<PAGE>
As filed with the Securities and Exchange Commission on January 29, 1999
1933 Act File No. 02-42722
1940 Act File No. 811-2258
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933 [X]
POST-EFFECTIVE AMENDMENT NO. 45 [X]
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 22 [X]
EATON VANCE INCOME FUND OF BOSTON
---------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
24 Federal Street, Boston, Massachusetts 02110
----------------------------------------------
(Address of Principal Executive Offices)
(617) 482-8260
--------------
(REGISTRANT'S TELEPHONE NUMBER)
ALAN R. DYNNER, 24 Federal Street, Boston, Massachusetts 02110
--------------------------------------------------------------
(Name and Address of Agent for Service)
It is proposed that this filing will become effective pursuant to Rule 485
(check appropriate box):
[ ] immediately upon filing pursuant to paragraph (b)
[x] on February 1, 1999 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2)
If appropriate, check the following box:
[ ] this post effective amendment designates a new effective date for a
previously filed post-effective amendment.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
LOGO
Investing
for the
21stCentury(R)
Eaton Vance
Income Fund
of Boston
A mutual fund seeking high current income
Prospectus Dated
February 1, 1999
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR DETERMINED WHETHER THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Information in this prospectus
Page Page
- --------------------------------------------------------------------------------
Fund Summary 2 Sales Charges 6
Investment Objective, Policies and Redeeming Shares 7
Risks 4 Shareholder Account Features 7
Management and Organization Tax Information 8
Valuing Shares 5 Financial Highlights 9
Purchasing Shares 5
- --------------------------------------------------------------------------------
This prospectus contains important information about the Fund and the services
available to shareholders. Please save it for reference.
<PAGE>
FUND SUMMARY
INVESTMENT OBJECTIVE AND PRINCIPAL STRATEGIES. The primary investment objective
of the Fund 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.
A substantial portion of Fund assets will constitute 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. The Fund will generally hold well in excess of 100 securities,
which helps reduce investment risk. Investments are actively managed, so
securities may be bought or sold on a daily basis. The credit quality and price
of securities held and of others that are available will be monitored, and
attempts to preserve and enhance principal value and to improve yield through
timely trading will be made.
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 Fund may purchase bonds that do not make regular
interest payments as well as foreign securities, which may be subject to greater
volatility and have special risks. The value of Fund shares may also decline
when interest rates rise, or when the supply of suitable bonds exceeds market
demand. 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.
FEES AND EXPENSES OF THE FUND. These tables describe the fees and expenses that
you may pay if you buy and hold shares.
Shareholder Fees
(fees paid directly from your investment)
- --------------------------------------------------------------------------------
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
Annual Fund Operating Expenses(expenses that are deducted from Fund assets)
- --------------------------------------------------------------------------------
Management Fees 0.63%
Other Expenses* 0.41%
-----
Total Annual Fund Operating Expenses 1.04%
* Other Expenses includes service fees of 0.15%.
2
<PAGE>
PERFORMANCE INFORMATION. The following bar chart and table provide information
about the Fund's performance including a comparision 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>
<CAPTION>
<S> <C> <C> <C> <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 1997
</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 ---7.36% for the quarter
ended March 31, 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 -2.0% 8.1% 10.0%
C.S. First Boston High Yield Bond Index 0.6% 8.6% 10.5%
</TABLE>
These 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.
EXAMPLE. This Example is intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The Example also assumes
that your investment has a 5% return each year and that the operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
$576 $790 $1,022 $1,686
3
<PAGE>
INVESTMENT OBJECTIVE, 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 reflect 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 preceived 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.
When deemed prudent by the investment adviser, the Fund will engage in active
trading to attempt to preserve and enhance principal value of Fund shares, and
to improve yield. 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, which reduce after tax returns of
shareholders holding Fund shares in taxable accounts, will be made to
shareholders if offsetting capital loss carryforwards do not exist.
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 temporarily borrow at any time up to 5% of the value of its total
assets to satisfy redemption requests or settle securities transactions.
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") 24 Federal Street, Boston, MA 02110. Eaton Vance has been managing
assets since 1924 and managing mutual funds since 1931. Eaton Vance and its
subsidiaries currently manage over $31 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 cerain
pre-clearance and reporting requirements and other procedures.
ORGANIZATION. 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).
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.
5
<PAGE>
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 r edemptions 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% contigent 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
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.
6
<PAGE>
REDEEMING SHARES
You can redeem shares in any of the following ways:
By Mail Send your request to the transfer agent along
with any certificates and stock powers. The
request must be signed exactly as your
account is registered and signature
guaranteed. You can obtain a signature
guarantee at certain banks, savings and loan
institutions, credit unions, securities
dealers, securities exchanges, clearing
agencies and registered securities
associations. You may be asked to provide
additional documents if your shares are
registered in the name of a corporation,
partnership or fiduciary.
By Telephone You can redeem up to $50,000 b y 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.
SHAREHOLDER ACCOUNT FEATURES
Once you purchase shares, the transfer agent establishes a Lifetime Investing
Account 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. 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.
7
<PAGE>
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
"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 intends to pay dividends monthly and to distribute any net realized
capital gains annually. A portion of the Fund's distributions may be eligible
for the corporate dividends-received deduction. Distributions of income and net
short-term capital gains will be taxable as ordinary income. Distributions of
any long-term capital gains are taxable as long-term gains.
Investors who purchase shares shortly before the record date of a distribution
will pay the full price for the shares and then receive some portion of the
price back as a taxable distribution. Certain distributions paid in January will
be taxable to shareholders as if received on December 31 of the prior year.
Shareholders should consult with their advisers concerning the applicability of
state, local and other taxes to an investment.
8
<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.
YEAR ENDED SEPTEMBER 30,
-------------------------------------------------------
1998 1997 1996 1995 1994
-------------------------------------------------------
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%
(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.
9
<PAGE>
LOGO
Investing
for the
21stCentury(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.
24 Federal Street
Boston, MA 02110
1-800-225-6265
website: www.eatonvance.com
You will find and may copy information about the Fund at the Securities and
Exchange Commission's public reference room in Washington, DC (call
1-800-SEC-0330 for information); on the SEC's Internet site
(http://www.sec.gov); or upon payment of copying fees by writing to the SEC's
public reference room in Washington, DC 20549-6009.
ABOUT SHAREHOLDER ACCOUNTS: You can obtain more information from Eaton Vance
Share- holder Services (1-800-225-6265). If you own shares and would like to add
to, redeem or change your account, please write or call the transfer agent:
- --------------------------------------------------------------------------------
First Data Investor Services Group
P.O. Box 5123
Westborough, MA 01581-5123
1-800-262-1122
SEC File No. 811-2258 IBP
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL INFORMATION
February 1, 1999
EATON VANCE INCOME FUND OF BOSTON
24 Federal Street
Boston, Massachusetts 02110
(800) 225-6265
This Statement of Additional Information ("SAI") provides general
information about the Fund. Capitalized terms used in this SAI and not
otherwise defined herein have the meanings given them in the prospectus. This
SAI contains additional information about:
Page
Strategies and Risks ................................................ 2
Investment Restrictions ............................................. 6
Management and Organization ......................................... 7
Investment Advisory Services ........................................ 9
Other Service Providers ............................................. 10
Purchasing and Redeeming Shares ..................................... 11
Sales Charges ....................................................... 12
Portfolio Security Transactions ..................................... 14
Performance ......................................................... 16
Certain Holders of Fund Shares ...................................... 17
Taxes ............................................................... 17
Financial Statements ................................................ 19
- -----------------------------------------------------------------------------
THIS SAI IS NOT A PROSPECTUS AND IS AUTHORIZED FOR DISTRIBUTION TO
PROSPECTIVE INVESTORS ONLY IF PRECEDED OR ACCOMPANIED BY THE FUND'S PROSPECTUS
DATED FEBRUARY 1, 1999, AS SUPPLEMENTED FROM TIME TO TIME, WHICH IS
INCORPORATED HEREIN BY REFERENCE. THIS SAI SHOULD BE READ IN CONJUNCTION WITH
THE PROSPECTUS, WHICH MAY BE OBTAINED BY CALLING 1-800-225-6265.
<PAGE>
STRATEGIES AND RISKS
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. In addition to lower-rated bonds, the Fund may
invest in higher-rated 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 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.
The rating assigned to a security by a rating agency does not reflect
assessment of the volatility of the security's market value or of the
liquidity of an investment in the securities. Credit ratings are based largely
on the issuer's historical financial condition and the rating agency's
investment analysis at the time of rating, and the rating assigned to any
particular security is not necessarily a reflection of the issuer's current
financial condition. Credit quality in the high yield high risk bond market
can change from time to time, and recently issued credit ratings may not fully
reflect the actual risks posed by a particular high yield security.
Certain securities held by the 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.
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.
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. The
investment adviser 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 the investment adviser and its affiliates may borrow money from various
banks in connection with their business activities. Such banks may also sell
interests in loans to or acquire such interests from the 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 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. Investments may include securities issued by
companies in lesser-developed countries, which are sometimes referred to as
"emerging markets". Such countries pose a heightened risk of nationalization
or expropriation or confiscatory taxation, political, financial or social
instability, armed conflict or diplomatic developments which could affect the
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. Investments in
foreign securities are not expected to exceed 25% of total assets.
FORWARD FOREIGN CURRENCY EXCHANGE TRANSACTIONS. 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.
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.
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. 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 Code for maintaining the qualification
of the Fund as a regulated investment company for federal income tax purposes
(see "Taxes").
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 CFTC, in each case that are not for bona fide hedging
purposes (as defined by the CFTC), the aggregate initial margin and premiums
required to establish these positions (excluding the amount by which options
are "in-the-money") may not exceed 5% of the liquidation value of the 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, 1998, and there is no
assurance that it will engage in such transactions in the future.
ASSET COVERAGE FOR DERIVATIVE INSTRUMENTS. Transactions involving when-issued
securities, 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 or other
options, futures contracts or forward contracts, or (2) cash or liquid
securities (such as readily marketable obligations and money market
instruments) with a value sufficient at all times to cover its potential
obligations not covered as provided in (1) above. The Fund will comply with
the Commission guidelines regarding cover for these instruments and, if the
guidelines so require, set aside cash, or liquid securities in a segregated
account with its custodian in the prescribed amount. The securities in the
segregated account will be marked to market daily. Assets used as cover or
held in a segregated account maintained by the Fund's custodian cannot be sold
while the position requiring coverage or segregation is outstanding unless
they are replaced with other appropriate assets. As a result, the commitment
of a large portion of the Fund's assets to segregated accounts or to cover
could impede portfolio management or the Fund's ability to meet redemption
requests or other current obligations.
INVESTMENT IN WARRANTS. The Fund may invest in warrants which have no voting
rights, pay no dividends and have no rights with respect to the assets of the
corporation issuing them. Warrants basically are options to purchase equity
securities at a specific price valid for a specific period of time. They do
not represent ownership of the securities, but only the right to buy them.
Warrants differ from calls in that warrants are issued by the same issuer as
the security which may be purchased on their exercise, whereas calls may be
written or issued by anyone. The prices of warrants do not necessarily move
parallel to the prices of the underlying securities.
RESTRICTED SECURITIES. The Fund may invest up to 15% of net assets in
illiquid securities. Illiquid securities include securities legally restricted
as to resale, such as commercial paper issued pursuant to Section 4(2) of the
Securities Act of 1933, as amended, and securities eligible for resale
pursuant to Rule 144A thereunder. Section 4(2) and Rule 144A securities may,
however, be treated as liquid by the investment adviser pursuant to procedures
adopted by the Trustees, which require consideration of factors such as
trading activity, availability of market quotations and number of dealers
willing to purchase the security. If the Fund invests in Rule 144A securities,
the level of portfolio illiquidity may be increased to the extent that
eligible buyers become uninterested in purchasing such securities.
It may be difficult to sell such securities at a price representing their
fair value until such time as such securities may 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 may exceed 100%
(excluding turnover of securities having a maturity of one year or less). A
100% annual turnover rate could occur, for example, if all the securities in
the portfolio were replaced once in a period of one year. A high turnover rate
could occur, for example, if all the securities in the portfolio were replaced
more than once in a period of one year. A high turnover rate (100% or more)
necessarily involves greater expenses to the Fund and may result in the
realization of substantial net short-term capital gains.
INVESTMENT RESTRICTIONS
The following investment restrictions are designated as fundamental
policies and as such cannot be changed without the approval of the holders of
a majority of the Fund's outstanding voting securities, which as used in this
SAI means the lesser of (a) 67% of the shares of the Fund present or
represented by proxy at a meeting if the holders of more than 50% of the
outstanding shares are present or represented at the meeting or (b) more than
50% of the outstanding shares of the Fund.
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 "1940 Act"). (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.
With respect to restriction (5), the Fund will construe the phrase "more
than 25%" to be "25% or more".
The Fund has adopted the following nonfundamental investment policies
which may be changed by the Trustees without shareholder approval. The Fund
will 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; or
(b) make short sales of securities or maintain a short position, unless at
all times when a short position is open it owns an equal amount of such
securities or securities convertible into or exchangeable for, without payment
of any further consideration, securities of the same issuer as, and equal in
amount to, the securities sold short, and unless not more than 25% of its net
assets (taken at current value) is held as collateral for such sales at any
one time.
MANAGEMENT AND ORGANIZATION
FUND MANAGEMENT. The Trustees of the Fund are responsible for the overall
management and supervision of the Fund's affairs. 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. Those Trustees who are
"interested persons" of the Fund, as defined in the 1940 Act by virtue of
their affiliation with any one or more of Eaton Vance, BMR, EVC or EV, are
indicated by an asterisk (*).
KENNETH C. KNIGHT (72), Chairman of the Board of Trustees
Consultant.
Address: 588 Andover Street, Lowell, Massachusetts 01852
JAMES B. HAWKES (57), President and Trustee*
Chairman, President and Chief Executive Officer of BMR, Eaton Vance and their
corporate parent and trustee (EVC and EV); Director of EVC and EV. Trustee
or officer of various investment companies managed by Eaton Vance or BMR.
DONALD R. DWIGHT (67), Trustee
President of Dwight Partners, Inc. (a corporate relations and communications
company). Trustee of various investment companies managed by Eaton Vance or
BMR.
Address: Clover Mill Lane, Lyme, New Hampshire 03768
ROBERT GLUCK (71), Trustee
Management Consultant
Address: 6742 Via Regina, Boca Raton, Florida 33433
SAMUEL L. HAYES III (63), Trustee
Jacob H. Schiff Professor of Investment Banking Emeritus, Harvard University
Graduate School of Business Administration. Trustee of the Kobrick-Cendent
Investment Trust (mutual funds). Trustee of various investment companies
managed by Eaton Vance or BMR.
Address: 345 Nahatan Road, Westwood, Massachusetts 02090
NORTON H. REAMER (63), Trustee
Chairman of the Board and Chief Executive Officer -- United Asset Management
Corporation (a holding company owning institutional investment management
firms); Chairman, President and Director, UAM Funds (mutual funds). Trustee
of various investment companies managed by Eaton Vance or BMR.
Address: One International Place, Boston, Massachusetts 02110
JOHN L. THORNDIKE (72), Trustee
Former Director of Fiduciary Company Incorporated. Trustee of various
investment companies managed by Eaton Vance or BMR.
Address: 175 Federal Street, Boston, Massachusetts 02110
MICHAEL W. WEILHEIMER (37), Vice President
Vice President of Eaton Vance and BMR. Officer of various other investment
companies managed by Eaton Vance or BMR.
JAMES L. O'CONNOR (53), Treasurer
Vice President of Eaton Vance and BMR. Officer of various other investment
companies managed by Eaton Vance or BMR.
ALAN R. DYNNER (58), Secretary
Vice President and Chief Legal Officer of BMR, Eaton Vance and EVC since
November 1, 1996. Previously, Mr. Dynner was a Partner of the law firm of
Kirkpartrick & Lockhart LLP, New York and Washington, D.C., and was
Executive Vice President of Neuberger & Berman Management, Inc., a mutual
fund management company. Officer of various investment companies managed by
Eaton Vance or BMR.
JANET E. SANDERS (63), Assistant Treasurer and Assistant Secretary
Vice President of Eaton Vance and BMR. Officer of various investment companies
managed by Eaton Vance or BMR.
A. JOHN MURPHY (36), Assistant Secretary
Vice President of Eaton Vance and BMR. Officer of various investment companies
managed by Eaton Vance or BMR.
ERIC G. WOODBURY (41), Assistant Secretary
Vice President of Eaton Vance and BMR. Officer of various investment companies
managed by Eaton Vance or BMR.
Messrs. Gluck, Knight and Hayes 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 Gluck 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 matters relative to trading and brokerage policies
and practices, accounting and auditing practices and procedures, accounting
records, internal accounting controls, and the functions performed by the
custodian, transfer agent and dividend disbursing agent of the Fund.
Trustees of the Eaton Vance fund complex (except Messrs. Gluck and Knight)
who are not affiliated with the investment adviser may elect to defer receipt
of all or a percentage of their annual fees in accordance with the terms of a
Trustees Deferred Compensation Plan (the "Trustees" Plan"). Under the
Trustees' Plan, an eligible Trustee may elect to have his deferred fees
invested by 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
Trustees' Plan will be determined based upon the performance of such
investments. Deferral of Trustees' fees in accordance with the Trustees' Plan
will have a negligible effect on the Fund's assets, liabilities, and net
income per share, and will not obligate the Fund to retain the services of any
Trustee or obligate the Fund to pay any particular level of compensation to
the Trustee. The Fund is not a participant in the Trustees' Plan. The Fund
does not have a retirement plan for its Trustees.
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, 1998, the noninterested Trustees of the Fund received 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 ..................... $1,984 $156,250(2)
Robert Gluck ......................... 2,500 7,500
Samuel L. Hayes, III ................. 2,241 166,250(3)
Kenneth C. Knight .................... 2,500 7,500
Norton H. Reamer ..................... 2,095 156,250
John L. Thorndike .................... 2,108 156,250(4)
- ------------
(1) As of February 1, 1999, the Eaton Vance fund complex consists of 152
registered investment companies or series thereof. Messrs. Gluck and
Knight serve only on the Board of Trustees of the Fund.
(2) Includes $56,250 of deferred compensation.
(3) Includes $41,563 of deferred compensation.
(4) Includes $155,790 of deferred compensation.
ORGANIZATION. The Fund is a Massachusetts business trust, which is organized
under Massachusetts law and is operated as an open-ended management investment
company. Eaton Vance, pursuant to its agreement with the Fund, 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 (such as reclassifying series or classes of shares or
restructuring the Fund) 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.
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.
Under Massachusetts law, if certain conditions prevail, shareholders of a
Massachusetts business trust (such as the Trust) could be deemed to have
personal liability for the obligations of the Trust. Numerous investment
companies registered under the 1940 Act have been formed as Massachusetts
business trusts, and management is not aware of an instance where such
liability has been imposed. The Fund's Declaration of Trust contains an
express disclaimer of liability on the part of the Fund shareholders and the
Trust's By-laws provide that the Trust shall assume the defense on behalf of
any Fund shareholders. The Declaration of Trust also contains provisions
limiting the liability of a series or class to that series or class. Moreover,
the Trust's By-laws also provide for indemnification out of the property of
the Fund of any shareholder held personally liable solely by reason of being
or having been a shareholder for all loss or expense arising from such
liability. The assets of the Fund are readily marketable and will ordinarily
substantially exceed its liabilities. In light of the nature of the Fund's
business and the nature of its assets, management believes that the
possibility of the Fund's liability exceeding its assets, and therefore the
shareholder's risk of personal liability, is remote.
INVESTMENT ADVISORY SERVICES
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 and its affiliates
maintain a large staff of experienced fixed-income and equity investment
professionals to service the needs of their 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 years ended September 30, 1998,
1997 and 1996, the Fund paid Eaton Vance advisory fees of $1,421,385,
$1,076,121 and $762,899, respectively.
The Investment Advisory Agreement with Eaton Vance continues in effect
from year to year so long as such continuance 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. 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.
INFORMATION ABOUT EATON VANCE. Eaton Vance and EV are both wholly-owned
subsidiaries of EVC. Eaton Vance is a Massachusetts business trust, and EV is
the trustee of Eaton Vance. The Directors of EV are James B. Hawkes and
Benjamin A. Rowland, Jr. The Directors of EVC consist of the same persons and
John G. L. Cabot, John M. Nelson, Vincent M. O'Reilly and Ralph Z. Sorenson.
Mr. Hawkes is chairman, president and chief executive officer of EVC, Eaton
Vance and EV. All of the issued and outstanding shares of Eaton Vance and of
EV are owned by EVC. All shares of the outstanding Voting Common Stock of EVC
are deposited in a Voting Trust, the Voting Trustees of which are Messrs.
Hawkes and Rowland and Alan R. Dynner, Thomas E. Faust, Jr., Thomas J. Fetter,
Duncan W. Richardson, William M. Steul and Wharton P. Whitaker. 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 or officers and Directors of EVC and EV. As indicated under
"Management and Organization", all of the officers of the Fund (as well as Mr.
Hawkes who is also a Trustee) hold positions in the Eaton Vance organization.
Eaton Vance, its affiliates and its predecessor companies have been
managing assets of individuals and institutions since 1924 and managing
investment companies since 1931. They maintain a large staff of experienced
fixed-income and equity investment professionals to service the needs of their
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.
Eaton Vance and its affiliates act as adviser to a family of mutual funds,
and individual and various institutional accounts, including corporations,
hospitals, retirement plans, universities, foundations and trusts. Eaton Vance
mutual funds feature international equities, domestic equities, tax-free
municipal bonds, and U.S. government and corporate bonds. Lloyd George
Management has advised Eaton Vance's international equity funds since 1992.
Founded in 1991, Lloyd George is headquartered in Hong Kong with offices in
London and Mumbai, India. It has established itself as a leader in investment
management in Asian equities and other global markets. Lloyd George features
an experienced team of investment professionals that began working together in
the mid-1980s. Lloyd George analysts cover East Asia, the India subcontinent,
Russia and Eastern Europe, Latin America, Australia and New Zealand from
offices in Hong Kong, London and Mumbai. Eaton Vance mutual funds are
distributed by the principal underwriter both within the United States and
offshore.
EXPENSES. The Fund is responsible for all expenses not expressly stated to be
payable by another party (such as the investment adviser under the Investment
Advisory Agreement, Eaton Vance under the Administrative Services Agreement or
the principal underwriter under the Distribution Agreement).
OTHER SERVICE PROVIDERS
PRINCIPAL UNDERWRITER. Eaton Vance Distributors, Inc. ("EVD"), 24 Federal
Street, Boston, MA 02110, is the Fund's principal underwriter. The principal
underwriter acts as principal in selling shares of the Fund under a
Distribution Agreement with the Fund. The expenses of printing copies of
prospectuses used to offer shares and other selling literature and of
advertising are borne by the principal underwriter. The fees and expenses of
qualifying and registering and maintaining qualifications and registrations of
the Fund and its shares under federal and state securities laws are borne by
the Fund. The distribution agreement is renewable annually by the Fund's Board
of Trustees (including a majority of the noninterested Trustees), 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 investment
dealers discounts from the applicable public offering price which are alike
for all investment dealers. The principal underwriter may allow, upon notice
to all investment dealers with whom it has agreements, discounts up to the
full sales charge during the periods specified in the notice. See "Purchasing
Shares" in the Fund's current prospectus for the discount allowed to
investment dealers on the sale of Fund shares. During periods when the
discount includes the full sales charge, such investment dealers may be deemed
to be underwriters as that term is defined in the Securities Act of 1933. The
total sales charges paid in connection with the sale of shares of the Fund
during the fiscal year ended September 30, 1998, was $2,149,508 of which
$2,031,897 was received by investment dealers and the balance of which was
retained by the principal underwriter. The total sales charges paid in
connection with the sale of shares of the Fund during the fiscal years ended
September 30, 1997 and 1996 were $1,781,179 and $1,154,976, respectively, all
of which were received by investment dealers.
CUSTODIAN. Investors Bank & Trust Company ("IBT"), 200 Clarendon Street,
Boston, MA 02116, serves as custodian to the Fund. IBT has the custody of all
cash and securities of the Fund, maintains the general ledger of the Fund and
computes the daily net asset value of the Fund. 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 also provides services in connection with the preparation
of shareholder reports and the electronic filing of such reports with the SEC.
EVC and its affiliates and their officers and employees from time to time have
transactions with various banks, including IBT. It is Eaton Vance's opinion
that the terms and conditions of such transactions were not and will not be
influenced by existing or potential custodial or other relationships between
the Fund and such banks.
INDEPENDENT ACCOUNTANTS. PricewaterhouseCoopers LLP, One Post Office Square,
Boston, Massachusetts 02110, are the independent accountants of the Fund,
providing audit services, tax return preparation, and assistance and
consultation with respect to the preparation of filings with the SEC.
TRANSFER AGENT. First Data Investor Services Group, P.O. Box 5123,
Westborough, MA 01581-5123, serves as transfer and dividend disbursing agent
for the Fund.
PURCHASING AND REDEEMING SHARES
CALCULATION OF NET ASSET VALUE. The net asset value of the Fund is computed by
IBT (as agent and custodian for the Fund) by subtracting the liabilities of
the Fund from the value of its total assets. The Fund will be closed for
business and will not price its shares on the following business holidays: New
Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
The Trustees of the Fund have established the following procedures for the
fair valuation of the Fund's assets under normal market conditions. Securities
listed on foreign or U.S. securities exchanges or in the NASDAQ National
Market System generally are valued at closing sale prices or, if there were no
sales, at the mean between the closing bid and asked prices therefor on the
exchange where such securities are principally traded or on such National
Market System. Unlisted or listed securities for which closing sale prices are
not available are valued at the mean between the latest bid and asked prices.
An option is valued at the last sale price as quoted on the principal exchange
or board of trade on which such option or contract is traded, or in the
absence of a sale, at the mean between the last bid and asked prices. Futures
positions on securities or currencies are generally valued at closing
settlement prices. Short-term debt securities with a remaining maturity of 60
days or less are valued at amortized cost. If securities were acquired with a
remaining maturity of more than 60 days, their amortized cost value will be
based on their value on the sixty-first day prior to maturity. Other fixed
income and debt securities, including listed securities and securities for
which price quotations are available, will normally be valued on the basis of
valuations furnished by a pricing service. All other securities are valued at
fair value as determined in good faith by or at the direction of the Trustees.
Generally, trading in the foreign securities owned by the Fund is
substantially completed each day at various times prior to the close of the
Exchange. The values of these securities used in determining the net asset
value of the Fund's shares generally are computed as of such times.
Occasionally, events affecting the value of foreign securities may occur
between such times and the close of the Exchange which will not be reflected
in the computation of the Fund's net asset value (unless the Fund deems that
such events would materially affect its net asset value, in which case an
adjustment would be made and reflected in such computation). Foreign
securities and currency held by the Fund will be valued in U.S. dollars; such
values will be computed by the custodian based on foreign currency exchange
rate quotations supplied by Reuters Information Service.
ADDITIONAL INFORMATION ABOUT PURCHASES. Fund shares are continuously offered
through investment dealers which have entered agreements with the principal
underwriter. The public offering price is the net asset value next computed
after receipt of the order, plus, a variable percentage (sales charge)
depending upon the amount of purchase as indicated by the sales charge table
set forth in the prospectus. The sales charge is divided between the principal
underwriter and the investment dealer. The sales charge table is applicable
to purchases of the Fund alone or in combination with purchases of certain
other funds offered by the principal underwriter, made at a single time by (i)
an individual, or an individual, his spouse and their children under the age
of twenty-one, purchasing shares for his or their own account, and (ii) a
trustee or other fiduciary purchasing shares for a single trust estate or a
single fiduciary account. The table is also presently applicable to (1)
purchases of Fund shares pursuant to a written Statement of Intention; or (2)
purchases of Fund shares pursuant to the Right of Accumulation and declared as
such at the time of purchase. See "Sales Charges".
ACQUIRING FUND SHARES IN EXCHANGE FOR SECURITIES. IBT, as escrow agent, will
receive securities acceptable to Eaton Vance, as administrator, in exchange
for Fund shares. The minimum value of securities (or securities and cash)
accepted for deposit is $5,000. Securities accepted will be sold on the day of
their receipt or as soon thereafter as possible. The number of Fund shares to
be issued in exchange for securities will be the aggregate proceeds from the
sale of such securities, divided by the applicable public offering price 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 investment
dealer, together with a completed and signed Letter of Transmittal in approved
form (available from investment dealers). Investors who are contemplating an
exchange of securities for shares, or their representatives, must contact
Eaton Vance to determine whether the securities are acceptable before
forwarding such securities. Eaton Vance reserves the right to reject any
securities. Exchanging securities for shares may create a taxable gain or
loss. Each investor should consult his or her tax adviser with respect to the
particular federal, state and local tax consequences of exchanging securities.
SUSPENSION OF SALES. The Fund may, in its absolute discretion, suspend
discontinue or limit the offering of shares at any time. In determining
whether any such action should be taken, the Fund's management intends to
consider all relevant factors, including (without limitation) the size of the
Fund, the investment climate and market conditions, and the volume of sales
and redemptions of shares. Suspension of the offering of shares would not, of
course, affect a shareholder's ability to redeem shares.
ADDITIONAL INFORMATION ABOUT REDEMPTIONS. The right to redeem shares of the
Fund can be suspended and the payment of the redemption price deferred when
the Exchange is closed (other than for customary weekend and holiday
closings), during periods when trading on the Exchange is restricted as
determined by the SEC, or during any emergency as determined by the SEC which
makes it impracticable for the Fund to dispose of its securities or value its
assets, or during any other period permitted by order of the SEC for the
protection of investors.
SYSTEMATIC WITHDRAWAL PLAN. The transfer agent will send to the shareholder
regular monthly or quarterly payments of any permitted amount designated by
the shareholder based upon the value of the shares held. The checks will be
drawn from share redemptions and hence may require the recognition of taxable
gain or loss. Income dividends and capital gains distributions in connection
with withdrawal plan accounts will be credited at net asset value as of the
record date for each distribution. Continued withdrawals in excess of current
income will eventually use up principal, particularly in a period of declining
market prices. A shareholder may not have a withdrawal plan in effect at the
same time he or she has authorized Bank Automated Investing or is otherwise
making regular purchases of Fund shares. The shareholder, the transfer agent
or the principal underwriter will be able to terminate the withdrawal plan at
any time without penalty.
SALES CHARGES
DEALER COMMISSIONS. The principal underwriter may, from time to time, at
its own expense, provide additional incentives to investment dealers which
employ registered representatives who sell Fund shares and/or shares of other
funds distributed by the principal underwriter. In some instances, such
additional incentives may be offered only to certain investment dealers whose
representatives sell or are expected to sell significant amounts of shares. In
addition, the principal underwriter may from time to time increase or decrease
the sales commissions payable to investment dealers. The principal underwriter
may allow, upon notice to all investment dealers with whom it has agreements,
discounts up to the full sales charge during the periods specified in the
notice. During periods when the discount includes the full sales charge, such
investment dealers may be deemed to be underwriters as that term is defined in
the Securities Act of 1933.
SALES CHARGE WAIVERS. Fund shares may be sold at net asset value to current
and retired Directors and Trustees of Eaton Vance funds; to clients and
current and retired officers and employees of Eaton Vance, its affiliates and
other investment advisers of Eaton Vance sponsored funds; to registered
representatives and employees of investment dealers and bank employees who
refer customers to registered representatives of invetment dealers; to
officers and employees of IBT and the transfer agent; and to such persons'
spouses, parents, siblings and children and their beneficial accounts. Fund
shares may also be issued at net asset value (1) in connection with the merger
of an investment company or series thereof 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, and (3) to investment
advisors, financial planners or other intermediaries who place trades for
their own accounts or the accounts of their clients and who charge a
management, consulting or other fee for their services; clients of such
investment advisors, financial planners or other intermediaries who place
trades for their own accounts if the accounts are linked to the master account
of such investment advisor, financial planner or other intermediary on the
books and records of the broker or agent; and retirement and deferred
compensation plans and trusts used to fund those plans, including, but not
limited to, those defined in Section 401(a), 403(b) or 457 of the Internal
Revenue Code of 1986, as amended (the "Code") and "rabbi trusts". Subject to
the applicable provisions of the 1940 Act, the Trust may issue Fund 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. Fund shares may be sold at net asset value to any
investment advisory, agency, custodial or trust account managed or
administered by Eaton Vance or by any parent, subsidiary or other affiliate of
Eaton Vance. Fund shares are offered at net asset value to the foregoing
persons and in the foregoing situations because either (i) there is no sales
effort involved in the sale of shares or (ii) the investor is paying a fee
(other than the sales charge) to the investment dealer involved in the sale.
STATEMENT OF INTENTION. If it is anticipated that $25,000 or more of Fund
shares and shares of other funds exchangeable for Class A shares of another
Eaton Vance 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. Any investor considering signing a Statement of Intention should
read it carefully.
RIGHT OF ACCUMULATION. 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 Fund shares the shareholder owns in his or her account(s) in the Fund,
and shares of other funds exchangeable for Fund shares. The sales charge on
the shares being purchased will then be at the rate applicable to the
aggregate. Shares purchased (i) by an individual, his or her spouse and their
children under the age of twenty-one, and (ii) by a trustee, guardian or other
fiduciary of a single trust estate or a single fiduciary account, will be
combined for the purpose of determining whether a purchase will qualify for
the Right of Accumulation and if qualifying, the applicable sales charge
level. For any such discount to be made available, at the time of purchase a
purchaser or his or her investment dealer must provide the principal
underwriter (in the case of a purchase made through an investment dealer) or
the transfer agent (in the case of an investment made by mail) with sufficient
information to permit verification that the purchase order qualifies for the
accumulation privilege. Confirmation of the order is subject to such
verification. The Right of Accumulation privilege may be amended or terminated
at any time as to purchases occurring thereafter.
TAX-SHELTERED RETIREMENT PLANS: Fund shares are available for purchase in
connection with certain tax-sheltered retirement plans. Detailed information
concerning these plans, including certain exceptions to minimum investment
requirements, and copies of the plans are available from the principal
underwriter. This information should be read carefully and consultation with
an attorney or tax adviser may be advisable. The information sets forth the
service fee charged for retirement plans and describes the federal income tax
consequences of establishing a plan. Participant accounting services
(including trust fund reconciliation services) will be offered only through
third party recordkeepers and not by the principal underwriter. Under all
plans, dividends and distributions will be automatically reinvested in
additional shares.
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
NASD. (Management believes service fee payments are not distribution expenses
governed by Rule 12b-1 under the 1940 Act, but has chosen to have the Plan
approved as if that Rule were applicable.) The following supplements the
discussion of the Plan contained in the Prospectus.
The Plan remains in effect from year to year, provided such continuance is
approved by a vote of both a majority of (i) noninterested Trustees who have
no direct or indirect financial interest in the operation of the Plan or any
agreements related to it (the "Plan 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 Plan Trustees or by a vote of a majority of the outstanding shares of the
Fund. The Plan was approved by the Trustees, including the Plan Trustees, on
May 22, 1989.
The Plan requires quarterly Trustee review of a written report of the
amount expended under the Plan and the purposes for which such expenditures
were made. The Plan may not be amended to increase materially the payments
described herein without approval of the shareholders of the Fund and the
Trustees. So long as the Plan is in effect, the selection and nomination of
noninterested Trustees shall be committed to the discretion of such Trustees.
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, 1998, the Fund made service fee
payments under the Plan aggregating $282,318, of which $241,541 was paid to
investment dealers and the balance of which was retained by the Principal
Underwriter.
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 full range and quality of the executing firm's
services, the value of the brokerage and research services provided, the
responsiveness of the firm to Eaton Vance, 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 this and 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 often
involve the payment of brokerage commissions, which may be higher than those
in the United States. There is generally no stated commission in the case of
securities traded in the over-the-counter markets, but the price paid or
received by 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, analytical, statistical and quotation services, data, information
and other services, products and materials which assist such advisers in the
performance of their investment responsibilities ("Research Services") from
broker-dealer firms which execute portfolio transactions for the clients of
such advisers and from third parties with which such broker-dealers have
arrangements. Consistent with this practice, 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, political, business and market information, industry and
company reviews, evaluations of securities and portfolio strategies and
transactions, proxy voting data and analysis services, technical analysis of
various aspects of the securities markets, recommendations as to the purchase
and sale of securities and other portfolio transactions, financial, industry
and trade publications, news and information services, pricing and quotation
equipment and services, and research oriented computer hardware, software,
data bases and services. Any particular Research Service obtained through a
broker-dealer may be used by 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 portfolio
security transactions 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.
The Fund and Eaton Vance may also receive Research Services from
underwriters and dealers in fixed-price offerings, which Research Services are
reviewed by Eaton Vance in connection with its investment responsibilities.
The investment companies sponsored by Eaton Vance may allocate trades in such
offerings to acquire information relating to the performance, fees and
expenses of such companies and other mutual funds, which information is used
by the Trustees of such companies to fulfill their responsibility to oversee
the quality of the services provided by various entities, including Eaton
Vance, to such companies. Such companies may also pay cash for such
information.
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. ("NASD"), which rule provides that no
firm which is a member of the NASD shall favor or disfavor the distribution of
shares of any particular investment company or group of investment companies
on the basis of brokerage commissions received or expected by such firm from
any source.
Securities considered as investments for the 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. However, there may be
instances when the Fund will not participate in a securities transaction that
is allocated among other 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.
For the fiscal year ended September 30, 1998, the Fund paid brokerage
commissions of $1,513 on portfolio security transactions. For the fiscal years
ended September 30, 1997 and 1996, the Fund paid no brokerage commissions.
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, distributions paid and
reinvested) for the stated period and annualizing the result. The calculation
assumes (i) the maximum sales charge is deducted from the initial $1,000
purchase order and (ii) that all dividends and distributions are reinvested at
net asset value on the reinvestment dates during the period. 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, 1998.
<TABLE>
VALUE OF A $1,000 INVESTMENT
<CAPTION>
TOTAL RETURN TOTAL RETURN
VALUE OF EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
INVESTMENT INVESTMENT AMOUNT OF INVESTMENT -------------------------- --------------------------
PERIOD DATE INVESTMENT* ON 9/30/98 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
------ ---- ----------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
10 Years Ended
9/30/98 9/30/88 $952.33 $2,553.93 168.17% 10.37% 155.39% 9.83%
5 Years Ended
9/30/98 9/30/93 $952.38 $1,488.46 56.29% 9.34% 48.85% 8.28%
1 Year Ended
9/30/98 9/30/97 $952.90 $ 962.21 0.98% 0.98% -3.78% -3.78%
- ------------
*Initial investment less the current maximum sales charge of 4.75%.
</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.
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 4.75% of the public offering price. Actual
yield may be affected by variations in sales charges on investments.
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. Information, charts and illustrations
relating to inflation and the effects of inflation on the dollar may be
included in advertisements and other material furnished to present and
prospective shareholders.
Information, charts and illustrations showing comparative historical
information of high-yielding bonds as represented by a relevant bond Index as
compared to 10-year U.S. Treasury bonds may be used in advertisements and
other material furnished to present or prospective shareholders. Rates are
given for illustrative purposes only and are not meant to imply or predict
actual results of an investment in the Fund.
Information used in advertisements and materials furnished to present and
prospective investors may include statements or illustrations relating to the
appropriateness of certain types of securities and/or mutual funds to meet
specific financial goals. Such information may address:
- cost associated with aging parents;
- funding a college education (including its actual and estimated cost);
- health care expenses (including actual and projected expenses);
- long-term disabilities (including the availability of, and coverage
provided by, disability insurance; and
- retirement (including the availability of social security benefits, the
tax treatment of such benefits and statistics and other information
relating to maintaining a particular standard of living and outliving
existing assets).
Such information may also address different methods for saving money and
the results of such methods, as well as the benefits of investing in bond
funds.
Information in advertisements and materials furnished to present and
prospective investors may include profiles of different types of investors
(i.e., investors with different goals and assets) and different investment
strategies for meeting specific goals. Such information may provide
hypothetical illustrations which include: results of various investment
strategies; performance of an investment in the Fund over various time
periods; and results of diversifying assets among several investments with
varying performance. Information in advertisements and materials furnished to
present and prospective investors may also include quotations (including
editorial comments) and statistics concerning investing in securities, as well
as investing in particular types of securities and the performance of such
securities.
The Fund (or Principal Underwriter) may provide information about Eaton
Vance, its affiliates and other investment advisers to the funds in the Eaton
Vance Family of Funds in sales material or advertisements provided to
investors or prospective investors. Such material or advertisements may also
provide information on the use of investment professionals by such investors.
CERTAIN HOLDERS OF FUND SHARES
As of December 31, 1998, 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 32246, was the record owner of approximately 9.2% 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.
TAXES
The Fund has elected to be treated, has qualified, and intends to continue
to qualify each year, as a regulated investment company ("RIC") under the
Code. Accordingly, the Fund intends to satisfy certain requirements relating
to sources of its income and diversification of its assets and to distribute
all of its ordinary income and net income in accordance with the timing
requirements imposed by the Code, so as to maintain its RIC status and to
avoid paying any federal income or excise tax. The Fund so qualified for its
fiscal year ended September 30, 1998.
In order to avoid incurring a federal excise tax obligation, the Code
requires that the Fund distribute (or be deemed to have distributed) by
December 31 of each calendar year at least 98% of its ordinary income (not
including tax-exempt income) for such year, at least 98% of the capital gain
net income (which is the excess of its realized capital gains over its
realized capital losses) generally computed on the basis of the one-year
period ending on October 31 of such year, after reduction by (i) any available
capital loss carryforwards, and (ii) 100% of any income from the prior year
(as previously computed) that was not paid out during such year and on which
the Fund paid no federal income tax. Under current law, provided 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
("TIN") and certain certifications required by the Internal Revenue Service
(the "IRS"), as well as shareholders with respect to whom the Fund has
received certain information from the IRS or a broker, may be subject to
"backup" withholding of federal income tax arising from the Fund's dividends
and other distributions as well as the proceeds of redemption transactions
(including repurchases and exchanges), at a rate of 31%. An individual's TIN
is generally his or her social security number.
The foregoing discussion does not address the special tax rules applicable
to certain classes of investors, such as 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 and, where
applicable, or foreign tax consequences of investing in the Fund.
FINANCIAL STATEMENTS
The audited financial statements and report of independent accountants for
the Fund, appear in the Fund's most recent annual report to shareholders and
are incorporated by reference into this SAI. A copy of the Fund's most recent
annual report accompanies this SAI. Consistent with applicable law, duplicate
mailings of shareholder reports and certain other Fund information to
shareholders residing at the same address may be eliminated.
The Fund incorporates by reference its audited financial information for
the fiscal year ended September 30, 1998, as previously filed electronically
with the Commission (Accession No. 0000950109-98-005363).
<PAGE>
PART C - OTHER INFORMATION
ITEM 23. EXHIBITS
(a)(1) Amended and Restated Declaration of Trust dated December 14,
1995, filed as Exhibit (1) to Post-Effective Amendment No. 42 and
incorporated herein by reference.
(b)(1) By-Laws filed as Exhibit (2)(a) to Post-Effective Amendment No.
41 and incorporated herein by reference.
(2) Amendment to By-Laws dated December 13, 1993 filed as Exhibit
(2)(b) to Post-Effective Amendment No. 41 and incorporated herein
by reference.
(c) Reference is made to Item 23(a) and 23(b) above.
(d) Investment Advisory Agreement dated November 1, 1990 filed as
Exhibit (5) to Post-Effective Amendment No. 41 and incorporated
herein by reference.
(e)(1) Distribution Agreement between Eaton Vance Income Fund of Boston
and Eaton Vance Distributors, Inc. dated November 1, 1996 filed
as Exhibit (6)(a) to Post-Effective Amendment No. 42 and
incorporated herein by reference.
(2) Selling Group Agreement between Eaton Vance Distributors, Inc.
and Authorized Dealers filed as Exhibit (6)(b) to the
Post-Effective Amendment No. 61 to the Registration Statement of
Eaton Vance Growth Trust (File Nos. 2-22019, 811-1241) and
incorporated herein by reference.
(f) Not applicable
(g)(1) Custodian Agreement with Investors Bank & Trust Company dated
December 17, 1990 filed as Exhibit (8)(a) to Post-Effective
Amendment No. 41 and incorporated herein by reference.
(2) Amendment to Custodian Agreement with Investors Bank & Trust
Company dated November 20, 1995 filed as Exhibit (8)(b) to
Post-Effective Amendment No. 41 and incorporated herein by
reference.
(h) Transfer Agency Agreement dated January 1, 1998 filed as Exhibit
(k)(b) to the Registration Statement on Form N-2 of Eaton Vance
Advisers Senior Floating-Rate Fund (File Nos. 333-46853,
811-08671) (Accession No. 0000950156-98-000172) and incorporated
herein by reference.
(i) Opinion of Internal Counsel filed as Exhibit (i) to
Post-Effective Amendment No. 44 and incorporated herein by
reference.
(j) Consent of Independent Accountants filed herewith.
(k) Not applicable
(l) Not applicable
(m)(1) Service Plan pursuant to Rule 12b-1 under the Investment Company
Act of 1940 dated August 9, 1993 filed as Exhibit (15) to
Post-Effective Amendment No. 41 and incorporated herein by
C-1
<PAGE>
reference.
(2) Amendment to Service Plan dated November 1, 1996 filed as Exhibit
(15)(b) to Post-Effective Amendment No. 42 and incorporated
herein by reference.
(n) Financial Data Schedule for the fiscal year ended September 30,
1998 filed herewith.
(o) Not applicable
(p) Power of Attorney dated November 17, 1997 filed as Exhibit (17)
to Post-Effective Amendment No. 43 and incorporated herein by
reference.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL
Not applicable
ITEM 25. INDEMNIFICATION
Article IV of the Registrant's Amended and Restated Declaration of Trust
permits Trustee and officer indemnification by By-law, contract and vote.
Article XI of the By-Laws contains indemnification provisions. Registrant's
Trustees and officers are insured under a standard mutual fund errors and
omissions insurance policy covering loss incurred by reason of negligent errors
and omissions committed in their capacities as such.
The distribution agreement of the Registrant also provide for reciprocal
indemnity of the principal underwriter, on the one hand, and the Trustees and
officers, on the other.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Reference is made to: (i) the information set forth under the caption
"Management and Organization" in the Statement of Additional Information; (ii)
the Eaton Vance Corp. 10-K filed under the Securities Exchange Act of 1934 (File
No. 1-8100); and (iii) the Form ADV of Eaton Vance Management filed with the
Commission, all of which are incorporated herein by reference.
ITEM 27. PRINCIPAL UNDERWRITERS
(a) Registrant's principal underwriter, Eaton Vance Distributors, Inc., a
wholly-owned subsidiary of Eaton Vance Management, is the principal
underwriter for each of the investment companies named below:
<TABLE>
<CAPTION>
<S> <C>
Eaton Vance Advisers Senior Floating-Rate Fund Eaton Vance Municipals Trust II
Eaton Vance Growth Trust Eaton Vance Mutual Funds Trust
Eaton Vance Income Fund of Boston Eaton Vance Prime Rate Reserves
Eaton Vance Investment Trust Eaton Vance Special Investment Trust
Eaton Vance Municipals Trust EV Classic Senior Floating-Rate Fund
</TABLE>
(b)
<TABLE>
<CAPTION>
<S> <C> <C>
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address* with Principal Underwiter with Registrant
----------------- ------------------------- ---------------
Albert F. Barbaro Vice President None
Chris Berg Vice President None
Kate B. Bradshaw Vice President None
Mark Carlson Vice President None
C-2
<PAGE>
Daniel C. Cataldo Vice President None
Raymond Cox Vice President None
Peter Crowley Vice President None
Mark P. Doman Vice President None
Alan R. Dynner Vice President Secretary
Richard A. Finelli Vice President None
Kelly Flynn Vice President None
James Foley Vice President None
Michael A. Foster Vice President None
William M. Gillen Senior Vice President None
Hugh S. Gilmartin Vice President None
James B. Hawkes Vice President and Director President and Trustee
Perry D. Hooker Vice President None
Brian Jacobs Senior Vice President None
Thomas P. Luka Vice President None
John Macejka Vice President None
Stephen Marks Vice President None
Joseph T. McMenamin Vice President None
Morgan C. Mohrman Senior Vice President None
James A. Naughton Vice President None
Joseph Nelson Vice President None
Mark D. Nelson Vice President None
Linda D. Newkirk Vice President None
James L. O'Connor Vice President Treasurer
Andrew Ogren Vice President None
Thomas Otis Secretary and Clerk None
George D. Owen, II Vice President None
Enrique M. Pineda Vice President None
F. Anthony Robinson Vice President None
Frances Rogell Vice President None
Jay S. Rosoff Vice President None
Benjamin A. Rowland, Jr. Vice President, Treasurer and Director None
Stephen M. Rudman Vice President None
Kevin Schrader Vice President None
George V.F. Schwab, Jr. Vice President None
Teresa A. Sheehan Vice President None
William M. Steul Vice President and Director None
Cornelius J. Sullivan Senior Vice President None
Peter Sykes Vice President None
David M. Thill Vice President None
John M. Trotsky Vice President None
Jerry Vainisi Vice President None
Chris Volf Vice President None
Wharton P. Whitaker President and Director None
Sue Wilder Vice President None
</TABLE>
- ------------------------------------------
* Address is 24 Federal Street, Boston, MA 02110
(c) Not applicable
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS
All applicable accounts, books and documents required to be maintained by
the Registrant by Section 31(a) of the Investment Company Act of 1940 and the
Rules promulgated thereunder are in the possession and custody of the
Registrant's custodian, Investors Bank & Trust Company, 200 Clarendon Street,
16th Floor, Mail Code ADM27, Boston, MA 02116, and its transfer agent, First
Data Investor Services Group, 4400 Computer Drive, Westborough, MA 01581-5120,
with the exception of certain corporate documents and portfolio trading
documents which are in the possession and custody, Eaton Vance Management, 24
Federal Street, Boston, MA 02110. Registrant is informed that all applicable
accounts, books and documents required to be maintained by registered investment
advisers are in the custody and possession of Eaton Vance Management.
C-3
<PAGE>
ITEM 29. MANAGEMENT SERVICES
Not applicable
ITEM 30. UNDERTAKINGS
Not applicable
C-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Amendment to the Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly
caused this Amendment to its Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized in the City of Boston, and the
Commonwealth of Massachusetts, on January 22, 1999.
EATON VANCE INCOME FUND OF BOSTON
By: /s/ James B. Hawkes
-----------------------------------
James B. Hawkes, President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement has been signed below by
the following persons in their capacities on January 22, 1999.
SIGNATURE TITLE
--------- -----
/s/James B. Hawkes President (Chief Executive Officer)
- ------------------ and Trustee
James B. Hawkes
/s/ James L. O'Connor Treasurer (Principal Financial and
- --------------------- Accounting Officer)
James L. O'Connor
Donald R. Dwight*
- ----------------- Trustee
Donald R. Dwight
Robert Gluck*
- ------------- Trustee
Robert Gluck
Samuel L. Hayes, III*
- --------------------- Trustee
Samuel L. Hayes, III
Kenneth C. Knight*
- ------------------ Trustee
Kenneth C. Knight
Norton H. Reamer*
- ----------------- Trustee
Norton H. Reamer
John L. Thorndike*
- ------------------ Trustee
John L. Thorndike
*By: /s/ Alan R. Dynner
-----------------------------------
Alan R. Dynner (As attorney-in-fact)
C-5
<PAGE>
EXHIBIT INDEX
The following exhibits are filed as part of this amendment to the
Registration Statement pursuant to Rule 483 of Regulation C.
Exhibit No. Description
- ----------- -----------
(j) Consent of Independent Accountants.
(n)
Financial Data Schedule for the fiscal year ended September 30,
1998.
C-6
<PAGE>
EXHIBIT (J)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the use in this Post-Effective Amendment No. 45 to the
Registration Statement of Eaton Vance Income Fund of Boston (1933 Act File No.
02-42722) of our report dated November 6, 1998, which report is included in the
Annual Report to Shareholders for the year ended September 30, 1998, which is
incorporated by reference in the Statement of Additional Information, which is
part of such Registration Statement.
We also consent to the reference to our Firm under the heading "Financial
Highlights" in the Prospectus and under the caption "Other Service Providers" in
the Statement of Additional Information of the Registration Statement.
/s/ PricewaterhouseCoopers LLP
------------------------------
PRICEWATERHOUSECOOPERS LLP
January 22, 1999
Boston, Massachusetts
<TABLE> <S> <C>
<ARTICLE> 6
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 235765
<INVESTMENTS-AT-VALUE> 220877
<RECEIVABLES> 6332
<ASSETS-OTHER> 33
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 227242
<PAYABLE-FOR-SECURITIES> 686
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1596
<TOTAL-LIABILITIES> 2282
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 246974
<SHARES-COMMON-STOCK> 28031
<SHARES-COMMON-PRIOR> 23848
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 398
<ACCUMULATED-NET-GAINS> (6729)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (14887)
<NET-ASSETS> 224960
<DIVIDEND-INCOME> 1775
<INTEREST-INCOME> 21294
<OTHER-INCOME> 283
<EXPENSES-NET> 2368
<NET-INVESTMENT-INCOME> 20983
<REALIZED-GAINS-CURRENT> 7819
<APPREC-INCREASE-CURRENT> (28049)
<NET-CHANGE-FROM-OPS> 753
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 20370
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 11189
<NUMBER-OF-SHARES-REDEEMED> 8116
<SHARES-REINVESTED> 1110
<NET-CHANGE-IN-ASSETS> 17438
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (14548)
<OVERDISTRIB-NII-PRIOR> 1011
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1421
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2368
<AVERAGE-NET-ASSETS> 227496
<PER-SHARE-NAV-BEGIN> 8.70
<PER-SHARE-NII> 0.81
<PER-SHARE-GAIN-APPREC> (0.70)
<PER-SHARE-DIVIDEND> 0.78
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.03
<EXPENSE-RATIO> 1.04
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
