<PAGE>
[LOGO] Investing
for the
EATON VANCE 21st
Mutual Funds Century
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.
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CONTENTS
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Page Page
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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 9 Eaton Vance Shareholder Services 17
Management of the Fund and the Portfolio 9 Distributions and Taxes 18
Distribution and Service Plans 11 Performance Information 19
Valuing Shares 12 Appendix A -- Corporate Bond Ratings 20
How to Buy Shares 12 Appendix B -- Asset Composition Ratings 21
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</TABLE>
Prospectus dated March 1, 1998,
as Revised July 27, 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 March 31, 1999. After such
date, Other Expenses will be higher. See "Distribution and Service Plans".
The Portfolio's monthly advisory fee has two components, a fee based on daily
net assets and a fee based on daily gross income, as set forth in the fee
schedule on page 10.
The Fund invests in the Portfolio and, at times, in another registered
investment company. Other investors with different distribution arrangements
and fees may invest in the Portfolio in the future. See "Organization of the
Fund and the Portfolio".
<PAGE>
THE FUND'S FINANCIAL HIGHLIGHTS
The following information should be read in conjunction with the audited
financial statements that appear in the Fund's annual report to shareholders.
The Fund's financial statements have been audited by 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.
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<CAPTION>
Year Ended October 31,
--------------------------------------------------------------------------------------------------
1997 1996 1995 1994++++ 1993 1992 1991++
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<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 distributions $ (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%+
Net Assets at End of
Year (000's omitted) $130,596 $129,671 $150,767 $233,139 $381,227 $533,253 $589,182
Portfolio Turnover of
the Fund(3) -- -- -- 55% 55% 56% 20%
Portfolio Turnover of
the Portfolio(3) 77% 71% 78% 71% -- -- --
* 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.
+ Computed on an annualized basis.
++ For the period from the start of business, November 26, 1990, to October 31, 1991.
+++ The per share amount is not in accord with the net realized and unrealized gain for the period due to the timing of the
sales of Fund shares and the amount of per-share realized and unrealized gains and losses at such time.
++++ Per share amounts have been calculated using the monthly average share method which more approximately presents the per
share data for the period, since the use of the undistributed method does not accord with the results of operations.
(1) Total return is calculated assuming a purchase at the net asset value on the first day and a sale at the net asset value on
the last day of each period reported. Distributions, if any, are assumed to be reinvested at the net asset value on the
payable date. 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.
(3) Portfolio Turnover of the Fund represents the rate of portfolio activity for the period while the Fund was making
investments directly in securities. The Fund began investing in the Portfolio on March 1, 1994.
</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 (over 50% of net assets) 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, including securities rated below BBB or 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 50% 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 June 30, 1998, HI Portfolio had 95.4% of its assets invested in
high yield, high risk bonds, and one obligation was in default. For more
detailed information about the risks associated with investing in lower-rated
securities, see "Additional Risk and Investment Information" below and
Appendix A.
The income producing securities in which the Portfolio invests may have fixed,
variable or floating interest rates, constitute a broad mix of asset classes,
and may include convertible bonds, securities of real estate investment trusts
and natural resource companies, stripped debt obligations, closed-end
investment companies (that invest primarily in debt securities the Portfolio
could invest in), preferred, preference and convertible stocks, equipment
lease certificates, equipment trust certificates, conditional sales contracts
and debt obligations collateralized by, or representing interests in pools of,
mortgages and other types of loans ("asset-backed obligations"). The Portfolio
may also acquire warrants as a unit with debt securities. 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; index-linked securities;
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 CONSIDERATIONS 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 50% 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 Appendix B to this Prospectus for asset
composition for the most recent fiscal year. For a description of securities
ratings, see Appendix A.
Although the Investment Adviser considers security ratings when making
investment decisions, it performs its own credit and investment analysis and
does not rely primarily on the ratings assigned by the rating services. In
evaluating the quality of a particular issue, whether rated or unrated, the
Investment Adviser will normally take into consideration, among other things,
the issuer's financial resources and operating history, its sensitivity to
economic conditions and trends, the ability of its management, its debt
maturity schedules and borrowing requirements, and relative values based on
anticipated cash flow, interest and asset coverages, and earnings prospects.
Because of the greater number of investment considerations involved in
investing in high yield, high risk bonds, the achievement of the Fund's
objective depends heavily on the Investment Adviser's judgment and analytical
abilities.
The lower ratings of certain securities reflect a greater possibility that
adverse changes in the financial condition of an issuer, or in general
economic conditions, or both, or an unanticipated rise in interest rates, may
impair the ability of the issuer to make payments of interest and principal.
The inability (or perceived inability) of issuers to make timely payment of
interest and principal would likely make the values of securities held by the
Fund more volatile and could limit the ability to sell securities at prices
approximating the values placed on such securities. It is possible that
legislation may be adopted in the future limiting the ability of certain
financial institutions to purchase such securities; such legislation may
adversely affect the liquidity of such securities. In the absence of a liquid
trading market for securities held by it, a Portfolio may be unable at times
to establish the fair market value of such securities.
The rating assigned to a security by a rating agency does not reflect an
assessment of the volatility of the security's market value or of the
liquidity of an investment in the securities. Credit ratings are based
largely on the issuer's historical financial condition and the rating agency's
investment analysis at the time of rating, and the rating assigned to any
particular security is not necessarily a reflection of the issuer's current
financial condition. Credit quality in the high yield, high risk bond market
can change from time to time, and recently issued credit ratings may not fully
reflect the actual risks posed by a particular high yield security.
While the Investment Adviser will attempt to reduce the risks of investing in
lower rated or unrated securities through active portfolio management,
diversification, credit analysis and attention to current developments and
trends in the economy and the financial markets, there can be no assurance
that a broadly diversified portfolio of such securities would substantially
lessen the risks of defaults brought about by an economic downturn or
recession.
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 an interestholder 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 interestholders 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 or remove 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 $27 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, 1996. 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.
Like most mutual funds, the Fund and the Portfolio rely on computers in
conducting daily business and processing information. There is a concern that
on January 1, 2000 some computer programs will be unable to recognize the new
year and as a consequence computer malfunctions will occur. The Administrator
is taking steps that it believes are reasonably designed to address this
potential problem and to obtain satisfactory assurance from other service
providers to the Fund and the Portfolio that they are also taking steps to
address the issue. There can, however, be no assurance that these steps will
be sufficient to avoid any adverse impact on the Fund, the Portfolio or the
shareholders.
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 Fund expects to begin making Class A service fee payments
during the quarter ending March 31, 1999.
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:
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 $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**
* 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.
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:
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
Investors Bank & Trust Company Fund (and Class)
For A/C Eaton Vance Strategic Income Physical Securities Processing
Fund (and Class) Settlement Area
200 Clarendon Street
Boston, MA 02116
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.
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 thirteen-month period are eligible for reduced sales charges under a
Statement of Intention. 5% of the dollar amount to be purchased will be held
in escrow in the form of shares registered in the investor's name until the
Statement is satisfied or the thirteen-month period expires. See the Account
Application for details.
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 19.44%
(1) For the period from the start of business, November 20, 1990 to
October 31, 1991.
<PAGE>
APPENDIX A
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%
Baa1 3.6%
Baa3 6.4%
Ba3 3.4%
B1 9.6%
B2 0.9%
B3 3.6%
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.
* The chart does not include the Strategic Income Fund's holdings of the High
Income Portfolio, almost all of which are rated Baa3. As of June 30, 1998,
the Fund had invested 12.9% of its assets in High Income Portfolio.
<PAGE>
APPENDIX B
DESCRIPTION OF MOODY'S CORPORATE BOND RATINGS:
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt-edged". Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risk appear somewhat larger than in Aaa
securities.
A: Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper-medium-grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may
be present which suggest a susceptibility to impairment sometime in the
future.
SECURITIES IN WHICH THE PORTFOLIO MAY INVEST WILL INCLUDE THOSE IN THE
FOLLOWING CATEGORIES:
Baa: Bonds which are rated Baa are considered as medium-grade obligations,
(i.e., they are neither highly protected nor poorly secured). Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba: Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate, and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal
or interest.
Ca: Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
NOTE: Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa to B. The modifier 1 indicates that the company ranks
in the higher end of its generic rating category; the modifier 2 indicates a
mid-range ranking; and the modifier 3 indicates that the company ranks in the
lower end of its generic rating category.
DESCRIPTION OF S&P'S CORPORATE DEBT RATINGS:
INVESTMENT GRADE
AAA: Debt rated AAA has the highest rating assigned by S&P's. Capacity to pay
interest and repay principal is extremely strong.
AA: Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A: Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than bonds in higher rated categories.
SECURITIES IN WHICH THE PORTFOLIO MAY INVEST WILL INCLUDE THOSE IN THE
FOLLOWING CATEGORIES:
BBB: Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than for bonds in higher rated categories.
SPECULATIVE GRADE
Debt rated BB, B, CCC, CC and C is regarded, on balance, as predominantly
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. BB indicates the lowest degree of
speculation and C the highest degree of speculation. While such debt will
likely have some quality and protective characteristics, these are outweighed
by large uncertainties or major risk exposures to adverse conditions.
BB: Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure
to adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB- rating.
B: Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness
to pay interest and repay principal. The B rating category is also used for
debt subordinated to senior debt that is assigned an actual or implied BB or
BB- rating.
CCC: Debt rated CCC has a currently identifiable vulnerability to default,
and is dependent upon favorable business, financial, and economic conditions
to meet timely payment of interest and repayment of principal. In the event of
adverse business, financial, or economic conditions, it is not likely to have
the capacity to pay interest and repay principal. The CCC rating category is
also used for debt subordinated to senior debt that is assigned an actual or
implied B or B- rating.
CC: The rating CC is typically applied to debt subordinated to senior debt
that is assigned an actual or implied CCC debt rating.
C: The rating C is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC- debt rating. The C rating may be
used to cover a situation where a bankruptcy petition has been filed, but debt
service payments are continued.
C1: The rating C1 is reserved for income bonds on which no interest is being
paid.
D: Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if
the applicable grace period has not expired, unless S&P's believes that such
payments will be made during such grace period. The D rating also will be used
upon the filing of a bankruptcy petition if debt service payments are
jeopardized.
PLUS (+) OR MINUS (-): The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
NR: Indicates that no public rating has been requested, because there is
insufficient information on which to base a rating, or because S&P's does not
rate a particular type of obligation as a matter of policy.
NOTES: Debt which is unrated exposes the investor to risks with respect to
capacity to pay interest or repay principal which are similar to the risks of
lower-rated speculative obligations. The Portfolio is dependent on the
Investment Adviser's judgment, analysis and experience in the evaluation of
such debt.
Investors should note that the assignment of a rating to a bond by a rating
service may not reflect the effect of recent developments on the issuer's
ability to make interest and principal payments.
<PAGE>
[LOGO] Investing
for the
EATON VANCE 21st
Mutual Funds Century
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Eaton Vance
Strategic Income Fund
PROSPECTUS
MARCH 1, 1998,
AS REVISED JULY 27, 1998
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INVESTMENT ADVISER AND ADMINISTRATOR OF STRATEGIC INCOME PORTFOLIO
INVESTMENT ADVISER OF HIGH INCOME PORTFOLIO
Boston Management and Research, 24 Federal Street, Boston, MA 02110
ADMINISTRATOR OF 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
PricewaterhouseCoopers LLP, One Post Office Square, Boston, MA 02109
SIP
