Edgar Filing: EATON VANCE LIMITED DURATION INCOME FUND

As filed with the Securities and Exchange Commission on May 23, 2003
1933 Act File No. 333-103901
1940 Act File No. 811-21323

U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM N-2

REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
PRE-EFFECTIVE AMENDMENT NO. 2 X
POST-EFFECTIVE AMENDMENT NO.

AND/OR

REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 2 X
(CHECK APPROPRIATE BOX OR BOXES)

EATON VANCE LIMITED DURATION INCOME FUND
------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)

THE EATON VANCE BUILDING, 255 STATE STREET, BOSTON, MASSACHUSETTS 02109
-----------------------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (617) 482-8260
-----------------------------------------------------------------

ALAN R. DYNNER
THE EATON VANCE BUILDING, 255 STATE STREET, BOSTON, MASSACHUSETTS 02109
-----------------------------------------------------------------------
NAME AND ADDRESS (OF AGENT FOR SERVICE)

COPIES OF COMMUNICATIONS TO:

MARK P. GOSHKO, ESQ. THOMAS A. HALE, ESQ.
KIRKPATRICK & LOCKHART LLP SKADDEN, ARPS, SLATE
75 STATE STREET MEAGHER & FLOM (ILLINOIS)
BOSTON, MASSACHUSETTS 02109 CHICAGO, ILLINOIS 60606

APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: As soon as practicable after
the effective date of this Registration Statement.

If any of the securities being registered on this form are to be offered
on a delayed or continuous basis in reliance on Rule 415 under the Securities
Act of 1933, other than securities offered in connection with a dividend
reinvestment plan, check the following box. [ ]

It is proposed that this filing will become effective (check appropriate box):
[X] when declared effective pursuant to Section 8(c)

CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933

PROPOSED PROPOSED
AMOUNT BEING MAXIMUM MAXIMUM AMOUNT OF
REGISTERED OFFERING AGGREGATE REGISTRATION
TITLE OF SECURITIES BEING (1) PRICE PER OFFERING FEES (1)(2)(3)
REGISTERED UNIT PRICE (1)
(1)
---------------------------------------------------------------------------------------------

Common Shares of Beneficial 95,000,000 $20.00 $1,900,000,000 $153,710
Interest, $0.01 par value

(1) Estimated solely for purposes of calculating the registration fee,
pursuant to Rule 457(o) under the Securities Act of 1933.

(2) Includes Shares that may be offered to the Underwriters pursuant to an
option to cover over-allotments.

(3) A registration fee of $80.90 was previously paid in connection with the
initial filing.

------------------------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATES AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.

THE INFORMATION IN THIS PROSPECTUS IS INCOMPLETE AND MAY BE CHANGED. WE MAY NOT
SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL
THESE SECURITIES, AND WE ARE NOT SOLICITING OFFERS TO BUY THESE SECURITIES, IN
ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.

PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION MAY 23, 2003

--------------------------------------------------------------------------------

EATON VANCE LIMITED DURATION
INCOME FUND

COMMON SHARES
[EATON VANCE LOGO]

--------------------------------------------------------------------------------

INVESTMENT OBJECTIVES AND POLICIES. Eaton Vance Limited Duration Income Fund
(the "Fund") is a newly organized, diversified, closed-end management investment
company. The Fund's investment objective is to provide a high level of current
income. The Fund may, as a secondary objective, also seek capital appreciation
to the extent consistent with its primary goal of high current income.

Under normal market conditions, Eaton Vance Management, the Fund's investment
adviser, expects the Fund to maintain a duration of between two and four years
(including the effect of anticipated leverage). Initially, the Fund is expected
to have a duration of approximately three years (including the effect of
anticipated leverage). Under normal market conditions, the Fund expects to
maintain a weighted average portfolio credit quality of investment grade (which
is at least BBB- as determined by Standard & Poor's Ratings Group ("S&P") or
Fitch Ratings ("Fitch"), Baa3 as determined by Moody's Investors Service, Inc.
("Moody's") or, if unrated, determined to be of comparable quality by Eaton
Vance Management).

INVESTMENT ADVISER. The Fund's investment adviser is Eaton Vance Management
("Eaton Vance" or the "Adviser"). As of March 31, 2003, Eaton Vance and its
subsidiaries managed approximately $55 billion on behalf of funds, institutional
clients and individuals.

PORTFOLIO CONTENTS. The Fund pursues its objectives by investing its assets
primarily in three distinct investment categories: 1) mortgage-backed securities
that are issued, backed or otherwise guaranteed by the U.S. Government or its
agencies or instrumentalities or that are issued by private issuers ("MBS"); 2)
senior, secured floating rate loans made to corporate and other business
entities ("Senior Loans"); and 3) corporate bonds that are of below "investment
grade" quality ("Non-Investment Grade Bonds"). Non-Investment Grade Bonds,
commonly referred to as "junk bonds," are bonds that are rated below investment
grade by each of the national rating agencies who cover the security, or, if
unrated, are determined to be of comparable quality by the Adviser. S&P and
Fitch consider securities rated below BBB- to be below investment grade and
Moody's considers securities rated below Baa3 to be below investment grade.
Senior Loans in which the Fund invests are also typically of below investment
grade quality. There is no limitation on the percentage of the Fund's assets
that may be allocated to each of these investment categories; provided that,
under normal market conditions, the Fund will invest at least 25% of its total
assets in each category. (continued on inside cover page)

INVESTING IN SHARES INVOLVES CERTAIN RISKS, INCLUDING THAT THE FUND MAY INVEST
SUBSTANTIAL PORTIONS OF ITS ASSETS IN BELOW INVESTMENT GRADE QUALITY SECURITIES
WITH SPECULATIVE CHARACTERISTICS. SEE "INVESTMENT OBJECTIVES, POLICIES AND
RISKS" BEGINNING AT PAGE 11.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

PRICE TO PUBLIC SALES LOAD PROCEEDS TO FUND
-------------------------------------------------------------------------------------------------------------

Per share $20.00 $0.90 $19.10
-------------------------------------------------------------------------------------------------------------
Total $ $ $
-------------------------------------------------------------------------------------------------------------

In addition to the sales load, the Fund will pay offering expenses of up to
$0.04 per share, estimated to total $ , which will reduce the "Proceeds
to Fund" (above). Eaton Vance or an affiliate has agreed to pay the amount by
which the aggregate of all of the Fund's offering costs (other than the sales
load) exceeds $0.04 per share. Eaton Vance or an affiliate has agreed to
reimburse all Fund organizational costs.

The underwriters are offering the shares subject to various conditions and
expect to deliver the shares to purchasers on or about , 2003.

UBS WARBURG CITIGROUP MERRILL LYNCH & CO.
A.G. EDWARDS & SONS, INC. RBC CAPITAL MARKETS WELLS FARGO SECURITIES, LLC
H&R BLOCK FINANCIAL ADVISORS, INC. FAHNESTOCK & CO. INC. J.J.B. HILLIARD, W.L. LYONS, INC.
JANNEY MONTGOMERY SCOTT LLC MCDONALD INVESTMENTS INC. QUICK & REILLY, INC.

--------------------------------------------------------------------------------

(continued from previous page)

EXCHANGE LISTING. The Fund has applied for the listing of its common shares on
the American Stock Exchange under the symbol "EVV."

Because the Fund is newly organized, its common shares have no history of public
trading. The shares of closed-end management investment companies frequently
trade at a discount from their net asset value. This risk may be greater for
investors expecting to sell their shares in a relatively short period after
completion of the public offering.

The Fund's net asset value and distribution rate will vary and may be affected
by several factors, including changes in the credit quality of issuers and
interest rates and other market factors. Fluctuations in net asset value may be
magnified as a result of the Fund's use of leverage, which is a speculative
investment technique. An investment in the Fund may not be appropriate for all
investors. There is no assurance that the Fund will achieve its investment
objectives.

The Fund expects to use financial leverage through the issuance of preferred
shares and/or through borrowings, initially equal to approximately 34% of its
gross assets (including the amount obtained through leverage). The Adviser
anticipates that the use of leverage will result in higher income to common
shareholders over time. Use of financial leverage creates an opportunity for
increased income but, at the same time, creates special risks. There can be no
assurance that a leveraging strategy will be utilized or will be successful. SEE
"INVESTMENT OBJECTIVES, POLICIES AND RISKS--USE OF LEVERAGE AND RELATED RISKS"
AT PAGE 21 AND "DESCRIPTION OF CAPITAL STRUCTURE" AT PAGE 30.

This Prospectus sets forth concisely information you should know before
investing in the shares of the Fund. Please read and retain this Prospectus for
future reference. A Statement of Additional Information dated , 2003,
has been filed with the Securities and Exchange Commission ("SEC") and can be
obtained without charge by calling 1-800-225-6265 or by writing to the Fund. A
table of contents to the Statement of Additional Information is located at page
38 of this Prospectus. This Prospectus incorporates by reference the entire
Statement of Additional Information. The Statement of Additional Information is
available along with other Fund-related materials: at the SEC's public reference
room in Washington, DC (call 1-202-942-8090 for information on the operation of
the reference room); the EDGAR database on the SEC's internet site
(http://www.sec.gov); upon payment of copying fees by writing to the SEC's
public reference section, Washington, DC 20549-0102; or by electronic mail at
publicinfo@sec.gov. The Fund's address is The Eaton Vance Building, 255 State
Street, Boston, Massachusetts 02109 and its telephone number is 1-800-225-6265.

The Fund's shares do not represent a deposit or obligation of, and are not
guaranteed or endorsed by, any bank or other insured depository institution, and
are not federally insured by the Federal Deposit Insurance Corporation, the
Federal Reserve Board or any other government agency.

The underwriters named in the Prospectus may purchase up to additional
shares from the Fund under certain circumstances.

You should rely only on the information contained or incorporated by reference
in this Prospectus. The Fund has not authorized anyone to provide you with
different information. The Fund is not making an offer of these securities in
any state where the offer is not permitted. You should not assume that the
information contained in this Prospectus is accurate as of any date other than
the date on the front of this Prospectus.

Until , 2003 (25 days after the date of this Prospectus), all dealers
that buy, sell or trade the shares, whether or not participating in this
offering, may be required to deliver a prospectus. This is in addition to the
dealers' obligation to deliver a prospectus when acting as underwriters and with
respect to their unsold allotments or subscriptions.

--------------------------------------------------------------------------------

TABLE OF CONTENTS
--------------------------------------------------------------------------------

Prospectus summary.................... 1
Summary of Fund expenses.............. 9
The Fund.............................. 11
Use of proceeds....................... 11
Investment objectives, policies and
risks............................... 11
Management of the Fund................ 26
Distributions......................... 27
Dividend reinvestment plan............ 29
Description of capital structure...... 31
Underwriting.......................... 35
Shareholder Servicing Agent, custodian
and transfer agent.................. 37
Legal opinions........................ 37
Reports to stockholders............... 38
Independent auditors.................. 38
Additional information................ 38
Table of contents for the Statement of
Additional Information.............. 39

--------------------------------------------------------------------------------

(This page intentionally left blank)

Prospectus summary

This is only a summary. You should review the more detailed information
contained in this Prospectus and in the Statement of Additional Information.

THE FUND

Eaton Vance Limited Duration Income Fund (the "Fund") is a newly organized,
diversified, closed-end management investment company. The Fund offers investors
the opportunity to receive a high level of current income, through a
professionally managed portfolio investing in a blend of three principal asset
classes: mortgage-backed securities, senior, secured floating rate loans, and
below investment grade corporate bonds. To the extent consistent with this
objective, the Fund may also offer an opportunity for capital appreciation.
Under normal market conditions, the Fund expects to limit the duration of its
portfolio to between two and four years (including the effect of anticipated
leverage) and is intended to have a relatively low level of interest rate risk
compared to investment portfolios with longer durations. Investments are based
on Eaton Vance Management's ("Eaton Vance" or the "Adviser") internal research
and ongoing credit analysis, which is generally not available to individual
investors. An investment in the Fund may not be appropriate for all investors.
There is no assurance that the Fund will achieve its investment objectives.

THE OFFERING

The Fund is offering common shares of beneficial interest, par value
$0.01 per share (the "Shares"), through a group of underwriters (the
"Underwriters") led by UBS Warburg LLC, Citigroup Global Markets Inc. and
Merrill Lynch, Pierce, Fenner & Smith Incorporated. The Underwriters have been
granted an option to purchase up to additional Shares solely to cover
over-allotments, if any. The initial public offering price is $20.00 per share.
The minimum purchase in this offering is 100 Shares ($2,000). See
"Underwriting." Eaton Vance or an affiliate has agreed to (i) reimburse all
organizational costs and (ii) pay all offering costs (other than sales loads)
that exceed $0.04 per Share.

INVESTMENT OBJECTIVES AND POLICIES

The Fund's investment objective is to provide a high level of current income.
The Fund may, as a secondary objective, also seek capital appreciation to the
extent consistent with its investment objective of high current income. The Fund
pursues its objectives by investing its assets primarily in three distinct
investment categories: 1) mortgage-backed securities that are issued, backed or
otherwise guaranteed by the U.S. Government or its agencies or instrumentalities
or that are issued by private issuers ("MBS"); 2) senior, secured floating rate
loans made to corporate and other business entities ("Senior Loans"); and 3)
corporate bonds of below "investment grade" quality ("Non-Investment Grade
Bonds"). Non-Investment Grade Bonds, commonly referred to as "junk bonds," are
bonds that are rated below investment grade by each of the national rating
agencies who cover the security, or, if unrated, are determined to be of
comparable quality by the Adviser. Standard & Poor's Ratings Group ("S&P") and
Fitch Ratings ("Fitch") consider securities rated below BBB- to be below
investment grade and Moody's Investors Service, Inc. ("Moody's") considers
securities rated below Baa3 to be below investment grade. Senior Loans in which
the Fund invests are also typically of below investment grade quality. The
Adviser has broad discretion to allocate the Fund's assets among the three
principal asset classes; provided that, under normal market conditions, the Fund
will invest at least 25% of its assets in each principal investment category.

amount), duration is a measure of the price volatility of a debt instrument as a
result of changes in market rates of interest, based on the weighted average
timing of the instrument's expected principal and interest payments. Duration
differs from maturity in that it considers a security's yield, coupon payments,
principal payments and call features in addition to the amount of time until the
security finally matures. As the value of a security changes over time, so will
its duration. Prices of securities with longer durations tend to be more
sensitive to interest rate changes than securities with shorter durations. In
general, a portfolio of securities with a longer duration can be expected to be
more sensitive to interest rate changes than a portfolio with a shorter
duration.

A team of Eaton Vance investment professionals is responsible for the overall
management of the Fund's investments as well as allocations among the Fund's
three principal investment categories. Individual members of this team with
specialized experience are responsible for the day-to-day portfolio management
within each of the Fund's three main asset classes. The Fund's investments are
actively managed, and securities may be bought or sold on a daily basis. The
Adviser attempts to manage yield through timely trading.

The Adviser's staff monitors the credit quality and price of securities held by
the Fund, as well as other securities that are available to the Fund. Under
normal market conditions, the Fund expects to maintain a weighted average
portfolio credit quality of investment grade (which is at least BBB- as
determined by S&P or Fitch, Baa3 as determined by Moody's or, if unrated,
determined to be of comparable quality by the Adviser). For this purpose, when a
security is rated by more than one of these rating agencies, the Adviser
generally will use the highest rating. Within this general guideline, the Fund
may invest in individual securities of any credit quality. Although the Adviser
considers ratings when making investment decisions, it performs its own credit
and investment analysis and does not rely primarily on the ratings assigned by
the rating services. In evaluating the quality of a particular security, whether
rated or unrated, the 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. The
Adviser will attempt to reduce the risks of investing in lower rated or unrated
debt instruments through active portfolio management, credit analysis and
attention to current developments and trends in the economy and the financial
markets. When purchasing and selling MBS, the Adviser focuses on the expected
principal payments on an MBS as well as current and anticipated market
conditions.

The Fund will only invest in U.S. dollar denominated securities. The Fund may
invest up to 5% of its assets in U.S. dollar denominated securities of
non-United States issuers. The Fund's investments may have significant exposure
to certain sectors of the economy and thus may react differently to political or
economic developments than the market as a whole.

The Fund may purchase or sell derivative instruments (which derive their value
from another instrument, security or index) only for risk management purposes,
such as hedging against fluctuations in securities prices or interest rates;
diversification purposes; or changing the duration of the Fund. Transactions in
derivative instruments may include the purchase or sale of futures contracts on
securities, indices and other financial instruments, credit-linked notes,
tranches of collateralized loan obligations, options on futures contracts, and
exchange-traded and over-the-counter options on securities or indices, and
interest rate, total return and credit default swaps. Guidelines of any rating
organization that rates any preferred shares issued by the Fund may limit the
Fund's ability to engage in such transactions.

LISTING

The Fund has applied for the listing of its common shares on the American Stock
Exchange under the symbol "EVV."

LEVERAGE

The Fund expects to use financial leverage through the issuance of preferred
shares and/or through borrowings, including the issuance of debt securities. The
Fund intends initially to use financial leverage of approximately 34% of its
gross assets (including the amount obtained through leverage). The Fund
generally will not use leverage if the Adviser anticipates that it would result
in a lower return to holders of the Shares ("Shareholders") over time. Use of
financial leverage creates an opportunity for increased income for Shareholders
but, at the same time, creates special risks (including the likelihood of
greater volatility of net asset value and market price of the Shares), and there
can be no assurance that a leveraging strategy will be successful during any
period in which it is employed. The Fund currently intends to issue preferred
shares approximately one to three months after completion of this offering,
subject to market conditions and to the Fund's receipt of a AAA credit rating on
such preferred shares from a nationally recognized statistical rating
organization ("Rating Agency") (typically, Moody's, S&P or Fitch). During
periods in which the Fund is using leverage the fees paid to Eaton Vance for
investment advisory services will be higher than if the Fund did not use
leverage because the fees paid will be calculated on the basis of the Fund's
gross assets, including proceeds from the issuance of preferred shares. See
"Investment objectives, policies and risks--Use of leverage and related risks"
and "Management of the Fund--The Adviser."

INVESTMENT ADVISER AND ADMINISTRATOR

Eaton Vance, an indirect wholly-owned subsidiary of Eaton Vance Corp., is the
Fund's investment adviser and administrator. The Adviser and its subsidiaries
manage approximately $55 billion on behalf of funds, institutional clients and
individuals as of March 31, 2003. Twenty-three of the funds are closed-end. See
"Management of the Fund."

DISTRIBUTIONS

Commencing with the Fund's first dividend, the Fund intends to make regular
monthly cash distributions to Shareholders of substantially all net investment
income of the Fund. The amount of each monthly distribution will vary depending
on a number of factors, including dividends payable on the preferred shares or
other costs of financial leverage. As portfolio and market conditions change,
the rate of dividends on the Shares and the Fund's dividend policy could change.
Over time, the Fund will distribute all of its net investment income (after it
pays accrued dividends on any outstanding preferred shares) or other costs of
financial leverage. In addition, at least annually, the Fund intends to
distribute any net short-term capital gain and any net capital gain (which is
the excess of net long-term capital gain over short-term capital loss). The
initial distribution is expected to be declared approximately 45 days and paid
approximately 60 to 90 days after the completion of this offering, depending on
market conditions. Shareholders may elect to automatically reinvest some or all
of their distributions in additional Shares under the Fund's dividend
reinvestment plan. See "Distributions and taxes" and "Dividend reinvestment
plan."

DIVIDEND REINVESTMENT PLAN

The Fund has established a dividend reinvestment plan (the "Plan"). Under the
Plan, a Shareholder may elect to have all dividend and capital gain
distributions automatically reinvested in additional Shares either purchased in
the open market, or newly issued by the Fund if the Shares are trading at or
above their net asset value. Shareholders may elect to participate in the Plan
by completing the dividend reinvestment plan application form. Shareholders who
do not elect to participate in the Plan will receive all distributions in cash
paid by check mailed directly to them by PFPC Inc., as dividend paying agent.
Shareholders who intend to hold their Shares through a broker or nominee should
contact such broker or nominee to determine whether or how they may participate
in the Plan. See "Dividend reinvestment plan."

CLOSED-END STRUCTURE

Closed-end funds differ from open-end management investment companies (commonly
referred to as mutual funds) in that closed-end funds generally list their
shares for trading on a securities exchange and do not redeem their shares at
the option of the shareholder. By comparison, mutual funds issue securities
redeemable at net asset value at the option of the shareholder and typically
engage in a continuous offering of their shares. Mutual funds are subject to
continuous asset in-flows and out-flows that can complicate portfolio
management, whereas closed-end funds generally can stay more fully invested in
securities consistent with the closed-end fund's investment objectives and
policies. In addition, in comparison to open-end funds, closed-end funds have
greater flexibility in the employment of financial leverage and in the ability
to make certain types of investments, including investments in illiquid
securities. However, shares of closed-end funds frequently trade at a discount
from their net asset value. In recognition of the possibility that the Shares
might trade at a discount to net asset value and that any such discount may not
be in the interest of Shareholders, the Fund's Board of Trustees (the "Board"),
in consultation with Eaton Vance, from time to time may review possible actions
to reduce any such discount. The Board might consider open market repurchases or
tender offers for Shares at net asset value. There can be no assurance that the
Board will decide to undertake any of these actions or that, if undertaken, such
actions would result in the Shares trading at a price equal to or close to net
asset value per Share. The Board might also consider the conversion of the Fund
to an open-end mutual fund. The Board believes, however, that the closed-end
structure is desirable, given the Fund's investment objectives and policies.
Investors should assume, therefore, that it is highly unlikely that the Board
would vote to convert the Fund to an open-end investment company. Investors
should note that the anticipated issuance of preferred shares to provide
investment leverage could make a conversion to open-end form more difficult
because of the voting rights of preferred shareholders, the costs of redeeming
preferred shares and other factors. See "Description of capital structure."

SPECIAL RISK CONSIDERATIONS

NO OPERATING HISTORY
The Fund is a closed-end investment company with no history of operations and is
designed for long-term investors and not as a trading vehicle.

INCOME RISK
The income investors receive from the Fund is based primarily on the interest it
earns from its investments, which can vary widely over the short and long-term.
If prevailing market interest rates drop, investors' income from the Fund over
time could drop as well. The Fund's income could also be affected adversely when
prevailing short-term interest rates increase and the Fund is utilizing
leverage, although this risk is mitigated by the Fund's investment in Senior
Loans.

CREDIT RISK
Credit risk is the risk that one or more debt obligations in the Fund's
portfolio will decline in price, or fail to pay interest or principal when due,
because the issuer of the obligation experiences a decline in its financial
status. Credit risk involves two types: delinquency and default. Delinquency
refers to interruptions in the payment of interest and principal. Default refers
to the potential for unrecoverable principal loss from the sale of foreclosed
collateral or the Fund's inherent right to forgive principal or modify a debt
instrument. For MBS, factors contributing to these risks include the effects of
general and local economic conditions on home values, the financial conditions
of homeowners, and other market factors. This risk is mitigated by a U.S.
government agency's or instrumentality's guarantee of the underlying debt
obligation.

securities. This is known as call or prepayment risk. Non-Investment Grade Bonds
frequently have call features that allow the issuer to redeem the security at
dates prior to its stated maturity at a specified price only if certain
prescribed conditions are met ("call protection"). An issuer may redeem a Non-
Investment Grade Bond if, for example, the issuer can refinance the debt at a
lower cost due to declining interest rates or an improvement in the credit
standing of the issuer. Senior Loans and MBS typically have no such call
protection. For premium bonds (bonds acquired at prices that exceed their par or
principal value) purchased by the Fund, prepayment risk may be enhanced.

ISSUER RISK
The value of corporate income-producing securities may decline for a number of
reasons which directly relate to the issuer, such as management performance,
financial leverage and reduced demand for the issuer's goods and services.

MORTGAGE-BACKED SECURITIES RISK
The value of Fund shares may be adversely affected by fluctuations in interest
rates and the prepayment of the mortgage loans underlying the MBS held by the
Fund. Mortgage loans are most likely to be prepaid in a declining interest rate
environment. Prepayment may reduce the Fund's coupon distributions because the
proceeds of a prepayment may be invested in lower-yielding securities. The
Adviser has historically attempted to minimize prepayment risk by acquiring MBS
with seasoned underlying mortgage loans that have had a history of refinancing
opportunities. In a rising interest rate environment, a declining prepayment
rate will extend the average life of many MBS which in turn would lengthen the
duration of the Fund's portfolio. This possibility is often referred to as
extension risk. Extending the average life of an MBS increases the risk of
depreciation due to future increases in market interest rates. The value of Fund
Shares can also be adversely affected by the existence of premiums on the price
of MBS it acquires.

Certain government agencies or instrumentalities, such as the Government
National Mortgage Association ("GNMA"), the Federal National Mortgage
Association ("FNMA"), and the Federal Home Loan Mortgage Corporation ("FHLMC"),
provide a guarantee as to timely payment of principal and interest for MBS each
entity issues, backs or otherwise guarantees. Guarantees may or may not be
backed by the full faith and credit of the U.S. government.

SENIOR LOANS RISK
The risks associated with Senior Loans are similar to the risks of
Non-Investment Grade Bonds, although Senior Loans are typically senior and
secured in contrast to Non-Investment Grade Bonds, which are often subordinated
and unsecured. Senior Loans' higher standing has historically resulted in
generally higher recoveries in the event of a corporate reorganization. In
addition, because their interest rates are adjusted for changes in short-term
interest rates, Senior Loans generally have less interest rate risk than
Non-Investment Grade Bonds, which are typically fixed rate. The Fund's
investments in Senior Loans are typically below investment grade and are
considered speculative because of the credit risk of their issuers. Such
companies are more likely to default on their payments of interest and principal
owed to the Fund, and such defaults could reduce the Fund's net asset value and
income distributions. An economic downturn generally leads to a higher
non-payment rate, and a debt obligation may lose significant value before a
default occurs. Moreover, any specific collateral used to secure a loan may
decline in value or become illiquid, which would adversely affect the loan's
value.

Economic and other events (whether real or perceived) can reduce the demand for
certain Senior Loans or Senior Loans generally, which may reduce market prices
and cause the Fund's net asset value per share to fall. The frequency and
magnitude of such changes cannot be predicted.

Loans and other debt securities are also subject to the risk of price declines
and to increases in prevailing interest rates, although floating-rate debt
instruments are substantially less exposed to this risk than fixed-rate debt
instruments. Interest rate changes may also increase prepayments of debt

obligations and require the Fund to invest assets at lower yields. No active
trading market may exist for certain loans, which may impair the ability of the
Fund to realize full value in the event of the need to liquidate such assets.
Adverse market conditions may impair the liquidity of some actively traded
loans.

NON-INVESTMENT GRADE BONDS RISK
The Fund's investments in Non-Investment Grade Bonds are predominantly
speculative because of the credit risk of their issuers. While offering a
greater potential opportunity for capital appreciation and higher yields,
Non-Investment Grade Bonds typically entail greater potential price volatility
and may be less liquid than higher-rated securities. Issuers of Non-Investment
Grade Bonds 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. The prices of these lower rated obligations are
more sensitive to negative developments than higher rated securities. Adverse
business conditions, such as a decline in the issuer's revenues or an economic
downturn, generally lead to a higher non-payment rate. In addition, a security
may lose significant value before a default occurs as the market adjusts to
expected higher non-payment rates.

DERIVATIVES
Derivative transactions (such as futures contracts and options thereon, options,
swaps and short sales) subject the Fund to increased risk of principal loss due
to imperfect correlation or unexpected price or interest rate movements. The
Fund also will be subject to credit risk with respect to the counterparties to
the derivatives contracts purchased by the Fund. If a counterparty becomes
bankrupt or otherwise fails to perform its obligations under a derivative
contract due to financial difficulties, the Fund may experience significant
delays in obtaining any recovery under the derivative contract in a bankruptcy
or other reorganization proceeding. The Fund may obtain only a limited recovery
or may obtain no recovery in such circumstances.

EFFECTS OF LEVERAGE

There can be no assurance that a leveraging strategy will be utilized by the
Fund or that, if utilized, it will be successful during any period in which it
is employed. Leverage creates risks for Shareholders, including the likelihood
of greater volatility of net asset value and market price of the Shares and the
risk that fluctuations in dividend rates on any preferred shares may affect the
return to Shareholders. To the extent the income derived from securities
purchased with proceeds received from leverage exceeds the cost of leverage, the
Fund's distributions will be greater than if leverage had not been used.
Conversely, if the income from the securities purchased with such proceeds is
not sufficient to cover the cost of leverage, the amount available for
distribution to Shareholders as dividends and other distributions will be less
than if leverage had not been used. In the latter case, Eaton Vance in its best
judgment may nevertheless determine to maintain the Fund's leveraged position if
it deems such action to be appropriate. The costs of an offering of preferred
shares and/or borrowing program will be borne by common Shareholders and
consequently will result in a reduction of the net asset value of Shares.

As discussed under "Management of the Fund," the fee paid to Eaton Vance will be
calculated on the basis of the Fund's gross assets, including proceeds from the
issuance of preferred shares and/or borrowings, so the fees will be higher when
leverage is utilized. See "Investment objectives, policies and risks--Use of
leverage and related risks."

The Fund currently intends to seek a AAA credit rating on any preferred shares
from a Rating Agency. The Fund may be subject to investment restrictions of the
Rating Agency as a result. These restrictions may impose asset coverage or
portfolio composition requirements that are more stringent than those imposed on
the Fund by the Investment Company Act of 1940, as amended (the "Investment
Company Act" or "1940 Act"). It is not anticipated that these covenants or
guidelines will impede

Eaton Vance in managing the Fund's portfolio in accordance with its investment
objectives and policies. See "Description of capital structure--Preferred
shares."

Financial leverage may also be achieved through the purchase of certain
derivative instruments. The Fund's use of derivative instruments exposes the
Fund to special risks. See "Investment objectives, policies and
risks--Additional investment practices" and "--Additional risk considerations."

INTEREST RATE RISK
The value of Fund shares will usually change in response to interest rate
fluctuations. When interest rates decline, the value of fixed-rate securities
already held by the Fund can be expected to rise. Conversely, when interest
rates rise, the value of existing fixed-rate portfolio securities can be
expected to decline. Because market interest rates are currently near their
lowest levels in many years, there is a greater than normal risk that the Fund's
portfolio will decline in value due to rising interest rates. Fluctuations in
the value of fixed-rate securities will not affect interest income on existing
securities but will be reflected in the Fund's net asset value. Fixed-rate
securities with longer durations tend to be more sensitive to changes in
interest rates than securities with shorter durations, usually making them more
volatile. Because the Fund will normally have a dollar-weighted average duration
of between two and four years (including the effects of anticipated leverage),
the Shares' net asset value and market price per Share will tend to fluctuate
more in response to changes in market interest rates than if the Fund invested
mainly in short-term debt securities and less than if the Fund invested mainly
in longer-term debt securities. The Fund may utilize certain strategies,
including taking positions in futures or interest rate swaps, for the purpose of
reducing the interest rate sensitivity of the portfolio and decreasing the
Fund's exposure to interest rate risk, although there is no assurance that it
will do so or that such strategies will be successful. The Fund is intended to
have a relatively low level of interest rate risk.

LIQUIDITY RISK
The Fund may invest in securities for which there is no readily available
trading market or which are otherwise illiquid. The Fund may not be able to
readily dispose of such securities at prices that approximate those at which the
Fund could sell such securities if they were more widely traded and, as a result
of such illiquidity, the Fund may have to sell other investments or engage in
borrowing transactions if necessary to raise cash to meet its obligations. In
addition, the limited liquidity could affect the market price of the debt
securities, thereby adversely affecting the Fund's net asset value and ability
to make dividend distributions.

REINVESTMENT RISK
Income from the Fund's portfolio will decline if and when the Fund invests the
proceeds from matured, traded or called debt obligations into lower yielding
instruments. A decline in income could affect the Shares' distribution rate and
their overall return.

INFLATION RISK
Inflation risk is the risk that the value of assets or income from investment
will be worth less in the future as inflation decreases the value of money. As
inflation increases, the real value of the Shares and distributions thereon can
decline. In addition, during any periods of rising inflation, dividend rates of
preferred shares would likely increase, which would tend to further reduce
returns to Shareholders. This risk is mitigated to some degree by the Fund's
investments in Senior Loans.

MARKET PRICE OF SHARES
The shares of closed-end management investment companies often trade at a
discount from their net asset value, and the Fund's Shares may likewise trade at
a discount from net asset value. The trading price of the Fund's Shares may be
less than the public offering price. This risk may be greater for investors who
sell their Shares in a relatively short period after completion of the public
offering.

MANAGEMENT RISK
The Fund is subject to management risk because it is an actively managed
portfolio. Eaton Vance and the individual portfolio managers will apply
investment techniques and risk analyses in making investment decisions for the
Fund, but there can be no guarantee that these will produce the desired results.

MARKET DISRUPTION
The terrorist attacks in the United States on September 11, 2001 had a
disruptive effect on the securities markets. The Fund cannot predict the effects
of similar events in the future on the U.S. economy. These terrorist attacks and
related events, including the war in Iraq, have led to increased short-term
market volatility and may have long-term effects on U.S. and world economies and
markets. A similar disruption of the financial markets could impact interest
rates, auctions, secondary trading, ratings, credit risk, inflation and other
factors relating to the Shares. In particular, Non-Investment Grade Bonds and
Senior Loans tend to be more volatile than higher rated fixed income securities
so that these events and any actions resulting from them may have a greater
impact on the prices and volatility on Non-Investment Grade Bonds and Senior
Loans than on higher rated fixed income securities.

ANTI-TAKEOVER PROVISIONS
The Fund's Agreement and Declaration of Trust includes provisions that could
have the effect of limiting the ability of other persons or entities to acquire
control of the Fund or to change the composition of its Board. See "Description
of capital structure--Anti-takeover provisions in the Declaration of Trust."

Summary of Fund expenses

The purpose of the table below is to help you understand all fees and expenses
that you, as a Shareholder, would bear directly or indirectly. The following
table assumes the issuance of preferred shares in an amount equal to 34% of the
Fund's total assets (after issuance), and shows Fund expenses as a percentage of
net assets attributable to common shares.

Shareholder transaction expenses
Sales load paid by you (as a percentage of offering
price)................................................. 4.50%
Expenses borne by the Fund.............................. 0.20%(1)(2)
Dividend reinvestment plan fees......................... None(3)

PERCENTAGE OF NET ASSETS
ATTRIBUTABLE
TO COMMON SHARES
(ASSUMING THE ISSUANCE
OF PREFERRED SHARES)(4)
-------------------------------------------------------------------------

Annual expenses
Investment advisory fee................................. 1.14%
Other expenses.......................................... 0.28%
-----------
Total annual expenses................................... 1.42%
Fee and expense reimbursements (years 1-5).............. (0.30)%(5)
-----------
Net annual expenses (years 1-5)......................... 1.12%(5)
-----------

------------

(1) Eaton Vance or an affiliate has agreed to reimburse all organizational
costs and pay all offering costs (other than sales load) that exceed $0.04
per Share.

(2) If the Fund offers preferred shares, costs of that offering, estimated to
be slightly more than 1.25% of the total amount of the preferred share
offering, will effectively be borne by common shareholders and result in
the reduction of the net asset value of the common shares. Assuming the
issuance of preferred shares in an amount equal to 34% of the Fund's total
assets (after issuance), those offering costs are estimated to be not more
than approximately $2,585,000 or $0.13 per common share (0.65% of the
offering price).

(3) You will be charged a $5.00 service charge and pay brokerage charges if you
direct the plan agent to sell your Shares held in a dividend reinvestment
account.

(4) Stated as percentages of net assets attributable to common shares assuming
no issuance of preferred shares or borrowings, the Fund's expenses would be
estimated to be as follows:

PERCENTAGE OF NET ASSETS
ATTRIBUTABLE
TO COMMON SHARES
(ASSUMING NO PREFERRED SHARES
ARE ISSUED OR OUTSTANDING)
-------------------------------------------------------------------------

Annual expenses
Investment advisory fee.................................. 0.75%
Other expenses........................................... 0.13%
-----------
Total annual expenses.................................... 0.88%
Fees and expense reimbursements (years 1-5).............. (0.20)%
-----------
Net annual expenses (years 1-5).......................... 0.68%
-----------

(5) Eaton Vance has contractually agreed to reimburse the Fund for fees and
other expenses in the amount of 0.20% of average weekly total assets of the
Fund for the first 5 full years of the Fund's operations, 0.15% of average
weekly total assets of the Fund in year 6, 0.10% in year 7 and 0.05% in
year 8. For this purpose, total assets (and gross assets in "Management of
the Fund--The Adviser") shall be calculated by deducting accrued
liabilities of the Fund not including the amount of any preferred shares
outstanding or the principal amount of any indebtedness for money borrowed.
Without the reimbursement, Total net annual expenses would be estimated to
be 1.42% of average weekly net assets (or, assuming no issuance of
preferred shares or borrowings, 0.88% of average weekly net assets)
attributable to common shares. Eaton

Vance may voluntarily reimburse additional fees and expenses but is under
no obligation to do so. Any such voluntary reimbursements may be terminated
at any time.

The expenses shown in the table are based on estimated amounts for the Fund's
first year of operations and assume that the Fund issues approximately
20,000,000 common shares. See "Management of the Fund" and "Dividend
reinvestment plan."

The following example illustrates the expenses that you would pay on a $1,000
investment in common shares (including the sales load of $45, estimated offering
expenses of this offering of $2 and the estimated preferred share offering costs
assuming preferred shares are issued representing 34% of the Fund's total assets
(after issuance) of $6.50), assuming (1) total net annual expenses of 1.12% of
net assets attributable to common shares in years 1 through 5, increasing to
1.42% in years 9 and 10 and (2) a 5% annual return(1):

1 YEAR 3 YEARS 5 YEARS 10 YEARS (2)
--------------------------------------------

$64 $87 $112 $196

THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES. ACTUAL
EXPENSES MAY BE HIGHER OR LOWER.
------------

(1) The example assumes that the estimated Other expenses set forth in the
Annual expenses table are accurate, that fees and expenses increase as
described in note 2 below and that all dividends and distributions are
reinvested at net asset value. Actual expenses may be greater or less than
those assumed. Moreover, the Fund's actual rate of return may be greater or
less than the hypothetical 5% return shown in the example.

(2) Assumes reimbursement of fees and expenses of 0.15% of average weekly total
assets of the Fund in year 6, 0.10% in year 7 and 0.05% in year 8 and no
reimbursement of fees or expenses in years 9 and 10. Eaton Vance has not
agreed to reimburse the Fund for any portion of its fees and expenses
beyond 2011.

--------------------------------------------------------------------------------

The Fund

The Fund is a newly organized, diversified, closed-end management investment
company registered under the 1940 Act. The Fund was organized as a Massachusetts
business trust on March 12, 2003 pursuant to a Declaration of Trust governed by
the laws of The Commonwealth of Massachusetts and has no operating history. The
Fund's principal office is located at The Eaton Vance Building, 255 State
Street, Boston, Massachusetts 02109 and its telephone number is 1-800-225-6265.

This Prospectus relates to the initial public offering of the Fund's common
shares of beneficial interest, $0.01 par value (the "Shares"). See
"Underwriting."

Use of proceeds

The net proceeds of this offering of Shares will be approximately $ (or
$ assuming exercise of the Underwriters' over-allotment option in
full), which, after payment of the estimated offering expenses, will be invested
in accordance with the Fund's investment objectives and policies as soon as
practicable, but, in no event, under normal market conditions, later than three
months after the receipt thereof. Pending such investment, the proceeds may be
invested in high-quality, short-term debt securities. Eaton Vance or an
affiliate has agreed to (i) reimburse all organizational costs and (ii) pay all
offering costs of the Fund (other than sales loads) that exceed $0.04 per Share.

Investment objectives, policies and risks

INVESTMENT OBJECTIVES

The Fund's investment objective is to provide a high level of current income.
The Fund may, as a secondary objective, also seek capital appreciation to the
extent consistent with its investment objective of high current income. The Fund
pursues its objectives by investing its assets primarily in three distinct
investment categories: 1) mortgage backed securities that are issued, backed or
otherwise guaranteed by the U.S. Government or its agencies or instrumentalities
or that are issued by private issuers ("MBS"); 2) senior, secured floating rate
loans made to corporate and other business entities ("Senior Loans"); and 3)
corporate bonds of below "investment grade" quality ("Non-Investment Grade
Bonds"). Non-Investment Grade Bonds, commonly referred to as "junk bonds," are
bonds that are rated below investment grade by each of the national rating
agencies who cover the security, or, if unrated, are determined to be of
comparable quality by the Adviser. Standard & Poor's Ratings Group ("S&P") and
Fitch Ratings ("Fitch") consider securities rated below BBB- to be below
investment grade and Moody's Investors Service, Inc. ("Moody's") considers
securities rated below Baa3 to be below investment grade. Senior Loans in which
the Fund invests are also typically of below investment grade quality. Many
Senior Loans in which the Fund may invest are also of below investment grade
quality. The Adviser has broad discretion to allocate the Fund's assets among
the three principal asset classes; provided that, under normal market
conditions, the Fund will invest at least 25% of its assets in each principal
investment category.

PRIMARY INVESTMENT POLICIES

GENERAL COMPOSITION OF THE FUND
A team of Eaton Vance investment professionals is responsible for the overall
management of the Fund's investments as well as allocations among the Fund's
three principal investment categories. Individual members of this team with
specialized expertise are responsible for the day-to-day portfolio management
within each of the Fund's three main asset classes. The Fund's investments are
actively

--------------------------------------------------------------------------------
11

INVESTMENT OBJECTIVES, POLICIES AND RISKS
--------------------------------------------------------------------------------

managed, and securities may be bought or sold on a daily basis. The Adviser
attempts to manage yield through timely trading.

Under normal market conditions, the Adviser expects to maintain a duration of
between two and four years (including the effect of anticipated leverage).
Initially, the Fund is expected to have a duration of approximately three years
(including the effect of anticipated leverage). This duration policy may only be
changed following provision of 60 days' prior notice to Shareholders. In
comparison to maturity (which is the date on which a debt instrument ceases and
the issuer is obligated to repay the principal amount), duration is a measure of
the price volatility of a debt instrument as a result in changes in market rates
of interest, based on the weighted average timing of the instrument's expected
principal and interest payments. Duration differs from maturity in that it
considers a security's yield, coupon payments and its principal payments in
addition to the amount of time until the security finally matures. As the value
of a security changes over time, so will its duration. Prices of securities with
longer durations tend to be more sensitive to interest rate changes than
securities with shorter durations. In general, a portfolio of securities with a
longer duration can be expected to be more sensitive to interest rate changes
than a portfolio with a shorter duration.

The Adviser's staff monitors the credit quality and the price of securities held
by the Fund, as well as other securities that are available to the Fund. Under
normal market conditions, the Fund will invest at least 25% of its portfolio in
MBS that are expected to be of the highest quality (generally AAA as determined
by S&P or Fitch, Aaa as determined by Moody's, or, if unrated determined to be
of comparable quality by the Adviser) and at least 25% of its portfolio in each
of Non-Investment Grade Bonds and Senior Loans (many of which are of below
investment grade quality). Under normal market conditions, the Fund will
structure and seek to maintain its portfolio of high quality MBS and lower
quality Non-Investment Grade Bond and Senior Loans in such a manner so that the
Fund has an average dollar weighted portfolio quality of investment grade (which
is BBB- as determined by S&P or Fitch, Baa as determined by Moody's, or, if
unrated determined to be of comparable quality by the Adviser). Within this
general guideline, the Fund may invest in securities of any credit quality. In
order to maintain compliance with this policy, the Fund's holdings of
Non-Investment Grade Bonds and Senior Loans of below investment grade quality
generally will be offset by investments in MBS of the highest quality. The
extremely high credit quality of the MBS will substantially raise the average
portfolio credit quality on a dollar-weighted basis. In addition, to the extent
necessary to maintain compliance with this weighted average portfolio credit
policy, the Fund will focus its investments in Non-Investment Grade Bonds and
Senior Loans on such issues that are rated in the higher tiers of the
non-investment grade range (including in the category just below investment
grade, which is in the BB range as determined by S&P or Fitch, Ba as determined
by Moody's, or if unrated determined to be of comparable quality by the
Adviser). Finally, although the Fund may invest in securities of any quality, to
the extent necessary to comply with its weighted average portfolio credit
policy, the Fund will avoid investing significant portions of its assets in the
lower tiers of the non-investment grade category. For purposes of the Fund's
policy on credit quality, when a security is rated by more than one of these
rating agencies, the Adviser generally will use the highest rating. The Fund
will monitor and adjust its portfolio on an ongoing basis in order to remain in
compliance with this credit quality policy.

A "barbell" portfolio such as the Fund that achieves a weighted average
investment grade credit quality by investing substantially in below investment
grade securities and very high quality securities involves certain risk
characteristics that differ from fixed income securities with credit ratings
equivalent to the portfolio average or from a portfolio of similar average
quality consisting mostly of securities of a quality near this average. Most
notably, the Fund's portfolio will contain a higher percentage of assets of
lower quality that each individually involve a higher degree of credit risk and
may be considered to be speculative in nature. For a description of these risk
characteristics, see

--------------------------------------------------------------------------------
12

INVESTMENT OBJECTIVES, POLICIES AND RISKS
--------------------------------------------------------------------------------

"Investment objectives, policies and risks -- "Primary Investment
Policies -- Non-investment Grade Bonds.

Although the Adviser considers ratings when making investment decisions, it
performs its own credit and investment analysis and does not rely primarily on
the ratings assigned by the rating services. In evaluating the quality of a
particular security, whether rated or unrated, the 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. The Adviser will attempt to reduce the
risks of investing in lower rated or unrated debt instruments through active
portfolio management, credit analysis and attention to current developments and
trends in the economy and the financial markets. When purchasing and selling
MBS, the Adviser focuses on the expected principal payments on an MBS as well as
current and anticipated market conditions.

Subject to its obligation on a portfolio wide basis to remain in ongoing
compliance with the weighted average portfolio credit policy discussed above,
the Fund is not required to dispose of a security in the event that a Rating
Agency downgrades its assessment of the credit characteristics of a particular
issue or withdraws its assessment, including in the event of a default. In
determining whether to retain or sell such a security, Eaton Vance may consider
such factors as Eaton Vance's assessment of the credit quality of the issuers of
such security, the price at which such security could be sold and the rating, if
any, assigned to such security by other Rating Agencies.

MORTGAGE-BACKED SECURITIES
The Fund invests only in MBS that are backed by a guarantee of the U.S.
Government (or one of its agencies or instrumentalities), although certain of
these instruments may be privately issued. MBS represent participation interests
in pools of fixed-rate and adjustable-rate mortgage loans. Unlike conventional
debt obligations, MBS provide monthly payments derived from the monthly interest
and principal payments (including any prepayments) made by the individual
borrowers on the pooled mortgage loans. The Adviser currently expects to invest
primarily in MBS that include mortgage loans that have had a history of
refinancing opportunities (so called "seasoned MBS"). The Adviser, typically,
considers MBS with mortgages which have been outstanding for ten years or more
to be seasoned MBS. Seasoned MBS tend to have a higher collateral to debt ratio
than other MBS because a greater percentage of the underlying debt has been
repaid and the collateral property may have appreciated in value. The Adviser
may discontinue the practice of focusing on seasoned MBS at any time. The
Adviser expects that under current market conditions many of the MBS held by the
Fund will be premium bonds acquired at prices that exceed their par or principal
value.

The mortgage loans underlying MBS are generally subject to a greater rate of
principal prepayments in a declining interest rate environment and to a lesser
rate of principal prepayments in an increasing interest rate environment,
although the Fund's investment in seasoned MBS mitigates this risk. Under
certain interest and prepayment rate scenarios, the Fund may fail to recover the
full amount of its investment in MBS, notwithstanding any direct or indirect
governmental or agency guarantee. Because faster than expected prepayments must
usually be invested in lower yielding securities, MBS are less effective than
conventional bonds in "locking in" a specified interest rate. Additionally, the
value of Fund Shares may be adversely affected by fluctuations in interest rates
underlying the MBS held by the Fund. In a rising interest rate environment, a
declining prepayment rate will extend the average life of

--------------------------------------------------------------------------------
13

INVESTMENT OBJECTIVES, POLICIES AND RISKS
--------------------------------------------------------------------------------

many MBS, which in turn would lengthen the duration of the Fund's portfolio.
This possibility is often referred to as extension risk. Extending the average
life of a mortgage-backed security increases the risk of depreciation due to
future increases in market interest rates, although investing in seasoned MBS
helps mitigate this extension risk. MBS that are purchased at a premium generate
current income that exceeds market rates for comparable investments but tend to
decrease in value as they mature, which may cause a resulting decrease in the
Fund's net asset value.

The Fund may also invest in classes of collateralized mortgage obligations
("CMOs") and various other MBS. In choosing among CMO classes, the Adviser will
evaluate the total income potential of each class and other factors. See
"Additional investment practices--Securitized interests."

Certain government agencies or instrumentalities, such as GNMA, FNMA and FHLMC
provide a guarantee as to timely payment of principal and interest for MBS each
entity issues but may or may not be backed by the full faith and credit of the
U.S. Government.

SENIOR LOANS
Senior Loans hold the most senior position in the capital structure of a
business entity (the "Borrower"), are typically secured with specific collateral
and have a claim on the assets and/or stock of the Borrower that is senior to
that held by subordinated debt holders and stockholders of the Borrower. The
proceeds of Senior Loans primarily are used to finance leveraged buyouts,
recapitalizations, mergers, acquisitions, stock repurchases, refinancings and to
finance internal growth and for other corporate purposes. Senior Loans typically
have rates of interest which are redetermined either daily, monthly, quarterly
or semi-annually by reference to a base lending rate, plus a premium or credit
spread. These base lending rates are primarily the London-Interbank Offered Rate
("LIBOR"), and secondarily the prime rate offered by one or more major United
States banks (the "Prime Rate") and the certificate of deposit ("CD") rate or
other base lending rates used by commercial lenders. The Senior Loans held by
the Fund will have a dollar-weighted average period until the next interest rate
adjustment of approximately 90 days or less. In the experience of the Adviser
over the last decade, because of prepayments the average life of Senior Loans
has been two to four years.

The Fund may also purchase unsecured loans, other floating rate debt securities
such as notes, bonds and asset-backed securities (such as special purpose trusts
investing in bank loans), credit-linked notes, tranches of collateralized loan
obligations, investment grade fixed income debt obligations and money market
instruments, such as commercial paper.

Senior Loans and other floating-rate debt instruments are subject to the risk of
non-payment of scheduled interest or principal. Such non-payment would result in
a reduction of income to the Fund, a reduction in the value of the investment
and a potential decrease in the net asset value of the Fund. There can be no
assurance that the liquidation of any collateral securing a loan would satisfy
the Borrower's obligation in the event of non-payment of scheduled interest or
principal payments, or that such collateral could be readily liquidated. In the
event of bankruptcy of a Borrower, the Fund could experience delays or
limitations with respect to its ability to realize the benefits of the
collateral securing a Senior Loan. The collateral securing a Senior Loan may
lose all or substantially all of its value in the event of bankruptcy of a
Borrower. Some Senior Loans are subject to the risk that a court, pursuant to
fraudulent conveyance or other similar laws, could subordinate such Senior Loans
to presently existing or future indebtedness of the Borrower or take other
action detrimental to the holders of Senior Loans including, in certain
circumstances, invalidating such Senior Loans or causing interest previously
paid to be refunded to the Borrower. If interest were required to be refunded,
it could negatively affect the Fund's performance.

--------------------------------------------------------------------------------
14

INVESTMENT OBJECTIVES, POLICIES AND RISKS
--------------------------------------------------------------------------------

Many Senior Loans in which the Fund will invest may not be rated by a Rating
Agency, will not be registered with the Securities and Exchange Commission or
any state securities commission and will not be listed on any national
securities exchange. The amount of public information available with respect to
Senior Loans will generally be less extensive than that available for registered
or exchange listed securities. In evaluating the creditworthiness of Borrowers,
the Adviser will consider, and may rely in part, on analyses performed by
others. Borrowers may have outstanding debt obligations that are rated below
investment grade by a Rating Agency. Many of the Senior Loans in the Fund have
been assigned ratings below investment grade by independent rating agencies. In
the event Senior Loans are not rated, they are likely to be the equivalent of
below investment grade quality. Because of the protective features of Senior
Loans, the Adviser believes that Senior Loans tend to have more favorable loss
recovery rates as compared to more junior types of below investment grade debt
obligations. The Adviser does not view ratings as the determinative factor in
its investment decisions and relies more upon its credit analysis abilities than
upon ratings.

No active trading market may exist for some loans and some loans may be subject
to restrictions on resale. A secondary market may be subject to irregular
trading activity, wide bid/ask spreads and extended trade settlement periods,
which may impair the ability to realize full value and thus cause a material
decline in the Fund's net asset value. During periods of limited supply and
liquidity of Senior Loans, the Fund's yield may be lower.

When interest rates decline, the value of a fund invested in fixed-rate
obligations can be expected to rise. Conversely, when interest rates rise, the
value of a fund invested in fixed-rate obligations can be expected to decline.
Although changes in prevailing interest rates can be expected to cause some
fluctuations in the value of Senior Loans (due to the fact that floating rates
on Senior Loans only reset periodically), the value of Senior Loans is
substantially less sensitive to changes in market interest rates than fixed-rate
instruments. As a result, the Adviser expects the Fund's policy of investing a
portion of its assets in floating-rate Senior Loans will make the Fund less
volatile and less sensitive to changes in market interest rates than if the Fund
invested exclusively in fixed-rate obligations. Similarly, a sudden and
significant increase in market interest rates may cause a decline in the value
of these investments and in the Fund's net asset value. Other factors
(including, but not limited to, rating downgrades, credit deterioration, a large
downward movement in stock prices, a disparity in supply and demand of certain
securities or market conditions that reduce liquidity) can reduce the value of
Senior Loans and other debt obligations, impairing the Fund's net asset value.

The Fund may purchase and retain in its portfolio a Senior Loan where the
Borrower has experienced, or may be perceived to be likely to experience, credit
problems, including involvement in or recent emergence from bankruptcy
reorganization proceedings or other forms of debt restructuring. Such
investments may provide opportunities for enhanced income as well as capital
appreciation. At times, in connection with the restructuring of a Senior Loan
either outside of bankruptcy court or in the context of bankruptcy court
proceedings, the Fund may determine or be required to accept equity securities
or junior debt securities in exchange for all or a portion of a Senior Loan.

Senior Loan assignments and participations. The Fund expects to primarily
purchase Senior Loans by assignment from a participant in the original syndicate
of lenders or from subsequent assignees of such interests. The Fund may also
purchase participations in the original syndicate making Senior Loans. Such
indebtedness may be secured or unsecured. Loan participations typically
represent direct participations in a loan to a corporate borrower, and generally
are offered by banks or other financial institutions or lending syndicates. The
Fund may participate in such syndications, or can buy part of a loan, becoming a
part lender. When purchasing loan participations, the Fund assumes the credit
risk associated with the corporate borrower and may assume the credit risk
associated with an interposed bank or other financial intermediary. The
participation interests in which the Fund intends to invest

--------------------------------------------------------------------------------
15

INVESTMENT OBJECTIVES, POLICIES AND RISKS
--------------------------------------------------------------------------------

may not be rated by any nationally recognized rating service. Given the current
structure of the markets for loan participations and assignments, the Fund
expects to treat these securities as illiquid.

Senior Loan valuation. The Adviser uses an independent pricing service to value
most loans and other debt securities at their market value. The Adviser may use
the fair value method to value loans or other securities if market quotations
for them are not readily available or are deemed unreliable, or if events
occurring after the close of a securities market and before the Fund values its
assets would materially affect net asset value. Because foreign securities trade
on days when the Shares are not priced, net asset value can change at time when
Shares cannot be redeemed.

NON-INVESTMENT GRADE BONDS
As indicated above, Non-Investment Grade Bonds are those rated lower than
investment grade (i.e., bonds rated lower than Baa3 by Moody's and lower than
BBB- by S&P and Fitch) or are unrated and of comparable quality as determined by
the Adviser. Non-Investment Grade Bonds rated BB and Ba have speculative
characteristics, while lower rated Non-Investment Grade Bonds are predominantly
speculative.

The Fund may hold securities that are unrated or in the lowest rating categories
(rated C by Moody's or D by S&P or Fitch). 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 or Fitch 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 net asset value.

The credit quality of most securities held by the Fund reflects a greater than
average possibility that adverse changes in the financial condition of an
issuer, or in general economic conditions, or both, may impair the ability of
the issuer to make payments of interest and principal. The inability (or
perceived inability) of issuers to make timely payment of interest and principal
would likely make the values of securities held by the Fund more volatile and
could limit the Fund's ability to sell its securities at favorable prices. In
the absence of a liquid trading market for securities held by it, the Fund may
have difficulties determining the fair market value of such securities.

Although the Adviser considers security ratings when making investment
decisions, it performs its own credit and investment analysis and does not rely
primarily on the ratings assigned by the rating services. In evaluating the
quality of a particular security, whether rated or unrated, the 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 Adviser's judgment
and analytical abilities than would be the case if the Fund invested primarily
in securities in the higher rating categories. While the Adviser will attempt to
reduce the risks of investing in lower rated or unrated securities through
active Fund 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 Fund of such securities would
substantially lessen the risks of defaults brought about by an economic downturn
or recession. In recent years, issuances of Non-Investment Grade Bonds by
companies in various sectors has increased. Accordingly, the Fund's investments
may have significant exposure to certain sectors of the economy and thus may
react differently to political or economic developments than the market as a
whole.

--------------------------------------------------------------------------------
16

INVESTMENT OBJECTIVES, POLICIES AND RISKS
--------------------------------------------------------------------------------

The Fund's high yield securities may have fixed or variable principal payments
and all types of interest rate and dividend payment and reset terms, including
fixed rate, adjustable rate, zero coupon, contingent, deferred, and payment in
kind features.

ADDITIONAL INVESTMENT PRACTICES

OTHER GOVERNMENT SECURITIES
U.S. Government securities include (1) U.S. Treasury obligations, which differ
in their interest rates, maturities and times of issuance: U.S. Treasury bills
(maturities of one year or less), U.S. Treasury notes (maturities of one year to
ten years) and U.S. Treasury bonds (generally maturities of greater than ten
years) and (2) obligations issued or guaranteed by U.S. Government agencies and
instrumentalities which are supported by any of the following: (a) the full
faith and credit of the U.S. Treasury, (b) the right of the issuer to borrow an
amount limited to a specific line of credit from the U.S. Treasury, (c)
discretionary authority of the U.S. Government to purchase certain obligations
of the U.S. Government agency or instrumentality or (d) the credit of the agency
or instrumentality. The Fund may also invest in any other security or agreement
collateralized or otherwise secured by U.S. Government securities. Agencies and
instrumentalities of the U.S. Government include but are not limited to: Federal
Land Banks, Federal Financing Banks, Banks for Cooperatives, Federal
Intermediate Credit Banks, Farm Credit Banks, Federal Home Loan Banks, FHLMC,
FNMA, GNMA, Student Loan Marketing Association, United States Postal Service,
Small Business Administration, Tennessee Valley Authority and any other
enterprise established or sponsored by the U.S. Government. Because the U.S.
Government generally is not obligated to provide support to its
instrumentalities, the Fund will invest in obligations issued by these
instrumentalities only if the Adviser determines that the credit risk with
respect to such obligations is minimal.

The principal of and/or interest on certain U.S. Government securities which may
be purchased by the Fund could be (a) payable in foreign currencies rather than
U.S. dollars or (b) increased or diminished as a result of changes in the value
of the U.S. dollar relative to the value of foreign currencies. The value of
such portfolio securities denominated in foreign currencies may be affected
favorably by changes in the exchange rate between foreign currencies and the
U.S. dollar.

SECURITIZED INTERESTS
The Fund may invest in certain asset-backed securities as discussed below.
Asset-backed securities are payment claims that are securitized in the form of
negotiable paper that is issued by a financing company (generically called a
Special Purpose Vehicle or "SPV"). These securitized payment claims are, as a
rule, corporate financial assets brought into a pool according to specific
diversification rules. The SPV is a company founded solely for the purpose of
securitizing these claims and its only asset is the risk arising out of this
diversified asset pool. On this basis, marketable securities are issued which,
due to the diversification of the underlying risk, generally represent a lower
level of risk than the original assets. The redemption of the securities issued
by the SPV takes place at maturity out of the cash flow generated by the
collected claims. Asset-backed securities may be issued by the U.S. government,
its agencies or instrumentalities, or by non-governmental issuers.

CMOs. The CMO classes in which the Fund may invest include sequential and
parallel pay CMOs, including planned amortization class and target amortization
class securities. CMOs are debt securities issued by either the U.S. government
(or one of its agencies or instrumentalities) or private issuers. The key
feature of the CMO structure is the prioritization of the cash flows from a pool
of mortgages among the several classes of CMO holders, thereby creating a series
of obligations with varying rates and maturities appealing to a wide range of
investors. CMOs generally are secured by an assignment to a trustee under the
indenture pursuant to which the bonds are issued of collateral consisting of a
pool of mortgages. Payments with respect to the underlying mortgages generally
are made to the trustee under the indenture. CMOs are issued in two or more
classes or series with varying maturities

--------------------------------------------------------------------------------
17

INVESTMENT OBJECTIVES, POLICIES AND RISKS
--------------------------------------------------------------------------------

and stated rates of interest determined by the issuer. Senior CMO classes will
typically have priority over residual CMO classes as to the receipt of principal
and/or interest payments on the underlying mortgages. Because the interest and
principal payments on the underlying mortgages are not passed through to holders
of CMOs, CMOs of varying maturities may be secured by the same pool of
mortgages, the payments on which are used to pay interest to each class and to
retire successive maturities in sequence. CMOs are designed to be retired as the
underlying mortgages are repaid. In the event of sufficient early prepayments on
such mortgages, the class or series of CMO first to mature generally will be
retired prior to maturity. Therefore, although in most cases the issuer of CMOs
will not supply additional collateral in the event of such prepayments, there
will be sufficient collateral to secure CMOs that remain outstanding. Currently,
the Adviser will consider privately issued CMOs or other mortgage-backed
securities as possible investments for the Fund only when the mortgage
collateral is insured, guaranteed or otherwise backed by the U.S. Government or
one or more of its agencies or instrumentalities (e.g., insured by the Federal
Housing Administration or Farmers Home Administration or guaranteed by the
Administrator of Veterans Affairs or consisting in whole or in part of U.S.
Government securities).

Collateralized debt obligations ("CDOs"). The Fund may invest in CDOs. A CDO is
a structured credit security issued by a special purpose entity that was created
to reapportion the risk and return characteristics of a pool of assets. The
assets, typically non-investment grade bonds, leveraged loans, and other
asset-backed obligations, are used as collateral supporting the various debt and
equity tranches issued by the special purpose entity. CDOs operate similarly to
CMOs and CLOs and are subject to the same inherent risks.

Collateralized loan obligations ("CLOs"). A CLO is a type of CDO that invests
primarily in leveraged loans as collateral underlying the obligations of the
special purpose entity. CLOs operate similarly to CMOs and are subject to the
same inherent risks.

MORTGAGE ROLLS
The Fund may enter into mortgage "dollar rolls" in which the Fund sells
mortgage-backed securities for delivery in the current month and simultaneously
contracts to repurchase substantially similar (same type, coupon and maturity)
securities on a specified future date. During the roll period, the Fund forgoes
principal and interest paid on the mortgage-backed securities. The Fund is
compensated by the difference between the current sales price and the lower
forward price for the future purchase (often referred to as the "drop") as well
as by the interest earned on the cash proceeds of the initial sales. A "covered
roll" is a specific type of dollar roll for which there is an offsetting cash
position or a cash equivalent security position which matures on or before the
forward settlement date of the dollar roll transaction. The Fund will only enter
into covered rolls. Covered rolls are not treated as a borrowing or other senior
security and will be excluded from the calculation of the Fund's borrowings and
other senior securities.

CREDIT-LINKED NOTES
The Fund may invest in credit-linked notes ("CLN"). A CLN is a derivative
instrument. It is a synthetic obligation between two or more parties where the
payment of principal and/or interest is based on the performance of some
obligation (a reference obligation). In addition to credit risk of the reference
obligation and interest rate risk, the buyer/seller of the CLN is subject to
counterparty risk.

COMMERCIAL PAPER
Commercial paper represents short-term unsecured promissory notes issued in
bearer form by corporations such as banks or bank holding companies and finance
companies. The rate of return on commercial paper may be linked or indexed to
the level of exchange rates between the U.S. dollar and a foreign currency or
currencies.

--------------------------------------------------------------------------------
18

INVESTMENT OBJECTIVES, POLICIES AND RISKS
--------------------------------------------------------------------------------

WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS
Securities may be purchased on a "forward commitment" or "when-issued" basis
(meaning securities are purchased or sold with payment and delivery taking place
in the future) in order to secure what is considered to be an advantageous price
and yield at the time of entering into the transaction. However, the yield on a
comparable security when the transaction is consummated may vary from the yield
on the security at the time that the forward commitment or when-issued
transaction was made. From the time of entering into the transaction until
delivery and payment is made at a later date, the securities that are the
subject of the transaction are subject to market fluctuations. In forward
commitment or when-issued transactions, if the seller or buyer, as the case may
be, fails to consummate the transaction the counterparty may miss the
opportunity of obtaining a price or yield considered to be advantageous. Forward
commitment or when-issued transactions may be expected to occur a month or more
before delivery is due. However, no payment or delivery is made until payment is
received or delivery is made from the other party to the transaction. Forward
commitment or when-issued transactions are not entered into for the purpose of
investment leverage.

ILLIQUID SECURITIES
The Fund may invest in securities for which there is no readily available
trading market or are otherwise illiquid. 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 Adviser pursuant to
procedures adopted by the Board, 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 the 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 it 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.

SWAPS
Swap contracts may be purchased or sold to hedge against fluctuations in
securities prices, interest rates or market conditions, to change the duration
of the overall portfolio, or to mitigate default risk. In a standard "swap"
transaction, two parties agree to exchange the returns (or differentials in
rates of return) to be exchanged or "swapped" between the parties, which returns
are calculated with respect to a "notional amount," i.e., the return on or
increase in value of a particular dollar amount invested at a particular
interest rate or in a "basket" of securities representing a particular index.

Interest Rate Swaps. The Fund will enter into interest rate and total return
swaps only on a net basis, i.e., the two payment streams are netted out, with
the Fund receiving or paying, as the case may be, only the net amount of the two
payments. Interest rate swaps involve the exchange by the Fund with another
party of their respective commitments to pay or receive interest (e.g., an
exchange of fixed rate payments for floating rate payments). The Fund will only
enter into interest rate swaps on a net basis (i.e., the two payment streams are
netted out with the Fund receiving or paying, as the case may be, only the net
amount of the two payments). If the other party to an interest rate swap
defaults, the Fund's risk of loss consists of the net amount of payments that
the Fund is contractually entitled to receive. The net amount of the excess, if
any, of the Fund's obligations over its entitlements will be

--------------------------------------------------------------------------------
19

INVESTMENT OBJECTIVES, POLICIES AND RISKS
--------------------------------------------------------------------------------

maintained in a segregated account by the Fund's custodian. The Fund will not
enter into any interest rate swap unless the claims-paying ability of the other
party thereto is considered to be investment grade by the Adviser. If there is a
default by the other party to such a transaction, the Fund will have contractual
remedies pursuant to the agreements related to the transaction. These
instruments are traded in the over-the-counter market.

The Fund may use interest rate swaps for risk management purposes only and not
as a speculative investment and would typically use interest rate swaps to
shorten the average interest rate reset time of the Fund's holdings. Interest
rate swaps involve the exchange by the Fund with another party of their
respective commitments to pay or receive interests (e.g., an exchange of fixed
rate payments for floating rate payments). The use of interest rate swaps is a
highly specialized activity which involves investment techniques and risks
different from those associated with ordinary portfolio securities transactions.
If the Adviser is incorrect in its forecasts of market values, interest rates
and other applicable factors, the investment performance of the Fund would be
unfavorably affected.

Total Return Swaps. As stated above, the Fund will enter into total return
swaps only on a net basis. Total return swaps are contracts in which one party
agrees to make payments of the total return from the underlying asset(s) which
may include securities, baskets of securities, or securities indices during the
specified period, in return for payments equal to a fixed or floating rate of
interest or the total return from other underlying asset(s).

Credit Default Swaps. The Fund may enter into credit default swap contracts for
risk management purposes, including diversification. When the Fund is the buyer
of a credit default swap contract, the Fund is entitled to receive the par (or
other agreed-upon) value of a referenced debt obligation from the counterparty
to the contract in the event of a default by a third party, such as a U.S. or
foreign corporate issuer, on the debt obligation. In return, the Fund would pay
the counterparty a periodic stream of payments over the term of the contract
provided that no event of default has occurred. If no default occurs, the Fund
would have spent the stream of payments and received no benefit from the
contract. When the Fund is the seller of a credit default swap contract, it
receives the stream of payments but is obligated to pay upon default of the
referenced debt obligation. As the seller, the Fund would effectively add
leverage to its portfolio because, in addition to its total net assets, the Fund
would be subject to investment exposure on the notional amount of the swap. The
Fund will segregate assets in the form of cash and cash equivalents in an amount
equal to the aggregate market value of the credit default swaps of which it is
the seller, marked to market on a daily basis. These transactions involve
certain risks, including the risk that the seller may be unable to fulfill the
transaction.

FUTURES AND OPTIONS ON FUTURES
The fund may purchase and sell various kinds of financial futures contracts and
options thereon to seek to hedge against changes in interest rates or for other
risk management purposes. Futures contracts may be based on various debt
securities and securities indices (such as the Municipal Bond Index traded on
the Chicago Board of Trade). Such transactions involve a risk of loss or
depreciation due to unanticipated adverse changes in securities prices, which
may exceed the fund's initial investment in these contracts. The Fund will only
purchase or sell futures contracts or related options in compliance with the
rules of the Commodity Futures Trading Commission. These transactions involve
transaction costs. There can be no assurance that Eaton Vance's use of futures
will be advantageous to the Fund. Rating Agency guidelines on any preferred
shares issued by the Fund may limit use of these transactions.

SECURITIES LENDING
The Fund may seek to earn income by lending portfolio securities to
broker-dealers or other institutional borrowers. As with other extensions of
credit, there are risks of delay in recovery or even

--------------------------------------------------------------------------------
20

INVESTMENT OBJECTIVES, POLICIES AND RISKS
--------------------------------------------------------------------------------

loss of rights in the securities loaned if the borrower of the securities fails
financially. In the judgment of the Adviser, the loans will be made only to
organizations whose credit quality or claims paying ability is considered to be
at least investment grade and when the expected returns, net of administrative
expenses and any finders' fees, justifies the attendant risk. Securities loans
currently are required to be secured continuously by collateral in cash, cash
equivalents (such as money market instruments) or other liquid securities held
by the custodian and maintained in an amount at least equal to the market value
of the securities loaned. The financial condition of the borrower will be
monitored by the Adviser on an ongoing basis.

BORROWINGS
The Fund may borrow money to the extent permitted under the 1940 Act as
interpreted, modified or otherwise permitted by regulatory authority having
jurisdiction, from time to time. The Fund may from time to time borrow money to
add leverage to the portfolio. The Fund may also borrow money for temporary
administrative purposes.

REVERSE REPURCHASE AGREEMENTS
The Fund may enter into reverse repurchase agreements. Under a reverse
repurchase agreement, the Fund temporarily transfers possession of a portfolio
instrument to another party, such as a bank or broker-dealer, in return for
cash. At the same time, the Fund agrees to repurchase the instrument at an
agreed upon time (normally within seven days) and price, which reflects an
interest payment. The Fund may enter into such agreements when it is able to
invest the cash acquired at a rate higher than the cost of the agreement, which
would increase earned income.

When the Fund enters into a reverse repurchase agreement, any fluctuations in
the market value of either the securities transferred to another party or the
securities in which the proceeds may be invested would affect the market value
of the Fund's assets. As a result, such transactions may increase fluctuations
in the market value of the Fund's assets. While there is a risk that large
fluctuations in the market value of the Fund's assets could affect net asset
value, this risk is not significantly increased by entering into reverse
repurchase agreements, in the opinion of the Adviser. Because reverse repurchase
agreements may be considered to be the practical equivalent of borrowing funds,
they constitute a form of leverage. Such agreements will be treated as subject
to investment restrictions regarding "borrowings." If the Fund reinvests the
proceeds of a reverse repurchase agreement at a rate lower than the cost of the
agreement, entering into the agreement will lower the Fund's yield.

PORTFOLIO TURNOVER
The Fund cannot accurately predict its portfolio turnover rate, but the annual
turnover rate may exceed 100% (excluding turnover of securities having a
maturity of one year or less). A high turnover rate (100% or more) necessarily
involves greater expenses to the Fund and may result in a realization of net
short-term capital gains. The Fund may engage in active short-term trading to
benefit from yield disparities among different issues of securities or among the
markets for fixed income securities of different countries, to seek short-term
profits during periods of fluctuating interest rates, or for other reasons. Such
trading will increase the Fund's rate of turnover and may increase the incidence
of net short-term capital gains which, upon distribution by the Fund, are
taxable to Fund Shareholders as ordinary income.

USE OF LEVERAGE AND RELATED RISKS

The Fund expects to use leverage through the issuance of preferred shares,
and/or through borrowings, including the issuance of debt securities. The Fund
initially intends to use leverage of approximately 34% of its gross assets
(including the amount obtained from leverage). The Fund generally will not use
leverage if the Adviser anticipates that it would result in a lower return to
Shareholders for any

--------------------------------------------------------------------------------
21

INVESTMENT OBJECTIVES, POLICIES AND RISKS
--------------------------------------------------------------------------------

significant amount of time. The Fund also may borrow money as a temporary
measure for extraordinary or emergency purposes, including the payment of
dividends and the settlement of securities transactions which otherwise might
require untimely dispositions of Fund securities.

Leverage creates risks for holders of the Shares, including the likelihood of
greater volatility of net asset value and market price of the Shares. There is a
risk that fluctuations in the dividend rates on any preferred shares may
adversely affect the return to the holders of the Shares. If the income from the
securities purchased with such funds is not sufficient to cover the cost of
leverage, the return on the Fund will be less than if leverage had not been
used, and therefore the amount available for distribution to Shareholders as
dividends and other distributions will be reduced. The Adviser in its best
judgment nevertheless may determine to maintain the Fund's leveraged position if
it deems such action to be appropriate in the circumstances. During periods in
which the Fund is using leverage the fees paid to Eaton Vance for investment
advisory services will be higher than if the Fund did not use leverage because
the fees paid will be calculated on the basis of the Fund's gross assets,
including proceeds from the issuance of preferred shares. As discussed under
"Description of capital structure," the Fund's issuance of preferred shares may
alter the voting power of common shareholders.

Capital raised through leverage will be subject to dividend payments, which may
exceed the income and appreciation on the assets purchased. The issuance of
preferred shares involves offering expenses and other costs and may limit the
Fund's freedom to pay dividends on Shares or to engage in other activities. The
issuance of a class of preferred shares having priority over the Fund's Shares
creates an opportunity for greater return per Share, but at the same time such
leveraging is a speculative technique in that it will increase the Fund's
exposure to capital risk. Unless the income and appreciation, if any, on assets
acquired with offering proceeds exceed the cost of issuing additional classes of
securities (and other Fund expenses), the use of leverage will diminish the
investment performance of the Fund's Shares compared with what it would have
been without leverage.

The Fund may be subject to certain restrictions on investments imposed by
guidelines of one or more Rating Agencies that may issue ratings for any
preferred shares issued by the Fund. These guidelines may impose asset coverage
or Fund composition requirements that are more stringent than those imposed on
the Fund by the 1940 Act. It is not anticipated that these covenants or
guidelines will impede the Adviser from managing the Fund's portfolio in
accordance with the Fund's investment objectives and policies.

Under the Investment Company Act, the Fund is not permitted to issue preferred
shares unless immediately after such issuance the total asset value of the
Fund's portfolio is at least 200% of the liquidation value of the outstanding
preferred shares (i.e., such liquidation value may not exceed 50% of the Fund's
total assets). In addition, the Fund is not permitted to declare any cash
dividend or other distribution on its Shares unless, at the time of such
declaration, the net asset value of the Fund's portfolio (determined after
deducting the amount of such dividend or other distribution) is at least 200% of
such liquidation value. If preferred shares are issued, the Fund intends, to the
extent possible, to purchase or redeem preferred shares, from time to time, to
maintain coverage of any preferred shares of at least 200%. If the Fund issues
preferred shares amounting to 34% leverage, there will be an asset coverage of
294%. Normally, holders of the Shares will elect five of the Trustees of the
Fund and holders of any preferred shares will elect two. In the event the Fund
failed to pay dividends on its preferred shares for two years, preferred
shareholders would be entitled to elect a majority of the Trustees until the
dividends are paid.

To qualify for federal income taxation as a "regulated investment company," the
Fund must distribute in each taxable year at least 90% of its net investment
income (including net interest income and net short-term gain). The Fund also
will be required to distribute annually substantially all of its income and
capital gain, if any, to avoid imposition of a nondeductible 4% federal excise
tax. If the Fund is

--------------------------------------------------------------------------------
22

INVESTMENT OBJECTIVES, POLICIES AND RISKS
--------------------------------------------------------------------------------

precluded from making distributions on the Shares because of any applicable
asset coverage requirements, the terms of the preferred shares may provide that
any amounts so precluded from being distributed, but required to be distributed
for the Fund to meet the distribution requirements for qualification as a
regulated investment company, will be paid to the holders of the preferred
shares as a special dividend. This dividend can be expected to decrease the
amount that holders of preferred shares would be entitled to receive upon
redemption or liquidation of the shares.

The Fund's willingness to issue new securities for investment purposes, and the
amount the Fund will issue, will depend on many factors, the most important of
which are market conditions and interest rates. Successful use of a leveraging
strategy may depend on the Adviser's ability to predict correctly interest rates
and market movements, and there is no assurance that a leveraging strategy will
be successful during any period in which it is employed.

Assuming the utilization of leverage in the amount of 34% of the Fund's gross
assets and an annual dividend rate on preferred shares of 1.35% payable on such
leverage based on market rates as of the date of this Prospectus, the additional
income that the Fund must earn (net of expenses) in order to cover such dividend
payments is 0.70%. The Fund's actual cost of leverage will be based on market
rates at the time the Fund undertakes a leveraging strategy, and such actual
cost of leverage may be higher or lower than that assumed in the previous
example.

The following table is designed to illustrate the effect on the return to a
holder of the Fund's Shares of leverage in the amount of approximately 34% of
the Fund's gross assets, assuming hypothetical annual returns of the Fund's
portfolio of minus 10% to plus 10%. As the table shows, leverage generally
increases the return to Shareholders when portfolio return is positive and
greater than the cost of leverage and decreases the return when the portfolio
return is negative or less than the cost of leverage. The figures appearing in
the table are hypothetical and actual returns may be greater or less than those
appearing in the table.

Assumed portfolio return (net of expenses)........ (10)% (5)% 0% 5% 10%
Corresponding Share return assuming 34%
leverage........................................ (15.85)% (8.27)% (0.70)% 6.88% 14.46%

Until the Fund issues preferred shares, the Shares will not be leveraged, and
the risks and special considerations related to leverage described in this
Prospectus will not apply. Such leveraging of the Shares cannot be achieved
until the proceeds resulting from the use of leverage have been invested in
accordance with the Fund's investment objectives and policies.

ADDITIONAL RISK CONSIDERATIONS

NO OPERATING HISTORY
The Fund is a closed-end management investment company with no history of
operations and is designed for long-term investors and not as a trading vehicle.

INCOME RISK
The income investors receive from the Fund is based primarily on the interest it
earns from its investments, which can vary widely over the short and long-term.
If prevailing market interest rates drop, investors' income from the Fund over
time could drop as well. The Fund's income could also be affected already when
prevailing short-term interest rates increase and the Fund is utilizing
leverage, although this risk is mitigated by the Fund's investment in Senior
Loans.

--------------------------------------------------------------------------------
23

INVESTMENT OBJECTIVES, POLICIES AND RISKS
--------------------------------------------------------------------------------

interruptions in the payment of interest and principal. Default refers to the
potential for unrecoverable principal loss from the sale of foreclosed
collateral or the Fund's inherent right to forgive principal or modify a debt
instrument. For MBS, factors contributing to these risks include the effects of
general and local economic conditions on home values, the financial conditions
of homeowners, and other market factors. This risk is mitigated by a U.S.
government agency's or instrumentality's guarantee of the underlying debt
obligation.

PREPAYMENT RISK
During periods of declining interest rates or for other purposes, the borrowers
may exercise their option to prepay principal earlier than scheduled, forcing
the Fund to reinvest in lower yielding securities. This is known as call or
prepayment risk. Non-Investment Grade Bonds frequently have call features that
allow the issuer to redeem the security at dates prior to its stated maturity at
a specified price only if certain prescribed conditions are met ("call
protection"). An issuer may redeem a high yield obligation if, for example, the
issuer can refinance the debt at a lower cost due to declining interest rates or
an improvement in the credit standing of the issuer. Senior Loans and MBS
typically have no such call protection. For premium bonds (bonds acquired at
prices that exceed their par or principal value) purchased by the Fund,
prepayment risk may be enhanced.

DERIVATIVES RISK
Derivative transactions (such as futures contracts and options thereon, options,
swaps and short sales) subject the Fund to increased risk of principal loss due
to imperfect correlation or unexpected price or interest rate movements. The
Fund also will be subject to credit risk with respect to the counterparties to
the derivatives contracts purchased by the Fund. If a counterparty becomes
bankrupt or otherwise fails to perform its obligations under a derivative
contract due to financial difficulties, the Fund may experience significant
delays in obtaining any recovery under the derivative contract in a bankruptcy
or other reorganization proceeding. The Fund may obtain only a limited recovery
or may obtain no recovery in such circumstances.

--------------------------------------------------------------------------------
24

INVESTMENT OBJECTIVES, POLICIES AND RISKS
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
25

INVESTMENT OBJECTIVES, POLICIES AND RISKS
--------------------------------------------------------------------------------

Management of the Fund

BOARD OF TRUSTEES

The management of the Fund, including general supervision of the duties
performed by the Adviser under the Advisory Agreement (as defined below), is the
responsibility of the Fund's Board under the laws of The Commonwealth of
Massachusetts and the 1940 Act.

THE ADVISER

Eaton Vance acts as the Fund's investment adviser under an Investment Advisory
Agreement (the "Advisory Agreement"). The Adviser's principal office is located
at The Eaton Vance Building, 255 State Street, Boston, MA 02109. Eaton Vance,
its affiliates and predecessor companies have been managing assets of
individuals and institutions since 1924 and of investment companies since 1931.
Eaton Vance (or its affiliates) currently serves as the investment adviser to
investment companies and various individual and institutional clients with
combined assets under management of approximately $55 billion as of March 31,
2003. Eaton Vance is an indirect, wholly-owned subsidiary of Eaton Vance Corp.,
a publicly-held holding company, which through its subsidiaries and affiliates
engages primarily in investment management, administration and marketing
activities.

Under the general supervision of the Fund's Board, the Adviser will carry out
the investment and reinvestment of the assets of the Fund, will furnish
continuously an investment program with respect to the Fund, will determine
which securities should be purchased, sold or exchanged, and will implement such
determinations. The Adviser will furnish to the Fund investment advice and
office facilities, equipment and personnel for servicing the investments of the
Fund. The Adviser will compensate all Trustees and officers of the Fund who are
members of the Adviser's organization and who render investment services to the
Fund, and will also compensate all other Adviser personnel who provide research
and investment services to the Fund. In return for these services, facilities
and payments, the Fund has agreed to pay the Adviser as compensation under the
Advisory Agreement a fee in the amount of 0.75% of the average weekly gross
assets of the Fund. Gross assets of the Fund shall be calculated by deducting
accrued liabilities of the Fund not including the amount of any preferred shares
outstanding or the principal amount of any indebtedness for money borrowed.
During periods in which the Fund is using leverage, the fees paid to Eaton Vance
for investment advisory services will be higher than if the Fund did not use
leverage because the fees paid will be calculated on the basis of the Fund's
gross assets, including proceeds from any borrowings and from the issuance of
preferred shares.

Thomas E. Faust, Jr. (Executive Vice President and Chief Investment Officer of
Eaton Vance), Susan Schiff, Scott H. Page, Payson F. Swaffield, Michael
Weilheimer and other Eaton Vance investment professionals comprise the
investment team responsible for the overall management of the Fund's investments
as well as allocations among the Fund's three principal investment categories.
The

--------------------------------------------------------------------------------
26

MANAGEMENT OF THE FUND
--------------------------------------------------------------------------------

following individual members of this team are responsible for the day-to-day
management with each of the Fund's three main asset classes:

MBS. Ms. Schiff is responsible for the day-to-day management of the Fund's MBS
strategy. Ms. Schiff, has been an Eaton Vance portfolio manager since 1991, and
is a Vice President of Eaton Vance. Among other portfolios, she currently
manages Eaton Vance Government Obligations Fund, a registered open-end fund,
which employs an investment strategy primarily focused on MBS. As of March 31,
2003, this fund had assets of $1.8 billion.

Senior Loans. Mr. Page and Mr. Swaffield are responsible for the day-to-day
management of the Fund's Senior Loan strategy. Among other portfolios, Mr. Page
and Mr. Swaffield have each been Eaton Vance portfolio managers since 1996, and
are Vice Presidents of Eaton Vance. They currently co-manage Eaton Vance Prime
Rate Reserves, a registered closed-end interval fund, Eaton Vance Classic Senior
Floating-Rate Fund, a registered closed-end interval fund, Eaton Vance
Floating-Rate Fund, a registered open-end fund, Eaton Vance Floating-Rate High
Income Fund, a registered open-end fund, and Eaton Vance Senior Income Trust, a
registered closed-end fund listed on the New York Stock Exchange, all of which
employ investment strategies primarily focused on Senior Loans. As of March 31,
2003, these funds had combined assets of $3.2 billion. See "Additional
investment information and restrictions -- Litigation involving Eaton Vance" in
the SAI for further information.

Non-Investment Grade Bonds. Mr. Weilheimer is responsible for the day-to-day
management of the Fund's Non-Investment Grade Bond strategy. Mr. Weilheimer has
been an Eaton Vance portfolio manager since 1996, and is a Vice President of
Eaton Vance. Among other portfolios, he currently co-manages Eaton Vance High
Income Fund, a registered open-end fund, and Eaton Vance Income Fund of Boston,
a registered open-end fund, both of which employ investment strategies primarily
focused on Non-Investment Grade Bonds. As of March 31, 2003, these funds had
combined assets of $1.8 billion.

The Fund and the Adviser have adopted a Code of Ethics relating to personal
securities transactions. The Code permits Adviser personnel to invest in
securities (including securities that may be purchased or held by the Fund) for
their own accounts, subject to certain pre-clearance, reporting and other
restrictions and procedures contained in such Code.

Eaton Vance serves as administrator of the Fund but currently receives no
compensation for providing administrative services to the Fund. Under an
Administration Agreement with the Fund ("Administration Agreement"), Eaton Vance
is responsible for managing the business affairs of the Fund, subject to the
supervision of the Fund's Board. Eaton Vance will furnish to the Fund all office
facilities, equipment and personnel for administering the affairs of the Fund.
Eaton Vance's administrative services include recordkeeping, preparation and
filing of documents required to comply with federal and state securities laws,
supervising the activities of the Fund's custodian and transfer agent, providing
assistance in connection with the Trustees' and shareholders' meetings,
providing service in connection with any repurchase offers and other
administrative services necessary to conduct the Fund's business.

Distributions

The Fund intends to make monthly distributions of net investment income, after
payment of interest on any outstanding borrowings or dividends on any
outstanding preferred shares. The Fund will distribute annually any net
short-term capital gain and any net capital gain (which is the excess of net
long-term capital gain over short-term capital loss). Distributions to
Shareholders cannot be assured, and the amount of each monthly distribution is
likely to vary. Initial distributions to Shareholders are expected to be
declared approximately 45 days and paid approximately 60 to 90 days after the

--------------------------------------------------------------------------------
27

DISTRIBUTIONS
--------------------------------------------------------------------------------

completion of this offering depending on market conditions. While there are any
borrowings or preferred shares outstanding, the Fund may not be permitted to
declare any cash dividend or other distribution on its Shares in certain
circumstances. See "Description of capital structure."

FEDERAL INCOME TAX MATTERS

The following discussion of federal income tax matters is based on the advice of
Kirkpatrick & Lockhart LLP, counsel to the Fund.

The Fund intends to make monthly distributions of net investment income after
payment of dividends on any outstanding preferred shares or interest on any
outstanding borrowings. The Fund will distribute annually any net short-term
capital gain (which are taxable as ordinary income) and any net capital gain.
Distributions of the Fund's net capital gains ("capital gain dividends"), if
any, are taxable to Shareholders as long-term capital gains, regardless of the
length of time Shares have been held by Shareholders. Distributions, if any, in
excess of the Fund's earnings and profits will first reduce the adjusted tax
basis of a holder's Shares and, after that basis has been reduced to zero, will
constitute capital gains to the Shareholder (assuming the Shares are held as a
capital asset). See below for a summary of the maximum tax rates applicable to
capital gains (including capital gain dividends). Dividends will not qualify for
a dividends received deduction generally available to corporate Shareholders.

The Fund will inform Shareholders of the source and tax status of all
distributions promptly after the close of each calendar year.

Selling Shareholders will generally recognize gain or loss in an amount equal to
the difference between the Shareholder's adjusted tax basis in the Shares sold
and the amount received. If the Shares are held as a capital asset, the gain or
loss will be a capital gain or loss. The maximum tax rate applicable to net
capital gains recognized by individuals and other non-corporate taxpayers is (i)
the same as the maximum ordinary income tax rate for gains recognized on the
sale of capital assets held for one year or less, (ii) 20% for gains recognized
on the sale of capital assets held for more than one year (as well as certain
capital gain dividends) (10% for individuals in the 10% or 15% tax brackets) or
(iii) 18% for gains on the sale of certain capital assets held more than 5 years
(as well as certain capital gain dividends) (8% for individuals in the 10% or
15% tax brackets). Any loss on a disposition of Shares held for six months or
less will be treated as a long-term capital loss to the extent of any capital
gain dividends received with respect to those Shares. For purposes of
determining whether Shares have been held for six months or less, the holding
period is suspended for any periods during which the Shareholder's risk of loss
is diminished as a result of holding one or more other positions in
substantially similar or related property, or through certain options or short
sales. Any loss realized on a sale or exchange of Shares will be disallowed to
the extent those Shares are replaced by other Shares within a period of 61 days
beginning 30 days before and ending 30 days after the date of disposition of the
Shares (whether through the reinvestment of distributions, which could occur,
for example, if the Shareholder is a participant in the Plan (as defined below)
or otherwise). In that event, the basis of the replacement Shares will be
adjusted to reflect the disallowed loss.

An investor should be aware that, if Shares are purchased shortly before the
record date for any taxable dividend (including a capital gain dividend), the
purchase price likely will reflect the value of the dividend and the investor
then would receive a taxable distribution likely to reduce the trading value of
such Shares, in effect resulting in a taxable return of some of the purchase
price. Taxable distributions to individuals and certain other non-corporate
Shareholders, including those who have not provided their correct taxpayer
identification number and other required certifications, may be subject to
"backup" federal income tax withholding at the fourth lowest rate of tax
applicable to a single individual (in 2003, 30%).

--------------------------------------------------------------------------------
28

DISTRIBUTIONS
--------------------------------------------------------------------------------

The foregoing briefly summarizes some of the important federal income tax
consequences to Shareholders of investing in Shares, reflects the federal tax
law as of the date of this Prospectus, and does not address special tax rules
applicable to certain types of investors, such as corporate and foreign
investors. Investors should consult their tax advisors regarding other federal,
state or local tax considerations that may be applicable in their particular
circumstances, as well as any proposed tax law changes.

Dividend reinvestment plan

Pursuant to the Fund's dividend reinvestment plan (the "Plan"), a Shareholder
may elect to have all distributions of dividends (including all capital gain
dividends) automatically reinvested in Shares. Shareholders may elect to
participate in the Plan by completing the dividend reinvestment plan application
form. If Shareholders do not participate, such Shareholders will receive all
distributions in cash paid by check mailed directly to them by PFPC Inc., as
dividend paying agent.

PFPC Inc. (the "Plan Agent") serves as agent for the Shareholders in
administering the Plan. Shareholders who elect not to participate in the Plan
will receive all distributions of dividends in cash paid by check mailed
directly to the Shareholder of record (or if the Shares are held in street or
other nominee name, then to the nominee) by PFPC Inc., as disbursing agent.
Participation in the Plan is completely voluntary and may be terminated or
resumed at any time without penalty by written notice if received by the Plan
Agent prior to any dividend record date.

Shares will be acquired by the Plan Agent or an independent broker-dealer for
the participants' accounts, depending upon the circumstances described below,
either (i) through receipt of additional previously authorized but unissued
Shares from the Fund ("newly issued Shares") or (ii) by purchase of outstanding
Shares on the open market ("open-market purchases") on the American Stock
Exchange or elsewhere. If on the payment date for the dividend, the net asset
value per Share is equal to or less than the market price per Share plus
estimated brokerage commissions (such condition being referred to herein as
"market premium"), the Plan Agent will invest the dividend amount in newly
issued Shares on behalf of the participants. The number of newly issued Shares
to be credited to each participant's account will be determined by dividing the
dollar amount of the dividend by the net asset value per Share on the date the
Shares are issued, provided that the maximum discount from the then current
market price per Share on the date of issuance may not exceed 5%. If on the
dividend payment date the net asset value per Share is greater than the market
value plus estimated brokerage commissions (such condition being referred to
herein as "market discount"), the Plan Agent will invest the dividend amount in
Shares acquired on behalf of the participants in open-market purchases.

In the event of a market discount on the dividend payment date, the Plan Agent
will have up to 30 days after the dividend payment date to invest the dividend
amount in Shares acquired in open-market purchases. If, before the Plan Agent
has completed its open-market purchases, the market price of a Share exceeds the
net asset value per Share, the average per Share purchase price paid by the Plan
Agent may exceed the net asset value of the Fund's Shares, resulting in the
acquisition of fewer Shares than if the dividend had been paid in newly issued
Shares on the dividend payment date. Therefore, the Plan provides that if the
Plan Agent is unable to invest the full dividend amount in open-market purchases
during the purchase period or if the market discount shifts to a market premium
during the purchase period, the Plan Agent will cease making open-market
purchases and will invest the uninvested portion of the dividend amount in newly
issued Shares.

The Plan Agent maintains all Shareholders' accounts in the Plan and furnishes
written confirmation of all transactions in the accounts, including information
needed by Shareholders for tax records. Shares in the account of each Plan
participant will be held by the Plan Agent on behalf of the Plan

--------------------------------------------------------------------------------
29

DIVIDEND REINVESTMENT PLAN
--------------------------------------------------------------------------------

participant, and each Shareholder proxy will include those Shares purchased or
received pursuant to the Plan. The Plan Agent will forward all proxy
solicitation materials to participants and vote proxies for Shares held pursuant
to the Plan in accordance with the instructions of the participants.

In the case of Shareholders such as banks, brokers or nominees that hold Shares
for others who are the beneficial owners, the Plan Agent will administer the
Plan on the basis of the number of Shares certified from time to time by the
record Shareholder's name and held for the account of beneficial owners who
participate in the Plan.

There will be no brokerage charges with respect to Shares issued directly by the
Fund as a result of dividends payable either in Shares or in cash. However, each
participant will pay a pro rata share of brokerage commissions incurred with
respect to the Plan Agent's open-market purchases in connection with the
reinvestment of dividends.

Shareholders participating in the Plan may receive benefits not available to
Shareholders not participating in the Plan. If the market price (plus
commissions) of the Fund's Shares is above their net asset value, participants
in the Plan will receive Shares of the Fund at less than they could otherwise
purchase them and will have Shares with a cash value greater than the value of
any cash distribution they would have received on their Shares. If the market
price plus commissions is below the net asset value, participants will receive
distributions in Shares with a net asset value greater than the per Share value
of any cash distribution they would have received on their Shares. However,
there may be insufficient Shares available in the market to make distributions
in Shares at prices below the net asset value. Also, since the Fund does not
redeem its Shares, the price on resale may be more or less than the net asset
value.

Experience under the Plan may indicate that changes are desirable. Accordingly,
upon 30 days' notice to Plan participants, the Fund reserves the right to amend
or terminate the Plan. Shareholders will be charged a $5.00 service charge and
pay brokerage charges if such Shareholder directs the Plan Agent to sell Shares
held in a dividend reinvestment account.

All correspondence concerning the Plan should be directed to the Plan Agent at
PFPC Inc., P.O. Box 43027, Providence, RI 02940-3027. Please call 1-800-331-1710
between the hours of 9:00 a.m. and 5:00 p.m. Eastern Standard Time if you have
questions regarding the Plan.

--------------------------------------------------------------------------------
30

--------------------------------------------------------------------------------

Description of capital structure

The Fund is an unincorporated business trust established under the laws of The
Commonwealth of Massachusetts by an Agreement and Declaration of Trust dated
March 12, 2003 and filed with the Secretary of The Commonwealth on March 13,
2003 (the "Declaration of Trust"). The Declaration of Trust provides that the
Trustees of the Fund may authorize separate classes of shares of beneficial
interest. The Trustees have authorized an unlimited number of Shares. The Fund
intends to hold annual meetings of Shareholders in compliance with the
requirements of the American Stock Exchange.

SHARES
The Declaration of Trust permits the Fund to issue an unlimited number of full
and fractional Shares of beneficial interest, $0.01 par value per Share. Each
Share represents an equal proportionate interest in the assets of the Fund with
each other Share in the Fund. Holders of Shares will be entitled to the payment
of dividends when, as and if declared by the Board. The 1940 Act or the terms of
any borrowings or preferred shares may limit the payment of dividends to the
holders of Shares. Each whole Share shall be entitled to one vote as to matters
on which it is entitled to vote pursuant to the terms of the Declaration of
Trust on file with the SEC. Upon liquidation of the Fund, after paying or
adequately providing for the payment of all liabilities of the Fund and the
liquidation preference with respect to any outstanding preferred shares, and
upon receipt of such releases, indemnities and refunding agreements as they deem
necessary for their protection, the Trustees may distribute the remaining assets
of the Fund among the holders of the Shares. The Declaration of Trust provides
that Shareholders are not liable for any liabilities of the Fund, requires
inclusion of a clause to that effect in every agreement entered into by the Fund
and indemnifies shareholders against any such liability. Although shareholders
of an unincorporated business trust established under Massachusetts law, in
certain limited circumstances, may be held personally liable for the obligations
of the Fund as though they were general partners, the provisions of the
Declaration of Trust described in the foregoing sentence make the likelihood of
such personal liability remote.

While there are any borrowings or preferred shares outstanding, the Fund may not
be permitted to declare any cash dividend or other distribution on its Shares,
unless at the time of such declaration, (i) all accrued dividends on preferred
shares or accrued interest on borrowings have been paid and (ii) the value of
the Fund's total assets (determined after deducting the amount of such dividend
or other distribution), less all liabilities and indebtedness of the Fund not
represented by senior securities, is at least 300% of the aggregate amount of
such securities representing indebtedness and at least 200% of the aggregate
amount of securities representing indebtedness plus the aggregate liquidation
value of the outstanding preferred shares (expected to equal the aggregate
original purchase price of the outstanding preferred shares plus redemption
premium, if any, together with any accrued and unpaid dividends thereon, whether
or not earned or declared and on a cumulative basis). In addition to the
requirements of the 1940 Act, the Fund may be required to comply with other
asset coverage requirements as a condition of the Fund obtaining a rating of the
preferred shares from a Rating Agency. These requirements may include an asset
coverage test more stringent than under the 1940 Act. This limitation on the
Fund's ability to make distributions on its Shares could in certain
circumstances impair the ability of the Fund to maintain its qualification for
taxation as a regulated investment company for federal income tax purposes. The
Fund intends, however, to the extent possible to purchase or redeem preferred
shares or reduce borrowings from time to time to maintain compliance with such
asset coverage requirements and may pay special dividends to the holders of the
preferred shares in certain circumstances in connection with any such impairment
of the Fund's status as a regulated investment company. See "Investment
objectives, policies and risks" and "Distributions and taxes." Depending on the
timing of any such redemption or repayment, the Fund may be required to pay a
premium in addition to the liquidation preference of the preferred shares to the
holders thereof.

--------------------------------------------------------------------------------
31

DESCRIPTION OF CAPITAL STRUCTURE
--------------------------------------------------------------------------------

The Fund has no present intention of offering additional Shares, except as
described herein. Other offerings of its Shares, if made, will require approval
of the Board. Any additional offering will not be sold at a price per Share
below the then current net asset value (exclusive of underwriting discounts and
commissions) except in connection with an offering to existing Shareholders or
with the consent of a majority of the Fund's outstanding Shares. The Shares have
no preemptive rights.

The Fund generally will not issue Share certificates. However, upon written
request to the Fund's transfer agent, a share certificate will be issued for any
or all of the full Shares credited to an investor's account. Share certificates
that have been issued to an investor may be returned at any time.

REPURCHASE OF SHARES AND OTHER DISCOUNT MEASURES
Because shares of closed-end management investment companies frequently trade at
a discount to their net asset values, the Board has determined that from time to
time it may be in the interest of Shareholders for the Fund to take corrective
actions. The Board, in consultation with Eaton Vance, will review at least
annually the possibility of open market repurchases and/or tender offers for the
Shares and will consider such factors as the market price of the Shares, the net
asset value of the Shares, the liquidity of the assets of the Fund, effect on
the Fund's expenses, whether such transactions would impair the Fund's status as
a regulated investment company or result in a failure to comply with applicable
asset coverage requirements, general economic conditions and such other events
or conditions which may have a material effect on the Fund's ability to
consummate such transactions. There are no assurances that the Board will, in
fact, decide to undertake either of these actions or if undertaken, that such
actions will result in the Fund's Shares trading at a price which is equal to or
approximates their net asset value. In recognition of the possibility that the
Shares might trade at a discount to net asset value and that any such discount
may not be in the interest of Shareholders, the Board, in consultation with
Eaton Vance, from time to time may review possible actions to reduce any such
discount.

PREFERRED SHARES
The Declaration of Trust authorizes the issuance of an unlimited number of
shares of beneficial interest with preference rights, including preferred shares
(the "preferred shares"), having a par value of $0.01 per share, in one or more
series, with rights as determined by the Board, by action of the Board without
the approval of the Shareholders.

Under the requirements of the 1940 Act, the Fund must, immediately after the
issuance of any preferred shares, have an "asset coverage" of at least 200%.
Asset coverage means the ratio which the value of the total assets of the Fund,
less all liability and indebtedness not represented by senior securities (as
defined in the 1940 Act), bears to the aggregate amount of senior securities
representing indebtedness of the Fund, if any, plus the aggregate liquidation
preference of the preferred shares. If the Fund seeks a rating of the preferred
shares, asset coverage requirements, in addition to those set forth in the 1940
Act, may be imposed. The liquidation value of the preferred shares is expected
to equal their aggregate original purchase price plus redemption premium, if
any, together with any accrued and unpaid dividends thereon (on a cumulative
basis), whether or not earned or declared. The terms of the preferred shares,
including their dividend rate, voting rights, liquidation preference and
redemption provisions, will be determined by the Board (subject to applicable
law and the Fund's Declaration of Trust) if and when it authorizes the preferred
shares. The Fund may issue preferred shares that provide for the periodic
redetermination of the dividend rate at relatively short intervals through an
auction or remarketing procedure, although the terms of the preferred shares may
also enable the Fund to lengthen such intervals. At times, the dividend rate as
redetermined on the Fund's preferred shares may approach or exceed the Fund's
return after expenses on the investment of proceeds from the preferred shares
and the Fund's leverage structure would result in a lower rate of return to
Shareholders than if the Fund were not so structured.

--------------------------------------------------------------------------------
32

DESCRIPTION OF CAPITAL STRUCTURE
--------------------------------------------------------------------------------

In the event of any voluntary or involuntary liquidation, dissolution or winding
up of the Fund, the terms of any preferred shares may entitle the holders of
preferred shares to receive a preferential liquidating distribution (expected to
equal the original purchase price per share plus redemption premium, if any,
together with accrued and unpaid dividends, whether or not earned or declared
and on a cumulative basis) before any distribution of assets is made to holders
of Shares. After payment of the full amount of the liquidating distribution to
which they are entitled, the preferred shareholders would not be entitled to any
further participation in any distribution of assets by the Fund.

Holders of preferred shares, voting as a class, shall be entitled to elect two
of the Fund's Trustees. Under the 1940 Act, if at any time dividends on the
preferred shares are unpaid in an amount equal to two full years' dividends
thereon, the holders of all outstanding preferred shares, voting as a class,
will be allowed to elect a majority of the Fund's Trustees until all dividends
in default have been paid or declared and set apart for payment. In addition, if
required by the Rating Agency rating the preferred shares or if the Board
determines it to be in the best interests of the Shareholders, issuance of the
preferred shares may result in more restrictive provisions than required by the
1940 Act being imposed. In this regard, holders of the preferred shares may be
entitled to elect a majority of the Fund's Board in other circumstances, for
example, if one payment on the preferred shares is in arrears.

The Fund currently intends to seek a AAA credit rating for the preferred shares
from a Rating Agency. The Fund intends that, as long as preferred shares are
outstanding, the composition of its portfolio will reflect guidelines
established by such Rating Agency. Although, as of the date hereof, no such
Rating Agency has established guidelines relating to the preferred shares, based
on previous guidelines established by such Rating Agencies for the securities of
other issuers, the Fund anticipates that the guidelines with respect to the
preferred shares will establish a set of tests for portfolio composition and
asset coverage that supplement (and in some cases are more restrictive than) the
applicable requirements under the 1940 Act. Although, at this time, no assurance
can be given as to the nature or extent of the guidelines which may be imposed
in connection with obtaining a rating of the preferred shares, the Fund
currently anticipates that such guidelines will include asset coverage
requirements which are more restrictive than those under the 1940 Act,
restrictions on certain portfolio investments and investment practices,
requirements that the Fund maintain a portion of its assets in short-term,
high-quality, fixed-income securities and certain mandatory redemption
requirements relating to the preferred shares. No assurance can be given that
the guidelines actually imposed with respect to the preferred shares by such
Rating Agency will be more or less restrictive than as described in this
Prospectus.

ANTI-TAKEOVER PROVISIONS IN THE DECLARATION OF TRUST
The Declaration of Trust includes provisions that could have the effect of
limiting the ability of other entities or persons to acquire control of the Fund
or to change the composition of its Board, and could have the effect of
depriving Shareholders of an opportunity to sell their Shares at a premium over
prevailing market prices by discouraging a third party from seeking to obtain
control of the Fund. These provisions may have the effect of discouraging
attempts to acquire control of the Fund, which attempts could have the effect of
increasing the expenses of the Fund and interfering with the normal operation of
the Fund. The Board is divided into three classes, with the term of one class
expiring at each annual meeting of Shareholders. At each annual meeting, one
class of Trustees is elected to a three-year term. This provision could delay
for up to two years the replacement of a majority of the Board. A Trustee may be
removed from office only for cause by a written instrument signed by the
remaining Trustees or by a vote of the holders of at least two-thirds of the
class of shares of the Fund that elected such Trustee and are entitled to vote
on the matter.

In addition, the Declaration of Trust requires the favorable vote of the holders
of at least 75% of the outstanding shares of each class of the Fund, voting as a
class, then entitled to vote to approve, adopt

--------------------------------------------------------------------------------
33

DESCRIPTION OF CAPITAL STRUCTURE
--------------------------------------------------------------------------------

or authorize certain transactions with 5%-or-greater holders of a class of
shares and their associates, unless the Board shall by resolution have approved
a memorandum of understanding with such holders, in which case normal voting
requirements would be in effect. For purposes of these provisions, a
5%-or-greater holder of a class of shares (a "Principal Shareholder") refers to
any person who, whether directly or indirectly and whether alone or together
with its affiliates and associates, beneficially owns 5% or more of the
outstanding shares of any class of beneficial interest of the Fund. The
transactions subject to these special approval requirements are: (i) the merger
or consolidation of the Fund or any subsidiary of the Fund with or into any
Principal Shareholder; (ii) the issuance of any securities of the Fund to any
Principal Shareholder for cash; (iii) the sale, lease or exchange of all or any
substantial part of the assets of the Fund to any Principal Shareholder (except
assets having an aggregate fair market value of less than $1,000,000,
aggregating for the purpose of such computation all assets sold, leased or
exchanged in any series of similar transactions within a twelve-month period);
or (iv) the sale, lease or exchange to the Fund or any subsidiary thereof, in
exchange for securities of the Fund, of any assets of any Principal Shareholder
(except assets having an aggregate fair market value of less than $1,000,000,
aggregating for the purposes of such computation all assets sold, leased or
exchanged in any series of similar transactions within a twelve-month period).

The Board has determined that provisions with respect to the Board and the 75%
voting requirements described above, which voting requirements are greater than
the minimum requirements under Massachusetts law or the 1940 Act, are in the
best interest of Shareholders generally. Reference should be made to the
Declaration of Trust on file with the SEC for the full text of these provisions.

CONVERSION TO OPEN-END FUND
The Fund may be converted to an open-end management investment company at any
time if approved by the lesser of (i) two-thirds or more of the Fund's then
outstanding Shares and preferred shares (if any), each voting separately as a
class, or (ii) more than 50% of the then outstanding Shares and preferred shares
(if any), voting separately as a class if such conversion is recommended by at
least 75% of the Trustees then in office. If approved in the foregoing manner,
conversion of the Fund could not occur until 90 days after the shareholders'
meeting at which such conversion was approved and would also require at least 30
days' prior notice to all shareholders. The composition of the Fund's portfolio
likely would prohibit the Fund from complying with regulations of the SEC
applicable to open-end management investment companies. Accordingly, conversion
likely would require significant changes in the Fund's investment policies and
liquidation of a substantial portion of its relatively illiquid portfolio.
Conversion of the Fund to an open-end management investment company also would
require the redemption of any outstanding preferred shares and could require the
repayment of borrowings, which would eliminate the leveraged capital structure
of the Fund with respect to the Shares. In the event of conversion, the Shares
would cease to be listed on the American Stock Exchange or other national
securities exchange or market system. The Board believes, however, that the
closed-end structure is desirable, given the Fund's investment objectives and
policies. Investors should assume, therefore, that it is unlikely that the Board
would vote to convert the Fund to an open-end management investment company.
Shareholders of an open-end management investment company may require the
company to redeem their shares at any time (except in certain circumstances as
authorized by or under the 1940 Act) at their net asset value, less such
redemption charge, if any, as might be in effect at the time of a redemption.
The Fund expects to pay all such redemption requests in cash, but intends to
reserve the right to pay redemption requests in a combination of cash or
securities. If such partial payment in securities were made, investors may incur
brokerage costs in converting such securities to cash. If the Fund were
converted to an open-end fund, it is likely that new Shares would be sold at net
asset value plus a sales load.

--------------------------------------------------------------------------------
34

--------------------------------------------------------------------------------

Underwriting

The underwriters named below (the "Underwriters"), acting through UBS Warburg
LLC, Citigroup Global Markets Inc. and Merrill Lynch, Pierce, Fenner & Smith
Incorporated as lead managers and A.G. Edwards & Sons, Inc., RBC Dain Rauscher
Incorporated, Wells Fargo Securities, LLC, H&R Block Financial Advisors, Inc.,
Fahnestock & Co. Inc., J.J.B. Hilliard, W.L. Lyons, Inc., Janney Montgomery
Scott LLC, McDonald Investments Inc., a KeyCorp Company and Quick & Reilly, Inc.
A FleetBoston Financial Company as their representatives (together with the lead
managers, the "Representatives"), have severally agreed, subject to the terms
and conditions of the Underwriting Agreement with the Fund and Eaton Vance (the
"Underwriting Agreement"), to purchase from the Fund the number of Shares set
forth opposite their respective names. The Underwriters are committed to
purchase and pay for all of such Shares (other than those covered by the
over-allotment option described below) if any are purchased.

UNDERWRITERS NUMBER OF SHARES
-------------------------------------------------------------------------------

UBS Warburg LLC.............................................
Citigroup Global Markets Inc................................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated...................................
A.G. Edwards & Sons, Inc. ..................................
RBC Dain Rauscher Incorporated..............................
Wells Fargo Securities, LLC.................................
H&R Block Financial Advisors, Inc. .........................
Fahnestock & Co. Inc. ......................................
J.J.B. Hilliard, W.L. Lyons, Inc. ..........................
Janney Montgomery Scott LLC.................................
McDonald Investments Inc., a KeyCorp Company ...............
Quick & Reilly, Inc. A FleetBoston Financial Company .......
-----------
Total..................................................
-----------
-----------

The Fund has granted to the Underwriters an option, exercisable for 45 days from
the date of this Prospectus, to purchase up to an additional
Shares to cover over-allotments, if any, at the initial offering price. The
Underwriters may exercise such option solely for the purpose of covering
Underwriting over-allotments incurred in the sale of the Shares offered hereby.
To the extent that the Underwriters exercise this option, each of the
Underwriters will have a firm commitment, subject to certain conditions, to
purchase an additional number of Shares proportionate to such Underwriter's
initial commitment.

The Fund has agreed to pay a commission to the Underwriters in the amount of
$0.90 per Share (4.5% of the public offering price per Share). The
Representatives have advised the Fund that the Underwriters may pay up to
$ per Share from such commission to selected dealers who sell the
Shares and that such dealers may reallow a concession of up to $ per Share
to certain other dealers who sell Shares. Eaton Vance or an affiliate has agreed
to (i) reimburse all organizational costs and (ii) pay all offering costs of the
Fund that exceed $0.04 per Share. Investors must pay for any Shares purchased on
or before , 2003.

Prior to this offering, there has been no public market for the Shares or any
other securities of the Fund. Consequently, the offering price for the Shares
was determined by negotiation among the Fund and the Representatives. There can
be no assurance, however, that the price at which Shares sell after this
offering will not be lower than the price at which they are sold by the
Underwriters or that an

--------------------------------------------------------------------------------
35

UNDERWRITING
--------------------------------------------------------------------------------

active trading market in the Shares will develop and continue after this
offering. The minimum investment requirement is 100 Shares ($2,000).

The Fund and Eaton Vance have each agreed to indemnify the several Underwriters
for or to contribute to the losses arising out of certain liabilities, including
liabilities under the Securities Act of 1933, as amended.

The Fund has agreed not to offer, sell or register with the Securities and
Exchange Commission any additional equity securities of the Fund, other than
issuances of Shares, including pursuant to the Fund's Plan, and issuances in
connection with any preferred shares, each as contemplated in this Prospectus,
for a period of 180 days after the date of the Underwriting Agreement without
the prior written consent of the Representatives.

The Representatives have informed the Fund that the Underwriters do not intend
to confirm sale to any accounts over which they exercise discretionary
authority.

In connection with this offering, the Underwriters may purchase and sell Shares
in the open market. These transactions may include over-allotment and
stabilizing transactions and purchases to cover syndicate short positions
created in connection with this offering. Stabilizing transactions consist of
certain bids or purchases for the purpose of preventing or retarding a decline
in the market price of the Shares and syndicate short positions involve the sale
by the Underwriters of a greater number of Shares than they are required to
purchase from the Fund in this offering. The Underwriters also may impose a
penalty bid, whereby selling concessions allowed to syndicate members or other
broker-dealers in respect of the Shares sold in this offering for their account
may be reclaimed by the syndicate if such Shares are repurchased by the
syndicate in stabilizing or covering transactions. These activities may
stabilize, maintain or otherwise affect the market price of the Shares, which
may be higher than the price that might otherwise prevail in the open market;
and these activities, if commenced, may be discontinued at any time without
notice. These transactions may be effected on the American Stock Exchange or
otherwise.

The Fund anticipates that the Representatives and certain other Underwriters may
from time to time act as brokers or dealers in connection with the execution of
its portfolio transactions after they have ceased to be Underwriters and,
subject to certain restrictions, may act as such brokers while they are
Underwriters.

In connection with the offering, certain of the Underwriters or selected dealers
may distribute prospectuses electronically.

The Adviser (and not the Fund) has agreed to pay to certain qualifying
Underwriters who meet specified sales targets ("Qualifying Underwriters") an
annual fee of up to 0.15% of the Fund's average weekly gross assets attributable
to Shares sold by such Qualifying Underwriters (including a proportionate share
of assets acquired using leverage). Such sales targets may be waived or lowered
with respect to any Underwriter in the sole discretion of the Adviser. These fee
payments will remain in effect only so long as the Advisory Agreement remains in
effect between the Fund and the Adviser or any successor in interest or
affiliate of the Adviser, as and to the extent that such Advisory Agreement is
renewed periodically in accordance with the 1940 Act. The Adviser will limit the
amount of such fee payments such that the total amount of such fee payments and
the sales loads paid to these Underwriters will not exceed any sales charge
limits (which the Adviser and the Underwriters currently understand to be 9.0%)
under the rules of the National Association of Securities Dealers, as then in
effect.

As described below under "Shareholder Servicing Agent, custodian and transfer
agent," UBS Warburg LLC will provide shareholder services to the Fund pursuant
to a Shareholder Servicing Agreement with Eaton Vance. Eaton Vance will pay a
fee for such services on an annual basis up to 0.10% of the average weekly gross
assets of the Fund.

--------------------------------------------------------------------------------
36

--------------------------------------------------------------------------------

Shareholder Servicing Agent, custodian and transfer agent

Pursuant to a shareholder servicing agreement ("Shareholder Servicing
Agreement") between UBS Warburg LLC (the "Shareholder Servicing Agent") and
Eaton Vance, the Shareholder Servicing Agent will (i) undertake to make public
information pertaining to the Fund on an ongoing basis and to communicate to
investors and prospective investors the Fund's features and benefits (including
periodic seminars or conference calls, responses to questions from current or
prospective shareholders and specific shareholder contact where appropriate);
(ii) make available to investors and prospective investors market price, net
asset value, yield and other information regarding the Fund, if reasonably
obtainable, for the purpose of maintaining the visibility of the Fund in the
investor community; (iii) at the request of Eaton Vance, provide certain
economic research and statistical information and reports, if reasonably
obtainable, on behalf of the Fund, and consult with representatives and Trustees
of the Fund in connection therewith, which information and reports shall
include: (a) statistical and financial market information with respect to the
Fund's market performance and (b) comparative information regarding the Fund and
other closed-end management investment companies with respect to (1) the net
asset value of their respective shares, (2) the respective market performance of
the Fund and such other companies and (3) other relevant performance indicators;
and (iv) at the request of Eaton Vance, provide information to and consult with
the Board with respect to applicable modifications to dividend policies or
capital structure, repositioning or restructuring of the Fund, conversion of the
Fund to an open-end management investment company, liquidation or merger;
provided, however, that under the terms of the Shareholder Servicing Agreement,
the Shareholder Servicing Agent is not obligated to render any opinions,
valuations or recommendations of any kind or to perform any such similar
services. For these services, Eaton Vance will pay the Shareholder Servicing
Agent a fee computed weekly and payable quarterly equal on an annual basis up to
0.10% of the Fund's average weekly gross assets. Under the terms of the
Shareholder Servicing Agreement, the Shareholder Servicing Agent is relieved
from liability to Eaton Vance for any act or omission in the course of its
performances under the Shareholder Servicing Agreement in the absence of gross
negligence or willful misconduct by the Shareholder Servicing Agent. The
Shareholder Servicing Agreement will continue so long as the Advisory Agreement
remains in effect between the Fund and the Adviser or any successor in interest
or affiliate of the Adviser, as and to the extent that such Advisory Agreement
is renewed periodically in accordance with the 1940 Act.

Investors Bank & Trust Company ("IBT"), 200 Clarendon Street, Boston, MA 02116
is the custodian of the Fund and will maintain custody of the securities and
cash of the Fund. IBT maintains the Fund's general ledger and computes net asset
value per share at least weekly. IBT also attends to details in connection with
the sale, exchange, substitution, transfer and other dealings with the Fund's
investments and receives and disburses all funds. IBT also assists in
preparation of shareholder reports and the electronic filing of such reports
with the SEC.

PFPC Inc., P.O. Box 43027, Providence, RI 02940-3027 is the transfer agent and
dividend disbursing agent of the Fund.

Legal opinions

Certain legal matters in connection with the Shares will be passed upon for the
Fund by Kirkpatrick & Lockhart LLP, Boston, Massachusetts, and for the
Underwriters by Skadden, Arps, Meagher & Flom (Illinois), Chicago, Illinois.

--------------------------------------------------------------------------------
37

--------------------------------------------------------------------------------

Reports to stockholders

The Fund will send to Shareholders unaudited semi-annual and audited annual
reports, including a list of investments held.

Independent auditors

Deloitte & Touche LLP, Boston, Massachusetts, are the independent auditors for
the Fund and will audit the Fund's financial statements.

Additional information

The Prospectus and the Statement of Additional Information do not contain all of
the information set forth in the Registration Statement that the Fund has filed
with the SEC. The complete Registration Statement may be obtained from the SEC
upon payment of the fee prescribed by its rules and regulations. The Statement
of Additional Information can be obtained without charge by calling
1-800-225-6265.

Statements contained in this Prospectus as to the contents of any contract or
other documents referred to are not necessarily complete, and, in each instance,
reference is made to the copy of such contract or other document filed as an
exhibit to the Registration Statement of which this Prospectus forms a part,
each such statement being qualified in all respects by such reference.

--------------------------------------------------------------------------------
38

--------------------------------------------------------------------------------

Table of contents for the Statement of Additional Information

Additional investment information and restrictions.......... 2
Trustees and officers....................................... 15
Investment advisory and other services...................... 20
Determination of net asset value............................ 22
Portfolio trading........................................... 23
Taxes....................................................... 26
Other information........................................... 28
Independent auditors........................................ 28
Independent auditors' report................................ 29
Financial statements........................................ 30
Appendix A: Ratings......................................... A-1
Appendix B: Performance related and comparative
information............................................... B-1

--------------------------------------------------------------------------------
39

[EATON VANCE LOGO]

STATEMENT OF ADDITIONAL INFORMATION SUBJECT TO COMPLETION MAY 23, 2003

--------------------------------------------------------------------------------

STATEMENT OF ADDITIONAL INFORMATION
, 2003

EATON VANCE LIMITED DURATION INCOME FUND

THE EATON VANCE BUILDING
255 STATE STREET
BOSTON, MASSACHUSETTS 02109
(800) 225-6265

TABLE OF CONTENTS
--------------------------------------------------------------------------------

PAGE
----

THIS STATEMENT OF ADDITIONAL INFORMATION ("SAI") IS NOT A PROSPECTUS AND IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY THE PROSPECTUS OF EATON VANCE LIMITED DURATION INCOME FUND (THE
"FUND") DATED , 2003, AS SUPPLEMENTED FROM TIME TO TIME, WHICH IS
INCORPORATED HEREIN BY REFERENCE. THIS SAI SHOULD BE READ IN CONJUNCTION WITH
SUCH PROSPECTUS, A COPY OF WHICH MAY BE OBTAINED WITHOUT CHARGE BY CONTACTING
YOUR FINANCIAL INTERMEDIARY OR CALLING THE FUND AT 1-800-225-6265.

THE INFORMATION IN THIS SAI IS NOT COMPLETE AND MAY BE CHANGED. THESE SECURITIES
MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION IS EFFECTIVE. THIS SAI, WHICH IS NOT A PROSPECTUS, IS NOT AN
OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.

Capitalized terms used in this SAI and not otherwise defined have the meanings
given them in the Fund's Prospectus.

Additional investment information and restrictions

Primary investment strategies are described in the Prospectus. The following is
a description of the various investment policies that may be engaged in, whether
as a primary or secondary strategy, and a summary of certain attendant risks.
Eaton Vance may not buy any of the following instruments or use any of the
following techniques unless it believes that doing so will help to achieve the
Fund's investment objectives.

MORTGAGE-BACKED SECURITIES

GENERAL
The Fund's investments in mortgage-backed securities may include conventional
mortgage pass-through securities, floating rate mortgage-backed securities and
certain classes of multiple class CMOs (as described below). Mortgage-backed
securities differ from bonds in that the principal is paid back by the borrower
over the length of the loan rather than returned in a lump sum at maturity.

Government National Mortgage Association ("GNMA") Certificates and Federal
National Mortgage Association ("FNMA") Mortgage-Backed Certificates are
mortgage-backed securities representing part ownership of a pool of mortgage
loans. GNMA loans -- issued by lenders such as mortgage bankers, commercial
banks and savings and loan associations -- are either insured by the Federal
Housing Administration or guaranteed by the Veterans Administration. A "pool" or
group of such mortgages is assembled and, after being approved by GNMA, is
offered to investors through securities dealers. Once such pool is approved by
GNMA, the timely payment of interest and principal on the Certificates issued
representing such pool is guaranteed by the full faith and credit of the U.S.
Government. FNMA, a federally chartered corporation owned entirely by private
stockholders, purchases both conventional and federally insured or guaranteed
residential mortgages from various entities, including savings and loan
associations, savings banks, commercial banks, credit unions and mortgage
bankers, and packages pools of such mortgages in the form of pass-through
securities generally called FNMA Mortgage-Backed Certificates, which are
guaranteed as to timely payment of principal and interest by FNMA but are not
backed by the full faith and credit of the U.S. Government. GNMA Certificates
and FNMA Mortgage-Backed Certificates are called "pass-through" securities
because a pro rata share of both regular interest and principal payments, as
well as unscheduled early prepayments, on the underlying mortgage pool is passed
through monthly to the holder of the Certificate (i.e., the Fund). The Fund may
purchase GNMA Certificates, FNMA Mortgage-Backed Certificates and various other
mortgage-backed securities on a when-issued basis subject to certain limitations
and requirements.

The Federal Home Loan Mortgage Corporation ("FHLMC"), a corporate
instrumentality of the U.S. Government created by Congress for the purposes of
increasing the availability of mortgage credit for residential housing, issues
participation certificates ("PCs") representing undivided interest in FHLMC'S
mortgage portfolio. While FHLMC guarantees the timely payment of interest and
ultimate collection of the principal of its PCs, its PCs are not backed by the
full faith and credit of the U.S. Government. FHLMC PCs differ from GNMA
Certificates in that the mortgages underlying the PCs are monthly "conventional"
mortgages rather than mortgages insured or guaranteed by a federal agency or
instrumentality. However, in several other respects, such as the monthly
pass-through of interest and principal (including unscheduled prepayments) and
the unpredictability of future unscheduled prepayments on the underlying
mortgage pools, FHLMC PCs are similar to GNMA Certificates.

While it is not possible to accurately predict the life of a particular issue of
a mortgage-backed "pass-through" security held by the Fund, the actual life of
any such security is likely to be substantially less than the average final
maturities of the mortgage loans underlying the security. This is because

--------------------------------------------------------------------------------
2

ADDITIONAL INVESTMENT INFORMATION AND RESTRICTIONS
--------------------------------------------------------------------------------

unscheduled early prepayments of principal on the security owned by the Fund
will result from the prepayment, refinancings or foreclosure of the underlying
mortgage loans in the mortgage pool. The Fund, when the monthly payments (which
may include unscheduled prepayments) on such a security are passed through to
it, may be able to reinvest them only at a lower rate of interest. Because of
the regular scheduled payments of principal and the early unscheduled
prepayments of principal, the mortgage-backed "pass-through" security is less
effective than other types of obligations as a means of "locking-in" attractive
long-term interest rates. As a result, this type of security may have less
potential for capital appreciation during periods of declining interest rates
than other U.S. Government securities of comparable maturities, although many
issues of mortgage-backed "pass-through" securities may have a comparable risk
of decline in market value during periods of rising interest rates. If such a
security has been purchased by the Fund at a premium above its par value, both a
scheduled payment of principal and an unscheduled prepayment of principal, which
would be made at par, will accelerate the realization of a loss equal to that
portion of the premium applicable to the payment or prepayment. If such a
security has been purchased by the Fund at a discount from its par value, both a
scheduled payment of principal and an unscheduled prepayment of principal will
increase current returns and will accelerate the recognition of income, which,
when distributed to Fund shareholders, will be taxable as ordinary income.

COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS")
The CMO classes in which the Fund may invest include sequential and parallel pay
CMOs, including planned amortization class and target amortization class
securities. CMOs are debt securities issued by the FHLMC and by financial
institutions and other mortgage lenders which are generally fully collateralized
by a pool of mortgages held under an indenture. The key feature of the CMO
structure is the prioritization of the cash flows from a pool of mortgages among
the several classes of CMO holders, thereby creating a series of obligations
with varying rates and maturities appealing to a wide range of investors. CMOs
generally are secured by an assignment to a trustee under the indenture pursuant
to which the bonds are issued of collateral consisting of a pool of mortgages.
Payments with respect to the underlying mortgages generally are made to the
trustee under the indenture. Payments of principal and interest on the
underlying mortgages are not passed through to the holders of the CMOs as such
(that is, the character of payments of principal and interest is not passed
through and therefore payments to holders of CMOs attributable to interest paid
and principal repaid on the underlying mortgages do not necessarily constitute
income and return of capital, respectively, to such holders), but such payments
are dedicated to payment of interest on and repayment of principal of the CMOs.
CMOs are issued in two or more classes or series with varying maturities and
stated rates of interest determined by the issuer. Senior CMO classes will
typically have priority over residual CMO classes as to the receipt of principal
and/or interest payments on the underlying mortgages. Because the interest and
principal payments on the underlying mortgages are not passed through to holders
of CMOs, CMOs of varying maturities may be secured by the same pool of
mortgages, the payments on which are used to pay interest to each class and to
retire successive maturities in sequence. CMOs are designed to be retired as the
underlying mortgages are repaid. In the event of sufficient early prepayments on
such mortgages, the class or series of CMO first to mature generally will be
retired prior to maturity. Therefore, although in most cases the issuer of CMOs
will not supply additional collateral in the event of such prepayments, there
will be sufficient collateral to secure CMOs that remain outstanding. Currently,
the Adviser will consider privately issued CMOs or other mortgage-backed
securities as possible investments for the Fund only when the mortgage
collateral is insured, guaranteed or otherwise backed by the U.S. Government or
one or more of its agencies or instrumentalities (e.g., insured by the Federal
Housing Administration or Farmers Home Administration or guaranteed by the
Administrator of Veterans Affairs or consisting in whole or in part of U.S.
Government securities).

--------------------------------------------------------------------------------
3

ADDITIONAL INVESTMENT INFORMATION AND RESTRICTIONS
--------------------------------------------------------------------------------

RISKS OF CERTAIN MORTGAGE-BACKED AND INDEXED SECURITIES
Although not mortgage-backed securities, index amortizing notes and other
callable securities are subject to extension risk resulting from the issuer's
failure to exercise its option to call or redeem the notes before their stated
maturity date. The residual classes of CMOs are subject to both prepayment and
extension risk.

Other types of floating rate derivative debt securities present more complex
types of interest rate risks. For example, range floaters are subject to the
risk that the coupon will be reduced to below market rates if a designated
interest rate floats outside of a specified interest rate band or collar. Dual
index or yield curve floaters are subject to depreciation in the event of an
unfavorable change in the spread between two designated interest rates. The
market values of currency-linked securities may be very volatile and may decline
during periods of unstable currency exchange rates.

SENIOR LOANS

STRUCTURE OF SENIOR LOANS
A Senior Loan 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 group of loan investors ("Loan Investors"). The
Agent typically administers and enforces the Senior Loan on behalf of the other
Loan Investors in the syndicate. In addition, an institution, typically but not
always the Agent, holds any collateral on behalf of the Loan Investors.

Senior Loans primarily include senior floating rate loans to corporations and
secondarily institutionally traded senior floating rate debt obligations issued
by an asset-backed pool, and interests therein. Loan interests primarily take
the form of assignments purchased in the primary or secondary market. Loan
interests may also take the form of participation interests in a Senior Loan.
Such loan interests may be acquired from U.S. or foreign commercial banks,
insurance companies, finance companies or other financial institutions who have
made loans or are Loan Investors or from other investors in loan interests.

The Fund typically purchases "Assignments" from the Agent or other Loan
Investors. The purchaser of an Assignment typically succeeds to all the rights
and obligations under the Loan Agreement of the assigning Loan Investor and
becomes a Loan Investor under the Loan Agreement with the same rights and
obligations as the assigning Loan Investor. Assignments may, however, be
arranged through private negotiations between potential assignees and potential
assignors, and the rights and obligations acquired by the purchaser of an
Assignment may differ from, and be more limited than, those held by the
assigning Loan Investor.

The Fund also may invest in "Participations." Participations by the Fund in a
Loan Investor's portion of a Senior Loan typically will result in the Fund
having a contractual relationship only with such Loan Investor, not with the
Borrower. As a result, the Fund may have the right to receive payments of
principal, interest and any fees to which it is entitled only from the Loan
Investor selling the Participation and only upon receipt by such Loan Investor
of such payments from the Borrower. In connection with purchasing
Participations, the Fund generally will have no right to enforce compliance by
the Borrower with the terms of the loan agreement, nor any rights with respect
to any funds acquired by other Loan Investors through set-off against the
Borrower and the Fund may not directly benefit from the collateral supporting
the Senior Loan in which it has purchased the Participation. As a result, the
Fund may assume the credit risk of both the Borrower and the Loan Investor
selling the Participation. In the event of the insolvency of the Loan Investor
selling a Participation, the Fund may be treated as a general creditor of such
Loan Investor. The selling Loan Investors and other persons interpositioned
between such Loan Investors and the Fund with respect to such Participations
will likely conduct their principal business activities in the banking, finance
and financial services industries. Persons engaged in such industries may be
more susceptible to, among other things, fluctuations in

--------------------------------------------------------------------------------
4

ADDITIONAL INVESTMENT INFORMATION AND RESTRICTIONS
--------------------------------------------------------------------------------

interest rates, changes in the Federal Open Market Committee's monetary policy,
governmental regulations concerning such industries and concerning capital
raising activities generally and fluctuations in the financial markets
generally.

The Fund will only acquire Participations if the Loan Investor selling the
Participation, and any other persons interpositioned between the Fund and the
Loan Investor, at the time of investment has outstanding debt or deposit
obligations rated investment grade (BBB or A-3 or higher by Standard & Poor's
Ratings Group ("S&P") or Baa or P-3 or higher by Moody's Investors Service, Inc.
("Moody's") or comparably rated by another nationally recognized rating agency)
or determined by the Adviser to be of comparable quality. Securities rated Baa
by Moody's have speculative characteristics. Long-term debt rated BBB by S&P is
regarded by S&P as having adequate capacity to pay interest and repay principal
and debt rated Baa by Moody's is regarded by Moody's as a medium grade
obligation, i.e., it is neither highly protected nor poorly secured. Commercial
paper rated A-3 by S&P indicates that S&P believes such obligations exhibit
adequate protection parameters but that adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity of the obligor to
meet its financial commitment on the obligation and issues of commercial paper
rated P-3 by Moody's are considered by Moody's to have an acceptable ability for
repayment of senior short-term obligations. The effect of industry
characteristics and market compositions may be more pronounced. Indebtedness of
companies whose creditworthiness is poor involves substantially greater risks,
and may be highly speculative. Some companies may never pay off their
indebtedness, or may pay only a small fraction of the amount owed. Consequently,
when investing in indebtedness of companies with poor credit, the Fund bears a
substantial risk of losing the entire amount invested.

LOAN COLLATERAL
In order to borrow money pursuant to a Senior Loan, a Borrower will frequently,
for the term of the Senior Loan, pledge collateral, including but not limited
to, (i) working capital assets, such as accounts receivable and inventory; (ii)
tangible fixed assets, such as real property, buildings and equipment; (iii)
intangible assets, such as trademarks and patent rights (but excluding
goodwill); and (iv) security interests in shares of stock of subsidiaries or
affiliates. In the case of Senior Loans made to non-public companies, the
company's shareholders or owners may provide collateral in the form of secured
guarantees and/or security interests in assets that they own. In many instances,
a Senior Loan may be secured only by stock in the Borrower or its subsidiaries.
Collateral may consist of assets that may not be readily liquidated, and there
is no assurance that the liquidation of such assets would satisfy fully a
Borrower's obligations under a Senior Loan.

CERTAIN FEES PAID TO THE FUND
In the process of buying, selling and holding Senior Loans, the Fund may receive
and/or pay certain fees. These fees are in addition to interest payments
received and may include facility fees, commitment fees, amendment fees,
commissions and prepayment penalty fees. When the Fund buys a Senior Loan it may
receive a facility fee and when it sells a Senior Loan it may pay a facility
fee. On an ongoing basis, the Fund may receive a commitment fee based on the
undrawn portion of the underlying line of credit portion of a Senior Loan. In
certain circumstances, the Fund may receive a prepayment penalty fee upon the
prepayment of a Senior Loan by a Borrower. Other fees received by the Fund may
include covenant waiver fees and covenant modification fees.

BORROWER COVENANTS
A Borrower must comply with various restrictive covenants contained in a loan
agreement or note purchase agreement between the Borrower and the holders of the
Senior Loan (the "Loan Agreement"). Such covenants, in addition to requiring the
scheduled payment of interest and principal, may include restrictions on
dividend payments and other distributions to stockholders, provisions requiring
the Borrower to maintain specific minimum financial ratios, and limits on total
debt. In addition, the Loan Agreement may contain a covenant requiring the
Borrower to prepay the Loan with

--------------------------------------------------------------------------------
5

ADDITIONAL INVESTMENT INFORMATION AND RESTRICTIONS
--------------------------------------------------------------------------------

any free cash flow. Free cash flow is generally defined as net cash flow after
scheduled debt service payments and permitted capital expenditures, and includes
the proceeds from asset dispositions or sales of securities. A breach of a
covenant which is not waived by the Agent, or by the Loan Investors directly, as
the case may be, is normally an event of acceleration; i.e., the Agent, or the
Loan Investors directly, as the case may be, has the right to call the
outstanding Senior Loan. The typical practice of an Agent or a Loan Investor in
relying exclusively or primarily on reports from the Borrower to monitor the
Borrower's compliance with covenants may involve a risk of fraud by the
Borrower. In the case of a Senior Loan in the form of a Participation, the
agreement between the buyer and seller may limit the rights of the holder to
vote on certain changes which may be made to the Loan Agreement, such as waiving
a breach of a covenant. However, the holder of the Participation will, in almost
all cases, have the right to vote on certain fundamental issues such as changes
in principal amount, payment dates and interest rate.

ADMINISTRATION OF LOANS
In a typical Senior 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 Senior 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 Loan Investors 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 Senior Loan usually does,
but is often not obligated to, notify holders of Senior Loans 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 Senior Loan, may give the
Borrower an opportunity to provide additional collateral or may seek other
protection for the benefit of the participants in the Senior 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 Senior Loan and other fees paid on a continuing basis. With respect to
Senior Loans 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 Loan Investors 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 Senior
Loans. 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 Senior Loan,
or suffer a loss of principal and/or interest. In situations involving
intermediate participants similar risks may arise.

PREPAYMENTS
Senior Loans will usually require, in addition to scheduled payments of interest
and principal, the prepayment of the Senior Loan from free cash flow, as defined
above. The degree to which Borrowers prepay Senior Loans, whether as a
contractual requirement or at their election, may be affected by general
business conditions, the financial condition of the Borrower and competitive
conditions among Loan Investors, among others. As such, prepayments cannot be
predicted with accuracy. Upon a prepayment, either in part or in full, the
actual outstanding debt on which the Fund derives interest

--------------------------------------------------------------------------------
6

ADDITIONAL INVESTMENT INFORMATION AND RESTRICTIONS
--------------------------------------------------------------------------------

income will be reduced. However, the Fund may receive both a prepayment penalty
fee from the prepaying Borrower and a facility fee upon the purchase of a new
Senior Loan with the proceeds from the prepayment of the former. Prepayments
generally will not materially affect the Fund's performance because the Fund
typically is able to reinvest prepayments in other Senior Loans that have
similar yields and because receipt of such fees may mitigate any adverse impact
on the Fund's yield.

OTHER INFORMATION REGARDING SENIOR LOANS
From time to time the Adviser and its affiliates may borrow money from various
banks in connection with their business activities. Such banks may also sell
interests in Senior Loans to or acquire them from the Fund or may be
intermediate participants with respect to Senior Loans in which the Fund owns
interests. Such banks may also act as Agents for Senior Loans held by the Fund.

The Fund may acquire interests in Senior Loans which are designed to provide
temporary or "bridge" financing to a Borrower pending the sale of identified
assets or the arrangement of longer-term loans or the issuance and sale of debt
obligations. The Fund may also invest in Senior Loans of Borrowers that have
obtained bridge loans from other parties. A Borrower's use of bridge loans
involves a risk that the Borrower may be unable to locate permanent financing to
replace the bridge loan, which may impair the Borrower's perceived
creditworthiness.

The Fund will be subject to the risk that collateral securing a loan will
decline in value or have no value. Such a decline, whether as a result of
bankruptcy proceedings or otherwise, could cause the Senior Loan to be
undercollateralized or unsecured. In most credit agreements there is no formal
requirement to pledge additional collateral. In addition, the Fund may invest in
Senior Loans guaranteed by, or secured by assets of, shareholders or owners,
even if the Senior Loans are not otherwise collateralized by assets of the
Borrower; provided, however, that such guarantees are fully secured. There may
be temporary periods when the principal asset held by a Borrower is the stock of
a related company, which may not legally be pledged to secure a Senior Loan. On
occasions when such stock cannot be pledged, the Senior Loan will be temporarily
unsecured until the stock can be pledged or is exchanged for or replaced by
other assets, which will be pledged as security for the Senior Loan. However,
the Borrower's ability to dispose of such securities, other than in connection
with such pledge or replacement, will be strictly limited for the protection of
the holders of Senior Loans and, indirectly, Senior Loans themselves.

If a Borrower becomes involved in bankruptcy proceedings, a court may invalidate
the Fund's security interest in the loan collateral or subordinate the Fund's
rights under the Senior Loan to the interests of the Borrower's unsecured
creditors or cause interest previously paid to be refunded to the Borrower. If a
court required interest to be refunded, it could negatively affect the Fund's
performance. Such action by a court could be based, for example, on a
"fraudulent conveyance" claim to the effect that the Borrower did not receive
fair consideration for granting the security interest in the loan collateral to
the Fund. For Senior Loans made in connection with a highly leveraged
transaction, consideration for granting a security interest may be deemed
inadequate if the proceeds of the Loan were not received or retained by the
Borrower, but were instead paid to other persons (such as shareholders of the
Borrower) in an amount which left the Borrower insolvent or without sufficient
working capital. There are also other events, such as the failure to perfect a
security interest due to faulty documentation or faulty official filings, which
could lead to the invalidation of the Fund's security interest in loan
collateral. If the Fund's security interest in loan collateral is invalidated or
the Senior Loan is subordinated to other debt of a Borrower in bankruptcy or
other proceedings, the Fund would have substantially lower recovery, and perhaps
no recovery on the full amount of the principal and interest due on the Loan.

The Fund may acquire warrants and other equity securities as part of a unit
combining a Senior Loan and equity securities of a Borrower or its affiliates.
The acquisition of such equity securities will only be incidental to the Fund's
purchase of a Senior Loan. The Fund may also acquire equity securities or

--------------------------------------------------------------------------------
7

ADDITIONAL INVESTMENT INFORMATION AND RESTRICTIONS
--------------------------------------------------------------------------------

debt securities (including non-dollar denominated debt securities) issued in
exchange for a Senior Loan or issued in connection with the debt restructuring
or reorganization of a Borrower, or if such acquisition, in the judgment of the
Adviser, may enhance the value of a Senior Loan or would otherwise be consistent
with the Fund's investment policies.

DEBTOR-IN-POSSESSION FINANCING

The Fund may invest in debtor-in-possession financings (commonly called "DIP
financings"). DIP financings are arranged when an entity seeks the protections
of the bankruptcy court under chapter 11 of the U.S. Bankruptcy Code. These
financings allow the entity to continue its business operations while
reorganizing under chapter 11. Such financings are senior liens on unencumbered
security (i.e., security not subject to other creditors claims). There is a risk
that the entity will not emerge from chapter 11 and be forced to liquidate its
assets under chapter 7 of the Bankruptcy Code. In such event, the Fund's only
recourse will be against the property securing the DIP financing.

LITIGATION INVOLVING EATON VANCE
On October 15, 2001, an amended consolidated complaint was filed in the United
States District Court for the District of Massachusetts against four Eaton Vance
closed-end interval funds (the "Interval Funds"); their Trustees and certain
officers of the Interval Funds; Eaton Vance, the Interval Funds' administrator;
Boston Management and Research, the Interval Funds' investment adviser; and
Eaton Vance Corp., the parent of Eaton Vance and Boston Management and Research.
The Complaint, framed as a class action, alleges that for the period between May
25, 1998 and March 5, 2001, the Interval Funds' assets were incorrectly valued
and certain matters were not properly disclosed, in violation of the federal
securities laws. The Complaint seeks unspecified damages. The named defendants
believe that the Complaint is without merit and are vigorously contesting the
lawsuit. Eaton Vance believes that the lawsuit is not likely to have a material
adverse affect on its ability to render services to the Fund.

REGULATORY CHANGES
To the extent that legislation or state or federal regulators that regulate
certain financial institutions impose additional requirements or restrictions
with respect to the ability of such institutions to make loans, particularly in
connection with highly leveraged transactions, the availability of Senior Loans
for investment may be adversely affected. Further, such legislation or
regulation could depress the market value of Senior Loans.

CREDIT QUALITY
Many Senior Loans in which the Fund may invest are of below investment grade
credit quality. Accordingly, these Senior Loans are subject to similar or
identical risks and other characteristics described below in relation to
Non-Investment Grade Bonds.

NON-INVESTMENT GRADE BONDS

Investments in Non-Investment Grade Bonds generally provide greater income and
increased opportunity for capital appreciation than investments in higher
quality securities, but they also typically entail greater price volatility and
principal and income risk, including the possibility of issuer default and
bankruptcy. Non-Investment Grade Bonds are regarded as predominantly speculative
with respect to the issuer's continuing ability to meet principal and interest
payments. Debt securities in the lowest investment grade category also may be
considered to possess some speculative characteristics by certain rating
agencies. In addition, analysis of the creditworthiness of issuers of
Non-Investment Grade Bonds may be more complex than for issuers of higher
quality securities.

Non-Investment Grade Bonds may be more susceptible to real or perceived adverse
economic and competitive industry conditions than investment grade securities. A
projection of an economic

--------------------------------------------------------------------------------
8

ADDITIONAL INVESTMENT INFORMATION AND RESTRICTIONS
--------------------------------------------------------------------------------

downturn or of a period of rising interest rates, for example, could cause a
decline in Non-Investment Grade Bond prices because the advent of recession
could lessen the ability of an issuer to make principal and interest payments on
its debt obligations. If an issuer of Non-Investment Grade Bonds defaults, in
addition to risking payment of all or a portion of interest and principal, the
Fund may incur additional expenses to seek recovery. In the case of
Non-Investment Grade Bonds structured as zero-coupon, step-up or payment-in-kind
securities, their market prices will normally be affected to a greater extent by
interest rate changes, and therefore tend to be more volatile than securities
which pay interest currently and in cash. Eaton Vance seeks to reduce these
risks through diversification, credit analysis and attention to current
developments in both the economy and financial markets.

The secondary market on which Non-Investment Grade Bonds are traded may be less
liquid than the market for investment grade securities. Less liquidity in the
secondary trading market could adversely affect the net asset value of the
Shares. Adverse publicity and investor perceptions, whether or not based on
fundamental analysis, may decrease the values and liquidity of Non-Investment
Grade Bonds, especially in a thinly traded market. When secondary markets for
Non-Investment Grade Bonds are less liquid than the market for investment grade
securities, it may be more difficult to value the securities because such
valuation may require more research, and elements of judgment may play a greater
role in the valuation because there is no reliable, objective data available.
During periods of thin trading in these markets, the spread between bid and
asked prices is likely to increase significantly and the Fund may have greater
difficulty selling these securities. The Fund will be more dependent on Eaton
Vance's research and analysis when investing in Non-Investment Grade Bonds.
Eaton Vance seeks to minimize the risks of investing in all securities through
in-depth credit analysis and attention to current developments in interest rate
and market conditions.

A general description of the ratings of securities by S&P, Fitch and Moody's is
set forth in Appendix A to this Statement of Additional Information. Such
ratings represent these rating organizations' opinions as to the quality of the
securities they rate. It should be emphasized, however, that ratings are general
and are not absolute standards of quality. Consequently, debt obligations with
the same maturity, coupon and rating may have different yields while obligations
with the same maturity and coupon may have the same yield. For these reasons,
the use of credit ratings as the sole method of evaluating Non-Investment Grade
Bonds can involve certain risks. For example, credit ratings evaluate the safety
or principal and interest payments, not the market value risk of Non-Investment
Grade Bonds. Also, credit rating agencies may fail to change credit ratings in a
timely fashion to reflect events since the security was last rated. Eaton Vance
does not rely solely on credit ratings when selecting securities for the Fund,
and develops its own independent analysis of issuer credit quality.

In the event that a rating agency or Eaton Vance downgrades its assessment of
the credit characteristics of a particular issue, the Fund is not required to
dispose of such security. In determining whether to retain or sell a downgraded
security, Eaton Vance may consider such factors as Eaton Vance's assessment of
the credit quality of the issuer of such security, the price at which such
security could be sold and the rating, if any, assigned to such security by
other rating agencies. However, analysis of the creditworthiness of issuers of
Non-Investment Grade Bonds may be more complex than for issuers of high quality
debt securities.

OTHER INVESTMENTS

FIXED INCOME SECURITIES
Fixed income securities include preferred, preference and convertible
securities, 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

--------------------------------------------------------------------------------
9

ADDITIONAL INVESTMENT INFORMATION AND RESTRICTIONS
--------------------------------------------------------------------------------

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.

Fixed-rate bonds may 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 they may be retained if interest rates decline. Acquiring these kinds of
bonds provides 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, it will not be assigned any separate
value.

Certain securities may permit the issuer at its option to "call," or redeem, the
securities. If an issuer were to redeem securities during a time of declining
interest rates, the Fund may not be able to reinvest the proceeds in securities
providing the same investment return as the securities redeemed.

The 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. In addition to lower rated securities, the
Fund also may invest in higher rated securities. For a description of corporate
bond ratings, see Appendix A.

REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements (the purchase of a security
coupled with an agreement to resell at a higher price) with respect to its
permitted investments. In the event of the bankruptcy of the other party to a
repurchase agreement, the Fund might experience delays in recovering its cash.
To the extent that, in the meantime, the value of the securities the Fund
purchased may have decreased, the Fund could experience a loss. Repurchase
agreements which mature in more than seven days will be treated as illiquid. The
Fund's repurchase agreements will provide that the value of the collateral
underlying the repurchase agreement will always be at least equal to the
repurchase price, including any accrued interest earned on the agreement, and
will be marked to market daily.

ZERO COUPONS BONDS
Zero coupon bonds are debt obligations which do not require the periodic payment
of interest and are issued at a significant discount from face value. The
discount approximates the total amount of interest the bonds will accrue and
compound over the period until maturity at a rate of interest reflecting the
market rate of the security at the time of issuance. The Fund is required to
accrue income from zero coupon bonds on a current basis, even though it does not
receive that income currently in cash and the Fund is required to distribute its
income for each taxable year. Thus, the Fund may have to sell other investments
to obtain cash needed to make income distributions.

INDEXED SECURITIES
The Fund may invest in securities that fluctuate in value with an index. Such
securities generally will either be issued by the U.S. Government or one of its
agencies or instrumentalities or, if privately issued, collateralized by
mortgages that are insured, guaranteed or otherwise backed by the U.S.
Government, its agencies or instrumentalities. The interest rate or, in some
cases, the principal payable at the maturity of an indexed security may change
positively or inversely in relation to one or more interest rates, financial
indices, securities prices or other financial indicators ("reference prices").

--------------------------------------------------------------------------------
10

ADDITIONAL INVESTMENT INFORMATION AND RESTRICTIONS
--------------------------------------------------------------------------------

An indexed security may be leveraged to the extent that the magnitude of any
change in the interest rate or principal payable on an indexed security is a
multiple of the change in the reference price. Thus, indexed securities may
decline in value due to adverse market changes in reference prices. Because
indexed securities derive their value from another instrument, security or
index, they are considered derivative debt securities, and are subject to
different combinations of prepayment, extension, interest rate and/or other
market risks.

SHORT SALES
The Fund may utilize short sales for hedging purposes. A short sale is affected
by selling a security which the Fund does not own, or, if the Fund does own the
security, is not to be delivered upon consummation of the sale. The Fund may
engage in short sales "against the box" (i.e., short sales of securities the
Fund already owns) for hedging purposes. If the price of the security in the
short sale decreases, the Fund will realize a profit to the extent that the
short sale price for the security exceeds the market price. If the price of the
security increases, the Fund will realize a loss to the extent that the market
price exceeds the short sale price. Selling securities short runs the risk of
losing an amount greater than the initial investment therein.

Purchasing securities to close out the short position can itself cause the price
of the securities to rise further, thereby exacerbating the loss. Short-selling
exposes the Fund to unlimited risk with respect to that security due to the lack
of an upper limit on the price to which an instrument can rise. Although the
Fund reserves the right to utilize short sales, the Adviser is under no
obligation to utilize shorts at all.

FOREIGN INVESTMENTS
The Fund may invest up to 5% of its total assets in U.S. dollar denominated
securities of non-U.S. issuers. Because foreign companies are not subject to
uniform accounting, auditing and financial reporting standards, practices and
requirements comparable to those applicable to U.S. companies, there may be less
publicly available information about a foreign company than about a domestic
company. Volume and liquidity in most foreign debt markets is less than in the
United States and securities of some foreign companies are less liquid and more
volatile than securities of comparable U.S. companies. There is generally less
government supervision and regulation of securities exchanges, broker-dealers
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. Payment for
securities before delivery may be required. In addition, with respect to certain
foreign countries, there is the possibility of expropriation or confiscatory
taxation, political or social instability, or diplomatic developments which
could affect 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.
Foreign securities markets, while growing in volume and sophistication, are
generally not as developed as those in the United States, and securities of some
foreign issuers (particularly those located in developing countries) may be less
liquid and more volatile than securities of comparable U.S. companies.

American Depositary Receipts (ADRs), European Depositary Receipts (EDRs) and
Global Depositary Receipts (GDRs) may be purchased. ADRs, EDRs and GDRs are
certificates evidencing ownership of shares of a foreign issuer and are
alternatives to directly purchasing the underlying foreign securities in their
national markets and currencies. However, they continue to be subject to many of
the risks associated with investing directly in foreign securities. These risks
include foreign exchange risk as well as the political and economic risks of the
underlying issuer's country. ADRs, EDRs and GDRs may be sponsored or
unsponsored. Unsponsored receipts are established without the participation of
the issuer.

--------------------------------------------------------------------------------
11

ADDITIONAL INVESTMENT INFORMATION AND RESTRICTIONS
--------------------------------------------------------------------------------

Unsponsored receipts may involve higher expenses, they may not pass-through
voting or other shareholder rights, and they may be less liquid.

OPTIONS
Call options may be purchased to provide exposure to increases in the market
(e.g., with respect to temporary cash positions) or to hedge against an increase
in the price of securities or other investments that the Fund intends to
purchase or has sold short. Similarly, put options may be purchased for
speculative purposes or to hedge against a decrease in the market generally or
in the price of securities or other investments held by the Fund. Buying options
may reduce the Fund's returns, but by no more than the amount of the premiums
paid for the options.

The Fund may write covered call options (i.e., where the Fund owns the security
or other investment that is subject to the call) to enhance returns when the
Adviser perceives that the option premium offered is in excess of the premium
that the Adviser would expect to be offered under existing market conditions, or
if the exercise price of the option is in excess of the price that the Adviser
expects the security or other underlying investment to reach during the life of
the option. Writing covered call options may limit the Fund's gain on portfolio
investments if the option is exercised because the Fund will have to sell the
underlying investments below the current market price. Purchasing and writing
put and call options are highly specialized activities and entail greater than
ordinary market risks.

SHORT-TERM TRADING
Securities may be sold in anticipation of market decline (a rise in interest
rates) or purchased in anticipation of a market rise (a decline in interest
rates) and later sold. In addition, a security may be sold and another purchased
at approximately the same time to take advantage of what the Adviser believes to
be a temporary disparity in the normal yield relationship between the two
securities. Yield disparities may occur for reasons not directly related to the
investment quality of particular issues or the general movement of interest
rates, such as changes in the overall demand for or supply of various types of
fixed income securities or changes in the investment objectives of investors.

TEMPORARY INVESTMENTS
The Fund may invest temporarily in cash or cash equivalents. Cash equivalents
are highly liquid, short-term securities such as commercial paper, certificates
of deposit, short-term notes and short-term U.S. Government obligations.

INVESTMENT RESTRICTIONS
The following investment restrictions of the Fund 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 outstanding shares
of the Fund. As a matter of fundamental policy the Fund may not:

(1) Borrow money, except as permitted by the Investment Company Act of 1940
(the "1940 Act"). The 1940 Act currently requires that any indebtedness
incurred by a closed-end investment company have an asset coverage of at
least 300%;

(2) Issue senior securities, as defined in the 1940 Act, other than (i)
preferred shares which immediately after issuance will have asset coverage
of at least 200%, (ii) indebtedness which immediately after issuance will
have asset coverage of at least 300%, or (iii) the borrowings permitted by
investment restriction (1) above. The 1940 Act currently defines "senior
security" as any bond, debenture, note or similar obligation or instrument
constituting a security and evidencing indebtedness, and any stock of a
class having priority over any other class as to distribution of assets or
payment of dividends. Debt and equity securities issued by a closed-end

--------------------------------------------------------------------------------
12

ADDITIONAL INVESTMENT INFORMATION AND RESTRICTIONS
--------------------------------------------------------------------------------

investment company meeting the foregoing asset coverage provisions are excluded
from the general 1940 Act prohibition on the issuance of 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 purchase of investment assets with the proceeds of a
permitted borrowing or securities offering will not be deemed to be the
purchase of securities on margin;

(4) Underwrite securities issued by other persons, except insofar as it may
technically be deemed to be an underwriter under the Securities Act of 1933
in selling or disposing of a portfolio investment;

(5) Make loans to other persons, except by (a) the acquisition of loan
interests, debt securities and other obligations in which the Fund is
authorized to invest in accordance with its investment objectives and
policies, (b) entering into repurchase agreements, and (c) lending its
portfolio securities;

(6) Purchase or sell real estate, although it may purchase and sell securities
which are secured by interests in real estate and securities of issuers
which invest or deal in real estate. The Fund reserves the freedom of
action to hold and to sell real estate acquired as a result of the
ownership of securities;

(7) Purchase or sell physical commodities or contracts for the purchase or sale
of physical commodities. Physical commodities do not include futures
contracts with respect to securities, securities indices or other financial
instruments; and

(8) With respect to 75% of its total assets, invest more than 5% of its total
assets in the securities of a single issuer or purchase more than 10% of
the outstanding voting securities of a single issuer, except obligations
issued or guaranteed by the U.S. government, its agencies or
instrumentalities and except securities of other investment companies; or
invest 25% or more of its total assets in any single industry (other than
securities issued or guaranteed by the U.S. government or its agencies or
instrumentalities.

The Fund may borrow money as a temporary measure for extraordinary or emergency
purposes, including the payment of dividends and the settlement of securities
transactions which otherwise might require untimely dispositions of Fund
securities. The 1940 Act currently requires that the Fund have 300% asset
coverage with respect to all borrowings other than temporary borrowings.

For purposes of construing restriction (8), securities of the U.S. Government,
its agencies, or instrumentalities are not considered to represent industries.
Municipal obligations backed by the credit of a governmental entity are also not
considered to represent industries.

The Fund has adopted the following nonfundamental investment policy which may be
changed by the Board without approval of the Fund's shareholders. As a matter of
nonfundamental policy, the Fund may not make short sales of securities or
maintain a short position, unless at all times when a short position is open it
either owns an equal amount of such securities or owns securities convertible
into or exchangeable, without payment of any further consideration, for
securities of the same issue as, and equal in amount to, the securities sold
short.

Upon the Board's approval, the Fund may invest more than 10% of its total assets
in one or more other management investment companies (or may invest in
affiliated investment companies) to the extent permitted by the 1940 Act and
rules thereunder.

Whenever an investment policy or investment restriction set forth in the
Prospectus or this SAI states a maximum percentage of assets that may be
invested in any security or other asset or describes a policy regarding quality
standards, such percentage limitation or standard shall be determined
immediately

--------------------------------------------------------------------------------
13

ADDITIONAL INVESTMENT INFORMATION AND RESTRICTIONS
--------------------------------------------------------------------------------

after and as a result of the Fund's acquisition of such security or asset.
Accordingly, any later increase or decrease resulting from a change in values,
assets or other circumstances or any subsequent rating change made by a rating
service (or as determined by the Adviser if the security is not rated by a
rating agency) will not compel the Fund to dispose of such security or other
asset. Notwithstanding the foregoing, the Fund must always be in compliance with
the borrowing policies set forth above.

As described in the Prospectus, under normal market circumstances, the Fund
expects to maintain a weighted average portfolio credit quality of investment
grade. In determining the average credit quality of the Fund, Eaton Vance
intends to use a methodology, based structurally on the S&P or Moody's rating
system (or both) described in Appendix A to this SAI, which assumes a linear
relationship in the credit quality ratings for ratings between C and AAA (Aaa).
Securities with a rating below C will not be assigned any value in the
calculation of average credit quality. For the purpose of determining the Fund's
average credit quality, when a security is rated by more than one nationally
recognized statistical rating agency, the Adviser generally will use the highest
rating available. Within this general guideline, the Fund may invest in
individual securities of any credit quality. The Fund's holdings of
Non-Investment Grade Bonds and Senior Loans with lower credit ratings generally
will be offset by MBS with very high credit ratings. A "barbell" portfolio of
lower rated and higher rated securities may have risk characteristics that
differ from fixed income securities with credit ratings equivalent to the
portfolio average.

--------------------------------------------------------------------------------
14

--------------------------------------------------------------------------------

Trustees and officers

The Trustees of the Fund are responsible for the overall management and
supervision of the affairs of the Fund. The Trustees and officers of the Fund
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. The business
address of each Trustee and officer is The Eaton Vance Building, 255 State
Street, Boston, Massachusetts 02109. As used in this SAI, "EVC" refers to Eaton
Vance Corp., "EV" refers to Eaton Vance, Inc., "BMR" refers to Boston Management
and Research, and "EVD" refers to Eaton Vance Distributors Inc. EVC and EV are
the corporate parent and trustee, respectively, of Eaton Vance and BMR.

NUMBER OF
PORTFOLIOS IN
TERM OF OFFICE FUND COMPLEX OTHER
NAME AND POSITION(S) AND LENGTH PRINCIPAL OCCUPATION(S) OVERSEEN BY DIRECTORSHIPS
DATE OF BIRTH WITH THE FUND OF SERVICE DURING PAST FIVE YEARS TRUSTEE(1) HELD
-----------------------------------------------------------------------------------------------------------------

NON-INTERESTED
TRUSTEES
Jessica M. Bibliowicz Trustee(2) Since 4/8/03 President and Chief 187 None
11/28/59 Three Years Executive Officer of
National Financial
Partners (financial
services company)
(since April 1999).
President and Chief
Operating Officer of
John A. Levin & Co.
(registered investment
adviser) (July 1997 to
April 1999) and a
Director of Baker,
Fentress & Company
which owns John A.
Levin & Co. (July 1997
to April 1999). Ms.
Bibliowicz is an
interested person
because of her
affiliation with a
brokerage firm.
James B. Hawkes Trustee(2) and Since 3/12/03 Chairman, President and 192 None
11/9/41 Vice President Three Years Chief Executive Officer
of BMR, Eaton Vance,
EVC and EV; Director of
EV and EVC; Vice
President and Director
of EVD. Trustee and/or
officer of 192
registered investment
companies in the Eaton
Vance Fund Complex. Mr.
Hawkes is an interested
person because of his
positions with BMR,
Eaton Vance, EVC and
EV, which are
affiliates of the Fund.

--------------------------------------------------------------------------------
15

TRUSTEES AND OFFICERS
--------------------------------------------------------------------------------

Samuel L. Hayes, III Trustee(3) Since 4/8/03 Jacob H. Schiff 192 Director of
2/23/35 Three Years Professor of Investment Tiffany & Co.
Banking Emeritus, (specialty
Harvard University retailer) and
Graduate School of Telect, Inc.
Business (telecommunication
Administration. services company)
Norton H. Reamer Trustee(3) Since 4/8/03 President, Unicorn 192 None
Three Years Corporation (an
investment and
financial advisory
services company)
(since September 2000).
Chairman, Hellman,
Jordan Management Co.,
Inc. (an investment
management company)
(since November 2000).
Advisory Director of
Berkshire Capital
Corporation (investment
banking firm) (since
June 2002). Formerly,
Chairman of the Board,
United Asset Management
Corporation (a holding
company owning
institutional
investment management
firms) and Chairman,
President and Director,
UAM Funds (mutual
funds).
Lynn A. Stout Trustee(4) Since 4/08/03 Professor of Law, 192 None
9/14/57 Three Years University of
California at Los
Angeles School of Law
(since July 2001).
Formerly, Professor of
Law, Georgetown
University Law Center.

------------
(1) Includes both master and feeder funds in master-feeder structure.
(2) Class I Trustees whose term expires in 2004.
(3) Class II Trustees whose terms expires in 2005.
(4) Class III Trustees whose term expires in 2006.

--------------------------------------------------------------------------------
16

TRUSTEES AND OFFICERS
--------------------------------------------------------------------------------

PRINCIPAL OFFICERS WHO ARE NOT TRUSTEES

TERM OF OFFICE
POSITION(S) AND LENGTH
NAME AND DATE OF BIRTH WITH THE FUND OF SERVICE PRINCIPAL OCCUPATIONS DURING PAST FIVE YEARS
--------------------------------------------------------------------------------------------------------

Thomas E. Faust Jr. President Since 3/12/03 Executive Vice President of Eaton Vance,
5/31/58 BMR, EVC and EV; Chief Investment Officer of
Eaton Vance and BMR and Director of EVC.
Chief Executive Officer of Belair Capital
Fund LLC, Belcrest Capital Fund LLC, Belmar
Capital Fund LLC, Belport Capital Fund LLC
and Belshire Capital Fund LLC (private
investment companies sponsored by Eaton
Vance). Officer of 51 registered investment
companies Managed by Eaton Vance or BMR.
James L. O'Connor Treasurer Since 3/12/03 Vice President of BMR, Eaton Vance and EVD.
4/1/45 Officer of 113 registered investment
companies managed by Eaton Vance or BMR.
Scott H. Page Vice President Since 3/12/03 Vice President of Eaton Vance and BMR.
11/30/59 Officer of 11 registered investment
companies managed by Eaton Vance or BMR.
Susan Schiff Vice President Since 3/12/03 Vice President of Eaton Vance and BMR.
3/13/61 Officer of 25 registered investment
companies managed by Eaton Vance or BMR.
Payson F. Swaffield Vice President Since 3/12/03 Vice President of Eaton Vance and BMR.
8/13/56 Officer of 11 registered investment
companies managed by Eaton Vance or BMR.
Michael W. Weilheimer Vice President Since 3/12/03 Vice President of Eaton Vance and BMR.
2/11/61 Officer of 8 registered investment companies
managed by Eaton Vance or BMR.

The Governance Committee of the Board of Trustees of the Fund is comprised of
those Trustees who are not "interested persons" of the Fund, as that term is
defined under the 1940 Act ("noninterested Trustees"). Ms. Stout currently
serves as the Governance Committee's chair. The purpose of the Committee is to
undertake a periodic review of, and make recommendations with respect to: (i)
the Board's performance; (ii) Trustee compensation; (iii) appointment of new
Trustees; (iv) identity, duties and composition of the various Board committees;
(v) development and maintenance of the Board's membership, structure and
operations; (vi) policies and procedures adopted or approved by the Board to
comply with regulatory requirements that relate to fund governance; and (vii)
any other matters related to fund governance.

Messrs. Hayes (Chairman), Reamer and Ms. Stout 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 and
performance of the independent accountants, and reviewing matters relative to
accounting and auditing practices and procedures, accounting records, and the
internal accounting controls, of the Fund, and certain service providers.

Messrs. Hayes (Chairman), Reamer and Ms. Stout are members of the Special
Committee of the Board of Trustees of the Fund. The purpose of the Special
Committee is to consider, evaluate and make

--------------------------------------------------------------------------------
17

TRUSTEES AND OFFICERS
--------------------------------------------------------------------------------

recommendations to the full Board of Trustees concerning (i) all contractual
arrangements with service providers to the Fund, including investment advisory,
administrative, transfer agency, custodial and fund accounting and distribution
services, and (ii) all other matters in which Eaton Vance or its affiliates has
any actual or potential conflict of interest with the Fund.

As of the date of this SAI, the Committees had not held any meetings.

When considering approval of the Advisory agreement between the Fund and the
Adviser, the noninterested Trustees considered, among other things, the
following:

+ A report comparing the fees and expenses of the Fund;

+ Information on the relevant peer group(s) of funds;

+ The economic outlook and the general investment outlook in the relevant
investment markets;

+ Eaton Vance's results and financial condition and the overall organization of
the Adviser;

+ Arrangements regarding the distribution of Fund shares;

+ The procedures used to determine the fair value of the Fund's assets;

+ The allocation of brokerage, including allocations to soft dollar brokerage
and allocations to firms that sell Eaton Vance fund shares;

+ Eaton Vance's management of the relationship with the custodian,
subcustodians and fund accountants;

+ The resources devoted to Eaton Vance's compliance efforts undertaken on
behalf of the funds it manages and the record of compliance with the
investment policies and restrictions and with policies on personal securities
transactions;

+ The quality nature, cost and character of the administrative and other
non-investment management services provided by Eaton Vance and its
affiliates;

+ Investment management staffing;

+ Operating expenses (including transfer agency expenses) to be paid to third
parties; and

+ Information to be provided to investors, including the Fund's shareholders.

In addition to the factors mentioned above, the noninterested Trustees also
reviewed the level of the Adviser's profits in respect of the management of the
Eaton Vance funds, including the Fund. The noninterested Trustees considered the
profits realized by Eaton Vance and its affiliates in connection with the
operation of the Fund. The noninterested Trustees also considered Eaton Vance's
profit margins in comparison with available industry data.

The noninterested Trustees did not consider any single factor as controlling in
determining whether or not to approve the Advisory agreement. Nor are the items
described herein all encompassing of the matters considered by the noninterested
Trustees. In assessing the information provided by Eaton Vance and its
affiliates, the noninterested Trustees also took into consideration the benefits
to shareholders of investing in a fund that is part of large family of funds
which provides a large variety of shareholder services.

Based on their consideration of all factors that it deemed material and assisted
by the advice of its independent counsel, the noninterested Trustees concluded
that the approval of the Advisory agreement, including the fee structure
(described herein) is in the interests of shareholders.

--------------------------------------------------------------------------------
18

TRUSTEES AND OFFICERS
--------------------------------------------------------------------------------

SHARE OWNERSHIP
The following table shows the dollar range of equity securities beneficially
owned by each Trustee in the Fund and all Eaton Vance Funds overseen by the
Trustee as of December 31, 2002.

AGGREGATE DOLLAR RANGE OF EQUITY
DOLLAR RANGE OF SECURITIES OWNED IN ALL REGISTERED
EQUITY SECURITIES FUNDS OVERSEEN BY TRUSTEE IN THE
NAME OF TRUSTEE OWNED IN THE FUND EATON VANCE FUND COMPLEX
-------------------------------------------------------------------------------------------------

INTERESTED TRUSTEES
Jessica M. Bibliowicz................. None $10,001--$50,000
James B. Hawkes....................... None over $100,000
NONINTERESTED TRUSTEES
Samuel L. Hayes, III.................. None over $100,000
Norton H. Reamer...................... None over $100,000
Lynn A. Stout......................... None $10,001--$50,000

As of December 31, 2002, no noninterested Trustee or any of their immediate
family members owned beneficially or of record any class of securities of EVC,
EVD or any person controlling, controlled by or under common control with EVC or
EVD.

During the calendar years ended December 31, 2001 and December 31, 2002, no
noninterested Trustee (or their immediate family members) had:

1. Any direct or indirect interest in Eaton Vance, EVC, EVD or any person
controlling, controlled by or under common control with EVC or EVD;

2. Any direct or indirect material interest in any transaction or series of
similar transactions with (i) the Trust or any Fund; (ii) another fund
managed by EVC, distributed by EVD or a person controlling, controlled by or
under common control with EVC or EVD; (iii) EVC or EVD; (iv) a person
controlling, controlled by or under common control with EVC or EVD; or (v)
an officer of any of the above; or

3. Any direct or indirect relationship with (i) the Trust or any Fund; (ii)
another fund managed by EVC, distributed by EVD or a person controlling,
controlled by or under common control with EVC or EVD; (iii) EVC or EVD;
(iv) a person controlling, controlled by or under common control with EVC or
EVD; or (v) an officer of any of the above.

During the calendar years ended December 31, 2001 and December 31, 2002, no
officer of EVC, EVD or any person controlling, controlled by or under common
control with EVC or EVD served on the Board of Directors of a company where a
noninterested Trustee of the Fund or any of their immediate family members
served as an officer.

Trustees of the Fund who are not affiliated with the Adviser may elect to defer
receipt of all or a percentage of their annual fees in accordance with the terms
of a Trustees Deferred Compensation Plan (the "Trustees' Plan"). Under the
Trustees' Plan, an eligible Trustee may elect to have his deferred fees invested
by the 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 does not have a
retirement plan for its Trustees.

The fees and expenses of the noninterested Trustees of the Fund are paid by the
Fund. (The Trustees of the Fund who are members of the Eaton Vance organization
receive no compensation from the Fund.)

--------------------------------------------------------------------------------
19

TRUSTEES AND OFFICERS
--------------------------------------------------------------------------------

During the Fund's fiscal year ending October 31, 2003, it is anticipated that
the noninterested Trustees of the Fund will earn the following compensation in
their capacities as Trustees. For the year ended December 31, 2002, the
noninterested Trustees earned the compensation set forth below in their
capacities as Trustees from the funds in the Eaton Vance fund complex(1).

JESSICA M. SAMUEL L. NORTON H. LYNN A.
SOURCE OF COMPENSATION BIBLIOWICZ HAYES, III REAMER STOUT
-----------------------------------------------------------------------------------------------

Fund*........................................ $ 1,000 $ 1,000 $ 1,000 $ 1,000
Fund Complex................................. $160,000 $180,000 $160,000 $160,000

------------
* Estimated
(1) As of April 1, 2003, the Eaton Vance fund complex consisted of 192
registered investment companies or series thereof.

Investment advisory and other services

Eaton Vance, its affiliates and its predecessor companies have been managing
assets of individuals and institutions since 1924 and of investment companies
since 1931. They maintain a large staff of experienced fixed-income, senior loan
and equity investment professionals to service the needs of their clients. The
fixed-income group 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 senior loan group focuses on senior floating
rate loans, unsecured loans and other floating rate debt securities such as
notes, bonds and asset backed securities. The equity group 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.

The Fund will be responsible for all of its costs and expenses not expressly
stated to be payable by Eaton Vance under the Advisory Agreement or
Administration Agreement. Such costs and expenses to be borne by the Fund
include, without limitation: custody and transfer agency fees and expenses,
including those incurred for determining net asset value and keeping accounting
books and records; expenses of pricing and valuation services; the cost of share
certificates; membership dues in investment company organizations; expenses of
acquiring, holding and disposing of securities and other investments; fees and
expenses of registering under the securities laws, stock exchange listing fees
and governmental fees; rating agency fees and preferred share remarketing
expenses; expenses of reports to shareholders, proxy statements and other
expenses of shareholders' meetings; insurance premiums; printing and mailing
expenses; interest, taxes and corporate fees; legal and accounting expenses;
compensation and expenses of Trustees not affiliated with Eaton Vance; expenses
of conducting repurchase offers for the purpose of repurchasing Fund shares; and
investment advisory and administration fees. The Fund will also bear expenses
incurred in connection with any litigation in which the Fund is a party and any
legal obligation to indemnify its officers and Trustees with respect thereto, to
the extent not covered by insurance.

The Advisory Agreement with the Adviser continues in effect to April 14, 2005
and from year to year so long as such continuance is approved at least annually
(i) by the vote of a majority of the noninterested Trustees of the Fund or of
the Adviser 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 interests of the Fund. The Fund's
Administration Agreement continues in effect from year to year so long as such
continuance is approved at least annually by the vote of a majority of the
Fund's Trustees. Each agreement may be terminated at any time without penalty on
sixty (60) days' written notice by the Trustees of the Fund or Eaton Vance, as
applicable, or by vote of the majority of the outstanding shares of the Fund.
Each agreement will terminate automatically in the

--------------------------------------------------------------------------------
20

INVESTMENT ADVISORY AND OTHER SERVICES
--------------------------------------------------------------------------------

event of its assignment. Each agreement provides that, in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations or duties to the Fund under such agreements on the part of Eaton
Vance, Eaton Vance shall not be liable to the Fund for any loss incurred, to the
extent not covered by insurance.

Eaton Vance is a business trust organized under Massachusetts law. EV serves as
trustee of Eaton Vance. Eaton Vance and EV are subsidiaries of EVC, a Maryland
corporation and publicly-held holding company. EVC through its subsidiaries and
affiliates engages primarily in investment management, administration and
marketing activities. The Directors of EVC are James B. Hawkes, John G. L.
Cabot, Thomas E. Faust Jr., Leo I. Higdon, Jr., John M. Nelson, Vincent M.
O'Reilly and Ralph Z. Sorenson. All shares of the outstanding Voting Common
Stock of EVC are deposited in a voting trust, the voting trustees of which are
Messrs. James B. Hawkes, Jeffrey P. Beale, Alan R. Dynner, Thomas E. Faust, Jr.,
Thomas J. Fetter, Scott H. Page, Duncan W. Richardson, William M. Steul, Payson
F. Swaffield, Michael W. Weilheimer and Wharton P. Whitaker (all of whom are
officers of Eaton Vance). The voting trustees have unrestricted voting rights
for the election of Directors of EVC. All of the outstanding voting trust
receipts issued under said voting trust are owned by certain of the officers of
BMR and Eaton Vance who are also officers, or officers and Directors of EVC and
EV. As indicated under "Trustees and Officers", all of the officers of the Fund
(as well as Mr. Hawkes who is also a Trustee) hold positions in the Eaton Vance
organization.

EVC and its affiliates and their officers and employees from time to time have
transactions with various banks, including the custodian of the Fund, 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.

CODE OF ETHICS
The Adviser and the Fund have adopted a Code of Ethics governing personal
securities transactions. Under the Code, Eaton Vance employees may purchase and
sell securities (including securities held or eligible for purchase by the Fund)
subject to certain pre-clearance and reporting requirements and other
procedures.

The Code can be reviewed and copied at the Securities and Exchange Commission's
public reference room in Washington, DC (call 1-202-942-8090 for information on
the operation of the public reference room); on the EDGAR Database on the SEC's
Internet site (http:/www.sec.gov); or, upon payment of copying fees, by writing
the SEC's public reference section, Washington, DC 20549-0102, or by electronic
mail at publicinfo@sec.gov.

INVESTMENT ADVISORY SERVICES
Under the general supervision of the Fund's Board of Trustees, Eaton Vance will
carry out the investment and reinvestment of the assets of the Fund, will
furnish continuously an investment program with respect to the Fund, will
determine which securities should be purchased, sold or exchanged, and will
implement such determinations. Eaton Vance will furnish to the Fund investment
advice and provide related office facilities and personnel for servicing the
investments of the Fund. Eaton Vance will compensate all Trustees and officers
of the Fund who are members of the Eaton Vance organization and who render
investment services to the Fund, and will also compensate all other Eaton Vance
personnel who provide research and investment services to the Fund.

ADMINISTRATIVE SERVICES
Under the Administration Agreement, Eaton Vance is responsible for managing the
business affairs of the Fund, subject to the supervision of the Fund's Board of
Trustees. Eaton Vance will furnish to the Fund all office facilities, equipment
and personnel for administering the affairs of the Fund. Eaton Vance will
compensate all Trustees and officers of the Fund who are members of the Eaton
Vance

--------------------------------------------------------------------------------
21

INVESTMENT ADVISORY AND OTHER SERVICES
--------------------------------------------------------------------------------

organization and who render executive and administrative services to the Fund,
and will also compensate all other Eaton Vance personnel who perform management
and administrative services for the Fund. Eaton Vance's administrative services
include recordkeeping, preparation and filing of documents required to comply
with federal and state securities laws, supervising the activities of the Fund's
custodian and transfer agent, providing assistance in connection with the
Trustees and shareholders' meetings, providing services in connection with
quarterly repurchase offers and other administrative services necessary to
conduct the Fund's business.

Determination of net asset value

The net asset value per Share of the Fund is determined no less frequently than
weekly, generally on the last day of the week that the New York Stock Exchange
(the "Exchange") is open for trading, as of the close of regular trading on the
Exchange (normally 4:00 p.m. New York time). The Fund's net asset value per
Share is determined by IBT, in the manner authorized by the Trustees of the
Fund. Net asset value is computed by dividing the value of the Fund's total
assets, less its liabilities by the number of shares outstanding.

The Adviser uses an independent pricing service to value most loans,
mortgage-backed securities (other than seasoned mortgage-backed securities) and
other debt securities at their market value. Seasoned mortgage-backed securities
are valued through the use of an independent matrix pricing system which takes
into account bond prices, yield differentials, anticipated prepayment and
interest rates provided by dealers. The Adviser may use the fair value method to
value loans or other securities if market quotations for them are not readily
available or are deemed unreliable, or if events occurring after the close of a
securities market and before the Fund values its assets would materially affect
net asset value. A security that is fair valued may be valued at a price higher
or lower than actual market quotations or the value determined by other funds
using their own fair valuation procedures.

The Trustees have approved and monitor the procedures under which Senior Loans
are valued. The Adviser and the Valuation Committee may implement new pricing
methodologies or expand mark-to-market valuation of Senior Loans in the future,
which may result in a change in the Fund's net asset value per share. The Fund's
net asset value per share will also be affected by fair value pricing decisions
and by changes in the market for Senior Loans. In determining the fair value of
a Senior Loan, the Adviser will consider relevant factors, data, and
information, including: (i) the characteristics of and fundamental analytical
data relating to the Senior Loan, including the cost, size, current interest
rate, period until next interest rate reset, maturity and base lending rate of
the Senior Loan, the terms and conditions of the Senior Loan and any related
agreements, and the position of the Senior Loan in the Borrower's debt
structure; (ii) the nature, adequacy and value of the collateral, including the
Fund's rights, remedies and interests with respect to the collateral; (iii) the
creditworthiness of the Borrower, based on an evaluation of its financial
condition, financial statements and information about the Borrower's business,
cash flows, capital structure and future prospects; (iv) information relating to
the market for the Senior Loan, including price quotations for and trading in
the Senior Loan and interests in similar Senior Loans and the market environment
and investor attitudes towards the Senior Loan and interests in similar Senior
Loans; (v) the experience, reputation, stability and financial condition of the
Agent and any intermediate participants in the Senior Loan; and (vi) general
economic and market conditions affecting the fair value of the Senior Loan. The
fair value of each Senior Loan is reviewed and approved by the Adviser's
Valuation Committee and the Fund's Trustees.

Non-loan holdings (other than debt securities, including short term obligations)
may be valued on the basis of prices furnished by one or more pricing services
which determine prices for normal, institutional-size trading units of such
securities using market information, transactions for comparable securities and
various relationships between securities which are generally recognized by
institutional

--------------------------------------------------------------------------------
22

DETERMINATION OF NET ASSET VALUE
--------------------------------------------------------------------------------

traders. In certain circumstances, portfolio securities will be valued at the
last sale price on the exchange that is the primary market for such securities,
or the average of the last quoted bid price and asked price for those securities
for which the over-the-counter market is the primary market or for listed
securities in which there were no sales during the day. Marketable securities
listed on the NASDAQ National Market System are valued at the NASDAQ official
closing price. The value of interest rate swaps will be based upon a dealer
quotation.

Debt securities for which the over-the-counter market is the primary market are
normally valued on the basis of prices furnished by one or more pricing services
at the mean between the latest available bid and asked prices. OTC options are
valued at the mean between the bid and asked prices provided by dealers.
Financial futures contracts listed on commodity exchanges and exchange-traded
options are valued at closing settlement prices. Short-term obligations having
remaining maturities of less than 60 days are valued at amortized cost, which
approximates value, unless the Trustees determine that under particular
circumstances such method does not result in fair value. As authorized by the
Trustees, debt securities (other than short-term obligations) may be valued on
the basis of valuations furnished by a pricing service which determines
valuations based upon market transactions for normal, institutional-size trading
units of such securities. Mortgage-backed "pass-through" securities are valued
through use of an independent matrix pricing system applied by the Adviser which
takes into account closing bond valuations, yield differentials, anticipated
prepayments and interest rates provided by dealers. Securities for which there
is no such quotation or valuation and all other assets are valued at fair value
as determined in good faith by or at the direction of the Fund's 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
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
New York Stock 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).

Portfolio trading

Decisions concerning the execution of portfolio security transactions, including
the selection of the market and the executing firm, are made by the Adviser. The
Adviser is also responsible for the execution of transactions for all other
accounts managed by it. The Adviser places the portfolio security transactions
of the Fund and of all other accounts managed by it for execution with many
firms. The Adviser uses its best efforts to obtain execution of portfolio
security transactions at prices which are advantageous to the Fund and at
reasonably competitive spreads or (when a disclosed commission is being charged)
at reasonably competitive commission rates. In seeking such execution, the
Adviser 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 the Adviser, the size and type of the transaction, the nature and
character of the market for the security, the confidentiality, speed and
certainty of effective execution required for the transaction, the general
execution and operational capabilities of the executing firm, the reputation,
reliability, experience and financial condition of the firm, the value and
quality of the services rendered by the firm in this and other transactions, and
the reasonableness of the spread or commission, if any.

The Fund will acquire Senior Loans from major international banks, selected
domestic regional banks, insurance companies, finance companies and other
financial institutions. In selecting financial institutions from which Senior
Loans may be acquired, the Adviser will consider, among other factors,

--------------------------------------------------------------------------------
23

PORTFOLIO TRADING
--------------------------------------------------------------------------------

the financial strength, professional ability, level of service and research
capability of the institution. While these financial institutions are generally
not required to repurchase Senior Loans which they have sold, they may act as
principal or on an agency basis in connection with their sale by the Fund.

Other fixed income obligations which may be purchased and sold by the Fund are
generally traded in the over-the-counter market on a net basis (i.e., without
commission) through broker-dealers or banks acting for their own account rather
than as brokers, or otherwise involve transactions directly with the issuers of
such obligations. The Fund may also purchase fixed income and other securities
from underwriters, the cost of which may include undisclosed fees and
concessions to the underwriters.

Transactions on stock exchanges and other agency transactions involve the
payment 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 such 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 usually includes an undisclosed
dealer markup or markdown.

Although spreads or commissions paid on portfolio security transactions will, in
the judgment of the Adviser, 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 Adviser's clients in part for providing brokerage and research
services to the Adviser.

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 the Adviser
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 that particular transaction or on the basis of
overall responsibilities which the Adviser and its affiliates have for accounts
over which they exercise investment discretion. In making any such
determination, the Adviser 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 of the investment advisory industry and of 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, the Adviser receives Research Services from many
broker-dealer firms with which the Adviser places the Fund's 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 market,
recommendations as to

--------------------------------------------------------------------------------
24

PORTFOLIO TRADING
--------------------------------------------------------------------------------

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 the Adviser 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 the Adviser 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 the Adviser receives such Research Services. The Adviser 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 the Adviser believes are useful or of value to it in rendering investment
advisory services to its clients.

The Fund and the Adviser may also receive Research Services from underwriters
and dealers in fixed-price offerings, which Research Services are reviewed and
evaluated by the Adviser in connection with its investment responsibilities. The
investment companies sponsored by the Adviser or its affiliates 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 the
Adviser, to such companies. Such companies may also pay cash for such
information.

Subject to the requirement that the Adviser shall use its best efforts to seek
and execute portfolio security transactions at advantageous prices and at
reasonably competitive spreads or commission rates, the Adviser is authorized to
consider as a factor in the selection of any broker-dealer firm with whom
portfolio orders may be placed the fact that such firm has sold or is selling
shares of the Fund or of other investment companies sponsored by the Adviser.
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 the Adviser or its affiliates. Whenever
decisions are made to buy or sell securities by the Fund and one or more of such
other accounts simultaneously, the Adviser 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 the
Adviser 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 the opinion of the Trustees of the Fund that the
benefits from the Adviser's organization outweigh any disadvantage that may
arise from exposure to simultaneous transactions.

--------------------------------------------------------------------------------
25

PORTFOLIO TRADING
--------------------------------------------------------------------------------

Taxes

The following discussion of federal income tax matters is based on the advice of
Kirkpatrick & Lockhart LLP, counsel to the Fund. The Fund intends to elect to be
treated and to qualify each year as a RIC under the Code. Accordingly, the Fund
intends to satisfy certain requirements relating to sources of its income and
diversification of its assets and to distribute substantially all of its net
income and net short-term and long-term capital gains (after reduction by any
available capital loss carryforwards) 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. To the extent it qualifies for treatment as a RIC
and satisfies the above-mentioned distribution requirements, the Fund will not
be subject to federal income tax on income paid to its shareholders in the form
of dividends or capital gain distributions.

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 an amount at least equal to the sum of (i) 98% of its
ordinary income for such year and (ii) 98% of its capital gain net income (which
is the excess of its realized net long-term capital gain over its realized net
short-term capital loss), generally computed on the basis of the one-year period
ending on October 31 of such year, after reduction by any available capital loss
carryforwards, plus 100% of any ordinary income and capital gain net income from
the prior year (as previously computed) that were not paid out during such year
and on which the Fund paid no federal income tax. Under current law, provided
that the Fund qualifies as a RIC for federal income tax purposes, the Fund
should not be liable for any income, corporate excise or franchise tax in The
Commonwealth of Massachusetts.

If the Fund does not qualify as a RIC for any taxable year, the Fund's taxable
income will be subject to corporate income taxes, and all distributions from
earnings and profits, including distributions of net capital gain (if any), will
be taxable to the shareholder as ordinary income. In addition, in order to
requalify for taxation as a RIC, the Fund may be required to recognize
unrealized gains, pay substantial taxes and interest, and make certain
distributions.

The Fund's investment in zero coupon and certain other securities will cause it
to realize income prior to the receipt of cash payments with respect to these
securities. Such income will be accrued daily by the Fund and, in order to avoid
a tax payable by the Fund, the Fund may be required to liquidate securities that
it might otherwise have continued to hold in order to generate cash so that the
Fund may make required distributions to its shareholders.

Investments in lower rated or unrated securities may present special tax issues
for the Fund to the extent that the issuers of these securities default on their
obligations pertaining thereto. The Code is not entirely clear regarding the
federal income tax consequences of the Fund's taking certain positions in
connection with ownership of such distressed securities.

Any recognized gain or income attributable to market discount on long-term debt
obligations (i.e., obligations with a term of more than one year except to the
extent of a portion of the discount attributable to original issue discount)
purchased by the Fund is taxable as ordinary income. A long-term debt obligation
is generally treated as acquired at a market discount if purchased after its
original issue at a price less than (i) the stated principal amount payable at
maturity, in the case of an obligation that does not have original issue
discount or (ii) in the case of an obligation that does have original issue
discount, the sum of the issue price and any original issue discount that
accrued before the obligation was purchased, subject to a de minimis exclusion.

The Fund's investments in options, futures contracts, hedging transactions,
forward contracts (to the extent permitted) and certain other transactions will
be subject to special tax rules (including mark-to-market, constructive sale,
straddle, wash sale, short sale and other rules), the effect of which may be to
accelerate income to the Fund, defer Fund losses, cause adjustments in the
holding periods of securities

--------------------------------------------------------------------------------
26

TAXES
--------------------------------------------------------------------------------

held by the Fund, convert capital gain into ordinary income and convert
short-term capital losses into long-term capital losses. These rules could
therefore affect the amount, timing and character of distributions to
shareholders. The Fund may be required to limit its activities in options and
futures contracts in order to enable it to maintain its RIC status.

Any loss realized upon the sale or exchange of Fund shares with a holding period
of 6 months or less will be treated as a long-term capital loss to the extent of
any capital gain distributions received with respect to such shares. In
addition, all or a portion of a loss realized on a redemption or other
disposition of Fund shares may be disallowed under "wash sale" rules to the
extent the shareholder acquires other shares of the same Fund (whether through
the reinvestment of distributions or otherwise) within the period beginning 30
days before the redemption of the loss shares and ending 30 days after such
date. Any disallowed loss will result in an adjustment to the shareholder's tax
basis in some or all of the other shares acquired.

Sales charges paid upon a purchase of shares cannot be taken into account for
purposes of determining gain or loss on a sale of the shares before the 91st day
after their purchase to the extent a sales charge is reduced or eliminated in a
subsequent acquisition of shares of the Fund (or of another fund) pursuant to
the reinvestment or exchange privilege. Any disregarded amounts will result in
an adjustment to the shareholder's tax basis in some or all of any other shares
acquired.

Dividends and distributions on the Fund's shares are generally subject to
federal income tax as described herein to the extent they do not exceed the
Fund's realized income and gains, even though such dividends and distributions
may economically represent a return of a particular shareholder's investment.
Such distributions are likely to occur in respect of shares purchased at a time
when the Fund's net asset value reflects gains that are either unrealized, or
realized but not distributed. Such realized gains may be required to be
distributed even when the Fund's net asset value also reflects unrealized
losses. Certain distributions declared in October, November or December and paid
in the following January will be taxed to shareholders as if received on
December 31 of the year in which they were declared. In addition, certain other
distributions made after the close of a taxable year of the Fund may be "spilled
back" and treated as paid by the Fund (except for purposes of the 4% excise tax)
during such taxable year. In such case, Shareholders will be treated as having
received such dividends in the taxable year in which the distributions were
actually made.

Amounts paid by the Fund to individuals and certain other shareholders who have
not provided the Fund with their correct taxpayer identification number ("TIN")
and certain certifications required by the Internal Revenue Service (the "IRS")
as well as shareholders with respect to whom the Fund has received certain
information from the IRS or a broker may be subject to "backup" withholding of
federal income tax arising from the Fund's taxable dividends and other
distributions as well as the gross proceeds of sales of shares, at a rate of up
to 30% for amounts paid during 2003. An individual's TIN is generally his or her
social security number. Backup withholding is not an additional tax. Any amounts
withheld under the backup withholding rules from payments made to a Shareholder
may be refunded or credited against such Shareholder's U.S. federal income tax
liability, if any, provided that the required information is furnished to the
IRS.

The foregoing discussion does not address the special tax rules applicable to
certain classes of investors, such as tax-exempt entities, foreign investors,
insurance companies and financial institutions. Shareholders should consult
their own tax advisers with respect to special tax rules that may apply in their
particular situations, as well as the state, local, and, where applicable,
foreign tax consequences of investing in the Fund.

If the Fund issues preferred shares, the Fund will designate dividends made to
holders of shares and to holders of those preferred shares in accordance with
each class's proportionate share of each item of Fund income (such as net
capital gains and other taxable income).

--------------------------------------------------------------------------------
27

TAXES
--------------------------------------------------------------------------------

STATE AND LOCAL TAXES
Shareholders should consult their own tax advisers as the state or local tax
consequences of investing in the Fund.

Other information

The Fund is an organization of the type commonly known as a "Massachusetts
business trust." Under Massachusetts law, shareholders of such a trust may, in
certain circumstances, be held personally liable as partners for the obligations
of the trust. The Declaration of Trust contains an express disclaimer of
shareholder liability in connection with the Fund property or the acts,
obligations or affairs of the Fund. The Declaration of Trust also provides for
indemnification out of the Fund property of any shareholder held personally
liable for the claims and liabilities to which a shareholder may become subject
by reason of being or having been a shareholder. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is limited to
circumstances in which the Fund itself is unable to meet its obligations. The
Fund has been advised by its counsel that the risk of any shareholder incurring
any liability for the obligations of the Fund is remote.

The Declaration of Trust 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 the Fund or its shareholders
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. Voting rights are not cumulative, which means that the
holders of more than 50% of the shares voting for the election of Trustees can
elect 100% of the Trustees and, in such event, the holders of the remaining less
than 50% of the shares voting on the matter will not be able to elect any
Trustees.

The Declaration of Trust provides that no person shall serve as a Trustee if
shareholders holding two-thirds of the outstanding shares have removed him from
that office either by a written declaration filed with the Fund's custodian or
by votes cast at a meeting called for that purpose. The Declaration of Trust
further provides that the Trustees of the Fund shall promptly call a meeting of
the shareholders for the purpose of voting upon a question of removal of any
such Trustee or Trustees when requested in writing so to do by the record
holders of not less than 10 per centum of the outstanding shares.

The Fund's Prospectus and this SAI do not contain all of the information set
forth in the Registration Statement that the Fund has filed with the SEC. The
complete Registration Statement may be obtained from the SEC upon payment of the
fee prescribed by its Rules and Regulations.

Independent auditors

Deloitte & Touche LLP, Boston, Massachusetts are the independent auditors for
the Fund, providing audit services, tax return preparation, and assistance and
consultation with respect to the preparation of filings with the SEC.

--------------------------------------------------------------------------------
28

--------------------------------------------------------------------------------

INDEPENDENT AUDITORS' REPORT

To the Trustees and Shareholder of
Eaton Vance Limited Duration Income Fund:

We have audited the accompanying statement of assets and liabilities of Eaton
Vance Limited Duration Income Fund (the "Fund") as of May 6, 2003 and the
related statement of operations for the period from March 12, 2003 (date of
organization) through May 6, 2003. These financial statements are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Eaton Vance Limited Duration
Income Fund as of May 6, 2003, and the result of its operations for the period
from March 12, 2003 (date of organization) through May 6, 2003 in conformity
with accounting principles generally accepted in the United States of America.

Deloitte & Touche LLP

Boston, Massachusetts

May 7, 2003

--------------------------------------------------------------------------------
29

--------------------------------------------------------------------------------

Eaton Vance Limited Duration Income Fund

STATEMENT OF ASSETS AND LIABILITIES

MAY 6, 2003

ASSETS
Cash...................................................... $100,000
Offering costs............................................ 800,000
Receivable from Adviser................................... 7,500
--------
Total assets.............................................. $907,500
========
LIABILITIES
Accrued offering costs.................................... $800,000
Accrued organizational costs.............................. 7,500
--------
Total liabilities......................................... $807,500
========
Net assets applicable to 5,000 common shares of beneficial
interest issued and outstanding........................... $100,000
========
NET ASSET VALUE AND OFFERING PRICE PER SHARE................ $ 20.00
========

STATEMENT OF OPERATIONS

PERIOD FROM MARCH 12, 2003 (DATE OF ORGANIZATION) THROUGH MAY 6, 2003

INVESTMENT INCOME........................................... $ --
-------
EXPENSES
Organization costs........................................ $ 7,500
Expense reimbursement..................................... (7,500)
-------
Net expenses........................................... $ --
-------
NET INVESTMENT INCOME....................................... $ --
=======

See notes to financial statements.

--------------------------------------------------------------------------------
30

Notes to financial statements

NOTE 1: ORGANIZATION

The Fund was organized as a Massachusetts business trust on March 12, 2003, and
has been inactive since that date except for matters relating to its
organization and registration as a diversified, closed-end management investment
company under the Investment Company Act of 1940, as amended, and the Securities
Act of 1933, as amended, and the sale of 5,000 common shares to Eaton Vance
Management, the Fund's Investment Adviser.

Eaton Vance Management, or an affiliate, has agreed to reimburse all
organizational costs, estimated at approximately $7,500.

Eaton Vance Management, or an affiliate, has agreed to pay all offering costs
(other than sales loads) that exceed $0.04 per common share.

NOTE 2: ACCOUNTING POLICIES

The Fund's financial statements are prepared in accordance with accounting
principles generally accepted in the United States of America which require the
use of management estimates. Actual results may differ from those estimates.

The Fund's share of offering costs will be recorded within paid in capital as a
reduction of the proceeds from the sale of common shares upon the commencement
of Fund operations. The offering costs reflected above assume the sale of
20,000,000 common shares.

NOTE 3: INVESTMENT MANAGEMENT AGREEMENT

Pursuant to an investment advisory agreement between the Adviser and the Fund,
the Fund has agreed to pay an investment advisory fee, payable on a monthly
basis, at an annual rate of 0.75% of the average weekly gross assets of the
Fund. Gross assets of the Fund shall be calculated by deducting accrued
liabilities of the Fund not including the amount of any preferred shares
outstanding or the principal amount of any indebtedness for money borrowed.

In addition, Eaton Vance has contractually agreed to reimburse the Fund for fees
and other expenses in the amount of 0.20% of the average weekly gross assets for
the first 5 full years of the Fund's operations, 0.15% of average weekly gross
assets in year 6, 0.10% in year 7 and 0.05% in year 8.

NOTE 4: FEDERAL INCOME TAXES

The Fund intends to comply with the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its
taxable income, including any net realized gain on investments.

--------------------------------------------------------------------------------
31

APPENDIX A
--------------------------------------------------------------------------------

Description of securities ratings+
Moody's Investors Service, Inc.

LONG-TERM DEBT SECURITIES RATINGS

AAA: Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.

AA: Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long term risk appear somewhat larger than the Aaa securities.

A: Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.

BAA: Bonds which are rated Baa are considered as medium-grade obligations
(i.e., they are neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.

BA: Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during other good and bad times over the future. Uncertainty of position
characterizes bonds in this class.

B: Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.

CAA: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.

CA: Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.

C: Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.

---------------

+ The ratings indicated herein are believed to be the most recent ratings
available at the date of this SAI for the securities listed. Ratings are
generally given to securities at the time of issuance. While the rating
agencies may from time to time revise such ratings, they undertake no
obligation to do so, and the ratings indicated do not necessarily represent
ratings which would be given to these securities on the date of the Fund's
fiscal year end.

--------------------------------------------------------------------------------

A- 1

DESCRIPTION OF SECURITIES RATINGS
--------------------------------------------------------------------------------

Absence of Rating: Where no rating has been assigned or where a rating has been
suspended or withdrawn, it may be for reasons unrelated to the quality of the
issue.

Should no rating be assigned, the reason may be one of the following:

1. An application for rating was not received or accepted.

2. The issue or issuer belongs to a group of securities or companies that are
not rated as a matter of policy.

3. There is a lack of essential data pertaining to the issue or issuer.

4. The issue was privately placed, in which case the rating is not published in
Moody's publications.

Suspension or withdrawal may occur if new and material circumstances arise, the
effects of which preclude satisfactory analysis; if there is no longer available
reasonable up-to-date data to permit a judgment to be formed; if a bond is
called for redemption; or for other reasons.

Note: Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa through B in its bond rating system. The modifier 1
indicates that the security ranks in the higher end of its generic rating
category; the modifier 2 indicates a mid-range ranking; and the modifier 3
indicates that the issue ranks in the lower end of its generic rating category.

SHORT-TERM DEBT SECURITIES RATINGS
Moody's short-term debt ratings are opinions of the ability of issuers to repay
punctually senior debt obligations. These obligations have an original maturity
not exceeding one year, unless explicitly noted.

Moody's employs the following three designations, all judged to be investment
grade, to indicate the relative repayment ability of rated issuers:

PRIME-1: Issuers rated Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1 repayment
ability will often be evidenced by many of the following characteristics:
leading market positions in well-established industries; high rates of return on
funds employed; conservative capitalization structure with moderate reliance on
debt and ample asset protection; broad margins in earnings coverage of fixed
financial charges and high internal cash generation; and well-established access
to a range of financial markets and assured sources of alternate liquidity.

PRIME-2: Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.

PRIME-3: Issuers rated Prime-3 (or supporting institutions) have an acceptable
ability for repayment of senior short-term obligations. The effect of industry
characteristics and market compositions may be more pronounced. Variability in
earnings and profitability may result in changes in the level of debt protection
measurements and may require relatively high financial leverage. Adequate
alternate liquidity is maintained.

NOT PRIME: Issuers rated Not Prime do not fall within any of the Prime rating
categories.

--------------------------------------------------------------------------------

A- 2

DESCRIPTION OF SECURITIES RATINGS
--------------------------------------------------------------------------------

STANDARD & POOR'S RATINGS GROUP

INVESTMENT GRADE
AAA: Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.

AA: Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.

A: Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.

BBB: Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibit adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay interest and repay principal for debt in this
category than in higher rated categories.

SPECULATIVE GRADE
Debt rated BB, B, CCC, CC and C is regarded as having predominantly speculative
characteristics with respect to capacity to pay interest and repay principal. BB
indicates the least degree of speculation and C the highest. While such debt
will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major exposures to adverse conditions.

BB: Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB- rating.

B: Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB or BB-
rating.

CCC: Debt rated CCC has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The CCC rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
B or B- rating.

CC: The rating CC is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC debt rating.

C: The rating C is typically applied to debt subordinated to senior debt which
is assigned an actual or implied CCC- debt rating. The C rating may be used to
cover a situation where a bankruptcy petition has been filed, but debt service
payments are continued.

C1: The Rating C1 is reserved for income bonds on which no interest is being
paid.

D: Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The D rating also will be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.

--------------------------------------------------------------------------------

A- 3

DESCRIPTION OF SECURITIES RATINGS
--------------------------------------------------------------------------------

PLUS (+) OR MINUS (-): The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.

P: The letter "p" indicates that the rating is provisional. A provisional rating
assumes the successful completion of the project being financed by the debt
being rated and indicates that payment of debt service requirements is largely
or entirely dependent upon the successful and timely completion of the project.
This rating, however, while addressing credit quality subsequent to completion
of the project, makes no comment on the likelihood of, or the risk of default
upon failure of such completion. The investor should exercise his own judgment
with respect to such likelihood and risk.

L: The letter "L" indicates that the rating pertains to the principal amount of
those bonds to the extent that the underlying deposit collateral is insured by
the Federal Deposit Insurance Corp. and interest is adequately collateralized.
In the case of certificates of deposit, the letter "L" indicates that the
deposit, combined with other deposits being held in the same right and capacity,
will be honored for principal and accrued pre-default interest up to the federal
insurance limits within 30 days after closing of the insured institution or, in
the event that the deposit is assumed by a successor insured institution, upon
maturity.

NR: NR indicates no rating has been requested, that there is insufficient
information on which to base a rating, or that S&P does not rate a particular
type of obligation as a matter of policy.

COMMERCIAL PAPER

COMMERCIAL PAPER RATING DEFINITIONS
A S&P's commercial paper rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.
Ratings are graded into several categories, ranging from A for the highest
quality obligations to D for the lowest. These categories are as follows:

A-1: A short-term obligation rated A-1 is rated in the highest category by S&P.
The obligor's capacity to meet its financial commitment on the obligation is
strong. Within this category, certain obligations are designated with a plus
sign (+). This indicates that the obligor's capacity to meet its financial
commitment on these obligations is extremely strong.

A-2: A short-term obligation rated A-2 is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than
obligations in higher rating categories. However, the obligor's capacity to meet
its financial commitment on the obligation is satisfactory.

A-3: A short-term obligation rated A-3 exhibits adequate protection parameters.
However, adverse economic conditions or changing circumstances are more likely
to lead to a weakened capacity of the obligor to meet its financial commitment
on the obligation.

B: A short-term obligation rated B is regarded as having significant
speculative characteristics. The obligor currently has the capacity to meet its
financial commitment on the obligation; however, it faces major ongoing
uncertainties which could lead to the obligor's inadequate capacity to meet its
financial commitment on the obligation.

C: A short-term obligation rated C is currently vulnerable to nonpayment and is
dependent upon favorable business, financial, and economic conditions for the
obligor to meet its financial commitment on the obligation.

D: A short-term obligation rated D is in payment default. The D rating category
is used when payments on an obligation are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The D rating also will be used upon the
filing of a bankruptcy petition or the taking of a similar action if payments on
an obligation are jeopardized.

--------------------------------------------------------------------------------

A- 4

DESCRIPTION OF SECURITIES RATINGS
--------------------------------------------------------------------------------

A commercial paper rating is not a recommendation to purchase, sell or hold a
security inasmuch as it does not comment as to market price or suitability for a
particular investor. The ratings are based on current information furnished to
S&P by the issuer or obtained from other sources it considers reliable. S&P does
not perform an audit in connection with any rating and may, on occasion, rely on
unaudited financial information. The ratings may be changed, suspended, or
withdrawn as a result of changes in or unavailability of such information.

FITCH RATINGS

INVESTMENT GRADE BOND RATINGS
AAA: Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.

AA: Bonds considered to be investment grade and of very high credit quality.
The obligor's ability to pay interest and repay principal is very strong,
although not quite as strong as bonds rated 'AAA'. Because bonds rated in the
'AAA' and 'AA' categories are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally rated 'F-1+'.

L: Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.

BBB: Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is considered
to be adequate. Adverse changes in economic conditions and circumstances,
however, are more likely to have adverse impact on these bonds, and therefore,
impair timely payment. The likelihood that the ratings of these bonds will fall
below investment grade is higher than for bonds with higher ratings.

HIGH YIELD BOND RATINGS
BB: Bonds are considered speculative. The obligor's ability to pay interest and
repay principal may be affected over time by adverse economic changes. However,
business and financial alternatives can be identified that could assist the
obligor in satisfying its debt service requirements.

B: Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic activity throughout the
life of the issue.

CCC: Bonds have certain identifiable characteristics which, if not remedied,
may lead to default. The ability to meet obligations requires an advantageous
business and economic environment.

CC: Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.

C: Bonds are in imminent default in payment of interest or principal.

DDD, DD AND D: Bonds are in default on interest and/or principal payments. Such
bonds are extremely speculative and should be valued on the basis of their
ultimate recovery value in liquidation or reorganization of the obligor. 'DDD'
represents the highest potential for recovery on these bonds, and 'D' represents
the lowest potential for recovery.

PLUS (+) OR MINUS (-): The ratings from AA to C may be modified by the addition
of a plus or minus sign to indicate the relative position of a credit within the
rating category.

NR: Indicates that Fitch does not rate the specific issue.

--------------------------------------------------------------------------------

A- 5

DESCRIPTION OF SECURITIES RATINGS
--------------------------------------------------------------------------------

CONDITIONAL: A conditional rating is premised on the successful completion of a
project or the occurrence of a specific event.

INVESTMENT GRADE SHORT-TERM RATINGS
Fitch's short-term ratings apply to debt obligations that are payable on demand
or have original maturities of generally up to three years, including commercial
paper, certificates of deposit, medium-term notes, and municipal and investment
notes.

F-1+: Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.

F-1: Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated
'F-1+'.

F-2: Good Credit Quality. Issues carrying this rating have a satisfactory
degree of assurance for timely payment, but the margin of safety is not as great
as the 'F-1+' and 'F-1' categories.

F-3: Fair Credit Quality. Issues carrying this rating have characteristics
suggesting that the degree of assurance for timely payment is adequate, however,
near-term adverse change could cause these securities to be rated below
investment grade.

* * * * * * * *

Notes: Bonds which are unrated expose the investor to risks with respect to
capacity to pay interest or repay principal which are similar to the risks of
lower-rated speculative bonds. The Fund is dependent on the Adviser's judgment,
analysis and experience in the evaluation of such bonds.

Investors should note that the assignment of a rating to a bond by a rating
service may not reflect the effect of recent developments on the issuer's
ability to make interest and principal payments.

--------------------------------------------------------------------------------

A- 6

APPENDIX B
--------------------------------------------------------------------------------

Performance related & comparative information

--------------------------------------------------------------------------------
B- 1

PERFORMANCE RELATED & COMPARATIVE INFORMATION

[EATON VANCE LOGO]

EATON VANCE LIMITED DURATION INCOME FUND (EVV)* [PHOTO OF STAIRS]
---------------------------------------------

* Application with American Stock Exchange pending

- Limited Duration for Reduced Interest Rate Sensitivity

- Seeks Attractive Current Income

- Portfolio Credit Quality Averages Investment Grade (Initially expected to
be above BBB-/Baa3)

- Professional Management by One of the Nation's Leading Fixed-Income
Managers

Initial Public Offering
May 2003

--------------------------------------------------------------------------------
B- 2

EATON VANCE
LIMITED DURATION INCOME FUND

With interest rates on U.S. Treasuries recently at 40-year lows, many investors
are increasingly concerned about the possibility of rising rates associated with
economic recovery. In the current environment, it may be prudent for investors
to shorten the duration of their portfolios to reduce exposure to future changes
in interest rates.

A NEW INVESTMENT OPPORTUNITY

Eaton Vance Limited Duration Income Fund offers a unique response to the
challenge of generating attractive income, while limiting interest rate risk.

In addition to providing the opportunity to realize HIGH CURRENT INCOME, the
asset classes in which the Fund invests have the advantage of exhibiting LESS
SENSITIVITY TO INTEREST RATES than many other fixed-income investments.

All with a weighted average portfolio credit quality of INVESTMENT GRADE.

INVESTMENT OBJECTIVES

The Fund is a newly organized, diversified closed-end management investment
company that seeks to provide a high level of current income. The Fund may, as a
secondary objective, also seek capital appreciation to the extent consistent
with its primary goal of high current income. The Fund pursues its objectives by
investing its assets primarily in:

- senior, secured floating-rate loans ("Senior Loans")

- mortgage-backed securities ("MBS")

- corporate bonds that are of below "investment grade" quality, commonly
known as "junk bonds" ("Non-Investment Grade Bonds")

[PICTURE OF CITY]

INVESTMENT APPROACH

- Under normal market conditions, Eaton Vance Management (the "Adviser")
expects the Fund to maintain a duration of between two and four years.*

-- Initially, the Fund is expected to have a duration of approximately
three years.*

- The Fund will allocate its assets among its three principal investment
categories. Under normal market conditions, the Fund will invest at least
25% of its total assets in each principal investment category.

- Under normal market conditions, the Fund expects to maintain a weighted
average portfolio credit quality of investment grade (at least BBB- as
determined by Standard & Poor's Ratings Group (S&P) or Fitch Ratings
(Fitch), Baa3 as determined by Moody's Investors Service, Inc. (Moody's)
or, if unrated, deemed to be of comparable quality by the Adviser).
Although the Fund's investments in MBS will be of high credit quality,
the remaining portion of the Fund's portfolio invested in Senior Loans
and Non-Investment Grade Bonds is expected to be of below investment
grade quality.

---------------

* Duration is calculated to include the effect of anticipated leverage.

--------------------------------------------------------------------------------
B- 3

ADVANTAGES OF A PROFESSIONALLY MANAGED INCOME FUND

Beyond providing ready access to a broad market of securities, professionally
managed funds, such as Eaton Vance Limited Duration Income Fund, offer investors
attractive advantages over direct ownership of individual income securities,
including monthly distributions, diversification among issuers and daily
liquidity.

Perhaps most important are the advantages of active management by dedicated
specialists who concentrate on seeking opportunities in the Senior Loan, MBS and
Non-Investment Grade Bond markets.

INVESTORS SHOULD BE AWARE THAT INDIVIDUAL FIXED INCOME SECURITIES, WHEN HELD TO
MATURITY, OFFER BOTH A FIXED PRINCIPAL VALUE AND RATE OF RETURN. THE FUND DOES
NOT OFFER A FIXED-RATE OF RETURN AND SHARES, WHEN SOLD, MAY BE WORTH MORE OR
LESS THAN THEIR ORIGINAL COST.

SHARES OF EATON VANCE LIMITED DURATION INCOME FUND ARE NOT INSURED BY THE FDIC
AND ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR GUARANTEED BY, ANY DEPOSITORY
INSTITUTION. SHARES ARE SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF
PRINCIPAL INVESTED.

INVESTMENT IN THE FUND INVOLVES A NUMBER OF RISKS, INCLUDING THE RISK OF
LEVERAGE, TRADING DISCOUNT AND DEFAULT. THE FUND MAY DIFFER FROM OTHER
INVESTMENT COMPANIES IN TERMS OF CREDIT RISK, LIQUIDITY, CHANGES AND EXPENSES,
AND OTHER IMPORTANT ISSUES. SEE RISKS.

[PICTURE OF BONDS]

--------------------------------------------------------------------------------
B- 4

WHY INVEST IN EATON VANCE
LIMITED DURATION INCOME FUND NOW?

1 LIMITED DURATION MAY REDUCE INTEREST RATE SENSITIVITY

Duration is a measure of the price volatility of a debt instrument as a result
of changes in interest rates, based on the weighted average timing of the
instrument's expected principal and interest payments. It can be a more useful
tool than maturity, which is simply the amount of time remaining until that debt
instrument matures and the issuer is obligated to repay principal. In general, a
portfolio of securities with a longer duration may be expected to be more
sensitive to interest rate fluctuations than a portfolio with a shorter
duration.

Consider this example . . .

APPROXIMATE CHANGE IN FIXED-INCOME SECURITY PRICE

DURATION RATES FALL 1% RATES RISE 1%
-------- ------------- -------------

3 Years................................................... +3% -3%
10 Years.................................................. +10% -10%

THIS EXAMPLE IS INTENDED TO SHOW THE APPROXIMATE EFFECT OF A CHANGE IN GENERAL
INTEREST RATES ON THE PRICE OF A HYPOTHETICAL FIXED-INCOME SECURITY. SIGNIFICANT
ASSUMPTIONS INCLUDE THAT INTEREST RATES MOVE IN PARALLEL ACROSS ALL MATURITIES,
THE CREDIT STANDING AND LIKELIHOOD OF PREPAYMENT OF THE HYPOTHETICAL BOND ARE
UNCHANGED, AND SUFFICIENT BUYERS AND SELLERS ARE AVAILABLE FOR THE SECURITY TO
BE EFFICIENTLY PRICED. FOR A PARTICULAR FIXED-INCOME SECURITY, THE RELATIONSHIP
BETWEEN DURATION AND INTEREST RATE-RELATED PRICE CHANGE MAY DIFFER FROM THE
EXAMPLE DUE TO CALL FEATURES, CREDIT CONSIDERATIONS OR OTHER FACTORS. BECAUSE A
FIXED-INCOME SECURITY'S DURATION WILL CHANGE OVER TIME, SO TOO WILL ITS PRICE
SENSITIVITY TO CHANGES IN INTEREST RATES.

With its unique combination of three asset classes and an anticipated average
duration of between two and four years (including the effect of anticipated
leverage), the Fund's exposure to loss of value due to interest rate increases
is expected to be less than that of longer duration portfolios. Because market
rates of interest are currently near historical lows, the risk of rising
interest rates may be greater than normal.

2 AVERAGE INVESTMENT GRADE PORTFOLIO QUALITY

Under normal market conditions, the Fund expects to maintain a weighted average
portfolio credit quality of INVESTMENT GRADE -- at least BBB- as determined by
S&P or Fitch; Baa3 as determined by Moody's; or, if unrated, deemed to be of
comparable quality by the Adviser.

In determining the weighted average credit quality of the Fund's portfolio, the
Fund's holdings of Non-Investment Grade Bonds and Senior Loans of below
investment grade credit quality will be averaged with its holdings of MBS, which
are considered to be high in credit quality.*

Although the Adviser considers ratings when making investment decisions, it
performs its own analysis of securities and does not rely primarily on the
evaluations of rating agencies.

---------------

* A "barbell" portfolio of lower-rated and higher-rated securities may have risk
characteristics that differ from fixed-income securities with credit ratings
equivalent to the portfolio average. The Fund's credit policies apply only at
the time a security is purchased.

--------------------------------------------------------------------------------
B- 5

3 OPPORTUNITY FOR ATTRACTIVE INCOME

Investors searching for current income may find the Fund's mix of
income-oriented securities compelling. Blending three income asset
groups -- Senior Loans, MBS and Non-Investment Grade Bonds -- in concert with
the ability to use leverage offers the opportunity for higher current income
with less sensitivity to interest rate risk than longer duration portfolios, and
less exposure to credit risk than portfolios with lower average quality ratings.

--------------------------------------------------------------------------------
B- 6

COMBINING 3 COMPLEMENTARY INCOME ASSETS

1 SENIOR LOANS

Senior Loans are made by banks and other financial institutions to large
corporate customers to finance

- leveraged buyouts

- recapitalizations

- mergers

- acquisitions

- stock repurchases

- refinancings

- internal growth

- other corporate purposes

Usually, they have the highest priority of claims on a borrower's cash flow and
typically have certain of the borrower's assets pledged as collateral.

Loan rates reset regularly to maintain a fixed spread over widely accepted base
rates, such as the London-Interbank Offered Rate (LIBOR) or prime rate offered
by one or more U.S. banks; thus, their value is generally less affected by
interest rate changes than other fixed-income investments.

Compared with other asset classes, Senior Loans, as measured by the Credit
Suisse First Boston Leveraged Loan Index, have historically had . . .

- Higher Risk-Adjusted Returns

- Less Volatility

- Low Correlation to Other Asset Classes

[LINE GRAPH]

GRAPH SOURCE: STANDARD & POOR'S MICROPAL. FOR ILLUSTRATIVE PURPOSES ONLY. CSFB
LEVERAGED LOAN INDEX IS AN INDEX OF TRADABLE, SENIOR, SECURED U.S.
DOLLAR-DENOMINATED LEVERAGED LOANS. MERRILL LYNCH US HIGH YIELD MASTER II INDEX
TRACKS THE PERFORMANCE OF BELOW INVESTMENT GRADE U.S. DOLLAR-DENOMINATED
CORPORATE BONDS. S&P 500 COMPOSITE INDEX IS COMMONLY USED AS A MEASURE OF U.S.
STOCK MARKET PERFORMANCE. CDS OFFER A FIXED RATE OF RETURN WHEN HELD TO MATURITY
AND ARE GENERALLY INSURED UP TO CERTAIN LIMITS BY FEDERAL AND STATE AGENCIES.
LEHMAN LONG-TERM GOVERNMENT INDEX INCLUDES THE TREASURY AND AGENCY BOND INDICES.
LEHMAN GOVERNMENT/CREDIT BOND INDEX INCLUDES THE GOVERNMENT AND CORPORATE BOND
INDICES, INCLUDING U.S. GOVERNMENT TREASURY AND AGENCY SECURITIES AND CORPORATE
AND YANKEE BONDS. RUSSELL 2000 INDEX IS A POPULAR MEASURE OF THE STOCK PRICE
PERFORMANCE OF SMALL COMPANIES. THESE INDICES ARE UNMANAGED. IT IS NOT POSSIBLE
TO INVEST DIRECTLY IN AN INDEX. UNLIKE THE FUND, INDICES CARRY NO MANAGEMENT
FEES, ACCOUNT CHARGES OR OTHER EXPENSES. THE FUND WILL NOT SEEK TO MATCH THE
COMPOSITION OF PERFORMANCE OF ANY SUCH INDICES. U.S. TREASURY BONDS GUARANTEE
PRINCIPAL AND INTEREST WHEN HELD TO MATURITY. PERFORMANCE OF AN INDEX SHOULD NOT
BE VIEWED AS INDICATIVE OF THAT OF THE FUND. PAST PERFORMANCE IS NO GUARANTEE OF
FUTURE RESULTS. STANDARD DEVIATION IS A MEASURE OF VOLATILITY OR VARIABILITY IN
EXPECTED RETURN. AS SUCH, IT IS A MEASURE OF RISK; HIGHER NUMBERS INDICATE
HIGHER HISTORICAL VOLATILITY.

2 SEASONED MORTGAGE-BACKED SECURITIES

The Adviser currently expects to invest primarily in "seasoned" MBS. What are
"seasoned" MBS? What are their advantages?

- "Seasoned" MBS include mortgages that have been outstanding for at least
10 years, with a history of refinancing opportunities

- shorter weighted average maturity than unseasoned (generic) MBS

--------------------------------------------------------------------------------
B- 7

- historically more stable duration than other MBS

- because underlying mortgages have been held by homeowners through several
interest rate cycles, they are less likely to be

- because unanticipated prepayments must usually be invested at lower
rates, seasoned MBS offer greater predictability of cash flows

- high credit rating or, if unrated, deemed to be of comparable quality by
the Adviser

MORTGAGE-BACKED SECURITIES (MBS) REPRESENT PARTICIPATION INTERESTS IN POOLS OF
FIXED-RATE AND ADJUSTABLE-RATE MORTGAGE LOANS. UNLIKE CONVENTIONAL DEBT
OBLIGATIONS, MBS PROVIDE MONTHLY PAYMENTS DERIVED FROM THE MONTHLY INTEREST AND
PRINCIPAL PAYMENTS (INCLUDING PREPAYMENTS) MADE BY THE INDIVIDUAL BORROWERS ON
THE POOLED MORTGAGE LOANS. WHILE THE ADVISER EXPECTS TO FOCUS ON SEASONED MBS,
IT MAY DISCONTINUE THAT PRACTICE AT ANY TIME.

3 NON-INVESTMENT GRADE BONDS

Non-Investment Grade Bonds are issued by companies with lower credit ratings,
and, therefore, generally provide greater income and increased opportunity for
capital appreciation than other fixed-income alternatives to compensate for the
higher risks involved.

- Less sensitivity to interest rates- unlikely to be as impacted as
high-grade bonds should rates climb

ACTUAL RESULTS FOR INDIVIDUAL ISSUERS MAY VARY.

- Positives for this market would include --

-- stabilizing economy

-- improving corporate earnings

-- fewer downgrades and defaults

- Historically attractive spreads between Non-Investment Grade Bonds and
10-year U.S. Treasuries -- 8.25% as of 3/31/03 -- mean Non-Investment
Grade Bonds may be inexpensive

SOURCE: CREDIT SUISSE FIRST BOSTON HIGH YIELD INDEX, A BROAD-BASED, UNMANAGED
INDEX AT HIGH-YIELD CORPORATE BONDS.

[GRAPH]

SOURCE: CITIGROUP GLOBAL MARKETS. NON-INVESTMENT GRADE BONDS ARE REPRESENTED BY
THE SALOMON HIGH YIELD BOND INDEX. TREASURY YIELDS ARE REPRESENTED BY THE
SALOMON 10-YEAR TREASURY BENCHMARK INDEX. FOR ILLUSTRATIVE PURPOSES ONLY. PAST
PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. U.S. TREASURY BONDS GUARANTEE
PRINCIPAL AND INTEREST WHEN HELD TO MATURITY. IT IS NOT POSSIBLE TO INVEST
DIRECTLY IN AN INDEX. UNLIKE THE FUND, INDICES CARRY NO MANAGEMENT FEES, ACCOUNT
CHARGES OR OTHER EXPENSES. THE FUND WILL NOT SEEK TO MATCH THE COMPOSITION OR
PERFORMANCE OF ANY SUCH INDICES. PERFORMANCE OF AN INDEX SHOULD NOT BE VIEWED AS
INDICATIVE OF THAT OF THE FUND.

--------------------------------------------------------------------------------
B- 8

THE EATON VANCE TEAM

FUND PRESIDENT

- THOMAS E. FAUST JR., CFA
EXECUTIVE VICE PRESIDENT CHIEF INVESTMENT OFFICER

INVESTMENT MANAGEMENT TEAM

- MICHAEL WEILHEIMER, CFA
VICE PRESIDENT PORTFOLIO MANAGER
15 YEARS OF EXPERIENCE IN NON-INVESTMENT GRADE BONDS

- SCOTT PAGE, CFA
VICE PRESIDENT PORTFOLIO MANAGER
20 YEARS OF EXPERIENCE ANALYZING AND MANAGING SENIOR LOANS

- PAYSON SWAFFIELD, CFA
VICE PRESIDENT PORTFOLIO MANAGER
23 YEARS OF EXPERIENCE ANALYZING AND MANAGING SENIOR LOANS

- SUSAN SCHIFF, CFA
VICE PRESIDENT PORTFOLIO MANAGER
18 YEARS OF EXPERIENCE MANAGING MORTGAGE-BACKED SECURITIES

LEADING INVESTMENT ADVISER

Eaton Vance Management, a subsidiary of Eaton Vance Corp., is the Fund's
investment adviser. Eaton Vance, its affiliates and predecessor companies have
been managing assets of individuals and institutions since 1924 and managing
investment companies since 1931. Eaton Vance and its affiliates currently have
over $55 billion* in assets under management.

[PHOTO OF 2 MEN]

Eaton Vance offers a wealth of investment management experience in each asset
class in which the Fund invests, having a strong team of portfolio managers,
research analysts and traders devoted to analyzing Senior Loans, MBS and
Non-Investment Grade Bonds. The firm emphasizes research, continuing security
analysis and attention to current economic/financial developments and trends.

Eaton Vance is a recognized leader in Senior Loans, having entered the bank-loan
fund market in 1989 and currently managing over $7 billion in Senior Loans.* The
firm also offers expertise in the MBS market dating to 1984, and manages
approximately $2 billion in MBS assets.* In the Non-Investment Grade Bond arena,
Eaton Vance has over 20 years' experience and manages nearly $3 billion.* The
Fund's management team includes over 20 investment professionals currently
responsible for managing approximately $12 billion in Senior Loans, MBS and
Non-Investment Grade Bonds.*

HIGHER INCOME POTENTIAL

The Fund expects to utilize financial leverage by issuing highly rated preferred
shares and/or through borrowings.

Initially the Fund intends to utilize financial leverage of up to approximately
34% of its total assets (including the amount obtained through leverage). The
Fund generally will not use leverage if it anticipates that it would result in a
lower return to Shareholders.

---------------

* As of 3/31/03

--------------------------------------------------------------------------------
B- 9

The Fund anticipates that the costs of financial leverage will normally vary
with changes in short-term interest rates. In an environment of rising
short-term interest rates, the Fund's investments in floating-rate Senior Loans
should help offset the impact of higher financing costs.

See Risks.

THE CLOSED-END FUND ADVANTAGE

Closed-end funds have greater flexibility than open-end funds to remain more
fully invested and make greater use of financial leverage by issuing preferred
shares and/or through borrowings and investing the proceeds at generally higher
rates. This enables closed-end funds, like Eaton Vance Limited Duration Income
Fund, to offer investors enhanced income potential over other income
investments. In addition, the Fund's closed-end structure protects the Fund from
the continuous inflow and outflow of assets that can complicate portfolio
management. Although the Fund's leveraged capital structure offers the
opportunity for increased income, it also involves risks.

[PHOTO STREET SCENE]

See Risks.

AMERICAN STOCK EXCHANGE LISTING

To provide daily liquidity, the Fund has applied for listing of its shares on
the AMEX. (See proposed symbol on the front cover.) The shares of closed-end
funds frequently trade at a discount to net asset value. This risk may be
greater for investors selling their shares shortly after completion of the
public offering.

See Risks.

--------------------------------------------------------------------------------
B- 10

RISKS

Before investing, consult your investment representative about how the Fund
differs from other investment companies regarding credit risk, liquidity,
charges and expenses, and other issues of importance. Please read the Prospectus
carefully, especially Investment objectives, policies and risks.

No Operating History -- The Fund is a closed-end investment company with no
history of operations and is designed for long-term investors and not as a
trading vehicle.

Income Risk -- The income investors receive from the Fund is based primarily on
the interest it earns from its investments, which can vary widely over the short
and long-term. If prevailing market interest rates drop, investors' income from
the Fund over time could drop as well if the Fund purchases securities with
lower interest coupons. This risk could be magnified when prevailing short-term
interest rates increase and the Fund is utilizing leverage, although this risk
is mitigated by the Fund's investment in Senior Loans.

Credit Risk -- Credit risk is the risk that one or more debt obligations in the
Fund's portfolio will decline in price, or fail to pay interest or principal
when due, because the issuer of the obligation experiences a decline in its
financial status. Credit risk involves two types: delinquency and default.
Delinquency refers to interruptions in the payment of interest and principal.
Default refers to the potential for unrecoverable principal loss from the sale
of foreclosed collateral or the Fund's inherent right to forgive principal or
modify a debt instrument. For MBS, factors contributing to these risks include
the effects of general and local economic conditions on home values, the
financial conditions of homeowners, and other market factors. This risk is
mitigated by a U.S. government agency's or instrumentality's guarantee of the
underlying debt obligation.

Prepayment Risk -- During periods of declining interest rates or for other
purposes, the borrowers may exercise their option to prepay principal earlier
than scheduled, forcing the Fund to reinvest in lower yielding securities. This
is known as call or prepayment risk. Non-Investment Grade Bonds frequently have
call features that allow the issuer to redeem the security at dates prior to its
stated maturity at a specified price only if certain prescribed conditions are
met ("call protection"). An issuer may redeem a Non-Investment Grade Bond if,
for example, the issuer can refinance the debt at a lower cost due to declining
interest rates or an improvement in the credit standing of the issuer. Senior
Loans and MBS typically have no such call protection. For premium bonds (bonds
acquired at prices that exceed their par or principal value) purchased by the
Fund, prepayment risk may be enhanced.

Issuer Risk -- The value of corporate income-producing securities may decline
for a number of reasons which directly relate to the issuer, such as management
performance, financial leverage and reduced demand for the issuer's goods and
services.

Mortgage-Backed Securities Risk -- The value of Fund shares may be adversely
affected by fluctuations in interest rates and the prepayment of the mortgage
loans underlying the MBS held by the Fund. Mortgage loans are most likely to be
prepaid in a declining interest rate environment. Prepayment may reduce the
Fund's coupon distributions because the proceeds of a prepayment may be invested
in lower yielding securities. The Adviser has historically attempted to minimize
prepayment risk by acquiring MBS with seasoned underlying mortgage loans that
have had a history of refinancing opportunities. In a rising interest rate
environment, a declining prepayment rate will extend the average life of many
MBS, which in turn would lengthen the duration of the Fund's portfolio. This
possibility is often referred to as extension risk. Extending the average life
of an MBS increases the risk of depreciation due to future increases in market
interest rates. The value of Fund Shares can also be adversely affected by the
existence of premiums on the price of MBS it acquires. Certain government
agencies or instrumentalities, such as the Government National Mortgage
Association ("GNMA"), the Federal National Mortgage Association ("FNMA"), and
the Federal Home Loan Mortgage Corporation ("FHLMC"), provide a guarantee as to
timely payment of principal and interest for MBS each entity issues, backs or
otherwise guarantees. Guarantees may or may not be backed by the full faith and
credit of the U.S. government.

--------------------------------------------------------------------------------
B- 11

Senior Loans Risk -- The risks associated with Senior Loans are similar to the
risks of Non-Investment Grade Bonds, although Senior Loans are typically senior
and secured in contrast to Non-Investment Grade Bonds, which are often
subordinated and unsecured. Senior Loans' higher standing has historically
resulted in generally higher recoveries in the event of a corporate
reorganization. In addition, because their interest rates are adjusted for
changes in short-term interest rates, Senior Loans generally have less interest
rate risk than Non-Investment Grade Bonds, which are typically fixed rate. The
Fund's investments in Senior Loans are typically below investment grade and are
considered speculative because of the credit risk of their issuers. Such
companies are more likely to default on their payments of interest and principal
owed to the Fund, and such defaults could reduce the Fund's net asset value and
income distributions. An economic downturn generally leads to a higher non-
payment rate, and a debt obligation may lose significant value before a default
occurs. Moreover, any specific collateral used to secure a loan may decline in
value or become illiquid, which would adversely affect the loan's value.
Economic and other events (whether real or perceived) can reduce the demand for
certain Senior Loans or Senior Loans generally, which may reduce market prices
and cause the Fund's net asset value per share to fall. The frequency and
magnitude of such changes cannot be predicted. Loans and other debt securities
are also subject to the risk of price declines and to increases in prevailing
interest rates, although floating-rate debt instruments are substantially less
exposed to this risk than fixed-rate debt instruments. Interest rate changes may
also increase prepayments of debt obligations and require the Fund to invest
assets at lower yields. No active trading market may exist for certain loans,
which may impair the ability of the Fund to realize full value in the event of
the need to liquidate such assets. Adverse market conditions may impair the
liquidity of some actively traded loans.

Non-Investment Grade Bonds Risk -- The Fund's investments in Non-Investment
Grade Bonds are predominantly speculative because of the credit risk of their
issuers. While offering a greater potential opportunity for capital appreciation
and higher yields, Non-Investment Grade Bonds typically entail greater potential
price volatility and may be less liquid than higher-rated securities. Issuers of
Non-Investment Grade Bonds 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. The prices of these lower rated
obligations are more sensitive to negative developments than higher rated
securities. Adverse business conditions, such as a decline in the issuer's
revenues or an economic downturn, generally lead to a higher non-payment rate.
In addition, a security may lose significant value before a default occurs as
the market adjusts to expected higher non-payment rates.

Derivatives -- Derivative transactions (such as futures contracts and options
thereon, options, swaps and short sales) subject the Fund to increased risk of
principal loss due to imperfect correlation or unexpected price or interest rate
movements. The Fund also will be subject to credit risk with respect to the
counterparties to the derivatives contracts purchased by the Fund. If a
counterparty becomes bankrupt or otherwise fails to perform its obligations
under a derivative contract due to financial difficulties, the Fund may
experience significant delays in obtaining any recovery under the derivative
contract in a bankruptcy or other reorganization proceeding. The Fund may obtain
only a limited recovery or may obtain no recovery in such circumstances.

Effects of Leverage -- There can be no assurance that a leveraging strategy will
be utilized by the Fund or that, if utilized, it will be successful during any
period in which it is employed. The Fund intends to use leverage to provide the
holders of Shares with a potentially higher return. Leverage creates risks for
Shareholders, including the likelihood of greater volatility of net asset value
and market price of the Shares and the risk that fluctuations in dividend rates
on any preferred shares may affect the return to Shareholders. To the extent the
income derived from securities purchased with proceeds received from leverage
exceeds the cost of leverage, the Fund's distributions will be greater than if
leverage had not been used. Conversely, if the income from the securities
purchased with such proceeds is not sufficient to cover the cost of leverage,
the proceeds to the Fund will be less than if leverage had not been used, and
therefore the amount available for distribution to Shareholders as dividends and
other distributions will be reduced. In the latter case, Eaton Vance in its best
judgment may nevertheless

--------------------------------------------------------------------------------
B- 12

determine to maintain the Fund's leveraged position if it deems such action to
be appropriate. The costs of an offering of preferred shares and/or borrowing
program will be borne by Shareholders and consequently will result in a
reduction of the net asset value of Shares.

The fee paid to Eaton Vance will be calculated on the basis of the Fund's gross
assets, including proceeds from the issuance of preferred shares and/or
borrowings, so the fees will be higher when leverage is utilized.

The Fund currently intends to seek a AAA grade rating on any preferred shares
from a Rating Agency. The Fund may be subject to investment restrictions of the
Rating Agency as a result. These restrictions may impose asset coverage or
portfolio composition requirements that are more stringent than those imposed on
the Fund by the Investment Company Act of 1940, as amended. It is not
anticipated that these covenants or guidelines will impede Eaton Vance in
managing the Fund's portfolio in accordance with its investment objective and
policies.

Financial leverage may also be achieved through the purchase of certain
derivative instruments. The Fund's use of derivative instruments exposes the
Fund to special risks.

Interest Rate Risk -- The value of Fund shares will usually change in response
to interest rate fluctuations. When interest rates decline, the value of
fixed-rate securities already held by the Fund can be expected to rise.
Conversely, when interest rates rise, the value of existing fixed-rate portfolio
securities can be expected to decline. Because market interest rates are
currently near their lowest levels in many years, there is a greater than normal
risk that the Fund's portfolio will decline in value due to rising interest
rates. Fluctuations in the value of fixed-rate securities will not affect
interest income on existing securities but will be reflected in the Fund's net
asset value. Fixed-rate securities with longer durations tend to be more
sensitive to changes in interest rates than securities with shorter durations,
usually making them more volatile. Because the Fund will normally have a
dollar-weighted average duration of between two and four years (including the
effects of anticipated leverage), the Shares' net asset value and market price
per Share will tend to fluctuate more in response to changes in market interest
rates than if the Fund invested mainly in short-term debt securities and less
than if the Fund invested mainly in longer-term debt securities. The Fund may
utilize certain strategies, including taking positions in futures or interest
rate swaps, for the purpose of reducing the interest rate sensitivity of the
portfolio and decreasing the Fund's exposure to interest rate risk, although
there is no assurance that it will do so or that such strategies will be
successful. The Fund is intended to have a relatively low level of interest rate
risk.

Liquidity Risk -- The Fund may invest in securities for which there is no
readily available trading market or which are otherwise illiquid. The Fund may
not be able to readily dispose of such securities at prices that approximate
those at which the Fund could sell such securities if they were more widely
traded and, as a result of such illiquidity, the Fund may have to sell other
investments or engage in borrowing transactions if necessary to raise cash to
meet its obligations. In addition, the limited liquidity could affect the market
price of the debt securities, thereby adversely affecting the Fund's net asset
value and ability to make dividend distributions.

Reinvestment Risk -- Income from the Fund's portfolio will decline if and when
the Fund invests the proceeds from matured, traded or called debt obligations
into lower yielding instruments. A decline in income could affect the Shares'
distribution rate and their overall return.

Inflation Risk -- Inflation risk is the risk that the value of assets or income
from investment will be worth less in the future as inflation decreases the
value of money. As inflation increases, the real value of the Shares and
distributions thereon can decline. In addition, during any periods of rising
inflation, dividend rates of preferred shares would likely increase, which would
tend to further reduce returns to Shareholders. This risk is mitigated to some
degree by the Fund's investments in Senior Loans.

Market Price of Shares -- The shares of closed-end investment companies often
trade at a discount from their net asset value, and the Fund's Shares may
likewise trade at a discount from net asset value.

--------------------------------------------------------------------------------
B- 13

The trading price of the Fund's Shares may be less than the public offering
price. This risk may be greater for investors who sell their Shares in a
relatively short period after completion of the public offering.

Management Risk -- The Fund is subject to management risk because it is an
actively managed portfolio. Eaton Vance and the individual portfolio managers
will apply investment techniques and risk analyses in making investment
decisions for the Fund, but there can be no guarantee that these will produce
the desired results.

Market Disruption -- The terrorist attacks in the United States on September 11,
2001 had a disruptive effect on the securities markets. The Fund cannot predict
the effects of similar events in the future on the U.S. economy. These terrorist
attacks and related events, including the war in Iraq, have led to increased
short-term market volatility and may have long-term effects on U.S. and world
economies and markets. A similar disruption of the financial markets could
impact interest rates, auctions, secondary trading, ratings, credit risk,
inflation and other factors relating to the Shares. In particular,
Non-Investment Grade Bonds and Senior Loans tend to be more volatile than higher
rated fixed income securities so that these events and any actions resulting
from them may have a greater impact on the prices and volatility on
Non-Investment Grade Bonds and Senior Loans than on higher rated fixed income
securities.

Anti-Takeover Provisions -- The Fund's Agreement and Declaration of Trust
includes provisions that could have the effect of limiting the ability of other
persons or entities to acquire control of the Fund or to change the composition
of its Board.

The information contained herein and in the preliminary prospectus is incomplete
and may be changed. These securities may not be sold until the registration
statement filed with the Securities and Exchange Commission is effective. This
document is not an offer to sell these securities and is not soliciting offers
to buy these securities in any state where the offer or sale is not permitted.
This is not an offering, which may only be made by a final prospectus. The final
prospectus for the Fund should be read carefully before you invest or send
money. The Fund involves a number of risks, including the risk of leverage,
trading discount and default. The Fund may differ from other investment
companies in terms of credit risk, liquidity, charges and expenses, and other
important issues.

Consult the preliminary prospectus for Eaton Vance Limited Duration Income Fund
for more complete information, including risk considerations, charges and
expenses. A preliminary prospectus is available on request from your financial
advisor, or you may obtain a copy from the Fund by calling 1-800-225-6265.

(C)2003 Eaton Vance - The Eaton Vance Building - 255 State Street - Boston, MA
02109 - www.eatonvance.com
1721-4/03 UBS Warburg LLC CE-LDICB

--------------------------------------------------------------------------------
B- 14

EATON VANCE LIMITED DURATION INCOME FUND

STATEMENT OF ADDITIONAL INFORMATION
, 2003

---------------------

INVESTMENT ADVISER AND ADMINISTRATOR
Eaton Vance Management
255 State Street
Boston, MA 02109

CUSTODIAN
Investors Bank & Trust Company
200 Clarendon Street
Boston, MA 02116

TRANSFER AGENT
PFPC INC.
P.O. Box 43027
Providence, RI 02940-3027
(800) 331-1710

INDEPENDENT AUDITORS
Deloitte & Touche LLP
200 Berkeley Street
Boston, MA 02116

PART C
OTHER INFORMATION

ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS

(1) FINANCIAL STATEMENTS:

Included in Part A:

Not applicable.

Included in Part B:

Independent Auditor's Report.
Statement of Assets and Liabilities as of May 6, 2003.
Notes to Financial Statement.

(2) EXHIBITS:

(a) Agreement and Declaration of Trust dated March 12, 2003 is
incorporated herein by reference to the Registrant's initial
Registration Statement on Form N-2 (File Nos. 333-103901 and
811-21323) as to the Registrant's common shares of beneficial
interest ("Common Shares") filed with the Securities and
Exchange Commission (the "Commission") on March 18, 2003
(Accession No. 0000898432-03-0003087) ("Initial Common Shares
Registration Statement").

(b) By-Laws are incorporated herein by reference to the
Registrant's Initial Common Shares Registration Statement.

(d) Form of Specimen Certificate for Common Shares of Beneficial
Interest are incorporated herein by reference to the
Registrant's Pre-Effective Amendment No. 1 to the Initial
Common Shares Registration Statement filed with the Commission
on April 25, 2003 (Accession No. 0000950135-03-00258)
("Pre-Effective Amendment No. 1 to the Initial Common Shares
Registration Statement").

(e) Dividend Reinvestment Plan is incorporated herein by reference
to the Registrant's Pre-Effective Amendment No. 1 to the
Initial Common Shares Registration Statement.

(f) Not applicable.

(g) (1) Investment Advisory Agreement dated April 14, 2003 is
incorporated herein by reference to the Registrant's
Pre-Effective Amendment No. 1 to the Initial Common Shares
Registration Statement.

(2) Expense Reimbursement Arrangement is incorporated
herein by reference to the Registrant's Pre-Effective
Amendment No. 1 to the Initial Common Shares
Registration Statement.

(h) (1) Form of Underwriting Agreement filed herewith.

(2) Form of Master Agreement Among Underwriters filed herewith.

(3) Form of Master Selected Dealers Agreement filed herewith.

(i) The Securities and Exchange Commission has granted the
Registrant an exemptive order that permits the Registrant to
enter into deferred compensation arrangements with its
independent Trustees. See in the matter of Capital Exchange
Fund, Inc., Release No. IC-20671 (November 1, 1994).

(j) (1) Master Custodian Agreement with Investors Bank & Trust
Company dated April 14, 2003 is incorporated herein by
reference to the Registrant's Pre-Effective Amendment No. 1 to
the Initial Common Shares Registration Statement.

(2) Extension Agreement dated August 31, 2000 to Master Custodian
Agreement with Investors Bank & Trust Company filed as Exhibit
(g)(4) to Post-Effective Amendment No. 85 of Eaton Vance
Municipals Trust (File Nos. 33-572, 811-4409) filed with the
Commission on January 23, 2001 (Accession No.
0000940394-01-500027) and incorporated herein by reference.

(3) Delegation Agreement dated December 11, 2000, with Investors
Bank & Trust Company filed as Exhibit (j)(e) to the Eaton
Vance Prime Rate Reserves N-2, Amendment No. 5 (File Nos.
333-32267, 811-05808) filed April 3, 2002 (Accession No.
0000940394-01-500126) and incorporated herein by reference.

(k) (1) Amendment to the Transfer Agency and Services Agreement
dated April 14, 2003 is incorporated herein by reference to
the Registrant's Pre-Effective Amendment No. 1 to the Initial
Common Shares Registration Statement.

(2) Transfer Agency and Services Agreement dated December 21,
1998, as amended, filed as Exhibit (k)(1) to Pre-Effective
Amendment No. 1 to the Registration Statement of Eaton Vance
Municipal Income Trust (File Nos. 333-68719 and 811-09141
filed December 12, 1999 (Accession No. 0000950135-99-000298)
and incorporated herein by reference.

(3) Administration Agreement dated April 14, 2003 is incorporated
herein by reference to the Registrant's Pre-Effective
Amendment No. 1 to the Initial Common Shares Registration
Statement.

(4) Form of Shareholder Servicing Agreement dated May 2003
filed herewith.

(5) Form of Additional Compensation Agreement dated May 2003
filed herewith.

(l) Opinion and Consent of Kirkpatrick & Lockhart LLP as to
Registrant's Common Shares dated May 22, 2003 filed herewith.

(m) Not applicable.

(n) Consent of Independent Auditors dated May 22, 2003 filed
herewith.

(o) Not applicable.

(p) Letter Agreement with Eaton Vance Management dated May 2, 2003
filed herewith.

(q) Not applicable.

(r) Code of Ethics adopted by Eaton Vance Corp., Eaton Vance
Management, Boston Management and Research, Eaton Vance
Distributors, Inc. and the Eaton Vance Funds effective
September 1, 2000, as revised June 4, 2002, filed as Exhibit
(p) to Post-Effective Amendment No. 45 of Eaton Vance
Investment Trust (File Nos. 33-1121, 811-4443) filed July 24,
2002 (Accession No. 0000940394-02-000462) and incorporated
herein by reference.

(s) Power of Attorney dated April 14, 2003 is incorporated herein
by reference to the Registrant's Pre-Effective Amendment No. 1
to the Initial Common Shares Registration Statement.

ITEM 25. MARKETING ARRANGEMENTS

See Form of Underwriting Agreement filed herewith.

ITEM 26. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The approximate expenses in connection with the offering are
as follows:

Registration and Filing Fees $153,710
National Association of Securities Dealers, Inc. Fees 30,500
American Stock Exchange Fees 5,000
Costs of Printing and Engraving 400,000
Accounting Fees and Expenses 25,000
Legal Fees and Expenses 200,000
--------
Total $814,210
--------

ITEM 27. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL

None.

ITEM 28. NUMBER OF HOLDERS OF SECURITIES

Set forth below is the number of record holders as of May 21, 2003, of
each class of securities of the Registrant:

Title of Class Number of Record Holders
-------------- ------------------------

Common Shares of Beneficial interest, 0
par value $0.01 per share

ITEM 29. INDEMNIFICATION

The Registrant's By-Laws filed in the Registrant's Initial Common
Shares Registration Statement and the Underwriting Agreement filed herewith
contain provisions limiting the liability, and providing for indemnification, of
the Trustees and officers under certain circumstances.

Registrant's Trustees and officers are insured under a standard
investment company errors and omissions insurance policy covering loss incurred
by reason of negligent errors and omissions committed in their official
capacities as such.

Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "Securities Act"), may be permitted to directors,
officers and controlling persons of the Registrant pursuant to the provisions
described in this Item 29, or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is therefore
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.

ITEM 30. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER

Reference is made to: (i) the information set forth under the caption
"Investment Advisory and Other Services" in the Statement of Additional
information; (ii) the Eaton Vance Corp. 10-K filed under the Securities Exchange
Act of 1934 (File No. 1-8100); and (iii) the Form ADV of Eaton Vance Management
(File No. 801-15930) filed with the Commission, all of which are incorporated
herein by reference.

ITEM 31. 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, Boston, MA 02116, and its transfer agent, PFPC Inc., 4400 Computer
Drive, Westborough, MA 01581-5120, with the exception of certain corporate
documents and portfolio trading documents which are in the possession and
custody of Eaton Vance Management, The Eaton Vance Building, 255 State Street,
Boston, MA 02109. 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.

ITEM 32. MANAGEMENT SERVICES

Not applicable.

ITEM 33. UNDERTAKINGS

1. The Registrant undertakes to suspend offering of Preferred Shares until
the prospectus is amended if (1) subsequent to the effective date of
this Registration Statement, the net asset value declines more than 10
percent from its net asset value as of the effective date of this
Registration Statement or (2) the net asset value increases to an
amount greater than its net proceeds as stated in the prospectus.

2. Not applicable.

3. Not applicable.

4. Not applicable.

5. The Registrant undertakes that:

a. for the purpose of determining any liability under the
Securities Act, the information omitted from the form of
prospectus filed as part of this Registration Statement in
reliance upon Rule 430A and contained in the form of
prospectus filed by the Registrant pursuant to 497(h) under
the 1933 Act shall be deemed to be part of the Registration
Statement as of the time it was declared effective; and

b. for the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a
form of prospectus shall be deemed to be a new registration
statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.

6. The Registrant undertakes to send by first class mail or other means
designed to ensure equally prompt delivery, within two business days of
receipt of an oral or written request, its Statement of Additional
Information.

NOTICE

A copy of the Agreement and Declaration of Trust of Eaton Vance Limited
Duration Income Fund is on file with the Secretary of State of the Commonwealth
of Massachusetts and notice is hereby given that this instrument is executed on
behalf of the Registrant by an officer of the Registrant as an officer and not
individually and that the obligations of or arising out of this instrument are
not binding upon any of the Trustees, officers or shareholders individually, but
are binding only upon the assets and property of the Registrant.

SIGNATURES

Pursuant to requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Pre-Effective Amendment No. 2 to the 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 the 22nd day of May 2003.

EATON VANCE LIMITED DURATION INCOME FUND

By: /s/ Thomas E. Faust Jr
-----------------------------
Thomas E. Faust Jr.
President

Pursuant to the requirements of the Securities Act of 1933, this
Pre-Effective Amendment No. 2 to the Registration Statement has been signed by
the following persons in the capacities and on the dates indicated.

Signature Title Date
--------- ----- ----

/s/ Thomas E. Faust Jr. President and Principal May 22, 2003
------------------------------------
Thomas E. Faust Jr. Executive Officer

/s/ James L. O'Connor Treasurer and Principal May 22, 2003
------------------------------------
James L. O'Connor Financial and Accounting
Officer

/s/ Jessica M. Bibliowicz* Trustee May 22, 2003
------------------------------------
Jessica M. Bibliowicz

/s/ James B. Hawkes Trustee May 22, 2003
------------------------------------
James B. Hawkes

/s/ Samuel L. Hayes, III* Trustee May 22, 2003
------------------------------------
Samuel L. Hayes, III

/s/ Norton H. Reamer* Trustee May 22, 2003
------------------------------------
Norton H. Reamer

/s/ Lynn A. Stout* Trustee May 22, 2003
------------------------------------
Lynn A. Stout

* By: /s/ Alan R. Dynner

------------------------------------
Alan R. Dynner (As attorney in-fact)

INDEX TO EXHIBITS

(h)(1) Form of Underwriting Agreement

(h)(2) Form of Master Agreement Among Underwriters

(h)(3) Form of Master Selected Dealers Agreement

(k)(4) Form of Shareholder Servicing Agreement

(k)(5) Form of Additional Compensation Agreement

(l) Opinion and Consent of Kirkpatrick & Lockhart LLP as to Registrant's
Common Shares dated May 22, 2003

(n) Consent of Independent Auditors dated May 22, 2003

(p) Letter Agreement with Eaton Vance Management dated May 2, 2003