<PAGE>
As filed with the Securities and Exchange Commission on December 22, 1999
1933 Act File No. 2-22019
1940 Act File No. 811-1241
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933 [x]
POST-EFFECTIVE AMENDMENT NO. 74 [x]
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940 [x]
AMENDMENT NO. 47 [x]
EATON VANCE GROWTH TRUST
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(Exact Name of Registrant as Specified in Charter)
The Eaton Vance Building, 255 State Street, Boston, Massachusetts 02109
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(Address of Principal Executive Offices)
(617) 482-8260
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(Registrant's Telephone Number)
ALAN R. DYNNER
The Eaton Vance Building, 255 State Street, Boston, Massachusetts 02109
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(Name and Address of Agent for Service)
It is proposed that this filing will become effective pursuant to Rule 485
(check appropriate box):
[ ] immediately upon filing pursuant to paragraph (b)
[x] on January 1, 2000 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date)pursuant to paragraph (a)(2)
If appropriate, check the following box:
[ ] this post effective amendment designates a new effective date for a
previously filed post-effective amendment.
Asian Small Companies Portfolio, Greater China Growth Portfolio, Growth
Portfolio, Information Age Portfolio and Worldwide Health Sciences Portfolio
have also executed this Registration Statement.
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<PAGE>
{LOGO} Investing
EATON VANCE for the
Mutual Funds 21st
Century(R)
Eaton Vance Asian Small
Companies Fund
A diversified fund investing in smaller companies based in Asia
Prospectus Dated
January 1, 2000
The Securities and Exchange Commission has not approved or disapproved these
securities or determined whether this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
Information in this prospectus
Page Page
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Fund Summary 2 Sales Charges 7
Investment Objective & Principal Redeeming Shares 8
Policies and Risks 4 Shareholder Account
Management and Organization 5 Features 9
Valuing Shares 6 Tax Information 10
Purchasing Shares 6 Financial Highlights 11
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This prospectus contains important information about the Fund and the services
available to shareholders. Please save it for reference.
<PAGE>
FUND SUMMARY
Investment Objective and Principal Strategies. The Fund's investment objective
is to seek capital growth. The Fund invests in equity securities of smaller
companies located or traded in Asia. The Fund normally will be invested in the
securities markets of countries in the Asian region, including Australia, China,
Hong Kong, India, Indonesia, Japan, Malaysia, Pakistan, the Philippines,
Singapore, South Korea, Sri Lanka, Taiwan and Thailand. It is anticipated that
investments in Hong Kong will represent more than 25% of total assets. The Fund
may attempt to hedge foreign currency fluctuations by entering forward currency
exchange contracts and options.
The Fund invests primarily in common stocks of Asian small companies. The
investment adviser will consider companies that it believes have all or most of
the following characteristics: sound and well-established management; producers
of goods or services for which a clear, continuing and long-term demand can be
identified within the context of national, regional and global development; a
clear strategy for growth; a history of earnings growth; financial strength; a
consistent or progressive dividend policy; and undervalued securities. Stocks
will be sold when they have achieved their perceived value or when a country's
stock market is expected to be depressed for an extended period.
The Fund currently invests its assets in Asian Small Companies Portfolio, a
separate registered investment company with the same objective and policies as
the Fund.
Principal Risk Factors. Securities markets in the Asian region are substantially
smaller, less liquid and more volatile than the major securities markets in the
United States. The value of Fund shares will be affected by political, economic,
fiscal, regulatory or other developments in the Asian region or neighboring
regions, as well as currency exchange rates. The extent of economic development,
political stability and market depth of different countries in the Asian region
varies widely. Certain Asian region countries, including China, Indonesia,
Malaysia, the Philippines and Thailand, are either comparatively underdeveloped
or in the process of becoming developed. Asian investments typically involve
greater potential for gain or loss than investments in securities of issuers in
developed countries. In comparison to the United States and other developed
countries, developing countries may have relatively unstable governments and
economies based on only a few industries. The Fund will likely be particularly
sensitive to changes in the economies of such countries as the result of any
reversals of economic liberalization, political unrest or changes in trading
status. In addition to these risks, the securities of smaller companies are
generally subject to greater price fluctuation and investment risk than
securities of more established companies.
The value of Fund shares also is sensitive to stock market volatility. If there
is a decline in the value of exchange-listed stocks, the value of Fund shares
will also likely decline. Changes in stock market values can be sudden and
unpredictable. Also, although stock values can rebound, there is no assurance
that values will return to previous levels. The Fund currently holds fewer than
75 stocks; therefore, the Fund's value is more sensitive to developments
affecting particular stocks than would be a more broadly diversified fund.
Foreign currency exchange contracts and options involve a risk of loss due to
unanticipated changes in exchange rates, as well as the risk of counterparty
default.
The Fund is not a complete investment program and you may lose money by
investing in the Fund. An investment in the Fund is not a deposit in a bank and
is not insured or guaranteed by the Federal Deposit Insurance Corporation or any
other government agency. Shareholders may realize substantial losses and should
invest for the long-term.
2
<PAGE>
Performance Information. The Fund commenced operations on March 1, 1999. The
following bar chart and table provide information about the performance of the
predecessor to the Asian Small Companies Portfolio (the "Predecessor Fund"),
which continues to invest in the Portfolio. The performance has not been
adjusted to reflect differences between the expenses of the Fund and the higher
expenses of the Predecessor Fund. The returns in the bar chart are for each
calendar year of the Predecessor Fund's operations through December 31, 1998.
The table below also contains a comparison of the Predecessor Fund's performance
to the performance of an index of common stocks traded in developed and emerging
markets of the Asia Pacific region. Although past performance is no guarantee of
future results, this performance information demonstrates the risk that the
value of your investment will change. The bar chart returns do not reflect the
Class A or Class B sales charge. If a sales charge was reflected, the returns
would be lower.
95.53% -12.24% -4.05% 10.92% -6.51% 4.20%
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1993 1994 1995 1996 1997 1998
The Predecessor Fund's highest quarterly total return was 41.26% for the quarter
ended December 31, 1993, and its lowest quarterly return was -28.73% for the
quarter ended December 31, 1997. The Predecessor Fund's year-to-date total
return through the end of the most recent calendar quarter (December 31, 1998 to
September 30, 1999) was 69.71%.
Average Annual Total Return One Five Life of
as of December 31, 1998 Year Years Fund
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Predecessor Fund -1.80% -3.03% 9.61%
Morgan Stanley Capital International
All Country Asia Pacific Index -0.53% -6.06% 0.85%
The Predecessor Fund's returns have been adjusted to reflect the maximum sales
charge for Class A shares of the Fund (5.75%). Life of Fund returns are
calculated from June 30, 1992. The Morgan Stanley Capital International All
Country (MSCI AC) Asia Pacific Index is a broad-based index of common stocks
traded in developed and emerging markets of the Asia Pacific region. Investors
cannot invest directly in an index. (Source for the MSCI AC Index returns:
Lipper, Inc.)
Fund Fees and Expenses. These tables describe the fees and expenses that you may
pay if you buy and hold shares.
Shareholder Fees
(fees paid directly from your investment) Class A Class B
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Maximum Sales Charge (Load) (as a
percentage of offering price) 5.75% None
Maximum Deferred Sales Charge (Load)
(as a percentage of the lower of
net asset value at time of purchase
or time of redemption) None 5.00%
Maximum Sales Charge (Load)
Imposed on Reinvested Distributions None None
Exchange Fee None None
Redemption Fee (as a percentage of
amount redeemed) 1.00%* None
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets) Class A Class B
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Management Fees 0.75% 0.75%
Distribution and Service (12b-1) Fees** 0.50% 1.00%
Other Expenses*** 6.00% 6.00%
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Total Annual Fund Operating Expense 7.25% 7.75%
Expense Reimbursement**** (4.75%) (4.75%)
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Total Annual Fund Operating Expenses
(net reimbursement) 2.50% 3.00%
* Effective for Class A shares purchased on or after February 1, 2000 and
redeemed within three months of purchase.
** Long-term shareholders may pay more than the economic equivalent of the
front-end sales charge permitted by the National Association of Securities
Dealers, Inc.
*** Other Expenses is estimated.
**** For the current fiscal year, Eaton Vance will reimburse the Fund pursuant
to a contractual reimbursement to the extent Other Expenses exceeds 1.25%
of average daily net assets.
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Example. This Example is intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The Example also assumes
that your investment has a 5% return each year and that the operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
1 Year 3 Years
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Class A shares $814* $1,309
Class B shares $803 $1,327
You would pay the following expenses if you did not redeem your shares:
1 Year 3 Years
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Class A shares $814 $1,309
Class B shares $303 $ 927
* Due to the redemption fee, the cost of investing in Class A shares for one
year would be $100 higher for shares purchased on and after February 1,
2000 and redeemed within three months of purchase.
3
<PAGE>
INVESTMENT OBJECTIVE & PRINCIPAL POLICIES AND RISKS
The Fund's investment objective is to seek capital growth. The Fund currently
seeks to meet its investment objective by investing in Asian Small Companies
Portfolio (the "Portfolio"), a separate registered investment company which has
the same objective and policies as the Fund. The Fund's investment objective and
certain policies may be changed without shareholder approval. The Trustees of
the Trust have no present intention to make such change and intend to submit any
proposed material change in investment objective to shareholders in advance for
their approval.
Under normal market conditions, the Portfolio invests at least 65% of its total
assets in equity securities of Asian small companies. Asian small companies (a)
have a market capitalization equivalent to less than $600 million and (b) are
located in or have securities which are principally traded in an Asian region
country. The Fund may invest 25% or more of its total assets in securities of
issuers located in any one country, and may retain securities of a company with
market capitalization that grows over the $600 million level. While there is no
minimum or maximum limitation on assets that may be invested in a single
country, it is anticipated that investments in Hong Kong will represent more
than 25% of total assets. As an alternative to investing directly in Asian small
companies, the Portfolio may invest in depositary receipts and similar
investments.
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. Smaller
companies may have limited product lines, markets or financial resources, and
they may be dependent on a limited management group. There is generally less
publicly available information about such companies than larger, more
established companies. The Portfolio may make direct investments in companies in
private placement transactions. Because of the absence of any public trading
market for some of these investments it may take longer to liquidate these
positions at fair value than would be the case for publicly traded securities.
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. 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 in foreign
securities are generally higher than in the United States, and foreign
securities markets may be less liquid, more volatile and less subject to
governmental supervision than in the United States. Investments in foreign
issuers could be affected by other factors not present in the United States,
including expropriation, armed conflict, confiscatory taxation, lack of uniform
accounting and auditing standards, less publicly available financial and other
information and potential difficulties in enforcing contractual obligations.
More than 25% of the Portfolio's total assets may be denominated in any single
currency. At times, the portfolio manager may (but is not obligated to) use
forward currency exchange contracts and options to attempt to mitigate adverse
effects of foreign currency fluctuations. These contracts allow the Portfolio to
establish a currency exchange rate with payment and delivery at a future date.
They are subject to a risk of loss due to unanticipated changes in currency
exchange rates and default by the counterparty to the contract. There can be no
assurance that this hedging strategy will be advantageous to the Portfolio.
Economies of countries in the Asian region differ from the U.S. economy in
various ways such as rate of growth of gross national product, rate of
inflation, capital reinvestment, resource self-sufficiency and balance of
payments position. As export-driven economies, the economies of countries in the
Asian region are affected by developments in the economies of their principal
trading partners. For example, revocation by the United States of China's "Most
Favored Nation" trading status, which the U.S. President and Congress reconsider
annually, would adversely affect the trade and economic development of China and
Hong Kong. Monsoons and natural disasters also can affect the value of Portfolio
investments. Political control of Hong Kong was transferred to China in
mid-1997, and the success of "one country - two systems" will affect investments
in Hong Kong and elsewhere.
Investments in Asian countries can be considered speculative, and therefore may
offer higher potential for gains and losses than investments in developed
markets of the world. Political and economic structures in Asian countries
generally lack the social, political and economic stability characteristics of
the United States. Governmental actions can have a significant effect on the
economic conditions in such countries, which could adversely affect the value
and liquidity of the Portfolio's investments. The laws of countries in the
region relating to limited liability of corporate shareholders, fiduciary duties
of officers and directors, and the bankruptcy of state enterprises are generally
less well developed than or different from such laws in the United States. It
may be more difficult to obtain a judgment in the courts of these countries than
it is in the United States. In addition, unanticipated political or social
4
<PAGE>
developments may affect the value of the Portfolio's investments in these
countries and the availability to the Portfolio of additional investments. As a
result, the Portfolio may be exposed to greater risk and will be more dependent
on the investment adviser's ability to assess such risk than if the Portfolio
invested solely in more developed countries.
Settlement of securities transactions in many Asian countries are subject to
risk of loss, may be delayed and are generally less frequent than in the United
States, which could affect the liquidity of the Portfolio's assets. In addition,
disruptions due to work stoppages and trading improprieties in these securities
markets have caused such markets to close. If extended closings were to occur in
stock markets where the Portfolio was heavily invested, the Fund's ability to
redeem Fund shares could become correspondingly impaired. To mitigate these
risks, the Portfolio may maintain a higher cash position than it otherwise
would, thereby possibly diluting its return, or the Portfolio may have to sell
more liquid securities which it would not otherwise choose to sell. The Fund may
suspend redemption privileges or postpone the date of payment for more than
seven days after a redemption order is received under certain circumstances.
The Portfolio may borrow amounts up to 25% of its net assets, but it will not
borrow more than 5% of the value of its total assets except to satisfy
redemption requests or for other temporary purposes. Such borrowings would
result in increased expense to the Fund and, while they are outstanding, would
magnify increases or decreases in the value of Fund shares. The Portfolio will
not purchase additional portfolio securities while outstanding borrowings exceed
5% of the value of its total assets. For temporary investment purposes (such as
during abnormal market or economic conditions), the Portfolio may invest some or
all of its total assets in cash or cash equivalents. While temporarily invested,
the Portfolio may not achieve its investment objective.
Like most mutual funds, the Fund and Portfolio rely on computers in conducting
daily business and processing information. There is a concern that on and after
January 1, 2000 some computer programs will be unable to recognize the new year
and as a consequence computer malfunctions will occur. Eaton Vance and the
investment adviser are taking steps that they believe are reasonably designed to
address this potential problem and to obtain satisfactory assurance from other
service providers to the Fund and the Portfolio that they are also taking steps
to address the issue. There can, however, be no assurance that these steps will
be sufficient to avoid any adverse impact on the Fund and the Portfolio or
shareholders. The Year 2000 concern may also adversely impact issuers of
securities held by the Portfolio and the markets on which these securities
trade, and may be more difficult to address in less-developed countries where
access to advanced technology may be limited. The foregoing statement is subject
to the Year 2000 Information and Readiness Disclosure Act, which may protect
Eaton Vance, the investment adviser and the Fund and the Portfolio from
liability arising from the statement.
MANAGEMENT AND ORGANIZATION
Management. The Portfolio's investment adviser is Lloyd George Investment
Management (Bermuda) Limited ("Lloyd George"), 3808 One Exchange Square,
Central, Hong Kong. The investment adviser manages Portfolio investments and
provides related office facilities and personnel. Lloyd George receives a
monthly advisory fee of 0.0625% (equivalent to 0.75% annually) of the
Portfolio's average daily net assets up to $500 million. This fee declines at
intervals above $500 million. For the fiscal year ended August 31, 1999, the
Portfolio paid advisory fees of 0.75% of its average daily net assets.
Scobie Dickinson Ward and Zaheer Sitabkhan co-manage the Portfolio. Mr. Ward has
managed the Portfolio since its inception. He is a Director of Lloyd George and
has been a portfolio manager at Lloyd George for more than five years. Mr.
Sitabkhan has managed the Portfolio since August 31, 1999. Mr. Sitabkhan joined
Lloyd George in March 1995 and currently serves as a Director. Prior to 1995 he
was Director of Business Development at Quality Sciences Inc., a Cleveland-based
software company.
Lloyd George and its affiliates act as investment adviser to various individual
and institutional clients and manage $2.2 billion in assets. Eaton Vance's
corporate parent owns 21% of Lloyd George's corporate parent. Lloyd George, its
affiliates and two of the Portfolio's Trustees are domiciled outside of the
United States. Because of this, it would be difficult for the Portfolio to bring
a claim or enforce a judgment against them.
Eaton Vance manages the business affairs of the Fund and administers the
business affairs of the Portfolio. For these services, Eaton Vance receives a
monthly fee from each of the Fund and Portfolio of 1/48 of 1% (equal to 0.25%
annually) of average daily net assets up to $500 million. This fee declines at
intervals above $500 million. For the fiscal year ended August 31, 1999, absent
a full fee waiver, Eaton Vance would have earned management fees of 0.25% of the
Fund's average daily net assets. For the same period, Eaton Vance earned
administration fees of 0.25% of the Portfolio's average daily net assets. Eaton
Vance has been managing assets since 1924 and managing mutual funds since 1931.
Eaton Vance and its subsidiaries currently manage over $41 billion on behalf of
mutual funds, institutional clients and individuals.
5
<PAGE>
The investment adviser, Eaton Vance and the Fund and Portfolio have adopted
Codes of Ethics governing personal securities transactions. Under the Codes,
employees of the investment adviser and Eaton Vance may purchase and sell
securities (including securities held by the Portfolio) subject to certain
reporting requirements and other procedures.
Organization. The Fund is a series of Eaton Vance Growth Trust, a Massachusetts
business trust. The Fund offers multiple classes of shares. Each class
represents a pro rata interest in the Fund, but is subject to different expenses
and rights. The Fund does not hold annual shareholder meetings, but may hold
special meetings for matters that require shareholder approval (like electing or
removing trustees, approving management contracts or changing investment
policies that may only be changed with shareholder approval). Because the Fund
invests in the Portfolio, it may be asked to vote on certain Portfolio matters
(like changes in certain Portfolio investment restrictions). When necessary, the
Fund will hold a meeting of its shareholders to consider the Portfolio matter
and then vote its interest in the Portfolio in proportion to the votes cast by
its shareholders. The Fund can withdraw from the Portfolio at any time.
VALUING SHARES
The Fund values its shares once each day only when the New York Stock Exchange
is open for trading (typically Monday through Friday), as of the close of
regular trading on the Exchange (normally 4:00 p.m. eastern time). The purchase
price of Fund shares is their net asset value (plus a sales charge for Class A),
which is derived from Portfolio holdings. Exchange-listed securities are valued
at closing sale prices; however, the investment adviser may use the fair value
of a security if events occurring after the close of an exchange would
materially affect net asset value. Because foreign securities trade on days when
Fund shares are not priced, net asset value can change at times when Fund shares
cannot be redeemed.
When purchasing or redeeming Fund shares, your investment dealer must
communicate your order to the principal underwriter by a specific time each day
in order for the purchase price or the redemption price to be based on that
day's net asset value per share. It is the investment dealer's responsibility to
transmit orders promptly. The Fund may accept purchase and redemption orders as
of the time of their receipt by certain investment dealers (or their designated
intermediaries).
PURCHASING SHARES
You may purchase shares through your investment dealer or by mailing the account
application form included in this prospectus to the transfer agent (see back
cover for address). Your initial investment must be at least $1,000. The price
of Class A shares is the net asset value plus a sales charge. The price of Class
B shares is the net asset value; however, you may be subject to a sales charge
(called a "contingent deferred sales charge" or "CDSC") if you redeem Class B
shares within six years of purchase. The sales charges are described below. Your
investment dealer can help you decide which class of shares suits your
investment needs.
After your initial investment, additional investments of $50 or more may be made
at any time by sending a check payable to the order of the Fund or the transfer
agent directly to the transfer agent (see back cover for address). Please
include your name and account number and the name of the Fund and Class of
shares with each investment.
You may also make automatic investments of $50 or more each month or each
quarter from your bank account. You can establish bank automated investing on
the account application or by calling 1-800-262-1122. The minimum initial
investment amount and Fund policy of redeeming accounts with low account
balances are waived for bank automated investing accounts and certain group
purchase plans.
You may purchase Fund shares in exchange for securities. Please call
1-800-225-6265 for information about exchanging securities for Fund shares. If
you purchase shares through an investment dealer (which includes brokers,
dealers and other financial institutions), that dealer may charge you a fee for
executing the purchase for you. The Fund may suspend the sale of its shares at
any time and any purchase order may be refused.
6
<PAGE>
SALES CHARGES
Front-End Sales Charge. Class A shares are offered at net asset value per share
plus a sales charge that is determined by the amount of your investment. The
current sales charge schedule is:
<TABLE>
Sales Charge Sales Charge Dealer Commission
as Percentage of as Percentage of Net as a Percentage of
Amount of Purchase Offering Price Amount Invested Offering Price
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<S> <C> <C> <C>
Less than $50,000 5.75% 6.10% 5.00%
$50,000 but less than $100,000 4.75% 4.99% 4.00%
$100,000 but less than $250,000 3.75% 3.90% 3.00%
$250,000 but less than $500,000 3.00% 3.09% 2.50%
$500,000 but less than $1,000,000 2.00% 2.04% 1.75%
$1,000,000 or more 0.00* 0.00* See Below
</TABLE>
* No sales charge is payable at the time of purchase on investments of $1
million or more. A CDSC of 1.00% will be imposed on such investments (as
described below) in the event of redemptions within 12 months of purchase.
The principal underwriter will pay a commission to investment dealers on sales
of $1 million or more as follows: 1.00% on amounts of $1 million or more but
less than $3 million; plus 0.50% on amounts over $3 million but less than $5
million; plus 0.25% on amounts over $5 million. Purchases totalling $1 million
or more will be aggregated over a 12-month period for purposes of determining
the commission. The principal underwriter may also pay commissions of up to
1.00% on sales of Class A shares made at net asset value to certain tax-deferred
retirement plans.
Contingent Deferred Sales Charge. Each class of shares is subject to a CDSC on
certain redemptions. Class A shares purchased at net asset value in amounts of
$1 million or more are subject to a 1% CDSC if redeemed within 12 months of
purchase. Class B shares are subject to the following CDSC schedule:
Year of Redemption After Purchase CDSC
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First or Second 5%
Third 4%
Fourth 3%
Fifth 2%
Sixth 1%
Seventh or following 0%
The CDSC is based on the lower of the net asset value at the time of purchase or
at the time of redemption. Shares acquired through the reinvestment of
distributions are exempt from the CDSC. Redemptions are made first from shares
that are not subject to a CDSC.
The principal underwriter pays commissions to investment dealers on sales of
Class B shares (except exchange transactions and reinvestments). The sales
commission equals 4% of the purchase price of the shares.
Reducing or Eliminating Sales Charges. Front-end sales charges on purchases of
Class A shares may be reduced under the right of accumulation or under a
statement of intention. Under the right of accumulation, the sales charges you
pay are reduced if the current market value of your current holdings (based on
the current offering price), plus your new purchases, total $50,000 or more.
Class A shares of other Eaton Vance funds owned by you can be included as part
of your current holdings for this purpose. Under a statement of intention,
purchases of $50,000 or more made over a 13-month period are eligible for
reduced sales charges. Under a statement of intention, the principal underwriter
may hold 5% of the dollar amount to be purchased in escrow in the form of shares
registered in your name until you satisfy the statement or the 13-month period
expires. See the account application for details.
Class A shares are offered at net asset value to clients of financial
intermediaries who charge a fee for their services; accounts affiliated with
those financial intermediaries; tax-deferred retirement plans; investment and
institutional clients of Eaton Vance; certain persons affiliated with Eaton
Vance; and certain Eaton Vance and fund service providers. Ask your investment
dealer for details. Effective February 1, 2000, Class A shares will be also sold
at net asset value if the amount invested represents redemption proceeds from a
mutual fund not affiliated with Eaton Vance, provided the redemption occurred
within 60 days of the Fund share purchase and the redeemed shares were subject
to a sales charge. Class A shares so acquired will be subject to a 0.50% CDSC if
they are redeemed within 12 months of purchase. Investment dealers will be paid
a commission on such sales of 0.50% of the amount invested.
CDSCs are waived for certain redemptions pursuant to a Withdrawal Plan (see
"Shareholder Account Features") and, for Class B shares, in connection with
certain redemptions from tax-sheltered retirement plans. Call 1-800-225-6265 for
details. The Class B CDSC is also waived following the death of all beneficial
owners of shares, but only if the redemption is requested within one year after
death (a death certificate and other applicable documents may be required).
7
<PAGE>
If you redeem shares, you may reinvest at net asset value all or any portion of
the redemption proceeds in the same class of shares of the Fund (or, for Class A
shares, in Class A shares of any other Eaton Vance fund), provided that the
reinvestment occurs within 60 days of the redemption, and the privilege has not
been used more than once in the prior 12 months. Under these circumstances your
account will be credited with any CDSC paid in connection with the redemption.
Any CDSC period applicable to the shares you acquire upon reinvestment will run
from the date of your original share purchase. Reinvestment requests must be in
writing. If you reinvest, you will be sold shares at the next determined net
asset value following receipt of your request.
Distribution and Service Fees. Each Class of shares has in effect a plan under
Rule 12b-1 that allows the Fund to pay distribution fees for the sale and
distribution of shares (so-called "12b-1 fees"). Class A shares pay a
distribution fee of 0.50% of average daily net assets on shares outstanding for
less than twelve months and a distribution fee of 0.25% on shares outstanding
for more than twelve months. Class B shares pay distribution fees of 0.75% of
average daily net assets annually. Because these fees are paid from Fund assets
on an ongoing basis, they will increase your cost over time and may cost you
more than paying other types of sales charges. All classes also pay service fees
for personal and/or account services equal to 0.25% of average daily net assets
annually. Class A shares only pay service fees on shares that have been
outstanding for twelve months.
The distribution fees paid by Class B are subject to termination when payments
under the Rule 12b-1 plans are sufficient to extinguish uncovered distribution
charges. As described more fully in the Statement of Additional Information,
uncovered distribution charges of a Class are increased by sales commissions
payable by the Class to the principal underwriter in connection with sales of
shares of that Class and by an interest factor tied to the U.S. Prime Rate.
Uncovered distribution charges are reduced by the distribution fees paid by the
Class and by CDSCs paid to the Fund by redeeming shareholders. The amount of the
sales commissions payable by Class B to the principal underwriter in connection
with sales of Class B shares is significantly less than the maximum permitted by
the sales charge rule of the National Association of Securities Dealers, Inc. To
date, Class B uncovered distribution charges have not been fully covered.
REDEEMING SHARES
You can redeem shares in any of the following ways:
By Mail Send your request to the transfer agent along with any
certificates and stock powers. The request must be signed
exactly as your account is registered and signature
guaranteed. You can obtain a signature guarantee at certain
banks, savings and loan institutions, credit unions,
securities dealers, securities exchanges, clearing agencies
and registered securities associations. You may be asked to
provide additional documents if your shares are registered
in the name of a corporation, partnership or fiduciary.
By Telephone You can redeem up to $50,000 by calling the transfer agent
at 1-800-262-1122 on Monday through Friday, 9:00 a.m. to
4:00 p.m. (eastern time). Proceeds of a telephone redemption
can be mailed only to the account address. Shares held by
corporations, trusts or certain other entities and shares
that are subject to fiduciary arrangements cannot be
redeemed by telephone.
Through an
Investment
Dealer Your investment dealer is responsible for transmitting the
order promptly. A dealer may charge a fee for this service.
For shares purchased on and after February 1, 2000, redemptions (including
exchanges) of Class A shares within three months of their purchase will be
subject to a redemption fee equal to 1% of the amount redeemed. All redemption
fees will be paid to the Fund. Redemptions of shares acquired as the result of
reinvesting distributions and those held by 401(k) plans or in proprietary
fee-based advisory programs sponsored by broker-dealers are not subject to the
redemption fee.
If you redeem shares, your redemption price will be based on the net asset value
per share next computed after the redemption request is received. Your
redemption proceeds will be paid in cash within seven days, reduced by the
amount of any applicable CDSC and/or redemption fee and any federal income tax
required to be withheld. Payments will be sent by mail unless you complete the
Bank Wire Redemptions section of the account application.
If you recently purchased shares, the proceeds of a redemption will not be sent
until the purchase check (including a certified or cashier's check) has cleared.
If the purchase check has not cleared, redemption proceeds may be delayed up to
8
<PAGE>
15 days from the purchase date. If your account value falls below $750 (other
than due to market decline), you may be asked to either add to your account or
redeem it within 60 days. If you take no action, your account will be redeemed
and the proceeds sent to you.
While redemption proceeds are normally paid in cash, redemptions may be paid by
distributing marketable securities. If you receive securities, you could incur
brokerage or other charges in converting the securities to cash.
SHAREHOLDER ACCOUNT FEATURES
Once you purchase shares, the transfer agent establishes a Lifetime Investing
Account(R) for you. Share certificates are issued only on request.
Distributions. You may have your Fund distributions paid in one of the following
ways:
*Full
Reinvest
Option Dividends and capital gains are reinvested in additional
shares. This option will be assigned if you do not specify
an option.
*Partial
Reinvest
Option Dividends are paid in cash and capital gains are reinvested
in additional shares.
*Cash
Option Dividends and capital gains are paid in cash.
*Exchange
Option Dividends and/or capital gains are reinvested in additional
shares of another Eaton Vance fund chosen by you. Before
selecting this option, you must obtain a prospectus of the
other fund and consider its objectives and policies
carefully.
Information from the Fund. From time to time, you may be mailed the following:
* Annual and Semi-Annual Reports, containing performance information and
financial statements.
* Periodic account statements, showing recent activity and total share
balance.
* Form 1099 and tax information needed to prepare your income tax
returns.
* Proxy materials, in the event a shareholder vote is required.
* Special notices about significant events affecting your Fund.
Withdrawal Plan. You may redeem shares on a regular monthly or quarterly basis
by establishing a systematic withdrawal plan. Withdrawals will not be subject to
any applicable CDSC if they do not in the aggregate exceed 12% annually of the
account balance at the time the plan is established. A minimum account size of
$5,000 is required to establish a systematic withdrawal plan. Because purchases
of Class A shares are generally subject to an initial sales charge, you should
not make withdrawals from your account while you are making purchases.
Tax-Sheltered Retirement Plans. Class A shares are available for purchase in
connection with certain tax-sheltered retirement plans. Call 1-800-225-6265 for
information. Distributions will be invested in additional shares for all
tax-sheltered retirement plans.
Exchange Privilege. You may exchange your Fund shares for shares of the same
class of another Eaton Vance fund. Exchanges are generally made at net asset
value. If you hold Class A shares for less than six months and exchange them for
shares subject to a higher sales charge, you will be charged the difference
between the two sales charges. If your shares are subject to a CDSC, the CDSC
will continue to apply to your new shares at the same CDSC rate. For purposes of
the CDSC, your shares will continue to age from the date of your original
purchase.
Before exchanging, you should read the prospectus of the new fund carefully. If
you wish to exchange shares, write to the transfer agent (address on back cover)
or call 1-800-262-1122. Periodic automatic exchanges are also available. The
exchange privilege may be changed or discontinued at any time. You will receive
60 days' notice of any material change to the privilege. This privilege may not
be used for "market timing". If an account (or group of accounts) makes more
than two round-trip exchanges within 12 months, it will be deemed to be market
timing. The exchange privilege may be terminated for market timing accounts.
Telephone and Electronic Transactions. You can redeem or exchange shares by
telephone as described in this prospectus. In addition, certain transactions may
be conducted through the Internet. The transfer agent and the principal
underwriter have procedures in place to authenticate telephone and electronic
instructions (such as using security codes or verifying personal account
information). As long as the transfer agent and principal underwriter follow
these procedures, they will not be responsible for unauthorized telephone or
electronic transactions and you bear the risk of possible loss resulting from
9
<PAGE>
these transactions. You may decline the telephone redemption option on the
account application. Telephone instructions are tape recorded.
"Street Name" Accounts. If your shares are held in a "street name" account at an
investment dealer, that dealer (and not the Fund or its transfer agent) will
perform all recordkeeping, transaction processing and distribution payments.
Because the Fund will have no record of your transactions, you should contact
your investment dealer to purchase, redeem or exchange shares, to make changes
in your account, or to obtain account information. You will not be able to
utilize a number of shareholder features, such as telephone transactions,
directly with the Fund. The transfer of shares in a "street name" account to an
account with another investment dealer or to an account directly with the Fund
involves special procedures and you will be required to obtain historical
information about your shares prior to the transfer. Before establishing a
"street name" account with an investment dealer, you should determine whether
that dealer allows reinvestment of distributions in "street name" accounts.
Account Questions. If you have any questions about your account or the services
available, please call Eaton Vance Shareholder Services at 1-800-225-6265, or
write to the transfer agent (see back cover for address).
TAX INFORMATION
The Fund pays dividends at least once annually and intends to pay capital gains
annually. Distributions of income and net short-term capital gains will be
taxable as ordinary income. Distributions of any long-term capital gains will be
taxable as long-term gains. The Fund expects that its distributions will consist
primarily of capital gains. The Fund's distributions will generally not qualify
for the dividends-received deduction for corporations. The Fund's distributions
will be taxable whether they are paid in cash or reinvested in additional
shares.
Investors who purchase shares shortly before the record date of a distribution
will pay the full price for the shares and then receive some portion of the
price back as a taxable distribution. Certain distributions paid in January will
be taxable to shareholders as if received on December 31 of the prior year. A
redemption of Fund shares, including an exchange for shares of another fund, is
a taxable transaction.
Shareholders should consult with their advisers concerning the applicability of
state, local and other taxes to an investment.
10
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights are intended to help you understand the Fund's
financial performance for the past five years. Certain information in the table
reflects the financial results for a single Fund share. The total returns in the
table represent the rate an investor would have earned (or lost) on an
investment in the Fund (assuming reinvestment of all distributions and not
taking into account a sales charge). This information has been audited by
Deloitte & Touche LLP, independent accountants. The report of Deloitte & Touche
LLP and the Fund's financial statements are incorporated herein by reference and
included in the annual report, which is available on request. As of August 31,
1999, Class B had not yet commenced operations.
<TABLE>
<CAPTION>
CLASS A
PERIOD FROM
MARCH 1, 1999
(COMMENCEMENT OF OPERATIONS) TO
AUGUST 31, 1999
-------------------------------
<S> <C>
Net asset value - Beginning
of period $10.000
Income (loss) from
operations
Net investment income $ 0.046
Net realized and unrealized
gain (loss) 5.794
-------
Total income (loss) from
operations $ 5.840
-------
Net asset value - End of
period $15.840
=======
Total return (1) 58.40%
Ratios/Supplemental Data+
Net assets, end of period
(000's omitted) $ 474
Ratios (as a percentage of
average daily net assets):
Expenses (2) 1.40%(3)
Net investment income
(2) 2.69%(3)
Portfolio turnover of the Portfolio 105%(4)
+ The operating expenses of the Fund reflect a reduction of the management
fee and distribution fee as well as an allocation of expenses to the
Distributor. Had such actions not been taken, the ratios and net investment
income (loss) per share would have been as follows:
Ratios (As a percentage of
average net assets):
Expenses (2) 8.23%(3)
Net investment income
(loss) (4.13)%(3)
</TABLE>
(1) Total return is calculated assuming a purchase at the net asset value on
the first day and a sale at the net asset value on the last day of each
period reported. Dividends and distributions, if any, are assumed to be
reinvested at the net asset value on the reinvestment date. Total return is
not computed on an annualized basis.
(2) Includes the Fund's share of its Portfolio's allocated expenses.
(3) Annualized.
(4) For the fiscal year ended August 31, 1999.
11
<PAGE>
{LOGO} Investing
EATON VANCE for the
Mutual Funds 21st
Century(R)
More Information
- --------------------------------------------------------------------------------
About the Fund: More information is available in the statement of
additional information. The statement of additional information is
incorporated by reference into this prospectus. Additional information
about the Portfolio's investments is available in the annual and
semi-annual reports to shareholders. In the annual report, you will find a
discussion of the market conditions and investment strategies that
significantly affected the Fund's performance during the past year. You may
obtain free copies of the statement of additional information and the
shareholder reports by contacting:
EATON VANCE DISTRIBUTORS, INC.
The Eaton Vance Building
255 State Street
Boston, MA 02109
1-800-225-6265
website: www.eatonvance.com
You will find and may copy information about the Fund at the Securities and
Exchange Commission's public reference room in Washington, DC (call
1-800-SEC-0330 for information on the operation of the public reference
room); on the SEC's Internet site (http://www.sec.gov); or, upon payment of
copying fees, by writing to the SEC's public reference room in Washington,
DC 20549-0102 or by electronic mail at [email protected].
About Shareholder Accounts: You can obtain more information from Eaton
Vance Share- holder Services (1-800-225-6265). If you own shares and would
like to add to, redeem or change your account, please write or call the
transfer agent:
- --------------------------------------------------------------------------------
PFPC Global Fund Services
P.O. BOX 5123
WESTBOROUGH, MA 01581-5123
1-800-262-1122
The Fund's SEC File No. is 811-1241 ACP
<PAGE>
{LOGO} Investing
EATON VANCE for the
Mutual Funds 21st
Century (R)
Eaton Vance
Greater China Growth Fund
A diversified fund investing in the China Region
Prospectus Dated
January 1, 2000
The Securities and Exchange Commission has not approved or disapproved these
securities or determined whether this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
Information in this prospectus
Page Page
- --------------------------------------------------------------------------------
Fund Summary 2 Sales Charges 6
Investment Objective & Principal Redeeming Shares 8
Policies and Risks 4 Shareholder Account
Management and Organization 5 Features 9
Valuing Shares 6 Tax Information 10
Purchasing Shares 6 Financial Highlights 11
- --------------------------------------------------------------------------------
This prospectus contains important information about the Fund and the services
available to shareholders. Please save it for reference.
<PAGE>
FUND SUMMARY
Investment Objective and Principal Strategies. The investment objective of the
Fund is to seek long-term capital appreciation. The Fund invests primarily in
common stocks of companies which, in the opinion of the investment adviser, will
benefit from the economic development and growth of the People's Republic of
China. The Portfolio normally will be invested primarily or exclusively in the
securities markets of countries in the China region, including Hong Kong, China,
Taiwan, South Korea, Singapore, Malaysia, Thailand, Indonesia and the
Philippines.
The investment adviser invests primarily in common stocks of China region
companies expected to grow in value over time, regardless of short-term market
fluctuations. The Fund may invest 25% or more of its total assets in securities
of issuers located in any one country, but ordinarily will only do so in Hong
Kong. The Fund invests in companies with a broad range of market
capitalizations, including smaller companies. The Fund may attempt to hedge
foreign currency fluctuations by entering forward currency exchange contracts.
The Fund currently invests its assets in Greater China Growth Portfolio (the
"Portfolio"), a separate registered investment company with the same objective
and policies as the Fund.
[Greater China Region Map]
Principal Risk Factors. Securities markets in the China region are substantially
smaller, less liquid and more volatile than the major securities markets in the
United States. The value of Fund shares will be affected by political, economic,
fiscal, regulatory or other developments in the China region or neighboring
regions, as well as currency exchange rates. The extent of economic development,
political stability and market depth of different countries in the China region
varies widely. Certain China region countries, including China, Indonesia,
Malaysia, the Philippines and Thailand, are either comparatively underdeveloped
or in the process of becoming developed. Greater China investments typically
involve greater potential for gain or loss than investments in securities of
issuers in developed countries. In comparison to the United States and other
developed countries, developing countries may have relatively unstable
governments and economies based on only a few industries. The Fund will likely
be particularly sensitive to changes in China's economy as the result of any
reversals of economic liberalization, political unrest or changes in China's
trading status.
The value of Fund shares also is sensitive to stock market volatility. If there
is a decline in the value of exchange-listed stocks, the value of Fund shares
will also likely decline. Changes in stock market values can be sudden and
unpredictable. Also, although stock values can rebound, there is no assurance
that values will return to previous levels. The securities of smaller companies
are generally subject to greater price fluctuation and investment risk than
securities of more established companies. Foreign currency exchange contracts
involve a risk of loss due to unanticipated changes in exchange rates, as well
as the risk of counterparty default.
The Fund is not a complete investment program and you may lose money by
investing in the Fund. An investment in the Fund is not a deposit in a bank and
is not insured or guaranteed by the Federal Deposit Insurance Corporation or any
other government agency. Shareholders may realize substantial losses and should
invest for the long-term.
2
<PAGE>
Performance Information. The following bar chart and table provide information
about the Fund's performance including a comparison of the Fund's performance to
the performance of an index of stocks in developed and emerging markets which
are open to foreign investment in the Far East (excluding Japan). Although past
performance is no guarantee of future results, this performance information
demonstrates the risk that the value of your investment will change. The
following returns are for Class B shares for each calendar quarter through
December 31, 1998 and do not reflect sales charges. If the sales charge was
reflected, returns would be lower.
80.75% -20.89% 3.53% 15.85% -24.86% -21.93%
- --------------------------------------------------------------------------------
1993 1994 1995 1996 1997 1998
The Fund's highest quarterly total return was 39.15% for the quarter ended
December 31, 1993, and its lowest quarterly return was -33.39% for the quarter
ended December 31, 1997. The year-to-date total return through the end of the
most recent calendar quarter (December 31, 1998 to September 30, 1999) was
21.06%.
Average Annual Total Return One Five Life of
as of December 31, 1998 Year Years Fund
- --------------------------------------------------------------------------------
Class A Shares -26.42% -12.11% -1.18%
Class B Shares -26.20% -11.73% -0.50%
Class C Shares -22.98% -11.45% -0.83%
Morgan Stanley Capital International
All Country Far East Free ex-Japan Index -4.82% -11.95% 0.11%
These returns reflect the maximum sales charge for Class A (5.75%) and any
applicable CDSC for Class B and Class C. The Class B and Class C performance
shown above for the period prior to June 7, 1993 and December 28, 1993,
respectively, is the performance of Class A shares, adjusted for the sales
charge that applies to Class B or Class C shares (but not adjusted for any other
differences in the expenses of the classes). Class A shares performance is for
the period beginning October 28, 1992. Life of Fund returns are calculated from
October 31, 1992. The Morgan Stanley Capital International All Country (MSCI AC)
Far East Free ex-Japan Index is an unmanaged index of stocks in developed and
emerging markets which are open to foreign investment in the Far East (excluding
Japan). Investors cannot invest directly in an index. (Source for the MSCI AC
Index returns: Lipper, Inc.)
Fund Fees and Expenses. These tables describe the fees and expenses that you may
pay if you buy and hold shares.
Shareholder Fees
(fees paid directly
from your investment) Class A Class B Class C
- --------------------------------------------------------------------------------
Maximum Sales Charge (Load)(as
a percentage of offering price) 5.75% None None
Maximum Deferred Sales Charge (Load)
(as a percentage of the lower of net
asset value at time of purchase or
time of redemption) None None None
Maximum Sales Charge (Load)
Imposed on Reinvested Distributions None None None
Exchange Fee None None None
Redemption Fee (as a percentage
of amount redeemed) 1.00%* None None
Annual Fund Operating Expenses
(expenses that are deducted
from Fund assets) Class A Class B Class C
- --------------------------------------------------------------------------------
Management Fees 0.75% 0.75% 0.75%
Distribution and Service
(12b-1) Fees** 0.50% 1.00% 1.00%
Other Expenses 1.08% 1.08% 1.08%
----- ----- -----
Total Annual Fund Operating Expenses 2.33% 2.83% 2.83%
* Effective for Class A shares purchased on or after February 1, 2000 and
redeemed within three months of purchase.
** Long-term shareholders may pay more than the economic equivalent of the
front-end sales charge permitted by the National Association of Securities
Dealers, Inc.
<PAGE>
Example. This Example is intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The Example also assumes
that your investment has a 5% return each year and that the operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Class A shares $ 798* $ 1,261 $ 1,749 $ 3,088
Class B shares $ 786 $ 1,277 $ 1,694 $ 3,157
Class C shares $ 386 $ 877 $ 1,494 $ 3,157
You would pay the following expenses if you did not redeem your shares:
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Class A shares $ 798 $ 1,261 $ 1,749 $ 3,088
Class B shares $ 286 $ 877 $ 1,494 $ 3,157
Class C shares $ 286 $ 877 $ 1,494 $ 3,157
* Due to the redemption fee, the cost of investing in Class A shares for one
year would be $100 higher for shares purchased on and after February 1,
2000 and redeemed within three months of purchase.
3
<PAGE>
INVESTMENT OBJECTIVE & PRINCIPAL POLICIES AND RISKS
The Fund's investment objective is to seek long-term capital appreciation. The
Fund currently seeks to meet its investment objective by investing in Greater
China Growth Portfolio (the "Portfolio"), a separate registered investment
company which has the same objective and policies as the Fund. The Fund's
investment objective and certain policies may be changed without shareholder
approval. The Trustees of the Trust have no present intention to make such
change and intend to submit any proposed material change in investment objective
to shareholders in advance for their approval.
The Portfolio invests in a carefully selected and continuously managed portfolio
consisting primarily of common stocks of companies which, in the opinion of the
investment adviser, will benefit from the economic development and growth of
China. China growth companies (a) are located in or have securities that are
principally traded in a China region country, (b)(i) have at least 50% of their
assets in one or more China region countries or (ii) derive at least 50% of
their gross sales revenues or profits from providing goods or services to or
from within one or more China region countries, and (c)(i) have at least 35% of
their assets in China or (ii) derive at least 35% of their gross sales revenues
or profits from providing goods or services to or from within China or (iii)
have manufacturing or other operations in China that are significant to such
companies. Securities of China growth companies are typically listed on stock
exchanges or traded in the over-the-counter markets in countries in the China
region. The principal offices of these companies, however, may be located
outside these countries. Under normal market conditions, the Portfolio will
invest at least 65% of its total assets in equity securities of China growth
companies. The Portfolio will not invest more than 10% of its total assets in
the securities of issuers in any country outside the China region. As an
alternative to investing directly in China growth companies, the Portfolio may
invest in depositary receipts and similar investments.
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. 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 affected by other factors
not present in the United States, including expropriation, armed conflict,
confiscatory taxation, lack of uniform accounting and auditing standards, less
publicly available financial and other information and potential difficulties in
enforcing contractual obligations. Transactions in the securities of foreign
issuers could be subject to settlement delays and risk of loss.
More than 25% of the Portfolio's total assets may be denominated in any single
currency. At times, the portfolio manager may (but is not obligated to) use
forward currency exchange contracts to attempt to mitigate adverse effects of
foreign currency fluctuations. These contracts allow the Portfolio to establish
a currency exchange rate with payment and delivery at a future date. They are
subject to a risk of loss due to unanticipated changes in currency exchange
rates and default by the counterparty to the contract. There can be no assurance
that this hedging strategy will be advantageous to the Portfolio.
Economies of countries in the China region differ from the U.S. economy in
various ways, such as rate of growth of gross national product, rate of
inflation, capital reinvestment, resource self-sufficiency and balance of
payments position. As export-driven economies, the economies of countries in the
China region are affected by developments in the economies of their principal
trading partners. For example, revocation by the United States of China's "Most
Favored Nation" trading status, which the U.S. President and Congress reconsider
annually, would adversely affect the trade and economic development of China and
Hong Kong. Monsoons and natural disasters also can affect the value of Portfolio
investments. Political control of Hong Kong was transferred to China in
mid-1997, and the success of "one country - two systems" will affect investments
in Hong Kong and elsewhere. China's governmental actions can have a significant
effect on the economic conditions in the China region, which could adversely
affect the value and liquidity of the Portfolio's investments. Although the
Chinese Government has recently begun to institute legal and economic reform
policies, there can be no assurances that it will continue to pursue such
policies or, if it does, that such policies will succeed.
The Portfolio may invest in securities of smaller, less seasoned companies. Such
securities are generally subject to greater price fluctuations, limited
liquidity, higher transaction costs and higher investment risk. Smaller
companies may have limited product lines, markets or financial resources, and
they may be dependent on a limited management group. There is generally less
publicly available information about such companies than larger, more
established companies. The Portfolio may make direct investments in companies in
private placement transactions. Because of the absence of any public trading
market for some of these investments (such as those that are legally restricted)
it may take longer to liquidate these positions at fair value than would be the
case for publicly traded securities.
4
<PAGE>
The Portfolio may borrow amounts up to 10% of its total assets, but it will not
borrow more than 5% of the value of its total assets except to satisfy
redemption requests or for other temporary purposes. Such borrowings would
result in increased expense to the Fund and, while they are outstanding, would
magnify increases or decreases in the value of Fund shares. The Portfolio will
not purchase additional portfolio securities while outstanding borrowings exceed
5% of the value of its total assets. For temporary defensive purposes (such as
during abnormal market or economic conditions), the Portfolio may invest some or
all of its total assets in cash and cash equivalents. While temporarily
invested, the Portfolio may not achieve its investment objective.
Like most mutual funds, the Fund and Portfolio rely on computers in conducting
daily business and processing information. There is a concern that on and after
January 1, 2000 some computer programs will be unable to recognize the new year
and as a consequence computer malfunctions will occur. Eaton Vance and the
investment adviser are taking steps that they believe are reasonably designed to
address this potential problem and to obtain satisfactory assurance from other
service providers to the Fund and the Portfolio that they are also taking steps
to address the issue. There can, however, be no assurance that these steps will
be sufficient to avoid any adverse impact on the Fund and the Portfolio or
shareholders. The Year 2000 concern may also adversely impact issuers of
securities held by the Portfolio and the markets on which these securities
trade, and may be more difficult to address in less-developed countries where
access to advanced technology may be limited. The foregoing statement is subject
to the Year 2000 Information and Readiness Disclosure Act, which may protect
Eaton Vance, the investment adviser and the Fund and the Portfolio from
liability arising from the statement.
MANAGEMENT AND ORGANIZATION
Management. The Portfolio's investment adviser is Lloyd George Investment
Management (Bermuda) Limited ("Lloyd George"), 3808 One Exchange Square,
Central, Hong Kong. The investment adviser manages Portfolio investments and
provides related office facilities and personnel. Lloyd George receives a
monthly advisory fee of 0.0625% (equivalent to 0.75% annually) of the
Portfolio's average daily net assets up to $500 million. This fee declines at
intervals above $500 million. For the fiscal year ended August 31, 1999, the
Portfolio paid advisory fees of 0.75% of its average daily net assets.
Adaline Mang-Yee Ko is the portfolio manager of the Portfolio (since June,
1996). She is a Director of Lloyd George. Prior to joining Lloyd George in 1995,
she was a Director of Fleming Investment Management Ltd.
Lloyd George and its affiliates act as investment adviser to various individual
and institutional clients and manage $2.2 billion in assets. Eaton Vance's
corporate parent owns 21% of Lloyd George's corporate parent. Lloyd George, its
affiliates and two of the Portfolio's Trustees are domiciled outside of the
United States. Because of this, it would be difficult for the Portfolio to bring
a claim or enforce a judgment against them.
Eaton Vance manages the business affairs of the Fund and administers the
business affairs of the Portfolio. For these services, Eaton Vance receives a
monthly fee from each of the Fund and Portfolio of 1/48 of 1% (equal to 0.25%
annually) of average daily net assets up to $500 million. This fee declines at
intervals above $500 million. For the fiscal year ended August 31, 1999, Eaton
Vance earned management fees of 0.25% of the Fund's average daily net assets and
administration fees of 0.25% of the Portfolio's average daily net assets. Eaton
Vance has been managing assets since 1924 and managing mutual funds since 1931.
Eaton Vance and its subsidiaries currently manage over $41 billion on behalf of
mutual funds, institutional clients and individuals.
The investment adviser, Eaton Vance and the Fund and Portfolio have adopted
Codes of Ethics governing personal securities transactions. Under the Codes,
employees of the investment adviser and Eaton Vance may purchase and sell
securities (including securities held by the Portfolio) subject to certain
reporting requirements and other procedures.
Organization. The Fund is a series of Eaton Vance Growth Trust, a Massachusetts
business trust. The Fund offers multiple classes of shares. Each class
represents a pro rata interest in the Fund, but is subject to different expenses
and rights. The Fund does not hold annual shareholder meetings, but may hold
special meetings for matters that require shareholder approval (like electing or
removing trustees, approving management contracts or changing investment
policies that may only be changed with shareholder approval). Because the Fund
invests in the Portfolio, it may be asked to vote on certain Portfolio matters
(like changes in certain Portfolio investment restrictions). When necessary, the
Fund will hold a meeting of its shareholders to consider the Portfolio matter
and then vote its interest in the Portfolio in proportion to the votes cast by
its shareholders. The Fund can withdraw from the Portfolio at any time.
5
<PAGE>
VALUING SHARES
The Fund values its shares once each day only when the New York Stock Exchange
is open for trading (typically Monday through Friday), as of the close of
regular trading on the Exchange (normally 4:00 p.m. eastern time). The purchase
price of Fund shares is their net asset value (plus a sales charge for Class A),
which is derived from Portfolio holdings. Exchange-listed securities are valued
at closing sale prices; however, the investment adviser may use the fair value
of a security if events occurring after the close of an exchange would
materially affect net asset value. Because foreign securities trade on days when
Fund shares are not priced, net asset value can change at times when Fund shares
cannot be redeemed.
When purchasing or redeeming Fund shares, your investment dealer must
communicate your order to the principal underwriter by a specific time each day
in order for the purchase price or the redemption price to be based on that
day's net asset value per share. It is the investment dealer's responsibility to
transmit orders promptly. The Fund may accept purchase and redemption orders as
of the time of their receipt by certain investment dealers (or their designated
intermediaries).
PURCHASING SHARES
You may purchase shares through your investment dealer or by mailing the account
application form included in this prospectus to the transfer agent (see back
cover for address). Your initial investment must be at least $1,000. The price
of Class A shares is the net asset value plus a sales charge. The price of Class
B and Class C shares is the net asset value; however, you may be subject to a
sales charge (called a "contingent deferred sales charge" or "CDSC") if you
redeem Class B shares within six years of purchase or Class C shares within one
year of purchase. The sales charges are described below. Your investment dealer
can help you decide which class of shares suits your investment needs.
After your initial investment, additional investments of $50 or more may be made
at any time by sending a check payable to the order of the Fund or the transfer
agent directly to the transfer agent (see back cover for address). Please
include your name and account number and the name of the Fund and Class of
shares with each investment.
You may also make automatic investments of $50 or more each month or each
quarter from your bank account. You can establish bank automated investing on
the account application or by calling 1-800-262-1122. The minimum initial
investment amount and Fund policy of redeeming accounts with low account
balances are waived for bank automated investing accounts and certain group
purchase plans.
You may purchase Fund shares in exchange for securities. Please call
1-800-225-6265 for information about exchanging securities for Fund shares. If
you purchase shares through an investment dealer (which includes brokers,
dealers and other financial institutions), that dealer may charge you a fee for
executing the purchase for you. The Fund may suspend the sale of its shares at
any time and any purchase order may be refused.
SALES CHARGES
Front-End Sales Charge. Class A shares are offered at net asset value per share
plus a sales charge that is determined by the amount of your investment. The
current sales charge schedule is:
<TABLE>
Sales Charge Sales Charge Dealer Commission
as Percentage of as Percentage of Net as a Percentage of
Amount of Purchase Offering Price Amount Invested Offering Price
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000 5.75% 6.10% 5.00%
$50,000 but less than $100,000 4.75% 4.99% 4.00%
$100,000 but less than $250,000 3.75% 3.90% 3.00%
$250,000 but less than $500,000 3.00% 3.09% 2.50%
$500,000 but less than $1,000,000 2.00% 2.04% 1.75%
$1,000,000 or more 0.00* 0.00* See Below
</TABLE>
* No sales charge is payable at the time of purchase on investments of $1
million or more. A CDSC of 1.00% will be imposed on such investments (as
described below) in the event of redemptions within 12 months of purchase.
The principal underwriter will pay a commission to investment dealers on sales
of $1 million or more as follows: 1.00% on amounts of $1 million or more but
less than $3 million; plus 0.50% on amounts over $3 million but less than $5
million; plus 0.25% on amounts over $5 million. Purchases totalling $1 million
or more will be aggregated over a 12-month period for purposes of determining
the commission. The principal underwriter may also pay commissions of up to
1.00% on sales of Class A shares made at net asset value to certain tax-deferred
retirement plans.
6
<PAGE>
Contingent Deferred Sales Charge. Each class of shares is subject to a CDSC on
certain redemptions. Class A shares purchased at net asset value in amounts of
$1 million or more are subject to a 1.00% CDSC if redeemed within 12 months of
purchase. Class C shares are subject to a 1.00% CDSC if redeemed within 12
months of purchase. Class B shares are subject to the following CDSC schedule:
Year of Redemption After Purchase CDSC
- --------------------------------------------------------------------------------
First or Second 5%
Third 4%
Fourth 3%
Fifth 2%
Sixth 1%
Seventh or following 0%
The CDSC is based on the lower of the net asset value at the time of purchase or
at the time of redemption. Shares acquired through the reinvestment of
distributions are exempt from the CDSC. Redemptions are made first from shares
that are not subject to a CDSC.
The principal underwriter pays commissions to investment dealers on sales of
Class B and Class C shares (except exchange transactions and reinvestments). The
sales commission on Class B shares equals 4% of the purchase price of the
shares. The sales commission on Class C shares equals .75% of the purchase price
of the shares. After the first year, investment dealers also receive 0.75% of
the value of Class C shares in annual distribution fees.
Reducing or Eliminating Sales Charges. Front-end sales charges on purchases of
Class A shares may be reduced under the right of accumulation or under a
statement of intention. Under the right of accumulation, the sales charges you
pay are reduced if the current market value of your current holdings (based on
the current offering price), plus your new purchases, total $50,000 or more.
Class A shares of other Eaton Vance funds owned by you can be included as part
of your current holdings for this purpose. Under a statement of intention,
purchases of $50,000 or more made over a 13-month period are eligible for
reduced sales charges. Under a statement of intention, the principal underwriter
may hold 5% of the dollar amount to be purchased in escrow in the form of shares
registered in your name until you satisfy the statement or the 13-month period
expires. See the account application for details.
Class A shares are offered at net asset value to clients of financial
intermediaries who charge a fee for their services; accounts affiliated with
those financial intermediaries; tax-deferred retirement plans; investment and
institutional clients of Eaton Vance; certain persons affiliated with Eaton
Vance; and certain Eaton Vance and fund service providers. Ask your investment
dealer for details. Effective February 1, 2000, Class A shares will be also sold
at net asset value if the amount invested represents redemption proceeds from a
mutual fund not affiliated with Eaton Vance, provided the redemption occurred
within 60 days of the Fund share purchase and the redeemed shares were subject
to a sales charge. Class A shares so acquired will be subject to a 0.50% CDSC if
they are redeemed within 12 months of purchase. Investment dealers will be paid
a commission on such sales of 0.50% of the amount invested.
The Class B and Class C CDSCs are waived for certain redemptions pursuant to a
Withdrawal Plan (see "Shareholder Account Features") and, for Class B and Class
C shares, in connection with certain redemptions from tax-sheltered retirement
plans. Call 1-800-225-6265 for details. The Class B CDSC is also waived
following the death of all beneficial owners of shares, but only if the
redemption is requested within one year after death (a death certificate and
other applicable documents may be required).
If you redeem shares, you may reinvest at net asset value all or any portion of
the redemption proceeds in the same class of shares of the Fund (or, for Class A
shares, in Class A shares of any other Eaton Vance fund), provided that the
reinvestment occurs within 60 days of the redemption, and the privilege has not
been used more than once in the prior 12 months. Under these circumstances your
account will be credited with any CDSC paid in connection with the redemption.
Any CDSC period applicable to the shares you acquire upon reinvestment will run
from the date of your original share purchase. Reinvestment requests must be in
writing. If you reinvest, you will be sold shares at the next determined net
asset value following receipt of your request.
Distribution and Service Fees. Each Class of shares has in effect a plan under
Rule 12b-1 that allows the Fund to pay distribution fees for the sale and
distribution of shares (so-called "12b-1 fees"). Class A shares pay a
distribution fee of 0.50% of average daily net assets on shares outstanding for
less than twelve months and a distribution fee of 0.25% on shares outstanding
for more than twelve months. Class B and Class C shares pay distribution fees of
0.75% of average daily net assets annually. Because these fees are paid from
Fund assets on an ongoing basis, they will increase your cost over time and may
cost you more than paying other types of sales charges. All classes also pay
service fees for personal and/or account services equal to 0.25% of average
daily net assets annually. Class A shares only pay service fees on shares that
have been outstanding for twelve months.
The distribution fees paid by Class B and Class C are subject to termination
when payments under the Rule 12b-1 plans are sufficient to extinguish uncovered
distribution charges. As described more fully in the Statement of Additional
Information, uncovered distribution charges of a Class are increased by sales
7
<PAGE>
commissions payable by the Class to the principal underwriter in connection with
sales of shares of that Class and by an interest factor tied to the U.S. Prime
Rate. Uncovered distribution charges are reduced by the distribution fees paid
by the Class and by CDSCs paid to the Fund by redeeming shareholders. The amount
of the sales commissions payable by Class B to the principal underwriter in
connection with sales of Class B shares is significantly less than the maximum
permitted by the sales charge rule of the National Association of Securities
Dealers, Inc. To date, neither Class B or Class C uncovered distribution charges
have been fully covered.
REDEEMING SHARES
You can redeem shares in any of the following ways:
By Mail Send your request to the transfer agent along with any
certificates and stock powers. The request must be signed exactly
as your account is registered and signature guaranteed. You can
obtain a signature guarantee at certain banks, savings and loan
institutions, credit unions, securities dealers, securities
exchanges, clearing agencies and registered securities
associations. You may be asked to provide additional documents if
your shares are registered in the name of a corporation,
partnership or fiduciary.
By Telephone You can redeem up to $50,000 by calling the transfer agent at
1-800-262-1122 on Monday through Friday, 9:00 a.m. to 4:00 p.m.
(eastern time). Proceeds of a telephone redemption can be mailed
only to the account address. Shares held by corporations, trusts
or certain other entities and shares that are subject to
fiduciary arrangements cannot be redeemed by telephone.
Through an
Investment
Dealer Your investment dealer is responsible for transmitting the order
promptly. A dealer may charge a fee for this service.
For shares purchased on and after February 1, 2000, redemptions (including
exchanges) of Class A shares within three months of their purchase will be
subject to a redemption fee equal to 1% of the amount redeemed. All redemption
fees will be paid to the Fund. Redemptions of shares acquired as the result of
reinvesting distributions and those held by 401(k) plans or in proprietary
fee-based advisory programs sponsored by broker-dealers are not subject to the
redemption fee.
If you redeem shares, your redemption price will be based on the net asset value
per share next computed after the redemption request is received. Your
redemption proceeds will be paid in cash within seven days, reduced by the
amount of any applicable CDSC and/or redemption fee and any federal income tax
required to be withheld. Payments will be sent by mail unless you complete the
Bank Wire Redemptions section of the account application.
If you recently purchased shares, the proceeds of a redemption will not be sent
until the purchase check (including a certified or cashier's check) has cleared.
If the purchase check has not cleared, redemption proceeds may be delayed up to
15 days from the purchase date. If your account value falls below $750 (other
than due to market decline), you may be asked to either add to your account or
redeem it within 60 days. If you take no action, your account will be redeemed
and the proceeds sent to you.
While redemption proceeds are normally paid in cash, redemptions may be paid by
distributing marketable securities. If you receive securities, you could incur
brokerage or other charges in converting the securities to cash.
8
<PAGE>
SHAREHOLDER ACCOUNT FEATURES
Once you purchase shares, the transfer agent establishes a Lifetime Investing
Account(R) for you. Share certificates are issued only on request.
Distributions. You may have your Fund distributions paid in one of the following
ways:
*Full
Reinvest
Option Dividends and capital gains are reinvested in additional shares.
This option will be assigned if you do not specify an option.
*Partial
Reinvest
Option Dividends are paid in cash and capital gains are reinvested in
additional shares.
*Cash
Option Dividends and capital gains are paid in cash.
*Exchange
Option Dividends and/or capital gains are reinvested in additional
shares of another Eaton Vance fund chosen by you. Before
selecting this option, you must obtain a prospectus of the other
fund and consider its objectives and policies carefully.
Information from the Fund. From time to time, you may be mailed the following:
*Annual and Semi-Annual Reports, containing performance information and
financial statements.
*Periodic account statements, showing recent activity and total share
balance.
*Form 1099 and tax information needed to prepare your income tax returns.
*Proxy materials, in the event a shareholder vote is required.
*Special notices about significant events affecting your Fund.
Withdrawal Plan. You may redeem shares on a regular monthly or quarterly basis
by establishing a systematic withdrawal plan. Withdrawals will not be subject to
any applicable CDSC if they do not in the aggregate exceed 12% annually of the
account balance at the time the plan is established. A minimum account size of
$5,000 is required to establish a systematic withdrawal plan. Because purchases
of Class A shares are generally subject to an initial sales charge, you should
not make withdrawals from your account while you are making purchases.
Tax-Sheltered Retirement Plans. Class A and Class C are available for purchase
in connection with certain tax-sheltered retirement plans. Call 1-800-225-6265
for information. Distributions will be invested in additional shares for all
tax-sheltered retirement plans.
Exchange Privilege. You may exchange your Fund shares for shares of the same
class of another Eaton Vance fund. Exchanges are generally made at net asset
value. If you hold Class A shares for less than six months and exchange them for
shares subject to a higher sales charge, you will be charged the difference
between the two sales charges. If your shares are subject to a CDSC, the CDSC
will continue to apply to your new shares at the same CDSC rate. For purposes of
the CDSC, your shares will continue to age from the date of your original
purchase.
Before exchanging, you should read the prospectus of the new fund carefully. If
you wish to exchange shares, write to the transfer agent (address on back cover)
or call 1-800-262-1122. Periodic automatic exchanges are also available. The
exchange privilege may be changed or discontinued at any time. You will receive
60 days' notice of any material change to the privilege. This privilege may not
be used for "market timing". If an account (or group of accounts) makes more
than two round-trip exchanges within 12 months, it will be deemed to be market
timing. The exchange privilege may be terminated for market timing accounts.
Telephone and Electronic Transactions. You can redeem or exchange shares by
telephone as described in this prospectus. In addition, certain transactions may
be conducted through the Internet. The transfer agent and the principal
underwriter have procedures in place to authenticate telephone and electronic
instructions (such as using security codes or verifying personal account
information). As long as the transfer agent and principal underwriter follow
these procedures, they will not be responsible for unauthorized telephone or
electronic transactions and you bear the risk of possible loss resulting from
these transactions. You may decline the telephone redemption option on the
account application. Telephone instructions are tape recorded.
"Street Name" Accounts. If your shares are held in a "street name" account at an
investment dealer, that dealer (and not the Fund or its transfer agent) will
perform all recordkeeping, transaction processing and distribution payments.
Because the Fund will have no record of your transactions, you should contact
your investment dealer to purchase, redeem or exchange shares, to make changes
in your account, or to obtain account information. You will not be able to
utilize a number of shareholder features, such as telephone transactions,
9
<PAGE>
directly with the Fund. The transfer of shares in a "street name" account to an
account with another investment dealer or to an account directly with the Fund
involves special procedures and you will be required to obtain historical
information about your shares prior to the transfer. Before establishing a
"street name" account with an investment dealer, you should determine whether
that dealer allows reinvestment of distributions in "street name" accounts.
Account Questions. If you have any questions about your account or the services
available, please call Eaton Vance Shareholder Services at 1-800-225-6265, or
write to the transfer agent (see back cover for address).
TAX INFORMATION
The Fund pays dividends at least once annually and intends to pay capital gains
annually. Distributions of income and net short-term capital gains will be
taxable as ordinary income. Distributions of any long-term capital gains will be
taxable as long-term gains. The Fund expects its distributions will consist
primarily of capital gains. The Fund's distributions will generally not qualify
for the dividends-received deduction for corporations. The Fund's distributions
will be taxable whether they are paid in cash or reinvested in additional
shares.
Investors who purchase shares shortly before the record date of a distribution
will pay the full price for the shares and then receive some portion of the
price back as a taxable distribution. Certain distributions paid in January will
be taxable to shareholders as if received on December 31 of the prior year. A
redemption of Fund shares, including an exchange for shares of another fund, is
a taxable transaction.
Shareholders should consult with their advisers concerning the applicability of
state, local and other taxes to an investment.
10
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights are intended to help you understand the Fund's
financial performance for the past five years. Certain information in the table
reflects the financial results for a single Fund share. The total returns in the
table represent the rate an investor would have earned (or lost) on an
investment in the Fund (assuming reinvestment of all distributions and not
taking into account a sales charge). This information has been audited by
Deloitte & Touche LLP, independent accountants. The report of Deloitte & Touche
LLP and the Fund's financial statements are incorporated herein by reference and
included in the annual report, which is available on request. The Fund began
offering three classes of shares on September 1, 1997. Prior to that date,
the Fund offered only Class B shares and Class A and Class C existed as separate
funds.
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
------------------------------------------------------------------------------------------------------
1999(1) 1998(1) 1997 1996 1995
------------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS B CLASS B CLASS B
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value -
Beginning of year $ 6.860 $ 6.200 $ 4.220 $ 17.710 $16.130 $10.970 $ 12.450 $ 11.890 $ 13.160
------- ------- ------- -------- ------- ------- -------- -------- --------
Income (loss) from
operations
Net investment income
(loss) $ 0.012 $(0.049) $(0.039) $ 0.013 $(0.041) $(0.025) $ (0.181) $ (0.087) $ (0.038)
Net realized and
unrealized gain (loss) 4.528 4.109 2.799 (10.863) (9.889) (6.725) 3.921 0.647 (1.157)
------- ------- ------- -------- ------- ------- -------- -------- --------
Total income (loss) from
operations $ 4.540 $ 4.060 $ 2.760 $(10.850) $(9.930) $(6.750) $ 3.740 $ 0.560 $ (1.195)
------- ------- ------- -------- ------- ------- -------- -------- --------
Less distributions
In excess of net
investment income $ -- $ -- $ -- $ -- $ -- $ -- $ (0.060) $ -- $ (0.065)
In excess of net realized
gain on investments -- -- -- -- -- -- -- -- (0.010)
------- ------- ------- -------- ------- ------- -------- -------- --------
Total distributions $ -- $ -- $ -- $ -- $ -- $ -- $ (0.060) $ -- $ (0.075)
------- ------- ------- -------- ------- ------- -------- -------- --------
Net asset value - End of
year $11.400 $10.260 $ 6.980 $ 6.860 $ 6.200 $ 4.220 $ 16.130 $ 12.450 $ 11.890
======= ======= ======= ======== ======= ======= ======== ======== ========
Total return (2) 66.18% 65.48% 65.40% (61.26)% (61.56)% (61.53)% 30.15% 4.71% (9.06)%
Ratios/Supplemental
Data
Net assets, end of year
(000's omitted) $65,299 $92,860 $ 8,158 $ 56,277 $75,635 $ 6,449 $296,586 $284,575 $324,258
Ratios (as a percentage
of average daily net
assets):
Expenses
(3)(4) 2.33% 2.83% 2.83% 2.27% 2.78% 2.79% 2.66% 2.63% 2.47%
Expenses after custodian
fee reduction (3) 2.14% 2.64% 2.64% 2.15% 2.66% 2.67% 2.63% 2.57% --
Net investment income
(loss) 0.13% (0.59)% (0.69)% 0.11% (0.40)% (0.36)% (0.75)% (0.51)% (0.02)%
Portfolio Turnover of the
Portfolio 57% 57% 57% 42% 42% 42% 48% 42% 32%
</TABLE>
(1) Net investment income (loss) per share was computed using average shares
outstanding.
(2) Total return is calculated assuming a purchase at the net asset value on
the first day and a sale at the net asset value on the last day of each
period reported. Distributions, if any, are assumed to be reinvested at the
net asset value on the reinvestment date. Total return is not computed on
an annualized basis.
(3) Includes the Fund's share of the Portfolio's allocated expenses.
(4) The expense ratios for the year ended August 31, 1996 and periods
thereafter, have been adjusted to reflect a change in reporting
requirements. The new reporting guidelines require the Fund, as well as its
corresponding Portfolio, to increase its expense ratio by the effect of any
expense offset arrangements with its service providers. The expense ratios
for the year ended August 31, 1995 has not been adjusted to reflect this
change.
11
<PAGE>
[LOGO} Investing
EATON VANCE for the
Mutual Funds 21st
Century(R)
More Information
- --------------------------------------------------------------------------------
About the Fund: More information is available in the statement of
additional information. The statement of additional information is
incorporated by reference into this prospectus. Additional information
about the Portfolio's investments is available in the annual and
semi-annual reports to shareholders. In the annual report, you will find a
discussion of the market conditions and investment strategies that
significantly affected the Fund's performance during the past year. You may
obtain free copies of the statement of additional information and the
shareholder reports by contacting:
Eaton Vance Distributors, Inc.
The Eaton Vance Building
255 State Street
Boston, MA 02109
1-800-225-6265
website: www.eatonvance.com
You will find and may copy information about the Fund at the Securities and
Exchange Commission's public reference room in Washington, DC (call
1-800-SEC-0330 for information on the operation of the public reference
room); on the SEC's Internet site (http://www.sec.gov); or, upon payment of
copying fees, by writing to the SEC's public reference room in Washington,
DC 20549-0102 or by electronic mail at [email protected].
About Shareholder Accounts: You can obtain more information from Eaton
Vance Share- holder Services (1-800-225-6265). If you own shares and would
like to add to, redeem or change your account, please write or call the
transfer agent:
- --------------------------------------------------------------------------------
PFPC Global Fund Services
P.O. Box 5123
Westborough, MA 01581-5123
1-800-262-1122
The Fund's SEC File No. is 811-1241 CGP
<PAGE>
[LOGO]
Investing
for the
21st
Century(R)
Eaton Vance
Growth Fund
A diversified fund for investors seeking growth of capital
Prospectus Dated
January 1, 2000
The Securities and Exchange Commission has not approved or disapproved these
securities or determined whether this prospectus is truthful or complete.
Any representation to the contrary is a criminal offense.
<TABLE>
<CAPTION>
Information in this prospectus
Page Page
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fund Summary 2 Sales Charges 6
Investment Objective & Principal Policies and Risks 4 Redeeming Shares 7
Management and Organization 4 Shareholder Account Features 8
Valuing Shares 5 Tax Information 9
Purchasing Shares 5 Financial Highlights 10
- ------------------------------------------------------------------------------------------------
</TABLE>
This prospectus contains important information about the Fund and the services
available to shareholders. Please save it for reference.
<PAGE>
FUND SUMMARY
Investment Objective and Principal Strategies. The Fund's investment objective
is to achieve capital growth. A secondary consideration is investment income.
The Fund invests primarily in common stocks of established growth companies.
Although it invests primarily in domestic companies, the Fund may invest up to
25% of its net assets in foreign companies. The Fund currently invests its
assets in a separate registered investment company with the same objective and
policies as the Fund.
Principal Risk Factors. The value of Fund shares is sensitive to stock market
volatility. If there is a general decline in the value of U.S. stocks, the
value of the Fund's shares will also likely decline. Changes in stock market
values can be sudden and unpredictable. Also, although stock values can
rebound, there is no assurance that values will return to previous levels. The
Fund has historically held fewer than 75 stocks at any one time; therefore, the
Fund's value is more sensitive to developments affecting particular stocks than
would be a more broadly diversified fund.
The Fund is not a complete investment program and you may lose money by
investing in the Fund. An investment in the Fund is not a deposit in a bank and
is not insured or guaranteed by the Federal Deposit Insurance Corporation or any
other government agency.
Performance Information. The following bar chart and table provide information
about the Fund's performance, including a comparison of the Fund's performance
to the performance of a broad-based index of domestic common stocks. Although
past performance is no guarantee of future results, this performance information
demonstrates the risk that the value of your investment will change. The
following returns are for Class A shares for each calendar year through December
31, 1998 and do not reflect a sales charge. If the sales charge was reflected,
the returns would be lower.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
30.34% -5.46% 39.66% 5.23% -2.51% -4.41% 29.23% 18.24% 28.53% 18.31%
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
</TABLE>
The Fund's highest quarterly total return was 16.91% for the quarter ended June
30, 1997, and its lowest quarterly return was -15.95% for the quarter ended
September 30, 1990. The year-to-date total return through the end of the most
recent calendar quarter (December 31, 1998 to September 30, 1999) was -4.82%.
<TABLE>
<CAPTION>
One Five Ten
Average Annual Total Return as of December 31, 1998 Year Years Years
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A Shares 11.50% 15.92% 13.97%
Class B Shares 12.41% 16.28% 14.25%
Class C Shares 16.29% 15.27% 13.64%
Standard & Poor's 500 Index 28.52% 24.02% 19.16%
</TABLE>
These returns reflect the maximum sales charge for Class A (5.75%) and any
applicable CDSC for Class B and Class C. The Class B and Class C performance
shown above for the periods prior to September 13, 1994 and November 7, 1994,
respectively, is the performance of Class A shares, adjusted for the sales
charge that applies to Class B or Class C shares (but not adjusted for any other
differences in the expenses of the classes). The Standard & Poor's 500 Index is
an unmanaged index commonly used as a measure of U.S. stock market performance.
Investors cannot invest directly in an Index. (Source for Standard & Poor's 500
Index: Lipper Inc.)
2
<PAGE>
Fund Fees and Expenses. These tables describe the fees and expenses that you
may pay if you buy and hold shares.
<TABLE>
<CAPTION>
Shareholder Fees
(fees paid directly from your investment) Class A Class B Class C
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge (Load) (as a percentage of offering price) 5.75% None None
Maximum Deferred Sales Charge (Load) (as a percentage of the
lower of net asset value at time of purchase or redemption) None 5.00% 1.00%
Maximum Sales Charge (Load)Imposed on Reinvested Distributions None None None
Exchange Fee None None None
</TABLE>
<TABLE>
<CAPTION>
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets) Class A Class B Class C
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Management Fees 0.625% 0.625% 0.625%
Distribution and Service (12b-1) Fees* 0.00% 1.000% 1.000%
Other Expenses** 0.535% 0.285% 0.285%
------ ------ ------
Total Annual Fund Operating Expenses 1.160% 1.910% 1.910%
</TABLE>
* Long-term shareholders of Class B and Class C shares may pay more than the
economic equivalent of the front-end sales charge permitted by the National
Association of Securities Dealers, Inc.
** Other Expenses for Class A shares includes a service fee of 0.25%.
Example. This Example is intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The Example also assumes
that your investment has a 5% return each year and that the operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A shares $ 686 $ 922 $ 1,177 $ 1,903
Class B shares $ 694 $ 1,000 $ 1,232 $ 2,233
Class C shares $ 294 $ 600 $ 1,032 $ 2,233
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A shares $ 686 $ 922 $ 1,177 $ 1,903
Class B shares $ 194 $ 600 $ 1,032 $ 2,233
Class C shares $ 194 $ 600 $ 1,032 $ 2,233
</TABLE>
3
<PAGE>
INVESTMENT OBJECTIVE & PRINCIPAL POLICIES AND RISKS
The Fund's investment objective is to achieve capital growth. A secondary
consideration is investment income. The Fund currently seeks to meet its
investment objective by investing in Growth Portfolio (the "Portfolio"), a
separate open-end investment company that has the same objective and policies as
the Fund. The Fund's investment objective may not be changed without
shareholder approval. The Fund's policies may be changed by the Trustees without
shareholder approval.
The Portfolio invests in a carefully selected and continuously managed portfolio
consisting primarily of common stocks of U.S. companies. The Portfolio
emphasizes investments in established growth companies that have attractive
financial characteristics. The portfolio manager seeks to purchase stocks that
are favorably priced in relation to their fundamental value, and which will grow
in value over time. In making investment decisions, the portfolio manager may
draw upon the information provided by, and the expertise of, the investment
adviser's research staff. Management of the Portfolio involves consideration of
numerous factors (such as potential for price appreciation, risk/return, the mix
of securities held by the Portfolio and, secondarily, expected dividends). Many
of these considerations are subjective. The Portfolio normally invests in a
variety of industries, which reduces risk.
The Portfolio may invest up to 25% of assets in securities of foreign companies
located in developed countries and traded in established markets. The value of
foreign securities is affected by changes in currency rates, foreign tax laws
(including withholding tax), government policies (in this country or abroad),
relations between nations and trading, settlement, custodial and other
operational risks. In addition, the costs of investing abroad 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 markets
in the United States. As an alternative to holding foreign stocks directly, the
Portfolio may invest in dollar-denominated depositary receipts which evidence
ownership in underlying foreign stocks. Investment in depositary receipts is not
subject to the limitation on investing in foreign securities stated above.
The Portfolio may borrow amounts up to one-third of the value of its total
assets (including borrowings), but it will not borrow more than 5% of the value
of its total assets except to satisfy redemption requests or for other temporary
purposes. Such borrowings would result in increased expense to the Fund and,
while they are outstanding, would magnify increases or decreases in the value of
Fund shares. The Portfolio will not purchase additional investment securities
while outstanding borrowings exceed 5% of the value of its total assets. During
unusual market conditions, the Portfolio may temporarily invest up to 100% of
its assets in cash or cash equivalents. While temporarily invested, the
Portfolio may not achieve its investment objective.
Like most mutual funds, the Fund and Portfolio rely on computers in conducting
daily business and processing information. There is a concern that on and after
January 1, 2000 some computer programs will be unable to recognize the new year
and as a consequence computer malfunctions will occur. Eaton Vance has taken
steps that it believes are reasonably designed to address this potential problem
and to obtain satisfactory assurance from other service providers to the Fund
and the Portfolio that they also have taken steps to address the issue. There
can, however, be no assurance that these steps will be sufficient to avoid any
adverse impact on the Fund and the Portfolio or shareholders. The Year 2000
concern may also adversely impact issuers of securities held by the Portfolio
and the markets in which these securities trade. The foregoing statement is
subject to the Year 2000 Information and Readiness Disclosure Act, which may
protect Eaton Vance and the Fund and the Portfolio from liability arising from
the statement.
MANAGEMENT AND ORGANIZATION
Management. The Portfolio's investment adviser is Boston Management and Research
("BMR"), a subsidiary of Eaton Vance Management ("Eaton Vance"), with offices at
The Eaton Vance Building, 255 State Street, Boston, Massachusetts 02109. Eaton
Vance has been managing assets since 1924 and managing mutual funds since 1931.
Eaton Vance and its subsidiaries currently manage over $41 billion on behalf of
mutual funds, institutional clients and individuals.
The investment adviser manages the investments of the Portfolio and provides
related office facilities and personnel. Under its investment advisory
agreement with the Portfolio, BMR receives a monthly advisory fee of 5/96 of 1%
(equivalent to 0.625% annually) of the average daily net assets of the Portfolio
up to and including $300 million, and 1/24 of 1% (equivalent to 0.50% annually)
of the average daily net assets over $300 million. For the fiscal year ended
August 31, 1999, the Portfolio paid BMR advisory fees equivalent to 0.625% of
its average daily net assets.
4
<PAGE>
Thomas E. Faust, Jr. is the portfolio manager of the Portfolio (since April,
1996). He also manages another Eaton Vance portfolio, has been an Eaton Vance
portfolio manager for more than 5 years, and is a Vice President of Eaton Vance
and BMR.
The investment adviser and the Fund and Portfolio have adopted Codes of Ethics
governing personal securities transactions. Under the Codes, Eaton Vance
employees may purchase and sell securities (including securities held by the
Portfolio) subject to certain pre-clearance and reporting requirements and other
procedures.
Eaton Vance serves as administrator of the Fund, providing the Fund with
administrative services and related office facilities. Eaton Vance does not
currently receive a fee for serving as administrator.
Organization. The Fund is a series of Eaton Vance Growth Trust, a Massachusetts
business trust. The Fund offers multiple classes of shares. Each class
represents a pro rata interest in the Fund, but is subject to different expenses
and rights. The Fund does not hold annual shareholder meetings, but may hold
special meetings for matters that require shareholder approval (like electing or
removing trustees, approving management contracts or changing investment
policies that may only be changed with shareholder approval). Because the Fund
invests in the Portfolio, it may be asked to vote on certain Portfolio matters
(like changes in certain Portfolio investment restrictions). When necessary,
the Fund will hold a meeting of its shareholders to consider the Portfolio
matter and then vote its interest in the Portfolio in proportion to the votes
cast by its shareholders. The Fund can withdraw from the Portfolio at any time.
VALUING SHARES
The Fund values its shares once each day only when the New York Stock Exchange
is open for trading (typically Monday through Friday), as of the close of
regular trading on the Exchange (normally 4:00 p.m. eastern time). The purchase
price of Fund shares is their net asset value (plus a sales charge for Class A
shares), which is derived from Portfolio holdings. Exchange-listed securities
are generally valued at closing sale prices.
When purchasing or redeeming Fund shares, your investment dealer must
communicate your order to the principal underwriter by a specific time each day
in order for the purchase price or the redemption price to be based on that
day's net asset value per share. It is the investment dealer's responsibility
to transmit orders promptly. The Fund may accept purchase and redemption orders
as of the time of their receipt by certain investment dealers (or their
designated intermediaries).
PURCHASING SHARES
You may purchase shares through your investment dealer or by mailing the account
application form included in this prospectus to the transfer agent (see back
cover for address). Your initial investment must be at least $1,000. The price
of Class A shares is the net asset value plus a sales charge. The price of
Class B and Class C shares is the net asset value; however, you may be subject
to a sales charge (called a "contingent deferred sales charge" or "CDSC") if you
redeem Class B shares within six years of purchase or Class C shares within one
year of purchase. The sales charges are described below. Your investment
dealer can help you decide which class of shares suits your investment needs.
After your initial investment, additional investments of $50 or more may be made
at any time by sending a check payable to the order of the Fund or the transfer
agent directly to the transfer agent (see back cover for address). Please
include your name and account number and the name of the Fund and class of
shares with each investment.
You may also make automatic investments of $50 or more each month or each
quarter from your bank account. You can establish bank automated investing on
the account application or by calling 1-800-262-1122. The minimum initial
investment amount and Fund policy of redeeming accounts with low account
balances are waived for bank automated investing accounts and certain group
purchase plans.
You may purchase Fund shares in exchange for securities. Please call
1-800-225-6265 for information about exchanging securities for Fund shares. If
you purchase shares through an investment dealer (which includes brokers,
dealers and other financial institutions), that dealer may charge you a fee for
executing the purchase for you. The Fund may suspend the sale of its shares at
any time and any purchase order may be refused.
5
<PAGE>
SALES CHARGES
Front-End Sales Charge. Class A shares are offered at net asset value per share
plus a sales charge that is determined by the amount of your investment. The
current sales charge schedule is:
<TABLE>
<CAPTION>
Sales Charge Sales Charge Dealer Commission
as Percentage of as Percentage of Net as a Percentage of
Amount of Purchase Offering Price Amount Invested Offering Price
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Less than $50,000 5.75% 6.10% 5.00%
$50,000 but less than $100,000 4.75% 4.99% 4.00%
$100,000 but less than $250,000 3.75% 3.90% 3.00%
$250,000 but less than $500,000 3.00% 3.09% 2.50%
$500,000 but less than $1,000,000 2.00% 2.04% 1.75%
$1,000,000 or more 0.00* 0.00* See Below
* No sales charge is payable at the time of purchase on investments of $1 million or more.
A CDSC of 1.00% will be imposed on such investments (as described below) in the event of
redemptions within 12 months of purchase.
</TABLE>
The principal underwriter will pay a commission to investment dealers on sales
of $1 million or more as follows: 1.00% on amounts of $1 million or more but
less than $3 million; plus 0.50% on amounts over $3 million but less than $5
million; plus 0.25% on amounts over $5 million. Purchases totalling $1 million
or more will be aggregated over a 12-month period for purposes of determining
the commission. The principal underwriter may also pay commissions of up to
1.00% on sales of Class A shares made at net asset value to certain tax-deferred
retirement plans.
Contingent Deferred Sales Charge. Each class of shares is subject to a CDSC on
certain redemptions. Class A shares purchased at net asset value in amounts of
$1 million or more are subject to a 1.00% CDSC if redeemed within 12 months of
purchase. Class C shares are subject to a 1.00% CDSC if redeemed within 12
months of purchase. Class B shares are subject to the following CDSC schedule:
<TABLE>
<CAPTION>
Year of Redemption After Purchase CDSC
- ---------------------------------------------
<S> <C> <C>
First or Second 5% The CDSC is based on the lower of the net asset value at
Third 4% the time of purchase or at the time of redemption.
Fourth 3% Shares acquired through the reinvestment of distributions
Fifth 2% are exempt from the CDSC. Redemptions are made first
Sixth 1% from shares that are not subject to a CDSC.
Seventh or following 0%
</TABLE>
The principal underwriter pays commissions to investment dealers on sales of
Class B and Class C shares (except exchange transactions and reinvestments).
The sales commission on Class B shares equals 4% of the purchase price of the
shares. The sales commission on Class C shares equals 0.75% of the purchase
price of the shares. After the first year, investment dealers also receive
0.75% of the value of Class C shares in distribution fees.
Reducing or Eliminating Sales Charges. Front-end sales charges on purchases of
Class A shares may be reduced under the right of accumulation or under a
statement of intention. Under the right of accumulation, the sales charges you
pay are reduced if the current market value of your current holdings (based on
the current offering price), plus your new purchases, total $50,000 or more.
Class A shares of other Eaton Vance funds owned by you can be included as part
of your current holdings for this purpose. Under a statement of intention,
purchases of $50,000 or more made over a 13-month period are eligible for
reduced sales charges. Under a statement of intention, the principal
underwriter may hold 5% of the dollar amount to be purchased in escrow in the
form of shares registered in your name until you satisfy the statement or the
13-month period expires. See the account application for details.
Class A shares are offered at net asset value to clients of financial
intermediaries who charge a fee for their services; accounts affiliated with
those financial intermediaries; tax-deferred retirement plans; investment and
institutional clients of Eaton Vance; certain persons affiliated with Eaton
Vance; and certain Eaton Vance and fund service providers. Ask your investment
dealer for details.
6
<PAGE>
CDSCs are waived for certain redemptions pursuant to a Withdrawal Plan (see
"Shareholder Account Features") and, for Class B and Class C shares, in
connection with certain redemptions from tax-sheltered retirement plans. Call
1-800-225-6265 for details. The Class B CDSC is also waived following the death
of all beneficial owners of shares, but only if the redemption is requested
within one year after death (a death certificate and other applicable documents
may be required).
If you redeem shares, you may reinvest at net asset value all or any portion of
the redemption proceeds in the same class of shares of the Fund (or, for Class A
shares, in Class A shares of any other Eaton Vance fund), provided that the
reinvestment occurs within 60 days of the redemption, and the privilege has not
been used more than once in the prior 12 months. Under these circumstances your
account will be credited with any CDSC paid in connection with the redemption.
Any CDSC period applicable to the shares you acquire upon reinvestment will run
from the date of your original share purchase. Reinvestment requests must be in
writing. If you reinvest, you will be sold shares at the next determined net
asset value following receipt of your request.
Distribution and Service Fees. Class B and Class C shares have in effect plans
under Rule 12b-1 that allow the Fund to pay distribution fees for the sale and
distribution of shares (so-called "12b-1 fees"). Class B and Class C shares pay
distribution fees of 0.75% of average daily net assets annually. Because these
fees are paid from Fund assets on an ongoing basis, they will increase your cost
over time and may cost you more than paying other types of sales charges. All
classes pay service fees for personal and/or account services equal to 0.25% of
average daily net assets annually.
Class B and Class C distribution fees are subject to termination when payments
under the Rule 12b-1 plans are sufficient to extinguish uncovered distribution
charges. As described more fully in the Statement of Additional Information,
uncovered distribution charges of a class are increased by sales commissions
payable by the class to the principal underwriter in connection with sales of
shares of that class and by an interest factor tied to the U.S. Prime Rate.
Uncovered distribution charges are reduced by the distribution fees paid by the
class and by CDSCs paid to the Fund by redeeming shareholders. The amount of
the sales commissions payable by Class B to the principal underwriter in
connection with sales of Class B shares is significantly less than the maximum
permitted by the sales charge rule of the National Association of Securities
Dealers, Inc. To date, neither Class B nor Class C uncovered distribution
charges have been fully covered.
REDEEMING SHARES
You can redeem shares in any of the following ways:
By Mail Send your request to the transfer agent along with any
certificates and stock powers. The request must be
signed exactly as your account is registered and
signature guaranteed. You can obtain a signature
guarantee at certain banks, savings and loan
institutions, credit unions, securities dealers,
securities exchanges, clearing agencies and registered
securities associations. You may be asked to provide
additional documents if your shares are registered in
the name of a corporation, partnership or fiduciary.
By Telephone You can redeem up to $50,000 b y calling the transfer
agent at 1-800-262-1122 on Monday through Friday, 9:00
a.m. to 4:00 p.m. (eastern time). Proceeds of a
telephone redemption can be mailed only to the account
address. Shares held by corporations, trusts or certain
other entities and shares that are subject to fiduciary
arrangements cannot be redeemed by telephone.
Through an Your investment dealer is responsible for transmitting
Investment the order promptly. A dealer may charge a fee for this
Dealer service.
If you redeem shares, your redemption price will be based on the net asset value
per share next computed after the redemption request is received. Your
redemption proceeds will be paid in cash within seven days, reduced by the
amount of any applicable CDSC and any federal income tax required to be
withheld. Payments will be sent by mail unless you complete the Bank Wire
Redemptions section of the account application.
If you recently purchased shares, the proceeds of a redemption will not be sent
until the purchase check (including a certified or cashier's check) has cleared.
If the purchase check has not cleared, redemption proceeds may be delayed up to
15 days from the purchase date. If your account value falls below $750 (other
than due to market decline), you may be asked to either add to your account or
redeem it within 60 days. If you take no action, your account will be redeemed
and the proceeds sent to you.
7
<PAGE>
While redemption proceeds are normally paid in cash, redemptions may be paid by
distributing marketable securities. If you receive securities, you could incur
brokerage or other charges in converting the securities to cash.
SHAREHOLDER ACCOUNT FEATURES
Once you purchase shares, the transfer agent establishes a Lifetime Investing
Account(R) for you. Share certificates are issued only on request.
Distributions. You may have your Fund distributions paid in one of the
following ways:
*Full Reinvest Option Dividends and capital gains are reinvested in
additional shares. This option will be assigned if
you do not specify an option.
*Partial Reinvest Option Dividends are paid in cash and capital gains are
reinvested in additional shares.
*Cash Option Dividends and capital gains are paid in cash.
*Exchange Option Dividends and/or capital gains are reinvested in
additional shares of another Eaton Vance fund
chosen by you. Before selecting this option, you
must obtain a prospectus of the other fund and
consider its objectives and policies carefully.
Information from the Fund. From time to time, you may be mailed the following:
* Annual and Semi-Annual Reports, containing performance information and
financial statements.
* Periodic account statements, showing recent activity and total share
balance.
* Form 1099 and tax information needed to prepare your income tax returns.
* Proxy materials, in the event a shareholder vote is required.
* Special notices about significant events affecting your Fund.
Withdrawal Plan. You may redeem shares on a regular monthly or quarterly basis
by establishing a systematic withdrawal plan. Withdrawals will not be subject to
any applicable CDSC if they do not in the aggregate exceed 12% annually of the
account balance at the time the plan is established. A minimum account size of
$5,000 is required to establish a systematic withdrawal plan. Because purchases
of Class A shares are generally subject to an initial sales charge, you should
not make withdrawals from your account while you are making purchases.
Tax-Sheltered Retirement Plans. Class A and Class C shares are available for
purchase in connection with certain tax-sheltered retirement plans. Call
1-800-225-6265 for information. Distributions will be invested in additional
shares for all tax-sheltered retirement plans.
Exchange Privilege. You may exchange your Fund shares for shares of the same
class of another Eaton Vance fund. Exchanges are generally made at net asset
value. If you hold Class A shares for less than six months and exchange them
for shares subject to a higher sales charge, you will be charged the difference
between the two sales charges. If your shares are subject to a CDSC, the CDSC
will continue to apply to your new shares at the same CDSC rate. For purposes
of the CDSC, your shares will continue to age from the date of your original
purchase.
Before exchanging, you should read the prospectus of the new fund carefully. If
you wish to exchange shares, write to the transfer agent (address on back cover)
or call 1-800-262-1122. Periodic automatic exchanges are also available. The
exchange privilege may be changed or discontinued at any time. You will receive
60 days' notice of any material change to the privilege. This privilege may not
be used for "market timing". If an account (or group of accounts) makes more
than two round-trip exchanges within 12 months, it will be deemed to be market
timing. The exchange privilege may be terminated for market timing accounts.
Telephone and Electronic Transactions. You can redeem or exchange shares by
telephone as described in this prospectus. In addition, certain transactions
may be conducted through the Internet. The transfer agent and the principal
underwriter have procedures in place to authenticate telephone and electronic
instructions (such as using security codes or verifying personal account
information). As long as the transfer agent and principal underwriter follow
these procedures, they will not be responsible for unauthorized telephone or
electronic transactions and you bear the risk of possible loss resulting from
these transactions. You may decline the telephone redemption option on the
account application. Telephone instructions are tape recorded.
8
<PAGE>
"Street Name" Accounts. If your shares are held in a "street name" account at
an investment dealer, that dealer (and not the Fund or its transfer agent) will
perform all recordkeeping, transaction processing and distribution payments.
Because the Fund will have no record of your transactions, you should contact
your investment dealer to purchase, redeem or exchange shares, to make changes
in your account, or to obtain account information. You will not be able to
utilize a number of shareholder features, such as telephone transactions,
directly with the Fund. The transfer of shares in a "street name" account to an
account with another investment dealer or to an account directly with the Fund
involves special procedures and you will be required to obtain historical
information about your shares prior to the transfer. Before establishing a
"street name" account with an investment dealer, you should determine whether
that dealer allows reinvestment of distributions in "street name" accounts.
Account Questions. If you have any questions about your account or the services
available, please call Eaton Vance Shareholder Services at 1-800-225-6265, or
write to the transfer agent (see back cover for address).
TAX INFORMATION
The Fund intends to pay dividends semi-annually and to distribute any net
realized capital gains annually. A portion of the Fund's distributions may be
eligible for the corporate dividends-received deduction. Distributions of income
and net short-term capital gains will be taxable as ordinary income.
Distributions of any long-term capital gains are taxable as long-term gains.
Distributions are expected to be taxable primarily as long-term capital gains.
The Fund's distributions will be taxable as described above whether they are
paid in cash or reinvested in additional shares.
Investors who purchase shares shortly before the record date of a distribution
will pay the full price for the shares and then receive some portion of the
price back as a taxable distribution. Certain distributions paid in January
will be taxable to shareholders as if received on December 31 of the prior year.
A redemption of Fund shares, including an exchange for shares of another fund,
is a taxable transaction.
Shareholders should consult with their advisers concerning the applicability of
state, local and other taxes to an investment.
9
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights are intended to help you understand the Fund's
financial performance for the past five years. Certain information in the table
reflects the financial results for a single Fund share. The total returns in
the table represent the rate an investor would have earned (or lost) on an
investment in the Fund (assuming reinvestment of all distributions and not
taking into account a sales charge). This information has been audited by
PricewaterhouseCoopers LLP, independent accountants. The report of
PricewaterhouseCoopers LLP and the Fund's financial statements are incorporated
herein by reference and included in the annual report, which is available on
request. The Fund began offering three classes of shares on September 1, 1997.
Prior to that date, the Fund offered only Class A shares and Class B and Class
C existed as separate funds.
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
---------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
---------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS A CLASS A CLASS A
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value - Beginning
of year $ 10.320 $16.490 $14.840 $ 10.360 $16.560 $14.940 $ 9.240 $ 8.330 $ 7.960
-------- ------- ------- -------- ------- ------- -------- -------- --------
Income (loss) from operations
Net investment income (loss) $ 0.008 $(0.135) $(0.109) $ 0.044 $(0.079) $(0.079) $ 0.020 $ 0.043 $ 0.024
Net realized and unrealized gain 2.153 3.467 3.091 0.111 0.204 0.174 2.845 1.202 1.086
-------- ------- ------- -------- ------- ------- -------- -------- ---------
Total income from operations $ 2.161 $ 3.332 $ 2.982 $ 0.155 $ 0.125 $ 0.095 $ 2.865 $ 1.245 $ 1.110
-------- ------- ------- -------- ------- ------- -------- -------- ---------
Less distributions
From net investment income $ (0.039) $ -- $ -- $ -- $ -- $ -- $ (0.019) $ (0.035) $ (0.032)
In excess of net investment
income(3) -- -- -- -- -- -- (0.018) -- (0.018)
From net realized gain (2.492) (2.492) 2.492) (0.195) (0.195) (0.195) (0.890) (0.300) (0.083)
In excess of net realized
gain(3) -- -- -- -- -- -- (0.762) -- (0.607)
From paid-in capital -- -- -- -- -- -- (0.056) -- --
-------- ------- ------- -------- ------- ------- -------- -------- ---------
Total distributions $ (2.531) $(2.492) $(2.492) $ (0.195) $(0.195) $(0.195) $ (1.745) $ (0.335) $ (0.740)
-------- ------- ------- -------- ------- ------- -------- -------- ---------
Net asset value - End of
year $ 9.950 $17.330 $15.330 $ 10.320 $16.490 $14.840 $ 10.360 $ 9.240 $ 8.330
-------- ------- ------- -------- ------- ------- -------- -------- ---------
Total return(1) 21.14% 20.28% 20.16% 1.45% 0.72% 0.60% 33.01% 15.38% 15.95%
Ratios/Supplemental Data
Net assets, end of year (000's
omitted) $171,752 $18,553 $ 3,244 $159,602 $17,359 $ 2,316 $165,676 $138,252 $130,966
Ratios (as a percentage of
average daily net assets):
Expenses(2) 1.03% 1.85% 1.91% 1.08% 1.93% 1.94% 1.01% 0.98% 0.98%
Net investment income (loss) 0.09% (0.74)% (0.80)% 0.37% (0.48)% (0.51)% 0.19% 0.48% 0.42%
Portfolio turnover of the
Portfolio 34% 34% 34% 55% 55% 55% 28% 62% 84%
</TABLE>
(1) Total return is calculated assuming a purchase at the net asset value on
the first day and a sale at the net asset value on the last day of each
period reported. Distributions, if any, are assumed to be reinvested at the
net asset value on the reinvestment date. Total return is not computed on
an annualized basis.
(2) Includes the Fund's share of the Portfolio's allocated expenses.
(3) The Fund has followed the Statement of Position (SOP) 93-2: Determination,
Disclosure and Financial Statement Presentation of Income, Capital Gain,
and Return of Capital Distribution by Investment Companies. The SOP
requires that differences in the recognition or classification of income
between the financial statements and tax earnings and profits that result
in temporary over-distributions for financial statement purposes, are
classified as distributions in excess of net investment income or
accumulated net realized gains.
10
<PAGE>
[LOGO]
Investing
for the
21st
Century(R)
More Information
- --------------------------------------------------------------------------------
About the Fund: More information is available in the statement of
additional information. The statement of additional information is
incorporated by reference into this prospectus. Additional
information about the Portfolio's investments is available in the
annual and semi-annual reports to shareholders. In the annual
report, you will find a discussion of the market conditions and
investment strategies that significantly affected the Fund's
performance during the past year. You may obtain free copies of the
statement of additional information and the shareholder reports by
contacting:
Eaton Vance Distributors, Inc.
The Eaton Vance Building
255 State Street
Boston, MA 02109
1-800-225-6265
website: www.eatonvance.com
You will find and may copy information about the Fund at the
Securities and Exchange Commission's public reference room in
Washington, DC (call 1-800-SEC-0330 for information on the operation
of the public reference room); on the SEC's Internet site
(http://www.sec.gov); or, upon payment of copying fees, by writing
to the SEC's public reference room in Washington, DC 20549-0102 or
by electronic mail at [email protected].
About Shareholder Accounts: You can obtain more information from
Eaton Vance Share- holder Services (1-800-225-6265). If you own
shares and would like to add to, redeem or change your account,
please write or call the transfer agent:
- --------------------------------------------------------------------------------
PFPC Global Fund Services
P.O. Box 5123
Westborough, MA 01581-5123
1-800-262-1122
The Fund's SEC File No. is 811-1241 GFP
<PAGE>
LOGO
Investing
for the
21st
Century(R)
EATON VANCE WORLDWIDE
HEALTH SCIENCES FUND
A diversified global growth fund concentrating in health sciences companies
EATON VANCE
INFORMATION AGE FUND
A diversified global growth fund of information age companies
Prospectus Dated
January 1, 2000
The Securities and Exchange Commission has not approved or disapproved these
securities or determined whether this prospectus is truthful or complete.
Any representation to the contrary is a criminal offense.
Information in this prospectus
Page Page
- -------------------------------------------------------------------------------
Fund Summaries 2 Sales Charges 10
Investment Objectives & Principal Redeeming Shares 12
Policies and Risks 7 Shareholder Account
Management and Organization 8 Features 12
Valuing Shares 9 Tax Information 13
Purchasing Shares 10 Financial Highlights 14
- -------------------------------------------------------------------------------
This prospectus contains important information about the Funds and the services
available to shareholders. Please save it for reference.
<PAGE>
FUND SUMMARIES
This section summarizes the investment objectives, and principal strategies and
risks of investing in each Fund. Information about the performance, fees and
expenses of each Fund is presented on the pages that follow.
INVESTMENT OBJECTIVES AND PRINCIPAL STRATEGIES
EATON VANCE WORLDWIDE HEALTH SCIENCES FUND. The Health Sciences Fund's
investment objective is to seek long-term capital growth by investing in a
global and diversified portfolio of health sciences companies. The Fund invests
primarily in common stocks of companies engaged in the development, production
or distribution of products related to scientific advances in health care. The
Fund invests in companies with a broad range of market capitalizations,
including small companies. The Fund invests in foreign securities and will
normally be invested in at least three different countries. In managing the
portfolio, the portfolio manager looks for stocks that will grow in value over
time, regardless of short-term market fluctuations. The Health Sciences Fund
concentrates (that is, invests at least 25% of its assets) its investments in
medical research and the health care industry, so the Fund could be affected by
any event that adversely affects that sector.
EATON VANCE INFORMATION AGE FUND. The Information Age Fund's investment
objective is to seek long-term capital growth. The Fund invests primarily in
common stocks of information age companies expected to grow in value.
Approximately 40% to 60% of total assets will be invested in foreign securities,
including securities issued by companies in emerging markets. The Fund invests
in companies with a broad range of market capitalizations, including smaller
companies. Because of the dynamic nature of many portfolio companies, trading
may be more frequent than for mutual funds focusing only on established
companies located in only one country. The Fund does not concentrate (that is,
invest 25% or more of its assets) in any one industry.
Each Fund currently invests its assets in a separate registered investment
company with the same objective and policies as the Fund.
PRINCIPAL RISK FACTORS
The value of each Fund's shares is sensitive to stock market volatility. If
there is a decline in the value of exchange-listed stocks, the value of Fund
shares will also likely decline. Changes in stock market values can be sudden
and unpredictable. Also, although stock values can rebound, there is no
assurance that values will return to previous levels. Because both Funds can
invest a significant portion of assets in foreign securities, the value of Fund
shares can also be adversely affected by changes in currency exchange rates and
political and economic developments abroad. In emerging or less-developed
countries, these risks can be significant. The securities of smaller companies
are generally subject to greater price fluctuation and investment risk than
securities of more established companies.
The Health Sciences Fund concentrates (that is, invests at least 25% of its
assets) its investments in medical research and the health care industry, so the
Fund will likely be affected by events that adversely affect that sector. The
Health Sciences Fund has historically held fewer than 50 stocks at any one time;
therefore, the Fund is more sensitive to developments affecting particular
stocks than would be a more broadly diversified fund. These developments include
product obsolescence, the failure of the issuer to develop new products and the
expiration of patent rights. The value of Health Sciences Fund shares can also
be impacted by regulatory activities that affect health sciences companies. For
instance, increased regulation can increase the cost of bringing new products to
market and thereby reduce profits.
The Information Age Fund is subject to factors that adversely affect
information-related industries, such as deregulation of certain of these
industries and product obsolescence due to technological advancements.
Neither Fund is a complete investment program and you may lose money by
investing. An investment in a Fund is not a deposit in a bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
2
<PAGE>
EATON VANCE WORLDWIDE HEALTH SCIENCES FUND
PERFORMANCE INFORMATION. The following bar chart and table provide information
about Health Sciences Fund's performance, including a comparison of the Fund's
performance to the performance of domestic and foreign stock indices. Although
past performance is no guarantee of future results, this performance information
demonstrates the risk that the value of your investment will change. The
following returns are for Class A shares for each calendar year through December
31, 1998 and do not reflect sales charges. If the sales charge was reflected,
the returns would be lower.
45.51% 5.42% 42.22% 2.26% 26.41% -6.42% 61.21% 18.39% 10.49% 23.45%
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
The Fund's highest quarterly total return was 27.16% for the quarter ended
December 31, 1998, and its lowest quarterly return was -16.76% for the quarter
ended September 30, 1990. The year-to-date total return through the end of the
most recent calendar quarter (December 31, 1998 to September 30, 1999) was 4.29%
<TABLE>
<CAPTION>
One Five Ten
Average Annual Total Return as of December 31, 1998 Year Years Years
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A Shares 16.35% 18.09% 20.54%
Class B Shares 17.64% 19.08% 21.14%
Class C Shares 22.19% 19.44% 21.23%
Standard & Poor's 500 Index 28.52% 24.02% 19.16%
Morgan Stanley Capital International Europe, Australasia & Far East Index 20.33% 9.50% 5.85%
</TABLE>
These returns reflect the maximum sales charge for Class A (5.75%) and any
applicable CDSC for Class B and Class C. The Class B and Class C performance
shown above for the period prior to September 23, 1996 and January 1, 1998,
respectively, is the performance of Class A shares, adjusted for the sales
charge that applies to Class B or Class C shares (but not adjusted for any other
differences in the expenses of the classes). The Standard & Poor's 500 Index is
an unmanaged index of common stocks trading in the U.S. The MSCI EAFE Index is
an unmanaged index of foreign stocks. Investors cannot invest directly in an
Index. (Source: Lipper, Inc.) The Fund's performance is compared to the
performance of a domestic and a foreign index because it invests in domestic and
foreign securities.
HEALTH SCIENCES FUND FEES AND EXPENSES. These tables describe the fees and
expenses that you may pay if you buy and hold shares.
<TABLE>
<CAPTION>
Shareholder Fees
(fees paid directly from your Class A Class B Class C
investment)
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge (Load) (as a
percentage of offering price) 5.75% None None
Maximum Deferred Sales Charge (Load)
(as a percentage of the lower of net
asset value at time of purchase or time
of redemption) None 5.00% 1.00%
Maximum Sales Charge (Load) Imposed on
Reinvested Distributions None None None
Exchange Fee None None None
</TABLE>
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets) Class A Class B Class C
- --------------------------------------------------------------------------------
Management Fees 1.11% 1.11% 1.11%
Distribution and Service (12b-1) Fees* 0.25% 1.00% 1.00%
Other Expenses 0.34% 0.34% 0.34%
----- ----- -----
Total Annual Fund Operating Expenses 1.70% 2.45% 2.45%
* Long-term shareholders of Class B and Class C shares may pay more than the
economic equivalent of the front-end sales charge permitted by the National
Association of Securities Dealers, Inc.
3
<PAGE>
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and then redeem all of
your shares at the end of those periods. The Example also assumes that your
investment has a 5% return each year and that the operating expenses remain the
same. Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
1 Year 3 Years 5 Years 10 Years
- -------------------------------------------------------------------------------
Class A shares $ 738 $ 1,080 $ 1,445 $ 2,468
Class B shares $ 748 $ 1,164 $ 1,506 $ 2,786
Class C shares $ 348 $ 764 $ 1,306 $ 2,786
You would pay the following expenses if you did not redeem your shares:
1 Year 3 Years 5 Years 10 Years
- -------------------------------------------------------------------------------
Class A shares $ 738 $ 1,080 $ 1,445 $ 2,468
Class B shares $ 248 $ 764 $ 1,306 $ 2,786
Class C shares $ 248 $ 764 $ 1,306 $ 2,786
4
<PAGE>
EATON VANCE INFORMATION AGE FUND
PERFORMANCE INFORMATION. The following bar chart and table provide information
about Information Age Fund's performance, including a comparison of the Fund's
performance to the performance of a global index of equity securities.
Although past performance is no guarantee of future results, this performance
information demonstrates the risk that the value of your investment will change
from year-to-year. The following returns are for Class B shares for each
calendar year through December 31, 1998 and do not reflect sales charges. If
the sales charge was reflected, the returns would be lower.
13.61% 16.86% 21.91%
1996 1997 1998
The Fund's highest quarterly total return was 19.00% for the quarter ended
December 31, 1998, and its lowest quarterly return was -12.11% for the quarter
ended September 30, 1998. The year-to-date total return through the end of the
most recent calendar quarter (December 31, 1998 to September 30, 1999) was
28.09%.
One Life of
Average Annual Total Return as of December 31, 1998 Year Fund
- --------------------------------------------------------------------------------
Class A Shares 15.14% 15.10%
Class B Shares 16.91% 16.27%
Class C Shares 20.71% 16.52%
Morgan Stanley Capital International World Index 22.78% 16.25%
These returns reflect the maximum sales charge for Class A (5.75%) and any
applicable CDSC for Class B and Class C. The Class A and Class C performance
shown above for the period prior to September 18, 1995 and November 22, 1995,
respectively, is the performance of Class B shares, adjusted for the sales
charge that applies to Class A or Class C shares (but not adjusted for any other
differences in the expenses of the classes). Class B shares commenced operations
on September 18, 1995. Life of Fund returns are calculated from September 30,
1995. The MSCI World Index is an unmanaged index of global stocks. Investors
cannot invest directly in an Index. (Source: Lipper, Inc.)
INFORMATION AGE FUND FEES AND EXPENSES. These tables describe the fees and
expenses that you may pay if you buy and hold shares.
Shareholder Fees
(fees paid directly from your Class A Class B Class C
investment)
- -------------------------------------------------------------------------------
Maximum Sales Charge (Load) (as a
percentage of offering price) 5.75% None None
Maximum Deferred Sales Charge (Load)
(as a percentage of the lower of net
asset value at time of purchase or time
of redemption) None 5.00% 1.00%
Maximum Sales Charge (Load) Imposed on
Reinvested Distributions None None None
Exchange Fee None None None
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets) Class A Class B Class C
- --------------------------------------------------------------------------------
Management Fees 1.25% 1.25% 1.25%
Distribution and Service (12b-1) Fees* 0.50% 1.00% 1.00%
Other Expenses 0.70% 0.70% 0.70%
----- ----- -----
Total Annual Fund Operating Expenses 2.45% 2.95% 2.95%
* Long-term shareholders of Class B and Class C shares may pay more than
theeconomic equivalent of the front-end sales charge permitted by the
National Association of Securities Dealers, Inc.
5
<PAGE>
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and then redeem all of
your shares at the end of those periods. The Example also assumes that your
investment has a 5% return each year and that the operating expenses remain the
same. Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
1 Year 3 Years 5 Years 10 Years
- -------------------------------------------------------------------------------
Class A shares $ 809 $ 1,295 $ 1,805 $ 3,201
Class B shares $ 798 $ 1,312 $ 1,752 $ 3,271
Class C shares $ 398 $ 913 $ 1,552 $ 3,271
You would pay the following expenses if you did not redeem your shares:
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Class A shares $ 809 $ 1,295 $ 1,805 $ 3,201
Class B shares $ 298 $ 913 $ 1,552 $ 3,271
Class C shares $ 298 $ 913 $ 1,552 $ 3,271
6
<PAGE>
INVESTMENT OBJECTIVES & PRINCIPAL POLICIES AND RISKS
HEALTH SCIENCES FUND. The Health Sciences Fund's investment objective is to seek
long-term capital growth by investing in a global and diversified portfolio of
health sciences companies. The Fund currently seeks to meet its investment
objective by investing in the Worldwide Health Sciences Portfolio, a separate
open-end investment company that has the same objective and policies as the
Fund. The Fund's objective and policies may be changed without shareholder
approval. There is no present intention to make any such change and any proposed
material change in investment objective will be submitted to shareholders for
their approval.
The Health Sciences Portfolio invests at least 65% of total assets in securities
(primarily common stocks) of companies principally engaged in the development,
production or distribution of products or services related to scientific
advances in health care, including biotechnology, diagnostics, managed health
care, medical equipment and supplies, and pharmaceuticals. At the time the
Health Sciences Portfolio makes an investment, 50% or more of the company's
sales, earnings or assets will arise from or will be dedicated to the
application of scientific advances related to health care. The Health Sciences
Portfolio may invest in securities of both established and emerging companies,
some of which may be denominated in foreign currencies.
Many health sciences 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
Health Sciences Portfolio will invest in securities of emerging growth health
sciences 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 portfolio manager seeks to purchase stocks that are favorably priced in
relation to their fundamental value, and which will grow in value over time. In
making each investment decision, the portfolio manager may draw upon the
information provided by, and the expertise of, the investment adviser's research
staff. The stock selection process will be based on numerous factors, including
the potential to increase market share (for larger companies), and the potential
of research and development projects (for smaller companies). The stock
selection process is highly subjective.
INFORMATION AGE FUND. The Information Age Fund's investment objective is to seek
long-term capital growth. The Fund currently seeks to meet its investment
objective by investing in the Information Age Portfolio, a separate open-end
investment company that has the same objective and policies as the Fund. The
Fund's objective and policies may be changed without shareholder approval. There
is no present intention to make any such change and any proposed material change
in investment objective will be submitted to shareholders for their approval.
The Information Age Portfolio invests in a global and diversified portfolio of
common stocks of companies in information-related industries. These "information
age" companies are companies that may be engaged in providing information
services, such as telephone, broadcasting, cable or satellite television,
publishing, advertising, producing information and entertainment media, data
processing, networking of data processing and communication systems, or
providing consumer interconnection to computer communication networks. In
addition, such companies may be engaged in the development, manufacture, sale,
or servicing of information age products, such as computer hardware, software
and networking equipment, mobile telephone devices, telecommunications network
switches and equipment, television and radio broadcasting and receiving
equipment, or news and information media of all types. The Information Age
Portfolio will invest at least 65% of total assets in securities of information
age companies.
The Information Age Portfolio may invest in securities of both established and
emerging companies operating in developed and emerging economies. Many
information age companies are subject to substantial government regulations that
can affect their prospects. The enforcement of patent, trademark and other
intellectual property laws will affect the value of many such companies. To
reduce risk, the portfolio managers normally diversify investments by
capitalization, geographical location and industry. The Portfolio does not
concentrate in any one industry. A portfolio manager may use hedging techniques
(such as forward contracts and options) to attempt to mitigate adverse effects
of foreign currency fluctuations.
The portfolio managers seek to purchase stocks that are favorably priced in
relation to their fundamental value, and which will grow in value over time.
Because the value of information age companies will fluctuate in response to
technological
7
<PAGE>
and regulatory developments, the portfolio manager will generally sell a stock
when he believes it has attained its optimum value. Therefore, the Information
Age Portfolio's annual portfolio turnover rate may exceed 100%. A fund with
high turnover (100% or more) pays more commissions and may generate more capital
gains than a fund with a lower rate. Paying more commissions may also reduce
return. Capital gains distributions will reduce after tax returns for
shareholders holding Fund shares in taxable accounts.
COMMON INVESTMENT PRACTICES. Each Portfolio may invest in securities of smaller,
less seasoned companies. Such securities are generally subject to greater price
fluctuations, limited liquidity, higher transaction costs and higher investment
risk. Smaller companies may have limited product lines, markets or financial
resources, and they may be dependent on a limited management group. There is
generally less publicly available information about such companies than for
larger, more established companies. The Health Sciences Portfolio may make
direct investments in companies in private placement transactions. Because of
the absence of any public trading market for some of these investments (such as
those that are legally restricted) it may take longer to liquidate these
positions at fair value than would be the case for publicly traded securities.
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. Currency exchange rates may fluctuate significantly over short periods
of time causing a 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 affected by other
factors not present in the United States, including expropriation, armed
conflict, confiscatory taxation, lack of uniform accounting and auditing
standards, less publicly available financial and other information and potential
difficulties in enforcing contractual obligations. Transactions in the
securities of foreign issuers could be subject to settlement delays and risk of
loss. As an alternative to holding foreign stocks directly, the Portfolios may
invest in dollar-denominated depositary receipts which evidence ownership in
underlying foreign stocks. Investment in depositary receipts is not subject to a
Portfolio's limitation on investing in foreign companies.
Health Sciences Portfolio may borrow amounts up to one-third of the value of its
total assets (including borrowings) and the Information Age Portfolio may borrow
up to 25% of net assets. Neither may borrow more than 5% of the value of its
total assets except to satisfy redemption requests or for other temporary
purposes. Such borrowings would result in increased expense to a Fund and, while
they are outstanding, would magnify increases or decreases in the value of Fund
shares. The Portfolios will not purchase additional investment securities while
outstanding borrowings exceed 5% of the value of its total assets. During
unusual market conditions, each Portfolio may temporarily invest up to 100% of
its assets in cash or cash equivalents. While temporarily invested, a Portfolio
may not achieve its investment objective.
Like most mutual funds, the Funds and Portfolios rely on computers in conducting
daily business and processing information. There is a concern that on and after
January 1, 2000 some computer programs will be unable to recognize the new year
and as a consequence computer malfunctions will occur. Eaton Vance and the
investment adviser are taking steps that they believe are reasonably designed to
address this potential problem and to obtain satisfactory assurance from other
service providers to the Funds and the Portfolios that they are also taking
steps to address the issue. There can, however, be no assurance that these steps
will be sufficient to avoid any adverse impact on the Funds and the Portfolios
or shareholders. The Year 2000 concern may also adversely impact issuers of
securities held by a Portfolio and the markets on which these securities trade,
and may be more difficult to address in less-developed countries where access to
advanced technology may be limited. The foregoing statement is subject to the
Year 2000 Information and Readiness Disclosure Act, which may protect Eaton
Vance, the investment adviser and the Funds and the Portfolios from liability
arising from the statement.
MANAGEMENT AND ORGANIZATION
MANAGEMENT. Boston Management and Research ("BMR"), The Eaton Vance Building,
255 State Street, Boston, MA 02109, and Lloyd George Investment Management
(Bermuda) Limited ("Lloyd George"), 3808 One Exchange Square, Central Hong Kong,
co-manage the Information Age Portfolio, with non-U.S. assets managed by Lloyd
George and U.S. assets managed by BMR. OrbiMed Advisors, Inc. ("OrbiMed"), 767
3rd Avenue, New York, NY 10017, manages the Health Sciences Portfolio. Eaton
Vance Management ("Eaton Vance") manages each Fund and serves as administrator
to each Portfolio. Each investment adviser manages Portfolio investments and
provides related office facilities and personnel.
8
<PAGE>
BMR and Lloyd George receive a monthly advisory fee, to be divided equally
between them, of .0625% (equivalent to .75% annually) of the average daily net
assets of the Information Age Portfolio up to $500 million. This fee declines at
intervals above $500 million. For the fiscal year ended August 31, 1999, the
Information Age Portfolio paid advisory fees of 0.75% of its average daily net
assets.
Duncan W. Richardson and Jacob Rees-Mogg are the portfolio managers of the
Information Age Portfolio (since it commenced operations). Mr. Richardson also
manages other Eaton Vance portfolios, has been an employee of Eaton Vance for
more than 5 years, and is a Vice President of Eaton Vance and of BMR. Mr.
Rees-Mogg is an Investment Manager for Lloyd George and has been employed by
Lloyd George for more than 5 years.
OrbiMed receives a monthly fee of 1.00% of the Health Sciences Portfolio's
average daily net assets up to $30 million of assets, 0.90% of the next $20
million of assets, and 0.75% on assets in excess of $50 million. The fee rate
declines for net assets of $500 million and greater. OrbiMed may receive a
performance-based adjustment of up to 0.25% of the average daily net assets of
the Health Sciences Portfolio based upon its investment performance compared to
the Standard & Poor's Index of 500 Common Stocks over specified periods. For the
fiscal year ended August 31, 1999, the Portfolio paid advisory fees of 0.61% of
its average daily net assets. OrbiMed has agreed to pay Eaton Vance
Distributors, Inc. one-third of its advisory fee receipts from its own resources
for EVD's activities as Portfolio placement agent.
Samuel D. Isaly is the portfolio manager of the Health Sciences Portfolio (since
it commenced operations). He is Managing Partner of OrbiMed and has been
employed by OrbiMed (or its predecessor) for more than 5 years. OrbiMed is an
investment advisory firm registered with the Securities and Exchange Commission.
Mr. Isaly has provided investment advisory services since 1989.
Eaton Vance has been managing assets since 1924 and managing mutual funds since
1931. Eaton Vance and its subsidiaries currently manage over $41 billion on
behalf of mutual funds, institutional clients and individuals. Lloyd George and
its affiliates act as investment adviser to various individual and institutional
clients and manage $2.2 billion in assets. Eaton Vance's corporate parent owns
21% of Lloyd George's corporate parent. Lloyd George, its affiliates and two of
the Information Age Portfolio's Trustees are domiciled outside of the United
States. Because of this, it would be difficult for the Portfolio to bring a
claim or enforce a judgment against them.
Eaton Vance manages the business affairs of the Funds and administers the
business affairs of the Portfolios. For these services, Eaton Vance receives a
monthly fee from each Fund and Portfolio of 1/48 of 1% (equal to 0.25% annually)
of average daily net assets up to $500 million. This fee declines at intervals
above $500 million. For the fiscal year ended August 31, 1999, Eaton Vance
earned management fees of 0.25% of each Fund's average daily net assets and
administration fees of 0.25% of each Portfolio's average daily net assets.
Each investment adviser and each Fund and Portfolio has adopted Codes of Ethics
governing personal securities transactions. Under the Codes, employees of the
investment adviser and Eaton Vance may purchase and sell securities (including
securities held by a Portfolio) subject to certain reporting requirements and
other procedures.
ORGANIZATION. Each Fund is a series of Eaton Vance Growth Trust, a Massachusetts
business trust. Each Fund offers multiple classes of shares. Each class
represents a pro rata interest in the Fund, but is subject to different expenses
and rights. The Funds do not hold annual shareholder meetings, but may hold
special meetings for matters that require shareholder approval (like electing or
removing trustees, approving management contracts or changing investment
policies that may only be changed with shareholder approval). Because a Fund
invests in a Portfolio, it may be asked to vote on certain Portfolio matters
(like changes in certain Portfolio investment restrictions). When necessary, a
Fund will hold a meeting of its shareholders to consider the Portfolio matter
and then vote its interest in the Portfolio in proportion to the votes cast by
its shareholders. A Fund can withdraw from a Portfolio at any time.
Because the Funds use this combined prospectus, a Fund could be held liable for
a misstatement or omission made about another Fund. The Trust's Trustees
considered this in approving the use of a combined prospectus.
VALUING SHARES
Each Fund values its shares once each day only when the New York Stock Exchange
is open for trading (typically Monday through Friday), as of the close of
regular trading on the Exchange (normally 4:00 p.m. eastern time). The purchase
price of Fund shares is their net asset value (plus a sales charge for Class A).
Exchange-listed securities are valued at closing sale prices; however, an
investment adviser may use the fair value of a security if events occurring
after the close of an exchange would materially affect net asset value. Because
foreign securities trade on days when Fund shares are not priced, net asset
value can change at times when Fund shares cannot be redeemed.
9
<PAGE>
When purchasing or redeeming Fund shares, your investment dealer must
communicate your order to the principal underwriter by a specific time each day
in order for the purchase price or the redemption price to be based on that
day's net asset value per share. It is the investment dealer's responsibility to
transmit orders promptly. Each Fund may accept purchase and redemption orders as
of the time of their receipt by certain investment dealers (or their designated
intermediaries).
PURCHASING SHARES
You may purchase shares through your investment dealer or by mailing the account
application form included in this prospectus to the transfer agent (see back
cover for address). Your initial investment must be at least $1,000. The price
of Class A shares is the net asset value plus a sales charge. The price of Class
B and Class C shares is the net asset value; however, you may be subject to a
sales charge (called a "contingent deferred sales charge" or "CDSC") if you
redeem Class B shares within six years of purchase or Class C shares within one
year of purchase. The sales charges are described below. Your investment dealer
can help you decide which class of shares suits your investment needs.
After your initial investment, additional investments of $50 or more may be made
at any time by sending a check payable to the order of the Fund or the transfer
agent directly to the transfer agent (see back cover for address). Please
include your name and account number and the name of the Fund and Class of
shares with each investment.
You may also make automatic investments of $50 or more each month or each
quarter from your bank account. You can establish bank automated investing on
the account application or by calling 1-800-262-1122. The minimum initial
investment amount and Fund policy of redeeming accounts with low account
balances are waived for bank automated investing accounts and certain group
purchase plans.
SALES CHARGES
FRONT-END SALES CHARGE. Class A shares are offered at net asset value per share
plus a sales charge that is determined by the amount of your investment. The
current sales charge schedule is:
<TABLE>
<CAPTION>
Sales Charge Sales Charge Dealer Commission
as Percentage of as Percentage of Net as a Percentage of
Amount of Purchase Offering Price Amount Invested Offering Price
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000 5.75% 6.10% 5.00%
$50,000 but less than $100,000 4.75% 4.99% 4.00%
$100,000 but less than $250,000 3.75% 3.90% 3.00%
$250,000 but less than $500,000 3.00% 3.09% 2.50%
$500,000 but less than $1,000,000 2.00% 2.04% 1.75%
$1,000,000 or more 0.00* 0.00* See Below
* No sales charge is payable at the time of purchase on investments of $1
million or more. A CDSC of 1.00% will be imposed on such investments (as
described below) in the event of r edemptions within 12 months of purchase.
</TABLE>
The principal underwriter will pay a commission to investment dealers on sales
of $1 million or more as follows: 1.00% on amounts of $1 million or more but
less than $3 million; plus 0.50% on amounts over $3 million but less than $5
million; plus 0.25% on amounts over $5 million. Purchases totalling $1 million
or more will be aggregated over a 12-month period for purposes of determining
the commission. The principal underwriter may also pay commissions of up to
1.00% on sales of Class A shares made at net asset value to certain tax-deferred
retirement plans.
CONTINGENT DEFERRED SALES CHARGE. Each class of shares is subject to a CDSC on
certain redemptions. Class A shares purchased at net asset value in amounts of
$1 million or more are subject to a 1.00% CDSC if redeemed within 12 months of
purchase. Class C shares are subject to a 1.00% CDSC if redeemed within 12
months of purchase. Class B shares are subject to the following CDSC schedule:
10
<PAGE>
Year of Redemption After Purchase CDSC
- ------------------------------------------------
First or Second 5%
Third 4%
Fourth 3%
Fifth 2%
Sixth 1%
Seventh or following 0%
The CDSC is based on the lower of the net asset value at the time of purchase or
at the time of redemption. Shares acquired through the reinvestment of
distributions are exempt from the CDSC. Redemptions are made first from shares
that are not subject to a CDSC.
REDUCING OR ELIMINATING SALES CHARGES. Front-end sales charges on purchases of
Class A shares may be reduced under the right of accumulation or under a
statement of intention. Under the right of accumulation, the sales charges you
pay are reduced if the current market value of your current holdings (based on
the current offering price), plus your new purchases, total $50,000 or more.
Class A shares of other Eaton Vance funds owned by you can be included as part
of your current holdings for this purpose. Under a statement of intention,
purchases of $50,000 or more made over a 13-month period are eligible for
reduced sales charges. Under a statement of intention, the principal underwriter
may hold 5% of the dollar amount to be purchased in escrow in the form of shares
registered in your name until you satisfy the statement or the 13-month period
expires. See the account application for details.
Class A shares are offered at net asset value to clients of financial
intermediaries who charge a fee for their services; accounts affiliated with
those financial intermediaries; tax-deferred retirement plans; investment and
institutional clients of Eaton Vance; certain persons affiliated with Eaton
Vance; and certain Eaton Vance and fund service providers. Ask your investment
dealer for details. Effective February 1, 2000, Class A shares will be also sold
at net asset value if the amount invested represents redemption proceeds from a
mutual fund not affiliated with Eaton Vance, provided the redemption occurred
within 60 days of the Fund share purchase and the redeemed shares were subject
to a sales charge. Class A shares so acquired will be subject to a 0.50% CDSC if
they are redeemed within 12 months of purchase. Investment dealers will be paid
a commission on such sales of 0.50% of the amount invested.
CDSCs are waived for certain redemptions pursuant to a Withdrawal Plan (see
"Shareholder Account Features") and, for Class B and Class C shares, in
connection with certain redemptions from tax-sheltered retirement plans. Call
1-800-225-6265 for details. The Class B CDSC is also waived following the death
of all beneficial owners of shares, but only if the redemption is requested
within one year after death (a death certificate and other applicable documents
may be required).
If you redeem shares, you may reinvest at net asset value all or any portion of
the redemption proceeds in the same class of shares of the Fund (or, for Class A
shares, in Class A shares of any other Eaton Vance fund), provided that the
reinvestment occurs within 60 days of the redemption, and the privilege has not
been used more than once in the prior 12 months. Under these circumstances your
account will be credited with any CDSC paid in connection with the redemption.
Any CDSC period applicable to the shares you acquire upon reinvestment will run
from the date of your original share purchase. Reinvestment requests must be in
writing. If you reinvest, you will be sold shares at the next determined net
asset value following receipt of your request.
DISTRIBUTION AND SERVICE FEES. Class A, Class B and Class C shares of the Funds
have in effect plans under Rule 12b-1 that allow each Fund to pay distribution
fees for the sale and distribution of shares (so-called "12b-1 fees"). Class A
shares of Information Age Fund pay a monthly distribution fee to the principal
underwriter in an amount equal to the aggregate of (a) 0.50% of that portion of
Class A average daily net assets for any fiscal year which is attributable to
shares which have remained outstanding for less than one year, and (b) 0.25% of
that portion of Class A average daily net assets for any fiscal year which is
attributable to shares which have remained outstanding for more than one year.
Class A shares of Health Sciences Fund pay a distribution fee at the annual rate
of 0.25% of average daily net assets. Class B and Class C shares pay
distribution fees at the annual rate of 0.75% of average daily net assets.
Because these fees are paid from Fund assets on an ongoing basis, they will
increase your cost over time and may cost you more than paying other types of
sales charges. All classes (except Class A of Health Sciences Fund) pay service
fees for personal and/or account services equal to an annual rate of 0.25% of
average daily net assets.
The distribution fees paid by Class B and Class C shares are subject to
termination when payments under the Rule 12b-1 plans are sufficient to
extinguish uncovered distribution charges. As described more fully in the
Statement of Additional Information, uncovered distribution charges of a class
are increased by sales commissions payable by the class to the principal
underwriter in connection with sales of shares of that class and by an interest
factor tied to the U.S. Prime Rate. Uncovered distribution charges are reduced
by the distribution fees paid by the class and by CDSCs paid to the principal
underwriter by redeeming shareholders. The amount of the sales commissions
payable by Class B to the principal underwriter in connection with sales of
Class B shares is significantly less than the maximum permitted by the sales
charge rule of the National Association of Securities Dealers, Inc. To date,
neither Class B nor Class C uncovered distribution charges have been fully
covered.
11
<PAGE>
REDEEMING SHARES
You can redeem shares in any of the following ways:
By Mail Send your request to the transfer agent along with
any certificates and stock powers. The request
must be signed exactly as your account is
registered and signature guaranteed. You can
obtain a signature guarantee at certain banks,
savings and loan institutions, credit unions,
securities dealers, securities exchanges, clearing
agencies and registered securities associations.
You may be asked to provide additional documents
if your shares are registered in the name of a
corporation, partnership or fiduciary.
By Telephone You can redeem up to $50,000 by calling the
transfer agent at 1-800-262-1122 on Monday through
Friday, 9:00 a.m. to 4:00 p.m. (eastern time).
Proceeds of a telephone redemption can be mailed
only to the account address. Shares held by
corporations, trusts or certain other entities and
shares that are subject to fiduciary arrangements
cannot be redeemed by telephone.
Through an Investment Dealer Your investment dealer is responsible for
transmitting the order promptly. A dealer may
charge a fee for this service.
If you redeem shares, your redemption price will be based on the net asset value
per share next computed after the redemption request is received. Your
redemption proceeds will be paid in cash within seven days, reduced by the
amount of any applicable CDSC and any federal income tax required to be
withheld. Payments will be sent by mail unless you complete the Bank Wire
Redemptions section of the account application.
If you recently purchased shares, the proceeds of a redemption will not be sent
until the purchase check (including a certified or cashier's check) has cleared.
If the purchase check has not cleared, redemption proceeds may be delayed up to
15 days from the purchase date. If your account value falls below $750 (other
than due to market decline), you may be asked to either add to your account or
redeem it within 60 days. If you take no action, your account will be redeemed
and the proceeds sent to you.
While redemption proceeds are normally paid in cash, redemptions may be paid by
distributing marketable securities. If you receive securities, you could incur
brokerage or other charges in converting the securities to cash.
SHAREHOLDER ACCOUNT FEATURES
Once you purchase shares, the transfer agent establishes a Lifetime Investing
Account(R) for you. Share certificates are issued only on request.
DISTRIBUTIONS. You may have your Fund distributions paid in one of the following
ways:
.Full Reinvest Option Dividends and capital gains are reinvested in
additional shares. This option will be assigned if
you do not specify an option.
.Partial Reinvest Option Dividends are paid in cash and capital gains are
reinvested in additional shares.
.Cash Option Dividends and capital gains are paid in cash.
.Exchange Option Dividends and/or capital gains are reinvested in
additional shares of another Eaton Vance fund
chosen by you. Before selecting this option, you
must obtain a prospectus of the other fund and
consider its objectives and policies carefully.
INFORMATION FROM THE FUND. From time to time, you may be mailed the following:
.Annual and Semi-Annual Reports, containing performance information and
financial statements.
.Periodic account statements, showing recent activity and total share balance.
.Form 1099 and tax information needed to prepare your income tax returns.
.Proxy materials, in the event a shareholder vote is required.
.Special notices about significant events affecting your Fund.
12
<PAGE>
WITHDRAWAL PLAN. You may redeem shares on a regular monthly or quarterly basis
by establishing a systematic withdrawal plan. Withdrawals will not be subject to
any applicable CDSC if they do not in the aggregate exceed 12% annually of the
account balance at the time the plan is established. A minimum account size of
$5,000 is required to establish a systematic withdrawal plan. Because purchases
of Class A shares are generally subject to an initial sales charge, you should
not make withdrawals from your account while you are making purchases.
TAX-SHELTERED RETIREMENT PLANS. Class A and Class C are available for purchase
in connection with certain tax-sheltered retirement plans. Call 1-800-225-6265
for information. Distributions will be invested in additional shares for all
tax-sheltered retirement plans.
EXCHANGE PRIVILEGE. You may exchange your Fund shares for shares of the same
class of another Eaton Vance fund. Exchanges are generally made at net asset
value. If you hold Class A shares for less than six months and exchange them for
shares subject to a higher sales charge, you will be charged the difference
between the two sales charges. If your shares are subject to a CDSC, the CDSC
will continue to apply to your new shares at the same CDSC rate. For purposes of
the CDSC, your shares will continue to age from the date of your original
purchase.
Before exchanging, you should read the prospectus of the new fund carefully. If
you wish to exchange shares, write to the transfer agent (address on back cover)
or call 1-800-262-1122. Periodic automatic exchanges are also available. The
exchange privilege may be changed or discontinued at any time. You will receive
60 days' notice of any material change to the privilege. This privilege may not
be used for "market timing". If an account (or group of accounts) makes more
than two round-trip exchanges within 12 months, it will be deemed to be market
timing. The exchange privilege may be terminated for market timing accounts.
TELEPHONE AND ELECTRONIC TRANSACTIONS. You can redeem or exchange shares by
telephone as described in this prospectus. In addition, certain transactions may
be conducted through the Internet. The transfer agent and the principal
underwriter have procedures in place to authenticate telephone and electronic
instructions (such as using security codes or verifying personal account
information). As long as the transfer agent and principal underwriter follow
these procedures, they will not be responsible for unauthorized telephone or
electronic transactions and you bear the risk of possible loss resulting from
these transactions. You may decline the telephone redemption option on the
account application. Telephone instructions are tape recorded.
"STREET NAME" ACCOUNTS. If your shares are held in a "street name" account at an
investment dealer, that dealer (and not the Fund or its transfer agent) will
perform all recordkeeping, transaction processing and distribution payments.
Because the Fund will have no record of your transactions, you should contact
your investment dealer to purchase, redeem or exchange shares, to make changes
in your account, or to obtain account information. You will not be able to
utilize a number of shareholder features, such as telephone transactions,
directly with the Fund. The transfer of shares in a "street name" account to an
account with another investment dealer or to an account directly with the Fund
involves special procedures and you will be required to obtain historical
information about your shares prior to the transfer. Before establishing a
"street name" account with an investment dealer, you should determine whether
that dealer allows reinvestment of distributions in "street name" accounts.
ACCOUNT QUESTIONS. If you have any questions about your account or the services
available, please call Eaton Vance Shareholder Services at 1-800-225-6265, or
write to the transfer agent (see back cover for address).
TAX INFORMATION
Each Fund pays dividends at least once annually and intends to pay capital gains
annually. Distributions of income and net short-term capital gains will be
taxable as ordinary income. Distributions of any long-term capital gains are
taxable as long-term gains. Each Fund expects that its distributions will
consist primarily of capital gains. The Funds' distributions will be taxable as
described above whether they are paid in cash or reinvested in additional
shares. A portion of each Fund's distributions may be eligible for the corporate
dividends-received deduction.
Investors who purchase shares shortly before the record date of a distribution
will pay the full price for the shares and then receive some portion of the
price back as a taxable distribution. Certain distributions paid in January will
be taxable to shareholders as if received on December 31 of the prior year. A
redemption of Fund shares, including an exchange for shares of another fund, is
a taxable transaction.
Shareholders should consult with their advisers concerning the applicability of
state, local and other taxes to an investment.
13
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights are intended to help you understand a Fund's financial
performance for the past five years. Certain information in the tables reflects
the financial results for a single Fund share. The total returns in the tables
represent the rate an investor would have earned (or lost) on an investment in
the Fund (assuming reinvestment of all distributions and not taking into account
a sales charge). This information has been audited by PricewaterhouseCoopers
LLP, independent accountants. The report of PricewaterhouseCoopers LLP and each
Fund's financial statements are incorporated by reference and included in the
Funds' annual report, which is available on request. The Information Age Fund
began offering Class A, Class B and Class C shares on September 1, 1997. Prior
to that date, that Fund offered only Class B shares and Class A and Class C
existed as separate funds. The Health Sciences Fund began offering Class A and
Class B shares on September 1, 1997. Prior to that date, that Fund offered only
Class A shares and Class B existed as a separate fund. Health Sciences Fund
began offering Class C shares on January 1, 1998.
<TABLE>
<CAPTION>
HEALTH SCIENCES FUND
- -----------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31,
- -----------------------------------------------------------------------------------------------------------------------------------
1999(1) 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C(2) CLASS A CLASS A CLASS A
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value -
Beginning of year $12.550 $ 9.760 $ 8.460 $14.930 $11.680 $10.000 $13.540 $11.710 $ 9.150
------- -------- ------- ------- ------- ------- ------- ------- -------
Income (loss) from
operations
Net investment loss $(0.182) $ (0.214) $(0.199) $(0.209) $(0.204) $(0.076) $(0.133) $(0.230) $(0.170)
Net realized and
unrealized gain
(loss) 6.794 5.246 4.541 (2.171) (1.716) (1.464) 1.818 3.460 3.410
------- -------- ------- ------- ------- ------- ------- ------- -------
Total income (loss)
from operations $ 6.612 $ 5.032 $ 4.342 $(2.380) $(1.920) $(1.540) $ 1.685 $ 3.230 $ 3.240
------- -------- ------- ------- ------- ------- ------- ------- -------
Less distributions
From net realized
gain $(0.672) $ (0.672) $(0.672) $ -- $ -- $ -- $(0.295) $(1.400) $(0.680)
------- -------- ------- ------- ------- ------- ------- ------- -------
Total distributions $(0.672) $ (0.672) $(0.672) $ -- $ -- $ -- $(0.295) $(1.400) $(0.680)
------- -------- ------- ------- ------- ------- ------- ------- -------
Net asset value -
End of year $18.490 $ 14.120 $12.130 $12.550 $ 9.760 $ 8.460 $14.930 $13.540 $11.710
======= ======== ======= ======= ======= ======= ======= ======= =======
Total return(3) 53.28% 52.29% 52.16% (15.94)% (16.44)% (15.40)% 17.67% 31.04% 38.13%
Ratios/Supplemental
Data+
Net assets, end of
year (000's omitted) $89,214 $107,923 $ 7,778 $66,831 $75,111 $ 1,905 $88,349 $55,016 $17,690
Ratios (as a
percentage of
average daily net
assets):
Net operating
expenses(4)(5) 1.69% 2.29% 2.44% 1.83% 2.43% 2.67%(6) 2.07% 2.21% 2.44%
Interest expense(4) 0.01% 0.01% 0.01% -- -- -- -- -- --
Net expenses after
custodian fee
reduction(4) 1.63% 2.23% 2.38% 1.69% 2.29% 2.53%(6) 2.00% 2.19% --
Net investment loss (1.11)% (1.70)% (1.82)% (1.21)% (1.80)% (1.84)%(6) (1.60)% (1.81)% (1.80)%
Portfolio turnover
of the Fund(7) -- -- -- -- -- -- -- 66% 45%
Portfolio turnover
of the Portfolio(7) 41% 41% 41% 34% 34% 34% 14% -- --
</TABLE>
+ The operating expenses of the Fund and the Portfolio may reflect a
reduction of the investment adviser fee, an allocation of expenses to the
manager or administrator, or both. Had such action not been taken, the
ratios and net investment loss per share would have been as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Ratios (as a percentage of average daily net assets):
Expenses(4)(5) 2.29% -- --
Expenses after custodian fee reduction(4) 2.22% -- --
Net investment loss (1.82)% -- --
Net Investment loss per share $(0.151) -- --
</TABLE>
(See footnotes on last page.)
14
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
INFORMATION AGE FUND
- -----------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31,
- -----------------------------------------------------------------------------------------------------------------------------------
1999(1) 1998 1997 1996(1)(2)
- -----------------------------------------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS B CLASS B
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value - Beginning
of year $11.710 $12.030 $11.720 $11.970 $12.310 $12.020 $11.040 $10.000
------- ------- ------- ------- ------- ------- ------- -------
Income (loss) from
operations
Net investment loss $(0.217) $(0.284) $(0.290) $(0.156) $(0.210) $(0.205) $(0.178) $(0.134)
Net realized and unrealized
gain 6.469 6.646 6.472 0.431 0.465 0.440 2.490 1.174
------- ------- ------- ------- ------- ------- ------- -------
Total income from operations $ 6.252 $ 6.362 $ 6.182 $ 0.275 $ 0.255 $ 0.235 $ 2.312 $ 1.040
------- ------- ------- ------- ------- ------- ------- -------
Less distributions
From net realized gain $(0.622) $(0.622) $(0.622) $(0.535) $(0.535) $(0.535) $(1.042) --
------- ------- ------- ------- ------- ------- ------- -------
Total distributions $(0.622) $(0.622) $(0.622) $(0.535) $(0.535) $(0.535) $(1.042) --
------- ------- ------- ------- ------- ------- ------- -------
Net asset value - End of
year $17.340 $17.770 $17.280 $11.710 $12.030 $11.720 $12.310 $11.040
======= ======= ======= ======= ======= ======= ======= =======
Total return(3) 54.95% 54.39% 54.29% 2.32% 2.08% 1.96% 20.79% 10.40%
Ratios/Supplemental Data
Net assets, end of year
(000's omitted) $20,908 $49,963 $ 6,118 $12,263 $30,331 $ 2,531 $29,037 $21,800
Ratios (as a percentage of
average daily net assets):
Expenses(4) 2.46% 2.87% 2.93% 2.68% 3.12% 3.20% 3.19% 2.96%(6)
Net investment loss (1.47)% (1.88)% (1.94)% (1.20)% (1.64)% (1.72)% (1.67)% (1.34)%(6)
Portfolio turnover of the
Portfolio 131% 131% 131% 157% 157% 157% 160% 115%
</TABLE>
(1) Net investment loss per share was computed using average shares
outstanding.
(2) For the Health Sciences Fund for the period from the commencement of
offering of Class C shares, January 5, 1998, to August 31, 1998, and for
the Information Age Fund for the period from the start of business,
September 18, 1995, to August 31, 1996.
(3) Total return is calculated assuming a purchase at the net asset value on
the first day and a sale at the net asset value on the last day of each
period reported. Distributions, if any, are assumed to be reinvested at the
net asset value on the reinvestment date. Total return is not computed on
an annualized basis.
(4) Includes the Fund's share of its Portfolio's allocated expenses for the
period the Fund was investing in the Portfolio.
(5) The expense ratios for the year ended August 31, 1996 and periods
thereafter have been adjusted to reflect a change in reporting
requirements. The new reporting guidelines require a Fund, as well as its
corresponding Portfolio, to increase its expense ratio by the effect of any
expense offset arrangements with its service providers. The expense ratio
for the year ended August 31, 1995 has not been adjusted to reflect this
change.
(6) Annualized.
(7) Portfolio Turnover of the Fund represents the rate of portfolio activity
for the period while the Fund was making investments directly in
securities. The Health Sciences Fund began investing in the Portfolio on
September 1, 1996.
15
<PAGE>
LOGO
Investing
for the
21st
Century(R)
MORE INFORMATION
- --------------------------------------------------------------------------------
ABOUT THE FUNDS: More information is available in the statement of
additional information. The statement of additional information is
incorporated by reference into this prospectus. Additional information
about each Portfolio's investments is available in the annual and
semi-annual reports to shareholders. In the annual report, you will
find a discussion of the market conditions and investment strategies
that significantly affected each Fund's performance during the past
year. You may obtain free copies of the statement of additional
information and the shareholder reports by contacting:
EATON VANCE DISTRIBUTORS, INC.
The Eaton Vance Building
255 State Street
Boston, MA 02109
1-800-225-6265
website: www.eatonvance.com
You will find and may copy information about each Fund at the
Securities and Exchange Commission's public reference room in
Washington, DC (call 1-800-SEC-0330 for information on the operation
of the public reference room); on the SEC's Internet site
(http://www.sec.gov); or, upon payment of copying fees, by writing to
the SEC's public reference room in Washington, DC 20549-0102 or by
electronic mail at [email protected].
About Shareholder Accounts: You can obtain more information from Eaton
Vance Shareholder Services (1-800-225-6265). If you own shares and
would like to add to, redeem or change your account, please write or
call the transfer agent:
----------------------------------------------------------------------
PFPC Global Fund Services
P.O. Box 5123
Westborough, MA 01581-5123
1-800-262-1122
The Funds' SEC File No. is 811-1241 1/1COMBP
<PAGE>
STATEMENT OF
ADDITIONAL INFORMATION
January 1, 2000
EATON VANCE ASIAN SMALL COMPANIES FUND
The Eaton Vance Building
255 State Street
Boston, Massachusetts 02109
(800) 225-6265
This Statement of Additional Information ("SAI") provides general
information about the Fund and the Portfolio. The Fund is a series of Eaton
Vance Growth Trust. Capitalized terms used in this SAI and not otherwise
defined have the meanings given to them in the prospectus. This SAI contains
additional information about:
Page
Strategies and Risks .................................................. 1
Investment Restrictions ............................................... 6
Management and Organization ........................................... 8
Investment Advisory and Administrative Services ....................... 12
Other Service Providers ............................................... 14
Purchasing and Redeeming Shares ....................................... 15
Sales Charges ......................................................... 17
Performance ........................................................... 20
Taxes ................................................................. 22
Portfolio Security Transactions ....................................... 23
Financial Statements .................................................. 25
Appendices:
A: Class A Fees, Performance and Ownership ............................ a-1
B: Class B Fees, Performance and Ownership ............................ b-1
C: Asian Region Countries ............................................. c-1
THIS IS NOT A PROSPECTUS AND IS AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE
INVESTORS ONLY IF PRECEDED OR ACCOMPANIED BY THE FUND'S PROSPECTUS DATED
JANUARY 1, 2000, AS SUPPLEMENTED FROM TIME TO TIME, WHICH IS INCORPORATED
HEREIN BY REFERENCE. THIS SAI SHOULD BE READ IN CONJUNCTION WITH THE
PROSPECTUS, WHICH MAY BE OBTAINED BY CALLING 1-800-225-6265.
<PAGE>
STRATEGIES AND RISKS
ASIAN REGION RISKS. The Portfolio will, under normal market conditions,
invest at least 65% of its total assets in equity securities of Asian small
companies. Such companies will (a) have a market capitalization equivalent to
less than $600 million and (b) be located in or have securities which are
principally traded in an Asian Region country. Such securities are typically
listed on stock exchanges or traded in over-the-counter markets in countries
in the Asian Region. The principal offices of these companies, however, may be
located outside these countries. The Portfolio may invest 25% or more of its
total assets in the securities of issuers located in any one country, and may
retain securities of a company with market capitalization that grows over the
$600 million level. While there is no minimum or maximum limitation on assets
that may be invested in a single country, the Adviser currently anticipates
that investments in Hong Kong will represent more than 25% of total assets.
Equity securities, for purposes of the 65% policy, will be limited to
common and preferred stocks; equity interests in trusts, partnerships, joint
ventures and other unincorporated entities or enterprises; special classes of
shares available only to foreign investors in markets that restrict the
ownership by foreign investors to certain classes of equity securities;
convertible preferred stocks; and other convertible investment grade debt
instruments. A debt security is investment grade if it is rated BBB or above
by Standard & Poor's Ratings Group ("S&P") or Baa or above by Moody's
Investors Service, Inc. ("Moody's") or determined to be of comparable quality
by the Adviser. Debt securities rated BBB by S&P or Baa by Moody's have
speculative characteristics and changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments than is the case with higher grade debt securities. The
Portfolio will promptly dispose of any convertible debt instrument which is
rated or determined by the Adviser to be below investment grade subsequent to
acquisition by the Portfolio.
In addition to its investments in equity securities, the Portfolio may
invest up to 5% of its net assets in warrants, including warrants traded in
over-the-counter markets. The Portfolio will not, under normal market
conditions, invest more than 35% of its total assets in equity securities
other than Asia small company investments, warrants, options on securities and
indices, options on currency, futures contracts and options on futures,
forward foreign currency exchange contracts, currency swaps and any other non-
equity investments. The Portfolio will not invest in debt securities, other
than investment grade convertible debt instruments.
SECURITIES TRADING MARKETS. A high proportion of the shares of many issuers
in the Asian Region may be held by a limited number of persons and financial
institutions, which may limit the number of shares available for investment by
the Portfolio. The prices at which the Portfolio may acquire investments may
be affected by trading by persons with material non-public information and by
securities transactions by brokers in anticipation of transactions by the
Portfolio in particular securities. Similarly, volume and liquidity in the
bond markets in the Asian Region are less than in the United States and, at
times, price volatility can be greater than in the United States. The limited
liquidity of securities markets may also affect the Portfolio's ability to
acquire or dispose of securities at the price and time it wishes to do so. In
addition, Asian Region securities markets are susceptible to being influenced
by large investors trading significant blocks of securities.
Asian Region stock markets are undergoing a period of growth and change
which may result in trading volatility and difficulties in the settlement and
recording of transactions, and in interpreting and applying the relevant law
and regulations. The securities industry in these countries is comparatively
underdeveloped and stockbrokers and other intermediaries may not perform as
well as their counterparts in the United States and other more developed
securities markets.
ASIAN COUNTRY CONSIDERATIONS. Political and economic structures in many Asian
countries are undergoing significant evolution and rapid development, and such
countries may lack the social, political and economic stability characteristic
of the United States. Certain of such countries have, in the past, failed to
recognize private property rights and have at times nationalized or
expropriated the assets of private companies. As a result, the risks described
above, including the risks of nationalization or expropriation of assets, may
be heightened. In addition, unanticipated political or social developments may
affect the values of the Portfolio's investments in those countries and the
availability to the Portfolio of additional investments in those countries.
The laws of countries in the region relating to limited liability of
corporate shareholders, fiduciary duties of officers and directors, and the
bankruptcy of state enterprises are generally less well developed than or
different from such laws in the United States. It may be more difficult to
obtain a judgement in the courts of these countries than it is in the United
States. Monsoons and natural disasters also can affect the value of Portfolio
investments.
The Fund and the Portfolio each intend to conduct its respective affairs
in such a manner to avoid taxation. Nevertheless, certain countries may
require withholding on dividends paid on portfolio securities and on realized
capital gains. In the past, these taxes have sometimes been substantial. There
can be no assurance that in the future the Portfolio will be able to
repatriate its income, gains or initial capital from these countries.
DIRECT INVESTMENTS AND SMALLER COMPANIES. The Portfolio may invest up to 10%
of its total assets in direct investments in smaller companies based in Asia.
Direct investments include (i) the private purchase from an enterprise of an
equity interest in the enterprise in the form of shares of common stock or
equity interests in trusts, partnerships, joint ventures or similar
enterprises, and (ii) the purchase of such an equity interest in an enterprise
from a principal investor in the enterprise. In each case, the Portfolio will,
at the time of making the investment, enter into a shareholder or similar
agreement with the enterprise and one or more other holders of equity
interests in the enterprise. The Adviser anticipates that these agreements
will, in appropriate circumstances, provide the Portfolio with the ability to
appoint a representative to the board of directors or similar body of the
enterprise and for eventual disposition of the Portfolio's investment in the
enterprise. Such a representative of the Portfolio will be expected to provide
the Portfolio with the ability to monitor its investment and protect its
rights in the investment and will not be appointed for the purpose of
exercising management or control of the enterprise.
The Portfolio's investments will include investments in smaller, less
seasoned companies for which there is less publicly available information than
larger, more established companies. The securities of these companies, which
may include legally restricted securities, are generally subject to greater
price fluctuations, limited liquidity, higher transaction costs and higher
investment risk. These companies may have limited product lines, markets or
financial resources, or they may be dependent on a limited management group.
Investments in smaller companies may involve a high degree of business and
financial risk that can result in substantial losses. Because of the absence
of any public trading market for some of these investments, the Portfolio may
take longer to liquidate these positions at fair value than would be the case
for publicly traded securities. Furthermore, issuers whose securities are not
publicly traded may not be subject to investor protection requirements
applicable to publicly traded securities.
FOREIGN INVESTMENTS. Investing in securities issued by companies whose
principal business activities are outside the United States may involve
significant risks not present in domestic investments. For example, there is
generally less publicly available information about foreign companies,
particularly those not subject to the disclosure and reporting requirements of
the U.S. securities laws. Foreign issuers are generally not bound by uniform
accounting, auditing, and financial reporting requirements and standards of
practice comparable to those applicable to domestic issuers. Investments in
foreign securities also involve the risk of possible adverse changes in
investment or exchange control regulations, expropriation or confiscatory
taxation, limitation on the removal of funds or other assets of the Portfolio,
political or financial instability or diplomatic and other developments which
could affect such investments. Further, economies of particular countries or
areas of the world may differ favorably or unfavorably from the economy of the
United States. It is anticipated that in most cases the best available market
for foreign securities will be on exchanges or in over-the-counter markets
located outside of the United States. Foreign stock markets, while growing in
volume and sophistication, are generally not as developed as those in the
United States, and securities of some foreign issuers (particularly those
located in developing countries) may be less liquid and more volatile than
securities of comparable U.S. companies. In addition, foreign brokerage
commissions are generally higher than commissions on securities traded in the
United States and may be non-negotiable. In general, there is less overall
governmental supervision and regulation of foreign securities markets, broker-
dealers, and issuers than in the United States.
Physical delivery of securities in small lots generally is required in
India and a shortage of vault capacity and trained personnel has existed among
qualified custodial Indian and Pakistani banks. The Portfolio may be unable to
sell securities where the registration process is incomplete and may
experience delays in receipt of dividends. If trading volume is limited by
operational difficulties, the ability of the Portfolio to invest its assets
may be impaired. Settlement of securities transactions in the Indian
subcontinent may be delayed and is generally less frequent than in the United
States, which could affect the liquidity of the Portfolio's assets. In
addition, disruptions due to work stoppages and trading improprieties in these
securities markets have caused such markets to close. If extended closings
were to occur in stock markets where the Portfolio was heavily invested, the
Fund's ability to redeem Fund shares could become correspondingly impaired.
The Adviser intends, as of the date of this SAI, not to invest in issuers
located in Vietnam, Cambodia, Laos or former Burma and to invest no more than
1% of total assets in Bangladesh issuers.
The Portfolio may also invest in American Depositary Receipts (ADRs)
European Depositary Receipts (EDRs) and Global Depositary Receipts (GDRs).
ADRs, EDRs and GDRs are certificates evidencing ownership of shares of a
foreign issuer and are alternatives to directly purchasing the underlying
foreign securities in their national markets and currencies. However, they
continue to be subject to many of the risks associated with investing directly
in foreign securities. These risks include foreign exchange risk as well as
the political and economic risks of the underlying issuer's country. ADRs,
EDRs and GDRs may be sponsored or unsponsored. Unsponsored receipts are
established without the participation of the issuer. Unsponsored receipts may
involve higher expenses, they may not pass-through voting or other shareholder
rights, and they may be less liquid.
FOREIGN CURRENCY TRANSACTIONS. Forward foreign currency exchange contracts
are individually negotiated and privately traded by currency traders and their
customers. A forward contract involves an obligation to purchase or sell a
specific currency (or basket of currencies) for an agreed price at a future
date, which may be any fixed number of days from the date of the contract. The
Portfolio may engage in cross-hedging by using forward contracts in one
currency (or basket of currencies) to hedge against fluctuations in the value
of securities denominated in a different currency if the Adviser determines
that there is an established historical pattern of correlation between the two
currencies (or the basket of currencies and the underlying currency). Use of a
different foreign currency magnifies the Portfolio's exposure to foreign
currency exchange rate fluctuations. The Portfolio may also use forward
contracts to shift its exposure to foreign currency exchange rate changes from
one currency to another.
The value of the assets of the Portfolio as measured in U.S. dollars may
be affected favorably or unfavorably by changes in foreign currency exchange
rates and exchange control regulations. Currency exchange rates can also be
affected unpredictably by intervention by U.S. or foreign governments or
central banks, or the failure to intervene, or by currency controls or
political developments in the U.S. or abroad. The Portfolio may conduct its
foreign currency exchange transactions on a spot (i.e., cash) basis at the
spot rate prevailing in the foreign currency exchange market or through
entering into swaps, forward contracts, options or futures on currency. In
spot transactions, foreign exchange dealers do not charge a fee for
conversion, but they do realize a profit based on the difference (the
"spread") between the prices at which they are buying and selling various
currencies. Thus, a dealer may offer to sell a foreign currency to the
Portfolio at one rate, while offering a lesser rate of exchange should the
Portfolio desire to resell that currency to the dealer.
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. Currency swaps
require maintenance of a segregated account as described under "Asset Coverage
Requirements" 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.
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.
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
considered 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 options on securities, indices
or currencies; and forward foreign currency exchange contracts. The Portfolio
incurs transaction costs in opening and closing positions in derivative
instruments. The use of futures for nonhedging purposes is limited by
regulations of the Commodity Futures Trading Commission. There can be no
assurance that the Adviser's use of derivative instruments will be
advantageous to the Portfolio.
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 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 days 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 certain purchased OTC options,
and assets used as cover for written OTC options, are subject to the
Portfolio's 15% limit on illiquid investments. 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 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.
ASSET COVERAGE REQUIREMENTS. Transactions involving reverse repurchase
agreements, currency swaps, forward contracts or 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, futures contracts or forward
contracts, or (2) cash or liquid securities (such as readily marketable
securities and money market instruments) with a value sufficient at all times
to cover its potential obligations not covered as provided in (1) above. (Only
the net obligation of a swap will be covered.) The Portfolio will comply with
Commission guidelines regarding cover for these instruments and, if the
guidelines so require, set aside cash or liquid securities in a segregated
account with its custodian in the prescribed amount. The securities in the
segregated account will be marked to market daily.
Assets used as cover or held in a segregated account maintained by the
Portfolio's custodian cannot be sold while the position requiring coverage or
segregation is outstanding unless they are replaced with other appropriate
assets. As a result, the commitment of a large portion of the Portfolio's
assets to segregated accounts or to cover could impede portfolio management or
the Portfolio's ability to meet redemption requests or other current
obligations.
LIMITATIONS ON FUTURES CONTRACTS AND OPTIONS. The Portfolio may purchase call
and put options on any securities in which the Portfolio may invest or
options, including those traded in over-the-counter markets, on any securities
index composed of securities in which the Portfolio may invest. The Portfolio
does not intend to write a covered option on any security if after such
transaction more than 15% of its net assets, as measured by the aggregate
value of the securities underlying all covered calls and puts written by the
Portfolio, would be subject to such options. The Portfolio will only write a
put option on a security which it intends to ultimately acquire for its
portfolio. The Portfolio does not intend to purchase any options if after such
transaction more than 5% of its net assets, as measured by the aggregate of
all premiums paid for all such options held by the Portfolio, would be so
invested. The Portfolio may enter into futures contracts (and options thereon)
traded on a foreign exchange, only if the Adviser determines that trading on
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 United States CFTC-regulated exchanges.
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.
REPURCHASE AGREEMENTS. The Portfolio may enter into repurchase agreements
(the purchase of a security coupled with an agreement to resell at a higher
price) with respect to its permitted investments. In the event of the
bankruptcy of the other party to a repurchase agreement, the Portfolio might
experience delays in recovering its cash. To the extent that, in the meantime,
the value of the securities the Portfolio purchased may have decreased, the
Portfolio could experience a loss. At no time will the Portfolio commit more
than 15% of its net assets to repurchase agreements which mature in more than
seven days and other illiquid securities. 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.
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 high turnover rate (100% or more) necessarily involves
greater expenses to the Portfolio. Short-term trading may be advisable in
light of a change in circumstances of a particular company or within a
particular industry, or in light of general market, economic or political
conditions. High portfolio turnover may also result in the realization of
substantial net short-term capital gains.
LENDING PORTFOLIO SECURITIES. 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 short-
term municipal obligations as well as taxable certificates of deposit,
commercial paper and other short-term money market instruments. The financial
condition of the borrower will be monitored by the Adviser on an ongoing
basis. The Portfolio would continue to receive the equivalent of the interest
or dividends paid by the issuer on the securities loaned and would also
receive a fee, or all or a portion of the interest on investment of the
collateral. The Portfolio would have the right to call a loan and obtain the
securities loaned at any time on up to five business days' notice. The
Portfolio would not have the right to vote any securities having voting rights
during the existence of a loan, but could call the loan in anticipation of an
important vote to be taken among holders of the securities or the giving or
holding of their consent on a material matter affecting the investment. If the
Adviser decides to make securities loans, it is intended that the value of the
securities loaned would not exceed one-third of the Portfolio's total assets.
As with other extensions of credit there are risks of delay in recovery or
even loss of rights in the securities loaned if the borrower of the securities
fails financially. However, the loans will be made only to organizations
deemed by the Adviser to be sufficiently creditworthy and when, in the
judgment of the Adviser, the consideration which can be earned from securities
loans of this type justifies the attendant risk. Securities lending involves
administration expenses including finders fees.
OTHER INVESTMENT COMPANIES. The Portfolio reserves the right to invest up to
10% of its total assets, calculated at the time of purchase, in the securities
of other investment companies unaffiliated with the investment adviser or the
Manager 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.
TEMPORARY INVESTMENTS. Under unusual market conditions, the Portfolio may
invest temporarily in cash or cash equivalents. Cash equivalents include high
grade debt securities of foreign and U.S. companies, foreign governments and
the U.S. government, and their respective agencies, instrumentalities,
political subdivisions and authorities, as well as high quality money market
instruments denominated in U.S. or foreign currencies.
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% or more of the outstanding voting
securities of the Fund present or represented by proxy at a meeting if the
holders of more than 50% of the outstanding shares are present or represented
at the meeting or (b) more than 50% of the outstanding shares of the Fund.
Accordingly, the Fund may not:
(1) Borrow money or issue senior securities except as permitted by the
Investment Company Act of 1940;
(2) Purchase any securities on margin (but the Fund and the Portfolio 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) or in commodities or commodity contacts for the purchase or sale of
physical commodities;
(5) 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;
(6) With respect to 75% of its total assets, invest more than 5% of its
total assets (taken at current value) in the securities of any one issuer, or
invest in more than 10% of the outstanding voting securities of any one
issuer, except obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities and except securities of other investment
companies; or
(7) Concentrate its investments in any particular industry, but, if deemed
appropriate for the Fund's objective, up to 25% of the value of its assets may
be invested in securities of companies in any one industry (although more than
25% may be invested in securities issued or guaranteed by the U.S. Government
or its agencies or instrumentalities).
Notwithstanding the investment policies and restrictions of the Fund, the
Fund may invest all of its investable 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 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.
For as long as a feeder fund of the Portfolio has registered shares in
Hong Kong (and for so long as Hong Kong requires the following restrictions),
the Portfolio may not:
(i) invest more than 10% of its net assets in the securities of any
one issuer or, purchase more than 10% of any class of security of any one
issuer, provided, however, up to 30% of the Portfolio's net asset value
may be invested in Government and public securities of the same issue; and
the Portfolio may invest all of its assets in Government and other public
securities in at least six different issues;
(ii) invest more than 15% of net assets in securities which are not
listed or quoted on any stock exchange, over-the-counter market or other
organized securities market that is open to the international public and
on which such securities are regularly traded (a "Market");
(iii) invest more than 15% of net assets in warrants and options for
non-hedging purposes;
(iv) write call options on Portfolio investments exceeding 25% of its
total net asset value in terms of exercise price;
(v) enter into futures contracts on an unhedged basis where the net
total aggregate value of contract prices, whether payable by or to the
Portfolio under all outstanding futures contracts, together with the
aggregate value of holdings under paragraph (vi) below exceeds 20% of the
net total asset value of the Portfolio;
(vi) invest in physical commodities (including gold, silver, platinum
or other bullion) and commodity based investments (other than shares in
companies engaged in producing, processing or trading in commodities)
which value together with the net aggregate value of the holdings
described in (v) above, exceeds 20% of the Portfolio's net asset value;
(vii) purchase shares of other investment companies exceeding 10% of
net assets. In addition, the investment objective of any scheme in which
any Portfolio invests must not be to invest in investments prohibited by
this undertaking and where the scheme's investment objective is to invest
primarily in investments which are restricted by this undertaking, such
holdings must not be in contravention of the relevant limitation;
(viii) borrow more than 25% of its net assets (provided that for the
purposes of this paragraph, back to back loans are not to be categorized
as borrowings);
(ix) write uncovered options;
(x) invest in real estate (including options, rights or interests
therein but excluding shares in real estate companies);
(xi) assume, guarantee, endorse or otherwise become directly or
contingently liable for, or in connection with, any obligation or
indebtedness of any person in respect of borrowed money without the prior
written consent of the custodian of the Portfolio;
(xii) engage in short sales involving a liability to deliver
securities exceeding 10% of its net assets provided that any security
which a Portfolio does sell short must be actively traded on a market;
(xiii) subject to paragraph (v) above, purchase an investment with
unlimited liability; or
(xiv) purchase any nil or partly-paid securities unless any call
thereon could be met in full out of cash or near cash held by it in the
amount of which has not already been taken into account for the purposes
of (ix) above.
The Fund and the Portfolio have adopted the following investment policies
which may be changed by the Trustees with respect to the Fund without approval
by the Fund's shareholders or with respect to the Portfolio without approval
of the Fund or its other investors. The Fund and the Portfolio will not:
(a) invest more than 15% of its net assets in investments which are
not readily marketable, including restricted securities and repurchase
agreements with a maturity longer than seven days. Restricted securities
for the purposes of this limitation do not include securities eligible for
resale pursuant to Rule 144A under the Securities Act of 1933 and
commercial paper issued pursuant to Section 4(2) of said Act that the
Board of Trustees of the Trust or the Portfolio, or their delegate,
determines to be liquid. Any such determination by a delegate will be made
pursuant to procedures adopted by the Board. If the Fund or Portfolio
invests in Rule 144A Securities, the level of portfolio illiquidity may be
increased to the extent that eligible buyers become uninterested in
purchasing such securities; or
(b) purchase any securities if at the time of such purchase, permitted
borrowings under investment restriction (1) above exceed 5% of the value
of the Portfolio's or the Fund's total assets, as the case may be.
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, or any
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 Asian small
companies. Moreover, the Fund and the Portfolio must always be in compliance
with the limitation on investing in illiquid securities and the borrowing
policies set forth above.
Although permissible under the Fund's investment restrictions, the Fund
has no present intention during the coming fiscal year to: borrow money;
pledge its assets; underwrite securities issued by other persons; or make
loans to other persons.
MANAGEMENT AND ORGANIZATION
FUND MANAGEMENT. The Trustees of the Trust are responsible for the overall
management and supervision of the Trust's affairs. The Trustees and officers
of the Trust and the Portfolio are listed below. Except as indicated, each
individual has held the office shown or other offices in the same company for
the last five years. Unless otherwise noted, the business address of each
Trustee and officer is The Eaton Vance Building, 255 State Street, Boston,
Massachusetts 02109. The business address of the Adviser is 3808 One Exchange
Square, Central Hong Kong. Those Trustees who are "interested persons" of the
Trust or the Portfolio, as defined in the 1940 Act, are indicated by an
asterisk(*).
JAMES B. HAWKES (58), President of the Trust, Vice President of the Portfolio
and Trustee*
Chairman, President and Chief Executive Officer of Eaton Vance, BMR and their
corporate parent (EVC and EV); Director of EVC and EV. Trustee and officer
of various investment companies managed by Eaton Vance or BMR. Director of
Lloyd George Management (B.V.I.) Limited.
HON. ROBERT LLOYD GEORGE (47), President and Trustee of the Portfolio*
Chairman and Chief Executive of Lloyd George Management (B.V.I.) Limited.
Chairman and Chief Executive Officer of the Adviser. Managing Director of
Indosuez Asia Investment Services, Ltd. from 1984 to 1991.
Address: 3808 One Exchange Square, Central, Hong Kong
JESSICA M. BIBLIOWICZ (39), Trustee of the Trust*
President and Chief Executive Officer of National Financial Partners (a
financial services company) (since April, 1999). President and Chief
Operating Officer of John A. Levin & Co. (a registered investment advisor)
(July, 1997 to April, 1999) and a Director of Baker, Fentress & Company
which owns John A. Levin & Co. (July, 1997 to April, 1999). Executive Vice
President of Smith Barney Mutual Funds (from July, 1994 to June, 1997).
Elected Trustee October 30, 1998. Trustee of various investment companies
managed by Eaton Vance or BMR since October 30, 1998.
Address: 1301 Avenue of the Americas, New York, New York 10019
EDWARD K.Y. CHEN (54), Trustee of the Portfolio
President of Lingnan College in Hong Kong. Professor and Director of Centre of
Asian Studies at the University of Hong Kong from 1979-1995. Director of
First Pacific Company and Asia Satellite Telecommunications Holdings Ltd.,
and a Board Member of the Mass Transit Railway Corporation. Member of the
Executive Council of the Hong Kong Government from 1992-1997 and Chairman of
the Consumer Council from 1991-1997.
Address: President's Office, Lingnan College, Tuen Mun, Hong Kong
DONALD R. DWIGHT (68), Trustee
President of Dwight Partners, Inc. (a corporate relations and communications
company). Trustee/Director of the Royce Funds (mutual funds). Trustee of
various investment companies managed by Eaton Vance or BMR.
Address: Clover Mill Lane, Lyme, New Hampshire 03768
SAMUEL L. HAYES, III (64), Trustee
Jacob H. Schiff Professor of Investment Banking Emeritus, Harvard University
Graduate School of Business Administration. Trustee of the Kobrick-Cendant
Investment Trust (mutual funds). Trustee of various investment companies
managed by Eaton Vance or BMR.
Address: 345 Nahatan Road, Westwood, Massachusetts 02090
NORTON H. REAMER (64), Trustee
Chairman of the Board and Chief Executive Officer, United Asset Management
Corporation (a holding company owning institutional investment management
firms); Chairman, President and Director, UAM Funds (mutual funds). Trustee
of various investment companies managed by Eaton Vance or BMR.
Address: One International Place, Boston, Massachusetts 02110
LYNN A. STOUT (42), Trustee
Professor of Law, Georgetown University Law Center. Elected Trustee October
30, 1998. Trustee of various investment companies managed by Eaton Vance or
BMR since October 30, 1998.
Address: 600 New Jersey Avenue, NW, Washington, DC 20001
JACK L. TREYNOR (69), Trustee
Investment Adviser and Consultant. Trustee of various investment companies
managed by Eaton Vance or BMR.
Address: 504 Via Almar, Palos Verdes Estates, California 90274
THOMAS E. FAUST, JR. (41), Vice President of the Trust
Vice President of BMR and Eaton Vance. Officer of various investment companies
managed by Eaton Vance or BMR.
SCOBIE DICKINSON WARD (33), Vice President, Assistant Secretary and Assistant
Treasurer of the Portfolio
Director of LGM and Chief Investment Officer of the Adviser.
Address: 3808 One Exchange Square, Central, Hong Kong
WILLIAM WALTER RALEIGH KERR (49), Vice President and Assistant Treasurer of
the Portfolio
Director, Finance Director and Chief Operating Officer of the Adviser.
Director of Lloyd George Management (B.V.I.) Limited.
Address: 3808 One Exchange Square, Central, Hong Kong
JAMES L. O'CONNOR (54), Vice President of the Portfolio and Treasurer
Vice President of Eaton Vance and BMR. Officer of various investment companies
managed by Eaton Vance or BMR.
ALAN R. DYNNER (59), Secretary
Vice President and Chief Legal Officer of Eaton Vance, BMR and EVC since
November 1, 1996. Previously, he was a Partner of the law firm of
Kirkpatrick & Lockhart LLP, New York and Washington, D.C., and was Executive
Vice President of Neuberger & Berman Management, Inc., a mutual fund
management company. Officer of various investment companies managed by Eaton
Vance or BMR.
JANET E. SANDERS (64), Assistant Treasurer and Assistant Secretary
Vice President of Eaton Vance and BMR. Officer of various investment companies
managed by Eaton Vance or BMR.
A. JOHN MURPHY (37), Assistant Secretary
Vice President of Eaton Vance and BMR. Officer of various investment companies
managed by Eaton Vance or BMR.
ERIC G. WOODBURY (42), Assistant Secretary
Vice President of Eaton Vance and BMR. Officer of various investment companies
managed by Eaton Vance or BMR.
The Nominating Committee of the Board of Trustees of the Trust and the
Portfolio is comprised of the Trustees who are not "interested persons" as
that term is defined under the 1940 Act ("noninterested Trustees"). 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, the Adviser and its
affiliates.
Messrs. Hayes (Chairman), Dwight and Reamer and Ms. Stout, 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 and the Portfolio,
including investment advisory (Portfolio only), administrative, transfer
agency, custodial and fund accounting and distribution services, and (ii) all
other matters in which Eaton Vance, the Adviser or its affiliates has any
actual or potential conflict of interest with the Fund, the Portfolio or
investors therein.
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
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, transfer agent and
dividend disbursing agent of the Trust and of the Portfolio.
Trustees of the Portfolio (except Mr. Chen) that are not affiliated with
Eaton Vance may elect to defer receipt of all or a percentage of their annual
fees in accordance with the terms of a Trustees Deferred Compensation Plan
(the "Trustees" Plan"). Under the Trustees' 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 Trustees' Plan will be determined based upon the
performance of such investments. Deferral of Trustees' fees in accordance with
the Trustees' Plan will have a negligible effect on the 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 Trust nor the
Portfolio has a retirement plan for its Trustees.
The fees and expenses of the noninterested Trustees of the Trust and the
Portfolio 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 Trust
or the Portfolio.) For the fiscal year ending August 31, 2000, it is estimated
that the noninterested Trustees of the Trust and the Portfolio will receive
the following compensation in their capacities as Trustees from the Fund and
the Portfolio, and, for the year ended December 31, 1998, earned the following
compensation in their capacities as Trustees of the funds in the Eaton Vance
fund complex(1):
<TABLE>
<CAPTION>
JESSICA M. HON. EDWARD DONALD R. SAMUEL L. NORTON H. LYNN A. JACK L.
SOURCE OF COMPENSATION BIBLIOWICZ(5) K.Y. CHEN DWIGHT HAYES, III REAMER STOUT(5) TREYNOR
- ---------------------- ------------- --------- ------ ---------- ------ -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Trust(2) ....................... $ 571 $ -- $ 1,785 $ 1,900 $ 1,758 $ 622 $ 2,119
Portfolio ...................... -- 2,250 2,250 2,250 2,250 2,250 2,250
Trust and Fund Complex ......... 33,334 20,525 160,000(3) 170,000(4) 160,000 -- 170,000
- ------------
(1) As of January 1, 2000, the Eaton Vance Fund complex consists of 143 registered investment companies or series thereof.
(2) The Trust consisted of 5 Funds as of August 31, 1999.
(3) Includes $60,000 of deferred compensation.
(4) Includes $41,563 of deferred compensation.
(5) Ms. Bibliowicz and Ms. Stout were elected Trustees on October 30, 1998.
</TABLE>
The Adviser is a subsidiary of Lloyd George Management (B.V.I.) Limited,
which is ultimately controlled by the Hon. Robert J.D. Lloyd George, President
of the Portfolio and Chairman and Chief Executive Officer of the Adviser. Mr.
Hawkes is a Trustee and officer of the Trust and an officer of the Fund's
sponsor and manager. Mr. Hayes is a Trustee of the Trust.
ORGANIZATION. The Fund is a series of the Trust, which is organized under
Massachusetts law and is operated as an open-end management investment
company. The Fund (formerly EV Marathon Asian Small Companies Fund)
established 2 classes of shares on September 1, 1997 -- Class A Shares
(formerly EV Traditional Asian Small Companies Fund) and Class B shares of
Eaton Vance Asian Small Companies Fund. Information herein prior to such date
is for the Fund before it became a multiple-class fund.
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). The
Trustees of the Trust have divided the shares of the Fund into multiple
classes. Each class represents an interest in the Fund, but is subject to
different expenses, rights and privileges. The Trustees have the authority
under the Declaration of Trust to create additional classes of shares with
differing rights and privileges. When issued and outstanding, shares are fully
paid and nonassessable by the Trust. Shareholders are entitled to one vote for
each full share held. Fractional shares may be voted proportionately. Shares
of the Fund will be voted together except that only shareholders of a
particular class may vote on matters affecting only that class. Shares have no
preemptive or conversion rights and are freely transferable. In the event of
the liquidation of the Fund, shareholders of each class are entitled to share
pro rata in the net assets attributable to that class available for
distribution to shareholders.
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 growth in the assets of the Portfolio,
may afford the potential for economies of scale for the Fund and may over time
result in lower expenses for the Fund.
As permitted by Massachusetts law, there will normally be no meetings of
shareholders for the purpose of electing Trustees unless and until such time
as less than a majority of the Trustees of the Trust holding office have been
elected by shareholders. In such an event the Trustees then in office will
call a shareholders' meeting for the election of Trustees. Except for the
foregoing circumstances and unless removed by action of the shareholders in
accordance with the Trust's By-laws, the Trustees shall continue to hold
office and may appoint successor Trustees.
The Trust's By-laws provide that no person shall serve as a Trustee if
shareholders holding two-thirds of the outstanding shares have removed him
from that office either by a written declaration filed with the Trust's
custodian or by votes cast at a meeting called for that purpose. The By-laws
further provide that under certain circumstances the shareholders may call a
meeting to remove a Trustee and that the Trust is required to provide
assistance in communication with shareholders about such a meeting.
The Trust's Declaration of Trust may be amended by the Trustees when
authorized by vote of a majority of the outstanding voting securities of the
Trust, the financial interests of which are affected by the amendment. The
Trustees may also amend the Declaration of Trust without the vote or consent
of shareholders to change the name of the Trust or any series or to make such
other changes (such as reclassifying series of classes of shares or
restructuring the Trust) as do not have a materially adverse effect on the
financial interests of shareholders or if they deem it necessary to conform it
to applicable federal or state laws or regulations. The Trust or any series or
class thereof may be terminated by: (1) the affirmative vote of the holders of
not less than two-thirds of the shares outstanding and entitled to vote at any
meeting of shareholders of the Trust or the appropriate series or class
thereof, or by an instrument or instruments in writing without a meeting,
consented to by the holders of two-thirds of the shares of the Trust or a
series or class thereof, provided, however, that, if such termination is
recommended by the Trustees, the vote of a majority of the outstanding voting
securities of the Trust or a series or class thereof entitled to vote thereon
shall be sufficient authorization; or (2) by means of an instrument in writing
signed by a majority of the Trustees, to be followed by a written notice to
shareholders stating that a majority of the Trustees has determined that the
continuation of the Trust or a series or a class thereof is not in the best
interest of the Trust, such series or class or of their respective
shareholders.
The Declaration of Trust further provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law; but nothing in the
Declaration of Trust protects a Trustee against any liability to which he
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of his
office.
Under Massachusetts law, if certain conditions prevail, shareholders of a
Massachusetts business trust (such as the Trust) could be deemed to have
personal liability for the obligations of the Trust. Numerous investment
companies registered under the 1940 Act have been formed as Massachusetts
business trusts, and management is not aware of an instance where such
liability has been imposed. The Trust's Declaration of Trust contains an
express disclaimer of liability on the part of the Fund shareholders and the
Trust's By-laws provide that the Trust shall assume the defense on behalf of
any Fund shareholders. The Declaration of Trust also contains provisions
limiting the liability of a series or class to that series or class. Moreover,
the Trust's By-laws also provide for indemnification out of the property of
the Fund of any shareholder held personally liable solely by reason of being
or having been a shareholder for all loss or expense arising from such
liability. The assets of the Fund are readily marketable and will ordinarily
substantially exceed its liabilities. In light of the nature of the Fund's
business and the nature of its assets, management believes that the
possibility of the Fund's liability exceeding its assets, and therefore the
shareholder's risk of personal liability, is remote.
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. In
accordance with the Declaration of Trust of the Portfolio, there will normally
be no meetings of the investors for the purpose of electing Trustees unless
and until such time as less than a majority of the Trustees of the Portfolio
holding office have been elected by investors. In such an event the Trustees
of the Portfolio then in office will call an investors' meeting for the
election of Trustees. Except for the foregoing circumstances and unless
removed by action of the investors in accordance with the Portfolio's
Declaration of Trust, the Trustees shall continue to hold office and may
appoint successor Trustees.
The Declaration of Trust of the Portfolio provides that no person shall
serve as a Trustee if investors holding two-thirds of the outstanding interest
have removed him from that office either by a written declaration filed with
the Portfolio's custodian or by votes cast at a meeting called for that
purpose. The Declaration of Trust further provides that under certain
circumstances the investors may call a meeting to remove a Trustee and that
the Portfolio is required to provide assistance in communicating with
investors about such a meeting.
The 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.
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 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. 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, the 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 (or the assets of another investor in the Portfolio) from the
Portfolio.
INVESTMENT ADVISORY AND ADMINISTRATIVE SERVICES
INVESTMENT ADVISORY SERVICES. The Portfolio has engaged Lloyd George
Investment Management (Bermuda) Limited (the "Adviser") as its investment
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. Under
the investment advisory agreement, the Adviser is entitled to receive a
monthly advisory fee computed by applying the annual asset rate applicable to
that portion of the average daily net assets of the Portfolio throughout the
month in each Category as indicated below:
ANNUAL
CATEGORY AVERAGE DAILY NET ASSETS ASSET RATE
-------- ------------------------ ----------
1 less than $500 million ......................... 0.75%
2 $500 million but less than $1 billion .......... 0.70
3 $1 billion but less than $1.5 billion .......... 0.65
4 $1.5 billion but less than $2 billion .......... 0.60
5 $2 billion but less than $3 billion ............ 0.55
6 $3 billion and over ............................ 0.50
As of August 31, 1999, the Portfolio had net assets of $28,484,630. For
fiscal year ended August 31, 1999, the investment adviser earned advisory fees
of $86,920 (equivalent to 0.75% (annualized) of the Portfolio's average daily
net assets for such period).
The Portfolio's investment advisory agreement with Lloyd George remains in
effect from year to year for so long as such continuance is approved at least
annually (i) by the vote of a majority of the noninterested Trustees 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 Lloyd George 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 Lloyd George, Lloyd George 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.
While the Portfolio is a New York trust, the Adviser, together with
certain Trustees and officers of the Portfolio, is not a resident of the
United States, and substantially all of its assets may be located outside of
the United States. It may be difficult for investors to effect service of
process within the United States upon the individuals identified above, or to
realize judgments of courts of the United States predicated upon civil
liabilities of the Adviser and such individuals under the federal securities
laws of the United States. The Portfolio has been advised that there is
substantial doubt as to the enforceability in the countries in which the
Adviser and such individuals reside of such civil remedies and criminal
penalties as are afforded by the federal securities laws of the United States.
INFORMATION ABOUT LLOYD GEORGE. LGM specializes in providing investment
management services with respect to equity securities of companies trading in
Asian securities markets, and also those of emerging markets. LGM currently
manages portfolios for both private clients and institutional investors
seeking long-term capital growth and has advised Eaton Vance's international
equity funds since 1992. LGM's core investment team consists of fourteen
experienced investment professionals who have worked together over a number of
years successfully managing client portfolios in non-U.S. stock markets. The
team has a unique knowledge of, and experience with, Asian and emerging
markets. LGM analysts cover Asia, the India subcontinent, Russia and Eastern
Europe, Latin America, Australia and New Zealand from offices in Hong Kong,
London and Mumbai. LGM is ultimately controlled by the Hon. Robert Lloyd
George, President of the Portfolio and Chairman and Chief Executive Officer of
the Adviser. LGM's only business is portfolio management. Eaton Vance's parent
is a shareholder of LGM.
The Adviser and LGM have adopted a conservative management style,
providing a blend of Asian and multinational expertise with the most rigorous
international standards of fundamental security analysis. Although focused
primarily in Asia, the Advisers and LGM maintain a network of international
contacts in order to monitor international economic and stock market trends
and offer clients a global management service.
The directors of the Adviser are the Honourable Robert Lloyd George,
William Walter Raleigh Kerr, M.F. Tang, Scobie Dickinson Ward, Pamela Chan and
Adaline Mang-Yee Ko. The Hon. Robert Lloyd George is Chairman and Chief
Executive Officer of each Adviser and Mr. Kerr is Chief Operating Officer of
each Adviser. The directors of LGIM-B are the Honorable Robert Lloyd George,
William Walter Raleigh Kerr, Scobie Dickinson Ward, M.F. Tang, Pamela Chan,
Adaline Mang-Yee Ko, Peter Bubenzer and Judith Collis. The business address of
the first six individuals is 3808 One Exchange Square, Central, Hong Kong and
of the last two is Cedar House, 41 Cedar Avenue, Hamilton HM 12, Bermuda.
Scobie Dickinson Ward is a director of LGM and co-manager of the Portfolio.
He was born in 1966 and a cum laude graduate of both Phillips Academy Andover,
and Harvard University. Mr. Ward joined Indosuez Asia Investment Services in
1989, where he managed the $100 million Himalayan Fund, and the Indosuez
Tasman Fund, investing in Australia and New Zealand.
The Adviser follows a common investment philosophy, striving to identify
companies with outstanding management and earnings growth potential by
following a disciplined management style, adhering to the most rigorous
international standards of fundamental security analysis, placing heavy
emphasis on research, visiting every company owned, and closely monitoring
political and economic developments.
ADMINISTRATIVE SERVICES. 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 ............................. 0.16667
As of August 31, 1999, the Portfolio had net assets of $28,484,630. For the
fiscal year ended August 31, 1999, absent a full fee reduction, Eaton Vance
would have earned administration fees of $28,974 (equivalent to 0.25%
(annualized) of the Portfolio's average daily net assets for such period).
As of August 31, 1999, the Fund had net assets of $474,467. For the period
from the start of business, March 1, 1999 to August 31, 1999, Eaton Vance
earned management fees of $128 (equivalent to 0.25% (annualized) of the Fund's
average daily net assets for such period).
Eaton Vance's management contract with the Fund and administration
agreement with the Portfolio will each remain in effect from year to year for
so long as such continuance is approved annually by the vote of a majority of
the Trustees of the Trust or the Portfolio, as the case may be. Each agreement
may be terminated at any time without penalty on sixty days' written notice by
the Board of Trustees of either party thereto, or by a vote of a majority of
the outstanding voting securities of the Fund or the Portfolio, as the case
may be. Each agreement will terminate automatically in the event of its
assignment. Each agreement provides that, in the absence of Eaton Vance's
willful misfeasance, bad faith, gross negligence or reckless disregard of its
obligations or duties to the Fund or the Portfolio under such contract or
agreement, Eaton Vance will not be liable to the Fund or the Portfolio for any
loss incurred. Each agreement was initially approved by the Trustees,
including the noninterested Trustees, of the Trust or the Portfolio which is a
party thereto at meetings held on February 21, 1996 of the Trust and the
Portfolio.
INFORMATION ABOUT EATON VANCE. Eaton Vance is a business trust organized
under Massachusetts law. Eaton Vance, Inc. ("EV") serves as trustee of Eaton
Vance. Eaton Vance and EV are wholly-owned subsidiaries of Eaton Vance
Corporation ("EVC"), a Maryland corporation and publicly-held holding company.
EVC through its subsidiaries and affiliates engages primarily in investment
management, administration and marketing activities. The Directors of EVC are
James B. Hawkes, John G.L. Cabot, John M. Nelson, Vincent M. O'Reilly and
Ralph Z. Sorenson. All of the issued and outstanding shares of Eaton Vance 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, the Voting Trustees of which are Messrs. Hawkes,
Jeffrey P. Beale, Alan R. Dynner, Thomas E. Faust, Jr., Thomas J. Fetter,
Scott H. Page, Duncan W. Richardson, William M. Steul, Payson E. Swaffield,
Michael W. Weilheimer and Wharton P. Whitaker (all of whom are officers of
Eaton Vance). The Voting Trustees have unrestricted voting rights for the
election of Directors of EVC. All of the outstanding voting trust receipts
issued under said Voting Trust are owned by certain of the officers of BMR and
Eaton Vance who are also officers, or officers and Directors of EVC and EV. As
indicated under "Management and Organization", all of the officers of the
Trust (as well as Mr. Hawkes who is also a Trustee) hold positions in the
Eaton Vance organization.
EXPENSES. The Fund and Portfolio are responsible for all expenses not
expressly stated to be payable by another party (such as the investment
adviser under the Investment Advisory Agreement, Eaton Vance under the
management contract and administration agreement or the principal underwriter
under the Distribution Agreement). In the case of expenses incurred by the
Trust, the Fund is responsible for its pro rata share of those expenses. The
only expenses of the Fund allocated to a particular class are those incurred
under the Distribution Plan applicable to that class and those resulting from
the fee paid to the principal underwriter for repurchase transactions.
OTHER SERVICE PROVIDERS
PRINCIPAL UNDERWRITER. Eaton Vance Distributors, Inc. ("EVD"), The Eaton
Vance Building, 255 State Street, Boston, MA 02109, is the Fund's principal
underwriter. The principal underwriter acts as principal in selling shares
under a Distribution Agreement with the Trust. The expenses of printing copies
of prospectuses used to offer shares and other selling literature and of
advertising are borne by the principal underwriter. The fees and expenses of
qualifying and registering and maintaining qualifications and registrations of
the Fund and its shares under federal and state securities laws are borne by
the Fund. The Distribution Agreement as it applies to Class A shares is
renewable annually by the Board of Trustees of the Trust (including a majority
of the noninterested Trustees) may be terminated on six months' notice by
either party and is automatically terminated upon assignment. The Distribution
Agreement as it applies to Class B shares is renewable annually by the Trust's
Board of Trustees (including a majority of the noninterested Trustees who have
no direct or indirect financial interest in the operation of the 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 shares of
the relevant class or on six months' notice by the principal underwriter and
is automatically terminated upon assignment. The principal underwriter
distributes shares on a "best efforts" basis under which it is required to
take and pay for only such shares as may be sold. The principal underwriter
allows investment dealers discounts from the applicable public offering price
which are alike for all investment dealers. See "Sales Charges." EVD is a
wholly-owned subsidiary of EVC. Mr. Hawkes is a Vice President and Director
and Messrs. Dynner and O'Connor are Vice Presidents of EVD.
CUSTODIAN. Investors Bank & Trust Company ("IBT"), 200 Clarendon Street,
Boston, MA 02116, serves as custodian to the Fund and Portfolio. IBT has the
custody of all cash and securities representing the Fund's interest in the
Portfolio, has custody of the Portfolio's assets, maintains the general ledger
of the Portfolio and the Fund and computes the daily net asset value of
interests in the Portfolio and the net asset value of shares of the Fund. In
such capacity it attends to details in connection with the sale, exchange,
substitution, transfer or other dealings with the Portfolio's investments,
receives and disburses all funds and performs various other ministerial duties
upon receipt of proper instructions from the Trust and the Portfolio. IBT also
provides services in connection with the preparation of shareholder reports
and the electronic filing of such reports with the SEC. EVC and its affiliates
and their officers and employees from time to time have transactions with
various banks, including IBT. It is Eaton Vance's opinion that the terms and
conditions of such transactions were not and will not be influenced by
existing or potential custodial or other relationships between the Fund or the
Portfolio and such banks.
INDEPENDENT ACCOUNTANTS. Deloitte & Touche LLP, 200 Berkeley Street, Boston,
MA 02116, are the independent accountants of the Fund and the Portfolio,
providing audit services, tax return preparation, and assistance and
consultation with respect to the preparation of filings with the SEC.
TRANSFER AGENT. PFPC Global Fund Services, P.O. Box 5123, Westborough, MA
01581-5123, serves as transfer and dividend disbursing agent for the Fund.
PURCHASING AND REDEEMING SHARES
CALCULATION OF NET ASSET VALUE. The net asset value of the Portfolio is
computed by IBT (as agent and custodian for the Portfolio) by subtracting the
liabilities of the Portfolio from the value of its total assets. The Fund and
the Portfolio will be closed for business and will not price their respective
shares or interests on the following business holidays: New Year's Day, Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day.
Each investor in the Portfolio, including the Fund, may add to or reduce
its investment in the Portfolio on each day the Exchange is open for trading
("Portfolio Business Day") as of the close of regular trading on the Exchange
(the "Portfolio Valuation Time"). The value of each investor's interest in the
Portfolio will be determined by multiplying the net asset value of the
Portfolio by the percentage, determined on the prior Portfolio Business Day,
which represented that investor's share of the aggregate interests in the
Portfolio on such prior day. Any additions or withdrawals for the current
Portfolio Business Day will then be recorded. Each investor's percentage of
the aggregate interest in the Portfolio will then be recomputed as the
percentage equal to a fraction (i) the numerator of which is the value of such
investor's investment in the Portfolio as of the close of Portfolio Valuation
Time on the prior Portfolio Business Day plus or minus, as the case may be,
that amount of any additions to or withdrawals from the investor's investment
in the Portfolio on the current Portfolio Business Day, and (ii) the
denominator of which is the aggregate net asset value of the Portfolio as of
the Portfolio Valuation Time on the prior Portfolio Business Day plus or
minus, as the case may be, the amount of the net additions to or withdrawals
from the aggregate investment in the Portfolio on the current Portfolio
Business Day by all investors in the Portfolio. The percentage so determined
will then be applied to determine the value of the investor's interest in the
Portfolio for the current Portfolio Business Day.
The Trustees of the Portfolio have established the following procedures
for the fair valuation of the Portfolio's assets under normal market
conditions. Marketable securities listed on foreign or U.S. securities
exchanges or in the NASDAQ National Market System generally are valued at
closing sale prices or, if there were no sales, at the mean between the
closing bid and asked prices therefor on the exchange where such securities
are principally traded or on such National Market System (such prices may not
be used, however, where an active over-the-counter market in an exchange
listed security better reflects current market value). Unlisted or listed
securities for which closing sale prices are not available are valued at the
mean between the latest bid and asked prices. An option is valued at the last
sale price as quoted on the principal exchange or board of trade on which such
option or contract is traded, or in the absence of a sale, the mean between
the last bid and asked price. Futures positions on securities or currencies
are generally valued at closing settlement prices. 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 shares generally are computed as of such times.
Occasionally, events affecting the value of foreign securities may occur
between such times and the close of the Exchange which will not be reflected
in the computation of the Portfolio's net asset value (unless the Portfolio
deems that such events would materially affect its net asset value, in which
case an adjustment would be made and reflected in such computation). Foreign
securities and currency held by the Portfolio will be valued in U.S. dollars;
such values will be computed by the custodian based on foreign currency
exchange rate quotations supplied by Reuters Information Service.
ADDITIONAL INFORMATION ABOUT PURCHASES. Fund shares are continuously offered
through investment dealers which have entered agreements with the principal
underwriter. The public offering price is the net asset value next computed
after receipt of the order, plus, in the case of Class A shares, a variable
percentage (sales charge) depending upon the amount of purchase as indicated
by the sales charge table set forth in the prospectus. The sales charge is
divided between the principal underwriter and the investment dealer. The
sales charge table is applicable to purchases of a Fund alone or in
combination with purchases of certain other funds offered by the principal
underwriter, made at a single time by (i) an individual, or an individual, his
spouse and their children under the age of twenty-one, purchasing shares for
his or their own account, and (ii) a trustee or other fiduciary purchasing
shares for a single trust estate or a single fiduciary account. The table is
also presently applicable to (1) purchases of Class A shares pursuant to a
written Statement of Intention; or (2) purchases of Class A shares pursuant to
the Right of Accumulation and declared as such at the time of purchase. See
"Sales Charges".
In connection with employee benefit or other continuous group purchase
plans, 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.
SUSPENSION OF SALES. The Trust may, in its absolute discretion, suspend,
discontinue or limit the offering of one or more of its classes of shares at
any time. In determining whether any such action should be taken, the Trust's
management intends to consider all relevant factors, including (without
limitation) the size of the Fund or class, the investment climate and market
conditions, the volume of sales and redemptions of shares, and in the case of
Class B shares, the amount of uncovered distribution charges of the principal
underwriter. The Class B Distribution Plan may continue in effect and payments
may be made under the Plan following any such suspension, discontinuance or
limitation of the offering of shares; however, there is no contractual
obligation to continue any Plan for any particular period of time. Suspension
of the offering of shares would not, of course, affect a shareholder's ability
to redeem shares.
ACQUIRING FUND SHARES IN EXCHANGE FOR SECURITIES. IBT, as escrow agent, will
receive securities acceptable to Eaton Vance, as administrator, in exchange
for Fund shares. The minimum value of securities (or securities and cash)
accepted for deposit is $5,000. Securities accepted will be sold on the day of
their receipt or as soon thereafter as possible. The number of Fund shares to
be issued in exchange for securities will be the aggregate proceeds from the
sale of such securities, divided by the applicable public offering price of
Class A shares or net asset value of Class B shares on the day such proceeds
are received. Eaton Vance will use reasonable efforts to obtain the then
current market price for such securities but does not guarantee the best
available price. Eaton Vance will absorb any transaction costs, such as
commissions, on the sale of securities. Securities determined to be acceptable
should be transferred via book entry or physically delivered, in proper form
for transfer, through an investment dealer, together with a completed and
signed Letter of Transmittal in approved form (available from investment
dealers). Investors who are contemplating an exchange of securities for
shares, 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
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.
ADDITIONAL INFORMATION ABOUT REDEMPTIONS. The right to redeem shares of the
Fund can be suspended and the payment of the redemption price deferred when
the Exchange is closed (other than for customary weekend and holiday
closings), during periods when trading on the Exchange is restricted as
determined by the SEC, or during any emergency as determined by the SEC which
makes it impracticable for the Portfolio to dispose of its securities or value
its assets, or during any other period permitted by order of the SEC for the
protection of investors.
While normally payments will be made 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 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.
Due to the high cost of maintaining small accounts, the Trust 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
Trust if the cause of the low account balance was a reduction in the net asset
value of shares. No CDSC will be imposed with respect to such involuntary
redemptions.
SYSTEMATIC WITHDRAWAL PLAN. The transfer agent will send to the shareholder
regular monthly or quarterly payments of any permitted amount designated by
the shareholder based upon the value of the shares held. The checks will be
drawn from share redemptions and hence may require the recognition of taxable
gain or loss. Income dividends and capital gains distributions in connection
with withdrawal plan 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. The shareholder, the transfer agent
or the principal underwriter will be able to terminate the withdrawal plan at
any time without penalty.
SALES CHARGES
DEALER COMMISSIONS. The principal underwriter may, from time to time, at its
own expense, provide additional incentives to investment dealers 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 investment dealers 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 investment dealers. The principal underwriter
may allow, upon notice to all investment dealers with whom it has agreements,
discounts up to the full sales charge during the periods specified in the
notice. During periods when the discount includes the full sales charge, such
investment dealers may be deemed to be underwriters as that term is defined in
the Securities Act of 1933.
SALES CHARGE WAIVERS. Class A shares may be sold at net asset value to
current and retired Directors and Trustees of Eaton Vance funds, including the
Portfolio; to clients and current and retired officers and employees of Eaton
Vance, its affiliates and other investment advisers of Eaton Vance sponsored
funds; to officers and employees of IBT and the transfer agent; to persons
associated with law firms, consulting firms and others providing services to
Eaton Vance and the Eaton Vance funds; and to such persons' spouses, parents,
siblings and children and their beneficial accounts. Such shares may also be
issued at net asset value (1) in connection with the merger of an investment
company (or series or class thereof) with the Fund (or class thereof), (2) to
investors making an investment as part of a fixed fee program whereby an
entity unaffiliated with the investment adviser provides multiple investment
services, such as management, brokerage and custody, and (3) to investment
advisors, financial planners or other intermediaries who place trades for
their own accounts or the accounts of their clients and who charge a
management, consulting or other fee for their services; clients of such
investment advisors, financial planners or other intermediaries who place
trades for their own accounts if the accounts are linked to the master account
of such investment advisor, financial planner or other intermediary on the
books and records of the broker or agent. Class A shares may also be sold to
registered representatives and employees of investment dealers and bank
employees who refer customers to registered representatives of investment
dealers. Class A shares may be sold at net asset value to any investment
advisory, agency, custodial or trust account managed or administered by Eaton
Vance or by any parent, subsidiary or other affiliate of Eaton Vance. Class A
shares are offered at net asset value to the foregoing persons and in the
foregoing situations because either (i) there is no sales effort involved in
the sale of shares or (ii) the investor is paying a fee (other than the sales
charge) to the investment dealer involved in the sale.
The CDSC applicable to Class B shares will be waived in connection with
minimum required distributions from tax-sheltered retirement plans by applying
the rate required to be withdrawn under the applicable rules and regulations
of the Internal Revenue Service to the balance of Class B shares in your
account.
STATEMENT OF INTENTION. If it is anticipated that $50,000 or more of Class A
shares and shares of other funds exchangeable for Class A shares of another
Eaton Vance fund will be purchased within a 13-month period, a Statement of
Intention should be signed so that shares may be obtained at the same reduced
sales charge as though the total quantity were invested in one lump sum.
Shares held under Right of Accumulation (see below) as of the date of the
Statement will be included toward the completion of the Statement. The
Statement authorizes the transfer agent to hold in escrow sufficient shares
(5% of the dollar amount specified in the Statement) which can be redeemed to
make up any difference in sales charge on the amount intended to be invested
and the amount actually invested. Execution of a Statement does not obligate
the shareholder to purchase or the Fund to sell the full amount indicated in
the Statement, and should the amount actually purchased during the 13-month
period be more or less than that indicated on the Statement, price adjustments
will be made. Any investor considering signing a Statement of Intention should
read it carefully.
RIGHT OF ACCUMULATION. The applicable sales charge level for the purchase of
Class A shares is calculated by taking the dollar amount of the current
purchase and adding it to the value (calculated at the maximum current
offering price) of the Class A shares the shareholder owns in his or her
account(s) in the Fund, and shares of other funds exchangeable for Class A
shares. The sales charge on the shares being purchased will then be at the
rate applicable to the aggregate. Shares purchased (i) by an individual, his
or her spouse and their children under the age of twenty-one, and (ii) by a
trustee, guardian or other fiduciary of a single trust estate or a single
fiduciary account, will be combined for the purpose of determining whether a
purchase will qualify for the Right of Accumulation and if qualifying, the
applicable sales charge level. For any such discount to be made available, at
the time of purchase a purchaser or his or her investment dealer must provide
the principal underwriter (in the case of a purchase made through an
investment dealer) or the transfer agent (in the case of an investment made by
mail) with sufficient information to permit verification that the purchase
order qualifies for the accumulation privilege. Confirmation of the order is
subject to such verification. The Right of Accumulation privilege may be
amended or terminated at any time as to purchases occurring thereafter.
TAX-SHELTERED RETIREMENT PLANS. Class A shares are available for purchase in
connection with certain tax-sheltered retirement plans. 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. Participant accounting services
(including trust fund reconciliation services) will be offered only through
third party recordkeepers and not by the principal underwriter. Under all
plans, dividends and distributions will be automatically reinvested in
additional shares.
DISTRIBUTION PLANS. The Trust has in effect a compensation-type Distribution
Plan (the "Class A Plan") for the Fund's Class A shares pursuant to Rule 12b-1
under the 1940 Act. The Class A Plan provides for the payment of a monthly
distribution fee to the principal underwriter in an amount equal to the
aggregate of (a) .50% of that portion of Class A average daily net assets for
any fiscal year which is attributable to its shares which have remained
outstanding for less than one year and (b) .25% of that portion of Class A
average daily net assets for any fiscal year which is attributable to its
shares which have remained outstanding for more than one year. Aggregate
payments to the principal underwriter under the Class A Plan are limited to
those permissible, pursuant to a rule of the National Association of
Securities Dealers, Inc.
The Class A Plan also provides that the Class will pay a quarterly service
fee to the principal underwriter in an amount equal on an annual basis to .25%
of that portion of its average daily net assets for any fiscal year which is
attributable to Class A shares which have remained outstanding for more than
one year; from such service fee the principal underwriter expects to pay a
quarterly service fee to investment dealers, as compensation for providing
personal services and/or the maintenance of shareholder accounts, with respect
to shares sold by such dealers which have remained outstanding for more than
one year. Service fee payments to investment dealers will be in addition to
sales charges on Class A shares which are reallowed to investment dealers. If
the Class A Plan is terminated or not continued in effect, the Class has no
obligation to reimburse the principal underwriter for amounts expended by the
principal underwriter in distributing Class A shares. For the distribution
fees paid by Class A shares, see Appendix A.
The Trust also has in effect a compensation-type Distribution Plan (the
"Class B Plan") pursuant to Rule 12b-1 under the 1940 Act for the Fund's Class
B shares. The Class B Plan is designed to permit an investor to purchase
shares through an investment dealer without incurring an initial sales charge
and at the same time permit the principal underwriter to compensate investment
dealers in connection therewith. The Class B Plan provides that the Fund will
pay sales commissions and distribution fees to the principal underwriter only
after and as a result of the sale of shares. On each sale of 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. To pay these amounts, Class B
pays the principal underwriter a fee, accrued daily and paid monthly, at an
annual rate not exceeding .75% of its average daily net assets to finance the
distribution of its shares. Such fees compensate the principal underwriter for
sales commissions paid by it to investment dealers on the sale of shares and
for interest expenses. For sales of Class B shares, the principal underwriter
uses its own funds to pay sales commissions (except on exchange transactions
and reinvestments) to investment dealers at the time of sale equal to 4% of
the purchase price of the Class B shares sold by such dealers. CDSCs paid to
the principal underwriter will be used to reduce amounts owed to it. The Class
B Plan provides that the Fund 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. CDSCs and accrued amounts
will be paid by the Trust to the principal underwriter whenever there exist
uncovered distribution charges. Because payments to the principal underwriter
under the Class B Plan is limited, uncovered distribution charges (sales
commissions paid by the principal underwriter plus interest, less the above
fees and CDSCs received by it) may exist indefinitely. For the sales
commissions and CDSCs paid on (and uncovered distribution charges of) Class B
shares, see Appendix B.
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 Class B Plan by the Trust to the principal underwriter and
CDSCs theretofore paid or payable to the principal underwriter will be
subtracted from such distribution charges; if the result of such subtraction
is positive, a distribution fee (computed at 1% over the prime rate then
reported in The Wall Street Journal) will be computed on such amount and added
thereto, with the resulting sum constituting the amount of outstanding
uncovered distribution charges with respect to such day. The amount of
outstanding uncovered distribution charges of the principal underwriter
calculated on any day does not constitute a liability recorded on the
financial statements of the Fund.
The amount of uncovered distribution charges of the principal underwriter
at any particular time depends upon various changing factors, including the
level and timing of sales of shares, the nature of such sales (i.e., whether
they result from exchange transactions, reinvestments or from cash sales
through investment dealers), the level and timing of redemptions of shares
upon which a CDSC will be imposed, the level and timing of redemptions of
shares upon which no CDSC will be imposed (including redemptions of shares
pursuant to the exchange privilege which result in a reduction of uncovered
distribution charges), changes in the level of the net assets of the Class,
and changes in the interest rate used in the calculation of the distribution
fee under the Class B Plan.
Distribution of Class B shares of the Fund by the principal underwriter
will also be encouraged by the payment by the investment adviser to the
principal underwriter of an amount equivalent to .15% of Class B annual
average daily net assets. The aggregate amounts of such payments are a
deduction in calculating the outstanding uncovered distribution charges of the
principal underwriter under the Class B Plan and, therefore, will benefit
shareholders when such charges exist. Such payments will be made in
consideration of the principal underwriter's distribution efforts.
The Class B Plan also authorizes the payment of service fees to the
principal underwriter, investment dealers and other persons in amounts not
exceeding .25% of its average daily net assets for personal services, and/or
the maintenance of shareholder accounts. This fee is paid quarterly in arrears
based on the value of Class B shares sold by such persons and remaining
outstanding for at least twelve months. For the service fees paid by Class B
shares, see Appendix B.
Currently, payments of sales commissions and distribution fees and of
service fees may equal 1% of a Class's average daily net assets per annum. The
Trust believes that the combined rate of all these payments may be higher than
the rate of payments made under distribution plans adopted by other investment
companies pursuant to Rule 12b-1. Although the principal underwriter will use
its own funds (which may be borrowed from banks) to pay sales commissions at
the time of sale, it is anticipated that the Eaton Vance organization will
profit by reason of the operation of the Class B Plan through an increase in
the Fund's assets (thereby increasing the management fee payable to Eaton
Vance by the Fund and the administration fees payable to Eaton Vance by the
Portfolio) resulting from sale of shares and through the amounts paid to the
principal underwriter, including CDSCs, pursuant to the Plans. The Eaton Vance
organization may be considered to have realized a profit under the Class B
Plan if at any point in time the aggregate amounts theretofore received by the
principal underwriter pursuant to the Class B Plan and from CDSCs have
exceeded the total expenses theretofore incurred by such organization in
distributing shares. 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 Trust.
The Plans continue in effect from year to year so long as such continuance
is approved at least annually by the vote of both a majority of (i) the
noninterested Trustees of the Trust who have no direct or indirect financial
interest in the operation of the Plan or any agreements related to the Plan
(the "Plan Trustees") and (ii) all of the Trustees then in office. Each Plan
may be terminated at any time by vote of a majority of the Plan Trustees or by
a vote of a majority of the outstanding voting securities of the applicable
Class. Each Plan requires quarterly Trustee review of a written report of the
amount expended under the Plan and the purposes for which such expenditures
were made. The Plans may not be amended to increase materially the payments
described therein without approval of the shareholders of the affected Class
and the Trustees. So long as a Plan is in effect, the selection and nomination
of the noninterested Trustees shall be committed to the discretion of such
Trustees. The Class A and Class B Plans were initially approved by the
Trustees, including the Plan Trustees, on June 23, 1997.
The Trustees of the Trust believe that each Plan will be a significant
factor in the expected growth of each Fund's assets, and will result in
increased investment flexibility and advantages which have benefitted and will
continue to benefit the Fund and its shareholders. Payments for sales
commissions and distribution fees made to the principal underwriter under the
Class B Plan will compensate the principal underwriter for its services and
expenses in distributing that class of shares. Service fee payments made to
the principal underwriter and investment dealers provide incentives to provide
continuing personal services to investors and the maintenance of shareholder
accounts. By providing incentives to the principal underwriter and investment
dealers, each 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 each Plan will benefit the Fund
and its shareholders.
PERFORMANCE
Average annual total return is determined separately for each Class of the
Fund by multiplying a hypothetical initial purchase order of $1,000 by the
average annual compound rate of return (including capital appreciation/
depreciation, and distributions paid and reinvested) for the stated period and
annualizing the results. The calculation assumes (i) that all distributions
are reinvested at net asset value on the reinvestment dates during the period,
(ii) the deduction of the maximum sales charge from the initial $1,000
purchase order for Class A shares, (iii) a complete redemption of the
investment and (iv) the deduction of any CDSC at the end of the period. The
Fund may also publish total return figures for each class based on reduced
sales charges or at net asset value. These returns would be lower if the full
sales charge was imposed. For information concerning the total return of the
Classes of the Fund, see Appendix A and Appendix B.
The Fund's performance may be compared in publications to the performance
of various indices and investments for which reliable data is available, and
to averages, performance rankings and/or ratings, or other information
prepared by recognized mutual fund statistical services. The Fund's
performance may differ from that of other investors in the Portfolio,
including other investment companies.
Total return may be compared to relevant indices, such as the Consumer
Price Index and various domestic and foreign securities indices. The Fund's
total return and comparisons with these indices may be used in advertisements
and in information furnished to present or prospective shareholders. In
addition, evaluations of the Fund's performance or rankings of mutual funds
(which include the Fund) made by independent sources may be used in
advertisements and in information furnished to present or prospective
shareholders. Information, charts and illustrations showing the effect of
compounding interest or relating to inflation and taxes (including their
effects on the dollar and the return on stocks and other investment vehicles)
may also be included in advertisements and materials furnished to present and
prospective investors.
Information used in advertisements and in materials furnished to present
or prospective shareholders may include statistics, data and performance
studies prepared by independent organizations or included in various
publications 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, portfolio turnover
and holdings of the Portfolio may be included in advertisements and other
material furnished to present and prospective shareholders.
Information used in advertisements and in material provided to present and
prospective shareholders may include descriptions of Lloyd George, Eaton Vance
and other Fund and Portfolio service providers, their investment styles, other
investment products, personnel and Fund distribution channels.
Information used in advertisements and materials furnished to present and
prospective investors may include statements or illustrations relating to the
appropriateness of certain types of securities and/or mutual funds to meet
specific financial goals. Such information may address:
-- cost associated with aging parents;
-- funding a college education (including its actual and estimated cost);
-- health care expenses (including actual and projected expenses);
-- long-term disabilities (including the availability of, and coverage
provided by, disability insurance); and
-- retirement (including the availability of social security benefits, the
tax treatment of such benefits and statistics and other information
relating to maintaining a particular standard of living and outliving
existing assets).
Such information may also address different methods for saving money and
the results of such methods, as well as the benefits of investing in equity
securities. Such information may describe: the potential for growth; the
performance of equities as compared to other investment vehicles; and the
value of investing as early as possible and regularly, as well as staying
invested. The benefits of investing in equity securities by means of a mutual
fund may also be included (such benefits may include diversification,
professional management and the variety of equity mutual fund products).
Information in advertisements and materials furnished to present and
prospective investors may include profiles of different types of investors
(i.e., investors with different goals and assets) and different investment
strategies for meeting specific financial goals. Such information may provide
hypothetical illustrations which include: results of various investment
strategies; performance of an investment in the Fund over various time
periods; and results of diversifying assets among several investments with
varying performance. Information in advertisements and materials furnished to
present and prospective investors may also include quotations (including
editorial comments) and statistics concerning investing in securities, as well
as investing in particular types of securities and the performance of such
securities.
The Trust (or Principal Underwriter) 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 Trust (or Principal Underwriter) 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
Each series of the Trust is treated as a separate entity for accounting
and tax purposes. The Fund has elected to be treated, and intends to qualify
each year as a regulated investment company ("RIC") under the Code.
Accordingly, the Fund intends to satisfy certain requirements relating to
sources of its income and diversification of its assets and to distribute
substantially all of its net income and net short-term and long-term capital
gains in accordance with the timing requirements imposed by the Code, so as to
maintain its RIC status and to avoid paying any federal income or excise tax.
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 also satisfy these requirements. The Portfolio will
allocate at least annually among its investors, including the Fund, the
Portfolio's net investment income, net realized capital gains, and any other
items of income, gain, loss, deduction or credit. The Portfolio will make
allocations to the Fund in a manner intended to comply 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 incurring a federal excise tax obligation, the Code
requires that the Fund distribute (or be deemed to have distributed) by
December 31 of each calendar year (i) at least 98% of its ordinary income for
such year, (ii) at least 98% of its capital gain net income (which is 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
(iii) 100% of any income and capital gains from the prior year (as previously
computed) that was not paid out during such year and on which the Fund paid no
federal income tax. Under current law, provided that the Fund qualifies as a RIC
and the Portfolio is treated as a partnership for Massachusetts and federal tax
purposes, neither the Fund nor the Portfolio should be liable for any income,
corporate excise or franchise tax in the Commonwealth of Massachusetts.
Certain 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 foreign currency related options, futures or forward
contracts or foreign currency may be treated as ordinary income and losses
under special tax rules. Certain options, futures or forward contracts of the
Portfolio may be required to be marked to market (i.e., treated as if closed
out) on the last day of each taxable year, and any gain or loss realized with
respect to these contracts may be required to be treated as 60% long-term and
40% short-term gain or loss or, in the case of certain contracts relating to
foreign currency, as ordinary income or loss. Positions of the Portfolio in
securities and offsetting options, futures or forward contracts may be treated
as "straddles", which are subject to tax rules that may cause deferral of
Portfolio losses, adjustments in the holding periods of Portfolio securities,
and other changes in the short-term or long-term characterization of capital
gains and losses, the effect of which may be to change 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 ability to qualify 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 in some cases. 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
("IRS") pursuant to which shareholders of the Fund will be required to (i)
include in ordinary gross income (in addition to dividends and distributions
actually received) their pro rata shares of qualified foreign income taxes
paid by the Portfolio and allocated to the Fund even though not actually
received by them, and (ii) treat such respective pro rata portions as foreign
income taxes paid by them. Shareholders may then deduct such pro rata portions
of qualified foreign income taxes in computing their taxable incomes, or,
alternatively, use them as foreign tax credits, subject to applicable
limitations, against their U.S. federal income taxes. Shareholders who do not
itemize deductions for federal income tax purposes will not, however, be able
to deduct their pro rata portion of foreign taxes deemed paid by the Fund,
although such shareholders will be required to include their shares of such
taxes in gross income. Shareholders who claim a foreign tax credit for such
foreign taxes may be required to treat a portion of dividends received from
the Fund as a separate category of income for purposes of computing the
limitations on the foreign tax credit. Tax-exempt shareholders will ordinarily
not benefit from this election. Each year that the Fund files the election
described above, its shareholders will be notified of the amount of (i) each
shareholder's pro rata share of foreign income taxes paid by the Portfolio and
allocated to the Fund and (ii) the portion of Fund dividends which represents
income from each foreign country. If the Fund does not make this election, it
may deduct its allocated share of such taxes in computing the income it is
required to distribute.
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 gain over
net short-term capital loss earned by the Portfolio and allocated to the Fund,
taking into account any capital loss carryforwards that may be available, 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 of the Fund
with a tax holding period of 6 months or less will be treated as a long-term
capital loss to the extent of any distribution treated as long-term capital
gains with respect to such shares. All or a portion of a loss realized upon a
redemption or other disposition of Fund shares may be disallowed under "wash
sale" rules if other shares of the Fund are purchased (whether through
reinvestment of dividends or otherwise) within 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.
Sales charges paid upon a purchase of shares of the Fund cannot be taken
into account for purposes of determining gain or loss on a redemption or
exchange of the shares before the 91st day after their purchase to the extent
a sales charge is reduced or eliminated in a subsequent acquisition of shares
of the Fund or of another fund pursuant to the Fund's reinvestment or exchange
privilege. Any disregarded amounts will result in an adjustment to the
shareholder's tax basis in some or all of any other shares acquired.
Amounts paid by the Fund to individuals and certain other shareholders who
have not provided the Fund with their correct taxpayer identification number
("TIN") and certain certifications required by the IRS, as well as
shareholders with respect to whom the Fund has received certain information
from the IRS or a broker, may be subject to "backup" withholding of federal
income tax arising from the Fund's dividends and other distributions as well
as the proceeds of redemption transactions (including repurchases and
exchanges), at a rate of 31%. An individual's TIN is generally his or her
social security number.
The foregoing discussion does not address the special tax rules applicable
to certain classes of investors, such as IRAs and other retirement plans, tax-
exempt entities, insurance companies and financial institutions. Shareholders
should consult their own tax advisers with respect to these or other special
tax rules that may apply in their particular situations, as well as the state,
local, and, where applicable, foreign tax consequences of investing in the
Fund.
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 investment adviser.
The investment adviser places the portfolio security transactions of the
Portfolio and of certain other accounts managed by the investment adviser for
execution with many firms. The investment 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 investment
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 or spread, 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
investment 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 investment adviser's other clients in part for providing
brokerage and research services to the investment 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 investment adviser determines in good faith that such
compensation was reasonable in relation to the value of the brokerage and
research services provided. This determination may be made on the basis of
either that particular transaction or on the basis of the overall
responsibilities which the investment adviser and its affiliates have for
accounts over which they exercise investment discretion. In making any such
determination, the investment adviser will not attempt to place a specific
dollar value on the brokerage and research services provided or to determine
what portion of the commission should be related to such services. Brokerage
and research services may include advice as to the value of securities, the
advisability of investing in, purchasing, or selling securities, and the
availability of securities or purchasers or sellers of securities; furnishing
analyses and reports concerning issuers, industries, securities, economic
factors and trends, portfolio strategy and the performance of accounts; and
effecting securities transactions and performing functions incidental thereto
(such as clearance and settlement); and the "Research Services" referred to in
the next paragraph.
It is a common practice in the investment advisory industry for the
advisers of investment companies, institutions and other investors to receive
research, statistical and quotation services, data, information and other
services, products and materials which assist such advisers in the performance
of their investment responsibilities ("Research Services") from broker-dealers
which execute portfolio transactions for the clients of such advisers and from
third parties with which such broker-dealers have arrangements. Consistent
with this practice, the investment adviser may receive Research Services from
broker-dealer firms with which the investment 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 investment 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 investment 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
investment adviser receives such Research Services. The investment 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
investment adviser believes are useful or of value to it in rendering
investment advisory services to its clients.
Subject to the requirement that the investment 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 investment 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 NASD which rule provides that no firm which is a member of
the NASD shall favor or disfavor the distribution of shares of any particular
investment company or group of investment companies on the basis of brokerage
commissions received or expected by such firm from any source.
Securities considered as investments for the Portfolio may also be
appropriate for other investment accounts managed by the investment adviser or
its affiliates. Whenever decisions are made to buy or sell securities by the
Portfolio and one or more of such other accounts simultaneously, the
investment adviser will allocate the security transactions (including "hot"
issues) in a manner which it believes to be equitable under the circumstances.
As a result of such allocations, there may be instances where the Portfolio
will not participate in a transaction that is allocated among other accounts.
If an aggregated order cannot be filled completely, allocations will generally
be made on a pro rata basis. An order may not be allocated on a pro rata basis
where, for example: (i) consideration is given to portfolio managers who have
been instrumental in developing or negotiating a particular investment; (ii)
consideration is given to an account with specialized investment policies that
coincide with the particulars of a specific investment; (iii) pro rata
allocation would result in odd-lot or de minimis amounts being allocated to a
portfolio or other client; or (iv) where the investment adviser reasonably
determines that departure from a pro rata allocation is advisable. While these
aggregation and allocation policies could have a detrimental effect on the
price or amount of the securities available to the Portfolio from time to
time, it is the opinion of the Trustees of the Trust and the Portfolio that
the benefits from the investment adviser's organization outweigh any
disadvantage that may arise from exposure to simultaneous transactions.
For the fiscal year ended August 31, 1999, the Portfolio paid brokerage
commissions of $211,592 with respect to portfolio transactions. Of this
amount, approximately $91,768 was paid in respect of portfolio security
transactions aggregating approximately $35,909,714 to firms which provided
some Research Services to the Adviser's organization (although many such firms
may have been selected in any particular transaction primarily because of
their execution capabilities).
FINANCIAL STATEMENTS
The audited financial statements of and the independent auditors' report
for the Fund and the Portfolio appear in the Fund's most recent annual report
to shareholders and are incorporated by reference into this SAI. A copy of the
Fund's most recent annual report accompanies this SAI. Consistent with
applicable law, duplicate mailings of shareholder reports and certain other
Fund information to shareholders residing at the same address may be
eliminated.
Registrant incorporates by reference the audited financial information for
the Fund and the Portfolio for the fiscal year ended August 31, 1999, as
previously filed electronically with the Commission (Accession No.
0000928816-99-000307).
<PAGE>
APPENDIX A
CLASS A FEES, PERFORMANCE AND OWNERSHIP
DISTRIBUTION AND SERVICE FEES
The Fund accrued approximately $255 to or payable to the principal
underwriter for the year ended August 31, 1999, representing approximately
0.50% of the average daily net assets for Class A, all of which was waived.
During the fiscal year ended August 31, 1999, Class A made no service fee
payments under the Plan.
PRINCIPAL UNDERWRITER
No fees paid to date.
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return
on a hypothetical investment of $1,000 in a predecessor fund for the periods
shown in the table. The "Value of Initial Investment" reflects the deduction
of the maximum sales charge of 5.75%. Past performance is no guarantee of
future results. Investment return and principal value will fluctuate; shares,
when redeemed, may be worth more or less than their original cost.
<TABLE>
VALUE OF $1,000 INVESTMENT
<CAPTION>
TOTAL RETURN TOTAL RETURN
EXCLUDING MAXIMUM INCLUDING MAXIMUM
VALUE OF VALUE OF SALES CHARGE SALES CHARGE
INVESTMENT INVESTMENT INITIAL INVESTMENT ------------------------------ ----------------------------
PERIOD DATE INVESTMENT ON 8/31/99 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
------ ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of the Fund* 6/30/92 $942.56 $3,040.31 222.56% 17.74% 204.03% 16.78%
5 Years Ended
8/31/99 8/31/94 $942.67 $1,510.01 60.18% 9.88% 51.00% 8.59%
1 Year Ended
8/31/99 8/31/98 $942.98 $1,876.77 99.03% 99.03% 87.68% 87.68%
*Predecessor fund operations began on June 30, 1992.
</TABLE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of December 1, 1999, the Trustees and officers of the Trust, as a
group, owned in the aggregate less than 1% of the outstanding Class A shares
of the Fund. As of December 1, 1999, Chrysalis Partners LP, Charlottesville,
VA was the record owner of approximately 99.2% of the outstanding Class A
shares. Beneficial owners of 25% or more of Class A shares are presumed to be
in control of such Class for purposes of voting on certain matters submitted
to shareholders. To the knowledge of the Trust, no other person owned of
record or beneficially 5% or more of the Fund's outstanding Class A shares as
of such date.
<PAGE>
APPENDIX B
CLASS B FEES, PERFORMANCE AND OWNERSHIP
DISTRIBUTION AND SERVICE FEES
During the fiscal year ended August 31, 1999, the Fund did not make any
distribution payments to the Principal Underwriter under the Distribution
Plan. During the fiscal year ended August 31, 1999, Class B made no service
fee payments under the Plan.
PRINCIPAL UNDERWRITER
No fees paid to date.
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return
on a hypothetical investment of $1,000 in a predecessor fund for the periods
shown in the table. This total return has not been adjusted to reflect sales
charges and other expenses (such as distribution and/or service fees). If such
adjustments were made, the performance would be lower. Past performance is no
guarantee of future results. Investment return and principal vaue will
fluctuate; shares, when redeemed, may be worth more or less than their
original cost.
<TABLE>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF
INVESTMENT INVESTMENT
BEFORE AFTER TOTAL RETURN BEFORE TOTAL RETURN AFTER
DEDUCTING THE DEDUCTING THE DEDUCTING THE CDSC DEDUCTING THE CDSC
INVESTMENT INVESTMENT AMOUNT OF CDSC CDSC ------------------------ ------------------------
PERIOD DATE INVESTMENT ON 8/31/99 ON 8/31/99 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
---------- ---------- ---------- ------------- ------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of the
Fund* 6/30/92 $1,000 $3,096.00 $3,096.00 209.60% 17.07% 209.60% 17.07%
5 Years
Ended
8/31/99 8/31/94 $1,000 $1,537.47 $1,517.47 53.75% 8.98% 51.75% 8.70%
1 Year Ended
8/31/99 8/31/98 $1,000 $1,910.29 $1,860.29 91.03% 91.03% 86.03% 86.03%
*Predecessor Fund commenced operations June 30, 1992.
</TABLE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As at December 1, 1999, the Trustees and officers of the Trust, as a
group, owned in the aggregate less than 1% of the outstanding Class B shares
of the Fund. As of December 1, 1999, Merrill Lynch, Pierce, Fenner & Smith,
Inc., Jacksonville, FL was the record owner of approximately 24% of the
outstanding Class B shares, which it held on behalf of its customers who are
the beneficial owners of such shares, and as to which they had voting power
under certain limited circumstances. In addition, as of the same date, the
following shareholders owned of record the percentage of Class B shares
indicated after their name: First Clearing Corporation A/C 2833-5852 Mildred
H. Dolan Trust, Long Branch, NJ (62.5%) and Raymond James & Associates Inc.
for Elite Acct #50035115, Saint Petersburg, FL (13.4%). Beneficial owners of
25% or more of Class B shares are presumed to be in control of such class for
purposes of voting on certain matters submitted to shareholders. To the
knowledge of the Trust, no other person owned of record or beneficially 5% or
more of the Fund's outstanding Class B shares as of such date.
<PAGE>
APPENDIX C
ASIAN REGION COUNTRIES
The information set forth in this Appendix has been extracted from various
government and private publications. The Trust's Board of Trustees makes no
representation as to the accuracy of the information, nor has the Board of
Trustees attempted to verify it. Moreover, the information is as of the date
of this SAI (or such other date as set forth below). This information is
expected to change substantially during the period in which this SAI is in
use. No representation is made that any correlation will exist between the
economies or stock markets of Asian Region countries and the Fund's
performance.
AUSTRALIA
The Commonwealth of Australia comprises an area of about 7,692,030 square
kilometers -- almost the same as that of the United States, excluding Alaska,
and about 50% greater than Europe (excluding the former USSR) and 32 times
greater than the UK. Australia's population of 18.5m is almost 5 times the size
of the population at the time of Federation.
There are 3 levels of government in Australia: Federal, State and local.
The 6 Australia colonies federated in 1901 to form the Commonwealth of
Australia.
Australia's economic development has been one of contrast and change. In
the early years of settlement (1788-1820), there was little scope for
industrial or commercial enterprises. Between 1820 and 1850, the pastoral
industry led Australia's economic development, and by 1850 it was supplying
well over 50% of the British market for imported wool. Gold surpassed wool as
Australia's major export earner throughout the 1850's and 1860's, resulting in
a rapid expansion of banking and commerce. From 1901 to 1930, manufacturing
expanded, with impetus from Federation and the elimination of customs barriers
between States, and from the First World War.
After the Second World War, all sectors of the economy experienced growth.
The onset of oil price rises in 1973-74 led the world into recession, and
"stagflation" affected all sectors. The modest employment growth between 1968
and 1979 was dominated by the service sector. The 1980's and 1990's have seen
a decline in the relative contribution to GDP from goods-producing industries
and a rise in the contribution from services industries.
The rural sector now accounts for approximately 4% of GDP, and about 5% of
employment. The mining sector also accounts for around 4% of GDP, but only 1%
of employment. Wholesale trade and manufacturing remain the dominant
contributors to GDP at 10.2% and 13.6% respectively. Exports of mining
products accounts for about 22% of total merchandise exports, with black coal
remaining the single largest export item. The tertiary sector accounts for
approximately 72% of GDP, approximately 73% of employment and around 23% of
exports by value.
As of 14 December 1999, the market capitalization of Australian equities
was in U.S.$373billion.
PEOPLE'S REPUBLIC OF CHINA
China is the world's third largest country occupying a region of 9.6
million square kilometers.China is the world's most populous nation,
consisting of more than one-fifth of the human race. The estimated population
is approximately 1.2 billion.
In 1949, the Communist Party established the People's Republic of China.
The Communist government engaged in numerous campaigns to industrialize the
country with various programs. The failure of the Communist Party to achieve
substantive economic growth eventually led to the ascendancy of reformers
headed by Deng Xiaoping. In the late 1970's, the Chinese government, which had
remained isolated from the world, opened its doors by encouraging foreign
investment and expertise inside its borders.
In 1989, a growing dissatisfaction with the corruption in the Communist
government led to anti-government student protests culminating in what is
known as the Tiananmen Square incident. The government's use of the military
to suppress a peaceful demonstration resulted in world-wide criticism.
However, recent developments in China have been encouraging. The death of Deng
Xiaoping did not trigger any social unrest and restructuring of state-owned
enterprises had been the main theme of the 15th Party Congress held in 1997.
Leadership under Jiang Zemin remains committed to the implementation of
economic reforms. Investment in China still entails significant political risk
of nationalization or expropriation. China's imminent admission to the WTO
will accelerate the reform process and reduce investment risks.
Since 1992, China has achieved annual growth in real gross domestic
product (GDP) averaging in excess of 10%. The economy in China consists of
three sectors: state, cooperative, and private. The state sector, though
decreasing in weighting, continues to constitute the bulk of the economy. In
recent years, however, the economy has been significantly restructured through
the abolition of the commune system in rural areas and the relaxing of
government authority in the day to day operations in both agricultural and
industrial enterprises. As the government assumes more of a regulatory and
supervisory role and less of a direct management role, market forces have been
allowed to operate. This has resulted in increased productivity and rising
incomes.
In 1990, industry accounted for 45.8% of China's National Income. In the
first three decades under Communist rule, China placed great emphasis on heavy
industry. Since the reform program began in 1978, a much greater emphasis has
been placed on light industry. Considerable industrial growth has come from
industrial enterprises in rural townships which are engaged in the processing
and assembly of consumer goods. These operations are concentrated in southern
China, where a major light industrial base has developed. Industrial output
has grown rapidly and is increasingly important to the Chinese economy.
China's current industrial policy also places emphasis on high-technology
industries supported by foreign technology, such as micro-electronics and
telecommunications. However, many enterprises have a huge staff burden which
must be relieved to increase the competitiveness of the enterprises. To avoid
social unrest caused by the increase in unemployment rate, there is so far no
easy solution.
Inflation, which was a problem in early 1990s, has been under control.
Inflation rate rocketed to 24% in 1994 and then dropped to 8.3% in 1996 and
2.8% by 1997. The control achieved over inflation is the result of austerity
measures implemented by the government during 1994, 1995 and early 1996. The
impact of these austerity measures was exacerbated by the Asian financial
crisis of 1997 and 1998, and the inherent structural imbalances in the Chinese
economy, caused China to enter a sustained period of deflation. In response,
the Chinese government has implemented a series of fiscal and monetary
stimulas packages aimed at boosting domestic demand. China's deflation appears
to be easing towards the end of 1999.
Textiles and garments together form the single largest export category,
representing about one quarter of total export values. China's trade balance
has fluctuated over the last five years. In 1999, China's foreign trade is
expected to yield a surplus of U.S. $30 billion. Hong Kong is one of the
leading destination for Chinese exports, accounting for over 20% of total
export volume. Hong Kong is also a major re-export center for Chinese goods.
Other large export markets for China include Japan, the United States, and
Germany. Over the past few years, China's imports have continued to expand and
diversify. Japan, the United States and Korea are China's top three suppliers.
Other major suppliers include Hong Kong and Germany.
China has traditionally adopted a policy of self-reliance when financing
development. The country has remained a conservative borrower but, since the
early 1980s, has been making greater use of foreign capital and financing,
including government-assisted facilities and project and trade financing.
Total foreign debt as at first half of 1999 was estimated at U.S. $148.8
billion while foreign exchange reserve was at U.S. $152.8 billion. The primary
sources of foreign capital for China include: International Monetary Fund and
World Bank loans and credits; government low interest loans and credits; and
commercial loans and credits.
There is centralized control and unified management of foreign exchange in
China. The renminbi has been devalued progressively in the past decade,
depreciating by almost 70% against the U.S. dollar between 1981 and 1990.
However, it has been stabilized at the 1994 level for the past 5 years.
There currently are two officially recognized exchanges in China, the
Shanghai Securities Exchange ("SHSE"), which commenced trading on December 19,
1990, and the Shenzhen Stock Exchange ("SZSE"), which commenced trading on
July 3, 1991. "B" shares are offered exclusively for investment by foreign
investors, and their total market capitalization in November 1999 was at $3.7
billion. A number of organized securities markets exist in other cities in
China, but these are primarily over-the-counter markets. At the local level,
however, many cities and provinces have promulgated securities rules and
regulations. In fact, it is becoming common for state-owned enterprises to go
for an overseas listing, for example by a listing of H Shares in Hong Kong, or
through Red Chips securities in The Stock Exchange of Hong Kong.
HONG KONG
As a trade entrepot and finance center, Hong Kong's viability has been
inexorably linked to mainland China since the establishment of the Colony in
1841. Hong Kong remains China's largest trade partner and its leading foreign
investor. In 1998, imports from China amounted to $74.7 billion, exports and
re-exports to $59.6 billion. In recent years large numbers of Hong Kong based
companies have set up factories in Southern China in the province of
Guangdong, where it is estimated that Hong Kong companies employ over 3
million workers. There also has been considerable growth in Chinese investment
in Hong Kong over the last decade and particularly in the last five years. In
contrast to Japanese investment, Chinese investment in Hong Kong typically
involves the purchase of stakes in existing companies. This has traditionally
been in the banking and import/export sectors. Recently, investment in
telecommunication projects has increased. In view of the growing economic
interaction between Hong Kong and Southern China, it is increasingly
meaningful to consider the concept of a Greater Hong Kong economy consisting
of Hong Kong and Guangdong Province, with a combined population of over 78
million. To sustain the growth of the Guangdong economy, the Hong Kong
government in 1989 unveiled PADS, the Port and Airport Development Strategy.
The project, which cost in excess of $21 billion was designed to allow Hong
Kong's cargo handling capacity to increase by four times between 1988 and 2011
and its air traffic handling capacity to increase from 15 million passengers
in 1988 to 50 million in 2011.
In the past, political considerations have hindered closer economic
integration between Hong Kong and China. It was largely in response to the
United Nations embargo on trade with China in the 1950s and 1960s that Hong
Kong developed a significant manufacturing base. In the last several years,
however, there has been an improvement in relations. The Basic Law, the
outline for Hong Kong's government post reunification with China in 1997,
calls for Hong Kong's capitalist system to remain intact for an additional
fifty years after 1997. This integration process directly affects the value of
Hong Kong investments.
In the last two decades there has been a structural change in Hong Kong's
economy, with growth in the services sector outpacing manufacturing growth.
With more and more labor intensive manufacturing relocating to Southern China,
Hong Kong has developed its services sector, which in 1998 contributed over
85% of GDP.
The Stock Exchange of Hong Kong Ltd. ("HKSE"), commenced trading on April
2, 1986. The HKSE, with a total market capitalization as of November, 1999 of
approximately U.S. $537 billion is now the second largest stock market in
Asia, measured by market capitalization, behind only that of Japan. As of that
date, 700 companies and 1,200 securities were listed on the Hong Kong Stock
Exchange.
There are no regulations governing foreign investment in Hong Kong. There
are no exchange control regulations and investors have total flexibility in
the movement of capital and the repatriation of profits. Funds invested in
Hong Kong can be repatriated at will; dividends and interest are freely
remittable.
INDIA
India is the seventh largest country in the world, covering an area of
approximately 3,300,000 square kilometers. It is situated in South Asia and is
bordered by Nepal, Bhutan and China in the north, Myanmar and Bangladesh in
the east, Pakistan in the west and Sri Lanka in the south.
India's population is currently estimated at approximately 1,054 million;
the figure in 1991, according to the official census, was 846 million. Most of
the population still lives in rural areas. Approximately 84 percent are
Hindus, 11 percent Muslims, 2 percent Sikhs, 2 percent Christians and 1
percent Buddhists. Hindi is one of the major languages, with English also
being used widely in official and business communications. With a middle class
of approximately 150 million people, India constitutes one of the largest
markets in the world.
Unlike certain other emerging market countries, India has a long tradition
of trade and markets, despite the central planning of the economy carried out
by the Indian government in the first decades after India's independence. The
Bombay Stock Exchange, for example, was founded over 120 years ago, is the
oldest stock exchange in Asia and currently lists almost 5,855 companies, more
than the New York Stock Exchange.
India became independent from the United Kingdom in 1947. It is governed
by a parliamentary democracy under the Constitution of India, under which the
executive, legislative and judicial functions are separated. India has been
engaged in a policy of gradual economic reform since the mid-1980's. In 1991,
the Government of Prime Minister Narasimha Rao had introduced far-reaching
measures with the goal of reducing government intervention in the economy,
strengthening India's industrial base, expanding exports and increasing
economic efficiency. The main focus of the policy was to place more authority
for making business decisions in the hands of those who operate the
businesses. The system of industrial licenses known as the "License Raj", by
means of which the government controlled many private sector investment
decisions, was substantially modified. Government approvals required to
increase, reduce or change production have been greatly reduced.
Modern economic development in India began in the mid-1940's with the
publication of the Bombay Plan. The Planning Commission was established in
1950 to assess the country's available resources and to identify growth areas.
A centrally planned economic model was adopted, and in order to control the
direction of private investment, most investment and major economic decisions
required government approval. Foreign investment was allowed only selectively.
This protectionist regime held back development of India's economy until the
mid-1980's when there began a gradual move towards the liberalization and
market orientation of the economy. After the liberalization measures, which
began in 1985, the annual growth of the country's real gross domestic product
has risen from an average 3-4% since the 1940's to an average 5.7% between
1991 and 1997.
Since 1991, the Indian government has continued to adopt measures to
further open the economy to private investment, attract foreign capital and
speed up the country's industrial growth rate. For example, the banking
industry has recently been opened to the private sector, including to foreign
investors. Most banks were nationalized in 1969, and no new privately owned
banks had been permitted. The Government is now granting new banking licenses.
The Government also has recently permitted foreign brokerage firms to operate
in India on behalf of Foreign Institutional Investors ("FIIs"), and has
permitted foreign investors to own majority stakes in Indian asset management
companies. In 1992, it was announced that FIIs would be able to invest
directly in the Indian capital markets. In September 1992, the guidelines for
FIIs were published and a number of such investors have been registered by the
Securities and Exchange Board of India, including the Adviser. In 1995, FII
regulations were supplemented and the Parliament approved the establishment of
central share depositories. Beginning in September 1995, several measures have
been adopted to establish securities depositories and permit trading without
share certificates. Dematerialization (paperless) trading began in 1997 and as
of the date hereof more than 550 companies have joined the National Securities
Depository Ltd. (NSDL) offering demat facilities to investors. These companies
represent about 80% of the market capitalization of the Indian market.
The government has also cut subsidies to ailing public sector businesses.
Further cuts, and privatizations, are expected, although resistance by labor
unions and other interest groups may hinder this process. Continuing the
reform process, recent budgets have implemented tax cuts for the corporate
sector and reductions in import duties. In sum, the government's new policies
seek to expand opportunities for entrepreneurship in India. The new government
has begun well by managing to pass two crucial bills in the Parliament -- a) the
Insurance Bill permitting private and foreign participation in the insurance
sector, and b) the Foreign Exchange Management Bill (FEMA) which relaxes norms
for foreign exchange transactions.
Foreign investors have responded to these trends by putting resources into
the Indian economy. According to the Reserve Bank of India, total inflows,
including both foreign direct and foreign portfolio investment, rose from
about $150 million in fiscal year 1992 to over $4.6 billion in fiscal year
1997. India's foreign exchange reserves, which had fallen to about $1 billion
in 1991, were $34 billion in November, 1999. Future direction of foreign
investment flows, however is dependent on clear cut policy thrust from the new
government.
The Indian population is comprised of diverse religious and linguistic
groups. Despite this diversity, India is the world's largest democracy and has
had one of the more stable political systems among the world's developing
nations. However, periodic sectarian conflict among India's religious and
linguistic groups could adversely affect Indian businesses, temporarily close
stock exchanges or other institutions, or undermine or distract from
government efforts to liberalize the Indian economy
INDONESIA
Up to early 1998, there were only two rulers of Indonesia since
independence was gained from the Dutch in 1948 -- Sukarno and Suharto.
However, independence and the 1965 revolution were unusually violent episodes
in the life of any country. The stability which Indonesia has enjoyed during
the past three decades under Suharto should, therefore, be placed against this
background. The regional currency crisis in late 1997 was exacerbated in
Indonesia in 1998. Under IMF's insistence, fuel prices were raised
significantly which lead to rioting and an overthrow of President Suharto. An
interim government under President Habibie took some momentous decisions. To
hold elections in Indonesia in a free and fair manner was a tremendous
success. However the referendum in East Timor led to a very violent
independence. The new president Mr. Wahid leads a coalition, but the
establishment may be considered as inexperienced to run a coalition in such a
diverse country.
The huge Indonesian archipelago will have, by the year 2000, a population
of over 200 million. Fundamentalism is on the rise, as also in Malaysia, and
politicians with fundamentalist Islamic beliefs and supporters are likely to
take a more active role. However, the social question, which one cannot
ignore, concerns the role of the minority and non-Muslim peoples in Indonesia,
in particular the Chinese community in Java. Although the total Chinese
population is less than 5 million, or around 3% of the total, approximately
80% of the commerce and much of the capital wealth remains in the hands of
this small but tight-knit Chinese community. Therefore, the Chinese community
were again targets of riots in 1998 and this had become the concern of the
world.
Indonesia began the 1980s principally as an oil exporter. During the 1970s
it had a high rate of inflation but also a very rapid economic growth on the
back of the oil boom. The fall in oil prices in the early 1980s, which became
precipitate in the spring of 1986, therefore, forced a review of their
priorities. Reducing inflation, diversifying the economy away from oil and
maintaining a stable growth in the economy were selected as the main
objectives. Inflation was brought from 20%, at the beginning of the decade, to
around 6% in 1989-90. However, inflation had again become a problem after the
crisis. Economic growth, having fallen to 2.5% in 1985 regained the level of
7.4% by 1990 and averaged at around 6% thereafter until 1997. Economic
contraction is however expected in the near future. The rupiah, which had
undergone a 30% once-and-for-all evaluation in the autumn of 1985, had
stabilized on a "crawling peg" system with an annual devaluation of around 5%
until 1997 when it seriously suffered in the Asian currency turmoil. The
economic development of the country very much depends on social and political
stability and also the new government's commitment to economic reforms.
JAPAN
The Japanese archipelago stretches for 1,300 miles in the western Pacific
Ocean. The total area of all the islands is about equal to the size of
California. Only one third of the land is suitable for agriculture, housing,
industry, and commerce.
Japan has a population of about 125 million people, roughly half that of
the United States and twice that of England or Germany. Life expectancy is the
highest in the world. The literacy rate in Japan approaches 100%. The high
level of education, combined with the Confucian work ethic, has created a
motivated work force which boasts a very high savings rate.
Japan is evolving into a post-industrial society and economy as we
approach the 21st century. Japan's postwar growth was phenomenal. By 1970,
Japan's Gross National Product (GNP) had surpassed those of the United Kingdom
and the former Soviet Union. The Japanese economy is now the second largest in
the world; its per capita GNP is the highest among large industrial countries.
During the era of high economic growth in the 1960s and early 1970s,
Japanese expansion focused on the development of heavy industries such as
steel, shipbuilding, and chemicals. In the 1970s, Japan's industrial structure
shifted toward assembly industries with a strong emphasis on exports. In that
decade, Japan became a major producer and exporter of automobiles and consumer
electronics. In the 1980s, Japan gradually stepped toward a post-industrial
society. This evolution had been characterized by an increased reliance on
services, a per capita income which is the highest in the world, rapidly
changing lifestyles influenced by the younger generation, a greater dependence
on domestic markets, a comparative advantage in high technology, and active
participation in the high-growth economies of East Asia, including China.
Japan has had low inflation in recent years. In the past 10 years, the
rate of inflation has ranged between 2% and 3% per year, making it one of the
lowest rates in the world. This achievement was made possible by gains in
productivity, which exceeded wage increases, and by a strong yen in the early
1990's, which reduced imported raw material costs.
Japan's stock exchanges comprise over 25% of the world's equity market.
Like other stock markets, the Japanese stock market can be volatile. For
example, the Japanese stock market, as measured by the Tokyo Stock Price Index
(TOPIX), increased by over 500% during the ten-year period ended December 31,
1989, reaching its high of 2884.80 on December 18, 1989, and it has declined
by 59% since that time, falling to 1177.52 on November 14, 1997. This decline
has had an adverse effect on the availability of credit and on the value of
the substantial stock holdings of Japanese companies, in particular, Japanese
banks, insurance companies and other financial institutions. This in turn has
contributed to the recent weakness in Japan's economy. Japanese banks'
recapitalization and record fiscal stimulus in 1998 and 1999 seem to have
stemmed the decline causing the stock markets to rally.
KOREA
Political volatility has characterized the history of South Korea
(referred to as Korea throughout this section) during the past forty years,
while at the same time an extraordinary economic boom has occurred. Rigid
discipline has been characteristic of the military government under President
Park during the 1960s and 1970s, which were the most successful decades in
economic terms particularly in the growth of Korea's exports and in the per
capita income. It is important to remember how completely the cities and
transport system of the southern part of the Korean peninsula had been
destroyed in the civil war of the 1950s. The effort of reconstruction was,
therefore, enormous. Living standards in the 1960s were extremely low. The
threat from North Korea has exerted a continuous military pressure on the
South in the past forty years which is probably unique to any country in the
world, even including West Germany or Taiwan. Seoul is only 30 kilometers from
the demilitarized zone and, therefore, lives in a continuous state of tension
and fear of an imminent invasion. This very real threat is also translated
into a very high percentage of military spending in the national budget. If
Korea is compared with Japan, the Koreans have had to spend ten times more of
their national income on defense than the Japanese.
Inflation in Korea has been higher than in Japan or Taiwan. In the 1970s,
Korea experienced an annual average inflation rate of nearly 15 percent.
Beginning in 1982, however, the tight monetary policy succeeded in bringing
this annual consumer price index down to single digits until 1990 when the
rate jumped again to 8.6 percent. However, series of economic problems have
flooded Korea since 1996. Korea won and stocks have seriously weakened in 1997
and early 1998. These have forced Korea to accept International Monetary
Fund's rescue package which comes in with measures intended to put the economy
in better order. As a result, drastic reforms have been introduced into
Korea's business practices.
Since January 1998, a dramatic economic recovery has taken place
principally driven by the cyclical recovery in the semiconductor, steel and
automobile industries. Sovereign debt and many top tier corporates have
recovered to investment grade status with bond yields on 10 year treasuries
falling from more than 1000 basis points over U.S. treasuries to less than a
200 basis point spread. Significant restructuring has taken place with the
closure or nationalization of major banks and subsequent distressed asset
sales by the Korea Asset Management Corporation. While the pace of large-scale
corporate restructuring has begun to slow in the latter half of 1999, exciting
growth and diversification is likely to continue in the technology and
Internet-related fields.
1999 has seen a steller recovery in the main KOSPI index from under 600 to
almost 1,000. Technology and Internet-related stocks have also shown
tremendous performance during this year, significantly contributing to the
KOSDAQ's 250% rise since January 1999.
MALAYSIA
The central dilemma in assessing Malaysia's political risk is the
perennial question of relations between the Malay and Chinese communities
representing as they do about 60 percent and 30 percent of the population
respectively. Since the 1969 anti-Chinese riots in Kuala Lumpur the country
has been unruffled by any serious inter-racial violence and during this period
a great deal has been accomplished in transforming the economy and in
transferring the wealth of the country from foreign and Chinese hands into the
hands of the bumiputra (or the sons of the soil), which is the dominant Malay
majority. The success of this New Economic Policy is unquestioned and has
given a great deal of legitimacy to the continued run of the United Malay
National Organisation (UMNO) under its successive prime ministers and most
recently under Dr. Mahathir Mohammed who has now held power for more than a
decade. This economic success has also done much to defuse the threat from the
Islamic fundamentalists who have tended to get co-opted into the ruling party.
The Chinese community has also done well in economic terms although the
political disunity in the Malay Chinese Association (MCA) has left them
somewhat leaderless in the political sphere.
United Malay National Organization (UMNO) the ruling party retained its
significant majority in the recent elections. Though Dr. Mahatir was popular,
his majority was lower than last time. The only difference was that PAS, a
Muslim party won over one more state.
Malaysia has a kingship which is shared on a five-year revolving basis
among the sultans of the various states of the federation. Malaysia's
relations with its neighbours are good. Singapore, remains the largest
investor in the country. Malaysia, like Singapore, has experienced high growth
with low inflation except during the recessions. Since 1987 Malaysia has,
however, returned to the path of high growth and low inflation. The change in
recent years has also been accompanied by an accelerated shift into
manufacturing and away from the old dependence on the plantation sector. This
manufacturing growth has been led by investment from Japan and Taiwan and
notable national projects such as the Proton car. Malaysia is attempting to
move up market into the new product areas such as electronics, car assembly
and consumer goods. It has a literate and trainable workforce.
As manufactured goods assume a larger importance in the composition of
exports compared with crude oil, rubber and palm oil, Malaysia's trade
position should gradually become steadier. For an investor, Malaysia remains
vulnerable to external shocks either in terms of commodity prices or in a fall
in export demand in its principal markets. As with other Asian markets,
currency and the stock market were severly attacked in late 1997 and 1998.
This led to the imposition of capital controls in September 1998, which have
been relaxed from February 1999 onwards.
PAKISTAN
Pakistan, occupying an area of about 800,000 square kilometers, is bounded
in the south by the Arabian Sea and India and in the north by China and
Afghanistan. To the west and northwest are Iran and Afghanistan and to the
east is India. The capital is Islamabad. Karachi is the biggest commercial and
industrial city.
Pakistan is the world's ninth most populous country. The population is
currently estimated at approximately 137 million, with an annual population
growth rate of 3.0%. The national language is Urdu, although English is widely
spoken and understood throughout the country.
Pakistan was created in 1947, in response to the demands of Indian Muslims
for an independent homeland, by the partition from British India of two Muslim
majority areas. In 1971, a civil war in East Pakistan culminated in
independence for East Pakistan (now Bangladesh). Over the past 50 years,
Pakistan and India have gone to war two times, and intermittent border
exchanges occur at times. In particular, relations with India remain
unfriendly over the disputed territory of Kashmir, with its majority Muslim
population.
In earlier decades, Pakistan had a federal parliamentary system. Economic
development since 1955 has taken place within the framework of successive
five-year plans which established growth targets and allocations of public
sector investment. However, the lack of realistic targets, plans and
successful policy implementation had finally caused problems. In November
1999, a military coup deposed Mr. Nawaz Sharif. There is so far no definite
timetable for a return to democracy. Political stability is critical before
investor's confidence returns.
Mr. Nawaz Sharif was preceded as Prime Minister by Mr. Meraj Khalid who
was named to head an interim government until the new government could be
elected following the Presidential removal of the Ms. Benazir Bhutto's
Government on November 3, 1996. Mr. Nawaz Sharif was elected on February 3,
1997 to a five year term. The caretaker government of Prime Minister Meraj
Khalid in consultation with President Farooq Leghari introduced certain
structural reforms into the Pakistan economy in order to reduce the budget
deficit, including the reduction of non-developmental projects and government
spending by reducing the number of government agencies and by making the State
Bank of Pakistan ("Central Bank") largely autonomous. Mr. Nawaz Sharif's
government is expected to continue the implementation of most of these
reforms, alongside accelerating the process of privatization and deregulation
of the economy to enhance industrial, commercial and export activities.
Periodic civil unrest witnessed in 1995 appears to have largely subsided
and the metropolitan city of Karachi, the commercial heart of Pakistan, has
largely regained its stability and economic vibrance. Therefore, in addition
to the ongoing international investment in infrastructure projects, foreign
and national private investments may gain momentum in other sectors of the
economy.
The Federal Shariat Court, a constitutionally established body which has
exclusive jurisdiction to determine whether any law in Pakistan violates the
principles of Islam, the official State religion, ruled in November 1991 that
a number of legal provisions in Pakistan violated Islamic principles relating
to Riba (an Islamic term generally accepted as being analogous to interest)
and instructed the Government of Pakistan to conform these provisions to
Islamic principles. It is believed that strict conformity with the ruling of
the Shariat Court would substantially disrupt a variety of commercial
relationships in Pakistan involving the payment of interest, although the
extent and nature of any such disruption on the Pakistani economy, or any
segment thereof (other than the banking system), is uncertain. The ruling of
the Shariat Court has been appealed and will have no effect until the Shariat
Appellate Bench of the Supreme Court of Pakistan renders a decision on the
appeal. A hearing on the appeal was held in November 1993 but, in early 1994
at the request of the Government of Pakistan, the appeal is still continuing.
In addition, pursuant to the Enforcement of Shariat Act, 1991 (the "Shariat
Act"), the Government of Pakistan has appointed a commission to recommend
steps to be taken to introduce suitable alternatives by which an economic
system in Pakistan conforming to Islamic principles could be established.
Since the current popularly elected government favors a free market economy,
the commission may propose a pragmatic approach to the requirements of the
Constitution and the Shariat Act with a view to avoiding any substantial
disruption to the economy of Pakistan. There can be no assurance, however,
that the commission will propose such an approach or that implementation of
the steps recommended by the commission or the effect of the ultimate decision
of the courts in Pakistan on this issue will not adversely affect the economy
in Pakistan.
Economic development since 1955 has taken place within the framework of
successive five-year plans which established growth targets and allocations of
public sector investment. In addition, annual development plans are prepared
indicating yearly allocation of investment and the program for economic
development in the public and private sectors.
For most of the 1980's, the Pakistani economy showed strong growth, with
GDP increasing at over 6% per annum. Over the past decade, despite a rapid
increase in the labor force, real wages in both rural and urban areas rose
substantially. However, the latter part of the decade was characterized by
increasing fiscal and external deficits, infrastructure deficiencies and
disruptions in production. In 1989, the government initiated a three year
structural adjustment program with the assistance of the International
Monetary Fund. The program sought to redress the growing macroeconomic
imbalances resulting from the large fiscal deficits and to increase
productivity through major structural reforms in the industrial and financial
sectors.
The government of Pakistan has been heavily involved in the economy
through ownership of financial and industrial enterprises, investment policies
and incentives, and taxation programs established in the five-year economic
plans. Recent governments, however, have announced various liberalization
measures, including banking reforms and a number of measures designed to
encourage the private sector.
In February 1991, the government announced a twenty-five point
liberalization and reform package. In particular, no approval would be
required for the issue and transfer of shares and the issue of capital by
companies in all but a few specified industries, and Pakistanis residing
overseas and foreign investors would be permitted to purchase listed shares
and to transfer capital and dividends without approval. The government has
also embarked on a major privatization program and a large number of public
sector entities have been offered for sale. Government owned banks,
telecommunications and power generation and gas distribution companies are
scheduled for privatization.
Pakistan's GDP growth for 1999 is approximately 5.4%. The projection for
economic growth for 1999 is approximately 3.3%. Inflation in 1997 was in
excess of 9%.
THE PHILIPPINES
The question most investors raise is whether the Philippines is capable of
responsible government and economic planning which would give it a GNP growth
rate approaching that of its Asian tiger neighbours. Many observers dismiss
this prospect out of hand citing the endemic problems of corruption, political
in-fighting and the lack of Confucian work ethic present in North Asia.
However, there is no doubt that the Philippines possesses enormous natural
advantages and it would be wrong to generalize about the whole archipelago of
7,000 islands from the political life of Manila alone. The island of Cebu, for
example, has seen a successful economic transformation in the past twenty
years. Manufacturing investment has grown and has begun to replace agriculture
as a principal source of employment. The Philippines did not experience the
same severe economic contraction as some of its neighbors during the Asian
economic crisis of 1997-98, due to a better-capitalized banking system and
lower corporate indebtedness. However, the quality of political governance has
steadily deteriorated since 1997. Corruption in the Philippines appears to be
on the rise as former Marcos cronies have regained control over businesses or
received valuable governmental posts. While countries such as South Korea and
Thailand have focused on reform and transparency, the Philippines currently
appears to be regressing.
SINGAPORE
"The silent success", in the words of a Singapore government minister, of
this region is based on a high literacy rate and a well-educated and trainable
workforce. The investment in human capital has proven to be more important to
a lasting economic growth success story than the availability of finance or
technology. Singapore is the de facto financial centre of the Association of
South East Asian Nations (ASEAN) region. Singapore is a small Chinese island
surrounded by a sea of Muslims. Singapore is aiming its investment at Johore
in Malaysia and Batam Island in Indonesia. This is the so-called growth
triangle.
One aspect of political risk is the handover of political power from one
generation to another. Although Lee Kwan Yew stepped down as Prime Minister in
1990, he continues to wield a large influence and power behind the scenes. His
son, Lee Hsien Loong may not take up the post of Prime Minister in the near
future. In any case, the question of dynastic succession in a parliamentary
democracy, even within a limited Confucian Chinese democracy, is, to say the
least, a questionable one. Many of the elder Lee's policies, such as imposing
the Mandarin Chinese language on the Singapore educational system, have
aroused fierce opposition among the older, anti-communist generation of
Singapore Chinese. The tight control of the media and the suppression of all
political opposition or criticism of the government, the People's Action Party
or the Prime Minister himself, has also aroused criticism both at home and
internationally.
The Singapore economy has been characterized by the highest degree of
government involvement and intervention outside of the socialist world.
Nevertheless, the growth rate has been quite impressive, averaging around 7
percent, except during the recessions, and even more impressive has been the
tight control of inflation which, along with that of Japan, has remained
extremely low at below 3 percent for the past decade. Being a small island
state it is very sensitive to developments in its two main neighbours,
Indonesia and Malaysia, with their large commodity-based economies.
Singapore's foreign reserves held by the Monetary Authority of Singapore (MAS)
and the Government Investment Corporation of Singapore (GICS) are estimated to
be around US $75 billion.
SRI LANKA
Sri Lanka, historically known as Ceylon, is an island of about 65,000
square kilometers, situated off the southeast coast of India. It has a
relatively well-educated population, with 10% of the 19 million Sri Lankans
speaking English and a literacy rate (in Sinhalese and Tamil) of nearly 90%.
A former British colony, Ceylon became an independent Commonwealth in 1948
and became the Democratic Socialist Republic of Sri Lanka in 1972. Sri Lanka
is governed by a popularly elected President and unicameral Parliament.
In the parliamentary elections held in August 1994, the People's Alliance
led by Mrs. Chandrika Kumaratunga managed to form the government ending the
17-year regime of the United National Party. The People's Alliance has further
consolidated its position by the victory of Mrs. Chandrika Kumaratunga in the
presidential elections held in November 1994. The new government has accorded
top priority for settling the ethnic conflict with the Tamils in the north and
had initiated peace talks with the LTTE. In 1999, however, hostility with the
Tamil Tigers was continuing.
Sri Lanka's most dynamic industries now are food processing, textiles and
apparel, food and beverages, telecommunications, and insurance and banking. By
1996 plantation crops made up only 20% of exports (compared with 93% in 1970),
while textiles and garments accounted for 63%. GDP grew at an annual average
rate of 5.5% throughout the 1990s until a drought and a deteriorating security
situation lowered growth to 3.8% in 1996. The economy rebounded in 1997-98
with growth of 6.4% and 4.7%. For the next round of reforms, the central bank
of Sri Lanka recommends that Colombo expand market mechanisms in nonplantation
agriculture, dismantle the government's monopoly on wheat imports, and promote
more competition in the financial sector.
Although tourism has been adversely affected by the conflict with the
Tamils, GDP growth was more than 4.7% in 1998.
TAIWAN
The basic geopolitical fact about Taiwan is that it sits under the shadow
of mainland China and under the threat of reunification, whether peaceful or
by military means. Taiwan is dependent on its close relationship with the
United States and its very successful diplomacy and public relations campaign
which, ever since Madame Chiang Kai-Shek's days in the 1940s has sustained a
high level of sympathy in Washington for the Nationalist regime. Taiwan also
has close relations with Israel, with whom it has had military as well as
trade links. Taiwan remains a free capitalist enclave with some very
successful entrepreneurial and export-oriented companies. The government's
role in the economy is relatively small.
Nevertheless, economic integration between the Chinese communities of
China and Taiwan has increased in recent years. China has low labor costs,
inexpensive land, natural resources and less rigid environmental rules. Taiwan
has capital, technology and trained entrepreneurs. Over 20 percent of Taiwan's
trade is with mainland China and the total investment from Taiwan to China has
exceeded US $20 billion since 1990. A shortage of skilled labour, the high
cost of labour and the relatively strong New Taiwan dollar, has impelled many
Taiwanese businesspeople to shift their production to Thailand, the
Philippines, and Malaysia as well as China. Taiwan has over US $103 billion of
foreign exchange reserves.
Between 1960 and 1997, Taiwan's GNP grew from less than $2 billion to over
$280 billion. The economic growth has been accompanied by a transformation of
domestic production from labor intensive to capital intensive industries in
the 1970s and finally to higher technology industries in the 1980s. The Taiwan
Stock Exchange Corp. is viewed as a highly priced and highly volatile
securities market.
Taiwan has a very Chinese culture and way of life which can affect the
commercial systems. For example, business deals very often depend on the
personal contact and mutual trust between the two parties involved.
THAILAND
Thailand is unique in South East Asia in that it has escaped the colonial
experience and maintained its freedom and independence. The monarchy plays a
key role in maintaining the country's political stability and independence.
Nevertheless, since the absolute monarchy was ended in 1932 there have been
twenty-one coup d'etats, of which twelve have been successful. Thailand in the
1990s may remain democratic but the King and the army will continue to play a
role.
Thailand has a free and independent peasant population which has, on the
whole, enjoyed a higher standard of living than their neighbours and,
therefore, the communist movement has never made much headway among the rural
people. On the other hand again, Thailand's extraordinary economic growth in
the 1980s (averaging 10 percent per annum) has put great strains not only on
the urban environment because of traffic jams and pollution, but also on the
social and family system. Many rural families have been forced to send their
teenage children to the cities to find employment. The contrast of living
standards between Bangkok and the north east provinces (an estimated per
capital income would be perhaps US $2,000 per annum for the former and less
than US $500 per annum for the latter) must eventually create social tensions
and potential unrest. Buddhism must also be counted as a major factor of
political stability.
Thailand's economy has been among the fastest growing in the world during
the past decade. The take-off really began in 1986-7 with the flood of new
foreign investment into the country, largely from Japan and Taiwan. There has
been a large shift away from agriculture towards manufacturing. As recently as
1980, 50 percent of Thailand's exports consisted of rice and tapioca and other
agricultural products. By 1990, 75 percent of the total volume of exports were
manufactured goods, mainly from the newly established assembly plants in
Bangkok and the south. This has resulted in large changes in employment and
moves of populations.
It is surprising, considering the very high rate of economic growth that
the economy has experienced, that prices, as measured by the consumer price
index, have been kept under control. The last serious bout of inflation in
Thailand occurred during the two oil crises, first in 1973-4 when the CPI
touched 24 percent and then again in 1980-1 when there was a resurgence of
inflation to nearly 20 percent. In the later 1980s, and thanks largely to a
more stable oil price, inflation has been held in single digits and has not
exceeded 7 percent.
The boom since the early 1990s has resulted in huge imbalances in the
country's balance of payments position and has significantly strained its
nascent banking system. These pressures finally exploded in July 1997 which
led to the devaluation of the THB. Help from the International Monetary Fund
was sought and arrived in the form of a US $17.2 billion aid package. The
economic contraction in 1998 was severe with more than 1 million Thais pushed
below the poverty line. Had it not been for the strong performance of its
agriculture sector, which employs more than 50% of the country's labour force
and is home to 50% of its population, its overall social stability might have
been threatened. From an enviable surplus position for more than a decade, the
Government was thrown into a realm of fiscal deficits. As for its financial
sector, the ability of the Thai authorities to directly intervene and
resuscitate its banking system has been limited due to its relatively
democratic political structure compared to its neighbors.
<PAGE>
STATEMENT OF
ADDITIONAL INFORMATION
January 1, 2000
EATON VANCE GREATER CHINA GROWTH FUND
The Eaton Vance Building
255 State Street
Boston, Massachusetts 02109
(800) 225-6265
This Statement of Additional Information ("SAI") provides general
information about the Fund and the Portfolio. The Fund is a series of Eaton
Vance Growth Trust. Capitalized terms used in this SAI and not otherwise
defined have the meanings given to them in the prospectus. This SAI contains
additional information about:
Page
Strategies and Risks .................................................. 1
Investment Restrictions ............................................... 6
Management and Organization ........................................... 9
Investment Advisory and Administrative Services ....................... 13
Other Service Providers ............................................... 16
Purchasing and Redeeming Shares ....................................... 16
Sales Charges ......................................................... 18
Performance ........................................................... 22
Taxes ................................................................. 23
Portfolio Security Transactions ....................................... 25
Financial Statements .................................................. 27
Appendices:
A: Class A Fees, Performance and Ownership ............................ a-1
B: Class B Fees, Performance and Ownership ............................ b-1
C: Class C Fees, Performance and Ownership ............................ c-1
D: China region Countries ............................................. d-1
THIS IS NOT A PROSPECTUS AND IS AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE
INVESTORS ONLY IF PRECEDED OR ACCOMPANIED BY THE FUND'S PROSPECTUS DATED
JANUARY 1, 2000, AS SUPPLEMENTED FROM TIME TO TIME, WHICH IS INCORPORATED
HEREIN BY REFERENCE. THIS SAI SHOULD BE READ IN CONJUNCTION WITH THE
PROSPECTUS, WHICH MAY BE OBTAINED BY CALLING 1-800-225-6265.
<PAGE>
STRATEGIES AND RISKS
CHINA REGION RISKS. Investments in the China region can involve significant
risks that are generally not involved with investments in U.S. companies. The
Fund is intended for long-term investors who can accept international
investment risk and little or no current income. The Fund is not intended to
be a complete investment program. A prospective investor should take into
account personal objectives and other investments when considering the
purchase of Fund shares. The Fund cannot assure achievement of its investment
objective. China region investments may offer higher potential for gains and
losses than investments in the United States.
The Portfolio will, under normal market conditions, invest at least 65% of
its total assets in equity securities of China growth companies ("Greater
China investments"). Equity securities, for purposes of the 65% policy, will
be limited to common and preferred stocks; equity interests in trusts,
partnerships, joint ventures and other unincorporated entities or enterprises;
special classes of shares available only to foreign investors in markets that
restrict the ownership by foreign investors to certain classes of equity
securities; convertible preferred stocks; and other convertible investment
grade debt instruments. A debt security is investment grade if it is rated BBB
or above by Standard & Poor's Ratings Group ("S&P") or Baa or above by Moody's
Investors Service, Inc. ("Moody's") or determined to be of comparable quality
by the Adviser. Debt securities rated BBB by S&P or Baa by Moody's have
speculative characteristics and changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments than is the case with higher grade debt securities. The
Portfolio will promptly dispose of any convertible debt instrument which is
rated or determined by the Adviser to be below investment grade subsequent to
acquisition by the Portfolio.
In addition to its investments in equity securities, the Portfolio may
invest up to 5% of its net assets in warrants, including options and warrants
traded in over-the-counter markets. The Portfolio will not, under normal
market conditions, invest more than 35% of its total assets in equity
securities other than Greater China investments, warrants, options on
securities and indices, options on currency, futures contracts and options on
futures, forward foreign currency exchange contracts, currency swaps and any
other non-equity investments. The Portfolio will not invest in debt
securities, other than investment grade convertible debt instruments.
SECURITIES TRADING MARKETS. A high proportion of the shares of many issuers in
the China region may be held by a limited number of persons and financial
institutions, which may limit the number of shares available for investment by
the Portfolio. The prices at which the Portfolio may acquire investments may
be affected by trading by persons with material non-public information and by
securities transactions by brokers in anticipation of transactions by the
Portfolio in particular securities. Similarly, volume and liquidity in the
bond markets in the China region are less than in the United States and, at
times, price volatility can be greater than in the United States. The limited
liquidity of securities markets in the China region may also affect the
Portfolio's ability to acquire or dispose of securities at the price and time
it wishes to do so. In addition, China region securities markets are
susceptible to being influenced by large investors trading significant blocks
of securities.
China region stock markets are undergoing a period of growth and change
which may result in trading volatility and difficulties in the settlement and
recording of transactions, and in interpreting and applying the relevant law
and regulations. In particular, the securities industry in China is not well
developed. China has no securities laws of nationwide applicability. Municipal
securities regulations governing the Shanghai and Shenzhen securities
exchanges are new. Stockbrokers and other intermediaries in the China region
may not perform as well as their counterparts in the United States and other
more developed securities markets.
Settlement of securities transactions in many China region countries are
subject to risk of loss, may be delayed and are generally less frequent than
in the United States, which could affect the liquidity of the Portfolio's
assets. In addition, disruptions due to work stoppages and trading
improprieties in these securities markets have caused such markets to close.
If extended closings were to occur in stock markets where the Portfolio was
heavily invested, the Fund's ability to redeem Fund shares could become
correspondingly impaired. To mitigate these risks, the Portfolio may maintain
a higher cash position than it otherwise would, thereby possibly diluting its
return, or the Portfolio may have to sell more liquid securities which it
would not otherwise choose to sell. The Fund may suspend redemption privileges
or postpone the date of payment for more than seven days after a redemption
order is received under certain circumstances.
CHINA REGION COUNTRY CONSIDERATIONS. The Portfolio will invest in China
region countries with emerging economies or securities markets. Political and
economic structures in many of such countries are undergoing significant
evolution and rapid development, and such countries may lack the social,
political and economic stability characteristic of the United States. Certain
of such countries may have, in the past, failed to recognize private property
rights and have at times nationalized or expropriated the assets of private
companies. As a result, the risks described above, including the risks of
nationalization or expropriation of assets, may be heightened. In addition,
unanticipated political or social developments may affect the values of the
Portfolio's investments in those countries and the availability to the
Portfolio of additional investments in those countries. The laws of countries
in the region relating to limited liability of corporate shareholders,
fiduciary duties of officers and directors, and the bankruptcy of state
enterprises are generally less well developed than or different from such laws
in the United States. It may be more difficult to obtain a judgement in the
courts of these countries than it is in the United States. China does not have
a comprehensive system of laws and some laws are not even publicly available.
The Fund and the Portfolio each intend to conduct its respective affairs
in such a manner to avoid taxation. Nevertheless, certain countries may
require withholding on dividends paid on portfolio securities and on realized
capital gains. In the past, these taxes have sometimes been substantial. There
can be no assurance that in the future the Portfolio will be able to
repatriate its income, gains or initial capital from these countries.
DIRECT INVESTMENTS. The Portfolio may invest up to 10% of its total assets in
direct investments in China growth companies. Direct investments include (i)
the private purchase from an enterprise of an equity interest in the
enterprise in the form of shares of common stock or equity interests in
trusts, partnerships, joint ventures or similar enterprises, and (ii) the
purchase of such an equity interest in an enterprise from a principal investor
in the enterprise. In each case, the Portfolio will, at the time of making the
investment, enter into a shareholder or similar agreement with the enterprise
and one or more other holders of equity interests in the enterprise. The
Adviser anticipates that these agreements will, in appropriate circumstances,
provide the Portfolio with the ability to appoint a representative to the
board of directors or similar body of the enterprise and for eventual
disposition of the Portfolio's investment in the enterprise. Such a
representative of the Portfolio will be expected to provide the Portfolio with
the ability to monitor its investment and protect its rights in the investment
and will not be appointed for the purpose of exercising management or control
of the enterprise.
FOREIGN INVESTMENTS. Investing in securities issued by companies whose
principal business activities are outside the United States may involve
significant risks not present in domestic investments. For example, there is
generally less publicly available information about foreign companies,
particularly those not subject to the disclosure and reporting requirements of
the U.S. securities laws. Foreign issuers are generally not bound by uniform
accounting, auditing, and financial reporting requirements and standards of
practice comparable to those applicable to domestic issuers. Investments in
foreign securities also involve the risk of possible adverse changes in
investment or exchange control regulations, expropriation or confiscatory
taxation, limitation on the removal of funds or other assets of the Portfolio,
political or financial instability or diplomatic and other developments which
could affect such investments. Further, economies of particular countries or
areas of the world may differ favorably or unfavorably from the economy of the
United States. It is anticipated that in most cases the best available market
for foreign securities will be on exchanges or in over-the-counter markets
located outside of the United States. Foreign stock markets, while growing in
volume and sophistication, are generally not as developed as those in the
United States, and securities of some foreign issuers (particularly those
located in developing countries) may be less liquid and more volatile than
securities of comparable U.S. companies. In addition, foreign brokerage
commissions are generally higher than commissions on securities traded in the
United States and may be non-negotiable. In general, there is less overall
governmental supervision and regulation of foreign securities markets, broker-
dealers, and issuers than in the United States.
The Portfolio may also invest in American Depositary Receipts (ADRs),
European Depositary Receipts (EDRs) and Global Depositary Receipts (GDRs).
ADRs, EDRs and GDRs are certificates evidencing ownership of shares of a
foreign issuer and are alternatives to directly purchasing the underlying
foreign securities in their national markets and currencies. However, they
continue to be subject to many of the risks associated with investing directly
in foreign securities. These risks include foreign exchange risk as well as
the political and economic risks of the underlying issuer's country. ADRs,
EDRs and GDRs may be sponsored or unsponsored. Unsponsored receipts are
established without the participation of the issuer. Unsponsored receipts may
involve higher expenses, they may not pass-through voting or other shareholder
rights, and they may be less liquid.
The value of the assets of the Portfolio as measured in U.S. dollars may
be affected favorably or unfavorably by changes in foreign currency exchange
rates and exchange control regulations. Currency exchange rates can also be
affected unpredictably by intervention by U.S. or foreign governments or
central banks, or the failure to intervene, or by currency controls or
political developments in the U.S. or abroad. The Portfolio may conduct its
foreign currency exchange transactions on a spot (i.e., cash) basis at the
spot rate prevailing in the foreign currency exchange market or through
entering into swaps, forward contracts, options or futures on currency. In
spot transactions, foreign exchange dealers do not charge a fee for
conversion, but they do realize a profit based on the difference (the
"spread") between the prices at which they are buying and selling various
currencies. Thus, a dealer may offer to sell a foreign currency to the
Portfolio at one rate, while offering a lesser rate of exchange should the
Portfolio desire to resell that currency to the dealer.
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.
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. Currency swaps
require maintenance of a segregated account as described under "Asset Coverage
Requirements" 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
Advisers.
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
considered 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 options on securities, indices
or currencies; and forward foreign currency exchange contracts. The Portfolio
incurs transaction costs in opening and closing positions in derivative
instruments. The use of futures for nonhedging purposes is limited by
regulations of the Commodity Futures Trading Commission. There can be no
assurance that the Adviser's use of derivative instruments will be
advantageous to the Portfolio.
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 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 days 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 certain purchased OTC options,
and assets used as cover for written OTC options, are subject to the
Portfolio's 15% limit on illiquid investments. 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 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.
ASSET COVERAGE REQUIREMENTS. Transactions involving reverse repurchase
agreements, currency swaps, forward contracts or 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, futures contracts or forward
contracts, or (2) cash or liquid securities (such as readily marketable
securities and money market instruments) with a value sufficient at all times
to cover its potential obligations not covered as provided in (1) above. (Only
the net obligation of a swap will be covered.) The Portfolio will comply with
Commission guidelines regarding cover for these instruments and, if the
guidelines so require, set aside cash or liquid securities in a segregated
account with its custodian in the prescribed amount. The securities in the
segregated account will be marked to market daily.
Assets used as cover or held in a segregated account maintained by the
Portfolio's custodian cannot be sold while the position requiring coverage or
segregation is outstanding unless they are replaced with other appropriate
assets. As a result, the commitment of a large portion of the Portfolio's
assets to segregated accounts or to cover could impede portfolio management or
the Portfolio's ability to meet redemption requests or other current
obligations.
FOREIGN CURRENCY TRANSACTIONS. Forward foreign currency exchange contracts are
individually negotiated and privately traded by currency traders and their
customers. A forward contract involves an obligation to purchase or sell a
specific currency (or basket of currencies) for an agreed price at a future
date, which may be any fixed number of days from the date of the contract. The
Portfolio may engage in cross-hedging by using forward contracts in one
currency (or basket of currencies) to hedge against fluctuations in the value
of securities denominated in a different currency if the Adviser determines
that there is an established historical pattern of correlation between the two
currencies (or the basket of currencies and the underlying currency). Use of a
different foreign currency magnifies the Portfolio's exposure to foreign
currency exchange rate fluctuations. The Portfolio may also use forward
contracts to shift its exposure to foreign currency exchange rate changes from
one currency to another.
LIMITATIONS ON FUTURES CONTRACTS AND OPTIONS. The Portfolio may purchase call
and put options, including those traded in the over-the-counter markets, on
any securities in which the Portfolio may invest or options on any securities
index composed of securities in which the Portfolio may invest. The Portfolio
does not intend to write a covered option on any security if after such
transaction more than 15% of its net assets, as measured by the aggregate
value of the securities underlying all covered calls and puts written by the
Portfolio, would be subject to such options. The Portfolio will only write a
put option on a security which it intends to ultimately acquire for its
portfolio. The Portfolio does not intend to purchase any options if after such
transaction more than 5% of its net assets, as measured by the aggregate of
all premiums paid for all such options held by the Portfolio, would be so
invested. The Portfolio may enter into futures contracts (and options thereon)
traded on a foreign exchange, only if the Adviser determines that trading on
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 United States CFTC-regulated exchanges.
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.
REPURCHASE AGREEMENTS. The Portfolio may enter into repurchase agreements (the
purchase of a security coupled with an agreement to resell at a higher price)
with respect to its permitted investments. In the event of the bankruptcy of
the other party to a repurchase agreement, the Portfolio might experience
delays in recovering its cash. To the extent that, in the meantime, the value
of the securities the Portfolio purchased may have decreased, the Portfolio
could experience a loss. At no time will the Portfolio commit more than 15% of
its net assets to repurchase agreements which mature in more than seven days
and other illiquid securities. 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.
LENDING PORTFOLIO SECURITIES. 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 short-
term municipal obligations as well as taxable certificates of deposit,
commercial paper and other short-term money market instruments. The financial
condition of the borrower will be monitored by the Adviser on an ongoing
basis. The Portfolio would continue to receive the equivalent of the interest
or dividends paid by the issuer on the securities loaned and would also
receive a fee, or all or a portion of the interest on investment of the
collateral. The Portfolio would have the right to call a loan and obtain the
securities loaned at any time on up to five business days' notice. The
Portfolio would not have the right to vote any securities having voting rights
during the existence of a loan, but could call the loan in anticipation of an
important vote to be taken among holders of the securities or the giving or
holding of their consent on a material matter affecting the investment. If the
Adviser decides to make securities loans, it is intended that the value of the
securities loaned would not exceed one-third of the Portfolio's total assets.
As with other extensions of credit there are risks of delay in recovery or
even loss of rights in the securities loaned if the borrower of the securities
fails financially. However, the loans will be made only to organizations
deemed by the Adviser to be sufficiently creditworthy and when, in the
judgment of the Adviser, the consideration which can be earned from securities
loans of this type justifies the attendant risk. Securities lending involves
administration expenses including finders fees.
OTHER INVESTMENT COMPANIES. The Portfolio reserves the right to invest up to
10% of its total assets, calculated at the time of purchase, in the securities
of other investment companies unaffiliated with the Adviser or the manager
that have the characteristics of closed-end investment companies. The
Portfolio will indirectly bear its proportionate share of any management fees
paid by investment companies in which it invests in addition to the advisory
fee paid by the Portfolio. The value of closed-end investment company
securities, which are usually traded on an exchange, is affected by demand for
the securities themselves, independent of the demand for the underlying
portfolio assets and, accordingly, such securities can trade at a discount
from their net asset values.
PORTFOLIO TURNOVER. 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 high turnover rate (100% or more) necessarily involves
greater expenses to the Portfolio. Short-term trading may be advisable in
light of a change in circumstances of a particular company or within a
particular industry, or in light of general market, economic or political
conditions. High portfolio turnover may also result in the realization of
substantial net short-term capital gains. For the fiscal years ended August
31, 1999 and 1998, the portfolio turnover rates of the Portfolio were 57% and
42%, respectively.
TEMPORARY INVESTMENTS. Under unusual market conditions, the Portfolio may
invest temporarily in cash or cash equivalents. Cash equivalents include high
grade debt securities of foreign and U.S. companies, foreign governments and
the U.S. government and their respective agencies, instrumentalities,
political subdivisions and authorities, as well as high quality money market
instruments denominated in U.S. or foreign currencies.
INVESTMENT RESTRICTIONS
The following investment restrictions of the Fund are designated as
fundamental and as such cannot be changed without the approval of the holders
of a majority of the Fund's outstanding voting securities, which as used in
this SAI means the lesser of (a) 67% of the shares of the Fund present or
represented by proxy at a meeting if the holders of more than 50% of the
outstanding shares are present or represented at the meeting or (b) more than
50% of the outstanding shares of the Fund. Accordingly, the Fund may not:
(1) issue senior securities (as defined in the Investment Company Act of
1940 and rules thereunder) or borrow money, except that the Fund or the
Portfolio may borrow:
(i) from banks to purchase or carry securities, commodities, commodities
contracts or other investments;
(ii) from banks for temporary or emergency purposes not in excess of 10%
of its gross assets taken at market value; or
(iii) by entering into reverse repurchase agreements,
if, immediately after any such borrowing, the value of the Fund's or
Portfolio's total assets, including all borrowings then outstanding, is equal
to at least 300% of the aggregate amount of borrowings then outstanding. Any
such borrowings may be secured or unsecured. The Portfolio or the Fund may
issue securities (including senior securities) appropriate to evidence such
indebtedness, including reverse repurchase agreements.
(2) Pledge its assets, except that the Portfolio or the Fund may pledge
not more than one-third of its total assets (taken at current value) to secure
borrowings made in accordance with investment restriction (1) above; for the
purpose of this restriction the deposit of assets in a segregated account with
the Portfolio's or the Fund's custodian, as the case may be, in connection
with any of the Portfolio's or the Fund's respective investment transactions
is not considered to be a pledge.
(3) Purchase securities on margin (but the Portfolio or the Fund may
obtain such short-term credits as may be necessary for the clearance of
purchases and sales of securities).
(4) Make short sales of securities or maintain a short position, unless at
all times when a short position is open the Portfolio or the Fund either owns
an equal amount of such securities or owns securities convertible into or
exchangeable, without the payment of any additional consideration, for
securities of the same issue as, and equal in amount to, the securities sold
short.
(5) Purchase securities issued by any other open-end investment company or
investment portfolio, except as they may be acquired as part of a merger,
consolidation or acquisition of assets, except that the Fund may invest all or
substantially all of its assets in either the Portfolio or any other
registered investment company having substantially the same investment
objective as the Fund and except as otherwise permitted by the Investment
Company Act of 1940.
(6) Purchase or retain in its portfolio any securities issued by an issuer
any of whose officers, directors, trustees or security holders is an officer
or Trustee of the Portfolio or the Trust or is a member, officer, director or
trustee of any investment adviser of the Portfolio or the Fund, if after the
purchase of the securities of such issuer by the Portfolio or the Fund one or
more of such persons owns beneficially more than 1/2 of 1% of the shares or
securities or both (all taken at current value) of such issuer and such
persons owning more than 1/2 of 1% of such shares or securities together own
beneficially more than 5% of such shares or securities or both (all taken at
current value); provided, however, that the Fund may invest all or
substantially all of its assets in either the Portfolio or any other
registered investment company having substantially the same investment
objective as the Fund and having any officers, directors, trustees or security
holders who are officers or Trustees of the Trust.
(7) Underwrite securities issued by other persons, except insofar as the
Fund or the Portfolio may technically be deemed to be an underwriter under the
Securities Act of 1933 in selling or disposing of a portfolio security, and
except that the Fund may invest all or substantially all of its assets in
either the Portfolio or any other registered investment company having
substantially the same investment objective as the Fund.
(8) Make loans to other persons, except by (a) the acquisition of money
market instruments, debt securities and other obligations in which the
Portfolio or the Fund is authorized to invest in accordance with their
respective investment objective and policies, (b) entering into repurchase
agreements and (c) lending their respective portfolio securities.
(9) Purchase the securities of any one issuer (other than obligations
issued or guaranteed by the U.S. Government or any of its agencies or
instrumentalities) if, with respect to 75% of its total assets and as a result
of such purchase (a) more than 5% of the total assets of the Portfolio or the
Fund, as the case may be (taken at current value), would be invested in the
securities of such issuer, or (b) the Fund or the Portfolio would hold more
than 10% of the outstanding voting securities of that issuer, except that the
Fund may invest all or substantially all of its assets in, and may acquire up
to 100% of the outstanding voting securities of either the Portfolio or any
other registered investment company having substantially the same investment
objectives as the Fund.
(10) Purchase any security if, as a result of such purchase, 25% or more
of the total assets of the Portfolio or the Fund, as the case may be (taken at
current value) would be invested in the securities of issuers having their
principal business activities in the same industry (the electric, gas and
telephone utility industries being treated as separate industries for the
purpose of this restriction); provided that there is no limitation with
respect to obligations issued or guaranteed by the U.S. Government or any of
its agencies or instrumentalities and except that the Fund may invest all or
substantially all of its assets in either the Portfolio or any other
registered investment company having substantially the same investment
objective as the Fund.
(11) Invest for the purpose of gaining control of a company's management.
(12) Purchase or sell real estate, although the Fund or the Portfolio may
purchase and sell securities which are secured by interests in real estate,
securities of issuers which invest or deal in real estate and real estate that
is acquired as the result of the ownership of securities.
(13) Purchase or sell physical commodities (other than currency) or
contracts for the purchase or sale of physical commodities (other than
currency).
(14) Buy investment securities from or sell them to any of the respective
officers or Trustees of the Trust or the Portfolio, the Portfolio's investment
adviser or the Fund's principal underwriter, as principal; provided, however,
that any such person or firm may be employed as a broker upon customary terms
and that this restriction does not apply to the Fund's investments in either
the Portfolio or any other registered investment company having substantially
the same investment objective as the Fund.
(15) Purchase oil, gas or other mineral leases or purchase partnership
interests in oil, gas or other mineral exploration or development programs.
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.
For the purpose of investment restrictions (1), (2) and (3), the
arrangements (including escrow, margin and collateral arrangements) made by
the Portfolio or the Fund with respect to their respective transactions in all
types of options, futures contracts, options on futures contracts, forward
contracts, currencies, and commodities and options thereon shall not be
considered to be (i) a borrowing of money or the issuance of securities
(including senior securities) by the Portfolio or the Fund, as the case may
be, (ii) a pledge of its assets or (iii) the purchase of a security on margin.
For as long as a feeder fund of the Portfolio has registered shares in
Hong Kong (and for so long as Hong Kong requires the following restrictions),
the Portfolio may not:
(i) invest more than 10% of its net assets in the securities of any
one issuer or, purchase more than 10% of the ordinary shares of any one
issuer, provided, however, up to 30% of the Portfolio's net asset value
may be invested in Government and public securities of the same issue; and
the Portfolio may invest all of its assets in Government and other public
securities in at least six different issues;
(ii) invest more than 15% of net assets in securities which are not
listed or quoted on any stock exchange, over-the-counter market or other
organized securities market that is open to the international public and
on which such securities are regularly traded (a "Market");
(iii) invest more than 15% of net assets in warrants and options for
non-hedging purposes;
(iv) write call options on Portfolio investments exceeding 25% of its
total net asset value in terms of exercise price;
(v) enter into futures contracts on an unhedged basis where the net
total aggregate value of contract prices, whether payable by or to the
Portfolio under all outstanding futures contracts, together with the
aggregate value of holdings under (vi) below exceeds 20% of the net total
asset value of the Portfolio;
(vi) invest in physical commodities (including gold, silver, platinum
or other bullion) and commodity based investments (other than shares in
companies engaged in producing, processing or trading in commodities)
which value together with the net aggregate value of the holdings
described in (v) above, exceeds 20% of the Portfolio's net asset value;
(vii) purchase shares of other investment companies exceeding 10% of
net assets. In addition, the investment objective of any scheme in which
any Portfolio invests must not be to invest in investments prohibited by
this undertaking and where the scheme's investment objective is to invest
primarily in investments which are restricted by this undertaking, such
holdings must not be in contravention of the relevant limitation;
(viii) borrow more than 25% of its net assets (provided that for the
purposes of this paragraph, back to back loans are not to be categorized
as borrowings);
(ix) write uncovered options;
(x) invest in real estate (including options, rights or interests
therein but excluding shares in real estate companies);
(xi) assume, guarantee, endorse or otherwise become directly or
contingently liable for, or in connection with, any obligation or
indebtedness of any person in respect of borrowed money without the prior
written consent of the custodian of the Portfolio;
(xii) engage in short sales involving a liability to deliver
securities exceeding 10% of its net assets provided that any security
which a Portfolio does sell short must be actively traded on a market;
(xiii) subject to paragraph (v) above, purchase an investment with
unlimited liability or;
(xiv) purchase any nil or partly-paid securities unless any call
thereon could be met in full out of cash or near cash held by it in the
amount of which has not already been taken into account for the purposes
of (ix) above.
The Fund and the Portfolio have adopted the following investment policies
which may be changed by the Trustees with respect to the Fund without approval
by the Fund's shareholders or with respect to the Portfolio without approval
of the Fund or its other investors. The Fund and the Portfolio will not:
(a) invest more than 15% of its net assets in investments which are
not readily marketable, including restricted securities and repurchase
agreements with a maturity longer than seven days. Restricted securities
for the purposes of this limitation do not include securities eligible for
resale pursuant to Rule 144A under the Securities Act of 1933 and
commercial paper issued pursuant to Section 4(2) of said Act that the
Board of Trustees of the Trust or the Portfolio, or its delegate,
determines to be liquid. Any such determination by a delegate will be made
pursuant to procedures adopted by the Board. If the Fund or Portfolio
invests in Rule 144A securities, the level of portfolio illiquidity may be
increased to the extent that eligible buyers become uninterested in
purchasing such securities; or
(b) purchase any securities if at the time of such purchase, permitted
borrowings under investment restriction (1) above exceed 5% of the value
of the Portfolio's or the Fund's total assets, as the case may be.
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, or any
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 China growth
companies. Moreover, the Fund and the Portfolio must always be in compliance
with the limitation on investing in illiquid securities and the borrowing
policies set forth above.
Although permissible under the Fund's investment restrictions, the Fund
has no present intention during the coming fiscal year to: borrow money;
pledge its assets; underwrite securities issued by other persons; or make
loans to other persons.
MANAGEMENT AND ORGANIZATION
FUND MANAGEMENT. The Trustees of the Trust are responsible for the overall
management and supervision of the Trust's affairs. The Trustees and officers
of the Trust and the Portfolio are listed below. Except as indicated, each
individual has held the office shown or other offices in the same company for
the last five years. Unless otherwise noted, the business address of each
Trustee and officer is The Eaton Vance Building, 255 State Street, Boston,
Massachusetts 02109. The business address of Lloyd George is 3808 One
Exchange Square, Central, Hong Kong. Those Trustees who are "interested
persons" of the Trust or the Portfolio, as defined in the 1940 Act, are
indicated by an asterisk(*).
JAMES B. HAWKES (58), President of the Trust, Vice President of the Portfolio
and Trustee*
Chairman, President and Chief Executive Officer of BMR, Eaton Vance and their
corporate parent and trustee (EVC and EV); Director of EVC and EV. Trustee
and officer of various investment companies managed by Eaton Vance or BMR.
Director of Lloyd George Management (B.V.I.) Limited.
HON. ROBERT LLOYD GEORGE (47), President of the Portfolio and Trustee of the
Portfolio*
Chairman and Chief Executive Officer of LGM. Chairman and Chief Executive
Officer of Lloyd George.
Address: 3808 One Exchange Square, Central, Hong Kong
JESSICA M. BIBLIOWICZ (39), Trustee of the Trust*
President and Chief Executive Officer of National Financial Partners (a
financial services company) (since April, 1999). President and Chief
Operating Officer of John A. Levin & Co. (a registered investment advisor)
(July, 1997 to April, 1999) and a Director of Baker, Fentress & Company
which owns John A. Levin & Co. (July, 1997 to April, 1999). Formerly
Executive Vice President of Smith Barney Mutual Funds (from July, 1994 to
June, 1997). Elected Trustee October 30, 1998. Trustee of various investment
companies managed by Eaton Vance or BMR since October 30, 1998.
Address: 1301 Avenue of the Americas, New York, NY 10019
EDWARD K.Y. CHEN (54), Trustee of the Portfolio
President of Lingnan College in Hong Kong. Professor and Director of Centre of
Asian Studies at the University of Hong Kong from 1979-1995. Director of
First Pacific Company and Asia Satellite Telecommunications Holdings Ltd.,
and a Board Member of the Mass Transit Railway Corporation. Member of the
Executive Council of the Hong Kong Government from 1992-1997 and Chairman of
the Consumer Council from 1991-1997.
Address: President's Office, Lingnan College, Tuen Mun, Hong Kong
DONALD R. DWIGHT (68), Trustee
President of Dwight Partners, Inc. (a corporate relations and communications
company). Trustee/Director of the Royce Funds (mutual funds). Trustee of
various investment companies managed by Eaton Vance or BMR.
Address: Clover Mill Lane, Lyme, New Hampshire 03768
SAMUEL L. HAYES, III (64), Trustee
Jacob H. Schiff Professor of Investment Banking Emeritus, Harvard University
Graduate School of Business Administration. Trustee of the Kobrick-Cedant
Investment Trust (mutual funds). Trustee of various investment companies
managed by Eaton Vance or BMR.
Address: 345 Nahatan Road, Westwood, Massachusetts 02190
NORTON H. REAMER (64), Trustee
Chairman of the Board and Chief Executive Officer, United Asset Management
Corporation (a holding company owning institutional investment management
firms); Chairman, President and Director, UAM Funds (mutual funds). Trustee
of various investment companies managed by Eaton Vance or BMR.
Address: One International Place, Boston, Massachusetts 02110
LYNN A. STOUT (42), Trustee of the Trust
Professor of Law, Georgetown University Law Center. Elected Trustee October
30, 1998. Trustee of various investment companies managed by Eaton Vance or
BMR since October 30, 1998.
Address: 600 New Jersey Avenue, NW, Washington, DC 20001
JACK L. TREYNOR (69), Trustee of the Trust
Investment Adviser and Consultant. Trustee of various investment companies
managed by Eaton Vance or BMR.
Address: 504 Via Almar, Palos Verdes Estates, California 90274
THOMAS E. FAUST, JR. (41), Vice President of the Trust
Vice President of Eaton Vance and BMR. Officer of various investment companies
managed by Eaton Vance or BMR.
SCOBIE DICKINSON WARD (33), Vice President, Assistant Secretary and Assistant
Treasurer of the Portfolio
Director of LGM and Chief Investment Officer of Lloyd George.
Address: 3808 One Exchange Square, Central, Hong Kong
WILLIAM WALTER RALEIGH KERR (49), Vice President and Assistant Treasurer of
the Portfolio
Director, Finance Director and Chief Operating Officer of Lloyd George.
Director of LGM.
Address: 3808 One Exchange Square, Central, Hong Kong
JAMES L. O'CONNOR (54), Treasurer
Vice President of Eaton Vance and BMR. Officer of various investment companies
managed by Eaton Vance or BMR.
ALAN R. DYNNER (59), Secretary
Vice President and Chief Legal Officer of BMR, Eaton Vance and EVC since
November 1, 1996. Previously, he was a Partner of the law firm of
Kirkpatrick & Lockhart LLP, New York and Washington, D.C., and was Executive
Vice President of Neuberger & Berman Management, Inc., a mutual fund
management company. Officer of various investment companies managed by Eaton
Vance or BMR.
JANET E. SANDERS (64), Assistant Treasurer and Assistant Secretary
Vice President of Eaton Vance and BMR. Officer of various investment companies
managed by Eaton Vance or BMR.
A. JOHN MURPHY (37), Assistant Secretary
Vice President of Eaton Vance and BMR. Officer of various investment companies
managed by Eaton Vance or BMR.
ERIC G. WOODBURY (42), Assistant Secretary
Vice President of Eaton Vance and BMR. Officer of various investment companies
managed by Eaton Vance or BMR.
The Nominating Committee of the Board of Trustees of the Trust and the
Portfolio is comprised of the Trustees who are not "interested persons" as
that term is defined under the 1940 Act ("noninterested Trustees"). 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. Hayes, Dwight and Reamer and Ms. Stout, are members of the Special
Committee of the Board of Trustees of the Trust and Messrs. Hayes, Dwight and
Reamer, are members of the Special Committee of the Board of Trustees 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 and the Portfolio,
including investment advisory (Portfolio only), administrative, transfer
agency, custodial and fund accounting and distribution services, and (ii) all
other matters in which Eaton Vance, the Advisers or their affiliates has any
actual or potential conflict of interest with the Fund, the Portfolio or
investors therein.
Messrs. Treynor (Chairman) and Dwight are members of the Audit Committee
of the Board of Trustees of the Trust and Messrs. Hayes, Chen and Dwight are
members of the Audit Committee of the Board of Trustees 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 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, transfer
agent and dividend disbursing agent of the Trust and of the Portfolio.
Trustees of the Portfolio (except Mr. Chen) that are not affiliated with
Eaton Vance may elect to defer receipt of all or a percentage of their annual
fees in accordance with the terms of a Trustees Deferred Compensation Plan
(the "Trustees" Plan"). Under the Trustees' 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 Trustees' Plan will be determined based upon the
performance of such investments. Deferral of Trustees' fees in accordance with
the Trustees' Plan will have a negligible effect on the 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
Trust has a retirement plan for its Trustees.
The fees and expenses of the noninterested Trustees of the Trust and the
Portfolio 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 Trust
or the Portfolio.) During the fiscal year ended August 31, 1999, the
noninterested Trustees of the Trust and the Portfolio earned the following
compensation in their capacities as Trustees from the Trust and the Portfolio,
and for the year ended December 31, 1998, earned the following compensation in
their capacities as Trustees of the funds in the Eaton Vance fund complex(1):
<TABLE>
<CAPTION>
SOURCE OF JESSICA M. HON. EDWARD DONALD R. SAMUEL L. NORTON H. LYNN A. JACK L.
COMPENSATION BIBLIOWICZ(5) K.Y. CHEN DWIGHT HAYES, III REAMER STOUT(5) TREYNOR
------------ ------------- ----------- --------- ---------- --------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Trust(2) ..................... $ 571 $ -- $ 1,785 $ 1,900 $ 1,758 $ 622 $ 2,119
Portfolio .................... -- 5,000 2,359 2,595 2,441 -- --
Trust and Fund
Complex .................... 33,334 20,525 160,000(3) 170,000(4) 160,000 32,842 170,000
- ------------
(1) As of January 1, 2000, the Eaton Vance Fund complex consists of 143 registered investment companies or series thereof.
(2) The Trust consisted of 5 Funds as of August 31, 1999.
(3) Includes $60,000 of deferred compensation.
(4) Includes $41,563 of deferred compensation.
(5) Ms. Bibliowicz and Ms. Stout were elected Trustees on October 30, 1998.
</TABLE>
The Advisers are subsidiaries of Lloyd George Management (B.V.I.) Limited,
which is ultimately controlled by the Hon. Robert J.D. Lloyd George, President
of the Portfolio and Chairman and Chief Executive Officer of the Adviser. Mr.
Hawkes is a Trustee and officer of the Trust and an officer of the Fund's
sponsor and manager. Mr. Hayes is a Trustee of the Trust.
ORGANIZATION. The Fund is a series of the Trust, which is organized under
Massachusetts law and is operated as an open-end management investment
company. The Fund (formerly EV Marathon Greater China Growth Fund) established
3 classes of shares on September 1, 1997 -- Class A shares (formerly EV
Traditional Greater China Growth Fund), Class B shares and Class C shares
(formerly EV Classic Greater China Growth Fund) of Eaton Vance Greater China
Growth Fund. Information herein prior to such date is for the Fund before it
became a multiple-class fund.
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). The
Trustees of the Trust have divided the shares of the Fund into multiple
classes. Each class represents an interest in the Fund, but is subject to
different expenses, rights and privileges. The Trustees have the authority
under the Declaration of Trust to create additional classes of shares with
differing rights and privileges. When issued and outstanding, shares are fully
paid and nonassessable by the Trust. Shareholders are entitled to one vote for
each full share held. Fractional shares may be voted proportionately. Shares
of the Fund will be voted together except that only shareholders of a
particular class may vote on matters affecting only that class. Shares have no
preemptive or conversion rights and are freely transferable. In the event of
the liquidation of the Fund, shareholders of each class are entitled to share
pro rata in the net assets attributable to that class available for
distribution to shareholders.
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 growth in the assets of the Portfolio,
may afford the potential for economies of scale for the Fund and may over time
result in lower expenses for the Fund.
As permitted by Massachusetts law, there will normally be no meetings of
shareholders for the purpose of electing Trustees unless and until such time
as less than a majority of the Trustees of the Trust holding office have been
elected by shareholders. In such an event the Trustees then in office will
call a shareholders' meeting for the election of Trustees. Except for the
foregoing circumstances and unless removed by action of the shareholders in
accordance with the Trust's By-laws, the Trustees shall continue to hold
office and may appoint successor Trustees.
The Trust's By-laws provide that no person shall serve as a Trustee if
shareholders holding two-thirds of the outstanding shares have removed him
from that office either by a written declaration filed with the Trust's
custodian or by votes cast at a meeting called for that purpose. The By-laws
further provide that under certain circumstances the shareholders may call a
meeting to remove a Trustee and that the Trust is required to provide
assistance in communication with shareholders about such a meeting.
The Trust's Declaration of Trust may be amended by the Trustees when
authorized by vote of a majority of the outstanding voting securities of the
Trust, the financial interests of which are affected by the amendment. The
Trustees may also amend the Declaration of Trust without the vote or consent
of shareholders to change the name of the Trust or any series or to make such
other changes (such as reclassifying series of classes of shares or
restructuring the Trust) as do not have a materially adverse effect on the
financial interests of shareholders or if they deem it necessary to conform it
to applicable federal or state laws or regulations. The Trust or any series or
class thereof may be terminated by: (1) the affirmative vote of the holders of
not less than two-thirds of the shares outstanding and entitled to vote at any
meeting of shareholders of the Trust or the appropriate series or class
thereof, or by an instrument or instruments in writing without a meeting,
consented to by the holders of two-thirds of the shares of the Trust or a
series or class thereof, provided, however, that, if such termination is
recommended by the Trustees, the vote of a majority of the outstanding voting
securities of the Trust or a series or class thereof entitled to vote thereon
shall be sufficient authorization; or (2) by means of an instrument in writing
signed by a majority of the Trustees, to be followed by a written notice to
shareholders stating that a majority of the Trustees has determined that the
continuation of the Trust or a series or a class thereof is not in the best
interest of the Trust, such series or class or of their respective
shareholders.
The Declaration of Trust further provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law; but nothing in the
Declaration of Trust protects a Trustee against any liability to which he
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of his
office.
Under Massachusetts law, if certain conditions prevail, shareholders of a
Massachusetts business trust (such as the Trust) could be deemed to have
personal liability for the obligations of the Trust. Numerous investment
companies registered under the 1940 Act have been formed as Massachusetts
business trusts, and management is not aware of an instance where such
liability has been imposed. The Trust's Declaration of Trust contains an
express disclaimer of liability on the part of the Fund shareholders and the
Trust's By-laws provide that the Trust shall assume the defense on behalf of
any Fund shareholders. The Declaration of Trust also contains provisions
limiting the liability of a series or class to that series or class. Moreover,
the Trust's By-laws also provide for indemnification out of the property of
the Fund of any shareholder held personally liable solely by reason of being
or having been a shareholder for all loss or expense arising from such
liability. The assets of the Fund are readily marketable and will ordinarily
substantially exceed its liabilities. In light of the nature of the Fund's
business and the nature of its assets, management believes that the
possibility of the Fund's liability exceeding its assets, and therefore the
shareholder's risk of personal liability, is remote.
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. In
accordance with the Declaration of Trust of the Portfolio, there will normally
be no meetings of the investors for the purpose of electing Trustees unless
and until such time as less than a majority of the Trustees of the Portfolio
holding office have been elected by investors. In such an event the Trustees
of the Portfolio then in office will call an investors' meeting for the
election of Trustees. Except for the foregoing circumstances and unless
removed by action of the investors in accordance with the Portfolio's
Declaration of Trust, the Trustees shall continue to hold office and may
appoint successor Trustees.
The Declaration of Trust of the Portfolio provides that no person shall
serve as a Trustee if investors holding two-thirds of the outstanding interest
have removed him from that office either by a written declaration filed with
the Portfolio's custodian or by votes cast at a meeting called for that
purpose. The Declaration of Trust further provides that under certain
circumstances the investors may call a meeting to remove a Trustee and that
the Portfolio is required to provide assistance in communicating with
investors about such a meeting.
The 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.
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 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. 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, the 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 (or the assets of another investor in the Portfolio) from the
Portfolio.
INVESTMENT ADVISORY AND ADMINISTRATIVE SERVICES
INVESTMENT ADVISORY SERVICES. The Portfolio has engaged Lloyd George
Management (Hong Kong) Limited ("LGM-HK") as its investment adviser. Pursuant
to a service agreement effective on January 1, 1996 between LGM-HK and its
affiliate, Lloyd George Investment Management (Bermuda) Limited ("LGIM-B"),
LGIM-B, acting under the general supervision of the Portfolio's Board of
Trustees, is responsible for managing the Portfolio's investments. LGM-HK
supervises LGIM-B's performance of this function and retains its contractual
obligations under its investment advisory agreement with the Portfolio. LGM-HK
and LGIM-B are both referred to separately as an Adviser or together as the
Advisers.
LGIM-B is responsible for effecting all security transactions on behalf of
the Portfolio, including the allocation of principal transactions and
portfolio brokerage and the negotiation of commissions. Under the investment
advisory agreement, LGM-HK is entitled to receive a monthly advisory fee
computed by applying the annual asset rate applicable to that portion of the
average daily net assets of the Portfolio throughout the month in each
Category as indicated below:
ANNUAL
CATEGORY AVERAGE DAILY NET ASSETS ASSET RATE
-------- ------------------------ ----------
1 less than $500 million ............................ 0.75%
2 $500 million but less than $1 billion ............. 0.70
3 $1 billion but less than $1.5 billion ............. 0.65
4 $1.5 billion but less than $2 billion ............. 0.60
5 $2 billion but less than $3 billion ............... 0.55
6 $3 billion and over ............................... 0.50
Since January 1, 1996, LGM-HK pays to LGIM-B the entire amount of the
advisory fee payable by the Portfolio under its investment advisory agreement
with LGM-HK.
As of August 31, 1999, the Portfolio had net assets of $168,101,708. For
the three fiscal years ended August 31, 1999, LGM-HK earned advisory fees of
$1,196,133, $2,102,636 and $3,890,037, respectively, (equivalent to 0.75% of
the Portfolio's average daily net assets for each such year).
The Portfolio's investment advisory agreement with LGM-HK remains in
effect from year to year for so long as such continuance is approved at least
annually (i) by the vote of a majority of the noninterested Trustees of the
Portfolio cast in person at a meeting specifically called for the purpose of
voting on such approval and (ii) by the Board of Trustees of the Portfolio or
by vote of a majority of the outstanding voting securities of the Portfolio.
The Agreement may be terminated at any time without penalty on sixty days'
written notice by the Board of Trustees of either party or by vote of the
majority of the outstanding voting securities of the Portfolio, and the
Agreement will terminate automatically in the event of its assignment. The
Agreement provides that the LGM-HK may render services to others. The
Agreement also provides that, in the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of obligations or duties under
the Agreement on the part of LGM-HK, LGM-HK shall not be liable to the
Portfolio or to any shareholder for any act or omission in the course of or
connected with rendering services or for any losses sustained in the purchase,
holding or sale of any security.
While the Portfolio is a New York trust, the Advisers, together with
certain Trustees and officers of the Portfolio, are not residents of the
United States, and substantially all of their respective assets may be located
outside of the United States. It may be difficult for investors to effect
service of process within the United States upon the individuals identified
above, or to realize judgments of courts of the United States predicated upon
civil liabilities of the Advisers and such individuals under the federal
securities laws of the United States. The Portfolio has been advised that
there is substantial doubt as to the enforceability in the countries in which
the Adviser and such individuals reside of such civil remedies and criminal
penalties as are afforded by the federal securities laws of the United States.
INFORMATION ABOUT LLOYD GEORGE. LGM specializes in providing investment
management services with respect to equity securities of companies trading in
Asian securities markets, and also those of emerging markets. LGM currently
manages portfolios for both private clients and institutional investors
seeking long-term capital growth and has advised Eaton Vance's international
equity funds since 1992. LGM's core investment team consists of fourteen
experienced investment professionals who have worked together over a number of
years successfully managing client portfolios in non-U.S. stock markets. The
team has a unique knowledge of, and experience with, Asian and emerging
markets. LGM analysts cover Asia, the India subcontinent, Russia and Eastern
Europe, Latin America, Australia and New Zealand from offices in Hong Kong,
London and Mumbai. LGM is ultimately controlled by the Hon. Robert Lloyd
George, President of the Portfolio and Chairman and Chief Executive Officer of
the Adviser. LGM's only business is portfolio management. Eaton Vance's parent
is a shareholder of LGM.
The Advisers and LGM have adopted a conservative management style,
providing a blend of Asian and multinational expertise with the most rigorous
international standards of fundamental security analysis. Although focused
primarily in Asia, the Advisers and LGM maintain a network of international
contacts in order to monitor international economic and stock market trends
and offer clients a global management service.
The directors of LGM-HK are the Honourable Robert Lloyd George, William
Walter Raleigh Kerr, M.F. Tang, Scobie Dickinson Ward, Pamela Chan and Adaline
Mang-Yee Ko. The Hon. Robert Lloyd George is Chairman and Chief Executive
Officer of each Adviser and Mr. Kerr is Chief Operating Officer of each
Adviser. The directors of LGIM-B are the Honorable Robert Lloyd George,
William Walter Raleigh Kerr, Scobie Dickinson Ward, M.F. Tang, Pamela Chan,
Adaline Mang-Yee Ko, Peter Bubenzer and Judith Collis. The business address of
the first six individuals is 3808 One Exchange Square, Central, Hong Kong and
of the last two is Cedar House, 41 Cedar Avenue, Hamilton HM 12, Bermuda.
Adaline Mang-Yee Ko is a director of LGM and manages the Portfolio. She
was born in 1943 and educated at University of Birmingham, England and at
London Business School, where she received her MBA. Ms. Ko has over 14 years
experience working with Far East Asian equities. From 1982-1988, she worked at
Save & Prosper Group Ltd. as an investment manager. In 1988, Ms. Ko
transferred to Robert Fleming & Co. Ltd. In 1990, she was promoted to Director
of Fleming Investment Management Ltd. In 1992, she was promoted to Head of the
Pacific Region Portfolios Group where she supervised a team of 5 with
responsibility for over $1.5 billion in assets under management. Ms. Ko joined
LGM in 1995.
The Advisers follow a common investment philosophy, striving to identify
companies with outstanding management and earnings growth potential by
following a disciplined management style, adhering to the most rigorous
international standards of fundamental security analysis, placing heavy
emphasis on research, visiting every company owned, and closely monitoring
political and economic developments.
ADMINISTRATIVE SERVICES. 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 ............................. 0.16667
As of August 31, 1999, the Portfolio had net assets of $168,101,708. For
the three fiscal years ended August 31, 1999, Eaton Vance earned
administration fees of $399,310, $700,907 and $1,295,045, respectively,
(equivalent to 0.25% of the Portfolio's average daily net assets for each such
year).
As of August 31, 1999, the Fund had net assets of $166,317,022. For the
three fiscal years ended August 31, 1999, Eaton Vance earned management fees
of $394,743, $695,437 and $722,858, respectively (equivalent to 0.25% of the
Fund's average daily net assets for each such year).
Eaton Vance's management contract with the Fund and administration
agreement with the Portfolio will each remain in effect from year to year for
so long as such continuance is approved annually by the vote of a majority of
the Trustees of the Trust or the Portfolio, as the case may be. Each agreement
may be terminated at any time without penalty on sixty days' written notice by
the Board of Trustees of either party thereto, or by a vote of a majority of
the outstanding voting securities of the Fund or the Portfolio, as the case
may be. Each agreement will terminate automatically in the event of its
assignment. Each agreement provides that, in the absence of Eaton Vance's
willful misfeasance, bad faith, gross negligence or reckless disregard of its
obligations or duties to the Fund or the Portfolio under such contract or
agreement, Eaton Vance will not be liable to the Fund or the Portfolio for any
loss incurred. Each agreement was initially approved by the Trustees,
including the noninterested Trustees, of the Trust or the Portfolio which is a
party thereto at meetings held on September 8, 1992 and on October 8, 1992,
respectively, of the Trust and the Portfolio.
INFORMATION ABOUT EATON VANCE. Eaton Vance is a business trust organized under
Massachusetts law. Eaton Vance, Inc. ("EV") serves as trustee of Eaton Vance.
Eaton Vance and EV are wholly-owned subsidiaries of Eaton Vance Corporation
("EVC"), a Maryland corporation and publicly-held holding company. EVC through
its subsidiaries and affiliates engages primarily in investment management,
administration and marketing activities. The Directors of EVC are James B.
Hawkes, John G.L. Cabot, John M. Nelson, Vincent M. O'Reilly and Ralph Z.
Sorenson. All of the issued and outstanding shares of Eaton Vance 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, the Voting Trustees of which are Messrs. Hawkes, Jeffrey P.
Beale, Alan R. Dynner, Thomas E. Faust, Jr., Thomas J. Fetter, Scott H. Page,
Duncan W. Richardson, William M. Steul, Payson F. Swaffield, Michael W.
Weilheimer, and Wharton P. Whitaker (all of whom are officers of Eaton Vance).
The Voting Trustees have unrestricted voting rights for the election of
Directors of EVC. All of the outstanding voting trust receipts issued under
said Voting Trust are owned by certain of the officers of BMR and Eaton Vance
who are also officers, or officers and Directors of EVC and EV. As indicated
under "Management and Organization", all of the officers of the Trust (as well
as Mr. Hawkes who is also a Trustee) hold positions in the Eaton Vance
organization.
EXPENSES. The Fund and Portfolio are responsible for all expenses not
expressly stated to be payable by another party (such as the investment
adviser under the Investment Advisory Agreement, Eaton Vance under the
management contract and administration agreement or the principal underwriter
under the Distribution Agreement). In the case of expenses incurred by the
Trust, the Fund is responsible for its pro rata share of those expenses. The
only expenses of the Fund allocated to a particular class are those incurred
under the Distribution Plan applicable to that class and those resulting from
the fee paid to the principal underwriter for repurchase transactions.
OTHER SERVICE PROVIDERS
PRINCIPAL UNDERWRITER. Eaton Vance Distributors, Inc. ("EVD"), The Eaton Vance
Building, 255 State Street, Boston, MA 02109, is the Fund's principal
underwriter. The principal underwriter acts as principal in selling shares
under a Distribution Agreement with the Trust. The expenses of printing copies
of prospectuses used to offer shares and other selling literature and of
advertising are borne by the principal underwriter. The fees and expenses of
qualifying and registering and maintaining qualifications and registrations of
the Fund and its shares under federal and state securities laws are borne by
the Fund. The Distribution Agreement as it applies to Class A shares is
renewable annually by the Board of Trustees of the Trust (including a majority
of the noninterested Trustees) may be terminated on six months' notice by
either party and is automatically terminated upon assignment. The Distribution
Agreement as it applies to Class B and Class C shares is renewable annually by
the Trust's Board of Trustees (including a majority of the noninterested
Trustees who have no direct or indirect financial interest in the operation of
the 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 shares of the relevant class or on six months' notice by the
principal underwriter and is automatically terminated upon assignment. The
principal underwriter distributes shares on a "best efforts" basis under which
it is required to take and pay for only such shares as may be sold. The
principal underwriter allows investment dealers discounts from the applicable
public offering price which are alike for all investment dealers. See "Sales
Charges." EVD is a wholly-owned subsidiary of EVC. Mr. Hawkes is a Vice
President and Director and Messrs. Dynner and O'Connor are Vice Presidents of
EVD.
CUSTODIAN. Investors Bank & Trust Company ("IBT"), 200 Clarendon Street,
Boston, MA 02116, serves as custodian to the Fund and Portfolio. IBT has the
custody of all cash and securities representing the Fund's interest in the
Portfolio, has custody of the Portfolio's assets, maintains the general ledger
of the Portfolio and the Fund and computes the daily net asset value of
interests in the Portfolio and the net asset value of shares of the Fund. In
such capacity it attends to details in connection with the sale, exchange,
substitution, transfer or other dealings with the Portfolio's investments,
receives and disburses all funds and performs various other ministerial duties
upon receipt of proper instructions from the Trust and the Portfolio. IBT also
provides services in connection with the preparation of shareholder reports
and the electronic filing of such reports with the SEC. EVC and its affiliates
and their officers and employees from time to time have transactions with
various banks, including IBT. It is Eaton Vance's opinion that the terms and
conditions of such transactions were not and will not be influenced by
existing or potential custodial or other relationships between the Fund or the
Portfolio and such banks.
INDEPENDENT ACCOUNTANTS. Deloitte & Touche LLP, 200 Berkeley Street, Boston,
MA 02116, are the independent accountants of the Fund and the Portfolio,
providing audit services, tax return preparation, and assistance and
consultation with respect to the preparation of filings with the SEC.
TRANSFER AGENT. PFPC Global Fund Services, P.O. Box 5123, Westborough, MA
01581-5123, serves as transfer and dividend disbursing agent for the Fund.
PURCHASING AND REDEEMING SHARES
CALCULATION OF NET ASSET VALUE. The net asset value of the Portfolio is
computed by IBT (as agent and custodian for the Portfolio) by subtracting the
liabilities of the Portfolio from the value of its total assets. The Fund and
the Portfolio will be closed for business and will not price their respective
shares or interests on the following business holidays: New Year's Day, Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day.
Each investor in the Portfolio, including the Fund, may add to or reduce
its investment in the Portfolio on each day the Exchange is open for trading
("Portfolio Business Day") as of the close of regular trading on the Exchange
(the "Portfolio Valuation Time"). The value of each investor's interest in the
Portfolio will be determined by multiplying the net asset value of the
Portfolio by the percentage, determined on the prior Portfolio Business Day,
which represented that investor's share of the aggregate interests in the
Portfolio on such prior day. Any additions or withdrawals for the current
Portfolio Business Day will then be recorded. Each investor's percentage of
the aggregate interest in the Portfolio will then be recomputed as the
percentage equal to a fraction (i) the numerator of which is the value of such
investor's investment in the Portfolio as of the close of Portfolio Valuation
Time on the prior Portfolio Business Day plus or minus, as the case may be,
that amount of any additions to or withdrawals from the investor's investment
in the Portfolio on the current Portfolio Business Day, and (ii) the
denominator of which is the aggregate net asset value of the Portfolio as of
the Portfolio Valuation Time on the prior Portfolio Business Day plus or
minus, as the case may be, the amount of the net additions to or withdrawals
from the aggregate investment in the Portfolio on the current Portfolio
Business Day by all investors in the Portfolio. The percentage so determined
will then be applied to determine the value of the investor's interest in the
Portfolio for the current Portfolio Business Day.
The Trustees of the Portfolio have established the following procedures
for the fair valuation of the Portfolio's assets under normal market
conditions. Marketable securities listed on foreign or U.S. securities
exchanges or in the NASDAQ National Market System generally are valued at
closing sale prices or, if there were no sales, at the mean between the
closing bid and asked prices therefor on the exchange where such securities
are principally traded or on such National Market System (such prices may not
be used, however, where an active over-the-counter market in an exchange
listed security better reflects current market value). Unlisted or listed
securities for which closing sale prices are not available are valued at the
mean between the latest bid and asked prices. An option is valued at the last
sale price as quoted on the principal exchange or board of trade on which such
option or contract is traded, or in the absence of a sale, the mean between
the last bid and asked price. Futures positions on securities or currencies
are generally valued at closing settlement prices. 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 shares generally are computed as of such times.
Occasionally, events affecting the value of foreign securities may occur
between such times and the close of the Exchange which will not be reflected
in the computation of the Portfolio's net asset value (unless the Portfolio
deems that such events would materially affect its net asset value, in which
case an adjustment would be made and reflected in such computation). Foreign
securities and currency held by the Portfolio will be valued in U.S. dollars;
such values will be computed by the custodian based on foreign currency
exchange rate quotations supplied by Reuters Information Service.
ADDITIONAL INFORMATION ABOUT PURCHASES. Fund shares are continuously offered
through investment dealers which have entered agreements with the principal
underwriter. The public offering price is the net asset value next computed
after receipt of the order, plus, in the case of Class A shares, a variable
percentage (sales charge) depending upon the amount of purchase as indicated
by the sales charge table set forth in the prospectus. The sales charge is
divided between the principal underwriter and the investment dealer. The
sales charge table is applicable to purchases of a Fund alone or in
combination with purchases of certain other funds offered by the principal
underwriter, made at a single time by (i) an individual, or an individual, his
spouse and their children under the age of twenty-one, purchasing shares for
his or their own account, and (ii) a trustee or other fiduciary purchasing
shares for a single trust estate or a single fiduciary account. The table is
also presently applicable to (1) purchases of Class A shares pursuant to a
written Statement of Intention; or (2) purchases of Class A shares pursuant to
the Right of Accumulation and declared as such at the time of purchase. See
"Sales Charges".
In connection with employee benefit or other continuous group purchase
plans, 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 redempton by the Fund as described below.
SUSPENSION OF SALES. The Trust may, in its absolute discretion, suspend,
discontinue or limit the offering of one or more of its classes of shares at
any time. In determining whether any such action should be taken, the Trust's
management intends to consider all relevant factors, including (without
limitation) the size of the Fund or class, the investment climate and market
conditions, the volume of sales and redemptions of shares, and in the case of
Class B and Class C shares, the amount of uncovered distribution charges of
the principal underwriter. The Class B and Class C Distribution Plans may
continue in effect and payments may be made under the Plans following any such
suspension, discontinuance or limitation of the offering of shares; however,
there is no contractual obligation to continue any Plan for any particular
period of time. Suspension of the offering of shares would not, of course,
affect a shareholder's ability to redeem shares.
ACQUIRING FUND SHARES IN EXCHANGE FOR SECURITIES. IBT, as escrow agent, will
receive securities acceptable to Eaton Vance, as administrator, in exchange
for Fund shares. The minimum value of securities (or securities and cash)
accepted for deposit is $5,000. Securities accepted will be sold on the day of
their receipt or as soon thereafter as possible. The number of Fund shares to
be issued in exchange for securities will be the aggregate proceeds from the
sale of such securities, divided by the applicable public offering price of
Class A shares or net asset value of Class B and Class C shares on the day
such proceeds are received. Eaton Vance will use reasonable efforts to obtain
the then current market price for such securities but does not guarantee the
best available price. Eaton Vance will absorb any transaction costs, such as
commissions, on the sale of securities. Securities determined to be acceptable
should be transferred via book entry or physically delivered, in proper form
for transfer, through an investment dealer, together with a completed and
signed Letter of Transmittal in approved form (available from investment
dealers). Investors who are contemplating an exchange of securities for
shares, 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
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.
ADDITIONAL INFORMATION ABOUT REDEMPTIONS. The right to redeem shares of the
Fund can be suspended and the payment of the redemption price deferred when
the Exchange is closed (other than for customary weekend and holiday
closings), during periods when trading on the Exchange is restricted as
determined by the SEC, or during any emergency as determined by the SEC which
makes it impracticable for the Portfolio to dispose of its securities or value
its assets, or during any other period permitted by order of the SEC for the
protection of investors.
While normally payments will be made 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 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.
Due to the high cost of maintaining small accounts, the Trust 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
Trust if the cause of the low account balance was a reduction in the net asset
value of shares. No CDSC will be imposed with respect to such involuntary
redemptions.
SYSTEMATIC WITHDRAWAL PLAN. The transfer agent will send to the shareholder
regular monthly or quarterly payments of any permitted amount designated by
the shareholder based upon the value of the shares held. The checks will be
drawn from share redemptions and hence, may require the recognition of taxable
gain or loss. Income dividends and capital gains distributions in connection
with withdrawal plan 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. The shareholder, the transfer agent
or the principal underwriter will be able to terminate the withdrawal plan at
any time without penalty.
SALES CHARGES
DEALER COMMISSIONS. The principal underwriter may, from time to time, at its
own expense, provide additional incentives to investment dealers 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 investment dealers 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 investment dealers. The principal underwriter
may allow, upon notice to all investment dealers with whom it has agreements,
discounts up to the full sales charge during the periods specified in the
notice. During periods when the discount includes the full sales charge, such
investment dealers may be deemed to be underwriters as that term is defined in
the Securities Act of 1933.
SALES CHARGE WAIVERS. Class A shares may be sold at net asset value to current
and retired Directors and Trustees of Eaton Vance funds, including the
Portfolio; to clients and current and retired officers and employees of Eaton
Vance, its affiliates and other investment advisers of Eaton Vance sponsored
funds; to officers and employees of IBT and the transfer agent; to persons
associated with law firms, consulting firms and others providing services to
Eaton Vance and the Eaton Vance Funds; and to such persons' spouses, parents,
siblings and children and their beneficial accounts. Such shares may also be
issued at net asset value (1) in connection with the merger of an investment
company (or series or class thereof) with the Fund (or class thereof), (2) to
investors making an investment as part of a fixed fee program whereby an
entity unaffiliated with the investment adviser provides multiple investment
services, such as management, brokerage and custody, and (3) to investment
advisors, financial planners or other intermediaries who place trades for
their own accounts or the accounts of their clients and who charge a
management, consulting or other fee for their services; clients of such
investment advisors, financial planners or other intermediaries who place
trades for their own accounts if the accounts are linked to the master account
of such investment advisor, financial planner or other intermediary on the
books and records of the broker or agent. Class A shares may also be sold to
registered representatives and employees of investment dealers and bank
employees who refer customers to registered representatives of investment
dealers. Class A shares may be sold at net asset value to any investment
advisory, agency, custodial or trust account managed or administered by Eaton
Vance or by any parent, subsidiary or other affiliate of Eaton Vance. Class A
shares are offered at net asset value to the foregoing persons and in the
foregoing situations because either (i) there is no sales effort involved in
the sale of shares or (ii) the investor is paying a fee (other than the sales
charge) to the investment dealer involved in the sale.
The CDSC applicable to Class B shares will be waived in connection with
minimum required distributions from tax-sheltered retirement plans by applying
the rate required to be withdrawn under the applicable rules and regulations
of the Internal Revenue Service to the balance of Class B shares in your
account.
STATEMENT OF INTENTION. If it is anticipated that $50,000 or more of Class A
shares and shares of other funds exchangeable for Class A shares of another
Eaton Vance fund will be purchased within a 13-month period, a Statement of
Intention should be signed so that shares may be obtained at the same reduced
sales charge as though the total quantity were invested in one lump sum.
Shares held under Right of Accumulation (see below) as of the date of the
Statement will be included toward the completion of the Statement. The
Statement authorizes the transfer agent to hold in escrow sufficient shares
(5% of the dollar amount specified in the Statement) which can be redeemed to
make up any difference in sales charge on the amount intended to be invested
and the amount actually invested. Execution of a Statement does not obligate
the shareholder to purchase or the Fund to sell the full amount indicated in
the Statement, and should the amount actually purchased during the 13-month
period be more or less than that indicated on the Statement, price adjustments
will be made. Any investor considering signing a Statement of Intention should
read it carefully.
RIGHT OF ACCUMULATION. The applicable sales charge level for the purchase of
Class A shares is calculated by taking the dollar amount of the current
purchase and adding it to the value (calculated at the maximum current
offering price) of the Class A shares the shareholder owns in his or her
account(s) in the Fund, and shares of other funds exchangeable for Class A
shares. The sales charge on the shares being purchased will then be at the
rate applicable to the aggregate. Shares purchased (i) by an individual, his
or her spouse and their children under the age of twenty-one, and (ii) by a
trustee, guardian or other fiduciary of a single trust estate or a single
fiduciary account, will be combined for the purpose of determining whether a
purchase will qualify for the Right of Accumulation and if qualifying, the
applicable sales charge level. For any such discount to be made available, at
the time of purchase a purchaser or his or her investment dealer must provide
the principal underwriter (in the case of a purchase made through an
investment dealer) or the transfer agent (in the case of an investment made by
mail) with sufficient information to permit verification that the purchase
order qualifies for the accumulation privilege. Confirmation of the order is
subject to such verification. The Right of Accumulation privilege may be
amended or terminated at any time as to purchases occurring thereafter.
TAX-SHELTERED RETIREMENT PLANS. Class A and Class C shares are available for
purchase in connection with certain tax-sheltered retirement plans. 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. Participant accounting
services (including trust fund reconciliation services) will be offered only
through third party recordkeepers and not by the principal underwriter. Under
all plans, dividends and distributions will be automatically reinvested in
additional shares.
DISTRIBUTION PLANS. The Trust has in effect a compensation-type Distribution
Plan (the "Class A Plan") for the Fund's Class A shares pursuant to Rule 12b-1
under the 1940 Act. The Class A Plan provides for the payment of a monthly
distribution fee to the principal underwriter in an amount equal to the
aggregate of (a) .50% of that portion of Class A average daily net assets for
any fiscal year which is attributable to its shares which have remained
outstanding for less than one year and (b) .25% of that portion of Class A
average daily net assets for any fiscal year which is attributable to its
shares which have remained outstanding for more than one year. Aggregate
payments to the principal underwriter under the Class A Plan are limited to
those permissible, pursuant to a rule of the National Association of
Securities Dealers, Inc.
The Class A Plan also provides that the Class will pay a quarterly service
fee to the principal underwriter in an amount equal on an annual basis to .25%
of that portion of its average daily net assets for any fiscal year which is
attributable to Class A shares which have remained outstanding for more than
one year; from such service fee the principal underwriter expects to pay a
quarterly service fee to investment dealers, as compensation for providing
personal services and/or the maintenance of shareholder accounts, with respect
to shares sold by such dealers which have remained outstanding for more than
one year. Service fee payments to investment dealers will be in addition to
sales charges on Class A shares which are reallowed to investment dealers. If
the Class A Plan is terminated or not continued in effect, the Class has no
obligation to reimburse the principal underwriter for amounts expended by the
principal underwriter in distributing Class A shares. For the distribution
fees paid by Class A shares, see Appendix A.
The Trust also has in effect compensation-type Distribution Plans (the
"Class B and Class C Plans") pursuant to Rule 12b-1 under the 1940 Act for the
Fund's Class B and Class C shares. The Class B and Class C Plans are designed
to permit an investor to purchase shares through an investment dealer without
incurring an initial sales charge and at the same time permit the principal
underwriter to compensate investment dealers in connection therewith. The
Class B and Class C Plans provide that the Fund will pay sales commissions and
distribution fees to the principal underwriter only after and as a result of
the sale of shares. On each sale of shares (excluding reinvestment of
distributions), the Fund will pay the principal underwriter amounts
representing (i) sales commissions equal to 5% for Class B shares and 6.25%
for Class C shares 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. To pay these amounts, each Class pays the principal underwriter a
fee, accrued daily and paid monthly, at an annual rate not exceeding .75% of
its average daily net assets to finance the distribution of its shares. Such
fees compensate the principal underwriter for sales commissions paid by it to
investment dealers on the sale of shares and for interest expenses. For sales
of Class B shares, the principal underwriter uses its own funds to pay sales
commissions (except on exchange transactions and reinvestments) to investment
dealers at the time of sale equal to 4% of the purchase price of the Class B
shares sold by such dealers. For Class C shares, the principal underwriter
currently expects to pay to an investment dealer (a) sales commissions (except
on exchange transactions and reinvestments) at the time of sale equal to .75%
of the purchase price of the shares sold by such dealer, and (b) monthly sales
commissions approximately equivalent to 1/12 of .75% of the value of shares
sold by such dealer and remaining outstanding for at least one year. During
the first year after a purchase of Class C shares, the principal underwriter
will retain the sales commission as reimbursement for the sales commissions
paid to investment dealers at the time of sale. CDSCs paid to the principal
underwriter will be used to reduce amounts owed to it. The Class B and Class C
Plans provide that the Fund 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. CDSCs and accrued amounts will be paid
by the Trust to the principal underwriter whenever there exist uncovered
distribution charges. Because payments to the principal underwriter under the
Class B and Class C Plans are limited, uncovered distribution charges (sales
commissions paid by the principal underwriter plus interest, less the above
fees and CDSCs received by it) may exist indefinitely. For the sales
commissions and CDSCs paid on (and uncovered distribution charges of) Class B
and Class C shares, see Appendix B and Appendix C, respectively.
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 Class B and Class C Plans by the Trust to the principal
underwriter and CDSCs theretofore paid or payable to the principal underwriter
will be subtracted from such distribution charges; if the result of such
subtraction is positive, a distribution fee (computed at 1% over the prime
rate then reported in The Wall Street Journal) will be computed on such amount
and added thereto, with the resulting sum constituting the amount of
outstanding uncovered distribution charges with respect to such day. The
amount of outstanding uncovered distribution charges of the principal
underwriter calculated on any day does not constitute a liability recorded on
the financial statements of the Fund.
The amount of uncovered distribution charges of the principal underwriter
at any particular time depends upon various changing factors, including the
level and timing of sales of shares, the nature of such sales (i.e., whether
they result from exchange transactions, reinvestments or from cash sales
through investment dealers), the level and timing of redemptions of shares
upon which a CDSC will be imposed, the level and timing of redemptions of
shares upon which no CDSC will be imposed (including redemptions of shares
pursuant to the exchange privilege which result in a reduction of uncovered
distribution charges), changes in the level of the net assets of the Class,
and changes in the interest rate used in the calculation of the distribution
fee under the Class B and Class C Plans.
Distribution of Class B and Class C shares of the Fund by the principal
underwriter will also be encouraged by the payment by LGIM-B to the principal
underwriter of amounts equivalent to .15% for Class B and .125% for Class C of
each Class's annual average daily net assets. The aggregate amounts of such
payments are a deduction in calculating the outstanding uncovered distribution
charges of the principal underwriter under the Class B and Class C Plans and,
therefore, will benefit shareholders when such charges exist. Such payments
will be made in consideration of the principal underwriter's distribution
efforts.
The Class B and Class C Plans also authorize each Class to make payments
of service fees to the principal underwriter, investment dealers and other
persons in amounts not exceeding .25% of its average daily net assets for
personal services, and/or the maintenance of shareholder accounts. This fee is
paid quarterly in arrears based on the value of Class B shares sold by such
persons and remaining outstanding for at least twelve months. For Class C,
investment dealers currently receive (a) a service fee (except on exchange
transactions and reinvestments) at the time of sale equal to .25% of the
purchase price of the Class C shares sold by such dealer, and (b) monthly
service fees approximately equivalent to 1/12 of .25% of the value of Class C
shares sold by such dealer and remaining outstanding for at least one year.
During the first year after a purchase of Class C shares, the principal
underwriter will retain the service fee as reimbursement for the service fee
payment made to investment dealers at the time of sale. For the service fees
paid by Class B and Class C shares, see Appendix B and Appendix C,
respectively.
Currently, payments of sales commissions and distribution fees and of
service fees equal 1% of a Class's average daily net assets per annum. The
Trust believes that the combined rate of all these payments may be higher than
the rate of payments made under distribution plans adopted by other investment
companies pursuant to Rule 12b-1. Although the principal underwriter will use
its own funds (which may be borrowed from banks) to pay sales commissions at
the time of sale, it is anticipated that the Eaton Vance organization will
profit by reason of the operation of the Class B and Class C Plans through an
increase in the Fund's assets (thereby increasing the advisory fee payable to
BMR by the Portfolio) resulting from sale of shares and through the amounts
paid to the principal underwriter, including CDSCs, pursuant to the Plans. The
Eaton Vance organization may be considered to have realized a profit under the
Class B and Class C Plans if at any point in time the aggregate amounts
theretofore received by the principal underwriter pursuant to the Class B or
Class C Plan and from CDSCs have exceeded the total expenses theretofore
incurred by such organization in distributing shares. 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 Trust.
The Plans continue in effect from year to year so long as such continuance
is approved at least annually by the vote of both a majority of (i) the
noninterested Trustees of the Trust who have no direct or indirect financial
interest in the operation of the Plan or any agreements related to the Plan
(the "Plan Trustees") and (ii) all of the Trustees then in office. Each Plan
may be terminated at any time by vote of a majority of the Plan Trustees or by
a vote of a majority of the outstanding voting securities of the applicable
Class. Each Plan requires quarterly Trustee review of a written report of the
amount expended under the Plan and the purposes for which such expenditures
were made. The Plans may not be amended to increase materially the payments
described therein without approval of the shareholders of the affected Class
and the Trustees. So long as a Plan is in effect, the selection and nomination
of the noninterested Trustees shall be committed to the discretion of such
Trustees. The Class A, Class B and Class C Plans were initially approved by
the Trustees, including the Plan Trustees, on June 23, 1997.
The Trustees of the Trust believe that each Plan will be a significant
factor in the expected growth of each Fund's assets, and will result in
increased investment flexibility and advantages which have benefitted and will
continue to benefit the Fund and its shareholders. Payments for sales
commissions and distribution fees made to the principal underwriter under the
Class B and Class C Plans will compensate the principal underwriter for its
services and expenses in distributing those classes of shares. Service fee
payments made to the principal underwriter and investment dealers provide
incentives to provide continuing personal services to investors and the
maintenance of shareholder accounts. By providing incentives to the principal
underwriter and investment dealers, each 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 each
Plan will benefit the Fund and its shareholders.
PERFORMANCE
Average annual total return is determined separately for each Class of the
Fund by multiplying a hypothetical initial purchase order of $1,000 by the
average annual compound rate of return (including capital appreciation/
depreciation, and distributions paid and reinvested) for the stated period and
annualizing the results. The calculation assumes (i) that all distributions
are reinvested at net asset value on the reinvestment dates during the period,
(ii) the deduction of the maximum sales charge from the initial $1,000
purchase order for Class A shares, (iii) a complete redemption of the
investment, and (iv) the deduction of any CDSC at the end of the period. The
Fund may also publish total return figures for each class based on reduced
sales charges or at net asset value. These returns would be lower if the full
sales charge was imposed. For information concerning the total return of the
Classes of the Fund, see Appendix A, Appendix B and Appendix C.
The Fund's performance may be compared in publications to the performance
of various indices and investments for which reliable data is available, and
to averages, performance rankings and/or ratings or other information prepared
by recognized mutual fund statistical services. The Fund's performance may
differ from that of other investors in the Portfolio, including other
investment companies.
Total return may be compared to relevant indices, such as the Consumer
Price Index and various domestic and foreign securities indices. The Fund's
total return and comparisons with these indices may be used in advertisements
and in information furnished to present or prospective shareholders. In
addition, evaluations of the Fund's performance or rankings of mutual funds
(which include the Fund) made by independent sources may be used in
advertisements and in information furnished to present or prospective
shareholders. Information, charts and illustrations showing the effect of
compounding interest or relating to inflation and taxes (including their
effects on the dollar and the return on stocks and other investment vehicles)
may also be included in advertisements and materials furnished to present and
prospective investors.
Information used in advertisements and materials furnished to present or
prospective shareholders may include descriptions of the economies of China
and countries in the China region. Such descriptions may include discussions
of developments in such economies; statistical information relating to China
and China region countries, companies located in such countries and the stock
markets of such countries; and opinions of the Adviser. Information provided
to present and prospective shareholders may also include descriptions of the
Adviser's investment experience and the benefits of global investing.
Information used in advertisements and in materials furnished to present
or prospective shareholders may include statistics, data and performance
studies prepared by independent organizations or included in various
publications reflecting the investment performance or return achieved by
various classes and types of investments (e.g., common stocks, small company
stocks, long-term corporate bonds, long-term government bonds, intermediate-
term government bonds, U.S. Treasury bills) over various periods of time. This
information may be used to illustrate the benefits of long-term investments in
common stocks. From time to time, information about the portfolio allocation,
portfolio turnover and holdings of the Portfolio may be included in
advertisements and other material furnished to present and prospective
shareholders.
Information used in advertisements and in material provided to present and
prospective shareholders may include descriptions of Lloyd George, Eaton Vance
and other Fund and Portfolio service providers, their investment styles, other
investment products, personnel and Fund distribution channels.
Information used in advertisements and materials furnished to present and
prospective investors may include statements or illustrations relating to the
appropriateness of certain types of securities and/or mutual funds to meet
specific financial goals. Such information may address:
-- cost associated with aging parents;
-- funding a college education (including its actual and estimated cost);
-- health care expenses (including actual and projected expenses);
-- long-term disabilities (including the availability of, and coverage
provided by, disability insurance); and
-- retirement (including the availability of social security benefits, the
tax treatment of such benefits and statistics and other information
relating to maintaining a particular standard of living and outliving
existing assets).
Such information may also address different methods for saving money and
the results of such methods, as well as the benefits of investing in equity
securities. Such information may describe: the potential for growth; the
performance of equities as compared to other investment vehicles; and the
value of investing as early as possible and regularly, as well as staying
invested. The benefits of investing in equity securities by means of a mutual
fund may also be included (such benefits may include diversification,
professional management and the variety of equity mutual fund products).
Information in advertisements and materials furnished to present and
prospective investors may include profiles of different types of investors
(i.e., investors with different goals and assets) and different investment
strategies for meeting specific financial goals. Such information may provide
hypothetical illustrations which include: results of various investment
strategies; performance of an investment in the Fund over various time
periods; and results of diversifying assets among several investments with
varying performance. Information in advertisements and materials furnished to
present and prospective investors may also include quotations (including
editorial comments) and statistics concerning investing in securities, as well
as investing in particular types of securities and the performance of such
securities.
The Trust (or Principal Underwriter) 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 Trust (or Principal Underwriter) 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
Each series of the Trust is treated as a separate entity for accounting
and tax purposes. The Fund has elected to be treated, and intends to qualify
each year as a regulated investment company ("RIC") under the Code.
Accordingly, the Fund intends to satisfy certain requirements relating to
sources of its income and diversification of its assets and to distribute
substantially all of its net income and net short-term and long-term capital
gains in accordance with the timing requirements imposed by the Code, so as to
maintain its RIC status and to avoid paying any federal income or excise tax.
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 also satisfy these requirements. The Portfolio will
allocate at least annually among its investors, including the Fund, the
Portfolio's net investment income, net realized capital gains, and any other
items of income, gain, loss, deduction or credit. The Portfolio will make
allocations to the Fund in a manner intended to comply 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 (i) will be deemed to own its proportionate share of each of the
assets of the Portfolio and (ii) will be entitled to the gross income of the
Portfolio attributable to such share.
In order to avoid incurring a federal excise tax obligation, the Code
requires that the Fund distribute (or be deemed to have distributed) by
December 31 of each calendar year (i) at least 98% of its ordinary income for
such year, (ii) at least 98% of its capital gain net income (which is 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
(iii) 100% of any income and capital gains from the prior year (as previously
computed) that was not paid out during such year and on which the Fund paid no
federal income tax. Under current law, provided that the Fund qualifies as a
RIC and the Portfolio is treated as a partnership for Massachusetts and
federal tax purposes, neither the Fund nor the Portfolio should be liable for
any income, corporate excise or franchise tax in the Commonwealth of
Massachusetts.
Certain 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 foreign currency related options, futures or forward
contracts or foreign currency may be treated as ordinary income and losses
under special tax rules. Certain options, futures or forward contracts of the
Portfolio may be required to be marked to market (i.e., treated as if closed
out) on the last day of each taxable year, and any gain or loss realized with
respect to these contracts may be required to be treated as 60% long-term and
40% short-term gain or loss or, in the case of certain contracts relating to
foreign currency, as ordinary income or loss. Positions of the Portfolio in
securities and offsetting options, futures or forward contracts may be treated
as "straddles", which are subject to tax rules that may cause deferral of
Portfolio losses, adjustments in the holding periods of Portfolio securities,
and other changes in the short-term or long-term characterization of capital
gains and losses, the effect of which may be to change 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 ability to qualify 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 in some cases. 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
(the "IRS") pursuant to which shareholders of the Fund will be required to (i)
include in ordinary gross income (in addition to dividends and distributions
actually received) their pro rata shares of qualified foreign income taxes
paid by the Portfolio and allocated to the Fund even though not actually
received by them, and (ii) treat such respective pro rata portions as foreign
income taxes paid by them. Shareholders may then deduct such pro rata portions
of qualified foreign income taxes in computing their taxable incomes, or,
alternatively, use them as foreign tax credits, subject to applicable
limitations, against their U.S. federal income taxes. Shareholders who do not
itemize deductions for federal income tax purposes will not, however, be able
to deduct their pro rata portion of foreign taxes deemed paid by the Fund,
although such shareholders will be required to include their shares of such
taxes in gross income. Shareholders who claim a foreign tax credit for such
foreign taxes may be required to treat a portion of dividends received from
the Fund as a separate category of income for purposes of computing the
limitations on the foreign tax credit. Tax-exempt shareholders will ordinarily
not benefit from this election. Each year that the Fund files the election
described above, its shareholders will be notified of the amount of (i) each
shareholder's pro rata share of foreign income taxes paid by the Portfolio and
allocated to the Fund and (ii) the portion of Fund dividends which represents
income from each foreign country. If the Fund does not make this election, it
may deduct its allocated share of such taxes in computing the income it is
required to distribute.
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 gain over
net short-term capital loss earned by the Portfolio and allocated to the Fund,
taking into account any capital loss carryforwards that may be available, 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 of the Fund
with a tax holding period of 6 months or less will be treated as a long-term
capital loss to the extent of any distribution treated long-term capital gains
with respect to such shares. All or a portion of a loss realized upon a
redemption or other disposition of Fund shares may be disallowed under "wash
sale" rules if other shares of the Fund are purchased (whether through
reinvestment of dividends or otherwise) within 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.
Sales charges paid upon a purchase of shares of the Fund cannot be taken
into account for purposes of determining gain or loss on a redemption or
exchange of the shares before the 91st day after their purchase to the extent
a sales charge is reduced or eliminated in a subsequent acquisition of shares
of the Fund or of another fund pursuant to the Fund's reinvestment or exchange
privilege. Any disregarded amounts will result in an adjustment to the
shareholder's tax basis in some or all of any other shares acquired.
Amounts paid by the Fund to individuals and certain other shareholders who
have not provided the Fund with their correct taxpayer identification number
("TIN") and certain certifications required by the IRS, as well as
shareholders with respect to whom the Fund has received certain information
from the IRS or a broker, may be subject to "backup" withholding of federal
income tax arising from the Fund's dividends and other distributions as well
as the proceeds of redemption transactions (including repurchases and
exchanges), at a rate of 31%. An individual's TIN is generally his or her
social security number.
The foregoing discussion does not address the special tax rules applicable
to certain classes of investors, such as IRAs and other retirement plans, tax-
exempt entities, insurance companies and financial institutions. Shareholders
should consult their own tax advisers with respect to these or other special
tax rules that may apply in their particular situations, as well as the state,
local, and, where applicable, foreign tax consequences of investing in the
Fund.
PORTFOLIO SECURITY TRANSACTIONS
Decisions concerning the execution of portfolio security transactions by
the Portfolio, including the selection of the market and the broker-dealer
firm, are made by the Adviser.
The Adviser places the portfolio security transactions of the Portfolio
and of certain other accounts managed by the Adviser for execution with many
firms. The Adviser uses its best efforts to obtain execution of portfolio
transactions at prices which are advantageous to the Portfolio and (when a
disclosed commission is being charged) at reasonably competitive commission
rates. In seeking such execution, the Adviser will use its best judgment in
evaluating the terms of a transaction, and will give consideration to various
relevant factors, including without limitation the size and type of the
transaction, the general execution and operational capabilities of the broker-
dealer, the nature and character of the market for the security, the
confidentiality, speed and certainty of effective execution required for the
transaction, the reputation, reliability, experience and financial condition
of the broker-dealer, the value and quality of services rendered by the
broker-dealer in other transactions, and the reasonableness of the commission
or spread, 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 compensation was
reasonable in relation to the value of the brokerage and research services
provided. This determination may be made on the basis of either that
particular transaction or on the basis of the overall responsibilities which
the Adviser and its affiliates have for accounts over which they exercise
investment discretion. In making any such determination, the Adviser will not
attempt to place a specific dollar value on the brokerage and research
services provided or to determine what portion of the commission should be
related to such services. Brokerage and research services may include advice
as to the value of securities, the advisability of investing in, purchasing,
or selling securities, and the availability of securities or purchasers or
sellers of securities; furnishing analyses and reports concerning issuers,
industries, securities, economic factors and trends, portfolio strategy and
the performance of accounts; and effecting securities transactions and
performing functions incidental thereto (such as clearance and settlement);
and the "Research Services" referred to in the next paragraph.
It is a common practice in the investment advisory industry for the
advisers of investment companies, institutions and other investors to receive
research, statistical and quotation services, data, information and other
services, products and materials which assist such advisers in the performance
of their investment responsibilities ("Research Services") from broker-dealers
which execute portfolio transactions for the clients of such advisers and from
third parties with which such broker-dealers have arrangements. Consistent
with this practice, the Adviser may receive Research Services from broker-
dealer firms with which the Adviser places the portfolio transactions of the
Portfolio and from third parties with which these broker-dealers have
arrangements. These Research Services may include such matters as general
economic and market reviews, industry and company reviews, evaluations of
securities and portfolio strategies and transactions and recommendations as to
the purchase and sale of securities and other portfolio transactions,
financial, industry and trade publications, news and information services,
pricing and quotation equipment and services, and research oriented computer
hardware, software, data bases and services. Any particular Research Service
obtained through a broker-dealer may be used by the Adviser in connection with
client accounts other than those accounts which pay commissions to such
broker-dealer. Any such Research Service may be broadly useful and of value to
the Adviser in rendering investment advisory services to all or a significant
portion of its clients, or may be relevant and useful for the management of
only one client's account or of a few clients' accounts, or may be useful for
the management of merely a segment of certain clients' accounts, regardless of
whether any such account or accounts paid commissions to the broker-dealer
through which such Research Service was obtained. The advisory fee paid by the
Portfolio is not reduced because the Adviser receives such Research Services.
The Adviser evaluates the nature and quality of the various Research Services
obtained through broker-dealer firms and attempts to allocate sufficient
commissions to such firms to ensure the continued receipt of Research Services
which the Adviser believes are useful or of value to it in rendering
investment advisory services to its clients.
Subject to the requirement that the Adviser shall use its best efforts to
seek to execute portfolio security transactions of the Portfolio at
advantageous prices and at reasonably competitive commission rates or spreads,
the Adviser is authorized to consider as a factor in the selection of any
broker-dealer firm with whom Portfolio orders may be placed the fact that such
firm has sold or is selling shares of the Fund or of other investment
companies sponsored by Eaton Vance. This policy is not inconsistent with a
rule of the NASD, which rule provides that no firm which is a member of the
NASD shall favor or disfavor the distribution of shares of any particular
investment company or group of investment companies on the basis of brokerage
commissions received or expected by such firm from any source.
Securities considered as investments for the Portfolio may also be
appropriate for other investment accounts managed by the Adviser or its
affiliates. Whenever decisions are made to buy or sell securities by the
Portfolio and one or more of such other accounts simultaneously, the Adviser
will allocate the security transactions (including "hot" issues) in a manner
which it believes to be equitable under the circumstances. As a result of such
allocations, there may be instances where the Portfolio will not participate
in a transaction that is allocated among other accounts. If an aggregated
order cannot be filled completely, allocations will generally be made on a pro
rata basis. An order may not be allocated on a pro rata basis where, for
example: (i) consideration is given to portfolio managers who have been
instrumental in developing or negotiating a particular investment; (ii)
consideration is given to an account with specialized investment policies that
coincide with the particulars of a specific investment; (iii) pro rata
allocation would result in odd-lot or de minimis amounts being allocated to a
portfolio or other client; or (iv) where the Adviser reasonably determines
that departure from a pro rata allocation is advisable. While these
aggregation and allocation policies could have a detrimental effect on the
price or amount of the securities available to the Portfolio from time to
time, it is the opinion of the Trustees of the Trust and the Portfolio that
the benefits from the Adviser's organization outweigh any disadvantage that
may arise from exposure to simultaneous transactions.
For the three fiscal years ended August 31, 1999, the Portfolio paid
brokerage commissions of $563,163, $1,005,499 and $2,263,407, respectively,
with respect to portfolio transactions. Of this amount, approximately
$169,025, $555,173 and $1,181,469 was paid in respect of portfolio security
transactions aggregating approximately $173,073,398, $224,737,604 and
$272,549,565, respectively, to firms which provided some Research Services to
the Adviser's organization (although many such firms may have been selected in
any particular transaction primarily because of their execution capabilities).
FINANCIAL STATEMENTS
The audited financial statements of and the independent auditors' report
for the Fund and the Portfolio appear in the Fund's most recent annual report
to shareholders and are incorporated by reference into this SAI. A copy of the
Fund's most recent annual report accompanies this SAI. Consistent with
applicable law, duplicate mailings of shareholder reports and certain other
Fund information to shareholders residing at the same address may be
eliminated.
Registrant incorporates by reference the audited financial information for
the Fund and the Portfolio for the fiscal year ended August 31, 1999, as
previously filed electronically with the Commission (Accession No.
0000912057-99-002329).
<PAGE>
APPENDIX A
CLASS A FEES, PERFORMANCE AND OWNERSHIP
DISTRIBUTION AND SERVICE FEES
During the fiscal year ended August 31, 1999, Class A paid distribution
fees under the Plan to the prinicpal underwriter aggregating $178,870. During
the fiscal year ended August 31, 1999, Class A made service fee payments to
the principal underwriter and investment dealers aggregating $162,774, of
which $52,057 was paid to investment dealers and the balance of which was
retained by the principal underwriter.
PRINCIPAL UNDERWRITER
The total sales charges paid in connection with sales of Class A shares
during the fiscal years ended August 31, 1999 and 1998, were $62,370 and
$345,848, respectively, of which $8,434 and $47,702, respectively, was
received by the Principal Underwriter. For the fiscal years ended August 31,
1999 and 1998, Authorized Firms received $53,936 and $298,146, respectively,
from the total sales charges.
The Trust 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. For the fiscal year ended August 31,
1999, Class A paid the principal underwriter $6,680 for repurchase
transactions handled by it.
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return
on a hypothetical investment of $1,000 in a predecessor fund reorganized
September 1, 1997 into Class A shares for the periods shown in the table. The
"Value of Initial Investment" reflects the deduction of the maximum sales
charge of 5.75%. Past performance is no guarantee of future results.
Investment return and principal value will fluctuate; shares, when redeemed,
may be worth more or less than their original cost.
<TABLE>
VALUE OF $1,000 INVESTMENT
<CAPTION>
TOTAL RETURN TOTAL RETURN
EXCLUDING MAXIMUM INCLUDING MAXIMUM
VALUE OF VALUE OF SALES CHARGE SALES CHARGE
INVESTMENT INVESTMENT INITIAL INVESTMENT ------------------------------ ----------------------------
PERIOD DATE INVESTMENT ON 8/31/99 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
---------- ---------- ---------- ---------- -------------- -------------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of the Fund* 10/28/92 $942.51 $1,199.78 27.30% 3.59% 19.98% 2.70%
5 Years Ended
8/31/99 8/31/94 $942.41 $ 761.34 -19.21% -4.18% -23.87% -5.31%
1 Year Ended
8/31/99 8/31/98 $942.31 $1,565.94 66.18% 66.18% 56.59% 56.59%
*Investment operations began on October 28, 1992.
</TABLE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of December 1, 1999, the Trustees and officers of the Trust, as a
group, owned in the aggregate less than 1% of the outstanding Class A shares
of the Fund. As of December 1, 1999, Merrill Lynch, Pierce, Fenner & Smith,
Inc., Jacksonville, FL was the record owner of approximately 22.9% of the
outstanding Class A shares, which it held on behalf of its customers who are
the beneficial owners of such shares, and as to which they had voting power
under certain limited circumstances. To the knowledge of the Trust, no other
person owned of record or beneficially 5% or more of the Fund's outstanding
Class A shares as of such date.
<PAGE>
APPENDIX B
CLASS B FEES, PERFORMANCE AND OWNERSHIP
DISTRIBUTION AND SERVICE FEES
During the fiscal year ended August 31, 1999, the principal underwriter paid
to investment dealers sales commissions of $72,361 on sales of Class B shares.
During the same period, the Fund made distribution payments to the Principal
Underwriter under the Distribution Plan aggregating $651,261 and the principal
underwriter received approximately $393,000 in CDSCs imposed on early redeeming
shareholders. These distribution payments and CDSC payments reduced uncovered
distribution charges under the Plan. As at August 31, 1999, the outstanding
uncovered distribution charges of the principal underwriter calculated under the
Plan amounted to approximately $3,473,000 (which amount was equivalent to
approximately 3.7% of the net assets attributable to Class B on such day).
During the fiscal year ended August 31, 1999, Class B made service fee payments
to the principal underwriter and investment dealers aggregating $199,110, of
which $196,343 was paid to investment dealers and the balance of which was
retained by the principal underwriter.
PRINCIPAL UNDERWRITER
The Trust 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. For the fiscal year ended August 31,
1999, Class B paid the principal underwriter $9,837.50 for repurchase
transactions handled by it.
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return
on a hypothetical investment of $1,000 in Class B shares for the periods shown
in the table. The total return for Class B prior to June 7, 1993 reflects the
total return of another investment company that invested in the Portfolio
adjusted to reflect the Class B sales charge. This total return has not been
adjusted to reflect certain other expenses (such as distribution and/or
service fees). If such adjustments were made, the performance would be lower.
Past performance is no guarantee of future results. Investment return and
principal vaue will fluctuate; shares, when redeemed, may be worth more or
less than their original cost.
<TABLE>
VALUE OF A $1,000 INVESTMENT
<CAPTION>
VALUE OF VALUE OF
INVESTMENT INVESTMENT
BEFORE AFTER TOTAL RETURN BEFORE TOTAL RETURN AFTER
DEDUCTING THE DEDUCTING THE DEDUCTING THE CDSC DEDUCTING THE CDSC
INVESTMENT INVESTMENT AMOUNT OF CDSC CDSC ------------------------ -------------------------
PERIOD DATE INVESTMENT ON 8/31/99 ON 8/31/99 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
---------- ---------- ---------- ------------- ------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of the
Fund* 10/28/92 $1,000 $1,248.17 $1,248.17 24.82% 3.29% 24.82% 3.29%
5 Years
Ended
8/31/99 8/31/94 $1,000 $ 788.31 $ 772.72 -21.17% - 4.65% -22.73% - 5.03%
1 Year Ended
8/31/99 8/31/98 $1,000 $1,654.84 $1,604.84 65.48% 65.48% 60.48% 60.48%
*Predecessor Fund commenced operations December 28, 1993.
</TABLE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As at December 1, 1999, the Trustees and officers of the Trust, as a
group, owned in the aggregate less than 1% of the outstanding Class B shares
of the Fund. As of December 1, 1999, Merrill Lynch, Pierce, Fenner & Smith,
Inc., Jacksonville, FL was the record owner of approximately 23.3% of the
outstanding Class B shares, which it held on behalf of its customers who are
the beneficial owners of such shares, and as to which they had voting power
under certain limited circumstances. To the knowledge of the Trust, no other
person owned of record or beneficially 5% or more of the Fund's outstanding
Class B shares as of such date.
<PAGE>
APPENDIX C
CLASS C FEES, PERFORMANCE AND OWNERSHIP
DISTRIBUTION AND SERVICE FEES
During the fiscal year ended August 31, 1999, the principal underwriter
paid to investment dealers sales commissions of $54,046 on sales of Class C
shares. During the same period, the Fund made distribution payments to the
principal underwriter under the Distribution Plan aggregating $55,439 and the
principal underwriter received approximately $4,000 in CDSCs imposed on early
redeeming shareholders. These distribution payments and CDSC payments reduced
uncovered distribution charges under the Plan. As at August 31, 1999, the
outstanding uncovered distribution charges of the principal underwriter
calculated under the Plan amounted to approximately $4,368,000 (which amount
was equivalent to approximately 53.5% of the net assets attributable to Class
C on such day). During the fiscal year ended August 31, 1999, Class C made
service fee payments to the principal underwriter and investment dealers
aggregating $18,375 of which $12,820 was paid to investment dealers and the
balance of which was retained by the principal underwriter.
PRINCIPAL UNDERWRITER
The Trust 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. For the fiscal year ended August 31,
1999, Class C paid the principal underwriter $1,052.50 for repurchase
transactions handled by it.
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return
on a hypothetical investment of $1,000 in Class C shares for the periods shown
in the table. Total return for Class C prior to December 28, 1993 reflects the
total return of another investment company that invested in the Portfolio
adjusted to reflect the Class C sales charge. This total return has not been
adjusted to reflect certain other expenses (such as distribution and/or
service fees). If such adjustments were made, performance would be lower. Past
performance is no guarantee of future results. Investment return and principal
value will fluctuate; shares, when redeemed, may be worth more or less than
their original cost.
<TABLE>
VALUE OF A $1,000 INVESTMENT
<CAPTION>
VALUE OF VALUE OF
INVEST- INVEST-
MENT BEFORE DE- MENT AFTER DE- TOTAL RETURN BEFORE TOTAL RETURN AFTER
DUCTING THE DUCTING THE DEDUCTING THE CDSC DEDUCTING THE CDSC
INVESTMENT INVESTMENT AMOUNT OF CDSC CDSC -------------------------- --------------------------
PERIOD DATE INVESTMENT ON 8/31/99 ON 8/31/99 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------------- ------------ ----------- --------------- --------------- ------------ ------------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of
the Fund* 10/28/92 $1,000 $1,221.26 $1,221.26 22.13% 2.97% 22.13% 2.97%
5 Years
Ended
8/31/99 8/31/94 $1,000 $ 774.93 $ 774.93 -22.51% - 4.97% -22.51% - 4.97%
1 Year
Ended
8/31/99 8/31/98 $1,000 $1,654.03 $1,644.03 65.40% 65.40% 64.40% 64.40%
*Predecessor Fund commenced operations June 7, 1993.
</TABLE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As at December 1, 1999, the Trustees and officers of the Trust, as a
group, owned in the aggregate less than 1% of the outstanding Class C shares
of the Fund. As at December 1, 1999, Merrill Lynch, Pierce, Fenner & Smith,
Jacksonville, FL and City of Pasadena Employees Deferred Compensation Plan c/o
NPC of Delaware, Newport, DE were the record owners of approximately 24.8% and
6.1%, respectively, of the outstanding Class C shares which are held on behalf
of their customers who are the beneficial owners of such shares, and as to
which they have voting power under certain limited circumstances. To the
knowledge of the Trust, no other person owned of record or beneficially 5% or
more of the Fund's outstanding Class C shares as of such date.
<PAGE>
APPENDIX D
CHINA REGION COUNTRIES
The information set forth in this Appendix has been extracted from various
government and private publications. The Trust's Board of Trustees make no
representation as to the accuracy of the information, nor has the Board of
Trustees attempted to verify it. Moreover, the information is as of the date
of this SAI (or such other date as set forth below). This information is
expected to change substantially during the period in which this SAI is in
use. No representation is made that any correlation will exist between the
economies or stock markets of China region countries and the Fund's
performance.
PEOPLE'S REPUBLIC OF CHINA
China is the world's third largest country occupying a region of 9.6
million square kilometers.China is the world's most populous nation,
consisting of more than one-fifth of the human race. The estimated population
is approximately 1.2 billion.
In 1949, the Communist Party established the People's Republic of China.
The Communist government engaged in numerous campaigns to industrialize the
country with various programs. The failure of the Communist Party to achieve
substantive economic growth eventually led to the ascendancy of reformers
headed by Deng Xiaoping. In the late 1970's, the Chinese government, which had
remained isolated from the world, opened its doors by encouraging foreign
investment and expertise inside its borders.
In 1989, a growing dissatisfaction with the corruption in the Communist
government led to anti-government student protests culminating in what is
known as the Tiananmen Square incident. The government's use of the military
to suppress a peaceful demonstration resulted in world-wide criticism.
However, recent developments in China have been encouraging. The death of Deng
Xiaoping did not trigger any social unrest and restructuring of state-owned
enterprises had been the main theme of the 15th Party Congress held in 1997.
Leadership under Jiang Zemin remains committed to the implementation of
economic reforms. Investment in China still entails significant political risk
of nationalization or expropriation. China's imminent admission to the WTO
will accelerate the reform process and reduce investment risks.
Since 1992, China has achieved annual growth in real gross domestic
product (GDP) averaging in excess of 10%. The economy in China consists of
three sectors: state, cooperative, and private. The state sector, though
decreasing in weighting, continues to constitute the bulk of the economy. In
recent years, however, the economy has been significantly restructured through
the abolition of the commune system in rural areas and the relaxing of
government authority in the day to day operations in both agricultural and
industrial enterprises. As the government assumes more of a regulatory and
supervisory role and less of a direct management role, market forces have been
allowed to operate. This has resulted in increased productivity and rising
incomes.
In 1990, industry accounted for 45.8% of China's National Income. In the
first three decades under Communist rule, China placed great emphasis on heavy
industry. Since the reform program began in 1978, a much greater emphasis has
been placed on light industry. Considerable industrial growth has come from
industrial enterprises in rural townships which are engaged in the processing
and assembly of consumer goods. These operations are concentrated in southern
China, where a major light industrial base has developed. Industrial output
has grown rapidly and is increasingly important to the Chinese economy.
China's current industrial policy also places emphasis on high-technology
industries supported by foreign technology, such as micro-electronics and
telecommunications. However, many enterprises have a huge staff burden which
must be relieved to increase the competitiveness of the enterprises. To avoid
social unrest caused by the increase in unemployment rate, there is so far no
easy solution.
Inflation, which was a problem in early 1990s, has been under control.
Inflation rate rocketed to 24% in 1994 and then dropped to 8.3% in 1996 and
2.8% by 1997. The control achieved over inflation is the result of austerity
measures implemented by the government during 1994, 1995 and early 1996. The
impact of these austerity measures was exacerbated by the Asian financial
crisis of 1997 and 1998, and the inherent structural imbalances in the Chinese
economy, caused China to enter a sustained period of deflation. In response,
the Chinese government has implemented a series of fiscal and monetary
stimulus packages aimed at boosting domestic demand. China's deflation appears
to be easing towards the end of 1999.
Textiles and garments together form the single largest export category,
representing about one quarter of total export values. China's trade balance
has fluctuated over the last five years. In 1999, China's foreign trade is
expected to yield a surplus of U.S. $30 billion. Hong Kong is one of the
leading destination for Chinese exports, accounting for over 20% of total
export volume. Hong Kong is also a major re-export center for Chinese goods.
Other large export markets for China include Japan, the United States, and
Germany. Over the past few years, China's imports have continued to expand and
diversify. Japan, the United States and Korea are China's top three suppliers.
Other major suppliers include Hong Kong and Germany.
China has traditionally adopted a policy of self-reliance when financing
development. The country has remained a conservative borrower but, since the
early 1980s, has been making greater use of foreign capital and financing,
including government-assisted facilities and project and trade financing.
Total foreign debt as at first half of 1999 was estimated at U.S. $148.8
billion while foreign exchange reserve was at U.S. $152.8 billion. The primary
sources of foreign capital for China include: International Monetary Fund and
World Bank loans and credits; government low interest loans and credits; and
commercial loans and credits.
There is centralized control and unified management of foreign exchange in
China. The renminbi has been devalued progressively in the past decade,
depreciating by almost 70% against the U.S. dollar between 1981 and 1990.
However, it has been stabilized at the 1994 level for the past 5 years.
There currently are two officially recognized exchanges in China, the
Shanghai Securities Exchange ("SHSE"), which commenced trading on December 19,
1990, and the Shenzhen Stock Exchange ("SZSE"), which commenced trading on
July 3, 1991. "B" shares are offered exclusively for investment by foreign
investors, and their total market capitalization in November 1999 was at $3.7
billion. A number of organized securities markets exist in other cities in
China, but these are primarily over-the-counter markets. At the local level,
however, many cities and provinces have promulgated securities rules and
regulations. In fact, it is becoming common for state-owned enterprises to go
for an overseas listing, for example by a listing of H Shares in Hong Kong, or
through Red Chips securities in The Stock Exchange of Hong Kong.
HONG KONG
As a trade entrepot and finance center, Hong Kong's viability has been
inexorably linked to mainland China since the establishment of the Colony in
1841. Hong Kong remains China's largest trade partner and its leading foreign
investor. In 1998, imports from China amounted to $74.7 billion, exports and
re-exports to $59.6 billion. In recent years large numbers of Hong Kong based
companies have set up factories in Southern China in the province of
Guangdong, where it is estimated that Hong Kong companies employ over 3
million workers. There also has been considerable growth in Chinese investment
in Hong Kong over the last decade and particularly in the last five years. In
contrast to Japanese investment, Chinese investment in Hong Kong typically
involves the purchase of stakes in existing companies. This has traditionally
been in the banking and import/export sectors. Recently, investment in
telecommunication projects has increased. In view of the growing economic
interaction between Hong Kong and Southern China, it is increasingly
meaningful to consider the concept of a Greater Hong Kong economy consisting
of Hong Kong and Guangdong Province, with a combined population of over 78
million. To sustain the growth of the Guangdong economy, the Hong Kong
government in 1989 unveiled PADS, the Port and Airport Development Strategy.
The project, which cost in excess of $21 billion, was designed to allow Hong
Kong's cargo handling capacity to increase by four times between 1988 and 2011
and its air traffic handling capacity to increase from 15 million passengers
in 1988 to 50 million in 2011.
In the past, political considerations have hindered closer economic
integration between Hong Kong and China. It was largely in response to the
United Nations embargo on trade with China in the 1950s and 1960s that Hong
Kong developed a significant manufacturing base. In the last several years,
however, there has been an improvement in relations. The Basic Law, the
outline for Hong Kong's government post reunification with China in 1997,
calls for Hong Kong's capitalist system to remain intact for an additional
fifty years after 1997. This integration process directly affects the value of
Hong Kong investments.
In the last two decades there has been a structural change in Hong Kong's
economy, with growth in the services sector outpacing manufacturing growth.
With more and more labor intensive manufacturing relocating to Southern China,
Hong Kong has developed its services sector, which in 1998 contributed over
85% of GDP.
The Stock Exchange of Hong Kong Ltd. ("HKSE"), commenced trading on April
2, 1986. The HKSE, with a total market capitalization as of November, 1999 of
approximately U.S. $537 billion, is now the second largest stock market in
Asia, measured by market capitalization, behind only that of Japan. As of that
date, 700 companies and 1,200 securities were listed on the Hong Kong Stock
Exchange.
There are no regulations governing foreign investment in Hong Kong. There
are no exchange control regulations and investors have total flexibility in
the movement of capital and the repatriation of profits. Funds invested in
Hong Kong can be repatriated at will; dividends and interest are freely
remittable.
TAIWAN
The basic geopolitical fact about Taiwan is that it sits under the shadow
of mainland China and under the threat of reunification, whether peaceful or
by military means. Taiwan is dependent on its close relationship with the
United States and its very successful diplomacy and public relations campaign
which, ever since Madame Chiang Kai-Shek's days in the 1940s has sustained a
high level of sympathy in Washington for the Nationalist regime. Taiwan also
has close relations with Israel, with whom it has had military as well as
trade links. Taiwan remains a free capitalist enclave with some very
successful entrepreneurial and export-oriented companies. The government's
role in the economy is relatively small.
Nevertheless, economic integration between the Chinese communities of
China and Taiwan has increased in recent years. China has low labor costs,
inexpensive land, natural resources and less rigid environmental rules. Taiwan
has capital, technology and trained entrepreneurs. Over 20 percent of Taiwan's
trade is with mainland China and the total investment from Taiwan to China has
exceeded U.S. $20 billion since 1990. A shortage of skilled labour, the high
cost of labour and the relatively strong New Taiwan dollar, has impelled many
Taiwanese businesspeople to shift their production to Thailand, the
Philippines, and Malaysia as well as China. Taiwan has over U.S. $103 billion
of foreign exchange reserves.
Between 1960 and 1997, Taiwan's GNP grew from less than $2 billion to over
$280 billion. The economic growth has been accompanied by a transformation of
domestic production from labor intensive to capital intensive industries in
the 1970s and finally to higher technology industries in the 1980s. The Taiwan
Stock Exchange Corp. is viewed as a highly priced and highly volatile
securities market.
Taiwan has a very Chinese culture and way of life which can affect the
commercial systems. For example, business deals very often depend on the
personal contact and mutual trust between the two parties involved.
KOREA
Political volatility has characterized the history of South Korea
(referred to as Korea throughout this section) during the past forty years,
while at the same time an extraordinary economic boom has occurred. Rigid
discipline has been characteristic of the military government under President
Park during the 1960s and 1970s, which were the most successful decades in
economic terms particularly in the growth of Korea's exports and in the per
capita income. It is important to remember how completely the cities and
transport system of the southern part of the Korean peninsula had been
destroyed in the civil war of the 1950s. The effort of reconstruction was,
therefore, enormous. Living standards in the 1960s were extremely low. The
threat from North Korea has exerted a continuous military pressure on the
South in the past forty years which is probably unique to any country in the
world, even including West Germany or Taiwan. Seoul is only 30 kilometers from
the demilitarized zone and, therefore, lives in a continuous state of tension
and fear of an imminent invasion. This very real threat is also translated
into a very high percentage of military spending in the national budget. If
Korea is compared with Japan, the Koreans have had to spend ten times more of
their national income on defense than the Japanese.
Inflation in Korea has been higher than in Japan or Taiwan. In the 1970s,
Korea experienced an annual average inflation rate of nearly 15 percent.
Beginning in 1982, however, the tight monetary policy succeeded in bringing
this annual consumer price index down to single digits until 1990 when the
rate jumped again to 8.6 percent. However, series of economic problems have
flooded Korea since 1996. Korea Won and stocks have seriously weakened in 1997
and early 1998. These have forced Korea to accept International Monetary
Fund's rescue package which comes in with measures intended to put the economy
in better order. As a result, drastic reforms have been introduced into
Korea's business practices.
Since January 1998, a dramatic economic recovery has taken place
principally driven by the cyclical recovery in the semiconductor, steel and
automobile industries. Sovereign debt and many top tier corporates have
recovered to investment grade status with bond yields on 10 year treasuries
falling from more than 1000 basis points over U.S. treasuries to less than a
200 basis point spread. Significant restructuring has taken place with the
closure or nationalization of major banks and subsequent distressed asset
sales by the Korea Asset Management Corporation. While the pace of large-scale
corporate restructuring has begun to slow in the latter half of 1999, exciting
growth and diversification is likely to continue in the technology and
Internet-related fields.
1999 has seen a stellar recovery in the main KOSPI index from under 600 to
almost 1,000. Technology and Internet-related stocks has also shown tremendous
performance during this year, significantly contributing to the KOSDAQ's 250%
rise since January 1999.
THAILAND
Thailand is unique in South East Asia in that it has escaped the colonial
experience and maintained its freedom and independence. The monarchy plays a
key role in maintaining the country's political stability and independence.
Nevertheless, since the absolute monarchy was ended in 1932 there have been
twenty-one coup d'etats, of which twelve have been successful. Thailand in the
1990s may remain democratic but the King and the army will continue to play a
role.
Thailand has a free and independent peasant population which has, on the
whole, enjoyed a higher standard of living than their neighbours and,
therefore, the communist movement has never made much headway among the rural
people. On the other hand again, Thailand's extraordinary economic growth in
the 1980s (averaging 10 percent per annum) has put great strains not only on
the urban environment because of traffic jams and pollution, but also on the
social and family system. Many rural families have been forced to send their
teenage children to the cities to find employment. The contrast of living
standards between Bangkok and the north east provinces (an estimated per
capital income would be perhaps U.S. $2,000 per annum for the former and less
than U.S. $500 per annum for the latter) must eventually create social
tensions and potential unrest. Buddhism must also be counted as a major factor
of political stability.
Thailand's economy has been among the fastest growing in the world during
the past decade. The take-off really began in 1986-7 with the flood of new
foreign investment into the country, largely from Japan and Taiwan. There has
been a large shift away from agriculture towards manufacturing. As recently as
1980, 50 percent of Thailand's exports consisted of rice and tapioca and other
agricultural products. By 1990, 75 percent of the total volume of exports were
manufactured goods, mainly from the newly established assembly plants in
Bangkok and the south. This has resulted in large changes in employment and
moves of populations.
It is surprising, considering the very high rate of economic growth that
the economy has experienced, that prices, as measured by the consumer price
index, have been kept under control. The last serious bout of inflation in
Thailand occurred during the two oil crises, first in 1973-4 when the CPI
touched 24 percent and then again in 1980-1 when there was a resurgence of
inflation to nearly 20 percent. In the later 1980s, and thanks largely to a
more stable oil price, inflation has been held in single digits and has not
exceeded 7 percent. The boom in early 1990s has resulted in over-valued
currency, real estates and problems in the banking sector. These have finally
hurt the economy of Thailand in 1997 and as a result International Monetary
Fund's rescue have been requested. The economic contraction in 1998 was severe
but was generally viewed as a healthy one.
The boom since the early 1990s has resulted in huge imbalances in the
country's balance of payments position and has significantly strained its
nascent banking system. These pressures finally exploded in July 1997 which
led to the devalution of the THB. Help from the International Monetary Fund
was sought and arrived in the form of a U.S. $17.2 billion aid package. The
economic contraction in 1998 was severe with more than 1 million Thais pushed
below the poverty line. Had it not been for the strong performance of its
agriculture sector, which employs more than 50% of the country's labour force
and is home to 50% of its population, its overlly social stability might have
been threatened. From an enviable surplus position for more than a decade, the
Government was thrown into a realm of fiscal deficits. As for its financial
sector, the ability of the Thai authorities to directly intervene and
resuscitate its banking system has been limited due to its relatively
democratic political structure compared to its neighbours.
MALAYSIA
The central dilemma in assessing Malaysia's political risk is the
perennial question of relations between the Malay and Chinese communities
representing as they do about 60 percent and 30 percent of the population
respectively. Since the 1969 anti-Chinese riots in Kuala Lumpur the country
has been unruffled by any serious inter-racial violence and during this period
a great deal has been accomplished in transforming the economy and in
transferring the wealth of the country from foreign and Chinese hands into the
hands of the bumiputra (or the sons of the soil), which is the dominant Malay
majority. The success of this New Economic Policy is unquestioned and has
given a great deal of legitimacy to the continued run of the United Malay
National Organisation (UMNO) under its successive prime ministers and most
recently under Dr. Mahathir Mohammed who has now held power for more than a
decade. This economic success has also done much to defuse the threat from the
Islamic fundamentalists who have tended to get co-opted into the ruling party.
The Chinese community has also done well in economic terms although the
political disunity in the Malay Chinese Association (MCA) has left them
somewhat leaderless in the political sphere.
United Malay National Organization (UMNO) the ruling party retained its
significant majority in the recent elections. Though Dr. Mahatir was popular,
his majority was lower than last time. The only difference was that PAS, a
Muslim party won over one more state.
Malaysia has a kingship which is shared on a five-year revolving basis
among the sultans of the various states of the federation. Malaysia's
relations with its neighbours are good. Singapore, remains the largest
investor in the country. Malaysia, like Singapore, has experienced high growth
with low inflation except during the recessions. Since 1987 Malaysia has,
however, returned to the path of high growth and low inflation. The change in
recent years has also been accompanied by an accelerated shift into
manufacturing and away from the old dependence on the plantation sector. This
manufacturing growth has been led by investment from Japan and Taiwan and
notable national projects such as the Proton car. Malaysia is attempting to
move up market into the new product areas such as electronics, car assembly
and consumer goods. It has a literate and trainable workforce.
As manufactured goods assume a larger importance in the composition of
exports compared with crude oil, rubber and palm oil, Malaysia's trade
position should gradually become steadier. For an investor, Malaysia remains
vulnerable to external shocks either in terms of commodity prices or in a fall
in export demand in its principal markets. As with other Asian markets,
currency and the stock market were severely attacked in late 1997 and 1998.
This led to the imposition of capital controls in September 1998, which have
been relaxed from February 1999 onwards.
SINGAPORE
"The silent success", in the words of a Singapore government minister, of
this region is based on a high literacy rate and a well-educated and trainable
workforce. The investment in human capital has proven to be more important to
a lasting economic growth success story than the availability of finance or
technology. Singapore is the de facto financial centre of the Association of
South East Asian Nations (ASEAN) region. Singapore is a small Chinese island
surrounded by a sea of Muslims. Singapore is aiming its investment at Johore
in Malaysia and Batam Island in Indonesia. This is the so-called growth
triangle.
One aspect of political risk is the handover of political power from one
generation to another. Although Lee Kwan Yew stepped down as Prime Minister in
1990, he continues to wield a large influence and power behind the scenes. His
son, Lee Hsien Loong may not take up the post of Prime Minister in the near
future. In any case, the question of dynastic succession in a parliamentary
democracy, even within a limited Confucian Chinese democracy, is, to say the
least, a questionable one. Many of the elder Lee's policies, such as imposing
the Mandarin Chinese language on the Singapore educational system, have
aroused fierce opposition among the older, anti-communist generation of
Singapore Chinese. The tight control of the media and the suppression of all
political opposition or criticism of the government, the People's Action Party
or the Prime Minister himself, has also aroused criticism both at home and
internationally.
The Singapore economy has been characterized by the highest degree of
government involvement and intervention outside of the socialist world.
Nevertheless, the growth rate has been quite impressive, averaging around 7
percent, except during the recessions, and even more impressive has been the
tight control of inflation which, along with that of Japan, has remained
extremely low at below 3 percent for the past decade. Being a small island
state it is very sensitive to developments in its two main neighbours,
Indonesia and Malaysia, with their large commodity-based economies.
Singapore's foreign reserves held by the Monetary Authority of Singapore (MAS)
and the Government Investment Corporation of Singapore (GICS) are estimated to
be in around of U.S. $75 billion.
INDONESIA
Up to early 1998, there were only two rulers of Indonesia since
independence was gained from the Dutch in 1948 -- Sukarno and Suharto.
However, independence and the 1965 revolution were unusually violent episodes
in the life of any country. The stability which Indonesia has enjoyed during
the past three decades under Suharto should, therefore, be placed against this
background. The regional currency crisis in late 1997 was exacerbated in
Indonesia in 1998. Under IMF's insistence, fuel prices were raised
significantly which lead to rioting and an overthrow of President Suharto. An
interim government under President Habibie took some momentous decisions. To
hold elections in Indonesia in a free and fair manner was a tremendous
success. However the referendum in East Timor led to a very violent
independence. The new president Mr. Wahid leads a coalition, but the
establishment may be considered as inexperienced to run a coalition in such a
diverse country.
The huge Indonesian archipelago will have, by the year 2000, a population
of over 200 million. Fundamentalism is on the rise, as also in Malaysia, and
politicians with fundamentalist Islamic beliefs and supporters are likely to
take a more active role. However, the social question, which one cannot
ignore, concerns the role of the minority and non-Muslim peoples in Indonesia,
in particular the Chinese community in Java. Although the total Chinese
population is less than 5 million, or around 3% of the total, approximately
80% of the commerce and much of the capital wealth remains in the hands of
this small but tight-knit Chinese community. Therefore, the Chinese community
were again targets of riots in 1998 and this had become the concern of the
world.
Indonesia began the 1980s principally as an oil exporter. During the 1970s
it had a high rate of inflation but also a very rapid economic growth on the
back of the oil boom. The fall in oil prices in the early 1980s, which became
precipitate in the spring of 1986, therefore, forced a review of their
priorities. Reducing inflation, diversifying the economy away from oil and
maintaining a stable growth in the economy were selected as the main
objectives. Inflation was brought from 20%, at the beginning of the decade, to
around 6% in 1989-90. However, inflation had again become a problem after the
crisis. Economic growth, having fallen to 2.5% in 1985 regained the level of
7.4% by 1990 and averaged at around 6% thereafter until 1997. Economic
contraction is however expected in the near future. The rupiah, which had
undergone a 30% once-and-for-all evaluation in the autumn of 1985, had
stabilized on a "crawling peg" system with an annual devaluation of around 5%
until 1997 when it seriously suffered in the Asian currency turmoil. The
economic development of the country very much depends on social and political
stability and also the new government's commitment to economic reforms.
THE PHILIPPINES
The question most investors raise is whether the Philippines is capable of
responsible government and economic planning which would give it a GNP growth
rate approaching that of its Asian tiger neighbours. Many observers dismiss
this prospect out of hand citing the endemic problems of corruption, political
in-fighting and the lack of Confucian work ethic present in North Asia.
However, there is no doubt that the Philippines possesses enormous natural
advantages and it would be wrong to generalize about the whole archipelago of
7,000 islands from the political life of Manila alone. The island of Cebu, for
example, has seen a successful economic transformation in the past twenty
years. Manufacturing investment has grown and has begun to replace agriculture
as a principal source of employment. The Philippines did not experience the
same severe economic contraction as some of its neighbours during the Asian
economic crisis of 1997-98, due to a better-capitalized banking system and
lower corporate indebtedness. However, the quality of political governance has
steadily deteriorated since 1997. Corruption in the Philippines appears to be
on the rise as former Marcos cronies have regained control over businesses or
received valuable governmental posts. While countries such as South Korea and
Thailand have focused on reform and transparency, the Philippines currently
appears to be regressing.
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL INFORMATION
January 1, 2000
EATON VANCE GROWTH FUND
The Eaton Vance Building
255 State Street
Boston, Massachusetts 02109
(800) 225-6265
This Statement of Additional Information ("SAI") provides general
information about the Fund and the Portfolio. The Fund is a series of Eaton
Vance Growth Trust. Capitalized terms used in this SAI and not otherwise
defined have the meanings given to them in the prospectus. This SAI contains
additional information about:
Page
Strategies and Risks .................................................. 1
Investment Restrictions ............................................... 4
Management and Organization ........................................... 5
Investment Advisory and Administrative Services ....................... 8
Other Service Providers ............................................... 9
Purchasing and Redeeming Shares ....................................... 10
Sales Charges ......................................................... 12
Performance ........................................................... 15
Taxes ................................................................. 16
Portfolio Security Transactions ....................................... 18
Financial Statements .................................................. 20
Appendices:
A: Class A Fees, Performance and Ownership ............................ a-1
B: Class B Fees, Performance and Ownership ............................ b-1
C: Class C Fees, Performance and Ownership ............................ c-1
THIS SAI IS NOT A PROSPECTUS AND IS AUTHORIZED FOR DISTRIBUTION TO
PROSPECTIVE INVESTORS ONLY IF PRECEDED OR ACCOMPANIED BY THE FUND'S PROSPECTUS
DATED JANUARY 1, 2000, AS SUPPLEMENTED FROM TIME TO TIME, WHICH IS
INCORPORATED HEREIN BY REFERENCE. THIS SAI SHOULD BE READ IN CONJUNCTION WITH
THE PROSPECTUS, WHICH MAY BE OBTAINED BY CALLING 1-800-225-6265.
<PAGE>
STRATEGIES AND RISKS
FOREIGN SECURITIES. Investing in securities issued by companies whose
principal business activities are outside the United States may involve
significant risks not present in domestic investments. For example, there is
generally less publicly available information about foreign companies,
particularly those not subject to the disclosure and reporting requirements of
the United States securities laws. Foreign issuers are generally not bound by
uniform accounting, auditing, and financial reporting requirements and
standards of practice comparable to those applicable to domestic issuers.
Investments in foreign securities also involve the risk of possible adverse
changes in investment or exchange control regulations, expropriation or
confiscatory taxation, limitation on the removal of funds or other assets of
the Portfolio, political or financial instability or diplomatic and other
developments which could affect such investments. Furthermore, economies of
particular countries or areas of the world may differ favorably or unfavorably
from the economy of the United States. It is anticipated that in most cases
the best available market for foreign securities will be on exchanges or in
over-the-counter markets located outside of the United States. Foreign stock
markets, while growing in volume and sophistication, are generally not as
developed as those in the United States, and securities of some foreign
issuers (particularly those located in developing countries) may be less
liquid and more volatile than securities of comparable U.S. companies. In
addition, foreign brokerage commissions are generally higher than commissions
on securities traded in the United States and may be non-negotiable. In
general, there is less overall governmental supervision and regulation of
foreign securities markets, broker-dealers, and issuers than in the United
States.
The Portfolio may also invest in American Depositary Receipts. ADRs may be
sponsored or unsponsored. Unsponsored receipts are established without the
participation of the issuer. Unsponsored receipts differ from receipts
sponsored by an issuer in that they may involve higher expenses, they may not
pass-through voting and other shareholder rights, and they may be less liquid.
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
generally 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.
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 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, forward
contracts are not traded on contract markets regulated by the Commodity
Futures Trading Commission (the "CFTC") or (with the exception of certain
foreign currency options) the Commission. To the contrary, such instruments
are traded through financial institutions acting as market-makers. 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. 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 contracts, and the Portfolio may be unable to
close out 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 an Adviser.
FUTURES CONTRACTS ON STOCK INDICES. The Portfolio may purchase and sell
exchange-traded futures contracts on stock indices and options thereon to
hedge against fluctuations in securities prices or as a substitute for the
purchase or sale of securities. Such transactions involve a risk of loss or
depreciation due to: unanticipated adverse changes in securities prices,
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 such transactions (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 future and options thereon. There can be
no assurance that the investment adviser's use of such instruments will be
advantageous to the Portfolio. Entering into a derivative instrument involves
a risk that the applicable market will move against the Portfolio's position
and that the Portfolio will incur a loss. This loss may exceed the amount of
the initial investment made or the premium received by the Portfolio.
Derivative instruments may sometimes increase or leverage the Portfolio's
exposure to a particular market risk. Leverage enhances the Portfolio's
exposure to the price volatility of derivative instruments it holds. The
Portfolio's success in using derivative instruments to hedge portfolio assets
depends on the degree of price correlation between the derivative instruments
and the hedged asset. Imperfect correlation may be caused by several factors,
including temporary price disparities among the trading markets for the
derivative instrument, the assets underlying the derivative instrument and the
Portfolio's assets. During periods of market volatility, a commodity exchange
may suspend or limit trading in an exchange-traded derivative instrument,
which may make the contract temporarily illiquid and difficult to price.
Commodity exchanges may also establish daily limits on the amount that the
price of a futures contract or futures can vary from the previous day's
settlement price. Once the daily limit is reached, no trades may be made that
day at a price beyond the limit. This may prevent the Portfolio from closing
out positions and limiting its losses. Certain provisions of the Code limit
the extent to which the Portfolio may purchase and sell derivative
instruments. The Portfolio will engage in transactions in futures contracts
and related options only to the extent such transactions are consistent with
the requirements of the Code for maintaining the qualification of the Fund as
a regulated investment company ("RIC") for federal income tax purposes.
To the extent that the Portfolio enters into futures contracts and options
thereon traded on an exchange regulated by the 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.
ASSET COVERAGE REQUIREMENTS. Transactions using forward contracts, futures
contracts and options thereon (other than options that the Portfolio has
purchased) expose the Portfolio to an obligation to another party. The
Portfolio will not enter into any such transactions unless it owns either (1)
an offsetting ("covered") position in securities, currencies, forward
contracts or futures contracts, or (2) cash or liquid securities (such as
readily marketable common stock and money market instruments) with a value
sufficient at all times to cover its potential obligations not covered as
provided in (1) above. The Portfolio will comply with Securities and Exchange
Commission ("SEC") guidelines regarding cover for these instruments and, if
the guidelines so require, set aside cash or liquid securities in a segregated
account with its custodian in the prescribed amount.
Assets used as cover or held in a segregated account maintained by the
Fund's custodian cannot be sold while the position in the corresponding
futures contract or option is open, unless they are replaced with other
appropriate assets. As a result, the commitment of a large portion of the
Portfolio's assets to cover or segregated accounts could impede portfolio
management or the Portfolio's ability to meet redemption requests or other
current obligations.
The Portfolio may enter into futures contracts, and options on futures
contracts, traded on an exchange regulated by the CFTC and on foreign
exchanges, but, with respect to foreign exchange-traded futures contracts and
options on such futures contracts, only if the investment adviser determined
that trading on each such foreign exchange does not subject the Portfolio to
risks, including credit and liquidity risks, that are materially greater then
the risks associated with trading on CFTC-regulated exchanges.
REPURCHASE AGREEMENTS. The Portfolio may purchase U.S. Government securities
and concurrently enter into repurchase agreements with the seller under which
the seller agrees to repurchase such securities at the Portfolio's cost plus
interest within a specified time (normally one day). While repurchase
agreements involve certain risks not associated with direct investments in
U.S. Government securities, the Portfolio follows procedures designed to
minimize such risks. These procedures include effecting repurchase
transactions only with large, well-capitalized banks. In addition, the
Portfolio's repurchase agreements will provide that the value of the
collateral underlying the repurchase agreement will always be at least equal
to the repurchase price, including any accrued interest earned on the
repurchase agreement. In the event of a default or bankruptcy by a selling
bank, the Portfolio will seek to liquidate such collateral. However, the
exercise of the Portfolio's right to liquidate such collateral could involve
certain costs or delays and, to the extent that proceeds from any sale upon a
default of the obligation to repurchase are less than the repurchase price,
the Portfolio could suffer a loss.
SHORT SALES. The Portfolio may sell a security short if it owns at least an
equal amount of the security sold short or another security convertible or
exchangeable for an equal amount of the security sold short without payment of
further compensation (a short sale against-the-box). In a short sale against-
the-box, the short seller is exposed to the risk of being forced to deliver
appreciated stock to close the position if the borrowed stock is called in.
These transactions may also require the current recognition of taxable gain
under certain tax rules applicable to constructive sales. The Portfolio
expects normally to close its short sales against-the-box by delivering newly-
acquired stock.
TEMPORARY INVESTMENTS. Under unusual market conditions, the Portfolio may
invest temporarily in cash or cash equivalents. Cash equivalents are highly
liquid, short-term securities such as commercial paper, certificates of
deposit, short-term notes and short-term U.S. Government obligations.
INVESTMENT RESTRICTIONS
The following investment restrictions of the Fund are designated as
fundamental policies and as such cannot be changed without the approval of the
holders of a majority of the Fund's outstanding voting securities, which as
used in this SAI means the lesser of (a) 67% of the shares of the Fund present
or represented by proxy at a meeting if the holders of more than 50% of the
outstanding shares are present or represented at the meeting or (b) more than
50% of outstanding shares of the Fund. Accordingly, the Fund may not:
(1) With respect to 75% of its total assets, purchase the securities of
any issuer if such purchase at the time thereof would cause more than 5% of
its total assets (taken at market value) to be invested in the securities of
such issuer, or purchase securities of any issuer if such purchase at the time
thereof would cause more than 10% of the total voting securities of such
issuer to be held by the Fund or Portfolio, except obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities and
except securities of other investment companies;
(2) Borrow money or issue senior securities except as permitted by the
Investment Company Act of 1940;
(3) Purchase securities on margin (but the Fund may obtain such short-term
credits as may be necessary for the clearance of purchase and sales of
securities);
(4) Underwrite or participate in the marketing of securities of others;
(5) Make an investment in any one industry if such investment would cause
investments in such industry to exceed 25% of the Fund's total assets, at
market value at the time of such investment (other than securities issued or
guaranteed by the U.S. Government or its agencies or instrumentalities);
(6) Purchase or sell real estate, although it may purchase and sell
securities which are secured by real estate and securities of companies which
invest or deal in real estate;
(7) Purchase or sell commodities or commodity contracts for the purchase
or sale of physical commodities; or
(8) Make loans to any person except by (a) the acquisition of debt
securities and making portfolio investments (b) entering into repurchase
agreements or (c) lending portfolio securities.
Notwithstanding the investment policies and restrictions of the Fund, the
Fund may invest all of its investable assets in an open-end management
investment company with substantially the same investment objective, policies
and restrictions as the Fund.
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 will not issue bonds, debentures or senior equity securities, and
this policy will not be changed unless authorized by a vote of the
shareholders of the Fund.
The Fund and the Portfolio have adopted the following investment policies
which may be changed by the Trustees with respect to the Fund without approval
by the Fund's shareholders or with respect to the Portfolio without approval
of the Fund or its other investors. The Fund and the Portfolio will not:
(a) sell or contract to sell any security which it does not own unless
by virtue of its ownership of other securities it has at the time of sale
a right to obtain securities equivalent in kind and amount to the
securities sold and provided that if such right is conditional the sale is
made upon the same conditions; or
(b) invest more than 15% of net assets in investments which are not
readily marketable, including restricted securities and repurchase
agreements maturing in more than seven days. Restricted securities for the
purposes of this limitation do not include securities eligible for resale
pursuant to Rule 144A of the Securities Act of 1933 and commercial paper
issued pursuant to Section 4(2) of said Act that the Board of Trustees of
the Trust or the Portfolio, or their delegate, determines to be liquid.
Any such determination by a delegate will be made pursuant to procedures
adopted by the Board. If the Fund or Portfolio invests in Rule 144A
securities, the level of portfolio illiquidity may be increased to the
extent that eligible buyers become uninterested in purchasing such
securities.
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, such percentage limitation shall be
determined immediately after and as a result of the Fund's or the Portfolio's
acquisition of such security or asset. Accordingly, any later increase or
decrease resulting from a change in values, assets or other circumstances,
will not compel the Fund or the Portfolio, as the case may be, to dispose of
such security or other asset. Notwithstanding the foregoing, the Fund and
Portfolio must always be in compliance with the limitation on investing in
illiquid securities and the borrowing policies set forth above.
MANAGEMENT AND ORGANIZATION
FUND MANAGEMENT. The Trustees of the Trust are responsible for the overall
management and supervision of the Trust's affairs. The Trustees and officers
of the Trust and the Portfolio are listed below. Except as indicated, each
individual has held the office shown or other offices in the same company for
the last five years. Unless otherwise noted, the business address of each
Trustee and officer is The Eaton Vance Building, 255 State Street, Boston,
Massachusetts 02109. Those Trustees who are "interested persons" of the Trust
or the Portfolio, as defined in the 1940 Act, are indicated by an asterisk(*).
JESSICA M. BIBLIOWICZ (40), Trustee*
President and Chief Executive Officer of National Financial Partners (a
financial services company) (since April, 1999). President and Chief
Operating Officer of John A. Levin & Co. (a registered investment advisor)
(July, 1997 to April, 1999) and a Director of Baker, Fentress & Company
which owns John A. Levin & Co. (July, 1997 to April, 1999). Formerly
Executive Vice President of Smith Barney Mutual Funds (from July, 1994 to
June, 1997). Elected Trustee October 30, 1998. Trustee of various investment
companies managed by Eaton Vance or BMR since October 30, 1998.
Address: 1301 Avenue of the Americas, New York, New York 10019
JAMES B. HAWKES (58), President and Trustee*
Chairman, President and Chief Executive Officer of BMR, Eaton Vance and their
corporate parent and trustee (EVC and EV); Director of EVC and EV. Trustee
and officer of various investment companies managed by Eaton Vance or BMR.
DONALD R. DWIGHT (68), Trustee
President of Dwight Partners, Inc. (a corporate relations and communications
company). Trustee/Director of the Royce Funds (mutual funds). Trustee of
various investment companies managed by Eaton Vance or BMR.
Address: Clover Mill Lane, Lyme, New Hampshire 03768
SAMUEL L. HAYES, III (64), Trustee
Jacob H. Schiff Professor of Investment Banking Emeritus, Harvard University
Graduate School of Business Administration. Trustee of the Kobrick
Investment Trust (mutual funds). Trustee of various investment companies
managed by Eaton Vance or BMR.
Address: 345 Nahatan Road, Westwood, Massachusetts 02090
NORTON H. REAMER (64), Trustee
Chairman of the Board and Chief Executive Officer, United Asset Management
Corporation (a holding company owning institutional investment management
firms); Chairman, President and Director, UAM Funds (mutual funds). Trustee
of various investment companies managed by Eaton Vance or BMR.
Address: One International Place, Boston, Massachusetts 02110
LYNN A. STOUT (42), Trustee
Professor of Law, Georgetown University Law Center. Elected Trustee October
30, 1998. Trustee of various investment companies managed by Eaton Vance or
BMR since October 30, 1998.
Address: 600 New Jersey Avenue, NW, Washington, DC 20001
JACK L. TREYNOR (69), Trustee
Investment Adviser and Consultant. Trustee of various investment companies
managed by Eaton Vance or BMR.
Address: 504 Via Almar, Palos Verdes Estates, California 90274
THOMAS E. FAUST, JR. (41), Vice President
Vice President of BMR and Eaton Vance. Officer of various investment companies
managed by Eaton Vance or BMR.
JAMES L. O'CONNOR (54), Treasurer
Vice President of BMR and Eaton Vance. Officer of various investment companies
managed by Eaton Vance or BMR.
ALAN R. DYNNER (59), Secretary
Vice President and Chief Legal Officer of BMR, Eaton Vance and EVC since
November 1, 1996. Previously, he was a Partner of the law firm of
Kirkpatrick & Lockhart LLP, New York and Washington, D.C., and was Executive
Vice President of Neuberger & Berman Management, Inc., a mutual fund
management company. Officer of various investment companies managed by Eaton
Vance or BMR.
JANET E. SANDERS (64), Assistant Treasurer and Assistant Secretary
Vice President of BMR and Eaton Vance. Officer of various investment companies
managed by Eaton Vance or BMR.
A. JOHN MURPHY (37), Assistant Secretary
Vice President of BMR and Eaton Vance. Officer of various investment companies
managed by Eaton Vance or BMR.
ERIC G. WOODBURY (42), Assistant Secretary
Vice President of BMR and Eaton Vance. Officer of various investment companies
managed by Eaton Vance or BMR.
The Nominating Committee of the Board of Trustees of the Trust and the
Portfolio is comprised of the Trustees who are not "interested persons" as
that term is defined under the 1940 Act ("noninterested Trustees"). 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. Hayes (Chairman), Dwight and Reamer and Ms Stout 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 and the Portfolio,
including investment advisory (Portfolio only), administrative, transfer
agency, custodial and fund accounting and distribution services, and (ii) all
other matters in which Eaton Vance or its affiliates has any actual or
potential conflict of interest with the Fund, the Portfolio or investors
therein.
Messrs. Treynor (Chairman) and Dwight are members of the Audit Committee
of the Board of Trustees of the Trust and of the Portfolio. The Audit
Committee's functions include making recommendations to the Trustees regarding
the selection of the independent accountants, and reviewing 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, transfer agent and dividend
disbursing agent of the Trust and of the Portfolio.
Trustees of the Portfolio who are not affiliated with the Investment
Adviser may elect to defer receipt of all or a percentage of their annual fees
in accordance with the terms of a Trustees Deferred Compensation Plan (the
"Trustees" Plan"). Under the Trustees' 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 Trustees' Plan will be determined based upon the performance of such
investments. Deferral of Trustees' fees in accordance with the Trustees' Plan
will have a negligible effect on the 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 Trust has a
retirement plan for its Trustees.
The fees and expenses of the noninterested Trustees of the Trust and the
Portfolio 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 Trust
or the Portfolio.) During the fiscal year ended August 31, 1999, the
noninterested Trustees of the Trust and the Portfolio earned the following
compensation in their capacities as Trustees from the Trust and the Portfolio,
and, for the year ended December 31, 1998, earned the following compensation
in their capacities as Trustees of the funds in the Eaton Vance fund complex(1):
<TABLE>
<CAPTION>
AGGREGATE AGGREGATE TOTAL COMPENSATION
COMPENSATION COMPENSATION FROM TRUST AND
NAME FROM TRUST(2) FROM PORTFOLIO FUND COMPLEX
- ---- ------------- -------------- ------------
<S> <C> <C> <C>
Jessica M. Bibliowicz(7) ................ $ 571 $ 993 $ 33,334
Donald R. Dwight ........................ 1,785 2,548(3) 160,000(5)
Samuel L. Hayes, III .................... 1,900 2,762(4) 170,000(6)
Norton H. Reamer ........................ 1,758 2,599 160,000
Lynn A. Stout(7) ........................ 622 1,088 32,842
Jack L. Treynor ......................... 2,119 2,865 170,000
- ------------
(1) As of January 1, 2000 the Eaton Vance fund complex consists of 143 registered investment
companies or series thereof.
(2) The Trust consisted of 5 Funds as of August 31, 1999.
(3) Includes $1,339 of deferred compensation.
(4) Includes $506 of deferred compensation.
(5) Includes $60,000 of deferred compensation.
(6) Includes $41,563 of deferred compensation.
(7) Ms. Bibliowicz and Ms. Stout were elected as Trustees on October 30, 1998.
</TABLE>
ORGANIZATION. The Fund is a series of the Trust, which is organized under
Massachusetts law as a business trust and is operated as an open-end
management investment company. The Fund (formerly EV Traditional Growth Fund)
established 3 classes of shares on September 1, 1997 -- Class A shares, Class
B shares (formerly EV Marathon Growth Fund) and Class C shares (formerly EV
Classic Growth Fund) of Eaton Vance Growth Fund. Information herein prior to
such date is for the Fund before it became a multiple-class fund.
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). The
Trustees of the Trust have divided the shares of the Fund into multiple
classes. Each class represents an interest in the Fund, but is subject to
different expenses, rights and privileges. The Trustees have the authority
under the Declaration of Trust to create additional classes of shares with
differing rights and privileges. When issued and outstanding, shares are fully
paid and nonassessable by the Trust. Shareholders are entitled to one vote for
each full share held. Fractional shares may be voted proportionately. Shares
of the Fund will be voted together except that only shareholders of a
particular class may vote on matters affecting only that class. Shares have no
preemptive or conversion rights and are freely transferable. In the event of
the liquidation of the Fund, shareholders of each class are entitled to share
pro rata in the net assets attributable to that class available for
distribution to shareholders.
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 growth in the assets of the Portfolio,
may afford the potential for economies of scale for the Fund and may over time
result in lower expenses for the Fund.
As permitted by Massachusetts law, there will normally be no meetings of
shareholders for the purpose of electing Trustees unless and until such time
as less than a majority of the Trustees of the Trust holding office have been
elected by shareholders. In such an event the Trustees then in office will
call a shareholders' meeting for the election of Trustees. Except for the
foregoing circumstances and unless removed by action of the shareholders in
accordance with the Trust's By-laws, the Trustees shall continue to hold
office and may appoint successor Trustees.
The Trust's By-laws provide that no person shall serve as a Trustee if
shareholders holding two-thirds of the outstanding shares have removed him
from that office either by a written declaration filed with the Trust's
custodian or by votes cast at a meeting called for that purpose. The By-laws
further provide that under certain circumstances the shareholders may call a
meeting to remove a Trustee and that the Trust is required to provide
assistance in communication with shareholders about such a meeting.
The Trust's Declaration of Trust may be amended by the Trustees when
authorized by vote of a majority of the outstanding voting securities of the
Trust, the financial interests of which are affected by the amendment. The
Trustees may also amend the Declaration of Trust without the vote or consent
of shareholders to change the name of the Trust or any series or to make such
other changes (such as reclassifying series of classes of shares or
restructuring the Trust) as do not have a materially adverse effect on the
financial interests of shareholders or if they deem it necessary to conform it
to applicable federal or state laws or regulations. The Trust or any series or
class thereof may be terminated by: (1) the affirmative vote of the holders of
not less than two-thirds of the shares outstanding and entitled to vote at any
meeting of shareholders of the Trust or the appropriate series or class
thereof, or by an instrument or instruments in writing without a meeting,
consented to by the holders of two-thirds of the shares of the Trust or a
series or class thereof, provided, however, that, if such termination is
recommended by the Trustees, the vote of a majority of the outstanding voting
securities of the Trust or a series or class thereof entitled to vote thereon
shall be sufficient authorization; or (2) by means of an instrument in writing
signed by a majority of the Trustees, to be followed by a written notice to
shareholders stating that a majority of the Trustees has determined that the
continuation of the Trust or a series or a class thereof is not in the best
interest of the Trust, such series or class or of their respective
shareholders.
The Declaration of Trust further provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law; but nothing in the
Declaration of Trust protects a Trustee against any liability to which he
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of his
office.
Under Massachusetts law, if certain conditions prevail, shareholders of a
Massachusetts business trust (such as the Trust) could be deemed to have
personal liability for the obligations of the Trust. Numerous investment
companies registered under the 1940 Act have been formed as Massachusetts
business trusts, and management is not aware of an instance where such
liability has been imposed. The Trust's Declaration of Trust contains an
express disclaimer of liability on the part of the Fund shareholders and the
Trust's By-laws provide that the Trust shall assume the defense on behalf of
any Fund shareholders. The Declaration of Trust also contains provisions
limiting the liability of a series or class to that series or class. Moreover,
the Trust's By-laws also provide for indemnification out of the property of
the Fund of any shareholder held personally liable solely by reason of being
or having been a shareholder for all loss or expense arising from such
liability. The assets of the Fund are readily marketable and will ordinarily
substantially exceed its liabilities. In light of the nature of the Fund's
business and the nature of its assets, management believes that the
possibility of the Fund's liability exceeding its assets, and therefore the
shareholder's risk of personal liability, is remote.
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. In
accordance with the Declaration of Trust of the Portfolio, there will normally
be no meetings of the investors for the purpose of electing Trustees unless
and until such time as less than a majority of the Trustees of the Portfolio
holding office have been elected by investors. In such an event the Trustees
of the Portfolio then in office will call an investors' meeting for the
election of Trustees. Except for the foregoing circumstances and unless
removed by action of the investors in accordance with the Portfolio's
Declaration of Trust, the Trustees shall continue to hold office and may
appoint successor Trustees.
The Declaration of Trust of the Portfolio provides that no person shall
serve as a Trustee if investors holding two-thirds of the outstanding interest
have removed him from that office either by a written declaration filed with
the Portfolio's custodian or by votes cast at a meeting called for that
purpose. The Declaration of Trust further provides that under certain
circumstances the investors may call a meeting to remove a Trustee and that
the Portfolio is required to provide assistance in communicating with
investors about such a meeting.
The 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.
Whenever the Fund as an investor in a 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 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. 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, the 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 (or the assets of another investor in the Portfolio) from the
Portfolio.
INVESTMENT ADVISORY AND ADMINISTRATIVE SERVICES
INVESTMENT ADVISORY SERVICES. BMR manages the investments and affairs of the
Portfolio subject to the supervision of the Portfolio's Board of Trustees. BMR
furnishes to the Portfolio investment research, advice and supervision,
furnishes an investment program and determines what securities will be
purchased, held or sold by the Portfolio and what portion, if any, of the
Portfolio's assets will be held uninvested. The Investment Advisory Agreement
requires BMR to pay the salaries and fees of all officers and Trustees of the
Portfolio who are members of the BMR organization and all personnel of BMR
performing services relating to research and investment activities.
For a description of the compensation that the Portfolio pays BMR under
the Investment Advisory Agreement, see the prospectus. As of August 31, 1999,
the Portfolio had net assets of $193,824,027. For the fiscal years ended
August 31, 1999, 1998 and 1997, the Portfolio paid BMR advisory fees of
$1,283,177, $1,280,824 and $1,038,600, respectively, (equivalent to 0.625% of
the Portfolio's average daily net assets for each such year).
The Investment Advisory Agreement with BMR continues in effect from year
to year for so long as such continuance is approved at least annually (i) by
the vote of a majority of the noninterested Trustees 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 BMR may render services to others. The Agreement also provides that BMR
shall not be liable for any loss incurred in connection with the performance
of its duties, or action taken or omitted under that Agreement, in the absence
of willful misfeasance, bad faith, gross negligence in the performance of its
duties or by reason of its reckless disregard of its obligations and duties
thereunder, or for any losses sustained in the acquisition, holding or
disposition of any security or other investment.
ADMINISTRATIVE SERVICES As indicated in the prospectus, Eaton Vance serves as
administrator of the Fund, but currently receives no compensation for
providing administrative services to the Fund. Under its Administrative
Services Agreement with the Trust, Eaton Vance has been engaged to administer
the Fund's affairs, subject to the supervision of the Trustees of the Trust,
and shall furnish for the use of the Fund office space and all necessary
office facilities, equipment and personnel for administering the affairs of
the Fund.
INFORMATION ABOUT BMR AND EATON VANCE. BMR and Eaton Vance are business trusts
organized under Massachusetts law. Eaton Vance, Inc. ("EV") serves as trustee of
BMR and Eaton Vance. BMR, Eaton Vance and EV are wholly-owned subsidiaries of
Eaton Vance Corporation ("EVC"), a Maryland corporation and publicly-held
holding company. EVC through its subsidiaries and affiliates engages primarily
in investment management, administration and marketing activities. The Directors
of EVC are James B. Hawkes, John G.L. Cabot, John M. Nelson, Vincent M. O'Reilly
and Ralph Z. Sorenson. All of the issued and outstanding shares of Eaton Vance
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, the Voting Trustees of which are Messrs. Hawkes,
Jeffrey P. Beale, Alan R. Dynner, Thomas E. Faust, Jr., Thomas J. Fetter, Scott
H. Page, Duncan W. Richardson, William M. Steul, Payson F. Swaffield, Michael W.
Weilheimer, and Wharton P. Whitaker (all of whom are officers of Eaton Vance).
The Voting Trustees have unrestricted voting rights for the election of
Directors of EVC. All of the outstanding voting trust receipts issued under said
Voting Trust are owned by certain of the officers of BMR and Eaton Vance who are
also officers, or officers and Directors of EVC and EV. As indicated under
"Management and Organization", all of the officers of the Trust (as well as Mr.
Hawkes who is also a Trustee) hold positions in the Eaton Vance organization.
EXPENSES. The Fund and Portfolio are each responsible for all expenses not
expressly stated to be payable by another party (such as the investment
adviser under the Investment Advisory Agreement, Eaton Vance under the
Administrative Services Agreement or the principal underwriter under the
Distribution Agreement). In the case of expenses incurred by the Trust, the
Fund is responsible for its pro rata share of those expenses. The only
expenses of the Fund allocated to a particular class are those incurred under
the Distribution or Service Plan applicable to that class and the fee paid to
the principal underwriter for handling repurchase transactions.
OTHER SERVICE PROVIDERS
PRINCIPAL UNDERWRITER. Eaton Vance Distributors, Inc. ("EVD"), The Eaton Vance
Building, 255 State Street, Boston, MA 02109, is the Fund's principal
underwriter. The principal underwriter acts as principal in selling shares
under a Distribution Agreement with the Trust. The expenses of printing copies
of prospectuses used to offer shares and other selling literature and of
advertising are borne by the principal underwriter. The fees and expenses of
qualifying and registering and maintaining qualifications and registrations of
the Fund and its shares under federal and state securities laws are borne by
the Fund. The Distribution Agreement as it applies to Class A shares is
renewable annually by the Board of Trustees of the Trust (including a majority
of the noninterested Trustees) may be terminated on six months' notice by
either party and is automatically terminated upon assignment. The Distribution
Agreement as it applies to Class B and Class C shares is renewable annually by
the Trust's Board of Trustees (including a majority of the noninterested
Trustees who have no direct or indirect financial interest in the operation of
the 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 shares of the relevant class or on six months' notice by the
principal underwriter and is automatically terminated upon assignment. The
principal underwriter distributes shares on a "best efforts" basis under which
it is required to take and pay for only such shares as may be sold. The
principal underwriter allows investment dealers discounts from the applicable
public offering price which are alike for all investment dealers. See "Sales
Charges". EVD is a wholly-owned subsidiary of EVC. Mr. Hawkes is a Vice
President and Director and Messrs. Dynner and O'Connor are Vice Presidents of
EVD.
CUSTODIAN. Investors Bank & Trust Company ("IBT"), 200 Clarendon Street,
Boston, MA 02116, serves as custodian to the Fund and Portfolio. IBT has the
custody of all cash and securities representing the Fund's interest in the
Portfolio, has custody of the Portfolio's assets, maintains the general ledger
of the Portfolio and the Fund and computes the daily net asset value of
interests in the Portfolio and the net asset value of shares of the Fund. In
such capacity it attends to details in connection with the sale, exchange,
substitution, transfer or other dealings with the Portfolio's investments,
receives and disburses all funds and performs various other ministerial duties
upon receipt of proper instructions from the Trust and the Portfolio. IBT also
provides services in connection with the preparation of shareholder reports
and the electronic filing of such reports with the SEC. EVC and its affiliates
and their officers and employees from time to time have transactions with
various banks, including IBT. It is Eaton Vance's opinion that the terms and
conditions of such transactions were not and will not be influenced by
existing or potential custodial or other relationships between the Fund or the
Portfolio and such banks.
INDEPENDENT ACCOUNTANTS. PricewaterhouseCoopers LLP, 160 Federal Street,
Boston, MA 02110, are the independent accountants of the Fund and the
Portfolio, providing audit services, tax return preparation, and assistance
and consultation with respect to the preparation of filings with the SEC.
TRANSFER AGENT. PFPC Global Fund Services, P.O. Box 5123, Westborough, MA
01581-5123, serves as transfer and dividend disbursing agent for the Fund.
PURCHASING AND REDEEMING SHARES
CALCULATION OF NET ASSET VALUE. The net asset value of the Portfolio is
computed by IBT (as agent and custodian for the Portfolio) by subtracting the
liabilities of the Portfolio from the value of its total assets. The Fund and
the Portfolio will be closed for business and will not price their respective
shares or interests on the following business holidays: New Year's Day, Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day.
Each investor in the Portfolio, including the Fund, may add to or reduce
its investment in the Portfolio on each day the New York Stock Exchange (the
"Exchange") is open for trading ("Portfolio Business Day") as of the close of
regular trading on the Exchange (the "Portfolio Valuation Time"). The value of
each investor's interest in the Portfolio will be determined by multiplying
the net asset value of the Portfolio by the percentage, determined on the
prior Portfolio Business Day, which represented that investor's share of the
aggregate interests in the Portfolio on such prior day. Any additions or
withdrawals for the current Portfolio Business Day will then be recorded. Each
investor's percentage of the aggregate interest in the Portfolio will then be
recomputed as a percentage equal to a fraction (i) the numerator of which is
the value of such investor's investment in the Portfolio as of the Portfolio
Valuation Time on the prior Portfolio Business Day plus or minus, as the case
may be, the amount of any additions to or withdrawals from the investor's
investment in the Portfolio on the current Portfolio Business Day and (ii) the
denominator of which is the aggregate net asset value of the Portfolio as of
the Portfolio Valuation Time on the prior Portfolio Business Day plus or
minus, as the case may be, the amount of the net additions to or withdrawals
from the aggregate investment in the Portfolio on the current Portfolio
Business Day by all investors in the Portfolio. The percentage so determined
will then be applied to determine the value of the investor's interest in the
Portfolio for the current Portfolio Business Day.
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. An option is valued at the last sale price as
quoted on the principal exchange or board of trade on which such option or
contract is traded, or in the absence of a sale, at the mean between the last
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 generally are computed as of such times.
Occasionally, events affecting the value of foreign securities may occur
between such times and the close of the Exchange which will not be reflected
in the computation of the Portfolio's net asset value (unless the Portfolio
deems that such events would materially affect its net asset value, in which
case an adjustment would be made and reflected in such computation). Foreign
securities and currency held by the Portfolio will be valued in U.S. dollars;
such values will be computed by the custodian based on foreign currency
exchange rate quotations supplied by Reuters Information Service.
ADDITIONAL INFORMATION ABOUT PURCHASES. Fund shares are continuously offered
through investment dealers which have entered agreements with the principal
underwriter. The public offering price is the net asset value next computed
after receipt of the order, plus, in the case of Class A shares, a variable
percentage (sales charge) depending upon the amount of purchase as indicated
by the sales charge table set forth in the prospectus. The sales charge is
divided between the principal underwriter and the investment dealer. The
sales charge table is applicable to purchases of a Fund alone or in
combination with purchases of certain other funds offered by the principal
underwriter, made at a single time by (i) an individual, or an individual, his
spouse and their children under the age of twenty-one, purchasing shares for
his or their own account, and (ii) a trustee or other fiduciary purchasing
shares for a single trust estate or a single fiduciary account. The table is
also presently applicable to (1) purchases of Class A shares pursuant to a
written Statement of Intention; or (2) purchases of Class A shares pursuant to
the Right of Accumulation and declared as such at the time of purchase. See
"Sales Charges".
In connection with employee benefit or other continuous group purchase
plans, 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.
SUSPENSION OF SALES. The Trust may, in its absolute discretion, suspend,
discontinue or limit the offering of one or more of its classes of shares at
any time. In determining whether any such action should be taken, the Trust's
management intends to consider all relevant factors, including (without
limitation) the size of the Fund or class, the investment climate and market
conditions, the volume of sales and redemptions of shares, and in the case of
Class B and Class C shares, the amount of uncovered distribution charges of
the principal underwriter. The Class B and Class C Distribution Plans may
continue in effect and payments may be made under the Plans following any such
suspension, discontinuance or limitation of the offering of shares; however,
there is no contractual obligation to continue any Plan for any particular
period of time. Suspension of the offering of shares would not, of course,
affect a shareholder's ability to redeem shares.
ACQUIRING FUND SHARES IN EXCHANGE FOR SECURITIES. IBT, as escrow agent, will
receive securities acceptable to Eaton Vance, as administrator, in exchange
for Fund shares. The minimum value of securities (or securities and cash)
accepted for deposit is $5,000. Securities accepted will be sold on the day of
their receipt or as soon thereafter as possible. The number of Fund shares to
be issued in exchange for securities will be the aggregate proceeds from the
sale of such securities, divided by the applicable public offering price of
Class A shares or the net asset value of Class B and Class C shares on the day
such proceeds are received. Eaton Vance will use reasonable efforts to obtain
the then current market price for such securities but does not guarantee the
best available price. Eaton Vance will absorb any transaction costs, such as
commissions, on the sale of the securities. Securities determined to be
acceptable should be transferred via book entry or physically delivered, in
proper form for transfer, through an investment dealer, together with a
completed and signed Letter of Transmittal in approved form (available from
investment dealers). Investors who are contemplating an exchange of securities
for shares, 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
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.
ADDITIONAL INFORMATION ABOUT REDEMPTIONS. The right to redeem shares of the
Fund can be suspended and the payment of the redemption price deferred when
the Exchange is closed (other than for customary weekend and holiday
closings), during periods when trading on the Exchange is restricted as
determined by the SEC, or during any emergency as determined by the SEC which
makes it impracticable for the Portfolio to dispose of its securities or value
its assets, or during any other period permitted by order of the SEC for the
protection of investors.
While normally payments will be made 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 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.
Due to the high cost of maintaining small accounts, the Trust 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
Trust if the cause of the low account balance was a reduction in the net asset
value of shares. No CDSC will be imposed with respect to such involuntary
redemptions.
SYSTEMATIC WITHDRAWAL PLAN. The transfer agent will send to the shareholder
regular monthly or quarterly payments of any permitted amount designated by
the shareholder based upon the value of the shares held. The checks will be
drawn from share redemptions and hence, may require the recognition of taxable
gain or loss. Income dividends and capital gains distributions in connection
with withdrawal plan 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. The shareholder, the transfer agent
or the principal underwriter will be able to terminate the withdrawal plan at
any time without penalty.
SALES CHARGES
DEALER COMMISSIONS. The principal underwriter may, from time to time, at its
own expense, provide additional incentives to investment dealers 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 investment dealers 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 investment dealers. The principal underwriter
may allow, upon notice to all investment dealers with whom it has agreements,
discounts up to the full sales charge during the periods specified in the
notice. During periods when the discount includes the full sales charge, such
investment dealers may be deemed to be underwriters as that term is defined in
the Securities Act of 1933.
SALES CHARGE WAIVERS. Class A shares may be sold at net asset value to current
and retired Directors and Trustees of Eaton Vance funds, including the
Portfolio; to clients and current and retired officers and employees of Eaton
Vance, its affiliates and other investment advisers of Eaton Vance sponsored
funds; to officers and employees of IBT and the transfer agent; to persons
associated with law firms, consulting firms and others providing services to
Eaton Vance and the Eaton Vance funds; and to such persons' spouses, parents,
siblings and children and their beneficial accounts. Such shares may also be
issued at net asset value (1) in connection with the merger of an investment
company (or series or class thereof) with the Fund (or class thereof), (2) to
investors making an investment as part of a fixed fee program whereby an
entity unaffiliated with the investment adviser provides multiple investment
services, such as management, brokerage and custody, and (3) to investment
advisors, financial planners or other intermediaries who place trades for
their own accounts or the accounts of their clients and who charge a
management, consulting or other fee for their services; clients of such
investment advisors, financial planners or other intermediaries who place
trades for their own accounts if the accounts are linked to the master account
of such investment advisor, financial planner or other intermediary on the
books and records of the broker or agent. Class A shares may also be sold at
net asset value to registered representatives and employees of investment
dealers and bank employees who refer customers to registered representatives
of investment dealers and to retirement and deferred compensation plans and
trusts used to fund those plans, including, but not limited to, those defined
in Section 401(a), 403(b) or 457 of the Internal Revenue Code of 1986, as
amended (the "Code") and "rabbi trusts". Class A shares may be sold at net
asset value to any investment advisory, agency, custodial or trust account
managed or administered by Eaton Vance or by any parent, subsidiary or other
affiliate of Eaton Vance. Class A shares are offered at net asset value to the
foregoing persons and in the foregoing situations because either (i) there is
no sales effort involved in the sale of shares or (ii) the investor is paying
a fee (other than the sales charge) to the investment dealer involved in the
sale.
The CDSC applicable to Class B shares will be waived in connection with
minimum required distributions from tax-sheltered retirement plans by applying
the rate required to be withdrawn under the applicable rules and regulations
of the Internal Revenue Service to the balance of Class B shares in your
account.
STATEMENT OF INTENTION. If it is anticipated that $50,000 or more of Class A
shares and shares of other funds exchangeable for Class A shares of another
Eaton Vance fund will be purchased within a 13-month period, a Statement of
Intention should be signed so that shares may be obtained at the same reduced
sales charge as though the total quantity were invested in one lump sum.
Shares held under Right of Accumulation (see below) as of the date of the
Statement will be included toward the completion of the Statement. The
Statement authorizes the transfer agent to hold in escrow sufficient shares
(5% of the dollar amount specified in the Statement) which can be redeemed to
make up any difference in sales charge on the amount intended to be invested
and the amount actually invested. Execution of a Statement does not obligate
the shareholder to purchase or the Fund to sell the full amount indicated in
the Statement, and should the amount actually purchased during the 13-month
period be more or less than that indicated on the Statement, price adjustments
will be made. Any investor considering signing a Statement of Intention should
read it carefully.
RIGHT OF ACCUMULATION. The applicable sales charge level for the purchase of
Class A shares is calculated by taking the dollar amount of the current
purchase and adding it to the value (calculated at the maximum current
offering price) of the Class A shares the shareholder owns in his or her
account(s) in the Fund, and shares of other funds exchangeable for Class A
shares. The sales charge on the shares being purchased will then be at the
rate applicable to the aggregate. Shares purchased (i) by an individual, his
or her spouse and their children under the age of twenty-one, and (ii) by a
trustee, guardian or other fiduciary of a single trust estate or a single
fiduciary account, will be combined for the purpose of determining whether a
purchase will qualify for the Right of Accumulation and if qualifying, the
applicable sales charge level. For any such discount to be made available, at
the time of purchase a purchaser or his or her investment dealer must provide
the principal underwriter (in the case of a purchase made through an
investment dealer) or the transfer agent (in the case of an investment made by
mail) with sufficient information to permit verification that the purchase
order qualifies for the accumulation privilege. Confirmation of the order is
subject to such verification. The Right of Accumulation privilege may be
amended or terminated at any time as to purchases occurring thereafter.
TAX-SHELTERED RETIREMENT PLANS: Class A and Class C shares are available for
purchase in connection with certain tax-sheltered retirement plans. 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. Participant accounting
services (including trust fund reconciliation services) will be offered only
through third party recordkeepers and not by the principal underwriter. Under
all plans, dividends and distributions will be automatically reinvested in
additional shares.
DISTRIBUTION AND SERVICE PLANS. The Trust has in effect a Service Plan (the
"Class A Plan") for the Fund's Class A shares that is designed to meet the
service fee requirements of the sales charge rule of the National Association
of Securities Dealers, Inc. (the "NASD"). (Management believes service fee
payments are not distribution expenses governed by Rule 12b-1 under the 1940
Act, but has chosen to have the Plan approved as if that Rule were
applicable.) The Class A Plan provides that the Class A may make service fee
payments for personal services and/or the maintenance of shareholder accounts
to the principal underwriter, investment dealers and other persons in amounts
not exceeding .25% of its average daily net assets for any fiscal year. For
the service fees paid by Class A shares, see Appendix A.
The Trust also has in effect compensation-type Distribution Plans (the
"Class B and Class C Plans") pursuant to Rule 12b-1 under the 1940 Act for the
Fund's Class B and Class C shares. The Class B and Class C Plans are designed
to permit an investor to purchase shares through an investment dealer without
incurring an initial sales charge and at the same time permit the principal
underwriter to compensate investment dealers in connection therewith. The
Class B and Class C Plans provide that the Fund will pay sales commissions and
distribution fees to the principal underwriter only after and as a result of
the sale of shares. On each sale of shares (excluding reinvestment of
distributions), the Fund will pay the principal underwriter amounts
representing (i) sales commissions equal to 5% for Class B shares and 6.25%
for Class C shares 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. To pay these amounts, each Class pays the principal underwriter a
fee, accrued daily and paid monthly, at an annual rate not exceeding .75% of
its average daily net assets to finance the distribution of its shares. Such
fees compensate the principal underwriter for sales commissions paid by it to
investment dealers on the sale of shares and for interest expenses. For sales
of Class B shares, the principal underwriter uses its own funds to pay sales
commissions (except on exchange transactions and reinvestments) to investment
dealers at the time of sale equal to 4% of the purchase price of the Class B
shares sold by such dealers. For Class C shares, the principal underwriter
currently expects to pay to an investment dealer (a) sales commissions (except
on exchange transactions and reinvestments) at the time of sale equal to .75%
of the purchase price of the shares sold by such dealer, and (b) monthly sales
commissions approximately equivalent to 1/12 of .75% of the value of shares
sold by such dealer and remaining outstanding for at least one year. During
the first year after a purchase of Class C shares, the principal underwriter
will retain the sales commission as reimbursement for the sales commissions
paid to investment dealers at the time of sale. CDSCs paid to the principal
underwriter will be used to reduce amounts owed to it. The Class B and Class C
Plans provide that the Fund 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. CDSCs and accrued amounts will be paid
by the Trust to the principal underwriter whenever there exist uncovered
distribution charges. Because payments to the principal underwriter under the
Class B and Class C Plans are limited, uncovered distribution charges (sales
commissions paid by the principal underwriter plus interest, less the above
fees and CDSCs received by it) may exist indefinitely. For the sales
commissions and CDSCs paid on (and uncovered distribution charges of) Class B
and Class C shares, see Appendix B and Appendix C, respectively.
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 Class B and Class C Plans by the Trust to the principal
underwriter and CDSCs theretofore paid or payable to the principal underwriter
will be subtracted from such distribution charges; if the result of such
subtraction is positive, a distribution fee (computed at 1% over the prime
rate then reported in The Wall Street Journal) will be computed on such amount
and added thereto, with the resulting sum constituting the amount of
outstanding uncovered distribution charges with respect to such day. The
amount of outstanding uncovered distribution charges of the principal
underwriter calculated on any day does not constitute a liability recorded on
the financial statements of the Fund.
The amount of uncovered distribution charges of the principal underwriter
at any particular time depends upon various changing factors, including the
level and timing of sales of shares, the nature of such sales (i.e., whether
they result from exchange transactions, reinvestments or from cash sales
through investment dealers), the level and timing of redemptions of shares
upon which a CDSC will be imposed, the level and timing of redemptions of
shares upon which no CDSC will be imposed (including redemptions of shares
pursuant to the exchange privilege which result in a reduction of uncovered
distribution charges), changes in the level of the net assets of the Class,
and changes in the interest rate used in the calculation of the distribution
fee under the Class B and Class C Plans.
The Class B and Class C Plans also authorize each Class to make payments
of service fees to the principal underwriter, investment dealers and other
persons in amounts not exceeding .25% of its average daily net assets for
personal services, and/or the maintenance of shareholder accounts. This fee is
paid quarterly in arrears based on the value of Class B shares sold by such
persons and remaining outstanding for at least twelve months. For Class C,
investment dealers currently receive (a) a service fee (except on exchange
transactions and reinvestments) at the time of sale equal to .25% of the
purchase price of the Class C shares sold by such dealer, and (b) monthly
service fees approximately equivalent to 1/12 of .25% of the value of Class C
shares sold by such dealer and remaining outstanding for at least one year.
During the first year after a purchase of Class C shares, the principal
underwriter will retain the service fee as reimbursement for the service fee
payment made to investment dealers at the time of sale. For the service fees
paid by Class B and Class C shares, see Appendix B and Appendix C,
respectively.
Currently, payments of sales commissions and distribution fees and of
service fees may equal 1% of a Class's average daily net assets per annum. The
Trust believes that the combined rate of all these payments may be higher than
the rate of payments made under distribution plans adopted by other investment
companies pursuant to Rule 12b-1. Although the principal underwriter will use
its own funds (which may be borrowed from banks) to pay sales commissions at
the time of sale, it is anticipated that the Eaton Vance organization will
profit by reason of the operation of the Class B and Class C Plans through an
increase in the Fund's assets (thereby increasing the advisory fee payable to
BMR by the Portfolio) resulting from sale of shares and through the amounts
paid to the principal underwriter, including CDSCs, pursuant to the Plans. The
Eaton Vance organization may be considered to have realized a profit under the
Class B and Class C Plans if at any point in time the aggregate amounts
theretofore received by the principal underwriter pursuant to the Class B or
Class C Plan and from CDSCs have exceeded the total expenses theretofore
incurred by such organization in distributing shares. 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 Trust.
The Class A and Class B and Class C Plans continue in effect from year to
year so long as such continuance is approved at least annually by the vote of
both a majority of (i) the noninterested Trustees of the Trust who have no
direct or indirect financial interest in the operation of the Plan or any
agreements related to the Plan (the "Plan Trustees") and (ii) all of the
Trustees then in office. Each Plan may be terminated at any time by vote of a
majority of the Plan Trustees or by a vote of a majority of the outstanding
voting securities of the applicable Class. Each Plan requires quarterly
Trustee review of a written report of the amount expended under the Plan and
the purposes for which such expenditures were made. The Plans may not be
amended to increase materially the payments described therein without approval
of the shareholders of the affected Class and the Trustees. So long as a Plan
is in effect, the selection and nomination of the noninterested Trustees shall
be committed to the discretion of such Trustees. The Class A, Class B and
Class C Plans were initially approved by the Trustees, including the Plan
Trustees, on June 23, 1997.
The Trustees of the Trust believe that each Plan will be a significant
factor in the expected growth of each Fund's assets, and will result in
increased investment flexibility and advantages which have benefitted and will
continue to benefit the Fund and its shareholders. Payments for sales
commissions and distribution fees made to the principal underwriter under the
Class B and Class C Plans will compensate the principal underwriter for its
services and expenses in distributing those classes of shares. Service fee
payments made to the principal underwriter and investment dealers provide
incentives to provide continuing personal services to investors and the
maintenance of shareholder accounts. By providing incentives to the principal
underwriter and investment dealers, each 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 each
Plan will benefit the Fund and its shareholders.
PERFORMANCE
Average annual total return is determined separately for each Class of the
Fund by multiplying a hypothetical initial purchase order of $1,000 by the
average annual compound rate of return (including capital appreciation/
depreciation, and distributions paid and reinvested) for the stated period and
annualizing the result. The calculation assumes (i) that all distributions
are reinvested at net asset value on the reinvestment dates during the period,
(ii) the deduction of the maximum sales charge from the initial $1,000
purchase order for Class A shares, (iii) a complete redemption of the
investment and, (iv) the deduction of any CDSC at the end of the period. The
Fund may also publish total return figures for each class based on reduced
sales charges or at net asset value. These returns would be lower if the full
sales charge was imposed. For further information concerning the total return
of the Classes of a Fund, see Appendix A, Appendix B and Appendix C.
The Fund's performance may be compared in publications to the performance
of various indices and investments for which reliable data is available, and
to averages, performance rankings or ratings, or other information prepared by
recognized mutual fund statistical services. The Fund's performance may differ
from that of other investors in the Portfolio, including other investment
companies.
The Fund's total return may be compared to relevant indices, such as the
Consumer Price Index and various domestic securities indices. The Fund's total
return and comparisons with these indices may be used in advertisements and in
information furnished to present or prospective shareholders. The Fund's
performance may differ from that of other investors in the Portfolio,
including any other investment companies. In addition, evaluations of the
Fund's performance, ratings, or rankings of mutual funds (which include the
Fund) made by independent sources may be used in advertisements and in
information furnished to present or prospective shareholders. Information,
charts and illustrations showing the effect of compounding interest or
relating to inflation and taxes (including their effects on the dollar and the
return on stocks and other investment vehicles) may also be included in
advertisements and material furnished to present and prospective investors.
Information used in advertisements and in materials furnished to present
or prospective shareholders may include statistics, data and performance
studies prepared by independent organizations 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, portfolio turnover and holdings of the
Portfolio may be included in advertisements and other material furnished to
present and prospective shareholders.
Information about portfolio allocation and holdings of the Portfolio at a
particular date may be included in advertisements and other material furnished
to present and prospective shareholders.
Information used in advertisements and in materials provided to present
and prospective shareholders may include descriptions of Eaton Vance and other
Fund and Portfolio service providers, their investment styles, other
investment products, personnel and Fund distribution channels.
Information used in advertisements and materials furnished to present and
prospective investors may include statements or illustrations relating to the
appropriateness of certain types of securities and/or mutual funds to meet
specific financial goals. Such information may address:
- cost associated with aging parents;
- funding a college education (including its actual and estimated
cost);
- health care expenses (including actual and projected expenses);
- long-term disabilities (including the availability of, and coverage
provided by, disability insurance); and
- retirement (including the availability of social security benefits,
the tax treatment of such benefits and statistics and other
information relating to maintaining a particular standard of living
and outliving existing assets).
Such information may also address different methods for saving money and
the results of such methods, as well as the benefits of investing in equity
securities. Such information may describe: the potential for growth; the
performance of equities as compared to other investment vehicles; and the
value of investing as early as possible and regularly, as well as staying
invested. The benefits of investing in equity securities by means of a mutual
fund may also be included (such benefits may include diversification,
professional management and the variety of equity mutual fund products).
Information in advertisements and materials furnished to present and
prospective investors may include profiles of different types of investors
(i.e., investors with different goals and assets) and different investment
strategies for meeting specific financial goals. Such information may provide
hypothetical illustrations which include: results of various investment
strategies; performance of an investment in the Fund over various time
periods; and results of diversifying assets among several investments with
varying performance. Information in advertisements and materials furnished to
present and prospective investors may also include quotations (including
editorial comments) and statistics concerning investing in securities, as well
as investing in particular types of securities and the performance of such
securities.
The Trust (or principal underwriter) 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
Each series of the Trust is treated as a separate entity for federal
income tax purposes. The Fund has elected to be treated, has qualified, and
intends to qualify each year as a RIC under the Code. Accordingly, the Fund
intends to satisfy certain requirements relating to sources of its income and
diversification of its assets and to distribute substantially all of its net
income and net short-term and long-term capital gains in accordance with the
timing requirements imposed by the Code, so as to maintain its RIC status and
to avoid paying any federal income or excise tax. The Fund so qualified for
its fiscal year ended August 31, 1999. 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 also satisfy
these requirements. The Portfolio will allocate at least annually among its
investors, including the Fund, the Portfolio's net investment income, net
realized capital gains, and any other items of income, gain, loss, deduction
or credit. The Portfolio will make allocations to the Fund in a manner
intended to comply 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 (i) will be deemed to own its
proportionate share of each of the assets of the Portfolio and (ii) will be
entitled to the gross income of the Portfolio attributable to such share.
In order to avoid incurring a federal excise tax obligation, the Code
requires that the Fund distribute (or be deemed to have distributed) by
December 31 of each calendar (i) year at least 98% of its ordinary income (not
including tax-exempt income) for such year, (ii) at least 98% of its capital
gain net income (which is 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 (iii) 100% of any income from the prior year
(as previously computed) that was not paid out during such year and on which
the Fund paid no federal income tax. Under current law, provided that the Fund
qualifies as a RIC and the Portfolio is treated as a partnership for
Massachusetts and federal tax purposes, neither the Fund nor the Portfolio
should be liable for any income, corporate excise or franchise tax in the
Commonwealth of Massachusetts.
Certain foreign exchange gains and losses realized by the Portfolio in
connection with investments in foreign securities and foreign currency related
options, futures or forward contracts or foreign currency may be treated as
ordinary income and losses under special tax rules. Certain foreign currency
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 generally will be
treated as ordinary income or loss. Certain options and futures contracts are
also subject to these mark to market rules, except that gains or losses on
these contracts, in connection with a marking to market or an actual
disposition, will generally be treated as 60% long-term and 40% short-term
capital gain or loss. Positions of the Portfolio in securities and offsetting
options, futures or forward contracts may be treated as "straddles," which are
subject to tax rules that may cause deferral of Portfolio losses, adjustments
in the holding periods of Portfolio securities, and other changes in the
short-term or long-term characterization of capital gains and losses, the
effect of which may be to change the amount, timing and character of the
Fund's distributions to shareholders. The Portfolio intends to limit its
options and futures transactions and its activities in foreign currency and
related forward contracts to the extent necessary to preserve the Fund's
ability to qualify as a RIC.
The Portfolio may be subject to foreign withholding or other foreign
taxes with respect to income (possibly including, in some cases, capital
gains) on certain foreign securities. These taxes may be reduced or eliminated
under the terms of an applicable U.S. income tax treaty. As it is not expected
that more than 50% of the value of the total assets of the Fund, taking into
account its allocable share of the Portfolio's total assets, at the close of
any taxable year of the Fund will consist of securities issued by foreign
corporations, the Fund will not be eligible to pass through to shareholders
their proportionate share of any foreign taxes paid by the Portfolio and
allocated to the Fund, with the result that shareholders will not include in
income, and will not be entitled to take any foreign tax credits or deductions
for, foreign taxes paid by the Portfolio and allocated to the Fund. Certain
uses of foreign currency and investments by the Portfolio in the stock of
certain "passive foreign investment companies" may be limited or a tax
election may be made, if available, in order to preserve the Fund's
qualification as a RIC and/or to avoid imposition of a tax on the Fund.
A portion of distributions made by the Fund which are derived from
dividends received by the Portfolio from domestic corporations and allocated
to the Fund may qualify for the dividends-received deduction for corporations.
The dividends-received deduction for corporate shareholders is reduced to the
extent the shares of the Fund with respect to which the dividends are received
are treated as debt-financed under the federal income tax law and is
eliminated if the shares are deemed to have been held for less than a minimum
period, generally 46 days, which must be satisfied separately for each
dividend during a specified period. Receipt of certain distributions
qualifying for the deduction may result in reduction of the tax basis of the
corporate shareholder's shares and require current income recognition to the
extent in excess of such basis or increase liability, if any, for the
corporate alternative minimum tax.
Distributions of the excess of net long-term capital gain over net short-
term capital loss (including any capital losses carried forward from prior
years) earned by the Portfolio and allocated to the Fund are taxable to
shareholders of the Fund as long-term capital gains, whether received in cash
or in additional shares and regardless of the length of time their shares have
been held. Certain distributions declared in October, November or December and
paid the following January will be taxed to shareholders as if received on
December 31 of the year in which they are declared.
Any loss realized upon the redemption or exchange of shares of the Fund
with a tax holding period of 6 months or less will be treated as a long-term
capital loss to the extent of any distribution treated as long-term capital
gains with respect to such shares. In addition, all or a portion of a loss
realized on a redemption or other disposition of Fund shares may be disallowed
under "wash sale" rules if other shares of the Fund are acquired (whether
through reinvestment of dividends or otherwise) within a period beginning 30
days before and ending 30 days after the date of such redemption or other
disposition. Any disallowed loss will result in an adjustment to the
shareholder's tax basis in some or all of the other shares acquired.
Sales charges paid upon a purchase of shares of the Fund cannot be taken
into account for purposes of determining gain or loss on a redemption or
exchange of the shares before the 91st day after their purchase to the extent
a sales charge is reduced or eliminated in a subsequent acquisition of shares
of the Fund or of another fund pursuant to the Fund's reinvestment or exchange
privilege. Any disregarded amounts will result in an adjustment to the
shareholder's tax basis in some or all of any other shares acquired.
Special tax rules apply to Individual Retirement Accounts ("IRAs") and
other retirement plans and persons investing through IRAs or such plans should
consult their tax advisers for more information. Amounts paid by the Fund to
individuals and certain other shareholders who have not provided the Fund with
their correct taxpayer identification number ("TIN") and certain
certifications required by the Internal Revenue Service (the "IRS"), as well
as shareholders with respect to whom the Fund has received certain information
from the IRS or a broker, may be subject to "backup" withholding of federal
income tax arising from the Fund's dividends and other distributions as well
as the proceeds of redemption transactions (including repurchases and
exchanges) at a rate of 31%. An individual's TIN is generally his or her
social security number.
The foregoing discussion does not address the special tax rules applicable
to certain classes of investors, such as IRAs and other retirement plans, tax-
exempt entities, foreign investors, insurance companies and financial
institutions. Shareholders should consult their own tax advisers with respect to
special tax rules that may apply in their particular situations, as well as the
state, local and, where applicable, foreign tax consequences of investing in the
Fund.
PORTFOLIO SECURITY TRANSACTIONS
Decisions concerning the execution of portfolio security transactions of
the Portfolio, including the selection of the market and the broker-dealer
firm, are made by BMR. BMR is also responsible for the execution of
transactions for all other accounts managed by it.
BMR places the security transactions of the Portfolio and of all other
accounts managed by it for execution with many broker-dealer firms. BMR uses
its best efforts to obtain execution of portfolio transactions at prices which
are advantageous to the Portfolio and at reasonably competitive spreads or
(when a disclosed commision is being charged) at reasonably competitive
commission rates. In seeking such execution, BMR will use its best judgment in
evaluating the terms of a transaction, and will give consideration to various
relevant factors, including without limitation the full range and quality of
the broker-dealer's services, the value of the brokerage and research services
provided, the responsiveness of the broker-dealer to BMR, 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 this and other transactions, and the reasonableness of the
commission or spread, if any. Transactions on United States stock exchanges
and other agency transactions involve the payment by the 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 often involve the payment of brokerage
commissions, which may be higher than those in the United States. There is
generally no stated commission in the case of securities traded in the over-
the-counter markets, but the price paid or received by the Portfolio usually
includes an undisclosed dealer markup or markdown. In an underwritten offering
the price paid by the Portfolio often includes a disclosed fixed commission or
discount retained by the underwriter or dealer. Although spreads or
commissions paid on portfolio security transactions will, in the judgment of
BMR, be reasonable in relation to the value of the services provided,
commissions exceeding those which another firm might charge may be paid to
broker-dealers who were selected to execute transactions on behalf of the
Portfolio and BMR's other clients in part for providing brokerage and research
services to BMR. For the fiscal years ended August 31, 1999, 1998 and 1997,
the Portfolio paid brokerage commissions of $184,601, $237,806 and $109,181,
respectively, on portfolio security transactions, of which approximately
$154,990, $141,404 and $106,933, respectively, was paid in respect of
portfolio security transactions aggregating approximately $100,724,145,
$105,857,362 and $93,456,264, respectively, to firms which provided some
Research Services to Eaton Vance, (although many of such firms may have been
selected in any particular transaction primarly because of their execution
capabilities).
As authorized in Section 28(e) of the Securities Exchange Act of 1934, a
broker or dealer who executes a portfolio transaction on behalf of the
Portfolio may receive a commission which is in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction if BMR determines in good faith that such compensation was
reasonable in relation to the value of the brokerage and research services
provided. This determination may be made on the basis of either that
particular transaction or on the basis of the overall responsibilities which
BMR and its affiliates have for accounts over which they exercise investment
discretion. In making any such determination, BMR will not attempt to place a
specific dollar value on the brokerage and research services provided or to
determine what portion of the commission should be related to such services.
Brokerage and research services may include advice as to the value of
securities, the advisability of investing in, purchasing, or selling
securities, and the availability of securities or purchasers or sellers of
securities; furnishing analyses and reports concerning issuers, industries,
securities, economic factors and trends, portfolio strategy and the
performance of accounts; and effecting securities transactions and performing
functions incidental thereto (such as clearance and settlement); and the
"Research Services" referred to in the next paragraph.
It is a common practice in the investment advisory industry for the
advisers of investment companies, institutions and other investors to receive
research, analytical, statistical and quotation services, data, information
and other services, products and materials which assist such advisers in the
performance of their investment responsibilities ("Research Services") from
broker-dealer firms which execute portfolio transactions for the clients of
such advisers and from third parties with which these broker-dealers have
arrangements. Consistent with this practice, BMR receives Research Services
from many broker-dealer firms with which BMR places the Portfolio transactions
and from third parties with which these broker-dealers have arrangements.
These Research Services include such matters as general economic, political,
business and market information, 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, proxy
voting data and analysis services, technical analysis of various aspects of
the securities markets, financial, industry and trade publications, news and
information services, pricing and quotation equipment and services, and
research oriented computer hardware, software, data bases and services. Any
particular Research Service obtained through a broker-dealer may be used by
BMR in connection with client accounts other than those accounts which pay
commissions to such broker-dealer. Any such Research Service may be broadly
useful and of value to BMR in rendering investment advisory services to all or
a significant portion of its clients, or may be relevant and useful for the
management of only one client's account or of a few clients' accounts, or may
be useful for the management of merely a segment of certain clients' accounts,
regardless of whether any such account or accounts paid commissions to the
broker-dealer through which such Research Service was obtained. The advisory
fee paid by the Portfolio is not reduced because BMR receives such Research
Services. BMR evaluates the nature and quality of the various Research
Services obtained through broker-dealer firms and attempts to allocate
sufficient portfolio security transactions to such firms to ensure the
continued receipt of Research Services which BMR believes are useful or of
value to it in rendering investment advisory services to its clients.
The Portfolio and BMR may also receive Research Services from underwriters
and dealers in fixed price offerings, which Research Services are reviewed and
evaluated by BMR in connection with its investment responsibilities. The
investment companies sponsored by BMR or Eaton Vance may allocate brokerage
commissions to acquire information relating to the performance, fees and
expenses of such companies and other mutual funds, which information is used
by the Trustees of such companies to fulfill their responsibility to oversee
the quality of the services provided by various entities, including BMR, to
such companies. Such companies may also pay cash for such information.
Subject to the requirement that BMR shall use its best efforts to seek to
execute portfolio security transactions at advantageous prices and at
reasonably competitive commission rates or spreads, BMR is authorized to
consider as a factor in the selection of any broker-dealer firm with whom
Portfolio orders may be placed the fact that such firm has sold or is selling
shares of the Fund or of other investment companies sponsored by BMR or Eaton
Vance. This policy is not inconsistent with a rule of the NASD, which rule
provides that no firm which is a member of the NASD shall favor or disfavor
the distribution of shares of any particular investment company or group of
investment companies on the basis of brokerage commissions received or
expected by such firm from any source.
Securities considered as investments for the Portfolio may also be
appropriate for other investment accounts managed by BMR or its affiliates.
Whenever decisions are made to buy or sell securities by the Portfolio and one
or more of such other accounts simultaneously, BMR will allocate the security
transactions (including "hot" issues) in a manner which it believes to be
equitable under the circumstances. As a result of such allocations, there may
be instances where the Portfolio will not participate in a transaction that is
allocated among other accounts. If an aggregated order cannot be filled
completely, allocations will generally be made on a pro rata basis. An order
may not be allocated on a pro rata basis where, for example: (i) consideration
is given to portfolio managers who have been instrumental in developing or
negotiating a particular investment; (ii) consideration is given to an account
with specialized investment policies that coincide with the particulars of a
specific investment; (iii) pro rata allocation would result in odd-lot or de
minimis amounts being allocated to a portfolio or other client; or (iv) where
BMR reasonably determines that departure from a pro rata allocation is
advisable. While these aggregation and allocation policies could have a
detrimental effect on the price or amount of the securities available to the
Portfolio from time to time, it is the opinion of the Trustees of the Trust
and the Portfolio that the benefits from the BMR organization outweigh any
disadvantage that may arise from exposure to simultaneous transactions.
FINANCIAL STATEMENTS
The audited financial statements of and the report of independent
auditors' for the Fund and the Portfolio appear in the Fund's most recent
annual report to shareholders and are incorporated by reference into this SAI.
A copy of the Fund's annual report accompanies this SAI. Consistent with
applicable law, duplicate mailings of shareholder reports and certain other
Fund information to shareholders residing at the same address may be
eliminated.
Registrant incorporates by reference the audited financial information for
the Fund and the Portfolio for the fiscal year ended August 31, 1999, as
previously filed electronically with the SEC (Accession No.
0000912057-99-002315).
<PAGE>
APPENDIX A
CLASS A FEES, PERFORMANCE AND OWNERSHIP
SERVICE FEES
During the fiscal year ended August 31, 1999, Class A made service fee
payments under the Plan aggregating $241,468, of which $155,563 was paid to
investment dealers and the balance of which was retained by the principal
underwriter.
PRINCIPAL UNDERWRITER
The total sales charges paid in connection with sales of Class A shares
during the fiscal years ended August 31, 1999, 1998 and 1997, were $36,829,
$72,772 and $24,331, respectively, of which $5,270, $9,701 and $3,685,
respectively, was received by the principal underwriter. For the fiscal years
ended August 31, 1999, 1998 and 1997, investment dealers received $31,559,
$63,071 and $20,646, respectively, from the total sales charges.
The Trust 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. For the fiscal year ended August 31,
1999, Class A paid the principal underwriter $975 for repurchase transactions
handled by it.
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return
on a hypothetical investment of $1,000, in Class A shares for the periods
shown in the table. The "Value of Initial Investment" reflects the deduction
of the maximum sales charge of 5.75%. Past performance is no guarantee of
future results. Investment return and principal value will fluctuate; shares,
when redeemed, may be worth more or less than their original cost.
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT
TOTAL RETURN TOTAL RETURN
EXCLUDING MAXIMUM INCLUDING MAXIMUM
VALUE OF VALUE OF SALES CHARGE SALES CHARGE
INVESTMENT INVESTMENT INITIAL INVESTMENT ---------------------------- -----------------------------
PERIOD DATE INVESTMENT ON 8/31/99 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ------------------------ ------------- -------------- ------------- ------------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
10 Years Ended 8/31/99 8/31/89 $942.73 $2,840.06 201.25% 11.66% 184.01% 11.00%
5 Years Ended 8/31/99 8/31/94 $942.01 $2,059.93 118.67% 16.94% 105.99% 15.55%
1 Year Ended 8/31/99 8/31/98 $942.46 $1,141.68 21.14% 21.14% 14.17% 14.17%
</TABLE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of December 1, 1999, the Trustees and officers of the Trust, as a
group, owned in the aggregate less than 1% of the outstanding shares of Class
A and of the Fund. To the knowledge of the Trust, no person owned of record or
beneficially 5% or more of the Fund's outstanding Class A shares as of such
date.
<PAGE>
APPENDIX B
CLASS B FEES, PERFORMANCE AND OWNERSHIP
DISTRIBUTION AND SERVICE FEES
During the fiscal year ended August 31, 1999, the principal underwriter
paid to investment dealers sales commissions of $64,458 on sales of Class B
shares. During the same period, the Fund paid distribution fees to the
principal underwriter under the Distribution Plan aggregating $146,815 and the
principal underwriter received approximately $50,000 in CDSCs imposed on early
redeeming shareholders. These distribution payments and CDSC payments reduce
uncovered distribution charges under the Plan. As at August 31, 1999, the
outstanding uncovered distribution charges of the principal underwriter
calculated under the Plan amounted to approximately $278,000 (which amount was
equivalent to approximately 1.5% of the net assets attributable to Class B on
such day). During the fiscal year ended August 31, 1999, Class B made service
fee payments to the principal underwriter and investment dealers aggregating
$40,649 of which $40,486 was paid to investment dealers and the balance of
which was retained by the principal underwriter.
PRINCIPAL UNDERWRITER
The Trust 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. For the fiscal year ended August 31,
1999, Class B paid the principal underwriter $985 for repurchase transactions
handled by it.
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return
on a hypothetical investment of $1,000 in Class B shares for the periods shown
in the table. Total return for the period prior to September 1, 1997 reflects
the total return of a predecessor to Class B. Total return prior to September
13, 1994 reflects the total return of Class A, adjusted to reflect the Class B
sales charge. The Class A total return has not been adjusted to reflect
certain other expenses (such as distribution and/or service fees). If such
adjustments were made the Class B total return would be different. Past
performance is no guarantee of future results. Investment return and principal
value will fluctuate; shares, when redeemed, may be worth more or less than
their original cost. Information presented with two asterisks (**) includes
the effect of subsidizing expenses. Returns would have been lower without
subsidies.
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF
INVESTMENT INVESTMENT
BEFORE AFTER TOTAL RETURN BEFORE
DEDUCTING THE DEDUCTING THE DEDUCTING TOTAL RETURN AFTER DEDUCTING
MAXIMUM MAXIMUM THE MAXIMUM CDSC THE MAXIMUM CDSC
INVESTMENT INVESTMENT CDSC ON CDSC ON -------------------------- ----------------------------
PERIOD DATE 8/31/99 8/31/99 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ----------------------- ----------- --------------- --------------- ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
10 Years Ended 8/31/99 8/31/89 $2,896.69 $2,896.69 189.67% 11.22% 189.67% 11.22%
5 Years Ended 8/31/99 8/31/94 $2,102.68 $2,082.68 110.27% 16.03% 108.27% 15.80%
1 Year Ended 8/31/99 8/31/98 $1,202.77 $1,152.77 20.28% 20.28% 15.28% 15.28%
</TABLE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As at December 1, 1999, the Trustees and officers of the Trust, as a
group, owned in the aggregate less than 1% of the outstanding shares of each
Class B and of each Fund. As of December 1, 1999, Merrill Lynch, Pierce,
Fenner & Smith, Inc., Jacksonville, FL was the record owner of approximately
14.9% of the outstanding Class B shares, which were held on behalf of its
customers who are the beneficial owners of such shares, and as to which it had
voting power under certain limited circumstances. To the knowledge of the
Trust, no other person owned of record or beneficially 5% or more of the
Fund's outstanding Class B shares as of such date.
<PAGE>
APPENDIX C
CLASS C FEES, PERFORMANCE AND OWNERSHIP
DISTRIBUTION AND SERVICE FEES
During the fiscal year ended August 31, 1999, the principal underwriter
paid to investment dealers sales commissions of $18,340 on sales of Class C
shares. During the same period, the Fund made distribution payments to the
principal underwriter under the Distribution Plan aggregating $25,549 and the
principal underwriter received approximately $2,000 in CDSCs imposed on early
redeeming shareholders. These distribution payments and CDSC payments reduced
uncovered distribution charges under the Plan. As at August 31, 1999, the
outstanding uncovered distribution charges of the principal underwriter
calculated under the Plan amounted to approximately $376,000 (which amount was
equivalent to 11.6% of the net assets attributable to Class C on such day).
During the fiscal year ended August 31, 1999, Class C made service fee
payments to the principal underwriter and investment dealers aggregating
$8,516 of which $4,589 was paid to investment dealers and the balance of which
was retained by the principal underwriter.
PRINCIPAL UNDERWRITER
The Trust 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. For the fiscal year ended August 31,
1999, Class C paid the principal underwriter $67.50 for repurchase
transactions handled by it.
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return
on a hypothetical investment of $1,000 in Class C shares for the periods shown
in the table. Total return for the period prior to September 1, 1997 reflects
the total return of a predecessor to Class C. Total return prior to November
7, 1994 reflects the total return of Class A, adjusted to reflect the Class C
sales charge. The Class A total return has not been adjusted to reflect
certain other expenses (such as distribution and/or service fees). If such
adjustments were made, the Class C total return would be different. Past
performance is no guarantee of future results. Investment return and principal
value will fluctuate; shares, when redeemed, may be worth more or less than
their original cost. Information presented with two asterisks (**) includes
the effect of subsidizing expenses.
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN BEFORE
BEFORE AFTER DEDUCTING TOTAL RETURN AFTER DEDUCTING
DEDUCTING DEDUCTING THE CDSC THE CDSC
INVESTMENT INVESTMENT THE CDSC THE CDSC -------------------------- ----------------------------
PERIOD DATE ON 8/31/99 ON 8/31/99 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ------------------------ ----------- --------------- --------------- ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
10 Years Ended 8/31/99 8/31/89 $2,746.34 $2,746.34 174.63% 10.63% 174.63% 10.63%
5 Years Ended 8/31/99 8/31/94 $1,993.56 $1,993.56 99.36% 14.80% 99.36% 14.80%
1 Year Ended 8/31/99 8/31/98 $1,201.60 $1,191.60 20.16% 20.16% 19.16% 19.16%
</TABLE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As at December 1, 1999, the Trustees and officers of the Trust, as a
group, owned in the aggregate less than 1% of the outstanding Class C shares
of the Fund. As at December 1, 1999, NFSC, Vero Beach, FL, was the record
owner of approximately 11.6% of the outstanding Class C shares, which were
held on behalf of its customers who are the beneficial owners of such shares,
and as to which it had voting power under certain limited circumstances. To
the knowledge of the Trust, no other person owned of record or beneficially 5%
or more of the Fund's outstanding Class C shares as of such date.
<PAGE>
STATEMENT OF
ADDITIONAL INFORMATION
January 1, 2000
EATON VANCE WORLDWIDE HEALTH SCIENCES FUND
EATON VANCE INFORMATION AGE FUND
The Eaton Vance Building
255 State Street
Boston, Massachusetts 02109
(800) 225-6265
This Statement of Additional Information ("SAI") provides general
information about the Funds listed above and their corresponding Portfolios.
Each Fund is a series of Eaton Vance Growth Trust. Capitalized terms used in
this SAI and not otherwise defined have the meanings given to them in the
prospectus. This SAI contains additional information about:
Page
Strategies and Risks ............................................. 1
Investment Restrictions .......................................... 6
Management and Organization ...................................... 8
Investment Advisory and Administrative Services .................. 12
Other Service Providers .......................................... 14
Purchasing and Redeeming Shares .................................. 15
Sales Charges .................................................... 17
Performance ...................................................... 20
Taxes ............................................................ 22
Portfolio Security Transactions .................................. 24
Financial Statements ............................................. 26
Appendices:
A: Class A Fees, Performance and Ownership ....................... a-1
B: Class B Fees, Performance and Ownership ....................... b-1
C: Class C Fees, Performance and Ownership ....................... c-1
Although each Fund offers only its shares of beneficial interest, it is
possible that a Fund (or Class) might become liable for a misstatement or
omission in this SAI regarding another Fund (or Class) because the Funds use
this combined SAI. The Trustees of the Trust have considered this factor in
approving the use of a combined SAI.
THIS IS NOT A PROSPECTUS AND IS AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE
INVESTORS ONLY IF PRECEDED OR ACCOMPANIED BY THE FUNDS' PROSPECTUS DATED
JANUARY 1, 2000, AS SUPPLEMENTED FROM TIME TO TIME, WHICH IS INCORPORATED
HEREIN BY REFERENCE. THIS SAI SHOULD BE READ IN CONJUNCTION WITH THE
PROSPECTUS, WHICH MAY BE OBTAINED BY CALLING 1-800-225-6265.
<PAGE>
STRATEGIES AND RISKS
HEALTH SCIENCES PORTFOLIO. Under normal market conditions, the Health
Sciences Portfolio will invest at least 65% of its total assets in securities
of health sciences 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. ("Moody's") or lower than BBB by Standard & Poor's Ratings Group ("S&P"))
or, if unrated, determined by OrbiMed 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.
INFORMATION AGE PORTFOLIO. Under normal market conditions, the Information
Age Portfolio will invest at least 65% of its total assets in securities of
information age companies. Securities eligible for purchase include common and
preferred stocks; equity interests in trusts, partnerships, joint ventures and
other unincorporated entities or enterprises; special classes of shares
available only to foreign investors in markets that restrict ownership by
foreign investors to certain classes of equity securities; 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 or lower than BBB by S&P) or, if unrated, determined by an
investment 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.
FOREIGN INVESTMENTS. Investing in securities issued by companies whose
principal business activities are outside the United States may involve
significant risks not present in domestic investments. For example, there is
generally less publicly available information about foreign companies,
particularly those not subject to the disclosure and reporting requirements of
the U.S. securities laws. Foreign issuers are generally not bound by uniform
accounting, auditing, and financial reporting requirements and standards of
practice comparable to those applicable to domestic issuers. Investments in
foreign securities also involve the risk of possible adverse changes in
investment or exchange control regulations, expropriation or confiscatory
taxation, limitation on the removal of funds or other assets of a 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. In some countries delayed
settlements are customary, which increases the risk of loss.
Each Portfolio may also invest in American Depositary Receipts (ADRs),
European Depositary Receipts (EDRs) and Global Depositary Receipts (GDRs). ADRs,
EDRs and GDRs are certificates evidencing ownership of shares of a foreign
issuer and are alternatives to directly purchasing the underlying foreign
securities in their national markets and currencies. However, they continue to
be subject to many of the risks associated with investing directly in foreign
securities. These risks include foreign exchange risk as well as the political
and economic risks of the underlying issuer's country. ADRs, EDRs and GDRs may
be sponsored or unsponsored. Unsponsored receipts are established without the
participation of the issuer. Unsponsored receipts may involve higher expenses,
they may not pass-through voting and other shareholder rights, and they may be
less liquid.
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 a
Portfolio may temporarily be held in bank deposits in foreign currencies
during the completion of investment programs, the value of the assets of a
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. A 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 a 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, a
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. A 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, a 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 an
investment adviser is incorrect in its forecasts of market values and currency
exchange rates, a Portfolio's performance will be adversely affected.
Currency swaps require maintenance of a segregated account described under
"Asset Coverage Requirements" below. Each 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 investment 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. 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.
Each Portfolio may engage in cross-hedging by using forward contracts in one
currency (or basket of currencies) to hedge against fluctuations in the value
of securities denominated in a different currency if the Portfolio's 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 a Portfolio's
exposure to foreign currency exchange rate fluctuations. Each Portfolio may
also use forward contracts to shift its exposure to foreign currency exchange
rate changes from one currency to another.
Each 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 a 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 a 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 a 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 a Portfolio from responding to such events in a timely
manner.
Settlements of over-the-counter forward contracts or of the exercise of
foreign currency options generally must occur within the country issuing the
underlying currency, which in turn requires parties to such contracts to
accept or make delivery of such currencies in conformity with any United
States or foreign restrictions and regulations regarding the maintenance of
foreign banking relationships, fees, taxes or other charges.
Unlike currency futures contracts and exchange-traded options, options on
foreign currencies and forward contracts are not traded on contract markets
regulated by the Commodity Futures Trading Commission ("CFTC") or (with the
exception of certain foreign currency options) the Securities and Exchange
Commission (the "SEC"). To the contrary, such instruments are traded through
financial institutions acting as market-makers. (Foreign currency options are
also traded on the Philadelphia Stock Exchange subject to SEC regulation). In
an over-the-counter trading environment, many of the protections associated
with transactions on exchanges will not be available. For example, there are
no daily price fluctuation limits, and adverse market movements could
therefore continue to an unlimited extent over a period of time. Although the
purchaser of an option cannot lose more than the amount of the premium plus
related transaction costs, this entire amount could be lost. Moreover, an
option writer could lose amounts substantially in excess of its 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 a 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 a
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 a 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 a 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. A 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 a Portfolio's ability to enter into desired hedging transactions.
A Portfolio will enter into over-the-counter transactions only with parties
whose creditworthiness has been reviewed and found satisfactory by an
investment 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.
DERIVATIVE INSTRUMENTS. Each Portfolio may purchase or sell derivative
instruments (which are instruments that derive their value from another
instrument, security, index or currency) to enhance return, to hedge against
fluctuations in securities prices, interest rates or currency exchange rates,
or as a substitute for the purchase or sale of securities or currencies. A
Portfolio's transactions in derivative instruments may be in the U.S. or
abroad and may include the purchase or sale of futures contracts on
securities, securities indices, other indices, other financial instruments or
currencies; options on futures contracts; exchange-traded and over-the-counter
options on securities, indices or currencies; and forward foreign currency
exchange contracts. A 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 a
Portfolio's initial investment in these instruments. In addition, a Portfolio
may lose the entire premium paid for purchased options that expire before they
can be profitably exercised by a Portfolio. A Portfolio incurs transaction
costs in opening and closing positions in derivative instruments. Under
regulations of the CFTC, the use of futures transactions for non-hedging
purposes is limited. There can be no assurance that a Portfolio's investment
adviser's use of derivative instruments will be advantageous to the Portfolio.
Each 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 a Portfolio's investment 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, a
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 a Portfolio's investment 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.
A Portfolio may purchase call and put options, subject to the Asset
Coverage Requirements set forth below. A Portfolio may only write a put option
on a security that it intends to acquire for its investment portfolio.
To the extent that a Portfolio enters into futures contracts, options on
futures contracts and options on foreign currencies traded on an exchange
regulated by the 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.
RISKS ASSOCIATED WITH DERIVATIVE INSTRUMENTS. Entering into a derivative
instrument involves a risk that the applicable market will move against a
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 a Portfolio. Derivative
instruments may sometimes increase or leverage a Portfolio's exposure to a
particular market risk. Leverage enhances the Portfolio's exposure to the
price volatility of derivative instruments it holds. A 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 a
Portfolio from closing out positions and limiting its losses. The staff of the
SEC takes the position that certain purchased OTC options, and assets used as
cover for written OTC options, are subject to a Portfolio's 15% limit on
illiquid investments. A 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 Code limit the extent to which the Portfolio may purchase
and sell derivative instruments. A 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 its corresponding Fund as a regulated investment company for federal income
tax purposes.
REPURCHASE AGREEMENTS. Each 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, a Portfolio might experience delays in recovering its cash. To the
extent that, in the meantime, the value of the securities a Portfolio
purchased may be have decreased, the Portfolio could experience a loss. The
Portfolios do not expect to invest more than 5% of their respective total
assets in repurchase agreements under normal circumstances. At no time will a
Portfolio commit more than 15% of its net assets to repurchase agreements
which mature in more than seven days and other illiquid securities. A
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. Each Portfolio may enter into reverse
repurchase agreements. Under a reverse repurchase agreement, a 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 a 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 an adviser. Because reverse repurchase agreements may be
considered to be the practical equivalent of borrowing funds, they constitute
a form of leverage. If a 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.
While an investment 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.
LENDING PORTFOLIO SECURITIES. If the relevant investment adviser decides to
make securities loans, each of the Portfolios may seek to increase its income
by lending portfolio securities to broker-dealers or other institutional
borrowers. The financial condition of the borrower will be monitored by an
adviser on an ongoing basis. The Portfolio would continue to receive the
equivalent of the interest or dividends paid by the issuer on the securities
loaned and would also receive a fee, or all or a portion of the interest on
investment of the collateral. The Portfolio would have the right to call a
loan and obtain the securities loaned at any time on up to five business days'
notice. The Portfolio would not have the right to vote any securities having
voting rights during the existence of a loan, but could call the loan in
anticipation of an important vote to be taken among holders of the securities
or the giving or holding of their consent on a material matter affecting the
investment. Securities lending involves administrative expenses, including
finders' fees. If an adviser decides to make securities loans, it is intended
that the value of the securities loaned would not exceed 1/3 of a Portfolio's
total assets.
ASSET COVERAGE REQUIREMENTS. Transactions involving reverse repurchase
agreements, currency swaps, forward contracts, futures contracts and options
(other than options that the Portfolio has purchased) expose a Portfolio to an
obligation to another party. A Portfolio will not enter into any such
transactions unless it owns either (1) an offsetting ("covered") position in
securities, currencies or other options, futures contracts or forward
contracts, or (2) cash or liquid securities with a value sufficient at all
times to cover its potential obligations not covered as provided in (1) above.
(Only the net obligations of a swap will be covered.) Each Portfolio will
comply with SEC guidelines regarding cover for these instruments and, if the
guidelines so require, set aside cash or liquid securities in a segregated
account with its custodian in the prescribed amount. The securities in the
segregated account will be marked to market daily.
Assets used as cover or held in a segregated account maintained by the
Portfolio's custodian cannot be sold while the position requiring coverage or
segregation is outstanding unless they are replaced with other appropriate
assets. As a result, the commitment of a large portion of a Portfolio's assets
to segregated accounts or to cover could impede portfolio management or the
Portfolio's ability to meet redemption requests or other current obligations.
CONVERTIBLE SECURITIES. A Portfolio may from time to time invest a portion of
its assets in debt securities and preferred stocks which are convertible into,
or carry the right to purchase, common stock or other equity securities. The
debt security or preferred stock (such as Canadian special warrants) may
itself be convertible into or exchangeable for equity securities, or the
purchase right may be evidenced by warrants attached to the security or
acquired as part of a unit with the security. Convertible securities may be
purchased for their appreciation potential when they yield more than the
underlying securities at the time of purchase or when they are considered to
present less risk of principal loss than the underlying securities. Generally
speaking, the interest or dividend yield of a convertible security is somewhat
less than that of a non-convertible security of similar quality issued by the
same company.
WARRANTS. Warrants are an option to purchase equity securities at a specific
price valid for a specific period of time. They do not represent ownership of
the securities, but only the right to buy them. The prices of warrants do not
necessarily move parallel to the prices of the underlying securities. Warrants
may become valueless if not sold or exercised prior to their expiration.
(Canadian special warrants issued in private placements prior to a public
offering are not considered warrants for purposes of a Portfolio's investment
restrictions).
OTHER INVESTMENT COMPANIES. Each Portfolio reserves the right to invest up to
10% of its total assets in the securities of other investment companies
unaffiliated with the Portfolio's adviser that have the characteristics of
closed-end investment companies. A 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 a Portfolio. The
value of closed-end investment company securities, which are usually traded on
an exchange, is affected by demand for the securities themselves, independent
of the demand for the underlying portfolio assets, and, accordingly, such
securities can trade at a discount from their net asset values.
PORTFOLIO TURNOVER. A Portfolio cannot accurately predict its portfolio
turnover rate, but it is anticipated that the Health Sciences Portfolio's
annual turnover rate will generally not exceed 100%, while the Information Age
Portfolio's annual turnover rate will exceed 100% (excluding, in both cases,
turnover of securities having a maturity of one year or less). A 100% turnover
rate could occur if all the securities held by a Portfolio are sold and either
repurchased or replaced within one year. A high turnover rate (100% or more)
necessarily involves greater expenses to a Portfolio. High portfolio turnover
may also result in the realization of substantial net short-term capital
gains.
INVESTMENT RESTRICTIONS
The following investment restrictions of each Fund are designated as
fundamental policies and as such cannot be changed without the approval of the
holders of a majority of a Fund's outstanding voting securities, which as used
in this SAI means the lesser of (a) 67% of the shares of a Fund present or
represented by proxy at a meeting if the holders of more than 50% of the
outstanding shares are present or represented at the meeting or (b) more than
50% of the outstanding shares of a Fund. Accordingly, each Fund may not:
(1) Borrow money or issue senior securities except as permitted by the
Investment Company Act of 1940, as amended (the "1940 Act");
(2) Purchase any securities on margin (but the Fund may obtain such
short-term credits as may be necessary for the clearance of purchases and
sales of securities);
(3) 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;
(4) With respect to 75% of its total assets, invest more than 5% of
its total assets (taken at current value) in the securities of any one
issuer, or invest in more than 10% of the outstanding voting securities of
any one issuer, except obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities and except securities of
other investment companies;
(5) Underwrite securities of other issuers; or
(6) 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) or in commodities or commodity contracts for the purchase or
sale of physical commodities.
With respect to the Information Age Fund, the Fund may not:
(7) Concentrate its investments in any particular industry, but, if
deemed appropriate for the Fund's objective, up to 25% of the value of its
assets may be invested in securities of companies in any one industry
(although more than 25% may be invested in securities issued or guaranteed
by the U.S. Government or its agencies or instrumentalities).
With respect to the Health Sciences Fund, the Fund may not:
(8) 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 25% or more of the Fund's total assets would be invested in
the securities of such industry.
Notwithstanding the investment policies and restrictions of each Fund, the
Fund may invest its investable assets in an open-end management investment
company with substantially the same investment objective, policies and
restrictions as the Fund.
Each Portfolio has adopted substantially the same fundamental investment
restrictions as the foregoing investment restrictions adopted by each Fund;
such restrictions cannot be changed without the approval of a "majority of the
outstanding voting securities" of a Portfolio.
For as long as a feeder fund of Information Age Portfolio has registered
shares in Hong Kong (and for so long as Hong Kong requires the following
restrictions), the Portfolio may not:
(i) invest more than 10% of its net assets in the securities of any
one issuer; (ii) purchase more than 10% of any class of security of any
one issuer; (iii) invest more than 15% of net assets in securities which
are not listed or quoted on any stock exchange, over-the-counter market or
other organized securities market that is open to the international public
and on which such securities are regularly traded (a "Market"); (iv)
invest more than 15% of net assets in warrants and options for non-hedging
purposes; (v) write call options on investments exceeding 25% of its total
net asset value in terms of exercise price; (vi) enter into futures
contracts on an unhedged basis where the net total aggregate value of
contract prices, whether payable by or to the Portfolio under all
outstanding futures contracts, together with the aggregate value of
holdings under paragraph (vii) below exceeds 20% of the net total asset
value; (vii) invest in physical commodities (including gold, silver,
platinum or other bullion) and commodity based investments (other than
shares in companies engaged in producing, processing or trading in
commodities) which value together with the net aggregate value of the
holdings described in (vi) above, exceeds 20% of the total net asset
value; (viii) purchase shares of other investment companies exceeding 10%
of net assets; (ix) borrow more than 25% of its net assets (excluding back
to back loans); (x) write uncovered options; (xi) invest in real estate
(including options, rights or interests therein but excluding shares in
real estate companies); (xii) assume, guarantee, endorse or otherwise
become directly or contingently liable for, or in connection with, any
obligation or indebtedness of any person in respect of borrowed money
without the prior written consent of the custodian; (xiii) engage in short
sales involving a liability to deliver securities exceeding 10% of its net
assets provided that any security sold short must be actively traded on a
Market; (xiv) purchase (subject to paragraph (vi) above) an investment
with unlimited liability; or (xv) purchase any nil or partly-paid
securities unless any call thereon could be met in full out of cash or
near cash held by it in the amount of which has not already been taken
into account for the purposes of (x) above.
The Funds and the Portfolios have adopted the following investment
policies which may be changed by the Trustees with respect to a Fund without
approval by that Fund's shareholders or with respect to the Portfolio without
approval of a Fund or its other investors. Each Fund and each Portfolio will
not:
(a) invest more than 15% of its net assets in investments which are
not readily marketable, including restricted securities and repurchase
agreements with a maturity longer than seven days. Restricted securities
for the purposes of this limitation do not include securities eligible for
resale pursuant to Rule 144A under the Securities Act and commercial paper
issued pursuant to Section 4(2) of said Act that the Trustees of the
Trust, or their delegate, determine to be liquid. Any such determination
by a delegate will be made pursuant to procedures adopted by the Board. If
a Fund or Portfolio invests in Rule 144A securities, the level of
portfolio illiquidity may be increased to the extent that eligible buyers
become uninterested in purchasing such securities; or
(b) purchase an option on a security if, after such transaction, more
than 5% of its net assets, measured by the aggregate of all premiums paid
for all such options held by the Portfolio, would be so invested (Health
Sciences Fund only).
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 or any
subsequent rating change 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.
Notwithstanding the foregoing, under normal circumstances the Information Age
Fund and Portfolio will maintain at least 65% of its total assets in
securities of information age companies and the Health Sciences Fund and
Portfolio will maintain at least 65% of its total assets in securities of
health science companies and will not invest more than 15% of net assets in
illiquid securities. Moreover, each Fund and the Portfolio must always be in
compliance with the borrowing policies set forth above.
MANAGEMENT AND ORGANIZATION
FUND MANAGEMENT. The Trustees and officers of the Trust and the Portfolios
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 The Eaton
Vance Building, 255 State Street, Boston, Massachusetts 02109. Those Trustees
who are "interested persons" of the Trust or a Portfolio, as defined in the
1940 Act, are indicated by an asterisk(*).
JESSICA M. BIBLIOWICZ (39), Trustee*
President and Chief Executive Officer of National Financial Partners (a
financial services company) (since April 1999). President and Chief
Operating Officer of John A. Levin & Co. (a registered investment advisor)
(July 1997 to April 1999) and a Director of Baker, Fentress & Company which
owns John A. Levin & Co. (July 1997 to April 1999). Formerly Executive Vice
President of Smith Barney Mutual Funds (from July 1994 to June 1997).
Elected Trustee October 30, 1998. Trustee of various investment companies
managed by Eaton Vance or BMR since October 30, 1998.
Address: 1301 Avenue of the Americas, New York, NY 10019
EDWARD K.Y. CHEN (54), Trustee of Information Age Portfolio
President of Lingnan College in Hong Kong. Professor and Director of Centre of
Asian Studies at the University of Hong Kong from 1979-1995. Director of
First Pacific Company, Asia Satellite Telecommunications Holdings Ltd., and
a Board Member of the Mass Transit Railway Corporation. Member of the
Executive Council of the Hong Kong Government from 1992-1997 and Chairman of
the Consumer Council from 1991-1997.
Address: President's Office, Lingnan College, Tuen Mun, Hong Kong
DONALD R. DWIGHT (68), Trustee
President of Dwight Partners, Inc. (a corporate relations and communications
company). Trustee/Director of the Royce Funds (mutual funds). Trustee of
various investment companies managed by Eaton Vance or BMR.
Address: Clover Mill Lane, Lyme, New Hampshire 03768
HON. ROBERT LLOYD GEORGE (47), Trustee and Vice President of Information Age
Portfolio*
Chairman and Chief Executive Officer of Lloyd George. Chairman and Chief
Executive Officer of the investment advisers.
Address: 3808 One Exchange Square, Central, Hong Kong
JAMES B. HAWKES (58), President and Trustee*
President and Chief Executive Officer of BMR, Eaton Vance and their corporate
parent and trustee (EVC and EV). Director of EVC and EV. Trustee and officer
of various investment companies managed by Eaton Vance or BMR.
SAMUEL L. HAYES, III (64), Trustee
Jacob H. Schiff Professor of Investment Banking Emeritus, Harvard University
Graduate School of Business Administration. Trustee of the Kobrick
Investment Trust (mutual funds). Trustee of various investment companies
managed by Eaton Vance or BMR.
Address: 345 Nahatan Road, Westwood, Massachusetts 02090
NORTON H. REAMER (64), Trustee
Chairman of the Board and Chief Executive Officer, United Asset Management
Corporation (a holding company owning institutional investment management
firms); Chairman, President and Director, UAM Funds (mutual funds). Trustee
of various investment companies managed by Eaton Vance or BMR.
Address: One International Place, Boston, Massachusetts 02110
LYNN A. STOUT (42), Trustee
Professor of Law, Georgetown University Law Center. Elected Trustee October
30, 1998. Trustee of various investment companies managed by Eaton Vance or
BMR since October 30, 1998.
Address: 600 New Jersey Avenue, NW, Washington, DC 20001
JACK L. TREYNOR (69), Trustee
Investment Adviser and Consultant. Trustee of various investment companies
managed by Eaton Vance or BMR.
Address: 504 Via Almar, Palos Verdes Estates, California 90274
SAMUEL D. ISALY (54), Vice President of Health Sciences Portfolio
Managing Partner of OrbiMed Advisors, Inc. since 1998; President of Mehta and
Isaly Asset Management, Inc. from 1989 through 1998; 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: OrbiMed Advisors, Inc., 767 3rd Avenue, New York, NY 10017
DUNCAN W. RICHARDSON (42), Vice President of Information Age Portfolio
Vice President of Eaton Vance and BMR. Officer of various investment companies
managed by Eaton Vance or BMR.
JAMES L. O'CONNOR (54), Treasurer
Vice President of BMR and Eaton Vance. Officer of various other investment
companies managed by Eaton Vance or BMR.
ALAN R. DYNNER (59), Secretary
Vice President and Chief Legal Officer of BMR, Eaton Vance, EVC and EV since
November 1, 1996. Previously, he was a Partner of the law firm of
Kirkpatrick & Lockhart LLP, New York and Washington, D.C., and was Executive
Vice President of Neuberger & Berman Management, Inc., a mutual fund
management company. Officer of various investment companies managed by Eaton
Vance or BMR.
JANET E. SANDERS (64), Assistant Treasurer and Assistant Secretary
Vice President of BMR and Eaton Vance. Officer of various investment companies
managed by Eaton Vance or BMR.
A. JOHN MURPHY (37), Assistant Secretary
Assistant Vice President of BMR and Eaton Vance. Officer of various investment
companies managed by Eaton Vance or BMR.
ERIC G. WOODBURY (42), Assistant Secretary
Vice President of BMR and Eaton Vance. Officer of various investment companies
managed by Eaton Vance or BMR.
The Nominating Committee of the Board of Trustees of the Trust and each
Portfolio is comprised of the Trustees who are not "interested persons" as
that term is defined under the 1940 Act ("noninterested Trustees"). 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. Hayes (Chairman), Dwight and Reamer and Ms. Stout are members of
the Special Committee of the Board of Trustees of the Trust and of each
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 Funds and the
Portfolios, including investment advisory (Portfolio only), administrative,
transfer agency, custodial and fund accounting and distribution services, and
(ii) all other matters in which Eaton Vance or its affiliates has any actual
or potential conflict of interest with the Funds, the Portfolios or investors
therein.
Messrs. Treynor (Chairman) and Dwight are members of the Audit Committee
of the Board of Trustees of the Trust and of each Portfolio. The Audit
Committee's functions include making recommendations to the Trustees regarding
the selection of the independent accountants, and reviewing 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, transfer agent and dividend
disbursing agent of the Trust and of the Portfolios.
Trustees of the Information Age Portfolio that are not affiliated with the
investment adviser may elect to defer receipt of all or a percentage of their
annual fees in accordance with the terms of a Trustees Deferred Compensation
Plan (the "Trustees" Plan"). Under the Trustees' 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 Trustees' Plan will be determined based upon the
performance of such investments. Deferral of Trustees' fees in accordance with
the Trustees' Plan will have a negligible effect on the 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
Trust has a retirement plan for its Trustees.
The fees and expenses of the noninterested Trustees of the Trust and the
Portfolios are paid by the Funds (and the other series of the Trust) and the
Portfolios, respectively. (The Trustees of the Trust and the Portfolios who
are members of the Eaton Vance organization receive no compensation from the
Trust or the Portfolios). Messrs. Chen, Lloyd George, Normandeau and O'Neill
are not U.S. residents. It may be difficult to effect service of process
within the U.S. or to realize judgments of U.S. courts upon them. It is
uncertain whether courts in other countries would entertain original actions
against them. During the fiscal year ended August 31, 1999, the noninterested
Trustees of the Trust and the Portfolios earned the following compensation in
their capacities as Trustees from the Trust and the Portfolios, and for the
year ended December 31, 1998, earned the following compensation in their
capacities as Trustees of the funds in the Eaton Vance fund complex(1):
<TABLE>
<CAPTION>
SOURCE OF JESSICA M. EDWARD DONALD R. SAMUEL L. NORTON H. LYNN A. JACK L.
COMPENSATION BIBLIOWICZ(7) K.Y. CHEN DWIGHT HAYES, III REAMER STOUT(7) TREYNOR
- ------------ ------------- --------- ------ ---------- ------ -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Trust(2) $ 571 $ -- $ 1,785 $ 1,900 $ 1,758 $ 622 $ 2,119
Information Age
Portfolio $ -- $ 5,000 $ 1,256(3) $ 1,478(4) $ 1,369 $ 544 $ 1,471
Health Sciences
Portfolio $ 993 $ -- $ 2,322 $ 2,639 $ 2,379 $ 1,088 $ 2,283
Trust and Fund
Complex $33,334 $20,525 $160,000(5) $170,000(6) $160,000 $32,842 $170,000
- ------------
(1) As of January 1, 2000, the Eaton Vance fund complex consists of 143 registered investment companies or series thereof.
(2) The Trust consisted of 5 Funds as of August 31, 1999.
(3) Mr. Dwight received deferred compensation of $659 from the Information Age Portfolio.
(4) Mr. Hayes received deferred compensation of $246 from the Information Age Portfolio.
(5) Includes $60,000 of deferred compensation.
(6) Includes $41,563 of deferred compensation.
(7) Ms. Bibliowicz and Ms. Stout were elected as Trustees on October 30, 1998.
</TABLE>
ORGANIZATION. Each Fund is a series of the Trust, which is organized under
Massachusetts law, and is operated as an open-end management investment
company. The Funds were reorganized as Class A shares (formerly EV Traditional
Information Age Fund and EV Traditional Worldwide Health Sciences Fund, Inc.),
Class B shares (formerly EV Marathon Information Age Fund and EV Marathon
Worldwide Health Sciences Fund) and Class C shares (formerly EV Classic
Information Age Fund) of Eaton Vance Growth Trust on September 1, 1997, so
information herein prior to such date is for the Funds when they were separate
series of the Trust (or a separate corporation) and before they became
multiple-class funds. Class C shares of Health Sciences Fund were established
January 1, 1998.
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 Funds). The
Trustees of the Trust have divided the shares of each Fund into multiple
classes. Each class represents an interest in a Fund, but is subject to
different expenses, rights and privileges. The Trustees have the authority
under the Declaration of Trust to create additional classes of shares with
differing rights and privileges. When issued and outstanding, shares are fully
paid and nonassessable by the Trust. Shareholders are entitled to one vote for
each full share held. Fractional shares may be voted proportionately. Shares
of a Fund will be voted together except that only shareholders of a particular
class may vote on matters affecting only that class. Shares have no preemptive
or conversion rights and are freely transferable. In the event of the
liquidation of a Fund, shareholders of each class are entitled to share pro
rata in the net assets attributable to that class available for distribution
to shareholders.
The Trustees of the Trust have considered the advantages and disadvantages
of investing the assets of each Fund in its corresponding Portfolio, as well
as the advantages and disadvantages of the two-tier format. The Trustees
believe that the structure offers opportunities for growth in the assets of
the Portfolios, may afford the potential for economies of scale for each Fund
and may over time result in lower expenses for a Fund.
As permitted by Massachusetts law, there will normally be no meetings of
shareholders for the purpose of electing Trustees unless and until such time
as less than a majority of the Trustees of the Trust holding office have been
elected by shareholders. In such an event the Trustees then in office will
call a shareholders' meeting for the election of Trustees. Except for the
foregoing circumstances and unless removed by action of the shareholders in
accordance with the Trust's By-laws, the Trustees shall continue to hold
office and may appoint successor Trustees.
The Trust's By-laws provide that no person shall serve as a Trustee if
shareholders holding two-thirds of the outstanding shares have removed him
from that office either by a written declaration filed with the Trust's
custodian or by votes cast at a meeting called for that purpose. The By-laws
further provide that under certain circumstances the shareholders may call a
meeting to remove a Trustee and that the Trust is required to provide
assistance in communication with shareholders about such a meeting.
The Trust's Declaration of Trust may be amended by the Trustees when
authorized by vote of a majority of the outstanding voting securities of the
Trust, the financial interests of which are affected by the amendment. The
Trustees may also amend the Declaration of Trust without the vote or consent
of shareholders to change the name of the Trust or any series or to make such
other changes (such as reclassifying series of classes of shares or
restructuring the Trust) as do not have a materially adverse effect on the
financial interests of shareholders or if they deem it necessary to conform it
to applicable federal or state laws or regulations. The Trust or any series or
class thereof may be terminated by: (1) the affirmative vote of the holders of
not less than two-thirds of the shares outstanding and entitled to vote at any
meeting of shareholders of the Trust or the appropriate series or class
thereof, or by an instrument or instruments in writing without a meeting,
consented to by the holders of two-thirds of the shares of the Trust or a
series or class thereof, provided, however, that, if such termination is
recommended by the Trustees, the vote of a majority of the outstanding voting
securities of the Trust or a series or class thereof entitled to vote thereon
shall be sufficient authorization; or (2) by means of an instrument in writing
signed by a majority of the Trustees, to be followed by a written notice to
shareholders stating that a majority of the Trustees has determined that the
continuation of the Trust or a series or a class thereof is not in the best
interest of the Trust, such series or class or of their respective
shareholders.
The Declaration of Trust further provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law; but nothing in the
Declaration of Trust protects a Trustee against any liability to which he
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of his
office.
Under Massachusetts law, if certain conditions prevail, shareholders of a
Massachusetts business trust (such as the Trust) could be deemed to have
personal liability for the obligations of the Trust. Numerous investment
companies registered under the 1940 Act have been formed as Massachusetts
business trusts, and management is not aware of an instance where such
liability has been imposed. The Trust's Declaration of Trust contains an
express disclaimer of liability on the part of the Fund shareholders and the
Trust's By-laws provide that the Trust shall assume the defense on behalf of
any Fund shareholders. The Declaration of Trust also contains provisions
limiting the liability of a series or class to that series or class. Moreover,
the Trust's By-laws also provide for indemnification out of the property of
the Fund of any shareholder held personally liable solely by reason of being
or having been a shareholder for all loss or expense arising from such
liability. The assets of the Fund are readily marketable and will ordinarily
substantially exceed its liabilities. In light of the nature of the Fund's
business and the nature of its assets, management believes that the
possibility of the Fund's liability exceeding its assets, and therefore the
shareholder's risk of personal liability, is remote.
Each 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. In
accordance with the Declaration of Trust of each Portfolio, there will
normally be no meetings of the investors for the purpose of electing Trustees
unless and until such time as less than a majority of the Trustees of the
Portfolio holding office have been elected by investors. In such an event the
Trustees of the Portfolio then in office will call an investors' meeting for
the election of Trustees. Except for the foregoing circumstances and unless
removed by action of the investors in accordance with the Portfolio's
Declaration of Trust, the Trustees shall continue to hold office and may
appoint successor Trustees.
The Declaration of Trust of each Portfolio provides that no person shall
serve as a Trustee if investors holding two-thirds of the outstanding interest
have removed him from that office either by a written declaration filed with
the Portfolio's custodian or by votes cast at a meeting called for that
purpose. The Declaration of Trust further provides that under certain
circumstances the investors may call a meeting to remove a Trustee and that
the Portfolio is required to provide assistance in communicating with
investors about such a meeting.
Each Portfolio's Declaration of Trust provides that a 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.
Whenever a Fund as an investor in a 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. A 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 a Portfolio may alone or
collectively acquire sufficient voting interests in the Portfolio to control
matters relating to the operation of the Portfolio, which may require the Fund
to withdraw its investment in the Portfolio or take other appropriate action.
Any such withdrawal could result in a distribution "in kind" of portfolio
securities (as opposed to a cash distribution from the Portfolio). If
securities are distributed, a Fund could incur brokerage, tax or other charges
in converting the securities to cash. In addition, the distribution in kind
may result in a less diversified portfolio of investments or adversely affect
the liquidity of a Fund. Notwithstanding the above, there are other means for
meeting shareholder redemption requests, such as borrowing.
A Fund may withdraw (completely redeem) all its assets from its
corresponding Portfolio at any time if the Board of Trustees of the Trust
determines that it is in the best interest of that Fund to do so. In the event
a Fund withdraws all of its assets from its corresponding Portfolio, or the
Board of Trustees of the Trust determines that the investment objective of
such Portfolio is no longer consistent with the investment objective of the
Fund, the Trustees would consider what action might be taken, including
investing the assets of such Fund in another pooled investment entity or
retaining an investment adviser to manage the Fund's assets in accordance with
its investment objective. A Fund's investment performance may be affected by a
withdrawal of all its assets (or the assets of another investor in the
Portfolio) from its corresponding Portfolio.
INVESTMENT ADVISORY AND ADMINISTRATIVE SERVICES
INVESTMENT ADVISORY SERVICES. The Information Age Portfolio has engaged BMR
and Lloyd George as its investment advisers and the Health Sciences Portfolio
has engaged OrbiMed as its investment adviser. As investment advisers to the
Portfolios, each adviser manages a Portfolio's investments, subject to the
supervision of the Board of Trustees of each Portfolio. The investment
advisers are also responsible for effecting all security transactions on
behalf of the Portfolios, including the allocation of principal transactions
and portfolio brokerage and the negotiation of commissions.
Under the investment advisory agreement with the Information Age
Portfolio, BMR and Lloyd George are entitled to receive a monthly advisory fee
computed by applying the annual asset rate applicable to that portion of the
average daily net assets of the Portfolio throughout the month in each
Category as indicated below:
ANNUAL
CATEGORY AVERAGE DAILY NET ASSETS ASSET RATE
-------- ------------------------ ----------
1 less than $500 million ...................... 0.75%
2 $500 million but less than $1 billion ....... 0.70
3 $1 billion but less than $1.5 billion ....... 0.65
4 $1.5 billion but less than $2 billion ....... 0.60
5 $2 billion but less than $3 billion ......... 0.55
6 $3 billion and over ......................... 0.50
As of August 31, 1999, the Information Age Portfolio had net assets of
$97,261,871. For the fiscal years ended August 31, 1999, 1998 and 1997, BMR
and Lloyd George earned advisory fees of $536,139, $432,808 and $362,172,
respectively. Such advisory fee was divided equally between Lloyd George and
BMR.
For a description of the compensation that Health Sciences Portfolio pays
OrbiMed, see the prospectus. As of August 31, 1999, the Health Sciences
Portfolio had net assets of $205,080,641. For the fiscal years ended August
31, 1999, 1998 and 1997, OrbiMed earned advisory fees of $1,141,637,
$1,162,878 and $800,167, respectively.
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
Health Sciences 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.
Each Investment Advisory Agreement continues in effect from year to year
so long as such continuance is approved at least annually (i) by the vote of a
majority of the noninterested Trustees of a 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 a Portfolio or by vote of a majority of the
outstanding voting securities of a Portfolio. Each 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 a Portfolio, and each Agreement will terminate automatically in
the event of its assignment. Each Agreement provides that an investment
adviser may render services to others. Each Agreement also provides that an
investment adviser shall not be liable for any loss incurred in connection
with the performance of its duties, or action taken or omitted under that
Agreement, in the absence of willful misfeasance, bad faith, gross negligence
in the performance of its duties or by reason of its reckless disregard of its
obligations and duties thereunder, or for any losses sustained in the
acquisition, holding or disposition of any security or other investment.
Lloyd George and Messrs. Lloyd George and Edward K.Y. Chen (Trustees of
the Information Age Portfolio), are not residents of the United States and
substantially all of their respective assets may be located outside of the
United States. It may be difficult for investors to effect service of process
within the United States upon them, or to realize judgments of courts of the
United States predicated upon civil liabilities of Lloyd George and such
individuals under the federal securities laws of the United States. The
Information Age Portfolio has been advised that there is substantial doubt as
to the enforceability in the countries in which Lloyd George and such
individuals reside of such civil remedies and criminal penalties as are
afforded by the federal securities laws of the United States.
ADMINISTRATIVE SERVICES. Under Eaton Vance's management contract with the
Information Age and Health Sciences Funds and administration agreement with
the Information Age and Health Sciences Portfolios, Eaton Vance receives a
monthly management fee from the Funds and a monthly administration fee from
the Portfolios. 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:
CATEGORY
ASSET RATE
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 fiscal years ended August 31, 1999, 1998 and 1997, Eaton Vance
earned administration fees of $466,036, $450,794 and $231,722, respectively,
from the Health Sciences Portfolio and $181,032, $144,501 and $120,758,
respectively, from the Information Age Portfolio (each equivalent to 0.25% of
the Portfolios' average daily net assets for such period).
As of August 31, 1999, the Information Age Fund had net assets of
$76,988,471. For the fiscal years ended August 31, 1999, 1998 and 1997, Eaton
Vance earned management fees of $153,499, $121,096 and $64,015, respectively
(equivalent to 0.25% of the Fund's average daily net assets for such periods).
As of August 31, 1999, the Health Sciences Fund had net assets of
$204,913,951. For the fiscal years ended August 31, 1999, 1998 and 1997, Eaton
Vance earned management fees of $462,162, $448,888 and $169,792, respectively,
(equivalent to 0.25% of the Fund's average daily net assets for such year), of
which $138,464 was waived by Eaton Vance for the fiscal year ended August 31,
1997.
Eaton Vance's management contract with the Information Age and Health
Sciences Funds, and its administration agreement with the Information Age and
Health Sciences Portfolios will continue in effect from year to year, so long
as such continuance is approved annually by the vote of a majority of the
Trustees of the Trust or the Portfolios, as the case may be. Each agreement
may be terminated at any time without penalty on sixty days' written notice by
the Board of Trustees of either party thereto, or by a vote of a majority of
the outstanding voting securities of the Funds or the Portfolios, 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 Information Age and Health Sciences Funds or the
Information Age and Health Sciences Portfolios under such contract or
agreement, Eaton Vance will not be liable to the Funds or the Portfolios for
any loss incurred. Each agreement was initially approved by the Trustees,
including the non-interested Trustees, of the Trust or the Portfolios.
INFORMATION ABOUT BMR AND EATON VANCE. BMR and Eaton Vance are business
trusts organized under Massachusetts law. Eaton Vance, Inc. ("EV") serves as
trustee of BMR and Eaton Vance. BMR, Eaton Vance and EV are wholly-owned
subsidiaries of Eaton Vance Corporation ("EVC"), a Maryland corporation and
publicly-held holding company. EVC through its subsidiaries and affiliates
engages primarily in investment management, administration and marketing
activities. The Directors of EVC are James B. Hawkes, John G.L. Cabot, John M.
Nelson, Vincent M. O'Reilly and Ralph Z. Sorenson. All of the issued and
outstanding shares of Eaton Vance 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, the
Voting Trustees of which are Messrs. Hawkes, Jeffrey P. Beale, Alan R. Dynner,
Thomas E. Faust, Jr., Thomas J. Fetter, Scott H. Page, Duncan W. Richardson,
William M. Steul, Payson F. Swaffield, Michael W. Weilheimer, and Wharton P.
Whitaker (all of whom are officers of Eaton Vance). The Voting Trustees have
unrestricted voting rights for the election of Directors of EVC. All of the
outstanding voting trust receipts issued under said Voting Trust are owned by
certain of the officers of BMR and Eaton Vance who are also officers, or
officers and Directors of EVC and EV. As indicated under "Management and
Organization," all of the officers of the Trust (as well as Mr. Hawkes who is
also a Trustee) hold positions in the Eaton Vance organization.
Eaton Vance and its affiliates act as adviser to a family of mutual funds,
and individual and various institutional accounts, including corporations,
hospitals, retirement plans, universities, foundations and trusts. Eaton Vance
mutual funds feature international equities, domestic equities, tax-free
municipal bonds, and U.S. government and corporate bonds. Lloyd George
Management has advised Eaton Vance's international equity funds since 1992.
Founded in 1991, Lloyd George is headquartered in Hong Kong with offices in
London and Mumbai. It has established itself as a leader in investment
management in Asian equities and other global markets. Lloyd George features
an experienced team of investment professionals that began working together in
the mid-1980s. Lloyd George analysts cover East Asia, the India subcontinent,
Russia and Eastern Europe, Latin America, Australia and New Zealand from
offices in Hong Kong, London and Mumbai. Eaton Vance mutual funds are
distributed by the Principal Underwriter both within the United States and
offshore.
Investment decisions for the Health Sciences 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 Mr. Viren Mehta
to found the partnership of Mehta and Isaly Asset Management, Inc. On January
1, 1998, Mehta and Isaly Asset Management, Inc. changed its name to OrbiMed
Advisors, Inc. and Mr. Mehta is no longer associated with OrbiMed.
EXPENSES. Each Fund and Portfolio is responsible for all expenses not
expressly stated to be payable by another party (such as the investment
adviser under the Investment Advisory Agreement, Eaton Vance under the
Administrative Services Agreement or the principal underwriter under the
Distribution Agreement). In the case of expenses incurred by the Trust, each
Fund is responsible for its pro rata share of those expenses. The only
expenses of a Fund allocated to a particular class are those incurred under
the Distribution or Service Plan applicable to that class and those resulting
from the fee paid to the principal underwriter for repurchase transactions.
OTHER SERVICE PROVIDERS
PRINCIPAL UNDERWRITER. Eaton Vance Distributors, Inc. ("EVD"), The Eaton
Vance Building, 255 State Street, Boston, MA 02109, is the Funds' principal
underwriter. The principal underwriter acts as principal in selling shares
under a Distribution Agreement with the Trust. The expenses of printing copies
of prospectuses used to offer shares and other selling literature and of
advertising are borne by the principal underwriter. The fees and expenses of
qualifying and registering and maintaining qualifications and registrations of
a Fund and its shares under federal and state securities laws are borne by
that Fund. The Distribution Agreement as it applies to Class A shares is
renewable annually by the Board of Trustees of the Trust (including a majority
of the noninterested Trustees), may be terminated on six months' notice by
either party and is automatically terminated upon assignment. The Distribution
Agreement as it applies to Class B and Class C shares is renewable annually by
the Trust's Board of Trustees (including a majority of the noninterested
Trustees who have no direct or indirect financial interest in the operation of
the 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 shares of the relevant class or on six months' notice by the
principal underwriter and is automatically terminated upon assignment. The
principal underwriter distributes shares on a "best efforts" basis under which
it is required to take and pay for only such shares as may be sold. The
principal underwriter allows investment dealers discounts from the applicable
public offering price which are alike for all investment dealers. See "Sales
Charges." EVD is a wholly-owned subsidiary of EVC. Mr. Hawkes is a Vice
President and Director and Messrs. Dynner and O'Connor are Vice Presidents of
EVD.
CUSTODIAN. Investors Bank & Trust Company ("IBT"), 200 Clarendon Street,
Boston, MA 02116, serves as custodian to the Funds and Portfolios. IBT has the
custody of all cash and securities representing a Fund's interest in a
Portfolio, has custody of each Portfolio's assets, maintains the general
ledger of each Portfolio and each Fund and computes the daily net asset value
of interests in each Portfolio and the net asset value of shares of the Fund.
In such capacity it attends to details in connection with the sale, exchange,
substitution, transfer or other dealings with the Portfolios' investments,
receives and disburses all funds and performs various other ministerial duties
upon receipt of proper instructions from the Trust and the Portfolios. IBT
also provides services in connection with the preparation of shareholder
reports and the electronic filing of such reports with the SEC. EVC and its
affiliates and their officers and employees from time to time have
transactions with various banks, including IBT. It is Eaton Vance's opinion
that the terms and conditions of such transactions were not and will not be
influenced by existing or potential custodial or other relationships between
the Fund or the Portfolio and such banks.
INDEPENDENT ACCOUNTANTS. PricewaterhouseCoopers LLP, 160 Federal Street,
Boston, Massachusetts 02110, are the independent accountants of the Funds and
the Portfolios, providing audit services, tax return preparation, and
assistance and consultation with respect to the preparation of filings with
the SEC.
TRANSFER AGENT. PFPC Global Fund Services, P.O. Box 5123, Westborough, MA
01581-5123, serves as transfer and dividend disbursing agent for the Funds.
PURCHASING AND REDEEMING SHARES
CALCULATION OF NET ASSET VALUE. The net asset value of each Portfolio is
computed by IBT (as agent and custodian for the Portfolio) by subtracting the
liabilities of the Portfolio from the value of its total assets. The Funds and
the Portfolios will be closed for business and will not price their respective
shares or interests on the following business holidays: New Year's Day, Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day.
Each investor in a Portfolio, including a Fund, may add to or reduce its
investment in the Portfolio on each day the New York Stock Exchange (the
"Exchange") is open for trading ("Portfolio Business Day") as of the close of
regular trading on the Exchange (the "Portfolio Valuation Time"). The value of
each investor's interest in the Portfolio will be determined by multiplying
the net asset value of the Portfolio by the percentage, determined on the
prior Portfolio Business Day, which represented that investor's share of the
aggregate interests in the Portfolio on such prior day. Any additions or
withdrawals for the current Portfolio Business Day will then be recorded. Each
investor's percentage of the aggregate interest in the Portfolio will then be
recomputed as a percentage equal to a fraction (i) the numerator of which is
the value of such investor's investment in the Portfolio as of the Portfolio
Valuation Time on the prior Portfolio Business Day plus or minus, as the case
may be, the amount of any additions to or withdrawals from the investor's
investment in the Portfolio on the current Portfolio Business Day and (ii) the
denominator of which is the aggregate net asset value of the Portfolio as of
the Portfolio Valuation Time on the prior Portfolio Business Day plus or
minus, as the case may be, the amount of the net additions to or withdrawals
from the aggregate investment in the Portfolio on the current Portfolio
Business Day by all investors in the Portfolio. The percentage so determined
will then be applied to determine the value of the investor's interest in the
Portfolio for the current Portfolio Business Day.
ADDITIONAL INFORMATION ABOUT PURCHASES. Fund shares are continuously offered
through investment dealers which have entered agreements with the principal
underwriter. The public offering price is the net asset value next computed
after receipt of the order, plus, in the case of Class A shares, a variable
percentage (sales charge) depending upon the amount of purchase as indicated
by the sales charge table set forth in the prospectus. The sales charge is
divided between the principal underwriter and the investment dealer. The
sales charge table is applicable to purchases of a Fund alone or in
combination with purchases of certain other funds offered by the principal
underwriter, made at a single time by (i) an individual, or an individual, his
spouse and their children under the age of twenty-one, purchasing shares for
his or their own account, and (ii) a trustee or other fiduciary purchasing
shares for a single trust estate or a single fiduciary account. The table is
also presently applicable to (1) purchases of Class A shares pursuant to a
written Statement of Intention; or (2) purchases of Class A shares pursuant to
the Right of Accumulation and declared as such at the time of purchase. See
"Sales Charges."
In connection with employee benefit or other continuous group purchase
plans, the Funds 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 decribed
below.
ACQUIRING FUND SHARES IN EXCHANGE FOR SECURITIES. IBT, as escrow agent, will
receive securities acceptable to Eaton Vance, as administrator, in exchange
for Fund shares. The minimum value of securities (or securities and cash)
accepted for deposit is $5,000. Securities accepted will be sold on the day of
their receipt or as soon thereafter as possible. The number of Fund shares to
be issued in exchange for securities will be the aggregate proceeds from the
sale of such securities, divided by the applicable public offering price of
Class A shares or net asset value of Class B and Class C shares on the day
such proceeds are received. Eaton Vance will use reasonable efforts to obtain
the then current market price for such securities but does not guarantee the
best available price. Eaton Vance will absorb any transaction costs, such as
commissions, on the sale of the securities. Securities determined to be
acceptable should be transferred via book entry or physically delivered, in
proper form for transfer, through an investment dealer, together with a
completed and signed Letter of Transmittal in approved form (available from
investment dealers). Investors who are contemplating an exchange of securities
for shares, 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
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.
The Trust may, in its absolute discretion, suspend, discontinue or limit
the offering of one or more of its classes of shares at any time. In
determining whether any such action should be taken, the Trust's management
intends to consider all relevant factors, including (without limitation) the
size of a Fund or class, the investment climate and market conditions, the
volume of sales and redemptions of shares, and in the case of Class B and
Class C shares, the amount of uncovered distribution charges of the principal
underwriter. The Class B and Class C Distribution Plans may continue in effect
and payments may be made under the Plans following any such suspension,
discontinuance or limitation of the offering of shares; however, there is no
contractual obligation to continue any Plans for any particular period of
time. Suspension of the offering of shares would not, of course, affect a
shareholder's ability to redeem shares.
ADDITIONAL INFORMATION ABOUT REDEMPTIONS. The right to redeem shares of a
Fund can be suspended and the payment of the redemption price deferred when
the Exchange is closed (other than for customary weekend and holiday
closings), during periods when trading on the Exchange is restricted as
determined by the SEC, or during any emergency as determined by the SEC which
makes it impracticable for a Portfolio to dispose of its securities or value
its assets, or during any other period permitted by order of the SEC for the
protection of investors.
While normally payments will be made 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 a Fund, either totally or
partially, by a distribution in kind of readily marketable securities
withdrawn from its corresponding 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.
Due to the high cost of maintaining small accounts, the Trust 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
Trust if the cause of the low account balance was a reduction in the net asset
value of shares. No CDSC will be imposed with respect to such involuntary
redemptions.
SYSTEMATIC WITHDRAWAL PLAN. The transfer agent will send to the shareholder
regular monthly or quarterly payments of any permitted amount designated by
the shareholder based upon the value of the shares held. The checks will be
drawn from share redemptions and hence may require the recognition of taxable
gain or loss. Income dividends and capital gains distributions in connection
with withdrawal plan 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. The shareholder, the transfer agent
or the principal underwriter will be able to terminate the withdrawal plan at
any time without penalty.
SALES CHARGES
DEALER COMMISSIONS. The principal underwriter may, from time to time, at its
own expense, provide additional incentives to investment dealers 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 investment dealers 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 investment dealers. The principal underwriter
may allow, upon notice to all investment dealers with whom it has agreements,
discounts up to the full sales charge during the periods specified in the
notice. During periods when the discount includes the full sales charge, such
investment dealers may be deemed to be underwriters as that term is defined in
the Securities Act of 1933.
SALES CHARGE WAIVERS. Class A shares may be sold at net asset value to
current and retired Directors and Trustees of Eaton Vance funds, including the
Portfolios; to clients and current and retired officers and employees of Eaton
Vance, its affiliates and other investment advisers of Eaton Vance sponsored
funds; to officers and employees of IBT and the transfer agent; to persons
associated with law firms, consulting firms and others providing services to
Eaton Vance and the Eaton Vance funds; and to such persons' spouses, parents,
siblings and children and their beneficial accounts. Such shares may also be
issued at net asset value (1) in connection with the merger of an investment
company (or series or class thereof) with a Fund (or class thereof), (2) to
investors making an investment as part of a fixed fee program whereby an
entity unaffiliated with the investment adviser provides multiple investment
services, such as management, brokerage and custody, and (3) to investment
advisors, financial planners or other intermediaries who place trades for
their own accounts or the accounts of their clients and who charge a
management, consulting or other fee for their services; clients of such
investment advisors, financial planners or other intermediaries who place
trades for their own accounts if the accounts are linked to the master account
of such investment advisor, financial planner or other intermediary on the
books and records of the broker or agent. Class A shares may also be sold at
net asset value to retirement and deferred compensation plans and trusts used
to fund those plans, including, but not limited to, those defined in Section
401(a), 403(b) or 457 of the Internal Revenue Code of 1986, as amended (the
"Code") and "rabbi trusts". Class A shares may be sold at net asset value to
any investment advisory, agency, custodial or trust account managed or
administered by Eaton Vance or by any parent, subsidiary or other affiliate of
Eaton Vance. Class A shares are offered at net asset value to the foregoing
persons and in the foregoing situations because either (i) there is no sales
effort involved in the sale of shares or (ii) the investor is paying a fee
(other than the sales charge) to the investment dealer involved in the sale.
The CDSC applicable to Class B shares will be waived in connection with
minimum required distributions from tax-sheltered retirement plans by applying
the rate required to be withdrawn under the applicable rules and regulations
of the Internal Revenue Service (the "IRS") to the balance of Class B shares
in your account.
STATEMENT OF INTENTION. If it is anticipated that $50,000 or more of Class A
shares and shares of other funds exchangeable for Class A shares of another
Eaton Vance fund will be purchased within a 13-month period, a Statement of
Intention should be signed so that shares may be obtained at the same reduced
sales charge as though the total quantity were invested in one lump sum.
Shares held under Right of Accumulation (see below) as of the date of the
Statement will be included toward the completion of the Statement. The
Statement authorizes the transfer agent to hold in escrow sufficient shares
(5% of the dollar amount specified in the Statement) which can be redeemed to
make up any difference in sales charge on the amount intended to be invested
and the amount actually invested. Execution of a Statement does not obligate
the shareholder to purchase or the Fund to sell the full amount indicated in
the Statement, and should the amount actually purchased during the 13-month
period be more or less than that indicated on the Statement, price adjustments
will be made. Any investor considering signing a Statement of Intention should
read it carefully.
RIGHT OF ACCUMULATION. The applicable sales charge level for the purchase of
Class A shares is calculated by taking the dollar amount of the current
purchase and adding it to the value (calculated at the maximum current
offering price) of the Class A shares the shareholder owns in his or her
account(s) in the Fund, and shares of other funds exchangeable for Class A
shares. The sales charge on the shares being purchased will then be at the
rate applicable to the aggregate. Shares purchased (i) by an individual, his
or her spouse and their children under the age of twenty-one, and (ii) by a
trustee, guardian or other fiduciary of a single trust estate or a single
fiduciary account, will be combined for the purpose of determining whether a
purchase will qualify for the Right of Accumulation and if qualifying, the
applicable sales charge level. For any such discount to be made available, at
the time of purchase a purchaser or his or her investment dealer must provide
the principal underwriter (in the case of a purchase made through an
investment dealer) or the transfer agent (in the case of an investment made by
mail) with sufficient information to permit verification that the purchase
order qualifies for the accumulation privilege. Confirmation of the order is
subject to such verification. The Right of Accumulation privilege may be
amended or terminated at any time as to purchases occurring thereafter.
TAX-SHELTERED RETIREMENT PLANS. Class A and Class C shares are available for
purchase in connection with certain tax-sheltered retirement plans. 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. Participant accounting
services (including trust fund reconciliation services) will be offered only
through third party recordkeepers and not by the principal underwriter. Under
all plans, dividends and distributions will be automatically reinvested in
additional shares.
DISTRIBUTION PLANS. The Trust has in effect a compensation-type Distribution
Plan (the "Class A Plan") for the Class A shares of each Fund pursuant to Rule
12b-1 under the 1940 Act. The Class A Plan for the Information Age Fund
provides for the payment of a monthly distribution fee to the principal
underwriter in an amount equal to the aggregate of (a) 0.50% of that portion
of Class A average daily net assets for any fiscal year which is attributable
to shares which have remained outstanding for less than one year, and (b)
0.25% of that portion of Class A average daily net assets for any fiscal year
which is attributable to shares which have remained outstanding for more than
one year. The Class A Plan for the Health Sciences Fund provides for the
payment of a monthly distribution fee to the principal underwriter in an
amount equal to 0.25% of Class A average daily net assets. The principal
underwriter intends to use at least part of such fees from the Health Sciences
Fund to compensate investment dealers, including OrbiMed, for personal service
rendered to Health Sciences Fund shareholders and/or the maintenance of
shareholder accounts. Aggregate payments to the principal underwriter under
the Class A Plan are limited to those permissible pursuant to a rule of the
National Association of Securities Dealers, Inc. ("NASD").
The Information Age Fund Class A Plan also provides that Class A will pay
a quarterly service fee to the principal underwriter in an amount equal on an
annual basis to 0.25% of that portion of average daily net assets for any
fiscal year which is attributable to Class A shares which have remained
outstanding for more than one year; from such service fee the principal
underwriter expects to pay a quarterly service fee to investment dealers, as
compensation for providing personal services and/or the maintenance of
shareholder accounts, with respect to shares sold by such dealers which have
remained outstanding for more than one year. Service fee payments to
investment dealers will be in addition to sales charges on Class A shares
which are reallowed to investment dealers. If the Class A Plan is terminated
or not continued in effect, the Class has no obligation to reimburse the
principal underwriter amounts expended by the principal underwriter in
distributing Class A shares. For the service fees paid by Class A shares, see
Appendix A.
The Trust also has in effect compensation-type Distribution Plans (the
"Class B and Class C Plans") pursuant to Rule 12b-1 under the 1940 Act for
each Fund's Class B and Class C shares. The Class B and Class C Plans are
designed to permit an investor to purchase shares through an investment dealer
without incurring an initial sales charge and at the same time permit the
principal underwriter to compensate investment dealers in connection
therewith. The Class B and Class C Plans provide that each Fund will pay sales
commissions and distribution fees to the principal underwriter only after and
as a result of the sale of shares. On each sale of shares (excluding
reinvestment of distributions), each Fund will pay the principal underwriter
amounts representing (i) sales commissions equal to 5% for Class B shares and
6.25% for Class C shares 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. To pay these amounts, each Class pays the principal underwriter a
fee, accrued daily and paid monthly, at an annual rate not exceeding .75% of
its average daily net assets to finance the distribution of its shares. Such
fees compensate the principal underwriter for sales commissions paid by it to
investment dealers on the sale of shares and for interest expenses. For sales
of Class B shares, the principal underwriter uses its own funds to pay sales
commissions (except on exchange transactions and reinvestments) to investment
dealers at the time of sale equal to 4% of the purchase price of the Class B
shares sold by such dealers. For Class C shares, the principal underwriter
currently expects to pay to an investment dealer (a) sales commissions (except
on exchange transactions and reinvestments) at the time of sale equal to .75%
of the purchase price of the shares sold by such dealer, and (b) monthly sales
commissions approximately equivalent to 1/12 of .75% of the value of shares
sold by such dealer and remaining outstanding for at least one year. During
the first year after a purchase of Class C shares, the principal underwriter
will retain the sales commission as reimbursement for the sales commissions
paid to investment dealers at the time of sale. CDSCs paid to the principal
underwriter will be used to reduce amounts owed to it. The Class B and Class C
Plans provide that each Fund 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. CDSCs and accrued amounts
will be paid by the Trust to the principal underwriter whenever there exist
uncovered distribution charges. Because payments to the principal underwriter
under the Class B and Class C Plans are limited, uncovered distribution
charges (sales commissions paid by the principal underwriter plus interest,
less the above fees and CDSCs received by it) may exist indefinitely. For the
sales commissions and CDSCs paid on (and uncovered distribution charges of)
Class B and Class C shares, see Appendix B and Appendix C, respectively.
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 Class B and Class C Plans by the Trust to the principal
underwriter and CDSCs theretofore paid or payable to the principal underwriter
will be subtracted from such distribution charges; if the result of such
subtraction is positive, a distribution fee (computed at 1% over the prime
rate then reported in The Wall Street Journal) will be computed on such amount
and added thereto, with the resulting sum constituting the amount of
outstanding uncovered distribution charges with respect to such day. The
amount of outstanding uncovered distribution charges of the principal
underwriter calculated on any day does not constitute a liability recorded on
the financial statements of the Fund.
The amount of uncovered distribution charges of the principal underwriter
at any particular time depends upon various changing factors, including the
level and timing of sales of shares, the nature of such sales (i.e., whether
they result from exchange transactions, reinvestments or from cash sales
through investment dealers), the level and timing of redemptions of shares
upon which a CDSC will be imposed, the level and timing of redemptions of
shares upon which no CDSC will be imposed (including redemptions of shares
pursuant to the exchange privilege which result in a reduction of uncovered
distribution charges), changes in the level of the net assets of the Class,
and changes in the interest rate used in the calculation of the distribution
fee under the Class B and Class C Plans.
The Class B and Class C Plans also authorize each Class to make payments
of service fees to the principal underwriter, investment dealers and other
persons in amounts not exceeding .25% of its average daily net assets for
personal services, and/or the maintenance of shareholder accounts. This fee is
paid quarterly in arrears based on the value of Class B shares sold by such
persons and remaining outstanding for at least twelve months. For Class C,
investment dealers currently receive (a) a service fee (except on exchange
transactions and reinvestments) at the time of sale equal to .25% of the
purchase price of the Class C shares sold by such dealer, and (b) monthly
service fees approximately equivalent to 1/12 of .25% of the value of Class C
shares sold by such dealer and remaining outstanding for at least one year.
During the first year after a purchase of Class C shares, the principal
underwriter will retain the service fee as reimbursement for the service fee
payment made to investment dealers at the time of sale. For the service fees
paid by Class B and Class C shares, see Appendix B and Appendix C,
respectively.
Currently, payments of sales commissions and distribution fees and of
service fees may equal 1% of a Class's average daily net assets per annum. The
Trust believes that the combined rate of all these payments may be higher than
the rate of payments made under distribution plans adopted by other investment
companies pursuant to Rule 12b-1. Although the principal underwriter will use
its own funds (which may be borrowed from banks) to pay sales commissions at
the time of sale, it is anticipated that the Eaton Vance organization will
profit by reason of the operation of the Class B and Class C Plans through an
increase in the Fund's assets (thereby increasing the advisory fee payable to
BMR by the Portfolio) resulting from sale of shares and through the amounts
paid to the principal underwriter, including CDSCs, pursuant to the Plans. The
Eaton Vance organization may be considered to have realized a profit under the
Class B and Class C Plans if at any point in time the aggregate amounts
theretofore received by the principal underwriter pursuant to the Class B or
Class C Plan and from CDSCs have exceeded the total expenses theretofore
incurred by such organization in distributing shares. 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 Trust.
The Plans continue in effect from year to year so long as such continuance
is approved at least annually by the vote of both a majority of (i) the
noninterested Trustees of the Trust who have no direct or indirect financial
interest in the operation of the Plan or any agreements related to the Plan
(the "Plan Trustees") and (ii) all of the Trustees then in office. Each Plan
may be terminated at any time by vote of a majority of the Plan Trustees or by
a vote of a majority of the outstanding voting securities of the applicable
Class. Each Plan requires quarterly Trustee review of a written report of the
amount expended under the Plan and the purposes for which such expenditures
were made. The Plans may not be amended to increase materially the payments
described therein without approval of the shareholders of the affected Class
and the Trustees. So long as a Plan is in effect, the selection and nomination
of the noninterested Trustees shall be committed to the discretion of such
Trustees. The Class A, Class B and Class C Plans were initially approved by
the Trustees, including the Plan Trustees, on June 23, 1997.
The Trustees of the Trust believe that each Plan will be a significant
factor in the expected growth of each Fund's assets, and will result in
increased investment flexibility and advantages which have benefitted and will
continue to benefit the Fund and its shareholders. Payments for sales
commissions and distribution fees made to the principal underwriter will
compensate the principal underwriter for its services and expenses in
distributing shares. Service fee payments made to the principal underwriter
and investment dealers provide incentives to provide continuing personal
services to investors and the maintenance of shareholder accounts. By
providing incentives to the principal underwriter and investment dealers, each
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 each Plan will benefit the Fund and its
shareholders.
PERFORMANCE
Average annual total return is determined separately for each Class of a
Fund by multiplying a hypothetical initial purchase order of $1,000 by the
average annual compound rate of return (including capital appreciation/
depreciation, and distributions paid and reinvested) for the stated period and
annualizing the result. The calculation assumes (i) that all distributions are
reinvested at net asset value on the reinvestment dates during the period,
(ii) the deduction of the maximum sales charge from the initial $1,000
purchase order for Class A shares, (iii) a complete redemption of the
investment and (iv) the deduction of any CDSC at the end of the period. A Fund
may also publish total return figures for each class based on reduced sales
charges or net asset value. These returns would be lower if the full sales
charge was imposed. For information concerning the total return of the Classes
of a Fund, see Appendix A, Appendix B and Appendix C.
Total return may be compared to relevant indices, such as the Consumer
Price Index and various domestic and foreign securities indices. A Fund's
total return and comparisons with these indices may be used in advertisements
and in information furnished to present or prospective shareholders. In
addition, evaluations of a Fund's performance or rankings of mutual funds
(which include a Fund) made by independent sources may be used in
advertisements and in information furnished to present or prospective
shareholders. Information about the portfolio allocation and holdings of a
Portfolio may also be included in advertisements and other material furnished
to present prospective shareholders. A Fund's performance may differ from that
of other investors in its corresponding Portfolio, including other investment
companies.
Information (including charts and illustrations) relating to inflation and
the effects of inflation on the dollar may be included in advertisements and
other material furnished to present and prospective shareholders. Such
information may reflect the change in the net asset value of a hypothetical
investment in a Fund over a specified time period and compare it to an
inflationary measure, such as the Consumer Price Index (which is computed by
the Bureau of Labor Statistics of the U.S. Department of Labor).
Information used in advertisements and in materials furnished to present
or prospective shareholders may include statistics, data and performance
studies prepared by independent organizations or included in various
publications 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 used in advertisements and in materials provided to present
and prospective shareholders may include descriptions of Eaton Vance and other
Fund and Portfolio service providers, their investment styles, other
investment products, personnel and Fund distribution channels.
Information used in advertisements and materials furnished to present and
prospective investors may include statements or illustrations relating to the
appropriateness of certain types of securities and/or mutual funds to meet
specific financial goals. Such information may address:
- cost associated with aging parents;
- funding a college education (including its actual and estimated
cost);
- health care expenses (including actual and projected expenses);
- long-term disabilities (including the availability of, and coverage
provided by, disability insurance); and
- retirement (including the availability of social security benefits,
the tax treatment of such benefits and statistics and other
information relating to maintaining a particular standard of living
and outliving existing assets).
Such information may also address different methods for saving money and
the results of such methods, as well as the benefits of investing in equity
securities. Such information may describe: the potential for growth; the
performance of equities as compared to other investment vehicles; and the
value of investing as early as possible and regularly, as well as staying
invested. The benefits of investing in equity securities by means of a mutual
fund may also be included (such benefits may include diversification,
professional management and the variety of equity mutual fund products).
Information in advertisements and materials furnished to present and
prospective investors may include profiles of different types of investors
(i.e., investors with different goals and assets) and different investment
strategies for meeting specific financial goals. Such information may provide
hypothetical illustrations which include: results of various investment
strategies; performance of an investment in the Fund over various time
periods; and results of diversifying assets among several investments with
varying performance. Information in advertisements and materials furnished to
present and prospective investors may also include quotations (including
editorial comments) and statistics concerning investing in securities, as well
as investing in particular types of securities and the performance of such
securities.
The Trust (or Principal Underwriter) 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.
Information used in advertisements for Health Sciences Fund may include
information about medical, pharmaceutical and technological developments and
innovations, as well as demographical information relating to health care
expenditures. Advertisements may also contain historical information on the
issuers of health sciences stocks and the performance of such stocks.
Information may also be provided about OrbiMed, including descriptions of: its
personnel; staffing techniques; evaluation and analysis procedures; and stock
selection process.
The Trust (or principal underwriter) may provide information about Lloyd
George, 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
Each series of the Trust is treated as a separate entity for federal
income tax purposes. Each Fund has elected to be treated and intends to
qualify each year as a regulated investment company ("RIC") under the Code.
Accordingly, each Fund intends to satisfy certain requirements relating to
sources of its income and diversification of its assets and to distribute
substantially all of its net income and net short-term and long-term capital
gains in accordance with the timing requirements imposed by the Code, so as to
maintain its RIC status and to avoid paying any federal income or excise tax.
Because each Fund invests its assets in a Portfolio, the Portfolio normally
must satisfy the applicable source of income and diversification requirements
in order for the Fund to also satisfy these requirements. Each Portfolio will
allocate at least annually among its investors, including a Fund, the
Portfolio's net investment income, net realized capital gains, and any other
items of income, gain, loss, deduction or credit. Each Portfolio will make
allocations to a Fund in a manner intended to comply with the Code and
applicable regulations and will make moneys available for withdrawal at
appropriate times and in sufficient amounts to enable a 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 taxes on the Fund.
For purposes of applying the requirements of the Code regarding qualification
as a RIC, each Fund will be deemed (i) to own its proportionate share of each
of the assets of the corresponding Portfolio and (ii) to be entitled to the
gross income of that Portfolio attributable to such share.
In order to avoid incurring a federal excise tax obligation, the Code
requires that each Fund distribute (or be deemed to have distributed) by
December 31 of each calendar year (i) at least 98% of its ordinary income for
such year, (ii) at least 98% of its capital gain net income (which is 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
(iii) 100% of any income from the prior year (as previously computed) that was
not paid out during such year and on which the Fund paid no federal income
tax. Under current law, provided that a Fund qualifies as a RIC and a
Portfolio is treated as a partnership for Massachusetts and federal tax
purposes, neither the Fund nor the Portfolio should be liable for any income,
corporate excise or franchise tax in the Commonwealth of Massachusetts.
For federal income tax purposes each Portfolio will be treated as a
partnership that is not a "publicly traded partnership." As a result, it will
not be subject to federal income tax; instead, the corresponding Fund, as an
investor in the Portfolio, will be required to take into account in
determining its federal income tax liability its share of the Portfolio's
income, gains, losses, deductions, and credits, without regard to whether it
has received any cash distributions from the Portfolio. Because the Fund will
be deemed to own a proportionate share of the Portfolio's assets, and to earn
a proportionate share of the Portfolio's income, for purposes of determining
whether the Fund satisfies the requirements to qualify as a RIC, the Portfolio
intends to conduct its operations so that the Fund will be able to satisfy all
those requirements.
A Portfolio's transactions in options, futures contracts, forward
contracts and certain other transactions involving foreign exchange gain or
loss will be subject to special tax rules, the effect of which may be to
accelerate income to the Portfolio, defer Portfolio losses, cause adjustments
in the holding periods of Portfolio securities, convert capital gain into
ordinary income and convert short-term capital losses into long-term capital
losses. The effect of these rules may be to change the amount, timing and
character of a Fund's distributions to its shareholders. For example, the tax
treatment of many types of options, futures contracts and forward contracts
entered into by a Portfolio will be governed by Section 1256 of the Code.
Absent a tax election for "mixed straddles" (see below), each such position
held by the Portfolio on the last business day of each taxable year will be
marked to market (i.e., treated as if it were closed out on such day), and any
resulting gain or loss, except for certain currency-related positions, will
generally be treated as 60% long-term and 40% short-term capital gain or loss,
with subsequent adjustments made to any gain or loss realized upon an actual
disposition of such positions. When the Portfolio holds an option or contract
governed by Section 1256 which substantially diminishes the Fund's risk of
loss with respect to another position of the Portfolio not governed by Section
1256 (as might occur in some hedging transactions), this combination of
positions could be a "mixed straddle" which is generally subject to special
tax rules requiring deferral of losses and other adjustments in addition to
being subject in part to Section 1256. A Portfolio may make certain tax
elections for its "mixed straddles" which could alter certain effects of these
rules.
Foreign exchange gains and losses realized by a Portfolio and allocated to
a 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 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.
Each 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 a Fund's total assets, taking into account its
allocable share of a 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 IRS 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 qualified
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 qualified foreign income taxes in computing their taxable
incomes, or, alternatively, use them as foreign tax credits, subject to
applicable limitations, against their U.S. federal income taxes. Shareholders
who do not itemize deductions for federal income tax purposes will not,
however, be able to deduct their pro rata portion of foreign taxes deemed paid
by the Fund, although such shareholders will be required to include their
shares of such taxes in gross income. Shareholders who claim a foreign tax
credit for such foreign taxes may be required to treat a portion of dividends
received from the Fund as a separate category of income for purposes of
computing the limitations on the foreign tax credit. Tax-exempt shareholders
will ordinarily not benefit from this election. Each year that the Fund files
the election described above, its shareholders will be notified of the amount
of (i) each shareholder's pro rata share of foreign income taxes paid by the
Portfolio and allocated to the Fund and (ii) the portion of Fund dividends
which represents income from each foreign country. If the Fund does not make
this election, it may deduct its allocated share of such taxes in computing
its investment company taxable income.
A Portfolio's investments, if any, in securities issued with original
issue discount (possibly including certain asset-related securities) or
securities acquired at a market discount (if an election is made to include
accrued market discount in current income) will cause it to realize income
prior to the receipt of cash payments with respect to these securities. In
order to enable the corresponding Fund to distribute its proprotionate share
of this income and avoid a tax payable by the Fund, the Portfolio may be
required to liquidate portfolio securities that it might otherwise have
continued to hold in order to generate cash that the Fund may withdraw from
the Portfolio for subsequent distribution to Fund shareholders.
Investments in lower-rated or unrated securities may present special tax
issues for a Portfolio (and, hence, for the corresponding Fund) to the extent
that the issuers of these securities may default on their obligations
pertaining thereto. The Code is not entirely clear regarding the federal
income tax consequences of a Portfolio's taking certain positions in
connection with ownership of such distressed securities. For example, the Code
is unclear regarding: (i) when the Portfolio may cease to accrue interest,
original issue discount, or market discount; (ii) when and to what extent
deductions may be taken for bad debts or worthless securities; (iii) how
payments received on obligations in default should be allocated between
principal and income; and (iv) whether exchanges of debt obligations in a
workout context are taxable.
The portion of distributions made by a Fund which are derived from
dividends received by the Portfolio from U.S. domestic corporations and
allocated to the Fund may qualify for the dividends-received deduction for
corporations. The dividends-received deduction is reduced to the extent the
shares of the Fund with respect to which the dividends are received are
treated as debt-financed under the federal income tax law and is eliminated if
the shares are deemed to have been held for less than a minimum period,
generally 46 days, which must be satisfied separately for each dividend during
a specified period. Receipt of certain distributions qualifying for the
deduction may result in reduction of the tax basis of the corporate
shareholder's shares and require current income recognition to the extent in
excess of such basis. Distributions eligible for the dividends-received
deduction may give rise to (or increase) an alternative minimum tax for
corporations, depending upon the shareholder's particular tax situation.
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 treated as long-term capital gains with
respect to such shares. All or a portion of a loss realized upon a redemption
or other disposition of Fund shares may be disallowed under "wash sale" rules
if other shares of the same Fund are purchased (whether through reinvestment
of dividends or otherwise) within the 30 days before or after such
disposition. Any disallowed loss will result in an adjustment to the
shareholder's tax basis in some or all of the other shares acquired. Sales
charges paid upon a purchase of shares of a Fund cannot be taken into account
for purposes of determining gain or loss on a redemption or exchange of the
shares before the 91st day after their purchase to the extent a sales charge
is reduced or eliminated in a subsequent acquisition of shares of the Fund or
of another fund pursuant to the Fund's reinvestment or exchange privilege. Any
disregarded amounts will result in an adjustment to the shareholder's tax
basis in some or all of any other shares acquired.
Amounts paid by a Fund to individuals and certain other shareholders who
have not provided the Fund with their correct taxpayer identification number
("TIN") and certain certifications required by the 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
arising from the Fund's dividends and other distributions as well as the
proceeds of redemption transactions (including repurchases and exchanges), at
a rate of 31%. An individual's TIN is generally his or her social security
number.
The foregoing discussion does not address the special tax rules applicable
to certain classes of investors, such as retirement plans, tax-exempt
entities, foreign investors, insurance companies and financial institutions.
Shareholders should consult their own tax advisers with respect to special tax
rules that may apply in their particular situations, as well as the state,
local and, when applicable, foreign tax consequences of investing in a Fund.
PORTFOLIO SECURITY TRANSACTIONS
Decisions concerning the execution of portfolio security transactions of
the Portfolios, including the selection of the market and the broker-dealer
firm, are made by an investment adviser. An investment adviser places the
portfolio security transactions of a Portfolio and of all other accounts
managed by it for execution with many broker-dealer firms. An investment
adviser uses its best efforts to obtain execution of portfolio transactions at
prices which are advantageous to the relevant Portfolio and (when a disclosed
commission is being charged) at reasonably competitive commission rates. In
seeking such execution, an adviser will use its best judgment in evaluating
the terms of a transaction, and will give consideration to various relevant
factors, including without limitation the full range and quality of the
broker-dealer's services, the value of the brokerage and research services
provided, the responsiveness of the broker-dealer to an investment adviser,
the size and type of the transaction, the general execution and operational
capabilities of the broker-dealer, the nature and character of the market for
the security, the confidentiality, speed and certainty of effective execution
required for the transaction, the reputation, reliability, experience and
financial condition of the broker-dealer, the value and quality of the
services rendered by the broker-dealer in this and other transactions, and the
reasonableness of the commission or spread, if any. Transactions on stock
exchanges and other agency transactions involve the payment by a 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 often involve the payment of brokerage
commissions, which may be higher than those in the United States. There is
generally no stated commission in the case of securities traded in the over-
the-counter markets, but the price paid or received by a Portfolio usually
includes an undisclosed dealer markup or markdown. In an underwritten
offering, the price paid by a Portfolio often includes a disclosed fixed
commission or discount retained by the underwriter or dealer. Although
commissions paid on portfolio security transactions will, in the judgment of
an 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
Portfolios and an investment adviser's other clients for providing brokerage
and research services to an investment 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 a 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
an investment adviser determines in good faith that such compensation was
reasonable in relation to the value of the brokerage and research services
provided. This determination may be made on the basis of either that
particular transaction or on the basis of overall responsibilities which an
investment adviser and its affiliates have for accounts over which they
exercise investment discretion. In making any such determination, an
investment adviser will not attempt to place a specific dollar value on the
brokerage and research services provided or to determine what portion of the
commission should be related to such services. Brokerage and research services
may include advice as to the value of securities, the advisability of
investing in, purchasing, or selling securities, and the availability of
securities or purchasers or sellers of securities; furnishing analyses and
reports concerning issuers, industries, securities, economic factors and
trends, portfolio strategy and the performance of accounts; effecting
securities transactions and performing functions incidental thereto (such as
clearance and settlement) and the "Research Services" referred to in the next
paragraph.
It is a common practice in the investment advisory industry for the
investment advisers of investment companies, institutions and other investors
to receive research, analytical, statistical and quotation services, data,
information and other services, products and materials which assist such
advisers in the performance of their investment responsibilities ("Research
Services") from broker-dealer firms which execute portfolio transactions for
the clients of such advisers and from third parties with which such broker-
dealers have arrangements. Consistent with this practice, an investment
adviser receives Research Services from many broker-dealer firms with which an
adviser places the portfolio transactions of a Portfolio and from third
parties with which these broker-dealers have arrangements. These Research
Services include such matters as general economic, political, business and
market information, industry and company reviews, evaluations of securities
and portfolio strategies and transactions, proxy voting data and analysis
services, technical analysis of various aspects of the securities markets,
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 an investment 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 an investment 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 each Portfolio is not reduced because an
investment adviser receives such Research Services. An investment adviser
evaluates the nature and quality of the various Research Services obtained
through broker-dealer firms and attempts to allocate sufficient portfolio
security transactions to such firms to ensure the continued receipt of
Research Services which the investment adviser believes are useful or of value
to it in rendering investment advisory services to its clients.
A Portfolio and an adviser may also receive Research Services from
underwriters and dealers in fixed-price offerings, which Research Services are
reviewed and evaluated by the investment adviser in connection with its
investment responsibilities. The investment companies sponsored by an
investment adviser or Eaton Vance may allocate brokerage commissions to
acquire information relating to the performance, fees and expenses of such
companies and other mutual funds, which information is used by the Trustees of
such companies to fulfill their responsibility to oversee the quality of the
services provided by various entities, including the investment adviser, to
such companies. Such companies may also pay cash for such information.
Subject to the requirement that an investment adviser shall use its best
efforts to seek to execute portfolio security transactions at advantageous
prices and at reasonably competitive commission rates or spreads, an
investment 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 Funds or of other investment
companies sponsored by Eaton Vance. This policy is not inconsistent with a
rule of the NASD, which rule provides that no firm which is a member of the
NASD shall favor or disfavor the distribution of shares of any particular
investment company or group of investment companies on the basis of brokerage
commissions received or expected by such firm from any source.
Securities considered as investments for the Portfolios may also be
appropriate for other investment accounts managed by an investment adviser or
its affiliates. Whenever decisions are made to buy or sell securities by a
Portfolio and one or more of such other accounts simultaneously, an investment
adviser will allocate the security transactions (including "hot" issues) in a
manner which it believes to be equitable under the circumstances. As a result
of such allocations, there may be instances where a Portfolio will not
participate in a transaction that is allocated among other accounts. If an
aggregated order cannot be filled completely, allocations will generally be
made on a pro rata basis. An order may not be allocated on a pro rata basis
where, for example: (i) consideration is given to portfolio managers who have
been instrumental in developing or negotiating a particular investment; (ii)
consideration is given to an account with specialized investment policies that
coincide with the particulars of a specific investment; (iii) pro rata
allocation would result in odd-lot or de minimis amounts being allocated to a
portfolio or other client; or (iv) where the adviser reasonably determines
that departure from a pro rata allocation is advisable. While these
aggregation and allocation policies could have a detrimental effect on the
price or amount of the securities available to the Portfolio from time to
time, it is the opinion of the Trustees of the Trust and the Portfolios that
the benefits from an investment adviser's organization outweigh any
disadvantage that may arise from exposure to simultaneous transactions.
For the fiscal years ended August 31, 1999, 1998 and 1997, the Information
Age Portfolio paid brokerage commissions of $225,039, $263,976 and $356,832,
respectively, with respect to portfolio transactions. Of these amounts,
approximately $162,952, $107,328 and $265,390, respectively, was paid in
respect of portfolio security transactions aggregating approximately
$120,766,906, $115,374,012 and $81,407,806, respectively, to firms which
provided some Research Services to the investment adviser's organization
(although many such firms may have been selected in any particular transaction
primarily because of their execution capabilities). For the fiscal years ended
August 31, 1999, 1998 and 1997, the Health Sciences Portfolio paid brokerage
commissions of $204,916, $169,807 and $115,257, respectively, with respect to
portfolio transactions. Of these amounts, approximately $55,589, $102,541 and
$66,817, respectively, was paid in respect of portfolio security transactions
aggregating approximately $102,059,232, $87,988,254 and $24,197,622,
respectively, to firms which provided some Research Services to the investment
adviser's organization (although many firms may have been selected in any
particular transaction primarily because of their execution capabilities).
FINANCIAL STATEMENTS
The audited financial statements of and the independent auditors' reports
for the Funds and the Portfolios appear in each Fund's most recent annual
report to shareholders and are incorporated by reference into this SAI. A copy
of each Fund's most recent annual report accompanies this SAI. Consistent with
applicable law, duplicate mailings of shareholder reports and certain other
Fund information to shareholders residing at the same address may be
eliminated.
Registrant incorporates by reference the audited financial information for
the fiscal year ended August 31, 1999 for the Funds and the Portfolios listed
below, all as previously filed electronically with the SEC:
Eaton Vance Information Age Fund
Information Age Portfolio
(Accession No. 0000912057-99-039267)
Eaton Vance Worldwide Health Sciences Fund
Worldwide Health Sciences Portfolio
(Accession No. 0000912057-99-002955)
<PAGE>
APPENDIX A
CLASS A FEES, PERFORMANCE AND OWNERSHIP
DISTRIBUTION AND SERVICE FEES
For the fiscal year ended August 31, 1999, the following table shows (1)
distribution and/or service fees paid or accrued under the Plan, and (2) fees
on Class A shares paid to investment dealers. The fees paid by the Funds that
were not paid to investment dealers were retained by the principal
underwriter.
DISTRIBUTION FEES TO
CLASS A FEES SERVICE FEES INVESTMENT DEALERS
- ------- ------------ ------------ ------------------
Health Sciences Fund .... $209,081 N/A $154,221
Information Age Fund .... 51,850 $30,453 23,185
PRINCIPAL UNDERWRITER
The total sales charges paid in connection with sales of Class A shares of
Information Age Fund during the fiscal years ended August 31, 1999 and 1998
were $122,695 and $53,833, respectively, of which $18,214 and $7,960,
respectively, was received by the principal underwriter. For the fiscal years
ended August 31, 1999 and 1998, investment dealers received $104,481 and
$45,873, respectively, from the total sales charges.
The total sales charges paid in connection with sales of Class A shares of
Health Sciences Fund during the fiscal years ended August 31, 1999, 1998 and
1997 were $254,243, $745,827 and $209,455, respectively, of which $36,383,
$105,245 and $185,989, respectively, was received by the principal
underwriter. For the fiscal years ended August 31, 1999, 1998 and 1997,
investment dealers received $217,960, $640,582 and $1,023,466, respectively,
from the total sales charges.
The Trust 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. For the fiscal year ended August 31,
1999, Class A paid the principal underwriter for repurchase transactions
handled by it $2.50 for each such transaction which aggregated as follows:
Health Sciences Fund -- $3,827.50; and Information Age Fund -- $547.50.
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return
on a hypothetical investment of $1,000 in Class A shares of Health Sciences
Fund for the periods shown in the table. The "Value of Initial Investment"
reflects the deduction of the maximum sales charge of 5.75%. Past performance
is no guarantee of future results. Investment return and principal value will
fluctuate; shares, when redeemed, may be worth more or less than their
original cost. Information presented with two asterisks (**) includes the
effect of subsidizing expenses. Return would have been lower without
subsidies.
<TABLE>
VALUE OF A $1,000 INVESTMENT -- HEALTH SCIENCES FUND
<CAPTION>
TOTAL RETURN TOTAL RETURN
EXCLUDING MAXIMUM INCLUDING MAXIMUM
VALUE OF VALUE OF SALES CHARGE SALES CHARGE
INVESTMENT INVESTMENT INITIAL INVESTMENT ----------------------------- -----------------------------
PERIOD DATE INVESTMENT ON 8/31/99 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- --------------------- -------------- --------------- -------------- -------------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
10 Years Ended
8/31/99** 8/31/89 $942.45 $5,241.95 456.20% 18.72% 424.20% 18.02%
5 Years Ended
8/31/99** 8/31/94 $942.33 $2,586.12 174.44% 22.37% 158.61% 20.93%
1 Year Ended
8/31/99 8/31/98 $942.19 $1,444.20 53.28% 53.28% 44.42% 44.42%
</TABLE>
The table below indicates the cumulative and average annual total return
on a hypothetical investment of $1,000 in Class A shares of Information Age
Fund. Total return for the period prior to September 1, 1997 reflects the
total return of a predecessor to Class A. Total return prior to the
Predecessor Fund's commencement of operations reflects the total return of
Class B, adjusted to reflect the Class A sales charge. The Class B total
return has not been adjusted to reflect certain other expenses (such as
distribution and/or service fees). If such adjustments were made, the Class A
total return would be different. The "Value of Initial Investment" reflects
the deduction of the maximum sales charge of 5.75%. Past performance is no
guarantee of future results. Investment return and principal value will
fluctuate; shares, when redeemed, may be worth more or less than their
original cost.
<TABLE>
VALUE OF A $1,000 INVESTMENT -- INFORMATION AGE FUND
<CAPTION>
TOTAL RETURN TOTAL RETURN
EXCLUDING MAXIMUM INCLUDING MAXIMUM
VALUE OF VALUE OF SALES CHARGE SALES CHARGE
INVESTMENT* INVESTMENT INITIAL INVESTMENT ----------------------------- -----------------------------
PERIOD DATE INVESTMENT ON 8/31/99 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- --------------------- -------------- --------------- -------------- -------------- ------------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of the Fund 9/18/95 $942.51 $1,999.89 112.19% 20.98% 99.99% 19.18%
1 Year Ended 8/31/99 8/31/98 $942.83 $1,460.90 54.95% 54.95% 46.09% 46.09%
- ---------
* Predecessor Fund commenced operations September 18, 1995.
</TABLE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As at December 1, 1999, the Trustees and officers of the Trust, as a
group, owned in the aggregate less than 1% of the outstanding Class A shares
of each Fund. In addition, as of the same date, the following record owners
held the amounts of Class A shares indicated below, which were held either (i)
individually or (ii) on behalf of their customers who are the beneficial
owners of such shares and as to which they have voting power under certain
limited circumstances:
<TABLE>
<S> <C> <C> <C>
HEALTH SCIENCES FUND -- Merrill Lynch, Pierce, Fenner & Smith, Inc. Jacksonville, FL 10.3%
INFORMATION AGE FUND -- Merrill Lynch, Pierce, Fenner & Smith, Inc. Jacksonville, FL 10.6%
Profit Sharing Retirement Plan of
Eaton Vance Management Boston, MA 8.2%
</TABLE>
To the knowledge of the Trust, no other person owned of record or
beneficially 5% or more of any Fund's outstanding Class A shares as of such
date.
<PAGE>
APPENDIX B
CLASS B FEES, PERFORMANCE AND OWNERSHIP
DISTRIBUTION AND SERVICE FEES
For the fiscal year ended August 31, 1999, the following table shows (1)
sales commissions paid by the principal underwriter to investment dealers on
sales of Class B shares, (2) distribution fees to the principal underwriter
under the Distribution Plan, (3) CDSC payments to the principal underwriter,
(4) uncovered distribution charges under the Plan (dollar amount and as a
percentage of net assets attributable to Class B), (5) service fees paid under
the Distribution Plan, and (6) the service fees paid to investment dealers.
The service fees paid by the Funds that were not paid to investment dealers
were retained by the principal underwriter. Distribution payments and CDSC
payments reduce uncovered distribution charges under the Plan.
<TABLE>
<CAPTION>
UNCOVERED
DISTRIBUTION CDSCS DISTRIBUTION SERVICE
FEES PAID TO PAID TO CHARGES FEES TO
SALES THE PRINCIPAL THE PRINCIPAL (AS A % OF SERVICE INVESTMENT
CLASS B COMMISSIONS UNDERWRITER UNDERWRITER CLASS NET ASSETS) FEES DEALERS
- ------- ----------- ----------- ----------- ----------------- ---- -------
<S> <C> <C> <C> <C> <C> <C>
Health Sciences Fund $502,532 $724,113 $522,000 $3,554,000 (3.3%) $166,820 $166,218
Information Age Fund .. 237,535 291,679 104,000 1,033,000 (2.1%) 74,226 73,904
</TABLE>
PRINCIPAL UNDERWRITER
The Trust 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. For the fiscal year ended August 31,
1999, Class B paid the principal underwriter for repurchase transactions
handled by it $2.50 for each such transaction which aggregated as follows:
Health Sciences Fund -- $4,290; and Information Age Fund -- $1,552.50.
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return
on a hypothetical investment of $1,000 in Class B shares of Information Age
Fund for the periods shown in each table. 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.
<TABLE>
VALUE OF A $1,000 INVESTMENT -- INFORMATION AGE FUND
<CAPTION>
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN BEFORE DEDUCTING TOTAL RETURN AFTER DEDUCTING
BEFORE DEDUCTING AFTER DEDUCTING THE MAXIMUM CDSC THE MAXIMUM CDSC
INVESTMENT INVESTMENT AMOUNT OF THE MAXIMUM THE MAXIMUM ------------------------------------------------------------
PERIOD DATE INVESTMENT CDSC ON 8/31/99 CDSC ON 8/31/99 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- --------- ---------- ---------- --------------- --------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of
the Fund 9/18/95 $1,000 $2,101.73 $2,071.73 110.17% 20.69% 107.17% 20.25%
1 Year
Ended
8/31/99 8/31/98 $1,000 $1,543.88 $1,493.88 54.39% 54.39% 49.39% 49.39%
</TABLE>
The table below indicates the cumulative and average annual total return
on a hypothetical investment of $1,000 in Class B shares of Health Sciences
Fund. Total return for the period prior to September 1, 1997 reflects the
total return of a predecessor to Class B. Total return prior to the
Predecessor Fund's commencement of operations reflects the total return of
Class A, adjusted to reflect the Class B sales charge. The Class A total
return has not been adjusted to reflect certain other expenses (such as
distribution and/or service fees). If such adjustments were made, the Class B
total return would be different. Past performance is no guarantee of future
results. Investment return and principal value will fluctuate; shares, when
redeemed, may be worth more or less than their original cost.
<TABLE>
VALUE OF A $1,000 INVESTMENT -- HEALTH SCIENCES FUND
<CAPTION>
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN BEFORE DEDUCTING TOTAL RETURN AFTER DEDUCTING
BEFORE DEDUCTING AFTER DEDUCTING THE MAXIMUM CDSC THE MAXIMUM CDSC
INVESTMENT* INVESTMENT AMOUNT OF THE MAXIMUM THE MAXIMUM ------------------------------------------------------------
PERIOD DATE INVESTMENT CDSC ON 8/31/99 CDSC ON 8/31/99 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- --------- ---------- ---------- --------------- --------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
10 Years
Ended
8/31/99 8/31/89 $1,000 $5,488.95 $5,488.95 448.90% 18.56% 448.90% 18.56%
5 Years
Ended
8/31/99 8/31/94 $1,000 $2,708.36 $2,688.36 170.84% 22.05% 168.84% 21.87%
1 Year
Ended
8/31/99 8/31/98 $1,000 $1,522.86 $1,472.86 52.29% 52.29% 47.29% 47.29%
- ------------
* Predecessor Fund commenced operations September 23, 1996.
</TABLE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As at December 1, 1999, the Trustees and officers of the Trust, as a
group, owned in the aggregate less than 1% of the outstanding Class B shares
of each Fund. In addition, as of the same date, Merrill Lynch, Pierce, Fenner
& Smith, Inc., Jacksonville, FL was the record owner of the following amounts
of Class B shares, which are held on behalf of its customers who are the
beneficial owners of such shares, and as to which it had voting power under
certain limited circumstances: Health Sciences Fund -- 23.6%; and Information
Age Fund -- 22.7%. To the knowledge of the Trust, no other person owned of
record or beneficially 5% or more of any Fund's outstanding Class B shares as
of such date.
<PAGE>
APPENDIX C
CLASS C FEES, PERFORMANCE AND OWNERSHIP
DISTRIBUTION AND SERVICE FEES
For the fiscal year ended August 31, 1999, the following table shows (1)
sales commissions paid by the principal underwriter to investment dealers on
sales of Class C shares, (2) distribution fees to the principal underwriter
under the Distribution Plan, (3) CDSC payments to the principal underwriter,
(4) uncovered distribution charges under the Plan (dollar amount and as a
percentage of net assets attributable to Class C), (5) service fees paid under
the Distribution Plan, and (6) the service fees paid to investment dealers.
The service fees paid by the Funds that were not paid to investment dealers
were retained by the principal underwriter. Distribution payments and CDSC
payments reduce uncovered distribution charges under the Plan.
<TABLE>
<CAPTION>
UNCOVERED
DISTRIBUTION
DISTRIBUTION CDSCS CHARGES SERVICE
FEES PAID TO PAID TO (AS A % OF FEES TO
SALES THE PRINCIPAL THE PRINCIPAL CLASS NET SERVICE INVESTMENT
CLASS C COMMISSIONS UNDERWRITER UNDERWRITER ASSETS) FEES DEALERS
- ------- ----------- ----------- ----------- ------- ---- -------
<S> <C> <C> <C> <C> <C> <C>
Information Age Fund .. $18,565 $27,528 $1,000 $258,000 (4.2%) $ 9,020 $6,269
Health
Sciences Fund ...... $ 5,728 $34,784 $4,000 $433,000 (5.6%) $13,578 $1,908
</TABLE>
PRINCIPAL UNDERWRITER
The Trust 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. For the fiscal year ended August 31,
1999, Class C paid the principal underwriter for repurchase transactions
handled by it $2.50 for each such transaction which aggregated as follows:
Health Sciences Fund -- $195; and Information Age Fund -- $142.50.
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return
on a hypothetical investment of $1,000 in Class C shares of Information Age
Fund. Total return for the period prior to September 1, 1997 reflects the
total return of a predecessor to Class C. Total return prior to the
Predecessor Fund's commencement of operations reflects the total return of
Class B, adjusted to reflect the Class C sales charge. The Class B total
return has not been adjusted to reflect certain other expenses (such as
distribution and/or service fees). If such adjustments were made, the Class C
total return would be different. Past performance is no guarantee of future
results. Investment return and principal value will fluctuate; shares, when
redeemed, may be worth more or less than their original cost.
<TABLE>
VALUE OF A $1,000 INVESTMENT -- INFORMATION AGE FUND
<CAPTION>
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN BEFORE DEDUCTING TOTAL RETURN AFTER DEDUCTING
BEFORE DEDUCTING AFTER DEDUCTING THE MAXIMUM CDSC THE MAXIMUM CDSC
INVESTMENT* INVESTMENT AMOUNT OF THE MAXIMUM THE MAXIMUM ------------------------------------------------------------
PERIOD DATE INVESTMENT CDSC ON 8/31/99 CDSC ON 8/31/99 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- --------- ---------- ---------- --------------- --------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of
the Fund 9/18/95 $1,000 $2,077.64 $2,077.64 107.76% 20.34% 107.76% 20.34%
1 Year
Ended
8/31/99 8/31/98 $1,000 $1,542.88 $1,532.88 54.29% 54.29% 53.29% 53.29%
- ------------
* Predecessor Fund commenced operations on November 22, 1995.
</TABLE>
The table below indicates the cumulative and average annual total return
on a hypothetical investment of $1,000 in Class C shares of Health Sciences
Fund. Total return for the period prior to January 1, 1998 reflects the total
return of Class A, adjusted to reflect the Class C sales charge. The Class A
total return has not been adjusted to reflect certain other expenses (such as
distribution and/or service fees). If such adjustments were made, the Class C
total return would be different. Past performance is no guarantee of future
results. Investment return and principal value will fluctuate; shares, when
redeemed, may be worth more or less than their original cost.
<TABLE>
VALUE OF A $1,000 INVESTMENT -- HEALTH SCIENCES FUND
<CAPTION>
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN BEFORE DEDUCTING TOTAL RETURN AFTER DEDUCTING
BEFORE DEDUCTING AFTER DEDUCTING THE MAXIMUM CDSC THE MAXIMUM CDSC
INVESTMENT* INVESTMENT AMOUNT OF THE MAXIMUM THE MAXIMUM ------------------------------------------------------------
PERIOD DATE INVESTMENT CDSC ON 8/31/99 CDSC ON 8/31/99 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- --------- ---------- ---------- --------------- --------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
10 Years
Ended
8/31/99 8/31/89 $1,000 $5,523.50 $5,523.50 452.35% 18.64% 452.35% 18.64%
5 Years
Ended
8/31/99 8/31/94 $1,000 $2,725.42 $2,725.42 172.54% 22.20% 172.54% 22.20%
1 Year
Ended
8/31/99 8/31/98 $1,000 $1,521.64 $1,511.64 52.16% 52.16% 51.16% 51.16%
</TABLE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As at December 1, 1999, the Trustees and officers of the Trust, as a
group, owned in the aggregate less than 1% of the outstanding Class C shares
of each Fund. In addition, as of the same date, the following record owners
held the amounts of Class C shares indicated below, which were held either (i)
individually or (ii) on behalf of their customers who are the beneficial
owners of such shares and as to which they have voting power under certain
limited circumstances:
<TABLE>
<S> <C> <C> <C>
HEALTH SCIENCES FUND -- Merrill Lynch, Pierce, Fenner & Smith, Inc. Jacksonville, FL 18.7%
PaineWebber FBO Leon D. Hadley IRA R/O Weehawken, NJ 11.3%
PaineWebber FBO Estate of Bettina G. Lowerre,
Paul C. Lowerre and Howard Presant New York, NY 9.7%
INFORMATION AGE FUND -- Merrill Lynch, Pierce, Fenner & Smith, Inc. Jacksonville, FL 27.2%
</TABLE>
Beneficial owners of 25% or more of Class C shares are presumed to be in
control of such class for purposes of voting on certain matters submitted to
shareholders.
To the knowledge of the Trust, no other person owned of record or
beneficially 5% or more of any Fund's outstanding Class C shares as of such
date.
<PAGE>
PART C - OTHER INFORMATION
ITEM 23. EXHIBITS
(a)(1) Declaration of Trust dated May 25, 1989, filed as Exhibit (1)(a) to
Post-Effective Amendment No. 59 and incorporated herein by
reference.
(2) Amendment to the Declaration of Trust dated August 18, 1992 filed as
Exhibit (1)(b) to Post-Effective Amendment No. 59 and incorporated
herein by reference.
(3) Amendment to the Declaration of Trust dated June 23, 1997 filed as
Exhibit (1)(c) to Post-Effective Amendment No. 68 and incorporated
herein by reference.
(4) Amendment and Restatement of Establishment and Designation of Series
of Shares of Beneficial Interest, Without Par Value, effective
October 19, 1998, filed as Exhibit (a)(4) to Post-Effective
Amendment No. 73 and incorporated herein by reference.
(b)(1) By-Laws filed as Exhibit (2)(a) to Post-Effective Amendment No. 59
and incorporated herein by reference.
(2) Amendment to By-Laws dated December 13, 1993 filed as Exhibit (2)(b)
to Post-Effective Amendment No. 59 and incorporated herein by
reference.
(c) Reference is made to Item 23(a) and 23(b) above.
(d) Not applicable
(e)(1) Distribution Agreement between Eaton Vance Growth Trust and Eaton
Vance Distributors, Inc. effective June 23, 1997 with attached
Schedule A effective June 23, 1997 filed as Exhibit (6)(a)(1) to
Post-Effective Amendment No. 68 and incorporated herein by
reference.
(2) Selling Group Agreement between Eaton Vance Distributors, Inc. and
Authorized Dealers filed as Exhibit (6)(b) to the Post-Effective
Amendment No. 61 and incorporated herein by reference.
(f) The Securities and Exchange Commission has granted the Registrant an
exemptive order that permits the Registrant to enter into deferred
compensation arrangements with its independent Trustees. See in the
Matter of Capital Exchange Fund, Inc., Release No. IC-20671
(November 1, 1994).
(g)(1) Custodian Agreement with Investors Bank & Trust Company dated
November 7, 1994 filed as Exhibit (8) to Post-Effective Amendment
No. 59 and incorporated herein by reference.
(2) Amendment to Custodian Agreement with Investors Bank & Trust Company
dated October 23, 1995 filed as Exhibit (8)(b) to Post-Effective
Amendment No. 61 and incorporated herein by reference.
(h)(1) Management Contract between Eaton Vance Growth Trust (on behalf of
Eaton Vance Asian Small Companies Fund, Eaton Vance Information Age
Fund, Eaton Vance Greater China Growth Fund and Eaton Vance
Worldwide Health Sciences Fund) and Eaton Vance Management dated
June 23, 1997 filed as Exhibit (5)(a) to Post-Effective Amendment
No. 68 and incorporated herein by reference.
C-1
<PAGE>
(h)(2)(a) Amended Administrative Services Agreement between Eaton Vance Growth
Trust (on behalf of each of its series listed on Schedule A) and
Eaton Vance Management with attached schedules (including Amended
Schedule A dated April 1, 1997) filed as Exhibit (9)(a) to
Post-Effective Amendment No. 66 and incorporated herein by
reference.
(b) Amendment to Schedule A dated June 23, 1997 to the Amended
Administrative Services Agreement dated April 1, 1997 filed as
Exhibit (9)(a)(2) to Post-Effective Amendment No. 68 and
incorporated herein by reference.
(3)(a) Transfer Agency Agreement dated January 1, 1998 filed as Exhibit
(k)(b) to the Registration Statement on Form N-2 of Eaton Vance
Advisers Senior Floating-Rate Fund (File Nos. 333-46853, 811-08671)
(Accession No. 0000950156-98-000172) and incorporated herein by
reference.
(b) Amendment to the Transfer Agency Agreement dated October 18, 1999
filed as Exhibit (h)(2)(b) to the Registration Statement of Eaton
Vance Municipals Trust (File Nos. 33-572, 811-4409) (Accession No.
0000950156-99-000723) and incorporated herein by reference.
(i)(1) Opinion of Internal Counsel filed as Exhibit (i) to Post-Effective
Amendment No. 71 and incorporated herein by reference.
(2) Consent of Internal Counsel filed herewith.
(j)(1) Consent of Independent Auditors for Eaton Vance Asian Small
Companies Fund filed herewith.
(2) Consent of Independent Auditors for Eaton Vance Greater China Growth
Fund filed herewith.
(3) Consent of Independent Accountants for Eaton Vance Growth Fund filed
herewith.
(4) Consent of Independent Accountants for Eaton Vance Information Age
Fund filed herewith.
(5) Consent of Independent Accountants for Eaton Vance Worldwide Health
Sciences Fund filed herewith.
(k) Not applicable
(l) Not applicable
(m)(1) Eaton Vance Growth Trust Class A Service Plan adopted June 23, 1997
with attached Schedule A effective June 23, 1997 filed as Exhibit
(15)(a) to Post-Effective Amendment No. 68 and incorporated herein
by reference.
(2) Eaton Vance Growth Trust Class A Distribution Plan adopted June 23,
1997 with attached Schedule A effective June 23, 1997 filed as
Exhibit (15)(b) to Post-Effective Amendment No. 68 and incorporated
herein by reference.
(3) Eaton Vance Growth Trust Class B Distribution Plan adopted June 23,
1997 with attached Schedule A effective June 23, 1997 filed as
Exhibit (15)(c) to Post-Effective Amendment No. 68 and incorporated
herein by reference.
C-2
<PAGE>
(4) Eaton Vance Growth Trust Class C Distribution Plan adopted June 23,
1997 with attached Schedule A effective June 23, 1997 filed as
Exhibit (15)(d) to Post-Effective Amendment No. 68 and incorporated
herein by reference.
(n) Not applicable.
(o) Multiple Class Plan for Eaton Vance Funds dated June 23, 1997 filed
as Exhibit (18) to Post-Effective Amendment No. 68 and incorporated
herein by reference.
(p)(1) Power of Attorney for Eaton Vance Growth Trust dated April 22, 1997
filed as Exhibit (17)(a) to Post-Effective Amendment No. 68 and
incorporated herein by reference.
(2) Power of Attorney for Eaton Vance Growth Trust dated November 16,
1998 filed as Exhibit (p)(2) to Post-Effective Amendment No. 72 and
incorporated herein by reference.
(3) Power of Attorney for Growth Portfolio dated April 22, 1997 filed as
Exhibit (17)(b) to Post-Effective Amendment No. 68 and incorporated
herein by reference.
(4) Power of Attorney for Growth Portfolio dated November 16, 1998 filed
as Exhibit (p)(4) to Post-Effective Amendment No. 72 and
incorporated herein by reference.
(5) Power of Attorney for Information Age Portfolio dated February 14,
1997 filed as Exhibit (17)(c) to Post-Effective Amendment No. 68 and
incorporated herein by reference.
(6) Power of Attorney for Information Age Portfolio dated November 16,
1998 filed as Exhibit (p)(6) to Post-Effective Amendment No. 72 and
incorporated herein by reference.
(7) Power of Attorney for Asian Small Companies Portfolio dated February
14, 1997 filed as Exhibit (17)(d) to Post-Effective Amendment No. 67
and incorporated herein by reference.
(8) Power of Attorney for Asian Small Companies Portfolio dated November
16, 1998 filed as Exhibit (p)(8) to Post-Effective Amendment No. 72
and incorporated herein by reference.
(9) Power of Attorney for Greater China Growth Portfolio dated February
14, 1997 filed as Exhibit (17)(e) to Post-Effective Amendment No. 67
and incorporated herein by reference.
(10) Power of Attorney for Worldwide Health Sciences Portfolio filed as
Exhibit (17)(f) to Post-Effective Amendment No. 68 and incorporated
herein by reference.
(11) Power of Attorney for Worldwide Health Sciences Portfolio dated
November 16, 1998 filed as Exhibit (p)(11) to Post-Effective
Amendment No. 72 and incorporated herein by reference.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL
Not applicable
ITEM 25. INDEMNIFICATION
Article IV of the Registrant's Amended and Restated Declaration of Trust
permits Trustee and officer indemnification by By-law, contract and vote.
Article XI of the By-Laws contains indemnification provisions. Registrant's
Trustees and officers are insured under a standard mutual fund errors and
omissions insurance policy covering loss incurred by reason of negligent errors
and omissions committed in their capacities as such.
C-3
<PAGE>
The distribution agreements of the Registrant also provide for reciprocal
indemnity of the principal underwriter, on the one hand, and the Trustees and
officers, on the other.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISERS
Reference is made to: (i) the information set forth under the caption
"Management and Organization" in the Statement of Additional Information; (ii)
the Eaton Vance Corp. 10-K filed under the Securities Exchange Act of 1934 (File
No. 1-8100); and (iii) the Form ADV of Eaton Vance (File No. 801-15930), BMR
(File No. 801-43127), Lloyd George (Bermuda) (File No. 801-40889), Lloyd George
(Hong Kong) (File No. 801-40890) and Orbimed (File No. 801-34429) filed with the
Commission, all of which are incorporated herein by reference.
ITEM 27. PRINCIPAL UNDERWRITERS
(a) Registrant's principal underwriter, Eaton Vance Distributors, Inc., a
wholly-owned subsidiary of Eaton Vance Management, is the principal
underwriter for each of the investment companies named below:
<TABLE>
<CAPTION>
<S> <C>
Eaton Vance Advisers Senior Floating-Rate Fund Eaton Vance Municipals Trust II
Eaton Vance Growth Trust Eaton Vance Mutual Funds Trust
Eaton Vance Income Fund of Boston Eaton Vance Prime Rate Reserves
Eaton Vance Institutional Senior Floating-Rate Fund Eaton Vance Special Investment Trust
Eaton Vance Investment Trust EV Classic Senior Floating-Rate Fund
Eaton Vance Municipals Trust
</TABLE>
(b)
<TABLE>
<CAPTION>
<S> <C> <C>
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address* with Principal Underwriter with Registrant
----------------- -------------------------- ---------------
Albert F. Barbaro Vice President None
Chris Berg Vice President None
Kate B. Bradshaw Vice President None
Mark Carlson Vice President None
Daniel C. Cataldo Vice President None
Raymond Cox Vice President None
Peter Crowley Vice President None
Anthony DeVille Vice President None
Ellen Duffy Vice President None
Alan R. Dynner Vice President Secretary
Richard A. Finelli Vice President None
Kelly Flynn Vice President None
James Foley Vice President None
Michael A. Foster Vice President None
William M. Gillen Senior Vice President None
Hugh S. Gilmartin Vice President None
James B. Hawkes Vice President and Director President and Trustee
Perry D. Hooker Vice President None
Brian Jacobs Senior Vice President None
Kara Lawler Vice President None
Thomas P. Luka Vice President None
John Macejka Vice President None
Stephen Marks Vice President None
Geoff Marshall Vice President None
Joseph T. McMenamin Vice President None
Morgan C. Mohrman Senior Vice President None
James A. Naughton Vice President None
Joseph Nelson Vice President None
Mark D. Nelson Vice President None
Linda D. Newkirk Vice President None
C-4
<PAGE>
James L. O'Connor Vice President Treasurer
Andrew Ogren Vice President None
Thomas Otis Secretary and Clerk None
George D. Owen, II Vice President None
Margaret Pier Vice President None
Enrique M. Pineda Vice President None
F. Anthony Robinson Vice President None
Frances Rogell Vice President None
Jay S. Rosoff Vice President None
Benjamin A. Rowland, Jr. Vice President, Treasurer and Director None
Stephen M. Rudman Vice President None
Kevin Schrader Vice President None
Teresa A. Sheehan Vice President None
William M. Steul Vice President and Director None
Cornelius J. Sullivan Senior Vice President None
Peter Sykes Vice President None
David M. Thill Vice President None
John M. Trotsky Vice President None
Jerry Vainisi Vice President None
Chris Volf Vice President None
Debra Wekstein Vice President None
Wharton P. Whitaker President and Director None
Sue Wilder Vice President None
</TABLE>
- ------------------------
* Address is The Eaton Vance Building, 255 State Street, Boston, MA 02109
(c) Not applicable
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS
All applicable accounts, books and documents required to be maintained by
the Registrant by Section 31(a) of the Investment Company Act of 1940 and the
Rules promulgated thereunder are in the possession and custody of the
Registrant's custodian, Investors Bank & Trust Company, 200 Clarendon Street,
16th Floor, Mail Code ADM27, Boston, MA 02116, and its transfer agent, PFPC
Global Fund Services, 4400 Computer Drive, Westborough, MA 01581-5120, with the
exception of certain corporate documents and portfolio trading documents which
are in the possession and custody of the administrator and investment adviser.
Registrant is informed that all applicable accounts, books and documents
required to be maintained by registered investment advisers are in the custody
and possession of Eaton Vance Management and Boston Management and Research.
ITEM 29. MANAGEMENT SERVICES
Not applicable
ITEM 30. UNDERTAKINGS
The Registrant undertakes to include the information required by Item 5 of
Form N-1A in its annual reports to shareholders under Rule 30d-1.
C-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Amendment to the Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly
caused this Amendment to its Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized in the City of Boston, and the
Commonwealth of Massachusetts, on December 20, 1999.
EATON VANCE GROWTH TRUST
By: /s/ James B. Hawkes
-------------------------------
James B. Hawkes, President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement has been signed below by
the following persons in their capacities indicated on December 20, 1999.
SIGNATURE TITLE
--------- -----
/s/ James B. Hawkes
- ------------------- President (Chief Executive Officer) and Trustee
James B. Hawkes
/s/ James L. O'Connor
- --------------------- Treasurer (Principal Financial and Accounting Officer)
James L. O'Connor
Jessica M. Bibliowicz*
- ---------------------- Trustee
Jessica M. Bibliowicz
Donald R. Dwight*
- ----------------- Trustee
Donald R. Dwight
Samuel L. Hayes, III*
- --------------------- Trustee
Samuel L. Hayes
Norton H. Reamer*
- ----------------- Trustee
Norton H. Reamer
Lynn A. Stout*
- -------------- Trustee
Lynn A. Stout
Jack L. Treynor*
- ----------------- Trustee
Jack L. Treynor
*By: /s/ Alan R. Dynner
-----------------------------------
Alan R. Dynner (As attorney-in-fact)
C-6
<PAGE>
SIGNATURES
Asian Small Companies Portfolio has duly caused this Amendment to the
Registration Statement on Form N-1A of Eaton Vance Growth Trust (File No.
2-22019) to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Boston and the Commonwealth of Massachusetts on
December 20, 1999.
ASIAN SMALL COMPANIES PORTFOLIO
By: HON. ROBERT LLOYD GEORGE*
-----------------------------------
Hon. Robert Lloyd George, President
This Amendment to the Registration Statement on Form N-1A of Eaton Vance
Growth Trust (File No. 2-22019) has been signed below by the following persons
in their capacities on December 20, 1999.
SIGNATURE TITLE
--------- -----
Hon. Robert Lloyd George*
- ------------------------- President (Chief Executive Officer) and Trustee
Hon. Robert Lloyd George
/s/ James L. O'Connor
- --------------------- Treasurer (Principal Financial and Accounting Officer)
James L. O'Connor
Hon. Edward K.Y. Chen*
- ---------------------- Trustee
Hon. Edward K.Y. Chen
Donald R. Dwight*
- ----------------- Trustee
Donald R. Dwight
/s/ James B. Hawkes
- ------------------- Trustee
James B. Hawkes
Samuel L. Hayes, III*
- --------------------- Trustee
Samuel L. Hayes
Norton H. Reamer*
- ----------------- Trustee
Norton H. Reamer
Lynn A. Stout*
- -------------- Trustee
Lynn A. Stout
Jack L. Treynor*
- ---------------- Trustee
Jack L. Treynor
*By: /s/ Alan R. Dynner
---------------------------------
Alan R. Dynner (As attorney-in-fact)
C-7
<PAGE>
SIGNATURES
Greater China Growth Portfolio has duly caused this Amendment to the
Registration Statement on Form N-1A of Eaton Vance Growth Trust (File No.
2-22019) to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Boston and the Commonwealth of Massachusetts on
December 20, 1999.
GREATER CHINA GROWTH PORTFOLIO
By: HON. ROBERT LLOYD GEORGE*
-----------------------------------
Hon. Robert Lloyd George, President
This Amendment to the Registration Statement on Form N-1A of Eaton Vance
Growth Trust (File No. 2-22019) has been signed below by the following persons
in their capacities on December 20, 1999.
SIGNATURE TITLE
--------- -----
Hon. Robert Lloyd George*
- ----------------- President (Chief Executive Officer) and Trustee
Hon. Robert Lloyd George
/s/ James L. O'Connor Treasurer (and Principal Financial
- --------------------- and Accounting Officer)
James L. O'Connor
Hon. Edward K.Y. Chen*
- ---------------------- Trustee
Hon. Edward K.Y. Chen
Donald R. Dwight*
- ----------------- Trustee
Donald R. Dwight
/s/ James B. Hawkes
- ------------------- Trustee
James B. Hawkes
Samuel L. Hayes, III*
- --------------------- Trustee
Samuel L. Hayes
Norton H. Reamer*
- ----------------- Trustee
Norton H. Reamer
*By: /s/ Alan R. Dynner
---------------------------------
Alan R. Dynner (As attorney-in-fact)
C-8
<PAGE>
SIGNATURES
Growth Portfolio has duly caused this Amendment to the Registration
Statement on Form N-1A of Eaton Vance Growth Trust (File No. 2-22019) to be
signed on its behalf by the undersigned, thereunto duly authorized in the City
of Boston and the Commonwealth of Massachusetts on December 20, 1999.
GROWTH PORTFOLIO
By: /s/ James B. Hawkes
-------------------------------
James B. Hawkes, President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement has been signed below by
the following persons in their capacities indicated on December 20, 1999.
SIGNATURE TITLE
--------- -----
/s/ James B. Hawkes
- ------------------- President (Chief Executive Officer) and Trustee
James B. Hawkes
/s/ James L. O'Connor
- --------------------- Treasurer (Principal Financial and Accounting Officer)
James L. O'Connor
Jessica M. Bibliowicz*
- ---------------------- Trustee
Jessica M. Bibliowicz
Donald R. Dwight*
- ----------------- Trustee
Donald R. Dwight
Samuel L. Hayes, III*
- --------------------- Trustee
Samuel L. Hayes
Norton H. Reamer*
- ----------------- Trustee
Norton H. Reamer
Lynn A. Stout*
- -------------- Trustee
Lynn A. Stout
Jack L. Treynor*
- ----------------- Trustee
Jack L. Treynor
*By: /s/ Alan R. Dynner
-----------------------------------
Alan R. Dynner (As attorney-in-fact)
C-9
<PAGE>
SIGNATURES
Information Age Portfolio has duly caused this Amendment to the
Registration Statement on Form N-1A of Eaton Vance Growth Trust (File No.
2-22019) to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Boston and the Commonwealth of Massachusetts on
December 20, 1999.
INFORMATION AGE PORTFOLIO
By: /s/ James B. Hawkes
-------------------------------
James B. Hawkes, President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement has been signed below by
the following persons in their capacities indicated on December 20, 1999.
SIGNATURE TITLE
--------- -----
/s/ James B. Hawkes
- ------------------- President (Chief Executive Officer) and Trustee
James B. Hawkes
/s/ James L. O'Connor
- --------------------- Treasurer (Principal Financial and Accounting Officer)
James L. O'Connor
Hon. Edward K.Y. Chen*
- ---------------------- Trustee
Hon. Edward K.Y. Chen
Donald R. Dwight*
- ----------------- Trustee
Donald R. Dwight
Hon. Robert Lloyd George*
- ------------------------- Trustee
Hon. Robert Lloyd George
Samuel L. Hayes, III*
- --------------------- Trustee
Samuel L. Hayes
Norton H. Reamer*
- ----------------- Trustee
Norton H. Reamer
Lynn A. Stout*
- -------------- Trustee
Lynn A. Stout
Jack L. Treynor*
- ----------------- Trustee
Jack L. Treynor
*By: /s/ Alan R. Dynner
-----------------------------------
Alan R. Dynner (As attorney-in-fact)
C-10
<PAGE>
SIGNATURES
Worldwide Health Sciences Portfolio has duly caused this Amendment to the
Registration Statement on Form N-1A of Eaton Vance Growth Trust (File No.
2-22019) to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Boston and the Commonwealth of Massachusetts on
December 20, 1999.
WORLDWIDE HEALTH SCIENCES PORTFOLIO
By: /s/ James B. Hawkes
-------------------------------
James B. Hawkes, President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement has been signed below by
the following persons in their capacities indicated on December 20, 1999.
SIGNATURE TITLE
--------- -----
/s/ James B. Hawkes
- ------------------- President (Chief Executive Officer) and Trustee
James B. Hawkes
/s/ James L. O'Connor
- --------------------- Treasurer (Principal Financial and Accounting Officer)
James L. O'Connor
Jessica M. Bibliowicz*
- ---------------------- Trustee
Jessica M. Bibliowicz
Donald R. Dwight*
- ----------------- Trustee
Donald R. Dwight
Samuel L. Hayes, III*
- --------------------- Trustee
Samuel L. Hayes
Norton H. Reamer*
- ----------------- Trustee
Norton H. Reamer
Lynn A. Stout*
- -------------- Trustee
Lynn A. Stout
Jack L. Treynor*
- ----------------- Trustee
Jack L. Treynor
*By: /s/ Alan R. Dynner
-----------------------------------
Alan R. Dynner (As attorney-in-fact)
C-11
<PAGE>
EXHIBIT INDEX
The following exhibits are filed as part of this amendment to the
Registration Statement pursuant to Rule 483 of Regulation C.
Exhibit No. Description
- ----------- -----------
(i)(2) Consent of Internal Counsel to Opinion
(j)(1)
Consent of Independent Auditors for Eaton Vance Asian Small
Companies Fund
(2) Consent of Independent Auditors for Eaton Vance Greater China
Growth Fund
(3) Consent of Independent Accountants for Eaton Vance Growth Fund
(4) Consent of Independent Accountants for Eaton Vance Information
Age Fund
(5) Consent of Independent Accountants for Eaton Vance Worldwide
Health Sciences Fund
C-12
<PAGE>
EXHIBIT (i)(2)
CONSENT OF COUNSEL
I consent to the incorporation by reference in this Post-Effective
Amendment No. 74 to the Registration Statement of Eaton Vance Growth Trust (1933
Act File No. 2-22019) of my opinion dated October 29, 1998, which was filed as
Exhibit (i) to Post-Effective Amendment No. 71.
/s/ Maureen A. Gemma
Maureen A. Gemma, Esq.
December 20, 1999
Boston, Massachusetts
<PAGE>
EXHIBIT (j)(1)
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference to the Prospectus and
Statement of Additional Information in this Post-Effective Amendment No. 74 to
the Registration Statement of Eaton Vance Growth Trust (1933 Act File No.
2-22019) of our reports each dated October 1, 1999 and the Financial Statements
and Financial Highlights or supplementary data of Eaton Vance Asian Small
Companies Fund and the Asian Small Companies Portfolio, included in the August
31, 1999 Annual Report to Shareholders of the Fund.
We also consent to the reference to our Firm under the heading "Financial
Highlights" in the Prospectus and under the heading "Other Service Providers" in
the Statement of Additional Information.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
December 20, 1999
Boston, Massachusetts
<PAGE>
EXHIBIT (j)(2)
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference to the Prospectus and
Statement of Additional Information in this Post-Effective Amendment No. 74 to
the Registration Statement of Eaton Vance Growth Trust (1933 Act File No.
2-22019) of our reports each dated October 1, 1999 and the Financial Statements
and Financial Highlights or supplementary data of Eaton Vance Greater China
Growth Fund and the Greater China Growth Portfolio, included in the August 31,
1999 Annual Report to Shareholders of the Fund.
We also consent to the reference to our Firm under the heading "Financial
Highlights" in the Prospectus and under the heading "Other Service Providers" in
the Statement of Additional Information of the Registration Statement.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
December 20, 1999
Boston, Massachusetts
<PAGE>
EXHIBIT (j)(3)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Post-Effective
Amendment No. 74 to the Registration Statement on Form N-1A of our report dated
October 1, 1999, relating to the financial statements and financial highlights
of the Eaton Vance Growth Fund (the "Fund") and of our report dated October 1,
1999, relating to the financial statements and supplementary data of the Growth
Portfolio, which appear in the August 31, 1999 Annual Report to Shareholders of
the Fund, which are also incorporated by reference into the Registration
Statement. We also consent to the references to us under the headings "Financial
Highlights" and "Other Service Providers" in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
PRICEWATERHOUSECOOPERS LLP
Boston, Massachusetts
December 20, 1999
<PAGE>
EXHIBIT (j)(4)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Post-Effective
Amendment No. 74 to the Registration Statement on Form N-1A of our report dated
October 4, 1999, relating to the financial statements and financial highlights
of the Eaton Vance Information Age Fund (the "Fund") and of our report dated
October 4, 1999, relating to the financial statements and supplementary data of
the Information Age Portfolio, which appear in the August 31, 1999 Annual Report
to Shareholders of the Fund, which are also incorporated by reference into the
Registration Statement. We also consent to the references to us under the
headings "Financial Highlights" and "Other Service Providers" in such
Registration Statement.
/s/ PricewaterhouseCoopers LLP
PRICEWATERHOUSECOOPERS LLP
Boston, Massachusetts
December 20, 1999
<PAGE>
EXHIBIT (j)(5)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Post-Effective
Amendment No. 74 to the Registration Statement on Form N-1A of our report dated
October 1, 1999, relating to the financial statements and financial highlights
of the Eaton Vance Worldwide Health Sciences Fund (the "Fund") and of our report
dated October 1, 1999, relating to the financial statements and supplementary
data of the Worldwide Health Sciences Portfolio, which appear in the August 31,
1999 Annual Report to Shareholders of the Fund, which are also incorporated by
reference into the Registration Statement. We also consent to the references to
us under the headings "Financial Highlights" and "Other Service Providers" in
such Registration Statement.
/s/ PricewaterhouseCoopers LLP
PRICEWATERHOUSECOOPERS LLP
Boston, Massachusetts
December 20, 1999
