<PAGE>
As filed with the Securities and Exchange Commission on July 25, 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. 64 [x]
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940 [ ]
AMENDMENT NO. 67 [x]
EATON VANCE MUTUAL FUNDS TRUST
------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
THE EATON VANCE BUILDING, 255 STATE STREET, BOSTON, MASSACHUSETTS 02109
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(617) 482-8260
--------------
(REGISTRANT'S TELEPHONE NUMBER)
ALAN R. DYNNER
THE EATON VANCE BUILDING, 255 STATE STREET, BOSTON, MASSACHUSETTS 02109
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(NAME AND ADDRESS OF AGENT FOR SERVICE)
It is proposed that this filing will become effective pursuant to Rule 485
(check appropriate box):
[ ] immediately upon filing pursuant to paragraph (b)
[x] on August 1, 2000 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2)
If appropriate, check the following box:
[ ] this post effective amendment designates a new effective date for a
previously filed post-effective amendment.
High Income Portfolio has also executed this Registration Statement.
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<PAGE>
{LOGO} Investing
EATON VANCE for the
Mutual Funds 21st
Century(R)
Eaton Vance
High Income
Fund
A diversified mutual fund seeking high current income
Prospectus Dated
August 1, 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 7
Investment Objective & Principal Redeeming Shares 8
Policies and Risks 4 Shareholder Account
Management and Organization 5 Features 8
Valuing Shares 6 Tax Information 9
Purchasing Shares 6 Financial Highlights 10
--------------------------------------------------------------------------------
This prospectus contains important information about the Fund and the services
available to shareholders. Please save it for reference.
<PAGE>
Fund Summary
Investment Objective and Principal Strategies. The Fund's investment objective
is to provide a high level of current income. To do so, the Fund invests
primarily in high yield, high risk corporate bonds (so-called "junk bonds"). The
Fund will invest a substantial portion of assets in bonds issued in connection
with mergers, acquisitions and other highly- leveraged transactions.
The Fund invests at least 80% of its net assets in fixed-income securities,
including preferred stocks (many of which have fixed maturities) and convertible
securities. The Fund may also purchase securities that make "in-kind" interest
payments, bonds not paying current income and bonds that do not make regular
interest payments. The Fund may invest up to 25% of its total assets in foreign
securities, which are predominantly U.S. dollar denominated. With respect to
non-dollar denominated securities, the Fund may hedge currency fluctuations by
entering forward foreign currency exchange contracts. The Fund will generally
hold well in excess of 100 securities, which may help reduce investment risk.
Investments are actively managed, and securities may be bought or sold on a
daily basis. The investment adviser's staff monitors the credit quality and
price of securities held by the Fund, as well as other securities that are
available to the Fund. The portfolio manager attempts to improve yield through
timely trading. The portfolio manager also considers the relative value of
securities in the marketplace in making investment decisions, and attempts to
preserve capital and enhance return when consistent with the Fund's objective.
The Fund currently invests its assets in a separate registered investment
company with the same investment objective and policies as the Fund.
Principal Risk Factors. The Fund invests primarily in below investment grade
bonds, which are predominantly speculative because of the credit risk of their
issuers. Such companies are more likely to default on their payments of interest
and principal owed to the Fund, and such defaults will reduce the Fund's net
asset value and income distributions. An economic downturn generally leads to a
higher non-payment rate, and a security may lose significant value before a
default occurs.
The value of Fund shares may also decline when interest rates rise, when the
supply of suitable bonds exceeds market demand, or in response to a significant
drop in the stock market. Bonds that make "in-kind" interest payments, as well
as bonds that do not pay income currently or do not make regular interest
payments may experience greater volatility in response to interest rate changes.
Because the Fund invests a portion of its assets in foreign securities, the
value of Fund shares could be adversely affected by changes in currency exchange
rates and by political and economic developments abroad. Forward foreign
currency contracts also involve a risk of loss due to imperfect correlation. The
Fund is not appropriate for investors who cannot assume the greater risk of
capital depreciation or loss inherent in seeking higher yields.
The Fund is not a complete investment program and you may lose money by
investing in the Fund. An investment in the Fund is not a deposit in a bank and
is not insured or guaranteed by the Federal Deposit Insurance Corporation or any
other government agency.
2
<PAGE>
Performance Information. The following bar chart and table provide information
about the Fund's performance, including a comparison of the Fund's performance
to the performance of a broad-based, unmanaged market index of high yield
corporate bonds. Although past performance is no guarantee of future results,
this performance information demonstrates the risk that the value of your
investment will change. The following returns are for Class B shares for each
calendar year through December 31, 1999 and do not reflect a sales charge. If
the sales charge was reflected, the returns would be lower.
-18.45% 38.34% 17.79% 16.92% -1.81% 13.86% 13.78% 15.35% 1.77% 10.99%
--------------------------------------------------------------------------------
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
The highest quarterly total return for Class B was 11.37%, for the quarter ended
June 30, 1991, and the lowest quarterly total return was -9.19%, for the quarter
ended September 30, 1990. The year-to-date total return through the end of the
most recent calendar quarter (December 31, 1999 to June 30, 2000) was -0.83%.
For the 30 days ended March 31, 2000, the SEC yield for Class B shares was
10.17% and for Class C shares was 10.14%. For current yield information call
1-800-225-6265.
Average Annual Total Return One Five Ten
as of December 31, 1999 Year Year Year
--------------------------------------------------------------------------------
Class B Shares 5.99% 10.77% 9.92%
Class C Shares 10.09% 10.85% 9.72%
C.S. First Boston High Yield Bond Index 3.28% 9.07% 11.06%
These returns reflect any applicable CDSC for Class B and Class C. The Class C
performance shown above for the period prior to June 8, 1994 is the performance
of Class B shares, adjusted for the sales charge that applies to Class C shares
(but not adjusted for any other differences in the expenses of the classes). The
C. S. First Boston High Yield Bond Index is a broad-based, unmanaged market
index of high yield corporate bonds. Investors cannot invest directly in an
index. (Source for C.S. First Boston High Yield Bond Index returns: C.S. First
Boston.)
Fund Fees and Expenses. These tables describe the fees and expenses that you may
pay if you buy and hold shares.
Shareholder Fees
(fees paid directly
from your investment) Class B Class C
--------------------------------------------------------------------------------
Maximum Sales Charge (Load)
(as a percentage of offering price) None None
Maximum Deferred Sales Charge (Load)
(as a percentage of the lower of net
asset value at time of purchase or
redemption 5.00% 1.00%
Maximum Sales Charge (Load) Imposed
on Reinvested Distributions None None
Exchange Fee None None
Annual Fund Operating Expenses
(expenses that are deducted from
Fund assets) Class B Class C
--------------------------------------------------------------------------------
Management Fees 0.60% 0.60%
Distribution and Service (12b-1) Fees 1.00% 1.00%
Other Expenses 0.18% 0.18%
----- -----
Total Annual Fund Operating Expenses 1.78% 1.78%
Example. This Example is intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The Example also assumes
that your investment has a 5% return each year and that the operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
1 Year 3 Years 5 Years 10 Years
--------------------------------------------------------------------------------
Class B shares $ 681 $ 960 $ 1,164 $ 2,095
Class C shares $ 281 $ 560 $ 964 $ 2,095
You would pay the following expenses if you did not redeem your shares:
1 Year 3 Years 5 Years 10 Years
--------------------------------------------------------------------------------
Class B shares $ 181 $ 560 $ 964 $ 2,095
Class C shares $ 181 $ 560 $ 964 $ 2,095
3
<PAGE>
Investment Objective & Principal Policies and Risks
The Fund's investment objective is to provide a high level of current income.
The Fund's investment objective and certain policies may be changed by the
Trustees without shareholder approval. The Trustees have no present intention to
make a change and intend to submit any material change in the objective to
shareholders for approval. The Fund currently seeks to meet its investment
objective by investing in High Income Portfolio (the "Portfolio"), a separate
open-ended management company that has the same objective and policies as the
Fund.
The Portfolio normally invests at least 65% of its total assets in bonds rated
in the lowest investment grade category or below (i.e. bonds rated Baa and below
by Moody's Investors Service, Inc. ("Moody's") or BBB and below by Standard &
Poor's Ratings Group ("S&P"), and in comparable unrated bonds. Bonds rated BBB
and Baa have speculative characteristics, while lower rated bonds are
predominantly speculative.
The Portfolio may hold securities that are unrated or in the lowest rating
categories (rated C by Moody's or D by S&P). Bonds rated C by Moody's are
regarded as having extremely poor prospects of ever attaining any real
investment standing. Bonds rated D by S&P are in payment default or a bankruptcy
petition has been filed and debt service payments are jeopardized. In order to
enforce its rights with defaulted securities, the Portfolio may be required to
retain legal counsel and/or a financial adviser. This may increase the
Portfolio's operating expenses and adversely affect net asset value.
The credit quality of most securities held by the Portfolio reflects a greater
possibility that adverse changes in the financial condition of an issuer, or in
general economic conditions, or both, may impair the ability of the issuer to
make payments of interest and principal. The inability (or perceived inability)
of issuers to make timely payment of interest and principal would likely make
the values of securities held by the Portfolio more volatile and could limit the
Portfolio's ability to sell its securities at favorable prices. In the absence
of a liquid trading market for securities held by it, the Portfolio may have
difficulties determining the fair market value of such securities.
Although the investment adviser considers security ratings when making
investment decisions, it performs its own credit and investment analysis and
does not rely primarily on the ratings assigned by the rating services. In
evaluating the quality of a particular security, whether rated or unrated, the
investment adviser will normally take into consideration, among other things,
the issuer's financial resources and operating history, its sensitivity to
economic conditions and trends, the ability of its management, its debt maturity
schedules and borrowing requirements, and relative values based on anticipated
cash flow, interest and asset coverage, and earnings prospects. Because of the
greater number of investment considerations involved in investing in high yield,
high risk bonds, the achievement of the Fund's objective depends more on the
investment adviser's judgment and analytical abilities than would be the case if
the Portfolio invested primarily in securities in the higher rating categories.
While the investment adviser will attempt to reduce the risks of investing in
lower rated or unrated securities through active portfolio management,
diversification, credit analysis and attention to current developments and
trends in the economy and the financial markets, there can be no assurance that
a broadly diversified portfolio of such securities would substantially lessen
the risks of defaults brought about by an economic downturn or recession.
Moreover, the Portfolio may invest up to 25% of its assets in any one industry,
which may expose the Fund to unique risks of that industry.
The Portfolio may invest in zero coupon bonds, deferred interest bonds and bonds
or preferred stocks on which the interest is payable in-kind ("PIK securities").
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 securities provide
that the issuer thereof may, at its option, pay interest in cash or in the form
of additional securities. Such investments may experience greater volatility in
market value due to changes in interest rates. The Portfolio accrues income on
these investments and is required to distribute its share of Portfolio income
each year. The Portfolio may be required to sell securities to obtain cash
needed for income distributions.
The Portfolio may invest up to 25% of total assets in foreign securities, which
are predominantly U.S. dollar denominated. The value of foreign securities is
affected by changes in currency rates, foreign tax laws (including withholding
tax), government policies (in this country or abroad) and relations between
nations, 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 expropriation, 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. With respect to non-dollar denominated securities, the
portfolio manager may use forward currency exchange contracts to attempt to
mitigate adverse effects of foreign currency fluctuations. These contracts allow
4
<PAGE>
the Portfolio to establish a currency exchange rate with payment and delivery at
a future date. They are subject to a risk of loss due to unanticipated changes
in currency exchange rates and default by the counterparty to the contract.
There can be no assurance that this hedging strategy will be advantageous to the
Portfolio.
The 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 than liquid securities. 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 Portfolio illiquidity if eligible buyers
become uninterested in purchasing them.
The value of Fund shares will usually change in response to interest rate
fluctuations. When interest rates decline, the value of securities already held
by the Portfolio can be expected to rise. Conversely, when interest rates rise,
the value of existing portfolio securities can be expected to decline. Other
economic factors (such as a large downward movement in stock prices or a poor
economic environment) can also adversely impact the high yield bond market.
Rating downgrades of securities held by the Portfolio may reduce their value.
The Portfolio may borrow amounts up to 25% of its net assets, but it will not
borrow more than 5% of the value of its total assets except to satisfy
redemption requests or for other temporary purposes. Such borrowings would
result in increased expense to the Fund and, while they are outstanding, would
magnify increases or decreases in the value of Fund shares. The Portfolio will
not purchase additional portfolio securities while outstanding borrowings exceed
5% of the value of its total assets.
The annual portfolio turnover rate may exceed 100%. A mutual fund with a high
turnover rate (100% or more) may generate more capital gains than a fund with a
lower rate. Capital gains distributions (which reduce the after-tax returns of
shareholders holding Fund shares in taxable accounts) will be made to
shareholders if offsetting capital loss carryforwards do not exist.
Management and Organization
Management. The Portfolio's investment adviser is Boston Management and Research
("BMR"), a subsidiary of Eaton Vance Management ("Eaton Vance"), with offices at
The Eaton Vance Building, 255 State Street, Boston, Massachusetts 02109. Eaton
Vance has been managing assets since 1924 and managing mutual funds since 1931.
Eaton Vance and its subsidiaries currently manage over $46 billion on behalf of
mutual funds, institutional clients and individuals.
The investment adviser manages the investments of the Portfolio and provides
related office facilities and personnel. Under its investment advisory agreement
with the Portfolio, BMR receives a monthly advisory fee equal to the aggregate
of a daily asset based fee and a daily income based fee. The fees are applied on
the basis of the following categories.
<TABLE>
Annual Daily
Category Daily Net Assets Asset Rate Income Rate
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 up to $500 million 0.300% 3.00%
2 $500 million but less than $1 billion 0.275% 2.75%
3 $1 billion but less than $1.5 billion 0.250% 2.50%
4 $1.5 billion but less than $2 billion 0.225% 2.25%
5 $2 billion but less than $3 billion 0.200% 2.00%
6 $3 billion and over 0.175% 1.75%
</TABLE>
On March 31, 2000, the Portfolio had net assets of $1,184,997,935. For the
fiscal year ended March 31, 2000, the Portfolio paid BMR advisory fees
equivalent to 0.60% of the Portfolio's average net assets for such year.
Michael Weilheimer and Thomas Huggins co-manage the Portfolio. Mr. Weilheimer
has managed the Portfolio since January 1, 1996. Prior thereto, he was a senior
analyst in the Eaton Vance high yield bond group. He also manages another Eaton
Vance portfolio, and is a Vice President of Eaton Vance and BMR. Thomas Huggins
has co-managed the Portfolio since January 1, 2000. 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.
5
<PAGE>
The investment adviser and the Fund and the Portfolio 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
Portfolio) subject to certain pre-clearance and reporting requirements and other
procedures.
Eaton Vance serves as administrator of the Fund, providing the Fund with
administrative services and related office facilities. Eaton Vance does not
currently receive a fee for serving as administrator.
Organization. The Fund is a series of Eaton Vance Mutual Funds Trust, a
Massachusetts business trust. The Fund offers multiple classes of shares. Each
Class represents a pro rata interest in the Fund, but is subject to different
expenses and rights. The Fund does not hold annual shareholder meetings, but may
hold special meetings for matters that require shareholder approval (like
electing or removing trustees, approving management contracts or changing
investment policies that may only be changed with shareholder approval). Because
the Fund invests in the Portfolio, it may be asked to vote on certain Portfolio
matters (like changes in certain Portfolio investment restrictions). When
necessary, the Fund will hold a meeting of its shareholders to consider the
Portfolio matter and then vote its interest in the Portfolio in proportion to
the votes cast by its shareholders. The Fund can withdraw from the Portfolio at
any time.
Valuing Shares
The Fund values its shares once each day only when the New York Stock Exchange
is open for trading (typically Monday through Friday), as of the close of
regular trading on the Exchange (normally 4:00 p.m. eastern time). The purchase
price of shares is their net asset value, which is derived from Portfolio
holdings. Most 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 Fund shares through your investment dealer or by mailing the
account application form included in this prospectus to the transfer agent (see
back cover for address). Your initial investment must be at least $1,000. The
price of Class B and Class C shares is the net asset value; however, you may be
subject to a sales charge (called a "contingent deferred sales charge" or
"CDSC") if you redeem Class B shares within six years of purchase or Class C
shares within one year of purchase. The sales charges are described below. Your
investment dealer can help you decide which Class of shares suits your
investment needs.
After your initial investment, additional investments of $50 or more may be made
at any time by sending a check payable to the order of the Fund or the transfer
agent directly to the transfer agent (see back cover for address). Please
include your name and account number and the name of the Fund and Class with
each investment.
You may also make automatic investments of $50 or more each month or each
quarter from your bank account. You can establish bank automated investing on
the account application or by calling 1-800-262-1122. The minimum initial
investment amount and Fund policy of redeeming accounts with low account
balances are waived for bank automated investing accounts and certain group
purchase plans.
6
<PAGE>
Sales Charges
Contingent Deferred Sales Charge. Each Class of shares is subject to a CDSC on
certain redemptions. Class C shares are subject to a 1.00% CDSC if redeemed
within 12 months of purchase. Class B shares are subject to the following CDSC
schedule:
Year of Redemption After Purchase CDSC
--------------------------------------------------------------------------------
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.
CDSCs are waived for certain redemptions pursuant to a Withdrawal Plan (see
"Shareholder Account Features") and in connection with certain redemptions from
tax-sheltered retirement plans. Call 1-800-225-6265 for details. The Class B
CDSC is also waived following the death of all beneficial owners of shares, but
only if the redemption is requested within one year after death (a death
certificate and other applicable documents may be required).
If you redeem shares, you may reinvest at net asset value all or any portion of
the redemption proceeds in the same class of shares of the Fund provided that
the reinvestment occurs within 60 days of the redemption, and the privilege has
not been used more than once in the prior 12 months. Your account will be
credited with any CDSC paid in connection with the redemption. 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 allow the Fund to pay distribution fees for the sale and
distribution of shares (so-called "12b-1 fees"). Class B and Class C shares pay
distribution fees of 0.75% of average daily net assets annually. Because these
fees are paid from Fund assets on an ongoing basis, they will increase your cost
over time and may cost you more than paying other types of sales charges. Class
B and Class C pay service fees for personal and/or account services 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 fees (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.
Class B and Class C distribution fees are subject to termination when payments
under the Rule 12b-1 plans are sufficient to extinguish uncovered distribution
charges. As described more fully in the Statement of Additional Information,
uncovered distribution charges of a Class are increased by sales commissions
payable by the Class to the principal underwriter in connection with sales of
shares of that Class and by an interest factor tied to the U.S. Prime Rate.
Uncovered distribution charges are reduced by the distribution fees paid by the
Class and by CDSCs paid to the Fund by redeeming shareholders. The amount of the
sales commissions payable by Class B to the principal underwriter in connection
with sales of Class B shares is significantly less than the maximum permitted by
the sales charge rule of the National Association of Securities Dealers, Inc. To
date, neither Class B nor Class C uncovered distribution charges have been fully
covered.
7
<PAGE>
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.
If you redeem shares, your redemption price will be based on the net asset value
per share next computed after the redemption request is received. Your
redemption proceeds will be paid in cash within seven days, reduced by the
amount of any applicable CDSC and any federal income tax required to be
withheld. Payments will be sent by mail unless you complete the Bank Wire
Redemptions section of the account application.
If you recently purchased shares, the proceeds of a redemption will not be sent
until the purchase check (including a certified or cashier's check) has cleared.
If the purchase check has not cleared, redemption proceeds may be delayed up to
15 days from the purchase date. If your account value falls below $750 (other
than due to market decline), you may be asked to either add to your account or
redeem it within 60 days. If you take no action, your account will be redeemed
and the proceeds sent to you.
While redemption proceeds are normally paid in cash, redemptions may be paid by
distributing marketable securities. If you receive securities, you could incur
brokerage or other charges in converting the securities to cash.
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.
8
<PAGE>
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.
Tax-Sheltered Retirement Plans. Class C shares are available for purchase in
connection with certain tax-sheltered retirement plans. Call 1-800-225-6265 for
information. Distributions will be invested in additional shares for all
tax-sheltered retirement plans.
Exchange Privilege. You may exchange your Class B and Class C shares for shares
of the same Class of another Eaton Vance fund. Exchanges are generally made at
net asset value. If your shares are subject to a CDSC, the CDSC will continue to
apply to your new shares at the same CDSC rate. For purposes of the CDSC, your
shares will continue to age from the date of your original purchase.
Before exchanging, you should read the prospectus of the new fund carefully. If
you wish to exchange shares, 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.
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.
9
<PAGE>
Financial Highlights
The financial highlights are intended to help you understand the Fund's
financial performance for the past five years. Certain information in the table
reflects the financial results for a single Fund share. The total returns in the
table represent the rate an investor would have earned (or lost) on an
investment in the Fund (assuming reinvestment of all distributions and not
taking into account a sales charge). This information has been audited by
Deloitte & Touche LLP, independent accountants. The report of Deloitte & Touche
LLP and the Fund's financial statements are incorporated herein by reference and
included in the annual report, which is available on request. The Fund began
offering two classes of shares on April 1, 1998. Prior to that date, the Fund
offered only Class B shares and Class C existed as a separate fund.
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
------------------------------------------------------------------------------
2000(1) 1999 1998 1997 1996
------------------------------------------------------------------------------
CLASS B CLASS C CLASS B CLASS C CLASS B CLASS B CLASS B
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value -
Beginning of year $ 7.510 $ 9.880 $ 8.030 $10.560 $ 7.220 $ 7.100 $ 6.920
-------- -------- -------- ------- -------- -------- --------
Income (loss) from
operations:
Net investment
income $ 0.702 $ 0.915 $ 0.685 $ 0.901 $ 0.658 $ 0.652 $ 0.665
Net realized and
unrealized gain
(loss) (0.242) (0.321) (0.543) (0.715) 0.774 0.120 0.189
-------- -------- -------- ------- -------- -------- --------
Total income (loss)
from operations $ 0.460 $ 0.594 $ 0.142 $ 0.186 $ 1.432 $ 0.772 $ 0.854
-------- -------- -------- ------- -------- -------- --------
Less
distributions:
From net investment
income $ (0.700) $ (0.914) $ (0.662) $(0.866) $ (0.622) $ (0.646) $ (0.665)
In excess of net
investment income -- -- -- -- -- (0.006) (0.009)
-------- -------- -------- ------- -------- -------- --------
Total distributions $ (0.700) $ (0.914) $ (0.662) $(0.866) $ (0.622) $ (0.652) $ (0.674)
-------- -------- -------- ------- -------- -------- --------
Net asset value -
End of year $ 7.270 $ 9.560 $ 7.510 $ 9.880 $ 8.030 $ 7.220 $ 7.100
-------- -------- -------- ------- -------- -------- --------
Total return(2) 6.36% 6.26% 2.08% 2.08% 20.59% 11.37% 12.80%
Ratios/Supplemental
Data:
Net assets, end of
year (000's omitted) $758,686 $136,851 $689,140 $61,660 $693,818 $598,273 $496,966
Ratios (as a
percentage of
average daily net
assets):
Expenses(3) 1.74% 1.78% 1.75% 1.79% 1.73% 1.77% 1.78%
Net investment
income 9.49% 9.42% 9.13% 9.18% 8.58% 8.97% 9.38%
Portfolio Turnover
of the Portfolio 113% 113% 150% 150% 137% 78% 88%
</TABLE>
(1) Net investment income per share was computed using average shares
outstanding.
(2) Total return is calculated assuming a purchase at the net asset value on
the first day and a sale at the net asset value on the last day of each
period reported. Dividends and distributions, if any, are assumed to be
reinvested at the net asset value on the reinvestment date. Total return is
not computed on an annualized basis.
(3) Includes the Fund's share of the Portfolio's allocated expenses.
10
<PAGE>
{LOGO} Investing
EATON VANCE for the
Mutual Funds 21st
Century(R)
More Information
--------------------------------------------------------------------------------
About the Fund: More information is available in the statement of
additional information. The statement of additional information is
incorporated by reference into this prospectus. Additional information
about the Portfolio's investments is available in the annual and
semi-annual reports to shareholders. In the annual report, you will find a
discussion of the market conditions and investment strategies that
significantly affected the Fund's performance during the past year. You may
obtain free copies of the statement of additional information and the
shareholder reports by contacting:
Eaton Vance Distributors, Inc.
The Eaton Vance Building
255 State Street
Boston, MA 02109
1-800-225-6265
website: www.eatonvance.com
You will find and may copy information about the Fund (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 Share- holder Services (1-800-225-6265). If you own shares and would
like to add to, redeem or change your account, please write or call the
transfer agent:
PFPC, Inc.
P.O. Box 9653
Providence, RI 02904-9653
1-800-262-1122
--------------------------------------------------------------------------------
The Fund's SEC File No. is 811-4015. HIP
<PAGE>
STATEMENT OF
ADDITIONAL INFORMATION
August 1, 2000
EATON VANCE HIGH INCOME FUND
The Eaton Vance Building
255 State Street
Boston, Massachusetts 02109
(800) 225-6265
This Statement of Additional Information ("SAI") provides general
information about the Fund and the Portfolio. The Fund is a series of Eaton
Vance Mutual Funds Trust. Capitalized terms used in this SAI and not otherwise
defined have the meanings given them in the prospectus. This SAI contains
additional information about:
Page
Strategies and Risks ............................................. 2
Investment Restrictions .......................................... 6
Management and Organization ...................................... 8
Investment Advisory and Administrative Services .................. 12
Other Service Providers .......................................... 13
Purchasing and Redeeming Shares .................................. 13
Sales Charges .................................................... 15
Performance ...................................................... 17
Taxes ............................................................ 19
Portfolio Security Transactions .................................. 21
Financial Statements ............................................. 22
Appendices:
A: Class B Fees, Performance and Ownership ....................... a-1
B: Class C Fees, Performance and Ownership ....................... b-1
C: Asset Composition Information ................................. c-1
D: Corporate Bond Ratings ........................................ d-1
THIS SAI IS NOT A PROSPECTUS AND IS AUTHORIZED FOR DISTRIBUTION TO
PROSPECTIVE INVESTORS ONLY IF PRECEDED OR ACCOMPANIED BY THE FUND'S PROSPECTUS
DATED AUGUST 1, 2000, AS SUPPLEMENTED FROM TIME TO TIME, WHICH IS INCORPORATED
HEREIN BY REFERENCE. THIS SAI SHOULD BE READ IN CONJUNCTION WITH SUCH
PROSPECTUS, WHICH MAY BE OBTAINED BY CALLING 1-800-225-6265.
<PAGE>
STRATEGIES AND RISKS
The rating assigned to a security by a rating agency does not reflect
assessment of the volatility of the security's market value or of the liquidity
of an investment in the securities. Credit ratings are based largely on the
issuer's historical financial condition and the rating agency's investment
analysis at the time of rating, and the rating assigned to any particular
security is not necessarily a reflection of the issuer's current financial
condition. Credit quality in the high yield high risk bond market can change
from time to time, and recently issued credit ratings may not fully reflect the
actual risks posed by a particular high yield security.
Certain securities held by the Portfolio may permit the issuer at its option
to "call," or redeem, its securities. If an issuer were to redeem securities
held by the Portfolio during a time of declining interest rates, the Portfolio
may not be able to reinvest the proceeds in securities providing the same
investment return as the securities redeemed.
OTHER FIXED-INCOME SECURITIES. Included in the fixed-income securities in which
the Portfolio may invest are preferred, preference and convertible stocks,
equipment lease certificates and equipment trust certificates. Equipment lease
certificates are debt obligations secured by leases on equipment (such as
railroad cars, airplanes or office equipment), with the issuer of the
certificate being the owner and lessor of the equipment. Equipment trust
certificates are debt obligations secured by an interest in property (such as
railroad cars or airplanes), the title of which is held by a trustee while the
property is being used by the borrower.
In addition to lower rated bonds, the Portfolio may invest in higher rated
securities. The Portfolio may also invest up to 20% of its net assets in common
stocks and other equity securities when consistent with its objective or
acquired as part of a fixed-income security. Equity securities are sensitive to
stock market volatility. Changes in stock market values can be sudden and
unpredictable. Even if values rebound, there is no assurance they will return to
previous levels.
LOAN INTERESTS. A loan in which the Portfolio may acquire a loan interest (a
"Loan Interest") is typically originated, negotiated and structured by a U.S. or
foreign commercial bank, insurance company, finance company or other financial
institution (the "Agent") for a lending syndicate of financial institutions. The
Agent typically administers and enforces the loan on behalf of the other lenders
in the syndicate. In addition, an institution, typically but not always the
Agent (the "Collateral Bank"), holds collateral (if any) on behalf of the
lenders. These Loan Interests may take the form of participation interests in,
assignments of or novations of a loan during its secondary distribution, or
direct interests during a primary distribution. Such Loan Interests may be
acquired from U.S. or foreign banks, insurance companies, finance companies or
other financial institutions who have made loans or are members of a lending
syndicate or from other holders of Loan Interests.
The Portfolio may also acquire Loan Interests under which the Portfolio
derives its rights directly from the borrower. Such Loan Interests are
separately enforceable by the Portfolio against the borrower and all payments of
interest and principal are typically made directly to the Portfolio from the
borrower. In the event that the Portfolio and other lenders become entitled to
take possession of shared collateral, it is anticipated that such collateral
would be held in the custody of a Collateral Bank for their mutual benefit. The
Portfolio may not act as an Agent, a Collateral Bank, a guarantor or sole
negotiator or structurer with respect to a loan.
The investment adviser will analyze and evaluate the financial condition of
the borrower in connection with the acquisition of any Loan Interest. The
investment adviser also analyzes and evaluates the financial condition of the
Agent and, in the case of Loan Interests in which the Portfolio does not have
privity with the borrower, those institutions from or through whom the Portfolio
derives its rights in a loan (the "Intermediate Participants"). From time to
time the investment adviser and its affiliates may borrow money from various
banks in connection with their business activities. Such banks may also sell
interests in loans to or acquire such interests from the Portfolio or may be
Intermediate Participants with respect to loans in which the Portfolio owns
interests. Such banks may also act as Agents for loans in which the Portfolio
owns interests.
In a typical loan the Agent administers the terms of the loan agreement. In
such cases, the Agent is normally responsible for the collection of principal
and interest payments from the borrower and the apportionment of these payments
to the credit of all institutions which are parties to the loan agreement. The
Portfolio will generally rely upon the Agent or an Intermediate Participant to
receive and forward to the Portfolio its portion of the principal and interest
payments on the loan. Furthermore, unless under the terms of a participation
agreement the Portfolio has direct recourse against the borrower, the Portfolio
will rely on the Agent and the other members of the lending syndicate to use
appropriate credit remedies against the borrower. The Agent is typically
responsible for monitoring compliance with covenants contained in the loan
agreement based upon reports prepared by the borrower. The seller of the Loan
Interest usually does, but is often not obligated to, notify holders of Loan
Interests of any failures of compliance. The Agent may monitor the value of the
collateral and, if the value of the collateral declines, may accelerate the
loan, may give the borrower an opportunity to provide additional collateral or
may seek other protection for the benefit of the participants in the loan. The
Agent is compensated by the borrower for providing these services under a loan
agreement, and such compensation may include special fees paid upon structuring
and funding the loan and other fees paid on a continuing basis. With respect to
Loan Interests for which the Agent does not perform such administrative and
enforcement functions, the Portfolio will perform such tasks on its own behalf,
although a Collateral Bank will typically hold any collateral on behalf of the
Portfolio and the other lenders pursuant to the applicable loan agreement.
A financial institution's appointment as Agent may usually be terminated in
the event that it fails to observe the requisite standard of care or becomes
insolvent, enters Federal Deposit Insurance Corporation ("FDIC") receivership,
or, if not FDIC insured, enters into bankruptcy proceedings. A successor Agent
would generally be appointed to replace the terminated Agent, and assets held by
the Agent under the loan agreement should remain available to holders of Loan
Interests. However, if assets held by the Agent for the benefit of the Portfolio
were determined to be subject to the claims of the Agent's general creditors,
the Portfolio might incur certain costs and delays in realizing payment on a
loan interest, or suffer a loss of principal and/or interest. In situations
involving Intermediate Participants similar risks may arise.
Purchasers of Loan interests depend primarily upon the creditworthiness of
the borrower for payment of principal and interest. If the Portfolio does not
receive scheduled interest or principal payments on such indebtedness, the
Portfolio could be adversely affected. Loans that are fully secured offer the
Portfolio more protections than an unsecured loan in the event of non-payment of
scheduled interest or principal. However, there is no assurance that the
liquidation of collateral from a secured loan would satisfy the borrower's
obligation, or that the collateral can be liquidated. Indebtedness of borrowers
whose creditworthiness is poor involves substantially greater risks, and may be
highly speculative. Borrowers that are in bankruptcy or restructuring may never
pay off their indebtedness, or may pay only a small fraction of the amount owed.
Direct indebtedness of developing countries will also involve a risk that the
governmental entities responsible for the repayment of the debt may be unable,
or unwilling, to pay interest and repay principal when due.
The Portfolio limits the amount of total assets that it will invest in any
one issuer or in issuers within the same industry. See Investment Restrictions
(1) and (5) below. For purposes of these restrictions, the Portfolio generally
will treat the borrower as the "issuer" of a Loan Interest held by the
Portfolio. In the case of loan participations where the Agent or Intermediate
Participant serves as financial intermediary between the Portfolio and the
borrower, the Portfolio, in appropriate circumstances, will treat both the Agent
or Intermediate Participant and the borrower as "issuers" for the purposes of
determining whether the Portfolio has invested more than 5% of its total assets
in a single issuer. Treating a financial intermediary as an issuer of
indebtedness may restrict the Portfolio's ability to invest in indebtedness
related to a single intermediary, or a group of intermediaries engaged in the
same industry, even if the underlying borrowers represent many different
companies and industries.
FOREIGN INVESTMENTS. Investing in securities issued by foreign-domiciled issuers
involves certain special considerations, including those set forth below, which
are not typically associated with investing in U.S. issuers. Since investments
in foreign issuers may involve currencies of foreign countries, and since the
Portfolio may temporarily hold funds in bank deposits in foreign currencies
during completion of investment programs, the Portfolio may be affected
favorably or unfavorably by changes in currency rates and in exchange control
regulations and may incur costs in connection with conversions between various
currencies.
Since foreign companies are not subject to uniform accounting, auditing and
financial reporting standards, practices and requirements comparable to those
applicable to U.S. companies, there may be less publicly available information
about a foreign company than about a domestic company. Foreign stock markets,
while growing in volume of trading activity, have substantially less volume than
the Exchange, and securities of some foreign companies are less liquid and more
volatile than securities of comparable U.S. companies. Similarly, volume and
liquidity in most foreign bond markets is less than in the United States and, at
times, volatility of price can be greater than in the United States. Fixed
commissions on foreign stock exchanges are generally higher than negotiated
commissions on U.S. exchanges, although the Portfolio endeavors to achieve the
most favorable net results on its portfolio transactions. There is generally
less government supervision and regulation of stock exchanges, brokers and
listed companies than in the United States. Mail service between the United
States and foreign countries may be slower or less reliable than within the
United States, thus increasing the risk of delayed settlements of portfolio
transactions or loss of certificates for portfolio securities. Investments may
include securities issued by companies in lesser- developed countries, which are
sometimes referred to as "emerging markets". Such countries pose a heightened
risk of nationalization or expropriation or confiscatory taxation, political,
financial or social instability, armed conflict or diplomatic developments which
could affect the Portfolio's investments in those countries. Moreover,
individual foreign economies may differ favorably or unfavorably from the U.S.
economy in such respects as growth of gross national product, rate of inflation,
capital reinvestment, resource self-sufficiency and balance of payments
position.
DERIVATIVE INSTRUMENTS. The Portfolio may purchase or sell derivative
instruments (which are instruments that derive their value from another
instrument, security, index or currency) to hedge against fluctuations in
interest rates, securities prices or currency exchange rates to change the
duration of the Portfolio's fixed income portfolio or as a substitute for the
purchase or sale of securities or currency. Options may be written to enhance
income. The Portfolio's transactions in derivative instruments may include the
purchase or sale of futures contracts on securities, (such as U.S. Government
securities), indices, other financial instruments (such as certificates of
deposit, Eurodollar time deposits, and economic indices) or currencies; options
on futures contracts; exchange-traded options on securities, indices or
currencies; and forward contracts to purchase or sell currencies. All of the
Portfolio's transactions in derivative instruments involve a risk of loss or
depreciation due to: unanticipated adverse changes in interest rates, securities
prices or currency exchange rates; the inability to close out a position; tax
constraints on closing out positions; default by the counterparty; imperfect
correlation between a position and the desired hedge; and portfolio management
constraints on disposing of securities subject to such transactions. The loss on
derivative instruments (other than purchased options) may substantially exceed
the Portfolio's initial investment in these instruments. In addition, the
Portfolio may lose the entire premium paid for purchased options that expire
before they can be profitably exercised by the Portfolio. The Portfolio incurs
transaction costs in opening and closing positions in derivative instruments.
Under regulations of the Commodity Future Trading Commission, the use of futures
transactions for nonhedging purposes is limited. There can be no assurance that
the investment adviser's use of derivative instruments will be advantageous to
the Portfolio.
The Portfolio's success in using derivative instruments to hedge portfolio
assets depends on the degree of price correlation between the derivative
instrument and the hedged asset. Imperfect correlation may be caused by several
factors, including temporary price disparities among the trading markets for the
derivative instrument, the assets underlying the derivative instrument and the
Portfolio's assets.
FORWARD FOREIGN CURRENCY EXCHANGE TRANSACTIONS. The Portfolio may enter into
forward foreign currency exchange contracts. A forward foreign currency exchange
contract involves an obligation to purchase or sell a specific currency at a
future date, which may be any fixed number of days from the date of the contract
agreed upon by the parties, at a price set at the time of the contract. These
contracts are traded in the interbank market conducted directly between currency
traders (usually large commercial banks) and their customers. A forward contract
generally has no deposit requirement, and no commissions are charged at any
stage for trades.
At the maturity of a forward contract the Portfolio may either accept or
make delivery of the currency specified in the contract or, at or prior to
maturity, enter into a closing transaction involving the purchase or sale of an
offsetting contract. Closing transactions with respect to forward contracts are
usually effected with the currency trader who is a party to the original forward
contract.
The Portfolio will not enter into forward contracts where the consummation
of the contracts would obligate the Portfolio to deliver an amount of foreign
currency in excess of the value of the securities held by the Portfolio or other
assets denominated in that currency. Under normal circumstances, consideration
of the prospect for currency parities will be incorporated into the long-term
investment decisions made with regard to overall diversification strategies.
However, the Portfolio believes that it is important to have the flexibility to
enter into such forward contracts when it determines that the best interests of
the Portfolio will be served. The Portfolio generally will not enter into a
forward contract with a term of greater than one year.
OPTIONS ON SECURITIES. An options position may be closed out only on an options
exchange which provides a secondary market for an option of the same series.
Although the Portfolio will generally purchase or write only those options for
which there appears to be an active secondary market, there is no assurance that
a liquid secondary market on an exchange will exist for any particular option,
or at any particular time. For some options, no secondary market on an exchange
may exist. In such event, it might not be possible to effect closing
transactions in particular options, with the result that the Portfolio would
have to exercise its options in order to realize any profit and would incur
transaction costs upon the sale of underlying securities pursuant to the
exercise of put options. If the Portfolio as a covered call option writer is
unable to effect a closing purchase transaction in a secondary market, it will
not be able to sell the underlying security until the option expires or it
delivers the underlying security upon exercise.
Reasons for the absence of a liquid secondary market on an exchange include
the following: (i) there may be insufficient trading interest in certain
options; (ii) restrictions may be imposed by an exchange on opening transactions
or closing transactions or both; (iii) trading halts, suspensions or other
restrictions may be imposed with respect to particular classes or series of
options or underlying securities; (iv) unusual or unforeseen circumstances may
interrupt normal operations on an exchange; (v) the facilities of an exchange or
the Options Clearing Corporation ("OCC") may not at all times be adequate to
handle current trading volume; or (vi) one or more exchanges could, for economic
or other reasons, decide or be compelled at some future date to discontinue the
trading of options (or a particular class or series of options), in which event
the secondary market on that exchange (or in that class or series of options)
would cease to exist, although outstanding options on that exchange that had
been issued by the OCC as a result of trades on that exchange would continue to
be exercisable in accordance with their terms.
There is no assurance that higher than anticipated trading activity or other
unforeseen events might not, at times, render certain of the facilities of the
OCC inadequate, and thereby result in the institution by an exchange of special
procedures which may interfere with the timely execution of customers' orders.
FUTURES CONTRACTS. All futures contracts entered into by the Portfolio are
traded on exchanges or boards of trade that are licensed and regulated by the
Commodity Futures Trading Commission ("CFTC"). The Portfolio may purchase and
write call and put options on futures contracts which are traded on a U.S.
exchange or board of trade.
The Portfolio will engage in futures and related options transactions for
bona fide hedging or non-hedging purposes as defined in or permitted by CFTC
regulations. The Portfolio will determine that the price fluctuations in the
futures contracts and options on futures used for hedging purposes are
substantially related to price fluctuations in securities held by the Portfolio
or which it expects to purchase. The Portfolio will engage in transactions in
futures and related options contracts only to the extent such transactions are
consistent with the requirements of the Code for maintaining the qualification
of the Fund as a regulated investment company for federal income tax purposes.
To the extent that the Portfolio enters into futures contracts, options on
futures contracts and options on foreign currencies traded on an exchange
regulated by the CFTC, in each case that are not for bona fide hedging purposes
(as defined by the CFTC), the aggregate initial margin and premiums required to
establish these positions (excluding the amount by which options are
"in-the-money") may not exceed 5% of the liquidation value of the Portfolio's
investments, after taking into account unrealized profits and unrealized losses
on any contracts the Portfolio has entered into. The Portfolio did not engage in
such transactions during the fiscal year ended March 31, 1999, and there is no
assurance that it will engage in such transactions in the future.
ASSET COVERAGE. Transactions involving forward contracts, futures contracts and
options (other than options that the Portfolio has purchased) expose the
Portfolio to an obligation to another party. The Portfolio will not enter into
any such transactions unless it owns either (1) an offsetting ("covered")
position in securities, or other options, futures contracts or forward
contracts, or (2) cash or liquid securities (such as readily marketable
obligations and money market instruments) with a value sufficient at all times
to cover its potential obligations not covered as provided in (1) above. The
Portfolio will comply with Securities and Exchange Commission ("SEC") guidelines
regarding cover for these instruments and, if the guidelines so require, set
aside cash, or liquid securities in a segregated account with its custodian in
the prescribed amount. The securities in the segregated account will be marked
to market daily.
Assets used as cover or held in a segregated account maintained by the
Portfolio's custodian cannot be sold while the position requiring coverage or
segregation is outstanding unless they are replaced with other appropriate
assets. As a result, the commitment of a large portion of the Portfolio's assets
to segregated accounts or to cover could impede portfolio management or the
Portfolio's ability to meet redemption requests or other current obligations.
SECURITIES LENDING. The Portfolio may seek to increase its income by lending
portfolio securities to broker-dealers or other institutional borrowers. If the
management of the Portfolio decides to make securities loans, it is intended
that the value of the securities loaned would not exceed 30% of the Portfolio's
total assets. Securities lending involves risks of delay in recovery or even
loss of rights on the securities loaned if the borrower fails financially. The
Portfolio has no present intention of engaging in securities lending.
INVESTMENT IN WARRANTS. The Portfolio may invest in warrants which have no
voting rights, pay no dividends and have no rights with respect to the assets of
the corporation issuing them. Warrants basically are options to purchase equity
securities at a specific price valid for a specific period of time. They do not
represent ownership of the securities, but only the right to buy them. Warrants
differ from calls in that warrants are issued by the same issuer as the security
which may be purchased on their exercise, whereas calls may be written or issued
by anyone. The prices of warrants do not necessarily move parallel to the prices
of the underlying securities.
ILLIQUID SECURITIES. It may be difficult to sell illiquid or restricted
securities at a price representing their fair value until such time as such
securities may by sold publicly. Where registration is required, a considerable
period may elapse between a decision to sell the securities and the time when
the Portfolio would be permitted to sell. Thus, the Portfolio may not be able to
obtain as favorable a price as that prevailing at the time of the decision to
sell. The Portfolio may also acquire securities through private placements under
which it may agree to contractual restrictions on the resale of such securities.
Such restrictions might prevent their sale at a time when such sale would
otherwise be desirable.
PORTFOLIO TURNOVER. The Portfolio cannot accurately predict its portfolio
turnover rate, but it is anticipated that its annual turnover rate generally may
exceed 100% (excluding turnover of securities having a maturity of one year or
less). A 100% annual turnover rate could occur, for example, if all the
securities held by the Portfolio were replaced more than once in a period of one
year. A high turnover rate (100% or more) necessarily involves greater brokerage
expenses to the Portfolio and may result in the realization of substantial net
short-term capital gains, which are taxable as ordinary income upon distribution
to the Fund's shareholders.
INVESTMENT RESTRICTIONS
The following investment restrictions are designated as fundamental policies
and as such cannot be changed without the approval of the holders of a majority
of the Fund's outstanding voting securities, which as used in this SAI means the
lesser of (a) 67% of the shares of the Fund present or represented by proxy at a
meeting if the holders of more than 50% of the outstanding shares are present or
represented at the meeting or (b) more than 50% of the outstanding shares of the
Fund. Accordingly, the Fund may not:
(1) With respect to 75% of total assets of the Fund, purchase any security
if such purchase, at the time thereof, would cause more than 5% of the total
assets of the Fund (taken at market value) to be invested in the securities of a
single issuer, or cause more than 10% of the total outstanding voting securities
of such issuer to be held by the Fund, except obligations issued or guaranteed
by the U.S. Government, its agencies or instrumentalities and except securities
of other investment companies;
(2) Borrow money or issue senior securities except as permitted by the 1940
Act;
(3) Purchase securities on margin (but the Fund may obtain such short-term
credits as may be necessary for the clearance of purchases and sales of
securities). The deposit or payment by the Fund of initial, maintenance or
variation margin in connection with all types of options and futures contract
transactions is not considered the purchase of a security on margin;
(4) Underwrite or participate in the marketing of securities of others,
except insofar as it may technically be deemed to be an underwriter in selling a
portfolio security under circumstances which may require the registration of the
same under the Securities Act of 1933;
(5) Purchase any security if such purchase, at the time thereof, would cause
more than 25% of the Fund's total assets to be invested in any single industry,
provided that the electric, gas and telephone utility industries shall be
treated as separate industries for purposes of this restriction and further
provided that there is no limitation with respect to obligations issued or
guaranteed by the U.S. Government or any of its agencies or instrumentalities.
(6) Purchase or sell real estate, although it may purchase and sell
securities which are secured by real estate and securities of companies which
invest or deal in real estate;
(7) Purchase or sell physical commodities or contracts for the purchase or
sale of physical commodities; or
(8) Make loans to any person except by (i) the acquisition of debt
securities and making portfolio investments, (ii) entering into repurchase
agreements or (iii) lending portfolio securities.
With respect to restriction (5), the Fund will construe the phrase "more
than 25%" to be "25% or more".
Notwithstanding the investment policies and restrictions of the Fund, the
Fund may invest all of its investable assets in an open-end management
investment company with substantially the same investment objective, policies
and restrictions as the Fund.
The Portfolio has adopted substantially the same fundamental investment
restrictions as the foregoing investment restrictions adopted by the Fund; such
restrictions cannot be changed without the approval of a "majority of the
outstanding voting securities" of the Portfolio.
The Fund and the Portfolio have each adopted the following investment
policies which may be changed by the Trustees with respect to the Fund without
shareholder approval or with respect to the Portfolio without approval of the
Fund or its other investors. The Fund and the Portfolio will not:
(a) invest more than 15% of its net assets in investments which are not
readily marketable, including restricted securities and repurchase agreements
maturing in more than seven days. Restricted securities for the purposes of this
limitation do not include securities eligible for resale pursuant to Rule 144A
under the Securities Act of 1933 and commercial paper issued pursuant to Section
4(2) of said Act that the Board of Trustees of the Trust or the Portfolio, or
their delegate, determines to be liquid, based upon the trading markets for the
specific security. Any such determination by a delegate will be made pursuant to
procedures adopted by the Board. If the Fund or Portfolio invests in Rule 144A
securities, the level of portfolio illiquidity may be increased to the extent
that eligible buyers become uninterested in purchasing such securities; or
(b) make short sales of securities or maintain a short position, unless at
all times when a short position is open it owns an equal amount of such
securities or securities convertible into or exchangeable for, without payment
of any further consideration, securities of the same issuer as, and equal in
amount to, the securities sold short, and unless not more than 25% of its net
assets (taken at current value) is held as collateral for such sales at any one
time.
For as long as a feeder fund of the Portfolio has registered shares in Hong
Kong (and for so long as Hong Kong requires the following restrictions), the
Portfolio may not (i) invest more than 10% of its net assets in the securities
of any one issuer or, purchase more than 10% of the ordinary shares of any one
issuer, provided, however, up to 30% of the Portfolio's net asset value may be
invested in Government and public securities of the same issue; and the
Portfolio may invest all of its assets in Government and other public securities
in at least six different issues, (ii) invest more than 15% of net assets in
securities which are not listed or quoted on any stock exchange,
over-the-counter market or other organized securities market that is open to the
international public and on which such securities are regularly traded (a
"Market"), (iii) invest more than 15% of net assets in warrants and options for
non-hedging purposes, (iv) write call options on Portfolio investments exceeding
25% of its total net asset value in terms of exercise price, (v) enter into
futures contracts on an unhedged basis where the net total aggregate value of
contract prices, whether payable by or to the Portfolio under all outstanding
futures contracts, together with the aggregate value of holdings under (vi)
below exceeds 20% of the net asset value of the Portfolio, (vi) invest in
physical commodities (including gold, silver, platinum or other bullion) and
commodity based investments (other than shares in companies engaged in
producing, processing or trading in commodities) which value together with the
net aggregate value of the holdings described in (v) above, exceeds 20% of the
Portfolio's net asset value, (vii) purchase shares of other investment companies
exceeding 10% of net assets. In addition, the investment objective of any scheme
in which any Portfolio invests must not be to invest in investments prohibited
by this undertaking and where the scheme's investment objective is to invest
primarily in investments which are restricted by this undertaking, such holdings
must not be in contravention of the relevant limitation, (viii) borrow more than
25% of its net assets (provided that for the purposes of this paragraph, back to
back loans are not to be categorized as borrowings), (ix) write uncovered
options, (x) invest in real estate (including options, rights or interests
therein but excluding shares in real estate companies), (xi) assume, guarantee,
endorse or otherwise become directly or contingently liable for, or in
connection with, any obligation or indebtedness of any person in respect of
borrowed money without the prior written consent of the custodian of the
Portfolio, (xii) engage in short sales involving a liability to deliver
securities exceeding 10% of its net assets provided that any security which a
Portfolio does sell short must be actively traded on a market, (xiii) subject to
paragraph (v) above, purchase an investment with unlimited liability or (xiv)
purchase any nil or partly-paid securities unless any call thereon could be met
in full out of cash or near cash held by it in the amount of which has not
already been taken into account for the purposes of (ix) above. For as long as a
feeder fund of the Portfolio is registered in Taiwan, the total value of the
Portfolio's investments in derivative products for hedging or investment
purposes will not exceed 15% of total net assets.
Whenever an investment policy or investment restriction set forth in the
prospectus or this SAI states a maximum percentage of assets that may be
invested in any security or other asset, or describes a policy regarding quality
standards such percentage limitation or standard shall be determined immediately
after and as a result of the Fund's or the Portfolio's acquisition of such
security or asset. Accordingly, any later increase or decrease resulting from a
change in values, assets or other circumstances, will not compel the Fund or the
Portfolio, as the case may be, to dispose of such security or other asset. Where
applicable and notwithstanding the foregoing, under normal market conditions the
Fund and the Portfolio must take actions necessary to comply with the policy of
investing at least 65% of total assets in the lowest investment grade and lower
rated and unrated debt obligations. Moreover, the Fund and Portfolio must always
be in compliance with the limitation on investing in illiquid securities and the
borrowing policies set forth above.
MANAGEMENT AND ORGANIZATION
FUND MANAGEMENT. The Trustees of the Trust are responsible for the overall
management and supervision of the Trust's affairs. The Trustees and officers of
the Trust and the Portfolio are listed below. Except as indicated, each
individual has held the office shown or other offices in the same company for
the last five years. Unless otherwise noted, the business address of each
Trustee and officer is The Eaton Vance Building, 255 State Street, Boston,
Massachusetts 02109. Those Trustees who are "interested persons" of the Trust or
the Portfolio, as defined in the 1940 Act, are indicated by an asterisk(*).
JESSICA M. BIBLIOWICZ (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). Executive Vice President of Smith
Barney Mutual Funds (from July, 1994 to June, 1997). Elected Trustee October
30, 1998. Trustee of various investment companies managed by Eaton Vance or
BMR since October 30, 1998.
Address: 1301 Avenue of the Americas, New York, NY 10019
DONALD R. DWIGHT (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 (56), Vice President of the Trust
Vice President of BMR and Eaton Vance. Officer of various investment companies
managed by Eaton Vance or BMR.
ROBERT B. MACINTOSH (43), Vice President of the Trust
Vice President of BMR and Eaton Vance. Officer of various investment companies
managed by Eaton Vance or BMR.
MICHAEL WEILHEIMER (39), Vice President of the Portfolio
Vice President of BMR and Eaton Vance. Officer of various investment companies
managed by Eaton Vance or BMR.
EDWARD E. SMILEY, JR. (55), Vice President of the Trust
Vice President of Eaton Vance and BMR since November 1, 1996. Previously, he was
a Senior Product Manager at Equity Management for TradeStreet Investment
Associates, Inc., a wholly-owned subsidiary of Nations Bank (1992-1996).
ARMIN J. LANG (36), Vice President of the Trust
Vice President of Eaton Vance and BMR since June 21, 1999. Previously, he was an
international equity portfolio manager and quantitative strategist at
Standish, Ayer & Wood. Officer of various investment companies managed by
Eaton Vance or BMR.
JAMES L. O'CONNOR (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 Commitee of the Board of Trustees of the Trust and the
Portfolio is comprised of all Trustees who are not "interested persons" as that
term is defined by the 1940 Act ("noninterested Trustees"). The purpose of the
Committee is to recommend to the Board nominees for the position of
noninterested Trustee and to assure that at least a majority of the Board of
Trustees is independent of Eaton Vance and its affiliates.
Messrs. Hayes (Chairman), Dwight and Reamer and Ms. Stout are members of the
Special Committee of the Board of Trustees of the Trust and of the Portfolio.
The purpose of the Special Committee is to consider, evaluate and make
recommendations to the full Board of Trustees concerning (i) all contractual
arrangements with service providers to the Fund and the Portfolio, including
investment advisory (Portfolio only), administrative, transfer agency,
custodial, fund accounting and distribution services, and (ii) all other matters
in which Eaton Vance or its affiliates has any actual or potential conflict of
interest with the Fund, the Portfolio or investors therein.
Messrs. Treynor (Chairman), 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 Portfolio nor the Trust has a
retirement plan for its Trustees.
The fees and expenses of the noninterested Trustees of the Trust and of the
Portfolio are paid by the Fund (and the other series of the Trust) and the
Portfolio, respectively. (The Trustees of the Trust and the Portfolio who are
members of the Eaton Vance organization receive no compensation from the Trust
or the Portfolio.) During the fiscal year ended March 31, 2000, the
noninterested Trustees of the Trust and the Portfolio earned the following
compensation in their capacities as Trustees from the Trust and the Portfolio,
and for the year ended December 31, 1999, earned the following compensation in
their capacities as Trustees of the funds in the Eaton Vance fund complex(1):
<TABLE>
<CAPTION>
JESSICA M. DONALD R. SAMUEL L. NORTON H. LYNN A. JACK L.
SOURCE OF COMPENSATION BIBLIOWICZ 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 ..................................... 5,286 4,713(3) 5,100 4,864 5,409(4) 5,356
Trust and Fund Complex ........................ 160,000 160,000(5) 170,000 160,000 160,000(6) 170,000
----------
(1) As of August 1, 2000 the Eaton Vance fund complex consists of 146 registered investment companies or series thereof.
(2) As of March 31, 2000, the Trust consisted of 13 Funds.
(3) Includes $2,495 of deferred compensation.
(4) Includes $751 of deferred compensation.
(5) Includes $60,000 of deferred compensation.
(6) Includes $16,000 of deferred compensation.
</TABLE>
ORGANIZATION. The Fund is a series of the Trust, which is organized under
Massachusetts law as a business trust and is operated as an open-end management
investment company. The Fund was reorganized into multiple classes and changed
its name to Eaton Vance High Income Fund on April 1, 1998. The operations of
Class B reflect the operations of the Fund prior to April 1, 1998. Class C is
the successor to the operations of a separate series of the Trust.
The Trust may issue an unlimited number of shares of beneficial interest (no
par value per share) in one or more series (such as the Fund). The Trustees of
the Trust have divided the shares of the Fund into multiple classes. Each class
represents an interest in the Fund, but is subject to different expenses, rights
and privileges. The Trustees have the authority under the Declaration of Trust
to create additional classes of shares with differing rights and privileges.
When issued and outstanding, shares are fully paid and nonassessable by the
Trust. Shareholders are entitled to one vote for each full share held.
Fractional shares may be voted proportionately. Shares of the Fund will be voted
together except that only shareholders of a particular class may vote on matters
affecting only that class. Shares have no preemptive or conversion rights and
are freely transferable. In the event of the liquidation of the Fund,
shareholders of each class are entitled to share pro rata in the net assets
attributable to that class available for distribution to shareholders.
The Trustees of the Trust have considered the advantages and disadvantages
of investing the assets of the Fund in the Portfolio, as well as the advantages
and disadvantages of the two-tier format. The Trustees believe that the
structure offers opportunities for growth in the assets of the Portfolio, may
afford the potential for economies of scale for the Fund and may over time
result in lower expenses for the Fund.
As permitted by Massachusetts law, there will normally be no meetings of
shareholders for the purpose of electing Trustees unless and until such time as
less than a majority of the Trustees of the Trust holding office have been
elected by shareholders. In such an event, the Trustees then in office will call
a shareholders' meeting for the election of Trustees. Except for the foregoing
circumstances and unless removed by action of the shareholders in accordance
with the Trust's by-laws, the Trustees shall continue to hold office and may
appoint successor Trustees.
The Trust's By-laws provide that no person shall serve as a Trustee if
shareholders holding two-thirds of the outstanding shares have removed him from
that office either by a written declaration filed with the Trust's custodian or
by votes cast at a meeting called for that purpose. The By-laws further provide
that under certain circumstances the shareholders may call a meeting to remove a
Trustee and that the Trust is required to provide assistance in communicating
with investors about such a meeting.
The Trust's Declaration of Trust may be amended by the Trustees when
authorized by vote of a majority of the outstanding voting securities of the
Trust, the financial interests of which are affected by the amendment. The
Trustees may also amend the Declaration of Trust without the vote or consent of
shareholders to change the name of the Trust or any series or to make such other
changes (such as reclassifying series or classes of shares or restructuring the
Trust) as do not have a materially adverse effect on the financial interests of
shareholders or if they deem it necessary to conform it to applicable federal or
state laws or regulations. The Trust or any series or class thereof may be
terminated by: (1) the affirmative vote of the holders of not less than
two-thirds of the shares outstanding and entitled to vote at any meeting of
shareholders of the Trust or the appropriate series or class thereof, or by an
instrument or instruments in writing without a meeting, consented to by the
holders of two-thirds of the shares of the Trust or a series or class thereof,
provided, however, that, if such termination is recommended by the Trustees, the
vote of a majority of the outstanding voting securities of the Trust or a series
or class thereof entitled to vote thereon will be sufficient authorization; or
(2) by means of an instrument in writing signed by a majority of the Trustees,
to be followed by a written notice to shareholders stating that a majority of
the Trustees has determined that the continuation of the Trust or a series or a
class thereof is not in the best interest of the Trust, such series or class or
of their respective shareholders.
The Declaration of Trust further provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law; but nothing in the
Declaration of Trust protects a Trustee against any liability to which he would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of his
office.
Under Massachusetts law, if certain conditions prevail, shareholders of a
Massachusetts business trust (such as the Trust) could be deemed to have
personal liability for the obligations of the Trust. Numerous investment
companies registered under the 1940 Act have been formed as Massachusetts
business trusts, and management is not aware of an instance where such liability
has been imposed. The Trust's Declaration of Trust contains an express
disclaimer of liability on the part of the Fund shareholders and the Trust's
By-laws provide that the Trust shall assume the defense on behalf of any Fund
shareholders. (The Declaration of Trust also contains provisions limiting the
liability of a series or class to that series or class.) Moreover, the Trust's
By-laws also provide for indemnification out of the property of the Fund of any
shareholder held personally liable solely by reason of being or having been a
shareholder for all loss or expense arising from such liability. The assets of
the Fund are readily marketable and will ordinarily substantially exceed its
liabilities. In light of the nature of the Fund's business and the nature of its
assets, management believes that the possibility of the Fund's liability
exceeding its assets, and therefore the shareholder's risk of personal
liability, is remote.
The Portfolio is organized as a trust under the laws of the state of New
York and intends to be treated as a partnership for federal tax purposes. In
accordance with the Declaration of Trust of the Portfolio, there will normally
be no meetings of the investors for the purpose of electing Trustees unless and
until such time as less than a majority of the Trustees of the Portfolio holding
office have been elected by investors. In such an event the Trustees of the
Portfolio then in office will call an investors' meeting for the election of
Trustees. Except for the foregoing circumstances and unless removed by action of
the investors in accordance with the Portfolio's Declaration of Trust, the
Trustees shall continue to hold office and may appoint successor Trustees.
The Declaration of Trust of the Portfolio provides that no person shall
serve as a Trustee if investors holding two-thirds of the outstanding shares
have removed him from that office either by a written declaration filed with the
Portfolio's custodian or by votes cast at a meeting called for that purpose. The
Declaration of Trust further provides that under certain circumstances the
investors may call a meeting to remove a Trustee and that the Portfolio is
required to provide assistance in communication with shareholders about such a
meeting.
The Portfolio's Declaration of Trust provides that the Fund and other
entities permitted to invest in the Portfolio (e.g., other U.S. and foreign
investment companies, and common and commingled trust funds) will each be liable
for all obligations of the Portfolio. However, the risk of the Fund incurring
financial loss on account of such liability is limited to circumstances in which
both inadequate insurance exists and the Portfolio itself is unable to meet its
obligations. Accordingly, the Trustees of the Trust believe that neither the
Fund nor its shareholders will be adversely affected by reason of the Fund
investing in the Portfolio.
Whenever the Fund as an investor in a Portfolio is requested to vote on
matters pertaining to the Portfolio (other than the termination of the
Portfolio's business, which may be determined by the Trustees of the Portfolio
without investor approval), the Fund will hold a meeting of Fund shareholders
and will vote its interest in the Portfolio for or against such matters
proportionately to the instructions to vote for or against such matters received
from Fund shareholders. The Fund shall vote shares for which it receives no
voting instructions in the same proportion as the shares for which it receives
voting instructions. Other investors in the Portfolio may alone or collectively
acquire sufficient voting interests in the Portfolio to control matters relating
to the operation of the Portfolio, which may require the Fund to withdraw its
investment in the Portfolio or take other appropriate action. Any such
withdrawal could result in a distribution "in kind" of portfolio securities (as
opposed to a cash distribution from the Portfolio). If securities are
distributed, the Fund could incur brokerage, tax or other charges in converting
the securities to cash. In addition, the distribution in kind may result in a
less diversified portfolio of investments or adversely affect the liquidity of
the Fund. Notwithstanding the above, there are other means for meeting
shareholder redemption requests, such as borrowing.
The Fund may withdraw (completely redeem) all its assets from the Portfolio
at any time if the Board of Trustees of the Trust determines that it is in the
best interest of the Fund to do so. In the event the Fund withdraws all of its
assets from the Portfolio, or the Board of Trustees of the Trust determines that
the investment objective of the Portfolio is no longer consistent with the
investment objective of the Fund, the Trustees would consider what action might
be taken, including investing the assets of the Fund in another pooled
investment entity or retaining an investment adviser to manage the Fund's assets
in accordance with its investment objective. The Fund's investment performance
may be affected by a withdrawal of all its assets (or the assets of another
investor in the Portfolio) from the Portfolio.
INVESTMENT ADVISORY AND ADMINISTRATIVE SERVICES
INVESTMENT ADVISORY SERVICES. BMR manages the investments and affairs of the
Portfolio subject to the supervision of the Portfolio's Board of Trustees. BMR
furnishes to the Portfolio investment research, advice and supervision,
furnishes an investment program and determines what securities will be
purchased, held or sold by the Portfolio and what portion, if any, of the
Portfolio's assets will be held uninvested. The Investment Advisory Agreement
requires BMR to pay the salaries and fees of all officers and Trustees of the
Portfolio who are members of the BMR organization and all personnel of BMR
performing services relating to research and investment activities.
For a description of the compensation that the Portfolio pays BMR, see the
prospectus. As at March 31, 2000, the Portfolio had net assets of
$1,184,997,935. For the fiscal years ended March 31, 2000, 1999 and 1998, the
Portfolio paid BMR advisory fees of $6,676,593, $5,895,549 and $4,736,709,
respectively, (equivalent to 0.60%, 0.61% and 0.58% of the Portfolio's average
daily net assets for each such year).
The Investment Advisory Agreement with BMR continues in effect from year to
year for so long as such continuance is approved at least annually (i) by the
vote of a majority of the noninterested Trustees of the Portfolio cast in person
at a meeting specifically called for the purpose of voting on such approval and
(ii) by the Board of Trustees of the Portfolio or by vote of a majority of the
outstanding voting securities of the Portfolio. The Agreement may be terminated
at any time without penalty on sixty (60) days' written notice by the Board of
Trustees of either party, or by vote of the majority of the outstanding voting
securities of the Portfolio, and the Agreement will terminate automatically in
the event of its assignment. The Agreement provides that BMR may render services
to others. The Agreement also provides that BMR shall not be liable for any loss
incurred in connection with the performance of its duties, or action taken or
omitted under that Agreement, in the absence of willful misfeasance, bad faith,
gross negligence in the performance of its duties or by reason of its reckless
disregard of its obligations and duties thereunder, or for any losses sustained
in the acquisition, holding or disposition of any security or other investment.
ADMINISTRATIVE SERVICES. As indicated in the prospectus, Eaton Vance serves as
administrator of the Fund, but currently receives no compensation for providing
administrative services to the Fund. Under its Administrative Services Agreement
with the Trust, Eaton Vance has been engaged to administer the Fund's affairs,
subject to the supervision of the Trustees of the Trust, and shall furnish for
the use of the Fund office space and all necessary office facilities, equipment
and personnel for administering the affairs of the Fund.
INFORMATION ABOUT BMR AND EATON VANCE. BMR and Eaton Vance are business trusts
organized under Massachusetts law. Eaton Vance, Inc. ("EV") serves as trustee
of BMR and Eaton Vance. BMR, Eaton Vance and EV are wholly-owned subsidiaries
of Eaton Vance Corporation ("EVC"), a Maryland corporation and publicly-held
holding company. EVC through its subsidiaries and affiliates engages primarily
in investment management, administration and marketing activities. The
Directors of EVC are James B. Hawkes, 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 Messrs. 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 Portfolio are each responsible for all expenses not
expressly stated to be payable by another party (such as the investment adviser
under the Investment Advisory Agreement, Eaton Vance under the Administrative
Services Agreement or the principal underwriter under the Distribution
Agreement). In the case of expenses incurred by the Trust, the Fund is
responsible for its pro rata share of those expenses. The only expenses of the
Fund allocated to a particular class are those incurred under the Distribution
Plan applicable to that class and the fee paid to the principal underwriter for
handling repurchase transactions.
OTHER SERVICE PROVIDERS
PRINCIPAL UNDERWRITER. Eaton Vance Distributors, Inc. ("EVD"), The Eaton Vance
Building, 255 State Street, Boston, MA 02109, is the Fund's principal
underwriter. The principal underwriter acts as principal in selling shares under
a Distribution Agreement with the Trust. The expenses of printing copies of
prospectuses used to offer shares and other selling literature and of
advertising are borne by the principal underwriter. The fees and expenses of
qualifying and registering and maintaining qualifications and registrations of
the Fund and its shares under federal and state securities laws are borne by the
Fund. The Distribution Agreement as it applies to Class B and Class C shares is
renewable annually by the Trust's Board of Trustees (including a majority of the
noninterested Trustees who have no direct or indirect financial interest in the
operation of the Distribution Plan or the Distribution Agreement), may be
terminated on sixty days' notice either by such Trustees or by vote of a
majority of the outstanding shares of the relevant class or on six months'
notice by the principal underwriter and is automatically terminated upon
assignment. The principal underwriter distributes shares on a "best efforts"
basis under which it is required to take and pay for only such shares as may be
sold. The principal underwriter allows investment dealers discounts from the
applicable public offering price which are alike for all investment dealers. See
"Sales Charges." EVD is a wholly-owned subsidiary of EVC. Mr. Hawkes is a Vice
President and Director and Messrs. Dynner and O'Connor are Vice Presidents of
EVD.
CUSTODIAN. Investors Bank & Trust Company ("IBT"), 200 Clarendon Street, Boston,
MA 02116, serves as custodian to the Fund and Portfolio. IBT has the custody of
all cash and securities representing the Fund's interest in the Portfolio, has
custody of the Portfolio's assets, maintains the general ledger of the Portfolio
and the Fund and computes the daily net asset value of interests in the
Portfolio and the net asset value of shares of the Fund. In such capacity it
attends to details in connection with the sale, exchange, substitution, transfer
or other dealings with the Portfolio's investments, receives and disburses all
funds and performs various other ministerial duties upon receipt of proper
instructions from the Trust and the Portfolio. IBT also provides services in
connection with the preparation of shareholder reports and the electronic filing
of such reports with the SEC. EVC and its affiliates and their officers and
employees from time to time have transactions with various banks, including IBT.
It is Eaton Vance's opinion that the terms and conditions of such transactions
were not and will not be influenced by existing or potential custodial or other
relationships between the Fund or the Portfolio and such banks.
INDEPENDENT ACCOUNTANTS. Deloitte & Touche LLP, 200 Berkeley Street, Boston,
Massachusetts 02116, are the independent accountants of the Fund and the
Portfolio, providing audit services, tax return preparation, and assistance and
consultation with respect to the preparation of filings with the SEC.
TRANSFER AGENT. 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 the Portfolio is computed
by IBT (as agent and custodian for the Portfolio) by subtracting the liabilities
of the Portfolio from the value of its total assets. The Fund and the Portfolio
will be closed for business and will not price their respective shares or
interests on the following business holidays: New Year's Day, Martin Luther
King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day.
The Trustees of the Portfolio have established the following procedures for
the fair valuation of the Portfolio's assets under normal market conditions.
Securities listed on foreign or U.S. securities exchanges or in the NASDAQ
National Market System generally are valued at closing sale prices or, if there
were no sales, at the mean between the closing bid and asked prices therefor on
the exchange where such securities are principally traded or on such National
Market System. Unlisted or listed securities for which closing sale prices are
not available are valued at the mean between the latest bid and asked prices. An
option is valued at the last sale price as quoted on the principal exchange or
board of trade on which such option or contract is traded, or in the absence of
a sale, at the mean between the last bid and asked prices. Futures positions on
securities or currencies are generally valued at closing settlement prices.
Short-term debt securities with a remaining maturity of 60 days or less are
valued at amortized cost. If securities were acquired with a remaining maturity
of more than 60 days, their amortized cost value will be based on their value on
the sixty-first day prior to maturity. Other fixed income and debt securities,
including listed securities and securities for which price quotations are
available, will normally be valued on the basis of valuations furnished by a
pricing service. All other securities are valued at fair value as determined in
good faith by or at the direction of the Trustees.
Generally, trading in the foreign securities owned by the Portfolio is
substantially completed each day at various times prior to the close of the New
York Stock Exchange (the "Exchange"). The values of these securities used in
determining the net asset value of the Portfolio's shares generally are computed
as of such times. Occasionally, events affecting the value of foreign securities
may occur between such times and the close of the Exchange which will not be
reflected in the computation of the Portfolio's net asset value (unless the
Portfolio deems that such events would materially affect its net asset value, in
which case an adjustment would be made and reflected in such computation).
Foreign securities and currency held by the Portfolio will be valued in U.S.
dollars; such values will be computed by the custodian based on foreign currency
exchange rate quotations supplied by an independent quotation service.
Each investor in the Portfolio, including the Fund, may add to or reduce its
investment in the Portfolio on each day the Exchange is open for trading
("Portfolio Business Day") as of the close of regular trading on the Exchange
(the "Portfolio Valuation Time"). The value of each investor's interest in the
Portfolio will be determined by multiplying the net asset value of the Portfolio
by the percentage, determined on the prior Portfolio Business Day, which
represented that investor's share of the aggregate interests in the Portfolio on
such prior day. Any additions or withdrawals for the current Portfolio Business
Day will then be recorded. Each investor's percentage of the aggregate interest
in the Portfolio will then be recomputed as a percentage equal to a fraction (i)
the numerator of which is the value of such investor's investment in the
Portfolio as of the Portfolio Valuation Time on the prior Portfolio Business Day
plus or minus, as the case may be, the amount of any additions to or withdrawals
from the investor's investment in the Portfolio on the current Portfolio
Business Day and (ii) the denominator of which is the aggregate net asset value
of the Portfolio as of the Portfolio Valuation Time on the prior Portfolio
Business Day plus or minus, as the case may be, the amount of the net additions
to or withdrawals from the aggregate investment in the Portfolio on the current
Portfolio Business Day by all investors in the Portfolio. The percentage so
determined will then be applied to determine the value of the investor's
interest in the Portfolio for the current Portfolio Business Day.
ADDITIONAL INFORMATION ABOUT PURCHASES. Fund shares are continuously offered
through investment dealers which have entered agreements with the principal
underwriter. The public offering price is the net asset value next computed
after receipt of the order. In connection with employee benefit or other
continuous group purchase plans, the Fund may accept initial investments of less
than $1,000 on the part of an individual participant. In the event a shareholder
who is a participant of such a plan terminates participation in the plan, his or
her shares will be transferred to a regular individual account. However, such
account will be subject to the right of redemption by the Fund as described
below.
SUSPENSION OF SALES. The Trust may, in its absolute discretion, suspend,
discontinue or limit the offering of one or more of its classes of shares at any
time. In determining whether any such action should be taken, the Trust's
management intends to consider all relevant factors, including (without
limitation) the size of the Fund or class, the investment climate and market
conditions, the volume of sales and redemptions of shares, and in the case of
Class B and Class C shares, the amount of uncovered distribution charges of the
principal underwriter. The Class B and Class C Distribution Plans may continue
in effect and payments may be made under the Plans following any such
suspension, discontinuance or limitation of the offering of shares; however,
there is no contractual obligation to continue any Plan for any particular
period of time. Suspension of the offering of shares would not, of course,
affect a shareholder's ability to redeem shares.
ACQUIRING FUND SHARES IN EXCHANGE FOR SECURITIES. IBT, as escrow agent, will
receive securities acceptable to Eaton Vance, as administrator, in exchange for
Fund shares. The minimum value of securities (or securities and cash) accepted
for deposit is $5,000. Securities accepted will be sold on the day of their
receipt or as soon thereafter as possible. The number of Fund shares to be
issued in exchange for securities will be the aggregate proceeds from the sale
of such securities, divided by the net asset value of Class B and Class C shares
on the day such proceeds are received. Eaton Vance will use reasonable efforts
to obtain the then current market price for such securities but does not
guarantee the best available price. Eaton Vance will absorb any transaction
costs, such as commissions, on the sale of the securities. Securities determined
to be acceptable should be transferred via book entry or physically delivered,
in proper form for transfer, through an investment dealer, together with a
completed and signed Letter of Transmittal in approved form (available from
investment dealers). Investors who are contemplating an exchange of securities
for shares, or their representatives, must contact Eaton Vance to determine
whether the securities are acceptable before forwarding such securities. Eaton
Vance reserves the right to reject any securities. Exchanging securities for
shares may create a taxable gain or loss. Each investor should consult his or
her tax adviser with respect to the particular federal, state and local tax
consequences of exchanging securities.
ADDITIONAL INFORMATION ABOUT REDEMPTIONS. The right to redeem shares of the Fund
can be suspended and the payment of the redemption price deferred when the
Exchange is closed (other than for customary weekend and holiday closings),
during periods when trading on the Exchange is restricted as determined by the
SEC, or during any emergency as determined by the SEC which makes it
impracticable for the Portfolio to dispose of its securities or value its
assets, or during any other period permitted by order of the SEC for the
protection of investors.
While normally payments will be made in cash for redeemed shares, the Trust,
subject to compliance with applicable regulations, has reserved the right to pay
the redemption price of shares of the Fund, either totally or partially, by a
distribution in kind of readily marketable securities withdrawn from the
Portfolio. The securities so distributed would be valued pursuant to the
Portfolio's valuation procedures. If a shareholder received a distribution in
kind, the shareholder could incur brokerage or other charges in converting the
securities to cash.
Due to the high cost of maintaining small accounts, the Trust reserves the
right to redeem accounts with balances of less than $750. Prior to such a
redemption, shareholders will be given 60 days' written notice to make an
additional purchase. However, no such redemption would be required by the Trust
if the cause of the low account balance was a reduction in the net asset value
of shares. No CDSC will be imposed with respect to such involuntary redemptions.
SYSTEMATIC WITHDRAWAL PLAN. The transfer agent will send to the shareholder
regular monthly or quarterly payments of any permitted amount designated by the
shareholder based upon the value of the shares held. The checks will be drawn
from share redemptions and hence, may require the recognition of taxable gain or
loss. Income dividends and capital gains distributions in connection with
withdrawal plan accounts will be credited at net asset value as of the record
date for each distribution. Continued withdrawals in excess of current income
will eventually use up principal, particularly in a period of declining market
prices. A shareholder may not have a withdrawal plan in effect at the same time
he or she has authorized Bank Automated Investing or is otherwise making regular
purchases of Fund shares. The shareholder, the transfer agent or the principal
underwriter will be able to terminate the withdrawal plan at any time without
penalty.
SALES CHARGES
DEALER COMMISSIONS. The principal underwriter may, from time to time, at its own
expense, provide additional incentives to investment dealers which employ
registered representatives who sell Fund shares and/or shares of other funds
distributed by the principal underwriter. In some instances, such additional
incentives may be offered only to certain investment dealers whose
representatives sell or are expected to sell significant amounts of shares. In
addition, the principal underwriter may from time to time increase or decrease
the sales commissions payable to investment dealers.
TAX-SHELTERED RETIREMENT PLANS. Class C shares are available for purchase in
connection with certain tax-sheltered retirement plans. Detailed information
concerning these plans, including certain exceptions to minimum investment
requirements, and copies of the plans are available from the principal
underwriter. This information should be read carefully and consultation with an
attorney or tax adviser may be advisable. The information sets forth the service
fee charged for retirement plans and describes the federal income tax
consequences of establishing a plan. Participant accounting services (including
trust fund reconciliation services) will be offered only through third party
recordkeepers and not by the principal underwriter. Under all plans, dividends
and distributions will be automatically reinvested in additional shares.
CDSC WAIVERS. The CDSC applicable to Class B shares will be waived in connection
with minimum required distributions from tax-sheltered retirement plans by
applying the rate required to be withdrawn under the applicable rules and
regulations of the Internal Revenue Service to the balance of Class B shares in
your account. All CDSC waivers are prospective only.
DISTRIBUTION PLANS. The Trust has adopted compensation-type Distribution Plans
(the "Class B and Class C Plans") pursuant to Rule 12b-1 under the 1940 Act for
the Fund's Class B and Class C shares. The Class B and Class C Plans are
designed to permit an investor to purchase shares through an investment dealer
without incurring an initial sales charge and at the same time permit the
principal underwriter to compensate investment dealers in connection therewith.
The Class B and Class C Plans provide that the Fund will pay sales commissions
and distribution fees to the principal underwriter only after and as a result of
the sale of shares. On each sale of shares (excluding reinvestment of
distributions), the Fund will pay the principal underwriter amounts representing
(i) sales commissions equal to 5% for Class B shares and 6.25% for Class C
shares of the amount received by the Fund for each share sold and (ii)
distribution fees calculated by applying the rate of 1% over the prime rate then
reported in The Wall Street Journal to the outstanding balance of uncovered
distribution charges (as described below) of the principal underwriter. To pay
these amounts, each Class pays the principal underwriter a fee, accrued daily
and paid monthly, at an annual rate not exceeding .75% of its average daily net
assets to finance the distribution of its shares. Such fees compensate the
principal underwriter for sales commissions paid by it to investment dealers on
the sale of shares and for interest expenses. For sales of Class B shares, the
principal underwriter uses its own funds to pay sales commissions (except on
exchange transactions and reinvestments) to investment dealers at the time of
sale equal to 4% of the purchase price of the Class B shares sold by such
dealers. For Class C shares, the principal underwriter currently expects to pay
to an investment dealer (a) sales commissions (except on exchange transactions
and reinvestments) at the time of sale equal to .75% of the purchase price of
the shares sold by such dealer, and (b) monthly sales commissions approximately
equivalent to 1/12 of .75% of the value of shares sold by such dealer and
remaining outstanding for at least one year. During the first year after a
purchase of Class C shares, the principal underwriter will retain the sales
commission as reimbursement for the sales commissions paid to investment dealers
at the time of sale. CDSCs paid to the principal underwriter will be used to
reduce amounts owed to it. The Class B and Class C Plans provide that the Fund
will make no payments to the principal underwriter in respect of any day on
which there are no outstanding uncovered distribution charges of the principal
underwriter. CDSCs and accrued amounts will be paid by the Trust to the
principal underwriter whenever there exist uncovered distribution charges.
Because payments to the principal underwriter under the Class B and Class C
Plans are limited, uncovered distribution charges (sales commissions paid by the
principal underwriter plus interest, less the above fees and CDSCs received by
it) may exist indefinitely. For the sales commissions and CDSCs paid on (and
uncovered distribution charges of) Class B and Class C shares, see Appendix A
and Appendix B, respectively.
In calculating daily the amount of uncovered distribution charges,
distribution charges will include the aggregate amount of sales commissions and
distribution fees theretofore paid plus the aggregate amount of sales
commissions and distribution fees which the principal underwriter is entitled to
be paid under the Plan since its inception. Payments theretofore paid or payable
under the Class B and Class C Plans by the Trust to the principal underwriter
and CDSCs theretofore paid or payable to the principal underwriter will be
subtracted from such distribution charges; if the result of such subtraction is
positive, a distribution fee (computed at 1% over the prime rate then reported
in The Wall Street Journal) will be computed on such amount and added thereto,
with the resulting sum constituting the amount of outstanding uncovered
distribution charges with respect to such day. The amount of outstanding
uncovered distribution charges of the principal underwriter calculated on any
day does not constitute a liability recorded on the financial statements of the
Fund.
The amount of uncovered distribution charges of the principal underwriter at
any particular time depends upon various changing factors, including the level
and timing of sales of shares, the nature of such sales (i.e., whether they
result from exchange transactions, reinvestments or from cash sales through
investment dealers), the level and timing of redemptions of shares upon which a
CDSC will be imposed, the level and timing of redemptions of shares upon which
no CDSC will be imposed (including redemptions of shares pursuant to the
exchange privilege which result in a reduction of uncovered distribution
charges), changes in the level of the net assets of the Class, and changes in
the interest rate used in the calculation of the distribution fee under the
Class B and Class C Plans.
The Class B and Class C Plans also authorize each Class to make payments of
service fees to the principal underwriter, investment dealers and other persons
in amounts not exceeding 0.25% of its average daily net assets for personal
services, and/or the maintenance of shareholder accounts. This fee is paid
quarterly in arrears based on the value of Class B shares sold by such persons.
For Class C, investment dealers currently receive (a) a service fee (except on
exchange transactions and reinvestments) at the time of sale equal to 0.25% of
the purchase price of the Class C shares sold by such dealer, and (b) monthly
service fees approximately equivalent to 1/12 of 0.25% of the value of Class C
shares sold by such dealer. During the first year after a purchase of Class C
shares, the principal underwriter will retain the service fee as reimbursement
for the service fee payment made to investment dealers at the time of sale. For
the service fees paid by Class B and Class C shares, see Appendix A and Appendix
B, respectively.
Currently, payments of sales commissions and distribution fees and of
service fees may equal 1% of a Class's average daily net assets per annum. The
Trust believes that the combined rate of all these payments may be higher than
the rate of payments made under distribution plans adopted by other investment
companies pursuant to Rule 12b-1. Although the principal underwriter will use
its own funds (which may be borrowed from banks) to pay sales commissions at the
time of sale, it is anticipated that the Eaton Vance organization will profit by
reason of the operation of the Class B and Class C Plans through an increase in
the Fund's assets (thereby increasing the advisory fee payable to BMR by the
Portfolio) resulting from sale of shares and through the amounts paid to the
principal underwriter, including CDSCs, pursuant to the Plans. The Eaton Vance
organization may be considered to have realized a profit under the Class B and
Class C Plans if at any point in time the aggregate amounts theretofore received
by the principal underwriter pursuant to the Class B or Class C Plan and from
CDSCs have exceeded the total expenses theretofore incurred by such organization
in distributing shares. Total expenses for this purpose will include an
allocable portion of the overhead costs of such organization and its branch
offices, which costs will include without limitation leasing expense,
depreciation of building and equipment, utilities, communication and postage
expense, compensation and benefits of personnel, travel and promotional expense,
stationery and supplies, literature and sales aids, interest expense, data
processing fees, consulting and temporary help costs, insurance, taxes other
than income taxes, legal and auditing expense and other miscellaneous overhead
items. Overhead is calculated and allocated for such purpose by the Eaton Vance
organization in a manner deemed equitable to the Trust.
The Class B and Class C Plans continue in effect from year to year so long
as such continuance is approved at least annually by the vote of both a majority
of (i) the noninterested Trustees of the Trust who have no direct or indirect
financial interest in the operation of the Plan or any agreements related to the
Plan (the "Plan Trustees") and (ii) all of the Trustees then in office. Each
Plan may be terminated at any time by vote of a majority of the Plan Trustees or
by a vote of a majority of the outstanding voting securities of the applicable
Class. Each Plan requires quarterly Trustee review of a written report of the
amount expended under the Plan and the purposes for which such expenditures were
made. The Plans may not be amended to increase materially the payments described
therein without approval of the shareholders of the affected Class and the
Trustees. So long as a Plan is in effect, the selection and nomination of the
noninterested Trustees shall be committed to the discretion of such Trustees.
The Class B and Class C Plans were initially approved by the Trustees, including
the Plan Trustees, on June 23, 1997. The Trustees of the Trust 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 each Fund's assets, and will result in
increased investment flexibility and advantages which have benefitted and will
continue to benefit the Fund and its shareholders. Payments for sales
commissions and distribution fees made to the principal underwriter under the
Class B and Class C Plans will compensate the principal underwriter for its
services and expenses in distributing those classes of shares. Service fee
payments made to the principal underwriter and investment dealers provide
incentives to provide continuing personal services to investors and the
maintenance of shareholder accounts. By providing incentives to the principal
underwriter and investment dealers, each Plan is expected to result in the
maintenance of, and possible future growth in, the assets of the Fund. Based on
the foregoing and other relevant factors, the Trustees of the Trust have
determined that in their judgment there is a reasonable likelihood that each
Plan will benefit the Fund and its shareholders.
PERFORMANCE
Average annual total return is determined separately for each Class of the
Fund by multiplying a hypothetical initial purchase order of $1,000 by the
average annual compound rate of return (including capital appreciation/
depreciation, and distributions paid and reinvested) for the stated period and
annualizing the result. The calculation assumes (i) that all distributions are
reinvested at net asset value on the reinvestment dates during the period, (ii)
a complete redemption of the investment and, (iii) the deduction of any CDSC at
the end of the period. The Fund may also publish total return figures for each
class based on reduced sales charges or at net asset value. These returns would
be lower if the full sales charge was imposed. For further information
concerning the total return of the Classes of the Fund, see Appendix A and
Appendix B.
Yield is computed separately for each Class of the Fund pursuant to a
standardized formula by dividing the net investment income per share earned
during a recent thirty-day period by the maximum offering price per share on the
last day of the period and annualizing the resulting figure. Net investment
income per share is calculated from the yields to maturity of all debt
obligations held by the Portfolio based on prescribed methods, reduced by
accrued Fund and Class expenses for the period with the resulting number being
divided by the average daily number of Class shares outstanding and entitled to
receive distributions during the period. This yield figure does not reflect the
deduction of any CDSCs which (if applicable) are imposed upon certain
redemptions at the rates set forth under "Sales Charges" in the prospectus.
The Fund's total return may be compared to relevant indices, such as the
Consumer Price Index and various domestic securities indices. The Fund's total
return and comparisons with these indices may be used in advertisements and in
information furnished to present or prospective shareholders. The Fund's
performance may differ from that of other investors in the Portfolio, including
any other investment companies. In addition, evaluations of the Fund's
performance, ratings, or rankings of mutual funds (which include the Fund) made
by independent sources may be used in advertisements and in information
furnished to present or prospective shareholders. Information, charts and
illustrations showing the effect of compounding interest or relating to
inflation and taxes (including their effects on the dollar and the return on
stocks and other investment vehicles) may also be included in advertisements and
material furnished to present and prospective investors.
Information used in advertisements and in materials furnished to present or
prospective shareholders may include statistics, data and performance studies
prepared by independent organizations reflecting the investment performance or
return achieved by various classes and types of investments (e.g., common
stocks, small company stocks, long-term corporate bonds, long-term government
bonds, intermediate-term government bonds, U.S. Treasury bills) over various
periods of time.
Evaluations of the Fund's performance including ratings and rankings made by
independent sources, e.g. Lipper, Inc., Wiesenberger and Morningstar, Inc., may
be used in advertisements and in information furnished to present or prospective
shareholders. Information, charts and illustrations relating to inflation and
the effects of inflation on the dollar may be included in advertisements and
other material furnished to present and prospective shareholders.
Information, charts and illustrations showing comparative historical
information of high-yielding bonds as represented by C.S. Boston High Yield
Index over 10-year U.S. Treasury bonds may be used in advertisements and other
material furnished to present or prospective shareholders. C.S. Boston High
Yield Index is an unmanaged index of 713 high-yielding securities. The principal
and interest of U.S. Treasury bonds are guaranteed by the United States
Government, while high yield bonds, sometimes referred to as "junk bonds", are
of lower quality than investment-grade bonds and U.S. Government securities.
Rates are given for illustrative purposes only and are not meant to imply or
predict actual results of an investment in the Fund.
Investors may be provided with information concerning Fund volatility or
risk, including but not limited to beta, standard deviation and Sharpe ratio.
Beta is a measure of risk which shows Fund volatility relative to a market
index. A fund with the beta of 1 would perform exactly like the market index; a
beta of 2 would mean its performance was twice as volatile as the index,
positive or negative. Standard deviation is a measure of a security's
volatility, or variability, in expected return. Sharpe ratio is a measure of
risk-adjusted performance. The higher the Sharpe ratio the better a fund's
historical risk-adjusted return. Information concerning Fund distribution
payments (or the payment record of issuers in which the Fund may invest) may
also be provided to investors.
From time to time, information about the portfolio allocation, portfolio
turnover and holdings of the Portfolio may be included in advertisements and
other material furnished to present and prospective shareholders. Such
information, for example, may include the Portfolio's diversification by asset
type, including mortgage-backed securities with varying maturities and interest
rates.
Information used in advertisements and in materials provided to present and
prospective shareholders may include descriptions of Eaton Vance and other Fund
and Portfolio service providers, their investment styles, other investment
products, personnel and Fund distribution channels.
Information used in advertisements and materials furnished to present and
prospective investors may include statements or illustrations relating to the
appropriateness of certain types of securities and/or mutual funds to meet
specific financial goals. Such information may address:
- cost associated with aging parents;
- funding a college education (including its actual and estimated
cost);
- health care expenses (including actual and projected expenses);
- long-term disabilities (including the availability of, and coverage
provided by, disability insurance); and
- retirement (including the availability of social security benefits,
the tax treatment of such benefits and statistics and other
information relating to maintaining a particular standard of living
and outliving existing assets).
Such information may also address different methods for saving money and the
results of such methods, as well as the benefits of investing in bond funds.
Information in advertisements and materials furnished to present and
prospective investors may include profiles of different types of investors
(i.e., investors with different goals and assets) and different investment
strategies for meeting specific financial goals. Such information may provide
hypothetical illustrations which include: results of various investment
strategies; performance of an investment in the Fund over various time periods;
and results of diversifying assets among several investments with varying
performance. Information in advertisements and materials furnished to present
and prospective investors may also include quotations (including editorial
comments) and statistics concerning investing in securities, as well as
investing in particular types of securities and the performance of such
securities.
The Trust (or principal underwriter) may provide information about Eaton
Vance, its affiliates and other investment advisers to the funds in the Eaton
Vance Family of Funds in sales material or advertisements provided to investors
or prospective investors. Such material or advertisements may also provide
information on the use of investment professionals by such investors.
TAXES
Each series of the Trust is treated as a separate entity for federal income
tax purposes. The Fund has elected to be treated, has qualified and intends to
continue to qualify each year as a regulated investment company ("RIC") under
the Code. Accordingly, the Fund intends to satisfy certain requirements relating
to sources of its income and diversification of its assets and to distribute
substantially all of its net income and net short-term and long-term capital
gains in accordance with the timing requirements imposed by the Code, so as to
maintain its RIC status and avoid paying any federal income or excise tax. The
Fund so qualified for its taxable year ended March 31, 2000.
Because the Fund invests its assets in the Portfolio, the Portfolio normally
must satisfy the applicable source of income and diversification requirements in
order for the Fund to also satisfy these requirements. The Portfolio will
allocate at least annually among its investors, including the Fund, the
Portfolio's net investment income, net realized capital gains, and any other
items of income, gain, loss, deduction or credit. The Portfolio will make
allocations to the Fund in accordance with the Code and applicable regulations
and will make moneys available for withdrawal at appropriate times and in
sufficient amounts to enable the Fund to satisfy the tax distribution
requirements that apply to the Fund and that must be satisfied in order to avoid
federal income and/or excise tax on the Fund. For purposes of applying the
requirements of the Code regarding qualification as a RIC, the Fund (i) will be
deemed to own its proportionate share of each of the assets of the Portfolio and
(ii) will be entitled to the gross income of the Portfolio attributable to such
share.
In order to avoid incurring a federal excise tax obligation, the Code
requires that the Fund distribute (or be deemed to have distributed) by December
31 of each calendar year (i) at least 98% of its ordinary income for such year,
(ii) 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 any available capital loss carryforwards and (iii) 100% of any
income from the prior year (as previously computed) that was not paid out during
such year and on which the Fund paid no federal income tax. Under current law,
provided that the Fund qualifies as a RIC and the Portfolio is treated as a
partnership for Massachusetts and federal tax purposes, neither the Fund nor the
Portfolio should be liable for any income, excise or franchise tax in the
Commonwealth of Massachusetts.
If the Fund does not qualify for taxation as a RIC for any taxable year, the
Fund's taxable income will be subject to corporate income taxes, and all
distributions from earnings and profits, including distributions of net capital
gain (if any), will be taxable to shareholders as ordinary income. In addition,
in order to requalify for taxation as a RIC, the Fund may be required to
recognize unrealized gains, pay substantial taxes and interest, and make certain
distributions.
The Portfolio's investments in options, futures contracts, hedging
transactions, forward contracts and certain other transactions will be subject
to special tax rules (including mark-to-market, constructive sale, straddle,
wash sale, short sale and other rules), the effect of which may be to accelerate
income to the Portfolio, defer Portfolio losses, cause adjustments in the
holding periods of Portfolio securities, convert capital gain into ordinary
income and convert short-term capital losses into long-term capital losses.
These rules could therefore affect the amount, timing and character of
distributions to investors.
The Fund's distributions of net investment income and the excess of net
short-term capital gain over net long-term capital loss and certain foreign
exchange gains earned by the Portfolio and allocated to the Fund are taxable to
shareholders of the Fund as ordinary income, whether received in cash or
reinvested in additional shares. The Fund's distributions of the excess of net
long-term capital gain over net short-term capital loss (including any capital
loss carried forward from prior years) earned by the Portfolio and allocated to
the Fund are taxable to shareholders of the Fund as long-term capital gains,
whether received in cash or reinvested in additional shares, and regardless of
the length of time their shares have been held. Dividends declared by the Fund
in October, November or December as of a record date in such a month that are
paid the following January are treated under the Code as if they were received
on December 31 of the year in which they are declared.
Dividends and distributions on a Fund's shares are generally subject to
federal income tax as described herein to the extent they do not exceed the
Fund's realized income and gains, even though such dividends and distributions
may economically represent a return of a particular shareholder's investment.
Such distributions are likely to occur in respect of shares purchased at a time
when the Fund's net asset value reflects gains that are either unrealized, or
realized but not distributed. Such realized gains may be required to be
distributed even when a Fund's net asset value also reflects unrealized losses.
Distributions made by the Fund, if any, that are derived from dividends received
by the Portfolio from taxable domestic corporations and allocated to the Fund
may qualify for the dividends-received deduction for corporations.
The Portfolio may be subject to foreign income taxes, withholding taxes or
other foreign taxes with respect to income (possibly including, in some cases,
capital gains) from certain foreign securities. These taxes may be reduced or
eliminated under the terms of an applicable tax convention between certain
countries and the U.S. It is not expected that more than 50% of the value of the
total assets of the Fund, taking into account its allocable share of the
Portfolio's total assets at the close of any taxable year of the Fund, will
consist of securities issued by foreign corporations. Accordingly, under the
Code, the Fund will not be eligible to pass through to its shareholders their
proportionate share of any tax credits or deductions for foreign taxes paid by
the Portfolio and allocated to the Fund. The Fund's transactions in foreign
currencies, foreign currency-denominated debt securities and certain foreign
currency options, futures contracts (and similar instruments) may give rise to
ordinary income or loss to the extent such income or loss results from
fluctuations in the value of the foreign currency concerned.
The Portfolio's investment in zero coupon, deferred interest and certain
pay-in-kind or other securities issued with original issue discount will cause
it to realize income prior to the receipt of cash payments with respect to these
securities. Such income will be allocated daily to interests in the Portfolio
and, in order to enable the Fund to distribute its proportionate share of this
income and avoid a tax payable by the Fund, the Portfolio may be required to
liquidate securities that it might otherwise have continued to hold in order to
generate cash that the Fund may withdraw from the Portfolio to make
distributions to Fund shareholders. Acquiring securities at a market discount
may have the same effect if an election is made to include accrued market
discount in income currently.
Investments in lower-rated or unrated securities may present special tax
issues for the Portfolio (and, hence, for the Fund) to the extent that the
issuers of these securities default on their obligations pertaining thereto. The
Code is not entirely clear regarding the federal income tax consequences of the
Portfolio's taking certain positions in connection with ownership of such
distressed securities. For example, the Code is unclear regarding: (i) when the
Portfolio may cease to accrue interest, original issue discount, or market
discount; (ii) when and to what extent deductions may be taken for bad debts or
worthless securities; (iii) how payments received on obligations in default
should be allocated between principal and income; and (iv) whether exchanges of
debt obligations in a workout context are taxable.
Any loss realized upon the sale or exchange of shares of the Fund with a tax
holding period of 6 months or less will be treated as a long-term capital loss
to the extent of any distribution treated as long-term capital gains with
respect to such shares. All or a portion of any loss realized upon a taxable
disposition of Fund shares may be disallowed under "wash sale" rules if other
shares of the Fund are purchased (whether through the reinvestment of
distributions or otherwise) within the 61-day period beginning 30 days before
and ending 30 days after the date of such disposition. Any disallowed loss will
result in an adjustment to the shareholder's tax basis in the other shares
acquired.
Sales charges, if any, paid upon a purchase of shares of the Fund cannot be
taken into account for purposes of determining gain or loss on a redemption or
exchange of the shares before the 91st day after their purchase to the extent a
sales charge is reduced or eliminated in a subsequent acquisition of the shares
of the Fund or of another fund pursuant to the Fund's reinvestment or exchange
privilege. Any disregarded amounts will result in an adjustment to the
shareholder's tax basis in the other shares acquired.
Amounts paid by the Fund to individuals and certain other shareholders who
have not provided the Fund with their correct taxpayer identification number
("TIN") and certain certifications required by the Internal Revenue Service (the
"IRS"), as well as shareholders with respect to whom the Fund has received
certain information from the IRS or a broker, may be subject to "backup"
withholding of federal income tax arising from the Fund's 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, foreign investors, 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
Decisions concerning the execution of portfolio security transactions,
including the selection of the market and the executing firm, are made by BMR.
BMR is also responsible for the execution of transactions for all other accounts
managed by it. BMR places the portfolio security transactions of the Portfolio
and of all other accounts managed by it for execution with many broker-dealer
firms. BMR uses its best efforts to obtain execution of portfolio security
transactions at prices which are advantageous to the Portfolio and at reasonably
competitive spreads or (when a disclosed commission is being charged) at
reasonably competitive commission rates. In seeking such execution, BMR will use
its best judgment in evaluating the terms of a transaction, and will give
consideration to various relevant factors including without limitation the full
range and quality of the executing firm's services, the value of the brokerage
and research services provided, the responsiveness of the firm to BMR, size and
type of the transaction, the general execution and operational capabilities of
the executing firm, the nature and character of the market for the security, the
confidentiality, speed and certainty of effective execution required for the
transaction, the reputation, reliability, experience and financial condition of
the firm, the value and quality of services rendered by the firm in other
transactions, and the reasonableness of the commission or spread, if any.
Transactions on United States stock exchanges and other agency transactions
involve the payment by the Portfolio of negotiated brokerage commissions. Such
commissions vary among different executing firms, and a particular firm may
charge different commissions according to such factors as the difficulty and
size of the transaction and the volume of business done with such broker-dealer.
Transactions in foreign securities usually involve the payment of fixed
brokerage commissions, which are generally higher than those in the United
States. There is generally no stated commission in the case of securities traded
in the over-the-counter markets, but the price paid or received by the Portfolio
usually includes an undisclosed dealer markup or markdown. In an underwritten
offering, the price paid by the Portfolio often includes a disclosed fixed
commission or discount retained by the underwriter or dealer. Although
commissions paid on portfolio security transactions will, in the judgment of
BMR, be reasonable in relation to the value of the services provided,
commissions exceeding those which another firm might charge may be paid to firms
who were selected to execute transactions on behalf of the Portfolio and BMR's
other clients for providing brokerage and research services to BMR.
As authorized in Section 28(e) of the Securities Exchange Act of 1934, a
broker or dealer who executes a portfolio transaction on behalf of the Portfolio
may receive a commission which is in excess of the amount of commission another
broker or dealer would have charged for effecting that transaction if BMR
determines in good faith that such compensation was reasonable in relation to
the value of the brokerage and research services provided. This determination
may be made either on the basis of that particular transaction or on the basis
of overall responsibilities which BMR and its affiliates have for accounts over
which they exercise investment discretion. In making any such determination, BMR
will not attempt to place a specific dollar value on the brokerage and research
services provided or to determine what portion of the commission should be
related to such services. Brokerage and research services may include advice as
to the value of securities, the advisability of investing in, purchasing, or
selling securities, and the availability of securities or purchasers or sellers
of securities; furnishing analyses and reports concerning issuers, industries,
securities, economic factors and trends, portfolio strategy and the performance
of accounts; effecting securities transactions and performing functions
incidental thereto (such as clearance and settlement); and the "Research
Services" referred to in the next paragraph.
It is a common practice in the investment advisory industry for the advisers
of investment companies, institutions and other investors to receive research,
analytical, statistical and quotation services, data, information and other
services, products and materials which assist such advisers in the performance
of their investment responsibilities ("Research Services") from broker-dealer
firms which execute portfolio transactions for the clients of such advisers and
from third parties with which such broker-dealers have arrangements. Consistent
with this practice, BMR receives Research Services from many broker-dealer firms
with which BMR places the portfolio transactions and from third parties with
which these broker-dealers have arrangements. These Research Services include
such matters as general economic, political, business and market information,
industry and company reviews, evaluations of securities and portfolio strategies
and transactions, proxy voting data and analysis services, technical analysis of
various aspects of the securities markets, recommendations as to the purchase
and sale of securities and other portfolio transactions, financial, industry and
trade publications, news and information services, pricing and quotation
equipment and services, and research oriented computer hardware, software, data
bases and services. Any particular Research Service obtained through a
broker-dealer may be used by BMR in connection with client accounts other than
those accounts which pay commissions to such broker-dealer. Any such Research
Service may be broadly useful and of value to BMR in rendering investment
advisory services to all or a significant portion of its clients, or may be
relevant and useful for the management of only one client's account or of a few
clients' accounts, or may be useful for the management of merely a segment of
certain clients' accounts, regardless of whether any such account or accounts
paid commissions to the broker-dealer through which such Research Service was
obtained. The advisory fee paid by the Portfolio is not reduced because BMR
receives such Research Services. BMR evaluates the nature and quality of the
various Research Services obtained through broker-dealer firms and attempts to
allocate sufficient portfolio security transactions to such firms to ensure the
continued receipt of Research Services which BMR believes are useful or of value
to it in rendering investment advisory services to its clients.
The Portfolio and BMR may also receive Research Services from underwriters
and dealers in fixed-price offerings, which Research Services are reviewed and
evaluated by BMR in connection with its investment responsibilities. The
investment companies sponsored by BMR or Eaton Vance may allocate brokerage
commissions to acquire information relating to the performance, fees and
expenses of such companies and other mutual funds, which information is used by
the Trustees of such companies to fulfill their responsibility to oversee the
quality of the services provided by various entities, including BMR, to such
companies. Such companies may also pay cash for such information.
Subject to the requirement that BMR shall use its best efforts to seek to
execute portfolio security transactions at advantageous prices and at reasonably
competitive commission rates or spreads, BMR is authorized to consider as a
factor in the selection of any broker-dealer firm with whom portfolio orders may
be placed the fact that such firm has sold or is selling shares of the Fund or
of other investment companies sponsored by BMR or Eaton Vance. This policy is
not inconsistent with a rule of the NASD, which rule provides that no firm which
is a member of the NASD shall favor or disfavor the distribution of shares of
any particular investment company or group of investment companies on the basis
of brokerage commissions received or expected by such firm from any source.
Securities considered as investments for the Portfolio may also be
appropriate for other investment accounts managed by BMR or its affiliates.
Whenever decisions are made to buy or sell securities by the Portfolio and one
or more of such other accounts simultaneously, BMR will allocate the security
transactions (including "hot" issues) in a manner which it believes to be
equitable under the circumstances. As a result of such allocations, there may be
instances where the Portfolio will not participate in a transaction that is
allocated among other accounts. If an aggregated order cannot be filled
completely, allocations will generally be made on a pro rata basis. An order may
not be allocated on a pro rata basis where, for example: (i) consideration is
given to portfolio managers who have been instrumental in developing or
negotiating a particular investment; (ii) consideration is given to an account
with specialized investment policies that coincide with the particulars of a
specific investment; (iii) pro rata allocation would result in odd-lot or de
minimis amounts being allocated to a portfolio or other client; or (iv) where
BMR reasonably determines that departure from a pro rata allocation is
advisable. While these aggregation and allocation policies could have a
detrimental effect on the price or amount of the securities available to the
Portfolio from time to time, it is the opinion of the Trustees of the Trust and
the Portfolio that the benefits from the BMR organization outweigh any
disadvantage that may arise from exposure to simultaneous transactions.
For the fiscal years ended March 31, 2000, 1999 and 1998, the 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 the independent auditors' report
for the Fund and the Portfolio, appear in the Fund's most recent annual report
to shareholders, which is incorporated by reference into this SAI. A copy of the
Fund's annual report accompanies this SAI. Consistent with applicable law,
duplicate mailings of shareholder reports and certain other Fund information to
shareholders residing at the same address may be eliminated.
Registrant incorporates by reference the audited financial information for
the Fund and the Portfolio for the fiscal year ended March 31, 2000 as
previously filed electronically with the Commission (Accession No.
0000912057-00-027169).
<PAGE>
APPENDIX A
CLASS B FEES, PERFORMANCE AND OWNERSHIP
DISTRIBUTION AND SERVICE FEES
During the fiscal year ended March 31, 2000, the principal underwriter paid
to investment dealers sales commissions of $7,382,393 on sales of Class B
shares. During the same period, the Fund made distribution payments to the
principal underwriter under the Distribution Plan aggregating $5,426,918, and
the principal underwriter received approximately $1,598,000 in CDSCs imposed on
early redeeming shareholders. These distribution payments and CDSC payments
reduced uncovered distribution charges under the Plan. As at March 31, 2000 the
outstanding uncovered distribution charges of the principal underwriter
calculated under the Plan amounted to approximately $23,735,000 (which amount
was equivalent to approximately 3.1% of the net assets attributable to Class B
on such day). During the fiscal year ended March 31, 2000, Class B made service
fee payments to the principal underwriter and investment dealers aggregating
$1,431,840 of which $1,358,040 was paid to investment dealers and the balance of
which was retained by the principal underwriter.
PRINCIPAL UNDERWRITER
The Trust has authorized the principal underwriter to act as its agent in
repurchasing shares at the rate of $2.50 for each repurchase transaction handled
by the principal underwriter. For the fiscal year ended March 31, 2000, Class B
paid the principal underwriter $15,298 for repurchase transactions handled by
it.
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return on
a hypothetical investment of $1,000 in Class B shares for the periods shown in
the table. Past performance is no guarantee of future results. Investment return
and principal value will fluctuate; shares, when redeemed, may be worth more or
less than their original cost.
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF
INVESTMENT INVESTMENT
BEFORE AFTER TOTAL RETURN BEFORE TOTAL RETURN AFTER
DEDUCTING DEDUCTING DEDUCTING THE CDSC DEDUCTING THE CDSC
INVESTMENT INVESTMENT THE CDSC THE CDSC -------------------------- --------------------------
PERIOD DATE ON 3/31/00 ON 3/31/00 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
------------------------ ------------- --------------- -------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
10 Years Ended 3/31/00 3/31/90 $2,831.96 $2,831.96 183.20% 10.97% 183.20% 10.97%
5 Years Ended 3/31/00 3/31/95 $1,644.84 $1,624.84 64.48% 10.47% 62.48% 10.20%
1 Year Ended 3/31/00 3/31/99 $1,063.65 $1,015.25 6.36% 6.36% 1.52% 1.52%
------------
</TABLE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As at June 30, 2000, the Trustees and officers of the Trust, as a group,
owned in the aggregate less than 1% of the outstanding Class B shares of the
Fund. As of June 30, 2000, Merrill Lynch, Pierce, Fenner & Smith, Inc.,
Jacksonville, FL was the record owner of approximately 23.3% of the outstanding
Class B shares, which were held on behalf of its customers who are the
beneficial owners of such shares, and as to which it had voting power under
certain limited circumstances. To the knowledge of the Trust, no other person
owned of record or beneficially 5% or more of the Fund's outstanding Class B
shares as of such date.
<PAGE>
APPENDIX B
CLASS C FEES, PERFORMANCE AND OWNERSHIP
DISTRIBUTION AND SERVICE FEES
During the fiscal year ended March 31, 2000, the principal underwriter paid
to investment dealers sales commissions of $298,868 on sales of Class C shares.
During the same period, the Fund made distribution payments to the principal
underwriter under the Distribution Plan aggregating $709,634 and the principal
underwriter received approximately $43,000 in CDSCs imposed on early redeeming
shareholders. These distribution payments and CDSC payments reduced uncovered
distribution charges under the Plan. As at March 31, 2000, the outstanding
uncovered distribution charges of the principal underwriter calculated under the
Plan amounted to approximately $10,784,000 (which amount was equivalent to
approximately 7.9% of the net assets attributable to Class C on such day).
During the fiscal year ended March 31, 2000, Class C made service fee payments
to the principal underwriter and investment dealers aggregating $232,581 of
which $74,451 was paid to investment dealers and the balance of which was
retained by the principal underwriter.
PRINCIPAL UNDERWRITER
The Trust has authorized the principal underwriter to act as its agent in
repurchasing shares at the rate of $2.50 for each repurchase transaction handled
by the principal underwriter. For the fiscal year ended March 31, 2000, Class C
paid the principal underwriter $2,333 for repurchase transactions handled by it.
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return on
a hypothetical investment of $1,000 in Class C shares for the periods shown in
the table. Total return for the period prior to April 1, 1998 reflects the total
return of the predecessor to Class C. Total return prior to the Predecessor
Fund's commencement of operations reflects the total return of Class B, adjusted
to reflect the Class C sales charge. The Class B total return has not been
adjusted to reflect certain other expenses (such as distribution and/or service
fees). If such adjustments were made, the Class C total return would be
different. Past performance is no guarantee of future results. Investment return
and principal value will fluctuate; shares, when redeemed, may be worth more or
less than their original cost.
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF
INVESTMENT INVESTMENT
BEFORE AFTER TOTAL RETURN BEFORE TOTAL RETURN AFTER
DEDUCTING DEDUCTING DEDUCTING THE CDSC DEDUCTING THE CDSC
INVESTMENT INVESTMENT THE CDSC THE CDSC -------------------------- --------------------------
PERIOD DATE ON 3/31/00 ON 3/31/00 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
------------------------ ------------- --------------- -------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
10 Years Ended 3/31/00** 3/31/90 $2,781.76 $2,781.76 178.18% 10.77% 178.18% 10.77%
5 Years Ended 3/31/00 3/31/95 $1,630.88 $1,630.88 63.09% 10.28% 63.09% 10.28%
1 Year Ended 3/31/00 3/31/99 $1,062.58 $1,052.90 6.26% 6.26% 5.29% 5.29%
------------
*Predecessor Fund commenced operations on June 8, 1994.
</TABLE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As at June 30, 2000, the Trustees and officers of the Trust, as a group,
owned in the aggregate less than 1% of the outstanding Class C shares of the
Fund. As at June 30, 2000, Merrill Lynch, Pierce, Fenner & Smith, Inc.,
Jacksonville, FL was the record owner of approximately 25.9% of the outstanding
Class C shares, which were held on behalf of its customers who are the
beneficial owners of such shares, and as to which it had voting power under
certain limited circumstances. To the knowledge of the Trust, no other person
owned of record or beneficially 5% or more of the Fund's outstanding Class C
shares as of such date.
<PAGE>
APPENDIX C
HIGH INCOME PORTFOLIO
ASSET COMPOSITION INFORMATION
FOR THE FISCAL YEAR ENDED MARCH 31, 2000
PERCENT OF
NET ASSETS
--------------------------------------------------------------
Cash/Short-term Obligations 2.86%
Debt Securities -- Moody's Rating
Aa1 0.62%
Ba 3.25%
B1 8.98%
B2 14.78%
B3 41.57%
Caa 16.03%
Unrated 10.99%
Other Equity Securities 0.92%
------
Total 100.00%
The chart above indicates the weighted average composition of the securities
held by the Portfolio for the fiscal year ended March 31, 2000, with the debt
securities rated by Moody's separated into the indicated categories. The
weighted average indicated above was calculated on a dollar weighted basis and
was computed as at the end of each month during the fiscal year. The chart does
not necessarily indicate what the composition of the Portfolio will be in the
current and subsequent fiscal years.
For a description of Moody's ratings of fixed-income securities, see
Appendix D to this SAI.
<PAGE>
APPENDIX D
DESCRIPTION OF MOODY'S CORPORATE BOND RATINGS:
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risk appear somewhat larger than the Aaa securities.
A: Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
SECURITIES IN WHICH THE PORTFOLIO MAY INVEST WILL INCLUDE THOSE IN THE FOLLOWING
CATEGORIES:
Baa: Bonds which are rated Baa are considered as medium-grade obligations (i.e.,
they are neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba: Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal
or interest.
Ca: Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
NOTE: Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa to B. The modifier 1 indicates that the company ranks in
the higher end of its generic rating category; the modifier 2 indicates a
mid-range ranking; and the modifier 3 indicates that the company ranks in the
lower end of its generic rating category.
DESCRIPTION OF S&P'S CORPORATE DEBT RATINGS:
INVESTMENT GRADE
AAA: Debt rated AAA has the highest rating assigned by S&P's. Capacity to pay
interest and repay principal is extremely strong.
AA: Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the higher rated issues only in small degree.
A: Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than bonds in higher rated categories.
SECURITIES IN WHICH THE PORTFOLIO MAY INVEST WILL INCLUDE THOSE IN THE FOLLOWING
CATEGORIES:
BBB: Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than for bonds in higher rated categories.
SPECULATIVE GRADE
Debt rated BB, B, CCC, CC, and C is regarded, on balance, as predominantly
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. BB indicates the lowest degree of
speculation and C the highest degree of speculation. While such debt will likely
have some quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
BB: Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB- rating.
B: Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB or BB-
rating.
CCC: Debt rated CCC has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The CCC rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
B or B- rating.
CC: The rating CC is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC debt rating.
C: The rating C is typically applied to debt subordinated to senior debt which
is assigned an actual or implied CCC- debt rating. The C rating may be used to
cover a situation where a bankruptcy petition has been filed, but debt service
payments are continued.
C1: The Rating C1 is reserved for income bonds on which no interest is being
paid.
D: Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless Standard & Poor's believes that
such payments will be made during such grace period. The D rating also will be
used upon the filing of a bankruptcy petition if debt service payments are
jeopardized.
PLUS (+) OR MINUS (-): The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
NR: NR indicates that no public rating has been requested, because there is
insufficient information on which to base a rating, or because Standard & Poor's
does not rate a particular type of obligation as a matter of policy.
NOTES: Debt which is unrated exposes the investor to risks with respect to
capacity to pay interest or repay principal which are similar to the risks of
lower-rated speculative obligations. The Portfolio is dependent on the
investment adviser's judgment, analysis and experience in the evaluation of such
debt.
Investors should note that the assignment of a rating to a bond by a rating
service may not reflect the effect of recent developments on the issuer's
ability to make interest and principal payments.
<PAGE>
PART C - OTHER INFORMATION
ITEM 23. EXHIBITS
(a)(1) Amended and Restated Declaration of Trust of Eaton Vance Mutual
Funds Trust dated August 17, 1993, filed as Exhibit (1)(a) to
Post-Effective Amendment No. 23 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 June 19, 2000 filed as Exhibit (a)(4) to
Post-Effective Amendment No. 61 filed June 23, 2000 and incorporated
herein by reference.
(5) 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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<PAGE>
(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.
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<PAGE>
(3) Amendment to Master Custodian Agreement with Investors Bank & Trust
Company dated December 21, 1998 filed as Exhibit (g)(3) to the
Registration Statement of Eaton Vance Municipals Trust (File Nos.
33-572, 811-4409 (Accession No. 0000950156-99-000050) filed January
25, 1999 and incorporated herein by reference.
(h)(1)(a) Amended Administrative Services Agreement between Eaton Vance Mutual
Funds Trust (on behalf of certain of its series) and Eaton Vance
Management dated July 31, 1995 with attached schedules (including
Amended Schedule A dated May 7, 1996) filed as Exhibit (9)(a) to
Post-Effective Amendment No. 24 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 dated June 23, 2000 filed as Exhibit
(i)(1) to Post-Effective Amendment No. 61 filed June 23, 2000 and
incorporated herein by reference.
(2) Consent of Internal Counsel dated July 21, 2000 filed herewith.
(j) Consent of Independent Auditors for Eaton Vance High Income Fund
filed herewith.
(k) Not applicable
(l) Not applicable
(m)(1)(a) Distribution Plan for Eaton Vance 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.
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<PAGE>
(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.
(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.
C-4
<PAGE>
(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.
(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.
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<PAGE>
(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.
(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:
Eaton Vance Advisers Senior Floating-Rate Fund
Eaton Vance Growth Trust
Eaton Vance Income Fund of Boston
Eaton Vance Institutional Senior Floating-Rate Fund
Eaton Vance Investment Trust
Eaton Vance Municipals Trust
Eaton Vance Municipals Trust II
Eaton Vance Mutual Funds Trust
Eaton Vance Prime Rate Reserves
Eaton Vance Special Investment Trust
EV Classic Senior Floating-Rate Fund
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<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
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
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<PAGE>
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 July 25, 2000.
EATON VANCE MUTUAL FUNDS TRUST
By: /s/ JAMES B. HAWKES
-----------------------------------
James B. Hawkes, President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement has been signed below by
the following persons in their capacities on July 25, 2000.
Signature Title
--------- -----
/s/ James B. Hawkes President (Chief Executive Officer) and
--------------------------- Trustee
James B. Hawkes
/s/ James L. O'Connor Treasurer (and Principal Financial and
--------------------------- Accounting Officer)
James L. O'Connor
Jessica M. Bibliowicz* Trustee
---------------------------
Jessica M. Bibliowicz
Donald R. Dwight* Trustee
---------------------------
Donald R. Dwight
Samuel L. Hayes, III* Trustee
---------------------------
Samuel L. Hayes, III
Norton H. Reamer* Trustee
---------------------------
Norton H. Reamer
Lynn A. Stout* Trustee
---------------------------
Lynn A. Stout
Jack L. Treynor* Trustee
---------------------------
Jack L. Treynor
*By: /s/ Alan R. Dynner
------------------------------------
Alan R. Dynner (As attorney-in-fact)
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<PAGE>
SIGNATURES
High Income Portfolio has duly caused this Amendment to the Registration
Statement on Form N-1A of Eaton Vance Mutual Funds Trust (File No. 02-90946) to
be signed on its behalf by the undersigned, thereunto duly authorized in the
City of Boston and the Commonwealth of Massachusetts on July 25, 2000.
HIGH INCOME PORTFOLIO
By: /s/ JAMES B. HAWKES
--------------------------------
James B. Hawkes, President
This Amendment to the Registration Statement on Form N-1A of Eaton Vance
Mutual Funds Trust (File No. 02-90946) has been signed below by the following
persons in their capacities on July 25, 2000.
Signature Title
--------- -----
/s/ James B. Hawkes President (Chief Executive Officer) and
--------------------------- Trustee
James B. Hawkes
/s/ James L. O'Connor Treasurer (and Principal Financial and
--------------------------- Accounting Officer)
James L. O'Connor
Jessica M. Bibliowicz* Trustee
---------------------------
Jessica M. Bibliowicz
Donald R. Dwight* Trustee
---------------------------
Donald R. Dwight
Samuel L. Hayes, III* Trustee
---------------------------
Samuel L. Hayes, III
Norton H. Reamer* Trustee
---------------------------
Norton H. Reamer
Lynn A. Stout* Trustee
---------------------------
Lynn A. Stout
Jack L. Treynor* Trustee
---------------------------
Jack L. Treynor
*By: /s/ Alan R. Dynner
------------------------------------
Alan R. Dynner (As attorney-in-fact)
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<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
----------- -----------
(i)(2) Consent of Counsel dated Juy 21, 2000.
(j) Consent of Independent Auditors for Eaton Vance High Income Fund
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