UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act File Number: 811-04015
Eaton Vance Mutual Funds Trust
(Exact Name of Registrant as Specified in Charter)
Two International Place, Boston, Massachusetts 02110
(Address of Principal Executive Offices)
Maureen A. Gemma
Two International Place, Boston, Massachusetts 02110
(Name and Address of Agent for Services)
(617) 482-8260
(Registrant’s Telephone Number)
January 31
Date of Fiscal Year End
July 31, 2014
Date of Reporting Period
Item 1. Reports to Stockholders
| Parametric Emerging Markets Fund
Semiannual Report July 31, 2014 |
Commodity Futures Trading Commission Registration. Effective December 31, 2012, the Commodity Futures Trading Commission (“CFTC”) adopted certain regulatory changes that subject registered investment companies and advisers to regulation by the CFTC if a fund invests more than a prescribed level of its assets in certain CFTC-regulated instruments (including futures, certain options and swap agreements) or markets itself as providing investment exposure to such instruments. The Fund has claimed an exclusion from the definition of the term “commodity pool operator” under the Commodity Exchange Act. Accordingly, neither the Fund nor the adviser with respect to the operation of the Fund is subject to CFTC regulation. Because of its management of other strategies, the Fund’s adviser is registered with the CFTC as a commodity pool operator and a commodity trading advisor.
Fund shares 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.
This report must be preceded or accompanied by a current summary prospectus or prospectus. Before investing, investors should consider carefully the investment objective, risks, and charges and expenses of a mutual fund. This and other important information is contained in the summary prospectus and prospectus, which can be obtained from a financial advisor. Prospective investors should read the prospectus carefully before investing. For further information, please call 1-800-260-0761.
Semiannual Report July 31, 2014
Parametric Emerging Markets Fund
Table of Contents
| Performance |
2 | |||
| Fund Profile |
3 | |||
| Endnotes and Additional Disclosures |
4 | |||
| Fund Expenses |
5 | |||
| Financial Statements |
6 | |||
| Special Meeting of Shareholders |
40 | |||
| Board of Trustees’ Contract Approval |
41 | |||
| Officers and Trustees |
44 | |||
| Important Notices |
45 | |||
Parametric Emerging Markets Fund
July 31, 2014
Performance1,2
Portfolio Managers David Stein, Ph.D., Thomas Seto and Timothy W. Atwill, CFA, each of Parametric Portfolio Associates LLC
| % Average Annual Total Returns | Class Inception Date |
Performance Inception Date |
Six Months | One Year | Five Years | Since Inception |
||||||||||||||||||
| Investor Class at NAV |
06/30/2006 | 06/30/2006 | 13.72 | % | 14.03 | % | 8.06 | % | 6.97 | % | ||||||||||||||
| Class C at NAV |
06/30/2006 | 06/30/2006 | 13.25 | 13.17 | 7.26 | 6.17 | ||||||||||||||||||
| Class C with 1% Maximum Sales Charge |
— | — | 12.25 | 12.17 | 7.26 | 6.17 | ||||||||||||||||||
| Institutional Class at NAV |
06/30/2006 | 06/30/2006 | 13.89 | 14.35 | 8.34 | 7.23 | ||||||||||||||||||
| Class R6 at NAV |
07/01/2014 | 06/30/2006 | 13.96 | 14.42 | 8.35 | 7.24 | ||||||||||||||||||
| MSCI Emerging Markets Index |
— | — | 15.70 | % | 15.32 | % | 7.34 | % | 7.01 | % | ||||||||||||||
| % Total Annual Operating Expense Ratios3 | Investor Class |
Class C | Institutional Class |
Class R6 | ||||||||||||||||||||
| 1.38 | % | 2.13 | % | 1.13 | % | 1.09 | % | |||||||||||||||||
See Endnotes and Additional Disclosures in this report.
Past performance is no guarantee of future results. Returns are historical and are calculated by determining the percentage change in net asset value (NAV) or offering price (as applicable) with all distributions reinvested. Investment return and principal value will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Performance less than one year is cumulative. Performance is for the stated time period only; due to market volatility, the Fund’s current performance may be lower or higher than quoted. Returns are before taxes unless otherwise noted. For performance as of the most recent month end, please refer to eatonvance.com.
| 2 |
Parametric Emerging Markets Fund
July 31, 2014
Fund Profile
See Endnotes and Additional Disclosures in this report.
| 3 |
Parametric Emerging Markets Fund
July 31, 2014
Endnotes and Additional Disclosures
| 4 |
Parametric Emerging Markets Fund
July 31, 2014
Fund Expenses
Example: As a Fund shareholder, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchases and redemption fees (if applicable); and (2) ongoing costs, including management fees; distribution and/or service fees; and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of Fund investing and to compare these costs with the ongoing costs of investing in other mutual funds. The actual expense Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (February 1, 2014 – July 31, 2014) for Investor Class, Class C and Institutional Class and (July 1, 2014 – July 31, 2014) for Class R6. The hypothetical expense Example is based on an investment of $1,000 invested for the one-half year period (February 1, 2014 – July 31, 2014).
Actual Expenses: The first section of the table below provides information about actual account values and actual expenses. You may use the information in this section, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes: The second section of the table below provides information about hypothetical account values and hypothetical expenses based on the actual Fund expense ratio and an assumed rate of return of 5% per year (before expenses), which is not the actual Fund return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in your Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) or redemption fees (if applicable). Therefore, the second section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would be higher.
| Beginning Account Value (2/1/14) |
Ending Account Value (7/31/14) |
Expenses Paid During Period (2/1/14 – 7/31/14) |
Annualized Expense Ratio |
|||||||||||||||
| Actual* |
|
|||||||||||||||||
| Investor Class |
$ | 1,000.00 | $ | 1,137.20 | $ | 7.21 | 1.36 | % | ||||||||||
| Class C |
$ | 1,000.00 | $ | 1,132.50 | $ | 11.10 | 2.10 | % | ||||||||||
| Institutional Class |
$ | 1,000.00 | $ | 1,138.90 | $ | 5.89 | 1.11 | % | ||||||||||
| Class R6 |
$ | 1,000.00 | $ | 1,008.20 | $ | 0.91 | 1.07 | % | ||||||||||
| * Class R6 had not commenced operations on February 1, 2014. Actual expenses are equal to the Fund’s annualized expense ratio for the indicated Class, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period); 31/365 for Class R6 (to reflect the period from the commencement of operations on July 1, 2014 to July 31, 2014). The Example assumes that the $1,000 was invested at the net asset value per share determined at the close of business on January 31, 2014 (July 1, 2014 for Class R6). | ||||||||||||||||||
| Hypothetical** |
|
|||||||||||||||||
| (5% return per year before expenses) |
||||||||||||||||||
| Investor Class |
$ | 1,000.00 | $ | 1,018.10 | $ | 6.81 | 1.36 | % | ||||||||||
| Class C |
$ | 1,000.00 | $ | 1,014.40 | $ | 10.49 | 2.10 | % | ||||||||||
| Institutional Class |
$ | 1,000.00 | $ | 1,019.30 | $ | 5.56 | 1.11 | % | ||||||||||
| Class R6 |
$ | 1,000.00 | $ | 1,019.50 | $ | 5.36 | 1.07 | % | ||||||||||
| ** | Hypothetical expenses are equal to the Fund’s annualized expense ratio for the indicated Class, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). The Example assumes that the $1,000 was invested at the net asset value per share determined at the close of business on January 31, 2014 (July 1, 2014 for Class R6). |
| 5 |
Parametric Emerging Markets Fund
July 31, 2014
Portfolio of Investments (Unaudited)
| 6 | See Notes to Financial Statements. |
Parametric Emerging Markets Fund
July 31, 2014
Portfolio of Investments (Unaudited) — continued
| 7 | See Notes to Financial Statements. |
Parametric Emerging Markets Fund
July 31, 2014
Portfolio of Investments (Unaudited) — continued
| 8 | See Notes to Financial Statements. |
Parametric Emerging Markets Fund
July 31, 2014
Portfolio of Investments (Unaudited) — continued
| 9 | See Notes to Financial Statements. |
Parametric Emerging Markets Fund
July 31, 2014
Portfolio of Investments (Unaudited) — continued
| 10 | See Notes to Financial Statements. |
Parametric Emerging Markets Fund
July 31, 2014
Portfolio of Investments (Unaudited) — continued
| 11 | See Notes to Financial Statements. |
Parametric Emerging Markets Fund
July 31, 2014
Portfolio of Investments (Unaudited) — continued
| 12 | See Notes to Financial Statements. |
Parametric Emerging Markets Fund
July 31, 2014
Portfolio of Investments (Unaudited) — continued
| 13 | See Notes to Financial Statements. |
Parametric Emerging Markets Fund
July 31, 2014
Portfolio of Investments (Unaudited) — continued
| 14 | See Notes to Financial Statements. |
Parametric Emerging Markets Fund
July 31, 2014
Portfolio of Investments (Unaudited) — continued
| 15 | See Notes to Financial Statements. |
Parametric Emerging Markets Fund
July 31, 2014
Portfolio of Investments (Unaudited) — continued
| 16 | See Notes to Financial Statements. |
Parametric Emerging Markets Fund
July 31, 2014
Portfolio of Investments (Unaudited) — continued
| 17 | See Notes to Financial Statements. |
Parametric Emerging Markets Fund
July 31, 2014
Portfolio of Investments (Unaudited) — continued
| 18 | See Notes to Financial Statements. |
Parametric Emerging Markets Fund
July 31, 2014
Portfolio of Investments (Unaudited) — continued
| 19 | See Notes to Financial Statements. |
Parametric Emerging Markets Fund
July 31, 2014
Portfolio of Investments (Unaudited) — continued
| 20 | See Notes to Financial Statements. |
Parametric Emerging Markets Fund
July 31, 2014
Portfolio of Investments (Unaudited) — continued
| 21 | See Notes to Financial Statements. |
Parametric Emerging Markets Fund
July 31, 2014
Portfolio of Investments (Unaudited) — continued
| 22 | See Notes to Financial Statements. |
Parametric Emerging Markets Fund
July 31, 2014
Portfolio of Investments (Unaudited) — continued
| 23 | See Notes to Financial Statements. |
Parametric Emerging Markets Fund
July 31, 2014
Portfolio of Investments (Unaudited) — continued
| 24 | See Notes to Financial Statements. |
Parametric Emerging Markets Fund
July 31, 2014
Portfolio of Investments (Unaudited) — continued
| 25 | See Notes to Financial Statements. |
Parametric Emerging Markets Fund
July 31, 2014
Portfolio of Investments (Unaudited) — continued
| 26 | See Notes to Financial Statements. |
Parametric Emerging Markets Fund
July 31, 2014
Statement of Assets and Liabilities (Unaudited)
| Assets | July 31, 2014 | |||
| Investments, at value (identified cost, $4,270,424,741) |
$ | 4,839,075,245 | ||
| Cash |
1,152,719 | |||
| Foreign currency, at value (identified cost, $24,957,790) |
24,750,472 | |||
| Dividends and interest receivable |
16,580,440 | |||
| Receivable for Fund shares sold |
30,345,945 | |||
| Tax reclaims receivable |
650,926 | |||
| Total assets |
$ | 4,912,555,747 | ||
| Liabilities | ||||
| Payable for investments purchased |
$ | 3,452,205 | ||
| Payable for Fund shares redeemed |
9,270,756 | |||
| Payable to affiliates: |
||||
| Investment adviser fee |
3,208,343 | |||
| Administration fee |
622,559 | |||
| Distribution and service fees |
173,863 | |||
| Accrued foreign capital gains taxes |
827,580 | |||
| Accrued expenses |
824,825 | |||
| Total liabilities |
$ | 18,380,131 | ||
| Net Assets |
$ | 4,894,175,616 | ||
| Sources of Net Assets | ||||
| Paid-in capital |
$ | 4,258,523,433 | ||
| Accumulated net realized gain |
22,550,615 | |||
| Accumulated undistributed net investment income |
45,678,324 | |||
| Net unrealized appreciation |
567,423,244 | |||
| Total |
$ | 4,894,175,616 | ||
| Investor Class Shares | ||||
| Net Assets |
$ | 721,769,593 | ||
| Shares Outstanding |
45,105,899 | |||
| Net Asset Value, Offering Price and Redemption Price Per Share |
||||
| (net assets ÷ shares of beneficial interest outstanding) |
$ | 16.00 | ||
| Class C Shares | ||||
| Net Assets |
$ | 20,568,241 | ||
| Shares Outstanding |
1,300,695 | |||
| Net Asset Value and Offering Price Per Share* |
||||
| (net assets ÷ shares of beneficial interest outstanding) |
$ | 15.81 | ||
| Institutional Class Shares | ||||
| Net Assets |
$ | 4,151,836,778 | ||
| Shares Outstanding |
258,413,872 | |||
| Net Asset Value, Offering Price and Redemption Price Per Share |
||||
| (net assets ÷ shares of beneficial interest outstanding) |
$ | 16.07 | ||
| Class R6 Shares | ||||
| Net Assets |
$ | 1,004 | ||
| Shares Outstanding |
62 | |||
| Net Asset Value, Offering Price and Redemption Price Per Share |
||||
| (net assets ÷ shares of beneficial interest outstanding, including fractional shares) |
$ | 16.08 | ||
| * | Redemption price per share is equal to the net asset value less any applicable contingent deferred sales charge. |
| 27 | See Notes to Financial Statements. |
Parametric Emerging Markets Fund
July 31, 2014
Statement of Operations (Unaudited)
| Investment Income | Six Months Ended July 31, 2014 |
|||
| Dividends (net of foreign taxes, $9,669,143) |
$ | 86,842,767 | ||
| Interest (net of foreign taxes, $288) |
2,335 | |||
| Total investment income |
$ | 86,845,102 | ||
| Expenses | ||||
| Investment adviser fee |
$ | 17,505,177 | ||
| Administration fee |
3,389,460 | |||
| Distribution and service fees |
||||
| Investor Class |
909,313 | |||
| Class C |
101,039 | |||
| Trustees’ fees and expenses |
34,000 | |||
| Custodian fee |
2,445,356 | |||
| Transfer and dividend disbursing agent fees |
989,180 | |||
| Legal and accounting services |
78,406 | |||
| Printing and postage |
232,999 | |||
| Registration fees |
254,260 | |||
| Miscellaneous |
77,212 | |||
| Total expenses |
$ | 26,016,402 | ||
| Deduct — |
||||
| Reduction of custodian fee |
$ | 118 | ||
| Total expense reductions |
$ | 118 | ||
| Net expenses |
$ | 26,016,284 | ||
| Net investment income |
$ | 60,828,818 | ||
| Realized and Unrealized Gain (Loss) | ||||
| Net realized gain (loss) — |
||||
| Investment transactions |
$ | 39,117,117 | ||
| Foreign currency transactions |
201,669 | |||
| Net realized gain |
$ | 39,318,786 | ||
| Change in unrealized appreciation (depreciation) — |
||||
| Investments (net of decrease in accrued foreign capital gains taxes of $408,751) |
$ | 479,149,414 | ||
| Foreign currency |
(265,115 | ) | ||
| Net change in unrealized appreciation (depreciation) |
$ | 478,884,299 | ||
| Net realized and unrealized gain |
$ | 518,203,085 | ||
| Net increase in net assets from operations |
$ | 579,031,903 | ||
| 28 | See Notes to Financial Statements. |
Parametric Emerging Markets Fund
July 31, 2014
Statements of Changes in Net Assets
| Increase (Decrease) in Net Assets | Six Months Ended July 31, 2014 |
Year Ended January 31, 2014 |
||||||
| From operations — |
||||||||
| Net investment income |
$ | 60,828,818 | $ | 60,340,212 | ||||
| Net realized gain from investment and foreign currency transactions |
39,318,786 | 50,565,991 | ||||||
| Net change in unrealized appreciation (depreciation) from investments and foreign currency |
478,884,299 | (361,780,951 | ) | |||||
| Net increase (decrease) in net assets from operations |
$ | 579,031,903 | $ | (250,874,748 | ) | |||
| Distributions to shareholders — |
||||||||
| From net investment income |
||||||||
| Investor Class |
$ | — | $ | (10,167,892 | ) | |||
| Class C |
— | (104,628 | ) | |||||
| Institutional Class |
— | (53,474,366 | ) | |||||
| Total distributions to shareholders |
$ | — | $ | (63,746,886 | ) | |||
| Transactions in shares of beneficial interest — |
||||||||
| Proceeds from sale of shares |
||||||||
| Investor Class |
$ | 75,956,551 | $ | 421,136,418 | ||||
| Class C |
496,873 | 2,992,656 | ||||||
| Institutional Class |
587,160,595 | 1,414,075,531 | ||||||
| Class R6 |
1,000 | — | ||||||
| Net asset value of shares issued to shareholders in payment of distributions declared |
||||||||
| Investor Class |
— | 8,965,960 | ||||||
| Class C |
— | 81,618 | ||||||
| Institutional Class |
— | 43,279,391 | ||||||
| Cost of shares redeemed |
||||||||
| Investor Class |
(204,133,916 | ) | (353,127,985 | ) | ||||
| Class C |
(2,228,368 | ) | (4,912,768 | ) | ||||
| Institutional Class |
(310,546,358 | ) | (550,702,918 | ) | ||||
| Net increase in net assets from Fund share transactions |
$ | 146,706,377 | $ | 981,787,903 | ||||
| Net increase in net assets |
$ | 725,738,280 | $ | 667,166,269 | ||||
| Net Assets | ||||||||
| At beginning of period |
$ | 4,168,437,336 | $ | 3,501,271,067 | ||||
| At end of period |
$ | 4,894,175,616 | $ | 4,168,437,336 | ||||
| Accumulated undistributed (distributions in excess of) net investment income included in net assets |
||||||||
| At end of period |
$ | 45,678,324 | $ | (15,150,494 | ) | |||
| 29 | See Notes to Financial Statements. |
Parametric Emerging Markets Fund
July 31, 2014
Financial Highlights
| Investor Class | ||||||||||||||||||||||||||||
| Six Months Ended July 31, 2014 (Unaudited) |
Year Ended January 31, | Period Ended January 31, 2012(1) |
Year Ended October 31, | |||||||||||||||||||||||||
| 2014 | 2013 | 2011 | 2010 | 2009 | ||||||||||||||||||||||||
| Net asset value — Beginning of period |
$ | 14.070 | $ | 15.260 | $ | 13.940 | $ | 13.750 | $ | 15.540 | $ | 12.440 | $ | 8.290 | ||||||||||||||
| Income (Loss) From Operations | ||||||||||||||||||||||||||||
| Net investment income (loss)(2) |
$ | 0.184 | $ | 0.201 | $ | 0.173 | $ | (0.014 | ) | $ | 0.201 | $ | 0.105 | $ | 0.121 | |||||||||||||
| Net realized and unrealized gain (loss) |
1.746 | (1.204 | ) | 1.339 | 0.328 | (1.826 | ) | 3.082 | 4.120 | |||||||||||||||||||
| Total income (loss) from operations |
$ | 1.930 | $ | (1.003 | ) | $ | 1.512 | $ | 0.314 | $ | (1.625 | ) | $ | 3.187 | $ | 4.241 | ||||||||||||
| Less Distributions | ||||||||||||||||||||||||||||
| From net investment income |
$ | — | $ | (0.187 | ) | $ | (0.181 | ) | $ | (0.124 | ) | $ | (0.165 | ) | $ | (0.089 | ) | $ | (0.092 | ) | ||||||||
| Tax return of capital |
— | — | (0.011 | ) | — | — | — | — | ||||||||||||||||||||
| Total distributions |
$ | — | $ | (0.187 | ) | $ | (0.192 | ) | $ | (0.124 | ) | $ | (0.165 | ) | $ | (0.089 | ) | $ | (0.092 | ) | ||||||||
| Redemption fees(2)(3) |
$ | — | $ | — | $ | — | $ | — | $ | 0.000 | (4) | $ | 0.002 | $ | 0.001 | |||||||||||||
| Net asset value — End of period |
$ | 16.000 | $ | 14.070 | $ | 15.260 | $ | 13.940 | $ | 13.750 | $ | 15.540 | $ | 12.440 | ||||||||||||||
| Total Return(5) |
13.72 | %(6) | (6.62 | )% | 10.89 | % | 2.38 | %(6) | (10.59 | )% | 25.77 | % | 51.81 | % | ||||||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||||||||||
| Net assets, end of period (000’s omitted) |
$ | 721,770 | $ | 755,768 | $ | 738,776 | $ | 493,567 | $ | 481,194 | $ | 267,040 | $ | 104,727 | ||||||||||||||
| Ratios (as a percentage of average daily net assets): |
||||||||||||||||||||||||||||
| Expenses(7) |
1.36 | %(8) | 1.38 | % | 1.42 | % | 1.45 | %(8) | 1.45 | % | 1.51 | % | 1.57 | %(9) | ||||||||||||||
| Net investment income (loss) |
2.43 | %(8) | 1.36 | % | 1.22 | % | (0.43 | )%(8) | 1.33 | % | 0.77 | % | 1.26 | % | ||||||||||||||
| Portfolio Turnover |
3 | %(6) | 7 | % | 3 | % | 0 | %(6)(10) | 3 | % | 8 | % | 11 | % | ||||||||||||||
| (1) | For the three months ended January 31, 2012. The Fund changed its fiscal year-end from October 31 to January 31. |
| (2) | Computed using average shares outstanding. |
| (3) | Redemption fees were discontinued as of January 1, 2011. |
| (4) | Amount is less than $0.0005. |
| (5) | Returns are historical and are calculated by determining the percentage change in net asset value with all distributions reinvested and do not reflect the effect of sales charges, if applicable, which were eliminated effective March 1, 2013. |
| (6) | Not annualized. |
| (7) | Excludes the effect of custody fee credits, if any, of less than 0.005%. |
| (8) | Annualized. |
| (9) | The investment adviser and administrator waived a portion of its fees and subsidized certain operating expenses (equal to 0.02% of average daily net assets for the year ended October 31, 2009). |
| (10) | Amount is less than 0.5%. |
| 30 | See Notes to Financial Statements. |
Parametric Emerging Markets Fund
July 31, 2014
Financial Highlights — continued
| Class C | ||||||||||||||||||||||||||||
| Six Months Ended July 31, 2014 (Unaudited) |
Year Ended January 31, | Period Ended January 31, 2012(1) |
Year Ended October 31, | |||||||||||||||||||||||||
| 2014 | 2013 | 2011 | 2010 | 2009 | ||||||||||||||||||||||||
| Net asset value — Beginning of period |
$ | 13.960 | $ | 15.130 | $ | 13.820 | $ | 13.530 | $ | 15.310 | $ | 12.280 | $ | 8.160 | ||||||||||||||
| Income (Loss) From Operations | ||||||||||||||||||||||||||||
| Net investment income (loss)(2) |
$ | 0.128 | $ | 0.091 | $ | 0.095 | $ | (0.038 | ) | $ | 0.074 | $ | 0.020 | $ | 0.042 | |||||||||||||
| Net realized and unrealized gain (loss) |
1.722 | (1.188 | ) | 1.294 | 0.333 | (1.792 | ) | 3.032 | 4.087 | |||||||||||||||||||
| Total income (loss) from operations |
$ | 1.850 | $ | (1.097 | ) | $ | 1.389 | $ | 0.295 | $ | (1.718 | ) | $ | 3.052 | $ | 4.129 | ||||||||||||
| Less Distributions | ||||||||||||||||||||||||||||
| From net investment income |
$ | — | $ | (0.073 | ) | $ | (0.075 | ) | $ | (0.005 | ) | $ | (0.062 | ) | $ | (0.024 | ) | $ | (0.010 | ) | ||||||||
| Tax return of capital |
— | — | (0.004 | ) | — | — | — | — | ||||||||||||||||||||
| Total distributions |
$ | — | $ | (0.073 | ) | $ | (0.079 | ) | $ | (0.005 | ) | $ | (0.062 | ) | $ | (0.024 | ) | $ | (0.010 | ) | ||||||||
| Redemption fees(2)(3) |
$ | — | $ | — | $ | — | $ | — | $ | 0.000 | (4) | $ | 0.002 | $ | 0.001 | |||||||||||||
| Net asset value — End of period |
$ | 15.810 | $ | 13.960 | $ | 15.130 | $ | 13.820 | $ | 13.530 | $ | 15.310 | $ | 12.280 | ||||||||||||||
| Total Return(5) |
13.25 | %(6) | (7.27 | )% | 10.07 | % | 2.18 | %(6) | (11.27 | )% | 24.91 | % | 50.69 | % | ||||||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||||||||||
| Net assets, end of period (000’s omitted) |
$ | 20,568 | $ | 19,779 | $ | 23,348 | $ | 22,646 | $ | 22,866 | $ | 22,800 | $ | 16,918 | ||||||||||||||
| Ratios (as a percentage of average daily net assets): |
||||||||||||||||||||||||||||
| Expenses(7) |
2.10 | %(8) | 2.13 | % | 2.16 | % | 2.19 | %(8) | 2.19 | % | 2.26 | % | 2.32 | %(9) | ||||||||||||||
| Net investment income (loss) |
1.71 | %(8) | 0.63 | % | 0.68 | % | (1.18 | )%(8) | 0.49 | % | 0.15 | % | 0.44 | % | ||||||||||||||
| Portfolio Turnover |
3 | %(6) | 7 | % | 3 | % | 0 | %(6)(10) | 3 | % | 8 | % | 11 | % | ||||||||||||||
| (1) | For the three months ended January 31, 2012. The Fund changed its fiscal year-end from October 31 to January 31. |
| (2) | Computed using average shares outstanding. |
| (3) | Redemption fees were discontinued as of January 1, 2011. |
| (4) | Amount is less than $0.0005. |
| (5) | Returns are historical and are calculated by determining the percentage change in net asset value with all distributions reinvested and do not reflect the effect of sales charges. |
| (6) | Not annualized. |
| (7) | Excludes the effect of custody fee credits, if any, of less than 0.005%. |
| (8) | Annualized. |
| (9) | The investment adviser and administrator waived a portion of its fees and subsidized certain operating expenses (equal to 0.02% of average daily net assets for the year ended October 31, 2009). |
| (10) | Amount is less than 0.5%. |
| 31 | See Notes to Financial Statements. |
Parametric Emerging Markets Fund
July 31, 2014
Financial Highlights — continued
| Institutional Class | ||||||||||||||||||||||||||||
| Six Months Ended July 31, 2014 (Unaudited) |
Year Ended January 31, | Period Ended January 31, 2012(1) |
Year Ended October 31, | |||||||||||||||||||||||||
| 2014 | 2013 | 2011 | 2010 | 2009 | ||||||||||||||||||||||||
| Net asset value — Beginning of period |
$ | 14.110 | $ | 15.310 | $ | 13.970 | $ | 13.810 | $ | 15.580 | $ | 12.460 | $ | 8.320 | ||||||||||||||
| Income (Loss) From Operations | ||||||||||||||||||||||||||||
| Net investment income (loss)(2) |
$ | 0.208 | $ | 0.224 | $ | 0.222 | $ | (0.006 | ) | $ | 0.233 | $ | 0.163 | $ | 0.156 | |||||||||||||
| Net realized and unrealized |
1.752 | (1.197 | ) | 1.339 | 0.322 | (1.821 | ) | 3.071 | 4.109 | |||||||||||||||||||
| Total income (loss) from operations |
$ | 1.960 | $ | (0.973 | ) | $ | 1.561 | $ | 0.316 | $ | (1.588 | ) | $ | 3.234 | $ | 4.265 | ||||||||||||
| Less Distributions | ||||||||||||||||||||||||||||
| From net investment income |
$ | — | $ | (0.227 | ) | $ | (0.209 | ) | $ | (0.156 | ) | $ | (0.182 | ) | $ | (0.116 | ) | $ | (0.126 | ) | ||||||||
| Tax return of capital |
— | — | (0.012 | ) | — | — | — | — | ||||||||||||||||||||
| Total distributions |
$ | — | $ | (0.227 | ) | $ | (0.221 | ) | $ | (0.156 | ) | $ | (0.182 | ) | $ | (0.116 | ) | $ | (0.126 | ) | ||||||||
| Redemption fees(2)(3) |
$ | — | $ | — | $ | — | $ | — | $ | 0.000 | (4) | $ | 0.002 | $ | 0.001 | |||||||||||||
| Net asset value — End of period |
$ | 16.070 | $ | 14.110 | $ | 15.310 | $ | 13.970 | $ | 13.810 | $ | 15.580 | $ | 12.460 | ||||||||||||||
| Total Return(5) |
13.89 | %(6) | (6.42 | )% | 11.22 | % | 2.41 | %(6) | (10.39 | )% | 26.22 | % | 52.15 | % | ||||||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||||||||||
| Net assets, end of period (000’s omitted) |
$ | 4,151,837 | $ | 3,392,890 | $ | 2,739,147 | $ | 1,988,618 | $ | 1,845,906 | $ | 1,623,796 | $ | 846,944 | ||||||||||||||
| Ratios (as a percentage of average daily net assets): |
||||||||||||||||||||||||||||
| Expenses(7) |
1.11 | %(8) | 1.13 | % | 1.16 | % | 1.20 | %(8) | 1.20 | % | 1.26 | % | 1.33 | %(9) | ||||||||||||||
| Net investment income (loss) |
2.74 | %(8) | 1.52 | % | 1.56 | % | (0.18 | )%(8) | 1.53 | % | 1.19 | % | 1.56 | % | ||||||||||||||
| Portfolio Turnover |
3 | %(6) | 7 | % | 3 | % | 0 | %(6)(10) | 3 | % | 8 | % | 11 | % | ||||||||||||||
| (1) | For the three months ended January 31, 2012. The Fund changed its fiscal year-end from October 31 to January 31. |
| (2) | Computed using average shares outstanding. |
| (3) | Redemption fees were discontinued as of January 1, 2011. |
| (4) | Amount is less than $0.0005. |
| (5) | Returns are historical and are calculated by determining the percentage change in net asset value with all distributions reinvested. |
| (6) | Not annualized. |
| (7) | Excludes the effect of custody fee credits, if any, of less than 0.005%. |
| (8) | Annualized. |
| (9) | The investment adviser and administrator waived a portion of its fees and subsidized certain operating expenses (equal to 0.02% of average daily net assets for the year ended October 31, 2009). |
| (10) | Amount is less than 0.5%. |
| 32 | See Notes to Financial Statements. |
Parametric Emerging Markets Fund
July 31, 2014
Financial Highlights — continued
| Class R6 | ||||
| Period Ended July 31, 2014(1) (Unaudited) |
||||
| Net asset value — Beginning of period |
$ | 15.950 | ||
| Income (Loss) From Operations | ||||
| Net investment income(2) |
$ | 0.040 | ||
| Net realized and unrealized gain |
0.090 | |||
| Total income from operations |
$ | 0.130 | ||
| Net asset value — End of period |
$ | 16.080 | ||
| Total Return(3) |
0.82 | %(4) | ||
| Ratios/Supplemental Data | ||||
| Net assets, end of period (000’s omitted) |
$ | 1 | ||
| Ratios (as a percentage of average daily net assets): |
||||
| Expenses(5) |
1.07 | %(6) | ||
| Net investment income |
2.92 | %(6) | ||
| Portfolio Turnover |
3 | %(4)(7) | ||
| (1) | For the period from the commencement of operations, July 1, 2014, to July 31, 2014. |
| (2) | Computed using average shares outstanding. |
| (3) | Returns are historical and are calculated by determining the percentage change in net asset value with all distributions reinvested. |
| (4) | Not annualized. |
| (5) | Excludes the effect of custody fee credits, if any, of less than 0.005%. |
| (6) | Annualized. |
| (7) | For the Fund’s six months ended July 31, 2014. |
| 33 | See Notes to Financial Statements. |
Parametric Emerging Markets Fund
July 31, 2014
Notes to Financial Statements (Unaudited)
1 Significant Accounting Policies
Parametric Emerging Markets Fund (the Fund) is a diversified series of Eaton Vance Mutual Funds Trust (the Trust). The Trust is a Massachusetts business trust registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company. The Fund’s investment objective is to seek long-term capital appreciation. The Fund offers four classes of shares. Investor Class, Institutional Class and Class R6 shares are sold at net asset value and are not subject to a sales charge. Class C shares are sold at net asset value and are generally subject to a contingent deferred sales charge (see Note 5). Effective March 1, 2013, Class C shares of the Fund are no longer available for purchase, except by existing shareholders (including shares acquired through the reinvestment of dividends and distributions) or qualified retirement plans. Each class represents a pro-rata interest in the Fund, but votes separately on class-specific matters and (as noted below) is subject to different expenses. Realized and unrealized gains and losses and net investment income and losses, other than class-specific expenses, are allocated daily to each class of shares based on the relative net assets of each class to the total net assets of the Fund. Sub-accounting, recordkeeping and similar administrative fees payable to financial intermediaries, which are a component of transfer and dividend disbursing agent fees on the Statement of Operations, are not allocated to Class R6 shares. Each class of shares differs in its distribution plan and certain other class-specific expenses.
The following is a summary of significant accounting policies of the Fund. The policies are in conformity with accounting principles generally accepted in the United States of America.
A Investment Valuation — The following methodologies are used to determine the market value or fair value of investments.
Equity Securities. Equity securities (including common shares of closed-end investment companies) listed on a U.S. securities exchange generally are valued at the last sale or closing price on the day of valuation or, if no sales took place on such date, at the mean between the closing bid and asked prices therefore on the exchange where such securities are principally traded. Equity securities listed on the NASDAQ Global or Global Select Market generally are valued at the NASDAQ official closing price. Unlisted or listed securities for which closing sales prices or closing quotations are not available are valued at the mean between the latest available bid and asked prices.
Debt Obligations. Debt obligations (including short-term obligations with a remaining maturity of more than sixty days) are generally valued on the basis of valuations provided by third party pricing services, as derived from such services’ pricing models. Inputs to the models may include, but are not limited to, reported trades, executable bid and asked prices, broker/dealer quotations, prices or yields of securities with similar characteristics, benchmark curves or information pertaining to the issuer, as well as industry and economic events. The pricing services may use a matrix approach, which considers information regarding securities with similar characteristics to determine the valuation for a security. Short-term obligations purchased with a remaining maturity of sixty days or less are generally valued at amortized cost, which approximates market value.
Foreign Securities and Currencies. Foreign securities and currencies are valued in U.S. dollars, based on foreign currency exchange rate quotations supplied by a third party pricing service. The pricing service uses a proprietary model to determine the exchange rate. Inputs to the model include reported trades and implied bid/ask spreads. The daily valuation of exchange-traded foreign securities generally is determined as of the close of trading on the principal exchange on which such securities trade. Events occurring after the close of trading on foreign exchanges may result in adjustments to the valuation of foreign securities to more accurately reflect their fair value as of the close of regular trading on the New York Stock Exchange. When valuing foreign equity securities that meet certain criteria, the Fund’s Trustees have approved the use of a fair value service that values such securities to reflect market trading that occurs after the close of the applicable foreign markets of comparable securities or other instruments that have a strong correlation to the fair-valued securities.
Fair Valuation. Investments for which valuations or market quotations are not readily available or are deemed unreliable are valued at fair value using methods determined in good faith by or at the direction of the Trustees of the Fund in a manner that fairly reflects the security’s value, or the amount that the Fund might reasonably expect to receive for the security upon its current sale in the ordinary course. Each such determination is based on a consideration of relevant factors, which are likely to vary from one pricing context to another. These factors may include, but are not limited to, the type of security, the existence of any contractual restrictions on the security’s disposition, the price and extent of public trading in similar securities of the issuer or of comparable companies or entities, quotations or relevant information obtained from broker/dealers or other market participants, information obtained from the issuer, analysts, and/or the appropriate stock exchange (for exchange-traded securities), an analysis of the company’s or entity’s financial condition, and an evaluation of the forces that influence the issuer and the market(s) in which the security is purchased and sold.
B Investment Transactions — Investment transactions for financial statement purposes are accounted for on a trade date basis. Realized gains and losses on investments sold are determined on the basis of identified cost.
C Income — Dividend income is recorded on the ex-dividend date for dividends received in cash and/or securities. However, if the ex-dividend date has passed, certain dividends from foreign securities are recorded as the Fund is informed of the ex-dividend date. Withholding taxes on foreign dividends, interest and capital gains have been provided for in accordance with the Fund’s understanding of the applicable countries’ tax rules and rates. Interest income is recorded on the basis of interest accrued, adjusted for amortization of premium or accretion of discount.
D Federal Taxes — The Fund’s policy is to comply with the provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute to shareholders each year substantially all of its net investment income, and all or substantially all of its net realized capital gains. Accordingly, no provision for federal income or excise tax is necessary.
| 34 |
Parametric Emerging Markets Fund
July 31, 2014
Notes to Financial Statements (Unaudited) — continued
In addition to the requirements of the Internal Revenue Code, the Fund may also be subject to local taxes on the recognition of capital gains in certain countries. In determining the daily net asset value, the Fund estimates the accrual for such taxes, if any, based on the unrealized appreciation on certain portfolio securities and the related tax rates. Taxes attributable to unrealized appreciation are included in the change in unrealized appreciation (depreciation) on investments. Capital gains taxes on securities sold are included in net realized gain (loss) on investments.
At January 31, 2014, the Fund, for federal income tax purposes, had a capital loss carryforward of $10,862,282 which will reduce its taxable income arising from future net realized gains on investment transactions, if any, to the extent permitted by the Internal Revenue Code, and thus will reduce the amount of distributions to shareholders, which would otherwise be necessary to relieve the Fund of any liability for federal income or excise tax. The capital loss carryforward will expire on January 31, 2017 ($9,781,273) and January 31, 2019 ($1,081,009) and its character is short-term. In addition, such capital loss carryforward cannot be utilized prior to the utilization of new capital losses, if any, created after January 31, 2014.
Additionally, at January 31, 2014, the Fund had a late year ordinary loss of $2,561,639 which it has elected to defer to the following taxable year pursuant to income tax regulations. Late year ordinary losses represent certain specified losses realized in that portion of a taxable year after October 31 that are treated as ordinary for tax purposes plus ordinary losses attributable to that portion of a taxable year after December 31.
As of July 31, 2014, the Fund had no uncertain tax positions that would require financial statement recognition, de-recognition, or disclosure. The Fund files a U.S. federal income tax return annually after its fiscal year-end, which is subject to examination by the Internal Revenue Service for a period of three years from the date of filing.
E Expenses — The majority of expenses of the Trust are directly identifiable to an individual fund. Expenses which are not readily identifiable to a specific fund are allocated taking into consideration, among other things, the nature and type of expense and the relative size of the funds.
F Expense Reduction — State Street Bank and Trust Company (SSBT) serves as custodian of the Fund. Pursuant to the custodian agreement, SSBT receives a fee reduced by credits, which are determined based on the average daily cash balance the Fund maintains with SSBT. All credit balances, if any, used to reduce the Fund’s custodian fees are reported as a reduction of expenses in the Statement of Operations.
G Foreign Currency Translation — Investment valuations, other assets, and liabilities initially expressed in foreign currencies are translated each business day into U.S. dollars based upon current exchange rates. Purchases and sales of foreign investment securities and income and expenses denominated in foreign currencies are translated into U.S. dollars based upon currency exchange rates in effect on the respective dates of such transactions. Recognized gains or losses on investment transactions attributable to changes in foreign currency exchange rates are recorded for financial statement purposes as net realized gains and losses on investments. That portion of unrealized gains and losses on investments that results from fluctuations in foreign currency exchange rates is not separately disclosed.
H Use of Estimates — The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expense during the reporting period. Actual results could differ from those estimates.
I Indemnifications — Under the Trust’s organizational documents, its officers and Trustees may be indemnified against certain liabilities and expenses arising out of the performance of their duties to the Fund. Under Massachusetts law, if certain conditions prevail, shareholders of a Massachusetts business trust (such as the Trust) could be deemed to have personal liability for the obligations of the Trust. However, the Trust’s Declaration of Trust contains an express disclaimer of liability on the part of Fund shareholders and the By-laws provide that the Trust shall assume the defense on behalf of any Fund shareholders. Moreover, the By-laws also provide for indemnification out of Fund property of any shareholder held personally liable solely by reason of being or having been a shareholder for all loss or expense arising from such liability. Additionally, in the normal course of business, the Fund enters into agreements with service providers that may contain indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred.
J Interim Financial Statements — The interim financial statements relating to July 31, 2014 and for the six months then ended have not been audited by an independent registered public accounting firm, but in the opinion of the Fund’s management, reflect all adjustments, consisting only of normal recurring adjustments, necessary for the fair presentation of the financial statements.
2 Distributions to Shareholders
It is the present policy of the Fund to make at least one distribution annually (normally in December) of all or substantially all of its net investment income and to distribute annually all or substantially all of its net realized capital gains (reduced by available capital loss carryforwards from prior years). Distributions to shareholders are recorded on the ex-dividend date. Distributions are declared separately for each class of shares. Shareholders may reinvest income and capital gain distributions in additional shares of the same class of the Fund at the net asset value as of the ex-dividend date or, at the election of the shareholder, receive distributions in cash. The Fund distinguishes between distributions on a tax basis and a financial reporting basis. Accounting principles generally accepted in the United States of America require that only distributions in excess of tax basis earnings and profits be reported in the financial statements as a return of capital. Permanent differences between book and tax accounting relating to distributions are reclassified to paid-in capital. For tax purposes, distributions from short-term capital gains are considered to be from ordinary income.
| 35 |
Parametric Emerging Markets Fund
July 31, 2014
Notes to Financial Statements (Unaudited) — continued
3 Investment Adviser Fee and Other Transactions with Affiliates
The investment adviser fee is earned by Eaton Vance Management (EVM) as compensation for management and investment advisory services rendered to the Fund. The fee is computed at an annual rate of 0.85% of the Fund’s average daily net assets up to $500 million, 0.80% on net assets of $500 million but less than $1 billion, 0.775% on net assets of $1 billion but less than $2.5 billion, 0.75% on net assets of $2.5 billion but less than $5 billion and 0.73% on average daily net assets of $5 billion and over, and is payable monthly. For the six months ended July 31, 2014, the investment adviser fee amounted to $17,505,177 or 0.77% (annualized) of the Fund’s average daily net assets. Pursuant to a sub-advisory agreement, EVM has delegated the investment management of the Fund to Parametric Portfolio Associates LLC (Parametric), a majority-owned subsidiary of Eaton Vance Corp. EVM pays Parametric a portion of its advisory fee for sub-advisory services provided to the Fund. The administration fee is earned by EVM for administering the business affairs of the Fund and is computed at an annual rate of 0.15% of the Fund’s average daily net assets. For the six months ended July 31, 2014, the administration fee amounted to $3,389,460.
EVM provides sub-transfer agency and related services to the Fund pursuant to a Sub-Transfer Agency Support Services Agreement. For the six months ended July 31, 2014, EVM earned $26,354 from the Fund pursuant to such agreement, which is included in transfer and dividend disbursing agent fees on the Statement of Operations. Eaton Vance Distributors, Inc. (EVD), an affiliate of EVM and the Fund’s principal underwriter, received distribution and service fees from Investor Class and Class C shares (see Note 4) and contingent deferred sales charges (see Note 5).
Trustees and officers of the Fund who are members of EVM’s organization receive remuneration for their services to the Fund out of the investment adviser fee. Trustees of the Fund who are not affiliated with EVM may elect to defer receipt of all or a percentage of their annual fees in accordance with the terms of the Trustees Deferred Compensation Plan. For the six months ended July 31, 2014, no significant amounts have been deferred. Certain officers and Trustees of the Fund are officers of EVM.
4 Distribution Plans
The Fund has in effect a distribution plan for Investor Class shares (Investor Class Plan) pursuant to Rule 12b-1 under the 1940 Act. Pursuant to the Investor Class Plan, the Fund pays EVD a distribution and service fee of 0.25% per annum of its average daily net assets attributable to Investor Class shares for distribution services and facilities provided to the Fund by EVD, as well as for personal services and/or the maintenance of shareholder accounts. Distribution and service fees paid or accrued to EVD for the six months ended July 31, 2014 amounted to $909,313 for Investor Class shares.
The Fund also has in effect a distribution plan for Class C shares (Class C Plan) pursuant to Rule 12b-1 under the 1940 Act. Pursuant to the Class C Plan, the Fund pays EVD amounts equal to 0.75% per annum of its average daily net assets attributable to Class C shares for providing ongoing distribution services and facilities to the Fund. For the six months ended July 31, 2014, the Fund paid or accrued to EVD $75,779 for Class C shares.
Pursuant to the Class C Plan, the Fund also makes payments of service fees to EVD, financial intermediaries and other persons in amounts equal to 0.25% per annum of its average daily net assets attributable to that class. Service fees paid or accrued are for personal services and/or the maintenance of shareholder accounts. They are separate and distinct from the sales commissions and distribution fees payable to EVD. Service fees paid or accrued for the six months ended July 31, 2014 amounted to $25,260 for Class C shares.
Distribution and service fees are subject to the limitations contained in the Financial Industry Regulatory Authority’s NASD Conduct Rule 2830(d).
5 Contingent Deferred Sales Charges
A contingent deferred sales charge (CDSC) of 1% generally is imposed on redemptions of Class C shares made within one year of purchase. Generally, the CDSC is based upon the lower of the net asset value at date of redemption or date of purchase. No charge is levied on shares acquired by reinvestment of dividends or capital gain distributions. For the six months ended July 31, 2014, the Fund was informed that EVD received approximately $200 of CDSCs paid by Class C shareholders.
6 Purchases and Sales of Investments
Purchases and sales of investments, other than short-term obligations, aggregated $280,733,167 and $136,665,588, respectively, for the six months ended July 31, 2014.
| 36 |
Parametric Emerging Markets Fund
July 31, 2014
Notes to Financial Statements (Unaudited) — continued
7 Shares of Beneficial Interest
The Fund’s Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest (without par value). Such shares may be issued in a number of different series (such as the Fund) and classes. Transactions in Fund shares were as follows:
| Investor Class | Six Months Ended July 31, 2014 (Unaudited) |
Year Ended January 31, 2014 |
||||||
| Sales |
4,994,627 | 28,688,546 | ||||||
| Issued to shareholders electing to receive payments of distributions in Fund shares |
— | 610,344 | ||||||
| Redemptions |
(13,587,786 | ) | (24,010,356 | ) | ||||
| Net increase (decrease) |
(8,593,159 | ) | 5,288,534 | |||||
| Class C | Six Months Ended July 31, 2014 (Unaudited) |
Year Ended January 31, 2014 |
||||||
| Sales |
32,482 | 207,316 | ||||||
| Issued to shareholders electing to receive payments of distributions in Fund shares |
— | 5,598 | ||||||
| Redemptions |
(148,602 | ) | (338,798 | ) | ||||
| Net decrease |
(116,120 | ) | (125,884 | ) | ||||
| Institutional Class | Six Months Ended July 31, 2014 (Unaudited) |
Year Ended January 31, 2014 |
||||||
| Sales |
38,482,588 | 95,945,622 | ||||||
| Issued to shareholders electing to receive payments of distributions in Fund shares |
— | 2,938,163 | ||||||
| Redemptions |
(20,462,542 | ) | (37,453,290 | ) | ||||
| Net increase |
18,020,046 | 61,430,495 | ||||||
| Class R6 | Period Ended July 31, 2014 (Unaudited)(1) |
|||||||
| Sales |
62 | |||||||
| Net increase |
62 | |||||||
| (1) | Class R6 commenced operations on July 1, 2014. |
| 37 |
Parametric Emerging Markets Fund
July 31, 2014
Notes to Financial Statements (Unaudited) — continued
8 Federal Income Tax Basis of Investments
The cost and unrealized appreciation (depreciation) of investments of the Fund at July 31, 2014, as determined on a federal income tax basis, were as follows:
| Aggregate cost |
$ | 4,288,919,485 | ||
| Gross unrealized appreciation |
$ | 978,352,883 | ||
| Gross unrealized depreciation |
(428,197,123 | ) | ||
| Net unrealized appreciation |
$ | 550,155,760 | ||
9 Line of Credit
The Fund participates with other portfolios and funds managed by EVM and its affiliates in a $750 million unsecured line of credit agreement with a group of banks. Borrowings are made by the Fund solely to facilitate the handling of unusual and/or unanticipated short-term cash requirements. Interest is charged to the Fund based on its borrowings at an amount above either the Eurodollar rate or Federal Funds rate. In addition, a fee computed at an annual rate of 0.08% on the daily unused portion of the line of credit is allocated among the participating portfolios and funds at the end of each quarter. Because the line of credit is not available exclusively to the Fund, it may be unable to borrow some or all of its requested amounts at any particular time. The Fund did not have any significant borrowings or allocated fees during the six months ended July 31, 2014.
10 Risks Associated with Foreign Investments
Investing in securities issued by companies whose principal business activities are outside the United States may involve significant risks not present in domestic investments. For example, there is generally less publicly available information about foreign companies, particularly those not subject to the disclosure and reporting requirements of the U.S. securities laws. Certain foreign issuers are generally not bound by uniform accounting, auditing, and financial reporting requirements and standards of practice comparable to those applicable to domestic issuers. Investments in foreign securities also involve the risk of possible adverse changes in investment or exchange control regulations, expropriation or confiscatory taxation, limitation on the removal of funds or other assets of the Fund, political or financial instability or diplomatic and other developments which could affect such investments. 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. In general, there is less overall governmental supervision and regulation of foreign securities markets, broker/dealers and issuers than in the United States. The foregoing risks of foreign investing can be more significant in less developed countries characterized as emerging market countries.
11 Fair Value Measurements
Under generally accepted accounting principles for fair value measurements, a three-tier hierarchy to prioritize the assumptions, referred to as inputs, is used in valuation techniques to measure fair value. The three-tier hierarchy of inputs is summarized in the three broad levels listed below.
| Ÿ | Level 1 – quoted prices in active markets for identical investments |
| Ÿ | Level 2 – other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.) |
| Ÿ | Level 3 – significant unobservable inputs (including a fund’s own assumptions in determining the fair value of investments) |
In cases where the inputs used to measure fair value fall in different levels of the fair value hierarchy, the level disclosed is determined based on the lowest level input that is significant to the fair value measurement in its entirety. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
| 38 |
Parametric Emerging Markets Fund
July 31, 2014
Notes to Financial Statements (Unaudited) — continued
At July 31, 2014, the hierarchy of inputs used in valuing the Fund’s investments, which are carried at value, were as follows:
| Asset Description | Level 1 | Level 2 | Level 3* | Total | ||||||||||||
| Common Stocks |
||||||||||||||||
| Asia/Pacific |
$ | 64,838,005 | $ | 1,993,401,039 | $ | 1,387,114 | $ | 2,059,626,158 | ||||||||
| Emerging Europe |
45,939,492 | 860,840,008 | 0 | 906,779,500 | ||||||||||||
| Latin America |
924,970,842 | — | 298,562 | 925,269,404 | ||||||||||||
| Middle East/Africa |
19,259,850 | 855,391,393 | 1,661,410 | 876,312,653 | ||||||||||||
| Total Common Stocks |
$ | 1,055,008,189 | $ | 3,709,632,440 | ** | $ | 3,347,086 | $ | 4,767,987,715 | |||||||
| Equity-Linked Securities |
$ | — | $ | 42,070,309 | $ | — | $ | 42,070,309 | ||||||||
| Investment Funds |
— | 3,570,414 | — | 3,570,414 | ||||||||||||
| Rights |
421,331 | — | — | 421,331 | ||||||||||||
| Short-Term Investments |
— | 25,025,476 | — | 25,025,476 | ||||||||||||
| Warrants |
0 | — | — | 0 | ||||||||||||
| Total Investments |
$ | 1,055,429,520 | $ | 3,780,298,639 | $ | 3,347,086 | $ | 4,839,075,245 | ||||||||
| * | None of the unobservable inputs for Level 3 assets, individually or collectively, had a material impact on the Fund. |
| ** | Includes foreign equity securities whose values were adjusted to reflect market trading of comparable securities or other correlated instruments that occurred after the close of trading in their applicable foreign markets. |
Level 3 investments at the beginning and/or end of the period in relation to net assets were not significant and accordingly, a reconciliation of Level 3 assets for the six months ended July 31, 2014 is not presented.
At July 31, 2014, investments having a value of $5,304,411 and $355,997,584 at January 31, 2014 were transferred from Level 1 to Level 2 and Level 2 to Level 1, respectively, during the six months then ended. The change in the level designations within the fair value hierarchy was due to an increase or decrease in the coverage of foreign equity securities provided by the Fund’s fair valuation pricing service as discussed in Note 1A.
| 39 |
Parametric Emerging Markets Fund
July 31, 2014
Special Meeting of Shareholders (Unaudited)
The Fund held a Special Meeting of Shareholders on May 29, 2014 to elect five Trustees. The results of the vote were as follows:
| Number of Shares(1) | ||||||||
| Nominee for Trustee | For | Withheld | ||||||
| Scott E. Eston |
253,774,467 | 440,435 | ||||||
| Cynthia E. Frost |
253,799,361 | 415,541 | ||||||
| George J. Gorman |
253,771,953 | 442,950 | ||||||
| Valerie A. Mosley |
253,809,882 | 405,021 | ||||||
| Harriett Tee Taggart |
253,802,280 | 412,622 | ||||||
| (1) | Excludes fractional shares. |
| 40 |
Parametric Emerging Markets Fund
July 31, 2014
Board of Trustees’ Contract Approval
Overview of the Contract Review Process
The Investment Company Act of 1940, as amended (the “1940 Act”), provides, in substance, that each investment advisory agreement between a fund and its investment adviser will continue in effect from year to year only if its continuation is approved at least annually by the fund’s board of trustees, including by a vote of a majority of the trustees who are not “interested persons” of the fund (“Independent Trustees”), cast in person at a meeting called for the purpose of considering such approval.
At a meeting of the Boards of Trustees (each a “Board”) of the mutual funds advised, administered and/or distributed by Eaton Vance Management or its affiliates (the “Eaton Vance Funds”) held on April 28, 2014, the Board, including a majority of the Independent Trustees, voted to approve continuation of existing advisory and sub-advisory agreements for the Eaton Vance Funds for an additional one-year period. In voting its approval, the Board relied upon the affirmative recommendation of the Contract Review Committee of the Board, which is a committee comprised exclusively of Independent Trustees. Prior to making its recommendation, the Contract Review Committee reviewed information furnished by each adviser to the Eaton Vance Funds (including information specifically requested by the Board) for a series of meetings of the Contract Review Committee held between February and April 2014, as well as information considered throughout the year at meetings of the Board and its committees. Such information included, among other things, the following:
Information about Fees, Performance and Expenses
| Ÿ | An independent report comparing the advisory and related fees paid by each fund with fees paid by comparable funds; |
| Ÿ | An independent report comparing each fund’s total expense ratio and its components to comparable funds; |
| Ÿ | An independent report comparing the investment performance of each fund (including, where relevant, yield data, Sharpe ratios and information ratios) to the investment performance of comparable funds over various time periods; |
| Ÿ | Data regarding investment performance in comparison to benchmark indices and customized peer groups identified by the adviser in consultation with the Board; |
| Ÿ | For each fund, comparative information concerning the fees charged and the services provided by each adviser in managing other accounts (including mutual funds, other collective investment funds and institutional accounts) using investment strategies and techniques similar to those used in managing such fund; |
| Ÿ | Profitability analyses for each adviser with respect to each fund; |
Information about Portfolio Management and Trading
| Ÿ | Descriptions of the investment management services provided to each fund, including the investment strategies and processes employed, and any changes in portfolio management processes and personnel; |
| Ÿ | Information about the allocation of brokerage and the benefits received by each adviser as a result of brokerage allocation, including information concerning the acquisition of research through client commission arrangements and the fund’s policies with respect to “soft dollar” arrangements; |
| Ÿ | Data relating to portfolio turnover rates of each fund; |
| Ÿ | The procedures and processes used to determine the fair value of fund assets and actions taken to monitor and test the effectiveness of such procedures and processes; |
| Ÿ | Information about each adviser’s processes for monitoring best execution of portfolio transactions, and other policies and practices of each adviser with respect to trading; |
Information about each Adviser
| Ÿ | Reports detailing the financial results and condition of each adviser; |
| Ÿ | Descriptions of the qualifications, education and experience of the individual investment professionals whose responsibilities include portfolio management and investment research for the funds, and information relating to their compensation and responsibilities with respect to managing other mutual funds and investment accounts; |
| Ÿ | Copies of the Codes of Ethics of each adviser and its affiliates, together with information relating to compliance with and the administration of such codes; |
| Ÿ | Copies of or descriptions of each adviser’s policies and procedures relating to proxy voting, the handling of corporate actions and class actions; |
| Ÿ | Information concerning the resources devoted to compliance efforts undertaken by each adviser and its affiliates on behalf of the funds (including descriptions of various compliance programs) and their record of compliance with investment policies and restrictions, including policies with respect to market-timing, late trading and selective portfolio disclosure, and with policies on personal securities transactions; |
| Ÿ | Descriptions of the business continuity and disaster recovery plans of each adviser and its affiliates; |
| Ÿ | A description of Eaton Vance Management’s procedures for overseeing third party advisers and sub-advisers, including with respect to regulatory and compliance issues, investment management and other matters; |
| 41 |
Parametric Emerging Markets Fund
July 31, 2014
Board of Trustees’ Contract Approval — continued
Other Relevant Information
| Ÿ | Information concerning the nature, cost and character of the administrative and other non-investment management services provided by Eaton Vance Management and its affiliates; |
| Ÿ | Information concerning management of the relationship with the custodian, subcustodians and fund accountants by each adviser or the funds’ administrator; and |
| Ÿ | The terms of each advisory agreement. |
Over the course of the twelve-month period ended April 30, 2014, with respect to one or more funds, the Board met nine times and the Contract Review Committee, the Audit Committee, the Governance Committee, the Portfolio Management Committee and the Compliance Reports and Regulatory Matters Committee, each of which is a Committee comprised solely of Independent Trustees, met seven, seventeen, eleven, six and ten times respectively. At such meetings, the Trustees participated in investment and performance reviews with the portfolio managers and other investment professionals of each adviser relating to each fund, and considered the investment and trading strategies used in pursuing each fund’s investment objective, including, where relevant, the use of derivative instruments, as well as processes for monitoring best execution of portfolio transactions risk management techniques. The Board and its Committees also evaluated issues pertaining to industry and regulatory developments, compliance procedures, fund governance and other issues with respect to the funds, and received and participated in reports and presentations provided by Eaton Vance Management and other fund advisers with respect to such matters.
For funds that invest through one or more underlying portfolios, the Board considered similar information about the portfolio(s) when considering the approval of advisory agreements. In addition, in cases where the fund’s investment adviser has engaged a sub-adviser, the Board considered similar information about the sub-adviser when considering the approval of any sub-advisory agreement.
The Contract Review Committee was assisted throughout the contract review process by Goodwin Procter LLP, legal counsel for the Independent Trustees. The members of the Contract Review Committee relied upon the advice of such counsel and their own business judgment in determining the material factors to be considered in evaluating each advisory and sub-advisory agreement and the weight to be given to each such factor. The conclusions reached with respect to each advisory and sub-advisory agreement were based on a comprehensive evaluation of all the information provided and not any single factor. Moreover, each member of the Contract Review Committee may have placed varying emphasis on particular factors in reaching conclusions with respect to each advisory and sub-advisory agreement. In evaluating each advisory and sub-advisory agreement, including the specific fee structures and other terms of the agreements, the Contract Review Committee was informed by multiple years of analysis and discussion among the Independent Trustees and the Funds’ advisers and sub-advisers.
Results of the Process
Based on its consideration of the foregoing, and such other information as it deemed relevant, including the factors and conclusions described below, the Contract Review Committee concluded that the continuation of the investment advisory agreement of Parametric Emerging Markets Fund (the “Fund”) with Eaton Vance Management (the “Adviser”) and the sub-advisory agreement with Parametric Portfolio Associates LLC (the “Sub-adviser”), an affiliate of Eaton Vance Management, including their fee structures, is in the interests of shareholders and, therefore, the Contract Review Committee recommended to the Board approval of each agreement. The Board accepted the recommendation of the Contract Review Committee as well as the factors considered and conclusions reached by the Contract Review Committee with respect to the agreements. Accordingly, the Board, including a majority of the Independent Trustees, voted to approve continuation of the investment advisory agreement and the sub-advisory agreement for the Fund.
Nature, Extent and Quality of Services
In considering whether to approve the investment advisory agreement and the sub-advisory agreement of the Fund, the Board evaluated the nature, extent and quality of services provided to the Fund by the Adviser and the Sub-adviser.
The Board considered the Adviser’s and the Sub-adviser’s management capabilities and investment process with respect to the types of investments held by the Fund, including the education, experience and number of its investment professionals and other personnel who provide portfolio management, investment research, and similar services to the Fund. With respect to the Adviser, the Board considered the Adviser’s responsibilities supervising the Sub-adviser. With respect to the Sub-adviser, the Board considered the abilities and experience of investment personnel in analyzing factors such as special considerations relevant to investing in emerging markets. The Board noted the Adviser’s in-house equity research capabilities. With respect to the Sub-adviser, the Board noted the Sub-adviser’s experience in deploying quantitative-based investment strategies. The Board also took into account the resources dedicated to portfolio management and other services, including the compensation methods of the Adviser to recruit and retain investment personnel, and the time and attention devoted to the Fund by senior management.
The Board reviewed the compliance programs of the Adviser and relevant affiliates thereof, including the Sub-adviser. Among other matters, the Board considered compliance and reporting matters relating to personal trading by investment personnel, selective disclosure of portfolio holdings, late trading, frequent trading, portfolio valuation, business continuity and the allocation of investment opportunities. The Board also evaluated the responses of the Adviser and its affiliates to requests in recent years from regulatory authorities such as the Securities and Exchange Commission and the Financial Industry Regulatory Authority.
| 42 |
Parametric Emerging Markets Fund
July 31, 2014
Board of Trustees’ Contract Approval — continued
The Board considered shareholder and other administrative services provided or managed by Eaton Vance Management and its affiliates, including transfer agency and accounting services. The Board evaluated the benefits to shareholders of investing in a fund that is a part of a large family of funds, including the ability, in many cases, to exchange an investment among different funds without incurring additional sales charges.
After consideration of the foregoing factors, among others, the Board concluded that the nature, extent and quality of services provided by the Adviser and the Sub-adviser, taken as a whole, are appropriate and consistent with the terms of the investment advisory agreement and the sub-advisory agreement.
Fund Performance
The Board compared the Fund’s investment performance to a relevant universe of similarly managed funds identified by an independent data provider and appropriate benchmark indices. The Board reviewed comparative performance data for the one-, three-, and five-year periods ended September 30, 2013 for the Fund. The Board concluded that the performance of the Fund was satisfactory.
Management Fees and Expenses
The Board reviewed contractual fee rates for investment advisory and administrative services payable by the Fund (referred to as “management fees”). As part of its review, the Board considered the management fees and the Fund’s total expense ratio for the year ended September 30, 2013, as compared to a group of similarly managed funds selected by an independent data provider. The Board also considered factors that had an impact on Fund expense ratios, as identified by management in response to inquiries from the Contract Review Committee, as well as actions taken by management in recent years to reduce expenses at the fund complex level, including the negotiation of reduced fees for transfer agency and custody services.
After reviewing the foregoing information, and in light of the nature, extent and quality of the services provided by the Adviser and the Sub-adviser, the Board concluded that the management fees charged for advisory and related services are reasonable.
Profitability
The Board reviewed the level of profits realized by the Adviser and relevant affiliates thereof, including the Sub-adviser, in providing investment advisory and administrative services to the Fund and to all Eaton Vance Funds as a group. The Board considered the level of profits realized without regard to revenue sharing or other payments by the Adviser and its affiliates to third parties in respect of distribution services. The Board also considered other direct or indirect benefits received by the Adviser and its affiliates, including the Sub-adviser, in connection with their relationships with the Fund, including the benefits of research services that may be available to the Adviser or the Sub-adviser as a result of securities transactions effected for the Fund and other investment advisory clients.
The Board concluded that, in light of the foregoing factors and the nature, extent and quality of the services rendered, the profits realized by the Adviser and its affiliates, including the Sub-adviser, are reasonable.
Economies of Scale
In reviewing management fees and profitability, the Board also considered the extent to which the Adviser and its affiliates, on the one hand, and the Fund, on the other hand, can expect to realize benefits from economies of scale as the assets of the Fund increase. The Board acknowledged the difficulty in accurately measuring the benefits resulting from the economies of scale with respect to the management of any specific fund or group of funds. The Board reviewed data summarizing the increases and decreases in the assets of the Fund and of all Eaton Vance Funds as a group over various time periods, and evaluated the extent to which the total expense ratio of the Fund and the profitability of the Adviser and its affiliates may have been affected by such increases or decreases. Based upon the foregoing, the Board concluded that the Fund currently shares in the benefits from economies of scale. The Board also concluded that, assuming reasonably foreseeable increases in the assets of the Fund, the structure of the advisory fee, which includes breakpoints at several asset levels, will allow the Fund to continue to benefit from economies of scale in the future.
| 43 |
Parametric Emerging Markets Fund
July 31, 2014
Officers and Trustees
Officers of Parametric Emerging Markets Fund
Trustees of Parametric Emerging Markets Fund
| * | Interested Trustee |
| 44 |
Eaton Vance Funds
IMPORTANT NOTICES
Privacy. The Eaton Vance organization is committed to ensuring your financial privacy. Each of the financial institutions identified below has in effect the following policy (“Privacy Policy”) with respect to nonpublic personal information about its customers:
| Ÿ | Only such information received from you, through application forms or otherwise, and information about your Eaton Vance fund transactions will be collected. This may include information such as name, address, social security number, tax status, account balances and transactions. |
| Ÿ | None of such information about you (or former customers) will be disclosed to anyone, except as permitted by law (which includes disclosure to employees necessary to service your account). In the normal course of servicing a customer’s account, Eaton Vance may share information with unaffiliated third parties that perform various required services such as transfer agents, custodians and broker-dealers. |
| Ÿ | Policies and procedures (including physical, electronic and procedural safeguards) are in place that are designed to protect the confidentiality of such information. |
| Ÿ | We reserve the right to change our Privacy Policy at any time upon proper notification to you. Customers may want to review our Privacy Policy periodically for changes by accessing the link on our homepage: www.eatonvance.com. |
Our pledge of privacy applies to the following entities within the Eaton Vance organization: the Eaton Vance Family of Funds, Eaton Vance Management, Eaton Vance Investment Counsel, Eaton Vance Distributors, Inc., Eaton Vance Trust Company, Eaton Vance Management’s Real Estate Investment Group and Boston Management and Research. In addition, our Privacy Policy applies only to those Eaton Vance customers who are individuals and who have a direct relationship with us. If a customer’s account (i.e., fund shares) is held in the name of a third-party financial advisor/broker-dealer, it is likely that only such advisor’s privacy policies apply to the customer. This notice supersedes all previously issued privacy disclosures. For more information about Eaton Vance’s Privacy Policy, please call 1-800-262-1122.
Delivery of Shareholder Documents. The Securities and Exchange Commission (SEC) permits funds to deliver only one copy of shareholder documents, including prospectuses, proxy statements and shareholder reports, to fund investors with multiple accounts at the same residential or post office box address. This practice is often called “householding” and it helps eliminate duplicate mailings to shareholders. Eaton Vance, or your financial advisor, may household the mailing of your documents indefinitely unless you instruct Eaton Vance, or your financial advisor, otherwise. If you would prefer that your Eaton Vance documents not be householded, please contact Eaton Vance at 1-800-260-0761, or contact your financial advisor. Your instructions that householding not apply to delivery of your Eaton Vance documents will be effective within 30 days of receipt by Eaton Vance or your financial advisor.
Portfolio Holdings. Each Eaton Vance Fund and its underlying Portfolio(s) (if applicable) will file a schedule of portfolio holdings on Form N-Q with the SEC for the first and third quarters of each fiscal year. The Form N-Q will be available on the Eaton Vance website at www.eatonvance.com, by calling Eaton Vance at 1-800-260-0761 or in the EDGAR database on the SEC’s website at www.sec.gov. Form N-Q may also be reviewed and copied at the SEC’s public reference room in Washington, D.C. (call 1-800-732-0330 for information on the operation of the public reference room).
Proxy Voting. From time to time, funds are required to vote proxies related to the securities held by the funds. The Eaton Vance Funds or their underlying Portfolios (if applicable) vote proxies according to a set of policies and procedures approved by the Funds’ and Portfolios’ Boards. You may obtain a description of these policies and procedures and information on how the Funds or Portfolios voted proxies relating to portfolio securities during the most recent 12-month period ended June 30, without charge, upon request, by calling 1-800-260-0761 and by accessing the SEC’s website at www.sec.gov.
| 45 |
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| * | FINRA BrokerCheck. Investors may check the background of their Investment Professional by contacting the Financial Industry Regulatory Authority (FINRA). FINRA BrokerCheck is a free tool to help investors check the professional background of current and former FINRA-registered securities firms and brokers. FINRA BrokerCheck is available by calling 1-800-289-9999 and at www.FINRA.org. The FINRA BrokerCheck brochure describing the program is available to investors at www.FINRA.org. |
| 7750 7.31.14 |
| Parametric Global Small-Cap Fund
Semiannual Report July 31, 2014 |
Commodity Futures Trading Commission Registration. Effective December 31, 2012, the Commodity Futures Trading Commission (“CFTC”) adopted certain regulatory changes that subject registered investment companies and advisers to regulation by the CFTC if a fund invests more than a prescribed level of its assets in certain CFTC-regulated instruments (including futures, certain options and swap agreements) or markets itself as providing investment exposure to such instruments. The Fund has claimed an exclusion from the definition of the term “commodity pool operator” under the Commodity Exchange Act. Accordingly, neither the Fund nor the adviser with respect to the operation of the Fund is subject to CFTC regulation. Because of its management of other strategies, the Fund’s adviser is registered with the CFTC as a commodity pool operator and a commodity trading advisor.
Fund shares 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.
This report must be preceded or accompanied by a current summary prospectus or prospectus. Before investing, investors should consider carefully the investment objective, risks, and charges and expenses of a mutual fund. This and other important information is contained in the summary prospectus and prospectus, which can be obtained from a financial advisor. Prospective investors should read the prospectus carefully before investing. For further information, please call 1-800-260-0761.
Semiannual Report July 31, 2014
Parametric Global Small-Cap Fund
Table of Contents
| Performance |
2 | |||
| Fund Profile |
3 | |||
| Endnotes and Additional Disclosures |
4 | |||
| Fund Expenses |
5 | |||
| Financial Statements |
6 | |||
| Special Meeting of Shareholders |
27 | |||
| Board of Trustees’ Contract Approval |
28 | |||
| Officers and Trustees |
31 | |||
| Important Notices |
32 | |||
Parametric Global Small-Cap Fund
July 31, 2014
Performance1,2
Portfolio Managers David Stein, Ph.D., Thomas Seto and Paul Bouchey, CFA, each of Parametric Portfolio Associates LLC
| % Average Annual Total Returns | Class Inception Date |
Performance Inception Date |
Six Months | One Year | Five Years | Since Inception |
||||||||||||||||||
| Institutional Class at NAV |
12/20/2012 | 12/20/2012 | 6.18 | % | 12.05 | % | — | 13.95 | % | |||||||||||||||
| Russell Global 2000 Index |
— | — | 4.53 | % | 12.55 | % | 13.22 | % | 15.57 | % | ||||||||||||||
| % Total Annual Operating Expense Ratios3 | Institutional Class |
|||||||||||||||||||||||
| Gross |
3.72 | % | ||||||||||||||||||||||
| Net |
0.86 | |||||||||||||||||||||||
See Endnotes and Additional Disclosures in this report.
Past performance is no guarantee of future results. Returns are historical and are calculated by determining the percentage change in net asset value (NAV) or offering price (as applicable) with all distributions reinvested. Investment return and principal value will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Performance less than one year is cumulative. Performance is for the stated time period only; due to market volatility, the Fund’s current performance may be lower or higher than quoted. Returns are before taxes unless otherwise noted. For performance as of the most recent month end, please refer to eatonvance.com.
| 2 |
Parametric Global Small-Cap Fund
July 31, 2014
Fund Profile
See Endnotes and Additional Disclosures in this report.
| 3 |
Parametric Global Small-Cap Fund
July 31, 2014
Endnotes and Additional Disclosures
| 4 |
Parametric Global Small-Cap Fund
July 31, 2014
Fund Expenses
Example: As a Fund shareholder, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchases and redemption fees (if applicable); and (2) ongoing costs, including management fees; distribution and/or service fees; and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of Fund investing and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (February 1, 2014 – July 31, 2014).
Actual Expenses: The first section of the table below provides information about actual account values and actual expenses. You may use the information in this section, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes: The second section of the table below provides information about hypothetical account values and hypothetical expenses based on the actual Fund expense ratio and an assumed rate of return of 5% per year (before expenses), which is not the actual Fund return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in your Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) or redemption fees (if applicable). Therefore, the second section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would be higher.
| Beginning Account Value (2/1/14) |
Ending Account Value (7/31/14) |
Expenses Paid During Period* (2/1/14 – 7/31/14) |
Annualized Expense Ratio |
|||||||||||||
| Actual |
| |||||||||||||||
| Institutional Class |
$ | 1,000.00 | $ | 1,061.80 | $ | 4.35 | ** | 0.85 | % | |||||||
| Hypothetical |
||||||||||||||||
| (5% return per year before expenses) |
||||||||||||||||
| Institutional Class |
$ | 1,000.00 | $ | 1,020.60 | $ | 4.26 | ** | 0.85 | % | |||||||
| * | Expenses are equal to the Fund’s annualized expense ratio for the indicated Class, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). The Example assumes that the $1,000 was invested at the net asset value per share determined at the close of business on January 31, 2014. |
| ** | Absent an allocation of certain expenses to affiliates, the expenses would be higher. |
| 5 |
Parametric Global Small-Cap Fund
July 31, 2014
Portfolio of Investments (Unaudited)
| 6 | See Notes to Financial Statements. |
Parametric Global Small-Cap Fund
July 31, 2014
Portfolio of Investments (Unaudited) — continued
| 7 | See Notes to Financial Statements. |
Parametric Global Small-Cap Fund
July 31, 2014
Portfolio of Investments (Unaudited) — continued
| 8 | See Notes to Financial Statements. |
Parametric Global Small-Cap Fund
July 31, 2014
Portfolio of Investments (Unaudited) — continued
| 9 | See Notes to Financial Statements. |
Parametric Global Small-Cap Fund
July 31, 2014
Portfolio of Investments (Unaudited) — continued
| 10 | See Notes to Financial Statements. |
Parametric Global Small-Cap Fund
July 31, 2014
Portfolio of Investments (Unaudited) — continued
| 11 | See Notes to Financial Statements. |
Parametric Global Small-Cap Fund
July 31, 2014
Portfolio of Investments (Unaudited) — continued
| 12 | See Notes to Financial Statements. |
Parametric Global Small-Cap Fund
July 31, 2014
Portfolio of Investments (Unaudited) — continued
| 13 | See Notes to Financial Statements. |
Parametric Global Small-Cap Fund
July 31, 2014
Portfolio of Investments (Unaudited) — continued
| 14 | See Notes to Financial Statements. |
Parametric Global Small-Cap Fund
July 31, 2014
Portfolio of Investments (Unaudited) — continued
| 15 | See Notes to Financial Statements. |
Parametric Global Small-Cap Fund
July 31, 2014
Portfolio of Investments (Unaudited) — continued
| 16 | See Notes to Financial Statements. |
Parametric Global Small-Cap Fund
July 31, 2014
Portfolio of Investments (Unaudited) — continued
| 17 | See Notes to Financial Statements. |
Parametric Global Small-Cap Fund
July 31, 2014
Portfolio of Investments (Unaudited) — continued
| 18 | See Notes to Financial Statements. |
Parametric Global Small-Cap Fund
July 31, 2014
Statement of Assets and Liabilities (Unaudited)
| Assets | July 31, 2014 | |||
| Unaffiliated investments, at value (identified cost, $5,536,102) |
$ | 6,163,730 | ||
| Affiliated investment, at value (identified cost, $25,283) |
25,283 | |||
| Cash |
209 | |||
| Foreign currency, at value (identified cost, $22,926) |
22,672 | |||
| Dividends receivable |
7,639 | |||
| Interest receivable from affiliated investment |
3 | |||
| Receivable for investments sold |
271,914 | |||
| Tax reclaims receivable |
2,838 | |||
| Receivable from affiliates |
14,903 | |||
| Total assets |
$ | 6,509,191 | ||
| Liabilities | ||||
| Payable for investments purchased |
$ | 277,936 | ||
| Payable to affiliate: |
||||
| Investment adviser and administration fee |
3,781 | |||
| Accrued expenses |
32,221 | |||
| Total liabilities |
$ | 313,938 | ||
| Net Assets |
$ | 6,195,253 | ||
| Sources of Net Assets | ||||
| Paid-in capital |
$ | 5,308,635 | ||
| Accumulated net realized gain |
216,168 | |||
| Accumulated undistributed net investment income |
43,094 | |||
| Net unrealized appreciation |
627,356 | |||
| Net Assets |
$ | 6,195,253 | ||
| Institutional Class | ||||
| Net Assets |
$ | 6,195,253 | ||
| Shares Outstanding |
529,912 | |||
| Net Asset Value, Offering Price and Redemption Price Per Share |
||||
| (net assets ÷ shares of beneficial interest outstanding) |
$ | 11.69 | ||
| 19 | See Notes to Financial Statements. |
Parametric Global Small-Cap Fund
July 31, 2014
Statement of Operations (Unaudited)
| Investment Income | Six Months Ended July 31, 2014 |
|||
| Dividends (net of foreign taxes, $7,291) |
$ | 77,814 | ||
| Interest allocated from affiliated investment |
13 | |||
| Expenses allocated from affiliated investment |
(2 | ) | ||
| Total investment income |
$ | 77,825 | ||
| Expenses | ||||
| Investment adviser and administration fee |
$ | 21,429 | ||
| Trustees’ fees and expenses |
393 | |||
| Custodian fee |
37,222 | |||
| Transfer and dividend disbursing agent fees |
273 | |||
| Legal and accounting services |
17,257 | |||
| Printing and postage |
7,064 | |||
| Registration fees |
11,565 | |||
| Miscellaneous |
3,308 | |||
| Total expenses |
$ | 98,511 | ||
| Deduct — |
||||
| Allocation of expenses to affiliates |
$ | 72,343 | ||
| Total expense reductions |
$ | 72,343 | ||
| Net expenses |
$ | 26,168 | ||
| Net investment income |
$ | 51,657 | ||
| Realized and Unrealized Gain (Loss) | ||||
| Net realized gain (loss) — |
||||
| Investment transactions |
$ | 212,062 | ||
| Foreign currency transactions |
205 | |||
| Net realized gain |
$ | 212,267 | ||
| Change in unrealized appreciation (depreciation) — |
||||
| Investments |
$ | 95,067 | ||
| Foreign currency |
233 | |||
| Net change in unrealized appreciation (depreciation) |
$ | 95,300 | ||
| Net realized and unrealized gain |
$ | 307,567 | ||
| Net increase in net assets from operations |
$ | 359,224 | ||
| 20 | See Notes to Financial Statements. |
Parametric Global Small-Cap Fund
July 31, 2014
Statements of Changes in Net Assets
| Increase (Decrease) in Net Assets | Six Months Ended July 31, 2014 (Unaudited) |
Year Ended January 31, 2014 |
||||||
| From operations — |
||||||||
| Net investment income |
$ | 51,657 | $ | 91,535 | ||||
| Net realized gain from investment and foreign currency transactions |
212,267 | 179,336 | ||||||
| Net change in unrealized appreciation (depreciation) from investments and foreign currency |
95,300 | 333,851 | ||||||
| Net increase in net assets from operations |
$ | 359,224 | $ | 604,722 | ||||
| Distributions to shareholders — |
||||||||
| From net investment income |
$ | — | $ | (130,296 | ) | |||
| From net realized gain |
— | (180,920 | ) | |||||
| Total distributions to shareholders |
$ | — | $ | (311,216 | ) | |||
| Transactions in shares of beneficial interest — |
||||||||
| Proceeds from sale of shares |
$ | — | $ | 77,608 | ||||
| Net asset value of shares issued to shareholders in payment of distributions declared |
— | 266,667 | ||||||
| Cost of shares redeemed |
$ | — | $ | (10,256 | ) | |||
| Net increase in net assets from Fund share transactions |
$ | — | $ | 334,019 | ||||
| Net increase in net assets |
$ | 359,224 | $ | 627,525 | ||||
| Net Assets | ||||||||
| At beginning of period |
$ | 5,836,029 | $ | 5,208,504 | ||||
| At end of period |
$ | 6,195,253 | $ | 5,836,029 | ||||
| Accumulated undistributed (distributions in excess of) net investment income included in net assets |
||||||||
| At end of period |
$ | 43,094 | $ | (8,563 | ) | |||
| 21 | See Notes to Financial Statements. |
Parametric Global Small-Cap Fund
July 31, 2014
Financial Highlights
| Institutional Class | ||||||||||||
| Six Months Ended July 31, 2014 (Unaudited) |
Year Ended January 31, 2014 |
Period Ended January 31, 2013(1) |
||||||||||
| Net asset value — Beginning of period |
$ | 11.010 | $ | 10.420 | $ | 10.000 | ||||||
| Income (Loss) From Operations | ||||||||||||
| Net investment income(2) |
$ | 0.097 | $ | 0.181 | $ | 0.006 | ||||||
| Net realized and unrealized gain |
0.583 | 1.023 | 0.418 | |||||||||
| Total income from operations |
$ | 0.680 | $ | 1.204 | $ | 0.424 | ||||||
| Less Distributions | ||||||||||||
| From net investment income |
$ | — | $ | (0.257 | ) | $ | (0.004 | ) | ||||
| From net realized gain |
— | (0.357 | ) | — | ||||||||
| Total distributions |
$ | — | $ | (0.614 | ) | $ | (0.004 | ) | ||||
| Net asset value — End of period |
$ | 11.690 | $ | 11.010 | $ | 10.420 | ||||||
| Total Return(3) |
6.18 | %(4) | 11.50 | % | 4.24 | %(4)(5) | ||||||
| Ratios/Supplemental Data | ||||||||||||
| Net assets, end of period (000’s omitted) |
$ | 6,195 | $ | 5,836 | $ | 5,209 | ||||||
| Ratios (as a percentage of average daily net assets): |
||||||||||||
| Expenses(6) |
0.85 | %(7) | 0.85 | % | 0.85 | %(7) | ||||||
| Net investment income |
1.69 | %(7) | 1.63 | % | 0.52 | %(7) | ||||||
| Portfolio Turnover |
21 | %(4) | 38 | % | 13 | %(4) | ||||||
| (1) | For the period from the start of business, December 20, 2012, to January 31, 2013. |
| (2) | Computed using average shares outstanding. |
| (3) | Returns are historical and are calculated by determining the percentage change in net asset value with all distributions reinvested. |
| (4) | Not annualized. |
| (5) | During the period ended January 31, 2013, the sub-adviser reimbursed the Fund for a net loss realized on the disposal of an investment which did not meet the Fund’s investment guidelines. The reimbursement had no effect on total return for the period ended January 31, 2013. |
| (6) | The investment adviser, sub-adviser and administrator reimbursed certain operating expenses (equal to 2.36%, 2.86% and 10.98% of average daily net assets for the six months ended July 31, 2014, the year ended January 31, 2014 and the period ended January 31, 2013, respectively). Absent this subsidy, total return would have been lower. |
| (7) | Annualized. |
| 22 | See Notes to Financial Statements. |
Parametric Global Small-Cap Fund
July 31, 2014
Notes to Financial Statements (Unaudited)
1 Significant Accounting Policies
Parametric Global Small-Cap Fund (the Fund) is a diversified series of Eaton Vance Mutual Funds Trust (the Trust). The Trust is a Massachusetts business trust registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company. The Fund’s investment objective is to seek long-term capital appreciation. The Fund offers Institutional Class shares, which are offered at net asset value and are not subject to a sales charge.
The following is a summary of significant accounting policies of the Fund. The policies are in conformity with accounting principles generally accepted in the United States of America.
A Investment Valuation — The following methodologies are used to determine the market value or fair value of investments.
Equity Securities. Equity securities (including common shares of closed-end investment companies) listed on a U.S. securities exchange generally are valued at the last sale or closing price on the day of valuation or, if no sales took place on such date, at the mean between the closing bid and asked prices therefore on the exchange where such securities are principally traded. Equity securities listed on the NASDAQ Global or Global Select Market generally are valued at the NASDAQ official closing price. Unlisted or listed securities for which closing sales prices or closing quotations are not available are valued at the mean between the latest available bid and asked prices. Equity-linked securities are generally valued based upon the value of the underlying equity security or instrument.
Foreign Securities and Currencies. Foreign securities and currencies are valued in U.S. dollars, based on foreign currency exchange rate quotations supplied by a third party pricing service. The pricing service uses a proprietary model to determine the exchange rate. Inputs to the model include reported trades and implied bid/ask spreads. The daily valuation of exchange-traded foreign securities generally is determined as of the close of trading on the principal exchange on which such securities trade. Events occurring after the close of trading on foreign exchanges may result in adjustments to the valuation of foreign securities to more accurately reflect their fair value as of the close of regular trading on the New York Stock Exchange. When valuing foreign equity securities that meet certain criteria, the Fund’s Trustees have approved the use of a fair value service that values such securities to reflect market trading that occurs after the close of the applicable foreign markets of comparable securities or other instruments that have a strong correlation to the fair-valued securities.
Affiliated Fund. The Fund may invest in Eaton Vance Cash Reserves Fund, LLC (Cash Reserves Fund), an affiliated investment company managed by Eaton Vance Management (EVM). The value of the Fund’s investment in Cash Reserves Fund reflects the Fund’s proportionate interest in its net assets. Cash Reserves Fund generally values its investment securities utilizing the amortized cost valuation technique in accordance with Rule 2a-7 under the 1940 Act. This technique involves initially valuing a portfolio security at its cost and thereafter assuming a constant amortization to maturity of any discount or premium. If amortized cost is determined not to approximate fair value, Cash Reserves Fund may value its investment securities based on available market quotations provided by a third party pricing service.
Fair Valuation. Investments for which valuations or market quotations are not readily available or are deemed unreliable are valued at fair value using methods determined in good faith by or at the direction of the Trustees of the Fund in a manner that fairly reflects the security’s value, or the amount that the Fund might reasonably expect to receive for the security upon its current sale in the ordinary course. Each such determination is based on a consideration of relevant factors, which are likely to vary from one pricing context to another. These factors may include, but are not limited to, the type of security, the existence of any contractual restrictions on the security’s disposition, the price and extent of public trading in similar securities of the issuer or of comparable companies or entities, quotations or relevant information obtained from broker/dealers or other market participants, information obtained from the issuer, analysts, and/or the appropriate stock exchange (for exchange-traded securities), an analysis of the company’s or entity’s financial condition, and an evaluation of the forces that influence the issuer and the market(s) in which the security is purchased and sold.
B Investment Transactions — Investment transactions for financial statement purposes are accounted for on a trade date basis. Realized gains and losses on investments sold are determined on the basis of identified cost.
C Income — Dividend income is recorded on the ex-dividend date for dividends received in cash and/or securities. However, if the ex-dividend date has passed, certain dividends from foreign securities are recorded as the Fund is informed of the ex-dividend date. Withholding taxes on foreign dividends and capital gains have been provided for in accordance with the Fund’s understanding of the applicable countries’ tax rules and rates. Interest income is recorded on the basis of interest accrued, adjusted for amortization of premium or accretion of discount.
D Federal Taxes — The Fund’s policy is to comply with the provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute to shareholders each year substantially all of its net investment income, and all or substantially all of its net realized capital gains. Accordingly, no provision for federal income or excise tax is necessary.
In addition to the requirements of the Internal Revenue Code, the Fund may also be subject to local taxes on the recognition of capital gains in certain countries. In determining the daily net asset value, the Fund estimates the accrual for such taxes, if any, based on the unrealized appreciation on certain portfolio securities and the related tax rates. Taxes attributable to unrealized appreciation are included in the change in unrealized appreciation (depreciation) on investments. Capital gains taxes on securities sold are included in net realized gain (loss) on investments.
| 23 |
Parametric Global Small-Cap Fund
July 31, 2014
Notes to Financial Statements (Unaudited) — continued
As of July 31, 2014, the Fund had no uncertain tax positions that would require financial statement recognition, de-recognition, or disclosure. The Fund files a U.S. federal income tax return annually after its fiscal year-end, which is subject to examination by the Internal Revenue Service for a period of three years from the date of filing.
E Expenses — The majority of expenses of the Trust are directly identifiable to an individual fund. Expenses which are not readily identifiable to a specific fund are allocated taking into consideration, among other things, the nature and type of expense and the relative size of the funds.
F Expense Reduction — State Street Bank and Trust Company (SSBT) serves as custodian of the Fund. Pursuant to the custodian agreement, SSBT receives a fee reduced by credits, which are determined based on the average daily cash balance the Fund maintains with SSBT. All credit balances, if any, used to reduce the Fund’s custodian fees are reported as a reduction of expenses in the Statement of Operations.
G Foreign Currency Translation — Investment valuations, other assets, and liabilities initially expressed in foreign currencies are translated each business day into U.S. dollars based upon current exchange rates. Purchases and sales of foreign investment securities and income and expenses denominated in foreign currencies are translated into U.S. dollars based upon currency exchange rates in effect on the respective dates of such transactions. Recognized gains or losses on investment transactions attributable to changes in foreign currency exchange rates are recorded for financial statement purposes as net realized gains and losses on investments. That portion of unrealized gains and losses on investments that results from fluctuations in foreign currency exchange rates is not separately disclosed.
H Use of Estimates — The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expense during the reporting period. Actual results could differ from those estimates.
I Indemnifications — Under the Trust’s organizational documents, its officers and Trustees may be indemnified against certain liabilities and expenses arising out of the performance of their duties to the Fund. Under Massachusetts law, if certain conditions prevail, shareholders of a Massachusetts business trust (such as the Trust) could be deemed to have personal liability for the obligations of the Trust. However, the Trust’s Declaration of Trust contains an express disclaimer of liability on the part of Fund shareholders and the By-laws provide that the Trust shall assume the defense on behalf of any Fund shareholders. Moreover, the By-laws also provide for indemnification out of Fund property of any shareholder held personally liable solely by reason of being or having been a shareholder for all loss or expense arising from such liability. Additionally, in the normal course of business, the Fund enters into agreements with service providers that may contain indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred.
J Interim Financial Statements — The interim financial statements relating to July 31, 2014 and for the six months then ended have not been audited by an independent registered public accounting firm, but in the opinion of the Fund’s management, reflect all adjustments, consisting only of normal recurring adjustments, necessary for the fair presentation of the financial statements.
2 Distributions to Shareholders
It is the present policy of the Fund to make at least one distribution annually (normally in December) of all or substantially all of its net investment income and to distribute annually all or substantially all of its net realized capital gains. Distributions to shareholders are recorded on the ex-dividend date. Shareholders may reinvest income and capital gain distributions in additional shares of the Fund at the net asset value as of the ex-dividend date or, at the election of the shareholder, receive distributions in cash. The Fund distinguishes between distributions on a tax basis and a financial reporting basis. Accounting principles generally accepted in the United States of America require that only distributions in excess of tax basis earnings and profits be reported in the financial statements as a return of capital. Permanent differences between book and tax accounting relating to distributions are reclassified to paid-in capital. For tax purposes, distributions from short-term capital gains are considered to be from ordinary income.
3 Investment Adviser and Administration Fee and Other Transactions with Affiliates
The investment adviser and administration fee is earned by EVM as compensation for investment advisory and administrative services rendered to the Fund. The fee is computed at an annual rate of 0.70% of the Fund’s average daily net assets up to $500 million and is payable monthly. On net assets of $500 million and over, the annual fee is reduced. For the six months ended July 31, 2014, the investment adviser and administration fee amounted to $21,429 or 0.70% (annualized) of the Fund’s average daily net assets. Pursuant to a sub-advisory agreement, EVM has delegated the investment management of the Fund to Parametric Portfolio Associates LLC (Parametric), a majority-owned subsidiary of Eaton Vance Corp. EVM pays Parametric a portion of its advisory and administration fee for sub-advisory services provided to the Fund. The Fund invests its cash in Cash Reserves Fund. EVM does not currently receive a fee for advisory services provided to Cash Reserves Fund.
EVM and Parametric have agreed to reimburse the Fund’s expenses to the extent that total annual operating expenses (relating to ordinary operating expenses only) exceed 0.85% of the Fund’s average daily net assets. This agreement may be changed or terminated after May 31, 2015. Pursuant to this agreement, EVM and Parametric were allocated $72,343 in total of the Fund’s operating expenses for the six months ended July 31, 2014.
| 24 |
Parametric Global Small-Cap Fund
July 31, 2014
Notes to Financial Statements (Unaudited) — continued
EVM provides sub-transfer agency and related services to the Fund pursuant to a Sub-Transfer Agency Support Services Agreement. For the six months ended July 31, 2014, EVM earned $12 from the Fund pursuant to such agreement, which is included in transfer and dividend disbursing agent fees on the Statement of Operations.
Trustees and officers of the Fund who are members of EVM’s organization receive remuneration for their services to the Fund out of the investment adviser and administration fee. Trustees of the Fund who are not affiliated with EVM may elect to defer receipt of all or a percentage of their annual fees in accordance with the terms of the Trustees Deferred Compensation Plan. For the six months ended July 31, 2014, no significant amounts have been deferred. Certain officers and Trustees of the Fund are officers of EVM.
4 Purchases and Sales of Investments
Purchases and sales of investments, other than short-term obligations, aggregated $1,363,141 and $1,311,603, respectively, for the six months ended July 31, 2014.
5 Shares of Beneficial Interest
The Fund’s Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest (without par value). Such shares may be issued in a number of different series (such as the Fund) and classes. Transactions in Fund shares were as follows:
| Institutional Class | Six Months Ended (Unaudited) |
Year Ended January 31, 2014 |
||||||
| Sales |
— | 7,114 | ||||||
| Issued to shareholders electing to receive payments of distributions in Fund shares |
— | 23,747 | ||||||
| Redemptions |
— | (949 | ) | |||||
| Net increase |
— | 29,912 | ||||||
At July 31, 2014, an affiliate of EVM owned 98.8% of the outstanding shares of the Fund.
6 Federal Income Tax Basis of Investments
The cost and unrealized appreciation (depreciation) of investments of the Fund at July 31, 2014, as determined on a federal income tax basis, were as follows:
| Aggregate cost |
$ | 5,575,268 | ||
| Gross unrealized appreciation |
$ | 970,963 | ||
| Gross unrealized depreciation |
(357,218 | ) | ||
| Net unrealized appreciation |
$ | 613,745 | ||
7 Risks Associated with Foreign Investments
Investing in securities issued by companies whose principal business activities are outside the United States may involve significant risks not present in domestic investments. For example, there is generally less publicly available information about foreign companies, particularly those not subject to the disclosure and reporting requirements of the U.S. securities laws. Certain foreign issuers are generally not bound by uniform accounting, auditing, and financial reporting requirements and standards of practice comparable to those applicable to domestic issuers. Investments in foreign securities also involve the risk of possible adverse changes in investment or exchange control regulations, expropriation or confiscatory taxation, limitation on the removal of funds or other assets of the Fund, political or financial instability or diplomatic and other developments which could affect such investments. 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. In general, there is less overall governmental supervision and regulation of foreign securities markets, broker/dealers and issuers than in the United States.
| 25 |
Parametric Global Small-Cap Fund
July 31, 2014
Notes to Financial Statements (Unaudited) — continued
8 Line of Credit
The Fund participates with other portfolios and funds managed by EVM and its affiliates in a $750 million unsecured line of credit agreement with a group of banks. Borrowings are made by the Fund solely to facilitate the handling of unusual and/or unanticipated short-term cash requirements. Interest is charged to the Fund based on its borrowings at an amount above either the Eurodollar rate or Federal Funds rate. In addition, a fee computed at an annual rate of 0.08% on the daily unused portion of the line of credit is allocated among the participating portfolios and funds at the end of each quarter. Because the line of credit is not available exclusively to the Fund, it may be unable to borrow some or all of its requested amounts at any particular time. The Fund did not have any significant borrowings or allocated fees during the six months ended July 31, 2014.
9 Fair Value Measurements
Under generally accepted accounting principles for fair value measurements, a three-tier hierarchy to prioritize the assumptions, referred to as inputs, is used in valuation techniques to measure fair value. The three-tier hierarchy of inputs is summarized in the three broad levels listed below.
| Ÿ | Level 1 – quoted prices in active markets for identical investments |
| Ÿ | Level 2 – other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.) |
| Ÿ | Level 3 – significant unobservable inputs (including a fund’s own assumptions in determining the fair value of investments) |
In cases where the inputs used to measure fair value fall in different levels of the fair value hierarchy, the level disclosed is determined based on the lowest level input that is significant to the fair value measurement in its entirety. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
At July 31, 2014, the hierarchy of inputs used in valuing the Fund’s investments, which are carried at value, were as follows:
| Asset Description | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| Common Stocks |
||||||||||||||||
| Asia/Pacific |
$ | 123,077 | $ | 1,712,678 | $ | — | $ | 1,835,755 | ||||||||
| Developed Europe |
121,861 | 1,703,689 | — | 1,825,550 | ||||||||||||
| Developed Middle East |
2,475 | 24,311 | — | 26,786 | ||||||||||||
| Emerging Europe |
34,749 | 97,910 | — | 132,659 | ||||||||||||
| Latin America |
166,694 | — | — | 166,694 | ||||||||||||
| Middle East/Africa |
— | 82,309 | — | 82,309 | ||||||||||||
| North America |
1,911,987 | 3,431 | — | 1,915,418 | ||||||||||||
| Total Common Stocks |
$ | 2,360,843 | $ | 3,624,328 | * | $ | — | $ | 5,985,171 | |||||||
| Equity-Linked Securities |
$ | — | $ | 178,412 | $ | — | $ | 178,412 | ||||||||
| Investment Funds |
— | 7 | — | 7 | ||||||||||||
| Rights |
140 | — | — | 140 | ||||||||||||
| Warrants |
0 | — | — | 0 | ||||||||||||
| Short-Term Investments |
— | 25,283 | — | 25,283 | ||||||||||||
| Total Investments |
$ | 2,360,983 | $ | 3,828,030 | $ | — | $ | 6,189,013 | ||||||||
| * | Includes foreign equity securities whose values were adjusted to reflect market trading of comparable securities or other correlated instruments that occurred after the close of trading in their applicable foreign markets. |
The Fund held no investments or other financial instruments as of January 31, 2014 whose fair value was determined using Level 3 inputs. At July 31, 2014, the value of investments transferred between Level 1 and Level 2 during the six months then ended was not significant.
| 26 |
Eaton Vance
Parametric Global Small-Cap Fund
July 31, 2014
Special Meeting of Shareholders (Unaudited)
The Fund held a Special Meeting of Shareholders on May 29, 2014 to elect five Trustees. The results of the vote were as follows:
| Number of Shares(1) | ||||||||
| Nominee for Trustee | For | Withheld | ||||||
| Scott E. Eston |
529,177 | 0 | ||||||
| Cynthia E. Frost |
529,177 | 0 | ||||||
| George J. Gorman |
529,177 | 0 | ||||||
| Valerie A. Mosley |
529,177 | 0 | ||||||
| Harriett Tee Taggart |
529,177 | 0 | ||||||
| (1) | Excludes fractional shares. |
| 27 |
Parametric Global Small-Cap Fund
July 31, 2014
Board of Trustees’ Contract Approval
Overview of the Contract Review Process
The Investment Company Act of 1940, as amended (the “1940 Act”), provides, in substance, that each investment advisory agreement between a fund and its investment adviser will continue in effect from year to year only if its continuation is approved at least annually by the fund’s board of trustees, including by a vote of a majority of the trustees who are not “interested persons” of the fund (“Independent Trustees”), cast in person at a meeting called for the purpose of considering such approval.
At a meeting of the Boards of Trustees (each a “Board”) of the mutual funds advised, administered and/or distributed by Eaton Vance Management or its affiliate, (the “Eaton Vance Funds”) held on April 28, 2014, the Board, including a majority of the Independent Trustees, voted to approve continuation of existing advisory and sub-advisory agreements for the Eaton Vance Funds for an additional one-year period. In voting its approval, the Board relied upon the affirmative recommendation of the Contract Review Committee of the Board, which is a committee comprised exclusively of Independent Trustees. Prior to making its recommendation, the Contract Review Committee reviewed information furnished by each adviser to the Eaton Vance Funds (including information specifically requested by the Board) for a series of meetings of the Contract Review Committee held between February and April 2014, as well as information considered throughout the year at meetings of the Board and its committees. Such information included, among other things, the following:
Information about Fees, Performance and Expenses
| Ÿ | An independent report comparing the advisory and related fees paid by each fund with fees paid by comparable funds; |
| Ÿ | An independent report comparing each fund’s total expense ratio and its components to comparable funds; |
| Ÿ | An independent report comparing the investment performance of each fund (including, where relevant, yield data, Sharpe ratios and information ratios) to the investment performance of comparable funds over various time periods; |
| Ÿ | Data regarding investment performance in comparison to benchmark indices and customized peer groups identified by the adviser in consultation with the Board; |
| Ÿ | For each fund, comparative information concerning the fees charged and the services provided by each adviser in managing other accounts (including mutual funds, other collective investment funds and institutional accounts) using investment strategies and techniques similar to those used in managing such fund; |
| Ÿ | Profitability analyses for each adviser with respect to each fund; |
Information about Portfolio Management and Trading
| Ÿ | Descriptions of the investment management services provided to each fund, including the investment strategies and processes employed, and any changes in portfolio management processes and personnel; |
| Ÿ | Information about the allocation of brokerage and the benefits received by each adviser as a result of brokerage allocation, including information concerning the acquisition of research through client commission arrangements and the fund’s policies with respect to “soft dollar” arrangements; |
| Ÿ | Data relating to portfolio turnover rates of each fund; |
| Ÿ | The procedures and processes used to determine the fair value of fund assets and actions taken to monitor and test the effectiveness of such procedures and processes; |
| Ÿ | Information about each adviser’s processes for monitoring best execution of portfolio transactions, and other policies and practices of each adviser with respect to trading; |
Information about each Adviser
| Ÿ | Reports detailing the financial results and condition of each adviser; |
| Ÿ | Descriptions of the qualifications, education and experience of the individual investment professionals whose responsibilities include portfolio management and investment research for the funds, and information relating to their compensation and responsibilities with respect to managing other mutual funds and investment accounts; |
| Ÿ | Copies of the Codes of Ethics of each adviser and its affiliates, together with information relating to compliance with and the administration of such codes; |
| Ÿ | Copies of or descriptions of each adviser’s policies and procedures relating to proxy voting, the handling of corporate actions and class actions; |
| Ÿ | Information concerning the resources devoted to compliance efforts undertaken by each adviser and its affiliates on behalf of the funds (including descriptions of various compliance programs) and their record of compliance with investment policies and restrictions, including policies with respect to market-timing, late trading and selective portfolio disclosure, and with policies on personal securities transactions; |
| Ÿ | Descriptions of the business continuity and disaster recovery plans of each adviser and its affiliates; |
| Ÿ | A description of Eaton Vance Management’s procedures for overseeing third party advisers and sub-advisers, including with respect to regulatory and compliance issues, investment management and other matters; |
| 28 |
Parametric Global Small-Cap Fund
July 31, 2014
Board of Trustees’ Contract Approval — continued
Other Relevant Information
| Ÿ | Information concerning the nature, cost and character of the administrative and other non-investment management services provided by Eaton Vance Management and its affiliates; |
| Ÿ | Information concerning management of the relationship with the custodian, subcustodians and fund accountants by each adviser or the funds’ administrator; and |
| Ÿ | The terms of each advisory agreement. |
Over the course of the twelve-month period ended April 30, 2014, with respect to one or more funds, the Board met nine times and the Contract Review Committee, the Audit Committee, the Governance Committee, the Portfolio Management Committee and the Compliance Reports and Regulatory Matters Committee, each of which is a Committee comprised solely of Independent Trustees, met seven, seventeen, eleven, six and ten times respectively. At such meetings, the Trustees participated in investment and performance reviews with the portfolio managers and other investment professionals of each adviser relating to each fund, and considered the investment and trading strategies used in pursuing each fund’s investment objective, including, where relevant, the use of derivative instruments, as well as processes for monitoring best execution of portfolio transactions risk management techniques. The Board and its Committees also evaluated issues pertaining to industry and regulatory developments, compliance procedures, fund governance and other issues with respect to the funds, and received and participated in reports and presentations provided by Eaton Vance Management and other fund advisers with respect to such matters.
For funds that invest through one or more underlying portfolios, the Board considered similar information about the portfolio(s) when considering the approval of advisory agreements. In addition, in cases where the fund’s investment adviser has engaged a sub-adviser, the Board considered similar information about the sub-adviser when considering the approval of any sub-advisory agreement.
The Contract Review Committee was assisted throughout the contract review process by Goodwin Procter LLP, legal counsel for the Independent Trustees. The members of the Contract Review Committee relied upon the advice of such counsel and their own business judgment in determining the material factors to be considered in evaluating each advisory and sub-advisory agreement and the weight to be given to each such factor. The conclusions reached with respect to each advisory and sub-advisory agreement were based on a comprehensive evaluation of all the information provided and not any single factor. Moreover, each member of the Contract Review Committee may have placed varying emphasis on particular factors in reaching conclusions with respect to each advisory and sub-advisory agreement. In evaluating each advisory and sub-advisory agreement, including the specific fee structures and other terms of the agreements, the Contract Review Committee was informed by multiple years of analysis and discussion among the Independent Trustees and the Funds’ advisers and sub-advisers.
Results of the Process
Based on its consideration of the foregoing, and such other information as it deemed relevant, including the factors and conclusions described below, the Contract Review Committee concluded that the continuation of the investment advisory and administrative agreement of Parametric Global Small-Cap Fund (the “Fund”) with Eaton Vance Management (the “Adviser”) and the sub-advisory agreement with Parametric Portfolio Associates LLC (the “Sub-adviser”), an affiliate of Eaton Vance Management, including their fee structures, is in the interests of shareholders and, therefore, the Contract Review Committee recommended to the Board approval of each agreement. The Board accepted the recommendation of the Contract Review Committee as well as the factors considered and conclusions reached by the Contract Review Committee with respect to the agreements. Accordingly, the Board, including a majority of the Independent Trustees, voted to approve continuation of the investment advisory agreement and the sub-advisory agreement for the Fund.
Nature, Extent and Quality of Services
In considering whether to approve the investment advisory and administrative agreement and sub-advisory agreement of the Fund, the Board evaluated the nature, extent and quality of services provided to the Fund by the Adviser and the Sub-adviser.
The Board considered the Adviser’s and the Sub-adviser’s management capabilities and investment process with respect to the types of investments held by the Fund, including the education, experience and number of its investment professionals and other personnel who provide portfolio management, investment research, and similar services to the Fund. With respect to the Adviser, the Board considered the Adviser’s responsibilities supervising the Sub-adviser. With respect to the Sub-adviser, the Board noted the Sub-adviser’s experience employing a top-down, disciplined investment processes that emphasizes broad exposure and diversification. The Board also took into account the resources dedicated to portfolio management and other services, including the compensation methods of the Adviser to recruit and retain investment personnel, and the time and attention devoted to the Fund by senior management.
The Board reviewed the compliance programs of the Adviser and relevant affiliates thereof, including the Sub-adviser. Among other matters, the Board considered compliance and reporting matters relating to personal trading by investment personnel, selective disclosure of portfolio holdings, late trading, frequent trading, portfolio valuation, business continuity and the allocation of investment opportunities. The Board also evaluated the responses of the Adviser and its affiliates to requests in recent years from regulatory authorities such as the Securities and Exchange Commission and the Financial Industry Regulatory Authority.
| 29 |
Parametric Global Small-Cap Fund
July 31, 2014
Board of Trustees’ Contract Approval — continued
The Board considered shareholder and other administrative services provided or managed by Eaton Vance Management and its affiliates, including transfer agency and accounting services. The Board evaluated the benefits to shareholders of investing in a fund that is a part of a large family of funds, including the ability, in many cases, to exchange an investment among different funds without incurring additional sales charges.
After consideration of the foregoing factors, among others, the Board concluded that the nature, extent and quality of services provided by the Adviser and the Sub-adviser, taken as a whole, are appropriate and consistent with the terms of the investment advisory and administrative agreement and the sub-advisory agreement.
Fund Performance
In light of the Fund’s relatively brief operating history, the Board concluded that additional time is required to evaluate Fund performance.
Management Fees and Expenses
The Board reviewed contractual fee rates for investment advisory and administrative services payable and by the Fund (referred to as “management fees”). As part of its review, the Board considered the management fees and the Fund’s total expense ratio for the year ended September 30, 2013, as compared to a group of similarly managed funds selected by an independent data provider. The Board noted that the Adviser had waived fees and/or paid expenses for the Fund. The Board also considered factors that had an impact on Fund expense ratios, as identified by management in response to inquiries from the Contract Review Committee, as well as actions taken by management in recent years to reduce expenses at the fund complex level, including the negotiation of reduced fees for transfer agency and custody services.
After reviewing the foregoing information, and in light of the nature, extent and quality of the services provided by the Adviser and the Sub-adviser, the Board concluded that the management fees charged for advisory and related services are reasonable.
Profitability
The Board reviewed the level of profits realized by the Adviser and relevant affiliates thereof, including the Sub-adviser, in providing investment advisory and administrative services to the Fund and to all Eaton Vance Funds as a group. The Board considered the level of profits realized without regard to revenue sharing or other payments by the Adviser and its affiliates to third parties in respect of distribution services. The Board also considered other direct or indirect benefits received by the Adviser and its affiliates, including the Sub-adviser, in connection with their relationships with the Fund, including the benefits of research services that may be available to the Adviser or the Sub-adviser as a result of securities transactions effected for the Fund and other investment advisory clients.
The Board concluded that, in light of the foregoing factors and the nature, extent and quality of the services rendered, the profits realized by the Adviser and its affiliates, including the Sub-adviser, are reasonable.
Economies of Scale
In reviewing management fees and profitability, the Board also considered the extent to which the Adviser and its affiliates, on the one hand, and the Fund, on the other hand, can expect to realize benefits from economies of scale as the assets of the Fund increase. The Board acknowledged the difficulty in accurately measuring the benefits resulting from the economies of scale with respect to the management of any specific fund or group of funds. The Board reviewed data summarizing the increases and decreases in the assets of the Fund and of all Eaton Vance Funds as a group over various time periods, and evaluated the extent to which the total expense ratio of the Fund and the profitability of the Adviser and its affiliates may have been affected by such increases or decreases. Based upon the foregoing, the Board concluded that the Fund currently shares in the benefits from economies of scale. The Board also concluded that, assuming reasonably foreseeable increases in the assets of the Fund, the structure of the advisory fee, which includes breakpoints at several asset levels, will allow the Fund to continue to benefit from economies of scale in the future.
| 30 |
Parametric Global Small-Cap Fund
July 31, 2014
Officers and Trustees
Officers of Parametric Global Small-Cap Fund
Trustees of Parametric Global Small-Cap Fund
| * | Interested Trustee |
| 31 |
Eaton Vance Funds
IMPORTANT NOTICES
Privacy. The Eaton Vance organization is committed to ensuring your financial privacy. Each of the financial institutions identified below has in effect the following policy (“Privacy Policy”) with respect to nonpublic personal information about its customers:
| Ÿ | Only such information received from you, through application forms or otherwise, and information about your Eaton Vance fund transactions will be collected. This may include information such as name, address, social security number, tax status, account balances and transactions. |
| Ÿ | None of such information about you (or former customers) will be disclosed to anyone, except as permitted by law (which includes disclosure to employees necessary to service your account). In the normal course of servicing a customer’s account, Eaton Vance may share information with unaffiliated third parties that perform various required services such as transfer agents, custodians and broker-dealers. |
| Ÿ | Policies and procedures (including physical, electronic and procedural safeguards) are in place that are designed to protect the confidentiality of such information. |
| Ÿ | We reserve the right to change our Privacy Policy at any time upon proper notification to you. Customers may want to review our Privacy Policy periodically for changes by accessing the link on our homepage: www.eatonvance.com. |
Our pledge of privacy applies to the following entities within the Eaton Vance organization: the Eaton Vance Family of Funds, Eaton Vance Management, Eaton Vance Investment Counsel, Eaton Vance Distributors, Inc., Eaton Vance Trust Company, Eaton Vance Management’s Real Estate Investment Group and Boston Management and Research. In addition, our Privacy Policy applies only to those Eaton Vance customers who are individuals and who have a direct relationship with us. If a customer’s account (i.e., fund shares) is held in the name of a third-party financial advisor/broker-dealer, it is likely that only such advisor’s privacy policies apply to the customer. This notice supersedes all previously issued privacy disclosures. For more information about Eaton Vance’s Privacy Policy, please call 1-800-262-1122.
Delivery of Shareholder Documents. The Securities and Exchange Commission (SEC) permits funds to deliver only one copy of shareholder documents, including prospectuses, proxy statements and shareholder reports, to fund investors with multiple accounts at the same residential or post office box address. This practice is often called “householding” and it helps eliminate duplicate mailings to shareholders. Eaton Vance, or your financial advisor, may household the mailing of your documents indefinitely unless you instruct Eaton Vance, or your financial advisor, otherwise. If you would prefer that your Eaton Vance documents not be householded, please contact Eaton Vance at 1-800-260-0761, or contact your financial advisor. Your instructions that householding not apply to delivery of your Eaton Vance documents will be effective within 30 days of receipt by Eaton Vance or your financial advisor.
Portfolio Holdings. Each Eaton Vance Fund and its underlying Portfolio(s) (if applicable) will file a schedule of portfolio holdings on Form N-Q with the SEC for the first and third quarters of each fiscal year. The Form N-Q will be available on the Eaton Vance website at www.eatonvance.com, by calling Eaton Vance at 1-800-260-0761 or in the EDGAR database on the SEC’s website at www.sec.gov. Form N-Q may also be reviewed and copied at the SEC’s public reference room in Washington, D.C. (call 1-800-732-0330 for information on the operation of the public reference room).
Proxy Voting. From time to time, funds are required to vote proxies related to the securities held by the funds. The Eaton Vance Funds or their underlying Portfolios (if applicable) vote proxies according to a set of policies and procedures approved by the Funds’ and Portfolios’ Boards. You may obtain a description of these policies and procedures and information on how the Funds or Portfolios voted proxies relating to portfolio securities during the most recent 12-month period ended June 30, without charge, upon request, by calling 1-800-260-0761 and by accessing the SEC’s website at www.sec.gov.
| 32 |
| * | FINRA BrokerCheck. Investors may check the background of their Investment Professional by contacting the Financial Industry Regulatory Authority (FINRA). FINRA BrokerCheck is a free tool to help investors check the professional background of current and former FINRA-registered securities firms and brokers. FINRA BrokerCheck is available by calling 1-800-289-9999 and at www.FINRA.org. The FINRA BrokerCheck brochure describing the program is available to investors at www.FINRA.org. |
| 7790 7.31.14 |
| Parametric International Equity Fund
Semiannual Report July 31, 2014 |
Commodity Futures Trading Commission Registration. Effective December 31, 2012, the Commodity Futures Trading Commission (“CFTC”) adopted certain regulatory changes that subject registered investment companies and advisers to regulation by the CFTC if a fund invests more than a prescribed level of its assets in certain CFTC-regulated instruments (including futures, certain options and swap agreements) or markets itself as providing investment exposure to such instruments. The Fund has claimed an exclusion from the definition of the term “commodity pool operator” under the Commodity Exchange Act. Accordingly, neither the Fund nor the adviser with respect to the operation of the Fund is subject to CFTC regulation. Because of its management of other strategies, the Fund’s adviser is registered with the CFTC as a commodity pool operator and a commodity trading advisor.
Fund shares 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.
This report must be preceded or accompanied by a current summary prospectus or prospectus. Before investing, investors should consider carefully the investment objective, risks, and charges and expenses of a mutual fund. This and other important information is contained in the summary prospectus and prospectus, which can be obtained from a financial advisor. Prospective investors should read the prospectus carefully before investing. For further information, please call 1-800-260-0761.
Semiannual Report July 31, 2014
Parametric International Equity Fund
Table of Contents
| Performance |
2 | |||
| Fund Profile |
3 | |||
| Endnotes and Additional Disclosures |
4 | |||
| Fund Expenses |
5 | |||
| Financial Statements |
6 | |||
| Special Meeting of Shareholders |
28 | |||
| Board of Trustees’ Contract Approval |
29 | |||
| Officers and Trustees |
32 | |||
| Important Notices |
33 | |||
Parametric International Equity Fund
July 31, 2014
Performance1,2
Portfolio Managers David Stein, Ph.D., Thomas Seto and Paul Bouchey, CFA, each of Parametric Portfolio Associates LLC
| % Average Annual Total Returns | Class Inception Date |
Performance Inception Date |
Six Months | One Year | Five Years | Since Inception |
||||||||||||||||||
| Investor Class at NAV |
04/01/2010 | 04/01/2010 | 7.36 | % | 13.42 | % | — | 7.73 | % | |||||||||||||||
| Institutional Class at NAV |
04/01/2010 | 04/01/2010 | 7.51 | 13.75 | — | 8.01 | ||||||||||||||||||
| MSCI EAFE Index |
— | — | 7.03 | % | 15.07 | % | 9.39 | % | 7.86 | % | ||||||||||||||
| % Total Annual Operating Expense Ratios3 | Investor Class |
Institutional Class |
||||||||||||||||||||||
| Gross |
1.34 | % | 1.09 | % | ||||||||||||||||||||
| Net |
0.90 | 0.65 | ||||||||||||||||||||||
See Endnotes and Additional Disclosures in this report.
Past performance is no guarantee of future results. Returns are historical and are calculated by determining the percentage change in net asset value (NAV) or offering price (as applicable) with all distributions reinvested. Investment return and principal value will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Performance less than one year is cumulative. Performance is for the stated time period only; due to market volatility, the Fund’s current performance may be lower or higher than quoted. Returns are before taxes unless otherwise noted. For performance as of the most recent month end, please refer to eatonvance.com.
| 2 |
Parametric International Equity Fund
July 31, 2014
Fund Profile
See Endnotes and Additional Disclosures in this report.
| 3 |
Parametric International Equity Fund
July 31, 2014
Endnotes and Additional Disclosures
| 4 |
Parametric International Equity Fund
July 31, 2014
Fund Expenses
Example: As a Fund shareholder, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchases and redemption fees (if applicable); and (2) ongoing costs, including management fees; distribution and/or service fees; and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of Fund investing and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (February 1, 2014 – July 31, 2014).
Actual Expenses: The first section of the table below provides information about actual account values and actual expenses. You may use the information in this section, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes: The second section of the table below provides information about hypothetical account values and hypothetical expenses based on the actual Fund expense ratio and an assumed rate of return of 5% per year (before expenses), which is not the actual Fund return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in your Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) or redemption fees (if applicable). Therefore, the second section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would be higher.
| Beginning Account Value (2/1/14) |
Ending Account Value (7/31/14) |
Expenses Paid During Period* (2/1/14 – 7/31/14) |
Annualized Expense Ratio |
|||||||||||||||
| Actual |
|
|||||||||||||||||
| Investor Class |
$ | 1,000.00 | $ | 1,073.60 | $ | 5.30 | ** | 1.03 | % | |||||||||
| Institutional Class |
$ | 1,000.00 | $ | 1,075.10 | $ | 4.01 | ** | 0.78 | % | |||||||||
| Hypothetical |
|
|||||||||||||||||
| (5% return per year before expenses) |
|
|||||||||||||||||
| Investor Class |
$ | 1,000.00 | $ | 1,019.70 | $ | 5.16 | ** | 1.03 | % | |||||||||
| Institutional Class |
$ | 1,000.00 | $ | 1,020.90 | $ | 3.91 | ** | 0.78 | % | |||||||||
Effective July 10, 2014, the contractual expense caps of the Fund changed. If these changes had been in place during the entire reporting period, the actual and hypothetical ending account values, expenses paid and annualized expense ratios would have been as follows:
| Beginning Account Value (2/1/14) |
Ending Account Value (7/31/14) |
Expenses Paid During Period* (2/1/14 – 7/31/14) |
Annualized Expense Ratio |
|||||||||||||||
| Actual |
|
|||||||||||||||||
| Investor Class |
$ | 1,000.00 | $ | 1,073.60 | $ | 4.63 | ** | 0.90 | % | |||||||||
| Institutional Class |
$ | 1,000.00 | $ | 1,075.10 | $ | 3.34 | ** | 0.65 | % | |||||||||
| Hypothetical |
|
|||||||||||||||||
| (5% return per year before expenses) |
|
|||||||||||||||||
| Investor Class |
$ | 1,000.00 | $ | 1,020.30 | $ | 4.51 | ** | 0.90 | % | |||||||||
| Institutional Class |
$ | 1,000.00 | $ | 1,021.60 | $ | 3.26 | ** | 0.65 | % | |||||||||
| * | Expenses are equal to the Fund’s annualized expense ratio for the indicated Class, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). The Example assumes that the $1,000 was invested at the net asset value per share determined at the close of business on January 31, 2014. |
| ** | Absent an allocation of certain expenses to affiliates, the expenses would be higher. |
| 5 |
Parametric International Equity Fund
July 31, 2014
Portfolio of Investments (Unaudited)
| 6 | See Notes to Financial Statements. |
Parametric International Equity Fund
July 31, 2014
Portfolio of Investments (Unaudited) — continued
| 7 | See Notes to Financial Statements. |
Parametric International Equity Fund
July 31, 2014
Portfolio of Investments (Unaudited) — continued
| 8 | See Notes to Financial Statements. |
Parametric International Equity Fund
July 31, 2014
Portfolio of Investments (Unaudited) — continued
| 9 | See Notes to Financial Statements. |
Parametric International Equity Fund
July 31, 2014
Portfolio of Investments (Unaudited) — continued
| 10 | See Notes to Financial Statements. |
Parametric International Equity Fund
July 31, 2014
Portfolio of Investments (Unaudited) — continued
| 11 | See Notes to Financial Statements. |
Parametric International Equity Fund
July 31, 2014
Portfolio of Investments (Unaudited) — continued
| 12 | See Notes to Financial Statements. |
Parametric International Equity Fund
July 31, 2014
Portfolio of Investments (Unaudited) — continued
| 13 | See Notes to Financial Statements. |
Parametric International Equity Fund
July 31, 2014
Portfolio of Investments (Unaudited) — continued
| 14 | See Notes to Financial Statements. |
Parametric International Equity Fund
July 31, 2014
Portfolio of Investments (Unaudited) — continued
| 15 | See Notes to Financial Statements. |
Parametric International Equity Fund
July 31, 2014
Portfolio of Investments (Unaudited) — continued
| 16 | See Notes to Financial Statements. |
Parametric International Equity Fund
July 31, 2014
Portfolio of Investments (Unaudited) — continued
| 17 | See Notes to Financial Statements. |
Parametric International Equity Fund
July 31, 2014
Statement of Assets and Liabilities (Unaudited)
| Assets | July 31, 2014 | |||
| Unaffiliated investments, at value (identified cost, $81,768,763) |
$ | 90,792,114 | ||
| Affiliated investment, at value (identified cost, $721,192) |
721,192 | |||
| Foreign currency, at value (identified cost, $36,851) |
36,731 | |||
| Dividends receivable |
128,772 | |||
| Interest receivable from affiliated investment |
65 | |||
| Receivable for investments sold |
16,113 | |||
| Receivable for Fund shares sold |
37,636 | |||
| Tax reclaims receivable |
118,801 | |||
| Receivable from affiliates |
33,145 | |||
| Total assets |
$ | 91,884,569 | ||
| Liabilities | ||||
| Payable for Fund shares redeemed |
$ | 56,864 | ||
| Payable to affiliates: |
||||
| Investment adviser and administration fee |
58,974 | |||
| Distribution and service fees |
3,015 | |||
| Accrued expenses |
30,528 | |||
| Total liabilities |
$ | 149,381 | ||
| Net Assets |
$ | 91,735,188 | ||
| Sources of Net Assets | ||||
| Paid-in capital |
$ | 77,381,932 | ||
| Accumulated net realized gain |
3,751,775 | |||
| Accumulated undistributed net investment income |
1,578,530 | |||
| Net unrealized appreciation |
9,022,951 | |||
| Total |
$ | 91,735,188 | ||
| Investor Class Shares | ||||
| Net Assets |
$ | 13,648,598 | ||
| Shares Outstanding |
1,063,184 | |||
| Net Asset Value, Offering Price and Redemption Price Per Share |
||||
| (net assets ÷ shares of beneficial interest outstanding) |
$ | 12.84 | ||
| Institutional Class Shares | ||||
| Net Assets |
$ | 78,086,590 | ||
| Shares Outstanding |
6,058,078 | |||
| Net Asset Value, Offering Price and Redemption Price Per Share |
||||
| (net assets ÷ shares of beneficial interest outstanding) |
$ | 12.89 | ||
| 18 | See Notes to Financial Statements. |
Parametric International Equity Fund
July 31, 2014
Statement of Operations (Unaudited)
| Investment Income | Six Months Ended July 31, 2014 |
|||
| Dividends (net of foreign taxes, $202,920) |
$ | 2,257,685 | ||
| Interest allocated from affiliated investment |
234 | |||
| Expenses allocated from affiliated investment |
(37 | ) | ||
| Total investment income |
$ | 2,257,882 | ||
| Expenses | ||||
| Investment adviser and administration fee |
$ | 334,542 | ||
| Distribution and service fees |
||||
| Investor Class |
18,329 | |||
| Trustees’ fees and expenses |
2,331 | |||
| Custodian fee |
67,508 | |||
| Transfer and dividend disbursing agent fees |
17,413 | |||
| Legal and accounting services |
19,507 | |||
| Printing and postage |
12,821 | |||
| Registration fees |
21,347 | |||
| Miscellaneous |
5,673 | |||
| Total expenses |
$ | 499,471 | ||
| Deduct — |
||||
| Reduction of custodian fee |
$ | 2 | ||
| Allocation of expenses to affiliates |
132,404 | |||
| Total expense reductions |
$ | 132,406 | ||
| Net expenses |
$ | 367,065 | ||
| Net investment income |
$ | 1,890,817 | ||
| Realized and Unrealized Gain (Loss) | ||||
| Net realized gain (loss) — |
||||
| Investment transactions |
$ | 8,073,834 | ||
| Investment transactions allocated from affiliated investment |
3 | |||
| Foreign currency transactions |
(5,750 | ) | ||
| Net realized gain |
$ | 8,068,087 | ||
| Change in unrealized appreciation (depreciation) — |
||||
| Investments |
$ | (3,772,568 | ) | |
| Foreign currency |
(1,690 | ) | ||
| Net change in unrealized appreciation (depreciation) |
$ | (3,774,258 | ) | |
| Net realized and unrealized gain |
$ | 4,293,829 | ||
| Net increase in net assets from operations |
$ | 6,184,646 | ||
| 19 | See Notes to Financial Statements. |
Parametric International Equity Fund
July 31, 2014
Statements of Changes in Net Assets
| Increase (Decrease) in Net Assets | Six Months Ended July 31, 2014 |
Year Ended January 31, 2014 |
||||||
| From operations — |
||||||||
| Net investment income |
$ | 1,890,817 | $ | 1,477,224 | ||||
| Net realized gain from investment and foreign currency transactions |
8,068,087 | 1,257,976 | ||||||
| Net change in unrealized appreciation (depreciation) from investments and foreign currency |
(3,774,258 | ) | 3,171,871 | |||||
| Net increase in net assets from operations |
$ | 6,184,646 | $ | 5,907,071 | ||||
| Distributions to shareholders — |
||||||||
| From net investment income |
||||||||
| Investor Class |
$ | — | $ | (264,173 | ) | |||
| Institutional Class |
— | (1,359,470 | ) | |||||
| Total distributions to shareholders |
$ | — | $ | (1,623,643 | ) | |||
| Transactions in shares of beneficial interest — |
||||||||
| Proceeds from sale of shares |
||||||||
| Investor Class |
$ | 4,577,823 | $ | 11,052,878 | ||||
| Class C |
— | 70,326 | ||||||
| Institutional Class |
12,186,873 | 29,593,077 | ||||||
| Net asset value of shares issued to shareholders in payment of distributions declared |
||||||||
| Investor Class |
— | 159,632 | ||||||
| Institutional Class |
— | 157,259 | ||||||
| Cost of shares redeemed |
||||||||
| Investor Class |
(5,972,776 | ) | (5,346,423 | ) | ||||
| Class C |
— | (60 | ) | |||||
| Institutional Class |
(8,159,592 | ) | (18,695,363 | ) | ||||
| Net asset value of shares merged* |
||||||||
| Investor Class |
— | 519,171 | ||||||
| Class C |
— | (519,171 | ) | |||||
| Net increase in net assets from Fund share transactions |
$ | 2,632,328 | $ | 16,991,326 | ||||
| Net increase in net assets |
$ | 8,816,974 | $ | 21,274,754 | ||||
| Net Assets | ||||||||
| At beginning of period |
$ | 82,918,214 | $ | 61,643,460 | ||||
| At end of period |
$ | 91,735,188 | $ | 82,918,214 | ||||
| Accumulated undistributed (distributions in excess of) net investment income included in net assets |
||||||||
| At end of period |
$ | 1,578,530 | $ | (312,287 | ) | |||
| * | At the close of business on March 15, 2013, Class C shares were merged into Investor Class shares. |
| 20 | See Notes to Financial Statements. |
Parametric International Equity Fund
July 31, 2014
Financial Highlights
| Investor Class | ||||||||||||||||||||
| Six Months Ended July 31, 2014 (Unaudited) |
Year Ended January 31, | Period
Ended January 31, 2011(1) |
||||||||||||||||||
| 2014 | 2013 | 2012 | ||||||||||||||||||
| Net asset value — Beginning of period |
$ | 11.960 | $ | 11.180 | $ | 9.850 | $ | 10.960 | $ | 10.000 | ||||||||||
| Income (Loss) From Operations | ||||||||||||||||||||
| Net investment income (loss)(2) |
$ | 0.259 | (3) | $ | 0.195 | $ | 0.227 | $ | 0.172 | $ | (0.020 | ) | ||||||||
| Net realized and unrealized gain (loss) |
0.621 | 0.822 | 1.370 | (1.073 | ) | 1.058 | ||||||||||||||
| Total income (loss) from operations |
$ | 0.880 | $ | 1.017 | $ | 1.597 | $ | (0.901 | ) | $ | 1.038 | |||||||||
| Less Distributions | ||||||||||||||||||||
| From net investment income |
$ | — | $ | (0.237 | ) | $ | (0.267 | ) | $ | (0.209 | ) | $ | (0.078 | ) | ||||||
| Total distributions |
$ | — | $ | (0.237 | ) | $ | (0.267 | ) | $ | (0.209 | ) | $ | (0.078 | ) | ||||||
| Redemption fees(2)(4) |
$ | — | $ | — | $ | — | $ | — | $ | 0.000 | (5) | |||||||||
| Net asset value — End of period |
$ | 12.840 | $ | 11.960 | $ | 11.180 | $ | 9.850 | $ | 10.960 | ||||||||||
| Total Return(6) |
7.36 | %(7) | 9.04 | % | 16.32 | % | (8.11 | )% | 10.39 | %(7) | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (000’s omitted) |
$ | 13,649 | $ | 14,007 | $ | 7,038 | $ | 12,263 | $ | 3,578 | ||||||||||
| Ratios (as a percentage of average daily net assets): |
||||||||||||||||||||
| Expenses(8)(9) |
1.03 | %(10) | 1.05 | % | 1.29 | % | 1.50 | % | 1.50 | %(10) | ||||||||||
| Net investment income (loss) |
4.09 | %(3)(10) | 1.65 | % | 2.22 | % | 1.68 | % | (0.22 | )%(10) | ||||||||||
| Portfolio Turnover |
54 | %(7) | 35 | % | 44 | % | 60 | % | 15 | %(7) | ||||||||||
| (1) | For the period from the start of business, April 1, 2010, to January 31, 2011. |
| (2) | Computed using average shares outstanding. |
| (3) | Net investment income per share reflects special dividends allocated from the Fund which amounted to $0.044 per share. Excluding special dividends, the ratio of net investment income to average daily net assets would have been 3.39%. |
| (4) | Redemption fees were discontinued as of January 1, 2011. |
| (5) | Amount is less than $0.0005. |
| (6) | Returns are historical and are calculated by determining the percentage change in net asset value with all distributions reinvested and do not reflect the effect of sales charges, if applicable, which were eliminated effective March 1, 2013. |
| (7) | Not annualized. |
| (8) | Excludes the effect of custody fee credits, if any, of less than 0.005%. |
| (9) | The investment adviser, sub-adviser and administrator subsidized certain operating expenses (equal to 0.30%, 0.29%, 0.29%, 0.25% and 0.72% of average daily net assets for the six months ended July 31, 2014, the years ended January 31, 2014, 2013 and 2012 and the period ended January 31, 2011, respectively). |
| (10) | Annualized. |
| 21 | See Notes to Financial Statements. |
Parametric International Equity Fund
July 31, 2014
Financial Highlights — continued
| Institutional Class | ||||||||||||||||||||
| Six Months Ended July 31, 2014 (Unaudited) |
Year Ended January 31, | Period Ended January 31, 2011(1) |
||||||||||||||||||
| 2014 | 2013 | 2012 | ||||||||||||||||||
| Net asset value — Beginning of period |
$ | 11.990 | $ | 11.200 | $ | 9.880 | $ | 10.970 | $ | 10.000 | ||||||||||
| Income (Loss) From Operations | ||||||||||||||||||||
| Net investment income(2) |
$ | 0.272 | (3) | $ | 0.259 | $ | 0.252 | $ | 0.239 | $ | 0.102 | |||||||||
| Net realized and unrealized gain (loss) |
0.628 | 0.790 | 1.375 | (1.104 | ) | 0.950 | ||||||||||||||
| Total income (loss) from operations |
$ | 0.900 | $ | 1.049 | $ | 1.627 | $ | (0.865 | ) | $ | 1.052 | |||||||||
| Less Distributions | ||||||||||||||||||||
| From net investment income |
$ | — | $ | (0.259 | ) | $ | (0.307 | ) | $ | (0.225 | ) | $ | (0.082 | ) | ||||||
| Total distributions |
$ | — | $ | (0.259 | ) | $ | (0.307 | ) | $ | (0.225 | ) | $ | (0.082 | ) | ||||||
| Redemption fees(2)(4) |
$ | — | $ | — | $ | — | $ | — | $ | 0.000 | (5) | |||||||||
| Net asset value — End of period |
$ | 12.890 | $ | 11.990 | $ | 11.200 | $ | 9.880 | $ | 10.970 | ||||||||||
| Total Return(6) |
7.51 | %(7) | 9.31 | % | 16.59 | % | (7.76 | )% | 10.54 | %(7) | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (000’s omitted) |
$ | 78,087 | $ | 68,911 | $ | 54,167 | $ | 45,957 | $ | 41,969 | ||||||||||
| Ratios (as a percentage of average daily net assets): |
||||||||||||||||||||
| Expenses(8)(9) |
0.78 | %(10) | 0.80 | % | 1.02 | % | 1.25 | % | 1.25 | %(10) | ||||||||||
| Net investment income |
4.27 | %(3)(10) | 2.20 | % | 2.45 | % | 2.28 | % | 1.20 | %(10) | ||||||||||
| Portfolio Turnover |
54 | %(7) | 35 | % | 44 | % | 60 | % | 15 | %(7) | ||||||||||
| (1) | For the period from the start of business, April 1, 2010, to January 31, 2011. |
| (2) | Computed using average shares outstanding. |
| (3) | Net investment income per share reflects special dividends allocated from the Fund which amounted to $0.043 per share. Excluding special dividends, the ratio of net investment income to average daily net assets would have been 3.59%. |
| (4) | Redemption fees were discontinued as of January 1, 2011. |
| (5) | Amount is less than $0.0005. |
| (6) | Returns are historical and are calculated by determining the percentage change in net asset value with all distributions reinvested. |
| (7) | Not annualized. |
| (8) | Excludes the effect of custody fee credits, if any, of less than 0.005%. |
| (9) | The investment adviser, sub-adviser and administrator subsidized certain operating expenses (equal to 0.30%, 0.29%, 0.30%, 0.25% and 0.72% of average daily net assets for the six months ended July 31, 2014, the years ended January 31, 2014, 2013 and 2012 and the period ended January 31, 2011, respectively). |
| (10) | Annualized. |
| 22 | See Notes to Financial Statements. |
Parametric International Equity Fund
July 31, 2014
Notes to Financial Statements (Unaudited)
1 Significant Accounting Policies
Parametric International Equity Fund (the Fund) is a diversified series of Eaton Vance Mutual Funds Trust (the Trust). The Trust is a Massachusetts business trust registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company. The Fund’s investment objective is to seek long-term capital appreciation. The Fund offers two classes of shares. Investor Class and Institutional Class shares are sold at net asset value and are not subject to a sales charge. Each class represents a pro-rata interest in the Fund, but votes separately on class-specific matters and (as noted below) is subject to different expenses. Realized and unrealized gains and losses and net investment income and losses, other than class-specific expenses, are allocated daily to each class of shares based on the relative net assets of each class to the total net assets of the Fund. Each class of shares differs in its distribution plan and certain other class-specific expenses.
The following is a summary of significant accounting policies of the Fund. The policies are in conformity with accounting principles generally accepted in the United States of America.
A Investment Valuation — The following methodologies are used to determine the market value or fair value of investments.
Equity Securities. Equity securities (including common shares of closed-end investment companies) listed on a U.S. securities exchange generally are valued at the last sale or closing price on the day of valuation or, if no sales took place on such date, at the mean between the closing bid and asked prices therefore on the exchange where such securities are principally traded. Equity securities listed on the NASDAQ Global or Global Select Market generally are valued at the NASDAQ official closing price. Unlisted or listed securities for which closing sales prices or closing quotations are not available are valued at the mean between the latest available bid and asked prices.
Debt Obligations. Short-term obligations purchased with a remaining maturity of sixty days or less are generally valued at amortized cost, which approximates market value.
Foreign Securities and Currencies. Foreign securities and currencies are valued in U.S. dollars, based on foreign currency exchange rate quotations supplied by a third party pricing service. The pricing service uses a proprietary model to determine the exchange rate. Inputs to the model include reported trades and implied bid/ask spreads. The daily valuation of exchange-traded foreign securities generally is determined as of the close of trading on the principal exchange on which such securities trade. Events occurring after the close of trading on foreign exchanges may result in adjustments to the valuation of foreign securities to more accurately reflect their fair value as of the close of regular trading on the New York Stock Exchange. When valuing foreign equity securities that meet certain criteria, the Fund’s Trustees have approved the use of a fair value service that values such securities to reflect market trading that occurs after the close of the applicable foreign markets of comparable securities or other instruments that have a strong correlation to the fair-valued securities.
Affiliated Fund. The Fund may invest in Eaton Vance Cash Reserves Fund, LLC (Cash Reserves Fund), an affiliated investment company managed by Eaton Vance Management (EVM). The value of the Fund’s investment in Cash Reserves Fund reflects the Fund’s proportionate interest in its net assets. Cash Reserves Fund generally values its investment securities utilizing the amortized cost valuation technique in accordance with Rule 2a-7 under the 1940 Act. This technique involves initially valuing a portfolio security at its cost and thereafter assuming a constant amortization to maturity of any discount or premium. If amortized cost is determined not to approximate fair value, Cash Reserves Fund may value its investment securities based on available market quotations provided by a third party pricing service.
Fair Valuation. Investments for which valuations or market quotations are not readily available or are deemed unreliable are valued at fair value using methods determined in good faith by or at the direction of the Trustees of the Fund in a manner that fairly reflects the security’s value, or the amount that the Fund might reasonably expect to receive for the security upon its current sale in the ordinary course. Each such determination is based on a consideration of relevant factors, which are likely to vary from one pricing context to another. These factors may include, but are not limited to, the type of security, the existence of any contractual restrictions on the security’s disposition, the price and extent of public trading in similar securities of the issuer or of comparable companies or entities, quotations or relevant information obtained from broker/dealers or other market participants, information obtained from the issuer, analysts, and/or the appropriate stock exchange (for exchange-traded securities), an analysis of the company’s or entity’s financial condition, and an evaluation of the forces that influence the issuer and the market(s) in which the security is purchased and sold.
B Investment Transactions — Investment transactions for financial statement purposes are accounted for on a trade date basis. Realized gains and losses on investments sold are determined on the basis of identified cost.
C Income — Dividend income is recorded on the ex-dividend date for dividends received in cash and/or securities. However, if the ex-dividend date has passed, certain dividends from foreign securities are recorded as the Fund is informed of the ex-dividend date. Withholding taxes on foreign dividends and capital gains have been provided for in accordance with the Fund’s understanding of the applicable countries’ tax rules and rates. Interest income is recorded on the basis of interest accrued, adjusted for amortization of premium or accretion of discount.
D Federal Taxes — The Fund’s policy is to comply with the provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute to shareholders each year substantially all of its net investment income, and all or substantially all of its net realized capital gains. Accordingly, no provision for federal income or excise tax is necessary.
In addition to the requirements of the Internal Revenue Code, the Fund may also be subject to local taxes on the recognition of capital gains in certain countries. In determining the daily net asset value, the Fund estimates the accrual for such taxes, if any, based on the unrealized appreciation on certain
| 23 |
Parametric International Equity Fund
July 31, 2014
Notes to Financial Statements (Unaudited) — continued
portfolio securities and the related tax rates. Taxes attributable to unrealized appreciation are included in the change in unrealized appreciation (depreciation) on investments. Capital gains taxes on securities sold are included in net realized gain (loss) on investments.
At January 31, 2014, the Fund, for federal income tax purposes, had a capital loss carryforward of $94,897 and deferred capital losses of $4,189,149 which will reduce its taxable income arising from future net realized gains on investment transactions, if any, to the extent permitted by the Internal Revenue Code, and thus will reduce the amount of distributions to shareholders, which would otherwise be necessary to relieve the Fund of any liability for federal income or excise tax. The capital loss carryforward will expire on January 31, 2019 and its character is short-term. The deferred capital losses are treated as arising on the first day of the Fund’s next taxable year, retaining the same short-term or long-term character as when originally deferred, and are treated as realized prior to the utilization of the capital loss carryforward. Of the deferred capital losses at January 31, 2014, $4,189,149 are short-term.
As of July 31, 2014, the Fund had no uncertain tax positions that would require financial statement recognition, de-recognition, or disclosure. The Fund files a U.S. federal income tax return annually after its fiscal year-end, which is subject to examination by the Internal Revenue Service for a period of three years from the date of filing.
E Expenses — The majority of expenses of the Trust are directly identifiable to an individual fund. Expenses which are not readily identifiable to a specific fund are allocated taking into consideration, among other things, the nature and type of expense and the relative size of the funds.
F Expense Reduction — State Street Bank and Trust Company (SSBT) serves as custodian of the Fund. Pursuant to the custodian agreement, SSBT receives a fee reduced by credits, which are determined based on the average daily cash balance the Fund maintains with SSBT. All credit balances, if any, used to reduce the Fund’s custodian fees are reported as a reduction of expenses in the Statement of Operations.
G Foreign Currency Translation — Investment valuations, other assets, and liabilities initially expressed in foreign currencies are translated each business day into U.S. dollars based upon current exchange rates. Purchases and sales of foreign investment securities and income and expenses denominated in foreign currencies are translated into U.S. dollars based upon currency exchange rates in effect on the respective dates of such transactions. Recognized gains or losses on investment transactions attributable to changes in foreign currency exchange rates are recorded for financial statement purposes as net realized gains and losses on investments. That portion of unrealized gains and losses on investments that results from fluctuations in foreign currency exchange rates is not separately disclosed.
H Use of Estimates — The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expense during the reporting period. Actual results could differ from those estimates.
I Indemnifications — Under the Trust’s organizational documents, its officers and Trustees may be indemnified against certain liabilities and expenses arising out of the performance of their duties to the Fund. Under Massachusetts law, if certain conditions prevail, shareholders of a Massachusetts business trust (such as the Trust) could be deemed to have personal liability for the obligations of the Trust. However, the Trust’s Declaration of Trust contains an express disclaimer of liability on the part of Fund shareholders and the By-laws provide that the Trust shall assume the defense on behalf of any Fund shareholders. Moreover, the By-laws also provide for indemnification out of Fund property of any shareholder held personally liable solely by reason of being or having been a shareholder for all loss or expense arising from such liability. Additionally, in the normal course of business, the Fund enters into agreements with service providers that may contain indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred.
J Interim Financial Statements — The interim financial statements relating to July 31, 2014 and for the six months then ended have not been audited by an independent registered public accounting firm, but in the opinion of the Fund’s management, reflect all adjustments, consisting only of normal recurring adjustments, necessary for the fair presentation of the financial statements.
2 Distributions to Shareholders
It is the present policy of the Fund to make at least one distribution annually (normally in December) of all or substantially all of its net investment income and to distribute annually all or substantially all of its net realized capital gains (reduced by available capital loss carryforwards from prior years). Distributions to shareholders are recorded on the ex-dividend date. Distributions are declared separately for each class of shares. Shareholders may reinvest income and capital gain distributions in additional shares of the same class of the Fund at the net asset value as of the ex-dividend date or, at the election of the shareholder, receive distributions in cash. The Fund distinguishes between distributions on a tax basis and a financial reporting basis. Accounting principles generally accepted in the United States of America require that only distributions in excess of tax basis earnings and profits be reported in the financial statements as a return of capital. Permanent differences between book and tax accounting relating to distributions are reclassified to paid-in capital. For tax purposes, distributions from short-term capital gains are considered to be from ordinary income.
3 Investment Adviser and Administration Fee and Other Transactions with Affiliates
The investment adviser and administration fee is earned by EVM as compensation for investment advisory and administrative services rendered to the Fund. Pursuant to the investment advisory and administrative agreement and subsequent fee reduction agreement between the Fund and EVM, the fee is
| 24 |
Parametric International Equity Fund
July 31, 2014
Notes to Financial Statements (Unaudited) — continued
computed at an annual rate of 0.75% of the Fund’s average daily net assets up to $500 million and is payable monthly. On net assets of $500 million and over, the annual fee is reduced. The fee reduction cannot be terminated without the consent of a majority of the Trustees and a majority of shareholders. For the six months ended July 31, 2014, the investment adviser and administration fee amounted to $334,542 or 0.75% (annualized) of the Fund’s average daily net assets. Pursuant to a sub-advisory agreement, EVM has delegated the investment management of the Fund to Parametric Portfolio Associates LLC (Parametric), a majority-owned subsidiary of Eaton Vance Corp. EVM pays Parametric a portion of its advisory and administration fee for sub-advisory services provided to the Fund. The Fund invests its cash in Cash Reserves Fund. EVM does not currently receive a fee for advisory services provided to Cash Reserves Fund.
EVM and Parametric have agreed to reimburse the Fund’s expenses to the extent that total annual operating expenses (relating to ordinary operating expenses only) exceed 0.90% and 0.65% (1.05% and 0.80% prior to July 10, 2014) of the Fund’s average daily net assets for Investor Class and Institutional Class, respectively. This agreement may be changed or terminated after May 31, 2015. Pursuant to this agreement, EVM and Parametric were allocated $132,404 in total of the Fund’s operating expenses for the six months ended July 31, 2014.
EVM provides sub-transfer agency and related services to the Fund pursuant to a Sub-Transfer Agency Support Services Agreement. For the six months ended July 31, 2014, EVM earned $500 from the Fund pursuant to such agreement, which is included in transfer and dividend disbursing agent fees on the Statement of Operations. Eaton Vance Distributors, Inc. (EVD), an affiliate of EVM and the Fund’s principal underwriter, received distribution and services fees from Investor Class (see Note 4).
Trustees and officers of the Fund who are members of EVM’s organization receive remuneration for their services to the Fund out of the investment adviser and administration fee. Trustees of the Fund who are not affiliated with EVM may elect to defer receipt of all or a percentage of their annual fees in accordance with the terms of the Trustees Deferred Compensation Plan. For the six months ended July 31, 2014, no significant amounts have been deferred. Certain officers and Trustees of the Fund are officers of EVM.
4 Distribution Plan
The Fund has in effect a distribution plan for Investor Class shares (Investor Class Plan) pursuant to Rule 12b-1 under the 1940 Act. Pursuant to the Investor Class Plan, the Fund pays EVD a distribution and service fee of 0.25% per annum of its average daily net assets attributable to Investor Class shares for distribution services and facilities provided to the Fund by EVD, as well as for personal services and/or the maintenance of shareholder accounts. Distribution and service fees paid or accrued to EVD for the six months ended July 31, 2014 amounted to $18,329 for Investor Class shares.
Distribution and service fees are subject to the limitations contained in the Financial Industry Regulatory Authority’s NASD Conduct Rule 2830(d).
5 Purchases and Sales of Investments
Purchases and sales of investments, other than short-term obligations, aggregated $52,375,987 and $48,325,119, respectively, for the six months ended July 31, 2014.
6 Shares of Beneficial Interest
The Fund’s Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest (without par value). Such shares may be issued in a number of different series (such as the Fund) and classes. Transactions in Fund shares were as follows:
| Investor Class | Six Months Ended July 31, 2014 (Unaudited) |
Year Ended January 31, 2014 |
||||||
| Sales |
356,167 | 930,182 | ||||||
| Issued to shareholders electing to receive payments of distributions in Fund shares |
— | 13,007 | ||||||
| Redemptions |
(464,154 | ) | (447,045 | ) | ||||
| Merger from Class C shares |
— | 45,498 | ||||||
| Net increase (decrease) |
(107,987 | ) | 541,642 | |||||
| 25 |
Parametric International Equity Fund
July 31, 2014
Notes to Financial Statements (Unaudited) — continued
| Class C | Year Ended January 31, 2014(1) |
|||||||
| Sales |
6,372 | |||||||
| Issued to shareholders electing to receive payments of distributions in Fund shares |
— | |||||||
| Redemptions |
(5 | ) | ||||||
| Merger to Investor Class shares |
(45,969 | ) | ||||||
| Net decrease |
(39,602 | ) | ||||||
| Institutional Class | Six Months Ended July 31, 2014 (Unaudited) |
Year Ended January 31, 2014 |
||||||
| Sales |
936,210 | 2,466,781 | ||||||
| Issued to shareholders electing to receive payments of distributions in Fund shares |
— | 12,826 | ||||||
| Redemptions |
(623,698 | ) | (1,569,599 | ) | ||||
| Net increase |
312,512 | 910,008 | ||||||
| (1) | At the close of business on March 15, 2013, Class C shares were merged into Investor Class shares. |
At July 31, 2014, an Eaton Vance collective investment trust and donor advised and pooled income funds (established and maintained by a public charity) managed by EVM owned in the aggregate 39.5% of the value of the outstanding shares of the Fund.
7 Federal Income Tax Basis of Investments
The cost and unrealized appreciation (depreciation) of investments of the Fund at July 31, 2014, as determined on a federal income tax basis, were as follows:
| Aggregate cost |
$ | 82,846,266 | ||
| Gross unrealized appreciation |
$ | 11,190,858 | ||
| Gross unrealized depreciation |
(2,523,818 | ) | ||
| Net unrealized appreciation |
$ | 8,667,040 | ||
8 Line of Credit
The Fund participates with other portfolios and funds managed by EVM and its affiliates in a $750 million unsecured line of credit agreement with a group of banks. Borrowings are made by the Fund solely to facilitate the handling of unusual and/or unanticipated short-term cash requirements. Interest is charged to the Fund based on its borrowings at an amount above either the Eurodollar rate or Federal Funds rate. In addition, a fee computed at an annual rate of 0.08% on the daily unused portion of the line of credit is allocated among the participating portfolios and funds at the end of each quarter. Because the line of credit is not available exclusively to the Fund, it may be unable to borrow some or all of its requested amounts at any particular time. The Fund did not have any significant borrowings or allocated fees during the six months ended July 31, 2014.
9 Risks Associated with Foreign Investments
Investing in securities issued by companies whose principal business activities are outside the United States may involve significant risks not present in domestic investments. For example, there is generally less publicly available information about foreign companies, particularly those not subject to the disclosure and reporting requirements of the U.S. securities laws. Certain foreign issuers are generally not bound by uniform accounting, auditing, and financial reporting requirements and standards of practice comparable to those applicable to domestic issuers. Investments in foreign securities also involve the risk of possible adverse changes in investment or exchange control regulations, expropriation or confiscatory taxation, limitation on the removal of funds or other assets of the Fund, political or financial instability or diplomatic and other developments which could affect such investments. Foreign securities
| 26 |
Parametric International Equity Fund
July 31, 2014
Notes to Financial Statements (Unaudited) — continued
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. In general, there is less overall governmental supervision and regulation of foreign securities markets, broker/dealers and issuers than in the United States.
10 Fair Value Measurements
Under generally accepted accounting principles for fair value measurements, a three-tier hierarchy to prioritize the assumptions, referred to as inputs, is used in valuation techniques to measure fair value. The three-tier hierarchy of inputs is summarized in the three broad levels listed below.
| Ÿ | Level 1 – quoted prices in active markets for identical investments |
| Ÿ | Level 2 – other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.) |
| Ÿ | Level 3 – significant unobservable inputs (including a fund’s own assumptions in determining the fair value of investments) |
In cases where the inputs used to measure fair value fall in different levels of the fair value hierarchy, the level disclosed is determined based on the lowest level input that is significant to the fair value measurement in its entirety. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
At July 31, 2014, the hierarchy of inputs used in valuing the Fund’s investments, which are carried at value, were as follows:
| Asset Description | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| Common Stocks |
||||||||||||||||
| Asia/Pacific |
$ | 267,638 | $ | 28,043,390 | $ | — | $ | 28,311,028 | ||||||||
| Developed Europe |
583,355 | 60,040,927 | — | 60,624,282 | ||||||||||||
| Developed Middle East |
599,243 | 1,224,241 | — | 1,823,484 | ||||||||||||
| Total Common Stocks |
$ | 1,450,236 | $ | 89,308,558 | * | $ | — | $ | 90,758,794 | |||||||
| Investment Funds |
$ | — | $ | 31,962 | $ | — | $ | 31,962 | ||||||||
| Rights |
1,358 | — | — | 1,358 | ||||||||||||
| Short-Term Investments |
— | 721,192 | — | 721,192 | ||||||||||||
| Total Investments |
$ | 1,451,594 | $ | 90,061,712 | $ | — | $ | 91,513,306 | ||||||||
| * | Includes foreign equity securities whose values were adjusted to reflect market trading of comparable securities or other correlated instruments that occurred after the close of trading in their applicable foreign markets. |
The Fund held no investments or other financial instruments as of January 31, 2014 whose fair value was determined using Level 3 inputs. At July 31, 2014, the value of investments transferred between Level 1 and Level 2 during the six months then ended was not significant.
| 27 |
Parametric International Equity Fund
July 31, 2014
Special Meeting of Shareholders (Unaudited)
The Fund held a Special Meeting of Shareholders on May 29, 2014 to elect five Trustees. The results of the vote were as follows:
| Number of Shares(1) | ||||||||
| Nominee for Trustee | For | Withheld | ||||||
| Scott E. Eston |
6,873,680 | 6,192 | ||||||
| Cynthia E. Frost |
6,873,680 | 6,192 | ||||||
| George J. Gorman |
6,873,680 | 6,192 | ||||||
| Valerie A. Mosley |
6,873,680 | 6,192 | ||||||
| Harriett Tee Taggart |
6,873,680 | 6,192 | ||||||
| (1) | Excludes fractional shares. |
| 28 |
Parametric International Equity Fund
July 31, 2014
Board of Trustees’ Contract Approval
Overview of the Contract Review Process
The Investment Company Act of 1940, as amended (the “1940 Act”), provides, in substance, that each investment advisory agreement between a fund and its investment adviser will continue in effect from year to year only if its continuation is approved at least annually by the fund’s board of trustees, including by a vote of a majority of the trustees who are not “interested persons” of the fund (“Independent Trustees”), cast in person at a meeting called for the purpose of considering such approval.
At a meeting of the Boards of Trustees (each a “Board”) of the mutual funds advised, administered and/or distributed by Eaton Vance Management or its affiliates (the “Eaton Vance Funds”) held on April 28, 2014, the Board, including a majority of the Independent Trustees, voted to approve continuation of existing advisory and sub-advisory agreements for the Eaton Vance Funds for an additional one-year period. In voting its approval, the Board relied upon the affirmative recommendation of the Contract Review Committee of the Board, which is a committee comprised exclusively of Independent Trustees. Prior to making its recommendation, the Contract Review Committee reviewed information furnished by each adviser to the Eaton Vance Funds (including information specifically requested by the Board) for a series of meetings of the Contract Review Committee held between February and April 2014, as well as information considered throughout the year at meetings of the Board and its committees. Such information included, among other things, the following:
Information about Fees, Performance and Expenses
| Ÿ | An independent report comparing the advisory and related fees paid by each fund with fees paid by comparable funds; |
| Ÿ | An independent report comparing each fund’s total expense ratio and its components to comparable funds; |
| Ÿ | An independent report comparing the investment performance of each fund (including, where relevant, yield data, Sharpe ratios and information ratios) to the investment performance of comparable funds over various time periods; |
| Ÿ | Data regarding investment performance in comparison to benchmark indices and customized peer groups identified by the adviser in consultation with the Board; |
| Ÿ | For each fund, comparative information concerning the fees charged and the services provided by each adviser in managing other accounts (including mutual funds, other collective investment funds and institutional accounts) using investment strategies and techniques similar to those used in managing such fund; |
| Ÿ | Profitability analyses for each adviser with respect to each fund; |
Information about Portfolio Management and Trading
| Ÿ | Descriptions of the investment management services provided to each fund, including the investment strategies and processes employed, and any changes in portfolio management processes and personnel; |
| Ÿ | Information about the allocation of brokerage and the benefits received by each adviser as a result of brokerage allocation, including information concerning the acquisition of research through client commission arrangements and the fund’s policies with respect to “soft dollar” arrangements; |
| Ÿ | Data relating to portfolio turnover rates of each fund; |
| Ÿ | The procedures and processes used to determine the fair value of fund assets and actions taken to monitor and test the effectiveness of such procedures and processes; |
| Ÿ | Information about each adviser’s processes for monitoring best execution of portfolio transactions, and other policies and practices of each adviser with respect to trading; |
Information about each Adviser
| Ÿ | Reports detailing the financial results and condition of each adviser; |
| Ÿ | Descriptions of the qualifications, education and experience of the individual investment professionals whose responsibilities include portfolio management and investment research for the funds, and information relating to their compensation and responsibilities with respect to managing other mutual funds and investment accounts; |
| Ÿ | Copies of the Codes of Ethics of each adviser and its affiliates, together with information relating to compliance with and the administration of such codes; |
| Ÿ | Copies of or descriptions of each adviser’s policies and procedures relating to proxy voting, the handling of corporate actions and class actions; |
| Ÿ | Information concerning the resources devoted to compliance efforts undertaken by each adviser and its affiliates on behalf of the funds (including descriptions of various compliance programs) and their record of compliance with investment policies and restrictions, including policies with respect to market-timing, late trading and selective portfolio disclosure, and with policies on personal securities transactions; |
| Ÿ | Descriptions of the business continuity and disaster recovery plans of each adviser and its affiliates; |
| Ÿ | A description of Eaton Vance Management’s procedures for overseeing third party advisers and sub-advisers, including with respect to regulatory and compliance issues, investment management and other matters; |
| 29 |
Parametric International Equity Fund
July 31, 2014
Board of Trustees’ Contract Approval — continued
Other Relevant Information
| Ÿ | Information concerning the nature, cost and character of the administrative and other non-investment management services provided by Eaton Vance Management and its affiliates; |
| Ÿ | Information concerning management of the relationship with the custodian, subcustodians and fund accountants by each adviser or the funds’ administrator; and |
| Ÿ | The terms of each advisory agreement. |
Over the course of the twelve-month period ended April 30, 2014, with respect to one or more funds, the Board met nine times and the Contract Review Committee, the Audit Committee, the Governance Committee, the Portfolio Management Committee and the Compliance Reports and Regulatory Matters Committee, each of which is a Committee comprised solely of Independent Trustees, met seven, seventeen, eleven, six and ten times respectively. At such meetings, the Trustees participated in investment and performance reviews with the portfolio managers and other investment professionals of each adviser relating to each fund, and considered the investment and trading strategies used in pursuing each fund’s investment objective, including, where relevant, the use of derivative instruments, as well as processes for monitoring best execution of portfolio transactions and risk management techniques. The Board and its Committees also evaluated issues pertaining to industry and regulatory developments, compliance procedures, fund governance and other issues with respect to the funds, and received and participated in reports and presentations provided by Eaton Vance Management and other fund advisers with respect to such matters.
For funds that invest through one or more underlying portfolios, the Board considered similar information about the portfolio(s) when considering the approval of advisory agreements. In addition, in cases where the fund’s investment adviser has engaged a sub-adviser, the Board considered similar information about the sub-adviser when considering the approval of any sub-advisory agreement.
The Contract Review Committee was assisted throughout the contract review process by Goodwin Procter LLP, legal counsel for the Independent Trustees. The members of the Contract Review Committee relied upon the advice of such counsel and their own business judgment in determining the material factors to be considered in evaluating each advisory and sub-advisory agreement and the weight to be given to each such factor. The conclusions reached with respect to each advisory and sub-advisory agreement were based on a comprehensive evaluation of all the information provided and not any single factor. Moreover, each member of the Contract Review Committee may have placed varying emphasis on particular factors in reaching conclusions with respect to each advisory and sub-advisory agreement. In evaluating each advisory and sub-advisory agreement, including the specific fee structures and other terms of the agreements, the Contract Review Committee was informed by multiple years of analysis and discussion among the Independent Trustees and the Funds’ advisers and sub-advisers.
Results of the Process
Based on its consideration of the foregoing, and such other information as it deemed relevant, including the factors and conclusions described below, the Contract Review Committee concluded that the continuation of the investment advisory and administrative agreement of Parametric International Equity Fund (the “Fund”) with Eaton Vance Management (the “Adviser”) and the sub-advisory agreement with Parametric Portfolio Associates LLC (the “Sub-adviser”), an affiliate of Eaton Vance Management, including their fee structures, is in the interests of shareholders and, therefore, the Contract Review Committee recommended to the Board approval of each agreement. The Board accepted the recommendation of the Contract Review Committee as well as the factors considered and conclusions reached by the Contract Review Committee with respect to the agreements. Accordingly, the Board, including a majority of the Independent Trustees, voted to approve continuation of the investment advisory and administrative agreement and the sub-advisory agreement for the Fund.
Nature, Extent and Quality of Services
In considering whether to approve the investment advisory and administrative agreement and the sub-advisory agreement of the Fund, the Board evaluated the nature, extent and quality of services provided to the Fund by the Adviser and the Sub-adviser.
The Board considered the Adviser’s and the Sub-adviser’s management capabilities and investment process with respect to the types of investments held by the Fund, including the education, experience and number of its investment professionals and other personnel who provide portfolio management, investment research, and similar services to the Fund. With respect to the Adviser, the Board considered the Adviser’s responsibilities supervising the Sub-adviser. With respect to the Sub-adviser, the Board considered the abilities and experience of investment personnel in analyzing factors such as special considerations relevant to investing in global markets. The Board noted the Adviser’s in-house equity research capabilities. With respect to the Sub-adviser, the Board noted the Sub-adviser’s experience in deploying quantitative-based investment strategies. The Board also took into account the resources dedicated to portfolio management and other services, including the compensation methods of the Adviser to recruit and retain investment personnel, and the time and attention devoted to the Fund by senior management.
The Board reviewed the compliance programs of the Adviser and relevant affiliates thereof, including the Sub-adviser. Among other matters, the Board considered compliance and reporting matters relating to personal trading by investment personnel, selective disclosure of portfolio holdings, late trading, frequent trading, portfolio valuation, business continuity and the allocation of investment opportunities. The Board also evaluated the responses of the Adviser and its affiliates to requests in recent years from regulatory authorities such as the Securities and Exchange Commission and the Financial Industry Regulatory Authority.
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Parametric International Equity Fund
July 31, 2014
Board of Trustees’ Contract Approval — continued
The Board considered shareholder and other administrative services provided or managed by Eaton Vance Management and its affiliates, including transfer agency and accounting services. The Board evaluated the benefits to shareholders of investing in a fund that is a part of a large family of funds, including the ability, in many cases, to exchange an investment among different funds without incurring additional sales charges.
After consideration of the foregoing factors, among others, the Board concluded that the nature, extent and quality of services provided by the Adviser and the Sub-adviser, taken as a whole, are appropriate and consistent with the terms of the investment advisory and administrative agreement and the sub-advisory agreement.
Fund Performance
The Board compared the Fund’s investment performance to a relevant universe of similarly managed funds identified by an independent data provider and appropriate benchmark indices. The Board reviewed comparative performance data for the one-year period ended September 30, 2013 for the Fund. The Board concluded that the performance of the Fund was satisfactory.
Management Fees and Expenses
The Board reviewed contractual fee rates for investment advisory and administrative services payable by the Fund (referred to as “management fees”). As part of its review, the Board considered the management fees and the Fund’s total expense ratio for the year ended September 30, 2013, as compared to a group of similarly managed funds selected by an independent data provider. The Board noted that the Adviser had waived fees and/or paid expenses for the Fund. The Board also considered factors that had an impact on Fund expense ratios, as identified by management in response to inquiries from the Contract Review Committee, as well as actions taken by management in recent years to reduce expenses at the fund complex level, including the negotiation of reduced fees for transfer agency and custody services.
After reviewing the foregoing information, and in light of the nature, extent and quality of the services provided by the Adviser and the Sub-adviser, the Board concluded that the management fees charged for advisory and related services are reasonable.
Profitability
The Board reviewed the level of profits realized by the Adviser and relevant affiliates thereof, including the Sub-adviser, in providing investment advisory and administrative services to the Fund and to all Eaton Vance Funds as a group. The Board considered the level of profits realized without regard to revenue sharing or other payments by the Adviser and its affiliates to third parties in respect of distribution services. The Board also considered other direct or indirect benefits received by the Adviser and its affiliates, including the Sub-adviser, in connection with their relationships with the Fund, including the benefits of research services that may be available to the Adviser or the Sub-adviser as a result of securities transactions effected for the Fund and other investment advisory clients.
The Board concluded that, in light of the foregoing factors and the nature, extent and quality of the services rendered, the profits realized by the Adviser and its affiliates, including the Sub-adviser, are reasonable.
Economies of Scale
In reviewing management fees and profitability, the Board also considered the extent to which the Adviser and its affiliates, on the one hand, and the Fund, on the other hand, can expect to realize benefits from economies of scale as the assets of the Fund increase. The Board acknowledged the difficulty in accurately measuring the benefits resulting from the economies of scale with respect to the management of any specific fund or group of funds. The Board reviewed data summarizing the increases and decreases in the assets of the Fund and of all Eaton Vance Funds as a group over various time periods, and evaluated the extent to which the total expense ratio of the Fund and the profitability of the Adviser and its affiliates may have been affected by such increases or decreases. Based upon the foregoing, the Board concluded that the Fund currently shares in the benefits from economies of scale. The Board also concluded that, assuming reasonably foreseeable increases in the assets of the Fund, the structure of the advisory fee, which includes breakpoints at several asset levels, will allow the Fund to continue to benefit from economies of scale in the future.
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Parametric International Equity Fund
July 31, 2014
Officers and Trustees
Officers of Parametric International Equity Fund
Trustees of Parametric International Equity Fund
| * | Interested Trustee |
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Eaton Vance Funds
IMPORTANT NOTICES
Privacy. The Eaton Vance organization is committed to ensuring your financial privacy. Each of the financial institutions identified below has in effect the following policy (“Privacy Policy”) with respect to nonpublic personal information about its customers:
| Ÿ | Only such information received from you, through application forms or otherwise, and information about your Eaton Vance fund transactions will be collected. This may include information such as name, address, social security number, tax status, account balances and transactions. |
| Ÿ | None of such information about you (or former customers) will be disclosed to anyone, except as permitted by law (which includes disclosure to employees necessary to service your account). In the normal course of servicing a customer’s account, Eaton Vance may share information with unaffiliated third parties that perform various required services such as transfer agents, custodians and broker-dealers. |
| Ÿ | Policies and procedures (including physical, electronic and procedural safeguards) are in place that are designed to protect the confidentiality of such information. |
| Ÿ | We reserve the right to change our Privacy Policy at any time upon proper notification to you. Customers may want to review our Privacy Policy periodically for changes by accessing the link on our homepage: www.eatonvance.com. |
Our pledge of privacy applies to the following entities within the Eaton Vance organization: the Eaton Vance Family of Funds, Eaton Vance Management, Eaton Vance Investment Counsel, Eaton Vance Distributors, Inc., Eaton Vance Trust Company, Eaton Vance Management’s Real Estate Investment Group and Boston Management and Research. In addition, our Privacy Policy applies only to those Eaton Vance customers who are individuals and who have a direct relationship with us. If a customer’s account (i.e., fund shares) is held in the name of a third-party financial advisor/broker-dealer, it is likely that only such advisor’s privacy policies apply to the customer. This notice supersedes all previously issued privacy disclosures. For more information about Eaton Vance’s Privacy Policy, please call 1-800-262-1122.
Delivery of Shareholder Documents. The Securities and Exchange Commission (SEC) permits funds to deliver only one copy of shareholder documents, including prospectuses, proxy statements and shareholder reports, to fund investors with multiple accounts at the same residential or post office box address. This practice is often called “householding” and it helps eliminate duplicate mailings to shareholders. Eaton Vance, or your financial advisor, may household the mailing of your documents indefinitely unless you instruct Eaton Vance, or your financial advisor, otherwise. If you would prefer that your Eaton Vance documents not be householded, please contact Eaton Vance at 1-800-260-0761, or contact your financial advisor. Your instructions that householding not apply to delivery of your Eaton Vance documents will be effective within 30 days of receipt by Eaton Vance or your financial advisor.
Portfolio Holdings. Each Eaton Vance Fund and its underlying Portfolio(s) (if applicable) will file a schedule of portfolio holdings on Form N-Q with the SEC for the first and third quarters of each fiscal year. The Form N-Q will be available on the Eaton Vance website at www.eatonvance.com, by calling Eaton Vance at 1-800-260-0761 or in the EDGAR database on the SEC’s website at www.sec.gov. Form N-Q may also be reviewed and copied at the SEC’s public reference room in Washington, D.C. (call 1-800-732-0330 for information on the operation of the public reference room).
Proxy Voting. From time to time, funds are required to vote proxies related to the securities held by the funds. The Eaton Vance Funds or their underlying Portfolios (if applicable) vote proxies according to a set of policies and procedures approved by the Funds’ and Portfolios’ Boards. You may obtain a description of these policies and procedures and information on how the Funds or Portfolios voted proxies relating to portfolio securities during the most recent 12-month period ended June 30, without charge, upon request, by calling 1-800-260-0761 and by accessing the SEC’s website at www.sec.gov.
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| * | FINRA BrokerCheck. Investors may check the background of their Investment Professional by contacting the Financial Industry Regulatory Authority (FINRA). FINRA BrokerCheck is a free tool to help investors check the professional background of current and former FINRA-registered securities firms and brokers. FINRA BrokerCheck is available by calling 1-800-289-9999 and at www.FINRA.org. The FINRA BrokerCheck brochure describing the program is available to investors at www.FINRA.org. |
| 7771 7.31.14 |
Item 2. Code of Ethics
Not required in this filing.
Item 3. Audit Committee Financial Expert
Not required in this filing.
Item 4. Principal Accountant Fees and Services
Not required in this filing.
Item 5. Audit Committee of Listed Registrants
Not applicable.
Item 6. Schedule of Investments
Please see schedule of investments contained in the Report to Stockholders included under Item 1 of this Form N-CSR.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders
No material changes.
Item 11. Controls and Procedures
(a) It is the conclusion of the registrant’s principal executive officer and principal financial officer that the effectiveness of the registrant’s current disclosure controls and procedures (such disclosure controls and procedures having been evaluated within 90 days of the date of this filing) provide reasonable assurance that the information required to be disclosed by the registrant has been recorded, processed, summarized and reported within the time period specified in the Commission’s rules and forms and that the information required to be disclosed by the registrant has been accumulated and communicated to the registrant’s principal executive officer and principal financial officer in order to allow timely decisions regarding required disclosure.
(b) There have been no changes in the registrant’s internal controls over financial reporting during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
Item 12. Exhibits
| (a)(1) | Registrant’s Code of Ethics – Not applicable (please see Item 2). | |
| (a)(2)(i) | Treasurer’s Section 302 certification. | |
| (a)(2)(ii) | President’s Section 302 certification. | |
| (b) | Combined Section 906 certification. | |
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Eaton Vance Mutual Funds Trust
| By: | /s/ Payson F. Swaffield | |
| Payson F. Swaffield | ||
| President | ||
| Date: | September 10, 2014 | |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| By: | /s/ James F. Kirchner | |
| James F. Kirchner | ||
| Treasurer | ||
| Date: | September 10, 2014 | |
| By: | /s/ Payson F. Swaffield | |
| Payson F. Swaffield | ||
| President | ||
| Date: | September 10, 2014 | |