Eaton Vance Income Fund of Boston
Institutional Shares
Supplement to
Statement of Additional Information
dated
July 1, 1999
The following is added after "Foreign Investments" on page 4 of:
DERIVATIVE INSTRUMENTS. The Fund may purchase or sell derivative
instruments (which are instruments that derive their value from another
instrument, security, index or currency), to hedge against fluctuations in
securities prices, interest rates or currency exchange rates, to change the
duration of the Fund's fixed income portfolio or as a substitute for the
purchase or sale of securities or currencies. Options may be written to
enhance income. Transactions in derivative instruments may include the
purchase or sale of futures contracts on securities, securities indices,
other indices, other financial instruments or currencies; options on
futures contracts; exchange-traded options on securities, indices or
currencies; and forward foreign currency exchange contracts. Transactions
in derivative instruments involve a risk of loss or depreciation due to:
unanticipated adverse changes in securities prices, interest rates, the
other financial instruments' prices or currency exchange rates; the
inability to close out a position; default by the counterparty; imperfect
correlation between a position and the desired hedge; tax constraints on
closing out positions; and portfolio management constraints on securities
subject to such transactions. The loss on derivative instruments (other
than purchased options) may substantially exceed the initial investment
therein. In addition, the Fund may lose the entire premium paid for
purchased options that expire before they can be profitably exercised. The
Fund incurs transaction costs in opening and closing positions in
derivative instruments. There can be no assurance that the investment
adviser's use of derivative instruments will be advantageous.
The Fund's success in using derivative instruments to hedge portfolio
assets depends on the degree of price correlation between the derivative
instrument and the hedged asset. Imperfect correlation may be caused by
several factors, including temporary price disparities among the trading
markets for the derivative instruments, the assets underlying the
derivative instrument and the Fund's assets.
The following replaces the third paragraph under "Forward Foreign Currency
Exchange Transactions" on page 4 :
The Fund will not enter into forward contracts or maintain a net exposure
to such contracts where the consummation of the contracts would obligate
the Fund to deliver an amount of foreign currency in excess of the value of
the securities held by the Fund or other assets denominated in that
currency. Under normal circumstances, consideration of the prospect for
currency parities will be incorporated into the long-term investment
decisions made with regard to overall diversification strategies. However,
the Fund believes that it is important to have the flexibility to enter
into such forward contracts when it determines that the best interests of
the Fund will be served. The Fund generally will not enter into a forward
contract with a term of greater than one year.
The following replaces the next to the last paragraph under "Portfolio
Securities Transactions" on page 16:
Securities considered as investments for the Fund may also be appropriate
for other investment accounts managed by Eaton Vance or its affiliates.
Whenever decisions are made to buy or sell securities by the Fund and one
or more of such other accounts simultaneously, Eaton Vance will allocate
the security transactions (including "hot" issues) in a manner which it
believes to be equitable under the circumstances. As a result of such
allocations, there may be instances where the Fund will not participate in
a transaction that is allocated among other accounts. If an aggregated
order cannot be filled completely, allocations will generally be made on a
pro rata basis. An order may not be allocated on a pro rata basis where,
for example: (i) consideration is given to portfolio managers who have been
instrumental in developing or negotiating a particular investment; (ii)
consideration is given to an account with specialized investment policies
that coincide with the particulars of a specific investment; (iii) pro rata
allocation would result in odd-lot or de minimis amounts being allocated to
a Portfolio or other client; or (iv) where Eaton Vance reasonably
determines that departure from a pro rata allocation is advisable. While
these aggregation and allocation policies could have a detrimental effect
on the price or amount of the securities available to the Fund from time to
time, it is in the opinion of the Trustees that the benefits from the Eaton
Vance organization outweigh any disadvantage that may arise from exposure
to simultaneous transactions.
July 14, 1999
