<PAGE>
As filed with the Securities and Exchange Commission on June 30, 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. 73 [x]
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940 [x]
AMENDMENT NO. 46 [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
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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 July 1, 1999 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 has 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 mutual fund investing in smaller companies based in Asia
Prospectus Dated
July 1, 1999
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 6
Investment Objective & Principal Redeeming Shares 8
Policies and Risks 4 Shareholder Account
Management and Organization 5 Features 8
Valuing Shares 6 Tax Information 9
Purchasing Shares 6
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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 will invest in equity securities of smaller
companies based 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 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
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 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 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 the Fund
invests predominantly 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.
Investors should be aware that the 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. 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.
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>
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 (as a
percentage of the lower of net asset
value at time of purchase or time of
redemption) None 5.00%
Sales Charge Imposed on Reinvested
Distributions None None
Exchange Fee None None
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets) Class A Class B
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Management Fees 1.25% 1.25%
Distribution and Service (12b-1) Fees* 0.50% 0.98%
Other Expenses** 0.75% 0.75%
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Total Annual Fund Operating Expenses 2.50% 2.98%
* 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.
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 $801 $1,321
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 $301 $ 921
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
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 will invest at least 65% of its
total assets in equity securities of Asian small companies. Asian small
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. The Fund may invest 25% or more of its 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 Hong Kong will represent more than 25% of
total assets. More than 25% of the Portfolio's total assets may be denominated
in any single currency. Although not a common practice, the portfolio manager
may use hedging techniques (such as forward contracts and options) to attempt to
mitigate adverse effects of foreign currency fluctuations.
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 (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.
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
developments may affect the value of the Portfolio's investments in these
countries and the availability to the Portfolio of additional investments.
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
Portfolio may also borrow amounts up to 25% of the value 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 investment securities while outstanding borrowings
exceed 5% of the value of its total assets. 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.
<PAGE>
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
4
<PAGE>
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. 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.
The Portfolio may, for temporary defensive purposes, such as during abnormal
market or economic conditions, invest some or all of its total assets in high
grade debt securities of foreign and United States companies, foreign
governments and the U.S. Government, and their respective agencies,
instrumentalities, political subdivisions and authorities, as well as in high
quality money market instruments denominated in U.S. dollars or a foreign
currency. 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 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.
Scobie Dickenson Ward is the portfolio manager of the Portfolio (since
inception). Mr. Ward is a Director of Lloyd George and has been a portfolio
manager at Lloyd George for more than five years.
Lloyd George and its affiliates act as investment adviser to various individual
and institutional clients and manage $1.3 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. Eaton Vance has been managing assets since 1924
and managing mutual funds since 1931. Eaton Vance and its subsidiaries currently
manage over $37 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
5
<PAGE>
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 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 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
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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.
6
<PAGE>
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 of $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 to certain tax-deferred retirement plans.
Contingent Deferred Sales Charge. Each Class of shares is subject to a CDSC on
certain redemptions. If Class A shares are purchased at net asset value because
the purchase amount is $1 million or more, they 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
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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
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 may be reduced
under the right of accumulation or under a statement of intention. Under the
right of accumulation, sales charges are reduced if the current market value of
your current holdings (shares at current offering price), plus your new
purchases, reach $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. 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 the statement is satisfied 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
clients of Eaton Vance; certain persons affiliated with Eaton Vance; and certain
Eaton Vance and fund service providers. Ask your investment dealer for details.
The Class B CDSC is waived for redemptions pursuant to a Withdrawal Plan (see
"Shareholder Account Features") and 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 any portion or all 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. Your account will be credited
with any CDSC paid in connection with the redemption. 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. The Fund has adopted 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 B shares pay distribution fees of 0.75% of
average daily net assets annually. 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. 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 not exceeding 0.25% of average daily net assets annually. Class A and
Class B shares only pay service fees on shares that have been outstanding for
twelve months.
7
<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, or 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.
8
<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 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, you may 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 Transactions. You can redeem or exchange shares by telephone as
described in this prospectus. The transfer agent and the principal underwriter
have procedures in place to authenticate telephone instructions (such as
verifying personal account information). As long as the transfer agent and
principal underwriter follow these procedures, they will not be responsible for
unauthorized telephone transactions and you bear the risk of possible loss
resulting from telephone 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. 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 are
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.
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>
{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 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 20549-6009.
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:
- --------------------------------------------------------------------------------
First Data Investor Services Group
P.O. Box 5123
Westborough, MA 01581-5123
1-800-262-1122
SEC File No. 811-1241 ACP
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL INFORMATION
July 1, 1999
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 ............................................... 15
Purchasing and Redeeming Shares ....................................... 15
Sales Charges ......................................................... 17
Performance ........................................................... 20
Taxes ................................................................. 22
Portfolio Security Transactions ....................................... 24
Financial Statements .................................................. 26
Appendices:
A: Class A and Class B Fees and Ownership ............................. a-1
B: Asian Region Countries ............................................. b-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 JULY
1, 1999, 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
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 options on equity securities and up to 5%
of its net assets in warrants, including options and warrants traded in over-
the-counter markets. The Portfolio will not, under normal market conditions,
invest more than 35% of its total assets in equity securities other than 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. The Portfolio may temporarily
borrow up to 5% of the value of its total assets to satisfy redemption
requests or settle securities transactions.
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.
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. These certificates are issued by depository banks and
generally trade on an established market in the United States or elsewhere.
The underlying shares are held in trust by a custodian bank or similar
financial institution in the issuer's home country. The depository bank may
not have physical custody of the underlying securities at all times and may
charge fees for various services, including forwarding dividends and interest
and corporate actions. ADRs are alternatives to directly purchasing the
underlying foreign securities in their national markets and currencies.
However, ADRs 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 differ from receipts sponsored by an issuer in that they may involve
higher expenses, they may not pass-through voting or other shareholder rights,
and they may be less liquid.
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.
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.
The Portfolio may purchase call and put options on any securities in which
the Portfolio may invest or options on any securities index composed of
securities in which the Portfolio may invest. The Portfolio does not intend to
write a covered option on any security if after such transaction more than 15%
of its net assets, as measured by the aggregate value of the securities
underlying all covered calls and puts written by the Portfolio, would be
subject to such options. The Portfolio does not intend to purchase an option
on any security if, after such transaction, more than 5% of its net assets, as
measured by the aggregate of all premiums paid for all such options held by
the Portfolio, would be so invested.
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.
DIVERSIFIED STATUS. The Portfolio is a "diversified" investment company under
the 1940 Act. This means that with respect to 75% of its total assets (1) the
Portfolio may not invest more than 5% of its total assets in the securities of
any one issuer (except U.S. Government obligations) and (2) the Portfolio may
not own more than 10% of the outstanding voting securities of any one issuer
(which generally is inapplicable because municipal debt obligations are not
voting securities).
LIMITATIONS ON FUTURES CONTRACTS AND OPTIONS. 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.
INVESTMENT POLICIES. The Fund and the Portfolio have adopted certain
fundamental investment restrictions and policies which are enumerated in
detail in the SAI and which may not be changed unless authorized by a
shareholder vote and an investor vote, respectively. Except with respect to
the Portfolio's borrowing limitation, investment restrictions are considered
at the time of acquisition of assets; the sale of portfolio assets generally
is not required in the event of a subsequent change in circumstances. As a
matter of fundamental policy the Portfolio will invest less than 25% of its
total assets in the securities, other than U.S. Government securities, of
issuers in any one industry. However, the Portfolio is permitted to invest 25%
or more of its total assets in (i) the securities of issuers located in any
one country in the Asian Region and (ii) assets denominated in the currency of
any one country.
Except for the fundamental investment restrictions and policies
specifically identified above and those enumerated in the SAI, the investment
objective and policies of the Fund and the Portfolio are not fundamental
policies and accordingly may be changed by the Trustees of the Trust and the
Portfolio without obtaining the approval of the shareholders of the Fund or
the interestholders in the Portfolio, as the case may be. The Portfolio may
lend portfolio securities and engage in repurchase agreements and reverse
repurchase agreements but the investment adviser has no current intention to
do so.
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% 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 (57), 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 (46), 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 (63), Trustee
President and Director, 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 (41), 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 (48), 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 (58), 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 (63), 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 (36), Assistant Secretary
Vice President of Eaton Vance and BMR. Officer of various investment companies
managed by Eaton Vance or BMR.
ERIC G. WOODBURY (41), 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, 1999, 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 fiscal year ended August 31, 1998, received 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) ............... $ 8 $ -- $ 8 $ 8 $ 8 $ 8 $ 8
Portfolio .............. -- 80 80 80 80 80 80
Trust and Fund Complex . -- 20,525 152,500(3) 162,500(4) 152,500 -- 160,000
- ------------
(1) As of July 1, 1999, the Eaton Vance Fund complex consists of 155 registered investment companies or series thereof.
(2) The Trust consisted of 6 Funds as of August 31, 1998.
(3) Includes $52,500 of deferred compensation.
(4) Includes $40,625 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 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. 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
The Portfolio has not paid investment advisory fees to the Adviser as of
the date hereof.
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 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
Neither the Portfolio nor the Fund have paid administration and management
fees to Eaton Vance as of the date hereof.
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, Benjamin A. Rowland, Jr., 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, and Rowland, Alan R. Dynner, Thomas E. Faust, Jr.,
Thomas J. Fetter, Duncan W. Richardson, William M. Steul, 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, 125 Summer Street, Boston,
Massachusetts, 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. First Data Investor Services Group, 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 registered representatives and employees of investment dealers and
bank employees who refer customers to registered representatives of invetment
dealers; to officers and employees of IBT and the transfer agent; to persons
associated with law firms, accounting firms and consulting firms 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 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 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 adopted 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 has also adopted 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 A.
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 A.
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 Class A and Class B 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.
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 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 intends to elect to be treated, and to qualify each
year as a regulated investment company ("RIC") under the Code. Accordingly,
the Fund intends to satisfy certain requirements relating to sources of its
income and diversification of its assets and to distribute substantially all
of its ordinary income and net income 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) 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 at least 98% of its ordinary income for such
year, 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 (i) any available capital loss carryforwards and (ii) 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 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 foreign income
taxes in computing their taxable incomes, or, alternatively, use them as
foreign tax credits, subject to applicable limitations, against their U.S.
income taxes. Shareholders who do not itemize deductions for federal income
tax purposes will not, however, be able to deduct their pro rata portion of
foreign taxes deemed paid by the Fund, although such shareholders will be
required to include their shares of such taxes in gross income. Shareholders
who claim a foreign tax credit for such foreign taxes may be required to treat
a portion of dividends received from the Fund as a separate category of income
for purposes of computing the limitations on the foreign tax credit. Tax-
exempt shareholders will ordinarily not benefit from this election. Each year
that the Fund files the election described above, its shareholders will be
notified of the amount of (i) each shareholder's pro rata share of foreign
income taxes paid by the Portfolio and allocated to the Fund and (ii) the
portion of Fund dividends which represents income from each foreign country.
If the Fund does not make this election, it may deduct its allocated share of
such taxes in computing 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 of net long-term capital gains
with respect to such shares. All or a portion of a loss realized upon a
redemption or other disposition of Fund shares may be disallowed under "wash
sale" rules if other Fund shares are purchased (whether through reinvestment
of dividends or otherwise) within 30 days before or after the disposition. Any
disallowed loss will result in an adjustment to the shareholder's tax basis in
some or all of the other shares acquired.
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.
Non-resident alien individuals, foreign corporations and certain other
foreign entities generally will be subject to a U.S. withholding tax at a rate
of 30% on the Fund's distributions from its ordinary income and the excess of
its net short-term capital gain over its net long-term capital loss, unless
the tax is reduced or eliminated by an applicable tax convention.
Distributions from the excess of the Fund's net long-term capital gain over
its net short-term capital loss received by such shareholders and any gain
from the sale or other disposition of shares of the Fund generally will not be
subject to U.S. federal income taxation, provided that non-resident alien
status has been certified by the shareholder. Different U.S. tax consequences
may arise if: (i) the shareholder is engaged in a trade or business in the
United States; (ii) the shareholder is present in the United States for a
sufficient period of time during a taxable year to be treated as a U.S.
resident, (generally 180 days or more); or (iii) the shareholder fails to
provide any required certifications regarding its status as a non-resident
alien investor. Foreign shareholders should consult their tax advisers
regarding the U.S. and foreign tax consequences of an investment in the Fund.
The foregoing discussion does not address the special tax rules applicable
to certain classes of investors, such as IRAs and other retirement plans, tax-
exempt entities, insurance companies and financial institutions. Shareholders
should consult their own tax advisers with respect to 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 brokerage commissions paid by the Portfolio on portfolio transactions, see
Appendix A.
<PAGE>
<TABLE>
FINANCIAL STATEMENTS (UNAUDITED)
EATON VANCE ASIAN SMALL COMPANIES FUND
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1999
<S> <C>
ASSETS:
Cash ........................................................................... $ 10
--------
Total assets ............................................................... $ 10
--------
Net assets (applicable to 1 share of beneficial interest issued and outstanding) $ 10
========
Net asset value and offering price per share ................................... $ 10
========
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED FEBRUARY 28, 1999
Organization expenses (Note 2) ..................................................... $ 28,500
Reimbursement of expenses by Administrator (Note 2) ................................ (28,500)
--------
Net income (loss) .......................................................... $ --
========
NOTES:
(1) Eaton Vance Growth Trust, a Massachusetts business trust (the Trust), established and
designated the Eaton Vance Asian Small Companies Fund (the Fund) as a separate series on
March 1, 1996. The Fund has been inactive since that date, except for matters relating to
the Fund's establishment, the designation and the registration under the Securities Act of
1933 of the Fund's shares of beneficial interest (Shares) and the sale of one Share
(Initial Share) of the Fund to Eaton Vance Management.
(2) Expenses incurred in connection with the organization of the Fund will be reimbursed by the
Administrator.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
EATON VANCE ASIAN SMALL COMPANIES FUND
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1998
<S> <C>
ASSETS:
Cash ........................................................................... $ 10
--------
Total assets ............................................................... $ 10
--------
Net assets (applicable to 1 share of beneficial interest issued and outstanding) $ 10
========
Net asset value and offering price per share ................................... $ 10
========
STATEMENT OF OPERATIONS
YEAR ENDED AUGUST 31, 1998
Organization expenses (Note 2) ..................................................... $ 28,500
Reimbursement of expenses by Administrator (Note 2) ................................ (28,500)
--------
Net income (loss) .......................................................... $ --
========
------
------
NOTES:
(1) Eaton Vance Growth Trust, a Massachusetts business trust (the Trust), established and
designated the Eaton Vance Asian Small Companies Fund (the Fund) as a separate series on
March 1, 1996. The Fund has been inactive since that date, except for matters relating to
the Fund's establishment, the designation and the registration under the Securities Act of
1933 of the Fund's shares of beneficial interest (Shares) and the sale of one Share
(Initial Share) of the Fund to Eaton Vance Management.
(2) Expenses incurred in connection with the organization of the Fund will be reimbursed by the
Administrator.
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Trustees and Shareholder of Eaton Vance Asian Small Companies Fund:
We have audited the accompanying statement of assets and liabilities of
Eaton Vance Asian Small Companies Fund (one of the series constituting Eaton
Vance Growth Trust) as of August 31, 1998 and the related statement of
operations for the year then ended. These financial statements are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position and results of operations of Eaton Vance
Asian Small Companies Fund as of August 31, 1998, in conformity with generally
accepted accounting principles.
Deloitte & Touche LLP
Boston, Massachusetts
December 11, 1998
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS
ASIAN SMALL COMPANIES PORTFOLIO
FEBRUARY 28, 1999 (UNAUDITED)
<CAPTION>
MARKET
SHARES DESCRIPTION VALUE
------ ----------- -----
<S> <C> <C>
COMMON STOCKS - 97.5%
AUSTRALIA - 0.0%
350,000 Kinetic Power Ltd. * $ - **
-----------
HONG KONG - 35.6%
2,019,000 Cafe De Coral Holdings Ltd. 605,879
300,000 CIM Company Ltd. * - **
986,700 Dairy Farm International Holdings Ltd. 1,055,769
5,046,000 Giordano International Ltd. 1,224,425
1,582,000 Hung Hing Print Group 576,835
706,000 Kerry Properties Ltd. 430,560
778,000 Li & Fung Ltd. 1,405,836
3,462,000 Pacific Ports Co. Ltd. 227,889
3,050,000 United Pacific Industries Ltd. 216,515
156,500 VTech Holdings Ltd. 487,818
-----------
Total 6,231,526
-----------
INDIA - 24.0%
46,000 Agrevo India Ltd. 754,182
16,500 Dr. Reddy's Laboratories Ltd. 219,587
24,600 Infosys Technologies Ltd. 1,560,860
1,166,900 Reliance Petroleum Ltd. * 519,472
14,300 Wipro Ltd. 1,144,871
-----------
Total 4,198,972
-----------
INDONESIA - 2.5%
30,120 Gulf Indonesia Resources Ltd.* 225,900
1,890,000 PT Hero Supermarket* 208,514
-----------
Total 434,414
-----------
JAPAN - 2.1%
35,300 Amway Japan Ltd. 368,497
-----------
KOREA - 5.4%
43,000 Hana Bank 400,653
11,500 Korea Chemical Co. Ltd. 535,758
-----------
Total 936,411
-----------
PAKISTAN - 0.0%
500 Faysal Bank Ltd.* 109
-----------
PHILIPPINES - 2.8%
5,750,000 Pryce Corporation* $ 95,956
5,251,000 JG Summit Holdings Inc.* 404,441
-----------
Total 500,397
-----------
SINGAPORE - 10.1%
670,000 Avimo Group Ltd. 956,753
125,000 Flextech Holdings Ltd. - Loan Stock 58,411
600,000 Flextech Holdings Ltd. 320,427
154,000 Natsteel Electronics Ltd. 429,093
-----------
Total 1,764,684
-----------
THAILAND - 15.0%
870,000 Golden Land Property Development Co. Ltd.* 209,807
725,000 Golden Land Property Development Co. Ltd. - Foreign* 223,405
236,300 Pizza Co. Ltd. 601,513
96,700 Thai President Foods Co. Ltd. - Foreign 326,479
693,000 Thai Reinsurance Co. Ltd. 1,262,700
-----------
Total 2,623,904
-----------
Total Common Stocks (Cost $16,884,091) 17,058,914
-----------
WARRANTS - 2.1%
PHILIPPINES - 1.8%
670,000 Jollibee Food Corp. (Exp. 03/24/03)* 313,928
SINGAPORE - 0.3%
167,940 Flextech Holdings Ltd. (Exp. 10/22/02)* 49,230
-----------
Total Warrants (Cost $325,400) 363,158
===========
Total Investments - 99.6% (Cost $17,209,491) 17,422,072
Other assets in excess of liabilities - 0.4% 78,688
-----------
Total Net Assets - 100.0% $17,500,760
===========
* Non-income producing security.
** Fair valued by Manager.
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
ASIAN SMALL COMPANIES PORTFOLIO
FEBRUARY 28, 1999 (UNAUDITED)
ASSETS:
Investments, at value (cost $17,209,491) $17,422,072
Cash 100,217
Foreign cash 3,883
Receivable for investments sold 286
Dividends receivable 17,321
Tax reclaim receivable 743
-----------
Total assets 17,544,522
-----------
LIABILITIES:
Payable to bank 33,000
Interest payable on loans 1,205
Accrued custody fee 6,201
Accrued foreign capital gains tax 3,356
-----------
Total liabilities 43,762
-----------
Net assets $17,500,760
===========
NET ASSETS:
Applicable to Investors' Beneficial Interests $17,500,760
===========
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
STATEMENT OF OPERATIONS
ASIAN SMALL COMPANIES PORTFOLIO
FOR THE SIX MONTHS ENDED FEBRUARY 28, 1999 (UNAUDITED)
<S> <C>
INVESTMENT INCOME:
Dividend income $ 163,834
Less: Foreign withholding taxes (4,386)
-----------
Total income 159,448
-----------
EXPENSES:
Custody expense 11,850
Interest expense 9,260
-----------
Total expenses 21,110
-----------
Net investment income 138,338
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:
Net realized loss on:
Investments (809,191)
Foreign currency transactions (95,710)
Net change in unrealized appreciation/(depreciation) on:
Investments 5,459,874
Foreign currency translations 128
-----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND FOREIGN CURRENCY 4,555,101
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 4,693,439
===========
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
ASIAN SMALL COMPANIES PORTFOLIO
<CAPTION>
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
FEBRUARY 28, 1999 AUGUST 31, 1998
----------------- ---------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
OPERATIONS-
Net investment income $ 138,338 $ 118,739
Net realized loss on investments and foreign currency transactions (904,901) (5,543,436)
Net change in unrealized appreciation/(depreciation) on investments
and foreign currency translations 5,460,002 (4,479,635)
----------- -----------
Net increase (decrease) in net assets resulting from operations 4,693,439 (9,904,332)
----------- -----------
CAPITAL TRANSACTIONS:
Proceeds from contributions -- 16,801,362
Withdrawals (2,400,000) --
----------- -----------
Net increase (decrease) in net assets from capital transactions (2,400,000) 16,801,362
----------- -----------
Total increase in net assets 2,293,439 6,897,030
NET ASSETS:
Beginning of period 15,207,321 8,310,291
----------- -----------
End of period $17,500,760 $15,207,321
=========== ===========
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<TABLE>
SUPPLEMENTARY DATA (UNAUDITED)
ASIAN SMALL COMPANIES PORTFOLIO
<CAPTION>
FOR THE SIX FOR THE FOR THE
MONTHS ENDED YEAR ENDED YEAR ENDED
FEBRUARY 28, 1999 AUGUST 31, 1998 AUGUST 31, 1997
----------------- --------------- ---------------
<S> <C> <C> <C>
Ratios and Supplemental Data:
Net assets, end of period (000's) $ 17,501 $ 15,207 $ 8,310
Portfolio Turnover 234.61% 100.53% 73.68%
Ratios to average net assets
Expenses 0.14% 0.50% 0.44%
Net investment income 1.68% 1.34% 0.97%
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
Asian Small Companies Portfolio
Notes to Financial Statements
February 28, 1999 (unaudited)
1. Significant Accounting Policies
Asian Small Companies Portfolio (the Portfolio) is registered under the
Investment Company Act of 1940 as a diversified, open-end management investment
company which was organized as a trust under the laws of the State of New York
on January 19,1996. The Declaration of Trust permits the Trustees to issue
interests in the Portfolio. The following is a summary of significant accounting
policies of the Portfolio. The policies are in conformity with accounting
principles generally accepted in the United States.
A. Investment Valuation
Marketable securities, including options, that are listed on foreign or U.S.
securities exchanges or in the NASDAQ National Market System are valued at
closing sale prices, on the exchange where such securities are principally
traded. Futures positions on securities or currencies are generally valued at
closing settlement prices. Unlisted or listed securities for which closing sales
prices are not available are valued at the mean between the latest bid and asked
prices. Short term debt securities with a remaining maturity of 60 days or less
are valued at amortized cost which approximates value. Other fixed income and
debt securities, including listed securities and securities for which price
quotations are available, will normally be valued on the basis of valuations
furnished by a pricing service. Investments for which valuations or market
quotations are unavailable are valued at fair value using methods determined in
good faith by or at the direction of the Trustees.
B. Income
Dividend income is recorded on the ex-dividend date. However, if the ex-dividend
date has passed, certain dividends from securities are recorded as the Portfolio
is informed of the ex-dividend date. Interest income is recorded on the accrual
basis.
C. Federal Taxes
The Portfolio has elected to be treated as a partnership for United States
Federal tax purposes. No provision is made by the Portfolio for federal or state
taxes on any taxable income of the Portfolio because each investor in the
Portfolio is individually responsible for the payment of any taxes on its share
of such income. Since some of the Portfolio's investors are regulated investment
companies that invest all or substantially all of their assets in the Portfolio,
the Portfolio normally must satisfy the applicable source of income and
diversification requirements (under the Internal Revenue Code) in order for its
investors to satisfy them. The Portfolio will allocate, at least annually among
its investors, each investor's distributive share of the Portfolio's net
investment income, net realized capital gains, and any other items of income,
gain, loss, deduction or credit. Withholding taxes on foreign dividends and
capital gains have been provided for in accordance with the Portfolio's
understanding of the applicable countries' tax rules and rates.
D. Futures Contracts
Upon the entering of a financial futures contract, the Portfolio is required to
deposit (initial margin) either cash or securities in an amount equal to a
certain percentage of the purchase price indicated in the financial futures
contract. Subsequent payments are made or received by the Portfolio (margin
maintenance) each day, dependent on the daily fluctuations in the value of the
underlying security, and are recorded for book purposes as unrealized gains or
losses by the Portfolio. The Portfolio's investment in financial futures
contracts is designed only to hedge against anticipated future changes in
interest or currency exchange rates. Should interest or currency exchange rates
move unexpectedly, the Portfolio may not achieve the anticipated benefits of the
financial futures contracts and may realize a loss. If the Portfolio enters into
a closing transaction, the Portfolio will realize, for book purposes, a gain or
loss equal to the difference between the value of the financial futures contract
to sell and financial futures contract to buy.
E. Foreign Currency Translation
Investment valuations, other assets, and liabilities initially expressed in
foreign currencies are converted each business day into U.S. dollars based upon
current exchange rates. Purchases and sales of foreign investment securities and
income and expenses are converted into U.S. dollars based upon currency exchange
rates prevailing on the respective dates of such transactions. Recognized gains
or losses on investment transactions attributable to foreign currency rates are
recorded for financial statement purposes as net realized gains and losses on
investments. That portion of unrealized gains and losses on investments that
result from fluctuations in foreign currency exchange rates are not separately
disclosed.
F. Forward Foreign Currency Exchange Contracts
The Portfolio may enter into forward foreign currency exchange contracts for the
purchase or sale of a specific foreign currency at a fixed price on a future
date. Risk may arise upon entering these contracts from the potential inability
of counterparties to meet the terms of their contracts and from movements in the
value of a foreign currency relative to the U.S. dollar. The Portfolio will
enter into forward contracts for hedging purposes as well as non-hedging
purposes. The forward foreign currency exchange contracts are adjusted by the
daily exchange rate of the underlying currency and any gains or losses are
recorded for financial statement purposes as unrealized until such time as the
contracts have been closed or offset.
G. Other
Investment transactions are accounted for on a trade date basis.
H. Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of income and expense during the
reporting period. Actual results could differ from those estimates.
2. Investment Transactions
Purchases and sales of investments, other than short-term obligations,
aggregated $7,889,154 and $6,732,318 respectively.
3. Federal Income Tax Basis of Investments
The cost and unrealized appreciation (depreciation) in value of the investments
owned at February 28, 1999, as computed on a federal income tax basis, are as
follows:
Aggregate Cost $17,209,491
Gross Unrealized Appreciation 3,023,195
Gross Unrealized Depreciation (2,810,614)
Net Unrealized $ 212,581
4. Line of Credit
The Portfolio participates with other portfolios and funds managed by EVM and
its affiliates in a $130 million unsecured line of credit agreement with a group
of banks. The Portfolio may temporarily borrow from the line of credit to
satisfy redemption requests or settle investment transactions. Interest is
charged to each portfolio or fund based on its borrowings at an amount above the
Eurodollar rate or Federal Funds rate. In addition, a fee computed at an annual
rate of 0.10% on the daily unused portion of the line of credit is allocated
among the participating portfolios and funds at the end of each quarter. The
Portfolio did not have any significant borrowings or allocated fees during the
period.
5. Risk Associated with Foreign Investments
Investing in securities issued by companies whose principal business activities
are outside the United States may involve significant risks not present in
domestic investments. For example, there is generally less publicly available
information about foreign companies, particularly those not subject to the
disclosure and reporting requirements of the U.S. securities laws. 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. Investment in foreign securities also involves 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. 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 general, there is less
overall governmental supervision and regulation of foreign securities markets,
broker-dealers, and issuers than in the United States.
6. Financial Instruments
The Portfolio regularly trades in financial instruments with off-balance sheet
risk in the normal course of its investing activities to assist in managing
exposure to various market risks. These financial instruments include forward
foreign currency exchange contracts and futures contracts and may involve, to a
varying degree, elements of risk in excess of the amounts recognized for
financial statement purposes. The notional or contractual amounts of these
instruments represent the investment the Portfolio has in particular classes of
financial instruments and does not necessarily represent the amounts potentially
subject to risk. The measurement of the risks associated with these instruments
is meaningful only when all related and offsetting transactions are considered.
At February 28, 1999, there were no outstanding obligations under these
financial instruments.
<PAGE>
APPENDIX A
CLASS A AND CLASS B FEES AND OWNERSHIP
ADVISER
No fees paid to date.
MANAGER AND ADMINISTRATOR
No fees paid to date.
DISTRIBUTION PLANS
The Fund has not paid any distribution fees to the Principal Underwriter
to date. The Fund expects to begin accruing for its service fee payments one
year after the commencement of operations.
PRINCIPAL UNDERWRITER
No fees paid to date.
BROKERAGE
No fees to date.
CLASS A AND CLASS B PERFORMANCE INFORMATION
The tables below indicate the cumulative and average annual total return
on a hypothetical investment of $1,000. Total return reflects the total return
of the predecessor to the Fund and has not been adjusted to reflect sales
charges and other expenses (such as distribution and/or service fees of the
Fund's classes). If such adjustments were made, total return would be
different. The "Value of Initial Investment" for Class A shares reflects the
deduction of the maximum sales charge of 5.75%. Past performance is not
indicative of future results. Investment return and principal value will
fluctuate; shares, when redeemed, may be worth more or less than their
original cost.
<TABLE>
CLASS A -- VALUE OF A $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 2/28/99 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ----------------- ---------- ---------- ----------- ------------- ------------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of Fund 06/30/92 $952.38 $1,939.39 103.64% 11.25% 93.94% 10.44%
5 Years Ended 02/28/99 02/28/94 $952.36 $ 929.42 -2.41% -0.49% -7.06% -1.45%
1 Year Ended 02/28/99 02/28/98 $925.44 $ 923.94 -2.99% -2.99% -7.61% -7.61%
</TABLE>
<TABLE>
CLASS B -- VALUE OF A $1,000 INVESTMENT
<CAPTION>
VALUE OF VALUE OF TOTAL RETURN TOTAL RETURN
VALUE OF INVESTMENT INVESTMENT BEFORE DEDUCTING CDSC AFTER DEDUCTING CDSC
INVESTMENT INVESTMENT INITIAL BEFORE CDSC AFTER CDSC ------------------------ ------------------------
PERIOD DATE INVESTMENT ON 2/28/99 ON 02/28/99 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ----------------- ---------- ---------- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of Fund 06/30/92 $1,000.00 $2,036.36 $2,036.36 103.64% 11.25% 103.64% 11.25%
5 Years Ended
02/28/99 02/28/94 $1,000.00 $ 975.91 $ 956.39 -2.41% -0.49% -4.36% -0.89%
1 Year Ended
02/28/99 02/28/98 $1.000.00 $ 970.08 $ 921.58 -2.99% -2.99% -7.84% -7.84%
</TABLE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of June 1, 1999, Eaton Vance owned one share of the Fund, being the
only shares of the Fund outstanding on such date. Eaton Vance is a
Massachusetts business trust and a wholly-owned subsidiary of EVC.
<PAGE>
APPENDIX B
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 2,773,000 square
miles -- almost the same as that of the United States, excluding Alaska. In
June 1992. Australia's population was estimated to be 17 million people.
The Commonwealth of Australia was formed as a federal union in 1901, when
six British colonies of New South Wales, Victoria, Queensland, South Australia
and Tasmania were united as states in a "Federal Commonwealth" under the
authority of the Commonwealth of Australia Constitution Act enacted by the
British Parliament.
Prior to World War II, the Australian economy was highly dependent on the
rural sector. The 1950s and 1960 saw strong growth in the economy and
diversification through developments in the mining sector. There have been
some significant structural changes in the past 20 years, with the tertiary
and mining sectors growing strongly. The rural sector now accounts for
approximately 4% of Gross Domestic Product ("GDP"), 6% of employment and 23%
of exports by value. The mining sector accounts for approximately 8% of GDP
and 1% of employment. Exports of mining commodities (including basic metal
products) account for approximately 42% of exports by value. The tertiary
sector accounts for approximately 71% of GDP, approximately 78% of employment
and around 20% of exports by value.
As of November, 1998, the total market capitalization of Australian listed
equities was U.S. $267 billion, which ranks behind Japan, Hong Kong and Taiwan
in Asia.
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 reform eventually led to political domination by the
army. In the 1970's, the Chinese government, which had remained isolated from
the world, opened its doors by encouraging foreign investment and expertise
inside its borders.
In 1989, a growing dissatisfaction with the Communist government led to
anti-government student protests culminating in what is known as the Tiananmen
Square incident. The government's use of the military to suppress a peaceful
demonstration resulted in world-wide criticism. 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.
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
soft landing of economy in 1996 has paved a better way for future economic
developments.
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 1997, China's foreign trade
yielded a surplus of U.S. $40.34 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 1997 was estimated at U.S. $150 billion while foreign
exchange reserve was at U.S. $143 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 4 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 1998 was at $3
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 1996, imports from China amounted to $73.8 billion, exports and
re-exports to $62.0 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 about 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
property, manufacturing and infrastructure 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
pver 75 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 1996 contributed over
80% 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, 1998 of
approximately U.S. $365 billion is now the second largest stock market in
Asia, measured by market capitalization, behind only that of Japan. As of that
date, 675 companies and 1,244 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. The official language is Hindi, 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 5,700 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. Such trading in selected securities has begun, but the
process is not yet well-defined.
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 recently
concluded mid term elections of 1998 to the Indian parliament has resulted in
a fragmented verdict with no single party able to muster the required
majority. The right wing Bharatiya Janata Party (BJP) has formed a coalition
government with the support of a number of small, regional parties. Mr. Atai
Bihari Vaypayee is the new Prime Minister and Mr. Yashwant Sinha the new
Finance Minister. It is unclear to what extent the new government will endorse
these policies.
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 $27 billion in December, 1998. 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. However, currency crisis and shortage of basic necessities in 1998
finally caused riots and forced Suharto to step down. The new ruler, Habibi,
has so far not been able to bring peace to the country. Riots and racial
problems are still prime concerns in Indonesia. The development of these will
be critical to the future of Indonesia.
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, 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. A continuation or
recurrence of a Japanese stock market decline could have an adverse impact
throughout Japan's economy.
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.
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.
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, along with Singapore, experienced a sharp
recession in 1985-6 owing to an excessive tight monetary policy in both
countries. Since 1987 Malaysia has, however, returned to the path of high
growth and low inflation. 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 has led to the imposition of capital controls since September 1998.
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.
Pakistan has a federal parliamentary system in which its provinces enjoy
considerable autonomy. The head of state is the President, who has certain
important executive powers but is generally required by the Constitution to
act on the advice of the Prime Minister. The President is elected for a period
of five years by the members of the National Assembly, the Senate and the four
provincial assemblies. The Prime Minister may remain in office as long as he
or she has the support of the National Assembly but not beyond the five-year
term of Parliament. The Prime Minister is currently Mr. Mohammad Nawaz Sharif,
of the Pakistan Muslim League.
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 has a very high rate of
literacy and the work ethic cannot be doubted by anyone who has employed
Filipino domestic workers overseas. Their earnings are an important source of
remittance back to the Philippines each year. The Filipino population in the
United States is now the largest Asian ethnic group in that country
approaching 2 million, mainly in California. Both natural resources, and an
intelligent, hardworking population favour the country. Unfortunately, the
political system has never been able to maintain the long-term stability for
its promise to be fulfilled.
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 1985-6 recession, and even more impressive has been
the tight control of inflation which, along with that of Japan, has remained
extremely low at below 3 percent for the past decade. 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 excess of US $70 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 nearly 25% of the 17 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 1997, however, hostility with the
Tamil Tigers was continuing.
The Sri Lankan government recently has reviewed and revised laws,
regulations and procedures to promote a competitive business environment,
remove distortions, and reduce unnecessary government regulation. The
government has liberalized trade and encourages private ownership, including
foreign investment. Laws pertaining to tax, labor standards, customs and
environmental norms have been designed to attract more investment. There are
now few exchange controls, a fairly stable currency, and many incentives for
private investors. With guidance from the World Bank, IMF and U.S. advisers,
government enterprises are being privatized, financial services liberalized,
manufacturing for exports encouraged, a stock exchange formed, and foreign
investment actively sought. About eighty percent of the land in Sri Lanka is
still owned by the government, including most tea, rubber and coconut
plantations. The government did privatize the management of these estates
recently, however.
Sri Lanka's economy is primarily agricultural, but the manufacturing and
service sectors have grown greatly in the past decade, partly in response to
the Sri Lankan government's efforts to diversify and liberalize its economy.
In 1991 gross foreign exchange earnings from apparel exports exceeded earnings
from the entire agricultural sector (tea, rubber and coconut) for the first
time.
The financial system is reasonably sophisticated, and basic legislation
for private corporations is in place. Commercial banks are the principal
source of finance. However, the increase in net government borrowing (because
of budget deficits) has reduced credit to the private sector. Inflation, which
was about 21% in 1990, has come down to approximately 10-11%, but remains a
concern.
Sri Lanka is actively working to improve its basic infrastructure. A $500
million expansion of the telecommunications network has begun. The Colombo
container port -- the 25th busiest in the world -- is expected to increase its
capacity soon, and new dry dock services are under construction.
The economic statement announced by the new government in January 1995
attempts a careful balance between the compulsions for welfare measures and
the need for attracting fresh investments. The privatization program is
scheduled to continue with the private sector given a major role in
infrastructure development. The new government has also presented its maiden
budget in February 1995 in which it has tried to do a delicate balancing act
between an extensive array of consumer subsidies on wheat, diesel and
fertilizers with a steep cut in import tariffs on consumer goods. Defense
spending increased to 14% of total government expenditures in 1996.
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 may
approach US $5 billion or even US $10 billion. 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 $80 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 purely Chinese culture and way of life which affects the
legal and commercial systems. Legal contracts or agreements may not be
enforceable. Even more than in China, Taiwan depends 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 $2,500 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 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.
<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 herewith.
(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.
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<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) 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.
(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) Consent of Independent Auditors for Eaton Vance Asian Small
Companies 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.
(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.
C-2
<PAGE>
(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.
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.
C-3
<PAGE>
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:
Eaton Vance Advisers Senior Floating-Rate Fund
Eaton Vance Growth Trust
Eaton Vance Income Fund of Boston
Eaton Vance Institutional Senior Floating-Rate Fund
Eaton Vance Investment Trust
Eaton Vance Municipals Trust
Eaton Vance Municipals Trust II
Eaton Vance Mutual Funds Trust
Eaton Vance Prime Rate Reserves
Eaton Vance Special Investment Trust
EV Classic Senior Floating-Rate Fund
(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
Mark P. Doman 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
Thomas P. Luka Vice President None
John Macejka Vice President None
Stephen Marks 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
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
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
George V.F. Schwab, Jr. 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
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<PAGE>
Jerry Vainisi Vice President None
Chris Volf 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, First
Data Investor Services Group, 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 the
investment adviser(s). 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
Not applicable
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 June 28, 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 the capacities indicated on June 28, 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, III
Norton H. Reamer* Trustee
- -----------------------------
Norton H. Reamer
Lynn A. Stout* Trustee
- -----------------------------
Lynn A. Stout
John L. Thorndike* Trustee
- -----------------------------
John L. Thorndike
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 June
28, 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 the capacities and on the dates indicated.
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, III
Norton H. Reamer* Trustee
- -----------------------------
Norton H. Reamer
John L. Thorndike* Trustee
- -----------------------------
John L. Thorndike
Jack L. Treynor* Trustee
- -----------------------------
Jack L. Treynor
*By: /s/ Alan R. Dynner
------------------------
Alan R. Dynner (As attorney-in-fact)
C-7
<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) Consent of Independent Auditors for Eaton Vance Asian Small
Companies Fund.
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<PAGE>
EXHIBIT (i)(2)
CONSENT OF COUNSEL
I consent to the incorporation by reference in this Post-Effective
Amendment No. 73 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.
June 28, 1999
Boston, Massachusetts
<PAGE>
EXHIBIT (j)
INDEPENDENT AUDITORS' CONSENT
We consent to the use in the Statement of Additional Information in this
Post-Effective Amendment No. 73 to the Registration Statement of Eaton Vance
Growth Trust (1933 Act File No. 2-22019) of our report dated December 11, 1998,
on the financial statements of Eaton Vance Asian Small Companies Fund for the
year ended August 31, 1998.
We also consent to the reference to our Firm under the heading "Other
Service Providers" in the Statement of Additional Information.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
June 28, 1999
Boston, Massachusetts
