<PAGE>
As filed with the Securities and Exchange Commission on July 28, 1999
1933 Act File No. 02-90946
1940 Act File No. 811-4015
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933 [x]
POST-EFFECTIVE AMENDMENT NO. 53 [x]
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940 [x]
AMENDMENT NO. 56 [x]
EATON VANCE MUTUAL FUNDS TRUST
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
THE EATON VANCE BUILDING, 255 STATE STREET, BOSTON, MASSACHUSETTS 02109
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(617) 482-8260
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(REGISTRANT'S TELEPHONE NUMBER)
ALAN R. DYNNER
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THE EATON VANCE BUILDING, 255 STATE STREET, BOSTON, MASSACHUSETTS 02109
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(NAME AND ADDRESS OF AGENT FOR SERVICE)
It is proposed that this filing will become effective pursuant to Rule 485
(check appropriate box):
[ ] immediately upon filing pursuant to paragraph (b)
[x] on July 30, 1999 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2)
If appropriate, check the following box:
[ ] this post effective amendment designates a new effective date for a
previously filed post-effective amendment.
High Income Portfolio has executed this Registration Statement.
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<PAGE>
{LOGO} Investing
EATON VANCE for the
Mutual Funds 21st
Century(R)
Eaton Vance
High Income
Fund
A diversified mutual fund seeking high current income
Prospectus Dated
August 1, 1999
The Securities and Exchange Commission has not approved or disapproved these
securities or determined whether this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
Information in this prospectus
Page Page
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Fund Summary 2 Sales Charges 6
Investment Objective & Principal Redeeming Shares 7
Policies and Risks 4 Shareholder Account
Management and Organization 5 Features 8
Valuing Shares 6 Tax Information 9
Purchasing Shares 6 Financial Highlights 10
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This prospectus contains important information about the Fund and the services
available to shareholders. Please save it for reference.
<PAGE>
FUND SUMMARY
Investment Objective and Principal Strategies. The Fund's investment objective
is to provide a high level of current income. To do so, the Fund invests
primarily in high yield, high risk corporate bonds (so-called "junk bonds"). The
Fund will invest a substantial portion of assets in bonds issued in connection
with mergers, acquisitions and other highly- leveraged transactions.
The Fund invests at least 80% of its net assets in fixed-income securities,
including preferred stocks (many of which have fixed maturities) and convertible
securities. The Fund may also purchase securities that make "in-kind" interest
payments, bonds not paying current income and bonds that do not make regular
interest payments. The Fund may invest up to 25% of its total assets in foreign
securities and may hedge currency fluctuations by entering forward foreign
currency exchange contracts. The Fund will generally hold well in excess of 100
securities, which helps reduce investment risk.
Investments are actively managed, and securities may be bought or sold on a
daily basis. The investment adviser's staff monitors the credit quality and
price of securities held by the Fund, as well as other securities that are
available to the Fund. The portfolio manager attempts to improve yield through
timely trading. The portfolio manager also considers the relative value of
securities in the marketplace in making investment decisions, and attempts to
preserve capital and enhance return when consistent with the Fund's objective.
The Fund currently invests its assets in High Income Portfolio (the
"Portfolio"), a separate registered investment company with the same investment
objective and policies as the Fund.
Principal Risk Factors. The Fund invests primarily in below investment grade
bonds, which are predominantly speculative because of the credit risk of their
issuers. Such companies are more likely to default on their payments of interest
and principal owed to the Fund, and such defaults will reduce the Fund's net
asset value and income distributions. An economic downturn generally leads to a
higher non-payment rate, and a security may lose significant value before a
default occurs.
The value of Fund shares may also decline when interest rates rise, when the
supply of suitable bonds exceeds market demand, or in response to a significant
drop in the stock market. Bonds that do not make regular interest payments may
experience greater volatility in response to interest rate changes. Because the
Fund invests a portion of its assets in foreign securities, the value of Fund
shares could be adversely affected by changes in currency exchange rates and by
political and economic developments abroad. Forward foreign currency exchange
contracts also involve a risk of loss due to unanticipated changes in exchange
rates, as well as the risk of counterparty default. The Fund is not appropriate
for investors who cannot assume the greater risk of capital depreciation or loss
inherent in seeking higher yields.
The Fund is not a complete investment program and you may lose money by
investing in the Fund. An investment in the Fund is not a deposit in a bank and
is not insured or guaranteed by the Federal Deposit Insurance Corporation or any
other government agency.
2
<PAGE>
Performance Information. The following bar chart and table provide information
about the Fund's performance, including a comparison of the Fund's performance
to the performance of a broad-based, unmanaged market index of high yield
corporate bonds. Although past performance is no guarantee of future results,
this performance information demonstrates the risk that the value of your
investment will change. The following returns are for Class B shares for each
calendar year through December 31, 1998 and do not reflect a sales charge. If
the sales charge was reflected, the returns would be lower.
1.13% -18.45% 38.34% 17.79% 16.92% -1.81% 13.86% 13.78% 15.35% 1.77%
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1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
The Fund's highest quarterly total return was 11.37% for the quarter ended June
30, 1991, and its lowest quarterly total return was -9.19% for the quarter ended
September 30, 1990. The year-to-date total return through the end of the most
recent calendar quarter (December 31, 1998 to June 30, 1999) was 6.83%. For the
30 days ended March 31, 1999, the SEC yield for Class B shares was 8.92% and for
Class C shares was 8.89%. For current yield information call 1-800-225-6265.
Average Annual Total Return One Five Ten
as of December 31, 1998 Year Years Years
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Class B Shares -2.90% 8.07% 8.90%
Class C Shares 0.70% 7.93% 8.69%
C.S. First Boston High Yield Bond Index 0.58% 8.16% 10.74%
These returns reflect any applicable CDSC for Class B and Class C. The Class C
performance shown above for the period prior to June 8, 1994 is the performance
of Class B shares, adjusted for the sales charge that applies to Class C shares
(but not adjusted for any other differences in the expenses of the classes). The
C. S. First Boston High Yield Bond Index is a broad-based, unmanaged market
index of high yield corporate bonds. Investors cannot invest directly in an
index. (Source for C.S. First Boston High Yield Bond Index returns: C.S. First
Boston)
Fund Fees and Expenses. These tables describe the fees and expenses that you may
pay if you buy and hold shares.
Shareholder Fees
(fees paid directly from your investment) Class B Class C
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Maximum Sales Charge (Load) (as a
percentage of offering price) None None
Maximum Deferred Sales Charge (Load)
(as a percentage of the lower of
net asset value at time of purchase
or time of redemption) 5.00% 1.00%
Maximum Sales Charge (Load) Imposed
on Reinvested Distributions None None
Exchange Fee None None
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets) Class B Class C
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Management Fees 0.61% 0.61%
Distribution and Service (12b-1) Fees* 0.96% 1.00%
Other Expenses 0.18% 0.18%
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Total Annual Fund Operating Expenses 1.75% 1.79%
* Long-term shareholders may pay more than the economic equivalent of the
front-end sales charge permitted by the National Association of Securities
Dealers, Inc.
<PAGE>
Example. This Example is intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The Example also assumes
that your investment has a 5% return each year and that the operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
1 Year 3 Years 5 Years 10 Years
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Class B shares $678 $951 $1,149 $2,062
Class C shares $282 $563 $ 970 $2,105
You would pay the following expenses if you did not redeem your shares:
1 Year 3 Years 5 Years 10 Years
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Class B shares $178 $551 $949 $2,062
Class C shares $182 $563 $970 $2,105
3
<PAGE>
INVESTMENT OBJECTIVE & PRINCIPAL POLICIES AND RISKS
The Fund's investment objective is to provide a high level of current income.
The Fund's investment objective and certain policies may be changed by the
Trustees without shareholder approval. The Trustees have no present intention to
make a change and intend to submit any material change in the objective to
shareholders for approval. The Fund currently seeks to meet its investment
objective by investing in High Income Portfolio (the "Portfolio"), a separate
open-ended management company that has the same objective and policies as the
Fund.
The Portfolio normally invests at least 65% of its total assets in bonds rated
in the lowest investment grade category or below (i.e. bonds rated Baa and below
by Moody's Investors Service, Inc. ("Moody's") or BBB and below by Standard &
Poor's Ratings Group ("S&P")), and in comparable unrated bonds. Bonds rated Baa
and BBB have speculative characteristics, while lower rated bonds are
predominantly speculative.
The Portfolio may hold securities that are unrated or in the lowest rating
categories (rated C by Moody's or D by S&P). Bonds rated C by Moody's are
regarded as having extremely poor prospects of ever attaining any real
investment standing. Bonds rated D by S&P are in payment default or a bankruptcy
petition has been filed and debt service payments are jeopardized. In order to
enforce its rights with defaulted securities, the Portfolio may be required to
retain legal counsel and/or a financial adviser. This may increase the
Portfolio's operating expenses and adversely affect the Fund's net asset value.
The credit quality of most securities held by the Portfolio reflects a greater
possibility that adverse changes in the financial condition of an issuer, or in
general economic conditions, or both, 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 Portfolio more volatile and could limit the
Portfolio's ability to sell its securities at favorable prices. In the absence
of a liquid trading market for securities held by it, the Portfolio may have
difficulties determining the fair market value of such securities.
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 coverage, 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 objectives depends more on the
investment adviser's judgment and analytical abilities than would be the case if
the Portfolio invested primarily in securities in the higher rating categories.
While the investment adviser will attempt to reduce the risks of investing in
lower rated or unrated securities through active portfolio management,
diversification, credit analysis and attention to current developments and
trends in the economy and the financial markets, there can be no assurance that
a broadly diversified portfolio of such securities would substantially lessen
the risks of defaults brought about by an economic downturn or recession.
The Portfolio may invest in zero coupon bonds, deferred interest bonds and bonds
or preferred stocks on which the interest is payable in-kind ("PIK bonds"). Zero
coupon and deferred interest bonds are debt obligations which are issued at a
significant discount from face value. While zero coupon bonds do not require the
periodic payment of interest, deferred interest bonds provide for a period of
delay before the regular payment of interest begins. PIK bonds are debt
obligations which provide that the issuer thereof may, at its option, pay
interest on such bonds in cash or in the form of additional debt obligations.
Such investments may experience greater volatility in market value due to
changes in interest rates. The Portfolio accrues income on these investments and
the Fund is required to distribute its share of Portfolio income each year. The
Portfolio may be required to sell securities to obtain cash needed for income
distributions.
The Portfolio may invest up to 25% of total assets in foreign securities. The
value of foreign securities is affected by changes in currency rates, foreign
tax laws (including withholding tax), government policies (in this country or
abroad) and relations between nations. In addition, the costs of investing
abroad are generally higher than in the United States, and foreign securities
markets may be less liquid, more volatile and less subject to governmental
supervision than markets in the United States. The portfolio manager may use
forward currency exchange contracts to attempt to mitigate adverse effects of
foreign currency fluctuations. These contracts allow the Portfolio to establish
a currency exchange rate with payment and delivery at a future date. They are
subject to a risk of loss due to unanticipated changes in currency exchange
rates and default by the counterparty to the contract. There can be no assurance
that this hedging strategy will be advantageous to the Portfolio.
4
<PAGE>
The value of Fund shares will usually change in response to interest rate
fluctuations. When interest rates decline, the value of securities already held
by the Portfolio can be expected to rise. Conversely, when interest rates rise,
the value of existing portfolio securities can be expected to decline. Other
economic factors (such as a large downward movement in stock prices) can also
adversely impact the high yield bond market. Rating downgrades of securities
held by the Portfolio may reduce their value.
The Portfolio may borrow amounts up to 25% of its net assets, but it will not
borrow more than 5% of the value of its total assets except to satisfy
redemption requests or for other temporary purposes. Such borrowings would
result in increased expense to the Fund and, while they are outstanding, would
magnify increases or decreases in the value of Fund shares. The Portfolio will
not purchase additional portfolio securities while outstanding borrowings exceed
5% of the value of its total assets.
The annual portfolio turnover rate may exceed 100%. A mutual fund with a high
turnover rate (100% or more) may generate more capital gains than a fund with a
lower rate. Capital gains distributions will be made to shareholders if
offsetting capital loss carryforwards do not exist, which reduce after tax
returns of shareholders holding Fund shares in taxable accounts.
Like most mutual funds, the Fund and 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. Eaton Vance 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 and the Portfolio or shareholders. The Year 2000
concern may also adversely impact issuers of obligations held by the Portfolio
and the markets in which these securities trade. The foregoing statement is
subject to the Year 2000 Information and Readiness Disclosure Act, which may
protect Eaton Vance and the Fund and the Portfolio from liability arising from
the statement.
MANAGEMENT AND ORGANIZATION
Management. The Portfolio's investment adviser is Boston Management and Research
("BMR"), a subsidiary of Eaton Vance Management ("Eaton Vance"), with offices at
The Eaton Vance Building, 255 State Street, Boston, Massachusetts 02109. Eaton
Vance has been managing assets since 1924 and managing mutual funds since 1931.
Eaton Vance and its subsidiaries currently manage over $38 billion on behalf of
mutual funds, institutional clients and individuals.
The investment adviser manages the investments of the Portfolio and provides
related office facilities and personnel. Under its investment advisory agreement
with the Portfolio, BMR receives a monthly advisory fee equal to the aggregate
of a daily asset based fee and a daily income based fee. The fees are applied on
the basis of the following categories.
Daily Annual Daily
Category Net Assets Asset Rate Income Rate
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1 up to $500 million 0.300% 3.00%
2 $500 million but less than $1 billion 0.275% 2.75%
3 $1 billion but less than $1.5 billion 0.250% 2.50%
4 $1.5 billion but less than $2 billion 0.225% 2.25%
5 $2 billion but less than $3 billion 0.200% 2.00%
6 $3 billion and over 0.175% 1.75%
On March 31, 1999, the Portfolio had net assets of $1,039,222,599. For the
fiscal year ended March 31, 1999, the Portfolio paid BMR advisory fees
equivalent to 0.61% of the Portfolio's average net assets for such year.
Michael Weilheimer is the portfolio manager of the Portfolio (since January 1,
1996). He also manages other Eaton Vance portfolios. Prior to assuming
management of the Portfolio, Mr. Weilheimer was a senior analyst in the Eaton
Vance high yield bond group. He is a Vice President of Eaton Vance and BMR.
The investment adviser and the Fund and the Portfolio have adopted Codes of
Ethics governing personal securities transactions. Under the Codes, employees of
Eaton Vance may purchase and sell securities (including securities held by the
Fund) subject to certain pre-clearance and reporting requirements and other
procedures.
Eaton Vance serves as administrator of the Fund, providing the Fund with
administrative services and related office facilities. Eaton Vance does not
currently receive a fee for serving as administrator.
5
<PAGE>
Organization. The Fund is a series of Eaton Vance Mutual Funds Trust, a
Massachusetts business trust. The Fund offers multiple classes of shares. Each
class represents a pro rata interest in the Fund, but is subject to different
expenses and rights. The Fund does not hold annual shareholder meetings, but may
hold special meetings for matters that require shareholder approval (like
electing or removing trustees, approving management contracts or changing
investment policies that may only be changed with shareholder approval). Because
the Fund invests in the Portfolio, it may be asked to vote on certain Portfolio
matters (like changes in certain Portfolio investment restrictions). When
necessary, the Fund will hold a meeting of its shareholders to consider the
Portfolio matter and then vote its interest in the Portfolio in proportion to
the votes cast by its shareholders. The Fund can withdraw from the Portfolio at
any time.
VALUING SHARES
The Fund values its shares once each day only when the New York Stock Exchange
is open for trading (typically Monday through Friday), as of the close of
regular trading on the Exchange (normally 4:00 p.m. eastern time). The price of
Fund shares is their net asset value, which is derived from Portfolio holdings.
Most debt securities are valued by an independent pricing service.
When purchasing or redeeming Fund shares, your investment dealer must
communicate your order to the principal underwriter by a specific time each day
in order for the purchase price or redemption price to be based on that day's
net asset value per share. It is the investment dealer's responsibility to
transmit orders promptly. The Fund may accept purchase and redemption orders as
of the time of their receipt by certain investment dealers (or their designated
intermediaries).
PURCHASING SHARES
You may purchase Fund shares through your investment dealer or by mailing the
account application form included in this prospectus to the transfer agent (see
back cover for address). Your initial investment must be at least $1,000. The
price of Class B and Class C shares is the net asset value; however, you may be
subject to a sales charge (called a "contingent deferred sales charge" or
"CDSC") if you redeem Class B shares within six years of purchase or Class C
shares within one year of purchase. The sales charges are described below. Your
investment dealer can help you decide which class of shares suits your
investment needs.
After your initial investment, additional investments of $50 or more may be made
at any time by sending a check payable to the order of the Fund or the transfer
agent directly to the transfer agent (see back cover for address). Please
include your name and account number and the name of the Fund and Class with
each investment.
You may also make automatic investments of $50 or more each month or each
quarter from your bank account. You can establish bank automated investing on
the account application or by calling 1-800-262-1122. The minimum initial
investment amount and Fund policy of redeeming accounts with low account
balances are waived for bank automated investing accounts and certain group
purchase plans.
SALES CHARGES
Contingent Deferred Sales Charge. Each class of shares is subject to a CDSC on
certain redemptions. Class C shares are subject to a 1.00% CDSC if redeemed
within 12 months of purchase. Class B shares are subject to the following CDSC
schedule:
Year of Redemption After Purchase CDSC
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First or Second 5%
Third 4%
Fourth 3%
Fifth 2%
Sixth 1%
Seventh or following 0%
The CDSC is 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 from the CDSC. Redemptions are made first from shares
that are not subject to a CDSC.
6
<PAGE>
The principal underwriter pays commissions to investment dealers on sales of
Class B and Class C shares (except exchange transactions and reinvestments). The
sales commission on Class B shares equals 4% of the purchase price of the
shares. The sales commission on Class C shares equals 0.75% of the purchase
price of the shares. After the first year, investment dealers also receive 0.75%
of the value of Class C shares in distribution fees.
CDSCs are waived for certain redemptions pursuant to a Withdrawal Plan (see
"Shareholder Account Features") and in connection with certain redemptions from
tax-sheltered retirement plans. Call 1-800-225-6265 for details. The Class B
CDSC is also waived following the death of all beneficial owners of shares, but
only if the redemption is requested within one year after death (a death
certificate and other applicable documents may be required).
If you redeem shares, you may reinvest at net asset value any portion or all of
the redemption proceeds in the same class of shares of the Fund provided that
the reinvestment occurs within 60 days of the redemption, and the privilege has
not been used more than once in the prior 12 months. Your account will be
credited with any CDSC paid in connection with the redemption. Reinvestment
requests must be in writing. If you reinvest, you will be sold shares at the
next determined net asset value following receipt of your request.
Distribution and Service Fees. Class B and Class C shares have adopted a plan
under Rule 12b-1 that allows the Fund to pay distribution fees for the sale and
distribution of shares (so-called "12b-1 fees"). Class B and Class C shares pay
distribution fees of 0.75% of average daily net assets annually. Because these
fees are paid from Fund assets on an ongoing basis, they will increase your cost
over time and may cost you more than paying other types of sales charges. Class
B and Class C pay service fees for personal and/or account services not
exceeding 0.25% of average daily net assets annually. Class B shares only pay
service fees on shares that have been outstanding for 12 months.
REDEEMING SHARES
You can redeem shares in any of the following ways:
By Mail Send your request to the transfer agent along with any
certificates and stock powers. The request must be
signed exactly as your account is registered and
signature guaranteed. You can obtain a signature
guarantee at certain banks, savings and loan
institutions, credit unions, securities dealers,
securities exchanges, clearing agencies and registered
securities associations. You may be asked to provide
additional documents if your shares are registered in
the name of a corporation, partnership or fiduciary.
By Telephone You can redeem up to $50,000 by calling the transfer
agent at 1-800-262-1122 on Monday through Friday, 9:00
a.m. to 4:00 p.m. (eastern time). Proceeds of a
telephone redemption can be mailed only to the account
address. Shares held by corporations, trusts or certain
other entities, or subject to fiduciary arrangements,
cannot be redeemed by telephone.
Through an
Investment
Dealer Your investment dealer is responsible for transmitting
the order promptly. A dealer may charge a fee for this
service.
If you redeem shares, your redemption price will be based on the net asset value
per share next computed after the redemption request is received. Your
redemption proceeds will be paid in cash within seven days, reduced by the
amount of any applicable CDSC and any federal income tax required to be
withheld. Payments will be sent by mail unless you complete the Bank Wire
Redemptions section of the account application.
If you recently purchased shares, the proceeds of a redemption will not be sent
until the purchase check (including a certified or cashier's check) has cleared.
If the purchase check has not cleared, redemption proceeds may be delayed up to
15 days from the purchase date. If your account value falls below $750 (other
than due to market decline), you may be asked to either add to your account or
redeem it within 60 days. If you take no action, your account will be redeemed
and the proceeds sent to you.
While redemption proceeds are normally paid in cash, redemptions may be paid by
distributing marketable securities. If you receive securities, you could incur
brokerage or other charges in converting the securities to cash.
7
<PAGE>
SHAREHOLDER ACCOUNT FEATURES
Once you purchase shares, the transfer agent establishes a Lifetime Investing
Account(R) for you. Share certificates are issued only on request.
Distributions. You may have your Fund distributions paid in one of the following
ways:
* Full
Reinvest
Option Dividends and capital gains are reinvested in additional
shares. This option will be assigned if you do not specify
an option.
* Partial
Reinvest
Option Dividends are paid in cash and capital gains are reinvested
in additional shares.
* Cash Option Dividends and capital gains are paid in cash.
* Exchange
Option Dividends and/or capital gains are reinvested in additional
shares of another Eaton Vance fund chosen by you. Before
selecting this option, you must obtain a prospectus of the
other fund and consider its objectives and policies
carefully.
Information from the Fund. From time to time, you may be mailed the following:
* Annual and Semi-Annual Reports, containing performance information and
financial statements.
* Periodic account statements, showing recent activity and total share
balance.
* Form 1099 and tax information needed to prepare your income tax
returns.
* Proxy materials, in the event a shareholder vote is required.
* Special notices about significant events affecting your Fund.
Withdrawal Plan. You may redeem shares on a regular monthly or quarterly basis
by establishing a systematic withdrawal plan. Withdrawals will not be subject to
any applicable CDSC if they do not in the aggregate exceed 12% annually of the
account balance at the time the plan is established. A minimum account size of
$5,000 is required to establish a systematic withdrawal plan.
Tax-Sheltered Retirement Plans. Class C shares are available for purchase in
connection with certain tax-sheltered retirement plans. Call 1-800-225-6265 for
information. Distributions will be invested in additional shares for all
tax-sheltered retirement plans.
Exchange Privilege. You may exchange your Class B and Class C shares for shares
of the same class of another Eaton Vance fund. Exchanges are generally made at
net asset value. If your shares are subject to a CDSC, the CDSC will continue to
apply to your new shares at the same CDSC rate. For purposes of the CDSC, your
shares will continue to age from the date of your original purchase.
Before exchanging, you should read the prospectus of the new fund carefully. If
you wish to exchange shares, you may write to the transfer agent (address on
back cover) or call 1-800-262-1122. Periodic automatic exchanges are also
available. The exchange privilege may be changed or discontinued at any time.
You will receive 60 days' notice of any material change to the privilege. This
privilege may not be used for "market timing". If an account (or group of
accounts) makes more than two round-trip exchanges within 12 months, it will be
deemed to be market timing. The exchange privilege may be terminated for market
timing accounts.
Telephone Transactions. You can redeem or exchange shares by telephone as
described in this prospectus. The transfer agent and the principal underwriter
have procedures in place to authenticate telephone instructions (such as
verifying personal account information). As long as the transfer agent and
principal underwriter follow these procedures, they will not be responsible for
unauthorized telephone transactions and you bear the risk of possible loss
resulting from telephone transactions. You may decline the telephone redemption
option on the account application. Telephone instructions are tape recorded.
"Street Name" Accounts. If your shares are held in a "street name" account at an
investment dealer, that dealer (and not the Fund or its transfer agent) will
perform all recordkeeping, transaction processing and distribution payments.
Because the Fund will have no record of your transactions, you should contact
your investment dealer to purchase, redeem or exchange shares, to make changes
in your account, or to obtain account information. The transfer of shares in a
"street name" account to an account with another investment dealer or to an
account directly with the Fund involves special procedures and you will be
required to obtain historical information about your shares prior to the
transfer. Before establishing a "street name" account with an investment dealer,
you should determine whether that dealer allows reinvestment of distributions in
"street name" accounts.
8
<PAGE>
Account Questions. If you have any questions about your account or the services
available, please call Eaton Vance Shareholder Services at 1-800-225-6265, or
write to the transfer agent (see back cover for address).
TAX INFORMATION
The Fund declares dividends daily and ordinarily pays distributions monthly. Any
net realized capital gains will be distributed once annually. Your account will
be credited with dividends beginning on the business day after the day when the
funds used to purchase your shares are collected by the transfer agent.
Distributions will generally be taxable to shareholders as ordinary income.
Distributions of any long-term capital gains are taxable as long-term gains. A
portion of the Fund's distributions may be eligible for the corporate
dividends-received deduction. The Fund's distributions are taxable as described
above whether they are paid in cash or reinvested in additional shares. A
redemption of Fund shares, including an exchange for shares of another fund, is
a taxable transaction.
Shareholders should consult with their advisers concerning the applicability of
state, local and other taxes to an investment.
9
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights are intended to help you understand the Fund's
financial performance for the past five years. Certain information in the table
reflects the financial results for a single Fund share. The total returns in the
table represent the rate an investor would have earned (or lost) on an
investment in the Fund (assuming reinvestment of all distributions and not
taking into account a sales charge). This information has been audited by
Deloitte & Touche LLP, independent accountants. The report of Deloitte & Touche
LLP and the Fund's financial statements are incorporated herein by reference and
included in the annual report, which is available on request. The Fund began
offering two classes of shares on April 1, 1998. Prior to that date, the Fund
offered only Class B shares and Class C existed as separate a fund.
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-------------------------------------------------------------------
1999 1998 1997 1996 1995
-------------------------------------------------------------------
CLASS B CLASS C CLASS B CLASS B CLASS B CLASS B
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value -
Beginning of year $ 8.030 $10.560 $ 7.220 $ 7.100 $ 6.920 $ 7.450
-------- ------- -------- -------- -------- --------
Income (loss) from
operations:
Net investment
income $ 0.685 $ 0.901 $ 0.658 $ 0.652 $ 0.665 $ 0.671
Net realized and
unrealized gain
(loss) (0.543) (0.715) 0.774 0.120 0.189 (0.507)
-------- ------- -------- -------- -------- --------
Total income (loss)
from operations $ 0.142 $ 0.186 $ 1.432 $ 0.772 $ 0.854 $ 0.164
-------- ------- -------- -------- -------- --------
Less
distributions:
From net investment
income $ (0.662) $(0.866) $ (0.622) $ (0.646) $ (0.665) $ (0.671)
In excess of net
investment income -- -- -- (0.006) (0.009) (0.023)
-------- ------- -------- -------- -------- --------
Total distributions $ (0.662) $(0.866) $ (0.622) $ (0.652) $ (0.674) $ (0.694)
-------- ------- -------- -------- -------- --------
Net asset value -
End of year $ 7.510 $ 9.880 $ 8.030 $ 7.220 $ 7.100 $ 6.920
-------- ------- -------- -------- -------- --------
Total return
(1) 2.08% 2.08% 20.59% 11.37% 12.80% 2.51%
Ratios/Supplemental
Data:
Net assets, end of
year (000's omitted) $689,140 $61,660 $693,818 $598,273 $496,966 $439,171
Ratios (as a
percentage of
average daily net
assets):
Expenses(2) 1.75% 1.79% 1.73% 1.77% 1.78% 1.78%
Net investment
income 9.13% 9.18% 8.58% 8.97% 9.38% 9.52%
Portfolio Turnover
of the Portfolio 150% 150% 137% 78% 88% 53%
</TABLE>
(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 reinvestment date. Total return is not computed on
an annualized basis.
(2) Includes the Fund's share of the Portfolio's allocated expenses.
10
<PAGE>
{LOGO} Investing
EATON VANCE for the
Mutual Funds 21st
Century(R)
MORE INFORMATION
- --------------------------------------------------------------------------------
About the Fund: More information is available in the statement of
additional information. The statement of additional information is
incorporated by reference into this prospectus. Additional information
about the Portfolio's investments is available in the annual and
semi-annual reports to shareholders. In the annual report, you will find a
discussion of the market conditions and investment strategies that
significantly affected the Fund's performance during the past year. You may
obtain free copies of the statement of additional information and the
shareholder reports by contacting:
EATON VANCE DISTRIBUTORS, INC.
The Eaton Vance Building
255 State Street
Boston, MA 02109
1-800-225-6265
website: www.eatonvance.com
You will find and may copy information about the Fund at the Securities and
Exchange Commission's public reference room in Washington, DC (call
1-800-SEC-0330 for information); on the SEC's Internet site
(http://www.sec.gov); or upon payment of copying fees by writing to the
SEC's public reference room in Washington, DC 20549-6009.
About Shareholder Accounts: You can obtain more information from Eaton
Vance Share- holder Services (1-800-225-6265). If you own shares and would
like to add to, redeem or change your account, please write or call the
transfer agent:
- --------------------------------------------------------------------------------
FIRST DATA INVESTOR SERVICES GROUP
P.O. BOX 5123
WESTBOROUGH, MA 01581-5123
1-800-262-1122
SEC File No. 811-4015 HIP
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL INFORMATION
August 1, 1999
EATON VANCE HIGH INCOME FUND
The Eaton Vance Building
255 State Street
Boston, Massachusetts 02109
(800) 225-6265
This Statement of Additional Information ("SAI") provides general
information about the Fund and the Portfolio. The Fund is a series of Eaton
Vance Mutual Funds Trust. Capitalized terms used in this SAI and not otherwise
defined have the meanings given them in the prospectus. This SAI contains
additional information about:
Page
Strategies and Risks .................................................. 2
Investment Restrictions ............................................... 6
Management and Organization ........................................... 8
Investment Advisory and Administrative Services ....................... 12
Other Service Providers ............................................... 13
Purchasing and Redeeming Shares ....................................... 14
Sales Charges ......................................................... 15
Performance ........................................................... 18
Taxes ................................................................. 19
Portfolio Security Transactions ....................................... 21
Financial Statements .................................................. 23
Appendices:
A: Class B Fees, Performance and Ownership ............................ a-1
B: Class C Fees, Performance and Ownership ............................ b-1
C: Asset Composition Information ...................................... c-1
D: Corporate Bond Ratings ............................................. d-1
THIS SAI IS NOT A PROSPECTUS AND IS AUTHORIZED FOR DISTRIBUTION TO
PROSPECTIVE INVESTORS ONLY IF PRECEDED OR ACCOMPANIED BY THE FUND'S PROSPECTUS
DATED AUGUST 1, 1999, AS SUPPLEMENTED FROM TIME TO TIME, WHICH IS INCORPORATED
HEREIN BY REFERENCE. THIS SAI SHOULD BE READ IN CONJUNCTION WITH SUCH
PROSPECTUS, WHICH MAY BE OBTAINED BY CALLING 1-800-225-6265.
<PAGE>
STRATEGIES AND RISKS
The rating assigned to a security by a rating agency does not reflect
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.
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.
OTHER FIXED-INCOME SECURITIES. Included in the fixed-income securities in which
the Portfolio may invest are preferred, preference and convertible stocks,
equipment lease certificates, equipment trust certificates. Equipment lease
certificates are debt obligations secured by leases on equipment (such as
railroad cars, airplanes or office equipment), with the issuer of the
certificate being the owner and lessor of the equipment. Equipment trust
certificates are debt obligations secured by an interest in property (such as
railroad cars or airplanes), the title of which is held by a trustee while the
property is being used by the borrower.
In addition to lower rated bonds, the Portfolio may invest in higher rated
securities. The Portfolio may also invest 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 fixed-income security. Equity securities are
sensitive to stock market volatility. Changes in stock market values can be
sudden and unpredictable. Even if values rebound, there is no assurance they
will return to previous levels.
LOAN INTERESTS. A loan in which the Portfolio may acquire a loan interest (a
"Loan Interest") is typically originated, negotiated and structured by a U.S.
or foreign commercial bank, insurance company, finance company or other
financial institution (the "Agent") for a lending syndicate of financial
institutions. The Agent typically administers and enforces the loan on behalf
of the other lenders in the syndicate. In addition, an institution, typically
but not always the Agent (the "Collateral Bank"), holds collateral (if any) on
behalf of the lenders. These Loan Interests may take the form of participation
interests in, assignments of or novations of a loan during its secondary
distribution, or direct interests during a primary distribution. Such Loan
Interests may be acquired from U.S. or foreign banks, insurance companies,
finance companies or other financial institutions who have made loans or are
members of a lending syndicate or from other holders of Loan Interests.
The Portfolio may also acquire Loan Interests under which the Portfolio
derives its rights directly from the borrower. Such Loan Interests are
separately enforceable by the Portfolio against the borrower and all payments
of interest and principal are typically made directly to the Portfolio from
the borrower. In the event that the Portfolio and other lenders become
entitled to take possession of shared collateral, it is anticipated that such
collateral would be held in the custody of a Collateral Bank for their mutual
benefit. The Portfolio may not act as an Agent, a Collateral Bank, a guarantor
or sole negotiator or structurer with respect to a loan.
The investment adviser will analyze and evaluate the financial condition
of the borrower in connection with the acquisition of any Loan Interest. The
investment adviser also analyzes and evaluates the financial condition of the
Agent and, in the case of Loan Interests in which the Portfolio does not have
privity with the borrower, those institutions from or through whom the
Portfolio derives its rights in a loan (the "Intermediate Participants"). From
time to time the investment adviser and its affiliates may borrow money from
various banks in connection with their business activities. Such banks may
also sell interests in loans to or acquire such interests from the Portfolio
or may be Intermediate Participants with respect to loans in which the
Portfolio owns interests. Such banks may also act as Agents for loans in which
the Portfolio owns interests.
In a typical loan the Agent administers the terms of the loan agreement.
In such cases, the Agent is normally responsible for the collection of
principal and interest payments from the borrower and the apportionment of
these payments to the credit of all institutions which are parties to the loan
agreement. The Portfolio will generally rely upon the Agent or an Intermediate
Participant to receive and forward to the Portfolio its portion of the
principal and interest payments on the loan. Furthermore, unless under the
terms of a participation agreement the Portfolio has direct recourse against
the borrower, the Portfolio will rely on the Agent and the other members of
the lending syndicate to use appropriate credit remedies against the borrower.
The Agent is typically responsible for monitoring compliance with covenants
contained in the loan agreement based upon reports prepared by the borrower.
The seller of the Loan Interest usually does, but is often not obligated to,
notify holders of Loan Interests of any failures of compliance. The Agent may
monitor the value of the collateral and, if the value of the collateral
declines, may accelerate the loan, may give the borrower an opportunity to
provide additional collateral or may seek other protection for the benefit of
the participants in the loan. The Agent is compensated by the borrower for
providing these services under a loan agreement, and such compensation may
include special fees paid upon structuring and funding the loan and other fees
paid on a continuing basis. With respect to Loan Interests for which the Agent
does not perform such administrative and enforcement functions, the Portfolio
will perform such tasks on its own behalf, although a Collateral Bank will
typically hold any collateral on behalf of the Portfolio and the other lenders
pursuant to the applicable loan agreement.
A financial institution's appointment as Agent may usually be terminated
in the event that it fails to observe the requisite standard of care or
becomes insolvent, enters Federal Deposit Insurance Corporation ("FDIC")
receivership, or, if not FDIC insured, enters into bankruptcy proceedings. A
successor Agent would generally be appointed to replace the terminated Agent,
and assets held by the Agent under the loan agreement should remain available
to holders of Loan Interests. However, if assets held by the Agent for the
benefit of the Portfolio were determined to be subject to the claims of the
Agent's general creditors, the Portfolio might incur certain costs and delays
in realizing payment on a loan interest, or suffer a loss of principal and/or
interest. In situations involving Intermediate Participants similar risks may
arise.
Purchasers of Loan interests depend primarily upon the creditworthiness of
the borrower for payment of principal and interest. If the Portfolio does not
receive scheduled interest or principal payments on such indebtedness, the
Portfolio could be adversely affected. Loans that are fully secured offer the
Portfolio more protections than an unsecured loan in the event of non-payment
of scheduled interest or principal. However, there is no assurance that the
liquidation of collateral from a secured loan would satisfy the borrower's
obligation, or that the collateral can be liquidated. Indebtedness of
borrowers whose creditworthiness is poor involves substantially greater risks,
and may be highly speculative. Borrowers that are in bankruptcy or
restructuring may never pay off their indebtedness, or may pay only a small
fraction of the amount owed. Direct indebtedness of developing countries will
also involve a risk that the governmental entities responsible for the
repayment of the debt may be unable, or unwilling, to pay interest and repay
principal when due.
The Portfolio limits the amount of total assets that it will invest in any
one issuer or in issuers within the same industry. See Investment Restrictions
(1) and (5) below. For purposes of these restrictions, the Portfolio generally
will treat the borrower as the "issuer" of a Loan Interest held by the
Portfolio. In the case of loan participations where the Agent or Intermediate
Participant serves as financial intermediary between the Portfolio and the
borrower, the Portfolio, in appropriate circumstances, will treat both the
Agent or Intermediate Participant and the borrower as "issuers" for the
purposes of determining whether the Portfolio has invested more than 5% of its
total assets in a single issuer. Treating a financial intermediary as an
issuer of indebtedness may restrict the Portfolio's ability to invest in
indebtedness related to a single intermediary, or a group of intermediaries
engaged in the same industry, even if the underlying borrowers represent many
different companies and industries.
FOREIGN INVESTMENTS. Investing in foreign issuers involves certain special
considerations, including those set forth below, which are not typically
associated with investing in U.S. issuers. Since investments in foreign
issuers may involve currencies of foreign countries, and since the Portfolio
may temporarily hold funds in bank deposits in foreign currencies during
completion of investment programs, the Portfolio may be affected favorably or
unfavorably by changes in currency rates and in exchange control regulations
and may incur costs in connection with conversions between various currencies.
Since foreign companies are not subject to uniform accounting, auditing
and financial reporting standards, practices and requirements comparable to
those applicable to U.S. companies, there may be less publicly available
information about a foreign company than about a domestic company. Foreign
stock markets, while growing in volume of trading activity, have substantially
less volume than the Exchange, and securities of some foreign companies are
less liquid and more volatile than securities of comparable U.S. companies.
Similarly, volume and liquidity in most foreign bond markets is less than in
the United States and, at times, volatility of price can be greater than in
the United States. Fixed commissions on foreign stock exchanges are generally
higher than negotiated commissions on U.S. exchanges, although the Portfolio
endeavors to achieve the most favorable net results on its portfolio
transactions. There is generally less government supervision and regulation of
stock exchanges, brokers and listed companies than in the United States. Mail
service between the United States and foreign countries may be slower or less
reliable than within the United States, thus increasing the risk of delayed
settlements of portfolio transactions or loss of certificates for portfolio
securities. Investments may include securities issued by companies in lesser-
developed countries, which are sometimes referred to as "emerging markets".
Such countries pose a heightened risk of nationalization or expropriation or
confiscatory taxation, political, financial or social instability, armed
conflict or diplomatic developments which could affect the Portfolio's
investments in those countries. Moreover, individual foreign economies may
differ favorably or unfavorably from the U.S. economy in such respects as
growth of gross national product, rate of inflation, capital reinvestment,
resource self-sufficiency and balance of payments position. Investments in
foreign securities are not expected to exceed 25% of total assets.
DERIVATIVE INSTRUMENTS. The Portfolio may purchase or sell derivative
instruments (which are instruments that derive their value from another
instrument, security, index or currency) to hedge against fluctuations in
interest rates, securities prices or currency exchange rates to change the
duration of the Portfolio's fixed income portfolio or as a substitute for the
purchase or sale of securities or currency. Options may be written to enhance
income. The Portfolio's transactions in derivative instruments may include the
purchase or sale of futures contracts on securities, (such as U.S. Government
securities), indices, other financial instruments (such as certificates of
deposit, Eurodollar time deposits, and economic indices) or currencies;
options on futures contracts; exchange-traded options on securities, indices
or currencies; and forward contracts to purchase or sell currencies. All of
the Portfolio's transactions in derivative instruments involve a risk of loss
or depreciation due to: unanticipated adverse changes in interest rates,
securities prices or currency exchange rates; the inability to close out a
position; tax constraints on closing out positions; default by the
counterparty; imperfect correlation between a position and the desired hedge;
and portfolio management constraints on disposing of securities subject to
such transactions. The loss on derivative instruments (other than purchased
options) may substantially exceed the Portfolio's initial investment in these
instruments. In addition, the Portfolio may lose the entire premium paid for
purchased options that expire before they can be profitably exercised by the
Portfolio. The Portfolio incurs transaction costs in opening and closing
positions in derivative instruments. Under regulations of the Commodity Future
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's success in using derivative instruments to hedge portfolio
assets depends on the degree of price correlation between the derivative
instrument and the hedged asset. Imperfect correlation may be caused by
several factors, including temporary price disparities among the trading
markets for the derivative instrument, the assets underlying the derivative
instrument and the Portfolio's assets.
FORWARD FOREIGN CURRENCY EXCHANGE TRANSACTIONS. The Portfolio may enter into
forward foreign currency exchange contracts. A forward foreign currency
exchange contract involves an obligation to purchase or sell a specific
currency at a future date, which may be any fixed number of days from the date
of the contract agreed upon by the parties, at a price set at the time of the
contract. These contracts are traded in the interbank market conducted
directly between currency traders (usually large commercial banks) and their
customers. A forward contract generally has no deposit requirement, and no
commissions are charged at any stage for trades.
At the maturity of a forward contract the Portfolio may either accept or
make delivery of the currency specified in the contract or, at or prior to
maturity, enter into a closing transaction involving the purchase or sale of
an offsetting contract. Closing transactions with respect to forward contracts
are usually effected with the currency trader who is a party to the original
forward contract.
The Portfolio will not enter into forward contracts or maintain a net
exposure to such contracts where the consummation of the contracts would
obligate the Portfolio to deliver an amount of foreign currency in excess of
the value of the securities held by the Portfolio or other assets denominated
in that currency. Under normal circumstances, consideration of the prospect
for currency parities will be incorporated into the long-term investment
decisions made with regard to overall diversification strategies. However, the
Portfolio believes that it is important to have the flexibility to enter into
such forward contracts when it determines that the best interests of the
Portfolio will be served. The Portfolio generally will not enter into a
forward contract with a term of greater than one year.
OPTIONS ON SECURITIES. An options position may be closed out only on an
options exchange which provides a secondary market for an option of the same
series. Although the Portfolio will generally purchase or write only those
options for which there appears to be an active secondary market, there is no
assurance that a liquid secondary market on an exchange will exist for any
particular option, or at any particular time. For some options, no secondary
market on an exchange may exist. In such event, it might not be possible to
effect closing transactions in particular options, with the result that the
Portfolio would have to exercise its options in order to realize any profit
and would incur transaction costs upon the sale of underlying securities
pursuant to the exercise of put options. If the Portfolio as a covered call
option writer is unable to effect a closing purchase transaction in a
secondary market, it will not be able to sell the underlying security until
the option expires or it delivers the underlying security upon exercise.
Reasons for the absence of a liquid secondary market on an exchange
include the following: (i) there may be insufficient trading interest in
certain options; (ii) restrictions may be imposed by an exchange on opening
transactions or closing transactions or both; (iii) trading halts, suspensions
or other restrictions may be imposed with respect to particular classes or
series of options or underlying securities; (iv) unusual or unforeseen
circumstances may interrupt normal operations on an exchange; (v) the
facilities of an exchange or the Options Clearing Corporation ("OCC") may not
at all times be adequate to handle current trading volume; or (vi) one or more
exchanges could, for economic or other reasons, decide or be compelled at some
future date to discontinue the trading of options (or a particular class or
series of options), in which event the secondary market on that exchange (or
in that class or series of options) would cease to exist, although outstanding
options on that exchange that had been issued by the OCC as a result of trades
on that exchange would continue to be exercisable in accordance with their
terms.
There is no assurance that higher than anticipated trading activity or
other unforeseen events might not, at times, render certain of the facilities
of the OCC inadequate, and thereby result in the institution by an exchange of
special procedures which may interfere with the timely execution of customers'
orders.
FUTURES CONTRACTS. All futures contracts entered into by the Portfolio are
traded on exchanges or boards of trade that are licensed and regulated by the
Commodity Futures Trading Commission ("CFTC"). The Portfolio may purchase and
write call and put options on futures contracts which are traded on a U.S.
exchange or board of trade.
The Portfolio will engage in futures and related options transactions for
bona fide hedging or non-hedging purposes as defined in or permitted by CFTC
regulations. The Portfolio will determine that the price fluctuations in the
futures contracts and options on futures used for hedging purposes are
substantially related to price fluctuations in securities held by the
Portfolio or which it expects to purchase. The Portfolio will engage in
transactions in futures and related options contracts only to the extent such
transactions are consistent with the requirements of the Code for maintaining
the qualification of the Fund as a regulated investment company for federal
income tax purposes.
To the extent that the Portfolio enters into futures contracts, options on
futures contracts and options on foreign currencies traded on an exchange
regulated by the CFTC, in each case that are not for bona fide hedging
purposes (as defined by the CFTC), the aggregate initial margin and premiums
required to establish these positions (excluding the amount by which options
are "in-the-money") may not exceed 5% of the liquidation value of the
Portfolio's investments, after taking into account unrealized profits and
unrealized losses on any contracts the Portfolio has entered into. The
Portfolio did not engage in such transactions during the fiscal year ended
March 31, 1999, and there is no assurance that it will engage in such
transactions in the future.
ASSET COVERAGE. Transactions involving forward contracts, futures contracts
and options (other than options that the Portfolio has purchased) expose the
Portfolio to an obligation to another party. The Portfolio will not enter into
any such transactions unless it owns either (1) an offsetting ("covered")
position in securities, or other options, futures contracts or forward
contracts, or (2) cash or liquid securities (such as readily marketable
obligations and money market instruments) with a value sufficient at all times
to cover its potential obligations not covered as provided in (1) above. The
Portfolio will comply with Securities and Exchange Commission ("SEC")
guidelines regarding cover for these instruments and, if the guidelines so
require, set aside cash, or liquid securities in a segregated account with its
custodian in the prescribed amount. The securities in the segregated account
will be marked to market daily.
Assets used as cover or held in a segregated account maintained by the
Portfolio's custodian cannot be sold while the position requiring coverage or
segregation is outstanding unless they are replaced with other appropriate
assets. As a result, the commitment of a large portion of the Portfolio's
assets to segregated accounts or to cover could impede portfolio management or
the Portfolio's ability to meet redemption requests or other current
obligations.
SECURITIES LENDING. The Portfolio may seek to increase its income by lending
portfolio securities to broker-dealers or other institutional borrowers. If
the management of the Portfolio decides to make securities loans, it is
intended that the value of the securities loaned would not exceed 30% of the
Portfolio's total assets. Securities lending involves risks of delay in
recovery or even loss of rights on the securities loaned if the borrower fails
financially. The Portfolio has no present intention of engaging in securities
lending.
INVESTMENT IN WARRANTS. The Portfolio may invest in warrants which have no
voting rights, pay no dividends and have no rights with respect to the assets
of the corporation issuing them. Warrants basically are options to purchase
equity securities at a specific price valid for a specific period of time.
They do not represent ownership of the securities, but only the right to buy
them. Warrants differ from calls in that warrants are issued by the same
issuer as the security which may be purchased on their exercise, whereas calls
may be written or issued by anyone. The prices of warrants do not necessarily
move parallel to the prices of the underlying securities.
RESTRICTED SECURITIES. The Portfolio may invest up to 15% of net assets in
illiquid securities. Illiquid securities include securities legally restricted
as to resale, such as commercial paper issued pursuant to Section 4(2) of the
Securities Act of 1933, as amended, and securities eligible for resale
pursuant to Rule 144A thereunder. Section 4(2) and Rule 144A securities may,
however, be treated as liquid by the investment adviser pursuant to procedures
adopted by the Trustees, which require consideration of factors such as
trading activity, availability of market quotations and number of dealers
willing to purchase the security. If the Portfolio invests in Rule 144A
securities, the level of portfolio illiquidity may be increased to the extent
that eligible buyers become uninterested in purchasing such securities.
It may be difficult to sell such securities at a price representing their
fair value until such time as such securities may by sold publicly. Where
registration is required, a considerable period may elapse between a decision
to sell the securities and the time when the Portfolio would be permitted to
sell. Thus, the Portfolio may not be able to obtain as favorable a price as
that prevailing at the time of the decision to sell. The Portfolio may also
acquire securities through private placements under which it may agree to
contractual restrictions on the resale of such securities. Such restrictions
might prevent their sale at a time when such sale would otherwise be
desirable.
DIVERSIFIED STATUS. The Portfolio is a "diversified" investment company under
the Investment Company Act of 1940 (the "1940 Act"). This means that with
respect to 75% of its total assets (1) the Portfolio may not invest more than
5% of its total assets in the securities of a single issuer (except U.S.
Government obligations) and (2) the Portfolio may not own more than 10% of the
outstanding voting securities of a single issuer which generally is
inapplicable because debt obligations are not voting securities.
PORTFOLIO TURNOVER. The Portfolio cannot accurately predict its portfolio
turnover rate, but it is anticipated that its annual turnover rate generally
may exceed 100% (excluding turnover of securities having a maturity of one
year or less). A 100% annual turnover rate could occur, for example, if all
the securities held by the Portfolio were replaced more than once in a period
of one year. A high turnover rate (100% or more) necessarily involves greater
brokerage expenses to the Portfolio and may result in the realization of
substantial net short-term capital gains, which are taxable as ordinary income
upon distribution to the Fund's shareholders.
INVESTMENT RESTRICTIONS
The following investment restrictions are designated as fundamental
policies and as such cannot be changed without the approval of the holders of
a majority of the Fund's outstanding voting securities, which as used in this
SAI means the lesser of (a) 67% of the shares of the Fund present or
represented by proxy at a meeting if the holders of more than 50% of the
outstanding shares are present or represented at the meeting or (b) more than
50% of the outstanding shares of the Fund. Accordingly, the Fund may not:
(1) With respect to 75% of total assets of the Fund, purchase any security
if such purchase, at the time thereof, would cause more than 5% of the total
assets of the Fund (taken at market value) to be invested in the securities of
a single issuer, or cause more than 10% of the total outstanding voting
securities of such issuer to be held by the Fund, except obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities and
except securities of other investment companies;
(2) Borrow money or issue senior securities except as permitted by the
1940 Act;
(3) Purchase securities on margin (but the Fund may obtain such short-term
credits as may be necessary for the clearance of purchases and sales of
securities). The deposit or payment by the Fund of initial, maintenance or
variation margin in connection with all types of options and futures contract
transactions is not considered the purchase of a security on margin;
(4) Underwrite or participate in the marketing of securities of others,
except insofar as it may technically be deemed to be an underwriter in selling
a portfolio security under circumstances which may require the registration of
the same under the Securities Act of 1933;
(5) Purchase any security if such purchase, at the time thereof, would
cause more than 25% of the Fund's total assets to be invested in any single
industry, provided that the electric, gas and telephone utility industries
shall be treated as separate industries for purposes of this restriction and
further provided that there is no limitation with respect to obligations
issued or guaranteed by the U.S. Government or any of its agencies or
instrumentalities.
(6) Purchase or sell real estate, although it may purchase and sell
securities which are secured by real estate and securities of companies which
invest or deal in real estate;
(7) Purchase or sell physical commodities or contracts for the purchase or
sale of physical commodities; or
(8) Make loans to any person except by (i) the acquisition of debt
securities and making portfolio investments, (ii) entering into repurchase
agreements or (iii) lending portfolio securities.
With respect to restriction (5), the Fund will construe the phrase "more
than 25%" to be "25% or more".
Notwithstanding the investment policies and restrictions of the Fund, the
Fund may invest all of its investable assets in an open-end management
investment company with substantially the same investment objective, policies
and restrictions as the Fund.
The Portfolio has adopted substantially the same fundamental investment
restrictions as the foregoing investment restrictions adopted by the Fund;
such restrictions cannot be changed without the approval of a "majority of the
outstanding voting securities" of the Portfolio.
The Fund and the Portfolio have each adopted the following investment
policies which may be changed by the Trustees with respect to the Fund without
shareholder approval or with respect to the Portfolio without approval of the
Fund or its other investors. The Fund and the Portfolio will not:
(a) invest more than 15% of its net assets in investments which are not
readily marketable, including restricted securities and repurchase agreements
maturing in more than seven days. Restricted securities for the purposes of
this limitation do not include securities eligible for resale pursuant to Rule
144A under the Securities Act of 1933 and commercial paper issued pursuant to
Section 4(2) of said Act that the Board of Trustees of the Trust or the
Portfolio, or their delegate, determines to be liquid, based upon the trading
markets for the specific security. Any such determination by a delegate will
be made pursuant to procedures adopted by the Board. If the Fund or Portfolio
invests in Rule 144A securities, the level of portfolio illiquidity may be
increased to the extent that eligible buyers become uninterested in purchasing
such securities; or
(b) make short sales of securities or maintain a short position, unless at
all times when a short position is open it owns an equal amount of such
securities or securities convertible into or exchangeable for, without payment
of any further consideration, securities of the same issuer as, and equal in
amount to, the securities sold short, and unless not more than 25% of its net
assets (taken at current value) is held as collateral for such sales at any
one time.
For as long as a feeder fund of the Portfolio has registered shares in
Hong Kong (and for so long as Hong Kong requires the following restrictions),
the Portfolio may not (i) invest more than 10% of its net assets in the
securities of any one issuer or, purchase more than 10% of the ordinary shares
of any one issuer, provided, however, up to 30% of the Portfolio's net asset
value may be invested in Government and public securities of the same issue;
and the Portfolio may invest all of its assets in Government and other public
securities in at least six different issues, (ii) invest more than 15% of net
assets in securities which are not listed or quoted on any stock exchange,
over-the-counter market or other organized securities market that is open to
the international public and on which such securities are regularly traded (a
"Market"), (iii) invest more than 15% of net assets in warrants and options
for non-hedging purposes, (iv) write call options on Portfolio investments
exceeding 25% of its total net asset value in terms of exercise price, (v)
enter into futures contracts on an unhedged basis where the net total
aggregate value of contract prices, whether payable by or to the Portfolio
under all outstanding futures contracts, together with the aggregate value of
holdings under (vi) below exceeds 20% of the net asset value of the Portfolio,
(vi) invest in physical commodities (including gold, silver, platinum or other
bullion) and commodity based investments (other than shares in companies
engaged in producing, processing or trading in commodities) which value
together with the net aggregate value of the holdings described in (v) above,
exceeds 20% of the Portfolio's net asset value, (vii) purchase shares of other
investment companies exceeding 10% of net assets. In addition, the investment
objective of any scheme in which any Portfolio invests must not be to invest
in investments prohibited by this undertaking and where the scheme's
investment objective is to invest primarily in investments which are
restricted by this undertaking, such holdings must not be in contravention of
the relevant limitation, (viii) borrow more than 25% of its net assets
(provided that for the purposes of this paragraph, back to back loans are not
to be categorized as borrowings), (ix) write uncovered options, (x) invest in
real estate (including options, rights or interests therein but excluding
shares in real estate companies), (xi) assume, guarantee, endorse or otherwise
become directly or contingently liable for, or in connection with, any
obligation or indebtedness of any person in respect of borrowed money without
the prior written consent of the custodian of the Portfolio, (xii) engage in
short sales involving a liability to deliver securities exceeding 10% of its
net assets provided that any security which a Portfolio does sell short must
be actively traded on a market, (xiii) subject to paragraph (v) above,
purchase an investment with unlimited liability or (xiv) purchase any nil or
partly-paid securities unless any call thereon could be met in full out of
cash or near cash held by it in the amount of which has not already been taken
into account for the purposes of (ix) above.
Whenever an investment policy or investment restriction set forth in the
prospectus or this SAI states a maximum percentage of assets that may be
invested in any security or other asset, or describes a policy regarding
quality standards such percentage limitation or standard shall be determined
immediately after and as a result of the Fund's or the Portfolio's acquisition
of such security or asset. Accordingly, any later increase or decrease
resulting from a change in values, assets or other circumstances, will not
compel the Fund or the Portfolio, as the case may be, to dispose of such
security or other asset. Where applicable and notwithstanding the foregoing,
under normal market conditions the Fund and the Portfolio must take actions
necessary to comply with the policy of investing at least 65% of total assets
in the lowest investment grade and lower rated and unrated debt obligations.
Moreover, the Fund and Portfolio must always be in compliance with the
limitation on investing in illiquid securities and the borrowing policies set
forth above.
MANAGEMENT AND ORGANIZATION
FUND MANAGEMENT. The Trustees of the Trust are responsible for the overall
management and supervision of the Trust's affairs. The Trustees and officers
of the Trust and the Portfolio are listed below. Except as indicated, each
individual has held the office shown or other offices in the same company for
the last five years. Unless otherwise noted, the business address of each
Trustee and officer is The Eaton Vance Building, 255 State Street, Boston,
Massachusetts 02109. Those Trustees who are "interested persons" of the Trust
or the Portfolio, as defined in the 1940 Act, are indicated by an asterisk(*).
JESSICA M. BIBLIOWICZ (39), Trustee*
President and Chief Executive Officer of National Financial Partners (a
financial services company) (since April, 1999). President and Chief
Operating Officer of John A. Levin & Co. (a registered investment advisor)
(July, 1997 to April, 1999) and a Director of Baker, Fentress & Company
which owns John A. Levin & Co. (July, 1997 to April, 1999). Executive Vice
President of Smith Barney Mutual Funds (from July, 1994 to June, 1997).
Elected Trustee October 30, 1998. Trustee of various investment companies
managed by Eaton Vance or BMR since October 30, 1998.
Address: 1301 Avenue of the Americas, New York, NY 10019
DONALD R. DWIGHT (68), Trustee
President of Dwight Partners, Inc. (a corporate relations and communications
company). Trustee/Director of the Royce Funds (mutual funds). Trustee of
various investment companies managed by Eaton Vance or BMR.
Address: Clover Mill Lane, Lyme, New Hampshire 03768
JAMES B. HAWKES (57), President and Trustee*
Chairman, President and Chief Executive Officer of BMR, Eaton Vance and their
corporate parent and trustee (EVC and EV); Director of EVC and EV. Trustee
and officer of various investment companies managed by Eaton Vance or BMR.
SAMUEL L. HAYES, III (64), Trustee
Jacob H. Schiff Professor of Investment Banking Emeritus, Harvard University
Graduate School of Business Administration. Trustee of the Kobrick-Cedant
Investment Trust (mutual funds). Trustee of various investment companies
managed by Eaton Vance or BMR.
Address: 345 Nahatan Road, Westwood, Massachusetts 02090
NORTON H. REAMER (63), Trustee
Chairman of the Board and Chief Executive Officer, United Asset Management
Corporation (a holding company owning institutional investment management
firms); Chairman, President and Director, UAM Funds (mutual funds). Trustee
of various investment companies managed by Eaton Vance or BMR.
Address: One International Place, Boston, Massachusetts 02110
LYNN A. STOUT (41), Trustee
Professor of Law, Georgetown University Law Center. Elected Trustee October
30, 1998. Trustee of various investment companies managed by Eaton Vance or
BMR since October 30, 1998.
Address: 600 New Jersey Avenue, NW, Washington, DC 20001
JACK L. TREYNOR (69), Trustee
Investment Adviser and Consultant. Trustee of various investment companies
managed by Eaton Vance or BMR.
Address: 504 Via Almar, Palos Verdes Estates, California 90274
WILLIAM H. AHERN, JR. (40), Vice President of the Trust
Vice President of BMR and Eaton Vance. Officer of various investment companies
managed by Eaton Vance or BMR.
THOMAS J. FETTER (55), Vice President of the Trust
Vice President of BMR and Eaton Vance. Officer of various investment companies
managed by Eaton Vance or BMR.
ROBERT B. MACINTOSH (42), Vice President of the Trust
Vice President of BMR and Eaton Vance. Officer of various investment companies
managed by Eaton Vance or BMR.
MICHAEL WEILHEIMER (38), Vice President of the Portfolio
Vice President of BMR and Eaton Vance. Officer of various investment companies
managed by Eaton Vance or BMR.
EDWARD E. SMILEY, JR. (54), Vice President of the Trust
Vice President of Eaton Vance and BMR since November 1, 1996. Previously, he
was a Senior Product Manager at Equity Management for TradeStreet Investment
Associates, Inc., a wholly-owned subsidiary of Nations Bank (1992-1996).
ARMIN J. LANG (35), Vice President of the Trust
Vice President of Eaton Vance and BMR since June 21, 1999. Previously, he was
an international equity portfolio manager and quantitative strategist at
Standish, Ayer & Wood. Officer of various investment companies managed by
Eaton Vance or BMR.
JAMES L. O'CONNOR (54), Treasurer
Vice President of BMR and Eaton Vance. Officer of various investment companies
managed by Eaton Vance or BMR.
ALAN R. DYNNER (58), Secretary
Vice President and Chief Legal Officer of BMR, Eaton Vance, and EVC since
November 1, 1996. Previously, he was a Partner of the law firm of
Kirkpartrick & Lockhart LLP, New York and Washington, D.C., and was
Executive Vice President of Neuberger & Berman Management, Inc., a mutual
fund management company. Officer of various investment companies managed by
Eaton Vance or BMR.
JANET E. SANDERS (63), Assistant Treasurer and Assistant Secretary
Vice President of BMR and Eaton Vance. Officer of various investment companies
managed by Eaton Vance or BMR.
A. JOHN MURPHY (36), Assistant Secretary
Assistant Vice President of BMR and Eaton Vance. Officer of various investment
companies managed by Eaton Vance or BMR.
ERIC G. WOODBURY (42), Assistant Secretary
Vice President of BMR and Eaton Vance. Officer of various investment companies
managed by Eaton Vance or BMR.
The Nominating Commitee of the Board of Trustees of the Trust and the
Portfolio is comprised of all Trustees who are not "interested persons" as
that term is defined by the 1940 Act ("noninterested Trustees"). The purpose
of the Committee is to recommend to the Board nominees for the position of
noninterested Trustee and to assure that at least a majority of the Board of
Trustees is independent of Eaton Vance and its affiliates.
Messrs. Hayes (Chairman), Dwight and Reamer and Ms. Stout are members of
the Special Committee of the Board of Trustees of the Trust and of the
Portfolio. The purpose of the Special Committee is to consider, evaluate and
make recommendations to the full Board of Trustees concerning (i) all
contractual arrangements with service providers to the Fund and the Portfolio,
including investment advisory (Portfolio only), administrative, transfer
agency, custodial, fund accounting and distribution services, and (ii) all
other matters in which Eaton Vance or its affiliates has any actual or
potential conflict of interest with the Fund, the Portfolio or investors
therein.
Messrs. Treynor (Chairman) and Dwight are members of the Audit Committee
of the Board of Trustees of the Trust and of the Portfolio. The Audit
Committee's functions include making recommendations to the Trustees regarding
the selection of the independent accountants, and reviewing matters relative
to trading and brokerage policies and practices, accounting and auditing
practices and procedures, accounting records, internal accounting controls,
and the functions performed by the custodian, transfer agent and dividend
disbursing agent of the Trust and of the Portfolio.
Trustees of the Portfolio who are not affiliated with the investment
adviser may elect to defer receipt of all or a percentage of their annual fees
in accordance with the terms of a Trustees Deferred Compensation Plan (the
"Trustees" Plan"). Under the Trustees' Plan, an eligible Trustee may elect to
have his deferred fees invested by the Portfolio in the shares of one or more
funds in the Eaton Vance Family of Funds, and the amount paid to the Trustees
under the Trustees' Plan will be determined based upon the performance of such
investments. Deferral of Trustees' fees in accordance with the Trustees' Plan
will have a negligible effect on the Portfolio's assets, liabilities, and net
income per share, and will not obligate the Portfolio to retain the services
of any Trustee or obligate the Portfolio to pay any particular level of
compensation to the Trustee. Neither the Portfolio nor the Trust has a
retirement plan for its Trustees.
The fees and expenses of the noninterested Trustees of the Trust and of
the Portfolio are paid by the Fund (and the other series of the Trust) and the
Portfolio, respectively. (The Trustees of the Trust and the Portfolio who are
members of the Eaton Vance organization receive no compensation from the Trust
or the Portfolio.) During the fiscal year ended March 31, 1999, the
noninterested Trustees of the Trust and the Portfolio earned the following
compensation in their capacities as Trustees from the Trust and the Portfolio,
and for the year ended December 31, 1998, earned the following compensation in
their capacities as Trustees of the funds in the Eaton Vance fund complex(1):
<TABLE>
<CAPTION>
JESSICA M. DONALD R. SAMUEL L. NORTON H. LYNN A. JACK L.
SOURCE OF COMPENSATION BIBLIOWICZ(6) DWIGHT HAYES, III REAMER STOUT(6) TREYNOR
- ---------------------- ------------- ---------- ----------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Trust(2) ...................................... $ 828 $ 1,138 $ 1,196 $ 1,121 $ 699 $ 1,036
Portfolio ..................................... 1,049 1,176(3) 1,234(4) 1,156 1,127 1,278
Trust and Fund Complex ........................ 33,334 160,000(5) 170,000 160,000 32,842 170,000
- ----------
(1) As of August 1, 1999 the Eaton Vance fund complex consists of 155 registered investment companies or series thereof.
(2) As of March 31, 1999, the Trust consisted of 11 Funds.
(3) Includes $609 of deferred compensation.
(4) Includes $1,196 of deferred compensation.
(5) Includes $41,563 of deferred compensation.
(6) Ms. Bibliowicz and Ms. Stout were elected Trustees on October 30, 1998.
</TABLE>
ORGANIZATION. The Fund is a series of the Trust, which is organized under
Massachusetts law as a business trust and is operated as an open-end
management investment company. The Trust changed its name from Eaton Vance
Government Obligations Trust on July 10, 1995. The Fund was reorganized into
multiple classes and changed its name to Eaton Vance High Income Fund on April
1, 1998. The operations of Class B reflect the operations of the Fund prior to
April 1, 1998. Class C is the successor to the operations of a separate series
of the Trust.
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. Each class represents an interest in the Fund, but is subject to
different expenses, rights and privileges. The Trustees have the authority
under the Declaration of Trust to create additional classes of shares with
differing rights and privileges. When issued and outstanding, shares are fully
paid and nonassessable by the Trust. Shareholders are entitled to one vote for
each full share held. Fractional shares may be voted proportionately. Shares
of the Fund will be voted together except that only shareholders of a
particular class may vote on matters affecting only that class. Shares have no
preemptive or conversion rights and are freely transferable. In the event of
the liquidation of the Fund, shareholders of each class are entitled to share
pro rata in the net assets attributable to that class available for
distribution to shareholders.
The Trustees of the Trust have considered the advantages and disadvantages
of investing the assets of the Fund in the Portfolio, as well as the
advantages and disadvantages of the two-tier format. The Trustees believe that
the structure offers opportunities for growth in the assets of the Portfolio,
may afford the potential for economies of scale for the Fund and may over time
result in lower expenses for the Fund.
As permitted by Massachusetts law, there will normally be no meetings of
shareholders for the purpose of electing Trustees unless and until such time
as less than a majority of the Trustees of the Trust holding office have been
elected by shareholders. In such an event, the Trustees then in office will
call a shareholders' meeting for the election of Trustees. Except for the
foregoing circumstances and unless removed by action of the shareholders in
accordance with the Trust's by-laws, the Trustees shall continue to hold
office and may appoint successor Trustees.
The Trust's By-laws provide that no person shall serve as a Trustee if
shareholders holding two-thirds of the outstanding shares have removed him
from that office either by a written declaration filed with the Trust's
custodian or by votes cast at a meeting called for that purpose. The By-laws
further provide that under certain circumstances the shareholders may call a
meeting to remove a Trustee and that the Trust is required to provide
assistance in communicating with investors about such a meeting.
The Trust's Declaration of Trust may be amended by the Trustees when
authorized by vote of a majority of the outstanding voting securities of the
Trust, the financial interests of which are affected by the amendment. The
Trustees may also amend the Declaration of Trust without the vote or consent
of shareholders to change the name of the Trust or any series or to make such
other changes (such as reclassifying series or classes of shares or
restructuring the Trust) as do not have a materially adverse effect on the
financial interests of shareholders or if they deem it necessary to conform it
to applicable federal or state laws or regulations. The Trust or any series or
class thereof may be terminated by: (1) the affirmative vote of the holders of
not less than two-thirds of the shares outstanding and entitled to vote at any
meeting of shareholders of the Trust or the appropriate series or class
thereof, or by an instrument or instruments in writing without a meeting,
consented to by the holders of two-thirds of the shares of the Trust or a
series or class thereof, provided, however, that, if such termination is
recommended by the Trustees, the vote of a majority of the outstanding voting
securities of the Trust or a series or class thereof entitled to vote thereon
will be sufficient authorization; or (2) by means of an instrument in writing
signed by a majority of the Trustees, to be followed by a written notice to
shareholders stating that a majority of the Trustees has determined that the
continuation of the Trust or a series or a class thereof is not in the best
interest of the Trust, such series or class or of their respective
shareholders.
The Declaration of Trust further provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law; but nothing in the
Declaration of Trust protects a Trustee against any liability to which he
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of his
office.
Under Massachusetts law, if certain conditions prevail, shareholders of a
Massachusetts business trust (such as the Trust) could be deemed to have
personal liability for the obligations of the Trust. Numerous investment
companies registered under the 1940 Act have been formed as Massachusetts
business trusts, and management is not aware of an instance where such
liability has been imposed. The Trust's Declaration of Trust contains an
express disclaimer of liability on the part of the Fund shareholders and the
Trust's By-laws provide that the Trust shall assume the defense on behalf of
any Fund shareholders. (The Declaration of Trust also contains provisions
limiting the liability of a series or class to that series or class.)
Moreover, the Trust's By-laws also provide for indemnification out of the
property of the Fund of any shareholder held personally liable solely by
reason of being or having been a shareholder for all loss or expense arising
from such liability. The assets of the Fund are readily marketable and will
ordinarily substantially exceed its liabilities. In light of the nature of the
Fund's business and the nature of its assets, management believes that the
possibility of the Fund's liability exceeding its assets, and therefore the
shareholder's risk of personal liability, is remote.
The Portfolio is organized as a trust under the laws of the state of New
York and intends to be treated as a partnership for federal tax purposes. In
accordance with the Declaration of Trust of the Portfolio, there will normally
be no meetings of the investors for the purpose of electing Trustees unless
and until such time as less than a majority of the Trustees of the Portfolio
holding office have been elected by investors. In such an event the Trustees
of the Portfolio then in office will call an investors' meeting for the
election of Trustees. Except for the foregoing circumstances and unless
removed by action of the investors in accordance with the Portfolio's
Declaration of Trust, the Trustees shall continue to hold office and may
appoint successor Trustees.
The Declaration of Trust of the Portfolio provides that no person shall
serve as a Trustee if investors holding two-thirds of the outstanding shares
have removed him from that office either by a written declaration filed with
the Portfolio's custodian or by votes cast at a meeting called for that
purpose. The Declaration of Trust further provides that under certain
circumstances the investors may call a meeting to remove a Trustee and that
the Portfolio is required to provide assistance in communication with
shareholders about such a meeting.
The Portfolio's Declaration of Trust provides that the Fund and other
entities permitted to invest in the Portfolio (e.g., other U.S. and foreign
investment companies, and common and commingled trust funds) will each be
liable for all obligations of the Portfolio. However, the risk of the Fund
incurring financial loss on account of such liability is limited to
circumstances in which both inadequate insurance exists and the Portfolio
itself is unable to meet its obligations. Accordingly, the Trustees of the
Trust believe that neither the Fund nor its shareholders will be adversely
affected by reason of the Fund investing in the Portfolio.
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 the Portfolio may alone or
collectively acquire sufficient voting interests in the Portfolio to control
matters relating to the operation of the Portfolio, which may require the Fund
to withdraw its investment in the Portfolio or take other appropriate action.
Any such withdrawal could result in a distribution "in kind" of portfolio
securities (as opposed to a cash distribution from the Portfolio). If
securities are distributed, the Fund could incur brokerage, tax or other
charges in converting the securities to cash. In addition, the distribution in
kind may result in a less diversified portfolio of investments or adversely
affect the liquidity of the Fund. Notwithstanding the above, there are other
means for meeting shareholder redemption requests, such as borrowing.
The Fund may withdraw (completely redeem) all its assets from the
Portfolio at any time if the Board of Trustees of the Trust determines that it
is in the best interest of the Fund to do so. In the event the Fund withdraws
all of its assets from the Portfolio, or the Board of Trustees of the Trust
determines that the investment objective of the Portfolio is no longer
consistent with the investment objective of the Fund, the Trustees would
consider what action might be taken, including investing the assets of the
Fund in another pooled investment entity or retaining an investment adviser to
manage the Fund's assets in accordance with its investment objective. The
Fund's investment performance may be affected by a withdrawal of all its
assets (or the assets of another investor in the Portfolio) from the
Portfolio.
INVESTMENT ADVISORY AND ADMINISTRATIVE SERVICES
INVESTMENT ADVISORY SERVICES. BMR manages the investments and affairs of the
Portfolio subject to the supervision of the Portfolio's Board of Trustees. BMR
furnishes to the Portfolio investment research, advice and supervision,
furnishes an investment program and determines what securities will be
purchased, held or sold by the Portfolio and what portion, if any, of the
Portfolio's assets will be held uninvested. The Investment Advisory Agreement
requires BMR to pay the salaries and fees of all officers and Trustees of the
Portfolio who are members of the BMR organization and all personnel of BMR
performing services relating to research and investment activities.
For a description of the compensation that the Portfolio pays BMR, see the
prospectus. As at March 31, 1999, the Portfolio had net assets of
$1,039,222,599. For the fiscal years ended March 31, 1999, 1998 and 1997, the
Portfolio paid BMR advisory fees of $5,895,549, $4,736,709 and $3,683,894,
respectively, (equivalent to 0.61%, 0.58% and 0.61% of the Portfolio's average
daily net assets for each such year).
The Investment Advisory Agreement with BMR continues in effect from year
to year for so long as such continuance is approved at least annually (i) by
the vote of a majority of the noninterested Trustees of the Portfolio cast in
person at a meeting specifically called for the purpose of voting on such
approval and (ii) by the Board of Trustees of the Portfolio or by vote of a
majority of the outstanding voting securities of the Portfolio. The Agreement
may be terminated at any time without penalty on sixty (60) days' written
notice by the Board of Trustees of either party, or by vote of the majority of
the outstanding voting securities of the Portfolio, and the Agreement will
terminate automatically in the event of its assignment. The Agreement provides
that BMR may render services to others. The Agreement also provides that BMR
shall not be liable for any loss incurred in connection with the performance
of its duties, or action taken or omitted under that Agreement, in the absence
of willful misfeasance, bad faith, gross negligence in the performance of its
duties or by reason of its reckless disregard of its obligations and duties
thereunder, or for any losses sustained in the acquisition, holding or
disposition of any security or other investment.
ADMINISTRATIVE SERVICES. As indicated in the prospectus, Eaton Vance serves as
administrator of the Fund, but currently receives no compensation for
providing administrative services to the Fund. Under its Administrative
Services Agreement with the Trust, Eaton Vance has been engaged to administer
the Fund's affairs, subject to the supervision of the Trustees of the Trust,
and shall furnish for the use of the Fund office space and all necessary
office facilities, equipment and personnel for administering the affairs of
the Fund.
INFORMATION ABOUT BMR AND EATON VANCE. BMR and Eaton Vance are business trusts
organized under Massachusetts law. Eaton Vance, Inc. ("EV") serves as trustee
of BMR and Eaton Vance. BMR, Eaton Vance and EV are wholly-owned subsidiaries
of Eaton Vance Corporation ("EVC"), a Maryland corporation and publicly-held
holding company. EVC through its subsidiaries and affiliates engages primarily
in investment management, administration and marketing activities. The
Directors of EVC are James B. Hawkes, Benjamin A. Rowland, Jr., John G. L.
Cabot, John M. Nelson, Vincent M. O'Reilly and Ralph Z. Sorenson. All of the
issued and outstanding shares of Eaton Vance are owned by EVC. All of the
issued and outstanding shares of BMR are owned by Eaton Vance. All shares of
the outstanding Voting Common Stock of EVC are deposited in a Voting Trust,
the Voting Trustees of which are Messrs. Hawkes and Rowland, Alan R. Dynner,
Thomas E. Faust, Jr., Thomas J. Fetter, Duncan W. Richardson, William M. Steul
and Wharton P. Whitaker (all of whom are officers of Eaton Vance). The Voting
Trustees have unrestricted voting rights for the election of Directors of EVC.
All of the outstanding voting trust receipts issued under said Voting Trust
are owned by certain of the officers of BMR and Eaton Vance who are also
officers or officers and Directors of EVC and EV. As indicated under
"Management and Organization", all of the officers of the Trust (as well as
Mr. Hawkes who is also a Trustee) hold positions in the Eaton Vance
organization.
EXPENSES. The Fund and Portfolio are each responsible for all expenses not
expressly stated to be payable by another party (such as the investment
adviser under the Investment Advisory Agreement, Eaton Vance under the
Administrative Services Agreement or the principal underwriter under the
Distribution Agreement). In the case of expenses incurred by the Trust, the
Fund is responsible for its pro rata share of those expenses. The only
expenses of the Fund allocated to a particular class are those incurred under
the Distribution Plan applicable to that class and the fee paid to the
principal underwriter for handling repurchase transactions.
OTHER SERVICE PROVIDERS
PRINCIPAL UNDERWRITER. Eaton Vance Distributors, Inc. ("EVD"), The Eaton Vance
Building, 255 State Street, Boston, MA 02109, is the Fund's principal
underwriter. The principal underwriter acts as principal in selling shares
under a Distribution Agreement with the Trust. The expenses of printing copies
of prospectuses used to offer shares and other selling literature and of
advertising are borne by the principal underwriter. The fees and expenses of
qualifying and registering and maintaining qualifications and registrations of
the Fund and its shares under federal and state securities laws are borne by
the Fund. The Distribution Agreement as it applies to Class B and Class C
shares is renewable annually by the Trust's Board of Trustees (including a
majority of the noninterested Trustees who have no direct or indirect
financial interest in the operation of the Distribution Plan or the
Distribution Agreement), may be terminated on sixty days' notice either by
such Trustees or by vote of a majority of the outstanding shares of the
relevant class or on six months' notice by the principal underwriter and is
automatically terminated upon assignment. The principal underwriter
distributes shares on a "best efforts" basis under which it is required to
take and pay for only such shares as may be sold. The principal underwriter
allows investment dealers discounts from the applicable public offering price
which are alike for all investment dealers. See "Sales Charges." EVD is a
wholly-owned subsidiary of EVC. Mr. Hawkes is a Vice President and Director
and Messrs. Dynner and O'Connor are Vice Presidents of EVD.
CUSTODIAN. Investors Bank & Trust Company ("IBT"), 200 Clarendon Street,
Boston, MA 02116, serves as custodian to the Fund and Portfolio. IBT has the
custody of all cash and securities representing the Fund's interest in the
Portfolio, has custody of the Portfolio's assets, maintains the general ledger
of the Portfolio and the Fund and computes the daily net asset value of
interests in the Portfolio and the net asset value of shares of the Fund. In
such capacity it attends to details in connection with the sale, exchange,
substitution, transfer or other dealings with the Portfolio's investments,
receives and disburses all funds and performs various other ministerial duties
upon receipt of proper instructions from the Trust and the Portfolio. IBT also
provides services in connection with the preparation of shareholder reports
and the electronic filing of such reports with the SEC. EVC and its affiliates
and their officers and employees from time to time have transactions with
various banks, including IBT. It is Eaton Vance's opinion that the terms and
conditions of such transactions were not and will not be influenced by
existing or potential custodial or other relationships between the Fund or the
Portfolio and such banks.
INDEPENDENT ACCOUNTANTS. Deloitte & Touche LLP, 200 Berkeley Street, Boston,
Massachusetts 02116, are the independent accountants of the Fund and the
Portfolio, providing audit services, tax return preparation, and assistance
and consultation with respect to the preparation of filings with the SEC.
TRANSFER AGENT. First Data Investor Services Group, P.O. Box 5123,
Westborough, MA 01581-5123, serves as transfer and dividend disbursing agent
for the Fund.
PURCHASING AND REDEEMING SHARES
CALCULATION OF NET ASSET VALUE. The net asset value of the Portfolio is
computed by IBT (as agent and custodian for the Portfolio) by subtracting the
liabilities of the Portfolio from the value of its total assets. The Fund and
the Portfolio will be closed for business and will not price their respective
shares or interests on the following business holidays: New Year's Day, Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day.
The Trustees of the Portfolio have established the following procedures
for the fair valuation of the Portfolio's assets under normal market
conditions. Securities listed on foreign or U.S. securities exchanges or in
the NASDAQ National Market System generally are valued at closing sale prices
or, if there were no sales, at the mean between the closing bid and asked
prices therefor on the exchange where such securities are principally traded
or on such National Market System. Unlisted or listed securities for which
closing sale prices are not available are valued at the mean between the
latest bid and asked prices. An option is valued at the last sale price as
quoted on the principal exchange or board of trade on which such option or
contract is traded, or in the absence of a sale, at the mean between the last
bid and asked prices. Futures positions on securities or currencies are
generally valued at closing settlement prices. Short-term debt securities with
a remaining maturity of 60 days or less are valued at amortized cost. If
securities were acquired with a remaining maturity of more than 60 days, their
amortized cost value will be based on their value on the sixty-first day prior
to maturity. Other fixed income and debt securities, including listed
securities and securities for which price quotations are available, will
normally be valued on the basis of valuations furnished by a pricing service.
All other securities are valued at fair value as determined in good faith by
or at the direction of the Trustees.
Generally, trading in the foreign securities owned by the Portfolio is
substantially completed each day at various times prior to the close of the
New York Stock Exchange (the "Exchange"). The values of these securities used
in determining the net asset value of the Portfolio's shares generally are
computed as of such times. Occasionally, events affecting the value of foreign
securities may occur between such times and the close of the Exchange which
will not be reflected in the computation of the Portfolio's net asset value
(unless the Portfolio deems that such events would materially affect its net
asset value, in which case an adjustment would be made and reflected in such
computation). Foreign securities and currency held by the Portfolio will be
valued in U.S. dollars; such values will be computed by the custodian based on
foreign currency exchange rate quotations supplied by an independent quotation
service.
Each investor in the Portfolio, including the Fund, may add to or reduce
its investment in the Portfolio on each day the Exchange is open for trading
("Portfolio Business Day") as of the close of regular trading on the Exchange
(the "Portfolio Valuation Time"). The value of each investor's interest in the
Portfolio will be determined by multiplying the net asset value of the
Portfolio by the percentage, determined on the prior Portfolio Business Day,
which represented that investor's share of the aggregate interests in the
Portfolio on such prior day. Any additions or withdrawals for the current
Portfolio Business Day will then be recorded. Each investor's percentage of
the aggregate interest in the Portfolio will then be recomputed as a
percentage equal to a fraction (i) the numerator of which is the value of such
investor's investment in the Portfolio as of the Portfolio Valuation Time on
the prior Portfolio Business Day plus or minus, as the case may be, the amount
of any additions to or withdrawals from the investor's investment in the
Portfolio on the current Portfolio Business Day and (ii) the denominator of
which is the aggregate net asset value of the Portfolio as of the Portfolio
Valuation Time on the prior Portfolio Business Day plus or minus, as the case
may be, the amount of the net additions to or withdrawals from the aggregate
investment in the Portfolio on the current Portfolio Business Day by all
investors in the Portfolio. The percentage so determined will then be applied
to determine the value of the investor's interest in the Portfolio for the
current Portfolio Business Day.
ADDITIONAL INFORMATION ABOUT PURCHASES. Fund shares are continuously offered
through investment dealers which have entered agreements with the principal
underwriter. The public offering price is the net asset value next computed
after receipt of the order.
In connection with employee benefit or other continuous group purchase
plans, the Fund may accept initial investments of less than $1,000 on the part
of an individual participant. In the event a shareholder who is a participant
of such a plan terminates participation in the plan, his or her shares will be
transferred to a regular individual account. However, such account will be
subject to the right of redemption by the Fund as described below.
SUSPENSION OF SALES. The Trust may, in its absolute discretion, suspend,
discontinue or limit the offering of one or more of its classes of 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 Class B and Class C Distribution Plans may
continue in effect and payments may be made under the Plans following any such
suspension, discontinuance or limitation of the offering of shares; however,
there is no contractual obligation to continue any Plan for any particular
period of time. Suspension of the offering of shares would not, of course,
affect a shareholder's ability to redeem shares.
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 net asset value of Class B and Class C
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 investment
dealer, together with a completed and signed Letter of Transmittal in approved
form (available from investment dealers). 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.
ADDITIONAL INFORMATION ABOUT REDEMPTIONS. The right to redeem shares of the
Fund can be suspended and the payment of the redemption price deferred when
the Exchange is closed (other than for customary weekend and holiday
closings), during periods when trading on the Exchange is restricted as
determined by the SEC, or during any emergency as determined by the SEC which
makes it impracticable for the Portfolio to dispose of its securities or value
its assets, or during any other period permitted by order of the SEC for the
protection of investors.
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.
Due to the high cost of maintaining small accounts, the Trust reserves the
right to redeem accounts with balances of less than $750. Prior to such a
redemption, shareholders will be given 60 days' written notice to make an
additional purchase. However, no such redemption would be required by the
Trust if the cause of the low account balance was a reduction in the net asset
value of shares. No CDSC will be imposed with respect to such involuntary
redemptions.
SYSTEMATIC WITHDRAWAL PLAN. The transfer agent will send to the shareholder
regular monthly or quarterly payments of any permitted amount designated by
the shareholder based upon the value of the shares held. The checks will be
drawn from share redemptions and hence, may require the recognition of taxable
gain or loss. Income dividends and capital gains distributions in connection
with withdrawal plan accounts will be credited at net asset value as of the
record date for each distribution. Continued withdrawals in excess of current
income will eventually use up principal, particularly in a period of declining
market prices. A shareholder may not have a withdrawal plan in effect at the
same time he or she has authorized Bank Automated Investing or is otherwise
making regular purchases of Fund shares. The shareholder, the transfer agent
or the principal underwriter will be able to terminate the withdrawal plan at
any time without penalty.
SALES CHARGES
DEALER COMMISSIONS. The principal underwriter may, from time to time, at its
own expense, provide additional incentives to investment dealers 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 investment dealers 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 investment dealers.
TAX-SHELTERED RETIREMENT PLANS. Class C shares 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.
CDSC WAIVERS. The CDSC applicable to Class B shares will be waived in
connection with minimum required distributions from tax-sheltered retirement
plans by applying the rate required to be withdrawn under the applicable rules
and regulations of the Internal Revenue Service to the balance of Class B
shares in your account.
DISTRIBUTION PLANS. The Trust has adopted compensation-type Distribution
Plans (the "Class B and Class C Plans") pursuant to Rule 12b-1 under the 1940
Act for the Fund's Class B and Class C shares. The Class B and Class C Plans
are designed to permit an investor to purchase shares through an investment
dealer without incurring an initial sales charge and at the same time permit
the principal underwriter to compensate investment dealers in connection
therewith. The Class B and Class C Plans provide that the Fund will pay sales
commissions and distribution fees to the principal underwriter only after and
as a result of the sale of shares. On each sale of shares (excluding
reinvestment of distributions), the Fund will pay the principal underwriter
amounts representing (i) sales commissions equal to 5% for Class B shares and
6.25% for Class C shares of the amount received by the Fund for each share
sold and (ii) distribution fees calculated by applying the rate of 1% over the
prime rate then reported in The Wall Street Journal to the outstanding balance
of uncovered distribution charges (as described below) of the principal
underwriter. To pay these amounts, each Class 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
investment dealers on the sale of shares and for interest expenses. For sales
of Class B shares, the principal underwriter uses its own funds to pay sales
commissions (except on exchange transactions and reinvestments) to investment
dealers at the time of sale equal to 4% of the purchase price of the Class B
shares sold by such dealers. For Class C shares, the principal underwriter
currently expects to pay to an investment dealer (a) sales commissions (except
on exchange transactions and reinvestments) at the time of sale equal to .75%
of the purchase price of the shares sold by such dealer, and (b) monthly sales
commissions approximately equivalent to 1/12 of .75% of the value of shares
sold by such dealer 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 investment dealers at the time of sale. CDSCs paid to the principal
underwriter will be used to reduce amounts owed to it. The Class B and Class C
Plans provide that the Fund will make no payments to the principal underwriter
in respect of any day on which there are no outstanding uncovered distribution
charges of the principal underwriter. CDSCs and accrued amounts will be paid
by the Trust to the principal underwriter whenever there exist uncovered
distribution charges. Because payments to the principal underwriter under the
Class B and Class C Plans are limited, uncovered distribution charges (sales
commissions paid by the principal underwriter plus interest, less the above
fees and CDSCs received by it) may exist indefinitely. For the sales
commissions and CDSCs paid on (and uncovered distribution charges of) Class B
and Class C shares, see Appendix A and Appendix B, respectively.
In calculating daily the amount of uncovered distribution charges,
distribution charges will include the aggregate amount of sales commissions
and distribution fees theretofore paid plus the aggregate amount of sales
commissions and distribution fees which the principal underwriter is entitled
to be paid under the Plan since its inception. Payments theretofore paid or
payable under the Class B and Class C Plans by the Trust to the principal
underwriter and CDSCs theretofore paid or payable to the principal underwriter
will be subtracted from such distribution charges; if the result of such
subtraction is positive, a distribution fee (computed at 1% over the prime
rate then reported in The Wall Street Journal) will be computed on such amount
and added thereto, with the resulting sum constituting the amount of
outstanding uncovered distribution charges with respect to such day. The
amount of outstanding uncovered distribution charges of the principal
underwriter calculated on any day does not constitute a liability recorded on
the financial statements of the Fund.
The amount of uncovered distribution charges of the principal underwriter
at any particular time depends upon various changing factors, including the
level and timing of sales of shares, the nature of such sales (i.e., whether
they result from exchange transactions, reinvestments or from cash sales
through investment dealers), the level and timing of redemptions of shares
upon which a CDSC will be imposed, the level and timing of redemptions of
shares upon which no CDSC will be imposed (including redemptions of shares
pursuant to the exchange privilege which result in a reduction of uncovered
distribution charges), changes in the level of the net assets of the Class,
and changes in the interest rate used in the calculation of the distribution
fee under the Class B and Class C Plans.
The Class B and Class C Plans also authorize each Class to make payments
of service fees to the principal underwriter, investment dealers and other
persons in amounts not exceeding 0.25% of its average daily net assets for
personal services, and/or the maintenance of shareholder accounts. This fee is
paid quarterly in arrears based on the value of Class B shares sold by such
persons and remaining outstanding for at least twelve months. For Class C,
investment dealers currently receive (a) a service fee (except on exchange
transactions and reinvestments) at the time of sale equal to 0.25% of the
purchase price of the Class C shares sold by such dealer, and (b) monthly
service fees approximately equivalent to 1/12 of 0.25% of the value of Class
C shares sold by such dealer 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 investment dealers at the time of sale. For the service fees
paid by Class B and Class C shares, see Appendix A and Appendix B,
respectively.
Currently, payments of sales commissions and distribution fees and of
service fees may equal 1% of a Class's average daily net assets per annum. The
Trust believes that the combined rate of all these payments may be higher than
the rate of payments made under distribution plans adopted by other investment
companies pursuant to Rule 12b-1. Although the principal underwriter will use
its own funds (which may be borrowed from banks) to pay sales commissions at
the time of sale, it is anticipated that the Eaton Vance organization will
profit by reason of the operation of the Class B and Class C Plans through an
increase in the Fund's assets (thereby increasing the advisory fee payable to
BMR by the Portfolio) resulting from sale of shares and through the amounts
paid to the principal underwriter, including CDSCs, pursuant to the Plans. The
Eaton Vance organization may be considered to have realized a profit under the
Class B and Class C Plans if at any point in time the aggregate amounts
theretofore received by the principal underwriter pursuant to the Class B or
Class C Plan and from CDSCs have exceeded the total expenses theretofore
incurred by such organization in distributing shares. Total expenses for this
purpose will include an allocable portion of the overhead costs of such
organization and its branch offices, which costs will include without
limitation leasing expense, depreciation of building and equipment, utilities,
communication and postage expense, compensation and benefits of personnel,
travel and promotional expense, stationery and supplies, literature and sales
aids, interest expense, data processing fees, consulting and temporary help
costs, insurance, taxes other than income taxes, legal and auditing expense
and other miscellaneous overhead items. Overhead is calculated and allocated
for such purpose by the Eaton Vance organization in a manner deemed equitable
to the Trust.
The Class B and Class C Plans continue in effect from year to year so long
as such continuance is approved at least annually by the vote of both a
majority of (i) the noninterested Trustees of the Trust who have no direct or
indirect financial interest in the operation of the Plan or any agreements
related to the Plan (the "Plan Trustees") and (ii) all of the Trustees then in
office. Each Plan may be terminated at any time by vote of a majority of the
Plan Trustees or by a vote of a majority of the outstanding voting securities
of the applicable Class. Each Plan requires quarterly Trustee review of a
written report of the amount expended under the Plan and the purposes for
which such expenditures were made. The Plans may not be amended to increase
materially the payments described therein without approval of the shareholders
of the affected Class and the Trustees. So long as a Plan is in effect, the
selection and nomination of the noninterested Trustees shall be committed to
the discretion of such Trustees. The Class B and Class C Plans were initially
approved by the Trustees, including the Plan Trustees, on June 23, 1997.
The Trustees of the Trust believe that each Plan will be a significant
factor in the expected growth of each Fund's assets, and will result in
increased investment flexibility and advantages which have benefitted and will
continue to benefit the Fund and its shareholders. Payments for sales
commissions and distribution fees made to the principal underwriter under the
Class B and Class C Plans will compensate the principal underwriter for its
services and expenses in distributing those classes of shares. Service fee
payments made to the principal underwriter and investment dealers provide
incentives to provide continuing personal services to investors and the
maintenance of shareholder accounts. By providing incentives to the principal
underwriter and investment dealers, each Plan is expected to result in the
maintenance of, and possible future growth in, the assets of the Fund. Based
on the foregoing and other relevant factors, the Trustees of the Trust have
determined that in their judgment there is a reasonable likelihood that each
Plan will benefit the Fund and its shareholders.
PERFORMANCE
Average annual total return is determined separately for each Class of the
Fund by multiplying a hypothetical initial purchase order of $1,000 by the
average annual compound rate of return (including capital appreciation/
depreciation, and distributions paid and reinvested) for the stated period and
annualizing the result. The calculation assumes (i) that all distributions
are reinvested at net asset value on the reinvestment dates during the period,
(ii) a complete redemption of the investment and, (iii) the deduction of any
CDSC at the end of the period. The Fund may also publish total return figures
for each class based on reduced sales charges or at net asset value. These
returns would be lower if the full sales charge was imposed. For further
information concerning the total return of the Classes of the Fund, see
Appendix A and Appendix B.
Yield is computed separately for each Class of the Fund pursuant to a
standardized formula by dividing the net investment income per share earned
during a recent thirty-day period by the maximum offering price per share on
the last day of the period and annualizing the resulting figure. Net
investment income per share is calculated from the yields to maturity of all
debt obligations held by the Portfolio based on prescribed methods, reduced by
accrued Fund and Class expenses for the period with the resulting number being
divided by the average daily number of Class shares outstanding and entitled
to receive distributions during the period. This yield figure does not reflect
the deduction of any CDSCs which (if applicable) are imposed upon certain
redemptions at the rates set forth under "Sales Charges" in the prospectus.
The Fund's total return may be compared to relevant indices, such as the
Consumer Price Index and various domestic securities indices. The Fund's total
return and comparisons with these indices may be used in advertisements and in
information furnished to present or prospective shareholders. The Fund's
performance may differ from that of other investors in the Portfolio,
including any other investment companies. In addition, evaluations of the
Fund's performance, ratings, or rankings of mutual funds (which include the
Fund) made by independent sources may be used in advertisements and in
information furnished to present or prospective shareholders. Information,
charts and illustrations showing the effect of compounding interest or
relating to inflation and taxes (including their effects on the dollar and the
return on stocks and other investment vehicles) may also be included in
advertisements and material furnished to present and prospective investors.
Information used in advertisements and in materials furnished to present
or prospective shareholders may include statistics, data and performance
studies prepared by independent organizations reflecting the investment
performance or return achieved by various classes and types of investments
(e.g., common stocks, small company stocks, long-term corporate bonds, long-
term government bonds, intermediate-term government bonds, U.S. Treasury
bills) over various periods of time.
Evaluations of the Fund's performance including ratings and rankings made
by independent sources, e.g. Lipper, Inc., Wiesenberger and Morningstar, Inc.,
may be used in advertisements and in information furnished to present or
prospective shareholders. Information, charts and illustrations relating to
inflation and the effects of inflation on the dollar may be included in
advertisements and other material furnished to present and prospective
shareholders.
Information, charts and illustrations showing comparative historical
information of high-yielding bonds as represented by The First Boston High
Yield Index over 10-year U.S. Treasury bonds may be used in advertisements and
other material furnished to present or prospective shareholders. The First
Boston High Yield Index is an unmanaged index of 713 high-yielding securities.
The principal and interest of U.S. Treasury bonds are guaranteed by the United
States Government, while high yield bonds, sometimes referred to as "junk
bonds", are of lower quality than investment-grade bonds and U.S. Government
securities. Rates are given for illustrative purposes only and are not meant
to imply or predict actual results of an investment in the Fund.
From time to time, information about the portfolio allocation, portfolio
turnover and holdings of the Portfolio may be included in advertisements and
other material furnished to present and prospective shareholders. Such
information, for example, may include the Portfolio's diversification by asset
type, including mortgage-backed securities with varying maturities and
interest rates.
Information used in advertisements and in materials provided to present
and prospective shareholders may include descriptions of Eaton Vance and other
Fund and Portfolio service providers, their investment styles, other
investment products, personnel and Fund distribution channels.
Information used in advertisements and materials furnished to present and
prospective investors may include statements or illustrations relating to the
appropriateness of certain types of securities and/or mutual funds to meet
specific financial goals. Such information may address:
- cost associated with aging parents;
- funding a college education (including its actual and estimated
cost);
- health care expenses (including actual and projected expenses);
- long-term disabilities (including the availability of, and coverage
provided by, disability insurance); and
- retirement (including the availability of social security benefits,
the tax treatment of such benefits and statistics and other
information relating to maintaining a particular standard of living
and outliving existing assets).
Such information may also address different methods for saving money and
the results of such methods, as well as the benefits of investing in bond
funds.
Information in advertisements and materials furnished to present and
prospective investors may include profiles of different types of investors
(i.e., investors with different goals and assets) and different investment
strategies for meeting specific financial goals. Such information may provide
hypothetical illustrations which include: results of various investment
strategies; performance of an investment in the Fund over various time
periods; and results of diversifying assets among several investments with
varying performance. Information in advertisements and materials furnished to
present and prospective investors may also include quotations (including
editorial comments) and statistics concerning investing in securities, as well
as investing in particular types of securities and the performance of such
securities.
The Trust (or principal underwriter) may provide information about Eaton
Vance, its affiliates and other investment advisers to the funds in the Eaton
Vance Family of Funds in sales material or advertisements provided to
investors or prospective investors. Such material or advertisements may also
provide information on the use of investment professionals by such investors.
TAXES
Each series of the Trust is treated as a separate entity for federal
income tax purposes. The Fund has elected to be treated, has qualified and
intends to continue to qualify each year as a regulated investment company
("RIC") under the Code. Accordingly, the Fund intends to satisfy certain
requirements relating to sources of its income and diversification of its
assets and to distribute substantially all of its net income and net short-
term and long-term capital gains in accordance with the timing requirements
imposed by the Code, so as to maintain its RIC status and avoid paying any
federal income or excise tax. The Fund so qualified for its taxable year ended
March 31, 1999. Because the Fund invests its assets in the Portfolio, the
Portfolio normally must satisfy the applicable source of income and
diversification requirements in order for the Fund to also satisfy these
requirements. The Portfolio will allocate at least annually among its
investors, including the Fund, the Portfolio's net investment income, net
realized capital gains, and any other items of income, gain, loss, deduction
or credit. The Portfolio will make allocations to the Fund in accordance with
the Code and applicable regulations and will make moneys available for
withdrawal at appropriate times and in sufficient amounts to enable the Fund
to satisfy the tax distribution requirements that apply to the Fund and that
must be satisfied in order to avoid federal income and/or excise tax on the
Fund. For purposes of applying the requirements of the Code regarding
qualification as a RIC, the Fund (i) will be deemed to own its proportionate
share of each of the assets of the Portfolio and (ii) will be entitled to the
gross income of the Portfolio attributable to such share.
In order to avoid incurring a federal excise tax obligation, the Code
requires that the Fund distribute (or be deemed to have distributed) by
December 31 of each calendar year at least 98% of its ordinary income for such
year, at least 98% of its capital gain net income (which is the excess of its
realized capital gains over its realized capital losses, generally computed on
the basis of the one-year period ending on October 31 of such year), after
reduction by (i) any available capital loss carryforwards and (ii) 100% of any
income from the prior year (as previously computed) that was not paid out
during such year and on which the Fund paid no federal income tax. Under
current law, provided that the Fund qualifies as a RIC and the Portfolio is
treated as a partnership for Massachusetts and federal tax purposes, neither
the Fund nor the Portfolio should be liable for any income, excise or
franchise tax in the Commonwealth of Massachusetts.
The Portfolio's transactions in options, futures contracts and forward
contracts will be subject to special tax rules that may affect the amount,
timing and character of the Fund's distributions to shareholders. For example,
certain positions held by the Portfolio on the last business day of each
taxable year will be "marked to market" (i.e., treated as if closed out on
such day), and any resulting gain or loss will generally be treated as 60%
long-term and 40% short-term capital gain or loss, or, in the case of certain
currency-related positions, recharacterized as ordinary income or loss.
Certain positions held by the Portfolio that substantially diminish the
Portfolio's risk of loss with respect to other positions in its portfolio may
constitute "straddles," which are subject to tax rules that may cause deferral
of Portfolio losses, adjustments in the holding periods of Portfolio
securities, and conversion of short-term capital losses into long-term capital
losses. The Portfolio may make certain elections to mitigate adverse
consequences of these tax rules and may have to limit its activities in
options, futures contracts and forward contracts in order to enable the Fund
to maintain its RIC status.
The Fund's distributions of net investment income and the excess of net
short-term capital gain over net long-term capital loss and certain foreign
exchange gains earned by the Portfolio and allocated to the Fund are taxable
to shareholders of the Fund as ordinary income, whether received in cash or
reinvested in additional shares. The Fund's distributions of the excess of net
long-term capital gain over net short-term capital loss (including any capital
loss carried forward from prior years) earned by the Portfolio and allocated
to the Fund are taxable to shareholders of the Fund as long-term capital
gains, whether received in cash or reinvested in additional shares, and
regardless of the length of time their shares have been held. Dividends
declared by the Fund in October, November or December as of a record date in
such a month that are paid the following January are treated under the Code as
if they were received on December 31 of the year in which they are declared.
Distributions of capital gains by the Fund reduce the net asset value of
the Fund's shares. Should such a distribution reduce the net asset value below
a shareholder's tax basis, such distribution would be taxable to the
shareholder even though, from an investment standpoint, it may constitute a
return of a portion of the purchase price. Therefore, investors should
consider the tax implications of buying shares immediately before a
distribution of capital gains.
Distributions made by the Fund, if any, that are derived from dividends
received by the Portfolio from domestic corporations and allocated to the Fund
may qualify for the dividends-received deduction for corporations. The
dividends-received deduction for corporate shareholders is reduced to the
extent the Fund shares with respect to which the dividends are received are
treated as debt-financed under federal income tax law and is eliminated if the
shares are deemed to have been held for less than a minimum period, generally
46 days, which must be satisfied separately for each dividend during a
specified period. Receipt of certain distributions qualifying for the
deduction may result in reduction of the tax basis of the corporate
shareholder's Fund shares and require current income recognition to the extent
in excess of such basis. Distributions eligible for the dividends-received
deduction may give rise to or increase an alternative minimum tax for
corporation.
The Portfolio may be subject to foreign income tax withholding or other
foreign taxes with respect to income (possibly including, in some cases,
capital gains) from certain foreign securities. These taxes may be reduced or
eliminated under the terms of an applicable tax convention between certain
countries and the U.S. It is not expected that more than 50% of the value of
the total assets of the Fund, taking into account its allocable share of the
Portfolio's total assets at the close of any taxable year of the Fund, will
consist of securities issued by foreign corporations. Accordingly, under the
Code, the Fund will not be eligible to pass through to its shareholders their
proportionate share of any foreign taxes paid by the Portfolio and allocated
to the Fund and shareholders will not be entitled to any related foreign tax
credits or deductions. Certain foreign exchange gains and losses realized by
Portfolio and allocated to the Fund in connection with the Portfolio's
investment in foreign securities, foreign currency, and foreign currency-
related options, futures or forward contracts may be treated as ordinary
income and losses. Certain uses of foreign currency and foreign currency
options, futures and forward contracts and investment by the Portfolio in
certain "passive foreign investment companies" ("PFICs") may be limited or a
tax election may be made, if available, in order to seek to preserve the
Fund's qualification as a RIC and/or avoid imposition of an income tax on the
Fund.
The Portfolio's investment in zero coupon, deferred interest and certain
pay-in-kind or other debt securities issued with original issue discount will
cause it to realize income prior to the receipt of cash payments with respect
to these securities. Such income will be allocated daily to interests in the
Portfolio and, in order to enable the Fund to distribute its proportionate
share of this income and avoid a tax payable by the Fund, the Portfolio may be
required to liquidate securities that it might otherwise have continued to
hold in order to generate cash that the Fund may withdraw from the Portfolio
to make distributions to Fund shareholders. Acquiring securities at a market
discount may have the same effect if an election is made to include accrued
market discount in income currently.
Investments in lower-rated or unrated securities may present special tax
issues for the Portfolio (and, hence, for the Fund) to the extent that the
issuers of these securities default on their obligations pertaining thereto.
The Code is not entirely clear regarding the federal income tax consequences
of the Portfolio's taking certain positions in connection with ownership of
such distressed securities. For example, the Code is unclear regarding: (i)
when the Portfolio may cease to accrue interest, original issue discount, or
market discount; (ii) when and to what extent deductions may be taken for bad
debts or worthless securities; (iii) how payments received on obligations in
default should be allocated between principal and income; and (iv) whether
exchanges of debt obligations in a workout context are taxable.
Any loss realized upon the sale or exchange of shares of the Fund with a
tax holding period of 6 months or less will be treated as a long-term capital
loss to the extent of any distribution treated as long-term capital gains with
respect to such shares. All or a portion of any loss realized upon a taxable
disposition of Fund shares may be disallowed under "wash sale" rules if other
shares of the Fund are purchased (whether through the reinvestment of
distributions or otherwise) within 30 days before or after such disposition.
Amounts paid by the Fund to individuals and certain other shareholders who
have not provided the Fund with their correct taxpayer identification number
("TIN") and certain certifications required by the Internal Revenue Service
(the "IRS"), as well as shareholders with respect to whom the Fund has
received certain information from the IRS or a broker, may be subject to
"backup" withholding of federal income tax arising from the Fund's taxable
dividends and other distributions as well as the proceeds of redemption
transactions (including repurchases and exchanges) at a rate of 31%. An
individual's TIN is generally his or her social security number.
Non-resident alien individuals, foreign corporations and certain other
foreign entities generally will be subject to a U.S. withholding tax at a rate
of 30% on the Fund's distributions from its ordinary income and the excess of
its net short-term capital gain over its net long-term capital loss, unless
the tax is reduced or eliminated by an applicable tax convention.
Distributions from the excess of the Fund's net long-term capital gain over
its net short-term capital loss received by such shareholders and any gain
from the sale or other disposition of shares of the Fund generally will not be
subject to U.S. federal income taxation, provided that non-resident alien
status has been certified by the shareholder. Different U.S. tax consequences
may result if: (i) the shareholder is engaged in a trade or business in the
United States; (ii) the shareholder is present in the United States for a
sufficient period of time during a taxable year to be treated as a U.S.
resident; or (iii) the shareholder fails to provide, or renew after
expiration, any required certifications regarding its status as a non-resident
alien investor. Foreign shareholders should consult their tax advisers
regarding the U.S. and foreign tax consequences of an investment in the Fund.
The foregoing discussion does not address the special tax rules applicable
to certain classes of investors, such as IRAs and other retirement plans, tax-
exempt entities, insurance companies and financial institutions. Shareholders
should consult their own tax advisers with respect to these or other special
tax rules that may apply in their particular situations, as well as the state,
local, and, where applicable, foreign tax consequences of investing in the
Fund.
PORTFOLIO SECURITY TRANSACTIONS
Decisions concerning the execution of portfolio security transactions,
including the selection of the market and the executing firm, are made by BMR.
BMR is also responsible for the execution of transactions for all other
accounts managed by it. BMR places the portfolio security transactions of the
Portfolio and of all other accounts managed by it for execution with many
broker-dealer firms. BMR uses its best efforts to obtain execution of
portfolio security transactions at prices which are advantageous to the
Portfolio and at reasonably competitive spreads or (when a disclosed
commission is being charged) at reasonably competitive commission rates. In
seeking such execution, BMR will use its best judgment in evaluating the terms
of a transaction, and will give consideration to various relevant factors
including without limitation the full range and quality of the executing
firm's services, the value of the brokerage and research services provided,
the responsiveness of the firm to BMR, size and type of the transaction, the
general execution and operational capabilities of the executing firm, the
nature and character of the market for the security, the confidentiality,
speed and certainty of effective execution required for the transaction, the
reputation, reliability, experience and financial condition of the firm, the
value and quality of services rendered by the firm in other transactions, and
the reasonableness of the commission or spread, if any. Transactions on United
States stock exchanges and other agency transactions involve the payment by
the Portfolio of negotiated brokerage commissions. Such commissions vary among
different executing firms, and a particular firm may charge different
commissions according to such factors as the difficulty and size of the
transaction and the volume of business done with such broker-dealer.
Transactions in foreign securities usually involve the payment of fixed
brokerage commissions, which are generally higher than those in the United
States. There is generally no stated commission in the case of securities
traded in the over-the-counter markets, but the price paid or received by the
Portfolio usually includes an undisclosed dealer markup or markdown. In an
underwritten offering, the price paid by the Portfolio often includes a
disclosed fixed commission or discount retained by the underwriter or dealer.
Although commissions paid on portfolio security transactions will, in the
judgment of BMR, be reasonable in relation to the value of the services
provided, commissions exceeding those which another firm might charge may be
paid to firms who were selected to execute transactions on behalf of the
Portfolio and BMR's other clients for providing brokerage and research
services to BMR.
As authorized in Section 28(e) of the Securities Exchange Act of 1934, a
broker or dealer who executes a portfolio transaction on behalf of the
Portfolio may receive a commission which is in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction if BMR determines in good faith that such compensation was
reasonable in relation to the value of the brokerage and research services
provided. This determination may be made either on the basis of that
particular transaction or on the basis of overall responsibilities which BMR
and its affiliates have for accounts over which they exercise investment
discretion. In making any such determination, BMR will not attempt to place a
specific dollar value on the brokerage and research services provided or to
determine what portion of the commission should be related to such services.
Brokerage and research services may include advice as to the value of
securities, the advisability of investing in, purchasing, or selling
securities, and the availability of securities or purchasers or sellers of
securities; furnishing analyses and reports concerning issuers, industries,
securities, economic factors and trends, portfolio strategy and the
performance of accounts; effecting securities transactions and performing
functions incidental thereto (such as clearance and settlement); and the
"Research Services" referred to in the next paragraph.
It is a common practice in the investment advisory industry for the
advisers of investment companies, institutions and other investors to receive
research, analytical, statistical and quotation services, data, information
and other services, products and materials which assist such advisers in the
performance of their investment responsibilities ("Research Services") from
broker-dealer firms which execute portfolio transactions for the clients of
such advisers and from third parties with which such broker-dealers have
arrangements. Consistent with this practice, BMR receives Research Services
from many broker-dealer firms with which BMR places the portfolio transactions
and from third parties with which these broker-dealers have arrangements.
These Research Services include such matters as general economic, political,
business and market information, industry and company reviews, evaluations of
securities and portfolio strategies and transactions, proxy voting data and
analysis services, technical analysis of various aspects of the securities
markets, recommendations as to the purchase and sale of securities and other
portfolio transactions, financial, industry and trade publications, news and
information services, pricing and quotation equipment and services, and
research oriented computer hardware, software, data bases and services. Any
particular Research Service obtained through a broker-dealer may be used by
BMR in connection with client accounts other than those accounts which pay
commissions to such broker-dealer. Any such Research Service may be broadly
useful and of value to BMR in rendering investment advisory services to all or
a significant portion of its clients, or may be relevant and useful for the
management of only one client's account or of a few clients' accounts, or may
be useful for the management of merely a segment of certain clients' accounts,
regardless of whether any such account or accounts paid commissions to the
broker-dealer through which such Research Service was obtained. The advisory
fee paid by the Portfolio is not reduced because BMR receives such Research
Services. BMR evaluates the nature and quality of the various Research
Services obtained through broker-dealer firms and attempts to allocate
sufficient portfolio security transactions to such firms to ensure the
continued receipt of Research Services which BMR believes are useful or of
value to it in rendering investment advisory services to its clients.
The Portfolio and BMR may also receive Research Services from underwriters
and dealers in fixed-price offerings, which Research Services are reviewed and
evaluated by BMR in connection with its investment responsibilities. The
investment companies sponsored by BMR or Eaton Vance may allocate brokerage
commissions to acquire information relating to the performance, fees and
expenses of such companies and other mutual funds, which information is used
by the Trustees of such companies to fulfill their responsibility to oversee
the quality of the services provided by various entities, including BMR, to
such companies. Such companies may also pay cash for such information.
Subject to the requirement that BMR shall use its best efforts to seek to
execute portfolio security transactions at advantageous prices and at
reasonably competitive commission rates or spreads, BMR is authorized to
consider as a factor in the selection of any broker-dealer firm with whom
portfolio orders may be placed the fact that such firm has sold or is selling
shares of the Fund or of other investment companies sponsored by BMR or Eaton
Vance. This policy is not inconsistent with a rule of the NASD, which rule
provides that no firm which is a member of the NASD shall favor or disfavor
the distribution of shares of any particular investment company or group of
investment companies on the basis of brokerage commissions received or
expected by such firm from any source.
Securities considered as investments for the Portfolio may also be
appropriate for other investment accounts managed by BMR or its affiliates.
Whenever decisions are made to buy or sell securities by the Portfolio and one
or more of such other accounts simultaneously, BMR will allocate the security
transactions (including "hot" issues) in a manner which it believes to be
equitable under the circumstances. As a result of such allocations, there may
be instances where the Portfolio will not participate in a transaction that is
allocated among other accounts. If an aggregated order cannot be filled
completely, allocations will generally be made on a pro rata basis. An order
may not be allocated on a pro rata basis where, for example: (i) consideration
is given to portfolio managers who have been instrumental in developing or
negotiating a particular investment; (ii) consideration is given to an account
with specialized investment policies that coincide with the particulars of a
specific investment; (iii) pro rata allocation would result in odd-lot or de
minimis amounts being allocated to a portfolio or other client; or (iv) where
BMR reasonably determines that departure from a pro rata allocation is
advisable. While these aggregation and allocation policies could have a
detrimental effect on the price or amount of the securities available to the
Portfolio from time to time, it is the opinion of the Trustees of the Trust
and the Portfolio that the benefits from the BMR organization outweigh any
disadvantage that may arise from exposure to simultaneous transactions.
For the fiscal years ended March 31, 1999 and 1998, the Portfolio paid
brokerage commissions of $682 and $5,287, respectively, on portfolio security
transactions, all of which was paid in respect of portfolio security
transactions aggregating $307,774 and $2,552,494, respectively, to firms which
provided some research services to Eaton Vance (although many of such firms
may have been selected in any particular transaction primarily because of
their execution capabilities). For the fiscal year ended March 31, 1997 the
Portfolio paid no brokerage commissions on portfolio security transactions.
FINANCIAL STATEMENTS
The audited financial statements of, and the independent auditors' report
for the Fund and the Portfolio, appear in the Fund's most recent annual report
to shareholders, which is incorporated by reference into this SAI. A copy of
the Fund's annual report accompanies this SAI. Consistent with applicable law,
duplicate mailings of shareholder reports and certain other Fund information
to shareholders residing at the same address may be eliminated.
Registrant incorporates by reference the audited financial information for
the Fund and the Portfolio for the fiscal year ended March 31, 1999 as
previously filed electronically with the Commission (Accession No.
0001047469-99-023215).
<PAGE>
APPENDIX A
CLASS B FEES, PERFORMANCE AND OWNERSHIP
DISTRIBUTION AND SERVICE FEES
During the fiscal year ended March 31, 1999, the principal underwriter
paid to investment dealers sales commissions of $4,560,179 on sales of Class B
shares. During the same period, the Fund made distribution payments to the
principal underwriter under the Distribution Plan aggregating $4,933,989, and
the principal underwriter received approximately $1,527,000 in CDSCs imposed
on early redeeming shareholders. These distribution payments and CDSC payments
reduced uncovered distribution charges under the Plan. As at March 31, 1999
the outstanding uncovered distribution charges of the principal underwriter
calculated under the Plan amounted to approximately $17,602,000 (which amount
was equivalent to approximately 2.6% of the net assets attributable to Class B
on such day). During the fiscal year ended March 31, 1999, Class B made
service fee payments to the principal underwriter and investment dealers
aggregating $1,387,362 of which $1,379,504 was paid to investment dealers and
the balance of which was retained by the principal underwriter.
PRINCIPAL UNDERWRITER
The Trust has authorized the principal underwriter to act as its agent in
repurchasing shares at the rate of $2.50 for each repurchase transaction
handled by the principal underwriter. For the fiscal year ended March 31,
1999, Class B paid the principal underwriter $14,620 for repurchase
transactions handled by it.
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return
on a hypothetical investment of $1,000 in Class B shares for the periods shown
in the table. Past performance is no guarantee of future results. Investment
return and principal value will fluctuate; shares, when redeemed, may be worth
more or less than their original cost.
<TABLE>
VALUE OF A $1,000 INVESTMENT
<CAPTION>
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN BEFORE TOTAL RETURN AFTER
BEFORE AFTER DEDUCTING DEDUCTING
DEDUCTING DEDUCTING THE CDSC THE CDSC
INVESTMENT INVESTMENT AMOUNT OF THE CDSC THE CDSC ------------------------ ------------------------
PERIOD DATE INVESTMENT ON 3/31/99 ON 3/31/99 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------- --------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
10 Years
Ended
3/31/99 3/31/89 $1,000 $2,445.75 $2,445.75 144.58% 9.36% 144.58% 9.36%
5 Years
Ended
3/31/99 3/31/94 $1,000 $1,585.13 $1,565.13 58.51% 9.65% 56.51% 9.37%
1 Year
Ended
3/31/99 3/31/98 $1,000 $1,020.81 $ 974.05 2.08% 2.08% -2.60% -2.60%
- ------------
</TABLE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As at June 30, 1999, the Trustees and officers of the Trust, as a group,
owned in the aggregate less than 1% of the outstanding Class B shares of the
Fund. As of June 30, 1999, Merrill Lynch, Pierce, Fenner & Smith, Inc.,
Jacksonville, FL was the record owner of approximately 26.0% of the
outstanding Class B shares, which were held on behalf of its customers who are
the beneficial owners of such shares, and as to which it had voting power
under certain limited circumstances. To the knowledge of the Trust, no other
person owned of record or beneficially 5% or more of the Fund's outstanding
Class B shares as of such date.
<PAGE>
APPENDIX B
CLASS C FEES, PERFORMANCE AND OWNERSHIP
DISTRIBUTION AND SERVICE FEES
During the fiscal year ended March 31, 1999, the principal underwriter
paid to investment dealers sales commissions of $202,207 on sales of Class C
shares. During the same period, the Fund made distribution payments to the
principal underwriter under the Distribution Plan aggregating $325,361 and the
principal underwriter received approximately $20,000 in CDSCs imposed on early
redeeming shareholders. These distribution payments and CDSC payments reduced
uncovered distribution charges under the Plan. As at March 31, 1999, the
outstanding uncovered distribution charges of the principal underwriter
calculated under the Plan amounted to approximately $4,605,000 (which amount
was equivalent to approximately 7.5% of the net assets attributable to Class C
on such day). During the fiscal year ended March 31, 1999, Class C made
service fee payments to the principal underwriter and investment dealers
aggregating $106,905 of which $50,341 was paid to investment dealers and the
balance of which was retained by the principal underwriter.
PRINCIPAL UNDERWRITER
The Trust has authorized the principal underwriter to act as its agent in
repurchasing shares at the rate of $2.50 for each repurchase transaction
handled by the principal underwriter. For the fiscal year ended March 31,
1999, Class C paid the principal underwriter $1,335 for repurchase
transactions handled by it.
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return
on a hypothetical investment of $1,000 in Class C shares for the periods shown
in the table. Total return for the period prior to April 1, 1998 reflects the
total return of the predecessor to Class C. Total return prior to the
Predecessor Fund's commencement of operations reflects the total return of
Class B, adjusted to reflect the Class C sales charge. The Class B total
return has not been adjusted to reflect certain other expenses (such as
distribution and/or service fees). If such adjustments were made, the Class C
total return would be different. Past performance is no guarantee of future
results. Investment return and principal value will fluctuate; shares, when
redeemed, may be worth more or less than their original cost. Two asterisk(**)
indicates subsidized expenses. Returns would have been lower without
subsidies.
<TABLE>
VALUE OF A $1,000 INVESTMENT
<CAPTION>
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN BEFORE TOTAL RETURN AFTER
BEFORE AFTER DEDUCTING DEDUCTING
DEDUCTING DEDUCTING THE CDSC THE CDSC
INVESTMENT INVESTMENT AMOUNT OF THE CDSC THE CDSC ------------------------ ------------------------
PERIOD* DATE INVESTMENT ON 3/31/99 ON 3/31/99 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
10 Years
Ended
3/31/99** 3/31/89 $1,000 $2,404.62 $2,404.62 140.46% 9.17% 140.46% 9.17%
5 Years
Ended**
3/31/99 3/31/94 $1,000 $1,558.65 $1,558.65 55.86% 9.28% 55.86% 9.28%
1 Year
Ended
3/31/99
3/31/98 $1,000 $1,020.79 $1,011.43 2.08% 2.08% 1.14% 1.14%
- ------------
*Predecessor Fund commenced operations on August 19, 1986.
</TABLE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As at June 30, 1999, the Trustees and officers of the Trust, as a group,
owned in the aggregate less than 1% of the outstanding Class C shares of the
Fund. As at June 30, 1999, Merrill Lynch, Pierce, Fenner & Smith, Inc.,
Jacksonville, FL was the record owner of approximately 28.7% of the
outstanding Class C shares, which were held on behalf of its customers who are
the beneficial owners of such shares, and as to which it had voting power
under certain limited circumstances. To the knowledge of the Trust, no other
person owned of record or beneficially 5% or more of the Fund's outstanding
Class C shares as of such date.
<PAGE>
APPENDIX C
HIGH INCOME PORTFOLIO
ASSET COMPOSITION INFORMATION
FOR THE FISCAL YEAR ENDED MARCH 31, 1999
PERCENT OF
NET ASSETS
-----------------------------------------------------------------
Cash/Short-term Obligations 3.56%
Debt Securities -- Moody's Rating
Ba 4.77%
B1 4.03%
B2 18.67%
B3 41.76%
Caa 11.08%
Unrated 16.15%
Preferred Stock 8.19%
Other Equity Securities 0.49%
-------
Total 100.00%
The chart above indicates the weighted average composition of the
securities held by the Portfolio for the fiscal year ended March 31, 1999,
with the debt securities rated by Moody's separated into the indicated
categories. The weighted average indicated above was calculated on a dollar
weighted basis and was computed as at the end of each month during the fiscal
year. The chart does not necessarily indicate what the composition of the
Portfolio will be in the current and subsequent fiscal years.
For a description of Moody's ratings of fixed-income securities, see
Appendix D to this SAI.
<PAGE>
APPENDIX D
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 the 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
which is assigned an actual or implied CCC debt rating.
C: The rating C is typically applied to debt subordinated to senior debt which
is assigned an actual or implied CCC- debt rating. The C rating may be used to
cover a situation where a bankruptcy petition has been filed, but debt service
payments are continued.
C1: The Rating C1 is reserved for income bonds on which no interest is being
paid.
D: Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if
the applicable grace period has not expired, unless Standard & Poor's believes
that such payments will be made during such grace period. The D rating also
will be used upon the filing of a bankruptcy petition if debt service payments
are jeopardized.
PLUS (+) OR MINUS (-): The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
NR: NR indicates that no public rating has been requested, because there is
insufficient information on which to base a rating, or because Standard &
Poor's does not rate a particular type of obligation as a matter of policy.
NOTES: Debt which is unrated exposes the investor to risks with respect to
capacity to pay interest or repay principal which are similar to the risks of
lower-rated speculative obligations. The Portfolio is dependent on the
investment adviser's judgment, analysis and experience in the evaluation of
such debt.
Investors should note that the assignment of a rating to a bond by a
rating service may not reflect the effect of recent developments on the
issuer's ability to make interest and principal payments.
<PAGE>
PART C - OTHER INFORMATION
ITEM 23. EXHIBITS
(a)(1) Amended and Restated Declaration of Trust of Eaton Vance Mutual
Funds Trust dated August 17, 1993, filed as Exhibit (1)(a) to
Post-Effective Amendment No. 23 and incorporated herein by
reference.
(2) Amendment dated July 10, 1995 to the Declaration of Trust filed as
Exhibit (1)(b) to Post-Effective Amendment No. 23 and incorporated
herein by reference.
(3) Amendment dated June 23, 1997 to the Declaration of Trust filed as
Exhibit (1)(c) to Post-Effective Amendment No. 38 and incorporated
herein by reference.
(4) Amendment and Restatement of Establishment and Designation of Shares
dated February 22, 1999 filed as Exhibit (a)(4) to Post-Effective
Amendment No. 49 and incorporated herein by reference.
(5) Amendment and Restatement of Establishment and Designation of Shares
dated June 22, 1998 filed herewith.
(6) Amendment and Restatement of Establishment and Designation of Shares
dated November 16, 1998 filed herewith.
(b)(1) By-Laws as amended November 3, 1986 filed as Exhibit (2)(a) to
Post-Effective Amendment No. 23 and incorporated herein by
reference.
(2) Amendment to By-Laws of Eaton Vance Mutual Funds Trust dated
December 13, 1993 filed as Exhibit (2)(b) to Post-Effective
Amendment No. 23 and incorporated herein by reference.
(c) Reference is made to Item 23(a) and 23(b) above.
(d)(1) Investment Advisory Agreement with Eaton Vance Management for Eaton
Vance Tax Free Reserves dated August 15, 1995 filed as Exhibit
(5)(b) to Post-Effective Amendment No. 25 and incorporated herein by
reference.
(2) Investment Advisory Agreement with Eaton Vance Management for Eaton
Vance Tax-Managed Emerging Growth Fund dated September 16, 1997
filed as Exhibit (5)(c) to Post-Effective Amendment No. 37 and
incorporated herein by reference.
(3) Investment Advisory Agreement with Eaton Vance Management for Eaton
Vance Municipal Bond Fund dated October 17, 1997 filed as Exhibit
(5)(d) to Post-Effective Amendment No. 37 and incorporated herein by
reference.
C-1
<PAGE>
(4) Investment Advisory Agreement with Eaton Vance Management for Eaton
Vance Tax-Managed International Growth Fund dated March 4, 1998
filed as Exhibit (5)(e) to Post-Effective Amendment No. 42 and
incorporated herein by reference.
(e)(1) Distribution Agreement between Eaton Vance Mutual Funds Trust, on
behalf of Eaton Vance Cash Management Fund, and Eaton Vance
Distributors, Inc. effective November 1, 1996 filed as Exhibit
(6)(a)(4) to Post-Effective Amendment No. 34 and incorporated herein
by reference.
(2) Distribution Agreement Between Eaton Vance Mutual Funds Trust, on
behalf of Eaton Vance Liquid Assets Fund, and Eaton Vance
Distributors, Inc. effective November 1, 1996 filed as Exhibit
(6)(a)(5) to Post-Effective Amendment No. 34 and incorporated herein
by reference.
(3) Distribution Agreement between Eaton Vance Mutual Funds Trust, on
behalf of Eaton Vance Money Market Fund, and Eaton Vance
Distributors, Inc. effective November 1, 1996 filed as Exhibit
(6)(a)(6) to Post-Effective Amendment No. 34 and incorporated herein
by reference.
(4) Distribution Agreement between Eaton Vance Mutual Funds Trust, on
behalf of Eaton Vance Tax Free Reserves, and Eaton Vance
Distributors, Inc. effective November 1, 1996 filed as Exhibit
(6)(a)(7) to Post-Effective Amendment No. 34 and incorporated herein
by reference.
(5) Distribution Agreement between Eaton Vance Mutual Funds Trust (on
behalf of certain of its series), and Eaton Vance Distributors, Inc.
effective June 23, 1997 with attached Schedules filed as Exhibit
(6)(a)(8) to Post-Effective Amendment No. 38 and incorporated herein
by reference.
(i) Amendment to Distribution Agreement dated October 17, 1997 filed as
Exhibit (6)(a)(9) to Post-Effective Amendment No. 38 and
incorporated herein by reference.
(ii)Schedule A-2 to Distribution Agreement dated March 4, 1998, filed as
Exhibit (6)(a)(5)(ii) to Post-Effective Amendment No. 42 and
incorporated herein by reference.
(6) Selling Group Agreement between Eaton Vance Distributors, Inc. and
Authorized Dealers filed as Exhibit (6)(b) to the Post-Effective
Amendment No. 61 to the Registration Statement of Eaton Vance Growth
Trust (File Nos. 2-22019, 811-1241) and incorporated herein by
reference.
(f) The Securities and Exchange Commission has granted the Registrant an
exemptive order that permits the Registrant to enter into deferred
compensation arrangements with its independent Trustees. See in the
Matter of Capital Exchange Fund, Inc., Release No. IC-20671
(November 1, 1994).
(g)(1) Custodian Agreement with Investors Bank & Trust Company dated
October 15, 1992 filed as Exhibit (8) to Post-Effective Amendment
No. 23 and incorporated herein by reference.
(2) Amendment to Custodian Agreement with Investors Bank & Trust Company
dated October 23, 1995 filed as Exhibit (8)(b) to Post-Effective
Amendment No. 27 and incorporated herein by reference.
C-2
<PAGE>
(3) Amendment to Master Custodian Agreement with Investors Bank & Trust
Company dated December 21, 1998 filed as Exhibit (g)(3) to the
Registration Statement of Eaton Vance Municipals Trust (File Nos.
33-572, 811-4409)(Accession No. 0000950156-99-000050) and
incorporated herein by reference.
(h)(1)(a) Amended Administrative Services Agreement between Eaton Vance Mutual
Funds Trust (on behalf of certain of its series) and Eaton Vance
Management dated July 31, 1995 with attached schedules (including
Amended Schedule A dated May 7, 1996) filed as Exhibit (9)(a) to
Post-Effective Amendment No. 24 and incorporated herein by
reference.
(b) Amendment to Schedule A dated June 23, 1997 to the Amended
Administrative Services Agreement dated July 31, 1995 filed as
Exhibit (9)(a)(1) to Post-Effective Amendment No. 38 and
incorporated herein by reference.
(2) Transfer Agency Agreement dated January 1, 1998 filed as Exhibit
(k)(b) to the Registration Statement on Form N-2 of Eaton Vance
Advisers Senior Floating-Rate Fund (File Nos. 333-46853, 811-08671)
(Accession No. 0000950156-98-000172) and incorporated herein by
reference.
(i)(1) Opinion of Internal Counsel filed as Exhibit No. (i) to
Post-Effective Amendment No. 47 and incorporated herein by
reference.
(2) Consent of Counsel dated July 28, 1999 filed herewith.
(j) Consent of Independent Auditors' for Eaton Vance High Income Fund
filed herewith.
(k) Not applicable
(l) Not applicable
(m)(1)(a) Distribution Plan for Eaton Vance Liquid Assets Fund pursuant to
Rule 12b-1 under the Investment Company Act of 1940 dated June 19,
1995 filed as Exhibit (15)(g) to Post-Effective Amendment No. 25 and
incorporated herein by reference.
(b) Amendment to Distribution Plan for Eaton Vance Mutual Funds Trust on
behalf of Eaton Vance Liquid Assets Fund adopted June 24, 1996 filed
as Exhibit (15)(g)(1) to Post-Effective Amendment No. 34 and
incorporated herein by reference.
(2)(a) Distribution Plan for Eaton Vance Money Market Fund pursuant to Rule
12b-1 under the Investment Company Act of 1940 dated June 19, 1995
filed as Exhibit (15)(h) to Post-Effective Amendment No. 25 and
incorporated herein by reference.
(b) Amendment to Distribution Plan for Eaton Vance Mutual Funds Trust on
behalf of Eaton Vance Money Market Fund adopted June 24, 1996 filed
as Exhibit (15)(h)(1) to Post-Effective Amendment No. 34 and
incorporated herein by reference.
(3)(a) Eaton Vance Mutual Funds Trust Class A Service Plan adopted June 23,
1997 with attached Schedules filed as Exhibit (15)(i) to
Post-Effective Amendment No. 38 and incorporated herein by
reference.
(b) Schedule A-2 to Class A Service Plan dated March 4, 1998, filed as
Exhibit (15)(d)(1) to Post-Effective Amendment No. 42 and
incorporated herein by reference.
C-3
<PAGE>
(c) Eaton Vance Mutual Funds Trust Class S Service Plan adopted February
22, 1999 filed herewith.
(4)(a) Eaton Vance Mutual Funds Trust Class B Distribution Plan adopted
June 23, 1997 with attached Schedules filed as Exhibit (15)(j) to
Post-Effective Amendment No. 38 and incorporated herein by
reference.
(b) Schedule A-2 to Class B Distribution Plan dated March 4, 1998, filed
as Exhibit (15)(e)(1) to Post-Effective Amendment No. 42 and
incorporated herein by reference.
(5)(a) Eaton Vance Mutual Funds Trust Class C Distribution Plan adopted
June 23, 1997 with attached Schedules filed as Exhibit (15)(k) to
Post-Effective Amendment No. 38 and incorporated herein by
reference.
(b) Schedule A-2 to Class C Distribution Plan dated March 4, 1998, filed
as Exhibit (15)(f)(1) to Post-Effective Amendment No. 42 and
incorporated herein by reference.
(n) Not applicable
(o)(1)(a) Multiple Class Plan for Eaton Vance Funds dated June 23, 1997 filed
as Exhibit (18) to Post-Effective Amendment No. 37 and incorporated
herein by reference.
(b) Schedule A-4 to Multiple Class Plan dated January 6, 1998 filed as
Exhibit (18)(a)(1) to Post-Effective Amendment No. 42 and
incorporated herein by reference.
(c) Amendment to Multiple Class Plan for Eaton Vance Mutual Funds Trust
dated February 22, 1999 filed herewith.
(p)(1) Power of Attorney for Eaton Vance Mutual Funds Trust dated June 23,
1997 filed as Exhibit No. (17)(a) to Post-Effective Amendment No. 35
and incorporated herein by reference.
(a) Power of Attorney for Eaton Vance Mutual Funds Trust dated November
16, 1998 filed as Exhibit (p)(1) to Post-Effective Amendment No. 47
and incorporated herein by reference.
(2) Power of Attorney for Government Obligations Portfolio dated April
22, 1997 filed as Exhibit (17)(b) to Post-Effective Amendment No. 36
and incorporated herein by reference.
(a) Power of Attorney for Government Obligations Portfolio dated
November 16, 1998 filed as Exhibit (p)(2)(a) to Post-Effective
Amendment No. 48 and incorporated herein by reference.
(3) Power of Attorney for High Income Portfolio dated February 14, 1997
filed as Exhibit No. (17)(c) to Post-Effective Amendment No. 36 and
incorporated herein by reference.
(a) Power of Attorney for High Income Portfolio dated November 16, 1998
filed as Exhibit (p)(3) to Post-Effective Amendment No. 47 and
incorporated herein by reference.
(4) Power of Attorney for Strategic Income Portfolio dated April 22,
1997 filed as Exhibit No. (17)(d) to Post-Effective Amendment No. 36
and incorporated herein by reference.
(a) Power of Attorney for Strategic Income Portfolio dated November 16,
1998 filed as Exhibit (p)(4) to Post-Effective Amendment No. 47 and
incorporated herein by reference.
C-4
<PAGE>
(5) Power of Attorney for Cash Management Portfolio dated April 22, 1997
filed as Exhibit (17)(e) to Post-Effective Amendment No. 36 and
incorporated herein by reference.
(a) Power of Attorney for Cash Management Portfolio dated November 16,
1998 filed as Exhibit (p)(5)(a) to Post-Effective Amendment No. 48
and incorporated herein by reference.
(6) Power of Attorney for Tax-Managed Growth Portfolio dated February
20, 1998 filed as Exhibit No. (17)(f) to Post-Effective Amendment
No. 41 and incorporated herein by reference.
(a) Power of Attorney for Tax-Managed Growth Portfolio dated November
16, 1998 filed as Exhibit (p)(6) to Post-Effective Amendment No. 47
and incorporated herein by reference.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL
Not applicable
ITEM 25. INDEMNIFICATION
Article IV of the Registrant's Amended and Restated Declaration of Trust
permits Trustee and officer indemnification by By-law, contract and vote.
Article XI of the By-Laws contains indemnification provisions. Registrant's
Trustees and officers are insured under a standard mutual fund errors and
omissions insurance policy covering loss incurred by reason of negligent errors
and omissions committed in their capacities as such.
The distribution agreements of the Registrant also provide for reciprocal
indemnity of the principal underwriter, on the one hand, and the Trustees and
officers, on the other.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Reference is made to: (i) the information set forth under the caption
"Management and Organization" in the Statement of Additional Information; (ii)
the Eaton Vance Corp. 10-K filed under the Securities Exchange Act of 1934 (File
No. 1-8100); and (iii) the Form ADV of Eaton Vance Management (File No.
801-15930) and Boston Management and Research (File No. 801-43127) filed with
the Commission, all of which are incorporated herein by reference.
ITEM 27. PRINCIPAL UNDERWRITERS
(a) Registrant's principal underwriter, Eaton Vance Distributors, Inc., a
wholly-owned subsidiary of Eaton Vance Management, is the principal
underwriter for each of the investment companies named below:
Eaton Vance Advisers Senior Floating-Rate Fund
Eaton Vance Growth Trust
Eaton Vance Income Fund of Boston
Eaton Vance Institutional Senior Floating-Rate Fund
Eaton Vance Investment Trust
Eaton Vance Municipals Trust
Eaton Vance Municipals Trust II
Eaton Vance Mutual Funds Trust
Eaton Vance Prime Rate Reserves
Eaton Vance Special Investment Trust
EV Classic Senior Floating-Rate Fund
C-5
<PAGE>
(b)
<TABLE>
<CAPTION>
<S> <C> <C>
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address* with Principal Underwriter with Registrant
-----------------
Albert F. Barbaro Vice President None
Chris Berg Vice President None
Kate B. Bradshaw Vice President None
Mark Carlson Vice President None
Daniel C. Cataldo Vice President None
Raymond Cox Vice President None
Peter Crowley Vice President None
Anthony DeVille Vice President None
Mark P. Doman Vice President None
Alan R. Dynner Vice President Secretary
Richard A. Finelli Vice President None
Kelly Flynn Vice President None
James Foley Vice President None
Michael A. Foster Vice President None
William M. Gillen Senior Vice President None
Hugh S. Gilmartin Vice President None
James B. Hawkes Vice President and Director President and Trustee
Perry D. Hooker Vice President None
Brian Jacobs Senior Vice President None
Thomas P. Luka Vice President None
John Macejka Vice President None
Stephen Marks Vice President None
Joseph T. McMenamin Vice President None
Morgan C. Mohrman Senior Vice President None
James A. Naughton Vice President None
Joseph Nelson Vice President None
Mark D. Nelson Vice President None
Linda D. Newkirk Vice President None
James L. O'Connor Vice President Treasurer
Andrew Ogren Vice President None
Thomas Otis Secretary and Clerk None
George D. Owen, II Vice President None
Margaret Pier Vice President None
Enrique M. Pineda Vice President None
F. Anthony Robinson Vice President None
Frances Rogell Vice President None
Jay S. Rosoff Vice President None
Benjamin A. Rowland, Jr. Vice President, Treasurer and Director None
Stephen M. Rudman Vice President None
Kevin Schrader Vice President None
Teresa A. Sheehan Vice President None
William M. Steul Vice President and Director None
Cornelius J. Sullivan Senior Vice President None
Peter Sykes Vice President None
David M. Thill Vice President None
John M. Trotsky Vice President None
Jerry Vainisi Vice President None
Chris Volf Vice President None
Wharton P. Whitaker President and Director None
Sue Wilder Vice President None
</TABLE>
- ------------------------------------------
* Address is The Eaton Vance Building, 255 State Street, Boston, MA 02109
(c) Not applicable
C-6
<PAGE>
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS
All applicable accounts, books and documents required to be maintained by
the Registrant by Section 31(a) of the Investment Company Act of 1940 and the
Rules promulgated thereunder are in the possession and custody of the
Registrant's custodian, Investors Bank & Trust Company, 200 Clarendon Street,
16th Floor, Mail Code ADM27, Boston, MA 02116, and its transfer agent, First
Data Investor Services Group, 4400 Computer Drive, Westborough, MA 01581-5120,
with the exception of certain corporate documents and portfolio trading
documents which are in the possession and custody of the administrator and
investment adviser. Registrant is informed that all applicable accounts, books
and documents required to be maintained by registered investment advisers are in
the custody and possession of Eaton Vance Management and Boston Management and
Research.
ITEM 29. MANAGEMENT SERVICES
Not applicable
ITEM 30. UNDERTAKINGS
Not applicable
C-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Amendment to the Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly
caused this Amendment to its Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized in the City of Boston, and the
Commonwealth of Massachusetts, on July 23, 1999.
EATON VANCE MUTUAL FUNDS TRUST
By: /s/ JAMES B. HAWKES
--------------------------------------
James B. Hawkes, President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement has been signed below by
the following persons in the capacities on July 23, 1999.
Signature Title
- --------- -----
/s/ James B. Hawkes President (Chief Executive Officer) and
- ----------------------------- Trustee
James B. Hawkes
/s/ James L. O'Connor Treasurer (and Principal Financial and
- ----------------------------- Accounting Officer)
James L. O'Connor
Jessica M. Bibliowicz* Trustee
- -----------------------------
Jessica M. Bibliowicz
Donald R. Dwight* Trustee
- -----------------------------
Donald R. Dwight
Samuel L. Hayes, III* Trustee
- -----------------------------
Samuel L. Hayes, III
Norton H. Reamer* Trustee
- -----------------------------
Norton H. Reamer
Lynn A. Stout* Trustee
- -----------------------------
Lynn A. Stout
Jack L. Treynor* Trustee
- -----------------------------
Jack L. Treynor
*By: /s/ Alan R. Dynner
-----------------------------
Alan R. Dynner (As attorney-in-fact)
C-8
<PAGE>
SIGNATURES
High Income Portfolio has duly caused this Amendment to the Registration
Statement on Form N-1A of Eaton Vance Mutual Funds Trust (File No. 02-90946) to
be signed on its behalf by the undersigned, thereunto duly authorized in the
City of Boston and the Commonwealth of Massachusetts on July 23, 1999.
HIGH INCOME PORTFOLIO
By: /s/ JAMES B. HAWKES
--------------------------------------
James B. Hawkes, President
This Amendment to the Registration Statement on Form N-1A of Eaton Vance
Mutual Funds Trust (File No. 02-90946) has been signed below by the following
persons in their capacities on July 23, 1999.
Signature Title
- --------- -----
/s/ James B. Hawkes President (Chief Executive Officer) and
- ----------------------------- Trustee
James B. Hawkes
/s/ James L. O'Connor Treasurer (Principal Financial and
- ----------------------------- Accounting Officer)
James L. O'Connor
Jessica M. Bibliowicz* Trustee
- -----------------------------
Jessica M. Bibliowicz
Donald R. Dwight* Trustee
- -----------------------------
Donald R. Dwight
Samuel L. Hayes, III* Trustee
- -----------------------------
Samuel L. Hayes, III
Norton H. Reamer* Trustee
- -----------------------------
Norton H. Reamer
Lynn A. Stout* Trustee
- -----------------------------
Lynn A. Stout
Jack L. Treynor* Trustee
- -----------------------------
Jack L. Treynor
*By: /s/ Alan R. Dynner
-----------------------------
Alan R. Dynner (As attorney-in-fact)
C-9
<PAGE>
EXHIBIT INDEX
The following exhibits are filed as part of this amendment to the
Registration Statement pursuant to Rule 483 of Regulation C.
Exhibit No. Description
- ----------- -----------
(a)(5) Amendment and Restatement of Establishment and Designation of
Shares dated June 22, 1998.
(a)(6) Amendment and Restatement of Establishment and Designation of
Shares dated November 16, 1998.
(i)(2) Consent of Counsel dated July 28, 1999.
(j) Consent of Independent Auditors' for Eaton Vance High Income
Fund.
(m)(3)(c) Eaton Vance Mutual Funds Trust Class S Service Plan adopted
February 22, 1999.
(o)(1)(c) Amendment to Multiple Class Plan for Eaton Vance Mutual Funds
Trust dated February 22, 1999.
C-10
<PAGE>
Exhibit (a)(5)
EATON VANCE MUTUAL FUNDS TRUST
Amendment and Restatement
of
Establishment and Designation of Series of Shares
of Beneficial Interest, Without Par Value
(as amended and restated June 22, 1998)
WHEREAS, the Trustees of Eaton Vance Mutual Funds Trust, a Massachusetts
business trust (the "Trust"), have previously designated separate series (or
"Funds"); and
WHEREAS, the Trustees now desire to add four additional series (i.e., Eaton
Vance Insured Tax-Managed Growth Fund, Eaton Vance Insured Tax-Managed Emerging
Growth Fund, Eaton Vance Insured Tax-Managed International Growth Fund and Eaton
Vance Insured High Income Fund) and to further redesignate the series or Funds
pursuant to Section 5.1 of Article V of the Trust's Amended and Restated
Declaration of Trust dated August 17, 1993 (as further Amended) (the
"Declaration of Trust");
NOW, THEREFORE, the undersigned, being at least a majority of the duly
elected and qualified Trustees presently in office of the Trust, hereby divide
the shares of beneficial interest of the Trust into sixteen separate series
("Funds"), each Fund to have the following special and relative rights:
1. The Funds shall be designated as follows:
Eaton Vance Government Obligations Fund
Eaton Vance High Income Fund
Eaton Vance Strategic Income Fund
Eaton Vance Tax-Managed Growth Fund
Eaton Vance Cash Management Fund
Eaton Vance Liquid Assets Fund
Eaton Vance Money Market Fund
Eaton Vance Municipal Bond Fund
Eaton Vance Short-Term Treasury Fund
Eaton Vance Tax Free Reserves
Eaton Vance Tax-Managed Emerging Growth Fund
Eaton Vance Tax-Managed International Growth Fund
Eaton Vance Insured Tax-Managed Growth Fund
Eaton Vance Insured Tax-Managed Emerging Growth Fund
Eaton Vance Insured Tax-Managed International Growth Fund
Eaton Vance Insured High Income Fund
2. Each Fund shall be authorized to invest in cash, securities, instruments
and other property as from time to time described in the Trust's then currently
effective registration statements under the Securities Act of 1933 and the
Investment Company Act of 1940. Each share of beneficial interest of each Fund
1
<PAGE>
("share") shall be redeemable, shall be entitled to one vote (or fraction
thereof in respect of afractional share) on matters on which shares of that Fund
shall be entitled to vote and shall represent a pro rata beneficial interest in
the assets allocated to that Fund, all as provided in the Declaration of Trust.
The proceeds of sales of shares of each Fund, together with any income and gain
thereon, less any diminution or expenses thereof, shall irrevocably belong to
such Fund, unless otherwise required by law. Each share of a Fund shall be
entitled to receive its pro rata share of net assets of that Fund upon
liquidation of that Fund.
3. Shareholders of each Fund shall vote separately as a class to the extent
provided in Rule 18f-2, as from time to time in effect, under the Investment
Company Act of 1940.
4. The assets and liabilities of the Trust shall be allocated among the
above-referenced Funds as set forth in Section 5.5 of Article V of the
Declaration of Trust, except as provided below:
(a) Costs incurred by each Fund in connection with its organization and
start-up, including Federal and state registration and qualification fees and
expenses of the initial public offering of such Fund's shares, shall (if
applicable) be borne by such Fund.
(b) Reimbursement required under any expense limitation applicable to the
Trust shall be allocated among those Funds whose expense ratios exceed such
limitation on the basis of the relative expense ratios of such Funds.
(c) The liabilities, expenses, costs, charges and reserves of the Trust
(other than the management and investment advisory fees or the organizational
expenses paid by the Trust) which are not readily identifiable as belonging to
any particular Fund shall be allocated among the Funds on an equitable basis as
determined by the Trustees.
5. The Trustees (including any successor Trustees) shall have the right at
any time and from time to time to reallocate assets and expenses or to change
the designation of any Fund now or hereafter created, or to otherwise change the
special and relative rights of any such Fund, and to terminate any Fund or add
additional Funds as provided in the Declaration of Trust.
6. Any Fund may merge or consolidate with any other corporation,
association, trust or other organization or may sell, lease or exchange all or
substantially all of its property, including its good will, upon such terms and
conditions and for such consideration when and as authorized by the Trustees;
and any such merger, consolidation, sale, lease or exchange shall be deemed for
all purposes to have been accomplished under and pursuant to the statutes of the
Commonwealth of Massachusetts. The Trustees may also at any time sell and
convert into money all the assets of any Fund. Upon making provision for the
payment of all outstanding obligations, taxes and other liabilities, accrued or
contingent, of such Fund, the Trustees shall distribute the remaining assets of
such Fund ratably among the holders of the outstanding shares. Upon completion
of the distribution of the remaining proceeds or the remaining assets as
provided in this paragraph 6, the Fund shall terminate and the Trustees shall be
discharged of any and all further liabilities and duties hereunder with respect
to such Fund and the right, title and interest of all parties with respect to
such Fund shall be canceled and discharged.
2
<PAGE>
7. The Declaration of Trust authorizes the Trustees to divide each Fund and
any other series of shares into two or more classes and to fix and determine the
relative rights and preferences as between, and all provisions applicable to,
each of the different classes so established and designated by the Trustees. The
following Funds (Eaton Vance Government Obligations Fund, Eaton Vance High
Income Fund, Eaton Vance Strategic Income Fund, Eaton Vance Tax-Managed Growth
Fund, Eaton Vance Municipal Bond Fund, Eaton Vance Tax-Managed Emerging Growth
Fund and Eaton Vance Tax-Managed International Growth Fund) shall have classes
of shares established and designated as Class A, Class B, Class C and Class I
shares, and the Trustees may designate additional classes in the future. In
addition, the following Funds (Eaton Vance Insured Tax-Managed Growth Fund,
Eaton Vance Insured Tax-Managed Emerging Growth Fund, Eaton Vance Insured
Tax-Managed International Growth Fund and Eaton Vance Insured High Income Fund)
shall have classes of shares established and designated as Class A and Class B
shares, and the Trustees may designate additional classes in the future. For
purposes of allocating liabilities among classes, each class of that Fund shall
be treated in the same manner as a separate series.
Dated: June 22, 1998
/s/ Donald R. Dwight /s/ Norton H. Reamer
- ----------------------- ---------------------------
Donald R. Dwight Norton H. Reamer
/s/ M. Dozier Gardner /s/ Samuel L. Hayes,III
- ----------------------- -----------------------
M. Dozier Gardner Samuel L. Hayes, III
/s/ James B. Hawkes /s/ John L. Thorndike
- ----------------------- ---------------------
James B. Hawkes John L. Thorndike
/s/ Jack L. Treynor
- -----------------------
Jack L. Treynor
<PAGE>
Exhibit (a)(6)
EATON VANCE MUTUAL FUNDS TRUST
Amendment and Restatement
of
Establishment and Designation of Series of Shares
of Beneficial Interest, Without Par Value
(as amended and restated November 16, 1998)
WHEREAS, the Trustees of Eaton Vance Mutual Funds Trust, a Massachusetts
business trust (the "Trust"), have previously designated separate series (or
"Funds"); and
WHEREAS, the Trustees now desire to terminate one series (i.e. Eaton Vance
Short-Term Treasury Fund) effective December 30, 1998 pursuant to Section 5.1 of
Article V of the Trust's Amended and Restated Declaration of Trust dated August
17, 1993 (as further Amended) (the "Declaration of Trust");
NOW, THEREFORE, the undersigned, being at least a majority of the duly
elected and qualified Trustees presently in office of the Trust, hereby divide
the shares of beneficial interest of the Trust effective December 30, 1998 into
fifteen separate series ("Funds"), each Fund to have the following special and
relative rights:
1. The Funds shall be designated as follows effective December 30, 1998:
Eaton Vance Government Obligations Fund
Eaton Vance High Income Fund
Eaton Vance Strategic Income Fund
Eaton Vance Tax-Managed Growth Fund
Eaton Vance Cash Management Fund
Eaton Vance Liquid Assets Fund
Eaton Vance Money Market Fund
Eaton Vance Municipal Bond Fund
Eaton Vance Tax Free Reserves
Eaton Vance Tax-Managed Emerging Growth Fund
Eaton Vance Tax-Managed International Growth Fund
Eaton Vance Insured Tax-Managed Growth Fund
Eaton Vance Insured Tax-Managed Emerging Growth Fund
Eaton Vance Insured Tax-Managed International Growth Fund
Eaton Vance Insured High Income Fund
2. Each Fund shall be authorized to invest in cash, securities, instruments
and other property as from time to time described in the Trust's then currently
effective registration statements under the Securities Act of 1933 and the
Investment Company Act of 1940. Each share of beneficial interest of each Fund
("share") shall be redeemable, shall be entitled to one vote (or fraction
thereof in respect of a fractional share) on matters on which shares of that
Fund shall be entitled to vote and shall represent a pro rata beneficial
<PAGE>
interest in the assets allocated to that Fund, all as provided in the
Declaration of Trust. The proceeds of sales of shares of each Fund, together
with any income and gain thereon, less any diminution or expenses thereof, shall
irrevocably belong to such Fund, unless otherwise required by law. Each share of
a Fund shall be entitled to receive its pro rata share of net assets of that
Fund upon liquidation of that Fund.
3. Shareholders of each Fund shall vote separately as a class to the extent
provided in Rule 18f-2, as from time to time in effect, under the Investment
Company Act of 1940.
4. The assets and liabilities of the Trust shall be allocated among the
above-referenced Funds as set forth in Section 5.5 of Article V of the
Declaration of Trust, except as provided below:
(a) Costs incurred by each Fund in connection with its organization and
start-up, including Federal and state registration and qualification fees and
expenses of the initial public offering of such Fund's shares, shall (if
applicable) be borne by such Fund.
(b) Reimbursement required under any expense limitation applicable to the
Trust shall be allocated among those Funds whose expense ratios exceed such
limitation on the basis of the relative expense ratios of such Funds.
(c) The liabilities, expenses, costs, charges and reserves of the Trust
(other than the management and investment advisory fees or the organizational
expenses paid by the Trust) which are not readily identifiable as belonging to
any particular Fund shall be allocated among the Funds on an equitable basis as
determined by the Trustees.
5. The Trustees (including any successor Trustees) shall have the right at
any time and from time to time to reallocate assets and expenses or to change
the designation of any Fund now or hereafter created, or to otherwise change the
special and relative rights of any such Fund, and to terminate any Fund or add
additional Funds as provided in the Declaration of Trust.
6. Any Fund may merge or consolidate with any other corporation,
association, trust or other organization or may sell, lease or exchange all or
substantially all of its property, including its good will, upon such terms and
conditions and for such consideration when and as authorized by the Trustees;
and any such merger, consolidation, sale, lease or exchange shall be deemed for
all purposes to have been accomplished under and pursuant to the statutes of the
Commonwealth of Massachusetts. The Trustees may also at any time sell and
convert into money all the assets of any Fund. Upon making provision for the
payment of all outstanding obligations, taxes and other liabilities, accrued or
contingent, of such Fund, the Trustees shall distribute the remaining assets of
such Fund ratably among the holders of the outstanding shares. Upon completion
of the distribution of the remaining proceeds or the remaining assets as
provided in this paragraph 6, the Fund shall terminate and the Trustees shall be
discharged of any and all further liabilities and duties hereunder with respect
to such Fund and the right, title and interest of all parties with respect to
such Fund shall be canceled and discharged.
7. The Declaration of Trust authorizes the Trustees to divide each Fund and
any other series of shares into two or more classes and to fix and determine the
relative rights and preferences as between, and all provisions applicable to,
each of the different classes so established and designated by the Trustees. The
following Funds (Eaton Vance Government Obligations Fund, Eaton Vance High
Income Fund, Eaton Vance Strategic Income Fund, Eaton Vance Tax-Managed Growth
Fund, Eaton Vance Municipal Bond Fund, Eaton Vance Tax-Managed Emerging Growth
Fund and Eaton Vance Tax-Managed International Growth Fund) shall have classes
of shares established and designated as Class A, Class B, Class C and Class I
shares, and the Trustees may designate additional classes in the future.
<PAGE>
In addition, the following Funds (Eaton Vance Insured Tax-Managed Growth Fund,
Eaton Vance Insured Tax-Managed Emerging Growth Fund, Eaton Vance Insured
Tax-Managed International Growth Fund and Eaton Vance Insured High Income Fund)
shall have classes of shares established and designated as Class A and Class B
shares, and the Trustees may designate additional classes in the future. For
purposes of allocating liabilities among classes, each class of that Fund shall
be treated in the same manner as a separate series.
Dated: November 16, 1998
/s/ Donald R. Dwight /s/ Samuel L. Hayes, III
- -------------------- ------------------------
Donald R. Dwight Samuel L. Hayes, III
/s/ James B. Hawkes /s/ John L. Thorndike
- ------------------- ---------------------
James B. Hawkes John L. Thorndike
/s/ Norton H. Reamer /s/ Jack L. Treynor
- -------------------- -------------------
Norton H. Reamer Jack L. Treynor
<PAGE>
Exhibit (m)(3)(c)
EATON VANCE MUTUAL FUNDS TRUST
CLASS S SERVICE PLAN
WHEREAS, Eaton Vance Mutual Funds Trust (the "Trust") engages in business
as an open-end management investment company with series with multiple classes,
and is registered as such under the Investment Company Act of 1940, as amended
(the "Act");
WHEREAS, on June 23, 1997 the Trust adopted a Multiple Class Plan on behalf
of its series and on February 22, 1999 the Trustees amended the Declaration of
Trust to establish five classes of shares (including Class S shares) within the
Tax-Managed Growth Fund series ("TMG Fund");
WHEREAS, the Trust on behalf of TMG Fund desires to adopt a Service Plan
with respect to the Fund's Class S shares pursuant to which the Fund intends to
pay service fees out of Class S assets as contemplated in subsections (b) and
(d) of Rule 2830 of the Conduct Rules of the National Association of Securities
Dealers, Inc. (the "NASD Rules");
WHEREAS, the Trustees of the Trust have determined that there is a
reasonable likelihood that adoption of this Service Plan will benefit the Trust,
TMG Fund and the holders of Class S shares of such Fund.
NOW, THEREFORE, the Trust hereby adopts this Service Plan (the "Plan") on
behalf of Class S shares of TMG Fund containing the following terms and
conditions:
1. TMG Fund may make payments of service fees out of Class S assets to
Eaton Vance Distributors, Inc., which may pay some or all of such amounts to
broker-dealers or others providing shareholder services. The aggregate of such
payments during any fiscal year of TMG Fund shall not exceed .20% of average
daily net assets of Class S for such year. Appropriate adjustment of service fee
payments shall be made whenever necessary to ensure that no such payment shall
cause the Class to exceed the applicable maximum cap imposed thereon by
subsection (d)(5) of Rule 2830 of the NASD Rules.
2. This Plan shall not take effect until after it has been approved by both
a majority of (i) those Trustees of the Trust who are not "interested persons"
of the Trust (as defined in the Act) and have no direct or indirect financial
interest in the operations of this Plan or any agreements related to it (the
"Rule 12b-1 Trustees"), and (ii) all of the Trustees then in office, cast in
person at a meeting (or meetings) called for the purpose of voting on this Plan.
3. Any agreements between the Trust on behalf of TMG Fund and any person
relating to this Plan shall be in writing and shall not take effect until
approved in the manner provided for Trustee approval of this Plan in Section 2.
4. This Plan shall continue in effect with respect to each Class S for so
long as such continuance is specifically approved at least annually in the
manner provided for Trustee approval of this Plan in Section 2.
<PAGE>
5. The persons authorized to direct the disposition of monies paid or
payable by the Trust pursuant to this Plan or any related agreement shall be the
President or any Vice President or the Treasurer of the Trust. Such persons
shall provide to the Trustees of the Trust and the Trustees shall review, at
least quarterly, a written report of the amounts so expended and the purposes
for which such expenditures were made.
6. This Plan may be terminated as to TMG Fund with respect to its Class S
shares at any time by vote of a majority of the Rule 12b-1 Trustees.
7. This Plan may not be amended to increase the payments to be made by the
Class S shares of TMG Fund as provided in Section 1 unless such amendment is
approved by a vote of at least a majority of the Class S outstanding voting
securities of TMG Fund (as defined in the Act). In addition, all material
amendments to this Plan shall be approved in the manner provided for in Section
2.
8. While this Plan is in effect, the selection and nomination of the Rule
12b-1 Trustees shall be committed to the discretion of the Rule 12b-1 Trustees.
9. The Trust shall preserve copies of this Plan and any related agreements
made by the Trust and all reports made pursuant to Section 5, for a period of
not less than six years from the date of this Plan, the first two years in an
easily accessible place.
10. Consistent with the limitation of shareholder, officer and Trustee
liability as set forth in the Trust's Declaration of Trust, any obligations
assumed by the Class S shares of TMG Fund pursuant to this Plan shall be limited
in all cases to the assets of such Class S shares and no person shall seek
satisfaction thereof from the shareholders of TMG Fund or officers or Trustees
of the Trust or any other class or series of the Trust.
11. When used in this Plan, the term "service fees" shall have the same
meaning as such term has in subsections (b) and (d) of Rule 2830 of the NASD
Rules.
12. If any provision of this Plan shall be held or made invalid by a court
decision, statute, rule or regulation of the Securities and Exchange Commission
or otherwise, the remainder of this Plan shall not be affected thereby.
13. This Plan shall be effective upon the issuance of Class S shares.
Adopted February 22, 1999
* * *
<PAGE>
EXHIBIT (i)(2)
CONSENT OF COUNSEL
I consent to the incorporation by reference in this Post-Effective
Amendment No. 53 to the Registration Statement of Eaton Vance Mutual Funds Trust
(1933 Act File No. 02-90946) of my opinion dated December 23, 1998, which was
filed as Exhibit (i) to Post-Effective Amendment No. 47.
/s/ Maureen A. Gemma
--------------------------------------
Maureen A. Gemma, Esq.
July 28, 1999
Boston, Massachusetts
<PAGE>
EXHIBIT (j)
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference into the Prospectus and
Statement of Additional Information in this Post-Effective Amendment No. 53 to
the Registration Statement of Eaton Vance Mutual Funds Trust (1933 Act File No.
02-90946) of our reports each dated April 30, 1999 on the financial statements,
supplementary data and financial highlights of Eaton Vance High Income Fund and
High Income Portfolio included in the March 31, 1999 Annual Report to
Shareholders of Eaton Vance High Income Fund.
We also consent to the reference to our Firm under the heading "Financial
Highlights" in the Prospectus and under the heading "Other Service Providers" in
the Statement of Additional Information.
/s/ Deloitte & Touche LLP
-------------------------------------
DELOITTE & TOUCHE LLP
July 28, 1999
Boston, Massachusetts
<PAGE>
Exhibit (o)(1)(c)
AMENDMENT TO
MULTIPLE CLASS PLAN FOR
EATON VANCE MUTUAL FUNDS TRUST
FEBRUARY 22, 1999
WHEREAS, Eaton Vance Mutual Funds Trust has established new Class S shares
of Eaton Vance Tax-Managed Growth Fund; and
WHEREAS, such Class S shares will be privately offered and will require
different transfer agency and shareholder servicing services than other classes
of shares.
NOW, THEREFORE, Eaton Vance Mutual Funds Trust hereby amends its Multiple
Class Plan for Eaton Vance Funds dated June 23, 1997 as follows:
1. Class S shares may be offered subject to a declining contingent deferred
sales charge of 1% in the first year after purchase and 1/2 of 1% in the second
year.
2. Class S shares also shall be subject to service fee payments in amounts
not exceeding .20% of average daily net assets attributable to such Class for
each fiscal year.
3. Class S shares shall have no exchange privileges.
4. All other provisions of the existing Multiple Class Plan shall remain in
effect.
* * *
