<PAGE>
As filed with the Securities and Exchange Commission on August 4, 2000
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 [ ]
POST-EFFECTIVE AMENDMENT NO. 65 [X]
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940 [ ]
AMENDMENT NO. 68 [X]
EATON VANCE MUTUAL FUNDS TRUST
------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN
CHARTER)
THE EATON VANCE BUILDING, 255 STATE STREET,
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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
--------------
THE EATON VANCE BUILDING, 255 STATE STREET,
-------------------------------------------
BOSTON, MASSACHUSETTS 02109
---------------------------
(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)
[ ] on (date) pursuant to paragraph (a)(1)
[X] on September 5, 2000 pursuant to paragraph (b)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] 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.
Floating Rate Portfolio and High Income Portfolio have also executed this
Registration Statement.
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<PAGE>
LOGO
Investing
for the
21st
Century(R)
EATON VANCE FLOATING-RATE
HIGH INCOME FUND
A mutual fund seeking high current income
Prospectus Dated
September , 2000
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 8
Investment Objective & Principal Policies Redeeming Shares 9
and Risks 4
Management and Organization 6 Shareholder Account
Valuing Shares 7 Features 10
Purchasing Shares 7 Tax Information 11
-------------------------------------------------------------------------------
This prospectus contains important information about the
Fund and the services available to shareholders. Please
save it for reference.
SUBJECT TO COMPLETION - AUGUST 1, 2000
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND
MAY BE CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL
THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS
NOT AN OFFER TO SELL THESE SECURITIES AND IS NOT
SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE
WHERE THE OFFER OR SALE IS NOT PERMITTED.
<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 senior secured floating rate loans and high yield, high risk
corporate bonds (so called "junk bonds"). The Fund will invest a substantial
portion of assets in debt obligations issued in connection with corporate
restructurings.
The Fund invests at least 65% of its net assets in income producing floating
rate loans and other floating rate debt securities. The Fund may also purchase
fixed income debt securities, preferred stocks (many of which have fixed
maturities), convertible securities, 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 engage in certain hedging transactions.
Investments are actively managed, and may be bought or sold on a daily basis
(although loans are generally held until repaid). The investment adviser's staff
monitors the credit quality of Fund holdings, as well as other investments that
are available. Preservation of capital is considered when consistent with the
Fund's objective.
The Fund currently seeks its objective by investing its assets in two other
registered investment companies.
PRINCIPAL RISK FACTORS. The Fund invests primarily in below investment grade
debt obligations, which are considered 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 debt obligation may lose significant
value before a default occurs. Moreover, the specific collateral used to secure
a loan may decline in value or become illiquid, which would adversely affect the
loan's value.
Loans and other debt securities are also subject to the risk of increases in
prevailing interest-rates, although floating rate securities reduce this risk.
Interest rate changes may also increase prepayments of debt obligations and
require the Fund to invest assets at lower yields. Most loans are not actively
traded, which may impair the ability of the Fund to realize full value in the
event of the need to liquidate such assets. Foreign securities are subject to
adverse changes in currency exchange rates and economic and political
developments abroad. Bonds that do not make regular payments of interest may
experience greater volatility in response to changes in interest rates. Hedging
transactions involve a risk of loss due to unanticipated changes in exchange or
interest rates, as well as the risk of counterparty default.
As a non-diversified fund, the Fund may invest a larger portion of its assets in
the obligations of a limited number of issuers than may a diversified fund. This
makes the Fund more susceptible to adverse economic, business or other
developments affecting such issuers. The Fund may invest, with respect to 50% of
its total assets, more than 5% (but not more than 25%) of its total assets in
securities of any one issuer, other than U.S. Government securities.
The 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.
PERFORMANCE INFORMATION. As of the date of this prospectus, the Fund had not
begun operations so there is no performance history.
2
<PAGE>
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 Class A Class B Class C
investment)
-------------------------------------------------------------------------------
Maximum Sales Charge (Load)(as a
percentage of offering price) 4.75% 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) None 5.00% 1.00%
Maximum Sales Charge (Load)Imposed on
Reinvested Distributions None None None
Exchange Fee None None None
Redemption Fee (as a percentage of
amount redeemed) 1.00%* None None
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets) Class A Class B Class C
----------------------------------------------------------------------------
Management Fees 0.58% 0.58% 0.58%
Distribution and Service (12b-1) Fees 0.00% 1.00% 1.00%
Other Expenses** 0.62% 0.37% 0.37%
----- ----- -----
Total Annual Fund Operating Expenses 1.20% 1.95% 1.95%
* Effective for Class A shares redeemed or exchanged within three months of
purchase.
** Other Expenses are based on estimates and for Class A shares include a
service fee of 0.25%.
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
-------------------------------------------------------------------------------
Class A shares $591* $ 838
Class B shares $698 $1,012
Class C shares $298 $ 612
You would pay the following expenses if you did not redeem your shares:
1 Year 3 Years
--------------------------------------------------------------------------------
Class A shares $591 $838
Class B shares $198 $612
Class C shares $198 $612
* Due to the redemption fee, the cost of investing in Class A shares for one
year would be $100 higher for shares redeemed or exchanged within three months
of purchase.
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 most 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 invests in Floating Rate Portfolio and High
Income Portfolio, which each have the same investment objective as the Fund.
The Fund's allocation of assets to floating rate and other securities in the
Floating Rate Portfolio will generally not exceed 90% nor be less than 65% of
net assets. The Floating Rate Portfolio normally invests primarily in interests
in senior secured floating rate loans ("Senior Loans").
Senior Loans hold the most senior position in the capital structure of a
business entity (the "Borrower"), are secured with specific collateral and have
a claim on the assets of the Borrower that is senior to that of subordinated
debt and stock of the Borrower. The proceeds of Senior Loans primarily are used
to finance leveraged buyouts, recapitalizations, mergers, acquisitions, stock
repurchases, and, to a lesser extent, to finance internal growth and for other
corporate purposes. Senior Loans typically have rates of interest which are
redetermined either daily, monthly, quarterly or semi-annually by reference to a
base lending rate, plus a premium. These base lending rates generally are the
London Inter-Bank Offered Rate ("LIBOR"), the prime rate offered by one or more
major United States banks (the "Prime Rate"), the certificate of deposit ("CD")
rate or other base lending rates used by commercial lenders. The Senior Loans
held by the Floating Rate Portfolio will have a dollar-weighted average period
until the next interest rate adjustment of approximately 90 days or less. In the
experience of the investment adviser over the last decade, because of
prepayments the average life of Senior Loans has been two to three years.
The Floating Rate Portfolio may also purchase unsecured loans, other floating
rate debt securities such as notes, bonds and asset-backed securities,
investment grade fixed income debt obligations and money market instruments.
Those money market holdings with a remaining maturity of less than 60 days will
be deemed floating rate assets.
The High Income 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 BBB and Baa have speculative characteristics, while lower rated bonds are
predominantly speculative.
The High Income 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 High Income Portfolio accrues income on
these investments and is required to distribute its share of income each year.
The High Income Portfolio may be required to sell securities to obtain cash
needed for income distributions.
Loans and other corporate debt obligations are subject to the risk of
non-payment of scheduled interest or principal. Such non-payment would result in
a reduction of income to the Fund, a reduction in the value of the investment
and a potential decrease in the net asset value of the Fund. There can be no
assurance that the liquidation of any collateral securing a loan would satisfy
the Borrower's obligation in the event of non-payment of scheduled interest or
principal payments, or that such collateral could be readily liquidated. In the
event of bankruptcy of a Borrower, the Floating Rate Portfolio could experience
delays or limitations with respect to its ability to realize the benefits of the
collateral securing a Senior Loan. To the extent that a Senior Loan is
collateralized by stock in the Borrower or its subsidiaries, such stock may lose
all or substantially all of its value in the event of bankruptcy of a Borrower.
Some Senior Loans are subject to the risk that a court, pursuant to fraudulent
conveyance or other similar laws, could subordinate such Senior Loans to
presently existing or future indebtedness of the Borrower or take other action
detrimental to the holders of Senior Loans including, in certain circumstances,
invalidating such Senior Loans.
Many loans in which the Floating Rate Portfolio will invest may not be rated by
a rating agency, and may not be registered with the Securities and Exchange
Commission or any state securities commission and will not be listed on any
national securities exchange. The amount of public information available with
respect to Senior Loans will generally be less extensive than that available for
rated, registered or exchange listed securities. In evaluating the
creditworthiness of Borrowers, the investment adviser will consider, and may
rely in part, on analyses performed by others. Borrowers may have outstanding
debt obligations that are rated below investment grade by a rating agency.
4
<PAGE>
Rating agencies have begun rating Senior Loans and most Senior Loans have been
assigned a rating below investment grade. Debt securities which are unsecured
and rated below investment grade are viewed by the rating agencies as having
speculative characteristics and are commonly known as "junk bonds". A
description of the ratings of corporate bonds by Moody's and S&P is included as
Appendix A to the Statement of Additional Information. Because of the protective
features of Senior Loans (being senior and secured by specific collateral), the
investment adviser believes that Senior Loans tend to have more favorable loss
recovery rates as compared to most other types of below investment grade debt
obligations. Accordingly, the investment adviser does not view ratings as a
determinative factor in its investment decisions and relies more upon its credit
analysis abilities than upon ratings.
The High Income 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 High Income Portfolio may be
required to retain legal counsel and/or a financial adviser. This may increase
operating expenses and adversely affect net asset value.
The credit quality of most securities held by the High Income 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 such securities more volatile and could limit
the ability to sell securities at favorable prices. In the absence of a liquid
trading market for securities held by it, the High Income Portfolio may have
difficulties determining the fair market value of such securities.
Although the investment adviser of High Income Portfolio 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. Because of the greater number of investment considerations
involved in investing in high yield, high risk bonds, the achievement of the
High Income Portfolio's objective depends more on the investment adviser's
judgment and analytical abilities than would be the case if it invested
primarily in securities in the higher rating categories.
The value of Fund shares will usually change in response to interest rate
fluctuations, although investment in floating rate obligations will mitigate
this risk. When interest rates decline, the value of holdings can be expected to
rise. Conversely, when interest rates rise, the value of holdings can be
expected to decline. Other economic factors (such as a large downward movement
in stock prices) can also adversely impact the markets for debt obligations.
Rating downgrades of holdings will generally reduce their value.
Most Loans are not highly marketable and may be subject to restrictions on
resale. No active trading market may exist for many loans. A secondary market
may be subject to irregular trading activity, wide bid/ask spreads and extended
trade settlement periods, which may impair the ability to realize full value.
Each Portfolio may invest not more than 15% of its net assets in illiquid
securities, which may be difficult to value properly and may involve greater
risks. Illiquid securities include those legally restricted as to resale, and
may include commercial paper issued pursuant to Section 4(2) of the Securities
Act of 1933 and securities eligible for resale pursuant to Rule 144A thereunder.
Certain Section 4(2) and Rule 144A securities may be treated as liquid
securities if the investment adviser determines that such treatment is
warranted. Even if determined to be liquid, holdings of these securities may
increase the level of illiquidity if eligible buyers become uninterested in
purchasing them.
Each Portfolio may invest up to 25% of total assets in foreign securities,
predominantly in developed countries. The value of foreign securities is
affected by changes in foreign tax laws (including withholding tax), government
policies (in this country or abroad) and relations between nations, and trading,
settlement, custodial and other operational risks. 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. Foreign investments
also could be affected by other factors not present in the United States,
including exploration, armed conflict, confiscatory taxation, lack of uniform
accounting and auditing standards, less publicly available financial and other
information and potential difficulties in enforcing contractual obligations. A
Portfolio may use forward currency exchange contracts to attempt to mitigate
adverse effects of foreign currency fluctuations. These contracts allow a
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.
The Floating Rate Portfolio may use interest rate swaps for risk management
purposes and not as a speculative investment and would typically use interest
rate swaps to shorten the average interest rate reset time of the Portfolio's
holdings. Interest rate swaps involve the exchange by the Portfolio with another
5
<PAGE>
party of their respective commitments to pay or receiveinterests, e.g., an
exchange of fixed rate payments for floating rate payments. The use of interest
rate swaps is a highly specialized activity which involves investment techniques
and risks different from those associated with ordinary portfolio securities
transactions. The investment adviser has had limited experience in the use of
interest rate swaps but has utilized other types of hedging techniques. If the
investment adviser is incorrect in its forecasts of market values, interest
rates and other applicable factors, the investment performance of the Fund would
be less favorable than what it would have been if this investment technique were
never used.
The Floating Rate Portfolio may borrow amounts up to one-third of the value of
its total assets (including borrowings) and the High Income Portfolio may borrow
up to 25% of its net assets, but neither will 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 and, while they are
outstanding, magnify increases or decreases in the value of Fund shares. Neither
Portfolio will purchase additional investment securities while outstanding
borrowings exceed 5% of the value of its total assets. During unusual market
conditions, the Floating Rate Portfolio may temporarily invest up to 100% of its
assets in cash or cash equivalents. While temporarily invested, the Fund may not
achieve its investment objective.
MANAGEMENT AND ORGANIZATION
MANAGEMENT. Each 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 $46 billion
on behalf of mutual funds, institutional clients and individuals.
The investment adviser manages the investments of each Portfolio and provides
related office facilities and personnel. Under its investment advisory agreement
with each 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.
Annual Daily
Category Daily Net Assets Asset Rate Income Rate
--------------------------------------------------------------------------------
1 up to $500 million 0.300% 3.00%
2 $500 million but less than $1 billion 0.275% 2.75%
3 $1 billion but less than $1.5 billion 0.250% 2.50%
4 $1.5 billion but less than $2 billion 0.225% 2.25%
5 $2 billion but less than $3 billion 0.200% 2.00%
6 $3 billion and over 0.175% 1.75%
For the fiscal year ended March 31, 2000, the High Income Portfolio paid BMR
advisory fees equivalent to 0.60% of High Income Portfolio's average daily net
assets for such year. The portion of the Fund's assets invested in the High
Income Portfolio will be subject to such Portfolio's advisory fee, but will not
be subject to Floating Rate Portfolio's advisory fee.
Scott H. Page and Payson F. Swaffield, Vice Presidents of Eaton Vance and BMR,
are co-portfolio managers of Floating-Rate Portfolio (since inception) and of
other Eaton Vance floating-rate loan portfolios (since August 1, 1996). Prior
thereto, Messrs. Page and Swaffied were senior analysts of Eaton Vance.
Michael Weilheimer is the portfolio manager of the High Income Portfolio (since
January 1, 1996). He also manages other Eaton Vance high yield bond portfolios.
Prior to assuming management of the High Income 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. Thomas Huggins has joined Mr. Weilheimer as co-portfolio
manager. Mr. Huggins is a Vice President of Eaton Vance and BMR. He joined Eaton
Vance in April 1997 as the head of high yield bond trading. Prior to joining
Eaton Vance, Mr. Huggins was a fixed income trader for John Hancock Mutual
Funds.
The investment adviser and the Fund and the Portfolios have adopted Codes of
Ethics governing personal securities transactions. Under the Codes, Eaton Vance
employees may purchase and sell securities (including securities held by the
Portfolios) 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. In return, the Fund is
authorized to pay Eaton Vance a fee of 0.15% of average daily net assets.
6
<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 Portfolios, 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 either 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 purchase
price of shares is their net asset value (plus a sales charge for Class A
shares), which is derived from Portfolio holdings. Most loans are valued by
dealer quotations and most other debt securities are valued by an independent
pricing service; however, the investment adviser may use the fair value of a
foreign security if events occurring after the close of a foreign securities
market would materially affect net asset value. Because foreign securities trade
on days when Fund shares are not priced, net asset value can change at times
when Fund shares cannot be redeemed.
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 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 A shares is the net asset value plus a sales charge. 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 of
shares 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.
You may purchase Fund shares in exchange for securities. Please call
1-800-225-6265 for information about exchanging securities for Fund shares. If
you purchase shares through an investment dealer (which includes brokers,
dealers and other financial institutions), that dealer may charge you a fee for
executing the purchase for you. The Fund may suspend the sale of its shares at
any time and any purchase order may be refused.
7
<PAGE>
SALES CHARGES
FRONT-END SALES CHARGE. Class A shares are offered at net asset value per share
plus a sales charge that is determined by the amount of your investment. The
current sales charge schedule is:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Sales Charge Sales Charge Dealer Commission
As Percentage of As Percentage of Net As a Percentage of
Amount of Purchase Offering Price Amount Invested Offering Price
------------------ -------------- --------------- --------------
Less than $25,000 4.75% 4.99% 4.50%
$25,000 but less than $100,000 4.50% 4.71% 4.25%
$100,000 but less than $250,000 3.75% 3.90% 3.50%
$250,000 but less than $500,000 3.00% 3.09% 2.75%
$500,000 but less than $1,000,000 2.00% 2.04% 2.00%
$1,000,000 or more 0.00* 0.00* See Below
</TABLE>
* No sales charge is payable at the time of purchase on investments of $1
million or more. A CDSC of 1.00% will be imposed on such investments (as
described below) in the event of redemptions within 12 months of purchase.
The principal underwriter will pay a commission to investment dealers on sales
of $1 million or more as follows: 1.00% on amounts of $1 million or more but
less than $3 million; plus 0.50% on amounts over $3 million but less than $5
million; plus 0.25% on amounts over $5 million. Purchases totaling $1 million or
more will be aggregated over a 12-month period for purposes of determining the
commission. The principal underwriter may also pay commissions of up to 1.00% on
sales of Class A shares to certain tax-deferred retirement plans.
CONTINGENT DEFERRED SALES CHARGE. Each Class of shares is subject to a CDSC on
certain redemptions. Class A shares purchased at net asset value in amounts of
$1 million or more are subject to a 1.00% CDSC if redeemed within 12 months of
purchase. 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
-------------------------------------------------
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
at 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.
CLASS B CONVERSION FEATURE. After eight years, your Class B shares will
automatically convert to Class A shares. Class B shares acquired through the
reinvestment of distributions will convert in proportion to shares not so
acquired.
REDUCING OR ELIMINATING SALES CHARGES. Front-end sales charges on purchases of
Class A shares may be reduced under the right of accumulation or under a
statement of intention. Under the right of accumulation, the sales charges you
pay are reduced if the current market value of your current holdings (based on
the current offering price), plus your new purchases, total $25,000 or more.
Class A shares of other Eaton Vance funds owned by you can be included as part
of your current holdings for this purpose. Under a statement of intention,
purchases of $25,000 or more made over a 13-month period are eligible for
reduced sales charges. Under a statement of intention, the principal underwriter
may hold 5% of the dollar amount to be purchased in escrow in the form of shares
registered in your name until you satisfy the statement or the 13-month period
expires.
Class A shares are offered at net asset value to clients of financial
intermediaries who charge a fee for their services; accounts affiliated with
those financial intermediaries; tax-deferred retirement plans; investment and
institutional clients of Eaton Vance; certain persons affiliated with Eaton
Vance; and certain Eaton Vance and fund service providers. Ask your investment
dealer for details. Class A shares are also sold at net asset value if the
amount invested represents redemption proceeds from a mutual fund not affiliated
with Eaton Vance, provided the redemption occurred within 60 days of the Fund
share purchase and the redeemed shares were subject to a sales charge. Class A
8
<PAGE>
shares so acquired will be subject to a 0.50% CDSC if they are redeemed within
12 months of purchase. Investment dealers will be paid a commission on such
sales equal to 0.50% of the amount invested.
CDSCs are waived for certain redemptions pursuant to a Withdrawal Plan (see
"Shareholder Account Features") and, for Class B and Class C shares, 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 all or any portion of
the redemption proceeds in the same class of shares of the Fund (or, for Class A
shares, in Class A shares of any other Eaton Vance 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. Under these circumstances your
account will be credited with any CDSC paid in connection with the redemption.
Any CDSC period applicable to the shares you acquire upon reinvestment will run
from the date of your original share purchase. 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 in effect plans
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. All
Classes pay service fees for personal and/or account services equal to 0.25% of
average daily net assets annually. 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 principal underwriter compensates
investment dealers who sell Class C shares at a rate of 1.00% of the purchase
price of the shares, consisting of 0.75% of sales commission and 0.25% of
service fee (for the first year's service). After the first year, investment
dealers also receive 0.75% of the value of Class C shares in annual distribution
fees. After the sale of shares, the principal underwriter receives service fees
for one year and thereafter investment dealers receive them based on the value
of shares sold by such dealers. Distribution and service fees are subject to the
limitations contained in the sales charge rule of the National Association of
Securities Dealers, Inc.
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 and shares
that are subject to fiduciary arrangements cannot be
redeemed by telephone.
Through an
Investment Dealer Your investment dealer is responsible for transmitting the
order promptly. An investment dealer may charge a fee for
this service.
Redemptions (including exchanges) of Class A shares made within three months of
their purchase will be subject to a redemption fee equal to 1% of the amount
redeemed. All redemption fees will be paid to the Fund. Redemptions of shares
acquired as the result of reinvesting distributions and those held by 401(k)
plans or in proprietary fee-based programs sponsored by broker-dealers are not
subject to the redemption fee.
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/or redemption fee 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.
9
<PAGE>
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.
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 are, in the aggregate, less than or equal to 12%
annually of the greater of either the initial account balance or the current
account balance. A minimum account size of $5,000 is required to establish a
systematic withdrawal plan. Because purchases of Class A shares are generally
subject to an initial sales charge, you should not make withdrawals from your
account while you are making purchases.
TAX-SHELTERED RETIREMENT PLANS. Class A and 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 Fund shares for shares of the same
Class of another Eaton Vance fund. Exchanges are generally made at net asset
value. If you hold Class A shares for less than six months and exchange them for
shares subject to a higher sales charge, you will be charged the difference
between the two sales charges. 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. Class A shares may also be exchanged for the Fund's Institutional
Shares, subject to the terms for investing in those shares.
Before exchanging, you should read the prospectus of the new fund carefully. If
you wish to exchange shares, 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 (exchanged from one fund to another and back
again) within 12 months, it will be deemed to be market timing. The exchange
privilege may be terminated for market timing accounts.
10
<PAGE>
TELEPHONE AND ELECTRONIC TRANSACTIONS. You can redeem or exchange shares by
telephone as described in this prospectus. In addition, certain transactions may
be conducted through the Internet. The transfer agent and the principal
underwriter have procedures in place to authenticate telephone and electronic
instructions (such as using security codes or verifying personal account
information). As long as the transfer agent and principal underwriter follow
reasonable procedures, they will not be responsible for unauthorized telephone
or electronic transactions and you bear the risk of possible loss resulting from
these 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. You will not be able to
utilize a number of shareholder features, such as telephone transactions,
directly with the Fund. 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.
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 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. The Fund
expects that its distributions will consist primarily of ordinary income.
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.
11
<PAGE>
LOGO
Investing
for the
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 will be 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 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 (including the
statement of additional information and shareholder reports): at the
Securities and Exchange Commission's public reference room in Washington,
DC (call 1-202-942-8090 for information on the operation of the public
reference room); on the EDGAR Database on the SEC's Internet site (http://
www.sec.gov); or, upon payment of copying fees, by writing to the SEC's
public reference section, Washington, DC 20549-0102, or by electronic mail
at [email protected].
ABOUT SHAREHOLDER ACCOUNTS: You can obtain more information from Eaton
Vance Shareholder 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:
PFPC, Inc.
P.O. Box 9653
Providence, RI 02904-9653
1-800-262-1122
--------------------------------------------------------------------------------
The Fund's SEC File No. is 811-4015. FRHIP
<PAGE>
Subject to Completion -- August 1, 2000
The information in this Statement of Additional Information is not complete and
may be changed. These securities may not be sold until the registration
statement filed with the Securities and Exchange Commission is effective.
This Statement of Additional Information, which is not a prospectus, is not an
offer to sell these securities and is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
STATEMENT OF
ADDITIONAL INFORMATION
, 2000
EATON VANCE FLOATING-RATE 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, Floating Rate Portfolio ("FR Portfolio") and High
Income Portfolio ("HI 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
Investment Policies and Risks ........................................... 1
Investment Restrictions ................................................. 8
Management and Organization ............................................. 10
Investment Advisory and Administrative Services ......................... 14
Other Service Providers ................................................. 15
Purchasing and Redeeming Shares ......................................... 16
Sales Charges ........................................................... 17
Performance ............................................................. 20
Control Persons ......................................................... 22
Taxes ................................................................... 22
Portfolio Security Transactions ......................................... 23
Financial Statements .................................................... 25
Appendix A: Description of Securities Ratings ......................... a-1
THIS IS NOT A PROSPECTUS AND IS AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE
INVESTORS ONLY IF PRECEDED OR ACCOMPANIED BY THE FUND'S PROSPECTUS DATED _____ ,
2000, AS SUPPLEMENTED FROM TIME TO TIME, WHICH IS INCORPORATED HEREIN BY
REFERENCE. THIS SAI SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS, WHICH MAY
BE OBTAINED BY CALLING 1-800-225-6265.
<PAGE>
INVESTMENT POLICIES AND RISKS
STRUCTURE OF SENIOR LOANS. A Senior Loan 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 ("Lenders"). The Agent typically administers and enforces
the Senior Loan on behalf of the other Lenders in the syndicate. In addition, an
institution, typically but not always the Agent, holds any collateral on behalf
of the Lenders.
Senior Loans include senior secured floating rate loans and institutionally
traded senior secured floating rate debt obligations issued by an asset-backed
pool, and interests therein. Loan interests generally take the form of direct
interests acquired during a primary distribution and may also take the form of
participation interests in, assignments of, or novations of a Senior Loan
acquired in secondary markets. Such loan interests may be acquired from U.S. or
foreign commercial 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.
A Portfolio may purchase "Assignments" from Lenders. The purchase of an
Assignment typically succeeds to all the rights and obligations under the Loan
Agreement of the assigning Lender and becomes a Lender under the Loan Agreement
with the same rights and obligations as the assigning Lender. Assignments may,
however, be arranged through private negotiations between potential assignees
and potential assignors, and the rights and obligations acquired by the
purchaser of an Assignment may differ from, and be more limited than, those held
by the assigning Lender.
A Portfolio also may invest in "Participations". Participations by a
Portfolio in a Lender's portion of a Senior Loan typically will result in the
Portfolio having a contractual relationship only with such Lender, not with the
Borrower. As a result, the Portfolio may have the right to receive payments of
principal, interest and any fees to which it is entitled only from the Lender
selling the Participation and only upon receipt by such Lender of such payments
from the Borrower. In connection with purchasing Participations, the Portfolio
generally will have no right to enforce compliance by the Borrower with the
terms of the loan agreement, nor any rights with respect to any funds acquired
by other Lenders through set-off against the Borrower and the Portfolio may not
directly benefit from the collateral supporting the Senior Loan in which it has
purchased the Participation. As a result, the Portfolio may assume the credit
risk of both the Borrower and the Lender selling the Participation. In the event
of the insolvency of the Lender selling a Participation, the Portfolio may be
treated as a general creditor of such Lender. The selling Lenders and other
persons interpositioned between such Lenders and the Portfolio with respect to
such Participations will likely conduct their principal business activities in
the banking, finance and financial services industries. Persons engaged in such
industries may be more susceptible to, among other things, fluctuations in
interest rates, changes in the Federal Open Market Committee's monetary policy,
governmental regulations concerning such industries and concerning capital
raising activities generally and fluctuations in the financial markets
generally.
A Portfolio will only acquire Participations if the Lender selling the
Participation, and any other persons interpositioned between the Portfolio and
the Lender, at the time of investment has outstanding debt or deposit
obligations rated investment grade (BBB or A-3 or higher by Standard & Poor's
Ratings Group ("S&P") or Baa or P-3 or higher by Moody's Investors Service, Inc.
("Moody's") or comparably rated by another nationally recognized rating agency
(each a "Rating Agency")) or determined by the investment adviser to be of
comparable quality. Securities rated Baa by Moody's have speculative
characteristics. Similarly, a Portfolio will purchase an Assignment or
Participation or act as a Lender with respect to a syndicated Senior Loan only
where the Agent with respect to such Senior Loan at the time of investment has
outstanding debt or deposit obligations rated investment grade or determined by
the investment adviser to be of comparable quality. Long-term debt rated BBB by
S&P is regarded by S&P as having adequate capacity to pay interest and repay
principal and debt rated Baa by Moody's is regarded by Moody's as a medium grade
obligation, i.e., it is neither highly protected nor poorly secured. Commercial
paper rated A-3 by S&P indicates that S&P believes such obligations exhibit
adequate protection parameters but that adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity of the obligor to
meet its financial commitment on the obligation and issues of commercial paper
rated P-3 by Moody's are considered by Moody's to have an acceptable ability for
repayment of senior short-term obligations. The effect of industry
characteristics and market compositions may be more pronounced.
LOAN COLLATERAL. In order to borrow money pursuant to a Senior Loan, a Borrower
will frequently, for the term of the Senior Loan, pledge collateral, including
but not limited to, (i) working capital assets, such as accounts receivable and
inventory; (ii) tangible fixed assets, such as real property, buildings and
equipment; (iii) intangible assets, such as trademarks and patent rights (but
excluding goodwill); and (iv) security interests in shares of stock of
subsidiaries or affiliates. In the case of Senior Loans made to non-public
companies, the company's shareholders or owners may provide collateral in the
form of secured guarantees and/or security interests in assets that they own. In
certain instances, a Senior Loan may be secured only by stock in the Borrower or
its subsidiaries. Collateral may consist of assets that may not be readily
liquidated, and there is no assurance that the liquidation of such assets would
satisfy fully a Borrower's obligations under a Senior Loan.
LENDING FEES. In the process of buying, selling and holding Senior Loans a
Portfolio may receive and/or pay certain fees. These fees are in addition to
interest payments received and may include facility fees, commitment fees,
commissions and prepayment penalty fees. When the Portfolio buys a Senior Loan
it may receive a facility fee and when it sells a Senior Loan it may pay a
facility fee. On an ongoing basis, the Portfolio may receive a commitment fee
based on the undrawn portion of the underlying line of credit portion of a
Senior Loan. In certain circumstances, the Portfolio may receive a prepayment
penalty fee upon the prepayment of a Senior Loan by a Borrower. Other fees
received by the Portfolio may include covenant waiver fees and covenant
modification fees.
BORROWER COVENANTS. A Borrower must comply with various restrictive covenants
contained in a loan agreement or note purchase agreement between the Borrower
and the Lender or lending syndicate (the "Loan Agreement"). Such covenants, in
addition to requiring the scheduled payment of interest and principal, may
include restrictions on dividend payments and other distributions to
stockholders, provisions requiring the Borrower to maintain specific minimum
financial ratios, and limits on total debt. In addition, the Loan Agreement may
contain a covenant requiring the Borrower to prepay the Loan with any free cash
flow. Free cash flow is generally defined as net cash flow after scheduled debt
service payments and permitted capital expenditures, and includes the proceeds
from asset dispositions or sales of securities. A breach of a covenant which is
not waived by the Agent, or by the lenders directly, as the case may be, is
normally an event of acceleration; i.e., the Agent, or the lenders directly, as
the case may be, has the right to call the outstanding Senior Loan. The typical
practice of an Agent or a Lender in relying exclusively or primarily on reports
from the Borrower may involve a risk of fraud by the Borrower. In the case of a
Senior Loan in the form of a Participation, the agreement between the buyer and
seller may limit the rights of the holder to vote on certain changes which may
be made to the Loan Agreement, such as waiving a breach of a covenant. However,
the holder of the Participation will, in almost all cases, have the right to
vote on certain fundamental issues such as changes in principal amount, payment
dates and interest rate.
ADMINISTRATION OF LOANS. In a typical Senior 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. A 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 Senior 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 Senior Loan usually does, but is often not obligated
to, notify holders of Senior Loans 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 Senior Loan, may give the Borrower an opportunity
to provide additional collateral or may seek other protection for the benefit of
the participants in the Senior 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 Senior Loan and other
fees paid on a continuing basis. With respect to Senior Loans 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 Senior
Loans. 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
Senior Loan, or suffer a loss of principal and/or interest. In situations
involving intermediate participants similar risks may arise.
PREPAYMENTS. Senior Loans will usually require, in addition to scheduled
payments of interest and principal, the prepayment of the Senior Loan from free
cash flow, as defined above. The degree to which Borrowers prepay Senior Loans,
whether as a contractual requirement or at their election, may be affected by
general business conditions, the financial condition of the Borrower and
competitive conditions among lenders, among others. As such, prepayments cannot
be predicted with accuracy. Upon a prepayment, either in part or in full, the
actual outstanding debt on which the Portfolio derives interest income will be
reduced. However, the Portfolio may receive both a prepayment penalty fee from
the prepaying Borrower and a facility fee upon the purchase of a new Senior Loan
with the proceeds from the prepayment of the former. Prepayments generally will
not materially affect the Fund's performance because the Portfolio should be
able to reinvest prepayments in other Senior Loans that have similar or
identical yields and because receipt of such fees may mitigate any adverse
impact on the Fund's yield.
OTHER INFORMATION REGARDING SENIOR LOANS. 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 Senior
Loans to or acquire them from the Portfolio or may be intermediate participants
with respect to Senior Loans in which the Portfolio owns interests. Such banks
may also act as Agents for Senior Loans held by the Portfolio.
A Portfolio may purchase and retain in its portfolio a Senior Loan where the
Borrower has experienced, or may be perceived to be likely to experience, credit
problems, including involvement in or recent emergence from bankruptcy
reorganization proceedings or other forms of debt restructuring. Such
investments may provide opportunities for enhanced income as well as capital
appreciation. At times, in connection with the restructuring of a Senior Loan
either outside of bankruptcy court or in the context of bankruptcy court
proceedings, a Portfolio may determine or be required to accept equity
securities or junior debt securities in exchange for all or a portion of a
Senior Loan.
A Portfolio may acquire interests in Senior Loans which are designed to
provide temporary or "bridge" financing to a Borrower pending the sale of
identified assets or the arrangement of longer-term loans or the issuance and
sale of debt obligations. The Portfolio may also invest in Senior Loans of
Borrowers who have obtained bridge loans from other parties. A Borrower's use of
bridge loans involves a risk that the Borrower may be unable to locate permanent
financing to replace the bridge loan, which may impair the Borrower's perceived
creditworthiness.
To the extent that collateral consists of the stock of the Borrower's
subsidiaries or other affiliates, the Portfolio will be subject to the risk that
this stock will decline in value. Such a decline, whether as a result of
bankruptcy proceedings or otherwise, could cause the Senior Loan to be
undercollateralized or unsecured. In most credit agreements there is no formal
requirement to pledge additional collateral. In addition, the Portfolio may
invest in Senior Loans guaranteed by, or fully secured by assets of,
shareholders or owners, even if the Senior Loans are not otherwise
collateralized by assets of the Borrower; provided, however, that such
guarantees are fully secured. There may be temporary periods when the principal
asset held by a Borrower is the stock of a related company, which may not
legally be pledged to secure a Senior Loan. On occasions when such stock cannot
be pledged, the Senior Loan will be temporarily unsecured until the stock can be
pledged or is exchanged for or replaced by other assets, which will be pledged
as security for the Senior Loan. However, the Borrower's ability to dispose of
such securities, other than in connection with such pledge or replacement, will
be strictly limited for the protection of the holders of Senior Loans and,
indirectly, Senior Loans.
If a Borrower becomes involved in bankruptcy proceedings, a court may
invalidate the Portfolio's security interest in the loan collateral or
subordinate the Portfolio's rights under the Senior Loan to the interests of the
Borrower's unsecured creditors. Such action by a court could be based, for
example, on a "fraudulent conveyance" claim to the effect that the Borrower did
not receive fair consideration for granting the security interest in the loan
collateral to the Portfolio. For Senior Loans made in connection with a highly
leveraged transaction, consideration for granting a security interest may be
deemed inadequate if the proceeds of the Loan were not received or retained by
the Borrower, but were instead paid to other persons (such as shareholders of
the Borrower) in an amount which left the Borrower insolvent or without
sufficient working capital. There are also other events, such as the failure to
perfect a security interest due to faulty documentation or faulty official
filings, which could lead to the invalidation of the Portfolio's security
interest in loan collateral. If the Portfolio's security interest in loan
collateral is invalidated or the Senior Loan is subordinated to other debt of a
Borrower in bankruptcy or other proceedings, it is unlikely that the Portfolio
would be able to recover the full amount of the principal and interest due on
the Loan.
A Portfolio may acquire warrants and other equity securities as part of a
unit combining a Senior Loan and equity securities of a Borrower or its
affiliates. The acquisition of such equity securities will only be incidental to
a Portfolio's purchase of a Senior Loan. A Portfolio may also acquire equity
securities issued in exchange for a Senior Loan or issued in connection with the
debt restructuring or reorganization of a Borrower, or if such acquisition, in
the judgment of the investment adviser, may enhance the value of a Senior Loan
or would otherwise be consistent with the Portfolio's investment policies.
REGULATORY CHANGES. To the extent that legislation or state or federal
regulators that regulate certain financial institutions impose additional
requirements or restrictions with respect to the ability of such institutions to
make loans, particularly in connection with highly leveraged transactions, the
availability of Senior Loans for investment may be adversely affected. Further,
such legislation or regulation could depress the market value of Senior Loans.
REPURCHASE AGREEMENTS. The FR Portfolio may enter into repurchase agreements
with member banks of the Federal Reserve System or primary dealers in U.S.
Government securities. Under a repurchase agreement, the Portfolio buys
securities at one price and simultaneously promises to sell back those
securities at a higher price. The Portfolio's repurchase agreements will provide
that the value of the collateral underlying the repurchase agreement will always
be at least equal to the repurchase price, including any accrued interest earned
on the repurchase agreement, and will be marked to market daily. The repurchase
date is usually within seven days of the original purchase date. In all cases,
the investment adviser must be satisfied with the creditworthiness of the other
party to the agreement before entering into a repurchase agreement. In the event
of the bankruptcy of the other party to a repurchase agreement, the Portfolio
might experience delays in recovering its cash. To the extent that, in the
meantime, the value of the securities the Portfolio purchased may have declined,
the Portfolio could experience a loss.
INTEREST RATE SWAPS. The FR Portfolio may enter into interest rate swaps on
either an asset-based or liability-based basis, depending on whether it is
hedging its assets or its liabilities. For example, if the Portfolio holds a
Senior Loan with an interest rate that is reset only once each year, it may swap
the right to receive interest at this fixed rate for the right to receive
interest at a rate that is reset daily. Such a swap position would offset
changes in the value of the Senior Loan because of subsequent changes in
interest rates. This would protect the Portfolio from a decline in the value of
the Senior Loan due to rising interest rates, but would also limit its ability
to benefit from falling interest rates.
The Portfolio will enter into interest rate swaps only on a net basis, i.e.,
the two payment streams are netted out, with the Portfolio receiving or paying,
as the case may be, only the net amount of the two payments. Inasmuch as these
transactions are entered into for good faith hedging purposes and because a
segregated account will be used, the Portfolio will not treat them as being
subject to the Portfolio's borrowing restrictions. The net amount of the excess,
if any, of the Portfolio's obligations over its entitlements with respect to
each interest rate swap will be accrued on a daily basis and an amount of cash
or liquid securities having an aggregate net asset value at least equal to the
accrued excess will be maintained in a segregated account by the Portfolio's
custodian. The Portfolio will not enter into any interest rate swap unless the
credit quality of the unsecured senior debt or the claims-paying ability of the
other party thereto is considered to be investment grade by the investment
adviser. If there is a default by the other party to such a transaction, the
Portfolio will have contractual remedies pursuant to the agreements related to
the transaction. The swap market has grown substantially in recent years with a
large number of banks and investment banking firms acting both as principals and
as agents utilizing standardized swap documentation. As a result, the swap
market has become relatively liquid in comparison with the markets for other
similar instruments which are traded in the interbank market.
The Portfolio may enter into interest rate swaps only with respect to
positions held in its portfolio. Interest rate swaps do not involve the delivery
of securities or other underlying assets or principal. Accordingly, the risk of
loss with respect to interest rate swaps is limited to the net amount of
interest payments that the Portfolio is contractually obligated to make or
receive. Since interest rate swaps are individually negotiated, the Portfolio
expects to achieve an acceptable degree of correlation between its rights to
receive interest on Senior Loans and its rights and obligations to receive and
pay interest pursuant to interest rate swaps.
BOND RATINGS. 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.
CALLS. Certain securities held by a Portfolio may permit the issuer at its
option to "call," or redeem, its securities. If an issuer were to redeem
securities held by a 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 INCOME SECURITIES. Included in the fixed-income securities in which the HI
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 HI Portfolio may invest in higher
rated securities and loan interests. 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.
FR Portfolio may also invest in closed-end investment companies which invest
in floating rate instruments. The value of common shares of closed-end
investment companies, which are generally traded on an exchange, is affected by
the demand for those securities regardless of the demand for the underlying
portfolio assets.
DERIVATIVE INSTRUMENTS. Each Portfolio may purchase or sell derivative
instruments (which are instruments that derive their value from another
instrument, security, index or currency) to seek to hedge against fluctuations
in interest rates, securities prices or currency exchange rates to change the
duration of the Portfolio's 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 a
Portfolio's initial investment in these instruments. In addition, a Portfolio
may lose the entire premium paid for purchased options that expire before they
can be profitably exercised by the Portfolio. A Portfolio incurs transaction
costs in opening and closing positions in derivative instruments. Under
regulations of the Commodity Futures Trading Commission ("CFTC"), 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.
A 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. A 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 a 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.
A 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, a 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. A 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 a 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 a 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 a 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 a Portfolio are
traded on exchanges or boards of trade that are licensed and regulated by the
CFTC. A Portfolio may purchase and write call and put options on futures
contracts which are traded on a U.S. exchange or board of trade.
A 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. A 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. A 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 a 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.
INVESTMENT IN WARRANTS. The HI 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. Each 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 a Portfolio would be permitted to sell.
Thus, a Portfolio may not be able to obtain as favorable a price as that
prevailing at the time of the decision to sell. A 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 HI 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 HI 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.
LENDING OF PORTFOLIO SECURITIES. Each Portfolio may seek to increase its income
by lending portfolio securities to broker-dealers or other institutional
borrowers. Under present regulatory policies of the Securities and Exchange
Commission ("SEC"), such loans are required to be secured continuously by
collateral in cash, cash equivalents or U.S. Government securities held by the
Portfolio's custodian and maintained on a current basis at an amount at least
equal to the market value of the securities loaned, which will be marked to
market daily. Cash equivalents include certificates of deposit, commercial paper
and other short-term money market instruments. A Portfolio would have the right
to call a loan and obtain the securities loaned at any time on up to five
business days' notice. During the existence of a loan, a Portfolio will continue
to receive the equivalent of the interest paid by the issuer on the securities
loaned and will also receive a fee or all of a portion of the interest on
investment of the collateral, if any. However, a Portfolio may pay lending fees
to such borrowers. A Portfolio would not have the right to vote any securities
having voting rights during the existence of a loan, but would call the loan in
anticipation of an important vote to be taken among holders of the securities or
the giving or withholding of their consent on a material matter affecting the
investment. As with other extensions of credit there are risks of delay in
recovery or even loss of rights in the securities loaned if the borrower fails
financially. However, the loans will be made only to organizations deemed by the
investment adviser to be of good standing and when the consideration which can
be earned from securities loans of this type, net of administrative expenses and
any finders fees, justifies the attendant risk. The financial condition of the
borrower will be monitored by the investment adviser on an ongoing basis. If the
investment adviser determines to make securities loans, it is not intended that
the value of the securities loaned would exceed 30% of a Portfolio's total
assets. Securities lending involves risks of delay in recovery or even loss of
rights on the securities loaned if the borrower fails financially. As of the
present time, the Trustees of neither Portfolio have made a determination to
engage in this activity, and have no present intention of making such a
determination during the current fiscal year.
FOREIGN INVESTMENTS. Since foreign companies are not subject to uniform
accounting, auditing and financial reporting standards, practices and
requirements comparable to those applicable to U.S. companies, there may be less
publicly available information about a foreign company than about a domestic
company. Volume and liquidity in most foreign bond markets is less than in the
United States and securities of some foreign companies are less liquid and more
volatile than securities of comparable U.S. companies. There is generally less
government supervision and regulation of securities exchanges, broker-dealers
and listed companies than in the United States. Mail service between the United
States and foreign countries may be slower or less reliable than within the
United States, thus increasing the risk of delayed settlements of portfolio
transactions or loss of certificates for portfolio securities. A Portfolio may
be required to pay for securities before delivery. In addition, with respect to
certain foreign countries, there is the possibility of expropriation or
confiscatory taxation, political or social instability, or diplomatic
developments which could affect a Portfolio's investments in those countries.
Moreover, individual foreign economies may differ favorably or unfavorably from
the U.S. economy in such respects as growth of gross national product, rate of
inflation, capital reinvestment, resource self-sufficiency and balance of
payments position.
ASSET COVERAGE REQUIREMENTS. Transactions involving swaps, forward contracts or
futures contracts and options (other than options that the Portfolio has
purchased) expose a Portfolio to an obligation to another party. A Portfolio
will not enter into any such transactions unless it owns either (1) an
offsetting ("covered") position in securities or other options, forward
contracts or futures contracts, or (2) cash or liquid securities (such as
readily marketable obligations and money market instruments) with a value
sufficient at all times to cover its potential obligations not covered as
provided in (1) above. (Only the net obligation of a swap will be covered). The
Portfolio will comply with SEC guidelines regarding cover for these instruments
and, if the guidelines so require, set aside cash, U.S. Government securities or
other 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 a Portfolio's assets
to segregated accounts or to cover could impede portfolio management or the
Portfolio's ability to meet redemption requests or other current obligations.
INVESTMENT RESTRICTIONS
The following investment restrictions of the Fund are designated as
fundamental policies and as such cannot be changed without the approval of the
holders of a majority of the Fund's outstanding voting securities, which as used
in this SAI means the lesser of (a) 67% of the shares of the Fund present or
represented by proxy at a meeting if the holders of more than 50% of the
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) Purchase any security if, as a result of such purchase, 25% or more of
the Fund's total assets (taken at current value) would be invested in the
securities of Borrowers and other issuers having their principal business
activities in the same industry (the electric, gas, water and telephone utility
industries, commercial banks, thrift institutions and finance companies being
treated as separate industries for the purpose of this restriction); 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;
(2) Borrow money or issue senior securities except as permitted by the 1940
Act;
(3) Purchase securities on margin (but the Fund may obtain such short-term
credits as may be necessary for the clearance of purchases and sales of
securities). The deposit or payment by the Fund of initial, maintenance or
variation margin in connection with all types of options and futures contract
transactions is not considered the purchase of a security on margin;
(4) Underwrite or participate in the marketing of securities of others,
except insofar as it may technically be deemed to be an underwriter in selling a
portfolio security under circumstances which may require the registration of the
same under the Securities Act of 1933;
(5) Purchase or sell real estate, although it may purchase and sell
securities which are secured by real estate and securities of companies which
invest or deal in real estate;
(6) Purchase or sell physical commodities or futures contracts for the
purchase or sale of physical commodities; or
(7) Make loans to any person, except by (a) the acquisition of debt
instruments and making portfolio investments, (b) entering into repurchase
agreements, (c) lending portfolio securities and (d) lending cash consistent
with applicable law.
For the purpose of investment restriction (1), the Fund will consider all
relevant factors in determining who is the issuer of the loan interest,
including: the credit quality of the Borrower, the amount and quality of the
collateral, the terms of the Loan Agreement and other relevant agreements
(including inter-creditor agreements), the degree to which the credit of such
interpositioned person was deemed material to the decision to purchase the loan
interest, the interest rate environment, and general economic conditions
applicable to the Borrower and such interpositioned person.
Notwithstanding the investment policies and restrictions of the Fund, the
Fund may invest in two or more open-end management investment companies (a
Portfolio) which together have substantially the same investment objective,
policies and restrictions as the Fund.
The Portfolios have adopted the same fundamental investment restrictions as
the foregoing investment restrictions adopted by the Fund, which restrictions
cannot be changed without the approval of a "majority of the outstanding voting
securities" of the Portfolio, except in lieu of restriction (1) HI Portfolio may
not:
(8) With respect to 75% of total assets of the Portfolio, purchase any
security if such purchase, at the time thereof, would cause more than 5% of the
total assets of the Portfolio (taken at market value) to be invested in the
securities of a single issuer, or cause more than 10% of the total outstanding
voting securities of such issuer to be held by the Portfolio, except obligations
issued or guaranteed by the U.S. Government, its agencies or instrumentalities
and except securities of other investment companies; or
(9) Purchase any security if such purchase, at the time thereof, would cause
25% or more of the Portfolio'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.
The Fund and the Portfolios have adopted the following investment policies
which may be changed by the Trustees with respect to the Fund without
shareholder approval or with respect to a Portfolio without approval by the Fund
or its other investors. The Fund and Portfolio will not:
(a) invest more than 15% of net assets in investments which are not readily
marketable, including restricted securities and repurchase agreements with a
maturity longer than seven days. Restricted securities for the purposes of this
limitation do not include securities eligible for resale pursuant to Rule 144A
under the Securities Act of 1933 and commercial paper issued pursuant to Section
4(2) of said Act that the Board of Trustees of the Trust or the Portfolio, or
their delegate, determines to be liquid. Any such determination by a delegate
will be made pursuant to procedures adopted by the Board; 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, without payment of
any further consideration, for securities of the same issue as, and equal in
amount to, the securities sold short, and unless no more than 25% of its net
assets (taken at current value) is held as collateral for such sales at any one
time.
For as long as a feeder fund of the HI 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 a Portfolio's acquisition of
such security or asset. Notwithstanding the foregoing, the Fund and each
Portfolio must always be in compliance with the borrowing policy set forth above
and may not invest more than 15% of net assets in illiquid securities.
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 (40), 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). Formerly 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, New York 10019
DONALD R. DWIGHT (69), 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 (58), 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 (65), Trustee
Jacob H. Schiff Professor of Investment Banking Emeritus, Harvard University
Graduate School of Business Administration. Trustee of the Kobrick 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 (64), Trustee
Chairman of the Board, 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 (42), 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 (70), 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. (41), 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 (57), Vice President of the Trust
Vice President of BMR and Eaton Vance. Officer of various investment companies
managed by Eaton Vance or BMR.
ARMIN J. LANG (36), Vice President of the Trust
Vice President of Eaton Vance and BMR since March 1998. Previously he was a Vice
President at Standish, Ayer & Wood.
MICHAEL R. MACH (52), Vice President of the Trust
Vice President of Eaton Vance and BMR since December 15, 1999. Previously, he
was a Managing Director and Senior Analyst for Robertson Stephens (1998-1999);
Managing Director and Senior Analyst for Piper Jaffray (1996-1998); and Senior
Vice President and Senior Analyst for Putnam Investments (1989-1996). Officer
of various investment companies managed by Eaton Vance or BMR.
ROBERT B. MACINTOSH (43), Vice President of the Trust
Vice President of BMR and Eaton Vance. Officer of various investment companies
managed by Eaton Vance or BMR.
EDWARD E. SMILEY, JR. (55), Vice President of the Trust
Vice President of Eaton Vance and BMR since November 1996. Previously he was a
Senior Vice President at Nationsbank. Officer of various investment companies
managed by Eaton Vance or BMR.
SCOTT H. PAGE (40), Vice President of the Portfolio
Vice President of BMR and Eaton Vance. Officer of various investment companies
managed by Eaton Vance or BMR.
PAYSON F. SWAFFIELD (44), Vice President of the Portfolio
Vice President of BMR and Eaton Vance. Officer of various investment companies
managed by Eaton Vance or BMR.
JAMES L. O'CONNOR (55), Treasurer
Vice President of BMR and Eaton Vance. Officer of various investment companies
managed by Eaton Vance or BMR.
ALAN R. DYNNER (59), Secretary
Vice President, Secretary and Chief Legal Officer of BMR, Eaton Vance and EVC.
Prior to joining Eaton Vance on November 1, 1996, 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 (64), 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 (37), Assistant Secretary
Vice President of BMR and Eaton Vance. Officer of various investment companies
managed by Eaton Vance or BMR.
ERIC G. WOODBURY (43), Assistant Secretary
Vice President of BMR and Eaton Vance. Officer of various investment companies
managed by Eaton Vance or BMR.
The Nominating Committee of the Board of Trustees of the Trust and the
Portfolio is comprised of Trustees who are not "interested persons" as that term
is defined under 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
and fund accounting and distribution services, and (ii) all other matters in
which Eaton Vance or its affiliates has any actual or potential conflict of
interest with the Fund, the Portfolio or investors therein.
Messrs. Treynor (Chairman), Dwight and Reamer 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 and performance of the independent accountants, and reviewing
matters relative to accounting and auditing practices and procedures, accounting
records, and the internal accounting controls of the Trust, the Portfolio and
certain of their service providers.
Trustees of the Portfolio who are not affiliated with the investment adviser
may elect to defer receipt of all or a percentage of their annual fees in
accordance with the terms of a Trustees Deferred Compensation Plan (the
"Trustees" Plan"). Under the Trustees' Plan, an eligible Trustee may elect to
have his deferred fees invested by the Portfolio in the shares of one or more
funds in the Eaton Vance Family of Funds, and the amount paid to the Trustees
under the Trustees' Plan will be determined based upon the performance of such
investments. Deferral of Trustees' fees in accordance with the Trustees' Plan
will have a negligible effect on the Portfolio's assets, liabilities, and net
income per share, and will not obligate the Portfolio to retain the services of
any Trustee or obligate the Portfolio to pay any particular level of
compensation to the Trustee. Neither the Trust nor the Portfolio has a
retirement plan for its Trustees.
The fees and expenses of the noninterested Trustees of the Trust and of the
Portfolio are paid by the Fund (and the other series of the Trust) and of the
Portfolio, respectively. (The Trustees of the Trust and of the Portfolio who are
members of the Eaton Vance organization receive no compensation from the Trust
or the Portfolio.) During the fiscal year ending October 31, 2000, it is
estimated that the noninterested Trustees of the Portfolio will earn the
following compensation in their capacities as Trustees of the Portfolio and, for
the year ended December 31, 1999, earned the following compensation in their
capacities as Trustees of the Trust and of the funds in the Eaton Vance fund
complex(1):
<TABLE>
<CAPTION>
SOURCE OF JESSICA M. DONALD R. SAMUEL L. NORTON H. LYNN A. JACK L.
COMPENSATION BIBLIOWICZ DWIGHT HAYES, III REAMER STOUT TREYNOR
------------ ---------- --------- ---------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Trust(2) ..................... $ 8,968 $ 8,508 $ 9,043 $ 8,575 $ 8,420 $ 9,365
Portfolio* ................... 29 29 29 29 29 29
Trust and Fund Complex ....... 160,000 160,000(3) 170,000 160,000 160,000(4) 170,000
------------
*Estimated.
(1) As of June 1, 2000, the Eaton Vance Fund complex consists of 146 registered investment companies or series thereof.
(2) The Trust consisted of 16 Funds as of December 31, 1999.
(3) Includes $60,000 of deferred compensation.
(4) Includes $16,000 of deferred compensation.
</TABLE>
ORGANIZATION. The Fund is a series of the Trust, which is organized under
Massachusetts law and is operated as an open-end management investment company.
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 Portfolios, as well as the advantages
and disadvantages of the two-tier format. The Trustees believe that the
structure offers opportunities for growth in the assets of the Portfolios, may
afford the potential for economies of scale for the Fund 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 communication
with shareholders 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 of 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 shall be sufficient authorization; or
(2) by means of an instrument in writing signed by a majority of the Trustees,
to be followed by a written notice to shareholders stating that a majority of
the Trustees has determined that the continuation of the Trust or a series or a
class thereof is not in the best interest of the Trust, such series or class or
of their respective shareholders.
Under Massachusetts law, if certain conditions prevail, shareholders of a
Massachusetts business trust (such as the Trust) could be deemed to have
personal liability for the obligations of the Trust. Numerous investment
companies registered under the 1940 Act have been formed as Massachusetts
business trusts, and management is not aware of an instance where such liability
has been imposed. The Trust's Declaration of Trust contains an express
disclaimer of liability on the part of the Fund shareholders and the Trust's
By-laws provide that the Trust shall assume the defense on behalf of any Fund
shareholders. (The Declaration of Trust also contains provisions limiting the
liability of a series or class to that series or class). Moreover, the Trust's
By-laws also provide for indemnification out of the property of the Fund of any
shareholder held personally liable solely by reason of being or having been a
shareholder for all loss or expense arising from such liability. The assets of
the Fund are readily marketable and will ordinarily substantially exceed its
liabilities. In light of the nature of the Fund's business and the nature of its
assets, management believes that the possibility of the Fund's liability
exceeding its assets, and therefore the shareholder's risk of personal
liability, is remote.
Each 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 each Portfolio, there will normally
be no meetings of the investors for the purpose of electing Trustees unless and
until such time as less than a majority of the Trustees of the Portfolio holding
office have been elected by investors. In such an event the Trustees of that
Portfolio then in office will call an investors' meeting for the election of
Trustees. Except for the foregoing circumstances and unless removed by action of
the investors in accordance with a Portfolio's Declaration of Trust, the
Trustees shall continue to hold office and may appoint successor Trustees.
The Declaration of Trust of each Portfolio provides that no person shall
serve as a Trustee if investors holding two-thirds of the outstanding interest
have removed him from that office either by a written declaration filed with the
Portfolio's custodian or by votes cast at a meeting called for that purpose. The
Declaration of Trust further provides that under certain circumstances the
investors may call a meeting to remove a Trustee and that the Portfolio is
required to provide assistance in communicating with investors about such a
meeting.
Each 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 Portfolios.
Whenever the Fund as an investor in a Portfolio is requested to vote on
matters pertaining to the Portfolio (other than the termination of the
Portfolio's business, which may be determined by the Trustees of the Portfolio
without investor approval), the Fund will hold a meeting of Fund shareholders
and will vote its interest in the Portfolio for or against such matters
proportionately to the instructions to vote for or against such matters received
from Fund shareholders. The Fund shall vote shares for which it receives no
voting instructions in the same proportion as the shares for which it receives
voting instructions. Other investors in a Portfolio may alone or collectively
acquire sufficient voting interests in the Portfolio to control matters relating
to the operation of the Portfolio, which may require the Fund to withdraw its
investment in the Portfolio or take other appropriate action. Any such
withdrawal could result in a distribution "in kind" of portfolio securities (as
opposed to a cash distribution from 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 a 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 a 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 a Portfolio.
The noninterested Trustees of HI Portfolio are the same persons as those of
the FR Portfolio and James B. Hawkes is the only additional Trustee. The
Committee structure and Trustee compensation policies of HI Portfolio and FR
Portfolio are identical.
INVESTMENT ADVISORY AND ADMINISTRATIVE SERVICES
INVESTMENT ADVISORY SERVICES. BMR manages the investments and affairs of each
Portfolio subject to the supervision of each Portfolio's Board of Trustees. BMR
furnishes to each 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
for each Portfolio requires BMR to pay the salaries and fees of all officers and
Trustees of the Portfolio who are members of the BMR organization and all
personnel of BMR performing services relating to research and investment
activities.
The investment advisory agreement of each Portfolio with BMR is
substantially the same. With respect to assets of the Fund invested in a
Portfolio, BMR's monthly fee is equal to the aggregate of
(a) a daily asset based fee computed by applying the annual asset rate
applicable to that portion of the total daily net assets in each
Category as indicated below, plus
(b) a daily income based fee computed by applying the daily income rate
applicable to that portion of the total daily gross income (which
portion shall bear the same relationship to the total daily gross income
on such day as that portion of the total daily net assets in the same
Category bears to the total daily net assets on such day) in each
Category as indicated below:
ANNUAL DAILY
CATEGORY DAILY NET ASSETS ASSET RATE INCOME RATE
---------------------------------------------------------------------------
1 up to $500 million 0.300% 3.00%
2 $500 million but less than $1 billion 0.275% 2.75%
3 $1 billion but less than $1.5 billion 0.250% 2.50%
4 $1.5 billion but less than $2 billion 0.225% 2.25%
5 $2 billion but less than $3 billion 0.200% 2.00%
6 $3 billion and over 0.175% 1.75%
For the fiscal years ended March 31, 2000, 1999 and 1998, HI Portfolio advisory
fees equaled 0.60%, 0.61% and 0.58%, respectively, of average daily net assets.
Each 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. An Agreement may be terminated
at any time without penalty on sixty 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. Each Agreement provides that BMR may render
services to others. Each 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, and the Fund is authorized to pay Eaton Vance a fee
in the amount of 0.15% of average daily net assets 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, John G.L. Cabot, Leo I.
Higdon, Jr., 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 Mr. Hawkes, Jeffrey P. Beale, Alan R. Dynner,
Thomas E. Faust, Jr., Thomas J. Fetter, Scott H. Page, Duncan W. Richardson,
William M. Steul, Payson F. Swaffield, Michael W. Weilheimer, 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 Portfolios are 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 or Service Plan applicable to
that class and the fee paid to the principal underwriter for handling share
repurchases.
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 A and Class I shares is
renewable annually by the Board of Trustees of the Trust (including a majority
of the noninterested Trustees) may be terminated on six months' notice by either
party and is automatically terminated upon assignment. The 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 Portfolios. IBT has the custody of
all cash and securities representing the Fund's interest in each Portfolio, has
custody of the Portfolios' assets, maintains the general ledger of the
Portfolios and the Fund and computes the daily net asset value of interests in
the Portfolios and the net asset value of shares of the Fund. In such capacity
it attends to details in connection with the sale, exchange, substitution,
transfer or other dealings with each Portfolio's investments, receives and
disburses all funds and performs various other ministerial duties upon receipt
of proper instructions from the Trust and the Portfolios. IBT also provides
services in connection with the preparation of shareholder reports and the
electronic filing of such reports with the 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 Portfolios and such
banks.
INDEPENDENT ACCOUNTANTS. Deloitte & Touche LLP, 200 Berkeley Street, Boston, MA
02116, are the independent accountants of the Fund and each Portfolio, providing
audit services, tax return preparation, and assistance and consultation with
respect to the preparation of filings with the SEC.
TRANSFER AGENT. PFPC, Inc., P.O. Box 9653, Providence, RI 02904-9653, serves
as transfer and dividend disbursing agent for the Fund.
PURCHASING AND REDEEMING SHARES
CALCULATION OF NET ASSET VALUE. The net asset value of each 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
each 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.
Each investor in the Portfolio, including the Fund, may add to or reduce its
investment in the Portfolio on each day the New York Stock Exchange (the
"Exchange") is open for trading ("Portfolio Business Day") as of the close of
regular trading on the Exchange (the "Portfolio Valuation Time"). The value of
each investor's interest in a Portfolio will be determined by multiplying the
net asset value of the Portfolio by the percentage, determined on the prior
Portfolio Business Day, which represented that investor's share of the aggregate
interests in the Portfolio on such prior day. Any additions or withdrawals for
the current Portfolio Business Day will then be recorded. Each investor's
percentage of the aggregate interest in a Portfolio will then be recomputed as a
percentage equal to a fraction (i) the numerator of which is the value of such
investor's investment in the Portfolio as of the Portfolio Valuation Time on the
prior Portfolio Business Day plus or minus, as the case may be, the amount of
any additions to or withdrawals from the investor's investment in the Portfolio
on the current Portfolio Business Day and (ii) the denominator of which is the
aggregate net asset value of the Portfolio as of the Portfolio Valuation Time on
the prior Portfolio Business Day plus or minus, as the case may be, the amount
of the net additions to or withdrawals from the aggregate investment in the
Portfolio on the current Portfolio Business Day by all investors in the
Portfolio. The percentage so determined will then be applied to determine the
value of the investor's interest in that Portfolio for the current Portfolio
Business Day.
Debt obligations (other than short-term obligations maturing in sixty days
or less), including listed securities and securities for which price quotations
are available and forward contracts, will normally be valued on the basis of
market valuations furnished by dealers or pricing services. Financial futures
contracts listed on commodity exchanges and exchange-traded options are valued
at closing settlement prices. Over-the-counter options are valued at the mean
between the bid and asked prices provided by dealers. Short-term obligations and
money market securities maturing in sixty days or less are valued at amortized
cost which approximates value. Investments for which market quotations are
unavailable are valued at fair value using methods determined in good faith by
or at the direction of the Trustees of a Portfolio. Occasionally, events
affecting the value of a foreign security may occur between the time trading is
completed abroad and the close of the Exchange will not be reflected in the
computation of a Portfolio's net asset value (unless the Portfolio deems that
such event would materially affect its net asset value in which case an
adjustment would be made).
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, plus, in the case of Class A shares, a variable
percentage (sales charge) depending upon the amount of purchase as indicated by
the sales charge table set forth in the prospectus. The sales charge is divided
between the principal underwriter and the investment dealer. The sales charge
table is applicable to purchases of the Fund alone or in combination with
purchases of certain other funds offered by the principal underwriter, made at a
single time by (i) an individual, or an individual, his spouse and their
children under the age of twenty-one, purchasing shares for his or their own
account, and (ii) a trustee or other fiduciary purchasing shares for a single
trust estate or a single fiduciary account. The table is also presently
applicable to (1) purchases of Class A shares pursuant to a written Statement of
Intention; or (2) purchases of Class A shares pursuant to the Right of
Accumulation and declared as such at the time of purchase. See "Sales Charges".
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 decribed 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.
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.
ACQUIRING FUND SHARES IN EXCHANGE FOR SECURITIES. IBT, as escrow agent, will
receive securities acceptable to Eaton Vance, as administrator, in exchange for
Fund shares. The minimum value of securities (or securities and cash) accepted
for deposit is $5,000. Securities accepted will be sold on the day of their
receipt or as soon thereafter as possible. The number of Fund shares to be
issued in exchange for securities will be the aggregate proceeds from the sale
of such securities, divided by the applicable public offering price of Class A
shares or 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 a 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 a
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. The principal underwriter
may allow, upon notice to all investment dealers with whom it has agreements,
discounts up to the full sales charge during the periods specified in the
notice. During periods when the discount includes the full sales charge, such
investment dealers may be deemed to be underwriters as that term is defined in
the Securities Act of 1933.
SALES CHARGE WAIVERS. Class A shares and Class I shares may be sold at net asset
value to current and retired Directors and Trustees of Eaton Vance funds,
including the Portfolios; to clients and current and retired officers and
employees of Eaton Vance, its affiliates and other investment advisers of Eaton
Vance sponsored funds; to officers and employees of IBT and the transfer agent;
to persons associated with law firms, consulting firms and others providing
services to Eaton Vance and the Eaton Vance funds; and to such persons' spouses,
parents, siblings and children and their beneficial accounts. Such shares may
also be issued at net asset value (1) in connection with the merger of an
investment company (or series or class thereof) with the Fund (or class
thereof), (2) to investors making an investment as part of a fixed fee program
whereby an entity unaffiliated with the investment adviser provides multiple
investment services, such as management, brokerage and custody, and (3) to
investment advisors, financial planners or other intermediaries who place trades
for their own accounts or the accounts of their clients and who charge a
management, consulting or other fee for their services; clients of such
investment advisors, financial planners or other intermediaries who place trades
for their own accounts if the accounts are linked to the master account of such
investment advisor, financial planner or other intermediary on the books and
records of the broker or agent. Class A shares may also be sold at net asset
value to retirement and deferred compensation plans and trusts used to fund
those plans, including, but not limited to, those defined in Section 401(a),
403(b) or 457 of the Internal Revenue Code of 1986, as amended (the "Code") and
"rabbi trusts". Class A shares and Class I shares may be sold at net asset value
to any investment advisory, agency, custodial or trust account managed or
administered by Eaton Vance or by any parent, subsidiary or other affiliate of
Eaton Vance. Class A shares are offered at net asset value to the foregoing
persons and in the foregoing situations because either (i) there is no sales
effort involved in the sale of shares or (ii) the investor is paying a fee
(other than the sales charge) to the investment dealer involved in the sale.
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.
All CDSC waivers are prospective only.
STATEMENT OF INTENTION. If it is anticipated that $25,000 or more of Class A
shares and shares of other funds exchangeable for Class A shares of another
Eaton Vance fund will be purchased within a 13-month period, the Statement of
Intention section of the account application should be completed so that shares
may be obtained at the same reduced sales charge as though the total quantity
were invested in one lump sum. Shares held under Right of Accumulation (see
below) as of the date of the Statement will be included toward the completion of
the Statement. If you make a Statement of Intention, the transfer agent is
authorized to hold in escrow sufficient shares (5% of the dollar amount
specified in the Statement) which can be redeemed to make up any difference in
sales charge on the amount intended to be invested and the amount actually
invested. A Statement of Intention does not obligate the shareholder to purchase
or the Fund to sell the full amount indicated in the Statement.
If the amount actually purchased during the 13-month period is less than
that indicated in the Statement, the shareholder will be requested to pay the
difference between the sales charge applicable to the shares purchased and the
sales charge paid under the Statement of Intention. If the payment is not
received in 20 days, the appropriate number of escrowed shares will be redeemed
in order to realize such difference. If the total purchases during the 13-month
period are large enough to qualify for a lower sales charge than that applicable
to the amount specified in the Statement, all transactions will be computed at
the expiration date of the Statement to give effect to the lower sales charge.
Any difference will be refunded to the shareholder in cash or applied to the
purchase of additional shares, as specified by the shareholder. This refund will
be made by the investment dealer and the principal underwriter. If at the time
of the recomputation, the investment dealer for the account has changed, the
adjustment will be made only on those shares purchased through the current
investment dealer for the account.
RIGHT OF ACCUMULATION. The applicable sales charge level for the purchase of
Class A shares is calculated by taking the dollar amount of the current purchase
and adding it to the value (calculated at the maximum current offering price) of
the Class A shares the shareholder owns in his or her account(s) in the Fund,
and shares of other funds exchangeable for Class A shares. The sales charge on
the shares being purchased will then be at the rate applicable to the aggregate.
Shares purchased (i) by an individual, his or her spouse and their children
under the age of twenty-one, and (ii) by a trustee, guardian or other fiduciary
of a single trust estate or a single fiduciary account, will be combined for the
purpose of determining whether a purchase will qualify for the Right of
Accumulation and if qualifying, the applicable sales charge level. For any such
discount to be made available, at the time of purchase a purchaser or his or her
investment dealer must provide the principal underwriter (in the case of a
purchase made through an investment dealer) or the transfer agent (in the case
of an investment made by mail) with sufficient information to permit
verification that the purchase order qualifies for the accumulation privilege.
Confirmation of the order is subject to such verification. The Right of
Accumulation privilege may be amended or terminated at any time as to purchases
occurring thereafter.
CONVERSION FEATURE. Class B shares held for eight years (the "holding period")
will automatically convert to Class A shares. For purposes of this conversion,
all distributions paid on Class B shares which the shareholder elects to
reinvest in Class B shares will be considered to be held in a separate
sub-account. Upon the conversion of Class B shares not acquired through the
reinvestment of distributions, a pro rata portion of the Class B shares held in
the sub-account will also convert to Class A shares. This portion will be
determined by the ratio that the Class B shares being converted bear to the
total of Class B shares (excluding shares acquired through reinvestment) in the
account. This conversion feature is subject to the continuing availability of a
ruling from the Internal Revenue Service or an opinion of counsel that the
conversion is not taxable for federal income tax purposes.
EXCHANGE PRIVILEGE. In addition to exchanges into the same class of another
Eaton Vance fund, Class B shares may be exchanged for shares of a money market
fund sponsored by an investment dealer and approved by the principal underwriter
(an "investment dealer fund"). For purposes of calculating the CDSC applicable
to investment dealer fund shares acquired in an exchange, the CDSC schedule
applicable to the exchanged shares will apply and the purchase of investment
dealer fund shares is deemed to have occurred at the time of the original
purchase of the exchanged shares, except that the time during which a
shareholder holds such investment dealer fund shares will not be credited toward
completion of the CDSC period.
TAX-SHELTERED RETIREMENT PLANS. Class A and 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.
DISTRIBUTION AND SERVICE PLANS. The Trust has in effect a Service Plan (the
"Class A Plan") for the Fund's Class A shares that is designed to meet the
service fee requirements of the sales charge rule of the National Association of
Securities Dealers, Inc. (the "NASD"). (Management believes service fee payments
are not distribution expenses governed by Rule 12b-1 under the 1940 Act, but has
chosen to have the Plan approved as if that Rule were applicable.) The Class A
Plan provides that the Class A may make service fee payments for personal
services and/or the maintenance of shareholder accounts to the principal
underwriter, investment dealers and other persons in amounts not exceeding .25%
of its average daily net assets for any fiscal year.
The Trust also has in effect 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 that permit compensation to be made to the
principal underwriter to the maximum extent permitted by the NASD sales charge
rule. 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. 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.
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 .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.
For Class C, investment dealers currently receive (a) a service fee (except on
exchange transactions and reinvestments) at the time of sale equal to .25% of
the purchase price of the Class C shares sold by such dealer, and (b) monthly
service fees approximately equivalent to 1/12 of .25% of the value of Class C
shares sold by such dealer. 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.
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 A, 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 Plans were initially approved by the Trustees, including the
Plan Trustees, on June 19, 2000. The Trustees of the Trust who are "interested"
persons of the Fund have an indirect financial interest in the Plans because
their employers (or affiliates thereof) receive distribution and/or service fees
under the Plans or agreements related thereto.
The Trustees of the Trust believe that each Plan will be a significant
factor in the expected growth of the Fund's assets, and will result in increased
investment flexibility and advantages which have 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)
the deduction of the maximum sales charge from the initial $1,000 purchase order
for Class A shares, (iii) a complete redemption of the investment and, (iv) the
deduction of any CDSC at the end of the period. 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.
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 (including the
maximum initial sales charge for Class A shares) per share on the last day of
the period and annualizing the resulting figure. Net investment income per share
is calculated from the yields to maturity of all debt obligations held by a
Portfolio based on prescribed methods, reduced by accrued Fund and Class
expenses for the period with the resulting number being divided by the average
daily number of Class shares outstanding and entitled to receive distributions
during the period. This yield figure does not reflect the deduction of any CDSCs
which (if applicable) are imposed upon certain redemptions at the rates set
forth under "Sales Charges" in the prospectus. Yield calculations assume the
current maximum initial sales charge for Class A shares set forth under "Sales
Charges" in the prospectus. (Actual yield may be affected by variations in sales
charges on investments).
The Fund may also publish total return figures for each Class which do not
take into account any sales charge. Any performance figure which does not take
into account a sales charge would be reduced to the extent such charge is
imposed. The Fund's performance may be compared in publications to the
performance of various indices and investments for which reliable data is
available, and to averages, performance rankings, or other information prepared
by recognized mutual fund statistical services. The Fund's performance may
differ from that of other investors in a Portfolio, including other investment
companies.
The Fund's total return may be compared to various domestic, international
and global securities indices, such as the Commodity Research Bureau Futures
Price Index. The Fund's yield may also be compared to the yields of other
fixed-income securities, such as U.S. Treasuries, mortgage-backed securities,
and corporate bonds or other securities comparable to the securities held by a
Portfolio as reported by various independent sources (such as Bloomberg L.P.).
In making such comparisons, the Fund may provide information concerning the
nature of such indices or securities. This information may be used in
advertisements and in information furnished to present or prospective
shareholders. The Fund's performance may differ from that of other investors in
the Portfolio, including other investment companies.
Evaluations of the Fund's performance (including ratings and rankings) made
by independent sources, may be used in advertisements and in information
furnished to present or prospective shareholders. In addition, information
showing the effects of compounding interest may be included in advertisements
and other material furnished to present and prospective shareholders.
Compounding is the process of earning interest on principal plus interest that
was earned earlier. Interest can be compounded annually, semi-annually,
quarterly or daily. Examples of compounding will be used for illustration
purposes only.
Information used in advertisements and in materials provided to present and
prospective shareholders may include descriptions of Eaton Vance and other Fund
service providers, their investment styles, other investment products, personnel
and Fund didstribution 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 equity
securities. Such information may describe: the potential for growth; the
performance of equities as compared to other investment vehicles; and the value
of investing as early as possible and regularly, as well as staying invested.
The benefits of investing in equity securities by means of a mutual fund may
also be included (such benefits may include diversification, professional
management and the variety of equity mutual fund products).
Information in advertisements and materials furnished to present and
prospective investors may include profiles of different types of investors
(i.e., investors with different goals and assets) and different investment
strategies for meeting specific financial goals. Such information may provide
hypothetical illustrations which include: results of various investment
strategies; performance of an investment in the Fund over various time periods;
and results of diversifying assets among several investments with varying
performance. Information in advertisements and materials furnished to present
and prospective investors may also include quotations (including editorial
comments) and statistics concerning investing in securities, as well as
investing in particular types of securities and the performance of such
securities.
The Trust (or principal underwriter) may provide information about Eaton
Vance, its affiliates and other investment advisers to the funds in the Eaton
Vance Family of Funds in sales material or advertisements provided to investors
or prospective investors. Such material or advertisements may also provide
information on the use of investment professionals by such investors.
CONTROL PERSONS
As of the date hereof, Eaton Vance owned one share of each Class of the
Fund, being the only shares of the Fund outstanding on such date.
TAXES
Each series of the Trust is treated as a separate entity for federal income
tax purposes. The Fund has elected to be treated and intends to qualify each
year, as a RIC under the Code. Accordingly, the Fund intends to satisfy certain
requirements relating to sources of its income and diversification of its assets
and to distribute substantially all of its net investment ordinary income and
net income in accordance with the timing requirements imposed by the Code, so as
to maintain its RIC status and avoid paying any federal income or excise tax.
Because the Fund invests substantially all of its assets in the Portfolios, the
Portfolios normally must satisfy the applicable source of income and
diversification requirements in order for the Fund to also satisfy these
requirements. Each Portfolio will allocate at least annually among its
investors, including the Fund, each investor's distributive share of the
Portfolio's net taxable and tax-exempt (if any) investment income, net realized
capital gains, and any other items of income, gain, loss, deduction or credit.
For purposes of applying the requirements of the Code regarding qualification as
a RIC, the Fund (i) will be deemed to own its proportionate share of each of the
assets of a Portfolio and (ii) will be entitled to the gross income of a
Portfolio attributable to such share.
In order to avoid incurring a federal excise tax obligation, the Code
requires that the Fund distribute (or be deemed to have distributed) by December
31 of each calendar year at least 98% of its ordinary income for such year, at
least 98% of its capital gain net income (which is the excess of its realized
capital gains over its realized capital losses), generally computed on the basis
of the one-year period ending on October 31 of such year, after reduction by (i)
any available capital loss carryforwards, and (ii) 100% of any income from the
prior year (as previously computed) that was not paid out during such year and
on which the Fund paid no federal income tax. Under current law, provided that
the Fund qualifies as a RIC and the Portfolios are treated as partnerships for
Massachusetts and federal tax purposes, neither the Fund nor a Portfolio should
be liable for any income, corporate excise or franchise tax in the Commonwealth
of Massachusetts.
The federal income tax rules governing the taxation of interest rate swaps
may require the Fund to treat certain payments received by the FR Portfolio
under such arrangements as ordinary income and to amortize such payments under
certain circumstances. The FR Portfolio will limit its activity in this regard
if necessary in order to enable the Fund to maintain its qualification as a RIC.
Certain investments of a Portfolio may bear original issue discount or
market discount for tax purposes. The Fund will be required to include in income
each year a portion of such original issue discount and may elect to include in
income each year a portion of such market discount. A Portfolio may have to
dispose of investments that it would otherwise have continued to hold to provide
cash to enable the Fund to satisfy its distribution requirements with respect to
such income.
Distributions made by the Fund, if any, that are derived from dividends
received by a 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 HI 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 a Portfolio and, hence, for the Fund to the extent that the issuers
of these securities default on their obligations pertaining thereto. The Code is
not entirely clear regarding the federal income tax consequences of the
Portfolio's taking certain positions in connection with ownership of such
distressed securites. For example, the Code is unclear regarding: (i) when a
Portfolio may cease to accrue interest, original issue discount, or market
discount; (ii) when and to what extent deductions may be taken for bad debts or
worthless securities; (iii) how payments received on obligations in default
should be allocated between principal and income; and (iv) whether exchanges of
debt obligations in a workout context are taxable.
Distributions of the excess of net long-term capital gain over net
short-term capital loss (including any capital losses carried forward from prior
years) earned by a Portfolio and allocated to the Fund are taxable to
shareholders of the Fund as long-term capital gains (generally at a 20% rate for
noncorporate shareholders), whether received in cash or in additional shares and
regardless of the length of time their shares have been held. Distributions of
net income and net short-term capital gains are taxable to shareholders as
ordinary income. Certain distributions declared in October, November or December
and paid the following January will be taxed to shareholders as if received on
December 31 of the year in which they are declared.
Redemptions and exchanges of the Fund's shares are taxable events and,
accordingly, shareholders may realize gain or loss on these transactions. In
general, any gain realized upon a taxable disposition of shares will be treated
as long-term capital gain if the shares have been held for more than one year.
Otherwise, the gain on the sale, exchange or redemption of Fund shares will be
treated as short-term capital gain.
Any loss realized upon the sale or exchange of shares of the Fund with a tax
holding period of 6 months or less will be treated as a long-term capital loss
to the extent of any distribution of net long-term capital gains with respect to
such shares. In addition, all or a portion of a loss realized on a redemption or
other disposition of Fund shares may be disallowed under "wash sale" rules if
other Fund shares are acquired (whether through reinvestment of dividends or
otherwise) within a period beginning 30 days before and ending 30 days after the
date of such redemption or other disposition. Any disallowed loss will result in
an adjustment to the shareholder's tax basis in some or all of the other shares
acquired.
Special tax rules apply to Individual Retirement Accounts ("IRAs") and other
retirement plans, and persons investing through such plans should consult their
tax advisers for more information. The deductibility of contributions to IRAs
may be restricted or eliminated for particular shareholders. Amounts paid by the
Fund to individuals and certain other shareholders who have not provided the
Fund with their correct taxpayer identification number ("TIN") and certain
certifications required by the Internal Revenue Service (the "IRS"), as well as
shareholders with respect to whom the Fund has received certain information from
the IRS or a broker, may be subject to "backup" withholding of federal income
tax arising from the Fund's taxable dividends and other distributions as well as
the proceeds of redemption transactions (including repurchases and exchanges),
at a rate of 31%. An individual's TIN is generally his or her social security
number.
The foregoing discussion does not address the special tax rules applicable
to certain classes of investors, such as IRAs and other retirement plans,
tax-exempt entities, insurance companies and financial institutions.
Shareholders should consult their own tax advisers with respect to special tax
rules that may apply in their particular situations, as well as the state, local
and, where applicable, foreign tax consequences of investing in the Fund.
PORTFOLIO SECURITY TRANSACTIONS
The FR Portfolio will acquire Senior Loans from major international banks,
selected domestic regional banks, insurance companies, finance companies and
other financial institutions. In selecting financial institutions from which
Senior Loans may be acquired, BMR will consider, among other factors, the
financial strength, professional ability, level of service and research
capability of the institution. While these financial institutions are generally
not required to repurchase Senior Loans which they have sold, they may act as
principal or on an agency basis in connection with their sale by the FR
Portfolio.
Decisions concerning the execution of portfolio security transactions,
including the selection of the market and the broker-dealer firm, are made by
BMR. BMR is also responsible for the execution of transactions for all other
accounts managed by it. BMR places the security transactions of a 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 transactions at
prices which are advantageous to a Portfolio and at reasonably competitive
spreads or (when a disclosed commision 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 broker-dealer's services, the value of the brokerage and research
services provided, the responsiveness of the broker-dealer to BMR, the size and
type of the transaction, the general execution and operational capabilities of
the broker-dealer, the nature and character of the market for the security, the
confidentiality, speed and certainty of effective execution required for the
transaction, the reputation, reliability, experience and financial condition of
the broker-dealer, the value and quality of services rendered by the
broker-dealer in this and 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 a Portfolio of negotiated
brokerage commissions. Such commissions vary among different broker-dealer
firms, and a particular broker-dealer may charge different commissions according
to such factors as the difficulty and size of the transaction and the volume of
business done with such broker-dealer. Transactions in foreign securities often
involve the payment of brokerage commissions, which may be 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 a Portfolio usually includes an undisclosed dealer markup or
markdown. In an underwritten offering the price paid by a Portfolio often
includes a disclosed fixed commission or discount retained by the underwriter or
dealer. Although spreads or 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 broker-dealers who were selected to execute transactions on
behalf of a Portfolio and BMR's other clients in part for providing brokerage
and research services to BMR.
As authorized in Section 28(e) of the Securities Exchange Act of 1934, a
broker or dealer who executes a portfolio transaction on behalf of a Portfolio
may receive a commission which is in excess of the amount of commission another
broker or dealer would have charged for effecting that transaction if BMR
determines in good faith that such compensation was reasonable in relation to
the value of the brokerage and research services provided. This determination
may be made on the basis of either that particular transaction or on the basis
of overall responsibilities which BMR and its affiliates have for accounts over
which they exercise investment discretion. In making any such determination, BMR
will not attempt to place a specific dollar value on the brokerage and research
services provided or to determine what portion of the commission should be
related to such services. Brokerage and research services may include advice as
to the value of securities, the advisability of investing in, purchasing, or
selling securities, and the availability of securities or purchasers or sellers
of securities; furnishing analyses and reports concerning issuers, industries,
securities, economic factors and trends, portfolio strategy and the performance
of accounts; effecting securities transactions and performing functions
incidental thereto (such as clearance and settlement); and the "Research
Services" referred to in the next paragraph.
It is a common practice of the investment advisory industry and of the
advisers of investment companies, institutions and other investors to receive
research, 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 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, and
recommendations as to the purchase and sale of securities and other portfolio
transactions, financial, industry and trade publications, news and information
services, pricing and quotation equipment and services, and research oriented
computer hardware, software, data bases and services. Any particular Research
Service obtained through a broker-dealer may be used by BMR in connection with
client accounts other than those accounts which pay commissions to such
broker-dealer. Any such Research Service may be broadly useful and of value to
BMR in rendering investment advisory services to all or a significant portion of
its clients, or may be relevant and useful for the management of only one
client's account or of a few clients' accounts, or may be useful for the
management of merely a segment of certain clients' accounts, regardless of
whether any such account or accounts paid commissions to the broker-dealer
through which such Research Service was obtained. The advisory fee paid to a
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 Portfolios 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 and
execute portfolio security transactions at advantageous prices and at reasonably
competitive spreads or commission rates, BMR is authorized to consider as a
factor in the selection of any broker-dealer firm with whom Portfolio orders may
be placed the fact that such firm has sold or is selling shares of the Fund or
of other investment companies sponsored by BMR or Eaton Vance. This policy is
not inconsistent with a rule of the NASD, which rule provides that no firm which
is a member of the NASD shall favor or disfavor the distribution of shares of
any particular investment company or group of investment companies on the basis
of brokerage commissions received or expected by such firm from any source.
Securities considered as investments for a 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 a 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 a
Portfolio will not participate in a transaction that is allocated among other
accounts. If an aggregate order cannot be filled completely, allocations will
generally be made on a pro rata basis. An order may not be allocated on a pro
rata basis where, for example: (i) consideration is given to portfolio managers
who have been instrumental in developing or negotiating a particular investment;
(ii) consideration is given to an account with specialized investment policies
that coincide with the particulars of a specific investment; (iii) pro rata
allocation would result in odd-lot or de minimis amounts being allocated to a
portfolio or other client; or (iv) where BMR reasonably determines that
departure from a pro rata allocation is advisable. While these aggregation and
allocation policies could have a detrimental effect on the price or amount of
the securities available to a 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, 2000, 1999 and 1998, the HI Portfolio
paid brokerage commissions of $4,256, $682 and $5,287, respectively, on
portfolio security transactions, all of which was paid in respect of portfolio
security transactions aggregating $4,204,407, $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).
FINANCIAL STATEMENTS
The audited financial statements of and independent accountants reports for
the HI Portfolio appear in the Eaton Vance High Income Fund's most recent annual
report to shareholders and are incorporated by reference into this SAI. A copy
of such Fund's annual report accompanies this SAI. The audited financial
statements of, and the independent auditors' report for, the FR Portfolio appear
herein. 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 HI Portfolio for the fiscal year ended March 31, 2000, as previously filed
electronically with the SEC (Accession No. 0000912057-00-027169).
<PAGE>
APPENDIX A
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S CORPORATE BOND RATINGS:
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as
"gilt-edged". Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuations of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risk appear somewhat larger than in Aaa securities.
A: Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa: Bonds which are rated Baa are considered as medium-grade obligations,
(i.e., they are neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba: Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate, and thereby not well safe-guarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal
or interest.
Ca: Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
NOTE: Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa to B. The modifier 1 indicates that the Company ranks in
the higher end of its generic rating category; the modifier 2 indicates a
mid-range ranking; and the modifier 3 indicates that the Company ranks in the
lower end of its generic rating category.
DESCRIPTION OF STANDARD & POOR'S RATINGS GROUP'S CORPORATE BOND RATINGS:
INVESTMENT GRADE
AAA: Debt rated AAA has the highest rating assigned by S&P's to a debt
obligation. Capacity to pay interest and repay principal is extremely strong.
AA: Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the higher rated issues only in small degree.
A: Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than bonds in higher rated categories.
BBB: Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
SPECULATIVE GRADE
Debt rated BB, B, CCC, CC, and C is regarded as having predominantly speculative
characteristics with respect to capacity to pay interest and repay principal. BB
indicates the least degree of speculation and C the highest. While such debt
will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major exposures to adverse conditions.
BB: Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB- rating.
B: Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB or BB-
rating.
CCC: Debt rated CCC has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The CCC rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
B or B- rating.
CC: The rating CC is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC debt rating.
C: The rating C is typically applied to debt subordinated to senior debt which
is assigned an actual or implied CCC- debt rating. The C rating may be used to
cover a situation where a bankruptcy petition has been filed, but debt service
payments are continued.
C1: The Rating C1 is reserved for income bonds on which no interest is being
paid.
D: Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless Standard & Poor's believes that
such payments will be made during such grace period. The D rating also will be
used upon the filing of a bankruptcy petition if debt service payments are
jeopardized.
PLUS (+) OR MINUS (-): The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
NR: Bonds may lack a S&P's rating because no public rating has been requested,
because there is insufficient information on which to base a rating, or because
S&P's does not rate a particular type of obligation as a matter of policy.
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 filed July 14, 1995 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 filed July 14,
1995 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 filed October 30,
1997 and incorporated herein by reference.
(4) Amendment and Restatement of Establishment and Designation of Series
of Shares dated August 14, 2000 to be filed by amendment.
(b)(1) By-Laws as amended November 3, 1986 filed as Exhibit (2)(a) to
Post-Effective Amendment No. 23 filed July 14, 1995 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 filed July 14, 1995 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 filed August 17, 1995 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 filed
October 17, 1997 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 filed October 17, 1997 and
incorporated herein by reference.
(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 filed
March 30, 1998 and incorporated herein by reference.
(5) Investment Advisory Agreement with Eaton Vance Management for Eaton
Vance Tax-Managed Value Fund dated August 16, 1999 filed as Exhibit
(d)(5) to Post-Effective Amendment No. 54 filed August 26, 1999 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 filed April 21, 1997
and incorporated herein by reference.
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(2) 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 filed April 21, 1997
and incorporated herein by reference.
(3) 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 filed April 21, 1997
and incorporated herein by reference.
(4) 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 (A, A-1 and A-2)
filed as Exhibit (6)(a)(8) to Post-Effective Amendment No. 38 filed
October 30, 1997 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 filed October
30, 1997 and incorporated herein by reference.
(ii) Schedules A-3, A-4 and A-5 to Distribution Agreement filed as
Exhibit (e)(4)(ii) to Post-Effective Amendment No. 54 filed August
26, 1999 and incorporated herein by reference.
(iii)Schedule A-6 to Distribution Agreement effective May 1, 2000 filed
as Exhibit (e)(4)(iii) to Post-Effective Amendment No. 59 filed May
1, 2000 and incorporated herein by reference.
(iv) Schedule A-7 to Distribution Agreement effective June 19, 2000 filed
as Exhibit (e)(4)(iv) to Post-Effective Amendment No. 61 filed June
23, 2000 and incorporated herein by reference.
(v) Schedule A-8 to Distribution Agreement effective August 14, 2000
to be filed by amendment.
(5) Selling Group Agreement between Eaton Vance Distributors, Inc. and
Authorized Dealers filed as Exhibit (6)(b) to the Post-Effective
Amendment No. 61 filed December 28, 1995 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 filed July 14, 1995 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 filed February 27, 1996 and incorporated herein by
reference.
(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) filed January
25, 1999 and incorporated herein by reference.
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(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 filed August 16, 1995 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 filed October
30, 1997 and incorporated herein by reference.
(2)(a) Administrative Services Agreement between Eaton Vance Mutual Funds
Trust (on behalf of certain of its series) and Eaton Vance
Management dated August 16, 1999 with attached Schedule A dated
August 16, 1999 filed as Exhibit (h)(2) to Post-Effective Amendment
No. 54 filed August 26, 1999 and incorporated herein by reference.
(b) Schedule A-1 to Administrative Services Agreement effective May 1,
2000 filed as Exhibit (h)(2)(b) to Post-Effective Amendment No. 59
filed May 1, 2000 and incorporated herein by reference.
(c) Schedule A-2 to Administrative Services Agreement effective June 19,
2000 filed as Exhibit (h)(2)(c) to Post-Effective Amendment No. 61
filed June 23, 2000 and incorporated herein by reference.
(d) Schedule A-3 to Administrative Services Agreement effective August
14, 2000 to be filed by amendment.
(3) 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) filed February 25, 1998 and
incorporated herein by reference.
(i)(1) Opinion of Internal Counsel to be filed by amendment.
(j)(1) Independent Auditors Consent for Floating Rate Portfolio filed
herewith.
(2) Independent Auditors Consent for High Income Portfolio filed
herewith.
(k) Not applicable
(l) Not applicable
(m)(1)(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 filed
August 17, 1995 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 filed April
21, 1997 and incorporated herein by reference.
(2)(a) Eaton Vance Mutual Funds Trust Class A Service Plan adopted June 23,
1997 with attached Schedules (A, A-1 and A-2) filed as Exhibit
(15)(i) to Post-Effective Amendment No. 38 filed October 30, 1997
and incorporated herein by reference.
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(b) Schedules A-3, A-4 and A-5 to Class A Service Plan filed as Exhibit
(m)(3)(b) to Post-Effective Amendment No. 54 filed August 26, 1999
and incorporated herein by reference.
(c) Schedule A-6 to Class A Service Plan effective May 1, 2000 filed as
Exhibit (m)(3)(c) to Post-Effective Amendment No. 59 filed May 1,
2000 and incorporated herein by reference.
(d) Schedule A-7 to Class A Service Plan effective June 19, 2000 filed
as Exhibit (m)(3)(d) to Post-Effective Amendment No. 61 filed June
23, 2000 and incorporated herein by reference.
(e) Schedule A-8 to Class A Service Plan effective August 14, 2000 to
be filed by amendment
(f) Eaton Vance Mutual Funds Trust Class S Service Plan adopted February
22, 1999 filed as Exhibit (m)(3)(c) to Post-Effective Amendment No.
53 filed July 28, 1999 and incorporated herein by reference.
(3)(a) Eaton Vance Mutual Funds Trust Class B Distribution Plan adopted
June 23, 1997 with attached Schedules (A, A-1 and A-2) filed as
Exhibit (15)(j) to Post-Effective Amendment No. 38 filed October 30,
1997 and incorporated herein by reference.
(b) Schedules A-3, A-4 and A-5 to Class B Distribution Plan filed as
Exhibit (m)(4)(b) to Post-Effective Amendment No. 54 filed August
26, 1999 and incorporated herein by reference.
(c) Schedule A-6 to Class B Distribution Plan effective May 1, 2000
filed as Exhibit (m)(4)(c) to Post-Effective Amendment No. 59 filed
May 1, 2000 and incorporated herein by reference.
(d) Schedule A-7 to Class B Distribution Plan effective June 19, 2000
filed as Exhibit (m)(4)(d) to Post-Effective Amendment No. 61 filed
June 23, 2000 and incorporated herein by reference.
(e) Schedule A-8 to Class B Distribution Plan effective August 14, 2000
to be filed by amendment.
(4)(a) Eaton Vance Mutual Funds Trust Class C Distribution Plan adopted
June 23, 1997 with attached Schedules (A and A-1) filed as Exhibit
(15)(k) to Post-Effective Amendment No. 38 filed October 30, 1997
and incorporated herein by reference.
(b) Schedules A-2, A-3, A-4 and A-5 to Class C Distribution Plan filed
as Exhibit (m)(5)(b) to Post-Effective Amendment No. 54 filed August
26, 1999 and incorporated herein by reference.
(c) Schedule A-6 to Class C Distribution Plan effective May 1, 2000
filed as Exhibit No. (m)(5)(c) to Post-Effective Amendment No. 59
filed May 1, 2000 and incorporated herein by reference.
(d) Schedule A-7 to Class C Distribution Plan effective June 19, 2000
filed as Exhibit (m)(5)(d) to Post-Effective Amendment No. 61 filed
June 23, 2000 and incorporated herein by reference.
(e) Schedule A-8 to Class C Distribution Plan effective August 14, 2000
to be filed by amendment.
(n) Not applicable
(o)(1) Amended and Restated Multiple Class Plan for Eaton Vance Funds dated
June 19, 2000 filed as Exhibit (o)(1) to Post-Effective Amendment
No. 61 filed June 23, 2000 and incorporated herein by reference.
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(2) Schedule A-1 to the Amended and Restated Multiple Class Plan dated
August 14, 2000 to be filed by amendment.
(p) Code of Ethics adopted by the Eaton Vance Group of Funds effective
May 1, 1981, as amended February 21, 1995 filed as Exhibit (r) to
the Registration Statement on Form N-2 of EV Classic Senior
Floating-Rate Fund (File Nos. 333-32262, 811-07945) (Accession No.
0000950156-00-000169) filed March 13, 2000 and incorporated herein
by reference.
(q)(1)(a) Power of Attorney for Eaton Vance Mutual Funds Trust dated June 23,
1997 filed as Exhibit No. (17)(a) to Post-Effective Amendment No. 35
filed July 3, 1997 and incorporated herein by reference.
(b) Power of Attorney for Eaton Vance Mutual Funds Trust dated November
16, 1998 filed as Exhibit (q)(1)(a) to Post-Effective Amendment No.
47 filed December 30, 1998 and incorporated herein by reference.
(2)(a) Power of Attorney for Government Obligations Portfolio dated April
22, 1997 filed as Exhibit (17)(b) to Post-Effective Amendment No. 36
filed July 25, 1997 and incorporated herein by reference.
(b) Power of Attorney for Government Obligations Portfolio dated
November 16, 1998 filed as Exhibit (q)(2)(a) to Post-Effective
Amendment No. 48 filed February 25, 1999 and incorporated herein by
reference.
(3)(a) Power of Attorney for High Income Portfolio dated February 14, 1997
filed as Exhibit No. (17)(c) to Post-Effective Amendment No. 36
filed July 26, 1997 and incorporated herein by reference.
(b) Power of Attorney for High Income Portfolio dated November 16, 1998
filed as Exhibit (q)(3)(a) to Post-Effective Amendment No. 47 filed
December 30, 1998 and incorporated herein by reference.
(4)(a) Power of Attorney for Strategic Income Portfolio dated April 22,
1997 filed as Exhibit No. (17)(d) to Post-Effective Amendment No. 36
filed July 26, 1997 and incorporated herein by reference.
(b) Power of Attorney for Strategic Income Portfolio dated November 16,
1998 filed as Exhibit (q)(4)(a) to Post-Effective Amendment No. 47
filed December 30, 1998 and incorporated herein by reference.
(5)(a) Power of Attorney for Cash Management Portfolio dated April 22, 1997
filed as Exhibit (17)(e) to Post-Effective Amendment No. 36 filed
July 26, 1997 and incorporated herein by reference.
(b) Power of Attorney for Cash Management Portfolio dated November 16,
1998 filed as Exhibit (q)(5)(a) to Post-Effective Amendment No. 48
filed February 25, 1999 and incorporated herein by reference.
(6)(a) Power of Attorney for Tax-Managed Growth Portfolio dated February
20, 1998 filed as Exhibit No. (17)(f) to Post-Effective Amendment
No. 41 filed February 26, 1998 and incorporated herein by reference.
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(b) Power of Attorney for Tax-Managed Growth Portfolio dated November
16, 1998 filed as Exhibit (q)(6)(a) to Post-Effective Amendment No.
47 filed December 30, 1998 and incorporated herein by reference.
(7) Power of Attorney for Capital Appreciation Portfolio dated February
28, 2000 filed as Exhibit (q)(7) to Post-Effective Amendment No. 56
filed February 28, 2000 and incorporated herein by reference.
(8) Power of Attorney for Floating Rate Portfolio dated June 19, 2000
filed as Exhibit (q)(8) to Post-Effective Amendment No. 61 filed
June 23, 2000 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:
<TABLE>
<CAPTION>
<S> <C>
Eaton Vance Advisers Senior Floating-Rate Fund Eaton Vance Municipals Trust II
Eaton Vance Growth Trust Eaton Vance Mutual Funds Trust
Eaton Vance Income Fund of Boston Eaton Vance Prime Rate Reserves
Eaton Vance Institutional Senior Floating-Rate Fund Eaton Vance Special Investment Trust
Eaton Vance Investment Trust EV Classic Senior Floating-Rate Fund
Eaton Vance Municipals Trust
</TABLE>
C-6
<PAGE>
(b)
(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
Ira Baron 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
and Treasurer
Raymond Cox Vice President None
Peter Crowley Vice President None
Anthony DeVille Vice President None
Ellen Duffy Vice President None
Alan R. Dynner Vice President, Secretary Secretary
and
Clerk
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
Robert Hammond Vice President None
James B. Hawkes Vice President and Director President and Trustee
Perry D. Hooker Vice President None
Kara Lawler Vice President None
Thomas P. Luka Vice President None
John Macejka Vice President None
Geoff Marshall Vice President None
Tim McEwan 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
George D. Owen, II Vice President None
Philip Pace 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
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
John Vaughan Vice President None
Chris Volf Vice President None
Debra Wekstein Vice President None
Wharton P. Whitaker President and Director None
Sue Wilder Vice President None
------------------------------------------
/*/ Address is The Eaton Vance Building, 255 State Street, Boston, MA 02109
(c) Not applicable
C-7
<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, PFPC,
Inc., 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
The Registrant undertakes to include the information required by Item 5 of
Form N-1A in its annual reports to shareholders under Rule 30d-1.
C-8
<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 August 3, 2000.
EATON VANCE MUTUAL FUNDS TRUST
By: 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 their capacities on August 3, 2000.
SIGNATURE TITLE
--------- -----
James B. Hawkes*
------------------- President (Chief Executive Officer)
James B. Hawkes and Trustee
/s/ James L. O'Connor
--------------------- Treasurer (and Principal Financial
James L. O'Connor and Accounting Officer)
Jessica M. Bibliowicz*
---------------------- Trustee
Jessica M. Bibliowicz
Donald R. Dwight*
----------------- Trustee
Donald R. Dwight
Samuel L. Hayes, III*
--------------------- Trustee
Samuel L. Hayes
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>
SIGNATURES
Floating Rate 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 August 3, 2000.
FLOATING RATE PORTFOLIO
By: 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 August 3, 2000.
SIGNATURE TITLE
--------- -----
James B. Hawkes*
------------------- President (Chief Executive Officer)
James B. Hawkes and Trustee
/s/ James L. O'Connor
--------------------- Treasurer (Principal Financial
James L. O'Connor and Accounting Officer)
Jessica M. Bibliowicz*
---------------------- Trustee
Jessica M. Bibliowicz
Donald R. Dwight*
----------------- Trustee
Donald R. Dwight
Samuel L. Hayes, III*
--------------------- Trustee
Samuel L. Hayes
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-10
<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 August 3, 2000.
HIGH INCOME PORTFOLIO
By: 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 August 3, 2000.
SIGNATURE TITLE
--------- -----
James B. Hawkes*
------------------- President (Chief Executive Officer)
James B. Hawkes and Trustee
/s/ James L. O'Connor
--------------------- Treasurer (Principal Financial
James L. O'Connor and Accounting Officer)
Jessica M. Bibliowicz*
---------------------- Trustee
Jessica M. Bibliowicz
Donald R. Dwight*
----------------- Trustee
Donald R. Dwight
Samuel L. Hayes, III*
--------------------- Trustee
Samuel L. Hayes
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-11
<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
----------- -----------
(j)(1) Independent Auditors Consent for Floating Rate Portfolio
(j)(2) Independent Auditors Consent for High Income Portfolio
C-12
