<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 26, 1998
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. 41 [X]
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 44 [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 pursuant [ ] on (date) pursuant to
to paragraph(b) paragraph (a)(1)
[X] on March 1, 1998 pursuant to [ ] 75 days after filing pursuant
paragraph (b) to paragraph (a)(2)
[ ] 60 days after filing pursuant to [ ] on (date) 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 Combined Prospectus of:
Eaton Vance Tax-Managed Growth Fund
Eaton Vance Tax-Managed Emerging Growth Fund
The Prospectus of:
Eaton Vance Strategic Income Fund
Part B--The Combined Statement of Additional Information of:
Eaton Vance Tax-Managed Growth Fund
Eaton Vance Tax-Managed Emerging Growth Fund
The Statement of Additional Information of:
Eaton Vance Strategic Income Fund
Part C--Other Information
Signatures
Exhibit Index Required by Rule 483(b) under the Securities Act of 1933
Exhibits
This Amendment is not intended to amend the Prospectus and Statement of
Additional Information of any series of the Registrant not identified above.
<PAGE>
EATON VANCE MUTUAL FUNDS TRUST
CROSS REFERENCE SHEET FOR
EATON VANCE STRATEGIC INCOME FUND
ITEMS REQUIRED BY FORM N-1A
PART A
ITEM NO. ITEM CAPTION PROSPECTUS CAPTION
- ------- ------------ -------------------------------
1. ............ Cover Page Cover Page
2. ............ Synopsis Shareholder and Fund Expenses
3. ............ Condensed Financial The Fund's Financial Highlights;
Information Performance Information
4. ............ General Description of The Fund's Investment
Registrant Objective; Investment
Policies and Risks;
Organization of the Fund and
the Portfolio
5. ............ Management of the Fund Management of the Fund and the
Portfolio
5A............. Management's Discussion of Not Applicable
Fund Performance
6. ............ Capital Stock and Other Organization of the Fund and
Securities the Portfolio; Reports to
Shareholders; The Lifetime
Investing Account/
Distribution Options;
Distributions and Taxes
7. ............ Purchase of Securities Valuing 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
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;
Other Information
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>
EATON VANCE MUTUAL FUNDS TRUST
CROSS REFERENCE SHEET FOR
EATON VANCE TAX-MANAGED GROWTH FUND
EATON VANCE TAX-MANAGED EMERGING 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 Funds' Financial
Information Highlights; Performance
Information
4. ............ General Description of The Funds' Investment
Registrant Objectives; The Tax-Managed
Mutual Fund Advantage;
Investment Policies and
Risks; Organization of the
Funds and the Portfolio
5. ............ Management of the Fund Management of the Funds and the
Portfolio
5A............. Management's Discussion of Not Applicable
Fund Performance
6. ............ Capital Stock and Other Organization of the Funds and
Securities the Portfolio; Reports to
Shareholders; The Lifetime
Investing Account/
Distribution Options;
Distributions and Taxes
7. ............ Purchase of Securities Valuing 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
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
Certified Public Accountants;
Other Information
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>
Investing
[GRAPHIC OMITTED] for the
21st Eaton Vance Tax-Managed Growth Fund
Century Eaton Vance Tax-Managed Emerging Growth Fund
EATON VANCE TAX-MANAGED GROWTH FUND ("TAX-MANAGED GROWTH") IS A MUTUAL FUND
SEEKING LONG-TERM, AFTER-TAX RETURNS FOR ITS SHAREHOLDERS THROUGH INVESTING IN A
DIVERSIFIED PORTFOLIO OF EQUITY SECURITIES. Tax-Managed Growth currently pursues
its investment objective by investing its assets in Tax-Managed Growth Portfolio
(the "Portfolio"), a separate mutual fund having the same investment objective
as Tax-Managed Growth, rather than by investing directly in and managing its own
portfolio of securities. The Fund is a series of Eaton Vance Mutual Funds Trust
(the "Trust").
EATON VANCE TAX-MANAGED EMERGING GROWTH FUND ("TAX-MANAGED EMERGING GROWTH") IS
A MUTUAL FUND SEEKING LONG-TERM, AFTER-TAX RETURNS FOR ITS SHAREHOLDERS THROUGH
INVESTING DIRECTLY IN A DIVERSIFIED PORTFOLIO OF EQUITY SECURITIES OF EMERGING
GROWTH COMPANIES. The Fund is also a series of the Trust.
SHARES OF THE FUNDS 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 FUNDS INVOLVE
INVESTMENT RISKS, INCLUDING FLUCTUATIONS IN VALUE AND THE POSSIBLE LOSS OF SOME
OR ALL OF THE PRINCIPAL INVESTMENT.
This combined Prospectus is designed to provide you with information you should
know before investing. Please retain this document for future reference. A
combined Statement of Additional Information dated March 1, 1998, 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 Funds'
principal underwriter, Eaton Vance Distributors, Inc. (the "Principal
Underwriter"), 24 Federal Street, Boston, MA 02110 (telephone (800) 225-6265).
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.
CONTENTS
<TABLE>
<CAPTION>
Page Page
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Shareholder and Fund Expenses 2 How to Buy Shares 12
The Funds' Financial Highlights 4 How to Redeem Shares 14
The Funds' Investment Objectives 5 Reports to Shareholders 15
The Tax-Managed Mutual Fund Advantage 5 The Lifetime Investing Account/Distribution Options 15
Investment Policies and Risks 6 The Eaton Vance Exchange Privilege 16
Organization of the Funds and the Portfolio 8 Eaton Vance Shareholder Services 17
Management of the Funds and the Portfolio 9 Distributions and Taxes 18
Distribution and Service Plans 10 Performance Information 18
Valuing Shares 11
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
Prospectus dated March 1, 1998
<PAGE>
SHAREHOLDER AND FUND EXPENSES
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
Class A Class B Class C
Shares Shares Shares
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <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)
<CAPTION>
Rule 12b-1
Investment Distribution Total
Adviser and/or Other Operating
Fees Service Fees Expenses Expenses
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax-Managed Growth
Class A shares 0.532% 0.050% 0.188% 0.770%
Class B shares 0.532 0.780 0.188 1.500
Class C shares 0.532 1.000 0.188 1.720
Tax-Managed Emerging Growth
Class A shares* 0.625% 0.000% 0.280% 0.905%
Class B shares* 0.625 0.750 0.280 1.655
Class C shares 0.625 1.000 0.280 1.905
*Payment of the Tax-Managed Emerging Growth Class A and Class B service fee will commence in the third quarter of 1998.
See note below.
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 (and, for Class B and Class C, no redemption):
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax-Managed Growth
Class A shares $65 $ 81 $ 98 $147
Class B shares 65 87 102 179
Class B shares (no redemption) 15 47 82 179
Class C shares 27 54 93 203
Class C shares (no redemption) 17 54 93 203
Tax-Managed Emerging Growth
Class A shares $66 $ 85 N/A N/A
Class B shares 67 192 N/A N/A
Class B shares (no redemption) 17 52 N/A N/A
Class C shares 29 19 N/A N/A
Class C shares (no redemption) 60 60 N/A N/A
</TABLE>
<PAGE>
NOTES: The table and Examples summarize the aggregate expenses of each Class of
shares of the Funds (including, in the case of Tax-Managed Growth, the
Portfolio) and are designed to help investors understand the costs and expenses
they will bear, directly or indirectly, by investing in a Fund. Information for
Class B shares of Tax-Managed Growth is for the most recent fiscal year.
Information for Class A and Class C shares of Tax-Managed Growth is estimated
based upon the most recent fiscal year of its predecessor fund adjusted for the
multiple-class structure. Information for each Class of Tax- Managed Emerging
Growth is estimated based on the most recent fiscal year because Tax-Managed
Emerging Growth has only recently been organized.
Each 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 EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES, AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. Federal
regulations require the Examples to assume a 5% annual return, but actual annual
return will vary. 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 Funds and the Portfolio see "The
Funds" Financial Highlights," "Management of the Funds and the Portfolio,"
"Distribution and Service Plans," and "How to Redeem Shares."
For Class A and Class B shares sold by Authorized Firms and remaining
outstanding for at least one year, Tax-Managed Emerging Growth will pay service
fees not exceeding .25% per annum of the average daily net assets of such
classes. Tax-Managed Emerging Growth expects to begin making service fee
payments during the quarter ending December 31, 1998. Therefore, expenses after
year one will be higher. See "Distribution and Service Plans."
Tax-Managed Growth invests exclusively in the Portfolio. Other investors with
different distribution arrangements and fees are investing in the Portfolio and
others may do so in the future. See "Organization of the Funds and the
Portfolio."
<PAGE>
THE FUNDS' FINANCIAL HIGHLIGHTS
The following information should be read in conjunction with the audited
financial statements that appear in the Funds' annual reports to shareholders.
The Funds' financial statements have been audited by Deloitte & Touche LLP,
independent certified public accountants, as experts in accounting and auditing.
The financial statements and the independent auditors' report are incorporated
by reference into the Statement of Additional Information. Further information
regarding the performance of a Fund is contained in its annual report to
shareholders which may be obtained without charge by contacting the Principal
Underwriter. The financial information for each of the periods presented in
Tax-Managed Growth'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 of Tax-Managed Growth 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>
Tax-Managed Growth (Class B Shares)
----------------------------------
Year Ended October 31,
----------------------------------
1997 1996*
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $ 11.150 $10.000
-------- -------
Income (loss) from operations:
Net investment loss $ (0.011) $(0.003)
Net realized and unrealized gain on investments 3.411 1.153
-------- -------
Total income from operations $ 3.400 $ 1.150
-------- -------
Net asset value, end of period $ 14.550 $11.150
======== =======
Total return(1) 30.49% 11.50%
Portfolio turnover of the Portfolio 14% 6%
Ratios/Supplemental data:
Net assets, end of period (000 omitted) $574,740 $77,644
Ratio of net expenses to average daily net assets(3) 1.50% 1.63%+
Ratio of net investment loss to average daily net assets (0.15)% (0.13)%+
<CAPTION>
Tax-Managed Emerging Growth
--------------------------------
Period Ended October 31, 1997*
--------------------------------
Class A Class B Class C
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $10.000 $10.000 $10.000
------- ------- -------
Income (loss) from operations:
Net investment income $ 0.008 $ 0.005 $ 0.003
Net realized and unrealized loss on investments (0.268) (0.265) (0.283)
------- ------- -------
Net loss from operations $(0.260) $(0.260) $(0.280)
------- ------- -------
Net asset value, end of period $ 9.740 $ 9.740 $ 9.720
------- ------- -------
Total Return(1) (2.60)% (2.60)% (2.80)%
------- ------- -------
Portfolio Turnover 7.00% 7.00% 7.00%
------- ------- -------
Average Commission Rate(2) $0.0600 $0.0600 $0.0600
Ratios/Supplemental data:
Net assets, end of period (000 omitted) $ 3,925 $ 8,613 $ 2,051
Ratio of net expenses to average daily net assets 0.63%+ 1.37%+ 1.56%+
Ratio of net investment income to average daily net assets 1.83%+ 1.13%+ 0.90%+
+ Computed on an annualized basis.
* For Tax-Managed Growth for the period from the start of business, March 28, 1996, to October 31, 1996
and for Tax-Managed Emerging Growth for Class A for the period from the start of bu siness, September
25, 1997, to October 31, 1997 and for Class B and Cla ss C for the period from the start of business,
September 29, 1 997, to October 31, 1997.
(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 ex-dividend date. Total return is computed on a non-annualized basis.
(2) Average commission rate paid is computed by dividing the total dollar amount of commissions paid during the
fiscal year by the total number of shares purchased and sold during the fiscal year for which commissions
were charged.
(3) Includes Tax-Managed Growth's share of the Portfolio's allocated expenses.
</TABLE>
<PAGE>
THE FUNDS' INVESTMENT OBJECTIVES
TAX-MANAGED GROWTH'S INVESTMENT OBJECTIVE IS TO ACHIEVE LONG-TERM, AFTER-TAX
RETURNS FOR ITS SHAREHOLDERS THROUGH INVESTING IN A DIVERSIFIED PORTFOLIO OF
EQUITY SECURITIES. Tax-Managed Growth 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 Tax-Managed
Growth to participate in a well-established investment portfolio without being
exposed to the unrealized gains accrued prior to Tax-Managed Growth's
operations.
TAX-MANAGED EMERGING GROWTH'S INVESTMENT OBJECTIVE IS TO ACHIEVE LONG-TERM,
AFTER-TAX RETURNS FOR ITS SHAREHOLDERS THROUGH INVESTING IN A DIVERSIFIED
PORTFOLIO OF EQUITY SECURITIES OF EMERGING GROWTH COMPANIES.
Each Fund seeks to achieve after-tax returns in part by minimizing the taxes
Fund shareholders incur in connection with 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.
Each Fund is designed for long-term taxable investors and 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. No Fund can assure achievement of its investment objective. While each
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 objective of
each Fund and the Portfolio are fundamental, and may not be changed unless
authorized by a shareholder vote.
Boston Management and Research ("BMR"), a wholly-owned subsidiary of Eaton Vance
Management ("Eaton Vance"), serves as investment adviser to the Portfolio. Eaton
Vance serves as investment adviser to Tax-Managed Emerging Growth. BMR and Eaton
Vance are each sometimes referred to herein as an "Adviser" or collectively as
the "Advisers." Eaton Vance also acts as the administrator (the "Administrator")
of the Funds. The offices of the Investment Adviser and the Administrator are
located at 24 Federal Street, Boston, MA 02110.
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, each 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 a Fund. Each 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 Funds are similar to retirement planning products such as variable annuities
and IRAs in that they are vehicles for long-term, tax-deferred investing. As
mutual funds, however, the Funds avoid 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 Funds. Eligibility to invest in IRAs and annual contributions to IRAs are
limited. Contributions to deductible IRAs can be made from pre-tax dollars and
distributions from Roth IRAs are not taxed if certain requirements are met.
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 Funds
cannot be predicted.
INVESTMENT POLICIES AND RISKS
TAX-MANAGED GROWTH PORTFOLIO. 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 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.
A substantial portion of the assets of the Portfolio are securities with large
accumulated capital gains that have been contributed by investors in the
Portfolio. As a general matter, the Portfolio will not sell appreciated
securities contributed to the Portfolio if such a sale would give rise to the
recognition of capital gains accumulated prior to investment in the Portfolio by
the investor in the Portfolio who contributed the securities, but will instead
seek to manage its exposure to such securities by using hedging techniques as
appropriate. The Portfolio follows the practice of distributing selected
appreciated securities to meet redemptions of certain investors and may, within
certain limits, use the selection of securities distributed to meet such
redemptions as a management tool. By distributing appreciated securities the
Portfolio can reduce its position in such securities without realizing capital
gains. During periods of net withdrawals by investors in the Portfolio, using
distributions of securities also enables the Portfolio to avoid the forced sale
of securities to raise cash for meeting redemptions. The Portfolio's ability to
select the securities used to meet redemptions is limited with respect to
redemptions by investors in the Portfolio who contributed securities, and with
respect to the securities contributed by such investors in the Portfolio. See
the Statement of Addtional Information. Such limitations could affect the
performance of the Portfolio, and, therefore, Tax-Managed Growth.
TAX-MANAGED EMERGING GROWTH. Tax-Managed Emerging Growth invests in a broadly
diversified selection of publicly-traded equity securities of emerging growth
companies that are believed to have superior long-term earnings growth
prospects. In the view of Eaton Vance, "emerging growth companies" are companies
that are expected to demonstrate earnings growth rates and profit margins over
the long term that are substantially in excess of the average of all
publicly-traded companies in the U.S. It is expected that most emerging growth
companies invested in by Tax-Managed Emerging Growth will have annual revenues
of between $50 million and $1 billion at the time of acquisition, but the Fund
may also invest in larger and smaller companies identified as having
characteristics of emerging growth. Eaton Vance believes that investing in
emerging growth companies offers significant opportunities for long-term capital
appreciation, particularly if Tax-Managed Emerging Growth can invest in such
companies before their potential is broadly recognized by investors.
Under normal market conditions, Tax-Managed Emerging Growth will invest at least
65% of its total assets in equity securities of emerging growth companies. For
this purpose, equity securities include common stocks and securities convertible
into common stocks. In selecting companies for investment, Eaton Vance may
consider overall growth prospects, financial condition, competitive position,
technology, marketing expertise, profit margins, return on investment, capital
resources, management and other factors. Tax-Managed Emerging Growth may invest
up to 35% of its assets in preferred stocks, warrants, money market instruments
(to meet anticipated redemption requests or while investment of cash is pending)
and other securities and instruments described in this Prospectus. For temporary
defensive purposes, such as during abnormal market or economic conditions,
Tax-Managed Emerging Growth may also invest without limitation in various money
market instruments and high grade debt obligations.
Tax-Managed Emerging Growth's investments will include investments in smaller
companies for which there is less publicly available information than larger,
more established companies. The securities of these companies, which may include
legally restricted securities, are generally subject to greater price
fluctuations, limited liquidity, higher transaction costs and higher investment
risk. These companies may have limited product lines, markets or financial
resources, or they may be dependent on a limited management group. Investments
in smaller companies may involve a higher degree of business and financial risk
that can result in substantial losses.
An investment in either Fund entails the risk that the principal value of Fund
shares may not increase or may decline.
TAX MANAGEMENT STRATEGIES. Assets will be managed for long-term, after-tax
returns. In managing investments, the Advisers will generally avoid selling
securities with large accumulated capital gains. Over time, such securities may
comprise a substantial portion of assets. Although certain hedging strategies
may be used in lieu of selling appreciated securities, a Fund's exposure to
losses during stock market declines may nonetheless become higher than that of
other funds investing in similar securities that do not follow a general policy
of avoiding sales of highly-appreciated securities.
Taxes on realized capital gains are minimized in part by maintaining relatively
low portfolio turnover, investing primarily in the above-described companies
with characteristics of above-average growth that are acquired with the
expectation of being held for a period of years. The realization of short-term
and mid-term capital gains generally will be avoided. When a decision is made to
sell a particular appreciated security, share lots selected for sale will be
those with holding periods sufficient to qualify for long-term capital gains
treatment and among those, the share lots with the highest cost basis. When
prudent, securities may be sold to realize capital losses that can be used to
offset realized capital gains.
In their operations, the Portfolio and Tax-Managed Emerging Growth seek to
achieve after-tax returns for their shareholders in part by minimizing the taxes
they incur in connection with investment income and realized capital gains.
Taxes on investment income are minimized by investing primarily in lower
yielding securities. The Funds can be expected to distribute relatively low
levels of taxable investment income, if any.
To protect against price declines in securities holdings that have developed
large accumulated capital gains, tax-advantaged hedging techniques may be
employed 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. Using these techniques
rather than selling such securities may reduce exposure to price declines in
certain securities without realizing substantial capital gains under current tax
law. The ability to use short sales against-the-box, certain 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 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 each 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 all 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 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. See "How to Redeem Shares." A redeeming shareholder of a
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 a
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 and Tax-Managed Emerging Growth can minimize the
extent to which shareholders incur taxes on Fund distributions of income and net
realized gains. Nevertheless, distributions may be made of taxable income or
gains from time to time.
INVESTING IN FOREIGN SECURITIES. The Portfolio may invest up to 25% and Tax-
Managed Emerging Growth may invest up to 20% of 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. Dividends on foreign stocks are generally subject to
withholding taxes. 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. Holdings of illiquid securities by each of the Portfolio and Tax-Managed
Emerging Growth may not exceed 15% of its net assets. Illiquid securities
include securities legally restricted as to resale, and may include 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 an 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. Ownership of
such securities may increase the level of portfolio illiquidity to the extent
qualified institutional buyers become uninterested in purchasing such
securities.
DERIVATIVE INVESTMENTS. The Portfolio and Tax-Managed Emerging Growth may
purchase or sell derivative instruments to hedge against securities price
declines and currency movements and to enhance returns. Transactions in
derivative instruments (which derive their value by reference to other
securities, indices, instruments, or currencies) may be conducted 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; equity swaps; and the
purchase and sale of forward currency exchange contracts and currency futures.
Transactions in derivative instruments may be used 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, they will not be used to leverage assets.
The purchase and sale of derivative instruments is a highly specialized activity
that can expose the Portfolio and Tax-Managed Emerging Growth 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. The use of
futures for nonhedging purposes is limited by regulations of the Commodity
Futures Trading Commission. There can be no assurance that the use of derivative
instruments will be advantageous.
Equity swaps and over-the-counter options contracts will only be entered into
with counterparties whose credit quality or claims paying ability are considered
to be investment grade by the Advisers. In addition, at the time of entering
into a transaction, the Portfolio's and Tax-Managed Emerging Growth's credit
exposure to any one counterparty will be limited to 5% or less of net assets.
The Portfolio's and Tax-Managed Emerging Growth's investment in illiquid assets,
which may 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.
LENDING OF PORTFOLIO SECURITIES. The Portfolio and Tax-Managed Emerging Growth
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 Advisers to be sufficiently
creditworthy and when, in the judgment of the Advisers, the consideration which
can be earned from securities loans of this type, net of administrative expenses
and finders' fees, justifies the attendant risk. The value of securities loaned
by each of the Portfolio and Tax-Managed Emerging Growth will not exceed 33% of
its total assets.
CERTAIN INVESTMENT POLICIES. The Funds 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. 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 such enumerated restrictions and as otherwise
indicated in the Prospectus, the policies of the Funds 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 a Fund
or the investors in the Portfolio, as the case may be. Each of the Portfolio and
Tax-Managed Emerging Growth may temporarily borrow up to 5% of the value of its
total assets to satisfy redemption requests or settle securities transactions.
ORGANIZATION OF THE FUNDS AND THE PORTFOLIO
EACH FUND IS A DIVERSIFIED SERIES OF EATON VANCE MUTUAL FUNDS TRUST, A BUSINESS
TRUST ESTABLISHED UNDER MASSACHUSETTS LAW PURSUANT TO A DECLARATION OF TRUST
DATED MAY 7, 1984, AS AMENDED. The Trustees of the Trust are responsible for the
overall management and supervision of its affairs. The Trust may issue an
unlimited number of shares of beneficial interest (no par value per share) in
one or more series (such as a Fund). The Trustees of the Trust have divided the
shares of each Fund into multiple classes, including Class A, Class B and Class
C shares. Each class represents an interest in a 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,
Tax-Managed Growth commenced offering Class A, Class B and Class 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 a 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 a 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 Tax-Managed Growth 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 Tax-Managed Growth 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 Tax-Managed Growth, 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
Tax-Managed Growth 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 Tax-Managed Growth 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), Tax-Managed Growth 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. Tax-Managed Growth 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
Tax-Managed Growth 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, Tax-Managed Growth 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 Tax- Managed Growth.
Tax-Managed Growth 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 Tax-Managed Growth
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
Tax-Managed Growth in another pooled investment entity or retaining an
investment adviser to manage the Fund's assets in accordance with its investment
objective. Tax-Managed Growth'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.
Although each Fund offers only its own shares of beneficial interest, it is
possible that a Fund or class might become liable for a misstatement or omission
in the Prospectus regarding another Fund or class because the Funds use this
combined Prospectus. The Trustees of the Trust have considered this factor in
approving the use of a combined prospectus.
MANAGEMENT OF THE FUNDS AND THE PORTFOLIO
THE TRUST ENGAGES EATON VANCE AS TAX-MANAGED EMERGING GROWTH'S INVESTMENT
ADVISER. THE PORTFOLIO ENGAGES BMR, A WHOLLY-OWNED SUBSIDIARY OF 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 OR EATON VANCE ACTS AS
INVESTMENT ADVISER TO INVESTMENT COMPANIES AND VARIOUS INDIVIDUAL AND
INSTITUTIONAL CLIENTS WITH ASSETS UNDER MANAGEMENT OF APPROXIMATELY $22 BILLION.
EATON VANCE HAS BEEN MANAGING INVESTMENT COMPANIES WITH OBJECTIVES SIMILAR TO
THAT OF EACH 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 the portfolio manager of the Portfolio since
it commenced operations and of its predecessor in investment operations (Capital
Exchange Fund) since 1990. He manages other Eaton Vance portfolios and is a Vice
President of Eaton Vance and BMR.
Edward E. Smiley, Jr. has acted as the portfolio manager of Tax-Managed Emerging
Growth since it commenced operations. He has been a Vice President of Eaton
Vance and BMR since 1996. Prior to joining Eaton Vance, he was a Senior Product
Manager, Equity Management for TradeStreet Investment Associates, Inc., a
wholly-owned subsidiary of NationsBank.
BMR and Eaton Vance, acting under the general supervision of the relevant Board
of Trustees, manage the investments and affairs of Tax-Managed Emerging Growth
and the Portfolio, repectively, pursuant to an investment advisory agreement.
The Advisers also furnish office space and all necessary office facilities,
equipment and personnel for servicing the investments of the Fund and the
Portfolio.
Under their respective investment advisory agreements, each of Tax-Managed
Emerging Growth and the Portfolio pays its Adviser a monthly advisory fee of
5/96 of 1% (equivalent to 0.625% annually) of average daily net assets 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 fiscal year ended October 31, 1997, the Portfolio paid BMR advisory fees
equivalent to 0.532% of the Portfolio's average daily net assets for such
period. For the period from the start of business, September 25, 1997, to
October 31, 1997, Tax-Managed Emerging Growth paid Eaton Vance advisory fees
equivalent to 0.625% (annualized) of the Fund's average daily net assets for
such period.
The Advisers place the portfolio securities transactions of Tax-Managed Emerging
Growth and the Portfolio with many broker-dealer firms and use their best
efforts to obtain execution of such transactions at prices which are
advantageous and at reasonably competitive commission rates. Subject to the
foregoing, the Advisers may consider sales of shares of a 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 the Advisers have adopted Codes of Ethics relating to personal
securities transactions. The Codes permit personnel of the Advisers to invest in
securities (including securities that may be purchased or held by Tax-Managed
Emerging Growth or 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 each Fund's
administrator. The Trust has not retained the services of an investment adviser
for Tax-Managed Growth since the Trust seeks to achieve the investment objective
of that Fund by investing its assets in the Portfolio. As Administrator, Eaton
Vance provides the Funds with general office facilities and supervises the
overall administration of the Funds. For these services Eaton Vance currently
receives no compensation. The Trustees of the Trust may determine, in the
future, to compensate Eaton Vance for such services.
The Funds 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 an
Adviser under an investment advisory agreement, by Eaton Vance under the
administrative services agreements, 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 each 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. Tax-Managed
Emerging Growth expects to begin making Class A service fee payments during the
quarter ending December 31, 1998.
The Trust has also adopted compensation-type Distribution Plans (the "Class B
Plan" and "Class C Plan") pursuant to Rule 12b-1 under the Investment Company
Act of 1940 (the "1940 Act") for each 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 due the Principal Underwriter plus interest, less the above
fees and CDSCs received by it) may exist indefinitely. During the fiscal year
ended October 31, 1997, Tax-Managed Growth Class B (which was then a separate
series fund) paid or accrued sales commissions equivalent to .75% of average
daily net assets. For the period from the start of business September 29, 1997,
to October 31, 1997, Tax-Managed Emerging Growth Class B and Class C paid or
accrued sales commissions equivalent to .75% (annualized) of average daily net
assets. As at October 31, 1997, the outstanding uncovered distribution charges
calculated under the Tax-Managed Growth and Tax-Managed Emerging Growth Class B
Plans and under the Tax-Managed Emerging Growth Class C Plan amounted to
approximately $19,923,000, $415,000 and $122,000, respectively (equivalent to
3.5%, 4.8% and 5.9%, respectively, of net assets on such day).
THE CLASS B AND CLASS C PLANS ALSO AUTHORIZE EACH SUCH CLASS TO MAKE PAYMENTS OF
SERVICE FEES TO THE PRINCIPAL UNDERWRITER, AUTHORIZED FIRMS AND OTHER PERSONS IN
AMOUNTS NOT EXCEEDING .25% OF 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, 1997, Tax-Managed Growth Class B and Tax-Managed Emerging
Growth Class C paid or accrued service fees under the Plans equivalent to 0.03%
and 0.25% (annualized), respectively, of average daily net assets for such
period. Tax- Managed Emerging Growth expects to begin making Class B service fee
payments during the quarter ending December 31, 1998.
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 Principal Underwriter may at times allow
discounts on the sale of Class A shares up to the full sales charge. During
periods when the discount includes the full sales charge, Authorized Firms may
be deemed to be underwriters as that term is defined in the Securities Act of
1933.
The Trust may, in its absolute discretion, suspend, discontinue or limit the
offering of one or more of 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
EACH FUND VALUES ITS SHARES ONCE ON EACH DAY THE NEW YORK STOCK EXCHANGE (THE
"EXCHANGE") IS OPEN FOR TRADING, as of the close of regular trading on the
Exchange (normally 4:00 p.m. New York time). Each 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 each Fund's total assets, less its
liabilities, by the number of shares of that Class outstanding. Because Tax-
Managed Growth invests its assets in an interest in the Portfolio, the net asset
value of each of its Classes will reflect the value of its interest in the
Portfolio (which, in turn, reflects the underlying value of the Portfolio's
assets and liabilities).
Authorized Firms must communicate an investor's order to the Principal
Underwriter by a specific time each day to receive that day's public offering
price per share. It is the Authorized Firms' responsibility to transmit orders
promptly to the Principal Underwriter. The Trust has approved the acceptance of
purchase and redemption orders as of the time of their receipt by certain
Authorized Firms (or their designated intermediaries).
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 A 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 in 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:
Sales Charge Sales Charge Dealer Commission
as Percentage of as Percentage of as Percentage of
Amount of Purchase Offering Price Amount Invested Offering Price
- --------------------------------------------------------------------------------
Less than $50,000 5.75% 6.10% 5.00%
$50,000 but less than 4.75 4.99
$100,000 4.00
$100,000 but less 3.75 3.90
than $250,000 3.00
$250,000 but less 3.00 3.09
than $500,000 2.50
$500,000 but less 2.00 2.04
than $1,000,000 1.75
$1,000,000 or more 0.00* 0.00* See Below**
*No sales charge is payable at the time of purchase on investments of $1
million or more. A 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.
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") ("Eligible Plans")
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.
Until March 31, 1998, 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. An Adviser may request that securities be retained for
investment purposes. The number of Fund shares to be issued to an investor
exchanging securities that are retained will be the value of the securities, as
determined by the Trust'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 public offering
price 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>
<S> <C>
IN THE CASE OF BOOK ENTRY: IN THE CASE OF PHYSICAL DELIVERY:
Deliver through Depository Trust Co. Investors Bank & Trust Company
Broker #2212 Attention: Eaton Vance [indicate Fund name and Class]
Investors Bank & Trust Company Physical Securities Processing Settlement Area
For A/C Eaton Vance [indicate Fund name 200 Clarendon Street
and Class] 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 share next computed after a redemption request is
received in the proper form as described below. 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.
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 calculated after the order is deemed to
be received by the Trust or the Principal Underwriter, as the Trust's agent. 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.
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. Each Fund currently
will meet redemptions entirely in cash, but in the future a Fund may adopt a
policy of meeting redemption requests in whole or in part by distributing
appreciated securities as chosen by its Adviser. Each Fund would only distribute
readily marketable securities, which would be valued pursuant to the applicable
valuation procedures. As described under "Investment Policies and Risks," the
practice of distributing appreciated securities to meet redemptions can be a
useful tool for tax-efficient management. 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 an
affiliate of 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 a 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, there may not be sufficient quantities of appreciated
securities available to meet redemptions by shareholders. Moreover, during
periods of volatile market conditions the Funds 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 prior to
April 1, 1998 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
EACH FUND WILL ISSUE TO ITS SHAREHOLDERS SEMI-ANNUAL AND ANNUAL REPORTS
CONTAINING FINANCIAL STATEMENTS. Financial statements included in annual reports
are audited by the independent accountants. Shortly after the end of each
calendar year, shareholders will be furnished 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 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 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 each 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 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 and EV Classic Senior Floating-Rate 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 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 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. Each 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. 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 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 each 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
The Portfolio and Tax-Managed Emerging Growth 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, investments generally will be
selected and managed to minimize net investment income and net realized gains
and associated distributions. The Funds 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 taxable distributions can be avoided. The
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.
Each Fund intends to distribute each year (normally in December) substantially
all of its investment company taxable income (consisting generally of taxable
net investment income and net short-term capital gain) and net capital gain, if
any. Distributions generally will not qualify for the dividends-received
deduction for corporations.
Distributions of investment company taxable income are taxable to shareholders
as ordinary income, whether paid in cash or additional shares of the Fund.
Distributions of net capital gain are taxable to shareholders as long-term or
mid-term capital gain, whether paid in cash or additional shares of the Fund and
regardless of the length of time Fund shares have been owned by the shareholder.
Current IRS rules permit the Fund to designate net capital gain distributions as
"28% rate gain distributions" (i.e., mid-term gain distributions) or "20% rate
gain distributions" (i.e., long-term gain distributions), and require
shareholders to treat such distributions accordingly.
Investors who purchase shares shortly before the record date of a distribution
will pay the full price for the shares and then receive some portion of the
price back as a taxable distribution. Certain distributions paid in January will
be taxable to shareholders as if received on December 31 of the prior year.
The redemption of shares of the Fund may result in a taxable gain or loss to the
redeeming shareholder, depending on whether the amount received is greater or
less than such shareholder's adjusted tax basis in the shares redeemed. An
exchange of shares of the Fund for shares of another Eaton Vance fund generally
will have similar tax consequences.
Taxable distributions to certain shareholders, including those who have not
provided the Fund with their correct taxpayer identification number and other
required certifications, may be subject to "backup" federal tax withholding of
31%.
The foregoing only summarizes some of the federal tax consequences to
shareholders of investing in shares of the Fund, and does not address special
tax rules applicable to certain types of investors, such as corporate and
foreign investors, individual retirement accounts and other retirement plans.
Investors should consult their tax advisers concerning the applicability of
state, local or other taxes.
PERFORMANCE INFORMATION
FROM TIME TO TIME, AVERAGE ANNUAL TOTAL RETURN MAY BE ADVERTISED. 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 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. Each Fund may also publish annual and
cumulative total return figures from time to time. Tax-Managed Growth 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.
Each 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. A 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 and operating
expenses. Investment results also often reflect the risks associated with the
particular investment objective and policies of a Fund. Among others, these
factors should be considered when comparing a Fund's investment results to those
of other mutual funds and other investment vehicles. If the expenses of a Fund
or the Portfolio are allocated to Eaton Vance, that Fund's performance will be
higher.
The following chart reflects the annual investment returns of CLASS B OF TAX-
MANAGED GROWTH for one-year periods ending October 31 and does not take into
account any sales charge. The total return for the period prior to Tax-Managed
Growth'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 predecessor funds of Class A and Class C was
different.
5 YEAR AVERAGE ANNUAL TOTAL RETURN -- 19.64%
10 YEAR AVERAGE ANNUAL TOTAL RETURN -- 16.25%
1988 5.49%
1989 16.46%
1990 (4.05%)
1991 37.13%
1992 10.94%
1993 7.33%
1994 8.80%
1995 32.56%
1996 22.31%
1997 30.49%
<PAGE>
[logo] Investing
for the
EATON VANCE 21st
- ------------ Century
MUTUAL FUNDS
- --------------------------------------------------------------------------------
Eaton Vance Tax-Managed Growth Fund
Eaton Vance Tax-Managed Emerging Growth Fund
PROSPECTUS
March 1, 1998
- --------------------------------------------------------------------------------
Portfolio Investment Adviser
Boston Management and Research, 24 Federal Street, Boston, MA 02110
Investment Adviser of Eaton Vance Tax-Managed Emerging Growth Fund
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 TGMGP
<PAGE>
Investing
[logo] for the
EATON VANCE 21st
- ------------- Century
MUTUAL FUNDS
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 March 1, 1998 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.
CONTENTS
<TABLE>
<CAPTION>
Page Page
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Shareholder and Fund Expenses 2 How to Redeem Shares 14
The Fund's Financial Highlights 4 Reports to Shareholders 15
The Fund's Investment Objective 5 The Lifetime Investing Account/Distribution Options 15
Investment Policies and Risks 5 The Eaton Vance Exchange Privilege 16
Organization of the Fund and the Portfolio 8 Eaton Vance Shareholder Services 17
Management of the Fund and the Portfolio 9 Distributions and Taxes 18
Distribution and Service Plans 10 Performance Information 19
Valuing Shares 11 Appendix 20
How to Buy Shares 12
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
Prospectus dated March 1, 1998
<PAGE>
SHAREHOLDER AND FUND EXPENSES
SHAREHOLDER TRANSACTION EXPENSES
Class A Class B Class C
Shares Shares Shares
- ------------------------------------------------------------------------------
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 0.67% 0.67% 0.67%
Rule 12b-1 Distribution and/or Service
Fees* 0.00 0.95 1.00
Other Expenses 0.46 0.46 0.46
---- ---- ----
Total Operating Expenses 1.13% 2.08% 2.13%
===== ==== ====
*Payment of Class A service fees will commence in 1999. See note below.
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 $ 58 $ 71 $ 32
3 Years 82 105 67
5 Years 107 132 114
10 Years 178 241 246
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 $ 58 $ 21 $ 22
3 Years 82 65 67
5 Years 107 112 114
10 Years 178 241 246
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. 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
0.52% 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 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 9.
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 in the future. See "Organization of the
Fund and the Portfolio".
THE FUND'S FINANCIAL HIGHLIGHTS
The following information should be read in conjunction with the audited
financial statements that appear in the Fund's annual report to shareholders.
The Fund's financial statements have been audited by Coopers & Lybrand L.L.P.,
independent accountants, as experts in accounting and auditing. The financial
statements and the report of independent accountants are incorporated by
reference into the Statement of Additional Information. Further information
regarding the performance of the Fund is contained in its annual report to
shareholders which may be obtained without charge by contacting the Principal
Underwriter. The financial information for each of the periods presented in
the Fund's Financial Highlights is 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>
Year Ended October 31,
-------------------------------------------------------------------------------------
1997 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 $ 0.657 $ 0.655 $ 0.726 $ 0.645 $ 0.239 $ 0.816 $ 0.786
Net realized and unrealized
gain (loss) on investments 0.288 0.858 0.167 (1.135) 0.683 (0.943) (0.022)+++
-------- -------- -------- -------- -------- -------- --------
Total income (loss) from operations $ 0.945 $ 1.513 $ 0.893 $ (0.490) $ 0.922 $ (0.127) $ 0.764
-------- -------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
From net investment income $ (0.657) $ (0.655) $ (0.361) $ (0.343) $ (0.632) $ (0.673) $ (0.786)
In excess of net investment income(2) (0.128) (0.048) -- -- -- -- --
From tax return of capital -- -- (0.322) (0.290) -- -- --
From paid-in capital -- -- -- -- -- -- (0.058)
-------- -------- -------- -------- -------- -------- --------
Total distribution $ (0.785) $ (0.703) $ (0.683) $ (0.633) $ (0.632) $ (0.673) $ (0.844)
-------- -------- -------- -------- -------- -------- --------
NET ASSET VALUE -- end of year $ 9.470 $ 9.310 $ 8.500 $ 8.290 $ 9.410 $ 9.120 $ 9.920
======== ======== ======== ======== ======== ======== ========
TOTAL RETURN(1) 10.44% 18.48% 11.34% (5.33%) 10.51% (1.45%) 7.97%
RATIOS/SUPPLEMENTAL DATA
(to average daily net assets):
Expenses* 2.08% 2.17% 2.18% 2.00% 1.99% 1.95% 2.11%+
Net investment income 6.91% 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) $130,596 $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, 1997, 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. Income dividends are assumed to be reinvested at the net asset value on the payable
date. Capital gain distributions, if any, are assumed to be reinvested at the net asset value on the ex-dividend date. Total
return is not computed on an 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/IBCA), and
certificates of deposit and bankers' acceptances issued or guaranteed by, or
time deposits maintained at, banks having total assets of more than $500
million and determined by the Investment Adviser to be of comparable credit
quality to short-term securities with those ratings. An unrated security will
be considered to be a high grade security if the Investment Adviser determines
that it is of comparable quality to any of the securities described above. In
making such determinations, the Adviser will consider any rating of the issuer
of unrated securities.
The Portfolio may invest the remainder of its assets in lower-rated debt
securities, although less than 35% of the Portfolio's assets will be invested
in securities rated below BBB-/Baa3 (commonly referred to as "junk bonds").
Lower-rated securities generally offer higher current yields and appreciation
potential than do higher-rated securities, but are subject to greater risks.
Securities in the lower categories are considered to be of poor standing and
predominantly speculative; securities in the lowest rating categories may be
in default and are generally regarded by the rating agencies as having
extremely poor prospects of ever attaining any real investment standing. The
values of lower-rated fixed income securities generally fluctuate more than
those of higher-rated fixed-income securities.
In lieu of having the Portfolio invest in lower-rated debt securities, the
Fund may invest up to 35% of its assets in High Income Portfolio ("HI
Portfolio"), a separate registered investment company advised by the
Investment Adviser. The investment objective of HI Portfolio is to provide a
high level of current income and it may invest in the same types of debt
securities (with the same risks) as the Portfolio. HI Portfolio normally
invests at least 65% of its assets in debt securities of the lowest investment
grade, lower-rated obligations and unrated obligations; at least 80% of its
net assets in fixed-income securities, including convertible securities; and
up to 20% of its net assets in common stocks and other equity securities when
consistent with its objective or acquired as part of a unit combining fixed-
income and equity securities. The Fund will not invest in the HI Portfolio
when such Portfolio is not so invested. Foreign investments of HI Portfolio
may not exceed 25% of total assets. HI Portfolio may purchase and sell
derivative instruments similar to those described in this Prospectus, except
for swaps. At January 31, 1998, HI Portfolio had 97.7% 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"). Convertible
and preferred equity securities may experience more price volatility than debt
securities. 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. Under regulations of the
Commodity Futures Trading Commission, the use of futures transactions for
nonhedging purposes is limited. 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.
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."
REVERSE REPURCHASE AGREEMENTS. 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 most recent fiscal year. 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 its 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 may offer opportunities for growth in the assets of the Portfolios,
may afford the potential for economies of scale for the Fund 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 or
class 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 may 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:
Annual Daily
Category Daily Net Assets Asset Rate Income Rate
- --------------------------------------------------------------------------------
1 up to $500 million 0.275% 2.75%
2 $500 million but less than $1 billion 0.250% 2.50%
3 $1 billion but less than $1.5 billion 0.225% 2.25%
4 $1.5 billion but less than $2 billion 0.200% 2.00%
5 $2 billion but less than $3 billion 0.175% 1.75%
6 $3 billion and over 0.150% 1.50%
Total daily gross income is the total gross investment income, exclusive of
capital gains and losses on investments and before deduction of expenses,
earned each day by the Portfolio.
As of October 31, 1997, the Portfolio had net assets of $121,255,999. For the
fiscal year ended October 31, 1997, the Portfolio paid BMR advisory fees
equivalent to 0.52% 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
HI Portfolio's 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. Michael Weilheimer has acted as the HI Portfolio's portfolio manager
since January 1, 1997. Mr. Weilheimer is a Vice President of Eaton Vance and
BMR and manages 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, 1997, 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 compensation-type 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 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 Class C shares sold by such Firm,
and (b) monthly sales commissions approximately equivalent to 1/12 of .75% 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 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 due the Principal
Underwriter plus interest, less the above fees and CDSCs received by it) may
exist indefinitely. During the fiscal year ended October 31, 1997, 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, 1997, the
outstanding uncovered distribution charges of the Principal Underwriter on
such day calculated under the Class B Plan amounted to approximately
$19,584,000 (equivalent to 15.0% 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,
1997, Class B paid or accrued service fees under its Plan equivalent to .20%
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 Principal Underwriter may at times allow
discounts on the sale of Class A shares up to the full sales charge. During
periods when the discount includes the full sales charge, Authorized Firms may
be deemed to be underwriters as that term is defined in the Securities Act of
1933.
The 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 by a specific time each day to receive that day's public offering
price per share. It is the Authorized Firms' responsibility to transmit orders
promptly to the Principal Underwriter. The Fund has approved the acceptance of
purchase and redemption orders as of the time of their receipt by certain
Authorized Firms (or their designated intermediaries).
Each Portfolio's net asset value is also determined as of the close of regular
trading on the Exchange by IBT (as custodian and agent for the Portfolio) in
the manner authorized by the Trustees of the Portfolio. Net asset value is
computed by subtracting the liabilities of a Portfolio from the value of its
total assets. Most debt securities are valued on the basis of market
valuations furnished by pricing services.
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 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>
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.
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.
Until March 31, 1998 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>
<S> <C>
IN THE CASE OF BOOK ENTRY: IN THE CASE OF PHYSICAL DELIVERY:
Deliver through Depository Trust Co. Investors Bank & Trust Company
Broker #2212 Attention: Eaton Vance Strategic Income Fund (state
Investors Bank & Trust Company Class)
For A/C Eaton Vance Strategic Income Fund (state 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 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. 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.
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 order is
deemed to be received by the Trust or the Principal Underwriter, as the
Trust's agent. 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.
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 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 prior
to April 1, 1998 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 independent accountants. Shortly after the end of
each calendar year, shareholders will be furnished 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 share balance in the account. THE
LIFETIME INVESTING ACCOUNT ALSO 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 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, 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 and EV Classic Senior Floating-Rate 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 purchases.
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 day 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 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 gain) 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. 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 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 -- 8.79%
1991(1) 7.97%
1992 (1.45)%
1993 10.51%
1994 (5.33)%
1995 11.34%
1996 18.48%
1997 10.44%
(1) For the period from the start of business, November 20, 1990 to
October 31, 1991.
<PAGE>
APPENDIX
STRATEGIC INCOME PORTFOLIO
ASSET COMPOSITION INFORMATION
FOR FISCAL YEAR ENDED OCTOBER 31, 1997
Percent of
Net Assets
- ---------------------------------------------------------------------------
Debt Securities -- Moody's Rating
Aaa 57.8%
Aa1 11.0%
A3 2.0%
Ba3 3.4%
B1 9.6%
B2 0.9%
B3 3.6%
Baa1 3.6%
Baa3 6.4%
Unrated 1.6%
-----
Total 100.0%
The chart above indicates the weighted average composition for the fiscal year
ended October 31, 1997 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] Investing
for the
EATON VANCE 21st
- ------------ Century
MUTUAL FUNDS
- --------------------------------------------------------------------------------
Eaton Vance
Strategic Income Fund
PROSPECTUS
March 1, 1998
- --------------------------------------------------------------------------------
Investment Adviser and Administrator of Stretegic 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 B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL INFORMATION
March 1, 1998
EATON VANCE TAX-MANAGED GROWTH FUND
EATON VANCE TAX-MANAGED EMERGING GROWTH FUND
24 Federal Street
Boston, Massachusetts 02110
(800) 225-6265
This Statement of Additional Information provides information about the
Funds listed above 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 ........................... 11
Service for Withdrawal ................................................ 11
Determination of Net Asset Value ...................................... 12
Investment Performance ................................................ 12
Taxes ................................................................. 14
Principal Underwriter ................................................. 15
Service Plan -- Class A Shares ........................................ 16
Distribution Plans -- Class B and Class C Shares ...................... 16
Portfolio Security Transactions ....................................... 18
Other Information ..................................................... 20
Independent Certified Public Accountants .............................. 21
Financial Statements .................................................. 21
Appendix A: Class A Shares ............................................ a-1
Appendix B: Class B Shares ............................................ b-1
Appendix C: Class C Shares ............................................ c-1
Although each Fund offers only its shares of beneficial interest, it is
possible that a Fund (or Class) might become liable for a misstatement or
omission in this Statement of Additional Information regarding another Fund
(or Class) because the Funds use this combined Statement of Additional
Information. The Trustees of the Trust have considered this factor in
approving the use of a combined Statement of Additional Information.
THIS COMBINED STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND
IS AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY THE FUNDS' PROSPECTUS DATED MARCH 1, 1998, AS SUPPLEMENTED FROM
TIME TO TIME, WHICH IS INCORPORATED HEREIN BY REFERENCE. THIS COMBINED
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 Funds and the Portfolio.
Capitalized terms used in this SAI and not otherwise defined have the meanings
given to them in the Prospectus. Tax-Managed Growth currently seeks to achieve
its objective by investing in the Portfolio and is subject to the same
investment policies as those of 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, 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 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. Foreign currency
exchange transactions may be conducted 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 at one rate,
while offering a lesser rate of exchange should an Adviser 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. An Adviser may enter into
a forward contract in connection with the purchase or sale of a security
denominated in a foreign currency, or when it anticipates the receipt in a
foreign currency of dividend or interest payments on such a security, 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
an 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 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.
Forward contracts with a term of greater than one year generally will not be
entered into.
Currency futures contracts are exchange traded instruments that may be
used 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. Investments in currency contracts are
subject to limitations and restrictions similar to those set forth for
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
position held and that a loss will result. For derivative instruments other
than purchased options, this loss may exceed the amount of the initial
investment made or the premium received. Derivative instruments may sometimes
increase or leverage exposure to a particular market risk. Leverage enhances
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 other assets
held in the portfolio. 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 closing out of positions and
limiting 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 15% limit on illiquid investments. The 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 derivative
instruments may be purchased and sold. Transactions in futures contracts and
related options will be entered into only to the extent such transactions are
consistent with the requirements of the Code for maintaining qualification as
a regulated investment company for federal income tax purposes. See "Taxes".
Limitations on Futures Contracts and Options. Futures contracts, and options
on futures contracts traded on an exchange regulated by the Commodity Futures
Trading Commission (the "CFTC ") and on foreign exchanges may be entered into,
but, with respect to foreign exchange-traded futures contracts and options on
such futures contracts, only if the Adviser determines that trading on each
such foreign exchange does not result in risks, including credit and liquidity
risks, that are materially greater than the risks associated with trading on
CFTC-regulated exchanges.
All futures contracts will be traded on exchanges or boards of trade that
are licensed and regulated by 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, futures contracts may only be entered into
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 net asset value, after taking into account
unrealized profits and losses on such positions.
In order to hedge current or anticipated portfolio positions, futures
contracts on securities held or on securities with characteristics similar to
those of the securities held may be used. If, in the opinion of an Adviser,
there is a sufficient degree of correlation between price trends for the
securities held and futures contracts based on other financial instruments,
securities indices or other indices, such futures contracts may also be
entered into as part of its hedging strategy.
All call options on securities written will be covered. This means that,
Tax-Managed Emerging Growth or 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. Securities may be sold short where Tax-Managed
Emerging Growth or the Portfolio 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 Adviser expects normally to
close short sale against-the-box transactions by delivering newly-acquired
stock. No more than 25% of 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
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. Securities will be loaned only to
borrowers whose credit quality or claims paying ability is considered to be
investment grade by an Adviser. The financial condition of the borrower will
be monitored by the Adviser on an ongoing basis. If a borrower of securities
defaults on a securities loan, the lender (i.e., Tax-Managed Emerging Growth
or the Portfolio) will, under proposed Treasury Regulations, be considered to
have disposed of the securities in a taxable transaction. Delays may be
experienced in the recovery or loss of rights in loaned securities if a
borrower of securities fails financially. The lender of the securities 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 lender of the
securities would have the right to call a loan and obtain the securities
loaned at any time on up to five business days' notice. The lender 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.
Asset Coverage Requirements. Transactions involving swaps, short sales,
forward contracts, futures contracts and options (other than options that the
Fund has purchased) create an obligation to another party. Neither Tax-Managed
Emerging Growth nor the Portfolio will 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. (Only the net
obligations of a swap will be covered.) Tax-Managed Emerging Growth and 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
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 assets to segregated accounts or
to cover could impede portfolio management or the ability to meet redemption
requests or other current obligations.
Selection of Securities Used to Meet Redemptions from Tax-Managed Growth
Portfolio. Investors in the Portfolio (including Tax-Managed Growth) may redeem
all or a portion of their interests in the Portfolio at net asset value on a
daily basis. Redemptions by Tax-Managed Growth's shareholders currently are met
entirely in cash, but distributions of securities generally are used to meet
redemptions by other investors in the Portfolio who have contributed securities
and may in the future be used to meet redemptions by Tax-Managed Growth'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 seven years of any
contribution of securities (or, for securities contributed prior to June 9,
1997, five years) (the "holding period") the Portfolio will not distribute such
securities to any investor other than the contributing investor. In meeting a
redemption of an investor within the holding period 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. After
expiration of the holding period, 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 (particularly during the holdin
period) 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 Tax-Managed Growth's performance.
Portfolio Turnover. Neither Tax-Managed Emerging Growth nor the Portfolio can
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). For the portfolio turnover
rate of each Fund, see "Financial Highlights" or "Supplementary Data" in the
"Financial Statements."
INVESTMENT RESTRICTIONS
The following investment restrictions of each 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, a 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.
The Portfolio has adopted substantially the same fundamental investment
restrictions as the investment restrictions adopted by Tax-Managed Growth set
forth above; such restrictions cannot be changed without the approval of a
"majority of the outstanding voting securities" of the Portfolio.
Notwithstanding their investment policies and restrictions, each Fund may
invest its assets in an open-end management investment company with
substantially the same investment objective, policies and restrictions as the
Fund; moreover, subject to Trustee approval, Tax-Managed Emerging Growth may
invest its investable assets in other open-end management investment companies
in the same group of investment companies with the same placement agent or
investment adviser (or an affiliate thereof) as Tax-Managed Emerging Growth
if, with respect to such assets, the other companies' permitted investments
are substantially the same as those of Tax-Managed Emerging Growth.
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.
Each Fund and the Portfolio have adopted the following investment policies
which may be changed without shareholder or investor approval. As a matter of
nonfundamental policy, each 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 a 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 a Fund or the Portfolio, as the case may be, to dispose of
such security or other asset. Notwithstanding the foregoing, under normal
market conditions Tax-Managed Growth and the Portfolio must take actions
necessary to comply with the policy of investing, at least 65% of total assets
in common stock and Tax-Managed Emerging Growth must take action to comply
with its policy of investing at least 65% of total assets in equity securities
of emerging growth companies. Moreover, the Funds and Portfolio must always be
in compliance with the borrowing policy and 15% limitation on investing in
illiquid securities 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 BMR, a wholly-owned
subsidiary of 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. Former Chairman of BMR, Eaton Vance, EVC and EV.
Address: 10 Post Office Square, Suite 300, Boston, Massachusetts 02109
JAMES B. HAWKES (56), 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). 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 (63), 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
Chairman of the Board and Chief Executive Officer, 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 (71), 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 (68), 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 (62), 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 (35), 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.
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 Funds 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 Funds, 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 Trust (with respect to Tax-Managed Emerging Growth's
allocable portion of their compensation received from the Trust) and the
Portfolio who are not affiliated with the Advisers 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 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 Tax-Managed Emerging Growth or the Portfolio's assets, liabilities,
and net income per share, and will not obligate Tax-Managed Emerging Growth or
the Portfolio to retain the services of any Trustee or obligate Tax-Managed
Emerging Growth or the Portfolio to pay any particular level of compensation
to the Trustees. 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 Funds (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, 1997, the
noninterested Trustees of the Trust and the Portfolio received the following
compensation in their capacities as Trustees of the Trust, the Portfolio and
of the other funds in the Eaton Vance fund complex(1):
<TABLE>
<CAPTION>
DONALD R. SAMUEL L. NORTON H. JOHN L. JACK L.
SOURCE OF COMPENSATION DWIGHT(3) HAYES, III(4) REAMER THORNDIKE(5) TREYNOR
---------------------- --------- ------------- ------ ------------ -------
<S> <C> <C> <C> <C> <C>
Trust(2) $ 6,080 $ 6,213 $ 5,958 $ 6,205 $ 6,511
Tax-Managed Portfolio 5,168 5,175 4,963 5,175 2,553
Trust and Fund Complex $145,000(6) $153,750(7) $145,000 $146,250(8) $150,000
- ----------
(1) As of March 1, 1998, the Eaton Vance complex consists of 146 registered investment companies or series thereof.
(2) The Trust consisted of 16 Funds as of October 31, 1997.
(3) Mr. Dwight received $678 of deferred compensation from the Portfolio.
(4) Mr. Hayes received $520 of deferred compensation from the Portfolio.
(5) Mr. Thorndike received $1,474 of deferred compensation from the Portfolio.
(6) Includes $45,000 of deferred compensation.
(7) Includes $38,438 of deferred compensation.
(8) Includes $109,022 of deferred compensation.
</TABLE>
INVESTMENT ADVISER AND ADMINISTRATOR
The Trust on behalf of Tax-Managed Emerging Growth engages Eaton Vance as
its investment adviser and the Portfolio engages BMR as its investment adviser
pursuant to separate investment advisory agreements which are substantially
the same for each. BMR or Eaton Vance acts as investment adviser to investment
companies and various individual and institutional clients with combined
assets under management of approximately $22 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 $23 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
its Investment Advisory Agreement, see the Prospectus. As of October 31, 1997,
the Portfolio had net assets of $2,871,445,818. For the fiscal year ended
October 31, 1997 and 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 $9,455,900 and $2,116,576, respectively (equivalent
to 0.53% and 0.618% (annualized), respectively, of the Portfolio's average
daily net assets for each such period).
Eaton Vance manages the investments and affairs of Tax-Managed Emerging
Growth subject to the supervision of the Trust's Board of Trustees. Eaton
Vance furnishes to Tax-Managed Emerging Growth investment research, advice and
assistance, administrative services, office space, equipment and clerical
personnel, and investment advisory, statistical and research facilities, and
has arranged for certain members of the Eaton Vance organization to serve
without salary as officers or Trustees of the Trust. The Fund is responsible
for all expenses not expressly stated to be payable by Eaton Vance under the
Investment Advisory Agreement, including, without limitation, the fees and
expenses of its custodian and transfer agent, including those incurred for
determining the Fund's net asset value and keeping its books; the cost of
share certificates; membership dues in investment company organizations;
brokerage commissions and fees; fees and expenses of registering its shares;
expenses of reports to shareholders, proxy statements, and other expenses of
shareholders' meetings; insurance premiums; printing and mailing expenses;
interest, taxes and corporate fees; legal and accounting expenses; and
compensation and expenses of Trustees not affiliated with Eaton Vance. Tax-
Managed Emerging Growth will also bear expenses incurred in connection with
litigation, proceedings and claims and any legal obligation of the Trust to
indemnify its officers and Trustees with respect thereto, to the extent not
covered by insurance.
For a description of the compensation that Tax-Managed Emerging Growth
pays Eaton Vance under the Investment Advisory Agreement, see the Prospectus.
As of October 31, 1997, Tax-Managed Emerging Growth had net assets of
$14,588,056. For the period from the start of business, September 25, 1997, to
October 31, 1997, Tax-Managed Emerging Growth paid Eaton Vance advisory fees
of $3,602 (equivalent to 0.625% (annualized) of the Fund's average daily net
assets for such period).
Each Investment Advisory Agreement 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 or the Trust (as the
case may be) 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 the Trust or by vote of a majority of the outstanding voting securities of
the Portfolio or Tax-Managed Emerging Growth. Each 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 or Tax-Managed Emerging Growth (as the case may
be), and each Agreement will terminate automatically in the event of its
assignment. Each Agreement provides that an Adviser may render services to
others. Each Agreement also provides that an Adviser shall not be liable for
any loss incurred in connection with the performance of its duties, or action
taken or omitted under that Agreement, in the absence of willful misfeasance,
bad faith, gross negligence in the performance of its duties or by reason of
its reckless disregard of its obligations and duties thereunder, or for any
losses sustained in the acquisition, holding or disposition of any security or
other investment.
Each 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, John M. Nelson and Ralph Z. Sorenson. Mr. Hawkes is chairman, president
and chief executive officer and Mr. Gardner is vice chairman 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.
Gardner, Hawkes, Rowland and Alan R. Dynner, 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 February 28, 1998, 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, 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 Trust and the Portfolio. IBT has custody of
all cash and securities of Tax-Managed Emerging Growth, maintains the Fund's
general ledger and computes the daily net asset value of shares of Tax-Managed
Emerging Growth. IBT has the custody of all cash and securities representing
Tax-Managed Growth'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 Tax-Managed Growth. In such capacity it attends
to details in connection with the sale, exchange, substitution, transfer or
other dealings with Tax-Managed Emerging Growth's and the Portfolio's
investments, receives and disburses all funds and performs various other
ministerial duties upon receipt of proper instruction from the Trust and the
Portfolio. IBT also provides services in connection with the preparation of
shareholder reports and the electronic filing of such reports with the
Commission for which it receives a separate fee. Landon T. Clay, a 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.
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 each Fund is
determined by IBT (as agent and custodian for the Funds and the Portfolio) in
the manner described under "Valuing Shares" in the Prospectus. Each Fund and
the 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 Trust and the Portfolio have established the following
procedures for the fair valuation of Tax-Managed Emerging Growth's and 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 Tax-Managed Growth, 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 Tax-Managed Emerging
Growth and 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 and Tax-Managed Emerging
Growth's shares 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
and Tax-Managed Emerging Growth's net asset value (unless the Portfolio or the
Fund deems that such events would materially affect net asset value, in which
case an adjustment would be made and reflected in such computation). Foreign
securities and currency held by the Portfolio and Tax-Managed Emerging Growth
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 seperately for each Class of a
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 a Fund, see Appendix
A, Appendix B and Appendix C.
Each 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.
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 a Fund's performance or rankings of mutual funds (which include
a 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.
Tax-Managed Growth'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 a 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.
TAXES
Each Fund is treated as a separate corporation, and intends to qualify
each year as a regulated investment company ("RIC") under the Code to avoid
federal income tax. Accordingly, each Fund intends to satisfy certain
requirements relating to sources of its income and diversification of its
assets and to distribute a sufficient amount of its investment company taxable
income so as to effect such qualification. Each Fund may also distribute part
of all of its net investment income and net realized capital gains in
accordance with the timing requirements imposed by the Code, so as to reduce
or avoid any federal income or excise tax.
Because Tax-Managed Growth 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 them, and
the Portfolio intends to do so. For federal income tax purposes, the Portfolio
intends to be treated as a partnership that is not a "publicly traded
partnership" and, as a result, will not be subject to federal income tax. Tax-
Managed Growth, as an investor in the Portfolio, will be required to take into
account in determining its federal income tax liability its share of the
Portfolio's income, gains, losses, deductions, and credits, without regard to
whether it has received any cash distributions from the Portfolio.
The Portfolio will allocate at least annually among its investors,
including Tax-Managed Growth, 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. For purposes of applying the
requirements of the Code regarding qualification as a RIC, Tax-Managed Growth
(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 excise tax, the Code requires each Fund to distribute by
the end of each calendar year substantially all of its ordinary income for
such year and capital gain net income for the one-year period ending on
October 31 of such year, plus certain other amounts. Under current law,
provided each Fund qualifies as a RIC and the Portfolio is treated as a
partnership for Massachusetts and federal tax purposes, neither Fund nor the
Portfolio should be liable for any income, corporate excise or franchise tax
in the Commonwealth of Massachusetts.
A portion of distributions made by a Fund (that are derived from dividends
received by the Portfolio in the case of Tax-Managed Growth) from domestic
corporations and allocated to the Fund may qualify for the dividends-received
deduction ("DRD") for corporations. The DRD is reduced to the extent the
shares of the Fund with respect to which the dividends are received are
treated as debt-financed under the Code and is eliminated if the shares are
deemed to have been held for less than a minimum period, generally 46 days.
Receipt of certain distributions qualifying for the DRD may result in
reduction of the tax basis of the corporate shareholder's shares.
Distributions eligible for the DRD may give rise to or increase an alternative
minimum tax for certain corporations.
Under the Code, the redemption or exchange of shares of a RIC normally
results in capital gain or loss if such shares are held as capital assets.
However, a loss realized on a redemption or other disposition of Fund shares
may be disallowed under certain "wash sale" rules if shares of the Fund are
acquired within a period beginning 30 days before and ending 30 days after the
date of such redemption or other disposition. Any disallowed loss will result
in an adjustment to the shareholder's tax basis in some or all of the other
shares acquired.
Any loss realized upon the redemption or exchange of a Fund with a tax
holding period of six 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.
Certain investors in the Portfolio, including RICs, have acquired
interests in the Portfolio by contributing securities. Due to tax
considerations, during the first seven years following the contribution of
securities (or within five years for securities contributed prior to June 9,
1997) 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 the applicable time period 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 Tax-Managed
Growth. If such securities were to be sold, the resulting capital gain would
be allocated disproportionately among the Portfolio's investors, with the
result that Tax-Managed Growth would not be subject to taxation on any gain
arising prior to the contribution of the securities to the Portfolio.
PRINCIPAL UNDERWRITER
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 A, Appendix
B and Appendix C.
CLASS A SHARES. Class A shares 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 a 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 a 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 a Fund and its shares
under federal and state securities laws are borne by the Fund. In addition,
each Class B and Class C makes payments to the Principal Underwriter pursuant
to a Distribution Plan 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.
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 was approved by the Trustees, including the
Plan Trustees, on behalf of Tax-Managed Growth on June 23, 1997 and on behalf
of Tax-Managed Emerging Growth on August 11, 1997.
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 a 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 Funds' respective Class and will
accordingly reduce the Class' net assets upon such accrual, all in accordance
with generally accepted accounting principles. The amount payable on each day
is limited to 1/365 of .75% of a Class's net assets on such day. The level of
a Class' 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
Tax-Managed Emerging Growth or the Portfolio, the expenses of the Class, Fund
and the Portfolio accrued and allocated to the Fund and Class on such day,
income on portfolio investments of Tax-Managed Emerging Growth or 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 a Class' 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 Class 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 a Class's average daily net assets per annum. For
actual payments made and the outstanding uncovered distribution charges of the
Principal Underwriter, see Appendix B and Appendix C. 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 or to
Eaton Vance by Tax-Managed Emerging Growth) 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. Each Plan was
approved by the Trustees, including the Rule 12b-1 Trustees on behalf of Tax-
Managed Growth on June 23, 1997 and on behalf of Tax-Managed Emerging Growth
on August 11, 1997.
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
an Adviser. An Adviser is also responsible for the execution of transactions
for all other accounts managed by it.
The Advisers place the portfolio security transactions of Tax-Managed
Emerging Growth and the Portfolio and of certain other accounts managed by
them for execution with many broker-dealer firms. An Adviser uses its best
efforts to obtain execution of portfolio security transactions at prices which
are advantageous and (when a disclosed commission is being charged) at
reasonably competitive commission rates. In seeking such execution, an Adviser
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 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 usually include an undisclosed dealer markup or markdown. In an
underwritten offering the price paid includes a disclosed fixed commission or
discount retained by the underwriter or dealer. Although commissions paid on
portfolio transactions will, in the judgment of the relevant Adviser, 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 Tax-Managed Emerging
Growth or the Portfolio and an Adviser's other clients in part for providing
brokerage and research services to the Adviser.
As authorized in Section 28(e) of the Securities Exchange Act of 1934, a
broker or dealer who executes a portfolio transaction 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 the relevant Adviser 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 the Adviser and its affiliates have for
accounts over which it exercises investment discretion. In making any such
determination, the Adviser 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, an Adviser may receive Research Services from broker-
dealer firms with which that Adviser places portfolio transactions 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 an Adviser 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 an Adviser 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 Tax-Managed Emerging Growth or
the Portfolio is not reduced because its Adviser receives such Research
Services. An Adviser 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 the Adviser believes are useful or of value to it in
rendering investment advisory services to its clients.
Subject to the requirement that an Adviser shall use its best efforts to
seek to execute portfolio security transactions at advantageous prices and at
reasonably competitive commission rates or spreads, an Adviser 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 Funds 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 Tax-Managed Emerging Growth or
the Portfolio may also be appropriate for other investment accounts managed by
an Adviser or its affiliates. Whenever decisions are made to buy or sell
securities for Tax-Managed Emerging Growth or the Portfolio and one or more of
such other accounts simultaneously, the Adviser 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 Tax-Managed Emerging Growth and 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 the Adviser 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 Tax-Managed Emerging Growth and
the Portfolio from time to time, it is the opinion of the Trustees of the
Trust and the Portfolio that the benefits from the Adviser's organization
outweigh any disadvantage that may arise from exposure to simultaneous
transactions.
For the period from the start of business, September 25, 1997, to October
31, 1997, Tax-Managed Emerging Growth paid brokerage commissions of $9,058
with respect to portfolio transactions. Of this amount, approximately $8,926
was paid in respect of portfolio security transactions aggregating
approximately $5,484,898 to firms which provided some Research Services to the
Adviser's organization (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, 1997 and 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 $1,019,496 and
$144,815, respectively, on portfolio security transactions. Of these amounts,
approximately $832,436 and $112,018, respectively, was paid in respect of
portfolio security transactions aggregating approximately $740,796,988 and
$89,523,457, respectively, to firms which provided some Research Services to
the Adviser's organization (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. Tax-Managed
Growth established multiple classes of shares on November 1, 1997. The
operations of Class B reflect the operations of Tax-Managed Growth prior to
such date. Class A and Class C are successors to the operations of separate
series of the Trust. Eaton Vance, pursuant to its agreement with the Trust,
controls the use of the words "Eaton Vance" and "EV" in the Fund's name and
may use the words "Eaton Vance" or "EV" in other connections and for other
purposes.
The Trust's Declaration of Trust may be amended by the Trustees when
authorized by vote of a majority of the outstanding voting securities of the
Trust, the financial interests of which are affected by the amendment. The
Trustees may also amend the Declaration of Trust without the vote or consent
of shareholders to change the name of the Trust or any series or to make such
other changes (such as reclassifying series or classes of shares or
restructuring the Trust) as do not have a materially adverse effect on the
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 of Trust also contains provisions
limiting the liability of a series or class to that series or class).
Moreover, the Trust's By-laws also provide for indemnification out of the
property of the Fund of any shareholder held personally liable solely by
reason of being or having been a shareholder for all loss or expense arising
from such liability. The assets of the Fund are readily marketable and will
ordinarily substantially exceed its liabilities. In light of the nature of the
Fund's business and the nature of its assets, management believes that the
possibility of the Fund's 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 Tax-Managed Growth 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 Tax-
Managed Growth 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 Tax-Managed Growth nor its shareholders will
be adversely affected by reason of the Fund investing in the Portfolio.
In connection with telephone redemptions and exchanges, the Trust, the
Principal Underwriter and the Transfer Agent generally will verify personal
account information in order to determine that instructions communicated are
genuine.
The Portfolio's Declaration of Trust provides that the Portfolio will
terminate 120 days after the complete withdrawal of Tax-Managed Growth 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 a 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 Funds 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 Funds and the Portfolio, appear in each Fund's most recent annual report
to shareholders, which are incorporated by reference into this SAI. A copy of
each Fund's annual report accompanies this SAI.
Registrant incorporates by reference the audited financial information for
the Funds and the Portfolio listed below for the fiscal year ended October 31,
1997, as previously filed electronically with the Commission:
Eaton Vance Tax-Managed Growth Fund
Tax-Managed Growth Portfolio
(Accession No. 0000950156-98-000080
Eaton Vance Tax-Managed Emerging Growth Fund
(Accession No. 0000950109-98-000228)
<PAGE>
APPENDIX A: CLASS A SHARES
FEES AND EXPENSES -- TAX-MANAGED EMERGING GROWTH
SERVICE PLAN
Class A has not made any service fee payments to the Principal Underwriter
under the Plan to date. Class A expects to begin accruing for its service fee
payments during the quarter ending December 31, 1998.
PRINCIPAL UNDERWRITER
For the period from the start for business, September 25, 1997, to October
31, 1997, there were no repurchase transactions.
The total sales charges for sales of shares of the Fund for the period
from the start of business, September 25, 1997, to October 31, 1997 was
$118,058, of which $17,757 was received by the Principal Underwriter and
Authorized Firms received $100,301.
PERFORMANCE INFORMATION -- ALL FUNDS
The table below indicates the cumulative and average annual total return
on a hypothetical investment of $1,000 in Class A shares for the period shown
in the table. 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 -- TAX-MANAGED EMERGING GROWTH
<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 10/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------------------- ------------- -------------- --------------- ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Life of Fund 9/25/97 $942.51 $918.00 -2.60% N/A -8.20% N/A
</TABLE>
The table below indicates the cumulative and average total return on a
hypothetical investment of $1,000. Total return prior to November 1, 1997
reflects the total return of the predecessor to Class A. Total return prior to
March 28, 1996 reflects the total return of Class B, adjusted to reflect the
Class A sales charge. The Class B total return has not been adjusted to
reflect certain other expenses (such as distribution and/or service fees). If
such adjustments were made, the Class A total return 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 -- TAX-MANAGED GROWTH
<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 10/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------------------- ------------- -------------- --------------- ------------ ------------ ------------- ------------
10 Years Ended
<S> <C> <C> <C> <C> <C> <C> <C>
10/31/97 10/31/87 $941.99 $4,297.25 356.18% 16.39% 329.72% 15.70%
5 Years Ended
10/31/97 10/31/92 $942.00 $2,355.80 150.09% 20.12% 135.58% 18.69%
1 Year Ended
10/31/97 10/31/96 $942.61 $1,242.81 31.85% 31.85% 24.28% 24.28%
</TABLE>
<PAGE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As at January 31, 1998, the Trustees and officers of the Trust, as a
group, owned in the aggregate less than 1% of the outstanding shares of each
Class A and of each Fund. In addition, as of the same date, the following
record owners held the amounts of Class A shares indicated below, which were
held on behalf of customers who are the beneficial owners of such shares, and
as to which they have voting power under certain limited circumstances:
<TABLE>
<S> <C> <C> <C>
TAX-MANAGED GROWTH -- Merrill Lynch, Pierce, Fenner & Smith, Inc. Jacksonville, FL 12.1%
TAX-MANAGED EMERGING GROWTH -- Merrill Lynch, Pierce, Fenner & Smith, Inc. Jacksonville, FL 8.7%
</TABLE>
To the knowledge of the Trust, no other person owned of record or
beneficially 5% or more of either Fund's outstanding Class A shares as of such
date.
<PAGE>
APPENDIX B: CLASS B SHARES
FEES AND EXPENSES -- ALL FUNDS
DISTRIBUTION PLANS
Each Distribution Plan and Distribution Agreement remains in effect until
April 28, 1998 and may be continued as described under "Distribution Plan".
Pursuant to Rule 12b-1, the Plan has been approved by the relevant Fund's
shareholders and by the Board of Trustees of the Trust, as required by Rule
12b-1.
The following table shows, for the fiscal year ended October 31, 1997, (1)
sales commissions paid by the Principal Underwriter to Authorized Firms on
sales of Class B shares, (2) distribution payments to the Principal
Underwriter allocated to Class B shares under the Plan, (3) CDSC payments to
the Principal Underwriter, (4) service fees on Class B shares paid under the
Plan, and (5) amount of service fees on Class B shares paid to Authorized
Firms (the balance of which being retained by the Principal Underwriter).
<TABLE>
<CAPTION>
DISTRIBUTION CDSC SERVICE
PAYMENTS TO PAYMENTS TO FEES TO
SALES THE PRINCIPAL THE PRINCIPAL SERVICE AUTHORIZED
CLASS B COMMISSIONS UNDERWRITER UNDERWRITER FEES** FIRMS
- ------- ----------- ----------- ----------- ------ -----
<S> <C> <C> <C> <C> <C>
Tax-Managed Growth ............... $16,528,950 $2,104,488 $353,000 $78,511 $77,815
Tax-Managed Emerging Growth* ..... 339,086 2,603 400 0 0
- ----------
* For the period from the start of business, September 29, 1997,to October 31, 1997.
** Tax-Managed Emerging Growth expects to begin accruing for its service fees during the quarter ending
December 31, 1998.
</TABLE>
PRINCIPAL UNDERWRITER
For the fiscal year ended October 31, 1997, Tax-Managed Growth paid the
Principal Underwriter $2,402.50 for repurchase transactions handled by the
Principal Underwriter. For the period from the start of business, September
29, 1997, to October 31, 1997 Tax-Managed Emerging Growth Class B had no
repurchase transactions.
PERFORMANCE INFORMATION -- ALL FUNDS
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 -- TAX-MANAGED EMERGING GROWTH
<TABLE>
<CAPTION>
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN BEFORE TOTAL RETURN AFTER
BEFORE AFTER DEDUCTING DEDUCTING
DEDUCTING THE DEDUCTING THE THE MAXIMUM CDSC THE MAXIMUM CDSC
INVESTMENT INVESTMENT AMOUNT OF MAXIMUM CDSC MAXIMUM CDSC -------------------------- --------------------------
PERIOD* DATE INVESTMENT ON 10/31/97 ON 10/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------- ------------ ----------- --------------- --------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of Fund 9/29/97 $1,000 $974.00 $925.30 -2.60% N/A -7.47% N/A
- ------------
*Investment operations began on September 29, 1997.
</TABLE>
The table below indicates the cumulative and average annual total return
on a hypothetical investment of $1,000 in Class B shares of Tax-Managed
Growth. Total return for Class B prior to March 28, 1996 reflects the total
return of another investor in the Portfolio, adjusted to reflect the Class B
sales charge. This total return has not been adjusted to reflect certain other
Class B 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 -- TAX-MANAGED GROWTH
<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 10/31/97 ON 10/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
------ ---- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
10 years ended
10/31/97 10/31/87 $4,506.89 $4,506.89 350.69% 16.25% 350.69% 16.25%
5 years ended
10/31/97 10/31/92 $2,470.82 $2,450.82 147.08% 19.83% 145.08% 19.64%
1 year ended
10/31/97 10/31/96 $1,304.93 $1,254.93 30.49% 30.49% 25.49% 25.49%
</TABLE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As at January 31, 1998, the Trustees and officers of the Trust, as a
group, owned in the aggregate less than 1% of the outstanding shares of each
Class B and of each Fund. In addition, as of the same date, the following
record owners held the amounts of Class B shares indicated below, which were
held on behalf of their customers who are the beneficial owners of such
shares, and as to which they have voting power under certain limited
circumstances:
<TABLE>
<S> <C> <C> <C>
TAX-MANAGED GROWTH -- Merrill Lynch, Pierce, Fenner & Smith, Inc. Jacksonville, FL 20.5%
TAX-MANAGED EMERGING GROWTH -- Merrill Lynch, Pierce, Fenner & Smith, Inc. Jacksonville, FL 17.8%
</TABLE>
To the knowledge of the Trust, no other person owned of record or
beneficially 5% or more of either Fund's outstanding Class B shares as of such
date.
<PAGE>
APPENDIX C: CLASS C SHARES
FEES AND EXPENSES -- TAX-MANAGED EMERGING GROWTH
DISTRIBUTION PLAN
For the period from the start of business, September 29, 1997, to October
31, 1997, the Principal Underwriter paid to Authorized Firms sales commissions
of $20,998 on sales of Class C shares of Tax-Managed Emerging Growth. During
the same period, Class C made sales commission payments under the Plan to the
Principal Underwriter aggregating $461. The Principal Underwriter received no
CDSCs during the period. The sales commission payments reduced Uncovered
Distribution Charges under the Plan. As at October 31, 1997, the outstanding
Uncovered Distribution Charges of the Principal Underwriter calculated under
the Plan amounted to approximately $122,000. During the period from the start
of business, September 29, 1997, to October 31, 1997, Class C made service fee
payments aggregating $154, all of which were paid to the Principal
Underwriter.
PRINCIPAL UNDERWRITER
For the period from the start of business, September 29, 1997, to October
31, 1997, there were no repurchase transactions.
PERFORMANCE INFORMATION -- ALL FUNDS
The table below indicates the cumulative and average annual total return
on a hypothetical investment of $1,000 in Class C shares for the period 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 -- TAX-MANAGED EMERGING GROWTH
<TABLE>
<CAPTION>
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN BEFORE TOTAL RETURN AFTER
BEFORE AFTER DEDUCTING DEDUCTING
DEDUCTING DEDUCTING THE MAXIMUM CDSC THE MAXIMUM CDSC
INVESTMENT INVESTMENT AMOUNT OF THE CDSC THE CDSC -------------------------- --------------------------
PERIOD* DATE INVESTMENT ON 10/31/97 ON 10/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------- ------------ ------------ --------------- -------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Life of
the Fund 9/29/97 $1,000 $972.00 $962.28 -2.80% N/A -3.77% N/A
- ------------
*Investment operations began on September 29, 1997.
</TABLE>
The table below indicates the cumulative and average annual total return
on a hypothetical investment of $1,000. Total return prior to November 1, 1997
reflects the total return of the predecessor to Class C. Total return prior to
August 2, 1996 reflects the total return of Class B adjusted to reflect the
Class C sales charge. The Class B total return has not been adjusted to
reflect certain other expenses (such as distribution and/or service fees). If
such adjustments were made, the Class C total return would be different. 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 -- TAX-MANAGED GROWTH
<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 10/31/97 ON 10/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------- ------------ ------------ --------------- -------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
10 Years Ended
10/31/97 10/31/87 $1,000 $4,484.42 $4,484.42 348.44% 16.19% 348.44% 16.19%
5 Years Ended
10/31/97 10/31/92 $1,000 $2,458.48 $2,458.48 145.85% 19.71% 145.85% 19.71%
1 Year Ended
10/31/97 10/31/96 $1,000 $1,301.48 $1,291.48 30.15% 30.15% 29.15% 29.15%
</TABLE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As at January 31, 1998, the Trustees and officers of the Trust, as a
group, owned in the aggregate less than 1% of the outstanding shares of each
Class C and of each Fund. In addition, as of the same date, the following
record owners held the amounts of Class C shares indicated below, which were
held either individually or on behalf of their customers who are the
beneficial owners of such shares, and as to which they have voting power under
certain limited circumstances:
<TABLE>
<S> <C> <C> <C>
TAX-MANAGED GROWTH - Merrill Lynch, Pierce, Fenner & Smith, Inc. Jacksonville, FL 34.1%
TAX-MANAGED EMERGING GROWTH - Merrill Lynch, Pierce, Fenner & Smith, Inc. Jacksonville, FL 30.2%
Kenneth and Anna Damhof Charitable
Remainder Unitrust Trust New Ulm, MN 5.4%
</TABLE>
To the knowledge of the Trust, no other person owned of record or
beneficially 5% or more of either Fund's outstanding Class C shares as of such
date.
<PAGE>
[logo] Investing
for the
EATON VANCE 21st
- ------------ Century
MUTUAL FUNDS
- --------------------------------------------------------------------------------
Eaton Vance Tax-Managed Growth Fund
Eaton Vance Tax-Managed Emerging Growth Fund
STATEMENT OF ADDITONAL INFORMATION
March 1, 1998
- --------------------------------------------------------------------------------
Portfolio Investment Adviser
Boston Management and Research, 24 Federal Street, Boston, MA 02110
Investment Adviser of Eaton Vance Tax-Managed Emerging Growth Fund
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
TGMGSAI
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL INFORMATION
March 1, 1998
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 .................................... 7
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 ........................................ 21
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 MARCH 1, 1998, 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 10% of its assets in each of convertible and preferred
equity securities or of investing more than 5% of its total assets in any of the
other types of securities described above. Equity securities received upon
conversion of convertible securities may be retained by the Portfolio. 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 Commodity Futures Trading
Commission ("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.
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 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.
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 could 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, 1997 and 1996, the portfolio turnover
rates of the Portfolio were 77% and 71%, 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.
Notwithstanding the foregoing, the Fund and each Portfolio must always be in
compliance with the borrowing policy set forth above and may not invest more
than 15% of net assets in illiquid securities.
TRUSTEES AND OFFICERS
The Trustees and officers of the Trust and the Portfolio are listed below.
Except as indicated, each individual has held the office shown or other offices
in the same company for the last five years. Unless otherwise noted, the
business address of each Trustee and officer is 24 Federal Street, Boston,
Massachusetts 02110, which is also the address of the Investment Adviser, BMR, a
wholly-owned subsidiary of Eaton Vance; of Eaton Vance's parent, Eaton Vance
Corp. ("EVC"); and of BMR's and Eaton Vance's trustee, Eaton Vance, Inc. ("EV").
Eaton Vance and EV are both wholly-owned subsidiaries of EVC. Those Trustees who
are "interested persons" of the Trust or the Portfolio, as defined in the 1940
Act by virtue of their affiliation with BMR, Eaton Vance, EVC, or EV, are
indicated by an asterisk(*).
TRUSTEES OF THE TRUST AND THE PORTFOLIO
M. DOZIER GARDNER (64), President and Trustee 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 (56), 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). 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 (63), 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
Chairman of the Board and Chief Executive Officer -- 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 (71), 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 (68), 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
Investment Adviser of Eaton Vance Tax-Managed Emerging Growth Fund
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 (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.
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 (57), 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 (62), 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 (35), 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.
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.
Investment Adviser of Eaton Vance Tax-Managed Emerging Growth Fund
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, 1997, the
noninterested Trustees of the Trust and the Portfolio received the following
compensation in their capacities as Trustees from the Trust and the Portfolio,
and, for the year ended December 31, 1997, earned the following compensation in
their capacities as Trustees of the funds in the Eaton Vance fund complex (1):
<TABLE>
<CAPTION>
AGGREGATE AGGREGATE TOTAL COMPENSATION
COMPENSATION COMPENSATION FROM TRUST AND
NAME FROM TRUST(2) FROM PORTFOLIO FUND COMPLEX
- ---- ------------- -------------- -------------------
<S> <C> <C> <C>
Donald R. Dwight .............................. $ 6,080 $1,556(3) $145,000(6)
Samuel L. Hayes, III .......................... 6,213 1,858(4) 153,750(7)
Norton H. Reamer .............................. 5,958 1,692 145,000
John L. Thorndike ............................. 6,205 1,797(5) 146,250(8)
Jack L. Treynor ............................... 6,501 1,818 150,000
(1) As of March 1, 1998, the Eaton Vance fund complex consists of 146 registered investment companies or series thereof.
(2) The Trust consisted of 16 Funds as of October 31, 1997.
(3) Includes $679 of deferred compensation.
(4) Includes $632 of deferred compensation.
(5) Includes $1,784 of deferred compensation.
(6) Includes $45,000 of deferred compensation.
(7) Includes $38,438 of deferred compensation.
(8) Includes $109,022 of deferred compensation.
</TABLE>
The noninterested Trustees of HI Portfolio are the same persons as those of
the Portfolio and James B. Hawkes is the only additional Trustee. The Committee
structure and Trustee compensation policies of HI Portfolio are identical to
that of the Portfolio.
Investment Adviser of Eaton Vance Tax-Managed Emerging Growth Fund
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,
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 Prospectus. As of October 31, 1997, the
Portfolio had net assets of $121,255,999. For the fiscal years ended October 31,
1997, 1996 and 1995, the Portfolio paid BMR advisory fees of $679,210, $744,744
and $992,620, respectively (equivalent to 0.52%, 0.54% and 0.55%, respectively,
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:
ANNUAL DAILY
CATEGORY DAILY NET ASSETS ASSET RATE INCOME RATE
- --------------------------------------------------------------------------------
1 up to $500 million 0.300% 3.00%
2 $500 million but less than $1 billion 0.275% 2.75%
3 $1 billion but less than $1.5 billion 0.250% 2.50%
4 $1.5 billion but less than $2 billion 0.225% 2.25%
5 $2 billion but less than $3 billion 0.200% 2.00%
6 $3 billion and over 0.175% 1.75%
For the fiscal years ended March 31, 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, 1997, 1996 and 1995, the Portfolio paid
BMR administration fees of $195,786, $208,657 and $273,545, 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, John M. Nelson and Ralph Z. Sorenson. Mr. Hawkes is chairman, president
and chief executive officer and Mr. Gardner is vice chairman 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.
Gardner, Hawkes and Rowland, and Alan R. Dynner, 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 February 28, 1998, Messrs. Gardner and Hawkes
each owned 24% of such voting trust receipts, 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, Terry, O'Connor and
Ahern and Ms. Sanders, are officers or Trustees of the Trust and/or the
Portfolio and are also members of the BMR, Eaton Vance and EV organizations.
Eaton Vance owns all the stock of Northeast Properties, Inc., which is
engaged in real estate investment. EVC 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 also provides
services in connection with the preparation of shareholder reports and the
electronic filing of such reports with the Commission.
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, 1997. 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
Portfolio'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.
The foregoing discussion does not address the special tax rules applicable
to certain classes of investors, such as IRAs and other retirement plans,
tax-exempt entities, insurance companies and financial institutions.
Shareholders should consult their own tax advisers with respect to 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
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.
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 the 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 Fund. 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.
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 was approved by the Trustees including the Plan Trustees, on June
23, 1997.
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 a Class' 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 Class 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 a Class's 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. Each Plan was approved by the Trustees, including the Rule 12b-1
Trustees, on June 23, 1997.
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 years ended October 31, 1997, 1996 and 1995, the Portfolio
paid brokerage commissions of $14,023, $23,792 and $11,700, respectively, with
respect to portfolio transactions. Of these amounts, approximately $14,023,
$23,792 and $11,357, respectively, was paid in respect of portfolio security
transactions aggregating approximately $182,150,347, $245,268,131 and
$148,774,532, respectively, to firms which provided some Research Services to
BMR or its affiliates, (although many of such firms may have been selected in
any particular transaction primarily because of their execution capabilities).
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 Trust's Declaration of Trust may be amended by the Trustees when
authorized by vote of a majority of the outstanding voting securities of the
Trust, the financial interests of which are affected by the amendment. The
Trustees may also amend the Declaration of Trust without the vote or consent of
shareholders to change the name of the Trust or any series or to make such other
changes (such as reclassifying series or classes of shares or restructuring the
Trust) as do not have a materially adverse effect on the financial interests of
shareholders or if they deem it necessary to conform it to applicable federal
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 of Trust 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.
In connection with telephone redemptions and exchanges, the Trust, the
Principal Underwriter and the Transfer Agent generally will verify personal
account information in order to determine that instructions communicated are
genuine.
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
accountants for the Fund and the Portfolio appear in the Fund's most recent
annual report to shareholders and are incorporated by reference into this SAI. A
copy of the Fund's annual report accompanies this SAI.
Registrant incorporates by reference the audited financial information for
the Fund and the Portfolio for the fiscal year ended October 31, 1997, as
previously filed electronically with the Commission (Accession No.
0000950109-98-000325).
<PAGE>
APPENDIX A: CLASS A SHARES
PERFORMANCE INFORMATION
The table below indicates the cumulative and average total return on a
hypothetical investment in shares of $1,000. Total return for Class A prior to
November 1, 1997 reflects the total return of Class B, adjusted to reflect the
Class A sales charge. The Class B total return has not been adjusted to reflect
certain other expenses (such as distribution and/or service fees). If such
adjustments were made, the Class A total return 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.
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT
TOTAL RETURN TOTAL RETURN
EXCLUDING MAXIMUM INCLUDING MAXIMUM
VALUE OF VALUE OF SALES CHARGE SALES CHARGE
INVESTMENT INVESTMENT INITIAL INVESTMENT --------------------------- ---------------------------
PERIOD DATE INVESTMENT ON 10/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------------------- ------------- -------------- -------------- ------------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of the Fund 11/26/90 $952.38 $1,544.48 62.17% 7.23% 54.45% 6.47%
5 Years Ended
10/31/97 10/31/92 $952.98 $1,452.37 52.40% 8.79% 45.24% 7.75%
1 Year Ended
10/31/97 10/31/96 $952.92 $1,052.36 10.44% 10.44% 5.24% 5.24%
</TABLE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of January 31, 1998, 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
January 31, 1998, Donaldson Lufkin Jenrette Securities Corporation Inc., P.O.
Box 2052, Jersey City, NJ 07303-9998 was the record owner of approximately
100.0% of the outstanding shares which were held on behalf of its customers who
are 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 B: CLASS B SHARES
FEES AND EXPENSES
DISTRIBUTION PLAN
During the fiscal year ended October 31, 1997, the Principal Underwriter
paid to Authorized Firms sales commissions of $527,959 on sales of Fund shares.
During the same period, the Fund made payments under the Plan to the Principal
Underwriter aggregating $979,078 and the Principal Underwriter received
approximately $25,000 in CDSCs imposed on early redeeming shareholders. These
payments reduced Uncovered Distribution Charges under the Plan. As at October
31, 1997, the outstanding uncovered distribution charges of the Principal
Underwriter calculated under the Plan amounted to approximately $19,584,000.
During the fiscal year ended October 31, 1997, the Fund made service fee
payments to the Principal Underwriter and Authorized Firms aggregating $238,745,
of which $235,714 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, 1997, the Fund paid the Principal
Underwriter $3,837.50 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 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.
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT
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 10/31/97 ON 10/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ----------- --------- ---------- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of
the Fund 11/26/90 $1,000 $1,621.71 $1,621.71 62.17% 7.23% 62.17% 7.23%
5 Years
Ended
10/31/97 10/31/92 $1,000 $1,524.03 $1,504.03 52.40% 8.79% 50.40% 8.51%
1 Year
Ended
10/31/97 10/31/96 $1,000 $1,104.35 $1,054.35 10.44% 10.44% 5.44% 5.44%
- ------------
</TABLE>
The Fund's yield for the 30-day period ended October 31, 1997 was 5.15%.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As at January 31, 1998, 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
January 31, 1998, Merrill Lynch, Pierce, Fenner & Smith, Inc., Jacksonville, FL
32246 was the record owner of approximately 32.0% 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 in shares of $1,000. Total return for the period prior
to November 1, 1997 reflects the total return of the predecessor to Class C.
Total return prior to May 25, 1994 reflects the total return of Class B,
adjusted to reflect the Class C sales charge. The Class B total return has not
been adjusted to reflect certain other expenses (such as distribution and/ or
service fees). If such adjustments were made, the Class C total return would be
different. 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.
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT
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 10/31/97 ON 10/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ----------- --------- ---------- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of Fund 11/26/90 $1,000 $1,639.69 $1,639.69 63.97% 7.40% 63.97% 7.40%
5 Years Ended
10/31/97 10/31/92 $1,000 $1,540.87 $1,540.87 54.09% 9.03% 54.09% 9.03%
1 Year Ended
10/31/97** 10/31/96 $1,000 $1,101.30 $1,091.42 10.13% 10.13% 9.14% 9.14%
- ------------
</TABLE>
The Fund's yield for the 30-day period ended October 31, 1997 was 5.59%. If
a portion of the Fund's expenses had not been allocated to the Administrator,
the Fund would have had a lower yield.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of January 31, 1998, 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
January 31, 1998, Merrill Lynch, Pierce, Fenner & Smith, Inc., Jacksonville, FL
32246 was the record owner of approximately 27.3% of the outstanding shares
which were held on behalf of its customers who are 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 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] Investing
for the
EATON VANCE 21st
- ------------ Century
MUTUAL FUNDS
- --------------------------------------------------------------------------------
Eaton Vance
Strategic Income Fund
STATEMENT OF ADDITONAL INFORMATION
March 1, 1998
- --------------------------------------------------------------------------------
Investment Adviser and Administrator of Stretegic 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 C
OTHER INFORMATION
ITEM 24: FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS
INCLUDED IN PART A:
INCLUDED IN PART A FOR THE FUNDS LISTED BELOW ARE "FINANCIAL
HIGHLIGHTS" FROM THE DATE INDICATED TO THE FISCAL YEAR ENDED
OCTOBER 31, 1997:
Eaton Vance Strategic Income Fund (formerly EV Marathon
Strategic Income Fund) (start of business November 26,
1990)
Eaton Vance Tax-Managed Growth Fund (formerly EV Marathon
Tax-Managed Growth Fund) (start of business March 28, 1996)
Eaton Vance Tax-Managed Emerging Growth Fund (start of
business September 26, 1997)
INCORPORATED BY REFERENCE INTO PART B ARE THE FOLLOWING
FINANCIAL STATEMENTS CONTAINED IN THE ANNUAL REPORTS FOR
THE FUNDS LISTED BELOW, EACH DATED OCTOBER 31, 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.
0000950109-98-000325)
Eaton Vance Tax-Managed Growth Fund (Accession No.
0000950156-98-000080) Eaton Vance
Tax-Managed Emerging Growth Fund (Accession No.
0000950109-98-000228)
THE FINANCIAL STATEMENTS CONTAINED IN EACH FUND'S ANNUAL
REPORT ARE AS FOLLOWS:
Portfolio of Investments (Eaton Vance Tax-Managed Emerging
Growth Fund only)
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, 1997 OF THE CORRESPONDING
FUNDS:
THE FINANCIAL STATEMENTS FOR EACH PORTFOLIO CONTAINED IN EACH
FUND'S ANNUAL REPORT ARE AS FOLLOWS:
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
as Exhibit (1)(c) to Post- Effective Amendment No. 38 and
incorporated herein by reference.
(d) Amendment and Restatement of Establishment and Designation
of Series of Shares dated January 6, 1998 filed herewith.
(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.
(e) Form of Investment Advisory Agreement with Eaton Vance
Management for Eaton Vance Tax- Managed International
Growth Fund filed as Exhibit (5)(e) to Post-Effective
Amendment No. 39 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. dated June 23,
1997 with attached Schedules filed as Exhibit (6)(a) (8) to
Post-Effective Amendment No. 38 and incorporated herein by
reference.
(i) Amendment to Distribution Agreement dated October 17,
1997 filed as Exhibit (6)(a)(9) to Post-Effective
Amendment No. 38 and incorporated herein by reference.
(ii) Form of Schedule A-2 to Distribution Agreement filed as
Exhibit (6)(a)(8)(i) to Post-Effective Amendment No. 39
and incorporated herein by reference.
(b) Selling Group Agreement between Eaton Vance Distributors,
Inc. and Authorized Dealers filed as Exhibit (6)(b) to the
Registration Statement of Eaton Vance Growth Trust Post-
Effective Amendment No. 61 and incorporated herein by
reference.
(7) The Securities and Exchange Commission has granted the
Registrant an exemptive order that permits the Registrant
to enter into deferred compensation arrangements with its
independent Trustees. See in the Matter of Capital Exchange
Fund, Inc., Release No. IC-20671 (November 1, 1994).
(8)(a) Custodian Agreement with Investors Bank & Trust Company
dated October 15, 1992 filed as Exhibit (8) to
Post-Effective Amendment No. 23 and incorporated herein by
reference.
(b) Amendment to Custodian Agreement with Investors Bank &
Trust Company dated October 23, 1995 filed as Exhibit
(8)(b) to Post-Effective Amendment No. 27 and incorporated
herein by reference.
(9)(a) Amended Administrative Services Agreement between Eaton
Vance Mutual Funds Trust (on behalf of each of its series)
and Eaton Vance Management dated July 31, 1995, with
attached schedules (including Amended Schedule A dated May
7, 1996) filed as Exhibit (9)(a) to Post-Effective
Amendment No. 24 and incorporated herein by reference.
(1) Amendment to Schedule A dated June 23, 1997 to the Amended
Administrative Services Agreement filed as Exhibit
(9)(a)(1) to Post-Effective Amendment No. 38 and
incorporated herein by reference.
(2) Form of Schedule A-1 to the Amended Administrative Services
Agreement filed as Exhibit (9)(a)(2) to Post-Effective
Amendment No. 39 and incorporated herein by reference.
(b) Transfer Agency Agreement dated January 1, 1998 filed as
Exhibit (k)(b) to the Registration Statement on Form N-2 of
Eaton Vance Advisers Senior Floating-Rate Fund (File Nos.
333-46853, 811-08671) (Accession No. 0000950156-98-000172)
and incorporated herein by reference.
(10) Opinion of Internal Counsel filed herewith.
(11)(a) Consent of Independent Accountants for Eaton Vance
Strategic Income Fund filed herewith.
(11)(b) Independent Auditors' Consent for Eaton Vance Tax-Managed
Growth Fund Filed herewith.
(11)(c) Independent Auditors' Consent for Eaton Vance Tax-Managed
Emerging 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) 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.
(b) 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.
(c) 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.
(d) 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.
(e) 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.
(f) Eaton Vance Mutual Funds Trust Class A Service Plan adopted
June 23, 1997 with attached Schedules filed as Exhibit
(15)(i) to Post-Effective Amendment No. 38 and incorporated
herein by reference.
(1) Form of Schedule A-2 to Class A Service Plan filed as
Exhibit (15)(i)(1) to Post- Effective Amendment No. 39 and
incorporated herein by reference.
(g) Eaton Vance Mutual Funds Trust Class B Distribution Plan
adopted June 23, 1997 with attached Schedules filed as
Exhibit (15)(j) to Post-Effective Amendment No. 38 and
incorporated herein by reference.
(1) Form of Schedule A-2 to Class B Distribution Plan filed as
Exhibit (15)(j)(1) to Post- Effective Amendment No. 39 and
incorporated herein by reference.
(h) Eaton Vance Mutual Funds Trust Class C Distribution Plan
adopted June 23, 1997 with attached Schedules filed as
Exhibit (15)(k) to Post-Effective Amendment No. 38 and
incorporated herein by reference.
(1) Form of Schedule A-2 to Class C Distribution Plan filed as
Exhibit (15)(k)(1) to Post-Effective Amendment No. 39 and
incorporated herein by reference.
(16) Schedules for Computation of Performance Quotations filed
herewith.
(17)(a) Power of Attorney for Eaton Vance Mutual Funds Trust dated
June 23, 1997, filed as Exhibit No. (17)(a) to
Post-Effective Amendment No. 35 and incorporated herein by
reference.
(b) Power of Attorney for Government Obligations Portfolio
dated April 22, 1997 filed 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
February 20, 1998 filed herewith.
(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
<TABLE>
<CAPTION>
(1) (2)
TITLE OF CLASS NUMBER OF RECORD HOLDERS
Shares of beneficial interest without par value as of January 30, 1998
<S> <C>
Eaton Vance Cash Management Fund 2,351
Eaton Vance Liquid Assets Fund 389
Eaton Vance Money Market Fund 962
Eaton Vance Short-Term Treasury Fund 64
Eaton Vance Tax Free Reserves 178
EV Classic High Income Fund 679
EV Marathon High Income Fund 16,361
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
<S> <C> <C> <C>
Eaton Vance Government Obligations Fund 3,214 3,350 8,375
Eaton Vance Strategic Income Fund 2 5,306 363
Eaton Vance Tax-Managed Growth Fund 9,319 24,464 7,871
Eaton Vance Tax-Managed Emerging Growth Fund 493 897 253
</TABLE>
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:
<TABLE>
<CAPTION>
<S> <C>
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
</TABLE>
(b)
<TABLE>
<CAPTION>
(1) (2) (3)
NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICE
BUSINESS ADDRESS* WITH PRINCIPAL UNDERWRITER WITH REGISTRANT
----------------- -------------------------- ---------------------
<S> <C> <C>
James B. Hawkes Vice President and Director Vice President and Trustee
William M. Steul Vice President and Director None
Wharton P. Whitaker President and Director None
Albert F. Barbaro Vice President 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
Richard Finelli Vice President None
Kelly Flynn Vice President None
James Foley Vice President None
Michael A. Foster Vice President None
William M. Gillen Senior Vice President None
Hugh S. Gilmartin Vice President None
Perry D. Hooker Vice President None
Brian Jacobs Senior Vice President None
Thomas P. Luka Vice President None
John Macejka Vice President None
Timothy D. McCarthy Vice President None
Joseph T. McMenamin Vice President None
Morgan C. Mohrman Senior Vice President None
James A. Naughton Vice President None
Mark D. Nelson Vice President None
Linda D. Newkirk Vice President None
James L. O'Connor Vice President Treasurer
Thomas Otis Secretary and Clerk None
George D. Owen, II Vice President None
Erique M. Pineda 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
Teresa A. Sheehan Vice President None
David C. Sturgis 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 International Growth Fund, using financial statements
which need not be certified, within four to six months from the effective date
of Post-Effective Amendment No. 39.
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 this Amendment to the Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has
duly caused this Post-Effective Amendment to its Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Boston, and the Commonwealth of Massachusetts, on the 23rd day of
February, 1998.
EATON VANCE MUTUAL FUNDS TRUST
By: /s/ M. DOZIER GARDNER
------------------------------
M. DOZIER GARDNER, President
Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment to the Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- -----
<S> <C> <C>
President, Principal
Executive Officer and
/s/ M. DOZIER GARDNER Trustee February 23, 1998
- --------------------------------------
M. DOZIER GARDNER
Treasurer and Principal
Financial and Accounting
/s/ JAMES L. O'CONNOR Officer February 23, 1998
- --------------------------------------
JAMES L. O'CONNOR
/s/ JAMES B. HAWKES Vice President and Trustee February 23, 1998
- --------------------------------------
JAMES B. HAWKES
DONALD R. DWIGHT* Trustee February 23, 1998
- --------------------------------------
DONALD R. DWIGHT
SAMUEL L. HAYES, III* Trustee February 23, 1998
- --------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee February 23, 1998
- --------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee February 23, 1998
- --------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee February 23, 1998
- --------------------------------------
JACK L. TREYNOR
*By: /s/ ALAN R. DYNNER
----------------------------------
ALAN R. DYNNER
As Attorney-in-fact
</TABLE>
<PAGE>
SIGNATURES
Strategic Income Portfolio has duly caused this Amendment to the
Registration Statement on Form N-1A of Eaton Vance Mutual Funds Trust (File
No. 2-90946) to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Boston, and the Commonwealth of Massachusetts, on
the 23rd day of February, 1998.
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.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
Trustee, President and
Principal Executive
/s/ JAMES B. HAWKES Officer February 23, 1998
- --------------------------------------
JAMES B. HAWKES
Treasurer and Principal
Financial and Accounting
/s/ JAMES L. O'CONNOR Officer February 23, 1998
- --------------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee February 23, 1998
- --------------------------------------
DONALD R. DWIGHT
SAMUEL L. HAYES, III* Trustee February 23, 1998
- --------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee February 23, 1998
- --------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee February 23, 1998
- --------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee February 23, 1998
- --------------------------------------
JACK L. TREYNOR
*By: /s/ ALAN R. DYNNER
--------------------------------
ALAN R. DYNNER
As Attorney-in-fact
</TABLE>
<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 23rd day of February, 1998.
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.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
Trustee, President and
Principal Executive
/s/ JAMES B. HAWKES Officer February 23, 1998
- --------------------------------------
JAMES B. HAWKES
Treasurer and Principal
Financial and Accounting
/s/ JAMES L. O'CONNOR Officer February 23, 1998
- --------------------------------------
JAMES L. O'CONNOR
LANDON T. CLAY* Trustee February 23, 1998
- --------------------------------------
LANDON T. CLAY
DONALD R. DWIGHT* Trustee February 23, 1998
- --------------------------------------
DONALD R. DWIGHT
SAMUEL L. HAYES, III* Trustee February 23, 1998
- --------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee February 23, 1998
- --------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee February 23, 1998
- --------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee February 23, 1998
- --------------------------------------
JACK L. TREYNOR
</TABLE>
*By: /s/ ALAN R. DYNNER
--------------------------------
ALAN R. DYNNER
As Attorney-in-fact
<PAGE>
EXHIBIT INDEX
PAGE IN SEQUENTIAL
EXHIBIT NO. DESCRIPTION NUMBERING SYSTEM
- ---------- ----------- -------------------
(1)(d) Amendment and Restatement of Establishment and
Designation of Series of Shares of Beneficial
Interest dated January 6, 1998.
(10) Opinion of Internal Counsel.
(11)(a) Consent of Independent Accountants for Eaton Vance
Strategic Income Fund.
(11)(b) Independent Auditors' Consent for Eaton Vance
Tax-Managed Growth Fund.
(11)(c) Independent Auditors' Consent for Eaton Vance
Tax-Managed Emerging Growth Fund.
(16) Schedules for Computation of Performance
Quotations.
(17)(f) Power of Attorney for Tax-Managed Growth Portfolio.
<PAGE>
Exhibit (1)(d)
EATON VANCE MUTUAL FUNDS TRUST
Amendment and Restatement
of
Establishment and Designation of Series of Shares
of Beneficial Interest, Without Par Value
(as amended and restated January 6, 1998)
WHEREAS, the Trustees of Eaton Vance Mutual Funds Trust, a
Massachusetts business trust (the "Trust"), have previously designated separate
series (or "Funds"); and
WHEREAS, the Trustees now desire to add an additional series and
establish classes thereof (i.e., Eaton Vance Tax-Managed International Growth
Fund) and to further redesignate the series or Funds pursuant to Section 5.1 of
Article V of the Trust's Amended and Restated Declaration of Trust dated August
17, 1993 (as further Amended) (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 divide
the shares of beneficial interest of the Trust into thirteen separate series
("Funds"), each Fund to have the following special and relative rights:
1. The Funds shall be designated as follows:
Eaton Vance Government Obligations Fund
EV Classic High Income Fund
EV Marathon High Income Fund
Eaton Vance Strategic Income Fund
Eaton Vance Tax-Managed Growth Fund
Eaton Vance Cash Management Fund
Eaton Vance Liquid Assets Fund
Eaton Vance Money Market Fund
Eaton Vance Municipal Bond Fund
Eaton Vance Short-Term Treasury Fund
Eaton Vance Tax Free Reserves
Eaton Vance Tax-Managed Emerging Growth Fund
Eaton Vance Tax-Managed International Growth Fund
2. Each Fund shall be authorized to invest in cash, securities,
instruments and other property as from time to time described in the Trust's
then currently effective registration statements under the Securities Act of
1933 and the Investment Company Act of 1940. Each share of beneficial interest
of each Fund ("share") shall be redeemable, shall be entitled to one vote (or
fraction thereof in respect of a fractional share) on matters on which shares of
that Fund shall be entitled to vote and shall represent a pro rata beneficial
interest in the assets allocated to that Fund, all as provided in the
Declaration of Trust. The proceeds of sales of shares of each Fund, together
with any income and gain thereon, less any diminution or expenses thereof, shall
irrevocably belong to such Fund, unless otherwise required by law. Each share of
a Fund shall be entitled to receive its pro rata share of net assets of that
Fund upon liquidation of that Fund.
3. Shareholders of each Fund shall vote separately as a class to the
extent provided in Rule 18f-2, as from time to time in effect, under the
Investment Company Act of 1940.
4. The assets and liabilities of the Trust shall be allocated among the
above-referenced Funds as set forth in Section 5.5 of Article V of the
Declaration of Trust, except as provided below:
(a) Costs incurred by each Fund in connection with its organization and
start-up, including Federal and state registration and qualification fees and
expenses of the initial public offering of such Fund's shares, shall (if
applicable) be borne by such Fund and deferred and amortized over the five year
period beginning on the date that such Fund commences operations.
(b) Reimbursement required under any expense limitation applicable to
the Trust shall be allocated among those Funds whose expense ratios exceed such
limitation on the basis of the relative expense ratios of such Funds.
(c) The liabilities, expenses, costs, charges and reserves of the Trust
(other than the management and investment advisory fees or the organizational
expenses paid by the Trust) which are not readily identifiable as belonging to
any particular Fund shall be allocated among the Funds on an equitable basis as
determined by the Trustees.
5. The Trustees (including any successor Trustees) shall have the right
at any time and from time to time to reallocate assets and expenses or to change
the designation of any Fund now or hereafter created, or to otherwise change the
special and relative rights of any such Fund, and to terminate any Fund or add
additional Funds as provided in the Declaration of Trust.
6. Any Fund may merge or consolidate with any other corporation,
association, trust or other organization or may sell, lease or exchange all or
substantially all of its property, including its good will, upon such terms and
conditions and for such consideration when and as authorized by the Trustees;
and any such merger, consolidation, sale, lease or exchange shall be deemed for
all purposes to have been accomplished under and pursuant to the statutes of the
Commonwealth of Massachusetts. The Trustees may also at any time sell and
convert into money all the assets of any Fund. Upon making provision for the
payment of all outstanding obligations, taxes and other liabilities, accrued or
contingent, of such Fund, the Trustees shall distribute the remaining assets of
such Fund ratably among the holders of the outstanding shares. Upon completion
of the distribution of the remaining proceeds or the remaining assets as
provided in this paragraph 6, the Fund shall terminate and the Trustees shall be
discharged of any and all further liabilities and duties hereunder with respect
to such Fund and the right, title and interest of all parties with respect to
such Fund shall be canceled and discharged.
7. The Declaration of Trust authorizes the Trustees to divide each Fund
and any other series of shares into two or more classes and to fix and determine
the relative rights and preferences as between, and all provisions applicable
to, each of the different classes so established and designated by the Trustees.
Each Fund shall have classes of shares established and designated as Class A,
Class B, Class C and Class I shares, and the Trustees may designate additional
classes in the future. For purposes of allocating liabilities among classes,
each class of that Fund shall be treated in the same manner as a separate
series.
This Amended and Restated Establishment and Designation of Series is
subject to the Amendment to the Declaration of Trust dated June 23, 1997, which
amendment remains in full force and effect.
Dated: January 6, 1998
/s/ Donald R. Dwight
- ---------------------------- -------------------------
Donald R. Dwight Norton H. Reamer
/s/ M. Dozier Gardner /s/ Samuel L. Hayes, III
- ---------------------------- -------------------------
M. Dozier Gardner Samuel L. Hayes, III
/s/ James B. Hawkes /s/ John L. Thorndike
- ---------------------------- -------------------------
James B. Hawkes John L. Thorndike
/s/ Jack L. Treynor
- ----------------------------
Jack L. Treynor
<PAGE>
Exhibit 10
Eaton Vance Management
24 Federal Street
Boston, MA 02110
Telephone: (617) 482-8260
Telecopy: (617) 338-8054
February 25, 1998
Eaton Vance Mutual Funds Trust
24 Federal Street
Boston, MA 02110
Ladies and Gentlemen:
Eaton Vance Mutual Funds Trust (the "Trust") is a voluntary association
(commonly referred to as a "business trust") established under Massachusetts law
with the powers and authority set forth under its Declaration of Trust dated May
7, 1984, as amended (the "Declaration of Trust").
I am of the opinion that all legal requirements have been complied with
in the creation of the Trust, and that said Declaration of Trust is legal and
valid.
The Trustees of the Trust have the powers set forth in the Declaration
of Trust, subject to the terms, provisions and conditions therein provided. As
provided in the Declaration of Trust, the Trustees may authorize one or more
series or classes of shares, without par value, and the number of shares of each
series or class authorized is unlimited. The series and classes of shares
established and designated as of the date hereof are identified on Appendix A
hereto.
Under the Declaration of Trust, the Trustees may from time to time issue
and sell or cause to be issued and sold shares of the Trust for cash or for
property. All such shares, when so issued, shall be fully paid and nonassessable
by the Trust.
I have examined originals, or copies, certified or otherwise identified
to my satisfaction, of such certificates, records and other documents as we have
deemed necessary or appropriate for the purpose of this opinion.
Based upon the foregoing, and with respect to Massachusetts law (other
than the Massachusetts Uniform Securities Act), only to the extent that
Massachusetts law may be applicable and without reference to the laws of the
other several states or of the United States of America, I am of the opinion
that under existing law:
1. The Trust is a trust with transferable shares of beneficial interest
organized in compliance with the laws of the Commonwealth of Massachusetts, and
the Declaration of Trust is legal and valid under the laws of the Commonwealth
of Massachusetts.
2. Shares of beneficial interest of the Trust registered by Form N-1A
may be legally and validly issued in accordance with the Declaration of Trust
upon receipt of payment in compliance with the Declaration of Trust and, when so
issued and sold, will be fully paid and nonassessable by the Trust.
I am a member of the Massachusetts bar and have acted as internal legal
counsel to the Trust in connection with the registration of shares.
I hereby consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to Post-Effective Amendment No. 41 to the
Trust's Registration Statement on Form N-1A pursuant to the Securities Act of
1933, as amended.
Very truly yours,
/s/ Maureen A. Gemma
---------------------------
Maureen A. Gemma, Esq.
Vice President
<PAGE>
Appendix A
Established and Designated Series* of the Trust
Eaton Vance High Income Fund
Eaton Vance Strategic Income Fund
Eaton Vance Tax-Managed Growth Fund
Eaton Vance Tax-Managed Emerging Growth Fund
Eaton Vance Tax-Managed International Growth Fund
Eaton Vance Government Obligations Fund
Eaton Vance Short-Term Treasury Fund
Eaton Vance Municipal Bond Fund
Eaton Vance Emerging Growth Fund
Eaton Vance Cash Management Fund
Eaton Vance Liquid Assets Fund
Eaton Vance Money Market Fund
Eaton Vance Tax Free Reserves
- ----------------------------
* Each Series is authorized to issue Class A, Class B, Class C and Class I
shares.
<PAGE>
EXHIBIT 11(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the use in this Post-Effective Amendment No. 41 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 5, 1997, relating to Eaton Vance Strategic Income Fund (formerly EV
Marathon Strategic Income Fund), and of our report dated December 5, 1997,
relating to Strategic Income Portfolio, which reports are included in the Annual
Report to Shareholders for the year ended October 31, 1997, 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 Funds'
Financial Highlights" in the Prospectus and under the caption "Independent
Accountants" in the Statement of Additional Information of the Registration
Statement.
/s/ COOPERS & LYBRAND L.L.P.
-------------------------------
COOPERS & LYBRAND L.L.P.
February 23, 1998
Boston, Massachusetts
<PAGE>
Exhibit 11(b)
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 41 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
December 5, 1997 relating to Eaton Vance Tax-Managed Growth Fund (formerly EV
Marathon Tax-Managed Growth Fund), and of our report dated December 5, 1997,
relating to Tax-Managed Growth Portfolio, which reports are included in the
Annual Report to Shareholders for the year ended October 31, 1997 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 Funds'
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
February 23, 1998
Boston, Massachusetts
<PAGE>
Exhibit (11)(c)
INDEPENDENT AUDITORS' CONSENT
We consent to the inclusion in Post-Effective Amendment No. 41 to the
Registration Statement of Eaton Vance Mutual Funds Trust (1933 Act File No.
2-90946) on behalf of Eaton Vance Tax-Managed Emerging Growth Fund (the "Fund")
of our report dated December 5, 1997 on our audit of the financial statements
and financial highlights of the Fund which report is included in the Annual
Report to Shareholders for the year ended October 31, 1997, 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
Funds' 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 & Touch LLP
------------------------------
Deloitte & Touch LLP
February 23, 1998
Boston, Massachusetts
<PAGE>
Exhibit 16
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 October 31, 1997. Total return for the
period prior to the Fund's commencement of operations is for the Portfolio (or
its predecessor) adjusted for the Fund's sales charge.
<TABLE>
<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 10/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
10 YEARS ENDED
10/31/97 10/31/87 $941.99 $4,297.25 356.18% 16.39% 329.72% 15.70%
5 YEARS ENDED
10/31/97 10/31/92 $942.00 $2,355.80 150.09% 20.12% 135.58% 18.69%
1 YEAR ENDED
10/31/97 10/31/96 $942.61 $1,242.81 31.85% 31.85% 24.28% 24.28%
</TABLE>
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%.
<PAGE>
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 October 31, 1997. Total return for the
period prior to the Fund's commencement of operations is for the Portfolio (or
its predecessor) adjusted for the Fund's sales charge.
VALUE OF A $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 10/31/97 ON 10/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
10 YEARS ENDED
10/31/97 10/31/87 $4,506.89 $4,506.89 350.69% 16.25% 350.69% 16.25%
5 YEARS ENDED
10/31/97 10/31/92 $2,470.82 $2,450.82 147.08% 19.83% 145.08% 19.64%
1 YEAR ENDED
10/31/97 10/31/96 $1,304.93 $1,254.93 30.49% 30.49% 25.49% 25.49%
</TABLE>
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 CDSC
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.
<PAGE>
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 October 31, 1997. Total return for the
period prior to the Fund's commencement of operations is for the Portfolio (or
its predecessor) adjusted for the Fund's sales charge.
VALUE OF A $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 10/31/97 ON 10/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
10 YEARS ENDED
10/31/97 10/31/87 $4,484.42 $4,484.42 348.44% 16.19% 348.44% 16.19%
5 YEARS ENDED
10/31/97 10/31/92 $2,458.48 $2,458.48 145.85% 19.71% 145.85% 19.71%
1 YEAR ENDED
10/31/97 10/31/96 $1,301.48 $1,291.48 30.15% 30.15% 29.15% 29.15%
</TABLE>
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 CDSC
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.
<PAGE>
INVESTMENT PERFORMANCE -- EATON VANCE TAX-MANAGED EMERGING 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 period from September 25, 1997 through October 31, 1997.
VALUE OF A $1,000 INVESTMENT
<TABLE>
<CAPTION>
VALUE OF VALUE OF TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT INITIAL INVESTMENT EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
PERIOD DATE INVESTMENT* ON 10/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 09/25/97 $942.51 $918.00 -2.60% NA -8.20% NA
</TABLE>
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%.
<PAGE>
INVESTMENT PERFORMANCE -- EATON VANCE TAX-MANAGED EMERGING 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 period from September 25, 1997 through October 31, 1997. Total
return for the period prior to the commencement of operations is for the
Portfolio (or its predecessor) adjusted for the Fund's sales charge.
VALUE OF A $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 10/31/97 ON 10/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 09/25/97 $974.00 $925.30 -2.60% NA -7.47% NA
</TABLE>
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.
<PAGE>
INVESTMENT PERFORMANCE -- EATON VANCE TAX-MANAGED EMERGING 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 period from September 25, 1997 through October 31, 1997. Total return for
the period prior to the commencement of operations is for the Portfolio (or its
predecessor) adjusted for the Fund's sales charge.
VALUE OF A $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 10/31/97 ON 10/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 09/25/97 $972.00 $962.28 -2.80% NA -3.77% NA
</TABLE>
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.
<PAGE>
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 October 31, 1997 and for the 1 and 5
year periods ended October 31, 1997. Total return for the period prior to the
Fund's commencement of operations is for the Portfolio (or its predecessor)
adjusted for the Fund's sales charge.
VALUE OF A $1,000 INVESTMENT
<TABLE>
<CAPTION>
VALUE OF VALUE OF TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT INITIAL INVESTMENT EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
PERIOD DATE INVESTMENT* ON 10/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 11/26/90 $952.38 $1,544.48 62.17% 7.23% 54.45% 6.47%
5 YEARS ENDED
10/31/97 10/31/92 $952.98 $1,452.37 52.40% 8.79% 45.24% 7.75%
1 YEAR ENDED
10/31/97 10/31/96 $952.92 $1,052.36 10.44% 10.44% 5.24% 5.24%
</TABLE>
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%.
<PAGE>
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 October 31, 1997 and for the 1 and 5
year periods ended October 31, 1997.
VALUE OF A $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 10/31/97 ON 10/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 11/26/90 $1,621.71 $1,621.71 62.17% 7.23% 62.17% 7.23%
5 YEARS ENDED
10/31/97 10/31/92 $1,524.03 $1,504.03 52.40% 8.79% 50.40% 8.51%
1 YEAR ENDED
10/31/97 10/31/96 $1,104.35 $1,054.35 10.44% 10.44% 5.44% 5.44%
</TABLE>
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.
<PAGE>
EV MARATHON STRATEGIC INCOME FUND
CALCULATION OF YIELD
For the 30 days ended 10/31/97:
Interest Income Earned: $778,175
Plus
----------
Equal Gross Income: $778,175
Minus Expenses: $226,041
----------
Equal Net Investment Income: $552,134
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 13,736,426
----------
Equal Net Investment Income Earned Per Share: $0.0402
Maximum Offering Price Per Share 10/31/97: $9.47
30 Day Yield*: 5.15%
* Yield is calculated on a bond equivalent rate as follows:
6
2[((0.0402/$9.47)+1)-1]
<PAGE>
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 October 31, 1997 and for the 1 and 5
year periods ended October 31, 1997. Total return for the period prior to the
Fund's commencement of operations is for the Portfolio (or its predecessor)
adjusted for the Fund's sales charge.
VALUE OF A $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 10/31/97 ON 10/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 11/26/90 $1,639.69 $1,639.69 63.97% 7.40% 63.97% 7.40%
5 YEARS ENDED
10/31/97 10/31/92 $1,540.87 $1,540.87 54.09% 9.03% 54.09% 9.03%
1 YEAR ENDED
10/31/97 10/31/96 $1,101.30 $1,091.42 10.13% 10.13% 9.14% 9.14%
</TABLE>
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.
<PAGE>
EV CLASSIC STRATEGIC INCOME FUND
CALCULATION OF YIELD
For the 30 days ended 10/31/97:
Interest Income Earned: $41,143
Plus
----------
Equal Gross Income: $41,143
Minus Expenses: $11,636
----------
Equal Net Investment Income: $29,507
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 536,132
----------
Equal Net Investment Income Earned Per Share: $0.0550
Maximum Offering Price Per Share 10/31/97: $11.95
30 Day Yield*: 5.59%
* Yield is calculated on a bond equivalent rate as follows:
6
2[((0.0550/$11.95)+1)-1]
<PAGE>
Exhibit (17)(f)
POWER OF ATTORNEY
We, the undersigned officers and Trustees of Tax-Managed Growth
Portfolio, a New York trust, do hereby severally constitute and appoint Alan R.
Dynner, James B. Hawkes and Eric G. Woodbury, or any of them, to be true,
sufficient and lawful attorneys, or attorney for each of us, to sign for each of
us, in the name of each of us in the capacities indicated below, any and all
amendments (including post-effective amendments) to the Registration Statement
on Form N-1A filed by Eaton Vance Mutual Funds Trust on behalf of an existing or
proposed series with the Securities and Exchange Commission in respect of shares
of beneficial interest and other documents and papers relating thereto.
IN WITNESS WHEREOF we have hereunto set our hands on the dates set
opposite our respective signatures.
Signature Title Date
--------- ----- ----
President, Principal
/s/ James B. Hawkes Executive Officer
- ----------------------------- and Trustee February 20, 1998
James B. Hawkes
Treasurer and Principal
Financial and Accounting
/s/ James L. O'Connor Officer February 20, 1998
- ----------------------------
James L. O'Connor
/s/ Landon T. Clay Trustee February 20, 1998
- ----------------------------
Landon T. Clay
/s/ Donald R. Dwight Trustee February 20, 1998
- ----------------------------
Donald R. Dwight
/s/ Samuel L. Hayes, III Trustee February 20, 1998
- ----------------------------
Samuel L. Hayes, III
/s/ Norton H. Reamer Trustee February 20, 1998
- ----------------------------
Norton H. Reamer
/s/ John L. Thorndike Trustee February 20, 1998
- ----------------------------
John L. Thorndike
/s/ Jack L. Treynor Trustee February 20, 1998
- ----------------------------
Jack L. Treynor
<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-31-1997
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 125,560
<INVESTMENTS-AT-VALUE> 131,067
<RECEIVABLES> 422
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 131,489
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 893
<TOTAL-LIABILITIES> 893
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 133,925
<SHARES-COMMON-STOCK> 13,786
<SHARES-COMMON-PRIOR> 13,932
<ACCUMULATED-NII-CURRENT> (2,280)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (6,555)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 5,506
<NET-ASSETS> 130,596
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 10,607
<EXPENSES-NET> 1,584
<NET-INVESTMENT-INCOME> 9,023
<REALIZED-GAINS-CURRENT> 6,394
<APPREC-INCREASE-CURRENT> (2,338)
<NET-CHANGE-FROM-OPS> 13,079
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,277
<NUMBER-OF-SHARES-REDEEMED> 2,963
<SHARES-REINVESTED> 540
<NET-CHANGE-IN-ASSETS> 925
<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> 1,584
<AVERAGE-NET-ASSETS> 130,543
<PER-SHARE-NAV-BEGIN> 9.31
<PER-SHARE-NII> 0.657
<PER-SHARE-GAIN-APPREC> 0.288
<PER-SHARE-DIVIDEND> (0.657)
<PER-SHARE-DISTRIBUTIONS> (0.128)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 9.47
<EXPENSE-RATIO> 2.08
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 102
<NAME> STRATEGIC INCOME PORTFOLIO
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 116,209
<INVESTMENTS-AT-VALUE> 118,067
<RECEIVABLES> 4,572
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 76
<TOTAL-ASSETS> 122,715
<PAYABLE-FOR-SECURITIES> 1,434
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 25
<TOTAL-LIABILITIES> 1,459
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 115,644
<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> 5,612
<NET-ASSETS> 121,256
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 11,644
<OTHER-INCOME> 0
<EXPENSES-NET> 1,127
<NET-INVESTMENT-INCOME> 10,517
<REALIZED-GAINS-CURRENT> 6,360
<APPREC-INCREASE-CURRENT> (2,307)
<NET-CHANGE-FROM-OPS> 14,570
<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> (11,151)
<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> 1,127
<AVERAGE-NET-ASSETS> 130,494
<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> 0.86
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 13
<NAME> EV MARATHON TAX MANAGED GROWTH FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 506,264
<INVESTMENTS-AT-VALUE> 567,860
<RECEIVABLES> 7,455
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 25
<TOTAL-ASSETS> 575,340
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 600
<TOTAL-LIABILITIES> 600
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 514,047
<SHARES-COMMON-STOCK> 39,504
<SHARES-COMMON-PRIOR> 6,963
<ACCUMULATED-NII-CURRENT> (426)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (478)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 61,596
<NET-ASSETS> 574,739
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 2,261
<EXPENSES-NET> 2,687
<NET-INVESTMENT-INCOME> (426)
<REALIZED-GAINS-CURRENT> (445)
<APPREC-INCREASE-CURRENT> 57,375
<NET-CHANGE-FROM-OPS> 56,504
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 34,050
<NUMBER-OF-SHARES-REDEEMED> 1,509
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 497,096
<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> 2,687
<AVERAGE-NET-ASSETS> 280,599
<PER-SHARE-NAV-BEGIN> 11.15
<PER-SHARE-NII> (0.011)
<PER-SHARE-GAIN-APPREC> 3.411
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 14.55
<EXPENSE-RATIO> 1.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 104
<NAME> TAX MANAGED GROWTH PORTFOLIO
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 1,859,931
<INVESTMENTS-AT-VALUE> 2,914,765
<RECEIVABLES> 2,625
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 217
<TOTAL-ASSETS> 2,917,607
<PAYABLE-FOR-SECURITIES> 46,013
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 148
<TOTAL-LIABILITIES> 46,161
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,816,613
<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> 1,054,833
<NET-ASSETS> 2,871,446
<DIVIDEND-INCOME> 21,074
<INTEREST-INCOME> 3,332
<OTHER-INCOME> 0
<EXPENSES-NET> 10,007
<NET-INVESTMENT-INCOME> 14,399
<REALIZED-GAINS-CURRENT> 52,638
<APPREC-INCREASE-CURRENT> 375,109
<NET-CHANGE-FROM-OPS> 442,146
<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> 1,934,646
<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> 10,007
<AVERAGE-NET-ASSETS> 1,781,153
<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> 0.56
<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
<SERIES>
<NUMBER> 16
<NAME> EATON VANCE TAX MANAGED EMERGING GROWTH FUND- CLASS A
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 1-MO
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 17,552
<INVESTMENTS-AT-VALUE> 17,098
<RECEIVABLES> 755
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 10
<TOTAL-ASSETS> 17,863
<PAYABLE-FOR-SECURITIES> 1,964
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,311
<TOTAL-LIABILITIES> 3,275
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 15,107
<SHARES-COMMON-STOCK> 403
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 8
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (74)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (453)
<NET-ASSETS> 14,588
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 15
<EXPENSES-NET> 7
<NET-INVESTMENT-INCOME> 8
<REALIZED-GAINS-CURRENT> (73)
<APPREC-INCREASE-CURRENT> (454)
<NET-CHANGE-FROM-OPS> (519)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 484
<NUMBER-OF-SHARES-REDEEMED> 81
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 14,588
<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> 7
<AVERAGE-NET-ASSETS> 674
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.008
<PER-SHARE-GAIN-APPREC> (0.268)
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 9.74
<EXPENSE-RATIO> 0.63
<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
<SERIES>
<NUMBER> 16
<NAME> EATON VANCE TAX MANAGED EMERGING GROWTH FUND- CLASS B
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 1-MO
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 17,552
<INVESTMENTS-AT-VALUE> 17,098
<RECEIVABLES> 755
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 10
<TOTAL-ASSETS> 17,863
<PAYABLE-FOR-SECURITIES> 1,964
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,311
<TOTAL-LIABILITIES> 3,275
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 15,107
<SHARES-COMMON-STOCK> 884
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 8
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (74)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (453)
<NET-ASSETS> 14,588
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 15
<EXPENSES-NET> 7
<NET-INVESTMENT-INCOME> 8
<REALIZED-GAINS-CURRENT> (73)
<APPREC-INCREASE-CURRENT> (454)
<NET-CHANGE-FROM-OPS> (519)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 887
<NUMBER-OF-SHARES-REDEEMED> 3
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 14,588
<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> 7
<AVERAGE-NET-ASSETS> 3,518
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.005
<PER-SHARE-GAIN-APPREC> (0.265)
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 9.74
<EXPENSE-RATIO> 1.37
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 16
<NAME> EATON VANCE TAX MANAGED EMERGING GROWTH FUND- CLASS C
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 1-MO
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 17,552
<INVESTMENTS-AT-VALUE> 17,098
<RECEIVABLES> 755
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 10
<TOTAL-ASSETS> 17,863
<PAYABLE-FOR-SECURITIES> 1,964
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,311
<TOTAL-LIABILITIES> 3,275
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 15,107
<SHARES-COMMON-STOCK> 211
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 8
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (74)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (453)
<NET-ASSETS> 14,588
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 15
<EXPENSES-NET> 7
<NET-INVESTMENT-INCOME> 8
<REALIZED-GAINS-CURRENT> (73)
<APPREC-INCREASE-CURRENT> (454)
<NET-CHANGE-FROM-OPS> (519)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 211
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 14,588
<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> 7
<AVERAGE-NET-ASSETS> 623
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.003
<PER-SHARE-GAIN-APPREC> (0.283)
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 9.72
<EXPENSE-RATIO> 1.56
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
