<PAGE>
Part A
Information Required in a Prospectus
EV MARATHON
WORLDWIDE HEALTH SCIENCES FUND
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EV MARATHON WORLDWIDE HEALTH SCIENCES FUND (THE "FUND") IS A MUTUAL FUND
SEEKING LONG-TERM CAPITAL GROWTH BY INVESTING IN A GLOBAL AND DIVERSIFIED
PORTFOLIO OF SECURITIES OF HEALTH SCIENCE COMPANIES. THE FUND INVESTS ITS
ASSETS IN WORLDWIDE HEALTH SCIENCES PORTFOLIO (THE "PORTFOLIO"), A DIVERSIFIED
OPEN-END INVESTMENT COMPANY HAVING THE SAME INVESTMENT OBJECTIVE AS THE FUND,
RATHER THAN BY INVESTING DIRECTLY 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 in the Fund. Please retain this document for future
reference. A Statement of Additional Information for the Fund dated September
3, 1996, 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 ("Eaton Vance" or
the "Manager"). The Portfolio's investment adviser is Mehta and Isaly Asset
Management, Inc. ("M&I" or the "Adviser"). The principal business address of
the Adviser is 41 Madison Avenue, 40th Floor, New York, NY 10010-2202.
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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.
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PAGE
Shareholder and Fund Expenses ......................... 2
Health Science Investments ............................ 3
The Fund's Investment Objective ....................... 3
Investment Policies and Risks ......................... 4
Organization of the Fund and the Portfolio ............ 6
Management of the Fund and the Portfolio .............. 8
Distribution Plan ..................................... 9
Valuing Fund Shares ................................... 10
PAGE
How to Buy Fund Shares ................................ 11
How to Redeem Fund Shares ............................. 12
Reports to Shareholders ............................... 14
The Lifetime Investing Account/Distribution Options 14
The Eaton Vance Exchange Privilege .................... 15
Eaton Vance Shareholder Services ...................... 15
Distributions and Taxes ............................... 16
Performance Information ............................... 17
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PROSPECTUS DATED SEPTEMBER 3, 1996
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SHAREHOLDER AND FUND EXPENSES
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<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
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<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 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%
<CAPTION>
ANNUAL FUND AND ALLOCATED PORTFOLIO OPERATING EXPENSES (as a percentage of average daily net assets)
----------------------------------------------------------------------------------------------------------------
<S> <C>
Management Fees 1.50%
Rule 12b-1 Distribution (and Service) Fees 0.75
Other Expenses 0.50
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Total Operating Expenses 2.75%
====
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS
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<S> <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: $78 $125
An investor would pay the following expenses on the same investment,
assuming (a) 5% annual return and (b) no redemptions: $28 $ 85
</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. Except for the
investment advisory fee, expenses are estimated for the fiscal year ending
August 31, 1997. Management Fees includes management fees paid by the Fund and
investment advisory and administration fees paid by the Portfolio of 0.25%,
0.75% and 0.25%, respectively. The advisory fee is assumed to be the same as
the actual fee paid by the predecessor fund of the Portfolio for its last
fiscal year. The advisory fee is subject to a performance adjustment after one
year. See "Management of the Fund and the Portfolio."
The Fund invests exclusively in the Portfolio. The Trustees of the Trust
believe the aggregate per share expenses of the Fund and the Portfolio should
approximate, and over time be less than, the per share expenses which 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 the Fund
and the Portfolio see "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, 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."
For shares sold by Authorized Firms and remaining outstanding for at least one
year, the Fund will pay service fees not exceeding .25% per annum of its
average daily net assets. The Fund expects to begin making service fee
payments during the quarter ending September 30, 1997. Therefore, expenses
after year one will be higher. See "Distribution Plan."
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."
HEALTH SCIENCE INVESTMENTS
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Markets for health sciences products and services have undergone significant
growth over the last 25 years. In the U.S., the Department of Health and Human
Services estimates health care expenditures alone could increase to over 16%
of gross national product by the year 2000, compared to 7.6%, 10.3% and 14.0%
in 1972, 1982 and 1992, respectively. Outside the U.S., most developed
countries are seeing similar growth in health care expenditures. In emerging
markets, health care spending is increasing as standards of living are
improving and as revenues become available to fund government and private
programs to address basic health needs. Factors contributing to this growth
include demographic shifts tending to a higher world population and a larger
elderly populaton in industrialized nations, technological advances, and
popular acceptance of and worldwide familiarity with health care products,
resulting in high consumer demand. In addition to increased demand for health
science products and services, substantial public and private expenditures on
basic medical research and advances in technology have accelerated the pace of
medical discoveries. The Adviser believes that the rate of change may
accelerate in the future, causing certain segments of the business to decline
and others to experience growth. Favorable investment opportunities may be
found in companies that provide products or services designed for the
prevention, diagnosis and treatment of physical and mental disorders.
In making portfolio selections, in addition to evaluating trends in corporate
revenues, earnings and dividends, the Adviser generally considers the amount
of capital currently being expended on research and development, and the
nature thereof. The Adviser believes that dollars invested in research and
development today frequently have significant bearing on future growth.
Portfolio securities generally will be selected from companies in the
following groups:
Biotechnology -- Companies which are producing or plan to produce as a result
of current research, diagnostic and therapeutic drugs and reagents based on
genetic engineering and the use of monoclonal antibodies or on recombinant
DNA; also, specialty companies catering to the unique requirements of
biotechnology companies such as those providing enzymes, media and
purification equipment.
Diagnostics -- Private organizations that develop or maintain sophisticated
diagnostic equipment such as CAT scanners and Magnetic Resonance Imaging as
well as urological and serological assays.
Managed Healthcare -- Operators of investor-owned hospital chains (including
acute care psychiatric hospitals), nursing centers for the elderly, health
maintenance organizations, and rehabilitation clinics which seek to deliver
hospital care on an efficient cost basis.
Medical Equipment and Supplies -- Companies engaged in the manufacture of
inpatient and outpatient medical (and dental), surgical, laboratory and
diagnostic products (ranging from cotton swabs through kidney dialyses
equipment to CAT scanners).
Pharmaceuticals -- Companies involved with new types of drugs and their
delivery systems.
By focusing on companies such as the foregoing, the Adviser believes that the
opportunity for long-term capital growth exists. Of course, there can be no
assurance that the Portfolio will be able to take advantage of the foregoing
opportunities, or that such investment opportunities will be favorable.
THE FUND'S INVESTMENT OBJECTIVE
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THE FUND'S INVESTMENT OBJECTIVE IS TO SEEK LONG-TERM CAPITAL GROWTH BY
INVESTING IN A GLOBAL AND DIVERSIFIED PORTFOLIO OF SECURITIES OF HEALTH
SCIENCE COMPANIES. It currently seeks to meet its investment objective by
investing its assets in Worldwide Health Sciences Portfolio (the "Portfolio"),
a separate registered investment company that invests in securities of health
science companies. This investment structure is commonly referred to as a
"master/feeder" structure.
The Fund is intended for long-term investors who can accept international
investment risk and little or no current income. Because the Fund concentrates
its investments in medical research and the health care industry, the Fund is
not intended to be a complete investment program. 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 investment
objective. See "Investment Policies and Risks" 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.
INVESTMENT POLICIES AND RISKS
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The Portfolio invests in a global and diversified portfolio of securities of
health science companies. These companies principally are engaged in the
development, production or distribution of products or services related to
scientific advances in health care, including biotechnology, diagnostics,
managed health care and medical equipment and supplies, and pharmaceuticals.
At the time the Fund makes an investment, 50% or more of such a company's
sales, earnings or assets will arise from or will be dedicated to the
application of scientific advances related to health care. The Portfolio may
invest in securities of both established and emerging companies, some of which
may be denominated in foreign currencies.
Under normal market conditions, the Portfolio will invest at least 65% of its
assets in securities of health science companies, including common and
preferred stocks; equity interests in partnerships; convertible preferred
stocks; and other convertible instruments. Convertible debt instruments
generally will be rated below investment grade (i.e., rated lower than Baa by
Moody's Investors Service, Inc. or lower than BBB by Standard & Poor's Ratings
Group) or, if unrated, determined by the Adviser to be of equivalent quality.
Convertible debt securities so rated are commonly called "junk bonds" and have
risks similar to equity securities; they are speculative 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. Such below investment grade, debt
securities will not exceed 20% of total assets. For temporary defensive
purposes, the Portfolio may invest without limit in high grade 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. 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.
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 are
subject to the risk of adverse developments affecting particular companies,
the health science industries and securities markets generally. The value of
Fund shares may fluctuate more than shares invested in a broader range of
industries. Many health science companies are subject to substantial
governmental regulations that can affect their prospects. Changes in
governmental policies, such as reductions in the funding of third-party
payment programs, may have a material effect on the demand for particular
health care products and services. Regulatory approvals (often entailing
lengthy application and testing procedures) are also generally required before
new drugs and certain medical devices and procedures may be introduced. Many
of the products and services of companies engaged in medical research and
health care are also subject to relatively high risks of rapid obsolescence
caused by progressive scientific and technological advances. The enforcement
of patent, trademark and other intellectual property laws will affect the
value of many such companies. The Portfolio will invest in securities of
emerging growth health science companies, which may offer limited products or
services or which are at the research and developmental stage with no
marketable or approved products or technologies. The securities of smaller,
less-seasoned companies, which may include legally restricted securities, are
generally subject to greater price fluctuations, limited liquidity, higher
transaction costs and higher investment risk. The Portfolio may invest up to
15% of its net assets in illiquid securities which excludes securities
eligible for resale under Rule 144A of the Securities Act of 1933 that the
Portfolio's Trustees and the Adviser determine are liquid. Holding Rule 144A
securities may increase illiquidity if qualified institutional buyers become
uninterested in buying them.
INVESTING IN FOREIGN SECURITIES. Investing in securities issued by foreign
companies and governments (including depository receipts) 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
tax), changes in governmental administration or economic or monetary policy
(in this country or abroad), or changed circumstances in dealings between
nations. Foreign currency exchange rates may fluctuate significantly over
short periods of time causing the Portfolio's net asset value to fluctuate as
well. Costs are incurred in connection with conversions between various
currencies. In addition, foreign brokerage commissions, custody fees 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 adversely 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. In addition to investing in foreign companies of
countries which represent established and developed economies, the Portfolio
may also invest some of its assets in the emerging economies of lesser
developed countries such as China and India, and countries located in Latin
America and Eastern Europe. Consistent with its investment objective, the
Portfolio is not limited in the percentage of assets it may invest in such
securities but the number of health science issuers in less developed
countries is relatively small. The relative risk and cost of investing in the
securities of companies in such emerging economies may be higher than an
investment in securities of companies in more developed countries. As of the
date of this Prospectus, more than 50% of the Portfolio's assets were
comprised of foreign securities.
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 (which may be
speculative), 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 covered call options on securities, indices or
currencies (and closing transactions); 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; default by the
counterparty; imperfect correlation between a position and the desired hedge;
tax constraints on closing out positions; and portfolio management constraints
on securities subject to such transactions. The loss on derivative instruments
(other than purchased options) may substantially exceed the 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.
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 investments, after taking into
account unrealized profits and unrealized losses on any contracts the
Portfolio has entered into. There is no current intention to use derivative
instruments for non-hedging purposes.
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
an Adviser 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
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.
CURRENCY SWAPS. 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.
REPURCHASE AGREEMENTS. The Portfolio may enter into repurchase agreements
(the purchase of a security coupled with an agreement to resell) 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. The
Portfolio does not expect to invest more than 5% of its total assets in
repurchase agreements under normal circumstances.
OTHER INVESTMENT COMPANIES. The Portfolio reserves the right to invest up to
10% of its total assets in the securities of other investment companies
unaffiliated with the Adviser that have the characteristics of closed-end
investment companies. 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.
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. Investment
restrictions are considered at the time of acquisition of assets; the sale of
portfolio assets generally is not required in the event of a subsequent change
in circumstances. As a matter of fundamental policy, the Portfolio will not
invest 25% or more of its total assets in the securities of issuers in any one
industry, other than U.S. Government securities and securities of health
science companies. 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 and (ii) securities denominated in the currency of any one country.
Under normal market conditions, the Portfolio will hold securities of issuers
in at least three countries.
Except for the fundamental investment restrictions and policies specifically
identified above and 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. Please refer to the Statement of Additional
Information for further information regarding the investment policies and
risks of the Fund and Portfolio.
ORGANIZATION OF THE FUND AND THE PORTFOLIO
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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. 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 (such as the Fund). 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 minimis amount of cash).
Therefore, the Fund's interest in 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 "Investment Policies and Risks." Further
information regarding the investment practices of the Portfolio 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.
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"), 24 Federal Street, Boston, MA 02110 (617)
482-8260. Smaller investors in the Portfolio may be adversely affected by the
actions of larger investors 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.
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 most of 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
"Trustees and Officers" in the Statement of Additional Information.
MANAGEMENT OF THE FUND AND THE PORTFOLIO
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EATON VANCE MANAGEMENT ("EATON VANCE") ACTS AS THE SPONSOR AND MANAGER OF THE
FUND AND AS THE ADMINISTRATOR OF THE PORTFOLIO. THE PORTFOLIO HAS ENGAGED
MEHTA AND ISALY ASSET MANAGEMENT, INC. ("M&I"), LOCATED AT 41 MADISON AVENUE,
40TH FLOOR, NEW YORK, NEW YORK 10010-2202 AS ITS INVESTMENT ADVISER (THE
"ADVISER"). M&I was incorporated in Delaware on February 24, 1989 and is
principally owned by Samuel D. Isaly, who serves as the President of M&I. The
Portfolio is the only investment company registered under the Investment
Company Act of 1940 (the "1940 Act") advised by M&I, which formerly was named
G/A Capital Management, Inc.
Investment decisions for the Portfolio are made by the portfolio manager,
Samuel D. Isaly. Mr. Isaly has been active in international and health care
investing throughout his career, beginning at Chase Manhattan Bank in New York
in 1968. He studied international economics, mathematics and econometrics at
Princeton and the London School of Economics. His company, Gramercy
Associates, was the first to develop an integrated worldwide system of
analysis on the 100 leading worldwide pharmaceutical companies, with
investment recommendations conveyed to 50 leading financial institutions in
the United States and Europe beginning in 1982. Gramercy Associates was
absorbed into S.G. Warburg & Company Inc. in 1986, where Mr. Isaly became a
Senior Vice President. In July of 1989, Mr. Isaly joined with Dr. Viren Mehta
to found the partnership of Mehta and Isaly. The operations of the combined
effort are (1) to provide investment ideas to institutional investors on the
subject of worldwide health care, (2) to undertake cross-border merger and
acquisition projects in the industry and (3) to provide investment management
services to selected investors. The latter activity is undertaken through the
legal entity Mehta and Isaly Asset Management, Inc., which is an investment
advisory firm registered with the Securities and Exchange Commission.
For its services, M&I receives a fee computed daily and payable monthly at an
annual rate of 1.00% of the Portfolio's average daily net assets up to $30
million of such assets, 0.90% of the next $20 million of such assets, and
0.75% on such assets in excess of $50 million. The fee rate declines for net
assets at $500 million and greater. After September 1, 1997, M&I may receive a
performance based adjustment of up to 0.25% of the average daily net assets of
the Portfolio. M&I has agreed to pay Eaton Vance Distributors, Inc. ("EVD")
the equivalent of one-third of its advisory fee receipts out of M&I's own
resources for EVD's activities as placement agent of the Portfolio.
The Adviser furnishes for the use of the Portfolio office space and all
necessary office facilities, equipment and personnel for servicing the
investments of the Portfolio. The Adviser 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, the Adviser 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 over $16 billion. Eaton Vance is a wholly-owned subsidiary of
Eaton Vance Corp., a publicly-held holding company, which through its
subsidiaries and affiliates engages primarily in investment management,
administration and marketing activities.
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 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. Eaton Vance does not provide any investment management or
advisory services to the Portfolio or the Fund.
The Fund, the Portfolio and M&I have adopted Codes of Ethics relating to
personal securities transactions. The Codes permit M&I personnel to invest in
securities (including securities that may be purchased or held by the
Portfolio) for their own accounts, subject to certain restrictions and
reporting procedures.
Under its management contract with the Fund, Eaton Vance receives a monthly
management 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. 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. The combined investment advisory, management and administration fees
payable by the Fund and the Portfolio are higher than similar fees charged by
many 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
Adviser under the investment advisory agreement, or Eaton Vance under the
management contract or the administration agreement, or by EVD under the
distribution 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 or the
Adviser; and investment advisory, management and administration fees. The Fund
and the Portfolio, as the case may be, 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.
DISTRIBUTION PLAN
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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 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.
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 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 based on the value of
Fund shares sold by such persons and remaining outstanding for at least one
year. 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 September 30, 1997.
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. 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
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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 IBT Fund Services (Canada) Inc. (as agent for the Fund)
in the manner authorized by the Trustees of the Trust. IBT Fund Services
(Canada), Inc. is a subsidiary of Investors Bank & Trust ("IBT"), the Fund's
and the Portfolio's custodian. Net asset value is computed by dividing the
value of the Fund's total assets, less its liabilities, by the number of Fund
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 Fund Services (Canada) Inc. (as agent for the
Portfolio) based on market or fair value in the manner authorized by the
Trustees of the Portfolio. Exchange traded equity securities generally are
valued at their last sale price. 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
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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. 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.
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, P.O. Box 5123, Westborough, MA 01581-5123. 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 price
available. 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 Worldwide Health Sciences Fund
IN THE CASE OF PHYSICAL DELIVERY:
Investors Bank & Trust Company
Attention: EV Marathon Worldwide Health Sciences 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. 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
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A SHAREHOLDER MAY REDEEM FUND SHARES IN ONE OF THREE WAYS - BY MAIL, BY
TELEPHONE OR THROUGH AN AUTHORIZED FIRM. The redemption price will be based
on the net asset value per Fund share next computed after a redemption request
is received in the proper form as described below.
REDEMPTION BY MAIL: Shares may be redeemed by delivering to First Data
Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123, during its
business hours a written request for redemption in good order, plus any share
certificates with executed stock powers. 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.
REDEMPTION BY TELEPHONE: Shares may be redeemed by telephone provided the
investor has not disclaimed in writing the use of the privilege. Such
redemptions can be effected by calling the Transfer Agent at 800-262-1122,
Monday through Friday, 9:00 a.m. to 4:00 p.m. (Eastern Standard Time). The
proceeds of a telephone redemption may be no greater than the maximum amount
established by the Principal Underwriter (currently $50,000) and may be mailed
only to the account address of record. Shares held by corporations, trusts or
certain other entities, or subject to fiduciary arrangements, may not be
redeemed by telephone. Neither the Fund, the Principal Underwriter nor the
Transfer Agent will be responsible for the authenticity of redemption
instructions received by telephone, provided that reasonable procedures to
confirm that instructions communicated by telephone are genuine have been
followed. If such procedures are not followed, the Fund, the Principal
Underwriter or the Transfer Agent may be liable for any losses due to
unauthorized or fraudulent telephone instructions. Telephone instructions will
be tape recorded. In times of drastic economic or market changes, a telephone
redemption may be difficult to implement.
REDEMPTION THROUGH AN AUTHORIZED FIRM: 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.
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.
If shares were recently purchased, the proceeds of a 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 $750. Prior to such a
redemption, shareholders will be given 60 days' written notice to make an
additional purchase. 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, in the value in the 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. As
described under "Distribution Plan," the contingent deferred sales charge will
be paid to the Principal Underwriter or the Fund. 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 REDEMPTION CONTINGENT DEFERRED
AFTER PURCHASE SALES CHARGE
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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 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 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 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
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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 tax
returns.
THE LIFETIME INVESTING ACCOUNT/DISTRIBUTION OPTIONS
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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
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, P.O. Box
5123, Westborough, MA 01581-5123 (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, P.O. Box
5123, Westborough, MA 01581-5123. 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 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.
THE EATON VANCE EXCHANGE PRIVILEGE
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Shares of the Fund currently may be exchanged for shares of one or more other
funds in the Eaton Vance Marathon Group of Funds (including Class I shares of
any EV Marathon Limited Maturity fund) or Eaton Vance Money Market Fund, which
are distributed subject to a contingent deferred sales charge. Shares of the
Fund may also be exchanged for shares of Eaton Vance Prime Rate Reserves,
which are subject to an early withdrawal charge, and shares of a money market
fund sponsored by an Authorized Firm and approved by the Principal Underwriter
(an "Authorized Firm fund"). Any such exchange will be made 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, except that time during
which shares are held in an Authorized Firm fund will not be credited toward
completion of the contingent deferred sales charge period. For the contingent
deferred sales charge schedule applicable to the Eaton Vance Marathon Group of
Funds (except EV Marathon Strategic Income Fund, Eaton Vance Prime Rate
Reserves and Class I shares of any EV Marathon Limited Maturity Fund), see
"How to Redeem Fund Shares." The contingent deferred sales charge or early
withdrawal charge schedule applicable to EV Marathon Strategic Income Fund,
Eaton Vance Prime Rate Reserves 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 funds listed above 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 the current
prospectus of any such fund.
Telephone exchanges are accepted by First Data Investor Services Group
provided that 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, 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. If such procedures
are not followed, the Fund, the Principal Underwriter or the Transfer Agent
may be liable for any losses due to unauthorized or fraudulent telephone
instructions. 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 Worldwide Health Sciences Fund may be mailed directly to First Data
Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123 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 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
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 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. The Fund's present policy is 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 (if any) allocated
to the Fund by the Portfolio (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 net asset value per share
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 reinvested in 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 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, if declared by the Fund 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 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 distributes 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.
Shareholders should consult with their tax advisors concerning the
applicability of state, local or other taxes to an investment in the Fund.
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 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 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 a
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 proportionate share of such taxes. The availability of foreign
tax credits or deductions for shareholders is subject to certain additional
restrictions and limitations.
The Fund will provide its shareholders annually with 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 (if any)
withheld by the Fund's Transfer Agent.
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 invested at the maximum public offering price
(net asset value) by the average annual compounded rate of return (including
capital appreciation/depreciation, 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 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 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]
EATON VANCE
MUTUAL FUNDS
EV MARATHON WORLDWIDE
HEALTH SCIENCES FUND
PROSPECTUS
SEPTEMBER 3, 1996
EV MARATHON WORLDWIDE
HEALTH SCIENCES FUND
24 FEDERAL STREET
BOSTON, MA 02110
- -------------------------------------------------------------------------------
SPONSOR AND MANAGER OF EV MARATHON WORLDWIDE HEALTH SCIENCES FUND
ADMINISTRATOR OF WORLDWIDE HEALTH SCIENCES PORTFOLIO
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
ADVISER OF WORLDWIDE HEALTH SCIENCES PORTFOLIO
Mehta and Isaly Asset Management, Inc. 41 Madison Avenue, New York, NY
10010-2202
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, P.O. Box 5123, Westborough, MA 01581-5123
(800) 262-1122
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand, L.L.P., One Post Office Square, Boston, MA 02109
M-HSP
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL INFORMATION
September 3, 1996
EV MARATHON
WORLDWIDE HEALTH SCIENCES FUND
24 Federal Street
Boston, Massachusetts 02110
(800) 225-6265
TABLE OF CONTENTS Page
PART I
Additional Information About Investment Policies .................. 1
Investment Restrictions ........................................... 5
Management of the Fund and the Portfolio .......................... 6
Custodian ......................................................... 9
Service for Withdrawal ............................................ 9
Determination of Net Asset Value .................................. 9
Investment Performance ............................................ 10
Taxes ............................................................. 11
Portfolio Security Transactions ................................... 13
Appendix .......................................................... 16
PART II
Fees and Expenses ................................................. a-1
Trustees and Officers ............................................. a-1
Principal Underwriter ............................................. a-3
Distribution Plan ................................................. a-4
Performance Information ........................................... a-5
Control Persons and Principal Holders of Securities ............... a-6
Independent Accountants ........................................... a-6
Financial Statements .............................................. a-6
Report of Independent Accountants ................................. a-8
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 SEPTEMBER 3, 1996, AS SUPPLEMENTED
FROM TIME TO TIME, WHICH IS INCORPORATED HEREIN BY REFERENCE. 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). THIS STATEMENT OF ADDITIONAL INFORMATION IS SOMETIMES
REFERRED TO HEREIN AS THE "SAI." CAPITALIZED TERMS USED IN THIS SAI AND NOT
OTHERWISE DEFINED HAVE THE MEANINGS GIVEN THEM IN THE FUND'S PROSPECTUS.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART I
ADDITIONAL INFORMATION ABOUT INVESTMENT POLICIES
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.
Foreign Investments. Under normal market conditions, the Portfolio will
invest in securities of issuers located in at least three different countries.
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. On 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.
Emerging Companies. The investment risk associated with emerging companies is
higher than that normally associated with larger, older companies due to the
greater business risks associated with small size, the relative age of the
company, limited product lines, distribution channels and financial and
managerial resources. Further, there is typically less publicly available
information concerning smaller companies than for larger, more established
ones. The securities of small companies are often traded only over-the-counter
and may not be traded in the volumes typical of trading on a national
securities exchange. As a result, in order to sell this type of holding, the
Portfolio may need to discount the securities from recent prices or dispose of
the securities over a long period of time. The prices of this type of security
may be more volatile than those of larger companies which are often traded on
a national securities exchange.
Currency Swaps. Currency swaps require maintenance of a segregated account
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 the Adviser. 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 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.
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 contacts, 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. The Portfolio will enter into over-the-counter transactions only
with parties whose creditworthiness has been reviewed and found satisfactory
by the Adviser.
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 Options Clearing Corporation ("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.
Risks Associated With Derivative Instruments. 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. For derivative
instruments other than purchased options, 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 assets. Over-the-counter ("OTC") derivative instruments involve an
enhanced risk that the issuer or counterparty will fail to perform its
contractual obligations. Some derivative instruments are not readily
marketable or may become illiquid under adverse market conditions. In
addition, 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 option 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. The staff of the Commission takes the
position that purchased OTC options, and assets used as cover for written OTC
options, are subject to the Portfolio's 15% limit on illiquid investments.
However, with respect to options written with primary dealers in U.S.
Government securities pursuant to an agreement requiring a closing purchase
transaction at a formula price, the amount of illiquid securities may be
calculated with reference to the formula price. The Portfolio's ability to
terminate OTC derivative instruments may depend on the cooperation of the
counterparties to such contracts. For thinly traded derivative instruments,
the only source of price quotations may be the selling dealer or counterparty.
In addition, 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 for federal income tax purposes.
See "Taxes."
Asset Coverage for Derivative Instruments. Transactions using forward
contracts, futures contracts and options (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, currencies, or
other options or futures contracts or forward contracts, or (2) cash and
liquid 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 Commission guidelines regarding cover for these instruments and, if the
guidelines so require, set aside cash and liquid 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 forward contract, 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 met redemption requests or other current obligations.
Limitations on Futures Contracts and Options. If the Portfolio has not
complied with the 5% CFTC test set forth in the Fund's prospectus, to evidence
its hedging intent, the Portfolio expects that, on 75% or more of the
occasions on which it takes a long futures or option on futures position, it
will have purchased or will be in the process of purchasing, equivalent
amounts of related securities at the time when the futures or options position
is closed out. However, in particular cases, when it is economically
advantageous for the Portfolio to do so, a long futures or options position
may be terminated (or an option may expire) without a corresponding purchase
of securities.
The Portfolio may enter into futures contracts, and options on futures
contracts, traded on an exchange regulated by the CFTC and on foreign
exchanges, but, with respect to foreign exchange-traded futures contracts and
options on such futures contracts, only if the Adviser determines that trading
on each such foreign exchange does not subject the Portfolio to risks,
including credit and liquidity risks, that are materially greater than the
risks associated with trading on CFTC-regulated exchanges.
In order to hedge its current or anticipated portfolio positions, the
Portfolio may use futures contracts on securities held in its Portfolio or on
securities with characteristics similar to those of the securities held by the
Portfolio. If, in the opinion of the Adviser, there is a sufficient degree of
correlation between price trends for the securities held by the Portfolio and
futures contracts based on other financial instruments, securities indices or
other indices, the Portfolio may also enter into such futures contracts as
part of its hedging strategy.
All call and put options on securities written by the Portfolio will be
covered. This means that, in the case of call option, the Portfolio will own
the securities subject to the call option or an offsetting call option so long
as the call option is outstanding. In the case of a put option, the Portfolio
will own an offsetting put option or will have deposited with its custodian
cash or liquid, high-grade debt securities with a value at least equal to the
exercise price of the put option. The Portfolio may only write a put option on
a security that it intends to acquire for its investment portfolio.
Repurchase Agreements. Under a repurchase agreement the Portfolio buys a
security at one price and simultaneously promise 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.
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 (including its
share of gains from the sale of securities 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 Commission, 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 holder of the securities or the giving or
holding of their consent on a material matter affecting the investment.
Securities lending involves administration expenses, including finders' fees.
If the Adviser decides to make securities loans, it is intended that the value
of the securities loaned would not exceed 1/3 of the Portfolio's total
assets. Securities lending involves administrative expenses including finders'
fees. As of the present time, the Trustees of the Portfolio have not made a
determination to engage in this activity, and have no present intention of
making such a determination during the current fiscal year.
INVESTMENT RESTRICTIONS
The following investment restrictions of the Fund are designated as
fundamental policies and as such cannot be changed without the approval of the
holders of a majority of the Fund's outstanding voting securities, which as
used in this SAI means the lesser of (a) 67% of the shares of the Fund,
present or represented by proxy at a meeting if the holders of more than 50%
of the shares are present or represented at the meeting or (b) more than 50%
of the shares of the Fund. Accordingly the Fund may not:
(1) Borrow money or issue any senior securities except as permitted by the
Investment Company Act of 1940;
(2) Purchase any securities on margin except that the Fund may obtain such
short-term credits as may be necessary for the clearance of purchases and
sales of securities;
(3) Underwrite securities of other issuers;
(4) Invest in real estate including interests in real estate limited
partnerships (although it may purchase and sell securities which are secured
by real estate and securities of companies which invest or deal in real
estate);
(5) Purchase or sell commodities or commodity contacts with respect to
physical commodities;
(6) Make loans to any person, except by (a) the acquisition of debt
securities and making portfolio investments, (b) entering into repurchase
agreements and (c) lending portfolio securities;
(7) With respect to 75% of its total assets, invest more than 5% of its
assets in the securities of any one issuer (except securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities), or
invest in the securities of any issuer if as a result the Fund holds more than
10% of the outstanding voting securities of such issuer;
(8) Sell securities short unless at all times when a short position is
open the Fund either owns an equal amount of such securities or owns
securities convertible into or exchangeable, without payment of any further
consideration, for securities of the same issue as, and equal in amount to,
the securities sold short; or
(9) Invest in the securities of any one industry, except the medical
research and health care industry (and except securities issued or guaranteed
by the U.S. Government, its agencies or instrumentalities) if as a result more
than 25% of the Fund's total assets would be invested in the securities of
such industry.
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. Notwithstanding the investment policies and restrictions of the
Portfolio, the Portfolio may invest part of its assets in another investment
company consistent with the Investment Company Act of 1940 (the "1940 Act").
The Portfolio has adopted substantially the same fundamental investment
restrictions as the foregoing 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.
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 (i) invest more than 15% of its net
assets in securities which are not readily marketable, including repurchase
agreements with remaining maturities in excess of seven days and restricted
securities. (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 the Fund or Portfolio, or their delegate,
determines to be liquid.); (ii) invest in the securities of any issuer
(including predecessors) which has not been in continuous operations for at
least three years if more than 5% of the Fund's or the Portfolio's total
assets, as the case may be, would be invested in such securities; (iii) invest
in warrants if as a result more than 2% of the value of the Fund's or
Portfolio's total assets would be invested in warrants which are not listed on
a recognized stock exchange, or more than 5% of the Fund's or the Portfolio's
total assets, as the case may be, would be invested in warrants regardless of
whether listed on such exchanges; (iv) purchase oil, gas or other mineral
leases or purchase partnership interest in oil, gas or other mineral
exploration or development programs; (v) purchase or retain the securities of
any issuer if to the knowledge of the Fund or Portfolio any officer, director
or trustee of the Fund, the Portfolio or of its investment adviser own
beneficially more than 1/2 of 1% of the outstanding securities of such issuer
and together they own beneficially more than 5% of the securities of such
issuer; (vi) invest in companies for the purpose of exercising control or
management; or (vii) invest in or sell put options, call options, straddles,
spreads or any combination thereof, except that the Fund may write covered
call options or enter into closing purchase transactions and except that the
Fund may enter into futures contracts and related options.
Whenever an investment policy or investment restriction set forth in the
Prospectus or this SAI states a maximum percentage of assets that may be
invested in any security or other asset or describes a policy regarding
quality standards, such percentage limitation or standard shall be determined
immediately 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. Nevertheless, under normal market conditions the Fund
and the Portfolio must take actions necessary to comply with its policy of
investing at least 65% of total assets in equity securities of health science
companies. Moreover, the Fund and the Portfolio must always be in compliance
with its borrowing policy set forth below.
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; or make loans to other persons.
MANAGEMENT OF THE FUND AND THE PORTFOLIO
Eaton Vance acts as the sponsor and manager of the Fund and the
administrator of the Portfolio. The Portfolio has engaged M&I as its
investment adviser.
THE ADVISER
As investment adviser to the Portfolio, the Adviser manages the
Portfolio's investments, subject to the supervision of the Board of Trustees
of the Portfolio. The Adviser is also 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." The advisory fee rate on average daily net
assets is reduced to .70% on assets of $500 million but less than $1 billion,
to .65% on assets of $1 billion but less than $1.5 billion, to .60% on assets
of $1.5 billion but less than $2 billion, to .55% on assets of $2 billion but
less than $3 billion and .50% on assets of $3 billion and over.
The performance fee adjustment to the advisory fee is as follows: After 12
months, the basic advisory fee is subject to upward or downward adjustment
depending upon whether, and to what extent, the investment performance of the
Portfolio differs by at least one percentage point from the record of the
Standard & Poor's Index of 500 Common Stocks over the same period. Each
percentage point difference is multiplied by a performance adjustment rate of
0.025%. The maximum adjustment plus/minus is 0.25%. One twelfth ( 1/12) of
this adjustment is applied each month to the average daily net assets of the
Portfolio over the entire performance period. This adjustment shall be based
on a rolling period of up to and including the most recent 36 months.
Portfolio performance shall be total return as computed under Rule 482 under
the Securities Act of 1933.
The Portfolio's investment advisory agreement with the Adviser remains in
effect until February 28, 1997; it may be continued indefinitely thereafter so
long as such continuance is approved at least annually (i) by the vote 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 Adviser 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 the Adviser, the Adviser 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
Eaton Vance, its affiliates and its predecessor companies have been
managing assets of individuals and institutions since 1924 and managing
investment companies since 1931. They maintain a large staff of experienced
fixed-income and equity investment professionals to service the needs of their
clients. The fixed-income division focuses on all kinds of taxable investment-
grade and high-yield securities, tax-exempt investment-grade and high-yield
securities, and U.S. Government securities. The equity division, with a staff
of approximately 30 professionals, covers stocks ranging from blue chip to
emerging growth companies. Eaton Vance manages more than 150 mutual funds, as
well as retirement plans, pension funds and endowments.
See "Management of the Fund and the Portfolio" in the 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:
ANNUAL
CATEGORY AVERAGE DAILY NET ASSETS ASSET RATE
- ---------- ------------------------ ----------
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 .................................. 0.1667
For the management fees that the Fund paid to Eaton Vance, see "Fees and
Expenses" in the Part II.
Eaton Vance's management contract with the Fund will remain in effect
until February 28, 1997, and its administration agreement with the Portfolio
will remain in effect until February 28, 1997. Each agreement may be continued
from year to year, so long as such continuance is approved annually by the
vote of a majority of the Board of the Fund or the Trustees of the Portfolio,
as the case may be. Each agreement may be terminated at any time without
penalty on sixty days' written notice by the relevant Board 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 Boards, including the non-interested members, of the Trust or
the Portfolio.
To the extent necessary to comply with U.S. tax law, Eaton Vance has
employed IBT Trust Company (Cayman) Ltd. to serve as the sub-administrator of
the Portfolio. The sub-administrator maintains the Portfolio's principal
office and certain of its records and provides administrative assistance in
connection with meetings of the Portfolio's Trustees and interestholders.
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 an Adviser under the investment advisory agreement, by Eaton Vance
under the management contract or the administration agreement, or by EVD under
the distribution 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 Directors or Trustees not affiliated with Eaton
Vance or an Adviser; distribution and service fees payable by the Fund under
its Rule 12b-1 distribution plan; and investment advisory, management and
administration fees. The Fund and the Portfolio, as the case may be, 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 Directors or 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
September 3, 1996, 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, Directors or Trustees of the Fund and/or the
Portfolio, are members of the EVC, Eaton Vance, BMR and EV organizations.
Messrs. Murphy, O'Connor, Richardson and Woodbury and Ms. Sanders are officers
of the Fund and/or the Portfolio, and are also members of the Eaton Vance, BMR
and/or EV organizations. Eaton Vance will receive the fees paid under the
management agreement and its wholly-owned subsidiary, Eaton Vance
Distributors, Inc., as Principal Underwriter, will receive its portion of the
sales charge on shares of the Fund sold through investment dealers.
EVC owns all of the stock of Energex Energy Corporation, which engages in
oil and gas exploration and development. In addition, Eaton Vance owns all the
stock of Northeast Properties, Inc., which is engaged in real estate
investment. EVC also owns 24% of the Class A shares of Lloyd George Management
(B.V.I.) Limited, a registered investment adviser. EVC owns all the stock of
Fulcrum Management, Inc. and MinVen, Inc., which are engaged in precious metal
mining venture investment and management. EVC, BMR, Eaton Vance and EV may
also enter into other businesses.
Eaton Vance mutual funds are distributed by Eaton Vance Distributors both
within the United States and offshore. Eaton Vance Distributors believes that
an investment professional can provide valuable services to you to help you
reach your investment goals. Meeting investment goals requires time,
objectivity and investment savvy. Before making an investment recommendation,
a representative can help you carefully consider your short- and long-term
financial goals, your tolerance for investment risk, your investment time
frame, and other investments you may already own. Your professional investment
representatives are knowledgeable about financial markets, as well as the wide
range of investment opportunities available. A representative can provide you
with tailored financial advice and help you decide when to buy, sell or
persevere with your investments.
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, and its subsidiary, IBT Fund
Services (Canada) Inc., 1 First Canadian Place, King Street West, Toronto,
Ontario, Canada, 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 member 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 Portfolio and IBT under the 1940 Act.
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 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. 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 Fund's 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 per share is computed daily, Monday through Friday, as
of the close of regular trading on the New York Stock Exchange (the
"Exchange"), which is currently 4:00 p.m., Eastern time, except that the net
asset value will not be computed on the following holidays: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. The Portfolio's net asset value also will
be determined on any day in which there is sufficient trading in its portfolio
securities that the net asset value might be affected materially, but only if
on any such day the Portfolio is required to sell or redeem shares. The net
asset value per share is computed by dividing the value of the securities held
by the Portfolio plus any cash or other assets (including any accrued interest
and dividends receivable but not yet received) minus all liabilities
(including accrued expenses) by the total number of Portfolio shares
outstanding at such time.
The Trustees of the Portfolio have established the following procedures
for the fair valuation of the Portfolio's assets under normal market
conditions. Securities listed on foreign or U.S. securities exchanges or in
the NASDAQ National Market System generally are valued at closing sale prices
or, if there were no sales, at the mean between the closing bid and asked
prices therefor on the exchange where such securities are principally traded
or on such National Market System. Unlisted or listed securities for which
closing sale prices are not available are valued at the mean between the
latest bid and asked prices. Futures positions on securities or currencies are
generally valued at closing settlement prices. Short-term debt securities with
a remaining maturity of 60 days or less are valued at amortized cost. If
securities were acquired with a remaining maturity of more than 60 days, their
amortized cost value will be based on their value on the sixty-first day prior
to maturity. Other fixed income and debt securities, including listed
securities and securities for which price quotations are available, will
normally be valued on the basis of valuations furnished by a pricing service.
All other securities are valued at fair value as determined in good faith by
or at the direction of the Trustees.
Generally, trading in the foreign securities owned by the 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 share 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.
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 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 represents that investor's share of the aggregate interests in the
Portfolio on such prior day. Any additions or withdrawals, which are to be
effected on that day, will then be effected. Each investor's percentage of the
aggregate interests 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 regular trading on the Exchange
(normally 4:00 p.m., New York time), on such 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 effected on such day, and (ii) the denominator of
which is the aggregate net asset value of the Portfolio as of the close of
such trading on such 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
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 annualizing the result. The
calculation assumes that all 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 the
contingent deferred sales charge at the end of the period.
Total return may be compared to relevant indices, such as the Consumer
Price Index and various domestic and foreign securities indices, such as the
Standard & Poor's Index 500 Stock Index. In addition, the Fund's total return
may be compared to indices available through Lipper Analytical Services, Inc.
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.
Average annual total return and total return figures represent the
increase (or decrease) in the value of an investment in the Fund over a
specified period. Both calculations assume that all income dividends and
capital gain distributions during the period are reinvested at net asset value
in additional Fund shares. Quotations of the average annual total return
reflect the deduction of the maximum sales charge and a proportional share of
Fund expenses on an annual basis. The results, which are annualized, represent
an average annual compounded rate of return on a hypothetical investment in
the Fund over a period of 1, 5 and 10 years ending on the most recent calendar
quarter (but not for a period greater than the life of the Fund), calculated
pursuant to the following formula:
P (1 + T) n = ERV
where P = a hypothetical initial payment of $1,000,
T = the average annual total return,
n = the number of years, and
ERV = the ending redeemable value of a hypothetical $1,000
payment made at the beginning of the period.
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 Private Client Group,
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.
Information about the Portfolio allocation and holdings of investments in
the Portfolio may be included in advertisements and other material furnished
to present and prospective shareholders. Also, 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.
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 form such reinvestments as well as the total value of all
shares acquired for such investments and reinvestments. Such information may
also include statements or illustration 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".
The Fund may provide investors with information on global investing, which
may include descriptions, comparisons, charts and/or illustrations of: foreign
and domestic equity market capitalizations; returns obtained by foreign and
domestic securities; and the effects of globally diversifying an investment
portfolio (including volatility analysis and performance information). Such
information may be provided for a variety of countries over varying time
periods.
The Fund may provide information about Eaton Vance, its affiliates and
other investment advisers to the funds in the Eaton Vance Family of Funds in
sales material or advertisements provided to investors or prospective
investors. Such material or advertisements may also provide information on the
use of investment professionals by such investors.
TAXES
See also "Distribution and Taxes" in the Fund's current Prospectus.
The Fund intends to elect to be treated, and 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 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, 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 was not taxed. Further, 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, corporate excise or
franchise tax in the Commonwealth of Massachusetts or State of Maryland.
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 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 separate category 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 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 a 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.
The Fund will not be subject to Massachusetts or Maryland income,
corporate excise or franchise taxation as long as it qualifies as a RIC under
the Code.
Special tax rules apply to Individual Retirement Accounts ("IRAs") and
shareholders investing through IRAs 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 certifications required by the Internal
Revenue Service (the "IRS"), as well as shareholders with respect to whom the
Fund has received notification from the IRS or a broker, may be subject to
"backup" withholding of federal income tax from the Fund's taxable 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, foreign corporations and certain 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
broker-dealer 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 overall responsibilities which the
Adviser and its affiliates have for accounts over which it exercises
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 of 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.
<PAGE>
Appendix
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EATON VANCE
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MUTUAL FUNDS
[medical graphic]
EATON VANCE
WORLDWIDE HEALTH
SCIENCES FUNDS
Participate in the Accelerating Revolution in Global Health Sciences
EV TRADITIONAL WORLDWIDE HEALTH SCIENCES FUND ("A")
EV MARATHON WORLDWIDE HEALTH SCIENCES FUND ("B")
[globe graphic]
EATON VANCE
GLOBAL MANAGEMENT--GLOBAL DISTRIBUTION
<PAGE>
[logo]
EATON VANCE
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MUTUAL FUNDS
THE CASE FOR HEALTH SCIENCES
THE ACCELERATING REVOLUTION
In no other discipline has innovation been more dramatic--or critical to human
existence--than in the field of health sciences, which embraces both medical
research and health care. Indeed, the health sciences industry is in the midst
of a revolution that began in this century and is accelerating as we approach
its close.
o The discovery of penicillin in the late 1920s was the catalyst for the modern
health care revolution. That discovery fostered the realization that disease
could be cured with drugs and was the foundation for today's
multi-billion-dollar pharmaceutical industry.
o More recently, technological breakthroughs like computerized axial tomography
(CAT scans), magnetic resonance imaging (MRI) and ultrasound have
revolutionized diagnostic capabilities, while heart-lung machines, kidney
dialysis and pacemakers are among the many devices that complement drugs and
surgery in treating illness.
o The discovery of the structure of DNA and the cracking of the genetic code
are perhaps the most notable breakthroughs. Not only have they produced
exciting recombinant/cloning therapies, they have opened new research
frontiers that are transforming health sciences even today.
o Today, all over the world, new drugs and treatments are in some stage of
development. Within the next few years, we will witness some startling
discoveries and, within many of our lifetimes, the health sciences industry
will achieve breakthroughs, so revolutionary, that none of us now can even
imagine.
The large and small companies engaged in the pursuit of tomorrow's innovations
(and those who invest in them) have the potential to profit handsomely.
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THE HEALTH SCIENCES UNIVERSE
[medical graphic]
The health sciences universe includes companies principally engaged in the
development, production or distribution of products and services related to
health care.
Biotechnology: Companies producing or planning to produce diagnostic and
therapeutic drugs using recombinant and molecular biology and rational drug
design platforms to treat and cure diseases.
Pharmaceuticals: Companies involved in large-scale, global discovery and
development of innovative prescription drugs and diagnostics,
over-the-counter products, delivery systems, nutrition, animal health and
sometimes chemical and agricultural products.
[microscope graphic]
Diagnostics: Companies that develop or maintain sophisticated diagnostic
equipment such as CAT scanners and Magnetic Resonance Imaging, as well as
urological and serological assays.
Managed Health Care: Operations of investor-owned hospital chains (including
acute care psychiatric hospitals), nursing centers, health maintenance
organizations, and rehabilitation clinics which seek to deliver hospital care
on an efficient cost basis.
Medical Equipment and Supplies: Companies engaged in the manufacture of
inpatient and outpatient medical (and dental), surgical, laboratory and
diagnostic products (ranging from cotton swabs through kidney dialysis
equipment to CAT scanners).
[beakers with solution graphic]
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- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
<PAGE>
WORLD DEMOGRAPHICS ARGUE FOR A
COMING EXPLOSION IN HEALTH CARE
The health sciences industry knows no borders or political frontiers. In the
U.S. and the developed countries of Europe and Asia, as well as in emerging
countries, demographics are at work that should push demand steadily upward.
IN THE MATURE ECONOMIES
The mature economies of the world house 14% of the earth's population, yet
account for 80% of all health care expenditures. What's more, individuals over
age 65 account for a substantially greater proportion of spending than younger
age groups, and that trend should continue as the populations of the world's
mature economies age.
Sources: PSMI International Data Bases; Central Intelligence Agency
o In 1900 in the U.S., for example, there were 3.1 million people age 65 or
older. By 1993, there were 32.8 million, or 10 times as many.*
o In the U.S., the 75-and-over age group is growing at the fastest pace, soon
to be replaced by those 85 and older. By the year 2050, it is projected that
the over-85 population will exceed 18 million people.*
* Source: U.S. Bureau of the Census
o The oldest of the "baby boomers" turned 50 in 1996. As this generation ages,
its demand for health care and, hence, its health care expenditures, should
escalate dramatically.
o Over the past two decades, health care expenditures have been increasing in
many countries throughout the world. In the U.S., for example, heath care
costs amounted to $884.2 billion in 1993, or 13.9% of Gross Domestic Product
(GDP), compared to only 5.9% of GDP in 1965.
Source: U.S. Department of Labor
AGING AMERICA
Population Growth 1900-2050
(in millions)
85 and older 65 and older
1900 0.1 3.1
1920 0.2 4.9
1940 0.4 9.0
1960 0.9 16.7
1980 2.2 25.7
1990 3.0 30.0
2000 4.3 35.3
2010 5.7 40.1
2020 6.5 53.3
2030 8.4 70.2
2050 18.2 78.9
Source: U.S. Bureau of the Census
IN THE EMERGING ECONOMIES
o Presently, the emerging markets account for 86% of the world's population,
but only 20% of global health care expenditures. But the potential lies in
how much they WILL spend. Where the per capita spending per year is $270 in
the west, it is only $15 in the emerging markets.
Sources: PSMI International Data Bases; Central Intelligence Agency
o It is estimated that over 10% of the emerging market population -- a consumer
group similar in size to the population of established economies -- can now
afford western prices. And the percentage will surely increase as
liberalization in these markets produces a growing middle class.
Source: Mehta and Isaly
ADVANCES CREATE DEMAND
Beyond demographics, the very innovations within the health sciences industry
create demand for products and services that improve our quality of life in a
highly cost-effective manner.
For example, if you were diagnosed with a peptic ulcer, surgery was the
accepted treatment. Then came Tagamet(TM), Zantac(TM) and Prilosec(TM).
Today, ulcers are more treatable than the common cold. (According to the
August 5, 1996 edition of FORTUNE, Zantac(TM) is the most successful drug
ever produced, generating over $27 billion in worldwide sales since it was
introduced in 1981.)
There are numerous unmet needs that the health sciences industry will seek to
answer in the future.
[Beakers with solutions graphic]
HISTORY OF STRONG PERFORMANCE
Although past performance cannot guarantee future results, over the past 10
years, the health and biotechnology sector has outperformed both the Standard &
Poor's 500 Index and the Morgan Stanley Capital International Index.
A HISTORY OF STRONG PERFORMANCE
HEALTH/BIOTECH FUNDS VERSUS WORLD MARKETS
Growth of $100, 12/31/85 - 6/30/96
MSCI S&P LIPPER HEALTH/
WORLD INDEX 500 BIOTECH FUNDS
1986 100 100 100
1987 142.800003 118.660004 116.599998
1988 166.729996 124.900002 117.650002
1989 206.669998 145.639999 132.160004
1990 242.210007 191.800003 191.080002
1991 202.199997 185.850006 232.880005
1992 240.550003 242.479996 398.51001
1993 229.339996 260.959991 329.130005
1994 284.440002 276.380005 344.709991
1995 312.170013 319.399994 422.700012
1996 376.820007 421.929993 611.02002
Sources: Lipper Analytical Services, Inc.; Standard & Poor's; MSCI.
The Lipper Health/Biotechnology Funds Average is composed of open-end mutual
funds that invest at least 65% of their equity portfolios in shares of companies
engaged in health care, medicine and biotechnology. The Standard & Poor's 500
Composite Index is an unmanaged index of 500 capitalization-weighted common
stocks and is commonly used as a measure of U.S. stock market performance. The
Morgan Stanley Capital International World Index is an unmanaged,
capitalization-weighted index composed of a sample of companies representative
of the market structure of 22 world markets, including the U.S., which are
generally open to foreign investments.
NOW EATON VANCE OFFERS YOU AN EASY, AFFORDABLE WAY TO PARTICIPATE IN THE GROWTH
POTENTIAL OF HEALTH SCIENCES ... THE EV WORLDWIDE HEALTH SCIENCES FUNDS.
THE CASE FOR
EV WORLDWIDE HEALTH SCIENCES FUNDS
INVESTMENT OBJECTIVE
The objective of the Eaton Vance Worldwide Health Sciences Funds is long-term
capital growth. The Funds seek to achieve their objective by investing in the
Worldwide Health Sciences Portfolio* (the "Portfolio"). The Portfolio is a
diversified, open-end investment company having the same investment objective as
the Funds.
* Formerly the Medical Research Investment Fund, Inc.
INVESTMENT STRATEGY
Recognizing that health sciences is truly a global industry and that knowledge
is not confined to any one region, the Funds' adviser, Mehta and Isaly Asset
Management, Inc., takes a worldwide investment perspective. Its current
investment strategy is...
o All investments are selected for their long-term potential.
o Generally, between 20% and 40% of the Portfolio assets are invested in 10 to
15 major pharmaceutical companies with market capitalizations greater than $2
billion. The selection of major companies is based on potential to increase
market share.
o The remaining 60% to 80% of assets are invested in 15 to 20 smaller
biotechnology and speciality health care companies. Selection is based on
Portfolio potential to achieve above-average growth.
o Portfolio holdings are distributed between the United States, Europe and the
Far East, which includes Australia.
o The goal is to achieve a high level of capital growth with controlled risk.
- --------------------------------------------------------------------------------
GEOGRAPHICAL ALLOCATION OF PORTFOLIO ASSETS
AS OF 7/31/96
WORLDWIDE DATASTREAM WORLD
HEALTH SCIENCES PORTFOLIO PHARMACEUTICALS INDEX
BIG CAP 42%* BIG CAP 94%*
FAR EAST 36% FAR EAST 29%
AMERICAS 16% AMERICAS 36%
EUROPE 48% EUROPE 35%
SMALLER CAP 56% SMALLER CAP 6%
FAR EAST 25% FAR EAST 27%
AMERICAS 48% AMERICAS 13%
EUROPE 27% EUROPE 60%
CASH: 2%
* market capitalization of $2 billion or more
In assembling the Portfolio, The Funds' adviser has focussed on smaller cap
companies, which account for two-thirds of all research being undertaken in the
worldwide health sciences industry. This weighting contrasts sharply with the
makeup of the Datastream World Pharmaceuticals Index, whose composition includes
94% large cap companies.
Source: Datastream; Mehta and Isaly
- --------------------------------------------------------------------------------
INVESTMENT UNIVERSE
According to a 1993 study by Hoffmann-La Roche (which the Funds' adviser
believes is the most current), the 20 largest research and development companies
in the world, with market capitalizations of $2 billion and up, had about 1,100
drugs in various stages of research. The small firms, of which there are
hundreds, had over 2,300 drugs in research. In other words, the smaller
companies are undertaking over two-thirds of the scientific research, and, in
the opinion of the Funds' adviser, this is where there is the greatest potential
for dramatic appreciation on investment.
FIRMS ARE EVALUATED DIFFERENTLY
o THE LARGE COMPANIES: Here, the Funds' adviser looks for future increase in
market share, which correlates well with the stock price.
o THE SMALLER COMPANIES: Here the focus is to look for "promise," -- for truly
innovate therapies that go beyond treating just the symptoms. The realization
of such promise will determine a company's future market share and so, just
as with the larger firms, will determine its future earnings and stock price.
All the new compounds (drugs) that will be on the market in the year 2000 are in
development now, and the Funds' investment adviser believes it knows about each
through its extensive investment research activities.
[hand holding test tube graphic]
THE CASE FOR
MEHTA AND ISALY ASSET MANAGEMENT, INC.
Mehta and Isaly Asset Management, Inc. (formerly G/A Capital Management, Inc.),
a New York-based investment advisory company founded in 1989, brings a unique
combination of scientific and financial expertise to the management of the
Funds. The firm includes 10 professional and 5 support staff who specialize in
pharmaceutical, biotechnology and health care analysis with a global
perspective.
At least four important differences distinguish Mehta and Isaly from other
investment management firms.
o First, all 10 professionals are analysts. The Funds' Portfolio averages 30
holdings at any one time. Probably no other management company has such a high
ratio of analysts to portfolio holdings.
o Second, four of the analysts hold Ph.D. degrees in scientific disciplines.
This means they are able to evaluate the viability of drugs and technologies
under development in the biotech sector.
o Third, analysts cover the health sciences industry from a global perspective.
This enables the firm to "buy the best there is," wherever it is. Every
portfolio acquisition is examined in a worldwide, not a country-by-country,
perspective.
o Fourth, the Portfolio is managed to remain fully invested. Reason:there are
always exciting opportunities; the question is which ones, and at which time,
will best serve the Portfolio's objective?
In addition to serving as investment adviser to the Funds, Mehta and Isaly
provides advice to 15 pharmaceutical companies worldwide and 80 institutional
investors in the U.S., Europe and Japan. Total assets under management are over
$250 million.
HOW THE ADVISER SEEKS TO CONTROL RISK
In Mehta and Isaly's view, there are two principal forms of risk associated with
investment in health sciences:technological risk and financial risk.
While there is a large component of chance in technological risk, (i.e.,
assessing the viability of products, therapies and technologies under
development) the firm strives to reduce that risk by carrying out an intensive
valuation process. This is where the team of scientific analysts proves
invaluable.
Mehta and Isaly focuses on 11 smaller-company research and therapeutic
subsectors. Then, working across the global spectrum of firms engaged in the
same pursuits, it evaluates competition, market potential and probabilities of
achieving a major breakthrough.
In addition, Mehta and Isaly seeks to control financial risk by diversifying the
Portfolio both geographically and by market capitalization, as well as thorough
painstaking financial analysis and field trips to targeted Portfolio companies.
- --------------------------------------------------------------------------------
HOW PORTFOLIO HOLDINGS ARE SELECTED
1) Mehta and Isaly keeps 300 companies on computer file
o 200 based in United States
o 100 based in Europe and Far East
2) Staff does initial screening on products and valuation
3) 200 companies are chosen for firm's assignment list
o Staff meets with company management
o Acquires in-depth perspective
o Does valuation screens
o Evaluates products and therapies
o Assesses markets
o Determines financial position
4) List is further narrowed to 100 companies
o Intensive contact with management
5) 25 to 30 companies are selected for Portfolio
o Staff closely monitors each one
- --------------------------------------------------------------------------------
ABOUT EATON VANCE
With a history that dates to 1924, Eaton Vance is a Boston-based investment
management firm. The company serves as the Funds' sponsor and administrator.
Eaton Vance features...
o Over seven decades of investment management expertise in U.S. equities
o More than 25 professionals specializing in security analysis and equity
management
o Over $17 billion in assets under management
o More than 150 mutual funds, as well as retirement plans, pension funds and
endowments
ABOUT RISK
Eaton Vance and Mehta and Isaly believe opportunities for long-term growth of
capital are excellent for many health sciences companies. The Funds, however,
should not be considered a complete investment program due to lack of industry
diversification.
The health sciences industry generally is subject to substantial government
regulation. Accordingly, changes in government policies or regulation could have
a material effect on the demand for products and services offered by health
science companies and, therefore, could affect the performance of the Funds.
Enforcement of intellectual property laws will effect the value of many
companies. It should be recognized that foreign securities and markets in which
the Portfolio invests pose different and greater risks than those customarily
associated with domestic securities and their markets. Furthermore, investors
should consider other risks associated with a portfolio which contains
international securities, including fluctuations in foreign currency exchange
rates and political and economic instability. In addition, the Portfolio may
invest up to 20% of its total assets in below investment grade securities and up
to 100% of its assets in the securities of emerging companies. Emerging
companies, especially foreign emerging companies, may not be as liquid as larger
domestic companies. The net asset value of Fund shares will fluctuate over time
and investors may experience losses.
SHAREHOLDER SERVICES
o Investment minimum, $1,000; subsequent investments of $50 or more.
o Reinvest fund distributions automatically.
o Free exchange of your shares for those of other Eaton Vance Funds (with the
same distribution plan) with the ease of a phone call. The exchange privilege
may be changed or discontinued at any time.
o Bank draft investing for automatic monthly or quarterly investments from a
checking account.
o Tax-sheltered retirement plans. Purchase shares of the Funds in an Individual
Retirement Account, 401(k) Plan, Pension or Profit-Sharing Plan or a 403(b)
Retirement Plan.
o Systematic withdrawal plans for automatic periodic withdrawals from a fund
account.
Withdrawals from Marathon Fund outside an allowed systematic withdrawal plan may
be subject to a contingent deferred sales charge. See prospectus for details.
IT PAYS TO SEEK PROFESSIONAL ADVICE
You have crucial investment goals -- your children's education, a comfortable
retirement, financial independence. Or all three. Meeting those goals requires
time, objectivity and investment savvy. Most people do not hesitate to consult a
professional for advice in other important areas of their lives. With your
financial future at stake, why not seek the help of a professional investment
representative! Before making an investment recommendation, your representative
can help you carefully consider --
o your short- and long-term financial goals
o your tolerance for investment risk
o your investment time frame
o the other investments you may already own
Your investment representative is knowledgeable about financial markets, as well
as the wide range of investment opportunities available. Your representative can
help you decide when to buy, sell or persevere with your investments. With your
professional investment representative, you have someone you can depend on for
tailored financial advice -- today, and during the years to come.
Take a closer look at the Eaton Vance Worldwide Health Sciences Funds. We think
you'll agree they represent an exciting global investment opportunity. Your
professional investment adviser and Eaton Vance are there to help you capture
the growth potential of the world's health sciences industry.
For more complete information about EV Marathon Worldwide Health Siences Fund,
EV Traditional Worldwide Health Sciences Fund or any other Eaton Vance fund,
including distribution plans, charges and expenses, please write or call your
financial adviser for a prospectus(es). Read the prospectus(es) carefully before
you invest or send money. The Funds' objective and certain policies are
nonfundamental and may be changed without shareholder approval. The Funds are
intended for long-term investors and are not meant to be a complete investment
program.
Ask your investment adviser how EV Marathon Worldwide Health Sciences Fund or EV
Traditional Worldwide Health Sciences Fund, Inc. might fit into your portfolio.
[logo]
EATON VANCE
- --------------
MUTUAL FUNDS
(C) 1996 EATON VANCE DISTRIBUTORS. INC., 24 Federal Street, Boston, MA 02110
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EV MARATHON WORLDWIDE HEALTH
SCIENCES FUND. The Fund became a series of Eaton Vance Growth Trust on March
20, 1996.
FEES AND EXPENSES
ADVISER
No fees paid to date.
MANAGER AND ADMINISTRATOR
No fees paid to date.
DISTRIBUTION PLAN
No fees paid to date.
PRINCIPAL UNDERWRITER
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. No fees paid to date.
BROKERAGE
No fees paid to date.
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.) For the fiscal year ending August 31, 1997, it is estimated
that the noninterested Trustees of the Fund and the Portfolio will receive the
following compensation in their capacities as Trustees of the Trust and the
Portfolio and, during the year ended December 31, 1996, the noninterested
Trustees of the Trust and the Portfolio will have earned the following
compensation in their capacities as Trustees of the funds in the Eaton Vance
fund complex(1):
NAME ESTIMATED ESTIMATED
AGGREGATE AGGREGATE TOTAL COMPENSATION
COMPENSATION COMPENSATION FROM TRUST AND
FROM FUND FROM PORTFOLIO FUND COMPLEX
------------ -------------- --------------
Donald R. Dwight ....... $35 $90 $145,000(2)
Samuel L. Hayes, III ... 35 90 150,000(3)
Norton H. Reamer ....... 35 90 145,000
John L. Thorndike ...... 35 90 150,000
Jack L. Treynor ........ 35 90 150,000
(1) The Eaton Vance fund complex consists of 227 registered investment
companies or series thereof.
(2) Includes $45,000 of deferred compensation.
(3) Includes $37,500 of deferred compensation.
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
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 of Lloyd George Management (B.V.I.) Limited ("LGM").
Director or Trustee and officer of various investment companies managed by
Eaton Vance or BMR.
DONALD R. DWIGHT (65), 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 (61), 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, 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 (66), 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 since November, 1994. Vice President of The
Boston Company prior thereto.
M. DOZIER GARDNER (62), Vice President
President and Chief Executive Officer 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.
BARCLAY TITTMANN (64), Vice President
Vice President of Eaton Vance since September, 1993. Vice President of INVESCO
prior thereto.
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.
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 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 on March 27, 1995.
ERIC G. WOODBURY (39), Assistant Secretary
Vice President of Eaton Vance 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.
OFFICERS AND TRUSTEES OF THE PORTFOLIO
The Trustees and officers of the Portfolio are identical to the Trustees
and officers of the Trust, except Mr. Burt, Mr. Gardner and Mr. Tittman are
not officers of the Portfolio and the following is an additional officer of
the Portfolio:
SAMUEL D. ISALY (51), Vice President
President of Mehta and Isaly Asset Management, Inc. since 1989; Senior Vice
President of S.G. Warburg & Co., Inc. from 1986 through 1989; and President
of Gramercy Associates, a health care industry consulting firm, from 1983
through 1986.
Address: Mehta and Isaly Asset Management, Inc., 41 Madison Avenue, 40th Floor,
New York, NY 10010-2202
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
purpose of the Special Committee is to consider, evaluate and make
recommendations to the full Board of Trustees concerning (i) all contractual
arrangements with service providers to the Fund, including administrative
services, transfer agency, custodial and fund accounting and distribution
services, and (ii) all other matters in which Eaton Vance or its affiliates
has any actual or potential conflict of interest with the Fund or its
shareholders.
The Nominating Committee is comprised of four Trustees who are not
"interested persons" as that term is defined under the 1940 Act
("noninterested Trustees"). The Committee has four-year staggered terms, with
one member rotating off the Committee to be replaced by another noninterested
Trustee of the Trust. Messrs. Hayes (Chairman), Reamer, Thorndike and Treynor
are currently serving on the Committee. The purpose of the Committee is to
recommend to the Board nominees for the position of noninterested Trustee and
to assure that at least a majority of the Board of Trustees is independent of
Eaton Vance and its affiliates.
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 certified public accountants, and reviewing
with such accountants and the Treasurer of the Trust and of the Portfolio
matters relative to trading and brokerage policies and practices, accounting
and auditing practices and procedures, accounting records, internal accounting
controls, and the functions performed by the custodian and transfer agent of
the Fund and of the Portfolio.
Trustees of the Portfolio who are not affiliated with the Adviser may
elect to defer receipt of all or a percentage of their annual fees in
accordance with the terms of a Trustees Deferred Compensation Plan (the
"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. Neither
the Portfolio nor the Fund has a retirement plan for its Trustees.
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."
PRINCIPAL UNDERWRITER
The Principal Underwriter is a wholly-owned subsidiary of Eaton Vance.
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 ("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 states 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 reserves the right to suspend or limit the offering
of shares to the public at any time.
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
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 Distributions 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
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." 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 many 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 fee
payable to Eaton Vance by the Portfolio) resulting from sale of Fund shares
and through the sales commissions and distribution fees and contingent
deferred sales charges paid to the Principal Underwriter. The Eaton Vance
organization may be considered to have realized a profit in distributing
shares of the Fund if at any point in time the aggregate amounts theretofore
received by the Principal Underwriter from the Fund 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.
Pursuant to Rule 12b-1, the Plan has been approved by the Fund's initial
sole shareholder (Eaton Vance Management) and by the Board of Trustees of the
Trust as required by Rule 12b-1. The Plan provides that it shall continue 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 the Distribution
Agreement may each 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. 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 lease 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 Authorized Firms under the Plan would 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 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.
<TABLE>
VALUE OF $1,000 INVESTMENT
<CAPTION>
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN TOTAL RETURN
INVESTMENT BEFORE CDSC AFTER CDSC* BEFORE DEDUCTING CDSC AFTER DEDUCTING CDSC*
INVESTMENT PERIOD DATE ON 8/31/95 ON 8/31/95 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ----------------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
10 years ended
8/31/95 8/31/85 $4,475.90 $4,475.90 347.59% 16.17% 347.59% 16.17%
5 years ended
8/31/95 8/31/90 $2,519.10 $2,499.10 151.91% 20.30% 149.91% 20.10%
1 year ended
8/31/95 8/31/94 $1,381.30 $1,331.30 38.13% 38.13% 33.13% 33.13%
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>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of June 30, 1996, Eaton Vance owned one share of the Fund, being the
only share of the Fund outstanding on such date. Eaton Vance is a
Massachusetts business trust and a wholly-owned subsidiary of EVC.
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P., One Post Office Square, Boston, Massachusetts,
are the independent accountants for 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. Coopers &
Lybrand Chartered Accountants, Toronto, Canada, are the independent
accountants for the Portfolio.
FINANCIAL STATEMENTS
At the time of the audit of the Portfolio, its name was Global Health
Sciences Portfolio.
<PAGE>
GLOBAL HEALTH SCIENCES PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
JUNE 3, 1996
ASSETS:
Cash ....................................................... $100,010
Deferred organization expenses ............................. 12,000
--------
Total assets ........................................... $112,010
LIABILITIES:
Accrued organization expenses .............................. 12,000
--------
NET ASSETS ..................................................... $100,010
========
NOTES:
(1) Global Health Sciences Portfolio (the "Portfolio") was organized as a New
York Trust on March 26, 1996 and has been inactive since that date, except
for matters relating to its organization and registration as an investment
company under the Investment Company Act of 1940 and the sale of interests
therein at the purchase price of $100,000 to Boston Management & Research
and the sale of interest therein at the purchase price of $10 to Eaton
Vance Management (the "Initial Interests").
(2) Organization expenses are being deferred and will be amortized on a
straight-line basis over a period not to exceed five years, commencing on
the effective date of the Portfolio's initial offering of its interests.
The amount paid by the Portfolio on any withdrawal by the holders of the
Initial Interests of any of the respective Initial Interests will be
reduced by a portion of any unamortized organization expenses, determined
by the proportion of the amount of the Initial Interests withdrawn to the
Initial Interests then outstanding.
(3) At 4:00 p.m., New York City time, on each business day of the Portfolio,
the value of an investor's interest in the Portfolio is equal to the
product of (i) the aggregate net asset value of the Portfolio multiplied
by (ii) the percentage representing that investor's share of the aggregate
interest in the Portfolio effective for that day.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Investors of Global Health Sciences Portfolio:
We have audited the accompanying statement of assets and liabilities of
Global Health Sciences Portfolio (a New York Trust) as of June 3, 1996. This
financial statement is the responsibility of the Portfolio's management. Our
responsibility is to express an opinion on this financial statement based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statement is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statement. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statement referred to above presents fairly,
in all material respects, the financial position of Global Health Sciences
Portfolio as of June 3, 1996, in conformity with generally accepted accounting
principles.
Coopers & Lybrand
Chartered Accountants
Toronto, Ontario
June 21, 1996
<PAGE>
[LOGO]
EATON VANCE
MUTUAL FUNDS
EV MARATHON WORLDWIDE
HEALTH SCIENCES FUND
STATEMENT OF
ADDITIONAL INFORMATION
SEPTEMBER 3, 1996
EV MARATHON WORLDWIDE
HEALTH SCIENCES FUND
24 FEDERAL STREET
BOSTON, MA 02110
- -------------------------------------------------------------------------------
SPONSOR AND MANAGER OF EV MARATHON WORLDWIDE HEALTH SCIENCES FUND
ADMINISTRATOR OF WORLDWIDE HEALTH SCIENCES PORTFOLIO
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
ADVISER OF WORLDWIDE HEALTH SCIENCES PORTFOLIO
Mehta and Isaly Asset Management, Inc. 41 Madison Avenue, New York, NY
10010-2202
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, P.O. Box 5123, Westborough, MA 01581-5123
(800) 262-1122
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand, L.L.P., One Post Office Square, Boston, MA 02109
M-HSSAI
