxes. Availability of foreign tax credits or deductions for shareholders
is subject to certain additional restrictions and limitations under the Code.
Sales charges paid upon a purchase of Class A shares cannot be taken into
account for purposes of determining gain or loss on a redemption or exchange of
the shares before the 91st day after their purchase to the extent a sales charge
is reduced or eliminated in a subsequent acquisition of such shares of the Fund
or of another fund pursuant to the Fund's reinvestment or exchange privilege.
Any disregarded amounts will result in an adjustment to the shareholder's tax
basis in some or all of any other shares acquired.
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 Portfolio assets and as
entitled to the income of each Portfolio properly attributable to such share.
As a regulated investment company under the Code, the Fund does not pay federal
income or excise taxes to the extent that it distributes to shareholders
substantially all of its ordinary income and capital gain net income in
accordance with the timing requirements imposed by the Code. As partnerships
under the Code, the Portfolios also do not pay federal income or excise tax.
Shareholders should consult their own tax advisors concerning the applicability
of state, local and other taxes to an investment.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
FROM TIME TO TIME, YIELD AND/OR AVERAGE ANNUAL TOTAL RETURN MAY BE ADVERTISED.
Current yield is calculated separately for each Class by dividing the net
investment income per share earned during a recent 30-day period by the maximum
offering price per share or net asset value on the last day of the period and
annualizing the resulting figure. Average annual total return is determined
separately for each Class by computing the average annual percentage change in
value of $1,000 invested at the maximum public offering price (including maximum
sales charge for Class A; net asset value for Class B and Class C shares) for
specified periods, assuming reinvestment of all distributions. Total return may
be quoted for the period prior to commencement of operations which would reflect
the Class's total return (or that of its predecessor) adjusted to reflect any
applicable sales charge. The average annual total return calculation assumes a
complete redemption of the investment and the deduction of any applicable sales
charge at the end of the period. The Fund may publish annual and cumulative
total return figures from time to time.
The Fund may also publish total return figures for each Class which do not take
into account any sales charge. Any performance figure which does not take into
account a sales charge would be reduced to the extent such charge is imposed
upon a redemption. The Fund's performance may be compared in publications to the
performance of various indices and investments for which reliable data is
available, and to averages, performance rankings, or other information prepared
by recognized mutual fund statistical services.
Investors should note that the investment results will fluctuate over time, and
any presentation of the yield or total return for any prior period should not be
considered as a representation of what an investment may earn or what the yield
or total return may be in any future period. If expenses are allocated to Eaton
Vance, performance will be higher.
The following chart reflects the annual investment returns of Class B of the
Fund for one-year periods ending October 31 and does not take into account any
sales charge which investors may bear. The performance of Class A and Class C
will be different.
5 YEAR AVERAGE ANNUAL TOTAL RETURN -- 6.34%
[Graphic Omitted]
1991(1) 1992 1993 1994 1995 1996
------ ---- ---- ---- ---- ----
7.97% (1.45)% 10.51% (5.33)% 11.34% 18.48%
<PAGE>
APPENDIX
STRATEGIC INCOME PORTFOLIO
ASSET COMPOSITION INFORMATION
FOR FISCAL YEAR ENDED OCTOBER 31, 1996
PERCENTAGE OF
NET ASSETS
-------------
Debt Securities -- Moody's Rating
Aaa .................................................... 36.7%
Aa1 .................................................... 11.3
Aa2 .................................................... 11.2
A1 ..................................................... 7.9
A3 ..................................................... 2.7
B1 ..................................................... 12.0
B2 ..................................................... 0.8
B3 ..................................................... 1.6
Baa3 ................................................... 14.3
Unrated ................................................ 1.5
----
Total .................................................. 100.0%
The chart above indicates the weighted average composition for the fiscal year
ended October 31, 1996 with the debt securities rated by Moody's separated into
the indicated categories. The weighted averages indicated above were calculated
on a dollar weighted basis and were computed as at the end of each month during
the period. The chart does not necessarily indicate what the composition of the
Portfolio will be in the current and subsequent fiscal years.
For the description of Moody's ratings of debt securities, see Appendix A to the
Statement of Additional Information.
<PAGE>
[logo] EATON VANCE
-----------
MUTUAL FUNDS
EATON VANCE
STRATEGIC INCOME
FUND
PROSPECTUS
NOVEMBER 1, 1997
EATON VANCE
STRATEGIC INCOME FUND
24 FEDERAL STREET
BOSTON, MA 02110
- --------------------------------------------------------------------------------
INVESTMENT ADVISER AND ADMINISTRATOR OF STRATEGIC INCOME PORTFOLIO
INVESTMENT ADVISER OF HIGH INCOME PORTFOLIO
Boston Management and Research, 24 Federal Street, Boston, MA 02110
ADMINISTRATOR OF EATON VANCE STRATEGIC INCOME FUND
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 200 Clarendon Street, Boston, MA 02116
TRANSFER AGENT
First Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123
(800) 262-1122
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P., One Post Office Square, Boston, MA 02109
SIP
<PAGE>
PART A
INFORMATION REQUIRED IN A PROSPECTUS
EATON VANCE
TAX-MANAGED GROWTH FUND
- --------------------------------------------------------------------------------
EATON VANCE TAX-MANAGED GROWTH FUND (THE "FUND") IS A MUTUAL FUND SEEKING
LONG-TERM, AFTER-TAX RETURNS FOR ITS SHAREHOLDERS THROUGH INVESTING IN A
DIVERSIFIED PORTFOLIO OF EQUITY SECURITIES. THE FUND CURRENTLY INTENDS TO
PURSUE ITS INVESTMENT OBJECTIVE BY INVESTING ITS ASSETS IN TAX-MANAGED GROWTH
PORTFOLIO (THE "PORTFOLIO"), A DIVERSIFIED OPEN-END INVESTMENT COMPANY HAVING
THE SAME INVESTMENT OBJECTIVE AS THE FUND, RATHER THAN BY INVESTING DIRECTLY
IN AND MANAGING ITS OWN PORTFOLIO OF SECURITIES. THE FUND IS A SEPARATE SERIES
OF EATON VANCE MUTUAL FUNDS TRUST (THE "TRUST").
Shares of the Fund are not deposits or obligations of, or guaranteed or
endorsed by, any bank or other insured depository institution, and are not
federally insured by the Federal Deposit Insurance Corporation, the Federal
Reserve Board or any other government agency. Shares of the Fund involve
investment risks, including fluctuations in value and the possible loss of
some or all of the principal investment.
This Prospectus is designed to provide you with information you should know
before investing. Please retain this document for future reference. A
Statement of Additional Information dated November 1, 1997, as supplemented
from time to time, has been filed with the Securities and Exchange Commission
(the "Commission") and is incorporated herein by reference. This Statement of
Additional Information is available without charge from the Fund's principal
underwriter, Eaton Vance Distributors, Inc. (the "Principal Underwriter"), 24
Federal Street, Boston, MA 02110 (telephone (800) 225-6265). The Portfolio's
investment adviser is Boston Management and Research (the "Investment
Adviser"), a wholly-owned subsidiary of Eaton Vance Management, and Eaton
Vance Management is the administrator (the "Administrator") of the Fund. The
offices of the Investment Adviser and the Administrator are located at 24
Federal Street, Boston, MA 02110.
- ------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE PAGE
<S> <C><C> <C>
Shareholder and Fund Expenses ......................... 2 How to Buy Shares ................................. 11
The Fund's Financial Highlights ...................... 4 How to Redeem Shares .............................. 14
The Fund's Investment Objective ....................... 5 Reports to Shareholders ........................... 16
The Tax-Managed Mutual Fund Advantage ................. 5 The Lifetime Investing Account/
Investment Policies and Risks ......................... 6 Distribution Options ............................ 16
Organization of the Fund and the Portfolio ............ 8 The Eaton Vance Exchange Privilege ................ 17
Management of the Fund and the Portfolio .............. 9 Eaton Vance Shareholder Services .................. 18
Distribution and Service Plans ........................ 10 Distribution and Taxes ............................ 18
Valuing Shares ........................................ 11 Performance Information ........................... 20
- ---------------------------------------------------------------------------------------------------------------------
PROSPECTUS DATED NOVEMBER 1, 1997
</TABLE>
<PAGE>
SHAREHOLDER AND FUND EXPENSES
- --------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
------- ------- -------
<S> <C>
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) 5.75% None None
Sales Charges Imposed on Reinvested Distributions None None None
Fees to Exchange Shares None None None
Maximum Contingent Deferred Sales Charge None 5.00% 1.00%
ANNUAL FUND AND ALLOCATED PORTFOLIO OPERATING EXPENSES (as a percentage of average daily net assets)
- ----------------------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
------ ------ ------
Investment Adviser Fee 0.618% 0.618% 0.618%
Rule 12b-1 Distribution and/or Service Fees 0.050% 0.800% 1.000%
Other Expenses 0.262% 0.262% 0.262%
---- ---- ----
Total Operating Expenses 0.930% 1.680% 1.880%
===== ===== =====
EXAMPLE
- ----------------------------------------------------------------------------------------------------------------
An investor would pay the following expenses and, in the case of Class A shares, maximum initial sales charge
or, in the case of Class B and Class C shares, the applicable contingent deferred sales charge on a $1,000
investment, assuming (a) 5% annual return and (b) redemption at the end of each period:
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
------- ------ ------
1 Year $ 66 $ 67 $ 29
3 Years $ 85 $ 93 $ 59
5 Years $106 $111 $102
10 Years $165 $199 $220
An investor would pay the following expenses on the same investment, assuming (a) 5% annual return and (b) no
redemptions:
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
------ ------ ------
1 Year $ 66 $ 17 $ 19
3 Years $ 85 $ 53 $ 59
5 Years $106 $ 91 $102
10 Years $165 $199 $220
</TABLE>
NOTES:
The table and Example summarize the aggregate expenses of the Portfolio and
each Class of shares of the Fund and are designed to help investors understand
the costs and expenses they will bear, directly or indirectly, by investing in
the Fund. Information for Class B shares is for the most recent fiscal year,
except for Distribution and Service fees which are estimated. Information for
Class A and Class C shares is estimated based upon the most recent fiscal year
of its predecessor fund adjusted for the multiple-class structure.
The Fund offers three classes of shares. Class A shares are sold subject to a
sales charge imposed at the time of purchase. No sales charge is payable at
the time of purchase on investments in Class A shares of $1 million or more.
However, a contingent deferred sales charge ("CDSC") of 1% will be imposed on
such investments in the event of certain redemptions within 12 months of
purchase. Class B shares are sold subject to a declining CDSC (5% maximum) if
redeemed within six years of purchase and Class C shares are sold subject to a
1% CDSC if redeemed within one year of purchase. The CDSC does not apply in
certain circumstances. See "How to Buy Shares" and "How to Redeem Shares."
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES, AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. Federal
regulations require the Example to assume a 5% annual return, but actual
annual return will vary. Long-term holders of Class B and Class C shares may
pay more than the economic equivalent of the maximum front-end sales charge
permitted by a rule of the National Association of Securities Dealers, Inc.
For further information regarding the expenses of the Fund and the Portfolio
see "The Fund's Financial Highlights," "Management of the Fund and the
Portfolio" "Distribution and Service Plans," and "How to Redeem Shares."
The Fund invests exclusively in the Portfolio. Other investors with different
distribution arrangements and fees may invest in the Portfolio. See
"Organization of the Fund and the Portfolio."
<PAGE>
THE FUND'S FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following information should be read in conjunction with the financial
statements that appear in the Fund's semi-annual and annual reports to
shareholders. The Fund's annual financial statements have been audited by
Deloitte & Touche LLP, independent certified public accountants, as experts in
accounting and auditing. The annual financial statements and the independent
auditors' report and the unaudited semi-annual financial statements are
incorporated by reference into the Statement of Additional Information.
Further information regarding the performance of the Fund is contained in its
annual and semi-annual reports to shareholders which may be obtained without
charge by contacting the Principal Underwriter. The financial information for
each of the periods presented in the Fund's Financial Highlights are for the
Fund prior to reclassification of its shares as Class B shares on November 1,
1997. Information for Class A and Class C shares is not presented because
these classes did not exist prior to November 1, 1997. The Financial
Highlights for Class A and Class C shares will differ from the Financial
Highlights for Class B shares due to the different fees imposed on Class A and
Class C shares.
- --------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED
APRIL 30, 1997 OCTOBER 31,
(UNAUDITED) 1996*
------------- -----------
NET ASSET VALUE, beginning of period $ 11.150 $10.000
------- -----
INCOME (LOSS) FROM OPERATIONS:
Net investment income (loss) $ 0.003 $(0.003)
Net realized and unrealized gain on
investments 1.367 1.153
------- -----
Total income from operations $ 1.370 $ 1.150
------- -----
NET ASSET VALUE, end of period $ 12.520 $11.150
======== =======
TOTAL RETURN(1) 12.29% 11.50%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted) $240,373 $77,644
Ratio of net expenses to average net assets(2) 1.59%+ 1.63%+
Ratio of net investment income (loss) to
average net assets 0.08%+ (0.13%)+
+Computed on an annualized basis.
*For the period from the start of business, March 28, 1996, to October 31,
1996.
(1)Total return is calculated assuming a purchase at the net asset value on
the first day and a sale at the net asset value on the last day of each
period reported. Distributions, if any, are assumed to be reinvested at the
net asset value on the payable date. Total return is computed on a non-
annualized basis.
(2)Includes the Fund's share of the Portfolio's allocated expenses.
<PAGE>
THE FUND'S INVESTMENT OBJECTIVE
- --------------------------------------------------------------------------------
THE FUND'S INVESTMENT OBJECTIVE IS TO ACHIEVE LONG-TERM, AFTER-TAX RETURNS FOR
ITS SHAREHOLDERS THROUGH INVESTING IN A DIVERSIFIED PORTFOLIO OF EQUITY
SECURITIES. THE FUND CURRENTLY INTENDS TO PURSUE ITS INVESTMENT OBJECTIVE BY
INVESTING ITS ASSETS IN TAX-MANAGED GROWTH PORTFOLIO (THE "PORTFOLIO"), A
SEPARATE REGISTERED INVESTMENT COMPANY WITH THE SAME INVESTMENT OBJECTIVE AND
POLICIES AS THE FUND. USING THIS STRUCTURE ENABLES THE FUND TO PARTICIPATE IN
A WELL-ESTABLISHED INVESTMENT PORTFOLIO WITHOUT EXPOSING THE FUND TO THE
UNREALIZED GAINS ACCRUED PRIOR TO THE FUND'S OPERATIONS.
In its operations, the Portfolio seeks to achieve after-tax returns for its
shareholders in part by minimizing the taxes they incur in connection with the
Portfolio's investment income and realized capital gains. Taxes on investment
income are minimized by investing primarily in lower yielding securities.
Taxes on realized capital gains are minimized by maintaining relatively low
portfolio turnover, by generally avoiding realized short-term and mid-term
gains and by employing a variety of tax-efficient management techniques. See
"Investment Policies and Risks" for further information.
The Fund is designed for long-term taxable investors. The Fund is not intended
to be a complete investment program. Prospective investors should take into
account their objectives and other investments when considering the purchase
of Fund shares. The Fund cannot assure achievement of its investment
objective. While the Fund seeks to minimize investor taxes associated with the
Fund's investment income and realized capital gains, the Fund may have taxable
investment income and may realize taxable gains from time to time. The
investment objectives of the Fund and the Portfolio are fundamental, and may
not be changed unless authorized by a vote of the Fund's shareholders or the
Portfolio's investors, as the case may be.
THE TAX-MANAGED MUTUAL FUND ADVANTAGE
- --------------------------------------------------------------------------------
Taxes are a major influence on the net returns that investors receive on their
taxable investments. There are five components of the returns of an equity
mutual fund -- price appreciation, distributions of income and distributions
of realized short-term, mid-term and long-term capital gains -- which are
treated differently for federal income tax purposes. Distributions of net
investment income and net realized short-term gains (on stocks held less than
12 months) are taxed as ordinary income, at rates as high as 39.6%.
Distributions of realized mid-term gains (on stocks held 12 to 18 months) are
taxed at rates up to 28% and distributions of realized long-term gains (on
stocks held at least 18 months) are taxed at rates up to 20%. Price
appreciation, or unrealized gains, are not subject to current tax. Most equity
mutual funds are managed to maximize PRE-TAX returns and largely ignore the
different tax treatment of the various components of fund returns. In
contrast, the Fund seeks to achieve long-term, AFTER-TAX returns for its
shareholders by managing its investments so as to minimize and defer the taxes
incurred by shareholders as a consequence of their investment in the Fund. The
Fund seeks to achieve returns primarily in the form of unrealized capital
gains, which do not give rise to current tax obligations for shareholders.
The Fund is similar to retirement planning products such as variable annuities
and IRAs in that it is a vehicle for long-term, tax-deferred investing. As a
mutual fund, however, the Fund avoids a number of structural disadvantages
inherent in a variable annuity--including the limitations and penalties on
early withdrawals, the taxing of all income and gain upon withdrawal at
ordinary income rates, and the inability to gain a step up in basis at death.
Variable annuities offer tax-free exchanges and a death benefit, which are not
offered by the Fund. Contributions to deductible IRAs can be made from pre-tax
dollars and distributions from Roth IRAs are not taxed. Eligibility to invest
in IRAs and annual contributions to IRAs are limited.
An analysis of long-term hypothetical returns achievable from a tax-managed
equity fund that achieves returns predominantly from unrealized gains compared
to a conventional equity mutual fund and a variable annuity can illustrate the
fundamental soundness of a tax-managed equity fund investment. Assuming
identical annual pre-tax returns, over a holding period of several years a
tax-managed fund can generate liquidation proceeds higher than a conventional
managed equity mutual fund and a variable annuity. If the investments are
passed into an estate (thereby triggering a step-up in basis), the relative
performance advantage of a tax-managed fund compared to a conventional fund or
to a variable annuity can be substantial, again assuming equivalent annual
returns before taxes. Of course, actual returns achieved by long-term
investors in the Fund cannot be predicted.
INVESTMENT POLICIES AND RISKS
- --------------------------------------------------------------------------------
It is the policy of the Portfolio to invest in a broadly diversified selection
of equity securities, emphasizing common stocks of domestic and foreign growth
companies that are considered to be high in quality and attractive in their
long-term investment prospects. Under normal market conditions, the Portfolio
will invest at least 65% of its assets in common stocks. Although the
Portfolio may invest in investment-grade preferred stocks and debt securities,
purchase of such securities will normally be limited to securities convertible
into common stocks and temporary investments in short-term notes or government
obligations. The Portfolio's holdings will represent a number of different
industries, and less than 25% of the Portfolio's assets will be invested in
any one industry. During defensive periods in which the Investment Adviser
believes that returns on common stock investments may be unfavorable, the
Portfolio may temporarily invest up to 65% of its assets in U.S. government
obligations and high quality short-term notes.
In its operations, the Portfolio seeks to achieve after-tax returns for its
shareholders in part by minimizing the taxes they incur in connection with the
Portfolio's investment income and realized capital gains. Taxes on investment
income are minimized by investing primarily in lower yielding securities. The
Fund can be expected to distribute relatively low levels of taxable investment
income, if any.
Taxes on realized capital gains are minimized in part by maintaining
relatively low portfolio turnover, investing primarily in established
companies with characteristics of above-average growth, predictability and
stability that are acquired with the expectation of being held for a period of
years. The Portfolio will generally seek to avoid realizing short-term and
mid-term capital gains. When a decision is made to sell a particular
appreciated security, the Portfolio will select for sale those share lots with
holding periods sufficient to qualify for long-term capital gains treatment
and among those, the share lots with the highest cost basis. The Portfolio
may, when prudent, sell securities to realize capital losses that can be used
to offset realized capital gains.
To protect against price declines in securities holdings that have developed
large accumulated capital gains, the Fund may use tax-advantaged hedging
techniques including, but not limited to, the purchase of put options on
securities held, equity collars (combining the purchase of a put option and
the sale of a call option), equity swaps, short sales against-the-box on
securities held and the sale of stock index futures contracts. By using these
techniques rather than selling such securities the Fund can reduce its
exposure to price declines in the securities without realizing substantial
capital gains under current tax law. The Fund's ability to use short sales
against-the-box, equity swaps and certain equity collar strategies as a tax-
efficient management technique with respect to holdings of appreciated
securities is limited to circumstances in which the hedging transaction is
closed out within thirty days after the end of the Fund's taxable year and the
underlying appreciated securities position is held unhedged for at least the
next sixty days after the hedging transaction is closed. In addition, while
the Fund currently meets redemptions solely in cash, it may adopt in the
future a policy of meeting shareholder redemptions in whole or in part through
the distribution of readily marketable securities. Such a policy would only be
adopted after giving notice to the shareholders and only in conjunction with
putting in place a program whereby redeeming shareholders who receive
securities could elect to sell the securities received to an affiliate of the
Fund's custodian (or a designated broker-dealer) at no cost and at a price
equal to the price used in determining the redemption value of the distributed
securities. See "How to Redeem Shares." A redeeming shareholder of the Fund
who received securities would incur no more or less taxable gain than if the
redemption had been paid in cash. By distributing appreciated securities the
Fund can reduce its position in such securities without realizing capital
gains.
It is expected that by employing the various tax-efficient management
strategies described herein, the Portfolio can minimize the extent to which
shareholders incur taxes on Fund distributions of income and net realized
gains. The Portfolio may nevertheless make taxable income or gains
distributions from time to time.
An investment in the Fund entails the risk that the principal value of Fund
shares may not increase or may decline. The Portfolio will be managed for
long-term, after-tax returns. In managing the Portfolio, the Investment
Adviser will generally avoid selling securities with large accumulated capital
gains. Over time, such securities may comprise a substantial portion of the
assets of the Portfolio. Although the Portfolio may utilize certain hedging
strategies in lieu of selling appreciated securities, the Fund's exposure to
losses during stock market declines may nonetheless become higher than that of
other funds that do not follow a general policy of avoiding sales of highly-
appreciated securities. The Portfolio may temporarily borrow up to 5% of the
value of its total assets to satisfy redemption requests or settle securities
transactions.
INVESTING IN FOREIGN SECURITIES. The Portfolio may invest up to 25% of its
assets in securities issued by foreign companies (including American
Depository Receipts and Global Depository Receipts). Investing in securities
issued by foreign companies involves considerations and possible risks not
typically associated with investing in securities issued by U.S. companies.
The value of foreign investments to U.S. investors may be adversely affected
by changes in currency exchange rates. Foreign brokerage commissions, custody
fees and other costs of investing are generally higher than in the United
States, and foreign securities markets may be less liquid, more volatile and
less subject to government supervision than in the United States. Investments
in foreign securities could be adversely affected by other factors not present
in the United States, including expropriation, confiscatory taxation, lack of
uniform accounting and auditing standards, armed conflict, and potential
difficulties in enforcing contractual obligations.
RESTRICTED SECURITIES. Securities that are not freely tradable or which are
subject to restrictions on sale under the Securities Act of 1933 are
considered restricted. Such securities may be illiquid and may be difficult to
properly value. The Fund's holdings of illiquid securities may not exceed 15%
of its net assets. 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. Such securities may increase the level of fund illiquidity to
the extent qualified institutional buyers become uninterested in purchasing
such securities.
DERIVATIVE INVESTMENTS. The Portfolio may purchase or sell derivative
instruments to hedge against securities price declines and currency movements
and to enhance returns. The Portfolio may engage in transactions in derivative
instruments (which derive their value by reference to other securities,
indices, instruments, or currencies) in the U.S. and abroad. Such transactions
may include the purchase and sale of stock index futures contracts and options
on stock index futures; the purchase of put options and the sale of call
options on securities held in the Portfolio; equity swaps; and the purchase
and sale of forward currency exchange contracts and currency futures. The
Portfolio may use transactions in derivative instruments as a substitute for
the purchase and sale of securities. Derivative transactions may be more
advantageous in a given circumstance than transactions involving securities
due to more favorable current tax treatment, lower transaction costs, or
greater liquidity. While many derivative instruments have built-in leveraging
characteristics, the Portfolio will not use them to leverage its net assets.
The purchase and sale of derivative instruments is a highly specialized
activity that can expose the Portfolio to a significant risk of loss. The
built-in leveraging inherent to many derivative instruments can result in
losses that substantially exceed the initial amount paid or received. Equity
swaps and over-the-counter options are private contracts in which there is a
risk of loss in the event of a default on an obligation to pay by a
counterparty. Derivative instruments may be difficult to value, may be
illiquid, and may be subject to wide swings in valuation caused by changes in
the value of an underlying security, index, instrument, or currency. There can
be no assurance that the use of derivative instruments will be advantageous to
the Portfolio.
The Portfolio will only enter into equity swaps and over-the-counter options
contracts with counterparties whose credit quality or claims paying ability
are considered to be investment grade by the Investment Adviser. In addition,
at the time of entering into a transaction, the Portfolio's credit exposure to
any one counterparty will be limited to 5% or less of the net assets of the
Portfolio. The Portfolio's investment in illiquid assets, which will include
certain equity swaps and over-the-counter options, may not represent more than
15% of net assets at the time any such illiquid assets are acquired.
All futures contracts entered into by the Portfolio will be traded on
exchanges or boards of trade that are licensed and regulated by the
Commodities Futures Trading Commission (the "CFTC") and must be executed
through a futures commission merchant or brokerage firm that is a member of
the relevant exchange. Under CFTC regulations, the Portfolio may only enter
into futures contracts if, immediately thereafter, the value of the aggregate
initial margin with respect to all currently outstanding non-hedging positions
in futures contracts does not exceed 5% of the Fund's net asset value, after
taking into account unrealized profits and losses on such positions.
LENDING OF PORTFOLIO SECURITIES. The Portfolio may seek to earn income by
lending portfolio securities to broker-dealers or other institutional
borrowers. As with other extensions of credit there are risks of delay in
recovery or even loss of rights in the securities loaned if the borrower of
the securities fails financially. However, the loans will be made only to
organizations deemed by the Investment Adviser to be sufficiently creditworthy
and when, in the judgment of the Investment Adviser, the consideration which
can be earned from securities loans of this type, net of administrative
expenses and finders' fees, justifies the attendant risk.
CERTAIN INVESTMENT POLICIES. The Fund and the Portfolio have adopted certain
fundamental investment restrictions and policies which are enumerated in
detail in the Statement of Additional Information and which may not be changed
unless authorized by a shareholder vote and an investor vote, respectively.
Among the fundamental restrictions, neither the Fund nor the Portfolio may (a)
borrow money, except as permitted by the Investment Company Act of 1940, as
amended (the "1940 Act"), or (b) with respect to 75% of its total assets,
invest more than 5% of total assets (taken at current value) in the securities
of any one issuer, or invest in more than 10% of total assets in the
outstanding voting securities of any one issuer, except obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities and
except securities of other investment companies. Investment restrictions
(except with respect to the borrowing of money and issuing senior securities)
are considered at the time of acquisition of assets; the sale of portfolio
assets is not required in the event of a subsequent change in circumstances.
Except for the fundamental investment restrictions and policies specifically
identified above and enumerated in the Statement of Additional Information,
the 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 shareholders of the Fund or the
investors in the Portfolio, as the case may be.
ORGANIZATION OF THE FUND AND THE PORTFOLIO
- --------------------------------------------------------------------------------
THE FUND IS A DIVERSIFIED SERIES OF EATON VANCE MUTUAL FUNDS TRUST, A BUSINESS
TRUST ESTABLISHED UNDER MASSACHUSETTS LAW PURSUANT TO A DECLARATION OF TRUST
DATED MAY 7, 1984, AS AMENDED. The Trustees of the Trust are responsible for
the overall management and supervision of its affairs. The Trust may issue an
unlimited number of shares of beneficial interest (no par value per share) in
one or more series (such as the Fund). The Trustees of the Trust have divided
the shares of the Fund into multiple classes, including Class A, Class B and
Class C shares. Each class represents an interest in the Fund, but is subject
to different expenses, rights and privileges. See "Distribution and Service
Plans" and "How to Buy Shares." The Trustees have the authority under the
Declaration of Trust to create additional classes of shares with differing
rights and privileges. As a result of a reorganization with separate series of
the Trust, the Fund commenced offering Class A, B and C shares on November 1,
1997.
When issued and outstanding, the shares are fully paid and nonassessable by
the Trust and redeemable as described under "How to Redeem Shares." There are
no annual meetings of shareholders, but special meetings may be held as
required by law to elect Trustees and consider certain other matters.
Shareholders are entitled to one vote for each full share held. Fractional
shares may be voted proportionately. Shares of the Fund will be voted together
except that only shareholders of a particular class may vote on matters
affecting only that class. Shares have no preemptive or conversion rights and
are freely transferable. In the event of the liquidation of the Fund,
shareholders of each class are entitled to share pro rata in the net assets
attributable to that class available for distribution to shareholders.
The Trustees of the Trust have considered the advantages and disadvantages of
investing the assets of the Fund in the Portfolio, as well as the advantages
and disadvantages of the two-tier format. Such investment may afford the
potential for economies of scale for the Fund and may over time result in
lower expenses.
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 and other 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
investment companies investing in the Portfolio either do not sell their
shares or are not required to sell their shares at the same public offering
price as the Fund due to variations in sales commissions and other operating
expenses. Therefore, these differences may result in differences in returns
experienced by investors in the various funds that invest in the Portfolio.
Information regarding other funds or investors that 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.
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 Board of Trustees
would consider what action might be taken, including investing the assets of
the Fund in another pooled investment entity or retaining an investment
adviser to manage the Fund's assets in accordance with its investment
objective. The Fund's investment performance may be affected by a withdrawal
of all its assets (or the assets of another investor in the Portfolio) from
the Portfolio.
MANAGEMENT OF THE FUND AND THE PORTFOLIO
- --------------------------------------------------------------------------------
THE PORTFOLIO ENGAGES BOSTON MANAGEMENT AND RESEARCH ("BMR"), A WHOLLY-OWNED
SUBSIDIARY OF EATON VANCE MANAGEMENT ("EATON VANCE"), AS ITS INVESTMENT
ADVISER. EATON VANCE, ITS AFFILIATES AND ITS PREDECESSOR COMPANIES HAVE BEEN
MANAGING ASSETS OF INDIVIDUALS AND INSTITUTIONS SINCE 1924 AND MANAGING
INVESTMENT COMPANIES SINCE 1931.
Acting under the general supervision of the Board of Trustees of the
Portfolio, BMR manages the Portfolio's investments and affairs. BMR also
furnishes for the use of the Portfolio office space and all necessary office
facilities, equipment and personnel for servicing the investments of the
Portfolio. Under the investment advisory agreement with the Portfolio, BMR
receives a monthly advisory fee of 5/96 of 1% (equivalent to 0.625% annually)
of the average daily net assets of the Portfolio up to $500 million. On net
assets of $500 million and over the annual fee is reduced and the advisory fee
is computed as follows:
ANNUALIZED FEE RATE
AVERAGE DAILY NET ASSETS FOR THE MONTH (FOR EACH LEVEL)
- ------------------------------------------------------------------
$500 million but less than $1 billion 0.5625%
$1 billion but less than $1.5 billion 0.5000%
$1.5 billion and over 0.4375%
For the period from the start of business, December 1, 1995, to October 31,
1996, the Portfolio paid BMR advisory fees equivalent to 0.618% (annualized)
of the Portfolio's average daily net assets for such period.
BMR OR EATON VANCE ACTS AS INVESTMENT ADVISER TO INVESTMENT COMPANIES AND
VARIOUS INDIVIDUAL AND INSTITUTIONAL CLIENTS WITH ASSETS UNDER MANAGEMENT OF
APPROXIMATELY $20 BILLION. EATON VANCE HAS BEEN MANAGING INVESTMENT COMPANIES
WITH OBJECTIVES SIMILAR TO THAT OF THE FUND SINCE 1961. Eaton Vance is a
wholly-owned subsidiary of Eaton Vance Corp., a publicly-held holding company
which through its subsidiaries and affiliates engages primarily in investment
management, administration and marketing activities. The Principal
Underwriter is a wholly-owned subsidiary of Eaton Vance.
Duncan W. Richardson has acted as a portfolio manager of the Portfolio since
it commenced operations. He manages other Eaton Vance portfolios and is a Vice
President of Eaton Vance and BMR.
BMR places the portfolio securities transactions of the Portfolio with many
broker-dealer firms and uses its best efforts to obtain execution of such
transactions at prices which are advantageous to the Portfolio and at
reasonably competitive commission rates. Subject to the foregoing, BMR may
consider sales of shares of the Fund or of other investment companies
sponsored by BMR or Eaton Vance as a factor in the selection of broker-dealer
firms to execute portfolio transactions. The Trust, the Portfolio and BMR have
adopted Codes of Ethics relating to personal securities transactions. The
Codes permit Eaton Vance personnel to invest in securities (including
securities that may be purchased or held by the Portfolio) for their own
accounts, subject to certain pre-clearance, reporting and other restrictions
and procedures contained in such Codes.
The Trust has retained the services of Eaton Vance to act as Administrator of
the Fund. The Trust has not retained the services of an investment adviser
since the Trust seeks to achieve the investment objective of the Fund by
investing 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 such services.
The Fund and the Portfolio, as the case may be, will each be responsible for
all respective costs and expenses not expressly stated to be payable by BMR
under the investment advisory agreement, by Eaton Vance under the
administrative services agreement, or by the Principal Underwriter under the
distribution agreement.
DISTRIBUTION AND SERVICE PLANS
- --------------------------------------------------------------------------------
The Trust has adopted a Service Plan (the "Class A Plan") for the Fund's Class
A shares that is designed to meet the service fee requirements of the sales
charge rule of the National Association of Securities Dealers, Inc. THE CLASS
A PLAN PROVIDES THAT CLASS A MAY MAKE SERVICE FEE PAYMENTS FOR PERSONAL
SERVICES AND/OR THE MAINTENANCE OF SHAREHOLDER ACCOUNTS TO THE PRINCIPAL
UNDERWRITER, FINANCIAL SERVICE FIRMS ("AUTHORIZED FIRMS") AND OTHER PERSONS IN
AMOUNTS NOT EXCEEDING .25% OF ITS AVERAGE DAILY NET ASSETS FOR ANY FISCAL
YEAR. The Trustees of the Trust have initially implemented the Class A Plan by
authorizing Class A to make quarterly service fee payments to the Principal
Underwriter and Authorized Firms in amounts not expected to exceed .25% of its
average daily net assets for any fiscal year which is based on the value of
Class A shares sold by such persons and remaining outstanding for at least
twelve months.
The Trust has also adopted Distribution Plans ("Class B Plan" and "Class C
Plan") pursuant to Rule 12b-1 under the 1940 Act for the Fund's Class B and
Class C shares. Each Plan is designed to permit an investor to purchase shares
through an Authorized Firm without incurring an initial sales charge and at
the same time permit the Principal Underwriter to compensate Authorized Firms
in connection therewith. UNDER SUCH PLANS, CLASS B AND CLASS C EACH PAYS THE
PRINCIPAL UNDERWRITER A FEE, ACCRUED DAILY AND PAID MONTHLY, AT AN ANNUAL RATE
NOT EXCEEDING .75% OF ITS AVERAGE DAILY NET ASSETS TO FINANCE THE DISTRIBUTION
OF ITS SHARES. Such fees compensate the Principal Underwriter for sales
commissions paid by it to Authorized Firms on the sale of Class B and Class C
shares and for interest expenses. Under the Class B Plan, the Principal
Underwriter uses its own funds to pay sales commissions (except on exchange
transactions and reinvestments) to Authorized Firms at the time of sale equal
to 4% of the purchase price of the Class B shares sold by such Firms. Under
the Class C Plan, the Principal Underwriter currently expects to pay to an
Authorized Firm (a) sales commissions (except on exchange transactions and
reinvestments) at the time of sale equal to .75% of the purchase price of the
shares sold by such Firm, and (b) monthly sales commissions approximately
equivalent to 1/12 of .75% of the value of shares sold by such Firm and
remaining outstanding for at least one year. During the first year after a
purchase of Class C shares, the Principal Underwriter will retain the sales
commission as reimbursement for the sales commissions paid to Authorized Firms
at the time of sale. CDSCs paid to the Principal Underwriter will be used to
reduce amounts owed to it. Because payments to the Principal Underwriter under
the two Plans are limited, uncovered distribution charges (sales commissions
paid by the Principal Underwriter plus interest, less the above fees and CDSCs
received by it) may exist indefinitely. For the period from the start of
business, March 28, 1996, to October 31, 1996, Class B (which was then a
separate series fund) paid or accrued sales commissions equivalent to .75%
(annualized) of average daily net assets. As at October 31, 1996, the
outstanding uncovered distribution charges of the Principal Underwriter on
such day calculated under the Class B Plan amounted to approximately
$3,260,000 (equivalent to 4.2% of net assets on such day).
THE CLASS B AND CLASS C PLANS ALSO AUTHORIZE EACH CLASS TO MAKE PAYMENTS OF
SERVICE FEES TO THE PRINCIPAL UNDERWRITER, AUTHORIZED FIRMS AND OTHER PERSONS
IN AMOUNTS NOT EXCEEDING .25% OF ITS AVERAGE DAILY NET ASSETS FOR PERSONAL
SERVICES, AND/OR THE MAINTENANCE OF SHAREHOLDER ACCOUNTS. Under the Class B
Plan, this fee is paid quarterly in arrears based on the value of Class B
shares sold by such persons and remaining outstanding for at least twelve
months. Under the Class C Plan, the Principal Underwriter currently expects to
pay to an Authorized Firm (a) a service fee (except on exchange transactions
and reinvestments) at the time of sale equal to .25% of the purchase price of
the Class C shares sold by such Firm, and (b) monthly service fees
approximately equivalent to 1/12 of .25% of the value of Class C shares sold
by such Firm and remaining outstanding for at least one year. During the first
year after a purchase of Class C shares, the Principal Underwriter will retain
the service fee as reimbursement for the service fee payment made to
Authorized Firms at the time of sale. The Fund began accruing for its service
fees during the quarter ended June 30, 1997.
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 Trust may, in its absolute discretion, suspend, discontinue or limit the
offering of one or more of its classes of its shares at any time. In
determining whether any such action should be taken, the Trust's management
intends to consider all relevant factors, including (without limitation) the
size of the Fund or class, the investment climate and market conditions, the
volume of sales and redemptions of shares, and, in the case of Class B and
Class C shares, the amount of uncovered distribution charges of the Principal
Underwriter. The Plans may continue in effect and payments may be made under
the Plans following any such suspension, discontinuance or limitation of the
offering of shares; however, there is no contractual obligation to continue
any Plan for any particular period of time. Suspension of the offering of
shares would not, of course, affect a shareholder's ability to redeem shares.
VALUING SHARES
- --------------------------------------------------------------------------------
THE FUND VALUES ITS SHARES ONCE ON EACH DAY THE NEW YORK STOCK EXCHANGE (THE
"EXCHANGE") IS OPEN FOR TRADING, as of the close of regular trading on the
Exchange (normally 4:00 p.m. New York time). Each Class's net asset value per
share is determined by the Trust's custodian, Investors Bank & Trust Company
("IBT"), (as agent for the Trust) in the manner authorized by the Trustees of
the Trust. Net asset value of each Class is computed by dividing the value of
that Class's pro rata share of the Fund's total assets, less its liabilities,
by the number of shares of that Class outstanding. Because the Fund invests
its assets in an interest in the Portfolio, each Class's net asset value will
reflect the value of the Fund's interest in the Portfolio (which, in turn,
reflects the underlying value of the Portfolio's assets and liabilities).
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 share and, for Class A shares, the
public offering price based thereon. It is the Authorized Firms'
responsibility to transmit orders promptly to the Principal Underwriter.
The Portfolio's net asset value is also determined as of the close of regular
trading on the Exchange by IBT (as custodian and agent for the Portfolio) in
the manner authorized by the Trustees of the Portfolio. Net asset value is
computed by subtracting the liabilities of the Portfolio from the value of its
total assets. Securities listed on securities exchanges or in the NASDAQ
National Market are valued at closing sale prices.
SHAREHOLDERS MAY DETERMINE THE VALUE OF THEIR INVESTMENT BY MULTIPLYING
THE NUMBER OF SHARES OWNED BY THE CURRENT NET ASSET VALUE PER SHARE.
HOW TO BUY SHARES
- --------------------------------------------------------------------------------
SHARES OF THE FUND MAY BE PURCHASED FOR CASH OR MAY BE ACQUIRED IN EXCHANGE
FOR ACCEPTABLE SECURITIES. Class A shares are purchased at the effective
public offering price, which price is based on the effective net asset value
per share plus the applicable sales charge. The sales charge is divided
between the Authorized Firm and the Principal Underwriter. Class B and Class C
shares are purchased at the net asset value per share next determined after an
order is effective. An Authorized Firm may charge its customers a fee in
connection with transactions executed by that Firm. The Fund may suspend the
offering of shares at any time and may refuse an order for the purchase of
shares.
An initial investment must be at least $1,000. Once an account has been
established the investor may send investments of $50 or more at any time
directly to the Trust's transfer agent (the "Transfer Agent") as follows:
First Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123.
The $1,000 minimum initial investment is waived for Bank Automated Investing
accounts, which may be established with an investment of $50 or more. See
"Eaton Vance Shareholder Services."
In connection with employee benefit or other continuous group purchase plans,
the Trust may accept initial investments of less than $1,000 on the part of an
individual participant. In the event a shareholder who is a participant of
such a plan terminates participation in the plan, his or her shares will be
transferred to a regular individual account. However, such account will be
subject to the right of redemption by the Trust as described under "How to
Redeem Shares."
CLASS A SHARES. The sales charge may vary depending on the size of the
purchase and the number of Class A shares of Eaton Vance funds the investor
may already own, any arrangement to purchase additional shares during a 13-
month period or special purchase programs. Complete details of how investors
may purchase shares at reduced sales charges under a Statement of Intention or
Right of Accumulation are available from Authorized Firms or the Principal
Underwriter.
The current sales charges and dealer commissions are:
<TABLE>
<CAPTION>
SALES CHARGE SALES CHARGE DEALER COMMISSION
AS PERCENTAGE OF AS PERCENTAGE OF AS PERCENTAGE OF
AMOUNT OF PURCHASE OFFERING PRICE AMOUNT INVESTED OFFERING PRICE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000 5.75% 6.10% 5.00%
$50,000 but less than $100,000 4.75 4.99 4.00
$100,000 but less than $250,000 3.75 3.90 3.00
$250,000 but less than $500,000 3.00 3.09 2.50
$500,000 but less than $1,000,000 2.00 2.04 1.75
$1,000,000 or more 0.00* 0.00* See Below**
</TABLE>
*No sales charge is payable at the time of purchase on investments of $1
million or more. A CDSC of 1% will be imposed on such investments in the
event of certain redemptions within 12 months of purchase.
**A commission on sales of $1 million or more will be paid as follows: 1.00%
on amounts of $1 million or more but less than $3 million; plus 0.50% on
amounts from $3 million but less than $5 million; plus 0.25% on amounts of
$5 million or more. Purchases of $1 million or more will be aggregated over
a 12-month period for purposes of determining the commission to be paid.
The Principal Underwriter may at times allow discounts up to the full sales
charge. During periods when the discount includes the full sales charge,
Authorized Firms may be deemed to be underwriters as that term is defined in
the Securities Act of 1933.
Class A shares may be sold at net asset value to current and retired Directors
and Trustees of Eaton Vance funds, including the Portfolio; to clients and
current and retired officers and employees of Eaton Vance, its affiliates and
other investment advisers of Eaton Vance sponsored funds; to registered
representatives and employees of Authorized Firms and bank employees who refer
customers to registered representatives of Authorized Firms; to officers and
employees of IBT and the Transfer Agent; and to such persons' spouses and
children under the age of 21 and their beneficial accounts. Class A shares may
also be issued at net asset value (1) in connection with the merger of an
investment company or series thereof with the Fund, (2) to investors making an
investment as part of a fixed fee program whereby an entity unaffiliated with
the Investment Adviser provides multiple investment services, such as
management, brokerage and custody, and (3) to investment advisors, financial
planners or other intermediaries who place trades for their own accounts or
the accounts of their clients and who charge a management, consulting or other
fee for their services; clients of such investment advisors, financial
planners or other intermediaries who place trades for their own accounts if
the accounts are linked to the master account of such investment advisor,
financial planner or other intermediary on the books and records of the broker
or agent; and retirement and deferred compensation plans and trusts used to
fund those plans, including, but not limited to, those defined in Section
401(a), 403(b) or 457 of the Internal Revenue Code of 1986, as amended (the
"Code") and "rabbi trusts". The Trust's Principal Underwriter may pay
commissions to Authorized Firms who initiate and are responsible for purchases
of Class A shares of the Fund by Eligible Plans of up to 1.00% of the amount
invested in such shares.
No sales charge is payable at the time of purchase where the amount invested
represents redemption proceeds from a mutual fund unaffiliated with Eaton
Vance if the redemption occurred no more than 60 days prior to the purchase of
Class A shares and the redeemed shares were potentially subject to a sales
charge. A CDSC of 0.50% will be imposed on such investments in the event of
certain redemptions within 12 months of purchase and the Authorized Firm will
be paid a commission on such sales of 0.50% of the amount invested.
STATEMENT OF INTENTION AND ESCROW AGREEMENT. If the investor, on an
application, makes a Statement of Intention to invest a specified amount over
a thirteen month period in Class A shares, then out of the initial purchase
(or subsequent purchases if necessary) 5% of the dollar amount specified on
the application shall be held in escrow by the escrow agent in the form of
such shares (computed to the nearest full share at the public offering price
applicable to the initial purchase hereunder) registered in the investor's
name. All income dividends and capital gains distributions on escrowed shares
will be paid to the investor or to the investor's order. When the minimum
investment so specified is completed, the escrowed shares will be delivered to
the investor. If the investor has an accumulation account the shares will
remain on deposit under the investor's account.
If total purchases under this Statement of Intention are less than the amount
specified, the investor will promptly remit to the Principal Underwriter any
difference between the sales charge on the amount specified and on the amount
actually purchased. If the investor does not within 20 days after written
request by the Principal Underwriter or the Authorized Firm pay such
difference in sales charge, the escrow agent will redeem an appropriate number
of the escrowed shares in order to realize such difference. Full shares
remaining after any such redemption together with any excess cash proceeds of
the shares so redeemed will be delivered to the investor or to the investor's
order by the escrow agent.
If total purchases made under this Statement are large enough to qualify for a
lower sales charge than that applicable to the amount specified, all
transactions will be computed at the expiration date of this Statement to give
effect to the lower charge. Any difference in sales charge will be refunded to
the investor in cash, or applied to the purchase of additional shares at the
lower charge if specified by the investor. This refund will be made by the
Authorized Firm and by the Principal Underwriter. If at the time of the
recomputation an Authorized Firm other than the original Firm is placing the
orders, the adjustment will be made only on those shares purchased through the
Firm then handling the investor's account.
ACQUIRING FUND SHARES IN EXCHANGE FOR SECURITIES. IBT, as escrow agent, will
receive securities acceptable to Eaton Vance, as Administrator, in exchange
for Fund shares. The minimum value of securities (or securities and cash)
accepted for deposit is $5,000. BMR may request that the Portfolio retain the
securities for investment purposes. The number of Fund shares to be issued to
an investor exchanging securities that are retained by the Portfolio will be
the value of the securities, as determined by the Portfolio's valuation
procedures, divided by the applicable net asset value of Class B and Class C
shares or public offering price of Class A shares on the day such securities
are accepted. Securities accepted for exchange may also be sold for the
account of their owner on the day of their receipt or as soon thereafter as
possible. In such event, the number of Fund shares acquired 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 on the day such proceeds
are received. Eaton Vance will use reasonable efforts to obtain the then
current market price for such securities, but does not guarantee the best
available price. Eaton Vance will absorb any transaction costs, such as
commissions, on the sale of the securities.
Securities determined to be acceptable should be transferred via book entry or
physically delivered, in proper form for transfer, through an Authorized Firm,
together with a completed and signed Letter of Transmittal in approved form
(available from Authorized Firms), as follows:
<TABLE>
<CAPTION>
IN THE CASE OF BOOK ENTRY: IN THE CASE OF PHYSICAL DELIVERY:
<S> <C>
Deliver through Depository Trust Co. Investors Bank & Trust Company
Broker #2212 Attention: Eaton Vance Tax-Managed Growth Fund (and
Investors Bank & Trust Company Class)
For A/C Eaton Vance Tax-Managed Growth Fund (and Class) Physical Securities Processing Settlement Area
200 Clarendon Street
Boston, MA 02116
</TABLE>
Investors who are contemplating an exchange of securities for shares, or their
representatives, must contact Eaton Vance to determine whether the securities
are acceptable before forwarding such securities. Eaton Vance reserves the
right to reject any securities. Exchanging securities for shares may create a
taxable gain or loss. Each investor should consult his or her tax adviser with
respect to the particular federal, state and local tax consequences of
exchanging securities.
IF YOU DON'T HAVE AN AUTHORIZED FIRM, EATON VANCE CAN RECOMMEND ONE.
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
A SHAREHOLDER MAY REDEEM FUND SHARES IN ONE OF THREE WAYS -- BY MAIL, BY
TELEPHONE OR THROUGH AN AUTHORIZED FIRM. The redemption price will be based
on the net asset value per 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 Trust, the Principal Underwriter nor the
Transfer Agent will be responsible for the authenticity of redemption
instructions received by telephone, provided that reasonable procedures to
confirm that instructions communicated by telephone are genuine have been
followed. Telephone instructions will be tape recorded. In times of drastic
economic or market changes, a telephone redemption may be difficult to
implement.
REDEMPTION THROUGH AN AUTHORIZED FIRM: To sell shares at their net asset value
through an Authorized Firm (a repurchase), a shareholder can place a
repurchase order with the Authorized Firm, which may charge a fee. The value
of such shares is based upon the net asset value next computed after the
Principal Underwriter, as the Trust'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 Trust will make payment for the net asset value of the
shares as of the date determined above, reduced by the amount of any
applicable CDSC (described below) and any federal income tax required to be
withheld.
If shares were recently purchased, the proceeds of a redemption will not be
sent until the check (including a certified or cashier's check) received for
the shares purchased has cleared. Payment for shares tendered for redemption
may be delayed up to 15 days from the purchase date when the purchase check
has not yet cleared. Redemptions may result in a taxable gain or loss.
Due to the high cost of maintaining small accounts, the Trust reserves the
right to redeem accounts with balances of less than $750. Prior to such a
redemption, shareholders will be given 60 days' written notice to make an
additional purchase. However, no such redemption would be required by the
Trust if the cause of the low account balance was a reduction in the net asset
value of shares. No CDSC will be imposed with respect to such involuntary
redemptions.
MEETING REDEMPTIONS BY DISTRIBUTING PORTFOLIO SECURITIES. The Fund currently
will meet redemptions entirely in cash, but in the future may adopt a policy
of meeting redemption requests in whole or in part by distributing appreciated
securities held in the Portfolio as chosen by the Investment Adviser. The Fund
would only distribute readily marketable securities, which would be valued
pursuant to the Portfolio's valuation procedures. As described under
"Investment Policies and Risks," the practice of distributing appreciated
securities to meet redemptions can be a useful tool for the tax-efficient
management of the Portfolio. A policy of meeting redemptions in whole or in
part through the distribution of securities will only be established in
conjunction with putting in place a program whereby redeeming shareholders who
receive securities could elect to sell the securities received to the Trust's
custodian (or a designated broker-dealer) at no cost and at a price equal to
the price used in determining the redemption value of the distributed
securities. Redeeming shareholders who receive securities and who elect to
participate in this program would receive the same amount of cash as if the
redemption had been paid directly in cash and would incur no more or less
taxable gain than if the redemption had been paid directly in cash. This
election would need to be made in a letter of instruction which would be
provided to shareholders before the policy was implemented. Shareholders not
making an affirmative election to sell distributed securities to the
custodian, would be required to take delivery of any securities distributed
upon a redemption of shares. Such shareholders could incur brokerage charges
and other costs and may be exposed to market risk in selling the distributed
securities.
If the Fund does adopt a policy of using distributions of securities to meet
redemptions, it may continue to meet redemptions in whole or in part using
cash. At certain times, the Portfolio may not have sufficient quantities of
appreciated securities available to meet redemptions by shareholders.
Moreover, during periods of volatile market conditions the Fund can be
expected to meet redemptions primarily through distributions of cash.
CONTINGENT DEFERRED SALES CHARGE. Each class of shares is subject to a CDSC on
certain redemptions. The CDSC is calculated based on the lower of the net
asset value at the time of purchase or the time of redemption. Shares acquired
through the reinvestment of distributions are exempt. Redemptions are made
first from shares in the account which are not subject to a CDSC.
In calculating a CDSC upon the redemption of shares acquired in an exchange,
the shares are deemed to have been acquired at the time of the original
purchase of the exchanged shares and, in the case of Class B shares, the CDSC
schedule applicable to the exchanged shares will apply to the acquired shares.
No CDSC is imposed on shares sold to Eaton Vance or its affiliates, or to
their respective employees or clients. Shares acquired as the result of a
merger or liquidation of another Eaton Vance sponsored fund generally will be
subject to the same CDSC rate imposed by the prior fund.
CLASS A SHARES. If Class A shares are purchased at net asset value because the
purchase amount is $1 million or more, they will be subject to a 1% CDSC if
redeemed within 12 months of purchase. If Class A shares are purchased at net
asset value because the amount invested represents redemption proceeds from an
unaffiliated mutual fund (as described under "How to Buy Shares"), they will
be subject to a .50% CDSC if redeemed within 12 months of purchase.
CLASS B SHARES. Class B shares will be subject to the following CDSC schedule:
YEAR OF
REDEMPTION
AFTER PURCHASE CDSC
- -------------------------------------------------------------------------------
First or Second 5%
Third 4%
Fourth 3%
Fifth 2%
Sixth 1%
Seventh and following 0%
The Class B CDSC is waived for redemptions (1) pursuant to a Withdrawal Plan
(see "Eaton Vance Shareholder Services"), (2) as part of a required minimum
distribution from a tax-sheltered retirement plan, or (3) following the death
of all beneficial owners of shares, provided the redemption is requested
within one year of death (a death certificate and other applicable documents
may be required).
CLASS C SHARES. Class C shares will be subject to a 1% CDSC if redeemed within
12 months of purchase. The Class C CDSC is waived for redemptions (1) pursuant
to a Withdrawal Plan (see "Eaton Vance Shareholder Services"), (2) as part of
a distribution from a retirement plan qualified under Section 401, 403(b) or
457 of the Code, or (3) as part of a required minimum distribution from other
tax-sheltered retirement plans.
REPORTS TO SHAREHOLDERS
- --------------------------------------------------------------------------------
THE FUND WILL ISSUE TO ITS SHAREHOLDERS SEMI-ANNUAL AND ANNUAL REPORTS
CONTAINING FINANCIAL STATEMENTS. Financial statements included in annual
reports are audited by the Fund's independent 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. Consistent with applicable law, duplicate mailings of shareholder
reports and certain other Fund information to shareholders residing at the
same address may be eliminated.
THE LIFETIME INVESTING ACCOUNT/DISTRIBUTION OPTIONS
- --------------------------------------------------------------------------------
AFTER AN INVESTOR MAKES AN INITIAL PURCHASE OF SHARES, THE TRANSFER AGENT WILL
SET UP A LIFETIME INVESTING ACCOUNT FOR THE INVESTOR ON THE TRUST'S RECORDS.
This account is a complete record of all transactions which at all times shows
the balance of shares owned. The Trust will not issue share certificates
except upon request.
Each time a transaction takes place in a shareholder's account, the shareholder
will receive a statement showing complete details of the transaction and the
current balance in the account. (Under certain investment plans, statements may
be sent only quarterly.) THE LIFETIME INVESTING ACCOUNT PERMITS A SHAREHOLDER TO
MAKE ADDITIONAL INVESTMENTS BY SENDING A CHECK FOR $50 OR MORE to the Transfer
Agent.
Any questions concerning a shareholder's account or services available may be
directed by telephone to EATON VANCE SHAREHOLDER SERVICES at 800-225-6265,
extension 2, or in writing to the Transfer Agent, First Data Investor Services
Group, P.O. Box 5123, Westborough, MA 01581-5123 (please provide the name of
the shareholder, the Fund and Class and the account number).
THE FOLLOWING DISTRIBUTION OPTIONS WILL BE AVAILABLE TO ALL LIFETIME INVESTING
ACCOUNTS and may be changed as often as desired by written notice to the
Trust's dividend disbursing agent, First Data Investor Services Group, P.O.
Box 5123, Westborough, MA 01581-5123. The currently effective option will
appear on each account statement.
Share Option -- Dividends and capital gains will be reinvested in additional
shares.
Income Option -- Dividends will be paid in cash, and capital gains will be
reinvested in additional shares.
Cash Option -- Dividends and capital gains will be paid in cash.
The Share Option will be assigned if no other option is specified.
Distributions, including those reinvested, will be reduced by any withholding
required under federal income tax laws.
If shareholder communications are returned by the United States Postal Service
or other delivery service as not deliverable, the distribution option on the
account will be automatically changed to the Share Option until such time as
the shareholder selects a different option. No interest will accrue on amounts
represented by uncashed distribution or redemption checks.
DISTRIBUTION INVESTMENT OPTION. In addition to the distribution options set
forth above, dividends and/or capital gains, if any, may be invested in
additional shares of another Eaton Vance fund. Before selecting this option, a
shareholder should obtain a prospectus of the other Eaton Vance fund and
consider its objectives and policies carefully.
"STREET NAME" ACCOUNTS. If shares are held in a "street name" account with
an Authorized Firm, all recordkeeping, transaction processing and payments of
distributions relating to the beneficial owner's account will be performed by
the Authorized Firm, and not by the Trust and its Transfer Agent. Since the
Trust will have no record of the beneficial owner's transactions, a beneficial
owner should contact the Authorized Firm to purchase, redeem or exchange
shares, to make changes in or give instructions concerning the account, or to
obtain information about the account. The transfer of shares in a "street
name" account to an account with an Authorized Firm or to an account directly
with the Trust involves special procedures and will require the beneficial
owner to obtain historical purchase information about the shares in the
account from the Authorized Firm. Before establishing a "street name" account
with an Authorized Firm, or transferring the account to another Authorized
Firm, an investor wishing to reinvest distributions should determine whether
the Authorized Firm which will hold the shares allows reinvestment of
distributions in "street name" accounts.
THE EATON VANCE EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
Shares of the Fund currently may be exchanged for shares of the same class of
one or more other funds in the Eaton Vance Group of Funds. Class A shares may
also be exchanged for shares of Eaton Vance Cash Management Fund, Eaton Vance
Income Fund of Boston, Eaton Vance Municipal Bond Fund L.P., and Eaton Vance
Tax Free Reserves. Class B shares may also be exchanged for shares of Eaton
Vance Prime Rate Reserves, which are subject to an early withdrawal charge, or
shares of Eaton Vance Money Market Fund, which are subject to a CDSC, and
shares of a money market fund sponsored by an Authorized Firm and approved by
the Principal Underwriter (an "Authorized Firm fund"). Class C shares may also
be exchanged for shares of Eaton Vance Money Market Fund. Any such exchange
will be made on the basis of the net asset value per share of each fund/class
at the time of the exchange (plus, in the case of an exchange made within six
months of the date of purchase of Class A shares subject to an initial sales
charge, an amount equal to the difference, if any, between the sales charge
previously paid on the shares being exchanged and the sales charge payable on
the shares being acquired). Exchange offers are available only in states where
shares of the fund being acquired may be legally sold. Exchanges are subject
to any restrictions or qualifications set forth in the current prospectus of
any such fund.
Each exchange must involve shares which have a net asset value of at least
$1,000. The exchange privilege may be changed or discontinued without penalty.
Shareholders will be given sixty (60) days' notice prior to any termination or
material amendment of the exchange privilege. The Trust does not permit the
exchange privilege to be used for "Market Timing" and may terminate the
exchange privilege for any shareholder account engaged in Market Timing
activity. Any shareholder account for which more than two round-trip exchanges
are made within any twelve-month period will be deemed to be engaged in Market
Timing. Furthermore, a group of unrelated accounts for which exchanges are
entered contemporaneously by a financial intermediary will be considered to be
engaged in Market Timing.
The Transfer Agent makes exchanges at the next determined net asset value
after receiving an exchange request in good order (see "How to Redeem
Shares"). Consult the Transfer Agent for additional information concerning the
exchange privilege. Applications and prospectuses of other funds are available
from Authorized Firms or the Principal Underwriter. The prospectus for each
fund describes its investment objectives and policies, and shareholders should
obtain a prospectus and consider these objectives and policies carefully
before requesting an exchange.
No CDSC is imposed on exchanges. For purposes of calculating the CDSC upon
redemption of shares acquired in an exchange, the CDSC schedule applicable to
the shares at the time of purchase will apply and the purchase of shares
acquired in one or more exchanges is deemed to have occurred at the time of
the original purchase of the exchanged shares, except that time during which
shares are held in an Authorized Firm fund will not be credited toward
completion of the CDSC period. For the CDSC schedule applicable to Class B
shares (except Prime Rate Reserves and Class B shares of the Limited Maturity
Funds), see "How to Redeem Shares." The CDSC or early withdrawal charge
schedule applicable to Prime Rate Reserves and Class B shares of the Limited
Maturity Funds is 3%, 2.5%, 2% or 1% in the event of a redemption occurring in
the first, second, third or fourth year, respectively, after the original
share purchase.
Telephone exchanges are accepted by the Transfer Agent provided that the
investor has not disclaimed in writing the use of the privilege. To effect
such exchanges, call the Transfer Agent at 800-262-1122, Monday through
Friday, 9:00 a.m. to 4:00 p.m. (Eastern Standard Time). Shares acquired by
telephone exchange must be registered in the same name(s) and with the same
address as the shares being exchanged. Neither the Trust, the Principal
Underwriter nor the Transfer Agent will be responsible for the authenticity of
exchange instructions received by telephone, provided that reasonable
procedures to confirm that instructions communicated are genuine have been
followed.Telephone instructions will be tape recorded. In times of drastic
economic or market changes, a telephone exchange may be difficult to
implement. An exchange may result in a taxable gain or loss.
EATON VANCE SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------
THE TRUST OFFERS THE FOLLOWING SERVICES, WHICH ARE VOLUNTARY, INVOLVE NO EXTRA
CHARGE, AND MAY BE CHANGED OR DISCONTINUED WITHOUT PENALTY AT ANY TIME. Full
information on each of the services described below and an application, where
required, are available from Authorized Firms or the Principal Underwriter.
The cost of administering such services for the benefit of shareholders who
participate in them is borne by the 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
Fund and specifying the Class may be mailed directly to the Transfer Agent,
First Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123
at any time -- whether or not distributions are reinvested. The name of the
shareholder, the Fund and Class and the account number should accompany each
investment.
BANK AUTOMATED INVESTING -- FOR REGULAR SHARE ACCUMULATION: Cash investments
of $50 or more may be made automatically each month or quarter from a
shareholder's bank account. The $1,000 minimum initial investment and small
account redemption policy are waived for these accounts.
WITHDRAWAL PLAN: The Fund will make available to shareholders making a
deposit of at least $5,000 a systematic withdrawal plan through which they can
make regular quarterly redemptions to yield them either a specified dollar
amount of at least $200 per year or a specified percentage of net asset value
of at least 4% but not more than 12% annually. Such amount will not be subject
to the Class B or Class C CDSC. See "How to Redeem Shares." Such distributions
would be paid at the option of each shareholder and would reduce the number of
shares held by any shareholder electing to receive them. Distributions would
consist of an untaxed return of capital component and a taxable capital gain
or capital loss. The all-in tax rate on the amount of cash received in such
redemptions (for shares held more than eighteen months equal to the long-term
capital gains rate multiplied by the percentage of the distribution that is
gain rather than return of capital) would be substantially below the rate
payable by mutual fund investors on dividend distributions (equal to the
ordinary income tax rate). The maintenance of a withdrawal plan concurrently
with purchases of additional Class A shares would be disadvantageous because
of the sales charge included in such purchases.
STATEMENT OF INTENTION: Purchases of $50,000 or more of Class A shares made
over a 13-month period are eligible for reduced sales charges. See "How to Buy
Shares - Statement of Intention and Escrow Agreement."
RIGHT OF ACCUMULATION: Purchases may qualify for reduced sales charges on
Class A shares when the current market value of holdings (shares at current
offering price), plus new purchases reaches $50,000 or more. Class A shares of
the Eaton Vance funds listed under "The Eaton Vance Exchange Privilege" may be
combined under the Statement of Intention and Right of Accumulation.
REINVESTMENT PRIVILEGE: A shareholder who has redeemed shares may reinvest,
with credit for any CDSCs paid on the redeemed shares, any portion or all of
the redemption proceeds (plus that amount necessary to acquire a fractional
share to round off the purchase to the nearest full share) in the same shares
(or for Class A shares in Class A shares of any other Eaton Vance fund),
provided that the reinvestment is effected within 60 days after such
redemption and the privilege has not been used more than once in the prior 12
months. Shares are sold to a reinvesting shareholder at the next determined
net asset value following timely receipt of a written purchase order by the
Principal Underwriter or by the Trust (or by the Trust's Transfer Agent). To
the extent that any shares of the Fund are sold at a loss and the proceeds are
reinvested in shares (or other shares are acquired) within the period
beginning 30 days before and ending 30 days after the date of 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
- --------------------------------------------------------------------------------
The Portfolio will be managed toward an objective of achieving long-term,
after-tax returns in part by minimizing shareholders taxes. Because
distributions of net investment income and realized capital gains give rise to
shareholder taxes, the Portfolio will generally seek to select and manage its
investments so as to minimize net investment income and net realized gains and
associated distributions. The Fund can be expected to generally distribute a
lesser percentage of returns each year than other equity mutual funds. There
can be no assurance, however, that the Portfolio can be managed to avoid
taxable distributions. The Portfolio's ability to utilize or the desirability
of various tax management techniques and securities lending may be reduced or
eliminated by future tax and other legislation, regulations, administrative
interpretations, or court decisions.
DISTRIBUTIONS. To the extent that the Fund has net investment income and net
realized capital gains in any year, the Fund's present policy is to make (A)
at least one distribution annually (normally in December) of all or
substantially all of the investment income (if any) allocated to the Fund by
the Portfolio, less the Fund's direct and allocated expenses and Class-
specific expenses and (B) at least one distribution annually of all or
substantially all of the net realized capital gains (if any) allocated to the
Fund by the Portfolio (reduced by any available capital loss carryforwards
from prior years). Shareholders may reinvest all distributions in shares of
the Fund without a sales charge at the net asset value per share as of the
close of business on the record date.
The Fund's net investment income consists of the Fund's allocated share of the
net investment income of the Portfolio, less all actual and accrued expenses
of the Fund and the relevant Class determined in accordance with generally
accepted accounting principles. The Portfolio's net investment income consists
of all income accrued on the Portfolio's assets, less all actual and accrued
expenses of the Portfolio determined in accordance with generally accepted
accounting principles. The Fund's net realized capital gains, if any, consist
of the net realized capital gains (if any) allocated to the Fund by the
Portfolio for tax purposes, after taking into account any available capital
loss carryovers.
TAXES. Distributions by the Fund which are derived from the Fund's allocated
share of the Portfolio's 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 of the
Fund. The Fund's distributions will generally not qualify for the dividends-
received deduction for corporate shareholders.
Capital gains referred to in clause (B) above, if any, realized by the
Portfolio and allocated to the Fund for the Fund's fiscal year, which ends on
October 31, will usually be distributed by the Fund prior to the end of
December. Distributions by the Fund of mid-term and long-term capital gains
allocated to the Fund by the Portfolio are taxable to shareholders as mid-term
and long-term capital gains, respectively, whether paid in cash or reinvested
in additional shares of the Fund and regardless of the length of time Fund
shares have been owned by the shareholder.
If shares are purchased shortly before the record date of 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. The amount, timing and
character of the Fund's distributions to shareholders may be affected by
special tax rules governing the Portfolio's activities in options, futures and
forward foreign currency exchange transactions or certain other investments.
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.
Sales charges paid upon a purchase of Class A shares cannot be taken into
account for purposes of determining gain or loss on a redemption or exchange
of the shares before the 91st day after their purchase to the extent a sales
charge is reduced or eliminated in a subsequent acquisition of such shares of
the Fund or of another fund pursuant to the Fund's reinvestment or exchange
privilege. Any disregarded or disallowed amounts will result in an adjustment
to the shareholder's tax basis in some or all of any other shares acquired.
The Fund intends to qualify as a regulated investment company under the Code
and to satisfy all requirements necessary to avoid paying federal income taxes
on the part of its investment company taxable income (consisting generally of
net investment income and net short-term capital gain) and net capital gains,
if any, that it distributes to shareholders. In satisfying these requirements,
the Fund will treat itself as owning its proportionate share of each of the
Portfolio's assets and as entitled to the income of the Portfolio properly
attributable to such share.
As a regulated investment company under the Code, the Fund does not pay
federal income or excise taxes to the extent that it distributes to
shareholders substantially all of its ordinary income and capital gain net
income in accordance with the timing requirements imposed by the Code. As a
partnership under the Code, the Portfolio does not pay federal income or
excise taxes.
Shareholders should consult their tax advisors concerning the applicability of
state, local or other taxes to an investment in the Fund.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
FROM TIME TO TIME, AVERAGE ANNUAL TOTAL RETURN MAY BE ADVERTISED. Average
annual total return is determined separately for each Class of the Fund by
computing the average annual percentage change in value of $1,000 invested at
the maximum public offering price (including maximum sales charge for Class A
shares; net asset value for Class B and Class C shares) for specified periods,
assuming reinvestment of all distributions. The average annual total return
calculation assumes a complete redemption of the investment and the deduction
of any applicable CDSC at the end of the period. The Fund may also publish
annual and cumulative total return figures from time to time. The Fund may
also quote total return for the period prior to commencement of operations
which would reflect the Portfolio's total return (or that of its predecessor)
adjusted to reflect any applicable Fund sales charge.
The Fund may also publish total return figures for each Class which do not
take into account any sales charge. Any performance figure which does not take
into account a sales charge would be reduced to the extent such charge is
imposed upon a redemption. The Fund's performance may be compared in
publications to the performance of various indices and investments for which
reliable data is available, and to averages, performance rankings, or other
information prepared by recognized mutual fund statistical services.
Investors should note that investment results will fluctuate over time, and
any presentation of total return for any prior period should not be considered
a representation of what an investment may earn or what the total return may
be in any future period. Investment results are based on many factors,
including market conditions, the composition of the security holdings of the
Portfolio and the operating expenses of the Fund and the Portfolio. Investment
results also often reflect the risks associated with the particular investment
objective and policies of the Fund and the Portfolio. Among others, these
factors should be considered when comparing the Fund's investment results to
those of other mutual funds and other investment vehicles. 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 Class B of the
Fund for one-year periods ending October 31 and does not take into account any
sales charge. The total return for the period prior to the Fund's commencement
of operations on March 28, 1996, reflects the total return of the Portfolio
(or that of its predecessor) which had different operating expenses. The
performance of the predcessor funds of Class A and Class C was different.
5 YEAR AVERAGE ANNUAL TOTAL RETURN -- 14.75%
10 YEAR AVERAGE ANNUAL TOTAL RETURN -- 16.00%
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
14.63% 5.49% 18.46% (4.05%) 37.13% 10.94% 7.33% 8.80% 32.56% 22.31%
[Graphic Omitted]
<PAGE>
[logo] EATON VANCE
-----------
Mutual Funds
EATON VANCE TAX-MANAGED
GROWTH FUND
- --------------------------------------------------------------------------------
PROSPECTUS
NOVEMBER 1, 1997
EATON VANCE
TAX-MANAGED GROWTH FUND
24 FEDERAL STREET
BOSTON, MA 02110
- --------------------------------------------------------------------------------
INVESTMENT ADVISER OF TAX-MANAGED GROWTH PORTFOLIO
Boston Management and Research, 24 Federal Street, Boston, MA 02110
ADMINISTRATOR OF EATON VANCE TAX-MANAGED GROWTH FUND
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 200 Clarendon Street, Boston, MA 02116
TRANSFER AGENT
First Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123
(800) 262-1122
INDEPENDENT ACCOUNTANTS
Deloitte & Touche LLP, 125 Summer Street, Boston, MA 02110
TGP
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL INFORMATION
November 1, 1997
EATON VANCE STRATEGIC INCOME FUND
24 Federal Street
Boston, Massachusetts 02110
(800) 225-6265
This Statement of Additional Information provides general information
about Eaton Vance Strategic Income Fund (the "Fund"), Strategic Income
Portfolio (the "Portfolio") and High Income Portfolio (the "HI Portfolio").
This Statement of Additional Information is sometimes referred to herein as
the "SAI."
TABLE OF CONTENTS
Page
Additional Information about Investment Policies ........ 1
Investment Restrictions ................................. 5
Trustees and Officers ................................... 6
Investment Adviser and Administrator .................... 9
Custodian ............................................... 12
Service for Accumulation -- Class A Shares .............. 12
Service for Withdrawal .................................. 13
Determination of Net Asset Value ........................ 13
Investment Performance .................................. 14
Taxes ................................................... 15
Principal Underwriter ................................... 17
Service Plan -- Class A Shares .......................... 18
Distribution Plans -- Class B and Class C Shares ........ 18
Portfolio Security Transactions ......................... 20
Other Information ....................................... 22
Independent Accountants ................................. 23
Financial Statements .................................... 23
Appendix A: Class A Shares .............................. a-1
Appendix B: Class B Shares .............................. b-1
Appendix C: Class C Shares .............................. c-1
Appendix D: Description of Securities Ratings ........... d-1
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY THE FUND'S PROSPECTUS DATED NOVEMBER 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>
This SAI provides information about the Fund, the Portfolio and HI
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.
ADDITIONAL INFORMATION ABOUT INVESTMENT POLICIES
INCOME PRODUCING SECURITIES
Included in the income producing securities in which the Portfolio may
invest are preferred and preference stocks, convertible bonds, securities of
real estate investment trusts and natural resource companies, stripped debt
obligations, closed-end investment companies (that invest primarily in debt
securities the Portfolio could invest in), equipment lease certificates,
equipment trust certificates and conditional sales contracts. Preference
stocks are stocks that have many characteristics of preferred stocks, but are
typically junior to an existing class of preferred stocks. Securities of real
estate investment trusts, such as debentures, are affected by conditions in
the real estate industry and interest rates. Securities of natural resource
companies are subject to price fluctuation based upon inflationary pressures
and demand for natural resources. Stripped debt obligations are comprised of
principal only or interest only obligations. The value of closed-end
investment company securities, which are generally traded on an exchange, is
affected by demand for those securities regardless of the demand for the
underlying portfolio assets. Equipment lease certificates are debt obligations
secured by leases on equipment (such as railroad cars, airplanes or office
equipment), with the issuer of the certificate being the owner and lessor of
the equipment. The issuers of equipment lease certificates tend to be
industrial, transportation and leasing companies. Equipment trust certificates
are debt obligations secured by an interest in property (such as railroad cars
or airplanes), the title of which is held by a trustee while the property is
being used by the borrower. Conditional sales contracts are agreements under
which the seller of property continues to hold title to the property until the
purchase price is fully paid or other conditions are met by the buyer. The
Portfolio has no current intention of investing more than 5% of its total
assets in any of these types of securities. HI Portfolio may also invest in
all of the foregoing.
The Portfolio (and HI Portfolio) may purchase fixed-rate bonds which have
a demand feature allowing the holder to redeem the bonds at specified times.
These bonds are more defensive than conventional long-term bonds (protecting
to some degree against a rise in interest rates) while providing greater
opportunity than comparable intermediate term bonds, since a Portfolio may
retain the bond if interest rates decline. By acquiring these kinds of bonds a
Portfolio obtains the contractual right to require the issuer of the bonds to
purchase the security at an agreed upon price, which right is contained in the
obligation itself rather than in a separate agreement or instrument. Since
this right is assignable only with the bond, a Portfolio will not assign any
separate value to such right. A Portfolio may also purchase floating or
variable rate obligations and warrants when such warrants are part of a unit
with other securities.
The Portfolio's (and HI Portfolio's) investments in high yield, high risk
obligations rated below investment grade, which have speculative
characteristics, bear special risks. They are subject to greater credit risks,
including the possibility of default or bankruptcy of the issuer. The value of
such investments may also be subject to a greater degree of volatility in
response to interest rate fluctuations, economic downturns and changes in the
financial condition of the issuer. These securities generally are less liquid
than higher quality securities. During periods of deteriorating economic
conditions and contractions in the credit markets, the ability of such issuers
to service their debt, meet projected goals or obtain additional financing may
be impaired. Each Portfolio will take such action as it considers appropriate
in the event of anticipated financial difficulties, default or bankruptcy of
either the issuer of any such obligation or of the underlying source of funds
for debt service. Such action may include retaining the services of various
persons and firms (including affiliates of the Investment Adviser) to evaluate
or protect any real estate, facilities or other assets securing any such
obligation or acquired by each Portfolio as a result of any such event. A
Portfolio will incur additional expenditures in taking protective action with
respect to portfolio obligations in default and assets securing such
obligations.
The Portfolio may invest in obligations of domestic and foreign companies
in the group consisting of the banking and the financial services industries.
Companies in the banking industry include U.S. and foreign commercial banking
institutions (including their parent holding companies). Companies in the
financial services industry include finance companies, diversified financial
services companies and insurance and insurance holding companies. Companies
engaged primarily in the investment banking, securities, investment advisory
or investment company business are not deemed to be in the financial services
industry for this purpose. The securities held by the Portfolio may be
affected by economic or regulatory developments in or related to such
industries. Sustained increases in interest rates can adversely affect the
availability and cost of funds for an institution's lending activities, and a
deterioration in general economic conditions could increase the institution's
exposure to credit losses.
A bank from whom a Portfolio acquires a loan participation interest may be
treated as a co-issuer for tax diversification purposes to the extent that the
Portfolio does not have direct recourse against the borrower of the underlying
loan and is therefore relying on the credit of such bank. For industry
concentration purposes, the Investment Adviser will consider all relevant
factors in determining the issuer of a loan interest, including: the credit
quality of the borrower, the amount and quality of the collateral, the terms
of the loan agreement and the other relevant agreements (including inter-
creditor agreements), the degree to which the credit of such interpositioned
person was deemed material to the decision to purchase the loan interest, the
interest rate environment, and general economic conditions applicable to the
borrower and such interpositioned person.
MORTGAGE ROLLS
The Portfolio may enter into mortgage "dollar rolls" in which the
Portfolio sells mortgage-backed securities for delivery in the current month
and simultaneously contracts to repurchase substantially similar (same type,
coupon and maturity) securities on a specified future date. During the roll
period, the Portfolio foregoes principal and interest paid on the mortgage-
backed securities. The Portfolio is compensated by the difference between the
current sales price and the lower forward price for the future purchase (often
referred to as the "drop") as well as by the interest earned on the cash
proceeds of the initial sale. A "covered roll" is a specific type of dollar
roll for which there is an offsetting cash position or a cash equivalent
security position which matures on or before the forward settlement date of
the dollar roll transaction. The Portfolio will only enter into covered rolls.
Covered rolls are not treated as a borrowing or other senior security and will
be excluded from the calculation of the Portfolio's borrowings and other
senior securities.
LENDING OF PORTFOLIO SECURITIES
Each Portfolio may seek to increase its income by lending portfolio
securities to broker-dealers or other institutional borrowers. Under present
regulatory policies of the Commission, such loans are required to be secured
continuously by collateral in cash, cash equivalents or U.S. Government
securities held by the Portfolio's custodian and maintained on a current basis
at an amount at least equal to the market value of the securities loaned,
which will be marked to market daily. Cash equivalents include certificates of
deposit, commercial paper and other short-term money market instruments. A
Portfolio would have the right to call a loan and obtain the securities
loaned at any time on up to five business days' notice. During the existence
of a loan, a Portfolio will continue to receive the equivalent of the interest
paid by the issuer on the securities loaned and will also receive a fee or all
of a portion of the interest on investment of the collateral, if any. However,
a Portfolio may pay lending fees to such borrowers. A Portfolio would not have
the right to vote any securities having voting rights during the existence of
a loan, but would call the loan in anticipation of an important vote to be
taken among holders of the securities or the giving or withholding of their
consent on a material matter affecting the investment. As with other
extensions of credit there are risks of delay in recovery or even loss of
rights in the securities by the Investment Adviser to be of good standing and
when the consideration which can be earned from securities loans of this type,
net of administrative expenses and any finders fees, justifies the attendant
risk. The financial condition of the borrower will be monitored by the
Investment Adviser on an ongoing basis. If the Investment Adviser determines
to make securities loans, it is not intended that the value of the securities
loaned would exceed 30% of a Portfolio's total assets. As of the present time,
the Trustees of neither Portfolio have made a determination to engage in this
activity, and have no present intention of making such a determination during
the current fiscal year.
FOREIGN INVESTMENTS
Since foreign companies are not subject to uniform accounting, auditing
and financial reporting standards, practices and requirements comparable to
those applicable to U.S. companies, there may be less publicly available
information about a foreign company than about a domestic company. Volume and
liquidity in most foreign bond markets is less than in the United States and
securities of some foreign companies are less liquid and more volatile than
securities of comparable U.S. companies. Fixed commissions on foreign stock
exchanges are generally higher than negotiated commissions on U.S. exchanges,
although each Portfolio endeavors to achieve the most favorable net results on
its portfolio transactions. There is generally less government supervision and
regulation of securities exchanges, broker-dealers and listed companies than
in the United States. Mail service between the United States and foreign
countries may be slower or less reliable than within the United States, thus
increasing the risk of delayed settlements of portfolio transactions or loss
of certificates for portfolio securities. A Portfolio may be required to pay
for securities before delivery. In addition, with respect to certain foreign
countries, there is the possibility of expropriation or confiscatory taxation,
political or social instability, or diplomatic developments which could affect
a Portfolio's investments in those countries. Moreover, individual foreign
economies may differ favorably or unfavorably from the U.S. economy in such
respects as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency and balance of payments position.
FOREIGN CURRENCY TRANSACTIONS
The value of the assets of a Portfolio as measured in U.S. dollars may be
affected favorably or unfavorably by changes in foreign currency exchange
rates and exchange control regulations. Currency exchange rates can also be
affected unpredictably by intervention by U.S. or foreign governments or
central banks, or the failure to intervene, or by currency controls or
political developments in the U.S. or abroad. A Portfolio may conduct its
foreign currency exchange transactions on a spot (i.e., cash) basis at the
spot rate prevailing in the foreign currency exchange market or through
entering into swaps, forward contracts, options or futures on currency. In
spot transactions, foreign exchange dealers do not charge a fee for
conversion, but they do realize a profit based on the difference (the
"spread") between the prices at which they are buying and selling various
currencies. Thus, a dealer may offer to sell a foreign currency to a Portfolio
at one rate, while offering a lesser rate of exchange should the Portfolio
desire to resell that currency to the dealer.
Currency swaps require maintenance of a segregated account as described
under "Asset Coverage Requirements" below. The Portfolio will not enter into
any currency swap unless the credit quality of the unsecured senior debt or
the claims-paying ability of the other party thereto is considered to be
investment grade by the Investment Adviser.
Each Portfolio may enter into forward foreign currency exchange contracts
in several circumstances. First, when a Portfolio enters into a contract for
the purchase or sale of a security denominated in a foreign currency, or when
a Portfolio anticipates the receipt in a foreign currency of dividend or
interest payments on such a security which it holds, the Portfolio may desire
to "lock in" the U.S. dollar price of the security or the U.S. dollar
equivalent of such dividend or interest payment, as the case may be. By
entering into a forward contract for the purchase or sale, for a fixed amount
of dollars, of the amount of foreign currency involved in the underlying
transactions, the Portfolio will attempt to protect itself against an adverse
change in the relationship between the U.S. dollar and the subject foreign
currency during the period between the date on which the security is purchased
or sold, or on which the dividend or interest payment is declared, and the
date on which such payments are made or received.
Additionally, when management of a Portfolio believes that the currency of
a particular foreign country may suffer a substantial decline against the U.S.
dollar, it may enter into a forward contract to sell, for a fixed amount of
dollars, the amount of foreign currency approximating the value of some or all
of the securities held by the Portfolio denominated in such foreign currency.
The precise matching of the forward contract amounts and the value of the
securities involved will not generally be possible because the future value of
such securities in foreign currencies will change as a consequence of market
movements in the value of those securities between the date on which the
contract is entered into and the date it matures. The precise projection of
short-term currency market movements is not possible, and short-term hedging
provides a means of fixing the dollar value of only a portion of the
Portfolio's foreign assets. Each Portfolio generally will not enter into a
forward contract with a term of greater than one year.
RISKS ASSOCIATED WITH DERIVATIVE INSTRUMENTS
Entering into a derivative instrument involves a risk that the applicable
market will move against a Portfolio's position and that the Portfolio will
incur a loss. For derivative instruments other than purchased options, this
loss may exceed the amount of the initial investment made or the premium
received by the Portfolio. Derivative instruments may sometimes increase or
leverage a Portfolio's exposure to a particular market risk. Leverage enhances
a Portfolio's exposure to the price volatility of derivative instruments it
holds. Success in using derivative instruments to hedge portfolio assets
depends on the degree of price correlation between the derivative instruments
and the hedged asset. Imperfect correlation may be caused by several factors,
including temporary price disparities among the trading markets for the
derivative instrument, the assets underlying the derivative instrument and a
Portfolio's assets. Over-the-counter ("OTC") derivative instruments involve an
enhanced risk that the issuer or counterparty will fail to perform its
contractual obligations. Some derivative instruments are not readily
marketable or may become illiquid under adverse market conditions. In
addition, during periods of market volatility, a commodity exchange may
suspend or limit trading in an exchange-traded derivative instrument, which
may make the contract temporarily illiquid and difficult to price. Commodity
exchanges may also establish daily limits on the amount that the price of a
futures contract or futures option can vary from the previous day's settlement
price. Once the daily limit is reached, no trades may be made that day at a
price beyond the limit. This may prevent a Portfolio from closing out
positions and limiting its losses. The staff of the Commission takes the
position that certain purchased OTC options, and assets used as cover for
written OTC options, are subject to each Portfolio's 15% limit on illiquid
investments. A Portfolio's ability to terminate OTC derivative instruments may
depend on the cooperation of the counterparties to such contracts. For thinly
traded derivative instruments, the only source of price quotations may be the
selling dealer or counterparty. In addition, certain provisions of the Code,
limit the extent to which a Portfolio may purchase and sell derivative
instruments. Each Portfolio will engage in transactions in futures contracts
and related options only to the extent such transactions are consistent with
the requirements of the Code for maintaining the qualification of the Fund as
a regulated investment company ("RIC") for federal income tax purposes. See
"Taxes".
LIMITATIONS ON FUTURES CONTRACTS AND OPTIONS
Each Portfolio may enter into futures contracts (and options thereon)
traded on a foreign exchange if it is determined by the Investment Adviser
that trading on such exchange does not subject the Portfolio to risks,
including credit and liquidity risks, that are materially greater than the
risks associated with trading on United States exchanges regulated by the
CFTC.
A Portfolio will only write a put option on a security which it intends to
ultimately acquire for its portfolio. The Portfolio does not intend to
purchase any options if after such transaction more than 5% of its net assets,
as measured by the aggregate of all premiums paid for all such options held by
the Portfolio, would be so invested.
INTEREST RATE AND CURRENCY SWAPS
Interest rate swaps involve the exchange by the Portfolio with another
party of their respective commitments to pay or receive interest, e.g., an
exchange of fixed rate payments for floating rate payments. Currency swaps
involve the exchange of their respective rights to make or receive payments in
specified currencies. The Portfolio will only enter into interest rate swaps
on a net basis, i.e., the two payment streams are netted out with the
Portfolio receiving or paying, as the case may be, only the net amount of the
two payments. If the other party to an interest rate swap defaults, the
Portfolio's risk of loss consists of the net amount of interest payments that
the Portfolio is contractually entitled to receive. In contrast, currency
swaps usually involve the delivery of the entire payment stream in one
designated currency in exchange for the entire payment stream in the other
designated currency. Therefore, the entire principal value of a currency swap
is subject to the risk that the other party to the swap will default on its
contractual delivery obligations. The net amount of the excess, if any, of the
Portfolio's obligations over its entitlements will be maintained in a
segregated account by the Portfolio's custodian. The Portfolio will not enter
into any interest rate or currency swap unless the credit quality of the
unsecured senior debt or the claims-paying ability of the other party thereto
is considered to be investment grade by the Investment Adviser. If there is a
default by the other party to such a transaction, the Portfolio will have
contractual remedies pursuant to the agreements related to the transaction.
The swap market has grown substantially in recent years with a large number of
banks and investment banking firms acting both as principals and as agents
utilizing standardized swap documentation. As a result, the swap market has
become relatively liquid in comparison with the markets for other similar
instruments which are traded in the interbank market.
REVERSE REPURCHASE AGREEMENTS
Each Portfolio may enter into reverse repurchase agreements. Under a
reverse repurchase agreement, a Portfolio temporarily transfers possession of
a portfolio instrument to another party, such as a bank or broker-dealer, in
return for cash. At the same time, a Portfolio agrees to repurchase the
instrument at an agreed upon time (normally within seven days) and price,
which reflects an interest payment. A Portfolio may enter into such agreements
when it is able to invest the cash acquired at a rate higher than the cost of
the agreement, which would increase earned income. A Portfolio could also
enter into reverse repurchase agreements as a means of raising cash to satisfy
redemption requests without the necessity of selling portfolio assets.
When a Portfolio enters into a reverse repurchase agreement, any
fluctuations in the market value of either the securities transferred to
another party or the securities in which the proceeds may be invested would
affect the market value of the Portfolio's assets. As a result, such
transactions may increase fluctuations in the market value of the Portfolio's
assets. While there is a risk that large fluctuations in the market value of
the Portfolio's assets could affect the Fund's net asset value per share, this
risk is not significantly increased by entering into reverse repurchase
agreements, in the opinion of the Investment Adviser. Because reverse
repurchase agreements may be considered to be the practical equivalent of
borrowing funds, they constitute a form of leverage. If the Portfolio
reinvests the proceeds of a reverse repurchase agreement at a rate lower than
the cost of the agreement, entering into the agreement will lower the Fund's
yield. Reverse repurchase agreements will be included within "borrowings"
contained in the Fund's investment restriction (2) set forth below.
ASSET COVERAGE REQUIREMENTS
Transactions involving reverse repurchase agreements, swaps, forward
contracts or futures contracts and options (other than options that the
Portfolio has purchased) expose a Portfolio to an obligation to another party.
A Portfolio will not enter into any such transactions unless it owns either
(1) an offsetting ("covered") position in securities or other options, forward
contracts or futures contracts, or (2) cash or liquid securities (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. (Only the net obligation of a swap will be covered).
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 requiring coverage or
segregation is outstanding unless they are replaced with other appropriate
assets. As a result, the commitment of a large portion of a Portfolio's assets
to segregated accounts or to cover could impede portfolio management or the
Portfolio's ability to meet redemption requests or other current obligations.
PORTFOLIO TURNOVER
Neither Portfolio can accurately predict its portfolio turnover rate, but
it is anticipated that the annual turnover rate will generally not exceed 100%
(excluding turnover of securities having a maturity of one year or less). A
100% annual turnover rate would occur, for example, if all the securities held
by a Portfolio were replaced in a period of one year. A high turnover rate
(such as 100% or more) necessarily involves greater expenses to a Portfolio
and may result in the realization of substantial net short-term capital gains.
The Portfolio may engage in active short-term trading to benefit from yield
disparities among different issues of securities or among the markets for
fixed income securities of different countries, to seek short-term profits
during periods of fluctuating interest rates, or for other reasons. Such
trading will increase the Portfolio's rate of turnover and may increase the
incidence of net short-term capital gains allocated to the Fund by the
Portfolio which, upon distribution by the Fund, are taxable to Fund
shareholders as ordinary income. For the fiscal years ended October 31, 1996
and 1995, the portfolio turnover rates of the Portfolio were 97% and 78%,
respectively.
INVESTMENT RESTRICTIONS
The following investment restrictions of the Fund are designated as
fundamental policies and as such cannot be changed without the approval of the
holders of a majority of the Fund's outstanding voting securities, which as
used in this SAI means the lesser of (a) 67% of the shares of the Fund present
or represented by proxy at a meeting if the holders of more than 50% of the
shares are present or represented at the meeting or (b) more than 50% of the
shares of the Fund. Accordingly, the Fund may not:
(1) Purchase any security (other than securities issued or guaranteed by
the U.S. Government or any of its agencies or instrumentalities) if such
purchase, at the time thereof, would cause 25% or more of the Fund's total
assets (taken at market value) to be invested in the securities of issuers in
any single industry, provided that the electric, gas and telephone utility
industries shall be treated as separate industries for purposes of this
restriction;
(2) Borrow money or issue senior securities except as permitted by the
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 or sell real estate, although it may purchase and sell
securities which are secured by real estate and securities of companies which
invest or deal in real estate;
(6) Purchase or sell physical commodities or futures contracts for the
purchase or sale of physical commodities, provided that the Fund may enter
into all types of futures and forward contracts on currency, securities and
securities, economic and other indices and may purchase and sell options on
such futures contracts; or
(7) Make loans to any person, except by (a) the acquisition of debt
instruments and making portfolio investments, (b) entering into repurchase
agreements, and (c) lending portfolio securities.
Notwithstanding the investment policies and restrictions of the Fund, the
Fund may invest its investable assets in an open-end management investment
company (a Portfolio) with substantially the same investment objective,
policies and restrictions as the Fund; moreover, subject to Trustee approval
the Fund may invest its investable assets in other open-end management
investment companies in the same group of investment companies with the same
investment adviser as the Portfolio (or an affiliate) if, with respect to such
assets, the other companies' permitted investments are substantially the same
as those of the Fund.
The Portfolio has adopted substantially the same fundamental investment
restrictions as the foregoing investment restrictions adopted by the Fund;
such restrictions cannot be changed without the approval of a "majority of the
outstanding voting securities" of the Portfolio.
The Fund and the Portfolio have adopted the following investment policies
which may be changed by the Trust with respect to the Fund without approval by
the Fund's shareholders or with respect to the Portfolio without approval by
the Fund or its other investors. As a matter of nonfundamental policy, the
Fund and the Portfolio may not: (a) invest more than 15% of net assets in
investments which are not readily marketable, including restricted securities
and repurchase agreements with a maturity longer than seven days. Restricted
securities for the purposes of this limitation do not include securities
eligible for resale pursuant to Rule 144A under the Securities Act of 1933 and
commercial paper issued pursuant to Section 4(2) of said Act that the Board of
Trustees of the Trust or the Portfolio, or their delegate, determines to be
liquid; (b) make short sales of securities or maintain a short position,
unless at all times when a short position is open it owns an equal amount of
such securities or securities convertible into or exchangeable, without
payment of any further consideration, for securities of the same issue as, and
equal in amount to, the securities sold short, and unless no more than 25% of
its net assets (taken at current value) is held as collateral for such sales
at any one time; 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 is a member, officer,
director or trustee of any investment adviser of the Trust or the Portfolio if
after the purchase of the securities of such issuer by the Fund or the
Portfolio one or more of such persons owns beneficially more than 1/2 of 1%
of the shares or securities or both (all taken at market value) of such issuer
and such persons owning more than 1/2 of 1% of such shares of securities
together own beneficially more than 5% of such shares or securities or both
(all taken at market value).
HI Portfolio has substantially the same fundamental and nonfundamental
policies as the Fund and the Portfolio except that HI Portfolio has the
following additional fundamental policy: With respect to 75% of total assets
of the Portfolio, the Portfolio may not purchase any security if such
purchase, at the time thereof, would cause more than 5% of the total assets of
the Portfolio (taken at market value) to be invested in the securities of a
single issuer, or cause more than 10% of the total outstanding voting
securities of such issuer to be held by the Portfolio, except obligations
issued or guaranteed by the U.S. Government, its agencies or instrumentalities
and except securities of other investment companies.
Whenever an investment policy or investment restriction set forth in the
Prospectus or this SAI states a maximum percentage of assets that may be
invested in any security or other asset, or describes a policy regarding
quality standards, such percentage limitation or standard shall be determined
immediately after and as a result of the Fund's or a Portfolio's acquisition
of such security or asset. Accordingly, any later increase or decrease
resulting from a change in values, assets or other circumstances, or any
subsequent rating change below investment grade made by a rating service, will
not compel the Fund or a Portfolio, as the case may be, to dispose of such
security or other asset. Moreover, the Fund and each Portfolio must always be
in compliance with the borrowing policy set forth above.
TRUSTEES AND OFFICERS
The Trustees and officers of the Trust and the Portfolio are listed below.
Except as indicated, each individual has held the office shown or other
offices in the same company for the last five years. Unless otherwise noted,
the business address of each Trustee and officer is 24 Federal Street, Boston,
Massachusetts 02110, which is also the address of the Investment Adviser, BMR,
a wholly-owned subsidiary of Eaton Vance Management ("Eaton Vance"); Eaton
Vance's parent, Eaton Vance Corp. ("EVC"); and of BMR's and Eaton Vance's
trustee, Eaton Vance, Inc. ("EV"). Eaton Vance and EV are both wholly-owned
subsidiaries of EVC. Those Trustees who are "interested persons" of the Trust
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 of the Trust*
Vice Chairman of BMR, Eaton Vance, EVC and EV, and a Director of EVC and EV.
Director or Trustee and officer of various investment companies managed by
Eaton Vance or BMR.
JAMES B. HAWKES (55), President of the Portfolio, Vice President of the Trust
and Trustee*
Chairman, President and Chief Executive Officer of BMR, Eaton Vance, EVC and
EV and a Director of EVC and EV. Director, Trustee and officer of various
investment companies managed by Eaton Vance or BMR.
DONALD R. DWIGHT (66), Trustee
President of Dwight Partners, Inc. (a corporate relations and communications
company); Chairman of the Board of Newspapers of New England, Inc. Director
or Trustee of various investment companies managed by Eaton Vance or BMR.
Address: Clover Mill Lane, Lyme, New Hampshire 03768
SAMUEL L. HAYES, III (62), Trustee
Jacob H. Schiff Professor of Investment Banking, Harvard University Graduate
School of Business Administration. Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: Harvard University Graduate School of Business Administration,
Soldiers Field Road, Boston, Massachusetts 02163
NORTON H. REAMER (61), Trustee
President and Director, United Asset Management Corporation (a holding company
owning institutional investment management firms); Chairman, President and
Director, UAM Funds (mutual funds). Director or Trustee of various
investment companies managed by Eaton Vance or BMR.
Address: One International Place, Boston, Massachusetts 02110
JOHN L. THORNDIKE (70), Trustee
Formerly Director of Fiduciary Company Incorporated. Director or Trustee of
various investment companies managed by Eaton Vance or BMR.
Address: 175 Federal Street, Boston, Massachusetts 02110
JACK L. TREYNOR (67), Trustee
Investment Adviser and Consultant. Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: 504 Via Almar, Palos Verdes Estates, California 90274
OFFICERS OF THE TRUST AND THE PORTFOLIO
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.
THOMAS J. FETTER (54), Vice President of the Trust
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR. Mr. Fetter was elected Vice
President on October 17, 1997.
MARK VENEZIA (48), Vice President of the Portfolio
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
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, Mr. Dynner was a Partner of the law firm of
Kirkpartrick & Lockhart LLP, New York and Washington, D.C., and was
Executive Vice President of Neuberger & Berman Management, Inc., a mutual
fund management company. Officer of various investment companies managed by
Eaton Vance or BMR. Mr. Dynner was elected Secretary on June 23, 1997.
JANET E. SANDERS (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 on March
27, 1995.
JOHN P. RYNNE (55), Assistant Secretary of the Trust
Corporate Controller and Vice President of EVC. Vice President of Eaton Vance,
EVD and BMR. Mr. Rynne was elected an officer of the Trust 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. Officer of various investment
companies managed by Eaton Vance or BMR. Mr. Woodbury was elected Assistant
Secretary on June 19, 1995.
Messrs. Hayes (Chairman), Reamer and Thorndike are members of the Special
Committee of the Board of Trustees of the Trust and of the Portfolio. The
purpose of the Special Committee is to consider, evaluate and make
recommendations to the full Board of Trustees concerning (i) all contractual
arrangements with service providers to the Fund and the Portfolio, including
investment advisory (Portfolio only), administrative, transfer agency,
custodial and fund accounting and distribution services, and (ii) all other
matters in which Eaton Vance or its affiliates has any actual or potential
conflict of interest with the Fund, the Portfolio or investors therein.
The Nominating Committee of the Board of Trustees of the Trust and the
Portfolio is comprised of four Trustees who are not "interested persons" as
that term is defined under the 1940 Act ("noninterested Trustees"). The
Committee has four-year staggered terms, with one member rotating off the
Committee to be replaced by another noninterested Trustee. The purpose of the
Committee is to recommend to the Board nominees for the position of
noninterested Trustee and to assure that at least a majority of the Board of
Trustees is independent of Eaton Vance and its affiliates.
Messrs. Treynor (Chairman) and Dwight are members of the Audit Committee
of the Board of Trustees of the Trust and of the Portfolio. The Audit
Committee's functions include making recommendations to the Trustees regarding
the selection of the independent accountants, and reviewing matters relative
to trading and brokerage policies and practices, accounting and auditing
practices and procedures, accounting records, internal accounting controls,
and the functions performed by the custodian, transfer agent and dividend
disbursing agent of the Trust and of the Portfolio.
Trustees of the Portfolio who are not affiliated with the Investment
Adviser may elect to defer receipt of all or a percentage of their annual fees
in accordance with the terms of a Trustees Deferred Compensation Plan (the
"Trustees" Plan"). Under the Trustees' Plan, an eligible Trustee may elect to
have his deferred fees invested by the Portfolio in the shares of one or more
funds in the Eaton Vance Family of Funds, and the amount paid to the Trustees
under the Trustees' Plan will be determined based upon the performance of such
investments. Deferral of Trustees' fees in accordance with the Trustees' Plan
will have a negligible effect on the Portfolio's assets, liabilities, and net
income per share, and will not obligate the Portfolio to retain the services
of any Trustee or obligate the Portfolio to pay any particular level of
compensation to the Trustee. Neither the Trust nor the Portfolio has a
retirement plan for its Trustees.
The fees and expenses of the noninterested Trustees of the Trust and the
Portfolio are paid by the Fund (and the other series of the Trust) and the
Portfolio, respectively. (The Trustees of the Trust and the Portfolio who are
members of the Eaton Vance organization receive no compensation from the Trust
or the Portfolio.) During the fiscal year ended October 31, 1996, the
noninterested Trustees of the Trust and the Portfolio received the following
compensation in their capacities as Trustees from the Fund and the Portfolio,
and, for the year ended December 31, 1996, earned the following compensation
in their capacities as Trustees of the funds in the Eaton Vance fund complex
(1):
<TABLE>
<CAPTION>
AGGREGATE AGGREGAE TOTAL COMPENSATION
COMPENSATION COMPENSATION FROM TRUST AND
NAME FROM TRUST(2) FROM PORTFOLIO FUND COMPLEX
<S> <C> <C> <C>
Donald R. Dwight .............................. $687 $1,668(3) $145,000(5)
Samuel L. Hayes, III .......................... 625 1,846(4) 161,250(6)
Norton H. Reamer .............................. 619 1,783 145,000
John L. Thorndike ............................. 634 1,885 150,000
Jack L. Treynor ............................... 679 1,850 150,000
</TABLE>
(1) As of November 1, 1997, the Eaton Vance complex consists of 166 registered
investment companies or series thereof.
(2) The Trust consisted of 15 Funds as of October 31, 1996.
(3) Includes $647 of deferred compensation.
(4) Includes $689 of deferred compensation.
(5) Includes $45,000 of deferred compensation.
(6) Includes $20,429 of deferred compensation.
The noninterested Trustees of HI Portfolio are the same persons as those
of the Portfolio and M. Dozier Gardner and James B. Hawkes are the only
interested Trustees. The Committee structure and Trustee compensation policies
of HI Portfolio are identical to that of the Portfolio.
INVESTMENT ADVISER AND ADMINISTRATOR
The Portfolio engages BMR as investment adviser pursuant to an Investment
Advisory Agreement, which is substantially the same for the Portfolio. BMR or
Eaton Vance acts as investment adviser to investment companies and various
individual and institutional clients with combined assets under management of
approximately $20 billion.
Eaton Vance, its affiliates and its predecessor companies have been
managing assets of individuals and institutions since 1924 and managing
investment companies since 1931. They maintain a large staff of experienced
fixed-income and equity investment professionals to service the needs of their
clients. The fixed-income division focuses on all kinds of taxable investment-
grade and high-yield securities, tax-exempt investment-grade and high-yield
securities, foreign debt, and U.S. Government securities. The equity division
covers stocks ranging from blue chip to emerging growth companies.
Eaton Vance and its affiliates act as adviser to a family of mutual funds,
and individual and various institutional accounts, including corporations,
hospitals, retirement plans, universities, foundations and trusts. Eaton Vance
mutual funds feature international equities, domestic equities, municipal
bonds and tax-free 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-1980's. Lloyd George analysts cover East Asia, the India subcontinent,
Russia and Eastern Europe, Latin America, Australia and New Zealand from
offices in Hong Kong, London and Mumbai. Together Eaton Vance and Lloyd George
manage over $21 billion in assets. Eaton Vance mutual funds are distributed by
the Principal Underwriter both within the United States and offshore.
The Principal Underwriter believes that an investment professional can
provide valuable services to you to help you reach your investment goals.
Meeting investment goals requires time, objectivity and investment savvy.
Before making an investment recommendation, a representative can help you
carefully consider your short- and long-term financial goals, your tolerance
for investment risk, your investment time frame, and other investments you may
already own. Your professional investment representatives are knowledgeable
about financial markets, as well as the wide range of investment opportunities
available. A representative can provide you with tailored financial advice and
help you decide when to buy, sell or persevere with your investments.
BMR manages the investments and affairs of the Portfolio subject to the
supervision of the Portfolio's Board of Trustees. BMR furnishes to the
Portfolio investment research, advice and supervision, furnishes an investment
program and determines what securities will be purchased, held or sold by the
Portfolio and what portion, if any, of the Portfolio's assets will be held
uninvested. The Investment Advisory Agreement requires BMR to pay the salaries
and fees of all officers and Trustees of the Portfolio who are members of the
BMR organization and all personnel of BMR performing services relating to
research and investment activities. The Portfolio is responsible for all
expenses not expressly stated to be payable by BMR under the Investment
Advisory Agreement, including, without implied limitation, (i) expenses of
maintaining the Portfolio and continuing its existence, (ii) registration of
the Portfolio under the 1940 Act, (iii) commissions, fees and other expenses
connected with the acquisition, holding and disposition of securities and
other investments, (iv) auditing, accounting and legal expenses, (v) taxes and
interest, (vi) governmental fees, (vii) expenses of issue, sale and redemption
of interests in the Portfolio, (viii) expenses of registering and qualifying
the Portfolio and interests in the Portfolio under federal and state
securities laws and of preparing and printing registration statements or other
offering statements or memoranda for such purposes and for distributing the
same to investors, and fees and expenses of registering and maintaining
registrations of the Portfolio and of the Portfolio's placement agent as
broker-dealer or agent under state securities laws, (ix) expenses of reports
and notices to investors and of meetings of investors and proxy solicitations
therefor, (x) expenses of reports to governmental officers and commissions,
(xi) insurance expenses, (xii) association membership dues, (xiii) fees,
expenses and disbursements of custodians and subcustodians for all services to
the Portfolio (including without limitation safekeeping of funds, securities
and other investments, keeping of books, accounts and records, and
determination of net asset values, book capital account balances and tax
capital account balances), (xiv) fees, expenses and disbursements of transfer
agents, dividend disbursing agents, investor servicing agents and registrars
for all services to the Portfolio, (xv) expenses for servicing the accounts of
investors, (xvi) any direct charges to investors approved by the Trustees of
the Portfolio, (xvii) compensation and expenses of Trustees of the Portfolio
who are not members of BMR's organization, and (xviii) such non-recurring
items as may arise, including expenses incurred in connection with litigation,
proceedings and claims and any legal obligation of the Portfolio to indemnify
its Trustees, officers and investors with respect thereto to the extent not
covered by insurance.
For a description of the compensation that the Portfolio pays BMR under
the Investment Advisory Agreement, see the Fund's current Prospectus. As of
October 31, 1996, the Portfolio had net assets of $132,406,799. For the fiscal
years ended 1996 and 1995 and for the period from the start of business March
1, 1994 to October 31, 1994, the Portfolio paid BMR advisory fees of $744,744,
$992,620 and $1,004,670, respectively, (equivalent to 0.54%, 0.55% and 0.49%,
respectively, (annualized) of the Portfolio's average daily net assets for
each such period).
The Investment Advisory Agreement with BMR continues in effect from year
to year for so long as such continuance is approved at least annually (i) by
the vote of a majority of the noninterested Trustees of the Portfolio cast in
person at a meeting specifically called for the purpose of voting on such
approval and (ii) by the Board of Trustees of the Portfolio or by vote of a
majority of the outstanding voting securities of the Portfolio. The Agreement
may be terminated at any time without penalty on sixty (60) days' written
notice by the Board of Trustees of either party, or by vote of the majority of
the outstanding voting securities of the Portfolio, and the Agreement will
terminate automatically in the event of its assignment. The Agreement provides
that BMR may render services to others. The Agreement also provides that BMR
shall not be liable for any loss incurred in connection with the performance
of its duties, or action taken or omitted under that Agreement, in the absence
of willful misfeasance, bad faith, gross negligence in the performance of its
duties or by reason of its reckless disregard of its obligations and duties
thereunder, or for any losses sustained in the acquisition, holding or
disposition of any security or other investment.
The investment advisory agreement of HI Portfolio with BMR is
substantially the same as that of the Portfolio. With respect to assets of the
Fund invested in HI Portfolio, BMR's monthly fee is equal to the aggregate of
(a) a daily asset based fee computed by applying the annual asset rate
applicable to that portion of the total daily net assets in each
Category as indicated below, plus
(b) a daily income based fee computed by applying the daily income rate
applicable to that portion of the total daily gross income (which
portion shall bear the same relationship to the total daily gross
income on such day as that portion of the total daily net assets in
the same Category bears to the total daily net assets on such day) in
each Category as indicated below:
<TABLE>
<CAPTION>
ANNUAL DAILY
CATEGORY DAILY NET ASSETS ASSET RATE INCOME RATE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
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%
</TABLE>
For the fiscal years ended March 31, 1997, 1996, and 1995, HI Portfolio
advisory fees equaled 0.61%, 0.63% and 0.64%, respectively, of average daily
net assets.
The Portfolio has also engaged BMR to act as its Administrator under an
Administration Agreement. The Administration Agreement with BMR continues in
effect from year to year so long as such continuance is approved at least
annually (i) by the Trustees of the Portfolio and (ii) by the vote of a
majority of those Trustees of the Portfolio who are not interested persons of
the Portfolio or of the Administrator. Under the Administration Agreement, BMR
is obligated to (a) review and supervise the provision of all domestic and
foreign custodial services to the Portfolio, and to make such reports and
recommendations to the Board of Trustees of the Portfolio concerning the
provision of such services as the Board deems appropriate; (b) provide to the
Portfolio certain valuation, legal, accounting and tax assistance and services
in connection with the Portfolio's (i) investments in (A) securities,
obligations and commercial paper that are denominated in foreign currencies or
the European Currency Unit ("ECU"), or that are issued or guaranteed by
foreign entities, (B) certificates of deposit and bankers' acceptances issued
or guaranteed by, or time deposits maintained at, foreign banks or foreign
branches of U.S. banks, and (C) participation interests in loans by U.S. or
foreign banks that are made to foreign borrowers or that are denominated in
foreign currencies or the ECU; and (ii) transactions in derivative
instruments, including instruments indexed to foreign exchange rates, forward
foreign currency exchange contracts, put and call options on foreign
currencies, futures contracts and options on such contracts, and interest rate
and currency swaps; and (c) provide to the Portfolio such other special
administrative services as the Board from time to time shall instruct BMR to
furnish under the Administration Agreement. In return for these special
services, the Portfolio pays BMR as compensation under the Administration
Agreement a monthly fee in the amount of .0125% (equivalent to .15% annually)
of the average daily net assets of the Portfolio. For the fiscal years ended
October 31, 1996 and 1995 and for the period from the start of business March
1, 1994, to October 31, 1994, the Portfolio paid BMR administration fees of
$208,657, $273,545 and $284,828, respectively.
The Portfolio will be responsible for all costs and expenses not
expressly stated to be payable by BMR under the Administration Agreement. Such
costs and expenses to be borne by the Portfolio include, without limitation,
the fees and expenses of the Portfolio's custodian and transfer agent,
including those incurred for determining the Portfolio's net asset value and
keeping the Portfolio's books; expenses of pricing and valuation services;
membership dues in investment company organizations; brokerage commissions and
fees; registration of the Portfolio under the 1940 Act; expenses of reports to
investors, proxy statements, and other expenses of investor's meetings;
insurance premiums; printing and mailing expenses; interest, taxes and
governmental fees; legal and accounting expenses; compensation and expenses of
Trustees not affiliated with BMR; and investment advisory and administration
fees. The Portfolio will also bear expenses incurred in connection with
litigation in which the Portfolio is a party and any legal obligation the
Portfolio may have to indemnify its officers and Trustees with respect
thereto, to the extent not covered by insurance.
As indicated in the Prospectus, Eaton Vance serves as administrator of the
Fund but currently receives no compensation for providing administrative
services to the Fund. Under its Administrative Services Agreement with the
Fund, Eaton Vance has been engaged to administer the Fund's affairs, subject
to the supervision of the Trustees of the Trust, and shall furnish for the use
of the Fund office space and all necessary office facilities, equipment and
personnel for administering the affairs of the Fund.
IBT Trust Company (Cayman), Ltd. maintains HI Portfolio's principal office
and certain of its records and provides administrative assistance in
connection with meetings of its Trustees and interestholders.
The Fund pays all of its own expenses including, without limitation, (i)
expenses of maintaining the Fund and continuing its existence, (ii) its pro
rata share of the Trust's registration under the 1940 Act, (iii) commissions,
fees and other expenses connected with the purchase or sale of securities and
other investments, (iv) auditing, accounting and legal expenses, (v) taxes and
interest, (vi) governmental fees, (vii) expenses of issue, sale, repurchase
and redemption of shares, (viii) expenses of registering and qualifying the
Fund and its shares under Federal and state securities laws and of preparing
and printing prospectuses for such purposes and for distributing the same to
shareholders and investors, and fees and expenses of registering and
maintaining registrations of the Fund and of the Fund's principal underwriter,
if any, as broker-dealer or agent under state securities laws, (ix) expenses
of reports and notices to shareholders and of meetings of shareholders and
proxy solicitations therefor, (x) expenses of reports to governmental officers
and commissions, (xi) insurance expenses, (xii) association membership dues,
(xiii) fees, expenses and disbursements of custodians and subcustodians for
all services to the Fund (including without limitation safekeeping of funds,
securities and other investments, keeping of books and accounts and
determination of net asset values), (xiv) fees, expenses and disbursements of
transfer agents, dividend disbursing agents, shareholder servicing agents and
registrars for all services to the Fund, (xv) expenses for servicing
shareholder accounts, (xvi) any direct charges to shareholders approved by the
Trustees of the Trust, (xvii) compensation and expenses of Trustees of the
Trust who are not members of the Eaton Vance organization, and (xviii) such
non-recurring items as may arise, including expenses incurred in connection
with litigation, proceedings and claims and any legal obligation of the Trust
to indemnify its Trustees and officers with respect thereto, to the extent not
covered by insurance.
BMR is a wholly-owned subsidiary of Eaton Vance. Eaton Vance and EV are
both wholly-owned subsidiaries of EVC. BMR and Eaton Vance are both
Massachusetts business trusts, and EV is the trustee of BMR and Eaton Vance.
The Directors of EV are M. Dozier Gardner, James B. Hawkes and Benjamin A.
Rowland, Jr. The Directors of EVC consist of the same persons and John G. L.
Cabot and Ralph Z. Sorenson. Mr. Hawkes is Chairman and Mr. Gardner is vice
chairman. Mr. Hawkes is president and chief executive officer of EVC, BMR,
Eaton Vance and EV. All of the issued and outstanding shares of Eaton Vance
and EV are owned by EVC. All of the issued and outstanding shares of BMR are
owned by Eaton Vance. All shares of the outstanding Voting Common Stock of EVC
are deposited in a Voting Trust, the Voting Trustees of which are Messrs.
Dynner, Gardner, Hawkes, Rowland, and Thomas E. Faust, Jr., William M. Steul
and Wharton P. Whitaker. The Voting Trustees have unrestricted voting rights
for the election of Directors of EVC. All of the outstanding voting trust
receipts issued under said Voting Trust are owned by certain of the officers
of BMR and Eaton Vance who are also officers or officers and Directors of EVC
and EV. As of October 31, 1997, Messrs. Gardner and Hawkes each owned 24% of
such voting trust receipts, and Messrs. Rowland and Faust, owned 15% and 13%,
respectively, and Messrs. Dynner, Steul, and Whitaker each owned 8%. Messrs.
Gardner, Hawkes and Dynner are officers or Trustees of the Trust and the
Portfolio and are members of the EVC, BMR, Eaton Vance and EV organizations.
Messrs. Woodbury, Fetter, Murphy, Venezia, O'Connor, Ahern and Rynne and Ms.
Sanders who are officers or Trustees of the Trust and/or the Portfolio, are
also members of the BMR, Eaton Vance and EV organizations.
Eaton Vance owns all the stock of Northeast Properties, Inc., which is
engaged in real estate investment. EVC owns all the stock of Fulcrum
Management, Inc. and MinVen, Inc., which are engaged in precious metal mining
venture investment and management. EVC also owns approximately 21% of the
Class A shares of Lloyd George Management (B.V.I.) Limited, a registered
investment adviser. Eaton Vance, BMR, EVC and EV may also enter into other
businesses.
EVC and its affiliates and their officers and employees from time to time
have transactions with various banks, including the custodian of the Fund and
the Portfolios, 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 Portfolios
and such banks.
CUSTODIAN
IBT acts as custodian for the Trust and each Portfolio. IBT has the
custody of all cash and securities representing the Fund's interest in the
Portfolios, has custody of all the Portfolios' assets, maintains the general
ledger of the Portfolios and the Fund and computes the daily net asset value
of interests in the Portfolios and the net asset value of shares of the Fund.
In such capacity it attends to details in connection with the sale, exchange,
substitution, transfer or other dealings with the Portfolios' investments,
receives and disburses all funds and performs various other ministerial duties
upon receipt of proper instructions from the Trust and the Portfolios. IBT
charges custody fees which are competitive within the industry. The fees for
the Portfolios relate to 1) bookkeeping and valuation services provided at an
annual rate, 2) activity charges based upon the volume of investment related
transactions, and 3) reimbursement of out-of-pocket expenses. These fees are
then reduced by a credit for cash balances of the Portfolios at the custodian
equal to 75% of the 91-day, U.S. Treasury Bill auction rate applied to the
Portfolios' average daily collected balances for the week. The fee for the
Fund relates to bookkeeping and valuation services and is based upon a
percentage of the Fund's net assets.
IBT also provides services in connection with the preparation of
shareholder reports and the electronic filing of such reports with the
Commission, for which it receives a separate fee.
SERVICES FOR ACCUMULATION -- CLASS A SHARES
The following services are voluntary, involve no extra charge, other than
the sales charge included in the offering price, and may be changed or
discontinued without penalty at any time.
INTENDED QUANTITY INVESTMENT -- STATEMENT OF INTENTION. If it is anticipated
that $25,000 or more of Class A shares and shares of other funds exchangeable
for Class A shares and listed under "The Eaton Vance Exchange Privilege" in
the Prospectus will be purchased within a 13-month period, a Statement of
Intention should be signed so that shares may be obtained at the same reduced
sales charge as though the total quantity were invested in one lump sum.
Shares held under Right of Accumulation (see below) as of the date of the
Statement will be included toward the completion of the Statement. The
Statement authorizes the Transfer Agent to hold in escrow sufficient shares
(5% of the dollar amount specified in the Statement) which can be redeemed to
make up any difference in sales charge on the amount intended to be invested
and the amount actually invested. Execution of a Statement does not obligate
the shareholder to purchase or the Fund to sell the full amount indicated in
the Statement, and should the amount actually purchased during the 13-month
period be more or less than that indicated on the Statement, price adjustments
will be made. For sales charges and other information on quantity purchases,
see "How to Buy Shares" in the Prospectus. Any investor considering signing a
Statement of Intention should read it carefully.
RIGHT OF ACCUMULATION -- CUMULATIVE QUANTITY DISCOUNT. The applicable sales
charge level for the purchase of Class A shares is calculated by taking the
dollar amount of the current purchase and adding it to the value (calculated
at the maximum current offering price) of the shares the shareholder owns in
his or her account(s) in the Fund, and shares of other funds exchangeable for
Class A shares and listed under "The Eaton Vance Exchange Privilege" in the
Prospectus. The sales charge on the shares being purchased will then be at the
rate applicable to the aggregate. For sales charges on quantity purchases, see
"How to Buy Shares" in the Prospectus. Shares purchased (i) by an individual,
his or her spouse and their children under the age of twenty-one, and (ii) by
a trustee, guardian or other fiduciary of a single trust estate or a single
fiduciary account, will be combined for the purpose of determining whether a
purchase will qualify for the Right of Accumulation and if qualifying, the
applicable sales charge level.
For any such discount to be made available, at the time of purchase a
purchaser or his or her Authorized Firm must provide the Principal Underwriter
(in the case of a purchase made through an Authorized Firm) or the Transfer
Agent (in the case of an investment made by mail) with sufficient information
to permit verification that the purchase order qualifies for the accumulation
privilege. Confirmation of the order is subject to such verification. The
Right of Accumulation privilege may be amended or terminated at any time as to
purchases occurring thereafter.
SERVICE FOR WITHDRAWAL
The Transfer Agent will send to the shareholder regular monthly or
quarterly payments of any permitted amount designated by the shareholder (see
"Eaton Vance Shareholder Services -- Withdrawal Plan" in the Prospectus) based
upon the value of the shares held. The checks will be drawn from share
redemptions and, hence, although they are a return of principal, may require
the recognition of taxable gain or loss. Income dividends and capital gains
distributions in connection with withdrawal plan accounts will be credited at
net asset value as of the record date for each distribution. Continued
withdrawals in excess of current income will eventually use up principal,
particularly in a period of declining market prices. A shareholder may not
have a withdrawal plan in effect at the same time he or she has authorized
Bank Automated Investing or is otherwise making regular purchases of Fund
shares. The shareholder, the Transfer Agent or the Principal Underwriter will
be able to terminate the withdrawal plan at any time without penalty.
DETERMINATION OF NET ASSET VALUE
The net asset value of the Portfolio is determined by IBT (as agent and
custodian for the Portfolio) in the manner described under "Valuing Shares" in
the Prospectus. IBT Fund Services (Canada) Inc. determines the net asset value
of HI Portfolio. The Fund and the Portfolios will be closed for business and
will not price their respective shares or interests on the following business
holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.
Debt securities (other than mortgage-backed, "pass-through" securities and
short-term obligations maturing in sixty days or less), including listed
securities and securities for which price quotations are available and forward
contracts, will normally be valued on the basis of market valuations furnished
by pricing services. Mortgage-backed "pass-through" securities are valued
using a matrix pricing system which takes into account closing bond
valuations, yield differentials, anticipated prepayments and interest rates.
Financial futures contracts listed on commodity exchanges and exchange-traded
options are valued at closing settlement prices. Over-the-counter options are
valued at the mean between the bid and asked prices provided by dealers.
Short-term obligations and money market securities maturing in sixty days or
less are valued at amortized cost which approximates value. Non-U.S. dollar
denominated short-term obligations maturing in sixty days or less are valued
at amortized cost as calculated in the base currency and translated into U.S.
dollars at the current exchange rate. Investments for which market quotations
are unavailable are valued at fair value using methods determined in good
faith by or at the direction of the Trustees of the Portfolio.
The value of all assets and liabilities expressed in foreign currencies
will be converted into U.S. dollar values at the mean between the buying and
selling rates of such currencies against U.S. dollars last quoted on one of
the principal markets for such currencies. Generally, trading in foreign
securities, derivative instruments and currencies is substantially completed
each day at various times prior to the time a Portfolio calculates its net
asset value. If an event materially affecting the values of such securities,
instruments or currencies occurs between the time such values are determined
and the time net asset value is calculated, such securities, instruments or
currencies may be valued at fair value.
Each investor in a Portfolio, including the Fund, may add to or reduce its
investment in the Portfolio on each day the Exchange is open for trading
("Portfolio Business Day") as of the close of regular trading on the Exchange
(the "Portfolio Valuation Time"). The value of each investor's interest in a
Portfolio will be determined by multiplying the net asset value of the
Portfolio by the percentage, determined on the prior Portfolio Business Day,
which represented that investor's share of the aggregate interests in the
Portfolio on such prior day. Any additions or withdrawals for the current
Portfolio Business Day will then be recorded. Each investor's percentage of
the aggregate interest in a Portfolio will then be recomputed as a percentage
equal to a fraction (i) the numerator of which is the value of such investor's
investment in the Portfolio as of the Portfolio Valuation Time on the prior
Portfolio Business Day plus or minus, as the case may be, the amount of any
additions to or withdrawals from the investor's investment in the Portfolio on
the current Portfolio Business Day and (ii) the denominator of which is the
aggregate net asset value of the Portfolio as of the Portfolio Valuation Time
on the prior Portfolio Business Day plus or minus, as the case may be, the
amount of the net additions to or withdrawals from the aggregate investment in
the Portfolio on the current Portfolio Business Day by all investors in the
Portfolio. The percentage so determined will then be applied to determine the
value of the investor's interest in a Portfolio for the current Portfolio
Business Day.
INVESTMENT PERFORMANCE
Average annual total return is determined separately for each Class of the
Fund by multiplying a hypothetical initial purchase order of $1,000 by the
average annual compound rate of return (including capital appreciation/
depreciation, and distributions paid and reinvested) for the stated period and
annualizing the result. The calculation assumes (i) that all distributions are
reinvested at net asset value on the reinvestment dates during the period,
(ii) the deduction of the maximum sales charge from the initial $1,000
purchase order for Class A shares, (iii) a complete redemption of the
investment and (iv) the deduction of any CDSC at the end of the period. For
information concerning the total return of the Classes of the Fund, see
Appendix A, Appendix B and Appendix C.
Yield is computed separately for each Class of the Fund pursuant to a
standardized formula by dividing the net investment income per share earned
during a recent 30-day period by the maximum offering price (including the
maximum initial sales charge for Class A shares) per share on the last day of
the period and annualizing the resulting figure. Net investment income per
share is calculated from the yields to maturity of all debt obligations held
by a Portfolio based on prescribed methods, reduced by accrued Fund and Class
expenses for the period, with the resulting number being divided by the
average daily number of Class shares outstanding and entitled to receive
distributions during the period. This yield figure does not reflect the
deduction of any CDSCs which (if applicable) are imposed on certain
redemptions at the rates set forth under "How to Redeem Shares" in the
Prospectus. Yield calculations assume the current maximum initial sales charge
for Class A shares set forth under "How to Buy Shares" in the Prospectus.
(Actual yield may be affected by variations in sales charges on investments).
For the yield of the Classes of the Fund, see Appendix A, Appendix B and
Appendix C.
The Fund's total return may be compared to various domestic, international
and global securities indices, such as the Commodity Research Bureau Futures
Price Index. The Fund's yield may also be compared to the yields of other
fixed-income securities, such as U.S. Treasuries, mortgage-backed securities,
and corporate bonds or other securities comparable to the securities held by a
Portfolio as reported by various independent sources (such as Bloomberg L.P.).
In making such comparisons, the Fund may provide information concerning the
nature of such indices or securities. This information may be used in
advertisements and in information furnished to present or prospective
shareholders. The Fund's performance may differ from that of other investors
in the Portfolio, including other investment companies.
Evaluations of the Fund's performance (including ratings and rankings)
made by independent sources, may be used in advertisements and in information
furnished to present or prospective shareholders. In addition, information
showing the effects of compounding interest may be included in advertisements
and other material furnished to present and prospective shareholders.
Compounding is the process of earning interest on principal plus interest that
was earned earlier. Interest can be compounded annually, semi-annually,
quarterly or daily. Examples of compounding will be used for illustration
purposes only.
The Trust (or Principal Underwriter) may also provide investors and
prospective investors with information on the Fund's duration and duration's
relationship to the stability or volatility of a security's price. Information
may also be provided concerning the diversification of the Portfolios (on such
basis as country of issuer's origin, industry sector or security type), as
well as the allocation of securities held by the Portfolios across various
rating categories. In addition, information on the Portfolios' turnover rate
may be provided to investors and prospective investors.
Information used in advertisements and materials furnished to present and
prospective investors may include statements or illustrations relating to the
appropriateness of certain types of securities and/or mutual funds to meet
specific financial goals. Such information may address:
-- cost associated with aging parents;
-- funding a college education (including its actual and estimated cost);
-- health care expenses (including actual and projected expenses);
-- long-term disabilities (including the availability of, and coverage
provided by, disability insurance); and
-- retirement (including the availability of social security benefits,
the tax treatment of such benefits and statistics and other
information relating to maintaining a particular standard of living
and outliving existing assets).
Such information may also address different methods for saving money and
the results of such methods, as well as the benefits of investing in equity
securities. Such information may describe: the potential for growth; the
performance of equities as compared to other investment vehicles; and the
value of investing as early as possible and regularly, as well as staying
invested. The benefits of investing in equity securities by means of a mutual
fund may also be included (such benefits may include diversification,
professional management and the variety of equity mutual fund products).
Information in advertisements and materials furnished to present and
prospective investors may include profiles of different types of investors
(i.e., investors with different goals and assets) and different investment
strategies for meeting specific financial goals. Such information may provide
hypothetical illustrations which include: results of various investment
strategies; performance of an investment in the Fund over various time
periods; and results of diversifying assets among several investments with
varying performance. Information in advertisements and materials furnished to
present and prospective investors may also include quotations (including
editorial comments) and statistics concerning investing in securities, as well
as investing in particular types of securities and the performance of such
securities.
The Principal Underwriter believes that an investment professional can
provide valuable services to you to help you reach your investment goals.
Meeting investment goals requires time, objectivity and investment savvy.
Before making an investment recommendation, a representative can help you
carefully consider your short- and long-term financial goals, your tolerance
for investment risk, your investment time frame, and other investments you may
already own. Your professional investment representatives are knowledgeable
about financial markets, as well as the wide range of investment opportunities
available. A representative can help you decide when to buy, sell or persevere
with your investments. A professional investment representative can provide
you with tailored financial advice. Information about investment professionals
may appear in sales literature and advertisements used by the Fund.
The Trust (or Principal Underwriter) may provide information about Eaton
Vance, its affiliates and other investment advisers to the funds in the Eaton
Vance Family of Funds in sales material or advertisements provided to
investors or prospective investors. Such material or advertisements may also
provide information on the use of investment professionals by such investors.
TAXES
Each series of the Trust is treated as a separate entity for federal
income tax purposes. The Fund has elected to be treated and intends to qualify
each year, as a RIC under the Code. Accordingly, the Fund intends to satisfy
certain requirements relating to sources of its income and diversification of
its assets and to distribute substantially all of its net investment ordinary
income and net income in accordance with the timing requirements imposed by
the Code, so as to maintain its RIC status and avoid paying any federal income
or excise tax. The Fund so qualified for its fiscal year ended October 31,
1996. Because the Fund invests substantially all of its assets in the
Portfolios, the Portfolios normally must satisfy the applicable source of
income and diversification requirements in order for the Fund to also satisfy
these requirements. Each Portfolio will allocate at least annually among its
investors, including the Fund, each investor's distributive share of the
Portfolio's net taxable and tax-exempt (if any) investment income, net
realized capital gains, and any other items of income, gain, loss, deduction
or credit. For purposes of applying the requirements of the Code regarding
qualification as a RIC, the Fund (i) will be deemed to own its proportionate
share of each of the assets of a Portfolio and (ii) will be entitled to the
gross income of a 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 Portfolios are
treated as partnerships for Massachusetts and federal tax purposes, neither
the Fund nor a Portfolio should be liable for any income, corporate excise or
franchise tax in the Commonwealth of Massachusetts.
A Portfolio's transactions in options, futures contracts and forward
contracts will be subject to special tax rules that may affect the amount,
timing and character of Fund distributions to shareholders. For example,
certain positions held by a Portfolio on the last business day of each taxable
year will be marked to market (i.e., treated as if closed out on such day),
and any resulting gain or loss will generally be treated as 60% long-term and
40% short-term capital gain or loss. Certain positions held by a Portfolio
that substantially diminish the Portfolio's risk of loss with respect to other
positions in its portfolio may constitute "straddles," which are subject to
tax rules that may cause deferral of Portfolio losses, adjustments in the
holding periods of Portfolio securities and conversion of short-term capital
losses into long-term capital losses. A Portfolio may make certain elections
to mitigate adverse consequences of these tax rules and may have to limit its
activities in options, futures contracts and forward contracts in order to
enable the Fund to maintain its RIC 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 Portfolios' total assets at the close of any taxable
year 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 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, foreign currency
options, futures and forward contracts, and interest rate and currency swaps,
and investment by the Portfolios 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.
A 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 a
Portfolio, and in order to distribute its proportionate share of this income
and avoid a tax payable by the Fund, the Portfolio may be required to
liquidate 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.
The appropriate tax accounting for dollar rolls is also uncertain in some
respects, and the Portfolio's use of such rolls may accordingly be limited in
order to preserve the Fund's qualification as a RIC.
Investments in lower-rated or unrated securities may present special tax
issues for a Portfolio and, hence, for the Fund to the extent 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 securites. For example, the Code is unclear regarding: (i) when a
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.
The Fund's distributions of taxable net investment income, the excess of
net short-term capital gain over net long-term capital loss and certain
foreign exchange gains earned by a Portfolio and allocated to the Fund are
taxable to shareholders of the Fund as ordinary income whether received in
cash or reinvested in additional shares. Only a small portion, if any, of such
distributions of net investment income made by the Fund may qualify for the
dividends-received deduction for corporations, subject to applicable
limitations under the Code. The Fund's distributions of the excess of net
long-term capital gain over net short-term capital loss (including any capital
losses carried forward from prior years) earned by a Portfolio and allocated
to the Fund are taxable to shareholders of the Fund as long-term capital
gains, whether received in cash or in additional shares and regardless of the
length of time their shares of the Fund have been held.
Any loss realized upon the 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 of net long-term capital gains with
respect to such shares. All or a portion of any loss realized upon a taxable
disposition of Fund shares may be disallowed under "wash sale" rules if other
shares of the Fund are purchased (whether through the reinvestment of
distributions or otherwise) within 30 days before or after such disposition.
Special tax rules apply to Individual Retirement Accounts ("IRAs") and
other retirement plans, and persons investing through such plans should
consult their tax advisers for more information. The deductibility of
contributions to IRAs may be restricted or eliminated for particular
shareholders.
Amounts paid by the Fund to individuals and certain other shareholders who
have not provided the Fund with their correct taxpayer identification number
("TIN") and certain certifications required by the Internal Revenue Service
(the "IRS"), as well as shareholders with respect to whom the Fund has
received certain information from the IRS or a broker, may be subject to
"backup" withholding of federal income tax arising from the Fund's taxable
dividends and other distributions as well as the proceeds of redemption
transactions (including repurchases and exchanges), at a rate of 31%. An
individual's TIN is generally his or her social security number.
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
CLASS A SHARES. Class A shares of the Fund may be continuously purchased
at the public offering price through Authorized Firms which have agreements
with the Principal Underwriter. The Trust reserves the right to suspend or
limit the offering of its shares to the public at any time. The public
offering price is the net asset value next computed after receipt of the
order, plus, where applicable, a variable percentage (sales charge) depending
upon the amount of purchase as indicated by the sales charge table set forth
in the Prospectus (see "How to Buy Shares"). Such table is applicable to
purchases of a Fund alone or in combination with purchases of certain other
funds offered by the Principal Underwriter, made at a single time by (i) an
individual, or an individual, his spouse and their children under the age of
twenty-one, purchasing shares for his or their own account, and (ii) a trustee
or other fiduciary purchasing shares for a single trust estate or a single
fiduciary account. The table is also presently applicable to (1) purchases of
Class A shares pursuant to a written Statement of Intention; or (2) purchases
of Class A shares pursuant to the Right of Accumulation and declared as such
at the time of purchase.
Subject to the applicable provisions of the 1940 Act, the Trust may issue
Class A shares at net asset value in the event that an investment company
(whether a regulated or private investment company or a personal holding
company) is merged or consolidated with or acquired by the Class. Normally no
sales charges will be paid in connection with an exchange of Class A shares
for the assets of such investment company. Class A shares may be sold at net
asset value to any officer, director, trustee, general partner or employee of
the Trust, the Portfolio or any investment company for which Eaton Vance or
BMR acts as investment adviser, any investment advisory, agency, custodial or
trust account managed or administered by Eaton Vance or by any parent,
subsidiary or other affiliate of Eaton Vance, or any officer, director or
employee of any parent, subsidiary or other affiliate of Eaton Vance. The
terms "officer," "director," "trustee," "general partner" or "employee" as
used in this paragraph include any such person's spouse and minor children,
and also retired officers, directors, trustees, general partners and employees
and their spouses and minor children. Class A shares may also be sold at net
asset value to registered representatives and employees of Authorized Firms
and to the spouses and children under the age of 21 and beneficial accounts of
such persons.
The Principal Underwriter acts as principal in selling Class A shares
under a Distribution Agreement with the Trust. The expenses of printing copies
of prospectuses used to offer shares to Authorized Firms or investors and
other selling literature and of advertising are borne by the Principal
Underwriter. The fees and expenses of qualifying and registering and
maintaining qualifications and registrations of the Fund and its Class A
shares under federal and state securities laws are borne by the Class. The
Distribution Agreement is renewable annually by the Board of Trustees of the
Trust (including a majority of the noninterested Trustees), may be terminated
on six months' notice by either party and is automatically terminated upon
assignment. The Principal Underwriter distributes Class A shares on a "best
efforts" basis under which it is required to take and pay for only such shares
as may be sold. The Principal Underwriter allows Authorized Firms discounts
from the applicable public offering price which are alike for all Authorized
Firms. The Principal Underwriter may allow, upon notice to all Authorized
Firms with whom it has agreements, discounts up to the full sales charge
during the periods specified in the notice. During periods when the discount
includes the full sales charge, such Authorized Firms may be deemed to be
underwriters as that term is defined in the Securities Act of 1933.
CLASS B AND CLASS C SHARES. Under the Distribution Agreement, the
Principal Underwriter acts as principal in selling Class B and Class C shares.
The expenses of printing copies of prospectuses used to offer shares to
Authorized Firms or investors and other selling literature and of advertising
is borne by the Principal Underwriter. The fees and expenses of qualifying and
registering and maintaining qualifications and registrations of the Fund and
its Class B and Class C shares under federal and state securities laws are
borne by the Class. In addition, each Class B and Class C makes payments to
the Principal Underwriter pursuant to their Distribution Plans as described in
the Prospectus; the provisions of the plan relating to such payments are
included in the Distribution Agreement. The Distribution Agreement is
renewable annually by the Trust's Board of Trustees (including a majority of
the noninterested Trustees who have no direct or indirect financial interest
in the operation of the Distribution Plans or the Distribution Agreement), may
be terminated on sixty days' notice either by such Trustees or by vote of a
majority of the outstanding Class B and Class C shares or on six months'
notice by the Principal Underwriter and is automatically terminated upon
assignment. The Principal Underwriter distributes Class B and Class C shares
on a "best efforts" basis under which it is required to take and pay for only
such shares as may be sold.
The Trust has authorized the Principal Underwriter to act as its agent in
repurchasing shares at the rate of $2.50 for each repurchase transaction
handled by the Principal Underwriter. The Principal Underwriter estimates that
the expenses incurred by it in acting as repurchase agent for the Trust will
exceed the amounts paid therefor. For the amount paid by the Trust to the
Principal Underwriter for acting as repurchase agent, see Appendix B.
SERVICE PLAN -- CLASS A SHARES
The Trust on behalf of its Class A shares has adopted a Service Plan (the
"Plan") designed to meet the service fee requirements of the sales charge rule
of the National Association of Securities Dealers, Inc. (the "NASD").
(Management believes service fee payments are not distribution expenses
governed by Rule 12b-1 under the 1940 Act, but has chosen to have the Plan
approved as if that Rule were applicable.) The following supplements the
discussion of the Plan contained in the Prospectus.
The Plan remains in effect from year to year provided such continuance is
approved by a vote of both a majority of (i) the noninterested Trustees who
have no direct or indirect financial interest in the operation of the Plan or
any agreements related to it (the "Plan Trustees") and (ii) all of the
Trustees then in office, cast in person at a meeting (or meetings) called for
the purpose of voting on this Plan. The Plan may be terminated any time by
vote of the Plan Trustees or by a vote of a majority of the outstanding Class
A shares of the Fund. The Plan has been approved by the Board of Trustees of
the Trust, including the Plan Trustees.
The Plan requires quarterly Trustee review of a written report of the
amount expended under the Plan and the purposes for which such expenditures
were made. The Plan may not be amended to increase materially the payments
described herein without approval of the affected shareholders of Class A
shares and the Trustees. So long as the Plan is in effect, the selection and
nomination of the noninterested Trustees shall be committed to the discretion
of such Trustees. The Trustees have determined that in their judgment there is
a reasonable likelihood that the Plan will benefit the Fund and its Class A
shareholders.
DISTRIBUTION PLANS -- CLASS B AND CLASS C SHARES
The Trust has adopted Distribution Plans (the "Plans") on behalf of its
Class B and Class C shares designed to meet the requirements of Rule 12b-1
under the 1940 Act and the sales charge rule of the NASD. The purpose of the
Plans is to compensate the Principal Underwriter for its distribution services
and facilities provided with respect to Class B and Class C shares.
The Plans provide that the Fund will pay sales commissions and
distribution fees to the Principal Underwriter only after and as a result of
the sale of Class B or Class C shares of the Fund. On each sale of Fund shares
(excluding reinvestment of distributions) the Fund will pay the Principal
Underwriter amounts representing (i) sales commissions equal to 5% of Class B
sales and 6.25% of Class C sales of the amount received by the Fund for each
share sold and (ii) distribution fees calculated by applying the rate of 1%
over the prime rate then reported in The Wall Street Journal to the
outstanding balance of uncovered distribution charges (as described below) of
the Principal Underwriter.
The amount payable to the Principal Underwriter pursuant to the Plans as
sales commissions and distribution fees with respect to each day will be
accrued on such day as a liability of the respective Class and will
accordingly reduce the net assets of the Class upon such accrual, all in
accordance with generally accepted accounting principles. The amount payable
on each day is limited to 1/365 of .75% of the net assets of the Class on
such day. The level of net assets changes each day and depends upon the amount
of sales and redemptions of shares, the changes in the value of the
investments held by the Portfolio, the expenses of the Class, the Fund and the
Portfolio accrued and allocated to the Fund and Class on such day, income on
portfolio investments of the Portfolio accrued and allocated to the Fund on
such day, and any dividends and distributions declared on Fund shares. The
Trust does not accrue possible future payments as a liability of a Class or
reduce current net assets in respect of unknown amounts which may become
payable under the Plans in the future because the standards for accrual of
such a liability under accounting principles have not been satisfied.
The Plans provide that the Fund will receive all CDSCs and will make no
payments to the Principal Underwriter in respect of any day on which there are
no outstanding uncovered distribution charges of the Principal Underwriter.
CDSCs and accrued amounts will be paid by the Trust to the Principal
Underwriter whenever there exist uncovered distribution charges.
In calculating daily the amount of uncovered distribution charges,
distribution charges will include the aggregate amount of sales commissions
and distribution fees theretofore paid plus the aggregate amount of sales
commissions and distribution fees which the Principal Underwriter is entitled
to be paid under the Plans since their inception. Payments theretofore paid or
payable under the Plans by the Trust to the Principal Underwriter and CDSCs
theretofore paid or payable to the Principal Underwriter will be subtracted
from such distribution charges; if the result of such subtraction is positive,
a distribution fee (computed at 1% over the prime rate then reported in The
Wall Street Journal) will be computed on such amount and added thereto, with
the resulting sum constituting the amount of outstanding uncovered
distribution charges with respect to such day. The amount of outstanding
uncovered distribution charges of the Principal Underwriter calculated on any
day does not constitute a liability recorded on the financial statements of
the Fund.
The amount of uncovered distribution charges of the Principal Underwriter
at any particular time depends upon various changing factors, including the
level and timing of sales of shares, the nature of such sales (i.e., whether
they result from exchange transactions, reinvestments or from cash sales
through Authorized Firms), the level and timing of redemptions of shares upon
which a CDSC will be imposed, the level and timing of redemptions of shares
upon which no CDSC will be imposed (including redemptions of shares pursuant
to the exchange privilege which result in a reduction of uncovered
distribution charges), changes in the level of the net assets of the Class,
and changes in the interest rate used in the calculation of the distribution
fee under the Plans. Periods with a high level of sales of Class shares
accompanied by a low level of early redemptions of Class shares resulting in
the imposition of CDSCs will tend to increase the time during which there will
exist uncovered distribution charges of the Principal Underwriter.
Currently, payments of sales commissions and distribution fees and of
service fees may equal 1% of average daily net assets per annum. For actual
payments made and the outstanding uncovered distribution charges of the
Principal Underwriter, see Appendix B. The Trust believes that the combined
rate of all these payments may be higher than the rate of payments made under
distribution plans adopted by other investment companies pursuant to Rule
12b-1. Although the Principal Underwriter will use its own funds (which may be
borrowed from banks) to pay sales commissions and service fees for Class C
sales and sales commissions for Class B sales at the time of sale, it is
anticipated that the Eaton Vance organization will profit by reason of the
operation of the Plans through an increase in the Fund's assets (thereby
increasing the advisory fee payable to BMR by the Portfolio) resulting from
sale of shares and through the amounts paid to the Principal Underwriter,
including CDSCs, pursuant to the Plans. The Eaton Vance organization may be
considered to have realized a profit under the Plans if at any point in time
the aggregate amounts theretofore received by the Principal Underwriter
pursuant to the Plans and from CDSCs have exceeded the total expenses
theretofore incurred by such organization in distributing Class B and Class C
shares of the Fund. Total expenses for this purpose will include an allocable
portion of the overhead costs of such organization and its branch offices,
which costs will include without limitation leasing expense, depreciation of
building and equipment, utilities, communication and postage expense,
compensation and benefits of personnel, travel and promotional expense,
stationery and supplies, literature and sales aids, interest expense, data
processing fees, consulting and temporary help costs, insurance, taxes other
than income taxes, legal and auditing expense and other miscellaneous overhead
items. Overhead is calculated and allocated for such purpose by the Eaton
Vance organization in a manner deemed equitable to the Trust.
The Plans continue in effect from year to year for so long as such
continuance is approved at least annually by the vote of both a majority of
(i) the noninterested Trustees of the Trust who have no direct or indirect
financial interest in the operation of the Plan or any agreements related to
the Plan (the "Rule 12b-1 Trustees") and (ii) all of the Trustees then in
office, and the Distribution Agreement contains a similar provision. The Plans
and Distribution Agreement may be terminated at any time by vote of a majority
of the Rule 12b-1 Trustees or by a vote of a majority of the outstanding
voting securities of the applicable Class. The Plans require quarterly Trustee
review of a written report of the amount expended under the Plans and the
purposes for which such expenditures were made. The Plans may not be amended
to increase materially the payments described therein without approval of the
shareholders of the affected Class and the Trustees. So long as the Plans are
in effect, the selection and nomination of the noninterested Trustees shall be
committed to the discretion of such Trustees.
The Trustees of the Trust believe that the Plans will be a significant
factor in the expected growth of the Fund's assets, and will result in
increased investment flexibility and advantages which have benefitted and will
continue to benefit the Fund and its Class B and Class C shareholders.
Payments for sales commissions and distribution fees made to the Principal
Underwriter under the Plans will compensate the Principal Underwriter for its
services and expenses in distributing Class B and Class C shares of the Fund.
Service fee payments made to the Principal Underwriter and Authorized Firms
under the Plans provide incentives to provide continuing personal services to
investors and the maintenance of shareholder accounts. By providing
incentives to the Principal Underwriter and Authorized Firms, the Plans are
expected to result in the maintenance of, and possible future growth in, the
assets of the Fund. Based on the foregoing and other relevant factors, the
Trustees of the Trust have determined that in their judgment there is a
reasonable likelihood that the Plan will benefit the Fund and its Class B and
Class C shareholders.
PORTFOLIO SECURITY TRANSACTIONS
Decisions concerning the execution of portfolio security transactions,
including the selection of the market and the broker-dealer firm, are made by
BMR. BMR is also responsible for the execution of transactions for all other
accounts managed by it.
BMR places the portfolio security transactions of each Portfolio and of
all other accounts managed by it for execution with many broker-dealer firms.
BMR uses its best efforts to obtain execution of portfolio security
transactions at prices which are advantageous to a Portfolio and at reasonably
competitive spreads or (when a disclosed commission is being charged) at
reasonably competitive commission rates. In seeking such execution, BMR will
use its best judgment in evaluating the terms of a transaction, and will give
consideration to various relevant factors, including without limitation the
size and type of the transaction, the nature and character of the market for
the security, the confidentiality, speed and certainty of effective execution
required for the transaction, the general execution and operational
capabilities of the executing firm, the reputation, reliability, experience
and financial condition of the firm, the value and quality of the services
rendered by the firm in this and other transactions, and the reasonableness of
the commission or spread, if any. The debt securities and obligations
purchased and sold by a Portfolio are generally traded in the domestic or
foreign over-the-counter markets on a net basis (i.e. without commission)
through broker-dealers and banks acting for their own account rather than as
brokers, or otherwise involve transactions directly with the issuer of such
obligations. Such firms attempt to profit from such transactions by buying at
the bid price and selling at the higher asked price of the market for such
obligations, and the difference between the bid and asked price is customarily
referred to as the spread. A Portfolio may also purchase debt securities from
domestic and foreign underwriters, the cost of which may include undisclosed
fees and concessions to the underwriters. Transactions in foreign obligations
usually involve the payment of fixed brokerage commissions when executed on
foreign securities exchanges, which commissions are generally higher than
those in the United States. Although commissions on portfolio security
transactions will, in the judgment of BMR, be reasonable in relation to the
value of the services provided, commissions exceeding those which another firm
might charge may be paid to firms who were selected to execute transactions on
behalf of the Portfolio and BMR's other clients for providing brokerage and
research services to BMR.
As authorized in Section 28(e) of the Securities Exchange Act of 1934, a
broker or dealer who executes a portfolio transaction on behalf of a Portfolio
may receive a commission which is in excess of the amount of commission
another broker or dealer would have charged for effecting that transaction if
BMR determines in good faith that such 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 of the investment advisory industry and of the
advisers of investment companies, institutions and other investors to receive
research, statistical and quotation services, data, information and other
services, products and materials which assist such advisers in the performance
of their investment responsibilities ("Research Services") from broker-dealer
firms which execute portfolio transactions for the clients of such advisers
and from third parties with which such broker-dealers have arrangements.
Consistent with this practice, BMR receives Research Services from many
broker-dealer firms with which BMR places the Portfolio transactions and from
third parties with which these broker-dealers have arrangements. These
Research Services include such matters as general economic and market reviews,
industry and company reviews, evaluations of securities and portfolio
strategies and transactions and recommendations as to the purchase and sale of
securities and other portfolio transactions, financial, industry and trade
publications, news and information services, pricing and quotation equipment
and services, and research oriented computer hardware, software, data bases
and services. Any particular Research Service obtained through a broker-dealer
may be used by BMR in connection with client accounts other than those
accounts which pay commissions to such broker-dealer. Any such Research
Service may be broadly useful and of value to BMR in rendering investment
advisory services to all or a significant portion of its clients, or may be
relevant and useful for the management of only one client's account or of a
few clients' accounts, or may be useful for the management of merely a segment
of certain clients' accounts, regardless of whether any such account or
accounts paid commissions to the broker-dealer through which such Research
Service was obtained. The advisory fee paid by the Portfolios is not reduced
because BMR receives such Research Services. BMR evaluates the nature and
quality of the various Research Services obtained through broker-dealer firms
and attempts to allocate sufficient commissions to such firms to ensure the
continued receipt of Research Services which BMR believes are useful or of
value to it in rendering investment advisory services to its clients.
Subject to the requirement that BMR shall use its best efforts to seek and
execute portfolio security transactions at advantageous prices and at
reasonably competitive spreads or commission rates, BMR is authorized to
consider as a factor in the selection of any broker-dealer firm with whom
Portfolio orders may be placed the fact that such firm has sold or is selling
shares of the Fund or of other investment companies sponsored by BMR or Eaton
Vance. This policy is not inconsistent with a rule of the NASD, which rule
provides that no firm which is a member of the NASD shall favor or disfavor
the distribution of shares of any particular investment company or group of
investment companies on the basis of brokerage commissions received or
expected by such firm from any source.
Securities considered as investments for the Portfolio may also be
appropriate for other investment accounts managed by BMR or its affiliates.
Whenever decisions are made to buy or sell securities by the Portfolio and one
or more of such other accounts simultaneously, BMR will allocate the security
transactions (including "hot" issues) in a manner which it believes to be
equitable under the circumstances. As a result of such allocations, there may
be instances where the Portfolio will not participate in a transaction that is
allocated among other accounts. If an aggregate 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 year ended October 31, 1996, the Portfolio paid brokerage
commissions of $23,792 on portfolio security transactions aggregating
$245,268,131 to firms which provided some research services to BMR or its
affiliates (although many of such firms may have been selected in any
particular transaction primarily because of their execution capabilities). For
the fiscal year ended October 31, 1995, the Portfolio paid brokerage
commissions of $11,700 with respect to portfolio transactions. Of this amount,
approximately $11,357 was paid in respect of portfolio security transactions
aggregating approximately $148,774,532 to firms which provided some research
services to BMR's organization. For the period from the start of business,
March 1, 1994 to October 31, 1994, the Portfolio paid foreign brokerage
commissions on its portfolio security transactions amounting to $6,875.
OTHER INFORMATION
The Trust changed its name from Eaton Vance Government Obligations Trust
on July 10, 1995. On October 31, 1995, the Fund was reorganized as a series
of the Trust. Prior thereto, the Fund was a series of Eaton Vance Investment
Fund, Inc. The Fund established multiple classes of shares on November 1,
1997. The operations of Class B reflect the operations of the Fund prior to
such date. Class C is the successor to the operations of a separate series of
the Trust. Class A shares commenced operations on November 1, 1997. Eaton
Vance, pursuant to its agreement with the Trust, controls the use of the words
"Eaton Vance" and "EV" in the Fund's name and may use the words "Eaton Vance"
or "EV" in other connections and for other purposes.
As permitted by Massachusetts law, there will normally be no meeting of
shareholders for the purpose of electing Trustees unless and until such time
as less than a majority of the Trustees of the Trust holding office have been
elected by shareholders. In such an event the Trustees then in office will
call a shareholders' meeting for the election of Trustees. Except for the
foregoing circumstances and unless removed by action of the shareholders in
accordance with the Trust's By-laws, the Trustees shall continue to hold and
may appoint successor Trustees.
The 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 laws or regulations. The Trust's By-laws provide that
the Trust will indemnify its Trustees and officers against liabilities and
expenses incurred in connection with any litigation or proceeding in which
they may be involved because of their offices with the Trust. However, no
indemnification will be provided to any Trustee or officer for any liability
to the Trust or its shareholders by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct
of his office. The Trust or any series or class thereof may be terminated by:
(1) the affirmative vote of the holders of not less than two-thirds of the
shares outstanding and entitled to vote at any meeting of shareholders of the
Trust or the appropriate series or class thereof, or by an instrument or
instruments in writing without a meeting, consented to by the holders of two-
thirds of the shares of the Trust or a series or class thereof, provided,
however, that, if such termination is recommended by the Trustees, the vote of
a majority of the outstanding voting securities of the Trust or a series or
class thereof entitled to vote thereon shall be sufficient authorization; or
(2) by means of an instrument in writing signed by a majority of the Trustees,
to be followed by a written notice to shareholders stating that a majority of
the Trustees has determined that the continuation of the Trust or a series or
a class thereof is not in the best interest of the Trust, such series or class
or of their respective shareholders.
Under Massachusetts law, if certain conditions prevail, shareholders of a
Massachusetts business trust (such as the Trust) could be deemed to have
personal liability for the obligations of the Trust. Numerous investment
companies registered under the 1940 Act have been formed as Massachusetts
business trusts, and management is not aware of an instance where such
liability has been imposed. The Trust's Declaration of Trust contains an
express disclaimer of liability on the part of the Fund shareholders and the
Trust's By-laws provide that the Trust shall assume the defense on behalf of
any Fund shareholders. (The Declaration also contains provisions limiting the
liability of a series or class to that series or class). Moreover, the Trust's
By-laws 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 each Portfolio, there will
normally be no meetings of the investors for the purpose of electing Trustees
unless and until such time as less than a majority of the Trustees holding
office have been elected by investors. In such an event the Trustees of a
Portfolio then in office will call an investors' meeting for the election of
Trustees. Except for the foregoing circumstances and unless removed by action
of the investors in accordance with a Portfolio's Declaration of Trust, the
Trustees shall continue to hold office and may appoint successor Trustees.
The Declaration of Trust of the Portfolio provides that no person shall
serve as a Trustee if shareholders holding two-thirds of the outstanding
interests have removed him from that office either by a written declaration
filed with the Portfolio's Chairman or by votes cast at a meeting called for
that purpose. The Declaration of Trust further provides that under certain
circumstances the shareholders may call a meeting to remove a Trustee and that
the Portfolio is required to provide assistance in communicating with
shareholders about such a meeting.
Each Portfolio's Declaration of Trust, as amended, provides that the Fund
and other entities permitted to invest in the Portfolio (e.g., other U.S. and
foreign investment companies, and common and commingled trust funds) will each
be liable for all obligations of the Portfolio. However, the risk of the Fund
incurring financial loss on account of such liability is limited to
circumstances in which both inadequate insurance exists and a Portfolio itself
is unable to meet its obligations. Accordingly, the Trustees of the Trust
believe that neither the Fund nor its shareholders will be adversely affected
by reason of the Fund investing in the Portfolios.
Each Portfolio's Declaration of Trust provides that the Portfolio will
terminate 120 days after the complete withdrawal of the Fund or any other
investor in the Portfolio, unless either the remaining investors by unanimous
vote at a meeting of such investors, or a majority of the Trustees of the
Portfolio, by written instrument consented to by all investors, agree to
continue the business of the Portfolio. This provision is consistent with
treatment of the Portfolio as a partnership for federal income tax purposes.
The right to redeem 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 a
Portfolio to dispose of its securities or value its assets, or during any
other period permitted by order of the Commission for the protection of
investors.
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P., One Post Office Square, Boston, Massachusetts
02109, are the independent accountants for the Fund and the Portfolio
providing audit services, tax return preparation, and assistance and
consultation with respect to the preparation of filings with the Commission.
Deloitte & Touche, Grand Cayman, Cayman Islands, British West Indies, are the
independent certified public accountants of the HI Portfolio.
FINANCIAL STATEMENTS
The audited financial statements of and the report of independent accounts
for the Fund and the Portfolio appear in the Fund's most recent annual report
to shareholders, the unaudited financial statements of the Fund and the
Portfolio appear in the Fund's most recent semiannual report to shareholders,
both of which are incorporated by reference into this SAI. A copy of the
Fund's most recent semiannual and annual report accompanies this SAI.
Registrant incorporates by reference the audited financial information for
the fiscal year ended October 31, 1996 and the unaudited financial information
for the six-months ended April 30, 1997, for the Fund and Portfolio listed
below, all as previously filed electronically with the Commission:
Six Months Ended April 30, 1997
EV Marathon Strategic Income Fund
Strategic Income Portfolio
(Accession No. 0000950109-97-004877)
Fiscal Year Ended October 31, 1996
EV Marathon Strategic Income Fund
Strategic Income Portfolio
(Accession No. 0000928816-96-000387)
<PAGE>
APPENDIX A: CLASS A SHARES
PERFORMANCE INFORMATION
The table below indicates the cumulative and average total return on a
hypothetical investment of $1,000 in Class A shares for the periods shown in
the table. Total return for Class A prior to November 1, 1997 reflects the
total return of predecessors, adjusted to reflect any applicable sales charge.
Predecessor total return has not been adjusted to reflect certain other
expenses (such as distribution and/or service fees). If such adjustments were
made, the performance would be different. The "Value of Initial Investment"
reflects the deduction of the maximum sales charge of 4.75%. Past performance
is not indicative of future results. Investment return and principal value
will fluctuate; shares, when redeemed, may be worth more or less than their
original cost.
VALUE OF A $1,000 INVESTMENT
<TABLE>
<CAPTION>
TOTAL RETURN TOTAL RETURN
EXCLUDING MAXIMUM INCLUDING MAXIMUM
VALUE OF VALUE OF SALES CHARGE SALES CHARGE
INVESTMENT INVESTMENT INITIAL INVESTMENT ---------------------------- ---------------------------
PERIOD DATE INVESTMENT ON 4/30/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------------------------- ------------- -------------- ------------- ------------- ------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of the Fund 11/26/90 $952.38 $1,486.66 56.08% 7.17% 48.67% 6.36%
5 Years Ended
4/30/97 4/30/92 $952.47 $1,340.89 40.78% 7.08% 34.09% 6.04%
1 Year Ended
4/30/97 4/30/96 $952.84 $1,103.87 15.85% 15.85% 10.39% 10.39%
</TABLE>
<PAGE>
APPENDIX B: CLASS B SHARES
FEES AND EXPENSES
DISTRIBUTION PLAN
During the fiscal year ended October 31, 1996, the Principal Underwriter
paid to Authorized Firms sales commissions of $118,170 on sales of Fund
shares. During the same period, the Fund made payments under the Plan to the
Principal Underwriter aggregating $1,028,723 and the Principal Underwriter
received approximately $76,000 in CDSCs imposed on early redeeming
shareholders. These payments reduced uncovered distribution charges under the
Plan. As at October 31, 1996, the outstanding uncovered distribution charges
of the Principal Underwriter calculated under the Plan amounted to
approximately $18,063,000. During the fiscal year ended October 31, 1996, the
Fund made service fee payments to the Principal Underwriter and Authorized
Firms aggregating $231,933, of which $229,952 was paid to Authorized Firms and
the balance of which was retained by the Principal Underwriter.
PRINCIPAL UNDERWRITER
For the fiscal year ended October 31, 1996, the Fund paid the Principal
Underwriter $6,415.00 for repurchase transactions handled by the Principal
Underwriter.
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return
on a hypothetical investment of $1,000 in Class B shares for the periods shown
in the table. Past performance is not indicative of future results. Investment
return and principal value will fluctuate; shares, when redeemed, may be worth
more or less than their original cost.
VALUE OF A $1,000 INVESTMENT
<TABLE>
<CAPTION>
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN BEFORE TOTAL RETURN AFTER
BEFORE AFTER DEDUCTING DEDUCTING
DEDUCTING DEDUCTING THE CDSC THE CDSC
INVESTMENT INVESTMENT AMOUNT OF THE CDSC THE CDSC** -------------------------- --------------------------
PERIOD DATE INVESTMENT ON 4/30/97 ON 4/30/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------------- ------------ ----------- --------------- --------------- ------------ ------------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of
the Fund* 11/26/90 $1,000 $1,560.83 $1,560.83 56.08% 7.17% 56.08% 7.17%
5 Years
Ended
4/30/97 4/30/92 $1,000 $1,407.80 $1,388.45 40.78% 7.08% 38.84% 6.78%
1 Year
Ended
4/30/97 4/30/96 $1,000 $1,158.51 $1,108.51 15.85% 15.85% 10.85% 10.85%
</TABLE>
- ------------
*Investment operations began on November 26, 1990.
**No CDSC is imposed on certain redemptions. See the Fund's current
Prospectus.
The Fund's yield for the 30-day period ended April 30, 1997 was 5.71%.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As at September 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 September 30, 1997, Merrill Lynch, Pierce, Fenner & Smith, Inc.,
Jacksonville, FL was the record owner of approximately 32.8% 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 as
of such date.
<PAGE>
APPENDIX C: CLASS C SHARES
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return
on a hypothetical investment of $1,000 in a predecessor fund reorganized
November 1, 1997 into Class C shares for the periods shown in the table. Total
return for Class C prior to November 1, 1997 reflects the total return of
predecessors, adjusted to reflect any applicable sales charge. Predecessor
total return has not been adjusted to reflect certain other expenses (such as
distribution and/or service fees). If such adjustments were made, the
performance would be lower. Past performance is not indicative of future
results. Investment return and principal value will fluctuate; shares, when
redeemed, may be worth more or less than their original cost. Two asterisk(**)
indicates subsidized expenses. Return would have been lower without subsidies.
VALUE OF A $1,000 INVESTMENT
<TABLE>
<CAPTION>
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN BEFORE TOTAL RETURN AFTER
BEFORE AFTER DEDUCTING DEDUCTING
DEDUCTING DEDUCTING THE CDSC THE CDSC
INVESTMENT INVESTMENT AMOUNT OF THE CDSC THE CDSC -------------------------- --------------------------
PERIOD DATE INVESTMENT ON 4/30/97 ON 4/30/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------------- ------------ ------------ --------------- -------------- ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of
Fund* 11/26/90 $1,000 $1,575.82 $1,575.82 57.58% 7.33% 57.58% 7.33%
5 Years
Ended
4/30/97 4/30/92 $1,000 $1,421.19 $1,421.19 42.12% 7.28% 42.12% 7.28%
1 Year
Ended
4/30/97** 4/30/96 $1,000 $1,149.93 $1,139.93 14.99% 14.99% 13.99% 13.99%
</TABLE>
- ------------
*Predecessor fund commenced operations May 25, 1994.
The Fund's yield for the 30-day period ended April 30, 1997 was 5.08%. If
a portion of the Fund's expenses had not been allocated to the Administrator,
the Fund would have had a lower yield.
<PAGE>
APPENDIX D
DESCRIPTION OF SECURITIES RATINGS(1)
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S CORPORATE BOND RATINGS:
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt-edged". Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuations of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risk appear somewhat larger than in Aaa
securities.
A: Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper-medium-grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may
be present which suggest a susceptibility to impairment sometime in the
future.
Baa: Bonds which are rated Baa are considered as medium-grade obligations,
(i.e., they are neither highly protected nor poorly secured). Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba: Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate, and thereby not well safe-guarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal
or interest.
Ca: Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
NOTE: Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa 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.
SHORT-TERM DEBT
Moody's short-term debt ratings are opinions of the ability of issuers to
repay punctually promissory obligations not having an original maturity in
excess of one year.
Issuers rated PRIME-1 or P-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1 or P-1
repayment ability will often be evidenced by many of the following
characteristics:
-- Leading market positions in well established industries.
-- High rates of return on funds employed.
-- Conservative capitalization structure with moderate reliance on debt
and ample asset protection.
-- Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
-- Well established access to a range of financial markets and assured
sources of alternate liquidity.
Issuers rated PRIME-2 or P-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations. This will
normally be evidenced by many of the characteristics cited above but to a
lesser degree. Earnings trends and coverage ratios, while sound, may be more
subject to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternate liquidity is
maintained.
DESCRIPTION OF STANDARD & POOR'S RATINGS GROUP'S CORPORATE BOND RATINGS:
INVESTMENT GRADE
AAA: Debt rated AAA has the highest rating assigned by S&P's to a debt
obligation. Capacity to pay interest and repay principal is extremely strong.
AA: Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A: Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than bonds in higher rated categories.
BBB: Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
SPECULATIVE GRADE
Debt rated BB, B, CCC, CC, and C is regarded as having predominantly
speculative characteristics with respect to capacity to pay interest and repay
principal. BB indicates the least degree of speculation and C the highest.
While such debt will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or major exposures to adverse
conditions.
BB: Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure
to adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB- rating.
B: Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness
to pay interest and repay principal. The B rating category is also used for
debt subordinated to senior debt that is assigned an actual or implied BB or
BB- rating.
CCC: Debt rated CCC has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial, and economic conditions to
meet timely payment of interest and repayment of principal. In the event of
adverse business, financial, or economic conditions, it is not likely to have
the capacity to pay interest and repay principal. The CCC rating category is
also used for debt subordinated to senior debt that is assigned an actual or
implied B or B- rating.
CC: The rating CC is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC debt rating.
C: The rating C is typically applied to debt subordinated to senior debt which
is assigned an actual or implied CCC- debt rating. The C rating may be used to
cover a situation where a bankruptcy petition has been filed, but debt service
payments are continued.
C1: The Rating C1 is reserved for income bonds on which no interest is being
paid.
D: Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if
the applicable grace period has not expired, unless Standard & Poor's believes
that such payments will be made during such grace period. The D rating also
will be used upon the filing of a bankruptcy petition if debt service payments
are jeopardized.
PLUS (+) OR MINUS (-): The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
NR: Bonds may lack a S&P's rating because no public rating has been requested,
because there is insufficient information on which to base a rating, or
because S&P's does not rate a particular type of obligation as a matter of
policy.
COMMERCIAL PAPER
A: S&P's commercial paper rating is a current assessment of the likelihood of
timely payment of debt considered short-term in the relevant market.
A-1: This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted with a plus (+) sign designation.
A-2: Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1".
A-3: Issues carrying this designation have adequate capacity for timely
payment. They are, however, more vulnerable to the adverse effects of changes
in circumstances than obligations carrying the higher designations.
FITCH INVESTORS SERVICE, INC.
INVESTMENT GRADE BOND RATINGS
AAA: Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest and
repay principal, which is unlikely to be affected by reasonably foreseeable
events.
AA: Bonds considered to be investment grade and of very high credit quality.
The obligor's ability to pay interest and repay principal is very strong,
although not quite as strong as bonds rated "AAA". Because bonds rated in the
"AAA" and "AA" categories are not significantly vulnerable to foreseeable
future developments, short-term debt of these issuers is generally rated
"F-1+".
A: Bonds considered to be investment grade and of high credit quality. The
obligors ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions
and circumstances than bonds with higher ratings.
BBB: Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these bonds,
and therefore, impair timely payment. The likelihood that the ratings of these
bonds will fall below investment grade is higher than for bonds with higher
ratings.
HIGH YIELD BOND RATINGS
BB: Bonds are considered speculative. The obligor's ability to pay interest
and repay principal may be affected over time by adverse economic changes.
However, business and financial alternatives can be identified which could
assist the obligor in satisfying its debt service requirements.
B: Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued
timely payment of principal and interest reflects the obligor's limited margin
of safety and the need for reasonable business and economic activity
throughout the life of the issue.
CCC: Bonds have certain identifiable characteristics which, if not remedied,
may lead to default. The ability to meet obligations requires an advantageous
business and economic environment.
CC: Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C: Bonds are in imminent default in payment of interest or principal.
DDD, DD, AND D: Bonds are in default of interest and/or principal payments.
Such bonds are extremely speculative and should be valued on the basis of
their ultimate recovery value in liquidation or reorganization of the obligor.
"DDD" represents the highest potential for recovery on these bonds, and"D"
represents the lowest potential for recovery.
PLUS (+) OR MINUS (-): The ratings from AA to C may be modified by the
addition of a plus or minus sign to indicate the relative position of a credit
within the rating category.
NR: Indicates that Fitch does not rate the specific issue.
CONDITIONAL: A conditional rating is premised on the successful completion of
a project or the occurrence of a specific event.
INVESTMENT GRADE SHORT-TERM RATINGS
Fitch's short-term ratings apply to debt obligations that are payable on
demand or have original maturities of generally up to three years, including
commercial paper, certificates of deposit, medium-term notes, and municipal
and investment notes.
F-1+: Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1: Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated
"F-1+".
F-2: Good Credit Quality. Issues assigned this rating have a satisfactory
degree of assurance for timely payment, but the margin of safety is not as
great as the "F-1+" and "F-1" categories.
F-3: Fair Credit Quality. Issues assigned this rating have characteristics
suggesting that the degree of assurance for timely payment is adequate,
however, near-term adverse changes could cause these securities to be rated
below investment grade.
DUFF & PHELPS
INVESTMENT GRADE BOND RATINGS
AAA: Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
AA+, AA, AND AA-: High credit quality. Protection factors are strong. Risk is
modest but may vary slightly from time to time because of economic conditions.
A+, A, AND A-: Protection factors are average but adequate. However, risk
factors are more variable and greater in periods of economic stress.
BBB+, BBB, AND BBB-: Below average protection factors but still considered
sufficient for prudent investment. Considerable variability in risk during
economic cycles.
HIGH YIELD BOND RATINGS
BB+, BB, AND BB-: Below investment grade but deemed likely to meet obligations
when due. Present or prospective financial protection factors fluctuate
according to industry conditions or company fortunes. Overall quality may move
up or down frequently within this category.
B+, B, AND B-: Below investment grade and possessing risk that obligations
will not be met when due. Financial protection factors will fluctuate widely
according to economic cycles, industry conditions and/or company fortunes.
Potential exists for frequent changes in the rating within this category or
into a higher or lower rating grade.
CCC: Well below investment grade securities. Considerable uncertainty exists
as to timely payment of principal interest or preferred dividends. Protection
factors are narrow and risk can be substantial with unfavorable economic/
industry conditions, and/or with unfavorable company developments.
Preferred stocks are rated on the same scale as bonds but the preferred rating
gives weight to its more junior position in the capital structure. Structured
Financings are also rated on this scale.
COMMERCIAL PAPER/CERTIFICATES OF DEPOSIT
CATEGORY 1: TOP GRADE
DUFF 1 PLUS: Highest certainty of timely payment. Short-term liquidity
including internal operating factors and/or ready access to alternative
sources of funds, is outstanding, and safety is just below risk-free U.S.
Treasury short-term obligations.
DUFF 1: Very high certainty of timely payment. Liquidity factors are excellent
and supported by good fundamental protection factors. Risk factors are minor.
DUFF 1 MINUS: High certainty of timely payment. Liquidity factors are strong
and supported by good fundamental protection factors. Risk factors are very
small.
CATEGORY 2: GOOD GRADE
DUFF 2: Good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing funding needs may enlarge total
financing requirements, access to capital markets is good. Risk factors are
small.
CATEGORY 3: SATISFACTORY GRADE
DUFF 3: Satisfactory liquidity and other protection factors qualify issue as
to investment grade. Risk factors are larger and subject to more variation.
Nevertheless timely payment is expected.
No ratings are issued for companies whose paper is not deemed to be of
investment grade.
* * * *
NOTES:
(1) The ratings indicated herein are believed to be the most recent ratings
available at the date of this Statement of Additional Information for the
securities listed. Ratings are generally given to securities at the time
of issuance. While the rating agencies may from time to time revise such
ratings, they undertake no obligation to do so, and the ratings indicated
do not necessarily represent ratings which would be given to these
securities on the date of the Portfolio's fiscal year end.
Bonds which are unrated expose the investor to risks with respect to capacity
to pay interest or repay principal which are similar to the risks of lower-
rated bonds. The Portfolio is dependent on the Investment Adviser's judgment,
analysis and experience in the evaluation of such bonds.
Investors should note that the assignment of a rating to a bond by a
rating service may not reflect the effect of recent developments on the
issuer's ability to make interest and principal payments.
<PAGE>
[logo] EATON VANCE
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MUTUAL FUNDS
EATON VANCE
STRATEGIC INCOME
FUND
STATEMENT OF ADDITIONAL INFORMATION
NOVEMBER 1, 1997
EATON VANCE
STRATEGIC INCOME FUND
24 FEDERAL STREET
BOSTON, MA 02110
- --------------------------------------------------------------------------------
INVESTMENT ADVISER AND ADMINISTRATOR OF STRATEGIC INCOME PORTFOLIO
INVESTMENT ADVISER OF HIGH INCOME PORTFOLIO
Boston Management and Research, 24 Federal Street, Boston, MA 02110
ADMINISTRATOR OF EATON VANCE STRATEGIC INCOME FUND
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 200 Clarendon Street, Boston, MA 02116
TRANSFER AGENT
First Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123
(800) 262-1122
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P., One Post Office Square, Boston, MA 02109
SISAI
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL INFORMATION
November 1, 1997
EATON VANCE TAX-MANAGED GROWTH FUND
24 Federal Street
Boston, Massachusetts 02110
(800) 225-6265
This Statement of Additional Information provides information about Eaton
Vance Tax-Managed Growth Fund (the "Fund") and Tax-Managed Growth Portfolio
(the "Portfolio"). This Statement of Additional Information is sometimes
referred herein to as the "SAI".
TABLE OF CONTENTS
Page
Additional Information about Investment Policies .......................... 2
Investment Restrictions ................................................... 4
Trustees and Officers ..................................................... 6
Investment Adviser and Administrator ...................................... 8
Custodian ................................................................. 10
Services for Accumulation -- Class A Shares ............................... 10
Service for Withdrawal .................................................... 11
Determination of Net Asset Value .......................................... 11
Investment Performance .................................................... 12
Taxes ..................................................................... 14
Principal Underwriter ..................................................... 16
Service Plan -- Class A Shares ............................................ 17
Distribution Plans -- Class B and Class C Shares .......................... 17
Portfolio Security Transactions ........................................... 19
Other Information ......................................................... 20
Independent Certified Public Accountants .................................. 22
Financial Statements ...................................................... 22
Appendix A: Class A Shares ................................................ a-1
Appendix B: Class B Shares ................................................ b-1
Appendix C: Class C Shares ................................................ c-1
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY THE FUND'S PROSPECTUS DATED NOVEMBER 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>
This SAI provides information about the Fund and the Portfolio.
Capitalized terms used in this SAI and not otherwise defined have the meanings
given to them in the 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
Foreign Securities. Investing in securities issued by companies whose
principal business activities are outside the United States may involve
significant risks not present in domestic investments. For example, there is
generally less publicly available information about foreign companies,
particularly those not subject to the disclosure and reporting requirements of
the U.S. securities laws. Foreign issuers are generally not bound by uniform
accounting, auditing, and financial reporting requirements and standards of
practice comparable to those applicable to domestic issuers. Investments in
foreign securities also involve the risk of possible adverse changes in
investment or exchange control regulations, expropriation or confiscatory
taxation, limitation on the removal of funds or other assets of the Portfolio,
political or financial instability or diplomatic and other developments which
could affect such investments. Further, economies of particular countries or
areas of the world may differ favorably or unfavorably from the economy of the
United States. It is anticipated that in most cases the best available market
for foreign securities will be on exchanges or in over-the-counter markets
located outside of the United States. Foreign stock markets, while growing in
volume and sophistication, are generally not as developed as those in the
United States, and securities of some foreign issuers (particularly those
located in developing countries) may be less liquid and more volatile than
securities of comparable U.S. companies. In addition, foreign brokerage
commissions are generally higher than commissions on securities traded in the
United States and may be non-negotiable. In general, there is less overall
governmental supervision and regulation of foreign securities markets, broker-
dealers, and issuers than in the United States.
Foreign Currency Transactions. The value of foreign assets of the Portfolio
as measured in U.S. dollars may be affected favorably or unfavorably by
changes in foreign currency exchange rates and exchange control regulations.
Currency exchange rates can also be affected unpredictably by intervention by
U.S. or foreign governments or central banks, or the failure to intervene, or
by currency controls or political developments in the U.S. or abroad. The
Portfolio may conduct its foreign currency exchange transactions on a spot
(i.e., cash) basis at the spot rate prevailing in the foreign currency
exchange market or through entering into swaps, forward contracts, options or
futures on currency. On spot transactions, foreign exchange dealers do not
charge a fee for conversion, but they do realize a profit based on the
difference (the "spread") between the prices at which they are buying and
selling various currencies. Thus, a dealer may offer to sell a foreign
currency to the Portfolio at one rate, while offering a lesser rate of
exchange should the Portfolio desire to resell that currency to the dealer.
Forward Foreign Currency Exchange Contracts and Currency Futures. Forward
foreign currency contracts ("forward contracts") are individually negotiated
and privately traded by currency traders and their customers. A forward
contract involves an obligation to purchase or sell a specific currency (or
basket of currencies) for an agreed price at a future date, which may be any
fixed number of days from the date of the contract. The Portfolio may enter
into a forward contract in connection with the purchase or sale of a security
denominated in a foreign currency, or when the Portfolio anticipates the
receipt in a foreign currency of dividend or interest payments on such a
security which it holds, to "lock" in the U.S. dollar price of the security or
the U.S. dollar equivalent of such dividend or interest payment, as the case
may be. Additionally, when the Investment Adviser believes that the currency
of a particular foreign country may suffer a substantial decline against the
U.S. dollar, it may enter into a forward contract to sell, for a fixed amount
of dollars, the amount of foreign currency approximating the value of some or
all of the Portfolio's securities denominated in such foreign currency. The
precise matching of the forward contract amounts and the value of the
securities involved will not generally be possible. The Portfolio generally
will not enter into a forward contract with a term of greater than one year.
Currency futures contracts are exchange traded instruments that may be
used by the Portfolio for the purposes described in the preceding paragraphs
as an alternative to the purchase or sale of forward currency exchange
contracts. Currency futures contracts are similar in structure to stock index
futures contracts, but change in value to reflect the movements of a currency
or basket of currencies rather than a stock index. The Portfolio's investments
in currency contracts are subject to limitations and restrictions similar to
those set forth for the Portfolio's investments in stock index futures and
options on stock index futures.
Risks Associated With Derivative Instruments. Entering into a derivative
instrument involves a risk that the applicable market will move against the
Portfolio's position and that the Portfolio will incur a loss. For derivative
instruments other than purchased options, this loss may exceed the amount of
the initial investment made or the premium received by the Portfolio.
Derivative instruments may sometimes increase or leverage the Portfolio's
exposure to a particular market risk. Leverage enhances the Portfolio's
exposure to the price volatility of derivative instruments it holds. The
Portfolio's success in using derivative instruments to hedge portfolio assets
depends on the degree of price correlation between the derivative instruments
and the hedged asset. Imperfect correlation may be caused by several factors,
including temporary price disparities among the trading markets for the
derivative instrument, the assets underlying the derivative instrument and the
Portfolio's assets. Over-the-counter ("OTC") derivative instruments involve an
enhanced risk that the issuer or counterparty will fail to perform its
contractual obligations. Some derivative instruments are not readily
marketable or may become illiquid under adverse market conditions. In
addition, during periods of market volatility, a commodity exchange may
suspend or limit trading in an exchange-traded derivative instrument, which
may make the contract temporarily illiquid and difficult to price. Commodity
exchanges may also establish daily limits on the amount that the price of a
futures contract or futures option can vary from the previous day's settlement
price. Once the daily limit is reached, no trades may be made that day at a
price beyond the limit. This may prevent the Portfolio from closing out
positions and limiting its losses. The staff of the Commission takes the
position that certain purchased OTC options, and assets used as cover for
written OTC options, are subject to the Portfolio's 15% limit on illiquid
investments. The Portfolio's ability to terminate OTC derivative instruments
may depend on the cooperation of the counterparties to such contracts. For
thinly traded derivative instruments, the only source of price quotations may
be the selling dealer or counterparty. In addition, certain provisions of the
Code limit the extent to which the Portfolio may purchase and sell derivative
instruments. The Portfolio will engage in transactions in futures contracts
and related options only to the extent such transactions are consistent with
the requirements of the Code for maintaining the qualification of the Fund as
a regulated investment company for federal income tax purposes. See "Taxes".
Limitations on Futures Contracts and Options. The Portfolio may enter into
futures contracts, and options on futures contracts, traded on an exchange
regulated by the CFTC and on foreign exchanges, but, with respect to foreign
exchange-traded futures contracts and options on such futures contracts, only
if the Investment Adviser determines that trading on each such foreign
exchange does not subject the Portfolio to risks, including credit and
liquidity risks, that are materially greater than the risks associated with
trading on CFTC-regulated exchanges.
In order to hedge its current or anticipated portfolio positions, the
Portfolio may use futures contracts on securities held in its Portfolio or on
securities with characteristics similar to those of the securities held by the
Portfolio. If, in the opinion of the Investment Adviser, there is a sufficient
degree of correlation between price trends for the securities held by the
Portfolio and futures contracts based on other financial instruments,
securities indices or other indices, the Portfolio may also enter into such
futures contracts as part of its hedging strategy.
All call options on securities written by the Portfolio will be covered.
This means that, the Portfolio will own the securities subject to the call
option or an offsetting call option so long as the call option is outstanding.
Short Sales Against-the-Box. The Portfolio may sell securities short where it
owns at least an equal amount of the security sold short or another security
convertible or exchangeable for an equal amount of the security sold short
without payment of further compensation (a short sale against-the-box). A
short sale against-the-box requires that the short seller absorb certain costs
so long as the position is open. In a short sale against-the-box, the short
seller is exposed to the risk of being forced to deliver appreciated stock to
close the position if the borrowed stock is called in, causing a gain to be
recognized. The Portfolio expects normally to close its short sale against-
the-box transactions by delivering newly-acquired stock. No more than 25% of
the Portfolio's assets is expected to be subject to short-sales against-the-
box at any one time.
Lending Portfolio Securities. Under present regulatory policies of the
Commission, securities 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 will only
lend securities to borrowers whose credit quality or claims paying ability is
considered to be investment grade by the Investment Adviser. The financial
condition of the borrower will be monitored by the Investment Adviser on an
ongoing basis. If a borrower of securities from the Portfolio defaults on a
securities loan, the Portfolio will, under proposed Treasury Regulations, be
considered to have disposed of the securities in a taxable transaction. The
Portfolio may experience delays in the recovery or loss of rights in loaned
securities if a borrower of securities fails financially. The Portfolio would
continue to receive the equivalent of the interest or dividends paid by the
issuer on the securities loaned and would also receive a fee, or all or a
portion of the interest on investment of the collateral. The Portfolio would
have the right to call a loan and obtain the securities loaned at any time on
up to five business days' notice. The Portfolio would not have the right to
vote any securities having voting rights during the existence of a loan, but
could call the loan in anticipation of an important vote to be taken among
holder of the securities or the giving or withholding of their consent on a
material matter affecting the investment. If the Investment Adviser decides to
make securities loans, it is intended that the value of the securities loaned
would not exceed 30% of the Portfolio's total assets.
Asset Coverage Requirements. Transactions involving swaps, short sales,
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,
swaps, or other options, futures contracts or forward contracts, or (2) cash
or liquid securities (such as readily marketable common stock and money market
instruments) with a value sufficient at all times to cover its potential
obligations not covered as provided in (1) above. For swap transactions only
the net obligations of the Portfolio will be covered. The Portfolio will
comply with Commission guidelines regarding cover for these instruments and,
if the guidelines so require, set aside cash or liquid securities in a
segregated account with its custodian in the prescribed amount. 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
Fund's custodian cannot be sold while the position requiring coverage or
segregation is outstanding unless they are replaced with other appropriate
assets. As a result, the commitment of a large portion of the Portfolio's
assets to segregated accounts or to cover could impede portfolio management or
the Portfolio's ability to meet redemption requests or other current
obligations.
Selection of Securities Used to Meet Redemptions. Investors in the Portfolio
may redeem interests in the Portfolio at net asset value on a daily basis.
Redemptions by the Fund's shareholders currently are met entirely in cash, but
distributions of securities generally are used to meet redemptions by other
investors in the Portfolio and may in the future be used to meet redemptions
by the Fund's shareholders. See "How to Redeem Shares" in the Prospectus. The
Portfolio's ability to select the securities used to meet redemptions is
limited with respect to redemptions by investors who contributed securities,
and with respect to the securities contributed by such investors. Within five
years of any contribution of securities, the Portfolio will not distribute
such securities to any investor other than the contributing investor. In
meeting a redemption of an investor within five years of a contribution of
securities by such investor, the Portfolio will not, unless requested by the
redeeming investor, distribute any securities other than the securities
contributed by the redeeming investor while retaining all or a portion of the
securities contributed by such investor. If the Portfolio were to do
otherwise, certain investors who contributed securities could realize taxable
gain. In addition, upon the request at any time of a redeeming investor in the
Portfolio that contributed securities, the Portfolio will utilize securities
held in the Portfolio that were contributed by such investor to meet the
redemption. Investors in the Portfolio can request a diversified basket of
securities, which may be distributed in the Investment Adviser's discretion.
These redemption practices constrain the selection of securities distributed
to meet redemptions and, consequently, may adversely affect the performance of
the Portfolio and the Fund. The Trustees of the Portfolio believe that the
potential advantages for the Portfolio to be derived from attracting
contributions of securities that would not be made in the absence of these
redemption practices outweigh the potential disadvantages of reduced
flexibility to select securities to meet redemptions. It is impossible to
predict whether the net result will be beneficial or detrimental to the Fund's
performance.
Portfolio Turnover. The Portfolio cannot accurately predict its portfolio
turnover rate, but it is anticipated that the annual turnover rate will
generally be lower than that of most other equity mutual funds and will
generally not exceed 20% (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 in 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 period from the start of business, December
1, 1995, to October 31, 1996, the portfolio turnover rate of the Portfolio was
6%.
INVESTMENT RESTRICTIONS
The following investment restrictions of the Fund are designated as
fundamental policies and as such cannot be changed without the approval of the
holders of a majority of the Fund's outstanding voting securities, which as
used in this SAI means the lesser of (a) 67% of the shares of the Fund present
or represented by proxy at a meeting if the holders of more than 50% of the
shares are present or represented at the meeting or (b) more than 50% of the
shares of the Fund. Accordingly, the Fund may not:
(1) Borrow money or issue senior securities except as permitted by the
Investment Company Act of 1940;
(2) Purchase any securities or evidences of interest therein on
"margin," that is to say in a transaction in which it has borrowed all or
a portion of the purchase price and pledged the purchased securities or
evidences of interest therein as collateral for the amount so borrowed;
(3) Engage in the underwriting of securities; or
(4) Buy or sell real estate (although it may purchase and sell
securities which are secured by real estate and securities of companies
which invest or deal in real estate), commodities or commodity contracts
for the purchase or sale of physical commodities;
(5) Make loans to other persons, except by (a) the acquisition of debt
securities and making portfolio investments, (b) entering into repurchase
agreements and (c) lending portfolio securities;
(6) With respect to 75% of its total assets, invest more than 5% of
its total assets (taken at current value) in the securities of any one
issuer, or invest in more than 10% of the outstanding voting securities of
any one issuer, except obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities and except securities of
other investment companies; or
(7) Concentrate its investments in any particular industry, but, if
deemed appropriate for the Fund's objective, up to 25% of the value of its
assets may be invested in any one industry.
Notwithstanding the investment policies and restrictions of the Fund, the
Fund may invest its assets in an open-end management investment company with
substantially the same investment objective, policies and restrictions as the
Fund. Notwithstanding the investment policies and restrictions of the
Portfolio, the Portfolio may invest part of its assets in another investment
company consistent with the 1940 Act.
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 each adopted the following investment
policies which may be changed without shareholder or investor approval. As a
matter of nonfundamental policy, the Fund and the Portfolio will not: (a)
invest more than 15% of its net assets in investments which are not readily
marketable, including restricted securities and repurchase agreements with a
maturity longer than seven days. Restricted securities for the purposes of
this limitation do not include securities eligible for resale pursuant to Rule
144A under the Securities Act of 1933 and commercial paper issued pursuant to
Section 4(2) of said Act that the Board of Trustees of the Trust or the
Portfolio, or their delegate, determines to be liquid; (b) sell or contract to
sell any security which it does not own unless by virtue of its ownership of
other securities it has at the time of sale a right to obtain securities
equivalent in kind and amount to the securities sold and provided that if such
right is conditional the sale is made upon the same conditions; (c) invest for
the purpose of exercising control or management of other companies; or (d)
purchase or retain in its portfolio any securities issued by an issuer any of
whose officers, directors, trustees or security holders is an officer or
Trustee of the Trust or is a member, officer, director or trustee of the
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, such percentage limitation shall be
determined immediately after and as a result of the Fund's or the Portfolio's
acquisition of such security or asset. Accordingly, any later increase or
decrease resulting from a change in values, assets or other circumstances,
will not compel the Fund or the Portfolio, as the case may be, to dispose of
such security or other asset. Notwithstanding the foregoing, under normal
market conditions the Fund and the Portfolio must take actions necessary to
comply with the policy of investing at least 65% of total assets in common
stock. Moreover, the Fund and Portfolio must always be in compliance with the
borrowing policy set forth above.
TRUSTEES AND OFFICERS
The Trustees and officers of the Trust and the Portfolio are listed below.
Except as indicated, each individual has held the office shown or other
offices in the same company for the last five years. Unless otherwise noted,
the business address of each Trustee and officer is 24 Federal Street, Boston,
Massachusetts 02110, which is also the address of the Investment Adviser, BMR,
a wholly-owned subsidiary of Eaton Vance Management ("Eaton Vance"); of Eaton
Vance's parent, Eaton Vance Corp. ("EVC"); and of Eaton Vance's and BMR's
trustee, Eaton Vance, Inc. ("EV"). Eaton Vance and EV are both wholly-owned
subsidiaries of EVC. Those Trustees and officers who are "interested persons"
of the Trust or the Portfolio, as defined in the 1940 Act by virtue of their
affiliation with Eaton Vance, BMR, EVC or EV, are indicated by an asterisk(*).
TRUSTEES OF THE TRUST AND THE PORTFOLIO
M. DOZIER GARDNER (64), President and Trustee of the Trust*
Vice Chairman of BMR, Eaton Vance, EVC and EV, and a Director of EVC and EV.
Director or Trustee and officer of various investment companies managed by
Eaton Vance or BMR.
LANDON T. CLAY (71), Trustee of the Portfolio*
Director or Trustee of various investment companies managed by Eaton Vance or
BMR.
JAMES B. HAWKES (55), President of the Portfolio, Vice President of the Trust
and Trustee*
Chairman, President and Chief Executive Officer of Eaton Vance, BMR, EVC and
EV, and a Director of EVC and EV. Director or Trustee and officer of various
investment companies managed by Eaton Vance or BMR.
DONALD R. DWIGHT (66), Trustee
President of Dwight Partners, Inc. (a corporate relations and communications
company); Chairman of Board of Newspapers of New England, Inc. Director or
Trustee of various investment companies managed by Eaton Vance or BMR.
Address: Clover Mill Lane, Lyme, New Hampshire 03768
SAMUEL L. HAYES, III (62), Trustee
Jacob H. Schiff Professor of Investment Banking, Harvard University Graduate
School of Business Administration. Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: Harvard University Graduate School of Business Administration,
Soldiers Field Road, Boston, Massachusetts 02163
NORTON H. REAMER (62), Trustee
President and Director, United Asset Management Corporation (a holding company
owning institutional investment management firms); Chairman, President and
Director, UAM Funds (mutual funds). Director or Trustee of various
investment companies managed by Eaton Vance or BMR.
Address: One International Place, Boston, Massachusetts 02110
JOHN L. THORNDIKE (70), Trustee
Formerly Director of Fiduciary Company Incorporated. Director or Trustee of
various investment companies managed by Eaton Vance or BMR.
Address: 175 Federal Street, Boston, Massachusetts 02110
JACK L. TREYNOR (67), Trustee
Investment Adviser and Consultant. Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: 504 Via Almar, Palos Verdes Estates, California 90274
OFFICERS OF THE TRUST AND THE PORTFOLIO
DUNCAN W. RICHARDSON (40), Vice President of the Portfolio
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR. Mr. Richardson was elected Vice
President of the Portfolio on October 23, 1995.
WILLIAM H. AHERN, JR. (38), Vice President of the Trust
Assistant Vice President of BMR, Eaton Vance and EV. Officer of various
investment companies managed by Eaton Vance or BMR. Mr. Ahern was elected
Vice President of the Trust on June 19, 1995.
MICHAEL B. TERRY (55), Vice President of the Trust
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
THOMAS J. FETTER (54), Vice President of the Trust
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR. Mr. Fetter was elected Vice
President of the Trust on October 17, 1997.
JAMES L. O'CONNOR (52), Treasurer
Vice President of Eaton Vance, BMR and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
ALAN R. DYNNER (57), Secretary
Vice President and Chief Legal Officer of Eaton Vance, BMR, EVC and EV since
November 1, 1996. Previously, he was a Partner of the law firm of
Kirkpatrick & 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 Eaton Vance, BMR and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
A. JOHN MURPHY (34), Assistant Secretary
Assistant Vice President of BMR, 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 October 23, 1995.
JOHN P. RYNNE (55), Assistant Secretary of the Trust
Corporate Controller and Vice President of EVC. Vice President of Eaton Vance,
EVD and BMR. Mr. Rynne became an officer of the Trust 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 on June 19, 1995 and of the Portfolio on
October 23, 1995.
Messrs. Hayes (Chairman), Reamer and Thorndike are members of the Special
Committee of the Board of Trustees of the Trust and of the Portfolio. The
purpose of the Special Committee is to consider, evaluate and make
recommendations to the full Board of Trustees concerning (i) all contractual
arrangements with service providers to the Fund and the Portfolio, including
investment advisory (Portfolio only), administrative, transfer agency,
custodial and fund accounting and distribution services, and (ii) all other
matters in which Eaton Vance or its affiliates has any actual or potential
conflict of interest with the Fund, the Portfolio or investors therein.
The Nominating Committee of the Board of Trustees of the Trust and the
Portfolio is comprised of four Trustees who are not "interested persons" as
that term is defined under the 1940 Act ("noninterested Trustees"). The
Committee has four-year staggered terms, with one member rotating off the
Committee to be replaced by another noninterested Trustee. The purpose of the
Committee is to recommend to the Board nominees for the position of
noninterested Trustee and to assure that at least a majority of the Board of
Trustees is independent of Eaton Vance and its affiliates.
Messrs. Treynor (Chairman) and Dwight are members of the Audit Committee
of the Board of Trustees of the Trust and of the Portfolio. The Audit
Committee's functions include making recommendations to the Trustees regarding
the selection of the independent 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 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 of
the Portfolio are paid by the Fund (and the other series of the Trust) and the
Portfolio, respectively. (The Trustees of the Trust and the Portfolio who are
members of the Eaton Vance organization receive no compensation from the Trust
or the Portfolio.) For the fiscal year ending October 31, 1997, it is
estimated that the noninterested Trustees of the Trust and the Portfolio will
receive the following compensation in their capacities as Trustees of the
Trust and the Portfolio and, during the one year period ended September 30,
1996, the noninterested Trustees of the Trust and the Portfolio earned the
following compensation in their capacities as Trustees of the other funds in
the Eaton Vance fund complex(1):
<TABLE>
<CAPTION>
ESTIMATED ESTIMATED TOTAL COMPENSATION
COMPENSATION COMPENSATION FROM TRUST AND
NAME FROM TRUST(2) FROM PORTFOLIO FUND COMPLEX
- ---- ------------- -------------- ------------------
<S> <C> <C> <C>
Donald R. Dwight $88 $1,254 $142,500(2)
Samuel L. Hayes, III 79 1,220 153,750(3)
Norton H. Reamer 78 1,191 142,500
John L. Thorndike 82 1,270 147,500
Jack L. Treynor 88 1,319 147,500
</TABLE>
- ----------
(1) As of November 1, 1997, the Eaton Vance fund complex consists of 166
registered investment companies or series thereof.
(2) The Trust consisted of 15 Funds as of October 31, 1996.
(3) Includes $42,500 of deferred compensation.
(4) Includes $37,500 of deferred compensation.
INVESTMENT ADVISER AND ADMINISTRATOR
The Portfolio engages BMR as investment adviser pursuant to an Investment
Advisory Agreement. BMR or Eaton Vance acts as investment adviser to
investment companies and various individual and institutional clients with
combined assets under management of approximately $20 billion.
Eaton Vance, its affiliates and its predecessor companies have been
managing assets of individuals and institutions since 1924 and managing
investment companies since 1931. They maintain a large staff of experienced
fixed-income and equity investment professionals to service the needs of their
clients. The fixed-income division focuses on all kinds of taxable investment-
grade and high-yield securities, tax-exempt investment-grade and high-yield
securities, and U.S. Government securities. The equity division cover stocks
ranging from blue chip to emerging growth companies.
Eaton Vance and its affiliates act as adviser to a family of mutual funds,
and individual and various institutional accounts, including corporations,
hospitals, retirement plans, universities, foundations and trusts. Eaton Vance
mutual funds feature international equities, domestic equities, tax-free
municipal bonds, and U.S. government and corporate bonds. Lloyd George
Management has advised Eaton Vance's international equity funds since 1992.
Founded in 1991, Lloyd George is headquartered in Hong Kong with offices in
London and Mumbai, India. It has established itself as a leader in investment
management in Asian equities and other global markets. Lloyd George features
an experienced team of investment professionals that began working together in
the mid-1980s. Lloyd George analysts cover East Asia, the India subcontinent,
Russia and Eastern Europe, Latin America, Australia and New Zealand from
offices in Hong Kong, London and Mumbai. Together Eaton Vance and Lloyd George
manage over $21 billion in assets. Eaton Vance mutual funds are distributed by
the Principal Underwriter both within the United States and offshore.
The Principal Underwriter believes that an investment professional can
provide valuable services to you to help you reach your investment goals.
Meeting investment goals requires time, objectivity and investment savvy.
Before making an investment recommendation, a representative can help you
carefully consider your short- and long-term financial goals, your tolerance
for investment risk, your investment time frame, and other investments you may
already own. Your professional investment representatives are knowledgeable
about financial markets, as well as the wide range of investment opportunities
available. A representative can 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) commission, 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 interest 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 registration
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, officer and investors with respect thereto, to the extent not
covered by insurance.
For a description of the compensation that the Portfolio pays BMR under
the Investment Advisory Agreement, see the Fund's current Prospectus. As of
October 31, 1996, the Portfolio had net assts of $936,799,570. For the period
from the Portfolio's start of business, December 1, 1995, to the fiscal year
ended October 31, 1996, the Portfolio paid BMR advisory fees of $2,116,576
(equivalent to 0.618% (annualized) of the Portfolio's average daily net assets
for such period).
The Investment Advisory Agreement with BMR continues in effect from year
to year so long as such continuance is approved at least annually (i) by the
vote of a majority of the noninterested Trustees of the Portfolio cast in
person at a meeting specifically called for the purpose of voting on such
approval and (ii) by the Board of Trustees of the Portfolio or by vote of a
majority of the outstanding voting securities of the Portfolio. The Agreement
may be terminated at any time without penalty on sixty (60) days' written
notice by the Board of Trustees of either party, or by vote of the majority of
the outstanding voting securities of the Portfolio, and the Agreement will
terminate automatically in the event of its assignment. The Agreement provides
that BMR may render services to others. The Agreement also provides that BMR
shall not be liable for any loss incurred in connection with the performance
of its duties, or action taken or omitted under that Agreement, in the absence
of willful misfeasance, bad faith, gross negligence in the performance of its
duties or by reason of its reckless disregard of its obligations and duties
thereunder, or for any losses sustained in the acquisition, holding or
disposition of any security or other investment.
As indicated in the Prospectus, Eaton Vance serves as Administrator of the
Fund, but currently receives no compensation for providing administrative
services to the Fund. Under its agreement with the 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) commission,
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 purpose and for distribution of the same to
shareholders and investors, and fees and expenses of registering and
maintaining registration 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
registrar 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. Eaton Vance and BMR are both
Massachusetts business trusts, and EV is the trustee of Eaton Vance and BMR.
The Directors of EV are M. Dozier Gardner, James B. Hawkes and Benjamin A.
Rowland, Jr. The Directors of EVC consist of the same persons and John G.L.
Cabot and Ralph Z. Sorenson. Mr. Hawkes is Chairman and Mr. Gardner is vice
chairman. Mr. Hawkes is president and chief executive officer of EVC, Eaton
Vance, BMR and EV. All of the issued and outstanding shares of Eaton Vance and
of EV are owned by EVC. All of the issued and outstanding shares of BMR are
owned by Eaton Vance. All shares of the outstanding Voting Common Stock of EVC
are deposited in a Voting Trust, the Voting Trustees of which are Messrs.
Dynner, Gardner, Hawkes, Rowland and Thomas E. Faust, Jr., William M. Steul
and Wharton P. Whitaker. The Voting Trustees have unrestricted voting rights
for the election of Directors of EVC. All of the outstanding voting trust
receipts issued under said Voting Trust are owned by certain of the officers
of Eaton Vance and BMR who are also officers or officers and Directors of EVC
and EV. As of October 31, 1997, Messrs. Gardner and Hawkes each owned 24% of
such voting trust receipts and Messrs. Rowland and Faust owned 15% and 13%,
respectively, and Messrs. Dynner, Steul and Whitaker each owned 8%. Messrs.
Gardner, Hawkes and Dynner, who are officers or Trustees of the Trust and/or
the Portfolio, are members of the EVC, Eaton Vance, BMR and EV organizations.
Messrs. Ahern, Fetter, Murphy, O'Connor, Richardson, Rynne, Terry and
Woodbury, and Ms. Sanders are officers of the Trust and/or the Portfolio and
are also members of the Eaton Vance, BMR and EV organizations.
Eaton Vance owns all the stock of Northeast Properties, Inc., which is
engaged in real estate investment. EVC owns all the stock of Fulcrum
Management, Inc. and MinVen, Inc., which are engaged in precious metal mining
venture investment and management. EVC also owns approximately 21% of the
Class A shares of Lloyd George Management (B.V.I.) Limited, a registered
investment adviser. EVC, Eaton Vance, BMR and EV may also enter into other
businesses.
EVC and its affiliates and their officers and employees from time to time
have transactions with various banks, including the custodian of the Fund and
the Portfolio, IBT. It is Eaton Vance's opinion that the terms and conditions
of such transactions will not be influenced by existing or potential custodial
or other relationships between the Trust or the Portfolio and such banks.
CUSTODIAN
IBT acts as custodian for the Fund and the Portfolio. IBT has the custody
of all cash and securities representing the Fund's interest in the Portfolio,
has custody of all the Portfolio's assets, maintains the general ledger of the
Portfolio and the Fund and computes the daily net asset value of interests in
the Portfolio and the net asset value of shares of the Fund. In such capacity
it attends to details in connection with the sale, exchange, substitution,
transfer or other dealings with the Portfolio's investments, receives and
disburse all funds and performs various other ministerial duties upon receipt
of proper instruction from the Fund and the Portfolio. IBT charges fees which
are competitive within the industry. A portion of the fee relates to custody,
bookkeeping and valuation services and is based upon a percentage of Fund and
Portfolio net assets and a portion of the fee relates to activity charges,
primarily the number of portfolio transactions. These fees are then reduced by
a credit for cash balances of the particular investment company at the
custodian equal to 75% of the 91-day, U.S. Treasury Bill auction rate applied
to the particular investment company's average daily collected balances for
the week. Landon T. Clay, a Trustee of the Portfolio, owns approximately 13%
of the voting stock of Investors Financial Services Corp., the holding company
parent of IBT. In view of Mr. Clay's interest in IBT, the Portfolio is treated
as a self-custodian pursuant to Rule 17f-2 under the 1940 Act and the
Portfolio's investments held by IBT as custodian are thus subject to the
additional examinations by the Portfolio's independent certified public
accountants as called for by such Rule.
IBT also provides services in connection with the preparation of
shareholder reports and the electronic filing of such reports with the
Commission for which it receives a separate fee.
SERVICES FOR ACCUMULATION -- CLASS A SHARES
The following services are voluntary, involve no extra charge, other than
the sales charge included in the offering price, and may be changed or
discontinued without penalty at any time.
Intended Quantity Investment -- Statement of Intention. If it is
anticipated that $50,000 or more of Class A shares and shares of other funds
exchangeable for Class A shares and listed under "The Eaton Vance Exchange
Privilege" in the Prospectus will be purchased within a 13-month period, a
Statement of Intention should be signed so that shares may be obtained at the
same reduced sales charge as though the total quantity were invested in one
lump sum. Shares held under Right of Accumulation (see below) as of the date
of the Statement will be included toward the completion of the Statement. The
Statement authorizes the Transfer Agent to hold in escrow sufficient shares
(5% of the dollar amount specified in the Statement) which can be redeemed to
make up any difference in sales charge on the amount intended to be invested
and the amount actually invested. Execution of a Statement does not obligate
the shareholder to purchase or the Fund to sell the full amount indicated in
the Statement, and should the amount actually purchased during the 13-month
period be more or less than that indicated on the Statement, price adjustments
will be made. For sales charges and other information on quantity purchases,
see "How to Buy Shares" in the Prospectus. Any investor considering signing a
Statement of Intention should read it carefully.
Right of Accumulation -- Cumulative Quantity Discount. The applicable
sales charge level for the purchase of Class A shares is calculated by taking
the dollar amount of the current purchase and adding it to the value
(calculated at the maximum current offering price) of the shares the
shareholder owns in his or her account(s) in the Fund and shares of other
funds exchangeable for Class A shares and listed under "The Eaton Vance
Exchange Privilege" in the Prospectus. The sales charge on the shares being
purchased will then be at the rate applicable to the aggregate. For sales
charges on quantity purchases, see "How to Buy Shares" in the Prospectus.
Shares purchased (i) by an individual, his or her spouse and their children
under the age of twenty-one, and (ii) by a trustee, guardian or other
fiduciary of a single trust estate or a single fiduciary account, will be
combined for the purpose of determining whether a purchase will qualify for
the Right of Accumulation and if qualifying, the applicable sales charge
level.
For any such discount to be made available, at the time of purchase a
purchaser or his or her Authorized Firm must provide the Principal Underwriter
(in the case of a purchase made through an Authorized Firm) or the Transfer
Agent (in the case of an investment made by mail) with sufficient information
to permit verification that the purchase order qualifies for the accumulation
privilege. Confirmation of the order is subject to such verification. The
Right of Accumulation privilege may be amended or terminated at any time as to
purchases occurring thereafter.
SERVICE FOR WITHDRAWAL
The Transfer Agent will send to the shareholder regular quarterly payments
of any permitted amount designated by the shareholder (see "Eaton Vance
Shareholder Services - Withdrawal Plan" in the Prospectus) based upon the
value of the shares held. The checks will be drawn from share redemptions and
hence, although they are a return of principal, may require the recognition of
taxable gain or loss. Income dividends and capital gain distributions in
connection with withdrawal plan accounts will be credited at net asset value
as of the record date for each distribution. Continued withdrawals in excess
of current income will eventually use up principal, particularly in a period
of declining market prices. A shareholder may not have a withdrawal plan in
effect at the same time he or she has authorized Bank Automated Investing or
is otherwise making regular purchases of Fund shares. The shareholder, the
Transfer Agent or the Principal Underwriter will be able to terminate the
withdrawal plan at any time without penalty.
DETERMINATION OF NET ASSET VALUE
The net asset value of the Portfolio and of shares of the Fund is
determined by IBT (as agent and custodian for the Fund and the Portfolio) in
the manner described under "Valuing Shares" in the Prospectus. The Fund and
Portfolio will be closed for business and will not price their shares on the
following business holidays: New Year's Day, Martin Luther King, Jr. Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
The Trustees of the Portfolio have established the following procedures
for the fair valuation of the Portfolio's assets under normal market
conditions. Securities listed on foreign or U.S. securities exchanges or in
the NASDAQ National Market System generally are valued at the last sale prices
or, if there were no sales on a particular day, at the mean between the
closing bid and asked prices therefor on the exchange where such securities
are principally traded or on such National Market System. Unlisted or listed
securities for which closing sale prices are not available are valued at the
mean between the latest bid and asked prices. An option is valued at the last
sale price as quoted on the principal exchange or board of trade on which such
option or contract is traded, or in the absence of a sale, at the mean between
the last bid and asked prices. Futures positions on securities or currencies
are generally valued at closing settlement prices. Short-term debt securities
with a remaining maturity of 60 days or less are valued at amortized cost. If
securities were acquired with a remaining maturity of more than 60 days, their
amortized cost value will be based on their value on the sixty-first day prior
to maturity. Other fixed income and debt securities, including listed
securities and securities for which price quotations are available, will
normally be valued on the basis of valuations furnished by a pricing service.
All other securities are valued at fair value as determined in good faith by
or at the direction of the Trustees.
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 represents 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.
Generally, trading in the foreign securities owned by the Portfolio is
substantially completed each day at various times prior to the close of the
Exchange. The values of these securities used in determining the net asset
value of the Portfolio's share are computed as of such times. Occasionally,
events affecting the value of foreign securities may occur between such times
and the close of the Exchange which will not be reflected in the computation
of the Portfolio's net asset value (unless the Portfolio deems that such
events would materially affect its net asset value, in which case an
adjustment would be made and reflected in such computation). Foreign
securities and currency held by the Portfolio will be valued in U.S. dollars;
such values will be computed by the custodian based on foreign currency
exchange rate quotations supplied by an independent quotation service.
INVESTMENT PERFORMANCE
Average annual total return is determined separately for each Class of the
Fund by multiplying a hypothetical initial purchase order of $1,000 by the
average annual compound rate of return (including capital appreciation/
depreciation, and distributions paid and reinvested) for the stated period and
annualizing the result. The calculation assumes (i) that all distributions are
reinvested at net asset value on the reinvestment dates during the period,
(ii) the deduction of the maximum sales charge from the initial $1,000
purchase order for Class A shares, (iii) a complete redemption of the
investment and, (iv) the deduction of any Class B or Class C CDSC at the end
of the period. For information concerning the total return of the Classes of
the Fund, see Appendix A, Appendix B and Appendix C.
The Fund may use total return figures showing after-tax returns, including
comparisons to tax-deferred vehicles such as Individual Retirement Accounts
("IRAs") and variable annuities. In calculating after-tax returns, the Fund
will, in general, assume that its shareholders are U.S. individual taxpayers
subject to federal income taxes at the highest marginal rate then applicable
to ordinary income and long-term capital gains. After-tax returns may also be
calculated using different tax rate assumptions and taking into account state
and local income taxes as well as federal taxes. In calculating after-tax
returns, distributions made by the Fund are assumed to be reduced by the
amount of taxes payable on the distribution, and the after-tax proceeds of the
distribution are reinvested in the Fund at net asset value on the reinvestment
date.
The Fund's total return may be compared to relevant indices, such as the
Consumer Price Index and various domestic and foreign securities indices. In
addition, evaluations of the Fund's performance or rankings of mutual funds
(which include the Fund) made by independent sources may be used in
advertisements and in information furnished to present or prospective
shareholders. Information, charts and illustrations showing the effect of
compounding interest or relating to inflation and taxes (including their
effects on the dollar and the return on stocks and other investment vehicles)
may also be included in advertisements and materials furnished to present and
prospective investors. The Fund's performance may differ from that of other
investors in the Portfolio, and other investment companies.
Information used in advertisements and in materials furnished to present
or prospective shareholders may include statistics, data and performance
studies prepared by independent organizations or included in various
publications reflecting the investment performance or return achieved by
various classes and types of investments (e.g. common stocks, small company
stocks, long-term corporate bonds, long-term government bonds, intermediate-
term government bonds, U.S. Treasury bills) over various periods of time. This
information may be used to illustrate the benefits of long-term investments in
common stocks.
Information about the allocation and holdings of investments in the
Portfolio may be included in advertisements and other material furnished to
present and prospective shareholders.
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:
-- costs associated with aging parents;
-- funding a college education (including its actual and estimated cost);
-- health care expenses (including actual and projected expenses);
-- long-term disabilities (including the availability of, and coverage
provided by, disability insurance); and
-- retirement (including the availability of social security benefits, the
tax treatment of such benefits and statistics and other information
relating to maintaining a particular standard of living and outliving
existing assets).
Such information may also address different methods for saving money and
the results of such methods, as well as the benefits of investing in equity
securities. Such information may describe: the potential for growth; the
performance of equities as compared to other investment vehicles; and the
value of investing as early as possible and regularly, as well as staying
invested. The benefits of investing in equity securities by means of a mutual
fund may also be included (such benefits may include diversification,
professional management and the variety of equity mutual fund products).
Information in advertisements and materials furnished to present and
prospective investors may include profiles of different types of investors
(i.e., investors with different goals and assets) and different investment
strategies for meeting specific financial goals. Such information may provide
hypothetical illustrations which include: results of various investment
strategies; performance of an investment in the Fund over various time
periods; and results of diversifying assets among several investments with
varying performance. Information in advertisements and materials furnished to
present and prospective investors may also include quotations (including
editorial comments) and statistics concerning investing in securities, as well
as investing in particular types of securities and the performance of such
securities.
The Trust (or Principal Underwriter) may provide information about Eaton
Vance, its affiliates and other investment advisers to the funds in the Eaton
Vance Family of Funds in sales material or advertisements provided to
investors or prospective investors. Such material or advertisements may also
provide information on the use of investment professionals by such investors.
HYPOTHETICAL RETURNS
The following analysis compares the after-tax returns achieved from three
hypothetical investments with identical pre-tax returns of 10% per year. The
first hypothetical investment is a tax-managed equity mutual fund whose
returns consist entirely of deferred gains (no dividend income and no realized
capital gains). Note - It is anticipated the Fund will distribute some net
investment income and capital gains in some years, so the hypothetical may not
be entirely applicable. The second hypothetical investment is a conventional
equity mutual fund, managed without regard to investor tax considerations,
whose 10% annual returns consist of 3% from dividend income and realized
short-term gains, 2% from realized mid-term gains and 5% from realized long-
term gains. The third hypothetical investment is a variable annuity fund,
which by its structure defers taxation on all income and gains. The investor
is assumed to pay federal taxes at the highest rate applicable to individual
income and gains, including the effect of the itemized deduction phaseout.
This rate is 40.8% for dividend income and short-term capital gains, 29.2% for
mid-term capital gains and 21.2% for long-term gains. The investor is assumed
to pay no state or local taxes.
An initial investment of $10,000 in each of the three hypothetical funds
would grow in value to:
<TABLE>
<CAPTION>
CONVENTIONAL EQUITY VARIABLE
TAX-MANAGED FUND MUTUAL FUND ANNUITY FUND
---------------- ------------------- ------------
<S> <C> <C> <C>
After 10 years: $25,937 $21,030 $25,937
After 20 years: $67,275 $44,226 $67,275
</TABLE>
The returns from the tax-managed fund and the variable annuity fund are
the same since the pre-tax returns are assumed to be identical and no taxes
have been paid in either case. The returns from the conventional fund are
substantially lower due to the taxes paid each year in connection with the
funds dividend income and realized long-term, mid-term and short-term capital
gains.
If the hypothetical fund investments were each to be sold, the amount
realized from the sale, net of taxes, would be:
<TABLE>
<CAPTION>
CONVENTIONAL EQUITY VARIABLE
TAX-MANAGED FUND MUTUAL FUND ANNUITY FUND
---------------- ------------------- ------------
<S> <C> <C> <C>
After 10 years: $22,561 $20,424 $19,437
After 20 years: $55,140 $42,347 $43,914
</TABLE>
The proceeds from selling the conventional fund, net of taxes, equals the
value of the shares (from above), since no gain is recognized at sale. The
net-of-tax proceeds of the tax-managed fund position is reduced by the capital
gains taxes due on the accumulated gain. The net-of-tax proceeds of the
variable annuity is reduced by taxes on the accumulated income and gain, all
of which is taxed as ordinary income.
If the holder of the hypothetical fund investments were to die, the value
of the investment passing to the estate would be:
<TABLE>
<CAPTION>
CONVENTIONAL EQUITY VARIABLE
TAX-MANAGED FUND MUTUAL FUND ANNUITY FUND
---------------- ------------------- ------------
<S> <C> <C> <C>
After 10 years: $25,937 $21,030 $19,437
After 20 years: $67,275 $44,226 $43,914
</TABLE>
The value of the tax-managed fund and the conventional fund would pass
through to the estate without being taxed and their tax basis would be
adjusted upward to the value at the time of death. The value of the variable
annuity would be reduced by taxes at the ordinary income rate on the
accumulated income and gain, as if the investor had sold the position.
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 on the Fund. Because the Fund
invests its assets in the Portfolio, the Portfolio normally must satisfy the
applicable source of income and diversification requirements in order for the
Fund to also satisfy these requirements. The Portfolio will allocate at least
annually among its investors, including the Fund, each investor's distributive
share of the Portfolio's net investment income, net realized capital gains,
and any other items of income, gain, loss, deduction or credit. The Portfolio
will make allocations to the Fund in accordance with the Code and applicable
regulations and will make moneys available for withdrawal at appropriate times
and in sufficient amounts to enable the Fund to satisfy the tax distribution
requirements that apply to the Fund and that must be satisfied in order to
avoid federal income and/or excise tax on the Fund. For purposes of applying
the requirements of the Code regarding qualification as a RIC, the Fund (i)
will be deemed to own its proportionate share of each of the assets of the
Portfolio and (ii) will be entitled to the gross income of the Portfolio
attributable to such share.
In order to avoid incurring a federal excise tax obligation, the Code
requires that the Fund distribute (or be deemed to have distributed) by
December 31 of each calendar year at least 98% of its ordinary income (not
including tax-exempt income) for such year, at least 98% of 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 and capital gains from
the prior year (as previously computed) that was not paid out during such year
and on which the Fund paid no federal income tax. Under current law, provided
that the Fund qualifies as a RIC and the Portfolio is treated as a partnership
for Massachusetts and federal tax purposes, neither the Fund nor the Portfolio
should be liable for any income, corporate excise or franchise tax in the
Commonwealth of Massachusetts.
Foreign exchange gains and losses realized by the Portfolio and allocated
to the Fund in connection with the Portfolio's investments in foreign
securities and certain options, futures or forward contracts or foreign
currency may be treated as ordinary income and losses under special tax rules.
Certain options, futures or forward contracts of the Portfolio may be required
to be marked to market (i.e., treated as if closed out) on the last day of
each taxable year, and any gain or loss realized with respect to these
contracts may be required to be treated as 60% long-term and 40% short-term
gain or loss. Positions of the Portfolio in securities and offsetting options,
swaps, futures or forward contracts may be treated as "straddles" and be
subject to other special rules that may, upon allocation of the Portfolio's
income, gain or loss to the Fund, affect the amount, timing and character of
the Fund's distributions to shareholders. Certain uses of foreign currency and
foreign currency derivatives such as options, futures, forward contracts and
swaps and investment by the Portfolio in certain "passive foreign investment
companies" may be limited or a tax election may be made, if available, in
order to preserve the Fund's qualification as a RIC or avoid imposition of an
income tax on the Fund.
The Portfolio will allocate at least annually to the Fund and its other
investors their respective distributive shares of any net investment income
and net capital gains which have been recognized for federal income tax
purposes (including unrealized gains at the end of the Portfolio's fiscal year
on certain options and futures transactions that are required to be marked-to-
market). Such amounts will be distributed by the Fund to its shareholders in
cash or additional shares, as they elect. Shareholders of the Fund will be
advised of the nature of the distributions.
Certain investors in the Portfolio, including RICs, have acquired
interests in the Portfolio by contributing securities. Due to tax
considerations, during the first five years following the contribution of
securities to the Portfolio by an investor, such securities will not be
distributed to any investor other than the investor who contributed those
securities. Investors who acquire an interest in the Portfolio by contributing
securities and who redeem that interest within five years thereafter will
generally receive back one or more of the securities they contributed. In
partial redemptions by such investors during this period, the Portfolio will
attempt to accommodate requests to distribute initially those contributed
securities and share lots with the highest cost basis.
The Portfolio has significant holdings of highly appreciated securities
that were contributed to the Portfolio by investors other than the Fund. If
such securities were to be sold, the resulting capital gain would be allocated
disproportionately among the Portfolio's investors, with the result that the
Fund would not be subject to taxation on any gain arising prior to the
contribution of the securities to the Portfolio.
Distributions by the Fund of the excess of net long-term capital gains
over short-term capital losses earned by the Portfolio and allocated to the
Fund, taking into account any capital loss carryforwards that may be available
to the Fund in years after its first taxable year, are taxable to shareholders
of the Fund as long-term capital gains, whether received in cash or in
additional shares and regardless of the length of time their shares have been
held. Certain distributions, if declared in October, November or December and
paid the following January, will be taxed to shareholders as if received on
December 31 of the year in which they are declared.
Any loss realized upon the redemption or exchange of shares with a tax
holding period of 6 months or less will be treated as a long-term capital loss
to the extent of any distribution of net long-term capital gains with respect
to such shares. All or a portion of a loss realized upon a taxable disposition
of Fund shares may be disallowed under "wash sale" rules if other Fund shares
are purchased (whether through reinvestment of dividends or otherwise) within
30 days before or after the disposition. Any disallowed loss will result in an
adjustment to the shareholder's tax basis in some or all of the other shares
acquired.
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 other classes of investors, such as other 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
CLASS A SHARES. Class A shares of the Fund may be continuously purchased
at the public offering price through Authorized Firms which have agreements
with the Principal Underwriter. The Trust reserves the right to suspend or
limit the offering of its shares to the public at any time. The public
offering price is the net asset value next computed after receipt of the
order, plus, where applicable, a variable percentage (sales charge) depending
upon the amount of purchase as indicated by the sales charge table set forth
in the Prospectus (see "How to Buy Shares"). Such table is applicable to
purchases of a Fund alone or in combination with purchases of certain other
funds offered by the Principal Underwriter, made at a single time by (i) an
individual, or an individual, his spouse and their children under the age of
twenty-one, purchasing shares for his or their own account, and (ii) a trustee
or other fiduciary purchasing shares for a single trust estate or a single
fiduciary account. The table is also presently applicable to (1) purchases of
Class A shares pursuant to a written Statement of Intention; or (2) purchases
of Class A shares pursuant to the Right of Accumulation and declared as such
at the time of purchase.
Subject to the applicable provisions of the 1940 Act, the Trust may issue
Class A shares at net asset value in the event that an investment company
(whether a regulated or private investment company or a personal holding
company) is merged or consolidated with or acquired by the Class. Normally no
sales charges will be paid in connection with an exchange of Class A shares
for the assets of such investment company. Class A shares may be sold at net
asset value to any officer, director, trustee, general partner or employee of
the Trust, the Portfolio or any investment company for which Eaton Vance or
BMR acts as investment adviser, any investment advisory, agency, custodial or
trust account managed or administered by Eaton Vance or by any parent,
subsidiary or other affiliate of Eaton Vance, or any officer, director or
employee of any parent, subsidiary or other affiliate of Eaton Vance. The
terms "officer," "director," "trustee," "general partner" or "employee" as
used in this paragraph include any such person's spouse and minor children,
and also retired officers, directors, trustees, general partners and employees
and their spouses and minor children. Class A shares may also be sold at net
asset value to registered representatives and employees of Authorized Firms
and to the spouses and children under the age of 21 and beneficial accounts of
such persons.
The Principal Underwriter acts as principal in selling Class A shares
under a Distribution Agreement with the Trust. The expenses of printing copies
of prospectuses used to offer shares to Authorized Firms or investors and other
selling literature and of advertising are borne by the Principal Underwriter.
The fees and expenses of qualifying and registering and maintaining
qualifications and registrations of the Fund and its shares under federal and
state securities laws are borne by the Fund. The Distribution Agreement is
renewable annually by the Board of Trustees of the Trust (including a majority
of the noninterested Trustees), may be terminated on six months' notice by
either party and is automatically terminated upon assignment. The Principal
Underwriter distributes Class A shares on a "best efforts" basis under which it
is required to take and pay for only such shares as may be sold. The Principal
Underwriter allows Authorized Firms discounts from the applicable public
offering price which are alike for all Authorized Firms. The Principal
Underwriter may allow, upon notice to all Authorized Firms with whom it has
agreements, discounts up to the full sales charge during the periods specified
in the notice. During periods when the discount includes the full sales charge,
such Authorized Firms may be deemed to be underwriters as that term is defined
in the Securities Act of 1933.
CLASS B AND CLASS C SHARES. Under the Distribution Agreement, the
Principal Underwriter acts as principal in selling Class B and Class C shares.
The expenses of printing copies of prospectuses used to offer shares to
Authorized Firms or investors and other selling literature and of advertising
is borne by the Principal Underwriter. The fees and expenses of qualifying and
registering and maintaining qualifications and registrations of the Fund and
its shares under federal and state securities laws are borne by the Class. In
addition, each Class B and Class C makes payments to the Principal Underwriter
pursuant to their Distribution Plans as described in the Prospectus; the
provisions of the plan relating to such payments are included in the
Distribution Agreement. The Distribution Agreement is renewable annually by the
Trust's Board of Trustees (including a majority of the noninterested Trustees
who have no direct or indirect financial interest in the operation of the
Distribution Plans or the Distribution Agreement), may be terminated on sixty
days' notice either by such Trustees or by vote of a majority of the outstanding
Class B and Class C shares or on six months' notice by the Principal Underwriter
and is automatically terminated upon assignment. The Principal Underwriter
distributes Class B and Class C shares on a "best efforts" basis under which it
is required to take and pay for only such shares as may be sold.
The Trust has authorized the Principal Underwriter to act as its agent in
repurchasing shares at the rate of $2.50 for each repurchase transaction
handled by the Principal Underwriter. The Principal Underwriter estimates that
the expenses incurred by it in acting as repurchase agent for the Trust will
exceed the amounts paid therefor. For the amount paid by the Trust to the
Principal Underwriter for acting as repurchase agent, see Appendix B.
SERVICE PLAN -- CLASS A SHARES
The Trust on behalf of its Class A shares has adopted a Service Plan (the
"Plan") designed to meet the service fee requirements of the sales charge rule
of the National Association of Securities Dealers, Inc. (the "NASD").
(Management believes service fee payments are not distribution expenses
governed by Rule 12b-1 under the 1940 Act, but has chosen to have the Plan
approved as if that Rule were applicable.) The following supplements the
discussion of the Plan contained in the Prospectus.
The Plan remains in effect from year to year provided such continuance is
approved by a vote of both a majority of (i) the noninterested Trustees who
have no direct or indirect financial interest in the operation of the Plan or
any agreements related to it (the "Plan Trustees") and (ii) all of the
Trustees then in office, cast in person at a meeting (or meetings) called for
the purpose of voting on this Plan. The Plan may be terminated any time by
vote of the Plan Trustees or by a vote of a majority of the outstanding Class
A shares of the Fund. The Plan has been approved by the Board of Trustees of
the Trust, including the Plan Trustees.
The Plan requires quarterly Trustee review of a written report of the
amount expended under the Plan and the purposes for which such expenditures
were made. The Plan may not be amended to increase materially the payments
described herein without approval of the affected shareholders of Class A
shares and the Trustees. So long as the Plan is in effect, the selection and
nomination of the noninterested Trustees shall be committed to the discretion
of such Trustees. The Trustees have determined that in their judgment there is
a reasonable likelihood that the Plan will benefit the Fund and its Class A
shareholders.
DISTRIBUTION PLANS -- CLASS B AND CLASS C SHARES
The Trust has adopted Distribution Plans (the "Plans") on behalf of its
Class B and Class C shares designed to meet the requirements of Rule 12b-1
under the 1940 Act and the sales charge rule of the NASD. The purpose of the
Plans is to compensate the Principal Underwriter for its distribution services
and facilities provided with respect to Class B and Class C shares.
The Plans provide that the Fund will pay sales commissions and
distribution fees to the Principal Underwriter only after and as a result of
the sale of Class B or Class C shares of the Fund. On each sale of Fund shares
(excluding reinvestment of distributions) the Fund will pay the Principal
Underwriter amounts representing (i) sales commissions equal to 5% of Class B
sales and 6.25% of Class C sales of the amount received by the Fund for each
share sold and (ii) distribution fees calculated by applying the rate of 1%
over the prime rate then reported in The Wall Street Journal to the
outstanding balance of uncovered distribution charges (as described below) of
the Principal Underwriter.
The amount payable to the Principal Underwriter pursuant to the Plans as
sales commissions and distribution fees with respect to each day will be
accrued on such day as a liability of the respective Class and will
accordingly reduce the net assets of the Class upon such accrual, all in
accordance with generally accepted accounting principles. The amount payable
on each day is limited to 1/365 of .75% of the net assets of the Class on
such day. The level of net assets changes each day and depends upon the amount
of sales and redemptions of shares, the changes in the value of the
investments held by the Portfolio, the expenses of the Class, the Fund and the
Portfolio accrued and allocated to the Fund and Class on such day, income on
portfolio investments of the Portfolio accrued and allocated to the Fund on
such day, and any dividends and distributions declared on Fund shares. The
Trust does not accrue possible future payments as a liability of a Class or
reduce current net assets in respect of unknown amounts which may become
payable under the Plans in the future because the standards for accrual of
such a liability under accounting principles have not been satisfied.
The Plans provide that the Fund will receive all CDSCs and will make no
payments to the Principal Underwriter in respect of any day on which there are
no outstanding uncovered distribution charges of the Principal Underwriter.
CDSCs and accrued amounts will be paid by the Trust to the Principal
Underwriter whenever there exist uncovered distribution charges.
In calculating daily the amount of uncovered distribution charges,
distribution charges will include the aggregate amount of sales commissions
and distribution fees theretofore paid plus the aggregate amount of sales
commissions and distribution fees which the Principal Underwriter is entitled
to be paid under the Plans since their inception. Payments theretofore paid or
payable under the Plans by the Trust to the Principal Underwriter and CDSCs
theretofore paid or payable to the Principal Underwriter will be subtracted
from such distribution charges; if the result of such subtraction is positive,
a distribution fee (computed at 1% over the prime rate then reported in The
Wall Street Journal) will be computed on such amount and added thereto, with
the resulting sum constituting the amount of outstanding uncovered
distribution charges with respect to such day. The amount of outstanding
uncovered distribution charges of the Principal Underwriter calculated on any
day does not constitute a liability recorded on the financial statements of
the Fund.
The amount of uncovered distribution charges of the Principal Underwriter
at any particular time depends upon various changing factors, including the
level and timing of sales of shares, the nature of such sales (i.e., whether
they result from exchange transactions, reinvestments or from cash sales
through Authorized Firms), the level and timing of redemptions of shares upon
which a CDSC will be imposed, the level and timing of redemptions of shares
upon which no CDSC will be imposed (including redemptions of shares pursuant
to the exchange privilege which result in a reduction of uncovered
distribution charges), changes in the level of the net assets of the Class,
and changes in the interest rate used in the calculation of the distribution
fee under the Plans. Periods with a high level of sales of Class shares
accompanied by a low level of early redemptions of Class shares resulting in
the imposition of CDSCs will tend to increase the time during which there will
exist uncovered distribution charges of the Principal Underwriter.
Currently, payments of sales commissions and distribution fees and of
service fees may equal 1% of average daily net assets per annum. For actual
payments made and the outstanding uncovered distribution charges of the
Principal Underwriter, see Appendix B. The Trust believes that the combined
rate of all these payments may be higher than the rate of payments made under
distribution plans adopted by other investment companies pursuant to Rule
12b-1. Although the Principal Underwriter will use its own funds (which may be
borrowed from banks) to pay sales commissions and service fees for Class C
sales and sales commissions for Class B sales at the time of sale, it is
anticipated that the Eaton Vance organization will profit by reason of the
operation of the Plans through an increase in the Fund's assets (thereby
increasing the advisory fee payable to BMR by the Portfolio) resulting from
sale of shares and through the amounts paid to the Principal Underwriter,
including CDSCs, pursuant to the Plans. The Eaton Vance organization may be
considered to have realized a profit under the Plans if at any point in time
the aggregate amounts theretofore received by the Principal Underwriter
pursuant to the Plans and from CDSCs have exceeded the total expenses
theretofore incurred by such organization in distributing Class B and Class C
shares of the Fund. Total expenses for this purpose will include an allocable
portion of the overhead costs of such organization and its branch offices,
which costs will include without limitation leasing expense, depreciation of
building and equipment, utilities, communication and postage expense,
compensation and benefits of personnel, travel and promotional expense,
stationery and supplies, literature and sales aids, interest expense, data
processing fees, consulting and temporary help costs, insurance, taxes other
than income taxes, legal and auditing expense and other miscellaneous overhead
items. Overhead is calculated and allocated for such purpose by the Eaton
Vance organization in a manner deemed equitable to the Trust.
The Plans continue in effect from year to year for so long as such
continuance is approved at least annually by the vote of both a majority of
(i) the noninterested Trustees of the Trust who have no direct or indirect
financial interest in the operation of the Plan or any agreements related to
the Plan (the "Rule 12b-1 Trustees") and (ii) all of the Trustees then in
office, and the Distribution Agreement contains a similar provision. The Plans
and Distribution Agreements may be terminated at any time by vote of a
majority of the Rule 12b-1 Trustees or by a vote of a majority of the
outstanding voting securities of the applicable Class. The Plans require
quarterly Trustee review of a written report of the amount expended under the
Plans and the purposes for which such expenditures were made. The Plans may
not be amended to increase materially the payments described therein without
approval of the shareholders of the affected Class and the Trustees. So long
as the Plans are in effect, the selection and nomination of the noninterested
Trustees shall be committed to the discretion of such Trustees.
The Trustees of the Trust believe that the Plans will be a significant
factor in the expected growth of the Fund's assets, and will result in
increased investment flexibility and advantages which have benefitted and will
continue to benefit the Fund and its Class B and Class C shareholders.
Payments for sales commissions and distribution fees made to the Principal
Underwriter under the Plans will compensate the Principal Underwriter for its
services and expenses in distributing Class B and Class C shares of the Fund.
Service fee payments made to the Principal Underwriter and Authorized Firms
under the Plans provide incentives to provide continuing personal services to
investors and the maintenance of shareholder accounts. By providing
incentives to the Principal Underwriter and Authorized Firms, the Plans are
expected to result in the maintenance of, and possible future growth in, the
assets of the Fund. Based on the foregoing and other relevant factors, the
Trustees of the Trust have determined that in their judgment there is a
reasonable likelihood that the Plans will benefit the Fund and its Class B and
Class C shareholders.
PORTFOLIO SECURITY TRANSACTIONS
Decisions concerning the execution of Portfolio security transactions,
including the selection of the market and the broker-dealer 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
certain other accounts managed by it for execution with many broker-dealer
firms. BMR uses its best efforts to obtain execution of portfolio security
transactions at prices which are advantageous to the Portfolio and (when a
disclosed commission is being charged) at reasonably competitive commission
rates. In seeking such execution, BMR will use its best judgment in evaluating
the terms of a transaction, and will give consideration to various relevant
factors, including without limitation the size and type of the transaction,
the general execution and operational capabilities of the broker-dealer, the
nature and character of the market for the security, the confidentiality,
speed and certainty of effective execution required for the transaction, the
reputation, reliability, experience and financial condition of the broker-
dealer, the value and quality of services rendered by the broker-dealer in
other transactions, and the reasonableness of the commission or spread, if
any. Transactions on stock exchanges and other agency transactions involve the
payment by the Portfolio of negotiated brokerage commissions. Such commissions
vary among different broker-dealer firms, and a particular broker-dealer may
charge different commissions according to such factors as the difficulty and
size of the transaction and the volume of business done with such broker-
dealer. Transactions in foreign securities usually involve the payment of
fixed brokerage commissions, which are generally higher than those in the
United States. There is generally no stated commission in the case of
securities traded in the over-the-counter markets, but the price paid or
received by the Portfolio usually includes an undisclosed dealer markup or
markdown. In an underwritten offering the price paid by the Portfolio includes
a disclosed fixed commission or discount retained by the underwriter or
dealer. Although commissions paid on portfolio transactions will, in the
judgment of BMR, be reasonable in relation to the value of the services
provided, commissions exceeding those which another firm might charge may be
paid to broker-dealers who were selected to execute transactions on behalf of
the Portfolio and BMR's other clients in part 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 it exercises 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; and effecting securities transactions and performing
functions incidental thereto (such as clearance and settlement); and the
"Research Services" referred to in the next paragraph.
It is a common practice of the investment advisory industry for the
advisers of investment companies, institutions and other investors to receive
research, statistical and quotation services, data, information and other
services, products and materials which assist such advisers in the performance
of their investment responsibilities ("Research Services") from broker-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 may receive Research Services from broker-dealer firms
with which BMR places the portfolio transactions of the Portfolio and from
third parties with which these broker-dealers have arrangements. These
Research Services may include such matters as general economic and market
reviews, industry and company reviews, evaluations of securities and portfolio
strategies and transactions and recommendations as to the purchase and sale of
securities and other portfolio transactions, financial, industry and trade
publications, news and information services, pricing and quotation equipment
and services, and research oriented computer hardware, software, data bases
and services. Any particular Research Service obtained through a broker-dealer
may be used by BMR in connection with client accounts other than those
accounts which pay commissions to such broker-dealer. Any such Research
Service may be broadly useful and of value to BMR in rendering investment
advisory services to all or a significant portion of its clients, or may be
relevant and useful for the management of only one client's account or of a
few clients' accounts, or may be useful for the management of merely a segment
of certain clients' accounts, regardless of whether any such account or
accounts paid commissions to the broker-dealer through which such Research
Service was obtained. The advisory fee paid by the Portfolio is not reduced
because BMR receives such Research Services. 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 Eaton Vance.
This policy is not inconsistent with a rule of the NASD, which rule provides
that no firm which is a member of the NASD shall favor or disfavor the
distribution of shares of any particular investment company or group of
investment companies on the basis of brokerage commissions received or
expected by such firm from any source.
Securities considered as investments for the Portfolio may also be
appropriate for other investment accounts managed by BMR or its affiliates.
Whenever decisions are made to buy or sell securities by the Portfolio and one
or more of such other accounts simultaneously, BMR will allocate the security
transactions (including "hot" issues) in a manner which it believes to be
equitable under the circumstances. As a result of such allocations, there may
be instances where the Portfolio will not 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 period from the Portfolio's start of business, December 1, 1995, to the
fiscal year ended October 31, 1996, the Portfolio paid brokerage commissions
of $144,815 on portfolio security transactions, of which approximately
$112,018 was paid in respect of portfolio security transactions aggregating
approximately $89,523,457 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 is organized as a business trust under the laws of the
Commonwealth of Massachusetts under a Declaration of Trust dated May 7, 1984,
as amended. On July 10, 1995, the Trust changed its name from Eaton Vance
Government Obligations Trust to Eaton Vance Mutual Funds Trust. Shares of the
Fund were designated as Class B shares, and Class A shares (formerly EV
Traditional Tax-Managed Growth Fund) and Class C shares (formerly EV Classic
Tax-Managed Growth Fund) were established on November 1, 1997, so information
for Class A and Class C shares herein prior to such date is for the
predecessor when it was a separate series of the Trust. Prior to November 1,
1997 the Fund was known as EV Marathon Tax-Managed Growth Fund. Eaton Vance,
pursuant to its agreement with the Trust, controls the use of the words "Eaton
Vance" and "EV" in the Fund's name and may use the words "Eaton Vance" or "EV"
in other connections and for other purposes.
The 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
rights or interests of shareholders or if they deem it necessary to conform it
to applicable federal or state laws or regulations. The Trust's By-laws
provide that the Trust will indemnify its Trustees and officers against
liabilities and expenses incurred in connection with any litigation or
proceeding in which they may be involved because of their offices with the
Trust. However, no indemnification will be provided to any Trustee or officer
for any liability to the Trust or its shareholders by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office. The Trust or any series or class
thereof may be terminated by: (1) the affirmative vote of the holders of not
less than two-thirds of the shares outstanding and entitled to vote at any
meeting of shareholders of the Trust or the appropriate series or class
thereof, or by an instrument or instruments in writing without a meeting,
consented to by the holders of two-thirds of the shares of the Trust or a
series or class thereof, provided, however, that, if such termination is
recommended by the Trustees, the vote of a majority of the outstanding voting
securities of the Trust or a series or class thereof entitled to vote thereon
shall be sufficient authorization; or (2) by means of an instrument in writing
signed by a majority of the Trustees, to be followed by a written notice to
shareholders stating that a majority of the Trustees has determined that the
continuation of the Trust or a series or a class thereof is not in the best
interest of the Trust, such series or class or of their respective
shareholders.
Under Massachusetts law, if certain conditions prevail, shareholders of a
Massachusetts business trust (such as the Trust) could be deemed to have
personal liability for the obligations of the Trust. Numerous investment
companies registered under the 1940 Act have been formed as Massachusetts
business trusts, and management is not aware of an instance where such
liability has been imposed. The Trust's Declaration of Trust contains an
express disclaimer of liability on the part of the Fund shareholders and the
Trust's By-laws provide that the Trust shall assume the defense on behalf of
any Fund shareholders. (The Declaration also contains provisions limiting the
liability of a series or class to that series or class). Moreover, the Trust's
By-laws also provide for indemnification out of the property of the Fund of
any shareholder held personally liable solely by reason of being or having
been a shareholder for all loss or expense arising from such liability. The
assets of the Fund are readily marketable and will ordinarily substantially
exceed its liabilities. In light of the nature of the Fund's business and the
nature of its assets, management believes that the possibility of the Fund's
liabilities exceeding its assets, and therefore the shareholder's risk of
personal liability, is extremely remote.
In accordance with the Declaration of Trust of the Portfolio, there will
normally be no meetings of the investors for the purpose of electing Trustees
unless and until such time as less than a majority of the Trustees holding
office have been elected by investors. In such an event the Trustees of the
Portfolio then in office will call an investors' meeting for the election of
Trustees. Except for the foregoing circumstances and unless removed by action
of the investors in accordance with the Portfolio's Declaration of Trust, the
Trustees shall continue to hold office and may appoint successor Trustees.
The Declaration of Trust of the Portfolio provides that no person shall
serve as a Trustee if investors holding two-thirds of the outstanding interest
have removed him from that office either by a written declaration filed with
the Portfolio's 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 and the Portfolio,
providing audit services, tax return preparation, and assistance and
consultation with respect to the preparation of filings with the Commission.
FINANCIAL STATEMENTS
The audited financial statements of and independent auditors' reports for
the Fund and the Portfolio, appear in the Fund's most recent annual report to
shareholders, and the unaudited financial statements of the Fund and the
Portfolio appear in the Fund's most recent semiannual report to shareholders
both of which are incorporated by reference into this SAI. A copy of the
Fund's semiannual and annual report accompanies this SAI.
Registrant incorporates by reference the audited financial information for
EV Marathon Tax-Managed Growth Fund and Tax-Managed Growth Portfolio for the
fiscal year ended October 31, 1996, as previously filed electronically with
the Commission (Accession No. 0000950156-97-000034) and the unaudited
financial information for the six months ended April 30, 1997, as previously
filed electronically with the Commission (Accession No. 0000950156-97-000526.
<PAGE>
APPENDIX A: CLASS A SHARES
PERFORMANCE INFORMATION
The table below indicates the cumulative and average total return on a
hypothetical investment of $1,000 in a predecessor fund reorganized November
1, 1997 into Class A shares covering the one-, five- and ten-year periods
ended April 30, 1997. Total return for Class A prior to November 1, 1997
reflects the total return of predecessors, adjusted to reflect any applicable
sales charge. Predecessor total return has not been adjusted to reflect
certain other expenses (such as distribution and/or service fees). If such
adjustments were made, the performance would be different. The "Value of
Initial Investment" reflects the deduction of the maximum sales charge of
5.75%. Past performance is not indicative of future results. Investment return
and principal value will fluctuate; shares, when redeemed, may be worth more
or less than their original cost.
VALUE OF A $1,000 INVESTMENT
<TABLE>
<CAPTION>
TOTAL RETURN TOTAL RETURN
EXCLUDING MAXIMUM INCLUDING MAXIMUM
VALUE OF VALUE OF SALES CHARGE SALES CHARGE
INVESTMENT INVESTMENT INITIAL INVESTMENT -------------------------- --------------------------
PERIOD DATE INVESTMENT ON 4/30/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------------------- ------------ ------------- ------------ ------------ ------------ ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
10 Years Ended
4/30/97 4/30/87 $942.37 $3,210.73 240.72% 13.04% 221.07% 12.37%
5 Years Ended
4/30/97 4/30/92 $942.89 $2,060.14 118.49% 16.92% 106.01% 15.55%
1 Year Ended
4/30/97 4/30/96 $942.81 $1,162.36 23.29% 23.29% 16.24% 16.24%
</TABLE>
<PAGE>
APPENDIX B: CLASS B SHARES
DISTRIBUTION PLAN
For the period from the start of business, March 28, 1996, to the fiscal
year ended October 31, 1996, the Principal Underwriter paid to Authorized
Firms sales commissions of $2,537,475 on sales of Fund shares. During the same
period, the Fund paid sales commissions under the Plan to the Principal
Underwriter aggregating $126,080, and the Principal Underwriter received
$6,015 in CDSCs imposed on early redeeming shareholders. These payments
reduced Uncovered Distribution Charges under the Plan. As at October 31, 1996,
the outstanding Uncovered Distribution Charges of the Principal Underwriter
calculated under the Plan amounted to approximately $3,260,000 (which amount
was equivalent to 4.10% of the Fund's net assets on such date). The Fund
expects to begin accruing for its service fee payments during the quarter
ending June 30, 1997.
PRINCIPAL UNDERWRITER
For the period from the start of business, March 28, 1996, to the fiscal
year ended October 31, 1996, the Fund paid the Principal Underwriter $77.50
for repurchase transactions handled by the Principal Underwriter.
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return
on a hypothetical investment of $1,000 in Class B shares covering the one-,
five- and ten- year periods ended April 30, 1997. Total return for Class B
prior to March 28, 1996 reflects the total return of predecessors, adjusted to
reflect any applicable sales charge. Predecessor total return has not been
adjusted to reflect certain other expenses (such as distribution and/or
service fees). If such adjustments were made, the performance would be lower.
Past performance is not indicative of future results. Investment return and
principal value will fluctuate; shares, when redeemed, may be worth more or
less than their original cost.
VALUE OF $1,000 INVESTMENT
<TABLE>
<CAPTION>
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC BEFORE DEDUCTING CDSC AFTER DEDUCTING CDSC
PERIOD DATE ON 4/30/97 ON 4/30/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
------ ---- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
10 years ended
4/30/97 4/30/87 $3,385.53 $3,385.53 238.55% 12.97% 238.55% 12.97%
5 years ended
4/30/97 4/30/92 $2,171.07 $2,151.07 117.11% 16.77% 115.11% 16.55%
1 year ended
4/30/97 4/30/96 $1,226.25 $1,176.25 22.62% 22.62% 17.62% 17.62%
</TABLE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of September 30, 1997, the Trustees and officers of the Trust, as a
group, owned in the aggregate less than 1% of the outstanding shares of Class
B of the Fund. As of September 30, 1997, Merrill Lynch, Pierce, Fenner &
Smith, Inc., Jacksonville, FL was the record owner of approximately 20.1% of
the outstanding Class B 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>
APPENDIX C: CLASS C SHARES
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return
on a hypothetical investment of $1,000 in a predecessor fund reorganized
November 1, 1997 into Class C shares for the one-, five- and ten-year periods
ended April 30, 1997. Total return for Class C prior to November 1, 1997
reflects the total return of predecessors adjusted to reflect any applicable
sales charge. Predecessor total return has not been adjusted to reflect
certain other expenses (such as distribution and/or service fees). If such
adjustments were made, the performance would be lower. Past performance is not
indicative of future results. Investment return and principal value will
fluctuate; shares, when redeemed, may be worth more or less than their
original cost.
VALUE OF A $1,000 INVESTMENT
<TABLE>
<CAPTION>
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN BEFORE TOTAL RETURN AFTER
BEFORE AFTER DEDUCTING DEDUCTING
DEDUCTING DEDUCTING THE CDSC THE CDSC
INVESTMENT INVESTMENT AMOUNT OF THE CDSC THE CDSC -------------------------- --------------------------
PERIOD DATE INVESTMENT ON 4/30/97 ON 4/30/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------- ------------ ------------ --------------- -------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
10 Years
Ended
4/30/97 4/30/87 $1,000 $3,370.71 $3,370.71 237.07% 12.92% 237.07% 12.92%
5 Years
Ended
4/30/97 4/30/92 $1,000 $2,161.53 $2,161.53 116.15% 16.67% 116.15% 16.67%
1 Year
Ended
4/30/97 4/30/96 $1,000 $1,221.09 $1,211.09 22.11% 22.11% 21.11% 21.11%
</TABLE>
<PAGE>
EATON VANCE
TAX-MANAGED GROWTH FUND
- --------------------------------------------------------------------------------
STATEMENT OF
ADDITIONAL INFORMATION
NOVEMBER 1, 1997
EATON VANCE
TAX-MANAGED GROWTH FUND
24 FEDERAL STREET
BOSTON, MA 02110
- --------------------------------------------------------------------------------
INVESTMENT ADVISER OF TAX-MANAGED GROWTH PORTFOLIO
Boston Management and Research, 24 Federal Street, Boston, MA 02110
FUND ADMINISTRATOR
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
TGSAI
<PAGE>
PART C
OTHER INFORMATION
ITEM 24: FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS
INCLUDED IN PART A:
FOR EATON VANCE STRATEGIC INCOME FUND (FORMERLY EV MARATHON
STRATEGIC INCOME FUND):
Financial Highlights for the period from the start of business,
November 26, 1990, through October 31, 1991, and for the five
years ended October 31, 1996 and for the six months ended
April 30, 1997 (Unaudited).
FOR EATON VANCE TAX-MANAGED GROWTH FUND (FORMERLY EV MARATHON
TAX-MANAGED GROWTH FUND):
Financial Highlights for the period from the start of business,
March 28, 1996, through October 31, 1996 and for the six
months ended April 30, 1997 (Unaudited).
INCORPORATED BY REFERENCE INTO PART B ARE THE FOLLOWING UNAUDITED
FINANCIAL STATEMENTS CONTAINED IN THE SEMI-ANNUAL REPORTS FOR THE
FUNDS LISTED BELOW, DATED APRIL 30, 1997 (WHICH WERE PREVIOUSLY
FILED ELECTRONICALLY PURSUANT TO SECTION 30(b)(2) OF THE
INVESTMENT COMPANY ACT OF 1940)
Eaton Vance Strategic Income Fund (Accession No.
0000950109-97-004877)
Eaton Vance Tax-Managed Growth Fund (Accession No.
0000950156-97-000526)
Statement of Assets and Liabilities (Unaudited)
Statement of Operations (Unaudited)
Statements of Changes in Net Assets (Unaudited)
Financial Highlights (Unaudited)
Notes to Financial Statements (Unaudited)
ALSO INCORPORATED BY REFERENCE INTO PART B ARE THE FOLLOWING
FINANCIAL STATEMENTS OF STRATEGIC INCOME PORTFOLIO AND
TAX-MANAGED GROWTH PORTFOLIO, WHICH ARE CONTAINED IN THE
SEMI-ANNUAL REPORTS DATED APRIL 30, 1997 OF THE CORRESPONDING
FUNDS:
Portfolio of Investments (Unaudited)
Statement of Assets and Liabilities (Unaudited)
Statement of Operations (Unaudited)
Statements of Changes in Net Assets (Unaudited)
Supplementary Data (Unaudited)
Notes to Financial Statements (Unaudited)
INCORPORATED BY REFERENCE INTO PART B ARE THE FOLLOWING FINANCIAL
STATEMENTS CONTAINED IN THE ANNUAL REPORT FOR THE FUNDS LISTED
BELOW, DATED OCTOBER 31, 1996 (WHICH WERE PREVIOUSLY FILED
ELECTRONICALLY PURSUANT TO SECTION 30(b)(2) OF THE INVESTMENT
COMPANY ACT OF 1940)
Eaton Vance Strategic Income Fund (Accession No.
0000928816-96-000387)
Eaton Vance Tax-Managed Growth Fund (Accession No.
0000950156-97-000034)
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 STRATEGIC INCOME PORTFOLIO AND
TAX-MANAGED GROWTH PORTFOLIO, WHICH ARE CONTAINED IN THE ANNUAL
REPORTS DATED OCTOBER 31, 1996 OF THE CORRESPONDING FUNDS:
Portfolio of Investments
Statement of Assets and Liabilities
Statement of Operations
Statements 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 to Declaration of Trust dated June 23, 1997
filed herewith.
(d) Amendment and Restatement of Establishment and
Designation of Series of Shares dated October 17, 1997
filed as Exhibit No. (1)(c) to Post-Effective Amendment
No. 37 and incorporated herein by reference.
(2)(a) By-Laws (As Amended November 3, 1986) filed as Exhibit
(2)(a) to Post-Effective Amendment No. 23 and
incorporated herein by reference.
(b) Amendment to By-Laws dated December 13, 1993 filed as
Exhibit (2)(b) to Post-Effective Amendment No. 23 and
incorporated herein by reference.
(3) Not applicable
(4) Not applicable
(5)(a) Investment Advisory Agreement with Eaton Vance
Management for Eaton Vance Short-Term Treasury Fund
dated February 4, 1991 filed as Exhibit (5)(a) to
Post-Effective Amendment No. 23 and incorporated herein
by reference.
(b) Investment Advisory Agreement with Eaton Vance
Management for Eaton Vance Tax Free Reserves dated
August 15, 1995 filed as Exhibit (5)(b) to
Post-Effective Amendment No. 25 and incorporated herein
by reference.
(c) Investment Advisory Agreement with Eaton Vance
Management for Eaton Vance Tax-Managed Emerging Growth
Fund dated September 16, 1997 filed as Exhibit No.
(5)(c) to Post- Effective Amendment No. 37 and
incorporated herein by reference.
(d) Investment Advisory Agreement with Eaton Vance
Management for Eaton Vance Municipal Bond Fund dated
October 17, 1997 filed as Exhibit No. (5)(d) to
Post-Effective Amendment No. 37 and incorporated herein
by reference.
(6)(a)(1) Distribution Agreement between Eaton Vance Mutual Funds
Trust (on behalf of its Classic series) and Eaton Vance
Distributors, Inc. effective November 1, 1996 (with
attached Schedule A effective November 1, 1996) filed
as Exhibit No. (6)(a)(1) to Post-Effective Amendment
No. 34 and incorporated herein by reference.
(2) Distribution Agreement between Eaton Vance Mutual Funds
Trust (on behalf of its Marathon series) and Eaton
Vance Distributors, Inc. effective November 1, 1996
(with attached Schedule A effective November 1, 1996)
filed as Exhibit (6)(a)(2) to Post- Effective Amendment
No. 34 and incorporated herein by reference.
(3) Distribution Agreement between Eaton Vance Mutual Funds
Trust (on behalf of its Traditional series) and Eaton
Vance Distributors, Inc. effective November 1, 1996
(with attached Schedule A effective November 1, 1996)
filed as Exhibit No. (6)(a)(3) to Post- Effective
Amendment No. 34 and incorporated herein by reference.
(4) Distribution Agreement between Eaton Vance Mutual Funds
Trust, on behalf of Eaton Vance Cash Management Fund,
and Eaton Vance Distributors, Inc. effective November
1, 1996 filed as Exhibit No. (6)(a)(4) to
Post-Effective Amendment No. 34 and incorporated herein
by reference.
(5) Distribution Agreement between Eaton Vance Mutual Funds
Trust, on behalf of Eaton Vance Liquid Assets Fund, and
Eaton Vance Distributors, Inc. effective November 1,
1996 filed as Exhibit No. (6)(a)(5) to Post-Effective
Amendment No. 34 and incorporated herein by reference.
(6) Distribution Agreement between Eaton Vance Mutual Funds
Trust, on behalf of Eaton Vance Money Market Fund, and
Eaton Vance Distributors, Inc. effective November 1,
1996 filed as Exhibit No. (6)(a)(6) to Post-Effective
Amendment No. 34 and incorporated herein by reference.
(7) Distribution Agreement between Eaton Vance Mutual Funds
Trust, on behalf of Eaton Vance Tax Free Reserves, and
Eaton Vance Distributors, Inc. effective November 1,
1996 filed as Exhibit No. (6)(a)(7) to Post-Effective
Amendment No. 34 and incorporated herein by reference.
(8) Distribution Agreement between Eaton Vance Mutual Funds
Trust and Eaton Vance Distributors, Inc. effective June
23, 1997 with attached Schedules filed herewith.
(9) Amendment to Distribution Agreement date October 17,
1997 filed herewith.
(b) Selling Group Agreement between Eaton Vance
Distributors, Inc. and Authorized Dealers filed as
Exhibit (6)(b) to the Registration Statement of Eaton
Vance Growth Trust Post- Effective Amendment No. 61 and
incorporated herein by reference.
(7) The Securities and Exchange Commission has granted the
Registrant an exemptive order that permits the
Registrant to enter into deferred compensation
arrangements with its independent Trustees. See in the
Matter of Capital Exchange Fund, Inc., Release No.
IC-20671 (November 1, 1994).
(8)(a) Custodian Agreement with Investors Bank & Trust Company
dated October 15, 1992 filed as Exhibit (8) to
Post-Effective Amendment No. 23 and incorporated herein
by reference.
(b) Amendment to Custodian Agreement with Investors Bank &
Trust Company dated October 23, 1995 filed as Exhibit
(8)(b) to Post-Effective Amendment No. 27 and
incorporated herein by reference.
(9)(a) Amended Administrative Services Agreement between Eaton
Vance Mutual Funds Trust (on behalf of each of its
series) and Eaton Vance Management dated July 31, 1995,
with attached schedules (including Amended Schedule A
dated May 7, 1996) filed as Exhibit (9)(a) to
Post-Effective Amendment No. 24 and incorporated herein
by reference.
(1) Amendment to Schedule A dated June 23, 1997 to the
Amended Administrative Services Agreement filed
herewith.
(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 Accountants for Eaton Vance
Strategic Income Fund filed herewith.
(b) Consent of Independent Auditors for Eaton Vance
Tax-Managed Growth Fund filed herewith.
(12) Not applicable
(13) Not applicable
(14)(a) Vance, Sanders Profit Sharing Retirement Plan for
Self-Employed Persons with Adoption Agreement and
instructions filed as Exhibit No. 14(1) to
Post-Effective Amendment #22 on Form N-1 under the
Securities Act of 1933 (File No. 2-28471) and
incorporated herein by reference.
(b) Eaton & Howard, Vance Sanders Defined Contribution
Prototype Plan and Trust with Adoption Agreements (1)
Basic Profit-Sharing Retirement Plan, (2) Basic Money
Purchase Pension Plan, (3) Thrift Plan Qualifying as
Profit Sharing Plan, (4) Thrift Plan Qualifying as
Money Purchase Plan, (5) Integrated Profit Sharing
Retirement Plan, (6) Integrated Money Purchase Pension
Plan filed as Exhibit 14(2) to Post-Effective Amendment
No. 22 on Form N-1 under the Securities Act of 1933
(File No. 2-28471) and incorporated herein by
reference.
(c) Individual Retirement Custodial Account (Form 5305-A)
and Investment Instruction Form filed as Exhibit 14(3)
to Post-Effective Amendment No. 22 on Form N-1 under
the Securities Act of 1933 (File No. 2-28471) and
incorporated herein by reference.
(d) Eaton & Howard, Vance Sanders Variable Pension
Prototype Plan and Trust with Adoption Agreement filed
as Exhibit 14(b) to Post-Effective Amendment No. 22 on
Form N-1 under the Securities Act of 1933 (File No.
2-28471) and incorporated herein by reference.
(15)(a) 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 Eaton Vance Liquid Assets Fund
pursuant to Rule 12b-1 under the Investment Company Act
of 1940 dated June 19, 1995 filed as Exhibit (15)(g) to
Post- Effective Amendment No. 25 and incorporated
herein by reference.
(1) Amendment to Distribution Plan for Eaton Vance Mutual
Funds Trust on behalf of Eaton Vance Liquid Assets Fund
adopted June 24, 1996 filed as Exhibit No. (15)(g)(1)
to Post- Effective Amendment No. 34 and incorporated
herein by reference.
(h) Distribution Plan for Eaton Vance Money Market Fund
pursuant to Rule 12b-1 under the Investment Company Act
of 1940 dated June 19, 1995 filed as Exhibit (15)(h) to
Post- Effective Amendment No. 25 and incorporated
herein by reference.
(1) Amendment to Distribution Plan for Eaton Vance Mutual
Funds Trust on behalf of Eaton Vance Money Market Fund
adopted June 24, 1996 filed as Exhibit No. (15)(h)(1)
to Post- Effective Amendment No. 34 and incorporated
herein by reference.
(i) Eaton Vance Mutual Funds Trust Class A Service Plan
adopted June 23, 1997 with attached Schedules filed
herewith.
(j) Eaton Vance Mutual Funds Trust Class B Distribution
Plan adopted June 23, 1997 with attached Schedules
filed herewith.
(k) Eaton Vance Mutual Funds Trust Class C Distribution
Plan adopted June 23, 1997 with attached Schedules
filed herewith.
(16) Schedules for Computation of Performance Quotations
filed herewith.
(17)(a) Power of Attorney for Eaton Vance Mutual Funds Trust
dated June 23, 1997, filed as Exhibit No. (17)(a) to
Post-Effective Amendment No. 35 and incorporated herein
by reference.
(b) Power of Attorney for Government Obligations Portfolio
dated April 22, 1997 filed as Exhibit (17)(b) to
Post-Effective Amendment No. 36 and incorporated herein
by reference.
(c) Power of Attorney for High Income Portfolio dated
February 14, 1997 filed as Exhibit (17)(c) to
Post-Effective Amendment No. 36 and incorporated herein
by reference.
(d) Power of Attorney for Strategic Income Portfolio dated
April 22, 1997 filed as Exhibit (17)(d) to
Post-Effective Amendment No. 36 and incorporated herein
by reference.
(e) Power of Attorney for Cash Management Portfolio dated
April 22, 1997 filed as Exhibit (17)(e) to
Post-Effective Amendment No. 36 and incorporated herein
by reference.
(f) Power of Attorney for Tax-Managed Growth Portfolio
dated October 23, 1995 filed as Exhibit (17)(f) to
Post-Effective Amendment No. 26 and incorporated herein
by reference.
(18) Multiple Class Plan for Eaton Vance Funds dated June
23, 1997 filed as Exhibit (18) to Post-Effective
Amendment No. 37 and incorporated herein by reference.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Not applicable
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
(1) (2)
TITLE OF CLASS NUMBER OF RECORD HOLDERS
Shares of beneficial interest without par value as of September 30, 1997
Eaton Vance Short-Term Treasury Fund 72
EV Classic Government Obligations Fund 3,257
EV Marathon Government Obligations Fund 3,339
EV Traditional Government Obligations Fund 8,604
EV Classic High Income Fund 527
EV Marathon High Income Fund 16,273
EV Classic Strategic Income Fund 134
EV Marathon Strategic Income Fund 5,359
EV Classic Tax-Managed Growth Fund 5,695
EV Marathon Tax-Managed Growth Fund 15,636
EV Traditional Tax-Managed Growth Fund 5,918
Eaton Vance Cash Management Fund 2,249
Eaton Vance Liquid Assets Fund 433
Eaton Vance Money Market Fund 880
Eaton Vance Tax Free Reserves 181
Eaton Vance Tax-Managed Emerging Growth Fund - Class A 0
Eaton Vance Tax-Managed Emerging Growth Fund - Class B 1
Eaton Vance Tax-Managed Emerging Growth Fund - Class C 0
ITEM 27. INDEMNIFICATION
Article IV of the Trust's Amended and Restated Declaration of Trust
permits Trustee and officer indemnification by By-law, contract and vote.
Article XI of the By-laws contains indemnification provisions. Registrant's
Trustees and officers are insured under a standard mutual fund errors and
omissions insurance policy covering insured by reason of negligent errors and
omissions committed in their capacities as such.
The distribution agreements of the Trust also provide for reciprocal
indemnity of the Principal Underwriter, on the one hand, and the Trustees and
officers, on the other.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Reference is made to the information set forth under the captions
"Investment Adviser and Administrator" or "Investment Adviser" in the
Statements of Additional Information which information is incorporated herein
by reference.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Registrant's principal underwriter, Eaton Vance Distributors, Inc., a
wholly-owned subsidiary of Eaton Vance Management, is the principal
underwriter for each of the investment companies named below:
Eaton Vance Growth Trust Eaton Vance Mutual Funds Trust
Eaton Vance Income Fund of Boston Eaton Vance Prime Rate Reserves
Eaton Vance Investment Trust Eaton Vance Special Investment Trust
Eaton Vance Municipals Trust EV Classic Senior Floating-Rate Fund
Eaton Vance Municipals Trust II
(b)
<TABLE>
<CAPTION>
(1) (2) (3)
NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICE
BUSINESS ADDRESS* WITH PRINCIPAL UNDERWRITER WITH REGISTRANT
----------------- -------------------------- ---------------
<S> <C> <C>
James B. Hawkes Vice President and Director Vice President and Trustee
William M. Steul Vice President and Director None
Wharton P. Whitaker President and Director None
Chris Berg Vice President None
Kate Bradshaw Vice President None
David B. Carle Vice President None
Daniel C. Cataldo Vice President None
Raymond Cox Vice President None
Mark P. Doman Vice President None
Alan R. Dynner Vice President Secretary
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 Senior Vice President None
David M. Thill Vice President None
John M. Trotsky Vice President None
Chris Volf Vice President None
Sue Wilder Vice President None
</TABLE>
- ----------
*Address is 24 Federal Street, Boston, MA 02110
(c) Not applicable
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
All applicable accounts, books and documents required to be maintained by
the Registrant by Section 31(a) of the Investment Company Act of 1940 and the
Rules promulgated thereunder are in the possession and custody of the
Registrant's custodian, Investors Bank & Trust Company, 200 Clarendon Street,
16th Floor, Mail Code ADM27, Boston, MA 02116 and its transfer agent, First
Data Investor Services Group, 4400 Computer Drive, Westborough, MA 01581, with
the exception of certain corporate documents and portfolio trading documents
which are in the possession and custody of Eaton Vance Management, 24 Federal
Street, Boston, MA 02110. Certain corporate documents of the High Income
Portfolio are also maintained by IBT Trust Company (Cayman), Ltd., The Bank of
Nova Scotia Building, P.O. Box 501, George Town, Grand Cayman, Cayman Islands,
British West Indies, and certain investor accounts and High Income Portfolio's
and the Registrant's accounting records are held by IBT Fund Services (Canada)
Inc., 1 First Canadian Place, Kingstreet West, Suite 2800, P.O. Box 231,
Toronto, Ontario, Canada M5X 1C8. Registrant is informed that all applicable
accounts, books and documents required to be maintained by registered
investment advisers are in the custody and possession of Eaton Vance
Management.
ITEM 31. MANAGEMENT SERVICES
Not applicable
ITEM 32. UNDERTAKINGS
The Registrant undertakes to file a Post-Effective Amendment on behalf of
Eaton Vance Tax-Managed Emerging Growth Fund, using financial statements which
need not be certified, within four to six months from the effective date of
Post-Effective Amendment No. 35.
The Registrant undertakes to furnish to each person to whom a prospectus
is delivered a copy of the latest annual report to shareholders, upon request
and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of the 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 27th day of
October, 1997.
EATON VANCE MUTUAL FUNDS TRUST
By: /s/ M. DOZIER GARDNER
--------------------------------
M. DOZIER GARDNER, President
Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment to the Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
President, Principal
Executive Officer and
/s/ M. DOZIER GARDNER Trustee October 27, 1997
- ---------------------------
M. DOZIER GARDNER
Treasurer and Principal
Financial and Accounting
/s/ JAMES L. O'CONNOR Officer October 27, 1997
- ---------------------------
JAMES L. O'CONNOR
/s/ JAMES B. HAWKES Vice President, and Trustee October 27, 1997
- ---------------------------
JAMES B. HAWKES
DONALD R. DWIGHT* Trustee October 27, 1997
- ---------------------------
DONALD R. DWIGHT
SAMUEL L. HAYES, III* Trustee October 27, 1997
- ---------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee October 27, 1997
- ---------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee October 27, 1997
- ---------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee October 27, 1997
- ---------------------------
JACK L. TREYNOR
*By: /s/ ALAN R. DYNNER
- ---------------------------
ALAN R. DYNNER
As Attorney-in-fact
<PAGE>
SIGNATURES
Strategic Income Portfolio has duly caused this Amendment to the
Registration Statement on Form N-1A of Eaton Vance Mutual Funds Trust (File
No. 2-90946) to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Boston, and the Commonwealth of Massachusetts, on
the 27th day of October, 1997.
STRATEGIC INCOME PORTFOLIO
By: /s/ JAMES B. HAWKES
--------------------------------
JAMES B. HAWKES, President
This Amendment to the Registration Statement on Form N-1A of Eaton Vance
Mutual Funds Trust (File No. 2-90946) has been signed below by the following
persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
Trustee, President and
Principal Executive
/s/ JAMES B. HAWKES Officer October 27, 1997
- ---------------------------
JAMES B. HAWKES
Treasurer and Principal
Financial and Accounting
/s/ JAMES L. O'CONNOR Officer October 27, 1997
- ---------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee October 27, 1997
- ---------------------------
DONALD R. DWIGHT
SAMUEL L. HAYES, III* Trustee October 27, 1997
- ---------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee October 27, 1997
- ---------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee October 27, 1997
- ---------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee October 27, 1997
- ---------------------------
JACK L. TREYNOR
*By: /s/ ALAN R. DYNNER
- ---------------------------
ALAN R. DYNNER
As Attorney-in-fact
<PAGE>
SIGNATURES
Tax-Managed Growth 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 27th day of October, 1997.
TAX-MANAGED GROWTH PORTFOLIO
By: /s/ JAMES B. HAWKES
--------------------------------
JAMES B. HAWKES, President
This Amendment to the Registration Statement on Form N-1A of Eaton Vance
Mutual Funds Trust (File No. 2-90946) has been signed below by the following
persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
Trustee, President and
Principal Executive
/s/ JAMES B. HAWKES Officer October 27, 1997
- ---------------------------
JAMES B. HAWKES
Treasurer and Principal
Financial and Accounting
/s/ JAMES L. O'CONNOR Officer October 27, 1997
- ---------------------------
JAMES L. O'CONNOR
LANDON T. CLAY* Trustee October 27, 1997
- ---------------------------
LANDON T. CLAY
DONALD R. DWIGHT* Trustee October 27, 1997
- ---------------------------
DONALD R. DWIGHT
SAMUEL L. HAYES, III* Trustee October 27, 1997
- ---------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee October 27, 1997
- ---------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee October 27, 1997
- ---------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee October 27, 1997
- ---------------------------
JACK L. TREYNOR
*By: /s/ JAMES B. HAWKES
- ---------------------------
JAMES B. HAWKES
As Attorney-in-fact
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
PAGE IN SEQUENTIAL
EXHIBIT NO. DESCRIPTION NUMBERING SYSTEM
- ----------- ----------- ----------------
<S> <C> <C>
(1)(c) Amendment to Declaration of Trust dated June 23, 1997.
(6)(a)(8) Distribution Agreement between Eaton Vance Mutual Funds Trust and Eaton Vance
Distributors, Inc. effective June 23, 1997 with attached Schedules.
(6)(a)(9) Amendment to Distribution Agreement dated October 17, 1997.
(9)(a)(1) Amendment to Schedule A dated June 23, 1997 to the Amended Administrative Services
Agreement.
(11)(a) Consent of Independent Accountants for Eaton Vance Strategic Income Fund.
(11)(b) Consent of Independent Auditors for Eaton Vance Tax-Managed Growth Fund.
(15)(i) Eaton Vance Mutual Funds Trust Class A Service Plan adopted June 23, 1997 with
attached Schedules.
(15)(j) Eaton Vance Mutual Funds Trust Class B Distribution Plan adopted June 23, 1997 with
attached Schedules.
(15)(k) Eaton Vance Mutual Funds Trust Class C Distribution Plan adopted June 23, 1997 with
attached Schedules.
(16) Schedules for Computation of Performance Quotations.
</TABLE>
<PAGE>
EXHIBIT 99.1(c)
EATON VANCE MUTUAL FUNDS TRUST
Amendment dated June 23, 1997 to Declaration of Trust
WHEREAS, the Trustees of Eaton Vance Mutual Funds Trust, a
Massachusetts business trust (the "Trust"), have previously designated separate
series (or "Funds"); and
WHEREAS, in connection with a reorganization of the Funds the Trustees
now desire to rename certain of the Funds, establish and designate classes of
shares for such Funds, and terminate certain other Funds effective with the end
of their current fiscal year ends pursuant to the Trust's Amended and Restated
Declaration of Trust dated August 17, 1993 as further amended July 10, 1995 (the
"Declaration of Trust");
NOW, THEREFORE, the undersigned, being at least a majority of the duly
elected and qualified Trustees presently in office of the Trust, hereby:
1. Rename the Funds listed below as follows:
Eaton Vance Government Obligations Fund
(formerly EV Traditional Government Obligations Fund -
Effective January 1, 1998)
Eaton Vance High Income Fund
(formerly EV Marathon High Income Fund - Effective April 1, 1998)
Eaton Vance Strategic Income Fund
(formerly EV Marathon Strategic Income Fund - Effective November 1, 1997)
Eaton Vance Tax-Managed Growth Fund
(formerly EV Marathon Tax-Managed Growth Fund - Effective November 1, 1997)
2. Each Fund shall have classes of shares established and designated as
Class A, Class B, Class C and Class I shares on the dates indicated in paragraph
1, and the Trustees may designate additional classes in the future. For purposes
of allocating liabilties among classes, each class of a series shall be treated
in the same manner as a separate series.
3. Series of Trust with the designations: EV Classic Government
Obligations Fund; EV Marathon Government Obligations Fund; EV Classic High
Income Fund; EV Classic Strategic Income Fund; EV Classic Tax-Managed Growth
Fund and EV Traditional Tax-Managed Growth Fund shall be terminated on the dates
indicated in paragraph 1.
Dated: June 23, 1997
/s/ Donald R. Dwight /s/ Samuel L. Hayes, III
- ---------------------------- ----------------------------
Donald R. Dwight Samuel L. Hayes, III
/s/ M. Dozier Gardner /s/ Norton H. Reamer
- ---------------------------- ----------------------------
M. Dozier Gardner Norton H. Reamer
/s/ James B. Hawkes /s/ John L. Thorndike
- ---------------------------- ----------------------------
James B. Hawkes John L. Thorndike
/s/ Jack L. Treynor
----------------------------
Jack L. Treynor
<PAGE>
EXHIBIT 99.6(a)(8)
EATON VANCE MUTUAL FUNDS TRUST
DISTRIBUTION AGREEMENT
AGREEMENT effective June 23, 1997 between EATON VANCE MUTUAL FUNDS
TRUST, a Massachusetts business trust having its principal place of business in
Boston in the Commonwealth of Massachusetts, hereinafter called the "Trust," on
behalf of each of its series listed on Schedule A (a "Fund"), and EATON VANCE
DISTRIBUTORS, INC., a Massachusetts corporation having its principal place of
business in said Boston, hereinafter sometimes called the "Principal
Underwriter." The Trustees of the Trust have established four classes of shares
of each of the Funds (except Eaton Vance Short-Term Treasury Fund), such classes
having been designated Class A, Class B, Class C and Class I (the "Classes").
IN CONSIDERATION of the mutual promises and undertakings herein
contained, the parties hereto agree with respect to each Fund:
1. The Trust grants to the Principal Underwriter the right to purchase
all classes of shares of the Fund upon the terms hereinbelow set forth during
the term of this Agreement. While this Agreement is in force, the Principal
Underwriter agrees to use its best efforts to find purchasers for shares of the
Fund.
The Principal Underwriter shall have the right to buy from the Fund the
shares needed, but not more than the shares needed (except for clerical errors
and errors of transmission) to fill unconditional orders for shares of the Fund
placed with the Principal Underwriter by financial service firms or investors as
set forth in the current Prospectus relating to shares of the Fund. The price
which the Principal Underwriter shall pay for Class A shares and shares of Eaton
Vance Short-Term Treasury Fund (which shall be treated as Class A shares herein)
so purchased shall be the net asset value used in determining the public
offering price on which such orders were based; the price for Class B, Class C
and Class I shares so purchased shall be equal to the price paid by investors
upon purchasing such shares. The Principal Underwriter shall notify Investors
Bank & Trust Company, Custodian of the Trust ("IBT"), and First Data Investor
Services Group, Transfer Agent of the Trust ("First Data"), or a successor
transfer agent, at the end of each business day, or as soon thereafter as the
orders placed with it have been compiled, of the number of shares and the prices
thereof which the Principal Underwriter is to purchase as principal for resale.
The Principal Underwriter shall take down and pay for shares ordered from the
Fund on or before the eleventh business day (excluding Saturdays) after the
shares have been so ordered.
The right granted to the Principal Underwriter to buy shares from the
Fund shall be exclusive, except that said exclusive right shall not apply to
shares issued in connection with the merger or consolidation of any other
investment company or personal holding company with the Fund or the acquisition
by purchase or otherwise of all (or substantially all) the assets or the
outstanding shares of any such company, by the Fund; nor shall it apply to
shares, if any, issued by the Fund in distribution of income or realized capital
gains of the Fund payable in shares or in cash at the option of the shareholder.
2. The shares may be resold by the Principal Underwriter to or through
financial service firms having agreements with the Principal Underwriter, and to
investors, upon the following terms and conditions.
CLASS A SHARES. The public offering price, i.e., the price per Class A
share at which the Principal Underwriter or financial service firm purchasing
shares from the Principal Underwriter may sell shares to the public, shall be
the public offering price as set forth in the current Prospectus relating to
said Class A shares, but not to exceed the net asset value at which the
Principal Underwriter is to purchase the Class A shares, plus a sales charge not
to exceed 7.25% of the public offering price (the net asset value divided by
.9275). If the resulting public offering price does not come out to an even
cent, the public offering price shall be adjusted to the nearer cent.
The Principal Underwriter may also sell Class A shares at the net asset
value at which the Principal Underwriter is to purchase such Class A shares,
provided such sales are not inconsistent with the provisions of Section 22(d) of
the Investment Company Act of 1940, as amended from time to time (the "1940
Act"), and the rules thereunder, including any applicable exemptive orders or
administrative interpretations or "no-action" positions with respect thereto.
CLASS B, CLASS C AND CLASS I SHARES. The public offering price, i.e.,
the price per Class B, Class C and Class I shares at which the Principal
Underwriter or financial service firm purchasing shares from the Principal
Underwriter may sell shares to the public, shall be equal to the net asset value
at which the Principal Underwriter is to purchase the Class B, Class C and Class
I shares.
The net asset value of shares of each Class of the Fund shall be
determined by the Trust or IBT, as the agent of the Trust, as of the close of
regular trading on the New York Stock Exchange (the "Exchange") on each business
day on which said Exchange is open, or as of such other time on each such
business day as may be determined by the Trustees of the Trust, in accordance
with the methodology and procedures for calculating such net asset value
authorized by the Trustees. The Trust may also cause the net asset value to be
determined in substantially the same manner or estimated in such manner and as
of such other time or times as may from time to time be agreed upon by the Trust
and Principal Underwriter. The Trust will notify the Principal Underwriter each
time the net asset value of a Class of shares is determined and when such value
is so determined it shall be applicable to transactions as set forth in the
current Prospectus(es) and Statement(s) of Additional Information (hereafter the
"Prospectus") relating to the Fund's shares.
No Class of shares of the Fund shall be sold by the Fund during any
period when the determination of that Class's net asset value is suspended
pursuant to the Declaration of Trust, except to the Principal Underwriter, in
the manner and upon the terms above set forth to cover contracts of sale made by
the Principal Underwriter with its customers prior to any such suspension, and
except as provided in paragraph 1 hereof. The Trust shall also have the right to
suspend the sale of any Class of shares if in the judgment of the Trust
conditions obtaining at any time render such action advisable. The Principal
Underwriter shall have the right to suspend sales at any time, to refuse to
accept or confirm any order from an investor or financial service firm, or to
accept or confirm any such order in part only, if in the judgment of the
Principal Underwriter such action is in the best interests of the Fund.
3. The Trust covenants and agrees that it will, from time to time, but
subject to the necessary approval of the Fund's shareholders, take such steps as
may be necessary to register the Fund's shares under the federal Securities Act
of 1933, as amended from time to time (the "1933 Act"), to the end that there
will be available for sale such number of shares as the Principal Underwriter
may reasonably be expected to sell. The Trust covenants and agrees to indemnify
and hold harmless the Principal Underwriter and each person, if any, who
controls the Principal Underwriter within the meaning of Section 15 of the 1933
Act against any loss, liability, claim, damages or expense (including the
reasonable cost of investigating or defending any alleged loss, liability,
claim, damages or expense and reasonable counsel fees incurred in connection
therewith), arising by reason of any person acquiring any shares of the Fund,
which may be based upon the 1933 Act or on any other statute or at common law,
on the ground that the Registration Statement or Prospectus, as from time to
time amended and supplemented, includes an untrue statement of a material fact
or omits to state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading, unless such statement or
omission was made in reliance upon, and in conformity with, information
furnished in writing to the Trust in connection therewith by or on behalf of the
Principal Underwriter; provided, however, that in no case (i) is the indemnity
of the Trust in favor of the Principal Underwriter and any such controlling
person to be deemed to protect such Principal Underwriter or any such
controlling person against any liability to the Trust or the Fund or its
security holders to which such Principal Underwriter or any such controlling
person would otherwise be subject by reason of willful misfeasance, bad faith,
or gross negligence in the performance of its duties or by reason of its
reckless disregard of its obligations and duties under this Agreement, or (ii)
is the Trust or the Fund to be liable under its indemnity agreement contained in
this paragraph with respect to any claim made against the Principal Underwriter
or any such controlling person unless the Principal Underwriter or any such
controlling person, as the case may be, shall have notified the Trust in writing
within a reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon the Principal
Underwriter or such controlling person (or after such Principal Underwriter or
such controlling person shall have received notice of such service on any
designated agent), but failure to notify the Trust of any such claim shall not
relieve it from any liability which the Fund may have to the person against whom
such action is brought otherwise than on account of its indemnity agreement
contained in this paragraph. The Trust shall be entitled to participate, at the
expense of the Fund, in the defense, or, if the Trust so elects, to assume the
defense of any suit brought to enforce any such liability, but if the Trust
elects to assume the defense, such defense shall be conducted by counsel chosen
by it and satisfactory to the Principal Underwriter or controlling person or
persons, defendant or defendants in the suit. In the event the Trust elects to
assume the defense of any such suit and retains such counsel, the Principal
Underwriter or controlling person or persons, defendant or defendants in the
suit, shall bear the fees and expenses of any additional counsel retained by
them, but, in case the Trust does not elect to assume the defense of any such
suit, the Fund shall reimburse the Principal Underwriter or controlling person
or persons, defendant or defendants in the suit, for the reasonable fees and
expenses of any counsel retained by them. The Trust agrees promptly to notify
the Principal Underwriter of the commencement of any litigation or proceedings
against it or any of its officers or Trustees in connection with the issuance or
sale of any of the Fund's shares.
4. The Principal Underwriter covenants and agrees that, in selling the
shares of the Fund, it will use its best efforts in all respects duly to conform
with the requirements of all state and federal laws relating to the sale of such
shares, and will indemnify and hold harmless the Trust and each of its Trustees
and officers and each person, if any, who controls the Trust within the meaning
of Section 15 of the 1933 Act, against any loss, liability, damages, claim or
expense (including the reasonable cost of investigating or defending any alleged
loss, liability, damages, claim or expense and reasonable counsel fees incurred
in connection therewith), arising by reason of any person acquiring any shares
of the Fund, which may be based upon the 1933 Act or any other statute or at
common law, on account of any wrongful act of the Principal Underwriter or any
of its employees (including any failure to conform with any requirement of any
state or federal law relating to the sale of such shares) or on the ground that
the Registration Statement or Prospectus, as from time to time amended and
supplemented, includes an untrue statement of a material fact or omits to state
a material fact required to be stated therein or necessary in order to make the
statements therein not misleading, insofar as any such statement or omission was
made in reliance upon, and in conformity with information furnished in writing
to the Trust in connection therewith by or on behalf of the Principal
Underwriter, provided, however, that in no case (i) is the indemnity of the
Principal Underwriter in favor of any person indemnified to be deemed to protect
the Fund or any such person against any liability to which the Fund or any such
person would otherwise be subject by reason of willful misfeasance, bad faith,
or gross negligence in the performance of its or his duties or by reason of its
or his reckless disregard of its obligations and duties under this Agreement, or
(ii) is the Principal Underwriter to be liable under its indemnity agreement
contained in this paragraph with respect to any claim made against the Fund or
any person indemnified unless the Trust or such person, as the case may be,
shall have notified the Principal Underwriter in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon the Trust, the Fund or upon such
person (or after the Trust, the Fund or such person shall have received notice
of such service on any designated agent), but failure to notify the Principal
Underwriter of any such claim shall not relieve it from any liability which it
may have to the Fund or any person against whom such action is brought otherwise
than on account of its indemnity agreement contained in this paragraph. The
Principal Underwriter shall be entitled to participate, at its own expense, in
the defense, or, if it so elects, to assume the defense of any suit brought to
enforce any such liability, but if the Principal Underwriter elects to assume
the defense, such defense shall be conducted by counsel chosen by it and
satisfactory to the Trust, or to its officers or Trustees, or to any controlling
person or persons, defendant or defendants in the suit. In the event that the
Principal Underwriter elects to assume the defense of any such suit and retains
such counsel, the Fund or such officers or Trustees or controlling person or
persons, defendant or defendants in the suit, shall bear the fees and expenses
of any additional counsel retained by them or the Trust, but, in case the
Principal Underwriter does not elect to assume the defense of any such suit, it
shall reimburse the Fund, any such officers and Trustees or controlling person
or persons, defendant or defendants in such suit, for the reasonable fees and
expenses of any counsel retained by them or the Trust. The Principal Underwriter
agrees promptly to notify the Trust of the commencement of any litigation or
proceedings against it in connection with the issue and sale of any of the
Fund's shares.
Neither the Principal Underwriter nor any financial service firm nor
any other person is authorized by the Trust to give any information or to make
any representations, other than those contained in the Registration Statement or
Prospectus filed with the Securities and Exchange Commission (the "Commission")
under the 1933 Act, (as said Registration Statement and Prospectus may be
amended or supplemented from time to time), covering the shares of the Fund.
Neither the Principal Underwriter nor any financial service firm nor any other
person is authorized to act as agent for the Trust or the Fund in connection
with the offering or sale of shares of the Fund to the public or otherwise. All
such sales made by the Principal Underwriter shall be made by it as principal,
for its own account. The Principal Underwriter may, however, act as agent in
connection with the repurchase of shares as provided in paragraph 6 below, or in
connection with "exchanges" between investment companies for which the Principal
Underwriter (or an affiliate thereof) acts as principal underwriter or
investment adviser.
5(a). The Fund will pay, or cause to be paid (by one or more classes) -
(i) all the costs and expenses of the Fund, including fees and
disbursements of its counsel, in connection with the preparation and filing of
any required Registration Statement and/or Prospectus under the 1933 Act, or the
1940 Act, covering its shares and all amendments and supplements thereto, and
preparing and mailing periodic reports to shareholders (including the expense of
setting up in type any such Registration Statement, Prospectus or periodic
report);
(ii) the cost of preparing temporary and permanent share
certificates (if any) for shares of the Fund;
(iii) the cost and expenses of delivering to the Principal
Underwriter at its office in Boston, Massachusetts, all shares of the Fund
purchased by it as principal hereunder; and
(iv) all the federal and state (if any) issue and/or transfer
taxes payable upon the issue by or (in the case of treasury shares) transfer
from the Fund to the Principal Underwriter of any and all shares of the Fund
purchased by the Principal Underwriter hereunder.
(v) the fees, costs and expenses of the registration or
qualification of shares for sale in the various states, territories or other
jurisdictions (including without limitation the registering or qualifying the
Fund as a broker or dealer or any officer of the Fund as agent or salesman in
any state, territory or other jurisdiction); and
(vi) all payments to be made pursuant to any written plan
approved in accordance with Rule 12b-1 under the 1940 Act or any written service
plan.
(b) The Principal Underwriter agrees that, after the Prospectus (other
than to existing shareholders of the Fund) and periodic reports have been set up
in type, it will bear the expense of printing and distributing any copies
thereof which are to be used in connection with the offering of shares of the
Fund to financial service firms or investors. The Principal Underwriter further
agrees that it will bear the expenses of preparing, printing and distributing
any other literature used by the Principal Underwriter or furnished by it for
use by financial service firms in connection with the offering of the shares of
the Fund for sale to the public and any expenses of advertising in connection
with such offering.
(c) In addition, the Trust agrees, in accordance with the Fund's
Distribution Plans (the "Plans"), adopted pursuant to Rule 12b-1 under the 1940
Act with respect to Class B and Class C shares, to make certain payments as
follows. The Principal Underwriter shall be entitled to be paid by the Fund a
sales commission equal to an amount not exceeding that set forth on Schedule A
hereto of the price received by the Fund for each sale of Class B shares and
6.25% of the price received by the Fund for each sale of Class C shares
(excluding in each case the reinvestment of dividends and distributions), such
payment to be made out of Class B or Class C assets as applicable and in the
manner set forth in this paragraph 5. The Principal Underwriter shall also be
entitled to be paid by the Fund a separate distribution fee (calculated in
accordance with paragraph 5(d)) out of the relevant Class' assets, such payment
to be made in the manner set forth and subject to the terms of this paragraph 5.
(d) The sales commissions and distribution fees referred to in
paragraph 5(c) shall be accrued and paid by the Fund in the following manner.
Each Class B and Class C shall accrue daily an amount calculated at the rate of
.75% per annum of its daily net assets, which net assets shall be computed as
described in paragraph 2. The daily amounts so accrued throughout the month
shall be paid to the Principal Underwriter on the last day of each month. The
amount of such daily accrual, as so calculated, shall first be applied and
charged to all unpaid sales commissions, and the balance, if any, shall then be
applied and charged to all unpaid distribution fees. No amount shall be accrued
with respect to any day on which there exist no outstanding uncovered
distribution charges of the Principal Underwriter due from the relevant Class.
The amount of such uncovered distribution charges shall be calculated daily. For
purposes of this calculation, distribution charges of the Principal Underwriter
shall include (a) the aggregate of all sales commissions which the Principal
Underwriter has been paid pursuant to this paragraph (d) (and pursuant to
paragraph 5(d) of the Prior Agreements) plus all sales commissions which it is
entitled to be paid pursuant to paragraph 5(c) (and pursuant to paragraph 5(c)
of the Prior Agreements) since inception of the Prior Agreements through and
including the day next preceding the date of calculation, and (b) an amount
equal to the aggregate of all distribution fees referred to below which the
Principal Underwriter has been paid pursuant to this paragraph (d) (and pursuant
to paragraph 5(d) of the Prior Agreements) plus all such fees which it is
entitled to be paid pursuant to paragraph 5(c) (and pursuant to paragraph 5(c)
of the Prior Agreements) since inception of the Prior Agreements through and
including the day next preceding the date of calculation. From this sum
(distribution charges) there shall be subtracted (i) the aggregate amount paid
or payable to the Principal Underwriter pursuant to this paragraph (d) (and
pursuant to paragraph (d) of the Prior Agreements) since inception of the Prior
Agreements through and including the day next preceding the date of calculation
and (ii) the aggregate amount of all contingent deferred sales charges paid or
payable to the Principal Underwriter since inception of the Prior Agreements
through and including the day next preceding the date of calculation. In
addition, the calculation shall include amounts under the Prior Agreements when
a predecessor principal underwriter existed. If the result of such subtraction
is a positive amount, a distribution fee [computed at the rate of 1% per annum
above the prime rate (being the base rate on corporate loans posted by at least
75% of the nation's 30 largest banks) then being reported in the Eastern Edition
of The Wall Street Journal or if such prime rate is not so reported such other
rate as may be designated from time to time by vote or other action of a
majority of (i) those Trustees of the Trust who are not "interested persons" of
the Trust (as defined in the 1940 Act) and have no direct or indirect financial
interest in the operation of the Plan or any agreements related to it (the "Rule
12b-1 Trustees") and (ii) all of the Trustees then in office] shall be computed
on such amount and added to such amount, with the resulting sum constituting the
amount of outstanding uncovered distribution charges of the Principal
Underwriter due from a Class with respect to such day for all purposes of this
Agreement. If the result of such subtraction is a negative amount, there shall
exist no outstanding uncovered distribution charges of the Principal Underwriter
due from that Class with respect to such day and no amount shall be accrued or
paid to the Principal Underwriter with respect to such day. The aggregate
amounts accrued and paid pursuant to this paragraph (d) during any fiscal year
of the Fund shall not exceed .75% of the average daily net assets of a Class for
such year. The term "Principal Underwriter" as used in this paragraph (d) shall
include the current Principal Underwriter's predecessor, a Massachusetts
corporation called Eaton Vance Distributors, Inc. that served as principal
underwriter for the Trust prior to November 1, 1996.
(e) The Principal Underwriter shall be entitled to receive all
contingent deferred sales charges paid or payable with respect to any day on
which there exist outstanding uncovered distribution charges due from a Class of
the Principal Underwriter. Each Class B and Class C shall be entitled to receive
all remaining contingent deferred sales charges paid or payable by its
shareholders with respect to any day on which there exist no outstanding
uncovered distribution charges of the Principal Underwriter due from that Class,
provided that no such sales charge which would cause the Fund to exceed the
maximum applicable cap imposed thereon by paragraph (2) of subsection (d) of
Rule 2830 of the Conduct Rules of the National Association of Securities
Dealers, Inc. shall be imposed.
(f) The Principal Underwriter shall be entitled to receive all
contingent deferred sales charges imposed in accordance with the Prospectus on
early redemption of Class A shares.
(g) The persons authorized to direct the disposition of monies paid or
payable by the Fund pursuant to the Plan or this Agreement shall be the
President or any Vice President or the Treasurer of the Trust. Such persons
shall provide to the Trust's Trustees and the Trustees shall review, at least
quarterly, a written report of the amounts so expended and the purposes for
which such expenditures were made.
(h) In addition to the payments to the Principal Underwriter provided
for in paragraph 5(d), the Fund may make payments from the assets of each Class
of service fees to the Principal Underwriter, Authorized Firms and other
persons. The aggregate of such payments during any fiscal year of the Fund shall
not exceed .25% of a class' average daily net assets for such year.
6. The Trust hereby authorizes the Principal Underwriter to repurchase,
upon the terms and conditions set forth in written instructions given by the
Trust to the Principal Underwriter from time to time, as agent of the Trust and
for its account, such shares of the Fund as may be offered for sale to the Fund
from time to time.
(a) The Principal Underwriter shall notify in writing IBT and First
Data at the end of each business day, or as soon thereafter as the repurchases
in each pricing period have been compiled, of the number of shares of each Class
repurchased for the account of the Fund since the last previous report, together
with the prices at which such repurchases were made, and upon the request of any
officer or Trustee of the Trust shall furnish similar information with respect
to all repurchases made up to the time of the request on any day.
(b) The Trust reserves the right to suspend or revoke the foregoing
authorization at any time; unless otherwise stated, any such suspension or
revocation shall be effective forthwith upon receipt of notice thereof by an
officer of the Principal Underwriter, by telegraph or by written instrument from
an officer of the Trust duly authorized by its Trustees. In the event that the
authorization of the Principal Underwriter is, by the terms of such notice,
suspended for more than twenty-four hours or until further notice, the
authorization given by this paragraph 6 shall not be revived except by action of
a majority of the Trustees of the Trust.
(c) The Principal Underwriter shall have the right to terminate the
operation of this paragraph 6 upon giving to the Trust thirty (30) days' written
notice thereof.
(d) The Trust agrees to authorize and direct IBT to pay, for the
account of the Fund, the purchase price of any shares so repurchased against
delivery of the certificates in proper form for transfer to the Trust or for
cancellation by the Trust.
(e) The Principal Underwriter shall receive no commission in respect of
any repurchase of shares under the foregoing authorization and appointment as
agent, except for any sales commission, distribution fee or contingent deferred
sales charges payable under paragraph 5.
(f) The Trust agrees that the Fund will reimburse the Principal
Underwriter, from time to time on demand, for any reasonable expenses incurred
in connection with the repurchase of shares of the Fund pursuant to this
paragraph 6.
7. If, at any time during the existence of this Agreement, the Trust
shall deem it necessary or advisable in the best interests of the Fund that any
amendment of this Agreement be made in order to comply with the recommendations
or requirements of the Commission or other governmental authority or to obtain
any advantage under Massachusetts or federal tax laws, and shall notify the
Principal Underwriter of the form of amendment which it deems necessary or
advisable and the reasons therefor, and, if the Principal Underwriter declines
to assent to such amendment, the Trust may terminate this Agreement forthwith by
written notice to the Principal Underwriter. If, at any time during the
existence of its agreement upon request by the Principal Underwriter, the Trust
fails (after a reasonable time) to make any changes in its Declaration of Trust,
as amended, or in its methods of doing business which are necessary in order to
comply with any requirement of federal law or regulations of the Commission or
of a national securities association of which the Principal Underwriter is or
may be a member, relating to the sale of the shares of the Fund, the Principal
Underwriter may terminate this Agreement forthwith by written notice to the
Trust.
8(a). The Principal Underwriter is a corporation in the United States
organized under the laws of Massachusetts and holding membership in the National
Association of Securities Dealers, Inc., a securities association registered
under Section 15A of the Securities Exchange Act of 1934, as amended from time
to time, and during the life of this Agreement will continue to be so resident
in the United States, so organized and a member in good standing of said
Association. The Principal Underwriter covenants that it and its officers and
directors will comply with the Trust's Declaration of Trust and By-Laws, and the
1940 Act and the rules promulgated thereunder, insofar as they are applicable to
the Principal Underwriter.
(b) The Principal Underwriter shall maintain in the United States and
preserve therein for such period or periods as the Commission shall prescribe by
rules and regulations applicable to it as Principal Underwriter of an open-end
investment company registered under the 1940 Act such accounts, books and other
documents as are necessary or appropriate to record its transactions with the
Fund. Such accounts, books and other documents shall be subject at any time and
from time to time to such reasonable periodic, special and other examinations by
the Commission or any member or representative thereof as the Commission may
prescribe. The Principal Underwriter shall furnish to the Commission within such
reasonable time as the Commission may prescribe copies of or extracts from such
records which may be prepared without effort, expense or delay as the Commission
may by order require.
9. This Agreement shall continue in force indefinitely until terminated
as in this Agreement above provided, except that:
(a) this Agreement shall remain in effect through and including April
28, 1998 (or, if applicable, the next April 28 which follows the day on which a
Fund has become a Fund hereunder by amendment to Schedule A subsequent to April
28, 1998), and shall continue in full force and effect indefinitely thereafter,
but only so long as such continuance after April 28, 1998 (or, if applicable,
said next April 28) is specifically approved at least annually (i) by the vote
of a majority of the Rule 12b-1 Trustees cast in person at a meeting called for
the purpose of voting on such approval, and (ii) by the Trustees of the Trust or
by vote of a majority of the outstanding voting securities of the Fund;
(b) this Agreement may be terminated with respect to a Class with a
12b-1 plan at any time by vote of a majority of the Rule 12b-1 Trustees or by
vote of a majority of the outstanding voting securities of the Class on not more
than sixty (60) days' notice to the Principal Underwriter. The Principal
Underwriter shall be entitled to receive all contingent deferred sales charges
paid or payable from such class with respect to any day subsequent to such
termination;
(c) either party shall have the right to terminate this Agreement with
respect to any Class on six (6) months' written notice thereof given in writing
to the other;
(d) the Trust shall have the right to terminate this Agreement
forthwith in the event that it shall have been established by a court of
competent jurisdiction that the Principal Underwriter or any director or officer
of the Principal Underwriter has taken any action which results in a breach of
the covenants set out in paragraph 9 hereof;
(e) if this Agreement is terminated with respect of any Class or Fund,
it shall not terminate the Agreement with respect to any other Class or Fund;
and
(f) additional series of the Trust will become Funds hereunder upon
approval by the Trustees of the Trust and amendment of Schedule A.
10. In the event of the assignment of this Agreement by the Principal
Underwriter, this Agreement shall automatically terminate.
11. Any notice under this Agreement shall be in writing, addressed and
delivered, or mailed postage paid, to the other party, at such address as such
other party may designate for the receipt of such notices. Until further notice
to the other party, it is agreed that the record address of the Trust and that
of the Principal Underwriter, shall be 24 Federal Street, Boston, Massachusetts
02110.
12. The services of the Principal Underwriter to the Trust hereunder
are not to be deemed to be exclusive, the Principal Underwriter being free to
(a) render similar service to, and to act as principal underwriter in connection
with the distribution of shares of, other series of the Trust or other
investment companies, and (b) engage in other business and activities from time
to time.
13. The terms "vote of a majority of the outstanding voting
securities," "assignment" and "interested persons," when used herein, shall have
the respective meanings specified in the 1940 Act, subject, however, to such
exemptions as may be granted by the Commission by any rule, regulation or order.
14. The Principal Underwriter expressly acknowledges the provision in
the Trust's Declaration of Trust limiting the personal liability of the
shareholders of the Trust and the Trustees of the Trust. The Principal
Underwriter hereby agrees that it shall have recourse only to the assets of the
relevant Fund or Class thereof for payment of claims or obligations as between
the Trust and the Principal Underwriter arising out of this Agreement and shall
not seek satisfaction from any shareholders or from the Trustees. No Fund or
Class shall not be responsible for obligations of any other fund or class of the
Trust.
15. On June 23, 1997, the Trust adopted a Plan of reorganization and a
Multiple Class Plan on behalf of its series and in connection therewith the
Trustees of the Trust amended the Declaration of Trust to terminate or rename
certain series and to establish four classes of shares within each renamed
series. Pursuant to such reorganization the assets of each Marathon series will
be converted to Class B assets of the renamed series, the shares of each
Marathon series will be converted to Class B shares of the renamed series, the
assets of each Classic series will be converted to Class C assets of the renamed
series, and the shares of each Classic series will be converted to Class C
shares of that renamed series. All references in this Agreement to the "Prior
Agreements" shall mean (i) with respect to the Class B assets or shares of a
particular Fund, all prior distribution agreements of the Trust applicable to
the converted assets and shares of the relevant Marathon series, and (ii) with
respect to the Class C assets or shares of a particular Fund, all prior
distribution agreements of the Trust applicable to the converted assets and
shares of the relevant Classic series. All references in this Agreement to the
"Prior Agreements" shall not be applicable to any additional series of the Trust
which becomes a Fund hereunder by amendment of Schedule A subsequent to June 23,
1997.
<PAGE>
16. This Agreement shall be effective with respect to a specific Class
of shares for a particular Fund on the date that Fund begins offering shares of
that Class. As of such effective date, this Agreement shall be deemed to amend,
replace and be substituted for the Prior Agreements previously applicable to the
relevant Class assets of that Fund. The outstanding uncovered distribution
charges of the Principal Underwriter with respect to a specific Class calculated
under the Prior Agreements as of the close of business on the date a Fund begins
offering shares of that Class shall be the outstanding uncovered distribution
charges of the Principal Underwriter with respect to such Class calculated under
this Agreement as of the opening of business on the date such shares are
offered.
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement
on the 23rd day June, 1997.
EATON VANCE MUTUAL FUNDS TRUST
By /s/ M. Dozier Gardner
--------------------------
President
EATON VANCE DISTRIBUTORS, INC.
By /s/ Alan R. Dynner
--------------------------
Vice President
<PAGE>
SCHEDULE A
EATON VANCE MUTUAL FUNDS TRUST
DISTRIBUTION AGREEMENT
EFFECTIVE: JUNE 23, 1997
<TABLE>
<CAPTION>
Prior Agreements
Sales Commissions Relating to Class B
Name of Fund Adopting this Agreement on Class B Shares and/or Class C Assets
------------------------------------ ----------------- ---------------------
<S> <C> <C>
Eaton Vance Government Obligations Fund 5% Class B: October 28, 1993
Class C: October 28, 1993/January 27, 1995
Eaton Vance High Income Fund* 5% Class B: August 1, 1986/July 7, 1993/
August 1, 1995
Class C: January 27, 1995/August 1, 1995
Eaton Vance Strategic Income Fund** 4.5% Class B: November 20, 1990/July 7, 1993/
November 1, 1995
Class C: March 1, 1994/January 27, 1995/
November 1, 1995
Eaton Vance Tax-Managed Growth Fund 5% Class B: March 20, 1996
Class C: June 24, 1996
Eaton Vance Short-Term Treasury Fund N/A N/A
</TABLE>
Note: All Funds adopted a Distribution Agreement dated November 1, 1996.
- -----------------------
* This fund is a successor in operations to a fund which was reorganized,
effective August 1, 1995 and the outstanding uncovered distribution charges
of the predecessor fund were assumed by the above fund.
** This fund is a successor in operations to a fund which was reorganized,
effective November 1, 1995, and the outstanding uncovered distribution
charges of the predecessor fund were assumed by the above fund.
<PAGE>
SCHEDULE A-1
EATON VANCE MUTUAL FUNDS TRUST
DISTRIBUTION AGREEMENT
EFFECTIVE: AUGUST 11, 1997
Sales Commissions on
Name of Fund Adopting this Plan Class B Shares Prior Agreements
------------------------------- -------------- ----------------
Eaton Vance Tax-Managed Emerging
Growth Fund 5% N/A
<PAGE>
SCHEDULE A-2
EATON VANCE MUTUAL FUNDS TRUST
DISTRIBUTION AGREEMENT
EFFECTIVE: OCTOBER 17, 1997
Sales Commissions on
Name of Fund Adopting this Plan Class B Shares Prior Agreements
------------------------------- -------------- ----------------
Eaton Vance Municipal Bond Fund 5% N/A
<PAGE>
EXHIBIT 99.6(a)(9)
EATON VANCE MUTUAL FUNDS TRUST
AMENDMENT TO DISTRIBUTION AGREEMENT
AMENDMENT to the Distribution Agreement dated June 23, 1997 between
EATON VANCE MUTUAL FUNDS TRUST (the "Trust") and EATON VANCE DISTRIBUTORS, INC.
(the "Principal Underwriter") (the "Agreement").
WHEREAS the Trustees of the Trust have established a new series of
shares designated "Eaton Vance Municipal Bond Fund" (the "Municipal Fund"),
which series issues four Classes of shares (as defined in the Agreement).
The Agreement is hereby amended as follows:
a. The price which the Principal Underwriter shall pay for Class
I shares of Municipal Fund will be the net asset value used in
determining the public offering price on which orders for such
shares are based.
b. The public offering price of Class I shares of Municipal Fund
shall be determined in the same manner as the public offering
price for Class A shares.
c. The Principal Underwriter shall be entitled to receive all
contingent deferred sales charges imposed in accordance with
the Prospectus on early redemption of Class I shares of
Municipal Fund.
In all other respects, the Agreement as applied to Municipal Fund shall
remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement
on this 17th day of October, 1997.
EATON VANCE MUTUAL FUNDS TRUST
By: /s/ M. Dozier Gardner
---------------------------------
M. Dozier Gardner, President
EATON VANCE DISTRIBUTORS, INC.
By: /s/ Wharton P. Whitaker
---------------------------------
Wharton P. Whitaker, President
<PAGE>
EXHIBIT 99.9(a)(1)
EATON VANCE MUTUAL FUNDS TRUST
ADMINISTRATIVE SERVICES AGREEMENT
dated July 31, 1995
June 23, 1997
Amendment to Schedule A
Effective with their fiscal year end certain Funds which are series of Eaton
Vance Mutual Funds Trust will be restructured as classes of shares. Of the Funds
which are restructuring, except for the EV Government Obligations series, all
Traditional and Classic Funds will become Class A and Class C, respectively of
the existing Marathon version of the corresponding Funds and the current
Marathon Fund will change its name to that indicated on Schedule A hereto.
Marathon shares will become Class B shares of the renamed Fund. In the case of
the EV Government Obligations series the Marathon and Classic Funds will become
Class B and Class C, respectively of the existing Traditional version of the
corresponding Fund and the current Traditional Fund will change its name to that
indicated on Schedule A hereto with the Traditional shares becoming Class A
shares of the renamed Fund.
<PAGE>
June 23, 1997
SCHEDULE A
Eaton Vance Government Obligations Fund (effective 1/2/98)
Eaton Vance High Income Fund (effective 4/1/98)
Eaton Vance Strategic Income Fund (effective 11/1/97)
Eaton Vance Tax-Managed Growth Fund (effective 11/1/97)
Eaton Vance Cash Management Fund
Eaton Vance Liquid Assets Fund
Eaton Vance Money Market Fund
<PAGE>
EXHIBIT 11(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the use in this Post-Effective Amendment No. 38 to the
Registration Statement of Eaton Vance Mutual Funds Trust (1933 Act File No.
2-90946) on behalf of Eaton Vance Strategic Income Fund of our report dated
December 2, 1996, relating to EV Marathon Strategic Income Fund, and of our
report dated December 2, 1996, relating to Strategic Income Portfolio, which
reports are included in the Annual Report to Shareholders for the year ended
October 31, 1996, which is incorporated by reference in the Statement of
Additional Information, which is part of such Registration Statement.
We also consent to the reference to our Firm under the heading "The Fund's
Financial Highlights" in the Prospectus and under the caption "Independent
Accountants" in the Statement of Additional Information of the Registration
Statement.
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
October 28, 1997
Boston, Massachusetts
<PAGE>
EXHIBIT 11(b)
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 38 to the
Registration Statement of Eaton Vance Mutual Funds Trust (1933 Act File No.
2-90946) on behalf of Eaton Vance Tax-Managed Growth Fund of our report dated
November 29, 1996 relating to EV Marathon Tax-Managed Growth Fund, and of our
report dated November 29, 1996, relating to Tax-Managed Growth Portfolio, which
reports are included in the Annual Report to Shareholders for the year ended
October 31, 1996 which is incorporated by reference in the Statement of
Additional Information, which is part of such Registration Statement.
We also consent to the reference to our Firm under the heading "The Fund's
Financial Highlights" in the Prospectus and under the caption "Independent
Certified Public Accountants" in the Statement of Additional Information of the
Registration Statement.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
October 28, 1997
Boston, Massachusetts
<PAGE>
EXHIBIT 99.15(i)
EATON VANCE MUTUAL FUNDS TRUST
CLASS A SERVICE PLAN
WHEREAS, Eaton Vance Mutual Funds Trust (the "Trust") engages in
business as an open-end management investment company with multiple series (each
with multiple classes), and is registered as such under the Investment Company
Act of 1940, as amended (the "Act");
WHEREAS, on June 23, 1997 the Trust adopted a Plan of Reorganization
and a Multiple Class Plan on behalf of its series and in connection therewith
the Trustees amended the Declaration of Trust to terminate or rename certain
series, and to establish four classes of shares (including Class A shares)
within each renamed series;
WHEREAS, the assets of each Traditional series will be converted to
Class A assets of the renamed series and the shares of each Traditional series
will be converted to Class A shares of the renamed series pursuant to such
reorganization;
WHEREAS, the Trust on behalf of each of its series listed on Schedule A
(a "Fund") desires to adopt a Service Plan with respect to each Fund's Class A
shares pursuant to which each Fund intends to pay service fees out of Class A
assets as contemplated in subsections (b) and (d) of Rule 2830 of the Conduct
Rules of the National Association of Securities Dealers, Inc. (the "NASD
Rules");
WHEREAS, the Trust employs Eaton Vance Distributors, Inc. to act as
Principal Underwriter (as defined in the Act) of Class A shares of each Fund;
and
WHEREAS, the Trustees of the Trust have determined that there is a
reasonable likelihood that adoption of this Service Plan will benefit the Trust,
each Fund listed on Schedule A and the holders of Class A shares of each such
Fund.
NOW, THEREFORE, the Trust hereby adopts this Service Plan (the "Plan")
on behalf of each Fund with Class A shares containing the following terms and
conditions:
1. The Fund may make payments of service fees out of Class A assets to
the Principal Underwriter, Authorized Firms and other persons. The aggregate of
such payments during any fiscal year of the Fund shall not exceed .25% of
average daily net assets of Class A for such year. Appropriate adjustment of
service fee payments shall be made whenever necessary to ensure that no such
payment shall cause the Class to exceed the applicable maximum cap imposed
thereon by subsection (d)(5) of Rule 2830 of the NASD Rules.
2. This Plan shall not take effect until after it has been approved by
both a majority of (i) those Trustees of the Trust who are not "interested
persons" of the Trust (as defined in the Act) and have no direct or indirect
financial interest in the operations of this Plan or any agreements related to
it (the "Rule 12b-1 Trustees"), and (ii) all of the Trustees then in office,
cast in person at a meeting (or meetings) called for the purpose of voting on
this Plan.
3. Any agreements between the Trust on behalf of the Fund and any
person relating to this Plan shall be in writing and shall not take effect until
approved in the manner provided for Trustee approval of this Plan in Section 2.
4. This Plan shall continue in effect with respect to each Class A for
so long as such continuance is specifically approved at least annually in the
manner provided for Trustee approval of this Plan in Section 2.
5. The persons authorized to direct the disposition of monies paid or
payable by the Trust pursuant to this Plan or any related agreement shall be the
President or any Vice President or the Treasurer of the Trust. Such persons
shall provide to the Trustees of the Trust and the Trustees shall review, at
least quarterly, a written report of the amounts so expended and the purposes
for which such expenditures were made.
6. This Plan may be terminated as to any Fund with respect to its Class
A shares at any time by vote of a majority of the Rule 12b-1 Trustees, or by
vote of a majority of the outstanding Class A voting securities of the Fund.
7. This Plan may not be amended to increase materially the payments to
be made by the Class A shares of the Fund as provided in Section 1 unless such
amendment, if required by law, is approved by a vote of at least a majority of
the Class A outstanding voting securities of the Fund. In addition, all material
amendments to this Plan shall be approved in the manner provided for in Section
2. Additional series of the Trust which are to become a Fund hereunder will
become subject to this Plan and governed hereby upon approval by the Trustees of
the Trust and amendment of Schedule A.
8. While this Plan is in effect, the selection and nomination of the
Rule 12b-1 Trustees shall be committed to the discretion of the Rule 12b-1
Trustees.
9. The Trust shall preserve copies of this Plan and any related
agreements made by the Trust and all reports made pursuant to Section 5, for a
period of not less than six years from the date of this Plan, the first two
years in an easily accessible place.
10. Consistent with the limitation of shareholder, officer and Trustee
liability as set forth in the Trust's Declaration of Trust, any obligations
assumed by the Class A shares of a Fund pursuant to this Plan shall be limited
in all cases to the assets of such Class A shares and no person shall seek
satisfaction thereof from the shareholders of the Fund or officers or Trustees
of the Trust or any other class or series of the Trust.
11. When used in this Plan, the term "service fees" shall have the same
meaning as such term has in subsections (b) and (d) of Rule 2830 of the NASD
Rules. When used in this Plan, the term "vote of a majority of the outstanding
Class A voting securities of the Fund" shall mean the vote of the lesser of (a)
67 per centum or more of the Class A shares of the Fund present or represented
by proxy at the meeting if the holders of more than 50 per centum of the
outstanding Class A shares of the Fund are present or represented by proxy at
the meeting, or (b) more than 50 per centum of the outstanding Class A shares of
the Fund.
12. If any provision of this Plan shall be held or made invalid by a
court decision, statute, rule or regulation of the Securities and Exchange
Commission or otherwise, the remainder of this Plan shall not be affected
thereby.
13. This Plan shall be effective with respect to a specific Fund on the
date that Fund begins offering its Class A shares. As of such effective date
this Plan shall amend, replace and be substituted for any service plan
previously applicable to the Class A assets of such Fund.
Adopted June 23, 1997
* * *
<PAGE>
SCHEDULE A
EATON VANCE MUTUAL FUNDS TRUST
CLASS A SERVICE PLAN
EFFECTIVE: JUNE 23, 1997
Name of Fund Adopting this Plan
Eaton Vance Government Obligations Fund
Eaton Vance Tax-Managed Growth Fund
<PAGE>
SCHEDULE A-1
EATON VANCE MUTUAL FUNDS TRUST
CLASS A SERVICE PLAN
EFFECTIVE: AUGUST 11, 1997
Name of Fund Adopting this Plan
Eaton Vance Tax-Managed Emerging Growth Fund
<PAGE>
SCHEDULE A-2
EATON VANCE MUTUAL FUNDS TRUST
CLASS A SERVICE PLAN
EFFECTIVE: OCTOBER 17, 1997
Name of Fund Adopting this Plan
Eaton Vance Municipal Bond Fund
Eaton Vance Strategic Income Fund
<PAGE>
EXHIBIT 99.15(j)
EATON VANCE MUTUAL FUNDS TRUST
CLASS B DISTRIBUTION PLAN
WHEREAS, Eaton Vance Mutual Funds Trust (the "Trust") engages in
business as an open-end investment company with multiple series (each with
multiple classes) and is registered as such under the Investment Company Act of
1940, as amended (the "Act");
WHEREAS, on June 23, 1997 the Trust adopted a Plan of Reorganization
and a Multiple Class Plan on behalf of its series and in connection therewith
the Trustees of the Trust amended the Declaration of Trust to terminate or
rename certain series, and to establish four classes of shares (including Class
B shares) within each renamed series;
WHEREAS, the assets of each Marathon series will be converted to Class
B assets of the renamed series and the shares of each Marathon series will be
converted to Class B shares of the renamed series pursuant to such
reorganization;
WHEREAS, the Trust adopted separate Distribution Plans and an Amended
Distribution Plan (collectively the "Original Plans") on behalf of its Marathon
series which are the predecessors to its Class B shares pursuant to which each
Marathon series made payments in connection with the distribution of its shares;
WHEREAS, the Trust employs Eaton Vance Distributors, Inc. to act as
Principal Underwriter (as defined in the Act) of Class B shares of each of its
series listed on Schedule A (a "Fund"), but does not intend to remunerate the
Principal Underwriter under this Class B Distribution Plan unless and until the
Principal Underwriter sells Class B shares of the Fund;
WHEREAS, each Fund will pay the Principal Underwriter sales commissions
and distribution fees out of Class B assets only in connection with the sale of
Class B shares;
WHEREAS, each Fund intends to pay service fees out of Class B assets as
contemplated in subsections (b) and (d) of Rule 2830 of the Conduct Rules of the
National Association of Securities Dealers, Inc. (the "NASD Rules");
WHEREAS, the Trustees of the Trust have determined that it is desirable
to adopt this Class B Distribution Plan as a successor to the Original Plans;
and
WHEREAS, the Trustees of the Trust have determined that there is a
reasonable likelihood that adoption of this Class B Distribution Plan will
benefit the Trust, each Fund listed on Schedule A, and the holders of Class B
shares of each such Fund.
NOW, THEREFORE, the Trust hereby adopts this Class B Distribution Plan
(this "Plan") on behalf of each Fund in accordance with Rule 12b-1 under the Act
and containing the following terms and conditions:
1. The Fund will pay sales commissions and distribution fees out of
Class B assets to the Principal Underwriter only after and as a result of the
sale of Class B shares. The Principal Underwriter will provide such distribution
services and facilities as the Trust may from time to time consider necessary to
accomplish the sale of Class B shares. It is understood that the Principal
Underwriter may pay such sales commissions and make such other payments to
Authorized Firms and other persons as it considers appropriate to encourage
distribution of such shares.
2. On each sale of Class B shares (excluding reinvestment of dividends
and distributions), the Fund shall pay the Principal Underwriter a sales
commission out of Class B assets in an amount not exceeding that set forth on
Schedule A hereto of the price received by the Fund therefor, such payment to be
made in the manner set forth and subject to the terms of this Plan. The amount
of the sales commission shall be established from time to time by vote or other
action of a majority of (i) those Trustees of the Trust who are not "interested
persons" (as defined in the Act) of the Trust and have no direct or indirect
financial interest in the operation of this Plan or any agreements related to it
(the "Rule 12b-1 Trustees") and (ii) all of the Trustees then in office. The
Fund shall also pay the Principal Underwriter out of Class B assets a separate
distribution fee (calculated in accordance with Section 3), such payment to be
made in the manner set forth and subject to the terms of this Plan.
3. The sales commissions and distribution fees referred to in Section 2
shall be accrued and paid in the following manner. Each Class B shall accrue
daily an amount calculated at the rate of .75% per annum of its daily net
assets, which net assets shall be computed in accordance with the governing
documents of the Trust and applicable votes and determinations of the Trustees
of the Trust. The daily amounts so accrued throughout the month shall be paid to
the Principal Underwriter on the last day of each month. The amount of such
daily accrual, as so calculated, shall first be applied and charged to all
unpaid sales commissions, and the balance, if any, shall then be applied and
charged to all unpaid distribution fees. No amount shall be accrued with respect
to any day on which there exist no outstanding uncovered distribution charges of
the Principal Underwriter due from Class B shares. The amount of such uncovered
distribution charges shall be calculated daily. For purposes of this
calculation, distribution charges of the Principal Underwriter shall include (a)
the aggregate of all sales commissions which the Principal Underwriter has been
paid pursuant to this Section 3 (and pursuant to Section 3 of the Original
Plans) plus all sales commissions which it is entitled to be paid pursuant to
Section 2 (and pursuant to Section 2 of the Original Plans) since inception of
the Original Plans through and including the day next preceding the date of
calculation, and (b) an amount equal to the aggregate of all distribution fees
referred to below which the Principal Underwriter has been paid pursuant to this
Section 3 (and pursuant to Section 3 of the Original Plans) plus all such fees
which it is entitled to be paid pursuant to Section 2 (and pursuant to Section 2
of the Original Plans) since inception of the Original Plans through and
including the day next preceding the date of calculation. From this sum
(distribution charges) there shall be subtracted (i) the aggregate amount paid
or payable to the Principal Underwriter pursuant to this Section 3 (and pursuant
to Section 3 of the Original Plans) since inception of the Original Plans
through and including the day next preceding the date of calculation and (ii)
the aggregate amount of all contingent deferred sales charges paid or payable to
the Principal Underwriter since inception of the Original Plans through and
including the day next preceding the date of calculation. If the result of such
subtraction is a positive amount, a distribution fee [computed at the rate of 1%
per annum above the prime rate (being the base rate on corporate loans posted by
at least 75% of the nation's 30 largest banks) then being reported in the
Eastern Edition of The Wall Street Journal or if such prime rate is not so
reported such other rate as may be designated from time to time by vote or other
action of a majority of (i) the Rule 12b-1 Trustees and (ii) all of the Trustees
then in office] shall be computed on such amount and added to such amount, with
the resulting sum constituting the amount of outstanding uncovered distribution
charges of the Principal Underwriter due from Class B shares with respect to
such day for all purposes of this Plan. In addition, the calculation shall
include amounts under the Original Plans when a predecessor principal
underwriter existed. If the result of such subtraction is a negative amount,
there shall exist no outstanding uncovered distribution charges of the Principal
Underwriter due from Class B shares with respect to such day and no amount shall
be accrued or paid to the Principal Underwriter with respect to such day. The
aggregate amounts accrued and paid pursuant to this Section 3 during any fiscal
year of the Fund shall not exceed .75% of the average daily net assets of Class
B for such year.
4. The Principal Underwriter shall be entitled to receive all
contingent deferred sales charges paid or payable with respect to any day on
which there exist outstanding uncovered distribution charges of the Principal
Underwriter due from Class B shares. Class B shall be entitled to receive all
remaining contingent deferred sales charges paid or payable by Class B
shareholders with respect to any day on which there exist no outstanding
uncovered distribution charges of the Principal Underwriter due from Class B
shares, provided that no such sales charge which would cause the Class B to
exceed the maximum applicable cap imposed thereon by paragraph (2) of subsection
(d) of Rule 2830 of the NASD Rules shall be imposed.
5. The Fund may make payments of service fees out of Class B assets to
the Principal Underwriter, Authorized Firms and other persons. The aggregate of
such payments during any fiscal year of the Fund shall not exceed .25% of the
average daily net assets of Class B for such year. Appropriate adjustment of
service fee payments shall be made whenever necessary to ensure that no such
payment shall cause the Class B to exceed the applicable maximum cap imposed
thereon by paragraph (5) of subsection (d) of Rule 2830 of the NASD Rules.
6. This Plan shall not take effect until after it has been approved by
both a majority of (i) the Rule 12b-1 Trustees and (ii) all of the Trustees then
in office, cast in person at a meeting (or meetings) called for the purpose of
voting on this Plan.
7. Any agreements between the Trust on behalf of the Funds and any
person relating to this Plan shall be in writing and shall not take effect until
approved in the manner provided for Trustee approval of this Plan in Section 6.
8. This Plan shall continue in effect with respect to each Class B
until April 28, 1998 (or, if applicable, the next April 28 which follows the day
on which the Fund has become a Fund hereunder by amendment to Schedule A
subsequent to April 28, 1998) and from year to year thereafter, but only for so
long as such continuance after April 28, 1998 (or if applicable, said next April
28) is specifically approved at least annually in the manner provided for
Trustee approval of this Plan in Section 6.
9. The persons authorized to direct the disposition of monies paid or
payable pursuant to this Plan or any related agreement shall be the President or
any Vice President or the Treasurer of the Trust. Such persons shall provide to
the Trustees of the Trust and the Trustees shall review, at least quarterly, a
written report of the amounts so expended and the purposes for which such
expenditures were made.
10. This Plan may be terminated as to any Fund with respect to its
Class B shares at any time by vote of a majority of the Rule 12b-1 Trustees, or
by vote of a majority of the outstanding Class B voting securities of the Fund.
The Principal Underwriter shall also be entitled to receive all contingent
deferred sales charges paid or payable with respect to any day subsequent to
termination of this Plan on which there exist outstanding uncovered distribution
charges of the Principal Underwriter due from Class B shares.
11. This Plan may not be amended to increase materially the payments to
be made by the Class B shares of the Fund as provided in Sections 2, 3 and 5
unless such amendment is approved by a vote of at least a majority of the
outstanding voting securities of the Class B shares of the Fund. In addition,
all material amendments to this Plan shall be approved in the manner provided
for Trustee approval of this Plan in Section 6. Additional series of the Trust
which are to become a Fund hereunder will become subject to this Plan and
governed hereby upon approval by the Trustees of the Trust and amendment of
Schedule A. All references in this Plan to the "Original Plans" shall not be
applicable to any such additional series of the Trust which becomes a Fund
hereunder by amendment of Schedule A subsequent to June 23, 1997.
12. While this Plan is in effect, the selection and nomination of the
Rule 12b-1 Trustees shall be committed to the discretion of the Rule 12b-1
Trustees.
13. The Trust shall preserve copies of this Plan and any related
agreements made by the Trust and all reports made pursuant to Section 9, for a
period of not less than six years from the date of this Plan, the first two
years in an easily accessible place.
14. Consistent with the limitation of shareholder, officer and Trustee
liability as set forth in the Trust's Declaration of Trust, any obligations
assumed by the Class B shares of a Fund pursuant to this Plan shall be limited
in all cases to the assets of such Class B shares and no person shall seek
satisfaction thereof from the shareholders, officers or Trustees of the Trust or
any other class or series of the Trust.
15. When used in this Plan, the term "service fees" shall have the same
meaning as such term has in subsections (b) and (d) of Rule 2830 of the NASD
Rules. When used in this Plan, the term "vote of a majority of the outstanding
Class B voting securities of the Fund" shall mean the vote of the lesser of (a)
67 per centum or more of the Class B shares of the Fund present or represented
by proxy at the meeting if the holders of more than 50 per centum of the
outstanding Class B shares of the Fund are present or represented by proxy at
the meeting, or (b) more than 50 per centum of the outstanding Class B shares of
the Fund.
16. If any provision of this Plan shall be held or made invalid by a
court decision, statute, rule or regulation of the Securities and Exchange
Commission or otherwise, the remainder of this Plan shall not be affected
thereby.
17. This Plan shall be effective with respect to a specific Fund on the
date that Fund begins offering its Class B shares. As of such effective date
this Plan shall amend, replace and be substituted for the Original Plans
previously applicable to the Class B assets of that Fund. The outstanding
uncovered distribution charges of the Principal Underwriter calculated under the
Original Plans as of the close of business on the day preceding the date a Fund
begins offering Class B shares shall be the outstanding uncovered distribution
charges of the Principal Underwriter with respect to such Class B calculated
under this Plan as of the opening of business on the date such shares are
offered.
Adopted June 23, 1997
* * *
<PAGE>
SCHEDULE A
EATON VANCE MUTUAL FUNDS TRUST
CLASS B DISTRIBUTION PLAN
EFFECTIVE: JUNE 23, 1997
<TABLE>
<CAPTION>
Sales
Name of Fund Adopting this Plan Commission Date of Original Plans (Inception Date)
- ------------------------------- ---------- ---------------------------------------
<S> <C> <C>
Eaton Vance Government Obligations Fund 5% October 28, 1993
Eaton Vance High Income Fund* 5% August 1, 1986/July 7, 1993/
June 19, 1995 (August 1, 1995)
Eaton Vance Strategic Income Fund** 4.5% November 20, 1990/July 7, 1993/
June 19, 1995 (November 1, 1995)
Eaton Vance Tax-Managed Growth Fund 5% March 20, 1996
</TABLE>
* This fund is a successor in operations to a fund which was reorganized,
effective August 1, 1995 and the outstanding uncovered distribution charges
of the predecessor fund were assumed by the above fund.
** This fund is a successor in operations to a fund which was reorganized,
effective November 1, 1995, and the outstanding uncovered distribution
charges of the predecessor fund were assumed by the above fund.
<PAGE>
SCHEDULE A-1
EATON VANCE MUTUAL FUNDS TRUST
CLASS B DISTRIBUTION PLAN
EFFECTIVE: AUGUST 11, 1997
Sales Date of Original Plans
Name of Fund Adopting This Plan Commission (Inception Date)
- ------------------------------- ---------- ----------------
Eaton Vance Tax-Managed Emerging 5% N/A
Growth Fund
<PAGE>
SCHEDULE A-2
EATON VANCE MUTUAL FUNDS TRUST
CLASS B DISTRIBUTION PLAN
EFFECTIVE: OCTOBER 17, 1997
Sales Date of Original Plans
Name of Fund Adopting This Plan Commission (Inception Date)
- ------------------------------- ---------- ----------------
Eaton Vance Municipal Bond Fund 5% N/A
<PAGE>
EXHIBIT 99.15(k)
EATON VANCE MUTUAL FUNDS TRUST
CLASS C DISTRIBUTION PLAN
WHEREAS, Eaton Vance Mutual Funds Trust (the "Trust") engages in
business as an open-end investment company with multiple series (each with
multiple classes) and is registered as such under the Investment Company Act of
1940, as amended (the "Act");
WHEREAS, on June 23, 1997 the Trust adopted a Plan of Reorganization
and a Multiple Class Plan on behalf of its series and in connection therewith
the Trustees amended the Declaration of Trust to terminate or rename certain
series, and to establish four classes of shares (including Class C shares)
within each renamed series;
WHEREAS, the assets of each Classic series will be converted to Class C
assets of the renamed series and the shares of each Classic series will be
converted to Class C shares of the renamed series pursuant to such
reorganization;
WHEREAS, the Trust adopted separate Distribution Plans and an Amended
Distribution Plan (collectively the "Original Plans") on behalf of its Classic
series which are the predecessors to its Class C shares pursuant to which each
Classic series made payments in connection with the distribution of its shares;
WHEREAS, the Trust employs Eaton Vance Distributors, Inc. to act as
Principal Underwriter (as defined in the Act) of Class C shares of each of its
series listed in Schedule A (a "Fund"), but does not intend to remunerate the
Principal Underwriter under this Class C Distribution Plan unless and until the
Principal Underwriter sells Class C shares of the Fund;
WHEREAS, each Fund will pay the Principal Underwriter sales commissions
and distribution fees out of Class C assets only in connection with the sale of
Class C shares;
WHEREAS, each Fund intends to pay service fees out of Class C assets as
contemplated in subsections (b) and (d) of Rule 2830 of the Conduct Rules of the
National Association of Securities Dealers, Inc. (the "NASD Rules");
WHEREAS, the Trustees of the Trust have determined that it is desirable
to adopt this Class C Distribution Plan as a successor to the Original Plans;
and
WHEREAS, the Trustees of the Trust have determined that there is a
reasonable likelihood that adoption of this Class C Distribution Plan will
benefit the Trust, each Fund listed on Schedule A and the holders of Class C
shares of each such Fund.
NOW, THEREFORE, the Trust hereby adopts this Class C Distribution Plan
(this "Plan") on behalf of each Fund in accordance with Rule 12b-1 under the Act
and containing the following terms and conditions:
1. The Fund will pay sales commissions and distribution fees out of
Class C assets to the Principal Underwriter only after and as a result of the
sale of Class C shares. The Principal Underwriter will provide such distribution
services and facilities as the Trust may from time to time consider necessary to
accomplish the sale of Class C shares. It is understood that the Principal
Underwriter may pay such sales commissions and make such other payments to
Authorized Firms and other persons as it considers appropriate to encourage
distribution of such shares.
2. On each sale of Class C shares (excluding reinvestment of dividends
and distributions), the Fund shall pay the Principal Underwriter a sales
commission out of Class C assets in an amount not exceeding 6.25% of the price
received by the Fund therefor, such payment to be made in the manner set forth
and subject to the terms of this Plan. The amount of the sales commission shall
be established from time to time by vote or other action of a majority of (i)
those Trustees of the Trust who are not "interested persons" (as defined in the
Act) of the Trust and have no direct or indirect financial interest in the
operation of this Plan or any agreements related to it (the "Rule 12b-1
Trustees") and (ii) all of the Trustees then in office. The Fund shall also pay
the Principal Underwriter out of Class C assets a separate distribution fee
(calculated in accordance with Section 3), such payment to be made in the manner
set forth and subject to the terms of this Plan.
3. The sales commissions and distribution fees referred to in Section 2
shall be accrued and paid in the following manner. Each Class C shall accrue
daily an amount calculated at the rate of .75% per annum of its daily net
assets, which net assets shall be computed in accordance with the governing
documents of the Trust and applicable votes and determinations of the Trustees
of the Trust. The daily amounts so accrued throughout the month shall be paid to
the Principal Underwriter on the last day of each month. The amount of such
daily accrual, as so calculated, shall first be applied and charged to all
unpaid sales commissions, and the balance, if any, shall then be applied and
charged to all unpaid distribution fees. No amount shall be accrued with respect
to any day on which there exist no outstanding uncovered distribution charges of
the Principal Underwriter due from Class C shares. The amount of such uncovered
distribution charges shall be calculated daily. For purposes of this
calculation, distribution charges of the Principal Underwriter shall include (a)
the aggregate of all sales commissions which the Principal Underwriter has been
paid pursuant to this Section 3 (and pursuant to Section 3 of the Original
Plans) plus all sales commissions which it is entitled to be paid pursuant to
Section 2 (and pursuant to Section 2 of the Original Plans) since inception of
the Original Plans through and including the day next preceding the date of
calculation, and (b) an amount equal to the aggregate of all distribution fees
referred to below which the Principal Underwriter has been paid pursuant to this
Section 3 (and pursuant to Section 3 of the Original Plans) plus all such fees
which it is entitled to be paid pursuant to Section 2 (and pursuant to Section 2
of the Original Plans) since inception of the Original Plans through and
including the day next preceding the date of calculation. From this sum
(distribution charges) there shall be subtracted (i) the aggregate amount paid
or payable to the Principal Underwriter pursuant to this Section 3 (and pursuant
to Section 3 of the Original Plans) since inception of the Original Plans
through and including the day next preceding the date of calculation and (ii)
the aggregate amount of all contingent deferred sales charges paid or payable to
the Principal Underwriter since inception of the Original Plans through and
including the day next preceding the date of calculation. If the result of such
subtraction is a positive amount, a distribution fee [computed at the rate of 1%
per annum above the prime rate (being the base rate on corporate loans posted by
at least 75% of the nation's 30 largest banks) then being reported in the
Eastern Edition of The Wall Street Journal or if such prime rate is not so
reported such other rate as may be designated from time to time by vote or other
action of a majority of (i) the Rule 12b-1 Trustees and (ii) all of the Trustees
then in office] shall be computed on such amount and added to such amount, with
the resulting sum constituting the amount of outstanding uncovered distribution
charges of the Principal Underwriter due from Class C shares with respect to
such day for all purposes of this Plan. In addition, the calculation shall
include amounts under the Original Plans when a predecessor principal
underwriter existed. If the result of such subtraction is a negative amount,
there shall exist no outstanding uncovered distribution charges of the Principal
Underwriter due from Class C shares with respect to such day and no amount shall
be accrued or paid to the Principal Underwriter with respect to such day. The
aggregate amounts accrued and paid pursuant to this Section 3 during any fiscal
year of the Fund shall not exceed .75% of the average daily net assets of Class
C for such year.
4. The Principal Underwriter shall be entitled to receive all
contingent deferred sales charges paid or payable with respect to any day on
which there exist outstanding uncovered distribution charges of the Principal
Underwriter due from Class C shares. Class C shall be entitled to receive all
remaining contingent deferred sales charges paid or payable by Class C
shareholders with respect to any day on which there exist no outstanding
uncovered distribution charges of the Principal Underwriter due from Class C
shares, provided that no such sales charge which would cause the Class C to
exceed the maximum applicable cap imposed thereon by paragraph (2) of subsection
(d) of Rule 2830 of the NASD Rules shall be imposed.
5. The Fund may make payments of service fees out of Class C assets to
the Principal Underwriter, Authorized Firms and other persons. The aggregate of
such payments during any fiscal year of the Fund shall not exceed .25% of the
average daily net assets of Class C for such year. Appropriate adjustment of
service fee payments shall be made whenever necessary to ensure that no such
payment shall cause the Class C to exceed the applicable maximum cap imposed
thereon by paragraph (5) of subsection (d) of Rule 2830 of the NASD Rules.
6. This Plan shall not take effect until after it has been approved by
both a majority of (i) the Rule 12b-1 Trustees and (ii) all of the Trustees then
in office, cast in person at a meeting (or meetings) called for the purpose of
voting on this Plan.
7. Any agreements between the Trust on behalf of the Funds and any
person relating to this Plan shall be in writing and shall not take effect until
approved in the manner provided for Trustee approval of this Plan in Section 6.
8. This Plan shall continue in effect with respect to each Class C
until April 28, 1998 (or, if applicable, the next April 28 which follows the day
on which the Fund has become a Fund hereunder by amendment to Schedule A
subsequent to April 28, 1998) and from year to year thereafter, but only for so
long as such continuance after April 28, 1998 (or if applicable, said next April
28) is specifically approved at least annually in the manner provided for
Trustee approval of this Plan in Section 6.
9. The persons authorized to direct the disposition of monies paid or
payable pursuant to this Plan or any related agreement shall be the President or
any Vice President or the Treasurer of the Trust. Such persons shall provide to
the Trustees of the Trust and the Trustees shall review, at least quarterly, a
written report of the amounts so expended and the purposes for which such
expenditures were made.
10. This Plan may be terminated as to any Fund with respect to its
Class C shares at any time by vote of a majority of the Rule 12b-1 Trustees, or
by vote of a majority of the outstanding Class C voting securities of the Fund.
The Principal Underwriter shall also be entitled to receive all contingent
deferred sales charges paid or payable with respect to any day subsequent to
termination of this Plan on which there exist outstanding uncovered distribution
charges of the Principal Underwriter due from Class C shares.
11. This Plan may not be amended to increase materially the payments to
be made by the Class C shares of the Fund as provided in Sections 2, 3 and 5
unless such amendment is approved by a vote of at least a majority of the
outstanding voting securities of the Class C shares of the Fund. In addition,
all material amendments to this Plan shall be approved in the manner provided
for Trustee approval of this Plan in Section 6. Additional series of the Trust
which are to become a Fund hereunder will become subject to this Plan and
governed hereby upon approval by the Trustees of the Trust and amendment of
Schedule A. All references in this Plan to the "Original Plans" shall not be
applicable to any such additional series of the Trust which becomes a Fund
hereunder by amendment of Schedule A subsequent to June 23, 1997.
12. While this Plan is in effect, the selection and nomination of the
Rule 12b-1 Trustees shall be committed to the discretion of the Rule 12b-1
Trustees.
13. The Trust shall preserve copies of this Plan and any related
agreements made by the Trust and all reports made pursuant to Section 9, for a
period of not less than six years from the date of this Plan, the first two
years in an easily accessible place.
14. Consistent with the limitation of shareholder, officer and Trustee
liability as set forth in the Trust's Declaration of Trust, any obligations
assumed by the Class C shares of a Fund pursuant to this Plan shall be limited
in all cases to the assets of such Class C shares and no person shall seek
satisfaction thereof from the shareholders, officers or Trustees of the Trust or
any other class or series of the Trust.
15. When used in this Plan, the term "service fees" shall have the same
meaning as such term has in subsections (b) and (d) of Rule 2830 of the NASD
Rules. When used in this Plan, the term "vote of a majority of the outstanding
Class C voting securities of the Fund" shall mean the vote of the lesser of (a)
67 per centum or more of the Class C shares of the Fund present or represented
by proxy at the meeting if the holders of more than 50 per centum of the
outstanding Class C shares of the Fund are present or represented by proxy at
the meeting, or (b) more than 50 per centum of the outstanding Class C shares of
the Fund.
16. If any provision of this Plan shall be held or made invalid by a
court decision, statute, rule or regulation of the Securities and Exchange
Commission or otherwise, the remainder of this Plan shall not be affected
thereby.
17. This Plan shall be effective with respect to a specific Fund on the
date that Fund begins offering its Class C shares. As of such effective date
this Plan shall amend, replace and be substituted for the Original Plans
previously applicable to the Class C assets of that Fund. The outstanding
uncovered distribution charges of the Principal Underwriter calculated under the
Original Plans as of the close of business on the day preceding the date a Fund
begins offering its Class C shares shall be the outstanding uncovered
distribution charges of the Principal Underwriter with respect to such Class C
calculated under this Plan as of the opening of business on the date such shares
are offered.
Adopted June 23, 1997
* * *
<PAGE>
SCHEDULE A
EATON VANCE MUTUAL FUNDS TRUST
CLASS C DISTRIBUTION PLAN
EFFECTIVE: JUNE 23, 1997
<TABLE>
<CAPTION>
Name of Fund Adopting this Plan Date of Original Plans (Inception Date)
- ------------------------------- ---------------------------------------
<S> <C>
Eaton Vance Government Obligations Fund October 28, 1993/January 27, 1995 (January 30, 1995)
Eaton Vance High Income Fund* May 31, 1994/January 27, 1995 (January 30, 1995)/
June 19, 1995 (August 1, 1995)
Eaton Vance Strategic Income Fund** March 1, 1994/January 27, 1995 (January 30, 1995)/
June 19, 1995 (November 1, 1995)
Eaton Vance Tax-Managed Growth Fund June 24, 1996
</TABLE>
- -----------------
* This fund is a successor in operations to a fund which was reorganized,
effective August 1, 1995 and the outstanding uncovered distribution charges
of the predecessor fund were assumed by the above fund.
** This fund is a successor in operations to a fund which was reorganized,
effective November 1, 1995, and the outstanding uncovered distribution
charges of the predecessor fund were assumed by the above fund.
<PAGE>
SCHEDULE A-1
EATON VANCE MUTUAL FUNDS TRUST
CLASS C DISTRIBUTION PLAN
EFFECTIVE: AUGUST 11, 1997
Name of Fund Adopting this Plan Date of Original Plans (Inception Date)
- ------------------------------- ---------------------------------------
Eaton Vance Tax-Managed
Emerging Growth Fund N/A
<PAGE>
EXHIBIT 99.16
<TABLE>
INVESTMENT PERFORMANCE -- EATON VANCE STRATEGIC INCOME FUND - CLASS A SHARES
The table below indicates the total return (capital changes plus reinvestment of all distributions) on a hypothetical investment of
$1,000 in the Fund covering the period from November 26, 1990 through April 30, 1997 and for the 1 and 5 year periods ended
April 30, 1997. Total return for the period prior to the Fund's commencement of operations is for the Portfolio (or its
predecessor) adjusted for the Fund's sales charge.
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT INITIAL INVESTMENT EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
PERIOD DATE INVESTMENT* ON 04/30/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ------ ---- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 11/26/90 $952.38 $1,486.66 56.08% 7.17% 48.67% 6.36%
5 YEARS ENDED
04/30/97 04/30/92 $952.47 $1,340.89 40.78% 7.08% 34.09% 6.04%
1 YEAR ENDED
04/30/97 04/30/96 $952.84 $1,103.87 15.85% 15.85% 10.39% 10.39%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000 **
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period
Cumulative total return is calculated using the following formula:
T = ( ERV / P ) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period
P = an initial investment of $1,000 ***
* Initial investment less the current maximum sales charge of 4.75%.
** The average annual total return including the sales charge is calculated based on an initial investment of $1,000 less the
maximum initial sales charge of 4.75%.
*** The cumulative total return including the sales charge is calculated based on an initial investment of $1,000 less
maximum initial sales charge of 4.75%.
</TABLE>
<PAGE>
Exhibit 16
EATON VANCE STRATEGIC INCOME FUND - CLASS B
CALCULATION OF YIELD
For the 30 days ended 4/30/97:
Interest Income Earned: $830,484
Plus
----------
Equal Gross Income: $830,484
Minus Expenses: $221,582
----------
Equal Net Investment Income: $608,902
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 13,617,697
----------
Equal Net Investment Income Earned Per Share: $0.0447
Maximum Offering Price Per Share 4/30/97: $9.50
30 Day Yield*: 5.71%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0505/$12.06)+1) -1]
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EATON VANCE STRATEGIC INCOME FUND - CLASS B SHARES
The table below indicates the total return (capital changes plus reinvestment of all distributions) on a hypothetical investment of
$1,000 in the Fund covering the period from November 26, 1990 through April 30, 1997 and for the 1 and 5 year periods ended
April 30, 1997.
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC BEFORE DEDUCTING CDSC AFTER DEDUCTING CDSC
PERIOD DATE ON 04/30/97 ON 04/30/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ------ ---- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 11/26/90 $1,560.83 $1,560.83 56.08% 7.17% 56.08% 7.17%
5 YEARS ENDED
04/30/97 04/30/92 $1,407.80 $1,388.45 40.78% 7.08% 38.84% 6.78%
1 YEAR ENDED
04/30/97 04/30/96 $1,158.51 $1,108.51 15.85% 15.85% 10.85% 10.85%
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
EATON VANCE STRATEGIC INCOME FUND - CLASS C
CALCULATION OF YIELD
For the 30 days ended 4/30/97:
Interest Income Earned: $3,565
Plus
----------
Equal Gross Income: $3,565
Minus Expenses: $1,085
----------
Equal Net Investment Income: $2,480
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 49,096
----------
Equal Net Investment Income Earned Per Share: $0.0505
Maximum Offering Price Per Share 4/30/97: $12.06
30 Day Yield*: 5.08%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0505/$12.06)+1) -1]
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EATON VANCE STRATEGIC INCOME FUND - CLASS C SHARES
The table below indicates the total return (capital changes plus reinvestment of all distributions) on a hypothetical investment of
$1,000 in the Fund covering the period from November 26, 1990 through April 30, 1997 and for the 1 and 5 year periods ended
April 30, 1997. Total return for the period prior to the Fund's commencement of operations is for the Portfolio (or its
predecessor) adjusted for the Fund's sales charge.
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC BEFORE DEDUCTING CDSC AFTER DEDUCTING CDSC
PERIOD DATE ON 04/30/97 ON 04/30/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ------ ---- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 11/26/90 $1,575.82 $1,575.82 57.58% 7.33% 57.58% 7.33%
5 YEARS ENDED
04/30/97 04/30/92 $1,421.19 $1,421.19 42.12% 7.28% 42.12% 7.28%
1 YEAR ENDED
04/30/97 04/30/96 $1,149.93 $1,139.93 14.99% 14.99% 13.99% 13.99%
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>
<TABLE>
INVESTMENT PERFORMANCE -- EATON VANCE TAX-MANAGED GROWTH FUND - CLASS A SHARES
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 April 30, 1997. Total return for the period prior to the
Fund's commencement of operations is for the Portfolio (or its predecessor) adjusted for the Fund's sales charge.
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT INITIAL INVESTMENT EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
PERIOD DATE INVESTMENT* ON 04/30/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ------ ---- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
10 YEARS ENDED
04/30/97 04/30/87 $942.37 $3,210.73 240.72% 13.04% 221.07% 12.37%
5 YEARS ENDED
04/30/97 04/30/92 $942.89 $2,060.14 118.49% 16.92% 106.01% 15.55%
1 YEAR ENDED
04/30/97 04/30/96 $942.81 $1,162.36 23.29% 23.29% 16.24% 16.24%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000 **
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period
Cumulative total return is calculated using the following formula:
T = ( ERV / P ) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period
P = an initial investment of $1,000 ***
* Initial investment less the current maximum sales charge of 5.75%.
** The average annual total return including the sales charge is calculated based on an initial investment of $1,000 less the
maximum initial sales charge of 5.75%.
*** The cumulative total return including the sales charge is calculated based on an initial investment of $1,000 less
maximum initial sales charge of 5.75%.
</TABLE>
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EATON VANCE TAX-MANAGED GROWTH FUND - CLASS B SHARES
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 April 30, 1997. Total return for the period prior to the
Fund's commencement of operations is for the Portfolio (or its predecessor) adjusted for the Fund's sales charge.
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC BEFORE DEDUCTING CDSC AFTER DEDUCTING CDSC
PERIOD DATE ON 04/30/97 ON 04/30/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ------ ---- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
10 YEARS ENDED
04/30/97 04/30/87 $3,385.53 $3,385.53 238.55% 12.97% 238.55% 12.97%
5 YEARS ENDED
04/30/97 04/30/92 $2,171.07 $2,151.07 117.11% 16.77% 115.11% 16.55%
1 YEAR ENDED
04/30/97 04/30/96 $1,226.25 $1,176.25 22.62% 22.62% 17.62% 17.62%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC *
Cumulative total return is calculated using the following formula:
T = ( ERV / P ) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC **
P = an initial investment of $1,000
* The average annual total return not including the CDSC is calculated based on the ending investment value
before deducting the CDSC.
** The cumulative total return not including the CDSC is calculated based on the ending investment value before
deducting the CDSC.
</TABLE>
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EATON VANCE TAX-MANAGED GROWTH FUND - CLASS C SHARES
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 April 30, 1997. Total return for the period prior to the
Fund's commencement of operations is for the Portfolio (or its predecessor) adjusted for the Fund's sales charge.
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC BEFORE DEDUCTING CDSC AFTER DEDUCTING CDSC
PERIOD DATE ON 04/30/97 ON 04/30/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ------ ---- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
10 YEARS ENDED
04/30/97 04/30/87 $3,370.71 $3,370.71 237.07% 12.92% 237.07% 12.92%
5 YEARS ENDED
04/30/97 04/30/92 $2,161.53 $2,161.53 116.15% 16.67% 116.15% 16.67%
1 YEAR ENDED
04/30/97 04/30/96 $1,221.09 $1,211.09 22.11% 22.11% 21.11% 21.11%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC *
Cumulative total return is calculated using the following formula:
T = ( ERV / P ) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC **
P = an initial investment of $1,000
* The average annual total return not including the CDSC is calculated based on the ending investment value
before deducting the CDSC.
** The cumulative total return not including the CDSC is calculated based on the ending investment value before
deducting the CDSC.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 5
<NAME>EV MARATHON STRATEGIC INCOME FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> APR-30-1997
<INVESTMENTS-AT-COST> 123,971
<INVESTMENTS-AT-VALUE> 129,827
<RECEIVABLES> 239
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 130,066
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,059
<TOTAL-LIABILITIES> 1,059
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 131,966
<SHARES-COMMON-STOCK> 13,582
<SHARES-COMMON-PRIOR> 13,932
<ACCUMULATED-NII-CURRENT> (1,333)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (7,481)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 5,856
<NET-ASSETS> 129,007
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 5,383
<EXPENSES-NET> 817
<NET-INVESTMENT-INCOME> 4,566
<REALIZED-GAINS-CURRENT> 5,468
<APPREC-INCREASE-CURRENT> (1,989)
<NET-CHANGE-FROM-OPS> 8,045
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (4,566)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (811)
<NUMBER-OF-SHARES-SOLD> 8,676
<NUMBER-OF-SHARES-REDEEMED> (14,576)
<SHARES-REINVESTED> 2,568
<NET-CHANGE-IN-ASSETS> (664)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 817
<AVERAGE-NET-ASSETS> 133,258
<PER-SHARE-NAV-BEGIN> 12.09
<PER-SHARE-NII> 0.557
<PER-SHARE-GAIN-APPREC> (2.424)
<PER-SHARE-DIVIDEND> (0.489)
<PER-SHARE-DISTRIBUTIONS> (0.234)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 9.50
<EXPENSE-RATIO> 2.14
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<NAME>STRATEGIC INCOME PORTFOLIO
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> APR-30-1997
<INVESTMENTS-AT-COST> 125,651
<INVESTMENTS-AT-VALUE> 128,107
<RECEIVABLES> 7,031
<ASSETS-OTHER> 85
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 135,223
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4,788
<TOTAL-LIABILITIES> 4,788
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 124,539
<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> 5,896
<NET-ASSETS> 130,435
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 6,028
<OTHER-INCOME> 0
<EXPENSES-NET> 583
<NET-INVESTMENT-INCOME> 5,445
<REALIZED-GAINS-CURRENT> 5,551
<APPREC-INCREASE-CURRENT> (2,022)
<NET-CHANGE-FROM-OPS> 8,974
<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> (1,971)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 349
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 583
<AVERAGE-NET-ASSETS> 133,258
<PER-SHARE-NAV-BEGIN> 0.00
<PER-SHARE-NII> 0.000
<PER-SHARE-GAIN-APPREC> 0.000
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 0.00
<EXPENSE-RATIO> 0.88
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 5
<NAME> EV MARATHON STRATEGIC INCOME FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 122,880
<INVESTMENTS-AT-VALUE> 130,725
<RECEIVABLES> 22
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 130,747
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,076
<TOTAL-LIABILITIES> 1,076
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 135,297
<SHARES-COMMON-STOCK> 13,932
<SHARES-COMMON-PRIOR> 17,745
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (2,003)
<ACCUMULATED-NET-GAINS> (11,467)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 7,844
<NET-ASSETS> 129,671
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 11,898
<EXPENSES-NET> 1,788
<NET-INVESTMENT-INCOME> 10,110
<REALIZED-GAINS-CURRENT> 9,539
<APPREC-INCREASE-CURRENT> 3,748
<NET-CHANGE-FROM-OPS> 23,397
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 10,110
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 749
<NUMBER-OF-SHARES-SOLD> 802
<NUMBER-OF-SHARES-REDEEMED> 5,224
<SHARES-REINVESTED> 609
<NET-CHANGE-IN-ASSETS> (21,095)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,788
<AVERAGE-NET-ASSETS> 137,039
<PER-SHARE-NAV-BEGIN> 8.50
<PER-SHARE-NII> 0.655
<PER-SHARE-GAIN-APPREC> 0.858
<PER-SHARE-DIVIDEND> (0.655)
<PER-SHARE-DISTRIBUTIONS> (0.048)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 9.31
<EXPENSE-RATIO> 2.17
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 120,286
<INVESTMENTS-AT-VALUE> 125,214
<RECEIVABLES> 4,255
<ASSETS-OTHER> 19
<OTHER-ITEMS-ASSETS> 2,972
<TOTAL-ASSETS> 132,460
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 53
<TOTAL-LIABILITIES> 53
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 124,489
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 7,918
<NET-ASSETS> 132,407
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 13,181
<EXPENSES-NET> 1,199
<NET-INVESTMENT-INCOME> 11,982
<REALIZED-GAINS-CURRENT> 9,573
<APPREC-INCREASE-CURRENT> 3,821
<NET-CHANGE-FROM-OPS> 25,376
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
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<NAME>EV MARATHON TAX-MANAGED GROWTH FUND
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
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<NAME>TAX-MANAGED GROWTH PORTFOLIO
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
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<NAME>EV MARATHON TAX-MANAGED GROWTH FUND
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