<PAGE>
As filed with the Securities and Exchange
Commission on December 21, 2000
1933 Act File No. 2-22019
1940 Act File No. 811-1241
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 75 [x]
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 48 [x]
EATON VANCE GROWTH TRUST
------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
THE EATON VANCE BUILDING, 255 STATE STREET, BOSTON, MASSACHUSETTS 02109
------------------------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(617) 482-8260
--------------
(REGISTRANT'S TELEPHONE NUMBER)
ALAN R. DYNNER
THE EATON VANCE BUILDING, 255 STATE STREET, BOSTON, MASSACHUSETTS 02109
-----------------------------------------------------------------------
(NAME AND ADDRESS OF AGENT FOR SERVICE)
It is proposed that this filing will become effective pursuant to Rule 485
(check appropriate box):
o immediately upon filing pursuant to o on (DATE) pursuant to paragraph (a)(1)
paragraph (b)
x on JANUARY 1, 2001 pursuant to o 75 days after filing pursuant to
paragraph (b) paragraph (a)(2)
o 60 days after filing pursuant to o on (date) pursuant to paragraph (a)(2)
paragraph (a)(1)
If appropriate, check the following box:
o this post effective amendment designates a new effective date for a previously
filed post-effective amendment.
Asian Small Companies Portfolio, Greater China Growth Portfolio, Growth
Portfolio, Information Age Portfolio and Worldwide Health Sciences Portfolio
have also executed this Registration Statement.
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--------------------------------------------------------------------------------
<PAGE>
{LOGO} Investing
EATON VANCE for the
Mutual Funds 21st
Century(R)
Eaton Vance Asian Small
Companies Fund
A diversified fund investing in smaller companies based in Asia
Prospectus Dated
January 1, 2001
The Securities and Exchange Commission has not approved or disapproved these
securities or determined whether this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
Information in this prospectus
Page Page
--------------------------------------------------------------------------------
Fund Summary 2 Sales Charges 6
Investment Objective & Principal Redeeming Shares 8
Policies and Risks 4 Shareholder Account
Management and Organization 5 Features 9
Valuing Shares 6 Tax Information 10
Purchasing Shares 6 Financial Highlights 11
--------------------------------------------------------------------------------
This prospectus contains important information about the Fund and the services
available to shareholders. Please save it for reference.
<PAGE>
FUND SUMMARY
Investment Objective and Principal Strategies. The Fund's investment objective
is to seek capital growth. The Fund invests in equity securities of smaller
companies located or traded in Asia. The Fund normally will be invested in the
securities markets of countries in the Asian region, including Australia, China,
Hong Kong, India, Indonesia, Japan, Malaysia, Pakistan, the Philippines,
Singapore, South Korea, Sri Lanka, Taiwan and Thailand. It is anticipated that
investments in Hong Kong will represent more than 25% of total assets. The Fund
may attempt to hedge foreign currency fluctuations by entering forward currency
exchange contracts and options.
The Fund invests primarily in common stocks of Asian small companies. The
investment adviser will consider companies that it believes have all or most of
the following characteristics: sound and well-established management; producers
of goods or services for which a clear, continuing and long-term demand can be
identified within the context of national, regional and global development; a
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 pursues its investment objective by investing its assets in a separate
registered investment company with the same objective and policies as the Fund.
Principal Risk Factors. Securities markets in the Asian region are substantially
smaller, less liquid and more volatile than the major securities markets in the
United States. The value of Fund shares will be affected by political, economic,
fiscal, regulatory or other developments in the Asian region or neighboring
regions, as well as currency exchange rates. The extent of economic development,
political stability and market depth of different countries in the Asian region
varies widely. Certain Asian region countries, including China, Indonesia,
Malaysia, the Philippines and Thailand, are either comparatively underdeveloped
or in the process of becoming developed. Asian investments typically involve
greater potential for gain or loss than investments in securities of issuers in
developed countries. In comparison to the United States and other developed
countries, developing countries may have relatively unstable governments and
economies based on only a few industries. The Fund will likely be particularly
sensitive to changes in the economies of such countries as the result of any
reversals of economic liberalization, political unrest or changes in trading
status. In addition to these risks, the securities of smaller companies are
generally subject to greater price fluctuation and investment risk than
securities of more established companies.
The value of Fund shares also is sensitive to stock market volatility. If there
is a decline in the value of exchange-listed stocks, the value of Fund shares
will also likely decline. Changes in stock market values can be sudden and
unpredictable. Also, although stock values can rebound, there is no assurance
that values will return to previous levels. The Fund has held fewer than 75
stocks; therefore, the Fund's value may be more sensitive to developments
affecting particular stocks than would be a more broadly diversified fund.
Foreign currency exchange contracts and options involve a risk of loss due to
unanticipated changes in exchange rates, as well as the risk of counterparty
default.
The Fund is not a complete investment program and you may lose money by
investing in the Fund. An investment in the Fund is not a deposit in a bank and
is not insured or guaranteed by the Federal Deposit Insurance Corporation or any
other government agency. Shareholders may realize substantial losses and should
invest for the long-term.
2
<PAGE>
Performance Information. The following bar chart and table provide information
about the Fund's performance, including a comparison of the Fund's performance
to the performance of an index of common stocks traded in developed and emerging
markets of the Asia Pacific region. Although past performance is no guarantee of
future results, this performance information demonstrates that the value of your
investment will change from year-to-year. The following returns are for Class A
shares for each calendar year through December 31, 1999 and do not reflect a
sales charge. If the sales charge was reflected, the returns would be lower. The
performance for the period prior to March 1, 1999 (when the Fund commenced
operations) is that of the predecessor to Asian Small Companies Portfolio
(without adjusting for Class A expenses).
95.53% -12.24% -4.05% 10.92% -6.51% 4.20% 146.13%
--------------------------------------------------------------------------------
1993 1994 1995 1996 1997 1998 1999
The highest quarterly total return for the Predecessor Fund was 45.03% for the
quarter ended December 31, 1993, and the lowest quarterly return was -28.73% for
the quarter ended December 31, 1997. The Fund's year-to-date total return
through the end of the most recent calendar quarter (December 31, 1999 to
September 30, 2000) was -16.43%.
Average Annual Total Return One Five Life of
as of December 31, 1999 Year Years Fund
--------------------------------------------------------------------------------
Class A Shares 163.60% 22.26% 24.20%
Class B Shares 151.51% 21.42% 23.75%
Morgan Stanley Capital International
All Country Asia Pacific Index 57.86% 0.72% 7.06%
The Predecessor Fund's returns have been adjusted to reflect the maximum sales
charge for Class A shares of the Fund (5.75%). Life of Fund returns are
calculated from June 30, 1992. The Morgan Stanley Capital International All
Country (MSCI AC) Asia Pacific Index is a broad-based index of common stocks
traded in developed and emerging markets of the Asia Pacific region. Investors
cannot invest directly in an Index. (Source for the MSCI AC Index returns:
Lipper Inc.) The total return achieved in 1999 is unlikely to be repeated.
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
--------------------------------------------------------------------------------
Maximum Sales Charge (Load)
(as a percentage of offering price) 5.75% None
Maximum Deferred Sales Charge (Load)
(as a percentage of the lower of net
asset value at time of purchase or
time of redemption) None 5.00%
Maximum Sales Charge (Load) Imposed
on Reinvested Distributions None None
Exchange Fee None None
Redemption Fee (as a percentage
of amount redeemed)* 1.00% None
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets) Class A Class B
--------------------------------------------------------------------------------
Management Fees 0.75% 0.75%
Distribution and Service (12b-1) Fees 0.50% 1.00%
Other Expenses 5.42% 3.06%
------- -------
Total Annual Fund Operating Expenses 6.67% 4.81%
Expense Reimbursement*** (3.97%) (2.04%)
------- -------
Total Annual Fund Operating Expenses
(net reimbursement) 2.70% 2.77%
* For shares redeemed within three months of the settlement of the purchase.
** For the current fiscal year, Eaton Vance will reimburse the Fund pursuant
to a contractual reimbursement to the extent Other Expenses exceeds 1.25%
of average daily net assets.
<PAGE>
Example. This Example is intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The Example also assumes
that your investment has a 5% return each year and that the operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
1 Year 3 Years 5 Years 10 Years
--------------------------------------------------------------------------------
Class A shares $832* $ 1,365 $1,923 $3,432
Class B shares $780 $ 1,259 $1,664 $3,099
You would pay the following expenses if you did not redeem your shares:
1 Year 3 Years 5 Years 10 Years
--------------------------------------------------------------------------------
Class A shares $832* $ 1,365 $1,923 $3,432
Class B shares $832 $ 859 $1,464 $3,099
* Due to the redemption fee, the cost of investing for one year would be $100
higher for shares redeemed or exchanged within three months of the
settlement of the purchase.
3
<PAGE>
INVESTMENT OBJECTIVE & PRINCIPAL POLICIES AND RISKS
The Fund's investment objective is to seek capital growth. The Fund currently
seeks to meet its investment objective by investing in Asian Small Companies
Portfolio (the "Portfolio"), a separate registered investment company which has
the same objective and policies as the Fund. The Fund's investment objective and
certain policies may be changed without shareholder approval. The Trustees of
the Trust have no present intention to make such change and intend to submit any
proposed material change in investment objective to shareholders in advance for
their approval.
Under normal market conditions, the Portfolio invests at least 65% of its total
assets in equity securities of Asian small companies. Asian small companies (a)
have a market capitalization equivalent to less than $600 million and (b) are
located in or have securities which are principally traded in an Asian region
country. The Fund may invest 25% or more of its total assets in securities of
issuers located in any one country, and may retain securities of a company with
market capitalization that grows over the $600 million level. While there is no
minimum or maximum limitation on assets that may be invested in a single
country, it is anticipated that investments in Hong Kong will represent more
than 25% of total assets. As an alternative to investing directly in Asian small
companies, the Portfolio may invest in depositary receipts and similar
investments.
Securities of smaller, less seasoned companies, which may include legally
restricted securities, are generally subject to greater price fluctuations,
limited liquidity, higher transaction costs and higher investment risk. Smaller
companies may have limited product lines, markets or financial resources, and
they may be dependent on a limited management group. There is generally less
publicly available information about such companies than larger, more
established companies. The Portfolio may make direct investments in companies in
private placement transactions. Because of the absence of any public trading
market for some of these investments it may take longer to liquidate these
positions at fair value than would be the case for publicly traded securities.
The values of foreign investments are affected by changes in currency rates or
exchange control regulations, application of foreign tax laws (including
withholding tax), changes in governmental administration or economic or monetary
policy (in this country or abroad) or changed circumstances in dealings between
nations. Exchange rates may fluctuate significantly over short periods of time
causing the Portfolio's net asset value to fluctuate as well. Costs are incurred
in connection with conversions between various currencies. In addition, foreign
brokerage commissions, custody fees and other costs of investing in foreign
securities are generally higher than in the United States, and foreign
securities markets may be less liquid, more volatile and less subject to
governmental supervision than in the United States. Investments in foreign
issuers could be affected by other factors not present in the United States,
including expropriation, armed conflict, confiscatory taxation, restrictions or
transfers of assets, lack of uniform accounting and auditing standards, less
publicly available financial and other information and potential difficulties in
enforcing contractual obligations.
More than 25% of the Portfolio's total assets may be denominated in any single
currency. At times, the portfolio manager may (but is not obligated to) use
forward currency exchange contracts and options to attempt to mitigate adverse
effects of foreign currency fluctuations. These contracts allow the Portfolio to
establish a currency exchange rate with payment and delivery at a future date.
They are subject to a risk of loss due to unanticipated changes in currency
exchange rates and default by the counterparty to the contract. There can be no
assurance that this hedging strategy will be advantageous to the Portfolio.
Economies of countries in the Asian region differ from the U.S. economy in
various ways such as rate of growth of gross national product, rate of
inflation, capital reinvestment, resource self-sufficiency and balance of
payments position. As export-driven economies, the economies of countries in the
Asian region are affected by developments in the economies of their principal
trading partners. 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. 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.
4
<PAGE>
Settlement of securities transactions in many Asian countries are subject to
risk of loss, may be delayed and are generally less frequent than in the United
States, which could affect the liquidity of the Portfolio's assets. In addition,
disruptions due to work stoppages and trading improprieties in these securities
markets have caused such markets to close. If extended closings were to occur in
stock markets where the Portfolio was heavily invested, the Fund's ability to
redeem Fund shares could become correspondingly impaired. To mitigate these
risks, the Portfolio may maintain a higher cash position than it otherwise
would, thereby possibly diluting its return, or the Portfolio may have to sell
more liquid securities which it would not otherwise choose to sell. The Fund may
suspend redemption privileges or postpone the date of payment for more than
seven days after a redemption order is received under certain circumstances.
The Portfolio may borrow amounts up to 25% of its net assets, but it will not
borrow more than 5% of the value of its total assets except to satisfy
redemption requests or for other temporary purposes. Such borrowings would
result in increased expense to the Fund and, while they are outstanding, would
magnify increases or decreases in the value of Fund shares. The Portfolio will
not purchase additional portfolio securities while outstanding borrowings exceed
5% of the value of its total assets. For temporary investment purposes (such as
during abnormal market or economic conditions), the Portfolio may invest some or
all of its total assets in cash or cash equivalents, which may be inconsistent
with the fund's investment objective. While temporarily invested, the Portfolio
may not achieve its investment objective. While at times the Portfolio may use
alternative investment strategies in an effort to limit losses, it may choose
not to do so.
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 the investments of the
Portfolio. Lloyd George receives a monthly advisory fee of 0.0625% (equivalent
to 0.75% annually) of the Portfolio's average daily net assets up to $500
million. This fee declines at intervals above $500 million. For the fiscal year
ended August 31, 2000, the Portfolio paid advisory fees of 0.75% of its average
daily net assets.
Zaheer Sitabkhan is the portfolio manager of the Portfolio (since August 31,
1999). Mr. Sitabkhan joined Lloyd George in March 1995 and currently serves as a
Director. Prior to 1995 he was Director of Business Development at Quality
Sciences Inc., a Cleveland-based software company.
Lloyd George and its affiliates act as investment adviser to various individual
and institutional clients and manage $2.0 billion in assets. Eaton Vance's
corporate parent owns 20% of Lloyd George's corporate parent. Lloyd George, its
affiliates and two of the Portfolio's Trustees are domiciled outside of the
United States. Because of this, it would be difficult for the Portfolio to bring
a claim or enforce a judgment against them.
Eaton Vance manages the business affairs of the Fund and administers the
business affairs of the Portfolio. For these services, Eaton Vance receives a
monthly fee from each of the Fund and Portfolio of 1/48 of 1% (equal to 0.25%
annually) of average daily net assets up to $500 million. This fee declines at
intervals above $500 million. For the fiscal year ended August 31, 2000, absent
a full fee waiver, Eaton Vance would have earned management fees of 0.25% of the
Fund's average daily net assets. For the same period, Eaton Vance earned
administration fees of 0.25% of the Portfolio's average daily net assets. Eaton
Vance has been managing assets since 1924 and managing mutual funds since 1931.
Eaton Vance and its subsidiaries currently manage over $45 billion on behalf of
mutual funds, institutional clients and individuals.
The investment adviser, Eaton Vance and the Fund and Portfolio have adopted
Codes of Ethics governing personal securities transactions. Under the Codes,
employees of the investment adviser and Eaton Vance may purchase and sell
securities (including securities held by the Portfolio) subject to certain
reporting requirements and other procedures.
Organization. The Fund is a series of Eaton Vance Growth Trust, a Massachusetts
business trust. The Fund offers multiple classes of shares. Each Class
represents a pro rata interest in the Fund, but is subject to different expenses
and rights. The Fund does not hold annual shareholder meetings, but may hold
special meetings for matters that require shareholder approval (like electing or
removing trustees, approving management contracts or changing investment
policies that may only be changed with shareholder approval). Because the Fund
invests in the Portfolio, it may be asked to vote on certain Portfolio matters
(like changes in certain Portfolio investment restrictions). When necessary, the
Fund will hold a meeting of its shareholders to consider the Portfolio matter
and then vote its interest in the Portfolio in proportion to the votes cast by
its shareholders. The Fund can withdraw from the Portfolio at any time.
<PAGE>
VALUING SHARES
The Fund values its shares once each day only when the New York Stock Exchange
is open for trading (typically Monday through Friday), as of the close of
regular trading on the Exchange (normally 4:00 p.m. eastern time). The purchase
5
<PAGE>
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 a securities market would
materially affect net asset value or market prices are unavailable. Because
foreign securities trade on days when Fund shares are not priced, net asset
value can change at times when Fund shares cannot be redeemed.
When purchasing or redeeming Fund shares, your investment dealer must
communicate your order to the principal underwriter by a specific time each day
in order for the purchase price or the redemption price to be based on that
day's net asset value per share. It is the investment dealer's responsibility to
transmit orders promptly. The Fund may accept purchase and redemption orders as
of the time of their receipt by certain investment dealers (or their designated
intermediaries).
PURCHASING SHARES
You may purchase shares through your investment dealer or by mailing the account
application form included in this prospectus to the transfer agent (see back
cover for address). Your initial investment must be at least $1,000. The price
of Class A shares is the net asset value plus a sales charge. The price of Class
B shares is the net asset value; however, you may be subject to a sales charge
(called a "contingent deferred sales charge" or "CDSC") if you redeem Class B
shares within six years of purchase. The sales charges are described below. Your
investment dealer can help you decide which Class of shares suits your
investment needs.
After your initial investment, additional investments of $50 or more may be made
at any time by sending a check payable to the order of the Fund or the transfer
agent directly to the transfer agent (see back cover for address). Please
include your name and account number and the name of the Fund and Class of
shares with each investment.
You may also make automatic investments of $50 or more each month or each
quarter from your bank account. You can establish bank automated investing on
the account application or by calling 1-800-262-1122. The minimum initial
investment amount and Fund policy of redeeming accounts with low account
balances are waived for bank automated investing accounts and certain group
purchase plans.
You may purchase Fund shares in exchange for securities. Please call
1-800-225-6265 for information about exchanging securities for Fund shares. If
you purchase shares through an investment dealer (which includes brokers,
dealers and other financial institutions), that dealer may charge you a fee for
executing the purchase for you. The Fund may suspend the sale of its shares at
any time and any purchase order may be refused.
SALES CHARGES
Front-End Sales Charge. Class A shares are offered at net asset value per share
plus a sales charge that is determined by the amount of your investment. The
current sales charge schedule is:
<TABLE>
Sales Charge Sales Charge Dealer Commission
as Percentage of as Percentage of Net as a Percentage of
Amount of Purchase Offering Price Amount Invested Offering Price
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000 5.75% 6.10% 5.00%
$50,000 but less than $100,000 4.75% 4.99% 4.00%
$100,000 but less than $250,000 3.75% 3.90% 3.00%
$250,000 but less than $500,000 3.00% 3.09% 2.50%
$500,000 but less than $1,000,000 2.00% 2.04% 1.75%
$1,000,000 or more 0.00* 0.00* See Below
</TABLE>
* No sales charge is payable at the time of purchase on investments of $1
million or more. A CDSC of 1.00% will be imposed on such investments (as
described below) in the event of redemptions within 12 months of purchase.
The principal underwriter will pay a commission to investment dealers on sales
of $1 million or more as follows: 1.00% on amounts of $1 million or more but
less than $3 million; plus 0.50% on amounts over $3 million but less than $5
million; plus 0.25% on amounts over $5 million. Purchases totalling $1 million
or more will be aggregated over a 12-month period for purposes of determining
the commission. The principal underwriter may also pay commissions of up to
1.00% on sales of Class A shares made at net asset value to certain tax-deferred
retirement plans.
6
<PAGE>
Contingent Deferred Sales Charge. Each Class of shares is subject to a CDSC on
certain redemptions. Class A shares purchased at net asset value in amounts of
$1 million or more are subject to a 1% CDSC if redeemed within 12 months of
purchase. Class B shares are subject to the following CDSC schedule:
Year of Redemption After Purchase CDSC
--------------------------------------------------------------------------------
First or Second 5%
Third 4%
Fourth 3%
Fifth 2%
Sixth 1%
Seventh or following 0%
The CDSC is based on the lower of the net asset value at the time of purchase or
at the time of redemption. Shares acquired through the reinvestment of
distributions are exempt from the CDSC. Redemptions are made first from shares
that are not subject to a CDSC.
Reducing or Eliminating Sales Charges. Front-end sales charges on purchases of
Class A shares may be reduced under the right of accumulation or under a
statement of intention. Under the right of accumulation, the sales charges you
pay are reduced if the current market value of your current holdings (based on
the current offering price), plus your new purchases, total $50,000 or more.
Class A shares of other Eaton Vance funds owned by you can be included as part
of your current holdings for this purpose. Under a statement of intention,
purchases of $50,000 or more made over a 13-month period are eligible for
reduced sales charges. Under a statement of intention, the principal underwriter
may hold 5% of the dollar amount to be purchased in escrow in the form of shares
registered in your name until you satisfy the statement or the 13-month period
expires.
Class A shares are offered at net asset value to clients of financial
intermediaries who charge a fee for their services; accounts affiliated with
those financial intermediaries; tax-deferred retirement plans; investment and
institutional clients of Eaton Vance; certain persons affiliated with Eaton
Vance; and certain Eaton Vance and fund service providers. Ask your investment
dealer for details. Class A shares are also sold at net asset value if the
amount invested represents redemption proceeds from a mutual fund not affiliated
with Eaton Vance, provided the redemption occurred within 60 days of the Fund
share purchase and the redeemed shares were subject to a sales charge. Class A
shares so acquired will be subject to a 0.50% CDSC if they are redeemed within
12 months of purchase. Investment dealers will be paid a commission on such
sales equal to 0.50% of the amount invested.
CDSCs are waived for certain redemptions pursuant to a Withdrawal Plan (see
"Shareholder Account Features") and, for Class B shares, in connection with
certain redemptions from tax-sheltered retirement plans. Call 1-800-225-6265 for
details. The Class B CDSC is also waived following the death of all beneficial
owners of shares, but only if the redemption is requested within one year after
death (a death certificate and other applicable documents may be required).
If you redeem shares, you may reinvest at net asset value all or any portion of
the redemption proceeds in the same class of shares of the Fund (or, for Class A
shares, in Class A shares of any other Eaton Vance fund), provided that the
reinvestment occurs within 60 days of the redemption, and the privilege has not
been used more than once in the prior 12 months. Under these circumstances your
account will be credited with any CDSC paid in connection with the redemption.
Any CDSC period applicable to the shares you acquire upon reinvestment will run
from the date of your original share purchase. Reinvestment requests must be in
writing. If you reinvest, you will be sold shares at the next determined net
asset value following receipt of your request.
Distribution and Service Fees. Each Class of shares has in effect a plan under
Rule 12b-1 that allows the Fund to pay distribution fees for the sale and
distribution of shares (so-called "12b-1 fees"). Class A shares pay a
distribution fee of 0.50% of average daily net assets on shares outstanding for
less than twelve months and a distribution fee of 0.25% on shares outstanding
for more than twelve months. Class B shares pay distribution fees of 0.75% of
average daily net assets annually. Because these fees are paid from Fund assets
on an ongoing basis, they will increase your cost over time and may cost you
more than paying other types of sales charges. Both classes also pay service
fees for personal and/or account services equal to 0.25% of average daily net
assets annually, in the case of Class A shares only on shares outstanding for
one year. The principal underwriter pays commissions to investment dealers on
sales of Class B shares (except exchange transactions and reinvestments). The
sales commission on Class B shares equals 4% of the purchase price of the
shares. After the sale of shares, the principal underwriter receives service
fees for one year and thereafter investment dealers generally receive them based
on the value of shares sold by such dealers.
Class B distribution fees are subject to termination when payments under the
Rule 12b-1 plans are sufficient to extinguish uncovered distribution charges. As
described more fully in the Statement of Additional Information, uncovered
7
<PAGE>
distribution charges of a Class are increased by sales commissions payable by
the Class to the principal underwriter in connection with sales of shares of
that Class and by an interest factor tied to the U.S. Prime Rate. Uncovered
distribution charges are reduced by the distribution fees paid by the Class and
by CDSCs paid to the Fund by redeeming shareholders. The amount of the sales
commissions payable by Class B to the principal underwriter in connection with
sales of Class B shares is significantly less than the maximum permitted by the
sales charge rule of the National Association of Securities Dealers, Inc. To
date, Class B uncovered distribution charges have not been fully covered.
REDEEMING SHARES
You can redeem shares in any of the following ways:
By Mail Send your request to the transfer agent along with any
certificates and stock powers. The request must be
signed exactly as your account is registered and
signature guaranteed. You can obtain a signature
guarantee at certain banks, savings and loan
institutions, credit unions, securities dealers,
securities exchanges, clearing agencies and registered
securities associations. You may be asked to provide
additional documents if your shares are registered in
the name of a corporation, partnership or fiduciary.
By Telephone You can redeem up to $50,000 by calling the transfer
agent at 1-800-262-1122 on Monday through Friday, 9:00
a.m. to 4:00 p.m. (eastern time). Proceeds of a
telephone redemption can be mailed only to the account
address. Shares held by corporations, trusts or certain
other entities and shares that are subject to fiduciary
arrangements cannot be redeemed by telephone.
Through an
Investment
Dealer Your investment dealer is responsible for transmitting
the order promptly. An investment dealer may charge a
fee for this service.
Redemptions or exchanges of Class A shares made within three months of the
settlement of the purchase will be subject to a redemption fee equal to 1% of
the amount redeemed. All redemption fees will be paid to the Fund. Redemptions
of shares held by 401(k) plans, in proprietary fee-based programs sponsored by
broker-dealers, or by Eaton Vance, its affiliated entities and accounts in which
Eaton Vance or such an affiliate have a beneficial interest, as well as the
redemption of shares acquired as the result of reinvesting distributions, are
not subject to the redemption fee.
If you redeem shares, your redemption price will be based on the net asset value
per share next computed after the redemption request is received. Your
redemption proceeds will be paid in cash within seven days, reduced by the
amount of any applicable CDSC and/or redemption fee and any federal income tax
required to be withheld. Payments will be sent by mail unless you complete the
Bank Wire Redemptions section of the account application.
If you recently purchased shares, the proceeds of a redemption will not be sent
until the purchase check (including a certified or cashier's check) has cleared.
If the purchase check has not cleared, redemption proceeds may be delayed up to
15 days from the purchase date. If your account value falls below $750 (other
than due to market decline), you may be asked to either add to your account or
redeem it within 60 days. If you take no action, your account will be redeemed
and the proceeds sent to you.
While redemption proceeds are normally paid in cash, redemptions may be paid by
distributing marketable securities. If you receive securities, you could incur
brokerage or other charges in converting the securities to cash.
8
<PAGE>
SHAREHOLDER ACCOUNT FEATURES
Once you purchase shares, the transfer agent establishes a Lifetime Investing
Account(R) for you. Share certificates are issued only on request.
Distributions. You may have your Fund distributions paid in one of the following
ways:
*Full
Reinvest
Option Dividends and capital gains are reinvested in additional shares.
This option will be assigned if you do not specify an option.
*Partial
Reinvest
Option Dividends are paid in cash and capital gains are reinvested in
additional shares.
*Cash
Option Dividends and capital gains are paid in cash.
*Exchange
Option Dividends and/or capital gains are reinvested in additional
shares of another Eaton Vance fund chosen by you. Before
selecting this option, you must obtain a prospectus of the other
fund and consider its objectives and policies carefully.
Information from the Fund. From time to time, you may be mailed the following:
* Annual and Semi-Annual Reports, containing performance information and
financial statements.
* Periodic account statements, showing recent activity and total share
balance.
* Form 1099 and tax information needed to prepare your income tax returns.
* Proxy materials, in the event a shareholder vote is required.
* Special notices about significant events affecting your Fund.
Withdrawal Plan. You may redeem shares on a regular monthly or quarterly basis
by establishing a systematic withdrawal plan. Withdrawals will not be subject to
any applicable CDSC if they are, in the aggregate, less than or equal to 12%
annually of the greater of either the initial account balance or the current
account balance. A minimum account size of $5,000 is required to establish a
systematic withdrawal plan. Because purchases of Class A shares are generally
subject to an initial sales charge, you should not make withdrawals from your
account while you are making purchases.
Tax-Sheltered Retirement Plans. Class A shares are available for purchase in
connection with certain tax-sheltered retirement plans. Call 1-800-225-6265 for
information. Distributions will be invested in additional shares for all
tax-sheltered retirement plans.
Exchange Privilege. You may exchange your Fund shares for shares of the same
class of another Eaton Vance fund. Exchanges are generally made at net asset
value. If you hold Class A shares for less than six months and exchange them for
shares subject to a higher sales charge, you will be charged the difference
between the two sales charges. If your shares are subject to a CDSC, the CDSC
will continue to apply to your new shares at the same CDSC rate. For purposes of
the CDSC, your shares will continue to age from the date of your original
purchase.
Before exchanging, you should read the prospectus of the new fund carefully. If
you wish to exchange shares, write to the transfer agent (address on back cover)
or call 1-800-262-1122. Periodic automatic exchanges are also available. The
exchange privilege may be changed or discontinued at any time. You will receive
60 days' notice of any material change to the privilege. This privilege may not
be used for "market timing". If an account (or group of accounts) makes more
than two round-trip exchanges (exchanged from one fund to another and back
again) within 12 months, it will be deemed to be market timing. The exchange
privilege may be terminated for market timing accounts.
Telephone and Electronic Transactions. You can redeem or exchange shares by
telephone as described in this prospectus. In addition, certain transactions may
be conducted through the Internet. The transfer agent and the principal
underwriter have procedures in place to authenticate telephone and electronic
instructions (such as using security codes or verifying personal account
information). As long as the transfer agent and principal underwriter follow
reasonable procedures, they will not be responsible for unauthorized telephone
or electronic transactions and you bear the risk of possible loss resulting from
these transactions. You may decline the telephone redemption option on the
account application. Telephone instructions are tape recorded.
"Street Name" Accounts. If your shares are held in a "street name" account at an
investment dealer, that dealer (and not the Fund or its transfer agent) will
perform all recordkeeping, transaction processing and distribution payments.
Because the Fund will have no record of your transactions, you should contact
your investment dealer to purchase, redeem or exchange shares, to make changes
in your account, or to obtain account information. You will not be able to
utilize a number of shareholder features, such as telephone transactions,
9
<PAGE>
directly with the Fund. The transfer of shares in a "street name" account to an
account with another investment dealer or to an account directly with the Fund
involves special procedures and you will be required to obtain historical
information about your shares prior to the transfer. Before establishing a
"street name" account with an investment dealer, you should determine whether
that dealer allows reinvestment of distributions in "street name" accounts.
Account Questions. If you have any questions about your account or the services
available, please call Eaton Vance Shareholder Services at 1-800-225-6265, or
write to the transfer agent (see back cover for address).
TAX INFORMATION
The Fund pays dividends at least once annually and intends to pay capital gains
annually. Distributions of income and net short-term capital gains will be
taxable as ordinary income. Distributions of any long-term capital gains will be
taxable as long-term gains. The Fund expects that its distributions will consist
primarily of capital gains. The Fund's distributions will generally not qualify
for the dividends-received deduction for corporations. The Fund's distributions
will be taxable whether they are paid in cash or reinvested in additional
shares.
Investors who purchase shares shortly before the record date of a distribution
will pay the full price for the shares and then may 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.
Investments in foreign securities may be subject to foreign withholding taxes.
In that case, the Fund's yield on those securities would be decreased.
Shareholders may be entitled to claim a credit or deduction with respect to
foreign taxes. In addition, investments in foreign securities or foreign
currencies may increase or accelerate the Fund's recognition of ordinary income
and may affect the timing or amount of the Fund's distributions.
Shareholders should consult with their advisers concerning the applicability of
state, local and other taxes to an investment.
10
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights are intended to help you understand the Fund's
financial performance for the past five years. Certain information in the table
reflects the financial results for a single Fund share. The total returns in the
table represent the rate an investor would have earned (or lost) on an
investment in the Fund (assuming reinvestment of all distributions and not
taking into account a sales charge). This information has been audited by
Deloitte & Touche LLP, independent accountants. The report of Deloitte & Touche
LLP and the Fund's financial statements are incorporated herein by reference and
included in the annual report, which is available on request.
<TABLE>
Year Ended August 31,
-------------------------------------------------
2000 1999
-------------------------------------------------
Class A Class B(1) Class A(1)
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value - Beginning of Year $15.840 $11.700 $10.000
-------- -------- --------
Income (loss) from operations
Net investment income (loss) $(0.322) $(0.345) $0.046
Net realized and unrealized gain 8.660 4.715 5.794
-------- -------- --------
Total income from operations $ 8.338 $ 4.370 $ 5.840
-------- -------- --------
Less distributions
From net investment income $(0.044) -- --
In excess of net investment income (0.004) -- --
-------- -------- --------
Total distributions $(0.048) -- --
-------- -------- --------
Net asset value - End of year $24.130 $16.070 $15.840
======== ======== ========
Total return(2) 52.65% 37.35% 58.40%
Ratios/Supplemental Data+
Net assets, end of yar (000's omitted) $ 1,723 $47 $474
Ratios (as a percentage of average daily net assets):
Net expenses(3) 2.70% 2.77%(4) 1.40%(4)
Net expenses after custodian fee reduction(3) 2.49% 2.56%(4) 1.40%(4)
Net investment income (loss) (1.66)% (1.59)%(4) 2.69%(4)
Portfolio turnover of the Portfolio 112% 112% 105%
</TABLE>
+ The operating expenses of the Fund reflect a reduction of the management
fee as well as an allocation of expenses to the Distributor. Had such
action not been taken, the ratios and investment income per share would
have been as follows:
<TABLE>
<S> <C> <C> <C>
Ratios (as a percentage of average daily net assets):
Expenses(3) 6.67% 4.81%(4) 8.23%(4)
Expenses after custodian fee reduction(3) 6.46% 4.60%(4) 8.23%(4)
Net investment income (5.63)% (3.63)%(4) (4.13)%(4)
Net investment income per share $(1.092) $(0.788) $(0.071)
</TABLE>
(1) For Class A, for the period from the start of business, March 1, 1999 to
August 31, 1999 and for Class B, for the period from the commencement of
the offering of Class B shares, October 8, 1999 to August 31, 1999.
(2) Total return is calculated assuming a purchase at the net asset value on
the first day and a sale at the net asset value on the last day of each
period reported. Distributions, if any, are assumed to be reinvested at the
net asset value on the reinvestment date. Total return is not computed on
an annualized basis.
(3) Includes the Fund's share of its Portfolio's allocated expenses.
(4) Annualized.
11
<PAGE>
{LOGO} Investing
EATON VANCE for the
Mutual Funds 21st
Century(R)
More Information
--------------------------------------------------------------------------------
About the Fund: More information is available in the statement of
additional information. The statement of additional information is
incorporated by reference into this prospectus. Additional information
about the Portfolio's investments is available in the annual and
semi-annual reports to shareholders. In the annual report, you will find a
discussion of the market conditions and investment strategies that
significantly affected the Fund's performance during the past year. You may
obtain free copies of the statement of additional information and the
shareholder reports by contacting:
Eaton Vance Distributors, Inc.
The Eaton Vance Building
255 State Street
Boston, MA 02109
1-800-225-6265
website: www.eatonvance.com
You will find and may copy information about the Fund (including the
statement of additional information and shareholder reports): at the
Securities and Exchange Commission's public reference room in Washington,
DC (call 1-202-942-8090 for information on the operation of the public
reference room); on the EDGAR Database on the SEC's Internet site (http://
www.sec.gov); or, upon payment of copying fees, by writing to the SEC's
public reference section, Washington, DC 20549-0102, or by electronic mail
at [email protected].
About Shareholder Accounts: You can obtain more information from Eaton
Vance Share- holder Services (1-800-225-6265). If you own shares and would
like to add to, redeem or change your account, please write or call the
transfer agent:
--------------------------------------------------------------------------------
PFPC, Inc.
P.O. Box 9653
Providence, RI 02904-9653
1-800-262-1122
The Fund's SEC File No. is 811-1241 ACP
<PAGE>
{LOGO} Investing
EATON VANCE for the
Mutual Funds 21st
Century(R)
Eaton Vance
Greater China Growth Fund
A diversified fund investing in the China Region
Prospectus Dated
January 1, 2001
The Securities and Exchange Commission has not approved or disapproved these
securities or determined whether this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
Information in this prospectus
Page Page
--------------------------------------------------------------------------------
Fund Summary 2 Sales Charges 6
Investment Objective & Principal Redeeming Shares 8
Policies and Risks 4 Shareholder Account
Management and Organization 5 Features 9
Valuing Shares 5 Tax Information 10
Purchasing Shares 6 Financial Highlights 11
--------------------------------------------------------------------------------
This prospectus contains important information about the Fund and the services
available to shareholders. Please save it for reference.
<PAGE>
FUND SUMMARY
Investment Objective and Principal Strategies. The investment objective of the
Fund is to seek long-term capital appreciation. The Fund invests primarily in
common stocks of companies which, in the opinion of the investment adviser, will
benefit from the economic development and growth of the People's Republic of
China. The Portfolio normally will be invested primarily or exclusively in the
securities markets of countries in the China region, including Hong Kong, China,
Taiwan, South Korea, Singapore, Malaysia, Thailand, Indonesia and the
Philippines.
The investment adviser invests primarily in common stocks of China region
companies expected to grow in value over time, regardless of short-term market
fluctuations. The Fund may invest 25% or more of its total assets in securities
of issuers located in any one country, but ordinarily will only do so in Hong
Kong. The Fund invests in companies with a broad range of market
capitalizations, including smaller companies. The Fund may attempt to hedge
foreign currency fluctuations by entering into forward currency exchange
contracts.
The Fund pursues its investment objective by investing its assets in a separate
registered investment company with the same objective and policies as the Fund.
Principal Risk Factors. Securities markets in the China region are substantially
smaller, less liquid and more volatile than the major securities markets in the
United States. The value of Fund shares will be affected by political, economic,
fiscal, regulatory or other developments in the China region or neighboring
regions, as well as currency exchange rates. The extent of economic development,
political stability and market depth of different countries in the China region
varies widely. Certain China region countries, including China, Indonesia,
Malaysia, the Philippines and Thailand, are either comparatively underdeveloped
or in the process of becoming developed. Greater China investments typically
involve greater potential for gain or loss than investments in securities of
issuers in developed countries. In comparison to the United States and other
developed countries, developing countries may have relatively unstable
governments and economies based on only a few industries. The Fund will likely
be particularly sensitive to changes in China's economy as the result of any
reversals of economic liberalization, political unrest or changes in China's
trading status.
The value of Fund shares also is sensitive to stock market volatility. If there
is a decline in the value of exchange-listed stocks, the value of Fund shares
will also likely decline. Changes in stock market values can be sudden and
unpredictable. Also, although stock values can rebound, there is no assurance
that values will return to previous levels. The securities of smaller companies
are generally subject to greater price fluctuation and investment risk than
securities of more established companies. Foreign currency exchange contracts
involve a risk of loss due to unanticipated changes in exchange rates, as well
as the risk of counterparty default.
The Fund is not a complete investment program and you may lose money by
investing in the Fund. An investment in the Fund is not a deposit in a bank and
is not insured or guaranteed by the Federal Deposit Insurance Corporation or any
other government agency. Shareholders may realize substantial losses and should
invest for the long-term.
2
<PAGE>
Performance Information. The following bar chart and table provide information
about the Fund's performance including a comparison of the Fund's performance to
the performance of an index of stocks in developed and emerging markets which
are open to foreign investment in the Far East (excluding Japan). Although past
performance is no guarantee of future results, this performance information
demonstrates the risk that the value of your investment will change. The
following returns are for Class A shares for each calendar quarter through
December 31, 1999 and do not reflect sales charges. If the sales charge was
reflected, returns would be lower.
80.75% -20.89% 3.53% 15.85% -24.86% -21.93% 60.47%
--------------------------------------------------------------------------------
1993 1994 1995 1996 1997 1998 1999
The highest quarterly total return for Class A was 39.15% for the quarter ended
December 31, 1993, and the lowest quarterly return was -33.39% for the quarter
ended December 31, 1997. The year-to-date total return through the end of the
most recent calendar quarter (December 31, 1999 to September 30, 2000) was
-10.02%.
Average Annual Total Return One Five Life of
as of December 31, 1999 Year Years Fund
--------------------------------------------------------------------------------
Class A Shares 51.23% 1.25% 5.73%
Class B Shares 54.72% 1.56% 6.29%
Class C Shares 58.48% 1.65% 5.97%
Morgan Stanley Capital International
All Country Far East Free ex-Japan Index 59.40% -1.26% 4.89%
These returns reflect the maximum sales charge for Class A (5.75%) and any
applicable CDSC for Class B and Class C. The Class B and Class C performance
shown above for the period prior to June 7, 1993 and December 28, 1993,
respectively, is the performance of Class A shares, adjusted for the sales
charge that applies to Class B or Class C shares (but not adjusted for any other
differences in the expenses of the classes). Class A shares performance is for
the period beginning October 28, 1992. Life of Fund returns are calculated from
October 31, 1992. The Morgan Stanley Capital International All Country (MSCI AC)
Far East Free ex-Japan Index is an unmanaged index of stocks in developed and
emerging markets which are open to foreign investment in the Far East (excluding
Japan). Investors cannot invest directly in an Index. (Source for the MSCI AC
Index returns: Lipper Inc.)
Fund Fees and Expenses. These tables describe the fees and expenses that you may
pay if you buy and hold shares.
Shareholder Fees
(fees paid directly from your investment) Class A Class B Class C
--------------------------------------------------------------------------------
Maximum Sales Charge (Load) (as a
percentage of offering price) 5.75% None None
Maximum Deferred Sales Charge (Load)
(as a percentage of the lower of net
asset value at time of purchase or
time of redemption) None 5.00% 1.00%
Maximum Sales Charge (Load) Imposed
on Reinvested Distributions None None None
Exchange Fee None None None
Redemption Fee (as a percentage of
amount redeemed)* 1.00% None None
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets) Class A Class B Class C
--------------------------------------------------------------------------------
Management Fees 0.75% 0.75% 0.75%
Distribution and Service (12b-1) Fees 0.50% 1.00% 1.00%
Other Expenses 1.05% 1.05% 1.05%
----- ----- -----
Total Annual Fund Operating Expenses 2.30% 2.80% 2.80%
* For shares redeemed within three months of the settlement of the purchase.
<PAGE>
Example. This Example is intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The Example also assumes
that your investment has a 5% return each year and that the operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
1 Year 3 Years 5 Years 10 Years
--------------------------------------------------------------------------------
Class A shares $ 795* $ 1,252 $ 1,734 $ 3,059
Class B shares $ 783 $ 1,268 $ 1,679 $ 3,128
Class C shares $ 383 $ 868 $ 1,479 $ 3,128
You would pay the following expenses if you did not redeem your shares:
1 Year 3 Years 5 Years 10 Years
--------------------------------------------------------------------------------
Class A shares $ 795* $ 1,252 $ 1,734 $ 3,059
Class B shares $ 283 $ 868 $ 1,479 $ 3,128
Class C shares $ 283 $ 868 $ 1,479 $ 3,128
* Due to the redemption fee, the cost of investing for one year would be $100
higher for shares redeemed or exchanged within three months of the
settlement of the purchase.
3
<PAGE>
INVESTMENT OBJECTIVE & PRINCIPAL POLICIES AND RISKS
The Fund's investment objective is to seek long-term capital appreciation. The
Fund currently seeks to meet its investment objective by investing in Greater
China Growth Portfolio (the "Portfolio"), a separate registered investment
company which has the same objective and policies as the Fund. The Fund's
investment objective and certain policies may be changed without shareholder
approval. The Trustees of the Trust have no present intention to make such
change and intend to submit any proposed material change in investment objective
to shareholders in advance for their approval.
The Portfolio invests in a carefully selected and continuously managed portfolio
consisting primarily of common stocks of companies which, in the opinion of the
investment adviser, will benefit from the economic development and growth of
China. China growth companies (a) are located in or have securities that are
principally traded in a China region country, (b)(i) have at least 50% of their
assets in one or more China region countries or (ii) derive at least 50% of
their gross sales revenues or profits from providing goods or services to or
from within one or more China region countries, and (c)(i) have at least 35% of
their assets in China or (ii) derive at least 35% of their gross sales revenues
or profits from providing goods or services to or from within China or (iii)
have manufacturing or other operations in China that are significant to such
companies. Securities of China growth companies are typically listed on stock
exchanges or traded in the over-the-counter markets in countries in the China
region. The principal offices of these companies, however, may be located
outside these countries. Under normal market conditions, the Portfolio will
invest at least 65% of its total assets in equity securities of China growth
companies. The Portfolio will not invest more than 10% of its total assets in
the securities of issuers in any country outside the China region. As an
alternative to investing directly in China growth company securities, the
Portfolio may invest in depository receipts and similar investments.
The values of foreign investments are affected by changes in currency rates or
exchange control regulations, application of foreign tax laws (including
withholding tax), changes in governmental administration or economic or monetary
policy (in this country or abroad) or changed circumstances in dealings between
nations. Exchange rates may fluctuate significantly over short periods of time
causing the Portfolio's net asset value to fluctuate as well. Costs are incurred
in connection with conversions between various currencies. In addition, foreign
brokerage commissions, custody fees and other costs of investing are generally
higher than in the United States, and foreign securities markets may be less
liquid, more volatile and less subject to governmental supervision than in the
United States. Investments in foreign issuers could be affected by other factors
not present in the United States, including expropriation, armed conflict,
confiscatory taxation, restrictions on transfers of assets, lack of uniform
accounting and auditing standards, less publicly available financial and other
information and potential difficulties in enforcing contractual obligations.
Transactions in the securities of foreign issuers could be subject to settlement
delays and risk of loss.
More than 25% of the Portfolio's total assets may be denominated in any single
currency. At times, the portfolio manager may (but is not obligated to) use
forward currency exchange contracts to attempt to mitigate adverse effects of
foreign currency fluctuations. These contracts allow the Portfolio to establish
a currency exchange rate with payment and delivery at a future date. They are
subject to a risk of loss due to unanticipated changes in currency exchange
rates and default by the counterparty to the contract. There can be no assurance
that this hedging strategy will be advantageous to the Portfolio.
Economies of countries in the China region differ from the U.S. economy in
various ways, such as rate of growth of gross national product, rate of
inflation, capital reinvestment, resource self-sufficiency and balance of
payments position. As export-driven economies, the economies of countries in the
China region are affected by developments in the economies of their principal
trading partners. Monsoons and natural disasters also can affect the value of
Portfolio investments. Political control of Hong Kong was transferred to China
in mid-1997, and the success of "one country - two systems" will affect
investments in Hong Kong and elsewhere. China's governmental actions can have a
significant effect on the economic conditions in the China region, which could
adversely affect the value and liquidity of the Portfolio's investments.
Although the Chinese Government has recently begun to institute legal and
economic reform policies, there can be no assurances that it will continue to
pursue such policies or, if it does, that such policies will succeed.
The Portfolio may invest in securities of smaller, less seasoned companies. Such
securities are generally subject to greater price fluctuations, limited
liquidity, higher transaction costs and higher investment risk. Smaller
companies may have limited product lines, markets or financial resources, and
they may be dependent on a limited management group. There is generally less
publicly available information about such companies than larger, more
established companies. The Portfolio may make direct investments in companies in
private placement transactions. Because of the absence of any public trading
market for some of these investments (such as those that are legally restricted)
it may take longer to liquidate these positions at fair value than would be the
case for publicly traded securities.
The Portfolio may borrow amounts up to 10% of its total assets, but it will not
borrow more than 5% of the value of its total assets except to satisfy
redemption requests or for other temporary purposes. Such borrowings would
4
<PAGE>
result in increased expense to the Fund and, while they are outstanding, would
magnify increases or decreases in the value of Fund shares. The Portfolio will
not purchase additional portfolio securities while outstanding borrowings exceed
5% of the value of its total assets. For temporary defensive purposes (such as
during abnormal market or economic conditions), the Portfolio may invest some or
all of its total assets in cash and cash equivalents. While temporarily
invested, the Portfolio may not achieve its investment objective.
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 the investments of the
Portfolio. Lloyd George receives a monthly advisory fee of 0.0625% (equivalent
to 0.75% annually) of the Portfolio's average daily net assets up to $500
million. This fee declines at intervals above $500 million. For the fiscal year
ended August 31, 2000, the Portfolio paid advisory fees of 0.75% of its average
daily net assets.
Adaline Mang-Yee Ko is the portfolio manager of the Portfolio (since June,
1996). She is a Director of Lloyd George. Prior to joining Lloyd George in 1995,
she was a Director of Fleming Investment Management Ltd.
Lloyd George and its affiliates act as investment adviser to various individual
and institutional clients and manage 2.0 billion in assets. Eaton Vance's
corporate parent owns 20% of Lloyd George's corporate parent. Lloyd George, its
affiliates and two of the Portfolio's Trustees are domiciled outside of the
United States. Because of this, it would be difficult for the Portfolio to bring
a claim or enforce a judgment against them.
Eaton Vance manages the business affairs of the Fund and administers the
business affairs of the Portfolio. For these services, Eaton Vance receives a
monthly fee from each of the Fund and Portfolio of 1/48 of 1% (equal to 0.25%
annually) of average daily net assets up to $500 million. This fee declines at
intervals above $500 million. For the fiscal year ended August 31, 2000, Eaton
Vance earned management fees of 0.25% of the Fund's average daily net assets and
administration fees of 0.25% of the Portfolio's average daily net assets. Eaton
Vance has been managing assets since 1924 and managing mutual funds since 1931.
Eaton Vance and its subsidiaries currently manage over $45 billion on behalf of
mutual funds, institutional clients and individuals.
The investment adviser, Eaton Vance and the Fund and Portfolio have adopted
Codes of Ethics governing personal securities transactions. Under the Codes,
employees of the investment adviser and Eaton Vance may purchase and sell
securities (including securities held by the Portfolio) subject to certain
reporting requirements and other procedures.
Organization. The Fund is a series of Eaton Vance Growth Trust, a Massachusetts
business trust. The Fund offers multiple classes of shares. Each Class
represents a pro rata interest in the Fund, but is subject to different expenses
and rights. The Fund does not hold annual shareholder meetings, but may hold
special meetings for matters that require shareholder approval (like electing or
removing trustees, approving management contracts or changing investment
policies that may only be changed with shareholder approval). Because the Fund
invests in the Portfolio, it may be asked to vote on certain Portfolio matters
(like changes in certain Portfolio investment restrictions). When necessary, the
Fund will hold a meeting of its shareholders to consider the Portfolio matter
and then vote its interest in the Portfolio in proportion to the votes cast by
its shareholders. The Fund can withdraw from the Portfolio at any time.
VALUING SHARES
The Fund values its shares once each day only when the New York Stock Exchange
is open for trading (typically Monday through Friday), as of the close of
regular trading on the Exchange (normally 4:00 p.m. eastern time). The purchase
price of Fund shares is their net asset value (plus a sales charge for Class A),
which is derived from Portfolio holdings. Exchange-listed securities are valued
at closing sale prices; however, the investment adviser may use the fair value
of a security if events occurring after the close of a securities market would
materially affect net asset value or market prices are unavailable. 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).
5
<PAGE>
PURCHASING SHARES
You may purchase shares through your investment dealer or by mailing the account
application form included in this prospectus to the transfer agent (see back
cover for address). Your initial investment must be at least $1,000. The price
of Class A shares is the net asset value plus a sales charge. The price of Class
B and Class C shares is the net asset value; however, you may be subject to a
sales charge (called a "contingent deferred sales charge" or "CDSC") if you
redeem Class B shares within six years of purchase or Class C shares within one
year of purchase. The sales charges are described below. Your investment dealer
can help you decide which Class of shares suits your investment needs.
After your initial investment, additional investments of $50 or more may be made
at any time by sending a check payable to the order of the Fund or the transfer
agent directly to the transfer agent (see back cover for address). Please
include your name and account number and the name of the Fund and Class of
shares with each investment.
You may also make automatic investments of $50 or more each month or each
quarter from your bank account. You can establish bank automated investing on
the account application or by calling 1-800-262-1122. The minimum initial
investment amount and Fund policy of redeeming accounts with low account
balances are waived for bank automated investing accounts and certain group
purchase plans.
You may purchase Fund shares in exchange for securities. Please call
1-800-225-6265 for information about exchanging securities for Fund shares. If
you purchase shares through an investment dealer (which includes brokers,
dealers and other financial institutions), that dealer may charge you a fee for
executing the purchase for you. The Fund may suspend the sale of its shares at
any time and any purchase order may be refused.
SALES CHARGES
Front-End Sales Charge. Class A shares are offered at net asset value per share
plus a sales charge that is determined by the amount of your investment. The
current sales charge schedule is:
<TABLE>
Sales Charge Sales Charge Dealer Commission
as Percentage of as Percentage of Net as a Percentage of
Amount of Purchase Offering Price Amount Invested Offering Price
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000 5.75% 6.10% 5.00%
$50,000 but less than $100,000 4.75% 4.99% 4.00%
$100,000 but less than $250,000 3.75% 3.90% 3.00%
$250,000 but less than $500,000 3.00% 3.09% 2.50%
$500,000 but less than $1,000,000 2.00% 2.04% 1.75%
$1,000,000 or more 0.00* 0.00* See Below
</TABLE>
* No sales charge is payable at the time of purchase on investments of $1
million or more. A CDSC of 1.00% will be imposed on such investments (as
described below) in the event of redemptions within 12 months of purchase.
The principal underwriter will pay a commission to investment dealers on sales
of $1 million or more as follows: 1.00% on amounts of $1 million or more but
less than $3 million; plus 0.50% on amounts over $3 million but less than $5
million; plus 0.25% on amounts over $5 million. Purchases totalling $1 million
or more will be aggregated over a 12-month period for purposes of determining
the commission. The principal underwriter may also pay commissions of up to
1.00% on sales of Class A shares made at net asset value to certain tax-deferred
retirement plans.
6
<PAGE>
Contingent Deferred Sales Charge. Each Class of shares is subject to a CDSC on
certain redemptions. Class A shares purchased at net asset value in amounts of
$1 million or more are subject to a 1.00% CDSC if redeemed within 12 months of
purchase. Class C shares are subject to a 1.00% CDSC if redeemed within 12
months of purchase. Class B shares are subject to the following CDSC schedule:
Year of Redemption After Purchase CDSC
--------------------------------------------------------------------------------
First or Second 5%
Third 4%
Fourth 3%
Fifth 2%
Sixth 1%
Seventh or following 0%
The CDSC is based on the lower of the net asset value at the time of purchase or
at the time of redemption. Shares acquired through the reinvestment of
distributions are exempt from the CDSC. Redemptions are made first from shares
that are not subject to a CDSC.
Reducing or Eliminating Sales Charges. Front-end sales charges on purchases of
Class A shares may be reduced under the right of accumulation or under a
statement of intention. Under the right of accumulation, the sales charges you
pay are reduced if the current market value of your current holdings (based on
the current offering price), plus your new purchases, total $50,000 or more.
Class A shares of other Eaton Vance funds owned by you can be included as part
of your current holdings for this purpose. Under a statement of intention,
purchases of $50,000 or more made over a 13-month period are eligible for
reduced sales charges. Under a statement of intention, the principal underwriter
may hold 5% of the dollar amount to be purchased in escrow in the form of shares
registered in your name until you satisfy the statement or the 13-month period
expires.
Class A shares are offered at net asset value to clients of financial
intermediaries who charge a fee for their services; accounts affiliated with
those financial intermediaries; tax-deferred retirement plans; investment and
institutional clients of Eaton Vance; certain persons affiliated with Eaton
Vance; and certain Eaton Vance and fund service providers. Ask your investment
dealer for details. Class A shares are also sold at net asset value if the
amount invested represents redemption proceeds from a mutual fund not affiliated
with Eaton Vance, provided the redemption occurred within 60 days of the Fund
share purchase and the redeemed shares were subject to a sales charge. Class A
shares so acquired will be subject to a 0.50% CDSC if they are redeemed within
12 months of purchase. Investment dealers will be paid a commission on such
sales equal to 0.50% of the amount invested.
CDSCs are waived for certain redemptions pursuant to a Withdrawal Plan (see
"Shareholder Account Features") and, for Class B and Class C shares, in
connection with certain redemptions from tax-sheltered retirement plans. Call
1-800-225-6265 for details. The Class B CDSC is also waived following the death
of all beneficial owners of shares, but only if the redemption is requested
within one year after death (a death certificate and other applicable documents
may be required).
If you redeem shares, you may reinvest at net asset value all or any portion of
the redemption proceeds in the same class of shares of the Fund (or, for Class A
shares, in Class A shares of any other Eaton Vance fund), provided that the
reinvestment occurs within 60 days of the redemption, and the privilege has not
been used more than once in the prior 12 months. Under these circumstances your
account will be credited with any CDSC paid in connection with the redemption.
Any CDSC period applicable to the shares you acquire upon reinvestment will run
from the date of your original share purchase. Reinvestment requests must be in
writing. If you reinvest, you will be sold shares at the next determined net
asset value following receipt of your request.
Distribution and Service Fees. Each Class of shares has in effect a plan under
Rule 12b-1 that allows the Fund to pay distribution fees for the sale and
distribution of shares (so-called "12b-1 fees"). Class A shares pay a
distribution fee of 0.50% of average daily net assets on shares outstanding for
less than twelve months and a distribution fee of 0.25% on shares outstanding
for more than twelve months. Class B and Class C shares pay distribution fees of
0.75% of average daily net assets annually. Because these fees are paid from
Fund assets on an ongoing basis, they will increase your cost over time and may
cost you more than paying other types of sales charges. All classes also pay
service fees for personal and/or account services equal to 0.25% of average
daily net assets annually, in the case of Class A shares only on shares
outstanding for one year. The principal underwriter pays commissions to
investment dealers on sales of Class B and Class C shares (except exchange
transactions and reinvestments). The sales commission on Class B shares equals
4% of the purchase price of the shares. The principal underwriter compensates
investment dealers who sell Class C shares as a rate of 1.00% of the purchase
price of the shares, consisting of 0.75% of sales commission and 0.25% of
service fee (for the first year's service). After the first year, investment
dealers also receive 0.75% of the value of Class C shares in annual
7
<PAGE>
distribution fees. After the sale of shares, the principal underwriter receives
service fees for one year and thereafter investment dealers generally receive
them based on the value of shares sold by such dealers.
Class B and Class C distribution fees are subject to termination when payments
under the Rule 12b-1 plans are sufficient to extinguish uncovered distribution
charges. As described more fully in the Statement of Additional Information,
uncovered distribution charges of a Class are increased by sales commissions
payable by the Class to the principal underwriter in connection with sales of
shares of that Class and by an interest factor tied to the U.S. Prime Rate.
Uncovered distribution charges are reduced by the distribution fees paid by the
Class and by CDSCs paid to the Fund by redeeming shareholders. The amount of the
sales commissions payable by Class B to the principal underwriter in connection
with sales of Class B shares is significantly less than the maximum permitted by
the sales charge rule of the National Association of Securities Dealers, Inc. To
date, neither Class B or Class C uncovered distribution charges have been fully
covered.
REDEEMING SHARES
You can redeem shares in any of the following ways:
By Mail Send your request to the transfer agent along with any
certificates and stock powers. The request must be
signed exactly as your account is registered and
signature guaranteed. You can obtain a signature
guarantee at certain banks, savings and loan
institutions, credit unions, securities dealers,
securities exchanges, clearing agencies and registered
securities associations. You may be asked to provide
additional documents if your shares are registered in
the name of a corporation, partnership or fiduciary.
By Telephone You can redeem up to $50,000 by calling the transfer
agent at 1-800-262-1122 on Monday through Friday, 9:00
a.m. to 4:00 p.m. (eastern time). Proceeds of a
telephone redemption can be mailed only to the account
address. Shares held by corporations, trusts or certain
other entities and shares that are subject to fiduciary
arrangements cannot be redeemed by telephone.
Through an
Investment
Dealer Your investment dealer is responsible for transmitting
the order promptly. An investment dealer may charge a
fee for this service.
Redemptions or exchanges of Class A shares made within three months of the
settlement of the purchase will be subject to a redemption fee equal to 1% of
the amount redeemed. All redemption fees will be paid to the Fund. Redemptions
of shares held by 401(k) plans, in proprietary fee-based programs sponsored by
broker-dealers, or by Eaton Vance, its affiliated entities and accounts in which
Eaton Vance or such an affiliate have a beneficial interest, as well as the
redemption of shares acquired as the result of reinvesting distributions, are
not subject to the redemption fee.
If you redeem shares, your redemption price will be based on the net asset value
per share next computed after the redemption request is received. Your
redemption proceeds will be paid in cash within seven days, reduced by the
amount of any applicable CDSC and/or redemption fee and any federal income tax
required to be withheld. Payments will be sent by mail unless you complete the
Bank Wire Redemptions section of the account application.
If you recently purchased shares, the proceeds of a redemption will not be sent
until the purchase check (including a certified or cashier's check) has cleared.
If the purchase check has not cleared, redemption proceeds may be delayed up to
15 days from the purchase date. If your account value falls below $750 (other
than due to market decline), you may be asked to either add to your account or
redeem it within 60 days. If you take no action, your account will be redeemed
and the proceeds sent to you.
While redemption proceeds are normally paid in cash, redemptions may be paid by
distributing marketable securities. If you receive securities, you could incur
brokerage or other charges in converting the securities to cash.
8
<PAGE>
SHAREHOLDER ACCOUNT FEATURES
Once you purchase shares, the transfer agent establishes a Lifetime Investing
Account(R) for you. Share certificates are issued only on request.
Distributions. You may have your Fund distributions paid in one of the following
ways:
* Full Reinvest Option Dividends and capital gains are reinvested in
additional shares. This option will be assigned if you do not specify an
option.
* Partial Reinvest Option Dividends are paid in cash and capital gains are
reinvested in additional shares.
* Cash Option Dividends and capital gains are paid in cash.
* Exchange Option Dividends and/or capital gains are reinvested in additional
shares of another Eaton Vance fund chosen by you. Before selecting this
option, you must obtain a prospectus of the other fund and consider its
objectives and policies carefully.
Information from the Fund. From time to time, you may be mailed the following:
* Annual and Semi-Annual Reports, containing performance information and
financial statements.
* Periodic account statements, showing recent activity and total share
balance.
* Form 1099 and tax information needed to prepare your income tax returns.
* Proxy materials, in the event a shareholder vote is required.
* Special notices about significant events affecting your Fund.
Withdrawal Plan. You may redeem shares on a regular monthly or quarterly basis
by establishing a systematic withdrawal plan. Withdrawals will not be subject to
any applicable CDSC if they are, in the aggregate, less than or equal to 12%
annually of the greater of either the initial account balance or the current
account balance. A minimum account size of $5,000 is required to establish a
systematic withdrawal plan. Because purchases of Class A shares are generally
subject to an initial sales charge, you should not make withdrawals from your
account while you are making purchases.
Tax-Sheltered Retirement Plans. Class A and Class C are available for purchase
in connection with certain tax-sheltered retirement plans. Call 1-800-225-6265
for information. Distributions will be invested in additional shares for all
tax-sheltered retirement plans.
Exchange Privilege. You may exchange your Fund shares for shares of the same
class of another Eaton Vance fund. Exchanges are generally made at net asset
value. If you hold Class A shares for less than six months and exchange them for
shares subject to a higher sales charge, you will be charged the difference
between the two sales charges. If your shares are subject to a CDSC, the CDSC
will continue to apply to your new shares at the same CDSC rate. For purposes of
the CDSC, your shares will continue to age from the date of your original
purchase.
Before exchanging, you should read the prospectus of the new fund carefully. If
you wish to exchange shares, write to the transfer agent (address on back cover)
or call 1-800-262-1122. Periodic automatic exchanges are also available. The
exchange privilege may be changed or discontinued at any time. You will receive
60 days' notice of any material change to the privilege. This privilege may not
be used for "market timing". If an account (or group of accounts) makes more
than two round-trip exchanges (exchanged from one fund to another and back
again) within 12 months, it will be deemed to be market timing. The exchange
privilege may be terminated for market timing accounts.
Telephone and Electronic Transactions. You can redeem or exchange shares by
telephone as described in this prospectus. In addition, certain transactions may
be conducted through the Internet. The transfer agent and the principal
underwriter have procedures in place to authenticate telephone and electronic
instructions (such as using security codes or verifying personal account
information). As long as the transfer agent and principal underwriter follow
reasonable procedures, they will not be responsible for unauthorized telephone
or electronic transactions and you bear the risk of possible loss resulting from
these transactions. You may decline the telephone redemption option on the
account application. Telephone instructions are tape recorded.
"Street Name" Accounts. If your shares are held in a "street name" account at an
investment dealer, that dealer (and not the Fund or its transfer agent) will
perform all recordkeeping, transaction processing and distribution payments.
Because the Fund will have no record of your transactions, you should contact
your investment dealer to purchase, redeem or exchange shares, to make changes
in your account, or to obtain account information. You will not be able to
utilize a number of shareholder features, such as telephone transactions,
9
<PAGE>
directly with the Fund. The transfer of shares in a "street name" account to an
account with another investment dealer or to an account directly with the Fund
involves special procedures and you will be required to obtain historical
information about your shares prior to the transfer. Before establishing a
"street name" account with an investment dealer, you should determine whether
that dealer allows reinvestment of distributions in "street name" accounts.
Account Questions. If you have any questions about your account or the services
available, please call Eaton Vance Shareholder Services at 1-800-225-6265, or
write to the transfer agent (see back cover for address).
TAX INFORMATION
The Fund pays dividends at least once annually and intends to pay capital gains
annually. Distributions of income and net short-term capital gains will be
taxable as ordinary income. Distributions of any long-term capital gains will be
taxable as long-term gains. The Fund expects its distributions will consist
primarily of capital gains. The Fund's distributions will generally not qualify
for the dividends-received deduction for corporations. The Fund's distributions
will be taxable whether they are paid in cash or reinvested in additional
shares.
Investors who purchase shares shortly before the record date of a distribution
will pay the full price for the shares and then may 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.
Investments in foreign securities may be subject to foreign withholding taxes.
In that case, the Fund's yield on those securities would be decreased.
Shareholders may be entitled to claim a credit or deduction with respect to
foreign taxes. In addition, investments in foreign securities or foreign
currencies may increase or accelerate the Fund's recognition of ordinary income
and may affect the timing or amount of the Fund's distributions.
Shareholders should consult with their advisers concerning the applicability of
state, local and other taxes to an investment.
10
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights are intended to help you understand the Fund's
financial performance for the past five years. Certain information in the table
reflects the financial results for a single Fund share. The total returns in the
table represent the rate an investor would have earned (or lost) on an
investment in the Fund (assuming reinvestment of all distributions and not
taking into account a sales charge). This information has been audited by
Deloitte & Touche LLP, independent accountants. The report of Deloitte & Touche
LLP and the Fund's financial statements are incorporated herein by reference and
included in the annual report, which is available on request. The Fund began
offering three classes of shares on September 1, 1997. Prior to that date, the
Fund offered only Class B shares and Class A and Class C existed as separate
funds.
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
------------------------------------------------------------------------------------------------------------
2000(1) 1999(1) 1998(1)
---------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value -
Beginning of year $11.400 $10.260 $ 6.980 $ 6.860 $ 6.200 $ 4.220 $ 17.710 $16.130 $10.970
------- ------- ------- ------- ------- ------- -------- ------- -------
Income (loss) from
operations
Net investment
income (loss) $(0.069) $(0.120) $(0.083) $ 0.012 $(0.049) $(0.039) $ 0.013 $(0.041) $(0.025)
Net realized and
unrealized gain
(loss) 2.859 2.570 1.743 4.528 4.109 2.799 (10.863) (9.889) (6.725)
------- ------- ------- ------- ------- ------- -------- ------- -------
Total income (loss)
from operations $ 2.790 $ 2.450 $ 1.660 $ 4.540 $ 4.060 $ 2.760 $(10.850) $(9.930) $(6.750)
------- ------- ------- ------- ------- ------- -------- ------- -------
Less distributions
In excess of net
investment income $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ --
In excess of net
realized gain on
investments $ -- $ -- $ -- -- -- -- -- -- --
------- ------- ------- ------- ------- ------- -------- ------- -------
Total distributions $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ --
------- ------- ------- ------- ------- ------- -------- ------- -------
Net asset value -
End of year $14.190 $12.710 $ 8.640 $11.400 $10.260 $ 6.980 $ 6.860 $ 6.200 $ 4.220
======= ======= ======= ======= ======= ======= ======== ======= =======
Total return
(2) 24.47% 23.88% 23.78% 66.18% 65.48% 65.40% (61.26)% (61.56)% (61.53)%
Ratios/Supplemental
Data
Net assets, end of
year (000's omitted) $66,428 $90,742 $ 8,851 $65,299 $92,860 $ 8,158 $ 56,277 $75,635 $ 6,449
Ratios (as a
percentage of
average daily net
assets):
Expenses
(3)(4) 2.30% 2.77% 2.80% 2.33% 2.83% 2.83% 2.27% 2.78% 2.79%
Expenses after
custodian fee
reduction
(3) 2.08% 2.55% 2.58% 2.14% 2.64% 2.64% 2.15% 2.66% 2.67%
Net investment
income (loss) (0.51)% (0.97)% (0.99)% 0.13% (0.59)% (0.69)% 0.11% (0.40)% (0.36)%
Portfolio Turnover
of the Portfolio 34% 34% 34% 57% 57% 57% 42% 42% 42%
<CAPTION>
<PAGE>
1997 1996
------------------------
CLASS B CLASS B
------------------------------------------------
<S> <C> <C>
Net asset value -
Beginning of year $ 12.450 $ 11.890
-------- --------
Income (loss) from
operations
Net investment $ (0.181) $ (0.087)
income (loss)
Net realized and
unrealized gain
(loss) 3.921 0.647
-------- --------
Total income (loss)
from operations $ 3.740 $ 0.560
-------- --------
Less distributions
In excess of net $ (0.060) $ --
investment income
In excess of net
realized gain on
investments -- --
-------- --------
Total distributions $ (0.060) $ --
-------- --------
Net asset value -
End of year $ 16.130 $ 12.450
======== ========
Total return 30.15% 4.71%
(2)
Ratios/Supplemental
Data
Net assets, end of $296,586 $284,575
year (000's omitted)
Ratios (as a
percentage of
average daily net
assets):
Expenses 2.66% 2.63%
(3)(4)
Expenses after 2.63% 2.57%
custodian fee
reduction
(3)
Net investment (0.75)% (0.51)%
income (loss)
Portfolio Turnover 48% 42%
of the Portfolio
</TABLE>
(1) Net investment income (loss) per share was computed using average shares
outstanding.
(2) Total return is calculated assuming a purchase at the net asset value on
the first day and a sale at the net asset value on the last day of each
period reported. Distributions, if any, are assumed to be reinvested at the
net asset value on the reinvestment date. Total return is not computed on
an annualized basis.
(3) Includes the Fund's share of the Portfolio's allocated expenses.
(4) The expense ratios for the year ended August 31, 1996 and periods
thereafter, have been adjusted to reflect a change in reporting
requirements. The new reporting guidelines require the Fund, as well as its
corresponding Portfolio, to increase its expense ratio by the effect of any
expense offset arrangements with its service providers. The expense ratios
for the year ended August 31, 1995 has not been adjusted to reflect this
change.
11
<PAGE>
{LOGO} Investing
EATON VANCE for the
Mutual Funds 21st
Century(R)
More Information
--------------------------------------------------------------------------------
About the Fund: More information is available in the statement of
additional information. The statement of additional information is
incorporated by reference into this prospectus. Additional information
about the Portfolio's investments is available in the annual and
semi-annual reports to shareholders. In the annual report, you will find a
discussion of the market conditions and investment strategies that
significantly affected the Fund's performance during the past year. You may
obtain free copies of the statement of additional information and the
shareholder reports by contacting:
Eaton Vance Distributors, Inc.
The Eaton Vance Building
255 State Street
Boston, MA 02109
1-800-225-6265
website: www.eatonvance.com
You will find and may copy information about the Fund (including the
statement of additional information and shareholder reports): at the
Securities and Exchange Commission's public reference room in Washington,
DC (call 1-202-942-8090 for information on the operation of the public
reference room); on the EDGAR Database on the SEC's Internet site (http://
www.sec.gov); or, upon payment of copying fees, by writing to the SEC's
public reference section, Washington, DC 20549-0102, or by electronic mail
at [email protected].
About Shareholder Accounts: You can obtain more information from Eaton
Vance Share- holder Services (1-800-225-6265). If you own shares and would
like to add to, redeem or change your account, please write or call the
transfer agent:
--------------------------------------------------------------------------------
PFPC, Inc.
P.O. Box 9653
Providence, RI 02904-9653
1-800-262-1122
The Fund's SEC File No. is 811-1241 CGP
<PAGE>
LOGO
Investing
for the
21st Century(R)
EATON VANCE GROWTH FUND
A diversified fund for investors seeking growth of capital
Prospectus Dated
January 1, 2001
The Securities and Exchange Commission has not approved or disapproved these
securities or determined whether this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
Information in this prospectus
Page Page
-------------------------------------------------------------------------------
Fund Summary 2 Sales Charges 6
Investment Objective & Principal Policies Redeeming Shares 7
and Risks 4
Management and Organization 4 Shareholder Account
Features 8
Valuing Shares 5 Tax Information 9
Purchasing Shares 5 Financial Highlights 10
-------------------------------------------------------------------------------
This prospectus contains important information about the
Fund and the services available to shareholders. Please
save it for reference.
<PAGE>
FUND SUMMARY
INVESTMENT OBJECTIVE AND PRINCIPAL STRATEGIES. The Fund's investment objective
is to achieve capital growth. A secondary consideration is investment income.
The Fund invests primarily in common stocks of U.S. growth companies. Although
it invests primarily in domestic companies, the Fund may invest up to 25% of its
net assets in foreign companies. The Fund currently invests its assets in a
separate registered investment company with the same objective and policies as
the Fund.
PRINCIPAL RISK FACTORS. The value of Fund shares is sensitive to stock market
volatility. If there is a general decline in the value of U.S. stocks, the value
of the Fund's shares will also likely decline. Changes in stock market values
can be sudden and unpredictable. Also, although stock values can rebound, there
is no assurance that values will return to previous levels. Because the Fund
invests a portion of its assets in foreign securities, the value of Fund shares
may be affected by changes in currency exchange rates and other developments
abroad.
The Fund is not a complete investment program and you may lose money by
investing in the Fund. An investment in the Fund is not a deposit in a bank and
is not insured or guaranteed by the Federal Deposit Insurance Corporation or any
other government agency.
PERFORMANCE INFORMATION. The following bar chart and table provide information
about the Fund's performance, including a comparison of the Fund's performance
to the performance of a broad-based index of domestic common stocks. Although
past performance is no guarantee of future results, this performance information
demonstrates the risk that the value of your investment will change. The
following returns are for Class A shares for each calendar year through December
31, 1999 and do not reflect a sales charge. If the sales charge was reflected,
the returns would be lower.
-5.46% 39.66% 5.23% -2.51% -4.41% 29.23% 18.24% 28.53% 18.31% 4.49%
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
The highest quarterly total return for Class A was 16.91% for the quarter ended
June 30, 1997, and the lowest quarterly return was -15.95% for the quarter ended
September 30, 1990. The year-to-date total return through the end of the most
recent calendar quarter (December 31, 1999 to September 30, 2000) was 0.49%.
One Five Ten
Average Annual Total Return as of December 31, 1999 Year Years Years
-------------------------------------------------------------------------------
Class A Shares -1.51% 18.01% 11.47%
Class B Shares -1.37% 17.96% 11.66%
Class C Shares 2.54% 16.79% 11.06%
Standard & Poor's 500 Index 21.03% 28.54% 18.19%
These returns reflect the maximum sales charge for Class A (5.75%) and any
applicable CDSC for Class B and Class C. The Class B and Class C performance
shown above for the periods prior to September 13, 1994 and November 7, 1994,
respectively, is the performance of Class A shares, adjusted for the sales
charge that applies to Class B or Class C shares (but not adjusted for any other
differences in the expenses of the classes). The Standard & Poor's 500 Index is
an unmanaged index commonly used as a measure of U.S. stock market performance.
Investors cannot invest directly in an Index. (Source for Standard & Poor's 500
Index: Lipper Inc.)
2
<PAGE>
FUND FEES AND EXPENSES. These tables describe the fees and expenses that you
may pay if you buy and hold shares.
Shareholder Fees
(fees paid directly from your Class A Class B Class C
investment)
-------------------------------------------------------------------------------
Maximum Sales Charge (Load) (as a
percentage of offering price) 5.75% None None
Maximum Deferred Sales Charge (Load)
(as a percentage of the lower of net
asset value at time of purchase or
redemption) None 5.00% 1.00%
Maximum Sales Charge (Load)Imposed on
Reinvested Distributions None None None
Exchange Fee None None None
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets) Class A Class B Class C
--------------------------------------------------------------------------------
Management Fees 0.625% 0.625% 0.625%
Distribution and Service (12b-1) Fees 0.000% 1.000% 1.000%
Other Expenses* 0.475% 0.325% 0.325%
----- ----- -----
Total Annual Fund Operating Expenses 1.100% 1.950% 1.950%
* Other Expenses for Class A includes a service fee of 0.15% (resulting from the
imposition of a 0.25% service fee on assets acquired since July, 1989).
EXAMPLE. This Example is intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The Example also assumes
that your investment has a 5% return each year and that the operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
1 Year 3 Years 5 Years 10 Years
-------------------------------------------------------------------------------
Class A shares $ 681 $ 905 $ 1,146 $ 1,838
Class B shares $ 698 $ 1,012 $ 1,252 $ 2,275
Class C shares $ 298 $ 612 $ 1,052 $ 2,275
You would pay the following expenses if you did not redeem your shares:
1 Year 3 Years 5 Years 10 Years
-------------------------------------------------------------------------------
Class A shares $ 681 $ 905 $ 1,146 $ 1,838
Class B shares $ 198 $ 612 $ 1,052 $ 2,275
Class C shares $ 198 $ 612 $ 1,052 $ 2,275
3
<PAGE>
INVESTMENT OBJECTIVE & PRINCIPAL POLICIES AND RISKS
The Fund's investment objective is to achieve capital growth. A secondary
consideration is investment income. The Fund currently seeks to meet its
investment objective by investing in Growth Portfolio (the "Portfolio"), a
separate open-end investment company that has the same objective and policies as
the Fund. The Fund's investment objective may not be changed without shareholder
approval. The Fund's policies may be changed by the Trustees without shareholder
approval.
The Portfolio invests in a carefully selected and continuously managed portfolio
consisting primarily of common stocks of U.S. companies that are expected to
grow at a rate that exceeds that of the overall U.S. economy. The portfolio
manager seeks to purchase stocks that are reasonably priced in relation to their
fundamental value, and which will grow in value over time. In making investment
decisions, the portfolio manager may draw upon the information provided by, and
the expertise of, the investment adviser's research staff. Management of the
Portfolio involves consideration of numerous factors (such as potential for
price appreciation, risk/return, the mix of securities held by the Portfolio
and, secondarily, long-term dividend prospects). Many of these considerations
are subjective. The Portfolio normally invests in a variety of industries, which
may reduce risk.
The Portfolio may invest up to 25% of assets in foreign securities, some of
which may be located in emerging market countries. The value of foreign
securities is affected by changes in currency rates, foreign tax laws (including
withholding tax), government policies (in this country or abroad), relations
between nations and trading, settlement, custodial and other operational risks.
In addition, the costs of investing abroad are generally higher than in the
United States, and foreign securities markets may be less liquid, more volatile
and less subject to governmental supervision than markets in the United States.
Foreign investments also 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. These risks can be more significant for securities
traded in less developed, emerging market countries. As an alternative to
holding foreign-traded securities, the Portfolio may invest in
dollar-denominated securities of foreign companies that trade on U.S. exchanges
or in the U.S. over-the-counter market (including depositary receipts which
evidence ownership in underlying foreign securities); such investments are not
subject to the Portfolio's 25% limitation on investing in foreign securities.
The annual portfolio turnover rate may exceed 100%. A mutual fund with a high
turnover rate (100% or more) may generate more capital gains than a fund with a
lower rate. Capital gains distributions (which reduce the after-tax returns of
shareholders holding Fund shares in taxable accounts) will be made to
shareholders if offsetting capital loss carryforwards do not exist.
The Portfolio may borrow amounts up to one-third of the value of its total
assets (including borrowings), but it will not borrow more than 5% of the value
of its total assets except to satisfy redemption requests or for other temporary
purposes. Such borrowings would result in increased expense to the Fund and,
while they are outstanding, would magnify increases or decreases in the value of
Fund shares. The Portfolio will not purchase additional investment securities
while outstanding borrowings exceed 5% of the value of its total assets. During
unusual market conditions, the Portfolio may temporarily invest up to 100% of
its assets in cash or cash equivalents, which may be inconsistent with the
Fund's investment objective. While temporarily invested, the Portfolio may not
achieve its investment objective. While at times the Portfolio may use
alternative investment strategies in an effort to limit losses, it may choose
not to do so.
MANAGEMENT AND ORGANIZATION
MANAGEMENT. The Portfolio's investment adviser is Boston Management and Research
("BMR"), a subsidiary of Eaton Vance Management ("Eaton Vance"), with offices at
The Eaton Vance Building, 255 State Street, Boston, Massachusetts 02109. Eaton
Vance has been managing assets since 1924 and managing mutual funds since 1931.
Eaton Vance and its subsidiaries currently manage over $45 billion on behalf of
mutual funds, institutional clients and individuals.
The investment adviser manages the investments of the Portfolio. Under its
investment advisory agreement with the Portfolio, BMR receives a monthly
advisory fee of 5/96 of 1% (equivalent to 0.625% annually) of the average daily
net assets of the Portfolio up to and including $300 million, and 1/24 of 1%
(equivalent to 0.50% annually) of the average daily net assets over $300
million. For the fiscal year ended August 31, 2000, the Portfolio paid BMR
advisory fees equivalent to 0.625% of its average daily net assets.
4
<PAGE>
Arieh Coll is the portfolio manager of the Portfolio (since January, 2000). He
also manages other Eaton Vance portfolios, has been an employee of Eaton Vance
and BMR since January, 2000, and is a Vice President of Eaton Vance and BMR.
Prior to joining Eaton Vance, Mr. Coll was employed by Fidelity Investments as a
portfolio manager and investment analyst.
ADMINISTRATION. Eaton Vance serves as the administrator of the Fund. In this
capacity, Eaton Vance administers the affairs of the Fund and provides certain
office facilities. Eaton Vance does not currently receive a fee for serving as
administrator.
ORGANIZATION. The Fund is a series of Eaton Vance Growth Trust, a Massachusetts
business trust. The Fund offers multiple classes of shares. Each Class
represents a pro rata interest in the Fund, but is subject to different expenses
and rights. The Fund does not hold annual shareholder meetings, but may hold
special meetings for matters that require shareholder approval (like electing or
removing trustees, approving management contracts or changing investment
policies that may only be changed with shareholder approval). Because the Fund
invests in the Portfolio, it may be asked to vote on certain Portfolio matters
(like changes in certain Portfolio investment restrictions). When necessary, the
Fund will hold a meeting of its shareholders to consider the Portfolio matter
and then vote its interest in the Portfolio in proportion to the votes cast by
its shareholders. The Fund can withdraw from the Portfolio at any time.
VALUING SHARES
The Fund values its shares once each day only when the New York Stock Exchange
is open for trading (typically Monday through Friday), as of the close of
regular trading on the Exchange (normally 4:00 p.m. eastern time). The purchase
price of Fund shares is their net asset value (plus a sales charge for Class A
shares), which is derived from Portfolio holdings. Exchange-listed securities
are valued at closing sale prices; however, the investment adviser may use the
fair value of a security if events occurring after the close of a securities
market would materially affect net asset value or market prices are unavailable.
Because foreign securities trade on days when Fund shares are not priced, net
asset value can change at times when Fund shares cannot be redeemed.
When purchasing or redeeming Fund shares, your investment dealer must
communicate your order to the principal underwriter by a specific time each day
in order for the purchase price or the redemption price to be based on that
day's net asset value per share. It is the investment dealer's responsibility to
transmit orders promptly. The Fund may accept purchase and redemption orders as
of the time of their receipt by certain investment dealers (or their designated
intermediaries).
PURCHASING SHARES
You may purchase shares through your investment dealer or by mailing the account
application form included in this prospectus to the transfer agent (see back
cover for address). Your initial investment must be at least $1,000. The price
of Class A shares is the net asset value plus a sales charge. The price of Class
B and Class C shares is the net asset value; however, you may be subject to a
sales charge (called a "contingent deferred sales charge" or "CDSC") if you
redeem Class B shares within six years of purchase or Class C shares within one
year of purchase. The sales charges are described below. Your investment dealer
can help you decide which Class of shares suits your investment needs.
After your initial investment, additional investments of $50 or more may be made
at any time by sending a check payable to the order of the Fund or the transfer
agent directly to the transfer agent (see back cover for address). Please
include your name and account number and the name of the Fund and Class of
shares with each investment.
You may also make automatic investments of $50 or more each month or each
quarter from your bank account. You can establish bank automated investing on
the account application or by calling 1-800-262-1122. The minimum initial
investment amount and Fund policy of redeeming accounts with low account
balances are waived for bank automated investing accounts and certain group
purchase plans.
You may purchase Fund shares in exchange for securities. Please call
1-800-225-6265 for information about exchanging securities for Fund shares. If
you purchase shares through an investment dealer (which includes brokers,
dealers and other financial institutions), that dealer may charge you a fee for
executing the purchase for you. The Fund may suspend the sale of its shares at
any time and any purchase order may be refused.
5
<PAGE>
SALES CHARGES
FRONT-END SALES CHARGE. Class A shares are offered at net asset value per share
plus a sales charge that is determined by the amount of your investment. The
current sales charge schedule is:
<TABLE>
Sales Charge Sales Charge Sales Charge
as Percentage of as Percentage of Net as a Percentage of
Amount of Purchase Offering Price Amount Invested Offering Price
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000 5.75% 6.10% 5.00%
$50,000 but less than $100,000 4.75% 4.99% 4.00%
$100,000 but less than $250,000 3.75% 3.90% 3.00%
$250,000 but less than $500,000 3.00% 3.09% 2.50%
$500,000 but less than $1,000,000 2.00% 2.04% 1.75%
$1,000,000 or more 0.00* 0.00* See Below
</TABLE>
*No sales charge is payable at the time of purchase on investments of $1
million or more. A CDSC of 1.00% will be imposed on such investments
(as described below) in the event of r edemptions within 12 months of purchase.
The principal underwriter will pay a commission to investment dealers on sales
of $1 million or more as follows: 1.00% on amounts of $1 million or more but
less than $3 million; plus 0.50% on amounts over $3 million but less than $5
million; plus 0.25% on amounts over $5 million. Purchases totalling $1 million
or more will be aggregated over a 12-month period for purposes of determining
the commission. The principal underwriter may also pay commissions of up to
1.00% on sales of Class A shares made at net asset value to certain tax-deferred
retirement plans.
CONTINGENT DEFERRED SALES CHARGE. Each Class of shares is subject to a CDSC on
certain redemptions. Class A shares purchased at net asset value in amounts of
$1 million or more are subject to a 1.00% CDSC if redeemed within 12 months of
purchase. Class C shares are subject to a 1.00% CDSC if redeemed within 12
months of purchase. Class B shares are subject to the following CDSC schedule:
Year of Redemption After Purchase CDSC
------------------------------------------------
First or Second 5%
Third 4%
Fourth 3%
Fifth 2%
Sixth 1%
Seventh or following 0%
The CDSC is based on the lower of the net asset value at the time of purchase or
at the time of redemption. Shares acquired through the reinvestment of
distributions are exempt from the CDSC. Redemptions are made first from shares
that are not subject to a CDSC.
REDUCING OR ELIMINATING SALES CHARGES. Front-end sales charges on purchases of
Class A shares may be reduced under the right of accumulation or under a
statement of intention. Under the right of accumulation, the sales charges you
pay are reduced if the current market value of your current holdings (based on
the current offering price), plus your new purchases, total $50,000 or more.
Class A shares of other Eaton Vance funds owned by you can be included as part
of your current holdings for this purpose. Under a statement of intention,
purchases of $50,000 or more made over a 13-month period are eligible for
reduced sales charges. Under a statement of intention, the principal underwriter
may hold 5% of the dollar amount to be purchased in escrow in the form of shares
registered in your name until you satisfy the statement or the 13-month period
expires.
Class A shares are offered at net asset value to clients of financial
intermediaries who charge a fee for their services; accounts affiliated with
those financial intermediaries; tax-deferred retirement plans; investment and
institutional clients of Eaton Vance; certain persons affiliated with Eaton
Vance; and certain Eaton Vance and fund service providers. Ask your investment
dealer for details. Class A shares are also sold at net asset value if the
amount invested represents redemption proceeds from a mutual fund not affiliated
with Eaton Vance, provided the redemption occurred within 60 days of the Fund
share purchase and the redeemed shares were subject to a sales charge. Class A
shares so acquired will be subject to a 0.50% CDSC if they are redeemed within
12 months of purchase. Investment dealers will be paid a commission on such
sales equal to 0.50% of the amount invested.
6
<PAGE>
CDSCs are waived for certain redemptions pursuant to a Withdrawal Plan (see
"Shareholder Account Features") and, for Class B and Class C shares, in
connection with certain redemptions from tax-sheltered retirement plans. Call
1-800-225-6265 for details. The Class B CDSC is also waived following the death
of all beneficial owners of shares, but only if the redemption is requested
within one year after death (a death certificate and other applicable documents
may be required).
If you redeem shares, you may reinvest at net asset value all or any portion of
the redemption proceeds in the same class of shares of the Fund (or, for Class A
shares, in Class A shares of any other Eaton Vance fund), provided that the
reinvestment occurs within 60 days of the redemption, and the privilege has not
been used more than once in the prior 12 months. Under these circumstances your
account will be credited with any CDSC paid in connection with the redemption.
Any CDSC period applicable to the shares you acquire upon reinvestment will run
from the date of your original share purchase. Reinvestment requests must be in
writing. If you reinvest, you will be sold shares at the next determined net
asset value following receipt of your request.
DISTRIBUTION AND SERVICE FEES. Class B and Class C shares have in effect plans
under Rule 12b-1 that allow the Fund to pay distribution fees for the sale and
distribution of shares (so-called "12b-1 fees"). Class B and Class C shares pay
distribution fees of 0.75% of average daily net assets annually. Because these
fees are paid from Fund assets on an ongoing basis, they will increase your cost
over time and may cost you more than paying other types of sales charges. All
Classes pay service fees for personal and/or account services equal to 0.25% of
average daily net assets annually (for Class A, only on assets acquired since
July, 1989). The principal underwriter pays commissions to investment dealers on
sales of Class B and Class C shares (except exchange transactions and
reinvestments). The sales commission on Class B shares equals 4% of the purchase
price of the shares. The principal underwriter compensates investment dealers
who sell Class C shares at a rate of 1.00% of the purchase price of the shares,
consisting of 0.75% of sales commission and 0.25% of service fees (for the first
year's service). After the first year, investment dealers also receive 0.75% of
the value of Class C shares in annual distribution fees. After the sale of
shares, the principal underwriter receives service fees for one year and
thereafter investment dealers generally receive them based on the value of
shares sold by such dealers.
Class B and Class C distribution fees are subject to termination when payments
under the Rule 12b-1 plans are sufficient to extinguish uncovered distribution
charges. As described more fully in the Statement of Additional Information,
uncovered distribution charges of a Class are increased by sales commissions
payable by the Class to the principal underwriter in connection with sales of
shares of that Class and by an interest factor tied to the U.S. Prime Rate.
Uncovered distribution charges are reduced by the distribution fees paid by the
Class and by CDSCs paid to the Fund by redeeming shareholders. The amount of the
sales commissions payable by Class B to the principal underwriter in connection
with sales of Class B shares is significantly less than the maximum permitted by
the sales charge rule of the National Association of Securities Dealers, Inc. To
date, neither Class B nor Class C uncovered distribution charges have been fully
covered.
REDEEMING SHARES
You can redeem shares in any of the following ways:
By Mail Send your request to the transfer agent along with any
certificates and stock powers. The request must be signed
exactly as your account is registered and signature
guaranteed. You can obtain a signature guarantee at certain
banks, savings and loan institutions, credit unions,
securities dealers, securities exchanges, clearing agencies
and registered securities associations. You may be asked to
provide additional documents if your shares are registered
in the name of a corporation, partnership or fiduciary.
By Telephone You can redeem up to $50,000 b y calling the transfer agent
at 1-800-262-1122 on Monday through Friday, 9:00 a.m. to
4:00 p.m. (eastern time). Proceeds of a telephone redemption
can be mailed only to the account address. Shares held by
corporations, trusts or certain other entities and shares
that are subject to fiduciary arrangements cannot be
redeemed by telephone.
Through an
Investment Dealer Your investment dealer is responsible for transmitting the
order promptly. An investment 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.
7
<PAGE>
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.
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 are, in the aggregate, less than or equal to 12%
annually of the greater of either the initial account balance or the current
account balance. A minimum account size of $5,000 is required to establish a
systematic withdrawal plan. Because purchases of Class A shares are generally
subject to an initial sales charge, you should not make withdrawals from your
account while you are making purchases.
TAX-SHELTERED RETIREMENT PLANS. Class A and Class C shares are available for
purchase in connection with certain tax-sheltered retirement plans. Call
1-800-225-6265 for information. Distributions will be invested in additional
shares for all tax-sheltered retirement plans.
EXCHANGE PRIVILEGE. You may exchange your Fund shares for shares of the same
Class of another Eaton Vance fund. Exchanges are generally made at net asset
value. If you hold Class A shares for less than six months and exchange them for
shares subject to a higher sales charge, you will be charged the difference
between the two sales charges. If your shares are subject to a CDSC, the CDSC
will continue to apply to your new shares at the same CDSC rate. For purposes of
the CDSC, your shares will continue to age from the date of your original
purchase.
Before exchanging, you should read the prospectus of the new fund carefully. If
you wish to exchange shares, write to the transfer agent (address on back cover)
or call 1-800-262-1122. Periodic automatic exchanges are also available. The
exchange privilege may be changed or discontinued at any time. You will receive
60 days' notice of any material change to the privilege. This privilege may not
be used for "market timing". If an account (or group of accounts) makes more
than two round-trip exchanges (exchanged from one fund to another and back
again) within 12 months, it will be deemed to be market timing. The exchange
privilege may be terminated for market timing accounts.
8
<PAGE>
TELEPHONE AND ELECTRONIC TRANSACTIONS. You can redeem or exchange shares by
telephone as described in this prospectus. In addition, certain transactions may
be conducted through the Internet. The transfer agent and the principal
underwriter have procedures in place to authenticate telephone and electronic
instructions (such as using security codes or verifying personal account
information). As long as the transfer agent and principal underwriter follow
reasonable procedures, they will not be responsible for unauthorized telephone
or electronic transactions and you bear the risk of possible loss resulting from
these transactions. You may decline the telephone redemption option on the
account application. Telephone instructions are tape recorded.
"STREET NAME" ACCOUNTS. If your shares are held in a "street name" account at an
investment dealer, that dealer (and not the Fund or its transfer agent) will
perform all recordkeeping, transaction processing and distribution payments.
Because the Fund will have no record of your transactions, you should contact
your investment dealer to purchase, redeem or exchange shares, to make changes
in your account, or to obtain account information. You will not be able to
utilize a number of shareholder features, such as telephone transactions,
directly with the Fund. The transfer of shares in a "street name" account to an
account with another investment dealer or to an account directly with the Fund
involves special procedures and you will be required to obtain historical
information about your shares prior to the transfer. Before establishing a
"street name" account with an investment dealer, you should determine whether
that dealer allows reinvestment of distributions in "street name" accounts.
ACCOUNT QUESTIONS. If you have any questions about your account or the services
available, please call Eaton Vance Shareholder Services at 1-800-225-6265, or
write to the transfer agent (see back cover for address).
TAX INFORMATION
The Fund intends to pay dividends semi-annually and to distribute any net
realized capital gains annually. A portion of the Fund's distributions may be
eligible for the corporate dividends-received deduction. Distributions of income
and net short-term capital gains will be taxable as ordinary income.
Distributions of any long-term capital gains are taxable as long-term gains.
Distributions are expected to be taxable primarily as long-term capital gains.
The Fund's distributions will be taxable as described above whether they are
paid in cash or reinvested in additional shares.
Investors who purchase shares shortly before the record date of a distribution
will pay the full price for the shares and then receive some portion of the
price back as a taxable distribution. Certain distributions paid in January will
be taxable to shareholders as if received on December 31 of the prior year. A
redemption of Fund shares, including an exchange for shares of another fund, is
a taxable transaction.
Shareholders should consult with their advisers concerning the applicability of
state, local and other taxes to an investment.
9
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights are intended to help you understand the Fund's
financial performance for the past five years. Certain information in the table
reflects the financial results for a single Fund share. The total returns in the
table represent the rate an investor would have earned (or lost) on an
investment in the Fund (assuming reinvestment of all distributions and not
taking into account a sales charge). This information has been audited by
PricewaterhouseCoopers LLP, independent accountants. The report of
PricewaterhouseCoopers LLP and the Fund's financial statements are incorporated
herein by reference and included in the annual report, which is available on
request. The Fund began offering three Classes of shares on September 1, 1997.
Prior to that date, the Fund offered only Class A shares and Class B and Class C
existed as separate funds.
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
------------------------------------------------------------------------------------------------------------
2000(1) 1999 1998
----------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value -
Beginning of year $ $9.950 $17.330 $15.330 $ 10.320 $16.490 $14.840 $ 10.360 $16.560 $14.940
-------- ------- ------- -------- ------- ------- -------- ------- -------
Income (loss) from
operations
Net investment
income (loss) $ (0.020) $(0.180) $(0.159) $ 0.008 $(0.135) $(0.109) $ 0.044 $(0.079) $(0.079)
Net realized and
unrealized gain 0.771 1.331 1.170 2.153 3.467 3.091 0.111 0.204 0.174
-------- ------- ------- -------- ------- ------- -------- ------- -------
Total income from
operations $ 0.751 $ 1.151 $ 1.011 $ 2.161 $ 3.332 $ 2.982 $ 0.155 $ 0.125 $ 0.095
-------- ------- ------- -------- ------- ------- -------- ------- -------
Less distributions
From net investment
income $ -- $ -- $ -- $ (0.039) $ -- $ -- $ -- $ -- $ --
In excess of net
investment income -- -- -- -- -- -- -- -- --
From net realized
gain (0.341) (0.341) (0.341) (2.492) (2.492) (2.492) (0.195) (0.195) (0.195)
In excess of net
realized gain -- -- -- -- -- -- -- -- --
From paid-in capital -- -- -- -- -- -- -- -- --
-------- ------- ------- -------- ------- ------- -------- ------- -------
Total distributions $ (0.341) $(0.341) $(0.341) $ (2.531) $(2.492) $(2.492) $ (0.195) $(0.195) $(0.195)
-------- ------- ------- -------- ------- ------- -------- ------- -------
Net asset value -
End of year $ 10.360 $18.140 $16.000 $ 9.950 $17.330 $15.330 $ 10.320 $16.490 $14.840
-------- ------- ------- -------- ------- ------- -------- ------- -------
Total return 2) 7.74% 6.74% 6.70% 21.14% 20.28% 20.16% 1.45% 0.72% 0.60%
Ratios/Supplemental
Data
Net assets, end of
year (000's omitted) $164,388 $16,178 $ 2,774 $171,752 $18,553 $ 3,244 $159,602 $17,359 $ 2,316
Ratios (as a
percentage of
average daily net
assets):
Operating expenses(3) 1.09% 1.94% 1.94% 1.03% 1.85% 1.91% 1.08% 1.93% 1.94%
Interest expense(3) 0.01% 0.01% 0.01% -- -- -- -- -- --
Net investment
income (loss) (0.21)% (1.05)% (1.05)% 0.09% (0.74)% (0.80)% 0.37% (0.48)% (0.51)%
Portfolio Turnover
of the Portfolio 274% 274% 274% 34% 34% 34% 55% 55% 55%
<CAPTION>
1997 1996
----------------------
CLASS A CLASS A
----------------------------------------------
<S> <C> <C>
Net asset value -
Beginning of year $ 9.240 $ 8.330
-------- --------
Income (loss) from
operations
Net investment $ 0.020 $ 0.043
income (loss)
Net realized and
unrealized gain 2.845 1.202
-------- --------
Total income from
operations $ 2.865 $ 1.245
-------- --------
Less distributions
From net investment $ (0.019) $ (0.035)
income
In excess of net (0.018) --
investment income
From net realized (0.890) (0.300)
gain
In excess of net (0.762) --
realized gain
From paid-in capital (0.056) --
-------- --------
Total distributions $ (1.745) $ (0.335)
-------- --------
Net asset value -
End of year $ 10.360 $ 9.240
-------- --------
Total return (2) 33.01% 15.38%
Ratios/Supplemental
Data
Net assets, end of $165,676 $138,252
year (000's omitted)
Ratios (as a
percentage of
average daily net
assets):
Operating expenses(3) 1.01% 0.98%
Interest expense(3) -- --
Net investment 0.19% 0.48%
income (loss)
Portfolio Turnover 28% 62%
of the Portfolio
</TABLE>
(1) Net investment loss per share was computed using average shares
outstanding.
(2) Total return is calculated assuming a purchase at the net asset value on
the first day and a sale at the net asset value on the last day of each
period reported. Distributions, if any, are assumed to be reinvested at the
net asset value on the reinvestment date. Total return is not computed on
an annualized basis.
(3) Includes the Fund's share of the Portfolio's allocated expenses.
10
<PAGE>
LOGO
Investing
for the
21st Century(R)
MORE INFORMATION
--------------------------------------------------------------------------------
ABOUT THE FUND: More information is available in the statement of
additional information. The statement of additional information is
incorporated by reference into this prospectus. Additional information
about the Portfolio's investments is available in the annual and
semi-annual reports to shareholders. In the annual report, you will find a
discussion of the market conditions and investment strategies that
significantly affected the Fund's performance during the past year. You may
obtain free copies of the statement of additional information and the
shareholder reports by contacting:
Eaton Vance Distributors, Inc.
The Eaton Vance Building
255 State Street
Boston, MA 02109
1-800-225-6265
website: www.eatonvance.com
You will find and may copy information about the Fund (including the
statement of additional information and shareholder reports): at the
Securities and Exchange Commission's public reference room in Washington,
DC (call 1-202-942-8090 for information on the operation of the public
reference room); on the EDGAR Database on the SEC's Internet site (http://
www.sec.gov); or, upon payment of copying fees, by writing to the SEC's
public reference section, Washington, DC 20549-0102, or by electronic mail
at [email protected].
ABOUT SHAREHOLDER ACCOUNTS: You can obtain more information from Eaton
Vance Share- holder Services (1-800-225-6265). If you own shares and would
like to add to, redeem or change your account, please write or call the
transfer agent:
--------------------------------------------------------------------------------
PFPC, Inc.
P.O. Box 9653
Providence, RI 02904-9653
1-800-262-1122
The Fund's SEC File No. is 811-1241. GFP
<PAGE>
LOGO
INVESTING
FOR THE
21ST
CENTURY(R)
EATON VANCE WORLDWIDE
HEALTH SCIENCES FUND
A diversified global growth fund concentrating in health
sciences companies
EATON VANCE
INFORMATION AGE FUND
A diversified global growth fund of information age
companies
Prospectus Dated
January 1, 2001
The Securities and Exchange Commission has not approved or disapproved these
securities or determined whether this prospectus is truthful or complete.
Any representation to the contrary is a criminal offense.
<TABLE>
<CAPTION>
Information in this prospectus
Page Page
-------------------------------------------------------------------------------
<S> <C> <C> <C>
Fund Summaries 2 Sales Charges 8
Investment Objectives & Principal Redeeming Shares 10
Policies and Risks 5
Management and Organization 6 Shareholder Account 10
Features
Valuing Shares 7 Tax Information 11
Purchasing Shares 8 Financial Highlights 13
-------------------------------------------------------------------------------
</TABLE>
This prospectus contains important information about the
Funds and the services available to shareholders.
Please save it for reference.
<PAGE>
Fund Summaries
This section summarizes the investment objectives, and principal strategies and
risks of investing in each Fund. Information about the performance, fees and
expenses of each Fund is presented on the pages that follow.
Investment Objectives and Principal Strategies
Eaton Vance Worldwide Health Sciences Fund. The Health Sciences Fund's
investment objective is to seek long-term capital growth by investing in a
global and diversified portfolio of health sciences companies. The Fund invests
primarily in common stocks of companies engaged in the development, production
or distribution of products related to scientific advances in health care. The
Fund invests in companies with a broad range of market capitalizations,
including small companies. The Fund invests in foreign securities and will
normally be invested in issuers located in at least three different countries.
In managing the portfolio, the portfolio manager looks for stocks that will grow
in value over time, regardless of short-term market fluctuations. The Health
Sciences Fund concentrates (that is, invests at least 25% of its assets) its
investments in medical research and the health care industry, so the Fund could
be affected by any event that adversely affects that industry.
Eaton Vance Information Age Fund. The Information Age Fund's investment
objective is to seek long-term capital growth. The Fund invests primarily in
common stocks of information age companies expected to grow in value.
Approximately 40% to 60% of total assets is managed by Lloyd George Investment
Management (Bermuda) Limited, which invests in foreign securities, including
securities issued by companies in emerging markets. The balance of the Fund's
total assets is managed by Boston Management and Research, which invests in
domestic and Canadian securities. The Fund invests in companies with a broad
range of market capitalizations, including smaller companies. Because of the
dynamic nature of many portfolio companies, trading may be more frequent than
for mutual funds focusing only on established companies located in only one
country. The Fund does not concentrate (that is, invest 25% or more of its
assets) in any one industry.
Each Fund currently invests its assets in a separate registered investment
company with the same objective and policies as the Fund.
Principal Risk Factors
The value of each Fund's shares is sensitive to stock market volatility.
Moreover, the stock in which the Funds invest may be more volatile than the
stock market as a whole. If there is a decline in the value of exchange-listed
stocks, the value of Fund shares will also likely decline. Changes in stock
market values can be sudden and unpredictable. Also, although stock values can
rebound, there is no assurance that values will return to previous levels.
Because both Funds can invest a significant portion of assets in foreign
securities, the value of Fund shares can also be adversely affected by changes
in currency exchange rates and political and economic developments abroad. In
emerging or less-developed countries, these risks can be significant. The
securities of smaller companies are generally subject to greater price
fluctuation and investment risk than securities of more established companies.
The Health Sciences Fund concentrates (that is, invests at least 25% of its
assets) its investments in medical research and the health care industry, so the
Fund will likely be affected by events that adversely affect that sector. The
Health Sciences Fund has historically held fewer than 60 stocks at any one time;
therefore, the Fund is more sensitive to developments affecting particular
stocks than would be a more broadly diversified fund. These developments include
product obsolescence, the failure of the issuer to develop new products and the
expiration of patent rights. The value of Health Sciences Fund shares can also
be impacted by regulatory activities that affect health sciences companies. For
instance, increased regulation can increase the cost of bringing new products to
market and thereby reduce profits.
The Information Age Fund is subject to factors that adversely affect
information-related industries, such as deregulation of certain of these
industries and product obsolescence due to technological advancements, and
increased competition from competitors.
Neither Fund is a complete investment program and you may lose money by
investing. An investment in a Fund is not a deposit in a bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
2
<PAGE>
Eaton Vance Worldwide Health Sciences Fund
Performance Information. The following bar chart and table provide information
about Health Sciences Fund's performance, including a comparison of the Fund's
performance to the performance of domestic and foreign stock indices. Although
past performance is no guarantee of future results, this performance information
demonstrates the risk that the value of your investment will change. The
following returns are for Class A shares for each calendar year through December
31, 1999 and do not reflect sales charges. If the sales charge was reflected,
the returns would be lower.
5.41% 42.22% 2.26% 26.41% -6.42% 61.21% 18.39% 10.49% 23.45% 23.92%
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
The highest quarterly total return for Class A was 27.16% for the quarter ended
December 31, 1998, and the lowest quarterly return was -16.76% for the quarter
ended September 30, 1990. The year-to-date total return through the end of the
most recent calendar quarter (December 31, 1999 to September 30, 2000) was
86.37%
<TABLE>
<CAPTION>
One Five Ten
Average Annual Total Return as of December 31, 1999 Year Years Years
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A Shares 16.78% 24.91% 18.62%
Class B Shares 18.05% 25.83% 19.13%
Class C Shares 21.90% 26.13% 19.20%
Standard & Poor's 500 Index 21.03% 28.54% 18.19%
Morgan Stanley Capital International Europe, Australasia & Far East Index 27.30% 13.15% 7.33%
</TABLE>
These returns reflect the maximum sales charge for Class A (5.75%) and any
applicable CDSC for Class B and Class C. The Class B and Class C performance
shown above for the period prior to September 23, 1996 and January 1, 1998,
respectively, is the performance of Class A shares, adjusted for the sales
charge that applies to Class B or Class C shares (but not adjusted for any other
differences in the expenses of the classes). The Standard & Poor's 500 Index is
an unmanaged index of common stocks trading in the U.S. The MSCI EAFE Index is
an unmanaged index of foreign stocks. Investors cannot invest directly in an
Index. (Source: Lipper Inc.) The Fund's performance is compared to the
performance of a domestic and a foreign index because it invests in domestic and
foreign securities.
Fund Fees and Expenses. These tables describe the fees and
expenses that you may pay if you buy and hold share.
<TABLE>
<CAPTION>
Shareholder Fees
(fees paid directly from your Class A Class B Class C
investment)
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Maximum Sales Charge (Load) (as a
percentage of offering price) 5.75% None None
Maximum Deferred Sales Charge (Load)
(as a percentage of the lower of net
asset value at time of purchase or time
of redemption) None 5.00% 1.00%
Maximum Sales Charge (Load) Imposed on
Reinvested Distributions None None None
Redemption Fee (as a percentage of
amount redeemed)* 1.00% None None
Exchange Fee None None None
</TABLE>
<TABLE>
<CAPTION>
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets) Class A Class B Class C
-------------------------------------------------------------------------------
<S> <C> <C> <C>
Management Fees 1.28% 1.28% 1.28%
Distribution and Service (12b-1) Fees 0.25% 1.00% 1.00%
Other Expenses 0.26% 0.26% 0.26%
-------- ---- --------
Total Annual Fund Operating Expenses 1.79% 2.54% 2.54%
</TABLE>
* For shares redeemed or exchanged within three months of the settlement of the
purchase.
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and then redeem all of
your shares at the end of those periods. The Example also assumes that your
investment has a 5% return each year and that the operating expenses remain the
same. Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A shares $ 746* $ 1,106 $ 1,489 $ 2,559
Class B shares $ 757 $ 1,191 $ 1,550 $ 2,875
Class C shares $ 357 $ 791 $ 1,350 $ 2,875
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A shares $ 746* $ 1,106 $ 1,489 $ 2,559
Class B shares $ 257 $ 791 $ 1,350 $ 2,875
Class C shares $ 257 $ 791 $ 1,350 $ 2,875
</TABLE>
* Due to the redemption fee, the cost of investing for one year would be $100
higher for shares redeemed or exchanged within three months of the settlement
of the purchase.
3
<PAGE>
Eaton Vance Information Age Fund
Performance Information. The following bar chart and table provide information
about Information Age Fund's performance, including a comparison of the Fund's
performance to the performance of a global index of equity securities. Although
past performance is no guarantee of future results, this performance information
demonstrates the risk that the value of your investment will change from
year-to-year. The following returns are for Class B shares for each calendar
year through December 31, 1999 and do not reflect sales charges. If the sales
charge was reflected, the returns would be lower.
13.61% 16.86% 21.91% 82.55%
1996 1997 1998 1999
The highest quarterly total return for Class B was 42.96% for the quarter ended
December 31, 1999, and the lowest quarterly return was -12.11% for the quarter
ended September 30, 1998. The year-to-date total return through the end of the
most recent calendar quarter (December 31, 1999 to September 30, 2000) was
-7.20%.
<TABLE>
<CAPTION>
One Life of
Average Annual Total Return as of December 31, 1999 Year Fund
---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Class A Shares 72.40% 28.40%
Class B Shares 77.55% 29.69%
Class C Shares 81.33% 29.51%
Morgan Stanley Capital International World Index 26.96% 13.47%
</TABLE>
These returns reflect the maximum sales charge for Class A (5.75%) and any
applicable CDSC for Class B and Class C. The Class A and Class C performance
shown above for the period prior to September 18, 1995 and November 22, 1995,
respectively, is the performance of Class B shares, adjusted for the sales
charge that applies to Class A or Class C shares (but not adjusted for any other
differences in the expenses of the classes). Class B shares commenced operations
on September 18, 1995. Life of Fund returns are calculated from September 30,
1995. The MSCI World Index is an unmanaged index of global stocks. Investors
cannot invest directly in an Index. (Source: Lipper Inc.)
Fund Fees and Expenses. These tables describe the fees and
expenses that you may pay if you buy and hold shares.
<TABLE>
<CAPTION>
Shareholder Fees
(fees paid directly from your Class A Class B Class C
investment)
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Maximum Sales Charge (Load) (as a
percentage of offering price) 5.75% None None
Maximum Deferred Sales Charge (Load)
(as a percentage of the lower of net
asset value at time of purchase or time
of redemption) None 5.00% 1.00%
Maximum Sales Charge (Load) Imposed on
Reinvested Distributions None None None
Exchange Fee None None None
</TABLE>
<TABLE>
<CAPTION>
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets) Class A Class B Class C
---------------------------------------------------------------------------
<S> <C> <C> <C>
Management Fees 1.25% 1.25% 1.25%
Distribution and Service (12b-1) Fees 0.50% 1.00% 1.00%
Other Expenses 0.37% 0.37% 0.37%
_____ _____ _____
Total Annual Fund Operating Expenses 2.12% 2.62% 2.62%
Expense Reimbursement* (0.13%) 0.00% 0.00%
______ _____ _____
Total Annual Fund Operating Expenses
(net of reimbursement) 1.99% 2.62% 2.62%
</TABLE>
* For the current fiscal year, Eaton Vance Management will reimburse Class A
Distribution and Service (12b-1) Fees to the extent Total
Annual Fund Operating Expenses for Class A shares exceed 1.99%.
Example
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and then redeem all of
your shares at the end of those periods. The Example also assumes that your
investment has a 5% return each year and that the operating expenses remain the
same. Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A shares $ 765 $ 1,189 $ 1,637 $ 2,876
Class B shares $ 765 $ 1,214 $ 1,590 $ 2,954
Class C shares $ 365 $ 814 $ 1,390 $ 2,954
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A shares $ 765 $ 1,189 $ 1,637 $ 2,876
Class B shares $ 265 $ 814 $ 1,390 $ 2,954
Class C shares $ 265 $ 814 $ 1,390 $ 2,954
</TABLE>
4
<PAGE>
Investment Objectives & Principal Policies and Risks
Health Sciences Fund. The Health Sciences Fund's investment objective is to seek
long-term capital growth by investing in a global and diversified portfolio of
health sciences companies. The Fund currently seeks to meet its investment
objective by investing in the Worldwide Health Sciences Portfolio, a separate
open-end investment company that has the same objective and policies as the
Fund. The Fund's objective and policies may be changed without shareholder
approval. There is no present intention to make any such change and any proposed
material change in investment objective will be submitted to shareholders for
their approval.
The Health Sciences Portfolio invests at least 65% of total assets in securities
(primarily common stocks) of companies principally engaged in the development,
production or distribution of products or services related to scientific
advances in health care, including biotechnology, diagnostics, managed health
care, medical equipment and supplies, and pharmaceuticals. At the time the
Health Sciences Portfolio makes an investment, 50% or more of the company's
sales, earnings or assets will arise from or will be dedicated to the
application of scientific advances related to health care. The Health Sciences
Portfolio may invest in securities of both established and emerging companies,
some of which may be denominated in foreign currencies.
Many health sciences companies are subject to substantial governmental
regulations that can affect their prospects. Changes in governmental policies,
such as reductions in the funding of third-party payment programs, may have a
material effect on the demand for particular health care products and services.
Regulatory approvals (often entailing lengthy application and testing
procedures) are also generally required before new drugs and certain medical
devices and procedures may be introduced. Many of the products and services of
companies engaged in medical research and health care are also subject to
relatively high risks of rapid obsolescence caused by progressive scientific and
technological advances. The enforcement of patent, trademark and other
intellectual property laws will affect the value of many such companies. The
Health Sciences Portfolio will invest in securities of emerging growth health
sciences companies, which may offer limited products or services or which are at
the research and developmental stage with no marketable or approved products or
technologies.
The portfolio manager seeks to purchase stocks that are reasonably priced in
relation to their fundamental value, and which will grow in value over time. In
making each investment decision, the portfolio manager may draw upon the
information provided by, and the expertise of, the investment adviser's research
staff. The stock selection process will be based on numerous factors, including
the potential to increase market share (for larger companies), and the potential
of research and development projects (for smaller companies). The portfolio
manager considers selling a holding whenever it adds a holding to the Portfolio.
The stock selection process is highly subjective.
Information Age Fund. The Information Age Fund's investment objective is to seek
long-term capital growth. The Fund currently seeks to meet its investment
objective by investing in the Information Age Portfolio, a separate open-end
investment company that has the same objective and policies as the Fund. The
Fund's objective and policies may be changed without shareholder approval. There
is no present intention to make any such change and any proposed material change
in investment objective will be submitted to shareholders for their approval.
The Information Age Portfolio invests in a global and diversified portfolio of
common stocks of companies in information-related industries. These "information
age" companies are companies that may be engaged in providing information
services, such as telephone, broadcasting, cable or satellite television,
publishing, advertising, producing information and entertainment media, data
processing, networking of data processing and communication systems, or
providing consumer interconnection to computer communication networks. In
addition, such companies may be engaged in the development, manufacture, sale,
or servicing of information age products, such as computer hardware, software
and networking equipment, mobile telephone devices, telecommunications network
switches and equipment, television and radio broadcasting and receiving
equipment, or news and information media of all types. The Information Age
Portfolio will invest at least 65% of total assets in securities of information
age companies.
The Information Age Portfolio may invest in securities of both established and
emerging companies operating in developed and emerging economies. Many
information age companies are subject to substantial government regulations that
can affect their prospects. The enforcement of patent, trademark and other
intellectual property laws will affect the value of many such companies. To
reduce risk, the portfolio managers normally diversify investments by
capitalization, geographical location and industry. The Portfolio does not
concentrate in any one industry. A portfolio manager may use hedging techniques
(such as forward contracts and options) to attempt to mitigate adverse effects
of foreign currency fluctuations.
5
<PAGE>
The portfolio managers seek to purchase stocks that are reasonably priced in
relation to their fundamental value, and which will grow in value over time. In
making each investment decision, a portfolio manager may draw upon the
information provided by, and the expertise of, the investment adviser's research
staff. The stock selection process will be based on numerous factors, including
the potential for price appreciation, risk/return, and the mix of securities in
the Portfolio. Many of these considerations are subjective. Because the value of
information age companies will fluctuate in response to technological and
regulatory developments, a portfolio manager generally will sell a stock when he
believes it has attained its optimum value. Therefore, the Information Age
Portfolio's annual portfolio turnover rate may exceed 100%. A fund with high
turnover (100% or more) pays more commissions and may generate more capital
gains than a fund with a lower rate. Paying more commissions may also reduce
return. Capital gains distributions will reduce after tax returns for
shareholders holding Fund shares in taxable accounts.
Common Investment Practices. Each Portfolio may invest in securities of smaller,
less seasoned companies. Such securities are generally subject to greater price
fluctuations, limited liquidity, higher transaction costs and higher investment
risk. Smaller companies may have limited product lines, markets or financial
resources, and they may be dependent on a limited management group. There is
generally less publicly available information about such companies than for
larger, more established companies. The Health Sciences Portfolio may make
direct investments in companies in private placement transactions. Because of
the absence of any public trading market for some of these investments (such as
those that are legally restricted) it may take longer to liquidate these
positions at fair value than would be the case for publicly traded securities.
The values of foreign investments are affected by changes in currency rates or
exchange control regulations, application of foreign tax laws (including
withholding tax), changes in governmental administration or economic or monetary
policy (in this country or abroad) or changed circumstances in dealings between
nations. Currency exchange rates may fluctuate significantly over short periods
of time causing a Portfolio's net asset value to fluctuate as well. Costs are
incurred in connection with conversions between various currencies. In addition,
foreign brokerage commissions, custody fees and other costs of investing are
generally higher than in the United States, and foreign securities markets may
be less liquid, more volatile and less subject to governmental supervision than
in the United States. Investments in foreign issuers could be affected by other
factors not present in the United States, including expropriation, armed
conflict, confiscatory taxation, lack of uniform accounting and auditing
standards, less publicly available financial and other information and potential
difficulties in enforcing contractual obligations. Transactions in the
securities of foreign issuers could be subject to settlement delays and risk of
loss. As an alternative to holding foreign stocks directly, the Portfolios may
invest in dollar-denominated depositary receipts which evidence ownership in
underlying foreign stocks. Investment in depositary receipts generally is not
subject to a Portfolio's limitation on investing in foreign companies.
Health Sciences Portfolio may borrow amounts up to one-third of the value of its
total assets (including borrowings) and the Information Age Portfolio may borrow
up to 25% of net assets. Neither may borrow more than 5% of the value of its
total assets except to satisfy redemption requests or for other temporary
purposes. Such borrowings would result in increased expense to A Fund and, while
they are outstanding, would magnify increases or decreases in the value of Fund
shares. The Portfolios will not purchase additional investment securities while
outstanding borrowings exceed 5% of the value of its total assets. During
unusual market conditions, each Portfolio may temporarily invest up to 100% of
its assets in cash or cash equivalents which may not be consistent with a Fund's
investment objective. While temporarily invested, a Portfolio may not achieve
its investment objective. While at times a Portfolio may use alternative
investment strategies in an effort to limit losses, it may choose not to do so.
Management and Organization
Management. Boston Management and Research ("BMR"), The Eaton Vance Building,
255 State Street, Boston, MA 02109, and Lloyd George Investment Management
(Bermuda) Limited ("Lloyd George"), 3808 One Exchange Square, Central Hong Kong,
co-manage the Information Age Portfolio. OrbiMed Advisors, Inc. ("OrbiMed"), 767
3rd Avenue, New York, NY 10017, manages the Health Sciences Portfolio. Each
investment adviser manages Portfolio investments. Eaton Vance Management ("Eaton
Vance") manages each Fund and serves as administrator to each Portfolio.
BMR and Lloyd George receive a monthly advisory fee, to be divided equally
between them, of .0625% (equivalent to .75% annually) of the average daily net
assets of the Information Age Portfolio up to $500 million. This fee declines at
intervals above $500 million. For the fiscal year ended August 31, 2000, the
Information Age Portfolio paid advisory fees of 0.75% of its average daily net
assets.
Duncan W. Richardson and Jacob Rees-Mogg are the portfolio managers of the
Information Age Portfolio (since it commenced operations). Mr. Richardson also
manages other Eaton Vance portfolios, has been an employee of Eaton Vance
6
<PAGE>
for more than 5 years, and is a Vice President of Eaton Vance and of BMR. Mr.
Rees-Mogg is an Investment Manager for Lloyd George and has been employed by
Lloyd George for more than 5 years.
OrbiMed receives a monthly fee of 1.00% of the Health Sciences Portfolio's
average daily net assets up to $30 million of assets, 0.90% of the next $20
million of assets, and 0.75% on assets in excess of $50 million. For assets of
$500 million or more, the advisory fee is 0.70% for $500 million but less than
$1 billion, 0.65% for $1 billion but less than $1.5 billion, 0.60% for $1.5
billion but less than $2 billion, 0.55% for $2 billion but less than $3 billion
and 0.50% for $3 billion and over. OrbiMed may receive a performance-based
adjustment of up to 0.25% of the average daily net assets of the Health Sciences
Portfolio based upon its investment performance compared to the Standard &
Poor's Index of 500 Common Stocks over specified periods. For the fiscal year
ended August 31, 2000, the Health Sciences Portfolio paid advisory fees of 0.78%
of its average daily net assets. OrbiMed has agreed to pay Eaton Vance
Distributors, Inc. one-third of its advisory fee receipts from its own resources
for EVD's activities as Portfolio placement agent.
Samuel D. Isaly is the portfolio manager of the Health Sciences Portfolio (since
it commenced operations). He is Managing Partner of OrbiMed and has been
employed by OrbiMed (and its predecessor) for more than 5 years. OrbiMed is an
investment advisory firm registered with the Securities and Exchange Commission.
Mr. Isaly has provided investment advisory services since 1989.
Lloyd George and its affiliates act as investment adviser to various individual
and institutional clients and manage $2.6 billion in assets. Eaton Vance's
corporate parent owns 21% of Lloyd George's corporate parent. Lloyd George, its
affiliates and two of the Information Age Portfolio's Trustees are domiciled
outside of the United States. Because of this, it would be difficult for the
Portfolio to bring a claim or enforce a judgment against them.
Eaton Vance manages the business affairs of the Funds and administers the
business affairs of the Portfolios. For these services, Eaton Vance receives a
monthly fee from each Fund and Portfolio of 1/48 of 1% (equal to 0.25% annually)
of average daily net assets up to $500 million. This fee declines at intervals
above $500 million. For the fiscal year ended August 31, 2000, Eaton Vance
earned management fees of 0.25% of each Fund's average daily net assets and
administration fees of 0.25% of each Portfolio's average daily net assets. Eaton
Vance has been managing assets since 1924 and managing mutual funds since 1931.
Eaton Vance and its subsidiaries currently manage over $45 billion on behalf of
mutual funds, institutional clients and individuals.
Organization. Each Fund is a series of Eaton Vance Growth Trust, a Massachusetts
business trust. Each Fund offers multiple classes of shares. Each Class
represents a pro rata interest in the Fund, but is subject to different expenses
and rights. The Funds do not hold annual shareholder meetings, but may hold
special meetings for matters that require shareholder approval (like electing or
removing trustees, approving management contracts or changing investment
policies that may only be changed with shareholder approval). Because A Fund
invests in a Portfolio, it may be asked to vote on certain Portfolio matters
(like changes in certain Portfolio investment restrictions). When necessary, A
Fund will hold a meeting of its shareholders to consider the Portfolio matter
and then vote its interest in the Portfolio in proportion to the votes cast by
its shareholders. A Fund can withdraw from A Portfolio at any time.
Because the Funds use this combined prospectus, a Fund could be held liable for
a misstatement or omission made about another Fund. The Trust's Trustees
considered this in approving the use of a combined prospectus.
Valuing Shares
Each Fund values its shares once each day only when the New York Stock Exchange
is open for trading (typically Monday through Friday), as of the close of
regular trading on the Exchange (normally 4:00 p.m. eastern time). The purchase
price of Fund shares is their net asset value (plus a sales charge for Class A).
Exchange-listed securities are valued at closing sale prices; however, an
investment adviser may use the fair value of a security if events occurring
after the close of a securities market 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. Each Fund may accept purchase and redemption orders as
of the time of their receipt by certain investment dealers (or their designated
intermediaries).
7
<PAGE>
Purchasing Shares
You may purchase shares through your investment dealer or by mailing the account
application form included in this prospectus to the transfer agent (see back
cover for address). Your initial investment must be at least $1,000. The price
of Class A shares is the net asset value plus a sales charge. The price of Class
B and Class C shares is the net asset value; however, you may be subject to a
sales charge (called a "contingent deferred sales charge" or "CDSC") if you
redeem Class B shares within six years of purchase or Class C shares within one
year of purchase. The sales charges are described below. Your investment dealer
can help you decide which Class of shares suits your investment needs.
After your initial investment, additional investments of $50 or more may be made
at any time by sending a check payable to the order of the Fund or the transfer
agent directly to the transfer agent (see back cover for address). Please
include your name and account number and the name of the Fund and Class of
shares with each investment.
You may also make automatic investments of $50 or more each month or each
quarter from your bank account. You can establish bank automated investing on
the account application or by calling 1-800-262-1122. The minimum initial
investment amount and Fund policy of redeeming accounts with low account
balances are waived for bank automated investing accounts and certain group
purchase plans.
Sales Charges
Front-End Sales Charge. Class A shares are offered at net asset value per share
plus a sales charge that is determined by the amount of your investment. The
current sales charge schedule is:
<TABLE>
<CAPTION>
Sales Charge Sales Charge Deal Commission
as Percentage of as Percentage of Net as a Percentage of
Amount of Purchase Offering Price Amount Invested Offering Price
----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Less than $50,000 5.75% 6.10% 5.00%
$50,000 but less than $100,000 4.75% 4.99% 4.00%
$100,000 but less than $250,000 3.75% 3.90% 3.00%
$250,000 but less than $500,000 3.00% 3.09% 2.50%
$500,000 but less than $1,000,000 2.00% 2.04% 1.75%
$1,000,000 or more 0.00* 0.00* See below
* No sales charge is payable at the time of purchase on investments of $1 million or more.
A CDSC of 1.00% will be imposed on such investments (as described below) in the event of
redemptions within 12 months of purchase.
<CAPTION>
</TABLE>
The principal underwriter will pay a commission to investment dealers on sales
of $1 million or more as follows: 1.00% on amounts of $1 million or more but
less than $3 million; plus 0.50% on amounts over $3 million but less than $5
million; plus 0.25% on amounts over $5 million. Purchases totalling $1 million
or more will be aggregated over a 12-month period for purposes of determining
the commission. The principal underwriter may also pay commissions of up to
1.00% on sales of Class A shares made at net asset value to certain tax-deferred
retirement plans.
Contingent Deferred Sales Charge. Each Class of shares is subject to a CDSC on
certain redemptions. Class A shares purchased at net asset value in amounts of
$1 million or more are subject to a 1.00% CDSC if redeemed within 12 months of
purchase. Class C shares are subject to a 1.00% CDSC if redeemed within 12
months of purchase. Class B shares are subject to the following CDSC schedule:
<TABLE>
<CAPTION>
Year of Redemption After Purchase CDSC
------------------------------------------------
<S> <C>
First or Second 5% The CDSC is based on the lower of the net asset value at
Third 4% the time of purchase or at the time of redemption.
Fourth 3% Shares acquired through the reinvestment of distributions
Fifth 2% are exempt from the CDSC. Redemptions are made first
Sixth 1% from shares that are not subject to a CDSC.
Seventh or following 0%
</TABLE>
8
<PAGE>
Reducing or Eliminating Sales Charges. Front-end sales charges on purchases of
Class A shares may be reduced under the right of accumulation or under a
statement of intention. Under the right of accumulation, the sales charges you
pay are reduced if the current market value of your current holdings (based on
the current offering price), plus your new purchases, total $50,000 or more.
Class A shares of other Eaton Vance funds owned by you can be included as part
of your current holdings for this purpose. Under a statement of intention,
purchases of $50,000 or more made over a 13-month period are eligible for
reduced sales charges. Under a statement of intention, the principal underwriter
may hold 5% of the dollar amount to be purchased in escrow in the form of shares
registered in your name until you satisfy the statement or the 13-month period
expires.
Class A shares are offered at net asset value to clients of financial
intermediaries who charge a fee for their services; accounts affiliated with
those financial intermediaries; tax-deferred retirement plans; investment and
institutional clients of Eaton Vance; certain persons affiliated with Eaton
Vance; and certain Eaton Vance and fund service providers. Ask your investment
dealer for details. Class A shares are also sold at net asset value if the
amount invested represents redemption proceeds from a mutual fund not affiliated
with Eaton Vance, provided the redemption occurred within 60 days of the Fund
share purchase and the redeemed shares were subject to a sales charge. Class A
shares so acquired will be subject to a 0.50% CDSC if they are redeemed within
12 months of purchase. Investment dealers will be paid a commission on such
sales equal to 0.50% of the amount invested.
CDSCs are waived for certain redemptions pursuant to a Withdrawal Plan (see
"Shareholder Account Features") and, for Class B and Class C shares, in
connection with certain redemptions from tax-sheltered retirement plans. Call
1-800-225-6265 for details. The Class B CDSC is also waived following the death
of all beneficial owners of shares, but only if the redemption is requested
within one year after death (a death certificate and other applicable documents
may be required).
If you redeem shares, you may reinvest at net asset value all or any portion of
the redemption proceeds in the same class of shares of the Fund (or, for Class A
shares, in Class A shares of any other Eaton Vance fund), provided that the
reinvestment occurs within 60 days of the redemption, and the privilege has not
been used more than once in the prior 12 months. Under these circumstances your
account will be credited with any CDSC paid in connection with the redemption.
Any CDSC period applicable to the shares you acquire upon reinvestment will run
from the date of your original share purchase. Reinvestment requests must be in
writing. If you reinvest, you will be sold shares at the next determined net
asset value following receipt of your request.
Distribution and Service Fees. Each Class of shares has in effect a plan under
Rule 12b-1 that allows each Fund to pay distribution fees for the sale and
distribution of shares (so-called "12b-1 fees"). Class A shares of Information
Age Fund pay a monthly distribution fee to the principal underwriter in an
amount equal to the aggregate of (a) 0.50% of that portion of Class A average
daily net assets for any fiscal year which is attributable to shares which have
remained outstanding for less than one year, and (b) 0.25% of that portion of
Class A average daily net assets for any fiscal year which is attributable to
shares which have remained outstanding for more than one year. Class A shares of
Health Sciences Fund pay a distribution fee at the annual rate of 0.25% of
average daily net assets. Class B and Class C shares pay distribution fees at
the annual rate of 0.75% of average daily net assets. Because distribution fees
are paid from Fund assets on an ongoing basis, they will increase your cost over
time and may cost you more than paying other types of sales charges.
All classes (except Class A of Health Sciences Fund) pay service fees for
personal and/or account services equal to an annual rate of 0.25% of average
daily net assets. Class A shares pay service fees on shares that have been
outstanding for twelve months and such fees are paid to investment dealers based
on the value of shares sold by such dealers. After the sale of Class B and Class
C shares, the principal underwriter receives service fees for one year and
thereafter investment dealers generally receive them based on the value of
shares sold by such dealers.
The distribution fees paid by Class B and Class C shares are subject to
termination when payments under the Rule 12b-1 plans are sufficient to
extinguish uncovered distribution charges. As described more fully in the
Statement of Additional Information, uncovered distribution charges of a class
are increased by sales commissions payable by the class to the principal
underwriter in connection with sales of shares of that class and by an interest
factor tied to the U.S. Prime Rate. Uncovered distribution charges are reduced
by the distribution fees paid by the class and by CDSCs paid to the principal
underwriter by redeeming shareholders. The amount of the sales commissions
payable by Class B to the principal underwriter in connection with sales of
Class B shares is significantly less than the maximum permitted by the sales
charge rule of the National Association of Securities Dealers, Inc. To date,
neither Class B nor Class C uncovered distribution charges have been fully
covered.
9
<PAGE>
Redeeming Shares
You can redeem shares in any of the following ways:
By Mail Send your request to the transfer agent along with any
certificates and stock powers. The request must be
signed exactly as your account is registered and
signature guaranteed. You can obtain a signature
guarantee at certain banks, savings and loan
institutions, credit unions, securities dealers,
securities exchanges, clearing agencies and registered
securities associations. You may be asked to provide
additional documents if your shares are registered in
the name of a corporation, partnership or fiduciary.
By Telephone You can redeem up to $50,000 by calling the transfer
agent at 1-800-262-1122 on Monday through Friday, 9:00
a.m. to 4:00 p.m. (eastern time). Proceeds of a
telephone redemption can be mailed only to the account
address. Shares held by corporations, trusts or certain
other entities and shares that are subject to fiduciary
arrangements cannot be redeemed by telephone.
Through an Investment Your investment dealer is responsible for
Dealer transmitting the order promptly. An investment dealer
may charge a fee for this service.
Redemptions or exchanges of Health Sciences Fund's Class A shares made within
three months of the settlement of the purchase will be subject to a redemption
fee equal to 1% of the amount redeemed. All redemption fees will be paid to the
Fund. Redemptions of shares held by 401(k) plans, in proprietary fee-based
programs sponsored by broker-dealers, or by Eaton Vance, its affiliated entities
and accounts in which Eaton Vance or such an affiliate have a beneficial
interest, as well as the redemption of shares acquired as the result of
reinvesting distributions, are not subject to the redemption fee.
If you redeem shares, your redemption price will be based on the net asset value
per share next computed after the redemption request is received. Your
redemption proceeds will be paid in cash within seven days, reduced by the
amount of any applicable CDSC and/or redemption fee and any federal income tax
required to be withheld. Payments will be sent by mail unless you complete the
Bank Wire Redemptions section of the account application.
If you recently purchased shares, the proceeds of a redemption will not be sent
until the purchase check (including a certified or cashier's check) has cleared.
If the purchase check has not cleared, redemption proceeds may be delayed up to
15 days from the purchase date. If your account value falls below $750 (other
than due to market decline), you may be asked to either add to your account or
redeem it within 60 days. If you take no action, your account will be redeemed
and the proceeds sent to you.
While redemption proceeds are normally paid in cash, redemptions may be paid by
distributing marketable securities. If you receive securities, you could incur
brokerage or other charges in converting the securities to cash.
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:
<TABLE>
<CAPTION>
<S> <C>
*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.
</TABLE>
10
<PAGE>
Information from the Fund. From time to time, you may be mailed the following:
*Annual and Semi-Annual Reports, containing performance
information and financial statements.
*Periodic account statements, showing recent activity and total share balance.
*Form 1099 and tax information needed to prepare your income tax returns.
*Proxy materials, in the event a shareholder vote is required.
*Special notices about significant events affecting your Fund.
Withdrawal Plan. You may redeem shares on a regular monthly or quarterly basis
by establishing a systematic withdrawal plan. Withdrawals will not be subject to
any applicable CDSC if they are, in the aggregate, less than or equal to 12%
annually of the greater of either the initial account balance or the current
account balance. A minimum account size of $5,000 is required to establish a
systematic withdrawal plan. Because purchases of Class A shares are generally
subject to an initial sales charge, you should not make withdrawals from your
account while you are making purchases.
Tax-Sheltered Retirement Plans. Class A and Class C shares are available for
purchase in connection with certain tax-sheltered retirement plans. Call
1-800-225-6265 for information. Distributions will be invested in additional
shares for all tax-sheltered retirement plans.
Exchange Privilege. You may exchange your Fund shares for shares of the same
Class of another Eaton Vance fund. Exchanges are generally made at net asset
value. If you hold Class A shares for less than six months and exchange them for
shares subject to a higher sales charge, you will be charged the difference
between the two sales charges. If your shares are subject to a CDSC, the CDSC
will continue to apply to your new shares at the same CDSC rate. For purposes of
the CDSC, your shares will continue to age from the date of your original
purchase.
Before exchanging, you should read the prospectus of the new fund carefully. If
you wish to exchange shares, write to the transfer agent (address on back cover)
or call 1-800-262-1122. Periodic automatic exchanges are also available. The
exchange privilege may be changed or discontinued at any time. You will receive
60 days' notice of any material change to the privilege. This privilege may not
be used for "market timing". If an account (or group of accounts) makes more
than two round-trip exchanges (exchanged from one fund to another and back
again) within 12 months, it will be deemed to be market timing. The exchange
privilege may be terminated for market timing accounts.
Telephone and Electronic Transactions. You can redeem or exchange shares by
telephone as described in this prospectus. In addition, certain transactions may
be conducted through the Internet. The transfer agent and the principal
underwriter have procedures in place to authenticate telephone and electronic
instructions (such as using security codes or verifying personal account
information). As long as the transfer agent and principal underwriter follow
reasonable procedures, they will not be responsible for unauthorized telephone
or electronic transactions and you bear the risk of possible loss resulting from
these transactions. You may decline the telephone redemption option on the
account application. Telephone instructions are tape recorded.
"Street Name" Accounts. If your shares are held in a "street name" account at an
investment dealer, that dealer (and not the Fund or its transfer agent) will
perform all recordkeeping, transaction processing and distribution payments.
Because the Fund will have no record of your transactions, you should contact
your investment dealer to purchase, redeem or exchange shares, to make changes
in your account, or to obtain account information. You will not be able to
utilize a number of shareholder features, such as telephone transactions,
directly with the Fund. The transfer of shares in a "street name" account to an
account with another investment dealer or to an account directly with the Fund
involves special procedures and you will be required to obtain historical
information about your shares prior to the transfer. Before establishing a
"street name" account with an investment dealer, you should determine whether
that dealer allows reinvestment of distributions in "street name" accounts.
Account Questions. If you have any questions about your account or the services
available, please call Eaton Vance Shareholder Services at 1-800-225-6265, or
write to the transfer agent (see back cover for address).
Tax Information
Each Fund pays dividends at least once annually and intends to pay capital gains
annually. Distributions of income and net gains from investments that a
Portfolio held for one year or less will be taxable as ordinary income.
Distributions of gains from investments held by a Portfolio for more than one
year are taxable as long-term gains. Each Fund expects that its distributions
will consist primarily of capital gains. The Funds' distributions will be
taxable as described above whether they are paid in cash or reinvested in
additional shares. A portion of each Fund's distributions may be eligible for
the corporate dividends-received deduction.
11
<PAGE>
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. A redemption of Fund shares, including an
exchange for shares of another fund, is a taxable transaction.
A Portfolio's investments in foreign securities may be subject to withholding
taxes, which would decrease a Fund's return on such securities, and may increase
or accelerate recognition of ordinary income and may affect the timing or amount
of a Fund's distributions.
Shareholders should consult with their advisers concerning the applicability of
state, local and other taxes to an investment.
12
<PAGE>
Financial Highlights
The financial highlights are intended to help you understand A Fund's financial
performance for the past five years. Certain information in the tables reflects
the financial results for a single Fund share. The total returns in the tables
represent the rate an investor would have earned (or lost) on an investment in
the Fund (assuming reinvestment of all distributions and not taking into account
a sales charge). This information has been audited by PricewaterhouseCoopers
LLP, independent accountants. The report of PricewaterhouseCoopers LLP and
each Fund's financial statements are incorporated by reference and included in
each Fund's annual report, which is available on request. The Information Age
Fund began offering Class A, Class B and Class C shares on September 1, 1997.
Prior to that date, that Fund offered only Class B shares and Class A and Class
C existed as separate funds. The Health Sciences Fund began offering Class A and
Class B shares on September 1, 1997. Prior to that date, that Fund offered only
Class A shares and Class B existed as a separate fund. Health Sciences Fund
began offering Class C shares on January 1, 1998.
<TABLE>
<CAPTION>
HEALTH SCIENCES FUND*
-------------------------------------------------------------------------
YEAR ENDED AUGUST 31,
-------------------------------------------------------------------------
2000(1) 1999 (1)
----------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value - Beginning of year $ 6.160 $ 7.060 $ 6.070 $ 4.180 $ 4.880 $ 4.230
-------- -------- -------- ------- -------- -------
Income (loss) from operations
Net investment loss $ (0.114) $ (0.198) $ (0.182) $(0.061) $ (0.107) $(0.100)
Net realized and unrealized gain (loss) 6.758 7.520 6.354 2.265 2.623 2.276
-------- -------- -------- ------- -------- -------
Total income (loss) from operations $ 6.644 $ 7.322 $ 6.172 $ 2.204 $ 2.516 $ 2.176
-------- -------- -------- ------- -------- -------
Less distributions
From net realized gain $ (0.474) $ (0.712) $ (0.712) $(0.224) $ (0.336) $(0.336)
-------- -------- -------- ------- -------- -------
Total distributions $ (0.474) $ (0.712) $ (0.712) $(0.224) $ (0.336) $(0.336)
-------- -------- -------- ------- -------- -------
Net asset value - End of year $ 12.330 $ 13.670 $ 11.530 $ 6.160 $ 7.060 $ 6.070
======== ======== ======== ======= ======== =======
Total return (3) 116.52% 114.93% 114.90% 53.28% 52.29% 52.16%
Ratios/Supplemental Data +
Net assets, end of year (000's omitted) $418,904 $411,280 $128,973 $89,214 $107,923 $ 7,778
Ratios (as a percentage of average
daily net assets):
Net operating expenses(4) 1.79% 2.54% 2.53% 1.69% 2.29% 2.44%
Interest expense(4) -- -- -- 0.01% 0.01% 0.01%
Net expenses after custodian fee reduction(4) 1.74% 2.49% 2.48% 1.63% 2.23% 2.38%
Net investment loss (1.29)% (2.03)% (2.02)% (1.11)% (1.70)% (1.82)%
Portfolio turnover of the Fund(6) -- -- -- -- -- --
Portfolio turnover of the Portfolio(6) 31% 31% 31% 41% 41% 41%
<CAPTION>
1998 1997 1996
--------------------------------------------------------------
CLASS A CLASS B CLASS C (2) CLASS A CLASS A
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value - Beginning of year $ 4.980 $ 5.840 $ 5.000 $ 4.510 $ 3.900
------- ------- ------- ------- -------
Income (loss) from operations
Net investment loss $(0.070) $(0.102) $(0.038) $(0.044) $(0.077)
Net realized and unrealized gain (loss) (0.730) (0.858) (0.732) 0.612 1.154
------- ------- ------- ------- -------
Total income (loss) from operations $(0.800) $(0.960) $(0.770) $ 0.568 $ 1.077
------- ------- ------- ------- -------
Less distributions
From net realized gain -- -- -- $(0.098) $(0.467)
------- ------- ------- ------- -------
Total distributions -- -- -- $(0.098) $(0.467)
------- ------- ------- ------- -------
Net asset value - End of year $ 4.180 $ 4.880 $ 4.230 $ 4.980 $ 4.510
======= ======= ======= ======= =======
Total return (3) (15.94)% (16.44)% (15.40)% 17.67% 31.04%
Ratios/Supplemental Data +
Net assets, end of year (000's omitted) $66,831 $75,111 $ 1,905 $88,349 $55,016
Ratios (as a percentage of average daily net assets):
Net operating expenses (4) 1.83% 2.43% 2.67%(5) 2.07% 2.21%
Interest expense (4) -- -- -- -- --
Net expenses after custodian fee reduction (4) 1.69% 2.29% 2.53%(5) 2.00% 2.19%
Net investment loss (1.21)% (1.80)% (1.84)%(5) (1.60)% (1.81)%
Portfolio turnover of the Fund (6) -- -- -- -- 66%
Portfolio turnover of the Portfolio (6) 34% 34% 34% 14% --
</TABLE>
+ The operating expenses of the Fund and the Portfolio may reflect a reduction
of the investment adviser fee, an allocation of expenses to the manager or
administrator, or both. Had such action not been taken, the ratios and net
investment loss per share would have been as follows:
<TABLE>
<CAPTION>
Ratios (as a percentage of average daily net assets):
Expenses(4) 2.29% --
Expenses after custodian fee reduction(4) 2.22% --
Net investment loss (1.82)% --
<S> <C> <C> <C> <C> <C>
Net investment loss per share $(0.151) --
(See footnotes on last page.)
</TABLE>
13
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
INFORMATION AGE FUND
----------------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31,
----------------------------------------------------------------------------------------------------
2000 (1) 1999(1) 1998
----------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value - Beginning
of year $17.340 $ 17.770 $17.280 $11.710 $12.030 $11.720 $11.970 $12.310 $12.020
------- -------- ------- ------- ------- ------- ------- ------- -------
Income (loss) from
operations
Net investment loss $(0.213) $ (0.353) $(0.342) $(0.217) $(0.284) $(0.290) $(0.156) $(0.210) $(0.205)
Net realized and unrealized
gain 6.939 7.189 6.898 6.469 6.646 6.472 0.431 0.465 0.440
------- -------- ------- ------- ------- ------- ------- ------- -------
Total income from operations $ 6.726 $ 6.836 $ 6.556 $ 6.252 $ 6.362 $ 6.182 $ 0.275 $ 0.255 $ 0.235
------- -------- ------- ------- ------- ------- ------- ------- -------
Less distributions
From net realized gain $(2.226) $ (2.226) $(2.226) $(0.622) $(0.622) $(0.622) $(0.535) $(0.535) $(0.535)
------- -------- ------- ------- ------- ------- ------- ------- -------
Total distributions $(2.226) $ (2.226) $(2.226) $(0.622) $(0.622) $(0.622) $(0.535) $(0.535) $(0.535)
------- -------- ------- ------- ------- ------- ------- ------- -------
Net asset value - End of
year $21.840 $ 22.380 $21.610 $17.340 $17.770 $17.280 $11.710 $12.030 $11.720
======= ======== ======= ======= ======= ======= ======= ======= =======
Total return (3) 43.12% 42.58% 42.42% 54.95% 54.39% 54.29% 2.32% 2.08% 1.96%
Ratios/Supplemental Data +
Net assets, end of year
(000's omitted) $68,208 $148,603 $41,113 $20,908 $49,963 $ 6,118 $12,263 $30,331 $ 2,531
Ratios (as a percentage of
average daily net assets):
Expenses (4) 1.99% 2.59% 2.60% 2.46% 2.87% 2.93% 2.68% 3.12% 3.20%
Net investment loss (0.98)% (1.59)% (1.57)% (1.47)% (1.88)% (1.94)% (1.20)% (1.64)% (1.72)%
Portfolio turnover of the
Portfolio 173% 173% 173% 131% 131% 131% 157% 157% 157%
<CAPTION>
1997 1996 (1)(2)
-----------------------------
CLASS B CLASS B
-------------------------------------------------------------
<S> <C> <C>
Net asset value - Beginning
of year $11.040 $10.000
------- -------
Income (loss) from
operations
Net investment loss $(0.178) $(0.134)
Net realized and unrealized
gain 2.490 1.174
------- -------
Total income from operations $ 2.312 $ 1.040
------- -------
Less distributions
From net realized gain $(1.042) --
------- -------
Total distributions $(1.042) --
------- -------
Net asset value - End of
year $12.310 $11.040
======= =======
Total return (3) 20.79% 10.40%
Ratios/Supplemental Data +
Net assets, end of year $29,037 $21,800
(000's omitted)
Ratios (as a percentage of
average daily net assets):
Expenses (4) 3.19% 2.96% (5)
Net investment loss (1.67)% (1.34)% (5)
Portfolio turnover of the 160% 115%
Portfolio
</TABLE>
+ The expenses of the Fund reflect a reimbursement of Class A distribution
and service fees. Had such action not been taken, the ratios and net
investment loss per share would have been as follows:
<TABLE>
<CAPTION>
Ratios (as a percentage of average daily net assets):
Expenses (4) 2.12%
Net investment loss (1.11)%
<S> <C> <C> <C> <C>
Net investment loss per share (0.241)
</TABLE>
* The Health Sciences Fund table reflects the approval by the Board of Trustees
of the Fund of a 3-for-1 split for Class A shares and a 2-for-1 split for
Class B and Class C shares, effective November 10, 2000.
(1) Net investment loss per share was computed using average shares
outstanding.
(2) For the Health Sciences Fund for the period from the commencement of
offering of Class C shares, January 5, 1998, to August 31, 1998, and for
the Information Age Fund for the period from the start of business,
September 18, 1995, to August 31, 1996.
(3) Total return is calculated assuming a purchase at the net asset value on
the first day and a sale at the net asset value on the last day of each
period reported. Distributions, if any, are assumed to be reinvested at the
net asset value on the reinvestment date. Total return is not computed on
an annualized basis.
(4) Includes the Fund's share of its Portfolio's allocated expenses for the
period the Fund was investing in the Portfolio.
(5) Annualized.
(6) Portfolio Turnover of the Fund represents the rate of portfolio activity
for the period while the Fund was making investments directly in
securities. The Health Sciences Fund began investing in the Portfolio on
September 1, 1996.
14
<PAGE>
LOGO
INVESTING
FOR THE
21ST
CENTURY(R)
More Information
--------------------------------------------------------------------------------
About the Funds: More information is available in the statement of
additional information. The statement of additional information is
incorporated by reference into this prospectus. Additional information
about each Portfolio's investments is available in the annual and
semi-annual reports to shareholders. In the annual report, you will find a
discussion of the market conditions and investment strategies that
significantly affected each Fund's performance during the past year. You
may obtain free copies of the statement of additional information and the
shareholder reports by contacting:
EATON VANCE DISTRIBUTORS, INC.
The Eaton Vance Building
255 State Street
Boston, MA 02109
1-800-225-6265
website: www.eatonvance.com
You will find and may copy information about each Fund (including the
statement of additional information and shareholder reports): at the
Securities and Exchange Commission's public reference room in Washington,
DC (call 1-202-942-8090 for information on the operation of the public
reference room); on the EDGAR Database on the SEC's Internet site (http://
www.sec.gov); or, upon payment of copying fees, by writing to the SEC's
public reference section, Washington, DC 20549-0102, or by electronic mail
at [email protected].
About Shareholder Accounts: You can obtain more information from Eaton
Vance Shareholder Services (1-800-225-6265). If you own shares and would
like to add to, redeem or change your account, please write or call the
transfer agent:
--------------------------------------------------------------------------------
PFPC, Inc.
P.O. BOX 9653
PROVIDENCE, RI 02904-9653
1-800-262-1122
The Funds' SEC File No. is 811-1241. 1/1COMBP
<PAGE>
STATEMENT OF
ADDITIONAL INFORMATION
January 1, 2001
EATON VANCE ASIAN SMALL COMPANIES FUND
The Eaton Vance Building
255 State Street
Boston, Massachusetts 02109
(800) 225-6265
This Statement of Additional Information ("SAI") provides general
information about the Fund and the Portfolio. The Fund is a series of Eaton
Vance Growth Trust. Capitalized terms used in this SAI and not otherwise
defined have the meanings given to them in the prospectus. This SAI contains
additional information about:
Page
Strategies and Risks ............................................. 1
Investment Restrictions .......................................... 6
Management and Organization ...................................... 8
Investment Advisory and Administrative Services .................. 12
Other Service Providers .......................................... 14
Purchasing and Redeeming Shares .................................. 15
Sales Charges .................................................... 17
Performance ...................................................... 21
Taxes ............................................................ 22
Portfolio Security Transactions .................................. 24
Financial Statements ............................................. 26
Appendices:
A: Class A Fees, Performance and Ownership ....................... a-1
B: Class B Fees, Performance and Ownership ....................... b-1
C: Asian Region Countries ........................................ c-1
THIS IS NOT A PROSPECTUS AND IS AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE
INVESTORS ONLY IF PRECEDED OR ACCOMPANIED BY THE FUND'S PROSPECTUS DATED
JANUARY 1, 2001, 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) are located in or have securities which are principally
traded in an Asian Region country. Such securities are typically listed on stock
exchanges or traded in over-the-counter markets in countries in the Asian
Region. The principal offices of these companies, however, may be located
outside these countries. The Portfolio may invest 25% or more of its total
assets in the securities of issuers located in any one country, and may retain
securities of a company with market capitalization that grows over the $600
million level. While there is no minimum or maximum limitation on assets that
may be invested in a single country, the Adviser currently anticipates that
investments in Hong Kong will represent more than 25% of total assets.
Equity securities, for purposes of the 65% policy, will be limited to common
and preferred stocks; equity interests in trusts, partnerships, joint ventures
and other unincorporated entities or enterprises; special classes of shares
available only to foreign investors in markets that restrict the ownership by
foreign investors to certain classes of equity securities; convertible preferred
stocks; and other convertible investment grade debt instruments. A debt security
is investment grade if it is rated BBB or above by Standard & Poor's Ratings
Group ("S&P") or Baa or above by Moody's Investors Service, Inc. ("Moody's") or
determined to be of comparable quality by the Adviser. Debt securities rated BBB
by S&P or Baa by Moody's have speculative characteristics and changes in
economic conditions or other circumstances are more likely to lead to a weakened
capacity to make principal and interest payments than is the case with higher
grade debt securities. The Portfolio will attempt to promptly dispose of any
convertible debt instrument which is rated or determined by the Adviser to be
below investment grade subsequent to acquisition by the Portfolio.
In addition to its investments in equity securities, the Portfolio may
invest up to 5% of its net assets in warrants, including warrants traded in
over-the-counter markets. The Portfolio will not, under normal market
conditions, invest more than 35% of its total assets in equity securities other
than Asia small company investments, warrants, options on securities and
indices, options on currency, futures contracts and options on futures, forward
foreign currency exchange contracts, currency swaps and any other non-equity
investments. Except during unusual market conditions, the Portfolio will not
invest in debt securities, other than investment grade convertible debt
instruments.
SECURITIES TRADING MARKETS. A high proportion of the shares of many issuers in
the Asian Region may be held by a limited number of persons and financial
institutions, which may limit the number of shares available for investment by
the Portfolio. The prices at which the Portfolio may acquire investments may be
affected by trading by persons with material non-public information and by
securities transactions by brokers in anticipation of transactions by the
Portfolio in particular securities. Similarly, volume and liquidity in the bond
markets in the Asian Region are less than in the United States and, at times,
price volatility can be greater than in the United States. The limited liquidity
of securities markets may also affect the Portfolio's ability to acquire or
dispose of securities at the price and time it wishes to do so. In addition,
Asian Region securities markets are susceptible to being influenced by large
investors trading significant blocks of securities.
Asian Region stock markets are undergoing a period of growth and change
which may result in trading volatility and difficulties in the settlement and
recording of transactions, and in interpreting and applying the relevant law and
regulations. The securities industry in these countries is comparatively
underdeveloped and stockbrokers and other intermediaries may not perform as well
as their counterparts in the United States and other more developed securities
markets.
ASIAN COUNTRY CONSIDERATIONS. Political and economic structures in many Asian
countries are undergoing significant evolution and rapid development, and such
countries may lack the social, political and economic stability characteristic
of the United States. Certain of such countries have, in the past, failed to
recognize private property rights and have at times nationalized or expropriated
the assets of private companies. As a result, the risks described herein,
including the risks of nationalization or expropriation of assets, may be
heightened. In addition, unanticipated political or social developments may
affect the values of the Portfolio's investments in those countries and the
availability to the Portfolio of additional investments in those countries.
The laws of countries in the region relating to limited liability of
corporate shareholders, fiduciary duties of officers and directors, and the
bankruptcy of state enterprises are generally less well developed than or
different from such laws in the United States. It may be more difficult to
obtain a judgement in the courts of these countries than it is in the United
States. Monsoons and natural disasters also can affect the value of Portfolio
investments.
The Fund and the Portfolio each intend to conduct its respective affairs in
such a manner to avoid taxation. Nevertheless, certain countries may require
withholding on dividends paid on portfolio securities and on realized capital
gains. In the past, these taxes have sometimes been substantial. There can be no
assurance that in the future the Portfolio will be able to repatriate its
income, gains or initial capital from these countries.
DIRECT INVESTMENTS AND SMALLER COMPANIES. The Portfolio may invest up to 10% of
its total assets in direct investments in smaller companies based in Asia.
Direct investments include (i) the private purchase from an enterprise of an
equity interest in the enterprise in the form of shares of common stock or
equity interests in trusts, partnerships, joint ventures or similar enterprises,
and (ii) the purchase of such an equity interest in an enterprise from a
principal investor in the enterprise. In each case, the Portfolio will, at the
time of making the investment, enter into a shareholder or similar agreement
with the enterprise and one or more other holders of equity interests in the
enterprise. The Adviser anticipates that these agreements will, in appropriate
circumstances, provide the Portfolio with the ability to appoint a
representative to the board of directors or similar body of the enterprise and
for eventual disposition of the Portfolio's investment in the enterprise. Such a
representative of the Portfolio will be expected to provide the Portfolio with
the ability to monitor its investment and protect its rights in the investment
and will not be appointed for the purpose of exercising management or control of
the enterprise.
The Portfolio's investments will include investments in smaller, less
seasoned companies for which there is less publicly available information than
larger, more established companies. The securities of these companies, which may
include legally restricted securities, are generally subject to greater price
fluctuations, limited liquidity, higher transaction costs and higher investment
risk. These companies may have limited product lines, markets or financial
resources, or they may be dependent on a limited management group. Investments
in smaller companies may involve a high degree of business and financial risk
that can result in substantial losses. Because of the absence of any public
trading market for some of these investments, the Portfolio may take longer to
liquidate these positions at fair value than would be the case for publicly
traded securities. Furthermore, issuers whose securities are not publicly traded
may not be subject to investor protection requirements applicable to publicly
traded securities.
FOREIGN INVESTMENTS. Investing in securities issued by companies whose principal
business activities are outside the United States may involve significant risks
not present in domestic investments. For example, there is generally less
publicly available information about foreign companies, particularly those not
subject to the disclosure and reporting requirements of the U.S. securities
laws. Foreign issuers are generally not bound by uniform accounting, auditing,
and financial reporting requirements and standards of practice comparable to
those applicable to domestic issuers. Investments in foreign securities also
involve the risk of possible adverse changes in investment or exchange control
regulations, expropriation or confiscatory taxation, limitation on the removal
of funds or other assets of the Portfolio, political or financial instability or
diplomatic and other developments which could affect such investments. Further,
economies of particular countries or areas of the world may differ favorably or
unfavorably from the economy of the United States. It is anticipated that in
most cases the best available market for foreign securities will be on exchanges
or in over-the-counter markets located outside of the United States. Foreign
stock markets, while growing in volume and sophistication, are generally not as
developed as those in the United States, and securities of some foreign issuers
(particularly those located in developing countries) may be less liquid and more
volatile than securities of comparable U.S. companies. In addition, foreign
brokerage commissions are generally higher than commissions on securities traded
in the United States and may be non-negotiable. In general, there is less
overall governmental supervision and regulation of foreign securities markets,
broker-dealers, and issuers than in the United States.
Physical delivery of securities in small lots generally is required in India
and a shortage of vault capacity and trained personnel has existed among
qualified custodial Indian and Pakistani banks. The Portfolio may be unable to
sell securities where the registration process is incomplete and may experience
delays in receipt of dividends. If trading volume is limited by operational
difficulties, the ability of the Portfolio to invest its assets may be impaired.
Settlement of securities transactions in the Indian subcontinent may be delayed
and is generally less frequent than in the United States, which could affect the
liquidity of the Portfolio's assets. In addition, disruptions due to work
stoppages and trading improprieties in these securities markets have caused such
markets to close. If extended closings were to occur in stock markets where the
Portfolio was heavily invested, the Fund's ability to redeem Fund shares could
become correspondingly impaired.
The Adviser intends, as of the date of this SAI, not to invest in issuers
located in Vietnam, Cambodia, Laos or former Burma and to invest no more than 1%
of total assets in Bangladesh issuers.
The Portfolio may also invest in American Depositary Receipts (ADRs)
European Depositary Receipts (EDRs) and Global Depositary Receipts (GDRs). ADRs,
EDRs and GDRs are certificates evidencing ownership of shares of a foreign
issuer and are alternatives to directly purchasing the underlying foreign
securities in their national markets and currencies. However, they continue to
be subject to many of the risks associated with investing directly in foreign
securities. These risks include foreign exchange risk as well as the political
and economic risks of the underlying issuer's country. ADRs, EDRs and GDRs may
be sponsored or unsponsored. Unsponsored receipts are established without the
participation of the issuer. Unsponsored receipts may involve higher expenses,
they may not pass-through voting or other shareholder rights, and they may be
less liquid.
FOREIGN CURRENCY TRANSACTIONS. Forward foreign currency exchange contracts are
individually negotiated and privately traded by currency traders and their
customers. A forward contract involves an obligation to purchase or sell a
specific currency (or basket of currencies) for an agreed price at a future
date, which may be any fixed number of days from the date of the contract. The
Portfolio may engage in cross-hedging by using forward contracts in one currency
(or basket of currencies) to hedge against fluctuations in the value of
securities denominated in a different currency if the Adviser determines that
there is an established historical pattern of correlation between the two
currencies (or the basket of currencies and the underlying currency). Use of a
different foreign currency magnifies the Portfolio's exposure to foreign
currency exchange rate fluctuations. The Portfolio may also use forward
contracts to shift its exposure to foreign currency exchange rate changes from
one currency to another.
The value of the assets of the Portfolio as measured in U.S. dollars may be
affected favorably or unfavorably by changes in foreign currency exchange rates
and exchange control regulations. Currency exchange rates can also be affected
unpredictably by intervention by U.S. or foreign governments or central banks,
or the failure to intervene, or by currency controls or political developments
in the U.S. or abroad. The Portfolio may conduct its foreign currency exchange
transactions on a spot (i.e., cash) basis at the spot rate prevailing in the
foreign currency exchange market or through entering into swaps, forward
contracts, options or futures on currency. In spot transactions, foreign
exchange dealers do not charge a fee for conversion, but they do realize a
profit based on the difference (the "spread") between the prices at which they
are buying and selling various currencies. Thus, a dealer may offer to sell a
foreign currency to the Portfolio at one rate, while offering a lesser rate of
exchange should the Portfolio desire to resell that currency to the dealer.
The Portfolio may enter into currency swaps for both hedging and non-hedging
purposes. Currency swaps involve the exchange of rights to make or receive
payments in specified currencies. Since currency swaps are individually
negotiated, the Portfolio expects to achieve an acceptable degree of correlation
between its portfolio investments and its currency swap positions. Currency
swaps usually involve the delivery of the entire principal value of one
designated currency in exchange for the other designated currency. Therefore,
the entire principal value of a currency swap is subject to the risk that the
other party to the swap will default on its contractual delivery obligations.
The use of currency swaps is a highly specialized activity which involves
special investment techniques and risks. If the Adviser is incorrect in its
forecasts of market values and currency exchange rates, the Portfolio's
performance will be adversely affected. Currency swaps require maintenance of a
segregated account as described under "Asset Coverage Requirements" below. The
Portfolio will not enter into any currency swap unless the credit quality of the
unsecured senior debt or the claims-paying ability of the other party thereto is
considered to be investment grade by the Adviser.
The Portfolio may enter into forward foreign currency exchange contracts in
several circumstances. First, when the Portfolio enters into a contract for the
purchase or sale of a security denominated in a foreign currency, or when the
Portfolio anticipates the receipt in a foreign currency of dividend or interest
payments on such a security which it holds, the Portfolio may desire to "lock
in" the U.S. dollar price of the security or the U.S. dollar equivalent of such
dividend or interest payment, as the case may be. By entering into a forward
contract for the purchase or sale, for a fixed amount of dollars, of the amount
of foreign currency involved in the underlying transactions, the Portfolio will
attempt to protect itself against an adverse change in the relationship between
the U.S. dollar and the subject foreign currency during the period between the
date on which the security is purchased or sold, or on which the dividend or
interest payment is declared, and the date on which such payments are made or
received.
Additionally, when management of the Portfolio believes that the currency of
a particular foreign country may suffer a substantial decline against the U.S.
dollar, it may enter into a forward contract to sell, for a fixed amount of
dollars, the amount of foreign currency approximating the value of some or all
of the securities held by the Portfolio denominated in such foreign currency.
The precise matching of the forward contract amounts and the value of the
securities involved will not generally be possible because the future value of
such securities in foreign currencies will change as a consequence of market
movements in the value of those securities between the date on which the
contract is entered into and the date it matures. The precise projection of
short-term currency market movements is not possible, and short-term hedging
provides a means of fixing the dollar value of only a portion of the Portfolio's
foreign assets.
DERIVATIVE INSTRUMENTS. The Portfolio may purchase or sell derivative
instruments (which are instruments that derive their value from another
instrument, security, index or currency) to enhance return (which may be
considered speculative), to hedge against fluctuations in securities prices,
interest rates or currency exchange rates, or as a substitute for the purchase
or sale of securities or currencies. The Portfolio's transactions in derivative
instruments may be in the U.S. or abroad and may include the purchase or sale of
futures contracts on securities, securities indices, other indices, other
financial instruments or currencies; options on futures contracts;
exchange-traded and over-the-counter options on securities, indices or
currencies; and forward foreign currency exchange contracts. The Portfolio
incurs transaction costs in opening and closing positions in derivative
instruments. The use of futures for nonhedging purposes is limited by
regulations of the Commodity Futures Trading Commission. There can be no
assurance that the Adviser's use of derivative instruments will be advantageous
to the Portfolio.
RISKS ASSOCIATED WITH DERIVATIVE INSTRUMENTS. Entering into a derivative
instrument involves a risk that the applicable market will move against the
Portfolio's position and that the Portfolio will incur a loss. For derivative
instruments other than purchased options, this loss may exceed the amount of the
initial investment made or the premium received by the Portfolio. Derivative
instruments may sometimes increase or leverage the Portfolio's exposure to a
particular market risk. Leverage enhances the Portfolio's exposure to the price
volatility of derivative instruments it holds. The Portfolio's success in using
derivative instruments to hedge portfolio assets depends on the degree of price
correlation between the derivative instruments and the hedged asset. Imperfect
correlation may be caused by several factors, including temporary price
disparities among trading markets for the derivative instrument, the assets
underlying the derivative instrument and the Portfolio assets. Over-the-counter
("OTC") derivative instruments involve an enhanced risk that the issuer or
counterparty will fail to perform its contractual obligations. Some derivative
instruments are not readily marketable or may become illiquid under adverse
market conditions. In addition, during periods of market volatility, a commodity
exchange may suspend or limit trading in an exchange-traded derivative
instrument, which may make the contract temporarily illiquid and difficult to
price. Commodity exchanges may also establish daily limits on the amount that
the price of a futures contract or futures option can vary from the previous
days settlement price. Once the daily limit is reached, no trades may be made
that day at a price beyond the limit. This may prevent the Portfolio from
closing out positions and limiting its losses. The staff of the Commission takes
the position that certain purchased OTC options, and assets used as cover for
written OTC options, are subject to the Portfolio's 15% limit on illiquid
investments. The Portfolio's ability to terminate OTC derivative instruments may
depend on the cooperation of the counterparties to such contracts. For thinly
traded derivative instruments, the only source of price quotations may be the
selling dealer or counterparty. In addition, certain provisions of the Code,
limit the extent to which the Portfolio may purchase and sell derivative
instruments. The Portfolio will engage in transactions in futures contracts and
related options only to the extent such transactions are consistent with the
requirements of the Code for maintaining the qualification of the Fund as a
regulated investment company for federal income tax purposes.
ASSET COVERAGE REQUIREMENTS. Transactions involving reverse repurchase
agreements, currency swaps, forward contracts or futures contracts and options
(other than options that the Portfolio has purchased) expose the Portfolio to an
obligation to another party. The Portfolio will not enter into any such
transactions unless it owns either (1) an offsetting ("covered") position in
securities, currencies, or other options, futures contracts or forward
contracts, or (2) cash or liquid securities (such as readily marketable
securities and money market instruments) with a value sufficient at all times to
cover its potential obligations not covered as provided in (1) above. (Only the
net obligation of a swap will be covered.) The Portfolio will comply with
Commission guidelines regarding cover for these instruments and, if the
guidelines so require, set aside cash or liquid securities in a segregated
account with its custodian in the prescribed amount. The securities in the
segregated account will be marked to market daily.
Assets used as cover or held in a segregated account maintained by the
Portfolio's custodian cannot be sold while the position requiring coverage or
segregation is outstanding unless they are replaced with other appropriate
assets. As a result, the commitment of a large portion of the Portfolio's assets
to segregated accounts or to cover could impede portfolio management or the
Portfolio's ability to meet redemption requests or other current obligations.
LIMITATIONS ON FUTURES CONTRACTS AND OPTIONS. The Portfolio may purchase call
and put options on any securities in which the Portfolio may invest or options,
including those traded in over-the-counter markets, on any securities index
composed of securities in which the Portfolio may invest. The Portfolio does not
intend to write a covered option on any security if after such transaction more
than 15% of its net assets, as measured by the aggregate value of the securities
underlying all covered calls and puts written by the Portfolio, would be subject
to such options. The Portfolio will only write a put option on a security which
it intends to ultimately acquire for its portfolio. The Portfolio does not
intend to purchase any options if after such transaction more than 5% of its net
assets, as measured by the aggregate of all premiums paid for all such options
held by the Portfolio, would be so invested. The Portfolio may enter into
futures contracts (and options thereon) traded on a foreign exchange, only if
the Adviser determines that trading on such foreign exchange does not subject
the Portfolio to risks, including credit and liquidity risks, that are
materially greater than the risks associated with trading on United States
CFTC-regulated exchanges.
To the extent that the Portfolio enters into futures contracts, options on
futures contracts and options on foreign currencies traded on an exchange
regulated by the Commodity Futures Trading Commission ("CFTC"), in each case
that are not for bona fide hedging purposes (as defined by the CFTC), the
aggregate initial margin and premiums required to establish these positions
(excluding the amount by which options are "in-the-money") may not exceed 5% of
the liquidation value of the Portfolio's investments, after taking into account
unrealized profits and unrealized losses on any contracts the Portfolio has
entered into.
REPURCHASE AGREEMENTS. The Portfolio may enter into repurchase agreements (the
purchase of a security coupled with an agreement to resell at a higher price)
with respect to its permitted investments. In the event of the bankruptcy of the
other party to a repurchase agreement, the Portfolio might experience delays in
recovering its cash. To the extent that, in the meantime, the value of the
securities the Portfolio purchased may have decreased, the Portfolio could
experience a loss. At no time will the Portfolio commit more than 15% of its net
assets to repurchase agreements which mature in more than seven days and other
illiquid securities. The Portfolio's repurchase agreements will provide that the
value of the collateral underlying the repurchase agreement will always be at
least equal to the repurchase price, including any accrued interest earned on
the repurchase agreement, and will be marked to market daily.
REVERSE REPURCHASE AGREEMENTS. The Portfolio may enter into reverse repurchase
agreements. Under a reverse repurchase agreement, the Portfolio temporarily
transfers possession of a portfolio instrument to another party, such as a bank
or broker-dealer, in return for cash. At the same time, the Portfolio agrees to
repurchase the instrument at an agreed upon time (normally within seven days)
and price, which reflects an interest payment. The Portfolio expects that it
will enter into reverse repurchase agreements when it is able to invest the cash
so acquired at a rate higher than the cost of the agreement, which would
increase the income earned by the Portfolio. The Portfolio could also enter into
reverse repurchase agreements as a means of raising cash to satisfy redemption
requests without the necessity of selling portfolio assets.
When the Portfolio enters into a reverse repurchase agreement, any
fluctuations in the market value of either the securities transferred to another
party or the securities in which the proceeds may be invested would affect the
market value of the Portfolio's assets. As a result, such transactions may
increase fluctuations in the market value of the Portfolio's assets. While there
is a risk that large fluctuations in the market value of the Portfolio's assets
could affect the Portfolio's net asset value, this risk is not significantly
increased by entering into reverse repurchase agreements, in the opinion of the
Adviser. Because reverse repurchase agreements may be considered to be the
practical equivalent of borrowing funds, they constitute a form of leverage. If
the Portfolio reinvests the proceeds of a reverse repurchase agreement at a rate
lower than the cost of the agreement, entering into the agreement will lower the
Portfolio's yield.
PORTFOLIO TURNOVER. The Portfolio cannot accurately predict its portfolio
turnover rate, but it is anticipated that the annual turnover rate will
generally not exceed 100% (excluding turnover of securities having a maturity of
one year or less). A high turnover rate (100% or more) necessarily involves
greater expenses to the Portfolio. Short-term trading may be advisable in light
of a change in circumstances of a particular company or within a particular
industry, or in light of general market, economic or political conditions. High
portfolio turnover may also result in the realization of substantial net
short-term capital gains.
LENDING PORTFOLIO SECURITIES. The Portfolio may seek to increase its income by
lending portfolio securities to broker-dealers or other institutional borrowers.
Under present regulatory policies of the Commission, such loans are required to
be secured continuously by collateral in cash, cash equivalents or U.S.
Government securities held by the Portfolio's custodian and maintained on a
current basis at an amount at least equal to market value of the securities
loaned, which will be marked to market daily. Cash equivalents include
short-term municipal obligations as well as taxable certificates of deposit,
commercial paper and other short-term money market instruments. The financial
condition of the borrower will be monitored by the Adviser on an ongoing basis.
The Portfolio would continue to receive the equivalent of the interest or
dividends paid by the issuer on the securities loaned and would also receive a
fee, or all or a portion of the interest on investment of the collateral. The
Portfolio would have the right to call a loan and obtain the securities loaned
at any time on up to five business days' notice. The Portfolio would not have
the right to vote any securities having voting rights during the existence of a
loan, but could call the loan in anticipation of an important vote to be taken
among holders of the securities or the giving or holding of their consent on a
material matter affecting the investment. If the Adviser decides to make
securities loans, it is intended that the value of the securities loaned would
not exceed one-third of the Portfolio's total assets. As with other extensions
of credit there are risks of delay in recovery or even loss of rights in the
securities loaned if the borrower of the securities fails financially. However,
the loans will be made only to organizations deemed by the Adviser to be
sufficiently creditworthy and when, in the judgment of the Adviser, the
consideration which can be earned from securities loans of this type justifies
the attendant risk. Securities lending involves administration expenses
including finders fees.
OTHER INVESTMENT COMPANIES. The Portfolio reserves the right to invest up to 10%
of its total assets, calculated at the time of purchase, in the securities of
other investment companies unaffiliated with the investment adviser or the
Manager that have the characteristics of closed-end investment companies. The
Portfolio will indirectly bear its proportionate share of any management fees
paid by investment companies in which it invests in addition to the advisory fee
paid by the Portfolio. The value of closed-end investment company securities,
which are usually traded on an exchange, is affected by demand for the
securities themselves, independent of the demand for the underlying portfolio
assets and, accordingly, such securities can trade at a discount from their net
asset values.
TEMPORARY INVESTMENTS. Under unusual market conditions, the Portfolio may invest
temporarily in cash or cash equivalents. Cash equivalents include high grade
debt securities of foreign and U.S. companies, foreign governments and the U.S.
government, and their respective agencies, instrumentalities, political
subdivisions and authorities, as well as high quality money market instruments
denominated in U.S. or foreign currencies.
INVESTMENT RESTRICTIONS
The following investment restrictions of the Fund are designated as
fundamental policies and as such cannot be changed without the approval of the
holders of a majority of the Fund's outstanding voting securities, which as used
in this SAI means the lesser of (a) 67% or more of the outstanding voting
securities of the Fund present or represented by proxy at a meeting if the
holders of more than 50% of the outstanding shares are present or represented at
the meeting or (b) more than 50% of the outstanding shares of the Fund.
Accordingly, the Fund may not:
(1) Borrow money or issue senior securities except as permitted by the
Investment Company Act of 1940;
(2) Purchase any securities on margin (but the Fund and the Portfolio may
obtain such short-term credits as may be necessary for the clearance of
purchases and sales of securities);
(3) Underwrite securities of other issuers;
(4) Invest in real estate including interests in real estate limited
partnerships (although it may purchase and sell securities which are secured by
real estate and securities of companies which invest or deal in real estate) or
in commodities or commodity contacts for the purchase or sale of physical
commodities;
(5) Make loans to any person except by (a) the acquisition of debt
securities and making portfolio investments, (b) entering into repurchase
agreements and (c) lending portfolio securities;
(6) With respect to 75% of its total assets, invest more than 5% of its
total assets (taken at current value) in the securities of any one issuer, or
invest in more than 10% of the outstanding voting securities of any one issuer,
except obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities and except securities of other investment companies; or
(7) Concentrate its investments in any particular industry, but, if deemed
appropriate for the Fund's objective, up to (but less than) 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 (except as stated below) more than 10% of its net assets in
the securities of any one issuer;
(ii) purchase (except as stated below) more than 10% of the ordinary
shares of any one issuer;
(iii) invest more than 15% of net assets in securities which are not
listed or quoted on any stock exchange, over-the-counter market or other
organized securities market that is open to the international public and on
which such securities are regularly traded (a "Market");
(iv) invest more than 15% of net assets in warrants and options for
non-hedging purposes;
(v) write call options on Portfolio investments exceeding 25% of its
total net asset value in terms of exercise price;
(vi) enter into futures contracts on an unhedged basis where the net
total aggregate value of contract prices, whether payable by or to the
Portfolio under all outstanding futures contracts, together with the
aggregate value of holdings under paragraph (vii) below exceeds 20% of the
net total asset value of the Portfolio;
(vii) invest in physical commodities (including gold, silver, platinum
or other bullion) and commodity based investments (other than shares in
companies engaged in producing, processing or trading in commodities) which
value together with the net aggregate value of the holdings described in
(vi) above, exceeds 20% of the Portfolio's net asset value;
(viii) purchase shares of other investment companies exceeding 10% of
net assets. In addition, the investment objective of any investment company
in which any Portfolio invests must not be to invest in investments
prohibited by this undertaking and where the investment company'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;
(ix) 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 but any reverse purchase agreement entered into by a Portfolio
will constitute a form of leverage and hence will count towards the 25%
borrowing limit);
(x) write uncovered options;
(xi) invest in real estate (including options, rights or interests
therein but excluding shares in real estate companies);
(xii) assume, guarantee, endorse or otherwise become directly or
contingently liable for, or in connection with, any obligation or
indebtedness of any person in respect of borrowed money without the prior
written consent of the custodian of the Portfolio;
(xiii) 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;
(xiv) subject to (vi) above, purchase an investment with unlimited
liability; or
(xv) purchase any nil or partly-paid securities unless any call thereon
could be met in full out of cash or near cash held by it in the amount of
which has not already been taken into account for the purposes of (v) above.
Notwithstanding (i) and (ii) above:
(i) up to 30% of a Portfolio's total net asset value may be invested in
government and public securities of the same issue; and
(ii) subject to (i) above, a Portfolio may invest all of its assets in
government and other public securities in at least six different issues.
The Fund and the Portfolio have adopted the following investment policy
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 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.
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 (59), 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 (48), 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 (40), 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: 787 Seventh Avenue, New York, New York 10019
EDWARD K.Y. CHEN (55), 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 (69), 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 (65), 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 (65), Trustee
Chairman and Chief Operating Officer, Hellman, Jordan Management Co., Inc. (an
investment management company) (since November, 2000) and; President, Jordan
Simmons Capital LLC (manager of energy related investments (since November,
2000. President, Unicorn Corporation (an investment and financial advisory
services company) (since September, 2000). Formerly Chairman of the Board,
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 (43), 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 (70), 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. (42), Vice President of the Trust
Vice President of BMR and Eaton Vance. Officer of various investment companies
managed by Eaton Vance or BMR.
WILLIAM WALTER RALEIGH KERR (50), 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
ZAHEER SITABKHAN (35), Vice President of the Portfolio
Director of the Adviser.
JAMES L. O'CONNOR (55), 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 (60), Secretary
Vice President, Secretary, and Chief Legal Officer of Eaton Vance, BMR and
EVC. Prior to joining Eaton Vance on November 1, 1996, 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 (65), 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 (38), Assistant Secretary
Vice President of Eaton Vance and BMR. Officer of various investment companies
managed by Eaton Vance or BMR.
ERIC G. WOODBURY (43), 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), Dwight and Reamer 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 and performance of the independent certified public accountants,
and reviewing matters relative to accounting and auditing practices and
procedures, accounting records, and the internal accounting controls of the
Trust, the Portfolio and certain of their service providers.
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.) During the fiscal year ended August 31, 2000, the
noninterested Trustees of the Trust and the Portfolio earned the following
compensation in their capacities as Trustees from the Trust and the Portfolio,
and for the year ended December 31, 1999, earned the following compensation in
their capacities as Trustees of the funds in the Eaton Vance fund complex(1):
<TABLE>
<CAPTION>
SOURCE OF JESSICA M. HON. EDWARD DONALD R. SAMUEL L. NORTON H. LYNN A. JACK L.
COMPENSATION BIBLIOWICZ K.Y. CHEN DWIGHT HAYES, III REAMER STOUT TREYNOR
------------ ---------- --------- ------ ---------- ------ ----- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Trust(2) .......... $ 1,590 $ -- $ 2,633 $ 2,998 $ 2,785 $ 2,051 $ 2,052
Portfolio ......... -- 0 0 0 0 0 0
Trust and Fund 160,000
Complex ........... 160,000 22,063 160,000(3) 170,000 160,000 (4) 170,000
------------
(1) As of January 1, 2001, the Eaton Vance Fund complex consists of 151 registered investment companies or series thereof.
(2) The Trust consisted of 5 Funds as of August 31, 2000.
(3) Includes $60,000 of deferred compensation.
(4) Includes $16,000 of deferred compensation.
</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 was organized under
Massachusetts law on May 25, 1989 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 or 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 was organized as a trust under the laws of the state of New
York on January 19, 1996 and intends to be treated as a partnership for federal
tax purposes. In accordance with the Declaration of Trust of the Portfolio,
there will normally be no meetings of the investors for the purpose of electing
Trustees unless and until such time as less than a majority of the Trustees of
the Portfolio holding office have been elected by investors. In such an event
the Trustees of the Portfolio then in office will call an investors' meeting for
the election of Trustees. Except for the foregoing circumstances and unless
removed by action of the investors in accordance with the Portfolio's
Declaration of Trust, the Trustees shall continue to hold office and may appoint
successor Trustees.
The Declaration of Trust of the Portfolio provides that no person shall
serve as a Trustee if investors holding two-thirds of the outstanding interest
have removed him from that office either by a written declaration filed with the
Portfolio's custodian or by votes cast at a meeting called for that purpose. The
Declaration of Trust further provides that under certain circumstances the
investors may call a meeting to remove a Trustee and that the Portfolio is
required to provide assistance in communicating with investors about such a
meeting.
The Portfolio's Declaration of Trust provides that the Fund and other
entities permitted to invest in the Portfolio (e.g., other U.S. and foreign
investment companies, and common and commingled trust funds) will each be liable
for all obligations of the Portfolio. However, the risk of the Fund incurring
financial loss on account of such liability is limited to circumstances in which
both inadequate insurance exists and the Portfolio itself is unable to meet its
obligations. Accordingly, the Trustees of the Trust believe that neither the
Fund nor its shareholders will be adversely affected by reason of the Fund
investing in the Portfolio.
Whenever the Fund as an investor in the Portfolio is requested to vote on
matters pertaining to the Portfolio (other than the termination of the
Portfolio's business, which may be determined by the Trustees of the Portfolio
without investor approval), the Fund will hold a meeting of Fund shareholders
and will vote its interest in the Portfolio for or against such matters
proportionately to the instructions to vote for or against such matters received
from Fund shareholders. The Fund shall vote shares for which it receives no
voting instructions in the same proportion as the shares for which it receives
voting instructions. Other investors in the Portfolio may alone or collectively
acquire sufficient voting interests in the Portfolio to control matters relating
to the operation of the Portfolio, which may require the Fund to withdraw its
investment in the Portfolio or take other appropriate action. Any such
withdrawal could result in a distribution "in kind" of portfolio securities (as
opposed to a cash distribution from the Portfolio). If securities are
distributed, the Fund could incur brokerage, tax or other charges in converting
the securities to cash. In addition, the distribution in kind may result in a
less diversified portfolio of investments or adversely affect the liquidity of
the Fund. Notwithstanding the above, there are other means for meeting
shareholder redemption requests, such as borrowing.
The Fund may withdraw (completely redeem) all its assets from the Portfolio
at any time if the Board of Trustees of the Trust determines that it is in the
best interest of the Fund to do so. In the event the Fund withdraws all of its
assets from the Portfolio, or the Board of Trustees of the Trust determines that
the investment objective of the Portfolio is no longer consistent with the
investment objective of the Fund, the Trustees would consider what action might
be taken, including investing the assets of the Fund in another pooled
investment entity or retaining an investment adviser to manage the Fund's assets
in accordance with its investment objective. The Fund's investment performance
may be affected by a withdrawal of all its assets (or the assets of another
investor in the Portfolio) from the Portfolio.
INVESTMENT ADVISORY AND ADMINISTRATIVE SERVICES
INVESTMENT ADVISORY SERVICES. The Portfolio has engaged Lloyd George Investment
Management (Bermuda) Limited (the "Adviser") as its investment adviser. As
investment adviser to the Portfolio, the Adviser manages the Portfolio's
investments, subject to the supervision of the Board of Trustees of the
Portfolio. The Adviser is also responsible for effecting all security
transactions on behalf of the Portfolio, including the allocation of principal
transactions and portfolio brokerage and the negotiation of commissions. Under
the investment advisory agreement, the Adviser is entitled to receive a monthly
advisory fee computed by applying the annual asset rate applicable to that
portion of the average daily net assets of the Portfolio throughout the month in
each Category as indicated below:
ANNUAL
CATEGORY AVERAGE DAILY NET ASSETS ASSET RATE
-------- ------------------------ ----------
1 less than $500 million ........................ 0.75%
2 $500 million but less than $1 billion ......... 0.70
3 $1 billion but less than $1.5 billion ......... 0.65
4 $1.5 billion but less than $2 billion ......... 0.60
5 $2 billion but less than $3 billion ........... 0.55
6 $3 billion and over ........................... 0.50
As of August 31, 2000, the Portfolio had net assets of $64,294,677. For the
fiscal years ended August 31, 2000 and 1999, the investment adviser earned
advisory fees of $458,883 and $86,920, respectively (equivalent to 0.75% of the
Portfolio's average daily net assets for each such year).
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, 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, 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.
The Adviser follows a common investment philosophy, striving to identify
companies with outstanding management and earnings growth potential by following
a disciplined management style, adhering to the most rigorous international
standards of fundamental security analysis, placing heavy emphasis on research,
visiting every company owned, and closely monitoring political and economic
developments.
ADMINISTRATIVE SERVICES. Under Eaton Vance's management contract with the Fund
and administration agreement with the Portfolio, Eaton Vance receives a monthly
management fee from the Fund and a monthly administration fee from the
Portfolio. Each fee is computed by applying the annual asset rate applicable to
that portion of the average daily net assets of the Fund or the Portfolio
throughout the month in each Category as indicated below:
ANNUAL
CATEGORY AVERAGE DAILY NET ASSETS ASSET RATE
-------- ------------------------ ----------
1 less than $500 million ........................ 0.25%
2 $500 million but less than $1 billion ......... 0.23333
3 $1 billion but less than $1.5 billion ......... 0.21667
4 $1.5 billion but less than $2 billion ......... 0.20
5 $2 billion but less than $3 billion ........... 0.18333
6 $3 billion and over ........................... 0.16667
As of August 31, 2000, the Portfolio had net assets of $64,294,677. For the
fiscal years ended August 31, 2000 and 1999, Eaton Vance earned administration
fees of $153,418 and $28,974, respectively (equivalent to 0.25% of the
Portfolio's average daily net assets for each such year).
As of August 31, 2000, the Fund had net assets of $1,769,748. For the fiscal
year ended August 31, 2000 and the period from the start of business, March 1,
1999 to August 31, 1999, absent a full fee reduction, Eaton Vance would have
earned management fees of $3,616 and $128, respectively (equivalent to 0.25% and
0.25% (annualized) of the Fund's average daily net assets for each such period).
Eaton Vance's management contract with the Fund and administration agreement
with the Portfolio will each remain in effect from year to year for so long as
such continuance is approved annually by the vote of a majority of the Trustees
of the Trust or the Portfolio, as the case may be. Each agreement may be
terminated at any time without penalty on sixty days' written notice by the
Board of Trustees of either party thereto, or by a vote of a majority of the
outstanding voting securities of the Fund or the Portfolio, as the case may be.
Each agreement will terminate automatically in the event of its assignment. Each
agreement provides that, in the absence of Eaton Vance's willful misfeasance,
bad faith, gross negligence or reckless disregard of its obligations or duties
to the Fund or the Portfolio under such contract or agreement, Eaton Vance will
not be liable to the Fund or the Portfolio for any loss incurred. Each agreement
was initially approved by the Trustees, including the noninterested Trustees, of
the Trust or the Portfolio which is a party thereto at meetings held on February
21, 1996 of the Trust and the Portfolio.
INFORMATION ABOUT EATON VANCE. Eaton Vance is a business trust organized under
Massachusetts law. Eaton Vance, Inc. ("EV") serves as trustee of Eaton Vance.
Eaton Vance and EV are wholly-owned subsidiaries of Eaton Vance Corporation
("EVC"), a Maryland corporation and publicly-held holding company. EVC through
its subsidiaries and affiliates engages primarily in investment management,
administration and marketing activities. The Directors of EVC are James B.
Hawkes, John G.L. Cabot, Leo I. Higdon, Jr., John M. Nelson, Vincent M. O'Reilly
and Ralph Z. Sorenson. All of the issued and outstanding shares of Eaton Vance
are owned by EVC. All of the issued and outstanding shares of BMR are owned by
Eaton Vance. All shares of the outstanding Voting Common Stock of EVC are
deposited in a Voting Trust, the Voting Trustees of which are Messrs. Hawkes,
Jeffrey P. Beale, Alan R. Dynner, Thomas E. Faust, Jr., Thomas J. Fetter, Scott
H. Page, Duncan W. Richardson, William M. Steul, Payson E. Swaffield, Michael W.
Weilheimer and Wharton P. Whitaker (all of whom are officers of Eaton Vance).
The Voting Trustees have unrestricted voting rights for the election of
Directors of EVC. All of the outstanding voting trust receipts issued under said
Voting Trust are owned by certain of the officers of BMR and Eaton Vance who are
also officers, or officers and Directors of EVC and EV. As indicated under
"Management and Organization", all of the officers of the Trust (as well as Mr.
Hawkes who is also a Trustee) hold positions in the Eaton Vance organization.
EXPENSES. The Fund and Portfolio are responsible for all expenses not expressly
stated to be payable by another party (such as the investment adviser under the
Investment Advisory Agreement, Eaton Vance under the management contract and
administration agreement or the principal underwriter under the Distribution
Agreement). In the case of expenses incurred by the Trust, the Fund is
responsible for its pro rata share of those expenses. Expenses of the Fund
allocated to a particular class include 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, Mr. Dynner is a Vice
President, Secretary and Clerk, Mr. O'Connor is a Vice President, and Mr. Murphy
is Assistant Secretary and Assistant Clerk of EVD.
CUSTODIAN. Investors Bank & Trust Company ("IBT"), 200 Clarendon Street, Boston,
MA 02116, serves as custodian to the Fund and Portfolio. IBT has the custody of
all cash and securities representing the Fund's interest in the Portfolio, has
custody of the Portfolio's assets, maintains the general ledger of the Portfolio
and the Fund and computes the daily net asset value of interests in the
Portfolio and the net asset value of shares of the Fund. In such capacity it
attends to details in connection with the sale, exchange, substitution, transfer
or other dealings with the Portfolio's investments, receives and disburses all
funds and performs various other ministerial duties upon receipt of proper
instructions from the Trust and the Portfolio. IBT also provides services in
connection with the preparation of shareholder reports and the electronic filing
of such reports with the SEC. EVC and its affiliates and their officers and
employees from time to time have transactions with various banks, including IBT.
It is Eaton Vance's opinion that the terms and conditions of such transactions
were not and will not be influenced by existing or potential custodial or other
relationships between the Fund or the Portfolio and such banks.
INDEPENDENT ACCOUNTANTS. Deloitte & Touche LLP, 200 Berkeley Street, Boston, MA
02116, are the independent accountants of the Fund and the Portfolio, providing
audit services, tax return preparation, and assistance and consultation with
respect to the preparation of filings with the SEC.
TRANSFER AGENT. PFPC Global Fund Services, P.O. Box 9656, Providence, RI
02904-9656, serves as transfer and dividend disbursing agent for the Fund.
PURCHASING AND REDEEMING SHARES
CALCULATION OF NET ASSET VALUE. The net asset value of the Portfolio is computed
by IBT (as agent and custodian for the Portfolio) by subtracting the liabilities
of the Portfolio from the value of its total assets. The Fund and the Portfolio
will be closed for business and will not price their respective shares or
interests on the following business holidays: New Year's Day, Martin Luther
King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day.
Each investor in the Portfolio, including the Fund, may add to or reduce its
investment in the Portfolio on each day the Exchange is open for trading
("Portfolio Business Day") as of the close of regular trading on the Exchange
(the "Portfolio Valuation Time"). The value of each investor's interest in the
Portfolio will be determined by multiplying the net asset value of the Portfolio
by the percentage, determined on the prior Portfolio Business Day, which
represented that investor's share of the aggregate interests in the Portfolio on
such prior day. Any additions or withdrawals for the current Portfolio Business
Day will then be recorded. Each investor's percentage of the aggregate interest
in the Portfolio will then be recomputed as the percentage equal to a fraction
(i) the numerator of which is the value of such investor's investment in the
Portfolio as of the close of Portfolio Valuation Time on the prior Portfolio
Business Day plus or minus, as the case may be, that amount of any additions to
or withdrawals from the investor's investment in the Portfolio on the current
Portfolio Business Day, and (ii) the denominator of which is the aggregate net
asset value of the Portfolio as of the Portfolio Valuation Time on the prior
Portfolio Business Day plus or minus, as the case may be, the amount of the net
additions to or withdrawals from the aggregate investment in the Portfolio on
the current Portfolio Business Day by all investors in the Portfolio. The
percentage so determined will then be applied to determine the value of the
investor's interest in the Portfolio for the current Portfolio Business Day.
The Trustees of the Portfolio have established the following procedures for
the fair valuation of the Portfolio's assets under normal market conditions.
Marketable securities listed on foreign or U.S. securities exchanges or in the
NASDAQ National Market System generally are valued at closing sale prices or, if
there were no sales, at the mean between the closing bid and asked prices
therefor on the exchange where such securities are principally traded or on such
National Market System (such prices may not be used, however, where an active
over-the-counter market in an exchange listed security better reflects current
market value). Unlisted or listed securities for which closing sale prices are
not available are valued at the mean between the latest bid and asked prices. An
option is valued at the last sale price as quoted on the principal exchange or
board of trade on which such option or contract is traded, or in the absence of
a sale, the mean between the last bid and asked price. Futures positions on
securities or currencies are generally valued at closing settlement prices.
Short term debt securities with a remaining maturity of 60 days or less are
valued at amortized cost. If securities were acquired with a remaining maturity
of more than 60 days, their amortized cost value will be based on their value on
the sixty-first day prior to maturity. Other fixed income and debt securities,
including listed securities and securities for which price quotations are
available, will normally be valued on the basis of valuations furnished by a
pricing service. All other securities are valued at fair value as determined in
good faith by or at the direction of the Trustees.
Generally, trading in the foreign securities owned by the Portfolio is
substantially completed each day at various times prior to the close of the
Exchange. The values of these securities used in determining the net asset value
of the Portfolio's shares generally are computed as of such times. Occasionally,
events affecting the value of foreign securities may occur between such times
and the close of the Exchange which will not be reflected in the computation of
the Portfolio's net asset value (unless the Portfolio deems that such events
would materially affect its net asset value, in which case an adjustment would
be made and reflected in such computation). Foreign securities and currency held
by the Portfolio will be valued in U.S. dollars; such values will be computed by
the custodian based on foreign currency exchange rate quotations supplied by
Reuters Information Service.
ADDITIONAL INFORMATION ABOUT PURCHASES. Fund shares are continuously offered
through investment dealers which have entered agreements with the principal
underwriter. The public offering price is the net asset value next computed
after receipt of the order, plus, in the case of Class A shares, a variable
percentage (sales charge) depending upon the amount of purchase as indicated by
the sales charge table set forth in the prospectus. The sales charge is divided
between the principal underwriter and the investment dealer. The sales charge
table is applicable to purchases of a Fund alone or in combination with
purchases of certain other funds offered by the principal underwriter, made at a
single time by (i) an individual, or an individual, his spouse and their
children under the age of twenty-one, purchasing shares for his or their own
account, and (ii) a trustee or other fiduciary purchasing shares for a single
trust estate or a single fiduciary account. The table is also presently
applicable to (1) purchases of Class A shares pursuant to a written Statement of
Intention; or (2) purchases of Class A shares pursuant to the Right of
Accumulation and declared as such at the time of purchase. See "Sales Charges".
In connection with employee benefit or other continuous group purchase
plans, the Fund may accept initial investments of less than $1,000 on the part
of an individual participant. In the event a shareholder who is a participant of
such a plan terminates participation in the plan, his or her shares will be
transferred to a regular individual account. However, such account will be
subject to the right of redemption by the Fund as described below.
SUSPENSION OF SALES. The Trust may, in its absolute discretion, suspend,
discontinue or limit the offering of one or more of its classes of shares at any
time. In determining whether any such action should be taken, the Trust's
management intends to consider all relevant factors, including (without
limitation) the size of the Fund or class, the investment climate and market
conditions, the volume of sales and redemptions of shares, and in the case of
Class B shares, the amount of uncovered distribution charges of the principal
underwriter. The Class B Distribution Plan may continue in effect and payments
may be made under the Plan following any such suspension, discontinuance or
limitation of the offering of shares; however, there is no contractual
obligation to continue any Plan for any particular period of time. Suspension of
the offering of shares would not, of course, affect a shareholder's ability to
redeem shares.
ACQUIRING FUND SHARES IN EXCHANGE FOR SECURITIES. IBT, as escrow agent, will
receive securities acceptable to Eaton Vance, as administrator, in exchange for
Fund shares. The minimum value of securities (or securities and cash) accepted
for deposit is $5,000. Securities accepted will be sold on the day of their
receipt or as soon thereafter as possible. The number of Fund shares to be
issued in exchange for securities will be the aggregate proceeds from the sale
of such securities, divided by the applicable public offering price of Class A
shares or net asset value of Class B shares on the day such proceeds are
received. Eaton Vance will use reasonable efforts to obtain the then current
market price for such securities but does not guarantee the best available
price. Eaton Vance will absorb any transaction costs, such as commissions, on
the sale of securities. Securities determined to be acceptable should be
transferred via book entry or physically delivered, in proper form for transfer,
through an investment dealer, together with a completed and signed Letter of
Transmittal in approved form (available from investment dealers). Investors who
are contemplating an exchange of securities for shares, or their
representatives, must contact Eaton Vance to determine whether the securities
are acceptable before forwarding such securities. Eaton Vance reserves the right
to reject any securities. Exchanging securities for shares may create a taxable
gain or loss. Each investor should consult his or her tax adviser with respect
to the particular federal, state and local tax consequences of exchanging
securities.
ADDITIONAL INFORMATION ABOUT REDEMPTIONS. The right to redeem shares of the Fund
can be suspended and the payment of the redemption price deferred when the
Exchange is closed (other than for customary weekend and holiday closings),
during periods when trading on the Exchange is restricted as determined by the
SEC, or during any emergency as determined by the SEC which makes it
impracticable for the Portfolio to dispose of its securities or value its
assets, or during any other period permitted by order of the SEC for the
protection of investors.
While normally payments will be made in cash for redeemed shares, the Trust,
subject to compliance with applicable regulations, has reserved the right to pay
the redemption price of shares of the Fund, either totally or partially, by a
distribution in kind of readily marketable securities withdrawn from the
Portfolio. The securities so distributed would be valued pursuant to the
Portfolio's valuation procedures. If a shareholder received a distribution in
kind, the shareholder could incur brokerage or other charges in converting the
securities to cash.
Due to the high cost of maintaining small accounts, the Trust reserves the
right to redeem accounts with balances of less than $750. Prior to such a
redemption, shareholders will be given 60 days' written notice to make an
additional purchase. However, no such redemption would be required by the Trust
if the cause of the low account balance was a reduction in the net asset value
of shares. No CDSC will be imposed with respect to such involuntary redemptions.
SYSTEMATIC WITHDRAWAL PLAN. The transfer agent will send to the shareholder
regular monthly or quarterly payments of any permitted amount designated by the
shareholder based upon the value of the shares held. The checks will be drawn
from share redemptions and hence may require the recognition of taxable gain or
loss. Income dividends and capital gains distributions in connection with
withdrawal plan accounts will be credited at net asset value as of the record
date for each distribution. Continued withdrawals in excess of current income
will eventually use up principal, particularly in a period of declining market
prices. A shareholder may not have a withdrawal plan in effect at the same time
he or she has authorized Bank Automated Investing or is otherwise making regular
purchases of Fund shares. The shareholder, the transfer agent or the principal
underwriter will be able to terminate the withdrawal plan at any time without
penalty.
SALES CHARGES
DEALER COMMISSIONS. The principal underwriter may, from time to time, at its own
expense, provide additional incentives to investment dealers which employ
registered representatives who sell Fund shares and/or shares of other funds
distributed by the principal underwriter. In some instances, such additional
incentives may be offered only to certain investment dealers whose
representatives sell or are expected to sell significant amounts of shares. In
addition, the principal underwriter may from time to time increase or decrease
the sales commissions payable to investment dealers. The principal underwriter
may allow, upon notice to all investment dealers with whom it has agreements,
discounts up to the full sales charge during the periods specified in the
notice. During periods when the discount includes the full sales charge, such
investment dealers may be deemed to be underwriters as that term is defined in
the Securities Act of 1933.
SALES CHARGE WAIVERS. Class A shares may be sold at net asset value to current
and retired Directors and Trustees of Eaton Vance funds, including the
Portfolio; to clients and current and retired officers and employees of Eaton
Vance, its affiliates and other investment advisers of Eaton Vance sponsored
funds; to officers and employees of IBT and the transfer agent; to persons
associated with law firms, consulting firms and others providing services to
Eaton Vance and the Eaton Vance funds; and to such persons' spouses, parents,
siblings and children and their beneficial accounts. Such shares may also be
issued at net asset value (1) in connection with the merger of an investment
company (or series or class thereof) with the Fund (or class thereof), (2) to
investors making an investment as part of a fixed fee program whereby an entity
unaffiliated with the investment adviser provides multiple investment services,
such as management, brokerage and custody, and (3) to investment advisors,
financial planners or other intermediaries who place trades for their own
accounts or the accounts of their clients and who charge a management,
consulting or other fee for their services; clients of such investment advisors,
financial planners or other intermediaries who place trades for their own
accounts if the accounts are linked to the master account of such investment
advisor, financial planner or other intermediary on the books and records of the
broker or agent. Class A shares may also be sold to registered representatives
and employees of investment dealers and bank employees who refer customers to
registered representatives of investment dealers. Class A shares may be sold at
net asset value to any investment advisory, agency, custodial or trust account
managed or administered by Eaton Vance or by any parent, subsidiary or other
affiliate of Eaton Vance. Class A shares are offered at net asset value to the
foregoing persons and in the foregoing situations because either (i) there is no
sales effort involved in the sale of shares or (ii) the investor is paying a fee
(other than the sales charge) to the investment dealer involved in the sale. Any
new or revised sales charge or CDSC waiver will be prospective only.
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, the Statement of
Intention section of the account application should be completed 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. If you make a Statement of Intention, the transfer agent is
authorized 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. A Statement of Intention does not obligate the shareholder to purchase
or the Fund to sell the full amount indicated in the Statement.
If the amount actually purchased during the 13-month period is less than
that indicated in the Statement, the shareholder will be requested to pay the
difference between the sales charge applicable to the shares purchased and the
sales charge paid under the Statement of Intention. If the payment is not
received in 20 days, the appropriate number of escrowed shares will be redeemed
in order to realize such difference. If the total purchases during the 13-month
period are large enough to qualify for a lower sales charge than that applicable
to the amount specified in the Statement, all transactions will be computed at
the expiration date of the Statement to give effect to the lower sales charge.
Any difference will be refunded to the shareholder in cash or applied to the
purchase of additional shares, as specified by the shareholder. This refund will
be made by the investment dealer and the principal underwriter. If at the time
of the recomputation, the investment dealer for the account has changed, the
adjustment will be made only on those shares purchased through the current
investment dealer for the account.
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.
EXCHANGE PRIVILEGE. In addition to exchanges into the same class of another
Eaton Vance fund, Class B shares may be exchanged for shares of a money market
fund sponsored by an investment dealer and approved by the principal underwriter
(an "investment dealer fund"). For purposes of calculating the CDSC applicable
to investment dealer fund shares acquired in an exchange, the CDSC schedule
applicable to the exchanged shares will apply and the purchase of investment
dealer fund shares is deemed to have occurred at the time of the original
purchase of the exchanged shares, except that the time during which a
shareholder holds such investment dealer fund shares will not be credited toward
completion of the CDSC period.
TAX-SHELTERED RETIREMENT PLANS. Class A shares are available for purchase in
connection with certain tax-sheltered retirement plans. Detailed information
concerning these plans, including certain exceptions to minimum investment
requirements, and copies of the plans are available from the principal
underwriter. This information should be read carefully and consultation with an
attorney or tax adviser may be advisable. The information sets forth the service
fee charged for retirement plans and describes the federal income tax
consequences of establishing a plan. Participant accounting services (including
trust fund reconciliation services) will be offered only through third party
recordkeepers and not by the principal underwriter. Under all plans, dividends
and distributions will be automatically reinvested in additional shares.
DISTRIBUTION PLANS. The Trust has in effect a compensation-type Distribution
Plan (the "Class A Plan") for the Fund's Class A shares pursuant to Rule 12b-1
under the 1940 Act. The Class A Plan provides for the payment of a monthly
distribution fee to the principal underwriter in an amount equal to the
aggregate of (a) .50% of that portion of Class A average daily net assets for
any fiscal year which is attributable to its shares which have remained
outstanding for less than one year and (b) .25% of that portion of Class A
average daily net assets for any fiscal year which is attributable to its shares
which have remained outstanding for more than one year. Aggregate payments to
the principal underwriter under the Class A Plan are limited to those
permissible, pursuant to a rule of the National Association of Securities
Dealers, Inc.
The Class A Plan also provides that the Class will pay a quarterly service
fee to the principal underwriter in an amount equal on an annual basis to .25%
of that portion of its average daily net assets for any fiscal year which is
attributable to Class A shares which have remained outstanding for more than one
year; from such service fee the principal underwriter expects to pay a quarterly
service fee to investment dealers, as compensation for providing personal
services and/or the maintenance of shareholder accounts, with respect to shares
sold by such dealers which have remained outstanding for more than one year.
Service fee payments to investment dealers will be in addition to sales charges
on Class A shares which are reallowed to investment dealers. If the Class A Plan
is terminated or not continued in effect, the Class has no obligation to
reimburse the principal underwriter for amounts expended by the principal
underwriter in distributing Class A shares. For the distribution fees paid by
Class A shares, see Appendix A.
The Trust also has in effect a compensation-type Distribution Plan (the
"Class B Plan") pursuant to Rule 12b-1 under the 1940 Act for the Fund's Class B
shares. The Class B Plan is designed to permit an investor to purchase shares
through an investment dealer without incurring an initial sales charge and at
the same time permit the principal underwriter to compensate investment dealers
in connection therewith. The Class B Plan provides that the Fund will pay sales
commissions and distribution fees to the principal underwriter only after and as
a result of the sale of shares. On each sale of shares (excluding reinvestment
of distributions), the Fund will pay the principal underwriter amounts
representing (i) sales commissions equal to 5% of the amount received by the
Fund for each share sold and (ii) distribution fees calculated by applying the
rate of 1% over the prime rate then reported in The Wall Street Journal to the
outstanding balance of uncovered distribution charges (as described below) of
the principal underwriter. To pay these amounts, Class B pays the principal
underwriter a fee, accrued daily and paid monthly, at an annual rate not
exceeding .75% of its average daily net assets to finance the distribution of
its shares. Such fees compensate the principal underwriter for sales commissions
paid by it to investment dealers on the sale of shares and for interest
expenses. For sales of Class B shares, the principal underwriter uses its own
funds to pay sales commissions (except on exchange transactions and
reinvestments) to investment dealers at the time of sale equal to 4% of the
purchase price of the Class B shares sold by such dealers. CDSCs paid to the
principal underwriter will be used to reduce amounts owed to it. The Class B
Plan provides that the Fund will make no payments to the principal underwriter
in respect of any day on which there are no outstanding uncovered distribution
charges of the principal underwriter. CDSCs and accrued amounts will be paid by
the Trust to the principal underwriter whenever there exist uncovered
distribution charges. Because payments to the principal underwriter under the
Class B Plan is limited, uncovered distribution charges (sales commissions paid
by the principal underwriter plus interest, less the above fees and CDSCs
received by it) may exist indefinitely. For the sales commissions and CDSCs paid
on (and uncovered distribution charges of) Class B shares, see Appendix B.
In calculating daily the amount of uncovered distribution charges,
distribution charges will include the aggregate amount of sales commissions and
distribution fees theretofore paid plus the aggregate amount of sales
commissions and distribution fees which the principal underwriter is entitled to
be paid under the Plan since its inception. Payments theretofore paid or payable
under the Class B Plan by the Trust to the principal underwriter and CDSCs
theretofore paid or payable to the principal underwriter will be subtracted from
such distribution charges; if the result of such subtraction is positive, a
distribution fee (computed at 1% over the prime rate then reported in The Wall
Street Journal) will be computed on such amount and added thereto, with the
resulting sum constituting the amount of outstanding uncovered distribution
charges with respect to such day. The amount of outstanding uncovered
distribution charges of the principal underwriter calculated on any day does not
constitute a liability recorded on the financial statements of the Fund.
The amount of uncovered distribution charges of the principal underwriter at
any particular time depends upon various changing factors, including the level
and timing of sales of shares, the nature of such sales (i.e., whether they
result from exchange transactions, reinvestments or from cash sales through
investment dealers), the level and timing of redemptions of shares upon which a
CDSC will be imposed, the level and timing of redemptions of shares upon which
no CDSC will be imposed (including redemptions of shares pursuant to the
exchange privilege which result in a reduction of uncovered distribution
charges), changes in the level of the net assets of the Class, and changes in
the interest rate used in the calculation of the distribution fee under the
Class B Plan.
Distribution of Class B shares of the Fund by the principal underwriter will
also be encouraged by the payment by the investment adviser to the principal
underwriter of an amount equivalent to .15% of Class B annual average daily net
assets. The aggregate amounts of such payments are a deduction in calculating
the outstanding uncovered distribution charges of the principal underwriter
under the Class B Plan and, therefore, will benefit shareholders when such
charges exist. Such payments will be made in consideration of the principal
underwriter's distribution efforts.
The Class B Plan also authorizes the payment of service fees to the
principal underwriter, investment dealers and other persons in amounts not
exceeding .25% of its average daily net assets for personal services, and/or the
maintenance of shareholder accounts. This fee is paid quarterly in arrears based
on the value of Class B shares sold by such persons. For the service fees paid
by Class B shares, see Appendix B.
Currently, payments of sales commissions and distribution fees and of
service fees may equal 1% of a Class's average daily net assets per annum. The
Trust believes that the combined rate of all these payments may be higher than
the rate of payments made under distribution plans adopted by other investment
companies pursuant to Rule 12b-1. Although the principal underwriter will use
its own funds (which may be borrowed from banks) to pay sales commissions at the
time of sale, it is anticipated that the Eaton Vance organization will profit by
reason of the operation of the Class B Plan through an increase in the Fund's
assets (thereby increasing the management and administration fees payable to the
managers and the advisory fee payable to the investment adviser) resulting from
sale of shares and through the amounts paid to the principal underwriter,
including CDSCs, pursuant to the Plans. The Eaton Vance organization may be
considered to have realized a profit under the Class B Plan if at any point in
time the aggregate amounts theretofore received by the principal underwriter
pursuant to the Class B Plan and from CDSCs have exceeded the total expenses
theretofore incurred by such organization in distributing shares. Total expenses
for this purpose will include an allocable portion of the overhead costs of such
organization and its branch offices, which costs will include without limitation
leasing expense, depreciation of building and equipment, utilities,
communication and postage expense, compensation and benefits of personnel,
travel and promotional expense, stationery and supplies, literature and sales
aids, interest expense, data processing fees, consulting and temporary help
costs, insurance, taxes other than income taxes, legal and auditing expense and
other miscellaneous overhead items. Overhead is calculated and allocated for
such purpose by the Eaton Vance organization in a manner deemed equitable to the
Trust.
The Plans continue in effect from year to year so long as such continuance
is approved at least annually by the vote of both a majority of (i) the
noninterested Trustees of the Trust who have no direct or indirect financial
interest in the operation of the Plan or any agreements related to the Plan (the
"Plan Trustees") and (ii) all of the Trustees then in office. Each Plan may be
terminated at any time by vote of a majority of the Plan Trustees or by a vote
of a majority of the outstanding voting securities of the applicable Class. Each
Plan requires quarterly Trustee review of a written report of the amount
expended under the Plan and the purposes for which such expenditures were made.
The Plans may not be amended to increase materially the payments described
therein without approval of the shareholders of the affected Class and the
Trustees. So long as a Plan is in effect, the selection and nomination of the
noninterested Trustees shall be committed to the discretion of such Trustees.
The Class A and Class B Plans were initially approved by the Trustees, including
the Plan Trustees, on June 23, 1997. The Trustees of the Trust who are
"interested" persons of the Fund have an indirect financial interest in the
Plans because their employers (or affiliates thereof) receive distribution
and/or service fees under the Plans or agreements related thereto.
The Trustees of the Trust believe that each Plan will be a significant
factor in the expected growth of each Fund's assets, and will result in
increased investment flexibility and advantages which have benefitted and will
continue to benefit the Fund and its shareholders. Payments for sales
commissions and distribution fees made to the principal underwriter under the
Class B Plan will compensate the principal underwriter for its services and
expenses in distributing that class of shares. Service fee payments made to the
principal underwriter and investment dealers provide incentives to provide
continuing personal services to investors and the maintenance of shareholder
accounts. By providing incentives to the principal underwriter and investment
dealers, each Plan is expected to result in the maintenance of, and possible
future growth in, the assets of the Fund. Based on the foregoing and other
relevant factors, the Trustees of the Trust have determined that in their
judgment there is a reasonable likelihood that each Plan will benefit the Fund
and its shareholders.
PERFORMANCE
Average annual total return is determined separately for each Class of the
Fund by multiplying a hypothetical initial purchase order of $1,000 by the
average annual compound rate of return (including capital appreciation/
depreciation, and distributions paid and reinvested) for the stated period and
annualizing the results. The calculation assumes (i) that all distributions are
reinvested at net asset value on the reinvestment dates during the period, (ii)
the deduction of the maximum sales charge from the initial $1,000 purchase order
for Class A shares, (iii) a complete redemption of the investment and (iv) the
deduction of any CDSC at the end of the period. The Fund may also publish total
return figures for each class based on reduced sales charges or at net asset
value. These returns would be lower if the full sales charge was imposed. For
information concerning the total return of the Classes of the Fund, see Appendix
A and Appendix B.
The Fund's performance may be compared in publications to the performance of
various indices and investments for which reliable data is available, and to
averages, performance rankings and/or ratings, or other information prepared by
recognized mutual fund statistical services. The Fund's performance may differ
from that of other investors in the Portfolio, including other investment
companies.
Total return may be compared to relevant indices, such as the Consumer Price
Index and various domestic and foreign securities indices. The Fund's total
return and comparisons with these indices may be used in advertisements and in
information furnished to present or prospective shareholders. In addition,
evaluations of the Fund's performance or rankings and/or ratings 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. Such information may also include commentary prepared by Eaton Vance
investment professionals, including portfolio managers.
Investors may be provided with information concerning Fund volatility or
risk, including but not limited to beta, standard deviation and Sharpe ratio.
Beta is a measure of risk which shows Fund volatility relative to a market
index. A fund with a beta of 1 would perform exactly like the market index; a
beta of 2 would mean its performance was twice as volatile as the index,
positive or negative. Standard deviation is a measure of a security's
volatility, or variability, in expected return. Sharpe ratio is a measure of
risk-adjusted performance. The higher the Sharpe ratio the better a fund's
historical risk-adjusted return. Information concerning Fund distribution
payments (or the payment record of issuers in which the Fund may invest) may
also be provided to investors.
Information used in advertisements and in materials furnished to present or
prospective shareholders may include statistics, data and performance studies
prepared by independent organizations or included in various publications
reflecting the investment performance or return achieved by various classes and
types of investments (e.g., common stocks, small company stocks, long-term
corporate bonds, long-term government bonds, intermediate-term government
bonds, U.S. Treasury bills) over various periods of time. This information may
be used to illustrate the benefits of long-term investments in common stocks.
Information about the portfolio allocation, portfolio turnover and holdings of
the Portfolio may be included in advertisements and other material furnished to
present and prospective shareholders.
Information used in advertisements and in material provided to present and
prospective shareholders may include descriptions of Lloyd George, Eaton Vance
and other Fund and Portfolio service providers, their investment styles, other
investment products, personnel and Fund distribution channels.
Information used in advertisements and materials furnished to present and
prospective investors may include statements or illustrations relating to the
appropriateness of certain types of securities and/or mutual funds to meet
specific financial goals. Such information may address:
-- cost associated with aging parents;
-- funding a college education (including its actual and estimated cost);
-- health care expenses (including actual and projected expenses);
-- long-term disabilities (including the availability of, and coverage
provided by, disability insurance); and
-- retirement (including the availability of social security benefits, the
tax treatment of such benefits and statistics and other information
relating to maintaining a particular standard of living and outliving
existing assets).
Such information may also address different methods for saving money and the
results of such methods, as well as the benefits of investing in equity
securities. Such information may describe: the potential for growth; the
performance of equities as compared to other investment vehicles; and the value
of investing as early as possible and regularly, as well as staying invested.
The benefits of investing in equity securities by means of a mutual fund may
also be included (such benefits may include diversification, professional
management and the variety of equity mutual fund products).
Information in advertisements and materials furnished to present and
prospective investors may include profiles of different types of investors
(i.e., investors with different goals and assets) and different investment
strategies for meeting specific financial goals. Such information may provide
hypothetical illustrations which include: results of various investment
strategies; performance of an investment in the Fund over various time periods;
and results of diversifying assets among several investments with varying
performance. Information in advertisements and materials furnished to present
and prospective investors may also include quotations (including editorial
comments) and statistics concerning investing in securities, as well as
investing in particular types of securities and the performance of such
securities.
The Trust (or Principal Underwriter) may provide investors with information
on global investing, which may include descriptions, comparisons, charts and/or
illustrations of foreign and domestic equity market capitalizations; returns
obtained by foreign and domestic securities; and the effects of globally
diversifying an investment portfolio (including volatility analysis and
performance information). Such information may be provided for a variety of
countries over varying time periods.
The Trust (or Principal Underwriter) may provide information about Eaton
Vance, its affiliates and other investment advisers to the funds in the Eaton
Vance Family of Funds in sales material or advertisements provided to investors
or prospective investors. Such material or advertisements may also provide
information on the use of investment professionals by such investors.
TAXES
Each series of the Trust is treated as a separate entity for federal income
tax purposes. The Fund has elected to be treated and intends to qualify each
year, as a regulated investment company ("RIC") under the Code. Accordingly, the
Fund intends to satisfy certain requirements relating to sources of its income
and diversification of its assets and to distribute substantially all of its net
income and net short-term and long-term capital gains (after reduction by any
available capital loss carryforwards) 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. To the extent it qualifies for treatment as a RIC
and satisfies the above-mentioned distributions requirements, the Fund will not
be subject to federal income tax on income paid to its shareholders in the form
of dividends or capital gain distributions. The Fund so qualified for its fiscal
year ended August 31, 2000.
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. For purposes of applying the
requirements of the Code regarding qualification as a RIC, the Fund (i) will be
deemed to own its proportionate share of each of the assets of the Portfolio and
(ii) will be entitled to the gross income of the Portfolio attributable to such
share.
In order to avoid incurring a federal excise tax obligation, the Code
requires that the Fund distribute (or be deemed to have distributed) by December
31 of each calendar year (i) at least 98% of its ordinary income (not including
tax-exempt income) for such year, (11) at least 98% of its capital gain net
income (which is the excess of its realized capital gains over its realized
capital losses), generally computed on the basis of the one-year period ending
on October 31 of such year, after reduction by any available capital loss
carryforwards and (iii) 100% of any income and capital gains from the prior year
(as previously computed) that was not paid out during such year and on which the
Fund paid no federal income tax. Under current law, provided that the Fund
qualifies as a RIC and a Portfolio is treated as a partnership for Massachusetts
and federal tax purposes, neither the Fund nor the Portfolio should be liable
for any income, corporate excise or franchise tax in the Commonwealth of
Massachusetts.
If the Fund does not qualify as a RIC for any taxable year, the Fund's
taxable income will be subject to corporate income taxes, and all distributions
from earnings and profits, including distributions of net capital gain (if any),
will be taxable to the shareholder as ordinary income. In addition, in order to
requalify for taxation as a RIC, the Fund may be required to recognize
unrealized gains, pay substantial taxes and interest, and make certain
distributions.
The Portfolio's investments in options, futures contracts, hedging
transactions, forward contracts (to the extent permitted) and certain other
transactions will be subject to special tax rules (including mark-to-market,
constructive sale, straddle, wash sale, short sale and other rules), the effect
of which may be to accelerate income to the Portfolio, defer Portfolio losses,
cause adjustments in the holding periods of Portfolio securities, convert
capital gain into ordinary income and convert short-term capital losses into
long-term capital losses. These rules could therefore affect the amount, timing
and character of distributions to investors
Transactions in foreign currencies, foreign currency-denominated debt
securities and certain foreign currency options, futures contracts, forward
contracts and similar instruments (to the extent permitted) may give rise to
ordinary income or loss to the extent such income or loss results from
fluctuations in the value of the foreign currency concerned.
Investments in "passive foreign investment companies" could subject the
Portfolio to U.S. federal income tax or other charge on the proceeds from the
sales of the investment in such company; however, this tax can be avoided by
making an election to mark such investment to market annually or treat the
passive foreign investment company as a "qualified electing fund".
If more than 50% of the Portfolio's assets at year end consists of the debt
and equity securities of foreign corporations, the Fund may elect to permit
shareholders to claim a credit or deduction on their income tax returns for
their pro rata portion of qualified taxes paid by the Fund to foreign countries.
If the election is made, shareholders will include in gross income from foreign
sources their pro rata share of such taxes. A shareholder's ability to claim a
foreign tax credit or deduction in respect of foreign taxes paid by the Fund may
be subject to certain limitations imposed by the Code (including a holding
period requirement applied at both the Fund and shareholder level), as a result
of which a shareholder may not get a full credit or deduction for the amount of
such taxes. Shareholders who do not itemize deductions on their federal income
tax returns may claim a credit (but no deduction) for such taxes.
A portion of distributions made by the Fund which are derived from dividends
from domestic corporations may qualify for the dividends-received deduction
("DRD") for corporations. The DRD is reduced to the extent the Fund shares with
respect to which the dividends are received are treated as debt-financed under
the Code and is eliminated if the shares are deemed to have been held for less
than a minimum period, generally 46 days. Receipt of certain distributions
qualifying for the DRD may result in reduction of the tax basis of the corporate
shareholder's shares. Distributions eligible for the DRD may give rise to or
increase an alternative minimum tax for certain corporations.
Any loss realized upon the sale or exchange of Fund shares with a tax
holding period of 6 months or less will be treated as a long-term capital loss
to the extent of any distributions treated as long-term capital gain with
respect to such shares. In addition, all or a portion of a loss realized on a
redemption or other disposition of Fund shares may be disallowed under "wash
sale" rules to the extent the shareholder acquired other shares of the same Fund
(whether through the reinvestment of distributions or otherwise) within the
period beginning 30 days before the redemption of the loss shares and ending 30
days after such date. Any disallowed loss will result in an adjustment to the
shareholder's tax basis in some or all of the other shares acquired.
Sales charges paid upon a purchase of shares subject to a front-end sales
charge cannot be taken into account for purposes of determining gain or loss on
a redemption or exchange of the shares before the 91st day after their purchase
to the extent a sales charge is reduced or eliminated in a subsequent
acquisition of shares of the Fund (or of another fund) pursuant to the
reinvestment or exchange privilege. Any disregarded amounts will result in an
adjustment to the shareholder's tax basis in some or all of any other shares
acquired.
Dividends and distributions on the Fund's shares are generally subject to
federal income tax as described herein to the extent they do not exceed the
Fund's realized income and gains, even though such dividends and distributions
may economically represent a return of a particular shareholder's investment.
Such distributions are likely to occur in respect of shares purchased at a time
when the Fund's net asset value reflects gains that are either unrealized, or
realized but not distributed. Such realized gains may be required to be
distributed even when the Fund's net asset value also reflects unrealized
losses. Certain distributions declared in October, November or December and paid
in the following January will be taxed to shareholders as if received on
December 31 of the year in which they were declared.
Amounts paid by the Fund to individuals and certain other shareholders who
have not provided the Fund with their correct taxpayer identification number
("TIN") and certain certifications required by the Internal Revenue Service (the
"IRS") as well as shareholders with respect to whom the Fund has received
certain information from the IRS or a broker, may be subject to "backup"
withholding of federal income tax arising from the Fund's taxable dividends and
other distributions as well as the proceeds of redemption transactions
(including repurchases and exchanges), at a rate of 31%. An individual's TIN is
generally his or her social security number.
The foregoing discussion does not address the special tax rules applicable
to certain classes of investors, such as IRAs and other retirement plans,
tax-exempt entities, foreign investors, insurance companies and financial
institutions. Shareholders should consult their own tax advisers with respect to
special tax rules that may apply in their particular situations, as well as the
state, local, and, where applicable, foreign tax consequences of investing in
the Fund.
PORTFOLIO SECURITY TRANSACTIONS
Decisions concerning the execution of portfolio security transactions by the
Portfolio, including the selection of the market and the broker-dealer firm, are
made by the investment adviser.
The investment adviser places the portfolio security transactions of the
Portfolio and of certain other accounts managed by the investment adviser for
execution with many firms. The investment adviser uses its best efforts to
obtain execution of portfolio transactions at prices which are advantageous to
the Portfolio and (when a disclosed commission is being charged) at reasonably
competitive commission rates. In seeking such execution, the investment adviser
will use its best judgment in evaluating the terms of a transaction, and will
give consideration to various relevant factors, including without limitation the
size and type of the transaction, the general execution and operational
capabilities of the broker-dealer, the nature and character of the market for
the security, the confidentiality, speed and certainty of effective execution
required for the transaction, the reputation, reliability, experience and
financial condition of the broker-dealer, the value and quality of services
rendered by the broker-dealer in other transactions, and the reasonableness of
the commission or spread, if any. Transactions on stock exchanges and other
agency transactions involve the payment by the Portfolio of negotiated brokerage
commissions. Such commissions vary among different broker-dealer firms, and a
particular broker-dealer may charge different commissions according to such
factors as the difficulty and size of the transaction and the volume of business
done with such broker-dealer. Transactions in foreign securities usually involve
the payment of fixed brokerage commissions, which are generally higher than
those in the United States. There is generally no stated commission in the case
of securities traded in the over-the-counter markets, but the price paid or
received by the Portfolio usually includes an undisclosed dealer markup or
markdown. In an underwritten offering the price paid by the Portfolio includes a
disclosed fixed commission or discount retained by the underwriter or dealer.
Although commissions paid on portfolio transactions will, in the judgment of the
investment adviser, be reasonable in relation to the value of the services
provided, commissions exceeding those which another firm might charge may be
paid to broker-dealers who were selected to execute transactions on behalf of
the Portfolio and the investment adviser's other clients in part for providing
brokerage and research services to the investment adviser.
As authorized in Section 28(e) of the Securities Exchange Act of 1934, a
broker or dealer who executes a portfolio transaction on behalf of the Portfolio
may receive a commission which is in excess of the amount of commission another
broker or dealer would have charged for effecting that transaction if the
investment adviser determines in good faith that such compensation was
reasonable in relation to the value of the brokerage and research services
provided. This determination may be made on the basis of either that particular
transaction or on the basis of the overall responsibilities which the investment
adviser and its affiliates have for accounts over which they exercise investment
discretion. In making any such determination, the investment adviser will not
attempt to place a specific dollar value on the brokerage and research services
provided or to determine what portion of the commission should be related to
such services. Brokerage and research services may include advice as to the
value of securities, the advisability of investing in, purchasing, or selling
securities, and the availability of securities or purchasers or sellers of
securities; furnishing analyses and reports concerning issuers, industries,
securities, economic factors and trends, portfolio strategy and the performance
of accounts; and effecting securities transactions and performing functions
incidental thereto (such as clearance and settlement); and the "Research
Services" referred to in the next paragraph.
It is a common practice in the investment advisory industry for the advisers
of investment companies, institutions and other investors to receive research,
statistical and quotation services, data, information and other services,
products and materials which assist such advisers in the performance of their
investment responsibilities ("Research Services") from broker-dealers which
execute portfolio transactions for the clients of such advisers and from third
parties with which such broker-dealers have arrangements. Consistent with this
practice, the investment adviser may receive Research Services from
broker-dealer firms with which the investment adviser places the portfolio
transactions of the Portfolio and from third parties with which these
broker-dealers have arrangements. These Research Services may include such
matters as general economic and market reviews, industry and company reviews,
evaluations of securities and portfolio strategies and transactions and
recommendations as to the purchase and sale of securities and other portfolio
transactions, financial, industry and trade publications, news and information
services, pricing and quotation equipment and services, and research oriented
computer hardware, software, data bases and services. Any particular Research
Service obtained through a broker-dealer may be used by the investment adviser
in connection with client accounts other than those accounts which pay
commissions to such broker-dealer. Any such Research Service may be broadly
useful and of value to the investment adviser in rendering investment advisory
services to all or a significant portion of its clients, or may be relevant and
useful for the management of only one client's account or of a few clients'
accounts, or may be useful for the management of merely a segment of certain
clients' accounts, regardless of whether any such account or accounts paid
commissions to the broker-dealer through which such Research Service was
obtained. The advisory fee paid by the Portfolio is not reduced because the
investment adviser receives such Research Services. The investment adviser
evaluates the nature and quality of the various Research Services obtained
through broker-dealer firms and attempts to allocate sufficient commissions to
such firms to ensure the continued receipt of Research Services which the
investment adviser believes are useful or of value to it in rendering investment
advisory services to its clients.
Subject to the requirement that the investment adviser shall use its best
efforts to seek to execute portfolio security transactions of the Portfolio at
advantageous prices and at reasonably competitive commission rates or spreads,
the investment adviser is authorized to consider as a factor in the selection of
any broker-dealer firm with whom Portfolio orders may be placed the fact that
such firm has sold or is selling shares of the Fund or of other investment
companies sponsored by Eaton Vance. This policy is not inconsistent with a rule
of the NASD which rule provides that no firm which is a member of the NASD shall
favor or disfavor the distribution of shares of any particular investment
company or group of investment companies on the basis of brokerage commissions
received or expected by such firm from any source.
Securities considered as investments for the Portfolio may also be
appropriate for other investment accounts managed by the investment adviser or
its affiliates. Whenever decisions are made to buy or sell securities by the
Portfolio and one or more of such other accounts simultaneously, the investment
adviser will allocate the security transactions (including "hot" issues) in a
manner which it believes to be equitable under the circumstances. As a result of
such allocations, there may be instances where the Portfolio will not
participate in a transaction that is allocated among other accounts. If an
aggregated order cannot be filled completely, allocations will generally be made
on a pro rata basis. An order may not be allocated on a pro rata basis where,
for example: (i) consideration is given to portfolio managers who have been
instrumental in developing or negotiating a particular investment; (ii)
consideration is given to an account with specialized investment policies that
coincide with the particulars of a specific investment; (iii) pro rata
allocation would result in odd-lot or de minimis amounts being allocated to a
portfolio or other client; or (iv) where the investment adviser reasonably
determines that departure from a pro rata allocation is advisable. While these
aggregation and allocation policies could have a detrimental effect on the price
or amount of the securities available to the Portfolio from time to time, it is
the opinion of the Trustees of the Trust and the Portfolio that the benefits
from the investment adviser's organization outweigh any disadvantage that may
arise from exposure to simultaneous transactions.
For the fiscal years ended August 31, 2000 and 1999, the Portfolio paid
brokerage commissions of $542,045 and $211,592, respectively, with respect to
portfolio transactions. Of this amount, approximately $308,243 and $91,768 was
paid in respect of portfolio security transactions aggregating approximately
$113,124,203 and $35,909,714, respectively, to firms which provided some
Research Services to the Adviser's organization (although many such firms may
have been selected in any particular transaction primarily because of their
execution capabilities).
FINANCIAL STATEMENTS
The audited financial statements of and the independent auditors' report for
the Fund and the Portfolio appear in the Fund's most recent annual report to
shareholders and are incorporated by reference into this SAI. A copy of the
Fund's most recent annual report accompanies this SAI.
HOUSEHOLDING. Consistent with applicable law, duplicate mailings of shareholder
reports and certain other Fund information to shareholders residing at the same
address may be eliminated.
Registrant incorporates by reference the audited financial information for
the Fund and the Portfolio for the fiscal year ended August 31, 2000, as
previously filed electronically with the SEC (Accession No.
0000912057-00-047647).
<PAGE>
APPENDIX A
CLASS A FEES, PERFORMANCE AND OWNERSHIP
DISTRIBUTION AND SERVICE FEES
The Fund accrued approximately $6,917 to or payable to the principal
underwriter for the year ended August 31, 2000, representing approximately 0.50%
of the average daily net assets for Class A, $2,980 of which was waived. During
the fiscal year ended August 31, 2000, Class A made service fee payments to the
principal underwriter and investment dealers aggregating $66, all of which was
paid to investment dealers.
PRINCIPAL UNDERWRITER
The total sales charges paid in connection with sales of Class A shares
during the fiscal year ended August 31, 2000, was $10,129, of which $1,576 was
received by the principal underwriter. For the fiscal year ended August 31,
2000, investment dealers received $8,553 from the total sales charges.
The Trust has authorized the principal underwriter to act as its agent in
repurchasing shares at the rate of $2.50 for each repurchase transaction handled
by the principal underwriter. For the fiscal year ended August 31, 2000, Class A
paid the principal underwriter $10.00 for repurchase transactions handled by it.
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return on
a hypothetical investment of $1,000 in a predecessor fund for the periods shown
in the table. The "Value of Initial Investment" reflects the deduction of the
maximum sales charge of 5.75%. Past performance is no guarantee of future
results. Investment return and principal value will fluctuate; shares, when
redeemed, may be worth more or less than their original cost.
<TABLE>
VALUE OF $1,000 INVESTMENT
<CAPTION>
TOTAL RETURN TOTAL RETURN
EXCLUDING MAXIMUM INCLUDING MAXIMUM
VALUE OF VALUE OF SALES CHARGE SALES CHARGE
INVESTMENT INVESTMENT INITIAL INVESTMENT ------------------------------ ------------------------------
PERIOD DATE INVESTMENT ON 8/31/00 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
------ ------ ------- ------ -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of the Fund* 6/30/92 $942.56 $4,641.12 392.39% 21.55% 364.11% 20.67%
5 Years Ended
8/31/00 8/31/95 $942.10 $2,569.63 172.75% 22.22% 156.96% 20.77%
1 Year Ended
8/31/00 8/31/99 $942.29 $1,438.44 52.65% 52.65% 43.84% 43.84%
* Predecessor fund operations began on June 30, 1992.
</TABLE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of December 1, 2000, the Trustees and officers of the Trust, as a group,
owned in the aggregate less than 1% of the outstanding Class A shares of the
Fund. As of December 1, 2000, Chrysalis Partners LP, Charlottesville, VA was the
record owner of approximately 69.2% of the outstanding Class A shares.
Beneficial owners of 25% or more of Class A shares are presumed to be in control
of such Class for purposes of voting on certain matters submitted to
shareholders. In addition, as of the same date, Norman B. Bodine, Bloomfield
Hills, MI and Merrill Lynch, Pierce, Fenner & Smith, Inc., Jacksonville FL were
the record owners of 13.2% and 7.4%, respectively of the Fund's Class A shares.
To the knowledge of the Trust, no other person owned of record or beneficially
5% or more of the Fund's outstanding Class A shares as of such date.
<PAGE>
APPENDIX B
CLASS B FEES, PERFORMANCE AND OWNERSHIP
DISTRIBUTION AND SERVICE FEES
During the fiscal year ended August 31, 2000, the principal underwriter paid
to investment dealers sales commissions of $3,244 on sales of Class B shares.
During the same period, the Fund made distribution payments to the principal
underwriter under the Distribution Plan aggregating $474 ($411 of which was
waived) and the principal underwriter didn't receive any CDSCs imposed on early
redeeming shareholders. The distribution payments reduced uncovered distribution
charges under the Plan. As at August 31, 2000, the outstanding uncovered
distribution charges of the principal underwriter calculated under the Plan
amounted to approximately $11,000 (which amount was equivalent to approximately
23.4% of the net assets attributable to Class B on such day). During the fiscal
year ended August 31, 2000, Class B made service fee payments to the principal
underwriter and investment dealers aggregating $213, of which $156 was paid to
investment dealers and the balance of which was retained by the principal
underwriter.
PRINCIPAL UNDERWRITER
The Trust has authorized the principal underwriter to act as its agent in
repurchasing shares at the rate of $2.50 for each repurchase transaction handled
by the principal underwriter. For the fiscal year ended August 31, 2000, Class B
paid the principal underwriter $10.00 for repurchase transactions handled by it.
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return on
a hypothetical investment of $1,000 in a predecessor fund for the periods shown
in the table. This total return has not been adjusted to reflect sales charges
and other expenses (such as distribution and/or service fees). If such
adjustments were made, the performance would be lower. Past performance is no
guarantee of future results. Investment return and principal vaue will
fluctuate; shares, when redeemed, may be worth more or less than their original
cost.
<TABLE>
VALUE OF A $1,000 INVESTMENT
<CAPTION>
VALUE OF VALUE OF
INVESTMENT INVESTMENT
BEFORE AFTER TOTAL RETURN BEFORE TOTAL RETURN AFTER
DEDUCTING THE DEDUCTING THE DEDUCTING THE CDSC DEDUCTING THE CDSC
INVESTMENT INVESTMENT AMOUNT OF CDSC CDSC -------------------------- -------------------------
PERIOD DATE INVESTMENT ON 8/31/00 ON 8/31/00 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
------ ---- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of the
Fund* 6/30/92 $1,000 $4,540.80 $4,540.80 354.08% 20.35% 354.08% 20.35%
5 Years
Ended
8/31/00 8/31/95 $1,000 $2,515.32 $2,495.32 151.53% 20.26% 149.53% 20.07%
1 Year Ended
8/31/00 8/31/99 $1,000 $1,466.66 $1,416.66 46.67% 46.67% 41.67% 41.67%
* Predecessor Fund commenced operations June 30, 1992.
</TABLE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As at December 1, 2000, the Trustees and officers of the Trust, as a group,
owned in the aggregate less than 1% of the outstanding Class B shares of the
Fund. As of December 1, 2000, Fifth Third Bank TTEE, Cincinnati, OH, Merrill
Lynch, Pierce, Fenner & Smith, Inc., Jacksonville, FL, Raymond James &
Associates Inc. for Elite Acct #50035115, Saint Petersburg, FL were the record
owners of approximately 28%, 26.9% and 24.5%, respectively, of the outstanding
Class B shares, which they held on behalf of customers who are the beneficial
owners of such shares, and as to which they had voting power under certain
limited circumstances. In addition, as of the same date, the following
shareholders owned of record the percentage of Class B shares indicated after
their name: Cynthia L. Lathrem-Mayette, Plattsburgh, NY, (7.9%), Ronald L.
Clemmer (5.5%) and Sharon & Larry James, Land O'Lakes, FL (5.2%). Beneficial
owners of 25% or more of Class B shares are presumed to be in control of such
class for purposes of voting on certain matters submitted to shareholders. To
the knowledge of the Trust, no other person owned of record or beneficially 5%
or more of the Fund's outstanding Class B shares as of such date.
<PAGE>
APPENDIX C
ASIAN REGION COUNTRIES
The information set forth in this Appendix has been extracted from various
government and private publications. The Trust's Board of Trustees makes no
representation as to the accuracy of the information, nor has the Board of
Trustees attempted to verify it. Moreover, the information is as of the date of
this SAI (or such other date as set forth below). This information is expected
to change substantially during the period in which this SAI is in use. No
representation is made that any correlation will exist between the economies or
stock markets of Asian Region countries and the Fund's performance.
AUSTRALIA
The Commonwealth of Australia comprises an area of about 7,692,030 square
kilometers -- almost the same as that of the United States, excluding Alaska,
and about 50% greater than Europe (excluding the former USSR) and 32 times
greater than the UK. Australia's population of 18.5m is almost 5 times the size
of the population at the time of Federation.
There are 3 levels of government in Australia: Federal, State and local. The
6 Australia colonies federated in 1901 to form the Commonwealth of Australia.
Australia's economic development has been one of contrast and change. In the
early years of settlement (1788-1820), there was little scope for industrial or
commercial enterprises. Between 1820 and 1850, the pastoral industry led
Australia's economic development, and by 1850 it was supplying well over 50% of
the British market for imported wool. Gold surpassed wool as Australia's major
export earner throughout the 1850's and 1860's, resulting in a rapid expansion
of banking and commerce. From 1901 to 1930, manufacturing expanded, with impetus
from Federation and the elimination of customs barriers between States, and from
the First World War.
After the Second World War, all sectors of the economy experienced growth.
The onset of oil price rises in 1973-74 led the world into recession, and
"stagflation" affected all sectors. The modest employment growth between 1968
and 1979 was dominated by the service sector. The 1980's and 1990's have seen a
decline in the relative contribution to GDP from goods-producing industries and
a rise in the contribution from services industries.
The rural sector now accounts for approximately 4% of GDP, and about 5% of
employment. The mining sector also accounts for around 4% of GDP, but only 1% of
employment. Wholesale trade and manufacturing remain the dominant contributors
to GDP at 10.2% and 13.6% respectively. Exports of mining products accounts for
about 22% of total merchandise exports, with black coal remaining the single
largest export item. The tertiary sector accounts for approximately 72% of GDP,
approximately 73% of employment and around 23% of exports by value.
As of November 30, 2000, the market capitalization of Australian equities
was in U.S.$356.5 billion.
PEOPLE'S REPUBLIC OF CHINA
China is the world's third largest country occupying a region of 9.6 million
square kilometers.China is the world's most populous nation, consisting of more
than one-fifth of the human race. The estimated population is approximately 1.2
billion.
In 1949, the Communist Party established the People's Republic of China. The
Communist government engaged in numerous campaigns to industrialize the country
with various programs. The failure of the Communist Party to achieve substantive
economic growth eventually led to the ascendancy of reformers headed by Deng
Xiaoping. In the late 1970's, the Chinese government, which had remained
isolated from the world, opened its doors by encouraging foreign investment and
expertise inside its borders.
In 1989, a growing dissatisfaction with the corruption in the Communist
government led to anti-government student protests culminating in what is known
as the Tiananmen Square incident. The government's use of the military to
suppress a peaceful demonstration resulted in world-wide criticism. However,
recent developments in China have been encouraging. The death of Deng Xiaoping
did not trigger any social unrest and restructuring of state-owned enterprises
had been the main theme of the 15th Party Congress held in 1997. Leadership
under Jiang Zemin remains committed to the implementation of economic reforms.
Investment in China still entails significant political risk of nationalization
or expropriation. China's imminent admission to the WTO will accelerate the
reform process and reduce investment risks.
Since 1992, China has achieved annual growth in real gross domestic product
(GDP) averaging in excess of 10%. The economy in China consists of three
sectors: state, cooperative, and private. The state sector, though decreasing in
weighting, continues to constitute the bulk of the economy. In recent years,
however, the economy has been significantly restructured through the abolition
of the commune system in rural areas and the relaxing of government authority in
the day to day operations in both agricultural and industrial enterprises. As
the government assumes more of a regulatory and supervisory role and less of a
direct management role, market forces have been allowed to operate. This has
resulted in increased productivity and rising incomes.
In 1990, industry accounted for 45.8% of China's National Income. In the
first three decades under Communist rule, China placed great emphasis on heavy
industry. Since the reform program began in 1978, a much greater emphasis has
been placed on light industry. Considerable industrial growth has come from
industrial enterprises in rural townships which are engaged in the processing
and assembly of consumer goods. These operations are concentrated in southern
China, where a major light industrial base has developed. Industrial output has
grown rapidly and is increasingly important to the Chinese economy. China's
current industrial policy also places emphasis on high-technology industries
supported by foreign technology, such as micro-electronics and
telecommunications. However, many enterprises have a huge staff burden which
must be relieved to increase the competitiveness of the enterprises. To avoid
social unrest caused by the increase in unemployment rate, there is so far no
easy solution.
Inflation, which was a problem in early 1990s, has been under control.
Inflation rate rocketed to 24% in 1994 and then dropped to 8.3% in 1996 and 2.8%
by 1997. The control achieved over inflation is the result of austerity measures
implemented by the government during 1994, 1995 and early 1996. The impact of
these austerity measures was exacerbated by the Asian financial crisis of 1997
and 1998, and the inherent structural imbalances in the Chinese economy, caused
China to enter a sustained period of deflation. In response, the Chinese
government has implemented a series of fiscal and monetary stimulas packages
aimed at boosting domestic demand.
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 the first ten months of 2000, China's
foreign trade yielded a surplus of U.S. $23.1 billion. Hong Kong is one of the
leading destination for Chinese exports, accounting for over 20% of total export
volume. Hong Kong is also a major re-export center for Chinese goods. Other
large export markets for China include Japan, the United States, and Germany.
Over the past few years, China's imports have continued to expand and diversify.
Japan, the United States and Korea are China's top three suppliers. Other major
suppliers include Hong Kong and Germany.
China has traditionally adopted a policy of self-reliance when financing
development. The country has remained a conservative borrower but, since the
early 1980s, has been making greater use of foreign capital and financing,
including government-assisted facilities and project and trade financing. Total
foreign debt as at first half of 2000 was estimated at U.S. $147.6 billion while
foreign exchange reserve was at U.S. $164.6 billion. The primary sources of
foreign capital for China include: International Monetary Fund and World Bank
loans and credits; government low interest loans and credits; and commercial
loans and credits.
There is centralized control and unified management of foreign exchange in
China. The renminbi has been devalued progressively in the past decade,
depreciating by almost 70% against the U.S. dollar between 1981 and 1990.
However, it has been stabilized at the 1994 level for the past 5 years.
There currently are two officially recognized exchanges in China, the
Shanghai Securities Exchange ("SHSE"), which commenced trading on December 19,
1990, and the Shenzhen Stock Exchange ("SZSE"), which commenced trading on July
3, 1991. "B" shares are offered exclusively for investment by foreign investors,
and their total market capitalization in November 2000 was at $6.7 billion. A
number of organized securities markets exist in other cities in China, but these
are primarily over-the-counter markets. At the local level, however, many cities
and provinces have promulgated securities rules and regulations. In fact, it is
becoming common for state-owned enterprises to go for an overseas listing, for
example by a listing of H Shares in Hong Kong, or through Red Chips securities
in The Stock Exchange of Hong Kong.
HONG KONG
As a trade entrepot and finance center, Hong Kong's viability has been
inexorably linked to mainland China since the establishment of the Colony in
1841. Hong Kong remains China's largest trade partner and its leading foreign
investor. In the first ten months of 2000, imports from China amounted to $76.3
billion, exports and re-exports to $109.5 billion. In recent years large numbers
of Hong Kong based companies have set up factories in Southern China in the
province of Guangdong, where it is estimated that Hong Kong companies employ
over 3 million workers. There also has been considerable growth in Chinese
investment in Hong Kong over the last decade and particularly in the last five
years. In contrast to Japanese investment, Chinese investment in Hong Kong
typically involves the purchase of stakes in existing companies. This has
traditionally been in the banking and import/export sectors. Recently,
investment in telecommunication projects has increased. In view of the growing
economic interaction between Hong Kong and Southern China, it is increasingly
meaningful to consider the concept of a Greater Hong Kong economy consisting of
Hong Kong and Guangdong Province, with a combined population of over 78 million.
To sustain the growth of the Guangdong economy, the Hong Kong government in 1989
unveiled PADS, the Port and Airport Development Strategy. The project, which
cost in excess of $21 billion was designed to allow Hong Kong's cargo handling
capacity to increase by four times between 1988 and 2011 and its air traffic
handling capacity to increase from 15 million passengers in 1988 to 50 million
in 2011.
In the past, political considerations have hindered closer economic
integration between Hong Kong and China. It was largely in response to the
United Nations embargo on trade with China in the 1950s and 1960s that Hong Kong
developed a significant manufacturing base. In the last several years, however,
there has been an improvement in relations. The Basic Law, the outline for Hong
Kong's government post reunification with China in 1997, calls for Hong Kong's
capitalist system to remain intact for an additional fifty years after 1997.
This integration process directly affects the value of Hong Kong investments.
In the last two decades there has been a structural change in Hong Kong's
economy, with growth in the services sector outpacing manufacturing growth. With
more and more labor intensive manufacturing relocating to Southern China, Hong
Kong has developed its services sector, which in 1999 contributed over 85% of
GDP.
The Stock Exchange of Hong Kong Ltd. ("HKSE"), commenced trading on April 2,
1986. The HKSE, with a total market capitalization as of November, 2000 of
approximately U.S. $573 billion is now the second largest stock market in Asia,
measured by market capitalization, behind only that of Japan. As of that date,
780 companies and 1,305 securities were listed on the Hong Kong Stock Exchange.
There are no regulations governing foreign investment in Hong Kong. There
are no exchange control regulations and investors have total flexibility in the
movement of capital and the repatriation of profits. Funds invested in Hong Kong
can be repatriated at will; dividends and interest are freely remittable.
INDIA
India is the seventh largest country in the world, covering an area of
approximately 3,300,000 square kilometers. It is situated in South Asia and is
bordered by Nepal, Bhutan and China in the north, Myanmar and Bangladesh in the
east, Pakistan in the west and Sri Lanka in the south.
India's population is currently estimated at approximately 1,054 million;
the figure in 1991, according to the official census, was 846 million. Most of
the population still lives in rural areas. Approximately 84 percent are Hindus,
11 percent Muslims, 2 percent Sikhs, 2 percent Christians and 1 percent
Buddhists. Hindi is one of the major languages, with English also being used
widely in official and business communications. With a middle class of
approximately 150 million people, India constitutes one of the largest markets
in the world.
Unlike certain other emerging market countries, India has a long tradition
of trade and markets, despite the central planning of the economy carried out by
the Indian government in the first decades after India's independence. The
Bombay Stock Exchange, for example, was founded over 120 years ago, is the
oldest stock exchange in Asia and currently lists almost 5,889 companies, more
than the New York Stock Exchange.
India became independent from the United Kingdom in 1947. It is governed by
a parliamentary democracy under the Constitution of India, under which the
executive, legislative and judicial functions are separated. India has been
engaged in a policy of gradual economic reform since the mid-1980's. In 1991,
the Government of Prime Minister Narasimha Rao had introduced far-reaching
measures with the goal of reducing government intervention in the economy,
strengthening India's industrial base, expanding exports and increasing economic
efficiency. The main focus of the policy was to place more authority for making
business decisions in the hands of those who operate the businesses. The system
of industrial licenses known as the "License Raj", by means of which the
government controlled many private sector investment decisions, was
substantially modified. Government approvals required to increase, reduce or
change production have been greatly reduced.
Modern economic development in India began in the mid-1940's with the
publication of the Bombay Plan. The Planning Commission was established in 1950
to assess the country's available resources and to identify growth areas. A
centrally planned economic model was adopted, and in order to control the
direction of private investment, most investment and major economic decisions
required government approval. Foreign investment was allowed only selectively.
This protectionist regime held back development of India's economy until the
mid-1980's when there began a gradual move towards the liberalization and market
orientation of the economy. After the liberalization measures, which began in
1985, the annual growth of the country's real gross domestic product has risen
from an average 3-4% since the 1940's to an average 5.7% between 1991 and 1997.
Since 1991, the Indian government has continued to adopt measures to further
open the economy to private investment, attract foreign capital and speed up the
country's industrial growth rate. For example, the banking industry has recently
been opened to the private sector, including to foreign investors. Most banks
were nationalized in 1969, and no new privately owned banks had been permitted.
The Government is now granting new banking licenses. The Government also has
recently permitted foreign brokerage firms to operate in India on behalf of
Foreign Institutional Investors ("FIIs"), and has permitted foreign investors to
own majority stakes in Indian asset management companies. In 1992, it was
announced that FIIs would be able to invest directly in the Indian capital
markets. In September 1992, the guidelines for FIIs were published and a number
of such investors have been registered by the Securities and Exchange Board of
India, including the Adviser. In 1995, FII regulations were supplemented and the
Parliament approved the establishment of central share depositories. Beginning
in September 1995, several measures have been adopted to establish securities
depositories and permit trading without share certificates. Dematerialization
(paperless) trading began in 1997 and as of the date hereof more than 2,050
companies have joined the National Securities Depository Ltd. (NSDL) offering
demat facilities to investors. These companies represent about 80% of the market
capitalization of the Indian market.
The government has also cut subsidies to ailing public sector businesses.
Further cuts, and privatizations, are expected, although resistance by labor
unions and other interest groups may hinder this process. Continuing the reform
process, recent budgets have implemented tax cuts for the corporate sector and
reductions in import duties. In sum, the government's new policies seek to
expand opportunities for entrepreneurship in India. The new government has begun
well by managing to pass two crucial bills in the Parliament -- a) the Insurance
Bill permitting private and foreign participation in the insurance sector, and
b) the Foreign Exchange Management Bill (FEMA) which relaxes norms for foreign
exchange transactions.
Foreign investors have responded to these trends by putting resources into
the Indian economy. According to the Reserve Bank of India, total inflows,
including both foreign direct and foreign portfolio investment, rose from about
$150 million in fiscal year 1992 to over $4.6 billion in fiscal year 1997.
India's foreign exchange reserves, which had fallen to about $1 billion in 1991,
were $39 billion in November, 2000. Future direction of foreign investment
flows, however is dependent on clear cut policy thrust from the new government.
The Indian population is comprised of diverse religious and linguistic
groups. Despite this diversity, India is the world's largest democracy and has
had one of the more stable political systems among the world's developing
nations. However, periodic sectarian conflict among India's religious and
linguistic groups could adversely affect Indian businesses, temporarily close
stock exchanges or other institutions, or undermine or distract from government
efforts to liberalize the Indian economy
INDONESIA
Up to early 1998, there were only two rulers of Indonesia since independence
was gained from the Dutch in 1948 -- Sukarno and Suharto. However, independence
and the 1965 revolution were unusually violent episodes in the life of any
country. The stability which Indonesia has enjoyed during the past three decades
under Suharto should, therefore, be placed against this background. The regional
currency crisis in late 1997 was exacerbated in Indonesia in 1998. Under IMF's
insistence, fuel prices were raised significantly which lead to rioting and an
overthrow of President Suharto. An interim government under President Habibie
took some momentous decisions. To hold elections in Indonesia in a free and fair
manner which were a tremendous success. The new president Mr. Wahid leads a
coalition, but the establishment may be considered as inexperienced to run a
coalition in such a diverse country. However a referendum in East Timor led to a
very violent independence.
The huge Indonesian archipelago has a population of over 200 million.
Fundamentalism is on the rise, 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 by most accounts is less than 5 million,
or around 3% of the total, approximately 80% of the commerce and much of the
capital wealth remains in the hands of this small but tight-knit Chinese
community. The Chinese community were the main targets of riots in 1998. Since
then, there are signs of a return to normality, but confidence remains brittle.
Indonesia began the 1980s principally as an oil exporter. During the 1970s
it had a high rate of inflation but also a very rapid economic growth on the
back of the oil boom. The fall in oil prices in the early 1980s, which became
precipitate in the spring of 1986, therefore, forced a review of their
priorities. Reducing inflation, diversifying the economy away from oil and
maintaining a stable growth in the economy were selected as the main objectives.
Inflation was brought from 20%, at the beginning of the decade, to around 6% in
1989-90. However, inflation had again become a problem after the crisis.
Economic growth, having fallen to 2.5% in 1985 regained the level of 7.4% by
1990 and averaged at around 6% thereafter until 1997. Economic contraction is
however expected in the near future. The rupiah, which had undergone a 30%
once-and-for-all evaluation in the autumn of 1985, had stabilized on a "crawling
peg" system with an annual devaluation of around 5% until 1997 when it seriously
suffered in the Asian currency turmoil. The economic development of the country
very much depends on social and political stability and also the new
government's commitment to economic reforms.
JAPAN
The Japanese archipelago stretches for 1,300 miles in the western Pacific
Ocean. The total area of all the islands is about equal to the size of
California. Only one third of the land is suitable for agriculture, housing,
industry, and commerce.
Japan has a population of about 125 million people, roughly half that of the
United States and twice that of England or Germany. Life expectancy is the
highest in the world. The literacy rate in Japan approaches 100%. The high level
of education, combined with the Confucian work ethic, has created a motivated
work force which boasts a very high savings rate.
Japan is evolving into a post-industrial society and economy as we approach
the 21st century. Japan's postwar growth was phenomenal. By 1970, Japan's Gross
National Product (GNP) had surpassed those of the United Kingdom and the former
Soviet Union. The Japanese economy is now the second largest in the world; its
per capita GNP is the highest among large industrial countries.
During the era of high economic growth in the 1960s and early 1970s,
Japanese expansion focused on the development of heavy industries such as steel,
shipbuilding, and chemicals. In the 1970s, Japan's industrial structure shifted
toward assembly industries with a strong emphasis on exports. In that decade,
Japan became a major producer and exporter of automobiles and consumer
electronics. In the 1980s, Japan gradually stepped toward a post-industrial
society. This evolution had been characterized by an increased reliance on
services, a per capita income which is the highest in the world, rapidly
changing lifestyles influenced by the younger generation, a greater dependence
on domestic markets, a comparative advantage in high technology, and active
participation in the high-growth economies of East Asia, including China.
Japan has had low inflation in recent years. In the past 10 years, the rate
of inflation has ranged between 2% and 3% per year, making it one of the lowest
rates in the world. This achievement was made possible by gains in productivity,
which exceeded wage increases, and by a strong yen in the early 1990's, which
reduced imported raw material costs.
Japan's stock exchanges comprise over 25% of the world's equity market. Like
other stock markets, the Japanese stock market can be volatile. For example, the
Japanese stock market, as measured by the Tokyo Stock Price Index (TOPIX),
increased by over 500% during the ten-year period ended December 31, 1989,
reaching its high of 2884.80 on December 18, 1989, and it has declined by 59%
since that time, falling to 1177.52 on November 14, 1997. This decline has had
an adverse effect on the availability of credit and on the value of the
substantial stock holdings of Japanese companies, in particular, Japanese banks,
insurance companies and other financial institutions. This in turn has
contributed to the recent weakness in Japan's economy. Japanese banks'
recapitalization and record fiscal stimulus in 1998 and 1999 ruled the economy.
Corporates have also started to restructure which bodes well for Japanese equity
markets in the future.
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.
However, the recent historic meeting between the two presidents of North and
South Korea have helped reduce tension to a large extent. Through tentative,
this first step is a significant move towards a possible reunification which
could take over a decade to accomplish.
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. The Korea Won and stocks fell sharply in 1997 and early 1998.
These economic difficulities forced Korea to accept International Monetary
Fund's rescue package which came in with measures intended to put the economy in
better order. As a result, drastic reforms have been introduced into Korea's
business practices.
Since January 1998, a dramatic economic recovery has taken place principally
driven by the cyclical recovery in the semiconductor, steel and automobile
industries. Sovereign debt and many top tier corporates have recovered to
investment grade status with bond yields on 10 year treasuries falling from more
than 1000 basis points over U.S. treasuries to less than a 200 basis point
spread. Significant restructuring has taken place with the closure or
nationalization of major banks and subsequent distressed asset sales by the
Korea Asset Management Corporation. While the pace of large-scale corporate
restructuring has begun to slow in the latter half of 1999, exciting growth and
diversification is likely to continue in the technology and Internet-related
fields.
Korea has posted a spectacular economic recovery in Year 2000 though the
risk of a slowing U.S. economy could cause problems to resurface.
MALAYSIA
The central dilemma in assessing Malaysia's political risk is the question
of who will succeed the Prime Minister Dr. Mahathir. Since the 1969 anti-Chinese
riots in Kuala Lumpur the country has been unruffled by any serious inter-racial
violence and during this period a great deal has been accomplished in
transforming the economy and in transferring the wealth of the country from
foreign and Chinese hands into the hands of the bumiputra (or the sons of the
soil), which is the dominant Malay majority. The success of this New Economic
Policy is unquestioned and has given a great deal of legitimacy to the continued
run of the United Malay National Organisation (UMNO) under its successive prime
ministers and most recently under Dr. Mahathir Mohammed who has now held power
for more than a decade. This economic success has also done much to defuse the
threat from the Islamic fundamentalists who have tended to get co-opted into the
ruling party. The Chinese community has also done well in economic terms
although the political disunity in the Malay Chinese Association (MCA) has left
them somewhat leaderless in the political sphere.
United Malay National Organization (UMNO) the ruling party retained its
significant majority in the recent elections. Though Dr. Mahatir was popular,
his majority was lower than last time. The only difference was that PAS, a
Muslim party won over one more state.
Malaysia has a kingship which is shared on a five-year revolving basis among
the sultans of the various states of the federation. Malaysia's relations with
its neighbours are good. Singapore, remains the largest investor in the country.
Malaysia, like Singapore, has experienced high growth with low inflation except
during the recessions. Since 1987 Malaysia has, however, returned to the path of
high growth and low inflation. The change in recent years has also been
accompanied by an accelerated shift into manufacturing and away from the old
dependence on the plantation sector. This manufacturing growth has been led by
investment from Japan and Taiwan and notable national projects such as the
Proton car. Malaysia is attempting to move up market into the new product areas
such as electronics, car assembly and consumer goods. It has a literate and
trainable workforce.
As manufactured goods assume a larger importance in the composition of
exports compared with crude oil, rubber and palm oil, Malaysia's trade position
should gradually become steadier. For an investor, Malaysia remains vulnerable
to external shocks either in terms of commodity prices or in a fall in export
demand in its principal markets. As with other Asian markets, currency and the
stock market were severly attacked in late 1997 and 1998. This led to the
imposition of capital controls in September 1998, which have been relaxed from
February 1999 onwards.
PAKISTAN
Pakistan, occupying an area of about 800,000 square kilometers, is bounded
in the south by the Arabian Sea and India and in the north by China and
Afghanistan. To the west and northwest are Iran and Afghanistan and to the east
is India. The capital is Islamabad. Karachi is the biggest commercial and
industrial city.
Pakistan is the world's ninth most populous country. The population is
currently estimated at approximately 137 million, with an annual population
growth rate of 3.0%. The national language is Urdu, although English is widely
spoken and understood throughout the country.
Pakistan was created in 1947, in response to the demands of Indian Muslims
for an independent homeland, by the partition from British India of two Muslim
majority areas. In 1971, a civil war in East Pakistan culminated in independence
for East Pakistan (now Bangladesh). Over the past 50 years, Pakistan and India
have gone to war two times, and intermittent border exchanges occur at times. In
particular, relations with India remain unfriendly over the disputed territory
of Kashmir, with its majority Muslim population.
In earlier decades, Pakistan had a federal parliamentary system. Economic
development since 1955 has taken place within the framework of successive
five-year plans which established growth targets and allocations of public
sector investment. However, the lack of realistic targets, plans and successful
policy implementation had finally caused problems. In November 1999, a military
coup deposed Mr. Nawaz Sharif. There is so far no definite timetable for a
return to democracy. Political stability is critical before investor's
confidence returns.
General Pervez Musharaf led a peaceful coup in Pakistan deposing former
Prime Minister Nawaz Sharif. Following that, General Musharaf has been to reform
taxation and collect unpaid taxes from many of the Nation's elite. His goal is
to stablize the economy, continue with reform and conduct a democratic election
at the earliest possible time.
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.
THE PHILIPPINES
The question most investors raise is whether the Philippines can produce
responsible government and economic planning which would give it a business
environment approaching that of its better-governed neighbors. Many observers
dismiss this prospect out of hand citing the endemic problems of corruption and
political in-fighting. However, there is no doubt that the Philippines possesses
enormous natural advantages and it would be wrong to generalize about the whole
archipelago of 7,000 islands from the political life of Manila alone. The island
of Cebu, for example, has seen a successful economic transformation in the past
twenty years. Manufacturing investment has grown and has begun to replace
agriculture as a principal source of employment. The Philippines did not
experience the same severe economic contraction as some of its neighbors during
the Asian economic crisis of 1997-98, due to a better-capitalized banking
system and lower corporate indebtedness. However, the quality of political
governance has steadily deteriorated since 1997. Corruption in the Philippines
appears to be on the rise as former Marcos cronies have regained control over
businesses or received valuable governmental posts. While countries such as
South Korea and Thailand have focused on reform and transparency, the
Philippines currently appears to be regressing. Much will depend on what happens
after President Estrada leaves office.
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. The
tight control of the media and the suppression of all political opposition or
criticism of the government, the People's Action Party or the Prime Minister
himself, has also aroused criticism both at home and internationally.
The Singapore economy has been characterized by the highest degree of
government involvement and intervention outside of the socialist world.
Nevertheless, the growth rate has been quite impressive, averaging around 7
percent, except during the recessions, and even more impressive has been the
tight control of inflation which has remained extremely low at below 3 percent
for the past decade. Being a small island state it is very sensitive to
developments in its two main neighbours, Indonesia and Malaysia, with their
large commodity-based economies. Singapore's foreign reserves held by the
Monetary Authority of Singapore (MAS) and the Government Investment Corporation
of Singapore (GICS) are estimated to be around US $78 billion.
SRI LANKA
Sri Lanka, historically known as Ceylon, is an island of about 65,000 square
kilometers, situated off the southeast coast of India. It has a relatively
well-educated population, with 10% of the 19 million Sri Lankans speaking
English and a literacy rate (in Sinhalese and Tamil) of nearly 90%.
A former British colony, Ceylon became an independent Commonwealth in 1948
and became the Democratic Socialist Republic of Sri Lanka in 1972. Sri Lanka is
governed by a popularly elected President and unicameral Parliament.
In the parliamentary elections held in August 1994, the People's Alliance
led by Mrs. Chandrika Kumaratunga managed to form the government ending the
17-year regime of the United National Party. The People's Alliance has further
consolidated its position by the victory of Mrs. Chandrika Kumaratunga in the
presidential elections held in November 1994. The new government has accorded
top priority for settling the ethnic conflict with the Tamils in the north and
had initiated peace talks with the LTTE. In 1999, however, hostility with the
Tamil Tigers was continuing.
Sri Lanka's most dynamic industries now are food processing, textiles and
apparel, food and beverages, telecommunications, and insurance and banking. By
1996 plantation crops made up only 20% of exports (compared with 93% in 1970),
while textiles and garments accounted for 63%. GDP grew at an annual average
rate of 5.5% throughout the 1990s until a drought and a deteriorating security
situation lowered growth to 3.8% in 1996. The economy rebounded in 1997-98 with
growth of 6.4% and 4.7%. For the next round of reforms, the central bank of Sri
Lanka recommends that Colombo expand market mechanisms in nonplantation
agriculture, dismantle the government's monopoly on wheat imports, and promote
more competition in the financial sector.
Although tourism has been adversely affected by the conflict with the
Tamils, GDP growth was more than 4.3% in 1999.
TAIWAN
The basic geopolitical fact about Taiwan is that it sits under the shadow of
mainland China and under the threat of reunification, whether peaceful or by
military means. Taiwan is dependent on its close relationship with the United
States and its very successful diplomacy and public relations campaign which,
ever since Madame Chiang Kai-Shek's days in the 1940s has sustained a high level
of sympathy in Washington for the Nationalist regime. Taiwan also has close
relations with Israel, with whom it has had military as well as trade links.
Taiwan remains a free capitalist enclave with some very successful
entrepreneurial and export-oriented companies. The government's role in the
economy is relatively small.
Nevertheless, economic integration between the Chinese communities of China
and Taiwan has increased in recent years. China has low labor costs, inexpensive
land, natural resources and less rigid environmental rules. Taiwan has capital,
technology and trained entrepreneurs. Over 20 percent of Taiwan's trade is with
mainland China and the total investment from Taiwan to China has exceeded US $20
billion since 1990. A shortage of skilled labour, the high cost of labour and
the relatively strong New Taiwan dollar, has impelled many Taiwanese
businesspeople to shift their production to Thailand, the Philippines, and
Malaysia as well as China. Taiwan has over US $111 billion of foreign exchange
reserves.
Between 1960 and 1997, Taiwan's GNP grew from less than $2 billion to over
$280 billion. The economic growth has been accompanied by a transformation of
domestic production from labor intensive to capital intensive industries in the
1970s and finally to higher technology industries in the 1980s. The Taiwan Stock
Exchange Corp. is viewed as a highly priced and highly volatile securities
market.
Taiwan has a very Chinese culture and way of life which can affect the
commercial systems. For example, business deals very often depend on the
personal contact and mutual trust between the two parties involved.
THAILAND
Thailand is unique in South East Asia in that it has escaped the colonial
experience and maintained its freedom and independence. The monarchy plays a key
role in maintaining the country's political stability and independence.
Nevertheless, since the absolute monarchy was ended in 1932 there have been
twenty-one coup d'etats, of which twelve have been successful. Thailand in the
1990s may remain democratic but the King and the army will continue to play a
role.
Thailand has a free and independent peasant population which has, on the
whole, enjoyed a higher standard of living than their neighbours and, therefore,
the communist movement has never made much headway among the rural people. On
the other hand again, Thailand's extraordinary economic growth in the 1980s
(averaging 10 percent per annum) has put great strains not only on the urban
environment because of traffic jams and pollution, but also on the social and
family system. Many rural families have been forced to send their teenage
children to the cities to find employment. The contrast of living standards
between Bangkok and the north east provinces (an estimated per capital income
would be perhaps US $2,000 per annum for the former and less than US $500 per
annum for the latter) must eventually create social tensions and potential
unrest. Buddhism must also be counted as a major factor of political stability.
Thailand's economy has been among the fastest growing in the world during
the past decade. The take-off really began in 1986-7 with the flood of new
foreign investment into the country, largely from Japan and Taiwan. There has
been a large shift away from agriculture towards manufacturing. As recently as
1980, 50 percent of Thailand's exports consisted of rice and tapioca and other
agricultural products. By 1990, 75 percent of the total volume of exports were
manufactured goods, mainly from the newly established assembly plants in Bangkok
and the south. This has resulted in large changes in employment and moves of
populations.
It is surprising, considering the very high rate of economic growth that the
economy has experienced, that prices, as measured by the consumer price index,
have been kept under control. The last serious bout of inflation in Thailand
occurred during the two oil crises, first in 1973-4 when the CPI touched 24
percent and then again in 1980-1 when there was a resurgence of inflation to
nearly 20 percent. In the later 1980s, and thanks largely to a more stable oil
price, inflation has been held in single digits and has not exceeded 7 percent.
The boom since the early 1990s has resulted in huge imbalances in the
country's balance of payments position and has significantly strained its
nascent banking system. These pressures finally exploded in July 1997 which led
to the devaluation of the THB. Help from the International Monetary Fund was
sought and arrived in the form of a US $17.2 billion aid package. The economic
contraction in 1998 was severe with more than 1 million Thais pushed below the
poverty line. Had it not been for the strong performance of its agriculture
sector, which employs more than 50% of the country's labour force and is home to
50% of its population, its overall social stability might have been threatened.
From an enviable surplus position for more than a decade, the Government was
thrown into a realm of fiscal deficits. As for its financial sector, the ability
of the Thai authorities to directly intervene and resuscitate its banking system
has been limited due to its relatively democratic political structure compared
to its neighbors.
<PAGE>
STATEMENT OF
ADDITIONAL INFORMATION
January 1, 2001
EATON VANCE GREATER CHINA GROWTH FUND
The Eaton Vance Building
255 State Street
Boston, Massachusetts 02109
(800) 225-6265
This Statement of Additional Information ("SAI") provides general
information about the Fund and the Portfolio. The Fund is a series of Eaton
Vance Growth Trust. Capitalized terms used in this SAI and not otherwise
defined have the meanings given to them in the prospectus. This SAI contains
additional information about:
Page
Strategies and Risks .............................................. 1
Investment Restrictions ........................................... 6
Management and Organization ....................................... 9
Investment Advisory and Administrative Services ................... 13
Other Service Providers ........................................... 16
Purchasing and Redeeming Shares ................................... 16
Sales Charges ..................................................... 18
Performance ....................................................... 22
Taxes ............................................................. 24
Portfolio Security Transactions ................................... 26
Financial Statements .............................................. 28
Appendices:
A: Class A Fees, Performance and Ownership ........................ a-1
B: Class B Fees, Performance and Ownership ........................ b-1
C: Class C Fees, Performance and Ownership ........................ c-1
D: China region Countries ......................................... d-1
THIS IS NOT A PROSPECTUS AND IS AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE
INVESTORS ONLY IF PRECEDED OR ACCOMPANIED BY THE FUND'S PROSPECTUS DATED
JANUARY 1, 2001, AS SUPPLEMENTED FROM TIME TO TIME, WHICH IS INCORPORATED
HEREIN BY REFERENCE. THIS SAI SHOULD BE READ IN CONJUNCTION WITH THE
PROSPECTUS, WHICH MAY BE OBTAINED BY CALLING 1-800-225-6265.
<PAGE>
STRATEGIES AND RISKS
CHINA REGION RISKS. Investments in the China region can involve significant
risks that are generally not involved with investments in U.S. companies. The
Fund is intended for long-term investors who can accept international
investment risk and little or no current income. The Fund is not intended to
be a complete investment program. A prospective investor should take into
account personal objectives and other investments when considering the
purchase of Fund shares. The Fund cannot assure achievement of its investment
objective. China region investments may offer higher potential for gains and
losses than investments in the United States.
The Portfolio will, under normal market conditions, invest at least 65% of
its total assets in equity securities of China growth companies ("Greater China
investments"). Equity securities, for purposes of the 65% policy, will be
limited to common and preferred stocks; equity interests in trusts,
partnerships, joint ventures and other unincorporated entities or enterprises;
special classes of shares available only to foreign investors in markets that
restrict the ownership by foreign investors to certain classes of equity
securities; convertible preferred stocks; and other convertible investment grade
debt instruments. A debt security is investment grade if it is rated BBB or
above by Standard & Poor's Ratings Group ("S&P") or Baa or above by Moody's
Investors Service, Inc. ("Moody's") or determined to be of comparable quality by
the Adviser. Debt securities rated BBB by S&P or Baa by Moody's have speculative
characteristics and changes in economic conditions or other circumstances are
more likely to lead to a weakened capacity to make principal and interest
payments than is the case with higher grade debt securities. The Portfolio will
attempt to promptly dispose of any convertible debt instrument which is rated or
determined by the Adviser to be below investment grade subsequent to acquisition
by the Portfolio.
In addition to its investments in equity securities, the Portfolio may
invest up to 5% of its net assets in warrants, including options and warrants
traded in over-the-counter markets. The Portfolio will not, under normal market
conditions, invest more than 35% of its total assets in equity securities other
than Greater China investments, warrants, options on securities and indices,
options on currency, futures contracts and options on futures, forward foreign
currency exchange contracts, currency swaps and any other non-equity
investments. Except during unusual market conditions, the Portfolio will not
invest in debt securities, other than investment grade convertible debt
instruments.
SECURITIES TRADING MARKETS. A high proportion of the shares of many issuers in
the China region may be held by a limited number of persons and financial
institutions, which may limit the number of shares available for investment by
the Portfolio. The prices at which the Portfolio may acquire investments may be
affected by trading by persons with material non-public information and by
securities transactions by brokers in anticipation of transactions by the
Portfolio in particular securities. Similarly, volume and liquidity in the bond
markets in the China region are less than in the United States and, at times,
price volatility can be greater than in the United States. The limited liquidity
of securities markets in the China region may also affect the Portfolio's
ability to acquire or dispose of securities at the price and time it wishes to
do so. In addition, China region securities markets are susceptible to being
influenced by large investors trading significant blocks of securities.
China region stock markets are undergoing a period of growth and change
which may result in trading volatility and difficulties in the settlement and
recording of transactions, and in interpreting and applying the relevant law and
regulations. In particular, the securities industry in China is not well
developed. China has no securities laws of nationwide applicability. Municipal
securities regulations governing the Shanghai and Shenzhen securities exchanges
are new. Stockbrokers and other intermediaries in the China region may not
perform as well as their counterparts in the United States and other more
developed securities markets.
Settlement of securities transactions in many China region countries are
subject to risk of loss, may be delayed and are generally less frequent than in
the United States, which could affect the liquidity of the Portfolio's assets.
In addition, disruptions due to work stoppages and trading improprieties in
these securities markets have caused such markets to close. If extended closings
were to occur in stock markets where the Portfolio was heavily invested, the
Fund's ability to redeem Fund shares could become correspondingly impaired. To
mitigate these risks, the Portfolio may maintain a higher cash position than it
otherwise would, thereby possibly diluting its return, or the Portfolio may have
to sell more liquid securities which it would not otherwise choose to sell. The
Fund may suspend redemption privileges or postpone the date of payment for more
than seven days after a redemption order is received under certain
circumstances.
CHINA REGION COUNTRY CONSIDERATIONS. The Portfolio will invest in China region
countries with emerging economies or securities markets. Political and economic
structures in many of such countries are undergoing significant evolution and
rapid development, and such countries may lack the social, political and
economic stability characteristic of the United States. Certain of such
countries may have, in the past, failed to recognize private property rights and
have at times nationalized or expropriated the assets of private companies. As a
result, the risks described herein, including the risks of nationalization or
expropriation of assets, may be heightened. In addition, unanticipated political
or social developments may affect the values of the Portfolio's investments in
those countries and the availability to the Portfolio of additional investments
in those countries. The laws of countries in the region relating to limited
liability of corporate shareholders, fiduciary duties of officers and directors,
and the bankruptcy of state enterprises are generally less well developed than
or different from such laws in the United States. It may be more difficult to
obtain a judgement in the courts of these countries than it is in the United
States. China does not have a comprehensive system of laws and some laws are not
even publicly available.
The Fund and the Portfolio each intend to conduct its respective affairs in
such a manner to avoid taxation. Nevertheless, certain countries may require
withholding on dividends paid on portfolio securities and on realized capital
gains. In the past, these taxes have sometimes been substantial. There can be no
assurance that in the future the Portfolio will be able to repatriate its
income, gains or initial capital from these countries.
DIRECT INVESTMENTS. The Portfolio may invest up to 10% of its total assets in
direct investments in China growth companies. Direct investments include (i) the
private purchase from an enterprise of an equity interest in the enterprise in
the form of shares of common stock or equity interests in trusts, partnerships,
joint ventures or similar enterprises, and (ii) the purchase of such an equity
interest in an enterprise from a principal investor in the enterprise. In each
case, the Portfolio will, at the time of making the investment, enter into a
shareholder or similar agreement with the enterprise and one or more other
holders of equity interests in the enterprise. The Adviser anticipates that
these agreements will, in appropriate circumstances, provide the Portfolio with
the ability to appoint a representative to the board of directors or similar
body of the enterprise and for eventual disposition of the Portfolio's
investment in the enterprise. Such a representative of the Portfolio will be
expected to provide the Portfolio with the ability to monitor its investment and
protect its rights in the investment and will not be appointed for the purpose
of exercising management or control of the enterprise.
FOREIGN INVESTMENTS. Investing in securities issued by companies whose principal
business activities are outside the United States may involve significant risks
not present in domestic investments. For example, there is generally less
publicly available information about foreign companies, particularly those not
subject to the disclosure and reporting requirements of the U.S. securities
laws. Foreign issuers are generally not bound by uniform accounting, auditing,
and financial reporting requirements and standards of practice comparable to
those applicable to domestic issuers. Investments in foreign securities also
involve the risk of possible adverse changes in investment or exchange control
regulations, expropriation or confiscatory taxation, limitation on the removal
of funds or other assets of the Portfolio, political or financial instability or
diplomatic and other developments which could affect such investments. Further,
economies of particular countries or areas of the world may differ favorably or
unfavorably from the economy of the United States. It is anticipated that in
most cases the best available market for foreign securities will be on exchanges
or in over-the-counter markets located outside of the United States. Foreign
stock markets, while growing in volume and sophistication, are generally not as
developed as those in the United States, and securities of some foreign issuers
(particularly those located in developing countries) may be less liquid and more
volatile than securities of comparable U.S. companies. In addition, foreign
brokerage commissions are generally higher than commissions on securities traded
in the United States and may be non-negotiable. In general, there is less
overall governmental supervision and regulation of foreign securities markets,
broker-dealers, and issuers than in the United States.
The Portfolio may also invest in American Depositary Receipts (ADRs),
European Depositary Receipts (EDRs) and Global Depositary Receipts (GDRs). ADRs,
EDRs and GDRs are certificates evidencing ownership of shares of a foreign
issuer and are alternatives to directly purchasing the underlying foreign
securities in their national markets and currencies. However, they continue to
be subject to many of the risks associated with investing directly in foreign
securities. These risks include foreign exchange risk as well as the political
and economic risks of the underlying issuer's country. ADRs, EDRs and GDRs may
be sponsored or unsponsored. Unsponsored receipts are established without the
participation of the issuer. Unsponsored receipts may involve higher expenses,
they may not pass-through voting or other shareholder rights, and they may be
less liquid.
The value of the assets of the Portfolio as measured in U.S. dollars may
be affected favorably or unfavorably by changes in foreign currency exchange
rates and exchange control regulations. Currency exchange rates can also be
affected unpredictably by intervention by U.S. or foreign governments or
central banks, or the failure to intervene, or by currency controls or
political developments in the U.S. or abroad. The Portfolio may conduct its
foreign currency exchange transactions on a spot (i.e., cash) basis at the
spot rate prevailing in the foreign currency exchange market or through
entering into swaps, forward contracts, options or futures on currency. In
spot transactions, foreign exchange dealers do not charge a fee for
conversion, but they do realize a profit based on the difference (the
"spread") between the prices at which they are buying and selling various
currencies. Thus, a dealer may offer to sell a foreign currency to the
Portfolio at one rate, while offering a lesser rate of exchange should the
Portfolio desire to resell that currency to the dealer.
The Portfolio may enter into forward foreign currency exchange contracts in
several circumstances. First, when the Portfolio enters into a contract for the
purchase or sale of a security denominated in a foreign currency, or when the
Portfolio anticipates the receipt in a foreign currency of dividend or interest
payments on such a security which it holds, the Portfolio may desire to "lock
in" the U.S. dollar price of the security or the U.S. dollar equivalent of such
dividend or interest payment, as the case may be. By entering into a forward
contract for the purchase or sale, for a fixed amount of dollars, of the amount
of foreign currency involved in the underlying transactions, the Portfolio will
attempt to protect itself against an adverse change in the relationship between
the U.S. dollar and the subject foreign currency during the period between the
date on which the security is purchased or sold, or on which the dividend or
interest payment is declared, and the date on which such payments are made or
received.
Additionally, when management of the Portfolio believes that the currency of
a particular foreign country may suffer a substantial decline against the U.S.
dollar, it may enter into a forward contract to sell, for a fixed amount of
dollars, the amount of foreign currency approximating the value of some or all
of the securities held by the Portfolio denominated in such foreign currency.
The precise matching of the forward contract amounts and the value of the
securities involved will not generally be possible because the future value of
such securities in foreign currencies will change as a consequence of market
movements in the value of those securities between the date on which the
contract is entered into and the date it matures. The precise projection of
short-term currency market movements is not possible, and short-term hedging
provides a means of fixing the dollar value of only a portion of the Portfolio's
foreign assets.
The Portfolio may enter into currency swaps for both hedging and non-hedging
purposes. Currency swaps involve the exchange of rights to make or receive
payments in specified currencies. Since currency swaps are individually
negotiated, the Portfolio expects to achieve an acceptable degree of correlation
between its portfolio investments and its currency swap positions. Currency
swaps usually involve the delivery of the entire principal value of one
designated currency in exchange for the other designated currency. Therefore,
the entire principal value of a currency swap is subject to the risk that the
other party to the swap will default on its contractual delivery obligations.
The use of currency swaps is a highly specialized activity which involves
special investment techniques and risks. If the Adviser is incorrect in its
forecasts of market values and currency exchange rates, the Portfolio's
performance will be adversely affected. Currency swaps require maintenance of a
segregated account as described under "Asset Coverage Requirements" below. The
Portfolio will not enter into any currency swap unless the credit quality of the
unsecured senior debt or the claims-paying ability of the other party thereto is
considered to be investment grade by the Advisers.
DERIVATIVE INSTRUMENTS. The Portfolio may purchase or sell derivative
instruments (which are instruments that derive their value from another
instrument, security, index or currency) to enhance return (which may be
considered speculative), to hedge against fluctuations in securities prices,
interest rates or currency exchange rates, or as a substitute for the purchase
or sale of securities or currencies. The Portfolio's transactions in derivative
instruments may be in the U.S. or abroad and may include the purchase or sale of
futures contracts on securities, securities indices, other indices, other
financial instruments or currencies; options on futures contracts;
exchange-traded and over-the-counter options on securities, indices or
currencies; and forward foreign currency exchange contracts. The Portfolio
incurs transaction costs in opening and closing positions in derivative
instruments. The use of futures for nonhedging purposes is limited by
regulations of the Commodity Futures Trading Commission. There can be no
assurance that the Adviser's use of derivative instruments will be advantageous
to the Portfolio.
RISKS ASSOCIATED WITH DERIVATIVE INSTRUMENTS. Entering into a derivative
instrument involves a risk that the applicable market will move against the
Portfolio's position and that the Portfolio will incur a loss. For derivative
instruments other than purchased options, this loss may exceed the amount of the
initial investment made or the premium received by the Portfolio. Derivative
instruments may sometimes increase or leverage the Portfolio's exposure to a
particular market risk. Leverage enhances the Portfolio's exposure to the price
volatility of derivative instruments it holds. The Portfolio's success in using
derivative instruments to hedge portfolio assets depends on the degree of price
correlation between the derivative instruments and the hedged asset. Imperfect
correlation may be caused by several factors, including temporary price
disparities among trading markets for the derivative instrument, the assets
underlying the derivative instrument and the Portfolio assets. Over-the-counter
("OTC") derivative instruments involve an enhanced risk that the issuer or
counterparty will fail to perform its contractual obligations. Some derivative
instruments are not readily marketable or may become illiquid under adverse
market conditions. In addition, during periods of market volatility, a commodity
exchange may suspend or limit trading in an exchange-traded derivative
instrument, which may make the contract temporarily illiquid and difficult to
price. Commodity exchanges may also establish daily limits on the amount that
the price of a futures contract or futures option can vary from the previous
days settlement price. Once the daily limit is reached, no trades may be made
that day at a price beyond the limit. This may prevent the Portfolio from
closing out positions and limiting its losses. The staff of the Commission takes
the position that certain purchased OTC options, and assets used as cover for
written OTC options, are subject to the Portfolio's 15% limit on illiquid
investments. The Portfolio's ability to terminate OTC derivative instruments may
depend on the cooperation of the counterparties to such contracts. For thinly
traded derivative instruments, the only source of price quotations may be the
selling dealer or counterparty. In addition, certain provisions of the Code,
limit the extent to which the Portfolio may purchase and sell derivative
instruments. The Portfolio will engage in transactions in futures contracts and
related options only to the extent such transactions are consistent with the
requirements of the Code for maintaining the qualification of the Fund as a
regulated investment company for federal income tax purposes.
ASSET COVERAGE REQUIREMENTS. Transactions involving reverse repurchase
agreements, currency swaps, forward contracts or futures contracts and options
(other than options that the Portfolio has purchased) expose the Portfolio to an
obligation to another party. The Portfolio will not enter into any such
transactions unless it owns either (1) an offsetting ("covered") position in
securities, currencies, or other options, futures contracts or forward
contracts, or (2) cash or liquid securities (such as readily marketable
securities and money market instruments) with a value sufficient at all times to
cover its potential obligations not covered as provided in (1) above. (Only the
net obligation of a swap will be covered.) The Portfolio will comply with
Commission guidelines regarding cover for these instruments and, if the
guidelines so require, set aside cash or liquid securities in a segregated
account with its custodian in the prescribed amount. The securities in the
segregated account will be marked to market daily.
Assets used as cover or held in a segregated account maintained by the
Portfolio's custodian cannot be sold while the position requiring coverage or
segregation is outstanding unless they are replaced with other appropriate
assets. As a result, the commitment of a large portion of the Portfolio's assets
to segregated accounts or to cover could impede portfolio management or the
Portfolio's ability to meet redemption requests or other current obligations.
FOREIGN CURRENCY TRANSACTIONS. Forward foreign currency exchange contracts are
individually negotiated and privately traded by currency traders and their
customers. A forward contract involves an obligation to purchase or sell a
specific currency (or basket of currencies) for an agreed price at a future
date, which may be any fixed number of days from the date of the contract. The
Portfolio may engage in cross-hedging by using forward contracts in one currency
(or basket of currencies) to hedge against fluctuations in the value of
securities denominated in a different currency if the Adviser determines that
there is an established historical pattern of correlation between the two
currencies (or the basket of currencies and the underlying currency). Use of a
different foreign currency magnifies the Portfolio's exposure to foreign
currency exchange rate fluctuations. The Portfolio may also use forward
contracts to shift its exposure to foreign currency exchange rate changes from
one currency to another.
LIMITATIONS ON FUTURES CONTRACTS AND OPTIONS. The Portfolio may purchase call
and put options, including those traded in the over-the-counter markets, on any
securities in which the Portfolio may invest or options on any securities index
composed of securities in which the Portfolio may invest. The Portfolio does not
intend to write a covered option on any security if after such transaction more
than 15% of its net assets, as measured by the aggregate value of the securities
underlying all covered calls and puts written by the Portfolio, would be subject
to such options. The Portfolio will only write a put option on a security which
it intends to ultimately acquire for its portfolio. The Portfolio does not
intend to purchase any options if after such transaction more than 5% of its net
assets, as measured by the aggregate of all premiums paid for all such options
held by the Portfolio, would be so invested. The Portfolio may enter into
futures contracts (and options thereon) traded on a foreign exchange, only if
the Adviser determines that trading on such foreign exchange does not subject
the Portfolio to risks, including credit and liquidity risks, that are
materially greater than the risks associated with trading on United States
CFTC-regulated exchanges.
To the extent that the Portfolio enters into futures contracts, options on
futures contracts and options on foreign currencies traded on an exchange
regulated by the Commodity Futures Trading Commission ("CFTC"), in each case
that are not for bona fide hedging purposes (as defined by the CFTC), the
aggregate initial margin and premiums required to establish these positions
(excluding the amount by which options are "in-the-money") may not exceed 5% of
the liquidation value of the Portfolio's investments, after taking into account
unrealized profits and unrealized losses on any contracts the Portfolio has
entered into.
REPURCHASE AGREEMENTS. The Portfolio may enter into repurchase agreements (the
purchase of a security coupled with an agreement to resell at a higher price)
with respect to its permitted investments. In the event of the bankruptcy of the
other party to a repurchase agreement, the Portfolio might experience delays in
recovering its cash. To the extent that, in the meantime, the value of the
securities the Portfolio purchased may have decreased, the Portfolio could
experience a loss. At no time will the Portfolio commit more than 15% of its net
assets to repurchase agreements which mature in more than seven days and other
illiquid securities. The Portfolio's repurchase agreements will provide that the
value of the collateral underlying the repurchase agreement will always be at
least equal to the repurchase price, including any accrued interest earned on
the repurchase agreement, and will be marked to market daily.
REVERSE REPURCHASE AGREEMENTS. The Portfolio may enter into reverse repurchase
agreements. Under a reverse repurchase agreement, the Portfolio temporarily
transfers possession of a portfolio instrument to another party, such as a bank
or broker-dealer, in return for cash. At the same time, the Portfolio agrees to
repurchase the instrument at an agreed upon time (normally within seven days)
and price, which reflects an interest payment. The Portfolio expects that it
will enter into reverse repurchase agreements when it is able to invest the cash
so acquired at a rate higher than the cost of the agreement, which would
increase the income earned by the Portfolio. The Portfolio could also enter into
reverse repurchase agreements as a means of raising cash to satisfy redemption
requests without the necessity of selling portfolio assets.
When the Portfolio enters into a reverse repurchase agreement, any
fluctuations in the market value of either the securities transferred to another
party or the securities in which the proceeds may be invested would affect the
market value of the Portfolio's assets. As a result, such transactions may
increase fluctuations in the market value of the Portfolio's assets. While there
is a risk that large fluctuations in the market value of the Portfolio's assets
could affect the Portfolio's net asset value, this risk is not significantly
increased by entering into reverse repurchase agreements, in the opinion of the
Adviser. Because reverse repurchase agreements may be considered to be the
practical equivalent of borrowing funds, they constitute a form of leverage. If
the Portfolio reinvests the proceeds of a reverse repurchase agreement at a rate
lower than the cost of the agreement, entering into the agreement will lower the
Portfolio's yield.
LENDING PORTFOLIO SECURITIES. The Portfolio may seek to increase its income by
lending portfolio securities to broker-dealers or other institutional borrowers.
Under present regulatory policies of the Commission, such loans are required to
be secured continuously by collateral in cash, cash equivalents or U.S.
Government securities held by the Portfolio's custodian and maintained on a
current basis at an amount at least equal to market value of the securities
loaned, which will be marked to market daily. Cash equivalents include
short-term municipal obligations as well as taxable certificates of deposit,
commercial paper and other short-term money market instruments. The financial
condition of the borrower will be monitored by the Adviser on an ongoing basis.
The Portfolio would continue to receive the equivalent of the interest or
dividends paid by the issuer on the securities loaned and would also receive a
fee, or all or a portion of the interest on investment of the collateral. The
Portfolio would have the right to call a loan and obtain the securities loaned
at any time on up to five business days' notice. The Portfolio would not have
the right to vote any securities having voting rights during the existence of a
loan, but could call the loan in anticipation of an important vote to be taken
among holders of the securities or the giving or holding of their consent on a
material matter affecting the investment. If the Adviser decides to make
securities loans, it is intended that the value of the securities loaned would
not exceed one-third of the Portfolio's total assets. As with other extensions
of credit there are risks of delay in recovery or even loss of rights in the
securities loaned if the borrower of the securities fails financially. However,
the loans will be made only to organizations deemed by the Adviser to be
sufficiently creditworthy and when, in the judgment of the Adviser, the
consideration which can be earned from securities loans of this type justifies
the attendant risk. Securities lending involves administration expenses
including finders fees.
OTHER INVESTMENT COMPANIES. The Portfolio reserves the right to invest up to 10%
of its total assets, calculated at the time of purchase, in the securities of
other investment companies unaffiliated with the Adviser or the manager that
have the characteristics of closed-end investment companies. The Portfolio will
indirectly bear its proportionate share of any management fees paid by
investment companies in which it invests in addition to the advisory fee paid by
the Portfolio. The value of closed-end investment company securities, which are
usually traded on an exchange, is affected by demand for the securities
themselves, independent of the demand for the underlying portfolio assets and,
accordingly, such securities can trade at a discount from their net asset
values.
PORTFOLIO TURNOVER. The Portfolio cannot accurately predict its portfolio
turnover rate, but it is anticipated that the annual turnover rate will
generally not exceed 100% (excluding turnover of securities having a maturity of
one year or less). A high turnover rate (100% or more) necessarily involves
greater expenses to the Portfolio. Short-term trading may be advisable in light
of a change in circumstances of a particular company or within a particular
industry, or in light of general market, economic or political conditions. High
portfolio turnover may also result in the realization of substantial net
short-term capital gains. For the fiscal years ended August 31, 1999 and 1998,
the portfolio turnover rates of the Portfolio were 57% and 42%, respectively.
TEMPORARY INVESTMENTS. Under unusual market conditions, the Portfolio may invest
temporarily in cash or cash equivalents. Cash equivalents include high grade
debt securities of foreign and U.S. companies, foreign governments and the U.S.
government and their respective agencies, instrumentalities, political
subdivisions and authorities, as well as high quality money market instruments
denominated in U.S. or foreign currencies.
INVESTMENT RESTRICTIONS
The following investment restrictions of the Fund are designated as
fundamental and as such cannot be changed without the approval of the holders of
a majority of the Fund's outstanding voting securities, which as used in this
SAI means the lesser of (a) 67% of the shares of the Fund present or represented
by proxy at a meeting if the holders of more than 50% of the outstanding shares
are present or represented at the meeting or (b) more than 50% of the
outstanding shares of the Fund. Accordingly, the Fund may not:
(1) issue senior securities (as defined in the Investment Company Act of
1940 and rules thereunder) or borrow money, except that the Fund or the
Portfolio may borrow:
(i) from banks to purchase or carry securities, commodities, commodities
contracts or other investments;
(ii) from banks for temporary or emergency purposes not in excess of 10%
of its gross assets taken at market value; or
(iii) by entering into reverse repurchase agreements,
if, immediately after any such borrowing, the value of the Fund's or Portfolio's
total assets, including all borrowings then outstanding, is equal to at least
300% of the aggregate amount of borrowings then outstanding. Any such borrowings
may be secured or unsecured. The Portfolio or the Fund may issue securities
(including senior securities) appropriate to evidence such indebtedness,
including reverse repurchase agreements.
(2) Pledge its assets, except that the Portfolio or the Fund may pledge not
more than one-third of its total assets (taken at current value) to secure
borrowings made in accordance with investment restriction (1) above; for the
purpose of this restriction the deposit of assets in a segregated account with
the Portfolio's or the Fund's custodian, as the case may be, in connection with
any of the Portfolio's or the Fund's respective investment transactions is not
considered to be a pledge.
(3) Purchase securities on margin (but the Portfolio or the Fund may obtain
such short-term credits as may be necessary for the clearance of purchases and
sales of securities).
(4) Make short sales of securities or maintain a short position, unless at
all times when a short position is open the Portfolio or the Fund either owns an
equal amount of such securities or owns securities convertible into or
exchangeable, without the payment of any additional consideration, for
securities of the same issue as, and equal in amount to, the securities sold
short.
(5) Purchase securities issued by any other open-end investment company or
investment portfolio, except as they may be acquired as part of a merger,
consolidation or acquisition of assets, except that the Fund may invest all or
substantially all of its assets in either the Portfolio or any other registered
investment company having substantially the same investment objective as the
Fund and except as otherwise permitted by the Investment Company Act of 1940.
(6) Purchase or retain in its portfolio any securities issued by an issuer
any of whose officers, directors, trustees or security holders is an officer or
Trustee of the Portfolio or the Trust or is a member, officer, director or
trustee of any investment adviser of the Portfolio or the Fund, if after the
purchase of the securities of such issuer by the Portfolio or the Fund one or
more of such persons owns beneficially more than 1/2 of 1% of the shares or
securities or both (all taken at current value) of such issuer and such persons
owning more than 1/2 of 1% of such shares or securities together own
beneficially more than 5% of such shares or securities or both (all taken at
current value); provided, however, that the Fund may invest all or substantially
all of its assets in either the Portfolio or any other registered investment
company having substantially the same investment objective as the Fund and
having any officers, directors, trustees or security holders who are officers or
Trustees of the Trust.
(7) Underwrite securities issued by other persons, except insofar as the
Fund or the Portfolio may technically be deemed to be an underwriter under the
Securities Act of 1933 in selling or disposing of a portfolio security, and
except that the Fund may invest all or substantially all of its assets in either
the Portfolio or any other registered investment company having substantially
the same investment objective as the Fund.
(8) Make loans to other persons, except by (a) the acquisition of money
market instruments, debt securities and other obligations in which the Portfolio
or the Fund is authorized to invest in accordance with their respective
investment objective and policies, (b) entering into repurchase agreements and
(c) lending their respective portfolio securities.
(9) Purchase the securities of any one issuer (other than obligations issued
or guaranteed by the U.S. Government or any of its agencies or
instrumentalities) if, with respect to 75% of its total assets and as a result
of such purchase (a) more than 5% of the total assets of the Portfolio or the
Fund, as the case may be (taken at current value), would be invested in the
securities of such issuer, or (b) the Fund or the Portfolio would hold more than
10% of the outstanding voting securities of that issuer, except that the Fund
may invest all or substantially all of its assets in, and may acquire up to 100%
of the outstanding voting securities of either the Portfolio or any other
registered investment company having substantially the same investment
objectives as the Fund.
(10) Purchase any security if, as a result of such purchase, 25% or more of
the total assets of the Portfolio or the Fund, as the case may be (taken at
current value) would be invested in the securities of issuers having their
principal business activities in the same industry (the electric, gas and
telephone utility industries being treated as separate industries for the
purpose of this restriction); provided that there is no limitation with respect
to obligations issued or guaranteed by the U.S. Government or any of its
agencies or instrumentalities and except that the Fund may invest all or
substantially all of its assets in either the Portfolio or any other registered
investment company having substantially the same investment objective as the
Fund.
(11) Invest for the purpose of gaining control of a company's management.
(12) Purchase or sell real estate, although the Fund or the Portfolio may
purchase and sell securities which are secured by interests in real estate,
securities of issuers which invest or deal in real estate and real estate that
is acquired as the result of the ownership of securities.
(13) Purchase or sell physical commodities (other than currency) or
contracts for the purchase or sale of physical commodities (other than
currency).
(14) Buy investment securities from or sell them to any of the respective
officers or Trustees of the Trust or the Portfolio, the Portfolio's investment
adviser or the Fund's principal underwriter, as principal; provided, however,
that any such person or firm may be employed as a broker upon customary terms
and that this restriction does not apply to the Fund's investments in either the
Portfolio or any other registered investment company having substantially the
same investment objective as the Fund.
(15) Purchase oil, gas or other mineral leases or purchase partnership
interests in oil, gas or other mineral exploration or development programs.
The Portfolio has adopted substantially the same fundamental investment
restrictions as the foregoing investment restrictions adopted by the Fund; such
restrictions cannot be changed without the approval of a "majority of the
outstanding voting securities" of the Portfolio.
For the purpose of investment restrictions (1), (2) and (3), the
arrangements (including escrow, margin and collateral arrangements) made by the
Portfolio or the Fund with respect to their respective transactions in all types
of options, futures contracts, options on futures contracts, forward contracts,
currencies, and commodities and options thereon shall not be considered to be
(i) a borrowing of money or the issuance of securities (including senior
securities) by the Portfolio or the Fund, as the case may be, (ii) a pledge of
its assets or (iii) the purchase of a security on margin.
For as long as a feeder fund of the Portfolio has registered shares in Hong
Kong (and for so long as Hong Kong requires the following restrictions), the
Portfolio may not:
(i) invest (except as stated below) more than 10% of its net assets in
the securities of any one issuer;
(ii) purchase (except as stated below) more than 10% of the ordinary
shares of any one issuer;
(iii) invest more than 15% of net assets in securities which are not
listed or quoted on any stock exchange, over-the-counter market or other
organized securities market that is open to the international public and on
which such securities are regularly traded (a "Market");
(iv) invest more than 15% of net assets in warrants and options for
non-hedging purposes;
(v) write call options on Portfolio investments exceeding 25% of its
total net asset value in terms of exercise price;
(vi) enter into futures contracts on an unhedged basis where the net
total aggregate value of contract prices, whether payable by or to the
Portfolio under all outstanding futures contracts, together with the
aggregate value of holdings under (vii) below exceeds 20% of the net total
asset value of the Portfolio;
(vii) invest in physical commodities (including gold, silver, platinum
or other bullion) and commodity based investments (other than shares in
companies engaged in producing, processing or trading in commodities) which
value together with the net aggregate value of the holdings described in
(vi) above, exceeds 20% of the Portfolio's net asset value;
(viii) purchase shares of other investment companies exceeding 10% of
net assets. In addition, the investment objective of any investment company
in which any Portfolio invests must not be to invest in investments
prohibited by this undertaking and where the investment company'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;
(ix) 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 but any reverse purchase agreement entered into by a Portfolio
will constitute a form of leverage and hence, will count towards the 25%
borrowing limit);
(x) write uncovered options;
(xi) invest in real estate (including options, rights or interests
therein but excluding shares in real estate companies);
(xii) assume, guarantee, endorse or otherwise become directly or
contingently liable for, or in connection with, any obligation or
indebtedness of any person in respect of borrowed money without the prior
written consent of the custodian of the Portfolio;
(xiii) 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;
(xiv) subject to (vi) above, purchase an investment with unlimited
liability or;
(xv) purchase any nil or partly-paid securities unless any call thereon
could be met in full out of cash or near cash held by it in the amount of
which has not already been taken into account for the purposes of (v) above.
Notwithstanding (i) and (ii) above:
(i) up to 30% of a Portfolio's total net asset value may be invested in
government and public securities of the same issue; and
(ii) subject to (i) above, a Portfolio may invest all of its assets in
government and other public securities in at least six different issues.
The Fund and the Portfolio have adopted the following investment policy
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 invest more
than 15% of its net assets in investments which are not readily marketable,
including restricted securities and repurchase agreements with a maturity longer
than seven days. Restricted securities for the purposes of this limitation do
not include securities eligible for resale pursuant to Rule 144A under the
Securities Act of 1933 and commercial paper issued pursuant to Section 4(2) of
said Act that the Board of Trustees of the Trust or the Portfolio, or its
delegate, determines to be liquid. Any such determination by a delegate will be
made pursuant to procedures adopted by the Board. If the Fund or Portfolio
invests in Rule 144A securities, the level of portfolio illiquidity may be
increased to the extent that eligible buyers become uninterested in purchasing
such securities.
Whenever an investment policy or investment restriction set forth in the
prospectus or this SAI states a maximum percentage of assets that may be
invested in any security or other asset or describes a policy regarding quality
standards, such percentage limitation or standard shall be determined
immediately after and as a result of the Fund's or the Portfolio's acquisition
of such security or other asset. Accordingly, any later increase or decrease
resulting from a change in values, assets or other circumstances, or any
subsequent rating change below investment grade made by a rating service, will
not compel the Fund or the Portfolio, as the case may be, to dispose of such
security or other asset. Nevertheless, under normal market conditions the Fund
and the Portfolio must take actions necessary to comply with its policy of
investing at least 65% of total assets in equity securities of China growth
companies. Moreover, the Fund and the Portfolio must always be in compliance
with the limitation on investing in illiquid securities and the borrowing
policies set forth above.
Although permissible under the Fund's investment restrictions, the Fund
has no present intention during the coming fiscal year to: borrow money;
pledge its assets; underwrite securities issued by other persons; or make
loans to other persons.
MANAGEMENT AND ORGANIZATION
FUND MANAGEMENT. The Trustees of the Trust are responsible for the overall
management and supervision of the Trust's affairs. The Trustees and officers of
the Trust and the Portfolio are listed below. Except as indicated, each
individual has held the office shown or other offices in the same company for
the last five years. Unless otherwise noted, the business address of each
Trustee and officer is The Eaton Vance Building, 255 State Street, Boston,
Massachusetts 02109. The business address of Lloyd George is 3808 One Exchange
Square, Central, Hong Kong. Those Trustees who are "interested persons" of the
Trust or the Portfolio, as defined in the 1940 Act, are indicated by an
asterisk(*).
JAMES B. HAWKES (59), President of the Trust, Vice President of the Portfolio
and Trustee*
Chairman, President and Chief Executive Officer of BMR, Eaton Vance and their
corporate parent and trustee (EVC and EV); Director of EVC and EV. Trustee
and officer of various investment companies managed by Eaton Vance or BMR.
Director of Lloyd George Management (B.V.I.) Limited.
HON. ROBERT LLOYD GEORGE (48), President of the Portfolio and Trustee of the
Portfolio*
Chairman and Chief Executive Officer of LGM. Chairman and Chief Executive
Officer of Lloyd George.
Address: 3808 One Exchange Square, Central, Hong Kong
JESSICA M. BIBLIOWICZ (40), Trustee of the Trust*
President and Chief Executive Officer of National Financial Partners (a
financial services company) (since April, 1999). President and Chief
Operating Officer of John A. Levin & Co. (a registered investment advisor)
(July, 1997 to April, 1999) and a Director of Baker, Fentress & Company
which owns John A. Levin & Co. (July, 1997 to April, 1999). Formerly
Executive Vice President of Smith Barney Mutual Funds (from July, 1994 to
June, 1997). Elected Trustee October 30, 1998. Trustee of various investment
companies managed by Eaton Vance or BMR since October 30, 1998.
Address: 787 Seventh Avenue, New York, NY 10019
EDWARD K.Y. CHEN (55), 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 (69), 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 (65), Trustee
Jacob H. Schiff Professor of Investment Banking Emeritus, Harvard University
Graduate School of Business Administration. Trustee of the Kobrick-Cedant
Investment Trust (mutual funds). Trustee of various investment companies
managed by Eaton Vance or BMR.
Address: 345 Nahatan Road, Westwood, Massachusetts 02190
NORTON H. REAMER (65), Trustee
Chairman and Chief Operating Officer, Hellman, Jordan Management Co., Inc. (an
investment management company) (since November, 2000) and President, Jordan
Simmons Capital LLC (manager of energy related investments) (since November,
2000). President, Unicorn Corporation (an investment and financial advisory
services company) (since September, 2000). Formerly Chairman of the Board,
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 (43), Trustee of the Trust
Professor of Law, Georgetown University Law Center. Elected Trustee October
30, 1998. Trustee of various investment companies managed by Eaton Vance or
BMR since October 30, 1998.
Address: 600 New Jersey Avenue, NW, Washington, DC 20001
JACK L. TREYNOR (70), Trustee of the Trust
Investment Adviser and Consultant. Trustee of various investment companies
managed by Eaton Vance or BMR.
Address: 504 Via Almar, Palos Verdes Estates, California 90274
THOMAS E. FAUST, JR. (42), Vice President of the Trust
Vice President of Eaton Vance and BMR. Officer of various investment companies
managed by Eaton Vance or BMR.
WILLIAM WALTER RALEIGH KERR (50), Vice President and Assistant Treasurer of
the Portfolio
Director, Finance Director and Chief Operating Officer of Lloyd George.
Director of LGM.
Address: 3808 One Exchange Square, Central, Hong Kong
JAMES L. O'CONNOR (55), Treasurer
Vice President of Eaton Vance and BMR. Officer of various investment companies
managed by Eaton Vance or BMR.
ALAN R. DYNNER (60), Secretary
Vice President, Secretary and Chief Legal Officer of BMR, Eaton Vance and EVC.
Prior to joining Eaton Vance on November 1, 1996, 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 (65), 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 (38), Assistant Secretary
Vice President of Eaton Vance and BMR. Officer of various investment companies
managed by Eaton Vance or BMR.
ERIC G. WOODBURY (43), Assistant Secretary
Vice President of Eaton Vance and BMR. Officer of various investment companies
managed by Eaton Vance or BMR.
The Nominating Committee of the Board of Trustees of the Trust and the
Portfolio is comprised of the Trustees who are not "interested persons" as that
term is defined under the 1940 Act ("noninterested Trustees"). The purpose of
the Committee is to recommend to the Board nominees for the position of
noninterested Trustee and to assure that at least a majority of the Board of
Trustees is independent of Eaton Vance and its affiliates.
Messrs. Hayes, Dwight and Reamer and Ms. Stout, are members of the Special
Committee of the Board of Trustees of the Trust and Messrs. Hayes, Dwight and
Reamer, are members of the Special Committee of the Board of Trustees of the
Portfolio. The purpose of the Special Committee is to consider, evaluate and
make recommendations to the full Board of Trustees concerning (i) all
contractual arrangements with service providers to the Fund and the Portfolio,
including investment advisory (Portfolio only), administrative, transfer agency,
custodial and fund accounting and distribution services, and (ii) all other
matters in which Eaton Vance, the Advisers or their affiliates has any actual or
potential conflict of interest with the Fund, the Portfolio or investors
therein.
Messrs. Treynor (Chairman), Dwight and Reamer are members of the Audit
Committee of the Board of Trustees of the Trust and Messrs. Hayes, Chen and
Dwight are members of the Audit Committee of the Board of Trustees of the
Portfolio. The Audit Committee's functions include making recommendations to the
Trustees regarding the selection and performance of the independent certified
public accountants, and reviewing matters relative to accounting and auditing
practices and procedures, accounting records, and the internal accounting
controls of the Trust, the Portfolio and certain of their service providers.
Trustees of the Portfolio (except Mr. Chen) that are not affiliated with
Eaton Vance may elect to defer receipt of all or a percentage of their annual
fees in accordance with the terms of a Trustees Deferred Compensation Plan (the
"Trustees" Plan"). Under the Trustees' Plan, an eligible Trustee may elect to
have his deferred fees invested by the Portfolio in the shares of one or more
funds in the Eaton Vance Family of Funds, and the amount paid to the Trustees
under the Trustees' Plan will be determined based upon the performance of such
investments. Deferral of Trustees' fees in accordance with the Trustees' Plan
will have a negligible effect on the Portfolio's assets, liabilities, and net
income per share, and will not obligate the Portfolio to retain the services of
any Trustee or obligate the Portfolio to pay any particular level of
compensation to the Trustee. Neither the Portfolio nor the Trust has a
retirement plan for its Trustees.
The fees and expenses of the noninterested Trustees of the Trust and the
Portfolio are paid by the Fund (and the other series of the Trust) and the
Portfolio, respectively. (The Trustees of the Trust and the Portfolio who are
members of the Eaton Vance organization receive no compensation from the Trust
or the Portfolio.) During the fiscal year ended August 31, 2000, the
noninterested Trustees of the Trust and the Portfolio earned the following
compensation in their capacities as Trustees from the Trust and the Portfolio,
and for the year ended December 31, 1999, earned the following compensation in
their capacities as Trustees of the funds in the Eaton Vance fund complex(1):
<TABLE>
<CAPTION>
SOURCE OF JESSICA M. HON. EDWARD DONALD R. SAMUEL L. NORTON H. LYNN A. JACK L.
COMPENSATION BIBLIOWICZ K.Y. CHEN DWIGHT HAYES, III REAMER STOUT TREYNOR
--------- ------- ------- ------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Trust(2) ..................... $ 1,590 $ -- $ 2,633 $ 2,998 $ 2,785 $ 2,051 $ 2,052
Portfolio .................... -- 6,250 2,018 2,363 1,963 -- --
Trust and Fund Complex ....... 160,000 22,063 160,000(3) 170,000 160,000 160,000(4) 170,000
------------
(1) As of January 1, 2001, the Eaton Vance Fund complex consists of 151 registered investment companies or series thereof.
(2) The Trust consisted of 5 Funds as of August 31, 2000.
(3) Includes $60,000 of deferred compensation.
(4) Includes $16,000 of deferred compensation.
</TABLE>
The Advisers are subsidiaries of Lloyd George Management (B.V.I.) Limited,
which is ultimately controlled by the Hon. Robert J.D. Lloyd George, President
of the Portfolio and Chairman and Chief Executive Officer of the Adviser. Mr.
Hawkes is a Trustee and officer of the Trust and an officer of the Fund's
sponsor and manager. Mr. Hayes is a Trustee of the Trust.
ORGANIZATION. The Fund is a series of the Trust, which was organized under
Massachusetts law on May 25, 1989 and is operated as an open-end management
investment company. The Fund (formerly EV Marathon Greater China Growth Fund)
established 3 classes of shares on September 1, 1997 -- Class A shares (formerly
EV Traditional Greater China Growth Fund), Class B shares and Class C shares
(formerly EV Classic Greater China Growth Fund) of Eaton Vance Greater China
Growth Fund. Information herein prior to such date is for the Fund before it
became a multiple-class fund.
The Trust may issue an unlimited number of shares of beneficial interest
(no par value per share) in one or more series (such as the Fund). The Trustees
of the Trust have divided the shares of the Fund into multiple classes. Each
class represents an interest in the Fund, but is subject to different expenses,
rights and privileges. The Trustees have the authority under the Declaration of
Trust to create additional classes of shares with differing rights and
privileges. When issued and outstanding, shares are fully paid and nonassessable
by the Trust. Shareholders are entitled to one vote for each full share held.
Fractional shares may be voted proportionately. Shares of the Fund will be voted
together except that only shareholders of a particular class may vote on matters
affecting only that class. Shares have no preemptive or conversion rights and
are freely transferable. In the event of the liquidation of the Fund,
shareholders of each class are entitled to share pro rata in the net assets
attributable to that class available for distribution to shareholders.
The Trustees of the Trust have considered the advantages and disadvantages
of investing the assets of the Fund in the Portfolio, as well as the advantages
and disadvantages of the two-tier format. The Trustees believe that the
structure offers opportunities for growth in the assets of the Portfolio, may
afford the potential for economies of scale for the Fund and may over time
result in lower expenses for the Fund.
As permitted by Massachusetts law, there will normally be no meetings of
shareholders for the purpose of electing Trustees unless and until such time as
less than a majority of the Trustees of the Trust holding office have been
elected by shareholders. In such an event the Trustees then in office will call
a shareholders' meeting for the election of Trustees. Except for the foregoing
circumstances and unless removed by action of the shareholders in accordance
with the Trust's By-laws, the Trustees shall continue to hold office and may
appoint successor Trustees.
The Trust's By-laws provide that no person shall serve as a Trustee if
shareholders holding two-thirds of the outstanding shares have removed him from
that office either by a written declaration filed with the Trust's custodian or
by votes cast at a meeting called for that purpose. The By-laws further provide
that under certain circumstances the shareholders may call a meeting to remove a
Trustee and that the Trust is required to provide assistance in communication
with shareholders about such a meeting.
The Trust's Declaration of Trust may be amended by the Trustees when
authorized by vote of a majority of the outstanding voting securities of the
Trust, the financial interests of which are affected by the amendment. The
Trustees may also amend the Declaration of Trust without the vote or consent of
shareholders to change the name of the Trust or any series or to make such other
changes (such as reclassifying series or 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 was organized as a trust under the laws of the state of New
York on September 1, 1992 and intends to be treated as a partnership for federal
tax purposes. In accordance with the Declaration of Trust of the Portfolio,
there will normally be no meetings of the investors for the purpose of electing
Trustees unless and until such time as less than a majority of the Trustees of
the Portfolio holding office have been elected by investors. In such an event
the Trustees of the Portfolio then in office will call an investors' meeting for
the election of Trustees. Except for the foregoing circumstances and unless
removed by action of the investors in accordance with the Portfolio's
Declaration of Trust, the Trustees shall continue to hold office and may appoint
successor Trustees.
The Declaration of Trust of the Portfolio provides that no person shall
serve as a Trustee if investors holding two-thirds of the outstanding interest
have removed him from that office either by a written declaration filed with the
Portfolio's custodian or by votes cast at a meeting called for that purpose. The
Declaration of Trust further provides that under certain circumstances the
investors may call a meeting to remove a Trustee and that the Portfolio is
required to provide assistance in communicating with investors about such a
meeting.
The Portfolio's Declaration of Trust provides that the Fund and other
entities permitted to invest in the Portfolio (e.g., other U.S. and foreign
investment companies, and common and commingled trust funds) will each be liable
for all obligations of the Portfolio. However, the risk of the Fund incurring
financial loss on account of such liability is limited to circumstances in which
both inadequate insurance exists and the Portfolio itself is unable to meet its
obligations. Accordingly, the Trustees of the Trust believe that neither the
Fund nor its shareholders will be adversely affected by reason of the Fund
investing in the Portfolio.
Whenever the Fund as an investor in the Portfolio is requested to vote on
matters pertaining to the Portfolio (other than the termination of the
Portfolio's business, which may be determined by the Trustees of the Portfolio
without investor approval), the Fund will hold a meeting of Fund shareholders
and will vote its interest in the Portfolio for or against such matters
proportionately to the instructions to vote for or against such matters received
from Fund shareholders. The Fund shall vote shares for which it receives no
voting instructions in the same proportion as the shares for which it receives
voting instructions. Other investors in the Portfolio may alone or collectively
acquire sufficient voting interests in the Portfolio to control matters relating
to the operation of the Portfolio, which may require the Fund to withdraw its
investment in the Portfolio or take other appropriate action. Any such
withdrawal could result in a distribution "in kind" of portfolio securities (as
opposed to a cash distribution from the Portfolio). If securities are
distributed, the Fund could incur brokerage, tax or other charges in converting
the securities to cash. In addition, the distribution in kind may result in a
less diversified portfolio of investments or adversely affect the liquidity of
the Fund. Notwithstanding the above, there are other means for meeting
shareholder redemption requests, such as borrowing.
The Fund may withdraw (completely redeem) all its assets from the
Portfolio at any time if the Board of Trustees of the Trust determines that it
is in the best interest of the Fund to do so. In the event the Fund withdraws
all of its assets from the Portfolio, or the Board of Trustees of the Trust
determines that the investment objective of the Portfolio is no longer
consistent with the investment objective of the Fund, the Trustees would
consider what action might be taken, including investing the assets of the Fund
in another pooled investment entity or retaining an investment adviser to manage
the Fund's assets in accordance with its investment objective. The Fund's
investment performance may be affected by a withdrawal of all its assets (or the
assets of another investor in the Portfolio) from the Portfolio.
INVESTMENT ADVISORY AND ADMINISTRATIVE SERVICES
INVESTMENT ADVISORY SERVICES. The Portfolio has engaged Lloyd George Management
(Hong Kong) Limited ("LGM-HK") as its investment adviser. Pursuant to a service
agreement effective on January 1, 1996 between LGM-HK and its affiliate, Lloyd
George Investment Management (Bermuda) Limited ("LGIM-B"), LGIM-B, acting under
the general supervision of the Portfolio's Board of Trustees, is responsible for
managing the Portfolio's investments. LGM-HK supervises LGIM-B's performance of
this function and retains its contractual obligations under its investment
advisory agreement with the Portfolio. LGM-HK and LGIM-B are both referred to
separately as an Adviser or together as the Advisers or LGM.
LGIM-B is responsible for effecting all security transactions on behalf of
the Portfolio, including the allocation of principal transactions and portfolio
brokerage and the negotiation of commissions. Under the investment advisory
agreement, LGM-HK is entitled to receive a monthly advisory fee computed by
applying the annual asset rate applicable to that portion of the average daily
net assets of the Portfolio throughout the month in each Category as indicated
below:
ANNUAL
CATEGORY AVERAGE DAILY NET ASSETS ASSET RATE
-------- ------------------------ ----------
1 less than $500 million ........................ 0.75%
2 $500 million but less than $1 billion ......... 0.70
3 $1 billion but less than $1.5 billion ......... 0.65
4 $1.5 billion but less than $2 billion ......... 0.60
5 $2 billion but less than $3 billion ........... 0.55
6 $3 billion and over ........................... 0.50
Since January 1, 1996, LGM-HK pays to LGIM-B the entire amount of the
advisory fee payable by the Portfolio under its investment advisory agreement
with LGM-HK.
As of August 31, 2000, the Portfolio had net assets of $169,181,050. For
the fiscal years ended August 31, 2000, 1999 and 1998, LGM-HK earned advisory
fees of $1,376,522, $1,196,133 and $2,102,636, respectively, (equivalent to
0.75% of the Portfolio's average daily net assets for each such year).
The Portfolio's investment advisory agreement with LGM-HK remains in
effect from year to year for so long as such continuance is approved at least
annually (i) by the vote of a majority of the noninterested Trustees of the
Portfolio cast in person at a meeting specifically called for the purpose of
voting on such approval and (ii) by the Board of Trustees of the Portfolio or by
vote of a majority of the outstanding voting securities of the Portfolio. The
Agreement may be terminated at any time without penalty on sixty days' written
notice by the Board of Trustees of either party or by vote of the majority of
the outstanding voting securities of the Portfolio, and the Agreement will
terminate automatically in the event of its assignment. The Agreement provides
that the LGM-HK may render services to others. The Agreement also provides that,
in the absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of obligations or duties under the Agreement on the part of LGM-HK,
LGM-HK shall not be liable to the Portfolio or to any shareholder for any act or
omission in the course of or connected with rendering services or for any losses
sustained in the purchase, holding or sale of any security.
While the Portfolio is a New York trust, the Advisers, together with
certain Trustees and officers of the Portfolio, are not residents of the United
States, and substantially all of their respective assets may be located outside
of the United States. It may be difficult for investors to effect service of
process within the United States upon the individuals identified above, or to
realize judgments of courts of the United States predicated upon civil
liabilities of the Advisers and such individuals under the federal securities
laws of the United States. The Portfolio has been advised that there is
substantial doubt as to the enforceability in the countries in which the Adviser
and such individuals reside of such civil remedies and criminal penalties as are
afforded by the federal securities laws of the United States.
INFORMATION ABOUT LLOYD GEORGE. LGM specializes in providing investment
management services with respect to equity securities of companies trading in
Asian securities markets, and also those of emerging markets. LGM currently
manages portfolios for both private clients and institutional investors seeking
long-term capital growth and has advised Eaton Vance's international equity
funds since 1992. LGM's core investment team consists of fourteen experienced
investment professionals who have worked together over a number of years
successfully managing client portfolios in non-U.S. stock markets. The team has
a unique knowledge of, and experience with, Asian and emerging markets. LGM
analysts cover Asia, the India subcontinent, Russia and Eastern Europe, Latin
America, Australia and New Zealand from offices in Hong Kong, London and Mumbai.
LGM is ultimately controlled by the Hon. Robert Lloyd George, President of the
Portfolio and Chairman and Chief Executive Officer of the Adviser. LGM's only
business is portfolio management. Eaton Vance's parent is a shareholder of LGM.
The Advisers and LGM have adopted a conservative management style,
providing a blend of Asian and multinational expertise with the most rigorous
international standards of fundamental security analysis. Although focused
primarily in Asia, the Advisers and LGM maintain a network of international
contacts in order to monitor international economic and stock market trends and
offer clients a global management service.
The directors of LGM-HK are the Honourable Robert Lloyd George, William
Walter Raleigh Kerr, M.F. Tang, 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, M.F. Tang,
Pamela Chan, Adaline Mang-Yee Ko, Peter Bubenzer and Judith Collis. The business
address of the first six individuals is 3808 One Exchange Square, Central, Hong
Kong and of the last two is Cedar House, 41 Cedar Avenue, Hamilton HM 12,
Bermuda.
Adaline Mang-Yee Ko is a director of LGM and manages the Portfolio. She
was born in 1943 and educated at University of Birmingham, England and at London
Business School, where she received her MBA. Ms. Ko has over 14 years experience
working with Far East Asian equities. From 1982-1988, she worked at Save &
Prosper Group Ltd. as an investment manager. In 1988, Ms. Ko transferred to
Robert Fleming & Co. Ltd. In 1990, she was promoted to Director of Fleming
Investment Management Ltd. In 1992, she was promoted to Head of the Pacific
Region Portfolios Group where she supervised a team of 5 with responsibility for
over $1.5 billion in assets under management. Ms. Ko joined LGM in 1995.
The Advisers follow a common investment philosophy, striving to identify
companies with outstanding management and earnings growth potential by following
a disciplined management style, adhering to the most rigorous international
standards of fundamental security analysis, placing heavy emphasis on research,
visiting every company owned, and closely monitoring political and economic
developments.
ADMINISTRATIVE SERVICES. Under Eaton Vance's management contract with the Fund
and administration agreement with the Portfolio, Eaton Vance receives a monthly
management fee from the Fund and a monthly administration fee from the
Portfolio. Each fee is computed by applying the annual asset rate applicable to
that portion of the average daily net assets of the Fund or the Portfolio
throughout the month in each Category as indicated below:
ANNUAL
CATEGORY AVERAGE DAILY NET ASSETS ASSET RATE
-------- ------------------------ ----------
1 less than $500 million ......................... 0.25%
2 $500 million but less than $1 billion .......... 0.23333
3 $1 billion but less than $1.5 billion .......... 0.21667
4 $1.5 billion but less than $2 billion .......... 0.20
5 $2 billion but less than $3 billion ............ 0.18333
6 $3 billion and over ............................ 0.16667
As of August 31, 2000, the Portfolio had net assets of $169,181,050. For the
fiscal years ended August 31, 2000, 1999 and 1998, Eaton Vance earned
administration fees of $458,639, $399,310 and $700,907, respectively,
(equivalent to 0.25% of the Portfolio's average daily net assets for each such
year).
As of August 31, 2000, the Fund had net assets of $166,020,998. For the
fiscal years ended August 31, 2000, 1999 and 1998, Eaton Vance earned management
fees of $451,884, $394,743 and $695,437, respectively (equivalent to 0.25% of
the Fund's average daily net assets for each such year).
Eaton Vance's management contract with the Fund and administration agreement
with the Portfolio will each remain in effect from year to year for so long as
such continuance is approved annually by the vote of a majority of the Trustees
of the Trust or the Portfolio, as the case may be. Each agreement may be
terminated at any time without penalty on sixty days' written notice by the
Board of Trustees of either party thereto, or by a vote of a majority of the
outstanding voting securities of the Fund or the Portfolio, as the case may be.
Each agreement will terminate automatically in the event of its assignment. Each
agreement provides that, in the absence of Eaton Vance's willful misfeasance,
bad faith, gross negligence or reckless disregard of its obligations or duties
to the Fund or the Portfolio under such contract or agreement, Eaton Vance will
not be liable to the Fund or the Portfolio for any loss incurred. Each agreement
was initially approved by the Trustees, including the noninterested Trustees, of
the Trust or the Portfolio which is a party thereto at meetings held on
September 8, 1992 and on October 8, 1992, respectively, of the Trust and the
Portfolio.
INFORMATION ABOUT EATON VANCE. Eaton Vance is a business trust organized under
Massachusetts law. Eaton Vance, Inc. ("EV") serves as trustee of Eaton Vance.
Eaton Vance and EV are wholly-owned subsidiaries of Eaton Vance Corporation
("EVC"), a Maryland corporation and publicly-held holding company. EVC through
its subsidiaries and affiliates engages primarily in investment management,
administration and marketing activities. The Directors of EVC are James B.
Hawkes, John G.L. Cabot, Leo I. Higdon, Jr., John M. Nelson, Vincent M. O'Reilly
and Ralph Z. Sorenson. All of the issued and outstanding shares of Eaton Vance
are owned by EVC. All of the issued and outstanding shares of BMR are owned by
Eaton Vance. All shares of the outstanding Voting Common Stock of EVC are
deposited in a Voting Trust, the Voting Trustees of which are Messrs. Hawkes,
Jeffrey P. Beale, Alan R. Dynner, Thomas E. Faust, Jr., Thomas J. Fetter, Scott
H. Page, Duncan W. Richardson, William M. Steul, Payson F. Swaffield, Michael W.
Weilheimer, and Wharton P. Whitaker (all of whom are officers of Eaton Vance).
The Voting Trustees have unrestricted voting rights for the election of
Directors of EVC. All of the outstanding voting trust receipts issued under said
Voting Trust are owned by certain of the officers of BMR and Eaton Vance who are
also officers, or officers and Directors of EVC and EV. As indicated under
"Management and Organization", all of the officers of the Trust (as well as Mr.
Hawkes who is also a Trustee) hold positions in the Eaton Vance organization.
EXPENSES. The Fund and Portfolio are responsible for all expenses not expressly
stated to be payable by another party (such as the investment adviser under the
Investment Advisory Agreement, Eaton Vance under the management contract and
administration agreement or the principal underwriter under the Distribution
Agreement). In the case of expenses incurred by the Trust, the Fund is
responsible for its pro rata share of those expenses. Expenses of the Fund
allocated to a particular class include those incurred under the Distribution
Plan applicable to that class and those resulting from the fee paid to the
principal underwriter for repurchase transactions.
OTHER SERVICE PROVIDERS
PRINCIPAL UNDERWRITER. Eaton Vance Distributors, Inc. ("EVD"), The Eaton Vance
Building, 255 State Street, Boston, MA 02109, is the Fund's principal
underwriter. The principal underwriter acts as principal in selling shares under
a Distribution Agreement with the Trust. The expenses of printing copies of
prospectuses used to offer shares and other selling literature and of
advertising are borne by the principal underwriter. The fees and expenses of
qualifying and registering and maintaining qualifications and registrations of
the Fund and its shares under federal and state securities laws are borne by the
Fund. The Distribution Agreement as it applies to Class A shares is renewable
annually by the Board of Trustees of the Trust (including a majority of the
noninterested Trustees) may be terminated on six months' notice by either party
and is automatically terminated upon assignment. The Distribution Agreement as
it applies to Class B and Class C shares is renewable annually by the Trust's
Board of Trustees (including a majority of the noninterested Trustees who have
no direct or indirect financial interest in the operation of the Distribution
Plan or the Distribution Agreement), may be terminated on sixty days' notice
either by such Trustees or by vote of a majority of the outstanding shares of
the relevant class or on six months' notice by the principal underwriter and is
automatically terminated upon assignment. The principal underwriter distributes
shares on a "best efforts" basis under which it is required to take and pay for
only such shares as may be sold. The principal underwriter allows investment
dealers discounts from the applicable public offering price which are alike for
all investment dealers. See "Sales Charges." EVD is a wholly-owned subsidiary of
EVC. Mr. Hawkes is a Vice President and Director, Mr. Dynner is a Vice
President, Secretary and Clerk, Mr. O'Connor is a Vice President, and Mr. Murphy
is Assistant Secretary and Assistant Clerk of EVD.
CUSTODIAN. Investors Bank & Trust Company ("IBT"), 200 Clarendon Street, Boston,
MA 02116, serves as custodian to the Fund and Portfolio. IBT has the custody of
all cash and securities representing the Fund's interest in the Portfolio, has
custody of the Portfolio's assets, maintains the general ledger of the Portfolio
and the Fund and computes the daily net asset value of interests in the
Portfolio and the net asset value of shares of the Fund. In such capacity it
attends to details in connection with the sale, exchange, substitution, transfer
or other dealings with the Portfolio's investments, receives and disburses all
funds and performs various other ministerial duties upon receipt of proper
instructions from the Trust and the Portfolio. IBT also provides services in
connection with the preparation of shareholder reports and the electronic filing
of such reports with the SEC. EVC and its affiliates and their officers and
employees from time to time have transactions with various banks, including IBT.
It is Eaton Vance's opinion that the terms and conditions of such transactions
were not and will not be influenced by existing or potential custodial or other
relationships between the Fund or the Portfolio and such banks.
INDEPENDENT ACCOUNTANTS. Deloitte & Touche LLP, 200 Berkeley Street, Boston, MA
02116, are the independent accountants of the Fund and the Portfolio, providing
audit services, tax return preparation, and assistance and consultation with
respect to the preparation of filings with the SEC.
TRANSFER AGENT. PFPC Global Fund Services, P.O. Box 9656, Providence, RI
02904-9656, serves as transfer and dividend disbursing agent for the Fund.
PURCHASING AND REDEEMING SHARES
CALCULATION OF NET ASSET VALUE. The net asset value of the Portfolio is computed
by IBT (as agent and custodian for the Portfolio) by subtracting the liabilities
of the Portfolio from the value of its total assets. The Fund and the Portfolio
will be closed for business and will not price their respective shares or
interests on the following business holidays: New Year's Day, Martin Luther
King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day.
Each investor in the Portfolio, including the Fund, may add to or reduce
its investment in the Portfolio on each day the Exchange is open for trading
("Portfolio Business Day") as of the close of regular trading on the Exchange
(the "Portfolio Valuation Time"). The value of each investor's interest in the
Portfolio will be determined by multiplying the net asset value of the Portfolio
by the percentage, determined on the prior Portfolio Business Day, which
represented that investor's share of the aggregate interests in the Portfolio on
such prior day. Any additions or withdrawals for the current Portfolio Business
Day will then be recorded. Each investor's percentage of the aggregate interest
in the Portfolio will then be recomputed as the percentage equal to a fraction
(i) the numerator of which is the value of such investor's investment in the
Portfolio as of the close of Portfolio Valuation Time on the prior Portfolio
Business Day plus or minus, as the case may be, that amount of any additions to
or withdrawals from the investor's investment in the Portfolio on the current
Portfolio Business Day, and (ii) the denominator of which is the aggregate net
asset value of the Portfolio as of the Portfolio Valuation Time on the prior
Portfolio Business Day plus or minus, as the case may be, the amount of the net
additions to or withdrawals from the aggregate investment in the Portfolio on
the current Portfolio Business Day by all investors in the Portfolio. The
percentage so determined will then be applied to determine the value of the
investor's interest in the Portfolio for the current Portfolio Business Day.
The Trustees of the Portfolio have established the following procedures for
the fair valuation of the Portfolio's assets under normal market conditions.
Marketable securities listed on foreign or U.S. securities exchanges or in the
NASDAQ National Market System generally are valued at closing sale prices or, if
there were no sales, at the mean between the closing bid and asked prices
therefor on the exchange where such securities are principally traded or on such
National Market System (such prices may not be used, however, where an active
over-the-counter market in an exchange listed security better reflects current
market value). Unlisted or listed securities for which closing sale prices are
not available are valued at the mean between the latest bid and asked prices. An
option is valued at the last sale price as quoted on the principal exchange or
board of trade on which such option or contract is traded, or in the absence of
a sale, the mean between the last bid and asked price. Futures positions on
securities or currencies are generally valued at closing settlement prices.
Short term debt securities with a remaining maturity of 60 days or less are
valued at amortized cost. If securities were acquired with a remaining maturity
of more than 60 days, their amortized cost value will be based on their value on
the sixty-first day prior to maturity. Other fixed income and debt securities,
including listed securities and securities for which price quotations are
available, will normally be valued on the basis of valuations furnished by a
pricing service. All other securities are valued at fair value as determined in
good faith by or at the direction of the Trustees.
Generally, trading in the foreign securities owned by the Portfolio is
substantially completed each day at various times prior to the close of the
Exchange. The values of these securities used in determining the net asset value
of the Portfolio's shares generally are computed as of such times. Occasionally,
events affecting the value of foreign securities may occur between such times
and the close of the Exchange which will not be reflected in the computation of
the Portfolio's net asset value (unless the Portfolio deems that such events
would materially affect its net asset value, in which case an adjustment would
be made and reflected in such computation). Foreign securities and currency held
by the Portfolio will be valued in U.S. dollars; such values will be computed by
the custodian based on foreign currency exchange rate quotations supplied by
Reuters Information Service.
ADDITIONAL INFORMATION ABOUT PURCHASES. Fund shares are continuously offered
through investment dealers which have entered agreements with the principal
underwriter. The public offering price is the net asset value next computed
after receipt of the order, plus, in the case of Class A shares, a variable
percentage (sales charge) depending upon the amount of purchase as indicated by
the sales charge table set forth in the prospectus. The sales charge is divided
between the principal underwriter and the investment dealer. The sales charge
table is applicable to purchases of a Fund alone or in combination with
purchases of certain other funds offered by the principal underwriter, made at a
single time by (i) an individual, or an individual, his spouse and their
children under the age of twenty-one, purchasing shares for his or their own
account, and (ii) a trustee or other fiduciary purchasing shares for a single
trust estate or a single fiduciary account. The table is also presently
applicable to (1) purchases of Class A shares pursuant to a written Statement of
Intention; or (2) purchases of Class A shares pursuant to the Right of
Accumulation and declared as such at the time of purchase. See "Sales Charges".
In connection with employee benefit or other continuous group purchase
plans, the Fund may accept initial investments of less than $1,000 on the part
of an individual participant. In the event a shareholder who is a participant of
such a plan terminates participation in the plan, his or her shares will be
transferred to a regular individual account. However, such account will be
subject to the right of redempton by the Fund as described below.
SUSPENSION OF SALES. The Trust may, in its absolute discretion, suspend,
discontinue or limit the offering of one or more of its classes of shares at any
time. In determining whether any such action should be taken, the Trust's
management intends to consider all relevant factors, including (without
limitation) the size of the Fund or class, the investment climate and market
conditions, the volume of sales and redemptions of shares, and in the case of
Class B and Class C shares, the amount of uncovered distribution charges of the
principal underwriter. The Class B and Class C Distribution Plans may continue
in effect and payments may be made under the Plans following any such
suspension, discontinuance or limitation of the offering of shares; however,
there is no contractual obligation to continue any Plan for any particular
period of time. Suspension of the offering of shares would not, of course,
affect a shareholder's ability to redeem shares.
ACQUIRING FUND SHARES IN EXCHANGE FOR SECURITIES. IBT, as escrow agent, will
receive securities acceptable to Eaton Vance, as administrator, in exchange for
Fund shares. The minimum value of securities (or securities and cash) accepted
for deposit is $5,000. Securities accepted will be sold on the day of their
receipt or as soon thereafter as possible. The number of Fund shares to be
issued in exchange for securities will be the aggregate proceeds from the sale
of such securities, divided by the applicable public offering price of Class A
shares or net asset value of Class B and Class C shares on the day such proceeds
are received. Eaton Vance will use reasonable efforts to obtain the then current
market price for such securities but does not guarantee the best available
price. Eaton Vance will absorb any transaction costs, such as commissions, on
the sale of securities. Securities determined to be acceptable should be
transferred via book entry or physically delivered, in proper form for transfer,
through an investment dealer, together with a completed and signed Letter of
Transmittal in approved form (available from investment dealers). Investors who
are contemplating an exchange of securities for shares, or their
representatives, must contact Eaton Vance to determine whether the securities
are acceptable before forwarding such securities. Eaton Vance reserves the right
to reject any securities. Exchanging securities for shares may create a taxable
gain or loss. Each investor should consult his or her tax adviser with respect
to the particular federal, state and local tax consequences of exchanging
securities.
ADDITIONAL INFORMATION ABOUT REDEMPTIONS. The right to redeem shares of the Fund
can be suspended and the payment of the redemption price deferred when the
Exchange is closed (other than for customary weekend and holiday closings),
during periods when trading on the Exchange is restricted as determined by the
SEC, or during any emergency as determined by the SEC which makes it
impracticable for the Portfolio to dispose of its securities or value its
assets, or during any other period permitted by order of the SEC for the
protection of investors.
While normally payments will be made in cash for redeemed shares, the
Trust, subject to compliance with applicable regulations, has reserved the right
to pay the redemption price of shares of the Fund, either totally or partially,
by a distribution in kind of readily marketable securities withdrawn from the
Portfolio. The securities so distributed would be valued pursuant to the
Portfolio's valuation procedures. If a shareholder received a distribution in
kind, the shareholder could incur brokerage or other charges in converting the
securities to cash.
Due to the high cost of maintaining small accounts, the Trust reserves the
right to redeem accounts with balances of less than $750. Prior to such a
redemption, shareholders will be given 60 days' written notice to make an
additional purchase. However, no such redemption would be required by the Trust
if the cause of the low account balance was a reduction in the net asset value
of shares. No CDSC will be imposed with respect to such involuntary redemptions.
SYSTEMATIC WITHDRAWAL PLAN. The transfer agent will send to the shareholder
regular monthly or quarterly payments of any permitted amount designated by the
shareholder based upon the value of the shares held. The checks will be drawn
from share redemptions and hence, may require the recognition of taxable gain or
loss. Income dividends and capital gains distributions in connection with
withdrawal plan accounts will be credited at net asset value as of the record
date for each distribution. Continued withdrawals in excess of current income
will eventually use up principal, particularly in a period of declining market
prices. A shareholder may not have a withdrawal plan in effect at the same time
he or she has authorized Bank Automated Investing or is otherwise making regular
purchases of Fund shares. The shareholder, the transfer agent or the principal
underwriter will be able to terminate the withdrawal plan at any time without
penalty.
SALES CHARGES
DEALER COMMISSIONS. The principal underwriter may, from time to time, at its own
expense, provide additional incentives to investment dealers which employ
registered representatives who sell Fund shares and/or shares of other funds
distributed by the principal underwriter. In some instances, such additional
incentives may be offered only to certain investment dealers whose
representatives sell or are expected to sell significant amounts of shares. In
addition, the principal underwriter may from time to time increase or decrease
the sales commissions payable to investment dealers. The principal underwriter
may allow, upon notice to all investment dealers with whom it has agreements,
discounts up to the full sales charge during the periods specified in the
notice. During periods when the discount includes the full sales charge, such
investment dealers may be deemed to be underwriters as that term is defined in
the Securities Act of 1933.
SALES CHARGE WAIVERS. Class A shares may be sold at net asset value to current
and retired Directors and Trustees of Eaton Vance funds, including the
Portfolio; to clients and current and retired officers and employees of Eaton
Vance, its affiliates and other investment advisers of Eaton Vance sponsored
funds; to officers and employees of IBT and the transfer agent; to persons
associated with law firms, consulting firms and others providing services to
Eaton Vance and the Eaton Vance Funds; and to such persons' spouses, parents,
siblings and children and their beneficial accounts. Such shares may also be
issued at net asset value (1) in connection with the merger of an investment
company (or series or class thereof) with the Fund (or class thereof), (2) to
investors making an investment as part of a fixed fee program whereby an entity
unaffiliated with the investment adviser provides multiple investment services,
such as management, brokerage and custody, and (3) to investment advisors,
financial planners or other intermediaries who place trades for their own
accounts or the accounts of their clients and who charge a management,
consulting or other fee for their services; clients of such investment advisors,
financial planners or other intermediaries who place trades for their own
accounts if the accounts are linked to the master account of such investment
advisor, financial planner or other intermediary on the books and records of the
broker or agent. Class A shares may also be sold to registered representatives
and employees of investment dealers and bank employees who refer customers to
registered representatives of investment dealers. Class A shares may be sold at
net asset value to any investment advisory, agency, custodial or trust account
managed or administered by Eaton Vance or by any parent, subsidiary or other
affiliate of Eaton Vance. Class A shares are offered at net asset value to the
foregoing persons and in the foregoing situations because either (i) there is no
sales effort involved in the sale of shares or (ii) the investor is paying a fee
(other than the sales charge) to the investment dealer involved in the sale. Any
new or revised sales charge or CDSC waiver will be prospective only.
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, the Statement of
Intention section of the account application should be completed 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. If you make a Statement of Intention, the transfer agent is
authorized 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. A Statement of Intention does not obligate the shareholder to purchase
or the Fund to sell the full amount indicated in the Statement.
If the amount actually purchased during the 13-month period is less than
that indicated in the Statement, the shareholder will be requested to pay the
difference between the sales charge applicable to the shares purchased and the
sales charge paid under the Statement of Intention. If the payment is not
received in 20 days, the appropriate number of escrowed shares will be redeemed
in order to realize such difference. If the total purchases during the 13-month
period are large enough to qualify for a lower sales charge than that applicable
to the amount specified in the Statement, all transactions will be computed at
the expiration date of the Statement to give effect to the lower sales charge.
Any difference will be refunded to the shareholder in cash or applied to the
purchase of additional shares, as specified by the shareholder. This refund will
be made by the investment dealer and the principal underwriter. If at the time
of the recomputation, the investment dealer for the account has changed, the
adjustment will be made only on those shares purchased through the current
investment dealer for the account.
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.
EXCHANGE PRIVILEGE. In addition to exchanges into the same class of another
Eaton Vance fund, Class B shares may be exchanged for shares of a money market
fund sponsored by an investment dealer and approved by the principal underwriter
(an "investment dealer fund"). For purposes of calculating the CDSC applicable
to investment dealer fund shares acquired in an exchange, the CDSC schedule
applicable to the exchanged shares will apply and the purchase of investment
dealer fund shares is deemed to have occurred at the time of the original
purchase of the exchanged shares, except that the time during which a
shareholder holds such investment dealer fund shares will not be credited toward
completion of the CDSC period.
TAX-SHELTERED RETIREMENT PLANS. Class A and Class C shares are available for
purchase in connection with certain tax-sheltered retirement plans. Detailed
information concerning these plans, including certain exceptions to minimum
investment requirements, and copies of the plans are available from the
principal underwriter. This information should be read carefully and
consultation with an attorney or tax adviser may be advisable. The information
sets forth the service fee charged for retirement plans and describes the
federal income tax consequences of establishing a plan. Participant accounting
services (including trust fund reconciliation services) will be offered only
through third party recordkeepers and not by the principal underwriter. Under
all plans, dividends and distributions will be automatically reinvested in
additional shares.
DISTRIBUTION PLANS. The Trust has in effect a compensation-type Distribution
Plan (the "Class A Plan") for the Fund's Class A shares pursuant to Rule 12b-1
under the 1940 Act. The Class A Plan provides for the payment of a monthly
distribution fee to the principal underwriter in an amount equal to the
aggregate of (a) .50% of that portion of Class A average daily net assets for
any fiscal year which is attributable to its shares which have remained
outstanding for less than one year and (b) .25% of that portion of Class A
average daily net assets for any fiscal year which is attributable to its shares
which have remained outstanding for more than one year. Aggregate payments to
the principal underwriter under the Class A Plan are limited to those
permissible, pursuant to a rule of the National Association of Securities
Dealers, Inc.
The Class A Plan also provides that the Class will pay a quarterly service
fee to the principal underwriter in an amount equal on an annual basis to .25%
of that portion of its average daily net assets for any fiscal year which is
attributable to Class A shares which have remained outstanding for more than one
year; from such service fee the principal underwriter expects to pay a quarterly
service fee to investment dealers, as compensation for providing personal
services and/or the maintenance of shareholder accounts, with respect to shares
sold by such dealers which have remained outstanding for more than one year.
Service fee payments to investment dealers will be in addition to sales charges
on Class A shares which are reallowed to investment dealers. If the Class A Plan
is terminated or not continued in effect, the Class has no obligation to
reimburse the principal underwriter for amounts expended by the principal
underwriter in distributing Class A shares. For the distribution fees paid by
Class A shares, see Appendix A.
The Trust also has in effect compensation-type Distribution Plans (the
"Class B and Class C Plans") pursuant to Rule 12b-1 under the 1940 Act for the
Fund's Class B and Class C shares. The Class B and Class C Plans are designed to
permit an investor to purchase shares through an investment dealer without
incurring an initial sales charge and at the same time permit the principal
underwriter to compensate investment dealers in connection therewith. The Class
B and Class C Plans provide that the Fund will pay sales commissions and
distribution fees to the principal underwriter only after and as a result of the
sale of shares. On each sale of shares (excluding reinvestment of
distributions), the Fund will pay the principal underwriter amounts representing
(i) sales commissions equal to 5% for Class B shares and 6.25% for Class C
shares of the amount received by the Fund for each share sold and (ii)
distribution fees calculated by applying the rate of 1% over the prime rate then
reported in The Wall Street Journal to the outstanding balance of uncovered
distribution charges (as described below) of the principal underwriter. To pay
these amounts, each Class pays the principal underwriter a fee, accrued daily
and paid monthly, at an annual rate not exceeding .75% of its average daily net
assets to finance the distribution of its shares. Such fees compensate the
principal underwriter for sales commissions paid by it to investment dealers on
the sale of shares and for interest expenses. For sales of Class B shares, the
principal underwriter uses its own funds to pay sales commissions (except on
exchange transactions and reinvestments) to investment dealers at the time of
sale equal to 4% of the purchase price of the Class B shares sold by such
dealers. For Class C shares, the principal underwriter currently expects to pay
to an investment dealer (a) sales commissions (except on exchange transactions
and reinvestments) at the time of sale equal to .75% of the purchase price of
the shares sold by such dealer, and (b) monthly sales commissions approximately
equivalent to 1/12 of .75% of the value of shares sold by such dealer and
remaining outstanding for at least one year. During the first year after a
purchase of Class C shares, the principal underwriter will retain the sales
commission as reimbursement for the sales commissions paid to investment dealers
at the time of sale. CDSCs paid to the principal underwriter will be used to
reduce amounts owed to it. The Class B and Class C Plans provide that the Fund
will make no payments to the principal underwriter in respect of any day on
which there are no outstanding uncovered distribution charges of the principal
underwriter. CDSCs and accrued amounts will be paid by the Trust to the
principal underwriter whenever there exist uncovered distribution charges.
Because payments to the principal underwriter under the Class B and Class C
Plans are limited, uncovered distribution charges (sales commissions paid by the
principal underwriter plus interest, less the above fees and CDSCs received by
it) may exist indefinitely. For the sales commissions and CDSCs paid on (and
uncovered distribution charges of) Class B and Class C shares, see Appendix B
and Appendix C, respectively.
In calculating daily the amount of uncovered distribution charges,
distribution charges will include the aggregate amount of sales commissions and
distribution fees theretofore paid plus the aggregate amount of sales
commissions and distribution fees which the principal underwriter is entitled to
be paid under the Plan since its inception. Payments theretofore paid or payable
under the Class B and Class C Plans by the Trust to the principal underwriter
and CDSCs theretofore paid or payable to the principal underwriter will be
subtracted from such distribution charges; if the result of such subtraction is
positive, a distribution fee (computed at 1% over the prime rate then reported
in The Wall Street Journal) will be computed on such amount and added thereto,
with the resulting sum constituting the amount of outstanding uncovered
distribution charges with respect to such day. The amount of outstanding
uncovered distribution charges of the principal underwriter calculated on any
day does not constitute a liability recorded on the financial statements of the
Fund.
The amount of uncovered distribution charges of the principal underwriter at
any particular time depends upon various changing factors, including the level
and timing of sales of shares, the nature of such sales (i.e., whether they
result from exchange transactions, reinvestments or from cash sales through
investment dealers), the level and timing of redemptions of shares upon which a
CDSC will be imposed, the level and timing of redemptions of shares upon which
no CDSC will be imposed (including redemptions of shares pursuant to the
exchange privilege which result in a reduction of uncovered distribution
charges), changes in the level of the net assets of the Class, and changes in
the interest rate used in the calculation of the distribution fee under the
Class B and Class C Plans.
Distribution of Class B and Class C shares of the Fund by the principal
underwriter will also be encouraged by the payment by LGIM-B to the principal
underwriter of amounts equivalent to .15% for Class B and .125% for Class C of
each Class's annual average daily net assets. The aggregate amounts of such
payments are a deduction in calculating the outstanding uncovered distribution
charges of the principal underwriter under the Class B and Class C Plans and,
therefore, will benefit shareholders when such charges exist. Such payments will
be made in consideration of the principal underwriter's distribution efforts.
The Class B and Class C Plans also authorize each Class to make payments of
service fees to the principal underwriter, investment dealers and other persons
in amounts not exceeding .25% of its average daily net assets for personal
services, and/or the maintenance of shareholder accounts. This fee is paid
quarterly in arrears based on the value of Class B shares sold by such persons.
For Class C, investment dealers currently receive (a) a service fee (except on
exchange transactions and reinvestments) at the time of sale equal to .25% of
the purchase price of the Class C shares sold by such dealer, and (b) monthly
service fees approximately equivalent to 1/12 of .25% of the value of Class C
shares sold by such dealer. During the first year after a purchase of Class C
shares, the principal underwriter will retain the service fee as reimbursement
for the service fee payment made to investment dealers at the time of sale. For
the service fees paid by Class B and Class C shares, see Appendix B and Appendix
C, respectively.
Currently, payments of sales commissions and distribution fees and of
service fees equal 1% of a Class's average daily net assets per annum. The Trust
believes that the combined rate of all these payments may be higher than the
rate of payments made under distribution plans adopted by other investment
companies pursuant to Rule 12b-1. Although the principal underwriter will use
its own funds (which may be borrowed from banks) to pay sales commissions at the
time of sale, it is anticipated that the Eaton Vance organization will profit by
reason of the operation of the Class B and Class C Plans through an increase in
the Fund's assets (thereby increasing the management and administration fees
payable to the manager and the advisory fee payable to LGM resulting from sale
of shares and through the amounts paid to the principal underwriter, including
CDSCs, pursuant to the Plans. The Eaton Vance organization may be considered to
have realized a profit under the Class B and Class C Plans if at any point in
time the aggregate amounts theretofore received by the principal underwriter
pursuant to the Class B or Class C Plan and from CDSCs have exceeded the total
expenses theretofore incurred by such organization in distributing shares. Total
expenses for this purpose will include an allocable portion of the overhead
costs of such organization and its branch offices, which costs will include
without limitation leasing expense, depreciation of building and equipment,
utilities, communication and postage expense, compensation and benefits of
personnel, travel and promotional expense, stationery and supplies, literature
and sales aids, interest expense, data processing fees, consulting and temporary
help costs, insurance, taxes other than income taxes, legal and auditing expense
and other miscellaneous overhead items. Overhead is calculated and allocated for
such purpose by the Eaton Vance organization in a manner deemed equitable to the
Trust.
The Plans continue in effect from year to year so long as such continuance
is approved at least annually by the vote of both a majority of (i) the
noninterested Trustees of the Trust who have no direct or indirect financial
interest in the operation of the Plan or any agreements related to the Plan (the
"Plan Trustees") and (ii) all of the Trustees then in office. Each Plan may be
terminated at any time by vote of a majority of the Plan Trustees or by a vote
of a majority of the outstanding voting securities of the applicable Class. Each
Plan requires quarterly Trustee review of a written report of the amount
expended under the Plan and the purposes for which such expenditures were made.
The Plans may not be amended to increase materially the payments described
therein without approval of the shareholders of the affected Class and the
Trustees. So long as a Plan is in effect, the selection and nomination of the
noninterested Trustees shall be committed to the discretion of such Trustees.
The Class A, Class B and Class C Plans were initially approved by the Trustees,
including the Plan Trustees, on June 23, 1997. The Trustees of the Trust who are
"interested" persons of the Fund have an indirect financial interest in the Plan
because their employers (or affiliates thereof) receive distribution and/or
service fees under the Plans or agreements related thereto.
The Trustees of the Trust believe that each Plan will be a significant
factor in the expected growth of each Fund's assets, and will result in
increased investment flexibility and advantages which have benefitted and will
continue to benefit the Fund and its shareholders. Payments for sales
commissions and distribution fees made to the principal underwriter under the
Class B and Class C Plans will compensate the principal underwriter for its
services and expenses in distributing those classes of shares. Service fee
payments made to the principal underwriter and investment dealers provide
incentives to provide continuing personal services to investors and the
maintenance of shareholder accounts. By providing incentives to the principal
underwriter and investment dealers, each Plan is expected to result in the
maintenance of, and possible future growth in, the assets of the Fund. Based on
the foregoing and other relevant factors, the Trustees of the Trust have
determined that in their judgment there is a reasonable likelihood that each
Plan will benefit the Fund and its shareholders.
PERFORMANCE
Average annual total return is determined separately for each Class of the
Fund by multiplying a hypothetical initial purchase order of $1,000 by the
average annual compound rate of return (including capital appreciation/
depreciation, and distributions paid and reinvested) for the stated period and
annualizing the results. The calculation assumes (i) that all distributions are
reinvested at net asset value on the reinvestment dates during the period, (ii)
the deduction of the maximum sales charge from the initial $1,000 purchase order
for Class A shares, (iii) a complete redemption of the investment, and (iv) the
deduction of any CDSC at the end of the period. The Fund may also publish total
return figures for each class based on reduced sales charges or at net asset
value. These returns would be lower if the full sales charge was imposed. For
information concerning the total return of the Classes of the Fund, see Appendix
A, Appendix B and Appendix C.
The Fund's performance may be compared in publications to the performance of
various indices and investments for which reliable data is available, and to
averages, performance rankings and/or ratings or other information prepared by
recognized mutual fund statistical services. The Fund's performance may differ
from that of other investors in the Portfolio, including other investment
companies.
Total return may be compared to relevant indices, such as the Consumer Price
Index and various domestic and foreign securities indices. The Fund's total
return and comparisons with these indices may be used in advertisements and in
information furnished to present or prospective shareholders. In addition,
evaluations of the Fund's performance or rankings and/or ratings 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. Such information may also include commentary prepared by Eaton Vance
professionals, including portfolio managers.
Investors may be provided with information concerning Fund volatility or
risk, including but not limited to beta, standard deviation and Sharpe ratio.
Beta is a measure of risk which shows Fund volatility relative to a market
index. A fund with a beta of 1 would perform exactly like the market index; a
beta of 2 would mean its performance was twice as volatile as the index,
positive or negative. Standard deviation is a measure of a security's
volatility, or variability, in expected return. Sharpe ratio is a measure of
risk-adjusted performance. The higher the Sharpe ratio the better a fund's
historical risk-adjusted return. Information concerning Fund distribution
payments (or the payment record of issuers in which the Fund may invest) may
also be provided to investors.
Information used in advertisements and materials furnished to present or
prospective shareholders may include descriptions of the economies of China and
countries in the China region. Such descriptions may include discussions of
developments in such economies; statistical information relating to China and
China region countries, companies located in such countries and the stock
markets of such countries; and opinions of the Adviser. Information provided to
present and prospective shareholders may also include descriptions of the
Adviser's investment experience and the benefits of global investing.
Information used in advertisements and in materials furnished to present or
prospective shareholders may include statistics, data and performance studies
prepared by independent organizations or included in various publications
reflecting the investment performance or return achieved by various classes and
types of investments (e.g., common stocks, small company stocks, long-term
corporate bonds, long-term government bonds, intermediate-term government
bonds, U.S. Treasury bills) over various periods of time. This information may
be used to illustrate the benefits of long-term investments in common stocks.
Information about the portfolio allocation, portfolio turnover and holdings of
the Portfolio may be included in advertisements and other material furnished to
present and prospective shareholders.
Information used in advertisements and in material provided to present and
prospective shareholders may include descriptions of Lloyd George, Eaton Vance
and other Fund and Portfolio service providers, their investment styles, other
investment products, personnel and Fund distribution channels.
Information used in advertisements and materials furnished to present and
prospective investors may include statements or illustrations relating to the
appropriateness of certain types of securities and/or mutual funds to meet
specific financial goals. Such information may address:
-- cost associated with aging parents;
-- funding a college education (including its actual and estimated cost);
-- health care expenses (including actual and projected expenses);
-- long-term disabilities (including the availability of, and coverage
provided by, disability insurance); and
-- retirement (including the availability of social security benefits, the
tax treatment of such benefits and statistics and other information
relating to maintaining a particular standard of living and outliving
existing assets).
Such information may also address different methods for saving money and
the results of such methods, as well as the benefits of investing in equity
securities. Such information may describe: the potential for growth; the
performance of equities as compared to other investment vehicles; and the
value of investing as early as possible and regularly, as well as staying
invested. The benefits of investing in equity securities by means of a mutual
fund may also be included (such benefits may include diversification,
professional management and the variety of equity mutual fund products).
Information in advertisements and materials furnished to present and
prospective investors may include profiles of different types of investors
(i.e., investors with different goals and assets) and different investment
strategies for meeting specific financial goals. Such information may provide
hypothetical illustrations which include: results of various investment
strategies; performance of an investment in the Fund over various time
periods; and results of diversifying assets among several investments with
varying performance. Information in advertisements and materials furnished to
present and prospective investors may also include quotations (including
editorial comments) and statistics concerning investing in securities, as well
as investing in particular types of securities and the performance of such
securities.
The Trust (or Principal Underwriter) may provide investors with information
on global investing, which may include descriptions, comparisons, charts and/or
illustrations of foreign and domestic equity market capitalizations; returns
obtained by foreign and domestic securities; and the effects of globally
diversifying an investment portfolio (including volatility analysis and
performance information). Such information may be provided for a variety of
countries over varying time periods.
The Trust (or Principal Underwriter) may provide information about Eaton
Vance, its affiliates and other investment advisers to the funds in the Eaton
Vance Family of Funds in sales material or advertisements provided to investors
or prospective investors. Such material or advertisements may also provide
information on the use of investment professionals by such investors.
TAXES
Each series of the Trust is treated as a separate entity for federal income
tax purposes. the Fund has elected to be treated and intends to qualify each
year, as a regulated investment company ("RIC") under the Code. Accordingly, the
Fund intends to satisfy certain requirements relating to sources of its income
and diversification of its assets and to distribute substantially all of its net
income and net short-term and long-term capital gains (after reduction by any
available capital loss carryforwards) 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. To the extent it qualifies for treatment as a RIC
and satisfies the above-mentioned distributions requirements, the Fund will not
be subject to federal income tax on income paid to its shareholders in the form
of dividends or capital gain distributions. The Fund so qualified for its fiscal
year ended August 31, 2000.
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. For purposes of applying the
requirements of the Code regarding qualification as a RIC, the Fund (i) will be
deemed to own its proportionate share of each of the assets of the Portfolio and
(ii) will be entitled to the gross income of the Portfolio attributable to such
share.
In order to avoid incurring a federal excise tax obligation, the Code
requires that the Fund distribute (or be deemed to have distributed) by December
31 of each calendar year (i) at least 98% of its ordinary income (not including
tax-exempt income) for such year, (11) at least 98% of its capital gain net
income (which is the excess of its realized capital gains over its realized
capital losses), generally computed on the basis of the one-year period ending
on October 31 of such year, after reduction by any available capital loss
carryforwards and (iii) 100% of any income and capital gains from the prior year
(as previously computed) that was not paid out during such year and on which the
Fund paid no federal income tax. Under current law, provided that the Fund
qualifies as a RIC and a Portfolio is treated as a partnership for Massachusetts
and federal tax purposes, neither the Fund nor the Portfolio should be liable
for any income, corporate excise or franchise tax in the Commonwealth of
Massachusetts.
If the Fund does not qualify as a RIC for any taxable year, the Fund's
taxable income will be subject to corporate income taxes, and all distributions
from earnings and profits, including distributions of net capital gain (if any),
will be taxable to the shareholder as ordinary income. In addition, in order to
requalify for taxation as a RIC, the Fund may be required to recognize
unrealized gains, pay substantial taxes and interest, and make certain
distributions.
The Portfolio's investments in options, futures contracts, hedging
transactions, forward contracts (to the extent permitted) and certain other
transactions will be subject to special tax rules (including mark-to-market,
constructive sale, straddle, wash sale, short sale and other rules), the effect
of which may be to accelerate income to the Portfolio, defer Portfolio losses,
cause adjustments in the holding periods of Portfolio securities, convert
capital gain into ordinary income and convert short-term capital losses into
long-term capital losses. These rules could therefore affect the amount, timing
and character of distributions to investors
Transactions in foreign currencies, foreign currency-denominated debt
securities and certain foreign currency options, futures contracts, forward
contracts and similar instruments (to the extent permitted) may give rise to
ordinary income or loss to the extent such income or loss results from
fluctuations in the value of the foreign currency concerned.
Investments in "passive foreign investment companies" could subject the
Portfolio to U.S. federal income tax or other charge on the proceeds from the
sales of the investment in such company; however, this tax can be avoided by
making an election to mark such investment to market annually or treat the
passive foreign investment company as a "qualified electing fund".
If more than 50% of the Portfolio's assets at year end consists of the debt
and equity securities of foreign corporations, the Fund may elect to permit
shareholders to claim a credit or deduction on their income tax returns for
their pro rata portion of qualified taxes paid by the Fund to foreign countries.
If the election is made, shareholders will include in gross income from foreign
sources their pro rata share of such taxes. A shareholder's ability to claim a
foreign tax credit or deduction in respect of foreign taxes paid by the Fund may
be subject to certain limitations imposed by the Code (including a holding
period requirement applied at both the Fund and shareholder level), as a result
of which a shareholder may not get a full credit or deduction for the amount of
such taxes. Shareholders who do not itemize deductions on their federal income
tax returns may claim a credit (but no deduction) for such taxes.
A portion of distributions made by the Fund which are derived from dividends
from domestic corporations may qualify for the dividends-received deduction
("DRD") for corporations. The DRD is reduced to the extent the Fund shares with
respect to which the dividends are received are treated as debt-financed under
the Code and is eliminated if the shares are deemed to have been held for less
than a minimum period, generally 46 days. Receipt of certain distributions
qualifying for the DRD may result in reduction of the tax basis of the corporate
shareholder's shares. Distributions eligible for the DRD may give rise to or
increase an alternative minimum tax for certain corporations.
Any loss realized upon the sale or exchange of Fund shares with a tax
holding period of 6 months or less will be treated as a long-term capital loss
to the extent of any distributions treated as long-term capital gain with
respect to such shares. In addition, all or a portion of a loss realized on a
redemption or other disposition of Fund shares may be disallowed under "wash
sale" rules to the extent the shareholder acquired other shares of the same Fund
(whether through the reinvestment of distributions or otherwise) within the
period beginning 30 days before the redemption of the loss shares and ending 30
days after such date. Any disallowed loss will result in an adjustment to the
shareholder's tax basis in some or all of the other shares acquired.
Sales charges paid upon a purchase of shares subject to a front-end sales
charge cannot be taken into account for purposes of determining gain or loss on
a redemption or exchange of the shares before the 91st day after their purchase
to the extent a sales charge is reduced or eliminated in a subsequent
acquisition of shares of the Fund (or of another fund) pursuant to the
reinvestment or exchange privilege. Any disregarded amounts will result in an
adjustment to the shareholder's tax basis in some or all of any other shares
acquired.
Dividends and distributions on the Fund's shares are generally subject to
federal income tax as described herein to the extent they do not exceed the
Fund's realized income and gains, even though such dividends and distributions
may economically represent a return of a particular shareholder's investment.
Such distributions are likely to occur in respect of shares purchased at a time
when the Fund's net asset value reflects gains that are either unrealized, or
realized but not distributed. Such realized gains may be required to be
distributed even when the Fund's net asset value also reflects unrealized
losses. Certain distributions declared in October, November or December and paid
in the following January will be taxed to shareholders as if received on
December 31 of the year in which they were declared.
Amounts paid by the Fund to individuals and certain other shareholders who
have not provided the Fund with their correct taxpayer identification number
("TIN") and certain certifications required by the Internal Revenue Service (the
"IRS") as well as shareholders with respect to whom the Fund has received
certain information from the IRS or a broker, may be subject to "backup"
withholding of federal income tax arising from the Fund's taxable dividends and
other distributions as well as the proceeds of redemption transactions
(including repurchases and exchanges), at a rate of 3 1 An individual's TIN is
generally his or her social security number.
The foregoing discussion does not address the special tax rules applicable
to certain classes of investors, such as IRAs and other retirement plans,
tax-exempt entities, foreign investors, insurance companies and financial
institutions. Shareholders should consult their own tax advisers with respect to
special tax rules that may apply in their particular situations, as well as the
state, local, and, where applicable, foreign tax consequences of investing in
the Fund.
PORTFOLIO SECURITY TRANSACTIONS
Decisions concerning the execution of portfolio security transactions by the
Portfolio, including the selection of the market and the broker-dealer firm, are
made by the Adviser.
The Adviser places the portfolio security transactions of the Portfolio and
of certain other accounts managed by the Adviser for execution with many firms.
The Adviser uses its best efforts to obtain execution of portfolio transactions
at prices which are advantageous to the Portfolio and (when a disclosed
commission is being charged) at reasonably competitive commission rates. In
seeking such execution, the Adviser will use its best judgment in evaluating the
terms of a transaction, and will give consideration to various relevant factors,
including without limitation the size and type of the transaction, the general
execution and operational capabilities of the broker-dealer, the nature and
character of the market for the security, the confidentiality, speed and
certainty of effective execution required for the transaction, the reputation,
reliability, experience and financial condition of the broker-dealer, the value
and quality of services rendered by the broker-dealer in other transactions, and
the reasonableness of the commission or spread, if any. Transactions on stock
exchanges and other agency transactions involve the payment by the Portfolio of
negotiated brokerage commissions. Such commissions vary among different
broker-dealer firms, and a particular broker-dealer may charge different
commissions according to such factors as the difficulty and size of the
transaction and the volume of business done with such broker-dealer.
Transactions in foreign securities usually involve the payment of fixed
brokerage commissions, which are generally higher than those in the United
States. There is generally no stated commission in the case of securities traded
in the over-the-counter markets, but the price paid or received by the Portfolio
usually includes an undisclosed dealer markup or markdown. In an underwritten
offering the price paid by the Portfolio includes a disclosed fixed commission
or discount retained by the underwriter or dealer. Although commissions paid on
portfolio transactions will, in the judgment of the Adviser, be reasonable in
relation to the value of the services provided, commissions exceeding those
which another firm might charge may be paid to broker-dealers who were selected
to execute transactions on behalf of the Portfolio and the Adviser's other
clients in part for providing brokerage and research services to the Adviser.
As authorized in Section 28(e) of the Securities Exchange Act of 1934, a
broker or dealer who executes a portfolio transaction on behalf of the Portfolio
may receive a commission which is in excess of the amount of commission another
broker or dealer would have charged for effecting that transaction if the
Adviser determines in good faith that such compensation was reasonable in
relation to the value of the brokerage and research services provided. This
determination may be made on the basis of either that particular transaction or
on the basis of the overall responsibilities which the Adviser and its
affiliates have for accounts over which they exercise investment discretion. In
making any such determination, the Adviser will not attempt to place a specific
dollar value on the brokerage and research services provided or to determine
what portion of the commission should be related to such services. Brokerage and
research services may include advice as to the value of securities, the
advisability of investing in, purchasing, or selling securities, and the
availability of securities or purchasers or sellers of securities; furnishing
analyses and reports concerning issuers, industries, securities, economic
factors and trends, portfolio strategy and the performance of accounts; and
effecting securities transactions and performing functions incidental thereto
(such as clearance and settlement); and the "Research Services" referred to in
the next paragraph.
It is a common practice in the investment advisory industry for the advisers
of investment companies, institutions and other investors to receive research,
statistical and quotation services, data, information and other services,
products and materials which assist such advisers in the performance of their
investment responsibilities ("Research Services") from broker-dealers which
execute portfolio transactions for the clients of such advisers and from third
parties with which such broker-dealers have arrangements. Consistent with this
practice, the Adviser may receive Research Services from broker-dealer firms
with which the Adviser places the portfolio transactions of the Portfolio and
from third parties with which these broker-dealers have arrangements. These
Research Services may include such matters as general economic and market
reviews, industry and company reviews, evaluations of securities and portfolio
strategies and transactions and recommendations as to the purchase and sale of
securities and other portfolio transactions, financial, industry and trade
publications, news and information services, pricing and quotation equipment and
services, and research oriented computer hardware, software, data bases and
services. Any particular Research Service obtained through a broker-dealer may
be used by the Adviser in connection with client accounts other than those
accounts which pay commissions to such broker-dealer. Any such Research Service
may be broadly useful and of value to the Adviser in rendering investment
advisory services to all or a significant portion of its clients, or may be
relevant and useful for the management of only one client's account or of a few
clients' accounts, or may be useful for the management of merely a segment of
certain clients' accounts, regardless of whether any such account or accounts
paid commissions to the broker-dealer through which such Research Service was
obtained. The advisory fee paid by the Portfolio is not reduced because the
Adviser receives such Research Services. The Adviser evaluates the nature and
quality of the various Research Services obtained through broker-dealer firms
and attempts to allocate sufficient commissions to such firms to ensure the
continued receipt of Research Services which the Adviser believes are useful or
of value to it in rendering investment advisory services to its clients.
Subject to the requirement that the Adviser shall use its best efforts to
seek to execute portfolio security transactions of the Portfolio at advantageous
prices and at reasonably competitive commission rates or spreads, the Adviser is
authorized to consider as a factor in the selection of any broker-dealer firm
with whom Portfolio orders may be placed the fact that such firm has sold or is
selling shares of the Fund or of other investment companies sponsored by Eaton
Vance. This policy is not inconsistent with a rule of the NASD, which rule
provides that no firm which is a member of the NASD shall favor or disfavor the
distribution of shares of any particular investment company or group of
investment companies on the basis of brokerage commissions received or expected
by such firm from any source.
Securities considered as investments for the Portfolio may also be
appropriate for other investment accounts managed by the Adviser or its
affiliates. Whenever decisions are made to buy or sell securities by the
Portfolio and one or more of such other accounts simultaneously, the Adviser
will allocate the security transactions (including "hot" issues) in a manner
which it believes to be equitable under the circumstances. As a result of such
allocations, there may be instances where the Portfolio will not participate in
a transaction that is allocated among other accounts. If an aggregated order
cannot be filled completely, allocations will generally be made on a pro rata
basis. An order may not be allocated on a pro rata basis where, for example: (i)
consideration is given to portfolio managers who have been instrumental in
developing or negotiating a particular investment; (ii) consideration is given
to an account with specialized investment policies that coincide with the
particulars of a specific investment; (iii) pro rata allocation would result in
odd-lot or de minimis amounts being allocated to a portfolio or other client; or
(iv) where the Adviser reasonably determines that departure from a pro rata
allocation is advisable. While these aggregation and allocation policies could
have a detrimental effect on the price or amount of the securities available to
the Portfolio from time to time, it is the opinion of the Trustees of the Trust
and the Portfolio that the benefits from the Adviser's organization outweigh any
disadvantage that may arise from exposure to simultaneous transactions.
For the fiscal years ended August 31, 2000,1999 and 1998, the Portfolio paid
brokerage commissions of $501,956, $563,163 and $1,005,499, respectively, with
respect to portfolio transactions. Of this amount, approximately $246,324,
$169,025 and $555,173 was paid in respect of portfolio security transactions
aggregating approximately $161,671,584, $173,073,398 and $224,737,604,
respectively, to firms which provided some Research Services to the Adviser's
organization (although many such firms may have been selected in any particular
transaction primarily because of their execution capabilities).
FINANCIAL STATEMENTS
The audited financial statements of and the independent auditors' report for
the Fund and the Portfolio appear in the Fund's most recent annual report to
shareholders and are incorporated by reference into this SAI. A copy of the
Fund's most recent annual report accompanies this SAI.
HOUSEHOLDING. Consistent with applicable law, duplicate mailings of shareholder
reports and certain other Fund information to shareholders residing at the same
address may be eliminated.
Registrant incorporates by reference the audited financial information for
the Fund and the Portfolio for the fiscal year ended August 31, 2000, as
previously filed electronically with the SEC (Accession No.
0000912057-00-045980).
<PAGE>
APPENDIX A
CLASS A FEES, PERFORMANCE AND OWNERSHIP
DISTRIBUTION AND SERVICE FEES
During the fiscal year ended August 31, 2000, Class A paid distribution fees
under the Plan to the prinicpal underwriter aggregating $197,025. During the
fiscal year ended August 31, 2000, Class A made service fee payments to the
principal underwriter and investment dealers aggregating $164,041, of which
$152,568 was paid to investment dealers and the balance of which was retained by
the principal underwriter.
PRINCIPAL UNDERWRITER
The total sales charges paid in connection with sales of Class A shares
during the fiscal years ended August 31, 2000, 1999 and 1998, were $156,097,
$62,370 and $345,848, respectively, of which $9,578, $8,434 and $47,702,
respectively, was received by the principal Underwriter. For the fiscal years
ended August 31, 2000, 1999 and 1998, investment dealers received $146,519,
$53,936 and $298,146, respectively, from the total sales charges.
The Trust has authorized the principal underwriter to act as its agent in
repurchasing shares at the rate of $2.50 for each repurchase transaction handled
by the principal underwriter. For the fiscal year ended August 31, 2000, Class A
paid the principal underwriter $4,782.50 for repurchase transactions handled by
it.
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return on
a hypothetical investment of $1,000 in a predecessor fund reorganized September
1, 1997 into Class A shares for the periods shown in the table. The "Value of
Initial Investment" reflects the deduction of the maximum sales charge of 5.75%.
Past performance is no guarantee of future results. Investment return and
principal value will fluctuate; shares, when redeemed, may be worth more or less
than their original cost.
<TABLE>
VALUE OF $1,000 INVESTMENT
<CAPTION>
TOTAL RETURN TOTAL RETURN
EXCLUDING MAXIMUM INCLUDING MAXIMUM
VALUE OF VALUE OF SALES CHARGE SALES CHARGE
INVESTMENT INVESTMENT INITIAL INVESTMENT ------------------------------ ------------------------------
PERIOD DATE INVESTMENT ON 8/31/00 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
------ ------ ------- ------ -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of the Fund* 10/28/92 $942.51 $1,493.41 58.45% 6.05% 49.34% 5.25%
5 Years Ended
8/31/00 8/31/95 $942.38 $1,039.37 10.29% 1.98% 3.94% 0.78%
1 Year Ended
8/31/00 8/31/99 $942.15 $1,172.73 24.47% 24.47% 17.27% 17.27%
* Investment operations began on October 28, 1992.
</TABLE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of December 1, 2000, the Trustees and officers of the Trust, as a group,
owned in the aggregate less than 1% of the outstanding Class A shares of the
Fund. As of December 1, 2000, Merrill Lynch, Pierce, Fenner & Smith, Inc.,
Jacksonville, FL was the record owner of approximately 20.3% of the outstanding
Class A shares, which it held on behalf of its customers who are the beneficial
owners of such shares, and as to which they had voting power under certain
limited circumstances. To the knowledge of the Trust, no other person owned of
record or beneficially 5% or more of the Fund's outstanding Class A shares as of
such date.
<PAGE>
APPENDIX B
CLASS B FEES, PERFORMANCE AND OWNERSHIP
DISTRIBUTION AND SERVICE FEES
During the fiscal year ended August 31, 2000, the principal underwriter paid
to investment dealers sales commissions of $111,923 on sales of Class B shares.
During the same period, the Fund made distribution payments to the Principal
Underwriter under the Distribution Plan aggregating $748,513 and the principal
underwriter received approximately $167,000 in CDSCs imposed on early redeeming
shareholders. These distribution payments and CDSC payments reduced uncovered
distribution charges under the Plan. As at August 31, 2000, the outstanding
uncovered distribution charges of the principal underwriter calculated under the
Plan amounted to approximately $2,822,000 (which amount was equivalent to
approximately 3.1% of the net assets attributable to Class B on such day).
During the fiscal year ended August 31, 2000, Class B made service fee payments
to the principal underwriter and investment dealers aggregating $240,357, of
which $232,887 was paid to investment dealers and the balance of which was
retained by the principal underwriter.
PRINCIPAL UNDERWRITER
The Trust has authorized the principal underwriter to act as its agent in
repurchasing shares at the rate of $2.50 for each repurchase transaction handled
by the principal underwriter. For the fiscal year ended August 31, 2000, Class B
paid the principal underwriter $6,855 for repurchase transactions handled by it.
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return
on a hypothetical investment of $1,000 in Class B shares for the periods shown
in the table. The total return for Class B prior to June 7, 1993 reflects the
total return of another investment company that invested in the Portfolio
adjusted to reflect the Class B sales charge. This total return has not been
adjusted to reflect certain other expenses (such as distribution and/or
service fees). If such adjustments were made, the performance would be lower.
Past performance is no guarantee of future results. Investment return and
principal vaue will fluctuate; shares, when redeemed, may be worth more or
less than their original cost.
<TABLE>
VALUE OF A $1,000 INVESTMENT
<CAPTION>
VALUE OF VALUE OF
INVESTMENT INVESTMENT
BEFORE AFTER TOTAL RETURN BEFORE TOTAL RETURN AFTER
DEDUCTING THE DEDUCTING THE DEDUCTING THE CDSC DEDUCTING THE CDSC
INVESTMENT INVESTMENT AMOUNT OF CDSC CDSC -------------------------- -------------------------
PERIOD DATE INVESTMENT ON 8/31/00 ON 8/31/00 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
------ ---- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of the
Fund* 10/28/92 $1,000 $1,546.22 $1,546.22 54.62% 5.72% 54.62% 5.72%
5 Years
Ended
8/31/00 8/31/95 $1,000 $1,073.83 $1,053.83 7.38% 1.43% 5.38% 1.05%
1 Year Ended
8/31/00 8/31/99 $1,000 $1,238.79 $1,188.79 23.88% 23.88% 18.88% 18.88%
* Predecessor Fund commenced operations December 28, 1993.
</TABLE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As at December 1, 2000, the Trustees and officers of the Trust, as a group,
owned in the aggregate less than 1% of the outstanding Class B shares of the
Fund. As of December 1, 2000, Merrill Lynch, Pierce, Fenner & Smith, Inc.,
Jacksonville, FL was the record owner of approximately 21.6% of the outstanding
Class B shares, which it held on behalf of its customers who are the beneficial
owners of such shares, and as to which they had voting power under certain
limited circumstances. To the knowledge of the Trust, no other person owned of
record or beneficially 5% or more of the Fund's outstanding Class B shares as of
such date.
<PAGE>
APPENDIX C
CLASS C FEES, PERFORMANCE AND OWNERSHIP
DISTRIBUTION AND SERVICE FEES
During the fiscal year ended August 31, 2000, the principal underwriter paid
to investment dealers sales commissions of $70,242 on sales of Class C shares.
During the same period, the Fund made distribution payments to the principal
underwriter under the Distribution Plan aggregating $62,643 and the principal
underwriter received approximately $13,000 in CDSCs imposed on early redeeming
shareholders. These distribution payments and CDSC payments reduced uncovered
distribution charges under the Plan. As at August 31, 2000, the outstanding
uncovered distribution charges of the principal underwriter calculated under the
Plan amounted to approximately $4,953,000 (which amount was equivalent to
approximately 55.9% of the net assets attributable to Class C on such day).
During the fiscal year ended August 31, 2000, Class C made service fee payments
to the principal underwriter and investment dealers aggregating $20,881 of which
$16,835 was paid to investment dealers and the balance of which was retained by
the principal underwriter.
PRINCIPAL UNDERWRITER
The Trust has authorized the principal underwriter to act as its agent in
repurchasing shares at the rate of $2.50 for each repurchase transaction handled
by the principal underwriter. For the fiscal year ended August 31, 2000, Class C
paid the principal underwriter $677.50 for repurchase transactions handled by
it.
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return on
a hypothetical investment of $1,000 in Class C shares for the periods shown in
the table. Total return for Class C prior to December 28, 1993 reflects the
total return of another investment company that invested in the Portfolio
adjusted to reflect the Class C sales charge. This total return has not been
adjusted to reflect certain other expenses (such as distribution and/or service
fees). If such adjustments were made, performance would be lower. Past
performance is no guarantee of future results. Investment return and principal
value will fluctuate; shares, when redeemed, may be worth more or less than
their original cost.
<TABLE>
VALUE OF A $1,000 INVESTMENT
<CAPTION>
VALUE OF VALUE OF
INVEST- INVEST-
MENT BEFORE DE- MENT AFTER DE- TOTAL RETURN BEFORE TOTAL RETURN AFTER
DUCTING THE DUCTING THE DEDUCTING THE CDSC DEDUCTING THE CDSC
INVESTMENT INVESTMENT AMOUNT OF CDSC CDSC -------------------------- --------------------------
PERIOD DATE INVESTMENT ON 8/31/00 ON 8/31/00 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
-------------- ------------ ----------- --------------- --------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of
the Fund* 10/28/92 $1,000 $1,511.71 $1,511.71 51.17% 5.41% 51.17% 5.41%
5 Years
Ended
8/31/00 8/31/95 $1,000 $1,064.04 $1,064.04 6.40% 1.25% 6.40% 1.25%
1 Year
Ended
8/31/00 8/31/99 $1,000 $1,237.82 $1,227.82 23.78% 23.78% 22.78% 22.78%
* Predecessor Fund commenced operations June 7, 1993.
</TABLE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As at December 1, 2000, the Trustees and officers of the Trust, as a group,
owned in the aggregate less than 1% of the outstanding Class C shares of the
Fund. As at December 1, 2000, Merrill Lynch, Pierce, Fenner & Smith,
Jacksonville, FL, and City of Pasadena Employees Deferred Compensation Plan c/ o
NPC of Delaware, Newport, DE and PaineWebber fbo Inversiones Lograno
PaineWebber, Coral Gables, FL were the record owners of approximately 20.1%,
6.4% and 5.5%, respectively, of the outstanding Class C shares which are held on
behalf of their customers who are the beneficial owners of such shares, and as
to which they have voting power under certain limited circumstances. To the
knowledge of the Trust, no other person owned of record or beneficially 5% or
more of the Fund's outstanding Class C shares as of such date.
<PAGE>
APPENDIX D
CHINA REGION COUNTRIES
The information set forth in this Appendix has been extracted from various
government and private publications. The Trust's Board of Trustees make no
representation as to the accuracy of the information, nor has the Board of
Trustees attempted to verify it. Moreover, the information is as of the date of
this SAI (or such other date as set forth below). This information is expected
to change substantially during the period in which this SAI is in use. No
representation is made that any correlation will exist between the economies or
stock markets of China region countries and the Fund's performance.
PEOPLE'S REPUBLIC OF CHINA
China is the world's third largest country occupying a region of 9.6 million
square kilometers.China is the world's most populous nation, consisting of more
than one-fifth of the human race. The estimated population is approximately 1.2
billion.
In 1949, the Communist Party established the People's Republic of China. The
Communist government engaged in numerous campaigns to industrialize the country
with various programs. The failure of the Communist Party to achieve substantive
economic growth eventually led to the ascendancy of reformers headed by Deng
Xiaoping. In the late 1970's, the Chinese government, which had remained
isolated from the world, opened its doors by encouraging foreign investment and
expertise inside its borders.
In 1989, a growing dissatisfaction with the corruption in the Communist
government led to anti-government student protests culminating in what is known
as the Tiananmen Square incident. The government's use of the military to
suppress a peaceful demonstration resulted in world-wide criticism. However,
recent developments in China have been encouraging. The death of Deng Xiaoping
did not trigger any social unrest and restructuring of state-owned enterprises
had been the main theme of the 15th Party Congress held in 1997. Leadership
under Jiang Zemin remains committed to the implementation of economic reforms.
Investment in China still entails significant political risk of nationalization
or expropriation. China's imminent admission to the WTO will accelerate the
reform process and reduce investment risks.
Since 1992, China has achieved annual growth in real gross domestic product
(GDP) averaging in excess of 10%. The economy in China consists of three
sectors: state, cooperative, and private. The state sector, though decreasing in
weighting, continues to constitute the bulk of the economy. In recent years,
however, the economy has been significantly restructured through the abolition
of the commune system in rural areas and the relaxing of government authority in
the day to day operations in both agricultural and industrial enterprises. As
the government assumes more of a regulatory and supervisory role and less of a
direct management role, market forces have been allowed to operate. This has
resulted in increased productivity and rising incomes.
In 1990, industry accounted for 45.8% of China's National Income. In the
first three decades under Communist rule, China placed great emphasis on heavy
industry. Since the reform program began in 1978, a much greater emphasis has
been placed on light industry. Considerable industrial growth has come from
industrial enterprises in rural townships which are engaged in the processing
and assembly of consumer goods. These operations are concentrated in southern
China, where a major light industrial base has developed. Industrial output has
grown rapidly and is increasingly important to the Chinese economy. China's
current industrial policy also places emphasis on high-technology industries
supported by foreign technology, such as micro-electronics and
telecommunications. However, many enterprises have a huge staff burden which
must be relieved to increase the competitiveness of the enterprises. To avoid
social unrest caused by the increase in unemployment rate, there is so far no
easy solution.
Inflation, which was a problem in early 1990s, has been under control.
Inflation rate rocketed to 24% in 1994 and then dropped to 8.3% in 1996 and 2.8%
by 1997. The control achieved over inflation is the result of austerity measures
implemented by the government during 1994, 1995 and early 1996. The impact of
these austerity measures was exacerbated by the Asian financial crisis of 1997
and 1998, and the inherent structural imbalances in the Chinese economy, caused
China to enter a sustained period of deflation. In response, the Chinese
government has implemented a series of fiscal and monetary stimulus packages
aimed at boosting domestic demand.
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 the first ten months of 2000, China's
foreign trade yielded a surplus of U.S. $23.1 billion. Hong Kong is one of the
leading destination for Chinese exports, accounting for over 20% of total export
volume. Hong Kong is also a major re-export center for Chinese goods. Other
large export markets for China include Japan, the United States, and Germany.
Over the past few years, China's imports have continued to expand and diversify.
Japan, the United States and Korea are China's top three suppliers. Other major
suppliers include Hong Kong and Germany.
China has traditionally adopted a policy of self-reliance when financing
development. The country has remained a conservative borrower but, since the
early 1980s, has been making greater use of foreign capital and financing,
including government-assisted facilities and project and trade financing. Total
foreign debt as at first half of 2000 was estimated at U.S. $147.6 billion while
foreign exchange reserve was at U.S. $64.6 billion. The primary sources of
foreign capital for China include: International Monetary Fund and World Bank
loans and credits; government low interest loans and credits; and commercial
loans and credits.
There is centralized control and unified management of foreign exchange in
China. The renminbi has been devalued progressively in the past decade,
depreciating by almost 70% against the U.S. dollar between 1981 and 1990.
However, it has been stabilized at the 1994 level for the past 5 years.
There currently are two officially recognized exchanges in China, the
Shanghai Securities Exchange ("SHSE"), which commenced trading on December 19,
1990, and the Shenzhen Stock Exchange ("SZSE"), which commenced trading on July
3, 1991. "B" shares are offered exclusively for investment by foreign investors,
and their total market capitalization in November 2000 was at $6.7 billion. A
number of organized securities markets exist in other cities in China, but these
are primarily over-the-counter markets. At the local level, however, many cities
and provinces have promulgated securities rules and regulations. In fact, it is
becoming common for state-owned enterprises to go for an overseas listing, for
example by a listing of H Shares in Hong Kong, or through Red Chips securities
in The Stock Exchange of Hong Kong.
HONG KONG
As a trade entrepot and finance center, Hong Kong's viability has been
inexorably linked to mainland China since the establishment of the Colony in
1841. Hong Kong remains China's largest trade partner and its leading foreign
investor. In the first ten months of 2000, imports from China amounted to $76.3
billion, exports and re-exports to $109.5 billion. In recent years large numbers
of Hong Kong based companies have set up factories in Southern China in the
province of Guangdong, where it is estimated that Hong Kong companies employ
over 3 million workers. There also has been considerable growth in Chinese
investment in Hong Kong over the last decade and particularly in the last five
years. In contrast to Japanese investment, Chinese investment in Hong Kong
typically involves the purchase of stakes in existing companies. This has
traditionally been in the banking and import/export sectors. Recently,
investment in telecommunication projects has increased. In view of the growing
economic interaction between Hong Kong and Southern China, it is increasingly
meaningful to consider the concept of a Greater Hong Kong economy consisting of
Hong Kong and Guangdong Province, with a combined population of over 78 million.
To sustain the growth of the Guangdong economy, the Hong Kong government in 1989
unveiled PADS, the Port and Airport Development Strategy. The project, which
cost in excess of $21 billion, was designed to allow Hong Kong's cargo handling
capacity to increase by four times between 1988 and 2011 and its air traffic
handling capacity to increase from 15 million passengers in 1988 to 50 million
in 2011.
In the past, political considerations have hindered closer economic
integration between Hong Kong and China. It was largely in response to the
United Nations embargo on trade with China in the 1950s and 1960s that Hong Kong
developed a significant manufacturing base. In the last several years, however,
there has been an improvement in relations. The Basic Law, the outline for Hong
Kong's government post reunification with China in 1997, calls for Hong Kong's
capitalist system to remain intact for an additional fifty years after 1997.
This integration process directly affects the value of Hong Kong investments.
In the last two decades there has been a structural change in Hong Kong's
economy, with growth in the services sector outpacing manufacturing growth. With
more and more labor intensive manufacturing relocating to Southern China, Hong
Kong has developed its services sector, which in 1999 contributed over 85% of
GDP.
The Stock Exchange of Hong Kong Ltd. ("HKSE"), commenced trading on April 2,
1986. The HKSE, with a total market capitalization as of November, 2000 of
approximately U.S. $573 billion, is now the second largest stock market in Asia,
measured by market capitalization, behind only that of Japan. As of that date,
780 companies and 1,305 securities were listed on the Hong Kong Stock Exchange.
There are no regulations governing foreign investment in Hong Kong. There
are no exchange control regulations and investors have total flexibility in the
movement of capital and the repatriation of profits. Funds invested in Hong Kong
can be repatriated at will; dividends and interest are freely remittable.
TAIWAN
The basic geopolitical fact about Taiwan is that it sits under the shadow of
mainland China and under the threat of reunification, whether peaceful or by
military means. Taiwan is dependent on its close relationship with the United
States and its very successful diplomacy and public relations campaign which,
ever since Madame Chiang Kai-Shek's days in the 1940s has sustained a high level
of sympathy in Washington for the Nationalist regime. Taiwan also has close
relations with Israel, with whom it has had military as well as trade links.
Taiwan remains a free capitalist enclave with some very successful
entrepreneurial and export-oriented companies. The government's role in the
economy is relatively small.
Nevertheless, economic integration between the Chinese communities of China
and Taiwan has increased in recent years. China has low labor costs, inexpensive
land, natural resources and less rigid environmental rules. Taiwan has capital,
technology and trained entrepreneurs. Over 20 percent of Taiwan's trade is with
mainland China and the total investment from Taiwan to China has exceeded U.S.
$20 billion since 1990. A shortage of skilled labour, the high cost of labour
and the relatively strong New Taiwan dollar, has impelled many Taiwanese
businesspeople to shift their production to Thailand, the Philippines, and
Malaysia as well as China. Taiwan has over U.S. $111 billion of foreign exchange
reserves.
Between 1960 and 1997, Taiwan's GNP grew from less than $2 billion to over
$280 billion. The economic growth has been accompanied by a transformation of
domestic production from labor intensive to capital intensive industries in the
1970s and finally to higher technology industries in the 1980s. The Taiwan Stock
Exchange Corp. is viewed as a highly priced and highly volatile securities
market.
Taiwan has a very Chinese culture and way of life which can affect the
commercial systems. For example, business deals very often depend on the
personal contact and mutual trust between the two parties involved.
KOREA
Political volatility has characterized the history of South Korea (referred
to as Korea throughout this section) during the past forty years, while at the
same time an extraordinary economic boom has occurred. Rigid discipline has been
characteristic of the military government under President Park during the 1960s
and 1970s, which were the most successful decades in economic terms particularly
in the growth of Korea's exports and in the per capita income. It is important
to remember how completely the cities and transport system of the southern part
of the Korean peninsula had been destroyed in the civil war of the 1950s. The
effort of reconstruction was, therefore, enormous. Living standards in the 1960s
were extremely low. The threat from North Korea has exerted a continuous
military pressure on the South in the past forty years which is probably unique
to any country in the world, even including West Germany or Taiwan. Seoul is
only 30 kilometers from the demilitarized zone and, therefore, lives in a
continuous state of tension and fear of an imminent invasion. This very real
threat is also translated into a very high percentage of military spending in
the national budget. If Korea is compared with Japan, the Koreans have had to
spend ten times more of their national income on defense than the Japanese.
However, the recent historic meeting between the two presidents of North and
South Korea have helped reduce tension to a large extent. Though tentative, this
first step is a significant move towards a possible reunification which could
take over a decade to accomplish.
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. The Korea Won and stocks fell sharply in 1997 and early 1998.
These economic difficulties forced Korea to accept International Monetary Fund's
rescue package which came in with measures intended to put the economy in better
order. As a result, drastic reforms have been introduced into Korea's business
practices.
Since January 1998, a dramatic economic recovery has taken place principally
driven by the cyclical recovery in the semiconductor, steel and automobile
industries. Sovereign debt and many top tier corporates have recovered to
investment grade status with bond yields on 10 year treasuries falling from more
than 1000 basis points over U.S. treasuries to less than a 200 basis point
spread. Significant restructuring has taken place with the closure or
nationalization of major banks and subsequent distressed asset sales by the
Korea Asset Management Corporation. While the pace of large-scale corporate
restructuring has begun to slow in the latter half of 1999, exciting growth and
diversification is likely to continue in the technology and Internet-related
fields.
Korea has posted a spectacular economic recovery in Year 2000 though the
risk of a slowing US economy could cause problems to resurface.
THAILAND
Thailand is unique in South East Asia in that it has escaped the colonial
experience and maintained its freedom and independence. The monarchy plays a key
role in maintaining the country's political stability and independence.
Nevertheless, since the absolute monarchy was ended in 1932 there have been
twenty-one coup d'etats, of which twelve have been successful. Thailand in the
1990s may remain democratic but the King and the army will continue to play a
role.
Thailand has a free and independent peasant population which has, on the
whole, enjoyed a higher standard of living than their neighbours and, therefore,
the communist movement has never made much headway among the rural people. On
the other hand again, Thailand's extraordinary economic growth in the 1980s
(averaging 10 percent per annum) has put great strains not only on the urban
environment because of traffic jams and pollution, but also on the social and
family system. Many rural families have been forced to send their teenage
children to the cities to find employment. The contrast of living standards
between Bangkok and the north east provinces (an estimated per capital income
would be perhaps U.S. $2,000 per annum for the former and less than U.S. $500
per annum for the latter) must eventually create social tensions and potential
unrest. Buddhism must also be counted as a major factor of political stability.
Thailand's economy has been among the fastest growing in the world during
the past decade. The take-off really began in 1986-7 with the flood of new
foreign investment into the country, largely from Japan and Taiwan. There has
been a large shift away from agriculture towards manufacturing. As recently as
1980, 50 percent of Thailand's exports consisted of rice and tapioca and other
agricultural products. By 1990, 75 percent of the total volume of exports were
manufactured goods, mainly from the newly established assembly plants in Bangkok
and the south. This has resulted in large changes in employment and moves of
populations.
It is surprising, considering the very high rate of economic growth that the
economy has experienced, that prices, as measured by the consumer price index,
have been kept under control. The last serious bout of inflation in Thailand
occurred during the two oil crises, first in 1973-4 when the CPI touched 24
percent and then again in 1980-1 when there was a resurgence of inflation to
nearly 20 percent. In the later 1980s, and thanks largely to a more stable oil
price, inflation has been held in single digits and has not exceeded 7 percent.
The boom in early 1990s has resulted in over-valued currency, real estates and
problems in the banking sector. These have finally hurt the economy of Thailand
in 1997 and as a result International Monetary Fund's rescue have been
requested. The economic contraction in 1998 was severe but was generally viewed
as a healthy one.
The boom since the early 1990s has resulted in huge imbalances in the
country's balance of payments position and has significantly strained its
nascent banking system. These pressures finally exploded in July 1997 which led
to the devalution of the THB. Help from the International Monetary Fund was
sought and arrived in the form of a U.S. $17.2 billion aid package. The economic
contraction in 1998 was severe with more than 1 million Thais pushed below the
poverty line. Had it not been for the strong performance of its agriculture
sector, which employs more than 50% of the country's labour force and is home to
50% of its population, its overlly social stability might have been threatened.
From an enviable surplus position for more than a decade, the Government was
thrown into a realm of fiscal deficits. As for its financial sector, the ability
of the Thai authorities to directly intervene and resuscitate its banking system
has been limited due to its relatively democratic political structure compared
to its neighbours.
MALAYSIA
The central dilemma in assessing Malaysia's political risk is the question
of who will succeed the Prime Minister Dr. Mahathir. Since the 1969 anti-Chinese
riots in Kuala Lumpur the country has been unruffled by any serious inter-racial
violence and during this period a great deal has been accomplished in
transforming the economy and in transferring the wealth of the country from
foreign and Chinese hands into the hands of the bumiputra (or the sons of the
soil), which is the dominant Malay majority. The success of this New Economic
Policy is unquestioned and has given a great deal of legitimacy to the continued
run of the United Malay National Organisation (UMNO) under its successive prime
ministers and most recently under Dr. Mahathir Mohammed who has now held power
for more than a decade. This economic success has also done much to defuse the
threat from the Islamic fundamentalists who have tended to get co-opted into the
ruling party. The Chinese community has also done well in economic terms
although the political disunity in the Malay Chinese Association (MCA) has left
them somewhat leaderless in the political sphere.
United Malay National Organization (UMNO) the ruling party retained its
significant majority in the recent elections. Though Dr. Mahatir was popular,
his majority was lower than last time. The only difference was that PAS, a
Muslim party won over one more state.
Malaysia has a kingship which is shared on a five-year revolving basis among
the sultans of the various states of the federation. Malaysia's relations with
its neighbours are good. Singapore, remains the largest investor in the country.
Malaysia, like Singapore, has experienced high growth with low inflation except
during the recessions. Since 1987 Malaysia has, however, returned to the path of
high growth and low inflation. The change in recent years has also been
accompanied by an accelerated shift into manufacturing and away from the old
dependence on the plantation sector. This manufacturing growth has been led by
investment from Japan and Taiwan and notable national projects such as the
Proton car. Malaysia is attempting to move up market into the new product areas
such as electronics, car assembly and consumer goods. It has a literate and
trainable workforce.
As manufactured goods assume a larger importance in the composition of
exports compared with crude oil, rubber and palm oil, Malaysia's trade position
should gradually become steadier. For an investor, Malaysia remains vulnerable
to external shocks either in terms of commodity prices or in a fall in export
demand in its principal markets. As with other Asian markets, currency and the
stock market were severely attacked in late 1997 and 1998. This led to the
imposition of capital controls in September 1998, which have been relaxed from
February 1999 onwards.
SINGAPORE
"The silent success", in the words of a Singapore government minister, of
this region is based on a high literacy rate and a well-educated and trainable
workforce. The investment in human capital has proven to be more important to a
lasting economic growth success story than the availability of finance or
technology. Singapore is the de facto financial centre of the Association of
South East Asian Nations (ASEAN) region. Singapore is a small Chinese island
surrounded by a sea of Muslims. Singapore is aiming its investment at Johore in
Malaysia and Batam Island in Indonesia. This is the so-called growth triangle.
One aspect of political risk is the handover of political power from one
generation to another. Although Lee Kwan Yew stepped down as Prime Minister in
1990, he continues to wield a large influence and power behind the scenes. The
tight control of the media and the suppression of all political opposition or
criticism of the government, the People's Action Party or the Prime Minister
himself, has also aroused criticism both at home and internationally.
The Singapore economy has been characterized by the highest degree of
government involvement and intervention outside of the socialist world.
Nevertheless, the growth rate has been quite impressive, averaging around 7
percent, except during the recessions, and even more impressive has been the
tight control of inflation which has remained extremely low at below 3 percent
for the past decade. Being a small island state it is very sensitive to
developments in its two main neighbours, Indonesia and Malaysia, with their
large commodity-based economies. Singapore's foreign reserves held by the
Monetary Authority of Singapore (MAS) and the Government Investment Corporation
of Singapore (GICS) are estimated to be in around of U.S. $78 billion.
INDONESIA
Up to early 1998, there were only two rulers of Indonesia since independence
was gained from the Dutch in 1948 -- Sukarno and Suharto. However, independence
and the 1965 revolution were unusually violent episodes in the life of any
country. The stability which Indonesia has enjoyed during the past three decades
under Suharto should, therefore, be placed against this background. The regional
currency crisis in late 1997 was exacerbated in Indonesia in 1998. Under IMF's
insistence, fuel prices were raised significantly which lead to rioting and an
overthrow of President Suharto. An interim government under President Habibie
took some momentous decisions. To hold elections in Indonesia in a free and fair
manner which were a tremendous success. The new president Mr. Wahid leads a
coalition, but the establishment may be considered as inexperienced to run a
coalition in such a diverse country. However a referendum in East Timor led to a
very violent independence.
The huge Indonesian archipelago has a population of over 200 million.
Fundamentalism is on the rise, 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 by most accounts is less than 5 million,
or around 3% of the total, approximately 80% of the commerce and much of the
capital wealth remains in the hands of this small but tight-knit Chinese
community. The Chinese community were the main targets of riots in 1998. Since
then, there are signs of a return to normality, but confidence remains brittle.
Indonesia began the 1980s principally as an oil exporter. During the 1970s
it had a high rate of inflation but also a very rapid economic growth on the
back of the oil boom. The fall in oil prices in the early 1980s, which became
precipitate in the spring of 1986, therefore, forced a review of their
priorities. Reducing inflation, diversifying the economy away from oil and
maintaining a stable growth in the economy were selected as the main objectives.
Inflation was brought from 20%, at the beginning of the decade, to around 6% in
1989-90. However, inflation had again become a problem after the crisis.
Economic growth, having fallen to 2.5% in 1985 regained the level of 7.4% by
1990 and averaged at around 6% thereafter until 1997. Economic contraction is
however expected in the near future. The rupiah, which had undergone a 30%
once-and-for-all evaluation in the autumn of 1985, had stabilized on a "crawling
peg" system with an annual devaluation of around 5% until 1997 when it seriously
suffered in the Asian currency turmoil. The economic development of the country
very much depends on social and political stability and also the new
government's commitment to economic reforms.
THE PHILIPPINES
The question most investors raise is whether the Philippines can produce
responsible government and economic planning which would give it a business
environment approaching that of its better-governed neighbors. Many observers
dismiss this prospect out of hand citing the endemic problems of corruption and
political in-fighting. However, there is no doubt that the Philippines possesses
enormous natural advantages and it would be wrong to generalize about the whole
archipelago of 7,000 islands from the political life of Manila alone. The island
of Cebu, for example, has seen a successful economic transformation in the past
twenty years. Manufacturing investment has grown and has begun to replace
agriculture as a principal source of employment. The Philippines did not
experience the same severe economic contraction as some of its neighbours during
the Asian economic crisis of 1997-98, due to a better-capitalized banking
system and lower corporate indebtedness. However, the quality of political
governance has steadily deteriorated since 1997. Corruption in the Philippines
appears to be on the rise as former Marcos cronies have regained control over
businesses or received valuable governmental posts. While countries such as
South Korea and Thailand have focused on reform and transparency, the
Philippines currently appears to be regressing. Much will depend on what happens
after President Estrada leaves office.
<PAGE>
STATEMENT OF
ADDITIONAL INFORMATION
January 1, 2001
Eaton Vance Growth Fund
The Eaton Vance Building
255 State StreetBoston, Massachusetts 02109
1-800-225-6265
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 Page
Strategies and Risks 2 Sales Charges 12
Investment Restrictions 4 Performance 15
Management and Organization 5 Taxes 16
Investment Advisory and Administrative 8 Portfolio Securities 18
Services Transactions
Other Service Providers 9 Financial Statements 20
Purchasing and Redeeming Shares 10
Appendix A: Class A Fees, Performance and Ownership 21
Appendix B: Class B Fees, Performance and Ownership 22
Appendix C: Class C Fees, Performance and Ownership 23
This SAI is NOT a prospectus and is authorized for distribution to prospective
investors only if preceded or accompanied by the Fund's prospectus dated January
1, 2001, as supplemented from time to time, which is incorporated herein by
reference. This SAI should be read in conjunction with the prospectus, which may
be obtained by calling 1-800-225-6265.
<PAGE>
STRATEGIES AND RISKS
FOREIGN INVESTMENTS. Because foreign companies are not subject to uniform
accounting, auditing and financial reporting standards, practices and
requirements comparable to those applicable to U.S. companies, there may be less
publicly available information about a foreign company than about a domestic
company. Volume and liquidity in most foreign debt markets is less than in the
United States and securities of some foreign companies are less liquid and more
volatile than securities of comparable U.S. companies. There is generally less
government supervision and regulation of securities exchanges, broker-dealers
and listed companies than in the United States. Mail service between the United
States and foreign countries may be slower or less reliable than within the
United States, thus increasing the risk of delayed settlements of portfolio
transactions or loss of certificates for portfolio securities. Payment for
securities before delivery may be required. In addition, with respect to certain
foreign countries, there is the possibility of expropriation or confiscatory
taxation, political or social instability, or diplomatic developments which
could affect investments in those countries. Moreover, individual foreign
economies may differ favorably or unfavorably from the U.S. economy in such
respects as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency and balance of payments position.
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.
FOREIGN CURRENCY TRANSACTIONS. The value of foreign assets as measured in U.S.
dollars may be affected favorably or unfavorably by changes in foreign currency
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. Foreign currency exchange transactions may
be conducted on a spot (i.e., cash) basis at the spot rate prevailing in the
foreign currency exchange market or through entering into derivative currency
transactions.
Forward foreign currency exchange contracts are individually negotiated and
privately traded so they are dependent upon the creditworthiness of the
counterparty. Such contracts may be used when a security denominated in a
foreign currency, or when the receipt in a foreign currency of dividend or
interest payments on such a security, is purchased or sold. A forward contract
can then "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.
Additionally, when the investment adviser 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 that are 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. Short-term hedging provides a means of
fixing the dollar value of only a portion of portfolio assets.
Cross-hedging may be used 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 investment 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 exposure to foreign currency exchange rate
fluctuations. Forward contracts may also be used to shift exposure to foreign
currency exchange rate changes from one currency to another.
Currency transactions are subject to the risk of a number of complex political
and economic factors applicable to the countries issuing the underlying
currencies. Furthermore, unlike trading in most other types of instruments,
there is no systematic reporting of last sale information with respect to the
foreign currencies underlying the derivative currency transactions. As a result,
available information may not be complete. In an over-the-counter trading
environment, there are no daily price fluctuation limits. There may be no liquid
secondary market to close out options purchased or written, or forward contracts
entered into, until their exercise, expiration or maturity. There is also the
risk of default by, or the bankruptcy of, the financial institution serving as a
counterparty.
FUTURES CONTRACTS ON STOCK INDICES. The Portfolio may purchase and sell
exchange-traded futures contracts on stock indices and options thereon to hedge
against fluctuations in securities prices or as a substitute for the purchase or
sale of securities. Such transactions involve a risk of loss or depreciation due
to: unanticipated adverse changes in securities prices, interest rates, the
other financial instruments' prices or currency exchange rates; the inability to
close out a position; default by the counterparty; imperfect correlation between
a position and the desired hedge; tax constraints on closing out positions; and
portfolio management constraints on securities subject to such transactions. The
loss on such transactions (other than purchased options) may substantially
exceed the Portfolio's initial investment in these instruments. In addition, the
Portfolio may lose the entire premium paid for purchased options that expire
before they can be profitably exercised. The Portfolio incurs transaction costs
in opening and closing positions in future and options thereon. There can be no
assurance that the investment adviser's use of such instruments will be
advantageous. Entering into a derivative instrument involves a risk that the
2
<PAGE>
applicable market will move against the Portfolio's position resulting in a
loss. This loss may exceed the amount of the initial investment made or the
premium received. Derivative instruments may sometimes increase or leverage the
Portfolio's exposure to a particular market risk. The Portfolio's success in
using derivative instruments to hedge portfolio assets depends on the degree of
price correlation between the derivative instruments and the hedged asset.
Imperfect correlation may be caused by several factors, including temporary
price disparities among the trading markets for the derivative instrument, the
assets underlying the derivative instrument and the Portfolio's assets. During
periods of market volatility, a commodity exchange may suspend or limit trading
in an exchange-traded derivative instrument, which may make the contract
temporarily illiquid and difficult to price. Commodity exchanges may also
establish daily limits on the amount that the price of a futures contract or
futures can vary from the previous day's settlement price. This may prevent the
Portfolio from closing out positions and limiting its losses.
The Portfolio may enter into futures contracts (including options on futures
contracts) traded on an exchange regulated by the CFTC and on foreign exchanges
if the investment adviser determines that trading on each such foreign exchange
does not subject the Portfolio to risks, including credit and liquidity risks,
that are materially greater then the risks associated with trading on
CFTC-regulated exchanges.
To the extent that the Portfolio enters into futures contracts and options
thereon traded on an exchange regulated by the CFTC, in each case that are not
for bona fide hedging purposes (as defined by the CFTC), the aggregate initial
margin and premiums required to establish these positions (excluding the amount
by which options are "in-the-money") may not exceed 5% of the liquidation value
of the Portfolio's investments, after taking into account unrealized profits and
unrealized losses on any contracts the Portfolio has entered into.
ASSET COVERAGE. To the extent required by SEC guidelines, the Portfolio will
only engage in transactions that expose the Portfolio to an obligation to
another party if it owns either (1) an offsetting ("covered") position for the
same type of financial asset, or (2) cash or liquid securities, held in a
segregated account with its custodian, with a value sufficient at all times to
cover its potential obligations not covered as provided in (1). Assets used as
cover or held in a segregated account cannot be sold while the position(s)
requiring cover is open unless replaced with other appropriate assets. As a
result, the commitment of a large portion of assets to cover or segregated
accounts could impede portfolio management or the ability to meet redemption
requests or other current obligations.
HIGH YIELD BONDS. The Portfolio may invest up to 5% of net assets in high yield,
high risk corporate bonds (commonly referred to as "junk bonds") if the
investment adviser believes such bonds offer the potential for capital growth.
High yield bonds are considered predominantly speculative because of the credit
risk of their issuers. The Portfolio may invest in such bonds regardless of
their credit rating.
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. Repurchase agreements which mature in more than seven days
will be treated as illiquid. 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 agreement, and will be marked to market daily.
SHORT SALES. The Portfolio may sell a security short if it owns at least an
equal amount of the security sold short or another security convertible or
exchangeable for an equal amount of the security sold short without payment of
further compensation (a short sale against-the-box). In a short sale
against-the-box, the short seller is exposed to the risk of being forced to
deliver appreciated stock to close the position if the borrowed stock is called
in. These transactions may also require the current recognition of taxable gain
under certain tax rules applicable to constructive sales. The Portfolio expects
normally to close its short sales against-the-box by delivering newly-acquired
stock.
TEMPORARY INVESTMENTS. Under unusual market conditions, the Portfolio may
invest temporarily in cash or cash equivalents. Cash equivalents are highly
liquid, short-term securities such as commercial paper, certificates of deposit,
short-term notes and short-term U.S. Government obligations.
PORTFOLIO TURNOVER. The Portfolio cannot accurately predict its portfolio
turnover rate, but the annual turnover rate may 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. During the
fiscal year ended August 31, 2000, the portfolio turnover rate of the Portfolio
was 274%, an increase over the turnover rate for the fiscal year ended August
31, 1999. This increase was due in large part to the change in portfolio manager
in January, 2000 and an adjustment during the period to the industry weightings
of securities held by the Portfolio.
3
<PAGE>
INVESTMENT RESTRICTIONS
The following investment restrictions of the Fund are designated as fundamental
policies and as such cannot be changed without the approval of the holders of a
majority of the Fund's outstanding voting securities, which as used in this SAI
means the lesser of (a) 67% of the shares of the Fund present or represented by
proxy at a meeting if the holders of more than 50% of the outstanding shares are
present or represented at the meeting or (b) more than 50% of the outstanding
shares of the Fund. Accordingly, the Fund may not:
(1) With respect to 75% of its total assets, purchase the securities of
any issuer if such purchase at the time thereof would cause more than
5% of its total assets (taken at market value) to be invested in the
securities of such issuer, or purchase securities of any issuer if
such purchase at the time thereof would cause more than 10% of the
total voting securities of such issuer to be held by the Fund or
Portfolio, except obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities and except securities of
other investment companies;
(2) Borrow money or issue senior securities except as permitted by the
Investment Company Act of 1940;
(3) Purchase securities on margin (but the Fund may obtain such short-term
credits as may be necessary for the clearance of purchase and sales of
securities);
(4) Underwrite or participate in the marketing of securities of others;
(5) Make an investment in any one industry if such investment would cause
investments in such industry to equal or exceed 25% of the Fund's
total assets, at market value at the time of such investment (other
than securities issued or guaranteed by the U.S. Government or its
agencies or instrumentalities);
(6) Purchase or sell real estate, although it may purchase and sell
securities which are secured by real estate and securities of
companies which invest or deal in real estate;
(7) Purchase or sell commodities or commodity contracts for the purchase
or sale of physical commodities; or
(8) Make loans to any person except by (a) the acquisition of debt
securities and making portfolio investments (b) entering into
repurchase agreements or (c) lending portfolio securities.
Notwithstanding the investment policies and restrictions of the Fund, the Fund
may invest all of its investable assets in an open-end management investment
company with substantially the same investment objective, policies and
restrictions as the Fund.
The Portfolio has adopted substantially the same fundamental investment
restrictions as the foregoing investment restrictions adopted by the Fund; such
restrictions cannot be changed without the approval of a "majority of the
outstanding voting securities" of the Portfolio.
The following investment policies have been adopted by the Fund and Portfolio.
These policies 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 Portfolio will not:
(a) make short sales of securities or maintain a short position, unless at
all times when a short position is open (i) it owns an equal amount of
such securities or securities convertible into or exchangeable,
without payment of any further consideration, for securities of the
same issue as, and equal in amount to, the securities sold short or
(ii) it holds in a segregated account cash or other liquid securities
(to the extent required under the 1940 Act) in an amount equal to the
current market value of the securities sold short, and unless not more
than 25% of its net assets (taken at current value) is held as
collateral for such sales at any one time; or
(b) invest more than 15% of net assets in investments which are not
readily marketable, including restricted securities and repurchase
agreements maturing in more than seven days. Restricted securities for
the purposes of this limitation do not include securities eligible for
resale pursuant to Rule 144A of the Securities Act of 1933 and
commercial paper issued pursuant to Section 4(2) of said Act that the
Board of Trustees of the Trust or the Portfolio, or their delegate,
determines to be liquid. Any such determination by a delegate will be
made pursuant to procedures adopted by the Board. If the Fund or
Portfolio invests in Rule 144A securities, the level of portfolio
illiquidity may be increased to the extent that eligible buyers become
uninterested in purchasing such securities.
Whenever an investment policy or investment restriction set forth in the
prospectus or this SAI states a maximum percentage of assets that may be
invested in any security or other asset, such percentage limitation shall be
determined immediately after and as a result of the Fund's or the Portfolio's
acquisition of such security or asset. Accordingly, any later increase or
decrease resulting from a change in values, assets or other circumstances, will
not compel the Fund or the Portfolio, as the case may be, to dispose of such
4
<PAGE>
security or other asset. Notwithstanding the foregoing, the Fund and Portfolio
must always be in compliance with the limitation on investing in illiquid
securities and the borrowing policies set forth above.
MANAGEMENT AND ORGANIZATION
FUND MANAGEMENT. The Trustees of the Trust are responsible for the overall
management and supervision of the Trust's affairs. The Trustees and officers of
the Trust and the Portfolio are listed below. Except as indicated, each
individual has held the office shown or other offices in the same company for
the last five years. Unless otherwise noted, the business address of each
Trustee and officer is The Eaton Vance Building, 255 State Street, Boston,
Massachusetts 02109. Those Trustees who are "interested persons" of the Trust
and the Portfolio, as defined in the 1940 Act, are indicated by an asterisk(*).
JESSICA M. BIBLIOWICZ (41), Trustee*
President and Chief Executive Officer of National Financial Partners (a
financial services company (since April, 1999). President and Chief Operating
Officer of John A. Levin & Co. (a registered investment advisor) (July, 1997 to
April, 1999) and a Director of Baker, Fentress & Company which owns John A.
Levin & Co. (July, 1997 to April, 1999). Formerly Executive Vice President of
Smith Barney Mutual Funds (from July, 1994 to June, 1997). Elected Trustee
October 30, 1998. Trustee of various investment companies managed by Eaton Vance
or BMR since October 30, 1998.
Address: 787 Seventh Avenue, New York, New York 10019
DONALD R. DWIGHT (69), 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
JAMES B. HAWKES (59), President and Trustee*
Chairman, President and Chief Executive Officer of BMR, Eaton Vance and their
corporate parent and trustee (EVC and EV); Director of EVC and EV. Trustee and
officer of various investment companies managed by Eaton Vance or BMR.
SAMUEL L. HAYES, III (65), Trustee
Jacob H. Schiff Professor of Investment Banking Emeritus, Harvard University
Graduate School of Business Administration. Trustee of the Kobrick Investment
Trust (mutual funds). Trustee of various investment companies managed by Eaton
Vance or BMR.
Address: 345 Nahatan Road, Westwood, Massachusetts 02090
NORTON H. REAMER (65), Trustee
Chairman and Chief Operating Officer, Hellman, Jordan Management Co., Inc. (an
investment management company) (since November, 2000) and President, Jordan
Simmons Capital LLC (manager of energy related investments) (since November,
2000). President, Unicorn Corporation (an investment and financial advisory
services company) (since September, 2000). Formerly Chairman of the Board,
United Asset Management Corporation (a holding company owning institutional
investment management firms) and 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 (43), 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 (70), 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
ARIEH COLL (37), Vice President of the Portfolio
Vice President of BMR and Eaton Vance since January 10, 2000. Portfolio manager
and investment analyst for Fidelity Investments (1989-1999). Officer of various
investment companies managed by Eaton Vance or BMR.
5
<PAGE>
THOMAS E. FAUST, JR. (42), Vice President of the Trust
Executive Vice President of BMR and Eaton Vance. Officer of various investment
companies managed by Eaton Vance or BMR.
JAMES L. O'CONNOR (55), Treasurer
Vice President of BMR and Eaton Vance. Officer of various investment companies
managed by Eaton Vance or BMR.
ALAN R. DYNNER (60), Secretary
Vice President, Secretary and Chief Legal Officer of BMR, Eaton Vance and EVC.
Prior to joining Eaton Vance on November 1, 1996, he was a Partner of the law
firm of Kirkpatrick & Lockhart LLP, New York and Washington, D.C. Officer of
various investment companies managed by Eaton Vance or BMR.
JANET E. SANDERS (65), Assistant Secretary
Vice President of BMR and Eaton Vance. Officer of various investment companies
managed by Eaton Vance or BMR.
A. JOHN MURPHY (38), Assistant Secretary
Vice President of BMR and Eaton Vance. Officer of various investment companies
managed by Eaton Vance or BMR.
ERIC G. WOODBURY (43), Assistant Secretary
Vice President of BMR and Eaton Vance. Officer of various investment companies
managed by Eaton Vance or BMR.
The Nominating Committee of the Board of Trustees of the Trust and the Portfolio
is comprised of the Trustees who are not "interested persons" as that term is
defined under the 1940 Act ("noninterested Trustees"). The purpose of the
Committee is to recommend to the Board nominees for the position of
noninterested Trustee and to assure that at least a majority of the Board of
Trustees is independent of Eaton Vance or 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 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 Trust and the Portfolio, including
investment advisory (Portfolio only), administrative, transfer agency, custodial
and fund accounting and distribution services, and (ii) all other matters in
which Eaton Vance or its affiliates has any actual or potential conflict of
interest with the Fund, Portfolio or investors therein.
Messrs. Treynor (Chairman), Dwight and Reamer are members of the Audit Committee
of the Board of Trustees of the Trust and the Portfolio. The Audit Committee's
functions include making recommendations to the Trustees regarding the selection
and performance of the independent accountants, and reviewing matters relative
to accounting and auditing practices and procedures, accounting records, and the
internal accounting controls, of the Trust and the Portfolio, and certain
service providers.
Trustees of the Portfolio who are not affiliated with the investment adviser may
elect to defer receipt of all or a percentage of their annual fees in accordance
with the terms of a Trustees Deferred Compensation Plan (the "Trustees' Plan").
Under the Trustees' Plan, an eligible Trustee may elect to have his deferred
fees invested by the Portfolio in the shares of one or more funds in the Eaton
Vance Family of Funds, and the amount paid to the Trustees under the Trustees'
Plan will be determined based upon the performance of such investments. Deferral
of Trustees' fees in accordance with the Trustees' Plan will have a negligible
effect on the Portfolio's assets, liabilities, and net income per share, and
will not obligate the Portfolio to retain the services of any Trustee or
obligate the Portfolio to pay any particular level of compensation to the
Trustee. Neither the 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 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
and the Portfolio). During the fiscal year ended August 31, 2000, the
noninterested Trustees of the Trust and the Portfolio earned the following
compensation in their capacities as Trustees from the Trust and the Portfolio.
For the year ended December 31, 1999, the noninterested Trustees earned the
following compensation in their capacities as Trustees of the funds in the Eaton
Vance fund complex(1):
6
<PAGE>
<TABLE>
<CAPTION>
Source of Compensation Jessica M. Bibliowicz Donald R. Dwight Samuel L. Hayes Norton H. Reamer Lynn A. Stout
---------------------- --------------------- ---------------- --------------- ---------------- -------------
<S> <C> <C> <C> <C> <C>
Trust(2) $ 773 $ 1,241 $ 1,462 $ 1,414 $ 1,147
Portfolio 1,276 1,179(3) 1,243 1,167 1,262(4)
Total 160,000 160,000(5) 170,000 160,000 160,000(6)
<CAPTION>
Source of Compensation Jack L. Treynor
---------------------- ---------------
<S> <C>
Trust(2) $ 1,141
Portfolio 1,293
Total 170,000
</TABLE>
(1) As of January 1, 2001, the Eaton Vance fund complex consists of 146
registered investment companies or series thereof.
(2) The Trust consisted of 5 Funds as of August 31, 2000.
(3) Includes $641 of deferred compensation.
(4) Includes $187 of deferred compensation.
(5) Includes $60,000 of deferred compensation.
(6) Includes $16,000 of deferred compensation.
ORGANIZATION. The Fund is a series of the Trust, which was organized under
Massachusetts law on May 25, 1989 and is operated as an open-end management
investment company. The Fund (formerly EV Traditional Growth Fund) established 3
classes of shares on September 1, 1997 - Class A shares, Class B shares
(formerly EV Marathon Growth Fund) and Class C shares (formerly EV Classic
Growth Fund) of Eaton Vance Growth Fund. Information herein prior to such date
is for the Fund before it became a multiple-class fund.
The Trust may issue an unlimited number of shares of beneficial interest (no par
value per share) in one or more series (such as the Fund). The Trustees of the
Trust have divided the shares of the Fund into multiple classes. Each class
represents an interest in the Fund, but is subject to different expenses, rights
and privileges. The Trustees have the authority under the Declaration of Trust
to create additional classes of shares with differing rights and privileges.
When issued and outstanding, shares are fully paid and nonassessable by the
Trust. Shareholders are entitled to one vote for each full share held.
Fractional shares may be voted proportionately. Shares of the Fund will be voted
together except that only shareholders of a particular class may vote on matters
affecting only that class. Shares have no preemptive or conversion rights and
are freely transferable. In the event of the liquidation of the Fund,
shareholders of each class are entitled to share pro rata in the net assets
attributable to that class available for distribution to shareholders.
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's By-laws provide that the Trust will
indemnify its Trustees and officers against liabilities and expenses incurred in
connection with any litigation or proceeding in which they may be involved
because of their offices with the Trust. However, no indemnification will be
provided to any Trustee or officer for any liability to the Trust or
shareholders by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his or her office.
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.
7
<PAGE>
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 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 Fund property of any shareholder
held personally liable solely by reason of being or having been a shareholder
for all loss or expense arising from such liability. 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 was organized as a trust under the laws of the state of New York
on May 1, 1992 and intends to be treated as a partnership for federal tax
purposes. In accordance with the Declaration of Trust of the Portfolio, there
will normally be no meetings of the investors for the purpose of electing
Trustees unless and until such time as less than a majority of the Trustees of
the Portfolio holding office have been elected by investors. In such an event
the Trustees of the Portfolio then in office will call an investors' meeting for
the election of Trustees. Except for the foregoing circumstances and unless
removed by action of the investors in accordance with the Portfolio's
Declaration of Trust, the Trustees shall continue to hold office and may appoint
successor Trustees.
The Declaration of Trust of the Portfolio provides that no person shall serve as
a Trustee if investors holding two-thirds of the outstanding interest have
removed him from that office either by a written declaration filed with the
Portfolio's custodian or by votes cast at a meeting called for that purpose. The
Declaration of Trust further provides that under certain circumstances the
investors may call a meeting to remove a Trustee and that the Portfolio is
required to provide assistance in communicating with investors about such a
meeting.
The Portfolio's Declaration of Trust provides that the Fund and other entities
permitted to invest in the Portfolio (e.g., other U.S. and foreign investment
companies, and common and commingled trust funds) will each be liable for all
obligations of the Portfolio. However, the risk of the Fund incurring financial
loss on account of such liability is limited to circumstances in which both
inadequate insurance exists and the Portfolio itself is unable to meet its
obligations. Accordingly, the Trustees of the Trust believe that neither the
Fund nor its shareholders will be adversely affected by reason of the Fund
investing in the Portfolio.
Whenever the Fund as an investor in the Portfolio is requested to vote on
matters pertaining to the Portfolio (other than the termination of the
Portfolio's business, which may be determined by the Trustees of the Portfolio
without investor approval), the Fund will hold a meeting of Fund shareholders
and will vote its interest in the Portfolio for or against such matters
proportionately to the instructions to vote for or against such matters received
from Fund shareholders. The Fund shall vote shares for which it receives no
voting instructions in the same proportion as the shares for which it receives
voting instructions. Other investors in the Portfolio may alone or collectively
acquire sufficient voting interests in the Portfolio to control matters relating
to the operation of the Portfolio, which may require the Fund to withdraw its
investment in the Portfolio or take other appropriate action. Any such
withdrawal could result in a distribution "in kind" of portfolio securities (as
opposed to a cash distribution from the Portfolio). If securities are
distributed, the Fund could incur brokerage, tax or other charges in converting
the securities to cash. In addition, the distribution in kind may result in a
less diversified portfolio of investments or adversely affect the liquidity of
the Fund. Notwithstanding the above, there are other means for meeting
shareholder redemption requests, such as borrowing.
The Fund may withdraw (completely redeem) all its assets from the Portfolio at
any time if the Board of Trustees of the Trust determines that it is in the best
interest of the Fund to do so. In the event a 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 investment adviser manages the investments and
affairs of the Portfolio and provides related office facilities and personnel
subject to the supervision of the Portfolio's Board of Trustees. The investment
adviser furnishes to the Portfolio investment research, advice and supervision,
furnishes an investment program and determines what securities will be
purchased, held or sold by the Portfolio and what portion, if any, of the
Portfolio's assets will be held uninvested. The Investment Advisory Agreement
8
<PAGE>
requires the investment adviser to pay the salaries and fees of all officers and
Trustees of the Portfolio who are members of the investment adviser's
organization and all personnel of the investment adviser performing services
relating to research and investment activities.
For a description of the compensation that the Portfolio pays the investment
adviser, see the prospectus. The following table sets forth the net assets of
the Portfolio and the advisory fees earned during the three fiscal years ended
August 31, 2000.
Advisory Fee Paid for Fiscal Years Ended
----------------------------------------
Net Assets
at August 31, 2000 August 31, 2000 August 31, 1999 August 31, 1998
-------------------------- --------------- --------------- ---------------
$183,552,721 $1,144,005 $1,283,177 $1,280,824
The Investment Advisory Agreement with the investment adviser continues in
effect from year to year so long as such continuance is approved at least
annually (i) by the vote of a majority of the noninterested Trustees of 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 (60) days'
written notice by the Board of Trustees of either party, or by vote of the
majority of the outstanding voting securities of the Portfolio, and the
Agreement will terminate automatically in the event of its assignment. The
Agreement provides that the investment adviser may render services to others.
The Agreement also provides that the investment adviser shall not be liable for
any loss incurred in connection with the performance of its duties, or action
taken or omitted under the Agreement, in the absence of willful misfeasance, bad
faith, gross negligence in the performance of its duties or by reason of its
reckless disregard of its obligations and duties thereunder, or for any losses
sustained in the acquisition, holding or disposition of any security or other
investment.
ADMINISTRATIVE SERVICES. As indicated in the prospectus, Eaton Vance serves as
administrator of the Fund, but currently receives no compensation for providing
administrative services to the Fund. Under its Administrative Services Agreement
with the Trust, Eaton Vance has been engaged to administer the Fund's affairs,
subject to the supervision of the Trustees of the Trust, and shall furnish
office space and all necessary office facilities, equipment and personnel for
administering the affairs of the Fund.
INFORMATION ABOUT BMR AND EATON VANCE. BMR and Eaton Vance are business trusts
organized under Massachusetts law. Eaton Vance, Inc. ("EV") serves as trustee of
BMR and Eaton Vance. EV, Eaton Vance and BMR are wholly-owned subsidiaries of
Eaton Vance Corporation ("EVC"), a Maryland corporation and publicly-held
holding company. EVC through its subsidiaries and affiliates engages primarily
in investment management, administration and marketing activities. The Directors
of EVC are James B. Hawkes, John G.L. Cabot, Leo I. Higdon, Jr., John M. Nelson,
Vincent M. O'Reilly and Ralph Z. Sorenson. All of the issued and outstanding
shares of BMR and Eaton Vance are owned by Eaton Vance and EVC, respectively.
All shares of the outstanding Voting Common Stock of EVC are deposited in a
Voting Trust, the Voting Trustees of which are Messrs. Hawkes, Jeffrey P. Beale,
Alan R. Dynner, Thomas E. Faust, Jr., Thomas J. Fetter, Scott H. Page, Duncan W.
Richardson, William M. Steul, Payson F. Swaffield, Michael W. Weilheimer, and
Wharton P. Whitaker (all of whom are officers of Eaton Vance). The Voting
Trustees have unrestricted voting rights for the election of Directors of EVC.
All of the outstanding voting trust receipts issued under said Voting Trust are
owned by certain of the officers of BMR and Eaton Vance who are also officers,
or officers and Directors of EVC and EV. As indicated under "Management and
Organization", all of the officers of the Trust (as well as Mr. Hawkes who is
also a Trustee) hold positions in the Eaton Vance organization.
CODE OF ETHICS. The investment adviser and the Fund and the Portfolio have
adopted Codes of Ethics governing personal securities transactions. Under the
Codes, Eaton Vance employees may purchase and sell securities (including
securities held by the Portfolio) subject to certain pre-clearance and reporting
requirements and other procedures.
EXPENSES. Each of the Fund and Portfolio is responsible for all expenses not
expressly stated to be payable by another party (such as expenses required to be
paid pursuant to an agreement with the investment adviser, the principal
underwriter or the administrator). In the case of expenses incurred by the
Trust, the Fund is responsible for its pro rata share of those expenses. The
only expenses of the Fund allocated to a particular class are those incurred
under the Distribution or Service Plan applicable to that class, the fee paid to
the principal underwriter for handling repurchase transactions and certain other
class-specific expenses.
OTHER SERVICE PROVIDERS
PRINCIPAL UNDERWRITER. Eaton Vance Distributors, Inc. ("EVD"), The Eaton Vance
Building, 255 State Street, Boston, Massachusetts 02109, is the principal
underwriter of the Fund. 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
9
<PAGE>
advertising are borne by the principal underwriter. The fees and expenses of
qualifying and registering and maintaining qualifications and registrations of
the Fund and its shares under federal and state securities laws are borne by the
Fund. The Distribution Agreement as it applies to Class A shares is renewable
annually by the Board of Trustees of the Trust (including a majority of the
noninterested Trustees), may be terminated on six months' notice by either party
and is automatically terminated upon assignment. The Distribution Agreement as
it applies to Class B and Class C shares is renewable annually by the Trust's
Board of Trustees (including a majority of the noninterested Trustees who have
no direct or indirect financial interest in the operation of the Distribution
Plan or the Distribution Agreement), may be terminated on sixty days' notice
either by such Trustees or by vote of a majority of the outstanding Class B and
Class C shares 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 Trust has authorized the principal
underwriter to act as its agent in repurchasing shares at a rate of $2.50 for
each repurchase transaction handled by the principal underwriter. EVD is a
wholly-owned subsidiary of EVC. Mr. Hawkes is a Vice President and Director, Mr.
Dynner is a Vice President, Secretary and Clerk, Mr. O'Connor is a Vice
President, and Mr. Murphy is Assistant Secretary and Assistant Clerk of EVD.
CUSTODIAN. Investors Bank & Trust Company ("IBT"), 200 Clarendon Street, Boston,
MA 02116, serves as custodian to the Fund and Portfolio. IBT has the custody of
all cash and securities representing the Fund's interest in the Portfolio, has
custody of the Portfolio's assets, maintains the general ledger of the Portfolio
and the Fund and computes the daily net asset value of interests in the
Portfolio and the net asset value of shares of the Fund. In such capacity it
attends to details in connection with the sale, exchange, substitution, transfer
or other dealings with the Portfolio's investments, receives and disburses all
funds and performs various other ministerial duties upon receipt of proper
instructions from the Trust and the Portfolio. IBT also provides services in
connection with the preparation of shareholder reports and the electronic filing
of such reports with the SEC. EVC and its affiliates and their officers and
employees from time to time have transactions with various banks, including IBT.
It is Eaton Vance's opinion that the terms and conditions of such transactions
were not and will not be influenced by existing or potential custodial or other
relationships between the Fund or the Portfolio and such banks.
INDEPENDENT ACCOUNTANTS. PricewaterhouseCoopers LLP, 160 Federal Street, Boston,
MA 02110, are the independent accountants of the Fund and the Portfolio,
providing audit services, tax return preparation, and assistance and
consultation with respect to the preparation of filings with the SEC.
TRANSFER AGENT. PFPC, Inc., P.O. Box 9653, Providence, RI 02904-9653, 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 Portfolio will
be closed for business and will not price their respective shares or interests
on the following business holidays: New Year's Day, Martin Luther King, Jr. Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
Each investor in the Portfolio, including the Fund, may add to or reduce its
investment in the Portfolio on each day the New York Stock Exchange (the
"Exchange") is open for trading ("Portfolio Business Day") as of the close of
regular trading on the Exchange (the "Portfolio Valuation Time"). The value of
each investor's interest in the Portfolio will be determined by multiplying the
net asset value of the Portfolio by the percentage, determined on the prior
Portfolio Business Day, which represented that investor's share of the aggregate
interests in the Portfolio on such prior day. Any additions or withdrawals for
the current Portfolio Business Day will then be recorded. Each investor's
percentage of the aggregate interest in the Portfolio will then be recomputed as
a percentage equal to a fraction (i) the numerator of which is the value of such
investor's investment in the Portfolio as of the Portfolio Valuation Time on the
prior Portfolio Business Day plus or minus, as the case may be, the amount of
any additions to or withdrawals from the investor's investment in the Portfolio
on the current Portfolio Business Day and (ii) the denominator of which is the
aggregate net asset value of the Portfolio as of the Portfolio Valuation Time on
the prior Portfolio Business Day plus or minus, as the case may be, the amount
of the net additions to or withdrawals from the aggregate investment in the
Portfolio on the current Portfolio Business Day by all investors in the
Portfolio. The percentage so determined will then be applied to determine the
value of the investor's interest in the Portfolio for the current Portfolio
Business Day.
The Trustees of the Portfolio have established the following procedures for the
fair valuation of the Portfolio's assets under normal market conditions.
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
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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, at the mean between the last bid and asked prices. Futures positions on
securities or currencies are generally valued at closing settlement prices.
Short-term debt securities with a remaining maturity of 60 days or less are
valued at amortized cost. If securities were acquired with a remaining maturity
of more than 60 days, their amortized cost value will be based on their value on
the sixty-first day prior to maturity. Other fixed income and debt securities,
including listed securities and securities for which price quotations are
available, will normally be valued on the basis of valuations furnished by a
pricing service. All other securities are valued at fair value as determined in
good faith by or at the direction of the Trustees.
Generally, trading in the foreign securities owned by the Portfolio is
substantially completed each day at various times prior to the close of the
Exchange. The values of these securities used in determining the net asset value
of the Portfolio's share generally are computed as of such times. Occasionally,
events affecting the value of foreign securities may occur between such times
and the close of the Exchange which will not be reflected in the computation of
the Portfolio's net asset value (unless the Portfolio deems that such events
would materially affect its net asset value, in which case an adjustment would
be made and reflected in such computation). Foreign securities and currency held
by the Portfolio will be valued in U.S. dollars; such values will be computed by
the custodian based on foreign currency exchange rate quotations supplied by an
independent quotation service.
ADDITIONAL INFORMATION ABOUT PURCHASES. Fund shares are offered for sale only in
states where they are registered. Fund shares are continuously offered through
investment dealers which have entered agreements with the principal underwriter.
The sales charge included in the public offering price of Class A shares is
divided between the principal underwriter and the investment dealer. The sales
charge table is applicable to purchases of the Fund alone or in combination with
purchases of certain other funds offered by the principal underwriter, made at a
single time by (i) an individual, or an individual, his spouse and their
children under the age of twenty-one, purchasing shares for his or their own
account, and (ii) a trustee or other fiduciary purchasing shares for a single
trust estate or a single fiduciary account. The table is also presently
applicable to (1) purchases of Class A shares pursuant to a written Statement of
Intention; or (2) purchases of Class A shares pursuant to the Right of
Accumulation and declared as such at the time of purchase. See "Sales Charges".
In connection with employee benefit or other continuous group purchase plans,
the Fund may accept initial investments of less than $1,000 on the part of an
individual participant. In the event a shareholder who is a participant of such
a plan terminates participation in the plan, his or her shares will be
transferred to a regular individual account. However, such account will be
subject to the right of redemption by the Fund as described below.
SUSPENSION OF SALES. The Trust may, in its absolute discretion, suspend,
discontinue or limit the offering of one or more of its classes of shares at any
time. In determining whether any such action should be taken, the Trust's
management intends to consider all relevant factors, including (without
limitation) the size of the Fund or class, the investment climate and market
conditions, the volume of sales and redemptions of shares, and in the case of
Class B and Class C shares, the amount of uncovered distribution charges of the
principal underwriter. The Class B and Class C Distribution Plans may continue
in effect and payments may be made under the Plans following any such
suspension, discontinuance or limitation of the offering of shares; however,
there is no contractual obligation to continue any Plan for any particular
period of time. Suspension of the offering of shares would not, of course,
affect a shareholder's ability to redeem shares.
ACQUIRING FUND SHARES IN EXCHANGE FOR SECURITIES. IBT, as escrow agent, will
receive securities acceptable to Eaton Vance, as administrator, in exchange for
Fund shares. The minimum value of securities (or securities and cash) accepted
for deposit is $5,000. Securities accepted will be sold on the day of their
receipt or as soon thereafter as possible. The number of Fund shares to be
issued in exchange for securities will be the aggregate proceeds from the sale
of such securities, divided by the applicable public offering price of shares
acquired on the day such proceeds are received. Eaton Vance will use reasonable
efforts to obtain the then current market price for such securities but does not
guarantee the best available price. Eaton Vance will absorb any transaction
costs, such as commissions, on the sale of the securities. Securities determined
to be acceptable should be transferred via book entry or physically delivered,
in proper form for transfer, through an investment dealer, together with a
completed and signed Letter of Transmittal in approved form (available from
investment dealers). Investors who are contemplating an exchange of securities
for shares, or their representatives, must contact Eaton Vance to determine
whether the securities are acceptable before forwarding such securities. Eaton
Vance reserves the right to reject any securities. Exchanging securities for
shares may create a taxable gain or loss. Each investor should consult his or
her tax adviser with respect to the particular federal, state and local tax
consequences of exchanging securities.
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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.
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.
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.
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 may 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 and portfolios; to
clients (including custodial, agency, advisory and trust accounts) and current
and retired officers and employees of Eaton Vance, its affiliates and other
investment advisers of Eaton Vance sponsored funds; to officers and employees of
IBT and the transfer agent; to persons associated with law firms, consulting
firms and others providing services to Eaton Vance and the Eaton Vance funds;
and to such persons' spouses, parents, siblings and children and their
beneficial accounts. Such shares may also be issued at net asset value (1) in
connection with the merger (or similar transaction) of an investment company (or
series or class thereof) or personal holding company 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; and to retirement and deferred compensation
plans and trusts used to fund those plans, including, but not limited to, those
defined in Section 401(a), 403(b) or 457 of the Internal Revenue Code of 1986
(the "Code") and "rabbi trusts". Class A shares may also be sold at net asset
value to registered representatives and employees of investment dealers and bank
employees who refer customers to registered representatives of investment
dealers. 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. Any new or
revised sales charge or CDSC waiver will be prospective only.
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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, the Statement of
Intention section of the account application should be completed 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. If you make a Statement of Intention, the transfer agent is
authorized 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. A Statement of Intention does not obligate the shareholder to purchase
or the Fund to sell the full amount indicated in the Statement.
If the amount actually purchased during the 13-month period is less than that
indicated in the Statement, the shareholder will be requested to pay the
difference between the sales charge applicable to the shares purchased and the
sales charge paid under the Statement of Intention. If the payment is not
received in 20 days, the appropriate number of escrowed shares will be redeemed
in order to realize such difference. If the total purchases during the 13-month
period are large enough to qualify for a lower sales charge than that applicable
to the amount specified in the Statement, all transactions will be computed at
the expiration date of the Statement to give effect to the lower sales charge.
Any difference will be refunded to the shareholder in cash or applied to the
purchase of additional shares, as specified by the shareholder. This refund
will be made by the investment dealer and the principal underwriter. If at the
time of the recomputation, the investment dealer for the account has changed,
the adjustment will be made only on those shares purchased through the current
investment dealer for the account.
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.
EXCHANGE PRIVILEGE. In addition to exchanges into the same class of another
Eaton Vance fund, Class B shares may be exchanged for shares of a money market
fund sponsored by an investment dealer and approved by the principal underwriter
(an "investment dealer fund"). For purposes of calculating the CDSC applicable
to investment dealer fund shares acquired in an exchange, the CDSC schedule
applicable to the exchanged shares will apply and the purchase of investment
dealer fund shares is deemed to have occurred at the time of the original
purchase of the exchanged shares, except that the time during which a
shareholder holds such investment dealer fund shares will not be credited toward
completion of the CDSC period.
TAX-SHELTERED RETIREMENT PLANS. Class A and Class C shares are available for
purchase in connection with certain tax-sheltered retirement plans. Detailed
information concerning these plans, including certain exceptions to minimum
investment requirements, and copies of the plans are available from the
principal underwriter. This information should be read carefully and consulting
with an attorney or tax adviser may be advisable. The information sets forth
the service fee charged for retirement plans and describes the federal income
tax consequences of establishing a plan. Participant accounting services
(including trust fund reconciliation services) will be offered only through
third party recordkeepers and not by the principal underwriter. Under all
plans, dividends and distributions will be automatically reinvested in
additional shares.
DISTRIBUTION AND SERVICE PLANS
CLASS A SERVICE PLAN. The Trust has in effect a Service Plan (the "Class A
Plan") for the Fund's Class A shares that is designed to meet the service fee
requirements of the sales charge rule of the National Association of Securities
Dealers, Inc. (the "NASD"). (Management believes service fee payments are not
distribution expenses governed by Rule 12b-1 under the 1940 Act, but has chosen
to have the Plan approved as if that Rule were applicable.) The Class A Plan
provides that the Class A may make service fee payments for personal services
and/or the maintenance of shareholder accounts to the principal underwriter,
investment dealers and other persons in amounts not exceeding 0.25% of its
average daily net assets for any fiscal year. For the service fees paid by Class
A shares, see Appendix A.
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CLASS B AND CLASS C DISTRIBUTION PLANS. The Trust also has in effect a
compensation-type Distribution Plan (the "Class B and Class C Plans") pursuant
to Rule 12b-1 under the 1940 Act for the Fund's Class B and Class C shares.
Under the Class B and Class C Plans, investors are permitted to purchase shares
through an investment dealer without incurring an initial sales charge and the
principal underwriter is permitted to compensate investment dealers in
connection therewith. The Fund will pay sales commissions and distribution fees
to the principal underwriter under the Class B and Class C Plans only after and
as a result of the sale of Class B and Class C shares of the Fund. On each sale
of Fund shares (excluding reinvestment of distributions) the Fund will pay the
principal underwriter amounts representing (i) sales commissions equal to 5% of
the amount received by the Fund for each Class B share sold and 6.25% of the
amount received for each Class C share sold and (ii) distribution fees
calculated by applying the rate of 1% over the prime rate then reported in The
Wall Street Journal to the outstanding balance of uncovered distribution charges
(as described below) of the principal underwriter. To pay these amounts, each
Class B and Class C pays the principal underwriter a fee, accrued daily and paid
monthly, at an annual rate not exceeding 0.75% of its average daily net assets
to finance the distribution of its shares. Such fees compensate the principal
underwriter for the sales commissions paid by it to investment dealers on the
sale of Class B and Class C shares and for interest expenses.
For Class B shares, the principal underwriter uses its own funds to pay sales
commissions (except on exchange transactions and reinvestments) to investment
dealers at the time of sale equal to 4% of the purchase price of the Class B
shares sold by such dealers.
For Class C shares, the principal underwriter currently expects to pay to an
investment dealer (a) sales commissions (except on exchange transactions and
reinvestments) at that time of sale equal to 0.75% of the purchase price of
Class C shares sold by such dealers, and (b) monthly sales commissions
approximately equivalent to 1/12 of 0.75% of the shares sold by such dealer and
remaining outstanding for at least one year. During the first year after a
purchase of Class C shares, the principal underwriter will retain the sales
commission paid by the Fund as reimbursement for the sales commissions paid to
the investment dealer at the time of sale.
CDSCs paid to the principal underwriter will be used to reduce amounts owed to
it. The Class B and Class C 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 and Class C Plans are limited, uncovered
distribution charges (sales commissions paid by the principal underwriter plus
interest, less the above fees and CDSCs received by it) may exist indefinitely.
For the sales commissions and CDSCs paid on (and uncovered distribution charges
of) Class B and Class C shares, see Appendix B and C.
In calculating daily the amount of uncovered distribution charges, distribution
charges will include the aggregate amount of sales commissions and distribution
fees theretofore paid plus the aggregate amount of sales commissions and
distribution fees which the principal underwriter is entitled to be paid under
the Plan since its inception. Payments theretofore paid or payable under the
Class B and Class C Plans by the Trust to the principal underwriter and CDSCs
theretofore paid or payable to the principal underwriter will be subtracted from
such distribution charges; if the result of such subtraction is positive, a
distribution fee (computed at 1% over the prime rate then reported in The Wall
Street Journal) will be computed on such amount and added thereto, with the
resulting sum constituting the amount of outstanding uncovered distribution
charges with respect to such day. The amount of outstanding uncovered
distribution charges of the principal underwriter calculated on any day does not
constitute a liability recorded on the financial statements of the Fund.
The amount of uncovered distribution charges of the principal underwriter at any
particular time depends upon various changing factors, including the level and
timing of sales of shares, the nature of such sales (i.e., whether they result
from exchange transactions, reinvestments or from cash sales through investment
dealers), the level and timing of redemptions of shares upon which a CDSC will
be imposed, the level and timing of redemptions of shares upon which no CDSC
will be imposed (including redemptions of shares pursuant to the exchange
privilege which result in a reduction of uncovered distribution charges),
changes in the level of the net assets of the Class, and changes in the interest
rate used in the calculation of the distribution fee under the Class B and Class
C Plans.
The Class B and Class C Plan also authorizes the payment of service fees to the
principal underwriter, investment dealers and other persons in amounts not
exceeding 0.25% of its average daily net assets for personal services, and/or
the maintenance of shareholder accounts. For Class B, this fee is paid quarterly
in arrears based on the value of Class B shares sold by such persons. For Class
C, investment dealers currently receive (a) a service fee (except on exchange
transactions and reinvestments) at the time of sale equal to 0.25% of the
purchase price of Class C shares sold by such dealer, and (b) monthly service
fees approximately equivalent to 1/12 of 0.25% of the value of Class C shares
sold by such dealer. During the first year after a purchase of Class C shares,
the principal underwriter will retain the service fee as reimbursement for the
service fee payment made to investment dealers at the time of sale. For the
service fees paid, see Appendix B and C.
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Currently, payments of sales commissions and distribution fees and of service
fees may equal 1% of a Class's average daily net assets per annum. The Trust
believes that the combined rate of all these payments may be higher than the
rate of payments made under distribution plans adopted by other investment
companies pursuant to Rule 12b-1. Although the principal underwriter will use
its own funds (which may be borrowed from banks) to pay sales commissions at the
time of sale, it is anticipated that the Eaton Vance organization will profit by
reason of the operation of the Class B and Class C Plan through an increase in
Fund assets (thereby increasing the advisory fee payable to the investment
adviser by the Portfolio) resulting from sale of shares and through the amounts
paid to the principal underwriter, including CDSCs, pursuant to the Plan. The
Eaton Vance organization may be considered to have realized a profit under the
Class B and Class C Plans if at any point in time the aggregate amounts
theretofore received by the principal underwriter pursuant to the Class B and
Class C Plans and from CDSCs have exceeded the total expenses theretofore
incurred by such organization in distributing Class B and Class C shares of the
Fund. Total expenses for this purpose will include an allocable portion of the
overhead costs of such organization and its branch offices, which costs will
include without limitation leasing expense, depreciation of building and
equipment, utilities, communication and postage expense, compensation and
benefits of personnel, travel and promotional expense, stationery and supplies,
literature and sales aids, interest expense, data processing fees, consulting
and temporary help costs, insurance, taxes other than income taxes, legal and
auditing expense and other miscellaneous overhead items. Overhead is calculated
and allocated for such purpose by the Eaton Vance organization in a manner
deemed equitable to the Trust.
The Plans continue in effect from year to year so long as such continuance is
approved at least annually by the vote of both a majority of (i) the
noninterested Trustees of the Trust who have no direct or indirect financial
interest in the operation of the Plan or any agreements related to the Plan (the
"Plan Trustees") and (ii) all of the Trustees then in office. Each Plan may be
terminated at any time by vote of a majority of the Plan Trustees or by a vote
of a majority of the outstanding voting securities of the applicable Class. Each
Plan requires quarterly Trustee review of a written report of the amount
expended under the Plan and the purposes for which such expenditures were made.
The Plans may not be amended to increase materially the payments described
therein without approval of the shareholders of the affected Class and the
Trustees. So long as a Plan is in effect, the selection and nomination of the
noninterested Trustees shall be committed to the discretion of such Trustees.
The Plans were approved by the Trustees, including the Plan Trustees, on June
23, 1997. The Trustees of the Trust who are "interested" persons of the Trust
have an indirect financial interest in the Plans because their employers (or
affiliates thereof) receive distribution and/or service fees under the Plans or
agreements related thereto.
The Trustees of the Trust believe that each Plan will be a significant factor in
the expected growth of the Fund's assets, and will result in increased
investment flexibility and advantages which have benefitted and will continue to
benefit the Fund and its shareholders. Payments for sales commissions and
distribution fees made to the principal underwriter under the Class B and Class
C Plan will compensate the principal underwriter for its services and expenses
in distributing Class B and Class C 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 by multiplying a hypothetical initial
purchase order of $1,000 by the average annual compound rate of return
(including capital appreciation/depreciation, and distributions paid and
reinvested) for the stated period and annualizing the result. The calculation
assumes (i) that all distributions are reinvested at net asset value on the
reinvestment dates during the period, (ii) the deduction of the maximum of any
initial sales charge from the initial $1,000 purchase, (iii) a complete
redemption of the investment at the end of the period, and (iv) the deduction of
any applicable CDSC at the end of the period. If shares are subject to a sales
charge, total return figures may be calculated based on reduced sales charges or
at net asset value. These returns would be lower if the full sales charge was
imposed. For total return information, see Appendix A, Appendix B and Appendix
C.
Investors may be provided with information on equity investing, which may
include comparative performance information, evaluations of Fund performance,
charts and/or illustrations prepared by independent sources, and narratives
(including editorial comments). Performance may be compared to relevant indices
and comparable investments, and to averages, performance rankings or ratings, or
other information prepared by recognized mutual fund statistical services.
Information included in advertisements and materials furnished to present and
prospective investors may also include charts and illustrations showing the
effects of inflation and taxes (including their effects on the dollar and the
return on various investments), the effects of compounding earnings, and
statistics, data and performance studies prepared by independent organizations
or included in various publications reflecting the performance achieved by
various asset classes or types of investments. Such information may also include
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commentary prepared by Eaton Vance investment professionals, including portfolio
managers.
Investors may be provided with information concerning Fund volatility or risk,
including but not limited to beta, standard deviation and Sharpe ratio. Beta is
a measure of risk which shows Fund volatility relative to a market index. A fund
with a beta of 1 would perform exactly like the market index; a beta of 2 would
mean its performance was twice as volatile as the index, positive or negative.
Standard deviation is a measure of a security's volatility, or variability, in
expected return. Sharpe ratio is a measure of risk-adjusted performance. The
higher the Sharpe ratio the better a fund's historical risk-adjusted return.
Information concerning Fund distribution payments (or the payment record of
issuers in which the Fund may invest) may also be provided to investors.
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 a particular
type of securities or in mutual funds. Information provided to investors may
also include profiles of different types of investors and different strategies
for achieving investment goals (such as asset allocation strategies).
Hypothetical examples may be used to demonstrate the foregoing.
Information about portfolio allocation, portfolio turnover and portfolio
holdings of the Portfolio at a particular date may be included in advertisements
and other material furnished to present and prospective shareholders.
Descriptions of Eaton Vance and other Fund and Portfolio service providers,
their investment styles, other investment products, personnel and Fund
distribution channels, as well as information on the use of investment
professionals, also may be provided.
The Fund's performance may differ from that of other investors in the Portfolio,
including other investment companies.
TAXES
Each series of the Trust is treated as a separate entity for federal income tax
purposes. The Fund has elected to be treated and intends to qualify each year,
as a regulated investment company ("RIC") under the Code. Accordingly, the Fund
intends to satisfy certain requirements relating to sources of its income and
diversification of its assets and to distribute substantially all of its net
income and net short-term and long-term capital gains (after reduction by any
available capital loss carryforwards) 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. To the extent it qualifies for treatment as a RIC
and satisfies the above-mentioned distributions requirements, the Fund will not
be subject to federal income tax on income paid to its shareholders in the form
of dividends or capital gain distributions. The Fund so qualified for its fiscal
year ended August 31, 2000.
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. For purposes of applying the
requirements of the Code regarding qualification as a RIC, the Fund (i) will be
deemed to own its proportionate share of each of the assets of the Portfolio and
(ii) will be entitled to the gross income of the Portfolio attributable to such
share.
In order to avoid incurring a federal excise tax obligation, the Code requires
that the Fund distribute (or be deemed to have distributed) by December 31 of
each calendar year (i) at least 98% of its ordinary income (not including
tax-exempt income) for such year, (ii) at least 98% of its capital gain net
income (which is the excess of its realized capital gains over its realized
capital losses), generally computed on the basis of the one-year period ending
on October 31 of such year, after reduction by any available capital loss
carryforwards and (iii) 100% of any income 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.
16
<PAGE>
If the Fund does not qualify as a RIC for any taxable year, the Fund's taxable
income will be subject to corporate income taxes, and all distributions from
earnings and profits, including distributions of net capital gain (if any), will
be taxable to the shareholder as ordinary income. In addition, in order to
requalify for taxation as a RIC, the Fund may be required to recognize
unrealized gains, pay substantial taxes and interest, and make certain
distributions.
The Portfolio's investments in options, futures contracts, hedging transactions,
forward contracts (to the extent permitted) and certain other transactions will
be subject to special tax rules (including mark-to-market, constructive sale,
straddle, wash sale short sale and other rules), the effect of which may be to
accelerate income to the Portfolio, defer Portfolio losses, cause adjustments in
the holding periods of Portfolio securities, convert capital gain into ordinary
income and convert short-term capital losses into long-term capital losses.
These rules could therefore affect the amount, timing and character of
distributions to investors.
Transactions in foreign currencies, foreign currency-denominated debt securities
and certain foreign currency options, futures contracts, forward contracts and
similar instruments (to the extent permitted) may give rise to ordinary income
or loss to the extent such income or loss results from fluctuations in the value
of the foreign currency concerned.
Investments in "passive foreign investment companies" could subject the
Portfolio to U.S. federal income tax or other charge on the proceeds from the
sales of the investment in such company; however, this tax can be avoided by
making an election to mark such investment to market annually or treat the
passive foreign investment company as a "qualified electing fund".
The Portfolio may be subject to foreign withholding or other foreign taxes with
respect to income (possibly including, in some cases, capital gains) on certain
foreign securities. These taxes may be reduced or eliminated under the terms of
an applicable U.S. income tax treaty. As it is not expected that more than 50%
of the value of the total assets of the Portfolio will consist of securities
issued by foreign corporations, the Fund will not be eligible to pass through to
shareholders its proportionate share of any foreign taxes paid by the Portfolio
and allocated to the Fund, with the result that shareholders will not include in
income, and will not be entitled to take any foreign tax credits or deductions
for, such foreign taxes.
A portion of distributions made by the Fund which are derived from dividends
from domestic corporations may qualify for the dividends-received deduction
("DRD") for corporations. The DRD is reduced to the extent the Fund shares with
respect to which the dividends are received are treated as debt-financed under
the Code and is eliminated if the shares are deemed to have been held for less
than a minimum period, generally 46 days. Receipt of certain distributions
qualifying for the DRD may result in reduction of the tax basis of the corporate
shareholder's shares. Distributions eligible for the DRD may give rise to or
increase an alternative minimum tax for certain corporations.
Any loss realized upon the sale or exchange of Fund shares with a tax holding
period of 6 months or less will be treated as a long-term capital loss to the
extent of any distributions treated as long-term capital gain with respect to
such shares. In addition, all or a portion of a loss realized on a redemption or
other disposition of Fund shares may be disallowed under "wash sale" rules to
the extent the shareholder acquired other shares of the same Fund (whether
through the reinvestment of distributions or otherwise) within the period
beginning 30 days before the redemption of the loss shares and ending 30 days
after such date. Any disallowed loss will result in an adjustment to the
shareholder's tax basis in some or all of the other shares acquired.
Sales charges paid upon a purchase of shares subject to a front-end sales charge
cannot be taken into account for purposes of determining gain or loss on a
redemption or exchange of the shares before the 91st day after their purchase to
the extent a sales charge is reduced or eliminated in a subsequent acquisition
of shares of the Fund (or of another fund) pursuant to the reinvestment or
exchange privilege. Any disregarded amounts will result in an adjustment to the
shareholder's tax basis in some or all of any other shares acquired.
Dividends and distributions on the Fund's shares are generally subject to
federal income tax as described herein to the extent they do not exceed the
Fund's realized income and gains, even though such dividends and distributions
may economically represent a return of a particular shareholder's investment.
Such distributions are likely to occur in respect of shares purchased at a time
when the Fund's net asset value reflects gains that are either unrealized, or
realized but not distributed. Such realized gains may be required to be
distributed even when the Fund's net asset value also reflects unrealized
losses. Certain distributions declared in October, November or December and paid
in the following January will be taxed to shareholders as if received on
December 31 of the year in which they were declared.
Amounts paid by the Fund to individuals and certain other shareholders who have
not provided the Fund with their correct taxpayer identification number ("TIN")
and certain certifications required by the Internal Revenue Service (the "IRS")
as well as shareholders with respect to whom the Fund has received certain
information from the IRS or a broker, may be subject to "backup" withholding of
federal income tax arising from the Fund's taxable dividends and other
distributions as well as the proceeds of redemption transactions (including
17
<PAGE>
repurchases and exchanges), at a rate of 31%. An individual's TIN is generally
his or her social security number.
The foregoing discussion does not address the special tax rules applicable to
certain classes of investors, such as IRAs and other retirement plans,
tax-exempt entities, foreign investors, insurance companies and financial
institutions. Shareholders should consult their own tax advisers with respect to
special tax rules that may apply in their particular situations, as well as the
state, local, and, where applicable, foreign tax consequences of investing in
the Fund.
PORTFOLIO SECURITIES TRANSACTIONS
Decisions concerning the execution of portfolio security transactions, including
the selection of the market and the executing firm, are made by BMR. BMR is also
responsible for the execution of transactions for all other accounts managed by
it. BMR places the portfolio security transactions of the Portfolio and of all
other accounts managed by it for execution with many firms. BMR uses its best
efforts to obtain execution of portfolio security transactions at prices which
are advantageous to the Portfolio and at reasonably competitive spreads or (when
a disclosed commission is being charged) at reasonably competitive commission
rates. In seeking such execution, BMR will use its best judgment in evaluating
the terms of a transaction, and will give consideration to various relevant
factors, including without limitation the full range and quality of the
executing firm's services, the value of the brokerage and research services
provided, the responsiveness of the firm to BMR, the size and type of the
transaction, the nature and character of the market for the security, the
confidentiality, speed and certainty of effective execution required for the
transaction, the general execution and operational capabilities of the executing
firm, the reputation, reliability, experience and financial condition of the
firm, the value and quality of the services rendered by the firm in this and
other transactions, and the reasonableness of the spread or commission, if any.
Transactions on United States stock exchanges and other agency transactions
involve the payment by the Portfolio of negotiated brokerage commissions. Such
commissions vary among different broker-dealer firms, and a particular
broker-dealer may charge different commissions according to such factors as the
difficulty and size of the transaction and the volume of business done with such
broker-dealer. Transactions in foreign securities often involve the payment of
brokerage commissions, which may be higher than those in the United States.
There is generally no stated commission in the case of securities traded in the
over-the-counter markets, but the price paid or received by the Portfolio
usually includes an undisclosed dealer markup or markdown. In an underwritten
offering the price paid by the Portfolio often includes a disclosed fixed
commission or discount retained by the underwriter or dealer. Although spreads
or commissions paid on portfolio security transactions will, in the judgment of
BMR be reasonable in relation to the value of the services provided, commissions
exceeding those which another firm might charge may be paid to broker-dealers
who were selected to execute transactions on behalf of the Portfolio and BMR's
other clients in part for providing brokerage and research services to BMR.
As authorized in Section 28(e) of the Securities Exchange Act of 1934, a broker
or dealer who executes a portfolio transaction on behalf of the Portfolio may
receive a commission which is in excess of the amount of commission another
broker or dealer would have charged for effecting that transaction if BMR
determines in good faith that such compensation was reasonable in relation to
the value of the brokerage and research services provided. This determination
may be made either on the basis of that particular transaction or on the basis
of overall responsibilities which BMR and its affiliates have for accounts over
which they exercise investment discretion. In making any such determination, BMR
will not attempt to place a specific dollar value on the brokerage and research
services provided or to determine what portion of the commission should be
related to such services. Brokerage and research services may include advice as
to the value of securities, the advisability of investing in, purchasing, or
selling securities, and the availability of securities or purchasers or sellers
of securities; furnishing analyses and reports concerning issuers, industries,
securities, economic factors and trends, portfolio strategy and the performance
of accounts; effecting securities transactions and performing functions
incidental thereto (such as clearance and settlement); and the "Research
Services" referred to in the next paragraph.
It is a common practice of the investment advisory industry and of the advisers
of investment companies, institutions and other investors to receive research,
analytical, statistical and quotation services, data, information and other
services, products and materials which assist such advisers in the performance
of their investment responsibilities ("Research Services") from broker-dealer
firms which execute portfolio transactions for the clients of such advisers and
from third parties with which such broker-dealers have arrangements. Consistent
with this practice, BMR receives Research Services from many broker-dealer firms
with which BMR places transactions for the Portfolio and from third parties with
which these broker-dealers have arrangements. These Research Services include
such matters as general economic, political, business and market information,
industry and company reviews, evaluations of securities and portfolio strategies
and transactions, proxy voting data and analysis services, technical analysis of
various aspects of the securities markets, recommendations as to the purchase
and sale of securities and other portfolio transactions, financial, industry and
trade publications, news and information services, pricing and quotation
equipment and services, and research oriented computer hardware, software, data
18
<PAGE>
bases and services. Any particular Research Service obtained through a
broker-dealer may be used by BMR in connection with client accounts other than
those accounts which pay commissions to such broker-dealer. Any such Research
Service may be broadly useful and of value to BMR in rendering investment
advisory services to all or a significant portion of its clients, or may be
relevant and useful for the management of only one client's account or of a few
clients' accounts, or may be useful for the management of merely a segment of
certain clients' accounts, regardless of whether any such account or accounts
paid commissions to the broker-dealer through which such Research Service was
obtained. The advisory fee paid by the Portfolio is not reduced because BMR
receives such Research Services. BMR evaluates the nature and quality of the
various Research Services obtained through broker-dealer firms and attempts to
allocate sufficient portfolio security transactions to such firms to ensure the
continued receipt of Research Services which BMR believes are useful or of value
to it in rendering investment advisory services to its clients.
The Portfolio and BMR may also receive Research Services from underwriters and
dealers in fixed-price offerings, which Research Services are reviewed and
evaluated by BMR in connection with its investment responsibilities. The
investment companies sponsored by BMR or its affiliates may allocate brokerage
commissions to acquire information relating to the performance, fees and
expenses of such companies and other mutual funds, which information is used by
the Trustees of such companies to fulfill their responsibility to oversee the
quality of the services provided by various entities, including BMR, to such
companies. Such companies may also pay cash for such information.
Subject to the requirement that BMR shall use its best efforts to seek and
execute portfolio security transactions at advantageous prices and at reasonably
competitive spreads or commission rates, BMR is authorized to consider as a
factor in the selection of any broker-dealer firm with whom portfolio orders may
be placed the fact that such firm has sold or is selling shares of the Fund or
of other investment companies sponsored by BMR or its affiliates. This policy is
not inconsistent with a rule of the NASD, which rule provides that no firm which
is a member of the NASD shall favor or disfavor the distribution of shares of
any particular investment company or group of investment companies on the basis
of brokerage commissions received or expected by such firm from any source.
Securities considered as investments for the Portfolio may also be appropriate
for other investment accounts managed by BMR or its affiliates. Whenever
decisions are made to buy or sell securities by a Portfolio and one or more of
such other accounts simultaneously, BMR will allocate the security transactions
(including "hot" issues) in a manner which it believes to be equitable under the
circumstances. As a result of such allocations, there may be instances where the
Portfolio will not participate in a transaction that is allocated among other
accounts. If an aggregated order cannot be filled completely, allocations will
generally be made on a pro rata basis. An order may not be allocated on a pro
rata basis where, for example: (i) consideration is given to portfolio managers
who have been instrumental in developing or negotiating a particular investment;
(ii) consideration is given to an account with specialized investment policies
that coincide with the particulars of a specific investment; (iii) pro rata
allocation would result in odd-lot or de minimis amounts being allocated to a
portfolio or other client; or (iv) where BMR reasonably determines that
departure from a pro rata allocation is advisable. While these aggregation and
allocation policies could have a detrimental effect on the price or amount of
the securities available to the Portfolio from time to time, it is the opinion
of the Trustees of the Trust and the Portfolio that the benefits from the BMR
organization outweigh any disadvantage that may arise from exposure to
simultaneous transactions.
The following table shows brokerage commissions paid by the Portfolio during the
three fiscal years ended August 31, 2000, as well as the amount of the
Portfolio's security transactions for the most recent fiscal year that were
directed to firms which provided some research services to BMR or its affiliates
and the commissions paid in connection therewith (although many of such firms
may have been selected in any particular transaction primarily because of their
execution capabilities):
Brokerage Commission Paid August 31, 2000 $ 767,062
August 31, 1999 $ 184,601
August 31, 1998 $ 237,806
Amount of Transactions Directed to Firms
Providing Research August 31, 2000 $ 672,074
Commissions Paid on Transactions Directed to
Firms Providing Research August 31, 2000 $552,709,724
The increase in brokerage commissions paid by the Portfolio during the most
recent fiscal year resulted from increased purchases and sales of portfolio
holdings during the period.
19
<PAGE>
FINANCIAL STATEMENTS
The audited financial statements of, and the reports of independent auditors'
for, the Fund and Portfolio, appear in the Fund's most recent annual report to
shareholders and are incorporated by reference into this SAI. A copy of the
annual report accompanies this SAI.
HOUSEHOLDING. Consistent with applicable law, duplicate mailings of shareholder
reports and certain other Fund information to shareholders residing at the same
address may be eliminated.
Registrant incorporates by reference the audited financial information for the
Fund and the Portfolio for the fiscal year ended August 31, 2000, as previously
filed electronically with the SEC (Accession No. 0000912057-00-045957).
20
<PAGE>
APPENDIX A
CLASS A FEES, PERFORMANCE & Ownership
SALES CHARGES, SERVICE FEES AND REPURCHASE TRANSACTION FEES. For the fiscal year
ended August 31, 2000, the following table shows (1) total sales charges paid by
the Fund, (2) sales charges paid to investment dealers, (3) sales charges paid
to the principal underwriter, (4) total service fees paid by the Fund, (5)
service fees paid to investment dealers and (6)repurchase transaction fees paid
to the principal underwriter. Service fees that were not paid to investment
dealers were retained by the principal underwriter.
<TABLE>
<CAPTION>
Total Sales Sales Charges to Sales Charges to Total Service Service Fees Paid Repurchase Transaction Fees
Charges Paid Investment Dealers Principal Underwriter Fees Paid to Investment Dealers Paid to Principal Underwriter
------------ ------------------ --------------------- ------------- --------------------- -----------------------------
<S> <C> <C> <C> <C> <C>
$55,087 $46,649 $8,438 $253,860 $169,385 $1,227.50
</TABLE>
PERFORMANCE INFORMATION. The table below indicates the cumulative and average
annual total return on a hypothetical investment of $1,000 in this Class of
shares for the periods shown in the table. Past performance is no guarantee of
future results. Investment return and principal value will fluctuate; shares,
when redeemed, may be worth more or less than their original cost. Any return
presented with two asterisks (**) includes the effect of subsidizing expenses. A
return would have been lower without subsidies.
<TABLE>
<CAPTION>
Total Return Excluding Total Return Including
Maximum Sales Charge Maximum Sales Charge
Period Ended ------------- -------------
August 31, 2000 Investment Date Initial Value Value on August 31, 2000 Cumulative Annualized Cumulative Annualized
--------------- --------------- ------------- ------------------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Ten Years 8/31/90 $942.83 $3,143.30 233.39% 12.80% 214.33% 12.13%
Five Years 8/31/95 $942.31 $1,914.68 103.19% 15.23% 91.47% 13.87%
One Year 8/31/99 $942.24 $1,015.17 7.74% 7.74% 1.52% 1.52%
</TABLE>
The "Initial Value" reflects the deduction of the maximum initial sales charge.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES. At December 1, 2000, the
Trustees and officers of the Trust, as a group, owned in the aggregate less than
1% of the outstanding shares of this Class of the Fund. To the knowledge of the
Trust, no other person owned of record or beneficially 5% or more of the
outstanding shares of this Class of the Fund as of such date.
21
<PAGE>
APPENDIX B
CLASS B FEES, PERFORMANCE & Ownership
DISTRIBUTION, SERVICE AND REPURCHASE TRANSACTION FEES. For the fiscal year ended
August 31, 2000, the following table shows (1) sales commissions paid by the
principal underwriter to investment dealers on sales of Class B shares, (2)
distribution fees to the principal underwriter under the Distribution Plan, (3)
CDSC payments to the principal underwriter, (4) uncovered distribution charges
under the Distribution Plan (dollar amount and as a percentage of net assets
attributable to Class B), (5) service fees paid under the Distribution Plan, (6)
the service fees paid to investment dealers, and (7) the repurchase transaction
fees paid to the principal underwriter. The service fees paid by the Fund that
were not paid to investment dealers were retained by the principal underwriter.
Distribution payments and CDSC payments reduce uncovered distribution charges
under the Distribution Plan.
<TABLE>
<CAPTION>
Distribution Fee Uncovered Distribution Service Fees
Sales Paid to CDSC Paid to Charges (as a % of Class Service Paid to
Commission Principal Underwriter Principal Underwriter Net Assets) Fees Investment Dealers
---------- --------------------- --------------------- ------------------------ ------- ------------------
<S> <C> <C> <C> <C> <C>
$39,515 $125,243 $66,000 $168,000 (1.0%) $37,050 $36,035
<CAPTION>
Repurchase Transaction
Sales Fees Paid to
Commission Principal Underwriter
---------- ------------------------
<S> <C>
$39,515 $1,220
</TABLE>
PERFORMANCE INFORMATION. The table below indicates the cumulative and average
annual total return on a hypothetical investment in shares of $1,000. Total
return for the period prior to September 1, 1997 reflects the total return of a
predecessor to Class B. Total return prior to the Predecessor Fund's
commencement of operations reflects the total return of Class A, adjusted to
reflect the Class B CDSC. The Class A total return has not been adjusted to
reflect certain other expenses (such as distribution and/or service fees). If
such adjustments were made, the Class B total return would be lower. Past
performance is no guarantee of future results. Investment return and principal
value will fluctuate; shares, when redeemed, may be worth more or less than
their original cost. Any return presented with two asterisks (**) includes the
effect of subsidizing expenses. A return would have been lower without
subsidies.
<TABLE>
<CAPTION>
Total Return Excluding Total Return Including
Maximum Sales Charge Maximum Sales Charge
Period Ended ------------- -------------
August 31, 2000 Investment Date Initial Value Value on August 31, 2000 Cumulative Annualized Cumulative Annualized
--------------- --------------- ------------- ------------------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Ten Years 8/31/90 $3,175.91 $3,175.91 217.59% 12.25% 217.59% 12.25%
Five Years 8/31/95 $1,946.02 $1,926.02 94.60% 14.24% 92.60% 14.01%
One Year 8/31/99 $1,067.38 $1,017.38 6.74% 6.74% 1.74% 1.74%
</TABLE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES. At December 1, 2000, the
Trustees and officers of the Trust, as a group, owned in the aggregate less than
1% of the outstanding shares of this Class of the Fund. In addition, as of the
same date, the following record owners held the amounts of shares indicated
below, which were held by investment dealers either (i) individually or (ii) on
behalf of their customers who are the beneficial owners of such shares and as to
which such dealers have voting power under certain limited circumstances:
Merrill Lynch, Pierce, Fenner & Smith, Inc. Jacksonville, FL 12.0%
To the knowledge of the Trust, no other person owned of record or beneficially
5% or more of the outstanding shares of this Class of the Fund as of such date.
22
<PAGE>
APPENDIX C
CLASS C FEES, PERFORMANCE & Ownership
DISTRIBUTION, SERVICE AND REPURCHASE TRANSACTION FEES. For the fiscal year ended
August 31, 2000, the following table shows (1) sales commissions paid by the
principal underwriter to investment dealers on sales of Class C shares, (2)
distribution fees to the principal underwriter under the Distribution Plan, (3)
CDSC payments to the principal underwriter, (4) uncovered distribution charges
under the Distribution Plan (dollar amount and as a percentage of net assets
attributable to Class C), (5) service fees paid under the Distribution Plan, (6)
the service fees paid to investment dealers, and (7) the repurchase transaction
fees paid to the principal underwriter. The service fees paid by the Fund that
were not paid to investment dealers were retained by the principal underwriter.
Distribution payments and CDSC payments reduce uncovered distribution charges
under the Distribution Plan.
<TABLE>
<CAPTION>
Distribution Fee Uncovered Distribution Service Fees
Sales Paid to CDSC Paid to Charges (as a % of Class Service Paid to
Commission Principal Underwriter Principal Underwriter Net Assets) Fees Investment Dealers
---------- --------------------- --------------------- ------------------------ ------- ------------------
<S> <C> <C> <C> <C> <C>
$21,219 $21,551 $293 $430,000 (15.5%) $7,184 $5,502
<CAPTION>
Repurchase Transaction
Sales Fees Paid to
Commission Principal Underwriter
---------- ------------------------
<S> <C>
$21,219 $90
</TABLE>
PERFORMANCE INFORMATION. The table below indicates the cumulative and average
annual total return on a hypothetical investment in shares of $1,000. Total
return for the period prior to September 1, 1997 reflects the total return of a
predecessor to Class C. Total return prior to the Predecessor Fund's
commencement of operations reflects the total return of Class A, adjusted to
reflect the Class C CDSC. The Class A total return has not been adjusted to
reflect certain other expenses (such as distribution and/or service fees). If
such adjustments were made, the Class C total return would be lower. Past
performance is no guarantee of future results. Investment return and principal
value will fluctuate; shares, when redeemed, may be worth more or less than
their original cost. Any return presented with two asterisks (**) includes the
effect of subsidizing expenses. A return would have been lower without
subsidies.
<TABLE>
<CAPTION>
Total Return Excluding Total Return Including
Maximum Sales Charge Maximum Sales Charge
Period Ended ------------- -------------
August 31, 2000 Investment Date Initial Value Value on August 31, 2000 Cumulative Annualized Cumulative Annualized
--------------- --------------- ------------- ------------------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Ten Years 8/31/90 $3,010.16 $3,010.16 201.02% 11.65% 201.02% 11.65%
Five Years 8/31/95 $1,851.57 $1,851.57 85.16% 13.11% 85.16% 13.11%
One Year 8/31/99 $1,067.04 $1,057.04 6.70% 6.70% 5.70% 5.70%
</TABLE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES. At December 1, 2000, the
Trustees and officers of the Trust, as a group, owned in the aggregate less than
1% of the outstanding shares of this Class of the Fund. In addition, as of the
same date, the following record owners held the amounts of shares indicated
below, which were held by investment dealers either (i) individually or (ii) on
behalf of their customers who are the beneficial owners of such shares and as to
which such dealers have voting power under certain limited circumstances:
Merrill Lynch, Pierce, Fenner & Smith, Inc. Jacksonville, FL 6.5%
In addition, as of the same date, the following shareholders owned of record the
following percentages of this Class of the Fund:
NFSC FBO Derwyn F. Phillips Vero Beach, FL 13.8%
To the knowledge of the Trust, no other person owned of record or beneficially
5% or more of the outstanding shares of this Class of the Fund as of such date.
23
<PAGE>
STATEMENT OF
ADDITIONAL INFORMATION
January 1, 2001
EATON VANCE WORLDWIDE HEALTH SCIENCES FUND
EATON VANCE INFORMATION AGE FUND
The Eaton Vance Building
255 State Street
Boston, Massachusetts 02109
(800) 225-6265
This Statement of Additional Information ("SAI") provides general
information about the Funds listed above and their corresponding Portfolios.
Each Fund is a series of Eaton Vance Growth Trust. Capitalized terms used in
this SAI and not otherwise defined have the meanings given to them in the
prospectus. This SAI contains additional information about:
Page
Strategies and Risks .................................................. 1
Investment Restrictions ............................................... 7
Management and Organization ........................................... 8
Investment Advisory and Administrative Services ....................... 12
Other Service Providers ............................................... 15
Purchasing and Redeeming Shares ....................................... 16
Sales Charges ......................................................... 17
Performance ........................................................... 21
Taxes ................................................................. 22
Portfolio Security Transactions ....................................... 24
Financial Statements .................................................. 26
Appendices:
A: Class A Fees, Performance and Ownership ............................ a-1
B: Class B Fees, Performance and Ownership ............................ b-1
C: Class C Fees, Performance and Ownership ............................ c-1
Although each Fund offers only its shares of beneficial interest, it is
possible that a Fund (or Class) might become liable for a misstatement or
omission in this SAI regarding another Fund (or Class) because the Funds use
this combined SAI. The Trustees of the Trust have considered this factor in
approving the use of a combined SAI.
THIS IS NOT A PROSPECTUS AND IS AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE
INVESTORS ONLY IF PRECEDED OR ACCOMPANIED BY THE FUNDS' PROSPECTUS DATED
JANUARY 1, 2001, AS SUPPLEMENTED FROM TIME TO TIME, WHICH IS INCORPORATED
HEREIN BY REFERENCE. THIS SAI SHOULD BE READ IN CONJUNCTION WITH THE
PROSPECTUS, WHICH MAY BE OBTAINED BY CALLING 1-800-225-6265.
<PAGE>
STRATEGIES AND RISKS
HEALTH SCIENCES PORTFOLIO. Under normal market conditions, the Health
Sciences Portfolio will invest at least 65% of its total assets in securities
of health sciences companies, including common and preferred stocks; equity
interests in partnerships; convertible preferred stocks; and other convertible
instruments. Convertible debt instruments generally will be rated below
investment grade (i.e., rated lower than Baa by Moody's Investors Service,
Inc. ("Moody's") or lower than BBB by Standard & Poor's Ratings Group ("S&P"))
or, if unrated, determined by OrbiMed to be of equivalent quality. Convertible
debt securities so rated are commonly called "junk bonds" and have risks
similar to equity securities; they are speculative and changes in economic
conditions or other circumstances are more likely to lead to a weakened
capacity to make principal and interest payments than is the case with higher
grade debt securities. Such below investment grade debt securities will not
exceed 20% of total assets.
INFORMATION AGE PORTFOLIO. Under normal market conditions, the Information
Age Portfolio will invest at least 65% of its total assets in securities of
information age companies. Securities eligible for purchase include common and
preferred stocks; equity interests in trusts, partnerships, joint ventures and
other unincorporated entities or enterprises; special classes of shares
available only to foreign investors in markets that restrict ownership by
foreign investors to certain classes of equity securities; convertible
preferred stocks; and other convertible instruments. Convertible debt
instruments generally will be rated below investment grade (i.e., rated lower
than Baa by Moody's or lower than BBB by S&P) or, if unrated, determined by an
investment adviser to be of equivalent quality. Convertible debt securities so
rated are commonly called "junk bonds" and have risks similar to equity
securities; they are speculative and changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments than is the case with higher grade debt securities. Such
below investment grade debt securities will not exceed 20% of total assets.
FOREIGN INVESTMENTS. Investing in securities issued by companies domiciled
outside the United States may involve significant risks not present in
domestic investments. For example, there is generally less publicly available
information about foreign companies, particularly those not subject to the
disclosure and reporting requirements of the U.S. securities laws. Foreign
issuers are generally not bound by uniform accounting, auditing, and financial
reporting requirements and standards of practice comparable to those
applicable to domestic issuers. Investments in foreign securities also involve
the risk of possible adverse changes in investment or exchange control
regulations, expropriation or confiscatory taxation, limitation on the removal
of funds or other assets of a Portfolio, political or financial instability or
diplomatic and other developments which could affect such investments.
Further, economies of particular countries or areas of the world may differ
favorably or unfavorably from the economy of the United States. It is
anticipated that in most cases the best available market for foreign
securities will be on exchanges or in over-the-counter markets located outside
of the United States. Foreign stock markets, while growing in volume and
sophistication, are generally not as developed as those in the United States,
and securities of some foreign issuers (particularly those located in
developing countries) may be less liquid and more volatile than securities of
comparable U.S. companies. In addition, foreign brokerage commissions are
generally higher than commissions on securities traded in the United States
and may be non-negotiable. In general, there is less overall governmental
supervision and regulation of foreign securities markets, broker-dealers, and
issuers than in the United States. In some countries delayed settlements are
customary, which increases the risk of loss.
Each Portfolio may also invest in American Depositary Receipts (ADRs),
European Depositary Receipts (EDRs) and Global Depositary Receipts (GDRs).
ADRs, EDRs and GDRs are certificates evidencing ownership of shares of a
foreign issuer and are alternatives to directly purchasing the underlying
foreign securities in their national markets and currencies. However, they
continue to be subject to many of the risks associated with investing directly
in foreign securities. These risks include foreign exchange risk as well as
the political and economic risks of the underlying issuer's country. ADRs,
EDRs and GDRs may be sponsored or unsponsored. Unsponsored receipts are
established without the participation of the issuer. Unsponsored receipts may
involve higher expenses, they may not pass-through voting and other
shareholder rights, and they may be less liquid.
FOREIGN CURRENCY TRANSACTIONS. Because investments in companies whose
principal business activities are located outside of the United States will
frequently involve currencies of foreign countries, and because assets of a
Portfolio may temporarily be held in bank deposits in foreign currencies
during the completion of investment programs, the value of the assets of a
Portfolio as measured in U.S. dollars may be affected favorably or unfavorably
by changes in foreign currency exchange rates and exchange control
regulations. Currency exchange rates can also be affected unpredictably by
intervention by U.S. or foreign governments or central banks, or the failure
to intervene, or by currency controls or political developments in the U.S. or
abroad. A Portfolio may conduct its foreign currency exchange transactions on
a spot (i.e., cash) basis at the spot rate prevailing in the foreign currency
exchange market or through entering into swaps, forward contracts, options or
futures on currency. On spot transactions, foreign exchange dealers do not
charge a fee for conversion, but they do realize a profit based on the
difference (the "spread") between the prices at which they are buying and
selling various currencies. Thus, a dealer may offer to sell a foreign
currency to a Portfolio at one rate, while offering a lesser rate of exchange
should the Portfolio desire to resell that currency to the dealer.
EMERGING COMPANIES. The investment risk associated with emerging companies is
higher than that normally associated with larger, older companies due to the
greater business risks associated with small size, the relative age of the
company, limited product lines, distribution channels and financial and
managerial resources. Further, there is typically less publicly available
information concerning smaller companies than for larger, more established
ones. The securities of small companies are often traded only over-the-counter
and may not be traded in the volumes typical of trading on a national
securities exchange. As a result, in order to sell this type of holding, a
Portfolio may need to discount the securities from recent prices or dispose of
the securities over a long period of time. The prices of this type of security
may be more volatile than those of larger companies which are often traded on
a national securities exchange.
CURRENCY SWAPS. A Portfolio may enter into currency swaps for both hedging
and non-hedging purposes. Currency swaps involve the exchange of rights to
make or receive payments in specified currencies. Since currency swaps are
individually negotiated, a Portfolio expects to achieve an acceptable degree
of correlation between its portfolio investments and its currency swap
positions. Currency swaps usually involve the delivery of the entire principal
value of one designated currency in exchange for the other designated
currency. Therefore, the entire principal value of a currency swap is subject
to the risk that the other party to the swap will default on its contractual
delivery obligations. The use of currency swaps is a highly specialized
activity which involves special investment techniques and risks. If an
investment adviser is incorrect in its forecasts of market values and currency
exchange rates, a Portfolio's performance will be adversely affected.
Currency swaps require maintenance of a segregated account described under
"Asset Coverage Requirements" below. Each Portfolio will not enter into any
currency swap unless the credit quality of the unsecured senior debt or the
claims-paying ability of the other party thereto is considered to be
investment grade by the investment adviser. If there is a default by the other
party to such a transaction, the Portfolio will have contractual remedies
pursuant to the agreements related to the transaction. The swap market has
grown substantially in recent years with a large number of banks and
investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid in comparison with the markets for other similar instruments
which are traded in the interbank market.
RESTRICTED SECURITIES. Each Portfolio may invest up to 15% of net assets in
illiquid securities. Illiquid securities include securities legally restricted
as to resale, such as commercial paper issued pursuant to Section 4(2) of the
Securities Act of 1933, as amended, and securities eligible for resale
pursuant to Rule 144A thereunder. Section 4(2) and Rule 144A securities may,
however, be treated as liquid by the investment adviser pursuant to procedures
adopted by the Trustees, which require consideration of factors such as
trading activity, availability of market quotations and number of dealers
willing to purchase the security. If a 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.
It may be difficult to sell such securities at a price representing their
fair value until such time as such securities may by sold publicly. Where
registration is required, a considerable period may elapse between a decision
to sell the securities and the time when a Portfolio would be permitted to
sell. Thus, a Portfolio may not be able to obtain as favorable a price as that
prevailing at the time of the decision to sell. Each Portfolio may also
acquire securities through private placements under which it may agree to
contractual restrictions on the resale of such securities. Such restrictions
might prevent their sale at a time when such sale would otherwise be
desirable.
FORWARD FOREIGN CURRENCY EXCHANGE TRANSACTIONS. Forward contracts are
individually negotiated and privately traded by currency traders and their
customers. A forward contract involves an obligation to purchase or sell a
specific currency (or basket of currencies) for an agreed price at a future
date, which may be any fixed number of days from the date of the contract.
Each Portfolio may engage in cross-hedging by using forward contracts in one
currency (or basket of currencies) to hedge against fluctuations in the value
of securities denominated in a different currency if the Portfolio's adviser
determines that there is an established historical pattern or correlation
between the two currencies (or the basket of currencies and the underlying
currency). Use of a different foreign currency magnifies a Portfolio's
exposure to foreign currency exchange rate fluctuations. Each Portfolio may
also use forward contracts to shift its exposure to foreign currency exchange
rate changes from one currency to another.
Each Portfolio may enter into forward foreign currency exchange contracts
in several circumstances. First, when the Portfolio enters into a contract for
the purchase or sale of a security denominated in a foreign currency, or when
the Portfolio anticipates the receipt in a foreign currency of dividend or
interest payments on such a security which it holds, the Portfolio may desire
to "lock in" the U.S. dollar price of the security or the U.S. dollar
equivalent of such dividend or interest payment, as the case may be. By
entering into a forward contract for the purchase or sale, for a fixed amount
of dollars, of the amount of foreign currency involved in the underlying
transactions, the Portfolio will attempt to protect itself against an adverse
change in the relationship between the U.S. dollar and the subject foreign
currency during the period between the date on which the security is purchased
or sold, or on which the dividend or interest payment is declared, and the
date on which such payments are made or received.
Additionally, when management of a Portfolio believes that the currency of
a particular foreign country may suffer a substantial decline against the U.S.
dollar, it may enter into a forward contract to sell, for a fixed amount of
dollars, the amount of foreign currency approximating the value of some or all
of the securities held by the Portfolio denominated in such foreign currency.
The precise matching of the forward contract amounts and the value of the
securities involved will not generally be possible because the future value of
such securities in foreign currencies will change as a consequence of market
movements in the value of those securities between the date on which the
contract is entered into and the date it matures. The precise projection of
short-term currency market movements is not possible, and short-term hedging
provides a means of fixing the dollar value of only a portion of a Portfolio's
foreign assets.
SPECIAL RISKS ASSOCIATED WITH CURRENCY TRANSACTIONS. Transactions in forward
contracts, as well as futures and options on foreign currencies, are subject
to the risk of governmental actions affecting trading in or the prices of
currencies underlying such contracts, which could restrict or eliminate
trading and could have a substantial adverse effect on the value of positions
held by the Portfolio. In addition, the value of such positions could be
adversely affected by a number of other complex political and economic factors
applicable to the countries issuing the underlying currencies.
Furthermore, unlike trading in most other types of instruments, there is
no systematic reporting of last sale information with respect to the foreign
currencies underlying forward contracts, futures contracts and options. As a
result, the available information on which a Portfolio's trading systems will
be based may not be as complete as the comparable data on which the Portfolio
makes investment and trading decisions in connection with securities and other
transactions. Moreover, because the foreign currency market is a global,
twenty-four hour market, events could occur in that market which will not be
reflected in the forward, futures or options markets until the following day,
thereby preventing a Portfolio from responding to such events in a timely
manner.
Settlements of over-the-counter forward contracts or of the exercise of
foreign currency options generally must occur within the country issuing the
underlying currency, which in turn requires parties to such contracts to
accept or make delivery of such currencies in conformity with any United
States or foreign restrictions and regulations regarding the maintenance of
foreign banking relationships, fees, taxes or other charges.
Unlike currency futures contracts and exchange-traded options, options on
foreign currencies and forward contracts are not traded on contract markets
regulated by the Commodity Futures Trading Commission ("CFTC") or (with the
exception of certain foreign currency options) the Securities and Exchange
Commission (the "SEC"). To the contrary, such instruments are traded through
financial institutions acting as market-makers. (Foreign currency options are
also traded on the Philadelphia Stock Exchange subject to SEC regulation). In
an over-the-counter trading environment, many of the protections associated
with transactions on exchanges will not be available. For example, there are
no daily price fluctuation limits, and adverse market movements could
therefore continue to an unlimited extent over a period of time. Although the
purchaser of an option cannot lose more than the amount of the premium plus
related transaction costs, this entire amount could be lost. Moreover, an
option writer could lose amounts substantially in excess of its initial
investment due to the margin and collateral requirements associated with such
option positions. Similarly, there is no limit on the amount of potential
losses on forward contracts to which a Portfolio is a party.
In addition, over-the-counter transactions can only be entered into with a
financial institution willing to take the opposite side, as principal, of a
Portfolio's position unless the institution acts as broker and is able to find
another counterparty willing to enter into the transaction with the Portfolio.
Where no such counterparty is available, it will not be possible to enter into
a desired transaction. There also may be no liquid secondary market in the
trading of over-the-counter contacts, and a Portfolio may be unable to close
out options purchased or written, or forward contracts entered into, until
their exercise, expiration or maturity. This in turn could limit a Portfolio's
ability to realize profits or to reduce losses on open positions and could
result in greater losses.
Furthermore, over-the-counter transactions are not backed by the guarantee
of an exchange's clearing corporation. A Portfolio will therefore be subject
to the risk of default by, or the bankruptcy of, the financial institution
serving as its counterparty. One or more of such institutions also may decide
to discontinue its role as market-maker in a particular currency, thereby
restricting a Portfolio's ability to enter into desired hedging transactions.
A Portfolio will enter into over-the-counter transactions only with parties
whose creditworthiness has been reviewed and found satisfactory by an
investment adviser.
The purchase and sale of exchange-traded foreign currency options,
however, are subject to the risks of the availability of a liquid secondary
market described above, as well as the risks regarding adverse market
movements, margining of options written, the nature of the foreign currency
market, possible intervention by governmental authorities and the effect of
other political and economic events. In addition, exchange-traded options on
foreign currencies involve certain risks not presented by the over-the-counter
market. For example, exercise and settlement of such options must be made
exclusively through the Options Clearing Corporation ("OCC"), which has
established banking relationships in applicable foreign countries for this
purpose. As a result, the OCC may, if it determines that foreign governmental
restrictions or taxes would prevent the orderly settlement of foreign currency
option exercises, or would result in undue burdens on the OCC or its clearing
member, impose special procedures for exercise and settlement, such as
technical changes in the mechanics of delivery of currency, the fixing of
dollar settlement prices or prohibitions on exercise.
DERIVATIVE INSTRUMENTS. Each Portfolio may purchase or sell derivative
instruments (which are instruments that derive their value from another
instrument, security, index or currency) to enhance return, to hedge against
fluctuations in securities prices, interest rates or currency exchange rates,
or as a substitute for the purchase or sale of securities or currencies. A
Portfolio's transactions in derivative instruments may be in the U.S. or
abroad and may include the purchase or sale of futures contracts on
securities, securities indices, other indices, other financial instruments or
currencies; options on futures contracts; exchange-traded and over-the-counter
options on securities, indices or currencies; and forward foreign currency
exchange contracts. A Portfolio's transactions in derivative instruments
involve a risk of loss or depreciation due to: unanticipated adverse changes
in securities prices, interest rates, the other financial instruments' prices
or currency exchange rates; the inability to close out a position; default by
the counterparty; imperfect correlation between a position and the desired
hedge; tax constraints on closing out positions; and portfolio management
constraints on securities subject to such transactions. The loss on derivative
instruments (other than purchased options) may substantially exceed a
Portfolio's initial investment in these instruments. In addition, a Portfolio
may lose the entire premium paid for purchased options that expire before they
can be profitably exercised by a Portfolio. A Portfolio incurs transaction
costs in opening and closing positions in derivative instruments. Under
regulations of the CFTC, the use of futures transactions for non-hedging
purposes is limited. There can be no assurance that a Portfolio's investment
adviser's use of derivative instruments will be advantageous to the Portfolio.
Each Portfolio may enter into futures contracts, and options on futures
contracts, traded on an exchange regulated by the CFTC and on foreign
exchanges, but, with respect to foreign exchange-traded futures contracts and
options on such futures contracts, only if a Portfolio's investment adviser
determines that trading on each such foreign exchange does not subject the
Portfolio to risks, including credit and liquidity risks, that are materially
greater than the risks associated with trading on CFTC-regulated exchanges.
In order to hedge its current or anticipated portfolio positions, a
Portfolio may use futures contracts on securities held in its Portfolio or on
securities with characteristics similar to those of the securities held by the
Portfolio. If, in the opinion of a Portfolio's investment adviser, there is a
sufficient degree of correlation between price trends for the securities held
by the Portfolio and futures contracts based on other financial instruments,
securities indices or other indices, the Portfolio may also enter into such
futures contracts as part of its hedging strategy.
A Portfolio may purchase call and put options, subject to the Asset
Coverage Requirements set forth below. A Portfolio may only write a put option
on a security that it intends to acquire for its investment portfolio. Health
Sciences Portfolio will not purchase an option on a security if, after such
transaction, more than 5% of its net assets, measured by the aggregate of all
premiums paid for all such options held by the Portfolio, would be so
invested.
To the extent that a Portfolio enters into futures contracts, options on
futures contracts and options on foreign currencies traded on an exchange
regulated by the CFTC, in each case that are not for bona fide hedging
purposes (as defined by the CFTC), the aggregate initial margin and premiums
required to establish these positions (excluding the amount by which options
are "in-the-money") may not exceed 5% of the liquidation value of the
Portfolio's investments, after taking into account unrealized profits and
unrealized losses on any contracts the Portfolio has entered into.
RISKS ASSOCIATED WITH DERIVATIVE INSTRUMENTS. Entering into a derivative
instrument involves a risk that the applicable market will move against a
Portfolio's position and that the Portfolio will incur a loss. For derivative
instruments other than purchased options, this loss may exceed the amount of
the initial investment made or the premium received by a Portfolio. Derivative
instruments may sometimes increase or leverage a Portfolio's exposure to a
particular market risk. Leverage enhances the Portfolio's exposure to the
price volatility of derivative instruments it holds. A Portfolio's success in
using derivative instruments to hedge portfolio assets depends on the degree
of price correlation between the derivative instruments and the hedged asset.
Imperfect correlation may be caused by several factors, including temporary
price disparities among the trading markets for the derivative instrument, the
assets underlying the derivative instrument and the Portfolio assets. Over-
the-counter ("OTC") derivative instruments involve an enhanced risk that the
issuer or counterparty will fail to perform its contractual obligations. Some
derivative instruments are not readily marketable or may become illiquid under
adverse market conditions. In addition, during periods of market volatility, a
commodity exchange may suspend or limit trading in an exchange-traded
derivative instrument, which may make the contract temporarily illiquid and
difficult to price. Commodity exchanges may also establish daily limits on the
amount that the price of a futures contract or futures option can vary from
the previous day's settlement price. Once the daily limit is reached, no
trades may be made that day at a price beyond the limit. This may prevent a
Portfolio from closing out positions and limiting its losses. The staff of the
SEC takes the position that certain purchased OTC options, and assets used as
cover for written OTC options, are subject to a Portfolio's 15% limit on
illiquid investments. A Portfolio's ability to terminate OTC derivative
instruments may depend on the cooperation of the counterparties to such
contracts. For thinly traded derivative instruments, the only source of price
quotations may be the selling dealer or counterparty. In addition, certain
provisions of the Code limit the extent to which the Portfolio may purchase
and sell derivative instruments. A Portfolio will engage in transactions in
futures contracts and related options only to the extent such transactions are
consistent with the requirements of the Code for maintaining the qualification
of its corresponding Fund as a regulated investment company for federal income
tax purposes.
REPURCHASE AGREEMENTS. Each Portfolio may enter into repurchase agreements
(the purchase of a security coupled with an agreement to resell) with respect
to its permitted investments, but currently intends to do so only with member
banks of the Federal Reserve System or with primary dealers in U.S. Government
securities. In the event of the bankruptcy of the other party to a repurchase
agreement, a Portfolio might experience delays in recovering its cash. To the
extent that, in the meantime, the value of the securities a Portfolio
purchased may be have decreased, the Portfolio could experience a loss. The
Portfolios do not expect to invest more than 5% of their respective total
assets in repurchase agreements under normal circumstances. At no time will a
Portfolio commit more than 15% of its net assets to repurchase agreements
which mature in more than seven days and other illiquid securities. A
Portfolio's repurchase agreements will provide that the value of the
collateral underlying the repurchase agreement will always be at least equal
to the repurchase price, including any accrued interest earned on the
repurchase agreement, and will be marked to market daily.
REVERSE REPURCHASE AGREEMENTS. Each Portfolio may enter into reverse
repurchase agreements. Under a reverse repurchase agreement, a Portfolio
temporarily transfers possession of a portfolio instrument to another party,
such as a bank or broker-dealer, in return for cash. At the same time, the
Portfolio agrees to repurchase the instrument at an agreed upon time (normally
within seven days) and price, which reflects an interest payment. The
Portfolio expects that it will enter into reverse repurchase agreements when
it is able to invest the cash so acquired at a rate higher than the cost of
the agreement, which would increase the income earned by the Portfolio. The
Portfolio could also enter into reverse repurchase agreements as a means of
raising cash to satisfy redemption requests without the necessity of selling
portfolio assets.
When a Portfolio enters into a reverse repurchase agreement, any
fluctuations in the market value of either the securities transferred to
another party or the securities in which the proceeds may be invested would
affect the market value of the Portfolio's assets. As a result, such
transactions may increase fluctuations in the market value of the Portfolio's
assets. While there is a risk that large fluctuations in the market value of
the Portfolio's assets could affect the Portfolio's net asset value, this risk
is not significantly increased by entering into reverse repurchase agreements,
in the opinion of an adviser. Because reverse repurchase agreements may be
considered to be the practical equivalent of borrowing funds, they constitute
a form of leverage. If a Portfolio reinvests the proceeds of a reverse
repurchase agreement at a rate lower than the cost of the agreement, entering
into the agreement will lower the Portfolio's yield.
While an investment adviser does not consider reverse repurchase
agreements to involve a traditional borrowing of money, reverse repurchase
agreements will be included within the aggregate limitation on "borrowings"
contained in the Portfolio's investment restriction (1) set forth below.
LENDING PORTFOLIO SECURITIES. If the relevant investment adviser decides to
make securities loans, each of the Portfolios may seek to increase its income
by lending portfolio securities to broker-dealers or other institutional
borrowers. The financial condition of the borrower will be monitored by an
adviser on an ongoing basis. The Portfolio would continue to receive the
equivalent of the interest or dividends paid by the issuer on the securities
loaned and would also receive a fee, or all or a portion of the interest on
investment of the collateral. The Portfolio would have the right to call a
loan and obtain the securities loaned at any time on up to five business days'
notice. The Portfolio would not have the right to vote any securities having
voting rights during the existence of a loan, but could call the loan in
anticipation of an important vote to be taken among holders of the securities
or the giving or holding of their consent on a material matter affecting the
investment. Securities lending involves administrative expenses, including
finders' fees. If an adviser decides to make securities loans, it is intended
that the value of the securities loaned would not exceed 1/3 of a Portfolio's
total assets.
ASSET COVERAGE REQUIREMENTS. Transactions involving reverse repurchase
agreements, currency swaps, forward contracts, futures contracts and options
(other than options that the Portfolio has purchased) expose a Portfolio to an
obligation to another party. A Portfolio will not enter into any such
transactions unless it owns either (1) an offsetting ("covered") position in
securities, currencies or other options, futures contracts or forward
contracts, or (2) cash or liquid securities with a value sufficient at all
times to cover its potential obligations not covered as provided in (1) above.
(Only the net obligations of a swap will be covered.) Each Portfolio will
comply with SEC guidelines regarding cover for these instruments and, if the
guidelines so require, set aside cash or liquid securities in a segregated
account with its custodian in the prescribed amount. The securities in the
segregated account will be marked to market daily.
Assets used as cover or held in a segregated account maintained by the
Portfolio's custodian cannot be sold while the position requiring coverage or
segregation is outstanding unless they are replaced with other appropriate
assets. As a result, the commitment of a large portion of a Portfolio's assets
to segregated accounts or to cover could impede portfolio management or the
Portfolio's ability to meet redemption requests or other current obligations.
CONVERTIBLE SECURITIES. A Portfolio may from time to time invest a portion of
its assets in debt securities and preferred stocks which are convertible into,
or carry the right to purchase, common stock or other equity securities. The
debt security or preferred stock (such as Canadian special warrants) may
itself be convertible into or exchangeable for equity securities, or the
purchase right may be evidenced by warrants attached to the security or
acquired as part of a unit with the security. Convertible securities may be
purchased for their appreciation potential when they yield more than the
underlying securities at the time of purchase or when they are considered to
present less risk of principal loss than the underlying securities. Generally
speaking, the interest or dividend yield of a convertible security is somewhat
less than that of a non-convertible security of similar quality issued by the
same company.
WARRANTS. Warrants are an option to purchase equity securities at a specific
price valid for a specific period of time. They do not represent ownership of
the securities, but only the right to buy them. The prices of warrants do not
necessarily move parallel to the prices of the underlying securities. Warrants
may become valueless if not sold or exercised prior to their expiration.
(Canadian special warrants issued in private placements prior to a public
offering are not considered warrants for purposes of a Portfolio's investment
restrictions).
OTHER INVESTMENT COMPANIES. Each Portfolio reserves the right to invest up to
10% of its total assets in the securities of other investment companies
unaffiliated with the Portfolio's adviser that have the characteristics of
closed-end investment companies. A Portfolio will indirectly bear its
proportionate share of any management fees paid by investment companies in
which it invests in addition to the advisory fee paid by a Portfolio. The
value of closed-end investment company securities, which are usually traded on
an exchange, is affected by demand for the securities themselves, independent
of the demand for the underlying portfolio assets, and, accordingly, such
securities can trade at a discount from their net asset values.
PORTFOLIO TURNOVER. A Portfolio cannot accurately predict its portfolio
turnover rate, but it is anticipated that the Health Sciences Portfolio's
annual turnover rate will generally not exceed 100%, while the Information Age
Portfolio's annual turnover rate will exceed 100% (excluding, in both cases,
turnover of securities having a maturity of one year or less). A 100% turnover
rate could occur if all the securities held by a Portfolio are sold and either
repurchased or replaced within one year. A high turnover rate (100% or more)
necessarily involves greater expenses to a Portfolio. High portfolio turnover
may also result in the realization of substantial net short-term capital
gains.
INVESTMENT RESTRICTIONS
The following investment restrictions of each Fund are designated as
fundamental policies and as such cannot be changed without the approval of the
holders of a majority of a Fund's outstanding voting securities, which as used
in this SAI means the lesser of (a) 67% of the shares of a Fund present or
represented by proxy at a meeting if the holders of more than 50% of the
outstanding shares are present or represented at the meeting or (b) more than
50% of the outstanding shares of a Fund. Accordingly, each Fund may not:
(1) Borrow money or issue senior securities except as permitted by the
Investment Company Act of 1940, as amended (the "1940 Act");
(2) Purchase any securities on margin (but the Fund may obtain such
short-term credits as may be necessary for the clearance of purchases and
sales of securities);
(3) Make loans to any person except by (a) the acquisition of debt
securities and making portfolio investments, (b) entering into repurchase
agreements and (c) lending portfolio securities;
(4) With respect to 75% of its total assets, invest more than 5% of
its total assets (taken at current value) in the securities of any one
issuer, or invest in more than 10% of the outstanding voting securities of
any one issuer, except obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities and except securities of
other investment companies;
(5) Underwrite securities of other issuers; or
(6) Invest in real estate including interests in real estate limited
partnerships (although it may purchase and sell securities which are
secured by real estate and securities of companies which invest or deal in
real estate) or in commodities or commodity contracts for the purchase or
sale of physical commodities.
With respect to the Information Age Fund, the Fund may not:
(7) Concentrate its investments in any particular industry, but, if
deemed appropriate for the Fund's objective, up to 25% of the value of its
assets may be invested in securities of companies in any one industry
(although more than 25% may be invested in securities issued or guaranteed
by the U.S. Government or its agencies or instrumentalities).
With respect to the Health Sciences Fund, the Fund may not:
(8) Invest in the securities of any one industry, except the medical
research and health care industry (and except securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities) if
as a result 25% or more of the Fund's total assets would be invested in
the securities of such industry.
Notwithstanding the investment policies and restrictions of each Fund, the
Fund may invest its investable assets in an open-end management investment
company with substantially the same investment objective, policies and
restrictions as the Fund.
Each Portfolio has adopted substantially the same fundamental investment
restrictions as the foregoing investment restrictions adopted by each Fund;
such restrictions cannot be changed without the approval of a "majority of the
outstanding voting securities" of a Portfolio.
For as long as a feeder fund of Information Age Portfolio has registered
shares in Hong Kong (and for so long as Hong Kong requires the following
restrictions), the Portfolio may not:
(i) invest (except as stated below) more than 10% of its net assets in
the securities of any one issuer; (ii) purchase (except as stated below)
more than 10% of the ordinary shares of any one issuer; (iii) invest more
than 15% of net assets in securities which are not listed or quoted on any
stock exchange, over-the-counter market or other organized securities
market that is open to the international public and on which such
securities are regularly traded (a "Market"); (iv) invest more than 15% of
net assets in warrants and options for non-hedging purposes; (v) write
call options on investments exceeding 25% of its total net asset value in
terms of exercise price; (vi) enter into futures contracts on an unhedged
basis where the net total aggregate value of contract prices, whether
payable by or to the Portfolio under all outstanding futures contracts,
together with the aggregate value of holdings under paragraph (vii) below
exceeds 20% of the net total asset value; (vii) invest in physical
commodities (including gold, silver, platinum or other bullion) and
commodity based investments (other than shares in companies engaged in
producing, processing or trading in commodities) which value together with
the net aggregate value of the holdings described in (v) above, exceeds
20% of the total net asset value; (viii) purchase shares of other
investment companies exceeding 10% of net assets. In addition, the
investment objective of any investment company in which any Portfolio
invests must not be to invest in investments prohibited by this
undertaking and where the investment company 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;
(ix) borrow more than 25% of its net assets (provided that for the
purposes of this paragraph, back to back loans are not to be characterized
as borrowings but any reverse repurchase agreement entered into by the
Portfolio will constitute a form of leverage and hence, will count towards
the 25% borrowing limit); (x) write uncovered options; (xi) invest in real
estate (including options, rights or interests therein but excluding
shares in real estate companies); (xii) assume, guarantee, endorse or
otherwise become directly or contingently liable for, or in connection
with, any obligation or indebtedness of any person in respect of borrowed
money without the prior written consent of the custodian; (xiii) engage in
short sales involving a liability to deliver securities exceeding 10% of
its net assets provided that any security sold short must be actively
traded on a Market; (xiv) purchase (subject to paragraph (vi) above) an
investment with unlimited liability; or (xv) purchase any nil or partly-
paid securities unless any call thereon could be met in full out of cash
or near cash held by it in the amount of which has not already been taken
into account for the purposes of (v) above. Notwithstanding (i) and (ii)
above: (i) up to 30% of a Portfolio's total net asset value may be
invested in government and public securities of the same issue; and (ii)
subject to (i) above, a Portfolio may invest all of its assets in
government and other public securities in at least six different issues.
The Funds and the Portfolios have adopted the following investment policy
which may be changed by the Trustees with respect to a Fund without approval
by that Fund's shareholders or with respect to the Portfolio without approval
of a Fund or its other investors. Each Fund and each Portfolio will not:
(a) invest more than 15% of its net assets in investments which are
not readily marketable, including restricted securities and repurchase
agreements with a maturity longer than seven days. Restricted securities
for the purposes of this limitation do not include securities eligible for
resale pursuant to Rule 144A under the Securities Act and commercial paper
issued pursuant to Section 4(2) of said Act that the Trustees of the
Trust, or their delegate, determine to be liquid. Any such determination
by a delegate will be made pursuant to procedures adopted by the Board.
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 a Fund's or a Portfolio's acquisition of
such security or other asset. Accordingly, any later increase or decrease
resulting from a change in values, assets or other circumstances or any
subsequent rating change made by a rating service will not compel the Fund or
the Portfolio, as the case may be, to dispose of such security or other asset.
Notwithstanding the foregoing, under normal circumstances the Information Age
Fund and Portfolio will maintain at least 65% of its total assets in
securities of information age companies and the Health Sciences Fund and
Portfolio will maintain at least 65% of its total assets in securities of
health science companies and will not invest more than 15% of net assets in
illiquid securities. Moreover, each Fund and the Portfolio must always be in
compliance with the borrowing policies set forth above.
MANAGEMENT AND ORGANIZATION
FUND MANAGEMENT. The Trustees and officers of the Trust and the Portfolios
are listed below. Except as indicated, each individual has held the office
shown or other offices in the same company for the last five years. Unless
otherwise noted, the business address of each Trustee and officer is The Eaton
Vance Building, 255 State Street, Boston, Massachusetts 02109. Those Trustees
who are "interested persons" of the Trust or a Portfolio, as defined in the
1940 Act, are indicated by an asterisk(*).
JESSICA M. BIBLIOWICZ (40), Trustee*
President and Chief Executive Officer of National Financial Partners (a
financial services company) (since April 1999). President and Chief
Operating Officer of John A. Levin & Co. (a registered investment advisor)
(July 1997 to April 1999) and a Director of Baker, Fentress & Company which
owns John A. Levin & Co. (July 1997 to April 1999). Formerly Executive Vice
President of Smith Barney Mutual Funds (from July 1994 to June 1997).
Elected Trustee October 30, 1998. Trustee of various investment companies
managed by Eaton Vance or BMR since October 30, 1998.
Address: 787 Seventh Avenue, 49th Floor, New York, NY 10019
EDWARD K.Y. CHEN (55), Trustee of Information Age Portfolio
President of Lingnan College in Hong Kong. Professor and Director of Centre of
Asian Studies at the University of Hong Kong from 1979-1995. Director of
First Pacific Company, Asia Satellite Telecommunications Holdings Ltd., and
a Board Member of the Mass Transit Railway Corporation. Member of the
Executive Council of the Hong Kong Government from 1992-1997 and Chairman of
the Consumer Council from 1991-1997.
Address: President's Office, Lingnan College, Tuen Mun, Hong Kong
DONALD R. DWIGHT (69), Trustee
President of Dwight Partners, Inc. (a corporate relations and communications
company). Trustee/Director of the Royce Funds (mutual funds). Trustee of
various investment companies managed by Eaton Vance or BMR.
Address: Clover Mill Lane, Lyme, New Hampshire 03768
HON. ROBERT LLOYD GEORGE (48), Trustee and Vice President of Information Age
Portfolio*
Chairman and Chief Executive Officer of Lloyd George. Chairman and Chief
Executive Officer of the investment advisers.
Address: 3808 One Exchange Square, Central, Hong Kong
JAMES B. HAWKES (59), President and Trustee*
President and Chief Executive Officer of BMR, Eaton Vance and their corporate
parent and trustee (EVC and EV). Director of EVC and EV. Trustee and officer
of various investment companies managed by Eaton Vance or BMR.
SAMUEL L. HAYES, III (65), Trustee
Jacob H. Schiff Professor of Investment Banking Emeritus, Harvard University
Graduate School of Business Administration. Trustee of the Kobrick
Investment Trust (mutual funds). Trustee of various investment companies
managed by Eaton Vance or BMR.
Address: 345 Nahatan Road, Westwood, Massachusetts 02090
NORTON H. REAMER (65), Trustee
President, Chairman and Chief Operating Officer, Hellman, Jordan Management
Co., Inc. (an investment management company) (since November 2000) and
President, Jordan Simmons Capital LLC (manager of energy related
investments) (since November 2000). President, Unicorn Corporation (an
investment and financial advisory services company). Formerly Chairman of
the Board, United Asset Management Corporation (a holding company owning
institutional investment management firms) and 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 (43), 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 (70), Trustee
Investment Adviser and Consultant. Trustee of various investment companies
managed by Eaton Vance or BMR.
Address: 504 Via Almar, Palos Verdes Estates, California 90274
SAMUEL D. ISALY (55), Vice President of Health Sciences Portfolio
Managing Partner of OrbiMed Advisors, Inc. since 1998; President of Mehta and
Isaly Asset Management, Inc. from 1989 through 1998; Senior Vice President
of S.G. Warburg & Co., Inc. from 1986 through 1989; and President of
Gramercy Associates, a health care industry consulting firm, from 1983
through 1986.
Address: OrbiMed Advisors, Inc., 767 3rd Avenue, New York, NY 10017
DUNCAN W. RICHARDSON (43), Vice President of Information Age Portfolio
Vice President of Eaton Vance and BMR. Officer of various investment companies
managed by Eaton Vance or BMR.
JAMES L. O'CONNOR (55), Treasurer
Vice President of BMR and Eaton Vance. Officer of various other investment
companies managed by Eaton Vance or BMR.
ALAN R. DYNNER (60), Secretary
Vice President, Secretary and Chief Legal Officer of BMR, Eaton Vance and EVC.
Prior to joining Eaton Vance on November 1, 1996, 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 (65), Assistant Treasurer and Assistant Secretary
Vice President of BMR and Eaton Vance. Officer of various investment companies
managed by Eaton Vance or BMR.
A. JOHN MURPHY (38), Assistant Secretary
Vice President of BMR and Eaton Vance. Officer of various investment companies
managed by Eaton Vance or BMR.
ERIC G. WOODBURY (43), Assistant Secretary
Vice President of BMR and Eaton Vance. Officer of various investment companies
managed by Eaton Vance or BMR.
The Nominating Committee of the Board of Trustees of the Trust and each
Portfolio is comprised of the Trustees who are not "interested persons" as
that term is defined under the 1940 Act ("noninterested Trustees"). The purpose
of the Committee is to recommend to the Board nominees for the position of
noninterested Trustee and to assure that at least a majority of the Board of
Trustees is independent of Eaton Vance and its affiliates.
Messrs. Hayes (Chairman), Dwight and Reamer and Ms. Stout are members of
the Special Committee of the Board of Trustees of the Trust and of each
Portfolio. The purpose of the Special Committee is to consider, evaluate and
make recommendations to the full Board of Trustees concerning (i) all
contractual arrangements with service providers to the Funds and the
Portfolios, including investment advisory (Portfolio only), administrative,
transfer agency, custodial and fund accounting and distribution services, and
(ii) all other matters in which Eaton Vance or its affiliates has any actual
or potential conflict of interest with the Funds, the Portfolios or investors
therein.
Messrs. Treynor (Chairman), Dwight and Reamer are members of the Audit
Committee of the Board of Trustees of the Trust and of each Portfolio. The
Audit Committee's functions include making recommendations to the Trustees
regarding the selection and performance of the independent accountants, and
reviewing matters relative to accounting and auditing practices and
procedures, accounting records, and the internal accounting controls of the
Trust, the Portfolios and certain of their service providers.
Trustees of the Information Age Portfolio that are not affiliated with the
investment adviser may elect to defer receipt of all or a percentage of their
annual fees in accordance with the terms of a Trustees Deferred Compensation
Plan (the "Trustees" Plan"). Under the Trustees' Plan, an eligible Trustee
may elect to have his deferred fees invested by the Portfolio in the shares of
one or more funds in the Eaton Vance Family of Funds, and the amount paid to
the Trustees under the Trustees' Plan will be determined based upon the
performance of such investments. Deferral of Trustees' fees in accordance with
the Trustees' Plan will have a negligible effect on the Portfolio's assets,
liabilities, and net income per share, and will not obligate the Portfolio to
retain the services of any Trustee or obligate the Portfolio to pay any
particular level of compensation to the Trustee. Neither the Portfolio nor the
Trust has a retirement plan for its Trustees.
The fees and expenses of the noninterested Trustees of the Trust and the
Portfolios are paid by the Funds (and the other series of the Trust) and the
Portfolios, respectively. (The Trustees of the Trust and the Portfolios who are
members of the Eaton Vance organization receive no compensation from the Trust
or the Portfolios). Messrs. Chen and Lloyd George are not U.S. residents. It may
be difficult to effect service of process within the U.S. or to realize
judgments of U.S. courts upon them. It is uncertain whether courts in other
countries would entertain original actions against them. During the fiscal year
ended August 31, 2000, the noninterested Trustees of the Trust and the
Portfolios earned the following compensation in their capacities as Trustees
from the Trust and the Portfolios, and for the year ended December 31, 1999,
earned the following compensation in their capacities as Trustees of the funds
in the Eaton Vance fund complex(1):
<TABLE>
<CAPTION>
JESSICA M. EDWARD DONALD R. SAMUEL L. NORTON H. LYNN A. JACK L.
SOURCE OF COMPENSATION BIBLIOWICZ K.Y. CHEN DWIGHT HAYES, III REAMER STOUT TREYNOR
---------------------- ---------- --------- ------ ---------- ------ ----- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Trust(2) $ 1,590 $ -- $ 2,633 $ 2,998 $ 2,785 $ 2,051 $ 2,052
Information Age Portfolio $ -- $ 5,000 $ 2,182(3) $ 2,296 $ 2,153 $ 2,335(4) $ 2,359
Health Sciences Portfolio $ 2,926 $ -- $ 2,717 $ 3,189 $ 2,931 $ 3,179 $ 2,884
Trust and Fund Complex $160,000 $22,062 $160,000(5) $170,000 $160,000 $160,000(6) $170,000
------------
(1) As of January 1, 2001, the Eaton Vance fund complex consists of 151 registered investment companies or series thereof.
(2) The Trust consisted of 5 Funds as of August 31, 2000.
(3) Includes deferred compensation of $811.
(4) Includes deferred compensation of $224.
(5) Includes $60,000 of deferred compensation.
(6) Includes $16,000 of deferred compensation.
</TABLE>
ORGANIZATION. Each Fund is a series of the Trust, which was organized under
Massachusetts law on May 25, 1989 and is operated as an open-end management
investment company. The Funds were reorganized as Class A shares (formerly EV
Traditional Information Age Fund and EV Traditional Worldwide Health Sciences
Fund, Inc.), Class B shares (formerly EV Marathon Information Age Fund and EV
Marathon Worldwide Health Sciences Fund) and Class C shares (formerly EV
Classic Information Age Fund) of Eaton Vance Growth Trust on September 1,
1997, so information herein prior to such date is for the Funds when they were
separate series of the Trust (or a separate corporation) and before they
became multiple-class funds. Class C shares of Health Sciences Fund were
established January 1, 1998.
The Trust may issue an unlimited number of shares of beneficial interest
(no par value per share) in one or more series (such as the Funds). The
Trustees of the Trust have divided the shares of each Fund into multiple
classes. Each class represents an interest in a Fund, but is subject to
different expenses, rights and privileges. The Trustees have the authority
under the Declaration of Trust to create additional classes of shares with
differing rights and privileges. When issued and outstanding, shares are fully
paid and nonassessable by the Trust. Shareholders are entitled to one vote for
each full share held. Fractional shares may be voted proportionately. Shares
of a Fund will be voted together except that only shareholders of a particular
class may vote on matters affecting only that class. Shares have no preemptive
or conversion rights and are freely transferable. In the event of the
liquidation of a Fund, shareholders of each class are entitled to share pro
rata in the net assets attributable to that class available for distribution
to shareholders.
The Trustees of the Trust have considered the advantages and disadvantages
of investing the assets of each Fund in its corresponding Portfolio, as well
as the advantages and disadvantages of the two-tier format. The Trustees
believe that the structure offers opportunities for growth in the assets of
the Portfolios, may afford the potential for economies of scale for each Fund
and may over time result in lower expenses for a Fund.
As permitted by Massachusetts law, there will normally be no meetings of
shareholders for the purpose of electing Trustees unless and until such time
as less than a majority of the Trustees of the Trust holding office have been
elected by shareholders. In such an event the Trustees then in office will
call a shareholders' meeting for the election of Trustees. Except for the
foregoing circumstances and unless removed by action of the shareholders in
accordance with the Trust's By-laws, the Trustees shall continue to hold
office and may appoint successor Trustees.
The Trust's By-laws provide that no person shall serve as a Trustee if
shareholders holding two-thirds of the outstanding shares have removed him
from that office either by a written declaration filed with the Trust's
custodian or by votes cast at a meeting called for that purpose. The By-laws
further provide that under certain circumstances the shareholders may call a
meeting to remove a Trustee and that the Trust is required to provide
assistance in communication with shareholders about such a meeting.
The Trust's Declaration of Trust may be amended by the Trustees when
authorized by vote of a majority of the outstanding voting securities of the
Trust, the financial interests of which are affected by the amendment. The
Trustees may also amend the Declaration of Trust without the vote or consent
of shareholders to change the name of the Trust or any series or to make such
other changes (such as reclassifying series of classes of shares or
restructuring the Trust) as do not have a materially adverse effect on the
financial interests of shareholders or if they deem it necessary to conform it
to applicable federal or state laws or regulations. The Trust or any series or
class thereof may be terminated by: (1) the affirmative vote of the holders of
not less than two-thirds of the shares outstanding and entitled to vote at any
meeting of shareholders of the Trust or the appropriate series or class
thereof, or by an instrument or instruments in writing without a meeting,
consented to by the holders of two-thirds of the shares of the Trust or a
series or class thereof, provided, however, that, if such termination is
recommended by the Trustees, the vote of a majority of the outstanding voting
securities of the Trust or a series or class thereof entitled to vote thereon
shall be sufficient authorization; or (2) by means of an instrument in writing
signed by a majority of the Trustees, to be followed by a written notice to
shareholders stating that a majority of the Trustees has determined that the
continuation of the Trust or a series or a class thereof is not in the best
interest of the Trust, such series or class or of their respective
shareholders.
The Declaration of Trust further provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law; but nothing in the
Declaration of Trust protects a Trustee against any liability to which he
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of his
office.
Under Massachusetts law, if certain conditions prevail, shareholders of a
Massachusetts business trust (such as the Trust) could be deemed to have
personal liability for the obligations of the Trust. Numerous investment
companies registered under the 1940 Act have been formed as Massachusetts
business trusts, and management is not aware of an instance where such
liability has been imposed. The Trust's Declaration of Trust contains an
express disclaimer of liability on the part of the Fund shareholders and the
Trust's By-laws provide that the Trust shall assume the defense on behalf of
any Fund shareholders. The Declaration of Trust also contains provisions
limiting the liability of a series or class to that series or class. Moreover,
the Trust's By-laws also provide for indemnification out of the property of
the Fund of any shareholder held personally liable solely by reason of being
or having been a shareholder for all loss or expense arising from such
liability. The assets of the Fund are readily marketable and will ordinarily
substantially exceed its liabilities. In light of the nature of the Fund's
business and the nature of its assets, management believes that the
possibility of the Fund's liability exceeding its assets, and therefore the
shareholder's risk of personal liability, is remote.
The Information Age Portfolio and Health Sciences Portfolio were organized
as trusts under the laws of the state of New York on June 1, 1995 and March
26, 1996, respectively, and intend to be treated as partnerships for federal
tax purposes. In accordance with the Declaration of Trust of each Portfolio,
there will normally be no meetings of the investors for the purpose of
electing Trustees unless and until such time as less than a majority of the
Trustees of the Portfolio holding office have been elected by investors. In
such an event the Trustees of the Portfolio then in office will call an
investors' meeting for the election of Trustees. Except for the foregoing
circumstances and unless removed by action of the investors in accordance with
the Portfolio's Declaration of Trust, the Trustees shall continue to hold
office and may appoint successor Trustees.
The Declaration of Trust of each Portfolio provides that no person shall
serve as a Trustee if investors holding two-thirds of the outstanding interest
have removed him from that office either by a written declaration filed with
the Portfolio's custodian or by votes cast at a meeting called for that
purpose. The Declaration of Trust further provides that under certain
circumstances the investors may call a meeting to remove a Trustee and that
the Portfolio is required to provide assistance in communicating with
investors about such a meeting.
Each Portfolio's Declaration of Trust provides that a Fund and other
entities permitted to invest in the Portfolio (e.g., other U.S. and foreign
investment companies, and common and commingled trust funds) will each be
liable for all obligations of the Portfolio. However, the risk of the Fund
incurring financial loss on account of such liability is limited to
circumstances in which both inadequate insurance exists and the Portfolio
itself is unable to meet its obligations. Accordingly, the Trustees of the
Trust believe that neither the Fund nor its shareholders will be adversely
affected by reason of the Fund investing in the Portfolio.
Whenever a Fund as an investor in a Portfolio is requested to vote on
matters pertaining to the Portfolio (other than the termination of the
Portfolio's business, which may be determined by the Trustees of the Portfolio
without investor approval), the Fund will hold a meeting of Fund shareholders
and will vote its interest in the Portfolio for or against such matters
proportionately to the instructions to vote for or against such matters
received from Fund shareholders. A Fund shall vote shares for which it
receives no voting instructions in the same proportion as the shares for which
it receives voting instructions. Other investors in a Portfolio may alone or
collectively acquire sufficient voting interests in the Portfolio to control
matters relating to the operation of the Portfolio, which may require the Fund
to withdraw its investment in the Portfolio or take other appropriate action.
Any such withdrawal could result in a distribution "in kind" of portfolio
securities (as opposed to a cash distribution from the Portfolio). If
securities are distributed, a Fund could incur brokerage, tax or other charges
in converting the securities to cash. In addition, the distribution in kind
may result in a less diversified portfolio of investments or adversely affect
the liquidity of a Fund. Notwithstanding the above, there are other means for
meeting shareholder redemption requests, such as borrowing.
A Fund may withdraw (completely redeem) all its assets from its
corresponding Portfolio at any time if the Board of Trustees of the Trust
determines that it is in the best interest of that Fund to do so. In the event
a Fund withdraws all of its assets from its corresponding Portfolio, or the
Board of Trustees of the Trust determines that the investment objective of
such Portfolio is no longer consistent with the investment objective of the
Fund, the Trustees would consider what action might be taken, including
investing the assets of such Fund in another pooled investment entity or
retaining an investment adviser to manage the Fund's assets in accordance with
its investment objective. A Fund's investment performance may be affected by a
withdrawal of all its assets (or the assets of another investor in the
Portfolio) from its corresponding Portfolio.
INVESTMENT ADVISORY AND ADMINISTRATIVE SERVICES
INVESTMENT ADVISORY SERVICES. The Information Age Portfolio has engaged BMR
and Lloyd George as its investment advisers and the Health Sciences Portfolio
has engaged OrbiMed as its investment adviser. As investment advisers to the
Portfolios, each adviser manages a Portfolio's investments and provides
related office facilities and personnel, subject to the supervision of the
Board of Trustees of each Portfolio. The investment advisers are also
responsible for effecting all security transactions on behalf of the
Portfolios, including the allocation of principal transactions and portfolio
brokerage and the negotiation of commissions.
Under the investment advisory agreement with the Information Age
Portfolio, BMR and Lloyd George are entitled to receive a monthly advisory fee
computed by applying the annual asset rate applicable to that portion of the
average daily net assets of the Portfolio throughout the month in each
Category as indicated below:
ANNUAL
CATEGORY AVERAGE DAILY NET ASSETS ASSET RATE
-------- ------------------------ ----------
1 less than $500 million ............................ 0.75%
2 $500 million but less than $1 billion ............. 0.70
3 $1 billion but less than $1.5 billion ............. 0.65
4 $1.5 billion but less than $2 billion ............. 0.60
5 $2 billion but less than $3 billion ............... 0.55
6 $3 billion and over ............................... 0.50
As of August 31, 2000, the Information Age Portfolio had net assets of
$334,611,382. For the fiscal years ended August 31, 2000, 1999 and 1998, BMR
and Lloyd George earned advisory fees of $1,836,584, $536,139 and $432,808,
respectively. Such advisory fee was divided equally between Lloyd George and
BMR.
For a description of the compensation that Health Sciences Portfolio pays
OrbiMed, see the prospectus. As of August 31, 2000, the Health Sciences
Portfolio had net assets of $962,711,769. For the fiscal years ended August
31, 2000, 1999 and 1998, OrbiMed earned advisory fees of $3,291,038,
$1,141,637 and $1,162,878, respectively.
The performance fee adjustment to the advisory fee is as follows: After 12
months, the basic advisory fee is subject to upward or downward adjustment
depending upon whether, and to what extent, the investment performance of the
Health Sciences Portfolio differs by at least one percentage point from the
record of the Standard & Poor's Index of 500 Common Stocks over the same
period. Each percentage point difference is multiplied by a performance
adjustment rate of 0.025%. The maximum adjustment plus/minus is 0.25%. One
twelfth (1/12) of this adjustment is applied each month to the average daily
net assets of the Portfolio over the entire performance period. This
adjustment shall be based on a rolling period of up to and including the most
recent 36 months. Portfolio performance shall be total return as computed
under Rule 482 under the Securities Act of 1933.
Each Investment Advisory Agreement continues in effect from year to year
so long as such continuance is approved at least annually (i) by the vote of a
majority of the noninterested Trustees of a Portfolio cast in person at a
meeting specifically called for the purpose of voting on such approval and
(ii) by the Board of Trustees of a Portfolio or by vote of a majority of the
outstanding voting securities of a Portfolio. Each Agreement may be terminated
at any time without penalty on sixty days' written notice by the Board of
Trustees of either party or by vote of the majority of the outstanding voting
securities of a Portfolio, and each Agreement will terminate automatically in
the event of its assignment. Each Agreement provides that an investment
adviser may render services to others. Each Agreement also provides that an
investment adviser shall not be liable for any loss incurred in connection
with the performance of its duties, or action taken or omitted under that
Agreement, in the absence of willful misfeasance, bad faith, gross negligence
in the performance of its duties or by reason of its reckless disregard of its
obligations and duties thereunder, or for any losses sustained in the
acquisition, holding or disposition of any security or other investment.
Lloyd George and Messrs. Lloyd George and Edward K.Y. Chen (Trustees of
the Information Age Portfolio), are not residents of the United States and
substantially all of their respective assets may be located outside of the
United States. It may be difficult for investors to effect service of process
within the United States upon them, or to realize judgments of courts of the
United States predicated upon civil liabilities of Lloyd George and such
individuals under the federal securities laws of the United States. The
Information Age Portfolio has been advised that there is substantial doubt as
to the enforceability in the countries in which Lloyd George and such
individuals reside of such civil remedies and criminal penalties as are
afforded by the federal securities laws of the United States.
ADMINISTRATIVE SERVICES. Under Eaton Vance's management contract with the
Information Age and Health Sciences Funds and administration agreement with
the Information Age and Health Sciences Portfolios, Eaton Vance receives a
monthly management fee from the Funds and a monthly administration fee from
the Portfolios. Each fee is computed by applying the annual asset rate
applicable to that portion of the average daily net assets of the Fund or the
Portfolio throughout the month in each Category as indicated below:
ANNUAL
CATEGORY AVERAGE DAILY NET ASSETS ASSET RATE
-------- ------------------------ ----------
1 less than $500 million .............................. 0.25%
2 $500 million but less than $1 billion ............... 0.23333
3 $1 billion but less than $1.5 billion ............... 0.21667
4 $1.5 billion but less than $2 billion ............... 0.20
5 $2 billion but less than $3 billion ................. 0.18333
6 $3 billion and over ................................. 0.1667
For the fiscal years ended August 31, 2000, 1999 and 1998, Eaton Vance
earned administration fees of $1,038,960, $466,036 and $450,794, respectively,
from the Health Sciences Portfolio and $614,327, $181,032 and $144,501,
respectively, from the Information Age Portfolio (each equivalent to 0.25% of
the Portfolios' average daily net assets for such period).
As of August 31, 2000, the Information Age Fund had net assets of
$257,924,122. For the fiscal years ended August 31, 2000, 1999 and 1998, Eaton
Vance earned management fees of $467,877, $153,499 and $121,096, respectively
(equivalent to 0.25% of the Fund's average daily net assets for such period).
As of August 31, 2000, the Health Sciences Fund had net assets of
$959,157,254. For the fiscal years ended August 31, 2000, 1999 and 1998, Eaton
Vance earned management fees of $1,028,765, $462,162 and $448,888,
respectively, (equivalent to 0.25% of the Fund's average daily net assets for
such period).
Eaton Vance's management contract with the Information Age and Health
Sciences Funds, and its administration agreement with the Information Age and
Health Sciences Portfolios will continue in effect from year to year, so long
as such continuance is approved annually by the vote of a majority of the
Trustees of the Trust or the Portfolios, as the case may be. Each agreement
may be terminated at any time without penalty on sixty days' written notice by
the Board of Trustees of either party thereto, or by a vote of a majority of
the outstanding voting securities of the Funds or the Portfolios, as the case
may be. Each agreement will terminate automatically in the event of its
assignment. Each agreement provides that, in the absence of Eaton Vance's
willful misfeasance, bad faith, gross negligence or reckless disregard of its
obligations or duties to the Information Age and Health Sciences Funds or the
Information Age and Health Sciences Portfolios under such contract or
agreement, Eaton Vance will not be liable to the Funds or the Portfolios for
any loss incurred. Each agreement was initially approved by the Trustees,
including the non-interested Trustees, of the Trust or the Portfolios.
INFORMATION ABOUT BMR AND EATON VANCE. BMR and Eaton Vance are business
trusts organized under Massachusetts law. Eaton Vance, Inc. ("EV") serves as
trustee of BMR and Eaton Vance. BMR, Eaton Vance and EV are wholly-owned
subsidiaries of Eaton Vance Corporation ("EVC"), a Maryland corporation and
publicly-held holding company. EVC through its subsidiaries and affiliates
engages primarily in investment management, administration and marketing
activities. The Directors of EVC are James B. Hawkes, John G.L. Cabot, Leo I.
Higdon, Jr., John M. Nelson, Vincent M. O'Reilly and Ralph Z. Sorenson. All of
the issued and outstanding shares of Eaton Vance are owned by EVC. All of the
issued and outstanding shares of BMR are owned by Eaton Vance. All shares of
the outstanding Voting Common Stock of EVC are deposited in a Voting Trust,
the Voting Trustees of which are Messrs. Hawkes, Jeffrey P. Beale, Alan R.
Dynner, Thomas E. Faust, Jr., Thomas J. Fetter, Scott H. Page, Duncan W.
Richardson, William M. Steul, Payson F. Swaffield, Michael W. Weilheimer, and
Wharton P. Whitaker (all of whom are officers of Eaton Vance). The Voting
Trustees have unrestricted voting rights for the election of Directors of EVC.
All of the outstanding voting trust receipts issued under said Voting Trust
are owned by certain of the officers of BMR and Eaton Vance who are also
officers, or officers and Directors of EVC and EV. As indicated under
"Management and Organization," all of the officers of the Trust (as well as
Mr. Hawkes who is also a Trustee) hold positions in the Eaton Vance
organization.
Eaton Vance and its affiliates act as adviser to a family of mutual funds,
and individual and various institutional accounts, including corporations,
hospitals, retirement plans, universities, foundations and trusts. Eaton Vance
mutual funds feature international equities, domestic equities, tax-free
municipal bonds, and U.S. government and corporate bonds. Lloyd George
Management has advised Eaton Vance's international equity funds since 1992.
Founded in 1991, Lloyd George is headquartered in Hong Kong with offices in
London and Mumbai. It has established itself as a leader in investment
management in Asian equities and other global markets. Lloyd George features
an experienced team of investment professionals that began working together in
the mid-1980s. Lloyd George analysts cover East Asia, the India subcontinent,
Russia and Eastern Europe, Latin America, Australia and New Zealand from
offices in Hong Kong, London and Mumbai. Eaton Vance mutual funds are
distributed by the Principal Underwriter both within the United States and
offshore.
Investment decisions for the Health Sciences Portfolio are made by the
portfolio manager, Samuel D. Isaly. Mr. Isaly has been active in international
and health care investing throughout his career, beginning at Chase Manhattan
Bank in New York in 1968. He studied international economics, mathematics and
econometrics at Princeton and the London School of Economics. His company,
Gramercy Associates, was the first to develop an integrated worldwide system
of analysis on the 100 leading worldwide pharmaceutical companies, with
investment recommendations conveyed to 50 leading financial institutions in
the United States and Europe beginning in 1982. Gramercy Associates was
absorbed into S.G. Warburg & Company Inc. in 1986, where Mr. Isaly became a
Senior Vice President. In July of 1989, Mr. Isaly co-founded OrbiMed Advisors,
Inc.
Each investment adviser and each Fund and Portfolio has adopted Codes of
Ethics governing securities transactions. Under the Codes, employees of each
investment adviser and Eaton Vance may purchase and sell securities (including
securities held by a Portfolio) subject to certain pre-clearance and reporting
requirements and other procedures.
EXPENSES. Each Fund and Portfolio is responsible for all expenses not
expressly stated to be payable by another party (such as the investment
adviser under the Investment Advisory Agreement, Eaton Vance under the
Administrative Services Agreement or the principal underwriter under the
Distribution Agreement). In the case of expenses incurred by the Trust, each
Fund is responsible for its pro rata share of those expenses. The only
expenses of a Fund allocated to a particular class are those incurred under
the Distribution or Service Plan applicable to that class and those resulting
from the fee paid to the principal underwriter for repurchase transactions.
OTHER SERVICE PROVIDERS
PRINCIPAL UNDERWRITER. Eaton Vance Distributors, Inc. ("EVD"), The Eaton
Vance Building, 255 State Street, Boston, MA 02109, is the Funds' principal
underwriter. The principal underwriter acts as principal in selling shares
under a Distribution Agreement with the Trust. The expenses of printing copies
of prospectuses used to offer shares and other selling literature and of
advertising are borne by the principal underwriter. The fees and expenses of
qualifying and registering and maintaining qualifications and registrations of
a Fund and its shares under federal and state securities laws are borne by
that Fund. The Distribution Agreement as it applies to Class A shares is
renewable annually by the Board of Trustees of the Trust (including a majority
of the noninterested Trustees), may be terminated on six months' notice by
either party and is automatically terminated upon assignment. The Distribution
Agreement as it applies to Class B and Class C shares is renewable annually by
the Trust's Board of Trustees (including a majority of the noninterested
Trustees who have no direct or indirect financial interest in the operation of
the Distribution Plan or the Distribution Agreement), may be terminated on
sixty days' notice either by such Trustees or by vote of a majority of the
outstanding shares of the relevant class or on six months' notice by the
principal underwriter and is automatically terminated upon assignment. The
principal underwriter distributes shares on a "best efforts" basis under which
it is required to take and pay for only such shares as may be sold. The
principal underwriter allows investment dealers discounts from the applicable
public offering price which are alike for all investment dealers. See "Sales
Charges." EVD is a wholly-owned subsidiary of EVC. Mr. Hawkes is a Vice
President and Director, Mr. Dynner is a Vice President, Secretary, and Clerk,
Mr. O'Connor is a Vice President, and Mr. Murphy is Assistant Secretary and
Assistant Clerk of EVD.
CUSTODIAN. Investors Bank & Trust Company ("IBT"), 200 Clarendon Street,
Boston, MA 02116, serves as custodian to the Funds and Portfolios. IBT has the
custody of all cash and securities representing a Fund's interest in a
Portfolio, has custody of each Portfolio's assets, maintains the general
ledger of each Portfolio and each Fund and computes the daily net asset value
of interests in each Portfolio and the net asset value of shares of the Fund.
In such capacity it attends to details in connection with the sale, exchange,
substitution, transfer or other dealings with the Portfolios' investments,
receives and disburses all funds and performs various other ministerial duties
upon receipt of proper instructions from the Trust and the Portfolios. IBT
also provides services in connection with the preparation of shareholder
reports and the electronic filing of such reports with the SEC. EVC and its
affiliates and their officers and employees from time to time have
transactions with various banks, including IBT. It is Eaton Vance's opinion
that the terms and conditions of such transactions were not and will not be
influenced by existing or potential custodial or other relationships between
the Fund or the Portfolio and such banks.
INDEPENDENT ACCOUNTANTS. PricewaterhouseCoopers LLP, 160 Federal Street,
Boston, Massachusetts 02110, are the independent accountants of the Funds and
the Portfolios, providing audit services, tax return preparation, and
assistance and consultation with respect to the preparation of filings with
the SEC.
TRANSFER AGENT. PFPC, Inc., P.O. Box 5123, Westborough, MA 01581-5123, serves
as transfer and dividend disbursing agent for the Funds.
PURCHASING AND REDEEMING SHARES
CALCULATION OF NET ASSET VALUE. The net asset value of each Portfolio is
computed by IBT (as agent and custodian for the Portfolio) by subtracting the
liabilities of the Portfolio from the value of its total assets. The Funds and
the Portfolios will be closed for business and will not price their respective
shares or interests on the following business holidays: New Year's Day, Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day.
Each investor in a Portfolio, including a Fund, may add to or reduce its
investment in the Portfolio on each day the New York Stock Exchange (the
"Exchange") is open for trading ("Portfolio Business Day") as of the close of
regular trading on the Exchange (the "Portfolio Valuation Time"). The value of
each investor's interest in the Portfolio will be determined by multiplying
the net asset value of the Portfolio by the percentage, determined on the
prior Portfolio Business Day, which represented that investor's share of the
aggregate interests in the Portfolio on such prior day. Any additions or
withdrawals for the current Portfolio Business Day will then be recorded. Each
investor's percentage of the aggregate interest in the Portfolio will then be
recomputed as a percentage equal to a fraction (i) the numerator of which is
the value of such investor's investment in the Portfolio as of the Portfolio
Valuation Time on the prior Portfolio Business Day plus or minus, as the case
may be, the amount of any additions to or withdrawals from the investor's
investment in the Portfolio on the current Portfolio Business Day and (ii) the
denominator of which is the aggregate net asset value of the Portfolio as of
the Portfolio Valuation Time on the prior Portfolio Business Day plus or
minus, as the case may be, the amount of the net additions to or withdrawals
from the aggregate investment in the Portfolio on the current Portfolio
Business Day by all investors in the Portfolio. The percentage so determined
will then be applied to determine the value of the investor's interest in the
Portfolio for the current Portfolio Business Day.
ADDITIONAL INFORMATION ABOUT PURCHASES. Fund shares are continuously offered
through investment dealers which have entered agreements with the principal
underwriter. The public offering price is the net asset value next computed
after receipt of the order, plus, in the case of Class A shares, a variable
percentage (sales charge) depending upon the amount of purchase as indicated
by the sales charge table set forth in the prospectus. The sales charge is
divided between the principal underwriter and the investment dealer. The
sales charge table is applicable to purchases of a Fund alone or in
combination with purchases of certain other funds offered by the principal
underwriter, made at a single time by (i) an individual, or an individual, his
spouse and their children under the age of twenty-one, purchasing shares for
his or their own account, and (ii) a trustee or other fiduciary purchasing
shares for a single trust estate or a single fiduciary account. The table is
also presently applicable to (1) purchases of Class A shares pursuant to a
written Statement of Intention; or (2) purchases of Class A shares pursuant to
the Right of Accumulation and declared as such at the time of purchase. See
"Sales Charges."
In connection with employee benefit or other continuous group purchase
plans, the Funds may accept initial investments of less than $1,000 on the
part of an individual participant. In the event a shareholder who is a
participant of such a plan terminates participation in the plan, his or her
shares will be transferred to a regular individual account. However, such
account will be subject to the right of redemption by the Fund as decribed
below.
ACQUIRING FUND SHARES IN EXCHANGE FOR SECURITIES. IBT, as escrow agent, will
receive securities acceptable to Eaton Vance, as administrator, in exchange
for Fund shares. The minimum value of securities (or securities and cash)
accepted for deposit is $5,000. Securities accepted will be sold on the day of
their receipt or as soon thereafter as possible. The number of Fund shares to
be issued in exchange for securities will be the aggregate proceeds from the
sale of such securities, divided by the applicable public offering price of
Class A shares or net asset value of Class B and Class C shares on the day
such proceeds are received. Eaton Vance will use reasonable efforts to obtain
the then current market price for such securities but does not guarantee the
best available price. Eaton Vance will absorb any transaction costs, such as
commissions, on the sale of the securities. Securities determined to be
acceptable should be transferred via book entry or physically delivered, in
proper form for transfer, through an investment dealer, together with a
completed and signed Letter of Transmittal in approved form (available from
investment dealers). Investors who are contemplating an exchange of securities
for shares, or their representatives, must contact Eaton Vance to determine
whether the securities are acceptable before forwarding such securities. Eaton
Vance reserves the right to reject any securities. Exchanging securities for
shares may create a taxable gain or loss. Each investor should consult his or
her tax adviser with respect to the particular federal, state and local tax
consequences of exchanging securities.
The Trust may, in its absolute discretion, suspend, discontinue or limit
the offering of one or more of its classes of shares at any time. In
determining whether any such action should be taken, the Trust's management
intends to consider all relevant factors, including (without limitation) the
size of a Fund or class, the investment climate and market conditions, the
volume of sales and redemptions of shares, and in the case of Class B and
Class C shares, the amount of uncovered distribution charges of the principal
underwriter. The Class B and Class C Distribution Plans may continue in effect
and payments may be made under the Plans following any such suspension,
discontinuance or limitation of the offering of shares; however, there is no
contractual obligation to continue any Plans for any particular period of
time. Suspension of the offering of shares would not, of course, affect a
shareholder's ability to redeem shares.
ADDITIONAL INFORMATION ABOUT REDEMPTIONS. The right to redeem shares of a
Fund can be suspended and the payment of the redemption price deferred when
the Exchange is closed (other than for customary weekend and holiday
closings), during periods when trading on the Exchange is restricted as
determined by the SEC, or during any emergency as determined by the SEC which
makes it impracticable for a Portfolio to dispose of its securities or value
its assets, or during any other period permitted by order of the SEC for the
protection of investors.
While normally payments will be made in cash for redeemed shares, the
Trust, subject to compliance with applicable regulations, has reserved the
right to pay the redemption price of shares of a Fund, either totally or
partially, by a distribution in kind of readily marketable securities
withdrawn from its corresponding Portfolio. The securities so distributed
would be valued pursuant to the Portfolio's valuation procedures. If a
shareholder received a distribution in kind, the shareholder could incur
brokerage or other charges in converting the securities to cash.
Due to the high cost of maintaining small accounts, the Trust reserves the
right to redeem accounts with balances of less than $750. Prior to such a
redemption, shareholders will be given 60 days' written notice to make an
additional purchase. However, no such redemption would be required by the
Trust if the cause of the low account balance was a reduction in the net asset
value of shares. No CDSC will be imposed with respect to such involuntary
redemptions.
SYSTEMATIC WITHDRAWAL PLAN. The transfer agent will send to the shareholder
regular monthly or quarterly payments of any permitted amount designated by
the shareholder based upon the value of the shares held. The checks will be
drawn from share redemptions and hence may require the recognition of taxable
gain or loss. Income dividends and capital gains distributions in connection
with withdrawal plan accounts will be credited at net asset value as of the
record date for each distribution. Continued withdrawals in excess of current
income will eventually use up principal, particularly in a period of declining
market prices. A shareholder may not have a withdrawal plan in effect at the
same time he or she has authorized Bank Automated Investing or is otherwise
making regular purchases of Fund shares. The shareholder, the transfer agent
or the principal underwriter will be able to terminate the withdrawal plan at
any time without penalty.
SALES CHARGES
DEALER COMMISSIONS. The principal underwriter may, from time to time, at its
own expense, provide additional incentives to investment dealers which employ
registered representatives who sell Fund shares and/or shares of other funds
distributed by the principal underwriter. In some instances, such additional
incentives may be offered only to certain investment dealers whose
representatives sell or are expected to sell significant amounts of shares. In
addition, the principal underwriter may from time to time increase or decrease
the sales commissions payable to investment dealers. The principal underwriter
may allow, upon notice to all investment dealers with whom it has agreements,
discounts up to the full sales charge during the periods specified in the
notice. During periods when the discount includes the full sales charge, such
investment dealers may be deemed to be underwriters as that term is defined in
the Securities Act of 1933.
SALES CHARGE WAIVERS. Class A shares may be sold at net asset value to
current and retired Directors and Trustees of Eaton Vance funds, including the
Portfolios; to clients and current and retired officers and employees of Eaton
Vance, its affiliates and other investment advisers of Eaton Vance sponsored
funds; to officers and employees of IBT and the transfer agent; to persons
associated with law firms, consulting firms and others providing services to
Eaton Vance and the Eaton Vance funds; and to such persons' spouses, parents,
siblings and children and their beneficial accounts. Such shares may also be
issued at net asset value (1) in connection with the merger of an investment
company (or series or class thereof) with a Fund (or class thereof), (2) to
investors making an investment as part of a fixed fee program whereby an
entity unaffiliated with the investment adviser provides multiple investment
services, such as management, brokerage and custody, and (3) to investment
advisors, financial planners or other intermediaries who place trades for
their own accounts or the accounts of their clients and who charge a
management, consulting or other fee for their services; clients of such
investment advisors, financial planners or other intermediaries who place
trades for their own accounts if the accounts are linked to the master account
of such investment advisor, financial planner or other intermediary on the
books and records of the broker or agent. Class A shares may also be sold at
net asset value to retirement and deferred compensation plans and trusts used
to fund those plans, including, but not limited to, those defined in Section
401(a), 403(b) or 457 of the Internal Revenue Code of 1986, as amended (the
"Code") and "rabbi trusts". Class A shares may be sold at net asset value to
any investment advisory, agency, custodial or trust account managed or
administered by Eaton Vance or by any parent, subsidiary or other affiliate of
Eaton Vance. Class A shares are offered at net asset value to the foregoing
persons and in the foregoing situations because either (i) there is no sales
effort involved in the sale of shares or (ii) the investor is paying a fee
(other than the sales charge) to the investment dealer involved in the sale.
The CDSC applicable to Class B shares will be waived in connection with
minimum required distributions from tax-sheltered retirement plans by applying
the rate required to be withdrawn under the applicable rules and regulations
of the Internal Revenue Service (the "IRS") to the balance of Class B shares
in your account. Any new or revised sales charge or CDSC waiver will be
prospective only.
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, the Statement of
Intention section of the account application should be completed 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. If you make a Statement of Intention,
the transfer agent is authorized 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. A Statement of Intention does not obligate the
shareholder to purchase or the Fund to sell the full amount indicated in the
Statement.
If the amount actually purchased during the 13-month period is less than
that indicated in the Statement, the shareholder will be requested to pay the
difference between the sales charge applicable to the shares purchased and the
sales charge paid under the Statement of Intention. If the payment is not
received in 20 days, the appropriate number of escrowed shares will be
redeemed in order to realize such difference. If the total purchases during
the 13-month period are large enough to qualify for a lower sales charge than
that applicable to the amount specified in the Statement, all transactions
will be computed at the expiration date of the Statement to give effect to the
lower sales charge. Any difference will be refunded to the shareholder in cash
or applied to the purchase of additional shares, as specified by the
shareholder. This refund will be made by the investment dealer and the
principal underwriter. If at the time of the recomputation, the investment
dealer for the account has changed, the adjustment will be made only on those
shares purchased through the current investment dealer for the account.
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.
EXCHANGE PRIVILEGE. In addition to exchanges into the same class of another
Eaton Vance fund, Class B shares may be exchanged for shares of a money market
fund sponsored by an investment dealer and approved by the principal
underwriter (an "investment dealer fund"). For purposes of calculating the
CDSC applicable to investment dealer fund shares acquired in an exchange, the
CDSC schedule applicable to the exchanged shares will apply and the purchase
of investment dealer fund shares is deemed to have occurred at the time of the
original purchase of the exchanged shares, except that the time during which a
shareholder holds such investment dealer fund shares will not be credited
toward completion of the CDSC period.
TAX-SHELTERED RETIREMENT PLANS. Class A and Class C shares are available for
purchase in connection with certain tax-sheltered retirement plans. Detailed
information concerning these plans, including certain exceptions to minimum
investment requirements, and copies of the plans are available from the
principal underwriter. This information should be read carefully and
consultation with an attorney or tax adviser may be advisable. The information
sets forth the service fee charged for retirement plans and describes the
federal income tax consequences of establishing a plan. Participant accounting
services (including trust fund reconciliation services) will be offered only
through third party recordkeepers and not by the principal underwriter. Under
all plans, dividends and distributions will be automatically reinvested in
additional shares.
DISTRIBUTION PLANS. The Trust has in effect a compensation-type Distribution
Plan (the "Class A Plan") for the Class A shares of each Fund pursuant to Rule
12b-1 under the 1940 Act. The Class A Plan for the Information Age Fund
provides for the payment of a monthly distribution fee to the principal
underwriter in an amount equal to the aggregate of (a) 0.50% of that portion
of Class A average daily net assets for any fiscal year which is attributable
to shares which have remained outstanding for less than one year, and (b)
0.25% of that portion of Class A average daily net assets for any fiscal year
which is attributable to shares which have remained outstanding for more than
one year. The Class A Plan for the Health Sciences Fund provides for the
payment of a monthly distribution fee to the principal underwriter in an
amount equal to 0.25% of Class A average daily net assets. The principal
underwriter intends to use at least part of such fees from the Health Sciences
Fund to compensate investment dealers, including OrbiMed, for personal service
rendered to Health Sciences Fund shareholders and/or the maintenance of
shareholder accounts. Aggregate payments to the principal underwriter under
the Class A Plan are limited to those permissible pursuant to a rule of the
National Association of Securities Dealers, Inc. ("NASD").
The Information Age Fund Class A Plan also provides that Class A will pay
a quarterly service fee to the principal underwriter in an amount equal on an
annual basis to 0.25% of that portion of average daily net assets for any
fiscal year which is attributable to Class A shares; 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. Service fee payments to investment dealers will be in addition to
sales charges on Class A shares which are reallowed to investment dealers. If
the Class A Plan is terminated or not continued in effect, the Class has no
obligation to reimburse the principal underwriter amounts expended by the
principal underwriter in distributing Class A shares. For the service fees
paid by Class A shares, see Appendix A.
The Trust also has in effect compensation-type Distribution Plans (the
"Class B and Class C Plans") pursuant to Rule 12b-1 under the 1940 Act for
each Fund's Class B and Class C shares. The Class B and Class C Plans are
designed to permit an investor to purchase shares through an investment dealer
without incurring an initial sales charge and at the same time permit the
principal underwriter to compensate investment dealers in connection
therewith. The Class B and Class C Plans provide that each Fund will pay sales
commissions and distribution fees to the principal underwriter only after and
as a result of the sale of shares. On each sale of shares (excluding
reinvestment of distributions), each Fund will pay the principal underwriter
amounts representing (i) sales commissions equal to 5% for Class B shares and
6.25% for Class C shares of the amount received by the Fund for each share
sold and (ii) distribution fees calculated by applying the rate of 1% over the
prime rate then reported in The Wall Street Journal to the outstanding balance
of uncovered distribution charges (as described below) of the principal
underwriter. To pay these amounts, each Class pays the principal underwriter a
fee, accrued daily and paid monthly, at an annual rate not exceeding .75% of
its average daily net assets to finance the distribution of its shares. Such
fees compensate the principal underwriter for sales commissions paid by it to
investment dealers on the sale of shares and for interest expenses. For sales
of Class B shares, the principal underwriter uses its own funds to pay sales
commissions (except on exchange transactions and reinvestments) to investment
dealers at the time of sale equal to 4% of the purchase price of the Class B
shares sold by such dealers. For Class C shares, the principal underwriter
currently expects to pay to an investment dealer (a) sales commissions (except
on exchange transactions and reinvestments) at the time of sale equal to .75%
of the purchase price of the shares sold by such dealer, and (b) monthly sales
commissions approximately equivalent to 1/12 of .75% of the value of shares
sold by such dealer and remaining outstanding for at least one year. During
the first year after a purchase of Class C shares, the principal underwriter
will retain the sales commission as reimbursement for the sales commissions
paid to investment dealers at the time of sale. CDSCs paid to the principal
underwriter will be used to reduce amounts owed to it. The Class B and Class C
Plans provide that each Fund will make no payments to the principal
underwriter in respect of any day on which there are no outstanding uncovered
distribution charges of the principal underwriter. CDSCs and accrued amounts
will be paid by the Trust to the principal underwriter whenever there exist
uncovered distribution charges. Because payments to the principal underwriter
under the Class B and Class C Plans are limited, uncovered distribution
charges (sales commissions paid by the principal underwriter plus interest,
less the above fees and CDSCs received by it) may exist indefinitely. For the
sales commissions and CDSCs paid on (and uncovered distribution charges of)
Class B and Class C shares, see Appendix B and Appendix C, respectively.
In calculating daily the amount of uncovered distribution charges,
distribution charges will include the aggregate amount of sales commissions
and distribution fees theretofore paid plus the aggregate amount of sales
commissions and distribution fees which the principal underwriter is entitled
to be paid under the Plan since its inception. Payments theretofore paid or
payable under the Class B and Class C Plans by the Trust to the principal
underwriter and CDSCs theretofore paid or payable to the principal underwriter
will be subtracted from such distribution charges; if the result of such
subtraction is positive, a distribution fee (computed at 1% over the prime
rate then reported in The Wall Street Journal) will be computed on such amount
and added thereto, with the resulting sum constituting the amount of
outstanding uncovered distribution charges with respect to such day. The
amount of outstanding uncovered distribution charges of the principal
underwriter calculated on any day does not constitute a liability recorded on
the financial statements of the Fund.
The amount of uncovered distribution charges of the principal underwriter
at any particular time depends upon various changing factors, including the
level and timing of sales of shares, the nature of such sales (i.e., whether
they result from exchange transactions, reinvestments or from cash sales
through investment dealers), the level and timing of redemptions of shares
upon which a CDSC will be imposed, the level and timing of redemptions of
shares upon which no CDSC will be imposed (including redemptions of shares
pursuant to the exchange privilege which result in a reduction of uncovered
distribution charges), changes in the level of the net assets of the Class,
and changes in the interest rate used in the calculation of the distribution
fee under the Class B and Class C Plans.
The Class B and Class C Plans also authorize each Class to make payments
of service fees to the principal underwriter, investment dealers and other
persons in amounts not exceeding .25% of its average daily net assets for
personal services, and/or the maintenance of shareholder accounts. This fee is
paid quarterly in arrears based on the value of Class B shares sold by such
persons. For Class C, investment dealers currently receive (a) a service fee
(except on exchange transactions and reinvestments) at the time of sale equal
to .25% of the purchase price of the Class C shares sold by such dealer, and
(b) monthly service fees approximately equivalent to 1/12 of .25% of the
value of Class C shares sold by such dealer and remaining outstanding for at
least one year. During the first year after a purchase of Class C shares, the
principal underwriter will retain the service fee as reimbursement for the
service fee payment made to investment dealers at the time of sale. For the
service fees paid by Class B and Class C shares, see Appendix B and Appendix
C, respectively.
Currently, payments of sales commissions and distribution fees and of
service fees may equal 1% of a Class's average daily net assets per annum. The
Trust believes that the combined rate of all these payments may be higher than
the rate of payments made under distribution plans adopted by other investment
companies pursuant to Rule 12b-1. Although the principal underwriter will use
its own funds (which may be borrowed from banks) to pay sales commissions at
the time of sale, it is anticipated that the Eaton Vance organization will
profit by reason of the operation of the Class B and Class C Plans through an
increase in the Fund's assets (thereby increasing the advisory fee payable to
BMR by the Portfolio) resulting from sale of shares and through the amounts
paid to the principal underwriter, including CDSCs, pursuant to the Plans. The
Eaton Vance organization may be considered to have realized a profit under the
Class B and Class C Plans if at any point in time the aggregate amounts
theretofore received by the principal underwriter pursuant to the Class B or
Class C Plan and from CDSCs have exceeded the total expenses theretofore
incurred by such organization in distributing shares. Total expenses for this
purpose will include an allocable portion of the overhead costs of such
organization and its branch offices, which costs will include without
limitation leasing expense, depreciation of building and equipment, utilities,
communication and postage expense, compensation and benefits of personnel,
travel and promotional expense, stationery and supplies, literature and sales
aids, interest expense, data processing fees, consulting and temporary help
costs, insurance, taxes other than income taxes, legal and auditing expense
and other miscellaneous overhead items. Overhead is calculated and allocated
for such purpose by the Eaton Vance organization in a manner deemed equitable
to the Trust.
The Plans continue in effect from year to year so long as such continuance
is approved at least annually by the vote of both a majority of (i) the
noninterested Trustees of the Trust who have no direct or indirect financial
interest in the operation of the Plan or any agreements related to the Plan
(the "Plan Trustees") and (ii) all of the Trustees then in office. Each Plan
may be terminated at any time by vote of a majority of the Plan Trustees or by
a vote of a majority of the outstanding voting securities of the applicable
Class. Each Plan requires quarterly Trustee review of a written report of the
amount expended under the Plan and the purposes for which such expenditures
were made. The Plans may not be amended to increase materially the payments
described therein without approval of the shareholders of the affected Class
and the Trustees. So long as a Plan is in effect, the selection and nomination
of the noninterested Trustees shall be committed to the discretion of such
Trustees. The Class A, Class B and Class C Plans were initially approved by
the Trustees, including the Plan Trustees, on June 23, 1997. The Trustees of
the Trust who are "interested" persons of the Funds have an indirect financial
interest in the Plans because their employers (or affiliates thereof) receive
distribution and/or service fees under the Plans or agreements related
thereto.
The Trustees of the Trust believe that each Plan will be a significant
factor in the expected growth of each Fund's assets, and will result in
increased investment flexibility and advantages which have benefitted and will
continue to benefit the Fund and its shareholders. Payments for sales
commissions and distribution fees made to the principal underwriter will
compensate the principal underwriter for its services and expenses in
distributing shares. Service fee payments made to the principal underwriter
and investment dealers provide incentives to provide continuing personal
services to investors and the maintenance of shareholder accounts. By
providing incentives to the principal underwriter and investment dealers, each
Plan is expected to result in the maintenance of, and possible future growth
in, the assets of the Fund. Based on the foregoing and other relevant factors,
the Trustees of the Trust have determined that in their judgment there is a
reasonable likelihood that each Plan will benefit the Fund and its
shareholders.
PERFORMANCE
Average annual total return is determined separately for each Class of a
Fund by multiplying a hypothetical initial purchase order of $1,000 by the
average annual compound rate of return (including capital appreciation/
depreciation, and distributions paid and reinvested) for the stated period and
annualizing the result. The calculation assumes (i) that all distributions are
reinvested at net asset value on the reinvestment dates during the period,
(ii) the deduction of the maximum sales charge from the initial $1,000
purchase order for Class A shares, (iii) a complete redemption of the
investment and (iv) the deduction of any CDSC at the end of the period. A Fund
may also publish total return figures for each class based on reduced sales
charges or net asset value. These returns would be lower if the full sales
charge was imposed. For information concerning the total return of the Classes
of a Fund, see Appendix A, Appendix B and Appendix C.
Total return may be compared to relevant indices, such as the Consumer
Price Index and various domestic and foreign securities indices. A Fund's
total return and comparisons with these indices may be used in advertisements
and in information furnished to present or prospective shareholders. In
addition, evaluations of a Fund's performance, ratings, or rankings of mutual
funds (which include a Fund) made by independent sources may be used in
advertisements and in information furnished to present or prospective
shareholders. Information about the portfolio allocation, turnover, and
holdings of a Portfolio may also be included in advertisements and other
material furnished to present prospective shareholders. A Fund's performance
may differ from that of other investors in its corresponding Portfolio,
including other investment companies.
Investors may be provided with information concerning Fund volatility or
risk, including but not limited to beta, standard deviation and Sharpe ratio.
Beta is a measure of risk which shows Fund volatility relative to a market
index. A fund with a beta of 1 would perform exactly like the market index; a
beta of 2 would mean its performance was twice as volatile as the index,
positive or negative. Standard deviation is a measure of a security's
volatility, or variability, in expected return. Sharpe ratio is a measure of
risk-adjusted performance. The higher the Sharpe ratio the better a fund's
historical risk-adjusted return. Information concerning Fund distribution
payments (or the payment record of issuers in which the Fund may invest) may
also be provided to investors.
Information (including charts and illustrations) relating to inflation and
the effects of inflation on the dollar may be included in advertisements and
other material furnished to present and prospective shareholders. Such
information may reflect the change in the net asset value of a hypothetical
investment in a Fund over a specified time period and compare it to an
inflationary measure, such as the Consumer Price Index (which is computed by
the Bureau of Labor Statistics of the U.S. Department of Labor).
Information used in advertisements and in materials furnished to present
or prospective shareholders may include statistics, data and performance
studies prepared by independent organizations or included in various
publications reflecting the investment performance or return achieved by
various classes and types of investments (e.g. common stocks, small company
stocks, long-term corporate bonds, long-term government bonds, intermediate-
term government bonds, U.S. Treasury bills) over various periods of time. Such
information may also include commentary prepared by Eaton Vance investment
professionals, including portfolio managers. This information may be used to
illustrate the benefits of long-term investments in common stocks.
Information used in advertisements and in materials provided to present
and prospective shareholders may include descriptions of Eaton Vance and other
Fund and Portfolio service providers, their investment styles, other
investment products, personnel and Fund distribution channels.
Information used in advertisements and materials furnished to present and
prospective investors may include statements or illustrations relating to the
appropriateness of certain types of securities and/or mutual funds to meet
specific financial goals. Such information may address:
- cost associated with aging parents;
- funding a college education (including its actual and estimated
cost);
- health care expenses (including actual and projected expenses);
- long-term disabilities (including the availability of, and coverage
provided by, disability insurance); and
- retirement (including the availability of social security benefits,
the tax treatment of such benefits and statistics and other
information relating to maintaining a particular standard of living
and outliving existing assets).
Such information may also address different methods for saving money and
the results of such methods, as well as the benefits of investing in equity
securities. Such information may describe: the potential for growth; the
performance of equities as compared to other investment vehicles; and the
value of investing as early as possible and regularly, as well as staying
invested. The benefits of investing in equity securities by means of a mutual
fund may also be included (such benefits may include diversification,
professional management and the variety of equity mutual fund products).
Information in advertisements and materials furnished to present and
prospective investors may include profiles of different types of investors
(i.e., investors with different goals and assets) and different investment
strategies for meeting specific financial goals. Such information may provide
hypothetical illustrations which include: results of various investment
strategies; performance of an investment in the Fund over various time
periods; and results of diversifying assets among several investments with
varying performance. Information in advertisements and materials furnished to
present and prospective investors may also include quotations (including
editorial comments) and statistics concerning investing in securities, as well
as investing in particular types of securities and the performance of such
securities.
The Trust (or Principal Underwriter) may provide investors with
information on global investing, which may include descriptions, comparisons,
charts and/or illustrations of: foreign and domestic equity market
capitalizations; returns obtained by foreign and domestic securities; and the
effects of globally diversifying an investment portfolio (including volatility
analysis and performance information). Such information may be provided for a
variety of countries over varying time periods.
Information used in advertisements for Health Sciences Fund may include
information about medical, pharmaceutical and technological developments and
innovations, as well as demographical information relating to health care
expenditures. Advertisements may also contain historical information on the
issuers of health sciences stocks and the performance of such stocks.
Information may also be provided about OrbiMed, including descriptions of: its
personnel; staffing techniques; evaluation and analysis procedures; and stock
selection process.
The Trust (or principal underwriter) may provide information about Lloyd
George, Eaton Vance, its affiliates and other investment advisers to the funds
in the Eaton Vance Family of Funds in sales material or advertisements
provided to investors or prospective investors. Such material or
advertisements may also provide information on the use of investment
professionals by such investors.
TAXES
Each series of the Trust is treated as a separate entity for federal income
tax purposes. Each Fund has elected to be treated and intends to qualify each
year, as a regulated investment company ("RIC") under the Code. Accordingly,
each Fund intends to satisfy certain requirements relating to sources of its
income and diversification of its assets and to distribute substantially all of
its net income and net short-term and long-term capital gains (after reduction
by any available capital loss carryforwards) 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. To the extent it qualifies for
treatment as a RIC and satisfies the above-mentioned distributions requirements,
the Fund will not be subject to federal income tax on income paid to its
shareholders in the form of dividends or capital gain distributions. Each Fund
so qualified for its fiscal year ended August 31, 2000.
Because each Fund invests its assets in a Portfolio, the Portfolio
normally must satisfy the applicable source of income and diversification
requirements in order for the Fund to also satisfy these requirements. Each
Portfolio will allocate at least annually among its investors, including a
Fund, the Portfolio's net investment income, net realized capital gains, and
any other items of income, gain, loss, deduction or credit. For purposes of
applying the requirements of the Code regarding qualification as a RIC, each
Fund (i) will be deemed to own its proportionate share of each of the assets
of the Portfolio and (ii) will be entitled to the gross income of the
Portfolio attributable to such share.
In order to avoid incurring a federal excise tax obligation, the Code
requires that each Fund distribute (or be deemed to have distributed) by
December 31 of each calendar year (i) at least 98% of its ordinary income (not
including tax-exempt income) for such year, (ii) at least 98% of its capital
gain net income (which is the excess of its realized capital gains over its
realized capital losses), generally computed on the basis of the one-year
period ending on October 31 of such year, after reduction by any available
capital loss carryforwards and (iii) 100% of any income 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 a Fund qualifies as a RIC and a Portfolio is treated as a partnership for
Massachusetts and federal tax purposes, neither the Fund nor the Portfolio
should be liable for any income, corporate excise or franchise tax in the
Commonwealth of Massachusetts.
If a Fund does not qualify as a RIC for any taxable year, the Fund's
taxable income will be subject to corporate income taxes, and all
distributions from earnings and profits, including distributions of net
capital gain (if any), will be taxable to the shareholder as ordinary income.
In addition, in order to requalify for taxation as a RIC, the Fund may be
required to recognize unrealized gains, pay substantial taxes and interest,
and make certain distributions.
A Portfolio's investments in options, futures contracts, hedging
transactions, forward contracts (to the extent permitted) and certain other
transactions will be subject to special tax rules (including mark-to-market,
constructive sale, straddle, wash sale and other rules), constructive sale,
straddle, wash sale, short sale and other rules), the effect of which may be
to accelerate income to a Portfolio, defer Portfolio losses, cause adjustments
in the holding periods of Portfolio securities, convert capital gain into
ordinary income and convert short-term capital losses into long-term capital
losses. These rules could therefore affect the amount, timing and character of
distributions to investors.
Transactions in foreign currencies, foreign currency-denominated debt
securities and certain foreign currency options, futures contracts, forward
contracts and similar instruments (to the extent permitted) may give rise to
ordinary income or loss to the extent such income or loss results from
fluctuations in the value of the foreign currency concerned.
Investments in "passive foreign investment companies" could subject the
Portfolio to U.S. federal income tax or other charge on the proceeds from the
sales of the investment in such company; however, this tax can be avoided by
making an election to mark such investment to market annually or treat the
passive foreign investment company as a "qualified electing fund".
If more than 50% of a Portfolio's assets at year end consists of the debt
and equity securities of foreign corporations, the Fund may elect to permit
shareholders to claim a credit or deduction on their income tax returns for
their pro rata portion of qualified taxes paid by the Fund to foreign
countries. If the election is made, shareholders will include in gross income
from foreign sources their pro rata share of such taxes. A shareholder's
ability to claim a foreign tax credit or deduction in respect of foreign taxes
paid by a Fund may be subject to certain limitations imposed by the Code
(including a holding period requirement applied at both the Fund and
shareholder level), as a result of which a shareholder may not get a full
credit or deduction for the amount of such taxes. Shareholders who do not
itemize deductions on their federal income tax returns may claim a credit (but
no deduction) for such taxes.
A Portfolio's investment in securities issued with original issue discount
will cause it to realize income prior to the receipt of cash payments with
respect to these securities. Such income will be accrued daily by the
Portfolio and, in order to avoid a tax payable by the Fund, the Portfolio may
be required to liquidate securities that it might otherwise have continued to
hold in order to generate cash so that the Fund may make required
distributions to its shareholders.
Investments in lower-rated or unrated securities may present special tax
issues for a Portfolio to the extent that the issuers of these securities
default on their obligations pertaining thereto. The Code is not entirely
clear regarding the federal income tax consequences of a Portfolio's taking
certain positions in connection with ownership of such distressed securities.
A portion of distributions made by a Fund which are derived from dividends
from domestic corporations may qualify for the dividends-received deduction
("DRD") for corporations. The DRD is reduced to the extent the Fund shares
with respect to which the dividends are received are treated as debt-financed
under the Code and is eliminated if the shares are deemed to have been held
for less than a minimum period, generally 46 days. Receipt of certain
distributions qualifying for the DRD may result in reduction of the tax basis
of the corporate shareholder's shares. Distributions eligible for the DRD may
give rise to or increase an alternative minimum tax for certain corporations.
Any loss realized upon the sale or exchange of Fund shares with a tax
holding period of 6 months or less will be treated as a long-term capital loss
to the extent of any distributions treated as long-term capital gain with
respect to such shares. In addition, all or a portion of a loss realized on a
redemption or other disposition of Fund shares may be disallowed under "wash
sale" rules to the extent the shareholder acquired other shares of the same
Fund (whether through the reinvestment of distributions or otherwise) within
the period beginning 30 days before the redemption of the loss shares and
ending 30 days after such date. Any disallowed loss will result in an
adjustment to the shareholder's tax basis in some or all of the other shares
acquired.
Sales charges paid upon a purchase of shares subject to a front-end sales
charge cannot be taken into account for purposes of determining gain or loss
on a redemption or exchange of the shares before the 91st day after their
purchase to the extent a sales charge is reduced or eliminated in a subsequent
acquisition of shares of the Fund (or of another fund) pursuant to the
reinvestment or exchange privilege. Any disregarded amounts will result in an
adjustment to the shareholder's tax basis in some or all of any other shares
acquired.
Dividends and distributions on a Fund's shares are generally subject to
federal income tax as described herein to the extent they do not exceed the
Fund's realized income and gains, even though such dividends and distributions
may economically represent a return of a particular shareholder's investment.
Such distributions are likely to occur in respect of shares purchased at a
time when the Fund's net asset value reflects gains that are either
unrealized, or realized but not distributed. Such realized gains may be
required to be distributed even when a Fund's net asset value also reflects
unrealized losses. Certain distributions declared in October, November or
December and paid in the following January will be taxed to shareholders as if
received on December 31 of the year in which they were declared.
Amounts paid by a Fund to individuals and certain other shareholders who
have not provided the Fund with their correct taxpayer identification number
("TIN") and certain certifications required by the Internal Revenue Service
(the "IRS") as well as shareholders with respect to whom the Fund has received
certain information from the IRS or a broker, may be subject to "backup"
withholding of federal income tax arising from the Fund's taxable dividends
and other distributions as well as the proceeds of redemption transactions
(including repurchases and exchanges), at a rate of 31%. An individual's TIN
is generally his or her social security number.
The foregoing discussion does not address the special tax rules applicable
to certain classes of investors, such as IRAs and other retirement plans, tax-
exempt entities, foreign investors, insurance companies and financial
institutions. Shareholders should consult their own tax advisers with respect
to special tax rules that may apply in their particular situations, as well as
the state, local, and, where applicable, foreign tax consequences of investing
in a Fund.
PORTFOLIO SECURITY TRANSACTIONS
Decisions concerning the execution of portfolio security transactions of
the Portfolios, including the selection of the market and the broker-dealer
firm, are made by an investment adviser. An investment adviser places the
portfolio security transactions of a Portfolio and of all other accounts
managed by it for execution with many broker-dealer firms. An investment
adviser uses its best efforts to obtain execution of portfolio transactions at
prices which are advantageous to the relevant Portfolio and (when a disclosed
commission is being charged) at reasonably competitive commission rates. In
seeking such execution, an adviser will use its best judgment in evaluating
the terms of a transaction, and will give consideration to various relevant
factors, including without limitation the full range and quality of the
broker-dealer's services, the value of the brokerage and research services
provided, the responsiveness of the broker-dealer to an investment adviser,
the size and type of the transaction, the general execution and operational
capabilities of the broker-dealer, the nature and character of the market for
the security, the confidentiality, speed and certainty of effective execution
required for the transaction, the reputation, reliability, experience and
financial condition of the broker-dealer, the value and quality of the
services rendered by the broker-dealer in this and other transactions, and the
reasonableness of the commission or spread, if any. Transactions on stock
exchanges and other agency transactions involve the payment by a Portfolio of
negotiated brokerage commissions. Such commissions vary among different
broker-dealer firms, and a particular broker-dealer may charge different
commissions according to such factors as the difficulty and size of the
transaction and the volume of business done with such broker-dealer.
Transactions in foreign securities often involve the payment of brokerage
commissions, which may be higher than those in the United States. There is
generally no stated commission in the case of securities traded in the over-
the-counter markets, but the price paid or received by a Portfolio usually
includes an undisclosed dealer markup or markdown. In an underwritten
offering, the price paid by a Portfolio often includes a disclosed fixed
commission or discount retained by the underwriter or dealer. Although
commissions paid on portfolio security transactions will, in the judgment of
an adviser, be reasonable in relation to the value of the services provided,
commissions exceeding those which another firm might charge may be paid to
broker-dealers who were selected to execute transactions on behalf of the
Portfolios and an investment adviser's other clients for providing brokerage
and research services to an investment adviser.
As authorized in Section 28(e) of the Securities Exchange Act of 1934, a
broker or dealer who executes a portfolio transaction on behalf of a Portfolio
may receive a commission which is in excess of the amount of commission
another broker or dealer would have charged for effecting that transaction if
an investment adviser determines in good faith that such compensation was
reasonable in relation to the value of the brokerage and research services
provided. This determination may be made on the basis of either that
particular transaction or on the basis of overall responsibilities which an
investment adviser and its affiliates have for accounts over which they
exercise investment discretion. In making any such determination, an
investment adviser will not attempt to place a specific dollar value on the
brokerage and research services provided or to determine what portion of the
commission should be related to such services. Brokerage and research services
may include advice as to the value of securities, the advisability of
investing in, purchasing, or selling securities, and the availability of
securities or purchasers or sellers of securities; furnishing analyses and
reports concerning issuers, industries, securities, economic factors and
trends, portfolio strategy and the performance of accounts; effecting
securities transactions and performing functions incidental thereto (such as
clearance and settlement) and the "Research Services" referred to in the next
paragraph.
It is a common practice in the investment advisory industry for the
investment advisers of investment companies, institutions and other investors
to receive research, analytical, statistical and quotation services, data,
information and other services, products and materials which assist such
advisers in the performance of their investment responsibilities ("Research
Services") from broker-dealer firms which execute portfolio transactions for
the clients of such advisers and from third parties with which such broker-
dealers have arrangements. Consistent with this practice, an investment
adviser receives Research Services from many broker-dealer firms with which an
adviser places the portfolio transactions of a Portfolio and from third
parties with which these broker-dealers have arrangements. These Research
Services include such matters as general economic, political, business and
market information, industry and company reviews, evaluations of securities
and portfolio strategies and transactions, proxy voting data and analysis
services, technical analysis of various aspects of the securities markets,
recommendations as to the purchase and sale of securities and other portfolio
transactions, financial, industry and trade publications, news and information
services, pricing and quotation equipment and services, and research oriented
computer hardware, software, data bases and services. Any particular Research
Service obtained through a broker-dealer may be used by an investment adviser
in connection with client accounts other than those accounts which pay
commissions to such broker-dealer. Any such Research Service may be broadly
useful and of value to an investment adviser in rendering investment advisory
services to all or a significant portion of its clients, or may be relevant
and useful for the management of only one client's account or of a few
clients' accounts, or may be useful for the management of merely a segment of
certain clients' accounts, regardless of whether any such account or accounts
paid commissions to the broker-dealer through which such Research Service was
obtained. The advisory fee paid by each Portfolio is not reduced because an
investment adviser receives such Research Services. An investment adviser
evaluates the nature and quality of the various Research Services obtained
through broker-dealer firms and attempts to allocate sufficient portfolio
security transactions to such firms to ensure the continued receipt of
Research Services which the investment adviser believes are useful or of value
to it in rendering investment advisory services to its clients.
A Portfolio and an adviser may also receive Research Services from
underwriters and dealers in fixed-price offerings, which Research Services are
reviewed and evaluated by the investment adviser in connection with its
investment responsibilities. The investment companies sponsored by an
investment adviser or Eaton Vance may allocate brokerage commissions to
acquire information relating to the performance, fees and expenses of such
companies and other mutual funds, which information is used by the Trustees of
such companies to fulfill their responsibility to oversee the quality of the
services provided by various entities, including the investment adviser, to
such companies. Such companies may also pay cash for such information.
Subject to the requirement that an investment adviser shall use its best
efforts to seek to execute portfolio security transactions at advantageous
prices and at reasonably competitive commission rates or spreads, an
investment adviser is authorized to consider as a factor in the selection of
any broker-dealer firm with whom Portfolio orders may be placed the fact that
such firm has sold or is selling shares of the Funds or of other investment
companies sponsored by Eaton Vance. This policy is not inconsistent with a
rule of the NASD, which rule provides that no firm which is a member of the
NASD shall favor or disfavor the distribution of shares of any particular
investment company or group of investment companies on the basis of brokerage
commissions received or expected by such firm from any source.
Securities considered as investments for the Portfolios may also be
appropriate for other investment accounts managed by an investment adviser or
its affiliates. Whenever decisions are made to buy or sell securities by a
Portfolio and one or more of such other accounts simultaneously, an investment
adviser will allocate the security transactions (including "hot" issues) in a
manner which it believes to be equitable under the circumstances. As a result
of such allocations, there may be instances where a Portfolio will not
participate in a transaction that is allocated among other accounts. If an
aggregated order cannot be filled completely, allocations will generally be
made on a pro rata basis. An order may not be allocated on a pro rata basis
where, for example: (i) consideration is given to portfolio managers who have
been instrumental in developing or negotiating a particular investment; (ii)
consideration is given to an account with specialized investment policies that
coincide with the particulars of a specific investment; (iii) pro rata
allocation would result in odd-lot or de minimis amounts being allocated to a
portfolio or other client; or (iv) where the adviser reasonably determines
that departure from a pro rata allocation is advisable. While these
aggregation and allocation policies could have a detrimental effect on the
price or amount of the securities available to the Portfolio from time to
time, it is the opinion of the Trustees of the Trust and the Portfolios that
the benefits from an investment adviser's organization outweigh any
disadvantage that may arise from exposure to simultaneous transactions.
For the fiscal years ended August 31, 2000, 1999 and 1998, the Information
Age Portfolio paid brokerage commissions of $1,184,720, $225,039 and $263,976,
respectively, with respect to portfolio transactions. Of these amounts,
approximately $805,634, $162,952 and $107,328, respectively, was paid in
respect of portfolio security transactions aggregating approximately
$665,044,518, $120,766,906 and $115,374,012, respectively, to firms which
provided some Research Services to the investment adviser's organization
(although many such firms may have been selected in any particular transaction
primarily because of their execution capabilities). For the fiscal years ended
August 31, 2000, 1999 and 1998, the Health Sciences Portfolio paid brokerage
commissions of $678,136, $204,916 and $169,807, respectively, with respect to
portfolio transactions. Of these amounts, approximately $530,142, $55,589 and
$102,541, respectively, was paid in respect of portfolio security transactions
aggregating approximately $385,323,150, $102,059,232 and $87,988,254,
respectively, to firms which provided some Research Services to the investment
adviser's organization (although many firms may have been selected in any
particular transaction primarily because of their execution capabilities).
FINANCIAL STATEMENTS
The audited financial statements of the Funds and the Portfolios and the
independent accountants' reports for Information Age Fund and Portfolio and
Health Sciences Portfolio appear in each Fund's most recent annual report to
shareholders and are incorporated by reference into this SAI. A copy of each
Fund's most recent annual report accompanies this SAI. The independent
accountants' report for Health Sciences Fund is attached hereto.
The Board of Trustees of the Health Sciences Fund approved a 3-for-1 stock
split for Class A shares and a 2-for-1 stock split for Class B and Class C
shares, effective November 10, 2000. The share and per-share data presented in
the financial statements incorporated by reference into this Statement of
Additional Information have not been restated for this split. The financial
highlights appearing on page 13 of the Prospectus have been so restated and
supersede the amounts appearing in the financial statements.
HOUSEHOLDING. Consistent with applicable law, duplicate mailings of
shareholder reports and certain other Fund information to shareholders
residing at the same address may be eliminated.
Registrant incorporates by reference the audited financial statements for
the fiscal year ended August 31, 2000 for the Funds and the Portfolios listed
below, all as previously filed electronically with the SEC:
Eaton Vance Information Age Fund
Information Age Portfolio
(Accession No. 0000912057-00-051535)
Eaton Vance Worldwide Health Sciences Fund
Worldwide Health Sciences Portfolio
(Accession No. 0000912057-00-047356)
<PAGE>
EATON VANCE WORLDWIDE HEALTH SCIENCES FUND AS OF AUGUST 31, 2000
INDEPENDENT ACCOUNTANTS' REPORT
To the Trustees and Shareholders of
Eaton Vance Worldwide Health Sciences Fund:
In our opinion, the accompanying statement of assets and liabilities, and
the related statements of operations and of changes in net assets and the
financial highlights present fairly, in all material respects, the financial
position of Eaton Vance Worldwide Health Sciences Fund (the "Fund") at August
31, 2000, the results of its operations for the year then ended, the changes
in its net assets for each of the two years in the period then ended, and the
financial highlights for each of the four years in the period then ended, in
conformity with accounting principles generally accepted in the United States
of America. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with auditing standards generally accepted in the
United States of America, which 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, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion. The financial
highlights for the year ended August 31, 1996 were audited by other
independent accountants whose report dated September 26, 1996 expressed an
unqualified opinion on those financial highlights.
PricewaterhouseCoopers LLP
Boston, Massachusetts
October 27, 2000, except as to the financial highlights in the prospectus,
which is as of November 10, 2000
<PAGE>
APPENDIX A
CLASS A FEES, PERFORMANCE AND OWNERSHIP
DISTRIBUTION AND SERVICE FEES
For the fiscal year ended August 31, 2000, the following table shows (1)
distribution and/or service fees paid or accrued under the Plan, and (2) fees
on Class A shares paid to investment dealers. The fees paid by the Funds that
were not paid to investment dealers were retained by the principal
underwriter.
<TABLE>
<CAPTION>
DISTRIBUTION FEES TO
CLASS A FEES SERVICE FEES INVESTMENT DEALERS
------- ------------ ------------ ------------------
<S> <C> <C>
Health Sciences Fund ...................................... $445,119 N/A $222,112
Information Age Fund ...................................... 185,469 $53,140 229,954
</TABLE>
PRINCIPAL UNDERWRITER
The total sales charges paid in connection with sales of Class A shares of
Information Age Fund during the fiscal years ended August 31, 2000, 1999 and
1998 were $951,653, $122,695 and $53,833, respectively, of which $128,191,
$18,214 and $7,960, respectively, was received by the principal underwriter.
For the fiscal years ended August 31, 2000, 1999 and 1998, investment dealers
received $823,462, $104,481 and $45,873, respectively, from the total sales
charges.
The total sales charges paid in connection with sales of Class A shares of
Health Sciences Fund during the fiscal years ended August 31, 2000, 1999 and
1998 were $4,166,138, $254,243 and $745,827, respectively, of which $546,349,
$36,383 and $105,245, respectively, was received by the principal underwriter.
For the fiscal years ended August 31, 2000, 1999 and 1998, investment dealers
received $3,619,789, $217,960 and $640,582, respectively, from the total sales
charges.
The Trust has authorized the principal underwriter to act as its agent in
repurchasing shares at the rate of $2.50 for each repurchase transaction
handled by the principal underwriter. For the fiscal year ended August 31,
2000, Class A paid the principal underwriter for repurchase transactions
handled by it $2.50 for each such transaction which aggregated as follows:
Health Sciences Fund -- $6,192.50; and Information Age Fund -- $1,495.
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return
on a hypothetical investment of $1,000 in Class A shares of Health Sciences
Fund for the periods shown in the table. The "Value of Initial Investment"
reflects the deduction of the maximum sales charge of 5.75%. Past performance
is no guarantee of future results. Investment return and principal value will
fluctuate; shares, when redeemed, may be worth more or less than their
original cost. Information presented with two asterisks (**) includes the
effect of subsidizing expenses. Return would have been lower without
subsidies.
<TABLE>
VALUE OF A $1,000 INVESTMENT -- HEALTH SCIENCES FUND
<CAPTION>
TOTAL RETURN TOTAL RETURN
EXCLUDING MAXIMUM INCLUDING MAXIMUM
VALUE OF VALUE OF SALES CHARGE SALES CHARGE
INVESTMENT INVESTMENT INITIAL INVESTMENT ------------------------ -------------------------
PERIOD DATE INVESTMENT ON 8/31/00 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
------------------------------ ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
10 Years Ended
8/31/00** 8/31/90 $942.31 $10,211.85 983.70% 26.91% 921.18% 26.16%
5 Years Ended
8/31/00** 8/31/95 $942.43 $ 4,054.31 330.20% 33.89% 305.43% 32.31%
1 Year Ended
8/31/00 8/31/99 $942.40 $ 2,040.55 116.52% 116.52% 104.06% 104.06%
</TABLE>
The table below indicates the cumulative and average annual total return
on a hypothetical investment of $1,000 in Class A shares of Information Age
Fund. Total return for the period prior to September 1, 1997 reflects the
total return of a predecessor to Class A. Total return prior to the
Predecessor Fund's commencement of operations reflects the total return of
Class B, adjusted to reflect the Class A sales charge. The Class B total
return has not been adjusted to reflect certain other expenses (such as
distribution and/or service fees). If such adjustments were made, the Class A
total return would be different. The "Value of Initial Investment" reflects
the deduction of the maximum sales charge of 5.75%. Past performance is no
guarantee of future results. Investment return and principal value will
fluctuate; shares, when redeemed, may be worth more or less than their
original cost. Information presented with two asterisks (**) includes the
effect of subsidizing expenses. Return would have been lower without
subsidies.
<TABLE>
VALUE OF A $1,000 INVESTMENT -- INFORMATION AGE FUND
<CAPTION>
TOTAL RETURN TOTAL RETURN
EXCLUDING MAXIMUM INCLUDING MAXIMUM
VALUE OF VALUE OF SALES CHARGE SALES CHARGE
INVESTMENT* INVESTMENT INITIAL INVESTMENT ------------------------ -------------------------
PERIOD DATE INVESTMENT ON 8/31/00 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of the Fund 9/18/95 $942.51 $2,862.20 203.67% 25.10% 186.22% 23.62%
1 Year Ended
8/31/00** 8/31/99 $942.39 $1,348.71 43.12% 43.12% 34.87% 34.87%
----------
*Predecessor Fund commenced operations September 18, 1995.
</TABLE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As at December 1, 2000, the Trustees and officers of the Trust, as a
group, owned in the aggregate less than 1% of the outstanding Class A shares
of each Fund. In addition, as of the same date, the following record owners
held the amounts of Class A shares indicated below, which were held either (i)
individually or (ii) on behalf of their customers who are the beneficial
owners of such shares and as to which they have voting power under certain
limited circumstances:
<TABLE>
<S> <C> <C>
HEALTH SCIENCES FUND -- Merrill Lynch, Pierce, Fenner & Smith, Inc. Jacksonville, FL 12.7%
Charles Schwab & Co., Inc. San Francisco, CA 11.4%
INFORMATION AGE FUND -- Merrill Lynch, Pierce, Fenner & Smith, Inc. Jacksonville, FL 12.6%
To the knowledge of the Trust, no other person owned of record or
beneficially 5% or more of any Fund's outstanding Class A shares as of such
date.
</TABLE>
<PAGE>
APPENDIX B
CLASS B FEES, PERFORMANCE AND OWNERSHIP
DISTRIBUTION AND SERVICE FEES
For the fiscal year ended August 31, 2000, the following table shows (1)
sales commissions paid by the principal underwriter to investment dealers on
sales of Class B shares, (2) distribution fees to the principal underwriter
under the Distribution Plan, (3) CDSC payments to the principal underwriter,
(4) uncovered distribution charges under the Plan (dollar amount and as a
percentage of net assets attributable to Class B), (5) service fees paid under
the Distribution Plan, and (6) the service fees paid to investment dealers.
The service fees paid by the Funds that were not paid to investment dealers
were retained by the principal underwriter. Distribution payments and CDSC
payments reduce uncovered distribution charges under the Plan.
<TABLE>
<CAPTION>
UNCOVERED
DISTRIBUTION CDSCS DISTRIBUTION SERVICE
FEES PAID TO PAID TO CHARGES FEES TO
SALES THE PRINCIPAL THE PRINCIPAL (AS A % OF SERVICE INVESTMENT
CLASS B COMMISSIONS UNDERWRITER UNDERWRITER CLASS NET ASSETS) FEES DEALERS
------- ----------- ------------- ------------- ----------------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Health Sciences Fund ....... $6,083,722 $1,474,085 $438,000 $9,545,000 (2.3%) $336,739 $278,006
Information Age Fund ....... 2,096,064 851,989 104,000 3,941,000 (2.6%) 210,580 154,155
</TABLE>
PRINCIPAL UNDERWRITER
The Trust has authorized the principal underwriter to act as its agent in
repurchasing shares at the rate of $2.50 for each repurchase transaction
handled by the principal underwriter. For the fiscal year ended August 31,
2000, Class B paid the principal underwriter for repurchase transactions
handled by it $2.50 for each such transaction which aggregated as follows:
Health Sciences Fund -- $4,880; and Information Age Fund -- $2,837.50.
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return
on a hypothetical investment of $1,000 in Class B shares of Information Age
Fund for the periods shown in each table. Past performance is not indicative
of future results. Investment return and principal value will fluctuate;
shares, when redeemed, may be worth more or less than their original cost.
<TABLE>
VALUE OF A $1,000 INVESTMENT -- INFORMATION AGE FUND
<CAPTION>
VALUE OF VALUE OF TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE DEDUCTING AFTER DEDUCTING
BEFORE DEDUCTING AFTER DEDUCTING THE MAXIMUM CDSC THE MAXIMUM CDSC
INVESTMENT INVESTMENT AMOUNT OF THE MAXIMUM THE MAXIMUM ------------------------- -------------------------
PERIOD DATE INVESTMENT CDSC ON 8/31/00 CDSC ON 8/31/00 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
-------------- ---------- ---------- ---------------- --------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of
the Fund 9/18/95 $1,000 $2,996.50 $2,976.50 199.65% 24.76% 197.65% 24.60%
1 Year
Ended
8/31/00 8/31/99 $1,000 $1,425.76 $1,375.76 42.58% 42.58% 37.58% 37.58%
</TABLE>
The table below indicates the cumulative and average annual total return
on a hypothetical investment of $1,000 in Class B shares of Health Sciences
Fund. Total return for the period prior to September 1, 1997 reflects the
total return of a predecessor to Class B. Total return prior to the
Predecessor Fund's commencement of operations reflects the total return of
Class A, adjusted to reflect the Class B sales charge. The Class A total
return has not been adjusted to reflect certain other expenses (such as
distribution and/or service fees). If such adjustments were made, the Class B
total return would be different. Past performance is no guarantee of future
results. Investment return and principal value will fluctuate; shares, when
redeemed, may be worth more or less than their original cost.
<TABLE>
VALUE OF A $1,000 INVESTMENT -- HEALTH SCIENCES FUND
<CAPTION>
VALUE OF VALUE OF TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE DEDUCTING AFTER DEDUCTING
BEFORE DEDUCTING AFTER DEDUCTING THE MAXIMUM CDSC THE MAXIMUM CDSC
INVESTMENT* INVESTMENT AMOUNT OF THE MAXIMUM THE MAXIMUM ------------------------- -------------------------
PERIOD DATE INVESTMENT CDSC ON 8/31/00 CDSC ON 8/31/00 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
-------------- ---------- ---------- ---------------- --------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
10 Years
Ended
8/31/00 8/31/90 $1,000 $10,615.74 $10,615.74 961.57% 26.65% 961.57% 26.65%
5 Years
Ended
8/31/00 8/31/95 $1,000 $ 4,214.12 $ 4,194.12 321.41% 33.33% 319.41% 33.21%
1 YearEnded
8/31/00 8/31/99 $1,000 $ 2,149.29 $ 2,099.29 114.93% 114.93% 109.93% 109.93%
------------
* Predecessor Fund commenced operations September 23, 1996.
</TABLE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As at December 1, 2000, the Trustees and officers of the Trust, as a
group, owned in the aggregate less than 1% of the outstanding Class B shares
of each Fund. In addition, as of the same date, Merrill Lynch, Pierce, Fenner
& Smith, Inc., Jacksonville, FL was the record owner of the following amounts
of Class B shares, which are held on behalf of its customers who are the
beneficial owners of such shares, and as to which it had voting power under
certain limited circumstances: Health Sciences Fund -- 20.5%; and Information
Age Fund -- 20.7%. To the knowledge of the Trust, no other person owned of
record or beneficially 5% or more of any Fund's outstanding Class B shares as
of such date.
<PAGE>
APPENDIX C
CLASS C FEES, PERFORMANCE AND OWNERSHIP
DISTRIBUTION AND SERVICE FEES
For the fiscal year ended August 31, 2000, the following table shows (1)
sales commissions paid by the principal underwriter to investment dealers on
sales of Class C shares, (2) distribution fees to the principal underwriter
under the Distribution Plan, (3) CDSC payments to the principal underwriter,
(4) uncovered distribution charges under the Plan (dollar amount and as a
percentage of net assets attributable to Class C), (5) service fees paid under
the Distribution Plan, and (6) the service fees paid to investment dealers.
The service fees paid by the Funds that were not paid to investment dealers
were retained by the principal underwriter. Distribution payments and CDSC
payments reduce uncovered distribution charges under the Plan.
<TABLE>
<CAPTION>
UNCOVERED
DISTRIBUTION
DISTRIBUTION CDSCS CHARGES SERVICE
FEES PAID TO PAID TO (AS A % OF FEES TO
SALES THE PRINCIPAL THE PRINCIPAL CLASS NET SERVICE INVESTMENT
CLASS C COMMISSIONS UNDERWRITER UNDERWRITER ASSETS) FEES DEALERS
------- ----------- ------------- ------------ ----------------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Health Sciences Fund ...... $92,626 $277,994 $44,000 $7,496,000 (5.8%) $96,507 $16,734
Information Age Fund ...... $67,183 $187,841 $ 4,000 $1,716,000 (4.2%) $62,614 $23,280
</TABLE>
PRINCIPAL UNDERWRITER
The Trust has authorized the principal underwriter to act as its agent in
repurchasing shares at the rate of $2.50 for each repurchase transaction
handled by the principal underwriter. For the fiscal year ended August 31,
2000, Class C paid the principal underwriter for repurchase transactions
handled by it $2.50 for each such transaction which aggregated as follows:
Health Sciences Fund -- $940; and Information Age Fund -- $532.50.
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return
on a hypothetical investment of $1,000 in Class C shares of Information Age
Fund. Total return for the period prior to September 1, 1997 reflects the
total return of a predecessor to Class C. Total return prior to the
Predecessor Fund's commencement of operations reflects the total return of
Class B, adjusted to reflect the Class C sales charge. The Class B total
return has not been adjusted to reflect certain other expenses (such as
distribution and/or service fees). If such adjustments were made, the Class C
total return would be different. Past performance is no guarantee of future
results. Investment return and principal value will fluctuate; shares, when
redeemed, may be worth more or less than their original cost.
<TABLE>
VALUE OF A $1,000 INVESTMENT -- INFORMATION AGE FUND
<CAPTION>
VALUE OF
INVESTMENT VALUE OF TOTAL RETURN BEFORE TOTAL RETURN AFTER
BEFORE INVESTMENT DEDUCTING DEDUCTING
DEDUCTING AFTER DEDUCTING THE MAXIMUM CDSC THE MAXIMUM CDSC
INVESTMENT* INVESTMENT AMOUNT OF THE MAXIMUM THE MAXIMUM ------------------------ -------------------------
PERIOD DATE INVESTMENT CDSC ON 8/31/00 CDSC ON 8/31/00 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
------------- ---------- --------- --------------- ---------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of
the Fund 9/18/95 $1,000 $2,958.97 $2,958.97 195.90% 24.65% 195.90% 24.65%
1 Year
Ended
8/31/00 8/31/99 $1,000 $1,424.19 $1,414.19 42.42% 42.42% 41.42% 41.42%
------------
* Predecessor Fund commenced operations on November 22, 1995.
</TABLE>
The table below indicates the cumulative and average annual total return
on a hypothetical investment of $1,000 in Class C shares of Health Sciences
Fund. Total return for the period prior to January 1, 1998 reflects the total
return of Class A, adjusted to reflect the Class C sales charge. The Class A
total return has not been adjusted to reflect certain other expenses (such as
distribution and/or service fees). If such adjustments were made, the Class C
total return would be different. Past performance is no guarantee of future
results. Investment return and principal value will fluctuate; shares, when
redeemed, may be worth more or less than their original cost.
<TABLE>
VALUE OF A $1,000 INVESTMENT -- HEALTH SCIENCES FUND
<CAPTION>
VALUE OF
INVESTMENT VALUE OF TOTAL RETURN BEFORE TOTAL RETURN AFTER
BEFORE INVESTMENT DEDUCTING DEDUCTING
DEDUCTING AFTER DEDUCTING THE MAXIMUM CDSC THE MAXIMUM CDSC
INVESTMENT INVESTMENT AMOUNT OF THE MAXIMUM THE MAXIMUM ------------------------ -------------------------
PERIOD DATE INVESTMENT CDSC ON 8/31/00 CDSC ON 8/31/00 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
------------- ---------- --------- --------------- ---------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
10 Years
Ended
8/31/00 8/31/90 $1,000 $10,681.30 $10,681.30 968.13% 26.73% 968.13% 26.73%
5 Years
Ended
8/31/00 8/31/95 $1,000 $ 4,240.19 $ 4,240.19 324.02% 33.50% 324.02% 33.50%
1 Year
Ended
8/31/00 8/31/99 $1,000 $ 2,149.00 $ 2,139.00 114.90% 114.90% 113.90% 113.90%
</TABLE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As at December 1, 2000, the Trustees and officers of the Trust, as a
group, owned in the aggregate less than 1% of the outstanding Class C shares
of each Fund. In addition, as of the same date, the following record owners
held the amounts of Class C shares indicated below, which were held either (i)
individually or (ii) on behalf of their customers who are the beneficial
owners of such shares and as to which they have voting power under certain
limited circumstances:
<TABLE>
<S> <C> <C> <C>
HEALTH SCIENCES FUND -- Merrill Lynch, Pierce, Fenner & Smith, Inc. Jacksonville, FL 18.9%
INFORMATION AGE FUND -- Merrill Lynch, Pierce, Fenner & Smith, Inc. Jacksonville, FL 19.1%
</TABLE>
To the knowledge of the Trust, no other person owned of record or
beneficially 5% or more of any Fund's outstanding Class C shares as of such
date.
<PAGE>
PART C - OTHER INFORMATION
ITEM 23. EXHIBITS
(a)(1) Declaration of Trust dated May 25, 1989, filed as Exhibit (1)(a) to
Post-Effective Amendment No. 59 filed August 16, 1995 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 filed August 16,
1995 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 filed August 25,
1997 and incorporated herein by reference.
(4) Amendment and Restatement of Establishment and Designation of Series
of Shares of Beneficial Interest, Without Par Value, effective
October 19, 1998, filed as Exhibit (a)(4) to Post-Effective
Amendment No. 73 filed June 30, 1999 and incorporated herein by
reference.
(b)(1) By-Laws filed as Exhibit (2)(a) to Post-Effective Amendment No. 59
filed August 16, 1995 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 filed August 16, 1995 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 filed August 25, 1997 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 filed December 28, 1995 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 filed August 16, 1995 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 filed December 28, 1995 and incorporated herein by
reference.
C-1
<PAGE>
(3) Amendment to Master Custodian Agreement with Investors Bank & Trust
Company dated December 21, 1998 filed as Exhibit (g)(3) to the
Registration Statement of Eaton Vance Municipals Trust (File Nos.
33-572, 811-4409) (Accession No. 0000950156-99-000050) filed January
25, 1999 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 filed August 25, 1997 and incorporated herein by reference.
(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 filed January 16, 1997 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 filed August
25, 1997 and incorporated herein by reference.
(3)(a) Transfer Agency Agreement dated January 1, 1998 filed as Exhibit
(k)(b) to the Registration Statement on Form N-2 of Eaton Vance
Advisers Senior Floating-Rate Fund (File Nos. 333-46853, 811-08671)
(Accession No. 0000950156-98-000172) and incorporated herein by
reference.
(b) Amendment to the Transfer Agency Agreement dated October 18, 1999
filed as Exhibit (h)(2)(b) to the Registration Statement of Eaton
Vance Municipals Trust (File Nos. 33-572, 811-4409) (Accession No.
0000950156-99-000723) filed December 20, 1999 and incorporated
herein by reference.
(i)(1) Opinion of Internal Counsel filed as Exhibit (i) to Post-Effective
Amendment No. 71 filed October 30, 1998 and incorporated herein by
reference.
(2) Consent of Internal Counsel filed herewith.
(j)(1) Consent of Independent Auditors for Eaton Vance Asian Small
Companies Fund filed herewith.
(2) Consent of Independent Auditors for Eaton Vance Greater China Growth
Fund filed herewith.
(3) Consent of Independent Accountants for Eaton Vance Growth Fund filed
herewith.
(4) Consent of Independent Accountants for Eaton Vance Information Age
Fund filed herewith.
(5) Consent of Independent Accountants for Eaton Vance Worldwide Health
Sciences Fund filed herewith.
(k) Not applicable
(l) Not applicable
C-2
<PAGE>
(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 filed August 25, 1997 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 filed August 25,
1997 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 filed August 25,
1997 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) Code of Ethics adopted by Eaton Vance Corp., Eaton Vance Management,
Boston Management and Research, Eaton Vance Distributors, Inc. and
the Eaton Vance Funds effective September 1, 2000, as revised
November 6, 2000, filed herewith.
(2) Code of Ethics adopted by Lloyd George Management (BVI) Limited,
Lloyd George Investment Management (Bermuda) Limited, Lloyd George
Management (Hong Kong) Limited, Lloyd George Management (Europe)
Limited and the LGM Funds effective September 1, 2000 filed as
Exhibit (p)(2) to Pre-Effective Amendment No. 1 of Eaton Vance
Variable Trust (File Nos. 333-44010 and 811-10067) filed November
17, 2000 and incorporated herein by reference.
(3) Code of Ethics adopted by OrbiMed Advisors Inc. effective September
1, 2000 filed as Exhibit (p)(3) to Pre-Effective Amendment No. 1 of
Eaton Vance Variable Trust (File Nos. 333-44010 and 811-10067) filed
November 17, 2000 and incorporated herein by reference.
(q)(1) Power of Attorney for Eaton Vance Growth Trust dated April 22, 1997
filed as Exhibit (17)(a) to Post-Effective Amendment No. 68 filed
August 25, 1997 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
filed December 22, 1998 and incorporated herein by reference.
(3) Power of Attorney for Growth Portfolio dated April 22, 1997 filed as
Exhibit (17)(b) to Post-Effective Amendment No. 68 filed August 25,
1997 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 filed December
22, 1998 and incorporated herein by reference.
.
C-3
<PAGE>
(5) Power of Attorney for Information Age Portfolio dated February 14,
1997 filed as Exhibit (17)(c) to Post-Effective Amendment No. 68
filed August 25, 1997 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
filed December 22, 1998 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
filed March 27, 1997 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
filed December 22, 1998 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
filed March 27, 1997 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 filed August 25,
1997 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 filed December 22, 1998 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-4
<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 Eaton Vance Municipals Trust II
Floating-Rate Fund
Eaton Vance Growth Trust Eaton Vance Mutual Funds Trust
Eaton Vance Income Fund of Boston Eaton Vance Prime Rate Reserves
Eaton Vance Institutional Senior Eaton Vance Special Investment Trust
Floating-Rate Fund
Eaton Vance Investment Trust EV Classic Senior Floating-Rate Fund
Eaton Vance Municipals Trust
(b)
(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
Ira Baron 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
and Treasurer
Raymond Cox Vice President None
Peter Crowley Vice President None
Ellen Duffy Vice President None
Alan R. Dynner Vice President, Secretary Secretary
and Clerk
Richard A. Finelli Vice President None
Kelly Flynn Vice President None
James Foley Vice President None
Michael A. Foster Vice President None
Anne Marie Gallagher Vice President None
William M. Gillen Senior Vice President None
Hugh S. Gilmartin Vice President None
Robert Hammond Vice President None
James B. Hawkes Vice President and Director President and Trustee
Perry D. Hooker Vice President None
Steve Jones Vice President None
Kara Lawler Vice President None
Thomas P. Luka Vice President None
John Macejka Vice President None
Geoff Marshall Vice President None
Tim McEwan 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
George D. Owen, II Vice President None
Philip Pace Vice President None
Margaret Pier Vice President None
Enrique M. Pineda Vice President None
Matt Raynor Vice President None
F. Anthony Robinson Vice President None
Frances Rogell Vice President None
Jay S. Rosoff Vice President None
Stephen M. Rudman Vice President None
Kevin Schrader Vice President None
Teresa A. Sheehan Vice President None
<PAGE>
Lawrence Sinsimer Senior Vice President None
William M. Steul Vice President and Director None
Cornelius J. Sullivan Senior Vice President None
Peter Sykes Vice President None
David M. Thill Vice President None
John M. Trotsky Vice President None
Jerry Vainisi Vice President None
John Vaughan Vice President None
Chris Volf Vice President None
Debra Wekstein Vice President None
Wharton P. Whitaker President and Director None
Sue Wilder Vice President None
C-5
<PAGE>
------------------------------------------
* Address is The Eaton Vance Building, 255 State Street, Boston, MA 02109
(c) Not applicable
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS
All applicable accounts, books and documents required to be maintained by
the Registrant by Section 31(a) of the Investment Company Act of 1940 and the
Rules promulgated thereunder are in the possession and custody of the
Registrant's custodian, Investors Bank & Trust Company, 200 Clarendon Street,
16th Floor, Mail Code ADM27, Boston, MA 02116, and its transfer agent, PFPC,
Inc., 4400 Computer Drive, Westborough, MA 01581-5120, with the exception of
certain corporate documents and portfolio trading documents which are in the
possession and custody of the administrator and investment adviser. Registrant
is informed that all applicable accounts, books and documents required to be
maintained by registered investment advisers are in the custody and possession
of Eaton Vance Management, Boston Management and Research, Lloyd George
Investment Management (Bermuda) Limited and OrbiMed Advisors Inc.
ITEM 29. MANAGEMENT SERVICES
Not applicable
ITEM 30. UNDERTAKINGS
The Registrant undertakes to include the information required by Item 5 of
Form N-1A in its annual reports to shareholders under Rule 30d-1.
C-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Amendment to the Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly
caused this Amendment to its Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized in the City of Boston, and the
Commonwealth of Massachusetts, on December 20, 2000.
EATON VANCE GROWTH TRUST
By: /s/ James B. Hawkes
----------------------
James B. Hawkes, President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement has been signed below by
the following persons in their capacities indicated on December 20, 2000.
SIGNATURE TITLE
--------- -----
/s/ James B. Hawkes
------------------- President (Chief Executive Officer) and Trustee
James B. Hawkes
/s/ James L. O'Connor
--------------------- Treasurer (Principal Financial and Accounting Officer)
James L. O'Connor
Jessica M. Bibliowicz*
---------------------- Trustee
Jessica M. Bibliowicz
Donald R. Dwight*
----------------- Trustee
Donald R. Dwight
Samuel L. Hayes, III*
--------------------- Trustee
Samuel L. Hayes
Norton H. Reamer*
----------------- Trustee
Norton H. Reamer
Lynn A. Stout*
-------------- Trustee
Lynn A. Stout
Jack L. Treynor*
----------------- Trustee
Jack L. Treynor
*By: /s/ Alan R. Dynner
-----------------------------------
Alan R. Dynner (As attorney-in-fact)
C-7
<PAGE>
SIGNATURES
Asian Small Companies Portfolio has duly caused this Amendment to the
Registration Statement on Form N-1A of Eaton Vance Growth Trust (File No.
2-22019) to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Boston and the Commonwealth of Massachusetts on
December 20, 2000.
ASIAN SMALL COMPANIES PORTFOLIO
By: HON. ROBERT LLOYD GEORGE*
---------------------------
Hon. Robert Lloyd George, President
This Amendment to the Registration Statement on Form N-1A of Eaton Vance
Growth Trust (File No. 2-22019) has been signed below by the following persons
in their capacities on December 20, 2000.
SIGNATURE TITLE
--------- -----
President(Chief Executive Officer) and Trustee
Hon. Robert Lloyd George*
-------------------------
Hon. Robert Lloyd George
/s/ James L. O'Connor Treasurer (and Principal Financial and
------------------------- Accounting Officer)
James L. O'Connor
Hon. Edward K.Y. Chen*
---------------------- Trustee
Hon. Edward K.Y. Chen
Donald R. Dwight*
----------------- Trustee
Donald R. Dwight
/s/ James B. Hawkes
------------------- Trustee
James B. Hawkes
Samuel L. Hayes, III*
--------------------- Trustee
Samuel L. Hayes
Norton H. Reamer*
----------------- Trustee
Norton H. Reamer
Jack L. Treynor*
---------------- Trustee
Jack L. Treynor
*By: /s/ Alan R. Dynner
---------------------------------
Alan R. Dynner (As attorney-in-fact)
C-8
<PAGE>
SIGNATURES
Greater China Growth Portfolio has duly caused this Amendment to the
Registration Statement on Form N-1A of Eaton Vance Growth Trust (File No.
2-22019) to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Boston and the Commonwealth of Massachusetts on
December 20, 2000.
GREATER CHINA GROWTH PORTFOLIO
By: HON. ROBERT LLOYD GEORGE*
---- ------ ----- ------- ----
Hon. Robert Lloyd George, President
This Amendment to the Registration Statement on Form N-1A of Eaton Vance
Growth Trust (File No. 2-22019) has been signed below by the following persons
in their capacities on December 20, 2000.
SIGNATURE TITLE
--------- -----
Hon. Robert Lloyd George* President (Chief Executive Officer) and
------------------------- Trustee
Hon. Robert Lloyd George
/s/ James L. O'Connor Treasurer (Principal Financial and
------------------------ Accounting Officer)
James L. O'Connor
Hon. Edward K.Y. Chen*
----------------------- Trustee
Hon. Edward K.Y. Chen
Donald R. Dwight*
----------------------- Trustee
Donald R. Dwight
/s/ James B. Hawkes
----------------------- Trustee
James B. Hawkes
Samuel L. Hayes, III*
----------------------- Trustee
Samuel L. Hayes
Norton H. Reamer*
----------------------- Trustee
Norton H. Reamer
*By: /s/ Alan R. Dynner
-----------------------------
Alan R. Dynner (As attorney-in-fact)
C-9
<PAGE>
SIGNATURES
Growth Portfolio has duly caused this Amendment to the Registration
Statement on Form N-1A of Eaton Vance Growth Trust (File No. 2-22019) to be
signed on its behalf by the undersigned, thereunto duly authorized in the City
of Boston and the Commonwealth of Massachusetts on December 20, 2000.
GROWTH PORTFOLIO
By: /s/ JAMES B. HAWKES
-----------------------------
James B. Hawkes, President
This Amendment to the Registration Statement on Form N-1A of Eaton Vance
Growth Trust (File No. 2-22019) has been signed below by the following persons
in their capacities on December 20, 2000.
SIGNATURE TITLE
--------- -----
/s/ James B. Hawkes
-------------------- President (Chief Executive Officer) and Trustee
James B. Hawkes
/s/ James L. O'Connor Treasurer (Principal Financial and
-------------------- Accounting Officer)
James L. O'Connor
Jessica M. Bibliowicz*
---------------------- Trustee
Jessica M. Bibliowicz
Donald R. Dwight*
---------------------- Trustee
Donald R. Dwight
Samuel L. Hayes, III*
---------------------- Trustee
Samuel L. Hayes
Norton H. Reamer*
--------------------- Trustee
Norton H. Reamer
Lynn A. Stout*
--------------------- Trustee
Lynn A. Stout
Jack L. Treynor*
---------------------- Trustee
Jack L. Treynor
*By: /s/ Alan R. Dynner
---------------------------------
Alan R. Dynner (As attorney-in-fact)
C-10
<PAGE>
SIGNATURES
Information Age Portfolio has duly caused this Amendment to the
Registration Statement on Form N-1A of Eaton Vance Growth Trust (File No.
2-22019) to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Boston and the Commonwealth of Massachusetts on
December 20, 2000.
INFORMATION AGE PORTFOLIO
By: /s/ JAMES B. HAWKES
---------------------------------
James B. Hawkes, President
This Amendment to the Registration Statement on Form N-1A of Eaton Vance
Growth Trust (File No. 2-22019) has been signed below by the following persons
in their capacities on December 20, 2000.
SIGNATURE TITLE
--------- -----
/s/ James B. Hawkes
--------------------- President (Chief Executive Officer) and Trustee
James B. Hawkes
/s/ James L. O'Connor Treasurer (Principal Financial and Accounting Officer)
---------------------
James L. O'Connor
Hon. Edward K.Y. Chen*
---------------------- Trustee
Hon. Edward K.Y. Chen
Donald R. Dwight*
---------------------- Trustee
Donald R. Dwight
Hon. Robert Lloyd George *
---------------------- Trustee
Hon. Robert Lloyd George
Samuel L. Hayes, III*
--------------------- Trustee
Samuel L. Hayes
Norton H. Reamer*
--------------------- Trustee
Norton H. Reamer
Lynn A. Stout*
--------------------- Trustee
Lynn A. Stout
Jack L. Treynor*
--------------------- Trustee
Jack L. Treynor
*By: /s/ Alan R. Dynner
---------------------------------
Alan R. Dynner (As attorney-in-fact)
C-11
<PAGE>
SIGNATURES
Worldwide Health Sciences Portfolio has duly caused this Amendment to the
Registration Statement on Form N-1A of Eaton Vance Growth Trust (File No.
2-22019) to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Boston and the Commonwealth of Massachusetts on
December 20, 2000.
WORLDWIDE HEALTH SCIENCES PORTFOLIO
By: /s/ JAMES B. HAWKES
------------------------------
James B. Hawkes, President
This Amendment to the Registration Statement on Form N-1A of Eaton Vance
Growth Trust (File No. 2-22019) has been signed below by the following persons
in their capacities on December 20, 2000.
SIGNATURE TITLE
--------- -----
/s/ James B. Hawkes
----------------------- President (Chief Executive Officer) and Trustee
James B. Hawkes
/s/ James L. O'Connor Treasurer (Principal Financial and Accounting Officer)
-----------------------
James L. O'Connor
Jessica M. Bibliowicz*
----------------------- Trustee
Jessica M. Bibliowicz
Donald R. Dwight*
----------------------- Trustee
Donald R. Dwight
Samuel L. Hayes, III*
----------------------- Trustee
Samuel L. Hayes
Norton H. Reamer*
----------------------- Trustee
Norton H. Reamer
Lynn A. Stout*
---------------------- Trustee
Lynn A. Stout
Jack L. Treynor*
---------------------- Trustee
Jack L. Treynor
*By: /s/ Alan R. Dynner
---------------------------------
Alan R. Dynner (As attorney-in-fact)
C-12
<PAGE>
EXHIBIT INDEX
The following exhibits are filed as part of this amendment to the
Registration Statement pursuant to Rule 483 of Regulation C.
Exhibit No. Description
----------- -----------
(i)(2) Consent of Internal Counsel to Opinion
(j)(1) Consent of Independent Auditors for Eaton Vance Asian Small
Companies Fund
(2) Consent of Independent Auditors for Eaton Vance Greater China
Growth Fund
(3) Consent of Independent Accountants for Eaton Vance Growth Fund
(4) Consent of Independent Accountants for Eaton Vance Information
Age Fund
(5) Consent of Independent Accountants for Eaton Vance Worldwide
Health Sciences Fund
(p)(1) Code of Ethics adopted by Eaton Vance Corp., Eaton Vance
Management, Boston Management and Research, Eaton Vance
Distributors, Inc. and the Eaton Vance Funds effective September
1, 2000, as revised November 6, 2000
C-13
