AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 28, 1995
1933 ACT FILE NO. 2-22019
1940 ACT FILE NO. 811-1241
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933 [X]
POST-EFFECTIVE AMENDMENT NO. 61 [X]
AND
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 34 [X]
EATON VANCE GROWTH TRUST
-------------------------------------------
(FORMERLY EATON VANCE GROWTH FUND)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
24 FEDERAL STREET, BOSTON, MASSACHUSETTS 02110
----------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
617-482-8260
------------------------
(REGISTRANT'S TELEPHONE NUMBER)
THOMAS OTIS
24 FEDERAL STREET, BOSTON, MASSACHUSETTS 02110
----------------------------------------
(NAME AND ADDRESS OF AGENT FOR SERVICE)
It is proposed that this filing will become effective on December 29, 1995
pursuant to paragraph (b) of Rule 485.
The exhibit index required by Rule 483(a) under the Securities Act of 1933
is located on page in the sequential numbering system of the manually signed
copy of this Registration Statement.
Greater China Growth Portfolio and Growth Portfolio have also executed this
Registration Statement.
CALCULATION OF REGISTRATION FEE
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
AMOUNT OF PROPOSED MAXIMUM PROPOSED AGGREGATE AMOUNT OF
TITLE OF SECURITIES SHARES BEING OFFERING PRICE MAXIMUM REGISTRATION
BEING REGISTERED REGISTERED PER SHARE OFFERING PRICE FEE
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares of Beneficial Interest 7,424,540 $12.10<F1> $89,836,934<F2> $100
- ---------------------------------------------------------------------------------------------------
<FN>
<F1> Computed under Rule 457(d) on the basis of the maximum aggregate offering price per share at the close of
business on December 15, 1995.
<F2> Registrant elects to calculate the maximum aggregate offering price pursuant to Rule 24e-2 for those series with a
fiscal year end of August 31, 1995. $268,764,321 of shares were redeemed during the fiscal year ended August 31,
1995. $179,217,382 of shares were used for reductions pursuant to Paragraph (c) of Rule 24f-2 during such fiscal
year. $89,546,939 of shares redeemed are being used for the reduction of the registration fee in this Amendment.
While no fee is required for the $89,546,939 of shares, the Registrant has elected to register, for $100, an
additional $290,000 of shares.
</TABLE>
The Registrant has filed a Declaration pursuant to Rule 24f-2, and on
October 19, 1995, filed its "Notice" as required by that Rule for the fiscal
year ended August 31, 1995. Registrant continues its election to register an
indefinite number of shares of beneficial interest pursuant to Rule 24f-2.
==============================================================================
<PAGE>
This Amendment to the registration statement on Form N-1A consists of the
following documents and papers:
Cross Reference Sheets required by Rule 481(a) under the Securities Act of
1933
Part A -- The Prospectuses of:
EV Classic Greater China Growth Fund
EV Marathon Greater China Growth Fund
EV Traditional Greater China Growth Fund
EV Classic Growth Fund EV Marathon Growth Fund
EV Traditional Growth Fund
EV Marathon Gold & Natural Resources Fund
Part B -- The Statements of Additional Information of:
EV Classic Greater China Growth Fund
EV Marathon Greater China Growth Fund
EV Traditional Greater China Growth Fund
EV Classic Growth Fund
EV Marathon Growth Fund
EV Traditional Growth Fund
EV Marathon Gold & Natural Resources Fund
Part C -- Other Information
Signatures
Exhibit Index Required by Rule 483(a) under the Securities Act of 1933
Exhibits
This Amendment is not intended to amend the Prospectuses and Statements of
Additional Information of any Series of the Registrant not identified above.
<PAGE>
EATON VANCE GROWTH TRUST
EV CLASSIC GREATER CHINA GROWTH FUND
EV MARATHON GREATER CHINA GROWTH FUND
EV TRADITIONAL GREATER CHINA GROWTH FUND
CROSS REFERENCE SHEET
ITEMS REQUIRED BY FORM N-1A
---------------------------
<TABLE>
<CAPTION>
PART A
ITEM NO. ITEM CAPTION PROSPECTUS CAPTION
- ------ -------- -------------------------------------------------------
<S> <C> <C>
1. .............. Cover Page Cover Page
2. .............. Synopsis Shareholder and Fund Expenses
3. .............. Condensed Financial Information The Fund's Financial Highlights; Performance
Information
4. .............. General Description of Registrant The Fund's Investment Objective; The Portfolio's
Investment Opportunities in the China Region; How the
Fund and the Portfolio Invest their Assets;
Special Investment Methods and Risk Factors;
Organization of the Fund and the Portfolio
5. .............. Management of the Fund Management of the Fund and the Portfolio
5A............... Management's Discussion of Fund Not Applicable
Performance
6. .............. Capital Stock and Other Securities Organization of the Fund and the Portfolio; Reports to
Shareholders; The Lifetime Investing Account/
Distribution Options; Distributions and Taxes
7. .............. Purchase of Securities Being Offered Valuing Fund Shares; How to Buy Fund Shares;
Distribution Plan (or Service Plan for the
Traditional Fund); The Lifetime Investing Account/
Distribution Options; The Eaton Vance Exchange
Privilege; Eaton Vance Shareholder Services;
Statement of Intention and Escrow Agreement
(Traditional Fund only)
8. .............. Redemption or Repurchase How to Redeem Fund Shares
9. .............. Pending Legal Proceedings Not Applicable
<CAPTION>
PART B
ITEM NO. ITEM CAPTION STATEMENT OF ADDITIONAL INFORMATION CAPTION
- ------ -------- -------------------------------------------------------
<S> <C> <C>
10. .............. Cover Page Cover Page
11. .............. Table of Contents Table of Contents
12. .............. General Information and History Other Information
13. .............. Investment Objective and Policies Additional Information about Investment Objectives;
Investment Restrictions
14. .............. Management of the Fund Trustees and Officers; Fees and Expenses
15. .............. Control Persons and Principal Holders Control Persons and Principal Holders of Securities
of Securities
16. .............. Investment Advisory and Other Management of the Fund; Distribution Plan (or Service
Services Plan for the Traditional Fund); Custodian;
Independent Certified Public Accountants; Fees and
Expenses
17. .............. Brokerage Allocation and Other Portfolio Security Transactions; Fees and Expenses
Practices
18. .............. Capital Stock and Other Securities Other Information
19. .............. Purchase, Redemption and Pricing of Determination of Net Asset Value; Service for
Securities Being Offered Withdrawal; Services for Accumulation (Traditional
Fund only); Principal Underwriter; Distribution Plan
(or Service Plan for the Traditional Fund); Fees and
Expenses
20. .............. Tax Status Taxes
21. .............. Underwriters Principal Underwriter; Fees and Expenses
22. .............. Calculation of Performance Data Investment Performance
23. .............. Financial Statements Financial Statements
</TABLE>
<PAGE>
EATON VANCE GROWTH TRUST
EV CLASSIC GROWTH FUND
EV MARATHON GROWTH FUND
EV TRADITIONAL GROWTH FUND
CROSS REFERENCE SHEET
ITEMS REQUIRED BY FORM N-1A
---------------------------
<TABLE>
<CAPTION>
PART A
ITEM NO. ITEM CAPTION PROSPECTUS CAPTION
- ------ -------- -------------------------------------------------------
<S> <C> <C>
1. .............. Cover Page Cover Page
2. .............. Synopsis Shareholder and Fund Expenses
3. .............. Condensed Financial Information The Fund's Financial Highlights; Performance
Information
4. .............. General Description of Registrant The Fund's Investment Objective; Investment Policies
and Risks; Organization of the Fund and the Portfolio
5. .............. Management of the Fund Management of the Fund and the Portfolio
5A............... Management's Discussion of Fund Not Applicable
Performance
6. .............. Capital Stock and Other Securities Organization of the Fund and the Portfolio; Reports to
Shareholders; The Lifetime Investing Account/
Distribution Options; Distributions and Taxes
7. .............. Purchase of Securities Being Offered Valuing Fund Shares; How to Buy Fund Shares;
Distribution Plan (or Service Plan for the
Traditional Fund); The Lifetime Investing Account/
Distribution Options; The Eaton Vance Exchange
Privilege; Eaton Vance Shareholder Services;
Statement of Intention and Escrow Agreement
(Traditional Fund only)
8. .............. Redemption or Repurchase How to Redeem Fund Shares
9. .............. Pending Legal Proceedings Not Applicable
<CAPTION>
PART B
ITEM NO. ITEM CAPTION STATEMENT OF ADDITIONAL INFORMATION CAPTION
- ------ -------- -------------------------------------------------------
<S> <C> <C>
10. .............. Cover Page Cover Page
11. .............. Table of Contents Table of Contents
12. .............. General Information and History Other Information
13. .............. Investment Objective and Policies Investment Objective, Policies and Restrictions
14. .............. Management of the Fund Trustees and Officers; Fees and Expenses
15. .............. Control Persons and Principal Holders Control Persons and Principal Holders of Securities
of Securities
16. .............. Investment Advisory and Other Investment Adviser and Administrator; Distribution Plan
Services (or Service Plan for the Traditional Fund);
Custodian; Independent Certified Public Accountants;
Fees and Expenses
17. .............. Brokerage Allocation and Other Portfolio Security Transactions; Fees and Expenses
Practices
18. .............. Capital Stock and Other Securities Other Information
19. .............. Purchase, Redemption and Pricing of Determination of Net Asset Value; Service for
Securities Being Offered Withdrawal; Services for Accumulation (Traditional
Fund only); Principal Underwriter; Distribution Plan
(or Service Plan for the Traditional Fund); Fees and
Expenses
20. .............. Tax Status Taxes
21. .............. Underwriters Principal Underwriter; Fees and Expenses
22. .............. Calculation of Performance Data Investment Performance
23. .............. Financial Statements Financial Statements
</TABLE>
<PAGE>
EATON VANCE GROWTH TRUST
EV MARATHON GOLD & NATURAL RESOURCES FUND
CROSS REFERENCE SHEET
ITEMS REQUIRED BY FORM N-1A
---------------------------
<TABLE>
<CAPTION>
PART A
ITEM NO. ITEM CAPTION PROSPECTUS CAPTION
- ------ -------- -------------------------------------------------------
<S> <C> <C>
1. .............. Cover Page Cover Page
2. .............. Synopsis Shareholder and Fund Expenses
3. .............. Condensed Financial Information The Fund's Financial Highlights; Performance
Information
4. .............. General Description of Registrant The Fund's Investment Objective; How the Fund Invests
its Assets; Special Considerations; Organization of
the Fund
5. .............. Management of the Fund Management of the Fund
5A............... Management's Discussion of Fund Not Applicable
Performance
6. .............. Capital Stock and Other Securities Organization of the Fund; Reports to Shareholders; The
Lifetime Investing Account/Distribution Options;
Distributions and Taxes
7. .............. Purchase of Securities Being Offered Valuing Fund Shares; How to Buy Fund Shares;
Distribution Plan; The Lifetime Investing Account/
Distribution Options; The Eaton Vance Exchange
Privilege; Eaton Vance Shareholder Services
8. .............. Redemption or Repurchase How to Redeem Fund Shares
9. .............. Pending Legal Proceedings Not Applicable
<CAPTION>
PART B
ITEM NO. ITEM CAPTION STATEMENT OF ADDITIONAL INFORMATION CAPTION
- ------ -------- -------------------------------------------------------
<S> <C> <C>
10. .............. Cover Page Cover Page
11. .............. Table of Contents Table of Contents
12. .............. General Information and History Other Information
13. .............. Investment Objective and Policies Investment Objective and Policies; Investment
Restrictions
14. .............. Management of the Fund Trustees and Officers
15. .............. Control Persons and Principal Holders Control Persons and Principal Holders of Securities
of Securities
16. .............. Investment Advisory and Other Investment Adviser; Distribution Plan; Custodian;
Services Independent Certified Public Accountants
17. .............. Brokerage Allocation and Other Portfolio Security Transactions
Practices
18. .............. Capital Stock and Other Securities Other Information
19. .............. Purchase, Redemption and Pricing of Determination of Net Asset Value; Service for
Securities Being Offered Withdrawal; Principal Underwriter; Distribution Plan
20. .............. Tax Status Taxes
21. .............. Underwriters Principal Underwriter
22. .............. Calculation of Performance Data Investment Performance
23. .............. Financial Statements Financial Statements
</TABLE>
<PAGE>
PART A
INFORMATION REQUIRED IN A PROSPECTUS
EV CLASSIC
GREATER CHINA GROWTH FUND
- ------------------------------------------------------------------------------
EV CLASSIC GREATER CHINA GROWTH FUND (THE "FUND") IS A MUTUAL FUND SEEKING
LONG-TERM CAPITAL APPRECIATION THROUGH PURCHASE OF AN INTEREST IN A SEPARATE
INVESTMENT COMPANY WHICH INVESTS IN EQUITY SECURITIES OF COMPANIES WHICH, IN
THE OPINION OF THE INVESTMENT ADVISER, WILL BENEFIT FROM THE ECONOMIC
DEVELOPMENT AND GROWTH OF THE PEOPLE'S REPUBLIC OF CHINA. ACCORDINGLY, THE
FUND INVESTS ITS ASSETS IN GREATER CHINA GROWTH PORTFOLIO (THE "PORTFOLIO"), A
DIVERSIFIED OPEN-END INVESTMENT COMPANY HAVING THE SAME INVESTMENT OBJECTIVE
AS THE FUND, RATHER THAN BY DIRECTLY INVESTING IN AND MANAGING ITS OWN
PORTFOLIO OF SECURITIES AS WITH HISTORICALLY STRUCTURED MUTUAL FUNDS. A
SIGNIFICANT PERCENTAGE OF THE PORTFOLIO WILL BE INVESTED IN THE SECURITIES
MARKETS OF COUNTRIES IN THE CHINA REGION, INCLUDING HONG KONG, CHINA, TAIWAN,
SOUTH KOREA, SINGAPORE, MALAYSIA, THAILAND, INDONESIA AND THE PHILIPPINES. THE
FUND IS A SEPARATE SERIES OF EATON VANCE GROWTH TRUST (THE "TRUST").
Shares of the Fund are not deposits or obligations of, or guaranteed or
endorsed by, any bank or other insured depository institution, and are not
federally insured by the Federal Deposit Insurance Corporation, the Federal
Reserve Board or any other government agency. Shares of the Fund involve
investment risks, including fluctuations in value and the possible loss of
some or all of the principal investment.
This Prospectus is designed to provide you with information you should know
before investing. Please retain this document for future reference. A
Statement of Additional Information dated January 1, 1996 for the Fund, as
supplemented from time to time, has been filed with the Securities and
Exchange Commission and is incorporated herein by reference. The Statement of
Additional Information is available without charge from the Fund's principal
underwriter, Eaton Vance Distributors, Inc. (the "Principal Underwriter"), 24
Federal Street, Boston, MA 02110 (telephone (800) 225-6265). The sponsor and
manager of the Fund and the administrator of the Portfolio is Eaton Vance
Management, 24 Federal Street, Boston, MA 02110 (the "Manager"). The
Portfolio's investment adviser is Lloyd George Investment Management (Bermuda)
Limited (the "Adviser"). The principal business address of the Adviser is 3808
One Exchange Square, Central, Hong Kong.
- ------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE PAGE
<S> <C> <C> <C>
Shareholder and Fund Expenses ............................ 2 Valuing Fund Shares .................................. 19
The Fund's Financial Highlights .......................... 3 How to Buy Fund Shares ............................... 20
The Fund's Investment Objective .......................... 5 How to Redeem Fund Shares ............................ 21
The Portfolio's Investment Opportunities in Reports to Shareholders .............................. 22
the China Region ....................................... 5 The Lifetime Investing Account/Distribution
How the Fund and the Portfolio Invest their Assets........ 8 Options ............................................ 22
Special Investment Methods and Risk Factors .............. 9 The Eaton Vance Exchange Privilege ................... 23
Organization of the Fund and the Portfolio ............... 14 Eaton Vance Shareholder Services ..................... 24
Management of the Fund and the Portfolio ................. 15 Distributions and Taxes .............................. 25
Distribution Plan ........................................ 18 Performance Information .............................. 26
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
PROSPECTUS DATED JANUARY 1, 1996
<PAGE>
<TABLE>
<CAPTION>
SHAREHOLDER AND FUND EXPENSES
- -----------------------------------------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES
- -----------------------------------------------------------------------------------------------------------------
<S> <C>
Sales Charge Imposed on Purchases of Shares None
Sales Charges Imposed on Reinvested Distributions None
Fees to Exchange Shares None
Contingent Deferred Sales Charge Imposed on Redemption During the First Year (as a
percentage of redemption proceeds exclusive of all reinvestments and capital
appreciation in the account) 1.00%
ANNUAL FUND AND ALLOCATED PORTFOLIO OPERATING EXPENSES (as a percentage of
average daily net assets)
- -----------------------------------------------------------------------------------------------------------------
Management Fees (including management fees paid by the Fund and investment advisory
and administration fees paid by the Portfolio of 0.25%, 0.74% and 0.24%,
respectively) 1.23%
Rule 12b-1 Distribution (and Service) Fees 1.00%
Other Expenses 0.81%
----
Total Operating Expenses 3.04%
====
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
An investor would pay the following expenses (including a
contingent deferred sales charge in the case of redemption
during the first year after purchase) on a $1,000 investment,
assuming (a) 5% annual return and (b) redemption at the end of
each period: $41 $94 $160 $336
An investor would pay the following expenses on the same
investment, assuming (a) 5% return and (b) no redemptions: $31 $94 $160 $336
</TABLE>
NOTES:
The table and Example summarize the aggregate expenses of the Fund and the
Portfolio and are designed to help investors understand the costs and expenses
they will bear, directly or indirectly, by investing in the Fund. Information
for the Fund is based on its expenses for the most recent fiscal year.
The Fund invests exclusively in the Portfolio. The Trustees believe the
aggregate per share expenses of the Fund and the Portfolio should approximate,
and over time may be less than, the per share expenses the Fund would incur if
the Trust retained the services of an investment adviser for the Fund and the
Fund's assets were invested directly in the type of securities being held by
the Portfolio.
The Example should not be considered a representation of past or future
expenses and actual expenses may be greater or less than those shown. Federal
regulations require the Example to assume a 5% annual return, but actual
return will vary. For further information regarding the expenses of both the
Fund and the Portfolio see "The Fund's Financial Highlights", "Organization of
the Fund and the Portfolio", "Management of the Fund and the Portfolio", and
"How to Redeem Fund Shares". A long-term shareholder in the Fund may pay more
than the economic equivalent of the maximum front-end sales charge permitted
by a rule of the National Association of Securities Dealers, Inc. See
"Distribution Plan".
No contingent deferred sales charge is imposed on (a) shares purchased more
than one year prior to redemption, (b) shares acquired through the
reinvestment of distributions or (c) any appreciation in value of other shares
in the account (see "How to Redeem Fund Shares"), and no such charge is
imposed on exchanges of Fund shares for shares of one or more other funds
listed under "The Eaton Vance Exchange Privilege."
Other investment companies and investors with different distribution
arrangements and fees are investing in the Portfolio and others may do so in
the future. See "Organization of the Fund and the Portfolio".
<PAGE>
THE FUND'S FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------
The following information should be read in conjunction with the audited
financial statements included in the Fund's annual report to shareholders
which is incorporated by reference into the Statement of Additional
Information in reliance upon the report of Deloitte & Touche LLP, independent
certified public accountants, as experts in accounting and auditing. Further
information regarding the performance of the Fund is contained in the Fund's
annual report to shareholders which may be obtained without charge by
contacting the Principal Underwriter, Eaton Vance Distributors, Inc.
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEAR ENDED AUGUST 31,
-----------------------------
1995 1994*
------- -------
<S> <C> <C>
NET ASSET VALUE, beginning of period $ 9.030 $10.000
------- -------
Income (loss) from investment operations:
Net investment loss $(0.037) $(0.033)
Net realized and unrealized loss on investments (0.853) (0.937)
------- -------
Total income (loss) from investment operations $(0.890) $(0.970)
------- -------
Less distributions:
In excess of net investment income $(0.020) $ --
------- -------
NET ASSET VALUE, end of year $ 8.120 $ 9.030
======= =======
TOTAL RETURN(1) (9.85)% (9.70)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $21,208 $26,430
Ratio of net expenses to average daily net assets(2) 3.04% 2.75%+
Ratio of net investment loss to average daily net assets (0.59)% (0.74)%+
<FN>
* For the period from December 28, 1993 (start of business) to August 31, 1994.
+ Computed on an annualized basis.
(1) Total return is calculated assuming a purchase at the net asset value on the first day and a sale at the
net asset value on the last day of each period reported. Dividends and distributions, if any, are
assumed to be reinvested at the net asset value on the record date. Total return is computed on a
non-annualized basis.
(2) Includes the Fund's share of Greater China Growth Portfolio's allocated expenses.
</TABLE>
<PAGE>
[MAP PAGE]
<PAGE>
THE FUND'S INVESTMENT OBJECTIVE
- -------------------------------------------------------------------------------
THE FUND'S INVESTMENT OBJECTIVE IS TO SEEK LONG-TERM CAPITAL APPRECIATION. The
Fund seeks to meet its investment objective by investing its assets in the
Greater China Growth Portfolio (the "Portfolio"), a separate registered
investment company which invests primarily in equity securities of companies
which, in the opinion of the Adviser, will benefit from the economic
development and growth of the People's Republic of China ("China"). A
significant percentage of the Portfolio's assets will be invested in the
securities markets of countries in the China region, consisting of Hong Kong,
China, Taiwan, South Korea, Singapore, Malaysia, Thailand, Indonesia and the
Philippines (collectively, the "China Region").
The Fund is intended for long-term investors and is not intended to be a
complete investment program. A prospective investor should take into account
personal objectives and other investments when considering the purchase of
Fund shares. The Fund cannot assure achievement of its investment objective.
See "How the Fund and the Portfolio Invest their Assets" for further
information. The investment objective of the Fund and the Portfolio are
nonfundamental. See "Organization of the Fund and the Portfolio -- Special
Information on the Fund/Portfolio Investment Structure" for further
information. In addition, investments in issuers of the China Region involve
possible risks not typically associated with issuers in the United States. See
"Special Investment Methods and Risk Factors" for further information.
THE PORTFOLIO'S INVESTMENT OPPORTUNITIES IN THE CHINA REGION
- ------------------------------------------------------------------------------
THE FOLLOWING IS A GENERAL DISCUSSION OF THE ECONOMIES AND SECURITIES MARKETS
IN WHICH THE PORTFOLIO MAY INVEST. There can be no assurance that the
Portfolio will be able to capitalize on the factors described herein. Opinions
expressed herein are the good faith opinions of the Portfolio's Adviser, Lloyd
George Investment Management (Bermuda) Limited. Unless otherwise indicated,
all amounts are expressed in United States dollars.
Over the past twenty years the performance of the major Asian securities markets
has generally been better than that of markets in Europe and the United States.
In the past five years, the newly emerging securities markets of the China
Region have demonstrated significant growth in market capitalization, in numbers
of listed securities and in the volume of transactions. Over the same period,
the underlying economies of the region have grown against a background of the
high savings rates characteristic of many Asian societies and generally moderate
inflation. According to the Asian Development Bank forecasts, the economies of
Southeast Asia, excluding Japan, are forecast to grow by 7.4% in 1996.
The following graph shows the average growth in gross domestic product ("GDP")
from 1990 to 1995 for the main countries in Southeast Asia, compared with the
United States.
[GRAPHIC OMITTED: bar chart:
AVERAGE GROSS DOMESTIC PRODUCT GROWTH (1990-1995)
THAILAND 8.92%
CHINA 9.97
MAYLASIA 8.65
SINGAPORE 8.22
SOUTH KOREA 6.04
INDONESIA 6.87
TAIWAN 6.50
HONG KONG 5.18
PHILIPPINES 2.50
UNITED STATES 2.12
SOURCE: LLOYD GEORGE MANAGEMENT (HONG KONG) LIMITED]
A PARTICULARLY SIGNIFICANT FACTOR WITHIN THE REGION OVER THE LAST 13 YEARS HAS
BEEN THE INCREASING INFLUENCE WHICH CHINA HAS HAD IN THE DETERMINATION OF THE
ECONOMIC DEVELOPMENT OF CERTAIN COUNTRIES. This influence has been
principally in providing manufacturing facilities, in providing a market for
goods and services and in creating a demand for export outlets, both directly
and indirectly, through for example Hong Kong.
The stages of China's economic development are discussed below. The effect has
been an increase in economic integration among the countries in the China
Region. The links between China and Hong Kong, between China and Taiwan and
between China and other countries within the region, where there is a
significant Chinese element of the population, have by now been strengthened
to a degree which makes a reversal unlikely. Moreover, although these links
have been developed to a stage where economic co-operation in trade operates
smoothly, the full potential of the market, both in terms of domestic
consumption and of export growth, has hardly begun to be realized. It is based
upon this potential that the Manager and Adviser perceive an investment
opportunity that may be exploited by the Fund and the Portfolio.
CHINA -- CHINA'S POPULATION, ESTIMATED AT 1.3 BILLION, IS THE HIGHEST OF ANY
COUNTRY IN THE WORLD. China has had for many centuries a well deserved
reputation for being closed to foreigners, with trade with the outside world
being carried on under terms of extreme restriction and under central control.
Such conditions were maintained in the first thirty years of the Communist
regime which began in 1949; however there have been several stages of
evolution, from the institution of an industrialization program in the 1950s
to a modernization policy commencing in 1978 which combined economic
development with the beginnings of opening the country. The economic reform
plan thus begun was designed to bring in foreign investment capital and
technological skills. The result has been a move towards a more mixed economy
away from the previous centrally planned economy. The process of devolving
responsibility for all aspects of enterprise to local management and
authorities continues, even though the system of socialism with Chinese
characteristics involves considerable influence by the central government on
production and marketing.
The economic plans covering the last decade of the century include objectives
to quadruple the country's 1980 industrial and agricultural output by the year
2000, to increase the export element of the economy and to continue to open
the country with further development of the designated special investment
areas. Average annual GDP growth rate between 1989 and 1994 was 9.2%. The
current Five Year Plan anticipates an annual growth rate of 6%, but some
senior leaders have called for this to be increased significantly.
In order to attract foreign investment China has since 1978 designated certain
areas of the country where overseas investors can receive special investment
incentives and tax concessions. There are five Special Economic Zones
(Shenzhen, Shantou and Zhuhai in Guangdong Province, Xiamen in Fujian Province
and Hainan Island, which itself is a province). Fourteen coastal cities have
been designated as "open cities" and certain Open Economic Zones have been
established in coastal areas. Shanghai has established the Pudong New Area.
Twenty-seven High and New Technology Industrial Development Zones have been
approved where preferential treatment is given to enterprises which are
confirmed as technology intensive.
AS A RESULT, FOREIGN DIRECT INVESTMENT IN CHINA HAS INCREASED SUBSTANTIALLY IN
THE LAST TEN YEARS. The contracted value of foreign investment in China was
over $70.8 billion in 1994. Investment by Taiwan in Fujian Province continues
to grow. Most of Hong Kong's manufacturing investment has been in Guangdong
Province, and more than 2.5 million workers are now employed in the Province
working for Hong Kong companies.
Since the beginning of 1992, China has indicated a willingness to speed up
reform of the economy. GDP grew by 11.8% in 1994 with gross industrial output
rising by 21.4%. Most notably among the high echelons of the Chinese
leadership, Deng Xiaoping has made a number of vigorously pro-reform
statements since he visited Shenzhen in January 1992 to demonstrate support
for the way in which the province of Guangdong is conducting its affairs.
Other senior Chinese Leaders have reaffirmed the principle of economic reform.
Exports continue to rise strongly, although China remains vulnerable to United
States economic conditions and possible trade sanctions, unless it liberalizes
current import restrictions and improves its human rights record. However,
imports are also expected to rise and may outstrip exports in terms of growth
rates.
1993 figures show the extent to which Southeast China, and Guangdong Province
in particular, is ahead of the rest of the country in economic performance.
Its industrial output grew by over 50.5% during 1993; exports increased by
more than 11.8% during 1993 following a 34% growth in 1992. In 1993 Guangdong
Province accounted for some 40.7% of total exports and for more than 10.3% of
GDP although having only 5.5% of the population.
THERE ARE CURRENTLY TWO OFFICIALLY RECOGNIZED SECURITIES EXCHANGES IN CHINA --
THE SHANGHAI SECURITIES EXCHANGE WHICH OPENED IN DECEMBER 1990 AND THE
SHENZHEN STOCK EXCHANGE WHICH OPENED IN JULY 1991. Shares traded on these
Exchanges are of two types -- "A" shares which can be traded only by Chinese
investors and "B" shares which can be traded only by individuals and
corporations not resident in China.
In Shanghai, all "B" Shares are denominated in Chinese renminbi ("RMB") but
all transactions in "B" Shares must be settled in US dollars, and all
distributions made on "B" Shares are payable in US dollars, the exchange rate
being the weighted average exchange rate for the US dollar as published by the
Shanghai Foreign Exchange Adjustment Centre. In Shenzhen, the purchase and
sale prices for "B" Shares are quoted in Hong Kong dollars. Dividends and
other lawful revenue derived from "B" Shares are calculated in RMB but payable
in Hong Kong dollars, the rate of exchange being the average rate published by
the Shenzhen Foreign Exchange Adjustment Centre. There are no foreign exchange
restrictions on the repatriation of gains made on or income derived from "B"
Shares, subject to the payment of taxes imposed by China thereon.
Company law relating to companies limited by shares and regulations regarding
the issuing of shares by equity joint ventures have not yet been developed on
a national basis. The Shenzhen municipality issued regulations in 1992
relating to joint stock companies, and the Shanghai municipality has a draft
joint stock company law under review. Regulations governing the trading of
securities on both the Shenzhen and the Shanghai stock exchanges have been
issued by each municipality; there is no national securities legislation as
yet.
As of December 6, 1995, 184 companies had shares listed on The Shanghai
Securities Exchange, of which 36 also had "B" Shares listed. The total market
capitalization of the "B" shares of these companies as at that date (which
includes equities and bonds) was approximately U.S. $1.52 billion. As of the
same date, 125 companies had shares listed on The Shenzhen Stock Exchange, of
which 33 also had "B" Shares listed. The total market capitalization of the
"B" Shares at that date was approximately HK $6.41 billion (U.S. $625.6
million).
HONG KONG -- AS A TRADE ENTREPOT AND FINANCE CENTER, HONG KONG'S VIABILITY HAS
BEEN INEXORABLY LINKED TO MAINLAND CHINA SINCE THE ESTABLISHMENT OF THE COLONY
IN 1841. HONG KONG REMAINS CHINA'S LARGEST TRADE PARTNER AND ITS LEADING
FOREIGN INVESTOR. In 1995, visible trade between Hong Kong and China exceeded
$33.4 billion.
In the last two decades there has been a structural change in Hong Kong's
economy, with growth in the services sector outpacing manufacturing growth.
With more and more labor intensive manufacturing relocating to Southern China,
Hong Kong has developed its services sector, which in 1993 contributed 72.5%
of GDP.
In recent years large numbers of Hong Kong based companies have set up
factories in the southern province of Guangdong, where it is estimated that
Hong Kong companies employ between 2.5 and 3 million workers. The low cost of
setting up a factory in China and low wage rates have been the primary
attractions. While few Hong Kong companies in the service sector derive the
majority of their sales from China, activity there is increasing notably in
the construction, utilities, communications and tourism sectors. Examples
include China Light and Power, Hong Kong Telecom and Hopewell Holdings.
Although less noticeable than Hong Kong's investment in China, there has been
considerable growth in Chinese investment in Hong Kong over the last decade
and particularly in the last five years. In contrast to Japanese investment,
Chinese investment in Hong Kong typically involves the purchase of stakes in
existing companies. This has traditionally been in the banking and import/
export sectors. Recently, investment in property, manufacturing and
infrastructure projects has increased. The most active Chinese enterprise in
Hong Kong, the Bank of China Group, is the second largest banking group in
Hong Kong. Much as China has become the manufacturing capital for Hong Kong
companies, Hong Kong is the primary funding center for the development of
China through direct investment, syndicated loans, commercial paper and share
issues in Hong Kong by Chinese companies.
In view of the growing economic interaction between Hong Kong and Southern
China, it is increasingly meaningful to consider the concept of a Greater Hong
Kong economy consisting of Hong Kong and Guangdong Province, with a combined
population of 72 million and average per capita GDP of $2,130 in 1993. Given
the human, financial and technological resources in Hong Kong and the low wage
rates and infrastructural requirements of China, the economic rationale for
further integration of the two economies is considerable. In ensuring the role
of Hong Kong in the economy of Southern China, the challenge of policy makers
in Hong Kong is to see that the colony's infrastructure is capable of
accommodating the sustained 15% annual growth of the Guangdong economy, and
with it increasing trade and investment flows. Towards this end, the Hong Kong
government in 1989 unveiled PADS, the Port and Airport Development Strategy.
The project, estimated to cost $21 billion, is designed to allow Hong Kong's
cargo handling capacity to increase by four times between 1988 and 2011 and
its air traffic handling capacity to increase from 15 million passengers in
1988 to 50 million in 2011. Representatives of the Hong Kong and Chinese
governments are currently discussing the future of the PADS project and its
financing.
In the past, political considerations have hindered closer economic
integration between Hong Kong and China. It was largely in response to the
United Nations embargo on trade with China in the 1950s and 1960s that Hong
Kong developed a significant manufacturing base. In the last several years,
however, there has been an improvement in relations between China and Hong
Kong. In September 1991, Hong Kong and China concluded the Sino-British
Memorandum of Understanding, providing a framework for the PADS project. Of
even greater importance, the Basic Law, the outline for Hong Kong's government
post 1997, calls for Hong Kong's capitalist system to remain intact for an
additional fifty years after 1997 and sets out details for the integration of
Hong Kong into China after 1997.
TAIWAN -- BETWEEN 1960 AND 1994, TAIWAN'S GNP GREW FROM LESS THAN $2 BILLION
TO OVER $240 BILLION. The economic growth has been accompanied by a
transformation of domestic production from labor intensive to capital
intensive industries in the 1970s and finally to higher technology industries
in the 1980s. With over $92 billion, Taiwan has the world's largest foreign
exchange reserves. Taiwan companies continue to be attracted by China's low
labor costs, inexpensive land and less rigid environmental rules. It is
estimated that accumulated Taiwanese investment in China exceeds $3 billion.
Taiwanese listed companies include a number which invested indirectly in
China, primarily in the textiles, food and rubber industries. Given the
proximity of Taiwan to China, the cultural homogeneity and the compelling
economic incentive for further investment, the primary obstacle to greater
investment flows has been the prohibition by Taiwanese authorities of direct
investment in China. Based on discussions with Taiwanese companies and the
trend toward greater liberalization by the government of investment in China,
the Adviser believes that over the next several years the scope for investment
by Taiwanese companies in China will widen substantially and that many more
companies listed on The Taiwan Stock Exchange Corp. will have significant
interests in China.
OTHER COUNTRIES -- GIVEN THE PROXIMITY OF HONG KONG AND TAIWAN TO CHINA, AND
THEIR ETHNIC AND CULTURAL TIES, THE ADVISER BELIEVES THERE WILL BE AN INCREASE
IN THE NUMBER AND COMMITMENT OF LISTED COMPANIES IN THOSE TWO COUNTRIES DOING
BUSINESS IN CHINA. Although less visible to the public, listed companies
elsewhere in Asia are also becoming increasingly active in China.
While Guangdong Province has been the leading recipient of foreign investment
in China, there has also been considerable foreign investment by Japanese
companies in the Northeastern Provinces of Liaoning, Jilin, and Heilongiang.
As the major trading partner of these provinces, Japan is primarily
manufacturing light industrial products for re-export. Major Japanese projects
have been set up in the electronics and natural resources sectors in China.
While Thailand has been traditionally known as a recipient of foreign
investment, Chinese-managed listed companies in the banking, textiles and
packaging sectors have indicated their intention of expanding into China. In
Singapore, shipping, construction and hotel companies have been the first
sectors to do business in China while several Malaysian companies in the
manufacturing sector have invested in joint ventures in China. The Adviser
believes that growing China exposure will enhance the earnings growth of such
companies, making them attractive for investment.
See Appendix B to the Statement of Additional Information for further
information about the economic characteristics of and risks associated with
investing in China Region countries.
HOW THE FUND AND THE PORTFOLIO INVEST THEIR ASSETS
- ------------------------------------------------------------------------------
THE PORTFOLIO SEEKS TO ACHIEVE ITS OBJECTIVE THROUGH INVESTING IN A CAREFULLY
SELECTED AND CONTINUOUSLY MANAGED PORTFOLIO CONSISTING PRIMARILY OF EQUITY
SECURITIES OF COMPANIES WHICH, IN THE OPINION OF THE ADVISER, WILL BENEFIT
FROM THE ECONOMIC DEVELOPMENT AND GROWTH OF CHINA ("CHINA GROWTH COMPANIES").
A significant percentage of the Portfolio's assets will be invested in the
securities markets of countries in the China Region (or Greater China),
consisting of Hong Kong, China, Taiwan, South Korea, Singapore, Malaysia,
Thailand, Indonesia and the Philippines. The Portfolio will, under normal
market conditions, invest at least 65% of its total assets in equity
securities of China growth companies ("Greater China investments"). However,
it is expected that substantially all of the Portfolio's assets will normally
be invested in equity securities, warrants and equity options. China growth
companies consist of companies that (a) are located in or whose securities are
principally traded in a China Region country, (b)(i) have at least 50% of
their assets in one or more China Region countries or (ii) derive at least 50%
of their gross sales revenues or profits from providing goods or services to
or from within one or more China Region countries and (c)(i) have at least 35%
of their assets in China, or (ii) derive at least 35% of their gross sales
revenues or profits from providing goods or services to or from within China
or (iii) have manufacturing or other operations in China that are significant
to such companies. Greater China investments are typically listed on stock
exchanges or traded in the over-the-counter markets in countries in the China
Region. The principal offices of these companies, however, may be located
outside these countries. The Portfolio may invest 25% or more of its total
assets in the securities of issuers located in any one country in the China
Region. The Portfolio has invested more than 25% of its total assets in
issuers located in Hong Kong, but the Adviser currently expects the Portfolio
ordinarily will not invest more than 10% of its total assets in any other
country.
Equity securities, for purposes of the 65% policy, will be limited to common
and preferred stocks; equity interests in trusts, partnerships, joint ventures
and other unincorporated entities or enterprises; special classes of shares
available only to foreign investors in markets that restrict the ownership by
foreign investors to certain classes of equity securities; convertible
preferred stocks; and other convertible investment grade debt instruments. A
debt security is investment grade if it is rated BBB or above by Standard &
Poor's Ratings Group ("S&P") or Baa or above by Moody's Investors Service,
Inc. ("Moody's") or determined to be of comparable quality by the Adviser.
Debt securities rated BBB by S&P or Baa by Moody's have speculative
characteristics and changes in economic conditions or other circumstances are
more likely to lead to a weakened capacity to make principal and interest
payments than is the case with higher grade debt securities. The Portfolio
will promptly dispose of any convertible debt instrument which is rated or
determined by the Adviser to be below investment grade subsequent to
acquisition by the Portfolio. Direct investments in China growth companies
will not exceed 10% of the Portfolio's total assets. See "Special Investment
Methods and Risk Factors -- Direct Investments" for a discussion of the risks
associated with direct investments.
In addition to its investments in equity securities, the Portfolio may invest
up to 5% of its net assets in options on equity securities and up to 5% of its
net assets in warrants, including options and warrants traded in over-the-
counter markets. The Portfolio will not, under normal market conditions,
invest more than 35% of its total assets in equity securities other than
Greater China investments, warrants, options on securities and indices,
options on currency, futures contracts and options on futures, forward foreign
currency exchange contracts, currency swaps and any other non-equity
investments. See "Special Investment Methods and Risk Factors" below and the
Fund's Statement of Additional Information for a description of certain active
management techniques available to the Portfolio. The Portfolio will not
invest in debt securities, other than investment grade convertible debt
instruments, except for temporary defensive purposes, as described below. The
Portfolio will not invest more than 10% of its assets in the securities of
issuers in any country outside the China Region.
The Portfolio may, for temporary defensive purposes, invest some or all of its
total assets in debt securities of foreign and United States companies,
foreign governments and the U.S. Government, and their respective agencies,
instrumentalities, political subdivisions and authorities, as well as in high
quality money market instruments denominated in U.S. dollars or a foreign
currency.
SPECIAL INVESTMENT METHODS AND RISK FACTORS
- ------------------------------------------------------------------------------
INVESTING IN FOREIGN SECURITIES. Investing in securities issued by foreign
companies and governments involves considerations and possible risks not
typically associated with investing in securities issued by the U.S.
Government and domestic corporations. The values of foreign investments are
affected by changes in currency rates or exchange control regulations,
application of foreign tax laws, including withholding taxes, changes in
governmental administration or economic or monetary policy (in this country or
abroad) or changed circumstances in dealings between nations. Costs are
incurred in connection with conversions between various currencies. In
addition, foreign brokerage commissions and other costs of investing are
generally higher than in the United States, and foreign securities markets may
be less liquid, more volatile and less subject to governmental supervision
than in the United States. Investments in foreign issuers could be affected by
other factors not present in the United States, including expropriation,
confiscatory taxation, lack of uniform accounting and auditing standards and
potential difficulties in enforcing contractual obligations. Transactions in
the securities of foreign issuers could be subject to settlement delays.
More than 25% of the Portfolio's total assets, adjusted to reflect currency
transactions and positions, may be denominated in any single currency.
Concentration in a particular currency will increase the Portfolio's exposure
to adverse developments affecting the value of such currency. An issuer of
securities purchased by the Portfolio may be domiciled in a country other than
the country in whose currency the securities are denominated.
Since the Portfolio will, under normal market conditions, invest at least 65%
of its total assets in Greater China investments, its investment performance
will be especially affected by events affecting China Region companies. The
value and liquidity of Greater China investments may be affected favorably or
unfavorably by political, economic, fiscal, regulatory or other developments
in the China Region or neighboring regions. The extent of economic
development, political stability and market depth of different countries in
the China Region varies widely. Certain China Region countries, including
China, Indonesia, Malaysia, the Philippines and Thailand, are either
comparatively underdeveloped or in the process of becoming developed. Greater
China investments typically involve greater potential for gain or loss than
investments in securities of issuers in developed countries. In comparison to
the United States and other developed countries, developing countries may have
relatively unstable governments and economies based on only a few industries.
Given the Portfolio's investments, the Portfolio will likely be particularly
sensitive to changes in China's economy as the result of any reversals of
economic liberalization, political unrest or changes in China's trading
status.
SECURITIES TRADING MARKETS. THE SECURITIES MARKETS IN THE CHINA REGION ARE
SUBSTANTIALLY SMALLER, LESS LIQUID AND MORE VOLATILE THAN THE MAJOR SECURITIES
MARKETS IN THE UNITED STATES. A high proportion of the shares of many issuers
may be held by a limited number of persons and financial institutions, which
may limit the number of shares available for investment by the Portfolio. The
prices at which the Portfolio may acquire investments may be affected by
trading by persons with material non-public information and by securities
transactions by brokers in anticipation of transactions by the Portfolio in
particular securities. Similarly, volume and liquidity in the bond markets in
the China Region are less than in the United States and, at times, price
volatility can be greater than in the United States. The limited liquidity of
securities markets in the China Region may also affect the Portfolio's ability
to acquire or dispose of securities at the price and time it wishes to do so.
Accordingly, during periods of rising securities prices in the more illiquid
China Region securities markets, the Portfolio's ability to participate fully
in such price increases may be limited by its investment policy of investing
not more than 15% of its net assets in illiquid securities. Conversely, the
Portfolio's inability to dispose fully and promptly of positions in declining
markets will cause the Portfolio's net asset value to decline as the value of
the unsold positions is marked to lower prices. In addition, China Region
securities markets are susceptible to being influenced by large investors
trading significant blocks of securities.
The Chinese, Hong Kong and Taiwan stock markets are undergoing a period of
growth and change which may result in trading volatility and difficulties in
the settlement and recording of transactions, and in interpreting and applying
the relevant law and regulations. In particular, the securities industry in
China is not well developed. China has no securities laws of nationwide
applicability. The municipal securities regulations adopted by Shanghai and
Shenzhen municipalities are very new, as are their respective securities
exchanges and other self-regulatory organizations. In addition, Chinese
stockbrokers and other intermediaries may not perform as efficiently as their
counterparts in the United States and other more developed securities markets.
THE PORTFOLIO WILL INVEST IN CHINA REGION COUNTRIES WITH EMERGING ECONOMIES OR
SECURITIES MARKETS. Political and economic structures in many of such
countries may be undergoing significant evolution and rapid development, and
such countries may lack the social, political and economic stability
characteristic of the United States. Certain of such countries may have, in
the past, failed to recognize private property rights and have at times
nationalized or expropriated the assets of private companies. As a result, the
risks described above, including the risks of nationalization or expropriation
of assets, may be heightened. In addition, unanticipated political or social
developments may affect the values of the Portfolio's investments in those
countries and the availability to the Portfolio of additional investments in
those countries.
The exchanges on which the Portfolio may purchase securities in the China
Region which are believed to provide sufficiently liquid markets so that the
securities acquired by the Portfolio on such markets need not be considered
illiquid securities currently include: Hong Kong -- The Stock Exchange of Hong
Kong Limited; South Korea -- The Korea Stock Exchange; Malaysia -- The Kuala
Lumpur Stock Exchange; Singapore -- The Stock Exchange of Singapore Limited;
Taiwan -- The Taiwan Stock Exchange Corp.; Thailand -- The Securities Exchange
of Thailand; Indonesia -- The Jakarta Stock Exchange; Philippines -- The
Manila and Makati Stock Exchange; China -- The Shanghai Securities Exchange
and The Shenzhen Stock Exchange.
ECONOMIES OF COUNTRIES IN THE CHINA REGION MAY DIFFER FAVORABLY OR UNFAVORABLY
FROM THE U.S. ECONOMY IN SUCH RESPECTS AS RATE OF GROWTH OF GROSS NATIONAL
PRODUCT, RATE OF INFLATION, CAPITAL REINVESTMENT, RESOURCE SELF-SUFFICIENCY
AND BALANCE OF PAYMENTS POSITION. As export-driven economies, the economies of
countries in the China Region are affected by developments in the economies of
their principal trading partners. Revocation by the United States of China's
"Most Favored Nation" trading status, which the U.S. President and Congress
reconsider annually, would adversely affect the trade and economic development
of China and Hong Kong. Hong Kong and Taiwan have limited natural resources,
resulting independence on foreign sources for certain raw materials and
economic vulnerability to global fluctuations of price and supply.
China governmental actions can have a significant effect on the economic
conditions in the China Region, which could adversely affect the value and
liquidity of the Portfolio's investments. Although the Chinese Government has
recently begun to institute economic reform policies, there can be no
assurances that it will continue to pursue such policies or, if it does, that
such policies will succeed.
China does not have a comprehensive system of laws, although substantial
changes have occurred in this regard in recent years. The corporate form of
organization has only recently been permitted in China and national
regulations governing corporations were introduced only in May, 1992. Prior to
the introduction of such regulations Shanghai had adopted a set of corporate
regulations applicable to corporations located or listed in Shanghai, and the
relationship between the two sets of regulations is not clear. Consequently,
until a firmer legal basis is provided, even such fundamental corporate law
tenets as the limited liability status of Chinese issuers and their authority
to issue shares remain open to question. Laws regarding fiduciary duties of
officers and directors and the protection of shareholders are not well
developed. China's judiciary is relatively inexperienced in enforcing the laws
that exist, leading to a higher than usual degree of uncertainty as to the
outcome of any litigation. Even where adequate law exists in China, it may be
impossible to obtain swift and equitable enforcement of such law, or to obtain
enforcement of the judgment by a court of another jurisdiction. The bankruptcy
laws pertaining to state enterprises have rarely been used and are untried in
regard to an enterprise with foreign shareholders, and there can be no
assurance that such shareholders, including the Portfolio, would be able to
realize the value of the assets of the enterprise or receive payment in
convertible currency. As the Chinese legal system develops, the promulgation
of new laws, changes to existing laws and the preemption of local laws by
national laws may adversely affect foreign investors, including the Portfolio.
The uncertainties faced by foreign investors in China are exacerbated by the
fact that many laws, regulations and decrees of China are not publicly
available, but merely circulated internally.
DIRECT INVESTMENTS. The Portfolio may invest up to 10% of its total assets in
direct investments in China growth companies. Direct investments include (i)
the private purchase from an enterprise of an equity interest in the
enterprise in the form of shares of common stock or equity interests in
trusts, partnerships, joint ventures or similar enterprises, and (ii) the
purchase of such an equity interest in an enterprise from a principal investor
in the enterprise. In each case, the Portfolio will, at the time of making the
investment, enter into a shareholder or similar agreement with the enterprise
and one or more other holders of equity interests in the enterprise. The
Adviser anticipates that these agreements will, in appropriate circumstances,
provide the Portfolio with the ability to appoint a representative to the
board of directors or similar body of the enterprise and for eventual
disposition of the Portfolio's investment in the enterprise. Such a
representative of the Portfolio will be expected to provide the Portfolio with
the ability to monitor its investment and protect its rights in the investment
and will not be appointed for the purpose of exercising management or control
of the enterprise.
Certain of the Portfolio's direct investments, particularly in China, will
probably include investments in smaller, less seasoned companies. These
companies may have limited product lines, markets or financial resources, or
they may be dependent on a limited management group. The Adviser does not
anticipate making direct investments in start-up operations, although it is
expected that in some cases the Portfolio's direct investments will fund new
operations for an enterprise which itself is engaged in similar operations or
is affiliated with an organization that is engaged in similar operations. Such
direct investments may be made in entities that are reasonably expected in the
foreseeable future to become China growth companies, either by expanding
current operations or establishing significant operations in China.
Direct investments may involve a high degree of business and financial risk
that can result in substantial losses. Because of the absence of any public
trading market for these investments, the Portfolio may take longer to
liquidate these positions than would be the case for publicly traded
securities. Although these securities may be resold in privately negotiated
transactions, the prices on these sales could be less than those originally
paid by the Portfolio. Furthermore, issuers whose securities are not publicly
traded may not be subject to public disclosure and other investor protection
requirements applicable to publicly traded securities. If such securities are
required to be registered under the securities laws of one or more
jurisdictions before being resold, the Portfolio may be required to bear the
expenses of registration. In addition, in the event the Portfolio sells
unlisted securities, any capital gains realized on such transactions may be
subject to higher rates of taxation than taxes payable on the sale of listed
securities.
OTHER INVESTMENT PRACTICES The Portfolio may engage in the following
investment practices, some of which may derive their value from another
instrument, security or index. In addition, the Portfolio may temporarily
borrow up to 5% of the value of its total assets to satisfy redemption
requests or settle securities transactions.
DERIVATIVE INSTRUMENTS. The Portfolio may purchase or sell derivative
instruments (which are instruments that derive their value from another
instrument, security, index or currency) to enhance return, to hedge against
fluctuations in securities prices, interest rates or currency exchange rates,
or as a substitute for the purchase or sale of securities or currencies. The
Portfolio's transactions in derivative instruments may be in the U.S. or
abroad and may include the purchase or sale of futures contracts on
securities, securities indices, other indices, other financial instruments or
currencies; options on futures contracts; exchange-traded and over-the-counter
options on securities, indices or currencies; and forward foreign currency
exchange contracts. The Portfolio's transactions in derivative instruments
involve a risk of loss or depreciation due to unanticipated adverse changes in
securities prices, interest rates, the other financial instruments' prices or
currency exchange rates, the inability to close out a position or default by
the counterparty. The loss on derivative instruments (other than purchased
options) may exceed the Portfolio's initial investment in these instruments.
In addition, the Portfolio may lose the entire premium paid for purchased
options that expire before they can be profitably exercised by the Portfolio.
The Portfolio incurs transaction costs in opening and closing positions in
derivative instruments. There can be no assurance that the Adviser's use of
derivative instruments will be advantageous to the Portfolio.
The Portfolio may purchase call and put options on any securities in which the
Portfolio may invest or options on any securities index composed of securities
in which the Portfolio may invest. The Portfolio does not intend to write a
covered option on any security if after such transaction more than 15% of its
net assets, as measured by the aggregate value of the securities underlying
all covered calls and puts written by the Portfolio, would be subject to such
options. The Portfolio does not intend to purchase an option on any security
if, after such transaction, more than 5% of its net assets, as measured by the
aggregate of all premiums paid for all such options held by the Portfolio,
would be so invested.
To the extent that the Portfolio enters into futures contracts, options on
futures contracts and options on foreign currencies traded on an exchange
regulated by the Commodity Futures Trading Commission ("CFTC"), in each case
that are not for bona fide hedging purposes (as defined by the CFTC), the
aggregate initial margin and premiums required to establish these positions
(excluding the amount by which options are "in-the-money") may not exceed 5%
of the liquidation value of the Portfolio's portfolio, after taking into
account unrealized profits and unrealized losses on any contracts the
Portfolio has entered into.
Forward contracts are individually negotiated and privately traded by currency
traders and their customers. A forward contract involves an obligation to
purchase or sell a specific currency (or basket of currencies) for an agreed
price at a future date, which may be any fixed number of days from the date of
the contract. The Portfolio may engage in cross-hedging by using forward
contracts in one currency (or basket of currencies) to hedge against
fluctuations in the value of securities denominated in a different currency if
the Adviser determines that there is an established historical pattern of
correlation between the two currencies (or the basket of currencies and the
underlying currency). Use of a different foreign currency magnifies the
Portfolio's exposure to foreign currency exchange rate fluctuations. The
Portfolio may also use forward contracts to shift its exposure to foreign
currency exchange rate changes from one currency to another.
The Portfolio may enter into currency swaps for both hedging and non-hedging
purposes. Currency swaps involve the exchange of rights to make or receive
payments in specified currencies. Since currency swaps are individually
negotiated, the Portfolio expects to achieve an acceptable degree of
correlation between its portfolio investments and its currency swap positions.
Currency swaps usually involve the delivery of the entire principal value of
one designated currency in exchange for the other designated
currency. Therefore, the entire principal value of a currency swap is subject
to the risk that the other party to the swap will default on its contractual
delivery obligations. The use of currency swaps is a highly specialized
activity which involves special investment techniques and risks. If the
Adviser is incorrect in its forecasts of market values and currency exchange
rates, the Portfolio's performance will be adversely affected.
LENDING OF PORTFOLIO SECURITIES. The Portfolio may seek to earn additional
income by lending portfolio securities to broker-dealers or other
institutional borrowers. As with other extensions of credit there are risks of
delay in recovery or even loss of rights in the securities loaned if the
borrower of the securities fails financially. However, the loans will be made
only to organizations deemed by the Adviser to be sufficiently creditworthy
and when, in the judgment of the Adviser, the consideration which can be
earned from securities loans of this type justifies the attendant risk.
REPURCHASE AGREEMENTS. The Portfolio may enter into repurchase agreements with
respect to its permitted investments, but currently intends to do so only with
member banks of the Federal Reserve System or with primary dealers in U.S.
Government securities. In the event of the bankruptcy of the other party to a
repurchase agreement, the Portfolio might experience delays in recovering its
cash. To the extent that, in the meantime, the value of the securities the
Portfolio purchased may have decreased, the Portfolio could experience a loss.
At no time will the Portfolio commit more than 15% of its net assets to
repurchase agreements which mature in more than seven days and other illiquid
securities.
OTHER INVESTMENT COMPANIES. The Portfolio reserves the right to invest up to
10% of its total assets, calculated at the time of purchase, in the securities
of other investment companies unaffiliated with the Adviser or the Manager
that have the characteristics of closed-end investment companies. The
Portfolio may not invest more than 5% of its total assets in the securities of
any one investment company or acquire more than 3% of the voting securities of
any other investment company. The Portfolio will indirectly bear its
proportionate share of any management fees paid by investment companies in
which it invests in addition to the advisory fee paid by the Portfolio. The
value of closed-end investment company securities, which are usually traded on
an exchange, is affected by demand for the securities themselves, independent
of the demand for the underlying portfolio assets and, accordingly, such
securities can trade at a discount from their net asset values.
PORTFOLIO TURNOVER. While it is the policy of the Portfolio to seek long-term
capital appreciation, and generally not to engage in trading for short-term
gains, the Portfolio will effect portfolio transactions without regard to its
holding period if, in the judgment of the Adviser, such transactions are
advisable in light of a change in circumstances of a particular company or
within a particular industry, or in light of general market, economic or
political conditions. Accordingly, the Portfolio may engage in short-term
trading under such circumstances. Portfolio expenses increase with turnover of
securities. It is anticipated that the annual portfolio turnover rate of the
Portfolio will be not more than 100%.
CERTAIN INVESTMENT POLICIES. The Fund and the Portfolio have adopted certain
fundamental investment restrictions and policies which are enumerated in
detail in the Statement of Additional Information and which may not be changed
unless authorized by a shareholder vote and an investor vote, respectively.
Among these fundamental restrictions, neither the Fund nor the Portfolio may
(1) borrow money except from banks or through reverse repurchase agreements
and in an amount not exceeding one-third of its total assets; or (2) with
respect to 75% of its total assets, invest more than 5% of its total assets in
the securities of any one issuer, other than U.S. Government securities or, in
the case of the Fund, interests in the Portfolio, or acquire more than 10% of
the outstanding voting securities of any one issuer. Except with respect to
the Portfolio's borrowing limitation, investment restrictions are considered
at the time of acquisition of assets; the sale of portfolio assets is not
required in the event of a subsequent change in circumstances. As a matter of
fundamental policy the Portfolio will invest less than 25% of its total assets
in the securities, other than U.S. Government securities, of issuers in any
one industry. However, the Portfolio is permitted to invest 25% or more of its
total assets in (i) the securities of issuers located in any one country in
the China Region and (ii) assets denominated in the currency of any one
country.
Except for the fundamental investment restrictions and policies specifically
identified above and those enumerated in the Statement of Additional
Information, the investment objective and policies of the Fund and the
Portfolio are not fundamental policies and accordingly may be changed by the
Trustees of the Trust and the Portfolio without obtaining the approval of the
shareholders of the Fund or the investors in the Portfolio, as the case may
be. If any changes were made, the Fund might have investment objectives
different from the objectives which an investor considered appropriate at the
time the investor became a shareholder in the Fund. As a matter of
nonfundamental policy, neither the Fund nor the Portfolio (i) intends to
borrow for leverage purposes or may purchase any securities if, at the time of
such purchase, permitted borrowings exceed 5% of the value of the Portfolio's
or the Fund's total assets, as the case may be, or (ii) is permitted to invest
more than 15% of its net assets in unmarketable securities, over-the-counter
options, repurchase agreements maturing in more than seven days and other
illiquid securities.
Under the 1940 Act and the rules promulgated thereunder, the Portfolio's
investments in the securities of any company that, in its most recent fiscal
year, derived more than 15% of its gross revenues from securities-related
activities is limited to 5% of any class of the issuer's equity securities and
10% of the outstanding principal amount of the issuer's debt securities,
provided that the Portfolio's aggregate investments in the securities of any
such issuer do not exceed 5% of the Portfolio's total assets. Some of the
companies available for investment in China and the China Region, including
enterprises being privatized by such countries, may be financial services
businesses that engage in securities-related activities. The Portfolio's
ability to invest in such enterprises may thus be limited.
ORGANIZATION OF THE FUND AND THE PORTFOLIO
- ------------------------------------------------------------------------------
THE FUND IS A DIVERSIFIED SERIES OF EATON VANCE GROWTH TRUST (THE "TRUST"), A
BUSINESS TRUST ESTABLISHED UNDER MASSACHUSETTS LAW PURSUANT TO A DECLARATION
OF TRUST DATED MAY 25, 1989, AS AMENDED, AND IS THE SUCCESSOR TO A
MASSACHUSETTS CORPORATION WHICH COMMENCED ITS INVESTMENT COMPANY OPERATIONS IN
1954. THE TRUST IS A MUTUAL FUND -- AN OPEN-END MANAGEMENT INVESTMENT COMPANY.
The Trustees of the Trust are responsible for the overall management and
supervision of its affairs. The Trust may issue an unlimited number of shares
of beneficial interest (no par value per share) in one or more series and
because the Trust can offer separate series (such as the Fund) it is known as
a "series company". Each share represents an equal proportionate beneficial
interest in the Fund. When issued and outstanding, the shares are fully paid
and nonassessable by the Trust and redeemable as described under "How to
Redeem Fund Shares." Shareholders are entitled to one vote for each full share
held. Fractional shares may be voted proportionately. Shares have no
preemptive or conversion rights and are freely transferable. In the event of
the liquidation of the Fund, shareholders are entitled to share pro rata in
the net assets of the Fund available for distribution to shareholders.
THE PORTFOLIO IS ORGANIZED AS A TRUST UNDER THE LAWS OF THE STATE OF NEW YORK
AND INTENDS TO BE TREATED AS A PARTNERSHIP FOR FEDERAL TAX PURPOSES. The
Portfolio, as well as the Trust, intends to comply with all applicable federal
and state securities laws. The Portfolio's Declaration of Trust provides that
the Fund and other entities permitted to invest in the Portfolio (e.g., other
U.S. and foreign investment companies and common and commingled trust funds)
will each be liable for all obligations of the Portfolio. However, the risk of
the Fund incurring financial loss on account of such liability is limited to
circumstances in which both inadequate insurance exists and the Portfolio
itself is unable to meet its obligations. Accordingly, the Trustees of the
Trust believe that neither the Fund nor its shareholders will be adversely
affected by reason of the Fund investing in the Portfolio.
SPECIAL INFORMATION ON THE FUND/PORTFOLIO INVESTMENT STRUCTURE. An investor in
the Fund should be aware that the Fund, unlike mutual funds which directly
acquire and manage their own portfolios of securities, seeks to achieve its
investment objective by investing its assets in an interest in the Portfolio
(although the Fund may temporarily hold a de minimus amount of cash), which is
a separate investment company with an identical investment objective.
Therefore, the Fund's interest in the securities owned by the Portfolio is
indirect. In addition to selling an interest to the Fund, the Portfolio may
sell interests to other affiliated and non-affiliated mutual funds or
institutional investors. Such investors will invest in the Portfolio on the
same terms and conditions and will pay a proportionate share of the
Portfolio's expenses. However, the other investors investing in the Portfolio
are not required to sell their shares at the same public offering price as the
Fund due to variations in sales commissions and other operating expenses.
Therefore, investors in the Fund should be aware that these differences may
result in differences in returns experienced by investors in the various funds
that invest in the Portfolio. Such differences in returns are also present in
other mutual fund structures, including funds that have multiple classes of
shares. For information regarding the investment objective, policies and
restrictions of the Portfolio, see "The Fund's Investment Objective", "How the
Fund and the Portfolio Invest their Assets" and "Special Investment Methods
and Risk Factors." Further information regarding investment practices may be
found in the Statement of Additional Information.
The Trustees of the Trust have considered the advantages and disadvantages of
investing the assets of the Fund in the Portfolio, as well as the advantages
and disadvantages of the two-tier format. The Trustees believe that the
structure offers opportunities for substantial growth in the assets of the
Portfolio, and affords the potential for economies of scale for the Fund, at
least when the assets of the Portfolio exceed $500 million.
The Fund may withdraw (completely redeem) all its assets from the Portfolio at
any time if the Board of Trustees of the Trust determines that it is in the
best interest of the Fund to do so. The investment objective and the
nonfundamental investment policies of the Fund and the Portfolio may be
changed by the Trustees of the Trust and the Portfolio without obtaining the
approval of the shareholders of the Fund or the investors in the Portfolio, as
the case may be. Any such change of the investment objective will be preceded
by thirty days' advance written notice to the shareholders of the Fund or the
investors in the Portfolio, as the case may be. If a shareholder redeems
shares within one year of their purchase because of a change in the
nonfundamental objective or policies of the Fund, those shares may be subject
to a contingent deferred sales charge as described in "How to Redeem Fund
Shares." In the event the Fund withdraws all of its assets from the Portfolio,
or the Board of Trustees of the Trust determines that the investment objective
of the Portfolio is no longer consistent with the investment objective of the
Fund, such Trustees would consider what action might be taken, including
investing the assets of the Fund in another pooled investment entity or
retaining an investment adviser to manage the Fund's assets in accordance with
its investment objective. The Fund's investment performance may be affected by
a withdrawal of all its assets from the Portfolio.
Information regarding the availability of other pooled investment entities or
funds which invest in the Portfolio may be obtained by contacting Eaton Vance
Distributors, Inc. (the "Principal Underwriter" or "EVD"), 24 Federal Street,
Boston, MA 02110 (617) 482-8260. Smaller investors in the Portfolio may be
adversely affected by the actions of a larger investor in the Portfolio. For
example, if a large investor withdraws from the Portfolio, the remaining
investors may experience higher pro rata operating expenses, thereby producing
lower returns. Additionally, the Portfolio may become less diverse, resulting
in increased portfolio risk, and experience decreasing economies of scale.
However, this possibility exists as well for historically structured funds
which have large or institutional investors.
Until 1992, the Manager sponsored and advised historically structured funds.
Funds which invest all their assets in interests in a separate investment
company are a relatively new development in the mutual fund industry and,
therefore, the Fund may be subject to additional regulations than historically
structured funds.
The Declaration of Trust of the Portfolio provides that the Portfolio will
terminate 120 days after the complete withdrawal of the Fund or any other
investor in the Portfolio, unless either the remaining investors, by unanimous
vote at a meeting of such investors, or a majority of the Trustees of the
Portfolio, by written instrument consented to by all investors, agree to
continue the business of the Portfolio. This provision is consistent with
treatment of the Portfolio as a partnership for federal income tax purposes.
See "Distributions and Taxes" for further information. Whenever the Fund as an
investor in the Portfolio is requested to vote on matters pertaining to the
Portfolio (other than the termination of the Portfolio's business, which may
be determined by the Trustees of the Portfolio without investor approval), the
Fund will hold a meeting of Fund shareholders and will vote its interest in
the Portfolio for or against such matters proportionately to the instructions
to vote for or against such matters received from Fund shareholders. The Fund
shall vote shares for which it receives no voting instructions in the same
proportion as the shares for which it receives voting instructions. Other
investors in the Portfolio may alone or collectively acquire sufficient voting
interests in the Portfolio to control matters relating to the operation of the
Portfolio, which may require the Fund to withdraw its investment in the
Portfolio or take other appropriate action. Any such withdrawal could result
in a distribution "in kind" of portfolio securities (as opposed to a cash
distribution from the Portfolio). If securities are distributed, a Fund could
incur brokerage, tax or other charges in converting the securities to cash. In
addition, the distribution in kind may result in a less diversified portfolio
of investments or adversely affect the liquidity of such Fund. Notwithstanding
the above, there are other means for meeting shareholder redemption requests,
such as borrowing.
One independent Trustee of the Portfolio also serves as a Trustee of the
Trust. The Trustees of the Trust, including a majority of the noninterested
Trustees, have approved written procedures designed to identify and address
any potential conflicts of interest which might arise as a result of the
existence of one common independent Trustee on the two Boards. For further
information concerning the Trustees and officers of each of the Trust and the
Portfolio, see the Statement of Additional Information.
MANAGEMENT OF THE FUND AND THE PORTFOLIO
- ------------------------------------------------------------------------------
EATON VANCE MANAGEMENT ("EATON VANCE") ACTS AS THE SPONSOR AND MANAGER OF THE
FUND AND THE ADMINISTRATOR OF THE PORTFOLIO. THE PORTFOLIO HAS ENGAGED LLOYD
GEORGE MANAGEMENT (HONG KONG) LIMITED ("LGM-HK") AS ITS INVESTMENT ADVISER.
Pursuant to a service agreement effective on January 1, 1996 between LGM-HK
and its affiliate Lloyd George Investment Management (Bermuda) Limited ("LGIM-
B"), LGIM-B, acting under the general supervision of the Portfolio's Trustees,
manages the Portfolio's investments and affairs. LGM-HK supervises LGIM-B's
performance of this function and retains its contractual obligations under its
investment advisory agreement with the Portfolio. LGM-HK and LGIM-B are
referred to collectively as the Advisers. The Portfolio is co-managed by
Robert Lloyd George and Scobie Dickinson Ward.
Each Adviser is registered as an investment adviser with the Securities and
Exchange Commission (the "Commission"). Each Adviser is a subsidiary of Lloyd
George Management (B.V.I.) Limited ("LGM"). LGM and its subsidiaries act as
investment adviser to various individual and institutional clients with total
assets under management of more than $1 billion. Eaton Vance's parent, Eaton
Vance Corp., owns 24% of the Class A shares issued by LGM.
LGM was established in 1991 to provide investment management services with
respect to equity securities of companies trading in Asian securities markets,
especially those of emerging markets. LGM currently manages Pacific Basin and
Asian portfolios for both private clients and institutional investors seeking
long-term capital growth. LGM's core investment team consists of nine
experienced investment professionals, based in Hong Kong, who have worked
together over a number of years successfully managing client portfolios in
Pacific Basin and Asian stock markets. LGM also has offices in Bombay, India
and London, England. The team has a unique knowledge of, and experience with,
Pacific Basin and Asian emerging markets. LGM is ultimately controlled by the
Hon. Robert J.D. Lloyd George, President and Trustee of the Portfolio and
Chairman and Chief Executive Officer of the Advisers. LGM's only activity is
portfolio management.
LGM and the Advisers have adopted a disciplined management style, providing a
blend of Asian and multinational expertise with the most rigorous
international standards of fundamental security analysis. Although focused
primarily in Asia, LGM and the Advisers maintain a network of international
contacts in order to monitor international economic and stock market trends
and offer clients a global management service.
THE HONOURABLE ROBERT LLOYD GEORGE. Chairman. Born in London in 1952 and
educated at Eton College, where he was a King's Scholar, and at Oxford
University. Prior to founding LGM, Mr. Lloyd George was Managing Director of
Indosuez Asia Investment Services Ltd. Previously, he spent four years with
the Fiduciary Trust Company of New York researching international securities,
in the United States and Europe, for the United Nations Pension Fund. Mr.
Lloyd George is the author of numerous published articles and three books --
"A Guide to Asian Stock Markets" (Longmans, Hong Kong, 1989), "The East West
Pendulum" (Woodhead-Faulkner, Cambridge, 1991) and "North South - an Emerging
Markets Handbook" (Probus, England, 1994).
WILLIAM WALTER RALEIGH KERR. Finance Director and Chief Operating Officer.
Born in 1950 and educated at Ampleforth and Oxford. Mr. Kerr qualified as a
Chartered Accountant at Thomson McLintock & Co. before joining The Oldham
Estate Company plc as Financial Controller. Prior to joining LGM, Mr. Kerr was
a Director of Banque Indosuez's corporate finance subsidiary, Financiere
Indosuez Limited, in London. Prior to that Mr. Kerr worked for First Chicago
Limited.
SCOBIE DICKINSON WARD. Director. Born in 1966 and a cum laude graduate of both
Phillips Academy Andover, and Harvard College. Mr. Ward joined Indosuez Asia
Investment Services in 1989, where he managed the $100 million Himalayan Fund,
and the Indosuez Tasman Fund, investing in Australia and New Zealand. Messrs.
Ward and Lloyd George manage Eaton Vance's Emerging Markets Portfolio and
South Asia Portfolio (which invests in India and the Indian subcontinent).
M. F. TANG. Director. Born in 1946 and educated in Hong Kong. Mr. Tang is a
Fellow of the Chartered Association of Certified Accountants. Mr. Tang joined
LGM having worked for Australian Mutual Provident Society in Sydney where he
was a Portfolio Manager responsible for Asian Equities. Prior thereto Mr. Tang
worked for Barclays Australia Investment Services Ltd. From 1978 to 1986 Mr.
Tang worked for Barings International Investment Management and prior to that
he spent six years with Peat Marwick Mitchell & Co. Mr. Tang is fluent in the
Cantonese and Mandarin dialects of the Chinese language.
PAMELA CHAN. Director. Born in Hong Kong in 1957 and graduated from Mills
College in Oakland, California. She was an investment executive for Jardine
Fleming from 1982-1984 before moving to Australia where she worked as a Fund
Manager for Rothschild and Aetna. She joined Sun Life Assurance Society PLC in
England in 1987 where she was the head of South East Asian Equities and a
Director. She joined LGM in April 1994 where she is a portfolio manager and a
member of the Pension Management Committee.
ADALINE MANG-YEE KO. Director. Born in 1943 and educated at University of
Birmingham, England and at London Business School where she received her MBA.
Ms. Ko has over 13 years experience working with Far East Asian equities. From
1982-1988, she worked at Save & Prosper Group Ltd. as an investment manager.
In 1988, Ms. Ko transferred to Robert Fleming & Co. Ltd. In 1990, she was
promoted to Director of Fleming Investment Management Ltd. In 1992, she was
promoted to Head of the Pacific Region Portfolios Group where she supervised a
team of 5 with responsibility for over $1.5 billion in assets under
management. Ms. Ko joined LGM in 1995.
Effective January 1, 1996, LGM-HK will pay to LGIM-B the entire amount of the
advisory fee payable by the Portfolio under its investment advisory agreement
with LGM-HK. Under this agreement, LGM-HK is entitled to receive a monthly
advisory fee of 0.0625% (equivalent to 0.75% annually) of the average daily
net assets of the Portfolio up to $500 million, which fee declines at
intervals above $500 million. As at August 31, 1995, the Portfolio had net
assets of $590,417,058. For the fiscal year ended August 31, 1995, the
Portfolio paid LGM-HK advisory fees equivalent to 0.74% of the Portfolio's
average daily net assets for such period.
LGIM-B also furnishes for the use of the Portfolio office space and all
necessary office facilities, equipment and personnel for servicing the
investments of the Portfolio. LGIM-B places the portfolio securities
transactions of the Portfolio with many broker-dealer firms and uses its best
efforts to obtain execution of such transactions at prices which are
advantageous to the Portfolio and at reasonably competitive commission rates.
Subject to the foregoing, LGIM-B may consider sales of shares of the Fund as a
factor in the selection of firms to execute portfolio transactions.
EATON VANCE, ITS AFFILIATES AND ITS PREDECESSOR COMPANIES HAVE BEEN MANAGING
ASSETS OF INDIVIDUALS AND INSTITUTIONS SINCE 1924, AND MANAGING INVESTMENT
COMPANIES SINCE 1931. EATON VANCE ACTS AS INVESTMENT ADVISER TO INVESTMENT
COMPANIES AND VARIOUS INDIVIDUAL AND INSTITUTIONAL CLIENTS WITH ASSETS UNDER
MANAGEMENT OF APPROXIMATELY $16 BILLION. Eaton Vance is a wholly-owned
subsidiary of Eaton Vance Corp., a publicly held holding company. Eaton Vance
Corp., through its subsidiaries and affiliates, engages in investment
management and marketing activities, fiduciary and banking services, oil and
gas operations, real estate investment, consulting and management, and
development of precious metals properties. Eaton Vance Corp. also owns 24% of
the Class A shares issued by LGM.
Eaton Vance, acting under the general supervision of the Boards of Trustees of
the Trust and the Portfolio, manages and administers the business affairs of
the Fund and the Portfolio. Eaton Vance's services include monitoring and
providing reports to the Trustees of the Trust and the Portfolio concerning
the investment performance achieved by the Adviser for the Portfolio,
recordkeeping, preparation and filing of documents required to comply with
federal and state securities laws, supervising the activities of the transfer
agent of the Fund and the custodian of the Portfolio, providing assistance in
connection with Trustees' and shareholders' meetings and other management and
administrative services necessary to conduct the business of the Fund and the
Portfolio. Eaton Vance does not provide any investment management or advisory
services to the Portfolio or the Fund. Eaton Vance also furnishes for the use
of the Fund and the Portfolio office space and all necessary office
facilities, equipment and personnel for managing and administering the
business affairs of the Fund and the Portfolio.
Under its management contract with the Fund, Eaton Vance receives a monthly
fee in the amount of 1/48 of 1% (equal to 0.25% annually) of the average
daily net assets of the Fund up to $500 million, which fee declines at
intervals above $500 million. As of August 31, 1995, the Fund had net assets
of $21,207,646. For the fiscal year ended August 31, 1995, Eaton Vance earned
management fees equivalent to 0.25% of the Fund's average daily net assets for
such period. In addition, under its administration agreement with the
Portfolio, Eaton Vance receives a monthly fee in the amount of 1/48 of 1%
(equal to 0.25% annually) of the average daily net assets of the Portfolio up
to $500 million, which fee declines at intervals above $500 million. For the
fiscal year ended August 31, 1995, Eaton Vance earned administration fees from
the Portfolio equivalent to 0.24% of the Portfolio's average daily net assets
for such period. The combined advisory, management and administration fees
payable by the Fund and the Portfolio are higher than similar fees charged by
most other investment companies.
The Fund and the Portfolio, as the case may be, will each be responsible for
all respective costs and expenses not expressly stated to be payable by the
Advisers under the investment advisory agreement and Eaton Vance under the
management contract or the administration agreement.
DISTRIBUTION PLAN
- ------------------------------------------------------------------------------
THE FUND FINANCES DISTRIBUTION ACTIVITIES AND HAS ADOPTED A DISTRIBUTION PLAN
(THE"PLAN") PURSUANT TO RULE 12B-1 UNDER THE INVESTMENT COMPANY ACT OF 1940
(THE "1940 ACT"). Rule 12b-1 permits a mutual fund, such as the Fund, to
finance distribution activities and bear expenses associated with the
distribution of its shares provided that any payments made by the Fund are
made pursuant to a written plan adopted in accordance with the Rule. The Plan
is subject to and complies with, the sales charge rule of the National
Association of Securities Dealers, Inc. (the "NASD Rule"). The Plan is
described further in the Statement of Additional Information, and the
following is a description of the salient features of the Plan. The Plan
provides that the Fund, subject to the NASD Rule, will pay sales commissions
and distribution fees to the Principal Underwriter only after and as a result
of the sale of shares of the Fund. On each sale of Fund shares (excluding
reinvestment of distributions) the Fund will pay the Principal Underwriter
amounts representing (i) sales commissions equal to 6.25% of the amount
received by the Fund for each share sold and (ii) distribution fees calculated
by applying the rate of 1% over the prime rate then reported in The Wall
Street Journal to the outstanding balance of Uncovered Distribution Charges
(as described below) of the Principal Underwriter. On sales of shares made
prior to January 30, 1995, the Principal Underwriter currently pays monthly
sales commissions to a financial service firm (an "Authorized Firm") in
amounts anticipated to be equivalent to .75%, annualized, of the assets
maintained in the Fund by the customers of such Firm. On sales of shares made
on January 30, 1995 and thereafter, the Principal Underwriter currently
expects to pay to an Authorized Firm (a) sales commissions (except on exchange
transactions and reinvestments) at the time of sale equal to .75% of the
purchase price of the shares sold by such Firm, and (b) monthly sales
commissions approximately equivalent to 1/12 of .75% of the value of shares
sold by such Firm and remaining outstanding for at least one year. The Plan is
designed to permit an investor to purchase Fund shares through an Authorized
Firm without incurring an initial sales charge and at the same time permit the
Principal Underwriter to compensate Authorized Firms in connection with the
sale of Fund shares.
THE NASD RULE REQUIRES THE FUND TO LIMIT ITS ANNUAL PAYMENTS OF SALES
COMMISSIONS AND DISTRIBUTION FEES TO AN AMOUNT NOT EXCEEDING .75% OF THE
FUND'S AVERAGE DAILY NET ASSETS FOR EACH FISCAL YEAR. Accordingly, the Fund
accrues daily an amount at the rate of 1/365 of .75% of the Fund's net
assets, and pays such accrued amounts monthly to the Principal Underwriter.
The Plan requires such accruals to be automatically discontinued during any
period in which there are no outstanding Uncovered Distribution Charges under
the Plan. Uncovered Distribution Charges are calculated daily and, briefly,
are equivalent to all unpaid sales commissions and distribution fees to which
the Principal Underwriter is entitled under the Plan less all contingent
deferred sales charges theretofore paid to the Principal Underwriter and less
all amounts theretofore paid to the Principal Underwriter by LGIM-B in
consideration of the former's distribution efforts. The Eaton Vance
organization may be considered to have realized a profit under the Plan if at
any point in time the aggregate amounts of all payments made to the Principal
Underwriter pursuant to the Fund's Plan and from LGIM-B in consideration of
the distribution efforts, including any contingent deferred sales charges,
have exceeded the total expenses theretofore incurred by such organization in
distributing shares of the Fund. Total expenses for this purpose will include
an allocable portion of the overhead costs of such organization and its branch
offices.
Because of the NASD Rule limitation on the amount of sales commissions and
distribution fees paid during any fiscal year, a high level of sales of Fund
shares during the initial years of the Fund's operations would cause a large
portion of the sales commissions attributable to a sale of Fund shares to be
accrued and paid by the Fund to the Principal Underwriter in fiscal years
subsequent to the year in which such shares were sold. This spreading of sales
commissions payments under the Plan over an extended period would result in
the incurrence and payment of increased distribution fees under the Plan.
During the fiscal year ended August 31, 1995, the Fund paid or accrued sales
commissions under the Plan equivalent to .75% (annualized) of the Fund's
average daily net assets. As at August 31, 1995, the outstanding Uncovered
Distribution Charges of the Principal Underwriter calculated under the Plan
amounted to approximately $574,000 (which amount was equivalent to 2.7% of the
Fund's net assets on such day).
THE PLAN ALSO AUTHORIZES THE FUND TO MAKE PAYMENTS OF SERVICE FEES TO THE
PRINCIPAL UNDERWRITER, AUTHORIZED FIRMS AND OTHER PERSONS IN AMOUNTS NOT
EXCEEDING .25% OF THE FUND'S AVERAGE DAILY NET ASSETS FOR EACH FISCAL YEAR.
The Trustees of the Trust have initially implemented this provision of the
Plan by authorizing the Fund to make monthly service fee payments to the
Principal Underwriter in amounts not expected to exceed .25% of the Fund's
average daily net assets for each fiscal year. The Fund accrues the service
fee daily at the rate of 1/365 of .25% of the Fund's net assets. On sales of
shares made prior to January 30, 1995, the Principal Underwriter currently
makes monthly service fee payments to an Authorized Firm in amounts
anticipated to be equivalent to .25%, annualized, of the assets maintained in
the Fund by the customers of such Firm. On sales of shares made on January 30,
1995 and thereafter, the Principal Underwriter currently expects to pay to an
Authorized Firm (a) a service fee (except on exchange transactions and
reinvestments) at the time of sale equal to .25% of the purchase price of the
shares sold by such Firm, and (b) monthly service fees approximately
equivalent to 1/12 of .25% of the value of shares sold by such Firm and
remaining outstanding for at least one year. During the first year after a
purchase of Fund shares, the Principal Underwriter will retain the service fee
as reimbursement for the service fee payment made to the Authorized Firm at
the time of sale. As permitted by the NASD Rule, all service fee payments are
made for personal services and/or the maintenance of shareholder accounts.
Service fees are separate and distinct from the sales commissions and
distribution fees payable by the Fund to the Principal Underwriter, and as
such are not subject to automatic discontinuance when there are no outstanding
Uncovered Distribution Charges of the Principal Underwriter. For the fiscal
year ended August 31, 1995, the Fund paid or accrued service fees under the
Plan equivalent to 0.25% (annualized) of the Fund's average daily net assets
for such period.
The Principal Underwriter may, from time to time, at its own expense, provide
additional incentives to Authorized Firms which employ registered
representatives who sell the Fund's shares and/or shares of other funds
distributed by the Principal Underwriter. In some instances, such additional
incentives may be offered only to certain Authorized Firms whose
representatives sell or are expected to sell significant amounts of shares. In
addition, the Principal Underwriter may from time to time increase or decrease
the sales commissions payable to Authorized Firms.
Distribution of Fund shares by the Principal Underwriter will also be
encouraged by the payment by LGIM-B to the Principal Underwriter of amounts
equivalent to .125% of the Fund's annual average daily net assets. Such
payments will be made from LGIM-B's own resources, not Fund assets. The
aggregate amounts of such payments are a deduction in calculating the
outstanding Uncovered Distribution Charges of the Principal Underwriter under
the Plan and, therefore, will benefit Fund shareholders when such charges
exist. Such payments will be made in consideration of the Principal
Underwriter's distribution efforts.
The Fund may, in its absolute discretion, suspend, discontinue or limit the
offering of its shares at any time. In determining whether any such action
should be taken, the Fund's management intends to consider all relevant
factors, including without limitation the size of the Fund, the investment
climate and market conditions, and the volume of sales and redemptions of Fund
shares and the amount of Uncovered Distribution Charges of the Principal
Underwriter. The Plan may continue in effect and payments may be made under
the Plan following any such suspension, discontinuance or limitation of the
offering of Fund shares; however, the Fund is not contractually obligated to
continue the Plan for any particular period of time. Suspension of the
offering of Fund shares would not, of course, affect a shareholder's ability
to redeem shares.
VALUING FUND SHARES
- ------------------------------------------------------------------------------
THE FUND VALUES ITS SHARES ONCE ON EACH DAY THE NEW YORK STOCK EXCHANGE (THE
"EXCHANGE") IS OPEN FOR TRADING, as of the close of regular trading on the
Exchange (normally 4:00 p.m. New York time). The Fund's net asset value per
share is determined by its custodian, Investors Bank & Trust Company ("IBT"),
(as agent for the Fund), in the manner authorized by the Trustees of the
Trust. Net asset value is computed by dividing the value of the Fund's total
assets, less its liabilities, by the number of shares outstanding. Because the
Fund invests its assets in an interest in the Portfolio, the Fund's net asset
value will reflect the value of its interest in the Portfolio (which, in turn,
reflects the underlying value of the Portfolio's assets and liabilities).
Authorized Firms must communicate an investor's order to the Principal
Underwriter prior to the close of the Principal Underwriter's business day to
receive that day's net asset value per share and the public offering price
based thereon. It is the Authorized Firms' responsibility to transmit orders
promptly to the Principal Underwriter, which is a wholly-owned subsidiary of
Eaton Vance.
The Portfolio's net asset value is also determined as of the close of regular
trading on the Exchange by IBT (as custodian and agent for the Portfolio)
based on market or fair value in the manner authorized by the Trustees of the
Portfolio, with special provisions for valuing debt obligations, short-term
investments, foreign securities, direct investments, hedging instruments and
assets not having readily available market quotations, if any. Net asset value
is computed by subtracting the liabilities of the Portfolio from the value of
its total assets. For further information regarding the valuation of the
Portfolio's assets, see "Determination of Net Asset Value" in the Statement of
Additional Information.
---------------------------------------------------------------------------
SHAREHOLDERS MAY DETERMINE THE VALUE OF THEIR INVESTMENT BY MULTIPLYING THE
NUMBER OF FUND SHARES OWNED BY THE CURRENT NET ASSET VALUE PER SHARE.
---------------------------------------------------------------------------
HOW TO BUY FUND SHARES
- ------------------------------------------------------------------------------
SHARES OF THE FUND MAY BE PURCHASED FOR CASH OR MAY BE ACQUIRED IN EXCHANGE
FOR SECURITIES. Investors may purchase shares of the Fund through Authorized
Firms at the net asset value per share of the Fund next determined after an
order is effective. The Fund may suspend the offering of shares at any time
and may refuse an order for the purchase of shares. An Authorized Firm may
charge its customers a fee in connection with transactions executed by that
Firm.
An initial investment in the Fund must be at least $1,000. Once an account has
been established the investor may send investments of $50 or more at any time
directly to the Fund's transfer agent (the "Transfer Agent") as follows: First
Data Investor Services Group, BOS725, P.O. Box 1559, Boston, MA 02104. The
$1,000 minimum initial investment is waived for Bank Automated Investing
accounts, which may be established with an investment of $50 or more. See
"Eaton Vance Shareholder Services".
In connection with employee benefit or other continuous group purchase plans
under which the average initial purchase by a participant of the plan is
$1,000 or more, the Fund may accept initial investments of less than $1,000 on
the part of an individual participant. In the event a shareholder who is a
participant of such a plan terminates participation in the plan, his or her
shares will be transferred to a regular individual account. However, such
account will be subject to the right of redemption by the Fund as described
below under "How to Redeem Fund Shares."
ACQUIRING FUND SHARES IN EXCHANGE FOR SECURITIES. IBT, as escrow agent, will
receive securities acceptable to Eaton Vance, as Manager, in exchange for Fund
shares at their net asset value as determined above. The minimum value of
securities (or securities and cash) accepted for deposit is $5,000. Securities
accepted will be sold on the day of their receipt or as soon thereafter as
possible. The number of Fund shares to be issued in exchange for securities
will be the aggregate proceeds from the sale of such securities, divided by
the applicable net asset value per Fund share on the day such proceeds are
received. Eaton Vance will use reasonable efforts to obtain the then current
market price for such securities, but does not guarantee the best available
price. Eaton Vance will absorb any transaction costs, such as commissions, on
the sale of the securities.
Securities determined to be acceptable should be transferred via book entry or
physically delivered, in proper form for transfer, through an Authorized Firm,
together with a completed and signed Letter of Transmittal in approved form
(available from Authorized Firms), as follows:
IN THE CASE OF BOOK ENTRY:
Deliver through Depository Trust Co.
Broker #2212
Investors Bank &Trust Company
For A/C EV Classic Greater China Growth Fund
IN THE CASE OF PHYSICAL DELIVERY:
Investors Bank & Trust Company
Attention: EV Classic Greater China Growth Fund
Physical Securities Processing Settlement Area
89 South Street
Boston, MA 02111
Investors who are contemplating an exchange of securities for shares of the
Fund, or their representatives, must contact Eaton Vance to determine whether
the securities are acceptable before forwarding such securities to IBT. Eaton
Vance reserves the right to reject any securities. Exchanging securities for
Fund shares may create a taxable gain or loss. Each investor should consult
his or her tax adviser with respect to the particular federal, state and local
tax consequences of exchanging securities for Fund shares.
---------------------------------------------------------------------------
IF YOU DON'T HAVE AN AUTHORIZED FIRM, EATON VANCE CAN RECOMMEND ONE.
---------------------------------------------------------------------------
HOW TO REDEEM FUND SHARES
- ------------------------------------------------------------------------------
A SHAREHOLDER MAY REDEEM FUND SHARES BY DELIVERING TO FIRST DATA INVESTOR
SERVICES GROUP, BOS725, P.O. BOX 1559, BOSTON, MA 02104, during its business
hours a written request for redemption in good order, plus any share
certificates with executed stock powers. The redemption price will be based on
the net asset value per Fund share next computed after such delivery. Good
order means that all relevant documents must be endorsed by the record owner
(s) exactly as the shares are registered and the signature(s) must be
guaranteed by a member of either the Securities Transfer Association's STAMP
program or the New York Stock Exchange's Medallion Signature Program, or
certain banks, savings and loan institutions, credit unions, securities
dealers, securities exchanges, clearing agencies and registered securities
associations as required by a regulation of the Securities and Exchange
Commission and acceptable to First Data Investor Services Group. In addition,
in some cases, good order may require the furnishing of additional documents
such as where shares are registered in the name of a corporation, partnership
or fiduciary.
Within seven days after receipt of a redemption request by First Data Investor
Services Group, the Fund will make payment in cash for the net asset value of
the shares as of the date determined above, and reduced by the amount of any
applicable contingent deferred sales charge (described below) and any federal
income tax required to be withheld. Although the Fund normally expects to make
payment in cash for redeemed shares, the Trust, subject to compliance with
applicable regulations, has reserved the right to pay the redemption price of
shares of the Fund, either totally or partially, by a distribution in kind of
readily marketable securities withdrawn by the Fund from the Portfolio. The
securities so distributed would be valued pursuant to the Portfolio's
valuation procedures. If a shareholder received a distribution in kind, the
shareholder could incur brokerage or other charges in converting the
securities to cash.
To sell shares at their net asset value through an Authorized Firm (a
repurchase), a shareholder can place a repurchase order with the Authorized
Firm, which may charge a fee. The value of such shares is based upon the net
asset value calculated after EVD, as the Fund's agent, receives the order. It
is the Authorized Firm's responsibility to transmit promptly repurchase orders
to EVD. Throughout this Prospectus, the word "redemption" is generally meant
to include a repurchase.
If shares were recently purchased, the proceeds of redemption (or repurchase)
will not be sent until the check (including a certified or cashier's check)
received for the shares purchased has cleared. Payment for shares tendered for
redemption may be delayed up to 15 days from the purchase date when the
purchase check has not yet cleared. Redemptions or repurchases may result in a
taxable gain or loss.
Due to the high cost of maintaining small accounts, the Fund reserves the
right to redeem Fund accounts with balances of less than $500. Prior to such a
redemption, shareholders will be given 60 days' written notice to make an
additional purchase. Thus, an investor making an initial investment of $1,000
would not be able to redeem shares without being subject to this policy.
However, no such redemption would be required by the Fund if the cause of the
low account balance was a reduction in the net asset value of Fund shares. No
contingent deferred sales charge will be imposed with respect to such
involuntary redemptions.
CONTINGENT DEFERRED SALES CHARGE. Shares purchased on or after January 30,
1995 and redeemed within the first year of their purchase (except shares
acquired through the reinvestment of distributions) generally will be subject
to a contingent deferred sales charge equal to 1% of the net asset value of
redeemed shares. This contingent deferred sales charge is imposed on any
redemption the amount of which exceeds the aggregate value at the time of
redemption of (a) all shares in the account purchased more than one year prior
to the redemption, (b) all shares in the account acquired through reinvestment
of distributions and (c) the increase, if any, of value in the other shares in
the account (namely those purchased within the year preceding the redemption)
over the purchase price of such shares. Redemptions are processed in a manner
to maximize the amount of redemption proceeds which will not be subject to a
contingent deferred sales charge. That is, each redemption will be assumed to
have been made first from the exempt amounts referred to in clauses (a), (b)
and (c) above, and second through liquidation of those shares in the account
referred to in clause (c) on a first-in-first-out basis.
In calculating the contingent deferred sales charge upon the redemption of
Fund shares acquired in an exchange for shares of a fund currently listed
under "The Eaton Vance Exchange Privilege," the purchase of Fund shares
acquired in the exchange is deemed to have occurred at the time of the
original purchase of exchanged shares.
No contingent deferred sales charge will be imposed on shares of the Fund
which have been sold to Eaton Vance or its affiliates, or to their respective
employees or clients. The contingent deferred sales charge will also be waived
for shares redeemed (1) pursuant to a Withdrawal Plan (see "Eaton Vance
Shareholder Services"), (2) as part of a distribution from a retirement plan
qualified under Section 401, 403(b) or 457 of the Internal Revenue Code of
1986, as amended (the "Code"), or (3) as part of a minimum required
distribution from other tax-sheltered retirement plans. The contingent
deferred sales charge will be paid to the Principal Underwriter or the Fund.
When paid to the Principal Underwriter it will reduce the amount of Uncovered
Distribution Charges calculated under the Fund's Distribution Plan. See
"Distribution Plan."
REPORTS TO SHAREHOLDERS
- ------------------------------------------------------------------------------
THE FUND WILL ISSUE TO ITS SHAREHOLDERS SEMI-ANNUAL AND ANNUAL REPORTS
CONTAINING FINANCIAL STATEMENTS. Financial statements included in annual
reports are audited by the Fund's independent certified public accountants.
Shortly after the end of each calendar year, the Fund will furnish its
shareholders with information necessary for preparing federal and state income
tax returns.
THE LIFETIME INVESTING ACCOUNT/DISTRIBUTION OPTIONS
- ------------------------------------------------------------------------------
AFTER AN INVESTOR MAKES AN INITIAL PURCHASE OF FUND SHARES, THE FUND'S
TRANSFER AGENT, FIRST DATA INVESTOR SERVICES GROUP, WILL SET UP A LIFETIME
INVESTING ACCOUNT FOR THE INVESTOR ON THE FUND'S RECORDS. This account is a
complete record of all transactions between the investor and the Fund which at
all times shows the balance of shares owned. The Fund will not issue share
certificates except upon request.
Each time a transaction takes place in a shareholder's account, the
shareholder will receive a statement showing complete details of the
transaction and the current balance in the account. (Under certain investment
plans, statements may be sent only quarterly). THE LIFETIME INVESTING ACCOUNT
ALSO PERMITS A SHAREHOLDER TO MAKE ADDITIONAL INVESTMENTS BY SENDING A CHECK
FOR $50 OR MORE TO First Data Investor Services Group.
Any questions concerning a shareholder's account or services available may
also be directed by telephone to EATON VANCE SHAREHOLDER SERVICES at 800-225-
6265, extension 2, or in writing to First Data Investor Services Group,
BOS725, P.O. Box 1559, Boston, MA 02104 (please provide the name of the
shareholder, the Fund and the account number).
THE FOLLOWING DISTRIBUTION OPTIONS WILL BE AVAILABLE TO ALL LIFETIME INVESTING
ACCOUNTS and may be changed as often as desired by written notice to the
Fund's dividend disbursing agent, First Data Investor Services Group, BOS725,
P.O. Box 1559, Boston, MA 02104. The currently effective option will appear on
each account statement.
SHARE OPTION -- Dividends and capital gains will be reinvested in additional
shares.
INCOME OPTION -- Dividends will be paid in cash, and capital gains will be
reinvested in additional shares.
CASH OPTION -- Dividends and capital gains will be paid in cash.
The SHARE OPTION will be assigned if no other option is specified.
Distributions, including those reinvested, will be reduced by any withholding
required under the federal income tax laws.
If the INCOME OPTION or CASH OPTION has been selected, dividend and/or capital
gains distribution checks which are returned by the United States Postal
Service as not deliverable or which remain uncashed for six months or more
will be reinvested in the account at the then current net asset value.
Furthermore, the distribution option on the account will be automatically
changed to the SHARE OPTION until such time as the shareholder selects a
different option.
DISTRIBUTION INVESTMENT OPTION. In addition to the distribution options set
forth above, dividends and/or capital gains may be invested in additional
shares of another Eaton Vance fund. Before selecting this option, a
shareholder should obtain a prospectus of the other Eaton Vance fund and
consider its objectives and policies carefully.
"STREET NAME" ACCOUNTS. If shares of a Fund are held in a "street name"
account with an Authorized Firm, all recordkeeping, transaction processing and
payments of distributions relating to the beneficial owner's account will be
performed by the Authorized Firm, and not by the Fund and its Transfer Agent.
Since the Fund will have no record of the beneficial owner's transactions, a
beneficial owner should contact the Authorized Firm to purchase, redeem or
exchange shares, to make changes in or give instructions concerning the
account, or to obtain information about the account. The transfer of shares in
a "street name" account to an account with another dealer or to an account
directly with a Fund involves special procedures and will require the
beneficial owner to obtain historical purchase information about the shares in
the account from the Authorized Firm. Before establishing a "street name"
account with an investment firm, or transferring the account to another
investment firm, an investor wishing to reinvest distributions should
determine whether the firm which will hold the shares allows reinvestment of
distributions in "street name" accounts.
---------------------------------------------------------------------------
UNDER A LIFETIME INVESTING ACCOUNT A SHAREHOLDER CAN MAKE ADDITIONAL
INVESTMENTS IN SHARES OF THE FUND BY SENDING A CHECK FOR $50 OR MORE.
---------------------------------------------------------------------------
THE EATON VANCE EXCHANGE PRIVILEGE
- ------------------------------------------------------------------------------
Shares of the Fund currently may be exchanged for shares of one or more other
funds in the Eaton Vance Classic Group of Funds or Eaton Vance Money Market
Fund, which are distributed with a contingent deferred sales charge, on the
basis of the net asset value per share of each fund at the time of the
exchange, provided that such exchange offers are available only in states
where shares of such fund may be legally sold.
Each exchange must involve shares which have a net asset value of at least
$1,000. The exchange privilege may be changed or discontinued without penalty.
Shareholders will be given sixty (60) days' notice prior to any termination or
material amendment of the exchange privilege. The Fund does not permit the
exchange privilege to be used for "Market Timing" and may terminate the
exchange privilege for any shareholder account engaged in Market Timing
activity. Any shareholder account for which more than two round-trip exchanges
are made within any twelve month period will be deemed to be engaged in Market
Timing. Furthermore, a group of unrelated accounts for which exchanges are
entered contemporaneously by a financial intermediary will be considered to be
engaged in Market Timing.
First Data Investor Services Group makes exchanges at the next determined net
asset value after receiving an exchange request in good order (see "How to
Redeem Fund Shares"). Consult First Data Investor Services Group for
additional information concerning the exchange privilege. Applications and
prospectuses of other funds are available from Authorized Firms or the
Principal Underwriter. The prospectus for each fund describes its investment
objectives and policies, and shareholders should obtain a prospectus and
consider these objectives and policies carefully before requesting an
exchange.
No contingent deferred sales charge is imposed on exchanges. For purposes of
calculating the contingent deferred sales charge upon the redemption of shares
acquired in an exchange, the purchase of shares acquired in one or more
exchanges is deemed to have occurred at the time of the original purchase of
the exchanged shares.
Shares of the other funds in the Eaton Vance Classic Group of Funds (and
shares of Eaton Vance Money Market Fund acquired as the result of an exchange
from an EV Classic fund) may be exchanged for Fund shares on the basis of the
net asset values per share of each fund at the time of the exchange, but
subject to any restrictions or qualifications set forth in the current
prospectus of any such fund.
Telephone exchanges are accepted by First Data Investor Services Group
provided the investor has not disclaimed in writing the use of the privilege.
To effect such exchanges, call First Data Investor Services Group at 800-262-
1122 or, within Massachusetts, 617-573-9403, Monday through Friday, 9:00 a.m.
to 4:00 p.m. (Eastern Standard Time). Shares acquired by telephone exchange
must be registered in the same name(s) and with the same address as the shares
being exchanged. Neither the Fund, the Principal Underwriter nor First Data
Investor Services Group will be responsible for the authenticity of exchange
instructions received by telephone, provided that reasonable procedures to
confirm that instructions communicated are genuine have been followed.
Telephone instructions will be tape recorded. In times of drastic economic or
market changes, a telephone exchange may be difficult to implement. An
exchange may result in a taxable gain or loss.
EATON VANCE SHAREHOLDER SERVICES
- ------------------------------------------------------------------------------
THE FUND OFFERS THE FOLLOWING SERVICES WHICH ARE VOLUNTARY, INVOLVE NO EXTRA
CHARGE, AND MAY BE CHANGED OR DISCONTINUED WITHOUT PENALTY AT ANY TIME. Full
information on each of the services described below and an application, where
required, are available from Authorized Firms or the Principal Underwriter.
The cost of administering such services for the benefit of shareholders who
participate in them is borne by the Fund as an expense to all shareholders.
INVEST-BY-MAIL -- FOR PERIODIC SHARE ACCUMULATION: Once the $1,000 minimum
investment has been made, checks of $50 or more payable to the order of EV
Classic Greater China Growth Fund may be mailed directly to First Data
Investor Services Group, BOS725, P.O. Box 1559, Boston, MA 02104 at any time
- -- whether or not distributions are reinvested. The name of the shareholder,
the Fund and the account number should accompany each investment.
BANK AUTOMATED INVESTING -- FOR REGULAR SHARE ACCUMULATION: Cash investments
of $50 or more may be made automatically each month or quarter from a
shareholder's bank account. The $1,000 minimum initial investment and small
account redemption policy are waived for these accounts.
WITHDRAWAL PLAN: A shareholder may draw on shareholdings systematically with
monthly or quarterly checks in an aggregate amount that does not exceed
annually 12% of the account balance at the time the plan is established. Such
amount will not be subject to a contingent deferred sales charge. See "How to
Redeem Fund Shares." A minimum deposit of $5,000 in shares is required.
REINVESTMENT PRIVILEGE: A SHAREHOLDER WHO HAS REPURCHASED OR REDEEMED SHARES
MAY REINVEST, WITH CREDIT FOR ANY CONTINGENT DEFERRED SALES CHARGES PAID ON
THE REPURCHASED OR REDEEMED SHARES, ANY PORTION OR ALL OF THE REPURCHASE OR
REDEMPTION PROCEEDS (PLUS THAT AMOUNT NECESSARY TO ACQUIRE A FRACTIONAL SHARE
TO ROUND OFF THE PURCHASE TO THE NEAREST FULL SHARE) IN SHARES OF THE FUND,
provided that the reinvestment is effected within 60 days after such
repurchase or redemption, and the privilege has not been used more than once
in the prior 12 months. Shares are sold to a reinvesting shareholder at the
next determined net asset value following timely receipt of a written purchase
order by the Principal Underwriter or by the Fund (or by the Fund's Transfer
Agent). To the extent that any shares of the Fund are sold at a loss and the
proceeds are reinvested in shares of the Fund (or other shares of the Fund are
acquired within the period beginning 30 days before and ending 30 days after
the date of the redemption) some or all of the loss generally will not be
allowed as a tax deduction. Shareholders should consult their tax advisers
concerning the tax consequences of reinvestments.
TAX-SHELTERED RETIREMENT PLANS: Shares of the Fund are available for purchase
in connection with the following tax-sheltered retirement plans:
-- Pension and Profit Sharing Plans for self-employed individuals,
corporations and nonprofit organizations;
-- Individual Retirement Account Plans for individuals and their non-
employed spouses; and
-- 403(b) Retirement Plans for employees of public school systems,
hospitals, colleges and other nonprofit organizations meeting certain
requirements of the Internal Revenue Code.
Detailed information concerning these plans, including certain exceptions to
minimum investment requirements, and copies of the plans are available from
the Principal Underwriter. This information should be read carefully and
consultation with an attorney or tax adviser may be advisable. The information
sets forth the service fee charged for retirement plans and describes the
federal income tax consequences of establishing a plan. Under all plans,
dividends and distributions will be automatically reinvested in additional
shares.
DISTRIBUTIONS AND TAXES
- ------------------------------------------------------------------------------
DISTRIBUTIONS. It is the present policy of the Fund to make (A) at least one
distribution annually (normally in December) of all or substantially all of
the investment income allocated to the Fund by the Portfolio, less the Fund's
direct and allocated expenses and (B) at least one distribution annually of
all or substantially all of the net realized capital gains allocated by the
Portfolio to the Fund, if any (reduced by any available capital loss
carryforwards from prior years).
Shareholders may reinvest all distributions in shares of the Fund without a
sales charge at the per share net asset value as of the close of business on
the record date.
The Fund's investment income consists of the Fund's allocated share of the net
investment income of the Portfolio, less all actual and accrued expenses of
the Fund determined in accordance with generally accepted accounting
principles. The Portfolio's net investment income consists of all income
accrued on the Portfolio's assets, less all actual and accrued expenses of the
Portfolio determined in accordance with generally accepted accounting
principles. The Fund's net realized capital gains, if any, consist of the net
realized capital gains (if any) allocated to the Fund by the Portfolio for tax
purposes, after taking into account any available capital loss carryovers.
TAXES. Distributions by the Fund which are derived from the Fund's allocated
share of the Portfolio's net investment income, net short-term capital gains
and certain foreign exchange gains are taxable to shareholders as ordinary
income, whether received in cash or reinvested in additional shares of the
Fund. The Fund's distributions will generally not qualify for the dividends-
received deduction for corporate shareholders. The Fund anticipates that for
tax purposes the entire distribution (including the excess amount), whether
paid in cash or additional shares of the Fund, will constitute ordinary income
to its shareholders. Shareholders reinvesting such distributions should treat
the entire amount of the distribution as the tax basis of the additional
shares acquired by reason of such reinvestment.
Capital gains referred to in clause (B) above, if any, realized by the
Portfolio and allocated to the Fund for the Fund's fiscal year, which ends on
August 31, will usually be distributed by the Fund prior to the end of
December. Distributions by the Fund of long-term capital gains allocated to
the Fund by the Portfolio are taxable to shareholders as long-term capital
gains, whether paid in cash or additional shares of the Fund, regardless of
the length of time Fund shares have been owned by the shareholder.
If shares are purchased shortly before the record date of a distribution, the
shareholder will pay the full price for the shares and then receive some
portion of the price back as a taxable distribution. The amount, timing and
character of the Fund's distributions to shareholders may be affected by
special tax rules governing the Portfolio's activities in options, futures and
forward foreign currency exchange transactions or certain other investments.
Certain distributions which are declared by the Fund in October, November or
December and paid the following January will be reportable by shareholders as
if received on December 31 of the year in which they are declared.
The Fund intends to qualify as a regulated investment company under the Code,
and to satisfy all requirements relating to the sources of its income, the
distribution of its income, and the diversification of its assets. In
satisfying these requirements, the Fund will treat itself as owning its
proportionate share of each of the Portfolio's assets and as entitled to the
income of the Portfolio properly attributable to such share.
As a regulated investment company under the Code, the Fund does not pay
federal income or excise taxes to the extent that it distributes to
shareholders its net investment income and net realized capital gains in
accordance with the timing requirements imposed by the Code. As a partnership
under the Code, the Portfolio does not pay federal income or excise taxes.
Income (possibly including, in some cases, capital gains) realized by the
Portfolio from certain instruments and allocated to the Fund may be subject to
foreign income taxes, and the Fund may make an election under Section 853 of
the Code that would allow shareholders to claim a credit or deduction on their
federal income tax returns for (and treat as additional amounts distributed to
them) their pro rata portion of the Fund's allocated share of qualified taxes
paid by the Portfolio to foreign countries. This election may be made only if
more than 50% of the assets of the Fund, including its allocable share of the
Portfolio's assets, at the close of the Fund's taxable year consists of
securities in foreign corporations. The Fund will send a written notice of any
such election (not later than 60 days after the close of its taxable year) to
each shareholder indicating the amount to be treated as the shareholder's
proportionate share of such taxes. Availability of foreign tax credits or
deductions for shareholders is subject to certain additional restrictions and
limitations under the Code.
Shareholders will receive annually tax information notices and Forms 1099 to
assist in the preparation of their federal and state income tax returns for
the prior calendar year's distributions, proceeds from the redemption or
exchange of Fund shares, and federal income tax (if any) withheld by the
Fund's Transfer Agent.
PERFORMANCE INFORMATION
- ------------------------------------------------------------------------------
THE FUND'S AVERAGE ANNUAL TOTAL RETURN IS DETERMINED BY MULTIPLYING A
HYPOTHETICAL INITIAL PURCHASE OF $1,000 INVESTED AT THE MAXIMUM PUBLIC
OFFERING PRICE (NET ASSET VALUE) BY THE AVERAGE ANNUAL COMPOUNDED RATE OF
RETURN (INCLUDING CAPITAL APPRECIATION/DEPRECIATION, AND DIVIDENDS AND
DISTRIBUTIONS PAID AND REINVESTED) FOR THE STATED PERIOD AND ANNUALIZING THE
RESULT. The average annual total return calculation assumes that all dividends
and distributions are reinvested at net asset value on the reinvestment dates
during the period. The average annual total return calculation assumes a
complete redemption of the investment and the deduction of any contingent
deferred sales charge at the end of the period. The Fund may also publish
annual and cumulative total return figures from time to time. The Fund may use
such total return figures, together with comparisons with the Consumer Price
Index, various domestic and foreign securities indices and performance studies
prepared by independent organizations, in advertisements and in information
furnished to present or prospective shareholders. The Fund may also quote
total return for the period prior to commencement of operations which would
reflect the Portfolio's total return (or that of its predecessor) adjusted to
reflect any applicable Fund sales charge.
The Fund may also publish total return figures which do not take into account
any contingent deferred sales charge which may be imposed upon redemptions at
the end of the specified period. Any performance figure which does not take
into account the contingent deferred sales charge would be reduced to the
extent such charge is imposed upon a redemption.
Investors should note that the investment results of the Fund will fluctuate
over time, and any presentation of the Fund's total return for any prior
period should not be considered a representation of what an investment may
earn or what the Fund's total return may be in any future period. The Fund's
investment results are based on many factors, including market conditions, the
composition of the security holdings of the Portfolio and the operating
expenses of the Fund and the Portfolio. Investment results also often reflect
the risks associated with the particular investment objective and policies of
the Fund and the Portfolio. Among others, these factors should be considered
when comparing the Fund's investment results to those of other mutual funds
and other investment vehicles.
<PAGE>
[LOGO] EV CLASSIC GREATER CHINA
GROWTH FUND
- -------------------------------------------------------------------------------
PROSPECTUS
JANUARY 1, 1996
EV CLASSIC GREATER CHINA
GROWTH FUND
24 FEDERAL STREET
BOSTON, MA 02110
- -------------------------------------------------------------------------------
SPONSOR AND MANAGER OF EV CLASSIC GREATER CHINA GROWTH FUND
Administrator of Greater China Growth Portfolio, Eaton Vance Management,
24 Federal Street, Boston, MA 02110
ADVISER OF GREATER CHINA GROWTH PORTFOLIO
Lloyd George Investment Management (Bermuda) Limited, 3808 One Exchange Square,
Central, Hong Kong
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 89 South Street, Boston, MA 02111
TRANSFER AGENT
First Data Investor Services Group, BOS725, P.O. Box 1559, Boston, MA 02104
(800) 262-1122
AUDITORS
Deloitte & Touche LLP, 125 Summer Street, Boston, MA 02110
C-CGP
<PAGE>
PART A
INFORMATION REQUIRED IN A PROSPECTUS
EV MARATHON
GREATER CHINA GROWTH FUND
- ------------------------------------------------------------------------------
EV MARATHON GREATER CHINA GROWTH FUND (THE "FUND") IS A MUTUAL FUND SEEKING
LONG-TERM CAPITAL APPRECIATION THROUGH PURCHASE OF AN INTEREST IN A SEPARATE
INVESTMENT COMPANY WHICH INVESTS IN EQUITY SECURITIES OF COMPANIES WHICH, IN
THE OPINION OF THE INVESTMENT ADVISER, WILL BENEFIT FROM THE ECONOMIC
DEVELOPMENT AND GROWTH OF THE PEOPLE'S REPUBLIC OF CHINA. ACCORDINGLY, THE
FUND INVESTS ITS ASSETS IN GREATER CHINA GROWTH PORTFOLIO (THE "PORTFOLIO"), A
DIVERSIFIED OPEN-END INVESTMENT COMPANY HAVING THE SAME INVESTMENT OBJECTIVE
AS THE FUND, RATHER THAN BY DIRECTLY INVESTING IN AND MANAGING ITS OWN
PORTFOLIO OF SECURITIES AS WITH HISTORICALLY STRUCTURED MUTUAL FUNDS. A
SIGNIFICANT PERCENTAGE OF THE PORTFOLIO WILL BE INVESTED IN THE SECURITIES
MARKETS OF COUNTRIES IN THE CHINA REGION, INCLUDING HONG KONG, CHINA, TAIWAN,
SOUTH KOREA, SINGAPORE, MALAYSIA, THAILAND, INDONESIA AND THE PHILIPPINES. THE
FUND IS A SEPARATE SERIES OF EATON VANCE GROWTH TRUST (THE "TRUST").
Shares of the Fund are not deposits or obligations of, or guaranteed or
endorsed by, any bank or other insured depository institution, and are not
federally insured by the Federal Deposit Insurance Corporation, the Federal
Reserve Board or any other government agency. Shares of the Fund involve
investment risks, including fluctuations in value and the possible loss of
some or all of the principal investment.
This Prospectus is designed to provide you with information you should know
before investing. Please retain this document for future reference. A
Statement of Additional Information dated January 1, 1996 for the Fund, as
supplemented from time to time, has been filed with the Securities and
Exchange Commission and is incorporated herein by reference. The Statement of
Additional Information is available without charge from the Fund's principal
underwriter, Eaton Vance Distributors, Inc. (the "Principal Underwriter"), 24
Federal Street, Boston, MA 02110 (telephone (800) 225-6265). The sponsor and
manager of the Fund and the administrator of the Portfolio is Eaton Vance
Management, 24 Federal Street, Boston, MA 02110 (the "Manager"). The
Portfolio's investment adviser is Lloyd George Investment Management (Bermuda)
Limited (the "Adviser"). The principal business address of the Adviser is 3808
One Exchange Square, Central, Hong Kong.
- ------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE PAGE
<S> <C> <C> <C>
Shareholder and Fund Expenses .......................... 2 Valuing Fund Shares................................. 19
The Fund's Financial Highlights ........................ 3 How to Buy Fund Shares ............................. 20
The Fund's Investment Objective ........................ 5 How to Redeem Fund Shares........................... 21
The Portfolio's Investment Opportunities in the Reports to Shareholders ............................ 22
China Region ......................................... 5 The Lifetime Investing Account/Distribution
How the Fund and the Portfolio Invest their Assets ..... 8 Options .......................................... 22
Special Investment Methods and Risk Factors ............ 9 The Eaton Vance Exchange Privilege ................. 23
Organization of the Fund and the Portfolio ............. 14 Eaton Vance Shareholder Services ................... 24
Management of the Fund and the Portfolio ............... 16 Distributions and Taxes ............................ 25
Distribution Plan ...................................... 18 Performance Information ............................ 26
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
PROSPECTUS DATED JANUARY 1, 1996
<PAGE>
<TABLE>
<CAPTION>
SHAREHOLDER AND FUND EXPENSES
- -------------------------------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES
-----------------------------------------------------------------------------------------------------
<S> <C>
Sales Charge Imposed on Purchases of Shares None
Sales Charges Imposed on Reinvested Distributions None
Fees to Exchange Shares None
Range of Declining Contingent Deferred Sales Charges Imposed on Redemption
during the First Seven Years (as a percentage of redemption proceeds
exclusive of all reinvestments and capital appreciation in the account) 5.00% - 0%
<CAPTION>
ANNUAL FUND AND ALLOCATED PORTFOLIO OPERATING EXPENSES (as a percentage of
average daily net assets)
-----------------------------------------------------------------------------------------------------
<S> <C>
Management Fees (including management fees paid by the Fund and investment
advisory and administration fees paid by the Portfolio of 0.25%, 0.74% and
0.24%, respectively) 1.23%
Rule 12b-1 Distribution (and Service) Fees 0.88%
Other Expenses 0.36%
----
Total Operating Expenses 2.47%
====
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
An investor would pay the following contingent
deferred sales charge and expenses on a $1,000
investment, assuming (a) 5% annual return and (b)
redemption at the end of each period: $75 $117 $152 $281
An investor would pay the following expenses on the
same investment, assuming (a) 5% annual return and
(b) no redemptions: $25 $ 77 $132 $281
</TABLE>
NOTES:
The table and Example summarize the aggregate expenses of the Fund and the
Portfolio and are designed to help investors understand the costs and expenses
they will bear, directly or indirectly, by investing in the Fund. Information
for the Fund is based on its expenses for the most recent fiscal year.
The Fund invests exclusively in the Portfolio. The Trustees believe the
aggregate per share expenses of the Fund and the Portfolio should approximate,
and over time may be less than, the per share expenses the Fund would incur if
the Trust retained the services of an investment adviser for the Fund and the
Fund's assets were invested directly in the type of securities being held by
the Portfolio.
The Example should not be considered a representation of past or future
expenses and actual expenses may be greater or less than those shown. Federal
regulations require the Example to assume a 5% annual return, but actual
return will vary. For further information regarding the expenses of both the
Fund and the Portfolio see "The Fund's Financial Highlights", "Organization of
the Fund and the Portfolio", "Management of the Fund and the Portfolio" and
"How to Redeem Fund Shares." A long-term shareholder in the Fund may pay more
than the economic equivalent of the maximum front-end sales charge permitted
by a rule of the National Association of Securities Dealers, Inc. See
"Distribution Plan".
No contingent deferred sales charge is imposed on (a) shares purchased more
than six years prior to the redemption, (b) shares acquired through the
reinvestment of distributions or (c) any appreciation in value of other shares
in the account (see "How to Redeem Fund Shares"), and no such charge is
imposed on exchanges of Fund shares for one or more other funds listed under
"The Eaton Vance Exchange Privilege".
Other investment companies and investors with different distribution
arrangements are investing in the Portfolio and others may do so in the
future. See "Organization of the Fund and the Portfolio".
THE FUND'S FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
The following information should be read in conjunction with the audited
financial statements included in the Fund's annual report to shareholders
which is incorporated by reference into the Statement of Additional
Information in reliance upon the report of Deloitte & Touche LLP, independent
certified public accountants, as experts in accounting and auditing. Further
information regarding the performance of the Fund is contained in the Fund's
annual report to shareholders which may be obtained without charge by
contacting the Principal Underwriter, Eaton Vance Distributors, Inc.
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
-------------------------------------
1995 1994 1993*
-------- -------- -------
<S> <C> <C> <C>
NET ASSET VALUE, beginning of year $ 13.160 $ 10.540 $10.000
-------- -------- -------
Income (loss) from Investment Operations --
Net investment loss $ (0.038) $ (0.039) $(0.015)
Net realized and unrealized gain (loss) on investments (1.157) 2.684 0.555
-------- -------- -------
Total income (loss) from operations $ (1.195) $ 2.645 $ 0.540
Less distributions --
In excess of net investment income $ (0.065) $ -- $ --
In excess of net realized gain on investment transactions (0.010) (0.025) --
-------- -------- -------
Total distributions $ (0.075) $ (0.025) $ --
-------- -------- -------
NET ASSET VALUE, end of year $ 11.890 $ 13.160 $10.540
======== ======== =======
TOTAL RETURN(1) (9.06)% 25.08% 5.40%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $324,258 $392,479 $63,672
-------- -------- -------
Ratio of net expenses to average daily net assets(2) 2.47% 2.38% 2.21%+
Ratio of net investment loss to average daily average net assets (0.02)% (0.55)% (1.44)%+
<FN>
* For the period from the start of business, June 7, 1993, to August 31, 1993.
+ Computed on an annualized basis.
(1) Total return is calculated assuming a purchase at the net asset value on the first day and a sale at
the net asset value on the last day of each period reported. Dividends and distributions, if any, are
assumed to be reinvested at the net asset value on the record date. Total return is computed on a non-
annualized basis.
(2) Includes the Fund's share of Greater China Growth Portfolio's allocated expenses.
</TABLE>
<PAGE>
[MAP PAGE]
<PAGE>
THE FUND'S INVESTMENT OBJECTIVE
- -------------------------------------------------------------------------------
THE FUND'S INVESTMENT OBJECTIVE IS TO SEEK LONG-TERM CAPITAL APPRECIATION. The
Fund seeks to meet its investment objective by investing its assets in the
Greater China Growth Portfolio (the "Portfolio"), a separate registered
investment company which invests primarily in equity securities of companies
which, in the opinion of the Adviser, will benefit from the economic
development and growth of the People's Republic of China ("China"). A
significant percentage of the Portfolio's assets will be invested in the
securities markets of countries in the China region, consisting of Hong Kong,
China, Taiwan, South Korea, Singapore, Malaysia, Thailand, Indonesia and the
Philippines (collectively, the "China Region").
The Fund is intended for long-term investors and is not intended to be a
complete investment program. A prospective investor should take into account
personal objectives and other investments when considering the purchase of
Fund shares. The Fund cannot assure achievement of its investment objective.
See "How the Fund and the Portfolio Invest their Assets" for further
information. The investment objective of the Fund and the Portfolio are
nonfundamental. See "Organization of the Fund and the Portfolio -- Special
Information on the Fund/Portfolio Investment Structure" for further
information. In addition, investments in issuers of the China Region involve
possible risks not typically associated with issuers in the United States. See
"Special Investment Methods and Risk Factors" for further information.
THE PORTFOLIO'S INVESTMENT OPPORTUNITIES IN THE CHINA REGION
- ------------------------------------------------------------------------------
THE FOLLOWING IS A GENERAL DISCUSSION OF THE ECONOMIES AND SECURITIES MARKETS
IN WHICH THE PORTFOLIO MAY INVEST. There can be no assurance that the
Portfolio will be able to capitalize on the factors described herein. Opinions
expressed herein are the good faith opinions of the Portfolio's Adviser, Lloyd
George Investment Management (Bermuda) Limited. Unless otherwise indicated,
all amounts are expressed in United States dollars.
Over the past twenty years the performance of the major Asian securities
markets has generally been better than that of markets in Europe and the
United States. In the past five years, the newly emerging securities markets
of the China Region have demonstrated significant growth in market
capitalization, in numbers of listed securities and in the volume of
transactions. Over the same period, the underlying economies of the region
have grown against a background of the high savings rates characteristic of
many Asian societies and generally moderate inflation. According to the Asian
Development Bank forecasts, the economies of Southeast Asia, excluding Japan,
are forecast to grow by 7.4% in 1996.
The following graph shows the average growth in gross domestic product ("GDP")
from 1990 to 1995 for the main countries in Southeast Asia, compared with the
United States.
[GRAPHIC OMITTED: bar chart:
AVERAGE GROSS DOMESTIC PRODUCT GROWTH (1990-1995)
THAILAND 8.92%
CHINA 9.97
MAYLASIA 8.65
SINGAPORE 8.22
SOUTH KOREA 6.04
INDONESIA 6.87
TAIWAN 6.50
HONG KONG 5.18
PHILIPPINES 2.50
UNITED STATES 2.12
SOURCE: LLOYD GEORGE MANAGEMENT (HONG KONG) LIMITED]
A PARTICULARLY SIGNIFICANT FACTOR WITHIN THE REGION OVER THE LAST 13 YEARS HAS
BEEN THE INCREASING INFLUENCE WHICH CHINA HAS HAD IN THE DETERMINATION OF THE
ECONOMIC DEVELOPMENT OF CERTAIN COUNTRIES. This influence has been
principally in providing manufacturing facilities, in providing a market for
goods and services and in creating a demand for export outlets, both directly
and indirectly, through for example Hong Kong.
The stages of China's economic development are discussed below. The effect by
1992 was an increase in economic integration among the countries in the China
Region. The links between China and Hong Kong, between China and Taiwan and
between China and other countries within the region, where there is a
significant Chinese element of the population, have by now been strengthened
to a degree which makes a reversal unlikely. Moreover, although these links
have been developed to a stage where economic co-operation in trade operates
smoothly, the full potential of the market, both in terms of domestic
consumption and of export growth, has hardly begun to be realized. It is based
upon this potential that the Manager and Adviser perceive an investment
opportunity that may be exploited by the Fund and the Portfolio.
CHINA -- CHINA'S POPULATION, ESTIMATED AT 1.3 BILLION, IS THE HIGHEST OF ANY
COUNTRY IN THE WORLD. China has had for many centuries a well deserved
reputation for being closed to foreigners, with trade with the outside world
being carried on under terms of extreme restriction and under central control.
Such conditions were maintained in the first thirty years of the Communist
regime which began in 1949; however there have been several stages of
evolution, from the institution of an industrialization program in the 1950s
to a modernization policy commencing in 1978 which combined economic
development with the beginnings of opening the country. The economic reform
plan thus begun was designed to bring in foreign investment capital and
technological skills. The result has been a move towards a more mixed economy
away from the previous centrally planned economy. The process of devolving
responsibility for all aspects of enterprise to local management and
authorities continues, even though the system of socialism with Chinese
characteristics involves considerable influence by the central government on
production and marketing.
The economic plans covering the last decade of the century include objectives
to quadruple the country's 1980 industrial and agricultural output by the year
2000, to increase the export element of the economy and to continue to open
the country with further development of the designated special investment
areas. Average annual GDP growth rate between 1989 and 1994 was
9.2%. The current Five Year Plan anticipates an annual growth rate of 6%, but
some senior leaders have called for this to be increased significantly.
In order to attract foreign investment China has since 1978 designated certain
areas of the country where overseas investors can receive special investment
incentives and tax concessions. There are five Special Economic Zones
(Shenzhen, Shantou and Zhuhai in Guangdong Province, Xiamen in Fujian Province
and Hainan Island, which itself is a province). Fourteen coastal cities have
been designated as "open cities" and certain Open Economic Zones have been
established in coastal areas. Shanghai has established the Pudong New Area.
Twenty-seven High and New Technology Industrial Development Zones have been
approved where preferential treatment is given to enterprises which are
confirmed as technology intensive.
AS A RESULT, FOREIGN DIRECT INVESTMENT IN CHINA HAS INCREASED SUBSTANTIALLY IN
THE LAST TEN YEARS. The contracted value of foreign investment in China was
over $70.8 billion in 1994. Investment by Taiwan in Fujian Province continues
to grow. Most of Hong Kong's manufacturing investment has been in Guangdong
Province, and more than 2.5 million workers are now employed in the Province
working for Hong Kong companies.
Since the beginning of 1992, China has indicated a willingness to speed up
reform of the economy. GDP grew by 11.8% in 1994 with gross industrial output
rising by 21.4%. Most notably among the high echelons of the Chinese
leadership, Deng Xiaoping has made a number of vigorously pro-reform
statements since he visited Shenzhen in January 1992 to demonstrate support
for the way in which the province of Guangdong is conducting its affairs.
Other senior Chinese Leaders have reaffirmed the principle of economic reform.
Exports continue to rise strongly, although China remains vulnerable to United
States economic conditions and possible trade sanctions, unless it liberalizes
current import restrictions and improves its human rights record. However,
imports are also expected to rise and may outstrip exports in terms of growth
rates.
1993 figures show the extent to which Southeast China, and Guangdong Province
in particular, is ahead of the rest of the country in economic performance.
Its industrial output grew by over 50.5% during 1993; exports increased by
more than 11.8% during 1993 following a 34% growth in 1992. In 1993 Guangdong
Province accounted for some 40.7% of total exports and for more than 10.3% of
GDP although having only 5.5% of the population.
THERE ARE CURRENTLY TWO OFFICIALLY RECOGNIZED SECURITIES EXCHANGES IN CHINA --
THE SHANGHAI SECURITIES EXCHANGE WHICH OPENED IN DECEMBER 1990 AND THE
SHENZHEN STOCK EXCHANGE WHICH OPENED IN JULY 1991. Shares traded on these
Exchanges are of two types -- "A" shares which can be traded only by Chinese
investors and "B" shares which can be traded only by individuals and
corporations not resident in China.
In Shanghai, all "B" Shares are denominated in Chinese renminbi ("RMB") but
all transactions in "B" Shares must be settled in US dollars, and all
distributions made on "B" Shares are payable in US dollars, the exchange rate
being the weighted average exchange rate for the US dollar as published by the
Shanghai Foreign Exchange Adjustment Centre. In Shenzhen, the purchase and
sale prices for "B" Shares are quoted in Hong Kong dollars. Dividends and
other lawful revenue derived from "B" Shares are calculated in RMB but payable
in Hong Kong dollars, the rate of exchange being the average rate published by
the Shenzhen Foreign Exchange Adjustment Centre. There are no foreign exchange
restrictions on the repatriation of gains made on or income derived from "B"
Shares, subject to the payment of taxes imposed by China thereon.
Company law relating to companies limited by shares and regulations regarding
the issuing of shares by equity joint ventures have not yet been developed on
a national basis. The Shenzhen municipality issued regulations in 1992
relating to joint stock companies, and the Shanghai municipality has a draft
joint stock company law under review. Regulations governing the trading of
securities on both the Shenzhen and the Shanghai stock exchanges have been
issued by each municipality; there is no national securities legislation as
yet.
As of December 6, 1995, 184 companies had shares listed on The Shanghai
Securities Exchange, of which 36 also had "B" Shares listed. The total market
capitalization of the "B" shares of these companies as at that date (which
includes equities and bonds) was approximately U.S. $1.52 billion. As of the
same date, 125 companies had shares listed on The Shenzhen Stock Exchange, of
which 33 also had "B" Shares listed. The total market capitalization of the
"B" Shares at that date was approximately HK $6.41 billion (U.S. $625.6
million).
HONG KONG -- AS A TRADE ENTREPOT AND FINANCE CENTER, HONG KONG'S VIABILITY HAS
BEEN INEXORABLY LINKED TO MAINLAND CHINA SINCE THE ESTABLISHMENT OF THE COLONY
IN 1841. HONG KONG REMAINS CHINA'S LARGEST TRADE PARTNER AND ITS LEADING
FOREIGN INVESTOR. In 1995, visible trade between Hong Kong and China exceeded
$33.4 billion.
In the last two decades there has been a structural change in Hong Kong's
economy, with growth in the services sector outpacing manufacturing growth.
With more and more labor intensive manufacturing relocating to Southern China,
Hong Kong has developed its services sector, which in 1993 contributed 72.5%
of Gross Domestic Product.
In recent years large numbers of Hong Kong based companies have set up
factories in the southern province of Guangdong, where it is estimated that
Hong Kong companies employ between 2.5 and 3 million workers. The low cost of
setting up a factory in China and low wage rates have been the primary
attractions. While few Hong Kong companies in the service sector derive the
majority of their sales from China, activity there is increasing notably in
the construction, utilities, communications and tourism sectors. Examples
include China Light and Power, Hong Kong Telecom and Hopewell Holdings.
Although less noticeable than Hong Kong's investment in China, there has been
considerable growth in Chinese investment in Hong Kong over the last decade
and particularly in the last five years. In contrast to Japanese investment,
Chinese investment in Hong Kong typically involves the purchase of stakes in
existing companies. This has traditionally been in the banking and import/
export sectors. Recently, investment in property, manufacturing and
infrastructure projects has increased. The most active Chinese enterprise in
Hong Kong, the Bank of China Group, is the second largest banking group in
Hong Kong. Much as China has become the manufacturing capital for Hong Kong
companies, Hong Kong is the primary funding center for the development of
China through direct investment, syndicated loans, commercial paper and share
issues in Hong Kong by Chinese companies.
In view of the growing economic interaction between Hong Kong and Southern
China, it is increasingly meaningful to consider the concept of a Greater Hong
Kong economy consisting of Hong Kong and Guangdong Province, with a combined
population of 72 million and average per capita GDP of $2,130 in 1993. Given
the human, financial and technological resources in Hong Kong and the low wage
rates and infrastructural requirements of China, the economic rationale for
further integration of the two economies is considerable. In ensuring the role
of Hong Kong in the economy of Southern China, the challenge of policy makers
in Hong Kong is to see that the colony's infrastructure is capable of
accommodating the sustained 15% annual growth of the Guangdong economy, and
with it increasing trade and investment flows. Towards this end, the Hong Kong
government in 1989 unveiled PADS, the Port and Airport Development Strategy.
The project, estimated to cost $21 billion, is designed to allow Hong Kong's
cargo handling capacity to increase by four times between 1988 and 2011 and
its air traffic handling capacity to increase from 15 million passengers in
1988 to 50 million in 2011. Representatives of the Hong Kong and Chinese
governments are currently discussing the future of the PADS project and its
financing.
In the past, political considerations have hindered closer economic
integration between Hong Kong and China. It was largely in response to the
United Nations embargo on trade with China in the 1950s and 1960s that Hong
Kong developed a significant manufacturing base. In the last several years,
however, there has been an improvement in relations between China and Hong
Kong. In September 1991, Hong Kong and China concluded the Sino-British
Memorandum of Understanding, providing a framework for the PADS project. Of
even greater importance, the Basic Law, the outline for Hong Kong's government
post 1997, calls for Hong Kong's capitalist system to remain intact for an
additional fifty years after 1997 and sets out details for the integration of
Hong Kong into China after 1997.
TAIWAN -- BETWEEN 1960 AND 1994, TAIWAN'S GNP GREW FROM LESS THAN $2 BILLION
TO OVER $240 BILLION. The economic growth has been accompanied by a
transformation of domestic production from labor intensive to capital
intensive industries in the 1970s and finally to higher technology industries
in the 1980s. With over $92 billion, Taiwan has the world's largest foreign
exchange reserves. Taiwan companies continue to be attracted by China's low
labor costs, inexpensive land and less rigid environmental rules. It is
estimated that accumulated Taiwanese investment in China exceeds $3 billion.
Taiwanese listed companies include a number which invested indirectly in
China, primarily in the textiles, food and rubber industries. Given the
proximity of Taiwan to China, the cultural homogeneity and the compelling
economic incentive for further investment, the primary obstacle to greater
investment flows has been the prohibition by Taiwanese authorities of direct
investment in China. Based on discussions with Taiwanese companies and the
trend toward greater liberalization by the government of investment in China,
the Adviser believes that over the next several years the scope for investment
by Taiwanese companies in China will widen substantially and that many more
companies listed on The Taiwan Stock Exchange Corp. will have significant
interests in China.
OTHER COUNTRIES -- GIVEN THE PROXIMITY OF HONG KONG AND TAIWAN TO CHINA, AND
THEIR ETHNIC AND CULTURAL TIES, THE ADVISER BELIEVES THERE WILL BE AN INCREASE
IN THE NUMBER AND COMMITMENT OF LISTED COMPANIES IN THOSE TWO COUNTRIES DOING
BUSINESS IN CHINA. Although less visible to the public, listed companies
elsewhere in Asia are also becoming increasingly active in China.
While Guangdong Province has been the leading recipient of foreign investment
in China, there has also been considerable foreign investment by Japanese
companies in the Northeastern Provinces of Liaoning, Jilin, and Heilongiang.
As the major trading partner of these provinces, Japan is primarily
manufacturing light industrial products for re-export. Major Japanese projects
have been set up in the electronics and natural resources sectors in China.
While Thailand has been traditionally known as a recipient of foreign
investment, Chinese-managed listed companies in the banking, textiles and
packaging sectors have indicated their intention of expanding into China. In
Singapore, shipping, construction and hotel companies have been the first
sectors to do business in China while several Malaysian companies in the
manufacturing sector have invested in joint ventures in China. The Adviser
believes that growing China exposure will enhance the earnings growth of such
companies, making them attractive for investment.
See Appendix B to the Statement of Additional Information for further
information about the economic characteristics of and risks associated with
investing in China Region countries.
HOW THE FUND AND THE PORTFOLIO INVEST THEIR ASSETS
- ------------------------------------------------------------------------------
THE PORTFOLIO SEEKS TO ACHIEVE ITS OBJECTIVE THROUGH INVESTING IN A CAREFULLY
SELECTED AND CONTINUOUSLY MANAGED PORTFOLIO CONSISTING PRIMARILY OF EQUITY
SECURITIES OF COMPANIES WHICH, IN THE OPINION OF THE ADVISER, WILL BENEFIT
FROM THE ECONOMIC DEVELOPMENT AND GROWTH OF CHINA ("CHINA GROWTH COMPANIES").
A significant percentage of the Portfolio's assets will be invested in the
securities markets of countries in the China Region (or Greater China),
consisting of Hong Kong, China, Taiwan, South Korea, Singapore, Malaysia,
Thailand, Indonesia and the Philippines. The Portfolio will, under normal
market conditions, invest at least 65% of its total assets in equity
securities of China growth companies ("Greater China investments"). However,
it is expected that substantially all of the Portfolio's assets will normally
be invested in equity securities, warrants and equity options. China growth
companies consist of companies that (a) are located in or whose securities are
principally traded in a China Region country, (b)(i) have at least 50% of
their assets in one or more China Region countries or (ii) derive at least 50%
of their gross sales revenues or profits from providing goods or services to
or from within one or more China Region countries and (c)(i) have at least 35%
of their assets in China, or (ii) derive at least 35% of their gross sales
revenues or profits from providing goods or services to or from within China
or (iii) have manufacturing or other operations in China that are significant
to such companies. Greater China investments are typically listed on stock
exchanges or traded in the over-the-counter markets in countries in the China
Region. The principal offices of these companies, however, may be located
outside these countries. The Portfolio may invest 25% or more of its total
assets in the securities of issuers located in any one country in the China
Region. The Portfolio has invested more than 25% of its total assets in
issuers located in Hong Kong, but the Adviser currently expects the Portfolio
ordinarily will not invest more than 10% of its total assets in any other
country.
Equity securities, for purposes of the 65% policy, will be limited to common
and preferred stocks; equity interests in trusts, partnerships, joint ventures
and other unincorporated entities or enterprises; special classes of shares
available only to foreign investors in markets that restrict the ownership by
foreign investors to certain classes of equity securities; convertible
preferred stocks; and other convertible investment grade debt instruments. A
debt security is investment grade if it is rated BBB or above by Standard &
Poor's Ratings Group ("S&P") or Baa or above by Moody's Investors Service,
Inc. ("Moody's") or determined to be of comparable quality by the Adviser.
Debt securities rated BBB by S&P or Baa by Moody's have speculative
characteristics and changes in economic conditions or other circumstances are
more likely to lead to a weakened capacity to make principal and interest
payments than is the case with higher grade debt securities. The Portfolio
will promptly dispose of any convertible debt instrument which is rated or
determined by the Adviser to be below investment grade subsequent to
acquisition by the Portfolio. Direct investments in China growth companies
will not exceed 10% of the Portfolio's total assets. See "Special Investment
Methods and Risk Factors -- Direct Investments" for a discussion of the risks
associated with direct investments.
In addition to its investments in equity securities, the Portfolio may invest
up to 5% of its net assets in options on equity securities and up to 5% of its
net assets in warrants, including options and warrants traded in over-the-
counter markets. The Portfolio will not, under normal market conditions,
invest more than 35% of its total assets in equity securities other than
Greater China investments, warrants, options on securities and indices,
options on currency, futures contracts and options on futures, forward foreign
currency exchange contracts, currency swaps and any other non-equity
investments. See "Special Investment Methods and Risk Factors" below and the
Fund's Statement of Additional Information for a description of certain active
management techniques available to the Portfolio. The Portfolio will not
invest in debt securities, other than investment grade convertible debt
instruments, except for temporary defensive purposes, as described below. The
Portfolio will not invest more than 10% of its assets in the securities of
issuers in any country outside the China Region.
The Portfolio may, for temporary defensive purposes, invest some or all of its
total assets in debt securities of foreign and United States companies,
foreign governments and the U.S. Government, and their respective agencies,
instrumentalities, political subdivisions and authorities, as well as in high
quality money market instruments denominated in U.S. dollars or a foreign
currency.
SPECIAL INVESTMENT METHODS AND RISK FACTORS
- ------------------------------------------------------------------------------
INVESTING IN FOREIGN SECURITIES. Investing in securities issued by foreign
companies and governments involves considerations and possible risks not
typically associated with investing in securities issued by the U.S.
Government and domestic corporations. The values of foreign investments are
affected by changes in currency rates or exchange control regulations,
application of foreign tax laws, including withholding taxes, changes in
governmental administration or economic or monetary policy (in this country or
abroad) or changed circumstances in dealings between nations. Costs are
incurred in connection with conversions between various currencies. In
addition, foreign brokerage commissions and other costs of investing are
generally higher than in the United States, and foreign securities markets may
be less liquid, more volatile and less subject to governmental supervision
than in the United States. Investments in foreign issuers could be affected by
other factors not present in the United States, including expropriation,
confiscatory taxation, lack of uniform accounting and auditing standards and
potential difficulties in enforcing contractual obligations. Transactions in
the securities of foreign issuers could be subject to settlement delays.
More than 25% of the Portfolio's total assets, adjusted to reflect currency
transactions and positions, may be denominated in any single currency.
Concentration in a particular currency will increase the Portfolio's exposure
to adverse developments affecting the value of such currency. An issuer of
securities purchased by the Portfolio may be domiciled in a country other than
the country in whose currency the securities are denominated.
Since the Portfolio will, under normal market conditions, invest at least 65%
of its total assets in Greater China investments, its investment performance
will be especially affected by events affecting China Region companies. The
value and liquidity of Greater China investments may be affected favorably or
unfavorably by political, economic, fiscal, regulatory or other developments
in the China Region or neighboring regions. The extent of economic
development, political stability and market depth of different countries in
the China Region varies widely. Certain China Region countries, including
China, Indonesia, Malaysia, the Philippines and Thailand, are either
comparatively underdeveloped or in the process of becoming developed. Greater
China investments typically involve greater potential for gain or loss than
investments in securities of issuers in developed countries. In comparison to
the United States and other developed countries, developing countries may have
relatively unstable governments and economies based on only a few industries.
Given the Portfolio's investments, the Portfolio will likely be particularly
sensitive to changes in China's economy as the result of any reversals of
economic liberalization, political unrest or changes in China's trading
status.
SECURITIES TRADING MARKETS. THE SECURITIES MARKETS IN THE CHINA REGION ARE
SUBSTANTIALLY SMALLER, LESS LIQUID AND MORE VOLATILE THAN THE MAJOR SECURITIES
MARKETS IN THE UNITED STATES. A high proportion of the shares of many issuers
may be held by a limited number of persons and financial institutions, which
may limit the number of shares available for investment by the Portfolio. The
prices at which the Portfolio may acquire investments may be affected by
trading by persons with material non-public information and by securities
transactions by brokers in anticipation of transactions by the Portfolio in
particular securities. Similarly, volume and liquidity in the bond markets in
the China Region are less than in the United States and, at times, price
volatility can be greater than in the United States. The limited liquidity of
securities markets in the China Region may also affect the Portfolio's ability
to acquire or dispose of securities at the price and time it wishes to do so.
Accordingly, during periods of rising securities prices in the more illiquid
China Region securities markets, the Portfolio's ability to participate fully
in such price increases may be limited by its investment policy of investing
not more than 15% of its net assets in illiquid securities. Converesly, the
Portfolio's inability to dispose fully and promptly of positions in declining
markets will cause the Portfolio's net asset value to decline as the value of
the unsold positions is marked to lower prices. In addition, China Region
securities markets are susceptible to being influenced by large investors
trading significant blocks of securities.
The Chinese, Hong Kong and Taiwan stock markets are undergoing a period of
growth and change which may result in trading volatility and difficulties in
the settlement and recording of transactions, and in interpreting and applying
the relevant law and regulations. In particular, the securities industry in
China is not well developed. China has no securities laws of nationwide
applicability. The municipal securities regulations adopted by Shanghai and
Shenzhen municipalities are very new, as are their respective securities
exchanges and other self-regulatory organizations. In addition, Chinese
stockbrokers and other intermediaries may not perform as efficiently as their
counterparts in the United States and other more developed securities markets.
THE PORTFOLIO WILL INVEST IN CHINA REGION COUNTRIES WITH EMERGING ECONOMIES OR
SECURITIES MARKETS. Political and economic structures in many of such
countries may be undergoing significant evolution and rapid development, and
such countries may lack the social, political and economic stability
characteristic of the United States. Certain of such countries may have, in
the past, failed to recognize private property rights and have at times
nationalized or expropriated the assets of private companies. As a result, the
risks described above, including the risks of nationalization or expropriation
of assets, may be heightened. In addition, unanticipated political or social
developments may affect the values of the Portfolio's investments in those
countries and the availability to the Portfolio of additional investments in
those countries.
The exchanges on which the Portfolio may purchase securities in the China
Region which are believed to provide sufficiently liquid markets so that the
securities acquired by the Portfolio on such markets need not be considered
illiquid securities currently include: Hong Kong -- The Stock Exchange of Hong
Kong Limited; South Korea -- The Korea Stock Exchange; Malaysia -- The Kuala
Lumpur Stock Exchange; Singapore -- The Stock Exchange of Singapore Limited;
Taiwan -- The Taiwan Stock Exchange Corp.; Thailand -- The Securities Exchange
of Thailand; Indonesia -- The Jakarta Stock Exchange; Philippines -- The
Manila and Makati Stock Exchange; China -- The Shanghai Securities Exchange
and The Shenzhen Stock Exchange.
ECONOMIES OF COUNTRIES IN THE CHINA REGION MAY DIFFER FAVORABLY OR UNFAVORABLY
FROM THE U.S. ECONOMY IN SUCH RESPECTS AS RATE OF GROWTH OF GROSS NATIONAL
PRODUCT, RATE OF INFLATION, CAPITAL REINVESTMENT, RESOURCE SELF-SUFFICIENCY
AND BALANCE OF PAYMENTS POSITION. As export-driven economies, the economies
of countries in the China Region are affected by developments in the economies
of their principal trading partners. Revocation by the United States of
China's "Most Favored Nation" trading status, which the U.S. President and
Congress reconsider annually, would adversely affect the trade and economic
development of China and Hong Kong. Hong Kong and Taiwan have limited natural
resources, resulting in dependence on foreign sources for certain raw
materials and economic vulnerability to global fluctuations of price and
supply.
China governmental actions can have a significant effect on the economic
conditions in the China Region, which could adversely affect the value and
liquidity of the Portfolio's investments. Although the Chinese Government has
recently begun to institute economic reform policies, there can be no
assurances that it will continue to pursue such policies or, if it does, that
such policies will succeed.
China does not have a comprehensive system of laws, although substantial
changes have occurred in this regard in recent years. The corporate form of
organization has only recently been permitted in China and national
regulations governing corporations were introduced only in May, 1992. Prior to
the introduction of such regulations Shanghai had adopted a set of corporate
regulations applicable to corporations located or listed in Shanghai, and the
relationship between the two sets of regulations is not clear. Consequently,
until a firmer legal basis is provided, even such fundamental corporate law
tenets as the limited liability status of Chinese issuers and their authority
to issue shares remain open to question. Laws regarding fiduciary duties of
officers and directors and the protection of shareholders are not well
developed. China's judiciary is relatively inexperienced in enforcing the laws
that exist, leading to a higher than usual degree of uncertainty as to the
outcome of any litigation. Even where adequate law exists in China, it may be
impossible to obtain swift and equitable enforcement of such law, or to obtain
enforcement of the judgment by a court of another jurisdiction. The bankruptcy
laws pertaining to state enterprises have rarely been used and are untried in
regard to an enterprise with foreign shareholders, and there can be no
assurance that such shareholders, including the Portfolio, would be able to
realize the value of the assets of the enterprise or receive payment in
convertible currency. As the Chinese legal system develops, the promulgation
of new laws, changes to existing laws and the preemption of local laws by
national laws may adversely affect foreign investors, including the Portfolio.
The uncertainties faced by foreign investors in China are exacerbated by the
fact that many laws, regulations and decrees of China are not publicly
available, but merely circulated internally.
DIRECT INVESTMENTS. The Portfolio may invest up to 10% of its total assets in
direct investments in China growth companies. Direct investments include (i)
the private purchase from an enterprise of an equity interest in the
enterprise in the form of shares of common stock or equity interests in
trusts, partnerships, joint ventures or similar enterprises, and (ii) the
purchase of such an equity interest in an enterprise from a principal investor
in the enterprise. In each case, the Portfolio will, at the time of making the
investment, enter into a shareholder or similar agreement with the enterprise
and one or more other holders of equity interests in the enterprise. The
Adviser anticipates that these agreements will, in appropriate circumstances,
provide the Portfolio with the ability to appoint a representative to the
board of directors or similar body of the enterprise and for eventual
disposition of the Portfolio's investment in the enterprise. Such a
representative of the Portfolio will be expected to provide the Portfolio with
the ability to monitor its investment and protect its rights in the investment
and will not be appointed for the purpose of exercising management or control
of the enterprise.
Certain of the Portfolio's direct investments, particularly in China, will
probably include investments in smaller, less seasoned companies. These
companies may have limited product lines, markets or financial resources, or
they may be dependent on a limited management group. The Adviser does not
anticipate making direct investments in start-up operations, although it is
expected that in some cases the Portfolio's direct investments will fund new
operations for an enterprise which itself is engaged in similar operations or
is affiliated with an organization that is engaged in similar operations. Such
direct investments may be made in entities that are reasonably expected in the
foreseeable future to become China growth companies, either by expanding
current operations or establishing significant operations in China.
Direct investments may involve a high degree of business and financial risk
that can result in substantial losses. Because of the absence of any public
trading market for these investments, the Portfolio may take longer to
liquidate these positions than would be the case for publicly traded
securities. Although these securities may be resold in privately negotiated
transactions, the prices on these sales could be less than those originally
paid by the Portfolio. Furthermore, issuers whose securities are not publicly
traded may not be subject to public disclosure and other investor protection
requirements applicable to publicly traded securities. If such securities are
required to be registered under the securities laws of one or more
jurisdictions before being resold, the Portfolio may be required to bear the
expenses of registration. In addition, in the event the Portfolio sells
unlisted securities, any capital gains realized on such transactions may be
subject to higher rates of taxation than taxes payable on the sale of listed
securities.
OTHER INVESTMENT PRACTICES. The Portfolio may engage in the following investment
practices, some of which may derive their value from another instrument,
security or index. In addition, the Portfolio may temporarily borrow up to 5% of
the value of its total assets to satisfy redemption requests or settle
securities transactions.
DERIVATIVE INSTRUMENTS. The Portfolio may purchase or sell derivative
instruments (which are instruments that derive their value from another
instrument, security, index or currency) to enhance return, to hedge against
fluctuations in securities prices, interest rates or currency exchange rates,
or as a substitute for the purchase or sale of securities or currencies. The
Portfolio's transactions in derivative instruments may be in the U.S. or
abroad and may include the purchase or sale of futures contracts on
securities, securities indices, other indices, other financial instruments or
currencies; options on futures contracts; exchange-traded and over-the-counter
options on securities, indices or currencies; and forward foreign currency
exchange contracts. The Portfolio's transactions in derivative instruments
involve a risk of loss or depreciation due to unanticipated adverse changes in
securities prices, interest rates, the other financial instruments' prices or
currency exchange rates, the inability to close out a position or default by
the counterparty. The loss on derivative instruments (other than purchased
options) may exceed the Portfolio's initial investment in these instruments.
In addition, the Portfolio may lose the entire premium paid for purchased
options that expire before they can be profitably exercised by the Portfolio.
The Portfolio incurs transaction costs in opening and closing positions in
derivative instruments. There can be no assurance that the Adviser's use of
derivative instruments will be advantageous to the Portfolio.
The Portfolio may purchase call and put options on any securities in which the
Portfolio may invest or options on any securities index composed of securities
in which the Portfolio may invest. The Portfolio does not intend to write a
covered option on any security if after such transaction more than 15% of its
net assets, as measured by the aggregate value of the securities underlying
all covered calls and puts written by the Portfolio, would be subject to such
options. The Portfolio does not intend to purchase an option on any security
if, after such transaction, more than 5% of its net assets, as measured by the
aggregate of all premiums paid for all such options held by the Portfolio,
would be so invested.
To the extent that the Portfolio enters into futures contracts, options on
futures contracts and options on foreign currencies traded on an exchange
regulated by the Commodity Futures Trading Commission ("CFTC"), in each case
that are not for bona fide hedging purposes (as defined by the CFTC), the
aggregate initial margin and premiums required to establish these positions
(excluding the amount by which options are "in-the-money") may not exceed 5%
of the liquidation value of the Portfolio's portfolio, after taking into
account unrealized profits and unrealized losses on any contracts the
Portfolio has entered into.
Forward contracts are individually negotiated and privately traded by currency
traders and their customers. A forward contract involves an obligation to
purchase or sell a specific currency (or basket of currencies) for an agreed
price at a future date, which may be any fixed number of days from the date of
the contract. The Portfolio may engage in cross-hedging by using forward
contracts in one currency (or basket of currencies) to hedge against
fluctuations in the value of securities denominated in a different currency if
the Adviser determines that there is an established historical pattern of
correlation between the two currencies (or the basket of currencies and the
underlying currency). Use of a different foreign currency magnifies the
Portfolio's exposure to foreign currency exchange rate fluctuations. The
Portfolio may also use forward contracts to shift its exposure to foreign
currency exchange rate changes from one currency to another.
The Portfolio may enter into currency swaps for both hedging and non-hedging
purposes. Currency swaps involve the exchange of rights to make or receive
payments in specified currencies. Since currency swaps are individually
negotiated, the Portfolio expects to achieve an acceptable degree of
correlation between its portfolio investments and its currency swap positions.
Currency swaps usually involve the delivery of the entire principal value of
one designated currency in exchange for the other designated currency.
Therefore, the entire principal value of a currency swap is subject to the
risk that the other party to the swap will default on its contractual delivery
obligations. The use of currency swaps is a highly specialized activity which
involves special investment techniques and risks. If the Adviser is incorrect
in its forecasts of market values and currency exchange rates, the Portfolio's
performance will be adversely affected.
LENDING OF PORTFOLIO SECURITIES. The Portfolio may seek to earn additional
income by lending portfolio securities to broker-dealers or other
institutional borrowers. As with other extensions of credit there are risks of
delay in recovery or even loss of rights in the securities loaned if the
borrower of the securities fails financially. However, the loans will be made
only to organizations deemed by the Adviser to be of sufficiently creditworthy
and when, in the judgment of the Adviser, the consideration which can be
earned from securities loans of this type justifies the attendant risk.
REPURCHASE AGREEMENTS. The Portfolio may enter into repurchase agreements with
respect to its permitted investments, but currently intends to do so only with
member banks of the Federal Reserve System or with primary dealers in U.S.
Government securities. In the event of the bankruptcy of the other party to a
repurchase agreement, the Portfolio might experience delays in recovering its
cash. To the extent that, in the meantime, the value of the securities the
Portfolio purchased may have decreased, the Portfolio could experience a loss.
At no time will the Portfolio commit more than 15% of its net assets to
repurchase agreements which mature in more than seven days and other illiquid
securities.
OTHER INVESTMENT COMPANIES. The Portfolio reserves the right to invest up to
10% of its total assets, calculated at the time of purchase, in the securities
of other investment companies unaffiliated with the Adviser or the Manager
that have the characteristics of closed-end investment companies. The
Portfolio may not invest more than 5% of its total assets in the securities of
any one investment company or acquire more than 3% of the voting securities of
any other investment company. The Portfolio will indirectly bear its
proportionate share of any management fees paid by investment companies in
which it invests in addition to he advisory fee paid by the Portfolio. The
value of closed-end investment company securities, which are usually traded on
an exchange, is affected by demand for the securities themselves, independent
of the demand for the underlying portfolio assets and, accordingly, such
securities can trade at a discount from their net asset values.
PORTFOLIO TURNOVER. While it is the policy of the Portfolio to seek long-term
capital appreciation, and generally not to engage in trading for short-term
gains, the Portfolio will effect portfolio transactions without regard to its
holding period if, in the judgment of the Adviser, such transactions are
advisable in light of a change in circumstances of a particular company or
within a particular industry, or in light of general market, economic or
political conditions. Accordingly, the Portfolio may engage in short-term
trading under such circumstances. Portfolio expenses increase with turnover of
securities. It is anticipated that the annual portfolio turnover rate of the
Portfolio will be not more than 100%.
CERTAIN INVESTMENT POLICIES. The Fund and the Portfolio have adopted certain
fundamental investment restrictions and policies which are enumerated in
detail in the Statement of Additional Information and which may not be changed
unless authorized by a shareholder vote and an investor vote, respectively.
Among these fundamental restrictions, neither the Fund nor the Portfolio may
(1) borrow money except from banks or through reverse repurchase agreements
and in an amount not exceeding one-third of its total assets; or (2) with
respect to 75% of its total assets, invest more than 5% of its total assets in
the securities of any one issuer, other than U.S. Government securities or, in
the case of the Fund, interests in the Portfolio, or acquire more than 10% of
the outstanding voting securities of any one issuer. Except with respect to
the Portfolio's borrowing limitation, investment restrictions are considered
at the time of acquisition of assets; the sale of portfolio assets is not
required in the event of a subsequent change in circumstances. As a matter of
fundamental policy the Portfolio will invest less than 25% of its total assets
in the securities, other than U.S. Government securities, of issuers in any
one industry. However, the Portfolio is permitted to invest 25% or more of its
total assets in (i) the securities of issuers located in any one country in
the China Region and (ii) assets denominated in the currency of any one
country.
Except for the fundamental investment restrictions and policies specifically
identified above and those enumerated in the Statement of Additional
Information, the investment objective and policies of the Fund and the
Portfolio are not fundamental policies and accordingly may be changed by the
Trustees of the Trust and the Portfolio without obtaining the approval of the
shareholders of the Fund or the investors in the Portfolio, as the case may
be. If any changes were made, the Fund might have investment objectives
different from the objectives which an investor considered appropriate at the
time the investor became a shareholder in the Fund. As a matter of
nonfundamental policy, neither the Fund nor the Portfolio (i) intends to
borrow for leverage purposes or may purchase any securities if, at the time of
such purchase, permitted borrowings exceed 5% of the value of the Portfolio's
or the Fund's total assets, as the case may be, or (ii) is permitted to invest
more than 15% of its net assets in unmarketable securities, over-the-counter
options, repurchase agreements maturing in more than seven days and other
illiquid securities.
Under the 1940 Act and the rules promulgated thereunder, the Portfolio's
investments in the securities of any company that, in its most recent fiscal
year, derived more than 15% of its gross revenues from securities-related
activities is limited to 5% of any class of the issuer's equity securities and
10% of the outstanding principal amount of the issuer's debt securities,
provided that the Portfolio's aggregate investments in the securities of any
such issuer do not exceed 5% of the Portfolio's total assets. Some of the
companies available for investment in China and the China Region, including
enterprises being privatized by such countries, may be financial services
businesses that engage in securities-related activities. The Portfolio's
ability to invest in such enterprises may thus be limited.
ORGANIZATION OF THE FUND AND THE PORTFOLIO
- ------------------------------------------------------------------------------
THE FUND IS A DIVERSIFIED SERIES OF EATON VANCE GROWTH TRUST (THE "TRUST"), A
BUSINESS TRUST ESTABLISHED UNDER MASSACHUSETTS LAW PURSUANT TO A DECLARATION
OF TRUST DATED MAY 25, 1989, AS AMENDED, AND IS THE SUCCESSOR TO A
MASSACHUSETTS CORPORATION WHICH COMMENCED ITS INVESTMENT COMPANY OPERATIONS IN
1954. THE TRUST IS A MUTUAL FUND -- AN OPEN-END MANAGEMENT INVESTMENT COMPANY.
The Trustees of the Trust are responsible for the overall management and
supervision of its affairs. The Trust may issue an unlimited number of shares
of beneficial interest (no par value per share) in one or more series and
because the Trust can offer separate series (such as the Fund) it is known as
a "series company". Each share represents an equal proportionate beneficial
interest in the Fund. When issued and outstanding, the shares are fully paid
and nonassessable by the Trust and redeemable as described under "How to
Redeem Fund Shares." Shareholders are entitled to one vote for each full share
held. Fractional shares may be voted proportionately. Shares have no
preemptive or conversion rights and are freely transferable. In the event of
the liquidation of the Fund, shareholders are entitled to share pro rata in
the net assets of the Fund available for distribution to shareholders.
THE PORTFOLIO IS ORGANIZED AS A TRUST UNDER THE LAWS OF THE STATE OF NEW YORK
AND INTENDS TO BE TREATED AS A PARTNERSHIP FOR FEDERAL TAX PURPOSES. The
Portfolio, as well as the Trust, intends to comply with all applicable federal
and state securities laws. The Portfolio's Declaration of Trust provides that
the Fund and other entities permitted to invest in the Portfolio (e.g., other
U.S. and foreign investment companies and common and commingled trust funds)
will each be liable for all obligations of the Portfolio. However, the risk of
the Fund incurring financial loss on account of such liability is limited to
circumstances in which both inadequate insurance exists and the Portfolio
itself is unable to meet its obligations. Accordingly, the Trustees of the
Trust believe that neither the Fund nor its shareholders will be adversely
affected by reason of the Fund investing in the Portfolio.
SPECIAL INFORMATION ON THE FUND/PORTFOLIO INVESTMENT STRUCTURE. An investor in
the Fund should be aware that the Fund, unlike mutual funds which directly
acquire and manage their own portfolios of securities, seeks to achieve its
investment objective by investing its assets in an interest in the Portfolio
(although the Fund may temporarily hold a de minimus amount of cash), which is
a separate investment company with an identical investment objective.
Therefore, the Fund's interest in the securities owned by the Portfolio is
indirect. In addition to selling an interest to the Fund, the Portfolio may
sell interests to other affiliated and non-affiliated mutual funds or
institutional investors. Such investors will invest in the Portfolio on the
same terms and conditions and will pay a proportionate share of the
Portfolio's expenses. However, the other investors investing in the Portfolio
are not required to sell their shares at the same public offering price as the
Fund due to variations in sales commissions and other operating expenses.
Therefore, investors in the Fund should be aware that these differences may
result in differences in returns experienced by investors in the various funds
that invest in the Portfolio. Such differences in returns are also present in
other mutual fund structures, including funds that have multiple classes of
shares. For information regarding the investment objective, policies and
restrictions of the Portfolio, see "The Fund's Investment Objective", "How the
Fund and the Portfolio Invest their Assets" and "Special Investment Methods
and Risk Factors." Further information regarding investment practices may be
found in the Statement of Additional Information.
The Trustees of the Trust have considered the advantages and disadvantages of
investing the assets of the Fund in the Portfolio, as well as the advantages
and disadvantages of the two-tier format. The Trustees believe that the
structure offers opportunities for substantial growth in the assets of the
Portfolio, and affords the potential for economies of scale for the Fund, at
least when the assets of the Portfolio exceed $500 million.
The Fund may withdraw (completely redeem) all its assets from the Portfolio at
any time if the Board of Trustees of the Trust determines that it is in the
best interest of the Fund to do so. The investment objective and the
nonfundamental investment policies of the Fund and the Portfolio may be
changed by the Trustees of the Trust and the Portfolio without obtaining the
approval of the shareholders of the Fund or the investors in the Portfolio, as
the case may be. Any such change of the investment objective will be preceded
by thirty days' advance written notice to the shareholders of the Fund or the
investors in the Portfolio, as the case may be. If a shareholder redeems
shares because of a change in the nonfundamental objective or policies of the
Fund, those shares may be subject to a contingent deferred sales charge, as
described in "How to Redeem Fund Shares". In the event the Fund withdraws all
of its assets from the Portfolio, or the Board of Trustees of the Trust
determines that the investment objective of the Portfolio is no longer
consistent with the investment objective of the Fund, such Trustees would
consider what action might be taken, including investing the assets of the
Fund in another pooled investment entity or retaining an investment adviser to
manage the Fund's assets in accordance with its investment objective. The
Fund's investment performance may be affected by a withdrawal of all its
assets from the Portfolio.
Information regarding the availability of other pooled investment entities or
funds which invest in the Portfolio may be obtained by contacting Eaton Vance
Distributors, Inc. (the "Principal Underwriter" or "EVD"), 24 Federal Street,
Boston, MA 02110 (617) 482-8260. Smaller investors in the Portfolio may be
adversely affected by the actions of a larger investor in the Portfolio. For
example, if a large investor withdraws from the Portfolio, the remaining
investors may experience higher pro rata operating expenses, thereby producing
lower returns. Additionally, the Portfolio may become less diverse, resulting
in increased portfolio risk, and experience decreasing economies of scale.
However, this possibility exists as well for historically structured funds
which have large or institutional investors.
Until 1992, the Manager sponsored and advised historically structured funds.
Funds which invest all their assets in interests in a separate investment
company are a relatively new development in the mutual fund industry and,
therefore, the Fund may be subject to additional regulations than historically
structured funds.
The Declaration of Trust of the Portfolio provides that the Portfolio will
terminate 120 days after the complete withdrawal of the Fund or any other
investor in the Portfolio, unless either the remaining investors, by unanimous
vote at a meeting of such investors, or a majority of the Trustees of the
Portfolio, by written instrument consented to by all investors, agree to
continue the business of the Portfolio. This provision is consistent with
treatment of the Portfolio as a partnership for federal income tax purposes.
See "Distributions and Taxes" for further information. Whenever the Fund as an
investor in the Portfolio is requested to vote on matters pertaining to the
Portfolio (other than the termination of the Portfolio's business, which may
be determined by the Trustees of the Portfolio without investor approval), the
Fund will hold a meeting of Fund shareholders and will vote its interest in
the Portfolio for or against such matters proportionately to the instructions
to vote for or against such matters received from Fund shareholders. The Fund
shall vote shares for which it receives no voting instructions in the same
proportion as the shares for which it receives voting instructions. Other
investors in the Portfolio may alone or collectively acquire sufficient voting
interests in the Portfolio to control matters relating to the operation of the
Portfolio, which may require the Fund to withdraw its investment in the
Portfolio or take other appropriate action. Any such withdrawal could result
in a distribution "in kind" of portfolio securities (as opposed to a cash
distribution from the Portfolio). If securities are distributed, a Fund could
incur brokerage, tax or other charges in converting the securities to cash. In
addition, the distribution in kind may result in a less diversified portfolio
of investments or adversely affect the liquidity of such Fund. Notwithstanding
the above, there are other means for meeting shareholder redemption requests,
such as borrowing.
One independent Trustee of the Portfolio also serves as a Trustee of the
Trust. The Trustees of the Trust, including a majority of the noninterested
Trustees, have approved written procedures designed to identify and address
any potential conflicts of interest which might arise as a result of the
existence of one common independent Trustee on the two Boards. For further
information concerning the Trustees and officers of each of the Trust and the
Portfolio, see the Statement of Additional Information.
MANAGEMENT OF THE FUND AND THE PORTFOLIO
- ------------------------------------------------------------------------------
EATON VANCE MANAGEMENT ("EATON VANCE") ACTS AS THE SPONSOR AND MANAGER OF THE
FUND AND THE ADMINISTRATOR OF THE PORTFOLIO. THE PORTFOLIO HAS ENGAGED LLOYD
GEORGE MANAGEMENT (HONG KONG) LIMITED ("LGM-HK") AS ITS INVESTMENT ADVISER.
Pursuant to a service agreement effective on January 1, 1996 between LGM-HK
and its affiliate, Lloyd George Investment Management (Bermuda) Limited
("LGIM-B"), LGIM-B, acting under the general supervision of the Portfolio's
Trustees, manages the Portfolio's investments and affairs. LGM-HK supervises
LGIM-B's performance of this function and retains its contractual obligations
under its investment advisory agreement with the Portfolio. LGM-HK and LGIM-B
are referred to collectively as the Advisers. The Portfolio is co-managed by
Robert Lloyd George and Scobie Dickinson Ward.
Each Adviser is registered as an investment adviser with the Securities and
Exchange Commission (the "Commission"). Each Adviser is a subsidiary of Lloyd
George Management (B.V.I.) Limited ("LGM"). LGM and its subsidiaries act as
investment adviser to various individual and institutional clients with total
assets under management of more than $1 billion. Eaton Vance's parent, Eaton
Vance Corp., owns 24% of the Class A shares issued by LGM.
LGM was established in 1991 to provide investment management services with
respect to equity securities of companies trading in Asian securities markets,
especially those of emerging markets. LGM currently manages Pacific Basin and
Asian portfolios for both private clients and institutional investors seeking
long-term capital growth. LGM's core investment team consists of nine
experienced investment professionals, based in Hong Kong, who have worked
together over a number of years successfully managing client portfolios in
Pacific Basin and Asian stock markets. LGM also has offices in Bombay, India
and London, England. The team has a unique knowledge of, and experience with,
Pacific Basin and Asian emerging markets. LGM is ultimately controlled by the
Hon. Robert J.D. Lloyd George, President and Trustee of the Portfolio and
Chairman and Chief Executive Officer of the Advisers. LGM's only activity is
portfolio management.
LGM and the Advisers have adopted a disciplined management style, providing a
blend of Asian and multinational expertise with the most rigorous
international standards of fundamental security analysis. Although focused
primarily in Asia, LGM and the Advisers maintain a network of international
contacts in order to monitor international economic and stock market trends
and offer clients a global management service.
THE HONOURABLE ROBERT LLOYD GEORGE. Chairman. Born in London in 1952 and
educated at Eton College, where he was a King's Scholar, and at Oxford
University. Prior to founding LGM, Mr. Lloyd George was Managing Director of
Indosuez Asia Investment Services Ltd. Previously, he spent four years with
Fiduciary Trust Company of New York researching international securities, in
the United States and Europe, for the United Nations Pension Fund. Mr. Lloyd
George is the author of numerous published articles and three books -- "A
Guide to Asian Stock Markets" (Longmans, Hong Kong, 1989), "The East West
Pendulum" (Woodhead - Faulkner, Cambridge, 1991) and "North South -- an
Emerging Markets Handbook" (Probus, England, 1994).
WILLIAM WALTER RALEIGH KERR. Finance Director and Chief Operating
Officer. Born in 1950 and educated at Ampleforth and Oxford. Mr. Kerr
qualified as a Chartered Accountant at Thomson McLintock & Co. before joining
The Oldham Estate Company plc as Financial Controller. Prior to joining LGM,
Mr. Kerr was a Director of Banque Indosuez's corporate finance subsidiary,
Financiere Indosuez Limited, in London. Prior to that Mr. Kerr worked for
First Chicago Limited.
SCOBIE DICKINSON WARD. Director. Born in 1966 and a cum laude graduate of both
Phillips Academy Andover, and Harvard College. Mr. Ward joined Indosuez Asia
Investment Services in 1989, where he managed the $100 million Himalayan Fund,
and the Indosuez Tasman Fund, investing in Australia and New Zealand. Messrs.
Ward and Lloyd George manage Eaton Vance's Emerging Markets Portfolio and
South Asia Portfolio (which invests in India and the Indian subcontinent).
M. F. TANG. Director. Born in 1946 and educated in Hong Kong. Mr. Tang is a
Fellow of the Chartered Association of Certified Accountants. Mr. Tang joined
LGM having worked for Australian Mutual Provident Society in Sydney where he
was a Portfolio Manager responsible for Asian Equities. Prior thereto Mr. Tang
worked for Barclays Australia Investment Services Ltd. From 1978 to 1986 Mr.
Tang worked for Barings International Investment Management and prior to that
he spent six years with Peat Marwick Mitchell & Co. Mr. Tang is fluent in the
Cantonese and Mandarin dialects of the Chinese language.
PAMELA CHAN. Director. Born in Hong Kong in 1957 and graduated from Mills
College in Oakland, California. She was an investment executive for Jardine
Fleming from 1982-1984 before moving to Australia where she worked as a Fund
Manager for Rothschild and Aetna. She joined Sun Life Assurance Society PLC in
England in 1987 where she was the head of South East Asian Equities and a
Director. She joined LGM in April 1994 where she is a portfolio manager and a
member of the Pension Management Committee.
ADALINE MANG-YEE KO. Director. Born in 1943 and educated at University of
Birmingham, England and at London Business School where she received her MBA.
Ms. Ko has over 13 years experience working with Far East Asian equities. From
1982-1988, she worked at Save & Prosper Group Ltd. as an investment manager.
In 1988, Ms. Ko transferred to Robert Fleming & Co. Ltd. In 1990, she was
promoted to Director of Fleming Investment Management Ltd. In 1992, she was
promoted to Head of the Pacific Region Portfolios Group where she supervised a
team of 5 with responsibility for over $1.5 billion in assets under
management. Ms. Ko joined LGM in 1995.
Effective January 1, 1996, LGM-HK will pay to LGIM-B the entire amount of the
advisory fee payable by the Portfolio under its investment advisory agreement
with LGM-HK. Under this agreement, LGM-HK is entitled to receive a monthly
advisory fee of 0.0625% (equivalent to 0.75% annually) of the average daily
net assets of the Portfolio up to $500 million, which fee declines at
intervals above $500 million. As at August 31, 1995, the Portfolio had net
assets of $590,417,058. For the fiscal year ended August 31, 1995, the
Portfolio paid LGM-HK advisory fees equivalent to 0.74% of the Portfolio's
average daily net assets for such period.
LGIM-B also furnishes for the use of the Portfolio office space and all
necessary office facilities, equipment and personnel for servicing the
investments of the Portfolio. LGIM-B places the portfolio securities
transactions of the Portfolio with many broker-dealer firms and uses its best
efforts to obtain execution of such transactions at prices which are
advantageous to the Portfolio and at reasonably competitive commission rates.
Subject to the foregoing, LGIM-B may consider sales of shares of the Fund as a
factor in the selection of firms to execute portfolio transactions.
EATON VANCE, ITS AFFILIATES AND ITS PREDECESSOR COMPANIES HAVE BEEN MANAGING
ASSETS OF INDIVIDUALS AND INSTITUTIONS SINCE 1924 AND MANAGING INVESTMENT
COMPANIES SINCE 1931. EATON VANCE ACTS AS INVESTMENT ADVISER TO INVESTMENT
COMPANIES AND VARIOUS INDIVIDUAL AND INSTITUTIONAL CLIENTS WITH ASSETS UNDER
MANAGEMENT OF APPROXIMATELY $16 BILLION. Eaton Vance is a wholly-owned
subsidiary of Eaton Vance Corp., a publicly held holding company. Eaton Vance
Corp., through its subsidiaries and affiliates, engages in investment
management and marketing activities, fiduciary and banking services, oil and
gas operations, real estate investment, consulting and management, and
development of precious metals properties. Eaton Vance Corp. also owns 24% of
the Class A shares issued by LGM.
Eaton Vance, acting under the general supervision of the Boards of Trustees of
the Trust and the Portfolio, manages and administers the business affairs of
the Fund and the Portfolio. Eaton Vance's services include monitoring and
providing reports to the Trustees of the Trust and the Portfolio concerning
the investment performance achieved by the Adviser for the Portfolio,
recordkeeping, preparation and filing of documents required to comply with
federal and state securities laws, supervising the activities of the transfer
agent of the Fund and the custodian of the Portfolio, providing assistance in
connection with Trustees' and shareholders' meetings and other management and
administrative services necessary to conduct the business of the Fund and the
Portfolio. Eaton Vance does not provide any investment management or advisory
services to the Portfolio or the Fund. Eaton Vance also furnishes for the use
of the Fund and the Portfolio office space and all necessary office
facilities, equipment and personnel for managing and administering the
business affairs of the Fund and the Portfolio.
Under its management contract with the Fund, Eaton Vance receives a monthly
fee in the amount of 1/48 of 1% (equal to 0.25% annually) of the average
daily net assets of the Fund up to $500 million, which fee declines at
intervals above $500 million. As of August 31, 1995, the Fund had net assets
of $324,257,771. For the fiscal year ended August 31, 1995, Eaton Vance earned
management fees equivalent to 0.25% of the Fund's average daily net assets for
such period. In addition, under its administration agreement with the
Portfolio, Eaton Vance receives a monthly fee in the amount of 1/48 of 1%
(equal to 0.25% annually) of the average daily net assets of the Portfolio up
to $500 million, which fee declines at intervals above $500 million. For the
fiscal year ended August 31, 1995, Eaton Vance earned administration fees from
the Portfolio equivalent to 0.24% of the Portfolio's average daily net assets
for such period. The combined advisory, management and administration fees
payable by the Fund and the Portfolio are higher than similar fees charged by
most other investment companies.
The Fund and the Portfolio, as the case may be, will each be responsible for
all respective costs and expenses not expressly stated to be payable by the
Advisers under the investment advisory agreement and Eaton Vance under the
management contract or the administration agreement.
DISTRIBUTION PLAN
- ------------------------------------------------------------------------------
THE FUND FINANCES DISTRIBUTION ACTIVITIES AND HAS ADOPTED A DISTRIBUTION PLAN
(THE "PLAN") PURSUANT TO RULE 12B-1 UNDER THE INVESTMENT COMPANY ACT OF 1940
(THE "1940 ACT"). Rule 12b-1 permits a mutual fund, such as the Fund, to
finance distribution activities and bear expenses associated with the
distribution of its shares provided that any payments made by the fund are
made pursuant to a written plan adopted in accordance with the Rule. The Plan
is subject to, and complies with, the sales charge rule of the National
Association of Securities Dealers, Inc. (the "NASD Rule"). The Plan is
described further in the Statement of Additional Information, and the
following is a description of the salient features of the Plan. The Plan
provides that the Fund, subject to the NASD Rule, will pay sales commissions
and distribution fees to the Principal Underwriter only after and as a result
of the sale of shares of the Fund. On each sale of Fund shares (excluding
reinvestment of distributions) the Fund will pay the Principal Underwriter (i)
sales commissions equal to 5% of the amount received by the Fund for each
share sold and (ii) distribution fees calculated by applying the rate of 1%
over the prime rate then reported in The Wall Street Journal to the
outstanding balance of Uncovered Distribution Charges (as described below) of
the Principal Underwriter. The Principal Underwriter currently expects to pay
sales commissions (except on exchange transactions and reinvestments) to a
financial services firm (an "Authorized Firm") at the time of sale equal to 4%
of the purchase price of the shares sold by such Firm. The Principal
Underwriter will use its own funds (which may be borrowed from banks) to pay
such commissions. Because the payment of the sales commissions and
distribution fees to the Principal Underwriter is subject to the NASD Rule
described below, it will take the Principal Underwriter a number of years to
recoup the sales commissions paid by it to Authorized Firms from the payments
received by it from the Fund pursuant to the Plan.
THE NASD RULE REQUIRES THE FUND TO LIMIT ITS ANNUAL PAYMENTS OF SALES
COMMISSIONS AND DISTRIBUTION FEES TO AN AMOUNT NOT EXCEEDING .75% OF THE
FUND'S AVERAGE DAILY NET ASSETS FOR EACH FISCAL YEAR. Accordingly, the Fund
accrues daily an amount at the rate of 1/365 of .75% of the Fund's net
assets, and pays such accrued amounts monthly to the Principal Underwriter.
The Plan requires such accruals to be automatically discontinued during any
period in which there are no outstanding Uncovered Distribution Charges under
the Plan. Uncovered Distribution Charges are calculated daily and, briefly,
are equivalent to all unpaid sales commissions and distribution fees to which
the Principal Underwriter is entitled under the Plan less all contingent
deferred sales charges theretofore paid to the Principal Underwriter and all
amounts theretofore paid to the Principal Underwriter by LGIM-B in
consideration of the former's distribution efforts. The Eaton Vance
organization may be considered to have realized a profit under the Fund's Plan
if at any point in time the aggregate amounts of all payments received by the
Principal Underwriter from the Fund, pursuant to the Plan and from LGIM-B in
consideration of the distribution efforts, including any contingent deferred
sales charges, have exceeded the total expenses theretofore incurred by such
organization in distributing shares of the Fund. Total expenses for this
purpose will include an allocable portion of the overhead costs of such
organization and its branch offices.
Because of the NASD Rule limitation on the amount of sales commissions and
distribution fees paid during any fiscal year, a high level of sales of Fund
shares during the initial years of the Fund's operations would cause a large
portion of the sales commissions attributable to a sale of Fund shares to be
accrued and paid by the Fund to the Principal Underwriter in fiscal years
subsequent to the year in which such shares were sold. This spreading of sales
commissions payments under the Plan over an extended period would result in
the incurrence and payment of increased distribution fees under the Plan.
During the fiscal year ended August 31, 1995, the Fund paid sales commissions
under its Plan equivalent to .75% of the Fund's average daily net assets. As
of August 31, 1995, the outstanding Uncovered Distribution Charges of the
Principal Underwriter calculated under the Plan amounted to approximately
$2,898,000 (equivalent to 0.9% of the Fund's net assets on such day).
THE PLAN ALSO AUTHORIZES THE FUND TO MAKE PAYMENTS OF SERVICE FEES TO THE
PRINCIPAL UNDERWRITER, AUTHORIZED FIRMS AND OTHER PERSONS IN AMOUNTS NOT
EXCEEDING .25% OF THE FUND'S AVERAGE DAILY NET ASSETS FOR EACH FISCAL YEAR.
The Trustees of the Trust have initially implemented the Plan by authorizing
the Fund to make quarterly service fee payments to the Principal Underwriter
and Authorized Firms in amounts not expected to exceed .25% per annum of the
Fund's average daily net assets for each fiscal year based on the value of
Fund shares sold by such persons and remaining outstanding for at least twelve
months. As permitted by the NASD Rule, such payments are made for personal
services and/or the maintenance of shareholder accounts. Service fees are
separate and distinct from the sales commissions and distribution fees payable
by the Fund to the Principal Underwriter, and as such are not subject to
automatic discontinuance when there are no outstanding Uncovered Distribution
Charges of the Principal Underwriter. For the fiscal year ended August 31,
1995, the Fund made service fee payments under the Plan equivalent to 0.13% of
the Fund's average daily net assets.
The Principal Underwriter may, from time to time, at its own expense, provide
additional incentives to Authorized Firms which employ registered
representatives who sell the Fund's shares and/or shares of other funds
distributed by the Principal Underwriter. In some instances, such additional
incentives may be offered only to certain Authorized Firms whose
representatives sell or are expected to sell significant amounts of shares. In
addition, the Principal Underwriter may from time to time increase or decrease
the sales commissions payable to Authorized Firms.
Distribution of Fund shares by the Principal Underwriter will also be
encouraged by the payment by LGIM-B to the Principal Underwriter of amounts
equivalent to .15% of the Fund's annual average daily net assets. Such
payments will be made from LGIM-B's own resources, not Fund assets. The
aggregate amounts of such payments are a deduction in calculating the
outstanding Uncovered Distribution Charges of the Principal Underwriter under
the Plan and, therefore, will benefit Fund shareholders when such charges
exist. Such payments will be made in consideration of the Principal
Underwriter's distribution efforts.
The Fund may, in its absolute discretion, suspend, discontinue or limit the
offering of its shares at any time. In determining whether any such action
should be taken, the Fund's management intends to consider all relevant
factors, including without limitation the size of the Fund, the investment
climate and market conditions, the volume of sales and redemptions of Fund
shares, and the amount of Uncovered Distribution Charges of the Principal
Underwriter. The Plan may continue in effect and payments may be made under
the Plan following any such suspension, discontinuance or limitation of the
offering of Fund shares; however, the Fund is not contractually obligated to
continue the Plan for any particular period of time. Suspension of the
offering of Fund shares would not, of course, affect a shareholder's ability
to redeem shares.
VALUING FUND SHARES
- ------------------------------------------------------------------------------
THE FUND VALUES ITS SHARES ONCE ON EACH DAY THE NEW YORK STOCK EXCHANGE (THE
"EXCHANGE") IS OPEN FOR TRADING, as of the close of regular trading on the
Exchange (normally 4:00 p.m. New York time). The Fund's net asset value per
share is determined by its custodian, Investors Bank & Trust Company ("IBT")
(as agent for the Fund) in the manner authorized by the Trustees of the Trust.
Net asset value is computed by dividing the value of the Fund's total assets,
less its liabilities, by the number of shares outstanding. Because the Fund
invests its assets in an interest in the Portfolio, the Fund's net asset value
will reflect the value of its interest in the Portfolio (which, in turn,
reflects the underlying value of the Portfolio's assets and liabilities).
Authorized Firms must communicate an investor's order to the Principal
Underwriter prior to the close of the Principal Underwriter's business day to
receive that day's net asset value per share and the public offering price
based thereon. It is the Authorized Firms' responsibility to transmit orders
promptly to the Principal Underwriter, which is a wholly-owned subsidiary of
Eaton Vance.
The Portfolio's net asset value is also determined as of the close of regular
trading on the Exchange by IBT (as custodian and agent for the Portfolio)
based on market or fair value in the manner authorized by the Trustees of the
Portfolio, with special provisions for valuing debt obligations, short-term
investments, foreign securities, direct investments, hedging instruments and
assets not having readily available market quotations, if any. Net asset value
is computed by subtracting the liabilities of the Portfolio from the value of
its total assets. For further information regarding the valuation of the
Portfolio's assets, see "Determination of Net Asset Value" in the Statement of
Additional Information.
---------------------------------------------------------------------------
SHAREHOLDERS MAY DETERMINE THE VALUE OF THEIR INVESTMENT BY MULTIPLYING
THE NUMBER OF FUND SHARES OWNED BY THE CURRENT NET ASSET VALUE PER SHARE.
---------------------------------------------------------------------------
HOW TO BUY FUND SHARES
- ------------------------------------------------------------------------------
SHARES OF THE FUND MAY BE PURCHASED FOR CASH OR MAY BE ACQUIRED IN EXCHANGE
FOR SECURITIES. Investors may purchase shares of the Fund through Authorized
Firms at the net asset value per share of the Fund next determined after an
order is effective. The Fund may suspend the offering of shares at any time
and may refuse an order for the purchase of shares. An Authorized Firm may
charge its customers a fee in connection with transactions executed by that
Firm.
An initial investment in the Fund must be at least $1,000. Once an account has
been established the investor may send investments of $50 or more at any time
directly to the Fund's transfer agent (the "Transfer Agent") as follows: First
Data Investor Services Group, BOS725, P.O. Box 1559, Boston, MA 02104. The
$1,000 minimum initial investment is waived for Bank Automated Investing
accounts, which may be established with an investment of $50 or more. See
"Eaton Vance Shareholder Services".
In connection with employee benefit or other continuous group purchase plans
under which the average initial purchase by a participant of the plan is
$1,000 or more, the Fund may accept initial investments of less than $1,000 on
the part of an individual participant. In the event a shareholder who is a
participant of such a plan terminates participation in the plan, his or her
shares will be transferred to a regular individual account. However, such
account will be subject to the right of redemption by the Fund as described
below under "How to Redeem Fund Shares."
ACQUIRING FUND SHARES IN EXCHANGE FOR SECURITIES. IBT, as escrow agent, will
receive securities acceptable to Eaton Vance, as Manager, in exchange for Fund
shares at their net asset value as determined above. The minimum value of
securities (or securities and cash) accepted for deposit is $5,000. Securities
accepted will be sold on the day of their receipt or as soon thereafter as
possible. The number of Fund shares to be issued in exchange for securities
will be the aggregate proceeds from the sale of such securities, divided by
the applicable net asset value per Fund share on the day such proceeds are
received. Eaton Vance will use reasonable efforts to obtain the then current
market price for such securities, but does not guarantee the best available
price. Eaton Vance will absorb any transaction costs, such as commissions, on
the sale of the securities.
Securities determined to be acceptable should be transferred via book entry or
physically delivered, in proper form for transfer, through an Authorized Firm,
together with a completed and signed Letter of Transmittal in approved form
(available from Authorized Firms), as follows:
IN THE CASE OF BOOK ENTRY:
Deliver through Depository Trust Co.
Broker #2212
Investors Bank & Trust Company
For A/C EV Marathon Greater China Growth Fund
IN THE CASE OF PHYSICAL DELIVERY:
Investors Bank & Trust Company
Attention: EV Marathon Greater China Growth Fund
Physical Securities Processing Settlement Area
89 South Street
Boston, MA 02111
Investors who are contemplating an exchange of securities for shares of the
Fund, or their representatives, must contact Eaton Vance to determine whether
the securities are acceptable before forwarding such securities to IBT. Eaton
Vance reserves the right to reject any securities. Exchanging securities for
Fund shares may create a taxable gain or loss. Each investor should consult
his or her tax adviser with respect to the particular federal, state and local
tax consequences of exchanging securities for Fund shares.
---------------------------------------------------------------------------
IF YOU DON'T HAVE AN AUTHORIZED FIRM, EATON VANCE CAN RECOMMEND ONE.
---------------------------------------------------------------------------
HOW TO REDEEM FUND SHARES
- ------------------------------------------------------------------------------
A SHAREHOLDER MAY REDEEM FUND SHARES BY DELIVERING TO FIRST DATA INVESTOR
SERVICES GROUP, BOS725, P.O. BOX 1559, BOSTON, MA 02104, during its business
hours a written request for redemption in good order, plus any share
certificates with executed stock powers. The redemption price will be based on
the net asset value per Fund share next computed after such delivery. Good
order means that all relevant documents must be endorsed by the record owner
(s) exactly as the shares are registered and the signature(s) must be
guaranteed by a member of either the Securities Transfer Association's STAMP
program or the New York Stock Exchange's Medallion Signature Program, or
certain banks, savings and loan institutions, credit unions, securities
dealers, securities exchanges, clearing agencies and registered securities
associations as required by a regulation of the Securities and Exchange
Commission and acceptable to First Data Investor Services Group. In addition,
in some cases, good order may require the furnishing of additional documents
such as where shares are registered in the name of a corporation, partnership
or fiduciary.
Within seven days after receipt of a redemption request by First Data Investor
Services Group, the Fund will make payment in cash for the net asset value of
the shares as of the date determined above and reduced by the amount of any
applicable contingent deferred sales charge (described below), and any federal
income tax required to be withheld. Although the Fund normally expects to make
payment in cash for redeemed shares, the Trust, subject to compliance with
applicable regulations, has reserved the right to pay the redemption price of
shares of the Fund, either totally or partially, by a distribution in kind of
readily marketable securities withdrawn by the Fund from the Portfolio. The
securities so distributed would be valued pursuant to the Portfolio's
valuation procedures. If a shareholder received a distribution in kind, the
shareholder could incur brokerage or other charges in converting the
securities to cash.
To sell shares at their net asset value through an Authorized Firm (a
repurchase), a shareholder can place a repurchase order with the Authorized
Firm, which may charge a fee. The value of such shares is based upon the net
asset value calculated after EVD, as the Fund's agent, receives the order. It
is the Authorized Firm's responsibility to transmit promptly repurchase orders
to EVD. Throughout this Prospectus, the word "redemption" is generally meant
to include a repurchase.
If shares were recently purchased, the proceeds of redemption (or repurchase)
will not be sent until the check (including a certified or cashier's check)
received for the shares purchased has cleared. Payment for shares tendered for
redemption may be delayed up to 15 days from the purchase date when the
purchase check has not yet cleared. Redemptions or repurchases may result in a
taxable gain or loss.
Due to the high cost of maintaining small accounts, the Fund reserves the
right to redeem Fund accounts with balances of less than $500. Prior to such a
redemption, shareholders will be given 60 days' written notice to make an
additional purchase. Thus, an investor making an initial investment of $1,000
would not be able to redeem shares without being subject to this policy.
However, no such redemption would be required by the Fund if the cause of the
low account balance was a reduction in the net asset value of Fund shares. No
contingent deferred sales charge will be imposed with respect to such
involuntary redemptions.
CONTINGENT DEFERRED SALES CHARGE. Shares redeemed within the first six years
of their purchase (except shares acquired through the reinvestment of
distributions) generally will be subject to a contingent deferred sales
charge. A contingent deferred sales charge is imposed on any redemption the
amount of which exceeds the aggregate value at the time of redemption of (a)
all shares in the account purchased more than six years prior to the
redemption, (b) all shares in the account acquired through reinvestment of
distributions and (c) the increase, if any, in value of all other shares in
the account (namely those purchased within the six years preceding the
redemption) over the purchase price of such shares. Redemptions are processed
in a manner to maximize the amount of redemption proceeds which will not be
subject to a contingent deferred sales charge. That is, each redemption will
be assumed to have been made first from the exempt amounts referred to in
clauses (a), (b) and (c) above, and second through liquidation of those shares
in the account referred to in clause (c) on a first-in-first-out basis. Any
contingent deferred sales charge which is required to be imposed on share
redemptions will be made in accordance with the following schedule:
CONTINGENT
DEFERRED
YEAR OF REDEMPTION AFTER PURCHASE SALES CHARGE
----------------------------------------------------------------------------
First or Second 5%
Third 4%
Fourth 3%
Fifth 2%
Sixth 1%
Seventh and following 0%
In calculating the contingent deferred sales charge upon the redemption of
shares acquired in an exchange for shares of a fund currently listed under
"The Eaton Vance Exchange Privilege", the contingent deferred sales charge
schedule applicable to the shares at the time of purchase will apply and the
purchase of Fund shares acquired in the exchange is deemed to have occurred at
the time of the original purchase of exchanged shares.
No contingent deferred sales charge will be imposed on shares of the Fund
which have been sold to Eaton Vance, its affiliates, or to their respective
employees or clients. The contingent deferred sales charge will be waived for
shares redeemed (1) pursuant to a Withdrawal Plan (see "Eaton Vance
Shareholder Services"), (2) as part of a required distribution from a tax-
sheltered retirement plan or (3) following the death of all beneficial owners
of such shares, provided the redemption is requested within one year of death
(a death certificate and other applicable documents may be required). The
contingent deferred sales charge will be paid to the Principal Underwriter or
the Fund. When paid to the Principal Underwriter it will reduce the amount of
Uncovered Distribution Charges calculated under the Fund's Distribution Plan.
See "Distribution Plan".
---------------------------------------------------------------------------
THE FOLLOWING EXAMPLE ILLUSTRATES THE OPERATION OF THE CONTINGENT DEFERRED
SALES CHARGE. ASSUME THAT AN INVESTOR PURCHASES $10,000 OF THE FUND'S
SHARES AND THAT 16 MONTHS LATER THE VALUE OF THE ACCOUNT HAS GROWN THROUGH
INVESTMENT PERFORMANCE AND REINVESTMENT OF DIVIDENDS TO $12,000. THE
INVESTOR THEN MAY REDEEM UP TO $2,000 OF SHARES WITHOUT INCURRING A
CONTINGENT DEFERRED SALES CHARGE. IF THE INVESTOR SHOULD REDEEM $3,000 OF
SHARES, A CHARGE WOULD BE IMPOSED ON $1,000 OF THE REDEMPTION. THE RATE
WOULD BE 5% BECAUSE THE REDEMPTION WAS MADE IN THE SECOND YEAR AFTER THE
PURCHASE WAS MADE AND THE CHARGE WOULD BE $50.
---------------------------------------------------------------------------
REPORTS TO SHAREHOLDERS
- ------------------------------------------------------------------------------
THE FUND WILL ISSUE TO ITS SHAREHOLDERS SEMI-ANNUAL AND ANNUAL REPORTS
CONTAINING FINANCIAL STATEMENTS. Financial statements included in annual
reports are audited by the Fund's independent certified public accountants.
Shortly after the end of each calendar year, the Fund will furnish its
shareholders with information necessary for preparing federal and state income
tax returns.
THE LIFETIME INVESTING ACCOUNT/DISTRIBUTION OPTIONS
- ------------------------------------------------------------------------------
AFTER AN INVESTOR MAKES AN INITIAL PURCHASE OF FUND SHARES, THE FUND'S
TRANSFER AGENT, FIRST DATA INVESTOR SERVICES GROUP, WILL SET UP A LIFETIME
INVESTING ACCOUNT FOR THE INVESTOR ON THE FUND'S RECORDS. This account is a
complete record of all transactions between the investor and the Fund which at
all times shows the balance of shares owned. The Fund will not issue share
certificates except upon request.
Each time a transaction takes place in a shareholder's account, the
shareholder will receive a statement showing complete details of the
transaction and the current balance in the account. (Under certain investment
plans, statements may be sent only quarterly). THE LIFETIME INVESTING ACCOUNT
ALSO PERMITS A SHAREHOLDER TO MAKE ADDITIONAL INVESTMENTS BY SENDING A CHECK
FOR $50 OR MORE TO First Data Investor Services Group.
Any questions concerning a shareholder's account or services available may
also be directed by telephone to EATON VANCE SHAREHOLDER SERVICES at 800-225-
6265, extension 2, or in writing to First Data Investor Services Group,
BOS725, P.O. Box 1559, Boston, MA 02104 (please provide the name of the
shareholder, the Fund and the account number).
THE FOLLOWING DISTRIBUTION OPTIONS WILL BE AVAILABLE TO ALL LIFETIME INVESTING
ACCOUNTS and may be changed as often as desired by written notice to the
Fund's dividend disbursing agent, First Data Investor Services Group, BOS725,
P.O. Box 1559, Boston, MA 02104. The currently effective option will appear on
each account statement.
SHARE OPTION -- Dividends and capital gains will be reinvested in additional
shares.
INCOME OPTION -- Dividends will be paid in cash and capital gains will be
reinvested in additional shares.
CASH OPTION -- Dividends and capital gains will be paid in cash.
The SHARE OPTION will be assigned if no other option is specified.
Distributions, including those reinvested, will be reduced by any withholding
required under the federal income tax laws.
If the INCOME OPTION or CASH OPTION has been selected, dividend and/or capital
gains distribution checks which are returned by the United States Postal
Service as not deliverable or which remain uncashed for six months or more
will be reinvested in the account at the then current net asset value.
Furthermore, the distribution option on the account will be automatically
changed to the SHARE OPTION until such time as the shareholder selects a
different option.
DISTRIBUTION INVESTMENT OPTION. In addition to the distribution options set
forth above, dividends and/or capital gains may be invested in additional
shares of another Eaton Vance fund. Before selecting this option, a
shareholder should obtain a prospectus of the other Eaton Vance fund and
consider its objectives and policies carefully.
"STREET NAME" ACCOUNTS. If shares of a Fund are held in a "street name"
account with an Authorized Firm, all recordkeeping, transaction processing and
payments of distributions relating to the beneficial owner's account will be
performed by the Authorized Firm, and not by the Fund and its Transfer Agent.
Since the Fund will have no record of the beneficial owner's transactions, a
beneficial owner should contact the Authorized Firm to purchase, redeem or
exchange shares, to make changes in or give instructions concerning the
account, or to obtain information about the account. The transfer of shares in
a "street name" account to an account with another dealer or to an account
directly with a Fund involves special procedures and will require the
beneficial owner to obtain historical purchase information about the shares in
the account from the Authorized Firm. Before establishing a "street name"
account with an investment firm, or transferring the account to another
investment firm, an investor wishing to reinvest distributions should
determine whether the firm which will hold the shares allows reinvestment of
distributions in "street name" accounts.
---------------------------------------------------------------------------
UNDER A LIFETIME INVESTING ACCOUNT A SHAREHOLDER CAN MAKE ADDITIONAL
INVESTMENTS IN SHARES OF THE FUND BY SENDING A CHECK FOR $50 OR MORE.
---------------------------------------------------------------------------
THE EATON VANCE EXCHANGE PRIVILEGE
- ------------------------------------------------------------------------------
Shares of the Fund currently may be exchanged for shares of one or more other
funds in the Eaton Vance Marathon Group of Funds (except Eaton Vance Prime
Rate Reserves) or Eaton Vance Money Market Fund, which are distributed with a
contingent deferred sales charge, on the basis of the net asset value per
share of each fund at the time of the exchange, provided that such exchange
offers are available only in states where shares of the fund being acquired
may be legally sold.
Each exchange must involve shares which have a net asset value of at least
$1,000. The exchange privilege may be changed or discontinued without penalty.
Shareholders will be given sixty (60) days' notice prior to any termination or
material amendment of the exchange privilege. The Fund does not permit the
exchange privilege to be used for "Market Timing" and may terminate the
exchange privilege for any shareholder account engaged in Market Timing
activity. Any shareholder account for which more than two round-trip exchanges
are made within any twelve month period will be deemed to be engaged in Market
Timing. Furthermore, a group of unrelated accounts for which exchanges are
entered contemporaneously by a financial intermediary will be considered to be
engaged in Market Timing.
First Data Investor Services Group makes exchanges at the next determined net
asset value after receiving an exchange request in good order (see "How to
Redeem Fund Shares"). Consult First Data Investor Services Group for
additional information concerning the exchange privilege. Applications and
prospectuses of other funds are available from Authorized Firms or the
Principal Underwriter. The prospectus for each fund describes its investment
objectives and policies, and shareholders should obtain a prospectus and
consider these objectives and policies carefully before requesting an
exchange.
No contingent deferred sales charge is imposed on exchanges. For purposes of
calculating the contingent deferred sales charge upon the redemption of shares
acquired in an exchange, the contingent deferred sales charge schedule
applicable to the shares at the time of purchase will apply and the purchase
of shares acquired in one or more exchanges is deemed to have occurred at the
time of the original purchase of the exchanged shares. For the contingent
deferred sales charge schedule applicable to the Eaton Vance Marathon Group of
Funds (except EV Marathon Strategic Income Fund and Class I shares of any EV
Marathon Limited Maturity Fund), see "How to Redeem Fund Shares." The
contingent deferred sales charge schedule applicable to EV Marathon Strategic
Income Fund and Class I shares of any EV Marathon Limited Maturity Fund is 3%,
2.5%, 2% or 1% in the event of a redemption occurring in the first, second,
third or fourth year, respectively, after the original share purchase.
Shares of other funds in the Eaton Vance Marathon Group of Funds and shares of
Eaton Vance Money Market Fund may be exchanged for Fund shares on the basis of
the net asset value per share of each fund at the time of exchange, but
subject to any restrictions or qualifications set forth in the current
prospectus of any such fund.
Telephone exchanges are accepted by First Data Investor Services Group
provided the investor has not disclaimed in writing the use of the privilege.
To effect such exchanges, call First Data Investor Services Group at 800-262-
1122 or, within Massachusetts, 617-573-9403, Monday through Friday, 9:00 a.m.
to 4:00 p.m. (Eastern Standard Time). Shares acquired by telephone exchange
must be registered in the same name(s) and with the same address as the shares
being exchanged. Neither the Fund, the Principal Underwriter nor First Data
Investor Services Group will be responsible for the authenticity of exchange
instructions received by telephone, provided that reasonable procedures to
confirm that instructions communicated are genuine have been followed.
Telephone instructions will be tape recorded. In times of drastic economic or
market changes, a telephone exchange may be difficult to implement. An
exchange may result in a taxable gain or loss.
EATON VANCE SHAREHOLDER SERVICES
- ------------------------------------------------------------------------------
THE FUND OFFERS THE FOLLOWING SERVICES WHICH ARE VOLUNTARY, INVOLVE NO EXTRA
CHARGE, AND MAY BE CHANGED OR DISCONTINUED WITHOUT PENALTY AT ANY TIME. Full
information on each of the services described below and an application, where
required, are available from Authorized Firms or the Principal Underwriter.
The cost of administering such services for the benefit of shareholders who
participate in them is borne by the Fund as an expense to all shareholders.
INVEST-BY-MAIL -- FOR PERIODIC SHARE ACCUMULATION: Once the $1,000 minimum
investment has been made, checks of $50 or more payable to the order of the EV
Marathon Greater China Growth Fund may be mailed directly to First Data
Investor Services Group BOS725, P.O. Box 1559, Boston, MA 02104 at any time --
whether or not distributions are reinvested. The name of the shareholder, the
Fund and the account number should accompany each investment.
BANK AUTOMATED INVESTING -- FOR REGULAR SHARE ACCUMULATION: Cash investments
of $50 or more may be made automatically each month or quarter from a
shareholder's bank account. The $1,000 minimum initial investment and small
account redemption policy are waived for these accounts.
WITHDRAWAL PLAN: A shareholder may draw on shareholdings systematically with
monthly or quarterly checks in an aggregate amount that does not exceed
annually 12% of the account balance at the time the plan is established. Such
amount will not be subject to a contingent deferred sales charge. See "How to
Redeem Fund Shares". A minimum deposit of $5,000 in shares is required.
REINVESTMENT PRIVILEGE: A SHAREHOLDER WHO HAS REPURCHASED OR REDEEMED SHARES
MAY REINVEST, WITH CREDIT FOR ANY CONTINGENT DEFERRED SALES CHARGES PAID ON
THE REPURCHASED OR REDEEMED SHARES, ANY PORTION OR ALL OF THE REPURCHASE OR
REDEMPTION PROCEEDS (PLUS THAT AMOUNT NECESSARY TO ACQUIRE A FRACTIONAL SHARE
TO ROUND OFF THE PURCHASE TO THE NEAREST FULL SHARE) IN SHARES OF THE FUND,
provided that the reinvestment is effected within 60 days after such
repurchase or redemption and the privilege has not been used more than once in
the prior 12 months. Shares are sold to a reinvesting shareholder at the next
determined net asset value following timely receipt of a written purchase
order by the Principal Underwriter or by the Fund (or by the Fund's Transfer
Agent). To the extent that any shares are sold at a loss and the proceeds are
reinvested in shares of the Fund (or other shares of the Fund are acquired
within the period beginning 30 days before and ending 30 days after the date
of the redemption), some or all of the loss generally will not be allowed as a
tax deduction. Shareholders should consult their tax advisers concerning the
tax consequences of reinvestments.
TAX-SHELTERED RETIREMENT PLANS: Shares of the Fund are available for purchase
in connection with the following tax-sheltered retirement plans:
-- Pension and Profit Sharing Plans for self-employed individuals,
corporations and nonprofit organizations;
-- Individual Retirement Account Plans for individuals and their non-
employed spouses; and
-- 403(b) Retirement Plans for employees of public school systems,
hospitals, colleges and other nonprofit organizations meeting certain
requirements of the Internal Revenue Code of 1986, as amended (the
"Code").
Detailed information concerning these plans, including certain exceptions to
minimum investment requirements, and copies of the plans are available from
the Principal Underwriter. This information should be read carefully and
consultation with an attorney or tax adviser may be advisable. The information
sets forth the service fee charged for retirement plans and describes the
federal income tax consequences of establishing a plan. Under all plans,
dividends and distributions will be automatically reinvested in additional
shares.
DISTRIBUTIONS AND TAXES
- ------------------------------------------------------------------------------
DISTRIBUTIONS. It is the present policy of the Fund to make (A) at least one
distribution annually (normally in December) of all or substantially all of
the investment income allocated to the Fund by the Portfolio, less the Fund's
direct and allocated expenses and (B) at least one distribution annually of
all or substantially all of the net realized capital gains allocated by the
Portfolio to the Fund, if any (reduced by any available capital loss
carryforwards from prior years).
Shareholders may reinvest all distributions in shares of the Fund without a
sales charge at the per share net asset value as of the close of business on
the record date.
The Fund's investment income consists of the Fund's allocated share of the net
investment income of the Portfolio, less all actual and accrued expenses of
the Fund determined in accordance with generally accepted accounting
principles. The Portfolio's net investment income consists of all income
accrued on the Portfolio's assets, less all actual and accrued expenses of the
Portfolio determined in accordance with generally accepted accounting
principles. The Fund's net realized capital gains, if any, consist of the net
realized capital gains (if any) allocated to the Fund by the Portfolio for tax
purposes, after taking into account any available capital loss carryovers.
TAXES. Distributions by the Fund which are derived from the Fund's allocated
share of the Portfolio's net investment income, net short-term capital gains
and certain foreign exchange gains are taxable to shareholders as ordinary
income, whether received in cash or reinvested in additional shares of the
Fund. The Fund's distributions will generally not qualify for the dividends-
received deduction for corporate shareholders. The Fund anticipates that for
Federal tax purposes the entire distribution will constitute ordinary income
to the shareholders. Shareholders reinvesting such distributions should treat
the entire amount of the distribution as the tax basis of the additional
shares acquired by reason of such reinvestment.
Capital gains referred to in clause (B) above, if any, realized by the
Portfolio and allocated to the Fund for the Fund's fiscal year, which ends on
August 31, will usually be distributed by the Fund prior to the end of
December. Distributions by the Fund of long-term capital gains allocated to
the Fund by the Portfolio are taxable to shareholders as long-term capital
gains, whether paid in cash or additional shares of the Fund, regardless of
the length of time Fund shares have been owned by the shareholder.
If shares are purchased shortly before the record date of a distribution, the
shareholder will pay the full price for the shares and then receive some
portion of the price back as a taxable distribution. The amount, timing and
character of the Fund's distributions to shareholders may be affected by
special tax rules governing the Portfolio's activities in options, futures and
forward foreign currency exchange transactions or certain other investments.
Certain distributions which are declared by the Fund in October, November or
December and paid the following January will be reportable by shareholders as
if received on December 31 of the year in which they are declared.
The Fund intends to qualify as a regulated investment company under the Code
and to satisfy all requirements relating to the sources of its income, the
distribution of its income, and the diversification of its assets. In
satisfying these requirements, the Fund will treat itself as owning its
proportionate share of each of the Portfolio's assets and as entitled to the
income of the Portfolio properly attributable to such share.
As a regulated investment company under the Code, the Fund does not pay
federal income or excise taxes to the extent that it distributes to
shareholders its net investment income and net realized capital gains in
accordance with the timing requirements imposed by the Code. As a partnership
under the Code, the Portfolio does not pay federal income or excise taxes.
Income (possibly including, in some cases, capital gains) realized by the
Portfolio from certain instruments and allocated to the Fund may be subject to
foreign income taxes, and the Fund may make an election under Section 853 of
the Code that would allow shareholders to claim a credit or deduction on their
federal income tax returns for (and treated as additional amounts distributed
to them) their pro rata portion of the Fund's allocated share of qualified
taxes paid by the Portfolio to foreign countries. This election may be made
only if more than 50% of the assets of the Fund, including its allocable share
of the Portfolio's assets, at the close of the Fund's taxable year consists of
securities in foreign corporations. The Fund will send a written notice of any
such election (not later than 60 days after the close of its taxable year) to
each shareholder indicating the amount to be treated as the shareholder's
proportionate share of such taxes. Availability of foreign tax credits or
deductions for shareholders is subject to certain additional restrictions and
limitations under the Code.
Shareholders will receive annually one or more Forms 1099 to assist in the
preparation of their federal and state income tax returns for the prior
calendar year's distributions, proceeds from the redemption or exchange of
Fund shares, and federal income tax (if any) withheld by the Fund's Transfer
Agent.
PERFORMANCE INFORMATION
- ------------------------------------------------------------------------------
THE FUND'S AVERAGE ANNUAL TOTAL RETURN IS DETERMINED BY MULTIPLYING A
HYPOTHETICAL INITIAL PURCHASE OF $1,000 INVESTED AT THE MAXIMUM PUBLIC
OFFERING PRICE (NET ASSET VALUE) BY THE AVERAGE ANNUAL COMPOUNDED RATE OF
RETURN (INCLUDING CAPITAL APPRECIATION/DEPRECIATION, AND DIVIDENDS AND
DISTRIBUTIONS PAID AND REINVESTED) FOR THE STATED PERIOD AND ANNUALIZING THE
RESULT. The average annual total return calculation assumes a complete
redemption of the investment and the deduction of any contingent deferred
sales charge at the end of the period. The Fund may also publish annual and
cumulative total return figures from time to time. The Fund may use such total
return figures, together with comparisons with the Consumer Price Index,
various domestic and foreign securities indices and performance studies
prepared by independent organizations, in advertisements and in information
furnished to present or prospective shareholders. The Fund may also quote
total return for the period prior to commencement of operations which would
reflect the Portfolio's total return (or that of its predecessor) adjusted to
reflect any applicable Fund sales charge.
The Fund may also publish total return figures which do not take into account
any contingent deferred sales charge which may be imposed upon redemptions at
the end of the specified period. Any performance figure which does not take
into account the contingent deferred sales charge would be reduced to the
extent such charge is imposed upon a redemption.
Investors should note that the investment results of the Fund will fluctuate
over time, and any presentation of the Fund's total return for any prior
period should not be considered a representation of what an investment may
earn or what the Fund's total return may be in any future period. The Fund's
investment results are based on many factors, including market conditions, the
composition of the security holdings of the Portfolio and the operating
expenses of the Fund and the Portfolio. Investment results also often reflect
the risks associated with the particular investment objective and policies of
the Fund and the Portfolio. Among others, these factors should be considered
when comparing the Fund's investment results to those of other mutual funds
and other investment vehicles.
<PAGE>
[LOGO]
EV MARATHON
GREATER CHINA
GROWTH FUND
PROSPECTUS
JANUARY 1, 1996
EV MARATHON GREATER
CHINA GROWTH FUND
24 FEDERAL STREET
BOSTON, MA 02110
- -------------------------------------------------------------------------------
SPONSOR AND MANAGER OF EV MARATHON GREATER CHINA GROWTH FUND
Administrator of Greater China Growth Portfolio, Eaton Vance Management,
24 Federal Street, Boston, MA 02110
ADVISER OF GREATER CHINA GROWTH PORTFOLIO
Lloyd George Investment Management (Bermuda) Limited, 3808 One Exchange Square,
Central, Hong Kong
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 89 South Street, Boston, MA 02111
TRANSFER AGENT
First Data Investor Services Group, BOS725, P.O. Box 1559, Boston, MA 02104
(800) 262-1122
AUDITORS
Deloitte & Touche LLP, 125 Summer Street, Boston, MA02110
M-CGP
<PAGE>
PART A
INFORMATION REQUIRED IN A PROSPECTUS
EV TRADITIONAL
GREATER CHINA GROWTH FUND
- ------------------------------------------------------------------------------
EV TRADITIONAL GREATER CHINA GROWTH FUND (THE "FUND") IS A MUTUAL FUND SEEKING
LONG-TERM CAPITAL APPRECIATION THROUGH PURCHASE OF AN INTEREST IN A SEPARATE
INVESTMENT COMPANY WHICH INVESTS IN EQUITY SECURITIES OF COMPANIES WHICH, IN THE
OPINION OF THE INVESTMENT ADVISER, WILL BENEFIT FROM THE ECONOMIC DEVELOPMENT
AND GROWTH OF THE PEOPLE'S REPUBLIC OF CHINA. ACCORDINGLY, THE FUND INVESTS ITS
ASSETS IN GREATER CHINA GROWTH PORTFOLIO (THE "PORTFOLIO"), A DIVERSIFIED
OPEN-END INVESTMENT COMPANY HAVING THE SAME INVESTMENT OBJECTIVE AS THE FUND,
RATHER THAN BY DIRECTLY INVESTING IN AND MANAGING ITS OWN PORTFOLIO OF
SECURITIES AS WITH HISTORICALLY STRUCTURED MUTUAL FUNDS. A SIGNIFICANT
PERCENTAGE OF THE PORTFOLIO WILL BE INVESTED IN THE SECURITIES MARKETS OF
COUNTRIES IN THE CHINA REGION, INCLUDING HONG KONG, CHINA, TAIWAN, SOUTH KOREA,
SINGAPORE, MALAYSIA, THAILAND, INDONESIA AND THE PHILIPPINES. THE FUND IS A
SEPARATE SERIES OF EATON VANCE GROWTH TRUST (THE "TRUST").
Shares of the Fund are not deposits or obligations of, or guaranteed or endorsed
by, any bank or other insured depository institution, and are not federally
insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board
or any other government agency. Shares of the Fund involve investment risks,
including fluctuations in value and the possible loss of some or all of the
principal investment.
This Prospectus is designed to provide you with information you should know
before investing. Please retain this document for future reference. A
Statement of Additional Information dated January 1, 1996 for the Fund, as
supplemented from time to time, has been filed with the Securities and
Exchange Commission and is incorporated herein by reference. The Statement of
Additional Information is available without charge from the Fund's principal
underwriter, Eaton Vance Distributors, Inc. (the "Principal Underwriter"), 24
Federal Street, Boston, MA 02110 (telephone (800) 225-6265). The sponsor and
manager of the Fund and the administrator of the Portfolio is Eaton Vance
Management, 24 Federal Street, Boston, MA 02110 (the "Manager"). The
Portfolio's investment adviser is Lloyd George Investment Management (Bermuda)
Limited (the "Adviser"). The principal business address of the Adviser is 3808
One Exchange Square, Central, Hong Kong.
- ------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE PAGE
<S> <C> <C> <C>
Shareholder and Fund Expenses ................. 2 How to Buy Fund Shares ......................... 19
The Fund's Financial Highlights ............... 3 How to Redeem Fund Shares ...................... 20
The Fund's Investment Objective ............... 5 Reports to Shareholders ....................... 21
The Portfolio's Investment Opportunities The Lifetime Investing Account/Distribution
in the China Region .......................... 5 Options ...................................... 22
How the Fund and the Portfolio Invest their Assets 8 The Eaton Vance Exchange Privilege ............. 23
Special Investment Methods and Risk Factors .... 9 Eaton Vance Shareholder Services ............... 23
Organization of the Fund and the Portfolio .... 14 Distributions and Taxes ........................ 24
Management of the Fund and the Portfolio ...... 15 Performance Information ........................ 26
Distribution Plan ............................. 18 Statement of Intention and
Valuing Fund Shares ............................ 18 Escrow Agreement ............................. 26
- -----------------------------------------------------------------------------------------------------------
PROSPECTUS DATED JANUARY 1, 1996
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SHAREHOLDER AND FUND EXPENSES
- -------------------------------------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES
-----------------------------------------------------------------------------------------------------------
<S> <C>
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price) 4.75%
Sales Charges Imposed on Reinvested Distributions None
Fees to Exchange Shares None
Contingent Deferred Sales Charges (on purchases of $1 million or more) Imposed on
Redemptions During the First Twelve Months (as a percentage of redemption
proceeds exclusive of all reinvestments and capital appreciation in the
account) 0.50%
<CAPTION>
ANNUAL FUND AND ALLOCATED PORTFOLIO OPERATING EXPENSES (as a percentage of average daily net assets)
-----------------------------------------------------------------------------------------------------------
<S> <C>
Management Fees (including management fees paid by the Fund and investment
advisory and administration fees paid by the Portfolio of 0.25%, 0.74% and
0.24%, respectively) 1.23%
Rule 12b-1 Distribution (and Service) Fees 0.50%
Other Expenses 0.35%
----
Total Operating Expenses 2.08%
====
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
An investor would pay the following maximum initial sales
charge and expenses on a $1,000 investment, assuming (a) 5%
annual return and (b) redemption at the end of each period: $68 $110 $154 $277
</TABLE>
NOTES:
The table and Example summarize the aggregate expenses of the Fund and the
Portfolio and are designed to help investors understand the costs and expenses
they will bear, directly or indirectly, by investing in the Fund. Information
for the Fund is based on its expenses for the most recent fiscal year.
The Fund invests exclusively in the Portfolio. The Trustees believe that the
aggregate per share expenses of the Fund and the Portfolio should approximate,
and over time may be less than, the per share expenses the Fund would incur if
the Trust retained the services of an investment adviser for the Fund and the
Fund's assets were invested directly in the type of securities being held by the
Portfolio.
The Example should not be considered a representation of past or future expenses
and actual expenses may be greater or less than those shown. Federal regulations
require the Example to assume a 5% annual return, but actual return will vary.
For further information regarding the expenses of both the Fund and the
Portfolio see "The Fund's Financial Highlights", "Organization of the Fund and
the Portfolio", "Management of the Fund and the Portfolio" and "How to Redeem
Fund Shares". A long-term shareholder in the Fund may pay more than the economic
equivalent of the maximum front-end sales charge permitted by a rule of the
National Association of Securities Dealers, Inc. See "Distribution Plan".
If shares were purchased at net asset value with no initial sales charge by
virtue of the purchase having been in the amount of $1 million or more and are
redeemed within 12 months of purchase, a contingent deferred sales charge of
0.50% will be imposed on such redemption. See "How to Buy Fund Shares", "How to
Redeem Fund Shares" and "Eaton Vance Shareholder Services". Other investment
companies and investors with different distribution arrangements are investing
in the Portfolio and others may do so in the future. See "Organization of the
Fund and the Portfolio".
<PAGE>
THE FUND'S FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------
The following information should be read in conjunction with the audited
financial statements included in the Fund's annual report to shareholders which
is incorporated by reference into the Statement of Additional Information in
reliance upon the report of Deloitte & Touche LLP, independent certified public
accountants, as experts in accounting and auditing. Further information
regarding the performance of the Fund is contained in the Fund's annual report
to shareholders which may be obtained without charge by contacting the Principal
Underwriter, Eaton Vance Distributors, Inc.
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEAR ENDED AUGUST 31,
-------------------------------------------
1995 1994 1993*
-------- -------- --------
<S> <C> <C> <C>
NET ASSET VALUE, beginning of year $ 15.710 $ 12.450 $ 10.000
-------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) $ 0.051 $ (0.026) $ (0.029)
Net realized and unrealized gain (loss) on investments (1.441) 3.336 2.479
-------- -------- --------
Total income (loss) from investment operations $ (1.390) $ 3.310 $ 2.450
-------- -------- --------
LESS DISTRIBUTIONS:
From net investment income $ (0.051) $ -- $ --
In excess of net investment income (0.004) -- --
From net realized gain on investments -- (0.050) --
In excess of net realized gain on investment transactions (0.035) -- --
-------- -------- --------
Total distributions $ (0.090) $ (0.050) $ --
-------- -------- --------
NET ASSET VALUE, end of year $ 14.230 $ 15.710 $ 12.450
======== ======== ========
TOTAL RETURN(1) (8.82)% 26.56% 24.50%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $242,901 $316,229 $154,317
Ratio of net expenses to average daily net assets(2) 2.08% 2.12% 2.47%+
Ratio of net investment income (loss) to average daily net assets (0.38)% (0.28)% (0.69)%+
<FN>
+ Computed on an annualized basis.
* For the period from the start of business, October 28, 1992, to August 31, 1993.
(1) Total return is calculated assuming a purchase at the net asset value on the first day and a sale at the net asset
value on the last day of each period reported. Dividends and distributions, if any, are assumed to be reinvested at
the net asset value on the record date. Total return is computed on a non-annualized basis.
(2) Includes the Fund's share of Greater China Growth Portfolio's allocated expenses.
</TABLE>
<PAGE>
[MAP PAGE]
<PAGE>
THE FUND'S INVESTMENT OBJECTIVE
- ------------------------------------------------------------------------------
THE FUND'S INVESTMENT OBJECTIVE IS TO SEEK LONG-TERM CAPITAL APPRECIATION. The
Fund seeks to meet its investment objective by investing its assets in the
Greater China Growth Portfolio (the "Portfolio"), a separate registered
investment company which invests primarily in equity securities of companies
which, in the opinion of the Adviser, will benefit from the economic development
and growth of the People's Republic of China ("China"). A significant percentage
of the Portfolio's assets will be invested in the securities markets of
countries in the China region, consisting of Hong Kong, China, Taiwan, South
Korea, Singapore, Malaysia, Thailand, Indonesia and the Philippines
(collectively, the "China Region").
The Fund is intended for long-term investors and is not intended to be a
complete investment program. A prospective investor should take into account
personal objectives and other investments when considering the purchase of Fund
shares. The Fund cannot assure achievement of its investment objective. See "How
the Fund and the Portfolio Invest their Assets" for further information. The
investment objective of the Fund and the Portfolio are nonfundamental. See
"Organization of the Fund and the Portfolio -- Special Information on the
Fund/Portfolio Investment Structure" for further information. In addition,
investments in issuers of the China Region involve risks not typically
associated with issuers in the United States. See "Special Investment Methods
and Risk Factors" for further information.
THE PORTFOLIO'S INVESTMENT OPPORTUNITIES IN THE CHINA REGION
- ------------------------------------------------------------------------------
THE FOLLOWING IS A GENERAL DISCUSSION OF THE ECONOMIES AND SECURITIES MARKETS IN
WHICH THE PORTFOLIO MAY INVEST. There can be no assurance that the Portfolio
will be able to capitalize on the factors described herein. Opinions expressed
herein are the good faith opinions of the Portfolio's Adviser, Lloyd George
Investment Management (Bermuda) Limited. Unless otherwise indicated, all amounts
are expressed in United States dollars.
Over the past twenty years the performance of the major Asian securities markets
has generally been better than that of markets in Europe and the United States.
In the past five years, the newly emerging securities markets of the China
Region have demonstrated significant growth in market capitalization, in numbers
of listed securities and in the volume of transactions. Over the same period,
the underlying economies of the region have grown against a background of the
high savings rates characteristic of many Asian societies and generally moderate
inflation. According to the Asian Development Bank forecasts, the economies of
Southeast Asia, excluding Japan, are forecast to grow by 7.4% in 1996.
The following graph shows the average growth in gross domestic product ("GDP")
from 1990 to 1995 for the main countries in Southeast Asia, compared with the
United States.
[GRAPHIC OMITTED: bar chart:
AVERAGE GROSS DOMESTIC PRODUCT GROWTH (1990-1995)
THAILAND 8.92%
CHINA 9.97
MAYLASIA 8.65
SINGAPORE 8.22
SOUTH KOREA 6.04
INDONESIA 6.87
TAIWAN 6.50
HONG KONG 5.18
PHILIPPINES 2.50
UNITED STATES 2.12
SOURCE: LLOYD GEORGE MANAGEMENT (HONG KONG) LIMITED]
A PARTICULARLY SIGNIFICANT FACTOR WITHIN THE REGION OVER THE LAST 13 YEARS HAS
BEEN THE INCREASING INFLUENCE WHICH CHINA HAS HAD IN THE DETERMINATION OF THE
ECONOMIC DEVELOPMENT OF CERTAIN COUNTRIES. This influence has been principally
in providing manufacturing facilities, a market for goods and services, and in
creating a demand for export outlets, both directly and indirectly.
The stages of China's economic development are discussed below. The effect by
1992 was an increase in economic integration among the countries in the China
Region. The links between China and Hong Kong, between China and Taiwan and
between China and other countries within the region, where there is a
significant Chinese element of the population, have by now been strengthened to
a degree which makes a reversal unlikely. Moreover, although these links have
been developed to a stage where economic co-operation in trade operates
smoothly, the full potential of the market, both in terms of domestic
consumption and of export growth, has hardly begun to be realized. It is based
upon this potential that the Manager and Adviser perceive an investment
opportunity that may be exploited by the Fund and the Portfolio.
CHINA -- CHINA'S POPULATION, ESTIMATED AT 1.3 BILLION, IS THE HIGHEST OF ANY
COUNTRY IN THE WORLD. China has had for many centuries a well deserved
reputation for being closed to foreigners, with trade with the outside world
being carried on under terms of extreme restriction and under central control.
Such conditions were maintained in the first thirty years of the Communist
regime which began in 1949; however there have been several stages of evolution,
from the institution of an industrialization program in the 1950s to a
modernization policy commencing in 1978 which combined economic development with
the beginnings of opening the country.
The economic reform plan thus begun was designed to bring in foreign investment
capital and technological skills. The result has been a move towards a more
mixed economy away from the previous centrally planned economy. The process of
devolving responsibility for all aspects of enterprise to local management and
authorities continues, even though the system of socialism with Chinese
characteristics involves considerable influence by the central government on
production and marketing.
The economic plans covering the last decade of the century include objectives to
quadruple the country's 1980 industrial and agricultural output by the year
2000, to increase the export element of the economy and to continue to open the
country with further development of the designated special investment areas.
Average annual GDP growth rate between 1989 and 1994 was 9.2%. The current Five
Year Plan anticipates an annual growth rate of 6%, but some senior leaders have
called for this to be increased significantly.
In order to attract foreign investment China has since 1978 designated certain
areas of the country where overseas investors can receive special investment
incentives and tax concessions. There are five Special Economic Zones (Shenzhen,
Shantou and Zhuhai in Guangdong Province, Xiamen in Fujian Province and Hainan
Island, which itself is a province). Fourteen coastal cities have been
designated as "open cities" and certain Open Economic Zones have been
established in coastal areas. Shanghai has established the Pudong New Area.
Twenty-seven High and New Technology Industrial Development Zones have been
approved where preferential treatment is given to enterprises which are
confirmed as technology intensive.
AS A RESULT, FOREIGN DIRECT INVESTMENT IN CHINA HAS INCREASED SUBSTANTIALLY IN
THE LAST TEN YEARS. The contracted value of foreign investment in China was over
$70.8 billion in 1994. Investment by Taiwan in Fujian Province continues to
grow. Most of Hong Kong's manufacturing investment has been in Guangdong
Province, and more than 2.5 million workers are now employed in the Province
working for Hong Kong companies.
Since the beginning of 1992, China has indicated a willingness to speed up
reform of the economy. GDP grew by 11.8% in 1994 with gross industrial output
rising by 21.4%. Most notably among the high echelons of the Chinese leadership,
Deng Xiaoping has made a number of vigorously pro-reform statements since he
visited Shenzhen in January 1992 to demonstrate support for the way in which the
province of Guangdong is conducting its affairs. Other senior Chinese Leaders
have reaffirmed the principle of economic reform.
Exports continue to rise strongly, although China remains vulnerable to United
States economic conditions and possible trade sanctions, unless it liberalizes
current import restrictions and improves its human rights record. However,
imports are also expected to rise and may outstrip exports in terms of growth
rates.
1993 figures show the extent to which Southeast China, and Guangdong Province in
particular, is ahead of the rest of the country in economic performance. Its
industrial output grew by over 50.5% during 1993; exports increased by more than
11.8% during 1993 following a 34% growth in 1992. In 1993 Guangdong Province
accounted for some 40.7% of total exports and for more than 10.3% of GDP
although having only 5.5% of the population.
THERE ARE CURRENTLY TWO OFFICIALLY RECOGNIZED SECURITIES EXCHANGES IN CHINA --
THE SHANGHAI SECURITIES EXCHANGE WHICH OPENED IN DECEMBER 1990 AND THE SHENZHEN
STOCK EXCHANGE WHICH OPENED IN JULY 1991. Shares traded on these Exchanges are
of two types -- "A" shares which can be traded only by Chinese investors and "B"
shares which can be traded only by individuals and corporations not resident in
China.
In Shanghai, all "B" Shares are denominated in Chinese renminbi ("RMB") but all
transactions in "B" Shares must be settled in US dollars, and all distributions
made on "B" Shares are payable in US dollars, the exchange rate being the
weighted average exchange rate for the US dollar as published by the Shanghai
Foreign Exchange Adjustment Centre. In Shenzhen, the purchase and sale prices
for "B" Shares are quoted in Hong Kong dollars. Dividends and other lawful
revenue derived from "B" Shares are calculated in RMB but payable in Hong Kong
dollars, the rate of exchange being the average rate published by the Shenzhen
Foreign Exchange Adjustment Centre. There are no foreign exchange restrictions
on the repatriation of gains made on or income derived from "B" Shares, subject
to the payment of taxes imposed by China thereon.
Company law relating to companies limited by shares and regulations regarding
the issuing of shares by equity joint ventures have not yet been developed on a
national basis. The Shenzhen municipality issued regulations in 1992 relating to
joint stock companies, and the Shanghai municipality has a draft joint stock
company law under review. Regulations governing the trading of securities on
both the Shenzhen and the Shanghai stock exchanges have been issued by each
municipality; there is no national securities legislation as yet.
As of December 6, 1995, 184 companies had shares listed on The Shanghai
Securities Exchange, of which 36 also had "B" Shares listed. The total market
capitalization of the "B" Shares of these companies as at that date (which
includes equities and bonds) was approximately U.S. $1.52 billion. As of the
same date, 125 companies had shares listed on The Shenzhen Stock Exchange, of
which 33 also had "B" Shares listed. The total market capitalization of the "B"
Shares at that date was approximately HK $6.41 billion (U.S. $625.6 million).
HONG KONG -- AS A TRADE ENTREPOT AND FINANCE CENTER, HONG KONG'S VIABILITY HAS
BEEN INEXORABLY LINKED TO MAINLAND CHINA SINCE THE ESTABLISHMENT OF THE COLONY
IN 1841. HONG KONG REMAINS CHINA'S LARGEST TRADE PARTNER AND ITS LEADING FOREIGN
INVESTOR. In 1995, visible trade between Hong Kong and China exceeded $33.4
billion.
In the last two decades there has been a structural change in Hong Kong's
economy, with growth in the services sector outpacing manufacturing growth. With
more and more labor intensive manufacturing relocating to Southern China, Hong
Kong has developed its services sector, which in 1993 contributed 72.5% of Gross
Domestic Product.
In recent years large numbers of Hong Kong based companies have set up factories
in the southern province of Guangdong, where it is estimated that Hong Kong
companies employ between 2.5 and 3 million workers. The low cost of setting up a
factory in China and low wage rates have been the primary attractions. While few
Hong Kong companies in the service sector derive the majority of their sales
from China, activity there is increasing notably in the construction, utilities,
communications and tourism sectors. Examples include China Light and Power, Hong
Kong Telecom and Hopewell Holdings. Although less noticeable than Hong Kong's
investment in China, there has been considerable growth in Chinese investment in
Hong Kong over the last decade and particularly in the last five years. In
contrast to Japanese investment, Chinese investment in Hong Kong typically
involves the purchase of stakes in existing companies. This has traditionally
been in the banking and import/ export sectors. Recently, investment in
property, manufacturing and infrastructure projects has increased. The most
active Chinese enterprise in Hong Kong, the Bank of China Group, is the second
largest banking group in Hong Kong. Much as China has become the manufacturing
capital for Hong Kong companies, Hong Kong is the primary funding center for the
development of China through direct investment, syndicated loans, commercial
paper and share issues in Hong Kong by Chinese companies.
In view of the growing economic interaction between Hong Kong and Southern
China, it is increasingly meaningful to consider the concept of a Greater Hong
Kong economy consisting of Hong Kong and Guangdong Province, with a combined
population of 72 million and average per capita GDP of $2,130 in 1993. Given the
human, financial and technological resources in Hong Kong and the low wage rates
and infrastructural requirements of China, the economic rationale for further
integration of the two economies is considerable. In ensuring the role of Hong
Kong in the economy of Southern China, the challenge of policy makers in Hong
Kong is to see that the colony's infrastructure is capable of accommodating the
sustained 15% annual growth of the Guangdong economy, and with it increasing
trade and investment flows. Towards this end, the Hong Kong government in 1989
unveiled PADS, the Port and Airport Development Strategy. The project, estimated
to cost $21 billion, is designed to allow Hong Kong's cargo handling capacity to
increase by four times between 1988 and 2011 and its air traffic handling
capacity to increase from 15 million passengers in 1988 to 50 million in 2011.
Representatives of the Hong Kong and Chinese governments are currently
discussing the future of the PADS project and its financing.
In the past, political considerations have hindered closer economic integration
between Hong Kong and China. It was largely in response to the United Nations
embargo on trade with China in the 1950s and 1960s that Hong Kong developed a
significant manufacturing base. In the last several years, however, there has
been an improvement in relations between China and Hong Kong. In September 1991,
Hong Kong and China concluded the Sino-British Memorandum of Understanding,
providing a framework for the PADS project. Of even greater importance, the
Basic Law, the outline for Hong Kong's government post 1997, calls for Hong
Kong's capitalist system to remain intact for an additional fifty years after
1997 and sets out details for the integration of Hong Kong into China after
1997.
TAIWAN -- BETWEEN 1960 AND 1994, TAIWAN'S GNP GREW FROM LESS THAN $2 BILLION TO
OVER $240 BILLION. The economic growth has been accompanied by a transformation
of domestic production from labor intensive to capital intensive industries in
the 1970s and finally to higher technology industries in the 1980s. With over
$92 billion, Taiwan has the world's largest foreign exchange reserves. Taiwan
companies continue to be attracted by China's low labor costs, inexpensive land
and less rigid environmental rules. It is estimated that accumulated Taiwanese
investment in China exceeds $3 billion. Taiwanese listed companies include a
number which invested indirectly in China, primarily in the textiles, food and
rubber industries. Given the proximity of Taiwan to China, the cultural
homogeneity and the compelling economic incentive for further investment, the
primary obstacle to greater investment flows has been the prohibition by
Taiwanese authorities of direct investment in China. Based on discussions with
Taiwanese companies and the trend toward greater liberalization by the
government of investment in China, the Adviser believes that over the next
several years the scope for investment by Taiwanese companies in China will
widen substantially and that many more companies listed on The Taiwan Stock
Exchange Corp. will have significant interests in China.
OTHER COUNTRIES -- GIVEN THE PROXIMITY OF HONG KONG AND TAIWAN TO CHINA, AND
THEIR ETHNIC AND CULTURAL TIES, THE ADVISER BELIEVES THERE WILL BE AN INCREASE
IN THE NUMBER AND COMMITMENT OF LISTED COMPANIES IN THOSE TWO COUNTRIES DOING
BUSINESS IN CHINA. Although less visible to the public, listed companies
elsewhere in Asia are also becoming increasingly active in China.
While Guangdong Province has been the leading recipient of foreign investment in
China, there has also been considerable foreign investment by Japanese companies
in the Northeastern Provinces of Liaoning, Jilin, and Heilongiang. As the major
trading partner of these provinces, Japan is primarily manufacturing light
industrial products for re-export. Major Japanese projects have been set up in
the electronics and natural resources sectors in China.
While Thailand has been traditionally known as a recipient of foreign
investment, Chinese-managed listed companies in the banking, textiles and
packaging sectors have indicated their intention of expanding into China. In
Singapore, shipping, construction and hotel companies have been the first
sectors to do business in China while several Malaysian companies in the
manufacturing sector have invested in joint ventures in China. The Adviser
believes that growing China exposure will enhance the earnings growth of such
companies, making them attractive for investment.
See Appendix B to the Statement of Additional Information for further
information about the economic characteristics of and risks associated with
investing in China Region countries.
HOW THE FUND AND THE PORTFOLIO INVEST THEIR ASSETS
- ------------------------------------------------------------------------------
THE PORTFOLIO SEEKS TO ACHIEVE ITS OBJECTIVE THROUGH INVESTING IN A CAREFULLY
SELECTED AND CONTINUOUSLY MANAGED PORTFOLIO CONSISTING PRIMARILY OF EQUITY
SECURITIES OF COMPANIES WHICH, IN THE OPINION OF THE ADVISER, WILL BENEFIT FROM
THE ECONOMIC DEVELOPMENT AND GROWTH OF CHINA ("CHINA GROWTH COMPANIES"). A
significant percentage of the Portfolio's assets will be invested in the
securities markets of countries in the China Region (or Greater China),
consisting of Hong Kong, China, Taiwan, South Korea, Singapore, Malaysia,
Thailand, Indonesia and the Philippines. The Portfolio will, under normal market
conditions, invest at least 65% of its total assets in equity securities of
China growth companies ("Greater China investments"). However, it is expected
that substantially all of the Portfolio's assets will normally be invested in
equity securities, warrants and equity options. China growth companies consist
of companies that (a) are located in or whose securities are principally traded
in a China Region country, (b)(i) have at least 50% of their assets in one or
more China Region countries or (ii) derive at least 50% of their gross sales
revenues or profits from providing goods or services to or from within one or
more China Region countries and (c)(i) have at least 35% of their assets in
China, or (ii) derive at least 35% of their gross sales revenues or profits from
providing goods or services to or from within China or (iii) have manufacturing
or other operations in China that are significant to such companies. Greater
China investments are typically listed on stock exchanges or traded in the
over-the-counter markets in countries in the China Region. The principal offices
of these companies, however, may be located outside these countries. The
Portfolio may invest 25% or more of its total assets in the securities of
issuers located in any one country in the China Region. The Portfolio has
invested more than 25% of its total assets in issuers located in Hong Kong, but
the Adviser currently expects the Portfolio ordinarily will not invest more than
10% of its total assets in any other country.
Equity securities, for purposes of the 65% policy, will be limited to common and
preferred stocks; equity interests in trusts, partnerships, joint ventures and
other unincorporated entities or enterprises; special classes of shares
available only to foreign investors in markets that restrict the ownership by
foreign investors to certain classes of equity securities; convertible preferred
stocks; and other convertible investment grade debt instruments. A debt security
is investment grade if it is rated BBB or above by Standard & Poor's Ratings
Group ("S&P") or Baa or above by Moody's Investors Service, Inc. ("Moody's") or
determined to be of comparable quality by the Adviser. Debt securities rated BBB
by S&P or Baa by Moody's have speculative characteristics and changes in
economic conditions or other circumstances are more likely to lead to a weakened
capacity to make principal and interest payments than is the case with higher
grade debt securities. The Portfolio will promptly dispose of any convertible
debt instrument which is rated or determined by the Adviser to be below
investment grade subsequent to acquisition by the Portfolio. Direct investments
in China growth companies will not exceed 10% of the Portfolio's total assets.
See "Special Investment Methods and Risk Factors -- Direct Investments" for a
discussion of the risks associated with direct investments.
In addition to its investments in equity securities, the Portfolio may invest up
to 5% of its net assets in options on equity securities and up to 5% of its net
assets in warrants, including options and warrants traded in over-the-counter
markets. The Portfolio will not, under normal market conditions, invest more
than 35% of its total assets in equity securities other than Greater China
investments, warrants, options on securities and indices, options on currency,
futures contracts and options on futures, forward foreign currency exchange
contracts, currency swaps and any other non-equity investments. See "Special
Investment Methods and Risk Factors" below and the Fund's Statement of
Additional Information for a description of certain active management techniques
available to the Portfolio. The Portfolio will not invest in debt securities,
other than investment grade convertible debt instruments, except for temporary
defensive purposes, as described below. The Portfolio will not invest more than
10% of its assets in the securities of issuers in any country outside the China
Region.
The Portfolio may, for temporary defensive purposes, invest some or all of its
total assets in debt securities of foreign and United States companies, foreign
governments and the U.S. Government, and their respective agencies,
instrumentalities, political subdivisions and authorities, as well as in high
quality money market instruments denominated in U.S. dollars or a foreign
currency.
SPECIAL INVESTMENT METHODS AND RISK FACTORS
- ------------------------------------------------------------------------------
INVESTING IN FOREIGN SECURITIES. Investing in securities issued by foreign
companies and governments involves considerations and possible risks not
typically associated with investing in securities issued by the U.S. Government
and domestic corporations. The values of foreign investments are affected by
changes in currency rates or exchange control regulations, application of
foreign tax laws, including withholding taxes, changes in governmental
administration or economic or monetary policy (in this country or abroad) or
changed circumstances in dealings between nations. Costs are incurred in
connection with conversions between various currencies. In addition, foreign
brokerage commissions and other costs of investing are generally higher than in
the United States, and foreign securities markets may be less liquid, more
volatile and less subject to governmental supervision than in the United States.
Investments in foreign issuers could be affected by other factors not present in
the United States, including expropriation, confiscatory taxation, lack of
uniform accounting and auditing standards and potential difficulties in
enforcing contractual obligations. Transactions in the securities of foreign
issuers could be subject to settlement delays.
More than 25% of the Portfolio's total assets, adjusted to reflect currency
transactions and positions, may be denominated in any single currency.
Concentration in a particular currency will increase the Portfolio's exposure to
adverse developments affecting the value of such currency. An issuer of
securities purchased by the Portfolio may be domiciled in a country other than
the country in whose currency the securities are denominated.
Since the Portfolio will, under normal market conditions, invest at least 65% of
its total assets in Greater China investments, its investment performance will
be especially affected by events affecting China Region companies. The value and
liquidity of Greater China investments may be affected favorably or unfavorably
by political, economic, fiscal, regulatory or other developments in the China
Region or neighboring regions. The extent of economic development, political
stability and market depth of different countries in the China Region varies
widely. Certain China Region countries, including China, Indonesia, Malaysia,
the Philippines and Thailand, are either comparatively underdeveloped or in the
process of becoming developed. Greater China investments typically involve
greater potential for gain or loss than investments in securities of issuers in
developed countries. In comparison to the United States and other developed
countries, developing countries may have relatively unstable governments and
economies based on only a few industries. Given the Portfolio's investments, the
Portfolio will likely be particularly sensitive to changes in China's economy as
the result of any reversals of economic liberalization, political unrest or
changes in China's trading status.
SECURITIES TRADING MARKETS. THE SECURITIES MARKETS IN THE CHINA REGION ARE
SUBSTANTIALLY SMALLER, LESS LIQUID AND MORE VOLATILE THAN THE MAJOR SECURITIES
MARKETS IN THE UNITED STATES. A high proportion of the shares of many issuers
may be held by a limited number of persons and financial institutions, which may
limit the number of shares available for investment by the Portfolio. The prices
at which the Portfolio may acquire investments may be affected by trading by
persons with material non-public information and by securities transactions by
brokers in anticipation of transactions by the Portfolio in particular
securities. Similarly, volume and liquidity in the bond markets in the China
Region are less than in the United States and, at times, price volatility can be
greater than in the United States. The limited liquidity of securities markets
in the China Region may also affect the Portfolio's ability to acquire or
dispose of securities at the price and time it wishes to do so. Accordingly,
during periods of rising securities prices in the more illiquid China Region
securities markets, the Portfolio's ability to participate fully in such price
increases may be limited by its investment policy of investing not more than 15%
of its net assets in illiquid securities. Conversely, the Portfolio's inability
to dispose fully and promptly of positions in declining markets will cause the
Portfolio's net asset value to decline as the value of the unsold positions is
marked to lower prices. In addition, China Region securities markets are
susceptible to being influenced by large investors trading significant blocks of
securities.
The Chinese, Hong Kong and Taiwan stock markets are undergoing a period of
growth and change which may result in trading volatility and difficulties in the
settlement and recording of transactions, and in interpreting and applying the
relevant law and regulations. In particular, the securities industry in China is
not well developed. China has no securities laws of nationwide applicability.
The municipal securities regulations adopted by Shanghai and Shenzhen
municipalities are very new, as are their respective securities exchanges and
other self-regulatory organizations. In addition, Chinese stockbrokers and other
intermediaries may not perform as efficiently as their counterparts in the
United States and other more developed securities markets.
THE PORTFOLIO WILL INVEST IN CHINA REGION COUNTRIES WITH EMERGING ECONOMIES OR
SECURITIES MARKETS. Political and economic structures in many of such countries
may be undergoing significant evolution and rapid development, and such
countries may lack the social, political and economic stability characteristic
of the United States. Certain of such countries may have, in the past, failed to
recognize private property rights and have at times nationalized or expropriated
the assets of private companies. As a result, the risks described above,
including the risks of nationalization or expropriation of assets, may be
heightened. In addition, unanticipated political or social developments may
affect the values of the Portfolio's investments in those countries and the
availability to the Portfolio of additional investments in those countries.
The exchanges on which the Portfolio may purchase securities in the China Region
which are believed to provide sufficiently liquid markets so that the securities
acquired by the Portfolio on such markets need not be considered illiquid
securities currently include: Hong Kong -- The Stock Exchange of Hong Kong
Limited; South Korea -- The Korea Stock Exchange; Malaysia -- The Kuala Lumpur
Stock Exchange; Singapore -- The Stock Exchange of Singapore Limited; Taiwan --
The Taiwan Stock Exchange Corp.; Thailand -- The Securities Exchange of
Thailand; Indonesia -- The Jakarta Stock Exchange; Philippines -- The Manila and
Makati Stock Exchange; China -- The Shanghai Securities Exchange and The
Shenzhen Stock Exchange.
ECONOMIES OF COUNTRIES IN THE CHINA REGION MAY DIFFER FAVORABLY OR UNFAVORABLY
FROM THE U.S. ECONOMY IN SUCH RESPECTS AS RATE OF GROWTH OF GROSS NATIONAL
PRODUCT, RATE OF INFLATION, CAPITAL REINVESTMENT, RESOURCE SELF-SUFFICIENCY AND
BALANCE OF PAYMENTS POSITION. As export-driven economies, the economies of
countries in the China Region are affected by developments in the economies of
their principal trading partners. Revocation by the United States of China's
"Most Favored Nation" trading status, which the U.S. President and Congress
reconsider annually, would adversely affect the trade and economic development
of China and Hong Kong. Hong Kong and Taiwan have limited natural resources,
resulting in dependence on foreign sources for certain raw materials and
economic vulnerability to global fluctuations of price and supply.
China governmental actions can have a significant effect on the economic
conditions in the China Region, which could adversely affect the value and
liquidity of the Portfolio's investments. Although the Chinese Government has
recently begun to institute economic reform policies, there can be no assurances
that it will continue to pursue such policies or, if it does, that such policies
will succeed.
China does not have a comprehensive system of laws, although substantial changes
have occurred in this regard in recent years. The corporate form of organization
has only recently been permitted in China and national regulations governing
corporations were introduced only in May, 1992. Prior to the introduction of
such regulations Shanghai had adopted a set of corporate regulations applicable
to corporations located or listed in Shanghai, and the relationship between the
two sets of regulations is not clear. Consequently, until a firmer legal basis
is provided, even such fundamental corporate law tenets as the limited liability
status of Chinese issuers and their authority to issue shares remain open to
question. Laws regarding fiduciary duties of officers and directors and the
protection of shareholders are not well developed. China's judiciary is
relatively inexperienced in enforcing the laws that exist, leading to a higher
than usual degree of uncertainty as to the outcome of any litigation. Even where
adequate law exists in China, it may be impossible to obtain swift and equitable
enforcement of such law, or to obtain enforcement of the judgment by a court of
another jurisdiction. The bankruptcy laws pertaining to state enterprises have
rarely been used and are untried in regard to an enterprise with foreign
shareholders, and there can be no assurance that such shareholders, including
the Portfolio, would be able to realize the value of the assets of the
enterprise or receive payment in convertible currency. As the Chinese legal
system develops, the promulgation of new laws, changes to existing laws and the
preemption of local laws by national laws may adversely affect foreign
investors, including the Portfolio. The uncertainties faced by foreign investors
in China are exacerbated by the fact that many laws, regulations and decrees of
China are not publicly available, but merely circulated internally.
DIRECT INVESTMENTS. The Portfolio may invest up to 10% of its total assets in
direct investments in China growth companies. Direct investments include (i) the
private purchase from an enterprise of an equity interest in the enterprise in
the form of shares of common stock or equity interests in trusts, partnerships,
joint ventures or similar enterprises, and (ii) the purchase of such an equity
interest in an enterprise from a principal investor in the enterprise. In each
case, the Portfolio will, at the time of making the investment, enter into a
shareholder or similar agreement with the enterprise and one or more other
holders of equity interests in the enterprise. The Adviser anticipates that
these agreements will, in appropriate circumstances, provide the Portfolio with
the ability to appoint a representative to the board of directors or similar
body of the enterprise and for eventual disposition of the Portfolio's
investment in the enterprise. Such a representative of the Portfolio will be
expected to provide the Portfolio with the ability to monitor its investment and
protect its rights in the investment and will not be appointed for the purpose
of exercising management or control of the enterprise.
Certain of the Portfolio's direct investments, particularly in China, will
probably include investments in smaller, less seasoned companies. These
companies may have limited product lines, markets or financial resources, or
they may be dependent on a limited management group. The Adviser does not
anticipate making direct investments in start-up operations, although it is
expected that in some cases the Portfolio's direct investments will fund new
operations for an enterprise which itself is engaged in similar operations or is
affiliated with an organization that is engaged in similar operations. Such
direct investments may be made in entities that are reasonably expected in the
foreseeable future to become China growth companies, either by expanding current
operations or establishing significant operations in China.
Direct investments may involve a high degree of business and financial risk that
can result in substantial losses. Because of the absence of any public trading
market for these investments, the Portfolio may take longer to liquidate these
positions than would be the case for publicly traded securities. Although these
securities may be resold in privately negotiated transactions, the prices on
these sales could be less than those originally paid by the Portfolio.
Furthermore, issuers whose securities are not publicly traded may not be subject
to public disclosure and other investor protection requirements applicable to
publicly traded securities. If such securities are required to be registered
under the securities laws of one or more jurisdictions before being resold, the
Portfolio may be required to bear the expenses of registration. In addition, in
the event the Portfolio sells unlisted securities, any capital gains realized on
such transactions may be subject to higher rates of taxation than taxes payable
on the sale of listed securities.
OTHER INVESTMENT PRACTICES. The Portfolio may engage in the following investment
practices, some of which may derive their value from another instrument,
security or index. In addition, the Portfolio may temporarily borrow up to 5% of
the value of its total assets to satisfy redemption requests or settle
securities transactions.
DERIVATIVE INSTRUMENTS. The Portfolio may purchase or sell derivative
instruments (which are instruments that derive their value from another
instrument, security, index or currency) to enhance return, to hedge against
fluctuations in securities prices, interest rates or currency exchange rates, or
as a substitute for the purchase or sale of securities or currencies. The
Portfolio's transactions in derivative instruments may be in the U.S. or abroad
and may include the purchase or sale of futures contracts on securities,
securities indices, other indices, other financial instruments or currencies;
options on futures contracts; exchange-traded and over-the-counter options on
securities, indices or currencies; and forward foreign currency exchange
contracts. The Portfolio's transactions in derivative instruments involve a risk
of loss or depreciation due to unanticipated adverse changes in securities
prices, interest rates, the other financial instruments' prices or currency
exchange rates, the inability to close out a position or default by the
counterparty. The loss on derivative instruments (other than purchased options)
may exceed the Portfolio's initial investment in these instruments. In addition,
the Portfolio may lose the entire premium paid for purchased options that expire
before they can be profitably exercised by the Portfolio. The Portfolio incurs
transaction costs in opening and closing positions in derivative instruments.
There can be no assurance that the Adviser's use of derivative instruments will
be advantageous to the Portfolio.
The Portfolio may purchase call and put options on any securities in which the
Portfolio may invest or options on any securities index composed of securities
in which the Portfolio may invest. The Portfolio does not intend to write a
covered option on any security if after such transaction more than 15% of its
net assets, as measured by the aggregate value of the securities underlying all
covered calls and puts written by the Portfolio, would be subject to such
options. The Portfolio does not intend to purchase an option on any security if,
after such transaction, more than 5% of its net assets, as measured by the
aggregate of all premiums paid for all such options held by the Portfolio, would
be so invested.
To the extent that the Portfolio enters into futures contracts, options on
futures contracts and options on foreign currencies traded on an exchange
regulated by the Commodity Futures Trading Commission ("CFTC"), in each case
that are not for bona fide hedging purposes (as defined by the CFTC), the
aggregate initial margin and premiums required to establish these positions
(excluding the amount by which options are "in-the-money") may not exceed 5% of
the liquidation value of the Portfolio's portfolio, after taking into account
unrealized profits and unrealized losses on any contracts the Portfolio has
entered into.
Forward contracts are individually negotiated and privately traded by currency
traders and their customers. A forward contract involves an obligation to
purchase or sell a specific currency (or basket of currencies) for an agreed
price at a future date, which may be any fixed number of days from the date of
the contract. The Portfolio may engage in cross-hedging by using forward
contracts in one currency (or basket of currencies) to hedge against
fluctuations in the value of securities denominated in a different currency if
the Adviser determines that there is an established historical pattern of
correlation between the two currencies (or the basket of currencies and the
underlying currency). Use of a different foreign currency magnifies the
Portfolio's exposure to foreign currency exchange rate fluctuations. The
Portfolio may also use forward contracts to shift its exposure to foreign
currency exchange rate changes from one currency to another.
The Portfolio may enter into currency swaps for both hedging and non-hedging
purposes. Currency swaps involve the exchange of rights to make or receive
payments in specified currencies. Since currency swaps are individually
negotiated, the Portfolio expects to achieve an acceptable degree of correlation
between its portfolio investments and its currency swap positions. Currency
swaps usually involve the delivery of the entire principal value of one
designated currency in exchange for the other designated currency. Therefore,
the entire principal value of a currency swap is subject to the risk that the
other party to the swap will default on its contractual delivery obligations.
The use of currency swaps is a highly specialized activity which involves
special investment techniques and risks. If the Adviser is incorrect in its
forecasts of market values and currency exchange rates, the Portfolio's
performance will be adversely affected.
LENDING OF PORTFOLIO SECURITIES. The Portfolio may seek to earn additional
income by lending portfolio securities to broker-dealers or other institutional
borrowers. As with other extensions of credit there are risks of delay in
recovery or even loss of rights in the securities loaned if the borrower of the
securities fails financially. However, the loans will be made only to
organizations deemed by the Adviser to be sufficiently creditworthy and when, in
the judgment of the Adviser, the consideration which can be earned from
securities loans of this type justifies the attendant risk.
REPURCHASE AGREEMENTS. The Portfolio may enter into repurchase agreements with
respect to its permitted investments, but currently intends to do so only with
member banks of the Federal Reserve System or with primary dealers in U.S.
Government securities. In the event of the bankruptcy of the other party to a
repurchase agreement, the Portfolio might experience delays in recovering its
cash. To the extent that, in the meantime, the value of the securities the
Portfolio purchased may have decreased, the Portfolio could experience a loss.
At no time will the Portfolio commit more than 15% of its net assets to
repurchase agreements which mature in more than seven days and other illiquid
securities.
OTHER INVESTMENT COMPANIES. The Portfolio reserves the right to invest up to 10%
of its total assets, calculated at the time of purchase, in the securities of
other investment companies unaffiliated with the Adviser or the Manager that
have the characteristics of closed-end investment companies. The Portfolio may
not invest more than 5% of its total assets in the securities of any one
investment company or acquire more than 3% of the voting securities of any other
investment company. The Portfolio will indirectly bear its proportionate share
of any management fees paid by investment companies in which it invests in
addition to the advisory fee paid by the Portfolio. The value of closed-end
investment company securities, which are usually traded on an exchange, is
affected by demand for the securities themselves, independent of the demand for
the underlying portfolio assets and, accordingly, such securities can trade at a
discount from their net asset values.
PORTFOLIO TURNOVER. While it is the policy of the Portfolio to seek long-term
capital appreciation, and generally not to engage in trading for short-term
gains, the Portfolio will effect portfolio transactions without regard to its
holding period if, in the judgment of the Adviser, such transactions are
advisable in light of a change in circumstances of a particular company or
within a particular industry, or in light of general market, economic or
political conditions. Accordingly, the Portfolio may engage in short-term
trading under such circumstances. Portfolio expenses increase with turnover of
securities. It is anticipated that the annual portfolio turnover rate of the
Portfolio will be not more than 100%.
CERTAIN INVESTMENT POLICIES. The Fund and the Portfolio have adopted certain
fundamental investment restrictions and policies which are enumerated in detail
in the Statement of Additional Information and which may not be changed unless
authorized by a shareholder vote and an investor vote, respectively. Among these
fundamental restrictions, neither the Fund nor the Portfolio may (1) borrow
money except from banks or through reverse repurchase agreements and in an
amount not exceeding one-third of its total assets; or (2) with respect to 75%
of its total assets, invest more than 5% of its total assets in the securities
of any one issuer, other than U.S. Government securities or, in the case of the
Fund, interests in the Portfolio, or acquire more than 10% of the outstanding
voting securities of any one issuer. Except with respect to the Portfolio's
borrowing limitation, investment restrictions are considered at the time of
acquisition of assets; the sale of portfolio assets is not required in the event
of a subsequent change in circumstances. As a matter of fundamental policy the
Portfolio will invest less than 25% of its total assets in the securities, other
than U.S. Government securities, of issuers in any one industry. However, the
Portfolio is permitted to invest 25% or more of its total assets in (i) the
securities of issuers located in any one country in the China Region and (ii)
assets denominated in the currency of any one country.
Except for the fundamental investment restrictions and policies specifically
identified above and those enumerated in the Statement of Additional
Information, the investment objective and policies of the Fund and the Portfolio
are not fundamental policies and accordingly may be changed by the Trustees of
the Trust and the Portfolio without obtaining the approval of the shareholders
of the Fund or the investors in the Portfolio, as the case may be. If any
changes were made, the Fund might have investment objectives different from the
objectives which an investor considered appropriate at the time the investor
became a shareholder in the Fund. As a matter of nonfundamental policy, neither
the Fund nor the Portfolio (i) intends to borrow for leverage purposes or may
purchase any securities if, at the time of such purchase, permitted borrowings
exceed 5% of the value of the Portfolio's or the Fund's total assets, as the
case may be, or (ii) is permitted to invest more than 15% of its net assets in
unmarketable securities, over-the-counter options, repurchase agreements
maturing in more than seven days and other illiquid securities.
Under the 1940 Act and the rules promulgated thereunder, the Portfolio's
investments in the securities of any company that, in its most recent fiscal
year, derived more than 15% of its gross revenues from securities-related
activities is limited to 5% of any class of the issuer's equity securities and
10% of the outstanding principal amount of the issuer's debt securities,
provided that the Portfolio's aggregate investments in the securities of any
such issuer do not exceed 5% of the Portfolio's total assets. Some of the
companies available for investment in China and the China Region, including
enterprises being privatized by such countries, may be financial services
businesses that engage in securities-related activities. The Portfolio's ability
to invest in such enterprises may thus be limited.
ORGANIZATION OF THE FUND AND THE PORTFOLIO
- ------------------------------------------------------------------------------
THE FUND IS A DIVERSIFIED SERIES OF EATON VANCE GROWTH TRUST (THE "TRUST"), A
BUSINESS TRUST ESTABLISHED UNDER MASSACHUSETTS LAW PURSUANT TO A DECLARATION OF
TRUST DATED MAY 25, 1989, AS AMENDED, AND IS THE SUCCESSOR TO A MASSACHUSETTS
CORPORATION WHICH COMMENCED ITS INVESTMENT COMPANY OPERATIONS IN 1954. THE TRUST
IS A MUTUAL FUND -- AN OPEN-END MANAGEMENT INVESTMENT COMPANY. The Trustees of
the Trust are responsible for the overall management and supervision of its
affairs. The Trust may issue an unlimited number of shares of beneficial
interest (no par value per share) in one or more series and because the Trust
can offer separate series (such as the Fund) it is known as a "series company".
Each share represents an equal proportionate beneficial interest in the Fund.
When issued and outstanding, the shares are fully paid and nonassessable by the
Trust and redeemable as described under "How to Redeem Fund Shares."
Shareholders are entitled to one vote for each full share held. Fractional
shares may be voted proportionately. Shares have no preemptive or conversion
rights and are freely transferable. In the event of the liquidation of the Fund,
shareholders are entitled to share pro rata in the net assets of the Fund
available for distribution to shareholders.
THE PORTFOLIO, IS ORGANIZED AS A TRUST UNDER THE LAWS OF THE STATE OF NEW YORK,
AND INTENDS TO BE TREATED AS A PARTNERSHIP FOR FEDERAL TAX PURPOSES. The
Portfolio, as well as the Trust, intends to comply with all applicable federal
and state securities laws. The Portfolio's Declaration of Trust provides that
the Fund and other entities permitted to invest in the Portfolio (e.g., other
U.S. and foreign investment companies and common and commingled trust funds)
will each be liable for all obligations of the Portfolio. However, the risk of
the Fund incurring financial loss on account of such liability is limited to
circumstances in which both inadequate insurance exists and the Portfolio itself
is unable to meet its obligations. Accordingly, the Trustees of the Trust
believe that neither the Fund nor its shareholders will be adversely affected by
reason of the Fund investing in the Portfolio.
SPECIAL INFORMATION ON THE FUND/PORTFOLIO INVESTMENT STRUCTURE. An investor in
the Fund should be aware that the Fund, unlike mutual funds which directly
acquire and manage their own portfolios of securities, seeks to achieve its
investment objective by investing its assets in an interest in the Portfolio
(although the Fund may temporarily hold a de minimus amount of cash), which is a
separate investment company with an identical investment objective. Therefore,
the Fund's interest in the securities owned by the Portfolio is indirect. In
addition to selling an interest to the Fund, the Portfolio may sell interests to
other affiliated and non-affiliated mutual funds or institutional investors.
Such investors will invest in the Portfolio on the same terms and conditions and
will pay a proportionate share of the Portfolio's expenses. However, the other
investors investing in the Portfolio are not required to sell their shares at
the same public offering price as the Fund due to variations in sales
commissions and other operating expenses. Therefore, investors in the Fund
should be aware that these differences may result in differences in returns
experienced by investors in the various funds that invest in the Portfolio. Such
differences in returns are also present in other mutual fund structures,
including funds that have multiple classes of shares. For information regarding
the investment objective, policies and restrictions of the Portfolio, see "The
Fund's Investment Objective," "How the Fund and the Portfolio Invest their
Assets" and "Special Investment Methods and Risk Factors." Further information
regarding investment practices may be found in the Statement of Additional
Information.
The Trustees of the Trust have considered the advantages and disadvantages of
investing the assets of the Fund in the Portfolio, as well as the advantages and
disadvantages of the two-tier format. The Trustees believe that the structure
offers opportunities for substantial growth in the assets of the Portfolio, and
affords the potential for economies of scale for the Fund, at least when the
assets of the Portfolio exceed $500 million.
The Fund may withdraw (completely redeem) all its assets from the Portfolio at
any time if the Board of Trustees of the Trust determines that it is in the best
interest of the Fund to do so. The investment objective and the nonfundamental
investment policies of the Fund and the Portfolio may be changed by the Trustees
of the Trust and the Portfolio without obtaining the approval of the
shareholders of the Fund or the investors in the Portfolio, as the case may be.
Any such change of the investment objective will be preceded by thirty days'
advance written notice to the shareholders of the Fund or the investors in the
Portfolio, as the case may be. In the event the Fund withdraws all of its assets
from the Portfolio, or the Board of Trustees of the Trust determines that the
investment objective of the Portfolio is no longer consistent with the
investment objective of the Fund, such Trustees would consider what action might
be taken, including investing the assets of the Fund in another pooled
investment entity or retaining an investment adviser to manage the Fund's assets
in accordance with its investment objective. The Fund's investment performance
may be affected by a withdrawal of all its assets from the Portfolio.
Information regarding the availability of other pooled investment entities or
funds which invest in the Portfolio may be obtained by contacting Eaton Vance
Distributors, Inc. (the "Principal Underwriter" or "EVD"), 24 Federal Street,
Boston, MA 02110 (617) 482-8260. Smaller investors in the Portfolio may be
adversely affected by the actions of a larger investor in the Portfolio. For
example, if a large investor withdraws from the Portfolio, the remaining
investors may experience higher pro rata operating expenses, thereby producing
lower returns. Additionally, the Portfolio may become less diverse, resulting in
increased portfolio risk, and experience decreasing economies of scale. However,
this possibility exists as well for historically structured funds which have
large or institutional investors.
Until 1992, the Manager sponsored and advised historically structured funds.
Funds which invest all their assets in interests in a separate investment
company are a relatively new development in the mutual fund industry and,
therefore, the Fund may be subject to additional regulations than historically
structured funds.
The Declaration of Trust of the Portfolio provides that the Portfolio will
terminate 120 days after the complete withdrawal of the Fund or any other
investor in the Portfolio, unless either the remaining investors, by unanimous
vote at a meeting of such investors, or a majority of the Trustees of the
Portfolio, by written instrument consented to by all investors, agree to
continue the business of the Portfolio. This provision is consistent with
treatment of the Portfolio as a partnership for Federal income tax purposes. See
"Distributions and Taxes" for further information. Whenever the Fund as an
investor in the Portfolio is requested to vote on matters pertaining to the
Portfolio (other than the termination of the Portfolio's business, which may be
determined by the Trustees of the Portfolio without investor approval), the Fund
will hold a meeting of Fund shareholders and will vote its interest in the
Portfolio for or against such matters proportionately to the instructions to
vote for or against such matters received from Fund shareholders. The Fund shall
vote shares for which it receives no voting instructions in the same proportion
as the shares for which it receives voting instructions. Other investors in the
Portfolio may alone or collectively acquire sufficient voting interests in the
Portfolio to control matters relating to the operation of the Portfolio, which
may require the Fund to withdraw its investment in the Portfolio or take other
appropriate action. Any such withdrawal could result in a distribution "in kind"
of portfolio securities (as opposed to a cash distribution from the Portfolio).
If securities are distributed, a Fund could incur brokerage, tax or other
charges in converting the securities to cash. In addition, the distribution in
kind may result in a less diversified portfolio of investments or adversely
affect the liquidity of such Fund. Notwithstanding the above, there are other
means for meeting shareholder redemption requests, such as borrowing.
One independent Trustee of the Portfolio also serves as a Trustee of the Trust.
The Trustees of the Trust, including a majority of the noninterested Trustees,
have approved written procedures designed to identify and address any potential
conflicts of interest which might arise as a result of the existence of one
common independent Trustee on the two Boards. For further information concerning
the Trustees and officers of each of the Trust and the Portfolio, see the
Statement of Additional Information.
MANAGEMENT OF THE FUND AND THE PORTFOLIO
- ------------------------------------------------------------------------------
EATON VANCE MANAGEMENT ("EATON VANCE") ACTS AS THE SPONSOR AND MANAGER OF THE
FUND AND THE ADMINISTRATOR OF THE PORTFOLIO. THE PORTFOLIO HAS ENGAGED LLOYD
GEORGE MANAGEMENT (HONG KONG) LIMITED ("LGM-HK") AS ITS INVESTMENT ADVISER.
Pursuant to a service agreement effective on January 1, 1996 between LGM-HK and
its affiliate Lloyd George Investment Management (Bermuda) Limited ("LGIM-B"),
LGIM-B, acting under the general supervision of the Portfolio's Trustees,
manages the Portfolio's investments and affairs. LGM-HK supervises LGIM-B's
performance of this function and retains its contractual obligations under its
investment advisory agreement with the Portfolio. LGM-HK and LGIM-B are referred
to collectively as the Advisers. The Portfolio is co-managed by Robert Lloyd
George and Scobie Dickinson Ward.
Each Adviser is registered as an investment adviser with the Securities and
Exchange Commission the ("Commission"). Each Adviser is a subsidiary of Lloyd
George Management (B.V.I.) Limited ("LGM"). LGM and its subsidiaries act as
investment adviser to various individual and institutional clients with total
assets under management of more than $1 billion. Eaton Vance's parent, Eaton
Vance Corp., owns 24% of the Class A shares issued by LGM.
LGM was established in 1991 to provide investment management services with
respect to equity securities of companies trading in Asian securities markets,
especially those of emerging markets. LGM currently manages Pacific Basin and
Asian portfolios for both private clients and institutional investors seeking
long-term capital growth. LGM's core investment team consists of nine
experienced investment professionals, based in Hong Kong, who have worked
together over a number of years successfully managing client portfolios in
Pacific Basin and Asian stock markets. LGM also has offices in Bombay, India and
London, England. The team has a unique knowledge of, and experience with,
Pacific Basin and Asian emerging markets. LGM is ultimately controlled by the
Hon. Robert J.D. Lloyd George, President and Trustee of the Portfolio and
Chairman and Chief Executive Officer of the Advisers. LGM's only activity is
portfolio management.
LGM and the Advisers have adopted a disciplined management style, providing a
blend of Asian and multinational expertise with the most rigorous international
standards of fundamental security analysis. Although focused primarily in Asia,
LGM and the Advisers maintain a network of international contacts in order to
monitor international economic and stock market trends and offer clients a
global management service.
THE HONOURABLE ROBERT LLOYD GEORGE. Chairman. Born in London in 1952 and
educated at Eton College, where he was a King's Scholar, and at Oxford
University. Prior to founding LGM, Mr. Lloyd George was Managing Director of
Indosuez Asia Investment Services Ltd. Previously, he spent four years with the
Fiduciary Trust Company of New York researching international securities, in the
United States and Europe, for the United Nations Pension Fund. Mr. Lloyd George
is the author of numerous published articles and three books -- "A Guide to
Asian Stock Markets" (Longmans, Hong Kong, 1989), "The East West Pendulum"
(Woodhead - Faulkner, Cambridge, 1991) and "North South -- an Emerging Markets
Handbook (Probus, England, 1994).
WILLIAM WALTER RALEIGH KERR. Finance Director and Chief Operating Officer.
Born in 1950 and educated at Ampleforth and Oxford. Mr. Kerr qualified as a
Chartered Accountant at Thomson McLintock & Co. before joining The Oldham
Estate Company plc as Financial Controller. Prior to joining LGM, Mr. Kerr was
a Director of Banque Indosuez's corporate finance subsidiary, Financiere
Indosuez Limited, in London. Prior to that Mr. Kerr worked for First Chicago
Limited.
SCOBIE DICKINSON WARD. Director. Born in 1966 and a cum laude graduate of both
Phillips Academy Andover, and Harvard College. Mr. Ward joined Indosuez Asia
Investment Services in 1989, where he managed the $100 million Himalayan Fund,
and the Indosuez Tasman Fund, investing in Australia and New Zealand. Messrs.
Ward and Lloyd George manage Eaton Vance's Emerging Markets Portfolio and
South Asia Portfolio (which invests in India and the Indian subcontinent).
M. F. TANG. Director. Born in 1946 and educated in Hong Kong. Mr. Tang is a
Fellow of the Chartered Association of Certified Accountants. Mr. Tang joined
LGM having worked for Australian Mutual Provident Society in Sydney where he
was a Portfolio Manager responsible for Asian Equities. Prior thereto Mr. Tang
worked for Barclays Australia Investment Services Ltd. From 1978 to 1986 Mr.
Tang worked for Barings International Investment Management and prior to that
he spent six years with Peat Marwick Mitchell & Co. Mr. Tang is fluent in the
Cantonese and Mandarin dialects of the Chinese language.
PAMELA CHAN. Director. Born in Hong Kong in 1957 and graduated from Mills
College in Oakland, California. She was an investment executive for Jardine
Fleming from 1982-1984 before moving to Australia where she worked as a Fund
Manager for Rothschild and Aetna. She joined Sun Life Assurance Society PLC in
England in 1987 where she was the head of South East Asian Equities and a
Director. She joined LGM in April 1994 where she is a portfolio manager and a
member of the Pension Management Committee.
ADALINE MANG-YEE KO. Director. Born in 1943 and educated at University of
Birmingham, England and at London Business School where she received her MBA.
Ms. Ko has over 13 years experience working with Far East Asian equities. From
1982-1988, she worked at Save & Prosper Group Ltd. as an investment manager.
In 1988, Ms. Ko transferred to Robert Fleming & Co. Ltd. In 1990, she was
promoted to Director of Fleming Investment Management Ltd. In 1992, she was
promoted to Head of the Pacific Region Portfolios Group where she supervised a
team of 5 with responsibility for over $1.5 billion in assets under
management. Ms. Ko joined LGM in 1995.
Effective January 1, 1996, LGM-HK will pay to LGIM-B the entire amount of the
advisory fee payable by the Portfolio under its investment advisory agreement
with LGM-HK. Under this agreement, LGM-HK is entitled to receive a monthly
advisory fee of 0.0625% (equivalent to 0.75% annually) of the average daily net
assets of the Portfolio up to $500 million, which fee declines at intervals
above $500 million. As at August 31, 1995, the Portfolio had net assets of
$590,417,058. For the fiscal year ended August 31, 1995, the Portfolio paid
LGM-HK advisory fees equivalent to 0.74% of the Portfolio's average daily net
assets for such period.
LGIM-B also furnishes for the use of the Portfolio office space and all
necessary office facilities, equipment and personnel for servicing the
investments of the Portfolio. LGIM-B places the portfolio securities
transactions of the Portfolio with many broker-dealer firms and uses its best
efforts to obtain execution of such transactions at prices which are
advantageous to the Portfolio and at reasonably competitive commission rates.
Subject to the foregoing, LGIM-B may consider sales of shares of the Fund as a
factor in the selection of firms to execute portfolio transactions.
EATON VANCE, ITS AFFILIATES AND ITS PREDECESSOR COMPANIES HAVE BEEN MANAGING
ASSETS OF INDIVIDUALS AND INSTITUTIONS SINCE 1924 AND MANAGING INVESTMENT
COMPANIES SINCE 1931. EATON VANCE ACTS AS INVESTMENT ADVISER TO INVESTMENT
COMPANIES AND VARIOUS INDIVIDUAL AND INSTITUTIONAL CLIENTS WITH ASSETS UNDER
MANAGEMENT OF APPROXIMATELY $16 BILLION. Eaton Vance is a wholly-owned
subsidiary of Eaton Vance Corp., a publicly held holding company. Eaton Vance
Corp., through its subsidiaries and affiliates, engages in investment management
and marketing activities, fiduciary and banking services, oil and gas
operations, real estate investment, consulting and management, and development
of precious metals properties. Eaton Vance Corp. also owns 24% of the Class A
shares issued by LGM.
Eaton Vance, acting under the general supervision of the Boards of Trustees of
the Trust and the Portfolio, manages and administers the business affairs of the
Fund and the Portfolio. Eaton Vance's services include monitoring and providing
reports to the Trustees of the Trust and the Portfolio concerning the investment
performance achieved by the Adviser for the Portfolio, recordkeeping,
preparation and filing of documents required to comply with federal and state
securities laws, supervising the activities of the transfer agent of the Fund
and the custodian of the Portfolio, providing assistance in connection with
Trustees" and shareholders' meetings and other management and administrative
services necessary to conduct the business of the Fund and the Portfolio. Eaton
Vance does not provide any investment management or advisory services to the
Portfolio or the Fund. Eaton Vance also furnishes for the use of the Fund and
the Portfolio office space and all necessary office facilities, equipment and
personnel for managing and administering the business affairs of the Fund and
the Portfolio.
Under its management contract with the Fund, Eaton Vance receives a monthly fee
in the amount of 1/48 of 1% (equal to 0.25% annually) of the average daily net
assets of the Fund up to $500 million, which fee declines at intervals above
$500 million. As of August 31, 1995, the Fund had net assets of $242,900,533.
For the fiscal year ended August 31, 1995, Eaton Vance earned management fees
equivalent to 0.25% (annualized) of the Fund's average daily net assets for such
period. In addition, under its administration agreement with the Portfolio,
Eaton Vance receives a monthly fee in the amount of 1/48 of 1% (equal to 0.25%
annually) of the average daily net assets of the Portfolio up to $500 million,
which fee declines at intervals above $500 million. For the fiscal year ended
August 31, 1995, Eaton Vance earned administration fees from the Portfolio
equivalent to 0.24% (annualized) of the Portfolio's average daily net assets for
such period. The combined advisory, management and administration fees payable
by the Fund and the Portfolio are higher than similar fees charged by most other
investment companies.
The Fund and the Portfolio, as the case may be, will each be responsible for all
respective costs and expenses not expressly stated to be payable by the Advisers
under the investment advisory agreement or Eaton Vance under the management
contract or the administration agreement.
DISTRIBUTION PLAN
- ------------------------------------------------------------------------------
IN ADDITION TO MANAGEMENT FEES AND OTHER EXPENSES, THE FUND PAYS FOR CERTAIN
EXPENSES PURSUANT TO A DISTRIBUTION PLAN (THE "PLAN") DESIGNED TO MEET THE
REQUIREMENTS OF RULE 12B-1 UNDER THE INVESTMENT COMPANY ACT OF 1940 (THE "1940
ACT"). The Plan provides that the Fund will pay a monthly distribution fee to
the Principal Underwriter in an amount equal to the aggregate of (a) .50% of
that portion of the Fund's average daily net assets for any fiscal year which is
attributable to shares of the Fund which have remained outstanding for less than
one year and (b) .25% of that portion of the Fund's average daily net assets for
any fiscal year which is attributable to shares of the Fund which have remained
outstanding for more than one year. Aggregate payments to the Principal
Underwriter under the Plan are limited to those permissible, pursuant to a rule
of the National Association of Securities Dealers, Inc. For the fiscal year
ended August 31, 1995, the Fund paid distribution fees under the Plan to the
Principal Underwriter representing 0.32% of the Fund's average daily net assets.
The Plan also provides that the Fund will pay a quarterly service fee to the
Principal Underwriter in an amount equal on an annual basis to .25% of that
portion of the Fund's average daily net assets for any fiscal year which is
attributable to shares of the Fund which have remained outstanding for more than
one year; from such service fee the Principal Underwriter expects to pay a
quarterly service fee to financial service firms ("Authorized Firms"), as
compensation for providing personal services and/or the maintenance of
shareholder accounts, with respect to shares sold by such Firms which have
remained outstanding for more than one year. The Trustees of the Trust have
implemented the Plan by authorizing the Fund to make quarterly service fee
payments to the Principal Underwriter not to exceed on an annual basis .25% of
that portion of the Fund's average daily net assets for any fiscal year which is
attributable to shares of the Fund which have remained outstanding for more than
one year. Service fee payments to Authorized Firms will be in addition to sales
charges on Fund shares which are reallowed to such Firms. To the extent that the
entire amount of such service fee payments are not paid to such Firms, the
balance will serve as compensation for personal and account maintenance services
furnished by the Principal Underwriter. The Principal Underwriter may realize a
profit from these arrangements. If the Plan is terminated or not continued in
effect, the Fund has no obligation to reimburse the Principal Underwriter for
amounts expended by the Principal Underwriter in distributing shares of the
Fund. For the fiscal year ended August 31, 1995, the Fund made service fee
payments under the Plan equivalent to 0.18% (annualized) of the Fund's average
daily net assets for such year.
VALUING FUND SHARES
- ------------------------------------------------------------------------------
THE FUND VALUES ITS SHARES ONCE ON EACH DAY THE NEW YORK STOCK EXCHANGE (THE
"EXCHANGE") IS OPEN FOR TRADING, as of the close of regular trading on the
Exchange (normally 4:00 P.M. New York time). The Fund's net asset value per
share is determined by its custodian, Investors Bank & Trust Company ("IBT") (as
agent for the Fund), in the manner authorized by the Trustees of the Trust. Net
asset value is computed by dividing the value of the Fund's total assets, less
its liabilities, by the number of shares outstanding. Because the Fund invests
its assets in an interest in the Portfolio, the Fund's net asset value will
reflect the value of its interest in the Portfolio (which, in turn, reflects the
underlying value of the Portfolio's assets and liabilities).
Authorized Firms must communicate an investor's order to the Principal
Underwriter prior to the close of the Principal Underwriter's business day to
receive that day's net asset value per share and the public offering price based
thereon. It is the Authorized Firms' responsibility to transmit orders promptly
to the Principal Underwriter, which is a wholly-owned subsidiary of Eaton Vance.
The Portfolio's net asset value is also determined as of the close of regular
trading on the Exchange by IBT (as custodian and agent for the Portfolio) based
on market or fair value in the manner authorized by the Trustees of the
Portfolio, with special provisions for valuing debt obligations, short-term
investments, foreign securities, direct investments, hedging instruments and
assets not having readily available market quotations, if any. Net asset value
is computed by subtracting the liabilities of the Portfolio from the value of
its total assets. For further information regarding the valuation of the
Portfolio's assets, see "Determination of Net Asset Value" in the Statement of
Additional Information.
---------------------------------------------------------------------------
SHAREHOLDERS MAY DETERMINE THE VALUE OF THEIR INVESTMENT BY MULTIPLYING THE
NUMBER OF FUND SHARES OWNED BY THE CURRENT NET ASSET VALUE PER SHARE.
---------------------------------------------------------------------------
HOW TO BUY FUND SHARES
- ------------------------------------------------------------------------------
SHARES OF THE FUND MAY BE PURCHASED FOR CASH OR MAY BE ACQUIRED IN EXCHANGE FOR
SECURITIES. Investors may purchase shares of the Fund through Authorized Firms
at the effective public offering price, which price is based on the effective
net asset value per share plus the applicable sales charge. The Fund receives
the net asset value, while the sales charge is divided between the Authorized
Firm and the Principal Underwriter. The Principal Underwriter will furnish the
names of Authorized Firms to an investor upon request. An Authorized Firm may
charge its customers a fee in connection with transactions executed by that
Firm. The Fund may suspend the offering of shares at any time and may refuse an
order for the purchase of shares.
The sales charge may vary depending on the size of the purchase and the number
of shares of Eaton Vance funds the investor may already own, any arrangement to
purchase additional shares during a 13-month period or special purchase
programs. Complete details of how investors may purchase shares at reduced sales
charges under a Statement of Intention, Right of Accumulation, or various
employee benefit plans are available from Authorized Firms or from the Principal
Underwriter.
<TABLE>
<CAPTION>
The current sales charges are:
SALES CHARGE SALES CHARGE DEALER DISCOUNT
AS PERCENTAGE OF AS PERCENTAGE OF AS PERCENTAGE OF
AMOUNT OF PURCHASE OFFERING PRICE AMOUNT INVESTED OFFERING PRICE
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Under $100,000 4.75% 4.99% 4.00%
$100,000 but less than $250,000 3.75% 3.90% 3.15%
$250,000 but less than $500,000 2.75% 2.83% 2.30%
$500,000 but less than $1,000,000 2.00% 2.04% 1.70%
$1,000,000 or more 0.00%* 0.00%* 0.50%
<FN>
*No sales charge is payable at the time of purchase on investments of $1 million or more. A contingent deferred sales
charge ("CDSC") of 0.50% will be imposed on such investments (as described below), in the event of certain redemptions
within 12 months of purchase. Such purchases made before November 9, 1995 will be subject to a CDSC of 1% in the event
of certain redemptions within 18 months of purchase. The CDSC will be waived on redemptions by employee retirement
plans organized under the Internal Revenue Code of 1986, as amended (the "Code") relating to distributions to plan
participants or beneficiaries upon retirement, disability or death.
</TABLE>
The Principal Underwriter may at times allow discounts up to the full sales
charge. During periods when the discount includes the full sales charge,
Authorized Firms may be deemed to be underwriters as that term is defined in the
Securities Act of 1933. The Principal Underwriter may, from time to time, at its
own expense, provide additional incentives to Authorized Firms which employ
registered representatives who sell Fund shares and/or shares of other funds
distributed by the Principal Underwriter. In some instances, such additional
incentives may be offered only to certain Authorized Firms whose representatives
are expected to sell significant amounts of shares.
An initial investment in the Fund must be at least $1,000. Once an account has
been established the investor may send investments of $50 or more at any time
directly to the Fund's transfer agent (the "Transfer Agent") as follows: First
Data Investor Services Group, BOS725, P.O. Box 1559, Boston, MA 02104. The
$1,000 minimum initial investment is waived for Bank Automated Investing
accounts, which may be established with an investment of $50 or more. See "Eaton
Vance Shareholder Services".
Shares of the Fund may be sold at net asset value to current and retired
Directors and Trustees of Eaton Vance funds, including the Portfolio; to
officers and employees and clients of Eaton Vance and its affiliates; to
registered representatives and employees of Authorized Firms; and bank employees
who refer customers to registered representatives of Authorized Firms; and to
such persons' spouses and children under the age of 21 and their beneficial
accounts. Shares may also be issued at net asset value (1) in connection with
the merger of an investment company with the Fund, (2) to investors making an
investment as part of a fixed fee program whereby an entity unaffiliated with
Eaton Vance provides multiple investment services, such as management, brokerage
and custody, (3) where the amount invested represents redemption proceeds from a
mutual fund unaffiliated with Eaton Vance, if the redemption occurred no more
than 60 days prior to the purchase of Fund shares and the redeemed shares were
subject to a sales charge, and (4) to an investor making an investment through
an investment adviser, financial planner, broker or other intermediary that
charges a fee for its services and has entered into an agreement with the Fund
or its Principal Underwriter.
No initial sales charge and no contingent deferred sales charge will be payable
or imposed with respect to shares of the Fund purchased by retirement plans
qualified under Section 401, 403(b) or 457 of the Code ("Eligible Plans"). In
order to purchase shares without a sales charge, the plan sponsor of an Eligible
Plan must notify the transfer agent of the Fund of its status as an Eligible
Plan. Participant accounting services (including trust fund reconciliation
services) will be offered only through third party record-keepers and not by
EVD. The Fund's Principal Underwriter may pay commissions to Authorized Firms
who initiate and are responsible for purchases of shares of the Fund by Eligible
Plans of up to 1.00% of the amount invested in such shares.
ACQUIRING FUND SHARES IN EXCHANGE FOR SECURITIES. IBT, as escrow agent, will
receive securities acceptable to Eaton Vance, as Manager, in exchange for Fund
shares at the applicable public offering price as shown above. The minimum value
of securities (or securities and cash) accepted for deposit is $5,000.
Securities accepted will be sold on the day of their receipt or as soon
thereafter as possible. The number of Fund shares to be issued in exchange for
securities will be the aggregate proceeds from the sale of such securities,
divided by the applicable public offering price per Fund share on the day such
proceeds are received. Eaton Vance will use reasonable efforts to obtain the
then current market price for such securities but does not guarantee the best
available price. Eaton Vance will absorb any transaction costs, such as
commissions, on the sale of the securities.
Securities determined to be acceptable should be transferred via book entry or
physically delivered, in proper form for transfer, through an Authorized Firm,
together with a completed and signed Letter of Transmittal in approved form
(available from Authorized Firms), as follows:
IN THE CASE OF BOOK ENTRY:
Deliver through Depository Trust Co.
Broker #2212
Investors Bank & Trust Company
For A/C EV Traditional Greater China Growth Fund
IN THE CASE OF PHYSICAL DELIVERY:
Investors Bank & Trust Company
Attention: EV Traditional Greater China Growth Fund
Physical Securities Processing Settlement Area
89 South Street
Boston, MA 02111
Investors who are contemplating an exchange of securities for shares of the
Fund, or their representatives, must contact Eaton Vance to determine whether
the securities are acceptable before forwarding such securities to IBT. Eaton
Vance reserves the right to reject any securities. Exchanging securities for
Fund shares may create a taxable gain or loss. Each investor should consult his
or her tax adviser with respect to the particular federal, state and local tax
consequences of exchanging securities for Fund shares.
---------------------------------------------------------------------------
IF YOU DON'T HAVE AN AUTHORIZED FIRM, EATON VANCE CAN RECOMMEND ONE.
---------------------------------------------------------------------------
HOW TO REDEEM FUND SHARES
- ------------------------------------------------------------------------------
A SHAREHOLDER MAY REDEEM FUND SHARES BY DELIVERING TO FIRST DATA INVESTOR
SERVICES GROUP, BOS725, P.O. BOX 1559, BOSTON, MA 02104, during its business
hours a written request for redemption in good order, plus any share
certificates with executed stock powers. The redemption price will be based on
the net asset value per Fund share next computed after such delivery. Good order
means that all relevant documents must be endorsed by the record owner (s)
exactly as the shares are registered and the signature(s) must be guaranteed by
a member of either the Securities Transfer Association's STAMP program or the
New York Stock Exchange's Medallion Signature Program, or certain banks, savings
and loan institutions, credit unions, securities dealers, securities exchanges,
clearing agencies and registered securities associations as required by a
regulation of the Securities and Exchange Commission and acceptable to First
Data Investor Services Group. In addition, in some cases, good order may require
the furnishing of additional documents such as where shares are registered in
the name of a corporation, partnership or fiduciary.
Within seven days after receipt of a redemption request by First Data Investor
Services Group, the Fund will make payment in cash for the net asset value of
the shares as of the date determined above and reduced by the amount of any
federal income tax required to be withheld. Although the Fund normally expects
to make payment in cash for redeemed shares, the Trust, subject to compliance
with applicable regulations, has reserved the right to pay the redemption price
of shares of the Fund, either totally or partially, by a distribution in kind of
readily marketable securities withdrawn by the Fund from the Portfolio. The
securities so distributed would be valued pursuant to the Portfolio's valuation
procedures. If a shareholder received a distribution in kind, the shareholder
could incur brokerage or other charges in converting the securities to cash.
To sell shares at their net asset value through an Authorized Firm (a
repurchase), a shareholder can place a repurchase order with the Authorized
Firm, which may charge a fee. The value of such shares is based upon the net
asset value calculated after EVD, as the Fund's agent, receives the order. It is
the Authorized Firm's responsibility to transmit promptly repurchase orders to
EVD. Throughout this Prospectus, the word "redemption" is generally meant to
include a repurchase.
If shares were recently purchased, the proceeds of redemption (or repurchase)
will not be sent until the check (including a certified or cashier's check)
received for the shares purchased has cleared. Payment for shares tendered for
redemption may be delayed up to 15 days from the purchase date when the purchase
check has not yet cleared. Redemptions or repurchases may result in a taxable
gain or loss.
Due to the high cost of maintaining small accounts, the Fund reserves the right
to redeem Fund accounts with balances of less than $500. Prior to such a
redemption, shareholders will be given 60 days' written notice to make an
additional purchase. Thus, an investor making an initial investment of $1,000
would not be able to redeem shares without being subject to this policy.
However, no such redemption would be required if the cause of the low account
balance was a reduction in the net asset value of Fund shares.
If shares have been purchased at net asset value with no initial sales charge by
virtue of the purchase having been in the amount of $1 million or more and are
redeemed within 12 months of purchase, a CDSC of 0.50% will be imposed on such
redemption. (Such purchases made before November 9, 1995, will be subject to a
CDSC of 1% in the event of certain redemptions made within 18 months of
purchase.) The CDSC will be retained by the Principal Underwriter.
The CDSC will be imposed on an amount equal to the lesser of the current market
value or the original purchase price of the shares redeemed. Accordingly, no
CDSC will be imposed on increases in account value above the initial purchase
price, including any dividends or distributions that have been reinvested in
additional shares. In determining whether a CDSC is applicable to a redemption,
the calculation will be made in a manner that results in the lowest possible
rate being charged. It will be assumed that redemptions are made first from any
shares in the shareholder's account that are not subject to a CDSC.
The CDSC is waived for redemptions involving certain liquidation, merger or
acquisition transactions involving other investment companies. If a shareholder
reinvests redemption proceeds within a 60-day period and in accordance with the
conditions set forth under "Eaton Vance Shareholder Services -- Reinvestment
Privilege", the shareholder's account will be credited with the amount of any
CDSC paid on such redeemed shares.
REPORTS TO SHAREHOLDERS
- ------------------------------------------------------------------------------
THE FUND WILL ISSUE TO ITS SHAREHOLDERS SEMI-ANNUAL AND ANNUAL REPORTS
CONTAINING FINANCIAL STATEMENTS. Financial statements included in annual reports
are audited by the Fund's independent certified public accountants. Shortly
after the end of each calendar year, the Fund will furnish its shareholders with
information necessary for preparing federal and state income tax returns.
Consistent with applicable law, duplicate mailings of shareholder reports and
certain other Fund information to shareholders at the same address may be
eliminated.
THE LIFETIME INVESTING ACCOUNT/DISTRIBUTION OPTIONS
- ------------------------------------------------------------------------------
AFTER AN INVESTOR MAKES AN INITIAL PURCHASE OF FUND SHARES, THE FUND'S TRANSFER
AGENT, FIRST DATA INVESTOR SERVICES GROUP, WILL SET UP A LIFETIME INVESTING
ACCOUNT FOR THE INVESTOR ON THE FUND'S RECORDS. This account is a complete
record of all transactions between the investor and the Fund which at all times
shows the balance of shares owned. The Fund will not issue share certificates
except upon request.
Each time a transaction takes place in a shareholder's account, the shareholder
will receive a statement showing complete details of the transaction and the
current balance in the account. (Under certain investment plans, statements may
be sent only quarterly). THE LIFETIME INVESTING ACCOUNT ALSO PERMITS A
SHAREHOLDER TO MAKE ADDITIONAL INVESTMENTS BY SENDING A CHECK FOR $50 OR MORE TO
First Data Investor Services Group.
Any questions concerning a shareholder's account or services available may also
be directed by telephone to EATON VANCE SHAREHOLDER SERVICES at 800-225- 6265,
extension 2, or in writing to First Data Investor Services Group, BOS725, P.O.
Box 1559, Boston, MA 02104 (please provide the name of the shareholder, the Fund
and the account number).
THE FOLLOWING DISTRIBUTION OPTIONS WILL BE AVAILABLE TO ALL LIFETIME INVESTING
ACCOUNTS and may be changed as often as desired by written notice to the Fund's
dividend disbursing agent, First Data Investor Services Group, BOS725, P.O. Box
1559, Boston, MA 02104. The currently effective option will appear on each
account statement.
SHARE OPTION -- Dividends and capital gains will be reinvested in additional
shares.
INCOME OPTION -- Dividends will be paid in cash and capital gains will be
reinvested in additional shares.
CASH OPTION -- Dividends and capital gains will be paid in cash.
The SHARE OPTION will be assigned if no other option is specified.
Distributions, including those reinvested, will be reduced by any withholding
required under the federal income tax laws.
If the INCOME OPTION or CASH OPTION has been selected, dividend and/or capital
gains distribution checks which are returned by the United States Postal Service
as not deliverable or which remain uncashed for six months or more will be
reinvested in the account at the then current net asset value. Furthermore, the
distribution option on the account will be automatically changed to the SHARE
OPTION until such time as the shareholder selects a different option.
DISTRIBUTION INVESTMENT OPTION. In addition to the distribution options set
forth above, dividends and/or capital gains may be invested in additional shares
of another Eaton Vance fund. Before selecting this option, a shareholder should
obtain a prospectus of the other Eaton Vance fund and consider its objectives
and policies carefully.
"STREET NAME" ACCOUNTS. If shares of a Fund are held in a "street name" account
with an Authorized Firm, all recordkeeping, transaction processing and payments
of distributions relating to the beneficial owner's account will be performed by
the Authorized Firm, and not by the Fund and its Transfer Agent. Since the Fund
will have no record of the beneficial owner's transactions, a beneficial owner
should contact the Authorized Firm to purchase, redeem or exchange shares, to
make changes in or give instructions concerning the account, or to obtain
information about the account. The transfer of shares in a "street name" account
to an account with another dealer or to an account directly with a Fund involves
special procedures and will require the beneficial owner to obtain historical
purchase information about the shares in the account from the Authorized Firm.
Before establishing a "street name" account with an investment firm, or
transferring the account to another investment firm, an investor wishing to
reinvest distributions should determine whether the firm which will hold the
shares allows reinvestment of distributions in "street name" accounts.
---------------------------------------------------------------------------
UNDER A LIFETIME INVESTING ACCOUNT A SHAREHOLDER CAN MAKE ADDITIONAL
INVESTMENTS IN SHARES OF THE FUND BY SENDING A CHECK FOR $50 OR MORE.
---------------------------------------------------------------------------
THE EATON VANCE EXCHANGE PRIVILEGE
- ------------------------------------------------------------------------------
Shares of the Fund currently may be exchanged for shares of any of the following
funds: Eaton Vance Cash Management Fund, Eaton Vance Income Fund of Boston,
Eaton Vance Municipal Bond Fund L.P., Eaton Vance Tax Free Reserves and any fund
in the Eaton Vance Traditional Group of Funds on the basis of the net asset
value per share of each fund at the time of the exchange (plus, in the case of
an exchange made within six months of the date of purchase, an amount equal to
the difference, if any, between the sales charge previously paid on the shares
being exchanged and the sales charge payable on the shares being acquired). Such
exchange offers are available only in states where shares of the fund being
acquired may be legally sold.
Each exchange must involve shares which have a net asset value of at least
$1,000. The exchange privilege may be changed or discontinued without penalty.
Shareholders will be given sixty (60) days' notice prior to any termination or
material amendment of the exchange privilege. The Fund does not permit the
exchange privilege to be used for "Market Timing" and may terminate the exchange
privilege for any shareholder account engaged in Market Timing activity. Any
shareholder account for which more than two round-trip exchanges are made within
any twelve month period will be deemed to be engaged in Market Timing.
Furthermore, a group of unrelated accounts for which exchanges are entered
contemporaneously by a financial intermediary will be considered to be engaged
in Market Timing.
Shares of the Fund which are subject to a CDSC may be exchanged into any of the
above funds without incurring the CDSC. The shares acquired in an exchange may
be subject to a CDSC upon redemption. For purposes of computing the CDSC payable
upon redemption of shares acquired in an exchange, the holding period of the
original shares is added to the holding period of the shares acquired in the
exchange.
First Data Investor Services Group makes exchanges at the next determined net
asset value after receiving an exchange request in good order (see "How to
Redeem Fund Shares"). Consult First Data Investor Services Group for additional
information concerning the exchange privilege. Applications and prospectuses of
other funds are available from Authorized Firms or the Principal Underwriter.
The prospectus for each fund describes its investment objectives and policies,
and shareholders should obtain a prospectus and consider these objectives and
policies carefully before requesting an exchange.
Shares of certain other funds for which Eaton Vance acts as investment adviser
or administrator may be exchanged for Fund shares on the basis of the net asset
value per share of each fund at the time of exchange, but subject to any
restrictions or qualifications set forth in the current prospectus of any such
fund.
Telephone exchanges are accepted by First Data Investor Services Group provided
the investor has not disclaimed in writing the use of the privilege. To effect
such exchanges, call First Data Investor Services Group at 800-262- 1122 or,
within Massachusetts, 617-573-9403, Monday through Friday, 9:00 a.m. to 4:00
p.m. (Eastern Standard Time). Shares acquired by telephone exchange must be
registered in the same name(s) and with the same address as the shares being
exchanged. Neither the Fund, the Principal Underwriter nor First Data Investor
Services Group will be responsible for the authenticity of exchange instructions
received by telephone, provided that reasonable procedures to confirm that
instructions communicated are genuine have been followed. Telephone instructions
will be tape recorded. In times of drastic economic or market changes, a
telephone exchange may be difficult to implement. An exchange may result in a
taxable gain or loss.
EATON VANCE SHAREHOLDER SERVICES
- ------------------------------------------------------------------------------
THE FUND OFFERS THE FOLLOWING SERVICES, WHICH ARE VOLUNTARY, INVOLVE NO EXTRA
CHARGE, AND MAY BE CHANGED OR DISCONTINUED WITHOUT PENALTY AT ANY TIME. Full
information on each of the services described below and an application, where
required, are available from Authorized Firms or the Principal Underwriter. The
cost of administering such services for the benefit of shareholders who
participate in them is borne by the Fund as an expense to all shareholders.
INVEST-BY-MAIL -- FOR PERIODIC SHARE ACCUMULATION: Once the $1,000 minimum
investment has been made, checks of $50 or more payable to the order of EV
Traditional Greater China Growth Fund may be mailed directly to First Data
Investor Services Group, BOS725, P.O. Box 1559, Boston, MA 02104 at any time --
whether or not dividends are reinvested. The name of the shareholder, the Fund
and the account number should accompany each investment.
BANK AUTOMATED INVESTING -- FOR REGULAR SHARE ACCUMULATION: Cash investments of
$50 or more may be made automatically each month or quarter from a shareholder's
bank account. The $1,000 minimum initial investment and small account redemption
policy are waived for these accounts.
STATEMENT OF INTENTION: Purchases of $100,000 or more made over a 13-month
period are eligible for reduced sales charges. See "Statement of Intention and
Escrow Agreement."
RIGHT OF ACCUMULATION: Purchases may qualify for reduced sales charges when the
current market value of holdings (shares at current offering price), plus new
purchases, reaches $100,000 or more. Shares of the Eaton Vance funds listed
under "The Eaton Vance Exchange Privilege" may be combined under the Statement
of Intention and Right of Accumulation.
WITHDRAWAL PLAN: A shareholder may draw on shareholdings systematically with
monthly or quarterly checks in an amount specified by the shareholder. A minimum
deposit of $5,000 in shares is required. The maintenance of a withdrawal plan
concurrently with purchases of additional shares would be disadvantageous
because of the sales charge included in such purchases.
REINVESTMENT PRIVILEGE: A SHAREHOLDER WHO HAS REPURCHASED OR REDEEMED SHARES MAY
REINVEST AT NET ASSET VALUE ANY PORTION OR ALL OF HIS REPURCHASE OR REDEMPTION
PROCEEDS (PLUS THAT AMOUNT NECESSARY TO ACQUIRE A FRACTIONAL SHARE TO ROUND OFF
THE PURCHASE TO THE NEAREST FULL SHARE), IN SHARES OF THE FUND or, provided that
the shares repurchased or redeemed have been held for at least 60 days, in
shares of any of the other funds offered by the Principal Underwriter subject to
an initial sales charge, provided that the reinvestment is effected within 60
days after such repurchase or redemption, and the privilege has not been used
more than once in the prior 12 months. Shares are sold to a reinvesting
shareholder at the next determined net asset value following timely receipt of a
written purchase order by the Principal Underwriter or by the fund the shares of
which are being purchased (or by such fund's transfer agent). The privilege is
also available to shareholders of the funds listed under "The Eaton Vance
Exchange Privilege" who wish to reinvest such repurchase or redemption proceeds
in shares of the Fund. If a shareholder reinvests redemption proceeds within the
60-day period, the shareholder's account will be credited with the amount of any
CDSC paid on such redeemed shares. To the extent that any shares of the Fund are
sold at a loss and the proceeds are reinvested in shares of the Fund (or other
shares of the Fund are acquired within the period beginning 30 days before and
ending 30 days after the date of the redemption) some or all of the loss
generally will not be allowed as a tax deduction. Shareholders should consult
their tax advisers concerning the tax consequences of reinvestments.
TAX-SHELTERED RETIREMENT PLANS: Shares of the Fund are available for purchase
in connection with the following tax-sheltered retirement plans:
-- Pension and Profit Sharing Plans for self-employed individuals,
corporations and nonprofit organizations;
-- Individual Retirement Account Plans for individuals and their non-
employed spouses; and
-- 403(b) Retirement Plans for employees of public school systems,
hospitals, colleges and other nonprofit organizations meeting certain
requirements of the Code.
Detailed information concerning these plans, including certain exceptions to
minimum investment requirements, and copies of the plans are available from the
Principal Underwriter. This information should be read carefully and
consultation with an attorney or tax adviser may be advisable. The information
sets forth the service fee charged for retirement plans and describes the
federal income tax consequences of establishing a plan. Under all plans,
dividends and distributions will be automatically reinvested in additional
shares.
DISTRIBUTIONS AND TAXES
- ------------------------------------------------------------------------------
DISTRIBUTIONS. It is the present policy of the Fund to make (A) at least one
distribution annually (normally in December) of all or substantially all of the
investment income allocated to the Fund by the Portfolio, less the Fund's direct
and allocated expenses and (B) at least one distribution annually of all or
substantially all of the net realized capital gains allocated by the Portfolio
to the Fund, if any (reduced by any available capital loss carryforwards from
prior years).
Shareholders may reinvest all distributions in shares of the Fund without a
sales charge at the per share net asset value as of the close of business on the
record date.
The Fund's net investment income consists of the Fund's allocated share of the
net investment income of the Portfolio, less all actual and accrued expenses of
the Fund determined in accordance with generally accepted accounting principles.
The Portfolio's net investment income consists of all income accrued on the
Portfolio's assets, less all actual and accrued expenses of the Portfolio
determined in accordance with generally accepted accounting principles. The
Fund's net realized capital gains, if any, consist of the net realized capital
gains (if any) allocated to the Fund by the Portfolio for tax purposes, after
taking into account any available capital loss carryovers.
TAXES. Distributions by the Fund which are derived from the Fund's allocated
share of the Portfolio's net investment income, net short-term capital gains and
certain foreign exchange gains are taxable to shareholders as ordinary income,
whether received in cash or reinvested in additional shares of the Fund. The
Fund's distributions will generally not qualify for the dividends-received
deduction for corporate shareholders.
Capital gains referred to in clause (B) above, if any, realized by the Portfolio
and allocated to the Fund for the Fund's fiscal year, which ends on August 31,
will usually be distributed by the Fund prior to the end of December.
Distributions by the Fund of long-term capital gains allocated to the Fund by
the Portfolio are taxable to shareholders as long-term capital gains, whether
paid in cash or additional shares of the Fund, regardless of the length of time
Fund shares have been owned by the shareholder.
If shares are purchased shortly before the record date of a distribution, the
shareholder will pay the full price for the shares and then receive some portion
of the price back as a taxable distribution. The amount, timing and character of
the Fund's distributions to shareholders may be affected by special tax rules
governing the Portfolio's activities in options, futures and forward foreign
currency exchange transactions or certain other investments.
Certain distributions which are declared by the Fund in October, November or
December and paid the following January will be reportable by shareholders as if
received on December 31 of the year in which they are declared.
Sales charges paid upon a purchase of shares of the Fund cannot be taken into
account for purposes of determining gain or loss on a redemption or exchange of
the shares before the 91st day after their purchase to the extent shares of the
Fund or of another fund are subsequently acquired pursuant to the Fund's
reinvestment or exchange privilege. Any disregarded or disallowed amounts will
result in an adjustment to the shareholder's tax basis in some or all of any
other shares acquired.
The Fund intends to qualify as a regulated investment company under the Code,
and to satisfy all requirements relating to the sources of its income, the
distribution of its income, and the diversification of its assets. In satisfying
these requirements, the Fund will treat itself as owning its proportionate share
of each of the Portfolio's assets and as entitled to the income of the Portfolio
properly attributable to such share.
As a regulated investment company under the Code, the Fund does not pay federal
income or excise taxes to the extent that it distributes to shareholders its net
investment income and net realized capital gains in accordance with the timing
requirements imposed by the Code. As a partnership under the Code, the Portfolio
also does not pay federal income or excise taxes.
Income (possibly including, in some cases, capital gains) realized by the
Portfolio from certain investments and allocated to the Fund may be subject to
foreign income taxes, and the Fund may make an election under Section 853 of the
Code that would allow shareholders to claim a credit or deduction on their
federal income tax returns for (and treated as additional amounts distributed to
them) their pro rata portion of the Fund's allocated share of qualified taxes
paid by the Portfolio to foreign countries. This election may be made only if
more than 50% of the assets of the Fund, including its allocable share of the
Portfolio's assets, at the close of the Fund's taxable year consists of
securities in foreign corporations. The Fund will send a written notice of any
such election (not later than 60 days after the close of its taxable year) to
each shareholder indicating the amount to be treated as the shareholder's
proportionate share of such taxes. Availability of foreign tax credits or
deductions for shareholders is subject to certain additional restrictions and
limitations under the Code.
Shareholders will receive annually one or more Forms 1099 to assist in the
preparation of their federal and state income tax returns for the prior calendar
year's distributions, proceeds from the redemption or exchange of Fund shares,
and federal income tax (if any) withheld by the Fund's Transfer Agent.
PERFORMANCE INFORMATION
- ------------------------------------------------------------------------------
THE FUND'S AVERAGE ANNUAL TOTAL RETURN IS DETERMINED BY MULTIPLYING A
HYPOTHETICAL INITIAL PURCHASE OF $1,000 BY THE AVERAGE ANNUAL COMPOUNDED RATE OF
RETURN (INCLUDING CAPITAL APPRECIATION/DEPRECIATION, AND DIVIDENDS AND
DISTRIBUTIONS PAID AND REINVESTED) FOR THE STATED PERIOD AND ANNUALIZING THE
RESULT. The average annual total return calculation assumes the maximum sales
charge is deducted from the initial $1,000 purchase order and that all dividends
and distributions are reinvested at net asset value on the reinvestment dates
during the period. The Fund may also publish annual and cumulative total return
figures from time to time. The Fund may use such total return figures, together
with comparisons with the Consumer Price Index, various domestic and foreign
securities indices and performance studies prepared by independent
organizations, in advertisements and in information furnished to present or
prospective shareholders.
The Fund may also furnish total return calculations based on investments at
various sales charge levels or at net asset value. Any performance data which is
based on the Fund's net asset value per share would be reduced if a sales charge
were taken into account. The Fund's performance may be compared in publications
to the performance of various indices and investments for which reliable data is
available, and to averages, performance rankings, or other information prepared
by recognized mutual fund statistical services.
Investors should note that the investment results of the Fund will fluctuate
over time, and any presentation of the Fund's total return for any prior period
should not be considered a representation of what an investment may earn or what
the Fund's total return may be in any future period. The Fund's investment
results are based on many factors, including market conditions, the composition
of the security holdings of the Portfolio and the operating expenses of the Fund
and the Portfolio. Investment results also often reflect the risks associated
with the particular investment objective and policies of the Fund and the
Portfolio. Among others, these factors should be considered when comparing the
Fund's investment results to those of other mutual funds and other investment
vehicles.
STATEMENT OF INTENTION AND ESCROW AGREEMENT
- ------------------------------------------------------------------------------
TERMS OF ESCROW. If the investor, on an application, makes a Statement of
Intention to invest a specified amount over a thirteen month period, then out of
the initial purchase (or subsequent purchases if necessary) 5% of the dollar
amount specified on the application shall be held in escrow by the escrow agent
in the form of shares (computed to the nearest full share at the public offering
price applicable to the initial purchase hereunder) registered in the investor's
name. All income dividends and capital gains distributions on escrowed shares
will be paid to the investor's order.
When the minimum investment so specified is completed, the escrowed shares will
be delivered to the investor. If the investor has an accumulation account the
shares will remain on deposit under the investor's account.
If total purchases under this Statement of Intention are less than the amount
specified, the investor will promptly remit to EVD any difference between the
sales charge on the amount specified and on the amount actually purchased. If
the investor does not within 20 days after written request by EVD or the
Authorized Firm pay such difference in sales charge, the escrow agent will
redeem an appropriate number of the escrowed shares in order to realize such
difference. Full shares remaining after any such redemption together with any
excess cash proceeds of the shares so redeemed will be delivered to the investor
or to the investor's order by the escrow agent.
In signing the application, the investor irrevocably constitutes and appoints
the escrow agent as his attorney to surrender for redemption any or all escrowed
shares with full power of substitution in the premises.
PROVISION FOR RETROACTIVE PRICE ADJUSTMENT. If total purchases made under this
Statement are large enough to qualify for a lower sales charge than that
applicable to the amount specified, all transactions will be computed at the
expiration date of this Statement to give effect to the lower charge. Any
difference in sales charge will be refunded to the investor in cash, or applied
to the purchase of additional shares at the lower charge if specified by the
investor. This refund will be made by the Authorized Firm and by EVD. If at the
time of the recomputation a firm other than the original firm is placing the
orders, the adjustment will be made only on those shares purchased through the
firm then handling the investor's account.
<PAGE>
[LOGO]
EV TRADITIONAL
GREATER CHINA
GROWTH FUND
PROSPECTUS
JANUARY 1, 1996
EV TRADITIONAL GREATER
CHINA GROWTH FUND
24 FEDERAL STREET
BOSTON, MA 02110
- -------------------------------------------------------------------------------
SPONSOR AND MANAGER OF EV TRADITIONAL GREATER CHINA GROWTH FUND
Administrator of Greater China Growth Portfolio
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
ADVISER OF GREATER CHINA GROWTH PORTFOLIO
Lloyd George Investment Management (Bermuda) Limited
3808 One Exchange Square, Central, Hong Kong
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 89 South Street, Boston, MA 02111
TRANSFER AGENT
First Data Investor Services Group, BOS725, P.O. Box 1559, Boston, MA 02104
(800) 262-1122
AUDITORS
Deloitte & Touche LLP, 125 Summer Street, Boston, MA 02110
T-CGP
<PAGE>
PART A
INFORMATION REQUIRED IN A PROSPECTUS
EV CLASSIC
GROWTH FUND
- ------------------------------------------------------------------------------
EV CLASSIC GROWTH FUND (THE "FUND") IS A MUTUAL FUND SEEKING GROWTH OF CAPITAL.
THE FUND INVESTS ITS ASSETS IN GROWTH PORTFOLIO (THE "PORTFOLIO"), A DIVERSIFIED
OPEN-END INVESTMENT COMPANY HAVING THE SAME INVESTMENT OBJECTIVE AS THE FUND,
RATHER THAN BY DIRECTLY INVESTING IN AND MANAGING ITS OWN PORTFOLIO OF
SECURITIES AS WITH HISTORICALLY STRUCTURED MUTUAL FUNDS. THE FUND IS A SERIES OF
EATON VANCE GROWTH TRUST (THE "TRUST").
Shares of the Fund are not deposits or obligations of, or guaranteed or endorsed
by, any bank or other insured depository institution, and are not federally
insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board
or any other government agency. Shares of the Fund involve investment risks,
including fluctuations in value and the possible loss of some or all of the
principal investment.
This Prospectus is designed to provide you with information you should know
before investing. Please retain this document for future reference. A
Statement of Additional Information dated January 1, 1996 for the Fund, as
supplemented from time to time, has been filed with the Securities and
Exchange Commission and is incorporated herein by reference. This Statement of
Additional Information is available without charge from the Fund's principal
underwriter, Eaton Vance Distributors, Inc. (the "Principal Underwriter"), 24
Federal Street, Boston, MA 02110 (telephone (800) 225-6265). The Portfolio's
investment adviser is Boston Management and Research (the "Investment
Adviser"), a wholly-owned subsidiary of Eaton Vance Management, and Eaton
Vance Management is the administrator (the "Administrator") of the Fund. The
offices of the Investment Adviser and the Administrator are located at 24
Federal Street, Boston, MA 02110.
- ------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE PAGE
<S> <C> <C> <C>
Shareholder and Fund Expenses .................. 2 How to Buy Fund Shares ............................ 9
The Fund's Financial Highlights ................ 3 How to Redeem Fund Shares ......................... 10
The Fund's Investment Objective ................ 4 Reports to Shareholders ........................... 11
Investment Policies and Risks .................. 4 The Lifetime Investing Account/Distribution Options 12
Organization of the Fund and the Portfolio ..... 5 Eaton Vance Exchange Privilege .................... 13
Management of the Fund and the Portfolio ....... 7 Eaton Vance Shareholder Services .................. 13
Distribution Plan .............................. 7 Distributions and Taxes ........................... 14
Valuing Fund Shares ............................ 9 Performance Information ........................... 15
- --------------------------------------------------------------------------------------------------------------
</TABLE>
PROSPECTUS JANUARY 1, 1996
<PAGE>
SHAREHOLDER AND FUND EXPENSES
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
--------------------------------------------------------------------------------------------------------------------------
<S> <C>
Sales Charges Imposed on Purchases of Shares None
Sales Charges Imposed on Reinvested Distributions None
Fees to Exchange Shares None
Contingent Deferred Sales Charge Imposed on Redemption During the First Year
(as a percentage of redemption proceeds exclusive of all reinvestments and
capital appreciation in the account) 1.00%
ANNUAL FUND AND ALLOCATED PORTFOLIO OPERATING EXPENSES (as a percentage of average daily net assets)
----------------------------------------------------------------------------------------------------------------------------
Investment Adviser Fee 0.625%
Rule 12b-1 Distribution (and Service) Fees 1.000%
Other Expenses (after any expense reduction) 1.845%
-----
Total Operating Expenses 3.470%
=====
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
An investor would pay the following expenses (including a contingent deferred
sales charge in the case of redemption during the first year after purchase)
on a $1,000 investment, assuming (a) 5% annual return and (b) redemption at
the end of each period: $45 $107 $180 $375
An investor would pay the following expenses on the same investment,
assuming (a) 5% return and (b) no redemptions: $35 $107 $180 $375
</TABLE>
NOTES:
The table and Example summarize the aggregate expenses of the Fund and the
Portfolio and are designed to help investors understand the costs and expenses
they will bear, directly or indirectly, by investing in the Fund. Information
for the Fund is based on its expenses for the most recent fiscal year. Absent an
expense allocation, Other Expenses of the Fund would have been 10.585% of
average daily net assets.
The Fund invests exclusively in the Portfolio. The Trustees believe the
aggregate per share expenses of the Fund and the Portfolio should approximate,
and over time may be less than, the per share expenses the Fund would incur if
the Trust were instead to retain the services of an investment adviser for the
Fund and the Fund's assets were invested directly in the type of securities
being held by the Portfolio.
The Example should not be considered a representation of past or future expenses
and actual expenses may be greater or less than those shown. Federal regulations
require the Example to assume a 5% annual return, but actual return may vary.
For further information regarding the expenses of both the Fund and the
Portfolio see "The Fund's Financial Highlights", "Organization of the Fund and
the Portfolio", "Management of the Fund and the Portfolio" and "How to Redeem
Fund Shares". A long-term shareholder in the Fund may pay more than the economic
equivalent of the maximum front-end sales charge permitted by a rule of the
National Association of Securities Dealers, Inc. See "Distribution Plan".
No contingent deferred sales charge is imposed on (a) shares purchased more than
one year prior to redemption, (b) shares acquired through the reinvestment of
distributions or (c) any appreciation in value of other shares in the account
(see "How to Redeem Fund Shares"), and no such charge is imposed on exchanges of
Fund shares for shares of one or more other funds listed under "The Eaton Vance
Exchange Privilege."
Other investment companies with different distribution arrangements and fees are
investing in the Portfolio and additional such companies may do so in the
future. See "Organization of the Fund and the Portfolio".
THE FUND'S FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------
The following information should be read in conjunction with the audited
financial statements included in the Fund's annual report to shareholders
which is incorporated by reference into the Statement of Additional
Information in reliance upon the report of Coopers & Lybrand L.L.P.,
independent certified public accountants, as experts in accounting and
auditing. Further information regarding the performance of the Fund is
contained in its annual report to shareholders which may be obtained without
charge by contacting the Principal Underwriter, Eaton Vance Distributors,
Inc..
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD FROM THE START OF BUSINESS, NOVEMBER 7, 1994, TO AUGUST 31, 1995
<S> <C>
NET ASSET VALUE, beginning of period $10.000
-------
INCOME FROM OPERATIONS:
Net investment loss $(0.214)
Net realized and unrealized gain on investments 1.894
-------
Total income from investment operations $ 1.680
-------
NET ASSET VALUE, end of period $11.680
=======
TOTAL RETURN(1) 16.80%
RATIOS/SUPPLEMENTAL DATA (AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS):*
Expenses(2) 3.47 %+
Net investment loss (2.17%)+
Net assets, end of period (000's omitted) $ 601
* For the period indicated, the expenses related to the operation of the Fund reflect an
allocation of expenses to the Administrator. Had such action not been taken, net investment
income per share and the ratios would have been as follows:
NET INVESTMENT INCOME PER SHARE $ 0.648
RATIOS (to average daily net assets)
Expenses(2) 12.21 %+
Net investment loss (10.90)%+
+ Computed on an annualized basis.
(1) Total return is calculated assuming a purchase at the net asset value on the first day and a
sale at the net asset value on the last day of the period reported. Dividends and
distributions, if any, are assumed to be reinvested at the net asset value on the record date.
Total return is computed on a non-annualized basis.
(2) Includes the Fund's share of Growth Portfolio's allocated expenses.
</TABLE>
<PAGE>
THE FUND'S INVESTMENT OBJECTIVE
- ------------------------------------------------------------------------------
EV CLASSIC GROWTH FUND'S INVESTMENT OBJECTIVE IS TO ACHIEVE CAPITAL GROWTH. The
Fund currently seeks to meet its investment objective by investing its assets in
the Growth Portfolio, a separate registered investment company. The Portfolio
has the same investment objective as the Fund and invests in a carefully
selected and continuously managed portfolio consisting primarily of equity
securities. The Fund's and the Portfolio's investment objectives are
nonfundamental and may be changed when authorized by a vote of the Trustees of
the Trust or the Portfolio, respectively, without obtaining the approval of the
Fund's shareholders or the investors in the Portfolio, as the case may be. The
Trustees of the Trust have no present intention to change the Fund's objective
and intend to submit any proposed material change in the investment objective to
shareholders in advance for their approval.
INVESTMENT POLICIES AND RISKS
- ------------------------------------------------------------------------------
THE FUND SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY INVESTING IN THE
PORTFOLIO. The policy of the Portfolio is to invest in a carefully selected and
continuously managed portfolio consisting primarily of domestic and foreign
equity securities. It may invest in all kinds of companies. The Portfolio will
invest primarily in common stocks or securities convertible into common stocks
(including convertible debt), which the Investment Adviser believes meet the
criteria for capital appreciation. The criteria for investments in convertible
debt are the same as used for the common stock of an issuer. The Portfolio does
not currently intend to invest more than 5% of its net assets in convertible
debt. It may also invest in other securities and obligations of all kinds. These
include preferred stocks, rights, warrants, bonds, repurchase agreements and
other evidences of indebtedness; however, the Portfolio does not currently
intend to invest more than 5% of its net assets in each of such investments and
currently intends to limit its investments in non-convertible debt to
non-convertible debt rated investment grade (i.e., rated Baa or higher by
Moody's Investors Service, Inc. or BBB or higher by Standard & Poor's Ratings
Group) or, if unrated, determined to be of comparable quality by the Portfolio's
Investment Adviser. The Portfolio may also invest in money market instruments.
While income is a subordinate consideration to capital growth, the Portfolio
will earn dividend or interest income to the extent that it receives dividends
or interest from its investments.
The Portfolio may invest in securities issued by foreign companies (including
American Depository Receipts and Global Depository Receipts). Such investments
may be subject to various risks such as fluctuations in currency and exchange
rates, foreign taxes, social, political and economic conditions in the countries
in which such companies operate, and changes in governmental, economic or
monetary policies both here and abroad. There may be less publicly available
information about a foreign company than about a comparable domestic company.
Since the securities markets in many foreign countries are not as developed as
those in the United States, the securities of many foreign companies are less
liquid and their prices are more volatile than securities of comparable domestic
companies. In order to hedge against possible variations in foreign exchange
rates pending the settlement of foreign securities transactions, the Portfolio
may buy or sell foreign currencies or may enter into forward foreign currency
exchange contracts to purchase or sell a specified currency at a specified price
and future date.
The Portfolio may purchase and sell exchange-traded futures contracts on stock
indices and options thereon to hedge against fluctuations in securities prices
or as a substitute for the purchase or sale of securities. Such transactions
involve a risk of loss or depreciation due to unanticipated adverse changes in
securities prices, which may exceed the Portfolio's initial investment in these
contracts. Futures contracts involve transaction costs. To the extent that the
Portfolio enters into futures contracts and options thereon traded on an
exchange regulated by the Commodity Futures Trading Commission, in each case
that are not for bona fide hedging purposes (as defined by the CFTC), the
aggregate initial margin and premiums required to establish these positions
(excluding the amount by which options are "in-the-money") may not exceed 5% of
the liquidation value of the Portfolio's investments, after taking into account
unrealized profits and unrealized losses on any contracts the Portfolio has
entered into. There can be no assurance that the Investment Adviser's use of
stock index futures and options thereon will be advantageous to the Portfolio.
The Portfolio may temporarily borrow up to 5% of the value of its total assets
to satisfy redemption requests or settle securities transactions. Certain
securities held by the Portfolio may permit the issuer at its option to "call",
or redeem, its securities. If an issuer redeems securities held by the Portfolio
during a time of declining interest rates, the Portfolio may not be able to
reinvest the proceeds in securities providing the same investment return as the
securities redeemed.
An investment in the Fund entails the risk that the principal value of Fund
shares may not increase or may decline. The Portfolio's investments in equity
securities are subject to the risk of adverse developments affecting particular
companies or industries and the stock market generally.
The Fund and the Portfolio have adopted certain fundamental investment
restrictions which are enumerated in detail in the Statement of Additional
Information and which may not be changed unless authorized by a Fund shareholder
vote and a Portfolio investor vote, respectively. Except for such enumerated
restrictions and as otherwise indicated in this Prospectus, the investment
objective and policies of the Fund and the Portfolio are not fundamental
policies and accordingly may be changed by the Trustees of the Trust and the
Portfolio without obtaining the approval of the Fund's shareholders or the
investors in the Portfolio, as the case may be. If any change were made in the
Fund's investment objective, the Fund might have an investment objective
different from the objective which an investor considered appropriate at the
time the investor became a shareholder of the Fund.
---------------------------------------------------------------------------
THE FUND IS NOT INTENDED TO BE A COMPLETE INVESTMENT PROGRAM, AND
PROSPECTIVE INVESTORS SHOULD TAKE INTO ACCOUNT THEIR OBJECTIVES AND OTHER
INVESTMENTS WHEN CONSIDERING THE PURCHASE OF FUND SHARES. THE FUND CANNOT
ASSURE ACHIEVEMENT OF ITS CAPITAL GROWTH OBJECTIVE.
---------------------------------------------------------------------------
ORGANIZATION OF THE FUND AND THE PORTFOLIO
- ------------------------------------------------------------------------------
THE FUND IS A DIVERSIFIED SERIES OF EATON VANCE GROWTH TRUST, A BUSINESS TRUST
ESTABLISHED UNDER MASSACHUSETTS LAW PURSUANT TO A DECLARATION OF TRUST DATED MAY
25, 1989, AS AMENDED, AND ORGANIZED AS THE SUCCESSOR TO A MASSACHUSETTS
CORPORATION WHICH COMMENCED ITS INVESTMENT COMPANY OPERATIONS IN 1954. THE TRUST
IS A MUTUAL FUND -- AN OPEN-END, MANAGEMENT INVESTMENT COMPANY. The Trustees of
the Trust are responsible for the overall management and supervision of its
affairs. The Trust may issue an unlimited number of shares of beneficial
interest (no par value per share) in one or more series and because the Trust
can offer separate series (such as the Fund) it is known as a "series company."
Each share represents an equal proportionate beneficial interest in the Fund.
When issued and outstanding, the shares are fully paid and nonassessable by the
Trust and redeemable as described under "How to Redeem Fund Shares."
Shareholders are entitled to one vote for each full share held. Fractional
shares may be voted proportionately. Shares have no preemptive or conversion
rights and are freely transferable. In the event of the liquidation of the Fund,
shareholders are entitled to share pro rata in the net assets of the Fund
available for distribution to shareholders.
THE PORTFOLIO IS ORGANIZED AS A TRUST UNDER THE LAWS OF THE STATE OF NEW YORK
AND INTENDS TO BE TREATED AS A PARTNERSHIP FOR FEDERAL TAX PURPOSES. The
Portfolio, as well as the Trust, intends to comply with all applicable federal
and state securities laws. The Portfolio's Declaration of Trust provides that
the Fund and other entities permitted to invest in the Portfolio (e.g., other
U.S. and foreign investment companies, and common and commingled trust funds)
will each be liable for all obligations of the Portfolio. However, the risk of
the Fund incurring financial loss on account of such liability is limited to
circumstances in which both inadequate insurance exists and the Portfolio itself
is unable to meet its obligations. Accordingly, the Trustees of the Trust
believe that neither the Fund nor its shareholders will be adversely affected by
reason of the Fund investing in the Portfolio.
SPECIAL INFORMATION ON THE FUND/PORTFOLIO INVESTMENT STRUCTURE. An investor in
the Fund should be aware that the Fund, unlike mutual funds which directly
acquire and manage their own portfolios of securities, seeks to achieve its
investment objective by investing its assets in an interest in the Portfolio,
which is a separate investment company with an identical investment objective
(although the Fund may temporarily hold a de minimus amount of cash). Therefore,
the Fund's interest in the securities owned by the Portfolio is indirect. In
addition to selling an interest to the Fund, the Portfolio may sell interests to
other affiliated and non-affiliated mutual funds or institutional investors.
Such investors will invest in the Portfolio on the same terms and conditions and
will pay a proportionate share of the Portfolio's expenses. However, the other
investors investing in the Portfolio are not required to sell their shares at
the same public offering price as the Fund due to variations in sales
commissions and other operating expenses. Therefore, investors in the Fund
should be aware that these differences may result in differences in returns
experienced by investors in the various funds that invest in the Portfolio. Such
differences in returns are also present in other mutual fund structures,
including funds that have multiple classes of shares. For information regarding
the investment objective, policies and restrictions, see "The Fund's Investment
Objective" and "Investment Policies and Risks". Further information regarding
investment practices may be found in the Statement of Additional Information.
The Trustees of the Trust have considered the advantages and disadvantages of
investing the assets of the Fund in the Portfolio, as well as the advantages and
disadvantages of the two-tier format. The Trustees believe that the structure
offers opportunities for substantial growth in the assets of the Portfolio, and
affords the potential for economies of scale for the Fund, at least when the
assets of the Portfolio exceed $300 million.
The Fund may withdraw (completely redeem) all its assets from the Portfolio at
any time if the Board of Trustees of the Trust determines that it is in the best
interest of the Fund to do so. The investment objective and the nonfundamental
investment policies of the Fund and the Portfolio may be changed by the Trustees
of the Trust and the Portfolio without obtaining the approval of the
shareholders of the Fund or the investors in the Portfolio, as the case may be.
Any such change of the investment objective will be preceded by thirty days'
advance written notice to the shareholders of the Fund or the investors in the
Portfolio, as the case may be. If a shareholder redeems shares because of a
change in the nonfundamental objective or policies of the Fund, those shares may
be subject to a contingent deferred sales charge, as described in "How to Redeem
Fund Shares". In the event the Fund withdraws all of its assets from the
Portfolio, or the Board of Trustees of the Trust determines that the investment
objective of the Portfolio is no longer consistent with the investment objective
of the Fund, such Trustees would consider what action might be taken, including
investing the assets of the Fund in another pooled investment entity or
retaining an investment adviser to manage the Fund's assets in accordance with
its investment objective. The Fund's investment performance may be affected by a
withdrawal of all its assets from the Portfolio.
Information regarding other pooled investment entities or funds which invest in
the Portfolio may be obtained by contacting Eaton Vance Distributors, Inc. (the
"Principal Underwriter" or "EVD"), 24 Federal Street, Boston, MA 02110, (617)
482-8260. Smaller investors in the Portfolio may be adversely affected by the
actions of a larger investor investing in the Portfolio. For example, if a large
investor withdraws from the Portfolio, the remaining investors may experience
higher pro rata operating expenses, thereby producing lower returns.
Additionally, the Portfolio may become less diverse, resulting in increased
portfolio risk, and experience decreasing economies of scale. However, this
possibility exists as well for historically structured funds which have large or
institutional investors.
Until 1992, the Administrator sponsored and advised historically structured
funds. Funds which invest all their assets in interests in a separate investment
company are a relatively new development in the mutual fund industry and,
therefore, the Fund may be subject to additional regulations than historically
structured funds.
The Declaration of Trust of the Portfolio provides that the Portfolio will
terminate 120 days after the complete withdrawal of the Fund or any other
investor in the Portfolio, unless either the remaining investors, by unanimous
vote at a meeting of such investors, or a majority of the Trustees of the
Portfolio, by written instrument consented to by all investors, agree to
continue the business of the Portfolio. This provision is consistent with
treatment of the Portfolio as a partnership for federal income tax purposes. See
"Distributions and Taxes" for further information. Whenever the Fund as an
investor in the Portfolio is requested to vote on matters pertaining to the
Portfolio (other than the termination of the Portfolio's business, which may be
determined by the Trustees of the Portfolio without investor approval), the Fund
will hold a meeting of Fund shareholders and will vote its interest in the
Portfolio for or against such matters proportionately to the instructions to
vote for or against such matters received from Fund shareholders. The Fund shall
vote shares for which it receives no voting instructions in the same proportion
as the shares for which it receives voting instructions. Other investors in the
Portfolio may alone or collectively acquire sufficient voting interests in the
Portfolio to control matters relating to the operation of the Portfolio, which
may require the Fund to withdraw its investment in the Portfolio or take other
appropriate action. Any such withdrawal could result in a distribution "in kind"
of portfolio securities (as opposed to a cash distribution from the Portfolio).
If securities are distributed, the Fund could incur brokerage, tax or other
charges in converting the securities to cash. In addition, the distribution in
kind may result in a less diversified portfolio of investments or adversely
affect the liquidity of the Fund. Notwithstanding the above, there are other
means for meeting shareholder redemption requests, such as borrowing.
The Trustees of the Trust, including a majority of the noninterested Trustees,
have approved written procedures designed to identify and address any potential
conflicts of interest arising from the fact that the Trustees of the Trust and
the Trustees of the Portfolio are the same. Such procedures require each Board
to take action to resolve any conflict of interest between the Fund and the
Portfolio, and it is possible that the creation of separate Boards may be
considered. For further information concerning the Trustees and officers of the
Trust and the Portfolio, see the Statement of Additional Information.
MANAGEMENT OF THE FUND AND THE PORTFOLIO
- ------------------------------------------------------------------------------
THE PORTFOLIO ENGAGES BOSTON MANAGEMENT AND RESEARCH ("BMR"), A WHOLLY-OWNED
SUBSIDIARY OF EATON VANCE MANAGEMENT ("EATON VANCE"), AS ITS INVESTMENT ADVISER.
EATON VANCE, ITS AFFILIATES AND ITS PREDECESSOR COMPANIES HAVE BEEN MANAGING
ASSETS OF INDIVIDUALS AND INSTITUTIONS SINCE 1924 AND MANAGING INVESTMENT
COMPANIES SINCE 1931.
Acting under the general supervision of the Board of Trustees of the Portfolio,
BMR manages the Portfolio's investments and affairs and furnishes for the use of
the Portfolio office space and all necessary office facilities, equipment and
personnel for servicing the investments of the Portfolio. Under its investment
advisory agreement with the Portfolio, BMR receives a monthly advisory fee of
5/96 of 1% (equivalent to 0.625% annually) of the average daily net assets of
the Portfolio up to and including $300 million, and 1/24 of 1% (equivalent to
0.50% annually) of the average daily net assets over $300 million. For the
fiscal year ended August 31, 1995, the Portfolio paid BMR advisory fees
equivalent to 0.625% of the Portfolio's average daily net assets for such year.
BMR places the portfolio transactions of the Portfolio with many broker-dealer
firms and uses its best efforts to obtain execution of such transactions at
prices which are advantageous to the Portfolio and at reasonably competitive
commission rates. Subject to the foregoing, BMR may consider sales of shares of
the Fund or of other investment companies sponsored by BMR or Eaton Vance as a
factor in the selection of broker-dealer firms to execute portfolio
transactions.
Peter F. Kiely has acted as the portfolio manager of the Portfolio since it
commenced operations. He has been a Vice President of Eaton Vance since 1980 and
of BMR since 1992.
BMR OR EATON VANCE ACTS AS INVESTMENT ADVISER TO INVESTMENT COMPANIES AND
VARIOUS INDIVIDUAL AND INSTITUTIONAL CLIENTS WITH ASSETS UNDER MANAGEMENT OF
APPROXIMATELY $16 BILLION. Eaton Vance is a wholly-owned subsidiary of Eaton
Vance Corp., a publicly held holding company. Eaton Vance Corp., through its
subsidiaries and affiliates, engages in investment management and marketing
activities, fiduciary and banking services, oil and gas operations, real estate
investment, consulting and management, and development of precious metals
properties.
The Trust has retained the services of Eaton Vance to act as Administrator of
the Fund. The Trust has not retained the services of an investment adviser since
the Trust seeks to achieve the investment objective of the Fund by investing the
Fund's assets in the Portfolio. As Administrator, Eaton Vance provides the Fund
with general office facilities and supervises the overall administration of the
Fund. For these services Eaton Vance currently receives no compensation. The
Trustees of the Trust may determine, in the future, to compensate Eaton Vance
for such services.
The Portfolio and the Fund, as the case may be, will each be responsible for all
respective costs and expenses not expressly stated to be payable by BMR under
the investment advisory agreement, by Eaton Vance under the administrative
services agreement, or by EVD under the distribution agreement.
DISTRIBUTION PLAN
- ------------------------------------------------------------------------------
THE FUND FINANCES DISTRIBUTION ACTIVITIES AND HAS ADOPTED A DISTRIBUTION PLAN
(THE "PLAN") PURSUANT TO RULE 12B-1 UNDER THE INVESTMENT COMPANY ACT OF 1940.
Rule 12b-1 permits a mutual fund, such as the Fund, to finance distribution
activities and bear expenses associated with the distribution of its shares
provided that any payments made by the Fund are made pursuant to a written plan
adopted in accordance with the Rule. The Plan is subject to, and complies with,
the sales charge rule of the National Association of Securities Dealers, Inc.
(the "NASD Rule"). The Plan is described further in the Statement of Additional
Information, and the following is a description of the salient features of the
Plan. The Plan provides that the Fund, subject to the NASD Rule, will pay sales
commissions and distribution fees to the Principal Underwriter only after and as
a result of the sale of shares of the Fund. On each sale of Fund shares
(excluding reinvestment of distributions) the Fund will pay the Principal
Underwriter amounts representing (i) sales commissions equal to 6.25% of the
amount received by the Fund for each share sold and (ii) distribution fees
calculated by applying the rate of 1% over the prime rate then reported in The
Wall Street Journal to the outstanding balance of Uncovered Distribution Charges
(as described below) of the Principal Underwriter. On sales of shares made prior
to January 30, 1995, the Principal Underwriter currently pays monthly sales
commissions to a financial service firm (an "Authorized Firm") in amounts
anticipated to be equivalent to .75%, annualized, of the assets maintained in
the Fund by the customers of such Firm. On sales of shares made on January 30,
1995 and thereafter, the Principal Underwriter currently expects to pay to an
Authorized Firm (a) sales commissions (except on exchange transactions and
reinvestments) at the time of sale equal to .75% of the purchase price of the
shares sold by such Firm and (b) monthly sales commissions approximately
equivalent to 1/12 of .75% of the value of shares sold by such Firm and
remaining outstanding for at least one year. The Plan is designed to permit an
investor to purchase Fund shares through an Authorized Firm without incurring an
initial sales charge and at the same time permit the Principal Underwriter to
compensate Authorized Firms in connection with the sale of Fund shares.
THE NASD RULE REQUIRES THE FUND TO LIMIT ITS ANNUAL PAYMENTS OF SALES
COMMISSIONS AND DISTRIBUTION FEES TO AN AMOUNT NOT EXCEEDING .75% OF THE FUND'S
AVERAGE DAILY NET ASSETS FOR EACH FISCAL YEAR. Under its Plan, the Fund accrues
daily an amount at the rate of 1/365 of .75% of the Fund's net assets, and pays
such accrued amounts monthly to the Principal Underwriter. The Plan requires
such accruals to be automatically discontinued during any period in which there
are no outstanding Uncovered Distribution Charges under the Plan. Uncovered
Distribution Charges are calculated daily and, briefly, are equivalent to all
unpaid sales commissions and distribution fees to which the Principal
Underwriter is entitled under the Plan less all contingent deferred sales
charges theretofore paid to the Principal Underwriter. The Eaton Vance
organization may be considered to have realized a profit under the Plan if at
any point in time the aggregate amounts of all payments made to the Principal
Underwriter pursuant to the Plan, including any contingent deferred sales
charges, have exceeded the total expenses theretofore incurred by such
organization in distributing shares of the Fund. Total expenses for this purpose
will include an allocable portion of the overhead costs of such organization and
its branch offices.
Because of the NASD Rule limitation on the amount of sales commissions and
distribution fees paid during any fiscal year, a high level of sales of Fund
shares during the initial years of the Fund's operations would cause a large
portion of the sales commission attributable to a sale of Fund shares to be
accrued and paid by the Fund to the Principal Underwriter in fiscal years
subsequent to the year in which such shares were sold. This spreading of sales
commissions payments under the Plan over an extended period would result in the
incurrence and payment of increased distribution fees under the Plan. For the
period from the start of business, November 7, 1994, to the fiscal year ended
August 31, 1995, the Fund paid or accrued sales commissions under the Plan
equivalent to .75% (annualized) of the Fund's average daily net assets for such
period. As at August 31 1995, the Uncovered Distribution Charges of the
Principal Underwriter calculated under the Plan amounted to approximately
$101,992 (equivalent to 16.0% of the Fund's net assets on such day).
THE PLAN ALSO AUTHORIZES THE FUND TO MAKE PAYMENTS OF SERVICE FEES TO THE
PRINCIPAL UNDERWRITER, AUTHORIZED FIRMS AND OTHER PERSONS IN AMOUNTS NOT
EXCEEDING .25% OF THE FUND'S AVERAGE DAILY NET ASSETS FOR EACH FISCAL YEAR. The
Trustees of the Trust have initially implemented the Plan by authorizing the
Fund to make monthly service fee payments to the Principal Underwriter in
amounts not expected to exceed .25% of the Fund's average daily net assets for
any fiscal year. The Fund accrues the service fee daily at the rate of 1/365 of
.25% of the Fund's net assets. On sales of shares made prior to January 30,
1995, the Principal Underwriter currently makes monthly service fee payments to
an Authorized Firm in amounts anticipated to be equivalent to .25%, annualized,
of the assets maintained in the Fund by the customers of such Firm. On sales of
shares made on January 30, 1995 and thereafter, the Principal Underwriter
currently expects to pay to an Authorized Firm (a) a service fee (except on
exchange transactions and reinvestments) at the time of sale equal to .25% of
the purchase price of the shares sold by such Firm, and (b) monthly service fees
approximately equivalent to 1/12 of .25% of the value of shares sold by such
Firm and remaining outstanding for at least one year. During the first year
after a purchase of Fund shares, the Principal Underwriter will retain the
service fee as reimbursement for the service fee payment made to the Authorized
Firm at the time of sale. As permitted by the NASD Rule, all service fee
payments are made for personal services and/or the maintenance of shareholder
accounts. Service fees are separate and distinct from the sales commissions and
distribution fees payable by the Fund to the Principal Underwriter, and as such
are not subject to automatic discontinuance when there are no outstanding
Uncovered Distribution Charges of the Principal Underwriter. For the period from
the start of business, November 7, 1994, to August 31, 1995, the Fund paid or
accrued service fees under the Plan equivalent to .25% (annualized) of the
Fund's average daily net assets for such period.
The Principal Underwriter may, from time to time, at its own expense, provide
additional incentives to Authorized Firms which employ registered
representatives who sell the Fund's shares and/or shares of other funds
distributed by the Principal Underwriter. In some instances, such additional
incentives may be offered only to certain Authorized Firms whose representatives
sell or are expected to sell significant amounts of shares. In addition, the
Principal Underwriter may from time to time increase or decrease the sales
commissions payable to Authorized Firms.
The Fund may, in its absolute discretion, suspend, discontinue or limit the
offering of its shares at any time. In determining whether any such action
should be taken, the Fund's management intends to consider all relevant factors,
including without limitation the size of the Fund, the investment climate and
market conditions, the volume of sales and redemptions of Fund shares, and the
amount of Uncovered Distribution Charges of the Principal Underwriter. The Plan
may continue in effect and payments may be made under the Plan following any
such suspension, discontinuance or limitation of the offering of Fund shares;
however, the Fund is not contractually obligated to continue the Plan for any
particular period of time. Suspension of the offering of Fund shares would not,
of course, affect a shareholder's ability to redeem shares.
VALUING FUND SHARES
- ------------------------------------------------------------------------------
THE FUND VALUES ITS SHARES ONCE ON EACH DAY THE NEW YORK STOCK EXCHANGE (THE
"EXCHANGE") IS OPEN FOR TRADING, as of the close of regular trading on the
Exchange (normally 4:00 p.m. New York time). The Fund's net asset value per
share is determined by its custodian, Investors Bank & Trust Company ("IBT"),
(as agent for the Fund) in the manner authorized by the Trustees of the Trust.
Net asset value is computed by dividing the value of the Fund's total assets,
less its liabilities, by the number of shares outstanding. Because the Fund
invests its assets in an interest in the Portfolio, the Fund's net asset value
will reflect the value of its interest in the Portfolio (which, in turn,
reflects the underlying value of the Portfolio's assets and liabilities).
Authorized Firms must communicate an investor's order to the Principal
Underwriter prior to the close of the Principal Underwriter's business day to
receive that day's net asset value per Fund share. It is the Authorized Firms'
responsibility to transmit orders promptly to the Principal Underwriter, which
is a wholly-owned subsidiary of Eaton Vance.
The Portfolio's net asset value is also determined as of the close of regular
trading on the Exchange by IBT (as custodian and agent for the Portfolio) in the
manner authorized by the Trustees of the Portfolio. Net asset value is computed
by subtracting the liabilities of the Portfolio from the value of its total
assets. For further information regarding the valuation of the Portfolio's
assets, see "Determination of Net Asset Value" in the Statement of Additional
Information.
---------------------------------------------------------------------------
SHAREHOLDERS MAY DETERMINE THE VALUE OF THEIR INVESTMENT BY MULTIPLYING THE
NUMBER OF FUND SHARES OWNED BY THE CURRENT NET ASSET VALUE PER SHARE.
---------------------------------------------------------------------------
HOW TO BUY FUND SHARES
- ------------------------------------------------------------------------------
SHARES OF THE FUND MAY BE PURCHASED FOR CASH OR MAY BE ACQUIRED IN EXCHANGE FOR
SECURITIES. Investors may purchase shares of the Fund through Authorized Firms
at the net asset value per share of the Fund next determined after an order is
effective. The Fund may suspend the offering of shares at any time and may
refuse an order for the purchase of shares. An Authorized Firm may charge its
customers a fee in connection with transactions executed by that Firm.
An initial investment in the Fund must be at least $1,000. Once an account has
been established the investor may send investments of $50 or more at any time
directly to the Fund's transfer agent (the "Transfer Agent") as follows: First
Data Investor Services Group, BOS725, P.O. Box 1559, Boston, MA 02104. The
$1,000 minimum initial investment is waived for Bank Automated Investing
accounts, which may be established with an investment of $50 or more. See
"Eaton Vance Shareholder Services."
In connection with employee benefit or other continuous group purchase plans
under which the average initial purchase by a participant of the plan is $1,000
or more, the Fund may accept initial investments of less than $1,000 on the part
of an individual participant. In the event a shareholder who is a participant of
such a plan terminates participation in the plan, his or her shares will be
transferred to a regular individual account. However, such account will be
subject to the right of redemption by the Fund as described under "How to Redeem
Fund Shares."
ACQUIRING FUND SHARES IN EXCHANGE FOR SECURITIES. IBT, as escrow agent, will
receive securities acceptable to Eaton Vance, as Administrator, in exchange for
Fund shares at their net asset value as determined above. The minimum value of
securities (or securities and cash) accepted for deposit is $5,000. Securities
accepted will be sold on the day of their receipt or as soon thereafter as
possible. The number of Fund shares to be issued in exchange for securities will
be the aggregate proceeds from the sale of such securities, divided by the
applicable net asset value per Fund share on the day such proceeds are received.
Eaton Vance will use reasonable efforts to obtain the then current market price
for such securities but does not guarantee the best available price. Eaton Vance
will absorb any transaction costs, such as commissions, on the sale of the
securities.
Securities determined to be acceptable should be transferred via book entry or
physically delivered, in proper form for transfer, through an Authorized Firm,
together with a completed and signed Letter of Transmittal in approved form
(available from Authorized Firms), as follows:
IN THE CASE OF BOOK ENTRY:
Deliver through Depository Trust Co.
Broker #2212
Investors Bank & Trust Company
For A/C EV Classic Growth Fund
IN THE CASE OF PHYSICAL DELIVERY:
Investors Bank & Trust Company
Attention: EV Classic Growth Fund
Physical Securities Processing Settlement Area
89 South Street
Boston, MA 02111
Investors who are contemplating an exchange of securities for shares of the
Fund, or their representatives, must contact Eaton Vance to determine whether
the securities are acceptable before forwarding such securities to IBT. Eaton
Vance reserves the right to reject any securities. Exchanging securities for
Fund shares may create a taxable gain or loss. Each investor should consult his
or her tax adviser with respect to the particular federal, state and local tax
consequences of exchanging securities for Fund shares.
---------------------------------------------------------------------------
IF YOU DON'T HAVE AN AUTHORIZED FIRM, EATON VANCE CAN RECOMMEND ONE.
---------------------------------------------------------------------------
HOW TO REDEEM FUND SHARES
- ------------------------------------------------------------------------------
A SHAREHOLDER MAY REDEEM FUND SHARES BY DELIVERING TO FIRST DATA INVESTOR
SERVICES GROUP, BOS725, P.O. BOX 1559, BOSTON, MA 02104, during its business
hours a written request for redemption in good order, plus any share
certificates with executed stock powers. The redemption price will be based on
the net asset value per Fund share next computed after such delivery. Good order
means that all relevant documents must be endorsed by the record owner (s)
exactly as the shares are registered and the signature(s) must be guaranteed by
a member of either the Securities Transfer Association's STAMP program or the
New York Stock Exchange's Medallion Signature Program, or certain banks, savings
and loan institutions, credit unions, securities dealers, securities exchanges,
clearing agencies and registered securities associations as required by a
regulation of the Securities and Exchange Commission (the "Commission") and
acceptable to First Data Investor Services Group. In addition, in some cases,
good order may require the furnishing of additional documents such as where
shares are registered in the name of a corporation, partnership or fiduciary.
Within seven days after receipt of a redemption request in good order by First
Data Investor Services Group, the Fund will make payment in cash for the net
asset value of the shares as of the date determined above, reduced by the amount
of any applicable contingent deferred sales charges (described below) and any
federal income tax required to be withheld. Although the Fund normally expects
to make payment in cash for redeemed shares, the Trust, subject to compliance
with applicable regulations, has reserved the right to pay the redemption price
of shares of the Fund, either totally or partially, by a distribution in kind of
readily marketable securities withdrawn by the Fund from the Portfolio. The
securities so distributed would be valued pursuant to the Portfolio's valuation
procedures. If a shareholder received a distribution in kind, the shareholder
could incur brokerage or other charges in converting the securities to cash.
To sell shares at their net asset value through an Authorized Firm (a
repurchase), a shareholder can place a repurchase order with the Authorized
Firm, which may charge a fee. The value of such shares is based upon the net
asset value calculated after EVD, as the Fund's agent, receives the order. It is
the Authorized Firm's responsibility to transmit promptly repurchase orders to
EVD. Throughout this Prospectus, the word "redemption" is generally meant to
include a repurchase.
If shares were recently purchased, the proceeds of redemption (or repurchase)
will not be sent until the check (including a certified or cashier's check)
received for the shares purchased has cleared. Payment for shares tendered for
redemption may be delayed up to 15 days from the purchase date when the purchase
check has not yet cleared. Redemptions or repurchases may result in a taxable
gain or loss.
Due to the high cost of maintaining small accounts, the Fund reserves the right
to redeem accounts with balances of less than $1,000. Prior to such a
redemption, shareholders will be given 60 days' written notice to make an
additional purchase. Thus, an investor making an initial investment of $1,000
would not be able to redeem shares without being subject to this policy.
However, no such redemption would be required by the Fund if the cause of the
low account balance was a reduction in the net asset value of Fund shares. No
contingent deferred sales charge will be imposed with respect to such
involuntary redemptions.
CONTINGENT DEFERRED SALES CHARGE. Shares purchased on or after January 30, 1995
and redeemed within the first year of their purchase (except shares acquired
through the reinvestment of distributions) generally will be subject to a
contingent deferred sales charge equal to 1% of the net asset value of the
redeemed shares. This contingent deferred sales charge is imposed on any
redemption the amount of which exceeds the aggregate value at the time of
redempton of (a) all shares in the account purchased more than one year prior to
the redemption, (b) all shares in the account acquired through reinvestment of
distributions, and (c) the increase, if any, of value of all other shares in the
account (namely those purchased within the year preceding the redemption) over
the purchase price of such shares. Redemptions are processed in a manner to
maximize the amount of redemption proceeds which will not be subject to a
contingent deferred sales charge. That is, each redemption will be assumed to
have been made first from the exempt amounts referred to in clauses (a), (b) and
(c) above, and second through liquidation of those shares in the account
referred to in clause (c) on a first-in-first-out basis.
In calculating the contingent deferred sales charge upon the redemption of Fund
shares acquired in an exchange for shares of a fund currently listed under "The
Eaton Vance Exchange Privilege," the purchase of Fund shares acquired in the
exchange is deemed to have occurred at the time of the original purchase of the
exchanged shares.
No contingent deferred sales charge will be imposed on Fund shares which have
been sold to Eaton Vance or its affiliates, or to their respective employees or
clients. The contingent deferred sales charge will also be waived for shares
redeemed (1) pursuant to a Withdrawal Plan (see "Eaton Vance Shareholder
Services"), (2) as part of a distribution from a retirement plan qualified under
Section 401, 403(b) or 457 of the Internal Revenue Code of 1986, as amended (the
"Code"), or (3) as part of a minimum required distribution from other
tax-sheltered retirement plans. The contingent deferred sales charge will be
paid to the Principal Underwriter or the Fund. When paid to the Principal
Underwriter it will reduce the amount of Uncovered Distribution Charges
calculated under the Fund's Distribution Plan. See "Distribution Plan".
REPORTS TO SHAREHOLDERS
- ------------------------------------------------------------------------------
THE FUND WILL ISSUE TO ITS SHAREHOLDERS SEMI-ANNUAL AND ANNUAL REPORTS
CONTAINING FINANCIAL STATEMENTS. Financial statements included in annual reports
are audited by the Fund's independent accountants. Shortly after the end of each
calendar year, the Fund will furnish all shareholders with information necessary
for preparing federal and state tax returns.
THE LIFETIME INVESTING ACCOUNT/DISTRIBUTION OPTIONS
- ------------------------------------------------------------------------------
AFTER AN INVESTOR MAKES AN INITIAL PURCHASE OF FUND SHARES, THE FUND'S TRANSFER
AGENT, FIRST DATA INVESTOR SERVICES GROUP, WILL SET UP A LIFETIME INVESTING
ACCOUNT FOR THE INVESTOR ON THE FUND'S RECORDS. This account is a complete
record of all transactions between the investor and the Fund which at all times
shows the balance of shares owned. The Fund will not issue share certificates
except upon request.
Each time a transaction takes place in a shareholder's account, the shareholder
will receive a statement showing complete details of the transaction and the
current balance in the account. (Under certain plans, statements may be sent
only quarterly). THE LIFETIME INVESTING ACCOUNT ALSO PERMITS A SHAREHOLDER TO
MAKE ADDITIONAL INVESTMENTS IN SHARES BY SENDING A CHECK FOR $50 OR MORE to
First Data Investor Services Group.
Any questions concerning a shareholder's account or services available may be
directed by telephone to EATON VANCE SHAREHOLDER SERVICES at 800-225-6265,
extension 2, or in writing to First Data Investor Services Group, Boston, MA
02104 (please provide the name of the shareholder, the Fund and the account
number).
THE FOLLOWING DISTRIBUTION OPTIONS WILL BE AVAILABLE TO ALL LIFETIME INVESTING
ACCOUNTS and may be changed as often as desired by written notice to the Fund's
dividend disbursing agent, First Data Investor Services Group, BOS725, P.O. Box
1559, Boston, MA 02104. The currently effective option will appear on each
confirmation statement.
SHARE OPTION -- Dividends and capital gains will be reinvested in additional
shares.
INCOME OPTION -- Dividends will be paid in cash, and capital gains will be
reinvested in additional shares.
CASH OPTION -- Dividends and capital gains will be paid in cash.
The SHARE OPTION will be assigned if no other option is specified.
Distributions, including those reinvested, will be reduced by any withholding
required under federal income tax laws.
If the INCOME OPTION or CASH OPTION has been selected, dividend and/or capital
gains distribution checks which are returned by the United States Postal Service
as not deliverable or which remain uncashed for six months or more will be
reinvested in the account in shares at the then current net asset value.
Furthermore, the distribution option on the account will be automatically
changed to the SHARE OPTION until such time as the shareholder selects a
different option.
DISTRIBUTION INVESTMENT OPTION. In addition to the distribution options set
forth above, dividends and/or capital gains may be invested in additional shares
of another Eaton Vance fund. Before selecting this option, a shareholder should
obtain a prospectus of the other Eaton Vance fund and consider its objectives
and policies carefully.
"STREET NAME" ACCOUNTS. If shares of the Fund are held in a "street name"
account with an Authorized Firm, all recordkeeping, transaction processing and
payments of distributions relating to the beneficial owner's account will be
performed by the Authorized Firm, and not by the Fund and its Transfer Agent.
Since the Fund will have no record of the beneficial owner's transactions, a
beneficial owner should contact the Authorized Firm to purchase, redeem or
exchange shares, to make changes in or give instructions concerning the account,
or to obtain information about the account. The transfer of shares in a "street
name" account to an account with another dealer or to an account directly with
the Fund involves special procedures and will require the beneficial owner to
obtain historical purchase information about the shares in the account from the
Authorized Firm. Before establishing a "street name" account with an investment
firm, or transferring the account to another investment firm, an investor
wishing to reinvest distributions should determine whether the firm which will
hold the shares allows reinvestment of distributions in "street name" accounts.
---------------------------------------------------------------------------
UNDER A LIFETIME INVESTING ACCOUNT A SHAREHOLDER CAN MAKE ADDITIONAL
INVESTMENTS IN FUND SHARES BY SENDING A CHECK FOR $50 OR MORE.
---------------------------------------------------------------------------
THE EATON VANCE EXCHANGE PRIVILEGE
- ------------------------------------------------------------------------------
Shares of the Fund currently may be exchanged for shares of one or more other
funds in the Eaton Vance Classic Group of Funds or Eaton Vance Money Market
Fund, which are distributed with a contingent deferred sales charge, on the
basis of the net asset value per share of each fund at the time of the exchange,
provided that such offer is available only in states where shares of such fund
being acquired may be legally sold.
Each exchange must involve shares which have a net asset value of at least
$1,000. The exchange privilege may be changed or discontinued without penalty.
Shareholders will be given sixty (60) days' notice prior to any termination or
material amendment of the exchange privilege. The Fund does not permit the
exchange privilege to be used for "Market Timing" and may terminate the exchange
privilege for any shareholder account engaged in Market Timing activity. Any
shareholder account for which more than two round-trip exchanges are made within
any twelve month period will be deemed to be engaged in Market Timing.
Furthermore, a group of unrelated accounts for which exchanges are entered
contemporaneously by a financial intermediary will be considered to be engaged
in Market Timing.
First Data Investor Services Group makes exchanges at the next determined net
asset value after receiving an exchange request in good order (see "How to
Redeem Fund Shares"). Consult First Data Investor Services Group for additional
information concerning the exchange privilege. Applications and prospectuses of
other funds are available from Authorized Firms or the Principal Underwriter.
The prospectus for each fund describes its investment objectives and policies,
and shareholders should obtain a prospectus and consider these objectives and
policies carefully before requesting an exchange.
No contingent deferred sales charge is imposed on exchanges. For purposes of
calculating the contingent deferred sales charge upon the redemption of Fund
shares acquired in an exchange, the purchase of shares acquired in one or more
exchanges is deemed to have occurred at the time of the original purchase of the
exchanged shares.
Shares of the other funds in the Eaton Vance Classic Group of Funds (and shares
of Eaton Vance Money Market Fund acquired as a result of an exchange from an EV
Classic fund) may be exchanged for Fund shares on the basis of the net asset
value per share of each fund at the time of the exchange, but subject to any
restrictions or qualifications set forth in a current prospectus of any such
fund.
Telephone exchanges are accepted by First Data Investor Services Group, provided
the investor has not disclaimed in writing the use of the privilege. To effect
such exchanges, call First Data Investor Services Group at 800-262- 1122 or,
within Massachusetts, 617-573-9403, Monday through Friday, 9:00 a.m. to 4:00
p.m. (Eastern Standard Time). Shares acquired by telephone exchange must be
registered in the same name(s) and with the same address as the shares being
exchanged. Neither the Fund, the Principal Underwriter nor First Data Investor
Services Group will be responsible for the authenticity of exchange instructions
received by telephone, provided that reasonable procedures to confirm that
instructions communicated are genuine have been followed. Telephone instructions
will be tape recorded. In times of drastic economic or market changes, a
telephone exchange may be difficult to implement. An exchange may result in a
taxable gain or loss.
EATON VANCE SHAREHOLDER SERVICES
- ------------------------------------------------------------------------------
THE FUND OFFERS THE FOLLOWING SERVICES, WHICH ARE VOLUNTARY, INVOLVE NO EXTRA
CHARGE, AND MAY BE CHANGED OR DISCONTINUED WITHOUT PENALTY AT ANY TIME. Full
information on each of the services described below and an application, where
required, are available from Authorized Firms or the Principal Underwriter. The
cost of administering such services for the benefit of shareholders who
participate in them is borne by the Fund as an expense to all shareholders.
INVEST-BY-MAIL -- FOR PERIODIC SHARE ACCUMULATION: Once the $1,000 minimum
investment has been made, checks of $50 or more payable to the order of EV
Classic Growth Fund may be mailed directly to First Data Investor Services
Group, BOS725, P.O. Box 1559, Boston, MA 02104 at any time -- whether or not
distributions are reinvested. The name of the shareholder, the Fund and the
account number should accompany each investment.
BANK AUTOMATED INVESTING -- FOR REGULAR SHARE ACCUMULATION: Cash investments of
$50 or more may be made automatically each month or quarter from a shareholder's
bank account. The $1,000 minimum initial investment and small account redemption
policy are waived for these accounts.
WITHDRAWAL PLAN: A shareholder may draw on shareholdings systematically with
monthly or quarterly checks in an aggregate amount that does not exceed annually
12% of the account balance at the time the plan is established. Such amount will
not be subject to a contingent deferred sales charge. See "How to Redeem Fund
Shares". A minimum deposit of $5,000 in shares is required.
REINVESTMENT PRIVILEGE: A SHAREHOLDER WHO HAS REPURCHASED OR REDEEMED SHARES MAY
REINVEST, WITH CREDIT FOR ANY CONTINGENT DEFERRED SALES CHARGES PAID ON THE
REPURCHASED OR REDEEMED SHARES, ANY PORTION OR ALL OF THE REPURCHASE OR
REDEMPTION PROCEEDS (PLUS THAT AMOUNT NECESSARY TO ACQUIRE A FRACTIONAL SHARE TO
ROUND OFF THE PURCHASE TO THE NEAREST FULL SHARE) IN SHARES OF THE FUND,
provided that the reinvestment is effected within 60 days after such repurchase
or redemption and the privilege has not been used more than once in the prior 12
months. Shares are sold to a reinvesting shareholder at the next determined net
asset value following timely receipt of a written purchase order by the
Principal Underwriter or by the Fund (or by the Fund's Transfer Agent). To the
extent that any shares of the Fund are sold at a loss and the proceeds are
reinvested in shares of the Fund (or other shares of the Fund are acquired
within the period beginning 30 days before and ending 30 days after the date of
the redemption) some or all of the loss generally will not be allowed as a tax
deduction. Shareholders should consult their tax advisers concerning the tax
consequences of reinvestments.
TAX-SHELTERED RETIREMENT PLANS: Shares of the Fund are available for purchase
in connection with the following tax-sheltered retirement plans:
-- Pension and Profit Sharing Plans for self-employed individuals,
corporations and non-profit organizations;
-- Individual Retirement Account Plans for individuals and their non-
employed spouses; and
-- 403(b) Retirement Plans for employees of public school systems, hospitals,
colleges and other non-profit organizations meeting certain requirements
of the Code.
Detailed information concerning these plans, including certain exceptions to
minimum investment requirements, and copies of the plans are available from the
Principal Underwriter. This information should be read carefully and
consultation with an attorney or tax adviser may be advisable. The information
sets forth the service fee charged for retirement plans and describes the
federal income tax consequences of establishing a plan. Under all plans,
dividends and distributions will be automatically reinvested in additional
shares.
DISTRIBUTIONS AND TAXES
- ------------------------------------------------------------------------------
The Fund's present policy is to distribute semi-annually substantially all of
the net investment income allocated to the Fund by the Portfolio, less the
Fund's direct and allocated expenses, and to distribute at least annually any
net realized capital gains. A portion of distributions from net investment
income may be eligible for the dividends-received deduction for corporations.
The Fund's distributions from its net investment income, net short-term capital
gains, and certain net foreign exchange gains will be taxable to shareholders as
ordinary income, whether received in cash or reinvested in additional shares of
the Fund. The Fund's distributions from its net long-term capital gains are
taxable to shareholders as such, whether received in cash or reinvested in
additional shares of the Fund and regardless of the length of time shares have
been owned by shareholders. If shares are purchased shortly before the record
date of a distribution, the shareholder will pay the full price for the shares
and then receive some portion of the price back as a taxable distribution.
Certain distributions, if declared in October, November or December and paid the
following January, will be taxed to shareholders as if received on December 31
of the year in which they are declared.
Shareholders will receive annually tax information notices and Forms 1099 to
assist in the preparation of their federal and state tax returns for the prior
calendar year's distributions, proceeds from the redemption or exchange of Fund
shares, and federal income tax withheld (if any) by the Fund's Transfer Agent.
The Fund intends to qualify as a regulated investment company under the Code,
and to satisfy all requirements necessary to be relieved of federal taxes on
income and gains it distributed to shareholders. In satisfying these
requirements, the Fund will treat itself as owning its proportionate share of
each of the Portfolio's assets and as entitled to the income of the Portfolio
properly attributable to such share.
---------------------------------------------------------------------------
AS A REGULATED INVESTMENT COMPANY UNDER THE CODE, THE FUND DOES NOT PAY
FEDERAL INCOME OR EXCISE TAXES TO THE EXTENT THAT IT DISTRIBUTES TO
SHAREHOLDERS ITS NET INVESTMENT INCOME AND NET REALIZED CAPITAL GAINS
IN ACCORDANCE WITH THE TIMING REQUIREMENTS IMPOSED BY THE CODE. AS A
PARTNERSHIP UNDER THE CODE, THE PORTFOLIO DOES NOT PAY FEDERAL INCOME OR
EXCISE TAXES.
---------------------------------------------------------------------------
PERFORMANCE INFORMATION
- ------------------------------------------------------------------------------
FROM TIME TO TIME, THE FUND MAY ADVERTISE ITS AVERAGE ANNUAL TOTAL RETURN. The
Fund's average annual total return is determined by computing the average annual
percentage change in value of $1,000 invested at the maximum public offering
price (net asset value) for specified periods ending with the most recent
calendar quarter, assuming reinvestment of all distributions. The average annual
total return calculation assumes a complete redemption of the investment and the
deduction of any applicable contingent deferred sales charge at the end of the
period. The Fund may also publish annual and cumulative total return figures
from time to time. The Fund may also quote total return for the period prior to
commencement of operations which would reflect the Portfolio's total return (or
that of its predecessor) adjusted to reflect any applicable Fund sales charge.
The Fund may also publish total return figures which do not take into account
any contingent deferred sales charge which may be imposed upon redemptions at
the end of the specified period. Any performance figure which does not take into
account the contingent deferred sales charge would be reduced to the extent such
charge is imposed upon a redemption.
Investors should note that the investment results of the Fund will fluctuate
over time, and any presentation of the Fund's total return for any prior period
should not be considered a representation of what an investment may earn or what
the Fund's total return may be in any future period. If the expenses related to
the operation of the Fund or the Portfolio are allocated to Eaton Vance, the
Fund's performance will be higher.
<PAGE>
[LOGO] EV CLASSIC
GROWTH FUND
- -------------------------------------------------------------------------------
PROSPECTUS
JANUARY 1, 1996
EV CLASSIC
GROWTH FUND
24 FEDERAL STREET
BOSTON, MA 02110
- -------------------------------------------------------------------------------
INVESTMENT ADVISER OF GROWTH PORTFOLIO
Boston Management and Research, 24 Federal Street, Boston, MA 02110
ADMINISTRATOR OF EV CLASSIC GROWTH FUND
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 89 South Street, Boston, MA 02111
TRANSFER AGENT
First Data Investor Services Group, BOS725, P.O. Box 1559, Boston, MA 02104
(800) 262-1122
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P., One Post Office Square, Boston, MA 02109
C-GFP
<PAGE>
Part A
Information Required in a Prospectus
EV MARATHON
GROWTH FUND
- --------------------------------------------------------------------------------
EV MARATHON GROWTH FUND (THE "FUND") IS A MUTUAL FUND SEEKING GROWTH OF CAPITAL.
THE FUND INVESTS ITS ASSETS IN GROWTH PORTFOLIO (THE "PORTFOLIO"), A DIVERSIFIED
OPEN-END INVESTMENT COMPANY HAVING THE SAME INVESTMENT OBJECTIVE AS THE FUND,
RATHER THAN BY DIRECTLY INVESTING IN AND MANAGING ITS OWN PORTFOLIO OF
SECURITIES AS WITH HISTORICALLY STRUCTURED MUTUAL FUNDS. THE FUND IS A SERIES OF
EATON VANCE GROWTH TRUST (THE "TRUST").
Shares of the Fund are not deposits or obligations of, or guaranteed or endorsed
by, any bank or other insured depository institution, and are not federally
insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board
or any other government agency. Shares of the Fund involve investment risks,
including fluctuations in value and the possible loss of some or all of the
principal investment.
This Prospectus is designed to provide you with information you should know
before investing. Please retain this document for future reference. A
Statement of Additional Information dated January 1, 1996 for the Fund, as
supplemented from time to time, has been filed with the Securities and
Exchange Commission and is incorporated herein by reference. This Statement of
Additional Information is available without charge from the Fund's principal
underwriter, Eaton Vance Distributors, Inc. (the "Principal Underwriter"), 24
Federal Street, Boston, MA 02110 (telephone (800) 225-6265). The Portfolio's
investment adviser is Boston Management and Research (the "Investment
Adviser"), a wholly-owned subsidiary of Eaton Vance Management, and Eaton
Vance Management is the administrator (the "Administrator") of the Fund. The
offices of the Investment Adviser and the Administrator are located at 24
Federal Street, Boston, MA 02110.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
PAGE PAGE
Shareholder and Fund Expenses ...... 2 How to Buy Fund Shares ............. 9
The Fund's Financial Highlights .... 3 How to Redeem Fund Shares........... 10
The Fund's Investment Objective .... 4 Reports to Shareholders ............ 12
Investment Policies and Risks ...... 4 The Lifetime Investing Account/
Organization of the Fund and the Distribution Options ............. 12
Portfolio ........................ 5 The Eaton Vance Exchange Privilege . 13
Management of the Fund and the Eaton Vance Shareholder Services ... 13
Portfolio ........................ 7 Distributions and Taxes ............ 14
Distribution Plan .................. 7 Performance Information ............ 15
Valuing Fund Shares................. 9
- --------------------------------------------------------------------------------
PROSPECTUS DATED JANUARY 1, 1996
<PAGE>
SHAREHOLDER AND FUND EXPENSES
- --------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES
------------------------------------------------------------------------------
Sales Charges Imposed on Purchases of Shares None
Sales Charges Imposed on Reinvested Distributions None
Fees to Exchange Shares None
Range of Declining Contingent Deferred Sales
Charges Imposed on Redemptions During the First
Seven Years (as a percentage of redemption
proceeds exclusive of all reinvestments and
capital appreciation in the account) 5.00% - 0%
ANNUAL FUND AND ALLOCATED PORTFOLIO OPERATING EXPENSES (as a percentage of
average daily net assets)
------------------------------------------------------------------------------
Investment Adviser Fee 0.625%
Rule 12b-1 Distribution (and Service) Fees 0.750%
Other Expenses (after any expense reduction) 1.445%
------
Total Operating Expenses 2.820%
======
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------------------------------------------------------------------------------
An investor would pay the following $79 $127 $169 $315
contingent deferred sales charge and
expenses on a $1,000 investment,
assuming (a) 5% annual return and (b)
redemption at the end of each period:
An investor would pay the following $29 $ 87 $149 $315
expenses on the same investment,
assuming (a) 5% annual return and (b)
no redemptions:
NOTES:
The table and Example summarize the aggregate expenses of the Fund and the
Portfolio and are designed to help investors understand the costs and expenses
they will bear, directly or indirectly, by investing in the Fund. Information
for the Fund is based on its expenses for the most recent fiscal year. Absent an
expense allocation, Other Expenses of the Fund would have been 6.635% of average
daily net assets.
The Fund invests exclusively in the Portfolio. The Trustees believe the
aggregate per share expenses of the Fund and the Portfolio should approximate,
and over time may be less than, the per share expenses the Fund would incur if
the Trust were instead to retain the services of an investment adviser for the
Fund and the Fund's assets were invested directly in the type of securities
being held by the Portfolio.
The Example should not be considered a representation of past or future expenses
and actual expenses may be greater or less than those shown. Federal regulations
require the Example to assume a 5% annual return, but actual return may vary.
For further information regarding the expenses of both the Fund and the
Portfolio see "The Fund's Financial Highlights", "Organization of the Fund and
the Portfolio", "Management of the Fund and the Portfolio" and "How to Redeem
Fund Shares". A long-term shareholder in the Fund may pay more than the economic
equivalent of the maximum front-end sales charge permitted by a rule of the
National Association of Securities Dealers, Inc. See "Distribution Plan".
No contingent deferred sales charge is imposed on (a) shares purchased more than
six years prior to the redemption, (b) shares acquired through the reinvestment
of distributions or (c) any appreciation in value of other shares in the account
(see "How to Redeem Fund Shares"), and no such charge is imposed on exchanges of
Fund shares for shares of one or more other funds listed under "The Eaton Vance
Exchange Privilege".
The Fund expects to begin making service fee payments during the quarter ending
March 31, 1996.
Other investment companies with different distribution arrangements and fees are
investing in the Portfolio and additional such companies may do so in the
future. See "Organization of the Fund and the Portfolio".
<PAGE>
THE FUND'S FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following information should be read in conjunction with the audited
financial statements included in the Fund's annual report to shareholders which
is incorporated by reference into the Statement of Additional Information in
reliance upon the report of Coopers & Lybrand L.L.P., independent certified
public accountants, as experts in accounting and auditing. Further information
regarding the performance of the Fund is contained in its annual report to
shareholders which may be obtained without charge by contacting the Principal
Underwriter, Eaton Vance Distributors, Inc.
- --------------------------------------------------------------------------------
FOR THE PERIOD FROM THE START OF BUSINESS, SEPTEMBER 13, 1994 TO
AUGUST 31, 1995
NET ASSET VALUE -- Beginning of period $10.000
-------
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss $(0.074)
Net realized and unrealized gain on investments 1.754
-------
Total income from investment operations $ 1.680
-------
NET ASSET VALUE, end of period $11.680
=======
TOTAL RETURN\1/ 16.80%
RATIOS/SUPPLEMENTAL DATA (as a percentage of average
daily net assets):*
Expenses\2/ 2.82%+
Net investment loss (1.59)%+
NET ASSETS AT END OF PERIOD (000'S OMITTED) $ 2,240
* For the period indicated, the expenses related to the operation of the
Fund reflect an allocation of expenses to the Administrator. Had such
action not been taken, net investment income per share and the ratios
would have been as follows:
NET INVESTMENT INCOME PER SHARE $ 0.167
RATIOS (to average daily net assets)
Expenses\2/ 8.01%+
Net investment loss (6.79)%+
+ Computed on an annualized basis.
\1/ Total return is calculated assuming a purchase at the net asset value
on the first day and a sale at the net asset value on the last day of
the period reported. Dividends and distributions, if any, are assumed
to be reinvested at the net asset value on the record date. Total
return is computed on a non-annualized basis.
\2/ Includes the Fund's share of Growth Portfolio's allocated expenses.
<PAGE>
THE FUND'S INVESTMENT OBJECTIVE
- --------------------------------------------------------------------------------
EV MARATHON GROWTH FUND'S INVESTMENT OBJECTIVE IS TO ACHIEVE CAPITAL GROWTH. The
Fund currently seeks to meet its investment objective by investing its assets in
the Growth Portfolio, a separate registered investment company. The Portfolio
has the same investment objective as the Fund and invests in a carefully
selected and continuously managed portfolio consisting primarily of equity
securities. The Fund's and the Portfolio's investment objectives are
nonfundamental and may be changed when authorized by a vote of the Trustees of
the Trust or the Portfolio, respectively, without obtaining the approval of the
Fund's shareholders or the investors in the Portfolio, as the case may be. The
Trustees of the Trust have no present intention to change the Fund's objective
and intend to submit any proposed material change in the investment objective to
shareholders in advance for their approval.
INVESTMENT POLICIES AND RISKS
- --------------------------------------------------------------------------------
THE FUND SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY INVESTING IN THE
PORTFOLIO. The policy of the Portfolio is to invest in a carefully selected and
continuously managed portfolio consisting primarily of domestic and foreign
equity securities. It may invest in all kinds of companies. The Portfolio will
invest primarily in common stocks or securities convertible into common stocks
(including convertible debt), which the Investment Adviser believes meet the
criteria for capital appreciation. The criteria for investments in convertible
debt are the same as used for the common stock of an issuer. The Portfolio does
not currently intend to invest more than 5% of its net assets in convertible
debt. It may also invest in other securities and obligations of all kinds. These
include preferred stocks, rights, warrants, bonds, repurchase agreements and
other evidences of indebtedness; however, the Portfolio does not currently
intend to invest more than 5% of its net assets in each of such investments and
currently intends to limit its investments in non-convertible debt to
non-convertible debt rated investment grade (i.e., rated Baa or higher by
Moody's Investors Service, Inc. or BBB or higher by Standard & Poor's Ratings
Group) or, if unrated, determined to be of comparable quality by the Portfolio's
Investment Adviser. The Portfolio may also invest in money market instruments.
While income is a subordinate consideration to capital growth, the Portfolio
will earn dividend or interest income to the extent that it receives dividends
or interest from its investments.
The Portfolio may invest in securities issued by foreign companies (including
American Depository Receipts and Global Depository Receipts). Such investments
may be subject to various risks such as fluctuations in currency and exchange
rates, foreign taxes, social, political and economic conditions in the countries
in which such companies operate, and changes in governmental, economic or
monetary policies both here and abroad. There may be less publicly available
information about a foreign company than about a comparable domestic company.
Since the securities markets in many foreign countries are not as developed as
those in the United States, the securities of many foreign companies are less
liquid and their prices are more volatile than securities of comparable domestic
companies. In order to hedge against possible variations in foreign exchange
rates pending the settlement of foreign securities transactions, the Portfolio
may buy or sell foreign currencies or may enter into forward foreign currency
exchange contracts to purchase or sell a specified currency at a specified price
and future date.
The Portfolio may purchase and sell exchange-traded futures contracts on stock
indices and options thereon to hedge against fluctuations in securities prices
or as a substitute for the purchase or sale of securities. Such transactions
involve a risk of loss or depreciation due to unanticipated adverse changes in
securities prices, which may exceed the Portfolio's initial investment in these
contracts. Futures contracts involve transactions costs. To the extent that the
Portfolio enters into futures contracts and options thereon traded on an
exchange regulated by the Commodity Futures Trading Commission, in each case
that are not for bona fide hedging purposes (as defined by the CFTC), the
aggregate initial margin and premiums required to establish these positions
(excluding the amount by which options are "in-the-money") may not exceed 5% of
the liquidation value of the Portfolio's investments, after taking into account
unrealized profits and unrealized losses on any contracts the Portfolio has
entered into. There can be no assurance that the Investment Adviser's use of
stock index futures and options thereon will be advantageous to the Portfolio.
The Portfolio may temporarily borrow up to 5% of the value of its total assets
to satisfy redemption requests or settle securities transactions. Certain
securities held by the Portfolio may permit the issuer at its option to "call",
or redeem, its securities. If an issuer redeems securities held by the Portfolio
during a time of declining interest rates, the Portfolio may not be able to
reinvest the proceeds in securities providing the same investment return as the
securities redeemed.
An investment in the Fund entails the risk that the principal value of Fund
shares may not increase or may decline. The Portfolio's investments in equity
securities are subject to the risk of adverse developments affecting particular
companies or industries and the stock market generally.
The Fund and the Portfolio have adopted certain fundamental investment
restrictions which are enumerated in detail in the Statement of Additional
Information and which may not be changed unless authorized by a Fund shareholder
vote and a Portfolio investor vote, respectively. Except for such enumerated
restrictions and as otherwise indicated in this Prospectus, the investment
objective and policies of the Fund and the Portfolio are not fundamental
policies and accordingly may be changed by the Trustees of the Trust and the
Portfolio without obtaining the approval of the Fund's shareholders or the
investors in the Portfolio, as the case may be. If any change were made in the
Fund's investment objective, the Fund might have an investment objective
different from the objective which an investor considered appropriate at the
time the investor became a shareholder of the Fund.
- ------------------------------------------------------------------------------
THE FUND IS NOT INTENDED TO BE A COMPLETE INVESTMENT PROGRAM, AND PROSPECTIVE
INVESTORS SHOULD TAKE INTO ACCOUNT THEIR OBJECTIVES AND OTHER INVESTMENTS WHEN
CONSIDERING THE PURCHASE OF FUND SHARES. THE FUND CANNOT ASSURE ACHIEVEMENT OF
ITS CAPITAL GROWTH OBJECTIVE.
- ------------------------------------------------------------------------------
ORGANIZATION OF THE FUND AND THE PORTFOLIO
- --------------------------------------------------------------------------------
THE FUND IS A DIVERSIFIED SERIES OF EATON VANCE GROWTH TRUST, A BUSINESS TRUST
ESTABLISHED UNDER MASSACHUSETTS LAW PURSUANT TO A DECLARATION OF TRUST DATED MAY
25, 1989, AS AMENDED, AND ORGANIZED AS THE SUCCESSOR TO A MASSACHUSETTS
CORPORATION WHICH COMMENCED ITS INVESTMENT COMPANY OPERATIONS IN 1954. THE TRUST
IS A MUTUAL FUND -- AN OPEN-END, MANAGEMENT INVESTMENT COMPANY. The Trustees of
the Trust are responsible for the overall management and supervision of its
affairs. The Trust may issue an unlimited number of shares of beneficial
interest (no par value per share) in one or more series and because the Trust
can offer separate series (such as the Fund) it is known as a "series company."
Each share represents an equal proportionate beneficial interest in the Fund.
When issued and outstanding, the shares are fully paid and nonassessable by the
Trust and redeemable as described under "How to Redeem Fund Shares."
Shareholders are entitled to one vote for each full share held. Fractional
shares may be voted proportionately. Shares have no preemptive or conversion
rights and are freely transferable. In the event of the liquidation of the Fund,
shareholders are entitled to share pro rata in the net assets of the Fund
available for distribution to shareholders.
THE PORTFOLIO IS ORGANIZED AS A TRUST UNDER THE LAWS OF THE STATE OF NEW YORK
AND INTENDS TO BE TREATED AS A PARTNERSHIP FOR FEDERAL TAX PURPOSES.The
Portfolio, as well as the Trust, intends to comply with all applicable federal
and state securities laws. The Portfolio's Declaration of Trust provides that
the Fund and other entities permitted to invest in the Portfolio (e.g., other
U.S. and foreign investment companies, and common and commingled trust funds)
will each be liable for all obligations of the Portfolio. However, the risk of
the Fund incurring financial loss on account of such liability is limited to
circumstances in which both inadequate insurance exists and the Portfolio itself
is unable to meet its obligations. Accordingly, the Trustees of the Trust
believe that neither the Fund nor its shareholders will be adversely affected by
reason of the Fund investing in the Portfolio.
SPECIAL INFORMATION ON THE FUND/PORTFOLIO INVESTMENT STRUCTURE.An investor in
the Fund should be aware that the Fund, unlike mutual funds which directly
acquire and manage their own portfolios of securities, seeks to achieve its
investment objective by investing its assets in an interest in the Portfolio,
which is a separate investment company with an identical investment objective
(although the Fund may temporarily hold a de minimus amount of cash). Therefore,
the Fund's interest in the securities owned by the Portfolio is indirect. In
addition to selling an interest to the Fund, the Portfolio may sell interests to
other affiliated and non-affiliated mutual funds or institutional investors.
Such investors will invest in the Portfolio on the same terms and conditions and
will pay a proportionate share of the Portfolio's expenses. However, the other
investors investing in the Portfolio are not required to sell their shares at
the same public offering price as the Fund due to variations in sales
commissions and other operating expenses. Therefore, investors in the Fund
should be aware that these differences may result in differences in returns
experienced by investors in the various funds that invest in the Portfolio. Such
differences in returns are also present in other mutual fund structures,
including funds that have multiple classes of shares. For information regarding
the investment objective, policies and restrictions, see "The Fund's Investment
Objective" and "Investment Policies and Risks". Further information regarding
investment practices may be found in the Statement of Additional Information.
The Trustees of the Trust have considered the advantages and disadvantages of
investing the assets of the Fund in the Portfolio, as well as the advantages and
disadvantages of the two-tier format. The Trustees believe that the structure
offers opportunities for substantial growth in the assets of the Portfolio, and
affords the potential for economies of scale for the Fund, at least when the
assets of the Portfolio exceed $300 million.
The Fund may withdraw (completely redeem) all its assets from the Portfolio at
any time if the Board of Trustees of the Trust determines that it is in the best
interest of the Fund to do so. The investment objective and the nonfundamental
investment policies of the Fund and the Portfolio may be changed by the Trustees
of the Trust and the Portfolio without obtaining the approval of the
shareholders of the Fund or the investors in the Portfolio, as the case may be.
Any such change of the investment objective will be preceded by thirty days'
advance written notice to the shareholders of the Fund or the investors in the
Portfolio, as the case may be. If a shareholder redeems shares because of a
change in the nonfundamental objective or policies of the Fund, those shares may
be subject to a contingent deferred sales charge, as described in "How to Redeem
Fund Shares". In the event the Fund withdraws all of its assets from the
Portfolio, or the Board of Trustees of the Trust determines that the investment
objective of the Portfolio is no longer consistent with the investment objective
of the Fund, such Trustees would consider what action might be taken, including
investing the assets of the Fund in another pooled investment entity or
retaining an investment adviser to manage the Fund's assets in accordance with
its investment objective. The Fund's investment performance may be affected by a
withdrawal of all its assets from the Portfolio.
Information regarding other pooled investment entities or funds which invest in
the Portfolio may be obtained by contacting Eaton Vance Distributors, Inc. (the
"Principal Underwriter" or "EVD"), 24 Federal Street, Boston, MA 02110, (617)
482-8260. Smaller investors in the Portfolio may be adversely affected by the
actions of a larger investor investing in the Portfolio. For example, if a large
investor withdraws from the Portfolio, the remaining investors may experience
higher pro rata operating expenses, thereby producing lower returns.
Additionally, the Portfolio may become less diverse, resulting in increased
portfolio risk, and experience decreasing economies of scale. However, this
possibility exists as well for historically structured funds which have large or
institutional investors.
Until 1992, the Administrator sponsored and advised historically structured
funds. Funds which invest all their assets in interests in a separate investment
company are a relatively new development in the mutual fund industry and,
therefore, the Fund may be subject to additional regulations than historically
structured funds.
The Declaration of Trust of the Portfolio provides that the Portfolio will
terminate 120 days after the complete withdrawal of the Fund or any other
investor in the Portfolio, unless either the remaining investors, by unanimous
vote at a meeting of such investors, or a majority of the Trustees of the
Portfolio, by written instrument consented to by all investors, agree to
continue the business of the Portfolio. This provision is consistent with
treatment of the Portfolio as a partnership for federal income tax purposes. See
"Distributions and Taxes" for further information. Whenever the Fund as an
investor in the Portfolio is requested to vote on matters pertaining to the
Portfolio (other than the termination of the Portfolio's business, which may be
determined by the Trustees of the Portfolio without investor approval), the Fund
will hold a meeting of Fund shareholders and will vote its interest in the
Portfolio for or against such matters proportionately to the instructions to
vote for or against such matters received from Fund shareholders. The Fund shall
vote shares for which it receives no voting instructions in the same proportion
as the shares for which it receives voting instructions. Other investors in the
Portfolio may alone or collectively acquire sufficient voting interests in the
Portfolio to control matters relating to the operation of the Portfolio, which
may require the Fund to withdraw its investment in the Portfolio or take other
appropriate action. Any such withdrawal could result in a distribution "in kind"
of portfolio securities (as opposed to a cash distribution from the Portfolio).
If securities are distributed, the Fund could incur brokerage, tax or other
charges in converting the securities to cash. In addition, the distribution in
kind may result in a less diversified portfolio of investments or adversely
affect the liquidity of the Fund. Notwithstanding the above, there are other
means for meeting shareholder redemption requests, such as borrowing.
The Trustees of the Trust, including a majority of the noninterested Trustees,
have approved written procedures designed to identify and address any potential
conflicts of interest arising from the fact that the Trustees of the Trust and
the Trustees of the Portfolio are the same. Such procedures require each Board
to take action to resolve any conflict of interest between the Fund and the
Portfolio, and it is possible that the creation of separate Boards may be
considered. For further information concerning the Trustees and officers of the
Trust and the Portfolio, see the Statement of Additional Information.
MANAGEMENT OF THE FUND AND THE PORTFOLIO
- --------------------------------------------------------------------------------
THE PORTFOLIO ENGAGES BOSTON MANAGEMENT AND RESEARCH ("BMR"), A WHOLLY-OWNED
SUBSIDIARY OF EATON VANCE MANAGEMENT ("EATON VANCE"), AS ITS INVESTMENT ADVISER.
EATON VANCE, ITS AFFILIATES AND ITS PREDECESSOR COMPANIES HAVE BEEN MANAGING
ASSETS OF INDIVIDUALS AND INSTITUTIONS SINCE 1924 AND MANAGING INVESTMENT
COMPANIES SINCE 1931.
Acting under the general supervision of the Board of Trustees of the Portfolio,
BMR manages the Portfolio's investments and affairs and furnishes for the use of
the Portfolio office space and all necessary office facilities, equipment and
personnel for servicing the investments of the Portfolio. Under its investment
advisory agreement with the Portfolio, BMR receives a monthly advisory fee of
5/96 of 1% (equivalent to 0.625% annually) of the average daily net assets of
the Portfolio up to and including $300 million, and 1/24 of 1% (equivalent to
0.50% annually) of the average daily net assets over $300 million. For the
fiscal year ended August 31, 1995, the Portfolio paid BMR advisory fees
equivalent to 0.625% of the Portfolio's average daily net assets for such year.
BMR places the portfolio transactions of the Portfolio with many broker-dealer
firms and uses its best efforts to obtain execution of such transactions at
prices which are advantageous to the Portfolio and at reasonably competitive
commission rates. Subject to the foregoing, BMR may consider sales of shares of
the Fund or of other investment companies sponsored by BMR or Eaton Vance as a
factor in the selection of broker-dealer firms to execute portfolio
transactions.
Peter F. Kiely has acted as the portfolio manager of the Portfolio since it
commenced operations. He has been a Vice President of Eaton Vance since 1980 and
of BMR since 1992.
BMR OR EATON VANCE ACTS AS INVESTMENT ADVISER TO INVESTMENT COMPANIES AND
VARIOUS INDIVIDUAL AND INSTITUTIONAL CLIENTS WITH ASSETS UNDER MANAGEMENT OF
APPROXIMATELY $16 BILLION. Eaton Vance is a wholly-owned subsidiary of Eaton
Vance Corp., a publicly held holding company. Eaton Vance Corp., through its
subsidiaries and affiliates, engages in investment management and marketing
activities, fiduciary and banking services, oil and gas operations, real estate
investment, consulting and management, and development of precious metals
properties.
The Trust has retained the services of Eaton Vance to act as Administrator of
the Fund. The Trust has not retained the services of an investment adviser since
the Trust seeks to achieve the investment objective of the Fund by investing the
Fund's assets in the Portfolio. As Administrator, Eaton Vance provides the Fund
with general office facilities and supervises the overall administration of the
Fund. For these services Eaton Vance currently receives no compensation. The
Trustees of the Trust may determine, in the future, to compensate Eaton Vance
for such services.
The Portfolio and the Fund, as the case may be, will each be responsible for all
respective costs and expenses not expressly stated to be payable by BMR under
the investment advisory agreement, by Eaton Vance under the administrative
services agreement, or by EVD under the distribution agreement.
DISTRIBUTION PLAN
- --------------------------------------------------------------------------------
THE FUND FINANCES DISTRIBUTION ACTIVITIES AND HAS ADOPTED A DISTRIBUTION PLAN
(THE "PLAN") PURSUANT TO RULE 12B-1 UNDER THE INVESTMENT COMPANY ACT OF 1940.
Rule 12b-1 permits a mutual fund, such as the Fund, to finance distribution
activities and bear expenses associated with the distribution of its shares
provided that any payments made by the Fund are made pursuant to a written plan
adopted in accordance with the Rule. The Plan is subject to, and complies with,
the sales charge rule of the National Association of Securities Dealers, Inc.
(the "NASD Rule"). The Plan is described further in the Statement of Additional
Information, and the following is a description of the salient features of the
Plan. The Plan provides that the Fund, subject to the NASD Rule, will pay sales
commissions and distribution fees to the Principal Underwriter only after and as
a result of the sale of shares of the Fund. On each sale of Fund shares
(excluding reinvestment of distributions) the Fund will pay the Principal
Underwriter amounts representing (i) sales commissions equal to 5% of the amount
received by the Fund for each share sold and (ii) distribution fees calculated
by applying the rate of 1% over the prime rate then reported in The Wall Street
Journal to the outstanding balance of Uncovered Distribution Charges (as
described below) of the Principal Underwriter. The Principal Underwriter
currently expects to pay sales commissions (except on exchange transactions and
reinvestments) to a financial services firm (an "Authorized Firm") at the time
of sale equal to 4% of the purchase price of the shares sold by such Firm. The
Principal Underwriter will use its own funds (which may be borrowed from banks)
to pay such commissions. Because the payment of the sales commissions and
distribution fees to the Principal Underwriter is subject to the NASD Rule
described below, it will take the Principal Underwriter a number of years to
recoup the sales commissions paid by it to Authorized Firms from the payments
received by it from the Fund pursuant to the Plan.
THE NASD RULE REQUIRES THE FUND TO LIMIT ITS ANNUAL PAYMENTS OF SALES
COMMISSIONS AND DISTRIBUTION FEES TO AN AMOUNT NOT EXCEEDING .75% OF THE FUND'S
AVERAGE DAILY NET ASSETS FOR EACH FISCAL YEAR. Under its Plan the Fund accrues
daily an amount at the rate of 1/365 of .75% of the Fund's net assets, and pays
such accrued amounts monthly to the Principal Underwriter. The Plan requires
such accruals to be automatically discontinued during any period in which there
are no outstanding Uncovered Distribution Charges under the Plan. Uncovered
Distribution Charges are calculated daily and, briefly, are equivalent to all
unpaid sales commissions and distribution fees to which the Principal
Underwriter is entitled under the Plan less all contingent deferred sales
charges theretofore paid to the Principal Underwriter. The Eaton Vance
organization may be considered to have realized a profit under the Plan if at
any point in time the aggregate amounts of all payments received by the
Principal Underwriter from the Fund pursuant to the Plan, including any
contingent deferred sales charges, have exceeded the total expenses theretofore
incurred by such organization in distributing shares of the Fund. Total expenses
for this purpose will include an allocable portion of the overhead costs of such
organization and its branch offices.
Because of the NASD Rule limitation on the amount of sales commissions and
distribution fees paid during any fiscal year, a high level of sales of Fund
shares during the initial years of the Fund's operations would cause a large
portion of the sales commission attributable to a sale of Fund shares to be
accrued and paid by the Fund to the Principal Underwriter in fiscal years
subsequent to the year in which such shares were sold. This spreading of sales
commissions payments under the Plan over an extended period would result in the
incurrence and payment of increased distribution fees under the Plan. For the
period from the start of business, September 13, 1994, to August 31, 1995, the
Fund paid sales commissions under the Plan equivalent to .75% (annualized) of
the Fund's average daily net assets for such period. As at August 31, 1995, the
Uncovered Distribution Charges of the Principal Underwriter calculated under the
Plan amounted to approximately $79,307 (equivalent to 3.5% of the Fund's net
assets on such day).
THE PLAN ALSO AUTHORIZES THE FUND TO MAKE PAYMENTS OF SERVICE FEES TO THE
PRINCIPAL UNDERWRITER, AUTHORIZED FIRMS AND OTHER PERSONS IN AMOUNTS NOT
EXCEEDING .25% OF THE FUND'S AVERAGE DAILY NET ASSETS FOR EACH FISCAL YEAR. The
Trustees of the Trust have initially implemented the Plan by authorizing the
Fund to make quarterly payments of service fees to the Principal Underwriter and
Authorized Firms in amounts not expected to exceed .25% of the Fund's average
daily net assets for any fiscal year based on the value of Fund shares sold by
such persons and remaining outstanding for at least twelve months. As permitted
by the NASD Rule, such payments are made for personal services and/or the
maintenance of shareholder accounts. Service fees are separate and distinct from
the sales commissions and distribution fees payable by the Fund to the Principal
Underwriter, and as such are not subject to automatic discontinuance when there
are no outstanding Uncovered Distribution Charges of the Principal Underwriter.
The Fund expects to begin making service fee payments during the quarter ending
March 31, 1996.
The Principal Underwriter may, from time to time, at its own expense, provide
additional incentives to Authorized Firms which employ registered
representatives who sell the Fund's shares and/or shares of other funds
distributed by the Principal Underwriter. In some instances, such additional
incentives may be offered only to certain Authorized Firms whose representatives
sell or are expected to sell significant amounts of shares. In addition, the
Principal Underwriter may from time to time increase or decrease the sales
commissions payable to Authorized Firms.
The Fund may, in its absolute discretion, suspend, discontinue or limit the
offering of its shares at any time. In determining whether any such action
should be taken, the Fund's management intends to consider all relevant factors,
including without limitation the size of the Fund, the investment climate and
market conditions, the volume of sales and redemptions of Fund shares, and the
amount of Uncovered Distribution Charges of the Principal Underwriter. The Plan
may continue in effect and payments may be made under the Plan following any
such suspension, discontinuance or limitation of the offering of Fund shares;
however, the Fund is not contractually obligated to continue the Plan for any
particular period of time. Suspension of the offering of Fund shares would not,
of course, affect a shareholder's ability to redeem shares.
VALUING FUND SHARES
- --------------------------------------------------------------------------------
THE FUND VALUES ITS SHARES ONCE ON EACH DAY THE NEW YORK STOCK EXCHANGE (THE
"EXCHANGE") IS OPEN FOR TRADING, as of the close of regular trading on the
Exchange (normally 4:00 p.m. New York time).The Fund's net asset value per share
is determined by its custodian, Investors Bank & Trust Company ("IBT"), (as
agent for the Fund) in the manner authorized by the Trustees of the Trust. Net
asset value is computed by dividing the value of the Fund's total assets, less
its liabilities, by the number of shares outstanding. Because the Fund invests
its assets in an interest in the Portfolio, the Fund's net asset value will
reflect the value of its interest in the Portfolio (which, in turn, reflects the
underlying value of the Portfolio's assets and liabilities).
Authorized Firms must communicate an investor's order to the Principal
Underwriter prior to the close of the Principal Underwriter's business day to
receive that day's net asset value per Fund share. It is the Authorized Firms'
responsibility to transmit orders promptly to the Principal Underwriter, which
is a wholly-owned subsidiary of Eaton Vance.
The Portfolio's net asset value is also determined as of the close of regular
trading on the Exchange by IBT (as custodian and agent for the Portfolio) in the
manner authorized by the Trustees of the Portfolio. Net asset value is computed
by subtracting the liabilities of the Portfolio from the value of its total
assets. For further information regarding the valuation of the Portfolio's
assets, see "Determination of Net Asset Value" in the Statement of Additional
Information.
- --------------------------------------------------------------------------------
SHAREHOLDERS MAY DETERMINE THE VALUE OF THEIR INVESTMENT BY MULTIPLYING THE
NUMBER OF FUND SHARES OWNED BY THE CURRENT NET ASSET VALUE PER SHARE.
- --------------------------------------------------------------------------------
HOW TO BUY FUND SHARES
- --------------------------------------------------------------------------------
SHARES OF THE FUND MAY BE PURCHASED FOR CASH OR MAY BE ACQUIRED IN EXCHANGE FOR
SECURITIES. Investors may purchase shares of the Fund through Authorized Firms
at the net asset value per share of the Fund next determined after an order is
effective. The Fund may suspend the offering of shares at any time and may
refuse an order for the purchase of shares. An Authorized Firm may charge its
customers a fee in connection with transactions executed by that Firm.
An initial investment in the Fund must be at least $1,000. Once an account has
been established the investor may send investments of $50 or more at any time
directly to the Fund's transfer agent (the "Transfer Agent") as follows: First
Data Investor Services Group, BOS725, P.O. Box 1559, Boston, MA 02104. The
$1,000 minimum initial investment is waived for Bank Automated Investing
accounts, which may be established with an investment of $50 or more. See "Eaton
Vance Shareholder Services".
In connection with employee benefit or other continuous group purchase plans
under which the average initial purchase by a participant of the plan is $1,000
or more, the Fund may accept initial investments of less than $1,000 on the part
of an individual participant. In the event a shareholder who is a participant of
such a plan terminates participation in the plan, his or her shares will be
transferred to a regular individual account. However, such account will be
subject to the right of redemption by the Fund as described under "How to Redeem
Fund Shares."
ACQUIRING FUND SHARES IN EXCHANGE FOR SECURITIES.IBT, as escrow agent, will
receive securities acceptable to Eaton Vance, as Administrator, in exchange for
Fund shares at their net asset value as determined above. The minimum value of
securities (or securities and cash) accepted for deposit is $5,000. Securities
accepted will be sold on the day of their receipt or as soon thereafter as
possible. The number of Fund shares to be issued in exchange for securities will
be the aggregate proceeds from the sale of such securities, divided by the
applicable net asset value per Fund share on the day such proceeds are received.
Eaton Vance will use reasonable efforts to obtain the then current market price
for such securities but does not guarantee the best available price. Eaton Vance
will absorb any transaction costs, such as commissions, on the sale of the
securities.
Securities determined to be acceptable should be transferred via book entry or
physically delivered, in proper form for transfer, through an Authorized Firm,
together with a completed and signed Letter of Transmittal in approved form
(available from Authorized Firms), as follows:
IN THE CASE OF BOOK ENTRY:
Deliver through Depository Trust Co.
Broker #2212
Investors Bank & Trust Company
For A/C EV Marathon Growth Fund
IN THE CASE OF PHYSICAL DELIVERY:
Investors Bank & Trust Company
Attention: EV Marathon Growth Fund
Physical Securities Processing Settlement Area
89 South Street
Boston, MA 02111
Investors who are contemplating an exchange of securities for shares of the
Fund, or their representatives, must contact Eaton Vance to determine whether
the securities are acceptable before forwarding such securities to IBT. Eaton
Vance reserves the right to reject any securities. Exchanging securities for
Fund shares may create a taxable gain or loss. Each investor should consult his
or her tax adviser with respect to the particular federal, state and local tax
consequences of exchanging securities for Fund shares.
- --------------------------------------------------------------------------------
IF YOU DON'T HAVE AN AUTHORIZED FIRM, EATON VANCE CAN RECOMMEND ONE.
- --------------------------------------------------------------------------------
HOW TO REDEEM FUND SHARES
- --------------------------------------------------------------------------------
A SHAREHOLDER MAY REDEEM FUND SHARES BY DELIVERING TO FIRST DATA INVESTOR
SERVICES GROUP, INC., BOS725, P.O. BOX 1559, BOSTON, MA 02104, during its
business hours a written request for redemption in good order, plus any share
certificates with executed stock powers. The redemption price will be based on
the net asset value per Fund share next computed after such delivery. Good order
means that all relevant documents must be endorsed by the record owner (s)
exactly as the shares are registered and the signature(s) must be guaranteed by
a member of either the Securities Transfer Association's STAMP program or the
New York Stock Exchange's Medallion Signature Program, or certain banks, savings
and loan institutions, credit unions, securities dealers, securities exchanges,
clearing agencies and registered securities associations as required by a
regulation of the Securities and Exchange Commission (the "Commission") and
acceptable to First Data Investor Services Group. In addition, in some cases,
good order may require the furnishing of additional documents such as where
shares are registered in the name of a corporation, partnership or fiduciary.
Within seven days after receipt of a redemption request in good order by First
Data Investor Services Group, the Fund will make payment in cash for the net
asset value of the shares as of the date determined above, reduced by the amount
of any applicable contingent deferred sales charges (described below) and any
federal income tax required to be withheld. Although the Fund normally expects
to make payment in cash for redeemed shares, the Trust, subject to compliance
with applicable regulations, has reserved the right to pay the redemption price
of shares of the Fund, either totally or partially, by a distribution in kind of
readily marketable securities withdrawn by the Fund from the Portfolio. The
securities so distributed would be valued pursuant to the Portfolio's valuation
procedures. If a shareholder received a distribution in kind, the shareholder
could incur brokerage or other charges in converting the securities to cash.
To sell shares at their net asset value through an Authorized Firm (a
repurchase), a shareholder can place a repurchase order with the Authorized
Firm, which may charge a fee. The value of such shares is based upon the net
asset value calculated after EVD, as the Fund's agent, receives the order. It is
the Authorized Firm's responsibility to transmit promptly repurchase orders to
EVD. Throughout this Prospectus, the word "redemption" is generally meant to
include a repurchase.
If shares were recently purchased, the proceeds of redemption (or repurchase)
will not be sent until the check (including a certified or cashier's check)
received for the shares purchased has cleared. Payment for shares tendered for
redemption may be delayed up to 15 days from the purchase date when the purchase
check has not yet cleared. Redemptions or repurchases may result in a taxable
gain or loss.
Due to the high cost of maintaining small accounts, the Fund reserves the right
to redeem accounts with balances of less than $1,000. Prior to such a
redemption, shareholders will be given 60 days' written notice to make an
additional purchase. Thus, an investor making an initial investment of $1,000
would not be able to redeem shares without being subject to this policy.
However, no such redemption would be required by the Fund if the cause of the
low account balance was a reduction in the net asset value of Fund shares. No
contingent deferred sales charge will be imposed with respect to such
involuntary redemptions.
CONTINGENT DEFERRED SALES CHARGE.Shares redeemed within the first six years of
their purchase (except shares acquired through the reinvestment of
distributions) generally will be subject to a contingent deferred sales charge.
This contingent deferred sales charge is imposed on any redemption the amount of
which exceeds the aggregate value at the time of redemption of (a) all shares in
the account purchased more than six years prior to the redemption, (b) all
shares in the account acquired through reinvestment of distributions, and (c)
the increase, if any, of value of all other shares in the account (namely those
purchased within the six years preceding the redemption) over the purchase price
of such shares. Redemptions are processed in a manner to maximize the amount of
redemption proceeds which will not be subject to a contingent deferred sales
charge. That is, each redemption will be assumed to have been made first from
the exempt amounts referred to in clauses (a), (b) and (c) above, and second
through liquidation of those shares in the account referred to in clause (c) on
a first-in-first-out basis. Any contingent deferred sales charge which is
required to be imposed on share redemptions will be made in accordance with the
following schedule:
CONTINGENT
YEAR OF REDEMPTION AFTER PURCHASE DEFERRED SALES CHARGE
------------------------------------------------------------------------------
First or Second .............................................. 5%
Third ........................................................ 4%
Fourth ....................................................... 3%
Fifth ........................................................ 2%
Sixth ........................................................ 1%
Seventh and following .........................................0%
In calculating the contingent deferred sales charge upon the redemption of Fund
shares acquired in an exchange for shares of a fund currently listed under "The
Eaton Vance Exchange Privilege", the contingent deferred sales charge schedule
applicable to the shares at the time of purchase will apply and the purchase of
shares acquired in the exchange is deemed to have occurred at the time of the
original purchase of the exchanged shares.
No contingent deferred sales charge will be imposed on Fund shares which have
been sold to Eaton Vance or its affiliates, or to their respective employees or
clients. The contingent deferred sales charge will be waived for shares redeemed
(1) pursuant to a Withdrawal Plan (see "Eaton Vance Shareholder Services"), (2)
as part of a required distribution from a tax-sheltered retirement plan, or (3)
following the death of all beneficial owners of such shares, provided the
redemption is requested within one year of death (a death certificate and other
applicable documents may be required). The contingent deferred sales charge will
be paid to the Principal Underwriter or the Fund. When paid to the Principal
Underwriter it will reduce the amount of Uncovered Distribution Charges
calculated under the Fund's Distribution Plan. See "Distribution Plan".
- --------------------------------------------------------------------------------
THE FOLLOWING EXAMPLE ILLUSTRATES THE OPERATION OF THE CONTINGENT DEFERRED
SALES CHARGE. ASSUME THAT AN INVESTOR PURCHASES $10,000 OF THE FUND'S SHARES
AND THAT 16 MONTHS LATER THE VALUE OF THE ACCOUNT HAS GROWN THROUGH INVESTMENT
PERFORMANCE AND REINVESTMENT OF DISTRIBUTIONS TO $12,000. THE INVESTOR THEN
MAY REDEEM UP TO $2,000 OF SHARES WITHOUT INCURRING A CONTINGENT DEFERRED
SALES CHARGE. IF THE INVESTOR SHOULD REDEEM $3,000 OF SHARES, A CHARGE WOULD
BE IMPOSED ON $1,000 OF THE REDEMPTION. THE RATE WOULD BE 5% BECAUSE THE
REDEMPTION WAS MADE IN THE SECOND YEAR AFTER THE PURCHASE WAS MADE AND THE
CHARGE WOULD BE $50.
- --------------------------------------------------------------------------------
REPORTS TO SHAREHOLDERS
- --------------------------------------------------------------------------------
THE FUND WILL ISSUE TO ITS SHAREHOLDERS SEMI-ANNUAL AND ANNUAL REPORTS
CONTAINING FINANCIAL STATEMENTS. Financial statements included in annual reports
are audited by the Fund's independent accountants. Shortly after the end of each
calendar year, the Fund will furnish all shareholders with information necessary
for preparing federal and state tax returns.
THE LIFETIME INVESTING ACCOUNT/DISTRIBUTION OPTIONS
- --------------------------------------------------------------------------------
AFTER AN INVESTOR MAKES AN INITIAL PURCHASE OF FUND SHARES, THE FUND'S TRANSFER
AGENT, FIRST DATA INVESTOR SERVICES GROUP, WILL SET UP A LIFETIME INVESTING
ACCOUNT FOR THE INVESTOR ON THE FUND'S RECORDS. This account is a complete
record of all transactions between the investor and the Fund which at all times
shows the balance of shares owned. The Fund will not issue share certificates
except upon request.
Each time a transaction takes place in a shareholder's account, the shareholder
will receive a statement showing complete details of the transaction and the
current balance in the account. (Under certain plans, statements may be sent
only quarterly). THE LIFETIME INVESTING ACCOUNT ALSO PERMITS A SHAREHOLDER TO
MAKE ADDITIONAL INVESTMENTS IN SHARES BY SENDING A CHECK FOR $50 OR MORE to
First Data Investor Services Group.
Any questions concerning a shareholder's account or services available may be
directed by telephone to EATON VANCE SHAREHOLDER SERVICES at 800-225-6265,
extension 2, or in writing to First Data Investor Services Group, BOS725, P.O.
Box 1559, Boston, MA 02104 (please provide the name of the shareholder, the Fund
and the account number).
THE FOLLOWING DISTRIBUTION OPTIONS WILL BE AVAILABLE TO ALL LIFETIME INVESTING
ACCOUNTS and may be changed as often as desired by written notice to the Fund's
dividend disbursing agent, First Data Investor Services Group, BOS725, P.O. Box
1559, Boston, MA 02104. The currently effective option will appear on each
confirmation statement.
Share Option -- Dividends and capital gains will be reinvested in additional
shares.
Income Option -- Dividends will be paid in cash, and capital gains will be
reinvested in additional shares.
Cash Option -- Dividends and capital gains will be paid in cash.
The Share Option will be assigned if no other option is specified.
Distributions, including those reinvested, will be reduced by any withholding
required under federal income tax laws.
If the Income Option or Cash Option has been selected, dividend and/or capital
gains distribution checks which are returned by the United States Postal Service
as not deliverable or which remain uncashed for six months or more will be
reinvested in the account in shares at the then current net asset value.
Furthermore, the distribution option on the account will be automatically
changed to the Share Option until such time as the shareholder selects a
different option.
DISTRIBUTION INVESTMENT OPTION. In addition to the distribution options set
forth above, dividends and/or capital gains may be invested in additional shares
of another Eaton Vance fund. Before selecting this option, a shareholder should
obtain a prospectus of the other Eaton Vance fund and consider its objectives
and policies carefully.
"STREET NAME" ACCOUNTS. If shares of the Fund are held in a "street name"
account with an Authorized Firm, all recordkeeping, transaction processing and
payments of distributions relating to the beneficial owner's account will be
performed by the Authorized Firm, and not by the Fund and its Transfer Agent.
Since the Fund will have no record of the beneficial owner's transactions, a
beneficial owner should contact the Authorized Firm to purchase, redeem or
exchange shares, to make changes in or give instructions concerning the account,
or to obtain information about the account. The transfer of shares in a "street
name" account to an account with another dealer or to an account directly with
the Fund involves special procedures and will require the beneficial owner to
obtain historical purchase information about the shares in the account from the
Authorized Firm. Before establishing a "street name" account with an investment
firm, or transferring the account to another investment firm, an investor
wishing to reinvest distributions should determine whether the firm which will
hold the shares allows reinvestment of distributions in "street name" accounts.
- --------------------------------------------------------------------------------
UNDER A LIFETIME INVESTING ACCOUNT A SHAREHOLDER CAN MAKE ADDITIONAL
INVESTMENTS IN FUND SHARES BY SENDING A CHECK FOR $50 OR MORE.
- --------------------------------------------------------------------------------
THE EATON VANCE EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
Shares of the Fund currently may be exchanged for shares of one or more other
funds in the Eaton Vance Marathon Group of Funds (except Eaton Vance Prime Rate
Reserves) or Eaton Vance Money Market Fund, which are distributed subject to a
contingent deferred sales charge, on the basis of the net asset value per share
of each fund at the time of the exchange, provided that such offer is available
only in states where shares of the fund being acquired may be legally sold.
Each exchange must involve shares which have a net asset value of at least
$1,000. The exchange privilege may be changed or discontinued without penalty.
Shareholders will be given sixty (60) days' notice prior to any termination or
material amendment of the exchange privilege. The Fund does not permit the
exchange privilege to be used for "Market Timing" and may terminate the exchange
privilege for any shareholder account engaged in Market Timing activity. Any
shareholder account for which more than two round-trip exchanges are made within
any twelve month period will be deemed to be engaged in Market Timing.
Furthermore, a group of unrelated accounts for which exchanges are entered
contemporaneously by a financial intermediary will be considered to be engaged
in Market Timing.
First Data Investor Services Group makes exchanges at the next determined net
asset value after receiving an exchange request in good order (see "How to
Redeem Fund Shares"). Consult First Data Investor Services Group for additional
information concerning the exchange privilege. Applications and prospectuses of
other funds are available from Authorized Firms or the Principal Underwriter.
The prospectus for each fund describes its investment objectives and policies,
and shareholders should obtain a prospectus and consider these objectives and
policies carefully before requesting an exchange.
No contingent deferred sales charge is imposed on exchanges. For purposes of
calculating the contingent deferred sales charge upon the redemption of shares
acquired in an exchange, the contingent deferred sales charge schedule
applicable to the shares at the time of purchase will apply and the purchase of
shares acquired in one or more exchanges is deemed to have occurred at the time
of the original purchase of the exchanged shares. For the contingent deferred
sales charge schedule applicable to the Eaton Vance Marathon Group of Funds
(except EV Marathon Strategic Income Fund and Class I shares of any EV Marathon
Limited Maturity Fund), see "How to Redeem Fund Shares." The contingent deferred
sales charge schedule applicable to EV Marathon Strategic Income Fund and Class
I shares of any EV Marathon Limited Maturity Fund is 3%, 2.5%, 2% or 1% in the
event of a redemption occurring in the first, second, third or fourth year,
respectively, after the original share purchase.
Shares of the other funds in the Eaton Vance Marathon Group of Funds and shares
of Eaton Vance Money Market Fund may be exchanged for Fund shares on the basis
of the net asset value per share of each fund at the time of the exchange, but
subject to any restrictions or qualifications set forth in a current prospectus
of any such fund.
Telephone exchanges are accepted by First Data Investor Services Group provided
the investor has not disclaimed in writing the use of the privilege. To effect
such exchanges, call First Data Investor Services Group at 800-262- 1122 or,
within Massachusetts, 617-573-9403, Monday through Friday, 9:00 a.m. to 4:00
p.m. (Eastern Standard Time). Shares acquired by telephone exchange must be
registered in the same name(s) and with the same address as the shares being
exchanged. Neither the Fund, the Principal Underwriter nor First Data Investor
Services Group will be responsible for the authenticity of exchange instructions
received by telephone, provided that reasonable procedures to confirm that
instructions communicated are genuine have been followed. Telephone instructions
will be tape recorded. In times of drastic economic or market changes, a
telephone exchange may be difficult to implement. An exchange may result in a
taxable gain or loss.
EATON VANCE SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------
THE FUND OFFERS THE FOLLOWING SERVICES, WHICH ARE VOLUNTARY, INVOLVE NO EXTRA
CHARGE, AND MAY BE CHANGED OR DISCONTINUED WITHOUT PENALTY AT ANY TIME. Full
information on each of the services described below and an application, where
required, are available from Authorized Firms or the Principal Underwriter. The
cost of administering such services for the benefit of shareholders who
participate in them is borne by the Fund as an expense to all shareholders.
INVEST-BY-MAIL -- FOR PERIODIC SHARE ACCUMULATION:Once the $1,000 minimum
investment has been made, checks of $50 or more payable to the order of EV
Marathon Growth Fund may be mailed directly to First Data Investor Services
Group, BOS725, P.O. Box 1559, Boston, MA 02104 at any time -- whether or not
distributions are reinvested. The name of the shareholder, the Fund and the
account number should accompany each investment.
WITHDRAWAL PLAN:A shareholder may draw on shareholdings systematically with
monthly or quarterly checks in an aggregate amount that does not exceed annually
12% of the account balance at the time the plan is established. Such amount will
not be subject to a contingent deferred sales charge. See "How to Redeem Fund
Shares". A minimum deposit of $5,000 in shares is required.
BANK AUTOMATED INVESTING -- FOR REGULAR SHARE ACCUMULATION:Cash investments of
$50 or more may be made automatically each month or quarter from a shareholder's
bank account. The $1,000 minimum initial investment and small account redemption
policy are waived for these accounts.
REINVESTMENT PRIVILEGE: A SHAREHOLDER WHO HAS REPURCHASED OR REDEEMED SHARES MAY
REINVEST, WITH CREDIT FOR ANY CONTINGENT DEFERRED SALES CHARGES PAID ON THE
REDEEMED OR REPURCHASED SHARES, ANY PORTION OR ALL OF THE REPURCHASE OR
REDEMPTION PROCEEDS (PLUS THAT AMOUNT NECESSARY TO ACQUIRE A FRACTIONAL SHARE TO
ROUND OFF THE PURCHASE TO THE NEAREST FULL SHARE) IN SHARES OF THE FUND,
provided that the reinvestment is effected within 60 days after such repurchase
or redemption and the privilege has not been used more than once in the prior 12
months. Shares are sold to a reinvesting shareholder at the net asset value next
determined following timely receipt of a written purchase order by the Principal
Underwriter or by the Fund (or by the Fund's Transfer Agent). To the extent that
any shares of the Fund are sold at a loss and the proceeds are reinvested in
shares of the Fund (or other shares of the Fund are acquired within the period
beginning 30 days before and ending 30 days after the date of the redemption)
some or all of the loss generally will not be allowed as a tax deduction.
Shareholders should consult their tax advisers concerning the tax consequences
of reinvestments.
TAX-SHELTERED RETIREMENT PLANS:Shares of the Fund are available for purchase in
connection with the following tax-sheltered retirement plans:
-- Pension and Profit Sharing Plans for self-employed individuals,
corporations and non-profit organizations;
-- Individual Retirement Account Plans for individuals and their non-
employed spouses; and
-- 403(b) Retirement Plans for employees of public school systems,
hospitals, colleges and other non-profit organizations meeting certain
requirements of the Internal Revenue Code of 1986, as amended (the
"Code").
Detailed information concerning these plans, including certain exceptions to
minimum investment requirements, and copies of the plans are available from the
Principal Underwriter. This information should be read carefully and
consultation with an attorney or tax adviser may be advisable. The information
sets forth the service fee charged for retirement plans and describes the
federal income tax consequences of establishing a plan. Under all plans,
dividends and distributions will be automatically reinvested in additional
shares.
DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
The Fund's present policy is to distribute semi-annually substantially all of
the net investment income allocated to the Fund by the Portfolio, less the
Fund's direct and allocated expenses, and to distribute at least annually any
net realized capital gains. A portion of distributions from net investment
income may be eligible for the dividends-received deduction for corporations.
The Fund's distributions from its net investment income, net short-term capital
gains, and certain net foreign exchange gains will be taxable to shareholders as
ordinary income, whether received in cash or reinvested in additional shares of
the Fund. The Fund's distributions from its long-term capital gains are taxable
to shareholders as such, whether received in cash or reinvested in additional
shares of the Fund and regardless of the length of time shares have been owned
by shareholders. If shares are purchased shortly before the record date of a
distribution, the shareholder will pay the full price for the shares and then
receive some portion of the price back as a taxable distribution. Certain
distributions, if declared in October, November or December and paid the
following January, will be taxed to shareholders as if received on December 31
of the year in which they are declared.
Shareholders will receive annually tax information notices and Forms 1099 to
assist in the preparation of their federal and state tax returns for the prior
calendar year's distributions, proceeds from the redemption or exchange of Fund
shares, and federal income tax withheld (if any) by the Fund's Transfer Agent.
The Fund intends to qualify as a regulated investment company under the Code,
and to satisfy all requirements necessary to be relieved of federal taxes on
income and gains it distributed to shareholders. In satisfying these
requirements, the Fund will treat itself as owning its proportionate share of
each of the Portfolio's assets and as entitled to the income of the Portfolio
properly attributable to such share.
- --------------------------------------------------------------------------------
AS A REGULATED INVESTMENT COMPANY UNDER THE CODE THE FUND DOES NOT PAY FEDERAL
INCOME OR EXCISE TAXES TO THE EXTENT THAT IT DISTRIBUTES TO SHAREHOLDERS ITS
NET INVESTMENT INCOME AND NET REALIZED CAPITAL GAINS IN ACCORDANCE WITH THE
TIMING REQUIREMENTS IMPOSED BY THE CODE. AS A PARTNERSHIP UNDER THE CODE, THE
PORTFOLIO DOES NOT PAY FEDERAL INCOME OR EXCISE TAXES.
- --------------------------------------------------------------------------------
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
FROM TIME TO TIME, THE FUND MAY ADVERTISE ITS AVERAGE ANNUAL TOTAL RETURN. The
Fund's average annual total return is determined by computing the average annual
percentage change in value of $1,000 invested at the maximum public offering
price (net asset value) for specified periods ending with the most recent
calendar quarter, assuming reinvestment of all distributions. The average annual
total return calculation assumes a complete redemption of the investment and the
deduction of any applicable contingent deferred sales charge at the end of the
period. The Fund may also publish annual and cumulative total return figures
from time to time. The Fund may also quote total return for the period prior to
commencement of operations which would reflect the Portfolio's total return (or
that of its predecessor) adjusted to reflect any applicable Fund sales charge.
The Fund may also publish total return figures which do not take into account
any contingent deferred sales charge which may be imposed upon redemptions at
the end of the specified period. Any performance figure which does not take into
account the contingent deferred sales charge would be reduced to the extent such
charge is imposed upon a redemption.
Investors should note that the investment results of the Fund will fluctuate
over time, and any presentation of the Fund's total return for any prior period
should not be considered a representation of what an investment may earn or what
the Fund's total return may be in any future period. If the expenses related to
the operation of the Fund or the Portfolio are allocated to Eaton Vance, the
Fund's performance will be higher.
<PAGE>
[LOGO]
EV MARATHON
GROWTH
FUND
PROSPECTUS
JANUARY 1, 1996
EV MARATHON
GROWTH FUND
24 FEDERAL STREET
BOSTON, MA 02110
- -------------------------------------------------------------------------------
INVESTMENT ADVISER OF GROWTH PORTFOLIO
Boston Management and Research, 24 Federal Street, Boston, MA 02110
ADMINISTRATOR OF EV MARATHON GROWTH FUND
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 89 South Street, Boston, MA 02111
TRANSFER AGENT
First Data Investor Services Group, BOS725, P.O. Box 1559, Boston, MA 02104
(800) 262-1122
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P., One Post Office Square, Boston, MA 02109
M-GFP
<PAGE>
PART A
INFORMATION REQUIRED IN A PROSPECTUS
EV TRADITIONAL
GROWTH FUND
- ------------------------------------------------------------------------------
EV TRADITIONAL GROWTH FUND (THE "FUND") IS A MUTUAL FUND SEEKING CAPITAL GROWTH.
THE FUND INVESTS ITS ASSETS IN GROWTH PORTFOLIO (THE "PORTFOLIO"), A DIVERSIFIED
OPEN-END INVESTMENT COMPANY HAVING THE SAME INVESTMENT OBJECTIVE AS THE FUND,
RATHER THAN BY DIRECTLY INVESTING IN AND MANAGING ITS OWN PORTFOLIO OF
SECURITIES AS WITH HISTORICALLY STRUCTURED MUTUAL FUNDS. THE FUND IS A SERIES OF
EATON VANCE GROWTH TRUST (THE "TRUST").
Shares of the Fund are not deposits or obligations of, or guaranteed or endorsed
by, any bank or other insured depository institution, and are not federally
insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board
or any other government agency. Shares of the Fund involve investment risks,
including fluctuations in value and the possible loss of some or all of the
principal investment.
This Prospectus is designed to provide you with information you should know
before investing. Please retain this document for future reference. A
Statement of Additional Information dated January 1, 1996 for the Fund, as
supplemented from time to time, has been filed with the Securities and
Exchange Commission and is incorporated herein by reference. This Statement of
Additional Information is available without charge from the Fund's principal
underwriter, Eaton Vance Distributors, Inc. (the "Principal Underwriter"), 24
Federal Street, Boston, MA 02110 (telephone (800) 225-6265). The Portfolio's
investment adviser is Boston Management and Research (the "Investment
Adviser"), a wholly-owned subsidiary of Eaton Vance Management, and Eaton
Vance Management is the administrator (the "Administrator") of the Fund. The
offices of the Investment Adviser and the Administrator are located at 24
Federal Street, Boston, MA 02110.
- ------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
- ------------------------------------------------------------------------------
PAGE PAGE
Shareholder and Fund Expenses ...... 2 How to Redeem Fund Shares........... 10
The Fund's Financial Highlights .... 3 Reports to Shareholders ............ 11
The Fund's Investment Objective .... 4 The Lifetime Investing Account/
Investment Policies and Risks ...... 4 Distribution Options ............. 11
Organization of the Fund and the The Eaton Vance Exchange Privilege . 12
Portfolio ........................ 5 Eaton Vance Shareholder Services ... 13
Management of the Fund and the Distributions and Taxes ............ 14
Portfolio ........................ 7 Performance Information ............ 15
Service Plan ...................... 7 Statement of Intention and
Valuing Fund Shares................. 9 Escrow Agreement ................. 15
How to Buy Fund Shares ............. 9
PROSPECTUS DATED JANUARY 1, 1996
<PAGE>
SHAREHOLDER AND FUND EXPENSES
- --------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES
------------------------------------------------------------------------------
Maximum Sales Charge Imposed on Purchases (as
a percentage of offering price) 4.75%
Sales Charges Imposed on Reinvested
Distributions None
Fees to Exchange Shares None
Contingent Deferred Sales Charges (on
purchases of $1 million or more) Imposed on
Redemptions During the First Twelve Months
(as a percentage of redemption proceeds
exclusive of all reinvestments and capital
appreciation in the account) 0.50%
ANNUAL FUND AND ALLOCATED PORTFOLIO OPERATING EXPENSES (as a
percentage of average daily net assets)
------------------------------------------------------------------------------
Investment Adviser Fee 0.625%
Rule 12b-1 Service Fees (Service Plan) 0.069%
Other Expenses 0.286%
-----
Total Operating Expenses 0.980%
=====
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
An investor would pay the
following expenses (including
initial maximum sales charge)
on a $1,000 investment,
assuming (a) 5% annual return
and (b) redemption at the end
of each period: $57 $77 $99 $162
NOTES:
The table and Example summarize the aggregate expenses of the Fund and the
Portfolio and are designed to help investors understand the costs and expenses
they will bear, directly or indirectly, by investing in the Fund. Information
for the Fund is based on its expenses for the most recent fiscal year.
The Fund invests exclusively in the Portfolio. The Trustees believe the
aggregate per share expenses of the Fund and the Portfolio should approximate,
and over time may be less than, the per share expenses the Fund would incur if
the Trust were instead to retain the services of an investment adviser for the
Fund and the Fund's assets were invested directly in the type of securities
being held by the Portfolio.
The Example should not be considered a representation of past or future
expenses, and actual expenses may be greater or less than those shown. Federal
regulations require the Example to assume a 5% annual return, but actual return
may vary. For further information regarding the expenses of both the Fund and
the Portfolio see "The Fund's Financial Highlights", "Organization of the Fund
and the Portfolio", "Management of the Fund and the Portfolio" and "How to
Redeem Fund Shares".
If shares have been purchased at net asset value with no initial sales charge by
virtue of the purchase having been in the amount of $1 million or more and are
redeemed within 12 months of purchase, a contingent deferred sales charge of
0.50% will be imposed on such redemption. See "How to Buy Fund Shares", "How to
Redeem Fund Shares" and "Eaton Vance Shareholder Services".
Other investment companies with different distribution arrangements and fees are
investing in the Portfolio and additional such companies may do so in the
future. See "Organization of the Fund and the Portfolio".
<PAGE>
THE FUND'S FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following information should be read in conjunction with the audited
financial statements included in the Fund's annual report to shareholders which
is incorporated by reference into the Statement of Additional Information in
reliance upon the report of Coopers & Lybrand L.L.P., independent accountants,
as experts in accounting and auditing. The financial highlights for each of the
seven years in the period ended August 31, 1992 were audited by other auditors
whose report dated September 30, 1992, expressed an unqualified opinion on such
financial highlights. Further information regarding the performance of the Fund
is contained in its annual report to shareholders which may be obtained without
charge by contacting the Fund's Principal Underwriter, Eaton Vance Distributors,
Inc.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
------------------------------------------------------------------------------------------------------------
1995 1994 1993\1/ 1992* 1991* 1990* 1989* 1988* 1987* 1986*
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
beginning of year $ 7.960 $ 8.070 $ 8.520 $ 8.450 $ 7.750 $ 8.560 $ 6.730 $ 9.670 $ 8.130 $ 6.330
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment
income $ 0.024 $ 0.052 $ 0.030 $ 0.046 $ 0.101 $ 0.109 $ 0.150 $ 0.114 $ 0.115 $ 0.128
Net realized and
unrealized gain
(loss) on
investments 1.086 (0.092) 0.660 0.544 1.499 (0.319) 1.980 (1.764) 2.335 1.742
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total income
(loss) from
investment
operations $ 1.110 $(0.040) $ 0.690 $ 0.590 $ 1.600 $(0.210) $ 2.130 $(1.650) $ 2.450 $ 1.870
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
From net investment
income $(0.032) $ (0.060) $ -- $ (0.040) $ (0.080) $ (0.110) $ (0.080) $ (0.060) $ (0.110) $ (0.070)
In excess of net
investment income (0.018) -- -- -- -- -- -- -- -- --
From net realized
gains on
investments (0.083) (0.010) (1.140) (0.480) (0.820) (0.490) (0.220) (1.230) (0.800) --
In excess of net
realized gains on
investments (0.607) -- -- -- -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total
distributions $(0.740) $(0.070) $(1.140) $(0.520) $(0.900) $(0.600) $(0.300) $(1.290) $(0.910) $(0.070)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
NET ASSET VALUE, end
of year $ 8.330 $ 7.960 $ 8.070 $ 8.520 $ 8.450 $ 7.750 $ 8.560 $ 6.730 $ 9.670 $ 8.130
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
TOTAL RETURN\2/ 15.95% (0.75)% 7.63% 7.22% 23.24% (2.65)% 32.90% (18.96)% 34.03% 29.63%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of
year (000's omitted) $130,966 $130,269 $143,264 $143,695 $143,090 $80,582 $92,448 $84,667 $112,843 $90,853
Ratio of expenses
to average net
assets\1/ 0.98% 0.95% 0.89% 0.87% 0.92% 0.96% 0.98% 1.00% 0.92% 0.91%
Ratio of net
investment income
to average net
assets 0.42% 0.61% 0.56% 0.53% 1.35% 1.38% 2.04% 1.66% 1.42% 1.77%
PORTFOLIO
TURNOVER\3/ -- 89% 84% 68% 73% 66% 54% 55% 57% 68%
<FN>
- ----------
* Audited by previous auditors.
\1/ Includes the Fund's share of Growth Portfolio's allocated expenses, for the year ended August 31, 1995 and for the period
from August 2, 1994 to August 31, 1994.
\2/ Total return is calculated assuming a purchase at the net asset value on the first day and a sale at the net asset value on
the last day of each period reported. Dividends and distributions, if any, are assumed to be reinvested at the net asset
value on the record date. Total return is computed on a non-annualized basis.
\3/ Portfolio turnover represents the rate of portfolio activity for the period while the Fund was making investments directly
in securities. The portfolio turnover for the period since the Fund transferred substantially all of its investable assets
to the Portfolio is shown in the Portfolio's financial statements which are incorporated by reference into the Statement of
Additional Information.
</TABLE>
<PAGE>
THE FUND'S INVESTMENT OBJECTIVE
- --------------------------------------------------------------------------------
EV TRADITIONAL GROWTH FUND'S INVESTMENT OBJECTIVE IS TO ACHIEVE CAPITAL GROWTH.
The Fund currently seeks to meet its investment objective by investing its
assets in the Growth Portfolio, a separate registered investment company. The
Portfolio has the same investment objective as the Fund and invests in a
carefully selected and continuously managed portfolio consisting primarily of
equity securities. The Fund's and the Portfolio's investment objective is
nonfundamental and may be changed when authorized by a vote of the Trustees of
the Trust or the Portfolio, respectively, without obtaining the approval of the
Fund's shareholders or the investors in the Portfolio, as the case may be. The
Trustees of the Trust have no present intention to change the Fund's objective
and intend to submit any proposed material change in the investment objective to
shareholders in advance for their approval.
INVESTMENT POLICIES AND RISKS
- --------------------------------------------------------------------------------
THE FUND SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY INVESTING IN THE
PORTFOLIO. The policy of the Portfolio is to invest in a carefully selected and
continuously managed portfolio consisting primarily of domestic and foreign
equity securities. It may invest in all kinds of companies. The Portfolio will
invest primarily in common stocks or securities convertible into common stocks
(including convertible debt), which the Investment Adviser believes meet the
criteria for capital appreciation. The criteria for investments in convertible
debt are the same as those used for the common stock of the issuer. The
Portfolio does not currently intend to invest more than 5% of its net assets in
convertible debt. It may also invest in other securities and obligations of all
kinds. These include preferred stocks, rights, warrants, bonds, repurchase
agreements and other evidences of indebtedness; however, the Portfolio does not
currently intend to invest more than 5% of its net assets in each of such
investments and currently intends to limit its investment in non-convertible
debt to non-convertible debt rated investment grade (i.e., rated Baa or higher
by Moody's Investors Service, Inc. or BBB or higher by Standard & Poor's Ratings
Group) or, if unrated, determined to be of comparable quality by the Portfolio's
Investment Adviser. The Portfolio may also invest in money market instruments.
While income is a subordinate consideration to capital growth, the Portfolio
will earn dividend or interest income to the extent that it receives dividends
or interest from its investments.
The Portfolio may invest in securities issued by foreign companies (including
American Depository Receipts and Global Depository Receipts). Such investments
may be subject to various risks such as fluctuations in currency and exchange
rates, foreign taxes, social, political and economic conditions in the countries
in which such companies operate, and changes in governmental, economic or
monetary policies both here and abroad. There may be less publicly available
information about a foreign company than about a comparable domestic company.
Since the securities markets in many foreign countries are not as developed as
those in the United States, the securities of many foreign companies are less
liquid and their prices are more volatile than securities of comparable domestic
companies. In order to hedge against possible variations in foreign exchange
rates pending the settlement of foreign securities transactions, the Portfolio
may buy or sell foreign currencies or may enter into forward foreign currency
exchange contracts to purchase or sell a specified currency at a specified price
and future date.
The Portfolio may purchase and sell exchange-traded futures contracts on stock
indices and options thereon to hedge against fluctuations in securities prices
or as a substitute for the purchase or sale of securities. Such transactions
involve a risk of loss or depreciation due to unanticipated adverse changes in
securities prices, which may exceed the Portfolio's initial investment in these
contracts. Futures contracts involve transaction costs. To the extent that the
Portfolio enters into futures contracts and options thereon traded on an
exchange regulated by the Commodity Futures Trading Commission, in each case
that are not for bona fide hedging purposes (as defined by the CFTC), the
aggregate initial margin and premiums required to establish these positions
(excluding the amount by which options are "in-the-money") may not exceed 5% of
the liquidation value of the Portfolio's investments, after taking into account
unrealized profits and unrealized losses on any contracts the Portfolio has
entered into. There can be no assurance that the Investment Adviser's use of
stock index futures and options thereon will be advantageous to the Portfolio.
The Portfolio may temporarily borrow up to 5% of the value of its total assets
to satisfy redemption requests or settle securities transactions. Certain
securities held by the Portfolio may permit the issuer at its option to "call",
or redeem, its securities. If an issuer redeems securities held by the Portfolio
during a time of declining interest rates, the Portfolio may not be able to
reinvest the proceeds in securities providing the same investment return as the
securities redeemed.
An investment in the Fund entails the risk that the principal value of Fund
shares may not increase or may decline. The Portfolio's investments in equity
securities are subject to the risk of adverse developments affecting particular
companies or industries and the stock market generally.
The Fund and the Portfolio have adopted certain fundamental investment
restrictions which are enumerated in detail in the Statement of Additional
Information and which may not be changed unless authorized by a Fund shareholder
vote and a Portfolio investor vote, respectively. Except for such enumerated
restrictions and as otherwise indicated in this Prospectus, the investment
objective and policies of the Fund and the Portfolio are not fundamental
policies and accordingly may be changed by the Trustees of the Trust and the
Portfolio without obtaining the approval of the Fund's shareholders or the
investors in the Portfolio, as the case may be. If any changes were made in the
Fund's investment objective, the Fund might have an investment objective
different from the objective which an investor considered appropriate at the
time the investor became a shareholder of the Fund.
- --------------------------------------------------------------------------------
THE FUND IS NOT INTENDED TO BE A COMPLETE INVESTMENT PROGRAM, AND PROSPECTIVE
INVESTORS SHOULD TAKE INTO ACCOUNT THEIR OBJECTIVES AND OTHER INVESTMENTS WHEN
CONSIDERING THE PURCHASE OF FUND SHARES. THE FUND CANNOT ASSURE ACHIEVEMENT OF
ITS CAPITAL GROWTH OBJECTIVE.
- --------------------------------------------------------------------------------
ORGANIZATION OF THE FUND AND THE PORTFOLIO
- --------------------------------------------------------------------------------
THE FUND IS A DIVERSIFIED SERIES OF EATON VANCE GROWTH TRUST, A BUSINESS TRUST
ESTABLISHED UNDER MASSACHUSETTS LAW PURSUANT TO A DECLARATION OF TRUST DATED MAY
25, 1989, AS AMENDED, AND ORGANIZED AS THE SUCCESSOR TO A MASSACHUSETTS
CORPORATION WHICH COMMENCED ITS INVESTMENT COMPANY OPERATIONS IN 1954. THE TRUST
IS A MUTUAL FUND -- AN OPEN-END, MANAGEMENT INVESTMENT COMPANY. The Trustees of
the Trust are responsible for the overall management and supervision of its
affairs. The Trust may issue an unlimited number of shares of beneficial
interest (no par value per share) in one or more series and because the Trust
can offer separate series (such as the Fund) it is known as a "series company."
Each share represents an equal proportionate beneficial interest in the Fund.
When issued and outstanding, the shares are fully paid and nonassessable by the
Trust and redeemable as described under "How to Redeem Fund Shares."
Shareholders are entitled to one vote for each full share held. Fractional
shares may be voted proportionately. Shares have no preemptive or conversion
rights and are freely transferable. In the event of the liquidation of the Fund,
shareholders are entitled to share pro rata in the net assets of the Fund
available for distribution to shareholders.
THE PORTFOLIO IS ORGANIZED AS A TRUST UNDER THE LAWS OF THE STATE OF NEW YORK
AND INTENDS TO BE TREATED AS A PARTNERSHIP FOR FEDERAL TAX PURPOSES. The
Portfolio, as well as the Trust, intends to comply with all applicable federal
and state securities laws. The Portfolio's Declaration of Trust provides that
the Fund and other entities permitted to invest in the Portfolio (e.g., other
U.S. and foreign investment companies, and common and commingled trust funds)
will each be liable for all obligations of the Portfolio. However, the risk of
the Fund incurring financial loss on account of such liability is limited to
circumstances in which both inadequate insurance exists and the Portfolio itself
is unable to meet its obligations. Accordingly, the Trustees of the Trust
believe that neither the Fund nor its shareholders will be adversely affected by
reason of the Fund investing in the Portfolio.
SPECIAL INFORMATION ON THE FUND/PORTFOLIO INVESTMENT STRUCTURE. An investor in
the Fund should be aware that the Fund, unlike mutual funds which directly
acquire and manage their own portfolios of securities, seeks to achieve its
investment objective by investing its assets in an interest in the Portfolio,
which is a separate investment company with an identical investment objective
(although the Fund may temporarily hold a de minimus amount of cash). Therefore,
the Fund's interest in the securities owned by the Portfolio is indirect. In
addition to selling an interest to the Fund, the Portfolio may sell interests to
other affiliated and non-affiliated mutual funds or institutional investors.
Such investors will invest in the Portfolio on the same terms and conditions and
will pay a proportionate share of the Portfolio's expenses. However, the other
investors investing in the Portfolio are not required to sell their shares at
the same public offering price as the Fund due to variations in sales
commissions and other operating expenses. Therefore, investors in the Fund
should be aware that these differences may result in differences in returns
experienced by investors in the various funds that invest in the Portfolio. Such
differences in returns are also present in other mutual fund structures,
including funds that have multiple classes of shares. For information regarding
the investment objective, policies and restrictions of the Portfolio, see "The
Fund's Investment Objective" and "Investment Policies and Risks". Further
information regarding investment practices may also be found in the Statement of
Additional Information.
The Trustees of the Trust have considered the advantages and disadvantages of
investing the assets of the Fund in the Portfolio, as well as the advantages and
disadvantages of the two-tier format. The Trustees believe that the structure
offers opportunities for substantial growth in the assets of the Portfolio, and
affords the potential for economies of scale for the Fund, at least when the
assets of the Portfolio exceed $300 million. The public shareholders of the Fund
have previously approved the policy of investing the Fund's assets in an
interest in the Portfolio.
The Fund may withdraw (completely redeem) all its assets from the Portfolio at
any time if the Board of Trustees of the Trust determines that it is in the best
interest of the Fund to do so. The investment objective and the nonfundamental
investment policies of the Fund and the Portfolio may be changed by the Trustees
of the Trust and the Portfolio without obtaining the approval of the
shareholders of the Fund or the investors in the Portfolio, as the case may be.
Any such change of the investment objective of the Fund or the Portfolio will be
preceded by thirty days' advance written notice to the shareholders of the Fund
or the investors in the Portfolio, as the case may be. In the event the Fund
withdraws all of its assets from the Portfolio, or the Board of Trustees of the
Trust determines that the investment objective of the Portfolio is no longer
consistent with the investment objective of the Fund, such Trustees would
consider what action might be taken, including investing the assets of the Fund
in another pooled investment entity or retaining an investment adviser to manage
the Fund's assets in accordance with its investment objective. The Fund's
investment performance may be affected by a withdrawal of all its assets from
the Portfolio.
Information regarding other pooled investment entities or funds which invest in
the Portfolio may be obtained by contacting Eaton Vance Distributors, Inc. (the
"Principal Underwriter" or "EVD"), 24 Federal Street, Boston, MA 02110, (617)
482-8260. Smaller investors in the Portfolio may be adversely affected by the
actions of a larger investor investing in the Portfolio. For example, if a large
investor withdraws from the Portfolio, the remaining investors may experience
higher pro rata operating expenses, thereby producing lower returns.
Additionally, the Portfolio may become less diverse, resulting in increased
portfolio risk, and experience decreasing economies of scale. However, this
possibility exists as well for historically structured funds which have large or
institutional investors.
Until 1992, the Administrator sponsored and advised historically structured
funds. Funds which invest all their assets in interests in a separate investment
company are a relatively new development in the mutual fund industry and,
therefore, the Fund may be subject to additional regulations than historically
structured funds.
The Declaration of Trust of the Portfolio provides that the Portfolio will
terminate 120 days after the complete withdrawal of the Fund or any other
investor in the Portfolio, unless either the remaining investors, by unanimous
vote at a meeting of such investors, or a majority of the Trustees of the
Portfolio, by written instrument consented to by all investors, agree to
continue the business of the Portfolio. This provision is consistent with
treatment of the Portfolio as a partnership for federal income tax purposes. See
"Distributions and Taxes" for further information. Whenever the Fund as an
investor in the Portfolio is requested to vote on matters pertaining to the
Portfolio (other than the termination of the Portfolio's business, which may be
determined by the Trustees of the Portfolio without investor approval), the Fund
will hold a meeting of Fund shareholders and will vote its interest in the
Portfolio for or against such matters proportionately to the instructions to
vote for or against such matters received from Fund shareholders. The Fund shall
vote shares for which it receives no voting instructions in the same proportion
as the shares for which it receives voting instructions. Other investors in the
Portfolio may alone or collectively acquire sufficient voting interests in the
Portfolio to control matters relating to the operation of the Portfolio, which
may require the Fund to withdraw its investment in the Portfolio or take other
appropriate action. Any such withdrawal could result in a distribution "in kind"
of portfolio securities (as opposed to a cash distribution from the Portfolio).
If securities are distributed, the Fund could incur brokerage, tax or other
charges in converting the securities to cash. In addition, the distribution in
kind may result in a less diversified portfolio of investments or adversely
affect the liquidity of the Fund. Notwithstanding the above, there are other
means for meeting shareholder redemption requests, such as borrowing.
The Trustees of the Trust, including a majority of the noninterested Trustees,
have approved written procedures designed to identify and address any potential
conflicts of interest arising from the fact that the Trustees of the Trust and
the Trustees of the Portfolio are the same. Such procedures require each Board
to take actions to resolve any conflict of interest between the Fund and the
Portfolio, and it is possible that the creation of separate Boards may be
considered. For further information concerning the Trustees and officers of each
of the Trust and the Portfolio, see the Statement of Additional Information.
MANAGEMENT OF THE FUND AND THE PORTFOLIO
- --------------------------------------------------------------------------------
THE PORTFOLIO ENGAGES BOSTON MANAGEMENT AND RESEARCH ("BMR"), A WHOLLY-OWNED
SUBSIDIARY OF EATON VANCE MANAGEMENT ("EATON VANCE"), AS ITS INVESTMENT ADVISER.
EATON VANCE, ITS AFFILIATES AND ITS PREDECESSOR COMPANIES HAVE BEEN MANAGING
ASSETS OF INDIVIDUALS AND INSTITUTIONS SINCE 1924 AND MANAGING INVESTMENT
COMPANIES SINCE 1931.
Acting under the general supervision of the Board of Trustees of the Portfolio,
BMR manages the Portfolio's investments and affairs and furnishes for the use of
the Portfolio office space and all necessary office facilities, equipment and
personnel for servicing the investments of the Portfolio. Under its investment
advisory agreement with the Portfolio, BMR receives a monthly advisory fee of
5/96 of 1% (equivalent to 0.625% annually) of average daily net assets of the
Portfolio up to and including $300 million and 1/24 of 1% (equivalent to 0.50%
annually) of average daily net assets over $300 million. For the fiscal year
ended August 31, 1995, the Portfolio paid BMR advisory fees equivalent to 0.625%
of the Portfolio's average daily net assets for such year.
BMR places the portfolio transactions of the Portfolio with many broker-dealer
firms and uses its best efforts to obtain execution of such transactions at
prices which are advantageous to the Portfolio and at reasonably competitive
commission rates. Subject to the foregoing, BMR may consider sales of shares of
the Fund or of other investment companies sponsored by BMR or Eaton Vance as a
factor in the selection of broker-dealer firms to execute portfolio
transactions.
Peter F. Kiely has acted as the portfolio manager since the Portfolio
commenced operations. Mr. Kiely has been a Vice President of Eaton Vance since
1980 and of BMR since 1992.
BMR OR EATON VANCE ACTS AS INVESTMENT ADVISER TO INVESTMENT COMPANIES AND
VARIOUS INDIVIDUAL AND INSTITUTIONAL CLIENTS WITH ASSETS UNDER MANAGEMENT OF
APPROXIMATELY $16 BILLION. Eaton Vance is a wholly-owned subsidiary of Eaton
Vance Corp., a publicly held holding company. Eaton Vance Corp., through its
subsidiaries and affiliates, engages in investment management and marketing
activities, fiduciary and banking services, oil and gas operations, real estate
investment, consulting and management, and development of precious metals
properties.
The Trust has retained the services of Eaton Vance to act as Administrator of
the Fund. The Trust has not retained the services of an investment adviser since
the Trust seeks to achieve the investment objective of the Fund by investing the
Fund's assets in the Portfolio. As Administrator, Eaton Vance provides the Fund
with general office facilities and supervises the overall administration of the
Fund. For these services Eaton Vance currently receives no compensation. The
Trustees of the Trust may determine, in the future, to compensate Eaton Vance
for such services.
The Portfolio and the Fund, as the case may be, will each be responsible for all
respective costs and expenses not expressly stated to be payable by BMR under
the investment advisory agreement, by Eaton Vance under the administrative
services agreement, or by EVD under the distribution agreement.
SERVICE PLAN
- ------------------------------------------------------------------------------
In addition to advisory fees and other expenses, the Fund pays service fees
pursuant to a Service Plan (the "Plan") designed to meet the service fee
requirements of the revised sales charge rule of the National Association of
Securities Dealers, Inc. THE PLAN PROVIDES THAT THE FUND MAY MAKE SERVICE FEE
PAYMENTS FOR PERSONAL SERVICES AND/OR THE MAINTENANCE OF SHAREHOLDER ACCOUNTS TO
THE PRINCIPAL UNDERWRITER, FINANCIAL SERVICE FIRMS ("AUTHORIZED FIRMS") AND
OTHER PERSONS IN AMOUNTS NOT EXCEEDING .25% OF THE FUND'S AVERAGE DAILY NET
ASSETS FOR ANY FISCAL YEAR. The Trustees of the Trust have implemented the Plan
by authorizing the Fund to make quarterly service fee payments to the Principal
Underwriter and Authorized Firms in amounts not expected to exceed .25% of that
portion of the Fund's average daily net assets for any fiscal year which is
attributable to shares of the Fund sold on or after July 1, 1989 and remaining
outstanding for at least twelve months. During the fiscal year ended August 31,
1995, the Fund made payments under the Plan to the Principal Underwriter and
Authorized Firms equivalent to 0.069% of the Fund's average daily net assets for
such year.
VALUING FUND SHARES
- ------------------------------------------------------------------------------
THE FUND VALUES ITS SHARES ONCE ON EACH DAY THE NEW YORK STOCK EXCHANGE (THE
"EXCHANGE") IS OPEN FOR TRADING, as of the close of regular trading on the
Exchange (normally 4:00 p.m. New York time). The Fund's net asset value per
share is determined by its custodian, Investors Bank & Trust Company ("IBT"),
(as agent for the Fund) in the manner authorized by the Trustees of the Trust.
Net asset value is computed by dividing the value of the Fund's total assets,
less its liabilities, by the number of shares outstanding. Because the Fund
invests its assets in an interest in the Portfolio, the Fund's net asset value
will reflect the value of its interest in the Portfolio (which, in turn,
reflects an interest in the underlying value of the Portfolio's assets and
liabilities).
Authorized Firms must communicate an investor's order to the Principal
Underwriter prior to the close of the Principal Underwriter's business day to
receive that day's net asset value per Fund share and the public offering price
based thereon. It is the Authorized Firms' responsibility to transmit orders
promptly to the Principal Underwriter, which is a wholly-owned subsidiary of
Eaton Vance.
The Portfolio's net asset value is also determined as of the close of regular
trading on the Exchange by IBT (as custodian and agent for the Portfolio) in the
manner authorized by the Trustees of the Portfolio. Net asset value is computed
by subtracting the liabilities of the Portfolio from the value of its total
assets. For further information regarding the valuation of the Portfolio's
assets, see "Determination of Net Asset Value" in the Statement of Additional
Information.
- --------------------------------------------------------------------------------
SHAREHOLDERS MAY DETERMINE THE VALUE OF THEIR INVESTMENT BY MULTIPLYING THE
NUMBER OF FUND SHARES OWNED BY THE CURRENT NET ASSET VALUE PER SHARE.
- --------------------------------------------------------------------------------
HOW TO BUY FUND SHARES
- ------------------------------------------------------------------------------
SHARES OF THE FUND MAY BE PURCHASED FOR CASH OR MAY BE ACQUIRED IN EXCHANGE FOR
SECURITIES. Investors may purchase shares of the Fund through Authorized Firms
at the effective public offering price, which price is based on the effective
net asset value per share plus the applicable sales charge. The Fund receives
the net asset value, while the sales charge is divided between the Authorized
Firm and the Principal Underwriter. The Principal Underwriter will furnish the
names of Authorized Firms to an investor upon request. The Fund may suspend the
offering of shares at any time and may refuse an order for the purchase of
shares. An Authorized Firm may charge its customers a fee in connection with
transactions executed by that Firm.
The sales charge may vary depending on the size of the purchase and the number
of shares of Eaton Vance funds the investor may already own, any arrangement to
purchase additional shares during a 13-month period or special purchase
programs. Complete details of how investors may purchase shares at reduced sales
charges under a Statement of Intention, Right of Accumulation, or various
employee benefit plans are available from Authorized Firms or from the Principal
Underwriter.
The current sales charges are:
<TABLE>
<CAPTION>
SALES CHARGE SALES CHARGE DEALER COMMISSION
AS PERCENTAGE OF AS PERCENTAGE OF AS PERCENTAGE OF
AMOUNT OF PURCHASE OFFERING PRICE AMOUNT INVESTED OFFERING PRICE
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $100,000 4.75% 4.99% 4.00%
$100,000 but less than $250,000 3.75% 3.90% 3.15%
$250,000 but less than $500,000 2.75% 2.83% 2.30%
$500,000 but less than $1,000,000 2.00% 2.04% 1.70%
$1,000,000 or more 0.00%* 0.00%* 0.50%
<FN>
* No sales charge is payable at the time of purchase on investments of $1 million or more. A contingent deferred sales charge
("CDSC") of 0.50% will be imposed on such investments (as described below) in the event of certain redemptions within 12 months
of purchase. Such purchases made before November 9, 1995 will be subject to a CDSC of 1% in the event of certain redemptions
within 18 months of purchase.
</TABLE>
The Principal Underwriter may at times allow discounts up to the full sales
charge. During periods when the discount includes the full sales charge,
Authorized Firms may be deemed to be underwriters as that term is defined in the
Securities Act of 1933. The Principal Underwriter may, from time to time, at its
own expense, provide additional incentives to Authorized Firms which employ
registered representatives who sell Fund shares and/or shares of other funds
distributed by the Principal Underwriter. In some instances, such additional
incentives may be offered only to certain Authorized Firms whose representatives
sell or are expected to sell significant amounts of shares.
An initial investment in the Fund must be at least $1,000. Once an account has
been established the investor may send investments of $50 or more at any time
directly to the Fund's transfer agent (the "Transfer Agent") as follows: First
Data Investor Services Group, BOS725, P.O. Box 1559, Boston, MA 02104. The
$1,000 minimum initial investment is waived for Bank Automated Investing
accounts, which may be established with an investment of $50 or more. See "Eaton
Vance Shareholder Services".
Shares of the Fund may be sold at net asset value to current and retired
Directors and Trustees of Eaton Vance funds, including the Portfolio; to
officers and employees and clients of Eaton Vance and its affiliates; to
registered representatives and employees of Authorized Firms; and bank employees
who refer customers to registered representatives of Authorized Firms; and to
such persons' spouses and children under the age of 21 and their beneficial
accounts. Shares may also be issued at net asset value (1) in connection with
the merger of an investment company with the Fund, (2) to investors making an
investment as part of a fixed fee program whereby an entity unaffiliated with
the Investment Adviser provides multiple investment services, such as
management, brokerage and custody, (3) where the amount invested represents
redemption proceeds from a mutual fund unaffiliated with Eaton Vance, if the
redemption occurred no more than 60 days prior to the purchase of Fund shares
and the redeemed shares were subject to a sales charge, and (4) to an investor
making an investment through an investment adviser, financial planner, broker or
other intermediary that charges a fee for its services and has entered into an
agreement with the Fund or its Principal Underwriter.
No initial sales charge and no contingent deferred sales charge will be payable
or imposed with respect to shares of the Fund purchased by retirement plans
qualifed under Section 401, 403(b) or 457 of the Internal Revenue Code of 1986,
as amended (the "Code") ("Eligible Plans"). In order to purchase shares without
a sales charge, the plan sponsor of an Eligible Plan must notify the Transfer
Agent of the Fund of its status as an Eligible Plan. Participant accounting
services (including trust fund reconciliation services) will be offered only
through third party recordkeepers and not by EVD. The Fund's Principal
Underwriter may pay commissions to Authorized Firms who initiate and are
responsible for purchases of shares of the Fund by Eligible Plans of up to 1.00%
of the amount invested in such shares.
ACQUIRING FUND SHARES IN EXCHANGE FOR SECURITIES. IBT, as escrow agent, will
receive securities acceptable to Eaton Vance, as Administrator, in exchange for
Fund shares at the applicable public offering price as shown above. The minimum
value of securities (or securities and cash) accepted for deposit is $5,000.
Securities accepted will be sold on the day of their receipt or as soon
thereafter as possible. The number of Fund shares to be issued in exchange for
securities will be the aggregate proceeds from the sale of such securities,
divided by the applicable public offering price per Fund share on the day such
proceeds are received. Eaton Vance will use reasonable efforts to obtain the
then current market price for such securities but does not guarantee the best
available price. Eaton Vance will absorb any transaction costs, such as
commissions, on the sale of the securities.
Securities determined to be acceptable should be transferred via book entry or
physically delivered, in proper form for transfer, through an Authorized Firm,
together with a completed and signed Letter of Transmittal in approved form
(available from Authorized Firms), as follows:
IN THE CASE OF BOOK ENTRY:
Deliver through Depository Fund Co.
Broker #2212
Investors Bank & Trust Company
For A/C EV Traditional Growth Fund
IN THE CASE OF PHYSICAL DELIVERY:
Investors Bank & Trust Company
Attention: EV Traditional Growth Fund
Physical Securities Processing Settlement Area
89 South Street
Boston, MA 02111
Investors who are contemplating an exchange of securities for shares of the
Fund, or their representatives, must contact Eaton Vance to determine whether
the securities are acceptable before forwarding such securities to IBT. Eaton
Vance reserves the right to reject any securities. Exchanging securities for
Fund shares may create a taxable gain or loss. Each investor should consult his
or her tax adviser with respect to the particular federal, state and local tax
consequences of exchanging securities for Fund shares.
- --------------------------------------------------------------------------------
IF YOU DON'T HAVE AN AUTHORIZED FIRM, EATON VANCE CAN RECOMMEND ONE.
- --------------------------------------------------------------------------------
HOW TO REDEEM FUND SHARES
- --------------------------------------------------------------------------------
A SHAREHOLDER MAY REDEEM FUND SHARES BY DELIVERING TO FIRST DATA INVESTOR
SERVICES GROUP, BOS725, P.O. BOX 1559, BOSTON, MASSACHUSETTS 02104, during its
business hours a written request for redemption in good order, plus any share
certificates with executed stock powers. The redemption price will be based on
the net asset value per Fund share next computed after such delivery. Good order
means that all relevant documents must be endorsed by the record owner (s)
exactly as the shares are registered and the signature(s) must be guaranteed by
a member of either the Securities Transfer Association's STAMP program or the
New York Stock Exchange's Medallion Signature Program, or certain banks, savings
and loan institutions, credit unions, securities dealers, securities exchanges,
clearing agencies and registered securities associations as required by a
regulation of the Securities and Exchange Commission and acceptable to First
Data Investor Services Group. In addition, in some cases, good order may require
the furnishing of additional documents such as where shares are registered in
the name of a corporation, partnership or fiduciary.
Within seven days after receipt of a redemption request in good order by First
Data Investor Services Group, the Fund will make payment in cash for the net
asset value of the shares as of the date determined above, reduced by the amount
of any federal income tax required to be withheld. Although the Fund normally
expects to make payment in cash for redeemed shares, the Trust, subject to
compliance with applicable regulations, has reserved the right to pay the
redemption price of shares of the Fund, either totally or partially, by a
distribution in kind of readily marketable securities withdrawn by the Fund from
the Portfolio. The securities so distributed would be valued pursuant to the
Portfolio's valuation procedures. If a shareholder received a distribution in
kind, the shareholder could incur brokerage or other charges in converting the
securities to cash.
To sell shares at their net asset value through an Authorized Firm (a
repurchase), a shareholder can place a repurchase order with the Authorized
Firm, which may charge a fee. The value of such shares is based upon the net
asset value calculated after EVD, as the Fund's agent, receives the order. It is
the Authorized Firm's responsibility to transmit promptly repurchase orders to
EVD. Throughout this Prospectus, the word "redemption" is generally meant to
include a repurchase.
If shares were recently purchased, the proceeds of redemption (or repurchase)
will not be sent until the check (including a certified or cashier's check)
received for the shares purchased has cleared. Payment for shares tendered for
redemption may be delayed up to 15 days from the purchase date when the purchase
check has not yet cleared. Redemptions or repurchases may result in a taxable
gain or loss.
Due to the high cost of maintaining small accounts, the Fund reserves the right
to redeem Fund accounts with balances of less than $1,000. Prior to such a
redemption, shareholders will be given 60 days' written notice to make an
additional purchase. Thus, an investor making an initial investment of $1,000
would not be able to redeem shares without being subject to this policy.
However, no such redemption would be required by the Fund if the cause of the
low account balance was a reduction in the net asset value of Fund shares.
If shares have been purchased at net asset value with no initial sales charge by
virtue of the purchase having been in the amount of $1 million or more and are
redeemed within 12 months of purchase, a CDSC of 0.50% will be imposed on such
redemption. (Such purchases made before November 9, 1995 will be subject to a
CDSC of 1% in the event of certain redemptions made within 18 months of
purchase.) The CDSC will be retained by the Principal Underwriter.
The CDSC will be imposed on an amount equal to the lesser of the current market
value or the original purchase price of the shares redeemed. Accordingly, no
CDSC will be imposed on increases in account value above the initial purchase
price, including any dividends or distributions that have been reinvested in
additional shares. It will be assumed that redemptions are made first from any
shares in the shareholder's account that are not subject to a CDSC.
The CDSC is waived for redemptions involving certain liquidation, merger or
acquisition transactions involving other investment companies. No initial sales
charge or CDSC will be imposed on Fund shares purchased by qualified retirement
plans. If a shareholder reinvests redemption proceeds within a 60- day period
and in accordance with the conditions set forth under "Eaton Vance Shareholder
Services -- Reinvestment Privilege," the shareholder's account will be credited
with the amount of any CDSC paid on such redeemed shares.
REPORTS TO SHAREHOLDERS
- ------------------------------------------------------------------------------
THE FUND WILL ISSUE TO ITS SHAREHOLDERS SEMI-ANNUAL AND ANNUAL REPORTS
CONTAINING FINANCIAL STATEMENTS. Financial statements included in annual reports
are audited by the Fund's independent certified public accountants. Shortly
after the end of each calendar year, the Fund will furnish all shareholders with
information necessary for preparing federal and state income tax returns.
Consistent with applicable law, duplicate mailings of shareholder reports and
certain other Fund information to shareholders residing at the same address may
be eliminated.
THE LIFETIME INVESTING ACCOUNT/DISTRIBUTION OPTIONS
- ------------------------------------------------------------------------------
AFTER AN INVESTOR MAKES AN INITIAL PURCHASE OF FUND SHARES, THE FUND'S TRANSFER
AGENT, FIRST DATA INVESTOR SERVICES GROUP, WILL SET UP A LIFETIME INVESTING
ACCOUNT FOR THE INVESTOR ON THE FUND'S RECORDS. This account is a complete
record of all transactions between the investor and the Fund which at all times
shows the balance of shares owned. The Fund will not issue share certificates
except upon request.
Each time a transaction takes place in a shareholder's account, the shareholder
will receive a statement showing complete details of the transaction and the
current share balance in the account. (Under certain investment plans,
statements may be sent only quarterly.) THE LIFETIME INVESTING ACCOUNT ALSO
PERMITS A SHAREHOLDER TO MAKE ADDITIONAL INVESTMENTS BY SENDING A CHECK FOR $50
OR MORE to First Data Investor Services Group.
Any questions concerning a shareholder's account or services available may be
directed by telephone to EATON VANCE SHAREHOLDER SERVICES at 800-225-6265,
extension 2, or in writing to First Data Investor Services Group, BOS725, P.O.
Box 1559, Boston, MA 02104 (please provide the name of the shareholder, the Fund
and the account number).
THE FOLLOWING DISTRIBUTION OPTIONS WILL BE AVAILABLE TO ALL LIFETIME INVESTING
ACCOUNTS and may be changed as often as desired by written notice to the Fund's
dividend disbursing agent, First Data Investor Services Group, BOS725, P.O. Box
1559, Boston, MA 02104. The currently effective option will appear on each
account statement.
Share Option -- Dividends and capital gains will be reinvested in additional
shares.
Income Option -- Dividends will be paid in cash, and capital gains will be
reinvested in additional shares.
Cash Option -- Dividends and capital gains will be paid in cash.
The Share Option will be assigned if no other option is specified.
Distributions, including those reinvested, will be reduced by any withholding
required under the federal income tax laws.
If the Income Option or Cash Option has been selected, dividend and/or capital
gains distribution checks which are returned by the United States Postal Service
as not deliverable or which remain uncashed for six months or more will be
reinvested in the account at the then current net asset value. Furthermore, the
distribution option on the account will be automatically changed to the Share
Option until such time as the shareholder selects a different option.
DISTRIBUTION INVESTMENT OPTION. In addition to the distribution options set
forth above, dividends and/or capital gains may be invested in additional shares
of another Eaton Vance fund. Before selecting this option, a shareholder should
obtain a prospectus of the other Eaton Vance fund and consider its objectives
and policies carefully.
"STREET NAME" ACCOUNTS. If shares of the Fund are held in a "street name"
account with an Authorized Firm, all recordkeeping, transaction processing and
payments of distributions relating to the beneficial owner's account will be
performed by the Authorized Firm, and not by the Fund and its Transfer Agent.
Since the Fund will have no record of the beneficial owner's transactions, a
beneficial owner should contact the Authorized Firm to purchase, redeem or
exchange shares, to make changes in or give instructions concerning the account,
or to obtain information about the account. The transfer of shares in a "street
name" account to an account with another dealer or to an account directly with
the Fund involves special procedures and will require the beneficial owner to
obtain historical purchase information about the shares in the account from the
Authorized Firm. Before establishing a "street name" account with an investment
firm, or transferring the account to another investment firm, an investor
wishing to reinvest distributions should determine whether the firm which will
hold the shares allows reinvestment of distributions in "street name" accounts.
- --------------------------------------------------------------------------------
UNDER A LIFETIME INVESTING ACCOUNT A SHAREHOLDER CAN MAKE ADDITIONAL
INVESTMENTS IN FUND SHARES BY SENDING A CHECK FOR $50 OR MORE.
- --------------------------------------------------------------------------------
THE EATON VANCE EXCHANGE PRIVILEGE
- ------------------------------------------------------------------------------
Shares of the Fund may currently be exchanged for shares of any of the following
funds: Eaton Vance Cash Management Fund, Eaton Vance Income Fund of Boston,
Eaton Vance Municipal Bond Fund L.P., Eaton Vance Tax Free Reserves and any fund
in the Eaton Vance Traditional Group of Funds on the basis of net asset value
per share of each fund at the time of the exchange (plus, in the case of an
exchange made within six months of the date of purchase, an amount equal to the
difference, if any, between the sales charge previously paid on the shares being
exchanged and the sales charge payable on the shares being acquired). Such
exchange offers are available only in states where shares of the fund being
acquired may be legally sold.
Each exchange must involve shares which have a net asset value of $1,000. The
exchange privilege may be changed or discontinued without penalty. Shareholders
will be given sixty (60) days' notice prior to any termination or material
amendment of the exchange privilege. The Fund does not permit the exchange
privilege to be used for "Market Timing" and may terminate the exchange
privilege for any shareholder account engaged in Market Timing activity. Any
shareholder account for which more than two round-trip exchanges are made within
any twelve month period will be deemed to be engaged in Market Timing.
Furthermore, a group of unrelated accounts for which exchanges are entered
contemporaneously by a financial intermediary will be considered to be engaged
in Market Timing.
Shares of the Fund which are subject to a CDSC may be exchanged into any of the
above funds without incurring the CDSC. The shares acquired in an exchange may
be subject to a CDSC upon redemption. For purposes of computing the CDSC payable
upon redemption of shares acquired in an exchange, the holding period of the
original shares is added to the holding period of the shares acquired in the
exchange.
First Data Investor Services Group makes exchanges at the next determined net
asset value after receiving an exchange request in good order (see "How to
Redeem Fund Shares"). Consult First Data Investor Services Group for additional
information concerning the exchange privilege. Applications and prospectuses of
the other funds are available from Authorized Firms or the Principal
Underwriter. The prospectus for each fund describes its investment objectives
and policies, and shareholders should obtain a prospectus and consider these
objectives and policies carefully before requesting an exchange.
Shares of certain other funds for which Eaton Vance acts as investment adviser
or administrator may be exchanged for Fund shares on the basis of the net asset
value per share of each fund at the time of exchange, but subject to any
restrictions or qualifications set forth in the current prospectus of any such
fund.
Telephone exchanges are accepted by First Data Investor Services Group provided
the investor has not disclaimed in writing the use of the privilege. To effect
such exchanges, call First Data Investor Services Group at 800-262- 1122 or,
within Massachusetts, 617-573-9403, Monday through Friday, 9:00 a.m. to 4:00
p.m. (Eastern Standard Time). Shares acquired by telephone exchange must be
registered in the same name(s) and with the same address as the shares being
exchanged. Neither the Fund, the Principal Underwriter nor First Data Investor
Services Group will be responsible for the authenticity of exchange instructions
received by telephone; provided that reasonable procedures to confirm that
instructions communicated are genuine have been followed. Telephone instructions
will be tape recorded. In times of drastic economic or market changes, a
telephone exchange may be difficult to implement. An exchange may result in a
taxable gain or loss.
EATON VANCE SHAREHOLDER SERVICES
- ------------------------------------------------------------------------------
THE FUND OFFERS THE FOLLOWING SERVICES, WHICH ARE VOLUNTARY, INVOLVE NO EXTRA
CHARGE, AND MAY BE CHANGED OR DISCONTINUED WITHOUT PENALTY AT ANY TIME. Full
information on each of the services described below and an application, where
required, are available from Authorized Firms or the Principal Underwriter. The
cost of administering such services for the benefit of shareholders who
participate in them is borne by the Fund as an expense to all shareholders.
INVEST-BY-MAIL -- FOR PERIODIC SHARE ACCUMULATION: Once the $1,000 minimum
investment has been made, checks of $50 or more payable to the order of the Fund
may be mailed directly to First Data Investor Services Group, BOS725, P.O. Box
1559, Boston, MA 02104 at any time -- whether or not dividends are reinvested.
The name of the shareholder, the Fund and the account number should accompany
each investment.
BANK AUTOMATED INVESTING -- FOR REGULAR SHARE ACCUMULATION: Cash investments of
$50 or more may be made automatically each month or quarter from a shareholder's
bank account. The $1,000 minimum initial investment and small account redemption
policy are waived for these accounts.
STATEMENT OF INTENTION: Purchases of $100,000 or more made over a 13-month
period are eligible for reduced sales charges. See "Statement of Intention and
Escrow Agreement".
RIGHT OF ACCUMULATION: Purchases may qualify for reduced sales charges when the
current market value of holdings (shares at current offering price), plus new
purchases, reaches $100,000 or more. Shares of the Eaton Vance funds listed
under "The Eaton Vance Exchange Privilege" may be combined under the Statement
of Intention and Right of Accumulation.
WITHDRAWAL PLAN: A shareholder may draw on shareholdings systematically with
monthly or quarterly checks in an amount specified by the shareholder. A minimum
deposit of $5,000 in shares is required. The maintenance of a withdrawal plan
concurrently with purchases of additional shares would be disadvantageous
because of the sales charge included in such purchases.
REINVESTMENT PRIVILEGE: A SHAREHOLDER WHO HAS REPURCHASED OR REDEEMED SHARES MAY
REINVEST ANY PORTION OR ALL OF THE REPURCHASE OR REDEMPTION PROCEEDS (PLUS THAT
AMOUNT NECESSARY TO ACQUIRE A FRACTIONAL SHARE TO ROUND OFF THE PURCHASE TO THE
NEAREST FULL SHARE) IN SHARES OF THE FUND, or, provided that the shares
repurchased or redeemed have been held for at least 60 days, in shares of any of
the other funds offered by the Principal Underwriter subject to an initial sales
charge, provided that the reinvestment is effected within 60 days after such
repurchase or redemption, and the privilege has not been used more than once in
the prior 12 months. Shares are sold to a reinvesting shareholder at the next
determined net asset value following timely receipt of a written purchase order
by the Principal Underwriter or by the fund the shares of which are being
purchased (or by such fund's transfer agent). The privilege is also available to
shareholders of the funds listed under "The Eaton Vance Exchange Privilege" who
wish to reinvest such redemption or repurchase proceeds in shares of the Fund.
If a shareholder reinvests redemption proceeds within the 60-day period the
shareholder's account will be credited with the amount of any CDSC paid on such
redeemed shares. To the extent that any shares of the Fund are sold at a loss
and the proceeds are reinvested in shares of the Fund (or other shares of the
Fund are acquired within the period beginning 30 days before and ending 30 days
after the date of the redemption) some or all of the loss generally will not be
allowed as a tax deduction. Shareholders should consult their tax advisers
concerning the tax consequences of reinvestments.
TAX-SHELTERED RETIREMENT PLANS: Shares of the Fund are available for purchase
in connection with the following tax-sheltered retirement plans:
-- Pension and Profit Sharing Plans for self-employed individuals,
corporations and non-profit organizations;
-- Individual Retirement Account Plans for individuals and their non-
employed spouses; and
-- 403(b) Retirement Plans for employees of public school systems,
hospitals, colleges and other non-profit organizations meeting certain
requirements of the Code.
Detailed information concerning these plans, including certain exceptions to
minimum investment requirements, and copies of the plans are available from the
Principal Underwriter. This information should be read carefully and
consultation with an attorney or tax adviser may be advisable. The information
sets forth the service fee charged for retirement plans and describes the
federal income tax consequences of establishing a plan. Under all plans,
dividends distributions will be automatically reinvested in additional shares.
DISTRIBUTIONS AND TAXES
- ------------------------------------------------------------------------------
The Fund's present policy is to distribute semi-annually substantially all of
the net investment income allocated to the Fund by the Portfolio, less the
Fund's direct and allocated expenses, and to distribute at least annually any
realized net capital gains. A portion of distributions from net investment
income may be eligible for the dividends-received deduction for corporations.
The Fund's distributions from its net investment income, net short-term capital
gains, and certain net foreign exchange gains will be taxable to shareholders as
ordinary income, whether received in cash or reinvested in additional shares of
the Fund. The Fund's distributions from its net long-term capital gains are
taxable to shareholders as such, whether received in cash or reinvested in
additional shares of the Fund and regardless of the length of time shares have
been owned by shareholders. If shares are purchased shortly before the record
date of a distribution, the shareholder will pay the full price for the shares
and then receive some portion of the price back as a taxable distribution.
Certain distributions, if declared in October, November or December and paid the
following January, will be taxed to shareholders as if received on December 31
of the year in which they are declared.
Sales charges paid upon a purchase of shares of the Fund cannot be taken into
account for purposes of determining gain or loss on a redemption or exchange of
the shares before the 91st day after their purchase to the extent shares of the
Fund or of another fund are subsequently acquired pursuant to the Fund's
reinvestment or exchange privilege. In addition, losses realized on a redemption
of Fund shares may be disallowed under certain "wash sale" rules if within a
period beginning 30 days before and ending 30 days after the date of redemption
other shares of the Fund are acquired. Any disregarded or disallowed amounts
will result in an adjustment to the shareholder's tax basis in some or all of
any other shares acquired.
Shareholders will receive annually tax information notices and Forms 1099 to
assist in the preparation of reporting on their federal and state income tax
returns for the prior calendar year's distributions, proceeds from the
redemption or exchange of Fund shares, and federal income tax withheld (if any)
by the Fund's Transfer Agent.
The Fund intends to qualify as a regulated investment company under the Code,
and to satisfy all requirements necessary to be relieved of federal taxes on
income and gains it distributed to shareholders. In satisfying these
requirements, the Fund will treat itself as owning its proportionate share of
each of the Portfolio's assets and as entitled to the income of the Portfolio
properly attributable to such share.
- --------------------------------------------------------------------------------
AS A REGULATED INVESTMENT COMPANY UNDER THE CODE, THE FUND DOES NOT PAY
FEDERAL INCOME OR EXCISE TAXES TO THE EXTENT THAT IT DISTRIBUTES TO
SHAREHOLDERS ITS NET INVESTMENT INCOME AND NET REALIZED CAPITAL GAINS IN
ACCORDANCE WITH THE TIMING REQUIREMENTS IMPOSED BY THE CODE. AS A PARTNERSHIP
UNDER THE CODE, THE PORTFOLIO DOES NOT PAY FEDERAL INCOME OR EXCISE TAXES.
- --------------------------------------------------------------------------------
PERFORMANCE INFORMATION
- ------------------------------------------------------------------------------
FROM TIME TO TIME, THE FUND MAY ADVERTISE ITS AVERAGE ANNUAL TOTAL RETURN. The
Fund's average annual total return is determined by multiplying a hypothetical
initial purchase order of $1,000 by the average annual compounded rate of return
(including capital appreciation/depreciation, and dividends and distributions
paid and reinvested) for the stated period and annualizing the result. The
average annual total return calculation assumes the maximum sales charge is
deducted from the initial $1,000 purchase order and that all dividends and
distributions are reinvested at net asset value on the reinvestment dates during
the period. The Fund may also publish annual and cumulative total return figures
from time to time.
The Fund may also furnish total return calculations based on investments at
various sales charge levels or at net asset value. Any performance data which is
based on the Fund's net asset value per share would be reduced if a sales charge
were taken into account. The Fund's performance may be compared in publications
to the performance of various indices and investments for which reliable data is
available, and to averages, performance rankings, or other information prepared
by recognized mutual fund statistical services.
Investors should note that the investment results of the Fund will fluctuate
over time, and any presentation of the Fund's total return for any prior period
should not be considered a representation of what an investment may earn or what
an investor's total return may be in any future period.
STATEMENT OF INTENTION AND ESCROW AGREEMENT
- ------------------------------------------------------------------------------
TERMS OF ESCROW. If the investor, on an application, makes a Statement of
Intention to invest a specified amount over a thirteen month period, then out of
the initial purchase (or subsequent purchases if necessary) 5% of the dollar
amount specified on the application shall be held in escrow by the escrow agent
in the form of shares (computed to the nearest full share at the public offering
price applicable to the initial purchase hereunder) registered in the investor's
name. All income dividends and capital gains distributions on escrowed shares
will be paid to the investor or to his order.
When the minimum investment so specified is completed, the escrowed shares will
be delivered to the investor. If the investor has an accumulation account the
shares will remain on deposit under the investor's account.
If total purchases under this Statement of Intention are less than the amount
specified, the investor will promptly remit to EVD any difference between the
sales charge on the amount specified and on the amount actually purchased. If
the investor does not within 20 days after written request by EVD or the
financial service firm pay such difference in sales charge, the escrow agent
will redeem an appropriate number of the escrowed shares in order to realize
such difference. Full shares remaining after any such redemption together with
any excess cash proceeds of the shares so redeemed will be delivered to the
investor or to his order by the escrow agent.
In signing the application, the investor irrevocably constitutes and appoints
the escrow agent the investor's attorney to surrender for redemption any or all
escrowed shares with full power of substitution in the premises.
PROVISION FOR RETROACTIVE PRICE ADJUSTMENT. If total purchases made under this
Statement are large enough to qualify for a lower sales charge than that
applicable to the amount specified, all transactions will be computed at the
expiration date of this Statement to give effect to the lower charge. Any
difference in sales charge will be refunded to the investor in cash, or applied
to the purchase of additional shares at the lower charge if specified by the
investor. This refund will be made by the financial service firm and by EVD. If
at the time of the recomputation a firm other than the original firm is placing
the orders, the adjustment will be made only on those shares purchased through
the firm then handling the investor's account.
<PAGE>
[LOGO]
EATON VANCE
MUTUAL FUNDS
EV TRADITIONAL
GROWTH
FUND
PROSPECTUS
JANUARY 1, 1996
EV TRADITIONAL
GROWTH FUND
24 FEDERAL STREET
BOSTON, MA 02110
- -------------------------------------------------------------------------------
INVESTMENT ADVISER OF GROWTH PORTFOLIO
Boston Management and Research, 24 Federal Street, Boston, MA 02110
ADMINISTRATOR OF EV TRADITIONAL GROWTH FUND
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
3808 One Exchange Square, Central, Hong Kong
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 89 South Street, Boston, MA 02111
TRANSFER AGENT
First Data Investor Services Group, BOS725, P.O. Box 1559, Boston, MA 02104
(800) 262-1122
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P., One Post Office Square, Boston, MA 02109
T-GFP
PART A
INFORMATION REQUIRED IN A PROSPECTUS
EV MARATHON
GOLD & NATURAL RESOURCES FUND
- ------------------------------------------------------------------------------
EV MARATHON GOLD & NATURAL RESOURCES FUND (THE "FUND") IS A MUTUAL FUND
SEEKING CAPITAL APPRECIATION AND PROTECTION OF PURCHASING POWER THROUGH
NATURAL RESOURCE RELATED INVESTMENTS. THE FUND IS A SERIES OF EATON VANCE
GROWTH TRUST (THE "TRUST").
Shares of the Fund are not deposits of, or guaranteed or endorsed by, any bank
or other insured depository institution, and are not federally insured by the
Federal Deposit Insurance Corporation, the Federal Reserve Board or any other
government agency. Shares of the Fund involve investment risks, including
fluctuations in value and the possible loss of some or all of the principal
investment.
This Prospectus is designed to provide you with information you should know
before investing. Please retain this document for future reference. A
Statement of Additional Information dated January 1, 1996 for the Fund, as
supplemented from time to time, has been filed with the Securities and
Exchange Commission and is incorporated herein by reference. The Statement of
Additional Information is available without charge from the Fund's principal
underwriter, Eaton Vance Distributors, Inc. (the "Principal Underwriter") 24
Federal Street, Boston, MA 02110 (telephone (800) 225-6265). The Fund's
investment adviser is Eaton Vance Management (the "Investment Adviser") which
is located at the same address.
- ------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE PAGE
<S> <C> <C> <C>
Shareholder and Fund Expenses .............................. 2 How to Buy Fund Shares ................................. 11
The Fund's Financial Highlights ............................ 3 How to Redeem Fund Shares .............................. 12
The Fund's Investment Objective ............................ 4 Reports to Shareholders ................................ 13
How the Fund Invests its Assets ............................ 4 The Lifetime Investing Account/Distribution
Special Considerations ..................................... 7 Options .............................................. 14
Organization of the Fund ................................... 8 The Eaton Vance Exchange Privilege ..................... 15
Management of the Fund ..................................... 9 Eaton Vance Shareholder Services ....................... 15
Distribution Plan .......................................... 9 Distributions and Taxes ................................ 16
Valuing Fund Shares ........................................ 11 Performance Information ............................... 17
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
PROSPECTUS DATED JANUARY 1, 1996
<PAGE>
SHAREHOLDER AND FUND EXPENSES
- ------------------------------------------------------------------------------
<TABLE>
SHAREHOLDER TRANSACTION EXPENSES
-------------------------------------------------------------------------------------------------------
<S> <C>
Sales Charges Imposed on Purchases of Shares None
Sales Charges Imposed on Reinvested Distributions None
Fees to Exchange Shares None
Range of Declining Contingent Deferred Sales Charges Imposed on Redemption
During the First Seven Years (as a percentage of redemption proceeds exclusive of
all reinvestments and capital appreciation in the account) 5.00%-0%
ANNUAL FUND OPERATING EXPENSES (as a percentage of average daily net assets)
-------------------------------------------------------------------------------------------------------
Investment Adviser Fee 0.75%
Rule 12b-1 Distribution (and Service) Fees 0.86%
Other Expenses 0.82%
----
Total Operating Expenses 2.43%
====
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
An investor would pay the following contingent deferred sales
charge and expenses on a $1,000 investment, assuming (a) 5%
annual return and (b) redemption at the end of each period: $75 $116 $150 $277
An investor would pay the following expenses on the same
investment, assuming (a) 5% annual return and (b) no
redemptions: $25 $ 76 $130 $277
</TABLE>
NOTES:
The table and Example summarize the aggregate expenses of the Fund and are
designed to help investors understand the costs and expenses they will bear,
directly or indirectly, by investing in the Fund. Information for the Fund is
based on its expenses for the most recent fiscal year.
The Example should not be considered a representation of past or future
expenses and actual expenses may be greater or less than those shown.
Federal regulations require the Example to assume a 5% annual return, but
actual annual return will vary. For further information regarding the expenses
of the Fund, see "The Fund's Financial Highlights", "Management of the Fund"
and "How to Redeem Fund Shares." A long-term shareholder in the Fund may pay
more than the economic equivalent of the maximum front-end sales charge
permitted by a rule of the National Association of Securities Dealers, Inc.
No contingent deferred sales charge is imposed on (a) shares purchased more
than six years prior to redemption, (b) shares acquired through the
reinvestment of dividends and distributions or (c) any appreciation in value
of other shares in the account (see "How to Redeem Fund Shares"), and no such
charge is imposed on exchanges of Fund shares for shares of the funds
currently listed under "The Eaton Vance Exchange Privilege."
<PAGE>
THE FUND'S FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------
The following information should be read in conjunction with the audited
financial statements included in the Fund's annual report to shareholders
which is incorporated by reference into the Statement of Additional
Information in reliance upon the report of Deloitte & Touche LLP, independent
certified public accountants, as experts in accounting and auditing. Further
information regarding the performance of the Fund is contained in its annual
report to shareholders which may be obtained without charge by contacting the
Principal Underwriter, Eaton Vance Distributors, Inc.
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED SEPTEMBER 30,
AUGUST 31, ----------------------------------------------------------------------------------
1995<F4> 1994 1993 1992 1991 1990 1989 1988<F2>
------ ---- ---- ---- ---- ---- ---- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning
of year ................ $14.890 $13.240 $11.850 $11.140 $12.140 $13.460 $11.420 $10.000
------- ------- ------- ------- ------- ------- ------- -------
INCOME FROM OPERATIONS:
Net investment income
(loss) ............... $(0.100)<F7> (0.050) (0.090) (0.083) $ 0.020 $ 0.069 $ 0.060 $ 0.134
Net realized and
unrealized gain (loss)
on investments ....... 1.630<F7> 2.650 1.480 1.103 (0.570) (0.009) 2.480 1.406
------- ------- ------ ------ ------ ------ ------ ------
Total income (loss)
from investment
operations ......... $ 1.530 $ 2.600 $ 1.390 $ 1.020 $(0.550) $ 0.060 $ 2.540 $ 1.540
------- ------- ------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
From net investment income $-- $-- $ -- $ -- $(0.020) $(0.069) $(0.074) $(0.120)
In excess of net
investment income<F5>. -- (0.020) -- (0.250) (0.110) (0.091) (0.146) --
Net realized gain on
investments .......... -- -- -- (0.060) (0.320) (1.220) (0.280) --
In excess of realized
gain on investments .. -- (0.930) -- -- -- -- -- --
------- ------- ------ ------- ------ ------ ------ ------
Total distributions .. $-- $(0.950) $ -- $(0.310) $(0.450) $(1.380) $(0.500) $(0.120)
------- ------- ------ ------- ------ ------ ------ ------
NET ASSET VALUE, end of year $16.420 $14.890 $13.240 $11.850 $11.140 $12.140 $13.460 $11.420
======= ======= ======= ======= ======= ======= ======= =======
TOTAL RETURN<F6>.......... 10.28% 20.47% 11.73% 9.44% (4.36)% 0.01% 22.96% 15.39%
RATIOS/SUPPLEMENTAL DATA<F1>:
Net assets, end of year
(000 omitted) ........ $15,259 $13,055 $ 5,792 $ 3,775 $ 4,042 $ 4,391 $ 2,999 $ 2,424
Ratio of net expenses to
average daily net assets 2.43%<F3> 2.64% 3.15% 3.26% 3.29% 2.50% 1.62% 0.99%<F3>
Ratio of net investment
income (loss) to
average daily net
assets ............... (0.74)%<F3> (0.96)% (0.92)% (0.67)% 0.17% 0.33% 0.45% 0.83%<F3>
PORTFOLIO TURNOVER ....... 49% 17% 57% 32% 27% 35% 53% 25%
<FN>
<F1> For the six years ended September 30, 1993, the operating expenses of the Fund reflect a reduction of the investment adviser
fee, an allocation of expenses to the Investment Adviser, or both. Had such actions not been taken, net investment income per
share and the ratios would have been as follows:
NET INVESTMENT INCOME (LOSS) PER SHARE ......... $(0.210) $(0.240) $(0.110) $(0.300) $(0.600) $(0.980)
======= ======= ======= ======= ======= =======
RATIOS (As a percentage of average daily net assets):
Expenses .................................... 3.90% 4.65% 4.42% 5.23% 6.87% 7.90%<F3>
Net investment income (loss) ................ (1.67)% (2.06)% (0.96)% (2.40)% (4.80)% (6.08)%<F3>
<F2> For the period from the start of business, October 21, 1987, to September 30, 1988.
<F3> Computed on an annualized basis.
<F4> For the eleven months ended August 31, 1995.
<F5> Distributions from paid-in capital for the years ended September 30, 1992 and for the years prior thereto have been restated
to conform with the treatment under current financial reporting standards.
<F6> Total return is calculated assuming a purchase at the net asset value on the first day and a sale at the net asset value on
the last day of each period. Dividends and distributions, if any, are assumed to be reinvested at the net asset value on
the reinvestment date.
<F7> Per share data is based on average shares outstanding.
</TABLE>
<PAGE>
THE FUND'S INVESTMENT OBJECTIVE
- ------------------------------------------------------------------------------
THE FUND'S INVESTMENT OBJECTIVE IS CAPITAL APPRECIATION AND PROTECTION OF THE
PURCHASING POWER OF THE SHAREHOLDER'S CAPITAL. The Fund will concentrate its
assets in natural resource related investments and may engage in various
active management strategies, as described below. Although the Fund will
derive income from some of its investments, current income is not an
investment objective and will not be a primary consideration in selecting
securities for the Fund's portfolio. There can be no assurance that the Fund
will achieve its investment objective.
Except as otherwise indicated in this Prospectus, the investment objective and
policies of the Fund may be changed by the Trustees of the Trust without
shareholder approval, although the Trustees intend to submit material changes
in the investment objective to shareholders for their approval. If any changes
were made, the Fund might have investment objectives different from the
objectives which an investor considered appropriate at the time the investor
became a shareholder in the Fund.
HOW THE FUND INVESTS ITS ASSETS
- ------------------------------------------------------------------------------
BASIC INVESTMENT STRATEGIES. The Fund seeks to achieve its investment
objective through a portfolio of domestic and foreign natural resource related
investments. Under normal investment conditions the Fund expects that it will
invest primarily in common stocks, but it may also hold convertible bonds,
convertible preferred stocks, warrants, preferred stocks and debt securities
if the Fund's investment adviser, Eaton Vance Management ("Eaton Vance"),
believes such investments would help to achieve the Fund's investment
objective. The Fund may also invest in debt, preferred or convertible
securities, the value of which is related to the market value of some natural
resource asset ("asset-related securities"). See "Special Considerations --
Asset-Related Securities" below. In making investments for the Fund, Eaton
Vance will seek to identify companies or asset-related securities it believes
are attractively priced relative to the intrinsic value of the underlying
natural resource assets, revenues or profits or are especially well positioned
to benefit during particular periods of investment or inflationary cycles.
The Fund may also from time to time invest to a limited extent in natural
resource-related direct placement securities and venture capital companies and
in gold or silver bullion, strategic metals, and gold or silver coins. See
"Direct Placement Securities and Venture Capital Investments" and "Metals
Investments" below.
WHEN EATON VANCE ANTICIPATES SIGNIFICANT ECONOMIC OR POLITICAL INSTABILITY,
SUCH AS HIGH INFLATION OR TURMOIL IN THE FOREIGN CURRENCY EXCHANGE MARKETS,
THE FUND, IN SEEKING TO PROTECT THE PURCHASING POWER OF SHAREHOLDERS' CAPITAL,
MAY INVEST A MAJORITY OF ITS ASSETS IN COMPANIES THAT EXPLORE FOR, EXTRACT,
PROCESS OR DEAL IN GOLD OR IN ASSET-RELATED SECURITIES INDEXED TO THE VALUE OF
SOME NATURAL RESOURCE SUCH AS GOLD BULLION. Such a change in investment
strategy could require the Fund to liquidate portfolio assets and incur
transaction costs. There can be no assurance that any such change in
investment strategy will result in the realization of the Fund's investment
objective.
Except as described below, the Fund under normal circumstances will maintain
at least 65% of its total assets in natural resource related investments or in
asset-related securities.
At times Eaton Vance may judge that investment conditions make the Fund's
basic investment strategies described above inconsistent with the best
interests of shareholders. At such times Eaton Vance may use alternative
investment strategies primarily designed to reduce fluctuations in the value
of the Fund's assets. In implementing these temporary "defensive" strategies,
the Fund may invest in U.S. Government securities and money market securities,
including repurchase agreements, or hold a portion of its assets in cash or
cash equivalents. The Fund may also hold a portion of its assets in cash or
money market instruments, including repurchase agreements and cash
equivalents, for liquidity purposes. It is impossible to predict when, or for
how long, the Fund will use these alternative strategies.
NATURAL RESOURCE RELATED INVESTMENTS. Under normal investment conditions it is
anticipated that the Fund's portfolio will include a significant amount of
domestic and foreign natural resource related investments. A natural resource
related investment includes securities issued by companies engaged in
exploring for, developing, processing, fabricating, producing, distributing,
dealing in or owning natural resources, companies engaged in the creation or
development of technologies for the production or use of natural resources,
and companies engaged in the furnishing of technology, equipment, supplies or
services to the natural resource investment sector. Eaton Vance currently
deems a company to be in the natural resource investment sector (a) if at
least 50% of the non-current assets, capitalization, gross revenues or
operating profit of the company in the most recent or current fiscal year are
involved in or result from (whether directly or indirectly through affiliates)
any of the foregoing activities, or (b) if in Eaton Vance's judgment the
company's natural resource assets, revenues or profit are of such magnitude,
when compared with the total non-current assets, capitalization, gross
revenues or operating profit of the company, that favorable changes in the
value of such assets or level of its natural resource revenues or profit could
favorably affect the market value of the equity securities of the company.
Natural resources include substances, materials and energy derived from
natural sources which have economic value. Examples of natural resources
include precious metals (e.g., gold, silver and platinum), ferrous and non-
ferrous metals (e.g., iron, aluminum and copper), strategic metals (e.g.,
titanium, chromium, vanadium and niobium), energy resources (coal, oil,
natural gas, oil shale and uranium), timberland, undeveloped real property and
agricultural and other commodities.
Eaton Vance will seek to identify securities of companies in this investment
sector which, in its judgment, are undervalued relative to the value of their
natural resource assets, revenues or profits in light of current and
anticipated economic or financial conditions. Eaton Vance believes that the
market value of securities of companies that have different kinds of natural
resource assets, revenues or profits may move relatively independently of one
another during different stages of investment and inflationary cycles. Eaton
Vance's flexible investment approach enables it to change the Fund's
investment emphasis to various subsectors within the large natural resource
investment sector depending upon Eaton Vance's outlook as to developments and
trends which may affect the value of and prospects for different types of
natural resource related investments.
In reviewing natural resource related investments available to the Fund, Eaton
Vance will consider, among other investments, domestic and foreign companies
which may
* EXPLORE FOR, FINANCE, DEVELOP, PRODUCE OR HOLD GOLD, SILVER, PLATINUM
AND OTHER PRECIOUS METALS. Eaton Vance will give special emphasis in
this subsector to efficiently managed, low cost gold producers which are
able to operate profitably at the current level of gold prices, thereby
benefiting from any future increase in gold prices.
* EXPLORE FOR, FINANCE, DEVELOP OR PRODUCE ENERGY RESOURCES SUCH AS OIL,
NATURAL GAS, COAL, OIL SHALE AND URANIUM. In this subsector, Eaton
Vance will stress low cost producers whose reserves will allow expansion
of production and those companies with established earnings records in
both rising and falling energy markets.
* EXPLORE FOR, FINANCE, DEVELOP, PRODUCE OR HOLD STRATEGIC METALS, SUCH AS
TITANIUM, CHROMIUM, VANADIUM AND NIOBIUM.
* CREATE AND DEVELOP NEW GEOCHEMICAL TECHNOLOGY OR PROPRIETARY METHODS FOR
DETECTING, DEVELOPING, PRODUCING OR PROCESSING MINERAL DEPOSITS AND
OTHER NATURAL RESOURCES.
* OWN, LEASE OR HAVE RIGHTS TO HOLDINGS OF TIMBER AND TIMBERLANDS. This
would include those companies which manufacture or process pulp, paper,
wood products and other specialty products.
* PROVIDE NATURAL RESOURCE TRANSPORTATION, DISTRIBUTION AND PROCESSING
SERVICES, SUCH AS PIPELINES AND REFINING.
DIRECT PLACEMENT SECURITIES AND VENTURE CAPITAL INVESTMENTS. On occasion the
Fund may make natural resource related investments in "direct placement
securities" issued by a company directly to the Fund. Direct placement
securities are normally not available to small investors, but are often
offered to institutional investors such as the Fund. Eaton Vance believes
there exist opportunities for acquiring direct placement securities from
issuers (particularly from junior North American gold mining companies) with
substantial growth potential in the natural resources area.
Direct placement securities acquired by the Fund will be common stock, or
obligations or preferred stock having, as part of the package purchased,
equity features such as accompanying shares of common stock, securities
convertible into such shares, or conversion rights or warrants to purchase
such shares. The shares of common stock which are the subject of such equity
features will generally be the shares of the issuer, although in some cases
they may be the shares of a parent or other affiliate of the issuer, and will
usually have or be expected in time to have a public market. Nearly all
securities acquired by the Fund directly from an issuer and shares into which
such securities may be converted or which may be purchased on the exercise of
warrants will, however, be subject to legal or contractual delays in or
restrictions on resale and will therefore initially be treated as "restricted
securities" in the Fund's portfolio.
The Fund is also empowered to make natural resource related investments in
"venture capital companies" -- companies, the securities of which have no
public market at the time of investment. An investment of this type gives the
aggressive investor participation in a private enterprise which may, if
successful, afford significant appreciation potential. Venture capital
investing is by its very nature a high-risk activity which can result in
substantial losses.
Eaton Vance anticipates that the Fund's direct placement securities and venture
capital investments will constitute a small portion of its total portfolio, and
may include companies involved in the production of precious metals. Advances in
extractive and exploration technology as well as inflationary economic
conditions have provided opportunities for small and medium sized independent
companies to profitably exploit previously known gold orebodies and newly
discovered types of orebodies. Eaton Vance believes that investing in such
companies may produce superior investment returns. In this connection, Eaton
Vance will attempt to identify those entrepreneurially managed emerging
companies which concentrate in developing mines that offer the potential of
quick payback, relatively high rates of return at current prices, and the
possibility of orebody extensions.
All of such investments will involve risks to the Fund and its shareholders.
Therefore, the Fund may not invest more than 10% of its total assets, taken at
market value at the time of investment, in certain securities issued by venture
capital companies, certain over-the-counter options, unmarketable securities,
and repurchase agreements maturing in more than seven days. The Fund is further
subject to an additional investment restriction (set forth in the Statement of
Additional Information) which in effect prohibits an investment which would
cause more than 5% of its total assets, taken at market value, to be invested in
companies with less than three years of continuous operations. The Fund's direct
placement securities and venture capital investments are considered speculative
in nature and are not readily marketable.
METALS INVESTMENTS. In addition to investments in natural resource related
securities, the Fund may invest up to 10% of its portfolio in gold or silver
bullion, strategic metals, and gold or silver coins ("Metals Investments"). The
Fund will invest only in metals that are readily marketable, and in coins only
if there is an active quoted market for the coins in question. Coins will not be
purchased for their numismatic value.
In making direct investments in bullion or metals, the Fund normally will not
take possession of the bullion or metals, but instead will obtain receipts or
certificates representing ownership. In the event the Fund does take possession,
the bullion or metals would be delivered to and held by a nonaffiliated
sub-custodian in a segregated account. When it purchases bullion or metals,
either by purchasing receipts or certificates or by having a sub- custodian
physically hold such metals, the Fund will pay for the metals only upon actual
receipt. Although the Fund would incur storage, shipping and other costs by
owning bullion or metals, such costs should be minimized by the use of receipts
or certificates.
The Fund's Metals Investments will not generate income. The return to the Fund
from its Metals Investments will consist solely of market appreciation or
depreciation and gains or losses realized on sales. Accordingly, as indicated
above, the Fund will not invest more than 10% of its total assets, taken at
market value at the time of investment, in Metals Investments.
ACTIVE MANAGEMENT STRATEGIES. The Fund may engage in various active management
strategies, including entering into repurchase agreements and forward foreign
currency exchange contracts, writing and purchasing options on foreign
currencies, and leverage through borrowing. The Fund may write covered call and
covered put options on securities and metals, purchase such call and put
options, and enter into closing purchase and sale transactions with respect
thereto. The Fund may, for hedging or permissible non-hedging purposes, purchase
and sell futures contracts on various securities and metals and other physical
commodities, certificates of deposit, Eurodollar time deposits, securities
indices, economic indices (e.g., the Consumer Price Indices and the Commodity
Research Bureau Futures Price Index) and other financial instruments or indices,
purchase and write call and put options on any of such futures contracts and
enter into closing purchase and sale transactions with respect to such contracts
and options. The principal risks of active management strategies are discussed
below. The Fund expects that various new types of investments, hedging
techniques and management strategies will be developed and made available to
institutional investors in the future. Eaton Vance will consider making such
investments or using such techniques or strategies if it determines that they
are consistent with the Fund's investment objective and policies.
SPECIAL CONSIDERATIONS
- ------------------------------------------------------------------------------
The Fund's classification under the Investment Company Act of 1940 (the "1940
Act") as a "non-diversified" investment company allows it to invest more than
5% of its assets in the securities of any issuer and, during certain periods,
to own more than 10% of the voting securities of an issuer. Since a relatively
high percentage of the Fund's assets may from time to time be invested in the
securities of a limited number of issuers which may be in the natural resource
investment sector, the value of the Fund's shares could be adversely affected
by a single economic, political or regulatory occurrence or other development.
In any event, because the Fund expects to concentrate its investments in the
natural resources sector or various subsectors thereof, the value of its
shares will be especially affected by factors peculiar to this investment
sector and may fluctuate more widely than the value of shares of a mutual fund
which invests in a broader range of industries. The Fund should therefore be
considered as an investment vehicle in the natural resources sector, and not
as a balanced investment program.
FOREIGN INVESTMENTS. The Fund has no restrictions on the amount of its assets
that may be invested in securities of foreign issuers. The Fund may invest in
securities of foreign issuers either directly or in the form of American
Depository Receipts, European Depository Receipts or other similar securities
convertible into securities of foreign issuers. Investing in foreign
securities may represent a greater degree of risk than investing in domestic
securities, because of the possibility of exchange rate fluctuations, adoption
of adverse exchange control regulations, delays in settlement of transactions,
less publicly-available financial and other information, more volatile and
less liquid markets, less securities regulation, higher brokerage costs,
difficulties in enforcing judgments, less favorable tax provisions, war,
expropriation or nationalization of assets or other adverse governmental
actions. Since the Fund may invest in securities denominated or quoted in
currencies other than the United States dollar, changes in foreign currency
exchange rates may affect the value of securities in the portfolio and the
unrealized appreciation or depreciation of investments insofar as United
States investors are concerned.
GOLD-RELATED INVESTMENTS. As indicated above, under certain circumstances the
Fund may invest a majority of its assets in gold-related companies or in
asset-related securities. Based on historic experience, during periods of
economic or political instability the securities of gold-related companies may
be subject to wide price fluctuations, reflecting the high volatility of gold
prices during such periods. In addition, the instability of gold prices may
result in volatile earnings of gold-related companies which, in turn, may
affect adversely the financial condition of such companies. Gold mining
companies also are subject to the risks generally associated with mining
operations.
The major producers of gold include the Republic of South Africa, Russia,
Canada, the United States, Brazil and Australia. Sales of gold by Russia are
largely unpredictable and often relate to political and economic
considerations rather than to market forces. Economic, social and political
developments within South Africa may affect significantly South African gold
production.
The Fund does not intend to invest in companies the assets of which are
located primarily in the Republic of South Africa. This current limitation may
affect adversely the Fund's ability to invest in gold-related securities and
during certain periods may result in the Fund restricting its investments to
relatively few gold-related companies.
ASSET-RELATED SECURITIES. The Fund may invest in debt securities, preferred
stocks or convertible securities, the principal amount, redemption terms or
conversion terms of which are related to the market price of some natural
resource asset such as gold bullion. These securities are referred to as
"asset-related securities". While the market prices for an asset-related
security and the related natural resource asset generally are expected to move
in the same direction, there may not be perfect correlation in the two price
movements. Asset-related securities may not necessarily be secured by a
security interest in or claim on the underlying natural resource asset. The
asset-related securities in which the Fund may invest may bear interest or pay
preferred dividends at below market (or even relatively nominal) rates.
LEVERAGE THROUGH BORROWING. The Fund may borrow from banks or by entering into
reverse repurchase agreements to increase its portfolio holdings of
securities, commodities and commodity contracts. Such borrowings may be on a
secured or unsecured basis at fixed or variable rates of interest. A reverse
repurchase agreement is functionally identical to a repurchase agreement
except that the roles of the parties are reversed so that the Fund will sell
the the underlying security with the promise to repurchase. The 1940 Act
requires the Fund to maintain continuous asset coverage of not less than 300%
with respect to all borrowings. Leveraging will exaggerate any increase or
decrease in the net asset value of the Fund's portfolio, and in that respect
may be considered a speculative practice. The interest which the Fund must pay
on borrowed money, together with any additional fees to maintain a line of
credit or any minimum average balances required to be maintained by the bank,
are additional costs which will reduce or eliminate any net investment income
and may also offset any potential capital gains. Unless the appreciation and
income, if any, on assets acquired with borrowed funds exceed the costs of
borrowing, the use of leverage will diminish the investment performance of the
Fund compared with what it would have been without leverage. Successful use of
a leveraging strategy depends on Eaton Vance's ability to correctly predict
interest rates and market movements.
DERIVATIVE INSTRUMENTS. From time to time, the Fund may purchase or sell
derivative instruments (which are instruments that derive their value from
another instrument, security, index or currency) to enhance return, to hedge
against fluctuations in securities or commodity prices, interest rates or
currency exchange rates, or as a substitute for the purchase or sale of
securities, commodities or currency. The Fund's transactions in derivative
instruments may include the purchase or sale of futures contracts on
securities or commodities, securities indices, other indices, other financial
instruments or currencies; options on futures contracts; exchange-traded and
over-the-counter options on securities, indices or currency; and forward
foreign currency exchange contracts.
The Fund's transactions in derivative instruments involve a risk of loss or
depreciation due to unanticipated adverse changes in interest rates,
securities prices, the other financial instruments' prices or currency
exchange rates, or the inability to close out a position or default by the
counterparty. The loss on derivative instruments (other than purchased
options) may exceed the Fund's initial investment in these instruments. In
addition, the Fund may lose the entire premium paid for purchased options that
expire before they can be profitably exercised by the Fund. The Fund incurs
transaction costs in opening and closing positions in derivative instruments.
There can be no assurance that Eaton Vance's use of derivative instruments
will be advantageous to the Fund.
To the extent that the Fund enters into futures contracts, options on futures
contracts and options on foreign currencies traded on an exchange regulated by
the Commodity Futures Trading Commission ("CFTC"), in each case that are not
for bona fide hedging purposes (as defined by the CFTC), the aggregate initial
margin and premiums required to establish these positions (excluding the
amount by which options are "in-the-money") may not exceed 5% of the
liquidation value of the Fund's investments, after taking into account
unrealized profits and unrealized losses on any contracts the Fund has entered
into.
Forward contracts are individually negotiated and privately traded by currency
traders and their customers. A forward contract involves an obligation to
purchase or sell a specific currency (or basket of currencies) for an agreed
price at a future date, which may be any fixed number of days from the date of
the contract. The Fund may engage in cross-hedging by using forward contracts
in one currency (or basket of currencies) to hedge against fluctuations in the
value of securities denominated in a different currency if Eaton Vance
determines that there is an established historical pattern or correlation
between the two currencies (or the basket of currencies and the underlying
currency). Use of a different foreign currency magnifies the Fund's exposure
to foreign currency exchange rate fluctuations. The Fund may also use forward
contracts to shift its exposure to foreign currency exchange rate changes from
one currency to another.
CERTAIN INVESTMENT RESTRICTIONS AND POLICIES. The Fund has adopted certain
fundamental investment restrictions and policies which are enumerated in
detail in the Statement of Additional Information and which may not be changed
unless authorized by a shareholder vote. Briefly, among these fundamental
restrictions, the Fund may not pledge more than 33 1/3% of its total assets to
secure its permitted borrowings; or purchase more than 10% of the total
outstanding voting securities of an issuer, except when significant economic,
political or financial instability is anticipated. In addition, the Fund has
adopted a fundamental policy which requires it during normal market conditions
to concentrate at least 25% of its total assets in the natural resource group
of industries. Except for the fundamental investment restrictions and policies
specifically enumerated in the Statement of Additional Information, the
investment objective and policies of the Fund are not fundamental policies and
accordingly may be changed by the Trustees of the Trust without obtaining the
approval of the Fund's shareholders. While not required to do so, the Trustees
intend to submit any material change in the Fund's investment objective to the
shareholders for their approval.
ORGANIZATION OF THE FUND
- ------------------------------------------------------------------------------
THE FUND IS A NON-DIVERSIFIED SERIES OF EATON VANCE GROWTH TRUST (THE
"TRUST"), A BUSINESS TRUST ESTABLISHED UNDER MASSACHUSETTS LAW PURSUANT TO A
DECLARATION OF TRUST DATED MAY 25, 1989, AS AMENDED. THE TRUST IS A MUTUAL
FUND -- AN OPEN-END MANAGEMENT INVESTMENT COMPANY. The Fund changed its name
from Eaton Vance Natural Resources Trust to EV Marathon Gold & Natural
Resources Fund on April 1, 1994. The Trustees of the Trust are responsible for
the overall management and supervision of the affairs of the Fund. The Trust
may issue an unlimited number of shares of beneficial interest (no par value
per share) in one or more series and because the Trust can offer separate
series (such as the Fund) it is known as a "series company". Each share
represents an equal proportionate beneficial interest in the Fund. When issued
and outstanding, the shares are fully paid and nonassessable by the Trust and
redeemable as described under "How to Redeem Fund Shares". Shareholders are
entitled to one vote for each full share held. Fractional shares may be voted
proportionately. Shares have no preemptive or conversion rights and are freely
transferable. In the event of the liquidation of the Fund, shareholders are
entitled to share pro rata in the net assets of the Fund available for
distribution to shareholders.
MANAGEMENT OF THE FUND
- ------------------------------------------------------------------------------
THE TRUST ENGAGES EATON VANCE MANAGEMENT ("EATON VANCE") AS THE FUND'S
INVESTMENT ADVISER. EATON VANCE, ITS AFFILIATES AND ITS PREDECESSOR COMPANIES
HAVE BEEN MANAGING ASSETS OF INDIVIDUALS AND INSTITUTIONS SINCE 1924 AND
MANAGING INVESTMENT COMPANIES SINCE 1931.
Acting under the general supervision of the Board of Trustees of the Trust,
Eaton Vance manages the Fund's investments and affairs. Under its investment
advisory agreement with the Trust on behalf of the Fund, Eaton Vance receives
a monthly advisory fee of .0625% (equivalent to .75 of 1% annually) of the
average daily net assets of the Fund up to $500 million; the fee will be
reduced at various asset levels over $500 million. This fee may be higher than
that paid by many other investment companies.
For the fiscal year ended August 31, 1995, the Fund paid Eaton Vance advisory
fees equivalent to 0.75% (annualized), of the Fund's average daily net assets
for such period.
Eaton Vance also furnishes for the use of the Fund office space and all
necessary office facilities, equipment and personnel for servicing the
investments of the Fund. The Fund is responsible for the payment of all
expenses other than those expressly stated to be payable by Eaton Vance under
the investment advisory agreement.
EATON VANCE OR ITS AFFILIATES ACTS AS INVESTMENT ADVISER TO INVESTMENT
COMPANIES AND VARIOUS INDIVIDUAL AND INSTITUTIONAL CLIENTS WITH ASSETS UNDER
MANAGEMENT OF APPROXIMATELY $16 BILLION. Eaton Vance is a wholly-owned
subsidiary of Eaton Vance Corp., a publicly held holding company. Eaton Vance
Corp., through its subsidiaries and affiliates, engages in investment
management and marketing activities, fiduciary and banking services, oil and
gas operations, real estate investment, consulting, and management, and
development of precious metals properties. Eaton Vance Distributors, Inc. (the
"Principal Underwriter" or "EVD"), 24 Federal Street, Boston, MA 02110, a
wholly-owned subsidiary of Eaton Vance, acts as Principal Underwriter to the
Fund.
William D. Burt and Barclay Tittmann are the co-portfolio managers of the
Fund. Mr. Burt joined Eaton Vance as a Vice President in November, 1994.
Previously he was a Vice President of The Boston Company (1990-1994) and a
Vice President of Baring America Asset Management (1979-1990). Mr. Tittmann
joined Eaton Vance as a Vice President in October, 1993. He was a Vice
President, portfolio manager and analyst with Invesco Management and Research
(formerly Gardner and Preston Moss) from 1970-1993.
Eaton Vance places the Fund's portfolio security transactions for execution
with many broker-dealer firms and uses its best efforts to obtain execution of
such transactions at prices which are advantageous to the Fund and at
reasonably competitive commission rates. Subject to the foregoing, Eaton Vance
may consider sales of shares of the Fund or of other investment companies
sponsored by Eaton Vance as a factor in the selection of firms to execute
portfolio transactions.
DISTRIBUTION PLAN
- ------------------------------------------------------------------------------
THE FUND FINANCES DISTRIBUTION ACTIVITIES AND HAS ADOPTED A DISTRIBUTION PLAN
(THE "PLAN") PURSUANT TO RULE 12B-1 UNDER THE 1940 ACT. Rule 12b-1 permits a
mutual fund, such as the Fund, to finance distribution activities and bear
expenses associated with the distribution of its shares provided that any
payments made by the fund are made pursuant to a written plan adopted in
accordance with the Rule. The Plan is subject to, and complies with, the sales
charge rule of the National Association of Securities Dealers, Inc. (the "NASD
Rule"). The Plan is described further in the Statement of Additional
Information, and the following is a description of the salient features of the
Plan. The Plan provides that the Fund, subject to the NASD Rule, will pay
sales commissions and distribution fees to the Principal Underwriter only
after and as a result of the sale of shares of the Fund. On each sale of Fund
shares (excluding reinvestment of distributions) the Fund will pay the
Principal Underwriter (i) sales commissions equal to 5% of the amount received
by the Fund for each share sold and (ii) distribution fees calculated by
applying the rate of 1% over the prime rate then reported in The Wall Street
Journal to the outstanding balance of Uncovered Distribution Charges (as
described below) of the Principal Underwriter. The Principal Underwriter
currently expects to pay sales commissions (except on exchange transactions
and reinvestments) to a financial services firm (an "Authorized Firm") at the
time of sale equal to 4% of the purchase price of the shares sold by such
Firm. The Principal Underwriter will use its own funds (which may be borrowed
from banks) to pay such commissions. Because the payment of the sales
commissions and distribution fees to the Principal Underwriter is subject to
the NASD Rule described below, it will take the Principal Underwriter a number
of years to recoup the sales commissions paid by it to Authorized Firms from
the payments received by it from the Fund pursuant to the Plan.
THE NASD RULE REQUIRES THE FUND TO LIMIT ITS ANNUAL PAYMENTS OF SALES
COMMISSIONS AND DISTRIBUTION FEES TO AN AMOUNT NOT EXCEEDING .75% OF THE
FUND'S AVERAGE DAILY NET ASSETS FOR EACH FISCAL YEAR. Under its Plan, the
Fund accrues daily an amount at the rate of 1/365 of .75% of the Fund's net
assets, and pays such accrued amounts monthly to the Principal Underwriter.
The Plan requires such accruals to be automatically discontinued during any
period in which there are no outstanding Uncovered Distribution Charges under
the Plan. Uncovered Distribution Charges are calculated daily and, briefly,
are equivalent to all unpaid sales commissions and distribution fees to which
the Principal Underwriter is entitled under the Plan less all contingent
deferred sales charges theretofore paid to the Principal Underwriter. The
Eaton Vance organization may be considered to have realized a profit under the
Plan if at any point in time the aggregate amounts of all payments received by
the Principal Underwriter from the Fund, pursuant to the Plan, including any
contingent deferred sales charges, have exceeded the total expenses
theretofore incurred by such organization in distributing shares of the Fund.
Total expenses for this purpose will include an allocable portion of the
overhead costs of such organization and its branch offices.
Because of the NASD Rule limitation on the amount of sales commissions and
distribution fees paid during any fiscal year, a high level of sales of Fund
shares during the initial years of the Fund's operations would cause a large
portion of the sales commissions attributable to a sale of Fund shares to be
accrued and paid by the Fund to the Principal Underwriter in fiscal years
subsequent to the year in which such shares were sold. This spreading of sales
commissions payments under the Plan over an extended period would result in
the incurrence and payment of increased distribution fees under the Plan.
During the fiscal year ended August 31, 1995, the Fund paid sales commissions
under the Plan equivalent to .75% (annualized) of the Fund's average daily net
assets. As at August 31, 1995, the outstanding Uncovered Distribution Charges
of the Principal Underwriter on such day calculated under the Plan amounted to
approximately $427,000 (which amount was equivalent to 2.8% of the Fund's net
assets on such day).
THE PLAN ALSO AUTHORIZES THE FUND TO MAKE PAYMENTS OF SERVICE FEES TO THE
PRINCIPAL UNDERWRITER, AUTHORIZED FIRMS AND OTHER PERSONS IN AMOUNTS NOT
EXCEEDING .25% OF THE FUND'S AVERAGE DAILY NET ASSETS FOR EACH FISCAL YEAR.
The Trustees of the Trust have initially implemented this provision of the
Plan by authorizing the Fund to make quarterly payments of service fees to the
Principal Underwriter and Authorized Firms in amounts not expected to exceed
.25% of the Fund's average daily net assets for each fiscal year based on the
value of Fund shares sold by such persons and remaining outstanding for at
least twelve months. As permitted by the NASD Rule, such payments are made for
personal services and/or the maintenance of shareholder accounts. Service fees
are separate and distinct from the sales commissions and distribution fees
payable by the Fund to the Principal Underwriter, and as such are not subject
to automatic discontinuance when there are no outstanding Uncovered
Distribution Charges of the Principal Underwriter. For the fiscal year ended
August 31, 1995, the Fund made service fee payments equivalent to 0.11% of the
Fund's average daily net assets for such year.
The Principal Underwriter may, from time to time, at its own expense, provide
additional incentives to Authorized Firms which employ registered
representatives who sell the Fund's shares and/or shares of other funds
distributed by the Principal Underwriter. In some instances, such additional
incentives may be offered only to certain Authorized Firms whose
representatives sell or are expected to sell significant amounts of shares. In
addition, the Principal Underwriter may from time to time increase or decrease
the sales commissions payable to Authorized Firms.
The Fund may, in its absolute discretion, suspend, discontinue or limit the
offering of its shares at any time. In determining whether any such action
should be taken, the Fund's management intends to consider all relevant
factors, including without limitation the size of the Fund, the investment
climate and market conditions, the volume of sales and redemptions of Fund
shares, and the amount of Uncovered Distribution Charges of the Principal
Underwriter. The Plan may continue in effect and payments may be made under
the Plan following any such suspension, discontinuance or limitation of the
offering of Fund shares; however, the Fund is not contractually obligated to
continue the Plan for any particular period of time. Suspension of the
offering of Fund shares would not, of course, affect a shareholder's ability
to redeem shares.
VALUING FUND SHARES
- ------------------------------------------------------------------------------
THE FUND VALUES ITS SHARES ONCE ON EACH DAY THE NEW YORK STOCK EXCHANGE (THE
"EXCHANGE") IS OPEN FOR TRADING, as of the close of regular trading on the
Exchange (normally 4:00 p.m. New York time). The Fund's net asset value per
share is determined by its custodian, Investors Bank & Trust Company ("IBT"),
(as agent for the Fund) in the manner authorized by the Trustees of the Trust.
Net asset value is computed by dividing the value of the Fund's total assets,
less its liabilities, by the number of shares outstanding. The Trustees have
established procedures for the valuation of the Fund's assets; in general,
these valuations are based on market value or fair value, with special
provisions for valuing debt obligations, short-term investments, foreign
securities, hedging instruments, direct placement securities, investments in
Venture Capital Companies, and assets not having readily available market
quotations.
Authorized Firms must communicate an investor's order to the Principal
Underwriter prior to the close of the Principal Underwriter's business day to
receive that day's net asset value per share. It is the Authorized Firms'
responsibility to transmit orders promptly to the Principal Underwriter, which
is a wholly-owned subsidiary of Eaton Vance.
SHAREHOLDERS MAY DETERMINE THE VALUE OF THEIR INVESTMENT BY MULTIPLYING
THE NUMBER OF FUND SHARES OWNED BY THE CURRENT NET ASSET VALUE PER SHARE.
HOW TO BUY FUND SHARES
- ------------------------------------------------------------------------------
SHARES OF THE FUND MAY BE PURCHASED FOR CASH OR MAY BE ACQUIRED IN EXCHANGE
FOR SECURITIES. Investors may purchase shares of the Fund through Authorized
Firms at the net asset value per share of the Fund next determined after an
order is effective. The Fund may suspend the offering of shares at any time
and may refuse an order for the purchase of shares. An Authorized Firm may
charge its customers a fee in connection with transactions executed by that
Firm.
An initial investment in the Fund must be at least $1,000. Once an account has
been established the investor may send investments of $50 or more at any time
directly to the Fund's transfer agent (the "Transfer Agent") as follows: First
Data Investor Services Group, BOS725, P.O. Box 1559, Boston, MA 02104. The
$1,000 minimum initial investment is waived for Bank Automated Investing
accounts, which may be established with an investment of $50 or more. See
"Eaton Vance Shareholder Services".
In connection with employee benefit or other continuous group purchase plans
under which the average initial purchase by a participant of the plan is
$1,000 or more, the Fund may accept initial investments of less than $1,000 on
the part of an individual participant. In the event a shareholder who is a
participant of such a plan terminates participation in the plan, his or her
shares will be transferred to a regular individual account. However, such
account will be subject to the right of redemption by the Fund as described
below under "How to Redeem Fund Shares."
ACQUIRING FUND SHARES IN EXCHANGE FOR SECURITIES. IBT, as escrow agent, will
receive securities acceptable to Eaton Vance, as Investment Adviser, in
exchange for Fund shares at their net asset value as determined above. The
minimum value of securities (or securities and cash) accepted for deposit is
$5,000. Securities accepted will be sold on the day of their receipt or as
soon thereafter as possible. The number of Fund shares to be issued in
exchange for securities will be the aggregate proceeds from the sale of such
securities, divided by the applicable net asset value per Fund share on the
day such proceeds are received. Eaton Vance will use reasonable efforts to
obtain the then current market price for such securities but does not
guarantee the best available price. Eaton Vance will absorb any transaction
costs, such as commissions, on the sale of the securities.
Securities determined to be acceptable should be transferred via book entry or
physically delivered, in proper form for transfer, through an Authorized Firm,
together with a completed and signed Letter of Transmittal in approved form
(available from Authorized Firms), as follows:
IN THE CASE OF BOOK ENTRY:
Deliver through Depository Trust Co.
Broker #2212
Investors Bank & Trust Company
For A/C EV Marathon Gold & Natural Resources Fund
IN THE CASE OF PHYSICAL DELIVERY:
Investors Bank & Trust Company
Attention: EV Marathon Gold & Natural Resources Fund
Physical Securities Processing Settlement Area
89 South Street
Boston, MA 02111
Investors who are contemplating an exchange of securities for shares of the
Fund, or their representatives, must contact Eaton Vance to determine whether
the securities are acceptable before forwarding such securities to IBT. Eaton
Vance reserves the right to reject any securities. Exchanging securities for
Fund shares may create a taxable gain or loss. Each investor should consult
his or her tax adviser with respect to the particular federal, state and local
tax consequences of exchanging securities for Fund shares.
IF YOU DON'T HAVE AN AUTHORIZED FIRM, EATON VANCE CAN RECOMMEND ONE.
HOW TO REDEEM FUND SHARES
- ------------------------------------------------------------------------------
A SHAREHOLDER MAY REDEEM FUND SHARES BY DELIVERING TO FIRST DATA INVESTOR
SERVICES GROUP, BOS725, P.O. BOX 1559, BOSTON, MASSACHUSETTS 02104, during its
business hours a written request for redemption in good order, plus any share
certificates with executed stock powers. The redemption price will be based on
the net asset value per share next computed after such delivery. Good order
means that all relevant documents must be endorsed by the record owner(s)
exactly as the shares are registered and the signature(s) must be guaranteed
by a member of either the Securities Transfer Association's STAMP program or
the New York Stock Exchange's Medallion Signature Program, or certain banks,
savings and loan institutions, credit unions, securities dealers, securities
exchanges, clearing agencies and registered securities associations as
required by a regulation of the Securities and Exchange Commission and
acceptable to First Data Investor Services Group. In addition, in some cases,
good order may require the furnishing of additional documents such as where
shares are registered in the name of a corporation, partnership or fiduciary.
Within seven days after receipt of a redemption request in good order by First
Data Investor Services Group, the Fund will make payment in cash for the net
asset value of the shares as of the date determined above, reduced by the
amount of any applicable contingent deferred sales charges (described below)
and any federal income tax required to be withheld.
To sell shares at their net asset value through an Authorized Firm (a
repurchase), a shareholder can place a repurchase order with the Authorized
Firm, which may charge a fee. The value of such shares is based upon the net
asset value calculated after EVD, as the Fund's agent, receives the order. It
is the Authorized Firm's responsibility to transmit promptly repurchase orders
to EVD. Throughout this Prospectus, the word "redemption" is generally meant
to include a repurchase.
If shares were recently purchased, the proceeds of redemption (or repurchase)
will not be sent until the check (including a certified or cashier's check)
received for the shares purchased has cleared. Payment for shares tendered for
redemption may be delayed up to 15 days from the purchase date when the
purchase check has not yet cleared. Redemptions or repurchases may result in a
taxable gain or loss.
Due to the high cost of maintaining small accounts, the Fund reserves the
right to redeem Fund accounts with balances of less than $1,000. Prior to such
a redemption, shareholders will be given 60 days' written notice to make an
additional purchase. Thus, an investor making an initial investment of $1,000
would not be able to redeem shares without being subject to this policy.
However, no such redemption would be required by the Fund if the cause of the
low account balance was a reduction in the net asset value of Fund shares. No
contingent deferred sales charge will be imposed with respect to such
involuntary redemptions.
CONTINGENT DEFERRED SALES CHARGE. Shares redeemed within the first six years
of their purchase (except shares acquired through the reinvestment of
distributions) generally will be subject to a contingent deferred sales
charge. This contingent deferred sales charge is imposed on any redemption the
amount of which exceeds the aggregate value at the time of redemption of (a)
all shares in the account purchased more than six years prior to the
redemption, (b) all shares in the account acquired through reinvestment of
distributions, and (c) the increase, if any, of value of all other shares in
the account (namely those purchased within the six years preceding the
redemption) over the purchase price of such shares. Redemptions are processed
in a manner to maximize the amount of redemption proceeds which will not be
subject to a contingent deferred sales charge. That is, each redemption will
be assumed to have been made first from the exempt amounts referred to in
clauses (a), (b) and (c) above, and second through liquidation of those shares
in the account referred to in clause (c) on a first-in-first-out basis. Any
contingent deferred sales charge which is required to be imposed on share
redemptions will be made in accordance with the following schedule:
YEAR OF CONTINGENT
REDEMPTION DEFERRED SALES
AFTER PURCHASE CHARGE
------------------------------------------------
First or Second ........... 5%
Third ..................... 4%
Fourth .................... 3%
Fifth ..................... 2%
Sixth ..................... 1%
Seventh and following ..... 0%
In calculating the contingent deferred sales charge upon the redemption of
Fund shares acquired in an exchange for shares of a fund currently listed
under "The Eaton Vance Exchange Privilege", the contingent deferred sales
charge schedule applicable to the shares at the time of purchase will apply
and the purchase of Fund shares acquired in the exchange is deemed to have
occurred at the time of the original purchase of exchanged shares.
No contingent deferred sales charge will be imposed on shares of the Fund
which have been sold to Eaton Vance, its affiliates or to their respective
employees or clients. The contingent deferred sales charge will be waived for
shares redeemed (1) pursuant to a Withdrawal Plan (see "Eaton Vance
Shareholder Services"), (2) as part of a required distribution from a tax-
sheltered retirement plan or (3) following the death of all beneficial owners
of such shares, provided the redemption is requested within one year of death
(a death certificate and other applicable documents may be required). The
contingent deferred sales charge will be paid to the Principal Underwriter or
the Fund. When paid to the Principal Underwriter it will reduce the amount of
Uncovered Distribution Charges calculated under the Fund's Distribution Plan.
See "Distribution Plan."
THE FOLLOWING EXAMPLE ILLUSTRATES THE OPERATION OF THE CONTINGENT DEFERRED
SALES CHARGE. ASSUME THAT AN INVESTOR PURCHASES $10,000 OF THE FUND'S
SHARES AND THAT 16 MONTHS LATER THE VALUE OF THE ACCOUNT HAS GROWN THROUGH
INVESTMENT PERFORMANCE AND REINVESTMENT OF DISTRIBUTIONS TO $12,000. THE
INVESTOR THEN MAY REDEEM UP TO $2,000 OF SHARES WITHOUT INCURRING A
CONTINGENT DEFERRED SALES CHARGE. IF THE INVESTOR SHOULD REDEEM $3,000 OF
SHARES, A CHARGE WOULD BE IMPOSED ON $1,000 OF THE REDEMPTION. THE RATE
WOULD BE 5% BECAUSE THE REDEMPTION WAS MADE IN THE SECOND YEAR AFTER THE
PURCHASE WAS MADE AND THE CHARGE WOULD BE $50.
REPORTS TO SHAREHOLDERS
- ------------------------------------------------------------------------------
THE FUND WILL ISSUE TO ITS SHAREHOLDERS SEMI-ANNUAL AND ANNUAL REPORTS
CONTAINING FINANCIAL STATEMENTS. Financial statements included in annual reports
are audited by the Fund's independent certified public accountants. Shortly
after the end of each calendar year, the Fund will furnish its shareholders with
information necessary for preparing federal and state tax returns.
THE LIFETIME INVESTING ACCOUNT/DISTRIBUTION OPTIONS
- ------------------------------------------------------------------------------
AFTER AN INVESTOR MAKES AN INITIAL PURCHASE OF FUND SHARES, THE FUND'S
TRANSFER AGENT, FIRST DATA INVESTOR SERVICES GROUP, WILL SET UP A LIFETIME
INVESTING ACCOUNT FOR THE INVESTOR ON THE FUND'S RECORDS. This account is a
complete record of all transactions between the investor and the Fund which at
all times shows the balance of shares owned. The Fund will not issue share
certificates except upon request.
Each time a transaction takes place in a shareholder's account, the shareholder
will receive a statement showing complete details of the transaction and the
current share balance in the account. (Under certain investment plans,
statements may be sent only quarterly). THE LIFETIME INVESTING ACCOUNT ALSO
PERMITS A SHAREHOLDER TO MAKE ADDITIONAL INVESTMENTS IN SHARES BY SENDING A
CHECK FOR $50 OR MORE TO First Data Investor Services Group.
Any questions concerning a shareholder's account or services available may be
directed by telephone to EATON VANCE SHAREHOLDER SERVICES at 800-225-6265,
extension 2, or in writing to First Data Investor Services Group, BOS725, P.O.
Box 1559, Boston, MA 02104 (please provide the name of the shareholder, the
Fund and the account number).
THE FOLLOWING DISTRIBUTION OPTIONS WILL BE AVAILABLE TO ALL LIFETIME INVESTING
ACCOUNTS and may be changed as often as desired by written notice to the
Fund's dividend disbursing agent, First Data Investor Services Group, BOS725,
P.O. Box 1559, Boston, MA 02104. The currently effective option will appear on
each account statement.
Share Option -- Dividends and capital gains will be reinvested in additional
shares.
Income Option -- Dividends will be paid in cash, and capital gains will be
reinvested in additional shares.
Cash Option -- Dividends and capital gains will be paid in cash.
The Share Option will be assigned if no other option is specified.
Distributions, including those reinvested, will be reduced by any withholding
required under the federal income tax laws.
If the Income Option or Cash Option has been selected, dividend and/or capital
gains distribution checks which are returned by the United States Postal
Service as not deliverable or which remain uncashed for six months or more
will be reinvested in the account in shares at the then current net asset
value. Furthermore, the distribution option on the account will be
automatically changed to the Share Option until such time as the shareholder
selects a different option.
DISTRIBUTION INVESTMENT OPTION. In addition to the distribution options set
forth above, dividends and/or capital gains may be invested in additional
shares of another Eaton Vance fund. Before selecting this option, a
shareholder should obtain a prospectus of the other Eaton Vance fund and
consider its objectives and policies carefully.
"STREET NAME" ACCOUNTS. If shares of the Fund are held in a "street name"
account with an Authorized Firm, all recordkeeping, transaction processing and
payments of distributions relating to the beneficial owner's account will be
performed by the Authorized Firm, and not by the Fund and its Transfer Agent.
Since the Fund will have no record of the beneficial owner's transactions, a
beneficial owner should contact the Authorized Firm to purchase, redeem or
exchange shares, to make changes in or give instructions concerning the
account, or to obtain information about the account. The transfer of shares in
a "street name" account to an account with another dealer or to an account
directly with the Fund involves special procedures and will require the
beneficial owner to obtain historical purchase information about the shares in
the account from the Authorized Firm. Before establishing a "street name"
account with an investment firm, or transferring the account to another
investment firm, an investor wishing to reinvest distributions should
determine whether the firm which will hold the shares allows reinvestment of
distributions in "street name" accounts.
UNDER A LIFETIME INVESTING ACCOUNT A SHAREHOLDER CAN MAKE ADDITIONAL
INVESTMENTS IN SHARES OF THE FUND BY SENDING A CHECK OF $50 OR MORE.
THE EATON VANCE EXCHANGE PRIVILEGE
- ------------------------------------------------------------------------------
Shares of the Fund currently may be exchanged for shares of one or more other
funds in the Eaton Vance Marathon Group of Funds (except Eaton Vance Prime
Rate Reserves) or Eaton Vance Money Market Fund, which are distributed with a
contingent deferred sales charge, on the basis of the net asset value per
share of each fund at the time of the exchange, provided that such exchange
offers are available only in states where shares of such fund being acquired
may be legally sold.
Each exchange must involve shares which have a net asset value of at least
$1,000. The exchange privilege may be changed or discontinued without penalty.
Shareholders will be given sixty (60) days' notice prior to any termination or
material amendment of the exchange privilege. The Fund does not permit the
exchange privilege to be used for "Market Timing" and may terminate the
exchange privilege for any shareholder account engaged in Market Timing
activity. Any shareholder account for which more than two round-trip exchanges
are made within any twelve month period will be deemed to be engaged in Market
Timing. Furthermore, a group of unrelated accounts for which exchanges are
entered contemporaneously by a financial intermediary will be considered to be
engaged in Market Timing.
First Data Investor Services Group makes exchanges at the next determined net
asset value after receiving an exchange request in good order (see "How to
Redeem Fund Shares"). Consult First Data Investor Services Group for
additional information concerning the exchange privilege. Applications and
prospectuses of the other funds are available from Authorized Firms or the
Principal Underwriter. The prospectus for each fund describes its investment
objectives and policies, and shareholders should obtain a prospectus and
consider these objectives and policies carefully before requesting an
exchange.
No contingent deferred sales charge is imposed on exchanges. For purposes of
calculating the contingent deferred sales charge upon redemption of shares
acquired in an exchange, the contingent deferred sales charge schedule
applicable to the shares at the time of purchase will apply and the purchase
of shares acquired in one or more exchanges is deemed to have occurred at the
time of the original purchase of the exchanged shares. For the contingent
deferred sales charge schedule applicable to the Eaton Vance Marathon Group of
Funds (except EV Marathon Strategic Income Fund and Class I shares of any EV
Marathon Limited Maturity Fund), see "How to Redeem Fund Shares". The
contingent deferred sales charge schedule applicable to EV Marathon Strategic
Income Fund and Class I shares of any EV Marathon Limited Maturity Fund is 3%,
2.5%, 2% or 1% in the event of a redemption occurring in the first, second,
third or fourth year, respectively, after the original share purchase.
Shares of the other funds in the Eaton Vance Marathon Group of Funds and
shares of Eaton Vance Money Market Fund may be exchanged for Fund shares on
the basis of the net asset value per share of each fund at the time of
exchange, but subject to any restrictions or qualifications set forth in the
current prospectus of any such fund.
Telephone exchanges are accepted by First Data Investor Services Group
provided the investor has not disclaimed in writing the use of the privilege.
To effect such exchanges, call First Data Investor Services Group at 800-262-
1122 or, within Massachusetts, 617-573-9403, Monday through Friday, 9:00 a.m.
to 4:00 p.m. (Eastern Standard Time). Shares acquired by telephone exchange
must be registered in the same name(s) and with the same address as the shares
being exchanged. Neither the Fund, the Principal Underwriter nor First Data
Investor Services Group, will be responsible for the authenticity of exchange
instructions received by telephone, provided that reasonable procedures to
confirm that instructions communicated are genuine have been followed.
Telephone instructions will be tape recorded. In times of drastic economic or
market changes, a telephone exchange may be difficult to implement. An
exchange may result in a taxable gain or loss.
EATON VANCE SHAREHOLDER SERVICES
- ------------------------------------------------------------------------------
THE FUND OFFERS THE FOLLOWING SERVICES, WHICH ARE VOLUNTARY, INVOLVE NO EXTRA
CHARGE, AND MAY BE CHANGED OR DISCONTINUED WITHOUT PENALTY AT ANY TIME. Full
information on each of the services described below and an application, where
required, are available from Authorized Firms or the Principal Underwriter.
The cost of administering such services for the benefit of shareholders who
participate in them is borne by the Fund as an expense to all shareholders.
INVEST-BY-MAIL -- FOR PERIODIC SHARE ACCUMULATION: Once the $1,000 minimum
investment has been made, checks of $50 or more payable to the order of EV
Marathon Gold & Natural Resources Fund may be mailed directly to First Data
Investor Services Group, BOS725, P.O. Box 1559, Boston, MA 02104 at any time
- -- whether or not distributions are reinvested. The name of the shareholder,
the Fund and the account number should accompany each investment.
BANK AUTOMATED INVESTING -- FOR REGULAR SHARE ACCUMULATION: Cash investments
of $50 or more may be made automatically each month or quarter from the
shareholder's bank account. The $1,000 minimum initial investment and small
account redemption policy are waived for these accounts.
WITHDRAWAL PLAN: A shareholder may draw on shareholdings systematically with
monthly or quarterly checks in an aggregate amount that does not exceed
annually 12% of the account balance at the time the plan is established. Such
amount will not be subject to a contingent deferred sales charge. See "How to
Redeem Fund Shares". A minimum deposit of $5,000 in shares is required.
REINVESTMENT PRIVILEGE: A SHAREHOLDER WHO HAS REPURCHASED OR REDEEMED SHARES
MAY REINVEST, WITH CREDIT FOR ANY CONTINGENT DEFERRED SALES CHARGES PAID ON
THE REDEEMED OR REPURCHASED SHARES, ANY PORTION OR ALL OF THE REPURCHASE OR
REDEMPTION PROCEEDS (PLUS THAT AMOUNT NECESSARY TO ACQUIRE A FRACTIONAL SHARE
TO ROUND OFF THE PURCHASE TO THE NEAREST FULL SHARE) IN SHARES OF THE FUND,
provided that the reinvestment is effected within 60 days after such
repurchase or redemption, and the privilege has not been used more than once
in the prior 12 months. Shares are sold to a reinvesting shareholder at the
next determined net asset value following timely receipt of a written purchase
order by the Principal Underwriter or by the Fund (or by the Fund's Transfer
Agent). To the extent that any shares of the Fund are sold at a loss and the
proceeds are reinvested in shares of the Fund (or other shares of the Fund are
acquired within the period beginning 30 days before and ending 30 days after
the date of redemption) some or all of the loss generally will not be allowed
as a tax deduction. Shareholders should consult their tax advisers concerning
the tax consequences of reinvestments.
TAX-SHELTERED RETIREMENT PLANS: Shares of the Fund are available for purchase
in connection with the following tax-sheltered retirement plans:
- --Pension and Profit Sharing Plans for self-employed individuals, corporations
and non-profit organizations;
- --Individual Retirement Account Plans for individuals and their non-employed
spouses; and
- --403(b) Retirement Plans for employees of public school systems, hospitals,
colleges and other non-profit organizations meeting certain requirements of
the Internal Revenue Code of 1986, as amended (the "Code").
Detailed information concerning these plans, including certain exceptions to
minimum investment requirements, and copies of the plans are available from
the Principal Underwriter. This information should be read carefully and
consultation with an attorney or tax adviser may be advisable. The information
sets forth the service fee charged for retirement plans and describes the
federal income tax consequences of establishing a plan. Under all plans,
dividends and distributions will be automatically reinvested in additional
shares.
DISTRIBUTIONS AND TAXES
- ------------------------------------------------------------------------------
DISTRIBUTIONS. It is the present policy of the Fund to make (A) at least one
distribution annually (normally in December) of all or substantially all of
its investment income earned, less its expenses, and (B) at least one
distribution (normally in December) of all or substantially all of the net
capital gains (reduced by any available capital loss carryforwards from prior
years) realized by the Fund, if any.
Shareholders may reinvest all distributions in shares of the Fund at net asset
value per share as of the close of business on the record date.
TAXES. The Fund intends to qualify as a regulated investment company under the
Code and consequently will not be required to pay any federal income or excise
taxes to the extent that it distributes to its shareholders its net investment
income and net realized capital gains in the manner required by the Code.
Distributions of the Fund from its net investment income, net short-term
capital gains and certain foreign exchange gains are taxable to shareholders
as ordinary income, whether received in cash or reinvested in additional
shares. A portion of distributions from the Fund's net investment income may
qualify for the dividends-received deduction for corporate shareholders.
Capital gains referred to in clause (B) above, if any, realized on sales of
investments and on options, futures and certain forward foreign currency
exchange transactions during the fiscal year, which ends on August 31, will
usually be distributed prior to the end of December. Distributions from the
Fund's net long-term capital gains are taxable to shareholders as long-term
capital gains, whether paid in cash or additional shares of the Fund and
regardless of the length of time Fund shares have been owned by the
shareholder.
If shares are purchased shortly before the record date of a distribution, the
shareholder will pay the full price for the shares and then receive some
portion of the price back as a taxable distribution. The amount, timing and
character of distributions to shareholders may be affected by special tax
rules governing the Fund's activities in options, futures and forward foreign
currency exchange transactions.
Certain distributions declared in October, November or December and paid the
following January will be taxable to shareholders as if received on December
31 of the year in which they are declared.
The Fund may be required to pay foreign taxes with respect to income (possibly
including, in some cases, capital gains) that it derives from investments in
foreign securities. If more than 50% of the value of the Fund's total assets
at the close of its taxable year (August 31) consists of securities in foreign
corporations, the Fund may make an election under Section 853 of the Code to
pass through to its shareholders the right to take the credit or deduction for
qualifying foreign taxes paid by the Fund during such year. The Fund will send
a written notice of any such election (not later than 60 days after the close
of its taxable year) to each shareholder indicating the amount to be treated
as the proportionate share of such taxes paid to each foreign country or U.S.
possession and the portion of the distribution which represents income derived
from sources within each country or U.S. possession. Each shareholder will
include in gross income (in addition to taxable distributions received from
the Fund) the proportionate share of such taxes, and can treat such amount as
paid by such shareholder for purposes of the deduction or credit for foreign
taxes on the shareholders own federal income tax return. Availability of the
deduction or credit for foreign taxes is subject to certain tax restrictions.
Shareholders will receive annually tax information notices and Forms 1099 to
assist in preparation of their federal and state tax returns the prior
calendar year's distributions, proceeds from the redemption or exchange of
Fund shares, and federal income tax (if any) withheld by the Fund's Transfer
Agent.
AS A REGULATED INVESTMENT COMPANY UNDER THE CODE, THE FUND DOES NOT PAY
FEDERAL INCOME OR EXCISE TAXES TO THE EXTENT THAT IT DISTRIBUTES TO
SHAREHOLDERS ITS NET INVESTMENT INCOME AND NET REALIZED CAPITAL GAINS IN
ACCORDANCE WITH THE TIMING REQUIREMENTS IMPOSED BY THE CODE.
PERFORMANCE INFORMATION
- ------------------------------------------------------------------------------
FROM TIME TO TIME, THE FUND MAY ADVERTISE ITS YIELD AND/OR AVERAGE ANNUAL
TOTAL RETURN. The Fund's current yield is calculated by dividing the net
investment income per share earned during a recent 30-day period by the
maximum offering price per share (net asset value) of the Fund on the last day
of the period and annualizing the resulting figure. The Fund's average annual
total return is determined by computing the average annual percentage change
in value of $1,000 invested at the maximum public offering price (net asset
value) for specified periods ending with the most recent calendar quarter,
assuming reinvestment of all distributions. The average annual total return
calculation assumes a complete redemption of the investment and the deduction
of any applicable contingent deferred sales charge at the end of the period.
The Fund may publish annual and cumulative total return figures from time to
time.
The Fund may also publish total return figures which do not take into account
any contingent deferred sales charge which may be imposed upon redemptions at
the end of the specified period. Any performance figure which does not take
into account the contingent deferred sales charge would be reduced to the
extent such charge is imposed upon a redemption.
Investors should note that the investment results of the Fund will fluctuate
over time, and any presentation of the Fund's current yield or total return
for any prior period should not be considered a representation of what an
investment may earn or what the Fund's yield or total return may be in any
future period.
<PAGE>
[LOGO]
EATON VANCE
MUTUAL FUNDS
EV MARATHON GOLD &
NATURAL RESOURCES FUND
PROSPECTUS
JANUARY 1, 1996
EV MARATHON GOLD &
NATURAL RESOURCES FUND
24 FEDERAL STREET
BOSTON, MA 02110
INVESTMENT ADVISER
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 89 South Street, Boston, MA 02111
TRANSFER AGENT
First Data Investor Services Group, BOS725, P.O. Box 1559, Boston, MA 02104
(800) 262-1122
AUDITORS
Deloitte &Touche LLP, 125 Summer Street, Boston, MA02110
NRP
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL INFORMATION
January 1, 1996
EV CLASSIC GREATER CHINA GROWTH FUND
24 Federal Street
Boston, Massachusetts 02110
(800) 225-6265
This Statement of Additional Information consists of two parts. Part I
provides general information about EV Classic Greater China Growth Fund (the
"Fund") and certain other series of Eaton Vance Growth Trust (the "Trust"). As
described in the Prospectus, the Fund invests its assets in a separate
registered investment company (the "Portfolio") with the same investment
objective and policies as the Fund. Part II provides information solely about
the Fund and the Portfolio. Where appropriate, Part I includes cross-
references to the relevant sections of Part II.
TABLE OF CONTENTS
PART I
Additional Information about Investment Policies ............. 1
Investment Restrictions ...................................... 6
Trustees and Officers ........................................ 9
Management of the Fund ....................................... 12
Custodian .................................................... 14
Service for Withdrawal ....................................... 15
Determination of Net Asset Value ............................. 15
Investment Performance ....................................... 16
Taxes ........................................................ 17
Portfolio Security Transactions .............................. 19
Other Information ............................................ 21
Independent Certified Public Accountants ..................... 22
Financial Statements ......................................... 22
Appendix A -- The Securities Markets in China and Hong Kong .. 23
Appendix B -- China Region Countries ......................... 35
PART II
Fees and Expenses ............................................ a-1
Performance Information ...................................... a-2
Principal Underwriter ........................................ a-2
Distribution Plan ............................................ a-3
Control Persons and Principal Holders of Securities .......... a-4
Appendix C -- Statistical Information ........................ C-1
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY THE FUND'S PROSPECTUS DATED JANUARY 1, 1996, AS SUPPLEMENTED
FROM TIME TO TIME. THIS STATEMENT OF ADDITIONAL INFORMATION SHOULD BE READ IN
CONJUNCTION WITH SUCH PROSPECTUS, A COPY OF WHICH MAY BE OBTAINED WITHOUT
CHARGE BY CONTACTING EATON VANCE DISTRIBUTORS, INC. (THE "PRINCIPAL
UNDERWRITER") (SEE BACK COVER FOR ADDRESS AND PHONE NUMBER).
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL INFORMATION
January 1, 1996
EV MARATHON GREATER CHINA GROWTH FUND
24 Federal Street
Boston, Massachusetts 02110
(800) 225-6265
This Statement of Additional Information consists of two parts. Part I
provides general information about EV Marathon Greater China Growth Fund (the
"Fund") and certain other series of Eaton Vance Growth Trust (the "Trust"). As
described in the Prospectus, the Fund invests its assets in a separate
registered investment company (the "Portfolio") with the same investment
objective and policies as the Fund. Part II provides information solely about
the Fund and the Portfolio. Where appropriate, Part I includes cross-
references to the relevant sections of Part II.
TABLE OF CONTENTS
PART I
Additional Information about Investment Policies .............. 1
Investment Restrictions ....................................... 6
Trustees and Officers ......................................... 9
Management of the Fund ........................................ 12
Custodian ..................................................... 14
Service for Withdrawal ........................................ 15
Determination of Net Asset Value .............................. 15
Investment Performance ........................................ 16
Taxes ......................................................... 17
Portfolio Security Transactions ............................... 19
Other Information ............................................. 21
Independent Certified Public Accountants ...................... 22
Financial Statements .......................................... 22
Appendix A -- The Securities Markets in China and Hong Kong ... 23
Appendix B -- China Region Countries .......................... 35
PART II
Fees and Expenses ............................................. a-1
Performance Information ....................................... a-2
Principal Underwriter ......................................... a-2
Distribution Plan ............................................. a-3
Control Persons and Principal Holders of Securities ........... a-4
Appendix C -- Statistical Information ......................... C-1
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY THE FUND'S PROSPECTUS DATED JANUARY 1, 1996, AS SUPPLEMENTED
FROM TIME TO TIME. THIS STATEMENT OF ADDITIONAL INFORMATION SHOULD BE READ IN
CONJUNCTION WITH SUCH PROSPECTUS, A COPY OF WHICH MAY BE OBTAINED WITHOUT
CHARGE BY CONTACTING EATON VANCE DISTRIBUTORS, INC. (THE "PRINCIPAL
UNDERWRITER") (SEE BACK COVER FOR ADDRESS AND PHONE NUMBER).
<PAGE>
Part B
Information Required in a Statement of Additional Information
STATEMENT OF
ADDITIONAL INFORMATION
January 1, 1996
EV TRADITIONAL GREATER CHINA GROWTH FUND
24 Federal Street
Boston, Massachusetts 02110
(800) 225-6265
This Statement of Additional Information consists of two parts. Part I
provides general information about EV Traditional Greater China Growth Fund
(the "Fund") and certain other series of Eaton Vance Growth Trust (the
"Trust"). As described in the Prospectus, the Fund invests its assets in
Greater China Growth Portfolio (the "Portfolio"), a separate registered
investment company with the same investment objective and policies as the
Fund. Part II provides information solely about the Fund. Where appropriate,
Part I includes cross-references to the relevant sections of Part II.
TABLE OF CONTENTS
Page
PART I
Additional Information about Investment Policies .............. 1
Investment Restrictions ....................................... 6
Trustees and Officers ......................................... 9
Management of the Fund ........................................ 12
Custodian ..................................................... 14
Service for Withdrawal ........................................ 15
Determination of Net Asset Value .............................. 15
Investment Performance ........................................ 16
Taxes ......................................................... 17
Portfolio Security Transactions ............................... 19
Other Information ............................................. 21
Independent Certified Public Accountants ...................... 22
Financial Statements .......................................... 22
Appendix A -- The Securities Markets in China and Hong Kong ... 23
Appendix B -- China Region Countries .......................... 35
PART II
Fees and Expenses ............................................. a-1
Performance Information ....................................... a-2
Services for Accumulation ..................................... a-2
Principal Underwriter ......................................... a-3
Distribution Plan ............................................. a-3
Control Persons and Principal Holders of Securities ........... a-4
Appendix C -- Statistical Information ......................... C-1
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY THE FUND'S PROSPECTUS DATED JANUARY 1, 1996, AS SUPPLEMENTED
FROM TIME TO TIME. THIS STATEMENT OF ADDITIONAL INFORMATION SHOULD BE READ IN
CONJUNCTION WITH SUCH PROSPECTUS, A COPY OF WHICH MAY BE OBTAINED WITHOUT
CHARGE BY CONTACTING EATON VANCE DISTRIBUTORS, INC. (THE "PRINCIPAL
UNDERWRITER") (SEE BACK COVER FOR ADDRESS AND PHONE NUMBER).
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART I
This Part I provides information about the Fund, certain other series of
the Trust and the Portfolio. Capitalized terms used in this Statement of
Additional Information and not otherwise defined have the meanings given them
in the Fund's Prospectus. The Fund is subject to the same investment policies
as those of the Portfolio. The Fund currently seeks to achieve its objective
by investing in the Portfolio.
ADDITIONAL INFORMATION ABOUT INVESTMENT POLICIES
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. 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 Portfolio,
political or financial instability or diplomatic and other developments which
could affect such investments. Further, economies of particular countries or
areas of the world may differ favorably or unfavorably from the economy of the
United States. It is anticipated that in most cases the best available market
for foreign securities will be on exchanges or in over-the-counter markets
located outside of the United States. Foreign stock 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 addition, foreign brokerage
commissions are generally higher than commissions on securities traded in the
United States and may be non-negotiable. In general, there is less overall
governmental supervision and regulation of foreign securities markets, broker-
dealers, and issuers than in the United States.
Foreign Currency Transactions. Because investments in companies whose
principal business activities are located outside of the United States will
frequently involve currencies of foreign countries, and because assets of the
Portfolio may temporarily be held in bank deposits in foreign currencies
during the completion of investment programs, the value of the assets of the
Portfolio as measured in U.S. dollars may be affected favorably or unfavorably
by changes in foreign currency exchange rates and exchange control
regulations. Currency exchange rates can also be affected unpredictably by
intervention by U.S. or foreign governments or central banks, or the failure
to intervene, or by currency controls or political developments in the U.S. or
abroad. The Portfolio may conduct its foreign currency exchange transactions
on a spot (i.e., cash) basis at the spot rate prevailing in the foreign
currency exchange market or through entering into swaps, forward contracts,
options or futures on currency. In spot transactions, foreign exchange dealers
do not charge a fee for conversion, but they do realize a profit based on the
difference (the "spread") between the prices at which they are buying and
selling various currencies. Thus, a dealer may offer to sell a foreign
currency to the Portfolio at one rate, while offering a lesser rate of
exchange should the Portfolio desire to resell that currency to the dealer.
Currency Swaps. Currency swaps require maintenance of a segregated account as
described under "Asset Coverage for Derivative Investments" below. The
Portfolio will not enter into any currency swap unless the credit quality of
the unsecured senior debt or the claims-paying ability of the other party
thereto is considered to be investment grade by Lloyd George Investment
Management (Bermuda) Limited ("LGIM-B" or an "Adviser") (LGIM-B and Lloyd
George Management (Hong Kong) Limited ("LGM-HK") are collectively referred to
as the "Advisers"). If there is a default by the other party to such a
transaction, the Portfolio will have contractual remedies pursuant to the
agreements related to the transaction. The swap market has grown substantially
in recent years with a large number of banks and investment banking firms
acting both as principals and as agents utilizing standardized swap
documentation. As a result, the swap market has become relatively liquid in
comparison with the markets for other similar instruments which are traded in
the interbank market.
Forward Foreign Currency Exchange Transactions. The Portfolio may enter into
forward foreign currency exchange contracts in several circumstances. First,
when the Portfolio enters into a contract for the purchase or sale of a
security denominated in a foreign currency, or when the Portfolio anticipates
the receipt in a foreign currency of dividend or interest payments on such a
security which it holds, the Portfolio may desire to "lock in" the U.S. dollar
price of the security or the U.S. dollar equivalent of such dividend or
interest payment, as the case may be. By entering into a forward contract for
the purchase or sale, for a fixed amount of dollars, of the amount of foreign
currency involved in the underlying transactions, the Portfolio will attempt
to protect itself against an adverse change in the relationship between the
U.S. dollar and the subject foreign currency during the period between the
date on which the security is purchased or sold, or on which the dividend or
interest payment is declared, and the date on which such payments are made or
received.
Additionally, when management of the Portfolio believes that the currency
of a particular foreign country may suffer a substantial decline against the
U.S. dollar, it may enter into a forward contract to sell, for a fixed amount
of dollars, the amount of foreign currency approximating the value of some or
all of the securities held by the Portfolio denominated in such foreign
currency. The precise matching of the forward contract amounts and the value
of the securities involved will not generally be possible because the future
value of such securities in foreign currencies will change as a consequence of
market movements in the value of those securities between the date on which
the contract is entered into and the date it matures. The precise projection
of short-term currency market movements is not possible, and short-term
hedging provides a means of fixing the dollar value of only a portion of the
Portfolio's foreign assets.
Special Risks Associated With Currency Transactions. Transactions in forward
contracts, as well as futures and options on foreign currencies, are subject
to the risk of governmental actions affecting trading in or the prices of
currencies underlying such contracts, which could restrict or eliminate
trading and could have a substantial adverse effect on the value of positions
held by the Portfolio. In addition, the value of such positions could be
adversely affected by a number of other complex political and economic factors
applicable to the countries issuing the underlying currencies.
Furthermore, unlike trading in most other types of instruments, there is
no systematic reporting of last sale information with respect to the foreign
currencies underlying forward contracts, futures contracts and options. As a
result, the available information on which the Portfolio's trading systems
will be based may not be as complete as the comparable data on which the
Portfolio makes investment and trading decisions in connection with securities
and other transactions. Moreover, because the foreign currency market is a
global, twenty-four hour market, events could occur on that market which will
not be reflected in the forward, futures or options markets until the
following day, thereby preventing the Portfolio from responding to such events
in a timely manner.
Settlements of over-the-counter forward contracts or of the exercise of
foreign currency options generally must occur within the country issuing the
underlying currency, which in turn requires parties to such contracts to
accept or make delivery of such currencies in conformity with any United
States or foreign restrictions and regulations regarding the maintenance of
foreign banking relationships, fees, taxes or other charges.
Unlike currency futures contracts and exchange-traded options, options on
foreign currencies and forward contracts are not traded on contract markets
regulated by the Commodity Futures Trading Commission ("CFTC") or (with the
exception of certain foreign currency options) the Securities and Exchange
Commission (the "Commission"). To the contrary, such instruments are traded
through financial institutions acting as market-makers. (Foreign currency
options are also traded on the Philadelphia Stock Exchange subject to
Commission regulation). In an over-the-counter trading environment, many of
the protections associated with transactions on exchanges will not be
available. For example, there are no daily price fluctuation limits, and
adverse market movements could therefore continue to an unlimited extent over
a period of time. Although the purchaser of an option cannot lose more than
the amount of the premium plus related transaction costs, this entire amount
could be lost. Moreover, an option writer could lose amounts substantially in
excess of its initial investment due to the margin and collateral requirements
associated with such option positions. Similarly, there is no limit on the
amount of potential losses on forward contracts to which the Portfolio is a
party.
In addition, over-the-counter transactions can only be entered into with a
financial institution willing to take the opposite side, as principal, of the
Portfolio's position unless the institution acts as broker and is able to find
another counterparty willing to enter into the transaction with the Portfolio.
If no such counterparty is available, it will not be possible to enter into a
desired transaction. There also may be no liquid secondary market in the
trading of over-the-counter contracts, and the Portfolio may be unable to
close out options purchased or written, or forward contracts entered into,
until their exercise, expiration or maturity. This in turn could limit the
Portfolio's ability to realize profits or to reduce losses on open positions
and could result in greater losses.
Furthermore, over-the-counter transactions are not backed by the guarantee
of an exchange's clearing corporation. The Portfolio will therefore be subject
to the risk of default by, or the bankruptcy of, the financial institution
serving as its counterparty. One or more of such institutions also may decide
to discontinue its role as market-maker in a particular currency, thereby
restricting the Portfolio's ability to enter into desired hedging
transactions. A Portfolio will enter into over-the-counter transactions only
with parties whose creditworthiness has been reviewed and found satisfactory
by the Adviser.
Over-the-counter options on foreign currencies, like exchange-traded
commodity futures contracts and commodity option contracts, are within the
exclusive regulatory jurisdiction of the CFTC. The CFTC currently permits the
trading of such options, but only subject to a number of conditions regarding
the commercial purpose of the purchaser of such options. The Portfolio is not
able to determine at this time whether or to what extent the CFTC may impose
additional restrictions on the trading of over-the-counter options on foreign
currencies at some point in the future, or the effect that any such
restrictions may have on the hedging strategies to be implemented by the
Portfolio.
CFTC regulations require that the Portfolio not enter into non-hedging
transactions in commodity futures contracts or commodity option contracts for
which the aggregate initial margin and premiums exceed 5% of the fair market
value of the Portfolio's net assets. Premiums paid to purchase over-the-
counter options on foreign currencies, and initial margin deposited in
connection with the writing of such options, are required to be included in
determining compliance with this requirement. This could, depending upon the
Portfolio's existing positions in futures contracts and options on futures
contracts, limit the Portfolio's ability to purchase or write options on
foreign currencies. Conversely, the existence of open positions in options on
foreign currencies could limit the ability of the Portfolio to enter into
desired transactions in other options or futures contracts.
While forward contracts and currency swaps are not presently subject to
regulation by the CFTC, the CFTC may in the future assert or be granted
authority to regulate such instruments. In such event, the Portfolio's ability
to utilize forward contracts and currency swaps in the manner set forth above
and in the Prospectus could be restricted.
Options on foreign currencies traded on a national securities exchange are
within the jurisdiction of the SEC, as are other securities traded on such
exchanges. As a result, many of the protections provided to traders on
organized exchanges will be available with respect to such transactions. In
particular, all foreign currency options positions entered into on a national
securities exchange are cleared and guaranteed by the Options Clearing
Corporation ("OCC"), thereby reducing the risk of counterparty default.
Further, a liquid secondary market in options traded on a national securities
exchange may be more readily available than in the over-the-counter market,
potentially permitting the Portfolio to liquidate open positions at a profit
prior to exercise or expiration, or to limit losses in the event of adverse
market movements.
The purchase and sale of exchange-traded foreign currency options,
however, are subject to the risks of the availability of a liquid secondary
market described above, as well as the risks regarding adverse market
movements, margining of options written, the nature of the foreign currency
market, possible intervention by governmental authorities and the effect of
other political and economic events. In addition, exchange-traded options on
foreign currencies involve certain risks not presented by the over-the-counter
market. For example, exercise and settlement of such options must be made
exclusively through the OCC, which has established banking relationships in
applicable foreign countries for this purpose. As a result, the OCC may, if it
determines that foreign governmental restrictions or taxes would prevent the
orderly settlement of foreign currency option exercises, or would result in
undue burdens on the OCC or its clearing member, impose special procedures for
exercise and settlement, such as technical changes in the mechanics of
delivery of currency, the fixing of dollar settlement prices or prohibitions
on exercise.
Repurchase Agreements. Under a repurchase agreement the Portfolio buys a
security at one price and simultaneously promises to sell that same security
back to the seller at a higher price. At no time will the Portfolio commit
more than 15% of its net assets to repurchase agreements which mature in more
than seven days and other illiquid securities. The Portfolio's repurchase
agreements will provide that the value of the collateral underlying the
repurchase agreement will always be at least equal to the repurchase price,
including any accrued interest earned on the repurchase agreement, and will be
marked to market daily.
Reverse Repurchase Agreements. The Portfolio may enter into reverse repurchase
agreements. Under a reverse repurchase agreement, the Portfolio temporarily
transfers possession of a portfolio instrument to another party, such as a
bank or broker-dealer, in return for cash. At the same time, the Portfolio
agrees to repurchase the instrument at an agreed upon time (normally within
seven days) and price, which reflects an interest payment. The Portfolio
expects that it will enter into reverse repurchase agreements when it is able
to invest the cash so acquired at a rate higher than the cost of the
agreement, which would increase the income earned by the Portfolio. The
Portfolio could also enter into reverse repurchase agreements as a means of
raising cash to satisfy redemption requests without the necessity of selling
portfolio assets.
When the Portfolio enters into a reverse repurchase agreement, any
fluctuations in the market value of either the securities transferred to
another party or the securities in which the proceeds may be invested would
affect the market value of the Portfolio's assets. As a result, such
transactions may increase fluctuations in the market value of the Portfolio's
assets. While there is a risk that large fluctuations in the market value of
the Portfolio's assets could affect the Portfolio's net asset value, this risk
is not significantly increased by entering into reverse repurchase agreements,
in the opinion of the Adviser. Because reverse repurchase agreements may be
considered to be the practical equivalent of borrowing funds, they constitute
a form of leverage. If the Portfolio reinvests the proceeds of a reverse
repurchase agreement at a rate lower than the cost of the agreement, entering
into the agreement will lower the Portfolio's yield.
At all times that a reverse repurchase agreement is outstanding, the
Portfolio will maintain cash or high grade liquid securities in a segregated
account at its custodian bank with a value at least equal to its obligation
under the agreement. Securities and other assets held in the segregated
account may not be sold while the reverse repurchase agreement is outstanding,
unless other suitable assets are substituted. While the Adviser does not
consider reverse repurchase agreements to involve a traditional borrowing of
money, reverse repurchase agreements will be included within the aggregate
limitation on "borrowings" contained in the Portfolio's investment restriction
(1) set forth below.
Writing and Purchasing Call and Put Options. A call option written by the
Portfolio obligates the Portfolio to sell specified securities to the holder
of the option at a specified price at any time before the expiration date. The
Portfolio will write a covered call option on a security for the purpose of
increasing its return on such security and/or to partially hedge against a
decline in the value of the security. In particular, when the Portfolio writes
an option which expires unexercised or is closed out by the Portfolio at a
profit, it will retain the premium paid for the option, which will increase
its gross income and will offset in part the reduced value of the portfolio
security underlying the option, or the increased cost of acquiring the
security for its portfolio. However, if the price of the underlying security
moves adversely to the Portfolio's position, the option may be exercised and
the Portfolio will be required to purchase or sell the underlying security at
a disadvantageous price, which may only be partially offset by the amount of
the premium, if at all. The Portfolio does not intend to write a covered
option on any security if after such transaction more than 15% of its net
assets, as measured by the aggregate value of the securities underlying all
covered calls and puts written by the Portfolio, would be subject to such
options. The Portfolio will only write a put option on a security which it
intends to ultimately acquire for its portfolio. A put option written by the
Portfolio would obligate the Portfolio to purchase specified securities from
the option holder at a specified price upon exercise of the option at any time
before the expiration date.
The Portfolio may purchase put or call options on securities or securities
indices in anticipation of changes in the value of its existing portfolio
securities or in the prices of securities that the Portfolio intends to
purchase at a later date. In the event that the expected changes occur, the
Portfolio may be able to offset adverse changes in the value of its portfolio,
in whole or in part, through the options purchased. The premium paid for a put
or call option plus any transaction costs will reduce the benefit, if any,
realized by the Portfolio upon exercise or liquidation of the option. Unless
the price of the underlying security changes sufficiently, the option may
expire without value to the Portfolio.
The Portfolio may terminate its obligations under a call or put option by
purchasing an option identical to the one it has written. Such purchases are
referred to as "closing purchase transactions."
The Portfolio would normally purchase call options in anticipation of an
increase in the market value of securities of the type in which the Portfolio
may invest. The purchase of a call option would entitle the Portfolio, in
return for the premium paid, to purchase specified securities at a specified
price during the option period. The Portfolio would ordinarily realize a gain
if, during the option period, the value of such securities exceeded the sum of
the exercise price, the premium paid and transaction costs; otherwise, the
Portfolio would realize a loss on the purchase of the call option.
The Portfolio would normally purchase put options in anticipation of a
decline in the market value of securities in its portfolio ("protective puts")
or securities of the type in which it is permitted to invest. The purchase of
a put option would entitle the Portfolio, in exchange for the premium paid, to
sell specified securities at a specified price during the option period. The
purchase of protective puts is designed merely to offset or hedge against a
decline in the market value of the securities held by the Portfolio. The
Portfolio would ordinarily realize a gain if, during the option period, the
value of the underlying securities decreased below the exercise price
sufficiently to cover the premium and transaction costs; otherwise, the
Portfolio would realize a loss on the purchase of the put option. Gains and
losses on the purchase of protective put options would tend to be offset by
countervailing changes in the value of underlying portfolio securities.
The Portfolio would also be able to enter into closing sale transactions
in order to realize gains or minimize losses on options purchased by the
Portfolio. The Portfolio does not intend to purchase any options if after such
transaction more than 5% of its net assets, as measured by the aggregate of
all premiums paid for all such options held by the Portfolio, would be so
invested.
The Portfolio would write and purchase put and call options on securities
indices for the same purposes as the writing and purchase of options on
securities. Options on securities indices are similar to options on
securities, except that the exercise of securities index options requires cash
payments and does not involve the actual purchase or sale of securities. In
addition, securities index options are designed to reflect price fluctuations
in a group of securities or segment of the securities market rather than price
fluctuations in a single security.
Special Risks Associated With Options on Securities. An options position may
be closed out only on an options exchange which provides a secondary market
for an option of the same series. Although the Portfolio will generally
purchase or write only those options for which there appears to be an active
secondary market, there is no assurance that a liquid secondary market on an
exchange will exist for any particular option, or at any particular time. For
some options no secondary market on an exchange may exist. In such event, it
might not be possible to effect closing transactions in particular options,
with the result that the Portfolio would have to exercise its options in order
to realize any profit and would incur transaction costs upon the sale of
underlying securities pursuant to the exercise of put options. If the
Portfolio as a covered call option writer is unable to effect a closing
purchase transaction in a secondary market, it will not be able to sell the
underlying security until the option expires or it delivers the underlying
security upon exercise.
Reasons for the absence of a liquid secondary market on an exchange
include the following: (i) there may be insufficient trading interest in
certain options; (ii) restrictions may be imposed by an exchange on opening
transactions or closing transactions or both; (iii) trading halts, suspensions
or other restrictions may be imposed with respect to particular classes or
series of options or underlying securities; (iv) unusual or unforeseen
circumstances may interrupt normal operations on an exchange; (v) the
facilities of an exchange, the OCC or another clearing organization may not at
all times be adequate to handle current trading volume; or (vi) one or more
exchanges could, for economic or other reasons, decide or be compelled at some
future date to discontinue the trading of options (or a particular class or
series of options), in which event the secondary market on that exchange (or
in that class or series of options) would cease to exist, although outstanding
options on that exchange that had been issued by the OCC or another clearing
organization as a result of trades on that exchange would continue to be
exercisable in accordance with their terms.
The Portfolio will pay brokerage commissions in connection with writing
options and effecting closing purchase transactions, as well as for purchases
and sales of underlying securities. The writing of options could result in
significant increases in the portfolio turnover rate of the Portfolio,
especially during periods when market prices of the underlying securities
appreciate.
There is no assurance that higher than anticipated trading activity or
other unforeseen events might not, at times, render certain of the facilities
of the OCC or other clearing organization inadequate, and thereby result in
the institution by an exchange of special procedures which may interfere with
the timely execution of customers' orders.
The amount of the premiums which the Portfolio may pay or receive may be
adversely affected as new or existing institutions, including other investment
companies, engage in or increase their option purchasing and writing
activities.
Futures Contracts. A change in the level of currency exchange rates or
securities prices may affect the value of the securities held by the Portfolio
(or of securities that the Portfolio expects to purchase). To hedge against
changes in rates or prices, the Portfolio may enter into (i) futures contracts
for the purchase or sale of securities and currency, (ii) futures contracts on
securities indices and (iii) futures contracts on other financial instruments
and indices. In the United States futures contracts are traded on exchanges or
boards of trade that are licensed and regulated by the CFTC, and must be
executed through a futures commission merchant or brokerage firm which is a
member of the relevant exchange. The Portfolio may also enter into futures
contracts traded on a foreign exchange if it is determined by the Adviser that
trading on such exchange does not subject the Portfolio to risks, including
credit and liquidity risks, that are materially greater than the risks
associated with trading on United States exchanges.
The Portfolio will engage in futures and related options transactions for
bona fide hedging purposes as defined in or permitted by CFTC regulations. The
Portfolio will determine that the price fluctuations in the futures contracts
and options on futures used for hedging purposes are substantially related to
price fluctuations in securities (or the currency in which they are
denominated) held by the Portfolio or which it expects to purchase. The
Portfolio's futures transactions will be entered into for traditional hedging
purposes -- that is, futures contracts will be sold to protect against a
decline in the price of securities that the Portfolio owns, or futures
contracts will be purchased to protect the Portfolio against an increase in
the price of securities it intends to purchase. As evidence of this hedging
intent, the Portfolio expects that on 75% or more of the occasions on which it
takes a long futures (or option) position (involving the purchase of futures
contracts), the Portfolio will have purchased, or will be in the process of
purchasing, equivalent amounts of related securities in the cash market at the
time when the futures (or option) position is closed out. However, in
particular cases, when it is economically advantageous for the Portfolio to do
so, a long futures position may be terminated (or an option may expire)
without the corresponding purchase of securities. The Portfolio will engage in
transactions in futures contracts and related options only to the extent such
transactions are consistent with the requirements of the Internal Revenue Code
of 1986, as amended (the "Code") for maintaining the qualification of an
investor in the Portfolio, such as the Fund, as a regulated investment company
for federal income tax purposes (see "Taxes").
The Portfolio will be required, in connection with transactions in futures
contracts and the writing of options on futures, to make margin deposits,
which will be held by the Portfolio's custodian for the benefit of the futures
commission merchant through whom the Portfolio engages in such futures and
options transactions. Cash or high grade liquid debt securities required to be
segregated in connection with a "long" futures position taken by the Portfolio
will also be held by the custodian in a segregated account and will be marked
to market daily.
Portfolio Turnover. The Portfolio cannot accurately predict its portfolio
turnover rate, but it is anticipated that the annual turnover rate will
generally not exceed 100% (excluding turnover of securities having a maturity
of one year or less). A 100% annual turnover rate would occur, for example, if
all the securities in the portfolio were replaced once in a period of one
year. A high turnover rate (100% or more) necessarily involves greater
expenses to the Portfolio. The Portfolio engages in portfolio trading
(including short-term trading) if it believes that a transaction including all
costs will help in achieving its investment objective either by increasing
income or by enhancing the Portfolio's net asset value. High portfolio
turnover may also result in the realization of substantial net short-term
capital gains. In order for the Fund to continue to qualify as a regulated
investment company for federal tax purposes, less than 30% of the annual gross
income of the Fund must be derived from the sale of securities and certain
other investments (including its share of gains from the sale of securities
and certain other investments held by the Portfolio) held for less than three
months.
Lending Portfolio Securities. If the Adviser decides to make securities loans,
the Portfolio may seek to increase its income by lending portfolio securities
to broker-dealers or other institutional borrowers. Under present regulatory
policies of the SEC, such loans are required to be secured continuously by
collateral in cash, cash equivalents or U.S. Government securities held by the
Portfolio's custodian and maintained on a current basis at an amount at least
equal to market value of the securities loaned, which will be marked to market
daily. Cash equivalents include certificates of deposit, commercial paper and
other short-term money market instruments. The financial condition of the
borrower will be monitored by the Adviser on an ongoing basis. The Portfolio
would continue to receive the equivalent of the interest or dividends paid by
the issuer on the securities loaned and would also receive a fee, or all or a
portion of the interest on investment of the collateral. The Portfolio would
have the right to call a loan and obtain the securities loaned at any time on
up to five business days' notice. The Portfolio would not have the right to
vote any securities having voting rights during the existence of a loan, but
could call the loan in anticipation of an important vote to be taken among
holders of the securities or the giving or holding of their consent on a
material matter affecting the investment. If the Adviser decides to make
securities loans, it is intended that the value of the securities loaned would
not exceed one-third of the Portfolio's total assets.
INVESTMENT RESTRICTIONS
Whenever an investment policy or investment restriction set forth in the
Prospectus or this Statement of Additional Information states a maximum
percentage of assets that may be invested in any security or other asset or
describes a policy regarding quality standards, such percentage limitation or
standard shall be determined immediately after and as a result of the Fund's
or the Portfolio's acquisition of such security or other asset. Accordingly,
any later increase or decrease resulting from a change in values, assets or
other circumstances, other than a subsequent rating change below investment
grade made by a rating service, will not compel the Fund or the Portfolio, as
the case may be, to dispose of such security or other asset.
The Fund and the Portfolio have each adopted the following investment
restrictions which may not be changed without the approval by the holders of a
majority of the outstanding voting securities of the Fund or the Portfolio, as
the case may be, which as used in this Statement of Additional Information
means the lesser of (a) 67% or more of the outstanding voting securities of
the Fund or the Portfolio, as the case may be, present or represented by proxy
at a meeting if the holders of more than 50% of the outstanding voting
securities of the Fund or the Portfolio are present or represented at the
meeting or (b) more than 50% of the outstanding voting securities of the Fund
or the Portfolio. Neither the Fund nor the Portfolio may:
(1) issue senior securities (as defined in the Investment Company Act
of 1940 and rules thereunder) or borrow money, except that the Fund or the
Portfolio may borrow:
(i) from banks to purchase or carry securities, commodities,
commodities contracts or other investments;
(ii) from banks for temporary or emergency purposes not in excess
of 10% of its gross assets taken at market value; or
(iii) by entering into reverse repurchase agreements,
if, immediately after any such borrowing, the value of the Fund's or
Portfolio's total assets, including all borrowings then outstanding, is
equal to at least 300% of the aggregate amount of borrowings then
outstanding. Any such borrowings may be secured or unsecured. The
Portfolio or the Fund may issue securities (including senior securities)
appropriate to evidence such indebtedness, including reverse repurchase
agreements.
(2) Pledge its assets, except that the Portfolio or the Fund may
pledge not more than one-third of its total assets (taken at current
value) to secure borrowings made in accordance with investment restriction
(1) above; for the purpose of this restriction the deposit of assets in a
segregated account with the Portfolio's or the Fund's custodian, as the
case may be, in connection with any of the Portfolio's or the Fund's
respective investment transactions is not considered to be a pledge.
(3) Purchase securities on margin (but the Portfolio or the Fund may
obtain such short-term credits as may be necessary for the clearance of
purchases and sales of securities).
(4) Make short sales of securities or maintain a short position,
unless at all times when a short position is open the Portfolio or the
Fund either owns an equal amount of such securities or owns securities
convertible into or exchangeable, without the payment of any additional
consideration, for securities of the same issue as, and equal in amount
to, the securities sold short.
(5) Purchase securities issued by any other open-end investment
company or investment portfolio, except as they may be acquired as part of
a merger, consolidation or acquisition of assets, except that the Fund may
invest all or substantially all of its assets in either the Portfolio or
any other registered investment company having substantially the same
investment objective as the Fund and except as otherwise permitted by the
Investment Company Act of 1940.
(6) Purchase or retain in its portfolio any securities issued by an
issuer any of whose officers, directors, trustees or security holders is
an officer or Trustee of the Portfolio or the Trust or is a member,
officer, director or trustee of any investment adviser of the Portfolio or
the Fund, if after the purchase of the securities of such issuer by the
Portfolio or the Fund one or more of such persons owns beneficially more
than 1/2 of 1% of the shares or securities or both (all taken at current
value) of such issuer and such persons owning more than 1/2 of 1% of
such shares or securities together own beneficially more than 5% of such
shares or securities or both (all taken at current value); provided,
however, that the Fund may invest all or substantially all of its assets
in either the Portfolio or any other registered investment company having
substantially the same investment objective as the Fund and having any
officers, directors, trustees or security holders who are officers or
Trustees of the Trust.
(7) Underwrite securities issued by other persons, except insofar as
the Fund or the Portfolio may technically be deemed to be an underwriter
under the Securities Act of 1933 in selling or disposing of a portfolio
security, and except that the Fund may invest all or substantially all of
its assets in either the Portfolio or any other registered investment
company having substantially the same investment objective as the Fund.
(8) Make loans to other persons, except by (a) the acquisition of
money market instruments, debt securities and other obligations in which
the Portfolio or the Fund is authorized to invest in accordance with their
respective investment objective and policies, (b) entering into repurchase
agreements and (c) lending their respective portfolio securities.
(9) Purchase the securities of any one issuer (other than obligations
issued or guaranteed by the U.S. Government or any of its agencies or
instrumentalities) if, with respect to 75% of its total assets and as a
result of such purchase (a) more than 5% of the total assets of the
Portfolio or the Fund, as the case may be (taken at current value), would
be invested in the securities of such issuer, or (b) the Fund or the
Portfolio would hold more than 10% of the outstanding voting securities of
that issuer, except that the Fund may invest all or substantially all of
its assets in, and may acquire up to 100% of the outstanding voting
securities of either the Portfolio or any other registered investment
company having substantially the same investment objectives as the Fund.
(10) Purchase any security if, as a result of such purchase, 25% or
more of the total assets of the Portfolio or the Fund, as the case may be
(taken at current value) would be invested in the securities of issuers
having their principal business activities in the same industry (the
electric, gas and telephone utility industries being treated as separate
industries for the purpose of this restriction); provided that there is no
limitation with respect to obligations issued or guaranteed by the U.S.
Government or any of its agencies or instrumentalities and except that the
Fund may invest all or substantially all of its assets in either the
Portfolio or any other registered investment company having substantially
the same investment objective as the Fund.
(11) Invest for the purpose of gaining control of a company's
management.
(12) Purchase or sell real estate, although the Fund or the Portfolio
may purchase and sell securities which are secured by interests in real
estate, securities of issuers which invest or deal in real estate and real
estate that is acquired as the result of the ownership of securities.
(13) Purchase or sell physical commodities (other than currency) or
contracts for the purchase or sale of physical commodities (other than
currency).
(14) Buy investment securities from or sell them to any of the
respective officers or Trustees of the Trust or the Portfolio, the
Portfolio's investment adviser or the Fund's principal underwriter, as
principal; provided, however, that any such person or firm may be employed
as a broker upon customary terms and that this restriction does not apply
to the Fund's investments in either the Portfolio or any other registered
investment company having substantially the same investment objective as
the Fund.
(15) Purchase oil, gas or other mineral leases or purchase partnership
interests in oil, gas or other mineral exploration or development
programs.
For the purpose of investment restrictions (1), (2) and (3), the
arrangements (including escrow, margin and collateral arrangements) made by
the Portfolio or the Fund with respect to their respective transactions in all
types of options, futures contracts, options on futures contracts, forward
contracts, currencies, and commodities and options thereon shall not be
considered to be (i) a borrowing of money or the issuance of securities
(including senior securities) by the Portfolio or the Fund, as the case may
be, (ii) a pledge of its assets or (iii) the purchase of a security on margin.
The Fund and the Portfolio have each adopted the following investment
policies which may be changed without shareholder or investor approval.
Neither the Fund nor the Portfolio may invest more than 15% of its net assets
in investments which are not readily marketable, including restricted
securities and repurchase agreements with a maturity longer than seven days.
Restricted securities for the purposes of this limitation do not include
securities eligible for resale pursuant to Rule 144A under the Securities Act
of 1933 and commercial paper issued pursuant to Section 4(2) of said Act that
the Board of Trustees of the Trust or the Portfolio, or its delegate,
determines to be liquid. Neither the Fund nor the Portfolio intends to invest
in Rule 144A securities or make short sales of securities during the coming
year. Except for obligations issued or guaranteed by the U.S. Government or
any of its agencies or instrumentalities, neither the Fund nor the Portfolio
will knowingly purchase a security issued by a company (including
predecessors) with less than three years operating history (unless such
security is rated at least B or a comparable rating at the time of purchase by
at least one nationally recognized statistical rating organization) if, as a
result of such purchase, more than 5% of the Portfolio's or the Fund's total
assets, as the case may be (taken at current value), would be invested in such
securities and except that the Fund may invest all or substantially all of its
assets in interests in the Portfolio or any other registered investment
company having substantially the same investment objective as the Fund.
Neither the Fund nor the Portfolio will purchase warrants if, as a result of
such purchase, more than 5% of the Portfolio's or the Fund's net assets, as
the case may be (taken at current value), would be invested in warrants, and
the value of such warrants which are not listed on the New York or American
Stock Exchange may not exceed 2% of the Portfolio's or the Fund's net assets;
this policy does not apply to or restrict warrants acquired by the Portfolio
or the Fund in units or attached to securities, inasmuch as such warrants are
deemed to be without value. Neither the Fund nor the Portfolio will purchase
any securities if at the time of such purchase, permitted borrowings under
investment restriction (1) above exceed 5% of the value of the Portfolio's or
the Fund's total assets, as the case may be.
In order to permit the sale of shares of the Fund in certain states, the
Fund and the Portfolio may make commitments more restrictive than the
fundamental policies described above. Should the Fund determine that any such
commitment is no longer in the best interests of the Fund and its
shareholders, it will revoke the commitment by terminating sales of its shares
in the state(s) involved.
Although permissible under the Fund's investment restrictions, the Fund
has no present intention during the coming fiscal year to: borrow money;
pledge its assets; underwrite securities issued by other persons; or make
loans to other persons.
TRUSTEES AND OFFICERS
The Trust's Trustees and officers are listed below. Except as indicated,
each individual has held the office shown or other offices in the same company
for the last five years. Unless otherwise noted, the business address of each
Trustee and officer is 24 Federal Street, Boston, Massachusetts 02110, which
is also the address of the Fund's sponsor and manager, Eaton Vance Management
("Eaton Vance"), of Eaton Vance's wholly-owned subsidiary, Boston Management
and Research ("BMR"), of Eaton Vance's parent, Eaton Vance Corp. ("EVC"), and
of Eaton Vance's trustee, Eaton Vance, Inc. ("EV"). Eaton Vance and EV are
both wholly-owned subsidiaries of EVC. Those Trustees who are "interested
persons" of the Trust, Eaton Vance, BMR, EVC or EV as defined in the 1940 Act,
by virtue of their affiliation with any one or more of the Trust, Eaton Vance,
BMR, EVC or EV, are indicated by an asterisk (*).
OFFICERS AND TRUSTEES OF THE TRUST
TRUSTEES
JAMES B. HAWKES (54), President and Trustee*
Executive Vice President of Eaton Vance, BMR, EVC and EV, and a Director of
EVC and EV. Director or Trustee and officer of various investment companies
managed by Eaton Vance or BMR. Director of Lloyd George Management (B.V.I.)
Limited.
DONALD R. DWIGHT (64), Trustee
President of Dwight Partners, Inc. (a corporate relations and communications
company) founded in 1988. Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: Clover Mill Lane, Lyme, New Hampshire 03768
SAMUEL L. HAYES, III (60), Trustee
Jacob H. Schiff Professor of Investment Banking, Harvard University Graduate
School of Business Administration. Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: Harvard University Graduate School of Business Administration,
Soldiers Field Road, Boston, Massachusetts 02134
NORTON H. REAMER (60), Trustee
President and Director, United Asset Management Corporation (a holding company
owning institutional investment management firms); Chairman, President and
Director, UAM Funds (mutual funds). Director or Trustee of various
investment companies managed by Eaton Vance or BMR.
Address: One International Place, Boston, Massachusetts 02110
JOHN L. THORNDIKE (69), Trustee
Director, Fiduciary Company Incorporated. Director or Trustee of various
investment companies managed by Eaton Vance or BMR.
Address: 175 Federal Street, Boston, Massachusetts 02110
JACK L. TREYNOR (65), Trustee
Investment Adviser and Consultant. Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: 504 Via Almar, Palos Verdes Estates, California 90274
OFFICERS
WILLIAM D. BURT (57), Vice President
Vice President of Eaton Vance, BMR and EV since November 1994; formerly Vice
President of The Boston Company (1990-1994). Mr. Burt was elected Vice
President of the Trust on June 19, 1995.
M. DOZIER GARDNER (62), Vice President
President and Chief Executive Officer of Eaton Vance, BMR, EVC and EV, and
Director of EVC and EV. Director or Trustee and officer of various
investment companies managed by Eaton Vance or BMR.
BARCLAY TITTMANN (63), Vice President
Vice President of Eaton Vance, BMR and EV since October 1993; formerly Vice
President of Invesco Management and Research (1970-1993). Mr. Tittmann was
elected Vice President of the Trust on June 19, 1995.
JAMES L. O'CONNOR (50), Treasurer
Vice President of Eaton Vance, BMR and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
THOMAS OTIS (64), Secretary
Vice President and Secretary of Eaton Vance, BMR, EVC and EV. Officer of
various investment companies managed by Eaton Vance or BMR.
WILLIAM J. AUSTIN, JR. (44), Assistant Treasurer
Assistant Vice President of Eaton Vance, BMR and EV. Officer of various
investment companies managed by Eaton Vance or BMR. Mr. Austin was elected
Assistant Treasurer of the Trust on December 16, 1991.
JANET E. SANDERS (60), Assistant Treasurer and Assistant Secretary
Vice President of Eaton Vance, BMR and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
A. JOHN MURPHY (33), Assistant Secretary
Assistant Vice President of Eaton Vance, BMR and EV since March 1, 1994;
employee of Eaton Vance since March 1993. State Regulations Supervisor, The
Boston Company (1991-1993) and Registration Specialist, Fidelity Management
& Research Co. (1986-1991). Officer of various investment companies managed
by Eaton Vance or BMR. Mr. Murphy was elected Assistant Secretary of the
Trust on March 27, 1995.
ERIC G. WOODBURY (38), Assistant Secretary
Vice President of Eaton Vance, BMR and EV since February 1993; formerly,
associate attorney at Dechert, Price & Rhoads and Gaston & Snow. Officer of
various investment companies managed by Eaton Vance or BMR. Mr. Woodbury was
elected Assistant Secretary of the Trust on June 19, 1995.
Messrs. Thorndike (Chairman), Hayes and Reamer, are members of the Special
Committee of the Board of Trustees of the Trust. The Special Committee's
functions include a continuous review of the Fund's management contract with
Eaton Vance, making recommendations to the Board of Trustees regarding the
compensation of those Trustees who are not members of the Eaton Vance
organization, and making recommendations to the Board of Trustees regarding
candidates to fill vacancies, as and when they occur, in the ranks of those
Trustees who are not "interested persons" of the Trust, the Portfolio, or the
Eaton Vance organization.
Messrs. Treynor (Chairman) and Dwight are members of the Audit Committee
of the Board of Trustees. The Audit Committee's functions include making
recommendations to the Board of Trustees regarding the selection of the
independent certified public accountants, and reviewing with such accountants
and the Treasurer of the Trust matters relative to accounting and auditing
practices and procedures, accounting records, internal accounting controls,
and the functions performed by the custodian, transfer agent and dividend
disbursing agent of the Trust.
Trustees of the Portfolio (except Messrs. Chen and Leckie) who are not
affiliated with Eaton Vance may elect to defer receipt of all or a percentage
of their annual fees in accordance with the terms of a Trustees Deferred
Compensation Plan (the "Plan"). Under the Plan, an eligible Trustee may elect
to have his deferred fees invested by the Portfolio in the shares of one or
more funds in the Eaton Vance Family of Funds, and the amount paid to the
Trustees under the Plan will be determined based upon the performance of such
investments. Deferral of Trustees' fees in accordance with the Plan will have
a negligible effect on the Portfolio's assets, liabilities, and net income per
share, and will not obligate the Portfolio to retain the services of any
Trustee or obligate the Portfolio to pay any particular level of compensation
to the Trustee. The Fund and Portfolio are not participants in the Plan. For
information concerning the compensation earned by the Trustees of the Trust
and the Portfolio, see "Fees and Expenses" in Part II of this Statement of
Additional Information.
OFFICERS AND TRUSTEES OF THE PORTFOLIO
The Portfolio's Trustees and officers are listed below. Except as
indicated, each individual has held the office shown or other offices in the
same company for the last five years. The business address of the Advisers is
3808 One Exchange Square, Central, Hong Kong. Those Trustees who are
"interested persons" of the Portfolio, the Advisers, Eaton Vance, EVC or EV as
defined in the 1940 Act by virtue of their affiliation with any one or more of
the Portfolio, the Advisers, Eaton Vance, BMR, EVC or EV, are indicated by an
asterisk (*).
TRUSTEES
HON. ROBERT LLOYD GEORGE (42), President and Trustee*
Chairman and Chief Executive of Lloyd George Management (B.V.I.) Limited.
Chairman and Chief Executive Officer of the Advisers. Managing Director of
Indosuez Asia Investment Services, Ltd. from 1984 to 1991.
Address: 3808 One Exchange Square, Central, Hong Kong
JAMES B. HAWKES (54), Vice President and Trustee*
Executive Vice President of Eaton Vance, BMR, EVC and EV, and a Director of
EVC and EV. Director of Lloyd George Management (B.V.I.) Limited. Director
or Trustee and officer of various investment companies managed by Eaton
Vance or BMR.
Address: Eaton Vance Management, 24 Federal Street, Boston, Massachusetts
02110
SAMUEL L. HAYES, III (60), Trustee
Jacob H. Schiff Professor of Investment Banking, Harvard University Graduate
School of Business Administration. Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: Harvard University Graduate School of Business Administration,
Soldiers Field Road, Boston, Massachusetts 02134
STUART HAMILTON LECKIE (49), Trustee
Chairman -- Asia Pacific Fidelity Investments Management (HK) Ltd.
Address: Citibank Tower, 3 Garden Road, Hong Kong
HON. EDWARD K.Y. CHEN (50), Trustee
President of Lingnan College in Hong Kong. Professor and Director of Centre of
Asian Studies at the University of Hong Kong from 1979-1995. Director of
First Pacific Company and a Board Member of the Mass Transit Railway
Corporation. Member of the Executive Council of the Hong Kong Government
since 1992 and Chairman of the Consumer Council since 1991.
Address: President's Office, Lingnan College, Tuen Mun, Hong Kong
OFFICERS
SCOBIE DICKINSON WARD (29), Vice President, Assistant Secretary and Assistant
Treasurer
Director of Lloyd George Management (B.V.I.) Limited. Director of the
Advisers. Investment Manager of Indosuez Asia Investment Services, Ltd. from
1990 to 1991.
Address: 3808 One Exchange Square, Central, Hong Kong
WILLIAM WALTER RALEIGH KERR (44), Vice President, Secretary and Assistant
Treasurer
Director, Finance Director and Chief Operating Officer of the Advisers.
Director of Lloyd George Management (B.V.I.) Limited.
Address: 3808 One Exchange Square, Central, Hong Kong
JAMES L. O'CONNOR (50), Vice President and Treasurer
Vice President of Eaton Vance, BMR and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
Address: Eaton Vance Management, 24 Federal Street, Boston, Massachusetts
02110
THOMAS OTIS (63), Vice President and Assistant Secretary
Vice President and Secretary of Eaton Vance, BMR, EVC and EV. Officer of
various investment companies managed by Eaton Vance or BMR.
Address: Eaton Vance Management, 24 Federal Street, Boston, Massachusetts
02110
JANET E. SANDERS (60), Assistant Secretary
Vice President of Eaton Vance, BMR and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
Address: Eaton Vance Management, 24 Federal Street, Boston, Massachusetts
02110
WILLIAM J. AUSTIN, JR. (44), Assistant Treasurer
Assistant Vice President of Eaton Vance, BMR and EV. Officer of various
investment companies managed by Eaton Vance or BMR.
Address: Eaton Vance Management, 24 Federal Street, Boston, Massachusetts
02110
A. JOHN MURPHY (33), Assistant Secretary
Assistant Vice President of BMR, Eaton Vance and EV since March 1, 1994;
employee of Eaton Vance since March 1993. Officer of various investment
companies managed by Eaton Vance or BMR. State Regulations Supervisor, The
Boston Company (1991-1993) and Registration Specialist, Fidelity Management
& Research Co. (1986-1991). Mr. Murphy was elected Assistant Secretary of
the Trust and the Portfolio on March 27, 1995.
ERIC G. WOODBURY (38), Assistant Secretary
Vice President of BMR, Eaton Vance and EV since February 1993; formerly,
associate attorney at Dechert, Price & Rhoads and Gaston & Snow. Officer of
various investment companies managed by Eaton Vance or BMR. Mr. Woodbury was
elected Assistant Secretary on June 19, 1995.
The Advisers are subsidiaries of Lloyd George Management (B.V.I.) Limited,
which is ultimately controlled by the Hon. Robert J.D. Lloyd George, President
and Trustee of the Portfolio and Chairman and Chief Executive Officer of the
Advisers. Mr. Hawkes is a Trustee and officer of the Trust and an officer of
the Fund's sponsor and manager. Mr. Hayes is a Trustee of the Trust.
While the Portfolio is a New York trust, the Advisers, together with
Messrs. Lloyd George, Leckie, Chen, Ward and Kerr, are not residents of the
United States, and substantially all of their respective assets may be located
outside of the United States. It may be difficult for investors to effect
service of process within the United States upon the individuals identified
above, or to realize judgments of courts of the United States predicated upon
civil liabilities of the Advisers and such individuals under the federal
securities laws of the United States. The Portfolio has been advised that
there is substantial doubt as to the enforceability in the countries in which
the Adviser and such individuals reside of such civil remedies and criminal
penalties as are afforded by the Federal securities laws of the United States.
MANAGEMENT OF THE FUND
Eaton Vance acts as the sponsor and manager of the Fund and the
administrator of the Portfolio. The Portfolio has engaged Lloyd George
Management (Hong Kong) Limited ("LGM-HK") as its investment adviser. Pursuant
to a service agreement effective on January 1, 1996 between LGM-HK and its
affiliate, Lloyd George Investment Management (Bermuda) Limited ("LGIM-B"),
LGIM-B, acting under the general supervision of the Portfolio's Board of
Trustees, is responsible for managing the Portfolio's investments. LGM-HK
supervises LGIM-B's performance of this function and retains its contractual
obligations under its investment advisory agreement with the Portfolio. LGM-HK
and LGIM-B are both referred to separately as an Adviser or together as the
Advisers.
THE ADVISER
LGIM-B is responsible for effecting all security transactions on behalf of
the Portfolio, including the allocation of principal transactions and
portfolio brokerage and the negotiation of commissions. See "Portfolio
Security Transactions." Under the investment advisory agreement, LGM-HK is
entitled to receive a monthly advisory fee computed by applying the annual
asset rate applicable to that portion of the average daily net assets of the
Portfolio throughout the month in each Category as indicated below:
<TABLE>
<CAPTION>
ANNUAL
CATEGORY AVERAGE DAILY NET ASSETS ASSET RATE
-------- ------------------------ ----------
<C> <S> <C>
1 less than $500 million ..................................... 0.75%
2 $500 million but less than $1 billion ...................... 0.70
3 $1 billion but less than $1.5 billion ...................... 0.65
4 $1.5 billion but less than $2 billion ...................... 0.60
5 $2 billion but less than $3 billion ........................ 0.55
6 $3 billion and over ........................................ 0.50
</TABLE>
Effective January 1, 1996, LGM-HK will pay to LGIM-B the entire amount of
the advisory fee payable by the Portfolio under its investment advisory
agreement with LGM-HK.
As of August 31, 1995, the Portfolio had net assets of $590,417,058. For
the fiscal year ended August 31, 1995, LGM-HK earned advisory fees of
$4,763,655 (equivalent to 0.74% of the Portfolio's average daily net assets
for such year). For the fiscal year ended August 31, 1994, LGM-HK earned
advisory fees of $4,100,334 (equivalent to 0.74% of the Portfolio's average
daily net assets for such year). For the period from the start of business,
October 28, 1992, to the fiscal year ended August 31, 1993, LGM-HK earned
advisory fees of $411,209 (equivalent to 0.75% (annualized) of the Portfolio's
average daily net assets for such period).
The directors of LGM-HK are the Honourable Robert Lloyd George, William
Walter Raleigh Kerr, M.F. Tang and Scobie Dickinson Ward. The Hon. Robert J.D.
Lloyd George is Chairman and Chief Executive Officer of each Adviser and Mr.
Kerr is an officer of each Adviser. The directors of LGIM-B are the Honorable
Robert Lloyd George, William Walter Raleigh Kerr, Scobie Dickinson Ward, M.F.
Tang, Peter Bubenzer and Judith Collis. The business address of these
individuals is 3808 One Exchange Square, Central, Hong Kong.
The Portfolio's investment advisory agreement with LGM-HK remains in
effect until February 28, 1996; it may be continued indefinitely thereafter so
long as such continuance after February 28, 1996 is approved at least annually
(i) by the vote of a majority of the Trustees of the Portfolio who are not
interested persons of the Portfolio cast in person at a meeting specifically
called for the purpose of voting on such approval and (ii) by the Board of
Trustees of the Portfolio or by vote of a majority of the outstanding voting
securities of the Portfolio. The agreement may be terminated at any time
without penalty on sixty days' written notice by the Board of Trustees of
either party or by vote of the majority of the outstanding voting securities
of the Portfolio, and the agreement will terminate automatically in the event
of its assignment. The agreement provides that the LGM-HK may render services
to others. The agreement also provides that, in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of obligations
or duties under the agreement on the part of LGM-HK, LGM-HK shall not be
liable to the Portfolio or to any shareholder for any act or omission in the
course of or connected with rendering services or for any losses sustained in
the purchase, holding or sale of any security.
MANAGER, SPONSOR AND ADMINISTRATOR
See "Management of the Fund and the Portfolio" in the Fund's current
Prospectus for a description of the services Eaton Vance performs as the
manager and sponsor of the Fund and the administrator of the Portfolio. Under
Eaton Vance's management contract with the Fund and administration agreement
with the Portfolio, Eaton Vance receives a monthly management fee from the
Fund and a monthly administration fee from the Portfolio. Each fee is computed
by applying the annual asset rate applicable to that portion of the average
daily net assets of the Fund or the Portfolio throughout the month in each
Category as indicated below:
<TABLE>
<CAPTION>
ANNUAL
CATEGORY AVERAGE DAILY NET ASSETS ASSET RATE
-------- ------------------------ ----------
<C> <S> <C>
1 less than $500 million ..................................... 0.25%
2 $500 million but less than $1 billion ...................... 0.23333
3 $1 billion but less than $1.5 billion ...................... 0.21667
4 $1.5 billion but less than $2 billion ...................... 0.20
5 $2 billion but less than $3 billion ........................ 0.18333
6 $3 billion and over ........................................ 0.16667
</TABLE>
As of August 31, 1995 the Portfolio had net assets of $590,417,058. For
the fiscal year ended August 31, 1995, Eaton Vance earned administration fees
of $1,571,184 (equivalent to 0.24% of the Portfolio's average daily net assets
for such year). For the fiscal year ended August 31, 1994, Eaton Vance earned
administration fees of $1,383,471 (equivalent to 0.25% of the Portfolio's
average daily net assets for such year). For the period from the Portfolio's
start of business, October 28, 1992, to the fiscal year ended August 31, 1993,
Eaton Vance earned administration fees of $137,070 (equivalent to 0.25%
(annualized) of the Portfolio's average daily net assets for such period).
For the management fees that the Fund paid to Eaton Vance, see "Fees and
Expenses" in Part II of this Statement of Additional Information.
Eaton Vance's management contract with the Fund and administration
agreement with the Portfolio will each remain in effect until February 28,
1996. Each agreement may be continued from year to year after February 28,
1996 so long as such continuance is approved annually by the vote of a
majority of the Trustees of the Trust or the Portfolio, as the case may be.
Each agreement may be terminated at any time without penalty on sixty days'
written notice by the Board of Trustees of either party thereto, or by a vote
of a majority of the outstanding voting securities of the Fund or the
Portfolio, as the case may be. Each agreement will terminate automatically in
the event of its assignment. Each agreement provides that, in the absence of
Eaton Vance's willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations or duties to the Fund or the Portfolio under such
contract or agreement, Eaton Vance will not be liable to the Fund or the
Portfolio for any loss incurred. Each agreement was initially approved by the
Trustees, including the non-interested Trustees, of the Trust or the Portfolio
which is a party thereto at meetings held on September 8, 1992 and on October
8, 1992, respectively, of the Trust and the Portfolio.
The Fund and the Portfolio, as the case may be, will each be responsible
for all of its respective costs and expenses not expressly stated to be
payable by Eaton Vance under the management contract or the administration
agreement. Such costs and expenses to be borne by each of the Fund or the
Portfolio, as the case may be, include, without limitation, custody and
transfer agency fees and expenses, including those incurred for determining
net asset value and keeping accounting books and records, expenses of pricing
and valuation services; the cost of share certificates; membership dues in
investment company organizations; brokerage commissions and fees; fees and
expenses of registering under the securities laws; expenses of reports to
shareholders and investors; proxy statements, and other expenses of
shareholders' or investors' meetings; insurance premiums, printing and mailing
expenses; interest, taxes and corporate fees; legal and accounting expenses;
compensation and expenses of Trustees not affiliated with Eaton Vance;
distribution and service fees payable by the Fund under its Rule 12b-1
distribution plan; and investment advisory, management and administration
fees. The Fund or the Portfolio will also each bear expenses incurred in
connection with litigation in which the Fund or the Portfolio, as the case may
be, is a party and any legal obligation to indemnify its respective officers
and Trustees with respect thereto.
Eaton Vance and EV are both wholly-owned subsidiaries of EVC. BMR is a
wholly-owned subsidiary of Eaton Vance. Eaton Vance and BMR are both
Massachusetts business trusts, and EV is the trustee of Eaton Vance and BMR.
The Directors of EV are Landon T. Clay, H. Day Brigham, Jr., M. Dozier
Gardner, James B. Hawkes and Benjamin A. Rowland, Jr. The Directors of EVC
consist of the same persons and John G.L. Cabot and Ralph Z. Sorenson. Mr.
Clay is chairman and Mr. Gardner is president and chief executive officer of
EVC, Eaton Vance, BMR and EV. All of the issued and outstanding shares of
Eaton Vance and of EV are owned by EVC. All of the issued and outstanding
shares of BMR are owned by Eaton Vance. All shares of the outstanding Voting
Common Stock of EVC are deposited in a Voting Trust which expires December 31,
1996, the Voting Trustees of which are Messrs. Brigham, Clay, Gardner, Hawkes
and Rowland. The Voting Trustees have unrestricted voting rights for the
election of Directors of EVC. All of the outstanding voting trust receipts
issued under said Voting Trust are owned by certain of the officers of Eaton
Vance and BMR who are also officers and Directors of EVC and EV. As of
November 30, 1995, Messrs. Clay, Gardner and Hawkes each owned 24% of such
voting trust receipts, and Messrs. Roland and Brigham owned 15% and 13%,
respectively, of such voting trust receipts. Messrs. Gardner, Hawkes and Otis,
who are officers or Trustees of the Trust, are members of the EVC, Eaton
Vance, BMR and EV organizations. Messrs. Austin, Burt, Murphy, O'Connor, Otis,
Tittmann and Woodbury and Ms. Sanders, are officers of the Trust and/or the
Portfolio, and are also members of the Eaton Vance, BMR and EV organizations.
Eaton Vance will receive the fees paid under the management agreement.
EVC and its affiliates and their officers and employees from time to time
have transactions with various banks, including the custodian of the Fund and
the Portfolio, Investors Bank & Trust Company. It is Eaton Vance's opinion
that the terms and conditions of such transactions were not and will not be
influenced by existing or potential custodial or other relationships between
the Fund and such banks.
EVC owns all of the stock of Energex Energy Corporation, which engages in
oil and gas operations. In addition, Eaton Vance owns all the stock of
Northeast Properties, Inc., which is engaged in real estate investment,
consulting and management. EVC owns all the stock of Fulcrum Management, Inc.
and MinVen, Inc., which are engaged in the development of precious metal
properties. EVC also owns 24% of the Class A shares issued by the parent of
each Adviser. EVC, Eaton Vance, BMR and EV may also enter into other
businesses.
CUSTODIAN
Investors Bank & Trust Company ("IBT"), 89 South Street, Boston,
Massachusetts, acts as custodian for the Fund and the Portfolio. IBT has the
custody of all cash and securities of the Fund and all securities of the
Portfolio purchased in the United States, maintains the Fund's and the
Portfolio's general ledger and computes the daily net asset value of interests
in the Portfolio and the net asset value of shares of the Fund. In such
capacities, IBT attends to details in connection with the sale, exchange,
substitution, transfer or other dealings with the Fund's and the Portfolio's
respective investments, receives and disburses all funds, and performs various
other ministerial duties upon receipt of proper instructions from the Fund and
the Portfolio, respectively.
Portfolio securities, if any, purchased by the Portfolio in the U.S. are
maintained in the custody of IBT or of other domestic banks or depositories.
Portfolio securities purchased outside of the U.S. are maintained in the
custody of foreign banks and trust companies that are members of IBT's Global
Custody Network, or foreign depositories used by such foreign banks and trust
companies. Each of the domestic and foreign custodial institutions holding
portfolio securities has been approved by the Board of Trustees of the
Portfolio in accordance with regulations under the 1940 Act.
IBT charges fees which are competitive within the industry. These fees for
the Portfolio relate to: (1) custody services based upon a percentage of the
market values of Portfolio securities; (2) bookkeeping and valuation services
provided at an annual rate; (3) activity charges, primarily the result of the
number of portfolio transactions; and (4) reimbursement of out-of-pocket
expenses. These fees are then reduced by a credit for cash balances of the
Portfolio at the custodian equal to 75% of the 91-day U.S. Treasury Bill
auction rate applied to the Portfolio's average daily collected balances. The
portion of the fee for the Fund related to bookkeeping and pricing services is
based upon a percentage of the Fund's net assets and the portion of the fee
related to financial statement preparation is a fixed amount. Landon T. Clay,
a Director of EVC and an officer, Trustee or Director of other entities in the
Eaton Vance organization, owns approximately 13% of the voting stock of
Investors Financial Services Corp., the holding company parent of IBT.
Management believes that such ownership does not create an affiliated person
relationship between the Fund or the Portfolio and IBT under the Investment
Company Act of 1940.
SERVICE FOR WITHDRAWAL
By a standard agreement, the Fund's Transfer Agent will send to the
shareholder regular monthly or quarterly payments of any permitted amount
designated by the shareholder (see "Eaton Vance Shareholder Services --
Withdrawal Plan" in the Fund's current Prospectus) based upon the value of the
shares held. The checks will be drawn from share redemptions and hence, are a
return of principal. Income dividends and capital gains distributions in
connection with withdrawal accounts will be credited at net asset value as of
the record date for each distribution. Continued withdrawals in excess of
current income will eventually use up principal, particularly in a period of
declining market prices.
To use this service, at least $5,000 in cash or shares at the public
offering price will have to be deposited with the Transfer Agent. The
maintenance of a withdrawal plan concurrently with purchases of additional
Fund shares would be disadvantageous if a sales charge is included in such
purchase. A shareholder may not have a withdrawal plan in effect at the same
time he or she has authorized Bank Automated Investing or is otherwise making
regular purchases of Fund shares. The shareholder, Transfer Agent or the
Principal Underwriter will be able to terminate the withdrawal plan at any
time without penalty.
DETERMINATION OF NET ASSET VALUE
The Fund and Portfolio will be closed for business and will not price
their shares on the following business holidays: New Year's Day, Presidents'
Day, Good Friday (a New York Stock Exchange holiday), Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
The Trustees of the Portfolio have established the following procedures
for the fair valuation of the Portfolio's assets under normal market
conditions. Marketable securities listed on foreign or U.S. securities
exchanges or in the NASDAQ National Market System generally are valued at
closing sale prices or, if there were no sales, at the mean between the
closing bid and asked prices therefor on the exchange where such securities
are principally traded or on such National Market System (such prices may not
be used, however, where an active over-the-counter market in an exchange
listed security better reflects current market value). Unlisted or listed
securities for which closing sale prices are not available are valued at the
mean between the latest bid and asked prices. An option is valued at the last
sale price as quoted on the principal exchange or board of trade on which such
option or contract is traded, or in the absence of a sale, the mean between
the last bid and asked price. Futures positions on securities or currencies
are generally valued at closing settlement prices. All other securities are
valued at fair value as determined in good faith by or pursuant to procedures
established by the Trustees of the Portfolio.
Short term debt securities with a remaining maturity of 60 days or less
are valued at amortized cost. If securities were acquired with a remaining
maturity of more than 60 days, their amortized cost value will be based on
their value on the sixty-first day prior to maturity. Other fixed income and
debt securities, including listed securities and securities for which price
quotations are available, will normally be valued on the basis of valuations
furnished by a pricing service.
Each investor in the Portfolio, including the Fund, may add to or reduce
its investment in the Portfolio on each day the New York Stock Exchange (the
"Exchange") is open for trading ("Portfolio Business Day") as of the close of
regular trading on the Exchange (the "Portfolio Valuation Time"). The value of
each investor's interest in the Portfolio will be determined by multiplying
the net asset value of the Portfolio by the percentage, determined on the
prior Portfolio Business Day, which represented that investor's share of the
aggregate interests in the Portfolio on such prior day. Any additions or
withdrawals for the current Portfolio Business Day will then be recorded. Each
investor's percentage of the aggregate interest in the Portfolio will then be
recomputed as the percentage equal to a fraction (i) the numerator of which is
the value of such investor's investment in the Portfolio as of the close of
Portfolio Valuation Time on the prior Portfolio Business Day plus or minus, as
the case may be, that amount of any additions to or withdrawals from the
investor's investment in the Portfolio on the current Portfolio Business Day,
and (ii) the denominator of which is the aggregate net asset value of the
Portfolio as of the Portfolio Valuation Time on the prior Portfolio Business
Day plus or minus, as the case may be, the amount of the net additions to or
withdrawals from the aggregate investment in the Portfolio on the current
Portfolio Business Day by all investors in the Portfolio. The percentage so
determined will then be applied to determine the value of the investor's
interest in the Portfolio for the current Portfolio Business Day.
Generally, trading in the foreign securities owned by the Portfolio is
substantially completed each day at various times prior to the close of the
Exchange. The values of these securities used in determining the net asset
value of the Portfolio's shares are computed as of such times. Occasionally,
events affecting the value of foreign securities may occur between such times
and the close of the Exchange which will not be reflected in the computation
of the Portfolio's net asset value (unless the Portfolio deems that such
events would materially affect its net asset value, in which case an
adjustment would be made and reflected in such computation). Foreign
securities and currency held by the Portfolio will be valued in U.S. dollars;
such values will be computed by the custodian based on foreign currency
exchange rate quotations supplied by Reuters Information Service.
INVESTMENT PERFORMANCE
The average annual total return is determined by multiplying a
hypothetical initial purchase order of $1,000 by the average annual compound
rate of return (including capital appreciation/depreciation, and distributions
paid and reinvested) for the stated period and annualizing the results. The
calculation assumes that all distributions are reinvested at net asset value
on the reinvestment dates during the period. For information concerning the
total return of the Fund, see "Performance Information" in Part II of this
Statement of Additional Information.
The Fund's total return may be compared to the Consumer Price Index and
various domestic and foreign securities indices, for example: Standard &
Poor's Index of 400 Common Stocks, Standard & Poor's Index of 500 Common
Stocks, Merrill Lynch U.S. Treasury (15-year plus) Index, Lehman Brothers
Government/Corporate Bond Index, the Dow Jones Industrial Average, Morgan
Stanley Pacific (Excluding Japan) Hang Seng, and FT Pacific (Excluding Japan).
The Fund's total return and comparisons with these indices may be used in
advertisements and in information furnished to present or prospective
shareholders. The Fund's performance may differ from that of other investors
in the Portfolio, including the other investment companies.
Information used in advertisements and in materials furnished to present
or prospective shareholders may include statistics, data and performance
studies prepared by independent organizations (e.g. Ibbotson Associates,
Standard & Poor's Ratings Group, Merrill Lynch, Pierce, Fenner & Smith, Inc.,
Bloomberg, L.P., Dow Jones & Company, Inc., and The Federal Reserve Board) or
included in various publications (e.g. The Wall Street Journal, Barron's and
The Decade: Wealth of Investments in U.S. Stocks, Bonds, Bills & Inflation)
reflecting the investment performance or return achieved by various classes
and types of investments (e.g. common stocks, small company stocks, long-term
corporate bonds, long-term government bonds, intermediate-term government
bonds, U.S. Treasury bills) over various periods of time. This information may
be used to illustrate the benefits of long-term investments in common stocks.
From time to time, information about the allocation and holdings of
investments in the Portfolio may be included in advertisements and other
material furnished to present and prospective shareholders. The Portfolio's
investment allocation on November 30, 1995, was as follows:
GREATER CHINA GROWTH PORTFOLIO
PERCENT OF
INVESTMENTS
COMMON STOCKS -----------
Hong Kong ............................... 42.4%
Singapore ............................... 12.1
Thailand ................................ 10.5
Korea ................................... 9.6
Malaysia ................................ 8.3
Philippines ............................. 6.3
Taiwan .................................. 4.1
Indonesia ............................... 2.8
China ................................... 1.3
United States ........................... 0.6
-----
TOTAL ....................................... 100.0%
The Portfolio's ten largest common stock holdings on November 30, 1995,
were:
COMPANY SHARES VALUE
------- ------ -----
HSBC Holdings PLC ........................... 2,043,400 $30,116,044
Hutchison Whampoa ........................... 4,573,000 25,835,824
Cheung Kong ................................. 4,130,000 23,493,213
New World Development ....................... 4,200,000 17,538,462
Korea Electric Power Corp. .................. 411,200 17,415,912
Siam Commercial Bank ........................ 1,426,600 16,796,881
Electricity Generating (Foreign) ............ 4,465,870 15,277,041
Philippine Long Distrance Telephone ......... 231,700 12,975,200
National Mutual Ltd. ........................ 16,264,000 12,510,769
Overseas Union Bank ......................... 1,916,000 12,167,885
From time to time, evaluations of the Fund's performance made by
independent sources, such as Lipper Analytical Services, Inc., CDA/
Weisenberger and Morningstar, Inc. may be used in advertisements and in
information furnished to present or prospective shareholders. The Fund's
performance may differ from that of other investors in the Portfolio,
including the other investment companies.
Information used in advertisements and materials furnished to present or
prospective shareholders may include examples and performance illustrations of
the cumulative change in various levels of investments in the Fund for various
periods of time and at various prices per share. Such examples and
illustrations may assume that all dividends and capital gain distributions are
reinvested in additional shares and may also show separately the value of
shares acquired from such reinvestments as well as the total value of all
shares acquired for such investments and reinvestments. Such information may
also include statements or illustrations relating to the appropriateness of
types of securities and/or mutual funds which may be employed to meet specific
financial goals, such as (1) funding retirement, (2) paying for children's
education, and (3) financially supporting aging parents. These three financial
goals may be referred to in such advertisements or materials as the "Triple
Squeeze".
For additional information, charts and illustrations relating to the
Fund's investment performance, see "Performance Information" in Part II of
this Statement of Additional Information.
TAXES
See also "Distributions and Taxes" in the Fund's current Prospectus.
The Fund, as a series of a Massachusetts business trust, will be treated
as a separate entity for accounting and tax purposes. The Fund has elected to
be treated, and intends to qualify each year as a regulated investment company
("RIC") under the Code. Accordingly, the Fund intends to satisfy certain
requirements relating to sources of its income and diversification of its
assets and to distribute all of its net investment income and net realized
capital gains in accordance with the timing requirements imposed by the Code,
so as to avoid any federal income or excise tax on the Fund. Because the Fund
invests its assets in the Portfolio, the Portfolio normally must satisfy the
applicable source of income and diversification requirements in order for the
Fund to satisfy them. The Portfolio will allocate at least annually among its
investors, including the Fund, each investor's distributive share of the
Portfolio's net investment income, net realized capital gains, and any other
items of income, gain, loss, deduction or credit. The Portfolio will make
allocations to the Fund in accordance with the Code and applicable
regulations, rulings and revenue procedures and will make moneys available for
withdrawal at appropriate times and in sufficient amounts to enable the Fund
to satisfy the tax distribution requirements that apply to the Fund and that
must be satisfied in order to avoid federal income and/or excise tax on the
Fund. For purposes of applying the requirements of the Code regarding
qualification as a RIC, the Fund will be deemed (i) to own its proportionate
share of each of the assets of the Portfolio and (ii) to be entitled to the
gross income of the Portfolio attributable to such share.
In order to avoid federal excise tax, the Code requires that the Fund
distribute (or be deemed to have distributed) by December 31 of each calendar
year at least 98% of its ordinary income for such year, at least 98% of the
excess of its realized capital gains over its realized capital losses,
generally computed on the basis of the one-year period ending on October 31 of
such year, after reduction by any available capital loss carryforwards, and
100% of any income and capital gains from the prior year (as previously
computed) that was not paid out during such year and on which the Fund paid no
federal income tax. Under current law, provided that the Fund qualifies as a
RIC investment company for federal income tax purposes and the Portfolio
is treated as a partnership for Massachusetts and federal tax purposes,
neither the Fund nor the Portfolio is liable for any income, corporate excise
or franchise tax in the Commonwealth of Massachusetts.
Foreign exchange gains and losses realized by the Portfolio and allocated
to the Fund in connection with the Portfolio's investments in foreign
securities and certain foreign currency related options, futures or forward
contracts or foreign currency may be treated as ordinary income and losses
under special tax rules. Certain options, futures or forward contracts of the
Portfolio may be required to be marked to market (i.e., treated as if closed
out) on the last day of each taxable year, and any gain or loss realized with
respect to these contracts may be required to be treated as 60% long-term and
40% short-term gain or loss. Positions of the Portfolio in securities and
offsetting options, futures or forward contracts may be treated as "straddles"
and be subject to other special rules that may, upon allocation of the
Portfolio's income, gain or loss to the Fund, affect the amount, timing and
character of the Fund's distributions to shareholders. Certain uses of foreign
currency and foreign currency derivatives such as options, futures, forward
contracts and swaps and investment by the Portfolio in certain "passive
foreign investment companies" may be limited or a tax election may be made, if
available, in order to preserve the Fund's qualification as a RIC or avoid
imposition of a tax on the Fund.
The Portfolio anticipates that it will be subject to foreign taxes on its
income (including, in some cases, capital gains) from foreign securities. Tax
conventions between certain countries and the U.S. may reduce or eliminate
such taxes. If more than 50% of the Fund's total assets, taking into account
its allocable share of the Portfolio's total assets, at the close of any
taxable year of the Fund consists of stock or securities of foreign
corporations, the Fund may file an election with the Internal Revenue Service
pursuant to which shareholders of the Fund will be required to (i) include in
ordinary gross income (in addition to taxable dividends actually received)
their pro rata shares of foreign income taxes paid by the Portfolio and
allocated to the Fund even though not actually received, and (ii) treat such
respective pro rata portions as foreign income taxes paid by them.
Shareholders may then deduct such pro rata portions of foreign income taxes in
computing their taxable incomes, or, alternatively, use them as foreign tax
credits, subject to applicable limitations, against their U.S. income taxes.
Shareholders who do not itemize deductions for federal income tax purposes
will not, however, be able to deduct their pro rata portion of foreign taxes
deemed paid by the Fund, although such shareholders will be required to
include their shares of such taxes in gross income. Shareholders who claim a
foreign tax credit for such foreign taxes may be required to treat a portion
of dividends received from the Fund as a separate category of income for
purposes of computing the limitations on the foreign tax credit. Tax-exempt
shareholders will ordinarily not benefit from this election. Each year that
the Fund files the election described above, its shareholders will be notified
of the amount of (i) each shareholder's pro rata share of foreign income taxes
paid by the Portfolio and allocated to the Fund and (ii) the portion of Fund
dividends which represents income from each foreign country. If the Fund does
not make this election, it may deduct its allocated share of such taxes in
computing its investment company taxable income.
The Portfolio will allocate at least annually to the Fund and its other
investors their respective distributive shares of any net investment income
and net capital gains which have been recognized for federal income tax
purposes (including unrealized gains at the end of the Portfolio's fiscal year
on certain options and futures transactions that are required to be marked-to-
market). Such amounts will be distributed by the Fund to its shareholders in
cash or additional shares, as they elect. Shareholders of the Fund will be
advised of the nature of the distributions.
Distributions by the Fund of the excess of net long-term capital gains
over net short-term capital losses earned by the Portfolio and allocated to
the Fund, taking into account any capital loss carryforwards that may be
available to the Fund in years after its first taxable year, are taxable to
shareholders of the Fund as long-term capital gains, whether received in cash
or in additional shares and regardless of the length of time their shares have
been held. Certain distributions, if declared in October, November or December
and paid the following January, will be taxed to shareholders as if received
on December 31 of the year in which they are declared.
Any loss realized upon the redemption or exchange of shares with a tax
holding period of 6 months or less will be treated as a long-term capital loss
to the extent of any distribution of net long-term capital gains with respect
to such shares. All or a portion of a loss realized upon taxable disposition
of Fund shares may be disallowed under "wash sale" rules if other Fund shares
are purchased (whether through reinvestment of dividends or otherwise) within
30 days before or after the disposition. Any disallowed loss will result in an
adjustment to the shareholder's tax basis in some or all of the other shares
acquired.
Special tax rules apply to Individual Retirement Accounts ("IRAs") and
shareholders investing through IRAs, should consult their tax advisers for
more information. An individual may make an aggregate annual contribution to
an IRA in an amount equal to the lesser of his or her earned income or $2,000
($2,250 for an individual and his or her nonearning spouse). The deductibility
of such contributions may be restricted or eliminated for particular
shareholders.
Amounts paid by the Fund to individuals and certain other shareholders who
have not provided the Fund with their correct taxpayer identification number
and certain required certifications, as well as shareholders with respect to
whom the Fund has received notification from the Internal Revenue Service or a
broker, may be subject to "backup" withholding of federal income tax from the
Fund's dividends and distributions and the proceeds of redemptions (including
repurchases and exchanges), at a rate of 31%. An individual's taxpayer
identification number is generally his or her social security number.
Non-resident alien individuals and certain foreign corporations and other
foreign entities generally will be subject to a U.S. withholding tax at a rate
of 30% on the Fund's distributions from its ordinary income and the excess of
its net short-term capital gain over its net long-term capital loss, unless
the tax is reduced or eliminated by an applicable tax treaty. Distributions
from the excess of the Fund's net long-term capital gain over its net short-
term capital loss received by such shareholders and any gain from the sale or
other disposition of shares of the Fund generally will not be subject to U.S.
federal income taxation, provided that non-resident alien status has been
certified by the shareholder. Different U.S. tax consequences may result if
the shareholder is engaged in a trade or business in the United States, is
present in the United States for a sufficient period of time during a taxable
year to be treated as a U.S. resident, or fails to provide any required
certifications regarding status as a non-resident alien investor. Foreign
shareholders should consult their tax advisers regarding the U.S. and foreign
tax consequences of an investment in the Fund.
The foregoing discussion does not describe many of the tax rules
applicable to IRAs nor does it address the special tax rules applicable to
certain other classes of investors, such as other retirement plans, tax-exempt
entities, insurance companies and financial institutions. Shareholders should
consult their own tax advisers with respect to these or other special tax
rules that may apply in their particular situations, as well as the state,
local or foreign tax consequences of investing in the Fund.
PORTFOLIO SECURITY TRANSACTIONS
Decisions concerning the execution of portfolio security transactions by
the Portfolio, including the selection of the market and the broker-dealer
firm, are made by the Adviser.
The Adviser places the portfolio security transactions of the Portfolio
and of certain other accounts managed by the Adviser for execution with many
firms. The Adviser uses its best efforts to obtain execution of portfolio
transactions at prices which are advantageous to the Portfolio and (when a
disclosed commission is being charged) at reasonably competitive commission
rates. In seeking such execution, the Adviser will use its best judgment in
evaluating the terms of a transaction, and will give consideration to various
relevant factors, including without limitation the size and type of the
transaction, the general execution and operational capabilities of the broker-
dealer, the nature and character of the market for the security, the
confidentiality, speed and certainty of effective execution required for the
transaction, the reputation, reliability, experience and financial condition
of the broker-dealer, the value and quality of services rendered by the
broker-dealer in other transactions, and the reasonableness of the commission,
if any. Transactions on stock exchanges and other agency transactions involve
the payment by the Portfolio of negotiated brokerage commissions. Such
commissions vary among different broker-dealer firms, and a particular broker-
dealer may charge different commissions according to such factors as the
difficulty and size of the transaction and the volume of business done with
such broker-dealer. Transactions in foreign securities usually involve the
payment of fixed brokerage commissions, which are generally higher than those
in the United States. There is generally no stated commission in the case of
securities traded in the over-the-counter markets, but the price paid or
received by the Portfolio usually includes an undisclosed dealer markup or
markdown. In an underwritten offering the price paid by the Portfolio includes
a disclosed fixed commission or discount retained by the underwriter or
dealer. Although commissions paid on portfolio transactions will, in the
judgment of the Adviser, be reasonable in relation to the value of the
services provided, commissions exceeding those which another firm might charge
may be paid to broker-dealers who were selected to execute transactions on
behalf of the Portfolio and the Adviser's other clients in part for providing
brokerage and research services to the Adviser.
As authorized in Section 28(e) of the Securities Exchange Act of 1934, a
broker or dealer who executes a portfolio transaction on behalf of the
Portfolio may receive a commission which is in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction if the Adviser determines in good faith that such commission was
reasonable in relation to the value of the brokerage and research services
provided. This determination may be made on the basis of either that
particular transaction or on the basis of the overall responsibilities which
the Adviser and its affiliates have for accounts over which they exercise
investment discretion. In making any such determination, the Adviser will not
attempt to place a specific dollar value on the brokerage and research
services provided or to determine what portion of the commission should be
related to such services. Brokerage and research services may include advice
as to the value of securities, the advisability of investing in, purchasing,
or selling securities, and the availability of securities or purchasers or
sellers of securities; furnishing analyses and reports concerning issuers,
industries, securities, economic factors and trends, portfolio strategy and
the performance of accounts; and effecting securities transactions and
performing functions incidental thereto (such as clearance and settlement);
and the "Research Services" referred to in the next paragraph.
It is a common practice in the investment advisory industry for the
advisers of investment companies, institutions and other investors to receive
research, statistical and quotation services, data, information and other
services, products and materials which assist such advisers in the performance
of their investment responsibilities ("Research Services") from broker-dealers
which execute portfolio transactions for the clients of such advisers and from
third parties with which such broker-dealers have arrangements. Consistent
with this practice, the Adviser may receive Research Services from broker-
dealer firms with which the Adviser places the portfolio transactions of the
Portfolio and from third parties with which these broker-dealers have
arrangements. These Research Services may include such matters as general
economic and market reviews, industry and company reviews, evaluations of
securities and portfolio strategies and transactions and recommendations as to
the purchase and sale of securities and other portfolio transactions,
financial, industry and trade publications, news and information services,
pricing and quotation equipment and services, and research oriented computer
hardware, software, data bases and services. Any particular Research Service
obtained through a broker-dealer may be used by the Adviser in connection with
client accounts other than those accounts which pay commissions to such
broker-dealer. Any such Research Service may be broadly useful and of value to
the Adviser in rendering investment advisory services to all or a significant
portion of its clients, or may be relevant and useful for the management of
only one client's account or of a few clients' accounts, or may be useful for
the management of merely a segment of certain clients' accounts, regardless of
whether any such account or accounts paid commissions to the broker-dealer
through which such Research Service was obtained. The advisory fee paid by the
Portfolio is not reduced because the Adviser receives such Research Services.
The Adviser evaluates the nature and quality of the various Research Services
obtained through broker-dealer firms and attempts to allocate sufficient
commissions to such firms to ensure the continued receipt of Research Services
which the Adviser believes are useful or of value to it in rendering
investment advisory services to its clients.
Subject to the requirement that the Adviser shall use its best efforts to
seek to execute portfolio security transactions of the Portfolio at
advantageous prices and at reasonably competitive commission rates or spreads,
the Adviser is authorized to consider as a factor in the selection of any
broker-dealer firm with whom Portfolio orders may be placed the fact that such
firm has sold or is selling shares of the Fund or of other investment
companies sponsored by Eaton Vance. This policy is not inconsistent with a
rule of the National Association of Securities Dealers, Inc., which rule
provides that no firm which is a member of the Association shall favor or
disfavor the distribution of shares of any particular investment company or
group of investment companies on the basis of brokerage commissions received
or expected by such firm from any source.
Securities considered as investments for the Portfolio may also be
appropriate for other investment accounts managed by the Adviser or its
affiliates. The Adviser will attempt to allocate equitably portfolio
transactions among the Portfolio and the portfolios of its other investment
accounts whenever decisions are made to purchase or sell securities by the
Portfolio and one or more of such other accounts simultaneously. In making
such allocations, the main factors to be considered are the respective
investment objectives of the Portfolio and such other accounts, the relative
size of portfolio holdings of the same or comparable securities, the
availability of cash for investment by the Portfolio and such accounts, the
size of investment commitments generally held by the Portfolio and such
accounts and the opinions of the persons responsible for recommending
investments to the Portfolio and such accounts. While this procedure could
have a detrimental effect on the price or amount of the securities available
to the Portfolio from time to time, it is the opinion of the Trustees of the
Portfolio that the benefits available from the Adviser's organization outweigh
any disadvantage that may arise from exposure to simultaneous transactions.
For the fiscal year ended August 31, 1995, the Portfolio paid brokerage
commissions of $2,608,520 with respect to portfolio transactions. Of this
amount, approximately $2,341,272 was paid in respect of portfolio security
transactions aggregating approximately $387,659,617 to firms which provided
some Research Services to the Adviser's organization. For the fiscal year
ended August 31, 1994, the Portfolio paid brokerage commissions of $4,177,780
with respect to portfolio transactions. All of such amount was paid in respect
of portfolio security transactions aggregating approximately $814,062,509 to
firms which provided some Research Services to the Adviser's organization. For
the period from the Portfolio's start of business, October 28, 1992, to the
fiscal year ended August 31, 1993, the Portfolio paid brokerage commissions of
$1,224,597 with respect to portfolio transactions. Of this amount,
approximately $1,218,619 was paid in respect of portfolio security
transactions aggregating approximately $180,689,369 to firms which provided
some Research Services to the Adviser's organization (although many such firms
may have been selected in any particular transaction primarily because of
their execution capabilities).
OTHER INFORMATION
On August 18, 1992, the Trust changed its name from Eaton Vance Growth Fund
to Eaton Vance Growth Trust. The Trust is a Massachusetts business trust
established in 1989 as the successor to Eaton Vance Growth Fund, Inc., a
Massachusetts corporation, which changed its name from Vance, Sanders Common
Stock Fund, Inc. on November 16, 1981. Such name was changed from Boston Common
Stock Fund, Inc. on December 29, 1972. It was originally organized as a Canadian
corporation in 1954, at which time it was known as Canada General Fund Limited.
Eaton Vance, pursuant to its agreement with the Trust, controls the use of the
words "Eaton Vance" and "EV" in the Fund's name and may use the words "Eaton
Vance" and "EV" in other connections and for other purposes.
The Trust's Declaration of Trust may be amended by the Trustees when
authorized by vote of a majority of the outstanding voting securities of the
Trust affected by the amendment. The Trustees may also amend the Declaration of
Trust without the vote or consent of shareholders to change the name of the
Trust or any series or to make such other changes as do not have a materially
adverse effect on the rights or interests of shareholders or if they deem it
necessary to conform the Declaration to the requirements of applicable federal
laws or regulations. The Trust's By-laws provide that the Trust will indemnify
its Trustees and officers against liabilities and expenses incurred in
connection with any litigation or proceeding in which they may be involved
because of their offices with the Trust. However, no indemnification will be
provided to any Trustee or officer for any liability to the Trust or its
shareholders by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office.
Under Massachusetts law, if certain conditions prevail, shareholders of a
Massachusetts business trust (such as the Trust) could be deemed to have
personal liability for the obligations of the Trust. Numerous investment
companies registered under the 1940 Act have been formed as Massachusetts
business trusts, and management is not aware of an instance where such
liability has been imposed. The Trust's Declaration of Trust contains an
express disclaimer of liability on the part of the Fund shareholders and the
Trust's By-laws provide that the Trust shall assume the defense on behalf of
any Fund shareholder. Moreover, the Trust's By-laws also provide for
indemnification out of the property of the Trust of any shareholder held
personally liable solely by reason of being or having been a shareholder for
all loss or expense arising from such liability. The assets directly held by
the Trust are not registered under the Securities Act of 1933 and are
therefore not readily marketable. The assets held by the Portfolio and
indirectly held by the Trust are readily marketable and will ordinarily
substantially exceed the Trust's liabilities. In light of the nature of the
Trust's business and the nature of its assets, management believes that the
possibility of the Trust's liabilities exceeding its assets, and therefore the
shareholder's risk of personal liability, is extremely remote.
As permitted by Massachusetts law, there will normally be no meetings of
shareholders for the purpose of electing Trustees unless and until such time
as less than a majority of the Trustees of the Trust holding office have been
elected by shareholders. In such an event the Trustees then in office will
call a shareholder's meeting for the election of Trustees. Except for the
foregoing circumstances and unless removed by action of the shareholders in
accordance with the Trust's By-Laws, the Trustees shall continue to hold
office and may appoint successor Trustees.
The Trust's By-Laws provide that no person shall serve as a Trustee if
shareholders holding two-thirds of the outstanding shares have removed him from
that office either by a written declaration filed with the Trust's custodian or
by votes cast at a meeting called for that purpose. The By-Laws further provide
that under certain circumstances the shareholders may call a meeting to remove a
Trustee and that the Trust is required to provide assistance in communicating
with shareholders about such a meeting.
In accordance with the Declaration of Trust of the Portfolio, there will
normally be no meetings of the investors for the purpose of electing Trustees
unless and until such time as less than a majority of the Trustees holding
office have been elected by investors. In such an event the Trustees of the
Portfolio then in office will call an investors' meeting for the election of
Trustees. Except for the foregoing circumstances and unless removed by action
of the investors in accordance with the Portfolio's Declaration of Trust, the
Trustees shall continue to hold office and may appoint successor Trustees.
The Declaration of Trust of the Portfolio provides that no person shall
serve as a Trustee if investors holding two-thirds of the outstanding
interests have removed him from that office either by a written declaration
filed with the Portfolio's custodian or by votes cast at a meeting called for
that purpose. The Declaration of Trust further provides that under certain
circumstances the investors may call a meeting to remove a Trustee and that
the Portfolio is required to provide assistance in communicating with
investors about such a meeting.
The right to redeem shares of the Fund can be suspended and the payment of
the redemption price deferred when the Exchange is closed (other than for
customary weekend and holiday closings), during periods when trading on the
Exchange is restricted as determined by the Securities and Exchange Commission,
or during any emergency as determined by the Commission which makes it
impracticable for the Portfolio to dispose of its securities or value its
assets, or during any other period permitted by order of the Commission for the
protection of investors.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Deloitte & Touche LLP, 125 Summer Street, Boston, Massachusetts, are the
independent certified public accountants of the Fund and the Portfolio,
providing audit services, tax return preparation, and assistance and
consultation with respect to the preparation of filings with the Securities
and Exchange Commission.
FINANCIAL STATEMENTS
The financial statements of the Fund and the Portfolio, which are included
in the Fund's Annual Report to Shareholders, are incorporated by reference
into this Statement of Additional Information and have been so incorporated in
reliance on the report of Deloitte & Touche LLP, independent certified public
accountants, as experts in accounting and auditing. A copy of the Annual
Report accompanies this Statement of Additional Information.
Registrant incorporates by reference the audited financial information for
the Funds and Portfolios listed below for the fiscal year ended August 31,
1995 as previously filed electronically with the Securities and Exchange
Commission:
EV Classic Greater China Growth Fund
(Accession No. 0000950109-95-004352)
EV Marathon Greater China Growth Fund
(Accession No. 0000950109-95-004353)
EV Traditional Greater China Growth Fund
(Accession No. 0000950109-95-004359)
Greater China Growth Portfolio
(Accession No. 0000950109-95-004360)
<PAGE>
APPENDIX A
THE SECURITIES MARKETS IN CHINA AND HONG KONG
The information set forth in this Statement of Additional Information
("SAI") regarding China, its economy and the Stock Exchange of Hong Kong Ltd.
has been extracted from various government and private publications. The
Trust's Board of Trustees make no representation as to the accuracy of such
information, nor has the Board of Trustees attempted to verify it.
In this SAI, unless otherwise specified, all references to "U.S. dollars,"
"U.S.$" or "$" are to United States dollars, to "RMB" or "renminbi" are to
Chinese renminbi and to "H.K. dollars" or "H.K.$" are to Hong Kong dollars. On
December 6, 1995, the exchange rate as published in The Asian Wall Street
Journal was 8.310 renminbi = U.S. $1.00 and 7.737 H.K. dollars = U.S. $1.00
and, unless otherwise specified, all renminbi and Hong Kong dollars have been
so converted at such exchange rates. No representation is made that the
renminbi, H.K. dollar or U.S. dollar amounts in this SAI could have been or
could be converted into U.S. dollars, renminbi or H.K. dollars, as the case
may be, at any particular rate or at all. See "Appendix B: People's Republic
of China--Exchange Rate" for information regarding historical rates of
exchange between the Chinese renminbi and the U.S. dollar.
HISTORY OF THE CHINESE SECURITIES MARKETS
The first securities exchange in China, the "Shanghai Gufen Gongsou"
(Shanghai Stock Confederation), was organized in the 1890s in Shanghai. The
first officially recognized exchange was established in 1914 in Shanghai,
which focused principally on the trading of government bonds. Additional
exchanges were opened in Beijing in 1918 and in Tianjin in 1921. By the period
following World War II, Shanghai had become one of the major financial centers
in Asia. However, when the Chinese communist party assumed power in 1949,
China's securities markets were closed and all securities were abolished.
The Beijing and Tianjin securities exchanges reopened in 1950 and 1949,
respectively, but were closed again in 1952. Securities markets were
nonexistent in China until the early 1980s when they reemerged in various
cities following initiation of China's economic reform program in 1978. There
currently are two officially recognized exchanges in China, the Shanghai
Securities Exchange ("SHSE"), which commenced trading on December 19, 1990,
and the Shenzhen Stock Exchange ("SZSE"), which commenced trading on July 3,
1991. A number of organized securities markets exist in other cities in China,
but these are primarily over-the-counter markets. Initially, shares on both
exchanges were made available only to Chinese investors and were traded only
in RMB, thus avoiding the issues of repatriation of profits and the remittance
of foreign currency that would arise with the participation of foreign
investors in the market. Recently, however, these issues have been addressed
in legislation concerning a special class of shares, commonly referred to as
"B" shares, which are denominated in RMB and are offered exclusively for
investment by foreign investors and such other investors as the authorities
may approve. The first issues of "B" shares were listed and traded on the SHSE
on February 21, 1992, and on the SZSE on February 28, 1992.
REGULATION AND OPERATION OF THE CHINESE SECURITIES MARKETS
Prior to the establishment of the SHSE and SZSE, trading of securities in
China was conducted in over-the-counter ("OTC") markets in a number of major
cities, including Shanghai, Chongqing, Wuhan, Guangzhou and Shenyang. The OTC
markets have no fixed location for trading; transactions are negotiated by
telephone or similar means. The SHSE and SZSE confine trading of listed shares
to the two exchanges, while unlisted stocks continue to be traded in the OTC
markets. In addition to the two exchanges and the OTC markets, a nationwide
computer system for trading of treasury bills and bonds, the Securities
Trading Automated Quotations System ("STAQ"), commenced operations on December
5, 1990 and currently links 54 licensed trading corporations in 16 cities.
Currently, trading of treasury bills constitutes the majority of the
activity in the Chinese securities markets, while trading of equity securities
constitutes only a small portion of the trading activity. The OTC markets
trade only treasury bills and equity securities that are not listed on the
SHSE or the SZSE. The SHSE and the SZSE trade both treasury bills and shares
of listed companies. Shares are divided into four types based on the type of
entity holding them: (1) State shares held by designated State entities on
behalf of the State; (2) shares held by Chinese corporations; (3) shares held
by Chinese individuals; and (4) shares held by foreign investors. The first
three categories are generally referred to as "A" shares. The fourth category
is referred to as "B" shares. State shares cannot be sold or transferred
without the approval of the State asset administrative departments. "A" shares
are quoted and traded in renminbi, while "B" shares are quoted in renminbi but
traded in foreign currencies (currently Hong Kong dollars and U.S. dollars).
China has not yet promulgated a national securities law. Although the
State Council has promulgated Interim Regulations for Administration of
Enterprise Bonds, these regulations apply only to bonds issued by State-owned
enterprises. At the local level, however, many cities and provinces have
promulgated securities rules and regulations.
The People's Bank of China (the "PBOC"), China's central bank, is
authorized to regulate stocks, bonds and other negotiable instruments and
administer China's financial markets, and it exercises this authority through
its local branches. The State Commission for Restructing the Economic System
has, in practice, assumed the principal role of formulating policies for the
development of the securities markets. In addition, the Stock Exchange
Executive Council, a nongovernmental organization, plays an important advisory
role in the formulation of a regulatory framework for the national securities
markets.
CORPORATE LAW IN CHINA
There is no national legislative framework in China providing for
regulations governing joint stock companies. However, there have been in force
in Shenzhen since February 1992 the Provisional Rules for Joint Stock
Companies in Shenzhen (the "Shenzhen Provisional Rules"). The Shenzhen
Provisional Rules include provisions governing the formation in Shenzhen of
joint stock companies, issuance of shares and debentures, ownership and
dealings in shares, reduction of capital, shareholders' rights and
obligations, meetings and resolutions, directors, financial accounting,
distribution and liquidation. More recently, the Provisional Regulations for
Shanghai Municipality Joint Stock Limited Companies came into force on June 1,
1992, covering broadly the same areas as the Shenzhen Provisional Rules.
SHENZHEN STOCK EXCHANGE
The SZSE was established in April 1991, and officially opened in July
1991. As of December 6, 1995, 125 companies had shares listed on the SZSE, of
which 33 also had "B" shares listed. Prices of "A" shares were subject to a
price fluctuation limit, but all such limits have been removed except for the
Shenzhen Champaign Company. The Shenzhen authorities have established a
regulatory fund, funded from proceeds of new issues of "A" shares, to buy and
sell shares on the open market in an attempt to minimize fluctuations of the
prices of "A" shares. In the issuance of "A" shares by Shenzhen Konka
Electronics, the first case in which this regulatory fund was introduced, an
amount equal to 5% of the aggregate "A" share premium was required to be paid
into the fund. It is expected that a similar percentage will be required for
future new issues.
The following table provides selected information regarding "B" shares of
the companies listed on the SZSE as of December 6, 1995.
INVESTMENT STATISTICS FOR "B" SHARES OF COMPANIES LISTED ON
THE SHENZHEN STOCK EXCHANGE*
<TABLE>
<CAPTION>
"B" SHARES 12/6/95 MARKET 12/6/95
IN ISSUE PRICE CAPITALIZATION TURNOVER
STOCK NAME (MILLIONS) (HK$) (HK$ MILLIONS) (HK$ MILLIONS)
- ---------- ---------- ----- -------------- --------------
<S> <C> <C> <C> <C>
Benelux-B ...................... 26 1.41 36 0.00
China Bicycles-B ............... 243 1.27 308 0.12
China Merchant-B ............... 132 2.80 369 0.00
China Vanke-B .................. 64 2.80 180 0.00
Chiwan Base-B .................. 111 3.30 367 0.00
Chiwan Wharf-B ................. 66 3.00 199 0.00
Fangda-B ....................... 50 1.55 78 2.10
Fiyta Hold-B ................... 23 3.17 71 0.01
Foshan Light-B ................. 50 5.40 270 0.00
Guangdong Power-B .............. 213 3.50 747 2.21
Hainan Pearl-B ................. 61 1.66 101 0.00
Health Mineral-B ............... 24 1.31 32 0.03
Huafa Elec-B ................... 77 1.25 96 0.00
Int Enterprise-B ............... 50 1.40 70 0.02
Intl Container-B ............... 63 5.50 347 0.08
Jiangling Motor-B .............. 174 1.45 252 0.02
Konka Elec-B ................... 118 4.00 473 0.28
Lionda Hold-B .................. 36 1.60 58 0.12
Lizhu Pharm-B .................. 79 2.90 230 0.00
Nanshan Power-B ................ 90 1.62 145 0.00
North Jianshe-B ................ 120 3.50 420 0.14
Petrochem Ind-B ................ 33 2.05 67 0.00
Pro & Res Dev-B ................ 56 1.55 87 0.01
Sez Real Estate-B .............. 120 1.76 211 0.00
Shenbao Ind-B .................. 22 1.20 26 0.00
Shenzhen Textile-B ............. 28 1.39 38 0.04
Shzh Gintian-B ................. 62 2.64 163 0.03
Shzh Tellus-B .................. 26 1.25 33 0.02
South Glass-B .................. 109 3.80 415 0.04
Tsann Kuen-B ................... 148 1.60 237 0.03
Victor on Text-B ............... 70 1.20 83 0.01
Weifu-B ........................ 68 2.50 170 0.00
Zhongchu-B ..................... 22 1.20 26 0.00
----- ----
TOTAL OF "B" SHARES ........................................... 6,405 5.31
===== ====
- ----------
Source: Lloyd George Management
</TABLE>
Market Index. The performance of the "B" shares on SZSE is measured by the
Shenzhen B Index. This Index stood at 86.7 on December 31, 1994 and closed at
61.7 on December 6, 1995.
Membership. The SZSE operates on a membership system. Membership is
restricted to securities institutions approved by the PBOC. As of March 31,
1992, there were 15 members admitted to the SZSE, consisting of banks, finance
companies, securities companies, insurance companies and trust and investment
companies. All are either Shenzhen local companies or Shenzhen branches of
national companies. Securities institutions in Shenzhen may join the Joint
Meeting of Shenzhen Securities Institutions, whether or not they are members
of the SZSE. This self-governing organization was formed in August of 1990 to
facilitate communication among securities institutions and to strengthen self-
discipline among members.
Regulation. The SZSE is regulated by the PBOC, Shenzhen Special Economic
Zone Branch and the local government in Shenzhen. The Shenzhen Municipal
People's Government promulgated the Provisional Measures of Shenzhen
Municipality for Administration of the Issue and Trading of Shares (the "SZSE
Measures"), which became effective on June 15, 1991 and govern the
establishment of the SZSE and the issuance and trading of shares in Shenzhen.
The issuance and trading of "B" shares in Shenzhen are governed by the
Provisional Measures of Shenzhen Municipality for Administration of Special
Renminbi-denominated Shares, which became effective on December 16, 1991.
These measures are supplemented by a set of Detailed Implementing Rules which
also became effective on December 16, 1991. In addition, Provisional Rules of
Shenzhen Municipality for Registration of Special Renminbi-denominated Shares
were promulgated by the Shenzhen Securities Registrars Co., Ltd. on January
29, 1992, and Operating Rules of the Shenzhen Securities Exchange for Trading
and Clearing of "B" shares were promulgated by the SZSE on January 31, 1992.
These rules provide detailed regulations relating to the issuance, trading,
settlement and registration of "B" shares.
New Issues and Listing Criteria. Shares of local Shenzhen companies may
either be listed on the SZSE or traded on the OTC markets. In accordance with
the SZSE Measures and the Shenzhen Provisional Rules, an issuer must meet the
following requirements when making a public share issue: (i) it must have
obtained prior approval from the relevant authorities to be and have been
established as or converted into a joint stock company; (ii) its production
and operations must comply with Shenzhen's industrial policies; (iii) it must
have a good financial and business record and net assets of at least RMB 10
million; (iv) for the year prior to applying for authorization to issue
shares, the value of its net tangible assets must have accounted for no less
than 25% of its gross tangible assets; (v) its promoters must subscribe for at
least RMB 5 million worth of shares, representing no less than 35% of its
total share capital; (vi) the number of shares to be issued to the public,
i.e., investors other than specially designated individuals, must be equal to
at least 25% of its total share capital; (vii) it must have a minimum of 800
shareholders following the issue; (viii) within three years prior to the
proposed issue, neither the company nor its promoters may have any record of
illegal activities or activities counter to the public interest; and (ix) the
shares subscribed by the employees of the company cannot exceed 10% of the
shares issued to the public and such shares are not assignable for a period of
one year; thereafter, assignment of such shares may not exceed 10% of the
shareholder's holding during any half year period.
All public share issues must be handled by securities distributors. Issues
of over RMB 30 million must be distributed by a syndicate made up of at least
three members. Issues of over RMB 50 million must be distributed by a
syndicate made up of at least five members.
In order to qualify for listing on the SZSE, companies must meet
additional requirements which are more stringent than those for public share
issues. Such additional requirements include: (i) the total par value of
shares of common stock actually issued must be more than RMB 20 million; (ii)
there must have been a minimum return on capital of more than 10% in the year
preceding listing and more than 8% over the two years prior to the year
preceding the listing; (iii) the number of registered shareholders must exceed
1,000, and the total number of shares held by shareholders holding less than
0.5% of the company's shares must account for more than 25% of the total paid-
up share capital; (iv) the company must have a continuous record of making
profits and must have a business record of more than three years; and (v) for
the year prior to applying for listing, the value of the net tangible assets
must have accounted for more than 38% of its gross tangible assets and there
must be no accumulated losses.
Application for a public share issue must be made to the PBOC, Shenzhen
Special Economic Zone Branch. Application for listing on the SZSE must be made
to the PBOC, Shenzhen Special Economic Zone Branch and the SZSE. A company's
prospectus for initial share issue must be published in a newspaper or other
publication approved by the PBOC, Shenzhen Special Economic Zone Branch, ten
days prior to the scheduled issuance date, which must include: (i) the name
and domicile of the company; (ii) the scope of the company's production and
business; (iii) resumes of the promoters or directors and the managers; (iv)
the reason for and purpose of the share issue; (v) the total amount, class(es)
and number of shares to be issued, and the par value and selling price of each
share; (vi) the method of issue; (vii) the investors to whom the issue is
marketed; (viii) the name(s) of the securities distributor(s), the total value
of the shares to be distributed and the method of distribution; (ix) details
of the company's history and conditions for future development, its main
business and financial situation, and the total amount and composition of its
assets and liabilities; and (x) a certified profit forecast.
A company applying for a further issue of shares must satisfy the relevant
authorities that the following conditions have been met: (i) its business
record since the time of the last issue must have been good, and its
utilization of capital must be above average in its line of business; (ii) not
less than one year must have elapsed since its last share issue; (iii) the
amount of shares it is applying to issue must not exceed the amount of its
existing shares; (iv) its application of the proceeds of the issue must
conform to the industrial policies of Shenzhen; and (v) the issue will be
beneficial to the healthy development of the Shenzhen securities markets.
Applications for approval to issue shares for the purpose of attracting
foreign investment are not bound by (ii) and (iii).
New Issues Criteria for "B" Shares in Shenzhen. A company wishing to issue
"B" shares in Shenzhen must comply with the following requirements: (i) it
must fulfill the issue requirements specified in the SZSE Measures; (ii) it
must obtain written consent from the relevant department of the State to
utilize foreign investment or to transform into a foreign investment
enterprise, and its use of proceeds from the "B" share issue must conform to
the laws and regulations of the State concerning the administration of foreign
investment; (iii) it must have a stable, adequate source of foreign exchange
revenue (sufficient to pay out the "B" share dividends and bonuses for each
year); (iv) the percentage of "B" shares (including promoters' shareholdings)
to the total shares of the company must not exceed the upper limit set by the
PBOC, Shenzhen Special Economic Zone Branch; and (v) the company must have a
business record of three years or more, or have received special permission
from the PBOC, Shenzhen Special Economic Zone Branch. (Companies in high
technology industries or other special industries are not bound by this
restriction.)
Subscription for "B" shares is carried out through authorized securities
institutions within Shenzhen Municipality. These institutions may arrange for
the participation of overseas securities institutions approved by the PBOC,
Shenzhen Special Economic Zone Branch. The holding by any foreign investor of
"B" shares of a joint stock company accounting for more than 5% of such
company's total shares must be reported to the PBOC, Shenzhen Special Economic
Zone Branch. Domestic securities institutions are not allowed to trade "B"
shares for their own accounts unless approved by the PBOC, Shenzhen Special
Economic Zone Branch.
The issuance of "B" shares through a syndicate underwriting on behalf of
the issuer must be managed by at least one authorized domestic securities
institution. The issue price of "B" shares may not be lower than the issue
price of "A" shares of the same company. During the distribution period,
distributors must sell the shares at the same predetermined price.
An issuer may request private placement of its "B" shares with
institutions outside China with which it has close business connections,
provided that such institutions are approved by the PBOC, Shenzhen Special
Economic Zone Branch and the number of shares privately placed with them does
not exceed 15% of the total number of "B" shares in such issue.
Reporting Requirements. Within 60 days following the end of each half of
the fiscal year, an issuer is required to submit an interim financial report,
reviewed and approved by an accounting firm, or its annual financial report,
audited by an accounting firm, to the PBOC, Shenzhen Special Economic Zone
Branch and to publish the same in a newspaper or other publication approved by
the PBOC, Shenzhen Special Economic Zone Branch. Such financial reports must
also be submitted to the SZSE if the issuer's securities are already listed on
the SZSE.
Insider Trading Restrictions. All persons are prohibited from using
insider information when engaging in the purchase or sale of securities.
THE SHANGHAI SECURITIES EXCHANGE
The SHSE was established on November 26, 1990 and officially opened on
December 19, 1990. Prior to the establishment of SHSE, an active OTC market in
local stocks and bonds existed in Shanghai.
As of December 6, 1995, 184 companies had shares listed on the SHSE of
which 36 also had "B" shares listed. Shares listed on the SHSE currently are
not subject to any limit on daily price fluctuations.
The following table provides selected information regarding the "B" shares
of the companies listed on the SHSE as of December 6, 1995.
INVESTMENT STATISTICS FOR "B" SHARES OF COMPANIES LISTED ON
THE SHANGHAI SECURITIES EXCHANGE*
<TABLE>
<CAPTION>
"B" SHARES 12/6/95 MARKET 12/6/95
IN ISSUE PRICE CAPITALIZATION TURNOVER
COMPANY (MILLIONS) (US$) (US$ MILLIONS) (US$ MILLIONS)
- ------- ---------- ------- -------------- --------------
<S> <C> <C> <C> <C>
Autom Instrume-B ............... 77 0.188 14 0.00
Ch 1st Pencil-B ................ 66 0.332 22 0.01
Ch Text Mach-B ................. 109 0.152 17 0.02
China Travel-B ................. 60 0.340 20 0.00
Chlor Alkali-B ................. 336 0.262 88 0.01
Dajiang Group-B ................ 263 0.498 131 0.04
Dazhong Taxi-B ................. 78 0.778 61 0.00
Diesel Engine-B ................ 110 0.376 41 0.14
Erdos Cashmere-B ............... 110 0.436 48 0.02
Erfangji-B ..................... 193 0.170 33 0.01
Forever Bicycle-B .............. 60 0.140 8 0.01
Friendship-B ................... 48 0.470 23 0.05
Goods & Material-B ............. 55 0.168 9 0.02
Haixin-B ....................... 84 0.428 36 0.00
Hua Xin Cement-B ............... 87 0.282 25 0.04
Jinjiang Tower-B ............... 92 0.300 28 0.12
Jinqiao Export-B ............... 143 0.428 61 0.01
Jintai-B ....................... 80 0.236 19 0.00
Lianhua Fibre-B ................ 65 0.170 11 0.11
Lujiazui Devel-B ............... 200 0.598 120 0.06
Narcissus-B .................... 100 0.198 20 0.01
New Asia-B ..................... 100 0.500 50 0.01
P&T Equipment-B ................ 60 0.450 27 0.05
Phoenix-B ...................... 100 0.172 17 0.07
Rubber Belt-B .................. 33 0.170 6 0.00
Sanmao Textile-B ............... 33 0.256 8 0.00
Sewing Machine-B ............... 75 0.160 12 0.03
Sh Refrig Comp-B ............... 65 0.400 26 0.07
Shanghai Hero-B ................ 46 0.276 13 0.03
Shangling-B .................... 79 0.650 51 0.02
Steel Tube-B ................... 88 0.142 12 0.00
Tyre & Rubber-B ................ 221 0.236 52 0.02
Vacuum & Elec-B ................ 145 0.230 33 0.00
Wai Gaoqiao-B .................. 166 0.384 64 0.02
Wing Sung-B .................... 30 0.188 6 0.01
Yaohua Glass-B ................. 165 0.890 147 0.00
----- ----
TOTAL OF "B" SHARES ........................................... 1,359 1.02
===== ====
- ----------
Source: Lloyd George Management
</TABLE>
Market Index. The performance of the "B" shares on the SHSE is measured by
the Shanghai Securities Exchange B Index. This Index stood at 62.8 on December
31, 1994 and closed at 50.4 on December 6, 1995.
Membership. The SHSE operates on a membership system. Membership is
restricted to securities institutions approved by the PBOC. As of March 31,
1992, there were 29 members admitted to the SHSE, 20 of which are local
institutions and 9 of which are from other provinces. The SHSE members are
comprised of securities companies, insurance companies, trust and investment
companies and open credit cooperatives. Members of the SHSE must join the
Securities Trade Association, which is a self-governing trade organization
whose articles of association specify such matters as the purpose, nature,
conditions for membership, rights and obligations of members and accounting of
the Association. The SHSE members may be classified as (1) members who trade
for others' accounts; (2) members who trade for their own accounts only; or
(3) members who trade both for their clients and for their own accounts. No
member may buy or sell any listed securities outside the SHSE without
permission.
Regulation. The SHSE is regulated by the local branch of the PBOC and the
local government in Shanghai. The Shanghai Municipal People's Government
adopted the Measures of Shanghai Municipality for Administration of the
Trading of Securities (the "SHSE Measures"), which came into effect on
December 1, 1990 and govern the establishment of the SHSE and the issuance and
trading of securities in Shanghai. In November of 1991, special regulations
contained in the Measures of Shanghai Municipality for the Administration of
Special Renminbi-denominated Shares and their Detailed Implementing Rules were
promulgated by the PBOC and the Shanghai Municipal People's Government
relating to the issue of "B" shares in Shanghai. Special rules for the trading
and settlement of "B" shares were also enacted in February 1992.
New Issues and Listed Criteria. To issue new securities, an issuer must
file an application with the PBOC, Shanghai Branch, along with the issuer's
articles of association, a prospectus to be used in offering the securities
which meets the requirements of the SHSE Measures and other related documents.
Issues of shares, or bonds of a value of RMB 10 million or more, must be
distributed by a securities institution, unless otherwise provided by the
State or placed privately. Issues with a total distribution value of RMB 30
million or more must be jointly distributed by a distribution syndicate formed
and led by a securities company. Distribution of securities includes the
underwriting of securities and the placement of securities by an agent.
Under the SHSE Measures, an issuer which intends to issue its shares must
submit: (i) the consent from the relevant authorities as to the establishment
or restructuring of the enterprise as a joint stock company; (ii) in the case
of a newly-established joint stock company, an investment certificate
evidencing that its organizers have subscribed for not less than 30% of the
total amount of shares; (iii) in the case of State-owned enterprise being
restructured as a joint stock company, a confirmation of asset valuation
issued by the Administration for State Assets with a report on the conclusions
from the asset valuation issued by the relevant asset valuation agency, or, in
the case of a non-State-owned enterprise being restructured as a joint stock
company, a report on the conclusions from the asset valuation issued by an
accounting firm and a registered accountant of that firm; (iv) in the case of
an existing joint stock company issuing shares in order to increase its
capital, financial statements of continuous profits during at least the
preceding two years and the preceding quarter of the current year, certified
by an accounting firm and a certified accountant of that firm, and a
shareholders' resolution authorizing the issue; and (v) an application for
share issue to the PBOC, Shanghai Branch, along with its articles of
association, the prospectus to be used for the share issue, a distribution
contract entered into with a securities distributor and, if the shares are to
be issued to raise funds for fixed asset investment, the approval document(s)
from the relevant administrative department(s). In addition, where the issuer
also intends to list shares on the SHSE, it must submit (i) an application for
the listing of and permission to deal in securities; (ii) a report on the
listing of the securities; (iii) consent from at least one securities house to
assist in the trading of the securities; and (iv) financial statements of
continuous profits for at least two years, certified by an accounting firm and
a registered accountant of that firm.
New Issues and Listing Criteria for "B" Shares on the SHSE. A company
wishing to issue "B" shares to be listed on the SHSE must comply with the
following requirements: (i) it must be an approved joint stock company which
has been registered with the relevant State authority or whose establishment
has been approved and has met all the listing requirements set forth in the
SHSE Measures; (ii) the proceeds from the issuance of the "B" shares must be
used in accordance with State policies and regulations on the administration
of foreign investment; (iii) it must have a stable, adequate source of foreign
exchange revenue (i.e., sufficient to pay out the "B" share dividends); and
(iv) the percentage of "B" shares among the total shares of a former state-
owned enterprise reorganized as a joint stock company must not exceed the
upper limit set by the PBOC, Shanghai Branch.
Subscription for "B" shares is carried out through approved securities
institutions. Approved domestic securities institutions may arrange for
participation by foreign securities institutions approved by the PBOC,
Shanghai Branch. Approval by the Shanghai Branch of the PBOC is required for
the subscription by a single investor for "B" shares which exceed 5% of the
total issued share capital of a company. In addition, "B" share trading must
be carried out by approved securities institutions and be processed through a
domestic securities house which is in the business of dealing in "B" shares.
Every investor dealing in "B" shares must open a "B" share securities account
with the SHSE. Domestic securities dealing organizations may open such "B"
share securities accounts on behalf of individuals and institutional investors
outside of China. Domestic securities institutions may not engage in "B" share
business for their own account.
The issuance of "B" shares in Shanghai may be through a public offering or
a private placement. A public offering must be conducted on behalf of the
issuer by an approved securities institution. The issuance of "B" shares
through a distribution syndicate must be managed by a domestic securities
institution. The prospectus for an issue of "B" shares must be published in a
newspaper or other publication approved by and on dates designated by the
PBOC, Shanghai Branch.
Reporting Requirements. Once securities are approved for listing on the
SHSE, the issuer must publish the report on the listing of the securities and
certified financial statements showing continuous profits for at least two
years preceding the listing. Issuers of listed securities are required to
submit interim financial reports to the PBOC, Shanghai Branch in the middle of
each fiscal year. Issuers of securities traded on the OTC markets or the SHSE
are required to submit certified financial reports at the end of each fiscal
year. Such reports are required to be submitted within 45 days after the end
of the relevant period.
Within 15 days after the occurrence of any of the following situations, an
issuer of securities must submit a status report to the PBOC, Shanghai Branch,
and the SHSE if the securities of such issuer are listed on the SHSE: (i) the
conclusion with another party of a contract or agreement that will have a
material effect on the assets or liabilities of the enterprise or the rights
and interests of its shareholders; (ii) a major change in the business items
or forms of business of the enterprise; (iii) the making of a decision on a
major or relatively long-term investment; (iv) the incurring of major debts or
losses; (v) major losses of the assets of the enterprise; (vi) a major change
in the production or business environment; (vii) a change in the members of
the board of directors or senior management personnel; (viii) a change in the
shareholdings of shareholders who hold 5% or more of the total amount of
shares or a change in the shareholdings in the company of the members of the
board of directors or senior management personnel; (ix) involvement in a major
lawsuit; (x) the making of such major policy decisions as on merger,
consolidation, etc.; and (xi) commencement of liquidation or bankruptcy
reorganization.
The trading and registration of transfer of registered shares will be
suspended 10 days before each announced date for payment of dividends or
bonuses or the issuance of new shares. Under the SHSE Measures, if the
transfer registration procedures are not completed within the specified time
limits, the dividends, bonuses and newly issued shares will be issued to the
persons in whose name the securities were registered at the time of such
distribution or issuance.
Insider Trading Restrictions. Certain persons involved in the issuance of
shares, such as relevant personnel of the PBOC, Shanghai Branch, who are
involved in securities administration, management personnel of the SHSE,
personnel of a securities house who are directly connected with the issue and
trading of shares and other insiders connected with the issue and trading of
shares are prohibited from trading, directly or indirectly, for their own
account.
TRADING AND REGULATION OF "B" SHARES
Trading of "B" Shares on the SZSE. Trading on the SZSE is conducted in
blocks of 2,000 shares. Trading in "B" shares may only be conducted between
non-Chinese investors. Investors outside China must trade "B" Shares through
approved foreign brokers who in turn instruct approved Shenzhen brokers who
actually effect trades on the SZSE. All trades must be transacted on the
trading floor; no off-market transactions are allowed. Trading on the SZSE is
carried out through a computerized automatic matching system which effects
each transaction based on price and time priority. Investors subscribing for
or buying "B" shares are required to produce their individual or corporate
identification documents, while individual investors must also pay a deposit
equal to 60% of the market price of the shares to be bought.
Commissions for transactions in "B" shares are fixed at 0.6% of the
purchase price. A stamp duty of 0.3% of the purchase price is also payable. In
addition, the SZSE imposes a transaction levy of 0.1% of the actual
transaction amount. A share transfer registration fee of 0.3% of the face
value of the "B" shares transferred is also payable by the buyer to the
official registrar of the "B" shares. Certain other fees may also be payable
to the clearing and settlement bank and foreign brokers for their services.
Any single investor holding "B" shares amounting to more than 5% of the
total share capital of an issuer must report such holding to the PBOC,
Shenzhen Special Economic Zone Branch. Short selling of "B" shares is
prohibited. Newly purchased "B" shares may not be sold before the settlement
and registration procedures for their purchase are completed.
Trading of "B" Shares on the SHSE. In Shanghai, "B" shares are traded in
blocks having a total face value of RMB 1,000. "B" shares may only be traded
between non-Chinese investors. Investors outside of China must trade "B"
shares through approved foreign brokers who instruct approved Shanghai brokers
who then actually effect trades on the SHSE. All trades must be transacted on
the trading floor; no off-market transactions are allowed.
Brokerage commissions for "B" share transactions are fixed at 0.6% of the
total amount of the transaction, with reduced rates of 0.5%, for transactions
with a value of RMB 500,000 and 0.4% with a value exceeding RMB 5,000,000. A
stamp duty of 0.3% of the amount of the transaction is also charged. The SHSE
also levies a transaction fee on securities dealers equal to 0.03% of the
amount of the transaction. A transfer fee of 0.1% of the face value of the
shares transferred is also payable by the investor. Certain other fees may
also be payable to the banks appointed to coordinate primary and secondary
clearing and settlement and to foreign brokers for their services. Fees are
calculated in renminbi and payable in U.S. dollars.
Any single investor (individual or institutional) purchasing "B" shares of
an amount exceeding 5% of the issuer's total share capital must obtain
approval for such purchase from the PBOC. Newly purchased "B" shares cannot be
sold before the transfer procedures for their purchase are completed.
Trading in "B" shares is in a scripless manner using the automatic book-
entry transfer system. Orders are matched automatically by computer by price
and time priority. Market and trading information is transmitted through
telecommunication links by an international information agency from the SHSE
to overseas countries on a real time basis.
Clearing and Settlement of "B" shares. In both Shenzhen and Shanghai,
clearing and settlement of "B" share transactions are effected on the third
day after the trade date. All clearing and settlement of "B" shares are
effected in a scripless manner, through a book-entry clearinghouse system. No
such certificates are issued to investors. Cash settlement is effected on a
broker to broker, transaction by transaction basis.
Clearing and settlement of "B" share transactions are conducted at two
levels. The Bank of Communications is responsible for coordinating the primary
settlement, for both shares and cash, between the Shanghai or Shenzhen brokers
and the exchanges, which is effected through a book-entry system. Citibank,
N.A. coordinates the secondary settlement, for cash only, which takes place
between the Shanghai or Shenzhen brokers and the off-shore brokers. Clearing
and settlement of "B" share transactions are handled by three approved banks:
Citibank N.A., Standard Chartered Bank and HongkongBank.
All "B" share prices and all dividends, bonuses and other income on "B"
shares are calculated in RMB but paid in foreign currency (Hong Kong dollars
or U.S. dollars). RMB amounts are converted to Hong Kong dollars or U.S.
dollars at the weekly weighted average conversion rate as quoted by the
Shanghai Foreign Exchange Transaction Center or the Shenzhen Foreign Exchange
Adjustment Center (with the exception of share sale prices in Shenzhen, which
are converted at the prior working day's conversion rate).
THE HONG KONG SECURITIES MARKET
Formal trading of investment securities was established in Hong Kong in
1891 when the Association of Stockbrokers in Hong Kong was formed. It was
renamed the Hong Kong Stock Exchange in 1914. In 1969, the Far East Exchange
was formed, followed by the Kam Ngan Stock Exchange in 1971 and the Kowloon
Stock Exchange in 1972. These four exchanges merged to form The Stock Exchange
of Hong Kong Ltd. ("Hong Kong Stock Exchange" or "HKSE"), which commenced
trading on April 2, 1986. The HKSE, with a total market capitalization as of
October, 1994 of approximately H.K. $2,476 billion (approximately U.S. $320.3
billion), is now the second largest stock market in Asia, measured by market
capitalization, behind only that of Japan. As of that date, 520 companies and
908 securities were listed on the Hong Kong Stock Exchange. The securities
listed include ordinary shares, warrants and other derivative instruments.
In addition to an active stock market, Hong Kong has an active foreign
exchange market, an interbank money market, a large gold bullion market and a
futures exchange. Hong Kong is also one of the major Asian centers for venture
capital businesses, many of such businesses having their Asian head office in
Hong Kong.
<PAGE>
Primary Market. Hong Kong has an active new issue market for equity
securities. The following table summarizes the new issues on the Hong Kong
Stock Exchange since 1986.
NEW ISSUES ON THE HKSE
VALUE OF VALUE OF
SHARE ISSUES RIGHTS ISSUES
------------------------ ----------------------
NUMBER (H.K. $ (U.S. $ (H.K. $ (U.S. $
YEAR OF ISSUES MILLION) MILLION) MILLION) MILLION)
- ---- --------- -------- -------- -------- --------
1986 ......... 8 3,268 419 1,184 152
1987 ......... 14 2,402 308 5,591 717
1988 ......... 20 1,443 185 2,401 308
1989 ......... 7 1,732 222 1,836 335
1990 ......... 41 7,067 906 2,511 322
1991 ......... 49 5,592 717 9,648 1,237
1992 ......... 59 9,633 1,235 11,227 1,439
1993 ......... 68 28,884 3,751 9,266 1,193
1994 ......... 53 16,732 2,165 5,643 130
- ----------------
Source: HKSE.
Secondary Market. The table below sets out selected data on the Hong Kong
Stock Exchange for each year since 1986, including the value of securities
traded during each year, and the number of companies and securities listed and
the total market capitalization as of December 31 of each year.
SELECTED DATA ON THE HKSE
VALUE OF DECEMBER 31 MARKET
SECURITIES TRADED CAPITALIZATION
-------------------------------- ------------------------------
(H.K. $ (U.S. $ LISTED LISTED (H.K. $ (U.S. $
YEAR MILLION) MILLION) COMPANIES SECURITIES MILLION) MILLION)
- ---- -------- -------- --------- ---------- -------- -------
1986 ....... 123,128 15,786 253 335 419,281 53,754
1987 ....... 371,406 47,616 276 412 419,612 53,796
1988 ....... 199,481 25,574 304 479 580,378 74,446
1989 ....... 299,147 38,352 298 479 605,010 77,565
1990 ....... 288,715 37,015 299 520 650,410 83,386
1991 ....... 334,104 42,834 357 597 1,052,012 134,873
1992 ....... 700,577 90,569 413 749 1,332,184 172,221
1993 ....... 1,149,265 148,670 477 891 2,975,379 381,459
1994 ....... 1,082,460 140,034 529 1,006 2,085,182 269,752
- ----------------
Source: HKSE.
Market Performance. The Hang Seng Index is the most widely followed
indicator of stock price performance in Hong Kong. The Hang Seng Index is an
arithmetic index based on the securities of 33 companies, weighted by their
respective market capitalizations, and is thus strongly influenced by large
capitalization stocks. The following table sets out high, low and end of year
close for the Hang Seng Index for each year since 1986.
<PAGE>
HANG SENG INDEX
% CHANGE
FROM PRIOR
YEAR HIGH LOW YEAR-END PERIOD-END
- ---- ---- --- -------- ----------
1986 ....................... 2,568.3 1,559.4 2,568.3 --
1987 ....................... 3,949.7 1,894.7 2,302.8 (10.3)
1988 ....................... 2,772.5 2,223.0 2,687.4 16.7
1989 ....................... 3,309.6 2,093.6 2,836.5 5.5
1990 ....................... 3,559.9 2,736.6 3,024.6 6.6
1991 ....................... 4,297.3 2,984.0 4,297.3 42.1
1992 ....................... 6,447.1 4,301.8 5,512.4 28.3
1993 ....................... 11,888.0 5,438.0 11,888.0 115.7
1994 ....................... 12,201.1 7,707.8 8,191.0 (31.1)
- ----------------
Source: HKSE.
The Hong Kong stock market can be volatile and is sensitive both to
developments in China and to the strength of other world markets. As an
example, in 1989, the Hang Seng Index rose to 3,310 in May from its previous
year-end level of 2,687, but fell to 2,094 in early June following the events
at Tiananmen Square. See "Appendix A: People's Republic of China." The Hang
Seng Index gradually climbed in subsequent months, but fell by 181 points on
October 13, 1989 (approximately 6.5%) following a substantial fall in the U.S.
stock market, and at the year end closed at a level of 2,837.
Trading. Trading on the HKSE is conducted through a computerized system to
convey bid and asked prices for securities. Trades are then effected on a
matched trade basis directly between buyers and sellers. All securities are
traded in board lots. For most companies a board lot is 1,000 shares, although
board lots can vary in size from 100 to 5,000 shares. Odd lots are traded
separately, usually at a small discount to the board lot prices. Share
certificates in board lots, together with transfer deed, must be delivered on
the day following the transaction. Payment is due against delivery. A
brokerage commission of 0.25% (with a minimum of H.K. $50) is standard. In
addition, trades are subject to a transaction levy of 0.025% payable equally
to the HKSE and the Hong Kong Securities and Futures Commission (the "SFC")
and a special levy of 0.03%. Finally, the Hong Kong government charges a stamp
duty of H.K. $2.50 for every H.K. $1,000 of the transaction price or any part
thereof.
Regulation and Supervision. The SFC was established by the Hong Kong
government in May 1989 as an autonomous statutory body outside the civil
service which provides a general regulatory framework for the securities and
futures industries. The SFC administers certain elements of Hong Kong
securities law including those ordinances governing the protection of
investors, disclosure of interests and insider dealing.
The governing authority of the Hong Kong Stock Exchange is its Council,
which is comprised of 30 members. The Council is responsible for formulating
policies and oversees the operations of the HKSE through standing committees.
Eighteen Council members are representatives of the brokerage firms in Hong
Kong, nine are representatives of investment and merchant banking firms and
two are appointed by the Hong Kong government. The chief executive officer of
the HKSE serves on the Council on an ex-officio basis. Of the 18 broker
representatives on the Council, four are elected by the top 14 major brokers
which have the top third of market share, five are elected by the 51 middle
tier brokers having the middle third of market share, and nine are elected by
the entire brokerage community.
The HKSE promulgates its own rules governing share trading and disclosure
of information to shareholders and investors. Companies listed on the HKSE
enter into a listing agreement with the exchange which includes provisions
requiring that listed companies send interim and annual accounts to
shareholders. In addition, the Hong Kong Code on Takeovers and Mergers (used
by the SFC) provides guidelines for companies and their advisers
contemplating, or becoming involved in, takeovers and mergers.
<PAGE>
Foreign Investment Restrictions. There are no regulations governing
foreign investment in Hong Kong. There are no exchange control regulations and
investors have total flexibility in the movement of capital and the
repatriation of profits. Funds invested in Hong Kong can be repatriated at
will; dividends and interest are freely remittable.
DIRECT INVESTMENTS IN CHINA
Since 1978, foreign direct investments in China have increased and have
become an important element in China's economy. Hong Kong and Macao have been
the most important source of foreign direct investments in China, accounting
for 64.9% in 1993 and 59.9% in 1994 of total direct foreign investments.
Direct foreign investments in China, by number of contracts and contract
value, during 1979 to 1993 were as follows:
DIRECT FOREIGN INVESTMENT
<TABLE>
<CAPTION>
1979-
1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Number of Contracts
(in thousands) ..................... 3.22 3.07 1.50 2.19 5.95 5.78 7.27 n.a. 48.0 83 48
Value of Contracts (in U.S. $
billion)
(pledged) .......................... 8.99 5.93 2.83 3.71 5.30 5.60 6.60 12.0 58.1 112.9 70.8
Actual Value of Contracts Utilized
(in U.S. $ billion) ................ 1.8 2.3 3.2 3.4 3.4 4.4 11.0 20.0 29.0
- ----------------
Source: figures for 1979 to 1990, Ministry of Foreign Economic Relations and
Trade; figures for 1991, State Statistical Bureau of the People's
Republic of China.
</TABLE>
FORM OF DIRECT FOREIGN INVESTMENTS
Direct foreign investments in China have taken a variety of forms,
including:
(a) Equity Joint Ventures
Equity joint ventures are principally owned by The Law of the People's
Republic of China on Joint Ventures Using Foreign and Chinese Investment,
promulgated in 1979. This law is among the first principal pieces of
legislation relating to foreign direct investments in China. It is
supplemented by rules and regulations governing taxation, labor and other
matters relating to equity joint ventures. Equity joint ventures are limited
liability legal entities in which Chinese and foreign partners hold equity
stakes.
(b) Contractual or Cooperative Joint Ventures
Contractual or cooperative joint ventures are governed by The Law of the
People's Republic of China on Chinese-Foreign Cooperative Joint Ventures of
1988. They are established by contracts between a Chinese party and a foreign
party. Unlike equity joint ventures, in which the rights, liabilities,
obligations and profit sharing arrangements between the joint venture partners
are usually defined by reference to their respective equity interests in the
joint venture, the rights, liabilities, obligations and profit sharing
arrangements between the parties in contractual or cooperative joint ventures
usually are specifically negotiated and set out in the joint venture contract.
This type of joint venture is generally perceived to have a greater degree of
flexibility than equity joint ventures.
(c) Wholly Foreign-Owned Enterprises
<PAGE>
Foreign companies are permitted to establish wholly-owned subsidiaries in
China. Such wholly foreign-owned enterprises are governed by The Law of the
People's Republic of China on Wholly Foreign-Owned Enterprises of 1986. These
enterprises are required to utilize advanced technology and equipment or to
export 50% or more of their finished products.
(d) Processing and Assembly Agreements
In this form of investment, the Chinese party normally provides the
factory, power and other utilities, and labor, and the foreign party supplies
the raw materials. The foreign party pays a processing or assembling fee to
the Chinese party and has ownership of the finished products.
(e) Compensation Trade
In this form of investment, the foreign party provides services,
equipment, training and/or technical know-how to the Chinese party and, in
exchange, receives compensation in the form of finished products produced by
the Chinese party.
PRIORITY INVESTMENT AREAS
In order to help modernize the Chinese economy, China has established
zones in which foreign investment is encouraged.
(a) Special Economic Zones
In 1980, China established special economic zones to attract foreign
capital, technology, and expertise by offering investors in these zones tax
incentives and other preferential treatment. Four of the five special economic
zones in China are located in the Guangdong and Fujian Provinces, Shenzhen,
Shantou and Zhuhai in Guangdong Province and Xiamen in Fujian Province.
(b) Open Coastal Cities
In April 1984, 14 areas were designated "open coastal cities" where, like
the special economic zones, preferential investment terms are offered to
investors. These cities are Qinhuangdao, Dalian, Tianjin, Yantai, Qingdao,
Lianyungang, Nantong, Shanghai, Ningbo, Wenzhou, Fuzhou, Guangzhou, Beihai and
Zhanjiang.
(c) Coastal Open Economic Zones
In the late 1980s, five areas were designated coastal open economic zones:
Liaodong Peninsula and Shangdong Peninsula in northeast China, the Yangtze
River Delta in the eastern Jiangsu Province, the Minnan Delta in Fujian
Province and the Pearl River Delta in southern Guangdong Province.
(d) Shanghai's Pudong District
In 1990, the Pudong area of Shanghai was also designated an open zone for
foreign investments with autonomy equivalent to that of a special economic
zone.
(e) High and New Technology Industrial Development Zones
High and new technology industrial development zones were first introduced
in 1988 to offer preferential treatment to enterprises which have been
confirmed as technology intensive in accordance with the requirements
formulated by the State Science and Technology Commission. There are 27 high
and new technology industrial development zones which have been approved by
the State Council. These zones presently exist in Beijing, Changchun,
Changsha, Chengdu, Chongqing, Dalian, Fuzhou, Guangzhou, Guilin, Hainan,
Hangzhou, Harbin, Hefei, Jinan, Lanzhou, Nanjing, Shanghai, Shenyang,
Shenzhen, Shijiazhuang, Tianjin, Weihai, Wuhaxn, Xi'an, Xiamen, Zhengzhou and
Zhongshan.
<PAGE>
APPENDIX B
CHINA REGION COUNTRIES
The information set forth in this Appendix has been extracted from various
government and private publications. The Trust's Board of Trustees make no
representation as to the accuracy of the information, nor has the Board of
Trustees attempted to verify it.
PEOPLE'S REPUBLIC OF CHINA
GENERAL INFORMATION
LOCATION AND GEOGRAPHY
China is the world's third largest country occupying a region of 9.6
million square kilometers. It borders Russia and Mongolia in the north and
joins the borders of Vietnam, Laos, Myanmar and Bhutan in the south. To the
west and northwest are states of Afghanistan, Pakistan, India and Nepal and to
the east is North Korea. The terrain in the west is dominated by steppes, vast
deserts and high mountain ranges. Mountain areas and highlands account for
about two-thirds of the Chinese territory. To the east, China has two of the
world's greatest rivers, Huang He (Yellow River) and Chang Jiang (Yangtze
River). Cultivation is concentrated in the north eastern half of the country
where flatter terrain and proximity to the coast and major river basins
compensate for lower rainfall.
The country is divided into 23 provinces, three municipalities (Beijing,
Shanghai and Tianjin) and five autonomous regions (Guangxi Xhuang, Nei Mongol,
Ningxia Hui, Xinjiang Uygur and Xizang (Tibet)). The capital and political
center of China is Beijing. Shanghai is the largest city and is also the
commercial and financial capital.
POPULATION
China is the world's most populous nation, consisting of more than one-
fifth of the human race. The estimated population was approximately 1.199
billion as of December 1994. According to the government census, the figure
represented an average annual increase of 1.48 percent over 1982. China has
engaged in a 20-year plan for restraining population growth as part of its
economic modernization program. Despite the plan, the population is likely to
exceed 1.300 billion by the year 2000. Over 80 percent of the population is
concentrated in the eastern half of the country as a result of systematic
cultivation.
The following table presents information regarding China's population
growth since 1950.
POPULATION
<TABLE>
<CAPTION>
TOTAL ANNUAL
POPULATION URBAN RURAL GROWTH RATE
YEAR (MILLION) % % (%)
- ---- ---------- ----- ----- -----------
<C> <C> <C> <C> <C>
1950 ............................................. 551.96 11.18 88.82 1.900
1955 ............................................. 614.65 13.48 86.52 2.032
1960 ............................................. 662.07 19.75 80.25 (.457)
1965 ............................................. 725.38 17.98 82.02 2.838
1970 ............................................. 829.92 17.38 82.62 2.583
1975 ............................................. 924.20 17.34 82.66 1.569
1980 ............................................. 987.05 19.39 80.61 1.187
1985 ............................................. 1,058.51 23.71 76.29 1.426
1990 ............................................. 1,143.33 26.41 73.59 1.439
1991 ............................................. 1,158.23 26.37 73.63 1.298
1992 ............................................. 1,171.71 27.63 72.37 1.160
1993 ............................................. 1,185.17 28.14 71.86 1.145
1994 ............................................. 1,198.50 28.62 71.38 1.121
</TABLE>
Notes: (i) Population figures for 1985 and 1990 were estimated based on the
Fourth (1987) National Population Census.
(ii) The 1985 growth rate was estimated based on the Third (1982) and
Fourth (1990) National Population Census. The 1990 growth rate is
from the National Sample Survey on Population Change in 1990. The
earlier growth rates are from the Annual Report of the Ministry of
Public Security.
Source: China Statistical Yearbook 1995, State Statistical Bureau of the
People's Republic of China.
The population is homogeneous, composed of mostly the Han ethnic group.
The national language is Putonghua which is based on Mandarin and was
simplified in 1945. Over 93 percent of the population speaks one of the five
main Sino-Tibetan dialects which are Mandarin, Cantonese, Fukienese, Hakka and
Wu. Religion is not a major source of ethics for Chinese and is not a divisive
force among its population. Some 20 percent of the population practice
Confucianism and 8 percent are Buddhists.
POLITICAL HISTORY
The Chinese state has origins dating back to the second millennium BC. A
long history of feudalism existed before a single Chinese empire was created.
Gradually, an imperial system developed under the rule of successive Chinese
and non-Chinese dynasties. The Manchu Dynasty, the last ruling dynasty, came
to an end in 1911 as a result of both an erosion of power from unequal foreign
treaties and a coup. Following the collapse of the dynasty, a period of
political instability and power struggle ensued between the Kuomintang
(Nationalist Party) and the Chinese Communist Party. In 1945, with the
Japanese surrender, the Communist Party under Mao Zedong seized most of the
formerly occupied China, defeating the Nationalist Party forces in a civil
war. With the victory by the Communists, the Nationalists under the leadership
of Chiang Kaishek fled the mainland to Taiwan where they established a
separate government. In 1949, The Communist Party established the People's
Republic of China.
Since 1949, the Communist government engaged in numerous campaigns to
industrialize the country with programs such as the "Great Leap Forward",
which fell short of its goals to increase industrial production and gave rise
to famine. In 1966, the government launched the Cultural Revolution seeking to
purge many of its political dissidents in order to centralize the political
power within the Communist Party. The campaign failed to significantly restore
socialist ideals and the Party experienced a loss of credibility with the
masses. The failure of the Communist Party to achieve substantive economic
reform eventually led to political domination by the army.
In the 1970's, the Chinese government, which had remained isolated from
the world, opened its doors. President Nixon's historic visit to China in 1972
established diplomatic ties between China and the United States. China also
renewed diplomatic and trade relations with Western Europe, Japan and other
Asian nations such as Singapore, Indonesia and South Korea. Following Mao
Zedong's death in 1976, and the election of Deng Xiaoping as China's paramount
leader, China has continued to pursue an "Open Door Policy" encouraging
foreign investment and expertise inside its borders. Deng's leadership has
emphasized pragmatism rather than Party ideology.
In 1989, a growing dissatisfaction with the Communist government led to
anti-government student protests culminating in what is known as the Tiananmen
Square incident. The government's use of the military to suppress a peaceful
demonstration resulted in world-wide criticism. Currently, the leadership
under Deng Xiaoping remains committed to basic economic reforms but continues
to reject liberalization from the domination of the Communist Party in the
political decision-making process. The Chinese leadership still faces the
challenge of maintaining power under the Communist Party while fending off
Western political ideologies.
China currently has diplomatic ties with approximately 140 nations. It is
a charter member of the United Nations and a permanent member of the United
Nations Security Council. Currently, China is seeking admission to the General
Agreement on Tariffs and Trade.
GOVERNMENT
China is currently governed under a new Constitution adopted on December
4, 1982. The highest ranking organization in the state power hierarchy is the
National People's Congress (NPC) which is composed of deputies elected by all
the regions for a term of five years. The NPC has 2,970 members with extensive
powers to amend the constitution and make laws. However, many view the main
purpose of this law-making body to be solely to approve Party policy. When the
NPC is not in session, the NPC Standing Committee exercises its functions,
including formulation of state policy, enactment of laws, examination and
approval of state plans and budgets, and amending and enforcing the
Constitution. The NPC elects the head of state and the State Council. The
State Council is the highest executive body, composed of the Premier, Vice
Premiers, State Councilors, Ministers, the Auditor General and the Secretary
General. The State Council has the power to enact administrative rules and
regulations, issue orders, appoint, remove and train administrative officers,
supervise the ministries and local governments, coordinate the work of the
ministries and state commissions and declare martial law. The current Premier
is Li Peng and the current President is Yang Shangkun, a professional soldier
from the Deng faction.
The Chinese Communist Party was established in 1921 and has remained the
ruling party since 1949. The Party is hierarchically organized, with a
membership of over 48 million members. The Party's structure parallels that of
the Government with a National Party Congress, Central Committee and Standing
Committee. Because Party membership is a prerequisite for holding influential
government positions, a significant overlap between the two structures exists
which adds to administrative inefficiencies. Furthermore, the Party's close
alignment with the military is a great source of political power as evidenced
by the outcome of the Tiananmen incident. Efforts to reduce the Communist
Party's participation in commercial and administrative decision-making have so
far been largely unsuccessful.
THE CHINESE ECONOMY
OVERVIEW AND RECENT DEVELOPMENTS
China has operated a centrally planned economy since 1949. The First Five-
Year Economic Plan was set forth in 1953 to stimulate economic growth and
development. Currently, China is in its second year of its Eighth Five-Year
Economic Plan. In 1978, China instituted an economic reform program to shift
from a completely centrally planned economy to a more mixed economy. The
program liberalized China's economy and opened it to foreign investment.
Currently, under a system called "socialism with Chinese characteristics,"
these economic reforms appear to continue in a more comprehensive manner.
Managers of enterprises have been granted more decision-making powers,
including the planning of production, marketing, use of funds and employment
of staff. Goods which are controlled and distributed by the state are still
sold at planned prices. However, the goods produced in excess of the state
production plan may be sold at floating prices, negotiated prices or free
prices.
Over the past decade, China has achieved annual growth in real gross
national product (GNP) averaging 10%. GNP in 1994 had increased to over 3.8
times the GNP in 1980 in real terms. However, growth has been unsteady, with
booms in 1984 and 1988 and downturns in 1981 and 1989. In 1988, the Chinese
Government instituted an austerity program which slowed the Chinese economy in
the following year. However, growth increased after 1989, achieving growth
rates of 9.5% in 1991, 14% in 1992, 13.3% in 1993 and 11.6% in 1994.
The economy in China consists of three sectors: state, cooperative, and
private. The state sector, though decreasing from 76% of GNP in 1980 to
approximately 50% in 1991, continues to constitute the bulk of the economy. In
recent years, however, the economy has been significantly restructured through
the abolition of the commune system in rural areas and the relaxing of
government authority in the day to day operations in both agricultural and
industrial enterprises. As the government assumes more of a regulatory and
supervisory role and less of a direct management role, market forces have been
allowed to operate. This has resulted in increased productivity and rising
incomes.
China's economic policy is set out in two overlapping plans, the 20-Year
Plan (1981-2000) and the Ninth Five-Year Economic Plan (1996-2000). The 20-
Year Plan calls for an average 7% growth in GNP over the entire 20-year
period; the initial decade was to be a period of reorganization, with the
second decade one of rapid economic progress. The 7% mark was exceeded in the
initial decade, with growth rates averaging 9.4%. The second decade growth,
thus far, is in step with the desired growth of the 20-Year Plan. The Ninth
Five-Year Economic Plan calls for 6% annual growth, starting in 1995.
The following table sets forth selected data regarding the Chinese
economy.
MAJOR ECONOMIC INDICATORS
<TABLE>
<CAPTION>
1988 1989 1990 1991 1992 1993 1994
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Gross National Product
(% annual real growth) ............... 11.3 4.1 3.8 9.3 14.2 13.5 11.8
(nominal, RMB billion) ............... 1,492.8 1,690.9 1,853.1 2,161.8 2,663.5 3,451.5 4,500.6
(nominal, U.S. $ billion)* ........... 401.3 358.2 355.8 368.1 463.2 595.1 533.2
Per Capita GNP (U.S. $) ................ 364.2 320.1 313.0 346.8 397.9 504.5 435.9
17.9 6.8 6.0 14.2 20.4 23.6 21.7
Inflation (retail price index, % annual
growth) .............................. 18.6 17.8 2.1 3.0 6.2 13.2 21.8
20.7 18.7 28.9 27.6 29.5 23.6 34.4
Government Budget Surplus/Deficit
(U.S. $ billion)* .................... (2.1) (1.9) (2.7) (3.9) (7.8) (10.3)
Exports (U.S. $ billion) ............... 47.6 52.5 62.1 71.9 85.1 91.7 121.0
(% annual growth) .................... 20.8 10.2 17.9 15.8 18.3 7.93 31.9
Imports (U.S. $ billion) ............... 55.3 59.1 53.3 63.8 80.8 103.9 115.7
(% annual growth) .................... 28.0 6.8 (9.8) 19.5 26.6 28.9 11.2
Trade Balance (U.S. $ billion) ......... (7.8) (6.6) 8.6 8.1 4.3 (12.2) 5.3
Exchange Rate (RMB/U.S. $) ............. 3.72 4.72 5.22 5.43 5.75 5.8 8.44
- ----------------
<FN>
*Translated at the respective exchange rate for each year shown in the table.
</TABLE>
Sources: China Statistical Yearbook, 1995 State Statistical Bureau of the
People's Republic of China, Baring Securities.
PRINCIPAL ECONOMIC SECTORS
Industry. In 1990, industry accounted for 45.8% of China's National
Income. In the first three decades under Communist rule, China placed great
emphasis on heavy industry. Since the reform program began in 1978, a much
greater emphasis has been placed on light industry. Considerable industrial
growth has come from industrial enterprises in rural townships which are
engaged in the processing and assembly of consumer goods. These operations are
concentrated in southern China, where a major light industrial base has
developed. Industrial output has grown rapidly and is increasingly important
to the Chinese economy.
China's current industrial policy also places emphasis on high-technology
industries supported by foreign technology, such as micro-electronics and
telecommunications. However, overstocking and poor economic results continue
to plague Chinese industry. Continued growth has been hampered by problems of
access to raw materials and energy supplies.
The following table sets forth the quantities and total value of China's
major industrial products for selected years.
INDUSTRIAL PRODUCTION
<TABLE>
<CAPTION>
ITEM 1952 1978 1980 1985 1989 1990 1994
- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Gross Output Value of Industry (RMB billions) ............... 34.9 423.7 515.4 971.6 2,201.7 2,392.4 7,690.9
Output of Major Industrial Products Cloth (meters billions) . 3.83 11.03 13.47 14.67 18.92 18.88 21.13
Machine-Made Paper and Paper boards (metric tons millions) 0.37 4.39 5.35 9.11 13.33 13.72 21.38
Sugar (metric tons millions) .............................. 0.45 2.27 2.57 4.51 5.01 5.82 5.92
Bicycles (metric tons millions) ........................... 0.08 8.54 13.02 32.28 36.77 31.42 43.65
Sewing Machines (thousands) ............................... 66 4,865 7,678 9,912 9,563 7,610 8,612
Wrist Watches (thousands) ................................. -- 13,511 22,155 54,311 72,756 83,526 453,945
Household Refrigerators (thousands) ....................... -- 28 49 1,448 6,708 4,631 7,681
Television Sets (thousands) ............................... -- 517.3 2,492 16,676.6 27,665.1 26,847 32,833
Color Television Sets (thousands) ....................... -- 3.8 32 4,352,8 9,400.2 10,330.4 16,891.5
Household Washing Machines (thousands) .................... -- 0.4 245 8,872 8,254.3 6,626.8 10,942.4
Cassette Recorders (thousands) ............................ -- 47 743 13,931 23,490 30,235 83,956
Cameras (thousands) ....................................... -- 178.9 372.8 1,789.7 2,451.8 2,132.2 28,300.2
Coal (metric tons millions) ............................... 66 618 620 872 1,054 1,080 1,240
Crude Oil (metric tons millions) .......................... 0.44 104.05 105.95 124.90 137.64 138.31 146.08
Electricity (kilowatt hours billions) ..................... 7.3 256.6 300.6 410.7 584.8 621.2 928.1
Steel (metric tons millions) .............................. 1.35 31.78 37.12 46.79 61.59 66.35 92.61
Rolled Steel (final products) (metric tons millions) ...... 1.06 22.08 27.16 36.93 48.59 51.53 84.28
Cement (metric tons millions) ............................. 2.86 65.24 79.86 145.95 210.29 209.71 421.18
- ----------------
Source: China Statistical Yearbook, 1995, State Statistical Bureau of the
People's Republic of China.
</TABLE>
Agriculture. Although long term growth in agricultural production has
slowed, China remains one of the world's largest agricultural producers. The
government has emphasized diversification of production, and a commitment to
the maintenance of grain outputs. Other agricultural products have also shown
increases in production in recent years, with cotton production at the
forefront.
The following table sets forth the quantities and total value of China's
leading agricultural products for selected years.
AGRICULTURAL PRODUCTION
<TABLE>
<CAPTION>
ITEM 1952 1978 1980 1985 1989 1990 1994
- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Gross Output Value (RMB billions) .......................... 46.1 139.7 192.3 361.9 653.5 766.2 1,595.0
Output of Major Farm Products Grain (metric tons millions) . 163.92 304.77 320.56 379.11 407.55 446.24 445.10
Cotton (metric tons thousands) ........................... 1,304 2,167 2,707 4,147 3,788 4,508 4,341
Oil-Bearing Crops (metric tons thousands) ................ 4,193 5,218 7,691 15,784 12,952 16,132 19,896
Sugar Cane (metric tons thousands) ....................... 7,116 21,116 22,807 51,549 48,795 57,620 60,927
Beet Roots (metric tons thousands) ....................... 479 2,702 6,305 8,919 9,253 14,525 12,526
Tea (metric tons thousands) .............................. 82 268 304 432 535 540 588
Fruits (metric tons thousands) ........................... 2,443 6,570 6,793 11,639 18,319 18,744 34,998
Pork, Beef and Mutton (metric tons thousands) ............ 3,385 8,563 12,054 17,607 23,262 25,135 36,927
Aquatic Products (metric tons millions) ................... 1.67 4.66 4.50 7.05 11.52 12.37 21.43
- ----------------
Source: China Statistical Yearbook, 1995, State Statistical Bureau of the People's Republic of China.
</TABLE>
The following table provides a breakdown of the value of China's
agricultural production for 1989, 1990 and 1994.
VALUE OF AGRICULTURAL PRODUCTS(1)
<TABLE>
<CAPTION>
1989 1990 1994
(RMB MILLION) (RMB MILLION) (RMB MILLION)
------------- ------------- -------------
<S> <C> <C> <C>
Gross Output Value ........................................................ 653,473 766,209 1,575,047
Farming ................................................................... 367,446 448,174 916,922
Grain ................................................................. 219,551 270,492 462,407
Industrial Crops ...................................................... 64,661 83,842 396,112
Other Crops ........................................................... 83,234 93,840 349,993
Forestry .................................................................. 28,492 33,027 61,107
Animal Husbandry .......................................................... 179,741 196,407 467,199
Fishers ................................................................... 34,885 41,056 129,819
<FN>
- ----------------
(1) At current prices.
</TABLE>
Source: China Statistical Yearbook, 1995, State Statistical Bureau of the
People's Republic of China.
Energy. Although China has a vast potential for energy production, this
potential has been largely untapped. However, China is the world's largest
producer of coal and the world's fifth largest oil producer. Until recently,
China did not have the capacity to utilize its off-shore oil fields due to the
country's relatively low level of technology. Joint ventures with foreign
companies, however, have allowed China to use the fields, and further growth
in oil production, both off-shore and on-shore, is expected. China also has
significant potential for harnessing hydroelectric power, but has utilized
only a small portion of this potential. China is planning to make
hydroelectric power a major source of energy in the years ahead.
The following table sets forth China's energy production and consumption
for the years 1980 to 1994, as well as the percentage contributions of the key
energy sources.
ENERGY PRODUCTION AND CONSUMPTION
TOTAL TOTAL
PRODUCTION % OF TOTAL PRODUCTION CONSUMPTION
(MILLION ----------------------------------- (MILLION
METRIC TONS NATURAL HYDRO- METRIC TONS
YEAR OF SCE)(1) COAL OIL GAS ELECTRIC OF SCE)(1)
- ---- ---------- ---- --- ------- -------- ----------
1980 ......... 637.35 69.4 23.8 3.0 3.8 602.75
1981 ......... 632.27 70.2 22.9 2.7 4.2 594.47
1982 ......... 667.78 71.3 21.8 2.4 4.5 620.67
1983 ......... 712.70 71.6 21.3 2.3 4.8 660.40
1984 ......... 778.55 72.4 21.0 2.1 4.5 709.04
1985 ......... 855.46 72.8 20.9 2.0 4.3 766.82
1986 ......... 881.24 72.4 21.2 2.1 4.3 808.50
1987 ......... 912.66 72.6 21.0 2.0 4.4 866.32
1988 ......... 958.01 73.1 20.4 2.0 4.5 929.97
1989 ......... 1,016.39 74.1 19.3 2.0 4.6 969.34
1990 ......... 1,039.22 74.2 19.0 2.0 4.8 987.03
1991 ......... 1,048.44 74.1 19.2 2.0 4.7 1,037.83
1992 ......... 1,072.56 74.3 18.9 2.0 4.8 1,091.70
1993 ......... 1,069.95 76.8 19.4 2.1 1.7 1,073.73
1994 ......... 1,140.09 77.1 18.3 2.0 2.0 1,180.95
- ----------------
(1) Excludes bio-energy, solar, geothermal and nuclear energy. All fuels
converted to Standard Coal Equivalent (SCE); 1 kg of coal = 0.714 kg of
SCE, 1 kg of oil = 14.6 kg of SCE, 1 cubic meter of natural gas = 1.33 kg
of SCE; Hydroelectric converted to SCE based on coal required to produce
equivalent thermal external-electric power.
Source: China Statistical Yearbook, 1995, State Statistical Bureau of the
People's Republic of China.
ECONOMIC PLANS
China's Eighth Five-Year Economic Plan for national economic and social
development was adopted by the Standing Committee of the National People's
Congress for 1991-95, along with a ten-year development program which extends
to the year 2000. Included in both of these plans is an objective for China to
quadruple its gross national output by the end of this century. In addition,
the proposals emphasize a policy of opening to the outside world, expanded
economic and technological exchanges with other countries, and further
development of the export-oriented economy and the special investment areas.
The basic guideline for China's economic activities in 1992 is to continue on
a path of economic reform while following principles of socialism.
During 1980 to 1990, China had an average annual GNP growth rate of
approximately 9.0%, surpassing the 7.5% annual GNP growth rate target under
the Seventh Five-Year Economic Plan (1986-1990).
China's objective to quadruple the 1980 industrial and agricultural output
by the year 2000 requires the country's output to grow at an average annual
rate of growth of about 6% in the 1990's. To enable China to accomplish this
growth target under the prevailing economic environment, China's economic
policy aims to provide a stable and non-inflationary environment to revive
growth. Another prevailing goal is to relieve the supply bottlenecks arising
from imbalanced growth over the last 10 years with resources to be allocated
to the priority areas of agriculture, energy, transportation,
telecommunications and basic materials industries. Emphasis is also placed on
export-oriented and import-substitute production.
THE FINANCIAL SYSTEM
The Ministry of Finance is responsible for overseeing state finances and
the collection of revenue and taxation. The banking system is managed by
China's central bank, the People's Bank of China ("PBOC"). The PBOC, like the
Ministry of Finance, is a state administrative organ under the leadership of
the State Council. Its primary functions include: the formation of national
financial regulations and policies; the issuance of currency and regulation of
its circulation; the co-ordination and implementation of credit plans;
overseeing the establishment and operation of financial institutions and
financial markets, including stock exchanges; administration of China's
foreign exchange and gold reserves and adjustment of exchange rates against
foreign currencies; and administration of China's securities markets.
There are currently five specialized banks, namely, the Industrial and
Commercial Bank of China, the China Investment Bank, the Agricultural Bank of
China, the People's Construction Bank of China, and the Bank of China (the
"BOC"). Trust and investment companies and credit cooperatives also provide
financial services in China. Major trust and investment corporations include
China International Trust and Investment Corporation ("CITIC"), Shanghai
Investment and Trust Corporation ("SITCO"), and Guangdong International Trust
and Investment Corporation ("GITIC").
SAVINGS AND INVESTMENT
Historically, China has had a relatively high rate of national savings.
The following table sets out the value of savings deposit balances for selected
years.
SAVINGS DEPOSIT BALANCES
(RMB BILLION)
<TABLE>
<CAPTION>
YEAR-END TOTAL URBAN AREAS RURAL AREAS
- -------- ----- ----------- -----------
<C> <C> <C> <C>
1955 .............................................................. 1.99 1.69 0.30
1960 .............................................................. 6.63 5.11 1.62
1965 .............................................................. 6.52 5.23 1.29
1970 .............................................................. 7.95 6.45 1.50
1975 .............................................................. 14.96 11.46 3.50
1980 .............................................................. 39.95 28.25 11.70
1985 .............................................................. 162.26 105.78 56.48
1990 .............................................................. 703.42 519.26 184.16
1994 .............................................................. 3,682.98 1,584.45
- ----------------
</TABLE>
Source: China Statistical Yearbook, 1995, State Statistical Balances of the
People's Republic of China.
The following table provides a breakdown of total fixed investment in
China for the years 1985 to 1990 and 1994.
TOTAL FIXED INVESTMENT
(RMB MILLION)
<TABLE>
<CAPTION>
ITEM 1985 1986 1987 1988 1989(A) 1990(A) 1994
- ---- ---- ---- ---- ---- ------- ------- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Total Investment ..... 254,319 301,962 364,086 449,654 413,773 444,929(c) 1,637,033
Ownership
State-Owned Units .. 168,051 197,850 229,799 276,276 253,548 291,864(c) 932,249
Capital
Construction ......... 107,437 117,611 134,310 157,431 155,174 170,381 643,674
Technical Updating
and Transformation ... 44,914 61,921 75,859 98,055 78,878 83,019
Other Investment in
Fixed Assets(b) ...... 15,700 18,318 19,630 20,790 19,497 19,907
Collective -- Owned
Units ................ 32,746 39,174 54,701 71,171 56,999 52,948 266,470
Urban ............ 12,823 14,639 18,130 25,497 18,563 16,338
Rural ............ 19,923 24,535 36,571 45,674 38,436 36,610 198,857
Individual
Investment ....... 53,522 64,938 79,586 102,208 103,226 100,117 197,056
Urban ............ 5,679 7,456 10,051 15,685 14,023 12,470
Rural ............ 47,843 57,482 69,535 86,523 89,203 87,647 151,924
Source of Finance
State Appropriation 40,780 44,063 47,554 41,001 34,162 38,765 52,957
Domestic Loans ..... 51,027 63,831 83,594 92,668 71,636 87,088 370,311
Foreign Investment . 9,148 13,216 17,537 25,899 27,415 27,826 176,895
Self-Raised Funds .. 148,851 174,518 235,550 232,949 800,148
153,364 290,087
Others ............. 32,000 40,883 45,009 58,301 254,339
- ----------------
<FN>
Notes:
(a) 1989 and 1990 figures exclude projects with value of RMB 20-50
thousand.
(b) Includes investment in oilfield maintenance and development, mine
expansion projects, highway maintenance and bridge construction,
warehouse construction and projects valued RMB 20-50 thousand for
fixed asset construction or equipment purchase.
(c) Includes RMB 18.557 billion investment to purchase buildings.
Source: China Statistical Yearbook, 1995, State Statistical Bureau of the
People's Republic of China.
</TABLE>
INFLATION AND MONETARY POLICY
Inflationary pressures are a major concern in the Chinese economy. While
the retail price index has been relatively stable in recent years, this figure
understates inflation, especially urban inflation. A more informative measure
is the cost of living index in 35 major cities, which has generally risen at a
higher rate. In light of the on-going reforms of price subsidies and continued
growth, relatively high inflation should be expected.
The following table provides information regarding wage and price
inflation in China during the years 1980 to 1994.
WAGE AND PRICE INFLATION (%)
<TABLE>
<CAPTION>
GENERAL RETAIL COST OF NOMINAL
YEAR PRICES LIVING WAGES
- ---- -------------- ------- -------
<C> <C> <C> <C>
1980 .............................................................. 6.0 7.5 4.1
1981 .............................................................. 2.4 2.5 1.3
1982 .............................................................. 1.9 2.0 3.4
1983 .............................................................. 1.5 2.0 3.5
1984 .............................................................. 2.8 2.7 17.9
1985 .............................................................. 8.8 11.9 17.9
1986 .............................................................. 6.0 7.0 15.8
1987 .............................................................. 7.3 8.8 9.8
1988 .............................................................. 18.5 20.7 19.7
1989 .............................................................. 17.8 16.3 10.8
1990 .............................................................. 2.1 1.3 10.6
1991 .............................................................. 2.9 5.1 9.3
1992 .............................................................. 5.4 8.6 15.9
1993 .............................................................. 13.2 16.1 24.3
1994 .............................................................. 21.7 25.0 34.6
- ----------------
Source: China Statistical Yearbook, 1995, State Statistical Bureau of the
People's Republic of China.
</TABLE>
China's monetary policy has vacillated between expansionist and
contractionist. This varying monetary policy has contributed to a fundamental
cycle of the Chinese economy in recent years: reform and expansion leading to
overheating of the economy and tightening of control.
PUBLIC FINANCE
Persistent fiscal deficits have been a macroeconomic management problem in
China in recent years. Despite efforts by the government to increase revenues
and control spending, deficits continue to be a problem.
The following table illustrates the persistent budget deficits for the
years 1980 to 1994.
GOVERNMENT BUDGET
<TABLE>
<CAPTION>
TOTAL
TOTAL REVENUE EXPENDITURE BALANCE
YEAR (RMB BILLION) (RMB BILLION) (RMB BILLION)
- ---- ------------- ------------- -------------
<C> <C> <C> <C>
1980 .............................................................. 108.52 121.27 (12.75)
1981 .............................................................. 108.95 111.50 (2.55)
1982 .............................................................. 112.40 115.33 (2.93)
1983 .............................................................. 124.90 129.25 (4.35)
1984 .............................................................. 150.19 154.64 (4.45)
1985 .............................................................. 186.64 184.48 2.16
1986 .............................................................. 226.03 233.08 (7.05)
1987 .............................................................. 236.89 244.85 (7.96)
1988 .............................................................. 262.80 270.66 (7.86)
1989 .............................................................. 294.79 304.02 (9.23)
1990 .............................................................. 331.26 345.22 (13.96)
1991 .............................................................. 361.09 381.36 (20.27)
1992 .............................................................. 415.31 438.97 (23.66)
1993 .............................................................. 508.82 538.74 (19.92)
1994 .............................................................. 521.81 579.26 (37.95)
- ----------------
Source: China Statistical Yearbook, 1995, State Statistical Bureau of the People's Republic of China.
The following table provides information regarding how China finances its deficit.
<CAPTION>
GOVERNMENT DEBT
(RMB MILLION)
DEBT ISSUED DEBT RETIRED AND INTEREST PAID
--------------------------------------- ---------------------------------------------------
DOMESTIC
BONDS AND PEOPLE'S
TREASURY FOREIGN DOMESTIC FOREIGN BANK
YEAR TOTAL BILLS DEBT TOTAL BONDS DEBTS LOANS
- ---- ----- -------- ------- ----- -------- ------- -----
<C> <C> <C> <C> <C> <C> <C> <C>
1980 .................. 4,301 -- 4,301 2,858 -- 2,440 418
1981 .................. 7,308 -- 7,308 6,289 -- 5,780 500
1982 .................. 8,386 4,383 4,003 5,552 -- 4,962 590
1983 .................. 7,941 4,158 3,783 4,247 -- 3,656 591
1984 .................. 7,734 4,253 3,481 2,891 -- 2,274 617
1985 .................. 8,985 6,061 2,924 3,956 -- 3,259 697
1986 .................. 13,825 6,251 7,574 5,016 798 3,449 769
1987 .................. 16,955 6,307 10,648 7,983 2,318 5,196 469
1988 .................. 27,078 13,217 13,861 7,675 2,844 4,258 573
1989 .................. 28,297 13,891 14,406 7,236 1,930 4,583 723
1990 .................. 37,545 19,724 17,821 19,040 11,375 6,821 844
1991 .................. 46,140 28,127 18,013 24,680 8,022 989
1992 .................. 66,968 46,077 20,891 43,857 8,026 1,578
1993 .................. 73,922 38,132 35,790 33,622 8,922 2,270
1994 .................. 117,525 102,857 14,668 99,936 36,496 10,717 2,723
- ----------------
Source: China Statistical Yearbook, 1995, State Statistical Bureau of the People's Republic of China.
</TABLE>
FOREIGN TRADE
As a result of the economic reforms commenced in 1978, China's foreign
trade has grown considerably in value, range of products and number of trading
partners. A major goal of China's trade policy is to increase the percentage
of manufactured goods in the country's total exports. Gradual progress has
been made in recent years with the aid of the imported foreign technology.
Textiles and garments together form the single largest export category,
representing 25% of total export values.
China's trade balance has fluctuated over the last five years. In 1991
China's foreign trade yielded a foreign trade surplus of U.S. $8.1 billion.
Exports reached U.S. $71.9 billion, an increase of 15.8% over that of 1990,
and imports reached U.S. $63.8 billion, an increase of 19.5% over the 1990
figure. Total trade for the year was approximately U.S. $135.7 billion, up
17.5% over 1990. In 1990, China experienced a trade surplus of $8.7 billion.
In contrast, the country experienced trade deficits of $7.8 billion and $6.6
billion, respectively, in 1988 and 1989.
The following table provides information about China's total import and
export values for the years 1981 to 1994.
IMPORTS, EXPORTS AND TRADE BALANCE
(U.S. $ BILLION)
<TABLE>
<CAPTION>
TRADE
YEAR TOTAL TRADE EXPORTS IMPORTS BALANCE
- ---- ----------- ------- ------- -------
<C> <C> <C> <C> <C>
1981 ............................................. 44.02 22.01 22.02 (0.01)
1982 ............................................. 41.61 22.32 19.26 3.04
1983 ............................................. 43.62 22.23 21.39 0.84
1984 ............................................. 53.55 26.14 27.41 (1.27)
1985 ............................................. 69.61 27.35 42.25 (14.90)
1986 ............................................. 73.85 30.94 42.90 (11.96)
1987 ............................................. 82.65 39.44 43.22 (3.78)
1988 ............................................. 102.78 47.52 55.27 (7.75)
1989 ............................................. 111.68 52.54 59.14 (6.60)
1990 ............................................. 115.41 62.06 53.35 8.71
1991 ............................................. 135.70 71.90 63.80 8.10
1992 ............................................. 165.53 84.94 80.57 4.35
1993 ............................................. 195.70 91.74 103.96 (12.22)
1994 ............................................. 236.73 121.04 115.69 5.35
- ----------------
Sources: China's Customs Statistics, General Administration of Customs of the
People's Republic of China; China Statistical Yearbook, 1995, State
Statistical Bureau of the People's Republic of China.
</TABLE>
Hong Kong is the leading destination for Chinese exports, accounting for
over 40% of total export volume. Hong Kong is also a major re-export center
for Chinese goods. Other large export markets for China include Japan, the
United States, and Germany. Over the past few years, China's imports have
continued to expand and diversify. Hong Kong, Japan and the United States are
China's top three suppliers. Other major suppliers include Germany and Italy.
The following table lists China's top-ten trading partners, along with the
U.S. dollar value of the trade between China and each country for the years
1989, 1990, 1991 and 1994.
MAJOR TRADING PARTNERS
<TABLE>
<CAPTION>
(U.S. $ MILLION)
TOTAL TRADE EXPORTS FROM CHINA IMPORTS TO CHINA
---------------------------------- ---------------------------------- ----------------------------------
1989 1990 1991 1994 1989 1990 1991 1994 1989 1990 1991 1994
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Hong Kong ............. 34,456 40,907 49,600 41,821 21,915 26,650 32,137 32,365 12,540 14,257 17,146 94,566
Japan ................. 18,928 16,599 20,284 47,894 8,394 9,011 10,252 21,373 10,533 7,587 10,032 26,321
United States ......... 12,273 11,767 14,202 35,432 4,409 5,179 6,194 21,461 7,863 6,588 8,008 13,470
Germany ............... 4,987 4,971 5,405 11,898 1,608 2,034 2,356 4,762 3,379 2,936 3,049 7,137
U.S.S.R.
(Russia) ............ 3,995 4,379 3,904 5,077 1,849 2,239 1,823 1,581 2,146 2,139 2,081 3,496
Singapore ............. 3,190 2,882 3,077 5,040 1,692 1,974 2,014 2,558 1,498 857 1,063 2,482
Italy ................. 2,550 1,904 2,389 4,654 714 835 931 1,591 1,835 1,069 1,458 3,068
France ................ 1,948 2,308 2,306 3,363 528 645 734 1,424 1,420 1,663 1,572 1,939
Australia ............. 1,895 1,808 2,110 3,940 423 455 554 1,488 1,472 1,353 1,556 2,452
United Kingdom 1,718 2,026 1,670 4,184 635 643 728 2,414 1,083 1,383 942 1,770
- ----------------
Sources: China Statistical Yearbook, 1995, State Statistical Bureau of the
People's Republic of China; China's Customs Statistics, General
Administration of Customs of the People's Republic of China.
</TABLE>
EXTERNAL DEBT AND FOREIGN CAPITAL UTILIZATION
China has traditionally adopted a policy of self-reliance when financing
development; overseas borrowings have been minimal. The country has remained a
conservative borrower but, since the early 1980s, has been making greater use
of foreign capital and financing, including government-assisted facilities and
project and trade financing.
The primary sources of foreign capital for China, in order of importance,
are as follows:
1) International Monetary Fund and World Bank loans and credits;
2) government low interest loans and credits; and
3) commercial loans and credits.
The following table shows the sources and types of foreign capital
utilized by China.
FOREIGN CAPITAL UTILIZATION
(U.S. $ MILLION)
<TABLE>
<CAPTION>
ITEM 1985 1989 1990 1994
- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
Total ....................................................... 9,867.42 11,478.78 12,085.69 3,756.10
Foreign Loans ............................................... 3,534.21 5,184.69 5,099.37 10,668.00
Loans from International Monetary Organizations ........... 1,131.51 855.80 1,893.00 4,409.00
Governmental Loans ........................................ 1,020.53 1,471.25 719.37 125.00
Other ..................................................... 1,382.17 2,857.64 2,487.00 5,009.00
Direct Investment by
Foreign Businesses ........................................ 5,931.10 5,599.76 6,596.11 82,679.77
Joint Venture ............................................. 2,029.70 2,659.02 2,703.95 40,193.52
Co-Operative Operation .................................... 3,496.15 1,083.22 1,254.10 20,300.93
Co-Operative Development .................................. 359.59 203.74 194.25 236.66
Foreign Enterprises(1) .................................... 45.66 1,653.78 2,443.81 219.48
Other Foreign Investments ................................... 402.11 694.33 390.21 408.33
Compensation Trade ........................................ 260.34 474.75 202.65 195.60
Processing and Assembly ................................... 141.77 147.60 136.48 195.63
International Rent ........................................ -- 71.98 51.08 17.10
- ----------------
<FN>
Note: (1) Includes equipment supplied by foreign businesses in transactions in
compensation trade, processing and assembly and value of equipment
supplied in financial leasing transactions.
Source: China Statistical Yearbook, 1995, State Statistical Bureau of the
People's Republic of China.
</TABLE>
EXCHANGE RATE AND FOREIGN EXCHANGE CONTROL
There is centralized control and unified management of foreign exchange in
China. The State Administration of Exchange Control (the "SAEC") is
responsible for matters relating to foreign exchange administration, while the
Bank of China (the "BOC") is in charge of foreign exchange operations.
Cooperating closely with the BOC, the SAEC fixes the official daily exchange
rate of RMB against major foreign currencies.
There are two types of monetary instruments in China today, the RMB and
Foreign Exchange Certificates ("FEC"). The RMB is the official currency in
China and is currently not convertible into foreign exchange unless converted
with express written authorization from the SAEC. The FEC is a Chinese
currency established for use by foreigners in lieu of RMB and is convertible
into hard currency. Both RMB and FEC are denominated in the monetary unit of
"yuan" and are officially at par with each other. It is expected that FECs
will be withdrawn from circulation in the near future.
While foreign investment enterprises are able to remit from China any
profits earned in foreign exchange, RMB earnings within China cannot be freely
converted into foreign exchange except at the foreign exchange adjustment
("swap") centers established by the SAEC. In order to provide some relief from
the controls imposed by the earlier foreign exchange legislation, the State
Council promulgated on January 15, 1986 the "Regulations Concerning the
Balance of Foreign Exchange Income and Expenditure of Chinese-Foreign Equity
Joint Ventures," which provide for a number of mechanisms to allow foreign
investment enterprises to "balance" their foreign exchange income and
expenditure. These mechanisms include the sale of joint venture products
within China for foreign exchange, the export of products purchased with RMB
from Chinese enterprises to generate foreign exchange, short-term loans and
the "swapping" of RMB for foreign exchange with other foreign investment
enterprises and Chinese enterprises, among others.
The exchange rate fluctuates from time to time and from swap center to
swap center depending on supply and demand. The renminbi has been devalued
progressively in recent years, depreciating by almost 70% against the U.S.
dollar between 1981 and 1990.
The following chart lists comparative average exchange rates for the
renminbi and other selected currencies since 1986.
<TABLE>
<CAPTION>
EXCHANGE RATES
(CURRENCY UNITS PER U.S. $)
1986 1987 1988 1989 1990 1991 1992 1993 1994
---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Australia ............. 1.491 1.472 1.275 1.262 1.280 1.284 1.363 1.974 1.370
New Zealand ........... 1.872 1.613 1.563 1.693 1.675 1.774 1.881 1.806 1.560
China ................. 3.7221 3.7222 3.7221 4.7221 5.2221 5.4000 5.8400 5.800 8.621
Hong Kong ............. 7.8030 7.7980 7.8060 7.8000 7.7950 7.7780 7.7400 7.730 7.730
Singapore ............. 2.1750 1.9985 1.9462 1.8944 1.7445 1.6190 1.6400 1.610 1.527
Korea ................. 861.4000 792.3000 684.1000 679.6000 716.4000 756.3000 781.0800 808.100 803.620
Taiwan ................ 35.5000 28.5500 28.1700 26.1600 27.1100 25.7475 25.2000 26.700 26.360
Malaysia .............. 2.6030 2.4928 2.7153 2.7033 2.6980 2.7410 2.6700 2.700 2.620
Philippines ........... 20.5300 20.8000 21.3350 22.4400 28.0000 26.0500 23.6000 27.100 26.300
Thailand .............. 26.1300 25.0700 25.2400 25.6900 25.2900 25.2600 25.9900 25.300 25.100
Indonesia ............. 1641.0000 1650.0000 1731.0000 1793.0000 1901.0000 1994.5000 2064.0000 2111.250 2161.000
- ----------------
Source: Wardley Investment Services, Baring Securities.
</TABLE>
TAIWAN
Taiwan is the most invisible country on the planet, and Taiwan is
recognized by very few countries, mostly small island states like itself in
the South Pacific and the Caribbean. And yet it is an oriental paradox -- it
has a financial and diplomatic influence which is out of all proportion to its
small size. For historical and cultural reasons Taiwan stands between China
and Japan. (The slow pace of the Sino-Japanese relationship since 1972 may be
partly caused by this conundrum.)
Indeed, if Taiwan is now going to be brought back into the fold it is also
reasonable to expect the level of Japanese investment and trade in China to
accelerate. It is very probable that Japan will use Taiwan as a "middle-man"
for trade and investment in China.
Taiwan is dependent on its close relationship with the United States and
its very successful diplomacy and public relations campaign which, ever since
Madame Chiang Kai-Shek's days in the 1940s has sustained a high level of
sympathy in Washington for the Nationalist regime. Taiwan also has close
relations with South Africa, from which it buys essential raw materials such
as coal, and also with Israel, with whom it has had military as well as trade
links.
For all these reasons, much of the real Taiwan has been hidden for many
years. It is misunderstood by Westerners -- the country has been the most
difficult of all Asian countries to follow and understand. However, since the
lifting of martial law in 1987 much of this has changed. People in Taipei are
again willing to talk openly and it is possible to begin to understand the
sense in which Taiwan has become a repository of much of the best of the old
Chinese traditions. In Taiwan can be found many of the old Chinese arts -- a
strong family life, Confucianism, a flourishing trade in traditional Chinese
medicines, the martial arts, an excellent standard of Chinese movies and
television, and the tradition of Chinese law.
Nevertheless, the basic geopolitical fact about Taiwan is that it sits
under the shadow of mainland China and under the threat of reunification,
whether peaceful or by military means. However in the last few years and
especially since June 1989, the leadership of the Communist Party in Peking
and in Taipei have begun, for the first time since 1949, to have serious talks
and regular communication. At the same time the flow of investment from Taiwan
into mainland China, especially into the neighbouring province of Fujian, has
grown dramatically and the two-way trade is now approaching US $4 billion
annually. In the early days of this two-way business, the authorities in
Taipei turned a blind eye to the many small projects that Taiwanese
businesspeople were embarking upon with PRC partners. Also, there was an
enormous increase in the number of annual visitors from Taiwan into China.
Along with the travel and tourism came the investment and it is now estimated
that there is over US $500 million of direct Taiwanese capital in plants and
small businesses in China. Many of the most successful toy and electronics
factories in Shenznen, across the border from Hong Kong, are owned and managed
by Taiwanese. Speaking Mandarin or the Fujianese dialect, they have the same
natural advantage in dealing with mainland officials and businesspeople that
the Hong Kong Cantonese have with the inhabitants of Guangdong Province.
So the analysis of risk and reward in Taiwan must already take account of
this rapidly growing economic integration between Taiwan and China which, has
led to over 30 percent of Taiwan's trade being with the mainland and that the
total investment from Taiwan to China may approach US $5 billion or even US
$10 billion. As with Hong Kong, increasingly an investment in Taiwan will be
seen indirectly as a "play" or an investment in China itself. Nevertheless,
Taiwan remains a free capitalist enclave with some very successful
entrepreneurial and export-oriented companies. The government's role in the
economy is relatively small. It has pursued consistently, since 1950, a
laissez-faire policy which allows small family run companies typically to
change their product line every two or three years to meet the demands of
American or other international clients. Statistics clearly indicate that the
exports strengths, which have powered the Taiwanese economic boom for thirty
or forty years, remain intact despite the shortage of skilled labour, the high
cost of labour and the strong New Taiwan dollar, which has impelled many
Taiwanese businesspeople to shift their production to Thailand, the
Philippines, and Malaysia as well as China. The best measure of Taiwan's
economic success is in its US $80 billion of foreign exchange reserves.
What then is the real risk to Taiwan? After Hong Kong is taken over in
1997 Taiwan will appear more isolated and it will have lost its neutral
meeting point with China which the British colony has represented. On the
other hand, by that time Taiwan and China may have grown sufficiently close in
economic, if not in political, terms that Hong Kong will have become
unnecessary. Direct trade and investment are already commencing. Some form of
political agreement allowing for Taiwan's autonomy, if not independence, may
be worked out. The one country two systems formula applied to Hong Kong and
Macau was always designed by Peking with the objective of regaining Taiwan in
the long term. That long term may not be as long as some observers have
predicted. The passing away of the older generation who fought in the bitter
civil wars between the communists and the KMT from 1927 to 1949 will remove
much of the bitterness and open up the way for a new dialogue between the
younger leaders in the two Chinas.
The strongest argument for a political compromise and a formula for
coexistence is the natural complementarity of the two Chinese communities on
an economic basis. China has the labour, the land and the resources. Taiwan
has the capital, the technology and the trained entrepreneurs. A formidable
Chinese Economic Community could be a reality before the end of the century.
However, a more pessimistic view would be to see a return to ideological
extremism in Peking resulting in a renewed cold war across the Taiwan Straits,
a cut off of business and cultural links, and a potential military conflict.
Even in this very gloomy scenario Taiwan may be able to defend itself and
maintain its economic prosperity because it will still have the economic
support of both Japan and the United States.
The following table gives details of the overall economic performance of
Taiwan from 1987 to 1994.
- ------------------------------------------------------------------------------
EXCHANGE GDP TRADE MARKET MARKET
RATE GROWTH SURPLUS YEAR-END CAPITAL
AV. US $ (%) CPI (US $BN) P/E CLOSING (US $BN)
--------- ------- ------ ---------- ---- -------- --------
1987 31.85 12.3 0.5 18.7 28.7 2,339.26 48.45
1988 28.57 7.3 1.3 10.9 68.9 5,119.11 120.1
1989 26.41 7.6 4.4 14.0 92.0 9,624.18 240.0
1990 26.39 6.9 4.1 14.9 33.0 4,530.16 112.4
1991 25.50 7.3 3.6 15.7 28.0 4,600.67 123.7
1992 25.20 6.1 4.5 12.5 30.1 3,377.06 100.1
1993 27.00 6.2 2.9 7.8 30.3 6,071.00 191.0
1994 26.36 6.5 4.1 7.8 22.6 7,125.00 242.1
1995* 27.30 6.6 3.4 -- 16.2 -- 186.7
*Estimate
The risks for an investor in The Taiwan Stock Exchange Corp. are
specifically those of a highly priced and highly volatile securities market
with very weak regulations and poor accounting standards. It was once
estimated that, out of 140 listed companies in Taiwan, perhaps twenty or
thirty counters were those of companies which were technically bankrupt.
Investors take little account of security analysis or of the investment
fundamentals which might count more for long-term Western investors. The
speculative atmosphere of The Taiwan Stock Exchange Corp. does, therefore,
portray a high degree of risk. However, the New Taiwan (NT) dollar is a very
steady currency in relation to the U.S. dollar. The economy of the island has
shown a steady and non-inflationary growth rate and savings are very high in
relation to disposable income.
The most important risk to consider for a Western investor trying to get
into the Taiwanese market is the choice of a trustworthy and reliable local
partner. This is much more difficult to achieve in Taiwan than in, say Hong
Kong, where the British legal and commercial system and the educational system
are more familiar. Taiwan has a purely Chinese culture and way of life even
though most of the younger business people are educated in the universities of
the United States and many have PhDs. Nevertheless, the way of doing business
remains a traditional Chinese way. Therefore, nothing can be achieved by means
of legal contracts or agreements in the accepted Western sense. Even more than
in China, Taiwan depends on the personal contact and trust between the two
individuals involved. Many Western banks have come to grief in their pursuit
of the elusive Taiwan millionaires in the private banking sector and in their
corporate loans to apparently sound Taiwanese companies, which either cannot
or will not repay. Recourse is very hard to enforce and the legal system is
undeveloped. These are the major risks in doing business in Taiwan but the
potential rewards should not be underestimated. Those who have had a long-term
commitment to the island republic, have had good contacts with the government
and have done business in the Chinese way with a good local Chinese partner
have been able to demonstrate very good long-term returns on their
investments. In addition, the links that Taiwan business people have built
around the globe, in the United States in particular but also increasingly in
Canada, where they have followed Hong Kong investors into Bristish Columbia,
in Australia, in the Philippines and in Bangkok, are impressive.
KOREA
Political volatility has characterized the history of South Korea
(referred to as Korea throughout this section) during the past forty years,
while at the same time an extraordinary economic boom has occurred. Rigid
discipline has been characteristic of the military government under President
Park during the 1960s and 1970s, which were the most successful decades in
economic terms particularly in the growth of Korea's exports and in the per
capita income. It is important to remember how completely the cities and
transport system of the southern part of the Korean peninsula had been
destroyed in the civil war of the 1950s. The effort of reconstruction was,
therefore, enormous. Living standards in the 1960s were extremely low. The
threat from North Korea has exerted a continuous military pressure on the
South in the past forty years which is probably unique to any country in the
world, even including West Germany or Taiwan. Seoul is only 30 kilometers from
the demilitarized zone and, therefore, lives in a continuous state of tension
and fear of an imminent invasion. This very real threat is also translated
into a very high percentage of military spending in the national budget. If
Korea is compared with Japan, the Koreans have had to spend ten times more of
their national income on defense than the Japanese and yet have succeeded in
recording higher rates of economic growth.
The fierce political in-fighting, which has been a constant characteristic
of Korean history, was suppressed for a period in the 1970s and 1980s, both
before and after the assassination of President Park. Since 1987 the opening
up of the democratic process has been smoothly handled despite the continuing
student riots and disturbances. In fact, stock market investors have generally
ignored the television images of riot police, tanks firing tear gas and
students throwing petrol bombs, to concentrate more on the continuous success
of Korean companies in their conquest of overseas export markets and their
impressive earnings growth. Nevertheless, the threat from the North and the
fierceness of the Korean political opposition do combine to give Korea a lower
score for political stability than its neighbours. We have the sense in Korea
of a higher risk but also a much greater potential should the rapprochement
with the North lead to a peaceful reunification.
The following table gives details of the overall economic performance of
South Korea from 1987 to 1994.
- ------------------------------------------------------------------------------
TRADE
EXCHANGE GDP SURPLUS/ MARKET MARKET
RATE GROWTH (DEFICIT) YEAR-END CAPITAL
AV. US $ % CPI (US $BN) P/E CLOSING (US $BN)
--------- ------- ------ ---------- ---- -------- --------
1987 822.57 13.0 3.0 7.7 10.6 525.1 33.0
1988 731.47 12.4 7.1 11.4 13.6 907.2 94.3
1989 671.46 6.7 5.7 4.6 22.9 909.7 140.9
1990 707.76 9.3 8.6 (2.0) 18.5 696.1 110.2
1991 731.60 8.3 9.7 (7.0) 15.0 610.9 96.4
1992 781.08 4.7 6.2 (2.1) 15.0 678.4 107.4
1993 808.10 5.5 6.5 (1.6) 17.5 866.0 139.0
1994 803.62 8.4 6.3 (3.1) 18.0 1,027.0 190.0
1995* 768.40 9.0 5.2 0.7 15.1 -- 203.0
*Estimate
South Korea has the highest overall score for economic growth in the world
over the past twenty years even when compared with the other Asian tigers. The
average growth over a twenty-year period has been close to 9 percent in real
terms, at certain times reaching even 13-14 percent. This means that the
average Korean today has a per capita income of nearly U.S. $6,000 per annum,
an income which has grown nearly thirty times in thirty years. There have been
tremendous social changes resulting from this economic boom, notably the shift
of population from the countryside into the cities and the shift in the
economic structure from agriculture to industry and, more recently, to the
service sector. This has all occurred in a shorter period of time than in
almost any other advanced economy. What took England one hundred years and
Japan thirty years, has taken Korea typically less than ten years. There has
been some slowing during the 1980s compared to the 1970s, but Korea still has
among the highest overall ratings for GNP growth. Its industrial workforce has
not lost its competitive edge and the average working week in Korea is still
in excess of fifty hours, the longest working week in the world. These are the
foundations of Korea's continued economic success. It is unlikely that such
characteristics, being social in origin, will disappoint us in the next
decade. Therefore it is reasonable to expect Korea's economy to continue to be
one of Asia's most succesful.
The flexibility of its large trading companies, the chaebol, has been
recently underlined again as they have shifted their emphasis from the United
States, Canada and Europe towards the new markets of China and the Soviet
Union. There is little doubt that Korean exporters will be leading the
Japanese in providing Russian consumers with basic consumer goods. The
readiness to take risks in new areas has continuously paid off for Korean
companies just as it did when they were able to grab the major construction
contracts in the Middle East during the oil boom of the 1970s. (These new
trade links have also translated into new diplomatic links with China,
Hungary, Poland and the Soviet Union, thus further isolating North Korea from
its communist neighbours.)
Inflation in Korea has been higher than in Japan or Taiwan. In the 1970s,
Korea experienced an annual average inflation rate of nearly 15 percent.
Beginning in 1982, however, the tight monetary policy succeeded in bringing
this annual consumer price index down to single digits until 1990 when the
rate jumped again to 8.6 percent. The Korean export boom has led to a big
inflow of foreign exchange accompanying Korea's trade surpluses of the past
five years. This, in turn, has led to a sharp increase in money supply and a
boom in real estate prices in Seoul. Thus the rise of both the Korean share
market and property market since 1985 has in a sense been a lagging indicator
of the economic boom of earlier years with its inevitable build up of national
and personal wealth among the Korean population. Nowhere has the number of
investors grown faster than in The Korea Stock Exchange during the 1980s. Thus
rising prices have reflected rising national wealth. This inflation problem
has been, and can again be, tamed by a strong central bank response and this
is what would be expected in the 1990s.
The exchange rate of the Korean won against the U.S. dollar has reflected
both the relative inflation rates of Korea and its international trading
partners and also the more recent success of Korea in repaying much of its
foreign debt and building up its reserves. The won was held very steady during
the 1970s and then allowed to devalue between 1980 and 1985 from 484 won to
the dollar to its lowest level of 890 won to the dollar. With the sharp
improvement in Korea's overseas trade position the won started to appreciate
from 1986 onwards. With the subsequent relapse of Korea into a new trade
deficit in 1990 and the recovery of the dollar in world exchange markets, the
Korean won has again depreciated slightly. However, there is a high degree of
stability and the currency is managed by the central bank. A devaluation of
more than 5 percent per annum should not be expected unless Korea's trade or
inflation problems worsen significantly.
It is likely that Korea's foreign trade position will improve again thanks
to the country's competitive position in export markets. In a more liberated
domestic economy with lower tariffs on foreign goods, however, it will be more
difficult to restrain the growth of imports as Korean consumers demand a
greater choice. Korea's main deficit is with Japan and consists largely of
capital goods. This is likely to continue as long as Korean manufacturers wish
to maintain their competitive edge in the most modern plant and equipment.
THAILAND
Thailand is unique in South East Asia in that it has escaped the colonial
experience and maintained its freedom and independence. In addition, the
monarchy plays a key role in maintaining the country's political stability and
independence. It is, nevertheless, sobering to realize that since the absolute
monarchy was ended in 1932 there have been no less than twenty-one coup
d'etats, of which twelve have been successful. The recent international
perception of Thailand was very much coloured by the experience of the past
fifteen years as there had been no successful coup d'etat since 1977. Thus the
one that took place in February 1991 was a surprise to many foreign observers
and investors, although it had broad popular support and the tacit blessing of
King Bhumibol himself. The army was felt to be acting not only to further its
own cause but to stamp out political corruption and restore, within a period
of six months, a democratically elected government. The Cabinet, which was put
in place immediately after this coup, contained fifteen PhDs out of a total of
twenty-three ministers, and the generals were in a small minority compared to
the businesspeople, diplomats and civil servants with a record of
disinterested public service. Thus it seems that Thailand in the 1990s will
remain democratic but that the King and the army will continue to play a role
which would be described in a Western democracy as that of "checks and
balances" on the excesses of elected politicians.
Political risk in Thailand needs to be seen in this cultural context.
Thailand has been given a higher rating for political stability because of the
existence of the monarchy first of all. King Bhumibol, who has been on the
throne since 1946, commands enormous personal respect and popular reverence.
It is impossible, therefore, for any government or military group to gain
power without his tacit approval. This factor mitigates much of the
instability which may be suggested by the record for the past sixty years of
attempted military coups. At the same time Thailand has differed from its
neighbours Burma and Vietnam in possessing a free and independent peasant
population which has, on the whole, enjoyed a higher standard of living than
their neighbours and, therefore, the communist movement has never made much
headway among the rural people. On the other hand again, Thailand's
extraordinary economic growth in the 1980s (averaging 10 percent per annum)
has put great strains not only on the urban environment because of traffic
jams and pollution, but also on the social and family system. Many rural
families have been forced to send their teenage children to the cities to find
employment. The contrast of living standards between Bangkok and the north
east provinces (an estimated per capital income would be perhaps US $2,500 per
annum for the former and less than US $500 per annum for the latter) must
eventually create social tensions and potential unrest. The laissez-faire
policy of the Bangkok government has thus far worked extremely well although
the lack of planning, in terms of the proliferation of factories around the
capital, leaves something to be desired.
The fact that Thailand is a majority Buddhist country may do much to
explain the non-violent changes of power and exchanges of politically
different views which characterizes its public life. So, along with the
monarchy, Buddhism must be counted as a major factor of political stability.
The army is the third element which can be considered, on balance, to be a
positive factor. During the 1970s when it seemed more than probable that
Thailand would bear out the Pentagon "domino theory" by which each country in
succession -- China in 1949, North Vietnam in 1954, South Vietnam in 1975,
Laos, Cambodia in 1975-7...Thailand, Malaysia, Singapore -- would fall to the
irresistible southward movement of the communist militias. But Thailand was
the point at which communism stumbled and fell back. Much of this has to do
with the professionalism of the army and the basic resistance of the people to
a foreign ideology. As Siam had resisted British and French colonial pressure
in the nineteenth century, so Thailand in the twentieth century resisted the
Marxist Leninist dictatorship which engulfed its once prosperous neighbour,
Vietnam.
Thailand is, finally, the most open country to foreigners and receives
almost 5 million tourists a year. The self-confidence and strong sense of
cultural identity of the Thai people is in no way diminished by the
superlative standards of service which characterize their hotels, tourist
resorts and airlines. Any independent observer or visitor to Thailand can,
therefore, assess the real nature of the underlying social stability of the
country which supports the high degree of political stability predicted for
the country.
The following table gives details of the overall economic performance of
Thailand from 1987 to 1994.
- ------------------------------------------------------------------------------
TRADE
EXCHANGE GDP SURPLUS/ MARKET MARKET
RATE GROWTH (DEFICIT) YEAR-END CAPITAL
AV. US $ % CPI (US $BN) P/E CLOSING (US $BN)
--------- ------- ------ ---------- ---- -------- --------
1987 25.72 9.5 2.5 (1.6) 9.3 284.99 5.4
1988 25.29 13.2 3.9 (3.9) 16.3 386.73 8.86
1989 25.70 12.2 5.4 (5.4) 26.4 879.19 25.67
1990 25.56 10.0 6.0 (9.9) 13.8 612.86 23.86
1991 25.05 8.2 5.7 (9.6) 15.6 711.40 35.7
1992 25.49 7.5 4.1 (8.5) 15.2 893.40 58.20
1993 25.50 7.8 4.8 (9.2) 27.6 1,183.00 130.0
1994 25.10 8.2 5.0 (9.5) 21.3 1,360.00 150.0
1995* 24.90 8.8 5.2 (11.9) 17.6 -- 140.0
*Estimate
Thailand's economy has been the fastest growing in the world for the past
three years. The take-off really began in 1986-7 with the flood of new foreign
investment into the country, largely from Japan and Taiwan. The rapid
appreciation of the Japanese yen against the dollar in 1985-6 forced many
Japanese manufacturers to consider moving some of the low technology, low
labour cost activities, such as textiles, consumer electronics and footwear,
offshore. Thailand was a natural destination for Japan's industrialists, made
easier by the low degree of red tape and bureaucratic delays. Hence as the
figures published by the Board of Investment between 1985 and 1992 show the
rising tide of foreign capital was a major cause of Thailand's economic boom.
GDP growth reached over 12 percent in 1988 and 1989 and it seems likely that
in the 1990s Thailand can sustain a medium-term growth of nearly 7 percent
annually in real terms.
There has been a large shift away from agriculture towards manufacturing.
As recently as 1980, 50 percent of Thailand's exports consisted of rice and
tapioca and other agricultural products. By 1990, 75 percent of the total
volume of exports were manufactured goods, mainly from the newly established
assembly plants in Bangkok and the south. This has resulted in large changes
in employment and moves of populations. Nevertheless, the profound change in
the structure of Thailand's economy has been well absorbed and sets the stage
for a move into higher value added products in the years up to 2000.
It is surprising, considering the very high rate of economic growth that
the economy has experienced, that prices, as measured by the consumer price
index, have been kept under control. The last serious bout of inflation in
Thailand occurred during the two oil crises, first in 1973-4 when the CPI
touched 24 percent and then again in 1980-1 when there was a resurgence of
inflation to nearly 20 percent. In the later 1980s, and thanks largely to a
more stable oil price, inflation has been held in single digits and has not
exceeded 6 percent. Nevertheless, the boom of the past three years,
particularly in Bangkok, has led to a rapid escalation of real estate values
and rents. It is likely that the slowdown in the economy in 1991 will result
in a lower inflation rate and, therefore, it is expected that Thailand's
inflation will be held at 5 percent or below in the next few years.
Once again the record is one of extraordinary stability. The Thai baht has
been carefully managed by the Bank of Thailand against a basket of currencies
which is thought to be around 80 percent dollars and 20 percent yen. When
measured against the U.S. dollar it has resulted in a very small annual
variation of less than 3 or 4 percent. In fact, during the last six years
there has been virtually no change in the value of the baht compared with the
dollar. Clearly, the weaker dollar of the 1985-90 period has favoured
Thailand's exports. (The same effect is observable with the Hong Kong dollar
which is also pegged to the American unit.) Therefore, it is expected that
Thailand's currency will remain extremely stable in dollar terms in the
future.
MALAYSIA
The central dilemma in assessing Malaysia's political risk is the
perennial question of relations between the Malay and Chinese communities
representing as they do about 60 percent and 30 percent of the population
respectively. Since the 1969 anti-Chinese riots in Kuala Lumpur the country
has been unruffled by any serious inter-racial violence and during this period
a great deal has been accomplished in transforming the economy and in
transferring the wealth of the country from foreign and Chinese hands into the
hands of the bumiputra (or the sons of the soil), which is the dominant Malay
majority. The success of this New Economic Policy is unquestioned and has
given a great deal of legitimacy to the continued run of the United Malay
National Organisation (UMNO) under its successive prime ministers and most
recently under Dr. Mahathir Mohammed who has now held power for a decade. This
economic success has also done much to defuse the threat from the Islamic
fundamentalists who have tended to get co-opted into the ruling party. The
Chinese community has also done well in economic terms although the political
disunity in the Malay Chinese Association (MCA) has left them somewhat
leaderless in the political sphere.
Politics in Malaysia continues to be a question to revolve around its
leading personalities. It should also be noted, however, that Malaysia shares
one characteristic with Thailand, which is a strong monarchical system. In
Malaysia's case it is less visible because the kingship is shared on a five-
year revolving basis among the sultans of the various states of the
federation. This clear distinction of the British model between the head of
state, or monarch, and the prime minister, or political leader, is important
to Malaysia's overall stability.
The geographical divide between peninsular Malaysia and East Malaysia,
consisting of the states of Sabah and Sarawak, also underlines the need for a
great deal of political decentralization. Sabah and Sarawak have very
different histories from the other Malaysian states and can be examined for
their political make-up on a separate basis including the question of the
Christian minority in Sabah. Overall, however, it must be judged that
Malaysia's economic success has led to a far greater degree of political
stability than was expected following independence in 1963.
Malaysia's relations with its neighbours on the whole are excellent and,
in particular, the relationship with Singapore, which remains the largest
investor in the country, is a key one. The Singapore government is obviously
enthusiastic to diversify its industrial base across the causeway into Johore
and further north into peninsular Malaysia. This is good news for Malaysia's
economic and political stability.
The following table gives details of the overall economic performance of
Malaysia from 1987 to 1994.
- ------------------------------------------------------------------------------
TRADE
EXCHANGE GDP SURPLUS/ MARKET MARKET
RATE GROWTH (DEFICIT) YEAR-END CAPITAL
AV. US $ % CPI (US $BN) P/E CLOSING (US $BN)
--------- ------- ------ ---------- ---- -------- --------
1987 2.52 5.4 0.8 5.9 78.0 261.19 18.49
1988 2.61 8.9 2.5 5.6 36.0 357.38 29.05
1989 2.70 9.2 2.8 3.9 28.7 562.28 39.73
1990 2.70 9.8 3.1 1.9 39.8 505.9 48.81
1991 2.75 8.8 4.3 (6.4) 29.3 556.2 57.49
1992 2.62 8.0 4.7 2.8 21.0 644.0 92.20
1993 2.70 8.5 3.6 3.8 34.3 1,275.0 241.00
1994 2.62 9.2 3.7 (2.2) 23.2 971.0 275.00
1995* 2.55 9.2 3.7 (6.7) 20.4 -- 204.00
*Estimate
Malaysia, along with Singapore, experienced a sharp recession in 1985-6
owing to an excessive tight monetary policy in both countries. Since 1987
Malaysia has, however, returned to the path of high growth and low inflation.
Nevertheless, over a twenty year period Malaysia ranks behind Singapore,
Thailand and Hong Kong, although ahead of Indonesia in past overall economic
growth. The change in the past five years has also been accompanied by an
accelerated shift into manufacturing and away from the old dependence on the
plantation sector. This manufacturing growth has been led by investment from
Japan and Taiwan and notable national projects such as the Proton car.
Malaysia is attempting to move up market into the new product areas such as
electronics, car assembly and consumer goods. It is likely to be successful in
doing so owing to its literate and trainable workforce. Therefore, one can be
fairly confident that Malaysia's economic record will continue to be bright.
The exchange rate of the Malaysian ringgit has been closely tied to that
of the Singapore dollar which itself has been very stable if not strong
against other world currencies, expecially the US dollar. Therefore, the
ringgit has had a very stable record against the dollar and is likely to
maintain this stability. Malaysia's foreign trade has generally been in
surplus, although between 1990 and 1991 this figure fell sharply partly owing
to fall-off in Malaysia's energy exports. As manufactured goods assume a
larger importance in the composition of exports compared with crude oil,
rubber and palm oil, Malaysia's trade position should gradually become
steadier. For an investor Malaysia remains attractive although vulnerable to
external shocks either in terms of commodity prices or in a fall in export
demand in its principal markets. The infrastructure, high literacy rate and
relative political stability in recent years are all bonus points for the
country's overall image.
SINGAPORE
"The silent success", in the words of a Singapore government minister, of
this region is based on a high literacy rate and a well-educated and trainable
workforce. The investment in human capital has proven to be more important to
a lasting economic growth success story than the availability of finance or
technology. The demise of communism is also promoting greater confidence and
political stability in the Association of South East Asian Nations (ASEAN)
region, of which Singapore is the de facto financial centre.
Essentially Singapore's aim in the 1990s will be to emulate what Hong Kong
has done in Guangdong Province and the hinterland of southern China. But in
Singapore's case its export of jobs and lower value added industries will be
mainly to neighbouring Malaysia and, to a lesser extent, to Indonesia. The
plantations in the southern part of the Malaysian peninsula depend almost
entirely on the large annual in-take of illegal workers from Indonesia. With
100 million people in Java alone, Indonesia needs to provide employment for 2-
3 million a year. Thus mobility of labour within ASEAN is as important, if not
more so, than mobility of capital.
Singapore is aiming its investment at Johore in Malaysia and Batam Island
in Indonesia. This is the so-called growth triangle. There is a political
aspect to this. Singapore is a small Chinese island surrounded by a sea of
Muslims. It needs to ensure political stability among its neighbours. One of
the best ways of doing this (as Hong Kong has found in southern China) is to
invest and create jobs and raise per capita incomes from their present low
level.
The other aspect of political risk when considering Singapore is, of
course, the handover of political power from one generation to another.
Although Lee Kwan Yew stepped down as Prime Minister in 1990, he continues to
wield a large influence and power behind the scenes. Nowhere in the world
could it be truer to say that the state is the creation of one man, thus his
succession poses a very real problem. His son, Lee Hsien Loong may not take up
the post of Prime Minister for three to five years. In any case, the question
of dynastic succession in a parliamentary democracy, even within a limited
Confucian Chinese democracy, is, to say the least, a questionable one. Many of
the elder Lee's policies, such as imposing the Mandarin Chinese language on
the Singapore educational system, have aroused fierce opposition among the
older, anti-communist generation of Singapore Chinese. The tight control of
the media and the suppression of all political opposition or criticism of the
government, the People's Action Party or the Prime Minister himself, has also
aroused criticism both at home and internationally.
But, on balance the enormous success of Lee Kwan Yew's achievement in
creating modern Singapore cannot be doubted. It is clean, efficient and
notably lacking in corruption compared to other Asian cities. The Central
Provident Fund, which takes 35 percent of every person's income as a
compulsory savings scheme, has built up an enormous reservoir of capital for
future use in Singapore. Notable public works such as Changi Airport or the
transport system have been the result. Long-term planning has not been as
successful anywhere else, with the possible exception of Japan. The
paternalistic attitude of the Singapore government towards its citizens is
unlikely to change in the immediate future especially since the younger
generation of Singaporeans have been thoroughly versed in the disciplined
Confucian thinking and authoritarianism which characterizes the school system
as well as government. Singapore also has a well run and modern citizens' army
based, like the Swiss model, on an annual call-up of every able-bodied man
aged between 18 and 50. The city state is thus well equipped to defend itself
against any aggressor. Singapore will also benefit from the inflow of human
and financial capital from Hong Kong as 1997 approaches. In this sense it does
not need to change but merely to retain its present stability and attractive
lifestyle in order to continue to prosper. Thus, the conclusion to be drawn is
that Singapore scores an equally high rating in terms of very low political
risk and a high degree of stability as Japan.
The following table gives details of the overall economic performance of
Singapore from 1987 to 1994.
- ------------------------------------------------------------------------------
TRADE
EXCHANGE GDP SURPLUS/ MARKET MARKET
RATE GROWTH (DEFICIT) YEAR-END CAPITAL
AV. US $ (%) CPI US $BN) P/E CLOSING (US $BN)
--------- ------- ------ ---------- ---- -------- --------
1987 2.10 9.4 0.5 (5.2) 17.8 270.34 17.86
1988 2.01 11.1 1.5 (4.7) 18.5 1,038.6 24.00
1989 1.95 9.2 2.4 (4.8) 18.3 1,481.3 35.95
1990 1.74 8.3 3.4 (5.3) 13.1 1,159.5 34.26
1991 1.62 6.7 3.4 (4.6) 18.5 1,490.7 51.20
1992 1.64 5.8 2.3 (4.9) 19.6 1,524.4 52.20
1993 1.61 9.9 2.4 (0.8) 36.0 2,426.0 132.05
1994 1.53 10.1 3.1 (5.9) 22.5 2,239.5 170.00
1995* 1.43 7.3 2.1 (4.9) 20.6 -- 160.00
*Estimate
Note: Market capital figures for Singapore for incorporated companies only.
The Singapore economy has been characterized by the highest degree of
government involvement and intervention outside of the socialist world.
Nevertheless, the growth rate has been quite impressive, averaging around 7-8
percent, except during the 1985-6 recession, and even more impressive has been
the tight control of inflation which, along with that of Japan, has remained
extremely low at below 3 percent for the past decade. The economic stability
of Singapore, therefore, scores high on a comparative basis although being a
small island state it is very sensitive to developments in its two main
neighbours, Indonesia and Malaysia, with their large commodity-based
economies. Thus, Singapore runs a regular trade deficit of around US $5
billion per annum which is easily covered by its current account surplus on
invisibles. Singapore's foreign reserves held by the Monetary Authority of
Singapore (MAS) and the Government Investment Corporation of Singapore (GICS)
are estimated to be in excess of US $50 billion which would give this tiny
Asian city state the third highest foreign exchange reserves after Japan and
Taiwan.
Thus, the overall management of "Singapore Inc." is extremely
conservative, with a very high degree of self-reliance, a high savings rate
and an ample cushion for unexpected global events. This financial conservatism
has been reflected in the strong performance of the Singapore dollar which has
advanced steadily against the US dollar during the past five years with an
average appreciation of 5 percent per annum. It is reasonable to expect these
trends -- high economic growth, high savings rate, low inflation and steady
currency appreciation -- to continue during the 1990s.
INDONESIA
It can at least be argued that Indonesia has had fewer changes in its
political system than its Asian neighbours. In fact, there have been only two
rulers of Indonesia since independence was gained from the Dutch in 1948 --
Sukarno and Suharto. But equally it should not be forgotten that the two major
turning points in the country's modern history -- independence and the 1965
revolution -- were unusually violent episodes in the life of any country. The
stability which Indonesia has enjoyed during the past twenty-five years under
Suharto should, therefore, be placed against this background.
In many ways the same three pillars of stability which are found in
Thailand -- the army, the king and the national religion -- are present in
Indonesia except that the President, Suharto, stands in the place of the
monarchy and the national religion is Islam rather than Buddhism. The question
of monarchical or presidential succession remains perhaps the major political
risk confronted by the foreign investor as so many aspects of the business
life of the country relate directly to Suharto or his immediate family. The
role of the army in Indonesia is a great deal more clear cut and predictable
than in either Thailand or in the Philippines. In effect, there have been no
attempted military coups since 1966. The army remains wholly in support of
Suharto. It has been suggested, in fact, that anyone who might be considered
as a candidate to succeed Suharto must be Javanese and must be a general.
The role of Islam in the national life of Indonesia is a more complex
subject. The Mohammedan religion first reached the shores of western Sumatra
through the coming of the Arab traders around 1400. The western-most state of
Aceh has remained a stronghold of Islamic fundamentalist belief ever since.
Sumatra in general has remained restive and unwilling to bend to the yoke of a
tight central control from Java. In fact, this is also true of many other
island provinces of the huge Indonesian archipelago which will have, by the
year 2000, a population of over 200 million. Following the 1958 uprising in
Sumatra and Celebes (or Sulawesi) the Javanese policy was to plant more
settlers in these outlying islands from Java (where 80 percent of the
population lives). Political and religious factors, therefore, cannot be
disentangled in the future horoscope of Indonesian political life.
Fundamentalism is on the rise, as also in Malaysia, and politicians with
fundamentalist Islamic beliefs and supporters are likely to take a more active
role. However, the situation cannot be compared with Iran or Saudi Arabia. In
neither Indonesia nor Malaysia has Islam taken over all aspects of every day
life with its rules about the role of women or the consumption of alcohol or
the exaction of interest or usury on capital. In all these respects Indonesian
life is relatively "modern." There is a more easy-going Asian approach to
matters of religious belief.
However, the social question, which one cannot ignore, concerns the role
of the minority and non-Muslim peoples in Indonesia, in particular the Chinese
community in Java. Although the total Chinese population is less than 5
million, or around 3 percent of the total, 80 percent of the commerce and much
of the capital wealth remains in the hands of this small but tight-knit
Chinese community. In 1966 there were violent anti-Chinese riots and killings
in Jakarta, Surabaya and other Javanese cities. Many thousands of Chinese fled
to Hong Kong and to China but this is a spectre which has been banished from
the life of the nation since Suharto came to power. He is well known to have
close links with the leading members of the Chinese business community.
The role of Chinese businesspeople in Indonesia has been brought into much
greater focus by the explosion of the Jakarta stock market in the late 1980's.
Much of the wealth which was rumoured to exist in the hands of the great
Chinese families is now visibly calculated on a daily basis in the large
listed capitalization of the Indonesian-Chinese industrial groups such as
Indo-Cement and Astra. There is, of course, a two-way flow of capital involved
in this process of the rapid evolution of the capital market in Jakarta, by
which up to U.S. $5 billion of foreign capital has entered the country in the
form of equity investment, largely from foreign fund managers, and a
substantial amount of Chinese capital has been able to leave the country in
the opposite direction.
The enormous economic potential of Indonesia, its vast natural resources
and its large labour force being two principal attractions, cannot be doubted.
However, the main element of political risk is the possibility of a further
violent episode in the political life of the country when the next transfer of
power occurs at the top.
The following table gives details of the overall economic performance of
Indonesia from 1987 to 1994.
- ------------------------------------------------------------------------------
TRADE
EXCHANGE GDP SURPLUS/ MARKET MARKET
RATE GROWTH (DEFICIT) YEAR-END CAPITAL
AV. US $ (%) CPI (US $BN) P/E CLOSING (US $BN)
--------- ------- ------ ---------- ---- -------- --------
1987 1,720 3.6 9.0 4.6 83.0 0.07
1988 1,735 5.6 7.4 4.9 41.2 305.0 0.26
1989 1,784 7.4 6.0 5.8 24.7 399.0 2.42
1990 1,889 7.4 9.6 3.9 19.9 418.0 6.2
1991 1,984 6.5 9.5 5.5 17.1 247.0 8.1
1992 2,064 6.0 4.9 6.9 14.4 274.0 12.1
1993 2,110 6.5 7.0 9.0 27.4 589.0 43.0
1994 2,160 7.3 9.2 7.8 18.8 470.0 52.0
1995* 2,316 7.2 9.6 7.0 14.5 -- 55.0
*Estimate
Indonesia began the 1980s principally as an oil exporter. During the 1970s
it had a high rate of inflation but also a very rapid economic growth on the
back of the oil boom. The fall in oil prices in the early 1980s, which became
precipitate in the spring of 1986, therefore, forced a review of their
priorities. Reducing inflation, diversifying the economy away from oil and
maintaining a stable growth in the economy to provide as full employment as
possible for the large young population, were selected as the main objectives.
It is remarkable to see the extent to which these aims have been achieved
during 1985-90. Inflation has been brought from 20 percent, at the beginning
of the decade, to around 6 percent in 1989-90. Economic growth, having fallen
to 2.5 percent in 1985 regained the level of 7.4 percent by 1990. The rupiah,
which had undergone a 30 percent once-and-for-all evaluation in the autumn of
1985, had stabilized on a "crawling peg" system with an annual devaluation of
around 5 percent. The trade surplus continued at a healthy US $4-5 billion
annually and the inflow of foreign capital more than offset Indonesia's
foreign debt position. Therefore, it is possible to conclude that the good
macroeconomic management, which was achieved by the small group of technocrats
employed by Suharto to direct the economy, had been very successful in
reducing the economic risk of the country. The future path of the Indonesian
economy will, therefore, depend as much on the development of low wage
manufacturing and the inflow of Japanese capital, on the liberalization of the
banking system and the capital market, as on the price of basic commodities.
This gives a much greater degree of stability to the Indonesian economy as a
whole.
THE PHILIPPINES
The Philippines is a special case in Asia. Culturally and politically it
has a very distinct national personality. The Roman Catholic Church plays a
leading role in its national life, not least in recent political changes. The
fact that the Philippines was the only American colony in Asia also gave it a
very different tradition from Indonesia or Malaysia, which had similar
languages but very different cultural traditions. The Spanish occupation of
the previous four hundred years also left some deeper traces than the Dutch
did in Indonesia.
When speaking of political risk, however, the real problem in the
Philippines has been the lack of legitimacy which has plagued successive
governments and has led to the constant pendulum between dictatorship and weak
democratic governments.
The U.S. tutelage has left a lasting imprint on the country. The
charismatic leadership of Magsaysay in the 1950s also left a vivid example to
his successors. The attempts, in the 1960s, to solve the enormous economic
problems of the Philippines, especially the rural poverty and the rapid growth
of population, were not successful when pursued in a socialist direction.
Marcos arrived in power in 1965 and inherited a country which still had higher
living standards than most other Asian countries such as Hong Kong, Korea,
Taiwan and Singapore. Therefore, judgment on his twenty year rule must be very
negative as a result, if only judged as an economic failure.
The question most investors, therefore, raise is whether the Philippines
is capable of responsible government and economic planning which would give it
a GNP growth rate approaching that of its Asian tiger neighbours. Many
observers dismiss this prospect out of hand citing the endemic problems of
corruption, political in-fighting and the lack of Confucian work ethic present
in North Asia. However, there is no doubt that the Philippines possesses
enormous natural advantages and it would be wrong to generalize about the
whole archipelago of 7,000 islands from the political life of Manila alone.
The island of Cebu, for example, has seen a successful economic transformation
in the past twenty years. Manufacturing investment has grown and has begun to
replace agriculture as a principal source of employment. The Philippines has a
very high rate of literacy and the work ethic cannot be doubted by anyone who
has employed Filipino domestic workers overseas. Their earnings are an
important source of remittance back to the Philippines each year. The Filipino
population in the United States is now the largest Asian ethnic group in that
country approaching 2 million, mainly in California. Both natural resources,
therefore, and an intelligent, hardworking population favour the country.
Unfortunately, the political system has never been able to maintain the
long-term stability for its promise to be fulfilled. The years of the Aquino
government, during which democratic procedures were restored to Philippine
political life, have also been disappointing in that many of the features of
Washington political life have been reproduced in Manila -- continuous discord
between Congress, Senate and the President, making important national
decisions extremely difficult to reach. On top of that, of course, there have
been the continuing attempts by the military to unseat the elected government.
Although all of these have failed they have, nevertheless, done much to
undermine the confidence of international investors in the political stability
of the country. In particular, the failed attempt of December 1989 led to a
slump in the economy and the stock market and scared away much needed foreign
capital.
There are signs that Japanese and Taiwanese investors and banks are coming
back to the Philippines. Nevertheless, it can only be concluded that
democracy is a fragile plant in the Philippines which may be damaged in the
future as it has been in the past. There is continued rivalry for political
and business influence among a small group of leading Filipino families. The
press, although perhaps the freest in Asia, is considered to be irresponsible
and corrupt and does much to undermine the legitimacy of the ruling
government. Political risk, therefore, is judged to be higher here than in
other Asian countries.
The following table gives details of the overall economic performance of
the Philippines from 1987 to 1994.
- ------------------------------------------------------------------------------
TRADE
EXCHANGE GDP SURPLUS/ MARKET MARKET
RATE GROWTH (DEFICIT) YEAR-END CAPITAL
AV. US $ (%) CPI (US $BN) P/E CLOSING (US $BN)
--------- ------- ------ ---------- ---- -------- --------
1987 20.5 4.8 3.8 (1.0) 15.9 642.72 2.97
1988 21.0 6.3 8.8 (1.1) 19.6 841.65 4.20
1989 21.7 5.0 10.6 (2.6) 16.8 1,145.45 11.82
1990 27.2 2.1 12.7 (4.0) 14.3 651.78 5.73
1991 26.2 (1.0) 17.7 (3.2) 12.7 1,152.00 11.10
1992 23.6 0.0 8.9 (4.7) 13.5 1,256.00 16.00
1993 27.1 1.7 9.8 (6.4) 29.4 3,196.00 39.00
1994 26.3 4.3 9.1 (7.8) 24.5 2,786.00 56.00
1995* 25.8 5.4 7.7 (9.3) 19.2 -- 56.00
*Estimate
The GDP growth, which had been running at 5.5 percent average for the
previous three years, fell to only 2 percent in 1990 and inflation rose to 12
percent. The peso was rather weak and the trade deficit doubled to nearly US
$4 billion. The stock market tumbled by over 50 percent, from a high of 1,145
to less than 600, and the overall value of listed Philippine shares fell from
US $12 billion to less than US $6 billion. Such is the real economic risk for
investors of this fragile political system. Nevertheless, the recovery of
confidence in early 1991 is testament to the long-term value that investors
see in the country. Even if relative to its Asian neighbours the Philippines
continues to have economic problems (and notably its high foreign debt), it
will benefit from regional trends and it will present, from time to time, very
interesting buying opportunities. The educated and literate labour force is a
major resource of wages and relatively low taxes.
At the worst point of the last years of the Marcos regime inflation in the
Philippines reached 50 percent, the highest recorded in Asia during the past
decade. With the strong support of the central bank under Governor Jobo
Fernandez, the money supply was reined in, the peso was stabilized and
inflation came down to single digits between 1986 and 1988. The tight monetary
policy has been maintained and interest rates have been as high as 35 percent
to control the supply of credit. Therefore, with good macroeconomic management
the inflation problems in the Philippines can be contained.
The same rule can be applied to the value of the peso which has had a poor
long-term record and, despite the efforts of a strong and independent central
bank, has again slid in value against the dollar in the past two years. With
the benefit of strict International Monetary Fund prescriptions it is hoped
that the Philippines will now be able to reschedule its foreign debt
particularly with the help of the Japanese banks, stabilize the currency and
maintain a reasonable growth in its export trade.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EV CLASSIC GREATER CHINA GROWTH
FUND. The Fund currently seeks to achieve its investment objective by investing
its assets in the Greater China Growth Portfolio (the "Portfolio").
FEES AND EXPENSES
MANAGER
As of August 31, 1995, the Fund had net assets of $21,207,646. For the
fiscal year ended August 31, 1995, Eaton Vance earned management fees of $57,931
(equivalent to 0.25% of the Fund's average daily net assets for such year). For
the period from the start of business, December 28, 1993, to the fiscal year
ended August 31, 1994, Eaton Vance earned management fees of $32,972 (equivalent
to 0.25% (annualized) of the Fund's average daily net assets for such period).
DISTRIBUTION PLAN
The Distribution Plan and Distribution Agreement remain in effect until
April 28, 1996 and may be continued as described under "Distribution Plan" in
this Part II. Pursuant to Rule 12b-1, the Plan has been approved by the Fund's
initial sole shareholder (Eaton Vance) and by the Board of Trustees of the
Trust, as required by Rule 12b-1. During the fiscal year ended August 31, 1995,
the Principal Underwriter paid to Authorized Firms sales commissions of $166,240
on sales of Fund shares. During the same period, the Fund paid sales commission
payments under the Plan to the Principal Underwriter aggregating $176,292. Such
payments reduced Uncovered Distribution Charges. During such period, contingent
deferred sales charges aggregating approximately $2,600 were imposed on early
redeeming shareholders and paid to the Principal Underwriter to reduce Uncovered
Distribution Charges. As at August 31, 1995, the outstanding Uncovered
Distribution Charges of the Principal Underwriter calculated under the Plan
amounted to approximately $574,000 (which amount was equivalent to 2.7% of the
Fund's net assets on such date). During the fiscal year ended August 31, 1995,
the Fund paid service fee payments under the Plan aggregating $58,791, of which
$54,553 was paid to Authorized Firms and the balance of which was retained by
the Principal Underwriter.
PRINCIPAL UNDERWRITER
For the fiscal year ended August 31, 1995, the Fund paid the Principal
Underwriter $1,160.00 for repurchase transactions handled by the Principal
Underwriter (being $2.50 for each such transaction).
<TABLE>
<CAPTION>
TRUSTEES
The fees and expenses of those Trustees of the Trust and of the Portfolio who are not members of the Eaton
Vance organization (the noninterested Trustees) are paid by the Fund (and the other series of the Trust) and the
Portfolio, respectively. (The Trustees of the Trust and of the Portfolio who are members of the Eaton Vance
organization receive no compensation from the Fund or the Portfolio.) During the fiscal year ended August 31, 1995,
the noninterested Trustees of the Trust and the Portfolio earned the following compensation in their capacities as
Trustees from the Fund and the Portfolio, and, for the year ended September 30, 1995, earned the following
compensation in their capacities as Trustees of the funds in the Eaton Vance fund complex<F1>:
AGGREGATE AGGREGATE TOTAL COMPENSATION
COMPENSATION COMPENSATION FROM TRUST AND
NAME FROM FUND FROM PORTFOLIO FUND COMPLEX
---- --------- -------------- ------------------
<S> <C> <C> <C>
Hon. Edward K.Y. Chen ......................... $ -- $15,000 $ 15,000
Donald R. Dwight .............................. 33 -- 135,000<F2>
Samuel L. Hayes, III .......................... 32 5,000 150,000<F3>
Stuart Hamilton Leckie ........................ -- 15,000 15,000
Norton H. Reamer .............................. 31 -- 135,000
John L. Thorndike ............................. 32 -- 140,000
Jack L. Treynor ............................... 34 -- 140,000
- ----------
<FN>
<F1>The Eaton Vance fund complex consists of 211 registered investment companies or series thereof.
<F2>Includes $35,000 of deferred compensation.
<F3>Includes $33,750 of deferred compensation.
</FN>
</TABLE>
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return on
a hypothetical investment of $1,000 in the Fund from October 28, 1992 through
August 31, 1995 and for the one-year period ended August 31, 1995. The total
return for the period prior to the Fund's commencement of operations on December
28, 1993 reflects the Portfolio's total return (or that of its predecessor)
adjusted to reflect any applicable Fund contingent deferred sales charge
("CDSC"). The total return for such prior period has not been adjusted to
reflect the Fund's distribution fees and certain other expenses. If such an
adjustment were made, the performance would be lower.
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT
TOTAL RETURN BEFORE TOTAL RETURN AFTER
VALUE BEFORE VALUE AFTER DEDUCTING CDSC DEDUCTING CDSC*
INVESTMENT INVESTMENT AMOUNT OF DEDUCTING CDSC DEDUCTING CDSC* -------------------------- --------------------------
PERIOD DATE INVESTMENT ON 8/31/95 ON 8/31/95 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------- ------------ ----------- --------------- --------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of
the Fund 10/28/92 $1,000 $1,420.72 $1,420.72 42.07% 13.16% 42.07% 13.16%
1 Year Ended
8/31/95 8/31/94 $1,000 $ 901.50 $ 892.51 -9.85% -9.85% -10.75% -10.75%
Past performance is not indicative of future results. Investment return and principal value will fluctuate; shares, when
redeemed, may be worth more or less than their original cost.
- ----------
* No CDSC is imposed on certain redemptions. See the Fund's current Prospectus.
</TABLE>
PRINCIPAL UNDERWRITER
Under the Distribution Agreement the Principal Underwriter acts as
principal in selling shares of the Fund. The expenses of printing copies of
prospectuses used to offer shares to financial service firms or investors and
other selling literature and of advertising is borne by the Principal
Underwriter. The fees and expenses of qualifying and registering and maintaining
qualifications and registrations of the Fund and its shares under federal and
state securities laws is borne by the Fund. In addition, the Fund makes payments
to the Principal Underwriter pursuant to its Distribution Plan as described in
the Fund's current Prospectus; the provisions of the plan relating to such
payments are included in the Distribution Agreement. The Distribution Agreement
is renewable annually by the Trust's Board of Trustees (including a majority of
its Trustees who are not interested persons of the Trust and who have no direct
or indirect financial interest in the operation of the Fund's Distribution Plan
or the Distribution Agreement), may be terminated on sixty days' notice either
by such Trustees or by vote of a majority of the outstanding voting securities
of the Fund or on six months' notice by the Principal Underwriter and is
automatically terminated upon assignment. The Principal Underwriter distributes
Fund shares on a "best efforts" basis under which it is required to take and pay
for only such shares as may be sold. The Fund has authorized the Principal
Underwriter to act as its agent in repurchasing shares and will pay the
Principal Underwriter $2.50 for each repurchase transaction handled by the
Principal Underwriter. The Principal Underwriter estimates that the expenses
incurred by it in acting as repurchase agent for the Fund will exceed the
amounts paid therefor by the Fund.
DISTRIBUTION PLAN
The Distribution Plan ("the Plan") is described in the Prospectus and is
designed to meet the requirements of Rule 12b-1 under the 1940 Act and the sales
charge rule of the National Association of Securities Dealers, Inc. (the "NASD
Rule"). The purpose of the Plan is to compensate the Principal Underwriter for
its distribution services and facilities provided to the Fund by paying the
Principal Underwriter sales commissions and a separate distribution fee in
connection with sales of Fund shares. The following supplements the discussion
of the Plan contained in the Fund's prospectus.
The amount payable to the Principal Underwriter pursuant to the Plan as
sales commissions and distribution fees with respect to each day will be accrued
on such day as a liability of the Fund and will accordingly reduce the Fund's
net assets upon such accrual, all in accordance with generally accepted
accounting principles. The amount payable on each day is limited to 1/365 of
.75% of the Fund's net assets on such day. The level of the Fund's net assets
changes each day and depends upon the amount of sales and redemptions of Fund
shares, the changes in the value of the investments held by the Portfolio, the
expenses of the Fund and the Portfolio accrued and allocated to the Fund on such
day, income on portfolio investments of the Portfolio accrued and allocated to
the Fund on such day, and any dividends and distributions declared on Fund
shares. The Fund does not accrue possible future payments as a liability of the
Fund or reduce the Fund's current net assets in respect of unknown amounts which
may become payable under the Plan in the future because the standards for
accrual of such a liability under accounting principles have not been satisfied.
The Plan provides that the Fund will receive all contingent deferred sales
charges and will make no payments to the Principal Underwriter in respect of any
day on which there are no outstanding Uncovered Distribution Charges of the
Principal Underwriter. Contingent deferred sales charges and accrued amounts
will be paid by the Fund to the Principal Underwriter whenever there exist
Uncovered Distribution Charges under the Fund's Plan.
Periods with a high level of sales of Fund shares accompanied by a low
level of early redemptions of Fund shares resulting in the imposition of
contingent deferred sales charges will tend to increase the time during which
there will exist Uncovered Distribution Charges of the Principal Underwriter.
Conversely, periods with a low level of sales of Fund shares accompanied by a
high level of early redemptions of Fund shares resulting in the imposition of
contingent deferred sales charges will tend to reduce the time during which
there will exist Uncovered Distribution Charges of the Principal Underwriter.
In calculating daily, the amount of uncovered distribution charges,
distribution charges will include the aggregate amount of sales commissions and
distribution fees theretofore paid plus the aggregate amount of sales
commissions and distribution fees which the Principal Underwriter is entitled to
be paid under the Plan since its inception. Payments theretofore paid or payable
under the Plan by the Fund to the Principal Underwriter and contingent deferred
sales charges theretofore paid or payable to the Principal Underwriter less all
amounts theretofore paid or payable to the Principal Underwriter by the Adviser
in consideration of the former's distribution efforts will be subtracted from
such distribution charges; if the result of such subtraction is positive, a
distribution fee (computed at 1% over the prime rate then reported in The Wall
Street Journal) will be computed on such amount and added thereto, with the
resulting sum constituting the amount of outstanding Uncovered Distribution
Charges with respect to such day. The amount of outstanding Uncovered
Distribution Charges of the Principal Underwriter calculated on any day does not
constitute a liability recorded on the financial statements of the Fund.
The amount of Uncovered Distribution Charges of the Principal Underwriter
at any particular time depends upon various changing factors, including the
level and timing of sales of Fund shares, the nature of such sales (i.e.,
whether they result from exchange transactions, reinvestments or from cash sales
through Authorized Firms), the level and timing of redemptions of Fund shares
upon which a contingent deferred sales charge will be imposed, the level and
timing of redemptions of Fund shares upon which no contingent deferred sales
charge will be imposed (including redemptions involving exchanges of Fund shares
for shares of another fund in the Eaton Vance Classic Group of Funds which
result in a reduction of Uncovered Distribution Charges), changes in the level
of the net assets of the Fund, and changes in the interest rate used in the
calculation of the distribution fee under the Plan. (For shares sold prior to
January 30, 1995, Plan payments are as follows: the Principal Underwriter pays
monthly sales commissions and service fee payments to Authorized Firms
equivalent to approximately .75% and .25%, respectively, annualized of the
assets maintained in the Fund by their customers beginning at the time of sale.
No payments were made at the time of sale and there is no contingent deferred
sales charge.)
As currently implemented by the Trustees, the Fund's Plan authorizes
payments of sales commissions and distribution fees to the Principal Underwriter
and service fees to the Principal Underwriter and Authorized Firms which may be
equivalent, on an aggregate basis during any fiscal year of the Fund, to 1% of
the Fund's average daily net assets for such year. For the sales commission and
service fee payments made by the Fund and the outstanding Uncovered Distribution
Charges of the Principal Underwriter, see "Fees and Expenses -- Distribution
Plan" in this Part II. The Fund believes that the combined rate of all these
payments may be higher than the rate of payments made under distribution plans
adopted by other investment companies pursuant to Rule 12b- 1. Although the
Principal Underwriter will use its own funds (which may be borrowed from banks)
to pay sales commissions at the time of sale, it is anticipated that the Eaton
Vance organization will profit by reason of the operation of the Plan through an
increase in the Fund's assets (thereby increasing the management fees payable to
Eaton Vance by the Fund and the administration fees payable to Eaton Vance by
the Portfolio) resulting from the sale of Fund shares and through the amounts
paid to the Principal Underwriter, including contingent deferred sales charges,
pursuant to the Plan. The Eaton Vance organization may be considered to have
realized a profit under the Plan if at any point in time the aggregate amounts
therefore received by the Principal Underwriter pursuant to the Plan and from
contingent deferred sales charges have exceeded the total expenses theretofore
incurred by such organization in distributing shares of the Fund. Total expenses
for this purpose will include an allocable portion of the overhead costs of such
organization and its branch offices, which costs will include without limitation
leasing expense, depreciation of building and equipment, utilities,
communication and postage expense, compensation and benefits of personnel,
travel and promotional expense, stationery and supplies, literature and sales
aids, interest expense, data processing fees, consulting and temporary help
costs, insurance, taxes other than income taxes, legal and auditing expense and
other miscellaneous overhead items. Overhead is calculated and allocated for
such purpose by the Eaton Vance organization in a manner deemed equitable to the
Fund.
The Plan provides that it shall continue in effect for so long as such
continuance is approved at least annually by the vote of both a majority of (i)
the Trustees of the Trust who are not interested persons of the Trust and who
have no direct or indirect financial interest in the operation of the Plan or
any agreements related to the Plan (the "Rule 12b-1 Trustees") and (ii) all of
the Trustees then in office, and the Distribution Agreement contains a similar
provision. The Plan and Distribution Agreement may be terminated at any time by
a vote of a majority of the Rule 12b-1 Trustees or by a vote of a majority of
the outstanding voting securities of the Fund. The provisions of the Plan
relating to payments of sales commissions and distribution fees to the Principal
Underwriter are also included in the Distribution Agreement between the Trust on
behalf of the Fund and the Principal Underwriter. Under the Plan the President
or a Vice President of the Trust shall provide to the Trustees for their review,
and the Trustees shall review at least quarterly, a written report of the amount
expended under the Plan and the purposes for which such expenditures were made.
The Plan may not be amended to increase materially the payments described
therein without approval of the shareholders of the Fund, and all material
amendments of the Plan must also be approved by the Trustees as required by Rule
12b-1. So long as the Plan is in effect, the selection and nomination of
Trustees who are not interested persons of the Trust shall be committed to the
discretion of the Trustees who are not such interested persons.
The Trustees believe that the Plan will be a significant factor in the
expected growth of the Fund's assets, resulting in increased investment
flexibility and advantages which have benefited and will continue to benefit the
Fund and its shareholders. Payments for sales commissions and distribution fees
made to the Principal Underwriter under the Plan will compensate the Principal
Underwriter for its services and expenses in distributing shares of the Fund.
Service fee payments made to the Principal Underwriter and Authorized Firms
under the Plan provide incentives to provide continuing personal services to
investors and the maintenance of shareholder accounts. By providing incentives
to the Principal Underwriter and Authorized Firms, the Plan is expected to
result in the maintenance of, and possible future growth in, the assets of the
Fund. Based on the foregoing and other relevant factors, the Trustees have
determined that in their judgment there is a reasonable likelihood that the Plan
will benefit the Fund and its shareholders.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As at November 30, 1995, the Trustees and officers of the Trust, as a
group, owned in the aggregate less than 1% of the outstanding shares of the
Fund. As of November 30, 1995, Merrill Lynch, Pierce, Fenner & Smith, Inc.,
Jacksonville, FL was the record owner of approximately 43.4% of the outstanding
shares, which it held on behalf of its customers who are the beneficial owners
of such shares, and as to which they had voting power under certain limited
circumstances. In addition, as of the same date, PaineWebber FBO World
Development Foundation, Coral Gables, FL 33134-2129 was the record owner of
approximately 7.2% of the outstanding shares. To the knowledge of the Trust, no
other person owned of record or beneficially 5% or more of the Fund's
outstanding shares as of such date.
<PAGE>
APPENDIX C
EATON CLASSIC
VANCE [LOGO] FUND
(Picture)
EV Classic
Greater China
Growth
Fund
<PAGE>
Investing in China
For Long-Term Capital Appreciation
The People's Republic of China ("China") and the surrounding countries of the
China region have recently become one of the most exciting and potentially
profitable areas for investors seeking capital appreciation. But capturing the
investment opportunity in China is challenging.
EV Classic Greater China Growth Fund - is a mutual fund that seeks capital
appreciation by investing in interests in a Portfolio of equity securities of
companies that, in the opinion of the Portfolio's investment adviser, will
benefit from the economic development and growth of China. The Fund offers
investors the advantages and convenience of an open-end mutual fund and the
benefits of an experienced, Hong Kong-based investment adviser with specialized
knowledge of the emerging East Asian markets.
Of course, while Eaton Vance believes that the opportunities for long-term
capital appreciation are excellent, investors should consider carefully the
risks involved in committing a portion of their assets to the Fund.
Such risks, for example, may include fluctuations in foreign exchange rates,
political or economic instability in the country in which the security's issuer
is located, and the possible imposition of exchange controls or other laws or
restrictions. In addition, foreign securities markets may be less liquid, more
volatile and subject to less government supervision than in the United States.
Further, there is no guarantee that the economy or stock market of China will
continue to grow as it has in the past, or that EV Classic Greater China Growth
Fund will benefit from such growth. Share values will fluctuate and, when
redeemed, may be worth more or less than at the time of purchase.
(map of Southeast Asia)
Greater China And
China's Special Economic Zones
Greater China
No. Korea
Japan
South Korea
China
CHINA'S SPECIAL ECONOMIC ZONES
Fujian Prov.
Pacific Ocean
Taiwan
Burma
Hong Kong
Guangdong Prov.
Xiamen
Laos
Shantou
Taiwan
Thailand
Shenzhen
Zhuhai
Philippines
Kampuchea
Hong Kong
So. China Sea
Malaysia
Philippines
Hainan Island
Singapore
Indonesia
Indian Ocean
Australia
IN ORDER TO ATTRACT FOREIGN INVESTMENT, SINCE 1978 CHINA HAS DESIGNATED CERTAIN
AREAS OF THE COUNTRY WHERE OVERSEAS INVESTORS CAN RECEIVE SPECIAL INVESTMENT
INCENTIVES AND TAX CONCESSIONS. THERE ARE FIVE SPECIAL ECONOMIC ZONES (SHENZHEN,
SHANTOU AND ZHUHAI IN GUANGDONG PROVINCE, XIAMEN IN FUJIAN PROVINCE AND HAINAN
ISLAND, WHICH ITSELF IS A PROVINCE).
IN ADDITION, 14 COASTAL CITIES HAVE BEEN DESIGNATED AS "OPEN CITIES" AND CERTAIN
OPEN ECONOMIC ZONES HAVE BEEN ESTABLISHED IN COASTAL AREAS. SHANGHAI HAS
ESTABLISHED THE PUDONG NEW AREA. TWENTY-SEVEN HIGH AND NEW TECHNOLOGY INDUSTRIAL
DEVELOPMENT ZONES HAVE BEEN APPROVED WHERE PREFERENTIAL TREATMENT IS GIVEN TO
ENTERPRISES WHICH ARE CONFIRMED AS TECHNOLOGY-RELATED.
CHINA IS ONE OF THE WORLD'S FASTEST GROWING ECONOMIES
In recent years, China has undergone remarkable change. China has embraced
economic reforms that have turned it into one of the world's most spectacularly
growing economies. Following strong growth in recent years, Gross Domestic
Product (GDP) in 1995 is forecast to grow by more than 9 percent. China's
leadership has officially declared this rapid growth as China's principal
political objective, until at least the turn of the century. China is also
influencing the growth rates of its neighbors: the average real (inflation
adjusted) GDP growth rate of the China region has been over 7.0 percent annually
for the past 6 years, compared with just 3 percent or less in Europe and the
United States.
With 1.2 billion people, China houses one quarter of the world's population.
China's population is young - an average 15 years younger than that of developed
Western countries, and its work force of 600 million is five times the size of
the U.S. work force.
Source: Lloyd George Management Ltd.
China's Potential
For Growth
US VS. CHINA:
A FINANCIAL COMPARISON
The table below compares financial statistics and consumption of various
products in the U.S. and China (all figures are annual, per person, except where
otherwise noted).
U.S. CHINA
GROSS NATIONAL PRODUCT ($US) $21,665 $395
AVERAGE MONTHLY WAGE ($US) $ 1,919 $38
PRIMARY ENERGY (TONS OF OIL EQUIVALENT) 7.5 0.64
COPPER (POUNDS) 20.0 0.9
ALUMINUM (POUNDS) 40.7 1.5
RAW STEEL (POUNDS) 880.0 165.0
RICE (POUNDS) 15.5 775.0
MEAT (POUNDS) 245.0 50.0
SUGAR (POUNDS) 140.0 9.6
SOFT DRINKS (GALLONS) 96.0 1.0
TVSETS (PER 1,000 PEOPLE) 885.0 8.0
NEWSPRINT (POUNDS) 125.0 3.0
TELEPHONE LINES (PER 1,000 PEOPLE) 520.0 5.3
CARS (PER 1,000 PEOPLE) 525.0 1.4
REFRIGERATORS (PER 1,000 PEOPLE) 390.0 2.6
Source: Lloyd George Management Ltd.
1994 AVERAGE FACTORY
WAGES PER MONTH
$U.S.
(Horizontal Bar Chart)
$3,574 Japan
$2,041 United States
$1,247 South Korea
$1,208 Taiwan
$1,191 Singapore
$1,140 Hong Kong
$346 Malaysia
$225 Spec. Economic Zones
$156 Thailand
$124 Philippines
$82 China
$66 Indonesia
Source: Lloyd George Management Ltd.
AT PRESENT, THERE IS AN ENORMOUS DISPARITY IN LABOR COSTS BETWEEN THE EMERGING
ASIAN COUNTRIES (CHINA, INDONESIA, THE PHILIPPINES, THAILAND AND MALAYSIA) AND
THOSE THAT ARE MORE INDUSTRIALIZED. OVER THE NEXT DECADE THERE IS STRONG REASON
TO BELIEVE THAT THE EMERGING COUNTRIES WILL START TO MOVE THEIR MANUFACTURING
FOCUS UPSCALE, SHIFTING FROM SUCH GOODS AS PLASTIC FLOWERS, TEXTILES AND TOYS,
TO COLOR TELEVISION SETS AND COMPUTERS, EMULATING THE LEAD OF SOUTH KOREA AND
TAIWAN.
WHAT ALL COUNTRIES OF THE REGION SHARE IS AN EQUITABLE WAGE STRUCTURE. UNLIKE
THE UNITED STATES, FOR EXAMPLE, WHERE A CHIEF EXECUTIVE OFFICER COULD EASILY
EARN 100 TIMES MORE THAN WHAT A PRODUCTION-LINE WORKER IN THE SAME COMPANY
MAKES, THE WAGE DIFFERENTIAL WITHIN THE CHINA REGION IS FAR SMALLER. IN SOUTH
KOREA, FOR EXAMPLE, THE DIFFERENCE BETWEEN THE TWO AT THE COUNTRY'S LARGEST
COMPANY IS ONLY NINE-FOLD.
AVERAGE GROWTH IN GROSS NATIONAL
PRODUCT: 1989 - 1994
Percent
(Horizontal Bar Chart)
19.03% China/Spec. Economic Zones
9.25% Thailand
8.80% Malaysia
8.30% Singapore
7.21% South Korea
6.80% Indonesia
6.41% Taiwan
4.60% Hong Kong
2.60% Philippines
1.90% United States
Source: Lloyd George Management Ltd.
THE AVERAGE REAL (INFLATION-ADJUSTED) GROSS DOMESTIC PRODUCT GROWTH RATE IN ASIA
HAS BEEN 7.0 PERCENT ANNUALLY OVER THE PAST 6 YEARS COMPARED WITH 3 PERCENT OR
LESS IN EUROPE AND THE UNITED STATES. ALTHOUGH MUCH WILL DEPEND ON THE
PRESERVATION OF THE INTERNATIONAL FREE TRADE SYSTEM, INTER-REGIONAL GROWTH IN
ASIAN TRADE HAS BECOME A MAJOR FACTOR IN THE CONTINUING SUPERIOR PERFORMANCE OF
ASIAN COUNTRIES.
THE LINKS BETWEEN CHINA AND HONG KONG, BETWEEN CHINA AND TAIWAN AND BETWEEN
CHINA AND OTHER COUNTRIES WITHIN THE REGION, WHERE THERE IS A SIGNIFICANT
OVERSEAS CHINESE POPULATION, HAVE BY NOW BEEN STRENGTHENED TO A DEGREE WHICH
MAKES A REVERSAL UNLIKELY. MOREOVER, ALTHOUGH THESE LINKS HAVE BEEN DEVELOPED TO
A STAGE WHERE ECONOMIC COOPERATION IN TRADE OPERATES SMOOTHLY, THE FULL
POTENTIAL OF THE MARKET, BOTH IN TERMS OF DOMESTIC CONSUMPTION AND OF EXPORT
GROWTH, HAS HARDLY BEGUN TO BE REALIZED.
DESPITE LOWER WAGES, CHINA'S SAVINGS RATE IS MORE THAN THREE TIMES THAT OF THE
UNITED STATES
The average monthly wage is between 200 and 300 renminbi, or approximately $75 -
$85. This compares to an average U.S. monthly wage of nearly $2,050. China's
savings rate of 42 percent of Gross National Product (GNP) is more than three
times that of the U.S. China's savings pool currently exceeds $250 billion, and
savings rates throughout the China region are correspondingly high. In 1994 the
gross national savings rate (as a percentage of GNP) in Singapore was a
remarkable 47.5 percent, followed closely by 42 percent in China, 36.6 percent
in Indonesia, 35.6 percent in Korea, 32.5 percent in Hong Kong, 31.7 percent in
Thailand, 28 percent in Taiwan, 24 percent in India, and 21 percent in the
Philippines. By comparison, the savings rate in the United States was only 12
percent for the same period.
Source: Lloyd George Management Ltd.
Chinese society has been based on the tenets of Confucius, which advocate order,
respect, hierarchy, good manners and the sacrifice of the individual for the
greater good of the family and the community. Chinese culture has favored hard
work, achievement and thrift, which is reflected in China's high savings rate.
THE 'OVERSEAS' CHINESE ARE LEADING CHINA'S TRANSFORMATION FROM CENTRAL PLANNING
TOWARD A MARKET-DRIVEN ECONOMY
The "overseas" Chinese - those living outside China - are leading China's
transformation from central planning toward a market-driven economy by supplying
capital and management expertise to complement the low-cost labor and land
resources of mainland China. Eaton Vance Management estimates that 75 percent of
all trade in most of the China region today goes through firms controlled by
overseas Chinese.
By far the largest part of foreign direct investment, presently running at a
$68 billion annual rate, is coming from the overseas Chinese. It is this direct
foreign investment - with its technology, management skills and export potential
- - that is transforming China's economy, leading many observers to believe that
China will assume the leadership in Asia within the next 20 years.
CHINA'S EXPORTS ARE ON THE RISE
$U.S. billion
(Horizontal Line Chart)
EXPORTS IMPORTS
1988 $44.6 $56.0
1989 $51.1 $59.0
1990 $61.9 $52.0
1991 $70.7 $62.5
1992 $84.9 $80.0
1993 $91.2 $104.7
1994E $111.2 $123.3
1995E $127.8 $137.9
Source: Lloyd George Management Ltd.
FOREIGN INVESTMENT IS
GROWING RAPIDLY
$U.S. billions
(Horizontal Bar Chart)
1994 $27.7
1993 $25.0
1992 $13.0
1991 $4.9
1990 $4.9
Source: Ministry of Foreign Economic Relations & Trade; State Statistical Bureau
of the People's Republic of China
ACTUAL FOREIGN INVESTMENT HAS GROWN TO $U.S. 27.7 BILLION IN 1994 FROM $U.S.
25.0 BILLION IN 1993 AND APPROXIMATELY $U.S. 13.0 BILLION IN 1992. FOREIGN
INVESTMENT IN 1991 AND 1990 WERE BELOW $U.S. 5.0 BILLION.
INVESTMENT IN TAIWAN AND CHINA'S FUJIAN PROVINCE CONTINUES TO GROW. MOST OF HONG
KONG'S MANUFACTURING INVESTMENT HAS BEEN IN CHINA'S GUANGDONG PROVINCE, AND MORE
THAN 3 MILLION WORKERS ARE NOW EMPLOYED IN THE PROVINCE, WORKING FOR HONG KONG
COMPANIES.
LLOYD GEORGE MANAGEMENT ESTIMATES THAT 75 PERCENT OF ALL TRADE IN MOST OF THE
CHINA REGION TODAY GOES THROUGH FIRMS CONTROLLED BY THE OVERSEAS CHINESE.
1994 GROSS NATIONAL
SAVINGS AS A % OF
GROSS NATIONAL PRODUCT
(Horizontal Bar Chart)
47.5% Singapore
42.0% China
36.6% Indonesia
35.6% Korea
32.5% Hong Kong
31.7% Thailand
28.0% Taiwan
24.0% India
21.0% Philippines
12.0% United States
Source: Lloyd George Management Ltd.
THE CITIZENS OF THE CHINA REGION ARE PRODIGIOUS SAVERS - AND INVESTORS. IN 1994,
THE GROSS NATIONAL SAVINGS RATE (AS A PERCENTAGE OF GROSS NATIONAL PRODUCT) IN
SINGAPORE WAS A REMARKABLE 47.5 PERCENT, FOLLOWED CLOSELY BY 42 PERCENT IN
CHINA, 36.6 PERCENT IN INDONESIA, 35.6 PERCENT IN KOREA, 32.5 PERCENT IN HONG
KONG, 31.7 PERCENT IN THAILAND, 28 PERCENT IN TAIWAN, 24 PERCENT IN INDIA AND 21
PERCENT IN THE PHILIPPINES. BY COMPARISON, THE SAVINGS RATE IN THE UNITED
STATES, AS A PERCENTAGE OF GNP, FOR THE SAME PERIOD WAS ONLY 12 PERCENT.
With the overseas Chinese leading the way, foreign trade now accounts for more
than 15 percent of China's GNP. The establishment of "Special Economic Zones"
along China's south coast, which welcomed foreign firms and foreign capital, has
fostered the rapid development of China's export markets. Comments by paramount
leader Deng Xiaoping early in 1992, holding up the experience of the Special
Economic Zones as the model on which China should base its future, form a basis
for confidence in the sustainability and growth of economic reform throughout
China.
ECONOMIC PLANS NOW INCLUDE OBJECTIVES TO FURTHER INCREASE THE EXPORT ELEMENT OF
THE ECONOMY
Economic plans covering the last decade of the 20th century now include
objectives to quadruple the country's 1980 industrial and agricultural output by
the year 2000...to further increase the export element of the economy...and to
continue to open the country with further development of the designated special
investment areas.
Over the past 20 years, the performance of the China region stock markets has
generally been better than those in the United States and Europe. In the past
five years, these newly emerging securities markets have demonstrated
significant growth in market capitalization, in the numbers of listed securities
and the volume of transactions. In addition, with price-to-earnings ratios in
the mid-to lower teens, the stock markets of the China region currently offer
excellent value compared to other countries.
Two stock exchanges have recently opened in China - the Shenzhen and the
Shanghai. Class "A" and Class "B" shares are traded on both. While only resident
Chinese can purchase Class "A" shares, foreign investors (such as EV Classic
Greater China Growth Fund) can purchase Class "B" shares.
The Shenzhen Stock Exchange, established in April 1991, officially opened in
July 1991 with 6 listed companies. By December 1994, 114 stocks were traded, of
which 22 were "B" shares.*
The Shanghai Stock Exchange, established in November 1990, officially opened in
December 1990 with 8 listed companies. By December 1994, 171 stocks were traded,
of which 32 were "B" shares.*
* Source: Lloyd George Management Ltd.
<PAGE>
EV Classic
Greater China Growth Fund
THE FUND OFFERS INVESTORS
THE POTENTIAL TO BENEFIT FROM
CHINA'S GROWTH
The investment objective of EV Classic Greater China Growth Fund is long-term
capital appreciation.
The Fund offers investors the potential to benefit from the economic development
and growth of China. It invests in interests in the Greater China Growth
Portfolio. The Portfolio invests primarily in equities traded on the securities
markets in the China region, including the two stock exchanges in China itself.
The Portfolio may invest in the common and preferred stocks of companies that
provide goods or services to, or from within, the People's Republic of China
(China), or have manufacturing or other operations in China - and that are
normally listed on Southeast Asian stock exchanges or traded on their
over-the-counter markets.
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.
COMPARATIVE CHINA REGION
PRICE/EARNINGS RATIOS
Year end 1994
(Horizontal Bar Chart)
20.6 Thailand
21.7 Malaysia
22.2 Singapore
14.4 United States
25.8 Philippines
28.7 Taiwan
17.8 Indonesia
18.7 South Korea
11.0 Hong Kong
Source: Lloyd George Management Ltd.
MOST OF THE STOCK MARKETS OF THE CHINA REGION CURRENTLY OFFER EXCELLENT VALUES.
THE GROWTH OF THE CHINA
REGION'S EMERGING MARKETS
Percent change in market capitalization
1984 - 1994
(Horizontal Bar Chart)
Indonesia 79000
Philippines 19000
Korea 3200
Taiwan 2470
Hong Kong 1263
Singapore 1008
Malaysia 697
Thailand 167
Source: Lloyd George Management Ltd.
THE MAJOR ASIAN SECURITIES MARKETS HAVE GENERALLY OUTPERFORMED THOSE IN EUROPE
AND THE UNITED STATES OVER THE PAST 20 YEARS. IN THE PAST FIVE YEARS, THE CHINA
REGION'S NEWLY EMERGING MARKETS HAVE GROWN DRAMATICALLY IN MARKET
CAPITALIZATION, IN NUMBERS OF LISTED SECURITIES AND IN THE VOLUME OF
TRANSACTIONS.
<PAGE>
PORTFOLIO INVESTMENTS
INCLUDE COUNTRIES THROUGHOUT
THE CHINA REGION
The countries in which the Portfolio may invest include:
o China o Singapore
o Hong Kong o South Korea
o Indonesia o Taiwan
o Malaysia o Thailand
o Philippines
Any well-managed investment, be it a start-up portfolio or a billion-dollar
institutional account, requires in-depth knowledge of markets, products,
management styles and, to the extent possible, a keen sense of economic and
political trends - past, current and future.
But investing in emerging overseas markets calls for even more. And that is a
thorough understanding of the cultures, history and attitudes of the people and
countries in which assets will be placed.
While there is no shortage of expertise in the established markets of North
America, Japan and Europe, there are relatively few advisers dedicated to the
emerging markets of the China region.
<PAGE>
The Investment Adviser:
Lloyd George Management (Hong Kong) Limited
THE ADVISER, LLOYD GEORGE
MANAGEMENT, HAS EXTENSIVE, HANDS-
ON EXPERIENCE IN THE CHINA REGION
Lloyd George Management (Hong Kong) Limited, the Portfolio's investment adviser,
comprises a group of highly qualified and experienced investment professionals.
Individually and collectively, they have extensive hands-on experience in the
securities markets of the China region, including the management of several
regional mutual funds.
Based in Hong Kong, Lloyd George Management is ideally situated to monitor the
pulse of the China region, select the securities for the Portfolio and manage,
on a day-to-day basis, its assets.
EATON VANCE IS THE FUND'S
SPONSOR AND ADMINISTRATOR
The Fund's sponsor and administrator is Eaton Vance Management, a Boston-based
investment firm founded in 1924. Eaton Vance currently manages approximately $15
billion in assets for more than 140 mutual funds, whose investment objectives
range from tax free and taxable income to maximum capital appreciation, as well
as individual and institutional accounts for retirement plans, pension funds and
endowments.
No Initial Sales Charge
o Invest a minimum of $1,000. The minimum subsequent investment is only $50.
o All of your money goes to work for you immediately! (Please refer to a
prospectus for details of the Fund's CDSC and distribution plan.)
o You have access to your investment on any business day! (Shares redeemed may
be worth more or less than at time of purchase.)
o Dividends and capital gains distributions may be taken in cash, or reinvested
at net asset value in additional shares.
o Qualified plans, including Individual Retirement Accounts, are available.
o Free telephone exchange is available between a variety of Eaton Vance Funds.
Ask your financial adviser for details.
o Bank draft investing (minimum $50 per month or quarter) allows shareholders to
invest regularly.
Please see a prospectus for more information about any of these services.
For more complete information about EV Classic Greater China Growth Fund or any
other Eaton Vance fund, including distribution plans, charges and expenses,
please write or call your financial adviser for a prospectus. Read the
prospectus(es) carefully before you invest or send money.
[LOGO]
EATON VANCE DISTRIBUTORS, INC.
24 Federal Street
Boston, MA 02110
[LOGO]
LLOYD GEORGE MANAGEMENT
(HONG KONG) LIMITED
3808, One Exchange Square
Central, Hong Kong
30960 - 2/95 C - CGCB
<PAGE>
[LOGO]
EATON VANCE
Mutual Funds
EV CLASSIC GREATER CHINA
GROWTH FUND
- -------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
JANUARY 1, 1996
EV CLASSIC GREATER CHINA
GROWTH FUND
24 FEDERAL STREET
BOSTON, MA 02110
- -------------------------------------------------------------------------------
SPONSOR AND MANAGER OF EV CLASSIC GREATER CHINA GROWTH FUND
Administrator of Greater China Growth Portfolio, Eaton Vance Management,
24 Federal Street, Boston, MA 02110
ADVISER OF GREATER CHINA GROWTH PORTFOLIO
Lloyd George Investment Management (Bermuda) Limited, 3808 One Exchange Square,
Central, Hong Kong
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 89 South Street, Boston, MA 02111
TRANSFER AGENT
First Data Investor Services Group, BOS725, P.O,. Box 1559, Boston, MA 02104
(800) 262-1122
AUDITORS
Deloitte & Touche LLP, 125 Summer Street, Boston, MA 02110
C-CGSAI
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EV MARATHON GREATER CHINA GROWTH
FUND. The Fund currently seeks to achieve its investment objective by investing
its assets in the Greater China Growth Portfolio (the "Portfolio").
FEES AND EXPENSES
MANAGER
As of August 31, 1995, the Fund had net assets of $324,257,771. For the
fiscal year ended August 31, 1995, Eaton Vance earned management fees of
$876,239 (equivalent to 0.25% of the Fund's average daily net assets for such
year). For the fiscal year ended August 31, 1994, Eaton Vance earned management
fees of $698,780 (equivalent to 0.25% of the Fund's average daily net assets for
such year). For the period from the start of business, June 7, 1993, to the
fiscal year ended August 31, 1993, Eaton Vance earned management fees of $16,092
(equivalent to 0.25% (annualized) of the Fund's average daily net assets for
such period).
DISTRIBUTION PLAN
The Distribution Plan and Distribution Agreement remain in effect until
April 28, 1996 and may be continued as described under "Distribution Plan" in
this Part II. Pursuant to Rule 12b-1, the Plan has been approved by the Fund's
initial shareholder (Eaton Vance) and by the Board of Trustees of the Trust, as
required by Rule 12b-1. During the fiscal year ended August 31, 1995, the
Principal Underwriter paid sales commissions of $1,283,418 to Authorized Firms
on sales of Fund shares. During the same period, the Fund made sales commission
payments under the Plan to the Principal Underwriter aggregating $2,628,719,
which amount reduced Uncovered Distribution Charges. During such period,
contingent deferred sales charges aggregating approximately $2,374,000 were
imposed on early redeeming shareholders and paid to the Principal Underwriter to
reduce Uncovered Distribution Charges. As at August 31, 1995, the outstanding
Uncovered Distribution Charges of the Principal Underwriter calculated under the
Plan amounted to approximately $2,898,000 (which amount was equivalent to 0.9%
of the Fund's net assets on such date). For the fiscal year ended August 31,
1995, the Fund paid service fee payments under the Plan aggregating $367,677, of
which $365,114 was paid to Authorized Firms and the balance of which was
retained by the Principal Underwriter.
PRINCIPAL UNDERWRITER
For the fiscal year ended August 31, 1995, the Fund paid the Principal
Underwriter $10,720.00 for repurchase transactions handled by the Principal
Underwriter (being $2.50 for each such transaction).
<TABLE>
<CAPTION>
TRUSTEES
The fees and expenses of those Trustees of the Trust and of the Portfolio who are not members of the Eaton Vance organization
(the noninterested Trustees) are paid by the Fund (and the other series of the Trust) and the Portfolio, respectively. (The
Trustees of the Trust and of the Portfolio who are members of the Eaton Vance organization receive no compensation from the Fund
or the Portfolio.) During the fiscal year ended August 31, 1995, the noninterested Trustees of the Trust and the Portfolio earned
the following compensation in their capacities as Trustees from the Fund and the Portfolio, and, for the year ended September 30,
1995, earned the following compensation in their capacities as Trustees of the funds in the Eaton Vance fund complex<F1>:
AGGREGATE AGGREGATE TOTAL COMPENSATION
COMPENSATION COMPENSATION FROM TRUST AND
NAME FROM FUND FROM PORTFOLIO FUND COMPLEX
---- --------- -------------- ------------------
<S> <C> <C> <C>
Hon. Edward K.Y. Chen ......................... $ -- $15,000 $ 15,000
Donald R. Dwight .............................. 666 -- 135,000<F2>
Samuel L. Hayes, III .......................... 643 5,000 150,000<F3>
Stuart Hamilton Leckie ........................ -- 15,000 15,000
Norton H. Reamer .............................. 628 -- 135,000
John L. Thorndike ............................. 637 -- 140,000
Jack L. Treynor ............................... 686 -- 140,000
- ----------
<FN>
<F1>The Eaton Vance fund complex consists of 211 registered investment companies or series thereof.
<F2>Includes $35,000 of deferred compensation.
<F3>Includes $33,750 of deferred compensation.
</FN>
</TABLE>
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return on
a hypothetical investment of $1,000 in the Fund from October 28, 1992 through
August 31, 1995 and for the one-year period ended August 31, 1995. The total
return for the period prior to the Fund's commencement of operations on June 7,
1993 reflects the Portfolio's total return (or that of its predecessor) adjusted
to reflect any applicable Fund contingent deferred sales charge ("CDSC"). The
total return for such prior period has not been adjusted to reflect the Fund's
distribution fees and certain other expenses. If such an adjustment were made,
the performance would be lower.
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF INVEST- VALUE OF INVEST- TOTAL RETURN BEFORE TOTAL RETURN AFTER
MENT BEFORE DE- MENT AFTER DE- DEDUCTING THE CDSC DEDUCTING THE CDSC*
INVESTMENT INVESTMENT AMOUNT OF DUCTING CDSC DUCTING CDSC* ------------------------ -------------------------
PERIOD DATE INVESTMENT** ON 8/31/95 ON 8/31/95 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
------ ---------- ------------ --------------- ---------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Life of the
Fund 10/28/92 $1,000 $1,439.90 $1,399.90 43.99% 13.70% 39.99% 12.58%
1 Year Ended
8/31/95 8/31/94 $1,000 $ 909.41 $ 864.24 -9.06% -9.06% -13.58% -13.58%
Past performance is not indicative of future results. Investment return and principal value will fluctuate; shares, when
redeemed, may be worth more or less than their original cost.
- ----------
* No contingent deferred sales charge is imposed on certain redemptions. See the Fund's current Prospectus.
</TABLE>
PRINCIPAL UNDERWRITER
Under the Distribution Agreement the Principal Underwriter acts as principal
in selling shares of the Fund. The expenses of printing copies of prospectuses
used to offer shares to financial service firms or investors and other selling
literature and of advertising is borne by the Principal Underwriter. The fees
and expenses of qualifying and registering and maintaining qualifications and
registrations of the Fund and its shares under Federal and state securities laws
is borne by the Fund. In addition, the Fund makes payments to the Principal
Underwriter pursuant to its Distribution Plan as described in the Fund's current
prospectus; the provisions of the plan relating to such payments are included in
the Distribution Agreement. The Distribution Agreement is renewable annually by
the Trust's Board of Trustees (including a majority of its Trustees who are not
interested persons of the Trust and who have no direct or indirect financial
interest in the operation of the Fund's Distribution Plan or the Distribution
Agreement), may be terminated on sixty days' notice either by such Trustees or
by vote of a majority of the outstanding voting securities of the Fund or on six
months' notice by the Principal Underwriter and is automatically terminated upon
assignment. The Principal Underwriter distributes Fund shares on a "best
efforts" basis under which it is required to take and pay for only such shares
as may be sold. The Fund has authorized the Principal Underwriter to act as its
agent in repurchasing shares and will pay the Principal Underwriter $2.50 for
each repurchase transaction handled by the Principal Underwriter. The Principal
Underwriter estimates that the expenses incurred by it in acting as repurchase
agent for the Fund will exceed the amounts paid therefor by the Fund.
DISTRIBUTION PLAN
The Distribution Plan (the "Plan") is described in the prospectus and is
designed to meet the requirements of Rule 12b-1 under the 1940 Act and the sales
charge rule of the national Association of Securities Dealers, Inc. (the "NASD
Rule"). The purpose of the Plan is to compensate the Principal Underwriter for
its distribution services and facilities provided to the Fund by paying the
Principal Underwriter sales commissions and a separate distribution fee in
connection with sales of Fund shares. The following supplements the discussion
of the Plan contained in the Fund's Prospectus.
The amount payable by the Fund to the Principal Underwriter pursuant to the
Plan as sales commissions and distribution fees with respect to each day will be
accrued on such day as a liability of the Fund and will accordingly reduce the
Fund's net assets upon such accrual, all in accordance with generally accepted
accounting principles. The amount payable on each day is limited to 1/365 of
.75% of the Fund's net assets on such day. The level of the Fund's net assets
changes each day and depends upon the amount of sales and redemptions of Fund
shares, the changes in the value of the investments made by its corresponding
Portfolio, the expenses of the Fund and of its corresponding Portfolio accrued
and allocated to the Fund on such day, income on portfolio investments of its
corresponding Portfolio accrued and allocated to the Fund on such day, and any
dividends and distributions declared on Fund shares. The Fund does not accrue
possible future payments as a liability of the Fund or reduce the Fund's current
net assets in respect of unknown amounts which may become payable under the Plan
in the future because the standards for accrual of such a liability under
accounting principles have not been satisfied.
The Plan provides that the Fund will receive all contingent deferred sales
charges and will make no payments to the Principal Underwriter in respect of any
day on which there are no outstanding Uncovered Distribution Charges of the
Principal Underwriter. Contingent deferred sales charges and accrued amounts
will be paid by the Fund to the Principal Underwriter whenever there exist
Uncovered Distribution Charges under the Fund's Plan.
Periods with a high level of sales of Fund shares accompanied by a low level
of early redemptions of Fund shares resulting in the imposition of contingent
deferred sales charges will tend to increase the time during which there will
exist Uncovered Distribution Charges of the Principal Underwriter. Conversely,
periods with a low level of sales of Fund shares accompanied by a high level of
early redemptions of Fund shares resulting in the imposition of contingent
deferred sales charges will tend to reduce the time during which there will
exist Uncovered Distribution Charges of the Principal Underwriter.
In calculating daily the amount of Uncovered Distribution Charges,
distribution charges will include the aggregate amount of sales commissions and
distribution fees theretofore paid plus the aggregate amount of sales
commissions and distribution fees which the Principal Underwriter is entitled to
be paid under the Plan since its inception. Payments theretofore paid or payable
under the Plan by the Fund to the Principal Underwriter and contingent deferred
sales charges theretofore paid or payable to the Principal Underwriter less all
amounts theretofore paid or payable to the Principal Underwriter by the Adviser
in consideration of the former's distribution efforts, will be subtracted from
such distribution charges; if the result of such subtraction is positive, a
distribution fee (computed at 1% over the prime rate then reported in The Wall
Street Journal) will be computed on such amount and added thereto, with the
resulting sum constituting the amount of Uncovered Distribution Charges with
respect to such day. The amount of outstanding Uncovered Distribution Charges of
the Principal Underwriter calculated on any day does not constitute a liability
recorded on the financial statements of the Fund.
The amount of Uncovered Distribution Charges of the Principal Underwriter at
any particular time depends upon various changing factors, including the level
and timing of sales of Fund shares, the nature of such sales (i.e., whether they
result from exchange transactions, reinvestments or from cash sales through
Authorized Firms), the level and timing of redemptions of Fund shares upon which
a contingent deferred sales charge will be imposed, the level and timing of
redemptions of Fund shares upon which no contingent deferred sales charge will
be imposed (including redemptions involving exchanges of Fund shares for shares
of another fund in the Eaton Vance Marathon Group of Funds which result in a
reduction of Uncovered Distribution Charges), changes in the level of the net
assets of the Fund, and changes in the interest rate used in the calculation of
the distribution fee under the the Plan.
As currently implemented by the Trustees, the Fund's Plan authorizes
payments of sales commissions and distribution fees to the Principal Underwriter
and service fees to the Principal Underwriter and Authorized Firms which may be
equivalent, on an aggregate basis during any fiscal year of the Fund, to 1% of
the Fund's average daily net assets for such year. For the sales commission and
service fee payments made by the Fund and the outstanding Uncovered Distribution
Charges of the Principal Underwriter, see "Fees and Expenses -- Distribution
Plan" in this Part II. The Fund believes that the combined rate of all these
payments may be higher than the rate of payments made under distribution plans
adopted by other investment companies pursuant to Rule 12b-1. Although the
Principal Underwriter will use its own funds (which may be borrowed from banks)
to pay sales commissions at the time of sale, it is anticipated that the Eaton
Vance organization will profit by reason of the operation of the Plan through an
increase in the Fund's assets (thereby increasing the management fee payable to
Eaton Vance by the Fund and the administration fees payable to Eaton Vance by
the Portfolio) resulting from sale of Fund shares and through amounts paid to
the Principal Underwriter, including contingent deferred sales charges pursuant
to the Plan. The Eaton Vance organization may be considered to have realized a
profit under the Plan if at any point in time the aggregate amounts theretofore
received by the Principal Underwriter pursuant to the Plan and from contingent
deferred sales charges have exceeded the total expenses theretofore incurred by
such organization in distributing shares of the Fund. Total expenses for this
purpose will include an allocable portion of the overhead costs of such
organization and its branch offices, which costs will include without limitation
leasing expense, depreciation of building and equipment, utilities,
communication and postage expense, compensation and benefits of personnel,
travel and promotional expense, stationery and supplies, literature and sales
aids, interest expense, data processing fees, consulting and temporary help
costs, insurance, taxes other than income taxes, legal and auditing expense and
other miscellaneous overhead items. Overhead is calculated and allocated for
such purpose by the Eaton Vance organization in a manner deemed equitable to the
Fund.
The Plan provides that it shall continue in effect for so long as such
continuance is approved at least annually by the vote of both a majority of (i)
the Trustees of the Trust who are not interested persons of the Trust and who
have no direct or indirect financial interest in the operation of the Plan or
any agreements related to the Plan (the "Rule 12b-1 Trustees") and (ii) all of
the Trustees then in office, and the Distribution Agreement contains a similar
provision. The Plan and Distribution Agreement may be terminated at any time by
a vote of a majority of the Rule 12b-1 Trustees or by a vote of a majority of
the outstanding voting securities of the Fund. The provisions of the Plan
relating to payments of sales commissions and distribution fees to the Principal
Underwriter are also included in the Distribution Agreement between the Trust on
behalf of the Fund and the Principal Underwriter. Under the Plan the President
or a Vice President of the Trust shall provide to the Trustees for their review,
and the Trustees shall review at least quarterly, a written report of the amount
expended under the Plan and the purposes for which such expenditures were made.
The Plan may not be amended to increase materially the payments described
therein without approval of the shareholders of the Fund, and all material
amendments of the Plan must also be approved by the Trustees as required by Rule
12b-1. So long as the Plan is in effect, the selection and nomination of the
Trustees who are not interested persons of the Trust shall be committed to the
discretion of the Trustees who are not such interested persons.
The Trustees believe that the Plan will be a significant factor in the
expected growth of the Fund's assets, resulting in increased investment
flexibility and advantages which will benefit the Fund and its shareholders.
Payments for sales commissions and distribution fees made to the Principal
Underwriter under the Plan will compensate the Principal Underwriter for its
services and expenses in distributing shares of the Fund. Service fee payments
made to the Principal Underwriter and Authorized Firms under the Plan provide
incentives to provide continuing personal services to investors and the
maintenance of shareholder accounts. By providing incentives to the Principal
Underwriter and Authorized Firms, the Plan is expected to result in the
maintenance of, and possible future growth in, the assets of the Fund. Based on
the foregoing and other relevant factors, the Trustees have determined that in
their judgment there is a reasonable likelihood that the Plan will benefit the
Fund and its shareholders.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As at November 30, 1995, the Trustees and officers of the Trust, as a
group, owned in the aggregate less than 1% of the outstanding shares of the
Fund. As of November 30, 1995, Merrill Lynch, Pierce, Fenner & Smith, Inc.,
Jacksonville, FL was the record owner of approximately 34.3% of the outstanding
shares, which it held on behalf of its customers who are the beneficial owners
of such shares, and as to which they had voting power under certain limited
circumstances. To the knowledge of the Trust, no other person owned of record or
beneficially 5% or more of the Fund's outstanding shares as of such date.
<PAGE>
APPENDIX C
[LOGO]
AN
EATON VANCE
MARATHON
FUND
EV MARATHON
GREATER CHINA
GROWTH FUND
<PAGE>
INVESTING IN CHINA FOR
LONG-TERM CAPITAL APPRECIATION
The People's Republic of China ("China") and the surrounding countries of
the China region have recently become one of the most exciting and potentially
profitable areas for investors seeking capital appreciation. But capturing the
investment opportunity in China is challenging.
EV Marathon Greater China Growth Fund is a mutual fund that seeks capital
appreciation by investing in interests in a Portfolio of equity securities of
companies that, in the opinion of the Portfolio's investment adviser, will
benefit from the economic development and growth of China. The Fund offers
investors the advantages and convenience of an open-end mutual fund and the
benefits of an experienced, Hong Kong-based investment adviser with specialized
knowledge of the emerging East Asian markets.
Of course, while Eaton Vance believes that the opportunities for long-term
capital appreciation are excellent, investors should consider carefully the
risks involved in committing a portion of their assets to the Fund.
Such risks, for example, may include fluctuations in foreign exchange rates,
political or economic instability in the country in which the security's issuer
is located, and the possible imposition of exchange controls or other laws or
restrictions. In addition, foreign securities markets may be less liquid, more
volatile and subject to less government supervision than in the United States.
Further, there is no guarantee that the economy or stock market of China will
continue to grow as it has in the past, or that EVMarathon Greater China Growth
Fund will benefit from such growth. Share values will fluctuate and, when
redeemed, may be worth more or less than at the time of purchase.
CHINA IS NOW ONE OF THE WORLD'S
FASTEST GROWING ECONOMIES
In recent years, China has undergone remarkable change. China has embraced
economic reforms that have turned it into one of the world's most spectacularly
growing economies. Following strong growth in recent years, (Gross Domestic
Product (GDP) in 1995 is forecast to grow by more than 9 percent.) China's
leadership has officially declared this rapid growth as China's principal
political objective, until at least the turn of the century. China is also
influencing the growth rates of its neighbors: the average real (inflation
adjusted) GDP growth rate of the China region has been over 7.0 percent annually
for the past 6 years, compared with just 3 percent or less in Europe and the
United States.
Source: Lloyd George Management Ltd.
<PAGE>
GREATER CHINA AND
CHINA'S SPECIAL ECONOMIC ZONES
IN ORDER TO ATTRACT FOREIGN INVESTMENT, SINCE 1978 CHINA HAS DESIGNATED CERTAIN
AREAS OF THE COUNTRY WHERE OVERSEAS INVESTORS CAN RECEIVE SPECIAL INVESTMENT
INCENTIVES AND TAX CONCESSIONS. THERE ARE FIVE SPECIAL ECONOMIC ZONES (SHENZHEN,
SHANTOU AND ZHUHI IN GUANGDONG PROVINCE, XIAMEN IN FUJIAN PROVINCE AND HAINAN
ISLAND, WHICH ITSELF IS A PROVINCE).
IN ADDITION, 14 COASTAL CITIES HAVE BEEN DESIGNATED AS "OPEN CITIES" AND CERTAIN
OPEN ECONOMIC ZONES HAVE BEEN ESTABLISHED IN COASTAL AREAS. SHANGHAI HAS
ESTABLISHED THE PUDONG NEW AREA. TWENTY-SEVEN HIGH AND NEW TECHNOLOGY INDUSTRIAL
DEVELOPMENT ZONES HAVE BEEN APPROVED WHERE PREFERENTIAL TREATMENT IS GIVEN TO
ENTERPRISES WHICH ARE CONFIRMED AS TECHNOLOGY-RELATED.
<PAGE>
CHINA'S POTENTIAL
FOR GROWTH
With 1.2 billion people, China houses one quarter of the world's population.
China's population is young - an average 15 years younger than that of developed
Western countries, and its work force of approximately 600 million is five times
the size of the U.S. work force.
Source: Lloyd George Management Ltd.
DESPITE LOWER WAGES, CHINA'S SAVINGS RATE IS MORE THAN THREE TIMES THAT OF
THE UNITED STATES
The average monthly wage is between 200 and 300 renminbi, or approximately
$75 - $85. This compares to an average U.S. monthly wage of nearly $2,050.
China's savings rate of 42 percent of Gross National Product (GNP) is more than
three times that of the U.S. China's savings pool currently exceeds $250
billion, and savings rates throughout the China region are correspondingly high.
In 1994 the gross national savings rate (as a percentage of GNP) in Singapore
was a remarkable 47.5 percent, followed closely by 42 percent in China, 36.6
percent in Indonesia, 35.6 percent in Korea, 32.5 percent in Hong Kong, 31.7
percent in Thailand, 28 percent in Taiwan, 24 percent in India, and 21 percent
in the Philippines. By comparison, the savings rate in the United States was
only 12 percent for the same period.
Source: Lloyd George Management Ltd.
US VS. CHINA:
A FINANCIAL COMPARISON
The table below compares financial statistics and consumption of various
products in the U.S. and China (all figures are annual, per person, except where
otherwise noted).
UNITED
STATES CHINA
GROSS NATIONAL PRODUCT ($US) $21,665 $395
AVERAGE MONTHLY WAGE ($US) $1,919 $38
PRIMARY ENERGY (TONS OF OIL EQUIVALENT) 7.5 0.64
COPPER (POUNDS) 20.0 0.9
ALUMINUM (POUNDS) 40.7 1.5
RAW STEEL (POUNDS) 880.0 165.0
RICE (POUNDS) 15.5 775.0
MEAT (POUNDS) 245.0 50.0
SUGAR (POUNDS) 140.0 9.6
SOFT DRINKS (GALLONS) 96.0 1.0
TV SETS (PER 1,000 PEOPLE) 885.0 8.0
NEWSPRINT (POUNDS) 125.0 3.0
TELEPHONE LINES (PER 1,000 PEOPLE) 520.0 5.3
CARS (PER 1,000 PEOPLE) 525.0 1.4
REFRIGERATORS (PER 1,000 PEOPLE) 390.0 2.6
Source: Lloyd George Management Ltd.
<PAGE>
(Horizontal Bar Chart)
1994 AVERAGE FACTORY WAGES PER MONTH
$US
$3,574 Japan
$2,041 USA
$1,247 South Korea
$1,208 Taiwan
$1,191 Singapore
$1,140 Hong Kong
$ 346 Malaysia
$ 225 Spec. Economic Zones
$ 156 Thailand
$ 124 Philippines
$ 82 China
$ 66 Indonesia
Source: Lloyd George Management Ltd.
AT PRESENT, THERE IS AN ENORMOUS DISPARITY IN LABOR COSTS BETWEEN THE EMERGING
ASIAN COUNTRIES (CHINA, INDONESIA, THE PHILIPPINES, THAILAND AND MALAYSIA) AND
THOSE THAT ARE MORE INDUSTRIALIZED. OVER THE NEXT DECADE THERE IS STRONG REASON
TO BELIEVE THAT THE EMERGING COUNTRIES WILL START TO MOVE THEIR MANUFACTURING
FOCUS UPSCALE, SHIFTING FROM SUCH GOODS AS PLASTIC FLOWERS, TEXTILES AND TOYS,
TO COLOR TELEVISION SETS AND COMPUTERS, EMULATING THE LEAD OF SOUTH KOREA AND
TAIWAN.
WHAT ALL COUNTRIES OF THE REGION SHARE IS AN EQUITABLE WAGE STRUCTURE. UNLIKE
THE UNITED STATES, FOR EXAMPLE, WHERE A CHIEF EXECUTIVE OFFICER COULD EASILY
EARN 100 TIMES MORE THAN WHAT A PRODUCTION-LINE WORKER IN THE SAME COMPANY
MAKES, THE WAGE DIFFERENTIAL WITHIN THE CHINA REGION IS FAR SMALLER. IN SOUTH
KOREA, FOR EXAMPLE, THE DIFFERENCE BETWEEN THE TWO AT THE COUNTRY'S LARGEST
COMPANY IS ONLY NINE-FOLD.
(Horizontal Bar Chart)
AVERAGE GROWTH IN GROSS NATIONAL PRODUCT: 1989-1994
Percent
19.03% China/Spec. Economic Zones
9.25% Thailand
8.80% Malaysia
8.30% Singapore
7.21% South Korea
6.80% Indonesia
6.41% Taiwan
4.60% Hong Kong
2.60% Philippines
1.90% United States
Source: Lloyd George Management Ltd.
THE AVERAGE REAL (INFLATION-ADJUSTED) GROSS DOMESTIC PRODUCT GROWTH RATE IN ASIA
HAS BEEN 7.0 PERCENT ANNUALLY OVER THE PAST 6 YEARS COMPARED WITH 3 PERCENT OR
LESS IN EUROPE AND THE UNITED STATES. ALTHOUGH MUCH WILL DEPEND ON THE
PRESERVATION OF THE INTERNATIONAL FREE TRADE SYSTEM, INTER-REGIONAL GROWTH IN
ASIAN TRADE HAS BECOME A MAJOR FACTOR IN THE CONTINUING SUPERIOR PERFORMANCE OF
ASIAN COUNTRIES.
THE LINKS BETWEEN CHINA AND HONG KONG, BETWEEN CHINA AND TAIWAN AND BETWEEN
CHINA AND OTHER COUNTRIES WITHIN THE REGION, WHERE THERE IS A SIGNIFICANT
OVERSEAS CHINESE POPULATION, HAVE BY NOW BEEN STRENGTHENED TO A DEGREE WHICH
MAKES A REVERSAL UNLIKELY. MOREOVER, ALTHOUGH THESE LINKS HAVE BEEN DEVELOPED TO
A STAGE WHERE ECONOMIC COOPERATION IN TRADE OPERATES SMOOTHLY, THE FULL
POTENTIAL OF THE MARKET, BOTH IN TERMS OF DOMESTIC CONSUMPTION AND OF EXPORT
GROWTH, HAS HARDLY BEGUN TO BE REALIZED.
<PAGE>
Chinese society has been based on the tenets of Confucius, which advocate order,
respect, hierarchy, good manners and the sacrifice of the individual for the
greater good of the family and the community. Chinese culture has favored hard
work, achievement and thrift, which is reflected in China's high savings rate.
THE 'OVERSEAS' CHINESE ARE LEADING CHINA'S TRANSFORMATION FROM CENTRAL
PLANNING TOWARD A MARKET-DRIVEN ECONOMY
The "overseas" Chinese - those living outside China - are leading the
Chinese economic miracle by supplying capital and management expertise to
complement the low-cost labor and land resources of mainland China. Eaton Vance
Management estimates that 75 percent of all trade in most of the China region
today goes through firms controlled by overseas Chinese.
By far the largest part of foreign contracted investment, presently running at a
$68 billion annual rate, is coming from the overseas Chinese. It is this direct
foreign investment - with its technology, management skills and export potential
- - that is transforming China's economy, leading many observers to believe that
China will assume the leadership in Asia within the next 20 years.
With the overseas Chinese leading the way, foreign trade now accounts for more
than 15 percent of China's GNP. The establishment of "Special Economic Zones"
along China's south coast, which welcomed foreign firms and foreign capital, has
fostered the rapid development of China's export markets. Comments by paramount
leader Deng Xiaoping early in 1992, holding up the experience of the Special
Economic Zones as the model on which China should base its future, form a basis
for confidence in the sustainability and growth of economic reform throughout
China.
(Horizontal Line Chart)
CHINA'S EXPORTS ARE ON THE RISE
$U.S. billion
Exports Imports
1988 $ 44.6 $ 56.0
1989 $ 51.1 $ 59.0
1990 $ 61.9 $ 52.0
1991 $ 70.7 $ 62.5
1992 $ 84.9 $ 80.0
1993 $ 91.2 $104.7
1994E $111.2 $123.3
1995E $127.8 $137.9
Source: Lloyd George Management Ltd.
<PAGE>
(Horizontal Line Chart)
1994 GROSS NATIONAL SAVINGS AS A % OF
GROSS NATIONAL PRODUCT
47.5% Singapore
42.0% China
36.6% Indonesia
35.6% Korea
32.5% Hong Kong
31.7% Thailand
28.0% Taiwan
24.0% India
21.0% Philippines
12.0% United States
Source: Lloyd George Management Ltd.
THE CITIZENS OF THE CHINA REGION ARE PRODIGIOUS SAVERS - AND INVESTORS. IN 1994,
THE GROSS NATIONAL SAVINGS RATE (AS A PERCENTAGE OF GROSS NATIONAL PRODUCT) IN
SINGAPORE WAS A REMARKABLE 47.5 PERCENT, FOLLOWED CLOSELY BY 42 PERCENT IN
CHINA, 36.6 PERCENT IN INDONESIA, 35.6 PERCENT IN KOREA, 32.5 PERCENT IN HONG
KONG, 31.7 PERCENT IN THAILAND, 28 PERCENT IN TAIWAN, 24 PERCENT IN INDIA AND 21
PERCENT IN THE PHILIPPINES. BY COMPARISON, THE SAVINGS RATE IN THE UNITED
STATES, AS A PERCENTAGE OF GNP, FOR THE SAME PERIOD WAS ONLY 12 PERCENT.
(Horizontal Bar Chart)
FOREIGN INVESTMENT IS GROWING RAPIDLY
$U.S. billion
1994 $27.7
1993 $25.0
1992 $13.0
1991 $4.9
1990 $4.9
Source: Ministry of Foreign Economic Relations & Trade; State Statistical Bureau
of the People' Republic of China
ACTUAL FOREIGN INVESTMENT HAS GROWN TO $U.S. 27.7 BILLION IN 1994 FROM $U.S.
25.0 BILLION IN 1993 AND APPROXIMATELY $U.S. 13.0 BILLION IN 1992. FOREIGN
INVESTMENT IN 1991 AND 1990 WERE BELOW $U.S. 5.0 BILLION.
INVESTMENT IN TAIWAN AND CHINA'S FUJIAN PROVINCE CONTINUES TO GROW. MOST OF HONG
KONG'S MANUFACTURING INVESTMENT HAS BEEN IN CHINA'S GUANGDONG PROVINCE, AND MORE
THAN 3 MILLION WORKERS ARE NOW EMPLOYED IN THE PROVINCE, WORKING FOR HONG KONG
COMPANIES.
LLOYD GEORGE MANAGEMENT ESTIMATES THAT 75 PERCENT OF ALL TRADE IN MOST OF THE
CHINA REGION TODAY GOES THROUGH FIRMS CONTROLLED BY THE OVERSEAS CHINESE.
<PAGE>
ECONOMIC PLANS NOW INCLUDE OBJECTIVES TO FURTHER INCREASE THE EXPORT
ELEMENT OF THE ECONOMY
Economic plans covering the last decade of the 20th century now include
objectives to quadruple the country's 1980 industrial and agricultural output by
the year 2000...to further increase the export element of the economy...and to
continue to open the country with further development of the designated special
investment areas.
Over the past 20 years, the performance of the China region stock markets has
generally been better than those in the United States and Europe. In the past
five years, these newly emerging securities markets have demonstrated
significant growth in market capitalization, in the numbers of listed securities
and the volume of transactions. In addition, with reasonable price-to-earnings
ratios, the stock markets of the China region currently offer excellent value
compared to other countries.
Two stock exchanges have opened in China - the Shenzhen and the Shanghai. Class
"A" and Class "B" shares are traded on both. While only resident Chinese can
purchase Class "A" shares, foreign investors (such as EV Marathon Greater China
Growth Fund) can purchase Class "B" shares.
The Shenzhen Stock Exchange, established in April 1991, officially opened in
July 1991 with 6 listed companies. By December 1994, 114 stocks were traded, of
which 22 were "B" shares.*
The Shanghai Stock Exchange, established in November 1990, officially opened in
December 1990 with 8 listed companies. By December 1994, 171 stocks were traded,
of which 32 were "B"shares.*
* Source: Lloyd George Management Ltd.
(Horizontal Bar Chart)
Comparative China Region Price/Earnings Ratios
Year end 1994
20.6 Thailand
21.7 Malaysia
22.2 Singapore
14.4 United States
25.8 Philippines
28.7 Taiwan
17.8 Indonesia
18.7 South Korea
11.0 Hong Kong
Source: Lloyd George Management Ltd.
MOST OF THE STOCK MARKETS OF THE CHINA REGION CURRENTLY OFFER EXCELLENT VALUES.
<PAGE>
EV MARATHON
GREATER CHINA GROWTH FUND
THE FUND OFFERS INVESTORS
THE POTENTIAL TO BENEFIT
FROM CHINA'S GROWTH
The investment objective of EV Marathon Greater China Growth Fund is
long-term capital appreciation.
The Fund offers investors the potential to benefit from the economic development
and growth of China. It invests in interests in the Greater China Growth
Portfolio. The Portfolio invests primarily in equities traded on the securities
markets in the China region, including the two stock exchanges in China itself.
The Portfolio may invest in the common and preferred stocks of companies that
provide goods or services to, or from within, the People's Republic of China
(China), or have manufacturing or other operations in China - and that are
normally listed on Southeast Asian stock exchanges or traded on their
over-the-counter markets.
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.
(Horizontal Bar Chart)
THE GROWTH OF THE CHINA REGION'S EMERGING MARKETS
Percent change in market capitalization 1984-1994
Indonesia 79000
Philippines 19000
Korea 3200
Taiwan 2470
Hong Kong 1263
Singapore 1008
Malaysia 697
Thailand 167
Source: Lloyd George Management Ltd.
THE MAJOR ASIAN SECURITIES MARKETS HAVE GENERALLY OUTPERFORMED THOSE IN EUROPE
AND THE UNITED STATES OVER THE PAST 20 YEARS. IN THE PAST FIVE YEARS, THE CHINA
REGION'S NEWLY EMERGING MARKETS HAVE GROWN DRAMATICALLY IN MARKET
CAPITALIZATION, IN NUMBERS OF LISTED SECURITIES AND IN THE VOLUME OF
TRANSACTIONS.
<PAGE>
PORTFOLIO INVESTMENTS
INCLUDE COUNTRIES THROUGHOUT
THE CHINA REGION
The countries in which the Portfolio may
invest include:
o China o Singapore
o Hong Kong o South Korea
o Indonesia o Taiwan
o Malaysia o Thailand
o Philippines
Any well-managed investment, be it a start- up portfolio or a billion-dollar
institutional account, requires in-depth knowledge of markets, products,
management styles and, to the extent possible, a keen sense of economic and
political trends - past, current and future.
But investing in emerging overseas markets calls for even more. And that is a
thorough understanding of the cultures, history and attitudes of the people and
countries in which assets will be placed.
While there is no shortage of expertise in the established markets of North
America, Japan and Europe, there are relatively few advisers dedicated to the
emerging markets of the China region.
<PAGE>
THE INVESTMENT ADVISER:
LLOYD GEORGE MANAGEMENT (HONG KONG) LIMITED
THE ADVISER, LLOYD GEORGE MANAGEMENT, HAS EXTENSIVE, HANDS-ON EXPERIENCE
IN THE CHINA REGION
Lloyd George Management (Hong Kong) Limited, the Portfolio's investment
adviser, comprises a group of highly qualified and experienced investment
professionals. Individually and collectively, they have extensive hands-on
experience in the securities markets of the China region, including the
management of several regional mutual funds.
Based in Hong Kong, Lloyd George Management is ideally situated to monitor the
pulse of the China region, select the securities for the Portfolio and manage,
on a day-to-day basis, its assets.
EATON VANCE IS THE FUND'S
SPONSOR AND ADMINISTRATOR
The Fund's sponsor and administrator is Eaton Vance Management, a
Boston-based investment firm founded in 1924. Eaton Vance currently manages
approximately $15 billion in assets for more than 140 mutual funds, whose
investment objectives range from tax free and taxable income to maximum capital
appreciation, as well as individual and institutional accounts for retirement
plans, pension funds and endowments.
<PAGE>
THE FUND HAS
NO INITIAL SALES CHARGE
o Invest a minimum of $1,000. The minimum subsequent investment is only $50.
o Dividends and capital gains distributions may be taken in cash, or
reinvested at net asset value in additional shares.
o Qualified plans, including Individual Retirement Accounts, are available.
o Free telephone exchange is available between a variety of Eaton Vance
Funds. Ask your investment adviser for details.
o Bank draft investing (minimum $50 per month or quarter) allows
shareholders to invest regularly.
Please see a prospectus for more information about any of these services.
For more complete information about EV Marathon Greater China Growth Fund or any
other Eaton Vance fund, including distribution plans, charges and expenses,
please write or call your financial adviser for a prospectus. Read the
prospectus(es) carefully before you invest or send money.
[LOGO]
EATON VANCE DISTRIBUTORS, INC.
24 Federal Street
Boston, MA 02110
[DRAGON LOGO]
LLOYD GEORGE MANAGEMENT
(HONG KONG) LIMITED
3808, One Exchange Square
Central, Hong Kong
<PAGE>
Page 1 photo courtesy of the Peabody Museum of Salem, from a painting of
Hong Kong, circa 1855-1860, attributed to Sunqua. Photo by Mark Sexton.
M-CGCB
30962 - 3/95
<PAGE>
[LOGO]
EATON VANCE
Mutual Funds
EV MARATHON
GREATER CHINA
GROWTH FUND
STATEMENT OF ADDITIONAL INFORMATION
JANUARY 1, 1996
EV MARATHON GREATER
CHINA GROWTH FUND
24 FEDERAL STREET
BOSTON, MA 02110
- -------------------------------------------------------------------------------
SPONSOR AND MANAGER OF EV MARATHON GREATER CHINA GROWTH FUND
Administrator of Greater China Growth Portfolio, Eaton Vance Management,
24 Federal Street, Boston, MA 02110
ADVISER OF GREATER CHINA GROWTH PORTFOLIO
Lloyd George Investment Management (Bermuda) Limited, 3808 One Exchange Square,
Central, Hong Kong
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 89 South Street, Boston, MA 02111
TRANSFER AGENT
First Data Investor Services Group, BOS725, P.O,. Box 1559, Boston, MA 02104
(800) 262-1122
AUDITORS
Deloitte & Touche LLP, 125 Summer Street, Boston, MA 02110
M-CGSAI
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EV TRADITIONAL GREATER CHINA GROWTH
FUND. On December 17, 1993, the Fund changed its name from Eaton Vance Greater
China Growth Fund to EV Traditional Greater China Growth Fund. The Fund
currently seeks to achieve its investment objective by investing its assets in
the Greater China Growth Portfolio (the "Portfolio").
FEES AND EXPENSES
MANAGER
As of August 31, 1995, the Fund had net assets of $242,900,533. For the
fiscal year ended August 31, 1995, Eaton Vance earned management fees of
$674,475 (equivalent to 0.25% of the Fund's average daily net assets for such
year). For the fiscal year ended August 31, 1994, Eaton Vance earned management
fees of $674,153 (equivalent to 0.25% of the Fund's average daily net assets for
such year.) For the period from the Fund's start of business, October 28, 1992,
to the fiscal year ended August 31, 1993, Eaton Vance earned management fees of
$129,661 (equivalent to 0.25% (annualized) of the Fund's average daily net
assets for such period).
DISTRIBUTION PLAN
For the fiscal year ended August 31, 1995, the Fund paid distribution fees
under the Plan to the Principal Underwriter aggregating $858,668. For the fiscal
year ended August 31, 1995, the Fund made service fee payments under the Plan
aggregating $436,867, of which $413,935 was paid to Authorized Firms and the
balance of which was retained by the Principal Underwriter.
PRINCIPAL UNDERWRITER
For the fiscal year ended August 31, 1995, the Fund paid the Principal
Underwriter $10,970 for repurchase transactions handled by the Principal
Underwriter (being $2.50 for each such transaction).
The total sales charges for sales of shares of the Fund for the fiscal year
ended August 31, 1995 were $870,918, of which $139,175 was received by the
Principal Underwriter and $731,743 was received by Authorized Firms.
<TABLE>
<CAPTION>
TRUSTEES
The fees and expenses of those Trustees of the Trust and of the Portfolio who are not members of the Eaton Vance organization
(the noninterested Trustees) are paid by the Fund (and the other series of the Trust) and the Portfolio, respectively. (The
Trustees of the Trust and the Portfolio who are members of the Eaton Vance organization receive no compensation from the Fund or
the Portfolio.) During the fiscal year ended August 31, 1995, the noninterested Trustees of the Trust and the Portfolio earned the
following compensation in their capacities as Trustees from the Fund and the Portfolio, and, for the year ended September 30,
1995, earned the following compensation in their capacities as Trustees of the funds in the Eaton Vance fund comple<F1>:
AGGREGATE AGGREGATE TOTAL COMPENSATION
COMPENSATION COMPENSATION FROM TRUST AND
NAME FROM FUND FROM PORTFOLIO FUND COMPLEX
---- --------- -------------- ------------------
<S> <C> <C> <C>
Hon. Edward K.Y. Chen ......................... $ -- $15,000 $ 15,000
Donald R. Dwight .............................. 666 -- 135,000<F2>
Samuel L. Hayes, III .......................... 643 5,000 150,000<F3>
Stuart Hamilton Leckie ........................ -- 15,000 15,000
Norton H. Reamer .............................. 628 -- 135,000
John L. Thorndike ............................. 636 -- 140,000
Jack L. Treynor ............................... 686 -- 140,000
- ----------
<FN>
<F1>The Eaton Vance fund complex consists of 211 registered investment companies or series thereof.
<F2>Includes $35,000 of deferred compensation.
<F3>Includes $3,750 of deferred compensation.
</FN>
</TABLE>
PERFORMANCE INFORMATION
The table below indicates the total return (capital changes plus
reinvestment of all distributions) on a hypothetical investment of $1,000 in the
Fund covering the life of the Fund from October 28, 1992 through August 31, 1995
and for the one-year period ended August 31, 1995.
<TABLE>
<CAPTION>
VALUE OF $1,000 INVESTMENT
TOTAL RETURN TOTAL RETURN
VALUE OF EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
INVESTMENT INVESTMENT AMOUNT OF INVESTMENT --------------------------------------------------------
PERIOD DATE INVESTMENT** ON 8/31/95 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
------ ------ ------- ------ --------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of the Fund* 10/28/92 $952.38 $1,368.23 43.67% 13.61% 38.82% 11.67%
1 Year Ended
8/31/95 8/31/94 $952.70 $868.67 -8.82 -8.82 -13.14% -13.14%
Past performance is not indicative of future results. Investment return and principal value will fluctuate; shares,
when redeemed, may be worth more or less than their original cost.
- ------------
*Investment operations began on October 28, 1992.
**Investment less the current maximum sales charge of 4.75%.
</TABLE>
SERVICES FOR ACCUMULATION
The following services are voluntary, involve no extra charge, other than
the sales charge included in the offering price, and may be changed or
discontinued without penalty at any time.
INTENDED QUANTITY INVESTMENT -- STATEMENT OF INTENTION. If it is anticipated
that $100,000 or more of Fund shares and shares of the other continuously
offered open-end funds listed under "The Eaton Vance Exchange Privilege" in the
current Prospectus of the Fund will be purchased within a 13-month period, a
Statement of Intention should be signed so that shares may be obtained at the
same reduced sales charge as though the total quantity were invested in one lump
sum. Shares held under Right of Accumulation (see below) as of the date of the
Statement will be included toward the completion of the Statement. The Statement
authorizes the Transfer Agent to hold in escrow sufficient shares (5% of the
dollar amount specified in the Statement) which can be redeemed to make up any
difference in sales charge on the amount intended to be invested and the amount
actually invested. Execution of a Statement does not obligate the shareholder to
purchase or the Fund to sell the full amount indicated in the Statement, and
should the amount actually purchased during the 13-month period be more or less
than that indicated on the Statement, price adjustments will be made. For sales
charges and other information on quantity purchases, see "How to Buy Fund
Shares" in the Fund's current Prospectus. Any investor considering signing a
Statement of Intention should read it carefully.
RIGHT OF ACCUMULATION -- CUMULATIVE QUANTITY DISCOUNT. The applicable sales
charge level for the purchase of Fund shares is calculated by taking the dollar
amount of the current purchase and adding it to the value (calculated at the
maximum current offering price) of the shares the shareholder owns in his or her
account(s) in the Fund and in the other continuously offered open-end funds
listed under "The Eaton Vance Exchange Privilege" in the current Prospectus of
the Fund for which Eaton Vance acts as investment adviser or administrator at
the time of purchase. The sales charge on the shares being purchased will then
be at the rate applicable to the aggregate. For example, if the shareholder
owned shares valued at $80,000 in the Fund, and purchased an additional $20,000
of Fund shares, the sales charge for the $20,000 purchase would be at the rate
of 3.75% of the offering price (3.90% of the net amount invested) which is the
rate applicable to single transactions of $100,000. For sales charges on
quantity purchases, see "How to Buy Fund Shares" in the Fund's current
Prospectus. Shares purchased (i) by an individual, his or her spouse and their
children under the age of twenty-one, and (ii) by a trustee, guardian or other
fiduciary of a single trust estate or a single fiduciary account, will be
combined for the purpose of determining whether a purchase will qualify for the
Right of Accumulation and if qualifying, the applicable sales charge level.
For any such discount to be made available, at the time of purchase a
purchaser or his or her financial service firm ("Authorized Firm") must provide
Eaton Vance Distributors, Inc. (the "Principal Underwriter") (in the case of a
purchase made through an Authorized Firm) or the Transfer Agent (in the case of
an investment made by mail) with sufficient information to permit verification
that the purchase order qualifies for the accumulation privilege. Confirmation
of the order is subject to such verification. The Right of Accumulation
privilege may be amended or terminated at any time as to purchases occurring
thereafter.
PRINCIPAL UNDERWRITER
Shares of the Fund may be continuously purchased at the public offering
price through Authorized Firms which have agreements with the Principal
Underwriter. The Principal Underwriter is a wholly-owned subsidiary of Eaton
Vance.
The public offering price is the net asset value next computed after receipt
of the order, plus, where applicable, a variable percentage (sales charge)
depending upon the amount of purchase as indicated by the sales charge table set
forth in the Fund's current Prospectus (see "How to Buy Fund Shares"). Such
table is applicable to purchases of the Fund alone or in combination with
purchases of the other funds offered by the Principal Underwriter, made at a
single time by (i) an individual, or an individual, his spouse and their
children under the age of twenty-one, purchasing shares for his or their own
account, and (ii) a trustee or other fiduciary purchasing shares for a single
trust estate or a single fiduciary account.
The table is also presently applicable to (1) purchases of Fund shares,
alone or in combination with purchases of any of the other funds offered by the
Principal Underwriter through one dealer aggregating $100,000 or more made by
any of the persons enumerated above within a thirteen-month period starting with
the first purchase pursuant to a written Statement of Intention, in the form
provided by the Principal Underwriter, which includes provisions for a price
adjustment depending upon the amount actually purchased within such period (a
purchase not made pursuant to such Statement may be included thereunder if the
Statement is filed within 90 days of such purchase); or (2) purchases of the
Fund pursuant to the Right of Accumulation and declared as such at the time of
purchase.
Subject to the applicable provisions of the 1940 Act, the Fund may issue
shares at net asset value in the event that an investment company (whether a
regulated or private investment company or a personal holding company) is merged
or consolidated with or acquired by the Fund. Normally no sales charges will be
paid in connection with an exchange of Fund shares for the assets of such
investment company. Shares may be sold at net asset value to any officer,
director, trustee, general partner or employee of the Fund, the Portfolio or any
investment company for which Eaton Vance or BMR acts as investment adviser, any
investment advisory, agency, custodial or trust account managed or administered
by Eaton Vance or by any parent, subsidiary or other affiliate of Eaton Vance,
or any officer, director, trustee or employee of any parent, subsidiary or other
affiliate of Eaton Vance. The terms "officer," "director," "trustee," "general
partner" or "employee" as used in this paragraph include any such person's
spouse and minor children, and also retired officers, directors, trustees,
general partners and employees and their spouses and minor children. Shares may
also be sold at net asset value to registered representatives and employees of
certain investment dealers and to such person's spouses and children under the
age of 21 and their beneficial accounts.
The Trust reserves the right to suspend or limit the offering of shares of
the Fund to the public at any time.
The Principal Underwriter acts as principal in selling shares of the Fund
under the Distribution Agreement with the Trust on behalf of the Fund. The
Distribution Agreement is renewable annually by the Board of Trustees of the
Trust (including a majority of its Trustees who are not interested persons of
the Principal Underwriter or the Trust), may be terminated on six months' notice
by either party, and is automatically terminated upon assignment. The Principal
Underwriter distributes Fund shares on a "best efforts" basis under which it is
required to take and pay for only such shares as may be sold. The Principal
Underwriter allows Authorized Firms discounts from the applicable public
offering price which are alike for all Authorized Firms. See "How to Buy Shares"
in the Fund's current Prospectus for the discount allowed to Authorized Firms on
the sale of Fund shares. The Principal Underwriter may allow, upon notice to all
Authorized Firms, with whom it has agreements, discounts up to the full sales
charge during the periods specified in the notice. During periods when the
discount includes the full sales charge, such Authorized Firms may be deemed to
be underwriters as that term is defined in the Securities Act of 1933.
The Fund has authorized the Principal Underwriter to act as its agent in
repurchasing shares and will pay the Principal Underwriter $2.50 for each
repurchase transaction handled by the Principal Underwriter. The Principal
Underwriter estimates that the expenses incurred by it in acting as repurchase
agent for the Fund will exceed the amounts paid therefor by the Fund.
DISTRIBUTION PLAN
As described in the Prospectus, in addition to the fees and expenses
described herein, the Fund finances distribution activities and bears expenses
associated with the distribution of its shares and the provision of certain
personal and account maintenance services to shareholders pursuant to a
distribution plan designed to meet the requirements of Rule 12b-1 under the 1940
Act (the "Plan").
Pursuant to such Rule, the Plan has been approved by the sole initial
shareholder of the Fund and by the Board of Trustees of the Trust (including a
majority of those Trustees who are not interested persons of the Trust and who
have no direct or indirect financial interest in the operation of the Plan).
Under the Plan, the President or a Vice President of the Trust shall provide to
the Trustees for their review, and the Trustees shall review at least quarterly,
a written report of the amount expended under the Plan and the purposes for
which such expenditures were made. The Plan remains in effect through April 28,
1996 and from year to year thereafter, provided such continuance is approved
annually by a vote of the Board of Trustees and by a majority of those Trustees
who are not interested persons of the Trust and who have no direct or indirect
financial interest in the operation of the Plan. The Plan may not be amended to
increase materially the payments described therein without approval of the
shareholders of the Fund, and all material amendments of the Plan must also be
approved by the Trustees in the manner described above. The Plan may be
terminated at any time by vote of a majority of the Trustees who are not
interested persons of the Trust and who have no direct or indirect financial
interest in the operation of the Plan or by a vote of a majority of the
outstanding voting securities of the Fund. If the Plan is terminated or not
continued in effect, the Fund has no obligation to reimburse the Principal
Underwriter for amounts expended by the Principal Underwriter in distributing
shares of the Fund. So long as the Plan is in effect, the selection and
nomination of Trustees who are not interested persons of the Trust shall be
committed to the discretion of the Trustees who are not such interested persons.
The Trustees have determined that in their judgment there is a reasonable
likelihood that the Plan will benefit the Fund and its shareholders.
The Plan is intended to compensate the Principal Underwriter for its
distribution services to the Fund by paying the Principal Underwriter monthly
distribution fees in connection with the sale of shares of the Fund. The
quarterly service fee paid by the Fund under the Plan is intended to compensate
the Principal Underwriter for its personal and account maintenance services and
for the payment by the Principal Underwriter of service fees to Authorized
Firms.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As at November 30, 1995, the Trustees and officers of the Trust, as a
group, owned in the aggregate less than 1% of the outstanding shares of the
Fund. As of November 30, 1995, Merrill Lynch, Pierce, Fenner & Smith, Inc.,
Jacksonville, FL was the record owner of approximately 34.5% of the outstanding
shares, which it held on behalf of its customers who are the beneficial owners
of such shares, and as to which they had voting power under certain limited
circumstances. To the knowledge of the Trust, no other person owned of record or
beneficially 5% or more of the Fund's outstanding shares as of such date.
<PAGE>
APPENDIX C
EV
Traditional
Greater AN
China EATON
Growth VANCE
Fund TRADITIONAL
FUND
<PAGE>
Investing in China
For Long-Term Capital Appreciation
The People's Republic of China ("China") and the surrounding countries of the
China region have recently become one of the most exciting and potentially
profitable areas for investors seeking capital appreciation. But capturing the
investment opportunity in China is challenging.
EV Traditional Greater China Growth Fund is a mutual fund that seeks capital
appreciation by investing in interests in a Portfolio of equity securities of
companies that, in the opinion of the Portfolio's investment adviser, will
benefit from the economic development and growth of China. The Fund offers
investors the advantages and convenience of an open-end mutual fund and the
benefits of an experienced, Hong Kong-based investment adviser with specialized
knowledge of the emerging East Asian markets.
Of course, while Eaton Vance believes that the opportunities for long-term
capital appreciation are excellent, investors should consider carefully the
risks involved in committing a portion of their assets to the Fund.
Such risks, for example, may include fluctuations in foreign exchange rates,
political or economic instability in the country in which the security's issuer
is located, and the possible imposition of exchange controls or other laws or
restrictions. In addition, foreign securities markets may be less liquid, more
volatile and subject to less government supervision than in the United States.
Further, there is no guarantee that the economy or stock market of China will
continue to grow as they have in the past, or that EV Traditional Greater China
Growth Fund will benefit from such growth. Share values will fluctuate and, when
redeemed, may be worth more or less than at the time of purchase.
CHINA IS NOW ONE OF THE WORLD'S FASTEST GROWING ECONOMIES
In recent years, China has undergone remarkable change. China has embraced
economic reforms that have turned it into one of the world's most spectacularly
growing economies. Following strong growth in recent years, Gross Domestic
Product (GDP) in 1995 is forecast to grow by more than 9 percent. China's
leadership has officially declared this rapid growth as China's principal
political objective, until at least the turn of the century. China is also
influencing the growth rates of its neighbors: the average real (inflation
adjusted) GDP growth rate of the China region has been over 7.0 percent annually
for the past 6 years, compared with just 3 percent or less in Europe and the
United States.
Source: Lloyd George Management Ltd.
<PAGE>
Greater China And
China's Special Economic Zones
IN ORDER TO ATTRACT FOREIGN INVESTMENT, SINCE 1978 CHINA HAS DESIGNATED CERTAIN
AREAS OF THE COUNTRY WHERE OVERSEAS INVESTORS CAN RECEIVE SPECIAL INVESTMENT
INCENTIVES AND TAX CONCESSIONS. THERE ARE FIVE SPECIAL ECONOMIC ZONES (SHENZHEN,
SHANTOU AND ZHUHAI IN GUANGDONG PROVINCE, XIAMEN IN FUJIAN PROVINCE AND HAINAN
ISLAND, WHICH ITSELF IS A PROVINCE).
IN ADDITION, 14 COASTAL CITIES HAVE BEEN DESIGNATED AS "OPEN CITIES" AND CERTAIN
OPEN ECONOMIC ZONES HAVE BEEN ESTABLISHED IN COASTAL AREAS. SHANGHAI HAS
ESTABLISHED THE PUDONG NEW AREA. TWENTY-SEVEN HIGH AND NEW TECHNOLOGY INDUSTRIAL
DEVELOPMENT ZONES HAVE BEEN APPROVED WHERE PREFERENTIAL TREATMENT IS GIVEN TO
ENTERPRISES WHICH ARE CONFIRMED AS TECHNOLOGY-RELATED.
<PAGE>
China's Potential
For Growth
With 1.2 billion people, China houses one quarter of the world's population.
China's population is young - an average 15 years younger than that of developed
Western countries, and its work force of approximately 600 million is five times
the size of the U.S. work force.
Source: Lloyd George Management Ltd.
DESPITE LOWER WAGES, CHINA'S SAVINGS RATE IS MORE THAN TWICE THAT OF THE UNITED
STATES
The average monthly wage is between 200 and 300 renminbi, or approximately $75 -
$85. This compares to an average U.S. monthly wage of nearly $2,050. China's
savings rate of 42 percent of Gross National Product (GNP) is more than three
times that of the U.S. China's savings pool currently exceeds $250 billion, and
savings rates throughout the China region are correspondingly high. In 1994 the
gross national savings rate (as a percentage of GNP) in Singapore was a
remarkable 47.5 percent, followed closely by 42 percent in China, 36.6 percent
in Indonesia, 35.6 percent in Korea, 32.5 percent in Hong Kong, 31.7 percent in
Thailand, 28 percent in Taiwan, 24 percent in India, and 21 percent in the
Philippines. By comparison, the savings rate in the United States was only 12
percent for the same period.
Source: Lloyd George Management Ltd.
US VS. CHINA:
A FINANCIAL COMPARISON
The table below compares financial statistics and consumption of various
products in the U.S. and China (all figures are annual, per person, except where
otherwise noted).
UNITED
STATES CHINA
GROSS NATIONAL PRODUCT ($US) $21,665 $395
AVERAGE MONTHLY WAGE ($US) $1,919 $38
PRIMARY ENERGY (TONS OF OIL EQUIVALENT) 7.5 0.64
COPPER (POUNDS) 20.0 0.9
ALUMINUM (POUNDS) 40.7 1.5
RAW STEEL (POUNDS) 880.0 165.0
RICE (POUNDS) 15.5 775.0
MEAT (POUNDS) 245.0 50.0
SUGAR (POUNDS) 140.0 9.6
SOFT DRINKS (GALLONS) 96.0 1.0
TV SETS (PER 1,000 PEOPLE) 885.0 8.0
NEWSPRINT (POUNDS) 125.0 3.0
TELEPHONE LINES (PER 1,000 PEOPLE) 520.0 5.3
CARS (PER 1,000 PEOPLE) 525.0 1.4
REFRIGERATORS (PER 1,000 PEOPLE) 390.0 2.6
Source: Lloyd George Management Ltd.
<PAGE>
(Horizontal Bar Chart)
1994 AVERAGE FACTORY WAGES PER MONTH
$U.S.
$3,574 Japan
$2,041 USA
$1,247 South Korea
$1,208 Taiwan
$1,191 Singapore
$1,140 Hong Kong
$ 346 Malaysia
$ 225 Spec. Economic Zones
$ 156 Thailand
$ 124 Philippines
$ 82 China
$ 66 Indonesia
Source: Lloyd George Management Ltd.
AT PRESENT, THERE IS AN ENORMOUS DISPARITY IN LABOR COSTS BETWEEN THE EMERGING
ASIAN COUNTRIES (CHINA, INDONESIA, THE PHILIPPINES, THAILAND AND MALAYSIA) AND
THOSE THAT ARE MORE INDUSTRIALIZED. OVER THE NEXT DECADE THERE IS STRONG REASON
TO BELIEVE THAT THE EMERGING COUNTRIES WILL START TO MOVE THEIR MANUFACTURING
FOCUS UPSCALE, SHIFTING FROM SUCH GOODS AS PLASTIC FLOWERS, TEXTILES AND TOYS,
TO COLOR TELEVISION SETS AND COMPUTERS, EMULATING THE LEAD OF SOUTH KOREA AND
TAIWAN.
WHAT ALL COUNTRIES OF THE REGION SHARE IS AN EQUITABLE WAGE STRUCTURE. UNLIKE
THE UNITED STATES, FOR EXAMPLE, WHERE A CHIEF EXECUTIVE OFFICER COULD EASILY
EARN 100 TIMES MORE THAN WHAT A PRODUCTION-LINE WORKER IN THE SAME COMPANY
MAKES, THE WAGE DIFFERENTIAL WITHIN THE CHINA REGION IS FAR SMALLER. IN SOUTH
KOREA, FOR EXAMPLE, THE DIFFERENCE BETWEEN THE TWO AT THE COUNTRY'S LARGEST
COMPANY IS ONLY NINE-FOLD.
(Horizontal Bar Chart)
AVERAGE GROWTH IN GROSS NATIONAL PRODUCT: 1989-1994
Percent
19.03% China/Spec. Economic Zones
9.25% Thailand
8.80% Malaysia
8.30% Singapore
7.21% South Korea
6.80% Indonesia
6.41% Taiwan
4.60% Hong Kong
2.60% Philippines
1.90% United States
Source: Lloyd George Management Ltd.
THE AVERAGE REAL (INFLATION-ADJUSTED) GROSS DOMESTIC PRODUCT GROWTH RATE IN ASIA
HAS BEEN 7.0 PERCENT ANNUALLY OVER THE PAST 6 YEARS COMPARED WITH 3 PERCENT OR
LESS IN EUROPE AND THE UNITED STATES. ALTHOUGH MUCH WILL DEPEND ON THE
PRESERVATION OF THE INTERNATIONAL FREE TRADE SYSTEM, INTER-REGIONAL GROWTH IN
ASIAN TRADE HAS BECOME A MAJOR FACTOR IN THE CONTINUING SUPERIOR PERFORMANCE OF
ASIAN COUNTRIES.
THE LINKS BETWEEN CHINA AND HONG KONG, BETWEEN CHINA AND TAIWAN AND BETWEEN
CHINA AND OTHER COUNTRIES WITHIN THE REGION, WHERE THERE IS A SIGNIFICANT
OVERSEAS CHINESE POPULATION, HAVE BY NOW BEEN STRENGTHENED TO A DEGREE WHICH
MAKES A REVERSAL UNLIKELY. MOREOVER, ALTHOUGH THESE LINKS HAVE BEEN DEVELOPED TO
A STAGE WHERE ECONOMIC COOPERATION IN TRADE OPERATES SMOOTHLY, THE FULL
POTENTIAL OF THE MARKET, BOTH IN TERMS OF DOMESTIC CONSUMPTION AND OF EXPORT
GROWTH, HAS HARDLY BEGUN TO BE REALIZED.
<PAGE>
Chinese society has been based on the tenets of Confucius, which advocate order,
respect, hierarchy, good manners and the sacrifice of the individual for the
greater good of the family and the community. Chinese culture has favored hard
work, achievement and thrift, which is reflected in China's high savings rate.
THE `OVERSEAS' CHINESE ARE LEADING CHINA'S TRANSFORMATION FROM CENTRAL PLANNING
TOWARD A MARKET-DRIVEN ECONOMY
The "overseas" Chinese - those living outside China - are leading China's
transformation from central planning toward a market-driven economy by supplying
capital and management expertise to complement the low-cost labor and land
resources of mainland China. Eaton Vance Management estimates that 75 percent of
all trade in most of the China region today goes through firms controlled by
overseas Chinese. By far the largest part of foreign contracted investment,
presently running at a $68 billion annual rate, is coming from the overseas
Chinese. It is this direct foreign investment - with its technology, management
skills and export potential - that is transforming China's economy, leading many
observers to believe that China will assume the leadership in Asia within the
next 20 years. With the overseas Chinese leading the way, foreign trade now
accounts for more than 15 percent of China's GNP. The establishment of "Special
Economic Zones" along China's south coast, which welcomed foreign firms and
foreign capital, has fostered the rapid development of China's export markets.
Comments by paramount leader Deng Xiaoping early in 1992, holding up the
experience of the Special Economic Zones as the model on which China should base
its future, form a basis for confidence in the sustainability and growth of
economic reform throughout China.
ECONOMIC PLANS NOW INCLUDE OBJECTIVES TO FURTHER INCREASE THE EXPORT ELEMENT OF
THE ECONOMY
Economic plans covering the last decade of the 20th century now include
objectives to quadruple the country's 1980 industrial and agricultural output by
the year 2000...to further increase the export element of the economy...and to
continue to open the country with further development of the designated special
investment areas.
(Horizontal Line Chart)
CHINA'S EXPORTS ARE ON THE RISE
$U.S. billion
Exports Imports
1988 $ 44.6 $ 56.0
1989 $ 51.1 $ 59.0
1990 $ 61.9 $ 52.0
1991 $ 70.7 $ 62.5
1992 $ 84.9 $ 80.0
1993 $ 91.2 $104.7
1994E $111.2 $123.3
1995E $127.8 $137.9
Source: Lloyd George Management Ltd.
<PAGE>
(Horizontal Bar Chart)
1994 GROSS NATIONAL SAVINGS AS A % OF
GROSS NATIONAL PRODUCT
47.5% Singapore
42.0% China
36.6% Indonesia
35.6% Korea
32.5% Hong Kong
31.7% Thailand
28.0% Taiwan
24.0% India
21.0% Philippines
12.0% United States
Source: Lloyd George Management Ltd.
THE CITIZENS OF THE CHINA REGION ARE PRODIGIOUS SAVERS - AND INVESTORS. IN 1994,
THE GROSS NATIONAL SAVINGS RATE (AS A PERCENTAGE OF GROSS NATIONAL PRODUCT) IN
SINGAPORE WAS A REMARKABLE 47.5 PERCENT, FOLLOWED CLOSELY BY 42 PERCENT IN
CHINA, 36.6 PERCENT IN INDONESIA, 35.6 PERCENT IN KOREA, 32.5 PERCENT IN HONG
KONG, 31.7 PERCENT IN THAILAND, 28 PERCENT IN TAIWAN, 24 PERCENT IN INDIA AND 21
PERCENT IN THE PHILIPPINES. BY COMPARISON, THE SAVINGS RATE IN THE UNITED
STATES, AS A PERCENTAGE OF GNP, FOR THE SAME PERIOD WAS ONLY 12 PERCENT.
(Horizontal Bar Chart)
FOREIGN INVESTMENT IS GROWING RAPIDLY
$U.S. billion
1994 $27.7
1993 $25.0
1992 $13.0
1991 $ 4.9
1990 $ 4.9
Source: Ministry of Foreign Economic Relations & Trade; State Statistical Bureau
of the People's Republic of China
ACTUAL FOREIGN INVESTMENT HAS GROWN TO $U.S. 27.7 BILLION IN 1994 FROM $U.S.
25.0 BILLION IN 1993 AND APPROXIMATELY $U.S. 13.0 BILLION IN 1992. FOREIGN
INVESTMENT IN 1991 AND 1990 WERE BELOW $U.S. 5.0 BILLION.
INVESTMENT IN TAIWAN AND CHINA'S FUJIAN PROVINCE CONTINUES TO GROW. MOST OF HONG
KONG'S MANUFACTURING INVESTMENT HAS BEEN IN CHINA'S GUANGDONG PROVINCE, AND MORE
THAN 3 MILLION WORKERS ARE NOW EMPLOYED IN THE PROVINCE, WORKING FOR HONG KONG
COMPANIES.
LLOYD GEORGE MANAGEMENT ESTIMATES THAT 75 PERCENT OF ALL TRADE IN MOST OF THE
CHINA REGION TODAY GOES THROUGH FIRMS CONTROLLED BY THE OVERSEAS CHINESE.
<PAGE>
Over the past 20 years, the performance of the China region stock markets has
generally been better than those in the United States and Europe. In the past
five years, these newly emerging securities markets have demonstrated
significant growth in market capitalization, in the numbers of listed securities
and the volume of transactions. In addition, with reasonable price-to-earnings
ratios, the stock markets of the China region currently offer excellent value
compared to other countries.
Two stock exchanges have opened in China - the Shenzhen and the Shanghai. Class
"A" and Class "B" shares are traded on both. While only resident Chinese can
purchase Class "A" shares, foreign investors (such as EV Traditional Greater
China Growth Fund) can purchase Class "B" shares.
The Shenzhen Stock Exchange, established in April 1991, officially opened in
July 1991 with 6 listed companies. By December 1994, 114 stocks were traded, of
which 22 were "B" shares.*
The Shanghai Stock Exchange, established in November 1990, officially opened in
December 1990 with 8 listed companies. By December 1994, 171 stocks were traded,
of which 32 were "B" shares.*
* Source: Lloyd George Management Ltd.
(Horizontal Bar Chart)
COMPARATIVE CHINA REGION PRICE/EARNINGS RATIOS
Year end 1994
20.6 Thailand
21.7 Malaysia
22.2 Singapore
14.4 United States
25.8 Philippines
28.7 Taiwan
17.8 Indonesia
18.7 South Korea
11.0 Hong Kong
Source: Lloyd George Management Ltd.
MOST OF THE STOCK MARKETS OF THE CHINA REGION CURRENTLY OFFER EXCELLENT VALUES.
<PAGE>
EV Traditional
Greater China Growth Fund
THE FUND OFFERS INVESTORS
THE POTENTIAL TO BENEFIT
FROM CHINA'S GROWTH
The investment objective of EV Traditional Greater China Growth Fund is
long-term capital appreciation.
The Fund offers investors the potential to benefit from the economic development
and growth of China. It invests in interests in the Greater China Growth
Portfolio. The Portfolio invests primarily in equities traded on the securities
markets in the China region, including the two stock exchanges in China itself.
The Portfolio may invest in the common and preferred stocks of companies that
provide goods or services to, or from within, the People's Republic of China
(China), or have manufacturing or other operations in China - and that are
normally listed on Southeast Asian stock exchanges or traded on their
over-the-counter markets.
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.
PORTFOLIO INVESTMENTS
INCLUDE COUNTRIES THROUGHOUT
THE CHINA REGION
The countries in which the Portfolio may invest include:
o China o Singapore
o Hong Kong o South Korea
o Indonesia o Taiwan
o Malaysia o Thailand
o Philippines
<PAGE>
Any well-managed investment, be it a start-up portfolio or a billion-dollar
institutional account, requires in-depth knowledge of markets, products,
management styles and, to the extent possible, a keen sense of economic and
political trends - past, current and future.
But investing in emerging overseas markets calls for even more. And that is a
thorough understanding of the cultures, history and attitudes of the people and
countries in which assets will be placed.
While there is no shortage of expertise in the established markets of North
America, Japan and Europe, there are relatively few advisers dedicated to the
emerging markets of the China region.
(Horizontal Bar Chart)
THE GROWTH OF THE CHINA REGION'S EMERGING MARKETS
Percent change in market capitalization 1984-1994
Indonesia 79000
Philippines 19000
Korea 3200
Taiwan 2470
Hong Kong 1263
Singapore 1008
Malaysia 697
Thailand 167
Source: Lloyd George Management Ltd.
THE MAJOR ASIAN SECURITIES MARKETS HAVE GENERALLY OUTPERFORMED THOSE IN EUROPE
AND THE UNITED STATES OVER THE PAST 20 YEARS. IN THE PAST FIVE YEARS, THE CHINA
REGION'S NEWLY EMERGING MARKETS HAVE GROWN DRAMATICALLY IN MARKET
CAPITALIZATION, IN NUMBERS OF LISTED SECURITIES AND IN THE VOLUME OF
TRANSACTIONS.
<PAGE>
The Investment Adviser:
Lloyd George Management (Hong Kong) Limited
THE ADVISER, LLOYD GEORGE MANAGEMENT, HAS EXTENSIVE, HANDS-ON EXPERIENCE IN THE
CHINA REGION
Lloyd George Management (Hong Kong) Limited, the Portfolio's investment adviser,
comprises a group of highly qualified and experienced investment professionals.
Individually and collectively, they have extensive hands-on experience in the
securities markets of the China region, including the management of several
regional mutual funds.
Based in Hong Kong, Lloyd George Management is ideally situated to monitor the
pulse of the China region, select the securities for the Portfolio and manage,
on a day-to-day basis, its assets.
EATON VANCE IS THE FUND'S
SPONSOR AND ADMINISTRATOR
The Fund's sponsor and administrator is Eaton Vance Management, a Boston-based
investment firm founded in 1924. Eaton Vance currently manages approximately $15
billion in assets for more than 140 mutual funds, whose investment objectives
range from tax free and taxable income to maximum capital appreciation, as well
as individual and institutional accounts for retirement plans, pension funds and
endowments.
<PAGE>
Shareholder
Privileges
o Invest a minimum of $1,000. The minimum subsequent investment is only $50.
o Dividends and capital gains distributions may be taken in cash, or reinvested
at net asset value in additional shares.
o Reduced sales charges are available, through a Letter of Intention or Right
of Accumulation.
o No sales charges are applied to investments of $1 million or more. Please see
a prospectus for details of the Fund's contingent deferred sales charge,
applied to early withdrawals on these accounts.
o Qualified plans, including 401(k) and Individual Retirement Accounts are
available.
o Free telephone exchange is available between a variety of Eaton Vance Funds.
Ask your investment adviser for details.
o Bank draft investing (minimum $50 per month or quarter) allows shareholders
to invest regularly.
o Withdrawal plans (minimum account $5,000) allow shareholders to make regular,
automatic redemptions from their accounts.
Please see a prospectus for more information about any of these services.
For more complete information about EV Traditional Greater China Growth Fund or
any other Eaton Vance fund, including distribution plans, charges and expenses,
please write or call your financial adviser for a prospectus. Read the
prospectus(es) carefully before you invest or send money.
[LOGO]
EATON VANCE DISTRIBUTORS, INC.
24 Federal Street
Boston, MA 02110
[DRAGON LOGO]
LLOYD GEORGE MANAGEMENT
(HONG KONG) LIMITED
3808, One Exchange Square
Central, Hong Kong
<PAGE>
Cover photo courtesy of the Peabody Museum of Salem, from a painting of Hong
Kong, circa 1855-1860, attributed to Sunqua. Photo by Mark Sexton.
30888 - 3/95 T - CGCB
<PAGE>
[LOGO]
EATON VANCE
Mutual Funds
EV TRADITIONAL
GREATER CHINA
GROWTH FUND
STATEMENT OF ADDITIONAL INFORMATION
JANUARY 1, 1996
EV TRADITIONAL GREATER
CHINA GROWTH FUND
24 FEDERAL STREET
BOSTON, MA 02110
- -------------------------------------------------------------------------------
SPONSOR AND MANAGER OF EV TRADITIONAL GREATER CHINA GROWTH FUND
Administrator of Greater China Growth Portfolio, Eaton Vance Management,
24 Federal Street, Boston, MA 02110
ADVISER OF GREATER CHINA GROWTH PORTFOLIO
Lloyd George Investment Management (Bermuda) Limited, 3808 One Exchange Square,
Central, Hong Kong
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 89 South Street, Boston, MA 02111
TRANSFER AGENT
First Data Investor Services Group, BOS725, P.O,. Box 1559, Boston, MA 02104
(800) 262-1122
AUDITORS
Deloitte & Touche LLP, 125 Summer Street, Boston, MA 02110
T-CGSAI
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL INFORMATION
January 1, 1996
EV CLASSIC GROWTH FUND
24 Federal Street
Boston, Massachusetts 02110
(800) 225-6265
This Statement of Additional Information consists of two parts. Part I
provides information about EV Classic Growth Fund (the "Fund") and certain
other series of Eaton Vance Growth Trust (the "Trust"). As described in the
Prospectus, the Fund invests its assets in a separate registered investment
company (the "Portfolio") with the same investment objective and policies as
the Fund. The Fund's Part II (the "Part II") provides information solely about
the Fund. Where appropriate Part I includes cross-references to the relevant
sections of Part II.
- -------------------------------------------------------------------------------
TABLE OF CONTENTS
PART I
Investment Objective, Policies and Restrictions .................... 1
Trustees and Officers .............................................. 4
Investment Adviser and Administrator ............................... 6
Custodian .......................................................... 8
Service for Withdrawal ............................................. 8
Determination of Net Asset Value ................................... 8
Investment Performance ............................................. 9
Taxes .............................................................. 10
Portfolio Security Transactions .................................... 12
Other Information .................................................. 13
Independent Accountants ............................................ 14
Financial Statements ............................................... 15
PART II
Fees and Expenses ................................................... a-1
Principal Underwriter ............................................... a-2
Distribution Plan ................................................... a-2
Performance Information ............................................. a-4
Control Persons and Principal Holders of Securities ................. a-5
- -------------------------------------------------------------------------------
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY THE CURRENT PROSPECTUS OF EV CLASSIC GROWTH FUND DATED JANUARY
1, 1996, AS SUPPLEMENTED FROM TIME TO TIME. THIS STATEMENT OF ADDITIONAL
INFORMATION SHOULD BE READ IN CONJUNCTION WITH SUCH PROSPECTUS, A COPY OF
WHICH MAY BE OBTAINED WITHOUT CHARGE BY CONTACTING EATON VANCE DISTRIBUTORS,
INC. (THE "PRINCIPAL UNDERWRITER") (SEE BACK COVER FOR ADDRESS AND PHONE
NUMBER).
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL INFORMATION
January 1, 1996
EV MARATHON GROWTH FUND
24 Federal Street
Boston, Massachusetts 02110
(800) 225-6265
This Statement of Additional Information consists of two parts. Part I
provides information about EV Marathon Growth Fund (the "Fund") and certain
other series of Eaton Vance Growth Trust (the "Trust"). As described in the
Prospectus, the Fund invests its assets in a separate registered investment
company (the "Portfolio") with the same investment objective and policies, as
the Fund. The Fund's Part II (the "Part II") provides information solely about
the Fund. Where appropriate Part I includes cross-references to the relevant
sections of Part II.
- -------------------------------------------------------------------------------
TABLE OF CONTENTS
PART I
Investment Objective, Policies and Restrictions ..................... 1
Trustees and Officers ............................................... 4
Investment Adviser and Administrator ................................ 6
Custodian ........................................................... 8
Service for Withdrawal .............................................. 8
Determination of Net Asset Value .................................... 8
Investment Performance .............................................. 9
Taxes ............................................................... 10
Portfolio Security Transactions ..................................... 12
Other Information ................................................... 13
Independent Accountants ............................................. 14
Financial Statements ................................................ 15
PART II
Fees and Expenses ................................................... a-1
Principal Underwriter ............................................... a-2
Distribution Plan ................................................... a-2
Performance Information ............................................. a-4
Control Persons and Principal Holders of Securities ................. a-5
- -------------------------------------------------------------------------------
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY THE CURRENT PROSPECTUS OF EV MARATHON GROWTH FUND DATED JANUARY
1, 1996, AS SUPPLEMENTED FROM TIME TO TIME. THIS STATEMENT OF ADDITIONAL
INFORMATION SHOULD BE READ IN CONJUNCTION WITH SUCH PROSPECTUS, A COPY OF
WHICH MAY BE OBTAINED WITHOUT CHARGE BY CONTACTING EATON VANCE DISTRIBUTORS,
INC. (THE "PRINCIPAL UNDERWRITER") (SEE BACK COVER FOR ADDRESS AND PHONE
NUMBER).
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL INFORMATION
January 1, 1996
EV TRADITIONAL GROWTH FUND
24 Federal Street
Boston, Massachusetts 02110
(800) 225-6265
This Statement of Additional Information consists of two parts. Part I
contains information that relates generally to EV Traditional Growth Fund (the
"Fund") and certain other series of Eaton Vance Growth Trust (the "Trust"). As
described in the Prospectus, the Fund invests its assets in a separate
registered investment company (the "Portfolio") with the same investment
objective and policies as the Fund. The Fund's Part II (the "Part II")
contains information that relates specifically to the Fund. Where appropriate
Part I includes cross-references to the relevant sections of Part II.
- -------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
PART I
Investment Objective, Policies and Restrictions ..................... 1
Trustees and Officers ............................................... 4
Investment Adviser and Administrator ................................ 6
Custodian ........................................................... 8
Service for Withdrawal .............................................. 8
Determination of Net Asset Value .................................... 8
Investment Performance .............................................. 9
Taxes ............................................................... 10
Portfolio Security Transactions ..................................... 12
Other Information ................................................... 13
Independent Accountants ............................................. 14
Financial Statements ................................................ 15
PART II
Fees and Expenses ................................................... a-1
Performance Information ............................................. a-2
Services for Accumulation ........................................... a-2
Principal Underwriter ............................................... a-3
Service Plan ........................................................ a-4
Control Persons and Principal Holders of Securities ................. a-5
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY THE CURRENT PROSPECTUS OF EV TRADITIONAL GROWTH FUND DATED
JANUARY 1, 1996, AS SUPPLEMENTED FROM TIME TO TIME. THIS STATEMENT OF
ADDITIONAL INFORMATION SHOULD BE READ IN CONJUNCTION WITH SUCH PROSPECTUS, A
COPY OF WHICH MAY BE OBTAINED WITHOUT CHARGE BY CONTACTING EATON VANCE
DISTRIBUTORS, INC. (THE "PRINCIPAL UNDERWRITER") (SEE BACK COVER FOR ADDRESS
AND PHONE NUMBER).
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART I
The following provides information about the Fund, certain other series of
the Trust and the Portfolio. Capitalized terms used in this Statement of
Additional Information and not otherwise defined have the meanings given them
in the Fund's Prospectus. The Fund is subject to the same investment policies
as those of the Portfolio. The Fund currently seeks to achieve its objective
by investing in the Portfolio.
INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS
The investment objective of the Fund is to achieve capital growth. The
Fund currently seeks to achieve its investment objective by investing its
assets in the Portfolio, which invests in a carefully selected and
continuously managed portfolio consisting primarily of equity securities.
The Portfolio's investment policy is flexible, and the Portfolio may
invest in all kinds of domestic and foreign companies in seeking to achieve
its objective of capital growth. Income is subordinate to growth; however, the
Portfolio will earn dividend or interest income to the extent that it receives
dividends or interest from its investments. As in any investment which
fluctuates in value, the management of the Portfolio cannot, of course, assure
the achievement of this objective or eliminate risk. It is believed, however,
that through broad and selective diversification and through informed and
discriminating investment supervision, the risks of investing will be reduced
and the shareholder's opportunities for a rewarding participation in the
capital growth sought by the Portfolio will be enhanced.
The Portfolio will invest primarily in common stocks or securities
convertible into common stocks (including convertible debt). The Portfolio may
also invest in other securities and obligations of all kinds, including
preferred stocks, warrants, rights, bonds, repurchase agreements, money market
instruments and other evidences of indebtedness. The Portfolio's holdings of
debt securities, preferred stocks, short-term obligations or cash would
normally be employed to provide a reserve for future equity purchases or when
the adviser believes a more defensive investment posture is warranted.
It is the policy of the Portfolio to diversify its investments among
industries and accordingly no investment shall be made which will cause
investments in any one industry to exceed 25% of the Portfolio's assets (at
market).
While it is not the policy of the Portfolio to trade actively in
securities for quick profits, the management will dispose of securities
without regard to the time they have been held if such action seems advisable,
subject to satisfaction of certain tax requirements.
FOREIGN SECURITIES. 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 United States securities laws. 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 Portfolio, political or financial instability or diplomatic and other
developments which could affect such investments. Furthermore, economies of
particular countries or areas of the world may differ favorably or unfavorably
from the economy of the United States. It is anticipated that in most cases
the best available market for foreign securities will be on exchanges or in
over-the-counter markets located outside of the United States. Foreign stock
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
addition, foreign brokerage commissions are generally higher than commissions
on securities traded in the United States and may be non-negotiable. In
general, there is less overall governmental supervision and regulation of
foreign securities markets, broker-dealers, and issuers than in the United
States.
Since investments in companies whose principal business activities are
located outside of the United States will frequently involve currencies of
foreign countries, and since assets of the Portfolio may temporarily be held
in bank deposits in foreign currencies during the completion of investment
programs, the value of the assets of the Portfolio as measured in U.S. dollars
may be affected favorably or unfavorably by changes in foreign currency
exchange rates and exchange control regulations. The Portfolio may conduct its
foreign currency exchange transactions on a spot (i.e., cash) basis at the
spot rate prevailing in the foreign currency exchange market or through
entering into contracts to purchase or sell foreign currencies at a future
date (i.e., a "forward foreign currency exchange" contract or "forward"
contract). It may convert currency on a spot basis from time to time, and
investors should be aware of the costs of currency conversion. Although
foreign exchange dealers do not charge a fee for conversion, they do realize a
profit based on the difference (the "spread") between the prices at which they
are buying and selling various currencies. Thus, a dealer may offer to sell a
foreign currency to the Portfolio at one rate, while offering a lesser rate of
exchange should the Portfolio desire to resell that currency to the dealer.
Forward contracts are traded in the interbank market conducted directly
between currency traders (usually large commercial banks) and their customers.
A forward contract generally has no deposit requirement, and no commissions
are charged at any stage for trades. When the Portfolio enters into a contract
for the purchase or sale of a security denominated in a foreign currency, it
may desire to "lock in" the U.S. dollar price of the security. By entering
into a forward contract for the purchase or sale, for a fixed amount of U.S.
dollars, of the amount of foreign currency involved in the underlying security
transaction, the Portfolio will be able to protect itself against a possible
loss resulting from an adverse change in the relationship between the U.S.
dollar and the subject foreign currency during the period between the date the
security is purchased or sold and the date on which payment is made or
received. Although a forward contract will minimize the risk of loss due to a
decline in the value of the hedged currency, it also limits any potential gain
which might result should the value of such currency increase.
STOCK INDEX FUTURES. Entering into a derivative instrument involves a risk
that the applicable market will move against the Portfolio's position and that
the Portfolio will incur a loss. This loss may exceed the amount of the
initial investment made or the premium received by the Portfolio. Derivative
instruments may sometimes increase or leverage the Portfolio's exposure to a
particular market risk. Leverage enhances the Portfolio's exposure to the
price volatility of derivative instruments it holds. The Portfolio's success
in using derivative instruments to hedge portfolio assets depends on the
degree of price correlation between the derivative instruments and the hedged
asset. Imperfect correlation may be caused by several factors, including
temporary price disparities among the trading markets for the derivative
instrument, the assets underlying the derivative instrument and the
Portfolio's assets. During periods of market volatility, a commodity exchange
may suspend or limit trading in an exchange-traded derivative instrument,
which may make the contract temporarily illiquid and difficult to price.
Commodity exchanges may also establish daily limits on the amount that the
price of a futures contract or futures can vary from the previous day's
settlement price. Once the daily limit is reached, no trades may be made that
day at a price beyond the limit. This may prevent the Portfolio from closing
out positions and limiting its losses. Certain provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), limit the extent to which the
Portfolio may purchase and sell derivative instruments. The Portfolio will
engage in transactions in futures contracts and related options only to the
extent such transactions are consistent with the requirements of the Code for
maintaining the qualification of the Fund as a regulated investment company
("RIC") for federal income tax purposes.
Transactions using futures contracts and options thereon (other than
options that the Portfolio has purchased) expose the Portfolio to an
obligation to another party. The Portfolio will not enter into any such
transactions unless it owns either (1) an offsetting ("covered") position in
securities or futures contracts, or (2) cash, receivables and short-term debt
securities with a value sufficient at all times to cover its potential
obligations not covered as provided in (1) above. The Portfolio will comply
with Securities and Exchange Commission guidelines regarding cover for these
instruments and, if the guidelines so require, set aside cash, U.S. Government
securities or other liquid, high-grade debt securities in a segregated account
with its custodian in the prescribed amount.
Assets used as cover or held in a segregated account cannot be sold while
the position in the corresponding futures contract or option is open, unless
they are replaced with other appropriate assets. As a result, the commitment
of a large portion of the Portfolio's assets to cover or segregated accounts
could impede portfolio management or the Portfolio's ability to meet
redemption requests or other current obligations.
The Portfolio may enter into futures contracts, and options on futures
contracts, traded on an exchange regulated by the Commodities Futures Trading
Commission ("CFTC") and on foreign exchanges, but, with respect to foreign
exchange-traded futures contracts and options on such futures contracts, only
if the Investment Adviser determined that trading on each such foreign
exchange does not subject the Portfolio to risks, including credit and
liquidity risks, that are materially greater then the risks associated with
trading on CFTC-regulated exchanges.
REPURCHASE AGREEMENTS. The Portfolio may purchase U.S. Government securities
and concurrently enter into repurchase agreements with the seller under which
the seller agrees to repurchase such securities at the Portfolio's cost plus
interest within a specified time (normally one day). While repurchase
agreements involve certain risks not associated with direct investments in
U.S. Government securities, the Portfolio follows procedures designed to
minimize such risks. These procedures include effecting repurchase
transactions only with large, well-capitalized banks. In addition, the
Portfolio's repurchase agreements will provide that the value of the
collateral underlying the repurchase agreement will always be at least equal
to the repurchase price, including any accrued interest earned on the
repurchase agreement. In the event of a default or bankruptcy by a selling
bank, the Portfolio will seek to liquidate such collateral. However, the
exercise of the Portfolio's right to liquidate such collateral could involve
certain costs or delays and, to the extent that proceeds from any sale upon a
default of the obligation to repurchase are less than the repurchase price,
the Portfolio could suffer a loss.
INVESTMENT RESTRICTIONS. The following investment restrictions have been
adopted by the Fund and may be changed only by the vote of a majority of the
Fund's outstanding voting securities as defined in the Investment Company Act
of 1940 (the "1940 Act").
As a matter of fundamental investment policy, the Fund may not:
(1) With respect to 75% of the total assets of the Fund, purchase the
securities of any issuer if such purchase at the time thereof would cause more
than 5% of its total assets (taken at market value) to be invested in the
securities of such issuer, or purchase securities of any issuer if such
purchase at the time thereof would cause more than 10% of the total voting
securities of such issuer to be held by the Fund, except obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities and
except securities of other investment companies;
(2) Borrow money or issue senior securities except as permitted by the
Investment Company Act of 1940;
(3) Purchase securities on margin (but the Fund may obtain such short-term
credits as may be necessary for the clearance of purchase and sales of
securities);
(4) Underwrite or participate in the marketing of securities of others;
(5) Make an investment in any one industry if such investment would cause
investments in such industry to exceed 25% of the Fund's total assets, at
market value at the time of such investment (other than securities issued or
guaranteed by the U.S. Government or its agencies or instrumentalities);
(6) Purchase or sell real estate, although it may purchase and sell securities
which are secured by real estate and securities of companies which invest or
deal in real estate;
(7) Purchase or sell commodities or commodity contracts for the purchase or
sale of physical commodities; or
(8) Make loans to any person except by (a) the acquisition of debt securities
and making portfolio investments (b) entering into repurchase agreements or
(c) lending portfolio securities.
Notwithstanding the investment policies and restrictions of the Fund, the
Fund may invest its assets in an open-end management investment company with
substantially the same investment objective, policies and restrictions as the
Fund.
The Fund will not issue bonds, debentures or senior equity securities, and
this policy will not be changed unless authorized by a vote of the
shareholders of the Fund.
The Portfolio has adopted substantially the same fundamental investment
restrictions as the foregoing numbered investment restrictions adopted by the
Fund; such restrictions cannot be changed without the approval of a "majority
of the outstanding voting securities" of the Portfolio, which as used in this
Statement of Additional Information means the lesser of (a) 67% of the
outstanding voting securities of the Portfolio present or represented by proxy
at a meeting if the holders of more than 50% of the outstanding voting
securities of the Portfolio are present or represented at the meeting or (b)
more than 50% of the outstanding voting securities of the Portfolio. The term
"voting securities" as used in this paragraph has the same meaning as in the
1940 Act. Whenever the Trust is requested to vote on a change in the
investment restrictions of the Portfolio, the Trust will hold a meeting of
Fund shareholders and will cast its vote as instructed by the shareholders.
The Fund and the Portfolio have adopted the following investment policies
which may be changed by the Trust with respect to the Fund without approval by
the Fund's shareholders or by the Portfolio with respect to the Portfolio
without approval by the Fund or its other investors. As a matter of
nonfundamental policy, the Fund and the Portfolio will not: (a) purchase
securities of companies which, including predecessors, have not been in
continuous operation for at least three years, except that 5% of its total
assets (taken at market value) may be invested in such companies and exempted
from this restriction are U.S. Government securities, securities of issuers
which are rated by at least one nationally recognized rating organization,
municipal obligations and obligations issued or guaranteed by any foreign
government or its agencies or instrumentalities; (b) purchase or retain in its
portfolio any securities issued by an issuer any of whose officers, directors,
trustees or security holders is an officer or trustee of the Trust or the
Portfolio or is a member, officer, director or trustee of any investment
adviser of the Trust or the Portfolio, if after the purchase of the securities
of such issuer by the Fund or the Portfolio one or more of such persons owns
beneficially more than 1/2 of 1% of the shares or securities or both (all
taken at market value) of such issuer and such persons owning more than 1/2
of 1% of such shares or securities together own beneficially more than 5% of
such shares or securities or both (all taken at market value); (c) sell or
contract to sell any security which it does not own unless by virtue of its
ownership of other securities it has at the time of sale a right to obtain
securities equivalent in kind and amount to the securities sold and provided
that if such right is conditional the sale is made upon the same conditions;
or (d) invest more than 15% of net assets in investments which are not readily
marketable, including restricted securities and repurchase agreements maturing
in more than seven days. Restricted securities for the purposes of this
limitation do not include securities eligible for resale pursuant to Rule 144A
of the Securities Act of 1933 and commercial paper issued pursuant to Section
4(2) of said Act that the Board of Trustees of the Trust or the Portfolio, or
their delegate, determines to be liquid.
In order to permit the sale of shares of the Fund in certain states, the
Fund may make commitments more restrictive than the policies described above.
Should the Fund determine that any such commitment is no longer in the best
interests of the Fund and its shareholders, it will revoke the commitment by
terminating sales of its shares in the state(s) involved.
TRUSTEES AND OFFICERS
The Trustees and officers of the Trust and the Portfolio are listed below.
Except as indicated, each individual has held the office shown or other
offices in the same company for the last five years. Unless otherwise noted,
the business address of each Trustee and officer is 24 Federal Street, Boston,
Massachusetts 02110, which is also the address of the Fund's investment
adviser, Boston Management and Research ("BMR" or the "Investment Adviser"), a
wholly-owned subsidiary of Eaton Vance Management ("Eaton Vance"); of Eaton
Vance's parent, Eaton Vance Corp. ("EVC"); and of BMR's and Eaton Vance's
trustee, Eaton Vance, Inc. ("EV"). Eaton Vance and EV are both wholly-owned
subsidiaries of EVC. Those Trustees who are "interested persons" of the Trust,
the Portfolio, BMR, Eaton Vance, EVC or EV as defined in the 1940 Act by
virtue of their affiliation with any one or more of the Trust, the Portfolio,
BMR, Eaton Vance, EVC or EV, are indicated by an asterisk (*).
TRUSTEES OF THE TRUST AND THE PORTFOLIO
JAMES B. HAWKES (54), President and Trustee*
Executive Vice President of BMR, Eaton Vance, EVC and EV, and a Director of
EVC and EV. Director or Trustee and officer of various investment companies
managed by Eaton Vance or BMR.
DONALD R. DWIGHT (64), Trustee
President of Dwight Partners, Inc. (a corporate relations and communications
company) founded in 1988; Chairman of the Board of Newspapers of New
England, Inc. since 1983. Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: Clover Mill Lane, Lyme, New Hampshire 03768
SAMUEL L. HAYES, III (60), Trustee
Jacob H. Schiff Professor of Investment Banking, Harvard University Graduate
School of Business Administration. Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: Harvard University Graduate School of Business Administration,
Soldiers Field Road, Boston, Massachusetts 02163
NORTON H. REAMER (60), Trustee
President and Director, United Asset Management Corporation (a holding company
owning institutional investment management firms); Chairman, President and
Director, UAM Funds (mutual funds). Director or Trustee of various
investment companies managed by Eaton Vance or BMR.
Address: One International Place, Boston, Massachusetts 02110
JOHN L. THORNDIKE (69), Trustee
Director of Fiduciary Company Incorporated. Director or Trustee of various
investment companies managed by Eaton Vance or BMR.
Address: 175 Federal Street, Boston, Massachusetts 02110
JACK L. TREYNOR (65), Trustee
Investment Adviser and Consultant. Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: 504 Via Almar, Palos Verdes Estates, California 90274
OFFICERS OF THE TRUST AND THE PORTFOLIO
M. DOZIER GARDNER (62), Vice President
President and Chief Executive Officer of BMR, Eaton Vance, EVC and EV, and
Director of EVC and EV. Director or Trustee and officer of various
investment companies managed by Eaton Vance or BMR.
WILLIAM D. BURT (57), Vice President
Vice President of Eaton Vance, BMR and EV since November 1994; formerly Vice
President of The Boston Company (1990-1994). Mr. Burt was elected Vice
President of the Trust on June 19, 1995.
BARCLAY TITTMANN (63), Vice President
Vice President of Eaton Vance, BMR and EV since October 1993; formerly Vice
President of Invesco Management and Research (1970-1993). Mr. Tittmann was
elected Vice President of the Trust on June 19, 1995.
PETER F. KIELY (59), Vice President of the Portfolio
Vice President of BMR, Eaton Vance and EV. Director or Trustee and officer of
various investment companies managed by Eaton Vance or BMR. Mr. Kiely was
elected Vice President of the Portfolio on June 14, 1993.
JAMES L. O'CONNOR (50), Treasurer
Vice President of BMR, Eaton Vance, and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
WILLIAM J. AUSTIN, JR. (44), Assistant Treasurer
Assistant Vice President of BMR, Eaton Vance and EV. Officer of various
investment companies managed by Eaton Vance or BMR. Mr. Austin was elected
Assistant Treasurer of the Trust on December 16, 1991.
THOMAS OTIS (64), Secretary
Vice President and Secretary of BMR, Eaton Vance, EVC and EV. Officer of
various investment companies managed by Eaton Vance or BMR.
JANET E. SANDERS (60), Assistant Treasurer and Assistant Secretary
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
A. JOHN MURPHY (33), Assistant Secretary
Assistant Vice President of BMR, Eaton Vance and EV since March 1, 1994;
employee of Eaton Vance since March 1993. State Regulations Supervisor, The
Boston Company (1991-1993) and Registration Specialist, Fidelity Management
& Research Co. (1986-1991). Officer of various investment companies managed
by Eaton Vance or BMR. Mr. Murphy was elected Assistant Secretary of the
Trust and the Portfolio on March 27, 1995.
ERIC G. WOODBURY (38), Assistant Secretary
Vice President of Eaton Vance, BMR and EV since February 1993; formerly,
associate attorney at Dechert, Price & Rhoades and Gaston & Snow. Officer of
various investment companies managed by Eaton Vance or BMR. Mr. Woodbury was
elected Assistant Secretary of the Trust and the Portfolio on June 19, 1995.
Messrs. Thorndike (Chairman), Hayes and Reamer are members of the Special
Committee of the Board of Trustees of the Trust and of the Portfolio. The
Special Committee's functions include a continuous review of the Trust's
contractual relationship with the Administrator, the Portfolio's contractual
relationship with the Investment Adviser, making recommendations to the
Trustees regarding the compensation of those Trustees who are not members of
the Eaton Vance organization, and making recommendations to the Trustees
regarding candidates to fill vacancies, as and when they occur, in the ranks
of those Trustees who are not "interested persons" of the Trust, the
Portfolio, or the Eaton Vance organization.
Messrs. Treynor (Chairman) and Dwight are members of the Audit Committee
of the Board of Trustees of the Trust and of the Portfolio. The Audit
Committee's functions include making recommendations to the Trustees regarding
the selection of the independent accountants, and reviewing with such
accountants and the Treasurer of the Trust and of the Portfolio matters
relative to accounting and auditing practices and procedures, accounting
records, internal accounting controls, and the functions performed by the
custodian and transfer agent of the Trust and of the Portfolio.
Trustees of the Portfolio who are not affiliated with the Investment
Adviser may elect to defer receipt of all or a percentage of their annual fees
in accordance with the terms of a Trustees Deferred Compensation Plan (the
"Plan"). Under the Plan, an eligible Trustee may elect to have his deferred
fees invested by the Portfolio in the shares of one or more funds in the Eaton
Vance Family of Funds, and the amount paid to the Trustees under the Plan will
be determined based upon the performance of such investments. Deferral of
Trustees' fees in accordance with the Plan will have a negligible effect on
the Portfolio's assets, liabilities, and net income per share, and will not
obligate the Portfolio to retain the services of any Trustee or obligate the
Portfolio to pay any particular level of compensation to the Trustee.
The fees and expenses of those Trustees of the Trust and the Portfolio who
are not members of the Eaton Vance organization (the noninterested Trustees)
are paid by the Fund (and the other series of the Trust) and the Portfolio,
respectively. For the compensation earned by the noninterested Trustees of the
Trust and the Portfolio, see "Fees and Expenses" in the Fund's Part II.
INVESTMENT ADVISER AND ADMINISTRATOR
The Portfolio engages BMR as its investment adviser pursuant to an
Investment Advisory Agreement dated August 1, 1994. BMR or Eaton Vance acts as
investment adviser to investment companies and various individual and
institutional clients with combined assets under management of approximately
$16 billion.
Eaton Vance, its affiliates and its predecessor companies have been
managing assets of individuals and institutions since 1924 and managing
investment companies since 1931. They maintain a large staff of experienced
fixed-income and equity investment professionals to service the needs of its
clients. The fixed-income division focuses on all kinds of taxable investment-
grade and high-yield securities, tax-exempt investment-grade and high-yield
securities, and U.S. Government securities. The equity division covers stocks
ranging from blue chip to emerging growth companies.
BMR manages the investments and affairs of the Portfolio subject to the
supervision of the Portfolio's Board of Trustees. BMR furnishes to the
Portfolio investment research, advice and supervision, furnishes an investment
program and determines what securities will be purchased, held or sold by the
Portfolio and what portion, if any, of the Portfolio's assets will be held
uninvested. The Investment Advisory Agreement requires BMR to pay the salaries
and fees of all officers and Trustees of the Portfolio who are members of the
BMR organization and all personnel of BMR performing services relating to
research and investment activities. The Portfolio is responsible for all
expenses not expressly stated to be payable by BMR under the Investment
Advisory Agreement, including, without implied limitation, (i) expenses of
maintaining the Portfolio and continuing its existence, (ii) registration of
the Portfolio under the 1940 Act, (iii) commissions, fees and other expenses
connected with the acquisition, holding and disposition of securities and
other investments, (iv) auditing, accounting and legal expenses, (v) taxes and
interest, (vi) governmental fees, (vii) expenses of issue, sale and redemption
of interests in the Portfolio, (viii) expenses of registering and qualifying
the Portfolio and interests in the Portfolio under federal and state
securities laws and of preparing and printing registration statements or other
offering statements or memoranda for such purposes and for distributing the
same to investors, and fees and expenses of registering and maintaining
registrations of the Portfolio and of the Portfolio's placement agent as
broker-dealer or agent under state securities laws, (ix) expenses of reports
and notices to investors and of meetings of investors and proxy solicitations
therefor, (x) expenses of reports to governmental officers and commissions,
(xi) insurance expenses, (xii) association membership dues, (xiii) fees,
expenses and disbursements of custodians and subcustodians for all services to
the Portfolio (including without limitation safekeeping of funds, securities
and other investments, keeping of books, accounts and records, and
determination of net asset values, book capital account balances and tax
capital account balances), (xiv) fees, expenses and disbursements of transfer
agents, dividend disbursing agents, investor servicing agents and registrars
for all services to the Portfolio, (xv) expenses for servicing the accounts of
investors, (xvi) any direct charges to investors approved by the Trustees of
the Portfolio, (xvii) compensation and expenses of Trustees of the Portfolio
who are not members of BMR's organization, and (xviii) such non-recurring
items as may arise, including expenses incurred in connection with litigation,
proceedings and claims and the obligation of the Portfolio to indemnify its
Trustees, officers and investors with respect thereto.
For a description of the compensation that the Portfolio pays BMR under
the Investment Advisory Agreement, see the Fund's current Prospectus. For
additional information about the Investment Advisory Agreement, including the
net assets of the Portfolio and the investment advisory fees that the
Portfolio paid BMR under the Investment Advisory Agreement, see "Fees and
Expenses" in the Fund's Part II.
The Investment Advisory Agreement with BMR remains in effect until
February 28, 1996. It may be continued indefinitely thereafter so long as such
continuance after February 28, 1996 is approved at least annually (i) by the
vote of a majority of the Trustees of the Portfolio who are not interested
persons of the Portfolio or of BMR cast in person at a meeting specifically
called for the purpose of voting on such approval and (ii) by the Board of
Trustees of the Portfolio or by vote of a majority of the outstanding voting
securities of the Portfolio. The Agreement may be terminated at any time
without penalty on sixty days' written notice by the Board of Trustees of
either party or by vote of the majority of the outstanding voting securities
of the Portfolio, and the Agreement will terminate automatically in the event
of its assignment. The Agreement provides that BMR may render services to
others and may permit other fund clients and other corporations and
organizations to use the words "Eaton Vance" or "Boston Management and
Research" in their names. The Agreement also provides that BMR shall not be
liable for any loss incurred in connection with the performance of its duties,
or action taken or omitted under that Agreement, in the absence of willful
misfeasance, bad faith, gross negligence in the performance of its duties or
by reason of its reckless disregard of its obligations and duties thereunder,
or for any losses sustained in the acquisition, holding or disposition of any
security or other investment.
As indicated in the Prospectus, Eaton Vance serves as Administrator of the
Fund, but currently receives no compensation for providing administrative
services to the Fund. Under its agreement with the Fund, Eaton Vance has been
engaged to administer the Fund's affairs, subject to the supervision of the
Trustees of the Trust, and shall furnish for the use of the Fund office space
and all necessary office facilities, equipment and personnel for administering
the affairs of the Fund. For additional information about the Administrator,
see "Fees and Expenses" in the Fund's Part II.
The Fund pays all of its own expenses including, without limitation, (i)
expenses of maintaining the Fund and continuing its existence, (ii)
registration of the Trust under the 1940 Act, (iii) commissions, fees and
other expenses connected with the purchase or sale of securities and other
investments, (iv) auditing, accounting and legal expenses, (v) taxes and
interest, (vi) governmental fees, (vii) expenses of issue, sale, repurchase
and redemption of shares, (viii) expenses of registering and qualifying the
Fund and its shares under federal and state securities laws and of preparing
and printing prospectuses for such purposes and for distributing the same to
shareholders and investors, and fees and expenses of registering and
maintaining registrations of the Fund and of the Fund's principal underwriter,
if any, as broker-dealer or agent under state securities laws, (ix) expenses
of reports and notices to shareholders and of meetings of shareholders and
proxy solicitations therefor, (x) expenses of reports to governmental officers
and commissions, (xi) insurance expenses, (xii) association membership dues,
(xiii) fees, expenses and disbursements of custodians and subcustodians for
all services to the Fund (including without limitation safekeeping of funds,
securities and other investments, keeping of books and accounts and
determination of net asset values), (xiv) fees, expenses and disbursements of
transfer agents, dividend disbursing agents, shareholder servicing agents and
registrars for all services to the Fund, (xv) expenses for servicing
shareholder accounts, (xvi) any direct charges to shareholders approved by the
Trustees of the Trust, (xvii) compensation and expenses of Trustees of the
Trust who are not members of the Eaton Vance organization, and (xviii) such
non-recurring items as may arise, including expenses incurred in connection
with litigation, proceedings and claims and the obligation of the Trust to
indemnify its Trustees and officers with respect thereto.
A commitment has been made to a state securities authority that Eaton
Vance will take certain actions, if necessary, so that the Fund's expenses
will not exceed expense limitation requirements of such state. The commitment
may be amended or rescinded by Eaton Vance in response to changes in the
requirements of the state or for other reasons.
BMR is a wholly-owned subsidiary of Eaton Vance. Eaton Vance and EV are
both wholly-owned subsidiaries of EVC. BMR and Eaton Vance are both
Massachusetts business trusts, and EV is the trustee of BMR and Eaton Vance.
The Directors of EV are Landon T. Clay, H. Day Brigham, Jr., M. Dozier
Gardner, James B. Hawkes and Benjamin A. Rowland, Jr. The Directors of EVC
consist of the same persons and John G. L. Cabot and Ralph Z. Sorenson. Mr.
Clay is chairman, and Mr. Gardner is president and chief executive officer, of
EVC, BMR, Eaton Vance and EV. All of the issued and outstanding shares of
Eaton Vance and of EV are owned by EVC. All of the issued and outstanding
shares of BMR are owned by Eaton Vance. All shares of the outstanding Voting
Common Stock of EVC are deposited in a Voting Trust, which expires December
31, 1996, the Voting Trustees of which are Messrs. Brigham, Clay, Gardner,
Hawkes and Rowland. The Voting Trustees have unrestricted voting rights for
the election of Directors of EVC. All of the outstanding voting trust receipts
issued under said Voting Trust are owned by certain of the officers of BMR and
Eaton Vance who are also officers or Directors of EVC and EV. As of November
30, 1995, Messrs. Clay, Gardner and Hawkes each owned 24% of such voting trust
receipts, and Messrs. Rowland and Brigham owned 15% and 13%, respectively, of
such voting trust receipts. Messrs. Clay, Gardner, Hawkes and Otis, who are
officers or Trustees of the Trust and the Portfolio, are members of the EVC,
Eaton Vance, BMR and EV organizations. Messrs. Austin, Burt, Kiely, Murphy,
O'Connor, Tittmann and Woodbury, and Ms. Sanders are officers of the Trust and
the Portfolio and all are also members of the BMR, Eaton Vance and EV
organizations. BMR will receive the fees paid under the Investment Advisory
Agreement.
Eaton Vance owns all of the stock of Energex Energy Corporation, which is
engaged in oil and gas operations. In addition, Eaton Vance owns all of the
stock of Northeast Properties, Inc., which is engaged in real estate
investment, consulting and management. EVC owns all of the stock of Fulcrum
Management, Inc. and MinVen, Inc., which are engaged in the development of
precious metal properties. EVC also owns 24% of the Class A shares of Lloyd
George Management (B.V.I.) Limited, a registered investment adviser. EVC, BMR,
Eaton Vance and EV may also enter into other businesses.
EVC and its affiliates and their officers and employees from time to time
have transactions with various banks, including the custodian of the Fund and
the Portfolio, Investors Bank & Trust Company. It is Eaton Vance's opinion
that the terms and conditions of such transactions were not and will not be
influenced by existing or potential custodial or other relationships between
the Fund or the Portfolio and such banks.
CUSTODIAN
Investors Bank & Trust Company ("IBT"), 89 South Street, Boston,
Massachusetts acts as custodian for the Fund and the Portfolio. IBT has the
custody of all cash and securities representing the Fund's interest in the
Portfolio, has custody of all the Portfolio's assets, maintains the general
ledger of the Portfolio and the Fund, and computes the daily net asset value of
interests in the Portfolio and the net asset value of shares of the Fund. In
such capacity it attends to details in connection with the sale, exchange,
substitution, transfer or other dealings with the Portfolio's investments,
receives and disburses all funds, and performs various other ministerial duties
upon receipt of proper instructions from the Fund and the Portfolio. IBT charges
fees which are believed to be competitive within the industry. A portion of the
fee relates to custody, bookeeping and valuation services and is based upon a
percentage of Fund and Portfolio net assets and a portion of the fee relates to
activity charges, primarily the number of portfolio transactions. These fees are
then reduced by a credit for cash balances of the particular investment company
at the custodian equal to 75% of the 91-day, U.S. Treasury Bill auction rate
applied to the particular investment company's average daily collected balances
for the week. Landon T. Clay, a Director of EVC and an officer, Trustee or
Director of other entities in the Eaton Vance organization, owns approximately
13% of the voting stock of Investors Financial Services Corp., the holding
company parent of IBT. Management believes that such ownership does not create
an affiliated person relationship between the Fund or the Portfolio and IBT
under the Investment Company Act of 1940. For the custody fees that the
Portfolio and the Fund paid to IBT, see "Fees and Expenses" in Part II.
SERVICE FOR WITHDRAWAL
By a standard agreement, the Trust's Transfer Agent will send to the
shareholder regular monthly or quarterly payments of any permitted amount
designated by the shareholder (see "Eaton Vance Shareholder Services --
Withdrawal Plan" in the Fund's current Prospectus) based upon the value of the
shares held. The checks will be drawn from share redemptions and hence, are a
return of principal. Income dividends and capital gain distributions in
connection with withdrawal accounts will be credited at net asset value as of
the record date for each distribution. Continued withdrawals in excess of
current income will eventually use up principal, particularly in a period of
declining market prices.
To use this service, at least $5,000 in cash or shares at the public
offering price will have to be deposited with the Transfer Agent. A
shareholder may not have a withdrawal plan in effect at the same time he or
she has authorized Bank Automated Investing or is otherwise making regular
purchases of Fund shares. Either the shareholder, the Transfer Agent or the
Principal Underwriter will be able to terminate the withdrawal plan at any
time without penalty.
DETERMINATION OF NET ASSET VALUE
The net asset value of the shares of the Fund is determined by IBT (as
agent and custodian for the Fund) in the manner described under "Valuing Fund
Shares" in the Fund's current Prospectus. The Fund and the Portfolio will be
closed for business and will not price their respective shares or interests on
the following business holidays: New Year's Day, Presidents' Day, Good Friday
(a New York Stock Exchange holiday), Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day.
Securities listed on securities exchanges or in the NASDAQ National Market
are valued at closing sale prices. Unlisted or listed securities for which
closing sale prices are not available are valued at the mean between the
latest bid and asked prices. Fixed-income securities (other than short-term
obligations), including listed securities and securities for which price
quotations are available, will normally be valued on the basis of market
valuations furnished by a pricing service. The pricing service uses
information with respect to transactions in bonds, quotations from bond
dealers, market transactions in comparable securities, various relationships
between securities, and yield to maturity in determining value. Short-term
obligations maturing in sixty days or less are valued at amortized cost, which
approximates market. Foreign securities are valued in U.S. Dollars at the
current exchange rate. Other assets are valued at fair value using methods
determined in good faith by the Trustees.
Each investor in the Portfolio, including the Fund, may add to or reduce
its investment in the Portfolio on each day the New York Stock Exchange (the
"Exchange") is open for trading ("Portfolio Business Day") as of the close of
regular trading on the Exchange (the "Portfolio Valuation Time"). The value of
each investor's interest in the Portfolio will be determined by multiplying
the net asset value of the Portfolio by the percentage, determined on the
prior Portfolio Business Day, which represented that investor's share of the
aggregate interests in the Portfolio on such prior day. Any additions or
withdrawals for the current Portfolio Business Day will then be recorded. Each
investor's percentage of the aggregate interest in the Portfolio will then be
recomputed as a percentage equal to a fraction (i) the numerator of which is
the value of such investor's investment in the Portfolio as of the Portfolio
Valuation Time on the prior Portfolio Business Day plus or minus, as the case
may be, the amount of any additions to or withdrawals from the investor's
investment in the Portfolio on the current Portfolio Business Day and (ii) the
denominator of which is the aggregate net asset value of the Portfolio as of
the Portfolio Valuation Time on the prior Portfolio Business Day plus or
minus, as the case may be, the amount of the net additions to or withdrawals
from the aggregate investment in the Portfolio on the current Portfolio
Business Day by all investors in the Portfolio. The percentage so determined
will then be applied to determine the value of the investor's interest in the
Portfolio for the current Portfolio Business Day.
INVESTMENT PERFORMANCE
Average annual total return is determined by multiplying a hypothetical
initial purchase order of $1,000 by the average annual compound rate of return
(including capital appreciation/depreciation, and dividends and distributions
paid and reinvested) for the stated period and, if necessary, annualizing the
result. The calculation assumes that all dividends from net investment income
and capital gain distributions are reinvested at net asset value on the
reinvestment dates during the period (and either (i) the deduction of the
maximum sales charge from the initial $1,000 purchase order, or (ii) a
complete redemption of the investment and, if applicable, the deduction of any
contingent deferred sales charge at the end of the period). For information
concerning the total return of the Fund, see "Performance Information" in the
Fund's Part II.
The Fund's total return may be compared to relevant indices, such as the
Consumer Price Index and various domestic securities indices, for example:
Standard & Poor's 400 Stock Index, Standard & Poor's 500 Stock Index, Merrill
Lynch U.S. Treasury (15-year plus) Index, Lehman Brothers Government/Corporate
Bond Index, and the Dow Jones Industrial Average. The Fund's total return and
comparisons with these indices may be used in advertisements and in
information furnished to present or prospective shareholders. The Fund's
performance may differ from that of other investors in the Portfolio,
including any other investment companies.
Information used in advertisements and in materials furnished to present
or prospective shareholders may include statistics, data and performance
studies prepared by independent organizations, (e.g., Ibbotson Associates,
Standard & Poor's Ratings Group, Merrill Lynch, Pierce, Fenner & Smith, Inc.,
Bloomberg, L.P., Dow Jones & Company, Inc., and The Federal Reserve Board) or
included in various publications (e.g., The Wall Street Journal, Barron's and
The Decade: Wealth of Investments in U.S. Stocks, Bonds, Bills & Inflation)
reflecting the investment performance or return achieved by various classes
and types of investments (e.g., common stocks, small company stocks, long-term
corporate bonds, long-term government bonds, intermediate-term government
bonds, U.S. Treasury bills) over various periods of time. This information may
be used to illustrate the benefits of long-term investments in common stocks.
From time to time, information about the portfolio allocation and holdings
of the Portfolio may be included in advertisements and other material
furnished to present and prospective shareholders.
The Portfolio's asset allocation on August 31, 1995 was as follows:
PERCENT OF NET ASSETS
---------------------
U.S. common stocks 84.9%
Foreign common stocks 13.7%
Cash & equivalents 1.4%
-----
Total 100%
The Portfolio's ten largest common stock holdings on August 31, 1995 were:
COMPANY PERCENT OF NET ASSETS
------- ---------------------
Astra AB Free Shares 4.3%
American International Group 3.6%
Anadarko Petroleum Corp. 3.6%
Triton Energy Corp. 3.6%
General Re Corp. 3.2%
Reuters Holdings PLC 3.1%
Omnicom Group 2.8%
Intel Corp. 2.7%
CBS Inc. 2.7%
Millipore Corp. 2.6%
----
Total 32.2%
From time to time, evaluations of the Fund's performance made by
independent sources (e.g., Lipper Analytical Services, Inc., CDA/Wiesenberger
and Morningstar, Inc.) may be used in advertisements and in information
furnished to present or prospective shareholders.
Information used in advertisements and in materials furnished to present
and prospective shareholders may include statements or illustrations relating
to the appropriateness of types of securities and/or mutual funds which may be
employed to meet specific financial goals, such as (1) funding retirement, (2)
paying for children's education, and (3) financially supporting aging parents.
These three financial goals may be referred to in such advertisements or
materials as the "Triple Squeeze."
TAXES
See "Distributions and Taxes" in the Fund's current Prospectus.
Each series of the Trust is treated as a separate entity for federal
income tax purposes. The Fund has elected to be treated and intends to qualify
each year as a RIC under the Code. Accordingly, the Fund intends to satisfy
certain requirements relating to sources of its income and diversification of
its assets and to distribute its net investment income and net realized
capital gains in accordance with the timing requirements imposed by the Code,
so as to avoid any federal income or excise tax to the Fund. The Fund so
qualified for its fiscal year ended August 31, 1995 (see the Notes to the
Financial Statements incorporated by reference into this Statement of
Additional Information). Because the Fund invests its assets in the Portfolio,
the Portfolio normally must satisfy the applicable source of income and
diversification requirements in order for the Fund to satisfy them. The
Portfolio will allocate at least annually among its investors, including the
Fund, the Portfolio's net investment income, net realized capital gains, and
any other items of income, gain, loss, deduction or credit. The Portfolio will
make allocations to the Fund in accordance with the Code and applicable
regulations and will make moneys available for withdrawal at appropriate times
and in sufficient amounts to enable the Fund to satisfy the tax distribution
requirements that apply to the Fund and that must be satisfied in order to
avoid federal income and/or excise tax on the Fund. For purposes of applying
the requirements of the Code regarding qualification as a RIC, the Fund will
be deemed (i) to own its proportionate share of each of the assets of the
Portfolio and (ii) to be entitled to the gross income of the Portfolio
attributable to such share.
In order to avoid federal excise tax, the Code requires that the Fund
distribute (or be deemed to have distributed) by December 31 of each calendar
year at least 98% of its ordinary income (not including tax-exempt income) for
such year, and at least 98% of the excess of its realized capital gains over
its realized capital losses, generally computed on the basis of the one-year
period ending on October 31 of such year or, by election, December 31 of such
year, after reduction by any available capital loss carryforwards, and 100% of
any income from the prior year (as previously computed) that was not paid out
during such year and on which the Fund was not taxed. Under current law,
provided that the Fund qualifies as a RIC for federal income tax purposes and
the Portfolio is treated as a partnership for Massachusetts and Federal tax
purposes, neither the Fund nor the Portfolio is liable for any income, excise
or franchise tax in the Commonwealth of Massachusetts.
Foreign exchange gains and losses realized by the Portfolio in connection
with investments in foreign securities and forward contracts may be treated as
ordinary income and losses under special tax rules. Certain forward contracts
of the Portfolio may be required to be marked to market (i.e., treated as if
closed out) on the last day of each taxable year, and any gain or loss
realized with respect to these contracts may be required to be treated as 60%
long-term and 40% short-term gain or loss. Positions of the Portfolio in
foreign securities and offsetting forward contracts may be treated as
"straddles" and be subject to other special rules that may affect the amount,
timing and character of Portfolio distributions to shareholders. The Portfolio
will limit its foreign currency hedging activities to the extent necessary to
preserve the Fund's qualification as a RIC.
The Portfolio may be subject to foreign withholding or other foreign
taxes with respect to income (possibly including, in some cases, capital
gains) on certain foreign securities. These taxes may be reduced or eliminated
under the terms of an applicable U.S. income tax treaty. As it is not expected
that more than 50% of the value of the total assets of the Fund, taking into
account its allocable share of the Portfolio's total assets, at the close of
any taxable year of the Fund will consist of securities issued by foreign
corporations, the Fund will not be eligible to pass through to shareholders
their proportionate share of any foreign taxes paid by the Portfolio and
allocated to the Fund, with the result that shareholders will not include in
income, and will not be entitled to take any foreign tax credits or deductions
for, foreign taxes paid by the Portfolio and allocated to the Fund. Certain
uses of foreign currency and investments by the Portfolio in the stock of
certain "passive foreign investment companies" may be limited or a tax
election may be made, if available, in order to preserve the Fund's
qualification as a RIC and/or to avoid imposition of a tax on the Fund.
A portion of distributions made by the Fund which are derived from
dividends received by the Portfolio from domestic corporations and allocated
to the Fund may qualify for the dividends-received deduction for corporations.
The dividends-received deduction for corporate shareholders is reduced to the
extent the shares of the Fund with respect to which the dividends are received
are treated as debt-financed under the federal income tax law and is
eliminated if the shares are deemed to have been held for less than a minimum
period, generally 46 days. Receipt of certain distributions qualifying for the
deduction may result in reduction of the tax basis of the corporate
shareholder's shares.
Distributions of the excess of net long-term capital gains over net short-
term capital losses (including any capital losses carried forward from prior
years) earned by the Portfolio and allocated to the Fund are taxable to
shareholders of the Fund as long-term capital gains, whether received in cash
or in additional shares and regardless of the length of time their shares have
been held. Certain distributions declared in October, November or December and
paid the following January will be taxed to shareholders as if received on
December 31 of the year in which they are declared.
Distributions of the Fund (including a portion of any distributions
eligible for the dividends-received deduction) may give rise to or increase an
alternative minimum tax for individuals and corporations depending upon the
shareholder's particular tax situation.
Any loss realized upon the redemption or exchange of shares of the Fund
with a tax holding period of 6 months or less will be treated as a long-term
capital loss to the extent of any distribution of net long-term capital gains
with respect to such shares. In addition, all or a portion of a loss realized
on a redemption or other disposition of Fund shares may be disallowed under
"wash sale" rules if other Fund shares are acquired (whether through
reinvestment of dividends or otherwise) within a period beginning 30 days
before and ending 30 days after the date of such redemption or other
disposition. Any disallowed loss will result in an adjustment to the
shareholder's tax basis in some or all of the other shares acquired.
Special tax rules apply to Individual Retirement Accounts ("IRAs") and
other retirement plans and persons investing through IRAs or such plans should
consult their tax advisers for more information.
Amounts paid by the Fund to individuals and certain other shareholders who
have not provided the Fund with their correct taxpayer identification number
and certain required certifications, as well as shareholders with respect to
whom the Fund has received notification from the Internal Revenue Service or a
broker, may be subject to "backup" withholding of federal income tax from the
Fund's dividends and distributions and the proceeds of redemptions (including
repurchases and exchanges) at a rate of 31%. An individual's taxpayer
identification number is generally his or her social security number.
Non-resident alien individuals and certain foreign corporations and other
foreign entities generally will be subject to a U.S. withholding tax at a rate
of 30% on the Fund's distributions from its ordinary income and the excess of
its net short-term capital gain over its net long-term capital loss, unless
the tax is reduced or eliminated by an applicable tax treaty. Distributions
from the excess of the Fund's net long-term capital gain over its net short-
term capital loss received by such shareholders and any gain from the sale or
other disposition of shares of the Fund generally will not be subject to U.S.
federal income taxation, provided that non-resident alien status has been
certified by the shareholder. Different U.S. tax consequences may result if
the shareholder is engaged in a trade or business in the United States, is
present in the United States for a sufficient period of time during a taxable
year to be treated as a U.S. resident, or fails to provide any required
certifications regarding status as a non-resident alien investor. Foreign
shareholders should consult their tax advisers regarding the U.S. and foreign
tax consequences of an investment in the Fund.
The foregoing discussion does not address the special tax rules applicable
to certain classes of investors, such as IRAs and other retirement plans, tax-
exempt entities, insurance companies and financial institutions. Shareholders
should consult their own tax advisers with respect to special tax rules that
may apply in their particular situations, as well as the state, local or
foreign tax consequences of investing in the Fund.
PORTFOLIO SECURITY TRANSACTIONS
Decisions concerning the execution of portfolio security transactions of
the Portfolio, including the selection of the market and the broker-dealer
firm, are made by BMR. BMR is also responsible for the execution of
transactions for all other accounts managed by it.
BMR places the security transactions of the Portfolio and of all other
accounts managed by it for execution with many broker-dealer firms. BMR uses
its best efforts to obtain execution of portfolio transactions at prices which
are advantageous to the Portfolio and (when a disclosed commission is being
charged) at reasonably competitive commission rates. In seeking such
execution, BMR will use its best judgment in evaluating the terms of a
transaction, and will give consideration to various relevant factors,
including without limitation the size and type of the transaction, the general
execution and operational capabilities of the broker-dealer, the nature and
character of the market for the security, the confidentiality, speed and
certainty of effective execution required for the transaction, the reputation,
reliability, experience and financial condition of the broker-dealer, the
value and quality of services rendered by the broker-dealer in other
transactions, and the reasonableness of the commission, if any. Transactions
on United States stock exchanges and other agency transactions involve the
payment by the Portfolio of negotiated brokerage commissions. Such commissions
vary among different broker-dealer firms, and a particular broker-dealer may
charge different commissions according to such factors as the difficulty and
size of the transaction and the volume of business done with such broker-
dealer. Transactions in foreign securities usually involve the payment of
fixed brokerage commissions, which are generally higher than those in the
United States. There is generally no stated commission in the case of
securities traded in the over-the-counter markets, but the price paid or
received by the Portfolio usually includes an undisclosed dealer markup or
markdown. In an underwritten offering the price paid by the Portfolio often
includes a disclosed fixed commission or discount retained by the underwriter
or dealer. Although commissions paid on portfolio security transactions will,
in the judgment of BMR, be reasonable in relation to the value of the services
provided, commissions exceeding those which another firm might charge may be
paid to broker-dealers who were selected to execute transactions on behalf of
the Portfolio and BMR's other clients in part for providing brokerage and
research services to BMR.
As authorized in Section 28(e) of the Securities Exchange Act of 1934, a
broker or dealer who executes a portfolio transaction on behalf of the
Portfolio may receive a commission which is in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction if BMR determines in good faith that such commission was
reasonable in relation to the value of the brokerage and research services
provided. This determination may be made on the basis of either that
particular transaction or on the basis of the overall responsibilities which
BMR and its affiliates have for accounts over which they exercise investment
discretion. In making any such determination, BMR will not attempt to place a
specific dollar value on the brokerage and research services provided or to
determine what portion of the commission should be related to such services.
Brokerage and research services may include advice as to the value of
securities, the advisability of investing in, purchasing, or selling
securities, and the availability of securities or purchasers or sellers of
securities; furnishing analyses and reports concerning issuers, industries,
securities, economic factors and trends, portfolio strategy and the
performance of accounts; and effecting securities transactions and performing
functions incidental thereto (such as clearance and settlement); and the
"Research Services" referred to in the next paragraph.
It is a common practice in the investment advisory industry for the
advisers of investment companies, institutions and other investors to receive
research, statistical and quotation services, data, information and other
services, products and materials which assist such advisers in the performance
of their investment responsibilities ("Research Services") from broker-
dealer firms which execute portfolio transactions for the clients of such
advisers and from third parties with which these broker-dealers have
arrangements. Consistent with this practice, BMR receives Research Services
from many broker-dealer firms with which BMR places the Portfolio transactions
and from third parties with which these broker-dealers have arrangements.
These Research Services include such matters as general economic and market
reviews, industry and company reviews, evaluations of securities and portfolio
strategies and transactions, recommendations as to the purchase and sale of
securities and other portfolio transactions, financial, industry and trade
publications, news and information services, pricing and quotation equipment
and services, and research oriented computer hardware, software, data bases
and services. Any particular Research Service obtained through a broker-dealer
may be used by BMR in connection with client accounts other than those
accounts which pay commissions to such broker-dealer. Any such Research
Service may be broadly useful and of value to BMR in rendering investment
advisory services to all or a significant portion of its clients, or may be
relevant and useful for the management of only one client's account or of a
few clients' accounts, or may be useful for the management of merely a segment
of certain clients' accounts, regardless of whether any such account or
accounts paid commissions to the broker-dealer through which such Research
Service was obtained. The advisory fee paid by the Portfolio is not reduced
because BMR receives such Research Services. BMR evaluates the nature and
quality of the various Research Services obtained through broker-dealer firms
and attempts to allocate sufficient commissions to such firms to ensure the
continued receipt of Research Services which BMR believes are useful or of
value to it in rendering investment advisory services to its clients.
Subject to the requirement that BMR shall use its best efforts to seek to
execute Portfolio security transactions at advantageous prices and at
reasonably competitive commission rates or spreads, BMR is authorized to
consider as a factor in the selection of any broker-dealer firm with whom
Portfolio orders may be placed the fact that such firm has sold or is selling
shares of the Fund or of other investment companies sponsored by BMR or Eaton
Vance. This policy is not inconsistent with a rule of the National Association
of Securities Dealers, Inc., which rule provides that no firm which is a
member of the Association shall favor or disfavor the distribution of shares
of any particular investment company or group of investment companies on the
basis of brokerage commissions received or expected by such firm from any
source.
Securities considered as investments for the Portfolio may also be
appropriate for other investment accounts managed by BMR or its affiliates.
BMR will attempt to allocate equitably portfolio security transactions among
the Portfolio and the portfolios of its other investment accounts whenever
decisions are made to purchase or sell securities by the Portfolio and one or
more of such other accounts simultaneously. In making such allocations, the
main factors to be considered are the respective investment objectives of the
Portfolio and such other accounts, the relative size of portfolio holdings of
the same or comparable securities, the availability of cash for investment by
the Portfolio and such accounts, the size of investment commitments generally
held by the Portfolio and such accounts and the opinions of the persons
responsible for recommending investments to the Portfolio and such accounts.
While this procedure could have a detrimental effect on the price or amount of
the securities available to the Portfolio from time to time, it is the opinion
of the Trustees of the Trust and the Portfolio that the benefits available
from the BMR organization outweigh any disadvantage that may arise from
exposure to simultaneous transactions. For the brokerage commissions paid by
the Portfolio on portfolio transactions, see "Fees and Expenses" in the Fund's
Part II.
OTHER INFORMATION
On August 18, 1992 the Trust changed its name from Eaton Vance Growth Fund
to Eaton Vance Growth Trust. The Trust is a Massachusetts business trust
established in 1989 as the successor to Eaton Vance Growth Fund, Inc., a
Massachusetts corporation, which changed its name from Vance, Sanders Common
Stock Fund, Inc. on November 16, 1981. Such name was changed from Boston
Common Stock Fund, Inc. on December 29, 1972. It was originally organized as a
Canadian corporation in 1954, at which time it was known as Canada General
Fund Limited. Eaton Vance, pursuant to its agreement with the Trust, controls
the use of the words "Eaton Vance" and "EV" in the Fund's name and may use the
words "Eaton Vance" and "EV" in other connections and for other purposes.
The Trust's Declaration of Trust may be amended by the Trustees when
authorized by vote of a majority of the outstanding voting securities of the
Trust affected by the amendment. The Trustees may also amend the Declaration
of Trust without the vote or consent of shareholders to change the name of the
Trust or to make such other changes as do not have a materially adverse effect
on the rights or interests of shareholders or if they deem it necessary to
conform the Declaration to the requirements of applicable federal laws or
regulations. The Trust's By-laws provide that the Fund will indemnify its
Trustees and officers against liabilities and expenses incurred in connection
with any litigation or proceeding in which they may be involved because of
their offices with the Trust. However, no indemnification will be provided to
any Trustee or officer for any liability to the Trust or its shareholders by
reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office.
Under Massachusetts law, if certain conditions prevail, shareholders of a
Massachusetts business trust (such as the Trust) could be deemed to have
personal liability for the obligations of the Trust. Numerous investment
companies registered under the 1940 Act have been formed as Massachusetts
business trusts, and management is not aware of an instance where such
liability has been imposed. The Trust's Declaration of Trust contains an
express disclaimer of liability on the part of the Fund shareholders and the
Trust's By-laws provide that the Trust shall assume the defense on behalf of
any Fund shareholders. Moreover, the Trust's By-laws also provide for
indemnification out of the property of the Fund of any shareholder held
personally liable solely by reason of being or having been a shareholder for
all loss or expense arising from such liability. The assets of the Fund are
readily marketable and will ordinarily substantially exceed its liabilities.
In light of the nature of the Fund's business and the nature of its assets,
management believes that the possibility of the Fund's liability exceeding its
assets, and therefore the shareholder's risk of personal liability, is
extremely remote.
As permitted by Massachusetts law, there will normally be no meetings of
shareholders for the purpose of electing Trustees unless and until such time
as less than a majority of the Trustees of the Trust holding office have been
elected by shareholders. In such an event the Trustees then in office will
call a shareholders' meeting for the election of Trustees. Except for the
foregoing circumstances and unless removed by action of the shareholders in
accordance with the Trust's By-laws, the Trustees shall continue to hold
office and may appoint successor Trustees.
The Trust's By-laws provide that no person shall serve as a Trustee if
shareholders holding two-thirds of the outstanding shares have removed him
from that office either by a written declaration filed with the Trust's
custodian or by votes cast at a meeting called for that purpose. The By-laws
further provide that under certain circumstances the shareholders may call a
meeting to remove a Trustee and that the Trust is required to provide
assistance in communicating with shareholders about such a meeting.
In accordance with the Declaration of Trust of the Portfolio, there will
normally be no meetings of the investors for the purpose of electing Trustees
unless and until such time as less than a majority of the Trustees holding
office have been elected by investors. In such an event the Trustees of the
Portfolio then in office will call an investors' meeting for the election of
Trustees. Except for the foregoing circumstances and unless removed by action
of the investors in accordance with the Portfolio's Declaration of Trust, the
Trustees shall continue to hold office and may appoint successor Trustees.
The Declaration of Trust of the Portfolio provides that no person shall
serve as a Trustee if investors holding two-thirds of the outstanding interest
have removed him from that office either by a written declaration filed with
the Portfolio's custodian or by votes cast at a meeting called for that
purpose. The Declaration of Trust further provides that under certain
circumstances the investors may call a meeting to remove a Trustee and that
the Portfolio is required to provide assistance in communicating with
investors about such a meeting.
The right to redeem shares of the Fund can be suspended and the payment of
the redemption price deferred when the Exchange is closed (other than for
customary weekend and holiday closings), during periods when trading on the
Exchange is restricted as determined by the Securities and Exchange
Commission, or during any emergency as determined by the Commission which
makes it impracticable for the Portfolio to dispose of its securities or value
its assets, or during any other period permitted by order of the Commission
for the protection of investors.
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P., One Post Office Square, Boston, Massachusetts,
are the independent accountants for the Fund and the Portfolio, providing
audit services, tax return preparation, and assistance and consultation with
respect to the preparation of filings with the Securities and Exchange
Commission.
FINANCIAL STATEMENTS
The financial statements of the Fund and the Portfolio, which are included
in the Fund's Annual Report to Shareholders, are incorporated by reference
into this Statement of Additional Information and have been so incorporated in
reliance on the report of Coopers & Lybrand L.L.P., independent certified
public accountants, as experts in accounting and auditing.
Registrant incorporates by reference the audited financial information for
the Fund's and the Portfolio's listed below for the fiscal year ended August
31, 1995 as previously filed electronically with the Securities and Exchange
Commission:
EV Classic Growth Fund
Growth Portfolio
(Accession No. 0000950156-95-000754)
EV Marathon Growth Fund
Growth Portfolio
(Accession No. 0000950156-95-000753)
EV Traditional Growth Fund
Growth Portfolio
(Accession No. 0000950156-95-000752)
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EV CLASSIC GROWTH FUND. The Fund
became a series of the Trust on July 27, 1994.
FEES AND EXPENSES
INVESTMENT ADVISER
As of August 31, 1995, the Portfolio has net assets of $134,002,600. For
the fiscal year ended August 31, 1995, the Portfolio paid BMR advisory fees of
$786,194 (equivalent to 0.625% of the Portfolio's average daily net assets for
such year). For the period from the Portfolio's start of business, August 2,
1994, to the fiscal year ended August 31, 1994, the Portfolio paid BMR
advisory fees of $64,233 (equivalent to 0.61% (annualized) of the Portfolio's
average daily net assets for such period).
ADMINISTRATOR
As stated under "Investment Adviser and Administrator" in Part I of this
Statement of Additional Information, the Administrator currently receives no
compensation for providing administrative services to the Fund. For the period
from the start of business, November 7, 1994, to the fiscal year ended August
31, 1995, $44,320 of the Fund's operating expenses were allocated to the
Administrator.
DISTRIBUTION PLAN
During the fiscal year ended August 31, 1995, the Principal Underwriter
paid to Authorized Firms sales commissions of $2,666 on sales of Fund shares.
During the same period, the Fund paid sales commission payments under the Plan
to the Principal Underwriter aggregating $3,706. Such payments reduced
Uncovered Distribution Charges. During such period, contingent deferred sales
charges aggregating approximately $167 were imposed on early redeeming
shareholders and paid to the Principal Underwriter to reduce Uncovered
Distribution Charges. As at August 31, 1995, the outstanding Uncovered
Distribution Charges of the Principal Underwriter calculated under the Plan
amounted to approximately $101,992 (which amount was equivalent to 16.0% of
the Fund's net assets on such date). During the fiscal year ended August 31,
1995, the Fund paid service fee payments under the Plan aggregating $1,235, of
which $885 was paid to Authorized Firms and the balance of which was retained
by the Principal Underwriter.
PRINCIPAL UNDERWRITER
For the period from the start of business, November 7, 1994, to the fiscal
year ended August 31, 1995, the Fund paid the Principal Underwriter $2.50 for
repurchase transactions handled by the Principal Underwriter (being $2.50 for
each such transaction).
CUSTODIAN
For the period from the start of business, November 7, 1994, to the fiscal
year ended August 31, 1995, the Fund paid IBT $2,833. For the fiscal year
ended August 31, 1995, the Portfolio paid IBT $80,036.
BROKERAGE COMMISSIONS
For the fiscal year ended August 31, 1995, the Portfolio paid brokerage
commissions of $272,785 on portfolio security transactions, of which
approximately $221,260 was paid in respect of portfolio security transactions
aggregating approximately $140,204,754 to firms which provided some Research
Services (as defined in Part I) to Eaton Vance. For the period from the start
of business, August 2, 1994, to the fiscal year ended August 31, 1994, the
Portfolio paid borkerage commissions of $33,546 on portfolio transactions, of
which approximately $27,546 was paid in respect of portfolio transactions
aggregating approximately $13,421,460 to firms which provide some Research
Services to Eaton Vance (although many of such firms may have been selected in
any particular transactions primarily because of their execution
capabilities).
TRUSTEES
The fees and expenses of those Trustees of the Trust and of the Portfolio
who are not members of the Eaton Vance organization (the noninterested Trustees)
are paid by the Fund (and the other series of the Trust) and the Portfolio,
respectively. (The Trustees of the Trust and the Portfolio who are members of
the Eaton Vance organization receive no compensation from the Fund or the
Portfolio.) During the fiscal year ended August 31, 1995, the noninterested
Trustees of the Trust and the Portfolio earned the following compensation in
their capacities as Trustees from the Fund and the Portfolio, and, for the year
ended September 30, 1995, earned the following compensation in their capacities
as Trustees of the funds in the Eaton Vance fund complex (1):
AGGREGATE AGGREGATE TOTAL COMPENSATION
COMPENSATION COMPENSATION FROM TRUST AND
NAME FROM FUND FROM PORTFOLIO FUND COMPLEX
- ---- ------------ -------------- ------------------
Donald R. Dwight .......... -- 0 -- $1,180(2) $135,000(4)
Samuel L. Hayes, III ...... -- 0 -- 1,207(3) 150,000(5)
Norton H. Reamer .......... -- 0 -- 1,230 135,000
John L. Thorndike ......... -- 0 -- 1,295 140,000
Jack L. Treynor ........... -- 0 -- 1,239 140,000
- ----------
(1) The Eaton Vance fund complex consists of 211 registered investment
companies or series thereof.
(2) Includes $393 of deferred compensation.
(3) Includes $517 of deferred compensation.
(4) Includes $35,000 of deferred compensation.
(5) Includes $33,750 of deferred compensation.
PRINCIPAL UNDERWRITER
Under the Distribution Agreement the Principal Underwriter acts as
principal in selling shares of the Fund. The expenses of printing copies of
prospectuses used to offer shares to Authorized Firms or investors and other
selling literature and of advertising is borne by the Principal Underwriter.
The fees and expenses of qualifying and registering and maintaining
qualifications and registrations of the Fund and its shares under Federal and
state securities laws is borne by the Fund. In addition, the Fund makes
payments to the Principal Underwriter pursuant to its Distribution Plan as
described in the Fund's current Prospectus; the provisions of the plan
relating to such payments are included in the Distribution Agreement. The
Distribution Agreement is renewable annually by the Trust's Board of Trustees
(including a majority of its Trustees who are not interested persons of the
Trust and who have no direct or indirect financial interest in the operation
of the Fund's Distribution Plan or the Distribution Agreement), may be
terminated on sixty days' notice either by such Trustees or by vote of a
majority of the outstanding voting securities of the Fund or on six months'
notice by the Principal Underwriter and is automatically terminated upon
assignment. The Principal Underwriter distributes Fund shares on a "best
efforts" basis under which it is required to take and pay for only such shares
as may be sold.
The Fund has authorized Eaton Vance Distributors, Inc. (the "Principal
Underwriter") to act as its agent in repurchasing shares at the rate of $2.50
for each repurchase transaction handled by the Principal Underwriter. The
Principal Underwriter estimates that the expenses incurred by it in acting as
repurchase agent for the Fund will exceed the amounts paid therefor by the
Fund.
DISTRIBUTION PLAN
The Distribution Plan ("the Plan") is described in the Prospectus and is
designed to meet the requirements of Rule 12b-1 under the 1940 Act and the
sales charge rule of the National Association of Securities Dealers, Inc. (the
"NASD Rule"). The purpose of the Plan is to compensate the Principal
Underwriter for its distribution services and facilities provided to the Fund
by paying the Principal Underwriter sales commissions and a separate
distribution fee in connection with sales of Fund shares. The following
supplements the discussion of the Plan contained in the Fund's Prospectus.
The amount payable by the Fund to the Principal Underwriter pursuant to
the Plan as sales commissions and distribution fees with respect to each day
will be accrued on such day as a liability of the Fund and will accordingly
reduce the Fund's net assets upon such accrual, all in accordance with
generally accepted accounting principles. The amount payable on each day is
limited to 1/365 of .75% of the Fund's net assets on such day. The level of
the Fund's net assets changes each day and depends upon the amount of sales
and redemptions of Fund shares, the changes in the value of the investments
held by the Portfolio, the expenses of the Fund and the Portfolio accrued and
allocated to the Fund on such day, income on portfolio investments of the
Portfolio accrued and allocated to the Fund on such day, and any dividends and
distributions declared on Fund shares. The Fund does not accrue possible
future payments as a liability of the Fund or reduce the Fund's current net
assets in respect of unknown amounts which may become payable under the Plan
in the future because the standards for accrual of such a liability under
accounting principles have not been satisfied.
The Plan provides that the Fund will receive all contingent deferred sales
charges and will make no payments to the Principal Underwriter in respect of
any day on which there are no outstanding uncovered distribution charges of
the Principal Underwriter. Contingent deferred sales charges and accrued
amounts will be paid by the Fund to the Principal Underwriter whenever there
exist uncovered distribution charges under the Fund's Plan.
Periods with a high level of sales of Fund shares accompanied by a low
level of early redemptions of Fund shares resulting in the imposition of
contingent deferred sales charges will tend to increase the time during which
there will exist uncovered distribution charges of the Principal Underwriter.
Conversely, periods with a low level of sales of Fund shares accompanied by a
high level of early redemptions of Fund shares resulting in the imposition of
contingent deferred sales charges will tend to reduce the time during which
there will exist uncovered distribution charges of the Principal Underwriter.
In calculating daily the amount of uncovered distribution charges,
distribution charges will include the aggregate amount of sales commissions
and distribution fees theretofore paid plus the aggregate amount of sales
commissions and distribution fees which the Principal Underwriter is entitled
to be paid under the Plan since its inception. Payments theretofore paid or
payable under the Plan by the Fund to the Principal Underwriter and contingent
deferred sales charges theretofore paid or payable to the Principal
Underwriter will be subtracted from such distribution charges; if the result
of such subtraction is positive, a distribution fee (computed at 1% over the
prime rate then reported in The Wall Street Journal) will be computed on such
amount and added thereto, with the resulting sum constituting the amount of
outstanding uncovered distribution charges with respect to such day. The
amount of outstanding uncovered distribution charges of the Principal
Underwriter calculated on any day does not constitute a liability recorded on
the financial statements of the Fund.
The amount of uncovered distribution charges of the Principal Underwriter
at any particular time depends upon various changing factors, including the
level and timing of sales of Fund shares, the nature of such sales (i.e.,
whether they result from exchange transactions, reinvestments or from cash
sales through Authorized Firms), the level and timing of redemptions of Fund
shares upon which a contingent deferred sales charge will be imposed, the
level and timing of redemptions of Fund shares upon which no contingent
deferred sales charge will be imposed (including redemptions involving
exchanges of Fund shares for shares of another fund in the Eaton Vance Classic
Group of Funds which result in a reduction of uncovered distribution charges),
changes in the level of the net assets of the Fund, and changes in the
interest rate used in the calculation of the distribution fee under the Plan.
(For shares sold prior to January 30, 1995, Plan payments are as follows: the
Principal Underwriter pays monthly sales commissions and service fee payments
to Authorized Firms equivalent to approximately .75% and .25%, respectively,
annualized of the assets maintained in the Fund by their customers beginning
at the time of sale. No payments were made at the time of sale and there is no
contingent deferred sales charge.)
As currently implemented by the Trustees, the Plan authorizes payments of
sales commissions, distribution fees and service fees to the Principal
Underwriter which may by equivalent, on an aggregate basis during any fiscal
year of the Fund, to 1% of the Fund's average daily net assets for such year.
For the sales commission and service fee payments made by the Fund and the
outstanding uncovered distribution charges of the Principal Underwriter, see
"Fees and Expenses -- Distribution Plan" in Part II. The Fund believes that
the combined rate of all these payments may be higher than the rate of
payments made under distribution plans adopted by other investment companies
pursuant to Rule 12b-1. Although the Principal Underwriter will use its own
funds (which may be borrowed from banks) to pay sales commissions and service
fees at the time of sale, it is anticipated that the Eaton Vance organization
will profit by reason of the operation of the Plan through an increase in the
Fund's assets (thereby increasing the advisory fee payable to BMR by the
Portfolio) resulting from sale of Fund shares and through the amounts paid to
the Principal Underwriter, including contingent deferred sales charges,
pursuant to the Plan. The Eaton Vance organization may be considered to have
realized a profit under the Plan if at any point in time the aggregate amounts
theretofore received by the Principal Underwriter under the Plan and from
contingent deferred sales charges have exceeded the total expenses theretofore
incurred by such organization in distributing shares of the Fund. Total
expenses for this purpose will include an allocable portion of the overhead
costs of such organization and its branch offices, which costs will include
without limitation leasing expense, depreciation of building and equipment,
utilities, communication and postage expense, compensation and benefits of
personnel, travel and promotional expense, stationery and supplies, literature
and sales aids, interest expense, data processing fees, consulting and
temporary help costs, insurance, taxes other than income taxes, legal and
auditing expense and other miscellaneous overhead items. Overhead is
calculated and allocated for such purpose by the Eaton Vance organization in a
manner deemed equitable to the Fund.
The provisions of the Plan relating to payments of sales commissions and
distribution fees to the Principal Underwriter are also included in the
Distribution Agreement between the Trust on behalf of the Fund and the
Principal Underwriter. Pursuant to Rule 12b-1, the Plan has been approved by
the Fund's initial sole shareholder (Eaton Vance) and by the Board of Trustees
of the Trust as required by Rule 12b-1. The Plan continues in effect through
and including April 28, 1996, and shall continue in effect indefinitely
thereafter for so long as such continuance is approved at least annually by
the vote of both a majority of (i) the Trustees of the Trust who are not
interested persons of the Trust and who have no direct or indirect financial
interest in the operation of the Plan or any agreements related to the Plan
(the "Rule 12b-1 Trustees") and (ii) all of the Trustees then in office, and
the Distribution Agreement contains a similar provision. The Plan and
Distribution Agreement may be terminated at any time by vote of a majority of
the Rule 12b-1 Trustees or by vote of a majority of the outstanding voting
securities of the Fund. Under the Plan the President or a Vice President of
the Trust shall provide to the Trustees for their review, and the Trustees
shall review at least quarterly, a written report of the amount expended under
the Plan and the purposes for which such expenditures were made. The Plan may
not be amended to increase materially the payments described therein without
approval of the shareholders of the Fund, and all material amendments of the
Plan must also be approved by the Trustees as required by Rule 12b-1. So long
as the Plan is in effect, the selection and nomination of Trustees who are not
interested persons of the Trust shall be committed to the discretion of the
Trustees who are not such interested persons.
The Trustees of the Trust believe that the Plan will be a significant
factor in the expected growth of the Fund's assets, and will result in
increased investment flexibility and advantages which will benefit the Fund
and its shareholders. Payments for sales commissions and distribution fees
made to the Principal Underwriter under the Plan will compensate the Principal
Underwriter for its services and expenses in distributing shares of the Fund.
Service fee payments made to the Principal Underwriter and Authorized Firms
under the Plan provide incentives to provide continuing personal services to
investors and the maintenance of shareholder accounts. By providing
incentives to the Principal Underwriter and Authorized Firms, the Plan is
expected to result in the maintenance of, and possible future growth in, the
assets of the Fund. Based on the foregoing and other relevant factors, the
Trustees of the Trust have determined that in their judgment there is a
reasonable likelihood that the Plan will benefit the Fund and its
shareholders.
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return
on a hypothetical investment of $1,000 in the Fund covering the 1, 5 and 10
year periods ended August 31, 1995. The total return for the period prior to
the Fund's commencement of operations on November 7, 1994 reflects the
Portfolio's total return (or that of its predecessor) adjusted to reflect any
applicable Fund contingent deferred sales charge ("CDSC"). The total return
for such prior period has not been adjusted to reflect the Fund's distribution
fees and certain other expenses. If such an adjustment were made, the
performance would be lower.
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE BEFORE VALUE AFTER TOTAL RETURN BEFORE TOTAL RETURN AFTER
DEDUCTING THE DEDUCTING THE DEDUCTING THE CDSC DEDUCTING THE CDSC*
INVESTMENT INVESTMENT AMOUNT OF CDSC ON CDSC* ON --------------------------- --------------------------
PERIOD DATE INVESTMENT 8/31/95 8/31/95 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ------------- ------------ ----------- --------------- --------------- -------------- ----------- ------------- -----------
10 Years
Ended
<C> <C> <C> <C> <C> <C> <C> <C> <C>
08/31/95 08/31/85 $1,000 $2,961.78 $2,961.78 196.18% 11.47% 196.18% 11.47%
5 Years
Ended
08/31/95 08/31/90 $1,000 $1,625.71 $1,625.71 62.57% 10.21% 62.57% 10.21%
1 Year
Ended
08/31/95* 08/31/94 $1,000 $1,148.87 $1,138.87 14.89% 14.89% 13.89% 13.89%
Past performance is not indicative of future results. Investment return and principal value will fluctuate; shares, when
redeemed, may be worth more or less than their original cost.
<FN>
- ----------
* No CDSC is imposed on certain redemptions. See the Fund's current Prospectus.
** If a portion of the expenses related to the operation of the Fund had not been allocated to Eaton Vance, the Fund would have had
lower returns.
</TABLE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of November 30, 1995, the Trustees and officers of the Trust, as a
group, owned in the aggregate less than 1% of the outstanding shares of the
Fund. As of November 30, 1995, Eaton Vance owned 18.82% of the outstanding
shares of the Fund; Eaton Vance is a Massachusetts business trust and a
wholly-owned subsidiary of EVC. In addition, the following shareholders owned
beneficially and of record the percentages of outstanding shares of the Fund
indicated after their names: Frontier Trust Co., FBO Guthy Renker Corporation,
401(k) Savings & Retirement Plan, c/o The Barclay Group, Ambler, PA (13.81%);
Frontier Trust Co., FBO O'Conner Davies & Co., 401(k) Savings & Retirement
Plan, c/o The Barclay Group, Ambler, PA (13.61%); Frontier Trust Co., FBO
Alliance Systems, Inc., 401(k) Savings and Retirement Plan, c/o The Barclay
Group, Ambler, PA (12.71%); Frontier Trust Co., FBO Mindich Enterprise, 401(k)
Savings & Retirement Plan, c/o The Barclay Group, Ambler, PA (9.37%); Frontier
Trust Co., FBO A & S Welding & Boiler Repair Inc., 401(k) Savings and
Retirement Plan, c/o The Barclay Group, Ambler, PA (9.06%); and Painewebber
FBO Marshall E. Bein, M.D., Weehawken, NJ (8.94%). To the knowledge of the
Trust, no other person owned of record or beneficially 5% or more of the
Fund's outstanding shares as of such date.
<PAGE>
[LOGO]
EV CLASSIC GROWTH FUND
- --------------------------------------------------------------------------------
STATEMENT OF
ADDITIONAL INFORMATION
JANUARY 1, 1996
EV CLASSIC
GROWTH FUND
24 FEDERAL STREET
BOSTON, MA 02110
- --------------------------------------------------------------------------------
INVESTMENT ADVISER OF GROWTH PORTFOLIO
Boston Management and Research, 24 Federal Street, Boston, MA 02110
FUND ADMINISTRATOR
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 89 South Street, Boston, MA 02111
TRANSFER AGENT
First Data Investor Services Group, BOS725, P.O. Box 1559, Boston, MA 02104
(800) 262-1122
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand LLP, One Post Office Square, Boston, MA 02109
C-CFSAI
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EV MARATHON GROWTH FUND. The Fund
became a series of the Trust on July 27, 1994.
FEES AND EXPENSES
INVESTMENT ADVISER
As of August 31, 1995, the Portfolio has net assets of $134,002,600. For
the fiscal year ended August 31, 1995, the Portfolio paid BMR advisory fees of
$786,194 (equivalent to 0.625% of the Portfolio's average daily net assets for
such year). For the period from the Portfolio's start of business, August 2,
1994, to the fiscal year ended August 31, 1994, the Portfolio paid BMR
advisory fees of $64,233 (equivalent to 0.61% (annualized) of the Portfolio's
average daily net assets for such period).
ADMINISTRATOR
As stated under "Investment Adviser and Administrator" in Part I of this
Statement of Additional Information, the Administrator currently receives no
compensation for providing administrative services to the Fund. For the period
from the start of business, September 13, 1994, to the fiscal year ended
August 31, 1995, $46,134 of the Fund's operating expenses were allocated to
the Administrator.
DISTRIBUTION PLAN
During the fiscal year ended August 31, 1995, the Principal Underwriter
paid to Authorized Firms sales commissions of $6,611 on sales of Fund shares.
During the same period, the Fund paid sales commission payments under the Plan
to the Principal Underwriter aggregating $10,211. Such payments reduced
Uncovered Distribution Charges. During such period, contingent deferred sales
charges aggregating approximately $5,662 were imposed on early redeeming
shareholders and paid to the Principal Underwriter to reduce Uncovered
Distribution Charges. As at August 31, 1995, the outstanding Uncovered
Distribution Charges of the Principal Underwriter calculated under the Plan
amounted to approximately $79,307 (which amount was equivalent to 3.5% of the
Fund's net assets on such date). During the fiscal year ended August 31, 1995,
the Fund made no service fee payments under the Plan.
PRINCIPAL UNDERWRITER
For the period from the start of business, September 13, 1994, to the
fiscal year ended August 31, 1995, the Fund paid the Principal Underwriter
$42.50 for repurchase transactions handled (being $2.50 for each such
transaction).
CUSTODIAN
For the period from the start of business, September 13, 1994, to the
fiscal year ended August 31, 1995, the Fund paid IBT $2,666. For the fiscal
year ended August 31, 1995, the Portfolio paid IBT $80,036.
BROKERAGE COMMISSIONS
For the fiscal year ended August 31, 1995, the Portfolio paid brokerage
commissions of $272,785 on portfolio security transactions, of which
approximately $221,260 was paid in respect of portfolio security transactions
aggregating approximately $140,204,754 to firms which provided some Research
Services (as defined in Part I) to Eaton Vance. For the period from the start
of business August 2, 1994, to the fiscal year ended August 31, 1994, the
Portfolio paid brokerage commissions of $33,546 on portfolio transactions, of
which approximately $27,546 was paid in respect of portfolio transactions
aggregating approximately $13,421,460 to firms which provide some Research
Services to Eaton Vance (although many of such firms may have been selected in
any particular transaction primarily because of their excecution
capabilities).
TRUSTEES
The fees and expenses of those Trustees of the Trust and of the Portfolio
who are not members of the Eaton Vance organization (the noninterested Trustees)
are paid by the Fund (and the other series of the Trust) and the Portfolio,
respectively. (The Trustees of the Trust and the Portfolio who are members of
the Eaton Vance organization receive no compensation from the Fund or the
Portfolio.) During the fiscal year ended August 31, 1995, the noninterested
Trustees of the Trust and the Portfolio earned the following compensation in
their capacities as Trustees from the Fund and the Portfolio, and, for the year
ended September 30, 1995, earned the following compensation in their capacities
as Trustees of the funds in the Eaton Vance fund complex (1):
AGGREGATE AGGREGATE TOTAL COMPENSATION
COMPENSATION COMPENSATION FROM TRUST AND
NAME FROM FUND FROM PORTFOLIO FUND COMPLEX
- ---- ------------ -------------- ------------------
Donald R. Dwight .......... $-0- $1,180(2) $135,000(4)
Samuel L. Hayes, III ...... -0- 1,207(3) 150,000(5)
Norton H. Reamer .......... -0- 1,230 135,000
John L. Thorndike ......... -0- 1,295 140,000
Jack L. Treynor ........... -0- 1,239 140,000
- ----------
(1) The Eaton Vance fund complex consists of 211 registered investment
companies or series thereof.
(2) Includes $393 of deferred compensation.
(3) Includes $517 of deferred compensation.
(4) Includes $35,000 of deferred compensation.
(5) Includes $33,750 of deferred compensation.
PRINCIPAL UNDERWRITER
Under the Distribution Agreement the Principal Underwriter acts as
principal in selling shares of the Fund. The expenses of printing copies of
prospectuses used to offer shares to Authorized Firms or investors and other
selling literature and of advertising is borne by the Principal Underwriter.
The fees and expenses of qualifying and registering and maintaining
qualifications and registrations of the Fund and its shares under Federal and
state securities laws is borne by the Fund. In addition, the Fund makes
payments to the Principal Underwriter pursuant to its Distribution Plan as
described in the Fund's current Prospectus; the provisions of the plan
relating to such payments are included in the Distribution Agreement. The
Distribution Agreement is renewable annually by the Trust's Board of Trustees
(including a majority of its Trustees who are not interested persons of the
Trust and who have no direct or indirect financial interest in the operation
of the Fund's Distribution Plan or the Distribution Agreement), may be
terminated on sixty days' notice either by such Trustees or by vote of a
majority of the outstanding voting securities of the Fund or on six months'
notice by the Principal Underwriter and is automatically terminated upon
assignment. The Principal Underwriter distributes Fund shares on a "best
efforts" basis under which it is required to take and pay for only such shares
as may be sold.
The Fund has authorized Eaton Vance Distributors, Inc. (the "Principal
Underwriter") to act as its agent in repurchasing shares at the rate of $2.50
for each repurchase transaction handled by the Principal Underwriter. The
Principal Underwriter estimates that the expenses incurred by it in acting as
repurchase agent for the Fund will exceed the amounts paid therefor by the
Fund.
DISTRIBUTION PLAN
The Distribution Plan ("the Plan") is described in the Prospectus and is
designed to meet the requirements of Rule 12b-1 under the 1940 Act and the
sales charge rule of the National Association of Securities Dealers, Inc. (the
"NASD Rule"). The purpose of the Plan is to compensate the Principal
Underwriter for its distribution services and facilities provided to the Fund
by paying the Principal Underwriter sales commissions and a separate
distribution fee in connection with sales of Fund shares. The following
supplements the discussion of the Plan contained in the Fund's Prospectus.
The amount payable by the Fund to the Principal Underwriter pursuant to
the Plan as sales commissions and distribution fees with respect to each day
will be accrued on such day as a liability of the Fund and will accordingly
reduce the Fund's net assets upon such accrual, all in accordance with
generally accepted accounting principles. The amount payable on each day is
limited to 1/365 of .75% of the Fund's net assets on such day. The level of
the Fund's net assets changes each day and depends upon the amount of sales
and redemptions of Fund shares, the changes in the value of the investments
held by the Portfolio, the expenses of the Fund and the Portfolio accrued and
allocated to the Fund on such day, income on portfolio investments of the
Portfolio accrued and allocated to the Fund on such day, and any dividends and
distributions declared on Fund shares. The Fund does not accrue possible
future payments as a liability of the Fund or reduce the Fund's current net
assets in respect of unknown amounts which may become payable under the Plan
in the future because the standards for accrual of such a liability under
accounting principles have not been satisfied.
The Plan provides that the Fund will receive all contingent deferred sales
charges and will make no payments to the Principal Underwriter in respect of
any day on which there are no outstanding uncovered distribution charges of
the Principal Underwriter. Contingent deferred sales charges and accrued
amounts will be paid by the Fund to the Principal Underwriter whenever there
exist uncovered distribution charges under the Plan.
Periods with a high level of sales of Fund shares accompanied by a low
level of early redemptions of Fund shares resulting in the imposition of
contingent deferred sales charges will tend to increase the time during which
there will exist uncovered distribution charges of the Principal Underwriter.
Conversely, periods with a low level of sales of Fund shares accompanied by a
high level of early redemptions of Fund shares resulting in the imposition of
contingent deferred sales charges will tend to reduce the time during which
there will exist uncovered distribution charges of the Principal Underwriter.
In calculating daily the amount of uncovered distribution charges,
distribution charges will include the aggregate amount of sales commissions
and distribution fees theretofore paid plus the aggregate amount of sales
commissions and distribution fees which the Principal Underwriter is entitled
to be paid under the Plan since its inception. Payments theretofore paid or
payable under the Plan by the Fund to the Principal Underwriter and contingent
deferred sales charges theretofore paid or payable to the Principal
Underwriter will be subtracted from such distribution charges; if the result
of such subtraction is positive, a distribution fee (computed at 1% over the
prime rate then reported in The Wall Street Journal) will be computed on such
amount and added thereto, with the resulting sum constituting the amount of
outstanding uncovered distribution charges with respect to such day. The
amount of outstanding uncovered distribution charges of the Principal
Underwriter calculated on any day does not constitute a liability recorded on
the financial statements of the Fund.
The amount of uncovered distribution charges of the Principal Underwriter
at any particular time depends upon various changing factors, including the
level and timing of sales of Fund shares, the nature of such sales (i.e.,
whether they result from exchange transactions, reinvestments or from cash
sales through Authorized Firms), the level and timing of redemptions of Fund
shares upon which a contingent deferred sales charge will be imposed, the
level and timing of redemptions of Fund shares upon which no contingent
deferred sales charge will be imposed (including redemptions involving
exchanges of Fund shares for shares of another fund in the Eaton Vance
Marathon Group of Funds which result in a reduction of uncovered distribution
charges), changes in the level of the net assets of the Fund, and changes in
the interest rate used in the calculation of the distribution fee under the
Plan.
As currently implemented by the Trustees, the Plan authorizes payments of
sales commissions and distribution fees to the Principal Underwriter and
service fees to the Principal Underwriter and Authorized Firms which may be
equivalent, on an aggregate basis during any fiscal year of the Fund, to 1% of
the Fund's average daily net assets for such year. For the sales commission
and service fee payments made by the Fund and the outstanding uncovered
distribution charges of the Principal Underwriter, see "Fees and Expenses --
Distribution Plan" in this Part II. The Fund believes that the combined rate
of all these payments may be higher than the rate of payments made under
distribution plans adopted by other investment companies pursuant to Rule 12b-
1. Although the Principal Underwriter will use its own funds (which may be
borrowed from banks) to pay sales commissions at the time of sale, it is
anticipated that the Eaton Vance organization will profit by reason of the
operation of the Plan through an increase in the Fund's assets (thereby
increasing the advisory fee payable to BMR by the Portfolio) resulting from
sale of Fund shares and through the amounts paid to the Principal Underwriter,
including contingent deferred sales charges, pursuant to the Plan. The Eaton
Vance organization may be considered to have realized a profit under the Plan
if at any point in time the aggregate amounts theretofore received by the
Principal Underwriter pursuant to the Plan and from contingent deferred sales
charges have exceeded the total expenses theretofore incurred by such
organization in distributing shares of the Fund. Total expenses for this
purpose will include an allocable portion of the overhead costs of such
organization and its branch offices, which costs will include without
limitation leasing expense, depreciation of building and equipment, utilities,
communication and postage expense, compensation and benefits of personnel,
travel and promotional expense, stationery and supplies, literature and sales
aids, interest expense, data processing fees, consulting and temporary help
costs, insurance, taxes other than income taxes, legal and auditing expense
and other miscellaneous overhead items. Overhead is calculated and allocated
for such purpose by the Eaton Vance organization in a manner deemed equitable
to the Fund.
The provisions of the Plan relating to payments of sales commissions and
distribution fees to the Principal Underwriter are also included in the
Distribution Agreement between the Trust on behalf of the Fund and the
Principal Underwriter. Pursuant to Rule 12b-1, the Plan has been approved by
the Fund's initial sole shareholder (Eaton Vance) and by the Board of
Trustees of the Trust as required by Rule 12b-1. The Plan continues in effect
through and including April 28, 1996, and shall continue in effect
indefinitely thereafter for so long as such continuance is approved at least
annually by the vote of both a majority of (i) the Trustees of the Trust who
are not interested persons of the Trust and who have no direct or indirect
financial interest in the operation of the Plan or any agreements related to
the Plan (the "Rule 12b-1 Trustees") and (ii) all of the Trustees then in
office, and the Distribution Agreement contains a similar provision. The Plan
and Distribution Agreement may be terminated at any time by vote of a majority
of the Rule 12b-1 Trustees or by a vote of a majority of the outstanding
voting securities of the Fund. Under the Plan the President or a Vice
President of the Trust shall provide to the Trustees for their review, and the
Trustees shall review at least quarterly, a written report of the amount
expended under the Plan and the purposes for which such expenditures were
made. The Plan may not be amended to increase materially the payments
described therein without approval of the shareholders of the Fund, and all
material amendments of the Plan must also be approved by the Trustees as
required by Rule 12b-1. So long as the Plan is in effect, the selection and
nomination of Trustees who are not interested persons of the Trust shall be
committed to the discretion of the Trustees who are not such interested
persons.
The Trustees of the Trust believe that the Plan will be a significant
factor in the expected growth of the Fund's assets, and will result in
increased investment flexibility and advantages which will benefit the Fund
and its shareholders. Payments for sales commissions and distribution fees
made to the Principal Underwriter under the Plan will compensate the Principal
Underwriter for its services and expenses in distributing shares of the Fund.
Service fee payments made to the Principal Underwriter and Authorized Firms
under the Plan provide incentives to provide continuing personal services to
investors and the maintenance of shareholder accounts. By providing incentives
to the Principal Underwriter and Authorized Firms, the Plan is expected to
result in the maintenance of, and possible future growth in, the assets of the
Fund. Based on the foregoing and other relevant factors, the Trustees of the
Trust have determined that in their judgment there is a reasonable likelihood
that the Plan will benefit the Fund and its shareholders.
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return
on a hypothetical investment of $1,000 in the Fund covering the 1, 5 and 10
year periods ended August 31, 1995. The total return for the period prior to
the Fund's commencement of operations on September 13, 1994 reflects the
Portfolio's total return (or that of its predecessor) adjusted to reflect any
applicable Fund contingent deferred sales charge ("CDSC"). The total return
for such prior period has not been adjusted to reflect the Fund's distribution
fees and certain other expenses. If such an adjustment were made, the
performance would be lower.
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE BEFORE VALUE AFTER TOTAL RETURN BEFORE TOTAL RETURN AFTER
DEDUCTING THE DEDUCTING THE DEDUCTING THE CDSC DEDUCTING THE CDSC*
INVESTMENT INVESTMENT AMOUNT OF CDSC ON CDSC* ON ------------------------ -------------------------
PERIOD DATE INVESTMENT 8/31/95 8/31/95 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ------------ ---------- --------- ------------- -------------- ----------- --------- ------------ ----------
<C> <C> <C> <C> <C> <C> <C> <C> <C>
10 Years
ended
8/31/95 8/31/85 $1,000 $2,973.17 $2,973.17 $197.32 11.51% 197.32% 11.51%
5 Years
ended
8/31/95 8/31/90 $1,000 $1,631.96 $1,611.96 63.20% 10.29% 61.20% 10.02%
1 Year
ended
8/31/95** 8/31/94 $1,000 $1,153.29 $1,103.29 15.33% 15.33% 10.33% 10.33%
Past performance is not indicative of future results. Investment return and principal value will fluctuate; shares, when
redeemed, may be worth more or less than their original cost.
<FN>
- ----------
* No CDSC is imposed on certain redemptions. See the Fund's current Prospectus.
** If a portion of the expenses related to the operation of the Fund had not been allocated to Eaton Vance, the Fund would have had
lower returns.
</TABLE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of November 30,, 1995, the Trustees and officers of the Trust, as a
group, owned in the aggregate less than 1% of the outstanding shares of the
Fund. As of November 30, 1995, Merrill Lynch, Pierce, Fenner & Smith, Inc.,
Jacksonville, FL was the record owner of approximately 24.22% of the
outstanding shares, which were held on behalf of its customers who are the
beneficial owners of such shares, and as to which it had voting power under
certain limited circumstances. To the knowledge of the Trust, no other person
owned of record or beneficially 5% or more of the Fund's outstanding shares as
of such date.
<PAGE>
[LOGO]
EV MARATHON GROWTH FUND
- --------------------------------------------------------------------------------
STATEMENT OF
ADDITIONAL INFORMATION
JANUARY 1, 1996
EV MARATHON
GROWTH FUND
24 FEDERAL STREET
BOSTON, MA 02110
- --------------------------------------------------------------------------------
INVESTMENT ADVISER OF GROWTH PORTFOLIO
Boston Management and Research, 24 Federal Street, Boston, MA 02110
FUND ADMINISTRATOR
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 89 South Street, Boston, MA 02111
TRANSFER AGENT
First Data Investor Services Group, BOS725, P.O. Box 1559, Boston, MA 02104
(800) 262-1122
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand LLP, One Post Office Square, Boston, MA 02109
M-GFSAI
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EV TRADITIONAL GROWTH FUND. On
July 27, 1994 the Fund became a series of the Trust and redesignated its name
from Eaton Vance Growth Fund to EV Traditional Growth Fund.
FEES AND EXPENSES
INVESTMENT ADVISER
As of August 31, 1995, the Portfolio has net assets of $134,002,600. For
the fiscal year ended August 31, 1995, the Portfolio paid BMR advisory fees of
$786,194 (equivalent to 0.625% of the Portfolio's average daily net assets for
such year). For the period from the Portfolio's start of business, August 2,
1994, to the fiscal year ended August 31, 1994, the Portfolio paid BMR
advisory fees of $64,233 (equivalent to 0.61% (annualized) of the Portfolio's
average daily net assets for such period).
Prior to the close of business on August 1, 1994 (when the Fund
transferred substantially all of its assets to the Portfolio in exchange for
an interest in the Portfolio), the Fund retained Eaton Vance as its investment
adviser. For the period from September 1, 1993 to August 1, 1994, the Fund
paid Eaton Vance advisory fees of $777,308 (equivalent to 0.63% (annualized)
of the Fund's average daily net assets for such period). For the fiscal year
ended August 31, 1993, the Fund paid Eaton Vance advisory fees of $902,236.
ADMINISTRATOR
As stated under "Investment Adviser and Administrator" in Part I of this
Statement of Additional Information, the Administrator currently receives no
compensation for providing administrative services to the Fund.
SERVICE PLAN
The Service Plan remains in effect until April 28, 1996 and may be
continued as described further under "Service Plan" in this Part II. The
Trustees have initially implemented the Plan by authorizing the Fund to make
quarterly service fee payments to the Principal Underwriter and Authorized
Firms in amounts not expected to exceed .25% of the Fund's average daily net
assets for any fiscal year based on the value of Fund shares sold by such
persons and remaining outstanding for at least twelve months. During the
fiscal year ended August 31, 1995, the Fund made service fee payments under
the Plan aggregating $87,903, of which $35,697 was paid to Authorized Firms
and the balance of which was retained by the Principal Underwriter.
CUSTODIAN
For the fiscal year ended August 31, 1995, the Fund paid IBT $12,082 and
the Portfolio paid IBT $80,036.
BROKERAGE COMMISSIONS
For the fiscal year ended August 31, 1995, the Portfolio paid brokerage
commissions of $272,785 on portfolio security transactions, of which
approximately $221,260 was paid in respect of portfolio security transactions
aggregating approximately $140,204,754 to firms which provided some Research
Services (as defined in Part I) to BMR. For the period from the Portfolio's
start of business, August 2, 1994 to the fiscal year ended August 31, 1994, the
Portfolio paid borkerage commissions of $33,546 on portfolio transactions, of
which approximately $27,546 was paid in respect of portfolio transactions
aggregating approximately $13,421,460 to firms which provide some Research
Services to BMR. For the period from September 1, 1993 to August 1, 1994, the
Fund paid brokerage commissions of $275,173 on portfolio security transactions,
of which approximately $261,973 was paid in respect of portfolio security
transactions aggregating approximately $174,390,224 to firms which provided some
Research Services to Eaton Vance.
During the fiscal year ended August 31, 1993 the Fund paid brokerage
commissions of $279,600 on portfolio security transactions, of which
approximately $258,744 was paid in respect of portfolio security transactions
aggregating approximately $172,838,057 to firms which provided some Research
Services to Eaton Vance (although many of such firms may have been selected in
any particular transaction primarily because of their execution capabilities).
PRINCIPAL UNDERWRITER
The total sales charges for sales of shares of the Fund during the fiscal
years ended August 31, 1995, 1994 and 1993, were $20,727, $54,164 and $68,513,
respectively, of which $3,924, $7,156 and $10,760, respectively, was received
by the Principal Underwriter. For the fiscal years ended August 31, 1994 and
1993, Authorized Firms received $47,007 and $57,752, respectively, from the
total sales charges.
For the fiscal year ended August 31, 1995, the Fund paid the Principal
Underwriter $830.00 for repurchase transactions handled by the Principal
Underwriter (being $2.50 for each repurchase transaction handled by the
Principal Underwriter).
TRUSTEES
The fees and expenses of those Trustees of the Trust and of the Portfolio
who are not members of the Eaton Vance organization (the noninterested Trustees)
are paid by the Fund (and the other series of the Trust) and the Portfolio,
respectively. (The Trustees of the Trust and the Portfolio who are members of
the Eaton Vance organization receive no compensation from the Fund or the
Portfolio.) During the fiscal year ended August 31, 1995, the noninterested
Trustees of the Trust and the Portfolio earned the following compensation in
their capacities as Trustees from the Fund and the Portfolio, and, for the year
ended September 30, 1995, earned the following compensation in their capacities
as Trustees of the funds in the Eaton Vance fund complex (1):
AGGREGATE AGGREGATE TOTAL COMPENSATION
COMPENSATION COMPENSATION FROM TRUST AND
NAME FROM FUND FROM PORTFOLIO FUND COMPLEX
- ---- ------------ -------------- ------------------
Donald R. Dwight ............. $879 $1,180(2) $135,000(4)
Samuel L. Hayes, III ......... 884 1,207(3) 150,000(5)
Norton H. Reamer ............. 868 1,230 135,000
John L. Thorndike ............ 897 1,295 140,000
Jack L. Treynor .............. 921 1,239 140,000
- ----------
(1) The Eaton Vance fund complex consists of 211 registered investment
companies or series thereof.
(2) Includes $393 of deferred compensation.
(3) Includes $517 of deferred compensation.
(4) Includes $35,000 of deferred compensation.
(5) Includes $33,750 of deferred compensation.
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return
on a hypothetical investment of $1,000 in the Fund covering the ten, five and
one year periods ended August 31, 1995.
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT
TOTAL RETURN TOTAL RETURN
VALUE OF EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
INVESTMENT INVESTMENT AMOUNT OF INVESTMENT ---------------------------- ----------------------------
PERIOD DATE INVESTMENT* ON 8/31/95 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
10 Years Ended
8/31/95 8/31/85 $951.88 $2,845.25 198.91% 11.56% 184.53% 11.01%
5 Years Ended
8/31/95 8/31/90 $952.09 $1,562.10 64.07% 10.39% 56.21% 9.31%
1 Year Ended
8/31/95 8/31/94 $952.15 $1,103.98 15.95% 15.95% 10.40% 10.40%
Past performance is not indicative of future results. Investment return and principal value will fluctuate; shares, when
redeemed, may be worth more or less than their original cost.
<FN>
* Initial investment less current maximum sales charge of 4.75%
</TABLE>
SERVICES FOR ACCUMULATION
The following services are voluntary, involve no extra charge other than
the sales charge included in the offering price, and may be changed or
discontinued without penalty at any time.
INTENDED QUANTITY INVESTMENT--STATEMENT OF INTENTION. If it is anticipated that
$100,000 or more of Fund shares and shares of the other continuously offered
open-end funds listed under "The Eaton Vance Exchange Privilege" in the current
Prospectus of the Fund will be purchased within a 13-month period, a Statement
of Intention should be signed so that shares may be obtained at the same reduced
sales charge as though the total quantity were invested in one lump sum. Shares
held under Right of Accumulation (see below) as of the date of the Statement
will be included toward the completion of the Statement. The Statement
authorizes the Transfer Agent to hold in escrow sufficient shares (5% of the
dollar amount specified in the Statement) which can be redeemed to make up any
difference in sales charge on the amount intended to be invested and the amount
actually invested. Execution of a Statement does not obligate the shareholder to
purchase or the Fund to sell the full amount indicated in the Statement, and
should the amount actually purchased during the 13-month period be more or less
than that indicated on the Statement, price adjustments will be made. For sales
charges and other information on quantity purchases, see "How to Buy Fund
Shares" in the Fund's current Prospectus. Any investor considering signing a
Statement of Intention should read it carefully.
RIGHT OF ACCUMULATION--CUMULATIVE QUANTITY DISCOUNT. The applicable sales charge
level for the purchase of Fund shares is calculated by taking the dollar amount
of the current purchase and adding it to the value (calculated at the maximum
current offering price) of the shares the shareholder owns in his account(s) in
the Fund and in the other continuously offered open-end funds listed under "The
Eaton Vance Exchange Privilege" in the current Prospectus of the Fund for which
Eaton Vance acts as adviser or administrator at the time of purchase. The sales
charge on the shares being purchased will then be at the rate applicable to the
aggregate. For example, if the shareholder owned shares valued at $80,000 in EV
Traditional Investors Fund, and purchased an additional $20,000 of Fund shares,
the sales charge for the $20,000 purchase would be at the rate of 3.75% of the
offering price (3.90% of the net amount invested) which is the rate applicable
to single transactions of $100,000. For sales charges on quantity purchases, see
"How to Buy Fund Shares" in the Fund's current Prospectus. Shares purchased (i)
by an individual, his spouse and their children under the age of twenty-one, and
(ii) by a trustee, guardian or other fiduciary of a single trust estate or a
single fiduciary account, will be combined for the purpose of determining
whether a purchase will qualify for the Right of Accumulation and if qualifying,
the applicable sales charge level.
For any such discount to be made available, at the time of purchase a
purchaser or his Authorized Firm must provide Eaton Vance Distributors, Inc.
(the "Principal Underwriter") (in the case of a purchase made through an
Authorized Firm) or the Transfer Agent (in the case of an investment made by
mail) with sufficient information to permit verification that the purchase
order qualifies for the accumulation privilege. Corfirmation of the order is
subject to such verification. The Right of Accumulation privilege may be
amended or terminated at any time as to purchases occurring thereafter.
PRINCIPAL UNDERWRITER
Shares of the Fund may be continuously purchased at the public offering
price through certain financial service firms ("Authorized Firms") which have
agreements with Eaton Vance Distributors, Inc., the Principal Underwriter. The
Principal Underwriter is a wholly-owned subsidiary of Eaton Vance. The public
offering price is the net asset value next computed after receipt of the
order, plus, where applicable, a variable percentage (sales charge) depending
upon the amount of purchase as indicated by the sales charge table set forth
in the prospectus. Such table is applicable to purchases of the Fund alone or
in combination with purchases of the other funds offered by the Principal
Underwriter, made at a single time by (i) an individual, or an individual, his
spouse and their children under the age of twenty-one, purchasing shares for
his or their own account; and (ii) a trustee or other fiduciary purchasing
shares for a single trust estate or a single fiduciary account.
The table is also presently applicable to (1) purchases of Fund shares,
alone or in combination with purchases of any of the other funds offered by
the Principal Underwriter through one dealer aggregating $100,000 or more made
by any of the persons enumerated above within a thirteen-month period starting
with first purchase pursuant to a written Statement of Intention, in the form
provided by the Underwriter, which includes provisions for a price adjustment
depending upon the amount actually purchased within such period (a purchase
not made pursuant to such Statement may be included thereunder if the
Statement is filed within 90 days of such purchase); or (2) purchases of the
Fund pursuant to the Right of Accumulation and declared as such at the time of
purchase.
Subject to the applicable provisions of the 1940 Act, the Fund may issue
shares at net asset value in the event that an investment company (whether a
regulated or private investment company or a personal holding company) is
merged or consolidated with or acquired by the Fund. Normally no sales charges
will be paid in connection with an exchange of Fund shares for the assets of
such investment company.
Shares may be sold at net asset value to any officer, director, trustee,
general partner or employee of the Fund, the Portfolio or any investment
company for which Eaton Vance or BMR acts as investment adviser, any
investment advisory, agency, custodial or trust account managed or
administered by Eaton Vance or by any parent, subsidiary or other affiliate of
Eaton Vance, or any officer, director or employee of any parent, subsidiary or
other affiliate of Eaton Vance. The terms "officer," "director," "trustee,"
"general partner" or "employee" as used in this paragraph include any such
person's spouse and minor children, and also retired officers, directors,
trustees, general partners and employees and their spouses and minor children.
Shares of the Fund may also be sold at net asset value to registered
representatives and employees of certain Authorized Firms and to such persons'
spouses and children under the age of 21 and their beneficial accounts.
The Trust reserves the right to suspend or limit the offering of shares of
the Fund to the public at any time.
The Principal Underwriter acts as principal in selling shares of the Fund
under the distribution agreement with the Trust on behalf of the Fund. The
expenses of printing copies of prospectuses used to offer shares to financial
service firms or investors and other selling literature and of advertising are
borne by the Principal Underwriter. The fees and expenses of qualifying and
registering and maintaining qualifications and registrations of the Fund and
its shares under Federal and state securities laws are borne by the Fund. The
distribution agreement is renewable annually by the Board of Trustees of the
Trust (including a majority of its Trustees who are not interested persons of
the Principal Underwriter or the Trust), may be terminated on six months'
notice by either party, and is automatically terminated upon assignment. The
Principal Underwriter distributes Fund shares on a "best efforts" basis under
which it is required to take and pay for only such shares as may be sold. The
Principal Underwriter allows Authorized Firms discounts from the applicable
public offering price which are alike for all Firms. In the case of the
maximum sales charge the Authorized Firm retains 4% of the public offering
price (4.20% of the net amount invested) and the Principal Underwriter retains
0.75% of the public offering price (0.79% of the net amount invested).
However, the Principal Underwriter may allow, upon notice to all Authorized
Firms with whom it has agreements, discounts up to the full sales charge
during the periods specified in the notice. During periods when the discount
includes the full sales charge, such Firms may be deemed to be underwriters as
that term is defined in the Securities Act of 1933.
The Fund has authorized the Principal Underwriter to act as its agent in
repurchasing shares at the rate of $2.50 for each repurchase transaction
handled by the Principal Underwriter. The Principal Underwriter estimates that
the expenses incurred by it in acting as repurchase agent for the Fund will
exceed the amounts paid therefor by the Fund.
SERVICE PLAN
The Trust on behalf of the Fund has adopted a Service Plan (the "Plan")
designed to meet the service fee requirements of the revised sales charge rule
of the National Association of Securities Dealers, Inc. Pursuant to such
Rule, the Plan has been approved by the independent Trustees of the Trust, who
have no direct or indirect financial interest in the Plan and by all of the
Trustees of the Trust on behalf of the Fund. The Plan amends and replaces the
Trust's original distribution plan which was approved by the Fund's
shareholders. (Management believes service fee payments are not distribution
expenses governed by the Rule, but has chosen to have the Plan approved as if
the Rule were applicable.)
The Plan provides that the Fund may make payments of service fees for
personal services and/or the maintenance of shareholder accounts to the
Principal Underwriter, Authorized Firms and other persons in amounts not
exceeding .25% of the Fund's average daily net assets for any fiscal year. The
Trustees have implemented the Plan by authorizing the Fund to make quarterly
service fee payments to the Principal Underwriter and Authorized Firms in
amounts not expected to exceed .25% of that portion of the Fund's average
daily net assets for any fiscal year which is attributable to shares of the
Fund sold on or after July 1, 1989 by such persons and remaining outstanding
for at least twelve months.
The Plan remains in effect through April 28, 1996 and from year to year
thereafter, provided such continuance is approved by a vote of the Board of
Trustees and by both a majority of (i) those Trustees who are not interested
persons of the Trust and who have no direct or indirect financial interest in
the operation of the Plan or any agreements related to it (the "Rule 12b-1
Trustees") and (ii) all of the Trustees then in office, cast in person at a
meeting (or meetings) called for the purpose of voting on this Plan. The Plan
may not be amended to increase materially the payments described herein
without approval of the shareholders of the Fund, and all material amendments
of the Plan must also be approved by the Trustees of the Trust in the manner
described above. The Plan may be terminated any time by vote of the Rule 12b-
1 Trustees or by a vote of a majority of the outstanding voting securities of
the Fund. Under the Plan, the President or a Vice President of the Trust shall
provide to the Trustees for their review, and the Trustees shall review at
least quarterly, a written report of the amount expended under the Plan and
the purposes for which such expenditures were made.
So long as the Plan is in effect, the selection and nomination of Trustees
who are not interested persons of the Trust shall be committed to the
discretion of the Trustees who are not such interested persons. The Trustees
have determined that in their judgment there is a reasonable likelihood that
the Plan will benefit the Fund and its shareholders.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of November 30, 1995, the Trustees and officers of the Trust, as a
group, owned in the aggregate less than 1% of the outstanding shares of the
Fund. To the knowledge of the Trust, no person owned of record or beneficially
5% or more of the Fund's outstanding shares as of such date.
<PAGE>
[LOGO]
EV TRADITIONAL
GROWTH
FUND
STATEMENT OF
ADDITIONAL INFORMATION
JANUARY 1, 1996
EV TRADITIONAL
GROWTH FUND
24 FEDERAL STREET
BOSTON, MA 02110
- --------------------------------------------------------------------------------
INVESTMENT ADVISER OF GROWTH PORTFOLIO
Boston Management and Research, 24 Federal Street, Boston, MA 02110
FUND ADMINISTRATOR
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 89 South Street, Boston, MA 02111
TRANSFER AGENT
First Data Investor Services Group, BOS725, P.O. Box 1559, Boston, MA 02104
(800) 262-1122
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand LLP, One Post Office Square, Boston, MA 02109
T-GFSAI
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL INFORMATION
January 1, 1996
EV MARATHON GOLD & NATURAL RESOURCES FUND
24 Federal Street
Boston, Massachusetts 02110
(800) 225-6265
- ------------------------------------------------------------------------------
TABLE OF CONTENTS Page
Investment Objective and Policies ............................. 2
Investment Restrictions ....................................... 10
Trustees and Officers ......................................... 13
Control Persons and Principal Holders of Securities ........... 15
Investment Adviser ............................................ 15
Custodian ..................................................... 16
Service for Withdrawal ........................................ 17
Determination of Net Asset Value .............................. 17
Investment Performance ........................................ 18
Taxes ......................................................... 19
Principal Underwriter ......................................... 20
Distribution Plan ............................................. 21
Portfolio Security Transactions ............................... 23
Other Information ............................................. 24
Independent Certified Public Accountants ...................... 25
Financial Statements .......................................... 25
Appendix ...................................................... 27
- ------------------------------------------------------------------------------
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY THE PROSPECTUS OF EV MARATHON GOLD & NATURAL RESOURCES FUND
(THE "FUND") DATED JANUARY 1, 1996, AS SUPPLEMENTED FROM TIME TO TIME. THIS
STATEMENT OF ADDITIONAL INFORMATION SHOULD BE READ IN CONJUNCTION WITH SUCH
PROSPECTUS, A COPY OF WHICH MAY BE OBTAINED WITHOUT CHARGE BY CONTACTING EATON
VANCE DISTRIBUTORS, INC. (THE "PRINCIPAL UNDERWRITER") (SEE BACK COVER FOR
ADDRESS AND PHONE NUMBER).
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
INVESTMENT OBJECTIVE
The investment objective of EV Marathon Gold & Resources Fund (the
"Fund"), a series of Eaton Vance Growth Trust (the "Trust"), is capital
appreciation and protection of the purchasing power of the shareholder's
capital. Although the Fund will derive income from some of its investments,
current income is not an investment objective and will not be a primary
consideration in selecting securities for the Fund's portfolio.
INVESTMENT POLICIES
The following investment policies supplement those set forth in the
current Prospectus. They are not fundamental policies and accordingly may be
changed by the Trustees of the Trust without obtaining the approval of the
Fund's shareholders.
PORTFOLIO TURNOVER
The Fund's investment adviser, Eaton Vance Management ("Eaton Vance") will
change the Fund's investments whenever it believes a change may be
appropriate, without regard to how long a particular investment may have been
held. Changes in investments generally involve expenses to the Fund, which may
include brokerage commissions or dealer mark-ups and other transaction costs
on the disposition of investments and reinvestment of the proceeds in other
investments, and may result in net capital gains distributions of which will
be subject to tax. The Fund's investment policies and strategies may result in
a higher portfolio turnover rate than that experienced by other mutual funds.
The Fund's portfolio turnover rate will not be a limiting factor when Eaton
Vance considers a change in the Fund's investment portfolio, and in any fiscal
year such rate could exceed 100%.
ASSET-RELATED SECURITIES
The Fund's investment adviser will evaluate the creditworthiness of the
issuer of an asset-related security. If the asset-related security is backed
by a bank letter of credit or other similar facility, the investment adviser
may take such backing into consideration in determining the creditworthiness
of the issuer.
The Fund will not acquire asset-related securities for which no trading
market exists if at the time of acquisition more than 10% of its total assets
are invested in securities which are not readily marketable. The Fund may
invest in asset-related securities without limit when it has the option to put
such securities to the issuer or a stand-by bank or broker and receive the
principal amount or redemption price thereof less transaction costs on no more
than seven days notice or when the Fund has the right to convert or exchange
such securities into a readily marketable security in which it could otherwise
invest upon not less than seven days notice.
The asset-related securities in which the Fund may invest may bear
interest or pay preferred dividends at below market (or even relatively
nominal) rates. The Fund's holdings of such securities therefore may not
generate appreciable current income, and the return from such securities
primarily will be from any profit on the sale, maturity or conversion thereof
at a time when the price of the related asset is higher than it was when the
Fund purchased such securities. As an example, assume gold is selling at a
market price of $300 per ounce and an issuer sells a $1,000 face amount gold
related note with a seven year maturity, payable at maturity at the greater of
either $1,000 in cash or the then market price of three ounces of gold. If at
maturity, the market price of gold is $400 per ounce, the amount payable on
the note would be $1,200. Certain asset-related securities may be payable at
maturity in cash at the stated principal amount, or at the option of the
holder, directly in a stated amount of the asset to which it is related. In
such instance the Fund may sell the asset-related security in the secondary
market, to the extent one exists, prior to the maturity if the value of the
stated amount of the asset exceeds the stated principal amount and thereby
realize the appreciation in the underlying asset.
FOREIGN INVESTMENTS
Investing in foreign issuers involves certain special considerations,
including those set forth below, which are not typically associated with
investing in U.S. issuers. Since investments in foreign issuers may involve
currencies of foreign countries, and since the Fund may temporarily hold funds
in bank deposits in foreign currencies during completion of investment
programs, the Fund may be affected favorably or unfavorably by changes in
currency rates and in exchange control regulations and may incur costs in
connection with conversions between various currencies.
Since foreign companies are not generally subject to uniform accounting,
auditing and financial reporting standards, practices and requirements
comparable to those applicable to U.S. companies, there may be less publicly
available information about a foreign company than about a domestic company.
Foreign stock markets, while growing in volume of trading activity, have
substantially less volume than the New York Stock Exchange, and securities of
some foreign companies are less liquid and more volatile than securities of
comparable U.S. companies. Similarly, volume and liquidity in most foreign
bond markets is less than in the United States and, at times, volatility of
price can be greater than in the United States. Fixed commissions on foreign
stock exchanges are generally higher than negotiated commissions on U.S.
exchanges, although the Fund endeavors to achieve the most favorable net
results on its portfolio transactions. There is generally less government
supervision and regulation of stock exchanges, brokers and listed companies
than in the United States. Mail service between the United States and foreign
countries may be slower or less reliable than within the United States, thus
increasing the risk of delayed settlements of portfolio transactions or loss
of certificates for portfolio securities. In addition, with respect to
certain foreign countries, there is the possibility of expropriation or
confiscatory taxation, political or social instability, or diplomatic
developments which could affect the Fund's investments in those countries.
Moreover, individual foreign economies may differ favorably or unfavorably
from the U.S. economy in such respects as growth of gross national product,
rate of inflation, capital reinvestment, resource self-sufficiency and balance
of payments position. In some countries delayed settlements are customary
which increases the risk of loss.
Depository receipts are not necessarily denominated in the same currency
as the securities into which they may be converted. American Depository
Receipts ("ADRs") are receipts typically issued by a U.S. banking institution
evidencing ownership of the underlying securities; European Depository
Receipts ("EDRs") are receipts evidencing a similar arrangement with a
European banking institution. Generally ADRs, in registered form are designed
for use in U.S. securities markets and EDRs, in bearer form, are designed for
use in European securities markets. Such securities may or may not be listed
on a foreign securities exchange.
FORWARD FOREIGN CURRENCY EXCHANGE TRANSACTIONS
Forward foreign currency exchange contracts are traded in the interbank
market conducted directly between currency traders (usually large commercial
banks) and their customers. A forward contract generally has no deposit
requirement, and no commissions are charged at any stage for trades. At the
maturity of a forward contract the Fund may either accept or make delivery of
the currency specified in the contract or, at or prior to maturity, enter into
a closing transaction involving the purchase or sale of an offsetting
contract. Closing transactions with respect to forward contracts are usually
effected with the currency trader who is a party to the original forward
contract.
The Fund may enter into forward foreign currency exchange contracts in
several circumstances. First, when the Fund enters into a contract for the
purchase or sale of a security denominated in a foreign currency, or when the
Fund anticipates the receipt in a foreign currency of dividend or interest
payments on such a security which it holds, the Fund may desire to "lock in"
the U.S. dollar price of the security or the U.S. dollar equivalent of such
dividend or interest payment, as the case may be. By entering into a forward
contract for the purchase or sale, for a fixed amount of dollars, of the
amount of foreign currency involved in the underlying transactions, the Fund
will attempt to protect itself against an adverse change in the relationship
between the U.S. dollar and the subject foreign currency during the period
between the date on which the security is purchased or sold, or on which the
dividend or interest payment is declared, and the date on which such payments
are made or received.
Additionally, when management of the Fund believes that the currency of a
particular foreign country may suffer a substantial decline against the U.S.
dollar, it may enter into a forward contract to sell, for a fixed amount of
dollars, the amount of foreign currency approximating the value of some or all
of the Fund's portfolio securities denominated in such foreign currency. The
precise matching of the forward contract amounts and the value of the
securities involved will not generally be possible because the future value of
such securities in foreign currencies will change as a consequence of market
movements in the value of those securities between the date on which the
contract is entered into and the date it matures. The precise projection of
short-term currency market movements is not possible, and short-term hedging
provides a means of fixing the dollar value of only a portion of the Fund's
foreign assets. The Fund will not enter into forward contracts or maintain a
net exposure to such contracts where the consummation of the contracts would
obligate the Fund to deliver an amount of foreign currency in excess of the
value of the Fund's portfolio securities or other assets denominated in that
currency.
The Fund's custodian will place cash or liquid securities into a
segregated account of the Fund in an amount equal to the value of the Fund's
total assets committed to the consummation of forward foreign currency
exchange contracts requiring the Fund to purchase foreign currencies. If the
value of the securities placed in the segregated account declines, additional
cash or securities will be placed in the account on a daily basis so that the
value of the account will equal the amount of the Fund's commitments with
respect to such contracts.
The Fund generally will not enter into a forward contract with a term of
greater than one year. It also should be realized that this method of
protecting the value of the Fund's portfolio securities against a decline in
the value of a currency does not eliminate fluctuations in the underlying
prices of the securities. It simply establishes a rate of exchange which the
Fund can achieve at some future point in time.
While the Fund will enter into forward contracts to reduce currency
exchange rate risks, transactions in such contracts involve certain other
risks. Thus, while the Fund may benefit from such transactions, unanticipated
changes in currency prices may result in a poorer overall performance for the
Fund than if it had not engaged in any such transactions. Moreover, there may
be imperfect correlation between the Fund's portfolio holdings of securities
denominated in a particular currency and forward contracts entered into by the
Fund. Such imperfect correlation may prevent the Fund from achieving a
complete hedge or expose the Fund to risk of foreign exchange loss.
REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements with respect to its
permitted investments, but currently intends to do so only with member banks
of the Federal Reserve System or with primary dealers in U.S. Government
securities. Under a repurchase agreement the Fund buys a security at one price
and simultaneously promises to sell that same security back to the seller at a
higher price. The repurchase date is usually within seven days of the original
purchase date. At no time will the Fund commit more than 10% of its assets to
repurchase agreements which mature in more than seven days. Repurchase
agreements are deemed to be loans under the Investment Company Act of 1940
(the "Act"). In all cases Eaton Vance must be satisfied with the
creditworthiness of the other party to the agreement before entering into a
repurchase agreement. In the event of the bankruptcy of the other party to a
repurchase agreement, the Fund might experience delays in recovering its cash.
To the extent that, in the meantime, the value of the securities the Fund
purchased may have decreased, the Fund could experience a loss. The Fund's
repurchase agreements will provide that the value of the collateral underlying
the repurchase agreement will always be at least equal to the repurchase
price, including any accrued interest earned on the repurchase agreement, and
will be marked to market daily.
REVERSE REPURCHASE AGREEMENTS
The Fund may enter into reverse repurchase agreements. Under a reverse
repurchase agreement, the Fund temporarily transfers possession of a portfolio
instrument to another party, such as a bank or broker-dealer, in return for
cash. At the same time, the Fund agrees to repurchase the instrument at an
agreed upon time (normally within seven days) and price, which reflects an
interest payment. The Fund expects that it will enter into reverse repurchase
agreements when it is able to invest the cash so acquired at a rate higher
than the cost of the agreement, which would increase the income earned by the
Fund. The Fund could also enter into reverse repurchase agreements as a means
of raising cash to satisfy redemption requests without the necessity of
selling portfolio assets.
When the Fund enters into a reverse repurchase agreement, any fluctuations
in the market value of either the securities transferred to another party or
the securities in which the proceeds may be invested would affect the market
value of the Fund's assets. As a result, such transactions may increase
fluctuations in the market value of the Fund's assets. While there is a risk
that large fluctuations in the market value of the Fund's assets could affect
the Fund's net asset value per share, this risk is not significantly increased
by entering into reverse repurchase agreements, in the opinion of Eaton Vance.
Because reverse repurchase agreements may be considered to be the practical
equivalent of borrowing funds, they constitute a form of leverage. If the Fund
reinvests the proceeds of a reverse repurchase agreement at a rate lower than
the cost of the agreement, entering into the agreement will lower the Fund's
yield.
At all times that a reverse repurchase agreement is outstanding, the Fund
will maintain cash and liquid securities in a segregated account at its
custodian bank with a value at least equal to its obligation under the
agreement. Securities and other assets held in the segregated account may not
be sold while the reverse repurchase agreement is outstanding, unless other
suitable assets are substituted. While Eaton Vance does not consider reverse
repurchase agreements to involve a traditional borrowing of money, reverse
repurchase agreements will be included within the aggregate limitation on
"borrowings" contained in the Fund's investment restriction (1) set forth
below.
LEVERAGE THROUGH BORROWING
The Fund will not always borrow money for additional investments. The
Fund's willingness to borrow money, and the amount it will borrow, will depend
on many factors the most important of which are market conditions and interest
rates.
The 1940 Act requires the Fund to maintain continuous asset coverage of
not less than 300% with respect to its borrowings. This allows the Fund to
borrow for leverage purposes an amount equal to as much as 50% of the value of
its net assets (not including such borrowings). If such asset coverage should
decline to less than 300% due to market fluctuations or other reasons, the
Fund may be required to sell some of its portfolio holdings within three days
in order to reduce the Fund's debt and restore the 300% asset coverage, even
though it may be disadvantageous from an investment standpoint to sell such
holdings at that time. The practice of leveraging to enhance investment return
may be viewed as a speculative activity. Leveraging will exaggerate any
increase or decrease in the market value of the Fund's portfolio. Money
borrowed for leveraging will be subject to interest costs which may or may not
exceed the income from the investments acquired with the borrowed funds. The
Fund may also be required to maintain minimum average balances in connection
with such borrowing or to pay a commitment or other fee to maintain a line of
credit; either of these requirements will increase the cost of borrowing over
the stated interest rate.
The Fund, like many other investment companies, may also borrow money for
temporary or emergency purposes, but such borrowings may not exceed 10% of the
value of the Fund's gross assets when the loan is made.
WRITING AND PURCHASING CALL AND PUT OPTIONS
A call option written by the Fund obligates the Fund to sell specified
securities to the holder of the option at a specified price if the option is
exercised at any time before the expiration date. The Fund will write a
covered call option on a security for the purpose of increasing its return on
such security and/or to partially hedge against a decline in the value of the
security. In particular, when the Fund writes an option which expires
unexercised or is closed out by the Fund at a profit, it will retain the
premium paid for the option, which will increase its gross income and will
offset in part the reduced value of the portfolio security underlying the
option, or the increased cost of acquiring the security for its portfolio.
However, if the price of the underlying security moves adversely to the Fund's
position, the option may be exercised and the Fund will be required to
purchase or sell the underlying security at a disadvantageous price, which may
only be partially offset by the amount of the premium, if at all. The Fund
does not intend to write a covered option on any security if after such
transaction more than 15% of its net assets, as measured by the aggregate
value of the securities underlying all covered calls and puts written by the
Fund, would be subject to such options. The Fund will only write a put option
on a security which it intends to ultimately acquire for its portfolio. A put
option written by the Fund would obligate the Fund to purchase specified
securities from the option holder at a specified price if the option is
exercised at any time before the expiration date.
The Fund may terminate its obligations under a call or put option by
purchasing an option identical to the one it has written. Such purchases are
referred to as "closing purchase transactions."
The Fund may purchase put or call options on securities or securities
indices in anticipation of changes in the value of its existing portfolio
securities or in the prices of securities that the Fund intends to purchase at
a later date. In the event that the expected changes occur, the Fund may be
able to offset adverse changes in the value of its portfolio, in whole or in
part, through the options purchased. The premium paid for a put or call option
plus any transaction costs will reduce the benefit, if any, realized by the
Fund upon exercise or liquidation of the option. Unless the price of the
underlying security changes sufficiently, the option may expire without value
to the Fund. The Fund does not intend to purchase an option on any security if
after such transaction more than 5% of its net assets, as measured by the
aggregate of all premiums paid for all such options held by the Fund, would be
so invested.
The Fund would normally purchase call options in anticipation of an
increase in the market value of securities of the type in which the Fund may
invest. The purchase of a call option would entitle the Fund, in return for
the premium paid, to purchase specified securities at a specified price during
the option period. The Fund would ordinarily realize a gain if, during the
option period, the value of such securities exceeded the sum of the exercise
price, the premium paid and transaction costs; otherwise, the Fund would
realize a loss on the purchase of the call option.
The Fund would normally purchase put options in anticipation of a decline
in the market value of securities in its portfolio ("protective puts") or
securities of the type in which it is permitted to invest. The purchase of a
put option would entitle the Fund, in exchange for the premium paid, to sell
specified securities at a specified price during the option period. The
purchase of protective puts is designed merely to offset or hedge against a
decline in the market value of the Fund's portfolio securities. The Fund would
ordinarily realize a gain if, during the option period, the value of the
underlying securities decreased below the exercise price sufficiently to cover
the premium and transaction costs; otherwise, the Fund would realize a loss on
the purchase of the put option. Gains and losses on the purchase of protective
put options would tend to be offset by countervailing changes in the value of
underlying portfolio securities.
The Fund would also be able to enter into closing sale transactions in
order to realize gains or minimize losses on options purchased by the Fund.
The Fund would write and purchase put and call options on securities
indices for the same purposes as the writing and purchase of options on
securities. Options on securities indices are similar to options on
securities, except that the exercise of securities index options requires cash
payments and does not involve the actual purchase or sale of securities. In
addition, securities index options are designed to reflect price fluctuations
in a group of securities or segment of the securities market rather than price
fluctuations in a single security.
SPECIAL RISKS ASSOCIATED WITH OPTIONS ON SECURITIES
An options position may be closed out only on an options exchange which
provides a secondary market for an option of the same series. Although the
Fund will generally purchase or write only those options for which there
appears to be an active secondary market, there is no assurance that a liquid
secondary market on an exchange will exist for any particular option, or at
any particular time. For some options no secondary market on an exchange may
exist. In such event, it might not be possible to effect closing transactions
in particular options, with the result that the Fund would have to exercise
its options in order to realize any profit and would incur transaction costs
upon the sale of underlying securities pursuant to the exercise of put
options. If the Fund as a covered call option writer is unable to effect a
closing purchase transaction in a secondary market, it will not be able to
sell the underlying security until the option expires or it delivers the
underlying security upon exercise.
Reasons for the absence of a liquid secondary market on an exchange
include the following: (i) there may be insufficient trading interest in
certain options; (ii) restrictions may be imposed by an exchange on opening
transactions or closing transactions or both; (iii) trading halts, suspensions
or other restrictions may be imposed with respect to particular classes or
series of options or underlying securities; (iv) unusual or unforeseen
circumstances may interrupt normal operations on an exchange; (v) the
facilities of an exchange or the Options Clearing Corporation ("OCC") may not
at all times be adequate to handle current trading volume; or (vi) one or more
exchanges could, for economic or other reasons, decide or be compelled at some
future date to discontinue the trading of options (or a particular class or
series of options), in which event the secondary market on that exchange (or
in that class or series of options) would cease to exist, although outstanding
options on that exchange that had been issued by the OCC as a result of trades
on that exchange would continue to be exercisable in accordance with their
terms.
The Fund will pay brokerage commissions in connection with writing options
and effecting closing purchase transactions, as well as for purchases and
sales of underlying securities. The writing of options could result in
significant increases in the Fund's portfolio turnover rate, especially during
periods when market prices of the underlying securities appreciate.
There is no assurance that higher than anticipated trading activity or
other unforeseen events might not, at times, render certain of the facilities
of the OCC inadequate, and thereby result in the institution by an exchange of
special procedures which may interfere with the timely execution of customers'
orders.
The amount of the premiums which the Fund may pay or receive may be
adversely affected as new or existing institutions, including other investment
companies, engage in or increase their option purchasing and writing
activities.
FUTURES TRANSACTIONS
Futures Contracts. A change in the level of interest rates, currency exchange
rates or securities prices may affect the value of the Fund's portfolio
securities (or of securities that the Fund expects to purchase). To hedge
against changes in rates or prices, or for non-hedging purposes, the Fund may
enter into (i) futures contracts for the purchase or sale of securities and
currency, (ii) futures contracts on securities indices and (iii) futures
contracts on other financial instruments and indices. In the United States,
futures contracts are traded on exchanges or boards of trade that are licensed
and regulated by the Commodity Futures Trading Commission ("CFTC") and must be
executed through a futures commission merchant or brokerage firm which is a
member of the relevant exchange. The Fund may also enter into futures
contracts traded on a foreign exchange if it is determined by the investment
adviser that trading on such exchange does not subject the Fund to risks,
including credit and liquidity risks, that are materially greater than the
risks associated with trading on United States exchanges. The futures
contracts may be based on various securities and commodities in which the Fund
may invest, foreign currencies, certificates of deposit, Eurodollar time
deposits, securities indices, economic indices (such as the Consumer Price
Indices compiled by the U.S. Department of Labor) and other financial
instruments and indices.
Futures Contracts on Securities and Currency. A futures contract on securities
or currency is a binding contractual commitment which, if held to maturity,
will result in an obligation to make or accept delivery, during a particular
month, of securities having a standardized face value and rate of return or of
the specified currency. By purchasing futures on securities or currency, the
Fund will legally obligate itself to accept delivery of the underlying
security or currency and pay the agreed price; by selling futures on
securities or currency, it will legally obligate itself to make delivery of
the security or currency against payment of the agreed price.
Positions taken in the futures markets are not normally held to maturity,
but are instead liquidated through offsetting transactions which may result in
a profit or a loss. While the Fund's futures contracts on securities or
currency will usually be liquidated in this manner, it may instead make or
take delivery of the underlying securities or currency whenever it appears
economically advantageous for the Fund to do so. A clearing corporation
associated with the exchange on which futures on securities or currency are
traded guarantees that, if still open, the sale or purchase will be performed
on the settlement date.
Futures Contracts on Securities Indices. Futures contracts on securities or
other indices do not require the physical delivery of securities, but merely
provide for profits and losses resulting from changes in the market value of a
contract to be credited or debited at the close of each trading day to the
respective accounts of the parties to the contract. On the contract's
expiration date a final cash settlement occurs and the future positions is
simply closed out. Changes in the market value of a particular futures
contract reflect changes in the level of the index on which the futures
contract is based.
Hedging Strategies. Hedging by use of futures contracts seeks to establish
more certainly than would otherwise be possible the effective price or rate of
return on portfolio securities or securities that the Fund proposes to
acquire. The Fund may, for example, take a "short" position in the futures
market by selling futures contracts in order to hedge against an anticipated
rise in interest rates or a decline in market prices or foreign currency
exchange rates that would adversely affect the value of the Fund's portfolio
securities. Such futures contracts may include contracts for the future
delivery of securities held by the Fund (or currency in which such securities
are denominated) or securities with characteristics similar to those of the
Fund's portfolio securities. If, in the opinion of Eaton Vance, there is a
sufficient degree of correlation between price trends for the Fund's portfolio
securities and futures contracts based on other financial instruments,
securities indices or other indices, the Fund may also enter into such futures
contracts as part of its hedging strategy. Although under some circumstances
prices of securities in the Fund's portfolio may be more or less volatile than
prices of such futures contracts, Eaton Vance will attempt to estimate the
extent of this difference in volatility based on historical patterns and to
compensate for it by having the Fund enter into a greater or lesser number of
futures contracts or by attempting to achieve only a partial hedge against
price changes affecting the Fund's securities portfolio. When hedging of this
character is successful, any depreciation in the value of portfolio securities
will be substantially offset by appreciation in the value of the futures
position.
On other occasions, the Fund may take a "long" position by purchasing such
futures contracts. This would be done, for example, when the Fund anticipates
the subsequent purchase of particular securities when it has the necessary
cash, but expects the prices then available in the securities market or
foreign currency exchange rates to be less favorable than prices or rates that
are currently available.
Options on Futures Contracts. The Fund may purchase and write call and put
options on futures contracts which are traded on a United States exchange or
board of trade. An option on a futures contract gives the purchaser the right,
in return for the premium paid, to assume a position in a futures contract at
a specified exercise price at any time during the option period. Upon exercise
of the option, the writer of the option is obligated to convey the appropriate
futures position to the holder of the option. If an option is exercised on the
last trading day before the expiration date of the option, a cash settlement
will be made in an amount equal to the difference between the closing price of
the futures contract and the exercise price of the option.
The Fund may use options on futures contracts for bona fide hedging
purposes as defined below or for non-hedging purposes subject to the
limitations imposed by CFTC regulations. If the Fund purchases a call (put)
option on a futures contract it benefits from any increase (decrease) in the
value of the futures contract, but is subject to the risk of decrease
(increase) in value of the futures contract. The benefits received are reduced
by the amount of the premium and transaction costs paid by the Fund for the
option. If market conditions do not favor the exercise of the option, the
Fund's loss is limited to the amount of such premium and transaction costs
paid by the Fund for the option.
If the Fund writes a call (put) option on a futures contract, the Fund
receives a premium but assumes the risk of a rise (decline) in value in the
underlying futures contract. If the option is not exercised, the Fund gains
the amount of the premium, which may partially offset unfavorable changes in
the value of securities (or the currency in which such securities are
denominated) held or to be acquired for the Fund's portfolio. If the option is
exercised, the Fund will incur a loss, which will be reduced by the amount of
the premium it receives. However, depending on the degree of correlation
between changes in the value of its portfolio securities (or the currency in
which they are denominated) and changes in the value of futures positions, the
Fund's losses from writing options on futures may be partially offset by
favorable changes in the value of portfolio securities or in the cost of
securities to be acquired.
The holder or writer of an option on a futures contract may terminate its
position by selling or purchasing an offsetting option of the same series.
There is no guarantee that such closing transactions can be effected. The
Fund's ability to establish and close out positions on such options will be
subject to the development and maintenance of a liquid market.
Limitations on the Use of Futures Contracts and Options on Futures
Contracts. The Fund will engage in futures and related options transactions
for bona fide hedging or non-hedging purposes as defined in or permitted by
CFTC regulations. The Fund will determine that the price fluctuations in the
futures contracts and options on futures used for hedging purposes are
substantially related to price fluctuations in securities (or the currency in
which they are denominated) held by the Fund or which it expects to purchase.
Except as stated below, the Fund's futures transactions will be entered into
for traditional hedging purposes -- i.e, futures contracts will be sold to
protect against a decline in the price of securities that the Fund owns, or
futures contracts will be purchased to protect the Fund against an increase in
the price of securities it intends to purchase. As evidence of this hedging
intent, the Fund expects that on 75% or more of the occasions on which it
takes a long futures (or option) position (involving the purchase of futures
contracts), the Fund will have purchased, or will be in the process of
purchasing, equivalent amounts of related securities in the cash market at the
time when the futures (or option) position is closed out. However, in
particular cases, when it is economically advantageous for the Fund to do so,
a long futures position may be terminated (or an option may expire) without
the corresponding purchase of securities. As an alternative to compliance with
the bona fide hedging definition, a CFTC regulation now permits the Fund to
elect to comply with a different test, under which the aggregate initial
margin and premiums required to establish non-hedging positions in futures
contracts and options on futures will not exceed 5% of the Fund's net asset
value after taking into account unrealized profits and losses on such
positions and excluding the in-the-money amount of such options. The Fund
will engage in transactions in futures contracts and related options only to
the extent such transactions are consistent with the requirements of the
Internal Revenue Code for maintaining its qualification as a regulated
investment company for federal income tax purposes (see "Taxes").
The Fund will be required, in connection with transactions in futures
contracts and the writing of options on futures, to make margin deposits,
which will be held by the Fund's custodian for the benefit of the futures
commission merchant through whom the Fund engages in such futures and options
transactions. Cash or liquid debt securities required to be segregated in
connection with a "long" futures position taken by the Fund will also be held
by the custodian in a segregated account and will be marked to market daily.
SPECIAL RISKS ASSOCIATED WITH FORWARD CONTRACTS, FOREIGN CURRENCY FUTURES
CONTRACTS AND OPTIONS THEREON AND OPTIONS ON FOREIGN CURRENCIES
Transactions in forward contracts, as well as futures and options on
foreign currencies, are subject to the risk of governmental actions affecting
trading in or the prices of currencies underlying such contracts, which could
restrict or eliminate trading and could have a substantial adverse effect on
the value of positions held by the Fund. In addition, the value of such
positions could be adversely affected by a number of other complex political
and economic factors applicable to the countries issuing the underlying
currencies.
Further, unlike trading in most other types of instruments, there is no
systematic reporting of last sale information with respect to the foreign
currencies underlying forward contracts, futures contracts and options. As a
result, the available information on which the Fund's trading systems will be
based may not be as complete as the comparable data on which the Fund makes
investment and trading decisions in connection with securities and other
transactions. Moreover, because the foreign currency market is a global,
twenty-four hour market, events could occur on that market which will not be
reflected in the forward, futures or options markets until the following day,
thereby preventing the Fund from responding to such events in a timely manner.
Settlements of over-the-counter forward contracts or of an exercise of
foreign currency options generally must occur within the country issuing the
underlying currency, which in turn requires parties to such contracts to
accept or make delivery of such currencies in conformity with any United
States or foreign restrictions and regulations regarding the maintenance of
foreign banking relationships, fees, taxes or other charges.
Unlike currency futures contracts and exchange-traded options, options on
foreign currencies and forward contracts are not traded on contract markets
regulated by the CFTC or (with the exception of certain foreign currency
options) the SEC. To the contrary, such instruments are traded through
financial institutions acting as market-makers. (Foreign currency options are
also traded on the Philadelphia Stock Exchange subject to SEC regulation). In
an over-the-counter trading environment, many of the protections associated
with transactions on exchanges will not be available. For example, there are
no daily price fluctuation limits, and adverse market movements could
therefore continue to an unlimited extent over a period of time. Although the
purchaser of an option cannot lose more than the amount of the premium plus
related transaction costs, this entire amount could be lost. Moreover, an
option writer could lose amounts substantially in excess of its investment,
due to the margin and collateral requirements associated with such option
positions. Similarly, there is no limit on the amount of potential losses on
forward contracts to which the Fund is a party.
In addition, over-the-counter transactions can only be entered into with a
financial institution willing to take the opposite side, as principal, of the
Fund's position unless the institution acts as broker and is able to find
another counterparty willing to enter into the transaction with the Fund.
Where no such counterparty is available, it will not be possible to enter into
a desired transaction. There also may be no liquid secondary market in the
trading of over-the-counter contracts, and the Fund may be unable to close out
options purchased or written, or forward contracts entered into, until their
exercise, expiration or maturity. This in turn could limit the Fund's ability
to realize profits or to reduce losses on open positions and could result in
greater losses.
Further, over-the-counter transactions are not backed by the guarantee of
an exchange clearing house, and the Fund will thererfore be subject to the
risk of default by, or the bankruptcy of, the financial institution serving as
its counterparty. One or more such institutions also may decide to discontinue
their role as market-makers in a particular currency, thereby restricting the
Fund's ability to enter into desired hedging transactions. A Fund will enter
into over-the-counter transactions only with parties whose creditworthiness
has been reviewed and found satisfactory by the Fund's investment adviser.
Over-the-counter options on foreign currencies, like exchange-traded
commodity futures contracts and commodity option contracts, are within the
exclusive regulatory jurisdiction of the CFTC, which currently permits the
trading of such options, but only subject to a number of conditions regarding
the commercial purpose of the purchaser of such option. The Fund is not able
to determine at this time whether or to what extent the CFTC may impose
additional restrictions on the trading of over-the-counter options on foreign
currencies at some point in the future, or the effect that any such
restrictions may have on the hedging strategies to be implemented by the Fund.
CFTC regulations require that the Fund not enter into transactions in
commodity futures contracts or commodity option contracts for which the
aggregate initial margin and premiums exceed 5% of the fair market value of
the Fund's assets. Premiums paid to purchase over-the-counter options on
foreign currencies, and margin deposited in connection with the writing of
such options, are required to be included in determining compliance with this
requirement. This could, depending upon the Fund's existing positions in
futures contracts and options on futures contracts, limit the Fund's ability
to purchase or write options on foreign currencies. Conversely, the existence
of open positions in options on foreign currencies could limit the ability of
the Fund to enter into desired transactions in other options or futures
contracts.
While forward contracts are not presently subject to regulation by the
CFTC, the CFTC may in the future assert or be granted authority to regulate
such instruments. In such event, the Fund's ability to utilize forward
contracts in the manner set forth above could be restricted.
Options on foreign currencies traded on a national securities exchange are
within the jurisdiction of the SEC, as are other securities traded on such
exchanges. As a result, many of the protections provided to traders on
organized exchanges will be available with respect to such transactions. In
particular, all foreign currency option positions entered into on a national
securities exchange are cleared and guaranteed by the OCC, thereby reducing
the risk of counterparty default. Further, a liquid secondary market in
options traded on a national securities exchange may be more readily available
than in the over-the-counter market, potentially permitting the Fund to
liquidate open positions at a profit prior to exercise or expiration, or to
limit losses in the event of adverse market movements.
The purchase and sale of exchange-traded foreign currency options,
however, is subject to the risks of the availability of a liquid secondary
market described above, as well as the risks regarding adverse market
movements, margining of options written, the nature of the foreign currency
market, possible intervention by governmental authorities and the effects of
other political and economic events. In addition, exchange-traded options on
foreign currencies involve certain risks not presented by the over-the-counter
market. For example, exercise and settlement of such options must be made
exclusively through the OCC, which has established banking relationships in
applicable foreign countries for this purpose. As a result, the OCC may, if it
determines that foreign governmental restrictions or taxes would prevent the
orderly settlement of foreign currency option exercises, or would result in
undue burdens on the OCC or its clearing member, impose special procedures for
exercise and settlement, such as technical changes in the mechanics of
delivery of currency, the fixing of dollar settlement prices or prohibitions
on exercise.
DIRECT PLACEMENT SECURITIES AND VENTURE CAPITAL INVESTMENTS
Assets of the Fund may be invested in direct placement securities of
small, unseasoned companies and in the securities of small, unseasoned Venture
Capital companies as well as in the securities of large and well known
companies. There may be little operating history and less available
information about such unseasoned companies than about large and well known
companies, and it may be more difficult to evaluate the management of a small,
unseasoned company. The securities of an unseasoned company may have a limited
trading market, which may adversely affect their disposition by the Fund. In
view of the limited liquidity of this type of investment, management will not
permit a substantial portion of the Fund to be so invested. The making of this
type of investment is subject to the policies of the Fund set forth under
"Investment Restrictions" below.
CONVERTIBLE SECURITIES
The Fund may from time to time invest a portion of its assets in debt
securities and preferred stocks which are convertible into, or carry the right
to purchase, common stock or other equity securities. The debt security or
preferred stock may itself be convertible into or exchangeable for equity
securities, or the purchase right may be evidenced by warrants attached to the
security or acquired as part of a unit with the security. Convertible
securities may be purchased for their appreciation potential when they yield
more than the underlying securities at the time of purchase or when they are
considered to present less risk of principal loss than the underlying
securities. Generally speaking, the interest or dividend yield of a
convertible security is somewhat less than that of a non-convertible security
of similar quality issued by the same company.
WARRANTS
The Fund may purchase warrants, but does not intend to invest more than 5%
of its net assets at the time of purchase in warrants (other than those that
have been acquired in units or attached to other securities). Warrants are an
option to purchase equity securities at a specific price valid for a specific
period of time. They do not represent ownership of the securities, but only
the right to buy them. The prices of warrants do not necessarily move parallel
to the prices of the underlying securities. Warrants may become valueless if
not sold or exercised prior to their expiration.
INVESTMENT RESTRICTIONS
Whenever an investment policy or investment restriction set forth in the
Fund's Prospectus or Statement of Additional Information states a maximum
percentage of the Fund's assets that may be invested in any security or other
asset or describes a policy regarding quality standards, such percentage
limitation or standard shall be determined immediately after and as a result
of the Fund's acquisition of such security or other asset. Accordingly, any
later increase or decrease resulting from a change in values, assets or other
circumstances or any subsequent rating change made by a rating service will
not compel the Fund to dispose of such security or other asset.
The following investment restrictions (1) through (14) are designated as
fundamental policies and as such cannot be changed without the approval of the
holders of a majority of the Fund's outstanding voting securities, which as
used in this Statement of Additional Information means the lesser of (a) 67%
of the shares of the Fund present or represented by proxy at a meeting if the
holders of more than 50% of the shares are present or represented at the
meeting or (b) more than 50% of the shares of the Fund. The Fund will not:
(1) Borrow money, except that it may borrow
(i) from banks to purchase or carry securities, commodities,
commodities contracts or other investments, or
(ii) from banks for temporary or emergency purposes not in excess of
10% of its gross assets taken at market value, or
(iii) by entering into reverse repurchase agreements,
if, immediately after any such borrowing, the value of the Fund's assets,
including all borrowings then outstanding, less its liabilities, is equal to
at least 300% of the aggregate amount of borrowings then outstanding (for the
purpose of determining the 300% asset coverage, the Fund's liabilities will
not include amounts borrowed). Any such borrowings may be secured or
unsecured. The Fund may issue securities (including senior securities)
appropriate to evidence the indebtedness, including reverse repurchase
agreements, which the Fund is permitted to incur.
(2) Pledge its assets, except that the Fund may pledge not more than one-
third of its total assets (taken at current value) to secure borrowings made
in accordance with investment restriction (1) above; for the purpose of this
restriction the deposit of cash, cash equivalents, portfolio securities or
other assets in a segregated account with the Fund's custodian in connection
with any of the Fund's investment transactions is not considered to be a
pledge.
(3) Purchase securities on margin (but the Fund may obtain such short-term
credits as may be necessary for the clearance of purchases and sales of
securities).
(4) Make short sales of securities, unless at all times when a short sale
position is open the Fund either owns an equal amount of such securities or
owns securities convertible into or exchangeable for securities of the same
issue as, and equal in amount to, the securities sold short.
(5) Purchase securities of any issuer if such purchase, at the time
thereof, would cause more than 10% of the total outstanding voting securities
of such issuer to be held by the Fund; this restriction will not apply during
periods when management of the Fund anticipates significant economic,
political or financial instability.
(6) Purchase securities issued by any other investment company, except in
connection with a merger, consolidation, acquisition of assets or
reorganization, or by purchase in the open market of securities of closed-end
investment companies where no underwriter's or dealer's commission or profit,
other than customary broker's commission, is involved and only if immediately
thereafter not more than 10% of the Fund's total assets (taken at current
value) would be invested in such securities.
(7) Purchase or retain in its portfolio any securities issued by an issuer
any of whose officers, directors, trustees or security holders is an officer
or Trustee of the Trust or is a member, officer, director or trustee of any
investment adviser of the Fund, if after the purchase of the securities of
such issuer by the Fund one or more of such persons owns beneficially more
than 1/2 of 1% of the shares or securities or both (all taken at current
value) of such issuer and such persons owning more than 1/2 of 1% of such
shares or securities together own beneficially more than 5% of such shares or
securities or both (all taken at current value).
(8) Underwrite securities issued by other persons, except insofar as it
may technically be deemed to be an underwriter under the Securities Act of
1933 in selling or disposing of a portfolio security.
(9) Make loans to other persons, except by (a) the acquisition of money
market instruments, debt securities and other obligations in which the Fund is
authorized to invest in accordance with its investment objective and policies,
(b) entering into repurchase agreements and (c) lending its portfolio
securities.
(10) Invest for the purpose of gaining control of a company's management.
(11) Purchase or sell real estate, although it may purchase and sell
securities which are secured by interests in real estate or interests therein
and securities of issuers (including real estate investment trusts) which
invest or deal in real estate or interests therein.
(12) Buy investment securities from or sell them to any of its officers or
Trustees, its investment adviser or its principal underwriter, as principal;
provided, however, that any such person or firm may be employed as a broker
upon customary terms.
(13) Purchase oil, gas or other mineral leases or purchase partnership
interests in oil, gas or other mineral exploration or development programs;
this restriction shall not be deemed to limit or restrict the Fund's
investments in securities issued by companies that engage in oil, gas or other
mineral exploration or development activities.
(14) Knowingly (i) purchase a security issued by a Venture Capital Company
(a company the securities of which have no public market at the time the
investment is made) or which at the time of purchase cannot be readily resold
because of legal or contractual restrictions or for which at the time of
purchase there is clearly no readily available market, (ii) invest in options
on foreign currencies which are not traded on an exchange or board of trade or
(iii) enter into a repurchase agreement maturing in more than seven days if,
as a result, more than 10% of the Fund's total assets (taken at current value)
would be invested in such securities, options and repurchase agreements. The
following securities are not subject to this restriction -- securities which
the Fund has a right to convert or exchange into a readily marketable security
in which it could otherwise invest upon not less than seven days notice;
securities which the Fund has the option to put to the issuer or a stand-by
bank or broker and receive the principal amount of redemption price less
transaction costs on not more than seven days notice; and securities
(purchased by the Fund at a time when the issuer was a Venture Capital
Company) of a company which has ceased to be a Venture Capital Company
provided that such securities are readily marketable.
For the purpose of investment restrictions (1), (2) and (3), the
arrangements (including escrow, margin and collateral arrangements) made by
the Fund with respect to its transactions in all types of options, futures
contracts, options on futures contracts, forward contracts, currencies, coins,
bullion, and commodities and options thereon shall not be considered to be (i)
a borrowing of money or the issuance of securities (including senior
securities) by the Fund, (ii) a pledge of its assets, or (iii) the purchase of
a security on margin.
In connection with investment restriction (9) above, the Fund has no
present intention of lending its portfolio securities. The Fund would lend its
portfolio securities to increase its income only if and when the Trustees
determine such activity to be appropriate, and such loans would be subject to
such policies and conditions as the Trustees may impose to safeguard the
Fund's assets. The Prospectus and Statement of Additional Information of the
Fund will be amended to describe Fund lending policies prior to the lending of
portfolio securities, except to the extent repurchase agreements may be deemed
to be loans of securities.
The Fund has adopted the following additional fundamental investment
policies which may not be changed without the approval of the holders of a
majority of the Fund's outstanding voting securities:
(A) During normal market conditions the Fund will invest at least 25%
of its total assets in the natural resource group of industries, except
when such percentage is reduced as a result of a decrease in value of the
assets so invested or during such times when management believes that the
assets so invested should be redeployed for defensive purposes or during
such times when management believes that the assets so invested should be
redeployed in obligations or other securities, the principal amount,
redemption terms or conversion terms of which are related to the market
price of some natural resource asset such as gold bullion; the Fund may
invest more than 25% of its total assets in any industry in the natural
resource group of industries; and the Fund may invest up to 25% of its
total assets, taken at market value at the time of each investment, in any
other industry. For the purposes of this policy, an investment by the Fund
in gold or silver bullion, other precious metals, strategic metals, or
gold or silver coins, or in securities issued by companies deemed by the
Fund's investment adviser to be engaged in the natural resource investment
sector (as from time to time described in the Fund's Prospectus), shall be
considered as an investment in the natural resource group of industries.
(B) The Fund may purchase and sell commodities and commodities
contracts (including without limitation futures contracts and options on
futures contracts) of all types and kinds.
In connection with investment policy (B) above, the Fund's present
intentions with respect to its investments in commodities and commodities
contracts are set forth in the Fund's Prospectus and elsewhere in this
Statement of Additional Information. The Fund would make other types of
investments in commodities and commodities contracts only if and when the
Trustees determine such activity is appropriate; any such additional
investment activity will be disclosed in the Fund's Prospectus or Statement of
Additional Information or in an amendment to either of them.
The Fund has adopted the following policies which may be changed without
shareholder approval. The Fund currently does not intend to purchase the
securities of any one issuer (other than securities or obligations issued or
guaranteed by the U.S. Government or any of its agencies or instrumentalities)
if, as a result of such purchase, more than 10% of the Fund's total assets
(taken at current value) would be invested in the securities of such issuer;
this policy does not apply to or limit the Fund's investments in certificates
of deposit, bankers' acceptances or time deposits of banking and thrift
institutions. Except for obligations issued or guaranteed by the U.S.
Government or any of its agencies or instrumentalities, the Fund will not
knowingly purchase a security issued by a company (including predecessors)
with less than three years operating history (unless such security is rated at
least B or a comparable rating at the time of purchase by at least one
nationally recognized rating service or unless such company is a regulated
public utility or pipeline company) if, as a result of such purchase, more
than 5% of the Fund's total assets (taken at current value) would be invested
in such securities. For a description of the securities ratings, see the
Appendix. The Fund may not invest more than 15% of its net assets in
investments which are not readily marketable, including restricted securities
and repurchase agreements with a maturity longer than seven days. Restricted
securities for the purposes of this limitation do not include securities
eligible for resale pursuant to Rule 144A under the Securities Act of 1933 and
commercial paper issued pursuant to Section 4(2) of said Act that the Board of
Trustees of the Trust, or their delegate, determines to be liquid. The Fund
will not purchase warrants if, as a result of such purchase, more than 5% of
the Fund's net assets, taken at current value, would be invested in warrants
and the value of such warrants which are not listed on the New York or
American Stock Exchange may not exceed 2% of the Fund's net assets); this
policy does not apply to or restrict warrants acquired by the Fund in units or
attached to securities, inasmuch as such warrants are deemed to be without
value. The Fund will not purchase or sell real property (including limited
partnership interests, but excluding readily marketable interests in real
estate investment trusts or readily marketable securities of companies which
invest in real estate).
In order to permit the sale of shares of the Fund in certain states, the
Fund may make commitments more restrictive than the policies described above.
Should the Fund determine that any such commitment is no longer in the best
interests of the Fund and its shareholders, it will revoke the commitment by
terminating sales of its shares in the state(s) involved.
TRUSTEES AND OFFICERS
The Trustees and officers of the Trust are listed below. Except as
indicated, each individual has held the office shown or other offices in the
same company for the last five years. Unless otherwise noted, the business
address of each Trustee and officer is 24 Federal Street, Boston,
Massachusetts 02110, which is also the address of Eaton Vance Management;
Eaton Vance's wholly-owned subdisiary, Boston Management and Research ("BMR");
Eaton Vance's parent, Eaton Vance Corp. ("EVC"); and of Eaton Vance's and
BMR's trustee, Eaton Vance, Inc. ("EV"). Eaton Vance and EV are both wholly-
owned subsidiaries of EVC. Those Trustees who are "interested persons" of the
Fund, Eaton Vance, BMR, EVC or EV, as defined in the Investment Company Act of
1940, by virtue of their affiliation with any one or more of the Fund, Eaton
Vance, BMR, EVC or EV, are indicated by an asterisk(*).
JAMES B. HAWKES (54), President and Trustee*
Executive Vice President of Eaton Vance, BMR, EVC and EV, and a Director of
EVC and EV. Director, Trustee and officer of various investment companies
managed by Eaton Vance or BMR.
DONALD R. DWIGHT (64), Trustee
President of Dwight Partners, Inc. (a corporate relations and communications
company) founded in 1988; Chairman of the Board of Newspapers of New
England, Inc., since 1983. Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: Clover Mill Lane, Lyme, New Hampshire 03768
SAMUEL L. HAYES, III (60), Trustee
Jacob H. Schiff Professor of Investment Banking, Harvard University Graduate
School of Business Administration. Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: Harvard University Graduate School of Business Administration,
Soldiers Field Road, Boston, Massachusetts 02134
NORTON H. REAMER (60), Trustee
President and Director, United Asset Management Corporation, a holding company
owning institutional investment management firms. Chairman, President and
Director, UAM Funds (mutual funds). Director or Trustee of various
investment companies managed by Eaton Vance or BMR.
Address: One International Place, Boston, Massachusetts 02110
JOHN L. THORNDIKE (69), Trustee
Director, Fiduciary Company Incorporated. Director or Trustee of various
investment companies managed by Eaton Vance or BMR.
Address: 175 Federal Street, Boston, Massachusetts 02110
JACK L. TREYNOR (65), Trustee
Investment Adviser and Consultant. Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: 504 Via Almar, Palos Verdes Estates, California 90274
WILLIAM D. BURT (57), Vice President
Vice President of Eaton Vance, BMR and EV since November 1994; formerly Vice
President of The Boston Company (1990-1994). Mr. Burt was elected Vice
President of the Trust on June 16, 1995.
M. DOZIER GARDNER (62), Vice President
President and Chief Executive Officer of Eaton Vance, BMR, EVC and EV, and a
Director of EVC and EV. Director or Trustee and officer of various
investment companies managed by Eaton Vance or BMR.
BARCLAY TITTMANN (63), Vice President
Vice President of Eaton Vance, BMR and EV since October 1993; formerly Vice
President of Invesco Management and Research (1970-1993). Mr. Tittmann was
elected Vice President of the Trust on June 16, 1995.
THOMAS OTIS (64), Secretary
Vice President and Secretary of Eaton Vance, BMR, EVC and EV. Officer of
various investment companies managed by Eaton Vance or BMR.
JAMES L. O'CONNOR (50), Treasurer
Vice President of Eaton Vance, BMR and EV. Officer of various other investment
companies managed by Eaton Vance or BMR.
WILLIAM J. AUSTIN, JR. (44), Assistant Treasurer
Assistant Vice President of Eaton Vance, BMR and EV. Officer of various
investment companies managed by Eaton Vance or BMR. Mr. Austin was elected
Assistant Treasurer of the Trust on December 16, 1991.
JANET E. SANDERS (60), Assistant Treasurer and Assistant Secretary
Vice President of Eaton Vance, BMR and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
A. JOHN MURPHY (33), Assistant Secretary
Assistant Vice President of Eaton Vance, BMR and EV since March 1, 1994;
employee of Eaton Vance since March 1993. State Regulations Supervisor, The
Boston Company (1991-1993) and Registration Specialist, Fidelity Management
& Research Co. (1986-1991). Officer of various investment companies managed
by Eaton Vance or BMR. Mr. Murphy was elected Assistant Secretary of the
Trust on March 27, 1995.
ERIC G. WOODBURY (38), Assistant Secretary
Vice President of Eaton Vance, BMR and EV since February 1993; formerly,
associate attorney at Dechert, Price & Rhoads and Gaston & Snow. Officer of
various investment companies managed by Eaton Vance or BMR. Mr. Woodbury was
elected Assistant Secretary of the Trust on June 19, 1995.
Messrs. Thorndike (Chairman), Hayes and Reamer are members of the Special
Committee of the Board of Trustees of the Trust. The Special Committee's
functions include a continuous review of the Trust's contractual relationship
with the investment adviser on behalf of the Fund, making recommendations to
the Trustees regarding the compensation of those Trustees who are not members
of the investment adviser's organization, and making recommendations to the
Trustees regarding candidates to fill vacancies, as and when they occur, in
the ranks of those Trustees who are not "interested persons" of the Trust or
the investment adviser.
Messrs. Treynor (Chairman) and Dwight are members of the Audit Committee
of the Board of Trustees of the Trust. The Audit Committee's functions include
making recommendations to the Trustees regarding the selection of the
independent certified public accountants, and reviewing with such accountants
and the Treasurer of the Trust matters relative to accounting and auditing
practices and procedures, accounting records, internal accounting controls,
and the functions performed by the custodian, transfer agent and dividend
disbursing agent of the Fund.
The fees and expenses of those Trustees of the Trust who are not members
of the Eaton Vance organization (the noninterested Trustees) are paid by the
Fund (and the other series of the Trust). (The Trustees of the Trust who are
members of the Eaton Vance organization receive no compensation from the
Fund.) During the fiscal year ended August 31, 1995, the noninterested
Trustees of the Trust earned the following compensation in their capacities as
Trustees from the Fund and, for the year ended September 30, 1995 earned the
following compensation in their capacities as Trustees of the other funds in
the Eaton Vance fund complex(1):
AGGREGATE TOTAL COMPENSATION
COMPENSATION ------------------
NAME ------------ FROM TRUST AND
- ---- FROM FUND FUND COMPLEX
Donald R. Dwight ............... $33(2) $135,000(4)
Samuel L. Hayes, III ........... 32(3) 150,000(5)
Norton H. Reamer ............... 31 135,000
John L. Thorndike .............. 32 140,000
Jack L. Treynor ................ 34 140,000
(1) The Eaton Vance fund complex consists of 211 registered investment
companies or series thereof.
(2) Includes $8 of deferred compensation.
(3) Includes $10 of deferred compensation.
(4) Includes $35,000 of deferred compensation.
(5) Includes $33,750 of deferred compensation.
Trustees of the Trust that are not affiliated with the Investment Adviser
may elect to defer receipt of all or a percentage of their annual fees in
accordance with the terms of a Trustees Deferred Compensation Plan (the
"Plan"). Under the Plan, an eligible Trustee may elect to have his deferred
fees invested by the Trust in the shares of one or more funds in the Eaton
Vance Family of Funds, and the amount paid to the Trustees under the Plan will
be determined based upon the performance of such investments. Deferral of
Trustees' fees in accordance with the Plan will have a negligible effect on
the Fund's assets, liabilities, and net income per share, and will not
obligate the Fund to retain the services of any Trustee or obligate the Fund
to pay any particular level of compensation to the Trustee.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As at November 30, 1995, the Trustees and officers of the Trust, as a
group, owned in the aggregate less than 1% of the outstanding shares of the
Fund. As of November 30, 1995, Merrill Lynch, Pierce, Fenner & Smith, Inc.,
Jacksonville, FL was the record owner of approximately 10.5% of the
outstanding shares, which were held on behalf of its customers who are the
beneficial owners of such shares, and as to which it had voting power under
certain limited circumstances. To the knowledge of the Trust, no other person
owned of record or beneficially 5% or more of the Fund's outstanding shares as
of such date.
INVESTMENT ADVISER
The Trust on behalf of the Fund engages Eaton Vance as investment adviser
pursuant to an Investment Advisory Agreement (the "Agreement") originally made
on October 21, 1987 and re-executed on November 1, 1990. Eaton Vance or its
affiliates acts as investment adviser to investment comanies and various
individual and institutional clients with combined assets under management of
approximately $16 billion. Eaton Vance is a wholly-owned subsidiary of EVC, a
publicly held holding company.
Eaton Vance, its affiliates and its predecessor companies have been
managing assets of individuals and institutions since 1924 and managing
investment companies since 1931. It maintains a large staff of experienced
fixed-income and equity investment professionals to service the needs of its
clients. The fixed-income division focuses on all kinds of taxable investment-
grade and high-yield securities, tax-exempt investment-grade and high-yield
securities, and U.S. Government securities. The equity division covers stocks
ranging from blue chip to emerging growth companies.
Eaton Vance manages the investments and affairs of the Fund subject to the
supervision of the Trust's Board of Trustees. Eaton Vance furnishes to the
Fund investment advice and assistance, administrative services, office space,
equipment and clerical personnel, and investment advisory, statistical and
research facilities, and has arranged for certain members of the Eaton Vance
organization to serve without salary as officers or Trustees of the Trust. The
Fund is responsible for all expenses not expressly stated to be payable by
Eaton Vance under the Investment Advisory Agreement, including, without
limitation, the fees and expenses of its custodian and transfer agent,
including those incurred for determining the Fund's net asset value and
keeping its books; the cost of share certificates; membership dues in
investment company organizations; brokerage commissions and fees; fees and
expenses of registering its shares; expenses of reports to shareholders, proxy
statements, and other expenses of shareholders' meetings; insurance premiums;
printing and mailing expenses; interest, taxes and corporate fees; legal and
accounting expenses; and compensation and expenses of Trustees not affiliated
with Eaton Vance. The Fund will also bear expenses incurred in connection with
litigation in which the Fund is a party and the legal obligation the Fund may
have to indemnify the Trust's officers and Trustees with respect thereto.
The Fund pays Eaton Vance as compensation under the Investment Advisory
Agreement a monthly fee based on average daily net assets as follows:
<TABLE>
<CAPTION>
AVERAGE DAILY NET ANNUALIZED FEE RATE MONTHLY FEE RATE
ASSETS FOR THE MONTH ------------------- ----------------
-------------------- (FOR EACH LEVEL) (FOR EACH LEVEL)
<S> <C> <C>
Up to $500 million ............................................................ 0.7500% 1/16 of 1%
$500 million but less than $1 billion ......................................... 0.6875% 11/192 of 1%
$1 billion but less than $1.5 billion ......................................... 0.6250% 5/96 of 1%
$1.5 billion but less than $2 billion ......................................... 0.5625% 3/64 of 1%
$2 billion but less than $3 billion ........................................... 0.5000% 1/24 of 1%
$3 billion and over ........................................................... 0.4375% 7/192 of 1%
</TABLE>
As at August 31, 1995, the Fund had net assets of $15,258,733. For the
fiscal year ended August 31, 1995, the Fund paid Eaton Vance advisory fees of
$92,809 (equivalent to 0.75% (annualized) of the Fund's average daily net
assets for such period). For the fiscal year ended September 30, 1994, the
Fund paid Eaton Vance advisory fees of $70,439 (equivalent to 0.75% of the
Fund's average daily net assets for such period). For the fiscal year ended
September 30, 1993, Eaton Vance would have earned, absent a fee reduction,
advisory fees of $32,300 (equivalent to 0.75%, of the Fund's average daily net
assets for such period). To enhance the net income of the Fund and to satisfy
certain state expense limitations, Eaton Vance reduced its fee by $32,300.
A commitment has been made to a state securities authority that Eaton
Vance will take certain actions, if necessary, so that the Fund's expenses
will not exceed expense limitation requirements of such state. The commitment
may be amended or rescinded by Eaton Vance in response to changes in the
requirements of the state or for other reasons.
The Investment Advisory Agreement with Eaton Vance remains in effect until
February 28, 1996. It may be continued indefinitely thereafter so long as such
continuance after February 28, 1996 is approved at least annually (i) by the
vote of a majority of the Trustees who are not interested persons of the Trust
or of Eaton Vance cast in person at a meeting specifically called for the
purpose of voting on such approval and (ii) by the Board of Trustees of the
Trust or by vote of a majority of the outstanding voting securities of the
Fund. The Agreement may be terminated at any time without penalty on sixty
(60) days' written notice by the Board of Trustees of either party, or by vote
of the majority of the outstanding voting securities of the Fund, and the
Agreement will terminate automatically in the event of its assignment. The
Agreement provides that Eaton Vance may render services to others and may
permit other fund clients and other corporations and organizations to use the
words "Eaton Vance" in their names. The Agreement also provides that, in the
absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of obligations or duties under the Agreement on the part of Eaton
Vance, Eaton Vance shall not be liable to the Fund or to any shareholder for
any act or omission in the course of or connected with rendering services or
for any losses sustained in the purchase, holding or sale of any security.
Eaton Vance and EV are both wholly-owned subsidiaries of EVC. BMR is a
wholly-owned subsidiary of Eaton Vance. Eaton Vance and BMR are both
Massachusetts business trusts, and EV is the trustee of Eaton Vance and BMR.
The Directors of EV are Landon T. Clay, H. Day Brigham, Jr., M. Dozier
Gardner, James B. Hawkes and Benjamin A. Rowland, Jr. The Directors of EVC
consist of the same persons and John G. L. Cabot and Ralph Z. Sorenson. Mr.
Clay is chairman and Mr. Gardner is president and chief executive officer of
EVC, Eaton Vance, BMR and EV. All of the issued and outstanding shares of
Eaton Vance and EV are owned by EVC. All of the issued and outstanding shares
of BMR are owned by Eaton Vance. All shares of the outstanding Voting Common
Stock of EVC are deposited in a Voting Trust which expires on December 31,
1996, the Voting Trustees of which are Messrs. Clay, Brigham, Gardner, Hawkes
and Rowland. The Voting Trustees have unrestricted voting rights for the
election of Directors of EVC. All of the outstanding voting trust receipts
issued under said Voting Trust are owned by certain of the officers of Eaton
Vance and BMR who are also officers and Directors of EVC and EV. As of
November 30, 1995, Messrs. Clay, Gardner and Hawkes each owned 24% of such
voting trust receipts, and Messrs. Rowland and Brigham owned 15% and 13%,
respectively, of such voting trust receipts. Messrs. Gardner, Hawkes and Otis
who are officers or Trustees of the Trust are members of the EVC, Eaton Vance,
BMR and EV organizations. Messrs. Austin, Burt, Murphy, O'Connor, Tittmann and
Woodbury, and Ms. Sanders, are officers of the Trust, and are also members of
the Eaton Vance, BMR and EV organizations. Eaton Vance will receive the fees
paid under the Investment Advisory Agreement.
EVC owns all of the stock of Marblehead Energy Corp., which engages in oil
and gas operations. Eaton Vance owns all the stock of Northeast Properties,
Inc., which is engaged in real estate investment, consulting and management.
EVC owns all the stock of Fulcrum Management, Inc. and MinVen, Inc., which are
engaged in the development of precious metal properties. EVC also owns 24% of
the Class A shares of Lloyd George Management (B.V.I.) Limited, a registered
investment adviser. EVC, Eaton Vance, BMR and EV may also enter into other
businesses.
EVC and its affiliates and their officers and employees from time to time
have transactions with various banks, including the Fund's custodian.
Investors Bank & Trust Company. It is Eaton Vance's opinion that the terms and
conditions of such transactions were not and will not be influenced by
existing or potential custodial or other relationships between the Fund and
such banks.
CUSTODIAN
Investors Bank & Trust Company ("IBT"), 89 South Street, Boston,
Massachusetts acts as custodian for the Fund. IBT has the custody of all cash
and securities of the Fund, maintains the Fund's general ledger and computes
the daily per share net asset value. In such capacity it attends to details in
connection with the sale, exchange, substitution, transfer or other dealings
with the Fund's investments, receives and disburses all funds and performs
various other ministerial duties upon receipt of proper instructions from the
Fund. IBT charges fees which are competitive within the industry. A portion of
the fee relates to custody, bookkeeping and valuation services and is based
upon a percentage of Fund net assets and a portion of the fee relates to
activity charges, primarily the number of portfolio transactions. These fees
are then reduced by a credit for the cash balances of the particular
investment company at the custodian equal to 75% of the 91-day, U.S. Treasury
Bill auction rate applied to the particular investment company's average daily
collected balances for the week. Landon T. Clay, a Director of EVC and an
officer, Trustee or Director of other entities in the Eaton Vance
organization, owns approximately 13% of the voting stock of Investors
Financial Services Corp., the parent holding company of IBT. Management
believes that such ownership does not create an affiliated person relationship
between the Fund and IBT under the 1940 Act. For the fiscal year ended August
31, 1995, the Fund paid IBT $8,957 under these arrangements.
SERVICE FOR WITHDRAWAL
By a standard agreement, the Trust's Transfer Agent will send to the
shareholder regular monthly or quarterly payments of any permitted amount
designated by the shareholder (see "Eaton Vance Shareholder Services --
Withdrawal Plan" in the Fund's current Prospectus) based upon the value of the
shares held. The checks will be drawn from share redemptions and hence, are a
return of principal. Income dividends and capital gains distributions in
connection with withdrawal accounts will be credited at net asset value as of
the record for each distribution. Continued withdrawals in excess of current
income will eventually use up principal, particularly in a period of declining
market prices.
To use this service, at least $5,000 in cash or shares at the public
offering price (i.e., net asset value) will have to be deposited with the
Transfer Agent. A shareholder may not have a withdrawal plan in effect at the
same time he or she has authorized Bank Automated Investing or is otherwise
making regular purchases of Fund shares. The shareholder, the Transfer Agent
or the Principal Underwriter will be able to terminate the withdrawal plan at
any time without penalty.
DETERMINATION OF NET ASSET VALUE
Shares of the Fund are offered and sold at their net asset value. For a
description of how the Fund values its shares, see "Valuing Fund Shares" in
the Fund's current prospectus. The Fund will be closed for business and will
not price its shares on the following business holidays: New Year's Day,
Presidents' Day, Good Friday (a New York Stock Exchange holiday), Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
The Trustees of the Trust have established the following procedures for
the valuation of the Fund's assets. Marketable securities listed on securities
exchanges or in the NASDAQ National Market System are valued at closing sale
prices or if there were no sales at the mean between the closing bid and asked
prices therefor on such exchanges or System. Unlisted or listed securities for
which closing sale prices are not available are valued at the mean between the
latest bid and asked prices. An option contract is valued at last sale price
as quoted on the principal exchange or board of trade on which such option or
contract is traded, or in the absence of a sale, the mean between the last bid
and asked price. Futures positions on securities or currencies are generally
valued at closing settlement prices. Direct placement securities and
securities of venture capital companies, except as provided below, are taken
at fair value as determined in good faith by or pursuant to procedures
established by the Trustees. Direct placement securities and securities of
former venture capital companies which are readily marketable are considered
marketable securities.
Short term debt securities are valued at amortized cost, which
approximates value. Other fixed income and debt securities, including listed
securities and securities for which price quotations are available, will
normally be valued on the basis of valuations furnished by a pricing service.
Generally, trading in the foreign securities owned by the Fund is
substantially completed each day at various times prior to the close of the
New York Stock Exchange. The values of these securities used in determining
the net asset value of the Fund's shares are computed as of such times.
Occasionally, events affecting the value of foreign securities may occur
between such times and the close of the Exchange which will not be reflected
in the computation of the Fund's net asset value (unless the Fund deems that
such events would materially affect its net asset value, in which case an
adjustment would be made and reflected in such computation). Foreign
securities and currency held by the Fund will be valued in U.S. dollars.
Physical commodities, including bullion, will generally be valued at fair
value based on prevailing market prices.
INVESTMENT PERFORMANCE
The average annual total return is determined by multiplying a
hypothetical initial purchase order of $1,000 by the average annual compound
rate of return (including capital appreciation/depreciation, and dividends and
distributions paid and reinvested) for the stated period and annualizing the
result. The calculation assumes that all dividends and distributions are
reinvested at net asset value on the reinvestment dates during the period, a
complete redemption of the investment and the deduction of the contingent
deferred sales charge at the end of the period.
The Fund's yield is computed pursuant to a standardized formula by
dividing its net investment income per share earned during a recent thirty-day
period by the maximum offering price (net asset value) per share on the last
day of the period and annualizing the resulting figure. Net investment income
per share is equal to the dividends and interest earned during the period,
reduced by accrued expenses for the period with the resulting number being
divided by the average daily number of Fund shares outstanding and entitled to
receive dividends during the period. This yield figure does not reflect the
deduction of any contingent deferred sales charges which are imposed upon
certain redemptions at the rates set forth under "How to Redeem Fund Shares"
in the Fund's current Prospectus.
The table below indicates the average annual and cumulative total return
on a hypothetical investment of $1,000 in the Fund covering the life of the
Fund from October 21, 1987 through August 31, 1995, and the one- and five-year
periods ended August 31, 1995.
VALUE OF A $1,000 INVESTMENT
<TABLE>
<CAPTION>
VALUE AFTER TOTAL RETURN TOTAL RETURN
VALUE BEFORE DEDUCTING THE BEFORE DEDUCTING AFTER DEDUCTING
DEDUCTING THE CONTINGENT THE CONTINGENT DEFERRED THE CONTINGENT DEFERRED
DEFERRED DEFERRED SALES CHARGE SALES CHARGE<F2>
INVESTMENT INVESTMENT AMOUNT OF SALES CHARGE SALES CHARGE<F2> -------------------------- ------------------------
PERIOD DATE INVESTMENT ON 8/31/95 ON 8/31/95 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ------------ ---------- ----------- --------------- ----------------- ------------ ------------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of
the Fund<F3> 10/21/87<F1> $1,000 $2,204.68 $2,204.68 120.47% 10.57% 120.47% 10.57%
5 Years Ended
8/31/95<F3> 8/31/90 $1,000 $1,501.71 $1,481.71 50.17% 8.45% 48.17% 8.16%
1 Year Ended
8/31/95 8/31/94 $1,000 $1,137.91 $1,087.91 13.79% 13.79% 8.79% 8.79%
Past performance is not indicative of future results. Investment return and principal value will fluctuate and shares, when
redeemed, may be worth more or less than their original cost.
- ----------
<FN>
<F1> Investment operations began on October 21, 1987.
<F2> No contingent deferred sales charge is imposed on certain redemptions. See the Fund's current Prospectus.
<F3> If a portion of the Fund's expenses had not been subsidized, the Fund would have had lower returns.
</TABLE>
The Fund's total return may be compared to the Consumer Price Index and
various domestic securities indices. The Fund's total return and comparisons
with these indices may be used in advertisements and in information furnished
to present or prospective shareholders. In addition, evaluations of the Fund's
performance made by independent sources may be used in advertisements and in
information furnished to present or prospective shareholders. The Fund may
also include information about the Fund's portfolio allocation and holdings in
such advertisements and other material.
Information (including charts and illustrations) relating to inflation and
the effects of inflation on the dollar may be included in advertisements and
other material furnished to present and prospective shareholders. Such
information may reflect the change in the net asset value of a hypothetical
investment in the Fund over a specified time period and compare it to an
inflationary measure, such as the Consumer Price Index (which is computed by
the Bureau of Labor Statistics of the U.S. Department of Labor).
Information used in advertisements and in materials furnished to present
and prospective shareholders may include statements or illustrations relating
to the appropriateness of types of securities and/or mutual funds which may be
employed to meet specific financial goals, such as (1) funding retirement, (2)
paying for children's education, and (3) financially supporting aging parents.
These three financial goals may be referred to in such advertisements or
materials at the "Triple Squeeze."
TAXES
FEDERAL INCOME TAXES
See "Distributions and Taxes" in the Fund's current Prospectus.
The Fund has elected to be treated, has qualified, and intends to continue
to qualify each year as a regulated investment company ("RIC") under the
Internal Revenue Code of 1986, as amended (the "Code"). Accordingly, the Fund
intends to satisfy certain requirements relating to sources of its income and
diversification of its assets and to distribute its net investment income
(including tax-exempt income) and net realized capital gains in accordance
with the timing requirements imposed by the Code, so as to avoid any federal
income or excise tax on the Fund. The Fund so qualified for its fiscal year
ended August 31, 1995 (see the Notes to the Financial Statements incorporated
by reference in this Statement of Additional Information).
In order to avoid Federal excise tax, the Code requires that the Fund
distribute (or be deemed to have distributed) by December 31 of each calendar
year at least 98% of its ordinary income (not including tax-exempt income) for
such year, at least 98% of the excess of its realized capital gains over its
realized capital losses, generally computed on the basis of the one-year
period ending on October 31 of such year, after reduction by any available
capital loss carryforwards, and 100% of any income from the prior year (as
previously computed) that was not paid out during such year and on which the
Fund paid no federal income tax. Under current law, provided the Fund
qualifies as a RIC for federal income tax purposes, the Fund is not liable for
any income, corporate excise or franchise tax in the Commonwealth of
Massachusetts.
The Fund's transactions in options, futures contracts, forward contracts
and certain other transactions involving foreign exchange gain or loss will be
subject to special tax rules, the effect of which may be to accelerate income
to the Fund, defer Fund losses, cause adjustments in the holding periods of
Fund securities, convert capital gain into ordinary income and convert short-
term capital losses into long-term capital losses. For example, the tax
treatment of many types of options, futures contracts and forward contracts
entered into by the Fund will be governed by Section 1256 of the Code. Absent
a tax election for "mixed straddles" (see below), each such position held by
the Fund on the last business day of each taxable year will be marked to
market (i.e., treated as if it were closed out on such day), and any resulting
gain or loss, except for certain currency-related positions, will generally be
treated as 60% long-term and 40% short-term capital gain or loss, with
subsequent adjustments made to any gain or loss realized upon an actual
disposition of such positions. When the Fund holds an option or contract
governed by Section 1256 which substantially diminishes the Fund's risk of
loss with respect to another position of the Fund not governed by Section 1256
(as might occur in some hedging transactions), this combination of positions
could be a "mixed straddle" which is generally subject to special tax rules
requiring deferral of losses and other adjustments in addition to being
subject in part to Section 1256. The Fund may make certain tax elections for
its "mixed straddles" which could alter certain effects of these rules. In
order to qualify as a RIC for federal income tax purposes, the Fund must
derive less than 30% of its annual gross income from the sale or other
disposition of securities and certain other investments held for less than
three months and will limit its activities in options, futures contracts and
forward contracts to the extent necessary to comply with this requirement.
The Fund may be subject to foreign withholding or other foreign taxes with
respect to income (possibly including, in some cases, capital gains) derived
from securities of foreign issuers and may be able to pass such taxes through
to shareholders along with foreign tax credits or deductions relating to these
taxes. These taxes may be reduced or eliminated under the terms of an
applicable U.S. income tax treaty. Certain foreign exchange gains and losses
realized by the Fund will be treated as ordinary income and losses. Certain
uses of foreign currency and options, futures or forward contracts thereon and
investment by the Fund in the stock of certain "passive foreign investment
companies" may be limited or a tax election may be made, if available, in
order to avoid imposition of a tax on the Fund.
The Fund's investments, if any, in securities issued with original issue
discount (possibly including certain asset-related securities) or securities
acquired at a market discount (if an election is made to include accrued
market discount in current income) will cause it to realize income prior to
the receipt of cash payments with respect to these securities. In order to
distribute this income and avoid a tax on the Fund, the Fund may be required
to liquidate portfolio securities that it might otherwise have continued to
hold.
The portion of distributions made by the Fund which is attributable to
dividends received by the Fund from U.S. domestic corporations may qualify for
the dividends-received deduction for corporations. The dividends-received
deduction is reduced to the extent the shares with respect to which the
dividends are received are treated as debt-financed under the Federal income
tax law and is eliminated if the shares are deemed to have been held for less
than a minimum period, generally 46 days. Receipt of certain distributions
qualifying for the deduction may result in reduction of the tax basis of the
corporate shareholder's shares. Distributions eligible for the dividends-
received deduction may give rise to (or increase) an alternative minimum tax
for corporations depending upon the shareholder's particular tax situation.
Distributions by the Fund of net investment income, the excess of net
short-term capital gain over net long-term capital loss, and certain foreign
exchange gains are taxable to shareholders as ordinary income, whether
received in cash or reinvested in additional shares. Distributions of the
excess of net long-term capital gain over net short-term capital loss
(including any capital losses carried forward from prior years) are taxable to
shareholders as long-term capital gains, whether received in cash or in
additional shares and regardless of the length of time their shares of the
Fund have been held.
Any loss realized upon the redemption or exchange of shares with a tax
holding period of 6 months or less will be treated as a long-term capital loss
to the extent of any distribution of net long-term capital gains with respect
to such shares. All or a portion of a loss realized upon a redemption or other
disposition of Fund shares may be disallowed under "wash sale" rules if other
shares of the Fund are purchased (whether through reinvestment of dividends or
otherwise) within the 30 days before or after such disposition.
Amounts paid by the Fund to individuals and certain other shareholders who
have not provided the Fund with their correct taxpayer identification number
and certain required certifications, as well as shareholders with respect to
whom the Fund has received notification from the Internal Revenue Service or a
broker, may be subject to "backup" withholding of federal income tax from the
Fund's dividends and distributions and the proceeds of redemptions (including
repurchases and exchanges), at a rate of 31%. An individual's taxpayer
identification number is generally his or her social security number.
Non-resident alien individuals and certain foreign corporations and other
foreign entities generally will be subject to a U.S. withholding tax at a rate
of 30% on the Fund's distributions from its ordinary income and the excess of
its net short-term capital gain over its net long-term capital loss, unless
the tax is reduced or eliminated by an applicable tax treaty. Distributions
from the excess of the Fund's net long-term capital gain over its net short-
term capital loss received by such shareholders and any gain from the sale or
other disposition of shares of the Fund generally will not be subject to U.S.
federal income taxation, provided that non-resident alien status has been
certified by the shareholder. Different U.S. tax consequences may result if
the shareholder is engaged in a trade or business in the United States, is
present in the United States for a sufficient period of time during a taxable
year to be treated as a U.S. resident, or fails to provide any required
certifications regarding status as a non-resident alien investor. Foreign
shareholders should consult their tax advisers regarding the U.S. and foreign
tax consequences of an investment in the Fund.
Special tax rules apply to Individual Retirement Accounts ("IRAs") and
other retirement plans and persons investing through such plans should consult
their tax advisers for more information. The deductibility of such
contributions may be restricted or eliminated for particular shareholders.
The foregoing discussion does not address the special tax rules applicable
to certain classes of investors, such as retirement plans, tax-exempt
entities, insurance companies and financial institutions. Shareholders should
consult their own tax advisers with respect to special tax rules that may
apply in their particular situations, as well as the state, local or foreign
tax consequences of investing in the Fund.
PRINCIPAL UNDERWRITER
Under the Distribution Agreement the Principal Underwriter acts as
principal in selling shares of the Fund. The expenses of printing copies of
prospectuses used to offer shares to financial service firms or investors and
other selling literature and of advertising is borne by the Principal
Underwriter. The fees and expenses of qualifying and registering and
maintaining qualifications and registrations of the Fund and its shares under
federal and state securities laws are borne by the Fund. In addition, the Fund
makes payments to the Principal Underwriter pursuant to its Distribution Plan
as described in the Fund's current Prospectus; the provisions of the plan
relating to such payments are included in the Distribution Agreement. The
Distribution Agreement is renewable annually by the Trust's Board of Trustees
(including a majority of its Trustees who are not interested persons of the
Trust and who have no direct or indirect financial interest in the operation
of the Fund's Distribution Plan or the Distribution Agreement), may be
terminated on sixty days' notice either by such Trustees or by vote of a
majority of the outstanding voting securities of the Fund or on six months'
notice by the Principal Underwriter and is automatically terminated upon
assignment. The Principal Underwriter currently distributes Fund shares on a
"best efforts" basis under which it is required to take and pay for only such
shares as may be sold. The Fund has authorized the Principal Underwriter to
act as its agent in repurchasing shares and paid the Principal Underwriter
$510 for the fiscal year ended August 31, 1995 (being $2.50 for each
repurchase transaction handled by the Principal Underwriter). The Principal
Underwriter estimates that the expenses incurred by it in acting as repurchase
agent for the Fund will exceed the amounts paid therefor by the Fund.
DISTRIBUTION PLAN
The Distribution Plan (the "Plan") is described in the Prospectus and is
designed to meet the requirements of Rule 12b-1 under the 1940 Act and the
sales charge rule of the National Association of Securities Dealers, Inc. (the
"NASD Rule"). The purpose of the Plan is to compensate the Principal
Underwriter for its distribution services and facilities provided to the Fund
by paying the Principal Underwriter sales commissions and a separate
distribution fee in connection with sales of Fund shares. The following
supplements the discussion of the Plan contained in the Fund's Prospectus.
The amount payable by the Fund to the Principal Underwriter pursuant to
the Plan as sales commissions and distribution fees with respect to each day
will be accrued on such day as a liability of the Fund and will accordingly
reduce the Fund's net assets upon such accrual, all in accordance with
generally accepted accounting principles. The amount payable on each day is
limited to 1/365 of .75% of the Fund's net assets on such day. The level of
the Fund's net assets changes each day and depends upon the amount of sales
and redemptions of Fund shares, the changes in the value of the investments
held by the Fund, the expenses of the Fund accrued on such day, income on
portfolio investments of the Fund accrued on such day, and any dividends and
distributions declared on Fund shares. The Fund does not accrue possible
future payments as a liability of the Fund or reduce the Fund's current net
assets in respect of unknown amounts which may become payable under the Plan
in the future because the standards for accrual of such a liability under
accounting principles have not been satisfied.
The Plan provides that the Fund will receive all contingent deferred sales
charges and will make no payments to the Principal Underwriter in respect of
any day on which there are no outstanding Uncovered Distribution Charges of
the Principal Underwriter. Contingent deferred sales charges and accrued
amounts will be paid by the Fund to the Principal Underwriter whenever there
exist Uncovered Distribution Charges under the Fund's Plan.
Periods with a high level of sales of Fund shares accompanied by a low
level of early redemptions of Fund shares resulting in the imposition of
contingent deferred sales charges will tend to increase the time during which
there will exist Uncovered Distribution Charges of the Principal Underwriter.
Conversely, periods with a low level of sales of Fund shares accompanied by a
high level of early redemptions of Fund shares resulting in the imposition of
contingent deferred sales charges will tend to reduce the time during which
there will exist Uncovered Distribution Charges of the Principal Underwriter.
In calculating daily the amount of Uncovered Distribution Charges,
distribution charges will include the aggregate amount of sales commissions
and distribution fees theretofore paid plus the aggregate amount of sales
commissions and distribution fees which the Principal Underwriter is entitled
to be paid under the Plan since its inception. Payments theretofore paid or
payable under the Plan by the Fund to the Principal Underwriter and contingent
deferred sales charges theretofore paid or payable to the Principal
Underwriter will be subtracted from such distribution charges; if the result
of such subtraction is positive, a distribution fee (computed at 1% over the
prime rate then reported in The Wall Street Journal) will be computed on such
amount and added thereto, with the resulting sum constituting the amount of
outstanding Uncovered Distribution Charges with respect to such day. The
amount of outstanding Uncovered Distribution Charges of the Principal
Underwriter calculated on any day does not constitute a liability recorded on
the financial statements of the Fund.
The amount of Uncovered Distribution Charges of the Principal Underwriter
at any particular time depends upon various changing factors, including the
level and timing of sales of Fund shares, the nature of such sales (i.e.,
whether they result from exchange transactions, reinvestments or from cash
sales through Authorized Firms), the level and timing of redemptions of Fund
shares upon which a contingent deferred sales charge will be imposed, the
level and timing of redemptions of Fund shares upon which no contingent
deferred sales charge will be imposed (including redemptions involving
exchanges of Fund shares for shares of another fund in the Eaton Vance
Marathon Group of Funds which result in a reduction of Uncovered Distribution
Charges), changes in the level of the net assets of the Fund, and changes in
the interest rate used in the calculation of the distribution fee under the
Plan.
As currently implemented by the Trustees, the Fund's Plan authorizes
payments of sales commissions and distribution fees to the Principal
Underwriter and service fees to the Principal Underwriter and Authorized Firms
which may be equivalent, on an aggregate basis during any fiscal year of the
Fund, to 1% of the Fund's average daily net assets for such year. The Fund
believes that the combined rate of all these payments may be higher than the
rate of payments made under distribution plans adopted by other investment
companies pursuant to Rule 12b-1. Although the Principal Underwriter will use
its own funds (which may be borrowed from banks) to pay sales commissions at
the time of sale, it is anticipated that the Eaton Vance organization will
profit by reason of the operation of the Plan through an increase in the
Fund's assets (thereby increasing the advisory fee payable to Eaton Vance)
resulting from sale of Fund shares and through amounts paid to the Principal
Underwriter, including contingent deferred sales charges, pursuant to the
Plan. The Eaton Vance organization may be considered to have realized a profit
under the Plan if at any point in time the aggregate amounts theretofore
received by the Principal Underwriter pursuant to the Plan and from contingent
deferred sales charges have exceeded the total expenses theretofore incurred
by such organization in distributing shares of the Fund. Total expenses for
this purpose will include an allocable portion of the overhead costs of such
organization and its branch offices, which costs will include without
limitation leasing expense, depreciation of building and equipment, utilities,
communication and postage expense, compensation and benefits of personnel,
travel and promotional expense, stationery and supplies, literature and sales
aids, interest expense, data processing fees, consulting and temporary help
costs, insurance, taxes other than income taxes, legal and auditing expense
and other miscellaneous overhead items. Overhead is calculated and allocated
for such purpose by the Eaton Vance organization in a manner deemed equitable
to the Fund.
During the fiscal year ended August 31, 1995, the Principal Underwriter
paid sales commissions of $96,613 to Authorized Firms on sales of Fund shares.
During the same period, the Fund made sales commission payments under the
Plan to the Principal Underwriter aggregating $92,800, which amount reduced
Uncovered Distribution Charges. During such period, contingent deferred sales
charges aggregating approximately $100,000 were imposed on early redeeming
shareholders and paid to the Principal Underwriter to reduce Uncovered
Distribution Charges. As at August 31, 1995, the outstanding Uncovered
Distribution Charges of the Principal Underwriter calculated under the Plan
amounted to approximately $427,000 (which amount was equivalent to 2.8% of the
Fund's net assets on such date). During the fiscal year ended August 31, 1995,
the Fund paid service fee payments under the Plan aggregating $12,788, of
which $12,460 was paid to Authorized Firms and the balance of which was
retained by the Principal Underwriter.
The Plan continues in effect through and including April 28, 1996, and
shall continue in effect indefinitely thereafter for so long as such
continuance is approved at least annually by the vote of both a majority of
(i) the Trustees of the Trust who are not interested persons of the Trust and
who have no direct or indirect financial interest in the operation of the Plan
or any agreements related to the Plan (the "Rule 12b-1 Trustees") and (ii) all
of the Trustees then in office, and the Distribution Agreement contains a
similar provision. The Plan and Distribution Agreement may be terminated at
any time by vote of a majority of the Rule 12b-1 Trustees or by a vote of a
majority of the outstanding voting securities of the Fund. The provisions of
the Plan relating to payments of sales commissions and distribution fees to
the Principal Underwriter are also included in the Distribution Agreement
between the Trust on behalf of the Fund and the Principal Underwriter.
Pursuant to Rule 12b-1, the Plan has been approved by the Fund's initial sole
shareholder (Eaton Vance) and by the Board of Trustees of the Trust, including
the Rule 12b-1 Trustees. Under the Plan, the President or a Vice President of
the Trust shall provide to the Trustees for their review, and the Trustees
shall review at least quarterly, a written report of the amount expended under
the Plan and the purposes for which such expenditures were made. The Plan may
not be amended to increase materially the payments described therein without
approval of the shareholders of the Fund, and all material amendments of the
Plan must also be approved by the Trustees as required by Rule 12b-1. So long
as the Plan is in effect, the selection and nomination of Trustees who are not
interested persons of the Trust shall be committed to the discretion of the
Trustees who are not such interested persons.
The Trustees believe that the Plan will be a significant factor in the
growth of the Fund's assets, resulting in increased investment flexibility and
advantages which will benefit the Fund and its shareholders. Payments for
sales commissions and distribution fees made to the Principal Underwriter
under the Plan will compensate the Principal Underwriter for its services and
expenses in distributing shares of the Fund. Service fee payments made to the
Principal Underwriter and Authorized Firms under the Plan provide incentives
to provide continuing personal services to investors and the maintenance of
shareholder accounts. By providing incentives to the Principal Underwriter
and Authorized Firms, the Plan is expected to result in the maintenance of,
and possible future growth in, the assets of the Fund. Based on the foregoing
and other relevant factors, the Trustees have determined that in their
judgment there is a reasonable likelihood that the Plan will benefit the Fund
and its shareholders.
PORTFOLIO SECURITY TRANSACTIONS
Decisions concerning the execution of Fund portfolio security
transactions, including the selection of the market and the broker-dealer
firm, are made by Eaton Vance. Eaton Vance is also responsible for the
execution of transactions for all other accounts managed by it.
Eaton Vance places the portfolio transactions of the Fund and of all other
accounts managed by it for execution with many broker-dealer firms. Eaton
Vance uses its best efforts to obtain execution of portfolio transactions at
prices which are advantageous to the Fund and (when a disclosed commission is
being charged) at reasonably competitive commission rates. In seeking such
execution, Eaton Vance will use its best judgment in evaluating the terms of a
transaction, and will give consideration to various relevant factors,
including without limitation the size and type of the transaction, the general
execution and operational capabilities of the broker-dealer, the nature and
character of the market for the security, the confidentiality, speed and
certainty of effective execution required for the transaction, the reputation,
reliability, experience and financial condition of the broker-dealer, the
value and quality of the services rendered by the broker-dealer in other
transactions, and the reasonableness of the commission or spread, if any.
Transactions on United States stock exchanges and other agency transactions
involve the payment by the Fund of negotiated brokerage commissions. Such
commissions vary among different broker-dealer firms, and a particular broker-
dealer may charge different commissions according to such factors as the
difficulty and size of the transaction and the volume of business done with
such broker-dealer. Transactions in foreign securities usually involve the
payment of fixed brokerage commissions, which are generally higher than those
in the United States. There is generally no stated commission in the case of
securities traded in the over-the-counter markets, but the price paid or
received by the Fund usually includes an undisclosed dealer markup or
markdown. In an underwritten offering, the price paid by the Fund often
includes a disclosed fixed commission or discount retained by the underwriter
or dealer. Although commissions paid on portfolio security transactions will,
in the judgment of Eaton Vance, be reasonable in relation to the value of the
services provided, commissions exceeding those which another firm might charge
may be paid to broker-dealers who were selected to execute transactions on
behalf of the Fund and Eaton Vance's other clients for providing brokerage and
research services to Eaton Vance.
As authorized in Section 28(e) of the Securities Exchange Act of 1934, a
broker or dealer who executes a portfolio transaction on behalf of the Fund
may receive a commission which is in excess of the amount of commission
another broker or dealer would have charged for effecting that transaction if
Eaton Vance determines in good faith that such compensation was reasonable in
relation to the value of the brokerage and research services provided. This
determination may be made on the basis of either that particular transaction
or on the basis of overall responsibilities which Eaton Vance and its
affiliates have for accounts over which they exercise investment discretion.
In making any such determination, Eaton Vance will not attempt to place a
specific dollar value on the brokerage and research services provided or to
determine what portion of the commission should be related to such services.
Brokerage and research services may include advice as to the value of
securities, the advisability of investing in, purchasing, or selling
securities, and the availability of securities or purchasers or sellers of
securities; furnishing analyses and reports concerning issuers, industries,
securities, economic factors and trends, portfolio strategy and the
performance of accounts; effecting securities transactions and performing
functions incidental thereto (such as clearance and settlement) and the
"Research Services" referred to in the next paragraph.
It is a common practice in the investment advisory industry for the
advisers of investment companies, institutions and other investors to receive
research, statistical and quotation services, data, information and other
services, products and materials which assist such advisers in the performance
of their investment responsibilities ("Research Services") from broker-dealer
firms which execute portfolio transactions for the clients of such advisers
and from third parties with which such broker-dealers have arrangements.
Consistent with this practice, Eaton Vance receives Research Services from
many broker-dealer firms with which Eaton Vance places the Fund's portfolio
transactions and from third parties with which these broker-dealers have
arrangements. These Research Services include such matters as general economic
and market reviews, industry and company reviews, evaluations of securities
and portfolio strategies and transactions, recommendations as to the purchase
and sale of securities and other portfolio transactions, financial, industry
and trade publications, news and information services, pricing and quotation
equipment and services, and research oriented computer hardware, software,
data bases and services. Any particular Research Service obtained through a
broker-dealer may be used by Eaton Vance in connection with client accounts
other than those accounts which pay commissions to such broker-dealer. Any
such Research Service may be broadly useful and of value to Eaton Vance in
rendering investment advisory services to all or a significant portion of its
clients, or may be relevant and useful for the management of only one client's
account or of a few clients' accounts, or may be useful for the management of
merely a segment of certain clients' accounts, regardless of whether any such
account or accounts paid commissions to the broker-dealer through which such
Research Service was obtained. The advisory fee paid by the Fund is not
reduced because Eaton Vance receives such Research Services. Eaton Vance
evaluates the nature and quality of the various Research Services obtained
through broker-dealer firms and attempts to allocate sufficient commissions to
such firms to ensure the continued receipt of Research Services which Eaton
Vance believes are useful or of value to it in rendering investment advisory
services to its clients.
Subject to the requirement that Eaton Vance shall use its best efforts to
seek to execute Fund portfolio security transactions at advantageous prices
and at reasonably competitive commission rates or spreads, Eaton Vance is
authorized to consider as a factor in the selection of any broker-dealer firm
with whom Fund portfolio orders may be placed the fact that such firm has sold
or is selling shares of the Fund or of other investment companies sponsored by
Eaton Vance. This policy is not inconsistent with a rule of the National
Association of Securities Dealers, Inc., which rule provides that no firm
which is a member of the Association shall favor or disfavor the distribution
of shares of any particular investment company or group of investment
companies on the basis of brokerage commissions received or expected by such
firm from any source.
Securities considered as investments for the Fund may also be appropriate
for other investment accounts managed by Eaton Vance or its affiliates. Eaton
Vance will attempt to allocate equitably portfolio security transactions among
the Fund and the portfolios of its other investment accounts whenever
decisions are made to purchase or sell securities by the Fund and one or more
of such other accounts simultaneously. In making such allocations, the main
factors to be considered are the respective investment objectives of the Fund
and such other accounts, the relative size of portfolio holdings of the same
or comparable securities, the availability of cash for investment by the Fund
and such accounts, the size of investment commitments generally held by the
Fund and such accounts and the opinions of the persons responsible for
recommending investments to the Fund and such accounts. While this procedure
could have a detrimental effect on the price or amount of the securities
available to the Fund from time to time, it is the opinion of the Trustees
that the benefits available from the Eaton Vance organization outweigh any
disadvantage that may arise from exposure to simultaneous transactions.
During the fiscal year ending August 31, 1995 the Fund paid brokerage
commissions of $30,126, on portfolio security transactions, of which
approximately $27,401 was paid in respect of portfolio security transactions
aggregating approximately $8,975,953 to firms which provided some research
services to Eaton Vance or its affiliates (although many of such firms may
have been selected in any particular transactions primarily because of their
execution capabilities). During the fiscal years ended September 30, 1994 and
1993, the Fund paid brokerage commissions of $19,482 and $15,436,
respectively.
OTHER INFORMATION
On August 18, 1992 the Trust changed its name from Eaton Growth Fund to
Eaton Vance Growth Trust. The Trust is a Massachusetts business trust
established in 1989 as the successor to Eaton Vance Growth Fund, Inc., a
Massachusetts corporation which changed its name from Vance, Sanders Common
Stock Fund, Inc. on November 16, 1981. Such name was changed from Boston
Common Stock Fund, Inc. on December 29, 1972. It was originally organized as a
Canadian corporation in 1954, at which time it was known as Canada General
Fund Limited. On August 31, 1995, the Fund was reorganized as a series of the
Trust. Prior thereto, the Fund was a Massachusetts business trust established
in 1987, originally called Eaton Vance Natural Resources Trust. The Fund
changed its name to EV Marathon Gold & Natural Resources Fund on April 1,
1994.
Eaton Vance, pursuant to the Investment Advisory Agreement, controls the
use of the words "Eaton Vance" and "EV" in the Fund's name and may use the
words "Eaton Vance" and "EV" in other connections and for other purposes.
Eaton Vance may require the Fund to cease using such words in its name if
Eaton Vance or any other subsidiary or affiliate of Eaton Vance ceases to act
as investment adviser of the Fund.
The Trust's Declaration of Trust may be amended by the Trustees when
authorized by a majority of the outstanding voting securities of the Trust
affected by the amendment. The Trustees may also amend the Declaration of
Trust without the vote or consent of shareholders to change the name of the
Trust or any series or to make such other changes as do not have a materially
adverse effect on the rights or interests of shareholders or if they deem it
necessary to conform the Declaration to the requirements of federal laws or
regulations. The Trust's By-Laws provide that the Fund will indemnify its
Trustees and officers against liabilities and expenses incurred in connection
with any litigation or proceeding in which they may be involved because of
their offices with the Trust. However, no indemnification will be provided to
any Trustee or officer for any liability to the Trust or its shareholders by
reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office.
Under Massachusetts law, if certain conditions prevail, shareholders of a
Massachusetts business trust (such as the Trust) could be deemed to have
personal liability for the obligations of the Trust. Numerous investment
companies registered under the 1940 Act have been formed as Massachusetts
business trusts, and management is not aware of an instance where such
liability has been imposed. The Trust's Declaration of Trust contains an
express disclaimer of liability on the part of the Fund shareholders, and the
Trust's By-Laws provide that the Trust shall assume the defense on behalf of
any Fund shareholders. Moreover, the Trust's By-Laws also provide for
indemnification out of the property of the Fund of any shareholder held
personally liable solely by reason of being or having been a shareholder for
all loss or expense arising from such liability. The assets of the Fund are
readily marketable and will ordinarily substantially exceed its liabilities.
In light of the nature of the Fund's business and the nature of its assets,
management believes that the possibility of the Fund's liability exceeding its
assets, and therefore the shareholders's risk of personal liability, is
extremely remote.
As permitted by Massachusetts law, there will normally be no meetings of
shareholders for the purpose of electing Trustees unless and until such time
as less than a majority of the Trustees of the Trust holding office have been
elected by shareholders. In such an event the Trustees then in office will
call a shareholder's meeting for the election of Trustees. Except for the
foregoing circumstances and unless removed by action of the shareholders in
accordance with the Trust's By-Laws, the Trustees shall continue to hold
office and may appoint successor Trustees.
The Trust's By-Laws provide that no person shall serve as a Trustee if
shareholders holding two-thirds of the outstanding shares have removed him
from that office either by a written declaration filed with the Trust's
custodian or by votes cast at a meeting called for that purpose. The By-Laws
further provide that under certain circumstances the shareholders may call a
meeting to remove a Trustee and that the Trust is required to provide
assistance in communicating with shareholders about such a meeting.
The right to redeem shares of the Fund can be suspended and the payment of
the redemption price deferred when the Exchange is closed (other than for
customary weekend and holiday closings), during periods when trading on the
Exchange is restricted as determined by the Securities and Exchange
Commission, or during any emergency as determined by the Commission which
makes it impracticable for the Portfolio to dispose of its securities or value
its assets, or during any other period permitted by order of the Commission
for the protection of investors.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Deloitte & Touche LLP, 125 Summer Street, Boston, Massachusetts, are the
independent certified public accountants of the Fund, providing audit
services, tax return preparation, and assistance and consultation with respect
to the preparation of filings with the Securities and Exchange Commission. An
Internal Revenue Service ruling requires that sales commissions paid by the
Fund pursuant to its Distribution Plan be expensed for tax purposes (rather
than charged to paid-in capital as the Fund has done in the past). The Fund
changed its tax accounting practice to conform to the ruling on November 16,
1994. The change will have no effect on the Fund's current yield or total
return.
FINANCIAL STATEMENTS
The financial statements of the Fund, which are included in the Fund's
Annual Report to Shareholders, are incorporated by reference into this
Statement of Additional Information and have been so incorporated in reliance
on the report of Deloitte & Touche LLP, independent certified public
accountants, as experts in accounting and auditing. A copy of the Annual
Report accompanies this Statement of Additional Information.
Registrant incorporates by reference the audited financial information for
the Fund for the eleven months ended August 31, 1995 as previously filed
electronically with the Securities and Exchange Commission (Accession No.
0000950156-95-000755).
<PAGE>
APPENDIX
FIXED-INCOME SECURITY RATINGS
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S CORPORATE BOND RATINGS:
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt-edge". Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.
A: Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may
be present which suggest a susceptibility to impairment sometime in the
future.
Baa: Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present, but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba: Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal
or interest.
Ca: Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
NOTE: Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the
modifier 3 indicates that the issue ranks in the lower end of its generic
rating category.
DESCRIPTION OF STANDARD & POOR'S RATINGS GROUP CORPORATE BOND RATINGS:
INVESTMENT GRADE
AAA: Bonds rated AAA have the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA: Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the higher rated issues only in small degree.
A: Bonds rated A have a strong capacity to pay interest and repay principal
although they are somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than bonds in higher rated
categories.
BBB: Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity to pay interest and repay
principal for bonds in this category than for bonds in higher rated
categories.
SPECULATIVE GRADE
Debt rated BB, B, CCC, CC, and C is regarded, on balance, as predominantly
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. BB indicates the lowest degree of
speculation and C the highest degree of speculation. While such debt will
likely have some quality and protective characteristics, these are outweighed
by large uncertainties or major exposures to adverse conditions.
BB: Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure
to adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB- rating.
B: Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness
to pay interest and repay principal.
The B rating category is also used for debt subordinated to senior debt that
is assigned an actual or implied BB or BB- rating.
CCC: Debt rated CCC has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial, and economic conditions to
meet timely payment of interest and repayment of principal. In the event of
adverse business, financial, or economic conditions, it is not likely to have
the capacity to pay interest and repay principal.
The CCC rating category is also used for debt subordinated to senior debt that
is assigned an actual or implied B or B- rating.
CC: The rating CC is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC debt rating.
C: The rating C is typically applied to debt subordinated to senior debt which
is assigned an actual or implied CCC- debt rating. The C rating may be used to
cover a situation where a bankruptcy petition has been filed, but debt service
payments are continued.
C1: The Rating C1 is reserved for income bonds on which no interest is being
paid.
D: Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if
the applicable grace period has not expired, unless Standard & Poor's believes
that such payments will be made during such grace period. The D rating also
will be used upon the filing of a bankruptcy petition if debt service payments
are jeopardized.
Plus (+) or Minus (-): The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
NR: Bonds may lack a Standard & Poor's rating because no public rating has
been requested, because there is insufficient information on which to base a
rating, or because Standard & Poor's does not rate a particular type of
obligation as a matter of policy.
NOTES: Bonds which are unrated expose the investor to risks with respect
to capacity to pay interest or repay principal which are similar to the risks
of lower-rated speculative obligations. The Fund is dependent on the
Investment Adviser's judgment, analysis and experience in the evaluation of
such bonds.
Investors should note that the assignment of a rating to a bond by a
rating service may not reflect the effect of recent developments on the
issuer's ability to make interest and principal payments.
<PAGE>
[Logo] EATON VANCE
MUTUAL FUNDS
EV MARATHON GOLD &
NATURAL RESOURCES FUND
STATEMENT OF ADDITIONAL INFORMATION
JANUARY 1, 1996
EV MARATHON GOLD &
NATURAL RESOURCES FUND
24 FEDERAL STREET
BOSTON, MA 02110
INVESTMENT ADVISER
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 89 South Street, Boston, MA 02111
TRANSFER AGENT
First Data Investor Services Group, BOS725, P.O. Box 1559, Boston, MA 02104
(800) 262-1122
AUDITORS
Deloitte & Touche LLP, 125 Summer Street, Boston, MA 02110
NRSAI
<PAGE>
PART C
OTHER INFORMATION
ITEM 24: FINANCIAL STATEMENTS AND EXHIBITS
(A) FINANCIAL STATEMENTS
INCLUDED IN PART A FOR THE FUNDS LISTED BELOW ARE "FINANCIAL
HIGHLIGHTS" FOR THE PERIOD FROM THE DATE INDICATED TO THE FISCAL
YEAR ENDED AUGUST 31, 1995:
EV Classic Greater China Growth Fund (from December 28, 1993)
EV Marathon Greater China Growth Fund (from June 7, 1993)
EV Traditional Greater China Growth Fund (from October 28, 1992)
EV Classic Growth Fund (from November 7, 1994)
EV Marathon Growth Fund (from September 13, 1994)
EV Traditional Growth Fund (from September 1, 1985)
EV Marathon Gold & Natural Resources Fund (from business
October 21, 1987)
INCLUDED IN PART B:
INCORPORATED BY REFERENCE TO THE ANNUAL REPORTS FOR THE FUNDS, EACH
DATED AUGUST 31, 1995, FILED ELECTRONICALLY PURSUANT TO SECTION
30(B)(2) OF THE INVESTMENT COMPANY ACT OF 1940 ARE THE FOLLOWING:
For:
EV Classic Greater China Growth Fund
(Accession No. 0000950109-95-004352)
EV Marathon Greater China Growth Fund
(Accession No. 0000950109-95-004353)
EV Traditional Greater China Growth Fund
(Accession No. 0000950109-95-004359)
EV Classic Growth Fund (Accession No. 0000950156-95-000754)
EV Marathon Growth Fund (Accession No. 0000950156-95-000753)
EV Traditional Growth Fund (Accession No. 0000950156-95-000752)
EV Marathon Gold & Natural Resources Fund
(Accession No. 0000950156-95-000755)
The Financial Statements for the above-referenced Funds for the
time periods set forth in the Funds' Annual Reports dated August
31, 1995 include:
Portfolio of Investments (for EV Marathon Gold & Natural
Resources Fund only)
Statement of Assets and Liabilities
Statement of Operations
Statements of Changes in Net Assets
Financial Highlights
Notes to Financial Statements
Independent Auditors' Report
INCORPORATED BY REFERENCE TO THEIR ANNUAL REPORTS, EACH DATED AUGUST
31, 1995, FILED ELECTRONICALLY PURSUANT TO SECTION 30(B)(2) OF THE
INVESTMENT COMPANY ACT OF 1940 ARE THE FOLLOWING:
For:
Greater China Growth Portfolio (Accession No. 0000950109-95-004360)
Growth Portfolio (Accession No. 0000950156-95-000760)
The Financial Statements for the above-referenced Portfolios for the
time periods set forth in the Funds' Annual Reports dated August
31, 1995 include:
Portfolio of Investments
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Supplementary Data
Notes to Financial Statements
Independent Auditors' Report
(B) EXHIBITS:
<TABLE>
<CAPTION>
<S> <C>
(1)(a) Declaration of Trust dated May 25, 1989. Filed as Exhibit (1)(a) to Post-Effective
Amendment No. 59 and incorporated herein by
reference.
(b) Amendment to the Declaration of Trust Filed as Exhibit (1)(b) to Post-Effective
dated August 18, 1992. Amendment No. 59 and incorporated herein by
reference.
(c) Amendment and Restatement of Filed herewith.
Establishment and Designation of Series
of Shares dated October 23, 1995.
(2)(a) By-Laws Filed as Exhibit (2)(a) to Post-Effective
Amendment No. 59 and incorporated herein by
reference.
(b) Amendment to By-Laws dated December 13, Filed as Exhibit (2)(b) to Post-Effective
1993. Amendment No. 59 and incorporated herein by
reference.
(3) Not applicable
(4) Not applicable
(5)(a) Investment Advisory Agreement with Eaton Filed as Exhibit (5)(a) to Post-Effective
Vance Management for EV Marathon Gold & Amendment No. 59 and incorporated herein by
Natural Resources Fund dated August 15, reference.
1995.
(b) Management Contract with Eaton Vance Filed as Exhibit (5)(b) to Post-Effective
Management for Eaton Vance Greater China Amendment No. 59 and incorporated herein by
Growth Fund. reference.
(c) Management Contract with Eaton Vance Filed as Exhibit (5)(c) to Post-Effective
Management for EV Marathon Greater China Amendment No. 59 and incorporated herein by
Growth Fund dated June 7, 1993. reference.
(d) Management Contract with Eaton Vance Filed as Exhibit (5)(d) to Post-Effective
Management for EV Classic Greater China Amendment No. 59 and incorporated herein by
Growth Fund dated December 17, 1993. reference.
(e) Management Contract with Eaton Vance Filed herewith.
Management for EV Marathon Information
Age Fund.
(f) Management Contract with Eaton Vance Filed herewith.
Management for EV Traditional
Information Age Fund.
(g) Management Contract with Eaton Vance Filed herewith.
Management for EV Classic Information
Age Fund.
(6)(a)(1)Distribution Agreement with Eaton Vance Filed as Exhibit (6)(a)(1) to Post-Effective
Distributors, Inc. dated August 30, Amendment No. 59 and incorporated herein by
1989. reference.
(a)(2)Distribution Agreement with Eaton Vance Filed as Exhibit (6)(a)(2) to Post-Effective
Distributors, Inc. for Eaton Vance Amendement No. 59 and incorporated herein by
Greater China Growth Fund. reference.
(a)(3)Distribution Agreement with Eaton Vance Filed as Exhibit (6)(a)(3) to Post-Effective
Distributors, Inc. for EV Marathon Amendment No. 59 and incorporated herein by
Greater China Growth Fund dated June reference.
7,1993.
(a)(4)Distribution Agreement with Eaton Vance Filed as Exhibit (6)(a)(4) to Post-Effective
Distributors, Inc. for EV Classic Amendment No. 59 and incorporated herein by
Greater China Growth Fund. reference.
(a)(5)Distribution Agreement with Eaton Vance Filed as Exhibit (6)(a)(5) to Post-Effective
Distributors, Inc. for EV Classic Growth Amendment No. 59 and incorporated herein by
Fund. reference.
(a)(6)Distribution Agreement with Eaton Vance Filed as Exhibit (6)(a)(6) to Post-Effective
Distributors, Inc. for EV Marathon Amendment No. 59 and incorporated herein by
Growth Fund. reference.
(a)(7)Distribution Agreement with Eaton Vance Filed herewith.
Distributors, Inc. for EV Marathon
Information Age Fund.
(a)(8)Distribution Agreement with Eaton Vance Filed herewith.
Distributors, Inc. for EV Traditional
Information Age Fund.
(a)(9)Distribution Agreement with Eaton Vance Filed as Exhibit (6)(a)(9) to Post-Effective
Distributors, Inc. for EV Marathon Gold Amendment No. 59 and incorporated herein by
& Natural Resources Fund dated August reference.
15, 1995.
(a)(10)Distribution Agreement with Eaton Vance Filed herewith.
Distributors, Inc. for EV Classic
Information Age Fund
(b) Selling Group Agreements between Eaton Filed herewith.
Vance Distributors, Inc. and Authorized
Firms.
(c) Schedule of Dealer Discounts and Sales Filed as Exhibit (6)(c) to Post-Effective
Charges. Amendment No. 59 and incorporated herein by
reference.
(7) The Securities and Exchange Commission
has granted the Registrant an exemptive
order that permits the Registrant to
enter into deferred compensation
arrangements with its indepen- dent
Trustees. See in the Matter of Capital
Exchange Fund, Inc., Release No. IC-
20671 (November 1, 1994).
(8)(a) Custodian Agreement with Investors Bank Filed as Exhibit (8) to Post-Effective Amendment
& Trust Company dated November 7, 1994. No. 59 and incorporated herein by reference.
(b) Amendment to Custodian Agreement witn Filed herewith.
Investors Bank & Trust Company dated
October 23, 1995.
(9)(a) Administrative Services Agreement with Filed as Exhibit (9)(a) to Post-Effective
Eaton Vance Management for EV Amendment No. 59 and incorporated herein by
Traditional Growth Fund. reference.
(b) Administrative Services Agreement with Filed as Exhibit (9)(b) to Post-Effective
Eaton Vance Management for EV Classic Amendment No. 59 and incorporated herein by
Growth Fund. reference.
(c) Administrative Services Agreement with Filed as Exhibit (9)(c) to Post-Effective
Eaton Vance Management for EV Marathon Amendment No. 59 and incorporated herein by
Growth Fund. reference.
(d) Transfer Agency Agreement dated June 7, Filed as Exhibit (9)(d) to Post-Effective
1989. Amendment No. 59 and incorporated herein by
reference.
(e) Amendment to Transfer Agency Agreeement Filed as Exhibit (9)(e) to Post-Effective
dated February 1, 1993. Amendment No. 59 and incorporated herein by
reference.
(10) Opinion of Counsel Filed herewith.
(11)(a) Consent of Independent Auditors for EV Filed herewith.
Classic Greater China Growth Fund.
(b) Consent of Independent Auditors for EV Filed herewith.
Marathon Greater China Growth Fund
(c) Consent of Independent Auditors for EV Filed herewith.
Traditional Greater China Growth Fund.
(d) Consent of Independent Auditors for EV Filed herewith.
Classic Growth Fund.
(e) Consent of Independent Auditors for EV Filed herewith.
Marathon Growth Fund.
(f) Consent of Independent Auditors for EV Filed herewith.
Traditional Growth Fund.
(g) Consent of Independent Auditors for EV Filed herewith.
Marathon Gold & Natural Resources Fund.
(12) Not applicable
(13) Not applicable
(14) (1)Vance, Sanders Profit Sharing Retirement Filed as Exhibit (8)(b)(1) to Post-Effective
Plan for Self-Employed Persons with Amendment No. 28 and incorporated herein by
Adoption Agreement and instructions. reference.
(2)Eaton & Howard, Vance Sanders Defined Filed as Exhibit (14)(2) to Post-Effective
Contribution Prototype Plan and Trust Amendment No. 29 and incorporated herein by
with Adoption Agreements: reference.
(1) Basic Profit-Sharing Retirement
Plan.
(2) Basic Money Purchase Pension Plan.
(3) Thrift Plan Qualifying as Profit-
Sharing Plan.
(4) Thrift Plan Qualifying as Money
Purchase Plan.
(5) Integrated Profit-Sharing Retirement
Plan.
(6) Integrated Money Purchase Pension
Plan.
(3)Individual Retirement Custodian Account Filed as Exhibit 18 to Post-Effective Amendment
(Form 5305A) and Instructions. No. 24 on Form S-5, File #2-22019 and
incorporated herein by reference.
(15)(a) Service Plan dated July 7, 1993 pursuant Filed as Exhibit (15)(a) to Post-Effective
to Rule 12b-1 under the Investment Amendment No. 59 and incorporated herein by
Company Act of 1940 for EV Traditional reference.
Growth Fund.
(b) Distribution Plan pursuant to Rule 12b-1 Filed as Exhibit (15)(b) to Post-Effective
under the Investment Company Act of 1940 Amendment No. 59 and incorporated herein by
for Eaton Vance Greater China Growth reference.
Fund.
(c) Distribution Plan pursuant to Rule 12b-1 Filed as Exhibit (15)(c) to Post-Effective
under the Investment Company Act of 1940 Amendment No. 59 and incorporated herein by
for EV Marathon Greater China Growth reference.
Fund dated June 7, 1993.
(d) Distribution Plan pursuant to Rule 12b-1 Filed as Exhibit (15)(d) to Post-Effective
under the Investment Company Act of 1940 Amendment No. 59 and incorporated herein by
for EV Classic Greater China Growth reference.
Fund.
(e) Distribution Plan for EV Classic Growth Filed as Exhibit (15)(e) to Post-Effective
Fund pursuant to Rule 12b-1 under the Amendment No. 59 and incorporated herein by
Investment Company Act of 1940. reference.
(f) Distribution Plan for EV Marathon Growth Filed as Exhibit (15)(f) to Post-Effective
Fund pursuant to Rule 12b-1 under the Amendment No. 59 and incorporated herein by
Investment Company Act of 1940. reference.
(g) Distribution Plan pursuant to Rule 12b-1 Filed herewith.
under the Investment Company Act of
1940, for EV Marathon Information Age
Fund.
(h) Distribution Plan pursuant to Rule 12b-1 Filed herewith.
under the Investment Company Act of 1940
for EV Traditional Information Age Fund.
(i) Distribution Plan pursuant to Rule 12b-1 Filed as Exhibit (15)(i) to Post-Effective
under the Investment Company Act of 1940 Amendment No. 59 and incorporated herein by
for EV Marathon Gold & Natural Resources reference.
Fund dated June 19, 1995.
(j) Distribution Plan pursuant to Rule 12b-1 Filed herewith.
under the Investment Company Act of 1940
for EV Classic Information Age Fund.
(16) Schedule for Computation of Performance Filed herewith.
Quotations.
(17)(a) Power of Attorney dated August 7, 1995 Filed as Exhibit (17)(a) to Post-Effective
for Eaton Vance Growth Trust. Amendment No. 59 and incorporated herein by
reference.
(b) Power of Attorney dated March 30, 1993 Filed as Exhibit (17)(b) to Post-Effective
for Greater China Growth Portfolio. Amendment No. 59 and incorporated herein by
reference.
(c) Power of Attorney dated August 7, 1995 Filed as Exhibit (17)(c) to Post-Effective
for Growth Portfolio. Amendment No. 59 and incorporated herein by
reference.
(d) Power of Attorney dated June 19, 1995 Filed herewith.
for Information Age Portfolio.
</TABLE>
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Not applicable
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
(2)
NUMBER OF RECORD
(1) HOLDERS AS OF
TITLE OF CLASS NOVEMBER 30, 1995
-------------- -----------------
Shares of beneficial interest without par value
EV Classic Greater China Growth Fund 1,204
EV Marathon Greater China Growth Fund 27,447
EV Traditional Greater China Growth Fund 19,136
EV Classic Growth Fund 22
EV Marathon Growth Fund 223
EV Traditional Growth Fund 10,938
EV Marathon Gold & Natural Resources Fund 911
EV Classic Information Age Fund 6
EV Marathon Information Age Fund 779
EV Traditional Information Age Fund 550
ITEM 27. INDEMNIFICATION
No change from the information set forth in Item 27 of Form N-1A, filed as
Post-Effective Amendment No. 41 to the Registration Statement under the
Securities Act of 1933 and Amendment No. 14 under the Investment Company Act of
1940, which information is incorporated herein by reference.
Registrant's Trustees and officers are insured under a standard mutual fund
errors and omissions insurance policy covering loss incurred by reason of
negligent errors and omissions committed in their capacities as such.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Reference is made to the information set forth under the caption "Investment
Adviser and Administrator" in the Statement of Additional Information, which
information is incorporated herein by reference.
<PAGE>
ITEM 29. PRINCIPAL UNDERWRITER
(A) Registrant's principal underwriter, Eaton Vance Distributors, Inc., a
wholly-owned subsidiary of Eaton Vance Management, is the principal
underwriter for each of the investment companies named below:
<TABLE>
<CAPTION>
<S> <C>
EV Classic Alabama Tax Free Fund EV Classic Senior Floating-Rate Fund
EV Classic Arizona Tax Free Fund EV Classic South Carolina Tax Free Fund
EV Classic Arkansas Tax Free Fund EV Classic Special Equities Fund
EV Classic California Limited Maturity EV Classic Stock Fund
Tax Free Fund EV Classic Strategic Income Fund
EV Classic California Municipals Fund EV Classic Tennessee Tax Free Fund
EV Classic Colorado Tax Free Fund EV Classic Texas Tax Free Fund
EV Classic Connecticut Limited Maturity EV Classic Total Return Fund
Tax Free Fund EV Classic Virginia Tax Free Fund
EV Classic Connecticut Tax Free Fund EV Classic West Virginia Tax Free Fund
EV Classic Florida Insured Tax Free Fund EV Marathon Alabama Tax Free Fund
EV Classic Florida Limited Maturity EV Marathon Arizona Limited Maturity
Tax Free Fund Tax Free Fund
EV Classic Florida Tax Free Fund EV Marathon Arizona Tax Free Fund
EV Classic Georgia Tax Free Fund EV Marathon Arkansas Tax Free Fund
EV Classic Government Obligations Fund EV Marathon California Limited Maturity
EV Classic Greater China Growth Fund Tax Free Fund
EV Classic Growth Fund EV Marathon California Municipals Fund
EV Classic Hawaii Tax Free Fund EV Marathon Colorado Tax Free Fund
EV Classic High Income Fund EV Marathon Connecticut Limited Maturity
EV Classic Information Age Fund Tax Free Fund
EV Classic Investors Fund EV Marathon Connecticut Tax Free Fund
EV Classic Kansas Tax Free Fund EV Marathon Emerging Markets Fund
EV Classic Kentucky Tax Free Fund Eaton Vance Equity - Income Trust
EV Classic Louisiana Tax Free Fund EV Marathon Florida Insured Tax Free Fund
EV Classic Maryland Tax Free Fund EV Marathon Florida Limited Maturity
EV Classic Massachusetts Limited Maturity Tax Free Fund
Tax Free Fund EV Marathon Florida Tax Free Fund
EV Classic Massachusetts Tax Free Fund EV Marathon Georgia Tax Free Fund
EV Classic Michigan Limited Maturity EV Marathon Gold & Natural Resources Fund
Tax Free Fund EV Marathon Government Obligations Fund
EV Classic Michigan Tax Free Fund EV Marathon Greater China Growth Fund
EV Classic Minnesota Tax Free Fund EV Marathon Greater India Fund
EV Classic Mississippi Tax Free Fund EV Marathon Growth Fund
EV Classic Missouri Tax Free Fund EV Marathon Hawaii Tax Free Fund
EV Classic National Limited Maturity Tax Free Fund EV Marathon High Income Fund
EV Classic National Municipals Fund EV Marathon High Yield Municipals Fund
EV Classic New Jersey Limited Maturity EV Marathon Information Age Fund
Tax Free Fund EV Marathon Investors Fund
EV Classic New Jersey Tax Free Fund EV Marathon Kansas Tax Free Fund
EV Classic New York Limited Maturity EV Marathon Kentucky Tax Free Fund
Tax Free Fund EV Marathon Louisiana Tax Free Fund
EV Classic New York Tax Free Fund EV Marathon Maryland Tax Free Fund
EV Classic North Carolina Tax Free Fund EV Marathon Massachusetts Limited Maturity
EV Classic Ohio Limited Maturity Tax Free Fund Tax Free Fund
EV Classic Ohio Tax Free Fund EV Marathon Massachusetts Tax Free Fund
EV Classic Oregon Tax Free Fund EV Marathon Michigan Limited Maturity
EV Classic Pennsylvania Limited Maturity Tax Free Fund
Tax Free Fund EV Marathon Michigan Tax Free Fund
EV Classic Pennsylvania Tax Free Fund EV Marathon Minnesota Tax Free Fund
EV Classic Rhode Island Tax Free Fund EV Marathon Mississippi Tax Free Fund
<PAGE>
EV Marathon Missouri Tax Free Fund EV Traditional Emerging Markets Fund
EV Marathon National Limited Maturity EV Traditional Florida Insured Tax Free Fund
Tax Free Fund EV Traditional Florida Limited Maturity
EV Marathon National Municipals Fund Tax Free Fund
EV Marathon New Jersey Limited Maturity EV Traditional Florida Tax Free Fund
Tax Free Fund EV Traditional Government Obligations Fund
EV Marathon New Jersey Tax Free Fund EV Traditional Greater China Growth Fund
EV Marathon New York Limited Maturity EV Traditional Greater India Fund
Tax Free Fund EV Traditional Growth Fund
EV Marathon New York Tax Free Fund EV Traditional High Income Fund
EV Marathon North Carolina Limited Maturity EV Traditional High Yield Municipals Fund
Tax Free Fund Eaton Vance Income Fund of Boston
EV Marathon North Carolina Tax Free Fund EV Traditional Information Age Fund
EV Marathon Ohio Limited Maturity Tax Free Fund EV Traditional Investors Fund
EV Marathon Ohio Tax Free Fund Eaton Vance Municipal Bond Fund L.P.
EV Marathon Oregon Tax Free Fund EV Traditional National Limited Maturity
EV Marathon Pennsylvania Limited Maturity Tax Free Fund
Tax Free Fund EV Traditional National Municipals Fund
EV Marathon Pennsylvania Tax Free Fund EV Traditional New Jersey Tax Free Fund
EV Marathon Rhode Island Tax Free Fund EV Traditional New York Limited Maturity
EV Marathon Strategic Income Fund Tax Free Fund
EV Marathon South Carolina Tax Free Fund EV Traditional New York Tax Free Fund
EV Marathon Special Equities Fund EV Traditional Pennsylvania Tax Free Fund
EV Marathon Stock Fund EV Traditional Special Equities Fund
EV Marathon Tennessee Tax Free Fund EV Traditional Stock Fund
EV Marathon Texas Tax Free Fund EV Traditional Total Return Fund
EV Marathon Total Return Fund Eaton Vance Cash Management Fund
EV Marathon Virginia Limited Maturity Eaton Vance Liquid Assets Trust
Tax Free Fund Eaton Vance Money Market Fund
EV Marathon Virginia Tax Free Fund Eaton Vance Prime Rate Reserves
EV Marathon West Virginia Tax Free Fund Eaton Vance Short-Term Treasury Fund
EV Traditional California Municipals Fund Eaton Vance Tax Free Reserves
EV Traditional Connecticut Tax Free Fund Massachusetts Municipal Bond Portfolio
</TABLE>
(b)
<TABLE>
<CAPTION>
(1) (2) (3)
NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICE
BUSINESS ADDRESS WITH PRINCIPAL UNDERWRITER WITH REGISTRANT
------------------ -------------------------- --------------------
<S> <C> <C>
James B. Hawkes* Vice President and Director President and Trustee
William M. Steul* Vice President and Director None
Wharton P. Whitaker* President and Director None
Howard D. Barr Vice President None
2750 Royal View Court
Oakland, Michigan
Nancy E. Belza Vice President None
463-1 Buena Vista East
San Francisco, California
Chris Berg Vice President None
45 Windsor Lane
Palm Beach Gardens, Florida
H. Day Brigham, Jr.* Vice President None
Susan W. Bukima Vice President None
106 Princess Street
Alexandria, Virginia
Jeffrey W. Butterfield Vice President None
9378 Mirror Road
Columbus, Indiana
Mark A. Carlson* Vice President None
Jeffrey Chernoff Vice President None
115 Concourse West
Bright Waters, New York
James S. Comforti Vice President None
1859 Crest Drive
Encinitas, California
Mark P. Doman Vice President None
107 Pine Street
Philadelphia, Pennsylvania
Michael A. Foster Vice President None
850 Kelsey Court
Centerville, Ohio
William M. Gillen Vice President None
280 Rea Street
North Andover, Massachusetts
Hugh S. Gilmartin Vice President None
1531-184th Avenue, NE
Bellevue, Washington
Richard E. Houghton* Vice President None
Brian Jacobs* Senior Vice President None
Stephen D. Johnson Vice President None
13340 Providence Lake Drive
Alpharetta, Georgia
Thomas J. Marcello Vice President None
553 Belleville Avenue
Glen Ridge, New Jersey
Timothy D. McCarthy Vice President None
9801 Germantown Pike
Lincoln Woods Apt. 416
Lafayette Hill, Pennsylvania
Morgan C. Mohrman* Senior Vice President None
James A. Naughton* Vice President None
James L. O'Connor* Vice President Treasurer
Thomas Otis* Secretary and Clerk Secretary
George D. Owen Vice President None
1911 Wildwood Court
Blue Springs, Missouri
F. Anthony Robinson Vice President None
510 Gravely Hill Road
Wakefield, Rhode Island
Benjamin A. Rowland, Jr.* Vice President, None
Treasurer and Director
John P. Rynne* Vice President None
George V.F. Schwab, Jr. Vice President None
9501 Hampton Oaks Lane
Charlotte, North Carolina
Cornelius J. Sullivan* Vice President None
David M. Thill Vice President None
126 Albert Drive
Lancaster, New York
Chris Volf Vice President None
6517 Thoroughbred Loop
Odessa, Florida
Donald E. Webber* Senior Vice President None
Sue Wilder Vice President None
141 East 89th Street
New York, New York
- ----------
*Address is 24 Federal Street, Boston, MA 02110
</TABLE>
(c) Not applicable
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
All applicable accounts, books and documents required to be maintained by
the Registrant by Section 31(a) of the Investment Company Act of 1940 and the
Rules promulgated thereunder are in the possession and custody of the
Registrant's custodian, Investors Bank & Trust Company, 89 South Street, Boston,
MA 02111, and its transfer agent, First Data Investor Services Group, 53 State
Street, Boston, MA 02104, with the exception of certain corporate documents and
portfolio trading documents which are in the possession and custody of Eaton
Vance Management, 24 Federal Street, Boston, MA 02110. Registrant is informed
that all applicable accounts, books and documents required to be maintained by
registered investment advisers are in the custody and possession of Eaton Vance
Management.
ITEM 31. MANAGEMENT SERVICES
Not applicable
ITEM 32. UNDERTAKINGS
The Registrant undertakes to file a Post-Effective Amendment on behalf of EV
Classic Information Age Fund, using financial statements which need not be
certified, within four to six months from the effective date of Post-Effective
Amendment No. 60.
The Registrant undertakes to furnish to each person to whom a prospectus is
delivered a copy of the latest annual report to shareholders, upon request and
without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Amendment to the Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly
caused this Amendment to its Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Boston, and
Commonwealth of Massachusetts, on the 28th day of December, 1995.
EATON VANCE GROWTH TRUST
By /s/ JAMES B. HAWKES
----------------------------
JAMES B. HAWKES, President
Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment to the Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
President, Principal Executive
/s/ JAMES B. HAWKES Officer and Trustee December 28, 1995
- ----------------------------
JAMES B. HAWKES
Treasurer and Principal
Financial and Accounting
/s/ JAMES L. O'CONNOR Officer December 28, 1995
- ----------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee December 28, 1995
- ----------------------------
DONALD R. DWIGHT
SAMUEL L. HAYES, III* Trustee December 28, 1995
- ----------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee December 28, 1995
- ----------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee December 28, 1995
- ----------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee December 28, 1995
- ----------------------------
JACK L. TREYNOR
*Signed by: /s/ H. DAY BRIGHAM, JR.
------------------------
As Attorney-in-fact
<PAGE>
SIGNATURES
Greater China Growth Portfolio has duly caused this Amendment to the
Registration Statement on Form N-1A of Eaton Vance Growth Trust (File No. 2-
22019) to be signed on its behalf by the undersigned, thereunto duly authorized,
in the City of Boston, and the Commonwealth of Massachusetts, on the 28th day of
December, 1995.
GREATER CHINA GROWTH PORTFOLIO
By HON. ROBERT LLOYD GEORGE*
----------------------------
HON. ROBERT LLOYD GEORGE,
President
Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment to the Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
President, Principal
Executive Officer and
HON. ROBERT LLOYD GEORGE* Trustee December 28, 1995
- ----------------------------
HON. ROBERT LLOYD GEORGE
Treasurer and Principal
Financial and Accounting
/s/ JAMES L. O'CONNOR Officer December 28, 1995
- ----------------------------
JAMES L. O'CONNOR
/s/ JAMES B. HAWKES Trustee December 28, 1995
- ----------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee December 28, 1995
- ----------------------------
SAMUEL L. HAYES, III
STUART HAMILTON LECKIE* Trustee December 28, 1995
- ----------------------------
STUART HAMILTON LECKIE
HON. EDWARD K.Y. CHEN* Trustee December 28, 1995
- ----------------------------
HON. EDWARD K.Y. CHEN
*Signed by: /s/ H. DAY BRIGHAM, JR.
------------------------
As Attorney-in-fact
<PAGE>
SIGNATURES
Growth Portfolio has duly caused this Amendment to the Registration Statement
on Form N-1A of Eaton Vance Growth Trust (File No. 2-22019) to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Boston, and
the Commonwealth of Massachusetts, in the 28th day of December, 1995.
GROWTH PORTFOLIO
By /s/ JAMES B. HAWKES
----------------------------
JAMES B. HAWKES, President
Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment to the Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
President, Principal Executive
/s/ JAMES B. HAWKES Officer and Trustee December 28, 1995
- ----------------------------
JAMES B. HAWKES
Treasurer and Principal
Financial and Accounting
/s/ JAMES L. O'CONNOR Officer December 28, 1995
- ----------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee December 28, 1995
- ----------------------------
DONALD R. DWIGHT
SAMUEL L. HAYES, III* Trustee December 28, 1995
- ----------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee December 28, 1995
- ----------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee December 28, 1995
- ----------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee December 28, 1995
- ----------------------------
JACK L. TREYNOR
*Signed by: /s/ H. DAY BRIGHAM, JR.
------------------------
As Attorney-in-fact
<PAGE>
EXHIBIT INDEX
PAGE IN
SEQUENTIAL
NUMBERING
EXHIBIT NO. DESCRIPTION SYSTEM
- ----------- ----------- ----------
(1)(c) Amendment and Restatement of Establishment and
Designation of Series dated October 23, 1995.
(5)(e) Management Contract with Eaton Vance Management for EV
Marathon Information Age Fund.
(f) Management Contract with Eaton Vance Management for EV
Traditional Information Age Fund.
(g) Management Contract with Eaton Vance Management for EV
Classic Information Age Fund.
(6)(a)(7) Distribution Agreement with Eaton Vance Distributors,
Inc. for EV Marathon Information Age Fund.
(a)(8) Distribution Agreement with Eaton Vance Distributors,
Inc. for EV Traditional Information Age Fund.
(a)(10) Distribution Agreement with Eaton Vance Distributors,
Inc. for EV Classic Information Age Fund.
(b) Selling Group Agreements between Eaton Vance
Distributors, Inc. and Authorized Firms.
(8)(a) Amendment to Custodian Agreement with Investors Bank &
Trust Company dated October 23, 1995.
(10) Opinion of Counsel.
(11)(a) Consent of Independent Auditors for EV Classic Greater
China Growth Fund.
(b) Consent of Independent Auditors for EV Marathon
Greater China Growth Fund.
(c) Consent of Independent Auditors for EV Traditional
Greater China Growth Fund.
(d) Consent of Independent Auditors for EV Classic Growth
Fund.
(e) Consent of Independent Auditors for EV Marathon Growth
Fund.
(f) Consent of Independent Auditors for EV Traditional
Growth Fund.
(g) Consent of Independent Auditors for EV Marathon Gold &
Natural Resources Fund.
(15)(g) Distribution Plan pursuant to Rule 12b-1 under the
Investment Company Act of 1940 for EV Marathon
Information Age Fund.
(h) Distribution Plan pursuant to Rule 12b-1 under the
Investment Company Act of 1940 for EV Traditional
Information Age Fund.
(j) Distribution Plan pursuant to Rule 12b-1 under the
Investment Company Act of 1940 for EV Classic
Information Age Fund.
(16) Schedule for Computation of Performance Quotations.
(17)(d) Power of Attorney dated June 19, 1995 for Information
Age Portfolio.
<PAGE>
EXHIBIT 99.(1)(c)
EATON VANCE GROWTH TRUST
Amendment and Restatement
of
Establishment and Designation of Series of Shares
of Beneficial Interest, Without Par Value
(as amended and restated October 23, 1995)
WHEREAS, the Trustees of Eaton Vance Growth Trust, a Massachusetts
business trust (the "Trust"), have previously designated separate series (or
"Funds"); and
WHEREAS, the Trustees now desire to further redesignate the series or
Funds pursuant to Section 2 of Article VI of the Trust's Amended and Restated
Declaration of Trust dated May 25, 1989, as further amended August 18, 1992 (the
"Declaration of Trust");
NOW, THEREFORE, the undersigned, being at least a majority of the duly
elected and qualified Trustees presently in office of the Trust, hereby divide
the shares of beneficial interest of the Trust into ten separate series
("Funds"), each Fund to have the following special and relative rights:
1. The Funds shall be designated as follows:
EV Classic Information Age Fund
EV Marathon Information Age Fund
EV Traditional Information Age Fund
EV Marathon Gold & Natural Resources Fund
EV Classic Greater China Growth Fund
EV Marathon Greater China Growth Fund
EV Traditional Greater China Growth Fund
EV Classic Growth Fund
EV Marathon Growth Fund
EV Traditional Growth Fund
2. Each Fund shall be authorized to invest in cash, securities,
instruments and other property as from time to time described in the Trust's
then currently effective registration statements under the Securities Act of
1933 and the Investment Company Act of 1940. Each share of beneficial interest
of each Fund ("share") shall be redeemable, shall be entitled to one vote (or
fraction thereof in respect of a fractional share) on matters on which shares of
that Fund shall be entitled to vote and shall represent a pro rata beneficial
interest in the assets allocated to that Fund, all as provided in the
Declaration of Trust. The proceeds of sales of shares of each Fund, together
with any income and gain thereon, less any diminution or expenses thereof, shall
irrevocably belong to such Fund, unless otherwise required by law. Each share of
a Fund shall be entitled to receive its pro rata share of net assets of that
Fund upon liquidation of that Fund.
3. Shareholders of each Fund shall vote separately as a class to the
extent provided in Rule 18f-2, as from time to time in effect, under the
Investment Company Act of 1940.
4. The assets and liabilities of the Trust shall be allocated among the
above-referenced Funds as set forth in Section 2 of Article VI of the
Declaration of Trust, except as provided below:
(a) Costs incurred by each Fund in connection with its organization and
start-up, including Federal and state registration and qualification fees and
expenses of the initial public offering of such Fund's shares, shall (if
applicable) be borne by such Fund and deferred and amortized over the five year
period beginning on the date that such Fund commences operations.
(b) Reimbursement required under any expense limitation applicable to
the Trust shall be allocated among those Funds whose expense ratios exceed such
limitation on the basis of the relative expense ratios of such Funds.
(c) The liabilities, expenses, costs, charges and reserves of the Trust
(other than the management and investment advisory fees or the organizational
expenses paid by the Trust) which are not readily identifiable as belonging to
any particular Fund shall be allocated among the Funds on an equitable basis as
determined by the Trustees.
5. The Trustees (including any successor Trustees) shall have the right
at any time and from time to time to reallocate assets and expenses or to change
the designation of any Fund now or hereafter created, or to otherwise change the
special and relative rights of any such Fund, and to terminate any Fund or add
additional Funds as provided in the Declaration of Trust.
6. Any Fund may merge or consolidate with any other corporation,
association, trust or other organization or may sell, lease or exchange all or
substantially all of its property, including its good will, upon such terms and
conditions and for such consideration when and as authorized by the Trustees;
and any such merger, consolidation, sale, lease or exchange shall be deemed for
all purposes to have been accomplished under and pursuant to the statutes of the
Commonwealth of Massachusetts. The Trustees may also at any time sell and
convert into money all the assets of any Fund. Upon making provision for the
payment of all outstanding obligations, taxes and other liabilities, accrued or
contingent, of such Fund, the Trustees shall distribute the remaining assets of
such Fund ratably among the holders of the outstanding shares. Upon completion
of the distribution of the remaining proceeds or the remaining assets as
provided in this paragraph 6, the Fund shall terminate and the Trustees shall be
discharged of any and all further liabilities and duties hereunder with respect
to such Fund and the right, title and interest of all parties with respect to
such Fund shall be cancelled and discharged.
7. It is anticipated that the Declaration of Trust may be revised to
authorize the Trustees to divide each Fund and any other series of shares into
two or more classes and to fix and determine the relative rights and preferences
as between, and all provisions applicable to, each of the different classes so
established and designated by the Trustees. The establishment and designation of
any class of any Fund or other series of shares shall be effective upon the
execution by a majority of the then Trustees of an instrument setting forth such
establishment and designation and the relative rights and preferences, and
provisions applicable to, such class, or as otherwise provided in such
instrument.
Dated: October 23, 1995
/s/Landon T. Clay /s/Samuel L. Hayes, III
- -------------------------- --------------------------
Landon T. Clay Samuel L. Hayes, III
/s/Donald R. Dwight /s/Norton H. Reamer
- -------------------------- --------------------------
Donald R. Dwight Norton H. Reamer
/s/James B. Hawkes /s/John L. Thorndike
- -------------------------- --------------------------
James B. Hawkes John L. Thorndike
/s/Jack L. Treynor
---------------------
Jack L. Treynor
<PAGE>
EXHIBIT 99.(5)(e)
EATON VANCE GROWTH TRUST
MANAGEMENT CONTRACT
on behalf of EV Marathon Information Age Fund
AGREEMENT made this 23rd day of August, 1995 between Eaton Vance Growth
Trust, a Massachusetts business trust (the "Trust"), on behalf of EV Marathon
Information Age Fund (the "Fund") and Eaton Vance Management, a Massachusetts
business trust (the "Manager"):
1. Duties of the Manager. The Trust hereby employs the Manager to act
as manager for and to manage and administer the affairs of the Fund, subject to
the supervision of the Trustees of the Trust, for the period and on the terms
set forth in this Contract.
The Manager hereby accepts such employment, and agrees to manage and
administer the Fund's business affairs and, in connection therewith, to furnish
for the use of the Fund office space and all necessary office facilities,
equipment and personnel for administering the affairs of the Fund.
The Manager's services include monitoring and providing reports to the
Trustees of the Trust concerning the investment performance achieved by the
investment adviser for Information Age Portfolio, recordkeeping, preparation and
filing of documents required to comply with Federal and state securities laws,
supervising the activities of the transfer agent of the Fund, providing
assistance in connection with Trustees and shareholders' meetings and other
management and administrative services necessary to conduct the business of the
Fund. The Manager shall not provide any investment management or advisory
services to the Fund.
2. Compensation of the Manager. For the services, payments and
facilities to be furnished hereunder by the Manager, the Fund shall pay to the
Manager on the last day of such month a fee computed by applying the annual
asset rate applicable to that portion of the average daily net assets of the
Fund throughout the month in each Category as indicated below:
Annual
Category Average Daily Net Assets Asset Rate
- -------- ------------------------ ----------
1 less than $500 million 0.25000%
2 $500 million but less than $1 billion 0.23333%
3 $1 billion but less than $1.5 billion 0.21667%
4 $1.5 billion but less than $2 billion 0.20000%
5 $2 billion but less than $3 billion 0.18333%
6 $3 billion and over 0.16667%
The average daily net assets of the Fund will be computed in accordance with the
Declaration of Trust, and any applicable votes of the Trustees of the Trust. In
case of initiation or termination of this Contract during any month, the fee for
that month shall be reduced proportionately on the basis of the number of
calendar days during which it is in effect and the fee shall be computed upon
the average net assets for the business days it is so in effect for that month.
The Manager may, from time to time, waive all or a part of the above
compensation.
3. Allocation of Charges and Expenses. It is understood that the Fund
will pay all its expenses other than those expressly stated to be payable by the
Manager hereunder, which expenses payable by the Fund shall include, without
implied limitation, (i) expenses of maintaining the Fund and continuing its
existence, (ii) registration of the Trust under the Investment Company Act of
1940, (iii) commissions, fees and other expenses connected with the purchase or
sale of securities and other investments, (iv) auditing, accounting and legal
expenses, (v) taxes and interest, (vi) governmental fees, (vii) expenses of
issue, sale, repurchase and redemption of shares, (viii) expenses of registering
and qualifying the Fund and its shares under federal and state securities laws
and of preparing and printing prospectuses for such purposes and for
distributing the same to shareholders and investors, and fees and expenses of
registering and maintaining registrations of the Fund and of the Fund's
principal underwriter, if any, as broker-dealer or agent under state securities
laws, (ix) expenses of reports and notices to shareholders and of meetings of
shareholders and proxy solicitations therefor, (x) expenses of reports to
governmental officers and commissions, (xi) insurance expenses, (xii)
association membership dues, (xiii) fees, expenses and other disbursements, if
any, of custodians and sub-custodians for all services to the Fund (including
without limitation safekeeping of funds, securities and other investments,
keeping of books and accounts and determination of net asset value), (xiv) fees,
expenses and disbursements of transfer agents, dividend disbursing agents,
shareholder servicing agents and registrars for all services to the Fund, (xv)
expenses of servicing shareholder accounts, (xvi) any direct charges to
shareholders approved by the Trustees of the Trust, (xvii) compensation and
expenses of Trustees of the Trust who are not members of the Manager's
organization, (xviii) all payments to be made and expenses to be assumed by the
Fund pursuant to any one or more distribution plans adopted by the Trust on
behalf of the Fund pursuant to Rule 12b-1 under the Investment Company Act of
1940 and (xix) such non-recurring items as may arise, including expenses
incurred in connection with litigation, proceedings and claims and the
obligation of the Trust to indemnify its Trustees and officers with respect
thereto.
4. Other Interests. It is understood that Trustees, officers and
shareholders of the Trust are or may be or become interested in the Manager as
Trustees, officers, or employees, or otherwise and that Trustees, officers and
employees of the Manager are or may be or become similarly interested in the
Trust, and that the Manager may be or become interested in the Fund as
shareholder or otherwise. It is also understood that Trustees, officers and
employees of the Manager may be or become interested (as directors, trustees,
officers, employees, stockholders or otherwise) in other companies or entities
(including, without limitation, other investment companies) which the Manager
may organize, sponsor or acquire, or with which it may merge or consolidate, and
that the Manager or its subsidiaries or affiliates may enter into advisory or
management agreements or other contracts or relationships with such other
companies or entities.
5. Limitation of Liability of the Manager. The services of the Manager
of the Fund are not to be deemed to be exclusive, the Manager being free to
render services to others and engage in other business activities. In the
absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of obligations or duties hereunder on the part of the Manager, the
Manager shall not be subject to liability to the Fund or to any shareholder of
the Fund for any act or omission in the course of, or connected with, rendering
services hereunder or for any losses which may be sustained in the purchase,
holding or sale of any security or other instrument, including options and
futures contracts.
6. Duration and Termination of the Contract. This Contract shall become
effective upon the date of its execution, and, unless terminated as herein
provided, shall remain in full force and effect to and including February 28,
1996 and shall continue in full force and effect indefinitely thereafter, but
only so long as such continuance after February 28, 1996 is specifically
approved at least annually by the Trustees of the Trust.
Either party hereto may, at any time on sixty (60) days' prior written
notice to the other, terminate this Contract, without the payment of any
penalty, by action of its Trustees, and the Trust may, at any time upon such
written notice to the Manager, terminate this Contract by vote of a majority of
the outstanding voting securities of the Fund. This Contract shall terminate
automatically in the event of its assignment.
7. Amendment of the Contract. This Contract may be amended by a writing
signed by both parties hereto, provided that no amendment to this Contract shall
be effective until approved by the vote of a majority of the Trustees of the
Trust.
8. Limitation of Liability. The Fund shall not be responsible for the
obligations of any other series of the Trust. The Manager expressly acknowledges
the provision in the Amended and Restated Declaration of Trust (Article IV,
Section 4.1) limiting the personal liability of shareholders of the Trust, and
the Manager hereby agrees that it shall have recourse only to the assets of the
Fund for payment of claims or obligations as between the Fund and Manager
arising out of this Contract and shall not seek satisfaction from the
shareholders or any shareholder or Trustee of the Fund or the Trust.
9. Use of the Name "Eaton Vance". The Manager hereby consents to the
use by the Fund of the name "Eaton Vance" as part of the Fund's name; provided,
however, that such consent shall be conditioned upon the employment of the
Manager or one of its affiliates as the manager or investment adviser of the
Fund. The name "Eaton Vance" or any variation thereof may be used from time to
time in other connections and for other purposes by the Manager and its
affiliates and other investment companies that have obtained consent to the use
of the name "Eaton Vance." Eaton Vance shall have the right to require the Fund
to cease using the name "Eaton Vance" as part of the Fund's name if the Fund
ceases, for any reason, to employ the Manager or one if its affiliates as the
Fund's manager or investment adviser. Future names adopted by the Fund for
itself, insofar as such names include identifying words requiring the consent of
the Manager, shall be the property of the Manager and shall be subject to the
same terms and conditions.
10. Certain Definitions. The term "assignment" when used herein shall
have the meaning specified in the Investment Company Act of 1940 as now in
effect or as hereafter amended subject, however, to such exemptions as may be
granted by the Securities and Exchange Commission by any rule, regulation or
order. The term "vote of a majority of the outstanding voting securities of the
Fund" shall mean the vote of the lesser of (a) 67 per centum or more of the
shares of the Fund present or represented by proxy at the meeting if the holders
of more than 50 per centum of the outstanding shares of the Fund are present or
represented by proxy at the meeting, or (b) more than 50 per centum of the
outstanding shares of the Fund.
EATON VANCE GROWTH TRUST EATON VANCE MANAGEMENT
(on behalf of EV Marathon
Information Age Fund)
By /s/James B. Hawkes By /s/H. Day Brigham, Jr.
----------------------- --------------------------
President Vice President,
and not individually
<PAGE>
EXHIBIT 99.(5)(f)
EATON VANCE GROWTH TRUST
MANAGEMENT CONTRACT
on behalf of EV Traditional Information Age Fund
AGREEMENT made this 23rd day of August, 1995 between Eaton Vance Growth
Trust, a Massachusetts business trust (the "Trust"), on behalf of EV Traditional
Information Age Fund (the "Fund") and Eaton Vance Management, a Massachusetts
business trust (the "Manager"):
1. Duties of the Manager. The Trust hereby employs the Manager to act
as manager for and to manage and administer the affairs of the Fund, subject to
the supervision of the Trustees of the Trust, for the period and on the terms
set forth in this Contract.
The Manager hereby accepts such employment, and agrees to manage and
administer the Fund's business affairs and, in connection therewith, to furnish
for the use of the Fund office space and all necessary office facilities,
equipment and personnel for administering the affairs of the Fund.
The Manager's services include monitoring and providing reports to the
Trustees of the Trust concerning the investment performance achieved by the
investment adviser for Information Age Portfolio, recordkeeping, preparation and
filing of documents required to comply with Federal and state securities laws,
supervising the activities of the transfer agent of the Fund, providing
assistance in connection with Trustees and shareholders' meetings and other
management and administrative services necessary to conduct the business of the
Fund. The Manager shall not provide any investment management or advisory
services to the Fund.
2. Compensation of the Manager. For the services, payments and
facilities to be furnished hereunder by the Manager, the Fund shall pay to the
Manager on the last day of such month a fee computed by applying the annual
asset rate applicable to that portion of the average daily net assets of the
Fund throughout the month in each Category as indicated below:
Annual
Category Average Daily Net Assets Asset Rate
- -------- ------------------------ ----------
1 less than $500 million 0.25000%
2 $500 million but less than $1 billion 0.23333%
3 $1 billion but less than $1.5 billion 0.21667%
4 $1.5 billion but less than $2 billion 0.20000%
5 $2 billion but less than $3 billion 0.18333%
6 $3 billion and over 0.16667%
The average daily net assets of the Fund will be computed in accordance with the
Declaration of Trust, and any applicable votes of the Trustees of the Trust. In
case of initiation or termination of this Contract during any month, the fee for
that month shall be reduced proportionately on the basis of the number of
calendar days during which it is in effect and the fee shall be computed upon
the average net assets for the business days it is so in effect for that month.
The Manager may, from time to time, waive all or a part of the above
compensation.
3. Allocation of Charges and Expenses. It is understood that the Fund
will pay all its expenses other than those expressly stated to be payable by the
Manager hereunder, which expenses payable by the Fund shall include, without
implied limitation, (i) expenses of maintaining the Fund and continuing its
existence, (ii) registration of the Trust under the Investment Company Act of
1940, (iii) commissions, fees and other expenses connected with the purchase or
sale of securities and other investments, (iv) auditing, accounting and legal
expenses, (v) taxes and interest, (vi) governmental fees, (vii) expenses of
issue, sale, repurchase and redemption of shares, (viii) expenses of registering
and qualifying the Fund and its shares under federal and state securities laws
and of preparing and printing prospectuses for such purposes and for
distributing the same to shareholders and investors, and fees and expenses of
registering and maintaining registrations of the Fund and of the Fund's
principal underwriter, if any, as broker-dealer or agent under state securities
laws, (ix) expenses of reports and notices to shareholders and of meetings of
shareholders and proxy solicitations therefor, (x) expenses of reports to
governmental officers and commissions, (xi) insurance expenses, (xii)
association membership dues, (xiii) fees, expenses and other disbursements, if
any, of custodians and sub-custodians for all services to the Fund (including
without limitation safekeeping of funds, securities and other investments,
keeping of books and accounts and determination of net asset value), (xiv) fees,
expenses and disbursements of transfer agents, dividend disbursing agents,
shareholder servicing agents and registrars for all services to the Fund, (xv)
expenses of servicing shareholder accounts, (xvi) any direct charges to
shareholders approved by the Trustees of the Trust, (xvii) compensation and
expenses of Trustees of the Trust who are not members of the Manager's
organization, (xviii) all payments to be made and expenses to be assumed by the
Fund pursuant to any one or more distribution plans adopted by the Trust on
behalf of the Fund pursuant to Rule 12b-1 under the Investment Company Act of
1940 and (xix) such non-recurring items as may arise, including expenses
incurred in connection with litigation, proceedings and claims and the
obligation of the Trust to indemnify its Trustees and officers with respect
thereto.
4. Other Interests. It is understood that Trustees, officers and
shareholders of the Trust are or may be or become interested in the Manager as
Trustees, officers, or employees, or otherwise and that Trustees, officers and
employees of the Manager are or may be or become similarly interested in the
Trust, and that the Manager may be or become interested in the Fund as
shareholder or otherwise. It is also understood that Trustees, officers and
employees of the Manager may be or become interested (as directors, trustees,
officers, employees, stockholders or otherwise) in other companies or entities
(including, without limitation, other investment companies) which the Manager
may organize, sponsor or acquire, or with which it may merge or consolidate, and
that the Manager or its subsidiaries or affiliates may enter into advisory or
management agreements or other contracts or relationships with such other
companies or entities.
5. Limitation of Liability of the Manager. The services of the Manager
of the Fund are not to be deemed to be exclusive, the Manager being free to
render services to others and engage in other business activities. In the
absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of obligations or duties hereunder on the part of the Manager, the
Manager shall not be subject to liability to the Fund or to any shareholder of
the Fund for any act or omission in the course of, or connected with, rendering
services hereunder or for any losses which may be sustained in the purchase,
holding or sale of any security or other instrument, including options and
futures contracts.
6. Duration and Termination of the Contract. This Contract shall become
effective upon the date of its execution, and, unless terminated as herein
provided, shall remain in full force and effect to and including February 28,
1996 and shall continue in full force and effect indefinitely thereafter, but
only so long as such continuance after February 28, 1996 is specifically
approved at least annually by the Trustees of the Trust.
Either party hereto may, at any time on sixty (60) days' prior written
notice to the other, terminate this Contract, without the payment of any
penalty, by action of its Trustees, and the Trust may, at any time upon such
written notice to the Manager, terminate this Contract by vote of a majority of
the outstanding voting securities of the Fund. This Contract shall terminate
automatically in the event of its assignment.
7. Amendment of the Contract. This Contract may be amended by a writing
signed by both parties hereto, provided that no amendment to this Contract shall
be effective until approved by the vote of a majority of the Trustees of the
Trust.
8. Limitation of Liability. The Fund shall not be responsible for the
obligations of any other series of the Trust. The Manager expressly acknowledges
the provision in the Amended and Restated Declaration of Trust (Article IV,
Section 4.1) limiting the personal liability of shareholders of the Trust, and
the Manager hereby agrees that it shall have recourse only to the assets of the
Fund for payment of claims or obligations as between the Fund and Manager
arising out of this Contract and shall not seek satisfaction from the
shareholders or any shareholder or Trustee of the Fund or the Trust.
9. Use of the Name "Eaton Vance". The Manager hereby consents to the
use by the Fund of the name "Eaton Vance" as part of the Fund's name; provided,
however, that such consent shall be conditioned upon the employment of the
Manager or one of its affiliates as the manager or investment adviser of the
Fund. The name "Eaton Vance" or any variation thereof may be used from time to
time in other connections and for other purposes by the Manager and its
affiliates and other investment companies that have obtained consent to the use
of the name "Eaton Vance." Eaton Vance shall have the right to require the Fund
to cease using the name "Eaton Vance" as part of the Fund's name if the Fund
ceases, for any reason, to employ the Manager or one if its affiliates as the
Fund's manager or investment adviser. Future names adopted by the Fund for
itself, insofar as such names include identifying words requiring the consent of
the Manager, shall be the property of the Manager and shall be subject to the
same terms and conditions.
10. Certain Definitions. The term "assignment" when used herein shall
have the meaning specified in the Investment Company Act of 1940 as now in
effect or as hereafter amended subject, however, to such exemptions as may be
granted by the Securities and Exchange Commission by any rule, regulation or
order. The term "vote of a majority of the outstanding voting securities of the
Fund" shall mean the vote of the lesser of (a) 67 per centum or more of the
shares of the Fund present or represented by proxy at the meeting if the holders
of more than 50 per centum of the outstanding shares of the Fund are present or
represented by proxy at the meeting, or (b) more than 50 per centum of the
outstanding shares of the Fund.
EATON VANCE GROWTH TRUST EATON VANCE MANAGEMENT
(on behalf of EV Traditional
Information Age Fund)
By /s/James B. Hawkes By /s/H. Day Brigham, Jr.
---------------------- --------------------------
President Vice President,
and not individually
<PAGE>
EXHIBIT 99.(5)(g)
EATON VANCE GROWTH TRUST
FORM OF MANAGEMENT CONTRACT
on behalf of EV Classic Information Age Fund
AGREEMENT made this 10th day of November, 1995 between Eaton Vance
Growth Trust, a Massachusetts business trust (the "Trust"), on behalf of EV
Classic Information Age Fund (the "Fund") and Eaton Vance Management, a
Massachusetts business trust (the "Manager"):
1. Duties of the Manager. The Trust hereby employs the Manager to act
as manager for and to manage and administer the affairs of the Fund, subject to
the supervision of the Trustees of the Trust, for the period and on the terms
set forth in this Contract.
The Manager hereby accepts such employment, and agrees to manage and
administer the Fund's business affairs and, in connection therewith, to furnish
for the use of the Fund office space and all necessary office facilities,
equipment and personnel for administering the affairs of the Fund.
The Manager's services include monitoring and providing reports to the
Trustees of the Trust concerning the investment performance achieved by the
investment adviser for Information Age Portfolio, recordkeeping, preparation and
filing of documents required to comply with Federal and state securities laws,
supervising the activities of the transfer agent of the Fund, providing
assistance in connection with Trustees and shareholders' meetings and other
management and administrative services necessary to conduct the business of the
Fund. The Manager shall not provide any investment management or advisory
services to the Fund.
2. Compensation of the Manager. For the services, payments and
facilities to be furnished hereunder by the Manager, the Fund shall pay to the
Manager on the last day of such month a fee computed by applying the annual
asset rate applicable to that portion of the average daily net assets of the
Fund throughout the month in each Category as indicated below:
Annual
Category Average Daily Net Assets Asset Rate
- -------- ------------------------ ----------
1 less than $500 million 0.25000%
2 $500 million but less than $1 billion 0.23333%
3 $1 billion but less than $1.5 billion 0.21667%
4 $1.5 billion but less than $2 billion 0.20000%
5 $2 billion but less than $3 billion 0.18333%
6 $3 billion and over 0.16667%
The average daily net assets of the Fund will be computed in accordance with the
Declaration of Trust, and any applicable votes of the Trustees of the Trust. In
case of initiation or termination of this Contract during any month, the fee for
that month shall be reduced proportionately on the basis of the number of
calendar days during which it is in effect and the fee shall be computed upon
the average net assets for the business days it is so in effect for that month.
The Manager may, from time to time, waive all or a part of the above
compensation.
3. Allocation of Charges and Expenses. It is understood that the Fund
will pay all its expenses other than those expressly stated to be payable by the
Manager hereunder, which expenses payable by the Fund shall include, without
implied limitation, (i) expenses of maintaining the Fund and continuing its
existence, (ii) registration of the Trust under the Investment Company Act of
1940, (iii) commissions, fees and other expenses connected with the purchase or
sale of securities and other investments, (iv) auditing, accounting and legal
expenses, (v) taxes and interest, (vi) governmental fees, (vii) expenses of
issue, sale, repurchase and redemption of shares, (viii) expenses of registering
and qualifying the Fund and its shares under federal and state securities laws
and of preparing and printing prospectuses for such purposes and for
distributing the same to shareholders and investors, and fees and expenses of
registering and maintaining registrations of the Fund and of the Fund's
principal underwriter, if any, as broker-dealer or agent under state securities
laws, (ix) expenses of reports and notices to shareholders and of meetings of
shareholders and proxy solicitations therefor, (x) expenses of reports to
governmental officers and commissions, (xi) insurance expenses, (xii)
association membership dues, (xiii) fees, expenses and other disbursements, if
any, of custodians and sub-custodians for all services to the Fund (including
without limitation safekeeping of funds, securities and other investments,
keeping of books and accounts and determination of net asset value), (xiv) fees,
expenses and disbursements of transfer agents, dividend disbursing agents,
shareholder servicing agents and registrars for all services to the Fund, (xv)
expenses of servicing shareholder accounts, (xvi) any direct charges to
shareholders approved by the Trustees of the Trust, (xvii) compensation and
expenses of Trustees of the Trust who are not members of the Manager's
organization, (xviii) all payments to be made and expenses to be assumed by the
Fund pursuant to any one or more distribution plans adopted by the Trust on
behalf of the Fund pursuant to Rule 12b-1 under the Investment Company Act of
1940 and (xix) such non-recurring items as may arise, including expenses
incurred in connection with litigation, proceedings and claims and the
obligation of the Trust to indemnify its Trustees and officers with respect
thereto.
4. Other Interests. It is understood that Trustees, officers and
shareholders of the Trust are or may be or become interested in the Manager as
Trustees, officers, or employees, or otherwise and that Trustees, officers and
employees of the Manager are or may be or become similarly interested in the
Trust, and that the Manager may be or become interested in the Fund as
shareholder or otherwise. It is also understood that Trustees, officers and
employees of the Manager may be or become interested (as directors, trustees,
officers, employees, stockholders or otherwise) in other companies or entities
(including, without limitation, other investment companies) which the Manager
may organize, sponsor or acquire, or with which it may merge or consolidate, and
that the Manager or its subsidiaries or affiliates may enter into advisory or
management agreements or other contracts or relationships with such other
companies or entities.
5. Limitation of Liability of the Manager. The services of the Manager
of the Fund are not to be deemed to be exclusive, the Manager being free to
render services to others and engage in other business activities. In the
absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of obligations or duties hereunder on the part of the Manager, the
Manager shall not be subject to liability to the Fund or to any shareholder of
the Fund for any act or omission in the course of, or connected with, rendering
services hereunder or for any losses which may be sustained in the purchase,
holding or sale of any security or other instrument, including options and
futures contracts.
6. Duration and Termination of the Contract. This Contract shall become
effective upon the date of its execution, and, unless terminated as herein
provided, shall remain in full force and effect to and including February 28,
1996 and shall continue in full force and effect indefinitely thereafter, but
only so long as such continuance after February 28, 1996 is specifically
approved at least annually by the Trustees of the Trust.
Either party hereto may, at any time on sixty (60) days' prior written
notice to the other, terminate this Contract, without the payment of any
penalty, by action of its Trustees, and the Trust may, at any time upon such
written notice to the Manager, terminate this Contract by vote of a majority of
the outstanding voting securities of the Fund. This Contract shall terminate
automatically in the event of its assignment.
7. Amendment of the Contract. This Contract may be amended by a writing
signed by both parties hereto, provided that no amendment to this Contract shall
be effective until approved by the vote of a majority of the Trustees of the
Trust.
8. Limitation of Liability. The Fund shall not be responsible for the
obligations of any other series of the Trust. The Manager expressly acknowledges
the provision in the Amended and Restated Declaration of Trust (Article IV,
Section 4.1) limiting the personal liability of shareholders of the Trust, and
the Manager hereby agrees that it shall have recourse only to the assets of the
Fund for payment of claims or obligations as between the Fund and Manager
arising out of this Contract and shall not seek satisfaction from the
shareholders or any shareholder or Trustee of the Fund or the Trust.
9. Use of the Name "Eaton Vance". The Manager hereby consents to the
use by the Fund of the name "Eaton Vance" as part of the Fund's name; provided,
however, that such consent shall be conditioned upon the employment of the
Manager or one of its affiliates as the manager or investment adviser of the
Fund. The name "Eaton Vance" or any variation thereof may be used from time to
time in other connections and for other purposes by the Manager and its
affiliates and other investment companies that have obtained consent to the use
of the name "Eaton Vance." Eaton Vance shall have the right to require the Fund
to cease using the name "Eaton Vance" as part of the Fund's name if the Fund
ceases, for any reason, to employ the Manager or one if its affiliates as the
Fund's manager or investment adviser. Future names adopted by the Fund for
itself, insofar as such names include identifying words requiring the consent of
the Manager, shall be the property of the Manager and shall be subject to the
same terms and conditions.
10. Certain Definitions. The term "assignment" when used herein shall
have the meaning specified in the Investment Company Act of 1940 as now in
effect or as hereafter amended subject, however, to such exemptions as may be
granted by the Securities and Exchange Commission by any rule, regulation or
order. The term "vote of a majority of the outstanding voting securities of the
Fund" shall mean the vote of the lesser of (a) 67 per centum or more of the
shares of the Fund present or represented by proxy at the meeting if the holders
of more than 50 per centum of the outstanding shares of the Fund are present or
represented by proxy at the meeting, or (b) more than 50 per centum of the
outstanding shares of the Fund.
EATON VANCE GROWTH TRUST EATON VANCE MANAGEMENT
(on behalf of EV Classic
Information Age Fund)
By /s/James B. Hawkes By /s/H. Day Brigham, Jr.
----------------------- ---------------------------
President Vice President,
and not individually
<PAGE>
EXHIBIT 99.(6)(a)(7)
EATON VANCE GROWTH TRUST
DISTRIBUTION AGREEMENT
ON BEHALF OF EV MARATHON INFORMATION AGE FUND
AGREEMENT effective as of August 23, 1995 between EATON VANCE GROWTH
TRUST, a Massachusetts business trust having its principal place of business in
Boston in the Commonwealth of Massachusetts, hereinafter called the "Trust", on
behalf of EV Marathon Information Age Fund (the "Fund"), and EATON VANCE
DISTRIBUTORS, INC., a Massachusetts corporation having its principal place of
business in said Boston, hereinafter sometimes called the "Principal
Underwriter".
IN CONSIDERATION of the mutual promises and undertakings herein
contained, the parties hereto agree:
1. The Trust grants to the Principal Underwriter the right to purchase
shares of the Fund upon the terms hereinbelow set forth during the term of this
Agreement. While this Agreement is in force, the Principal Underwriter agrees to
use its best efforts to find purchasers for shares of the Fund.
The Principal Underwriter shall have the right to buy from the Fund the
shares needed, but not more than the shares needed (except for clerical errors
and errors of transmission) to fill unconditional orders for shares of the Fund
placed with the Principal Underwriter by financial service firms or investors as
set forth in the current Prospectus relating to shares of the Fund. The price
which the Principal Underwriter shall pay for the shares so purchased shall be
equal to the price paid by investors upon purchasing such shares. The Principal
Underwriter shall notify Investors Bank & Trust Company, Custodian of the Fund
("IBT"), and The Shareholder Services Group, Inc., Transfer Agent of the Fund
("TSSG"), or a successor transfer agent, at the end of each business day, or as
soon thereafter as the orders placed with it have been compiled, of the number
of shares and the prices thereof which the Principal Underwriter is to purchase
as principal for resale. The Principal Underwriter shall take down and pay for
shares ordered from the Fund on or before the eleventh business day (excluding
Saturdays) after the shares have been so ordered.
The right granted to the Principal Underwriter to buy shares from the
Fund shall be exclusive, except that said exclusive right shall not apply to
shares issued in connection with the merger or consolidation of any other
investment company or personal holding company with the Fund or the acquisition
by purchase or otherwise of all (or substantially all) the assets or the
outstanding shares of any such company, by the Fund; nor shall it apply to
shares, if any, issued by the Fund in distribution of income or realized capital
gains of the Fund payable in shares or in cash at the option of the shareholder.
2. The shares may be resold by the Principal Underwriter to or through
financial service firms having agreements with the Principal Underwriter, and to
investors, upon the following terms and conditions.
The public offering price, i.e., the price per share at which the
Principal Underwriter or financial service firm purchasing shares from the
Principal Underwriter may sell shares to the public, shall be equal to the net
asset value at which the Principal Underwriter is to purchase the shares.
The net asset value of shares of the Fund shall be determined by the
Trust or IBT, as the agent of the Fund, as of the close of regular trading on
the New York Stock Exchange on each business day on which said Exchange is open,
or as of such other time on each such business day as may be determined by the
Trustees of the Trust, in accordance with the methodology and procedures for
calculating such net asset value authorized by the Trustees. The Trust may also
cause the net asset value to be determined in substantially the same manner or
estimated in such manner and as of such other time or times as may from time to
time be agreed upon by the Trust and Principal Underwriter. The Trust will
notify the Principal Underwriter each time the net asset value of the Fund's
shares is determined and when such value is so determined it shall be applicable
to transactions as set forth in the current Prospectus and Statement of
Additional Information (hereafter the "Prospectus") relating to the Fund's
shares.
No shares of the Fund shall be sold by the Fund during any period when
the determination of net asset value is suspended pursuant to the Declaration of
Trust, except to the Principal Underwriter, in the manner and upon the terms
above set forth to cover contracts of sale made by the Principal Underwriter
with its customers prior to any such suspension, and except as provided in the
last paragraph of paragraph 1 hereof. The Trust shall also have the right to
suspend the sale of the Fund's shares if in the judgment of the Trust conditions
obtaining at any time render such action advisable. The Principal Underwriter
shall have the right to suspend sales at any time, to refuse to accept or
confirm any order from an investor or financial service firm, or to accept or
confirm any such order in part only, if in the judgment of the Principal
Underwriter such action is in the best interests of the Fund.
3. The Trust agrees that it will, from time to time, but subject to the
necessary approval of the Fund's shareholders, take such steps as may be
necessary to register the Fund's shares under the federal Securities Act of
1933, as amended from time to time, (the "1933 Act"), to the end that there will
be available for sale such number of shares as the Principal Underwriter may
reasonably be expected to sell. The Trust agrees to indemnify and hold harmless
the Principal Underwriter and each person, if any, who controls the Principal
Underwriter within the meaning of Section 15 of the 1933 Act against any loss,
liability, claim, damages or expense (including the reasonable cost of
investigating or defending any alleged loss, liability, claim, damages or
expense and reasonable counsel fees incurred in connection therewith), arising
by reason of any person acquiring any shares of the Fund, which may be based
upon the 1933 Act or on any other statute or at common law, on the ground that
the Registration Statement or Prospectus, as from time to time amended and
supplemented, includes an untrue statement of a material fact or omits to state
a material fact required to be stated therein or necessary in order to make the
statements therein not misleading, unless such statement or omission was made in
reliance upon, and in conformity with, information furnished in writing to the
Trust in connection therewith byor on behalf of the Principal Underwriter;
provided, however, that in no case (i) is the indemnity of the Trust in favor of
the Principal Underwriter and any such controlling person to be deemed to
protect such Principal Underwriter or any such controlling person against any
liability to the Trust or the Fund or its security holders to which such
Principal Underwriter or any such controlling person would otherwise be subject
by reason of willful misfeasance, bad faith, or gross negligence in the
performance of its duties or by reason of its reckless disregard of its
obligations and duties under this Agreement, or (ii) is the Trust or the Fund to
be liable under its indemnity agreement contained in this paragraph with respect
to any claim made against the Principal Underwriter or any such controlling
person unless the Principal Underwriter or any such controlling person, as the
case may be, shall have notified the Trust in writing within a reasonable time
after the summons or other first legal process giving information of the nature
of the claim shall have been served upon the Principal Underwriter or such
controlling person (or after such Principal Underwriter or such controlling
person shall have received notice of such service on any designated agent), but
failure to notify the Trust of any such claim shall not relieve it from any
liability which the Fund may have to the person against whom such action is
brought otherwise than on account of its indemnity agreement contained in this
paragraph. The Trust shall be entitled to participate, at the expense of the
Fund, in the defense, or, if the Trust so elects, to assume the defense of any
suit brought to enforce any such liability, but if the Trust elects to assume
the defense, such defense shall be conducted by counsel chosen by it and
satisfactory to the Principal Underwriter or controlling person or persons,
defendant or defendants in the suit. In the event the Trust elects to assume the
defense of any such suit and retains such counsel, the Principal Underwriter or
controlling person or persons, defendant or defendants in the suit, shall bear
the fees and expenses of any additional counsel retained by them, but, in case
the Trust does not elect to assume the defense of any such suit, the Fund shall
reimburse the Principal Underwriter or controlling person or persons, defendant
or defendants in the suit, for the reasonable fees and expenses of any counsel
retained by them. The Trust agrees promptly to notify the Principal Underwriter
of the commencement of any litigation or proceedings against it or any of its
officers or Trustees in connection with the issuance or sale of any of the
Fund's shares.
4. The Principal Underwriter covenants and agrees that, in selling the
shares of the Fund, it will use its best efforts in all respects duly to conform
with the requirements of all state and federal laws relating to the sale of such
shares, and will indemnify and hold harmless the Trust and each of its Trustees
and officers and each person, if any, who controls the Trust within the meaning
of Section 15 of the 1933 Act, against any loss, liability, damages, claim or
expense (including the reasonable cost of investigating or defending any alleged
loss, liability, damages, claim or expense and reasonable counsel fees incurred
in connection therewith), arising by reason of any person acquiring any shares
of the Fund, which may be based upon the 1933 Act or any other statute or at
common law, on account of any wrongful act of the Principal Underwriter or any
of its employees (including any failure to conform with any requirement of any
state or federal law relating to the sale of such shares) or on the ground that
the registration statement or Prospectus, as from time to time amended and
supplemented, includes an untrue statement of a material fact or omits to state
a material fact required to be stated therein or necessary in order to make the
statements therein not misleading, insofar as any such statement or omission was
made in reliance upon, and in conformity with information furnished in writing
to the Fund in connection therewith by or on behalf of the Principal
Underwriter, provided, however, that in no case (i) is the indemnity of the
Principal Underwriter in favor of any person indemnified to be deemed to protect
the Fund or any such person against any liability to which the Fund or any such
person would otherwise be subject by reason of willful misfeasance, bad faith,
or gross negligence in the performance of its or his duties or by reason of its
or his reckless disregard of its obligations and duties under this Agreement, or
(ii) is the Principal Underwriter to be liable under its indemnity agreement
contained in this paragraph with respect to any claim made against the Fund or
any person indemnified unless the Trust or such person, as the case may be,
shall have notified the Principal Underwriter in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon the Trust, the Fund or upon such
person (or after the Trust or such person shall have received notice of such
service on any designated agent), but failure to notify the Principal
Underwriter of any such claim shall not relieve it from any liability which it
may have to the Fund or any person against whom such action is brought otherwise
than on account of its indemnity agreement contained in this paragraph. The
Principal Underwriter shall be entitled to participate, at its own expense, in
the defense, or, if it so elects, to assume the defense of any suit brought to
enforce any such liability, but if the Principal Underwriter elects to assume
the defense, such defense shall be conducted by counsel chosen by it and
satisfactory to the Trust, or to its officers or Trustees, or to any controlling
person or persons, defendant or defendants in the suit. In the event that the
Principal Underwriter elects to assume the defense of any such suit and retains
such counsel, the Fund or such officers or Trustees or controlling person or
persons, defendant or defendants in the suit, shall bear the fees and expenses
of any additional counsel retained by them or the Trust, but, in case the
Principal Underwriter does not elect to assume the defense of any such suit, it
shall reimburse the Fund, any such officers and Trustees or controlling person
or persons, defendant or defendants in such suit, for the reasonable fees and
expenses of any counsel retained by them or the Trust. The Principal Underwriter
agrees promptly to notify the Trust of the commencement of any litigation or
proceedings against it in connection with the issue and sale of any of the
Fund's shares.
Neither the Principal Underwriter nor any financial service firm nor
any other person is authorized by the Trust to give any information or to make
any representations, other than those contained in the Registration Statement or
Prospectus filed with the Securities and Exchange Commission (the "Commission")
under the 1933 Act, (as said Registration Statement and Prospectus may be
amended or supplemented from time to time), covering the shares of the Fund.
Neither the Principal Underwriter nor any financial service firm nor any other
person is authorized to act as agent for the Trust or the Fund in connection
with the offering or sale of shares of the Fund to the public or otherwise. All
such sales made by the Principal Underwriter shall be made by it as principal,
for its own account. The Principal Underwriter may, however, act as agent in
connection with the repurchase of shares as provided in paragraph 6 below, or in
connection with "exchanges" between investment companies for which the Principal
Underwriter acts as Principal Underwriter or for which an affiliate of the
Principal Underwriter acts as investment adviser.
5(a). The Fund will pay, or cause to be paid -
(i) all the costs and expenses of the Fund, including fees and
disbursements of its counsel, in connection with the preparation and filing of
any required Registration Statement and/or Prospectus under the 1933 Act, or the
Investment Company Act of 1940, as amended from time to time, (the "1940 Act")
covering its shares and all amendments and supplements thereto, and preparing
and mailing periodic reports to shareholders (including the expense of setting
up in type any such Registration Statement, Prospectus or periodic report);
(ii) the cost of preparing temporary and permanent share
certificates (if any) for shares of the Fund;
(iii) The cost and expenses of delivering to the Principal
Underwriter at its office in Boston, Massachusetts, all shares of the Fund
purchased by it as principal hereunder; and
(iv) all the federal and state (if any) issue and/or transfer
taxes payable upon the issue by or (in the case of treasury shares) transfer
from the Fund to the Principal Underwriter of any and all shares of the Fund
purchased by the Principal Underwriter hereunder.
(b) The Principal Underwriter agrees that, after the Prospectus and
periodic reports have been set up in type, it will bear the expense of printing
and distributing any copies thereof which are to be used in connection with the
offering of shares of the Fund to financial service firms or investors. The
Principal Underwriter further agrees that it will bear the expenses of
preparing, printing and distributing any other literature used by the Principal
Underwriter or furnished by it for use by financial service firms in connection
with the offering of the shares of the Fund for sale to the public and any
expenses of advertising in connection with such offering. The Fund agrees to pay
the expenses of registration and maintaining registration of its shares for sale
under federal and state securities laws, and, if necessary or advisable in
connection therewith, of qualifying the Trust or the Fund as a dealer or broker,
in such states as shall be selected by the Principal Underwriter and the fees
payable to each such state for continuing the qualification therein until the
Principal Underwriter notifies the Trust that it does not wish such
qualification continued.
(c) In addition, the Trust agrees, in accordance with the Fund's
Distribution Plan (the "Plan"), adopted pursuant to Rule 12b-1 under the 1940
Act with respect to shares, to make certain payments as follows. The Principal
Underwriter shall be entitled to be paid by the Fund a sales commission equal to
an amount not exceeding 5% of the price received by the Fund for each sale of
shares (excluding reinvestment of dividends and distributions), such payment to
be made in the manner set forth in this paragraph 5. The Principal Underwriter
shall also be entitled to be paid by the Fund a separate distribution fee
(calculated in accordance with paragraph 5(d)), such payment to be made in the
manner set forth and subject to the terms of this paragraph 5.
(d) The sales commissions and distribution fees referred to in
paragraph 5(c) shall be accrued and paid by the Fund in the following manner.
The Fund shall accrue daily an amount calculated at the rate of .75% per annum
of the daily net assets of the Fund, which net assets shall be computed in
accordance with the governing documents of the Fund and applicable votes and
determinations of the Trustees of the Trust. The daily amounts so accrued
throughout the month shall be paid to the Principal Underwriter on the last day
of each month. The amount of such daily accrual, as so calculated, shall first
be applied and charged to all unpaid sales commissions, and the balance, if any,
shall then be applied and charged to all unpaid distribution fees. No amount
shall be accrued with respect to any day on which there exist no outstanding
uncovered distribution charges of the Principal Underwriter. The amount of such
uncovered distribution charges shall be calculated daily. For purposes of this
calculation, distribution charges of the Principal Underwriter shall include (a)
the aggregate of all sales commissions which the Principal Underwriter has been
paid pursuant to this paragraph (d) plus all sales commissions which it is
entitled to be paid pursuant to paragraph 5(c) since inception of this Agreement
through and including the day next preceding the date of calculation, and (b) an
amount equal to the aggregate of all distribution fees referred to below which
the Principal Underwriter has been paid pursuant to this paragraph (d) plus all
such fees which it is entitled to be paid pursuant to paragraph 5(c) since
inception of this Agreement through and including the day next preceding the
date of calculation. From this sum (distribution charges) there shall be
subtracted (i) the aggregate amount paid or payable to the Principal Underwriter
pursuant to this paragraph (d) since inception of this Agreement through and
including the day next preceding the date of calculation and (ii) the aggregate
amount of all contingent deferred sales charges paid or payable to the Principal
Underwriter since inception of this Agreement through and including the day next
preceding the date of calculation. If the result of such subtraction is a
positive amount, a distribution fee [computed at the rate of 1% per annum above
the prime rate (being the base rate on corporate loans posted by at least 75% of
the nation's 30 largest banks) then being reported in the Eastern Edition of The
Wall Street Journal or if such prime rate is not so reported such other rate as
may be designated from time to time by vote or other action of a majority of (i)
those Trustees of the Trust who are not "interested persons" of the Trust (as
defined in the 1940 Act) and have no direct or indirect financial interest in
the operation of the Plan or any agreements related to it and (ii) all of the
Trustees then in office] shall be computed on such amount and added to such
amount, with the resulting sum constituting the amount of outstanding uncovered
distribution charges of the Principal Underwriter with respect to such day for
all purposes of this Agreement. If the result of such subtraction is a negative
amount, there shall exist no outstanding uncovered distribution charges of the
Principal Underwriter with respect to such day and no amount shall be accrued or
paid to the Principal Underwriter with respect to such day. The aggregate
amounts accrued and paid pursuant to this paragraph (d) during any fiscal year
of the Fund shall not exceed .75% of the average daily net assets of the Fund
for such year.
(e) The Principal Underwriter shall be entitled to receive all
contingent deferred sales charges paid or payable with respect to any day on
which there exist outstanding uncovered distribution charges of the Principal
Underwriter. The Fund shall be entitled to receive all remaining contingent
deferred sales charges paid or payable by shareholders with respect to any day
on which there exist no outstanding uncovered distribution charges of the
Principal Underwriter, provided that no such sales charge which would cause the
Fund to exceed the maximum applicable cap imposed thereon by paragraph (2) of
subsection (d) of Section 26 of Article III of the Rules of Fair Practice of the
National Association of Securities Dealers, Inc. shall be imposed.
(f) The persons authorized to direct the disposition of monies paid or
payable on behalf of the Fund pursuant to the Plan or this Agreement shall be
the President or any Vice President of the Trust. Such persons shall provide to
the Trust's Trustees and the Trustees shall review, at least quarterly, a
written report of the amounts so expended and the purposes for which such
expenditures were made.
(g) In addition to the payments to the Principal Underwriter provided
for in paragraph 5(d), the Fund may make payments of service fees to the
Principal Underwriter, Authorized Firms and other persons. The aggregate of such
payments during any fiscal year of the Fund shall not exceed .25% of the Fund's
average daily net assets for such year.
6. The Trust hereby authorizes the Principal Underwriter to repurchase,
upon the terms and conditions set forth in written instructions given by the
Trust to the Principal Underwriter from time to time, as agent of the Fund and
for its account, such shares of the Fund as may be offered for sale to the Fund
from time to time.
(a) The Principal Underwriter shall notify in writing IBT and TSSG at
the end of each business day, or as soon thereafter as the repurchases in each
pricing period have been compiled, of the number of shares repurchased for the
account of the Fund since the last previous report, together with the prices at
which such repurchases were made, and upon the request of any officer or Trustee
of the Trust shall furnish similar information with respect to all repurchases
made up to the time of the request on any day.
(b) The Trust reserves the right to suspend or revoke the foregoing
authorization at any time; unless otherwise stated, any such suspension or
revocation shall be effective forthwith upon receipt of notice thereof by an
officer of the Principal Underwriter, by telegraph or by written instrument from
an officer of the Trust duly authorized by its Trustees. In the event that the
authorization of the Principal Underwriter is, by the terms of such notice,
suspended for more than twenty-four hours or until further notice, the
authorization given by this paragraph 6 shall not be revived except by action of
a majority of the Trustees of the Trust.
(c) The Principal Underwriter shall have the right to terminate the
operation of this paragraph 6 upon giving to the Trust thirty (30) days' written
notice thereof.
(d) The Trust agrees to authorize and direct TSSG to pay, for the
account of the Fund, the purchase price of any shares so repurchased against
delivery of the certificates in proper form for transfer to the Fund or for
cancellation by the Fund.
(e) The Principal Underwriter shall receive no commission in respect of
any repurchase of shares under the foregoing authorization and appointment as
agent, except for any sales commission, distribution fee or contingent deferred
sales charges payable under paragraph 5.
(f) The Trust agrees that the Fund will reimburse the Principal
Underwriter, from time to time on demand, for any reasonable expenses incurred
in connection with the repurchase of shares of the Fund pursuant to this
paragraph 6.
7. If, at any time during the existence of this Agreement, the Trust
shall deem it necessary or advisable in the best interests of the Fund that any
amendment of this Agreement be made in order to comply with the recommendations
or requirements of the Commission or other governmental authority or to obtain
any advantage under Massachusetts or federal tax laws, and shall notify the
Principal Underwriter of the form of amendment which it deems necessary or
advisable and the reasons therefor, and, if the Principal Underwriter declines
to assent to such amendment, the Trust may terminate this Agreement forthwith by
written notice to the Principal Underwriter. If, at any time during the
existence of its agreement upon request by the Principal Underwriter, the Trust
fails (after a reasonable time) to make any changes in its Declaration of Trust,
as amended, or in its methods of doing business which are necessary in order to
comply with any requirement of federal law or regulations of the Commission or
of a national securities association of which the Principal Underwriter is or
may be a member, relating to the sale of the shares of the Fund, the Principal
Underwriter may terminate this Agreement forthwith by written notice to the
Trust.
8. The term "net asset value" as used in this Agreement with reference
to the shares of the Fund shall have the same meaning as used in the Declaration
of Trust, as amended, and calculated in the manner referred to in paragraph 2
above.
9. (a) The Principal Underwriter is a corporation in the United States
organized under the laws of Massachusetts and holding membership in the National
Association of Securities Dealers, Inc., a securities association registered
under Section 15A of the Securities Exchange Act of 1934, as amended from time
to time, and during the life of this Agreement will continue to be so resident
in the United States, so organized and a member in good standing of said
Association. The Principal Underwriter will comply with the Trust's Declaration
of Trust and By-Laws, and the 1940 Act and the rules promulgated thereunder,
insofar as they are applicable to the Principal Underwriter.
(b) The Principal Underwriter shall maintain in the United States and
preserve therein for such period or periods as the Commission shall prescribe by
rules and regulations applicable to it as Principal Underwriter of an open-end
investment company registered under the 1940 Act such accounts, books and other
documents as are necessary or appropriate to record its transactions with the
Fund. Such accounts, books and other documents shall be subject at any time and
from time to time to such reasonable periodic, special and other examinations by
the Commission or any member or representative thereof as the Commission may
prescribe. The Principal Underwriter shall furnish to the Commission within such
reasonable time as the Commission may prescribe copies of or extracts from such
records which may be prepared without effort, expense or delay as the Commission
may by order require.
10. This Agreement shall continue in force indefinitely until
terminated as in this Agreement above provided, except that:
(a) this Agreement shall remain in effect for one year from the date of
its execution and shall continue in full force and effect indefinitely
thereafter, but only so long as such continuance is specifically approved at
least annually (i) by the vote of a majority of the Trustees of the Trust who
are not "interested persons" of the Trust and who have no direct or indirect
interest in the operation of the Plan or this Agreement (the "Rule 12b-1
Trustees") cast in person at a meeting called for the purpose of voting on such
approval, and (ii) by the Trustees of the Trust or by vote of a majority of the
outstanding voting securities of the Fund;
(b) this Agreement may be terminated at any time by vote of a majority
of the Rule 12b-1 Trustees or by vote of a majority of the outstanding voting
securities of the Fund on not more than sixty days' notice to the Principal
Underwriter. The Principal Underwriter shall be entitled to receive all
contingent deferred sales charges paid or payable with respect to any day
subsequent to the termination of this Agreement;
(c) the Principal Underwriter shall have the right to terminate this
Agreement on six (6) months' written notice thereof given in writing to the
Fund; and
(d) the Trust shall have the right to terminate this Agreement
forthwith in the event that it shall have been established by a court of
competent jurisdiction that the Principal Underwriter or any director or officer
of the Principal Underwriter has taken any action which results in a breach of
the covenants set out in paragraph 9 hereof.
11. In the event of the assignment of this Agreement by the Principal
Underwriter, this Agreement shall automatically terminate.
12. Any notice under this Agreement shall be in writing, addressed and
delivered, or mailed postage paid, to the other party, at such address as such
other party may designate for the receipt of such notices. Until further notice
to the other party, it is agreed that the record address of the Trust and that
of the Principal Underwriter, shall be 24 Federal Street, Boston, Massachusetts
02110.
13. The services of the Principal Underwriter to the Fund hereunder are
not to be deemed to be exclusive, the Principal Underwriter being free to (a)
render similar service to, and to act as principal underwriter in connection
with the distribution of shares of, other series of the Trust or other
investment companies, and (b) engage in other business and activities from time
to time.
14. The terms "vote of a majority of the outstanding voting
securities," "assignment" and "interested persons," when used herein, shall have
the respective meanings specified in the 1940 Act, subject, however, to such
exemptions as may be granted by the Commission by any rule, regulation or order.
15. The Principal Underwriter expressly acknowledges the provision in
the Trust's Declaration of Trust limiting the personal liability of the
shareholders of the Fund or the Trustees of the Trust. The Principal Underwriter
hereby agrees that it shall have recourse to the Trust or the Fund for payment
of claims or obligations as between the Trust or the Fund and the Principal
Underwriter arising out of this Agreement and shall not seek satisfaction from
the shareholders or any shareholder of the Trust or from the Trustees or any
Trustee of the Trust. The Fund shall not be responsible for obligations of any
other series of the Trust.
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement
on this 23rd day of August, 1995.
EATON VANCE GROWTH TRUST
(on behalf of EV MARATHON
INFORMATION AGE FUND)
By /s/James B. Hawkes
---------------------------
President
EATON VANCE DISTRIBUTORS INC.
By /s/H. Day Brigham, Jr.
---------------------------
Vice President
<PAGE>
EXHIBIT 99.(6)(a)(8)
EATON VANCE GROWTH TRUST
DISTRIBUTION AGREEMENT
ON BEHALF OF EV TRADITIONAL INFORMATION AGE FUND
AGREEMENT effective as of August 23, 1995 between EATON VANCE GROWTH
TRUST, hereinafter called the "Trust", a Massachusetts business trust having its
principal place of business in Boston in the Commonwealth of Massachusetts, on
behalf of EV Traditional Information Age Fund, hereinafter called the "Fund" and
EATON VANCE DISTRIBUTORS, INC., a Massachusetts corporation having its principal
place of business in said Boston, hereinafter sometimes called the "Principal
Underwriter".
IN CONSIDERATION of the mutual promises and undertakings herein
contained, the parties hereto agree:
1. The Trust grants to the Principal Underwriter the right to purchase
shares of the Fund upon the terms hereinbelow set forth during the term of this
Agreement. While this Agreement is in force, the Principal Underwriter agrees to
use its best efforts to find purchasers for shares of the Fund.
The Principal Underwriter shall have the right to buy from the Fund the
shares needed, but not more than the shares needed (except for clerical errors
and errors of transmission) to fill unconditional orders for shares of the Fund
placed with the Principal Underwriter by financial service firms or investors as
set forth in the current Prospectus relating to shares of the Fund. The price
which the Principal Underwriter shall pay for the shares so purchased shall be
the net asset value used in determining the public offering price on which such
orders were based. The Principal Underwriter shall notify Investors Bank & Trust
Company, Custodian of the Fund ("IBT"), and The Shareholder Services Group,
Inc., Transfer Agent of the Fund ("TSSG"), or a successor transfer agent, at the
end of each business day, or as soon thereafter as the orders placed with it
have been compiled, of the number of shares and the prices thereof which the
Principal Underwriter is to purchase as principal for resale. The Principal
Underwriter shall take down and pay for shares ordered from the Fund on or
before the eleventh business day (excluding Saturdays) after the shares have
been so ordered.
The right granted to the Principal Underwriter to buy shares from the
Fund shall be exclusive, except that said exclusive right shall not apply to
shares issued in connection with the merger or consolidation of any other
investment company or personal holding company with the Fund or the acquisition
by purchase or otherwise of all (or substantially all) the assets or the
outstanding shares of any such company, by the Fund; nor shall it apply to
shares, if any, issued by the Fund in distribution of income or realized capital
gains of the Fund payable in shares or in cash at the option of the shareholder.
2. The shares may be resold by the Principal Underwriter to or through
financial service firms having agreements with the Principal Underwriter, and to
investors, upon the following terms and conditions.
The public offering price, i.e., the price per share at which the
Principal Underwriter or financial service firm purchasing shares from the
Principal Underwriter may sell shares to the public, shall be the public
offering price as set forth in the current Prospectus relating to said shares,
but not to exceed the net asset value at which the Principal Underwriter is to
purchase the shares, plus a sales charge not to exceed 7.25% of the public
offering price (the net asset value divided by .9275). If the resulting public
offering price does not come out to an even cent, the public offering price
shall be adjusted to the nearer cent.
The Principal Underwriter may also sell shares at the net asset value
at which the Principal Underwriter is to purchase such shares, provided such
sales are not inconsistent with the provisions of Section 22(d) of the
Investment Company Act of 1940, as amended from time to time (the "1940 Act"),
and the rules thereunder, including any applicable exemptive orders or
administrative interpretations or "no-action" positions with respect thereto.
The net asset value of shares of the Fund shall be determined by the
Trust or IBT, as the agent of the Fund, as of the close of regular trading on
the New York Stock Exchange on each business day on which said Exchange is open,
or as of such other time on each such business day as may be determined by the
Trustees of the Trust, in accordance with the methodology and procedures for
calculating such net asset value authorized by the Trustees. The Trust may also
cause the net asset value to be determined in substantially the same manner or
estimated in such manner and as of such other time or times as may from time to
time be agreed upon by the Trust and Principal Underwriter. The Trust will
notify the Principal Underwriter each time the net asset value of the Fund's
shares is determined and when such value is so determined it shall be applicable
to transactions as set forth in the current Prospectus and Statement of
Additional Information (hereafter the "Prospectus") relating to the Fund's
shares.
No shares of the Fund shall be sold by the Fund during any period when
the determination of net asset value is suspended pursuant to the Declaration of
Trust, except to the Principal Underwriter, in the manner and upon the terms
above set forth to cover contracts of sale made by the Principal Underwriter
with its customers prior to any such suspension, and except as provided in the
last paragraph of paragraph 1 hereof. The Trust shall also have the right to
suspend the sale of the Fund's shares if in the judgment of the Trust conditions
obtaining at any time render such action advisable. The Principal Underwriter
shall have the right to suspend sales at any time, to refuse to accept or
confirm any order from an investor or financial service firm, or to accept or
confirm any such order in part only, if in the judgment of the Principal
Underwriter such action is in the best interests of the Fund.
3. The Trust covenants and agrees that it will, from time to time, but
subject to the necessary approval of the Fund's shareholders, take such steps as
may be necessary to register the Fund's shares under the federal Securities Act
of 1933, as amended from time to time (the "1933 Act"), to the end that there
will be available for sale such number of shares as the Principal Underwriter
may reasonably be expected to sell. The Trust covenants and agrees to indemnify
and hold harmless the Principal Underwriter and each person, if any, who
controls the Principal Underwriter within the meaning of Section 15 of the 1933
Act against any loss, liability, claim, damages or expense (including the
reasonable cost of investigating or defending any alleged loss, liability,
claim, damages or expense and reasonable counsel fees incurred in connection
therewith), arising by reason of any person acquiring any shares of the Fund,
which may be based upon the 1933 Act or on any other statute or at common law,
on the ground that the Registration Statement or Prospectus, as from time to
time amended and supplemented, includes an untrue statement of a material fact
or omits to state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading, unless such statement or
omission was made in reliance upon, and in conformity with, information
furnished in writing to the Trust in connection therewith by or on behalf of the
Principal Underwriter; provided, however, that in no case (i) is the indemnity
of the Trust in favor of the Principal Underwriter and any such controlling
person to be deemed to protect such Principal Underwriter or any such
controlling person against any liability to the Trust or the Fund or its
security holders to which such Principal Underwriter or any such controlling
person would otherwise be subject by reason of willful misfeasance, bad faith,
or gross negligence in the performance of its duties or by reason of its
reckless disregard of its obligations and duties under this Agreement, or (ii)
is the Trust or the Fund to be liable under its indemnity agreement contained in
this paragraph with respect to any claim made against the Principal Underwriter
or any such controlling person unless the Principal Underwriter or any such
controlling person, as the case may be, shall have notified the Trust in writing
within a reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon the Principal
Underwriter or such controlling person (or after such Principal Underwriter or
such controlling person shall have received notice of such service on any
designated agent), but failure to notify the Trust of any such claim shall not
relieve it from any liability which the Fund may have to the person against whom
such action is brought otherwise than on account of its indemnity agreement
contained in this paragraph. The Trust shall be entitled to participate, at the
expense of the Fund, in the defense, or, if the Trust so elects, to assume the
defense of any suit brought to enforce any such liability, but if the Trust
elects to assume the defense, such defense shall be conducted by counsel chosen
by it and satisfactory to the Principal Underwriter or controlling person or
persons, defendant or defendants in the suit. In the event the Trust elects to
assume the defense of any such suit and retains such counsel, the Principal
Underwriter or controlling person or persons, defendant or defendants in the
suit, shall bear the fees and expenses of any additional counsel retained by
them, but, in case the Trust does not elect to assume the defense of any such
suit, the Fund shall reimburse the Principal Underwriter or controlling person
or persons, defendant or defendants in the suit, for the reasonable fees and
expenses of any counsel retained by them. The Trust agrees promptly to notify
the Principal Underwriter of the commencement of any litigation or proceedings
against it or any of its officers or Trustees in connection with the issuance or
sale of any of the Fund's shares.
4. The Principal Underwriter covenants and agrees that, in selling the
shares of the Fund, it will use its best efforts in all respects duly to conform
with the requirements of all state and federal laws relating to the sale of such
shares, and will indemnify and hold harmless the Trust and each of its Trustees
and officers and each person, if any, who controls the Trust within the meaning
of Section 15 of the 1933 Act, against any loss, liability, damages, claim or
expense (including the reasonable cost of investigating or defending any alleged
loss, liability, damages, claim or expense and reasonable counsel fees incurred
in connection therewith), arising by reason of any person acquiring any shares
of the Fund, which may be based upon the 1933 Act or any other statute or at
common law, on account of any wrongful act of the Principal Underwriter or any
of its employees (including any failure to conform with any requirement of any
state or federal law relating to the sale of such shares) or on the ground that
the registration statement or Prospectus, as from time to time amended and
supplemented, includes an untrue statement of a material fact or omits to state
a material fact required to be stated therein or necessary in order to make the
statements therein not misleading, insofar as any such statement or omission was
made in reliance upon, and in conformity with information furnished in writing
to the Trust in connection therewith by or on behalf of the Principal
Underwriter, provided, however, that in no case (i) is the indemnity of the
Principal Underwriter in favor of any person indemnified to be deemed to protect
the Fund or any such person against any liability to which the Fund or any such
person would otherwise be subject by reason of willful misfeasance, bad faith,
or gross negligence in the performance of its or his duties or by reason of its
or his reckless disregard of its obligations and duties under this Agreement, or
(ii) is the Principal Underwriter to be liable under its indemnity agreement
contained in this paragraph with respect to any claim made against the Fund or
any person indemnified unless the Trust or such person, as the case may be,
shall have notified the Principal Underwriter in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon the Trust, the Fund or upon such
person (or after the Trust, the Fund or such person shall have received notice
of such service on any designated agent), but failure to notify the Principal
Underwriter of any such claim shall not relieve it from any liability which it
may have to the Fund or any person against whom such action is brought otherwise
than on account of its indemnity agreement contained in this paragraph. The
Principal Underwriter shall be entitled to participate, at its own expense, in
the defense, or, if it so elects, to assume the defense of any suit brought
toenforce any such liability, but if the Principal Underwriter elects to assume
the defense, such defense shall be conducted by counsel chosen by it and
satisfactory to the Trust, or to its officers or Trustees, or to any controlling
person or persons, defendant or defendants in the suit. In the event that the
Principal Underwriter elects to assume the defense of any such suit and retains
such counsel, the Fund or such officers or Trustees or controlling person or
persons, defendant or defendants in the suit, shall bear the fees and expenses
of any additional counsel retained by them or the Trust, but, in case the
Principal Underwriter does not elect to assume the defense of any such suit, it
shall reimburse the Fund, any such officers and Trustees or controlling person
or persons, defendant or defendants in such suit, for the reasonable fees and
expenses of any counsel retained by them or the Trust. The Principal Underwriter
agrees promptly to notify the Trust of the commencement of any litigation or
proceedings against it in connection with the issue and sale of any of the
Fund's shares.
Neither the Principal Underwriter nor any financial service firm nor
any other person is authorized by the Trust to give any information or to make
any representations, other than those contained in the Registration Statement or
Prospectus filed with the Securities and Exchange Commission (the "Commission")
under the 1933 Act (as said Registration Statement and Prospectus may be amended
or supplemented from time to time), covering the shares of the Fund. Neither the
Principal Underwriter nor any financial service firm nor any other person is
authorized to act as agent for the Trust or the Fund in connection with the
offering or sale of shares of the Fund to the public or otherwise. All such
sales made by the Principal Underwriter shall be made by it as principal, for
its own account. The Principal Underwriter may, however, act as agent in
connection with the repurchase of shares as provided in paragraph 6 below, or in
connection with "exchanges" between investment companies for which the Principal
Underwriter (or an affiliate thereof) acts as principal underwriter or
investment adviser.
5(a). The Fund will pay, or cause to be paid -
(i) all the costs and expenses of the Fund, including fees and
disbursements of its counsel, in connection with the preparation and filing of
any required Registration Statement and/or Prospectus under the 1933 Act, or the
1940 Act, covering its shares and all amendments and supplements thereto, and
preparing and distributing periodic reports to shareholders (including the
expense of setting up in type any such Registration Statement, Prospectus or
periodic report);
(ii) the cost of preparing temporary and permanent share
certificates (if any) for shares of the Fund;
(iii) The cost and expenses of delivering to the Principal
Underwriter at its office in Boston, Massachusetts, all shares of the Fund
purchased by it as principal hereunder;
(iv) all the federal and state (if any) issue and/or transfer
taxes payable upon the issue by or (in the case of treasury shares) transfer
from the Fund to the Principal Underwriter of any and all shares of the Fund
purchased by the Principal Underwriter hereunder;
(v) the fees, costs and expenses of the registration or
qualification of shares of the Fund for sale in the various states, territories
or other jurisdictions (including without limitation the registering or
qualifying the Fund as a broker or dealer or any officer of the Fund as agent or
salesman in any state, territory or other jurisdiction); and
(vi) all payments to be made by the Fund pursuant to any written
plan approved in accordance with Rule 12b-1 under the 1940 Act.
(b) The Principal Underwriter agrees that, after the Prospectus (other
than to existing shareholders of the Fund) and periodic reports have been set up
in type, it will bear the expense of printing and distributing any copies
thereof which are to be used in connection with the offering of shares of the
Fund to financial service firms or investors. The Principal Underwriter further
agrees that it will bear the expenses of preparing, printing and distributing
any other literature used by the Principal Underwriter or furnished by it for
use by financial service firms in connection with the offering of the shares of
the Fund for sale to the public and any expenses of advertising in connection
with such offering.
(c) The Principal Underwriter shall be entitled to receive all
contingent deferred sales charges imposed in accordance with the Prospectus on
early redemptions of Fund shares.
6. The Trust hereby authorizes the Principal Underwriter to repurchase,
upon the terms and conditions set forth in written instructions given by the
Trust to the Principal Underwriter from time to time, as agent of the Fund and
for its account, such shares of the Fund as may be offered for sale to the Fund
from time to time.
(a) The Principal Underwriter shall notify in writing IBT and TSSG, at
the end of each business day, or as soon thereafter as the repurchases in each
pricing period have been compiled, of the number of shares repurchased for the
account of the Fund since the last previous report, together with the prices at
which such repurchases were made, and upon the request of any officer or Trustee
of the Trust shall furnish similar information with respect to all repurchases
made up to the time of the request on any day.
(b) The Trust reserves the right to suspend or revoke the foregoing
authorization at any time; unless otherwise stated, any such suspension or
revocation shall be effective forthwith upon receipt of notice thereof by an
officer of the Principal Underwriter, by telegraph or by written instrument from
an officer of the Trust duly authorized by its Trustees. In the event that the
authorization of the Principal Underwriter is, by the terms of such notice,
suspended for more than twenty-four hours or until further notice, the
authorization given by this paragraph 6 shall not be revived except by action of
a majority of the Trustees of the Trust.
(c) The Principal Underwriter shall have the right to terminate the
operation of this paragraph 6 upon giving to the Trust thirty (30) days' written
notice thereof.
(d) The Trust agrees to authorize and direct TSSG, to pay, for the
account of the Fund, the purchase price of any shares so repurchased against
delivery of the certificates in proper form for transfer to the Fund or for
cancellation by the Fund.
(e) The Principal Underwriter shall receive no commission in respect of
any repurchase of shares under the foregoing authorization and appointment as
agent.
(f) The Trust agrees that the Fund will reimburse the Principal
Underwriter, from time to time on demand, for any reasonable expenses incurred
in connection with the repurchase of shares of the Fund pursuant to this
paragraph 6.
7. If, at any time during the existence of this Agreement, the Trust
shall deem it necessary or advisable in the best interests of the Fund that any
amendment of this Agreement be made in order to comply with the recommendations
or requirements of the Commission or other governmental authority or to obtain
any advantage under Massachusetts or federal tax laws, and shall notify the
Principal Underwriter of the form of amendment which it deems necessary or
advisable and the reasons therefor, and, if the Principal Underwriter declines
to assent to such amendment, the Trust may terminate this Agreement forthwith by
written notice to the Principal Underwriter. If, at any time during the
existence of this Agreement upon request by the Principal Underwriter, the Trust
fails (after a reasonable time) to make any changes in its Declaration of Trust,
as amended, or in its methods of doing business which are necessary in order to
comply with any requirement of federal law or regulations of the Commission or
of a national securities association of which the Principal Underwriter is or
may be a member, relating to the sale of the shares of the Fund, the Principal
Underwriter may terminate this Agreement forthwith by written notice to the
Trust.
8. (a) The Principal Underwriter is a corporation in the United States
organized under the laws of Massachusetts and holding membership in the National
Association of Securities Dealers, Inc., a securities association registered
under Section 15A of the Securities Exchange Act of 1934, as amended from time
to time, and during the life of this Agreement will continue to be so resident
in the United States, so organized and a member in good standing of said
Association. The Principal Underwriter covenants that it and its officers and
directors will comply with the Trust's Declaration of Trust and By-Laws, and the
1940 Act and the rules promulgated thereunder, insofar as they are applicable to
the Principal Underwriter.
(b) The Principal Underwriter shall maintain in the United States and
preserve therein for such period or periods as the Commission shall prescribe by
rules and regulations applicable to it as Principal Underwriter of an open-end
investment company registered under the 1940 Act such accounts, books and other
documents as are necessary or appropriate to record its transactions with the
Fund. Such accounts, books and other documents shall be subject at any time and
from time to time to such reasonable periodic, special and other examinations by
the Commission or any member or representative thereof as the Commission may
prescribe. The Principal Underwriter shall furnish to the Commission within such
reasonable time as the Commission may prescribe copies of or extracts from such
records which may be prepared without effort, expense or delay as the Commission
may by order require.
9. This Agreement shall continue in force indefinitely until terminated
as in this Agreement above provided, except that:
(a) this Agreement shall remain in effect for one year from the date of
its execution and shall continue in full force and effect indefinitely
thereafter, but only so long as such continuance is specifically approved at
least annually (i) by the vote of a majority of the Trustees of the Trust who
are not interested persons of the Trust or of the Principal Underwriter cast in
person at a meeting called for the purpose of voting on such approval, and (ii)
by the Trustees of the Trust or by vote of a majority of the outstanding voting
securities of the Fund; and
(b) that either party shall have the right to terminate this Agreement
on six (6) months' written notice thereof given in writing to the other.
10. In the event of the assignment of this Agreement by the Principal
Underwriter, this Agreement shall automatically terminate.
11. Any notice under this Agreement shall be in writing, addressed and
delivered, or mailed postage paid, to the other party, at such address as such
other party may designate for the receipt of such notices. Until further notice
to the other party, it is agreed that the record address of the Trust and that
of the Principal Underwriter, shall be 24 Federal Street, Boston, Massachusetts
02110.
12. The services of the Principal Underwriter to the Fund hereunder are
not to be deemed to be exclusive, the Principal Underwriter being free to (a)
render similar services to, and to act as principal underwriter in connection
with the distribution of shares of, other series of the Trust or other
investment companies, and (b) engage in other business and activities from time
to time.
13. The terms "vote of a majority of the outstanding voting
securities," "assignment" and "interested persons," when used herein, shall have
the respective meanings specified in the 1940 Act, subject, however, to such
exemptions as may be granted by the Commission by any rule, regulation or order.
14. The Principal Underwriter expressly acknowledges the provision in
the Trust's Declaration of Trust limiting the personal liability of the
shareholders of the Fund or the Trustees of the Trust. The Principal Underwriter
hereby agrees that it shall have recourse only to the assets of the Fund for
payment of claims or obligations as between the Trust on behalf of the Fund, and
the Principal Underwriter arising out of this Agreement and shall not seek
satisfaction from any shareholders of the Trust or from the Trustees or any
Trustee of the Trust. The Fund shall not be responsible for obligations of any
other series of the Trust.
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement
this 23rd day of August, 1995.
EATON VANCE GROWTH TRUST
(on behalf of EV TRADITIONAL
INFORMATION AGE FUND)
By /s/James B. Hawkes
---------------------------
President
EATON VANCE DISTRIBUTORS INC.
By /s/H. Day Brigham, Jr.
---------------------------
Vice President
<PAGE>
EXHIBIT 99.(6)(a)(10)
EATON VANCE GROWTH TRUST
FORM OF DISTRIBUTION AGREEMENT
ON BEHALF OF EV CLASSIC INFORMATION AGE FUND
AGREEMENT effective as of November 10, 1995 between EATON VANCE GROWTH
TRUST, a Massachusetts business trust having its principal place of business in
Boston in the Commonwealth of Massachusetts, hereinafter called the "Trust", on
behalf of EV Classic Information Age Fund (the "Fund"), and EATON VANCE
DISTRIBUTORS, INC., a Massachusetts corporation having its principal place of
business in said Boston, hereinafter sometimes called the "Principal
Underwriter".
IN CONSIDERATION of the mutual promises and undertakings herein
contained, the parties hereto agree:
1. The Trust grants to the Principal Underwriter the right to purchase
shares of the Fund upon the terms hereinbelow set forth during the term of this
Agreement. While this Agreement is in force, the Principal Underwriter agrees to
use its best efforts to find purchasers for shares of the Fund.
The Principal Underwriter shall have the right to buy from the Fund the
shares needed, but not more than the shares needed (except for clerical errors
and errors of transmission) to fill unconditional orders for shares of the Fund
placed with the Principal Underwriter by financial service firms or investors as
set forth in the current Prospectus relating to shares of the Fund. The price
which the Principal Underwriter shall pay for the shares so purchased shall be
equal to the price paid by investors upon purchasing such shares. The Principal
Underwriter shall notify Investors Bank & Trust Company, Custodian of the Fund
("IBT"), and The Shareholder Services Group, Inc., Transfer Agent of the Fund
("TSSG"), or a successor transfer agent, at the end of each business day, or as
soon thereafter as the orders placed with it have been compiled, of the number
of shares and the prices thereof which the Principal Underwriter is to purchase
as principal for resale. The Principal Underwriter shall take down and pay for
shares ordered from the Fund on or before the eleventh business day (excluding
Saturdays) after the shares have been so ordered.
The right granted to the Principal Underwriter to buy shares from the
Fund shall be exclusive, except that said exclusive right shall not apply to
shares issued in connection with the merger or consolidation of any other
investment company or personal holding company with the Fund or the acquisition
by purchase or otherwise of all (or substantially all) the assets or the
outstanding shares of any such company, by the Fund; nor shall it apply to
shares, if any, issued by the Fund in distribution of income or realized capital
gains of the Fund payable in shares or in cash at the option of the shareholder.
2. The shares may be resold by the Principal Underwriter to or through
financial service firms having agreements with the Principal Underwriter, and to
investors, upon the following terms and conditions.
The public offering price, i.e., the price per share at which the
Principal Underwriter or financial service firm purchasing shares from the
Principal Underwriter may sell shares to the public, shall be equal to the net
asset value at which the Principal Underwriter is to purchase the shares.
The net asset value of shares of the Fund shall be determined by the
Trust or IBT, as the agent of the Fund, as of the close of regular trading on
the New York Stock Exchange on each business day on which said Exchange is open,
or as of such other time on each such business day as may be determined by the
Trustees of the Trust, in accordance with the methodology and procedures for
calculating such net asset value authorized by the Trustees. The Trust may also
cause the net asset value to be determined in substantially the same manner or
estimated in such manner and as of such other time or times as may from time to
time be agreed upon by the Trust and Principal Underwriter. The Trust will
notify the Principal Underwriter each time the net asset value of the Fund's
shares is determined and when such value is so determined it shall be applicable
to transactions as set forth in the current Prospectus and Statement of
Additional Information (hereafter the "Prospectus") relating to the Fund's
shares.
No shares of the Fund shall be sold by the Fund during any period when
the determination of net asset value is suspended pursuant to the Declaration of
Trust, except to the Principal Underwriter, in the manner and upon the terms
above set forth to cover contracts of sale made by the Principal Underwriter
with its customers prior to any such suspension, and except as provided in the
last paragraph of paragraph 1 hereof. The Trust shall also have the right to
suspend the sale of the Fund's shares if in the judgment of the Trust conditions
obtaining at any time render such action advisable. The Principal Underwriter
shall have the right to suspend sales at any time, to refuse to accept or
confirm any order from an investor or financial service firm, or to accept or
confirm any such order in part only, if in the judgment of the Principal
Underwriter such action is in the best interests of the Fund.
3. The Trust agrees that it will, from time to time, but subject to the
necessary approval of the Fund's shareholders, take such steps as may be
necessary to register the Fund's shares under the federal Securities Act of
1933, as amended from time to time, (the "1933 Act"), to the end that there will
be available for sale such number of shares as the Principal Underwriter may
reasonably be expected to sell. The Trust agrees to indemnify and hold harmless
the Principal Underwriter and each person, if any, who controls the Principal
Underwriter within the meaning of Section 15 of the 1933 Act against any loss,
liability, claim, damages or expense (including the reasonable cost of
investigating or defending any alleged loss, liability, claim, damages or
expense and reasonable counsel fees incurred in connection therewith), arising
by reason of any person acquiring any shares of the Fund, which may be based
upon the 1933 Act or on any other statute or at common law, on the ground that
the Registration Statement or Prospectus, as from time to time amended and
supplemented, includes an untrue statement of a material fact or omits to state
a material fact required to be stated therein or necessary in order to make the
statements therein not misleading, unless such statement or omission was made in
reliance upon, and in conformity with, information furnished in writing to the
Trust in connection therewith byor on behalf of the Principal Underwriter;
provided, however, that in no case (i) is the indemnity of the Trust in favor of
the Principal Underwriter and any such controlling person to be deemed to
protect such Principal Underwriter or any such controlling person against any
liability to the Trust or the Fund or its security holders to which such
Principal Underwriter or any such controlling person would otherwise be subject
by reason of willful misfeasance, bad faith, or gross negligence in the
performance of its duties or by reason of its reckless disregard of its
obligations and duties under this Agreement, or (ii) is the Trust or the Fund to
be liable under its indemnity agreement contained in this paragraph with respect
to any claim made against the Principal Underwriter or any such controlling
person unless the Principal Underwriter or any such controlling person, as the
case may be, shall have notified the Trust in writing within a reasonable time
after the summons or other first legal process giving information of the nature
of the claim shall have been served upon the Principal Underwriter or such
controlling person (or after such Principal Underwriter or such controlling
person shall have received notice of such service on any designated agent), but
failure to notify the Trust of any such claim shall not relieve it from any
liability which the Fund may have to the person against whom such action is
brought otherwise than on account of its indemnity agreement contained in this
paragraph. The Trust shall be entitled to participate, at the expense of the
Fund, in the defense, or, if the Trust so elects, to assume the defense of any
suit brought to enforce any such liability, but if the Trust elects to assume
the defense, such defense shall be conducted by counsel chosen by it and
satisfactory to the Principal Underwriter or controlling person or persons,
defendant or defendants in the suit. In the event the Trust elects to assume the
defense of any such suit and retains such counsel, the Principal Underwriter or
controlling person or persons, defendant or defendants in the suit, shall bear
the fees and expenses of any additional counsel retained by them, but, in case
the Trust does not elect to assume the defense of any such suit, the Fund shall
reimburse the Principal Underwriter or controlling person or persons, defendant
or defendants in the suit, for the reasonable fees and expenses of any counsel
retained by them. The Trust agrees promptly to notify the Principal Underwriter
of the commencement of any litigation or proceedings against it or any of its
officers or Trustees in connection with the issuance or sale of any of the
Fund's shares.
4. The Principal Underwriter covenants and agrees that, in selling the
shares of the Fund, it will use its best efforts in all respects duly to conform
with the requirements of all state and federal laws relating to the sale of such
shares, and will indemnify and hold harmless the Trust and each of its Trustees
and officers and each person, if any, who controls the Trust within the meaning
of Section 15 of the 1933 Act, against any loss, liability, damages, claim or
expense (including the reasonable cost of investigating or defending any alleged
loss, liability, damages, claim or expense and reasonable counsel fees incurred
in connection therewith), arising by reason of any person acquiring any shares
of the Fund, which may be based upon the 1933 Act or any other statute or at
common law, on account of any wrongful act of the Principal Underwriter or any
of its employees (including any failure to conform with any requirement of any
state or federal law relating to the sale of such shares) or on the ground that
the registration statement or Prospectus, as from time to time amended and
supplemented, includes an untrue statement of a material fact or omits to state
a material fact required to be stated therein or necessary in order to make the
statements therein not misleading, insofar as any such statement or omission was
made in reliance upon, and in conformity with information furnished in writing
to the Fund in connection therewith by or on behalf of the Principal
Underwriter, provided, however, that in no case (i) is the indemnity of the
Principal Underwriter in favor of any person indemnified to be deemed to protect
the Fund or any such person against any liability to which the Fund or any such
person would otherwise be subject by reason of willful misfeasance, bad faith,
or gross negligence in the performance of its or his duties or by reason of its
or his reckless disregard of its obligations and duties under this Agreement, or
(ii) is the Principal Underwriter to be liable under its indemnity agreement
contained in this paragraph with respect to any claim made against the Fund or
any person indemnified unless the Trust or such person, as the case may be,
shall have notified the Principal Underwriter in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon the Trust, the Fund or upon such
person (or after the Trust or such person shall have received notice of such
service on any designated agent), but failure to notify the Principal
Underwriter of any such claim shall not relieve it from any liability which it
may have to the Fund or any person against whom such action is brought otherwise
than on account of its indemnity agreement contained in this paragraph. The
Principal Underwriter shall be entitled to participate, at its own expense, in
the defense, or, if it so elects, to assume the defense of any suit brought to
enforce any such liability, but if the Principal Underwriter elects to assume
the defense, such defense shall be conducted by counsel chosen by it and
satisfactory to the Trust, or to its officers or Trustees, or to any controlling
person or persons, defendant or defendants in the suit. In the event that the
Principal Underwriter elects to assume the defense of any such suit and retains
such counsel, the Fund or such officers or Trustees or controlling person or
persons, defendant or defendants in the suit, shall bear the fees and expenses
of any additional counsel retained by them or the Trust, but, in case the
Principal Underwriter does not elect to assume the defense of any such suit, it
shall reimburse the Fund, any such officers and Trustees or controlling person
or persons, defendant or defendants in such suit, for the reasonable fees and
expenses of any counsel retained by them or the Trust. The Principal Underwriter
agrees promptly to notify the Trust of the commencement of any litigation or
proceedings against it in connection with the issue and sale of any of the
Fund's shares.
Neither the Principal Underwriter nor any financial service firm nor
any other person is authorized by the Trust to give any information or to make
any representations, other than those contained in the Registration Statement or
Prospectus filed with the Securities and Exchange Commission (the "Commission")
under the 1933 Act, (as said Registration Statement and Prospectus may be
amended or supplemented from time to time), covering the shares of the Fund.
Neither the Principal Underwriter nor any financial service firm nor any other
person is authorized to act as agent for the Trust or the Fund in connection
with the offering or sale of shares of the Fund to the public or otherwise. All
such sales made by the Principal Underwriter shall be made by it as principal,
for its own account. The Principal Underwriter may, however, act as agent in
connection with the repurchase of shares as provided in paragraph 6 below, or in
connection with "exchanges" between investment companies for which the Principal
Underwriter acts as Principal Underwriter or for which an affiliate of the
Principal Underwriter acts as investment adviser.
5(a). The Fund will pay, or cause to be paid -
(i) all the costs and expenses of the Fund, including fees and
disbursements of its counsel, in connection with the preparation and filing of
any required Registration Statement and/or Prospectus under the 1933 Act, or the
Investment Company Act of 1940, as amended from time to time, (the "1940 Act")
covering its shares and all amendments and supplements thereto, and preparing
and mailing periodic reports to shareholders (including the expense of setting
up in type any such Registration Statement, Prospectus or periodic report);
(ii) the cost of preparing temporary and permanent share
certificates (if any) for shares of the Fund;
(iii) The cost and expenses of delivering to the Principal
Underwriter at its office in Boston, Massachusetts, all shares of the Fund
purchased by it as principal hereunder; and
(iv) all the federal and state (if any) issue and/or transfer
taxes payable upon the issue by or (in the case of treasury shares) transfer
from the Fund to the Principal Underwriter of any and all shares of the Fund
purchased by the Principal Underwriter hereunder.
(b) The Principal Underwriter agrees that, after the Prospectus and
periodic reports have been set up in type, it will bear the expense of printing
and distributing any copies thereof which are to be used in connection with the
offering of shares of the Fund to financial service firms or investors. The
Principal Underwriter further agrees that it will bear the expenses of
preparing, printing and distributing any other literature used by the Principal
Underwriter or furnished by it for use by financial service firms in connection
with the offering of the shares of the Fund for sale to the public and any
expenses of advertising in connection with such offering. The Fund agrees to pay
the expenses of registration and maintaining registration of its shares for sale
under federal and state securities laws, and, if necessary or advisable in
connection therewith, of qualifying the Trust or the Fund as a dealer or broker,
in such states as shall be selected by the Principal Underwriter and the fees
payable to each such state for continuing the qualification therein until the
Principal Underwriter notifies the Trust that it does not wish such
qualification continued.
(c) In addition, the Trust agrees, in accordance with the Fund's
Distribution Plan (the "Plan"), adopted pursuant to Rule 12b-1 under the 1940
Act with respect to shares, to make certain payments as follows. The Principal
Underwriter shall be entitled to be paid by the Fund a sales commission equal to
an amount not exceeding 6.25% of the price received by the Fund for each sale of
shares (excluding reinvestment of dividends and distributions), such payment to
be made in the manner set forth in this paragraph 5. The Principal Underwriter
shall also be entitled to be paid by the Fund a separate distribution fee
(calculated in accordance with paragraph 5(d)), such payment to be made in the
manner set forth and subject to the terms of this paragraph 5.
(d) The sales commissions and distribution fees referred to in
paragraph 5(c) shall be accrued and paid by the Fund in the following manner.
The Fund shall accrue daily an amount calculated at the rate of .75% per annum
of the daily net assets of the Fund, which net assets shall be computed as
described in paragraph 2. The daily amounts so accrued throughout the month
shall be paid to the Principal Underwriter on the last day of each month. The
amount of such daily accrual, as so calculated, shall first be applied and
charged to all unpaid sales commissions, and the balance, if any, shall then be
applied and charged to all unpaid distribution fees. No amount shall be accrued
with respect to any day on which there exist no outstanding uncovered
distribution charges of the Principal Underwriter. The amount of such uncovered
distribution charges shall be calculated daily. For purposes of this
calculation, distribution charges of the Principal Underwriter shall include (a)
the aggregate of all sales commissions which the Principal Underwriter has been
paid pursuant to this paragraph (d) plus all sales commissions which it is
entitled to be paid pursuant to paragraph 5(c) since inception of this Agreement
through and including the day next preceding the date of calculation, and (b) an
amount equal to the aggregate of all distribution fees referred to below which
the Principal Underwriter has been paid pursuant to this paragraph (d) plus all
such fees which it is entitled to be paid pursuant to paragraph 5(c) since
inception of this Agreement through and including the day next preceding the
date of calculation. From this sum (distribution charges) there shall be
subtracted (i) the aggregate amount paid or payable to the Principal Underwriter
pursuant to this paragraph (d) since inception of this Agreement through and
including the day next preceding the date of calculation and (ii) the aggregate
amount of all contingent deferred sales charges paid or payable to the Principal
Underwriter since inception of this Agreement through and including the day next
preceding the date of calculation. If the result of such subtraction is a
positive amount, a distribution fee [computed at the rate of 1% per annum above
the prime rate (being the base rate on corporate loans posted by at least 75% of
the nation's 30 largest banks) then being reported in the Eastern Edition of The
Wall Street Journal or if such prime rate is not so reported such other rate as
may be designated from time to time by vote or other action of a majority of (i)
those Trustees of the Trust who are not "interested persons" of the Trust (as
defined in the 1940 Act) and have no direct or indirect financial interest in
the operation of the Plan or any agreements related to it (the "Rule 12b-1
Trustees") and (ii) all of the Trustees then in office] shall be computed on
such amount and added to such amount, with the resulting sum constituting the
amount of outstanding uncovered distribution charges of the Principal
Underwriter with respect to such day for all purposes of this Agreement. If the
result of such subtraction is a negative amount, there shall exist no
outstanding uncovered distribution charges of the Principal Underwriter with
respect to such day and no amount shall be accrued or paid to the Principal
Underwriter with respect to such day. The aggregate amounts accrued and paid
pursuant to this paragraph (d) during any fiscal year of the Fund shall not
exceed .75% of the average daily net assets of the Fund for such year.
(e) The Principal Underwriter shall be entitled to receive all
contingent deferred sales charges paid or payable with respect to any day on
which there exist outstanding uncovered distribution charges of the Principal
Underwriter. The Fund shall be entitled to receive all remaining contingent
deferred sales charges paid or payable by shareholders with respect to any day
on which there exist no outstanding uncovered distribution charges of the
Principal Underwriter, provided that no such sales charge which would cause the
Fund to exceed the maximum applicable cap imposed thereon by paragraph (2) of
subsection (d) of Section 26 of Article III of the Rules of Fair Practice of the
National Association of Securities Dealers, Inc. shall be imposed.
(f) The persons authorized to direct the disposition of monies paid or
payable on behalf of the Fund pursuant to the Plan or this Agreement shall be
the President or any Vice President of the Trust. Such persons shall provide to
the Trust's Trustees and the Trustees shall review, at least quarterly, a
written report of the amounts so expended and the purposes for which such
expenditures were made.
(g) In addition to the payments to the Principal Underwriter provided
for in paragraph 5(d), the Fund may make payments of service fees to the
Principal Underwriter, Authorized Firms and other persons. The aggregate of such
payments during any fiscal year of the Fund shall not exceed .25% of the Fund's
average daily net assets for such year.
6. The Trust hereby authorizes the Principal Underwriter to repurchase,
upon the terms and conditions set forth in written instructions given by the
Trust to the Principal Underwriter from time to time, as agent of the Fund and
for its account, such shares of the Fund as may be offered for sale to the Fund
from time to time.
(a) The Principal Underwriter shall notify in writing IBT and TSSG at
the end of each business day, or as soon thereafter as the repurchases in each
pricing period have been compiled, of the number of shares repurchased for the
account of the Fund since the last previous report, together with the prices at
which such repurchases were made, and upon the request of any officer or Trustee
of the Trust shall furnish similar information with respect to all repurchases
made up to the time of the request on any day.
(b) The Trust reserves the right to suspend or revoke the foregoing
authorization at any time; unless otherwise stated, any such suspension or
revocation shall be effective forthwith upon receipt of notice thereof by an
officer of the Principal Underwriter, by telegraph or by written instrument from
an officer of the Trust duly authorized by its Trustees. In the event that the
authorization of the Principal Underwriter is, by the terms of such notice,
suspended for more than twenty-four hours or until further notice, the
authorization given by this paragraph 6 shall not be revived except by action of
a majority of the Trustees of the Trust.
(c) The Principal Underwriter shall have the right to terminate the
operation of this paragraph 6 upon giving to the Trust thirty (30) days' written
notice thereof.
(d) The Trust agrees to authorize and direct IBT to pay, for the
account of the Fund, the purchase price of any shares so repurchased against
delivery of the certificates in proper form for transfer to the Fund or for
cancellation by the Fund.
(e) The Principal Underwriter shall receive no commission in respect of
any repurchase of shares under the foregoing authorization and appointment as
agent, except for any sales commission, distribution fee or contingent deferred
sales charges payable under paragraph 5.
(f) The Trust agrees that the Fund will reimburse the Principal
Underwriter, from time to time on demand, for any reasonable expenses incurred
in connection with the repurchase of shares of the Fund pursuant to this
paragraph 6.
7. If, at any time during the existence of this Agreement, the Trust
shall deem it necessary or advisable in the best interests of the Fund that any
amendment of this Agreement be made in order to comply with the recommendations
or requirements of the Commission or other governmental authority or to obtain
any advantage under Massachusetts or federal tax laws, and shall notify the
Principal Underwriter of the form of amendment which it deems necessary or
advisable and the reasons therefor, and, if the Principal Underwriter declines
to assent to such amendment, the Trust may terminate this Agreement forthwith by
written notice to the Principal Underwriter. If, at any time during the
existence of its agreement upon request by the Principal Underwriter, the Trust
fails (after a reasonable time) to make any changes in its Declaration of Trust,
as amended, or in its methods of doing business which are necessary in order to
comply with any requirement of federal law or regulations of the Commission or
of a national securities association of which the Principal Underwriter is or
may be a member, relating to the sale of the shares of the Fund, the Principal
Underwriter may terminate this Agreement forthwith by written notice to the
Trust.
8. The term "net asset value" as used in this Agreement with reference
to the shares of the Fund shall have the same meaning as used in the Declaration
of Trust, as amended, and calculated in the manner referred to in paragraph 2
above.
9. (a) The Principal Underwriter is a corporation in the United States
organized under the laws of Massachusetts and holding membership in the National
Association of Securities Dealers, Inc., a securities association registered
under Section 15A of the Securities Exchange Act of 1934, as amended from time
to time, and during the life of this Agreement will continue to be so resident
in the United States, so organized and a member in good standing of said
Association. The Principal Underwriter will comply with the Trust's Declaration
of Trust and By-Laws, and the 1940 Act and the rules promulgated thereunder,
insofar as they are applicable to the Principal Underwriter.
(b) The Principal Underwriter shall maintain in the United States and
preserve therein for such period or periods as the Commission shall prescribe by
rules and regulations applicable to it as Principal Underwriter of an open-end
investment company registered under the 1940 Act such accounts, books and other
documents as are necessary or appropriate to record its transactions with the
Fund. Such accounts, books and other documents shall be subject at any time and
from time to time to such reasonable periodic, special and other examinations by
the Commission or any member or representative thereof as the Commission may
prescribe. The Principal Underwriter shall furnish to the Commission within such
reasonable time as the Commission may prescribe copies of or extracts from such
records which may be prepared without effort, expense or delay as the Commission
may by order require.
10. This Agreement shall continue in force indefinitely until
terminated as in this Agreement above provided, except that:
(a) this Agreement shall remain in effect for one year from the date of
its execution and shall continue in full force and effect indefinitely
thereafter, but only so long as such continuance is specifically approved at
least annually (i) by the vote of a majority of the Trustees of the Trust who
are not "interested persons" of the Trust and who have no direct or indirect
interest in the operation of the Plan or this Agreement (the "Rule 12b-1
Trustees") cast in person at a meeting called for the purpose of voting on such
approval, and (ii) by the Trustees of the Trust or by vote of a majority of the
outstanding voting securities of the Fund;
(b) this Agreement may be terminated at any time by vote of a majority
of the Rule 12b-1 Trustees or by vote of a majority of the outstanding voting
securities of the Fund on not more than sixty (60) days' notice to the Principal
Underwriter. The Principal Underwriter shall be entitled to receive all
contingent deferred sales charges paid or payable with respect to any day
subsequent to the termination of this Agreement;
(c) the Principal Underwriter shall have the right to terminate this
Agreement on six (6) months' written notice thereof given in writing to the
Fund; and
(d) the Trust shall have the right to terminate this Agreement
forthwith in the event that it shall have been established by a court of
competent jurisdiction that the Principal Underwriter or any director or officer
of the Principal Underwriter has taken any action which results in a breach of
the covenants set out in paragraph 9 hereof.
11. In the event of the assignment of this Agreement by the Principal
Underwriter, this Agreement shall automatically terminate.
12. Any notice under this Agreement shall be in writing, addressed and
delivered, or mailed postage paid, to the other party, at such address as such
other party may designate for the receipt of such notices. Until further notice
to the other party, it is agreed that the record address of the Trust and that
of the Principal Underwriter, shall be 24 Federal Street, Boston, Massachusetts
02110.
13. The services of the Principal Underwriter to the Fund hereunder are
not to be deemed to be exclusive, the Principal Underwriter being free to (a)
render similar service to, and to act as principal underwriter in connection
with the distribution of shares of, other series of the Trust or other
investment companies, and (b) engage in other business and activities from time
to time.
14. The terms "vote of a majority of the outstanding voting
securities," "assignment" and "interested persons," when used herein, shall have
the respective meanings specified in the 1940 Act, subject, however, to such
exemptions as may be granted by the Commission by any rule, regulation or order.
15. The Principal Underwriter expressly acknowledges the provision in
the Trust's Declaration of Trust limiting the personal liability of the
shareholders of the Fund or the Trustees of the Trust. The Principal Underwriter
hereby agrees that it shall have recourse to the Trust or the Fund for payment
of claims or obligations as between the Trust or the Fund and the Principal
Underwriter arising out of this Agreement and shall not seek satisfaction from
the shareholders or any shareholder of the Trust or from the Trustees or any
Trustee of the Trust. The Fund shall not be responsible for obligations of any
other series of the Trust.
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement
on the 10th day of November, 1995.
EATON VANCE GROWTH TRUST
(on behalf of EV CLASSIC
INFORMATION AGE FUND)
By /s/James B. Hawkes
---------------------------
President
EATON VANCE DISTRIBUTORS INC.
By /s/H. Day Brigham, Jr.
---------------------------
Vice President
<PAGE>
EXHIBIT 99.(6)(b)
SELLING GROUP AGREEMENT
Between: EATON VANCE DISTRIBUTORS, INC.
24 Federal Street
Boston, MA 02110
and
- --------------------
- --------------------
- --------------------
- --------------------
As the principal underwriter of the shares of the Eaton Vance Group of Funds,
we, Eaton Vance Distributors, Inc., agree to sell to you shares of each of the
Funds, subject to any limitations imposed by any of the Funds and to
confirmation by us in each instance of such sale. By your acceptance hereof, you
agree to the following terms and conditions:
1. (a) In the case of a Fund having an initial sales charge (an "SC Fund") (i)
you shall sell such shares at the applicable public offering price described
in the then-current prospectus of the Fund; and (ii) your discount in
respect of such sale shall be as set forth in the applicable schedule of
dealer discounts issued by us and in effect at the time of the sale by us to
you of such shares. Such schedule shall be subject to change or
discontinuance by us from time to time upon notice to you.
(b) In the case of a Fund having a contingent deferred sales charge or early
withdrawal charge (a "CDSC Fund") (i) you shall sell such shares at the
applicable net asset value described in the then-current prospectus of the
Fund; and (ii) your sales commission shall be as set forth in the schedule
of sales commissions issued by us and in effect at the time of the sale by
us to you of such shares. Such schedule is subject to change or
discontinuance by us from time to time upon notice to you.
(c) In addition to the dealer discount, if any, or sales commission, if any,
paid or allowed pursuant to the foregoing provisions of this section, we
may, at our expense, provide additional promotional incentives or payments
to dealers. Any such payment shall be made in the manner set forth in the
schedule of distribution (or service) plan payments issued by us and in
effect at the time such payment is made. Such schedule is subject to change
or discontinuance by us from time to time upon notice to you.
(d) Each sale is always made subject to confirmation by us at the public
offering price next computed after receipt of the order.
2. (a) You hereby agree (i) to exercise your best efforts to find purchasers
for the shares of the Funds, (ii) to furnish to each person to whom any sale
is made a copy of the then-current prospectus of the applicable Fund in
accordance with and at the times required by all applicable laws, including
without limitation the Securities Act of 1933, as amended, and any state
securities laws, (iii) to transmit to us promptly upon receipt any and all
orders received by you, and (iv) to pay to us the offering price, less any
dealer discount to which you are entitled, with in three (3) business days
of our acceptance of your order or such shorter time as may be required by
law. If such payment is not received within said time period, we reserve the
right, without prior notice, to cancel the sale, or at our option to return
the shares to the issuer for redemption or repurchase. You agree that, in
the latter case, we shall have the right to hold you responsible for any
loss resulting to us. Should payment be made by check on your local bank,
liquidation of shares may be delayed pending clearance of your check. You
agree to issue confirmations promptly for all accepted purchase orders for
accounts held in street name. All sales shall be subject to our
confirmation. All orders are subject to acceptance or rejection by us in our
sole discretion, and by the Funds in their sole discretion. The procedures
stated herein shall be subject to instructions which we may issue from time
to time.
(b) You appoint the transfer agent for each Fund as your agent to execute
customers' purchases of Fund shares sold in accordance with the terms and
provisions of any account, program, plan, or service established or used by
your customers and to confirm each such purchase to your customers on your
behalf, and you guarantee the legal capacity of your customers so purchasing
such shares and any co-owners of such shares. All sales of Fund shares sold
through you hereunder shall be deemed to be made in Boston, Massachusetts,
and title to such shares shall pass in Boston, Massachusetts.
3. We will furnish you with such number of copies of the then-current
prospectus and statement of additional information of any of the Funds, and
the printed information referred to in paragraph 5 below issued as
supplemental thereto, as you may reasonably request.
4. Each of us represents to the other that it is a broker-dealer registered
under the Securities Exchange Act of 1934, as amended, and a member of the
National Association of Securities Dealers, Inc. ("NASD"). In addition, you
and we agree as follows:
(a) You shall not purchase Fund shares from us except for the purpose of
covering purchase orders already received by you from your customers.
(b) You shall not withhold placing customers' orders for Fund shares so as
to profit yourself as a result of such withholding (e.g., by virtue of a
change in the net asset value from that used in determining the offering
price to your customers). (c) If shares of an SC Fund are repurchased by the
issuing Fund or by us for the account of such Fund or are tendered for
redemption within seven business days after confirmation by us of your
original purchase order for such shares, you shall forthwith refund to us
the full discount allowed to you on the original sale. We shall use
reasonable efforts to notify you of such repurchase or redemption within ten
business days after the date when the redemption order is received by the
Fund in good order. Termination of this agreement will not affect your
obligations under this subsection.
(d) If shares of a CDSC Fund other than Eaton Vance Prime Rate Reserves or
EV Classic Senior Floating-Rate Fund are repurchased by the issuing Fund or
by us for the account of such Fund or are tendered for redemption within
seven business days after confirmation by us of the original purchase order
for such shares, you shall forthwith refund to us the full sales commission
paid to you on the original sale. We shall use reasonable efforts to notify
you of such repurchase or redemption within ten business days after the date
when the redemption order is received by the Fund in good order. Termination
of this agreement will not affect your obligations under this subsection.
(e) You will not, as principal, purchase Fund shares from a record holder at
a price lower than the bid price next quoted by or for the issuing Fund.
(f) You agree that you will not make a secondary market in the shares of
Eaton Vance Prime Rate Reserves or EV Classic Senior Floating-Rate Fund, and
you will not purchase or hold shares of either Fund for purposes of resale
to your customers.
(g) Nothing in this agreement shall prevent you from selling Fund shares for
the account of a record owner to us or the issuing Fund and charging the
investor a reasonable charge for handling the transaction, provided you
disclose to such record owner that direct redemption of the shares can be
accomplished by the record owner without incurring such charge.
(h) You will comply with all applicable laws, rules, and regulations,
including the applicable provisions of the Securities Act of 1933, as
amended, the applicable rules of the NASD, and the applicable rules and
regulations of any jurisdiction in which you sell, directly or indirectly,
any shares. You agree not to offer for sale or sell the shares of any Fund
in any jurisdiction in which the shares are not qualified for sale or in
which you are not qualified as a broker-dealer.
5. You will offer and sell the shares only in accordance with the terms and
conditions of the current prospectus and statement of additional information
of the applicable Fund. In offering and selling shares under this agreement,
you shall be acting as principal, and nothing herein shall be construed to
constitute you or any of your agents, employees, or representatives as our
agent or employee, or as an agent or employee of the Funds. You are not
authorized to make any representations on our behalf. No person is
authorized to make any representations concerning Fund shares except those
contained in the then-current prospectus and statement of additional
information of the Fund in question and in such printed information
subsequently issued to you by us or by the Funds for the purpose as
supplemental to such prospectus and statement of additional information. In
buying Fund shares from us or selling shares to us hereunder, you shall rely
solely on the representations contained in the appropriate prospectus and
statement of additional information and in the supplemental information
mentioned in the preceding sentence. You agree that you will not use any
other offering materials for the Funds without our written consent.
6. We reserve the right in our discretion, without notice, to suspend sales or
to withdraw the offering of Fund shares, in whole or in part, or to make a
limited offering of Fund shares. Either of us may cancel this agreement upon
ten days' written notice to the other. We may terminate this agreement for
cause upon the violation by you of any of the provisions hereof, such
termination to become effective on the date such notice of termination is
mailed to you.
Upon written notice to you, we may change or amend any provision of this
agreement or restate this agreement in its entirety. Upon written notice to
you, we may change or discontinue any schedule or schedules of dealer
discounts, of sales commissions and of distribution plan payments from time
to time and we may issue a new or replacement schedule or schedules of
dealer discounts, of sales commissions, or of distribution plan payments.
You hereby agree that you shall have no right or interest in any type or
level of discount, sales commission, distribution assistance payment, or
service fee, or right to expect or to rely upon the continuance in effect of
any thereof, and that you shall have no claim against us or any Fund by
virtue of any change or diminution in the rate or amount of, or
discontinuance of, any discount, sales commission, distribution assistance
payment or service fee in connection with shares of any Fund. Upon your
ceasing to be a member of the NASD, this agreement shall automatically
terminate.
7. As used herein, the following terms shall have the meaning hereinafter set
forth (unless a different meaning is plainly required by the context):
(a) "Eaton Vance Group of Funds" shall mean the investment companies the
shares of which from time to time shall be offered by us as principal
underwriter for sale to you hereunder and which are designated by us as such
from time to time by notice to you.
(b) "Fund" shall mean any one of the Eaton Vance Group of Funds.
8. As general distributor of the Funds, we shall have full authority to take
such action as we may deem advisable in respect of all matters pertaining to
the distribution of shares. We shall not be under any obligation to you
except for obligations expressly assumed by us in this contract.
<PAGE>
9. All communications to us should be sent to the above address. Any notice to
you shall be duly given if mailed or telegraphed to you at the address
specified by you below. If you are already a member of our selling group,
this agreement amends and restates our existing agreement and shall become
binding on you and us on the date of your first order for shares of any Fund
sold to you by us subsequent to our furnishing a copy of this agreement to
you. If you are about to become a new member of our selling group, this
agreement shall become binding upon receipt by us in Boston of a counterpart
hereof duly accepted and signed by you. This agreement shall be construed in
accordance with the laws of Massachusetts (other than conflicts of laws
rules).
EATON VANCE DISTRIBUTORS, INC.
Dated: __________________ By: _______________________________
ACCEPTED:
Firm: ______________________________________________________________
By: _______________________________________________________________
Authorized Representative
Address: ___________________________________________________________
<PAGE>
BANK SERVICE AGREEMENT
Between: EATON VANCE DISTRIBUTORS, INC.
24 Federal Street
Boston, MA 02110
and
- --------------------
- --------------------
- --------------------
- --------------------
In connection with your providing various services to your customers, you desire
to make available to your customers, as agent for such customers, shares of the
Eaton Vance Group of Funds. As the principal underwriter of the shares of the
Eaton Vance Group of Funds, we, Eaton Vance Distributors, Inc., agree to make
shares of the Funds available upon the following terms and conditions:
1. (a) This Agreement relates to sales of shares to your customers, in respect
of which sales you act as agent for your customers.
(b) All shares will be sold at the public offering price applicable to each
order, except as otherwise provided in the Fund's then-current prospectus,
and all sales of Fund shares shall be subject to applicable minimum purchase
amounts, as provided in the Fund's then-current prospectus. The procedures
relating to the handling of orders shall be subject to instructions which we
may issue from time to time. All orders are subject to acceptance or
rejection by us in our sole discretion, and by the Funds in their sole
discretion.
(c) In the case of shares of a Fund having an initial sales charge (an "SC
Fund"), you will remit to the Fund, on or before the settlement date of any
sale of shares of the Fund in connection with which you serve as agent, an
amount equal to the public offering price of the shares on the basis of
which the shares were sold, less an amount equal to an agency fee, the
amount of which shall be determined in accordance with the applicable
schedule of agency fees issued by us and in effect at the time of the sale
of such shares.
(d) In the case of shares of a Fund having a contingent deferred sales
charge or early withdrawal charge (a "CDSC Fund"), (i) you will remit to the
Fund, on or before the settlement date of any sale of shares of the Fund in
connection with which you serve as agent, an amount equal to the public
offering price of the shares on the basis of which the shares were sold, and
(ii) we will thereupon pay you an agency fee in respect of such shares at
such rate or amount as may be set forth in the applicable schedule of agency
fees issued by us and in effect at the time of the sale of such shares.
(Each of such schedule and of the schedule of agency fees referred to in the
immediately preceding paragraph (c) is referred to herein as a "Fee
Schedule".)
(e) We may change or discontinue any Fee Schedule at any time upon notice to
you, and we may issue a new or replacement Fee Schedule at any time or from
time to time. You agree that you will not be entitled to receive any agency
fees, selling concessions, or other amounts in respect of the sale of any
shares in connection with which you serve as agent other than those set out
from time to time on the applicable Fee Schedule.
(f) Each sale is always made subject to confirmation by us at the public
offering price next computed after receipt of the order.
2. (a) You hereby agree (i) to furnish to each person to whom any sale is made
a copy of the then-current prospectus of the applicable Fund in accordance
with and at the times required by all applicable laws, including without
limitation the Securities Act of 1933, as amended, and any state securities
laws, (ii) to transmit to us promptly upon receipt any and all orders
received by you, and (iii) to pay to us the offering price, less any agency
fee to which you are entitled, within three (3) business days of our
acceptance of your order or such shorter time as may be required by law. If
such payment is not received within said time period, we reserve the right,
without prior notice, to cancel the sale, or at our option to return the
shares to the issuer for redemption or repurchase. You agree that, in the
latter case, we shall have the right to hold you responsible for any loss
resulting to us. Should payment be made by check, liquidation of shares may
be delayed pending clearance of your check. You agree to issue confirmations
promptly for all accepted purchase orders for accounts held in street name.
All sales shall be subject to our confirmation. The procedures stated herein
shall be subject to instructions which we may issue from time to time.
(b) You appoint the transfer agent for each Fund as your agent to execute
customers' purchases of Fund shares sold in accordance with the terms and
provisions of any account, program, plan, or service established or used by
your customers and to confirm each such purchase to your customers on your
behalf, and you guarantee the legal capacity of your customers so purchasing
such shares and any co-owners of such shares. All sales of Fund shares sold
through you hereunder shall be deemed to be made in Boston, Massachusetts,
and title to such shares shall pass in Boston, Massachusetts.
3. You represent and warrant to us that (i) you are a "bank" as such term is
defined in Section 3(a)(6) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"); (ii) you are duly organized, validly existing,
and in good standing under the laws of the jurisdiction in which you are
organized; (iii) all necessary and appropriate authorizations for your
lawful execution of this Agreement and your performance of your obligations
hereunder have been obtained; and (iv) this agreement constitutes a valid
and binding agreement, enforceable against you in accordance with its terms.
You agree to notify us promptly in the event you shall cease to be a "bank",
as such term is defined in Section 3(a)(6) of the Exchange Act; this
agreement shall terminate automatically upon our receipt of such notice,
unless we notify you otherwise.
4. We will furnish you with such number of copies of the then-current
prospectus and statement of additional information of any of the Funds, and
the printed information referred to in paragraph 6 below issued as
supplemental thereto, as you may reasonably request.
5. While, as a bank, you are not a broker-dealer or a member of the National
Association of Securities Dealers, Inc., you nonetheless agree as follows:
(a) You shall not place orders for shares of the Fund except for the purpose
of covering purchase orders already received by you from your customers.
(b) You shall not withhold placing customers' orders for Fund shares so as
to profit yourself as a result of such withholding (e.g., by virtue of a
change in the net asset value from that used in determining the offering
price to your customers).
(c) If shares of an SC Fund are repurchased by the issuing Fund or by us for
the account of such Fund or are tendered for redemption within seven
business days after confirmation by us of your original purchase order for
such shares, you shall forthwith refund to us the full agency fee retained
or received by you on the original sale. We shall use reasonable efforts to
notify you of such repurchase or redemption within ten business days after
the date when the redemption order is received by the Fund in good order.
Termination of this agreement will not affect your obligations under this
subsection.
(d) If shares of a CDSC Fund other than Eaton Vance Prime Rate Reserves or
EV Classic Senior Floating-Rate Fund are repurchased by the issuing Fund or
by us for the account of such Fund or are tendered for redemption within
seven business days after confirmation by us of the original purchase order
for such shares, you shall forthwith refund to us the full agency fee
retained or received by you on the original sale. We shall use reasonable
efforts to notify you of such repurchase or redemption within ten business
days after the date when the redemption order is received by the Fund in
good order. Termination of this agreement will not affect your obligations
under this subsection.
(e) You will not, as principal, purchase Fund shares from a record holder at
a price lower than the bid price next quoted by or for the issuing Fund.
(f) You agree that you will not make a secondary market in the shares of
Eaton Vance Prime Rate Reserves or EV Classic Senior Floating-Rate Fund, and
you will not purchase or hold shares of either Fund for purposes of resale
to your customers.
(g) Nothing in this agreement shall prevent you from selling Fund shares for
the account of a record owner to us or the issuing Fund and charging the
investor a reasonable charge for handling the transaction, provided you
disclose to such record owner that direct redemption of the shares can be
accomplished by the record owner without incurring such charge.
(h) You will comply with all applicable laws, rules, and regulations,
including the applicable provisions of the Securities Act of 1933, as
amended, the applicable rules of the NASD, and the applicable rules and
regulations of any jurisdiction in which you sell, directly or indirectly,
any shares. You agree not to offer for sale or sell the shares of any Fund
in any jurisdiction in which the shares are not qualified for sale or in
which you are not qualified as a broker-dealer.
6. You will offer the shares only in accordance with the terms and conditions
of the current prospectus and statement of additional information of the
applicable Fund. Nothing herein shall be construed to constitute you or any
of your agents, employees, or representatives as our agent or employee, or
as an agent or employee of the Funds. You are not authorized to make any
representations on our behalf. No person is authorized to make any
representations concerning Fund shares except those contained in the
then-current prospectus and statement of additional information of the Fund
in question and in such printed information subsequently issued to you by us
or by the Funds for the purpose as supplemental to such prospectus and
statement of additional information. You shall rely solely on the
representations contained in the appropriate prospectus and statement of
additional information and in the supplemental information mentioned in the
preceding sentence. You agree that you will not use any other offering
materials for the Funds without our written consent.
7. You agree that either you or a clearing broker through which you clear
transactions for your customers will comply with the recordkeeping
requirements of Section 17(a) of the Securities Exchange Act of 1934, as
amended, and any rules or regulations thereunder.
8. We reserve the right in our discretion, without notice, to suspend sales or
to withdraw the offering of Fund shares, in whole or in part, or to make a
limited offering of Fund shares. Either of us may cancel this agreement upon
ten days' written notice to the other. We may terminate this agreement for
cause upon the violation by you of any of the provisions hereof, such
termination to become effective on the date such notice of termination is
mailed to you.
Upon written notice to you, we may change or amend any provision of this
agreement or restate this agreement in its entirety. Upon written notice to
you, we may change or discontinue any Fee Schedule or other schedule or
schedules of agency fees, of sales commissions, or of distribution plan
payments from time to time, and we may issue a new or replacement schedule
or schedules of agency fees, of sales commissions, or of distribution plan
payments. You hereby agree that you shall have no right or interest in any
type or level of agency fee, sales commission, distribution assistance
payment, or service fee, or right to expect or to rely upon the continuance
in effect of any thereof, and that you shall have no claim against us or any
Fund by virtue of any change or diminution in the rate or amount of, or
discontinuance of, any agency fee, sales commission, distribution assistance
payment, or service fee in connection with shares of any Fund.
9. As used herein, the following terms shall have the meaning hereinafter set
forth (unless a different meaning is plainly required by the context):
(a) "Eaton Vance Group of Funds" shall mean the investment companies the
shares of which from time to time shall be made available by us hereunder
and which are designated by us as such from time to time by notice to you.
(b) "Fund" shall mean any one of the Eaton Vance Group of Funds.
10. As general distributor of the Funds, we shall have full authority to take
such action as we may deem advisable in respect of all matters pertaining to
the distribution of shares. We shall not be under any obligation to you
except for obligations expressly assumed by us in this contract.
11. All communications to us should be sent to the above address. Any notice to
you shall be duly given if mailed or telegraphed to you at the address
specified by you below. If we have already entered into an agreement in
respect of your sale of shares of the Funds as agent, this agreement amends
and restates our existing agreement and shall become binding on you and us
on the date of your first order for shares of any Fund by you subsequent to
our furnishing a copy of this agreement to you. If you have not previously
entered into such an agreement, this agreement shall become binding upon
receipt by us in Boston of a counterpart hereof duly accepted and signed by
you. This agreement shall be construed in accordance with the laws of
Massachusetts (other than conflicts of laws rules).
EATON VANCE DISTRIBUTORS, INC.
Dated: _______________________ By: __________________________________
ACCEPTED:
Firm: __________________________________________________________________________
By: __________________________________________________________________________
Authorized Representative
Address: ______________________________________________________________________
<PAGE>
SERVICE AGREEMENT
Between: EATON VANCE DISTRIBUTORS, INC.
24 Federal Street
Boston, MA 02110
and
- --------------------
- --------------------
- --------------------
- --------------------
In connection with your providing various services to your customers, you desire
to make available to your customers, as agent for such customers, shares of the
Eaton Vance Group of Funds. As the principal underwriter of the shares of the
Eaton Vance Group of Funds, we, Eaton Vance Distributors, Inc., agree to make
shares of the Funds available upon the following terms and conditions:
1. (a) This Agreement relates to sales of shares to your customers, in respect
of which sales you act as agent for your customers.
(b) All shares will be sold at the public offering price applicable to each
order, except as otherwise provided in the Fund's then-current prospectus,
and all sales of Fund shares shall be subject to applicable minimum purchase
amounts, as provided in the Fund's then-current prospectus. The procedures
relating to the handling of orders shall be subject to instructions which we
may issue from time to time. All orders are subject to acceptance or
rejection by us in our sole discretion, and by the Funds in their sole
discretion.
(c) In the case of shares of a Fund having an initial sales charge (an "SC
Fund"), you will remit to the Fund, on or before the settlement date of any
sale of shares of the Fund in connection with which you serve as agent, an
amount equal to the public offering price of the shares on the basis of
which the shares were sold, less an amount equal to an agency fee, the
amount of which shall be determined in accordance with the applicable
schedule of agency fees issued by us and in effect at the time of the sale
of such shares.
(d) In the case of shares of a Fund having a contingent deferred sales
charge or early withdrawal charge (a "CDSC Fund"), (i) you will remit to the
Fund, on or before the settlement date of any sale of shares of the Fund in
connection with which you serve as agent, an amount equal to the public
offering price of the shares on the basis of which the shares were sold, and
(ii) we will thereupon pay you an agency fee in respect of such shares at
such rate or amount as may be set forth in the applicable schedule of agency
fees issued by us and in effect at the time of the sale of such shares.
(Each of such schedule and of the schedule of agency fees referred to in the
immediately preceding paragraph (c) is referred to herein as a "Fee
Schedule".)
(e) We may change or discontinue any Fee Schedule at any time upon notice to
you, and we may issue a new or replacement Fee Schedule at any time or from
time to time. You agree that you will not be entitled to receive any agency
fees, selling concessions, or other amounts in respect of the sale of any
shares in connection with which you serve as agent other than those set out
from time to time on the applicable Fee Schedule.
(f) Each sale is always made subject to confirmation by us at the public
offering price next computed after receipt of the order.
2. (a) You hereby agree (i) to furnish to each person to whom any sale is made
a copy of the then-current prospectus of the applicable Fund in accordance
with and at the times required by all applicable laws, including without
limitation the Securities Act of 1933, as amended, and any state securities
laws, (ii) to transmit to us promptly upon receipt any and all orders
received by you, and (iii) to pay to us the offering price, less any agency
fee to which you are entitled, within three (3) business days of our
acceptance of your order or such shorter time as may be required by law. If
such payment is not received within said time period, we reserve the right,
without prior notice, to cancel the sale, or at our option to return the
shares to the issuer for redemption or repurchase. You agree that, in the
latter case, we shall have the right to hold you responsible for any loss
resulting to us. Should payment be made by check on your local bank,
liquidation of shares may be delayed pending clearance of your check. You
agree to issue confirmations promptly for all accepted purchase orders for
accounts held in street name. All sales shall be subject to our
confirmation. The procedures stated herein shall be subject to instructions
which we may issue from time to time.
(b) You appoint the transfer agent for each Fund as your agent to execute
customers' purchases of Fund shares sold in accordance with the terms and
provisions of any account, program, plan, or service established or used by
your customers and to confirm each such purchase to your customers on your
behalf, and you guarantee the legal capacity of your customers so purchasing
such shares and any co-owners of such shares. All sales of Fund shares sold
through you hereunder shall be deemed to be made in Boston, Massachusetts,
and title to such shares shall pass in Boston, Massachusetts.
3. We will furnish you with such number of copies of the then-current
prospectus and statement of additional information of any of the Funds, and
the printed information referred to in paragraph 5 below issued as
supplemental thereto, as you may reasonably request.
4. Each of us represents to the other that it is a broker-dealer registered
under the Securities Exchange Act of 1934, as amended, and a member of the
National Association of Securities Dealers, Inc. ("NASD"). In addition, you
and we agree as follows:
(a) You shall not place orders for shares of the Fund except for the purpose
of covering purchase orders already received by you from your customers.
(b) You shall not withhold placing customers' orders for Fund shares so as
to profit yourself as a result of such withholding (e.g., by virtue of a
change in the net asset value from that used in determining the offering
price to your customers).
(c) If shares of an SC Fund are repurchased by the issuing Fund or by us for
the account of such Fund or are tendered for redemption within seven
business days after confirmation by us of your original purchase order for
such shares, you shall forthwith refund to us the full agency fee retained
or received by you on the original sale. We shall use reasonable efforts to
notify you of such repurchase or redemption within ten business days after
the date when the redemption order is received by the Fund in good order.
Termination of this agreement will not affect your obligations under this
subsection.
(d) If shares of a CDSC Fund other than Eaton Vance Prime Rate Reserves or
EV Classic Senior Floating-Rate Fund are repurchased by the issuing Fund or
by us for the account of such Fund or are tendered for redemption within
seven business days after confirmation by us of the original purchase order
for such shares, you shall forthwith refund to us the full agency fee
retained or received by you on the original sale. We shall use reasonable
efforts to notify you of such repurchase or redemption within ten business
days after the date when the redemption order is received by the Fund in
good order. Termination of this agreement will not affect your obligations
under this subsection.
(e) You will not, as principal, purchase Fund shares from a record holder at
a price lower than the bid price next quoted by or for the issuing Fund.
(f) You agree that you will not make a secondary market in the shares of
Eaton Vance Prime Rate Reserves or EV Classic Senior Floating-Rate Fund, and
you will not purchase or hold shares of either Fund for purposes of resale
to your customers.
(g) Nothing in this agreement shall prevent you from selling Fund shares for
the account of a record owner to us or the issuing Fund and charging the
investor a reasonable charge for handling the transaction, provided you
disclose to such record owner that direct redemption of the shares can be
accomplished by the record owner without incurring such charge.
(h) You will comply with all applicable laws, rules, and regulations,
including the applicable provisions of the Securities Act of 1933, as
amended, the applicable rules of the NASD, and the applicable rules and
regulations of any jurisdiction in which you sell, directly or indirectly,
any shares. You agree not to offer for sale or sell the shares of any Fund
in any jurisdiction in which the shares are not qualified for sale or in
which you are not qualified as a broker-dealer.
5. You will offer the shares only in accordance with the terms and conditions
of the current prospectus and statement of additional information of the
applicable Fund. Nothing herein shall be construed to constitute you or any
of your agents, employees, or representatives as our agent or employee, or
as an agent or employee of the Funds. You are not authorized to make any
representations on our behalf. No person is authorized to make any
representations concerning Fund shares except those contained in the
then-current prospectus and statement of additional information of the Fund
in question and in such printed information subsequently issued to you by us
or by the Funds for the purpose as supplemental to such prospectus and
statement of additional information. You shall rely solely on the
representations contained in the appropriate prospectus and statement of
additional information and in the supplemental information mentioned in the
preceding sentence. You agree that you will not use any other offering
materials for the Funds without our written consent.
6. You agree that either you or a clearing broker through which you clear
transactions for your customers will comply with the recordkeeping
requirements of Section 17(a) of the Securities Exchange Act of 1934, as
amended, and any rules or regulations thereunder.
7. We reserve the right in our discretion, without notice, to suspend sales or
to withdraw the offering of Fund shares, in whole or in part, or to make a
limited offering of Fund shares. Either of us may cancel this agreement upon
ten days' written notice to the other. We may terminate this agreement for
cause upon the violation by you of any of the provisions hereof, such
termination to become effective on the date such notice of termination is
mailed to you.
Upon written notice to you, we may change or amend any provision of this
agreement or restate this agreement in its entirety. Upon written notice to
you, we may change or discontinue any Fee Schedule or other schedule or
schedules of agency fees, of sales commissions, or of distribution plan
payments from time to time, and we may issue a new or replacement schedule
or schedules of agency fees, of sales commissions, or of distribution plan
payments. You hereby agree that you shall have no right or interest in any
type or level of agency fee, sales commission, distribution assistance
payment, or service fee, or right to expect or to rely upon the continuance
in effect of any thereof, and that you shall have no claim against us or any
Fund by virtue of any change or diminution in the rate or amount of, or
discontinuance of, any agency fee, sales commission, distribution assistance
payment, or service fee in connection with shares of any Fund. Upon your
ceasing to be a member of the NASD, this agreement shall automatically
terminate.
8. As used herein, the following terms shall have the meaning hereinafter set
forth (unless a different meaning is plainly required by the context):
(a) "Eaton Vance Group of Funds" shall mean the investment companies the
shares of which from time to time shall be made available by us hereunder
and which are designated by us as such from time to time by notice to you.
(b) "Fund" shall mean any one of the Eaton Vance Group of Funds.
9. As general distributor of the Funds, we shall have full authority to take
such action as we may deem advisable in respect of all matters pertaining to
the distribution of shares. We shall not be under any obligation to you
except for obligations expressly assumed by us in this contract.
10. All communications to us should be sent to the above address. Any notice to
you shall be duly given if mailed or telegraphed to you at the address
specified by you below. If we have already entered into an agreement in
respect of your sale of shares of the Funds as agent, this agreement amends
and restates our existing agreement and shall become binding on you and us
on the date of your first order for shares of any Fund by you subsequent to
our furnishing a copy of this agreement to you. If you have not previously
entered into such an agreement, this agreement shall become binding upon
receipt by us in Boston of a counterpart hereof duly accepted and signed by
you. This agreement shall be construed in accordance with the laws of
Massachusetts (other than conflicts of laws rules).
EATON VANCE DISTRIBUTORS, INC.
Dated: _______________________ By: __________________________________
ACCEPTED:
Firm: __________________________________________________________________________
By: __________________________________________________________________________
Authorized Representative
Address: ______________________________________________________________________
<PAGE>
EXHIBIT 99.(8)(b)
AMENDMENT TO
MASTER CUSTODIAN AGREEMENT
BETWEEN
EATON VANCE GROUP OF FUNDS
AND
INVESTORS BANK & TRUST COMPANY
This Amendment, dated as of October 23, 1995, is made to the MASTER
CUSTODIAN AGREEMENT (the "Agreement") between each investment company for which
Eaton Vance Management acts as investment adviser or administrator which has
adopted the Agreement (the "Funds") and Investors Bank & Trust Company (the
"Custodian") pursuant to Section 10 of the Agreement.
The Funds and the Custodian agree that Section 10 of the Agreement
shall, as of October 23, 1995, be amended to read as follows:
Unless otherwise defined herein, terms which are defined in the
Agreement and used herein are so used as so defined.
10. Effective Period, Termination and Amendment; Successor Custodian
This Agreement shall become effective as of its execution, shall
continue in full force and effect until terminated by either party after August
31, 2000 by an instrument in writing delivered or mailed, postage prepaid to the
other party, such termination to take effect not sooner than sixty (60) days
after the date of such delivery or mailing; provided, that the Fund may at any
time by action of its Board, (i) substitute another bank or trust company for
the Custodian by giving notice as described above to the Custodian in the event
the Custodian assigns this Agreement to another party without consent of the
noninterested Trustees of the Funds, or (ii) immediately terminate this
Agreement in the event of the appointment of a conservator or receiver for the
Custodian by the Federal Deposit Insurance Corporation or by the Banking
Commissioner of The Commonwealth of Massachusetts or upon the happening of a
like event at the direction of an appropriate regulatory agency or court of
competent jurisdiction. Upon termination of the Agreement, the Fund shall pay to
the Custodian such compensation as may be due as of the date of such termination
(and shall likewise reimburse the Custodian for its costs, expenses and
disbursements).
This Agreement may be amended at any time by the written agreement of
the parties hereto. If a majority of the non-interested trustees of any of the
Funds determines that the performance of the Custodian has been unsatisfactory
or adverse to the interests of shareholders of any Fund or Funds or that the
terms of the Agreement are no longer consistent with publicly available industry
standards, then the Fund or Funds shall give written notice to the Custodian of
such determination and the Custodian shall have 60 days to (1) correct such
performance to the satisfaction of the non-interested trustees or (2)
renegotiate terms which are satisfactory to the non-interested trustees of the
Funds. If the conditions of the preceding sentence are not met then the Fund or
Funds may terminate this Agreement on sixty (60) days written notice.
The Board of the Fund shall, forthwith, upon giving or receiving notice
of termination of this Agreement, appoint as successor custodian, a bank or
trust company having the qualifications required by the Investment Company Act
of 1940 and the Rules thereunder. The Bank, as Custodian, Agent or otherwise,
shall, upon termination of the Agreement, deliver to such successor custodian,
all securities then held hereunder and all funds or other properties of the Fund
deposited with or held by the Bank hereunder and all books of account and
records kept by the Bank pursuant to this Agreement, and all documents held by
the Bank relative thereto. In the event that no written order designating a
successor custodian shall have been delivered to the Bank on or before the date
when such termination shall become effective, then the Bank shall not deliver
the securities, funds and other properties of the Fund to the Fund but shall
have the right to deliver to a bank or trust company doing business in Boston,
Massachusetts of its own selection meeting the above required qualifications,
all funds, securities and properties of the Fund held by or deposited with the
Bank, and all books of account and records kept by the Bank pursuant to this
Agreement, and all documents held by the Bank relative thereto. Thereafter such
bank or trust company shall be the successor of the Custodian under this
Agreement.
Except as expressly provided herein, the Agreement shall remain
unchanged and in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their duly authorized officers, as of the day and year first above
written.
CAPITAL EXCHANGE FUND, INC. EATON VANCE MUNICIPALS TRUST II
DEPOSITORS FUND OF BOSTON, INC. EATON VANCE MUTUAL FUNDS TRUST
DIVERSIFICATION FUND, INC. EATON VANCE PRIME RATE RESERVES
EATON VANCE EQUITY-INCOME TRUST EATON VANCE SPECIAL INVESTMENT TRUST
EATON VANCE GROWTH TRUST EV CLASSIC SENIOR FLOATING-RATE FUND
EATON VANCE INVESTMENT FUND, INC. FIDUCIARY EXCHANGE FUND, INC.
EATON VANCE INVESTMENT TRUST SECOND FIDUCIARY EXCHANGE FUND, INC.
EATON VANCE MUNICIPAL BOND FUND L.P. THE EXCHANGE FUND OF BOSTON, INC.
EATON VANCE MUNICIPALS TRUST VANCE, SANDERS EXCHANGE FUND
By: /s/James L. O'Connor
-------------------------
Treasurer
INVESTORS BANK & TRUST COMPANY
By: /s/Michael Rogers
--------------------------
December 28, 1995
Eaton Vance Growth Trust
24 Federal Street
Boston, MA 02110
Gentlemen:
Eaton Vance Growth Trust (the "Trust") is a Massachusetts business
trust created under a Declaration of Trust dated May 25, 1989 executed and
delivered in Boston, Massachusetts and currently operating under an Amended
Declaration of Trust dated August 18, 1992 (the "Declaration of Trust"). I am of
the opinion that all legal requirements have been complied with in the creation
of the Trust, and that said Declaration of Trust is legal and valid.
The Trustees of the Trust have the powers set forth in the Declaration
of Trust, subject to the terms, provisions and conditions therein provided. As
provided in the Declaration of Trust, the interest of shareholders is divided
into shares of beneficial interest without par value, and the number of shares
that may be issued is unlimited. The Trustees may from time to time issue and
sell or cause to be issued and sold shares for cash or for property. All such
shares, when so issued, shall be fully paid and nonassessable by the Trust.
By votes duly adopted, the Trustees of the Trust have authorized the
issuance of shares of beneficial interest, without par value. The Trust intends
to register under the Securities Act of 1933, as amended, 7,424,540 of its
shares of beneficial interest with Post-Effective Amendment No. 61 to its
Registration Statement on Form N-1A (the "Amendment") with the Securities and
Exchange Commission.
I have examined originals, or copies, certified or otherwise identified
to my satisfaction, of such certificates, records and other documents as I have
deemed necessary or appropriate for the purpose of this opinion, including the
Declaration of Trust and votes adopted by the Trustees. Based upon the
foregoing, and with respect to Massachusetts law (other than the Massachusetts
Uniform Securities Act), only to the extent that Massachusetts law may be
applicable and without reference to the laws of the other several states or of
the United States of America, I am of the opinion that under existing law:
1. The Trust is a trust with transferable shares of beneficial interest
organized in compliance with the laws of The Commonwealth of Massachusetts, and
the Declaration of Trust is legal and valid under the laws of The Commonwealth
of Massachusetts.
Eaton Vance Growth Trust
December 28, 1995
Page 2
2. Shares of beneficial interest registered by the Amendment may be
legally and validly issued in accordance with the Declaration of Trust upon
receipt by the Trust of payment in compliance with the Declaration of Trust and,
when so issued and sold, will be fully paid and nonassessable by the Trust.
I am a member of the Massachusetts and New York bars, and I hereby
consent to the filing of this opinion with the Securities and Exchange
Commission as an exhibit thereto.
Very truly yours,
/s/ H. Day Brigham, Jr.
H. Day Brigham, Jr., Esq.
Vice President, Eaton Vance Management
HDB/EGW/drb
b:\grth.opn
EXHIBIT 11(A)
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 61 to the
Registration Statement of Eaton Vance Growth Trust (1933 Act File No. 2-22019)
on behalf of EV Classic Greater China Growth Fund of our report dated October
6, 1995, relating to EV Classic Greater China Growth Fund, and of our report
dated October 6, 1995, relating to Greater China Growth Portfolio, which
reports are included in the Annual Report to Shareholders for the year ended
August 31, 1995 which is incorporated by reference in the Statement of
Additional Information.
We also consent to the reference to our Firm under the heading "The Fund's
Financial Highlights" in the Prospectus and under the captions "Independent
Certified Public Accountants" and "Financial Statements" in the Statement of
Additional Information of the Registration Statement.
DELOITTE & TOUCHE LLP
December 28, 1995
Boston, Massachusetts
EXHIBIT 11(B)
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 61 to the
Registration Statement of Eaton Vance Growth Trust (1933 Act File No. 2-22019)
on behalf of EV Marathon Greater China Growth Fund, of our report dated
October 6, 1995, relating to EV Marathon Greater China Growth Fund, and of our
report dated October 6, 1995, relating to Greater China Growth Portfolio,
which reports are included in the Annual Report to Shareholders for the year
ended August 31, 1995 which is incorporated by reference in the Statement of
Additional Information.
We also consent to the reference to our Firm under the heading "The Fund's
Financial Highlights" in the Prospectus and under the captions "Independent
Certified Public Accountants" and "Financial Statements" in the Statement of
Additional Information of the Registration Statement.
DELOITTE & TOUCHE LLP
December 28, 1995
Boston, Massachusetts
EXHIBIT 11(C)
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 61 to the
Registration Statement of Eaton Vance Growth Trust (1933 Act File No. 2-22019)
on behalf of EV Traditional Greater China Growth Fund, of our report dated
October 6, 1995, relating to EV Traditional Greater China Growth Fund, and of
our report dated October 6, 1995, relating to Greater China Growth Portfolio,
which reports are included in the Annual Report to Shareholders for the year
ended August 31, 1995 which is incorporated by reference in the Statement of
Additional Information.
We also consent to the reference to our Firm under the heading "The Fund's
Financial Highlights" in the Prospectus and under the captions "Independent
Certified Public Accountants" and "Financial Statements" in the Statement of
Additional Information of the Registration Statement.
DELOITTE & TOUCHE LLP
December 28, 1995
Boston, Massachusetts
EXHIBIT 11(D)
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 61 to the
Registration Statement of Eaton Vance Growth Trust (1933 Act File No. 2-22019)
on behalf of EV Classic Growth Fund, of our report dated September 29, 1995,
relating to EV Classic Growth Fund, and of our report dated September 29,
1995, relating to Growth Portfolio which reports are included in the Annual
Report to Shareholders for the year ended August 31, 1995 which is
incorporated by reference in the Statement of Additional Information.
We also consent to the reference to our Firm under the heading "The Fund's
Financial Highlights" in the Prospectus and under the captions "Independent
Certified Public Accountants" and "Financial Statements" in the Statement of
Additional Information of the Registration Statement.
COOPERS & LYBRAND L.L.P.
December 28, 1995
Boston, Massachusetts
EXHIBIT 11(E)
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 61 to the
Registration Statement of Eaton Vance Growth Trust (1933 Act File No. 2-22019)
on behalf of EV Marathon Growth Fund, of our report dated September 29, 1995,
relating to EV Marathon Growth Fund, and of our report dated September 29,
1995, relating to Growth Portfolio, which reports are included in the Annual
Report to Shareholders for the year ended August 31, 1995 which is
incorporated by reference in the Statement of Additional Information.
We also consent to the reference to our Firm under the heading "The Fund's
Financial Highlights" in the Prospectus and under the captions "Independent
Certified Public Accountants" and "Financial Statements" in the Statement of
Additional Information of the Registration Statement.
COOPERS & LYBRAND L.L.P.
December 28, 1995
Boston, Massachusetts
EXHIBIT 11(F)
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 61 to the
Registration Statement of Eaton Vance Growth Trust (1933 Act File No. 2-22019)
on behalf of EV Traditional Growth Fund, of our report dated September 29,
1995, relating to EV Traditional Growth Fund, and of our report dated
September 29, 1995, relating to Growth Portfolio, which reports are included
in the Annual Report to Shareholders for the year ended August 31, 1995 which
is incorporated by reference in the Statement of Additional Information.
We also consent to the reference to our Firm under the heading "The Fund's
Financial Highlights" in the Prospectus and under the captions "Independent
Certified Public Accountants" and "Financial Statements" in the Statement of
Additional Information of the Registration Statement.
COOPERS & LYBRAND L.L.P.
December 28, 1995
Boston, Massachusetts
EXHIBIT 11(G)
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 61 to the
Registration Statement of Eaton Vance Growth Trust (1933 Act File No. 2-22019)
on behalf of EV Marathon Gold & Natural Resources Fund, of our report dated
September 29, 1995, relating to EV Marathon Gold & Natural Resources Fund,
which report is included in the Annual Report to Shareholders for the year
ended August 31, 1995 which is incorporated by reference in the Statement of
Additional Information.
We also consent to the reference to our Firm under the heading "The Fund's
Financial Highlights" in the Prospectus and under the captions "Independent
Certified Public Accountants" and "Financial Statements" in the Statement of
Additional Information of the Registration Statement.
DELOITTE & TOUCHE LLP
December 28, 1995
Boston, Massachusetts
<PAGE>
EXHIBIT 99.(15)(g)
EATON VANCE GROWTH TRUST
DISTRIBUTION PLAN
ON BEHALF OF
EV MARATHON INFORMATION AGE FUND
WHEREAS, Eaton Vance Growth Trust (the "Trust") engages in business as
an open-end investment company with multiple series and is registered as such
under the Investment Company Act of 1940, as amended (the "Act");
WHEREAS, the Trust desires to adopt a separate Distribution Plan on
behalf of its series, EV Marathon Information Age Fund (the "Fund"), pursuant to
which the Fund will make payments in connection with the distribution of shares
of the Fund;
WHEREAS, the Trust employs Eaton Vance Distributors, Inc. to act as
Principal Underwriter (as defined in the Act) of shares of the Fund, but does
not intend to remunerate the Principal Underwriter unless and until the
Principal Underwriter sells shares of the Fund;
WHEREAS, the Fund will pay the Principal Underwriter sales commissions
and distribution fees only in connection with the sale of shares of the Fund;
WHEREAS, the Fund intends to pay service fees as contemplated in
subsections (b) and (d) of Section 26 of Article III of the Rules of Fair
Practice of the National Association of Securities Dealers, Inc. (the "NASD
Rules"); and
WHEREAS, the Trustees of the Trust have determined that there is a
reasonable likelihood that adoption of this Distribution Plan will benefit the
Fund and its shareholders.
NOW, THEREFORE, the Trust hereby adopts this Distribution Plan (this
"Plan") on behalf of the Fund in accordance with Rule 12b-1 under the Act and
containing the following terms and conditions:
1. The Fund will pay sales commissions and distribution fees to the
Principal Underwriter only after and as a result of the sales of shares of the
Fund. The Principal Underwriter will provide the Fund with such distribution
services and facilities as the Trust may from time to time consider necessary to
accomplish the sale of shares of the Fund. It is understood that the Principal
Underwriter may pay such sales commissions and make such other payments to
Authorized Firms and other persons as it considers appropriate to encourage
distribution of such shares.
2. On each sale of Fund shares (excluding reinvestment of dividends and
distributions), the Fund shall pay the Principal Underwriter a sales commission
in an amount not exceeding 5% of the price received by the Fund therefor, such
payment to be made in the manner set forth and subject to the terms of this
Plan. The amount of the sales commission shall be established from time to time
by vote or other action of a majority of (i) those Trustees of the Trust who are
not "interested persons" (as defined in the Act) of the Trust and have no direct
or indirect financial interest in the operation of this Plan or any agreements
related to it (the "Rule 12b-1 Trustees") and (ii) all of the Trustees then in
office. The Fund shall also pay the Principal Underwriter a separate
distribution fee (calculated in accordance with Section 3), such payment to be
made in the manner set forth and subject to the terms of this Plan.
3. The sales commissions and distribution fees referred to in Section 2
shall be accrued and paid by the Fund in the following manner. The Fund shall
accrue daily an amount calculated at the rate of .75% per annum of the daily net
assets of the Fund, which net assets shall be computed in accordance with the
governing documents of the Trust and applicable votes and determinations of the
Trustees of the Trust. The daily amounts so accrued throughout the month shall
be paid to the Principal Underwriter on the last day of each month. The amount
of such daily accrual, as so calculated, shall first be applied and charged to
all unpaid sales commissions, and the balance, if any, shall then be applied and
charged to all unpaid distribution fees. No amount shall be accrued with respect
to any day on which there exist no outstanding uncovered distribution charges of
the Principal Underwriter. The amount of such uncovered distribution charges
shall be calculated daily. For purposes of this calculation, distribution
charges of the Principal Underwriter shall include (a) the aggregate of all
sales commissions which the Principal Underwriter has been paid pursuant to this
Section 3 plus all sales commissions which it is entitled to be paid pursuant to
Section 2 since inception of this Plan through and including the day next
preceding the date of calculation, and (b) an amount equal to the aggregate of
all distribution fees referred to below which the Principal Underwriter has been
paid pursuant to this Section 3 plus all such fees which it is entitled to be
paid pursuant to Section 2 since inception of this Plan through and including
the day next preceding the date of calculation. From this sum (distribution
charges) there shall be subtracted (i) the aggregate amount paid or payable to
the Principal Underwriter pursuant to this Section 3 since inception of this
Plan through and including the day next preceding the date of calculation and
(ii) the aggregate amount of all contingent deferred sales charges paid or
payable to the Principal Underwriter since inception of this Plan through and
including the day next preceding the date of calculation. If the result of such
subtraction is a positive amount, a distribution fee [computed at the rate of 1%
per annum above the prime rate (being the base rate on corporate loans posted by
at least 75% of the nation's 30 largest banks) then being reported in the
Eastern Edition of The Wall Street Journal or if such prime rate is not so
reported such other rate as may be designated from time to time by vote or other
action of a majority of (i) the Rule 12b-1 Trustees and (ii) all of the Trustees
then in office] shall be computed on such amount and added to such amount, with
the resulting sum constituting the amount of outstanding uncovered distribution
charges of the Principal Underwriter with respect to such day for all purposes
of this Plan. If the result of such subtraction is a negative amount, there
shall exist no outstanding uncovered distribution charges of the Principal
Underwriter with respect to such day and no amount shall be accrued or paid to
the Principal Underwriter with respect to such day. The aggregate amounts
accrued and paid pursuant to this Section 3 during any fiscal year of the Fund
shall not exceed .75% of the average daily net assets of the Fund for such year.
4. The Principal Underwriter shall be entitled to receive all
contingent deferred sales charges paid or payable with respect to any day on
which there exist outstanding uncovered distribution charges of the Principal
Underwriter. The Fund shall be entitled to receive all remaining contingent
deferred sales charges paid or payable by shareholders with respect to any day
on which there exist no outstanding uncovered distribution charges of the
Principal Underwriter, provided that no such sales charge which would cause the
Fund to exceed the maximum applicable cap imposed thereon by paragraph (2) of
subsection (d) of Section 26 of Article III of the NASD Rules shall be imposed.
5. The Fund may make payments of service fees to the Principal
Underwriter, Authorized Firms and other persons. The aggregate of such payments
during any fiscal year of the Fund shall not exceed .25% of the Fund's average
daily net assets for such year. Appropriate adjustment of service fee payments
shall be made whenever necessary to ensure that no such payment shall cause the
Fund to exceed the applicable maximum cap imposed thereon by paragraph (5) of
subsection (d) of Section 26 of Article III of the NASD Rules.
6. This Plan shall not take effect until after it has been approved by
both a majority of (i) the Rule 12b-1 Trustees and (ii) all of the Trustees then
in office, cast in person at a meeting (or meetings) called for the purpose of
voting on this Plan.
7. Any agreements between the Trust on behalf of the Fund and any
person relating to this Plan shall be in writing and shall not take effect until
approved in the manner provided for Trustee approval of this Plan in Section 6.
8. This Plan shall continue in effect for so long as such continuance
is specifically approved at least annually in the manner provided for Trustee
approval of this Plan in Section 6.
9. The persons authorized to direct the disposition of monies paid or
payable by the Fund pursuant to this Plan or any related agreement made on
behalf of the Fund shall be the President or any Vice President of the Trust.
Such persons shall provide to the Trustees of the Trust and the Trustees shall
review, at least quarterly, a written report of the amounts so expended and the
purposes for which such expenditures were made.
10. This Plan may be terminated at any time by vote of a majority of
the Rule 12b-1 Trustees, or by vote of a majority of the outstanding voting
securities of the Fund. The Principal Underwriter shall also be entitled to
receive all contingent deferred sales charges paid or payable with respect to
any day subsequent to termination of this Plan on which there exist outstanding
uncovered distribution charges of the Principal Underwriter.
11. This Plan may not be amended to increase materially the payments to
be made by the Fund as provided in Sections 2, 3 and 5 unless such amendment is
approved by a vote of at least a majority of the outstanding voting securities
of the Fund. In addition, all material amendments to this Plan shall be approved
in the manner provided for Trustee approval of this Plan in Section 6.
12. While this Plan is in effect, the selection and nomination of the
Rule 12b-1 Trustees shall be committed to the discretion of the Rule 12b-1
Trustees.
13. The Trust shall preserve copies of this Plan and any related
agreements made by the Trust on behalf of the Fund and all reports made pursuant
to Section 9, for a period of not less than six years from the date of this
Plan, or of the agreements or of such report, as the case may be, the first two
years in an easily accessible place.
14. Consistent with the limitation of shareholder, officer and Trustee
liability as set forth in the Trust's Declaration of Trust, any obligations
assumed by the Fund pursuant to this Plan shall be limited in all cases to the
assets of the Fund and no person shall seek satisfaction thereof from the
shareholders of the Trust, officers or Trustees of the Trust or any other series
of the Trust.
15. This Plan shall, prior to the initial accrual or payment of any
amount hereunder, be approved by a vote of at least a majority of the
outstanding voting securities of the Fund.
16. When used in this Plan, the term "service fees" shall have the same
meaning as such term has in subsections (b) and (d) of Section 26 of Article III
of the NASD Rules. When used in this Plan, the term "vote of a majority of the
outstanding voting securities of the Fund" shall mean the vote of the lesser of
(a) 67 per centum or more of the shares of the Fund present or represented by
proxy at the meeting if the holders of more than 50 per centum of the
outstanding shares of the Fund are present or represented by proxy at the
meeting, or (b) more than 50 per centum of the outstanding shares of the Fund.
17. If any provision of this Plan shall be held or made invalid by a
court decision, statute, rule or regulation of the Securities and Exchange
Commission or otherwise, the remainder of this Plan shall not be affected
thereby.
ADOPTED JUNE 19, 1995
* * *
<PAGE>
EXHIBIT 99.(15)(h)
DISTRIBUTION PLAN
OF
EATON VANCE GROWTH TRUST
ON BEHALF OF EV TRADITIONAL INFORMATION AGE FUND
WHEREAS, Eaton Vance Growth Trust (the "Trust") engages in business as
an open-end management investment company with multiple series and is registered
as such under the Investment Company Act of 1940, as amended (the "Act");
WHEREAS, the Trust desires to adopt a separate Distribution Plan on
behalf of its series, EV Traditional Information Age Fund (the "Fund"), pursuant
to Rule 12b-1 under the Act, pursuant to which the Fund intends to finance
activities which are primarily intended to result in the distribution and sale
of its shares of beneficial interest and to make payments in connection with the
distribution of its shares;
WHEREAS, the Trust employs Eaton Vance Distributors, Inc., to act as
Principal Underwriter (as defined in the Act) of the shares of the Fund;
WHEREAS, the Fund intends to compensate the Principal Underwriter for
its distribution services to the Fund by paying the Principal Underwriter
monthly distribution fees in connection with the sale of shares of the Fund;
WHEREAS, the Fund intends to pay quarterly service fees (as
contemplated in subsections (b) and (d) of Section 26 of Article III of the
Rules of Fair Practice of the National Association of Securities Dealers, Inc.
(the "NASD Rules")) to the Principal Underwriter (from which the Principal
Underwriter may pay service fees to Authorized Firms and other third parties
based on the amount of Fund shares sold through them and remaining outstanding
for specified periods of time);
WHEREAS, such service fees will compensate the Principal Underwriter,
Authorized Firms and other third parties for providing personal services and/or
the maintenance of shareholder accounts;
WHEREAS, the Trustees of the Trust have determined that there is a
reasonable likelihood that adoption of this Distribution Plan will benefit the
Fund and its shareholders.
NOW, THEREFORE, the Trust hereby adopts this Distribution Plan (the
"Plan") on behalf of the Fund in accordance with Rule 12b-1 under the Act and
containing the following terms and conditions:
1. The Principal Underwriter will provide the Fund with such
distribution services and facilities as the Fund may from time to time consider
necessary to enhance the sale of shares of the Fund, and the Principal
Underwriter shall pay such compensation to Authorized Firms and other third
parties as it considers appropriate to encourage distribution of such shares.
The Principal Underwriter will also provide such personal and account
maintenance services as the Fund may from time to time consider necessary to
enhance the provision of personal services and/or the maintenance of shareholder
accounts, and the Principal Underwriter may pay such service fees to Authorized
Firms and other third parties as it considers appropriate to encourage the
provision of personal services and/or the maintenance of shareholder accounts.
2. The Fund shall pay a monthly distribution fee to the Principal
Underwriter on the last day of each month. Such distribution fee shall be in an
amount equal on an annual basis to the aggregate of (a) .50% of that portion of
the Fund's average daily net assets for any fiscal year which is attributable to
shares of the Fund which have remained outstanding for less than one year and
(b) .25% of that portion of the Fund's average daily net assets for any fiscal
year which is attributable to shares of the Fund which have remained outstanding
for more than one year. For the purposes of this Plan, daily net assets of the
Fund shall be computed in accordance with the governing documents of the Fund
and applicable votes and determinations of the Trustees of the Trust. All
distribution fees are being paid in consideration for the distribution services
and facilities to be furnished to the Fund hereunder by the Principal
Underwriter.
3. Appropriate adjustment of payments made pursuant to Section 2 of
this Plan shall be made whenever necessary to ensure that no such payment shall
cause the Fund to exceed the applicable maximum cap imposed on asset-based,
front-end and deferred sales charges by subsection (d) of Section 26 of Article
III of the NASD Rules.
4. In addition to the payments of distribution fees to the Principal
Underwriter provided for in Section 2, the Fund shall pay a quarterly service
fee to the Principal Underwriter on the last day of each calendar quarter of the
Fund. Such service fee shall be in an amount equal on an annual basis to .25% of
that portion of the Fund's average daily net assets for any fiscal year which is
attributable to shares of the Fund which have remained outstanding for more than
one year. All service fees are being paid to the Principal Underwriter hereunder
in consideration for the personal and account maintenance services to be
furnished by the Principal Underwriter and for the payment of service fees by
the Principal Underwriter to Authorized Firms and other third parties in
connection with the provision of personal services and/or the maintenance of
shareholder accounts.
5. This Plan shall not take effect until it has been approved by (a) a
vote of at least a majority of the outstanding voting securities of the Fund and
(b) both a majority of (i) those Trustees of the Trust who are not "interested
persons" of the Trust or the Fund (as defined in the Act) and have no direct or
indirect financial interest in the operation of the Plan or any agreements
related to it (the "Rule 12b-1 Trustees") and (ii) all of the Trustees then in
office, cast in person at a meeting (or meetings) called for the purpose of
voting on this Plan.
6. Any agreements between the Trust on behalf of the Fund and any
person relating to this Plan shall be in writing and shall not take effect until
approved in the manner provided for in clause (b) of the first paragraph of
Section 5.
7. This Plan shall continue in effect for one year from the date of its
execution and shall continue indefinitely thereafter, but only for so long as
such continuance is specifically approved at least annually in the manner
provided for approval of this Plan in clause (b) of the first paragraph of
Section 5.
8. The persons authorized to direct the disposition of monies paid or
payable by the Fund pursuant to this Plan or any related agreement made on
behalf of the Fund shall be the President or any Vice President of the Trust.
Such persons shall provide to the Trust's Board of Trustees and the Board of
Trustees shall review, at least quarterly, a written report of the amounts so
expended and the purposes for which such expenditures were made.
9. This Plan may be terminated at any time by vote of a majority of the
Rule 12b-1 Trustees, or by vote of a majority of the outstanding voting
securities of the Fund.
10. This Plan may not be amended to increase materially the payments to
be made by the Fund as provided in Sections 2, 3 and 4 unless such amendment is
approved in the manner provided for initial approval of the Plan in Section 5,
and all material amendments to this Plan shall be approved in the manner
provided for in clause (b) of the first paragraph of Section 5.
11. While this Plan is in effect, the selection and nomination of the
Rule 12b-1 Trustees shall be committed to the discretion of the Rule 12b-1
Trustees.
12. The Trust shall preserve copies of this Plan and any related
agreements made by the Trust on behalf of the Fund and all reports made pursuant
to Section 8, for a period of not less than six years from the date of this
Plan, or of the agreements or of such report, as the case may be, the first two
years in an easily accessible place.
13. Consistent with the limitation of shareholder, officer and Trustee
liability as set forth in the Trust's Declaration of Trust, any obligations
assumed by the Fund pursuant to this Plan shall be limited in all cases to the
assets of the Fund and no person shall seek satisfaction thereof from the
shareholders of the Trust, officers or Trustees of the Trust or any other series
of the Trust.
14.This Plan shall, prior to the initial accrual or payment of any
amount hereunder, be approved by a vote of at least a majority of the
outstanding voting securities of the Fund.
15. When used in this Plan, the term "service fees" shall have the same
meaning as such term is used in subsections (b) and (d) of Section 26 of Article
III of the NASD Rules. When used in this Plan, the term "vote of a majority of
the outstanding voting securities of the Fund" shall mean the vote of the lesser
of (a) 67 per centum or more of the shares of the Fund present or represented by
proxy at the meeting if the holders of more than 50 per centum of the
outstanding shares of the Fund are present or represented by proxy at the
meeting, or (b) more than 50 per centum of the outstanding shares of the Fund.
16. If any provision of this Plan shall be held or made invalid by a
court decision, statute, rule or regulation of the Securities and Exchange
Commission or otherwise, the remainder of this Plan shall not be affected
thereby.
ADOPTED JUNE 19, 1995
* * *
<PAGE>
EXHIBIT 99.(15)(j)
EATON VANCE GROWTH TRUST
FORM OF DISTRIBUTION PLAN
ON BEHALF OF
EV CLASSIC INFORMATION AGE FUND
WHEREAS, Eaton Vance Growth Trust (the "Trust") engages in business as
an open-end investment company with multiple series and is registered as such
under the Investment Company Act of 1940, as amended (the "Act");
WHEREAS, the Trust desires to adopt a separate Distribution Plan on
behalf of its series, EV Classic Information Age Fund (the "Fund"), pursuant to
which the Fund will make payments in connection with the distribution of shares
of the Fund;
WHEREAS, the Trust employs Eaton Vance Distributors, Inc. to act as
Principal Underwriter (as defined in the Act) of shares of the Fund, but does
not intend to remunerate the Principal Underwriter unless and until the
Principal Underwriter sells shares of the Fund;
WHEREAS, the Fund will pay the Principal Underwriter sales commissions
and distribution fees only in connection with the sale of shares of the Fund;
WHEREAS, the Fund intends to pay service fees as contemplated in
subsections (b) and (d) of Section 26 of Article III of the Rules of Fair
Practice of the National Association of Securities Dealers, Inc. (the "NASD
Rules"); and
WHEREAS, the Trustees of the Trust have determined that there is a
reasonable likelihood that adoption of this Distribution Plan will benefit the
Fund and its shareholders.
NOW, THEREFORE, the Trust hereby adopts this Distribution Plan (this
"Plan") on behalf of the Fund in accordance with Rule 12b-1 under the Act and
containing the following terms and conditions:
1. The Fund will pay sales commissions and distribution fees to the
Principal Underwriter only after and as a result of the sales of shares of the
Fund. The Principal Underwriter will provide the Fund with such distribution
services and facilities as the Trust may from time to time consider necessary to
accomplish the sale of shares of the Fund. It is understood that the Principal
Underwriter may pay such sales commissions and make such other payments to
Authorized Firms and other persons as it considers appropriate to encourage
distribution of such shares.
2. On each sale of Fund shares (excluding reinvestment of dividends and
distributions), the Fund shall pay the Principal Underwriter a sales commission
in an amount not exceeding 6.25% of the price received by the Fund therefor,
such payment to be made in the manner set forth and subject to the terms of this
Plan. The amount of the sales commission shall be established from time to time
by vote or other action of a majority of (i) those Trustees of the Trust who are
not "interested persons" (as defined in the Act) of the Trust and have no direct
or indirect financial interest in the operation of this Plan or any agreements
related to it (the "Rule 12b-1 Trustees") and (ii) all of the Trustees then in
office. The Fund shall also pay the Principal Underwriter a separate
distribution fee (calculated in accordance with Section 3), such payment to be
made in the manner set forth and subject to the terms of this Plan.
3. The sales commissions and distribution fees referred to in Section 2
shall be accrued and paid by the Fund in the following manner. The Fund shall
accrue daily an amount calculated at the rate of .75% per annum of the daily net
assets of the Fund, which net assets shall be computed in accordance with the
governing documents of the Trust and applicable votes and determinations of the
Trustees of the Trust. The daily amounts so accrued throughout the month shall
be paid to the Principal Underwriter on the last day of each month. The amount
of such daily accrual, as so calculated, shall first be applied and charged to
all unpaid sales commissions, and the balance, if any, shall then be applied and
charged to all unpaid distribution fees. No amount shall be accrued with respect
to any day on which there exist no outstanding uncovered distribution charges of
the Principal Underwriter. The amount of such uncovered distribution charges
shall be calculated daily. For purposes of this calculation, distribution
charges of the Principal Underwriter shall include (a) the aggregate of all
sales commissions which the Principal Underwriter has been paid pursuant to this
Section 3 plus all sales commissions which it is entitled to be paid pursuant to
Section 2 since inception of this Plan through and including the day next
preceding the date of calculation, and (b) an amount equal to the aggregate of
all distribution fees referred to below which the Principal Underwriter has been
paid pursuant to this Section 3 plus all such fees which it is entitled to be
paid pursuant to Section 2 since inception of this Plan through and including
the day next preceding the date of calculation. From this sum (distribution
charges) there shall be subtracted (i) the aggregate amount paid or payable to
the Principal Underwriter pursuant to this Section 3 since inception of this
Plan through and including the day next preceding the date of calculation and
(ii) the aggregate amount of all contingent deferred sales charges paid or
payable to the Principal Underwriter since inception of this Plan through and
including the day next preceding the date of calculation. If the result of such
subtraction is a positive amount, a distribution fee [computed at the rate of 1%
per annum above the prime rate (being the base rate on corporate loans posted by
at least 75% of the nation's 30 largest banks) then being reported in the
Eastern Edition of The Wall Street Journal or if such prime rate is not so
reported such other rate as may be designated from time to time by vote or other
action of a majority of (i) the Rule 12b-1 Trustees and (ii) all of the Trustees
then in office] shall be computed on such amount and added to such amount, with
the resulting sum constituting the amount of outstanding uncovered distribution
charges of the Principal Underwriter with respect to such day for all purposes
of this Plan. If the result of such subtraction is a negative amount, there
shall exist no outstanding uncovered distribution charges of the Principal
Underwriter with respect to such day and no amount shall be accrued or paid to
the Principal Underwriter with respect to such day. The aggregate amounts
accrued and paid pursuant to this Section 3 during any fiscal year of the Fund
shall not exceed .75% of the average daily net assets of the Fund for such year.
4. The Principal Underwriter shall be entitled to receive all
contingent deferred sales charges paid or payable with respect to any day on
which there exist outstanding uncovered distribution charges of the Principal
Underwriter. The Fund shall be entitled to receive all remaining contingent
deferred sales charges paid or payable by shareholders with respect to any day
on which there exist no outstanding uncovered distribution charges of the
Principal Underwriter, provided that no such sales charge which would cause the
Fund to exceed the maximum applicable cap imposed thereon by paragraph (2) of
subsection (d) of Section 26 of Article III of the NASD Rules shall be imposed.
5. The Fund may make payments of service fees to the Principal
Underwriter, Authorized Firms and other persons. The aggregate of such payments
during any fiscal year of the Fund shall not exceed .25% of the Fund's average
daily net assets for such year. Appropriate adjustment of service fee payments
shall be made whenever necessary to ensure that no such payment shall cause the
Fund to exceed the applicable maximum cap imposed thereon by paragraph (5) of
subsection (d) of Section 26 of Article III of the NASD Rules.
6. This Plan shall not take effect until after it has been approved by
both a majority of (i) the Rule 12b-1 Trustees and (ii) all of the Trustees then
in office, cast in person at a meeting (or meetings) called for the purpose of
voting on this Plan.
7. Any agreements between the Trust on behalf of the Fund and any
person relating to this Plan shall be in writing and shall not take effect until
approved in the manner provided for Trustee approval of this Plan in Section 6.
8. This Plan shall continue in effect through and including April 28,
1996, and shall continue in effect indefinitely thereafter, but only for so long
as such continuance after April 28, 1996 is specifically approved at least
annually in the manner provided for Trustee approval of this Plan in Section 6.
9. The persons authorized to direct the disposition of monies paid or
payable by the Fund pursuant to this Plan or any related agreement made on
behalf of the Fund shall be the President or any Vice President of the Trust.
Such persons shall provide to the Trustees of the Trust and the Trustees shall
review, at least quarterly, a written report of the amounts so expended and the
purposes for which such expenditures were made.
10. This Plan may be terminated at any time by vote of a majority of
the Rule 12b-1 Trustees, or by vote of a majority of the outstanding voting
securities of the Fund. The Principal Underwriter shall also be entitled to
receive all contingent deferred sales charges paid or payable with respect to
any day subsequent to termination of this Plan on which there exist outstanding
uncovered distribution charges of the Principal Underwriter.
11. This Plan may not be amended to increase materially the payments to
be made by the Fund as provided in Sections 2, 3 and 5 unless such amendment is
approved by a vote of at least a majority of the outstanding voting securities
of the Fund. In addition, all material amendments to this Plan shall be approved
in the manner provided for Trustee approval of this Plan in Section 6.
12. While this Plan is in effect, the selection and nomination of the
Rule 12b-1 Trustees shall be committed to the discretion of the Rule 12b-1
Trustees.
13. The Trust shall preserve copies of this Plan and any related
agreements made by the Trust on behalf of the Fund and all reports made pursuant
to Section 9, for a period of not less than six years from the date of this
Plan, or of the agreements or of such report, as the case may be, the first two
years in an easily accessible place.
14. Consistent with the limitation of shareholder, officer and Trustee
liability as set forth in the Trust's Declaration of Trust, any obligations
assumed by the Fund pursuant to this Plan shall be limited in all cases to the
assets of the Fund and no person shall seek satisfaction thereof from the
shareholders of the Trust, officers or Trustees of the Trust or any other series
of the Trust.
15. This Plan shall, prior to the initial accrual or payment of any
amount hereunder, be approved by a vote of at least a majority of the
outstanding voting securities of the Fund.
16. When used in this Plan, the term "service fees" shall have the same
meaning as such term has in subsections (b) and (d) of Section 26 of Article III
of the NASD Rules. When used in this Plan, the term "vote of a majority of the
outstanding voting securities of the Fund" shall mean the vote of the lesser of
(a) 67 per centum or more of the shares of the Fund present or represented by
proxy at the meeting if the holders of more than 50 per centum of the
outstanding shares of the Fund are present or represented by proxy at the
meeting, or (b) more than 50 per centum of the outstanding shares of the Fund.
17. If any provision of this Plan shall be held or made invalid by a
court decision, statute, rule or regulation of the Securities and Exchange
Commission or otherwise, the remainder of this Plan shall not be affected
thereby.
ADOPTED NOVEMBER 10, 1995
* * *
EXHIBIT 99.16
<TABLE>
INVESTMENT PERFORMANCE -- EV CLASSIC GREATER CHINA GROWTH FUND
The table below indicates the total return (capital changes plus reinvestment of all distributions) on a hypothetical investment of
$1,000 in the Fund covering the period from October 28, 1992 through August 31, 1995 and for the 1 year period ended
August 31, 1995. Total return for the period prior to the Fund's commencement of operations is for the Portfolio (or its
predecessor) adjusted for the Fund's sales charge.
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC BEFORE DEDUCTING CDSC AFTER DEDUCTING CDSC
PERIOD DATE ON 08/31/95 ON 08/31/95 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- --------- ---------- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 10/28/92 $1,420.72 $1,420.72 42.07% 13.16% 42.07% 13.16%
1 YEAR ENDED
08/31/95 08/31/94 $901.50 $892.51 -9.85% -9.85% -10.75% -10.75%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC*
Cumulative total return is calculated using the following formula:
T = ( ERV / P ) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC**
P = an initial investment of $1,000
* The average annual total return not including the CDSC is calculated based the ending investment value
before deducting the CDSC.
** The cumulative total return not including the CDSC is calculated based the ending investment value before
deducting the CDSC.
</TABLE>
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EV MARATHON GREATER CHINA GROWTH FUND
The table below indicates the total return (capital changes plus reinvestment of all distributions) on a hypothetical investment of
$1,000 in the Fund covering the period from October 28, 1992 through August 31, 1995 and for the 1 year period ended
August 31, 1995. Total return for the period prior to the Fund's commencement of operations is for the Portfolio (or its
predecessor) adjusted for the Fund's sales charge.
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC BEFORE DEDUCTING CDSC AFTER DEDUCTING CDSC
PERIOD DATE ON 08/31/95 ON 08/31/95 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- --------- ---------- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 10/28/92 $1,439.90 $1,399.90 43.99% 13.70% 39.99% 12.58%
1 YEAR ENDED
08/31/95 08/31/94 $909.41 $864.24 -9.06% -9.06% -13.58% -13.58%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC*
Cumulative total return is calculated using the following formula:
T = ( ERV / P ) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC**
P = an initial investment of $1,000
* The average annual total return not including the CDSC is calculated based the ending investment value
before deducting the CDSC.
** The cumulative total return not including the CDSC is calculated based the ending investment value before
deducting the CDSC.
</TABLE>
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EV TRADITIONAL GREATER CHINA GROWTH FUND
The table below indicates the total return (capital changes plus reinvestment of all distributions) on a hypothetical investment of
$1,000 in the Fund covering the period from October 28, 1992 through August 31, 1995 and for the 1 year period ended
August 31, 1995.
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT INITIAL INVESTMENT EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
PERIOD DATE INVESTMENT* ON 08/31/95 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- --------- ---------- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 10/28/92 $952.38 $1,368.23 43.67% 13.61% 36.82% 11.67%
1 YEAR ENDED
08/31/95 08/31/94 $952.70 $868.61 -8.83% -8.83% -13.14% -13.14%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000**
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period
Cumulative total return is calculated using the following formula:
T = ( ERV / P ) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period
P = an initial investment of $1,000***
* Initial investment less the current maximum sales charge of 4.75%.
** The average annual total return including the sales charge is calculated based on an initial investment of $1,000 less the
maximum initial sales charge of 4.75%.
*** The cumulative total return including the sales charge is calculated based on an initial investment of $1,000 less
maximum initial sales charge of 4.75%.
</TABLE>
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EV CLASSIC GROWTH FUND
The table below indicates the total return (capital changes plus reinvestment of all distributions) on a hypothetical investment of
$1,000 in the Fund covering the 1, 5, and 10 year periods ended August 31, 1995. Total return for the period prior to the
Fund's commencement of operations is for the Portfolio (or its predecessor) adjusted for the Fund's sales charge.
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC BEFORE DEDUCTING CDSC AFTER DEDUCTING CDSC
PERIOD DATE ON 08/31/95 ON 08/31/95 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- --------- ---------- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
10 YEARS ENDED
08/31/95 08/31/85 $2,961.78 $2,961.78 196.18% 11.47% 196.18% 11.47%
5 YEARS ENDED
08/31/95 08/31/90 $1,625.71 $1,625.71 62.57% 10.21% 62.57% 10.21%
1 YEAR ENDED
08/31/95 08/31/94 $1,148.87 $1,138.87 14.89% 14.89% 13.89% 13.89%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC*
Cumulative total return is calculated using the following formula:
T = ( ERV / P ) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC**
P = an initial investment of $1,000
* The average annual total return not including the CDSC is calculated based the ending investment value
before deducting the CDSC.
** The cumulative total return not including the CDSC is calculated based the ending investment value before
deducting the CDSC.
</TABLE>
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EV MARATHON GROWTH FUND
The table below indicates the total return (capital changes plus reinvestment of all distributions) on a hypothetical investment of
$1,000 in the Fund covering the 1, 5, and 10 year periods ended August 31, 1995. Total return for the period prior to the
Fund's commencement of operations is for the Portfolio (or its predecessor) adjusted for the Fund's sales charge.
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC BEFORE DEDUCTING CDSC AFTER DEDUCTING CDSC
PERIOD DATE ON 08/31/95 ON 08/31/95 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- --------- ---------- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
10 YEARS ENDED
08/31/95 08/31/85 $2,973.17 $2,973.17 197.32% 11.51% 197.32% 11.51%
5 YEARS ENDED
08/31/95 08/31/90 $1,631.96 $1,611.96 63.20% 10.29% 61.20% 10.02%
1 YEAR ENDED
08/31/95 08/31/94 $1,153.29 $1,103.29 15.33% 15.33% 10.33% 10.33%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC*
Cumulative total return is calculated using the following formula:
T = ( ERV / P ) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC**
P = an initial investment of $1,000
* The average annual total return not including the CDSC is calculated based the ending investment value
before deducting the CDSC.
** The cumulative total return not including the CDSC is calculated based the ending investment value before
deducting the CDSC.
</TABLE>
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EV TRADITIONAL GROWTH FUND
The table below indicates the total return (capital changes plus reinvestment of all distributions) on a hypothetical investment of
$1,000 in the Fund covering the 1, 5, and 10 year periods ended August 31, 1995.
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT INITIAL INVESTMENT EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
PERIOD DATE INVESTMENT* ON 08/31/95 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- --------- ---------- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
10 YEARS ENDED
08/31/95 08/31/85 $951.88 $2,845.25 198.91% 11.56% 184.53% 11.01%
5 YEARS ENDED
08/31/95 08/31/90 $952.09 $1,562.10 64.07% 10.39% 56.21% 9.31%
1 YEAR ENDED
08/31/95 08/31/94 $952.15 $1,103.98 15.95% 15.95% 10.40% 10.40%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000**
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period
Cumulative total return is calculated using the following formula:
T = ( ERV / P ) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period
P = an initial investment of $1,000***
* Initial investment less the current maximum sales charge of 4.75%.
** The average annual total return including the sales charge is calculated based on an initial investment of $1,000 less the
maximum initial sales charge of 4.75%.
*** The cumulative total return including the sales charge is calculated based on an initial investment of $1,000 less
maximum initial sales charge of 4.75%.
</TABLE>
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EV MARATHON GOLD & NATURAL RESOURCES FUND
The table below indicates the total return (capital changes plus reinvestment of all distributions) on a hypothetical investment of
$1,000 in the Fund covering the period from October 21, 1987 through August 31, 1995 and for the 1 and 5 year periods ended
August 31, 1995.
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC BEFORE DEDUCTING CDSC AFTER DEDUCTING CDSC
PERIOD DATE ON 08/31/95 ON 08/31/95 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- --------- ---------- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 10/21/87 $2,204.68 $2,204.68 120.47% 10.57% 120.47% 10.57%
5 YEARS ENDED
08/31/95 08/31/90 $1,501.71 $1,481.71 50.17% 8.45% 48.17% 8.16%
1 YEAR ENDED
08/31/95 08/31/94 $1,137.91 $1,087.91 13.79% 13.79% 8.79% 8.79%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC*
Cumulative total return is calculated using the following formula:
T = ( ERV / P ) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC**
P = an initial investment of $1,000
* The average annual total return not including the CDSC is calculated based the ending investment value
before deducting the CDSC.
** The cumulative total return not including the CDSC is calculated based the ending investment value before
deducting the CDSC.
</TABLE>
<PAGE>
EXHIBIT 99.(17)(d)
POWER OF ATTORNEY
We, the undersigned officers and Trustees of Information Age Portfolio,
a New York trust, do hereby severally constitute and appoint H. Day Brigham,
Jr., James B. Hawkes and Thomas Otis, or any of them, to be true, sufficient and
lawful attorneys, or attorney for each of us, to sign for each of us, in the
name of each of us in the capacities indicated below, any and all amendments
(including post-effective amendments) to the Registration Statement on Form N-1A
filed by Eaton Vance Growth Trust on behalf of an existing or proposed series
with the Securities and Exchange Commission in respect of shares of beneficial
interest and other documents and papers relating thereto.
IN WITNESS WHEREOF we have hereunto set our hands on the dates set
opposite our respective signatures.
Name Capacity Date
---- -------- ----
/s/Donald R. Dwight Trustee June 19, 1995
- --------------------------
Donald R. Dwight
/s/Samuel L. Hayes, III Trustee June 19, 1995
- --------------------------
Samuel L. Hayes, III
/s/Norton H. Reamer Trustee June 19, 1995
- --------------------------
Norton H. Reamer
/s/John L. Thorndike Trustee June 19, 1995
- --------------------------
John L. Thorndike
/s/Jack L. Treynor Trustee June 19, 1995
- --------------------------
Jack L. Treynor
/s/James B. Hawkes President, Principal June 19, 1995
- -------------------------- Executive Officer and
James B. Hawkes Trustee
/s/James L. O'Connor Treasurer and June 19, 1995
- -------------------------- Principal Financial
James L. O'Connor and Accounting
Officer
a:\poa.x17
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000102816
<NAME> EATON VANCE GROWTH TRUST
<SERIES>
<NUMBER> 4
<NAME> EV CLASSIC GREATER CHINA GROWTH FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-END> AUG-31-1995
<INVESTMENTS-AT-COST> 20,955,090
<INVESTMENTS-AT-VALUE> 21,323,340
<RECEIVABLES> 14,709
<ASSETS-OTHER> 33,388
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 21,371,437
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 163,791
<TOTAL-LIABILITIES> 163,791
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 24,427,060
<SHARES-COMMON-STOCK> 2,612,008
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (139,381)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (3,448,283)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 368,250
<NET-ASSETS> 21,207,646
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 313,420
<EXPENSES-NET> 449,091
<NET-INVESTMENT-INCOME> (135,671)
<REALIZED-GAINS-CURRENT> (2,187,569)
<APPREC-INCREASE-CURRENT> (194,248)
<NET-CHANGE-FROM-OPS> (2,517,488)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (59,285)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,851,528
<NUMBER-OF-SHARES-REDEEMED> 2,173,165
<SHARES-REINVESTED> 6,929
<NET-CHANGE-IN-ASSETS> (5,221,939)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 449,091
<AVERAGE-NET-ASSETS> 23,158,081
<PER-SHARE-NAV-BEGIN> 9.03
<PER-SHARE-NII> (0.037)
<PER-SHARE-GAIN-APPREC> (0.853)
<PER-SHARE-DIVIDEND> (0.020)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.12
<EXPENSE-RATIO> 3.04
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000102816
<NAME> EATON VANCE GROWTH TRUST
<SERIES>
<NUMBER> 3
<NAME> EV MARATHON GREATER CHINA GROWTH FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-END> AUG-31-1995
<INVESTMENTS-AT-COST> 301,527,345
<INVESTMENTS-AT-VALUE> 325,090,135
<RECEIVABLES> 150,017
<ASSETS-OTHER> 27,167
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 325,267,319
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,009,548
<TOTAL-LIABILITIES> 1,009,548
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 334,564,189
<SHARES-COMMON-STOCK> 27,276,927
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (2,496,917)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (31,372,291)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 23,562,790
<NET-ASSETS> 324,257,771
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 4,719,436
<EXPENSES-NET> 4,775,273
<NET-INVESTMENT-INCOME> (55,837)
<REALIZED-GAINS-CURRENT> (20,527,900)
<APPREC-INCREASE-CURRENT> (16,595,613)
<NET-CHANGE-FROM-OPS> (37,179,350)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,966,526
<DISTRIBUTIONS-OF-GAINS> 302,624
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5,441,956
<NUMBER-OF-SHARES-REDEEMED> 8,172,241
<SHARES-REINVESTED> 173,957
<NET-CHANGE-IN-ASSETS> (68,220,937)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,775,273
<AVERAGE-NET-ASSETS> 350,311,065
<PER-SHARE-NAV-BEGIN> 13.16
<PER-SHARE-NII> (0.038)
<PER-SHARE-GAIN-APPREC> (1.157)
<PER-SHARE-DIVIDEND> (0.065)
<PER-SHARE-DISTRIBUTIONS> (0.010)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.89
<EXPENSE-RATIO> 2.47
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000102816
<NAME> EATON VANCE GROWTH TRUST
<SERIES>
<NUMBER> 2
<NAME> EV TRADITIONAL GREATER CHINA GROWTH FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-END> AUG-31-1995
<INVESTMENTS-AT-COST> 210,694,722
<INVESTMENTS-AT-VALUE> 243,678,145
<RECEIVABLES> 295,983
<ASSETS-OTHER> 57,946
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 244,032,074
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,131,541
<TOTAL-LIABILITIES> 1,131,541
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 216,686,231
<SHARES-COMMON-STOCK> 17,063,840
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (2,537,335)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (4,231,786)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 32,983,423
<NET-ASSETS> 242,900,533
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 3,636,958
<EXPENSES-NET> 2,620,584
<NET-INVESTMENT-INCOME> 1,016,374
<REALIZED-GAINS-CURRENT> (6,375,900)
<APPREC-INCREASE-CURRENT> (23,589,918)
<NET-CHANGE-FROM-OPS> (28,949,444)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,086,484
<DISTRIBUTIONS-OF-GAINS> 693,661
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,121,448
<NUMBER-OF-SHARES-REDEEMED> 6,307,031
<SHARES-REINVESTED> 114,671
<NET-CHANGE-IN-ASSETS> (73,328,717)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,620,584
<AVERAGE-NET-ASSETS> 269,589,958
<PER-SHARE-NAV-BEGIN> 15.71
<PER-SHARE-NII> 0.051
<PER-SHARE-GAIN-APPREC> (1.441)
<PER-SHARE-DIVIDEND> (0.055)
<PER-SHARE-DISTRIBUTIONS> (0.035)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.23
<EXPENSE-RATIO> 2.08
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000892885
<NAME> GREATER CHINA GROWTH PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-END> AUG-31-1995
<INVESTMENTS-AT-COST> 507,528,635
<INVESTMENTS-AT-VALUE> 565,233,759
<RECEIVABLES> 1,299,504
<ASSETS-OTHER> 63,231
<OTHER-ITEMS-ASSETS> 25,284,534
<TOTAL-ASSETS> 591,881,028
<PAYABLE-FOR-SECURITIES> 1,436,747
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 27,223
<TOTAL-LIABILITIES> 1,463,970
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 533,468,333
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 56,948,725
<NET-ASSETS> 590,417,058
<DIVIDEND-INCOME> 15,724,962
<INTEREST-INCOME> 58,676
<OTHER-INCOME> 0
<EXPENSES-NET> 7,110,757
<NET-INVESTMENT-INCOME> 8,672,881
<REALIZED-GAINS-CURRENT> (29,095,245)
<APPREC-INCREASE-CURRENT> (40,394,548)
<NET-CHANGE-FROM-OPS> (60,816,912)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (142,195,619)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4,763,655
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 7,110,757
<AVERAGE-NET-ASSETS> 644,418,232
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 1.10
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000102816
<NAME> EATON VANCE GROWTH TRUST
<SERIES>
<NUMBER> 5
<NAME> EV CLASSIC GROWTH FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-END> AUG-31-1995
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 563,941
<RECEIVABLES> 45,372
<ASSETS-OTHER> 31,758
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 641,071
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 40,372
<TOTAL-LIABILITIES> 40,372
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 459,390
<SHARES-COMMON-STOCK> 51,440
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 15,576
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 125,733
<NET-ASSETS> 600,699
<DIVIDEND-INCOME> 5,571
<INTEREST-INCOME> 1,027
<OTHER-INCOME> (3,569)
<EXPENSES-NET> 14,023
<NET-INVESTMENT-INCOME> (10,994)
<REALIZED-GAINS-CURRENT> 25,651
<APPREC-INCREASE-CURRENT> 125,733
<NET-CHANGE-FROM-OPS> 140,390
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 157,048
<NUMBER-OF-SHARES-REDEEMED> 105,609
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 600,689
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 58,343
<AVERAGE-NET-ASSETS> 621,286
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> (0.214)
<PER-SHARE-GAIN-APPREC> 1.894
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.68
<EXPENSE-RATIO> 3.47
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000102816
<NAME> EATON VANCE GROWTH TRUST
<SERIES>
<NUMBER> 6
<NAME> EV MARATHON GROWTH FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-END> AUG-31-1995
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 2,195,252
<RECEIVABLES> 46,134
<ASSETS-OTHER> 30,738
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,272,124
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 32,464
<TOTAL-LIABILITIES> 32,464
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,032,994
<SHARES-COMMON-STOCK> 191,686
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 11,433
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 195,233
<NET-ASSETS> 2,239,660
<DIVIDEND-INCOME> 9,037
<INTEREST-INCOME> 1,828
<OTHER-INCOME> (6,425)
<EXPENSES-NET> 18,587
<NET-INVESTMENT-INCOME> (14,147)
<REALIZED-GAINS-CURRENT> 18,499
<APPREC-INCREASE-CURRENT> 195,233
<NET-CHANGE-FROM-OPS> 199,585
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 296,114
<NUMBER-OF-SHARES-REDEEMED> 104,429
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 2,239,650
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 64,721
<AVERAGE-NET-ASSETS> 918,347
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> (0.074)
<PER-SHARE-GAIN-APPREC> 1.754
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.68
<EXPENSE-RATIO> 2.82
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000102816
<NAME> EATON VANCE GROWTH TRUST
<SERIES>
<NUMBER> 1
<NAME> EV TRADITIONAL GROWTH FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-END> AUG-31-1995
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 131,243,407
<RECEIVABLES> 297
<ASSETS-OTHER> 9,012
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 131,252,716
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 286,619
<TOTAL-LIABILITIES> 286,619
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 103,837,980
<SHARES-COMMON-STOCK> 15,724,672
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 148,652
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,283,750
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 25,695,715
<NET-ASSETS> 130,966,097
<DIVIDEND-INCOME> 1,436,983
<INTEREST-INCOME> 309,276
<OTHER-INCOME> (907,024)
<EXPENSES-NET> 313,416
<NET-INVESTMENT-INCOME> 525,819
<REALIZED-GAINS-CURRENT> 1,314,198
<APPREC-INCREASE-CURRENT> 16,656,001
<NET-CHANGE-FROM-OPS> 18,496,018
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 826,514
<DISTRIBUTIONS-OF-GAINS> 10,882,489
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5,794,759
<NUMBER-OF-SHARES-REDEEMED> 7,862,026
<SHARES-REINVESTED> 1,428,098
<NET-CHANGE-IN-ASSETS> 696,740
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 313,416
<AVERAGE-NET-ASSETS> 124,198,548
<PER-SHARE-NAV-BEGIN> 7.96
<PER-SHARE-NII> 0.024
<PER-SHARE-GAIN-APPREC> 1.086
<PER-SHARE-DIVIDEND> (0.050)
<PER-SHARE-DISTRIBUTIONS> (0.690)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.33
<EXPENSE-RATIO> 0.98
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000925461
<NAME> GROWTH PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-END> AUG-31-1995
<INVESTMENTS-AT-COST> 108,932,346
<INVESTMENTS-AT-VALUE> 134,949,027
<RECEIVABLES> 1,042,714
<ASSETS-OTHER> 12,834
<OTHER-ITEMS-ASSETS> 18,906
<TOTAL-ASSETS> 136,023,481
<PAYABLE-FOR-SECURITIES> 2,006,727
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 14,154
<TOTAL-LIABILITIES> 2,020,881
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 107,985,919
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 26,016,681
<NET-ASSETS> 134,002,600
<DIVIDEND-INCOME> 1,451,591
<INTEREST-INCOME> 312,131
<OTHER-INCOME> 0
<EXPENSES-NET> 917,018
<NET-INVESTMENT-INCOME> 846,704
<REALIZED-GAINS-CURRENT> 1,358,348
<APPREC-INCREASE-CURRENT> 16,976,967
<NET-CHANGE-FROM-OPS> 19,182,019
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 2,466,731
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 786,194
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 917,018
<AVERAGE-NET-ASSETS> 125,812,990
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0.73
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000102816
<NAME> EATON VANCE GROWTH TRUST
<SERIES>
<NUMBER> 7
<NAME> EV MARATHON GOLD & NATURAL RESOURCES FUND
<S> <C>
<PERIOD-TYPE> 11-MOS
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-END> AUG-31-1995
<INVESTMENTS-AT-COST> 12,574,005
<INVESTMENTS-AT-VALUE> 15,201,821
<RECEIVABLES> 32,473
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 114,643
<TOTAL-ASSETS> 15,348,937
<PAYABLE-FOR-SECURITIES> 68,750
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 21,454
<TOTAL-LIABILITIES> 90,204
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 11,816,225
<SHARES-COMMON-STOCK> 929,319
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 814,692
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,627,816
<NET-ASSETS> 15,258,733
<DIVIDEND-INCOME> 188,694
<INTEREST-INCOME> 20,571
<OTHER-INCOME> 0
<EXPENSES-NET> 300,308
<NET-INVESTMENT-INCOME> (91,043)
<REALIZED-GAINS-CURRENT> 875,917
<APPREC-INCREASE-CURRENT> 634,567
<NET-CHANGE-FROM-OPS> 1,419,441
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 345,747
<NUMBER-OF-SHARES-REDEEMED> 293,310
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 2,203,418
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 92,809
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 300,308
<AVERAGE-NET-ASSETS> 13,488,148
<PER-SHARE-NAV-BEGIN> 14.89
<PER-SHARE-NII> (0.100)
<PER-SHARE-GAIN-APPREC> 1.630
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.42
<EXPENSE-RATIO> 2.43
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>