<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Capital Exchange Fund, Inc.
(Name of Registrant as Specified in Its Charter)
Janet E. Sanders
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(l)(ii), 14a-6(i)(1), 14a-6(j)(2)
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transactions applies:
3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11:(1)
4) Proposed maximum aggregate value of transaction:
[X] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid: $125.00
2) Form, Schedule or Registration Statement No.: PRE 14A
3) Filing Party:
4) Date Filed: October 20, 1995
(1) Set forth the amount on which the filing fee is calculated and state how it
was determined
<PAGE>
CAPITAL EXCHANGE FUND, INC.
24 FEDERAL STREET BOSTON, MASS. 02110
October 30, 1995
Dear Stockholders:
On November 30, 1995, a Special Meeting in lieu of the Annual Meeting of the
Stockholders of Capital Exchange Fund, Inc. (the "Fund") will be held to vote on
several important proposals. ADOPTION OF THESE PROPOSALS, WHICH THE FUND'S
DIRECTORS HAVE APPROVED AND BELIEVE WILL PROVIDE SIGNIFICANT BENEFITS TO THE
FUND AND ITS STOCKHOLDERS WITHOUT ANY ADVERSE TAX CONSEQUENCES, REQUIRES
APPROVAL OF THE FUND'S STOCKHOLDERS. As a stockholder, you are entitled to cast
one vote for each share that you own.
VOTING ONLY TAKES A FEW MINUTES -- PLEASE RESPOND PROMPTLY.
YOUR VOTE IS IMPORTANT, NO MATTER HOW MANY SHARES YOU OWN. If the required
votes are not received by November 30, 1995, it will be necessary to send
further mailings to secure it. This is a costly process and is paid for by the
Fund. Therefore, you, as a stockholder, ultimately pay for the expense of a
delayed vote. Please sign and return your proxy promptly to avoid this
unnecessary expense.
In addition to matters related to an Annual Meeting, the Meeting is called
to consider proposals to adopt the Hub and Spoke(R) mutual fund structure for
the Fund. This would involve the transfer of the Fund's assets to a
corresponding open-end management investment company (the "Portfolio") having
substantially the same investment objective, policies and restrictions as the
Fund. In adopting this structure, the Fund should be able to consolidate its
assets on a tax-free basis with other similar funds managed by the investment
adviser if the shareholders of such funds approve a similar transaction. In
addition, the adviser is sponsoring new funds investing in the Portfolio. Since
these other funds have or will have investors who could not otherwise invest in
the existing Fund, converting to the Hub and Spoke structure may enable the Fund
and its shareholders to participate in a much larger investment portfolio with a
greater number and a broader diversity of securities holdings. BY PARTICIPATING
IN A MORE DIVERSIFIED PORTFOLIO, THE FUND MAY ACHIEVE MORE CONSISTENT RETURNS
OVER TIME. BY PARTICIPATING IN A LARGER PORTFOLIO, THE FUND WILL BE IN A
POSITION TO ACHIEVE HIGHER RETURNS FOR SHAREHOLDERS BY REALIZING DIRECTLY AND
INDIRECTLY CERTAIN ECONOMIES OF SCALE AND OPERATING EFFICIENCIES. The Directors
believe that over time the aggregate per share expenses borne by the Fund's
stockholders should be less than the expenses that would be incurred if the Fund
continued to operate as a stand alone entity. There can, of course, be no
assurance these benefits will be realized and the tax and other consequences of
approval of the proposals are discussed in the accompanying proxy statement.
OTHER PROPOSALS YOU ARE VOTING ON.
At the Meeting, stockholders will be asked to amend the Fund's investment
objective to state more explicitly that consideration is given to investor taxes
in managing the investment portfolio. Stockholders will also be asked to amend
certain fundamental investment restrictions to enable the Fund to pursue
tax-efficient management strategies and to utilize certain modern investment
techniques commonly used by investment professionals. Amendment of the By-Laws
of the Fund with respect to the timing of stockholder meetings also is proposed.
Finally, amendment of the Articles of Organization with respect to
reorganizations is proposed.
<PAGE>
THIS IS A VERY IMPORTANT MEETING. IF YOU DO NOT PLAN
TO ATTEND IN PERSON, PLEASE SIGN, DATE AND RETURN THE
ENCLOSED PROXY CARD TODAY.
The matters to be presented to the Meeting are described in detail in the
enclosed proxy statement. THE DIRECTORS BELIEVE THAT ALL OF THE PROPOSALS ARE IN
THE BEST INTERESTS OF THE FUND AND ITS STOCKHOLDERS. The Directors believe that
converting the Fund to the Hub and Spoke structure will not expose stockholders
to significant new risks and will enable them to participate in a larger, more
diversified and potentially more attractive investment portfolio and to achieve
cost savings over time.
For the Board of Directors
/s/ Landon T. Clay
Landon T. Clay, President and Director
- --------------------------------------------------------------------------------
YOUR DIRECTORS URGE YOU TO VOTE IN FAVOR OF ALL PROPOSALS, AND LOOK FORWARD
TO RECEIVING YOUR PROXY SO YOUR SHARES CAN BE VOTED AT THE MEETING. FOR YOUR
CONVENIENCE AND TO SPEED DELIVERY OF YOUR PROXY, PLEASE USE THE ENCLOSED
POSTAGE-PAID ENVELOPE. YOUR PROMPT RESPONSE IS APPRECIATED. THANK YOU.
- --------------------------------------------------------------------------------
<PAGE>
CAPITAL EXCHANGE FUND, INC.
24 FEDERAL STREET, BOSTON, MASS. 02110
NOTICE OF SPECIAL MEETING IN LIEU OF THE
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 30, 1995
A Special Meeting in lieu of the Annual Meeting of Stockholders of Capital
Exchange Fund, Inc. (the "Fund"), will be held at the principal office of the
Fund, 24 Federal Street, Boston, Massachusetts on November 30, 1995, commencing
at 10:00 A.M. (Boston time), for the following purposes:
1. To fix the number of Directors, and to elect a Board of Directors for the
ensuing year and until their successors are elected and qualified.
2. To ratify or reject the selection of Deloitte & Touche LLP as the
independent certified public accountants to be employed by the Fund to
sign or certify financial statements which may be filed by the Fund with
the Securities and Exchange Commission in respect of all or any part of
its current fiscal year.
3. To consider and act upon a proposal to approve an Amendment to the By-
Laws regarding the timing of annual stockholder meetings.
4. To consider and act upon a proposal to adopt a new investment policy to
authorize the Fund to invest its investable assets in a specific
corresponding open-end management investment company (the "Portfolio")
having substantially the same investment objective, policies and
restrictions as the Fund, and to supplement investment restrictions to
permit such investment.
5. To consider and act upon a proposal to authorize the Fund to vote at a
meeting of holders of interests in the Portfolio to (A) elect a board of
trustees of the Portfolio; (B) ratify the selection of Deloitte & Touche
LLP as the independent certified public accountants of the Portfolio; and
(C) approve the Investment Advisory Agreement (as set forth in Exhibit A
to the accompanying Proxy Statement) between the Portfolio and its
investment adviser, Boston Management and Research (a subsidiary of Eaton
Vance Management).
6. To consider and act upon a proposal to eliminate, reclassify and amend
the Fund's investment objective and certain of the Fund's fundamental
investment policies (as set forth in Exhibit B to the accompanying Proxy
Statement).
7. To consider and act upon a proposal to approve an Amendment to the
Articles of Organization regarding reorganizations.
8. To consider and act upon any matters incidental to the foregoing purposes
or any of them, and any other matters which may properly come before said
meeting or any adjourned session thereof.
These items are discussed in greater detail in the following pages.
The meeting is called pursuant to the By-Laws of the Fund. The Board of
Directors of the Fund have fixed the close of business on October 23, 1995 as
the record date for the determination of the stockholders of the Fund entitled
to notice of and to vote at the meeting and any adjournments thereof.
/s/ THOMAS OTIS
October 30, 1955 THOMAS OTIS, Clerk
IMPORTANT -- STOCKHOLDERS CAN HELP THE BOARD OF DIRECTORS OF THEIR FUND AVOID
THE NECESSITY AND ADDITIONAL EXPENSE TO THE FUND OF FURTHER SOLICITATIONS TO
INSURE A QUORUM BY PROMPTLY RETURNING THE ENCLOSED PROXY. THE ENCLOSED ADDRESSED
ENVELOPE REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES AND IS INTENDED FOR
YOUR CONVENIENCE.
<PAGE>
CAPITAL EXCHANGE FUND, INC.
24 FEDERAL STREET, BOSTON, MASSACHUSETTS 02110
October 30, 1995
PROXY STATEMENT
A proxy is enclosed with the foregoing Notice of a Special Meeting in lieu
of the Annual Meeting of Stockholders of Capital Exchange Fund, Inc. (the
"Fund"), to be held November 30, 1995 for the benefit of stockholders who do not
expect to be present at the meeting. This proxy is solicited on behalf of the
Board of Directors of the Fund, and is revocable by the person giving it prior
to exercise by a signed writing filed with the Fund's transfer agent, The
Shareholder Services Group, Inc., BOS725, P.O. Box 1559, Boston, Massachusetts
02104, or by executing and delivering a later dated proxy, or by attending the
meeting and voting your shares in person. Each proxy will be voted in accordance
with its instructions; if no instruction is given, an executed proxy will
authorize the persons named as attorneys, or any of them, to vote in favor of
each such matter. This proxy material is being mailed to stockholders on or
about November 1, 1995.
The Board of Directors of the Fund has fixed the close of business October
23, 1995, as the record date for the determination of the stockholders entitled
to notice of and to vote at the meeting and any adjournments thereof.
Stockholders at the close of business on the record date will be entitled to one
vote for each share held. As of October 23, 1995, there were 496,736.551 shares
of capital stock of the Fund outstanding. As of such date, the following
stockholders beneficially owned the following number of shares of the Fund (at
least 5% of outstanding shares); Patterson & Co., Philadelphia, PA 55,028.058
(11.8%), Leonard G. Carpenter, C. Curtis, Lee & David R. Brink, Trustees U/A
dated November 16, 1979, Geraldine K. Carpenter Living Trust, Wayzata, MN 47,380
(9.54%) and Arthur F. Albert, Trustee Arthur F. Albert Trust U/A dated October
3, 1978, Glenview, IL 30,900 (6.22%). To the knowledge of the Fund, no other
person owns (of record or beneficially) more than 5% of its outstanding shares.
The Board of Directors of the Fund knows of no business other than that
mentioned in Items 1 through 7 of the Notice of the meeting which will be
presented for consideration. If any other matters are properly presented, as to
such matters, it is the intention of the persons named as attorneys in the
enclosed proxy to vote the proxies in accordance with their judgment.
PROPOSAL 1. ELECTION OF DIRECTORS
It is the present intention that the enclosed proxy will, unless authority
to vote for election to office is specifically withheld by executing the proxy
in the manner stated thereon, be used for the purpose of voting to fix the
number of Directors for the ensuing year at six, and of voting in favor of the
election of the nominees named below for the respective offices indicated below,
to hold office for a term of one year and until their successors are elected and
qualified. The nominee whose names is preceded by an asterisk(*) is an
"interested person" (as defined in the Investment Company Act of 1940) by reason
of his affiliations with the Funds, the Funds' investment adviser, Eaton Vance
Management ("EVM" or the "Investment Adviser") or Boston Management and Research
("BMR"), EVM's wholly-owned subsidiary, or Eaton Vance Corp. ("EVC"), which owns
all of the outstanding stock of EVM, and of EVM's and BMR's trustee, Eaton
Vance, Inc. ("EV"), which is a wholly-owned subsidiary of EVC. (EVM, EVD, EVC,
BMR and their affiliates are sometimes referred to collectively as the "EVC
organization".)
DIRECTORS
NAME AND PRINCIPAL OCCUPATIONS OVER
OTHER INFORMATION PAST FIVE YEARS
- ----------------- --------------------------
*LANDON T. CLAY President of the Fund. Chairman of the Board of
Age: 69, has been a EVC, EV, EVM, BMR and Director of EVC and EV. He
Director since 1970. also serves as a Director, Managing General
Partner, Director General Partner, Trustee and/or
officer of fifteen investment companies advised or
administered by EVM or BMR.
DONALD R. DWIGHT Mr. Dwight is President of Dwight Partners, Inc.
Age: 64; has been a (a corporate relations and communications
Director since 1986. company) founded in 1988; Chairman of the Board
of Newspapers of New England, Inc., since 1982. He
also serves as a Director, Managing General
Partner, Director General Partner, or Trustee of
seventy-nine investment companies advised or
administered by EVM or BMR.
SAMUEL L. HAYES, III Dr. Hayes is the Jacob H. Schiff Professor of
Age: 60; has been a Investment Banking at Harvard Graduate School of
Director since 1986. Business Administration. He also serves as a
Director, Managing General Partner, Director
General Partner, or Trustee of eighty-two
investment companies advised or administered by EVM
or BMR.
NORTON H. REAMER President and a Director of United Asset
Age: 60; has been a Management Corporation, Direcctor, Chairman and
Direction since 1986. President of The Regis Fund, Inc., an open-end
mutual fund. He also serves as a Director, Managing
General Partner, Director General Partner, or
Trustee of seventy-nine investment companies
advised or administered by EVM or BMR.
JOHN L. THORNDIKE Director of Fiduciary Company Incorporated in
Age 69; has been a Boston, Massachusetts; a Trustee of the Boston
Director since 1971. Symphony Orchestra. He also serves as a Director,
Managing General Partner, Director General Partner,
or Trustee of seventy-nine investment companies
advised or administered by EVM or BMR.
JACK L. TREYNOR An investment adviser and consultant. Associate
Age: 65; has been a Professor of Finance, Loyola-Marymount
Trustee since 1971. University, Los Angeles, California (until May
1989). Mr. Treynor is also a member of the
Advisory Board of the Institute for Quantitive
Research in Finance. He also serves as a
Director, Managing General Partner, Director
General Partner, or Trustee of seventy-seven
investment companies advised or administered by
EVM or BMR.
As of October 23, 1995, none of the Directors or officers of the Fund
beneficially owned shares of the Fund.
It is not expected that any of the nominees referred to above will decline
or become unavailable for election, but in case this should happen, the
discretionary power given in the proxy may be used to vote for a substitute
nominee or nominees or to vote to fix the number of Directors for the ensuing
year at less than six (unless authority to vote for election of all nominees is
specifically withheld by executing the proxy in the manner stated thereon).
Messrs. Thorndike (Chairman), Hayes and Reamer are members of the Special
Committee of the Board of Directors of the Fund. The Special Committee's
functions include a continuous review of the Fund's investment advisory
agreement with the investment adviser, making recommendations to the Board
regarding the compensation of those Directors who are not members of the
investment adviser's organization, and making recommendations to the Board
regarding candidates to fill vacancies, as and when they occur, in the ranks of
those Directors who are not "interested persons" of the Fund or the investment
adviser. The Board will, when a vacancy exists or is anticipated, consider any
nominee for Director of a Fund recommended by a shareholder if such
recommendation is submitted to the Board in writing and contains sufficient
background information concerning the individual to enable a proper judgment to
be made as to such individual's qualifications.
Messrs. Treynor (Chairman) and Dwight are members of the Audit Committee of
the Board of Directors of the Fund. The Audit Committee's functions include
making recommendations to the Board regarding the selection of the independent
public accountants, and reviewing with such accountants and the Treasurer of the
Fund matters relative to accounting and auditing practices and procedures,
accounting records, internal accounting controls, and the functions performed by
the custodian, transfer agent and dividend disbursing agent of the Fund.
During the Fund's last fiscal year, the Board of Directors held eight
meetings, the Special committee held five meetings and the Audit Committee held
one meeting. Mr. Clay attended fewer than 75% of such Board meetings.
The fees and expenses of those Directors of the Fund who are not members of
the Eaton Vance organization are paid by the Fund. For the fiscal year ended
October 31, 1995, the Directors of the Fund will have earned the following
compensation in their capacities as Directors from the Fund and other funds in
the Eaton Vance fund complex:
AGGREGATE RETIREMENT TOTAL
COMPENSATION BENEFIT ACCRUED COMPENSATION
FROM THE FUND S/B 10/1/94 9/30/95
NAME FOR FYE 10/31/95 FROM FUND COMPLEX FUND COMPLEX\1/
- ---- ---------------- ----------------- --------------
Donald R. Dwight ....... $1,244 $35,000 $135,000
Samuel L. Hayes, III ... 1,297 33,750 150,000
Norton H. Reamer ....... 1,329 --0-- 135,000
John L. Thorndike ...... 1,411 --0-- 140,000
Jack L. Treynor ........ 1,318 --0-- 140,000
- ----------
\1/ The Eaton Vance fund complex consists of 211 registered investment companies
or series thereof.
Directors of the Fund 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 Deferred Compensation Plan (the "Plan"). Under
the Plan, an eligible Director may elect to have his deferred fees invested by a
Fund in the shares of one or more funds in the Eaton Vance Family of Funds, and
the amount paid to the Directors under the Plan will be determined based upon
the performance of such investments. Deferral of Directors' fees in accordance
with the Plan will have a negligible effect on the Portfolio's assets,
liabilities, and net income per share, and will not obligate the Portfolio to
retain the services of any Director or obligate the Portfolio to pay any
particular level of compensation to the Director. If Proposal 5(A) is approved,
the Plan will cease to be effective as to the fees paid to Directors of the
Fund, but will be effective as to the fees paid to the Trustees of the
Portfolio.
The Fund's charter provides that the Fund will indemnify its Directors 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 Fund. However, no indemnification will be provided to any Director or
officer for any liability to the Fund or its shareholders by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
2. RATIFICATION OF SELECTION OF ACCOUNTANTS OF THE FUND
A majority of the members of the Board of Directors who are not interested
persons of the Fund have selected Deloitte & Touche LLP, 125 Summer Street,
Boston, Massachusetts 02110, as independent certified public accountants to sign
or certify any financial statements which may be filed by the Fund with the
Securities and Exchange Commission in respect of all or any part of the Fund's
fiscal year ending October 31, 1996, the employment of such accountants being
expressly conditioned upon the right of the Fund, by vote of a majority of the
outstanding capital stock at any meeting called for the purpose, to terminate
such employment forthwith without any penalty. Such selection was made pursuant
to provisions of Section 32(a) of the Investment Company Act of 1940, and is
subject to ratification or rejection by the stockholders at this meeting. The
Fund is informed that no member of Deloitte & Touche LLP has any direct or
material indirect interest in the Fund.
The Fund's independent certified public accountants provide customary
professional services in connection with the audit function for a management
investment company such as the Fund, including services leading to the
expression of opinions on the financial statements included in the Fund's annual
report to stockholders, opinions on financial statements and other data included
in the Fund's annual report to the Securities and Exchange Commission, opinions
on financial statements included in amendments to the Fund's registration
statement, and preparation of the Fund's Federal tax returns. The nature and
scope of the professional services of the accountants have been approved by the
Audit Committee of the Fund's Board of Directors, which has considered the
possible effect thereof on the independence of the accountants.
Representatives of Deloitte & Touche LLP are not expected to be present at
the meeting but have been given the opportunity to make a statement if they so
desire and will be available should any matter arise requiring their presence.
It is intended that proxies not limited to the contrary will be voted in
favor of ratifying the selection of Deloitte & Touche LLP, as the independent
certified public accountants to be employed by the Fund to sign or certify
financial statements required to be signed or certified by independent public
accountants and filed with the Securities and Exchange Commission in respect of
all or part of the fiscal year ending October 31, 1996.
3. TO APPROVE AN AMENDMENT TO THE
BY-LAWS OF THE FUND
The Directors of the Fund recommend amending the Fund's By-Laws to change
the annual meeting date. The purpose of this change is to permit greater
flexibility in scheduling meetings and, when appropriate, the use of combined
proxy materials for Annual Meetings of this and other similar funds which will
reduce the costs associated with annual proxy solicitations. Under Massachusetts
General Laws Chapter 156B, Section 33, the annual shareholder meeting can be
held at any time in the first 6 months of the fiscal year. The Directors
recommend that the Fund change its annual meeting date from the third Thursday
in March to the second Wednesday in April, or such other date as the Directors
shall fix consistent with applicable law. If this Proposal is approved, the
meeting on November 30, 1995 will serve as the annual meeting for the 1995-96
fiscal year. Approval of the amendment requires the affirmative vote of a
majority of the outstanding shares of stock, and implementation is not dependent
on any other proposal in this proxy statement being approved.
PROPOSAL 4. TO APPROVE A NEW INVESTMENT POLICY
AND TO SUPPLEMENT INVESTMENT RESTRICTIONS TO
PERMIT A NEW INVESTMENT STRUCTURE
SUMMARY
The Board of Directors of the Fund has approved, and is submitting to the
stockholders of the Fund for approval, the adoption of a new investment policy
for the Fund and the addition of a fundamental investment provision to permit
the Fund to invest its "investable assets" (portfolio securities and cash) in a
corresponding open-end management investment company, the Tax-Managed Growth
Portfolio (the "Portfolio"), having substantially the same investment objective,
policies and restrictions as the Fund. The new investment policy and change in
the investment restrictions for the Fund are subject to approval by the Fund's
stockholders. If this Proposal is approved by the Fund's stockholders, the
Directors intend to invest the Fund's investable assets in the Portfolio,
thereby converting the Fund to the Hub and Spoke(R) structure. (Hub and Spoke(R)
is a registered service mark of Signature Financial Group, Inc.)
NEW INVESTMENT POLICY
The Board of Directors recommends that the stockholders of the Fund approve
a new investment policy for the Fund, i.e., to invest its investable assets in
the Portfolio. The Portfolio is a trust which, like the Fund, is registered as
an open-end management company under the Investment Company Act of 1940 (the
"Act"). The Portfolio will have substantially the same investment objective,
policies and restrictions as the Fund if shareholders approve Proposal 6. EVM is
currently the investment adviser of the Fund and its wholly-owned subsidiary,
BMR, will be the investment adviser of the Portfolio if Proposal 5(C) is
approved. Accordingly, by investing in the Portfolio, the Fund would seek its
investment objective through its investment in the Portfolio, rather than
through direct investments in securities. The Portfolio in turn would invest in
securities in accordance with its objective, policies and restrictions.
The Portfolio is a no-load, open-end management investment company
registered under the Act. The Portfolio was organized as a trust under New York
law on October 23, 1995. The interests in the Portfolio are not available for
purchase by members of the general public.
By investing the Fund's assets in the Portfolio, the Directors expect that
the Eaton Vance organization will be in a better position to sponsor other
collective investment vehicles that could invest in the Portfolio without
assuming potential liability for the Fund's large unrealized capital gains.
These new vehicles will include continuously offered open-end investment
companies. Eaton Vance Distributors, Inc. has employed personnel to develop such
new vehicles. To the extent that these strategies are successful, the new Hub
and Spoke structure could enable the Fund to participate in a larger, more
diversified and potentially more attractive investment portfolio. The Fund would
be in a position to benefit, directly or indirectly, from certain economies of
scale, based on the premise that certain of the expenses of operating an
investment portfolio are relatively fixed and that a larger investment portfolio
may eventually achieve a lower ratio of operating expenses to average net
assets. The Directors also believe that investing in the Portfolio may produce
other benefits resulting from such increased asset size such as the ability to
purchase securities in larger amounts than the Fund currently is able to
acquire. No such portfolio benefits or economies of scale are anticipated until
other investors invest their assets in the Portfolio. See the pro forma expense
tables and the discussion provided below. There can be no assurance that these
anticipated benefits will be realized.
Other investment companies advised by Eaton Vance with substantially the
same investment objectives and policies as the Fund may also invest in the
Portfolio. (For a list, see page 21.) Adding the assets of such other
established investment companies to the Portfolio will potentially enable the
Fund to achieve additional portfolio benefits and economies of scale. Investors
in the Fund will not assume potential liability for the unrealized capital gains
of other investment companies that invest in the Portfolio. During the first
five years after the Fund invests in the Portfolio, the Portfolio does not
intend to distribute securities contributed by the Fund to any investor in the
Portfolio other than the Fund. Therefore, adopting the Hub-and Spoke structure
itself should not subject the Fund's shareholders to increased capital gain
realizations. A more diverse portfolio of investments will, however, affect
investment returns. Although the consistency of returns over time should improve
with a more diversified portfolio, the level of returns (including dividends)
could be higher or lower than what the Fund would achieve in its current form.
To the extent that the Fund invests its investable assets in the Portfolio,
the Fund would no longer require investment advisory services and would have a
reduced need for certain administrative services. For this reason, if
stockholders of the Fund approve the addition to the investment restrictions
described and adopt the new investment policy described in this Proposal, and
the Fund invests its investable assets in the Portfolio, no investment advisory
fees will be paid under the existing investment Advisory Agreement of the Fund
with EVM. Currently, under the existing Investment Advisory Agreement with EVM,
the Fund pays a monthly fee of 5/96 of 1% (equivalent to .625% annually) of the
average daily net assets of the Fund.
The Portfolio has an Investment Advisory Agreement pursuant to which BMR
will be paid a monthly fee calculated in the same manner as the fee currently
being paid by the Fund, as set forth above, on the average daily net assets of
the Portfolio up to $500 million. On net assets of $500 million and over the
annual fee is reduced as follows:
ANNUALIZED FEE RATE
AVERAGE DAILY NET ASSETS FOR THE MONTH (FOR EACH LEVEL)
- -------------------------------------- ----------------
$500 million but less than $1.0 billion .5625%
$1.0 billion but less than $1.5 billion .5000%
$1.5 billion and over .4375%
If Proposal 5(C) is approved and the average daily net assets of the Portfolio
should grow to over $500 million, lower advisory fee rates would go into effect
in accordance with the above schedule. Thus, the total investment advisory fee
received by EVM and its subsidiary will not increase as a result of the
implementation of the Fund's proposed investment in the Portfolio.
Upon exchange of the investable assets of the Fund for an interest in the
Portfolio, the Fund will retain the services of EVM under an administrative
services agreement to act as administrator of the Fund. The Fund has not
retained the services of an investment adviser since the Fund seeks to achieve
the investment objective of the Fund by investing the Fund's assets in the
Portfolio. Under the administrative services agreement, EVM would provide the
Fund with general office facilities and supervise the overall administration of
the Fund. For these services EVM currently receives no compensation. The
Directors of the Fund may determine, in the future, to compensate EVM for its
services under the administrative services agreement.
The Portfolio and the Fund, as the case may be, will each be responsible for
all respective costs and expenses not expressly stated to be payable by BMR
under the investment advisory agreement with the Portfolio, or by EVM under the
administrative services agreement with the Fund. Such costs and expenses to be
borne by the Portfolio and the Fund, as the case may be, include, without
limitation: custody and transfer agency fees and expenses, including those
incurred for determining net asset value and keeping accounting books and
records; expenses of pricing and valuation services; the cost of share
certificates; membership dues in investment company organizations; expenses of
acquiring, holding and disposing of securities and other investments; fees and
expenses of registering under the securities laws and the governmental fees;
expenses of reporting to stockholders and investors; proxy statements and other
expenses of stockholders' or investors' meetings; insurance premiums; printing
and mailing expenses; interest, taxes and corporate fees; legal and accounting
expenses; compensation and expenses of trustees or Directors, as the case may
be, not affiliated with BMR or EVM; and investment advisory fees and, if any,
administrative services fees. The Portfolio and the Fund will also each bear
expenses incurred in connection with litigation in which the Portfolio or the
Fund, as the case may be, is a party and any legal obligation to indemnify its
respective officers and trustees or Directors, as the case may be, with respect
thereto.
The following table shows the actual expenses of the Fund for the six months
ended April 30, 1995, and a pro forma adjustment thereof assuming the Fund had
invested its investable assets in the Portfolio for the entire period then
ended. The pro forma adjustment includes the estimated costs of converting the
Fund to the Hub and Spoke structure and the estimated costs of this proxy
solicitation (approximately $3,500). The pro forma adjustment assumes that: (i)
there were no holders of interests in the Portfolio other than the Fund; and
(ii) the average daily net assets of the Fund and the Portfolio were equal to
the actual average daily net assets of the Fund during the period.
FUND OPERATING EXPENSES FOR THE SIX MONTHS
ENDED APRIL 30, 1995
(ANNUALIZED AS A PERCENT OF AVERAGE DAILY NET ASSETS)
PRO FORMA (ASSUMING THAT THE AVERAGE
DAILY NET ASSETS INVESTED BY
THE FUND IN THE PORTFOLIO WERE 94,237,918)
-----------------------------------------
ACTUAL FUND PORTFOLIO TOTAL
Annual Fund Operating Expenses
Investment advisory fees 0.625% 0.000% 0.625% 0.625%
Other expenses 0.165% 0.095% 0.080% 0.175%
------ ------ ------ ------
Total Fund Operating Expenses 0.790% 0.095% 0.705% 0.800%
====== ====== ====== ======
Assuming that the Fund was the only holder of interests in the Portfolio and
that the Fund was fully invested therein, the net asset value per share,
distributions per share and net investment income per share of the Fund would
have been about the same on a pro forma basis as the actual net asset value,
distributions and net investment income per share of the Fund during the period
indicated. If average daily net assets of the Portfolio grew to $200 million,
the projected operating total expense ratio would be reduced to 0.760%.
In recommending that the stockholders authorize the conversion of the Fund
to the Hub and Spoke structure, the Directors have taken into account and
evaluated the possible effects which increased assets in the Portfolio may have
on the expense ratio of the Fund. There is, of course, no assurance that the net
assets of the Portfolio will grow. After carefully weighing the costs involved
against the anticipated benefits of converting the Fund to the Hub and Spoke
structure, the Board of Directors recommend that the stockholders of the Fund
vote to approve Proposal 4.
If Proposal 4 is approved by stockholders of the Fund, the Board of
Directors expects to implement the investment for the Fund by causing the Fund
to exchange its investable assets (portfolio securities and cash) as well as
certain other assets (including receivables for securities sold from the
portfolio and receivables for interest on portfolio securities) for an interest
in the Portfolio. The proposed transaction will not alter the rights and
privileges of stockholders of the Fund. The value of a stockholder's investment
in the Fund will be the same immediately after the Fund's investment in the
Portfolio as immediately before that investment. Of course, the value of a
stockholder's investment in the Fund may fluctuate thereafter.
The Fund would be able to withdraw its investment in the Portfolio at any
time, if the Directors determine that it is in the best interests of the Fund to
do so. Upon any such withdrawal, the Directors would consider what action might
be taken, including the investment of the investable assets of the Fund in
another pooled investment entity having substantially the same investment
objective as the Fund or the retention of an investment adviser to manage the
Fund's assets in accordance with its investment policies as is presently the
case.
DESCRIPTION OF THE PORTFOLIO
The investment objective of the Portfolio is the same as the objective of
the Fund, assuming Proposal 6 is approved. The Portfolio seeks to achieve its
investment objective through investments limited to the types of securities in
which the Fund is authorized to invest. The investment restrictions and policies
of the Portfolio are such that the Portfolio may not invest in any security or
engage in any transaction which would not be permitted by the investment
restrictions and policies of the Fund if the Fund were to invest directly in
such a security or engage directly in such a transaction, again assuming
Proposal 6 is approved.
If the proposed investment in the Portfolio is implemented, the Fund's
assets would no longer be directly invested in a portfolio of securities but
would rather be invested in the securities of a single issuer, i.e., the
Portfolio, which is a New York trust, and is registered as an open-end
management investment company under the Act. Nevertheless, inasmuch as the
assets of the Portfolio would be directly invested in a portfolio of securities,
the Fund believes there are no material risks of investing in the Portfolio that
are different from those to which stockholders of the Fund are currently
subject.
The approval of the Portfolio's investors (i.e., holders of interests in the
Portfolio, such as the Fund) would be required to change any of its investment
restrictions; however, any change in nonfundamental investment policies would
not require such approval. For a discussion of when Fund stockholders would be
requested to vote on Portfolio matters, see page 12 below.
Like the Fund, the Portfolio determines its net asset value once on each day
the New York Stock Exchange (the "Exchange") is open for trading, as of the
close of regular trading on the Exchange. The Portfolio's net asset value is
computed by determining the value of the Portfolio's total assets (the
securities it holds plus any cash or other assets, including interest accrued
but not yet received), and subtracting all of the Portfolio's liabilities
(including accrued expenses).
Securities listed on securities exchanges or in the NASDAQ National Market
are valued at closing sale prices. Unlisted or listed securities for which
closing sale prices are not available are valued at the closing bid prices.
Short-term obligations maturing in sixty days or less are valued at amortized
cost, which approximates market. Other assets are valued at fair value using
methods determined in good faith by the Directors.
The Fund's net asset value is determined at the same time and on the same
days that the net asset value of the Portfolio is calculated. Net asset value
per share is computed by determining the value of the Fund's assets (its
investment in the Portfolio and other assets), subtracting all of the Fund's
liabilities (including accrued expenses), and dividing the result by the total
number of shares outstanding at such time.
As a partnership under the Internal Revenue Code, the Portfolio does not pay
Federal income or excise taxes. Provided the Fund qualifies as a regulated
investment company for Federal income tax purposes and the Portfolio is treated
as a partnership for Federal and Massachusetts tax purposes, neither is liable
for income, corporate excise tax or franchise tax in Massachusetts.
Interests in the Portfolio have no pre-emptive or conversion rights, and are
fully paid and non-assessable, except as set forth below. The Portfolio normally
will not hold meetings of holders of such interests except as required under the
Act. The Portfolio would be required to hold a meeting of holders in the event
that at any time less than a majority of the trustees holding office had been
elected by holders. The trustees of the Portfolio continue to hold office until
their successors are elected and have qualified. Holders holding a specified
percentage interest in the Portfolio may call a meeting of holders in the
Portfolio for the purpose of removing any trustee. A trustee of the Portfolio
may be removed upon a majority vote of holders in the Portfolio qualified to
vote in the election. The Act requires the Portfolio to assist its holders in
calling such a meeting. Upon liquidation of the Portfolio, holders in the
Portfolio would be entitled to share pro rata in the net assets of the Portfolio
available for distribution to holders.
Each holder in the Portfolio is entitled to a vote in proportion to its
share of the interests in the Portfolio. Except as described below, whenever the
Fund is requested to vote on matters pertaining to the Portfolio, the Fund will
hold a meeting of its stockholders and will cast its votes proportionately as
instructed by Fund stockholders.
Subject to applicable statutory and regulatory requirements, the Fund would
not request a vote of its stockholders with respect to (a) any proposal relating
to the Portfolio, which proposal, if made with respect to the Fund, would not
require the vote of the stockholders of the Fund, or (b) any proposal, with
respect to the Portfolio that is identical, in all material respects, to a
proposal that has previously been approved by stockholders of the Fund. Any
proposal submitted to holders in the Portfolio, and that is not required to be
voted on by stockholders of the Fund, would nonetheless be voted on by the
Directors of the Fund.
Investments in the Portfolio may not be transferred, but a holder may
withdraw all or any portion of its investment at any time at net asset value.
Each holder in the Portfolio, including the Fund, will be liable for all
obligations of the Portfolio. However, the risk of a holder in the Portfolio
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. Thus, stockholders of the Fund should
not experience losses from the new investment structure itself.
The Portfolio has its own board of trustees, including a majority of
trustees who are not "interested" persons of the Portfolio as defined in the
Act. The present trustees of the Portfolio are identical to the present
Directors of the Fund and are listed on pages 2 and 3 of this Proxy Statement.
TAX CONSIDERATIONS
The Internal Revenue Service has issued private letter rulings to numerous
investment companies, including other EVM advised funds, to the effect that this
type of transaction will not result in recognition of capital gains. Such
rulings are not binding on the Service with respect to the Fund. Nevertheless,
the Fund has received an opinion of tax counsel, Brown & Wood, to the effect
that, although there is no judicial authority directly on point, the
contribution of its assets to the Portfolio in exchange for an interest in the
Portfolio will not result in the recognition of gain or loss to the Fund for
federal income tax purposes pursuant to Internal Revenue Code Section 721 and
related authorities. The Fund has not applied for a ruling from the Internal
Revenue Service to the same effect and legal opinions are not binding on the
Service. If it were determined that the transaction was taxable, the Fund would
realize and recognize gain in an amount equal to the appreciation (undiminished
by losses) in the transferred assets as of the date of the transfer (the "deemed
gain"). If the Fund did not make a distribution to its stockholders equal to all
or a portion of the deemed gain, the Fund could be subject to tax (plus interest
and penalties) on all or a portion of the deemed gain. Alternatively, if the
Fund were to make a distribution to its stockholders in an amount equal to all
or a portion of the deemed gain, then its stockholders at the time of such
distribution would be taxed on the amount distributed and the Fund could be
required to pay penalties and/or interest. Depending on the amount and nature of
the deemed gain and the Fund's previous distributions of gains with respect to
the same taxable year, the Fund might be required to make the distribution
described in the preceding sentence in order to preserve its qualification under
the Internal Revenue Code (the "Code") as a regulated investment company.
As of September 30, 1995, the gross unrealized appreciation in the assets of
the Fund on a Federal Income tax basis was $93,498,646. The amount of gross
unrealized appreciation in the assets of the Fund at the time of transfer of the
Fund's assets to the Portfolio may be more or less than the amount indicated in
the preceding sentence, and no assurance can be given as to the magnitude of
such amount at the time of such transfer.
As a regulated investment company under the Code, the Fund does not pay
federal income or excise taxes to the extent that it distributes to stockholders
its net investment income and net realized capital gains in accordance with the
timing requirements imposed by the Code. Under current law, provided that the
Fund qualifies as a regulated investment company for federal income tax
purposes, the Fund is not liable for any income, corporate excise or franchise
tax in the Commonwealth of Massachusetts. The Portfolio also is not expected to
be required to pay any federal income or excise taxes.
Shareholders redeeming Fund shares will not recognize additional capital
gains as a result of the use of the Hub and Spoke structure. Such shareholders
will receive securities during the first five years after the conversion which
were held by the Fund on the conversion date, and thereafter could receive such
securities or any other portfolio securities then held by the Portfolio.
PROPOSED SUPPLEMENT TO INVESTMENT RESTRICTIONS
Certain of the Fund's investment restrictions must be amended, eliminated or
reclassified in order for the Fund to invest its investable assets in the
Portfolio. (See investment restrictions (1), (2), (4), (5), (10), (13) and (14)
in Exhibit B.) The Board of Directors of the Fund has approved, subject to a
stockholder vote, a supplemental provision to be added to the investment
restrictions of the Fund to permit it to invest its investable assets in the
Portfolio.
The Board of Directors proposes that these restrictions and all other
investment restrictions be supplemented with an additional fundamental
investment provision as follows: "(15) 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 additional investment provision would also apply to any conflicting
nonfundamental investment policies. (The current investment restrictions would
also be revised if Proposal 6 is approved.)
EVALUATION BY THE FUND'S DIRECTORS
The Board of Directors of the Fund has carefully considered Proposal 4,
which will in effect authorize the conversion of the Fund to the Hub and Spoke
structure. The Board has carefully evaluated the potential benefits that would
be associated with this Proposal. In this regard, the Board believes that the
Portfolio will attract other collective investment vehicles which will have
investors who would not otherwise be investors in the Fund. Investors in the
Portfolio may include other established investment companies advised by Eaton
Vance with substantially the same investment objectives and policies as the
Fund. By adopting the Hub-and-Spoke structure the Fund can participate in a
larger, more diversified and potentially more attractive investment portfolio.
By this pooling of assets the Portfolio is likely, over time, to achieve a
variety of operating economies. The larger asset size of the Portfolio, in the
Board's view, can be expected to permit the purchase of investments in larger
amounts than the Fund currently is able to purchase, which may reduce certain
operating expenses indirectly borne by the Fund's stockholders. In general, to
the extent that certain operating costs are relatively fixed and currently are
borne by the Fund alone, these expenses would instead be borne in whole or in
part by the Portfolio and shared by the Fund's stockholders with other investors
in the Portfolio. These portfolio benefits and economies of scale would be
likely only if assets of the Portfolio were to grow through investments in the
Portfolio by entities in addition to the Fund. There can be no assurance that
such benefits will be realized. The Board also recognized that BMR could benefit
from the proposed structure because such structure could enable BMR to increase
its assets under management through the development of new vehicles to attract
investor assets.
The Directors of the Fund believe that over time the aggregate per share
expenses of the Fund and the Portfolio should be less than the expenses that
would be incurred by the Fund if it continued to retain the services of an
investment adviser and to invest directly in securities although there can be no
assurance that such expense savings will be realized. The Board also considered
risks associated with an investment in the Portfolio. The Directors believe that
the Portfolio's investment policies and restrictions involve substantially the
same risks as are associated with the Fund's direct investment in securities.
Based on their consideration, analysis and evaluation of the above factors
and other information deemed by them to be relevant to this Proposal, the Fund's
Board of Directors (including the Independent Directors) have concluded that it
would be in the best interests of the Fund and its stockholders to approve a new
investment policy and supplement to the Fund's investment restrictions to enable
the Fund to invest its investable assets in the Portfolio.
VOTE REQUIRED TO APPROVE PROPOSAL 4
Approval by the stockholders of the Fund of the new investment policy and
supplement to its fundamental investment restrictions requires the affirmative
vote of a majority of the outstanding voting securities of the Fund which term
as used in this Proxy Statement means the vote of the lesser of (a) more than
50% of the outstanding shares of the Fund, or (b) 67% of the shares of the Fund
present at the meeting if the holders of more than 50% of the outstanding shares
of the Fund are present or represented by proxy at the meeting.
THE DIRECTORS OF THE FUND RECOMMEND THAT THE STOCKHOLDERS OF THE FUND VOTE
TO APPROVE THIS PROPOSAL. Implementation of this Proposal is dependent upon
approval of Proposals 5 and 6. In the event the stockholders of the Fund fail to
approve this Proposal, the Directors would continue to retain EVM as the
investment adviser for the Fund to manage the Fund's assets through direct
investments in securities, and the Fund's existing Investment Advisory Agreement
between EVM and the Fund would continue in effect in its current form.
PROPOSAL 5. AUTHORIZATION TO VOTE AT MEETINGS OF PORTFOLIO INVESTORS
Stockholders of the Fund are being asked to vote on certain matters with
respect to the Portfolio because the Portfolio is expected to call a meeting of
its holders (including the Fund) to vote on such matters. Specifically, it is
expected that the Portfolio will ask its holders to vote at such meeting to:
(A) Elect a board of trustees of the Portfolio;
(B) Ratify the selection of Deloitte & Touche LLP as the independent
certified public accountants of the Portfolio; and
(C) Approve the Investment Advisory Agreement as set forth in Exhibit A
to this Proxy Statement between the Portfolio and its investment adviser,
Boston Management and Research (a subsidiary of EVM).
The Fund will cast its votes at the meeting of holders of interests in the
Portfolio on each matter in the same proportions as the votes cast by the Fund's
stockholders. Based on the Fund's current net assets, it is anticipated that the
Fund will hold over 99% of the interests in the Portfolio when the conversion
occurs.
PROPOSAL 5(A). AUTHORIZE THE FUND TO ELECT
TRUSTEES OF THE PORTFOLIO
It is the present intention that the enclosed proxy will, unless authority
to vote for election of one or more nominees is specifically withheld by
executing the proxy in the manner stated thereon, be used for the purpose of
authorizing the Fund to vote in favor of the election of the following six
nominees indicated below as trustees of the Portfolio, to hold office until
their successors are elected and qualified. PLEASE NOTE THAT EACH OF THE
FOLLOWING NOMINEES CURRENTLY SERVES AS A DIRECTOR OF THE FUND. The biographical
information as to each nominee is provided under Proposal 1 on pages and 2 and
3. The nominee whose name is preceded by an asterisk(*) is an "interested
person" (as defined in the Act), by reason of his affiliation with the Portfolio
or the EVC organization.
NOMINEES FOR TRUSTEES
*Landon T. Clay Norton H. Reamer
Donald R. Dwight John L. Thorndike
Samuel L. Hayes, III Jack L. Treynor
It is not expected that any of the nominees referred to above will decline
or become unavailable for election, but in case this should happen, the
Portfolio may vote for a substitute nominee or nominees (unless authority to
vote for election of all nominees is specifically withheld by executing the
proxy in the manner stated thereon).
As discussed in Proposal 1, Trustees of the 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 Deferred
Compensation Plan (the "Plan"). Under the Plan, an eligible Trustee may elect to
have his deferred fees invested by a Portfolio in the shares of one or more
funds in the Eaton Vance Family of Funds, and the amount paid to the Trustees
under the Plan will be determined based upon the performance of such
investments. Deferral of Trustees' fees in accordance with the Plan will have a
negligible effect on a 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.
If Proposal 4 is approved it is estimated that each Trustee will receive
approximately $800 in compensation from the Fund and $1,600 from the Portfolio
in the first fiscal year of operations.
Mr. Clay, a Director of the Fund and trustee of the Portfolio who is
affiliated with EVM and BMR is compensated by EVM and BMR and does not and will
not receive fees or renumeration directly from the Fund or the Portfolio.
The Directors of the Fund recommend that the stockholders of the Fund vote
to authorize the Fund to elect each nominee as a trustee of the Portfolio at the
meeting of the holders of interests in the Portfolio.
PROPOSAL 5(B). RATIFICATION OF SELECTION OF
ACCOUNTANTS OF THE PORTFOLIO
A majority of the trustees of the Portfolio who are not interested persons
of the Portfolio or BMR have selected Deloitte & Touche LLP, 125 Summer Street,
Boston, MA 02110 as independent certified public accountants to sign or certify
and financial statements which may be filed by the Portfolio with the Securities
and Exchange Commission in respect of all or any part of the fiscal year ending
October 31, 1996, of the employment of such accountants being expressly
conditioned upon the right of the Portfolio, by vote of a majority of the
outstanding "voting securities" in the Portfolio at any meeting called for the
purpose, to terminate such employment forthwith without any penalty. Such
selection was made pursuant to provisions of Section 32(a) of the Act, and is
subject to ratification or rejection by the holders of interests in the
Portfolio at the meeting of such holders. Deloitte & Touche LLP currently serves
as the independent certified public accountants of the Fund. The Fund is
informed that no member of Deloitte & Touche LLP has any direct or material
indirect interest in the Fund or the Portfolio.
The Portfolio's independent certified public accountants provide customary
professional services in connection with the audit function for a management
investment company such as the Portfolio, and their fees for such services
include fees for work leading to the expression of opinions on the financial
statements included in annual reports to the holders of interests in the
Portfolio, opinions on financial statements and other data included in the
Portfolio's annual report to the Securities and Exchange Commission, opinions on
financial statements included in amendments to the Portfolio's registration
statement, and preparation of the Portfolio's federal and state income tax
returns. The nature and scope of the professional services of the accountants
have been approved by the Portfolio's trustees, which have considered the
possible effect thereof on the independence of the accountants.
Representatives of Deloitte & Touche LLP are not expected to be present at
the meeting but have been given the opportunity to make a statement if they do
so desire and will be available should any matter arise requiring their
presence.
It is intended that proxies not limited to the contrary will be voted in
favor of authorizing the Fund to ratify the selection of Deloitte & Touche LLP
as the independent certified public accountants to be employed by the Portfolio
to sign or certify financial statements required to be signed or certified by
independent public accountants and filed with the Securities and Exchange
Commission in respect of all or part of the fiscal year ending October 31, 1996.
The Directors of the Fund recommend that the stockholders of the Fund vote
to authorize the Fund to ratify the selection of Deloitte & Touche LLP as the
independent certified public accountants of the Portfolio at the meeting of the
holders of interests in the Portfolio.
PROPOSAL 5(C). AUTHORIZE THE FUND TO APPROVE
THE INVESTMENT ADVISORY AGREEMENT WITH
BOSTON MANAGEMENT AND RESEARCH
Boston Management and Research acts as investment adviser to the Portfolio
pursuant to an Investment Advisory Agreement between BMR and the Portfolio (the
"Agreement"). BMR, a Massachusetts business trust, is a wholly-owned subsidiary
of EVM. BMR or EVM act as investment adviser to investment companies and various
individual and institutional clients with combined assets under management of
approximately $16 billion. EVM a Massachusetts business trust, is a wholly-owned
subsidiary of EVC, a holding company which through subsidiaries and affiliates
is engaged in investment management and marketing activities, real estate
investment, consulting and management, oil and gas operations, development of
precious metals properties, and fiduciary and banking services. BMR and EVM
employ the same investment personnel to provide advisory services to their
respective clients.
The Directors of the Fund have reviewed the Agreement and recommend that the
stockholders of the Fund vote to authorize the Fund to approve the Agreement
entered into by the Portfolio at the meeting of holders of interests in the
Portfolio. A copy of the Agreement is attached hereto as Exhibit A and the
discussion of the Agreement herein is qualified in its entirety by such
Agreement.
The Agreement will remain in full force and effect through February 28,
1996, and will continue in full force and effect indefinitely thereafter, but
only so long as such continuance is specifically approved at least annually (i)
by the board of trustees of the Portfolio or by vote of a majority of the
outstanding voting securities (as defined in the Act) of the Portfolio, and (ii)
by the vote of a majority of those trustees of the Portfolio who are not
interested persons (as defined in the Act) of BMR or the Portfolio cast in
person at a meeting called for the purpose of voting on such approval. In
connection with the organization of the Portfolio, the Agreement was approved by
the trustees of the Portfolio, including a majority of those trustees who are
not interested persons of BMR or the Portfolio, on October 23, 1995, and by vote
of EVM and BMR, which were then the holders of all the outstanding voting
securities of the Portfolio, on October 24, 1995. At the time of such action by
the trustees of the Portfolio, Mr. Clay, a director and officer of EVC and EV
and an officer of BMR and EVM, and a Voting Trustee and stockholder of EVC, was
a trustee of the Portfolio.
Under the terms of the Agreement, the Portfolio will employ BMR to act as
investment adviser for and to manage the investment and reinvestment of the
assets of the Portfolio and to administer its affairs, subject to the
supervision of its trustees. BMR furnishes to the Portfolio investment advice
and assistance, administrative services, office space, equipment and clerical
personnel, and investment advisory, statistical and research facilities, and has
arranged for certain members of the BMR organization to serve without salary as
officers or trustees of the Portfolio.
In approving the Agreement for the Portfolio, the trustees of the Portfolio
have taken into account such factors and information as were deemed by them to
be relevant to BMR's investment advisory relationship with the Portfolio. In
their deliberations the trustees have considered: the requirements and needs of
the Portfolio for management and administrative services and facilities, the
desirability of providing for the management of the Portfolio through the EVC
organization (of which BMR is a part), the nature, extent and quality of the
management and administrative services and facilities heretofore provided by the
EVC organization to the Fund, the ability of BMR's personnel, the fiduciary
duties and risks to be assumed by the BMR organization and its commitment to
provide management and administrative services and facilities to the Portfolio
on a continuing basis, the aggregate of the compensation and benefits which will
be received by the BMR organization pursuant to the Agreement, the compensation
and benefits which will be received by Investors Bank & Trust Company (currently
77.3% owned subsidiary of EVC) as custodian of the Portfolio, the necessity that
the BMR organization maintain its ability to retain and attract capable
personnel to service the Portfolio, the continuance of appropriate incentives to
assure that the BMR organization will provide high quality management and
administrative services to the Portfolio, the revenues, expenses, financial
condition, stability and capabilities of the EVC organization, the advantages to
the Portfolio of being one of many investment companies advised and administered
by the EVC organization, the investment performance of the Fund since its
inception, the various investment strategies and techniques to be employed by
BMR to enhance the Portfolio's investment performance, current developments and
trends in the mutual fund and financial services industries including the entry
of large and highly capitalized companies which are spending and appear to be
prepared to continue to spend substantial amounts to engage personnel and to
provide services for competing mutual funds, and other information and factors
which the trustees believed relevant to the matter.
Pursuant to the Agreement, BMR will provide the Portfolio with investment
research, advice and supervision, will furnish an investment program and will
determine 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
Agreement requires BMR to pay the salaries and fees of all officers and trustees
of the Portfolio who are members of the BMR organization and all personnel of
BMR performing services relating to research and investment activities. The
Agreement provides that the Portfolio will pay all its expenses other than those
expressly stated to be payable by BMR, which expenses payable by the Portfolio
will include, without implied limitation, (i) expenses of maintaining the
Portfolio and continuing its existence, (ii) registration of the Portfolio under
the Act, (iii) commissions, fees and other expenses connected with
theacquisition, holding and disposition of securities and other investments,
(iv) auditing, accounting and legal expenses, (v) taxes and interest, (vi)
governmental fees, (vii) expenses of issue, sale and redemption of interests in
the Portfolio, (viii) expenses of registering and qualifying the Portfolio and
interests in the Portfolio under federal and state securities laws and of
preparing and printing registration statements or other offering statements or
memoranda for such purposes and for distributing the same to holders and
investors, and fees and expenses of registering and maintaining registrations of
the Portfolio and of the Portfolio's placement agent as broker-dealer or agent
under state securities laws, (ix) expenses of reports and notices to holders and
of meetings of holders and proxy solicitations therefor, (x) expenses of reports
to governmental officers and commissions, (xi) insurance expenses, (xii)
association membership dues, (xiii) fees, expenses and disbursements of
custodians and subcustodians for all services to the Portfolio (including
without limitation safekeeping of funds, securities and other investments,
keeping of books, accounts and records, and determination of net asset values,
book capital account balances and tax capital account balances), (xiv) fees,
expenses and disbursements of transfer agents, dividend disbursing agents,
holder servicing agents and registrars for all services to the Portfolio, (xv)
expenses for servicing the accounts of holders, (xvi) any direct charges to
holders approved by the trustees of the Portfolio, (xvii) compensation and
expenses of trustees of the Portfolio who are not members of the Adviser's
organization, and (xviii) such non-recurring items as may arise, including
expenses incurred in connection with litigation, proceedings and claims and the
obligation of the Portfolio to indemnify its trustees, officers and holders with
respect thereto.
In consideration of the services, payments and facilities to be furnished by
BMR under the Agreement, the Portfolio will pay BMR a monthly advisory fee equal
to and calculated in the same manner as the advisory fee currently being paid by
the Fund on average daily net assets up to $500 million with reduced rates at
various breakpoints as disclosed under Proposal 4 as set forth on page 8 above.
Therefore, there will be no increase in the schedule of advisory fee rates as a
result of the conversion of the Fund to the Hub and Spoke structure. Because the
Portfolio has not commenced operations as of the date of this Proxy Statement,
BMR has not received any investment advisory fees from the Portfolio.
Duncan S. Richardson, a Vice President of EVM and BMR and the portfolio
manager of the Fund, serves as portfolio manager of the Portfolio.
The Agreement provides that it may be terminated at any time without penalty
on sixty days' notice by BMR or by the trustees of the Portfolio or by vote of a
majority of the outstanding voting securities of the Portfolio, and that it
shall automatically terminate in the event of its assignment. The Agreement
provides that BMR may render services to others and engage in other business
activities. The Agreement also provides that BMR shall to 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 or
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 which may
be sustained in the acquisition, holding or disposition of any security or other
investment.
EVM currently acts as investment adviser to the following funds with a
similar investment objective:
NET ASSETS RATE OF COMPENSATION
(IN MILLIONS) (AS A PERCENTAGE OF
NAME 9/30/95 NET ASSETS)
---- ------------- -------------------
Diversification Fund, Inc. $ 77.71 .625%
The Exchange Fund of Boston, Inc. 73.56 .625%
Depositors Fund of Boston, Inc. 68.91 .625%
Fiduciary Exchange Fund, Inc. 58.46 .625%
Second Fiduciary Exhange Fund, Inc. 74.39 .625%
Vance, Sanders Exchange Fund 223.68 .600%
The foregoing funds may become investors in the Portfolio over time.
VOTE REQUIRED TO AUTHORIZE THE FUND TO APPROVE
THE INVESTMENT ADVISORY AGREEMENT
Authorization of the Fund to approve the Portfolio's Investment Advisory
Agreement with BMR at the meeting of the holders of interests in the Portfolio
requires the affirmative vote of a majority of the outstanding voting securities
of the Fund which term as used in this Proxy Statement means the vote of the
lesser of (a) more than 50% of the outstanding shares of the Fund, or (b) 67% of
the shares of the Fund present at the meeting if the holders of more than 50% of
the outstanding shares of the Fund are present or represented by proxy at the
meeting.
THE DIRECTORS OF THE FUND RECOMMEND THAT THE STOCKHOLDERS OF THE FUND VOTE TO
APPROVE THIS PROPOSAL. In the event that the stockholders of the Fund fail to
approve this Proposal, the Directors of the Fund will consider what further
action should be taken.
PROPOSAL 6. TO APPROVE THE ELIMINATION,
RECLASSIFICATION AND/OR AMENDMENT OF THE FUND'S
INVESTMENT OBJECTIVE AND CERTAIN FUNDAMENTAL
INVESTMENT POLICIES
The Act requires a registered investment company like the Fund to have
certain specific investment policies which can be changed only by a shareholder
vote. Investment companies may also elect to designate other policies which may
be changed only by a shareholder vote. Both types of policies are often referred
to as "fundamental" policies. (In this Proxy Statement, the word "restriction"
is sometimes used to describe a policy.) Some fundamental policies have been
adopted in the past by the Fund to reflect certain regulatory, business or
industry conditions which are no longer in effect. Accordingly, the Directors
authorized a review of the Fund's fundamental policies to simplify and modernize
those policies which are required to be fundamental, and to eliminate as
fundamental any policies which are not required to be fundamental under the
positions of the staff of the Securities and Exchange Commission in interpreting
the Act, in which case, depending on the circumstances, the policy would be
reclassified as a nonfundamental policy in the same or a modified form, or
eliminated. Nonfundamental policies can be changed by the Directors without
stockholder approval. Revision of fundamental policies have been approved by
shareholders of numerous other funds advised by EVM, and if these revisions are
approved then the uniformity of such policies would serve to facilitate EVM's
compliance efforts.
This Proposal seeks stockholder approval of changes which are intended to
accomplish the foregoing goals. In addition, the revised policies would be in
conformity with those of the Portfolio to allow implementation of the Hub and
Spoke structure. Because an anticipated investor in the Portfolio will register
its securities with state securities ("Blue Sky") laws, the Fund's policies
should also be conformed to such laws. The proposed changes to the fundamental
policies are discussed in detail below. Please refer to the changes to the
policies as set forth in Exhibit B (which does not include the additional
fundamental investment provision to be added if Proposal 4 is approved). By
reducing to a minimum those policies which can be changed only by stockholder
vote, the Fund would be able to avoid the costs and delay associated with a
stockholder meeting and the Directors believe that EVM's ability to manage the
Fund's portfolio in a changing regulatory or investment environment will be
enhanced. Accordingly, investment management opportunities will be increased.
The references to the Fund's investment restrictions correspond to the
paragraphs in Exhibit B. If this Proposal is approved, the restrictions would be
reordered.
Aside from the changes to restrictions (6), (7), (11) and (14), the proposed
changes will not affect current management of the Fund's portfolio.
See "Use of Modern Investment Management Techniques".
RECLASSIFICATION AND AMENDMENT OF THE INVESTMENT OBJECTIVE
The Fund's present investment objective is "to seek long-term growth of
capital and consequent long-term growth of income." Among the principal
investment policies are that the Fund invests in "a diversified list of common
stocks representing a number of different industries" and that "one of the
factors which will be considered before any portfolio securities are sold will
be the resulting tax liability." It is proposed that the investment objective be
modified to express more explicitly the focus on investing in a diversified
portfolio of stocks, and the consideration given to investor taxation in
managing the investment portfolio. The proposed new objective is to "achieve
long-term, after-tax returns for its shareholders through investing in a
diversified portfolio of equity securities." The proposed change would not
affect portfolio management.
Modifying the statement of the Fund's investment objective in the manner
proposed will clarify the management focus of the Fund. The Portfolio and new
investment vehicles that will invest in the Portfolio need to adopt the same
objective as the Fund. Expressing the investment objective in a way that
emphasizes the focus on after-tax returns is thought to enhance the investor
appeal of these investment vehicles, potentially leading to greater success in
adding additional assets to the Portfolio than if the present statement of the
Fund's objective were retained. As discussed in proposal 4, adding additional
assets should enable the Fund to realize certain portfolio benefits and
economies of scale.
The Directors of the Fund also propose that the objective become
"nonfundamental", which means the Directors could change it without stockholder
approval in the future. The Directors have no present intention to change the
objective other than as discussed above, and intend to submit any further
proposed change which would be material to stockholders for approval in advance
for approval.
ELIMINATION OF CERTAIN RESTRICTIONS
The Directors propose to delete Restrictions (3) and (7) because such
restrictions are not required to be fundamental policies under the Act or state
"Blue Sky" laws and/or the practices referred to therein are otherwise governed
by the Act.
Restriction (3) concerning investment in other investment companies
prohibits the Fund from investing in securities of other investment companies
and investment funds. Investment in other investment companies is regulated by
the Act and this restriction does not contain all of the provisions in the Act
regarding such investments.
Restriction (7) concerning pledging, mortgaging or hypothecating the assets
of the Corporation is being deleted as pledging restrictions are no longer
required by state law. Restriction (6), as revised, contains limitations on
leverage.
RECLASSIFICATION OF CERTAIN RESTRICTIONS
The Directors also propose that Restrictions (4) and (10) be eliminated as
fundamental, but be retained as nonfundamental policies of the Fund (which could
be thereafter changed or eliminated by Director vote). Each of these
restrictions is required under various state "Blue Sky" laws and/or federal
laws, but are not required to be fundamental policies of the Fund.
Restriction (4) concerning investments in unseasoned issuers limits
investment in securities of companies with less than three years continuous
operation to 5% of total assets. The Fund's investment policies generally
contemplate investing in seasoned issuers.
Restriction (10) concerning investing for control prohibits the Fund from
investing for control or management of other companies. Such investments would
be difficult because of the Act's diversification requirements contained in
Restrictions (1) and (2), and are regulated by the Act's provisions on
affiliated transactions.
As a result of this proposed reclassification of certain investment
restrictions as nonfundamental, a future change in any of these restrictions
could be effected by the Directors without stockholder approval if the Directors
determined that such change was appropriate and desirable. The Directors have no
present intention of amending or eliminating the foregoing restrictions which
would be reclassified. The Directors believe, however, that this
reclassification of restrictions will permit the Fund to respond more rapidly to
future changes in the Fund's competitive and regulatory environment.
AMENDMENT OF CERTAIN RESTRICTIONS
The Trustees also propose the amendment of five fundamental policies.
Restrictions (1) and (2) concerning diversification of assets by issuer is
more restrictive than needed to comply with the Act and Subchapter M of the
Internal Revenue Code. The revised restrictions comport with these statutes
primarily by having the diversification tests apply to 75%, instead of 100%, of
total assets.
Restriction (6) concerning borrowing has been revised by permitting
borrowing and the issuance of senior securities consistent with the Act. The
positions of staff of the Securities and Exchange Commission on borrowings and
senior securities have evolved in recent years with the development of new
investment strategies, such as reverse repurchase agreements and futures
transactions. The Fund would like the ability to consider use of new investment
techniques consistent with the Act as interpretations of the Act are further
developed. The new restriction would no longer prohibit the use of borrowing for
investment purposes, but the Investment Adviser has no intention to engage in
such borrowings.
Restriction (11) concerning lending has been amended to reflect current
regulatory restraints and proposed changes to the lending policy of other Eaton
Vance funds. The Fund does not expect to lend, if at all, more than 30% of the
value of its total assets.
Restriction (12) concerning investments in real estate and commodities is
being amended in order to expressly permit the Fund to invest in securities
secured by real estate and securities of companies which invest or deal in real
estate which was previously implied, and to permit the use of financial futures
contracts for the reasons described below.
USE OF CERTAIN TECHNIQUES FOR TAX-EFFICIENT MANAGEMENT
Since the Fund commenced operation in 1966, certain techniques for the
tax-efficient management of equity portfolios have been developed and come into
wide use among investment professionals. Consistent with the investment
objective, the Portfolio (through which the Fund will invest if Proposals 4 and
5 are adopted) intends to employ them. Restrictions (6) regarding senior
securities, (7) regarding pledging, (11) regarding lending of portfolio
securities and (12) regarding nonphysical commodity contracts need to be revised
for the Fund to invest in the Portfolio and have it employ these techniques.
The Portfolio may purchase or sell certain derivative instruments to hedge
against securities price declines and currency movements, and to enhance
returns. The Portfolio may engage in transactions in derivative instruments
(which derive their value by reference to other securities, indices,
instruments, or currencies) in the U.S. and abroad. Such transactions may
include the purchase and sale of stock index futures contracts and options on
stock index futures; the purchase of put options and the sale of call options on
securities held in the Portfolio; equity swaps; and the purchase and sale of
forward currency exchange contracts and currency futures. The Portfolio may use
transactions in derivative instruments as a substitute for the purchase and sale
of securities. Derivative transactions may be more advantageous in a given
circumstance than transactions involving securities due to more favorable tax
treatment, lower transaction costs, or greater liquidity. While many derivative
instruments have built-in leveraging characteristics, the Portfolio will not use
them to leverage its net assets. The purchase and sale of derivative instruments
is a highly specialized activity that can expose the Portfolio to a significant
risk of loss. The built-in leveraging inherent to many derivative instruments
can result in losses that substantially exceed the initial amount paid or
received. Equity swaps and over-the-counter options are private contracts in
which there is a risk of loss in the event of a default on an obligation to pay
by a counterparty. Derivative instruments may be difficult to value, may be
illiquid, and may be subject to wide swings in valuation caused by changes in
the value of an underlying security, index, instrument, or currency. There can
be no assurance thatthe use of derivative instruments will be advantageous to
the Portfolio. The Portfolio will only enter into equity swaps and
over-the-counter options contracts with counterparties whose credit quality or
claims paying ability are considered to be investment grade by BMR. In addition,
at the time of entering into a transaction, the Portfolio's credit exposure to
any one counterparty will be limited to 5% or less of the net assets of the
Portfolio. The Portfolio's investment in illiquid assets, which may include
equity swaps and over-the-counter options, may not represent more than 15% of
net assets at the time any such illiquid assets are acquired. All futures
contracts entered into by the Portfolio will be traded on exchanges or boards of
trade that are licensed and regulated by the Commodities Futures Trading
Commission (the "CFTC") and must be executed through a futures commission
merchant or brokerage firm that is a member of the relevant exchange. Under CFTC
regulations, the Portfolio may only enter into futures contracts if, immediately
thereafter, the value of the aggregate initial margin with respect to all
currently outstanding non-hedging positions in futures contracts does not exceed
5% of the Fund's net asset value, after taking into account unrealized profits
and losses on such positions.
In addition, the Portfolio may seek to earn income by lending portfolio
securities to broker-dealers or other institutional borrowers. As with other
extensions of credit there are risks of delay in recovery or even loss of rights
in the securities loaned if the borrower of the securities fails financially.
However, the loans will be made only to organizations deemed by BMR to be
sufficiently creditworthy and when, in the judgment of BMR, the consideration
which can be earned from securities loans of this type justifies the attendant
risk. Moreover, the tax consequences of the income received would be considered
before lending was implemented.
VOTE REQUIRED TO APPROVE PROPOSAL 6
Approval of any part of this Proposal requires the affirmative vote of a
majority of the outstanding voting securities of the Fund as defined under
Proposal 4. Implementation of any part of this Proposal is not dependent upon
any other proposal herein.
The Directors have considered various factors and believe that this Proposal
will increase investment management flexibility and is in the best interests of
the Fund's stockholders. If the Proposal is not approved, the Fund's present
objective and fundamental restrictions will remain in effect and a stockholder
vote would be required before the Fund could engage in activities prohibited by
a fundamental restriction. The Directors recommend that the stockholders vote in
favor of the elimination, reclassification and/ or amendment of the Fund's
investment objective and restrictions as described above.
PROPOSAL 7. TO APPROVE AN AMENDMENT TO THE
FUND'S ARTICLES OF ORGANIZATION
REGARDING REORGANIZATIONS
In order to facilitate a possible tax-free reorganization between the Fund
(assuming it invests substantially all of its assets in the Portfolio in
accordance with Proposal 4) and similarly structured and managed investment
companies sponsored by Eaton Vance, the Directors recommend that the
shareholders authorize an Amendment to the Fund's Articles of Organization to
reduce the shareholder vote required for such a transaction from two-thirds to a
majority.
Under Massachusetts General Laws Chapter 156, Section 75, the affirmative
vote of two-thirds of the outstanding shareholders is required to approve a
reorganization unless the Articles of Organization provide for a less onerous
requirement which can be no less than a majority. Because of the expense and
delay that can be involved in obtaining a two-thirds vote, the Directors
recommend the change be approved.
A reorganization may be in the shareholders' interest in the future to
reduce costs. Any specific proposal to reorganize would be the subject of a
separate proxy solicitation in which shareholders would receive proxy materials
describing the proposal.
An affirmative vote of a majority of the outstanding shares of the Fund
entitled to vote at this meeting will be required to authorize the Amendment.
THE DIRECTORS UNANIMOUSLY RECOMMEND THAT THE SHAREHOLDERS VOTE TO AMEND THE
ARTICLES OF ORGANIZATION. The Amendment would apply to any type of
reorganization permitted under Massachusetts law. Failure to receive an
affirmative vote on this Proposal will not preclude acting on any other Proposal
set forth in this Proxy Statement which has received the required affirmative
vote.
CERTAIN INFORMATION REGARDING BMR, EVM
AND THE OFFICERS OF THE FUND AND THE PORTFOLIO
INVESTMENT ADVISERS
Eaton Vance Management ("EVM") or Boston Management and Research ("BMR") act
as investment adviser to investment companies and various individual and
institutional clients, with combined assets under management of approximately
$16 billion. EVM provides administrative and management services to certain
Eaton Vance funds, as well as The Wright Managed Income Trust, The Wright
Managed Equity Trust, The Wright EquiFund Equity Trust and The Wright Managed
Blue Chip Series Trust. EVM and its affiliates also provide investment
management services to substantial individual and institutional investment
counsel accounts.
There are no financial conditions known by the EVC organization which would
impair the financial ability of BMR to fulfill its commitment to the Portfolio
under the proposed investment advisory agreement. BMR and EVM are Massachusetts
business trusts, and EV is the trustee of BMR and EVM. The Directors of EV are
Landon T. Clay, H. Day Brigham, Jr., M. Dozier Gardner, James B. Hawkes and
Benjamin A. Rowland, Jr. The Directors of EVC consist of the same persons and
John G. L. Cabot and Ralph Z. Sorenson. Mr. Clay is chairman and Mr. Gardner is
president and chief executive officer of EVC, EVM, BMR and EV. All shares of the
outstanding Voting Common Stock of EVC are deposited in a Voting Trust which
expires on December 31, 1996, the Voting Trustees of which are Messrs. Clay,
Brigham, Gardner, Hawkes, and Rowland. The Voting Trustees have unrestricted
voting rights for the election of Directors of EVC. All of the outstanding
voting trust receipts issued under said Voting Trust are owned by certain of the
officers of BMR and EVM who are also officers and Directors of EVC and EV. As of
October 25, 1995, Messrs. Clay, Gardner and Hawkes each owned 24% of such voting
trust receipts, and Messrs. Rowland and Brigham owned 15% and 13%, respectively.
The address of EVC, EVM, BMR, EV and of its Directors or Trustees is 24 Federal
Street, Boston, Massachusetts 02110.
As of October 23, 1995 there were 9,294,224 shares of Non-Voting Common
Stock of EVC outstanding, 102,741 shares of which were held by EVM. As at such
date, Landon T. Clay owned 1,779,739 shares (or 19.15%) of such Non-Voting
Common Stock of EVC then outstanding, and M. Dozier Gardner owned 249,448 shares
(or 2.68%) of such Non-Voting Common Stock. EVC has issued outstanding options
to the following individuals covering the number of shares of EVC Non- Voting
Common Stock set forth after their names: Landon T. Clay (19,000); M. Dozier
Gardner (52,500); Benjamin A. Rowland, Jr., (31,000); and James B.
Hawkes (130,144).
EVC owns all the stock of Marblehead Energy Corp., which engages in oil and
gas operations, and 77.3% of the stock of Investors Bank & Trust Company
("IBT"), the custodian of the Fund and the Portfolio, which also provides
bookkeeping and pricing services to the Fund and the Portfolio. The charges for
its services are offset by the value (determined by an agreed-upon formula) of
the cash balances of the Fund and the Portfolio, which are maintained with it as
the custodian of the Fund and the Portfolio. IBT also provides custodial,
trustee and other fiduciary services to investors, including individuals,
employee benefit plans, corporations, savings banks, investment companies and
other institutions. EVC has announced its intention to spin-off IBT as an
independent company in November, 1995. EVM owns all the stock of Northeast
Properties, Inc., which is engaged in real estate investment management and
consulting. EVC owns all the stock of Fulcrum Management, Inc. and MinVen, Inc.,
which are engaged in the development of precious metal properties. EVC, BMR, EVM
and EV may also enter into other businesses.
The fees paid IBT under these arrangements for its services as custodian by
the Fund for the six months ended April 30, 1995 and for the fiscal year ended
October 31, 1994, were $22,604 and $49,061 respectively.
EATON VANCE DISTRIBUTORS, INC.
Eaton Vance Distributors, Inc. ("EVD") (a wholly-owned subsidiary of EVM)
acts as Principal Underwriter for over 140 investment companies, each of which
makes a continuous offering of shares.
EVD also acts as the Placement Agent for the Portfolio. The Placement Agent
Agreement is renewable annually by the Portfolio's Board of Trustees (including
a majority of the Independent Trustees), may be terminated on sixty days' notice
either by such Trustees or by vote of a majority of the outstanding voting
securities of the Portfolio or on six months' notice by the Placement Agent and
is automatically terminated upon assignment.
OFFICERS OF THE FUND AND THE PORTFOLIO
The officers of the Fund and the Portfolio, with their ages indicated in
parenthesis, are as follows: Landon T. Clay (69), President and Director of the
Fund since 1970 and of the Portfolio; James B. Hawkes, Jr., (53), Vice President
of the Fund since 1971 and of the Portfolio; Duncan W. Richardson (38), Vice
President of the Fund since 1991 and of the Portfolio; James L. O'Connor (50),
Treasurer of the Fund since 1989 and of the Portfolio; Thomas Otis (64), Clerk
of the Fund since 1969 and of the Portfolio; Janet E. Sanders (59), Assistant
Treasurer and Assistant Clerk of the Fund since 1990 and of the Portfolio; James
F. Alban (33), Assistant Treasurer of the Fund since 1991 and of the Portfolio;
A. John Murphy (32), Assistant Clerk of the Fund since April 18, 1995 and of the
Portfolio; and Eric G. Woodbury (38), Assistant Clerk of the Fund since August
7, 1995 and of the Portfolio. Except as indicated, all officers of the Fund have
served in that capacity for the last five years and all officers of the
Portfolio have served since October 23, 1995. All of the officers of the Fund
and the Portfolio have been employed by BMR, EVM or their predecessors for more
than five years except Mr. Alban, Assistant Vice President of EVM and EV since
January 17, 1992 and of BMR since its inception, and an employee of EVM since
September 23, 1991 was a tax Consultant Audit Senior at Deloitte & Touche LLP
from 1987 to 1991; Mr. Murphy, Assistant Vice President of EVM, BMR and EV since
March 1, 1994 and an employee of EVM since March 1993, was State Regulations
Supervisor, The Boston Company from 1991-1993 and Registration Specialist,
Fidelity Management & Research Co., from 1986-1991; and Mr. Woodbury, Vice
President of EVM since February 1993, who was an associate attorney at Dechert,
Price & Rhoades and Gaston & Snow prior thereto. Mr. Hawkes is an officer,
Director, and a stockholder of EVC, an officer and Director of EV, and an
officer of EVM and BMR. Messrs. Alban, Murphy, O'Connor, Richardson, Ms. Sanders
and Mr. Woodbury are officers of EVM, BMR and EV, and stockholders of EVC. Mr.
Otis is an officer and stockholder of EVC and an officer of EVM, BMR and EV.
Because of their positions with BMR, EVM and EV or their ownership of stock of
EVC, Mr. Clay (an Officer and Director of the Fund and officer and trustee of
the Portfolio), as well as the other officers of the Fund and the Portfolio,
will benefit from the advisory fees paid by the Portfolio to BMR and the
Portfolio, as well as any income derived by IBT under the custodian agreements
with the Fund and the Portfolio.
NOTICE TO BANKS AND BROKER/DEALERS
The Fund has previously solicited all Nominee and Broker/Dealer accounts as
to the number of additional proxy statements required to supply owners of
shares. Should additional proxy material be required for beneficial owners,
please forward such requests to: The Shareholder Services Group, Inc., Eaton
Vance Group of Funds, Proxy Department, P.O. Box 9122 Hingham, MA 02043-9717.
ADDITIONAL INFORMATION
The expense of preparing, printing and mailing this Proxy Statement and
enclosures and the cost of soliciting proxies on behalf of the Board of
Directors of the Fund will be borne by the Fund. Proxies will be solicited by
mail and may be solicited in person or by telephone or telegraph by officers of
the Fund, be personnel of its investment adviser, EVM, its transfer agent, The
Shareholder Services Group, Inc., by broker-dealer firms or by a professional
solicitation organization. The expenses connected with the solicitation of these
proxies and with any further proxies which may be solicited by the Fund's
officers, by EVM's personnel, by its transfer agent, The Shareholder Services
Group, Inc., or by broker-dealer firms, in person, by telephone or by telegraph
will be borne by the Fund. The Fund will reimburse banks, broker-dealer firms,
and other persons holding shares registered in their names or in the names of
their nominees, for their expenses incurred in sending proxy material to and
obtaining proxies from the beneficial owners of such shares.
All proxy cards solicited by the Board of Directors that are properly
executed and received by the Clerk prior to the meeting, and which are not
revoked, will be voted at the meeting. Shares represented by such proxies will
be voted in accordance with the instructions thereon. If no specification is
made on the proxy card, it will be voted for the matters specified on the proxy
card. All proxies not voted, will not be counted toward establishing a quorum.
Broker non-votes will be counted toward establishing a quorum and for
determining whether sufficient votes have been received for approval of the
Proposal to be acted upon. Stockholders should note that while votes to abstain
will count toward establishing a quorum, passage of any Proposal being
considered at the meeting will occur only if a sufficient number of votes are
cast for the Proposal. Accordingly, votes to abstain, broker non-votes and votes
against will have the same effect in determining whether a Proposal is approved.
In the event that sufficient votes by the stockholders of the Fund in favor
of any Proposal set forth in the Notice of this meeting are not received by
November 30, 1995, the persons named as attorneys in the enclosed proxy may
propose one or more adjournments of the meeting to permit further solicitation
of proxies. A stockholder vote may be taken on one or more of the Proposals in
this Proxy Statement prior to such adjournment if sufficient votes have been
received and it is otherwise appropriate. Any such adjournment will require the
affirmative vote of the holders of a majority of the shares present in person or
by proxy at the session of the meeting to be adjourned. The persons named as
attorneys in the enclosed proxy will vote in favor of such adjournment those
proxies which they are entitled to vote in favor of the Proposal for which
further solicitation of proxies is to be made. They will vote against any such
adjournment those proxies required to be voted against such Proposal. The costs
of any such additional solicitation and of any adjourned session will be borne
by the Fund.
The Fund will furnish, without charge a copy of the Fund's Annual Report and
its most recent Semi-Annual Report succeeding the Annual Report to any
stockholder upon request. Stockholders desiring to obtain a copy of such reports
should direct all written requests to: Thomas Otis, Clerk, Capital Exchange
Fund, Inc., 24 Federal, Street, Boston, Massachusetts 02110, or should call
Eaton Vance Shareholder Services at 1-800-225-6265.
CAPITAL EXCHANGE FUND, INC.
October 30, 1995
<PAGE>
EXHIBIT A
TAX-MANAGED GROWTH PORTFOLIO
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 23rd day of October, 1995, between Tax-Managed Growth
Portfolio, a New York trust (the "Trust"), and Boston Management and Research, a
Massachusetts business trust (the "Adviser").
1. Duties of the Adviser. The Trust hereby employs the Adviser to act as
investment adviser for and to manage the investment and reinvestment of the
assets of the Trust and to administer its affairs, subject to the supervision of
the Trustees of the Trust, for the period and on the terms set forth in this
Agreement.
The Adviser hereby accepts such employment, and undertakes to afford to the
Trust the advice and assistance of the Adviser's organization in the choice of
investments and in the purchase and sale of securities for the Trust and to
furnish for the use of the Trust office space and all necessary office
facilities, equipment and personnel for servicing the investments of the Trust
and for administering its affairs and to pay the salaries and fees of all
officers and Trustees of the Trust who are members of the Adviser's organization
and all personnel of the Adviser performing services relating to research and
investment activities. The Adviser shall for all purposes herein be deemed to be
an independent contractor and shall, except as otherwise expressly provided or
authorized, have no authority to act for or represent the Trust in any way or
otherwise be deemed an agent of the Trust.
The Adviser shall provide the Trust with such investment management and
supervision as the Trust may from time to time consider necessary for the proper
supervision of the Trust. As investment adviser to the Trust, the Adviser shall
furnish continuously an investment program and shall determine from time to time
what securities and other investments shall be acquired, disposed of or
exchanged and what portion of the Trust's assets shall be held uninvested,
subject always to the applicable restrictions of the Declaration of Trust,
By-Laws and registration statement of the Trust under the Investment Company Act
of 1940, all as from time to time amended. Should the Trustees of the Trust at
any time, however, make any specific determination as to investment policy for
the Trust and notify the Adviser thereof in writing, the Adviser shall be bound
by such determination for the period, if any, specified in such notice or until
similarly notified that such determination has been revoked. The Adviser shall
take, on behalf of the Trust, all actions which it deems necessary or desirable
to implement the investment policies of the Trust.
The Adviser shall place all orders for the purchase or sale of portfolio
securities for the account of the Trust either directly with the issuer or with
brokers or dealers selected by the Adviser, and to that end the Adviser is
authorized as the agent of the Trust to give instructions to the custodian of
the Trust as to deliveries of securities and payments of cash for the account of
the Trust. In connection with the selection of such brokers or dealers and the
placing of such orders, the Adviser shall use its best efforts to seek to
execute security transactions at prices which are advantageous to the Trust and
(when a disclosed commission is being charged) at reasonably competitive
commission rates. In selecting brokers or dealers qualified to execute a
particular transaction, brokers or dealers may be selected who also provide
brokerage and research services (as those terms are defined in Section 28(e) of
the Securities Exchange Act of 1934) to the Adviser and the Adviser is expressly
authorized to pay any broker or dealer who provides such brokerage and research
services a commission for executing a security transaction 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
amount of commission is reasonable in relation to the value of the brokerage and
research services provided by such broker or dealer, viewed in terms of either
that particular transaction or the overall responsibilities which the Adviser
and its affiliates have with respect to accounts over which they exercise
investment discretion. Subject to the requirement set forth in the second
sentence of this paragraph, the Adviser is authorized to consider, as a factor
in the selection of any broker or dealer with whom purchase or sale orders may
be placed, the fact that such broker or dealer has sold or is selling shares of
any one or more investment companies sponsored by the Adviser or its affiliates
or shares of any other investment company investing in the Trust.
2. Compensation of the Adviser. For the services, payments and facilities to
be furnished hereunder by the Adviser, the Adviser shall be entitled to receive
from the Trust compensation in an amount equal to the following of the average
daily net assets of the Trust throughout each month:
AVERAGE DAILY NET ASSETS FOR THE MONTH ANNUAL FEE RATE
-------------------------------------- ---------------
up to $500 million 0.625%
$500 million but less than $1 billion 0.5625%
$1 billion but less than $1.5 billion 0.50%
$1.5 billion and over 0.4375%
Such compensation shall be paid monthly in arrears on the last business day of
each month. The Trust's daily net assets shall be computed in accordance with
the Declaration of Trust of the Trust and any applicable votes and
determinations of the Trustees of the Trust.
In case of initiation or termination of the Agreement during any month with
respect to the Trust, the fee for that month shall be based on the number of
calendar days during which it is in effect.
The Adviser may, from time to time, waive all or a part of the above
compensation.
3. Allocation of Charges and Expenses. It is understood that the Trust will
pay all expenses other than those expressly stated to be payable by the Adviser
hereunder, which expenses payable by the Trust shall include, without implied
limitation, (i) expenses of maintaining the Trust and continuing its existence,
(ii) registration of the Trust under the Investment Company Act of 1940, (iii)
commissions, fees and other expenses connected with the acquisition, holding and
disposition of securities and other investments, (iv) auditing, accounting and
legal expenses, (v) taxes and interest, (vi) governmental fees, (vii) expenses
of issue, sale, and redemption of Interests in the Trust, (viii) expenses of
registering and qualifying the Trust and Interests in the Trust under federal
and state securities laws and of preparing and printing registration statements
or other offering statements or memoranda for such purposes and for distributing
the same to Holders and investors, and fees and expenses of registering and
maintaining registrations of the Trust and of the Trust's placement agent as
broker-dealer or agent under state securities laws, (ix) expenses of reports and
notices to Holders and of meetings of Holders and proxy solicitations therefor,
(x) expenses of reports to governmental officers and commissions, (xi) insurance
expenses, (xii) association membership dues, (xiii) fees, expenses and
disbursements of custodians and subcustodians for all services to the Trust
(including without limitation safekeeping of funds, securities and other
investments, keeping of books, accounts and records, and determination of net
asset values, book capital account balances and tax capital account balances),
(xiv) fees, expenses and disbursementsof transfer agents, dividend disbursing
agents, Holder servicing agents and registrars for all services to the Trust,
(xv) expenses for servicing the account of Holders, (xvi) any direct charges to
Holders approved by the Trustees of the Trust, (xvii) compensation and expenses
of Trustees of the Trust who are not members of the Adviser's organization, and
(xviii) such non-recurring items as may arise, including expenses incurred in
connection with litigation, proceedings and claims and the obligation of the
Trust to indemnify its Trustees, officers and Holders with respect thereto.
4. Other Interests. It is understood that Trustees and officers of the Trust
and Holders of Interests in the Trust are or may be or become interested in the
Adviser as trustees, shareholders or otherwise and that trustees, officers and
shareholders of the Adviser are or may be or become similarly interested in the
Trust, and that the Adviser may be or become interested in the Trust as Holder
or otherwise. It is also understood that trustees, officers, employees and
shareholders of the Adviser may be or become interested (as directors, trustees,
officers, employees, shareholders or otherwise) in other companies or entities
(including, without limitation, other investment companies) which the Adviser
may organize, sponsor or acquire, or with which it may merge or consolidate, and
which may include the words "Eaton Vance" or "Boston Management and Research" or
any combination thereof as part of their name, and that the Adviser or its
subsidiaries or affiliates may enter into advisory or management agreements or
other contracts or relationships with such other companies or entities.
5. Limitation of Liability of the Adviser. The services of the Adviser to
the Trust are not to be deemed to be exclusive, the Adviser being free to render
services to others and engage in other business activities. In the absence of
willful misfeasance, bad faith, gross negligence or reckless disregard of
obligations or duties hereunder on the part of the Adviser, the Adviser shall
not be subject to liability to the Trust or to any Holder of Interests in the
Trust for any act or omission in the course of, or connected with, rendering
services hereunder or for any losses which may be sustained in the acquisition,
holding or disposition of any security or other investment.
6. Sub-Investment Advisers. The Adviser may employ one or more sub-
investment advisers from time to time to perform such of the acts and services
of the Adviser, including the selection of brokers or dealers to execute the
Trust's portfolio security transactions, and upon such terms and conditions as
may be agreed upon between the Adviser and such investment adviser and approved
by the Trustees of the Trust.
7. Duration and Termination of this Agreement. This Agreement shall become
effective upon the date of its execution, and, unless terminated as herein
provided, shall remain in full force and effect through and including February
28, 1996 and shall continue in full force and effect indefinitely thereafter,
but only so long as such continuance after February 28, 1996 is specifically
approved at least annually (i) by the Board of Trustees of the Trust or by vote
of a majority of the outstanding voting securities of the Trust and (ii) by the
vote of a majority of those Trustees of the Trust who are not interested persons
of the Adviser or the Trust cast in person at a meeting called for the purpose
of voting on such approval.
Either party hereto may, at any time on sixty (60) days' prior written
notice to the other, terminate this Agreement without the payment of any
penalty, by action of Trustees of the Trust or the trustees of the Adviser, as
the case may be, and the Trust may, at any time upon such written notice to the
Adviser, terminate this Agreement by vote of a majority of the outstanding
voting securities of the Trust. This Agreement shall terminate automatically in
the event of its assignment.
8. Amendments of the Agreement. This Agreement may be amended by a writing
signed by both parties hereto, provided that no amendment to this Agreement
shall be effective until approved (i) by the vote of a majority of those
Trustees of the Trust who are not interested persons of the Adviser or the Trust
cast in person at a meeting called for the purpose of voting on such approval,
and (ii) by vote of a majority of the outstanding voting securities of the
Trust.
9. Limitation of Liability. The Adviser expressly acknowledges the provision
in the Declaration of Trust of the Trust (Section 5.2 and 5.6) limiting the
personal liability of the Trustees and officers of the Trust, and the Adviser
hereby agrees that it shall have recourse to the Trust for payment of claims or
obligations as between the Trust and the Adviser arising out of this Agreement
and shall not seek satisfaction from any Trustee or officer of the Trust.
10. Certain Definitions. The terms "assignment" and "interested persons"
when used herein shall have the respective meanings specified in the Investment
Company Act of 1940 as now in effect or as hereafter amended subject, however,
to such exemptions as may be granted by the Securities and Exchange Commission
by any rule, regulation or order. The term "vote of a majority of the
outstanding voting securities" shall mean the vote, at a meeting of Holders, of
the lesser of (a) 67 per centum or more of the Interests in the Trust present or
represented by proxy at the meeting if the Holders of more than 50 per centum of
the outstanding Interests in the Trust are present or represented by proxy at
the meeting, or (b) more than 50 per centum of the outstanding Interests in the
Trust. The terms "Holders" and "Interests" when used herein shall have the
respective meanings specified in the Declaration of Trust of the Trust.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the day and year first above written.
TAX-MANAGED GROWTH PORTFOLIO
By: /s/ Landon T. Clay
--------------------------
President
BOSTON MANAGEMENT AND RESEARCH
By: /s/ James B. Hawkes
--------------------------
Vice President
and not individually
<PAGE>
EXHIBIT B
CAPITAL EXCHANGE FUND, INC.
FUNDAMENTAL INVESTMENT POLICIES
[PROPOSED ADDITIONS IN ITALICS AND PROPOSED DELETIONS IN BRACKETS]
As a matter of fundamental investment policy, the Fund may not:
(1) With respect to 75% of its total assets, invest [purchase the securities
of any issuer if such purchase at the time thereof would cause] more than five
percent (5%) of its [the] total assets [of the Corporation] (taken at market
value) [to be invested] in the securities of any one [such] issuer, except
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities and except securities of other investment companies. [The
foregoing limitation shall not apply to investments in Government securities as
defined in the Investment Company Act of 1940.]
(2) With respect to 75% of its total assets, invest [purchase securities of
any issuer if such purchase at the time thereof would cause] more than ten
percent (10%) of its assets in 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 [any class of securities of such issuer to be held by the Corporation.
For this purpose all outstanding bonds and other evidences of indebtedness shall
be deemed to be a single class of securities of the issuer, and all kinds of
stock of an issuer preferred over the common stock as to dividends or in
liquidation shall be deemed to constitute a single class regardless of relative
priorities, series designations, conversion rights and other differences.]
(3) [Purchase securities issued by any other investment company or
investment trust texcept by purchase in the open market where no commission or
profit to a sponsor or dealer results from such purchase other than the
customary broker's commission, or except when such purchase, though not made in
the open market, is part of a plan of merger or consolidation.]
(4)*Purchase securities of any issuer which has a record of less than three
(3) years' continuous operation including, however, in such three (3) years the
operation of any predecessor company or companies, partnership or individual
enterprise if the issuer whose securities are proposed as an investment for
funds of the Corporation has come into existence as a result of a merger,
consolidation, reorganization, or the purchase of substantially all the assets
of such predecessor company or companies, partnership or individual enterprise,
provided that nothing in this restriction shall prevent (a) the purchase of
securities of a company substantially all of whose assets are (i) securities of
one or more companies which have had a record of three (3) years' continuous
operation, or (ii) assets of an independent division of another company, which
division has had a record of three (3) years' continuous operation; (b) the
purchase of securities of (i) a public utility subject to supervision or
regulation as to its rates or charges by a commission or board or officer of the
United States or of any state or territory thereof, or of the government of
Canada or of any province or territory of Canada or (ii) companies operating or
formed for the purpose of operating pipe or transmission lines for the
transmission of oil, gas or electric energy or like products; provided that no
security shall be purchased pursuant to exception (a) or (b) of this restriction
if such purchase at the time thereof will cause more than five percent (5%) of
the total assets of the Fund (taken at market value) to be invested in
securities of companies which would not then be eligible for purchase but for
those exceptions.
- ----------
*This restriction would become nonfundamental if Proposal 6 is approved.
<PAGE>
(5)* 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
Director of the Corporation, or is a member, officer, director or trustee of the
Investment Adviser of the Corporation, if after the purchase of the securities
of such issuer by the Corporation one or more of such persons owns beneficially
more than one-half of one percent ( 1/2%) of the shares or securities, or both
(all taken at market value), of such issuer, and such persons owning more than
one-half of one percent ( 1/2%) of such shares or securities together own
beneficially more than five percent (5%) of such shares or securities, or both
(all taken at market value).
(6) Borrow money or issue senior securities except as permitted by the
Investment Company Act of 1940 [amounts in excess of ten percent (10%) of the
gross assets of the Corporation taken at cost determined in accordance with good
accounting practice, and no borrowing shall be undertaken except as a temporary
measure for extraordinary or emergency purposes.] (Options and futures
transactions and short sales may be subject to the restriction on senior
securities.)
(7) [Pledge, mortgage, or hypothecate the assets of the Corporation.]
(8) Purchase any securities or evidences of interest therein on "margin,"
that is to say in a transaction in which it has borrowed all or a portion of the
purchase price and pledged the purchased securities or evidences of interest
therein as collateral for the amount so borrowed;
(9)* Sell or contract to sell any security which it does not own unless by
virtue of its ownership of other securities it has at the time of sale a right
to obtain securities equivalent in kind and amount to the securities sold and
provided that if such right is conditional the sale is made upon the same
conditions.
(10)* Invest for the purpose of exercising control or management of other
companies;
(11) Make loans to other persons, except by (a) the acquisition of debt
securities and making portfolio investments, (b)entering into repurchase
agreements and (c) lending portfolio securities;
(12) Buy 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), commodities or commodity contracts for the purchase or
sale of physical commodities;
(13) Engage in the underwriting of securities; or
(14) Concentrate its investments in any particular industry, but if it is
deemed appropriate for the attainment of the Fund's objective, up to 25% of the
value of its assets may be invested in any one industry.
- ----------
*This restriction would become nonfundamental if Proposal 6 is approved.
<PAGE>
CAPITAL EXCHANGE FUND, INC. THIS PROXY IS SOLICITED ON BEHALF OF
PROXY THE BOARD OF DIRECTORS OF THE FUND
KNOW ALL MEN BY THESE PRESENTS: That the undersigned, revoking previous proxies
for such stock, hereby appoints H. Day Brigham, Jr., Landon T. Clay and Thomas
Otis, or any of them, attorneys of the undersigned, with full power of
substitution, to vote all stock of Capital Exchange Fund, Inc., which the
undersigned is entitled to vote at the Special Meeting in lieu of the Annual
Meeting of the Stockholders of said Fund to be held on November 30, 1995 at the
principal office of the Fund, 24 Federal Street, Boston, Massachusetts 02110, at
10:00 A.M. (Boston time), and at any and all adjournments thereof. Receipt of
the Notice of and Proxy Statement for said Meeting is acknowledged.
The shares represented by this proxy will be voted on the following matters as
specified below and on the reverse side by the undersigned. If no specification
is made, this proxy will be voted in favor of all such matters. Note: This proxy
must be returned in order for your shares to be voted.
- ----
1. TO FIX THE NUMBER OF DIRECTORS, AND TO ELECT DIRECTORS.
| | FOR the following nominees, except those whose names are inserted on the
line below:
Directors - L. T. Clay, D.R. Dwight, S.L. Hayes, III, N.H. Reamer,
J. L. Thorndike and J.L. Treynor
- -------------------------------------------------------------------------------
| | WITHHOLD AUTHORITY to vote for any of the nominees.
2. To ratify the selection of Deloitte FOR | | AGAINST | | ABSTAIN | |\2/
& Touche LLP as independent public
accountants of the Fund.
3. To approve an Amendment to the FOR | | AGAINST | | ABSTAIN | |\3/
By-Laws of the Fund.
4. To adopt a new investment policy FOR | | AGAINST | | ABSTAIN | |\4/
and to supplement investment
restrictions to permit a new
investment structure as described
in the Proxy Statement.
5.A. To authorize the Fund to vote at FOR | | WITHHOLD | |\5A/
a meeting of holders of interests the following AUTHORITY
in the Portfolio to elect six nominees except to vote for
trustees of the Portfolio. those whose names any of the
are inserted on the nominees.
line below.
T. Clay, D.R. Dwight, S.L. Hayes,
III, N.H. Reamer, J.L. Thorndike,
J.L. Treynor
---------------------------------
5.B. To authorize the Fund to vote at FOR | | AGAINST | | ABSTAIN | |\5B/
a meeting of holders of interests
in the Portfolio to ratify the
selection of Deloitte & Touche
LLP as independent public
accountants of the Portfolio.
5.C. To authorize the Fund to vote at FOR | | AGAINST | | ABSTAIN | |\5C/
a meeting of holders of interests
in the Portfolio to approve the
Investment Advisory Agreement
between the Portfolio and Boston
Management and Research as set
forth in Exhibit A to the Proxy
Statement.
<PAGE>
6. To approve the revision of the
Fund's investment objective and
certain of the Fund's investment
policies as set forth in Exhibit
B to the Proxy Statement as
follows:
6.A. Reclassification and amendment FOR | | AGAINST | | ABSTAIN | |\6A/
of the investment objective.
6.B. Eliminate the restriction FOR | | AGAINST | | ABSTAIN | |\6B/
concerning investment in other
investment companies.
6.C. Eliminate the restriction FOR | | AGAINST | | ABSTAIN | |\6C/
concerning pledging.
6.D. Reclassify the restriction FOR | | AGAINST | | ABSTAIN | |\6D/
concerning investment in
unseasoned issuers.
6.E. Reclassify the restriction FOR | | AGAINST | | ABSTAIN | |\6E/
concerning investing for
control.
6.F. Amend the restrictions concerning FOR | | AGAINST | | ABSTAIN | |\6F/
diversification.
6.G. Amend the restriction concerning FOR | | AGAINST | | ABSTAIN | |\6G/
borrowing.
6.H. Amend the restriction concerning FOR | | AGAINST | | ABSTAIN | |\6H/
lending.
6.I. Amend the restriction concerning FOR | | AGAINST | | ABSTAIN | |\6I/
real estate.
6.J. Amend the restriction concerning FOR | | AGAINST | | ABSTAIN | |\6J/
commodities.
7. To approve an amendment to the FOR | | AGAINST | | ABSTAIN | |\7/
Articles of Organization.
As to any other matter, or if any of the nominees named in the Proxy Statement
are not available for election, said attorneys shall vote in accordance with
their judgment.
THE DIRECTORS RECOMMEND A VOTE IN FAVOR OF
ALL MATTERS -----------
---
------------------------------------------
------------------------------------------
Please sign exactly as your name or names
appear at left.
Dated: --------------------------- , 1995
