<PAGE>
EATON VANCE INCOME
FUND OF BOSTON
- ------------------------------------------------------------------------------
EATON VANCE INCOME FUND OF BOSTON (THE "FUND") IS A MUTUAL FUND SEEKING AS ITS
PRIMARY OBJECTIVE TO PROVIDE AS MUCH CURRENT INCOME AS POSSIBLE. IN SEEKING
ITS INVESTMENT OBJECTIVE, THE FUND MAY INVEST UP TO 100% OF ITS ASSETS IN
LOWER-RATED BONDS, COMMONLY KNOWN AS "JUNK BONDS", THAT ENTAIL GREATER RISKS,
INCLUDING DEFAULT, THAN THOSE OF HIGHER-RATED SECURITIES. INVESTORS SHOULD
CAREFULLY CONSIDER THESE RISKS AND INVEST FOR THE LONG TERM. SEE "THE FUND'S
INVESTMENT OBJECTIVES" AND "INVESTMENT POLICIES AND RISKS".
Shares of the Fund are not deposits or obligations of, or guaranteed or
endorsed by, any bank or other insured depository institution, and are not
federally insured by the Federal Deposit Insurance Corporation, the Federal
Reserve Board or any other government agency. Shares of the Fund involve
investment risks, including fluctuations in value and the possible loss of
some or all of the principal investment.
This Prospectus is designed to provide you with information you should know
before investing. Please retain this document for future reference. A
Statement of Additional Information dated February 1, 1996 for the Fund, as
supplemented from time to time, has been filed with the Securities and
Exchange Commission and is incorporated herein by reference. The Statement of
Additional Information is available without charge from the Fund's principal
underwriter, Eaton Vance Distributors, Inc. (the "Principal Underwriter"), 24
Federal Street, Boston, MA 02110 (telephone (800) 225-6265). The Fund's
investment adviser is Eaton Vance Management (the "Investment Adviser") which
is located at the same address.
- ------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE PAGE
<S> <C> <C> <C>
Shareholder and Fund Expenses ........................... 2 Reports to Shareholders ............................ 11
The Fund's Financial Highlights ......................... 3 The Lifetime Investing
The Fund's Investment Objectives ........................ 4 Account/Distribution Options ..................... 11
Investment Policies and Risks ........................... 4 The Eaton Vance Exchange Privilege ................. 12
Organization of the Fund ............................... 7 Eaton Vance Shareholder Services ................... 13
Management of the Fund .................................. 7 Distributions and Taxes ............................ 14
Service Plan ............................................ 8 Performance Information ............................ 15
Valuing Fund Shares ..................................... 8 Statement of Intention and Escrow Agreement ........ 15
How to Buy Fund Shares .................................. 9 Appendix A ......................................... 17
How to Redeem Fund Shares ............................... 10 Appendix B ......................................... 19
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
PROSPECTUS DATED FEBRUARY 1, 1996
<PAGE>
SHAREHOLDER AND FUND EXPENSES
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
- -------------------------------------------------------------------------------------------------------
<S> <C>
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price) 3.75%
Sales Charges Imposed on Reinvested Distributions None
Exchange Fees None
ANNUAL FUND OPERATING EXPENSES (as a percentage of average daily net assets)
-------------------------------------------------------------------------------------------------------
Investment Adviser Fee 0.625%
Other Expenses (including Service Plan Fees of 0.118%) 0.465%
----- -----
Total Operating Expenses 1.090%
=====
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
An investor would pay the following maximum initial sales
charge and expenses on a $1,000 investment, assuming (a) 5%
annual return and (b) redemption at the end of each period: $48 $71 $95 $165
</TABLE>
NOTES:
The table and Example summarize the aggregate expenses of the Fund and are
designed to help investors understand the costs and expenses they will bear,
directly or indirectly, by investing in the Fund. Information for the Fund is
based on its expenses for the most recent fiscal year.
The Example should not be considered a representation of past or future
expenses and actual expenses may be greater or less than those shown. Federal
regulations require the Example to assume a 5% annual return, but actual
annual return will vary. For further information regarding the expenses of the
Fund see "The Fund's Financial Highlights", "Management of the Fund", "Service
Plan" and "How to Redeem Fund Shares".
If shares are purchased at net asset value with no initial sales charge by
virtue of the purchase having been in the amount of $1 million or more and are
redeemed within 12 months of purchase, a contingent deferred sales charge of
0.50% will be imposed on such redemption. See "How to Buy Fund Shares", "How
to Redeem Fund Shares" and "Eaton Vance Shareholder Services".
THE FUND'S FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------
The following information should be read in conjunction with the audited
financial statements included in the Fund's annual report to shareholders
which is incorporated by reference into the Statement of Additional
Information in reliance upon the report of Coopers & Lybrand L.L.P.,
independent accountants, as experts in accounting and auditing. The financial
highlights for each of the six years in the period ending September 30, 1991,
presented here, were audited by other auditors whose report dated November 5,
1991, expressed an unqualified opinion on such financial highlights. Further
information regarding the performance of the Fund is contained in its annual
report to shareholders which may be obtained without charge by contacting the
Principal Underwriter, Eaton Vance Distributors, Inc.
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991<F1> 1990<F1> 1989<F1> 1988<F1> 1987<F1> 1986<F1>
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
beginning of year $ 7.90 $ 8.40 $ 8.33 $ 7.56 $ 6.89 $ 9.16 $ 9.39 $ 10.07 $ 10.01 $ 9.30
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
INCOME FROM OPERATIONS:
Net investment income $ 0.82 $ 0.83 $ 0.92 $ 0.97 $ 1.04 $ 1.15 $ 1.10 $ 1.08 $ 1.02 $ 1.04
Net realized and
unrealized gain
(loss) on
investments 0.02 (0.47) 0.07 0.77 0.71 (2.26) (0.22) (0.25) 0.08 0.71
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total income from
operations $ 0.84 $ 0.36 $ 0.99 $ 1.74 $ 1.75 $ (1.11) $ 0.88 $ 0.83 $ 1.10 $ 1.75
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
From net investment
income $ (0.82) $ (0.81) $ (0.92) $ (0.97) $ (1.04) $ (1.15) $ (1.10) $ (1.30) $ (1.04) $ (1.04)
From paid-in capital -- -- -- -- (0.04) (0.01) (0.01) (0.21) -- --
In excess of net
investment income<F3> -- (0.05) -- -- -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total
distributions $ (0.82) $ (0.86) $ (0.92) $ (0.97) $ (1.08) $ (1.16) $ (1.11) $ (1.51) $ (1.04) $ (1.04)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
NET ASSET VALUE, end
of year $ 7.92 $ 7.90 $ 8.40 $ 8.33 $ 7.56 $ 6.89 $ 9.16 $ 9.39 $ 10.07 $ 10.01
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
TOTAL RETURN<F2> 11.25% 4.25% 12.59% 24.25% 28.53% (13.06%) 9.76% 9.35% 11.11% 19.26%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of
year (000's omitted) $106,414 $103,482 $95,123 $85,778 $70,773 $65,588 $45,852 $44,492 $42,824 $38,336
Ratio of net expenses
to average daily net
assets 1.09% 1.04% 1.03% 1.08% 1.15% 1.05% 1.39% 1.31% 1.21% 1.16%
Ratio of net
investment income to
average daily net
assets 10.50% 9.75% 11.01% 12.02% 15.36% 14.26% 11.54% 11.32% 9.84% 10.36%
PORTFOLIO TURNOVER 84% 70% 102% 90% 80% 67% 66% 61% 86% 74%
- ----------
<FN>
<F1> Audited by previous auditors.
<F2> Total investment 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 payable date.
<F3> During the year ended September 30, 1993, the Fund adopted Statement of Position (SOP) 93-2: Determination,
Disclosure and Financial Statement Presentation of Income, Capital Gain, and Return of Capital Distributions by
Investment Companies. The SOP requires that differences in the recognition or classification of income between
the financial statements and tax earnings and profits that result in temporary over-distributions for financial
statement purposes, are classified as distributions in excess of net investment income or accumulated net realized gains.
</TABLE>
<PAGE>
THE FUND'S INVESTMENT OBJECTIVES
- ------------------------------------------------------------------------------
THE FUND'S PRIMARY INVESTMENT OBJECTIVE IS TO PROVIDE AS MUCH CURRENT INCOME
AS POSSIBLE. In seeking this objective, the Fund currently invests a
significant portion of its assets in high yield, high risk bonds -- i.e.,
those rated lower than investment grade and unrated obligations (commonly
referred to as "junk bonds"). The Fund also seeks reasonable preservation of
capital to the extent attainable from such investments, and growth of income
and capital, as secondary objectives.
The high yield, high risk bonds in which the Fund invests are considered
predominently speculative with respect to the ability of the issuer to meet
principal and interest payments. Achievement of the Fund's objectives, which
cannot be assured, is therefore much more dependent on the Investment
Adviser's own credit analysis than is the case for higher quality bonds.
Investors are urged to carefully consider the substantial risks of investing
in a portfolio of high yield, high risk bonds before purchasing shares of the
Fund.
INVESTMENT POLICIES AND RISKS
- ------------------------------------------------------------------------------
THE FUND SEEKS AS MUCH CURRENT INCOME AS POSSIBLE BY INVESTING PRIMARILY IN
HIGH-YIELDING, HIGH RISK, FIXED-INCOME SECURITIES. During its last fiscal
year the Fund invested a significant portion of its assets in high yield, high
risk bonds which were rated lower than investment grade (i.e., bonds rated
lower than Baa by Moody's Investors Service, Inc. ("Moody's") and lower than
BBB by Standard & Poor's Ratings Group ("S&P")) or which were unrated bonds.
For a description of the Moody's and S&P's ratings, see Appendix A to this
Prospectus. These obligations are commonly referred to as "junk bonds", carry
a high degree of risk and are considered speculative by the investment
community. At September 30, 1995, the Fund had approximately 96.7% of its
assets invested in such bonds. See Appendix B to this Prospectus for the asset
composition information for the most recent fiscal year of the Fund.
A substantial portion of the Fund's assets consists of high yield, high risk
corporate bonds issued in connection with mergers, acquisitions, leveraged
buy-outs, recapitalizations and other highly leveraged transactions. These
bonds are subject to substantially greater credit risks than some of the other
fixed-income securities in which the Fund may invest. These credit risks
include the possibility of default or the bankruptcy of the issuer. These
bonds may also be less liquid than other fixed-income securities. During
periods of deteriorating economic conditions and contraction in the credit
markets, the ability of issuers of such bonds to service their debt, meet
projected goals, or obtain additional financing may be impaired. Because the
Fund seeks, in part, preservation of capital, the Investment Adviser is more
likely to avoid or limit investment in securities with substantial credit
risks than if high current income were the Fund's only objective. For more
detailed information about the risks associated with investing in such
securities, see "Risk Considerations" below.
The Fund may also invest a portion of its assets in debt securities that are
not paying current income in anticipation of the receipt of possible future
income or capital appreciation. Interest and/or principal payments thereon
could be in arrears when such securities are acquired, and the issuer may be
in bankruptcy or undergoing a debt restructuring or reorganization. Such
securities may be unrated or the lowest rated obligations (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. The Fund may retain defaulted obligations in
its portfolio when such retention is considered desirable by the Investment
Adviser. The Fund may also acquire other securities issued in exchange for
such obligations or issued in connection with the debt restructuring or
reorganization of the issuers, or where such acquisition, in the judgment of
the Investment Adviser, may enhance the value of such obligations or would
otherwise be consistent with the Fund's investment policies.
Although the Investment Adviser considers security ratings when making
investment decisions, it performs its own credit and investment analysis and
does not rely primarily on the ratings assigned by the rating services. In
evaluating the quality of a particular issue, whether rated or unrated, the
Investment Adviser will normally take into consideration, among other things,
the issuer's financial resources and operating history, its sensitivity to
economic conditions and trends, the ability of its management, its debt
maturity schedules and borrowing requirements, and relative values based on
anticipated cash flow, interest and asset coverages, and earnings prospects.
Because of the greater number of investment considerations involved in
investing in high yield, high risk bonds, the achievement of the Fund's
objectives depends more on the Investment Adviser's judgment and analytical
abilities than would be the case if the Fund were investing primarily in
securities in the higher rating categories.
The Fund's portfolio may be invested in a broad range of securities, including
fixed-income and equity securities and short-term obligations. Investment in
bonds may include those in both the higher categories of recognized rating
services (such as Moody's Baa and S&P's BBB and above) and in the lower
categories of such services (Moody's Ba and S&P's BB and below) and unrated
bonds. Bonds in the lower rated or unrated categories involve much greater
risk of principal and income, and involve greater volatility of price, than
securities in the higher rated categories. The Fund may also invest in non-
dividend paying common stocks and rights and warrants when the Investment
Adviser believes they present opportunities for capital appreciation.
FIXED-INCOME OBLIGATIONS. The fixed-income securities in which the Fund may
invest include preferred and preference stocks and all types of debt
obligations of both domestic and foreign issuers, such as bonds, debentures,
notes, equipment lease certificates, equipment trust certificates, conditional
sales contracts, commercial paper, and obligations issued or guaranteed by the
U.S. Government, any state or territory of the United States, any foreign
government or any of their respective political subdivisions, agencies or
instrumentalities. Debt securities may bear fixed, fixed and contingent,
floating or variable rates of interest.
The Fund may also invest a portion of its assets in loan interests, which are
interests in amounts owed by a corporate, governmental or other borrower to
lenders or lending syndicates. Loan interests purchased by the Fund may have a
maturity of any number of days or years, may be secured or unsecured, and may
be of any credit quality. Loan interests, which may take the form of
participation interests in, assignments of or novations of a loan, may be
acquired from U.S. and foreign banks, insurance companies, finance companies
or other financial institutions which have made loans or are members of a
lending syndicate or from the holders of loan interests. Loan interests
involve the risk of loss in case of default or bankruptcy of the borrower and,
in the case of participation interests, involve a risk of insolvency of the
agent lending bank or other financial intermediary.
The Fund may invest up to 15% of net assets in illiquid securities, including
securities legally restricted as to resale, and securities eligible for resale
pursuant to Rule 144A under the Securities Act of 1933. Rule 144A securities
may, however, be treated as liquid by the Investment Adviser pursuant to
procedures adopted by the Trustees, which require consideration of factors
such as trading activity, availability of market quotations and number of
dealers willing to purchase the security.
INVESTMENT PRACTICES
DERIVATIVE INSTRUMENTS. The Fund 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
Fund'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 Fund'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, Euro-
dollar 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 Fund'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 or default by
the counterparty. The loss on derivative instruments (other than purchased
options) may exceed the Fund's initial investment in these instruments. In
addition, the Fund may lose the entire premium paid for purchased options that
expire before they can be profitably exercised by the Fund. The Fund incurs
transaction costs in opening and closing positions in derivative instruments.
There can be no assurance that the Investment Adviser's use of derivative
instruments will be advantageous to the Fund.
The Fund'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 instruments, the assets underlying the derivative instrument and
the Fund's assets.
The Fund may write (sell) covered call and put options only with respect to up
to 25% of its net assets. To the extent that the Fund enters into futures
contracts, options on futures contracts and options on foreign currencies
traded on an exchange regulated by the Commodity Futures Trading Commission,
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 Fund's portfolio, after taking into
account unrealized profits and unrealized losses on any contracts the Fund has
entered into. The Fund did not engage in such transactions during the fiscal
year ended September 30, 1995, and there is no assurance that it will engage
in such transactions in the future.
SHORT-TERM TRADING. Securities may be sold in anticipation of a market
decline (a rise in interest rates) and later purchased, or purchased in
anticipation of a market rise (a decline in interest rates) and later sold. In
addition, a security may be sold and another purchased at approximately the
same time to take advantage of what the Fund believes to be a temporary
disparity in the normal yield relationship between the two securities. Yield
disparities may occur for reasons not directly related to the investment
quality of particular issues or the general movement of interest rates, such
as changes in the overall demand for or supply of various types of fixed-
income securities or changes in the investment objectives of investors. Such
trading may be expected to increase the portfolio turnover rate and the
expenses incurred in connection with such trading. The Fund anticipates that
its annual portfolio turnover rate will generally not exceed 100% (excluding
turnover of securities having a maturity of one year or less).
RISK CONSIDERATIONS
Investors should carefully consider their ability to assume the risks of
owning shares of a mutual fund that invests in below investment grade debt
obligations (commonly referred to as "junk bonds") before making an investment
in the Fund. The lower ratings of certain securities held by the Fund reflect
a greater possibility that adverse changes in the financial condition of an
issuer, or in general economic conditions, or both, or an unanticipated rise
in interest rates, may impair the ability of the issuer to make payments of
interest and principal. The inability (or perceived inability) of issuers to
make timely payment of interest and principal would likely make the values of
securities held by the Fund more volatile and could limit the Fund's ability
to sell its securities at prices approximating the values the Fund has placed
on such securities. It is possible that legislation may be adopted in the
future limiting the ability of certain financial institutions to purchase such
securities; such legislation may adversely affect the liquidity of such
securities. In the absence of a liquid trading market for securities held by
it, the Fund may be unable at times to establish the fair market value of such
securities. The rating assigned to a security by a rating agency does not
reflect an assessment of the volatility of the security's market value or of
the liquidity of an investment in the securities. Credit ratings are based
largely on the issuer's historical financial condition and the rating agency's
investment analysis at the timing of rating, and the rating assigned to any
particular security is not necessarily a reflection of the issuer's current
financial condition. Credit quality in the high yield, high risk bond market
can change from time to time, and recently issued credit ratings may not fully
reflect the actual risks posed by a particular high yield security.
While the Investment Adviser will attempt to reduce the risks of investing in
lower rated or unrated securities through active portfolio management,
diversification, credit analysis and attention to current developments and
trends in the economy and the financial markets, there can be no assurance
that a broadly diversified portfolio of such securities would substantially
lessen the risks of defaults brought about by an economic downturn or
recession.
The net asset value of the Fund will change in response to fluctuations in
prevailing interest rates and changes in the value of its portfolio
securities. When interest rates decline, the value of securities already held
in the Fund's portfolio can be expected to rise. Conversely, when interest
rates rise, the value of existing portfolio securities can be expected to
decline. Changes in the credit quality of issuers of debt obligations held in
the Fund's portfolio will affect the principal value (and possibly the income
earned) on such obligations. In addition, the values of such securities are
affected by changes in general economic conditions and business conditions
affecting the specific industries of their issuers. Changes by recognized
rating services in their ratings of any fixed-income security and in the
ability of an issuer to make payments of interest and principal may also
affect the value of these investments. The Fund will not dispose of a security
solely because its rating is reduced below its rating at the time of purchase,
although the Investment Adviser will monitor the investment to determine
whether continued investment in the security will assist in meeting the Fund's
investment objectives.
Interest and/or principal payments on securities in default could be in
arrears when such securities are acquired, and the issuer may be in bankruptcy
or undergoing a debt restructuring or reorganization. In order to enforce its
rights in the event of a default under such securities, the Fund may be
required to take possession of and manage assets securing the issuer's
obligation on such securities, which may increase the Fund's operating
expenses and adversely affect the Fund's net asset value. As at September 30,
1995, one of the obligations of the Fund was in default.
Certain securities held by the Fund may permit the issuer at its option to
"call", or redeem, its securities. If an issuer were to redeem securities held
by the Fund during a time of declining interest rates, the Fund may not be
able to reinvest the proceeds in securities providing the same investment
return as the securities redeemed. The Fund may temporarily borrow up to 5% of
the value of its total assets to satisfy redemption requests or settle
securities transactions.
Loan interests generally are not rated by any nationally recognized rating
service and are, at present, not readily marketable and may be subject to
contractual restrictions on resale. An investment in restricted securities may
involve relative greater risk and cost to the Fund because of their
illiquidity. Moreover, liquid Rule 144A securities may increase the level of
Fund illiquidity to the extent qualified institutional buyers become
uninterested in purchasing such securities.
Fixed-income securities that the Fund may invest in also include zero coupon
bonds, deferred interest bonds and bonds on which the interest is payable in
kind ("PIK bonds"). Zero coupon and deferred interest bonds are debt
obligations which are issued at a significant discount from face value. While
zero coupon bonds do not require the periodic payment of interest, deferred
interest bonds provide for a period of delay before the regular payment of
interest begins. PIK bonds are debt obligations which provide that the issuer
thereof may, at its option, pay interest on such bonds in cash or in the form
of additional debt obligations. Such investments may experience greater
volatility in market value due to changes in interest rates than debt
obligations which make regular payments of interest. The Fund will accrue
income on such investments for tax and accounting purposes, in accordance with
applicable law, which income is distributable to shareholders. Because no cash
is received at the time such income is accrued, the Fund may be required to
liquidate other portfolio securities to satisfy its distribution obligations.
Investing in foreign securities may represent a greater degree of risk than
investing in domestic securities, because of the possibility of exchange rate
fluctuations, less publicly-available financial and other information, more
volatile and less liquid markets, less securities regulation, higher brokerage
costs, imposition of foreign withholding and other taxes, war, expropriation
or other adverse governmental actions.
The Fund has adopted certain fundamental investment restrictions which are
enumerated in detail in the Statement of Additional Information and which may
not be changed unless authorized by a shareholder vote. While the Fund's
investment objectives are not fundamental (i.e., changeable only if authorized
by shareholder vote), the Fund's management believes that any material change
of the investment objectives should be authorized by shareholder vote. If any
changes were made, the Fund might have investment objectives different from
the objectives which an investor considered appropriate at the time the
investor became a shareholder in the Fund.
ORGANIZATION OF THE FUND
- ------------------------------------------------------------------------------
THE FUND, A BUSINESS TRUST ESTABLISHED UNDER MASSACHUSETTS LAW PURSUANT TO A
DECLARATION OF TRUST DATED MARCH 27, 1989, AS AMENDED, IS A MUTUAL FUND -- AN
OPEN-END DIVERSIFIED MANAGEMENT INVESTMENT COMPANY. Its predecessor, was
organized as a Maryland corporation and commenced operation in 1971. The
Trustees of the Fund are responsible for the overall management and
supervision of its affairs. The Fund has one class of shares of beneficial
interest (no par value per share), an unlimited number of which may be issued.
Each share represents an equal proportionate beneficial interest in the Fund.
When issued and outstanding, the shares are fully paid and nonassessable by
the Fund and redeemable as described under "How to Redeem Fund Shares".
Shareholders are entitled to one vote for each full share held. Fractional
shares may be voted proportionately. Shares have no preemptive or conversion
rights and are freely transferable. In the event of the liquidation of the
Fund, shareholders are entitled to share pro rata in the net assets of the
Fund available for distribution to shareholders.
MANAGEMENT OF THE FUND
- ------------------------------------------------------------------------------
THE FUND ENGAGES EATON VANCE MANAGEMENT ("EATON VANCE") AS ITS INVESTMENT
ADVISER. EATON VANCE, ITS AFFILIATES AND ITS PREDECESSOR COMPANIES HAVE BEEN
MANAGING ASSETS OF INDIVIDUALS AND INSTITUTIONS SINCE 1924 AND MANAGING
INVESTMENT COMPANIES SINCE 1931.
Acting under the general supervision of the Board of Trustees of the Fund,
Eaton Vance manages the Fund's investments and affairs. Under its investment
advisory agreement with the Fund, Eaton Vance receives a monthly advisory fee
of 5/96 of 1% (equivalent to 5/8 of 1% annually) of average monthly net
assets of the Fund. The Fund paid Eaton Vance advisory fees equivalent to
0.625% of the Fund's average daily net assets for the fiscal year ended
September 30, 1995.
Eaton Vance also furnishes for the use of the Fund office space and all
necessary office facilities, equipment and personnel for servicing the
investments of the Fund. The Fund is responsible for the payment of all
expenses other than those expressly stated to be payable by Eaton Vance under
the investment advisory agreement.
EATON VANCE OR ITS AFFILIATES ACTS AS INVESTMENT ADVISER TO INVESTMENT
COMPANIES AND VARIOUS INDIVIDUAL AND INSTITUTIONAL CLIENTS WITH ASSETS UNDER
MANAGEMENT OF APPROXIMATELY $16 BILLION. Eaton Vance is a wholly-owned
subsidiary of Eaton Vance Corp., a publicly held holding company. Eaton Vance
Corp., through its subsidiaries and affiliates, engages in investment
management and marketing activities, oil and gas operations, real estate
investment, consulting and management, and development of precious metals
properties. Eaton Vance Distributors, Inc. (the "Principal Underwriter" or
"EVD"), 24 Federal Street, Boston, MA 02110, a wholly-owned subsidiary of
Eaton Vance, acts as Principal Underwriter to the Fund.
Hooker Talcott, Jr. has acted as the portfolio manager since 1986 and Michael
Weilheimer is the co-portfolio manager. Both are Vice Presidents of Eaton
Vance.
Eaton Vance places the Fund's portfolio security transactions for execution
with many broker-dealer firms and uses its best efforts to obtain execution of
such transactions at prices which are advantageous to the Fund and at
reasonably competitive commission rates. The Fund's investment advisory
agreement provides that, subject to the foregoing, Eaton Vance may consider
sales of shares of the Fund or of other investment companies sponsored by
Eaton Vance as a factor in the selection of broker-dealer firms to execute
portfolio transactions.
SERVICE PLAN
- ------------------------------------------------------------------------------
In addition to advisory fees and other expenses, the Fund pays service fees
pursuant to a Service Plan (the "Plan") designed to meet the service fee
requirements of the sales charge rule of the National Association of
Securities Dealers, Inc. THE PLAN PROVIDES THAT THE FUND MAY MAKE SERVICE FEE
PAYMENTS FOR PERSONAL SERVICES AND/OR THE MAINTENANCE OF SHAREHOLDER ACCOUNTS
TO THE PRINCIPAL UNDERWRITER, FINANCIAL SERVICE FIRMS ("AUTHORIZED FIRMS") AND
OTHER PERSONS IN AMOUNTS NOT EXCEEDING .25% OF THE FUND'S AVERAGE DAILY NET
ASSETS FOR ANY FISCAL YEAR. The Trustees of the Fund have initially
implemented the Plan by authorizing the Fund to make quarterly service fee
payments to the Principal Underwriter and Authorized Firms in amounts not
expected to exceed .25% of that portion of the Fund's average daily net assets
for any fiscal year which is attributable to shares of the Fund sold on or
after May 22, 1989 and remaining outstanding for at least twelve months. The
Plan replaced the Fund's distribution plan which originally became effective
on May 22, 1989. For the fiscal year ended September 30, 1995, the Fund made
service fee payments under the Plan equivalent to 0.118% of the Fund's average
daily net assets for such year. The Plan is described further in the Statement
of Additional Information.
VALUING FUND SHARES
- ------------------------------------------------------------------------------
THE FUND VALUES ITS SHARES ONCE ON EACH DAY THE NEW YORK STOCK EXCHANGE (THE
"EXCHANGE") IS OPEN FOR TRADING, as of the close of regular trading on the
Exchange (normally 4:00 p.m. New York time). The Fund's net asset value per
share is determined by its custodian, Investors Bank & Trust Company ("IBT"),
(as agent for the Fund) in the manner authorized by the Trustees of the Fund.
Net asset value is computed by dividing the value of the Fund's total assets,
less its liabilities, by the number of shares outstanding. Most debt
securities are valued by an independent pricing service. See "Determination of
Net Asset Value" in the Statement of Additional Information.
Authorized Firms must communicate an investor's order to the Principal
Underwriter prior to the close of the Principal Underwriter's business day to
receive that day's net asset value per share and the public offering price
based thereon. It is the Authorized Firms' responsibility to transmit orders
promptly to the Principal Underwriter, which is a wholly-owned subsidiary of
Eaton Vance.
SHAREHOLDERS MAY DETERMINE THE VALUE OF THEIR INVESTMENT BY MULTIPLYING THE
NUMBER OF FUND SHARES OWNED BY THE CURRENT NET ASSET VALUE PER SHARE.
HOW TO BUY FUND SHARES
- ------------------------------------------------------------------------------
SHARES OF THE FUND MAY BE PURCHASED FOR CASH OR MAY BE ACQUIRED IN EXCHANGE
FOR SECURITIES. Investors may purchase shares of the Fund through Authorized
Firms at the effective public offering price, which price is based on the
effective net asset value per share plus the applicable sales charge. The Fund
receives the net asset value, while the sales charge is divided between the
Authorized Firm and the Principal Underwriter. The Principal Underwriter will
furnish the names of Authorized Firms to an investor upon request. An
Authorized Firm may charge its customers a fee in connection with transactions
executed by that Firm. The Fund may suspend the offering of shares at any time
and may refuse an order for the purchase of shares.
The sales charge may vary depending on the size of the purchase and the number
of shares of Eaton Vance funds the investor may already own, any arrangement
to purchase additional shares during a 13-month period or special purchase
programs. Complete details of how investors may purchase shares at reduced
sales charges under a Statement of Intention, Right of Accumulation, or
various Employee Benefit Plans are available from Authorized Firms or the
Principal Underwriter.
The current sales charges and dealer commissions are:
<TABLE>
<CAPTION>
SALES CHARGE SALES CHARGE DEALER COMMISSION
AS PERCENTAGE OF AS PERCENTAGE OF AS PERCENTAGE OF
AMOUNT OF PURCHASE OFFERING PRICE AMOUNT INVESTED OFFERING PRICE
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000 3.75% 3.90% 4.00%
$50,000 but less than $100,000 2.75 2.83 3.00
$100,000 but less than $250,000 2.25 2.30 2.50
$250,000 but less than $500,000 1.75 1.78 2.00
$500,000 but less than $1,000,000 1.25 1.27 1.50
$1,000,000 or more 0.00<F1> 0.00<F1> 0.50
<F1> No sales charge is payable at the time of purchase on investments of $1 million or more. A contingent deferred sales charge
("CDSC") of 0.50% will be imposed on such investments (as described below) in the event of certain redemptions within 12
months of purchase. Such purchases made before March 27, 1995 will be subject to a CDSC of 1% in the event of certain
redemptions within 18 months of purchase.
</TABLE>
The Principal Underwriter may at times allow discounts up to the full sales
charge. During periods when the discount includes the full sales charge,
Authorized Firms may be deemed to be underwriters as that term is defined in
the Securities Act of 1933. The Principal Underwriter may, from time to time,
at its own expense, provide additional incentives to Authorized Firms which
employ registered representatives who sell the Fund's shares and/or shares of
other funds distributed by the Principal Underwriter. In some instances, such
additional incentives may be offered only to Authorized Firms whose
representatives sell or are expected to sell significant amounts of shares.
An initial investment in the Fund must be at least $1,000. Once an account has
been established the investor may send investments of $50 or more at any time
directly to the Fund's transfer agent (the "Transfer Agent") as follows: First
Data Investor Services Group, BOS725, P.O. Box 1559, Boston, MA 02104. The
$1,000 minimum initial investment is waived for Bank Automated Investing
accounts, which may be established with an investment of $50 or more. See
"Eaton Vance Shareholder Services".
Shares of the Fund may be sold at net asset value to current and retired
Directors and Trustees of Eaton Vance funds; to officers and employees and
clients of Eaton Vance and its affiliates; to registered representatives and
employees of Authorized Firms; and bank employees who refer customers to
registered representatives of Authorized Firms; and to such persons' spouses
and children under the age of 21 and their beneficial accounts. Shares may
also be issued at net asset value (1) in connection with the merger of an
investment company with the Fund, (2) to investors making an investment as
part of a fixed fee program whereby an entity unaffiliated with the Investment
Adviser provides multiple investment services, such as management, brokerage
and custody, (3) where the amount invested represents redemption proceeds from
a mutual fund unaffiliated with Eaton Vance, if the redemption occurred no
more than 60 days' prior to the purchase of Fund shares and the redeemed
shares were subject to a sales charge, and (4) to an investor making an
investment through an investment adviser, financial planner, broker or other
intermediary that charges a fee for its services and has entered into an
agreement with the Fund or its Principal Underwriter.
No initial sales charge and no contingent deferred sales charge will be
payable or imposed with respect to shares of the Fund purchased by retirement
plans qualified under Section 401, 403(b) or 457 of the Internal Revenue Code
of 1986, as amended (the "Code") ("Eligible Plans"). In order to purchase
shares without a sales charge, the plan sponsor of an Eligible Plan must
notify the Transfer Agent of the Fund of its status as an Eligible Plan.
Participant accounting services (including trust fund reconciliation services)
will be offered only through third party recordkeepers and not by EVD. The
Fund's Principal Underwriter may pay commissions to Authorized Firms who
initiate and are responsible for purchases of shares of the Fund by Eligible
Plans of up to 1.00% of the amount invested in such shares.
ACQUIRING FUND SHARES IN EXCHANGE FOR SECURITIES. IBT, as escrow agent, will
receive securities acceptable to Eaton Vance, as Investment Adviser, in
exchange for Fund shares at the applicable public offering price shown above.
The minimum value of securities (or securities and cash) accepted for deposit
is $5,000. Securities accepted will be sold on the day of their receipt or as
soon thereafter as possible. The number of Fund shares to be issued in
exchange for securities will be the aggregate proceeds from the sale of such
securities, divided by the applicable public offering price per Fund share on
the day such proceeds are received. Eaton Vance will use reasonable efforts to
obtain the then current market price for such securities but does not
guarantee the best available price. Eaton Vance will absorb any transaction
costs, such as commissions, on the sale of the securities.
Securities determined to be acceptable should be transferred via book entry or
physically delivered, in proper form for transfer, through an Authorized Firm,
together with a completed and signed Letter of Transmittal in approved form
(available from Authorized Firms), as follows:
IN THE CASE OF BOOK ENTRY:
Deliver through Depository Trust Co.
Broker #2212
Investors Bank & Trust Company
For A/C Eaton Vance Income Fund of Boston
IN THE CASE OF PHYSICAL DELIVERY:
Investors Bank & Trust Company
Attention: Eaton Vance Income Fund of Boston
Physical Securities Processing Settlement Area
89 South Street
Boston, MA 02111
Investors who are contemplating an exchange of securities for shares of the
Fund, or their representatives, must contact Eaton Vance to determine whether
the securities are acceptable before forwarding such securities to IBT. Eaton
Vance reserves the right to reject any securities. Exchanging securities for
Fund 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 for Fund shares.
IF YOU DON'T HAVE AN AUTHORIZED FIRM, EATON VANCE CAN RECOMMEND ONE.
HOW TO REDEEM FUND SHARES
- -----------------------------------------------------------------------------
A SHAREHOLDER MAY REDEEM FUND SHARES BY DELIVERING TO FIRST DATA INVESTOR
SERVICES GROUP, BOS725, P.O. BOX 1559, BOSTON, MASSACHUSETTS 02104, during
its business hours a written request for redemption in good order, plus any
share certificates with executed stock powers. The redemption price will be
based on the net asset value per share next computed after such delivery. Good
order means that all relevant documents must be endorsed by the record owner
(s) exactly as the shares are registered and the signature(s) must be
guaranteed by a member of either the Securities Transfer Association's STAMP
program or the New York Stock Exchange's Medallion Signature Program, or
certain banks, savings and loan institutions, credit unions, securities
dealers, securities exchanges, clearing agencies and registered securities
associations as required by a regulation of the Securities and Exchange
Commission (the "Commission") and acceptable to First Data Investor Services
Group. In addition, in some cases, good order may require the furnishing of
additional documents such as where shares are registered in the name of a
corporation, partnership or fiduciary.
Within seven days after receipt of a redemption request in good order by First
Data Investor Services Group, the Fund will make payment in cash for the net
asset value of the shares as of the date determined above, reduced by the
amount of any federal income tax required to be withheld.
To sell shares at their net asset value through an Authorized Firm (a
repurchase), a shareholder can place a repurchase order with the Authorized
Firm, which may charge a fee. The value of such shares is based upon the net
asset value calculated after EVD, as the Fund's agent, receives the order. It
is the Authorized Firm's responsibility to transmit promptly repurchase orders
to EVD. Throughout this Prospectus, the word "redemption" is generally meant
to include a repurchase.
If shares were recently purchased, the proceeds of redemption (or repurchase)
will not be sent until the check (including a certified or cashier's check)
received for the shares purchased has cleared. Payment for shares tendered for
redemption may be delayed up to 15 days from the purchase date when the
purchase check has not yet cleared. Redemptions or repurchases may result in a
taxable gain or loss.
Due to the high cost of maintaining small accounts, the Fund reserves the
right to redeem Fund 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 Fund
if the cause of the low account balance was a reduction in the net asset value
of Fund shares.
If shares have been purchased at net asset value with no initial sales charge
by virtue of the purchase having been in the amount of $1 million or more and
are redeemed within 12 months of purchase, a CDSC of 0.50% will be imposed on
such redemption. (Such purchases made before March 27, 1995 will be subject to
a CDSC of 1% in the event of certain redemptions made within 18 months of
purchase). The CDSC will be retained by the Principal Underwriter. The CDSC
will be imposed on an amount equal to the lesser of the current market value
or the original purchase price of the shares redeemed. Accordingly, no CDSC
will be imposed on increases in account value above the initial purchase
price, including any dividends or distributions that have been reinvested in
additional shares. In determining whether a CDSC is applicable to a
redemption, the calculation will be made in a manner that results in the
lowest possible rate being charged. It will be assumed that redemptions are
made first from any shares in the shareholder's account that are not subject
to a CDSC.
The CDSC is waived for redemptions involving certain liquidation, merger or
acquisition transactions involving other investment companies. If a
shareholder reinvests redemption proceeds within a 60-day period and in
accordance with the conditions set forth under "Eaton Vance Shareholder
Services -- Reinvestment Privilege," the shareholder's account will be
credited with the amount of any CDSC paid on such redeemed shares.
REPORTS TO SHAREHOLDERS
- ------------------------------------------------------------------------------
THE FUND WILL ISSUE TO ITS SHAREHOLDERS SEMI-ANNUAL AND ANNUAL REPORTS
CONTAINING FINANCIAL STATEMENTS. Financial statements included in annual
reports are audited by the Fund's independent accountants. Shortly after the
end of each calendar year, the Fund will furnish all shareholders with
information necessary for preparing federal and state income tax returns.
Consistent with applicable law, duplicate mailings of shareholder reports and
certain other Fund information to shareholders residing at the same address
may be eliminated.
THE LIFETIME INVESTING ACCOUNT/DISTRIBUTION OPTIONS
- ------------------------------------------------------------------------------
AFTER AN INVESTOR MAKES AN INITIAL PURCHASE OF FUND SHARES, THE FUND'S
TRANSFER AGENT, FIRST DATA INVESTOR SERVICES GROUP, WILL SET UP A LIFETIME
INVESTING ACCOUNT FOR THE INVESTOR ON THE FUND'S RECORDS. This account is a
complete record of all transactions between the investor and the Fund which at
all times shows the balance of shares owned. The Fund will not issue share
certificates except upon request.
At least quarterly, shareholders will receive a statement showing complete
details of any transaction and the current share balance in the account. THE
LIFETIME INVESTING ACCOUNT PERMITS A SHAREHOLDER TO MAKE ADDITIONAL
INVESTMENTS IN SHARES BY SENDING A CHECK FOR $50 OR MORE TO First Data
Investor Services Group.
Any questions concerning a shareholder's account or services available may
also be directed by telephone to EATON VANCE SHAREHOLDER SERVICES at 800-225-
6265, extension 2, or in writing to First Data Investor Services Group,
BOS725, P.O. Box 1559, Boston, MA 02104 (please provide the name of the
shareholder, the Fund and the account number).
THE FOLLOWING DISTRIBUTION OPTIONS WILL BE AVAILABLE TO ALL LIFETIME INVESTING
ACCOUNTS and may be changed as often as desired by written notice to the
Fund's dividend disbursing agent, First Data Investor Services Group, BOS725,
P.O. Box 1559, Boston, MA 02104. The currently effective option will appear on
each account statement.
SHARE OPTION -- Dividends and capital gains will be reinvested in additional
shares.
INCOME OPTION -- Dividends will be paid in cash, and capital gains will be
reinvested in additional shares.
CASH OPTION -- Dividends and capital gains will be paid in cash.
The SHARE OPTION will be assigned if no other option is specified.
Distributions, including those reinvested, will be reduced by any withholding
required under federal income tax laws.
If the INCOME OPTION or CASH OPTION has been selected, dividend and/or capital
gains distribution checks which are returned by the United States Postal
Service as not deliverable or which remain uncashed for six months or more
will be reinvested in the account in shares at the then current net asset
value. Furthermore, the distribution option on the account will be
automatically changed to the Share Option until such time as the shareholder
selects a different option.
DISTRIBUTION INVESTMENT OPTION. In addition to the distribution options set
forth above, dividends and/or capital gains may be invested in additional
shares of another Eaton Vance fund. Before selecting this option, a
shareholder should obtain a prospectus of the other Eaton Vance fund and
consider its objectives and policies carefully.
"STREET NAME" ACCOUNTS. If shares of the Fund are held in a "street name"
account with an Authorized Firm, all recordkeeping, transaction processing and
payments of distributions relating to the beneficial owner's account will be
performed by the Authorized Firm, and not by the Fund and its Transfer Agent.
Since the Fund will have no record of the beneficial owner's transactions, a
beneficial owner should contact the Authorized Firm to purchase, redeem or
exchange shares, to make changes in or give instructions concerning the
account, or to obtain information about the account. The transfer of shares in
a "street name" account to an account with another dealer or to an account
directly with the Fund involves special procedures and will require the
beneficial owner to obtain historical purchase information about the shares in
the account from the Authorized Firm. Before establishing a "street name"
account with an investment firm, or transferring the account to another
investment firm, an investor wishing to reinvest distributions should
determine whether the firm which will hold the shares allows reinvestment of
distributions in "street name" accounts.
THE EATON VANCE EXCHANGE PRIVILEGE
- ------------------------------------------------------------------------------
Shares of the Fund currently may be exchanged for shares of any of the
following funds: Eaton Vance Cash Management Fund, Eaton Vance Municipal Bond
Fund L.P., Eaton Vance Tax Free Reserves and any fund in the Eaton Vance
Traditional Group of Funds on the basis of the net asset value per share of
each fund at the time of the exchange (plus, in the case of an exchange made
within six months of the date of purchase of shares subject to an initial
sales charge, an amount equal to the difference, if any, between the sales
charge previously paid on the shares being exchanged and the sales charge
payable on the shares being acquired). Such exchange offers are available only
in states where shares of the fund being acquired may be legally sold.
Each exchange must involve shares which have a net asset value of at least
$1,000. The exchange privilege may be changed or discontinued without penalty.
Shareholders will be given sixty (60) days' notice prior to any termination or
material amendment of the exchange privilege. The Fund does not permit the
exchange privilege to be used for "Market Timing" and may terminate the
exchange privilege for any shareholder account engaged in Market Timing
activity. Any shareholder account for which more that two round-trip exchanges
are made within any twelve month period will be deemed to be engaged in Market
Timing. Furthermore, a group of unrelated accounts for which exchanges are
entered contemporaneously by a financial intermediary will be considered to be
engaged in Market Timing.
Shares of the Fund which are subject to a CDSC may be exchanged into any of
the above funds without incurring the CDSC. The shares acquired in an exchange
may be subject to a CDSC upon redemption. For purposes of computing the CDSC
payable upon redemption of shares acquired in an exchange, the holding period
of the original shares is added to the holding period of the shares acquired
in the exchange.
First Data Investor Services Group makes exchanges at the next determined net
asset value after receiving an exchange request in good order (see "How to
Redeem Fund Shares"). Consult First Data Investor Services Group for
additional information concerning the exchange privilege. Applications and
prospectuses of the other funds are available from Authorized Firms or the
Principal Underwriter. The prospectus for each fund describes its investment
objectives and policies, and shareholders should obtain a prospectus and
consider these objectives and policies carefully before requesting an
exchange.
Shares of certain other funds for which Eaton Vance acts as investment adviser
or administrator may be exchanged for Fund shares on the basis of the net
asset value per share of each fund at the time of the exchange, but subject to
any restrictions or qualifications set forth in the current prospectus of any
such fund.
Telephone exchanges are accepted by First Data Investor Services Group
provided the investor has not disclaimed in writing the use of the privilege.
To effect such exchanges, call First Data Investor Services Group at 800-262-
1122 or, within Massachusetts, 617-573-9403, Monday through Friday, 9:00 a.m.
to 4:00 p.m. (Eastern Standard Time). Shares acquired by telephone exchange
must be registered in the same name(s) and with the same address as the shares
being exchanged. Neither the Fund, the Principal Underwriter nor First Data
Investor Services Group will be responsible for the authenticity of exchange
instructions received by telephone, provided that reasonable procedures to
confirm that instructions communicated are genuine have been followed.
Telephone instructions will be tape recorded. In times of drastic economic or
market changes, a telephone exchange may be difficult to implement. An
exchange may result in a taxable gain or loss.
EATON VANCE SHAREHOLDER SERVICES
- ------------------------------------------------------------------------------
THE FUND OFFERS THE FOLLOWING SERVICES, WHICH ARE VOLUNTARY, INVOLVE NO EXTRA
CHARGE, AND MAY BE CHANGED OR DISCONTINUED WITHOUT PENALTY AT ANY TIME. Full
information on each of the services described below and an application, where
required, are available from Authorized Firms or the Principal Underwriter.
The cost of administering such services for the benefit of shareholders who
participate in them is borne by the Fund as an expense to all shareholders.
INVEST-BY-MAIL -- FOR PERIODIC SHARE ACCUMULATION: Once the $1,000 minimum
investment has been made, checks of $50 or more payable to the order of Eaton
Vance Income Fund of Boston may be mailed directly to First Data Investor
Services Group, BOS725, P.O. Box 1559, Boston, MA 02104 at any time -- whether
or not dividends are reinvested. The name of the shareholder, the Fund and the
account number should accompany each investment.
BANK AUTOMATED INVESTING -- FOR REGULAR SHARE ACCUMULATION: Cash investments
of $50 or more may be made automatically each month or quarter from the
shareholder's bank account. The $1,000 minimum initial investment and small
account redemption policy are waived for these accounts.
STATEMENT OF INTENTION: Purchases of $50,000 or more made over a 13-month
period are eligible for reduced sales charges. See "Statement of Intention and
Escrow Agreement."
RIGHT OF ACCUMULATION: Purchases may qualify for reduced sales charges when
the current market value of holdings (shares at current offering price), plus
new purchases, reaches $50,000 or more. Shares of the Eaton Vance funds listed
under "The Eaton Vance Exchange Privilege" may be combined under the Statement
of Intention and Right of Accumulation.
WITHDRAWAL PLAN: A shareholder may draw on shareholdings systematically with
monthly or quarterly checks in an amount specified by the shareholder. A
minimum deposit of $5,000 in shares is required. The maintenance of a
withdrawal plan concurrently with purchases of additional shares would be
disadvantageous because of the sales charge included in such purchases.
REINVESTMENT PRIVILEGE: A SHAREHOLDER WHO HAS REPURCHASED OR REDEEMED SHARES
MAY REINVEST AT NET ASSET VALUE ANY PORTION OR ALL OF THE REPURCHASE OR
REDEMPTION PROCEEDS (PLUS THAT AMOUNT NECESSARY TO ACQUIRE A FRACTIONAL SHARE
TO ROUND OFF THE PURCHASE TO THE NEAREST FULL SHARE), IN SHARES OF THE FUND,
or, provided that the shares repurchased or redeemed have been held for at
least 60 days, in shares of any of the other funds offered by the Principal
Underwriter subject to an initial sales charge, provided that the reinvestment
is effected within 60 days after such repurchase or redemption, and the
privilege has not been used more than once in the prior 12 months. Shares are
sold to a reinvesting shareholder at the next determined net asset value
following timely receipt of a written purchase order by the Principal
Underwriter or by the fund the shares of which are being purchased (or by such
fund's transfer agent). The privilege is also available to shareholders of the
funds listed under the "The Eaton Vance Exchange Privilege" who wish to
reinvest such redemption or repurchase proceeds in shares of the Fund. If a
shareholder reinvests redemption proceeds within the 60-day period, the
shareholder's account will be credited with the amount of any CDSC paid on
such redeemed shares. To the extent that any shares of the Fund are sold at a
loss and the proceeds are reinvested in shares of the Fund (or other shares of
the Fund are acquired within the period beginning 30 days before and ending 30
days after the date of the redemption) some or all of the loss generally will
not be allowed as a tax deduction. Shareholders should consult their tax
advisers concerning the tax consequences of reinvestments.
TAX-SHELTERED RETIREMENT PLANS: Shares of the Fund are available for purchase
in connection with the following tax-sheltered retirement plans:
- -- Pension and Profit Sharing Plans for self-employed individuals,
corporations and non-profit organizations;
- -- Individual Retirement Account Plans for individuals and their non-employed
spouses; and
- -- 403(b) Retirement Plans for employees of public school systems, hospitals,
colleges and other non-profit organizations meeting certain requirements of
the Code.
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. Under all plans,
dividends and distributions will be automatically reinvested in additional
shares.
DISTRIBUTIONS AND TAXES
- ------------------------------------------------------------------------------
DISTRIBUTIONS. Substantially all of the investment income earned by the Fund,
less its expenses, will be declared daily as a distribution to shareholders of
record at the time of declaration. Such distributions whether taken in cash or
reinvested in additional shares, will ordinarily be paid on the last day of
each month or the next business day thereafter. Capital gains, if any,
realized on sales of investments and on options and futures transactions will
be offset by any capital loss carryovers and will be distributed at least once
a year, usually in December. Daily distribution crediting will commence on the
day that collected funds for the purchase of Fund shares are available at the
Fund's Transfer Agent.
TAXES. For federal income tax purposes, a shareholder's proportionate share of
distributions from the Fund's net investment income and net short-term capital
gains and certain foreign exchange gains are taxable as ordinary income,
whether received in cash or reinvested in additional shares. A small portion
of distributions from net investment income may be eligible for the dividends
received deduction for corporations. A shareholder's proportionate share of
distributions from the Fund's net long-term capital gain is taxable as long-
term capital gains whether received in cash or reinvested in additional
shares, regardless of the length of time Fund shares have been owned by the
shareholder. If shares are purchased shortly before the record date of a
distribution, the shareholder will pay the full price for the shares and then
receive some portion of the price back as a taxable distribution.
Sales charges paid upon a purchase of Fund shares cannot be taken into account
for purposes of determining gain or loss on a redemption or exchange of the
shares before the 91st day after their purchase to the extent shares of the
Fund or of another fund are subsequently acquired pursuant to the Fund's
reinvestment or exchange privilege. Any disregarded amounts will result in an
adjustment to the shareholder's tax basis in some or all of any other shares
acquired.
Shareholders will receive annually one or more Forms 1099 to assist in
reporting on their federal and state income tax returns the prior calendar
year's distributions, proceeds from the redemption or exchange of Fund shares,
and federal income tax (if any) withheld by the Fund's Transfer Agent.
AS A REGULATED INVESTMENT COMPANY UNDER THE CODE, THE FUND DOES NOT PAY
FEDERAL INCOME OR EXCISE TAXES TO THE EXTENT THAT IT DISTRIBUTES TO
SHAREHOLDERS ITS NET INVESTMENT INCOME AND NET REALIZED CAPITAL GAINS IN
ACCORDANCE WITH THE TIMING REQUIREMENTS IMPOSED BY THE CODE.
PERFORMANCE INFORMATION
- ------------------------------------------------------------------------------
FROM TIME TO TIME, THE FUND MAY ADVERTISE ITS YIELD AND/OR AVERAGE ANNUAL
TOTAL RETURN. The Fund's current yield is calculated by dividing the net
investment income per share earned during a recent 30-day period by the
maximum offering price per share of the Fund on the last day of the period and
annualizing the resulting figure. The Fund's average annual total return is
determined by multiplying a hypothetical initial purchase order of $1,000 by
the average annual compounded rate of return (including capital appreciation/
depreciation, and dividends and distributions paid and reinvested) for the
stated period and annualizing the result. The average annual total return
calculation assumes that the maximum sales charge is deducted from the initial
$1,000 purchase order and that all dividends and distributions are reinvested
at net asset value on the reinvestment dates during the period. The Fund may
also publish annual and cumulative total return figures from time to time.
The Principal Underwriter may publish to Authorized Firms the Fund's
distribution rate and/or effective distribution rate. The Fund's distribution
rate is computed by dividing the most recent monthly distribution per share
annualized by the current maximum offering price per share. The Fund's
effective distribution rate is computed by dividing the distribution rate by
the ratio used to annualize the most recent monthly distribution and
reinvesting the resulting amount for a full year on the basis of such ratio.
The effective distribution rate will be higher than the distribution rate
because of the compounding effect of the assumed reinvestment. Investors
should note that the Fund's yield is calculated using a standardized formula
the income component of which is computed from the yields to maturity of all
debt obligations in the Fund's portfolio based on the market value of such
obligations and from dividends from equity securities based on stated annual
rates, exclusive of special or extra distributions (with all purchases and
sales of securities during such period included in the income calculation on a
settlement date basis), whereas the distribution rate is based on the Fund's
last monthly distribution which tends to be relatively stable and may be more
or less than the amount of net investment income and short-term capital gain
actually earned by the Fund during the month.
The Fund may also furnish total return calculations based on investments at
various sales charge levels or at net asset value. Any performance data which
is based on the Fund's net asset value per share would be reduced if a sales
charge were taken into account. The Fund's performance may be compared in
publications to the performance of various indices and investments for which
reliable data is available, and to averages, performance rankings, or other
information prepared by recognized mutual fund statistical services.
Investors should note that the investment results of the Fund will fluctuate
over time, and any presentation of the Fund's current yield or total return
for any prior period should not be considered a representation of what an
investment may earn or what the Fund's yield or total return may be in any
future period.
STATEMENT OF INTENTION AND ESCROW AGREEMENT
- ------------------------------------------------------------------------------
TERMS OF ESCROW. If the investor, on an application, makes a Statement of
Intention to invest a specified amount over a thirteen month period, then out
of the initial purchase (or subsequent purchases if necessary) 5% of the
dollar amount specified on the application shall be held in escrow by the
escrow agent in the form of shares (computed to the nearest full share at the
public offering price applicable to the initial purchase hereunder) registered
in the investor's name. All income dividends and capital gains distributions
on escrowed shares will be paid to the investor or to the investor's order.
When the minimum investment so specified is completed, the escrowed shares
will be delivered to the investor. If the investor has an accumulation account
the shares will remain on deposit under the account.
If total purchases under this Statement of Intention are less than the amount
specified, the investor will promptly remit to EVD any difference between the
sales charge on the amount specified and on the amount actually purchased. If
the investor does not within 20 days after written request by EVD or the
Authorized Firm pay such difference in sales charge, the escrow agent will
redeem an appropriate number of the escrowed shares in order to realize such
difference. Full shares remaining after any such redemption together with any
excess cash proceeds of the shares so redeemed will be delivered to the
investor or to the investor's order by the escrow agent.
PROVISION FOR RETROACTIVE PRICE ADJUSTMENT. If total purchases made under this
Statement are large enough to qualify for a lower sales charge than that
applicable to the amount specified, all transactions will be computed at the
expiration date of this Statement to give effect to the lower charge. Any
difference in sales charge will be refunded to the investor in cash, or
applied to the purchase of additional shares at the lower charge if specified
by the investor. This refund will be made by the Authorized Firm and by EVD.
If at the time of the recomputation a firm other than the original firm is
placing the orders, the adjustment will be made only on those shares purchased
through the firm then handling the investor's account.
<PAGE>
APPENDIX A
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S CORPORATE BOND RATINGS:
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt-edge". 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 risks appear somewhat larger than in Aaa
securities.
A: Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may
be present which suggest a susceptibility to impairment sometime in the
future.
SECURITIES IN WHICH THE FUND 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 through B in its corporate bond rating system. The
modifier 1 indicates that the security 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 issue ranks in the lower end of its generic
rating category.
DESCRIPTION OF STANDARD & POOR'S RATINGS GROUP CORPORATE BOND RATINGS:
INVESTMENT GRADE
AAA: Bonds rated AAA have the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA: Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the higher rated issues only in small degree.
A: Bonds rated A have a strong capacity to pay interest and repay principal
although they are somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than bonds in higher rated
categories.
SECURITIES IN WHICH THE FUND MAY INVEST WILL INCLUDE THOSE IN THE FOLLOWING
CATEGORIES:
BBB: Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit 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 bonds 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: Bonds may lack a Standard & Poor's rating because 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: Bonds which are unrated expose the investor to risks with respect to
capacity to pay interest or repay principal which are similar to the risks of
lower-rated speculative obligations. The Fund is dependent on the Investment
Adviser's judgment, analysis and experience in the evaluation of such bonds.
Investors should note that the assignment of a rating to a bond by a rating
service may not reflect the effect of recent developments on the issuer's
ability to make interest and principal payments.
<PAGE>
APPENDIX B
EATON VANCE INCOME FUND OF BOSTON
ASSET COMPOSITION INFORMATION
FOR FISCAL YEAR ENDED SEPTEMBER 30, 1995
PERCENT OF
NET ASSETS
----------
Common Stocks & Warrants ............................. 1.0%
Short-Term Obligations ............................... 2.3%
Debt Securities -- Moody's Rating
Ba ............................................... 8.9%
B1 ............................................... 21.6%
B2 ............................................... 26.3%
B3 ............................................... 28.1%
Caa .............................................. 8.1%
Unrated .......................................... 3.7%
-----
Total ............................................ 100.0%
The chart above indicates the weighted average composition of the Fund's
portfolio for the fiscal year ended September 30, 1995, with the debt
securities rated by Moody's Investors Service, Inc. 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 Fund's portfolio will be in the current and subsequent fiscal years.
For a description of Moody's Investors Service, Inc's. ratings of fixed-income
securities, see Appendix A to this Prospectus.
<PAGE>
EATON VANCE [logo]
INCOME FUND EATON VANCE
OF BOSTON MUTUAL FUNDS
PROSPECTUS
FEBRUARY 1, 1996
EATON VANCE
INCOME FUND
OF BOSTON
24 FEDERAL STREET
BOSTON, MA 02110
- -----------------------------------------------------------------------------
INVESTMENT ADVISER
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 89 South Street, Boston, MA 02111
TRANSFER AGENT
First Data Investor Services Group, BOS725, P.O. Box 1559, Boston, MA 02104
(800) 262-1122
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P., One Post Office Square, Boston, MA 02109
LEGAL COUNSEL
Gordon Altman Butowsky Weitzen Shalov & Wein, 114 West 47th Street,
New York, NY 10036
IBP
<PAGE>
STATEMENT OF
ADDITIONAL INFORMATION
February 1, 1996
EATON VANCE INCOME FUND OF BOSTON
24 Federal Street
Boston, Massachusetts 02110
(800) 225-6265
- ------------------------------------------------------------------------------
TABLE OF CONTENTS Page
General Information and History .................................. 2
Investment Objectives and Policies ............................... 2
Investment Restrictions .......................................... 7
Officers and Trustees of the Fund ................................ 8
Control Persons and Principal Holders of Securities .............. 10
Investment Adviser ............................................... 10
Custodian ........................................................ 12
Services for Accumulation ........................................ 12
Service for Withdrawal ........................................... 13
Portfolio Security Transactions .................................. 13
Determination of Net Asset Value ................................. 15
Investment Performance ........................................... 15
Taxes ............................................................ 17
Principal Underwriter ............................................ 18
Service Plan ..................................................... 19
Other Information ................................................ 20
Independent Accountants .......................................... 21
Financial Statements ............................................. 21
- ------------------------------------------------------------------------------
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY THE CURRENT PROSPECTUS OF EATON VANCE INCOME FUND OF BOSTON
(THE "FUND") DATED FEBRUARY 1, 1996, AS SUPPLEMENTED FROM TIME TO TIME. THIS
STATEMENT OF ADDITIONAL INFORMATION SHOULD BE READ IN CONJUNCTION WITH SUCH
PROSPECTUS, A COPY OF WHICH MAY BE OBTAINED WITHOUT CHARGE BY CONTACTING EATON
VANCE DISTRIBUTORS, INC. (THE "PRINCIPAL UNDERWRITER") (SEE BACK COVER FOR
ADDRESS AND PHONE NUMBER).
<PAGE>
GENERAL INFORMATION AND HISTORY
Eaton Vance Income Fund of Boston (the "Fund") is a Massachusetts business
trust established under a Declaration of Trust dated March 27, 1989, as
amended and restated November 20, 1995. Its predecessor, Eaton Vance Income
Fund of Boston, Inc., was organized as a Maryland corporation and commenced
operation in 1971. References herein to the "Fund" include the Fund's
predecessor, unless the context requires otherwise. The Fund's investment
adviser is Eaton Vance Management ("Eaton Vance" or the "Investment Adviser"),
a Massachusetts business trust. Eaton Vance is a wholly-owned subsidiary of
Eaton Vance Corp. ("EVC").
INVESTMENT OBJECTIVES AND POLICIES
The Fund seeks to achieve its primary investment objective, as much
current income as possible, by investing primarily in high-yielding, high
risk, fixed-income securities. A substantial portion of the Fund's portfolio
will generally consist of fixed-income securities and dividend paying stocks.
However, the Fund may also, from time to time, invest in non-income producing
bonds and obligations and in non-dividend paying stocks and rights and
warrants when it believes there is a substantial opportunity for capital
appreciation. Any realized gains from such capital appreciation provide an
opportunity for increasing the Fund's investment in income producing
securities. Bonds and preferred stocks will tend to be acquired for current
income and reasonable stability of capital; convertible securities and common
stocks will normally be acquired for their growth potential as well as their
yield. The percentages of assets invested in fixed-income securities and the
type of such securities held by the Fund will vary and may include a broad
range of quality in rated and unrated debt securities, as described in the
Prospectus. The Fund does not invest in companies for the primary purpose of
acquiring control or management thereof.
The Fund does not seek to realize short-term gains. However, it may
dispose of fixed-income securities on a short term (less than six months)
basis in order to take advantage of differentials in bond prices and yields or
of fluctuations in interest rates consistent with its investment objective.
Other securities may also be disposed of earlier than originally anticipated
because of changes in business trends or developments, or other circumstances
believed to render them vulnerable to price decline or otherwise undesirable
for continued holding.
See the information contained under the caption "Investment Policies and
Risks" in the current Prospectus for a further description of the Fund's
objective and investment policies.
OTHER FIXED-INCOME SECURITIES
Included in the fixed-income securities in which the Fund may invest are
preferred, preference and convertible stocks, equipment lease certificates,
equipment trust certificates and conditional sales contracts. Preference
stocks are stocks that have many characteristics of preferred stocks, but are
typically junior to an existing class of preferred stocks. 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. Conditional sales contracts are
agreements under which the seller of property continues to hold title to the
property until the purchase price is fully paid or other conditions are met by
the buyer.
The Fund may purchase fixed-rate bonds which have a demand feature
allowing the holder to redeem the bonds at specified times. These bonds are
more defensive than conventional long-term bonds (protecting to some degree
against a rise in interest rates) while providing greater opportunity than
comparable intermediate term bonds, since the Fund may retain the bond if
interest rates decline. By acquiring these kinds of bonds the Fund obtains the
contractual right to require the issuer of the bonds to purchase the security
at an agreed upon price, which right is contained in the obligation itself
rather than in a separate agreement or instrument. Since this right is
assignable only with the bond, the Fund will not assign any separate value to
such right. The Fund may also purchase floating or variable rate obligations,
which it would anticipate using as short-term investments pending longer term
investment of its funds.
CONCENTRATION
Although there is no current intention to do so, the Fund may invest up to
25% of its assets in securities of issuers in each of the electric, gas and
telephone utility industries if, in the opinion of the Investment Adviser, the
relative return available from such securities and the relative risk,
marketability, quality or availability of securities of issuers in such
industry justifies such an investment. The value of such investments may be
affected to a greater degree by adverse developments in such industries.
Industry-wide problems include the effects of fluctuating economic conditions,
energy conservation practices, environmental regulations, high capital
expenditures, construction delays due to pollution control and environmental
considerations, uncertainties as to fuel availability and costs, increased
competition in deregulated sectors of such industries and difficulties in
obtaining timely and adequate rate relief from regulatory commissions. If
applications for rate increases are not granted or are not acted upon
promptly, the market prices of and interest or dividend payments on utility
securities may be adversely affected.
LOAN INTERESTS
A loan in which the Fund 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
Fund may also acquire Loan Interests under which the Fund derives its rights
directly from the borrower. Such Loan Interests are separately enforceable by
the Fund against the borrower and all payments of interest and principal are
typically made directly to the Fund from the borrower. In the event that the
Fund 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 Fund 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. Eaton
Vance also analyzes and evaluates the financial condition of the Agent and, in
the case of Loan Interests in which the Fund does not have privity with the
borrower, those institutions from or through whom the Fund derives its rights
in a loan (the "Intermediate Participants"). From time to time Eaton Vance 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 Fund or may be Intermediate Participants with respect
to loans in which the Fund owns interests. Such banks may also act as Agents
for loans in which the Fund 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 Fund will generally rely upon the Agent or an Intermediate
Participant to receive and forward to the Fund its portion of the principal
and interest payments on the loan. Furthermore, unless under the terms of a
participation agreement the Fund has direct recourse against the borrower, the
Fund 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 Fund will perform
such tasks on its own behalf, although a Collateral Bank will typically hold
any collateral on behalf of the Fund 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 Fund were determined to be subject to the claims of the Agent's
general creditors, the Fund 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 Fund does not
receive scheduled interest or principal payments on such indebtedness, the
Fund's share price and yield could be adversely affected. Loans that are fully
secured offer the Fund 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 Fund 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 Fund generally will
treat the borrower as the "issuer" of a Loan Interest held by the Fund. In the
case of loan participations where the Agent or Intermediate Participant serves
as financial intermediary between the Fund and the borrower, the Fund, in
appropriate circumstances, will treat both the Agent or Intermediate
Participant and the borrower as "issuers" for the purposes of determining
whether the Fund 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 Fund's ability to invest in indebtedness related to a single
intermediary, or a group of intermediaries engaged in the same industry, even
if the underlying borrowers represent many different companies and industries.
FOREIGN INVESTMENTS
Investing in foreign issuers involves certain special considerations,
including those set forth below, which are not typically associated with
investing in U.S. issuers. Since investments in foreign issuers may involve
currencies of foreign countries, and since the Fund may temporarily hold funds
in bank deposits in foreign currencies during completion of investment
programs, the Fund 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 generally 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 New York Stock 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 Fund 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. In addition, with respect to certain
foreign countries, there is the possibility of expropriation or confiscatory
taxation, political or social instability, or diplomatic developments which
could affect the Fund'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.
FORWARD FOREIGN CURRENCY EXCHANGE TRANSACTIONS
The Fund does not intend to enter into forward foreign currency exchange
contracts to protect the value of its portfolio securities on a regular
continuous basis, and will not do so if, as a result, the Fund will have more
than 15% of the value of its total assets committed to the consummation of
such contracts. The Fund also will not enter into such forward contracts or
maintain a net exposure to such contracts where the consummation of the
contracts would obligate the Fund to deliver an amount of foreign currency in
excess of the value of the securities held by the Fund 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 Fund believes that it is important to have the flexibility to
enter into such forward contracts when it determines that the best interests
of the Fund will be served. The Fund generally will not enter into a forward
contract with a term of greater than one year.
The Fund 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 Fund 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.
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
Fund 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 Fund 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 Fund 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 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 Options Clearing
Corporation 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 Options Clearing Corporation 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 Fund are traded on exchanges or
boards of trade that are licensed and regulated by the Commodity Futures
Trading Commission ("CFTC").
The Fund may purchase and write call and put options on futures contracts
which are traded on a United States exchange or board of trade.
The Fund 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 Fund 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 Fund or
which it expects to purchase. Except as stated below, the Fund's futures
transactions will be entered into for traditional hedging purposes -- i.e.,
futures contracts will be sold to protect against a decline in the price of
securities that the Fund owns, or futures contracts will be purchased to
protect the Fund against an increase in the price of securities it intends to
purchase. As evidence of this hedging intent, the Fund expects that on 75% or
more of the occasions on which it takes a long futures (or option) position
(involving the purchase of futures contracts), the Fund will have purchased,
or will be in the process of purchasing, equivalent amounts of related
securities in the cash market at the time when the futures (or option)
position is closed out. However, in particular cases, when it is economically
advantageous for the Fund to do so, a long futures position may be terminated
(or an option may expire) without the corresponding purchase of securities. As
an alternative to compliance with the bona fide hedging definition, a CFTC
regulation permits the Fund to elect to comply with a different test, under
which the aggregate initial margin and premiums required to establish non-
hedging positions in futures contracts and options on futures will not exceed
5% of the Fund's net asset value after taking into account unrealized profits
and losses on such positions and excluding the in-the-money amount of such
options. The Fund will engage in transactions in futures contracts and related
options only to the extent such transactions are consistent with the
requirements of the Internal Revenue Code for maintaining the qualification of
the Fund as a regulated investment company for federal income tax purposes
(see "Taxes").
ASSET COVERAGE FOR DERIVATIVE INSTRUMENTS
Transactions using forward contracts, futures contracts and options (other
than options that the Fund has purchased) expose the Fund to an obligation to
another party. The Fund will not enter into any such transactions unless it
owns either (1) an offsetting ("covered") position in securities, currencies,
or other options, futures contracts or forward contracts, or (2) cash,
receivables and short-term debt securities with a value sufficient at all
times to cover its potential obligations not covered as porvided in (1) above.
The Fund will comply with Securities and Exchange Commission ("SEC")
guidelines regarding cover for these instruments and, if the guidelines so
require, set aside cash, U.S. Government securities or other liquid, highgrade
debt securities in a segragated account with its custodian in the prescribed
amount.
Assets used as cover or held in a segregated account cannot be sold while
the position in the corresponding forward contract, futures contract or option
is open, unless they are replaced with other appropriate assets. As a result,
the commitment of a large portion of the Fund's assets to cover or segregated
accounts could impede portfolio management or the Fund's ability to meet
redemption requests or other current obligations.
LENDING PORTFOLIO SECURITIES
The Fund may seek to increase its income by lending portfolio securities
to broker-dealers or other institutional borrowers. During the existence of a
loan, the Fund will continue to receive the equivalent of the interest paid by
the issuer on the securities loaned and will also receive a fee or all of a
portion of the interest on investment of the collateral, if any. However, the
Fund may pay lending fees to such borrowers. As with other extensions of
credit there are risks of delay in recovery or even loss of rights in the
securities loaned if the borrower of the securities fails financially.
However, the loans would be made only to organizations deemed by the Fund's
management to be of good standing and when, in the judgment of the Fund's
management, the consideration which can be earned from securities loans of
this type justifies the attendant risk. The financial condition of the
borrower will be monitored by the Investment Adviser on an ongoing basis. The
value of the securilties loaned will not exceed 30% of the Fund's total
assets.
Under present regulatory policies of the Securities and Exchange
Commission, such loans are required to be secured continuously by collateral
in cash, cash equivalents or U.S. Government securities held by the Fund's
custodian and maintained on a current basis at an amount at least equal to the
market value of the securities loaned, which will be marked to market daily.
Cash equivalents include certificates of deposit, commercial paper and other
short-term money market instruments. The Fund would have the right to call a
loan and obtain the securities loaned at any time on up to five business days'
notice. The Fund would not have the right to vote any securities having voting
rights during the existence of a loan, but would call the loan in anticipation
of an important vote to be taken among holders of the securities or the giving
or withholding of their consent on a material matter affecting the investment.
INVESTMENT IN WARRANTS
The Fund may invest in warrants; however, not more than 5% of its assets
(at the time of purchase) will be invested in warrants other than warrants
acquired in units or attached to other securities. Of such 5% not more than 2%
of assets at the time of purchase may be invested in warrants that are not
listed on the New York or American Stock Exchanges. Warrants are pure
speculation in that they have no voting rights, pay no dividends and have no
rights with respect to the assets of the corporation issuing them. Warrants
basically are options to purchase equity securities at a specific price valid
for a specific period of time. They do not represent ownership of the
securities, but only the right to buy them. Warrants differ from calls in that
warrants are issued by the same issuer as the security which may be purchased
on their exercise, whereas calls may be written or issued by anyone. The
prices of warrants do not necessarily move parallel to the prices of the
underlying securities.
RESTRICTED SECURITIES
The Fund may invest in securities the disposition of which would be
subject to legal restrictions. It may be difficult to sell such securities at
a price representing their fair value until such time as such securities may
be sold publicly. Where registration is required, a considerable period may
elapse between a decision to sell the securities and the time when the Fund
would be permitted to sell. Thus, the Fund may not be able to obtain as
favorable a price as that prevailing at the time of the decision to sell. The
Fund 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 Fund cannot accurately predict its portfolio turnover rate, but it is
anticipated that the annual turnover rate will generally not exceed 100%
(excluding turnover of securities having a maturity of one year or less). A
100% annual turnover rate would occur, for example, if all the securities in
the portfolio were replaced once in a period of one year. A high turnover rate
would occur, for example, if all the securities in the portfolio were replaced
once in a period of one year. A high turnover rate (100% or more) necessarily
involves greater expenses to the Fund. The Fund engages in portfolio trading
(including short-term trading) if it believes that a transaction including all
costs will help in achieving its investment objective either directly by
increasing income or indirectly by enhancing the Fund's net asset value.
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
Statement of Additional Information means the lesser of (a) 67% of the shares
of the Fund present or represented by proxy at a meeting if the holders of
more than 50% of the shares are present or represented at the meeting or (b)
more than 50% of the shares of the Fund.
As a matter of fundamental policy, the Fund may not:
(1) With respect to 75% of the total assets of the Fund, purchase any
security if such purchase, at the time thereof, would cause more than 5% of
the value 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
Investment Company Act of 1940. (The use of options and futures transactions
and short sales may be deemed senior securities);
(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 (restricted securities);
(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.
The Fund has adopted the following nonfundamental investment policies
which may be changed by the Trustees without the approval of the Fund's
shareholders. As a matter of nonfundamental policy, the Fund may not (a)
invest more than 15% of 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, or its delegate,
determines to be liquid; (b) invest more than 5% of its total assets (taken at
current value) in the securities of issuers which, including their
predecessors, have been in operation for less than three years; (c) purchase
put or call options on securities if after such purchase more than 5% of its
net assets, as measured by the aggregate of the premiums paid for such
options, would be so invested; (d) purchase warrants in excess of 5% of
assets, of which 2% may be warrants which are not listed on the New York or
American Stock Exchanges; (e) 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. (The Fund will make such sales only for the
purpose of deferring realization of gain or loss for federal income tax
purposes); (f) purchase or retain in its portfolio any securities issued by an
issuer, any of whose officers, directors, trustees or security holders is an
officer or Trustee of the Fund or is a member, officer, director or trustee of
an investment adviser of the Fund, if after the purchase the securities of
such issuer by the Fund one or more of such persons owns beneficially more
than 1/2 of 1% of the shares or securities or both (all taken at market value)
of such issuer and such persons owning more than 1/2 of 1% of such shares or
securities together own beneficially more than 5% of such shares or securities
or both (all taken at market value); or (g) purchase oil, gas or other mineral
leases or purchase partnership interests in oil, gas or other mineral
exploration or development programs.
In order to permit the sale of shares of the Fund in certain states the
Fund may make commitments more restrictive than the policies described above.
Should the Fund determine that any such commitment is no longer in the best
interests of the Fund and its shareholders, it will revoke the commitment by
terminating sales of its shares in the state(s) involved.
OFFICERS AND TRUSTEES OF THE FUND
The Fund's Trustees and officers are listed below. Except as indicated,
each individual has held the office shown or other offices in the same company
for the last five years. Unless otherwise noted, the business address of each
Trustee and officer is 24 Federal Street, Boston, Massachusetts 02110, which
is also the address of Eaton Vance; Eaton Vance's wholly-owned subsidiary,
Boston Management and Research ("BMR"); Eaton Vance's parent, Eaton Vance
Corp. ("EVC"); and of Eaton Vance's and BMR's trustee Eaton Vance, Inc.
("EV"). Eaton Vance and EV are both wholly-owned subsidiaries of EVC. Those
Trustees who are "interested persons" of the Fund, Eaton Vance, BMR, EVC or EV
as defined in the Investment Company Act of 1940 by virtue of their
affiliation with any one or more of the Fund, Eaton Vance, BMR, EVC or EV, are
indicated by an asterisk (*).
KENNETH C. KNIGHT (69), Chairman of the Board of Trustees
Consultant; prior to 1989, Division Manager, The Whale Oil Corp. of New
England (fuel oils and home heating). During the previous five years an
officer of various predecessor fuel oil and home heating companies which
were involved in takeovers.
Address: 588 Andover Street, Lowell, Massachusetts 01852
M. DOZIER GARDNER (62), President and Trustee*
President and Chief Executive Officer of Eaton Vance, BMR, EVC and EV, and
Director of EVC and EV. Director or Trustee and officer of various
investment companies managed by Eaton Vance or BMR.
DONALD R. DWIGHT (64), Trustee
President of Dwight Partners, Inc. (a corporate relations and communications
company) founded in 1988; Chairman of the Board of Newspapers of New
England, Inc., since 1983. Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: Clover Mill Lane, Lyme, New Hampshire 03768
ROBERT GLUCK (68), Trustee
Management Consultant
Address: 6742 Via Regina, Boca Raton, Florida 33433
SAMUEL L. HAYES III (60), Trustee
Jacob H. Schiff Professor of Investment Banking, Harvard University Graduate
School of Business Administration, Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: Harvard University Graduate School of Business Administration,
Soldiers Field Road, Boston, Massachusetts 02163
JEROME PRESTON, JR. (73), Trustee
Partner, Foley, Hoag & Eliot (law firm). A Trustee of University Hospital.
Address: One Post Office Square, Boston, Massachusetts 02110
NORTON H. REAMER (60), Trustee
President and Director, United Asset Management Corporation (a holding company
owning institutional investment management firms); Chairman, President and
Director, UAM Funds (mutual funds). Director or Trustee of various
investment companies managed by Eaton Vance or BMR.
Address: One International Place, Boston, Massachusetts 02110
JOHN L. THORNDIKE (69), Trustee
Director, Fiduciary Company Incorporated; Director or Trustee of various
investment companies managed by Eaton Vance or BMR.
Address: 175 Federal Street, Boston, Massachusetts 02110
HOOKER TALCOTT (53), Vice President
Vice President of Eaton Vance, BMR and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
JAMES L. O'CONNOR (50), Treasurer
Vice President of Eaton Vance, BMR and EV. Officer of various other investment
companies managed by Eaton Vance or BMR.
THOMAS OTIS (64), Secretary
Vice President and Secretary of Eaton Vance, BMR, EVC and EV. Officer of
various investment companies managed by Eaton Vance or BMR.
BARBARA E. CAMPBELL (38), Assistant Treasurer
Assistant Vice President of Eaton Vance and EV since January 17, 1992 and of
BMR since August 11, 1992, employee of Eaton Vance since October 23, 1991.
Audit Manager -- Financial Services Industry Practice, Deloitte & Touche
(1987-1991). Officer of various investment companies managed by Eaton Vance
or BMR. Ms. Campbell was elected Assistant Treasurer of the Fund on December
16, 1991.
JANET E. SANDERS (60), Assistant Treasurer and Assistant Secretary
Vice President of Eaton Vance, BMR and EV. Officer of various investment
companies managed by Eaton Vance or BMR. Ms. Sanders was elected Assistant
Treasurer and Assistant Secretary of the Fund on April 18, 1989.
A. JOHN MURPHY (33), Assistant Secretary
Assistant Vice President of Eaton Vance, BMR and EV since March 1, 1994;
employee of Eaton Vance since March 1993. State Regulations Supervisor, The
Boston Company (1991-1993) and Registration Specialist, Fidelity Management
& Research Co. (1986-1991). Officer of various investment companies managed
by Eaton Vance or BMR. Mr. Murphy was elected Assistant Secretary of the
Fund on April 18, 1995.
ERIC G. WOODBURY (38), Assistant Secretary
Vice President of Eaton Vance, BMR and EV since February 1993; formerly,
associate attorney at Dechert, Price & Rhoads and Gaston & Snow. Mr.
Woodbury was elected Assistant Secretary of the Fund on August 7, 1995.
Messrs. Gluck, Knight and Thorndike are members of the Special Committee
of the Board of Trustees of the Fund. The Special Committee's functions
include a continuous review of the Fund's contractual relationship with the
Investment Adviser, making recommendations to the Trustees regarding the
compensation of those Trustees who are not members of the Investment Adviser's
organization, and making recommendations to the Trustees regarding candidates
to fill vacancies, as and when they occur, in the ranks of those Trustees who
are not "interested persons" of the Fund or the Investment Adviser.
Messrs. Dwight and Preston are members of the Audit Committee of the Board
of Trustees of the Fund. The Audit Committee's functions include making
recommendations to the Trustees regarding the selection of the independent
accountants, and reviewing with such accountants and the Treasurer of the Fund
matters relative to accounting and auditing practices and procedures,
accounting records, internal accounting controls, and the functions performed
by the custodian, transfer agent and dividend disbursing agent of the Fund.
The fees and expenses of those Trustees of the Fund who are not members of
the Eaton Vance organization (the noninterested Trustees) are paid by the
Fund. (The Trustees of the Fund who are members of the Eaton Vance
organization receive no compensation from the Fund.) During the fiscal year
ended September 30, 1995, the noninterested Trustees of the Fund earned the
following compensation in their capacities as Trustees from the Fund and the
funds in the Eaton Vance fund complex(1):
AGGREGATE TOTAL COMPENSATION
COMPENSATION FROM FUND AND
NAME FROM FUND FUND COMPLEX
- --- -------- -----------
Donald R. Dwight ............... $ 1,106 $135,000(2)
Robert Gluck ................... 9,600 9,600
Samuel L. Hayes, III ........... 1,021 150,000(3)
Kenneth C. Knight .............. 10,000 10,000
Jerome Preston Jr. ............. 9,600 9,600
Norton H. Reamer ............... 1,124 135,000
John L. Thorndike .............. 1,156 140,000
- ----------
(1) The Eaton Vance fund complex consists of 211 registered investment
companies or series thereof. Messrs. Gluck, Knight and Preston serve only
on the Board of Trustees of the Fund.
(2) Includes $35,000 of deferred compensation.
(3) Includes $33,750 of deferred compensation.
Trustees of the Eaton Vance fund complex (except Messrs. Gluck, Knight and
Preston) that 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 "Plan"). Under the
Plan, an eligible Trustee may elect to have his deferred fees invested by an
Eaton Vance fund in the shares of one or more funds in the Eaton Vance Family
of Funds, and the amount paid to the Trustees under the Plan will be
determined based upon the performance of such investments. The Fund is not a
participant in the Plan. The Fund does not have a retirement plan for its
Trustees.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of October 31, 1995, the Trustees and officers of the Fund, as a group,
owned in the aggregate less than 1% of the outstanding shares of the Fund. As
of that same date, Merrill Lynch, Pierce, Fenner & Smith, Inc., Jacksonville,
FL, was the record owner of approximately 9.0% of the outstanding shares,
which it 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 Fund, no other person owned of record
or beneficially 5% or more of the Fund's outstanding shares as of such date.
INVESTMENT ADVISER
The Fund engages Eaton Vance as its investment adviser pursuant to an
Investment Advisory Agreement (the "Agreement") originally made on May 22,
1989 and re-executed on November 1, 1990. Eaton Vance or its affiliates acts
as investment adviser to investment companies and various individual and
institutional clients with combined assets under management of approximately
$16 billion. Eaton Vance is a wholly-owned subsidiary of EVC, a publicly held
holding company.
Eaton Vance, its affiliates and its predecessor companies have been
managing assets of individuals and institutions since 1924 and managing
investment companies since 1931. It maintains a large staff of experienced
fixed-income and equity investment professionals to service the needs of its
clients. The fixed-income division focuses on all kinds of taxable investment-
grade and high-yield securities, tax-exempt investment-grade and high-yield
securities, and U.S. Government securities. The equity division covers stocks
ranging from blue chip to emerging growth companies.
Under the Investment Advisory Agreement, Eaton Vance receives a monthly
advisory fee of 5/96 of 1% (equivalent to 5/8 of 1% annually) of average
monthly net assets of the Fund. For the fiscal year ended September 30, 1995,
the Fund paid Eaton Vance an advisory fee of $628,411. The Fund paid Eaton
Vance an advisory fee of $645,516 for the fiscal year ended September 30, 1994
and $554,722 for the fiscal year ended September 30, 1993.
As investment adviser to the Fund, Eaton Vance manages the Fund's
investments and administers its affairs, subject to the supervision of the
Board of Trustees of the Fund. Pursuant to the Investment Advisory Agreement,
Eaton Vance furnishes for the use of the Fund office space and all necessary
office facilities, equipment and personnel for servicing the investments of
the Fund, and compensates all officers and Trustees of the Fund who are
members of the Eaton Vance organization and all personnel of Eaton Vance
performing services relating to research and investment activities.
The Fund has agreed to pay all expenses not expressly stated to be payable
by Eaton Vance under the Investment Advisory Agreement, which expenses payable
by the Fund include, without implied limitation, expenses of maintaining the
Fund and continuing its existence, registration of the Fund under the
Investment Company Act of 1940, commissions, fees and other expenses connected
with the purchase or sale of securities, auditing, accounting and legal
expenses, taxes and interest, governmental fees, expenses of issue, sale,
repurchase and redemptions of shares, expenses of registering and qualifying
the Fund and its shares under federal and state securities laws and of
preparing and printing prospectuses for such purposes and for distributing the
same to shareholders and investors, expenses of reports and notices to
shareholders and of meetings of shareholders and proxy solicitations therefor,
expenses of reports to governmental officers and commissions, insurance
expenses, association membership dues, fees, expenses and disbursements of
custodians and subcustodians for all services to the Fund (including without
limitation safekeeping of funds and securities, keeping of books and accounts
and determination of net asset values), fees, expenses and disbursements of
transfer agents, dividend disbursing agents and registrars for all services to
the Fund, expenses for servicing shareholder accounts, any direct charges to
shareholders approved by the Trustees of the Fund, compensation and expenses
of Trustees of the Fund who are not members of the Eaton Vance organization,
and such non-recurring items as may arise, including expenses incurred in
connection with litigation, proceedings and claims and the obligation of the
Fund to indemnify its Trustees and officers with respect thereto.
The Fund is responsible for all expenses for servicing shareholder
accounts, and Eaton Vance performs on behalf of the Fund various functions
which relate to the administration and servicing of existing shareholder
accounts without being reimbursed by the Fund for its costs in connection
therewith. It is possible that Eaton Vance may, in the future, request that
the Trustees of the Fund take action to have the Fund reimburse Eaton Vance
for its costs in performing these services. These services include functions
which are primarily administrative and clerical in nature, and include such
matters as handling communications from shareholders with respect to their
accounts and the processing of liquidation and exchange requests received from
dealers or shareholders with respect to such accounts. If any such request for
reimbursement is made, the Trustees of the Fund intend to review the specific
nature and costs of these services prior to approving any such reimbursement.
The Investment Advisory Agreement with Eaton Vance remains in effect until
February 28, 1996; it may be continued indefinitely thereafter so long as such
continuance after February 28, 1996 is approved at least annually (i) by the
vote of a majority of the Trustees who are not interested persons of the Fund
or of Eaton Vance 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
Fund or by vote of a majority of the outstanding voting securities of the
Fund. The Agreement may be terminated at any time without penalty on sixty
days written notice by the Board of Trustees of either party or by vote of the
majority of the outstanding voting securities of the Fund, and the Agreement
will terminate automatically in the event of its assignment. The Agreement
provides that Eaton Vance may render services to others and may permit other
fund clients and other corporations and organizations to use the words "Eaton
Vance" or "Eaton & Howard" or "Vance, Sanders" in their names. The Agreement
also provides that, in the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of obligations or duties under the agreement
on the part of Eaton Vance, Eaton Vance shall not be liable to the Fund or to
any shareholder for any act or omission in the course of or connected with
rendering services or for any losses sustained in the purpose, holding or sale
of any security.
A commitment has been made to a state securities authority that Eaton
Vance will take certain actions, if necessary, so that the Fund's expenses
will not exceed expense limitation requirements of such state. The commitment
may be amended or rescinded by Eaton Vance in response to changes in the
requirements of the state or for other reasons.
Eaton Vance and EV are both wholly-owned subsidiaries of EVC. BMR is a
wholly-owned subsidiary of Eaton Vance. Eaton Vance and BMR are both
Massachusetts business trusts, and EV is the trustee of Eaton Vance and BMR.
The Directors of EV are Landon T. Clay, H. Day Brigham, Jr., M. Dozier
Gardner, James B. Hawkes and Benjamin A. Rowland, Jr. The Directors of EVC
consist of the same persons and John G. L. Cabot and Ralph Z. Sorenson. Mr.
Clay is chairman, and Mr. Gardner is president and chief executive officer of
EVC, Eaton Vance, BMR and EV. All of the issued and outstanding shares of
Eaton Vance and of EV are owned by EVC. All of the issued and outstanding
shares of BMR are owned by Eaton Vance. All shares of the outstanding Voting
Common Stock of EVC are deposited in a Voting Trust which expires December 31,
1996, the Voting Trustees of which are Messrs. Clay, Brigham, Gardner, Hawkes
and Rowland. The Voting Trustees have unrestricted voting rights for the
election of Directors of EVC. All of the outstanding voting trust receipts
issued under said Voting Trust are owned by certain of the officers of Eaton
Vance and BMR who are also officers and Directors of EVC and EV. As of October
31, 1995, Messrs. Clay, Gardner and Hawkes each owned 24% of such voting trust
receipts and Messrs. Rowland and Brigham owned 15% and 13%, respectively, of
such voting trust receipts. Messrs. Gardner and Otis, who are officers or
Trustees of the Fund are members of the EVC, Eaton Vance, BMR and EV
organizations. Messrs. Murphy, O'Connor, Talcott and Woodbury and Ms.
Campbell, and Ms. Sanders, are officers of the Fund, and are also members of
the Eaton Vance, BMR and EV organizations. Eaton Vance will receive the fees
paid under the Investment Advisory Agreement and its wholly-owned subsidiary,
Eaton Vance Distributors, Inc., as Principal Underwriter, will receive its
portion of the sales charge on shares of the Fund sold through financial
service firms ("Authorized Firms").
EVC owns all of the stock of Energex Energy Corporation, which engages in
oil and gas operations. In addition, Eaton Vance owns all the stock of
Northeast Properties, Inc., which is engaged in real estate investment,
consulting and management. EVC owns all of the stock of Fulcrum Management,
Inc. and MinVen, Inc., which are engaged in the development of precious metal
properties. EVC also owns 24% of the Class A shares of Lloyd George Management
(B. V. I.) Limited, a registered investment adviser. EVC, Eaton Vance, BMR and
EV may also enter into other businesses.
EVC and its affiliates and their officers and employees from time to time
have transactions with various banks, including the Fund's custodian,
Investors Bank & Trust Company. 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 and
such banks.
CUSTODIAN
Investors Bank & Trust Company ("IBT"), 89 South Street, Boston,
Massachusetts, acts as custodian for the Fund. IBT has the custody of all cash
and securities of the Fund, maintains the Fund's general ledger and computes
the daily per share net asset value. In such capacity it attends to details in
connection with the sale, exchange, substitution, transfer or other dealings
with the Fund's investments, receives and disburses all funds, and performs
various other ministerial duties upon receipt of proper instructions from the
Fund. IBT charges fees which are competitive within the industry. A portion of
the fee relates to custody, bookkeeping and valuation services and is based
upon a percentage of Fund net assets and a portion of the fee relates to
activity charges, primarily the number of portfolio transactions. These fees
are then reduced by a credit for cash balances of the particular investment
company at the custodian equal to 75% of the 91-day U.S. Treasury Bill auction
rate applied to the particular investment company's average daily collected
balances for the week. Landon T. Clay, a Director of EVC and an officer,
Trustee or Director of other entities in the Eaton Vance organization, owns
approximately 13% of the voting stock of Investors Financial Services Corp.,
the holding company parent of IBT. Management believes that such ownership
does not create an affiliated person relationship between the Fund and IBT
under the Investment Company Act of 1940. During the fiscal year ended
September 30, 1995, the Fund paid IBT $68,455 under these arrangements.
SERVICES FOR ACCUMULATION
The following services are voluntary, involve no extra charge, other than
the sales charge included in the offering price, and may be changed or
discontinued without penalty at any time.
Intended Quantity Investment--Statement of Intention. If it is anticipated
that $50,000 or more of Fund shares and shares of the other continuously
offered open-end funds listed under "The Eaton Vance Exchange Privilege" in
the current Prospectus of the Fund will be purchased within a 13-month period,
a Statement of Intention should be signed so that shares may be obtained at
the same reduced sales charge as though the total quantity were invested in
one lump sum. Shares held under Right of Accumulation (see below) as of the
date of the Statement will be included toward the completion of the Statement.
The Statement authorizes the Transfer Agent to hold in escrow sufficient
shares (5% of the dollar amount specified in the Statement) which can be
redeemed to make up any difference in sales charge on the amount intended to
be invested and the amount actually invested. Execution of a Statement does
not obligate the shareholder to purchase or the Fund to sell the full amount
indicated in the Statement, and should the amount actually purchased during
the 13-month period be more or less than that indicated on the Statement,
price adjustments will be made. For sales charges and other information on
quantity purchases, see "How to Buy Fund Shares" in the Fund's current
Prospectus. Any investor considering signing a Statement of Intention should
read it carefully.
Right of Accumulation--Cumulative Quantity Discount. The applicable sales
charge level for the purchase of Fund shares is calculated by taking the
dollar amount of the current purchase and adding it to the value (calculated
at the maximum current offering price) of the shares the shareholder owns in
his or her account(s) in the Fund and in the other continuously offered open-
end funds listed under "The Eaton Vance Exchange Privilege" in the current
Prospectus of the Fund for which Eaton Vance acts as investment adviser or
administrator at the time of purchase. The sales charge on the shares being
purchased will then be at the rate applicable to the aggregate. For example,
if the shareholder owned shares valued at $30,000 in EV Traditional California
Municipals Fund, and purchased an additional $20,000 of Fund shares, the sales
charge for the $20,000 purchase would be at the rate of 2.75% of the offering
price (2.83% of the net amount invested) which is the rate applicable to
single transactions of $50,000. For sales charges on quantity purchases, see
"How to Buy Fund Shares" in the Fund's current Prospectus. Shares purchased
(i) by an individual, his or her spouse and their children under the age of
twenty-one, and (ii) by a trustee, guardian or other fiduciary of a single
trust estate or a single fiduciary account, will be combined for the purpose
of determining whether a purchase will qualify for the Right of Accumulation
and if qualifying, the applicable sales charge level.
For any such discount to be made available, at the time of purchase a
purchaser or his or her financial service firm ("Authorized Firm") must
provide Eaton Vance Distributors, Inc. (in the case of a purchase made through
an Authorized Firm) or the Transfer Agent (in the case of an investment made
by mail) with sufficient information to permit verification that the purchase
order qualifies for the accumulation privilege. Confirmation of the order is
subject to such verification. The Right of Accumulation privilege may be
amended or terminated at any time as to purchases occurring thereafter.
SERVICE FOR WITHDRAWAL
By a standard agreement, the Fund's Transfer Agent will send to the
shareholder regular monthly or quarterly payments of any permitted amount
designated by the shareholder (see "Eaton Vance Shareholder Services --
Withdrawal Plan" in the Fund's current Prospectus) based upon the value of the
shares held. The checks will be drawn from share redemptions and hence, are a
return of principal. Income dividends and capital gain distributions in
connection with withdrawal 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.
To use this service, at least $5,000 in cash or shares at the public
offering price (i.e., net asset value plus the applicable sales charge) will
have to be deposited with the Transfer Agent. The maintenance of a withdrawal
plan concurrently with purchases of additional Fund shares would be
disadvantageous because of the sales charge included in such purchases. 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.
PORTFOLIO SECURITY TRANSACTIONS
Decisions concerning the execution of Fund portfolio security
transactions, including the selection of the market and the broker-dealer
firm, are made by Eaton Vance. Eaton Vance is also responsible for the
execution of transactions for all other accounts managed by it.
Eaton Vance places the portfolio security transactions of the Fund and of
all other accounts managed by it for execution with many broker-dealer firms.
Eaton Vance uses its best efforts to obtain execution of portfolio
transactions at prices which are advantageous to the Fund and (when a
disclosed commission is being charged) at reasonably competitive commission
rates. In seeking such execution, Eaton Vance will use its best judgment in
evaluating the terms of a transaction, and will give consideration to various
relevant factors including without limitation the size and type of the
transaction, the general execution and operational capabilities of the broker-
dealer, the nature and character of the market for the security, the
confidentiality, speed and certainty of effective execution required for the
transaction, the reputation, reliability, experience and financial condition
of the broker-dealer, the value and quality of the services rendered by the
broker-dealer in other transactions, and the reasonableness of the commission,
if any. Transactions on United States stock exchanges and other agency
transactions involve the payment by the Fund of negotiated brokerage
commissions. Such commissions vary among different broker-dealer firms, and a
particular broker-dealer may charge different commissions according to such
factors as the difficulty and size of the transaction and the volume of
business done with the 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 Fund usually includes an undisclosed
dealer markup or markdown. In an underwritten offering, the price paid by the
Fund 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 Eaton Vance, be reasonable in relation
to the value of the services provided, commissions exceeding those which
another firm might charge may be paid to broker-dealers who were selected to
execute transactions on behalf of the Fund and Eaton Vance's other clients for
providing brokerage and research services to Eaton Vance.
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 Fund
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
Eaton Vance determines in good faith that such compensation was reasonable in
relation to the value of the brokerage and research services provided. This
determination may be made on the basis of either that particular transaction
or on the basis of overall responsibilities which Eaton Vance and its
affiliates have for accounts over which they exercise investment discretion.
In making any such determination, Eaton Vance 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, 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, Eaton Vance receives Research
Services from many broker-dealer firms with which Eaton Vance places the
Fund's portfolio transactions and from third parties with which these broker-
dealers have arrangements. These Research Services, include such matters as
general economic and market reviews, industry and company reviews, evaluations
of securities and portfolio strategies and transactions, 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 Eaton Vance 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
Eaton Vance 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
Fund is not reduced because Eaton Vance receives such Research Services. Eaton
Vance evaluates the nature and quality of the various Research Services
obtained through broker-dealer firms and attempts to allocate sufficient
commissions to such firms to ensure the continued receipt of Research Services
which Eaton Vance believes are useful or of value to it in rendering
investment advisory services to its clients.
Subject to the requirement that Eaton Vance shall use its best efforts to
seek to execute Fund portfolio security transactions at advantageous prices
and at reasonably competitive commission rates or spreads, Eaton Vance is
authorized to consider as a factor in the selection of any broker-dealer firm
with whom Fund 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
Eaton Vance. This policy is not inconsistent with a rule of the National
Association of Securities Dealers, Inc., which rule provides that no firm
which is a member of the Association 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 Fund may also be appropriate
for other investment accounts managed by Eaton Vance or its affiliates. Eaton
Vance will attempt to allocate equitably portfolio security transactions among
the Fund and the portfolios of its other investment accounts whenever
decisions are made to purchase or sell securities by the Fund and one or more
of such other accounts simultaneously. In making such allocations, the main
factors to be considered are the respective investment objectives of the Fund
and such other accounts, the relative size of portfolio holdings of the same
or comparable securities, the availability of cash for investment by the Fund
and such accounts, the size of investment commitments generally held by the
Fund and such accounts and the opinions of the persons responsible for
recommending investments to the Fund and such accounts. While this procedure
could have a detrimental effect on the price or amount of the securities
available to the Fund from time to time, it is the opinion of the Trustees
that the benefits available from the Eaton Vance organization outweigh any
disadvantage that may arise from exposure to simultaneous transactions.
During the Fund's fiscal year ended September 30, 1995, the Fund paid
brokerage commissions of $625 on portfolio transactions and for the fiscal
year ended September 30, 1994, the Fund paid no brokerage commissions. During
the fiscal year ended September 30, 1993, the Fund paid brokerage commissions
of $1,049 on portfolio transactions.
DETERMINATION OF NET ASSET VALUE
For a description of how the Fund values its shares, see "Valuing Fund
Shares" in the Fund's current prospectus. The Fund will be closed for business
and will not price its shares on the following business holidays: New Year's
Day, Presidents' Day, Good Friday (a New York Stock Exchange holiday),
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Debt securities will normally be valued on the basis of market valuations
furnished by an independent pricing service, which uses information such as
transactions in bonds, quotations by bond dealers, market transactions in
comparable securities, relationships between securities and yield to maturity.
Debt securities for which such market valuations are unavailable or deemed not
to represent market value by the Investment Adviser will be valued at fair
value pursuant to procedures established by the Trustees. Equity securities
listed on securities exchanges or in the NASDAQ National Market are valued at
closing sale prices. Listed equity securities for which closing sale prices
are not available and unlisted securities are valued at the mean between the
latest bid and asked prices provided by dealers. Warrants will be valued at
cost or market, unless the Investment Adviser believes fair value should be
used. Short-term obligations maturing in 60 days or less are valued by
amortized cost. Other assets will be valued at fair value pursuant to
procedures established by the Trustees.
INVESTMENT PERFORMANCE
Average annual total return is determined by multiplying a hypothetical
initial purchase order of $1,000 by the average annual compound rate of return
(including capital appreciation/depreciation, and dividends and distributions
paid and reinvested) for the stated period and annualizing the result. The
calculation assumes the maximum sales charge is deducted from the initial
$1,000 purchase order and that all dividends and distributions are reinvested
at net asset value on the reinvestment dates during the period. The Fund's
average annual total return for the ten year period ended September 30, 1995
was 10.74%.
Yield is computed pursuant to a standardized formula by dividing its net
investment income per share earned during a recent thirty-day period by the
maximum offering price (including the maximum sales charge) per share on the
last day of the period and annualizing the resulting figure. Net investment
income per share is equal to the Fund's dividends and interest earned during
the period, reduced by accrued expenses for the period with the resulting
number being divided by the average daily number of Fund shares outstanding
and entitled to receive dividends during the period. Yield calculations assume
a maximum sales charge equal to 3.75% of the public offering price. Actual
yield may be affected by variations in sales charges on investments. For the
thirty-day period ended September 30, 1995 the yield of the Fund was 10.27%.
The Principal Underwriter may publish to Authorized Firms the Fund's
distribution rate and/or its effective distribution rate. The Fund's
distribution rate is computed by dividing the most recent monthly distribution
per share annualized, by the current maximum offering price per share. The
Fund's effective distribution rate is computed by dividing the distribution
rate by the ratio used to annualize the distribution and reinvesting the
resulting amount for a full year on the basis of such ratio. The effective
distribution rate will be higher than the distribution rate because of the
compounding effect of the assumed reinvestment. Investors should note that the
Fund's yield is calculated using a standardized formula the income component
of which is computed from the yields to maturity of all debt obligations in
the Fund's portfolio based on the market value of such obligations and from
dividends from equity securities based on stated annual rates, exclusive of
special or extra distributions, (with all purchases and sales of securities
during such period included in the income calculation on a settlement date
basis), whereas the distribution rate is based on the Fund's last monthly
distribution which tends to be relatively stable and may be more or less than
the amount of net investment income and short-term capital gain actually
earned by the Fund during the month. The Fund's distribution rate (calculated
on September 30, 1995 and based on the Fund's monthly distribution paid
September 29, 1995) was 10.09%, and the Fund's effective distribution rate
(calculated on the same date and based on the same monthly distribution) was
10.57%.
The table below indicates the cumulative and average annual total return
on a hypothetical investment of $1,000 in the Fund covering the one-, five-
and ten-year periods ended September 30, 1995.
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT
TOTAL RETURN TOTAL RETURN
VALUE OF EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
INVESTMENT INVESTMENT AMOUNT OF INVESTMENT ------------------------------ ------------------------------
PERIOD DATE INVESTMENT<F1> ON 9/30/95 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
---------- ---------- ----------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
10 Years Ended 9/30/95 9/30/85 $962.74 $2,775.79 188.32% 11.16% 177.58% 10.74%
5 Years Ended 9/30/95 9/30/90 $962.29 $2,006.76 108.54% 15.80% 100.68% 14.92%
1 Year Ended 9/30/95 9/30/94 $962.24 $1,070.47 11.25% 11.25% 7.05% 7.05%
- ----------
<FN>
<F1> Initial investment less the current maximum sales charge of 3.75%.
</TABLE>
Past performance is not indicative of future results. Investment return
and principal value will fluctuate and shares, when redeemed, may be worth
more or less than their original cost.
The Fund's total return may be compared to relevant indices, such as the
Consumer Price Index, and various domestic securities indices, which may be
used in advertisements and in information furnished to present or prospective
shareholders. The performance of the Fund and/or the high yield bond market
may also be compared to the performance of comparable securities (such as
Treasury bonds) or comparable mutual funds or mutual fund averages prepared by
independent sources (such as Lipper Analytical Services, Inc., CDA/
Wiesenberger and Morningstar, Inc.). Evaluations of the Fund's performance,
comparative performance information, charts and/or other illustrations
prepared by independent sources may also be used in advertisements and in
information furnished to present or prospective shareholders.
Information showing the effects of compounding interest (based on
different investment amounts and hypothetical rates of return) may be included
in advertisements and other material furnished to present and prospective
shareholders. Compounding is the process of earning interest on principal plus
interest that was earned earlier. Interest can be compounded annually, semi-
anually, quarterly or daily, e.g. $1,000 compounded annually at 9% will grow
to $1,090 at the end of the first year and $1,188 at the end of the second
year. The extra $8, which was earned on the $90 interest from the first year
is the compound interest. $1,000 compounded annually at 9% grows to $2,367 at
the end of 10 years and $5,604 at the end of 20 years. Other examples of
compounding $1,000 annually are 7% grows to $1,967 at the end of 10 years and
$3,870 at the end of 20 years. At 12% the $1,000 grows to $3,106 at the end of
10 years and $9,646 at the end of 20 years. All of these examples are for
illustrative purposes only and are not meant to indicate performance of the
Fund.
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. For example: After
10 years, the purchasing power of $25,000 would shrink to $16,621, $14,968,
$13,465 and $12,100, respectively, if the annual rates of inflation during
such period were 4%, 5%, 6% and 7%, respectively. (To calculate the purchasing
power, the value at the end of each year is reduced by the above inflation
rates for 10 consecutive years.)
Information used in advertisements and in materials furnished to present
and prospective shareholders may include statements or illustrations relating
to the appropriateness of types of securities and/or mutual funds which may be
employed to meet specific financial goals, such as (1) funding retirement, (2)
paying for children's education, and (3) financially supporting aging parents.
These three financial goals may be referred to in such advertisements or
materials as the "Triple Squeeze." Certain information presented in
advertisements and other materials furnished by the Fund to present or
prospective investors is for illustrative purposes only and is not intended to
project future performance results.
TAXES
See "Distributions and Taxes" in the Fund's current Prospectus.
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
Internal Revenue Code of 1986, as amended (the "Code"). Accordingly, the Fund
intends to satisfy certain requirements relating to sources of its income and
diversification of its assets and to distribute all of its net investment
income and net realized capital gains in accordance with the timing
requirements imposed by the Code, so as to avoid any federal income or excise
tax to the Fund. The Fund so qualified for its fiscal year ended September 30,
1995 (see Notes to the Financial Statements incorporated by reference in this
Statement of Additional Information).
In order to avoid federal excise tax, the Code requires that the Fund
distribute (or be deemed to have distributed) by December 31 of each calendar
year at least 98% of its ordinary income (not including tax-exempt income) for
such year, at least 98% of 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 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 the Fund qualifies as a RIC
for federal income tax purposes, the Fund is not liable for any income,
corporate excise or franchise tax in the Commonwealth of Massachusetts.
The Fund's transactions in options, futures contracts and forward
contracts will be subject to special tax rules that may affect the amount,
timing and character of distributions to shareholders. For example, certain
positions held by the Fund on the last business day of each taxable year will
be marked to market (i.e., treated as if closed out on such day), and any
resulting gain or loss will, except for certain currency-related positions,
generally be treated as 60% long-term and 40% short-term capital gain or loss.
Certain positions held by the Fund that substantially diminish the Fund's risk
of loss with respect to other positions in its portfolio may constitute
"straddles," which are subject to tax rules that may cause deferral of Fund
losses, adjustments in the holding periods of Fund securities and conversion
of short-term into long-term capital losses. The Fund may have to limit its
activities in options, futures contracts and forward contracts in order to
maintain its qualification as a RIC.
The Fund's investment in zero coupon and deferred interest securities,
payment in kind securities and any other securities with original issue
discount (or market discount, if an election is made to include earned market
discount in current income) will cause it to realize income prior to the
receipt of cash payments with respect to these securities. In order to
distribute this income and avoid a tax on the Fund, the Fund may be required
to liquidate portfolio securities that it might otherwise have continued to
hold.
Investments in lower-rated or unrated securities may present special tax
issues for the Fund to the extent actual or anticipated defaults may be more
likely with respect to such securities. Tax rules are not entirely clear about
issues such as when the Fund may cease to accrue interest, original issue
discount, or market discount; when and to what extent deductions may be taken
for bad debts or worthless securities; how payments received on obligations in
default should be allocated between principal and income; and whether
exchanges of debt obligations in a workout context are taxable.
Distributions by the Fund of net investment income, the excess of net
short-term capital gains over net long-term capital losses and certain foreign
exchange gains are taxable to shareholders as ordinary income, whether
received in cash or reinvested in additional shares. Distributions of the
excess of net long-term capital gains over net short-term capital losses
(including any capital losses carried forward from prior years) are taxable to
shareholders as long-term capital gains whether received in cash or in
additional shares and regardless of the length of time their shares of the
Fund have been held. Certain distributions declared in October, November or
December and paid the following January will be taxed to shareholders as if
received on December 31 of the year in which they are declared.
The portion of distributions made by the Fund which are derived from
dividends received by the Fund from domestic corporations may qualify for the
dividends-received deduction for corporations. The dividends-received
deduction for corporate shareholders is reduced to the extent the shares with
respect to which the dividends are received are treated as debt-financed under
the Federal income tax law and is eliminated if the shares are deemed to have
been held for less than a minimum period, generally 46 days. Receipt of
certain distributions qualifying for the deduction may result in reduction of
the tax basis of the corporate shareholder's shares.
Any loss realized upon the redemption or exchange of shares of the Fund
with a tax holding period of 6 months or less will be treated as a long-term
capital loss to the extent of any distribution of net long-term capital gains
with respect to such shares. All or a portion of any loss realized upon a
taxable disposition of Fund shares may be disallowed under "wash sale" rules
if other shares of the Fund are purchased (whether through the reinvestment of
distributions or otherwise) within 30 days before or after such disposition.
The Fund may be subject to foreign withholding or other foreign taxes with
respect to income (possibly including, in some cases, capital gains) on
certain foreign securities. As it is not expected that more than 50% of the
value of the total assets of the Fund at the close of any taxable year will
consist of securities issued by foreign corporations, the Fund will not be
eligible to pass through to shareholders any foreign tax credits or deductions
for foreign taxes paid by the Fund. These taxes may be reduced or eliminated
under the terms of an applicable U.S. income tax treaty. Certain foreign
exchange gains and losses realized by the Fund will be treated as ordinary
income and losses. Certain uses of foreign currency or currency derivatives
and investment by the Fund in the stock of certain "passive foreign investment
companies" may be limited or a tax-deduction may be made, if available, in
order to avoid imposition of a tax on the Fund.
Amounts paid by the Fund to individuals and certain other shareholders who
have not provided the Fund with their correct taxpayer identification number
and certain required certifications, as well as shareholders with respect to
whom the Fund has received notification from the Internal Revenue Service or a
broker, may be subject to "backup" withholding of federal income tax from the
Fund's dividends and distributions and the proceeds of redemptions (including
repurchases and exchanges), at a rate of 31%. An individual's taxpayer
identification number is generally his or her social security number.
Non-resident alien individuals and certain foreign corporations and other
entities generally will be subject to a U.S. withholding tax at a rate of 30%
on the Fund's distributions from ordinary income and the excess of net short-
term capital gain over net long-term capital loss unless the tax is reduced or
eliminated by an applicable tax treaty. Distributions from the excess of the
Fund's net long-term capital gain over net short-term capital loss received by
such shareholders and any gain from the sale or other disposition of shares of
the Fund generally will not be subject to U.S. federal income taxation,
provided that nonresident alien status has been certified by the shareholder.
Different U.S. tax consequences may result if the shareholder is engaged in a
trade or business in the United States, is present in the United States for a
sufficient period of time during a taxable year to be treated as a U.S.
resident, or fails to provide any required certifications regarding status as
a non-resident alien investor. Foreign shareholders should consult their tax
advisers regarding the U.S. and foreign tax consequences of an investment in
the Fund.
Special tax rules apply to Individual Retirement Accounts ("IRAs") and
other retirement plans and persons investing through such plans should consult
their tax advisers for more information. The deductibility of such
contributions may be restricted or eliminated for particular shareholders.
The foregoing discussion does not address the special tax rules applicable
to certain classes of investors, such as retirement plans, tax-exempt
entities, insurance companies and financial institutions. Shareholders should
consult their own tax advisers with respect to the special tax rules that may
apply in their particular situations, as well as the state, local or foreign
tax consequences of investing in the Fund.
PRINCIPAL UNDERWRITER
Shares of the Fund may be continuously purchased at the public offering
price through certain Authorized Firms which have agreements with the
Principal Underwriter. The Principal Underwriter is a wholly-owned subsidiary
of Eaton Vance.
The public offering price is the net asset value next computed after
receipt of the order, plus, where applicable, a variable percentage (sales
charge) depending upon the amount of purchase as indicated by the sales charge
table set forth in the Fund's current Prospectus. Such table is applicable to
purchases of the Fund alone or in combination with purchases of the other
funds offered by the Principal Underwriter, made at a single time by (i) an
individual, or an individual, his or her spouse and their children under the
age of twenty-one, purchasing shares for his or their own account; and (ii) a
trustee or other fiduciary purchasing shares for a single trust estate or a
single fiduciary account.
The table is also presently applicable to (1) purchases of Fund shares,
alone or in combination with purchases of any of the other funds offered by
the Principal Underwriter through one dealer aggregating $50,000 or more made
by any of the persons enumerated above within a thirteen-month period starting
with the first purchase pursuant to a written Statement of Intention, in the
form provided by the Principal Underwriter, which includes provisions for a
price adjustment depending upon the amount actually purchased within such
period (a purchase not made pursuant to such Statement may be included
thereunder if the Statement is filed within 90 days of such purchase); or (2)
purchases of the Fund pursuant to the Right of Accumulation and declared as
such at the time of purchase.
Subject to the applicable provisions of the Investment Company Act of
1940, the Fund may issue shares at net asset value in the event that an
investment company (whether a regulated or private investment company or a
personal holding company) is merged or consolidated with or acquired by the
Fund. Normally no sales charges will be paid in connection with an exchange of
Fund shares for the assets of such investment company. Shares may be sold at
net asset value to any officer, director, trustee, general partner or employee
of the Fund, or any investment company for which Eaton Vance or BMR acts as
investment adviser, any investment advisory, agency, custodial or trust
account managed or administered by Eaton Vance or by any parent, subsidiary or
other affiliate of Eaton Vance, or any officer, director or employee of any
parent, subsidiary or other affiliate of Eaton Vance. The terms "officer,"
"director," "trustee," "general partner" or "employee" as used in this
paragraph include any such person's spouse and minor children, and also
retired officers, directors, trustees, general partners and employees and
their spouses and minor children. Shares of the Fund may also be sold at net
asset value to registered representatives and employees of Authorized Firms
and to the spouses and children under the age of 21 and beneficial accounts of
such persons.
The Fund reserves the right to suspend or limit the offering of shares of
the Fund to the public at any time.
The Principal Underwriter acts as principal in selling shares of the Fund
under the Distribution Agreement with the Fund. The expenses of printing
copies of prospectuses used to offer shares to Authorized Firms or investors
and other selling literature and of advertising are borne by the Principal
Underwriter. The fees and expenses of qualifying and registering and
maintaining qualifications and registrations of the Fund and its shares under
federal and state securities laws are borne by the Fund. The distribution
agreement is renewable annually by the Fund's Board of Trustees (including a
majority of its Trustees who are not interested persons of the Principal
Underwriter or the Fund), may be terminated on six months' notice by either
party, and is automatically terminated upon assignment. The Principal
Underwriter distributes Fund shares on a "best efforts" basis under which it
is required to take and pay for only such shares as may be sold. The Principal
Underwriter allows Authorized Firms discounts from the applicable public
offering price which are alike for all Authorized Firms. The Principal
Underwriter may allow, upon notice to all Authorized Firms with whom it has
agreements, discounts up to the full sales charge during the periods specified
in the notice. See "How to Buy Fund Shares" in the Fund's current Prospectus
for the discount allowed to Authorized Firms on the sale of Fund shares.
During periods when the discount includes the full sales charge, such
Authorized Firms may be deemed to be underwriters as that term is defined in
the Securities Act of 1933. The total sales charges for sale of shares of the
Fund during the fiscal years ended September 30, 1995, 1994 and 1993, were
$390,210, $456,053 and $396,885, respectively, of which $16,634, $71,474 and
$63,089, respectively, was received by the Principal Underwriter. For the
fiscal years ended September 30, 1995, 1994 and 1993, Authorized Firms
received $373,576, $384,579 and $333,796, respectively, from the total sales
charges.
SERVICE PLAN
The Fund has adopted a Service Plan (the "Plan") designed to meet the
service fee requirements of the revised sales charge rule of the National
Association of Securities Dealers, Inc. (Management believes service fee
payments are not distribution expenses governed by Rule 12b-1 under the 1940
Act, but has chosen to have the Plan approved as if that Rule were
applicable.) The following supplements the discussion of the Plan contained in
the Fund's Prospectus.
The Plan remains in effect through April 28, 1996 and from year to year
thereafter, provided such continuance is approved by a vote of both of a
majority of (i) those Trustees who are not interested persons of the Fund and
who have no direct or indirect financial interest in the operation of the Plan
or any agreements related to it (the "Noninterested Trustees") and (ii) all of
the Trustees then in office, cast in person at a meeting (or meetings) called
for the purpose of voting on this Plan. The Plan may be terminated any time by
vote of the Noninterested Trustees or by a vote of a majority of the
outstanding voting securities of the Fund. The Plan has been approved by the
Board of Trustees of the Fund, including the Noninterested Trustees. The Plan
amends and replaces the Fund's original distribution plan (which originally
became effective on May 22, 1989 and which was approved by the Fund's
shareholders).
Under the Plan, the President or a Vice President of the Fund shall
provide to the Trustees for their review, and the Trustees shall review at
least quarterly, a written report of the amount expended under the Plan and
the purposes for which such expenditures were made. The Plan may not be
amended to increase materially the payments described herein without approval
of the shareholders of the Fund, and all material amendments of the Plan must
also be approved by the Trustees of the Fund as prescribed by the Rule. So
long as the Plan is in effect, the selection and nomination of Trustees who
are not interested persons of the Fund shall be committed to the discretion of
the Trustees who are not such interested persons. The Trustees have determined
that in their judgment there is a reasonable likelihood that the Plan will
benefit the Fund and its shareholders.
During the fiscal year ended September 30, 1995, the Fund made service fee
payments under the Plan aggregating $109,518, of which $73,781 was paid to
Authorized Firms and the balance of which was retained by the Principal
Underwriter.
OTHER INFORMATION
Eaton Vance, pursuant to the Investment Advisory Agreement, controls the
use of the Fund's name and may use the words "Eaton Vance" in other
connections and for other purposes. EVC may require the Fund to cease using
such words in its name if EVC or Eaton Vance or any other subsidiary or
affiliate of EVC ceases to act as investment manager of 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 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 Fund's By-laws, the Trustees shall continue to hold office and may
appoint successor Trustees.
The Fund's Declaration of Trust may be amended by the Trustees when
authorized by vote of a majority of the outstanding voting securities of the
Fund, 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 Fund (or any series) or to make such
other changes 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 Trustees are also
authorized to issue shares in one or more series or classes thereof.
Currently, the Trustees have only authorized issuance of shares of the Fund.
Nevertheless, the Trustees intend to submit to shareholders any proposal
involving the merger of the Fund with an operating investment company
unaffiliated with Eaton Vance. The Fund (or any series or class) 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 Fund (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 Fund (or 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 Fund (or
series or class thereof) entitled to vote thereon shall be sufficient
authorization; or (2) by means of an instrument in writing signed by a
majority of the Trustees, be followed by a written notice to shareholders
stating that a majority of the Trustees has determined that the continuation
of the Fund (or series or class thereof) is not in the best interests of the
Fund, (or such series or class) or of its 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. In addition, the By-Laws of the Fund provide that no natural person
shall serve as a Trustee of the Fund after the holders of record of not less
than two-thirds of the outstanding shares have declared that he be removed
from that office either by declaration in writing filed with the custodian of
the assets of the Fund or by votes cast in person or by proxy at a meeting
called for the purpose. The By-Laws also provide that the Trustees shall
promptly call a meeting of shareholders for the purpose of voting upon a
question of removal of a Trustee when requested so to do by the record holders
of not less than 10 per centum of the outstanding shares.
The right to redeem shares of the Fund can be suspended and the payment of
the redemption price deferred when the New York Stock Exchange (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
Securities and Exchange Commission (the "Commission"), or during any emergency
as determined by the Commission which makes it impracticable for the Fund to
dispose of its securities or value its assets, or during any other period
permitted by order of the Commission for the protection of investors.
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P., One Post Office Square, Boston, Massachusetts
are the independent accountants for the Fund, providing audit services, tax
return preparation, and assistance and consultation with respect to the
preparation of filings with the Securities and Exchange Commission.
FINANCIAL STATEMENTS
The financial statements of the Fund, which are included in the Fund's
Annual Report to Shareholders, are incorporated by reference into this
Statement of Additional Information and have been so incorporated in reliance
on the report of Coopers & Lybrand L.L.P., independent accountants, as experts
in accounting and auditing. A copy of the Fund's most recent Annual Report
accompanies this Statement of Additional Information.
<PAGE>
To Shareholders
Eaton Vance Income Fund of Boston had a total return of 11.3% for the year ended
September 30, 1995. This was the result of a rise in net asset value per share
to $7.92 on September 30, 1995, from $7.90 on September 30, 1994, and the
reinvestment of $0.82 per share in income dividends. It does not include the
effect of the Fund's 3.75% sales charge. For comparison, the Lehman Brothers
High Yield Bond Index, an unmanaged index of corporate bonds, returned 15.2 %
for the same period.
Based on the Fund's most recent dividend and a net asset value of $7.92, the
Fund had a distribution rate of 10.5% at September 30.
THE HIGH YIELD MARKET CROSSES THE $300 BILLION THRESHOLD IN 1995...
New issuance has again been brisk in 1995, totalling about $20 billion through
September. While that is somewhat lower than the pace of recent years, $35
billion in 1994 and $54 billion in 1993, it shows a continuing reliance by
corporations on the high yield market for financing. By the end of September,
the high yield market had crossed a major threshold, reaching $300 billion in
market capitalization, according to Securities Data Corp. That figure
demonstrates the rapid growth of a market that measured only $120 billion in
1986. Importantly, the new supply has been met by strong demand from investors.
WITH GROWTH HAS COME IMPROVED MARKET LIQUIDITY...
The growth of the high yield market has resulted in improved liquidity, an
important investment criterion for investors. Quality, too, continues to
improve. As one indication of that trend, net upgrades in the market totalled
nearly $10 billion through September alone, according to a recent high yield
market review by CS First Boston.
- -------------------------------------------------------------------------------
[GRAPHIC OMITTED: pie chart:
INCOME FUND OF BOSTON: RATINGS BREAKDOWN OF BOND HOLDINGS*
Aaa 5.0%
Ba 9.4%
B1 12.8%
B2 25.6%
B3 40.9%
Caa 5.4%
Non-rated 0.9%
* Moody's Investors Services ratings; percentages based on market value as of
September 30, 1995.
Source: Eaton Vance Management.]
- -------------------------------------------------------------------------------
These trends should provide a favorable background for Eaton Vance Income Fund
of Boston. In the following pages, portfolio manager Hooker Talcott reviews the
past year and discusses the outlook for income-seeking investors in the high
yield market.
[Photo of
M. Dozier Gardner]
Sincerely,
/s/ M. Dozier Gardner
M. Dozier Gardner
President
November 20, 1995
<PAGE>
Management Discussion
An interview with Hooker Talcott, Jr., Vice President and Portfolio Manager of
Eaton Vance Income Fund of Boston.
Q. HOOKER, HOW WOULD YOU EVALUATE THE FUND'S PERFORMANCE DURING THE YEAR?
A. Although the market has been somewhat difficult to negotiate, the Fund
posted a good positive total return during the year, up 11.3%. However, the
Treasury market certainly provided a volatile backdrop, and the Fund
underperformed the Lehman Brothers High Yield Bond Index. The primary reason
for the Fund's underperformance was our emphasis on lower-rated,
higher-yielding bonds. These do not respond to the U.S. Treasury* market to
the same degree that higher-rated bonds in the high yield universe do.
Yield spreads - the difference in yields between bonds of varying quality -
widened in the period, meaning that higher-yielding, B-rated bonds - the
primary investment universe of the Portfolio - slightly underperformed their
BB-rated counterparts. I think it's fair to say that, given the difficult
terrain for the high yield market, the Fund fared satisfactorily in this
period. It's important for shareholders to remember that the Fund tends to
emphasize high current yields. Over the long-term, the compounding of those
higher yields can have a significant and beneficial effect on long-term
returns.
*High yield bonds carry a higher degree of investment risk, while the principal
and interest of Treasury issues are guaranteed by the U.S. government. High
yield bonds are considered speculative because they present greater risks of
price volatility and default.
Q. HOW HAVE YOU ALTERED THE PORTFOLIO?
A. I've continued the restructuring that I mentioned in our last report.
Namely, decreasing the Portfolio's exposure to cyclical issues, while
increasing our exposure to defensive issues. The current mix is
approximately 65% defensive bonds and 35% cyclical bonds. A year ago, those
percentages were roughly reversed.
- ----------------------------------
[Photo of Hooker Talcott, Jr.]
HOOKER TALCOTT, JR.
- ----------------------------------
Q. WHAT GROUPS HAVE YOU BEEN BUYING?
A. I've focused on areas of the economy where cash flow and earnings are likely
to remain strong, regardless of the direction of the economy. Those areas
include consumer products, healthcare, cable and broadcasting.
We've purchased companies such as Van de Kamp's, a food processing and
packaging company, and American Safety Razor, a maker of shaving
accessories. These makers of consumer staples are less dependent on a strong
economy than are cyclical industries. Health care providers, such as
Universal Healthcare, tend to maintain their growth rates even in a slowing
economic climate. Elsewhere, we've retained an exposure to the cable and
broadcasting segments. Cable television operators, like Marcus Cable, and
broadcasters, such as Young Broadcasting, continue to enjoy good growth.
Q. AND WHAT SECTORS HAVE YOU AVOIDED?
A. While the Federal Reserve has apparently managed to engineer a soft landing,
the economy remains in a very delicate balance. At the retail level,
consumers are nearing the upper reaches of their available credit limits,
according to bank industry data. Since consumer spending accounts for around
60% of economic activity in the U.S., that's a cause for concern. We've
therefore lightened up on autos, retailers, and apparel makers.
In the manufacturing sector, inventories have crept higher in recent months.
As Fed chairman Greenspan noted recently, that's a trend that bears watching
because it may signal a slowdown in future manufacturing activity.
Therefore, we've also reduced our holdings among the steels, metals, and
heavy manufacturers. Moreover, the trends I've mentioned above suggest that
the economic cycle is reaching a more mature stage.
Q. WE'VE DISCUSSED YOUR BUY DISCIPLINE IN PAST REPORTS. BUT WHAT DRIVES YOU TO
SELL A BOND HOLDING?
A. At Eaton Vance, we follow a very credit-intensive approach. Through
"bottom-up" research, we monitor companies very closely for any change in
their creditworthiness. We search for signs of deteriorating fundamentals or
changing economic conditions that might adversely affect the company's
future cash flows or earnings prospects. Equally as important, we try to be
alert to signs that a bond may have reached what we believe is its full
price potential. In that event, we may elect to sell and redirect our
investment into bonds that we believe represent better value.
Q. COULD YOU GIVE A RECENT EXAMPLE?
A. Yes. The Portfolio recently sold an Inland Steel issue, which we had
purchased in 1991 at a yield near 12%. As the manufacturing side of the
economy recovered in the early 1990s, and demand rose both domestically and
abroad, Inland's results improved significantly, and the bonds performed
very well. We sold the issue recently at a yield of 8.5%, after significant
price appreciation. At that level we felt the bonds were fully priced and
chose to look for opportunities elsewhere.
Q. HOOKER, WHAT IS YOUR OUTLOOK FOR THE HIGH-YIELD MARKET?
A. While the economy is clearly less robust than it was six months ago, the
high yield market should continue to fare relatively well. Given the Fed's
success in controlling inflation, we should see less volatility in interest
rates generally. A slow-growth economy will continue to benefit some sectors
of the economy. Meanwhile, yield spreads on 10-year B-rated bonds have
widened to 500 basis points over 10-year Treasuries. Naturally, there are
additional risks associated with high yield bonds, and past trends don't
always guarantee future performance. But in my view, the high yield sector
continues to offer unusual value and good opportunities for the
income-oriented investor.
Comparison of Change in Value of a $10,000 Investment in Eaton Vance Income Fund
of Boston (Including Sales Charge) and the Lehman Brothers High Yield Bond Index
From September 30, 1985, thrugh September 30, 1995
----------------------------------------------
AVERAGE ANNUAL 1 5 10
RETURNS Year Year Year
----------------------------------------------
With 3.75%
Max. Sales Charge 7.1% 14.9% 10.7%
----------------------------------------------
Without 3.75%
Max. Sales Charge 11.3% 15.8% 11.2%
----------------------------------------------
Label A B C
-------------------------------------------------------------
date ifob - nav ifob - off hi yield
-------------------------------------------------------------
1 9/85+ 10000 9627 10000
2 10/85 10247 9865 10026
3 11/85 10516 10124 10276
4 12/85 10873 10467 10662
5 1/86 10840 10436 10802
6 2/86 11259 10839 11218
7 3/86 11516 11087 11649
8 4/86 11516 11087 11834
9 5/86 11708 11272 11965
10 6/86 11869 11426 12097
11 7/86 11799 11359 11976
12 8/86 12136 11684 12161
13 9/86 11926 11482 12307
14 10/86 12271 11814 12592
15 11/86 12426 11963 12558
16 12/86 12498 12032 12522
17 1/87 13046 12560 13040
18 2/87 13266 12772 13317
19 3/87 13300 12805 13409
20 4/87 12950 12468 12942
21 5/87 12875 12395 13035
22 6/87 13085 12598 13202
23 7/87 13162 12672 13238
24 8/87 13457 12956 13320
25 9/87 13250 12757 12900
26 10/87 12566 12098 12478
27 11/87 12803 12326 12838
28 12/87 12926 12444 13147
29 1/88 13310 12814 13586
30 2/88 13679 13170 14026
31 3/88 13677 13168 13880
32 4/88 13780 13266 13986
33 5/88 13897 13379 14007
34 6/88 14159 13631 14211
35 7/88 14294 13761 14305
36 8/88 14309 13776 14284
37 9/88 14489 13950 14464
38 10/88 14675 14128 14639
39 11/88 14721 14172 14725
40 12/88 14891 14336 14794
41 1/89 15145 14581 15055
42 2/89 15193 14627 15088
43 3/89 15240 14672 14970
44 4/89 15371 14798 15033
45 5/89 15637 15055 15325
46 6/89 15748 15161 15515
47 7/89 15861 15270 15495
48 8/89 15942 15348 15547
49 9/89 15904 15311 15286
50 10/89 15638 15055 14924
51 11/89 15509 14931 14894
52 12/89 15522 14943 14918
53 1/90 15154 14589 14597
54 2/90 14494 13954 14296
55 3/90 14380 13844 14671
56 4/90 14449 13911 14646
57 5/90 14767 14216 14929
58 6/90 15086 14524 15290
59 7/90 15431 14856 15701
60 8/90 14734 14185 14808
61 9/90 13826 13311 13727
62 10/90 13399 12900 13006
63 11/90 13169 12678 13412
64 12/90 13116 12627 13487
65 1/91 13083 12596 13858
66 2/91 13924 13405 15374
67 3/91 14676 14129 16279
68 4/91 15827 15237 16947
69 5/91 15911 15318 16977
70 6/91 16371 15761 17480
71 7/91 17047 16412 18039
72 8/91 17318 16673 18454
73 9/91 17772 17109 18711
74 10/91 18401 17716 19336
75 11/91 18623 17929 19436
76 12/91 18735 18036 19716
77 1/92 19521 18793 20410
78 2/92 19983 19238 20914
79 3/92 20455 19692 21174
80 4/92 20725 19952 21254
81 5/92 20953 20173 21554
82 6/92 21280 20487 21756
83 7/92 21616 20810 22085
84 8/92 21903 21087 22374
85 9/92 22082 21259 22602
86 10/92 21844 21030 22284
87 11/92 21946 21128 22564
88 12/92 22158 21333 22822
89 1/93 22674 21829 23486
90 2/93 23146 22284 23899
91 3/93 23477 22602 24207
92 4/93 23691 22808 24418
93 5/93 24056 23160 24709
94 6/93 24553 23638 25228
95 7/93 24802 23878 25472
96 8/93 24879 23952 25686
97 9/93 24862 23935 25753
98 10/93 25413 24466 26273
99 11/93 25754 24794 26399
100 12/93 26141 25167 26727
101 1/94 26747 25750 27307
102 2/94 26951 25947 27236
103 3/94 26160 25185 26206
104 4/94 25854 24890 26028
105 5/94 25992 25023 26042
106 6/94 26113 25140 26122
107 7/94 26018 25049 26344
108 8/94 25923 24957 26530
109 9/94 25917 24952 26532
110 10/94 25952 24985 26595
111 11/94 25643 24687 26260
112 12/94 25806 24844 26453
113 1/95 26037 25067 26811
114 2/95 26656 25663 27730
115 3/95 26789 25791 28029
116 4/95 27538 26512 28742
117 5/95 28237 27185 29548
118 6/95 28266 27212 29745
119 7/95 28764 27692 30112
120 8/95 28658 27590 30206
121 9/95 28833 27758 30577
Past performance is not indicative of future results. Investment returns and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than their original cost. Source: Towers Data Systems,
Bethesda, MD.
* Investment operations commenced on 6/15/72.
+ Index information is available only at month-end; therefore, the line
comparison begins at the next month-end following the commencement of the
Fund's investment.
FUND PERFORMANCE
In accordance with Securities and Exchange Commission guidelines, we are
including a performance chart that compares your Fund's total return with that
of a broad-based securities market index. The lines on the chart represent the
total returns of $10,000 hypothetical investments in the Fund and the unmanaged
Lehman Brothers High Yield Bond Index.
THE TOTAL RETURN FIGURES
The black solid line on the chart represents the Fund's performance, after
deducting the Fund's 3.75% current maximum sales charge. The Fund's total return
figure reflects Fund expenses and portfolio transaction costs, and assumes the
reinvestment of income dividends and capital gain distributions.
The dotted line represents the performance of the Lehman Brothers High Yield
Bond Index, a broad-based, widely recognized unmanaged index of high yield
bonds. The Index's total return does not reflect any management, transaction or
custody expenses, or commissions that would be incurred if an investor
individually purchased or sold the securities represented in the Index.
<PAGE>
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1995
- --------------------------------------------------------------------------------
CORPORATE BONDS AND NOTES -- 94.5%
- --------------------------------------------------------------------------------
FACE
SECURITY AMOUNT VALUE
- --------------------------------------------------------------------------------
AUTOMOTIVE/TRUCK -- 3.1%
Exide Corporation, Sr. Notes,
10.75%, 12/15/02 $ 500,000 $ 532,500
JPS Automotive Prod. Corp., Sr. Notes,
11.125%, 6/15/01 1,500,000 1,515,000
Key Plastics, Sr. Notes, 14%, 11/15/99 1,200,000 1,224,000
------------
$ 3,271,500
------------
BUILDING PRODUCTS -- 5.7%
American Standard, Sr. Notes,
11.375%, 5/15/04 $ 750,000 $ 825,000
Building Materials Corp., Sr. Sub. Notes,
11.75% (0% until 2000), 7/1/04 1,850,000 1,147,000
Overhead Door Corp., Sr. Notes, 12.25%, 2/1/00 1,500,000 1,462,500
Schuller International Group Inc., Sr. Notes,
10.875%, 12/15/04 800,000 880,000
Southdown Inc., Sr. Sub. Notes.,
14%, 10/15/01 750,000 828,750
Tarkett International, Sr. Sub. Notes,
9%, 3/1/02 900,000 918,000
------------
$ 6,061,250
------------
CHEMICALS -- 7.4%
Agricultural Minerals & Chemicals, Sr. Notes,
10.75%, 9/30/03 $1,000,000 $ 1,047,500
GI Holdings, Sr. Discount Notes,
11.125% (0% until 1995), 10/1/98 1,300,000 942,500
NL Industries Inc., Sr. Sec. Notes,
11.75%, 10/15/03 1,000,000 1,055,000
NL Industries Inc., Sr. Disc. Notes,
13% (0% until 1998), 10/15/05 1,250,000 925,000
Pioneer Americas Acq., Senior Notes,
13.625%, 4/1/05+ 1,500,000 1,537,500
Rexene Corp, Sr. Notes, 11.75%, 12/1/04 700,000 750,750
Terra Industries Inc., Senior Notes,
10.5%, 6/15/05 700,000 736,750
Uniroyal Chemical Corp., Sr. Sub.
Notes, 11%, 5/01/03 800,000 818,000
------------
$ 7,813,000
------------
COMMUNICATIONS -- 11.3%
Australis Media LTD.,
Sub. Disc. Notes,
14% (0% until 2000), 5/13/03 $1,700,000 $ 1,020,000
Dial Call Communications Inc.,
Sr. Red. Notes,
12.25% (0% until 1998), 4/15/04 1,800,000 949,500
<PAGE>
Diamond Cable Communications Co.,
Sr. Disc. Notes,
13.25% (0% until 1999), 9/30/04 1,600,000 1,064,000
Galaxy Telecom LP., Sr. Sub. Notes,
12.375%, 10/01/05 1,000,000 1,000,000
Granite Broadcasting Corp., Sr. Sub.
Notes, 10.375%, 5/15/05 1,500,000 1,530,000
In-Flight Phone Corp., Sr. Disc. Notes,
14% (0% until 1998), 5/15/02+ 1,500,000 615,000
IXC Communications Inc., Senior
Notes, 13%, 10/1/05+ 900,000 886,500
Marcus Cable Co., Sr. Disc. Notes,
14.25% (0% until 2000), 12/15/05 2,500,000 1,450,000
Marcus Cable Co., Senior Debs.,
11.875%, 10/1/05 200,000 202,000
Pricellular Wireless Comm.,
Sr. Sub. Disc. Nts.,
12.25% (0% until 1998), 10/01/03 800,000 568,000
United International Holdings Inc.,
Sr. Sec. Disc. Notes, 0%, 11/15/99 1,960,000 1,195,600
Videotron Holdings, Sr. Disc. Notes,
11% (0% until 2000), 8/15/05 2,600,000 1,501,500
------------
$ 11,982,100
------------
ENERGY -- 6.0%
Gulf Canada Resources Ltd., Sr. Sub.
Notes, 9.25%, 1/15/04 $1,800,000 $ 1,782,000
Midland Funding II, Subordinated Secured Lease
Obligation, 11.75%, 7/23/05 1,200,000 1,254,000
Mesa Capital Corp., Sec. Disc. Notes,
12.75%, 6/30/98 1,200,000 1,107,000
Midland Cogeneration Venture, Sr. Sec. Lease
Oblig., 10.33%, 7/23/02 804,091 839,270
Trans Texas Gas Corp., Sr. Sec. Notes,
11.5%, 6/15/02 850,000 890,375
Tuboscope Vetco, Sr. Sub. Debs.,
10.75%, 4/15/03 500,000 510,000
------------
$ 6,382,645
------------
FOOD/RESTAURANTS/HOTELS -- 5.7%
American Restaurant Group Inc., Sr. Sec. Notes,
12%, 9/15/98 $ 700,000 $ 514,500
BFI Acquisition Corp., Sr. Sub. Notes (Series A)
12%, 12/1/01 1,500,000 1,050,000
Flagstar Corp., Sub. Debs., 10.75%, 9/15/01 2,150,000 2,021,000
Purina Mills, Sr. Sec. Sub. Notes, 10.25%, 9/1/03 1,050,000 1,076,250
Seven Up/RC Bottling Co., Sr. Sec. Notes,
11.5%, 8/1/99* 1,200,000 516,000
Van De Kamps, Inc., Sr. Sub. Notes, 12%, 9/15/05+ 850,000 862,750
------------
$ 6,040,500
------------
HEALTHCARE -- 4.8%
Dade International Inc., Sr. Sub. Notes,
13%, 2/1/05 $1,200,000 $ 1,284,000
Genesis Health Ventures, Sr. Sub. Notes,
9.75%, 6/15/05 750,000 781,875
Ordna Health Corp., Sr. Sub. Notes,
11.375%, 8/15/04 1,425,000 1,585,313
Universal Health Services Corp., Sr. Notes,
8.75%, 8/15/05 1,500,000 1,487,640
------------
$ 5,138,828
------------
<PAGE>
HIGH TECH -- 2.6%
Blue Bell Funding Inc., Sec. Ext. Notes,
11.85%, 5/1/99 $ 742,000 $ 780,955
GS Technologies Corp., Sr. Notes, 12.25%, 10/1/05 1,000,000 1,012,500
Unisys Corp., Sr. Notes, 13.5%, 7/1/97 900,000 974,250
------------
$ 2,767,705
------------
LEISURE -- 1.0%
Roadmaster Industries, Inc., Sr. Sub. Notes,
11.75%, 7/15/02 $1,600,000 $ 1,040,000
------------
METALS -- 6.4%
Acme Metals Inc., Sr. Notes, 12.5%, 8/1/02 $ 650,000 $ 643,500
Algoma Steel Corp., Sr. Secured Notes,
12.375%, 7/15/05 500,000 457,500
Gulf States Steel, First Mtg. Notes, 13.5%, 4/15/03 1,000,000 960,000
Inland Steel Corp., First Mtg. Bonds, 12%, 12/1/98 750,000 817,500
Kaiser Aluminum, Sr. Sub. Notes, 12.75%, 2/1/03 1,000,000 1,082,500
Maxxam Group Inc., Sr. Sec. Notes, 11.25%, 8/1/03 700,000 684,250
Maxxam Group Inc., Sr. Sec. Disc. Notes,
12.25% (0% until 1998), 8/1/03 700,000 456,750
Republic Engineered Steels Inc., First Mtg.,
9.875%, 12/15/01 1,000,000 932,500
Stelco Inc., SF Debentures, 13.5%, 10/1/00 CAD 272,380 203,740
Ucar Global Enterprises, Sr. Sub. Notes,
12%, 1/15/05 525,000 585,375
------------
$ 6,823,615
------------
MANUFACTURING/MACHINERY -- 9.1%
Applied Extrusion Inc., Sr. Notes, 11.5%, 4/1/02 $ 800,000 $ 856,000
Day International Group, Inc., Sr. Sub. Notes,
11.125%, 6/1/05+ 1,000,000 1,037,500
Dictaphone Corp., Sr. Sub. Notes, 11.75%, 8/1/05 1,250,000 1,231,250
Graphic Controls Corp., Sr. Sub. Notes,
12%, 9/15/05+ 900,000 915,750
Monarch Acquisition Corp., Senior Notes,
12.5%, 7/1/03+ 1,200,000 1,230,000
Newflo Corp., Sub. Notes, 13.25%, 11/15/02 1,400,000 1,442,000
Plastic Specialties & Tech, Sr. Sec. Notes,
11.25%, 12/1/03 500,000 457,500
Selmer Company, Inc., Sr. Sub. Notes, 11%, 5/15/05 900,000 873,000
Waters Corp., Sr. Sub. Notes, 12.75%, 9/30/04 1,500,000 1,627,500
------------
$ 9,670,500
------------
MISCELLANEOUS -- 4.8%
Alliance Entertainment Corp., Sr. Sub. Notes,
11.25%, 7/15/05+ $ 900,000 $ 897,750
Alliant Tech Systems Inc., Sr. Sub. Notes,
11.75%, 3/1/03 1,000,000 1,085,000
Corporate Express Inc., Sr. Sub. Notes,
9.125%, 3/15/04 1,300,000 1,293,500
Imax Corp., Sr. Notes, 7%, 3/1/01 600,000 567,000
Williamhouse-Regency of Del., Sr. Sub. Deb.,
11.5%, 6/15/05 1,300,000 1,287,000
------------
$ 5,130,250
------------
PAPER/PACKAGING -- 9.6%
Container Corp., Sr. Notes (Ser. B), 10.75%, 5/1/02 $ 600,000 $ 631,500
Fort Howard Corp., Sr. Sec. Notes, 11%, 1/2/02 655,633 681,858
Gaylord Container Corp., Sr. Sub. Disc. Debs.,
12.75% (0% until 1996), 5/15/05 300,000 295,500
Owens Illinois Inc., Sr. Notes,
9.95%, 10/15/04 1,000,000 1,027,500
Portola Packaging Corp., Senior Notes,
10.75%, 10/1/05 1,000,000 1,011,250
Riverwood International, Sr. Sub. Notes,
10.375%, 6/30/04 1,100,000 1,210,000
S.D. Warren Company Inc., Sr. Sub. Notes,
12%, 12/15/04 1,000,000 1,105,000
Silgan Corp., Sr. Notes,
13.25% (0% until 1996), 12/15/02 1,000,000 935,000
Silgan Corp., Sr. Sub. Notes,
11.75%, 6/15/02 500,000 527,500
Stone Container Corp., First Mtg. Notes,
10.75%, 10/1/02 500,000 518,750
Stone Container Corp., Sr. Notes, 12.625%, 7/15/98 800,000 868,000
<PAGE>
Tembec Finance Corp., Sr. Notes, 9.875%, 9/30/05 600,000 594,000
U.S. Can Company, Sr. Sub. Notes, 13.5%, 1/15/02 750,000 823,125
------------
$ 10,228,983
------------
RECREATION -- 3.3%
Aztar Corp., Sr. Sub. Notes, 13.75%, 10/1/04 $1,000,000 $ 1,076,250
Trump Holdings & Funding, Senior Notes,
15.5%, 6/15/05 300,000 297,000
Trump Plaza Funding, First Mtg. Notes,
10.875%, 6/15/01 900,000 824,625
Trump Taj Mahal, First Mtg. Bonds,
11.35%, 11/15/99 1,524,215 1,352,741
------------
$ 3,550,616
------------
RETAILING -- 10.1%
Apparel Retailers Inc., Sr. Disc. Debs.,
12.75% (0% until 1998), 8/15/05 $1,400,000 $ 854,000
Brunos, Inc., Sr. Sub. Notes, 10.5%, 8/1/05 1,425,000 1,382,250
Dominick's Finer Foods, Inc., Sr. Sub. Notes,
10.875%, 5/1/05+ 1,000,000 1,015,000
Duane Reade, G.P., Sr. Notes, 12%, 9/15/02 1,200,000 1,098,000
Levitz Furniture Corp., Sr. Sub. Notes,
9.625%, 7/15/03 600,000 477,000
Pathmark Stores Inc., Jr. Sub., Disc. Notes,
10.75% (0% until 1999), 11/1/03 1,500,000 971,250
Purity Supreme, Sr. Sec. Notes, 11.75%, 8/1/99 1,200,000 1,311,000
Ralphs Grocery Company, Inc., Sr. Sub. Notes,
13.75%, 6/15/05 1,500,000 1,582,500
Specialty Foods, Inc., Sr. Sub. Notes,
13% (0% until 1999), 8/15/05 500,000 265,000
Specialty Foods, Inc., Sr. Sub. Notes,
10.25%, 8/15/01 1,000,000 952,500
Specialty Retailers, Inc., Sr. Sub. Notes, 11%,
8/15/03 900,000 846,000
------------
$ 10,754,500
------------
TEXTILES -- 3.0%
Dan River Inc., Sr. Sub. Notes, 10.125%, 12/15/03 $1,450,000 $ 1,460,875
Westpoint Stevens, Sr. Sub. Debs., 9.375%, 12/15/05 1,800,000 1,750,500
------------
$ 3,211,375
------------
TRANSPORTATION -- 0.6%
Moran Transportation, 1st Mtg. Notes, 11.75%,
7/15/04 $ 700,000 $ 654,500
------------
TOTAL CORPORATE BONDS AND NOTES
(identified cost, $98,695,496) $100,521,867
------------
- --------------------------------------------------------------------------------
PREFERRED STOCKS -- 0.4%
- --------------------------------------------------------------------------------
SD Warren Company 14% PFD Stock $ 12,000 $ 366,000
Terex Corp., 13% CV PFD+ 8,000 104,000
------------
TOTAL PREFERRED STOCKS
(identified cost, $510,400) $ 470,000
------------
- --------------------------------------------------------------------------------
COMMON STOCKS, WARRANTS AND RIGHTS -- 1.5%
- --------------------------------------------------------------------------------
SHARES/WARRANTS
- --------------------------------------------------------------------------------
AUTO/TRUCK -- 0.7%
Bucyrus - Erie Company, Common* 87,279 $ 774,601
------------
<PAGE>
CHEMICALS -- 0.1%
UCC Invt. Hldgs, Class A Common+* 7,431 $ 83,599
------------
COMMUNICATIONS -- 0.1%
Dial Call Communications, Wts.+* 1,800 $ 450
United International Hldg. Inc., Warrants+* 1,960 58,800
------------
$ 59,250
------------
ENERGY -- 0.0%
Empire Gas Corp., Wts.+* 1,380 $ 1,380
------------
FOOD -- 0.0%
Servam Corp., Common* 884 $ 0
Servam Corp., $2.00 Wts.
Exp. 4/1/2001+* 7,864 0
Servam Corp., $4.50 Wts.
Exp. 4/1/2001+* 1,768 0
Specialty Foods Acquisition, Common+* 12,000 21,000
------------
$ 21,000
------------
INDUSTRIAL -- 0.0%
Thermadyne Holdings Corp., Common+* 777 $ 13,986
------------
MANUFACTURING -- 0.5%
Pullman Company, Common Stock+* 43,702 $ 349,615
Southdown Inc., Wts.+* 7,500 31,875
Terex Corporation, Rights,
Exp. 8/1/96+* 2,700 1,350
Terex Corporation, Rights,
Exp. 8/1/96+* 375 188
Terex Corporation, Rights,
Exp. 7/1/97+* 1,790 1,343
Terex Corp., Wts.+* 8,000 76,000
Triangle Wire & Cable, Common Stock+* 31,667 79,168
Triangle Wire and Cable, Wts.+* 7,500 0
------------
$ 539,539
------------
METALS -- 0.0%
Gulf States Steel, Warrants+* 1,000 $ 50
------------
MISCELLANEOUS -- 0.0%
Australis Media, Warrants+* 1,700 $ 0
------------
PAPER/PACKAGING -- 0.1%
SD Warren Company, Warrants* 12,000 $ 72,000
------------
RETAILING -- 0.0%
Purity Supreme, Wts.,
Exp. 8/1/1999+* 1,733 $ 1,334
Waxman Industries Inc., Warrants+* 14,000 700
------------
$ 2,034
------------
TOTAL COMMON STOCKS, WARRANTS AND RIGHTS
(IDENTIFIED COST, $3,648,961) $ 1,567,439
------------
<PAGE>
- --------------------------------------------------------------------------------
SHORT-TERM OBLIGATION -- 5.0%
- --------------------------------------------------------------------------------
FACE
SECURITY AMOUNT VALUE
- --------------------------------------------------------------------------------
Melville Corp. 6.60%, 10/02/95,
at amortized cost $5,317,000 $ 5,314,076
------------
TOTAL INVESTMENTS
(IDENTIFIED COST, $110,487,822) $107,873,382
OTHER ASSETS, LESS LIABILITIES -- (1.4%) (1,459,411)
------------
NET ASSETS -- 100% $106,413,971
============
*Non-income producing security.
+Restricted Security (Note 8).
CAD -- The principal amount of these securities is stated in Canadian
Dollars, the currency in which the security is denominated.
The accompanying notes are an integral part of the financial statements
<PAGE>
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
- ------------------------------------------------------------------------------
September 30, 1995
- ------------------------------------------------------------------------------
ASSETS:
Investments, at value (Note 1A) (identified cost,
$110,487,822) $107,873,382
Cash 3,782
Receivable for investments sold 436,841
Receivable for Trust shares sold 283,824
Interest and dividends receivable 2,502,570
------------
Total assets $111,100,399
LIABILITIES:
Dividends payable $ 410,456
Payable for investments purchased 4,026,359
Payable for Trust shares redeemed 197,377
Payable to affiliates --
Trustees' fee 1,478
Custodian fee 4,296
Accrued expenses 46,462
----------
Total liabilities 4,686,428
------------
NET ASSETS for 13,434,312 shares of beneficial
interest outstanding $106,413,971
============
SOURCES OF NET ASSETS:
Paid-in capital $124,816,196
Accumulated net realized loss on investment
transactions (computed on the basis
of identified cost) (15,063,922)
Unrealized depreciation of investments (computed
on the basis of identified cost) (2,611,674)
Accumulated distributions in excess of net
investment income (726,629)
------------
Total $106,413,971
============
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($106,413,971 / 13,434,312 shares of beneficial
interest) $7.92
=====
COMPUTATION OF OFFERING PRICE:
(Offering price per share 100/96.25 of $7.92) $8.23
=====
On sales of $50,000 or more, the offering price is reduced.
The accompanying notes are an integral part of the financial statements
<PAGE>
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
For the Year Ended September 30, 1995
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest income $11,650,298
Expenses --
Investment adviser fee (Note 4) $ 628,411
Compensation of Trustees not members of the
Investment Adviser's organization 34,783
Service fees (Note 5) 118,974
Custodian fees (Note 4) 68,455
Transfer and dividend disbursing agent fees 85,714
Printing and postage 55,271
Legal and accounting services 48,058
Registration costs 23,605
Miscellaneous 28,518
-----------
Total expenses 1,091,789
-----------
Net investment income $10,558,509
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized loss on investment transactions
(identified cost basis) ($1,177 net loss for
federal income tax purposes) $(2,502,141)
Change in unrealized appreciation of investments 2,497,668
-----------
Net realized and unrealized loss on
investments (4,473)
-----------
Net increase in net assets from
operations $10,554,036
===========
The accompanying notes are an integral part of the financial statements
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
----------------------------
1995 1994
------------- -------------
INCREASE (DECREASE) IN NET ASSETS:
From operations --
Net investment income $ 10,558,509 $ 10,066,646
Net realized gain (loss) on investment
transactions (2,502,141) 147,154
Change in unrealized appreciation
(depreciation) of investments 2,497,668 (6,048,456)
------------ ------------
Net increase in net assets from operations $ 10,554,036 $ 4,165,344
------------ ------------
Distributions to shareholders --
From net investment income $(10,503,271) $(10,066,646)
In excess of net investment income -- (563,437)
------------ ------------
Total distributions to shareholders $(10,503,271) $(10,630,083)
------------ ------------
Net increase from Trust share transactions
(Note 2) $ 2,880,933 $ 14,824,209
------------ ------------
Net increase in net assets $ 2,931,698 $ 8,359,470
NET ASSETS:
At beginning of year 103,482,273 95,122,803
------------ ------------
At end of year (including distributions in
excess of net investment income of
$726,629 and $775,340 respectively) $106,413,971 $103,482,273
============ ============
The accompanying notes are an integral part of the financial statements
<PAGE>
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------------
1995 1994 1993 1992 1991
----------- ----------- ---------- ---------- ---------
NET ASSET
VALUE, beginning
of year $ 7.90 $ 8.40 $ 8.33 $ 7.56 $ 6.89
-------- -------- ------- ------- -------
INCOME FROM
OPERATIONS:
Net investment
income $ 0.82 $ 0.83 $ 0.92 $ 0.97 $ 1.04
Net realized
and unrealized
gain (loss) on
investments 0.02 (0.47) 0.07 0.77 0.71
-------- -------- ------- ------- -------
Total income from
operations $ 0.84 $ 0.36 $ 0.99 $ 1.74 $ 1.75
-------- -------- ------- ------- -------
LESS DISTRIBUTIONS:
From net
investment
income $ (0.82) $ (0.81) $ (0.92) $ (0.97) $ (1.04)
From paid-in
capital -- -- -- -- (0.04)
In excess of net
investment income -- (0.05) -- -- --
-------- -------- ------- ------- -------
Total
distributions $ (0.82) $ (0.86) $ (0.92) $ (0.97) $ (1.08)
-------- -------- ------- ------- -------
NET ASSET VALUE,
end of year $ 7.92 $ 7.90 $ 8.40 $ 8.33 $ 7.56
======== ======== ======= ======= =======
TOTAL RETURN (1) 11.25% 4.25% 12.59% 24.25% 28.53%
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end
of year (000's
omitted) $106,414 $103,482 $95,123 $85,778 $70,773
-------- -------- ------- ------- -------
Ratio of net
expenses to
average daily
net assets 1.09% 1.04% 1.03% 1.08% 1.15%
Ratio of net
investment
income to
average daily
net assets 10.50% 9.75% 11.01% 12.02% 15.36%
PORTFOLIO TURNOVER 84% 70% 102% 90% 80%
- -------------
(1) Total investment 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 payable date.
The accompanying notes are an integral part of the financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES
Eaton Vance Income Fund of Boston (the Trust), a Massachusetts business trust,
is registered under the Investment Company Act of 1940, as amended, as a
diversified, open-end, management investment company. The following is a summary
of significant accounting policies consistently followed by the Trust in the
preparation of its financial statements. The policies are in conformity with
generally accepted accounting principles.
A. INVESTMENT VALUATIONS -- Investments listed on securities exchanges or in the
NASDAQ National Market are valued at closing sale prices. Listed or unlisted
investments for which closing sale prices are not available are valued at the
mean between the latest bid and asked prices. Fixed income investments (other
than short-term obligations), including listed investments and investments for
which price quotations are available, will normally be valued on the basis of
market valuations furnished by a pricing service. Short-term obligations,
maturing in sixty days or less, are valued at amortized cost, which approximates
value. Investments for which there is no quotation or valuation are valued at
fair value using methods determined in good faith by or at the direction of the
Trustees.
B. INCOME -- Interest income is determined on the basis of interest accrued,
adjusted for amortization of premium or discount when required for federal
income tax purposes. Dividend income is recorded on the ex-dividend date.
C. FEDERAL TAXES -- The Trust's policy is to comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute to shareholders all of its taxable income, including any net realized
gain on investments. Accordingly, no provision for federal income or excise tax
is necessary. At September 30, 1995, the Trust, for federal income tax purposes,
had a capital loss carryover of $12,557,485 which will reduce the Trust's
taxable income arising from future net realized gains on investments, if any, to
the extent permitted by the Internal Revenue Code, and thus will reduce the
amount of the distributions to shareholders which would otherwise be necessary
to relieve the Trust of any liability for federal income or excise tax. Such
capital loss carryovers will expire on September 30, 1999 ($7,407,810), 2000
($5,148,498) and 2003 ($1,177). Additionally, at September 30, 1995, net capital
losses of $2,416,189 attributable to security transactions incurred after
October 31, 1994, are treated as arising on the first day of the Fund's next
taxable year.
D. DISTRIBUTIONS TO SHAREHOLDERS -- The net investment income of the Trust is
determined daily, and substantially all of the net investment income so
determined is declared daily as a dividend to shareholders of record at the time
of declaration. Distributions are paid monthly. Distributions of realized
capital gains, if any, are made at least annually. Shareholders may reinvest
capital gain distributions in additional shares of the Trust at the net asset
value as of the ex-dividend date. Distributions are paid in the form of
additional shares of the Trust or, at the election of the shareholder, in cash.
The Trust distinguishes between distributions on a tax basis and a financial
reporting basis. Generally accepted accounting principles require that only
distributions in excess of tax basis earnings and profits be reported in the
financial statements as a return of capital. Differences in the recognition or
classification of income between the financial statements and tax earnings and
profits which result in temporary over-distributions for financial statement
purposes are classified as distributions in excess of net investment income or
accumulated net realized gains. Permanent differences between book and tax
accounting relating to distributions are reclassified to paid-in capital.
E. OTHER -- Investment transactions are accounted for on the date the
investments are purchased or sold.
<PAGE>
- ------------------------------------------------------------------------------
(2) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in Trust shares were as follows:
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 1995 SEPTEMBER 30, 1994
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
--------- ----------- --------- -----------
Sales 2,247,830 $17,720,814 3,376,464 $28,296,646
Issued to shareholders
electing to receive
payment of
distributions in
Trust shares 748,929 5,876,531 743,312 6,186,563
Repurchases (2,656,086) (20,716,412) (2,351,168) (19,659,000)
--------- ----------- --------- -----------
Net increase
(decrease) 340,673 $ 2,880,933 1,768,608 $14,824,209
========= =========== ========= ===========
- ------------------------------------------------------------------------------
(3) PURCHASES AND SALES OF INVESTMENTS
The Trust invests primarily in debt securities. The ability of the issuers of
the debt securities held by the Trust to meet their obligations may be affected
by economic developments in a specific industry. Purchases and sales of
investments, other than U.S. Government securities and short-term obligations,
aggregated $80,678,587 and $81,267,554, respectively.
- ------------------------------------------------------------------------------
(4) INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
The investment adviser fee, computed at the monthly rate of 5/96 of 1% ( 5/8 of
1% annually) of the Trust's average monthly net assets, was earned by Eaton
Vance Management (EVM) as compensation for management and investment advisory
services rendered to the Trust. Except as to Trustees of the Trust who are not
members of EVM's organization, officers and Trustees receive remuneration for
their services to the Trust out of such investment adviser fee. Eaton Vance
Distributors, Inc., a subsidiary of EVM and the Trust's principal underwriter,
received approximately $16,600 as its portion of the sales charge on sales of
Trust shares during the year ended September 30, 1995. Investors Bank & Trust
Company (IBT), an affiliate of EVM, serves as custodian of the Trust. Pursuant
to the custodian agreement, IBT receives a fee reduced by credits which are
determined based on the average daily cash balances the Trust maintains with
IBT. Certain of the officers and Trustees of the Trust are officers and
directors/trustees of the above organizations.
- ------------------------------------------------------------------------------
(5) SERVICE PLAN
The Trustees of the Trust on behalf of the Fund have adopted a Service Plan
designed to meet the requirements of Rule 12b-1 under the Investment Company Act
of 1940 and the service fee requirements of the revised sales charge rule of The
National Association of Securities Dealers Inc. The Service Plan provides that
the Trust may make service fee payments to the Principal Underwriter, Eaton
Vance Distributors, Inc., a subsidiary of Eaton Vance Management, Authorized
Firms or other persons in amounts not exceeding 0.25% of the Trust's average
daily net assets for any fiscal year. The Trustees have implemented the Service
plan by authorizing the Fund to make quarterly service fee payments to the
Principal Underwriter and Authorized Firms in amounts not expected to exceed
0.25% of that portion of the Trust's average daily net assets for any fiscal
year which is attributable to shares of the Trust sold on or after May 22, 1989
by such persons and remaining outstanding for at least twelve months. Such
payments are made for personal services and/or the maintenance of shareholder
accounts. Pursuant to the Plan, the Trust made provisions of $118,974 under the
Plan to the Principal Underwriter and Authorized Firms during the year ended
September 30, 1995.
- ------------------------------------------------------------------------------
(6) LINE OF CREDIT
The Trust participates with other funds managed by EVM in a $120 million
unsecured line of credit agreement with a bank. The line of credit consists of a
$20 million committed facility and a $100 million discretionary facility.
Borrowings will be made by the Trust solely to facilitate the handling of
unusual and/or unanticipated short term cash requirements. Interest is charged
to each fund based on its borrowings at an amount above either the bank's
adjusted certificate of deposit rate, a variable adjusted certificate of deposit
rate, or a federal funds effective rate. In addition, a fee computed at an
annual rate of 1/4 of 1% on the $20 million committed facility and on the daily
unused portion of the $100 million discretionary facility is allocated among the
participating funds at the end of each quarter. The Trust did not have any
significant borrowings or allocated fees during the period.
- ------------------------------------------------------------------------------
(7) FEDERAL INCOME TAX BASIS OF INVESTMENTS
The cost and unrealized depreciation/appreciation in value of the investments
owned at September 30, 1995, as computed on a federal income tax basis, are as
follows:
Aggregate cost $110,578,070
============
Gross unrealized depreciation $ 5,844,613
Gross unrealized appreciation 3,139,925
------------
Net unrealized depreciation $ 2,704,688
============
- ------------------------------------------------------------------------------
(8) RESTRICTED SECURITIES
At September 30, 1995, the Trust owned the following securities (constituting
9.2% of net assets) which were restricted at such date. The Trust has various
registration rights (exercisable under a variety of circumstances) with respect
to these securities. The fair value of these securities is determined based on
valuations provided by brokers when available, or if not available, they are
valued at fair value using methods determined in good faith by or at the
direction of the Trustees.
<TABLE>
<CAPTION>
DESCRIPTION DATES OF ACQUISITION SHARES/FACE COST FAIR VALUE
CORPORATE BONDS AND NOTES
<S> <C> <C> <C> <C>
Alliance Entertainment,
Sr. Sub. Notes,
11.25%, 7/15/05 7/18/95 900,000 $ 905,375 $ 897,750
Day International Corp.,
Sr. Sub. Notes,
11.125%, 6/1/05 5/20/95 1,000,000 1,010,000 1,037,500
Dominick's Finer Foods,
Sr. Sub Notes,
10.875%, 5/1/05 4/27/95 1,000,000 1,000,000 1,015,000
Graphic Controls, Sr. Sub.
Notes, 12%, 9/15/05 9/21/95 900,000 900,000 915,750
In-Flight Phone Corp., Sr.
Disc. Notes, 0/14%, 5/15/02 4/28/95 1,500,000 997,260 615,000
IXC Communications Corp.,
Sr. Notes, 13%, 10/1/05 9/25/95 900,000 875,250 886,500
Monarch Acquisition Corp.,
Sr. Notes, 12.5%, 7/1/03 6/23/95 1,200,000 1,200,000 1,230,000
Pioneer Americas Acquisition,
First Mtg. Notes,
13.625%, 4/1/05 4/13, 7/13, 8/24/95 1,500,000 1,523,000 1,537,500
Van De Kamps, Inc., Sr.
Sub. Notes, 12%, 9/19/05 9/14, 9/15/95 850,000 856,125 862,750
CORPORATE STOCKS, WARRANTS
AND RIGHTS
Australis Media, Warrants 5/26/95 1,700 0 0
Dial Call Communications,
Warrants 10/01/94 1,800 0 450
Empire Gas Corp., Warrants 1/27/95 1,380 0 1,380
Gulf States Steel, Warrants 8/23/95 1,000 0 50
Pullman Co., Common Stock 2/22/95 43,702 1,267,788 349,616
Purity Supreme, Warrants,
Exp. 8/1/99 7/29/92 1,733 0 1,334
Servam Corp., $2.00 Warrants,
Exp. 4/1/01 8/28/91 7,864 0 0
Servam Corp., $4.50 Warrants,
Exp. 4/1/01 8/28/91 1,768 0 0
Southdown, Inc., Warrants 10/28/91 7,500 22,500 31,875
Specialty Foods, Acquisition,
Common Stock 8/10/93 12,000 8,722 21,000
Terex Corp., 13%, CV Preferred 12/15/93 8,000 198,400 104,000
Terex Corp., Rights, Exp.
8/1/96 7/24/92 2,700 0 1,350
Terex Corp., Rights,
Exp. 8/1/96 8/20/92-7/01/94-8/02/94 375 0 188
Terex Corp., Rights,
Exp. 7/1/97 11/07/94 1,791 0 1,343
Terex Corp., Warrants 12/15/93 8,000 1,600 76,000
Thermadyne Holdings Corp.,
Common Stock 5/17/94 777 18,900 13,986
Triangle Wire & Cable,
Common Stock 5/02/94 31,667 750,000 79,168
Triangle Wire & Cable,
Warrants 10/28/91 7,500 0 0
UCC Holdings, Class A
Common Stock 12/05/89 7,431 7,431 83,599
United International Hldg.
Inc., Warrants 11/16/94 1,960 55,546 58,800
Waxman Industries, Inc.,
Warrants 10/01/91 14,000 14,000 700
----------- ----------
$11,611,897 $9,822,589
=========== ==========
</TABLE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- ------------------------------------------------------------------------------
TO THE TRUSTEES AND SHAREHOLDERS OF
EATON VANCE INCOME FUND OF BOSTON:
We have audited the accompanying statement of assets and liabilities of
Eaton Vance Income Fund of Boston, including the investment portfolio, as of
September 30, 1995, the related statement of operations for the year then ended,
the statements of changes in net assets for each of the two years in the period
then ended, and the financial highlights for each of the five years in the
period then ended. These financial statements and financial highlights are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
September 30, 1995 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Eaton Vance Income Fund of Boston as of September 30, 1995, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the five years in the period then ended, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
BOSTON, MASSACHUSETTS
OCTOBER 27, 1995
<PAGE>
INVESTMENT MANAGEMENT
EATON VANCE OFFICERS INDEPENDENT TRUSTEES
INCOME FUND M. DOZIER GARDNER KENNETH C. KNIGHT
OF BOSTON President and Trustee Consultant
24 Federal Street HOOKER TALCOTT, JR. DONALD R. DWIGHT
Boston, MA 02110 Vice President President, Dwight Partners, Inc.
and Portfolio Manager Chairman, Newspapers of
JAMES L. O'CONNOR New England, Inc.
Treasurer ROBERT GLUCK
THOMAS OTIS Management Consultant
Secretary SAMUEL L. HAYES, III
Jacob H. Schiff Professor of
Investment Banking,
Harvard University
Graduate School of
Business Administration
JEROME PRESTON, JR.
Partner, Foley, Hoag & Eliot
NORTON H. REAMER
President and Director,
United Asset Management
Corporation
JOHN L. THORNDIKE
Director,
Fiduciary Company Incorporated
<PAGE>
ADMINISTRATOR OF
EATON VANCE
INCOME FUND OF BOSTON
Eaton Vance Management
24 Federal Street
Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc.
24 Federal Street
Boston, MA 02110
(617) 482-8260
CUSTODIAN
Investors Bank & Trust Company
24 Federal Street
Boston, MA 02110
TRANSFER AGENT
The Shareholder Services Group, Inc.
BOS725
P.O. Box 1559
Boston, MA 02104
LEGAL COUNSEL
Gordon Altman Butowsky Weitzen
Shalov & Wein
114 West 47th Street
New York, NY 10036
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, MA02109
This report must be preceded or
accompanied by a current prospectus
which contains more complete information
on the Fund, including its distribution
plan, sales charges and expenses. Please
read the prospectus carefully before you
invest or send money.
EATON VANCE
INCOME FUND OF BOSTON
24 FEDERAL STREET
BOSTON, MA 02110
T-IBSRC
EATON VANCE
INCOME FUND
OF BOSTON
ANNUAL
SHAREHOLDER REPORT
SEPTEMBER 30, 1995
<PAGE>
EATON VANCE [logo]
INCOME FUND EATON VANCE
OF BOSTON MUTUAL FUNDS
STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 1, 1996
EATON VANCE
INCOME FUND
OF BOSTON
24 FEDERAL STREET
BOSTON, MA 02110
- -----------------------------------------------------------------------------
INVESTMENT ADVISER
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 89 South Street, Boston, MA 02111
TRANSFER AGENT
First Data Investor Services Group, BOS725, P.O. Box 1559, Boston, MA 02104
(800) 262-1122
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P., One Post Office Square, Boston, MA 02109
LEGAL COUNSEL
Gordon Altman Butowsky Weitzen Shalov & Wein, 114 West 47th Street,
New York, NY 10036
IBSAI
