LOGO
Investing
for the
21st
Century(R)
Eaton Vance
Income Fund
of Boston
A mutual fund seeking high current income
Prospectus Dated
February 1, 1999
as revised
July 1, 1999
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR DETERMINED WHETHER THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Information in this prospectus
Page Page
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fund Summary 2 Sales Charges 6
Investment Objectives, Policies and Risks 4 Redeeming Shares 7
Management and Organization 5 Shareholder Account Features 8
Valuing Shares 5 Tax Information 9
Purchasing Shares 6 Financial Highlights 10
- ----------------------------------------------------------------------------------------
</TABLE>
This prospectus contains important information about the Fund and the
services available to shareholders. Please save it for reference.
<PAGE>
FUND SUMMARY
INVESTMENT OBJECTIVES AND PRINCIPAL STRATEGIES. The primary investment objective
of Eaton Vance Income Fund of Boston is to provide as much current income as
possible. To do so, the Fund invests primarily in high yield, high risk
corporate bonds (so-called "junk bonds"). Secondary purposes of the Fund are to
provide reasonable preservation of capital to the extent attainable from such
bonds, and growth of income and capital.
The Fund invests a substantial portion of its assets in bonds issued in
connection with mergers, acquisitions and other highly leveraged transactions.
The Fund may invest in a wide variety of other income producing debt securities,
as well as preferred stocks that pay dividends. Some debt securities acquired by
the Fund do not make regular interest payments. The Fund will generally hold
well in excess of 100 securities, which helps reduce investment risk. The Fund
may invest a portion of its assets in foreign securities.
The Fund's investments are actively managed and securities may be bought and
sold on a daily basis. The investment adviser's staff monitors the credit
quality of securities held by the Fund and other securities available to the
Fund. The portfolio manager attempts to improve yield and preserve and enhance
principal value through timely trading.
PRINCIPAL RISK FACTORS. The Fund invests predominantly in below investment grade
bonds, which have speculative characteristics because of the credit risk of
their issuers. Such companies are more likely to default on their payments of
interest and principal owed to the Fund, and such defaults will reduce the
Fund's net asset value and income distributions. An economic downturn generally
leads to a higher non-payment rate, and a security may lose significant value
before a default occurs.
The value of Fund shares may decline when interest rates rise, or when the
supply of suitable bonds exceeds market demand. Bonds that do not make regular
interest payments and foreign securities may be subject to greater volatility
and have special risks. The Fund is not appropriate for investors who cannot
assume the greater risk of capital depreciation or loss inherent in seeking
higher yields.
The Fund is not a complete investment program and you may lose money by
investing in the Fund. An investment in the Fund is not a deposit in a bank and
is not insured or guaranteed by the Federal Deposit Insurance Corporation or any
other government agency.
2
<PAGE>
PERFORMANCE INFORMATION. The following bar chart and table provide information
about the Fund's performance including a comparison of the Fund's performance to
the performance of a national index of corporate obligations. Although past
performance is no guarantee of future results, this performance information
demonstrates the risk that the value of your investment will change. These
returns are for each calendar year through December 31, 1998 and do not reflect
a sales charge. If the sales charge was reflected, the returns would be lower.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
4.2% -15.5% 42.8% 18.3% 18.0% -1.3% 15.3% 13.7% 16.3% 2.9%
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
</TABLE>
The Fund's highest quarterly total return was 11.90% for the quarter ended March
31, 1991, and its lowest quarterly total return was -8.35% for the quarter ended
September 30, 1990. For the thirty-day period ended September 30, 1998 the yield
of the Fund was 9.25%.
<TABLE>
<CAPTION>
One Five Ten
Average Annual Total Return as of December 31, 1998 Year Years Years
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fund Shares -1.95% 8.08% 9.98%
C.S. First Boston High Yield Bond Index 0.58% 8.16% 10.74%
</TABLE>
The Fund's returns reflect the maximum sales charge (4.75%). The C.S. First
Boston High Yield Bond Index is an unmanaged index of corporate bonds.
Investors cannot invest directly in an index.
FEES AND EXPENSES OF THE FUND. These tables describe the fees and expenses that
you may pay if you buy and hold shares.
<TABLE>
<CAPTION>
Shareholder Fees
(fees paid directly from your investment)
- ----------------------------------------------------------------------------------------------
<S> <C>
Maximum Sales Charge (as a percentage of offering price) 4.75%
Maximum Deferred Sales Charge (as a percentage of the lower of net asset value at
time of purchase or time of redemption) None
Sales Charge Imposed on Reinvested Distributions None
Exchange Fee None
</TABLE>
<TABLE>
<CAPTION>
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets)
- ---------------------------------------------------------------------
<S> <C>
Management Fees 0.63%
Other Expenses* 0.41%
-------
Total Annual Fund Operating Expenses 1.04%
</TABLE>
* Other Expenses includes service fees of 0.15%.
EXAMPLE. This Example is intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The Example also assumes
that your investment has a 5% return each year and that the operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$576 $790 $1,022 $1,686
</TABLE>
3
<PAGE>
INVESTMENT OBJECTIVES, POLICIES AND RISKS
The Fund's primary investment objective is to provide as much current income as
possible. In seeking this objective, the Fund currently invests primarily in
high yield, high risk corporate bonds which are 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
are unrated and of comparable quality. 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 Fund may 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 on a security could
be in arrears when the security is acquired, and the issuer may be in bankruptcy
or undergoing a debt restructuring or reorganization. These 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. In order to enforce its rights with defaulted securities, the Fund
may be required to retain legal counsel and/or a financial adviser. This may
increase the Fund's operating expenses and adversely affect the Fund's net asset
value.
The credit quality of most securities held by the Fund reflects a greater
possibility that adverse changes in the financial condition of an issuer, or in
general economic conditions, or both, may impair the ability of the issuer to
make payments of interest and principal. The inability (or perceived inability)
of issuers to make timely payment of interest and principal would likely make
the values of securities held by the Fund more volatile and could limit the
Fund's ability to sell its securities at favorable prices. In the absence of a
liquid trading market for securities held by it, the Fund may have difficulties
determining the fair market value of such securities.
Although the investment adviser considers security ratings when making
investment decisions, it performs its own credit and investment analysis and
does not rely primarily on the ratings assigned by the rating services. In
evaluating the quality of a particular issue, whether rated or unrated, the
investment adviser will normally take into consideration, among other things,
the issuer's financial resources and operating history, its sensitivity to
economic conditions and trends, the ability of its management, its debt maturity
schedules and borrowing requirements, and relative values based on anticipated
cash flow, interest and asset coverage, and earnings prospects. Because of the
greater number of investment considerations involved in investing in high yield,
high risk bonds, the achievement of the Fund's objectives depends more on the
investment adviser's judgment and analytical abilities than would be the case if
the Fund were investing primarily in securities in the higher rating categories.
While the investment adviser will attempt to reduce the risks of investing in
lower rated or unrated securities through active portfolio management,
diversification, credit analysis and attention to current developments and
trends in the economy and the financial markets, there can be no assurance that
a broadly diversified portfolio of such securities would substantially lessen
the risks of defaults brought about by an economic downturn or recession.
The Fund will engage in active trading to attempt to improve yield and to
preserve and enhance the principal value of Fund shares. The annual portfolio
turnover rate may exceed 100%. A mutual fund with a high turnover rate may
generate more capital gains than a fund with a lower rate. Capital gains
distributions will be made to shareholders if offsetting capital loss
carryforwards do not exist, which reduces after tax returns of shareholders
holding Fund shares in taxable accounts.
The Fund may invest in 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. In addition
to lower rated bonds, the Fund may invest in higher rated securities. 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.
The Fund may invest up to 25% of net assets in foreign securities. The value of
foreign securities is affected by changes in currency rates, foreign tax laws
(including withholding tax), government policies (in this country or abroad) and
relations between nations. In addition, the costs of investing abroad are
generally higher than in the United States, and foreign securities markets may
be less liquid, more volatile and less subject to governmental supervision than
markets in the United States.
4
<PAGE>
The value of Fund shares will usually change in response to interest rate
fluctuations. When interest rates decline, the value of securities already held
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.
Rating downgrades of securities held by the Fund may reduce their value.
The Fund may borrow amounts up to one-third of the value of its total assets
(including borrowings), but it will not borrow more than 5% of the value of its
total assets except to satisfy redemption requests or for other temporary
purposes. Such borrowings would result in increased expense to the Fund and,
while they are outstanding, would magnify increases or decreases in the value of
Fund shares. The Fund will not purchase additional portfolio securities while
outstanding borrowings exceed 5% of the value of its total assets.
Like most mutual funds, the Fund relies on computers in conducting daily
business and processing information. There is a concern that on January 1, 2000
some computer programs will be unable to recognize the new year and as a
consequence computer malfunctions will occur. Eaton Vance is taking steps that
it believes are reasonably designed to address this potential problem and to
obtain satisfactory assurance from other service providers to the Fund that they
are also taking steps to address the issue. There can, however, be no assurance
that these steps will be sufficient to avoid any adverse impact on the Fund or
shareholders. The Year 2000 concern may also adversely impact issuers of
obligations held by the Fund.
MANAGEMENT AND ORGANIZATION
MANAGEMENT. The Fund's investment adviser is Eaton Vance Management ("Eaton
Vance"), with offices at The Eaton Vance Building, 255 State Street, Boston, MA
02109. Eaton Vance has been managing assets since 1924 and managing mutual funds
since 1931. Eaton Vance and its subsidiaries currently manage over $37 billion
on behalf of mutual funds, institutional clients and individuals.
The investment adviser manages the investments of the Fund and provides related
office facilities and personnel. Under its investment advisory agreement with
the Fund, Eaton Vance receives a monthly advisory fee of 5/96 of 1% (equivalent
to 0.625% annually) of the average daily net assets of the Fund up to and
including $300 million, and 1/24 of 1% (equivalent to 0.50% annually) of the
average daily net assets over $300 million. For the fiscal year ended September
30, 1998, the Fund paid Eaton Vance advisory fees equivalent to 0.63% of its
average daily net assets.
Michael Weilheimer is the portfolio manager of the Fund (since January 1, 1996).
He also manages other Eaton Vance portfolios, has been an employee of Eaton
Vance for more than 5 years, and is a Vice President of Eaton Vance.
Eaton Vance and the Fund have adopted Codes of Ethics governing personal
securities transactions. Under the Codes, employees of Eaton Vance may purchase
and sell securities (including securities held by the Fund) subject to certain
pre-clearance and reporting requirements and other procedures.
ORGANIZATION. The Fund is a series of a Massachusetts business trust. The Fund
offers multiple classes of shares. Each class represents a pro rata interest in
the Fund, but is subject to different expenses and rights. Effective July 1,
1999, the shares offered in this prospectus are Class A shares. The Fund does
not hold annual shareholder meetings, but may hold special meetings for matters
that require shareholder approval (like electing or removing trustees, approving
management contracts or changing investment policies that may only be changed
with shareholder approval).
VALUING SHARES
The Fund values its shares once each day only when the New York Stock Exchange
is open for trading (typically Monday through Friday), as of the close of
regular trading on the Exchange (normally 4:00 p.m. eastern time). The price of
Fund shares is their net asset value. Most debt securities are valued by an
independent pricing service.
When purchasing or redeeming Fund shares, your investment dealer must
communicate your order to the principal underwriter by a specific time each day
in order for the purchase price or redemption price to be based on that day's
net asset value per share. It is the investment dealer's responsibility to
transmit orders promptly. The Fund may accept purchase and redemption orders as
of the time of their receipt by certain investment dealers (or their designated
intermediaries).
5
<PAGE>
PURCHASING SHARES
You may purchase Fund shares through your investment dealer or by mailing the
account application form included in this prospectus to the transfer agent (see
back cover for address). Your initial investment must be at least $1,000. The
price of Fund shares is the net asset value plus a sales charge.
You may purchase Fund shares for cash or in exchange for securities. Please call
1-800-225-6265 for information about exchanging securities for Fund shares.
If you purchase shares through an investment dealer (which includes brokers,
dealers and other financial institutions), that dealer may charge you a fee for
executing the purchase for you. The Fund may suspend the sale of its shares at
any time and any purchase order may be refused.
After your initial investment, additional investments of $50 or more may be made
at any time by sending a check payable to the order of the Fund or the transfer
agent directly to the transfer agent (see back cover for address). Please
include your name and account number and the name of the Fund with each
investment.
You may also make automatic investments of $50 or more each month or each
quarter from your bank account. You can establish bank automated investing on
the account application or by calling 1-800-262-1122. The minimum initial
investment amount and Fund policy of redeeming accounts with low account
balances are waived for bank automated investing accounts.
SALES CHARGES
Fund shares are offered at net asset value per share plus a sales charge that is
determined by the amount of your investment. The current sales charge schedule
is:
<TABLE>
<CAPTION>
Sales Charge Sales Charge Dealer Commission
as Percentage of as Percentage of Net as a Percentage of
Amount of Purchase Offering Price Amount Invested Offering Price
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $25,000 4.75% 4.99% 4.50%
$25,000 but less than $100,000 4.50% 4.71% 4.25%
$100,000 but less than $250,000 3.75% 3.90% 3.50%
$250,000 but less than $500,000 3.00% 3.09% 2.75%
$500,000 but less than $1,000,000 2.00% 2.04% 2.00%
$1,000,000 or more 0.00* 0.00* See Below
* No sales charge is payable at the time of purchase on investments of $1
million or more. A CDSC of 1.00% will be imposed on such investments (as
described below) in the event of redemptions within 12 months of purchase.
</TABLE>
The principal underwriter will pay a commission to investment dealers on sales
of $1 million or more as follows: 1.00% on amounts of $1 million or more but
less than $3 million; plus 0.50% on amounts over $3 million but less than $5
million; plus 0.25% on amounts over $5 million. Purchases of $1 million or more
will be aggregated over a 12-month period for purposes of determining the
commission. The principal underwriter may also pay commissions of up to 1.00% on
sales of Fund shares to certain tax-deferred retirement plans.
If Fund shares are purchased at net asset value because the purchase amount is
$1 million or more, they are subject to a 1.00% contingent deferred sales charge
("CDSC") if redeemed within 12 months of purchase. The CDSC is based on the
lower of the net asset value at the time of purchase or the time of redemption.
Shares acquired through the reinvestment of distributions are exempt.
Redemptions are made first from shares which are not subject to a CDSC.
REDUCING OR ELIMINATING SALES CHARGES. Front-end sales charges may be reduced
under the right of accumulation or under a statement of intention. Under the
right of accumulation, sales charges are reduced if the current market value of
your current holdings (shares at current offering price), plus your new
purchases, reach $25,000 or more. Class A shares of other Eaton Vance funds
owned by you can be included as part of your current holdings for this purpose.
Under a statement of intention, purchases of $25,000 or more made over a
13-month period are eligible for reduced sales charges. The principal
underwriter may hold 5% of the dollar amount to be purchased in escrow in the
form of shares registered in your name until the statement is satisfied or the
13-month period expires. See the account application for details.
Fund shares are offered at net asset value through certain wrap fee programs and
other programs sponsored by investment dealers that charge fees for their
6
<PAGE>
services. Ask your investment dealer for details. Certain persons associated
with Eaton Vance, other advisers to Eaton Vance funds, the transfer agent, the
custodian and investment dealers may purchase shares at net asset value.
If you redeem shares, you may reinvest at net asset value any portion or all of
the redemption proceeds in shares of the Fund (or in Class A shares of any other
Eaton Vance fund), provided that the reinvestment occurs within 60 days of the
redemption, and the privilege has not been used more than once in the prior 12
months. Your account will be credited with any CDSC paid in connection with the
redemption. Reinvestment requests must be in writing. If you reinvest, you will
be sold shares at the next determined net asset value following receipt of your
request.
SERVICE FEES. The Fund pays service fees for personal and/or account services
not exceeding .25% of average daily net assets annually. Service fees are paid
on Fund shares only after they have been outstanding for twelve months.
REDEEMING SHARES
You can redeem shares in any of the following ways:
By Mail Send your request to the transfer agent along with any
certificates and stock powers. The request must be
signed exactly as your account is registered and
signature guaranteed. You can obtain a signature
guarantee at certain banks, savings and loan
institutions, credit unions, securities dealers,
securities exchanges, clearing agencies and registered
securities associations. You may be asked to provide
additional documents if your shares are registered in
the name of a corporation, partnership or fiduciary.
By Telephone You can redeem up to $50,000 by calling the transfer
agent at 1-800-262-1122 on Monday through Friday, 9:00
a.m. to 4:00 p.m. (eastern time). Proceeds of a
telephone redemption can be mailed only to the account
address. Shares held by corporations, trusts or certain
other entities, or subject to fiduciary arrangements,
cannot be redeemed by telephone.
Through an
Investment
Dealer Your investment dealer is responsible for transmitting
the order promptly. A dealer may charge a fee for this
service.
If you redeem shares, your redemption price will be based on the net asset value
per share next computed after the redemption request is received. Your
redemption proceeds will be paid in cash within seven days, reduced by the
amount of any applicable CDSC and any federal income tax required to be
withheld. Payments will be sent by mail unless you complete the Bank Wire
Redemptions section of the account application.
If you recently purchased shares, the proceeds of a redemption will not be sent
until the check (including a certified or cashier's check) has cleared. If the
purchase check has not cleared, redemption proceeds may be delayed up to 15 days
from the purchase date. If your account value falls below $750 (other than due
to market decline), you may be asked to either add to your account or redeem it
within 60 days. If you take no action, your account will be redeemed and the
proceeds sent to you.
While redemption proceeds are normally paid in cash, redemptions may be paid by
distributing marketable securities. If you receive securities, you could incur
brokerage or other charges in converting the securities to cash.
7
<PAGE>
SHAREHOLDER ACCOUNT FEATURES
Once you purchase shares, the transfer agent establishes a Lifetime Investing
Account(R) for you. Share certificates are issued only on request.
DISTRIBUTIONS. You may have your Fund distributions paid in one of the
following ways:
.Full Reinvest Option Dividends and capital gains are reinvested in
additional shares. This option will be assigned if
you do not specify an option.
.Partial Reinvest Option Dividends are paid in cash and
capital gains are reinvested in additional shares.
.Cash Option Dividends and capital gains are paid in cash.
.Exchange Option Dividends and/or capital gains are reinvested
in additional shares of another Eaton Vance fund
chosen by you. Before selecting this option, you
must obtain a prospectus of the other fund and
consider its objectives and policies carefully.
INFORMATION FROM THE FUND. From time to time, you may be mailed the following:
. Annual and Semi-Annual Reports, containing performance information and
financial statements.
. Periodic account statements, showing recent activity and total share
balance.
. Form 1099 and tax information needed to prepare your income tax returns.
. Proxy materials, in the event a shareholder vote is required.
. Special notices about significant events affecting your Fund.
WITHDRAWAL PLAN. You may redeem shares on a regular monthly or quarterly basis
by establishing a systematic withdrawal plan. Withdrawals will not be subject to
any applicable CDSC if they do not in the aggregate exceed 12% annually of the
account balance at the time the plan is established. A minimum account size of
$5,000 is required to establish a systematic withdrawal plan. Because purchases
of Fund shares are subject to a sales charge, you should not make withdrawals
from your account while you are making purchases.
TAX-SHELTERED RETIREMENT PLANS. Fund shares are available for purchase in
connection with certain tax-sheltered retirement plans. Call 1-800-225-6265 for
information. Distributions will be invested in additional shares for all
tax-sheltered retirement plans.
EXCHANGE PRIVILEGE. You may exchange your Fund shares for Class A shares of
another Eaton Vance fund. Exchanges are generally made at net asset value. If
you have held Fund shares for less than six months, an additional sales charge
may apply if you exchange. If your shares are subject to a CDSC, the CDSC will
continue to apply to your new shares at the same CDSC rate. For purposes of the
CDSC, your shares will continue to age from the date of your original purchase.
Before exchanging, you should read the prospectus of the new fund carefully. If
you wish to exchange shares, you may write to the transfer agent (address on
back cover) or call 1-800-262-1122. Periodic automatic exchanges are also
available. The exchange privilege may be changed or discontinued at any time.
You will receive 60 days' notice of any material change to the privilege. This
privilege may not be used for "market timing". If an account (or group of
accounts) makes more than two round-trip exchanges within 12 months, it will be
deemed to be market timing. The exchange privilege may be terminated for market
timing accounts.
TELEPHONE TRANSACTIONS. You can redeem or exchange shares by telephone as
described in this prospectus. The transfer agent and the principal underwriter
have procedures in place to authenticate telephone instructions (such as
verifying personal account information). As long as the transfer agent and
principal underwriter follow these procedures, they will not be responsible for
unauthorized telephone transactions and you bear the risk of possible loss
resulting from telephone transactions. You may decline the telephone redemption
option on the account application. Telephone instructions are tape recorded.
"STREET NAME" ACCOUNTS. If your shares are held in a "street name" account at an
investment dealer, that dealer (and not the Fund or its transfer agent) will
perform all recordkeeping, transaction processing and distribution payments.
Because the Fund will have no record of your transactions, you should contact
your investment dealer to purchase, redeem or exchange shares, to make changes
in your account, or to obtain account information. The transfer of shares in a
8
<PAGE>
"street name" account to an account with another investment dealer or to an
account directly with the Fund involves special procedures and you will be
required to obtain historical information about your shares prior to the
transfer. Before establishing a "street name" account with an investment dealer,
you should determine whether that dealer allows reinvestment of distributions in
"street name" accounts.
ACCOUNT QUESTIONS. If you have any questions about your account or the services
available, please call Eaton Vance Shareholder Services at 1-800-225-6265, or
write to the transfer agent (see back cover for address).
TAX INFORMATION
The Fund declares dividends daily and ordinarily pays distributions monthly. Any
net realized capital gains will be distributed once annually. Your account will
be credited with dividends beginning on the business day after the day when the
funds used to purchase your shares are collected by the transfer agent.
Distributions will generally be taxable to shareholders as ordinary income.
A redemption of Fund shares, including an exchange for shares of another fund,
is a taxable transaction. Distributions of any long-term capital gains are
taxable as long-term gains. A portion of the Fund's distributions may be
eligible for the corporate dividends-received deduction.
Shareholders should consult with their advisers concerning the applicability of
state, local and other taxes to an investment.
9
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights are intended to help you understand the Fund's
financial performance for the past five years. Certain information in the table
reflects the financial results for a single Fund share. The total returns in the
table represent the rate an investor would have earned (or lost) on an
investment in the Fund (assuming reinvestment of all distributions and not
taking into account a sales charge). This information has been audited by
PricewaterhouseCoopers LLP, independent accountants. The report of
PricewaterhouseCoopers LLP and the Fund's financial statements are incorporated
by reference and included in the annual report, which is available on request.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-------------------------------------------------------
1998 1997 1996 1995 1994
-------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value - Beginning of year $ 8.70 $ 8.12 $ 7.92 $ 7.90 $ 8.40
-------- -------- -------- -------- --------
Income (loss) from operations
Net investment income $ 0.81 $ 0.79 $ 0.80 $ 0.82 $ 0.83
Net realized and unrealized gain (loss) (0.70) 0.57 0.21 0.02 (0.47)
-------- -------- -------- -------- --------
Total income (loss) from operations $ 0.11 $ 1.36 $ 1.01 $ 0.84 $ 0.36
-------- -------- -------- -------- --------
Less distributions
From net investment income $ (0.78) $ (0.77) $ (0.80) $ (0.82) $ (0.81)
In excess of net investment income(2) -- (0.01) (0.01) -- (0.05)
-------- -------- -------- -------- --------
Total distributions $ (0.78) $ (0.78) $ (0.81) $ (0.82) $ (0.86)
Net asset value - End of year $ 8.03 $ 8.70 $ 8.12 $ 7.92 $ 7.90
-------- -------- -------- -------- --------
Total return(1) 0.98% 17.68% 13.41% 11.25% 4.25%
Ratios/Supplemental Data:
Net assets, end of year (000's omitted) $224,960 $207,522 $143,844 $106,414 $103,482
Ratio of net expenses to average daily net assets 1.04% 1.05% 1.07% 1.09% 1.04%
Ratio of net investment income to average daily net assets 9.22% 9.32% 9.96% 10.50% 9.75%
Portfolio turnover 141% 105% 81% 84% 70%
</TABLE>
(1) Total return is calculated assuming a purchase at the net asset value on
the first day and a sale at the net asset value on the last day of each
period reported. Distributions, if any, are assumed to be reinvested at the
net asset value on the reinvestment date. Total return is not computed on
an annualized basis.
(2) The Fund has followed the Statement of Position (SOP) 93-2: Determination,
Disclosure and Financial Statement Presentation of Income, Capital Gain,
and Return of Capital Distribution by Investment Companies. The SOP
requires that differences in the recognition or classification of income
between the financial statements and tax earnings and profits that result
in temporary over-distributions for financial statement purposes, are
classified as distributions in excess of net investment income or
accumulated net realized gains.
10
<PAGE>
LOGO
Investing
for the
21st
Century(R)
More Information
- --------------------------------------------------------------------------------
ABOUT THE FUND: More information is available in the statement of
additional information. The statement of additional information is
incorporated by reference into this prospectus. Additional information
about the Fund's investments is available in the annual and semi-annual
reports to shareholders. In the annual report, you will find a discussion
of the market conditions and investment strategies that significantly
affected the Fund's performance during the past year. You may obtain free
copies of the statement of additional information and the shareholder
reports by contacting:
Eaton Vance Distributors, Inc.
The Eaton Vance Building
255 State Street
Boston, MA 02109
1-800-225-6265
website: www.eatonvance.com
You will find and may copy information about the Fund at the Securities
and Exchange Commission's public reference room in Washington, DC (call
1-800-SEC-0330 for information); on the SEC's Internet site
(http://www.sec.gov); or upon payment of copying fees by writing to the
SEC's public reference room in Washington, DC 20549-6009.
About Shareholder Accounts: You can obtain more information from
Eaton Vance Shareholder Services (1-800-225-6265). If you own
shares and would like to add to, redeem or change your account, please
write or call the transfer agent:
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First Data Investor Services Group
P.O. Box 5123
Westborough, MA 01581-5123
1-800-262-1122
SEC File No. 811-2258 IBP