<PAGE>
EV MARATHON SPECIAL EQUITIES FUND
EV MARATHON SPECIAL EQUITIES FUND (THE "FUND") IS A MUTUAL FUND SEEKING
GROWTH OF CAPITAL. THE FUND INVESTS ITS ASSETS IN SPECIAL INVESTMENT PORTFOLIO
(THE "PORTFOLIO"), A DIVERSIFIED OPEN-END INVESTMENT COMPANY HAVING THE SAME
INVESTMENT OBJECTIVE AS THE FUND, RATHER THAN BY DIRECTLY INVESTING IN AND
MANAGING ITS OWN PORTFOLIO OF SECURITIES AS WITH HISTORICALLY STRUCTURED MUTUAL
FUNDS. THE FUND IS A SERIES OF EATON VANCE SPECIAL INVESTMENT TRUST (THE
"TRUST").
Shares of the Fund are not deposits or obligations of, or guaranteed or
endorsed by, any bank or other insured depository institution, and are not
federally insured by the Federal Deposit Insurance Corporation, the Federal
Reserve Board or any other government agency. Shares of the Fund involve
investment risks, including fluctuations in value and the possible loss of some
or all of the principal investment.
This Prospectus is designed to provide you with information you should know
before investing. Please retain this document for future reference. A Statement
of Additional Information dated April 1, 1995 for the Fund, as supplemented from
time to time, has been filed with the Securities and Exchange Commission and is
incorporated herein by reference. This Statement of Additional Information is
available without charge from the Fund's principal underwriter, Eaton Vance
Distributors Inc. (the "Principal Underwriter"), 24 Federal Street, Boston, MA
02110 (telephone (800) 225-6265). The Portfolio's investment adviser is Boston
Management and Research (the "Investment Adviser"), a wholly-owned subsidiary of
Eaton Vance Management, and Eaton Vance Management is the administrator (the
"Administrator") of the Fund. The offices of the Investment Adviser and the
Administrator are located at 24 Federal Street, Boston, MA 02110.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURI-
TIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROS-
PECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE PAGE
<S> <C> <C> <C>
Shareholder and Fund Expenses ..................... 2 How to Buy Fund Shares ........................ 12
The Fund's Financial Highlights ................... 3 How to Redeem Fund Shares ..................... 13
The Fund's Investment Objective ................... 4 Reports to Shareholders ....................... 15
How the Fund and the Portfolio Invest The Lifetime Investing Account/Distribution
their Assets; Investment Risks .................. 4 Options ..................................... 15
Organization of the Fund and the Portfolio ........ 5 The Eaton Vance Exchange Privilege ............ 16
Management of the Fund and the Portfolio .......... 7 Eaton Vance Shareholder Services .............. 17
Distribution Plan ................................. 9 Distributions and Taxes ....................... 18
Valuing Fund Shares ............................... 11 Performance Information ....................... 19
</TABLE>
- --------------------------------------------------------------------------------
PROSPECTUS DATED APRIL 1, 1995
<PAGE>
SHAREHOLDER AND FUND EXPENSES \1/
- --------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES
Sales Charges Imposed on Purchases of Shares None
Sales Charges Imposed on Reinvested Distributions None
Redemption Fees None
Fees to Exchange Shares None
Range of Declining Contingent Deferred Sales
Charges Imposed on Redemptions During the First Seven Years (as a percentage
of redemption proceeds exclusive of all reinvestments
and capital appreciation in the account)\2/ 5.00% - 0%
ANNUAL FUND AND ALLOCATED PORTFOLIO OPERATING EXPENSES
(as a percentage of average daily net assets)
Investment Adviser Fee 0.625%
Rule 12b-1 Distribution (and Service) Fees\3/ 0.770%
Other Expenses 0.315%
--------
Total Operating Expenses 1.710%
========
EXAMPLE 1 YEAR 3 YEARS
------ -------
An investor would pay the following contingent deferred sales charge and
expenses on a $1,000 investment, assuming (a) 5% annual return and (b)
redemption at the end of each time period: $67 $94
An investor would pay the following expenses on
the same investment, assuming (a) 5% annual return
and (b) no redemptions: $17 $54
Notes:
\1/ The purpose of the above table and Example is to summarize the aggregate
expenses of the Fund and the Portfolio and to assist investors in
understanding the various costs and expenses that investors in the Fund will
bear directly or indirectly. The Trustees of the Trust believe that over
time the aggregate per share expenses of the Fund and the Portfolio should
be approximately equal to the per share expenses which the Fund would incur
if the Trust retained the services of an investment adviser and the assets
of the Fund were invested directly in the type of securities being held by
the Portfolio. Because the Fund does not yet have a sufficient operating
history, the percentages indicated as Annual Fund and Allocated Portfolio
Operating Expenses in the table and the amounts included in the Example are
based on the Fund's and the Portfolio's projected fees and expenses for the
current fiscal year ending December 31, 1995. The Example should not be
considered a representation of past or future expenses and actual expenses
may be greater or less than those shown. The Example assumes a 5% annual
return and the Fund's actual performance may result in an annual return
greater or less than 5%. For further information regarding the expenses of
both the Fund and the Portfolio, see "The Fund's Financial Highlights",
"Organization of the Fund and the Portfolio", "Management of the Fund and
the Portfolio" and "How to Redeem Fund Shares". Because the Fund makes
payments under its Distribution Plan adopted under Rule 12b-1, a long-term
shareholder may pay more than the economic equivalent of the maximum
front-end sales charge permitted by a rule of the National Association of
Securities Dealers, Inc. See "Distribution Plan".
\2/ No contingent deferred sales charge is imposed on (a) shares purchased more
than six years prior to the redemption, (b) shares acquired through the
reinvestment of distributions or (c) any appreciation in value of other
shares in the account (see "How to Redeem Fund Shares"), and no such charge
is imposed on exchanges of Fund shares for shares of one or more other funds
listed under "The Eaton Vance Exchange Privilege".
\3/ The percentage has been restated because the Fund expects to begin accruing
for its service fee payments during the quarter ending September 30, 1995.
\4/ Other investment companies with different distribution arrangements and fees
are investing in the Portfolio and additional such companies may do so in
the future. See "Organization of the Fund and the Portfolio".
THE FUND'S FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following information should be read in conjunction with the audited
financial statements included in the Statement of Additional Information, all of
which has been so included in reliance upon the report of Coopers & Lybrand
L.L.P., independent accountants, as experts in accounting and auditing, which
report is contained in the Statement of Additional Information. Further
information regarding the performance of the Fund is contained in the Fund's
annual report to shareholders which may be obtained without charge by contacting
the Principal Underwriter.
- --------------------------------------------------------------------------------
FOR THE PERIOD FROM THE START OF BUSINESS, AUGUST 22, 1994, TO DECEMBER 31,
1994
NET ASSET VALUE, beginning of period ........................... $ 10.000
--------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) ................................. $ (0.021)
Net realized and unrealized gain (loss) on investments ....... (0.169)
--------
Total income (loss) from investment operations ............. $ (0.190)
--------
NET ASSET VALUE, end of period ................................. $ 9.810
========
TOTAL RETURN\1/ ................................................ (1.90)%
RATIOS/SUPPLEMENTAL DATA:*
Net assets, end of period (000's omitted) .................... 623
Ratio of net expenses to average daily net assets\2/ ......... 3.05%+
Ratio of net investment income (loss) to
average daily net assets ................................... (2.00)%+
*The expenses related to the operation of the Fund reflect an allocation of
expenses to the Administrator. Had such action not been taken, the ratios would
have been as follows:
RATIOS (to average daily net assets)
Expenses .................................................. 9.55%+
Net investment income (loss) .............................. (8.50)%+
+ Computed on an annualized basis.
\1/ Total return is calculated assuming a purchase at the net asset value on the
first day and a sale at the net asset value on the last day of the period
reported. Dividends and distributions, if any, are assumed to be reinvested
at the net asset value on the record date.
\2/ Includes the Fund's share of Special Investment Portfolio's allocated
expenses for the period from the Fund's start of business, August 22, 1994,
to December 31, 1994.
<PAGE>
THE FUND'S INVESTMENT OBJECTIVE
- --------------------------------------------------------------------------------
EV MARATHON SPECIAL EQUITIES FUND'S INVESTMENT OBJECTIVE IS TO PROVIDE GROWTH OF
CAPITAL. The Fund currently seeks to meet its investment objective by investing
its assets in the Special Investment Portfolio, a separate registered investment
company that invests primarily in quality growth securities. The Fund's and the
Portfolio's investment objectives are nonfundamental and may be changed when
authorized by a vote of the Trustees of the Trust or the Portfolio,
respectively, without obtaining the approval of the Fund's shareholders or the
investors in the Portfolio, as the case may be. The Trustees of the Trust have
no present intention to change the Fund's objective and intend to submit any
proposed material change in the investment objective to shareholders in advance
for their approval.
HOW THE FUND AND THE PORTFOLIO INVEST THEIR
ASSETS; INVESTMENT RISKS
- --------------------------------------------------------------------------------
THE FUND SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY INVESTING IN THE
PORTFOLIO. Although there is no formula as to the percentage of assets that will
be invested in any one type of security, the policy of the Portfolio is to
invest principally (i.e., at least 65% of its total assets during normal
investment conditions) in equity securities, including common stocks and
securities convertible into common stocks, of publicly held companies combining
characteristics of both growth and quality sought by the Portfolio. Any income
received will be incidental to the Portfolio's objective of capital growth. The
criteria for investments in convertible debt are the same as those used for the
common stock of the issuer. The Portfolio does not currently intend to invest
more than 5% of its net assets in convertible debt. The Portfolio may invest in
companies that have market capitalizations of $250 million or less. Investment
in the securities of such companies may be characterized as involving greater
relative risk due to their smaller size. From time to time, the Portfolio may
also invest in bonds, notes and certificates of indebtedness if in the
Investment Adviser's judgment such investments are consistent with the
Portfolio's objective; however, the Portfolio does not currently intend to
invest more than 5% of its net assets in each of such investments and currently
intends to limit its investments in non-convertible debt to non-convertible debt
rated investment grade (i.e., rated Baa or higher by Moody's Investors Service,
Inc. or BBB or higher by Standard & Poor's Ratings Group) or, if unrated,
determined to be of comparable quality by the Portfolio's Investment Adviser.
Realization of the Portfolio's objective will depend to a large extent on the
accuracy of earnings projections, which are not subject to exact prediction. If,
in the opinion of BMR, market conditions are such that a more conservative
approach to investments is deemed desirable, then the Portfolio may temporarily
make substantial investments in investment grade fixed-income obligations of all
types and U.S. Government obligations, or in bonds, notes or other certificates
of indebtedness.
In the view of the Investment Adviser, a growth security is an equity security
of a company which has shown relative gains in earning power over a period of
years substantially above that achieved by the economy as a whole and which, the
Investment Adviser expects, will continue to show such gains. It is the
intention of the Portfolio that its portfolio will be concentrated in securities
of companies which, in the Investment Adviser's judgment, seem likely to double
their earning power within a five-year period. To achieve this objective, a
company would require minimum average annual compound rates of growth over such
period of at least 15%. There is, of course, no assurance that the Investment
Adviser will be successful in selecting securities of companies which meet these
standards. In recommending portfolio investments on behalf of the Portfolio, the
Investment Adviser will consider that the quality of a security depends upon the
ability, motivation, depth and integrity of the issuer's management, the
importance of the enterprise in its industry and the relative importance of the
industry within the broad economic framework, the current financial strength of
the enterprise in terms of ability to cushion adversity and to fund the
expansion of activities, and the reliability of final demand characteristics for
products or services. The Portfolio would generally expect to hold its
securities until BMR's judgment of the issuing company's prospects is altered
and/or the price of the company's securities appears to over-discount
prospective earnings progress as compared with other issues with similar
characteristics.
The Portfolio may invest in securities issued by foreign companies
(including American Depository Receipts and Global Depository Receipts). Such
investments may be subject to various risks such as fluctuations in currency and
exchange rates, foreign taxes, social, political and economic conditions in the
countries in which such companies operate, and changes in governmental, economic
or monetary policies both here and abroad. There may be less publicly available
information about a foreign company than about a comparable domestic company.
Because the securities markets in many foreign countries are not as developed as
those in the United States, the securities of many foreign companies are less
liquid and their prices are more volatile than securities of comparable domestic
companies. In order to hedge against possible variations in foreign exchange
rates pending the settlement of foreign securities transactions, the Portfolio
may buy or sell foreign currencies.
An investment in the Fund entails the risk that the principal value of Fund
shares may not increase or may decline. The Portfolio's investments in equity
securities are subject to the risk of adverse developments affecting particular
companies or industries and the stock market generally. Investments in bonds are
subject to the risk that the issuer may default on its obligations to pay
principal and interest. The value of bonds tends to increase during periods of
falling interest rates and to decline during periods of rising interest rates.
The Fund and the Portfolio have adopted certain fundamental investment
restrictions which are enumerated in detail in the Statement of Additional
Information and which may not be changed unless authorized by a shareholder vote
and an investor vote, respectively. Except for such enumerated restrictions and
as otherwise indicated in this Prospectus, the investment objective and policies
of the Fund and the Portfolio are not fundamental policies and accordingly may
be changed by the Trustees of the Trust and the Portfolio without obtaining the
approval of the Fund's shareholders or the investors in the Portfolio, as the
case may be. If any changes were made in the Fund's investment objective, the
Fund might have an investment objective different from the objective which an
investor considered appropriate at the time the investor became a shareholder of
the Fund.
- --------------------------------------------------------------------------------
THE FUND IS NOT INTENDED TO BE A COMPLETE INVESTMENT PROGRAM, AND PROSPECTIVE
INVESTORS SHOULD TAKE INTO ACCOUNT THEIR OBJECTIVES AND OTHER INVESTMENTS WHEN
CONSIDERING THE PURCHASE OF FUND SHARES. THE FUND CANNOT ELIMINATE RISK OR
ASSURE ACHIEVEMENT OF ITS OBJECTIVE.
- --------------------------------------------------------------------------------
ORGANIZATION OF THE FUND AND THE PORTFOLIO
- --------------------------------------------------------------------------------
THE FUND IS A DIVERSIFIED SERIES OF EATON VANCE SPECIAL INVESTMENT TRUST, A
BUSINESS TRUST ESTABLISHED UNDER MASSACHUSETTS LAW PURSUANT TO A DECLARATION OF
TRUST DATED MARCH 27, 1989, AS AMENDED, AS THE SUCCESSOR TO A CORPORATION WHICH
COMMENCED OFFERING ITS SHARES TO THE PUBLIC IN APRIL, 1968. THE TRUST IS A
MUTUAL FUND -- AN OPEN-END MANAGEMENT INVESTMENT COMPANY. The Trustees of the
Trust are responsible for the overall management and supervision of its affairs.
The Trust may issue an unlimited number of shares of beneficial interest (no par
value per share) in one or more series and because the Trust can offer separate
series (such as the Fund) it is known as a "series company." Each share
represents an equal proportionate beneficial interest in the Fund. When issued
and outstanding, the shares are fully paid and nonassessable by the Trust and
redeemable as described under "How to Redeem Fund Shares". Shareholders are
entitled to one vote for each full share held. Fractional shares may be voted
proportionately. Shares have no preemptive or conversion rights and are freely
transferable. In the event of the liquidation of the Fund, shareholders are
entitled to share pro rata in the net assets of the Fund available for
distribution to shareholders.
THE PORTFOLIO IS ORGANIZED AS A TRUST UNDER THE LAWS OF THE STATE OF NEW
YORK AND INTENDS TO BE TREATED AS A PARTNERSHIP FOR FEDERAL TAX PURPOSES. The
Portfolio, as well as the Trust, intends to comply with all applicable Federal
and state securities laws. The Portfolio's Declaration of Trust provides that
the Fund and other entities permitted to invest in the Portfolio (e.g., other
U.S. and foreign investment companies, and common and commingled trust funds)
will each be liable for all obligations of the Portfolio. However, the risk of
the Fund incurring financial loss on account of such liability is limited to
circumstances in which both inadequate insurance exists and the Portfolio itself
is unable to meet its obligations. Accordingly, the Trustees of the Trust
believe that neither the Fund nor its shareholders will be adversely affected by
reason of the Fund investing in the Portfolio.
SPECIAL INFORMATION ON THE FUND/PORTFOLIO INVESTMENT STRUCTURE. An investor in
the Fund should be aware that the Fund, unlike mutual funds which directly
acquire and manage their own portfolios of securities, seeks to achieve its
investment objective by investing its assets in an interest in the Portfolio
(although the Fund may temporarily hold a de minimus amount of cash), which is a
separate investment company with an identical investment objective. Therefore,
the Fund's interest in the securities owned by the Portfolio is indirect. In
addition to selling an interest to the Fund, the Portfolio may sell interests to
other affiliated and non-affiliated mutual funds or institutional investors.
Such investors will invest in the Portfolio on the same terms and conditions and
will pay a proportionate share of the Portfolio's expenses. However, the other
investors investing in the Portfolio are not required to sell their shares at
the same public offering price as the Fund due to variations in sales
commissions and other operating expenses. Therefore, investors in the Fund
should be aware that these differences may result in differences in returns
experienced by investors in the various funds that invest in the Portfolio. Such
differences in returns are also present in other mutual fund structures,
including funds that have multiple classes of shares. For information regarding
the investment objective, policies and restrictions, see "The Fund's Investment
Objective" and "How the Fund and the Portfolio Invest their Assets; Investment
Risks". Further information regarding investment practices may be found in the
Statement of Additional Information.
The Trustees of the Trust have considered the advantages and disadvantages
of investing the assets of the Fund in the Portfolio, as well as the advantages
and disadvantages of the two-tier format. The Trustees believe that the
structure offers opportunities for substantial growth in the assets of the
Portfolio, and affords the potential for economies of scale for the Fund.
The Fund may withdraw (completely redeem) all its assets from the Portfolio
at any time if the Board of Trustees of the Trust determines that it is in the
best interest of the Fund to do so. The investment objective and the
nonfundamental investment policies of the Fund and the Portfolio may be changed
by the Trustees of the Trust and the Portfolio without obtaining the approval of
the shareholders of the Fund or the investors in the Portfolio, as the case may
be. Any such change of the investment objective will be preceded by thirty days'
advance written notice to the shareholders of the Fund or the investors in the
Portfolio, as the case may be. If a shareholder redeems shares because of a
change in the nonfundamental objective or policies of the Fund, those shares may
be subject to a contingent deferred sales charge, as described in "How to Redeem
Fund Shares". In the event the Fund withdraws all of its assets from the
Portfolio, or the Board of Trustees of the Trust determines that the investment
objective of the Portfolio is no longer consistent with the investment objective
of the Fund, such Trustees would consider what action might be taken, including
investing the assets of the Fund in another pooled investment entity or
retaining an investment adviser to manage the Fund's assets in accordance with
its investment objective. The Fund's investment performance may be affected by a
withdrawal of all its assets from the Portfolio.
Information regarding other pooled investment entities or funds which invest
in the Portfolio may be obtained by contacting Eaton Vance Distributors, Inc.
(the "Principal Underwriter" or "EVD"), 24 Federal Street, Boston, MA 02110,
(617) 482-8260. Smaller investors in the Portfolio may be adversely affected by
the actions of larger investors in the Portfolio. For example, if a large
investor withdraws from the Portfolio, the remaining investors may experience
higher pro rata operating expenses, thereby producing lower returns.
Additionally, the Portfolio may become less diverse, resulting in increased
portfolio risk, and experience decreasing economies of scale. However, this
possibility exists as well for historically structured funds which have large or
institutional investors.
Until recently, the Administrator sponsored and advised historically
structured funds. Funds which invest all their assets in interests in a separate
investment company are a relatively new development in the mutual fund industry
and, therefore, the Fund may be subject to additional regulations than
historically structured funds.
The Declaration of Trust of the Portfolio provides that the Portfolio will
terminate 120 days after the complete withdrawal of the Fund or any other
investor in the Portfolio, unless either the remaining investors, by unanimous
vote at a meeting of such investors, or a majority of the Trustees of the
Portfolio, by written instrument consented to by all investors, agree to
continue the business of the Portfolio. This provision is consistent with
treatment of the Portfolio as a partnership for Federal income tax purposes. See
"Distributions and Taxes" for further information. Whenever the Fund as an
investor in the Portfolio is requested to vote on matters pertaining to the
Portfolio (other than the termination of the Portfolio's business, which may be
determined by the Trustees of the Portfolio without investor approval), the Fund
will hold a meeting of Fund shareholders and will vote its interest in the
Portfolio for or against such matters proportionately to the instructions to
vote for or against such matters received from Fund shareholders. The Fund shall
vote shares for which it receives no voting instructions in the same proportion
as the shares for which it receives voting instructions. Other investors in the
Portfolio may alone or collectively acquire sufficient voting interests in the
Portfolio to control matters relating to the operation of the Portfolio, which
may require the Fund to withdraw its investment in the Portfolio or take other
appropriate action. Any such withdrawal could result in a distribution "in kind"
of portfolio securities (as opposed to a cash distribution from the Portfolio).
If securities are distributed, the Fund could incur brokerage, tax or other
charges in converting the securities to cash. In addition, the distribution in
kind may result in a less diversified portfolio of investments or adversely
affect the liquidity of the Fund. Notwithstanding the above, there are other
means for meeting shareholder redemption requests, such as borrowing.
The Trustees of the Trust, including a majority of the noninterested
Trustees, have approved written procedures designed to identify and address any
potential conflicts of interest arising from the fact that the Trustees of the
Trust and the Trustees of the Portfolio are the same. Such procedures require
each Board to take action to resolve any conflict of interest between the Fund
and the Portfolio, and it is possible that the creation of separate Boards may
be considered. For further information concerning the Trustees and officers of
the Trust and the Portfolio, see the Statement of Additional Information.
MANAGEMENT OF THE FUND AND THE PORTFOLIO
- --------------------------------------------------------------------------------
THE PORTFOLIO ENGAGES BOSTON MANAGEMENT AND RESEARCH ("BMR"), A WHOLLY-OWNED
SUBSIDIARY OF EATON VANCE MANAGEMENT ("EATON VANCE"), AS ITS INVESTMENT ADVISER.
EATON VANCE, ITS AFFILIATES AND ITS PREDECESSOR COMPANIES HAVE BEEN MANAGING
ASSETS OF INDIVIDUALS AND INSTITUTIONS SINCE 1924 AND MANAGING INVESTMENT
COMPANIES SINCE 1931.
Acting under the general supervision of the Board of Trustees of the
Portfolio, BMR manages the Portfolio's investments and affairs. Under its
investment advisory agreement with the Portfolio, BMR receives a monthly
advisory fee of 5/96 of 1% (equivalent to 0.625% annually) of the average daily
net assets of the Portfolio. For the period from the start of business, August
1, 1994, to December 31, 1994, the Portfolio paid BMR advisory fees equivalent
to 0.625% (annualized) of the Portfolio's average daily net assets for such
period.
BMR also furnishes for the use of the Portfolio office space and all
necessary office facilities, equipment and personnel for servicing the
investments of the Portfolio. BMR places the portfolio transactions of the
Portfolio with many broker-dealer firms and uses its best efforts to obtain
execution of such transactions at prices which are advantageous to the Portfolio
and at reasonably competitive commission rates. Subject to the foregoing, BMR
may consider sales of shares of the Fund or of other investment companies
sponsored by BMR or Eaton Vance as a factor in the selection of broker-dealer
firms to execute portfolio transactions.
Clifford H. Krauss has acted as the portfolio manager of the Portfolio since
it commenced operations. Mr. Krauss has been a Vice President of Eaton Vance
since 1987 and of BMR since 1992.
BMR OR EATON VANCE ACTS AS INVESTMENT ADVISER TO INVESTMENT COMPANIES AND
VARIOUS INDIVIDUAL AND INSTITUTIONAL CLIENTS WITH ASSETS UNDER MANAGEMENT OF
APPROXIMATELY $15 BILLION. Eaton Vance is a wholly-owned subsidiary of Eaton
Vance Corp., a publicly-held holding company. Eaton Vance Corp., through its
subsidiaries and affiliates, engages in investment management and marketing
activities, fiduciary and banking services, oil and gas operations, real estate
investment, consulting and management, and development of precious metals
properties.
The Trust has retained the services of Eaton Vance to act as Administrator
of the Fund. The Trust has not retained the services of an investment adviser
since the Trust seeks to achieve the investment objective of the Fund by
investing the Fund's assets in the Portfolio. As Administrator, Eaton Vance
provides the Fund with general office facilities and supervises the overall
administration of the Fund. For these services Eaton Vance currently receives no
compensation. The Trustees of the Trust may determine, in the future, to
compensate Eaton Vance for such services.
The Portfolio and the Fund, as the case may be, will each be responsible for
all of its respective costs and expenses not expressly stated to be payable by
BMR under the investment advisory agreement, by Eaton Vance under the
administrative services agreement, or by EVD under the distribution agreement.
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 certficates; 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 shareholders and investors; proxy
statements and other expenses of shareholders' or investors' meetings; insurance
premiums; printing and mailing expenses; interest, taxes and corporate fees;
legal and accounting expenses; compensation and expenses of Trustees not
affiliated with BMR or Eaton Vance; 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 with respect thereto.
DISTRIBUTION PLAN
- --------------------------------------------------------------------------------
THE FUND FINANCES DISTRIBUTION ACTIVITIES AND HAS ADOPTED A DISTRIBUTION PLAN
(THE "PLAN") PURSUANT TO RULE 12B-1 UNDER THE INVESTMENT COMPANY ACT OF 1940.
Rule 12b-1 permits a mutual fund, such as the Fund, to finance distribution
activities and bear expenses associated with the distribution of its shares
provided that any payments made by the Fund are made pursuant to a written plan
adopted in accordance with the Rule. The Plan is subject to, and complies with,
the sales charge rule of the National Association of Securities Dealers, Inc.
(the "NASD Rule"). The Plan is described further in the Statement of Additional
Information, and the following is a description of the salient features of the
Plan. The Plan provides that the Fund, subject to the NASD Rule, will pay sales
commissions and distribution fees to the Principal Underwriter only after and as
a result of the sale of shares of the Fund. On each sale of Fund shares
(excluding reinvestment of distributions) the Fund will pay the Principal
Underwriter amounts representing (i) sales commissions equal to 5% of the amount
received by the Fund for each share sold and (ii) distribution fees calculated
by applying the rate of 1% over the prime rate then reported in The Wall Street
Journal to the outstanding balance of Uncovered Distribution Charges (as
described below) of the Principal Underwriter. The Principal Underwriter
currently expects to pay sales commissions (except on exchange transactions and
reinvestments) to a financial services firm (an "Authorized Firm") at the time
of sale equal to 4% of the purchase price of the shares sold by such Firm. The
Principal Underwriter will use its own funds (which may be borrowed from banks)
to pay such commissions. Because the payment of the sales commissions and
distribution fees to the Principal Underwriter is subject to the NASD Rule
described below, it will take the Principal Underwriter a number of years to
recoup the sales commissions paid by it to Authorized Firms from the payments
received by it from the Fund pursuant to the Plan.
THE NASD RULE REQUIRES THE FUND TO LIMIT ITS ANNUAL PAYMENTS OF SALES
COMMISSIONS AND DISTRIBUTION FEES TO THE PRINCIPAL UNDERWRITER TO AN AMOUNT NOT
EXCEEDING .75% OF THE FUND'S AVERAGE DAILY NET ASSETS FOR EACH FISCAL YEAR.
Under its Plan, the Fund accrues daily an amount at the rate of 1/365 of .75% of
the Fund's net assets, and pays such accrued amounts monthly to the Principal
Underwriter. The Plan requires such accruals to be automatically discontinued
during any period in which there are no outstanding Uncovered Distribution
Charges under the Plan. Uncovered Distribution Charges are calculated daily and,
briefly, are equivalent to all unpaid sales commissions and distribution fees to
which the Principal Underwriter is entitled under the Plan less all contingent
deferred sales charges theretofore paid to the Principal Underwriter. The Eaton
Vance organization may be considered to have realized a profit under the Plan if
at any point in time the aggregate amounts of all payments received by the
Principal Underwriter from the Fund pursuant to the Plan, including any
contingent deferred sales charges, have exceeded the total expenses theretofore
incurred by such organization in distributing shares of the Fund. Total expenses
for this purpose will include an allocable portion of the overhead costs of such
organization and its branch offices.
The amount payable by the Fund to the Principal Underwriter pursuant to the
Plan with respect to each day will be accrued on such day as a liability of the
Fund and will accordingly reduce the Fund's net assets upon such accrual, all in
accordance with generally accepted accounting principles. The amount payable on
each day is limited to 1/365 of .75% of the Fund's net assets on such day. The
level of the Fund's net assets changes each day and depends upon the amount of
sales and redemptions of Fund shares, the changes in the value of the
investments held by the Portfolio, the expenses of the Fund and the Portfolio
accrued and allocated to the Fund on such day, income on portfolio investments
of the Portfolio accrued and allocated to the Fund on such day, and any
dividends and distributions declared on Fund shares. The Fund does not accrue
possible future payments as a liability of the Fund or reduce the Fund's current
net assets in respect of unknown amounts which may become payable under the Plan
in the future because the standards for accrual of a liability under such
accounting principles have not been satisfied.
The Plan provides that the Fund will receive all contingent deferred sales
charges and will make no payments to the Principal Underwriter in respect of any
day on which there are no outstanding Uncovered Distribution Charges of the
Principal Underwriter. Contingent deferred sales charges and accrued amounts
will be paid by the Fund to the Principal Underwriter whenever there exist
Uncovered Distribution Charges under the Plan.
The provisions of the Plan relating to payments of sales commissions and
distribution fees to the Principal Underwriter are also included in the
Distribution Agreement between the Trust on behalf of the Fund and the Principal
Underwriter. The Plan continues in effect through and including April 28, 1995,
and shall continue in effect indefinitely thereafter for so long as such
continuance is approved at least annually by the vote of both a majority of (i)
the Trustees of the Trust who are not interested persons of the Trust and who
have no direct or indirect financial interest in the operation of the Plan or
any agreements related to the Plan (the "Rule 12b-1 Trustees") and (ii) all of
the Trustees then in office, and the Distribution Agreement contains a similar
provision. The Plan and Distribution Agreement may be terminated at any time by
vote of a majority of the Rule 12b-1 Trustees or by a vote of a majority of the
outstanding voting securities of the Fund.
Periods with a high level of sales of Fund shares accompanied by a low level
of early redemptions of Fund shares resulting in the imposition of contingent
deferred sales charges will tend to increase the time during which there will
exist Uncovered Distribution Charges of the Principal Underwriter. Conversely,
periods with a low level of sales of Fund shares accompanied by a high level of
early redemptions of Fund shares resulting in the imposition of contingent
deferred sales charges will tend to reduce the time during which there will
exist Uncovered Distribution Charges of the Principal Underwriter.
Because of the NASD Rule limitation on the amount of sales commissions and
distribution fees paid to the Principal Underwriter during any fiscal year, a
high level of sales of Fund shares during the initial years of the Fund's
operations would cause a large portion of the sales commission attributable to a
sale of Fund shares to be accrued and paid by the Fund to the Principal
Underwriter in fiscal years subsequent to the year in which such shares were
sold. This spreading of sales commissions payments under the Plan over an
extended period would result in the incurrence and payment of increased
distribution fees under the Plan. For the period from the start of business,
August 22, 1994, to December 31, 1994, the Fund paid sales commissions under the
Plan equivalent to .75% (annualized) of the Fund's average daily net assets for
such period. As at December 31, 1994, the Uncovered Distribution Charges of the
Principal Underwriter calculated under the Plan amounted to approximately
$21,676 (equivalent to 3.5% of the Fund's net assets on such day).
THE PLAN ALSO AUTHORIZES THE FUND TO MAKE PAYMENTS OF SERVICE FEES TO THE
PRINCIPAL UNDERWRITER, AUTHORIZED FIRMS AND OTHER PERSONS IN AMOUNTS NOT
EXCEEDING .25% OF THE FUND'S AVERAGE DAILY NET ASSETS FOR EACH FISCAL YEAR. The
Trustees of the Trust have initially implemented the Plan by authorizing the
Fund to make quarterly service fee payments to the Principal Underwriter and
Authorized Firms in amounts not expected to exceed .25% of the Fund's average
daily net assets for any fiscal year based on the value of Fund shares sold by
such persons and remaining outstanding for at least twelve months. As permitted
by the NASD Rule, all such payments are made for personal services and/or the
maintenance of shareholder accounts. Service fees are separate and distinct from
the sales commissions and distribution fees payable by the Fund to the Principal
Underwriter, and as such are not subject to automatic discontinuance when there
are no outstanding Uncovered Distribution Charges of the Principal Underwriter.
The Fund expects to begin accruing for its service fee payments during the
quarter ending September 30, 1995.
As currently implemented by the Trustees, the Plan authorizes payments of
sales commissions and distribution fees to the Principal Underwriter and service
fees to the Principal Underwriter and Authorized Firms which may be equivalent,
on an aggregate basis during any fiscal year of the Fund, to 1% of the Fund's
average daily net assets for such year. The Fund believes that the combined rate
of all these payments may be higher than the rate of payments made under
distribution plans adopted by other investment companies pursuant to Rule 12b-1.
It is anticipated that the Eaton Vance organization will profit by reason of the
operation of the Plan through increases in the Fund's assets (thereby increasing
the advisory fees payable to BMR by the Portfolio) resulting from sales of Fund
shares and through amounts paid under the Plan to the Principal Underwriter and
contingent deferred sales charges paid to the Principal Underwriter.
The Principal Underwriter may, from time to time, at its own expense,
provide additional incentives to Authorized Firms which employ registered
representatives who sell a minimum dollar amount of the Fund's shares and/or
shares of other funds distributed by the Principal Underwriter. In some
instances, such additional incentives may be offered only to certain Authorized
Firms whose representatives are expected to sell significant amounts of shares.
In addition, the Principal Underwriter may from time to time increase or
decrease the sales commissions payable to Authorized Firms.
The Fund may, in its absolute discretion, suspend, discontinue or limit the
offering of its shares at any time. In determining whether any such action
should be taken, the Fund's management intends to consider all relevant factors,
including without limitation the size of the Fund, the investment climate and
market conditions, the volume of sales and redemptions of Fund shares, and the
amount of Uncovered Distribution Charges of the Principal Underwriter. The Plan
may continue in effect and payments may be made under the Plan following any
such suspension, discontinuance or limitation of the offering of Fund shares;
however, the Fund is not contractually obligated to continue the Plan for any
particular period of time. Suspension of the offering of Fund shares would not,
of course, affect a shareholder's ability to redeem shares.
VALUING FUND SHARES
- --------------------------------------------------------------------------------
THE FUND VALUES ITS SHARES ONCE ON EACH DAY THE NEW YORK STOCK EXCHANGE (THE
"EXCHANGE") IS OPEN FOR TRADING, as of the close of regular trading on the
Exchange (normally 4:00 p.m. New York time). The Fund's net asset value per
share is determined by its custodian, Investors Bank & Trust Company ("IBT"),
(as agent for the Fund) in the manner authorized by the Trustees of the Trust.
Net asset value is computed by dividing the value of the Fund's total assets,
less its liabilities, by the number of shares outstanding. Because the Fund
invests its assets in an interest in the Portfolio, the Fund's net asset value
will reflect the value of its interest in the Portfolio (which, in turn,
reflects the underlying value of the Portfolio's assets and liabilities).
Authorized Firms must communicate an investor's order to the Principal
Underwriter prior to the close of the Principal Underwriter's business day to
receive that day's net asset value per Fund share. It is the Authorized Firms'
responsibility to transmit orders promptly to the Principal Underwriter, which
is a wholly-owned subsidiary of Eaton Vance.
The Portfolio's net asset value is also determined as of the close of
regular trading on the Exchange by IBT (as custodian and agent for the
Portfolio) in the manner authorized by the Trustees of the Portfolio. The net
asset value is computed by subtracting the liabilities of the Portfolio from the
value of its total assets. Securities listed on securities exchanges or in the
NASDAQ National Market are valued at closing sale prices. For further
information regarding the valuation of the Portfolio's assets, see
"Determination of Net Asset Value" in the Statement of Additional Information.
Eaton Vance Corp. owns 77.3% of the outstanding stock of IBT, the Fund's and the
Portfolio's custodian.
- --------------------------------------------------------------------------------
SHAREHOLDERS MAY DETERMINE THE VALUE OF THEIR INVESTMENT BY MULTIPLYING THE
NUMBER OF FUND SHARES OWNED BY THE CURRENT NET ASSET VALUE PER SHARE.
- --------------------------------------------------------------------------------
HOW TO BUY FUND SHARES
- --------------------------------------------------------------------------------
SHARES OF THE FUND MAY BE PURCHASED FOR CASH OR MAY BE ACQUIRED IN EXCHANGE FOR
SECURITIES. Investors may purchase shares of the Fund through Authorized Firms
at the net asset value per share of the Fund next determined after an order is
effective. The Fund may suspend the offering of shares at any time and may
refuse an order for the purchase of shares.
An initial investment in the Fund must be at least $1,000. Once an account
has been established the investor may send investments of $50 or more at any
time directly to the Fund's Transfer Agent (the "Transfer Agent") as follows:
The Shareholder Services Group, Inc., BOS725, P.O. Box 1559, Boston, MA 02104.
The $1,000 minimum initial investment is waived for Bank Automated Investing
accounts, which may be established with an investment of $50 or more. See "Eaton
Vance Shareholder Services".
In connection with employee benefit or other continuous group purchase plans
under which the average initial purchase by a participant of the plan is $1,000
or more, the Fund may accept initial investments of less than $1,000 on the part
of an individual participant. In the event a shareholder who is a participant of
such a plan terminates participation in the plan, his or her shares will be
transferred to a regular individual account. However, such account will be
subject to the right of redemption by the Fund as described under "How to Redeem
Fund Shares."
ACQUIRING FUND SHARES IN EXCHANGE FOR SECURITIES. IBT, as escrow agent, will
receive securities acceptable to Eaton Vance, as Administrator, in exchange for
Fund shares at their net asset value as determined above. The minimum value of
securities (or securities and cash) accepted for deposit is $5,000. Securities
accepted will be sold by IBT as agent for the account of their owner on the day
of their receipt by IBT or as soon thereafter as possible. The number of Fund
shares to be issued in exchange for securities will be the aggregate proceeds
from the sale of such securities, divided by the applicable net asset value per
Fund share on the day such proceeds are received. Eaton Vance will use
reasonable efforts to obtain the then current market price for such securities
but does not guarantee the best available price. Eaton Vance will absorb any
transaction costs, such as commissions, on the sale of the securities.
Securities determined to be acceptable should be transferred via book entry
or physically delivered, in proper form for transfer, through an Authorized
Firm, together with a completed and signed Letter of Transmittal in approved
form (available from Authorized Firms), as follows:
IN THE CASE OF BOOK ENTRY:
Deliver through Depository Trust Co.
Broker #2212
Investors Bank & Trust Company
For A/C EV Marathon Special Equities Fund
IN THE CASE OF PHYSICAL DELIVERY:
Investors Bank & Trust Company
Attention: EV Marathon Special Equities Fund
Physical Securities Processing Settlement Area
89 South Street
Boston, MA 02111
Investors who are contemplating an exchange of securities for shares of the
Fund, or their representatives, are advised to contact Eaton Vance to determine
whether the securities are acceptable before forwarding such securities to IBT.
Eaton Vance reserves the right to reject any securities. Exchanging securities
for Fund shares may create a taxable gain or loss. Each investor should consult
his or her tax adviser with respect to the particular Federal, state and local
tax consequences of exchanging securities for Fund shares.
- --------------------------------------------------------------------------------
IF YOU DON'T HAVE AN AUTHORIZED FIRM, EATON VANCE CAN RECOMMEND ONE.
- --------------------------------------------------------------------------------
HOW TO REDEEM FUND SHARES
- --------------------------------------------------------------------------------
A SHAREHOLDER MAY REDEEM FUND SHARES BY DELIVERING TO THE SHAREHOLDER SERVICES
GROUP, INC., BOS725, P.O. BOX 1559, BOSTON, MASSACHUSETTS 02104, during its
business hours a written request for redemption in good order, plus any share
certificates with executed stock powers. The redemption price will be based on
the net asset value per Fund share next computed after such delivery. Good order
means that all relevant documents must be endorsed by the record owner (s)
exactly as the shares are registered and the signature(s) must be guaranteed by
a member of either the Securities Transfer Association's STAMP program or the
New York Stock Exchange's Medallion Signature Program, or certain banks, savings
and loan institutions, credit unions, securities dealers, securities exchanges,
clearing agencies and registered securities associations as required by a
regulation of the Securities and Exchange Commission (the "Commission") and
acceptable to The Shareholder Services Group, Inc. In addition, in some cases,
good order may require the furnishing of additional documents such as where
shares are registered in the name of a corporation, partnership or fiduciary.
Within seven days after receipt of a redemption request in good order by The
Shareholder Services Group, Inc., the Fund will make payment in cash for the net
asset value of the shares as of the date determined above, reduced by the amount
of any applicable contingent deferred sales charges (described below) and any
Federal income tax required to be withheld. Although the Fund normally expects
to make payment in cash for redeemed shares, the Trust, subject to compliance
with applicable regulations, has reserved the right to pay the redemption price
of shares of the Fund, either totally or partially, by a distribution in kind of
readily marketable securities withdrawn by the Fund from the Portfolio. The
securities so distributed would be valued pursuant to the Portfolio's valuation
procedures. If a shareholder received a distribution in kind, the shareholder
could incur brokerage or other charges in converting the securities to cash.
To sell shares at their net asset value through an Authorized Firm (a
repurchase), a shareholder can place a repurchase order with the Authorized
Firm, which may charge a fee. The value of such shares is based upon the net
asset value calculated after EVD, as the Fund's agent, receives the order. It is
the Authorized Firm's responsibility to transmit promptly repurchase orders to
EVD. Throughout this Prospectus, the word "redemption" is generally meant to
include a repurchase.
If shares were recently purchased, the proceeds of redemption (or
repurchase) will not be sent until the check (including a certified or cashier's
check) received for the shares purchased has cleared. Payment for shares
tendered for redemption may be delayed up to 15 days from the purchase date when
the purchase check has not yet cleared. Redemptions or repurchases may result in
a taxable gain or loss.
Due to the high cost of maintaining small accounts, the Fund reserves the
right to redeem accounts with balances of less than $1,000. Prior to such a
redemption, shareholders will be given 60 days' written notice to make an
additional purchase. Thus, an investor making an initial investment of $1,000
would not be able to redeem shares without being subject to this policy.
However, no such redemption would be required by the Fund if the cause of the
low account balance was a reduction in the net asset value of Fund shares. No
contingent deferred sales charge will be imposed with respect to such
involuntary redemptions.
CONTINGENT DEFERRED SALES CHARGE. Shares redeemed within the first six years of
their purchase (except shares acquired through the reinvestment of
distributions) generally will be subject to a contingent deferred sales charge.
This contingent deferred sales charge is imposed on any redemption the amount of
which exceeds the aggregate value at the time of redemption of (a) all shares in
the account purchased more than six years prior to the redemption, (b) all
shares in the account acquired through reinvestment of distributions and (c) the
increase, if any, of value of all other shares in the account (namely those
purchased within the six years preceding the redemption) over the purchase price
of such shares. Redemptions are processed in a manner to maximize the amount of
redemption proceeds which will not be subject to a contingent deferred sales
charge. That is, each redemption will be assumed to have been made first from
the exempt amounts referred to in clauses (a), (b) and (c) above, and second
through liquidation of those shares in the account referred to in clause (c) on
a first-in-first-out basis. Any contingent deferred sales charge which is
required to be imposed on share redemptions will be made in accordance with the
following schedule:
YEAR OF CONTINGENT
REDEMPTION DEFERRED SALES
AFTER PURCHASE CHARGE
-------------- --------------
First .................... 5%
Second ................... 5%
Third .................... 4%
Fourth ................... 3%
Fifth .................... 2%
Sixth .................... 1%
Seventh and following .... 0%
In calculating the contingent deferred sales charge upon the redemption of
Fund shares acquired in an exchange for shares of a fund currently listed under
"The Eaton Vance Exchange Privilege," the contingent deferred sales charge
schedule applicable to the shares at the time of purchase will apply and the
purchase of Fund shares acquired in the exchange is deemed to have occurred at
the time of the original purchase of the exchanged shares. The contingent
deferred sales charge will be waived for shares redeemed (1) pursuant to a
Withdrawal Plan (see "Eaton Vance Shareholder Services"), (2) as part of a
required distribution from a tax-sheltered retirement plan, or (3) following the
death of all beneficial owners of such shares, provided the redemption is
requested within one year of death (a death certificate and other applicable
documents may be required).
No contingent deferred sales charge will be imposed on Fund shares which
have been sold to Eaton Vance, or its affiliates, or to their respective
employees or clients. The contingent deferred sales charge will be paid to the
Principal Underwriter or the Fund. When paid to the Principal Underwriter it
will reduce the amount of Uncovered Distribution Charges calculated under the
Fund's Distribution Plan. See "Distribution Plan".
- --------------------------------------------------------------------------------
THE FOLLOWING EXAMPLE ILLUSTRATES THE OPERATION OF THE CONTINGENT DEFERRED
SALES CHARGE. ASSUME THAT AN INVESTOR PURCHASES $10,000 OF THE FUND'S SHARES
AND THAT 16 MONTHS LATER THE VALUE OF THE ACCOUNT HAS GROWN THROUGH
INVESTMENT PERFORMANCE AND REINVESTMENT OF DISTRIBUTIONS TO $12,000. THE
INVESTOR THEN MAY REDEEM UP TO $2,000 OF SHARES WITHOUT INCURRING A
CONTINGENT DEFERRED SALES CHARGE. IF THE INVESTOR SHOULD REDEEM $3,000 OF
SHARES, A CHARGE WOULD BE IMPOSED ON $1,000 OF THE REDEMPTION. THE RATE
WOULD BE 5% BECAUSE THE REDEMPTION WAS MADE IN THE SECOND YEAR AFTER THE
PURCHASE WAS MADE AND THE CHARGE WOULD BE $50. y
- --------------------------------------------------------------------------------
REPORTS TO SHAREHOLDERS
- --------------------------------------------------------------------------------
THE FUND WILL ISSUE TO ITS SHAREHOLDERS SEMI-ANNUAL AND ANNUAL REPORTS
CONTAINING FINANCIAL STATEMENTS. Financial statements included in annual reports
are audited by the Fund's independent accountants. Shortly after the end of each
calendar year, the Fund will furnish all shareholders with information necessary
for preparing Federal and state tax returns.
THE LIFETIME INVESTING ACCOUNT/DISTRIBUTION OPTIONS
- --------------------------------------------------------------------------------
AFTER AN INVESTOR MAKES AN INITIAL PURCHASE OF FUND SHARES, THE FUND'S TRANSFER
AGENT, THE SHAREHOLDER SERVICES GROUP, INC., WILL SET UP A LIFETIME INVESTING
ACCOUNT FOR THE INVESTOR ON THE FUND'S RECORDS. This account is a complete
record of all transactions between the investor and the Fund which at all times
shows the balance of shares owned. The Fund will not issue share certificates
except upon request.
Each time a transaction takes place in a shareholder's account, the
shareholder will receive a statement showing complete details of the transaction
and the current balance in the account. (Under certain investment plans,
statements may be sent only quarterly.) THE LIFETIME INVESTING ACCOUNT ALSO
PERMITS A SHAREHOLDER TO MAKE ADDITIONAL INVESTMENTS IN SHARES BY SENDING A
CHECK FOR $50 OR MORE to The Shareholder Services Group, Inc.
Any questions concerning a shareholder's account or services available may
be directed by telephone to EATON VANCE SHAREHOLDER SERVICES at 800-225-6265,
extension 2, or in writing to The Shareholder Services Group, Inc., BOS725, P.O.
Box 1559, Boston, MA 02104 (please provide the name of the shareholder, the Fund
and the account number).
THE FOLLOWING DISTRIBUTION OPTIONS WILL BE AVAILABLE TO ALL LIFETIME
INVESTING ACCOUNTS and may be changed as often as desired by written notice to
the Fund's dividend disbursing agent, The Shareholder Services Group, Inc.,
BOS725, P.O. Box 1559, Boston, MA 02104. The currently effective option will
appear on each confirmation statement.
Share Option -- Dividends and capital gains will be reinvested in additional
shares.
Income Option -- Dividends will be paid in cash, and capital gains will be
reinvested in additional shares.
Cash Option -- Dividends and capital gains will be paid in cash.
The Share Option will be assigned if no other option is specified.
Distributions, including those reinvested, will be reduced by any withholding
required under Federal income tax laws.
If the Income Option or Cash Option has been selected, dividend and/or
capital gains distribution checks which are returned by the United States Postal
Service as not deliverable or which remain uncashed for six months or more will
be reinvested in the account in shares at the then current net asset value.
Furthermore, the distribution option on the account will be automatically
changed to the Share Option until such time as the shareholder selects a
different option.
DISTRIBUTION INVESTMENT OPTION. In addition to the distribution options set
forth above, dividends and/or capital gains may be invested in additional shares
of another Eaton Vance fund. Before selecting this option, a shareholder should
obtain a prospectus of the other Eaton Vance fund and consider its objectives
and policies carefully.
"STREET NAME" ACCOUNTS. If shares of the Fund are held in a "street name"
account with an Authorized Firm, all recordkeeping, transaction processing and
payments of distributions relating to the beneficial owner's account will be
performed by the Authorized Firm, and not by the Fund and its Transfer Agent.
Since the Fund will have no record of the beneficial owner's transactions, a
beneficial owner should contact the Authorized Firm to purchase, redeem or
exchange shares, to make changes in or give instructions concerning the account,
or to obtain information about the account. The transfer of shares in a "street
name" account to an account with another dealer or to an account directly with
the Fund involves special procedures and will require the beneficial owner to
obtain historical purchase information about the shares in the account from the
Authorized Firm. Before establishing a "street name" account with an investment
firm, or transferring the account to another investment firm, an investor
wishing to reinvest distributions should determine whether the firm which will
hold the shares allows reinvestment of distributions in "street name" accounts.
- --------------------------------------------------------------------------------
UNDER A LIFETIME INVESTING ACCOUNT A SHAREHOLDER CAN MAKE ADDITIONAL
INVESTMENTS IN SHARES BY SENDING A CHECK FOR $50 OR MORE.
- --------------------------------------------------------------------------------
THE EATON VANCE EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
Shares of the Fund may be exchanged for shares of one or more other funds in the
Eaton Vance Marathon Group of Funds (which includes Eaton Vance Equity- Income
Trust and any EV Marathon fund, except Eaton Vance Prime Rate Reserves) or Eaton
Vance Money Market Fund, which are distributed subject to a contingent deferred
sales charge, on the basis of the net asset value per share of each fund at the
time of the exchange, provided that such offers are available only in states
where shares of the fund being acquired may be legally sold.
Each exchange must involve shares which have a net asset value of at least
$1,000. The exchange privilege may be changed or discontinued without penalty.
Shareholders will be given sixty (60) days' notice prior to any termination or
material amendment of the exchange privilege. The Fund does not permit the
exchange privilege to be used for "Market Timing" and may terminate the exchange
privilege for any shareholder account engaged in Market Timing activity. Any
shareholder account for which more than two round-trip exchanges are made within
any twelve month period will be deemed to be engaged in Market Timing.
Furthermore, a group of unrelated accounts for which exchanges are entered
contemporaneously by a financial intermediary will be considered to be engaged
in Market Timing.
The Shareholder Services Group, Inc. makes exchanges at the next determined
net asset value after receiving an exchange request in good order (see "How to
Redeem Fund Shares"). Consult The Shareholder Services Group, Inc. for
additional information concerning the exchange privilege. Applications and
prospectuses of other funds are available from Authorized Firms or the Principal
Underwriter. The prospectus for each fund describes its investment objectives
and policies, and shareholders should obtain a prospectus and consider these
objectives and policies carefully before requesting an exchange.
No contingent deferred sales charge is imposed on exchanges. For purposes of
calculating the contingent deferred sales charge upon the redemption of shares
acquired in an exchange, the contingent deferred sales charge schedule
applicable to the shares at the time of purchase will apply and the purchase of
shares acquired in one or more exchanges is deemed to have occurred at the time
of the original purchase of the exchanged shares. For the contingent deferred
sales charge schedule applicable to the Eaton Vance Marathon Group of Funds
(except EV Marathon Strategic Income Fund and Class I shares of any EV Marathon
Limited Maturity Fund), see "How to Redeem Fund Shares". The contingent deferred
sales charge schedule applicable to EV Marathon Strategic Income Fund and Class
I shares of any EV Marathon Limited Maturity Fund is 3%, 2.5%, 2% or 1% in the
event of a redemption occurring in the first, second, third or fourth year,
respectively, after the original share purchase.
Shares of the other funds in the Eaton Vance Marathon Group of Funds and
shares of Eaton Vance Money Market Fund may be exchanged for Fund shares on the
basis of the net asset value per share of each fund at the time of the exchange,
but subject to any restrictions or qualifications set forth in the current
prospectus of any such fund.
Telephone exchanges are accepted by The Shareholder Services Group, Inc.,
provided, that the investor has not disclaimed in writing the use of the
privilege. To effect such exchanges, call The Shareholder Services Group, Inc.
at 800-262-1122 or, within Massachusetts, 617-573-9403, Monday through Friday,
9:00 a.m. to 4:00 p.m. (Eastern Standard Time). Shares acquired by telephone
exchange must be registered in the same name(s) and with the same address as the
shares being exchanged. Neither the Fund, the Principal Underwriter nor The
Shareholder Services Group, Inc. will be responsible for the authenticity of
exchange instructions received by telephone, provided that reasonable procedures
to confirm that instructions communicated are genuine have been followed.
Telephone instructions will be tape recorded. In times of drastic economic or
market changes, a telephone exchange may be difficult to implement. An exchange
may result in a taxable gain or loss.
EATON VANCE SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------
THE FUND OFFERS THE FOLLOWING SERVICES, WHICH ARE VOLUNTARY, INVOLVE NO EXTRA
CHARGE, AND MAY BE CHANGED OR DISCONTINUED WITHOUT PENALTY AT ANY TIME. Full
information on each of the services described below and an application, where
required, are available from Authorized Firms or the Principal Underwriter. The
cost of administering such services for the benefit of shareholders who
participate in them is borne by the Fund as an expense to all shareholders.
INVEST-BY-MAIL -- FOR PERIODIC SHARE ACCUMULATION: Once the $1,000 minimum
investment has been made, checks of $50 or more payable to the order of the Fund
may be mailed directly to The Shareholder Services Group, Inc., BOS725, P.O. Box
1559, Boston, MA 02104 at any time -- whether or not distributions are
reinvested. The name of the shareholder, the Fund and the account number should
accompany each investment.
WITHDRAWAL PLAN: A shareholder may draw on shareholdings systematically with
monthly or quarterly checks in an aggregate amount that does not exceed annually
12% of the account balance at the time the plan is established. Such amount will
not be subject to a contingent deferred sales charge. See "How to Redeem Fund
Shares". A minimum deposit of $5,000 in shares is required.
BANK AUTOMATED INVESTING -- FOR REGULAR SHARE ACCUMULATION: Cash investments of
$50 or more may be made automatically each month or quarter from a shareholder's
bank account. The $1,000 minimum initial investment and small account redemption
policy are waived for these accounts.
REINVESTMENT PRIVILEGE: A SHAREHOLDER WHO HAS REPURCHASED OR REDEEMED SHARES MAY
REINVEST, WITH CREDIT FOR ANY CONTINGENT DEFERRED SALES CHARGES PAID ON THE
REPURCHASED OR REDEEMED SHARES, ANY PORTION OR ALL OF THE REPURCHASE OR
REDEMPTION PROCEEDS (PLUS THAT AMOUNT NECESSARY TO ACQUIRE A FRACTIONAL SHARE TO
ROUND OFF THE PURCHASE TO THE NEAREST FULL SHARE) IN SHARES OF THE FUND,
provided that the reinvestment is effected within 30 days after such repurchase
or redemption. Shares are sold to a reinvesting shareholder at the net asset
value next determined following timely receipt of a written purchase order by
the Principal Underwriter or by the Fund (or by the Fund's Transfer Agent). To
the extent that any shares of the Fund are sold at a loss and the proceeds are
reinvested in shares of the Fund (or other shares of the Fund are acquired
within the period beginning 30 days before and ending 30 days after the date of
the redemption) some or all of the loss generally will not be allowed as a tax
deduction. Shareholders should consult their tax advisers concerning the tax
consequences of reinvestments.
TAX-SHELTERED RETIREMENT PLANS: Shares of the Fund are available for purchase in
connection with the following tax-sheltered retirement plans:
-- Pension and Profit Sharing Plans for self-employed individuals,
corporations and non-profit organizations;
-- Individual Retirement Account Plans for individuals and their non-
employed spouses; and
-- 403(b) Retirement Plans for employees of public school systems,
hospitals, colleges and other non-profit organizations meeting certain
requirements of the Internal Revenue Code of 1986, as amended (the
"Code").
Detailed information concerning these plans, including certain exceptions to
minimum investment requirements, and copies of the plans are available from the
Principal Underwriter. This information should be read carefully and
consultation with an attorney or tax adviser may be advisable. The information
sets forth the service fee charged for retirement plans and describes the
Federal income tax consequences of establishing a plan. Under all plans,
dividends and distributions will be automatically reinvested in additional
shares.
DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
It is the present policy of the Fund to pay at least annually dividends from net
investment income allocated to the Fund by the Portfolio, less the Fund's direct
and allocated expenses and to distribute at least annually any net capital gains
realized (the Fund's realized net capital gains consist of the net realized
capital gains from the sale of portfolio securities allocated to the Fund by the
Portfolio).
Shareholders may reinvest dividends, if any, in shares of the Fund at the
current net asset value per share as of the ex-dividend date and may accumulate
capital gains distributions, if any, in additional shares also at the current
net asset value per share as of the ex-dividend date.
Distributions by the Fund of ordinary income and net short-term capital
gains allocated to the Fund by the Portfolio will be taxable to the Fund's
shareholders as ordinary income, whether received in cash or reinvested in
additional shares of the Fund. Shareholders reinvesting such distributions
should treat the amount of the entire distribution as the tax cost basis of the
additional shares acquired by reason of such reinvestment. Distributions of net
long-term capital gains are taxable to shareholders as such, whether received in
cash or reinvested in additional shares of the Fund, and regardless of the
length of time shares have been owned by shareholders. If shares are purchased
shortly before the record date of a distribution, the shareholder will pay the
full price for the shares and then receive some portion of the price back as a
taxable distribution. Certain distributions which are declared in October,
November or December and paid the following January will be reportable by
shareholders as if received on December 31 of the year in which they are
declared.
Shareholders will receive annually tax information notices and Forms 1099 to
assist in the preparation of their Federal and state tax returns for the prior
calendar year's distributions, proceeds from the redemption or exchange of Fund
shares, and Federal income tax (if any) withheld by the Fund's Transfer Agent.
In order to qualify as a regulated investment company under the Code, the
Fund must satisfy certain requirements relating to the sources of its income,
the distribution of its income, and the diversification of its assets. In
satisfying these requirements, the Fund will treat itself as owning its
proportionate share of each of the Portfolio's assets and as entitled to the
income of the Portfolio properly attributable to such share.
- --------------------------------------------------------------------------------
AS A REGULATED INVESTMENT COMPANY UNDER THE CODE, THE FUND DOES NOT PAY
FEDERAL INCOME OR EXCISE TAXES TO THE EXTENT THAT IT DISTRIBUTES TO
SHAREHOLDERS ITS NET INVESTMENT INCOME AND NET REALIZED CAPITAL GAINS IN
ACCORDANCE WITH THE TIMING REQUIREMENTS IMPOSED BY THE CODE. AS A
PARTNERSHIP UNDER THE CODE, THE PORTFOLIO DOES NOT PAY FEDERAL INCOME OR
EXCISE TAXES.
- --------------------------------------------------------------------------------
PERFORMANCE INFORMATION
- ------------------------------------------------------------------------------
FROM TIME TO TIME, THE FUND MAY ADVERTISE ITS AVERAGE ANNUAL TOTAL RETURN. The
Fund's average annual total return is determined by computing the average annual
percentage change in value of $1,000 invested at the maximum public offering
price (net asset value) for specified periods ending with the most recent
calendar quarter, assuming reinvestment of all distributions. The average annual
total return calculation assumes a complete redemption of the investment and the
deduction of any applicable contingent deferred sales charge at the end of the
period. The Fund may also publish annual and cumulative total return figures
from time to time.
The Fund may also publish total return figures which do not take into
account any contingent deferred sales charge which may be imposed upon
redemptions at the end of the specified period. Any performance figure which
does not take into account the contingent deferred sales charge would be reduced
to the extent such charge is imposed upon a redemption.
Investors should note that the investment results of the Fund will fluctuate
over time, and any presentation of the Fund's total return for any prior period
should not be considered as a representation of what an investment may earn or
what an investor's total return may be in any future period. If the expenses of
the Fund or the Portfolio are paid by Eaton Vance, the Fund's performance will
be higher.
<PAGE>
INVESTMENT ADVISER OF
SPECIAL INVESTMENT PORTFOLIO
Boston Management and Research
24 Federal Street
Boston, MA 02110
ADMINISTRATOR OF
EV MARATHON SPECIAL EQUITIES FUND
Eaton Vance Management
24 Federal Street
Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc.
24 Federal Street
Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company
24 Federal Street
Boston, MA 02110
TRANSFER AGENT
The Shareholder Services Group, Inc.
BOS725
P.O. Box 1559
Boston, MA 02104
(800) 262-1122
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, MA 02109
EV MARATHON SPECIAL EQUITIES FUND
24 FEDERAL STREET
BOSTON, MA 02110
M-SEP
[Logo]
EV MARATHON
SPECIAL EQUITIES
FUND
PROSPECTUS
APRIL 1, 1995
<PAGE>
STATEMENT OF
ADDITIONAL INFORMATION
April 1, 1995
EV MARATHON SPECIAL EQUITIES FUND
24 Federal Street
Boston, Massachusetts 02110
(800) 225-6265
This Statement of Additional Information consists of two parts. Part I
provides information about EV Marathon Special Equities Fund (the "Fund") and
certain other series of Eaton Vance Special Investment Trust (the "Trust"). Part
II provides information solely about the Fund. Where appropriate, Part I
includes cross-references to the relevant sections of Part II that provide
additional, Fund-specific information.
TABLE OF CONTENTS
PART I
Investment Objective, Policies and Restrictions ........................... 2
Other Investment Features ................................................. 4
Trustees and Officers ..................................................... 5
Investment Adviser and Administrator ...................................... 6
Custodian ................................................................. 9
Service for Withdrawal .................................................... 9
Determination of Net Asset Value .......................................... 9
Investment Performance .................................................... 10
Taxes ..................................................................... 11
Portfolio Security Transactions ........................................... 12
Other Information ......................................................... 14
Independent Accountants ................................................... 15
PART II
Fees and Expenses ......................................................... a-1
Principal Underwriter ..................................................... a-1
Distribution Plan ......................................................... a-2
Performance Information ................................................... a-3
Additional Tax Matters .................................................... a-3
Control Persons and Principal Holders of Securities ....................... a-4
Financial Statements ...................................................... a-5
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY THE PROSPECTUS OF EV MARATHON SPECIAL EQUITIES FUND DATED APRIL
1, 1995, AS SUPPLEMENTED FROM TIME TO TIME. THIS STATEMENT OF ADDITIONAL
INFORMATION SHOULD BE READ IN CONJUNCTION WITH SUCH PROSPECTUS, A COPY OF WHICH
MAY BE OBTAINED WITHOUT CHARGE BY CONTACTING EATON VANCE DISTRIBUTORS, INC. (THE
"PRINCIPAL UNDERWRITER") (SEE BACK COVER FOR ADDRESS AND PHONE NUMBER).
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART I
The following provides information about the Fund and certain other series
of the Trust.
INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS
The investment objective of the Fund, a diversified series of the Trust, is
to seek growth of capital. The Fund currently seeks to achieve its investment
objective by investing its assets in the Special Investment Portfolio (the
"Portfolio"), a separate registered investment company with the same investment
objective as the Fund and substantially the same investment policies and
restrictions as the Fund. The Portfolio seeks to achieve its investment
objective by investing primarily in growth securities.
The Trustees of the Trust may withdraw the Fund's investment from the
Portfolio at any time, if they determine that it is in the best interests of the
Fund to do so. Upon any such withdrawal, the Fund's assets would be invested in
another investment company with substantially the same investment objective,
policies and restrictions as those of the Fund or directly in investment
securities in accordance with the Portfolio's investment policies, as described
below. Except as indicated below, the approval of the Fund's shareholders would
not be required to change the Portfolio's investment policies discussed below,
including those concerning security transactions.
The Portfolio's investment policies may involve a portfolio turnover rate
(and corresponding brokerage expenses) somewhat greater than that of other
investment companies. Such turnover can result from portfolio transactions
reflecting Boston Management and Research's ("BMR" or the "Investment Adviser")
view of a change or prospective changes in the earnings growth rate of a
company, what it considers a more favorable investment opportunity, and other
circumstances bearing on the desirability of continuing a given investment.
The following investment restrictions have been adopted by the Fund and may
be changed only by the vote of a majority of the Fund's outstanding voting
securities as defined in the Investment Company Act of 1940 (the "1940 Act").
As a matter of fundamental policy, the Fund may not:
(1) With respect to 75% of its total assets, invest more than 5% of its
total assets (taken at current value) in the securities of any one issuer or in
more than 10% of the outstanding voting securities of any one issuer, except
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities and except securities of other investment companies;
(2) Borrow money or issue senior securities except as permitted by the
Investment Company Act of 1940;
(3) Purchase any securities on margin (but the Fund may obtain such
short-term credits as may be necessary for the clearance of purchases and sales
of securities);
(4) Underwrite securities of other issuers;
(5) Concentrate its investments in any particular industry, but, if deemed
appropriate for the Fund's objective, up to 25% of the value of its assets may
be invested in securities of companies in any one industry (although more than
25% may be invested in securities issued or guaranteed by the U.S. Government or
its agencies or instrumentalities);
(6) Invest in 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), invest in commodities or commodity contracts for the
purchase or sale of physical commodities; or
(7) Make loans to any person except by (a) the acquisition of debt
securities and making portfolio investments, (b) entering into repurchase
agreements, and (c) lending portfolio securities.
Notwithstanding the investment policies and restrictions of the Fund, the
Fund may invest its assets in an open-end management investment company with
substantially the same investment objective, policies and restrictions as the
Fund.
The Portfolio has adopted substantially the same fundamental investment
restrictions as the foregoing numbered investment restrictions adopted by the
Fund; such restrictions cannot be changed without the approval of a "majority of
the outstanding voting securities" of the Portfolio, which as used in this
Statement of Additional Information means the lesser of (a) 67% of the
outstanding voting securities of the Portfolio present or represented by proxy
at a meeting if the holders of more than 50% of the outstanding voting
securities of the Portfolio are present or represented at the meeting or (b)
more than 50% of the outstanding voting securities of the Portfolio. The term
"voting securities" as used in this paragraph has the same meaning as in the
1940 Act. Whenever the Trust is requested to vote on a change in the investment
restrictions of the Portfolio, the Trust will hold a meeting of Fund
shareholders and will cast its vote as instructed by the shareholders.
The Fund and the Portfolio have each adopted the following nonfundamental
investment policies which may be changed with respect to the Fund by the
Trustees of the Trust without approval by the Fund's shareholders or may be
changed with respect to the Portfolio by the Trustees of the Portfolio without
the approval of the Fund or the Portfolio's other investors. As a matter of
nonfundamental policy, neither the Fund nor the Portfolio may: (a) invest more
than 15% of net assets in investments which are not readily marketable,
including restricted securities and repurchase agreements maturing in more than
seven days. Restricted securities for the purposes of this limitation do not
include securities eligible for resale pursuant to Rule 144A of the Securities
Act of 1933 that the Board of Trustees of the Trust or the Portfolio or its
delegate, determine to be liquid, based upon the trading markets for the
specific security; (b) invest in put or call options, except that the Fund or
the Portfolio is authorized to engage in the writing and sale of call option
contracts and the purchase of call options as described below under "Writing
Covered Call Options" and the Fund or the Portfolio may invest in warrants where
the grantor thereof is the issuer of the underlying securities; (c) invest in
the securities of an issuer when any officer or Trustee of the Trust or the
Portfolio, the Investment Adviser, or any officer or trustee of the Investment
Adviser, owns in excess of 1/2 of 1% of the issuer's securities if such owners
together own more than 5% of such securities; (d) purchase securities of
companies which, including predecessors, have not been in continuous operation
for at least three years, except that 5% of total assets (taken at market value)
may be invested in certain issuers not in such continuous operation but
substantially all of whose assets are (i) securities of one or more issuers
which have had a record of three years' continuous operation or (ii) assets of
an independent division of an issuer which division has had a record of three
years' continuous operation; provided, however, that exempted from this
restriction are U.S. Government securities, securities of issuers which are
rated by at least one nationally recognized statistical rating organization,
municipal obligations and obligations issued or guaranteed by any foreign
government or its agencies or instrumentalities; (e) sell or contract to sell a
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; (f) invest in interests
in oil, gas or other mineral exploration or development programs (this
restriction does not, however, prevent investment in securities of companies
engaged in such activities); or (g) purchase warrants in excess of 2% of net
assets, except that if such warrants are listed on the New York or American
Stock Exchanges, the percentage restriction is 5% of net assets. Any such
warrants shall be valued at the lower of cost or market except that warrants
acquired by the Fund or the Portfolio attached to portfolio securities shall be
deemed to be without value for the purpose of this restriction.
In order to permit the sale of shares of the Fund in certain states, the
Fund may make commitments more restrictive than the policies described above.
Should the Fund determine that any such commitment is no longer in the best
interests of the Fund and its shareholders, it will revoke the commitment by
terminating sales of its shares in the state(s) involved. For example, the Fund
has agreed that it will not pledge, mortgage or hypothecate its portfolio
securities to the extent that on a per share basis the percentage of such
pledged, mortgaged or hypothecated assets would exceed 15% of the Fund's net
assets.
OTHER INVESTMENT FEATURES
LENDING OF PORTFOLIO SECURITIES
The Portfolio may seek to increase its income by lending portfolio
securities. Under present regulatory policies, including those of the Board of
Governors of the Federal Reserve System and the Securities and Exchange
Commission, such loans may be made to member firms of the New York Stock
Exchange, and would be required to be secured continuously by collateral in cash
or cash equivalents maintained on a current basis at an amount at least equal to
the market value of the securities loaned. The Portfolio would have the right to
call a loan and obtain the securities loaned at any time on five days' notice.
During the existence of a loan, the Portfolio would continue to receive the
equivalent of the interest or dividends paid by the issuer on the securities
loaned and would also receive the interest on investment of the collateral. The
Portfolio would not, however, have the right to vote any securities having
voting rights during the existence of the loan, but would call the loan in
anticipation of an important vote to be taken among holders of the securities or
of the giving or withholding of their consent on a material matter affecting the
investment. As with other extensions of credit there are risks of delay in
recovery or even loss of rights in the collateral should the borrower of the
securities fail financially. However, the loans would be made only to firms
deemed by the Investment Adviser to be of good standing, and when, in its
judgment, the consideration which can be earned currently from securities loans
of this type justifies the attendant risk.
If the Investment Adviser determines to make securities loans, it is not
intended that the value of the securities loaned would exceed 30% of the
Portfolio's total assets. As of the present time, the Trustees have not made a
determination to engage in this activity, and have no present intention of
making such a determination during the current fiscal year.
WRITING COVERED CALL OPTIONS
The Portfolio may engage in the writing of call option contracts on
securities which are owned by the Portfolio ("covered call options") when, in
the opinion of the Trustees, such activity is advisable and appropriate.
A call option written by the Portfolio obligates the Portfolio to sell
specified securities to the holder of the option at a specified price at any
time before the expiration date. The Portfolio will write a covered call option
on a security for the purpose of increasing its return on such security and/or
to partially hedge against a decline in the value of the security. In
particular, when the Portfolio writes an option which expires unexercised or is
closed out by the Portfolio at a profit, it will retain the premium paid for the
option, which will increase its gross income and will offset in part the reduced
value of the portfolio security underlying the option, or the increased cost of
acquiring the security for its portfolio. However, if the price of the
underlying security moves adversely to the Portfolio's position, the option may
be exercised and the Portfolio will be required to sell the underlying security
at a disadvantageous price, which may only be partially offset by the amount of
the premium, if at all. The Portfolio does not intend to write a covered option
on any security if after such transaction more than 25% of its net assets, as
measured by the aggregate value of the securities underlying all covered calls
written by the Portfolio, would be subject to such options.
The Portfolio may terminate its obligations under a call option by
purchasing an option identical to the one it has written. Such purchases are
referred to as "closing purchase transactions."
An options position may be closed out only on an options exchange which
provides a secondary market for an option of the same series. Although the
Portfolio will generally purchase or write only those options for which there
appears to be an active secondary market, there is no assurance that a liquid
secondary market on an exchange will exist for any particular option, or at any
particular time. For some options no secondary market on an exchange may exist.
In such event, it might not be possible to effect closing transactions in
particular options, with the result that the Portfolio would have to exercise
its options in order to realize any profit and would incur transaction costs
upon the sale of underlying securities pursuant to the exercise of put options.
If the Portfolio as a covered call option writer is unable to effect a closing
purchase transaction in a secondary market, it will not be able to sell the
underlying security until the option expires or it delivers the underlying
security upon exercise.
Reasons for the absence of a liquid secondary market on an exchange include
the following: (i) there may be insufficient trading interest in certain
options; (ii) restrictions may be imposed by an exchange on opening transactions
or closing transactions or both; (iii) trading halts, suspensions or other
restrictions may be imposed with respect to particular classes or series of
options or underlying securities; (iv) unusual or unforeseen circumstances may
interrupt normal operations on an exchange; (v) the facilities of an exchange or
the Options Clearing Corporation may not at all times be adequate to handle
current trading volume; or (vi) one or more exchanges could, for economic or
other reasons, decide or be compelled at some future date to discontinue the
trading of options (or a particular class or series of options), in which event
the secondary market on that exchange (or in that class or series of options)
would cease to exist, although outstanding options on that exchange that had
been issued by the Options Clearing Corporation as a result of trades on that
exchange would continue to be exercisable in accordance with their terms.
The Portfolio will pay brokerage commissions in connection with writing
options and effecting closing purchase transactions, as well as for sales of
underlying securities. The writing of options could result in significant
increases in the Portfolio's portfolio turnover rate, especially during periods
when market prices of the underlying securities appreciate.
There is no assurance that higher than anticipated trading activity or
other unforeseen events might not, at times, render certain of the facilities of
the Options Clearing Corporation inadequate, and thereby result in the
institution by an exchange of special procedures which may interfere with the
timely execution of customers' orders.
The amount of the premiums which the Portfolio may pay or receive may be
adversely affected as new or existing institutions, including other investment
companies, engage in or increase their option purchasing and writing activities.
TRUSTEES AND OFFICERS
The Trustees and officers of the Trust and the Portfolio are listed below.
Except as indicated, each individual has held the office shown or other offices
in the same company for the last five years. Unless otherwise noted, the
business address of each Trustee and officer is 24 Federal Street, Boston,
Massachusetts 02110, which is also the address of the Portfolio's investment
adviser, Boston Management and Research ("BMR" or the "Investment Adviser"), a
wholly-owned subsidiary of Eaton Vance ("Eaton Vance"); of Eaton Vance's parent,
Eaton Vance Corp. ("EVC"); and of BMR's and Eaton Vance's trustee, Eaton Vance,
Inc. ("EV"). Eaton Vance and EV are both wholly-owned subsidiaries of EVC. Those
Trustees and officers who are "interested persons" of the Trust, the Portfolio,
BMR, Eaton Vance, EVC or EV as defined in the 1940 Act by virtue of their
affiliation with any one or more of the Trust, the Portfolio, BMR, Eaton Vance,
EVC or EV, are indicated by an asterisk (*).
TRUSTEES OF THE TRUST AND THE PORTFOLIO
JAMES B. HAWKES (53), PRESIDENT AND TRUSTEE*
Executive Vice President of BMR, Eaton Vance, EVC and EV, and a Director of EVC
and EV. Director or Trustee and officer of various investment companies
managed by Eaton Vance or BMR.
LANDON T. CLAY (69), TRUSTEE*
Chairman of BMR, Eaton Vance, EVC and EV and a Director of EVC and EV. Director
or Trustee and officer of various investment companies managed by Eaton Vance
or BMR.
DONALD R. DWIGHT (64), TRUSTEE
President of Dwight Partners, Inc. (a corporate relations and communications
company) founded in 1988; Chairman of the Board of Newspapers of New England,
Inc. since 1983. Director or Trustee of various investment companies managed
by Eaton Vance or BMR.
Address: Clover Mill Lane, Lyme, New Hampshire 03768
SAMUEL L. HAYES, III (60), TRUSTEE
Jacob J. Schiff Professor of Investment Banking, Harvard University Graduate
School of Business Administration. Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: Harvard University Graduate School of Business Administration,
Soldiers Field Road, Boston, Massachusetts 02163
NORTON H. REAMER (59), TRUSTEE
President and Director, United Asset Management Corporation (a holding company
owning institutional investment management firms); Chairman, President and
Director, The Regis Fund, Inc. (mutual fund). Director or Trustee of various
investment companies managed by Eaton Vance or BMR.
Address: One International Place, Boston, Massachusetts 02110
JOHN L. THORNDIKE (68), TRUSTEE
Director of Fiduciary Company Incorporated. Director or Trustee of various
investment companies managed by Eaton Vance or BMR.
Address: 175 Federal Street, Boston, Massachusetts 02110
JACK L. TREYNOR (65), TRUSTEE
Investment Adviser and Consultant. Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: 504 Via Almar, Palos Verdes Estates, California 90274
OFFICERS OF THE TRUST AND THE PORTFOLIO
PETER F. KIELY (58), VICE PRESIDENT*
Vice President of BMR, Eaton Vance and EV. Director or Trustee and officer of
various investment companies managed by Eaton Vance or BMR. Mr. Kiely was
elected Trustee of the Trust on December 16, 1991.
CLIFFORD H. KRAUSS (40), VICE PRESIDENT*
Vice President of BMR, Eaton Vance and EV.
JAMES L. O'CONNOR (49), TREASURER*
Vice President of BMR, Eaton Vance, and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
WILLIAM J. AUSTIN, JR. (43), ASSISTANT TREASURER*
Assistant Vice President of BMR, Eaton Vance and EV. Officer of various
investment companies managed by Eaton Vance or BMR. Mr. Austin was elected
Assistant Treasurer of the Trust on December 16, 1991.
THOMAS OTIS (63), SECRETARY*
Vice President and Secretary of BMR, Eaton Vance, EVC and EV. Officer of various
investment companies managed by Eaton Vance or BMR.
JANET E. SANDERS (59), ASSISTANT TREASURER AND ASSISTANT SECRETARY*
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
Messrs. Thorndike (Chairman), Hayes and Reamer are members of the Special
Committee of the Board of Trustees of the Trust and of the Portfolio. The
Special Committee's functions include a continuous review of the Trust's
contractual relationship with the Administrator, the Portfolio's contractual
relationship with the Investment Adviser, making recommendations to the Trustees
regarding the compensation of those Trustees who are not members of the Eaton
Vance organization, and making recommendations to the Trustees regarding
candidates to fill vacancies, as and when they occur, in the ranks of those
Trustees who are not "interested persons" of the Trust, the Portfolio, or the
Eaton Vance organization.
Messrs. Treynor (Chairman) and Dwight are members of the Audit Committee of
the Board of Trustees of the Trust and of the Portfolio. The Audit Committee's
functions include making recommendations to the Trustees regarding the selection
of the independent accountants, and reviewing with such accountants and the
Treasurer of the Trust and of the Portfolio matters relative to accounting and
auditing practices and procedures, accounting records, internal accounting
controls, and the functions performed by the custodian and transfer agent of the
Trust and of the Portfolio.
Trustees of the Portfolio who are not affiliated with the Investment
Adviser may elect to defer receipt of all or a percentage of their annual fees
in accordance with the terms of a Trustees Deferred Compensation Plan (the
"Plan"). Under the Plan, an eligible Trustee may elect to have his deferred fees
invested by the Portfolio in the shares of one or more funds in the Eaton Vance
Family of Funds, and the amount paid to the Trustees under the Plan will be
determined based upon the performance of such investments. Deferral of Trustees'
fees in accordance with the Plan will have a negligible effect on the
Portfolio's assets, liabilities, and net income per share, and will not obligate
the Portfolio to retain the services of any Trustee or obligate the Portfolio to
pay any particular level of compensation to the Trustee.
For the compensation earned by the Trustees of the Trust and the Portfolio,
see "Fees and Expenses" in Part II of this Statement of Additional Information.
INVESTMENT ADVISER AND ADMINISTRATOR
The Portfolio engages BMR as its investment adviser pursuant to an
Investment Advisory Agreement dated August 1, 1994. BMR or Eaton Vance acts as
investment adviser to investment companies and various individual and
institutional clients with combined assets under management of approximately $15
billion.
Eaton Vance, its affiliates and its predecessor companies have been
managing assets of individuals and institutions since 1924 and managing
investment companies since 1931. They maintain a large staff of experienced
fixed-income and equity investment professionals to service the needs of its
clients. The fixed-income division focuses on all kinds of taxable investment-
grade and high-yield securities, tax-exempt investment-grade and high-yield
securities, and U.S. Government securities. The equity division covers stocks
ranging from blue chip to emerging growth companies.
BMR manages the investments and affairs of the Portfolio subject to the
supervision of the Portfolio's Board of Trustees. BMR furnishes to the Portfolio
investment research, advice and supervision, furnishes an investment program and
determines what securities will be purchased, held or sold by the Portfolio and
what portion, if any, of the Portfolio's assets will be held uninvested. The
Investment Advisory Agreement requires BMR to pay the salaries and fees of all
officers and Trustees of the Portfolio who are members of the BMR organization
and all personnel of BMR performing services relating to research and investment
activities. The Portfolio is responsible for all expenses not expressly stated
to be payable by BMR under the Investment Advisory Agreement, including, without
implied limitation, (i) expenses of maintaining the Portfolio and continuing its
existence, (ii) registration of the Portfolio under the 1940 Act, (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 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 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 investors and of meetings of investors 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, investor servicing agents and registrars for all
services to the Portfolio, (xv) expenses for servicing the accounts of
investors, (xvi) any direct charges to investors approved by the Trustees of the
Portfolio, (xvii) compensation and expenses of Trustees of the Portfolio who are
not members of BMR'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 investors with respect thereto.
Under the Investment Advisory Agreement with the Portfolio, BMR receives a
monthly advisory fee of 5/96 of 1% (equivalent to 0.625% annually) of average
daily net assets of the Portfolio. As at December 31, 1994, the Portfolio had
net assets of $64,442,372. For the period from the start of business, August 1,
1994, to December 31, 1994, BMR received advisory fees of $175,012 (equivalent
to 0.625% (annualized) of the Portfolio's average daily net assets).
The Investment Advisory Agreement with BMR remains in effect until February
28, 1996. It may be continued indefinitely thereafter so long as such
continuance after February 28, 1996 is approved at least annually (i) by the
vote of a majority of the Trustees of the Portfolio who are not interested
persons of the Portfolio or of BMR cast in person at a meeting specifically
called for the purpose of voting on such approval and (ii) by the Board of
Trustees of the Portfolio or by vote of a majority of the outstanding voting
securities of the Portfolio. The Agreement may be terminated at any time without
penalty on sixty days' written notice by the Board of Trustees of either party
or by vote of the majority of the outstanding voting securities of the
Portfolio, and the Agreement will terminate automatically in the event of its
assignment. The Agreement provides that BMR may render services to others and
may permit other fund clients and other corporations and organizations to use
the words "Eaton Vance" or "Boston Management and Research" in their names. The
Agreement also provides that BMR shall not be liable for any loss incurred in
connection with the performance of its duties, or action taken or omitted under
that Agreement, in the absence of willful misfeasance, bad faith, gross
negligence in the performance of its duties or by reason of its reckless
disregard of its obligations and duties thereunder, or for any losses sustained
in the acquisition, holding or disposition of any security or other investment.
As indicated in the Prospectus, Eaton Vance serves as Administrator of the
Fund, but receives no compensation for providing administrative services to the
Fund. Under its agreement with the Fund, Eaton Vance has been engaged to
administer the Fund's affairs, subject to the supervision of the Trustees of the
Trust, and shall furnish for the use of the Fund office space and all necessary
office facilities, equipment and personnel for administering the affairs of the
Fund.
The Fund pays all of its own expenses including, without limitation, (i)
expenses of maintaining the Fund and continuing its existence, (ii) registration
of the Trust under the 1940 Act, (iii) commissions, fees and other expenses
connected with the purchase or sale of securities and other investments, (iv)
auditing, accounting and legal expenses, (v) taxes and interest, (vi)
governmental fees, (vii) expenses of issue, sale, repurchase and redemption of
shares, (viii) expenses of registering and qualifying the Fund and its shares
under federal and state securities laws and of preparing and printing
prospectuses for such purposes and for distributing the same to shareholders and
investors, and fees and expenses of registering and maintaining registrations of
the Fund and of the Fund's principal underwriter, if any, as broker-dealer or
agent under state securities laws, (ix) expenses of reports and notices to
shareholders and of meetings of shareholders 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 Fund
(including without limitation safekeeping of funds, securities and other
investments, keeping of books and accounts and determination of net asset
values), (xiv) fees, expenses and disbursements of transfer agents, dividend
disbursing agents, shareholder servicing agents and registrars for all services
to the Fund, (xv) expenses for servicing shareholder accounts, (xvi) any direct
charges to shareholders approved by the Trustees of the Trust, (xvii)
compensation and expenses of Trustees of the Trust who are not members of the
Eaton Vance 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 and officers
with respect thereto.
A commitment has been made to a state securities authority that Eaton Vance
will take certain actions, if necessary, so that the Fund's expenses will not
exceed expense limitation requirements of such state. The commitment may be
amended or rescinded by Eaton Vance in response to changes in the requirements
of the state or for other reasons.
BMR is a wholly-owned subsidiary of Eaton Vance. Eaton Vance and EV are
both wholly-owned subsidiaries of EVC. BMR and Eaton Vance are both
Massachusetts business trusts, and EV is the trustee of BMR and Eaton Vance. 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, BMR, Eaton
Vance and EV. All of the issued and outstanding shares of Eaton Vance and of EV
are owned by EVC. All of the issued and outstanding shares of BMR are owned by
Eaton Vance. All shares of the outstanding Voting Common Stock of EVC are
deposited in a Voting Trust, which expires December 31, 1996, the Voting
Trustees of which are Messrs. Brigham, Clay, Gardner, Hawkes and Rowland. The
Voting Trustees have unrestricted voting rights for the election of Directors of
EVC. All of the outstanding voting trust receipts issued under said Voting Trust
are owned by certain of the officers of BMR and Eaton Vance who are also
officers or Directors of EVC and EV. As of February 28, 1995, Messrs. Clay,
Gardner and Hawkes each owned 24% of such voting trust receipts, and Messrs.
Rowland and Brigham owned 15% and 13%, respectively, of such voting trust
receipts. Messrs. Clay, Hawkes and Otis, who are officers or Trustees of the
Trust and the Portfolio, are members of the EVC, Eaton Vance, BMR and EV
organizations. Messrs. Austin, Kiely, Krauss and O'Connor and Ms. Sanders are
officers of the Trust and the Portfolio and are also members of the BMR, Eaton
Vance and EV organizations. BMR will receive the fees paid under the Investment
Advisory Agreement.
Eaton Vance owns all of the stock of Energex Corporation, which is engaged
in oil and gas operations. EVC owns all of the stock of Marblehead Energy Corp.
(which is engaged in oil and gas operations) and 77.3% of the stock of Investors
Bank & Trust Company, the custodian of the Fund and the Portfolio, which
provides custodial, trustee and other fiduciary services to investors, including
individuals, employee benefit plans, corporations, investment companies, savings
banks and other institutions. In addition, Eaton Vance owns all of the stock of
Northeast Properties, Inc., which is engaged in real estate investment,
consulting and management. EVC owns all of the stock of Fulcrum Management, Inc.
and MinVen, Inc., which are engaged in the development of precious metal
properties. EVC, BMR, Eaton Vance and EV may also enter into other businesses.
EVC and its affiliates and its officers and employees from time to time
have transactions with various banks, including the custodian of the Fund and
the Portfolio, Investors Bank & Trust Company. It is Eaton Vance's opinion that
the terms and conditions of such transactions were not and will not be
influenced by existing or potential custodial or other relationships between the
Fund or the Portfolio and such banks.
CUSTODIAN
Investors Bank & Trust Company ("IBT"), 24 Federal Street, Boston,
Massachusetts, (a 77.3% owned subsidiary of EVC) acts as custodian for the Fund
and the Portfolio. IBT has the custody of all cash and securities representing
the Fund's interest in the Portfolio, has custody of all the Portfolio's assets,
maintains the general ledger of the Portfolio and the Fund, and computes the
daily net asset value of interests in the Portfolio and the net asset value of
shares of the Fund. In such capacity it attends to details in connection with
the sale, exchange, substitution, transfer or other dealings with the
Portfolio's investments, receives and disburses all funds, and performs various
other ministerial duties upon receipt of proper instructions from the Fund and
the Portfolio. IBT charges fees which are competitive within the industry. A
portion of the fee relates to custody, bookkeeping and valuation services and is
based upon a percentage of Fund and Portfolio net assets and a portion of the
fee relates to activity charges, primarily the number of portfolio transactions.
These fees are then reduced by a credit for cash balances of the particular
investment company at the custodian equal to 75% of the 91-day, U.S. Treasury
Bill auction rate applied to the particular investment company's average daily
collected balances for the week. In view of the ownership of EVC in IBT, the
Portfolio is treated as a self-custodian pursuant to Rule 17f-2 under the 1940
Act, and the Portfolio's investments held by IBT as custodian are thus subject
to additional examinations by the Portfolio's independent auditors as called for
by such Rule. For the period from the start of business, August 1, 1994, to
December 31, 1994, the Portfolio paid IBT $20,710. For the custody fees that the
Fund paid to IBT, see "Fees and Expenses" in Part II of this Statement of
Additional Information.
SERVICE FOR WITHDRAWAL
By a standard agreement, the Trust's Transfer Agent will send to the
shareholder regular monthly or quarterly payments of any permitted amount
designated by the shareholder (see "Eaton Vance Shareholder Services --
Withdrawal Plan" in the Fund's current Prospectus) based upon the value of the
shares held. The checks will be drawn from share redemptions and hence are a
return of principal. Income dividends and capital gain distributions in
connection with withdrawal accounts will be credited at net asset value as of
the record date for each distribution. Continued withdrawals in excess of
current income will eventually use up principal, particularly in a period of
declining market prices.
To use this service, at least $5,000 in cash or shares at the public
offering price will have to be deposited with the Transfer Agent. The
maintenance of a withdrawal plan concurrently with purchases of additional Fund
shares would be disadvantageous if a sales charge is included in such purchases.
A shareholder may not have a withdrawal plan in effect at the same time he or
she has authorized Bank Automated Investing or is otherwise making regular
purchases of Fund shares. Either the shareholder, the Transfer Agent or the
Principal Underwriter will be able to terminate the withdrawal plan at any time
without penalty.
DETERMINATION OF NET ASSET VALUE
The net asset value of the Portfolio and of shares of the Fund is
determined by the custodian, IBT, (as agent for the Fund and the Portfolio) in
the manner described under "Valuing Fund Shares" in the Fund's current
Prospectus. The Fund and the Portfolio will be closed for business and will not
price their respective shares or interests on the following business holidays:
New Year's Day, Presidents' Day, Good Friday (a New York Stock Exchange
holiday), Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.
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 mean between the latest
bid and asked prices. Securities for which market quotations are unavailable,
including any security the disposition of which is restricted under the
Securities Act of 1933, and other assets will be appraised at their fair value
as determined in good faith by or at the direction of the Trustees of the
Portfolio. Short-term obligations maturing in sixty days or less are valued at
original cost which, when combined with amortized discount or accrued interest,
the Trustees of the Portfolio have determined approximates fair market value.
Each investor in the Portfolio, including the Fund, may add to or reduce
its investment in the Portfolio on each day the New York Stock Exchange (the
"Exchange") is open for trading ("Portfolio Business Day") as of the close of
regular trading on the Exchange (the "Portfolio Valuation Time"). The value of
each investor's interest in the Portfolio will be determined by multiplying the
net asset value of the Portfolio by the percentage, determined on the prior
Portfolio Business Day, which represented that investor's share of the aggregate
interests in the Portfolio on such prior day. Any additions or withdrawals for
the current Portfolio Business Day will then be recorded. Each investor's
percentage of the aggregate interest in the Portfolio will then be recomputed as
a percentage equal to a fraction (i) the numerator of which is the value of such
investor's investment in the Portfolio as of the Portfolio Valuation Time on the
prior Portfolio Business Day plus or minus, as the case may be, the amount of
any additions to or withdrawals from the investor's investment in the Portfolio
on the current Portfolio Business Day and (ii) the denominator of which is the
aggregate net asset value of the Portfolio as of the Portfolio Valuation Time on
the prior Portfolio Business Day plus or minus, as the case may be, the amount
of the net additions to or withdrawals from the aggregate investment in the
Portfolio on the current Portfolio Business Day by all investors in the
Portfolio. The percentage so determined will then be applied to determine the
value of the investor's interest in the Portfolio for the current Portfolio
Business Day.
INVESTMENT PERFORMANCE
The average annual total return is determined by multiplying a hypothetical
initial purchase order of $1,000 by the average annual compound rate of return
(including capital appreciation/depreciation, and dividends and distributions
paid and reinvested) for the stated period and annualizing the result. The
calculation assumes that all dividends from net investment income and capital
gain distributions are reinvested at net asset value on the reinvestment dates
during the period (and either (i) the deduction of the maximum sales charge from
the initial $1,000 purchase order, or (ii) a complete redemption of the
investment and, if applicable, the deduction of any contingent deferred sales
charge at the end of the period). For information concerning the total return of
the Fund, see "Performance Information" in Part II of this Statement of
Additional Information.
The Fund's total return may be compared to the Consumer Price Index and
various domestic securities indices, for example: Standard & Poor's 400 Stock
Index, Standard & Poor's 500 Stock Index, NASDAQ National Market System, Merrill
Lynch U.S. Treasury (15-year plus) Index, Lehman Brothers Government/ Corporate
Bond Index, and the Dow Jones Industrial Average. The Fund's total return and
comparisons with these indices may be used in advertisements and in information
furnished to present or prospective shareholders.
Information used in advertisements and in materials furnished to present or
prospective shareholders may include statistics, data and performance studies
prepared by independent organizations, (e.g., Ibbotson Associates, Standard &
Poor's Ratings Group, Merrill Lynch, Pierce, Fenner & Smith, Inc., Bloomberg,
L.P., Dow Jones & Company, Inc., and The Federal Reserve Board) or included in
various publications (e.g., The Wall Street Journal, Barron's and The Decade:
Wealth of Investments in U.S. Stocks, Bonds, Bills & Inflation) reflecting the
investment performance or return achieved by various classes and types of
investments (e.g., common stocks, small company stocks, long-term corporate
bonds, long-term government bonds, intermediate-term government bonds, U.S.
Treasury bills) over various periods of time. This information may be used to
illustrate the benefits of long-term investments in common stocks.
From time to time, information about the portfolio allocation and holdings
of the Portfolio may be included in advertisements and other material furnished
to present and prospective shareholders.
The Portfolio's asset allocation on January 31, 1995 was as follows:
PERCENT OF NET ASSETS
---------------------
Common stocks 93.2%
Preferred stocks 0.1%
Cash & equivalents 6.7%
------
Total 100%
The Portfolio's ten largest common stock holdings on January 31, 1995 were:
COMPANY PERCENT OF NET ASSETS
------- ---------------------
Boston Scientific Corp. 3.9%
Wabash National Corp. 3.5%
FIserv Incorporated 3.5%
Federal National Mortgage Association 3.4%
Mylan Labs. Inc. 3.3%
Consolidated Stores Corp. 2.8%
Dallas Semiconductor Corp. 2.7%
MFS Communications Co., Inc. 2.7%
Home Depot 2.6%
Loctite Corp. 2.4%
-----
Total 30.8%
From time to time, evaluations of the Fund's performance made by
independent sources (e.g., Lipper Analytical Services, Inc., CDA/Wiesenberger
and Morningstar, Inc.) may be used in advertisements and in information
furnished to present or prospective shareholders. See "Performance Information"
in Part II of this Statement of Additional Information.
Information used in advertisements and in materials furnished to present
and prospective shareholders may include statements or illustrations relating to
the appropriateness of types of securities and/or mutual funds which may be
employed to meet specific financial goals, such as (1) funding retirement, (2)
paying for children's education, and (3) financially supporting aging parents.
These three financial goals may be referred to in such advertisements or
materials as the "Triple Squeeze."
TAXES
See "Distributions and Taxes" in the Fund's current Prospectus and
"Additional Tax Matters" in Part II of this Statement of Additional Information.
Each series of the Trust is treated as a separate entity for Federal income
tax purposes. The Fund will elect to be treated and intends to qualify each year
as a regulated investment company ("RIC") under the Internal Revenue Code of
1986, as amended (the "Code"). Accordingly, the Fund intends to satisfy certain
requirements relating to sources of its income and diversification of its assets
and to distribute its net investment income and net realized capital gains in
accordance with the timing requirements imposed by the Code, so as to avoid any
Federal income or excise tax to the Fund. Because the Fund invests its assets in
the Portfolio, the Portfolio normally must satisfy the applicable source of
income and diversification requirements in order for the Fund to satisfy them.
The Portfolio will allocate at least annually among its investors, including the
Fund, the Portfolio's net investment income, net realized capital gains, and any
other items of income, gain, loss, deduction or credit. The Portfolio will make
allocations to the Fund in accordance with the Code and applicable regulations
and will make moneys available for withdrawal at appropriate times and in
sufficient amounts to enable the Fund to satisfy the tax distribution
requirements that apply to the Fund and that must be satisfied in order to avoid
Federal income and/or excise tax on the Fund. For purposes of applying the
requirements of the Code regarding qualification as a RIC, the Fund will be
deemed (i) to own its proportionate share of each of the assets of the Portfolio
and (ii) to be entitled to the gross income of the Portfolio attributable to
such share.
In order to avoid Federal excise tax, the Code requires that the Fund
distribute by December 31 of each calendar year at least 98% of its ordinary
income (not including tax-exempt income) for such year, and at least 98% of the
excess of its realized capital gains over its realized capital losses, after
reduction by any available capital loss carryforwards, and 100% of any income
from the prior year (as previously computed) that was not paid out during such
year and on which the Fund paid no Federal income tax. Further, under current
law, provided that the Fund qualifies as a RIC for Federal income tax purposes
and the Portfolio is treated as a partnership for Massachusetts and Federal tax
purposes, neither the Fund nor the Portfolio is liable for any income, corporate
excise or franchise tax in the Commonwealth of Massachusetts.
The Portfolio's transactions in options will be subject to special tax
rules that may affect the amount, timing and character of distributions to
shareholders. For example, certain positions held by the Portfolio that
substantially diminish the Portfolio's risk of loss with respect to other
positions in its portfilio may constitute "straddles," which are subject to tax
rules that may cause deferral of Portfolio losses, adjustments in the holding
period of portfolio securities and conversion of short-term into long-term
capital losses.
Distributions of net investment income and the excess of net short-term
capital gains over net long-term capital losses earned by the Portfolio and
allocated to the Fund are taxable to shareholders of the Fund as ordinary income
whether received in cash or in additional shares. Distributions of the excess of
net long-term capital gains over net short-term capital losses (including any
capital losses carried forward from prior years) earned by the Portfolio and
allocated to the Fund are taxable to shareholders as long-term capital gains,
whether received in cash or in additional shares and regardless of the length of
time their shares of the Fund have been held. Certain distributions declared in
October, November or December and paid the following January will be taxed to
shareholders as if received on December 31 of the year in which they are
declared.
A portion of distributions made by the Fund which are derived from
dividends received by the Portfolio from domestic corporations and allocated to
the Fund may qualify for the dividends-received deduction for corporations. The
dividends-received deduction for corporate shareholders is reduced to the extent
the shares of the Fund with respect to which the dividends are received are
treated as debt-financed under the Federal income tax law and is eliminated if
the shares are deemed to have been held for less than 46 days. Receipt of
certain distributions qualifying for the deduction may result in reduction of
the tax basis of the corporate shareholder's shares. Distributions eligible for
the dividends-received deduction may give rise to or increase an alternative
minimum tax for corporations.
Any loss realized upon the redemption or exchange of shares of the Fund
within a tax-holding period of 6 months or less will be treated as a long-term
capital loss to the extent of any distribution of net long-term capital gains
with respect to such shares. In addition, a loss realized on a redemption of
Fund shares may be disallowed under certain "wash sale" rules if other shares of
the Fund are acquired within a period beginning 30 days before and ending 30
days after the date of such redemption. Any disallowed loss will result in an
adjustment to the shareholder's tax basis in some or all of the other shares
acquired.
The Portfolio may be subject to foreign withholding taxes with respect to
income on certain foreign securities. These taxes may be reduced or eliminated
under the terms of an applicable U.S. income tax treaty. As it is not expected
that more than 50% of the value of the total assets of the Fund, taking into
account its allocable share of the Portfolio's total assets, at the close of any
taxable year of the Fund will consist of securities issued by foreign
corporations, the Fund will not be eligible to pass through to shareholders
their proportionate share of any foreign taxes paid by the Portfolio and
allocated to the Fund, with the result that shareholders of the Fund will not be
entitled to take any foreign tax credits or deductions for foreign taxes paid by
the Portfolio and allocated to the Fund. Certain foreign exchange gains and
losses realized by the Portfolio and allocated to the Fund will be treated as
ordinary income and losses. Certain uses of foreign currency and investments by
the Portfolio in certain "passive foreign investment companies" may be limited
or a tax election may be made if available, in order to preserve the Fund's
qualification as a RIC and/or to avoid imposition of a tax on the Fund.
Special tax rules apply to Individual Retirement Accounts ("IRAs") and
other retirement plans and persons investing through such plans should consult
their tax advisers for more information. The deductibility of such contributions
may be restricted or eliminated for particular shareholders.
Amounts paid by the Fund to individuals and certain other shareholders who
have not provided the Fund with their correct taxpayer identification number and
certain required certifications, as well as shareholders with respect to whom
the Fund has received notification from the Internal Revenue Service or a
broker, may be subject to "backup" withholding of Federal income tax from the
Fund's dividends and distributions and the proceeds of redemptions (including
repurchases and exchanges) at a rate of 31%. An individual's taxpayer
identification number is generally his or her social security number.
Non-resident alien individuals and certain foreign corporations and other
foreign entities generally will be subject to a U.S. withholding tax at a rate
of 30% on the Fund's distributions from its ordinary income and the excess of
its net short-term capital gain over its net long-term capital loss, unless the
tax is reduced or eliminated by an applicable tax treaty. Distributions from the
excess of the Fund's net long-term capital gain over its net short-term capital
loss received by such shareholders and any gain from the sale or other
disposition of shares of the Fund generally will not be subject to U.S. Federal
income taxation, provided that non-resident alien status has been certified by
the shareholder. Different U.S. tax consequences may result if the shareholder
is engaged in a trade or business in the United States, is present in the United
States for a sufficient period of time during a taxable year to be treated as a
U.S. resident, or fails to provide any required certifications regarding status
as a non-resident alien investor. Foreign shareholders should consult their tax
advisers regarding the U.S. and foreign tax consequences of an investment in the
Fund.
The foregoing discussion does not address the special tax rules applicable
to certain classes of investors, such as retirement plans, tax-exempt entities,
insurance companies and financial institutions. Shareholders should consult
their own tax advisers with respect to special tax rules that may apply in their
particular situations, as well as the state, local or foreign tax consequences
of investing in the Fund.
PORTFOLIO SECURITY TRANSACTIONS
Decisions concerning the execution of portfolio security transactions of
the Portfolio, including the selection of the market and the broker-dealer firm,
are made by BMR. BMR is also responsible for the execution of transactions for
all other accounts managed by it.
BMR places the security transactions of the Portfolio and of all other
accounts managed by it for execution with many broker-dealer firms. BMR uses its
best efforts to obtain execution of portfolio transactions at prices which are
advantageous to the Portfolio and (when a disclosed commission is being charged)
at reasonably competitive commission rates. In seeking such execution, BMR will
use its best judgment in evaluating the terms of a transaction, and will give
consideration to various relevant factors, including without limitation the size
and type of the transaction, the general execution and operational capabilities
of the broker-dealer, the nature and character of the market for the security,
the confidentiality, speed and certainty of effective execution required for the
transaction, the reputation, reliability, experience and financial condition of
the broker-dealer, the value and quality of services rendered by the
broker-dealer in other transactions, and the reasonableness of the commission,
if any. Transactions on United States stock exchanges and other agency
transactions involve the payment by the Portfolio of negotiated brokerage
commissions. Such commissions vary among different broker-dealer firms, and a
particular broker-dealer may charge different commissions according to such
factors as the difficulty and size of the transaction and the volume of business
done with such broker-dealer. Transactions in foreign securities usually involve
the payment of fixed brokerage commissions, which are generally higher than
those in the United States. There is generally no stated commission in the case
of securities traded in the over-the-counter markets, but the price paid or
received by the Portfolio usually includes an undisclosed dealer markup or
markdown. In an underwritten offering the price paid by the Portfolio often
includes a disclosed fixed commission or discount retained by the underwriter or
dealer. Although commissions paid on portfolio security transactions will, in
the judgment of BMR, be reasonable in relation to the value of the services
provided, commissions exceeding those which another firm might charge may be
paid to broker-dealers who were selected to execute transactions on behalf of
the Portfolio and BMR's other clients in part for providing brokerage and
research services to BMR.
As authorized in Section 28(e) of the Securities Exchange Act of 1934, a
broker or dealer who executes a portfolio transaction on behalf of the Portfolio
may receive a commission which is in excess of the amount of commission another
broker or dealer would have charged for effecting that transaction if BMR
determines in good faith that such commission was reasonable in relation to the
value of the brokerage and research services provided. This determination may be
made on the basis of either that particular transaction or on the basis of the
overall responsibilities which BMR and its affiliates have for accounts over
which they exercise investment discretion. In making any such determination, BMR
will not attempt to place a specific dollar value on the brokerage and research
services provided or to determine what portion of the commission should be
related to such services. Brokerage and research services may include advice as
to the value of securities, the advisability of investing in, purchasing, or
selling securities, and the availability of securities or purchasers or sellers
of securities; furnishing analyses and reports concerning issuers, industries,
securities, economic factors and trends, portfolio strategy and the performance
of accounts; and effecting securities transactions and performing functions
incidental thereto (such as clearance and settlement); and the "Research
Services" referred to in the next paragraph.
It is a common practice in the investment advisory industry for the
advisers of investment companies, institutions and other investors to receive
research, statistical and quotation services, data, information and other
services, products and materials which assist such advisers in the performance
of their investment responsibilities ("Research Services") from broker-dealer
firms which execute portfolio transactions for the clients of such advisers and
from third parties with which these broker-dealers have arrangements. Consistent
with this practice, BMR receives Research Services from many broker-dealer firms
with which BMR places the Portfolio transactions and from third parties with
which these broker-dealers have arrangements. These Research Services include
such matters as general economic and market reviews, industry and company
reviews, evaluations of securities and portfolio strategies and transactions,
recommendations as to the purchase and sale of securities and other portfolio
transactions, financial, industry and trade publications, news and information
services, pricing and quotation equipment and services, and research oriented
computer hardware, software, data bases and services. Any particular Research
Service obtained through a broker-dealer may be used by BMR in connection with
client accounts other than those accounts which pay commissions to such
broker-dealer. Any such Research Service may be broadly useful and of value to
BMR in rendering investment advisory services to all or a significant portion of
its clients, or may be relevant and useful for the management of only one
client's account or of a few clients' accounts, or may be useful for the
management of merely a segment of certain clients' accounts, regardless of
whether any such account or accounts paid commissions to the broker-dealer
through which such Research Service was obtained. The advisory fee paid by the
Portfolio is not reduced because BMR receives such Research Services. BMR
evaluates the nature and quality of the various Research Services obtained
through broker-dealer firms and attempts to allocate sufficient commissions to
such firms to ensure the continued receipt of Research Services which BMR
believes are useful or of value to it in rendering investment advisory services
to its clients.
Subject to the requirement that BMR shall use its best efforts to seek to
execute Portfolio security transactions at advantageous prices and at reasonably
competitive commission rates or spreads, BMR is authorized to consider as a
factor in the selection of any broker-dealer firm with whom Portfolio orders may
be placed the fact that such firm has sold or is selling shares of the Fund or
of other investment companies sponsored by BMR or Eaton Vance. This policy is
not inconsistent with a rule of the National Association of Securities Dealers,
Inc., which rule provides that no firm which is a member of the Association
shall favor or disfavor the distribution of shares of any particular investment
company or group of investment companies on the basis of brokerage commissions
received or expected by such firm from any source.
Securities considered as investments for the Portfolio may also be
appropriate for other investment accounts managed by BMR or its affiliates. BMR
will attempt to allocate equitably portfolio security transactions among the
Portfolio and the portfolios of its other investment accounts whenever decisions
are made to purchase or sell securities by the Portfolio and one or more of such
other accounts simultaneously. In making such allocations, the main factors to
be considered are the respective investment objectives of the Portfolio and such
other accounts, the relative size of portfolio holdings of the same or
comparable securities, the availability of cash for investment by the Portfolio
and such accounts, the size of investment commitments generally held by the
Portfolio and such accounts and the opinions of the persons responsible for
recommending investments to the Portfolio and such accounts. While this
procedure could have a detrimental effect on the price or amount of the
securities available to the Portfolio from time to time, it is the opinion of
the Trustees of the Trust and the Portfolio that the benefits available from the
BMR organization outweigh any disadvantage that may arise from exposure to
simultaneous transactions. For the period from the start of business, August 1,
1994, to December 31, 1994, the Portfolio paid brokerage commissions of $36,041
on portfolio securities transactions. Of the total brokerage commissions paid,
approximately $31,811 was paid in respect of portfolio transactions aggregating
approximately $12,822,000 to firms which provided some research services to BMR
(although many of such firms may have been selected in any particular
transaction primarily because of their execution capabilities).
OTHER INFORMATION
On July 21, 1992, the Trust changed its name from Eaton Vance Special
Equities Fund to Eaton Vance Special Investment Trust. The Trust is organized as
a business trust under the laws of the Commonwealth of Massachusetts under a
Declaration of Trust dated March 27, 1989, as amended. The Trust is the
successor to a corporation which commenced offering its shares to the public in
April, 1968. The Trust changed its name from Eaton & Howard Growth Fund, Inc. on
September 24, 1982. Eaton Vance, pursuant to its agreement with the Trust,
controls the use of the words "Eaton Vance" in the Trust's name and may use the
words "Eaton Vance" in other connections and for other purposes.
The Trust's Declaration of Trust may be amended by the Trustees when
authorized by vote of a majority of the outstanding voting securities of the
Trust affected by the amendment. The Trustees may also amend the Declaration of
Trust without the vote or consent of shareholders to change the name of the
Trust or to make such other changes as do not have a materially adverse effect
on the rights or interests of shareholders or if they deem it necessary to
conform the Declaration to the requirements of applicable Federal laws or
regulations. The Trust's by-laws provide that the Fund will indemnify its
Trustees and officers against liabilities and expenses incurred in connection
with any litigation or proceeding in which they may be involved because of their
offices with the Trust. However, no indemnification will be provided to any
Trustee or officer for any liability to the Trust or its shareholders by reason
of willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office.
Under Massachusetts law, if certain conditions prevail, shareholders of a
Massachusetts business trust (such as the Trust) could be deemed to have
personal liability for the obligations of the Trust. Numerous investment
companies registered under the 1940 Act have been formed as Massachusetts
business trusts, and management is not aware of an instance where such liability
has been imposed. The Trust's Declaration of Trust contains an express
disclaimer of liability on the part of the Fund shareholders and the Trust's
By-laws provide that the Trust shall assume the defense on behalf of any Fund
shareholders. Moreover, the Trust's By-laws also provide for indemnification out
of the property of the Fund of any shareholder held personally liable solely by
reason of being or having been a shareholder for all loss or expense arising
from such liability. The assets of the Fund are readily marketable and will
ordinarily substantially exceed its liabilities. In light of the nature of the
Fund's business and the nature of its assets, management believes that the
possibility of the Fund's liability exceeding its assets, and therefore the
shareholder's risk of personal liability, is extremely remote.
As permitted by Massachusetts law, there will normally be no meetings of
shareholders for the purpose of electing Trustees unless and until such time as
less than a majority of the Trustees of the Trust holding office have been
elected by shareholders. In such an event the Trustees then in office will call
a shareholders' meeting for the election of Trustees. Except for the foregoing
circumstances and unless removed by action of the shareholders in accordance
with the Trust's By-laws, the Trustees shall continue to hold office and may
appoint successor Trustees.
The Trust's By-laws provide that no person shall serve as a Trustee if
shareholders holding two-thirds of the outstanding shares have removed him from
that office either by a written declaration filed with the Trust's custodian or
by votes cast at a meeting called for that purpose. The By-laws further provide
that under certain circumstances the shareholders may call a meeting to remove a
Trustee and that the Trust is required to provide assistance in communicating
with shareholders about such a meeting.
In accordance with the Declaration of Trust of the Portfolio, there will
normally be no meetings of the investors for the purpose of electing Trustees
unless and until such time as less than a majority of the Trustees of the
Portfolio holding office have been elected by investors. In such an event the
Trustees then in office will call an investors' meeting for the election of
Trustees. Except for the foregoing circumstances and unless removed by action of
the investors in accordance with the Portfolio's Declaration of Trust, the
Trustees shall continue to hold office and may appoint successor Trustees.
The Declaration of Trust of the Portfolio provides that no person shall
serve as a Trustee if investors holding two-thirds of the outstanding interests
have removed him from that office either by a written declaration filed with the
Portfolio's custodian or by votes cast at a meeting called for that purpose. The
Declaration of Trust further provides that under certain circumstances the
investors may call a meeting to remove a Trustee and that the Portfolio is
required to provide assistance in communicating with investors about such a
meeting.
The right to redeem can be suspended and the payment of the redemption
price deferred when the Exchange is closed (other than for customary weekend and
holiday closings), during periods when trading on the Exchange is restricted as
determined by the Securities and Exchange Commission, or during any emergency as
determined by the Commission which makes it impracticable for the Portfolio to
dispose of its securities or value its assets, or during any other period
permitted by order of the Commission for the protection of investors.
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P., One Post Office Square, Boston, Massachusetts,
are the independent accountants for the Fund and the Portfolio, providing audit
services, tax return preparation, and assistance and consultation with respect
to the preparation of filings with the Securities and Exchange Commission.
For the financial statements of the Fund and the Portfolio see "Financial
Statements" in Part II of this Statement of Additional Information.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EV MARATHON SPECIAL EQUITIES FUND.
The Fund became a series of the Trust on July 27, 1994.
FEES AND EXPENSES
ADMINISTRATOR
As stated under "Investment Adviser and Administrator" in Part I of this
Statement of Additional Information, the Administrator receives no compensation
for providing administrative services to the Fund. For the period from the start
of business, August 22, 1994, to December 31, 1994, $4,325 of the Fund's
operating expenses were allocated to the Administrator.
DISTRIBUTION PLAN
The Distribution Plan and Distribution Agreement remain in effect until
April 28, 1995 and may be continued as described under "Distribution Plan" in
the Prospectus. Pursuant to Rule 12b-1, the Plan has been approved by the Fund's
initial sole shareholder (Eaton Vance) and by the Board of Trustees of the Trust
as required by Rule 12b-1. For the period from the start of business, August 22,
1994, to December 31, 1994, the Fund made sales commission payments under the
Plan to the Principal Underwriter aggregating $486, which amount was used by the
Principal Underwriter to partially defray sales commissions aggregating $1,055
paid during such period by the Principal Underwriter to Authorized Firms on
sales of Fund shares. During such period, contingent deferred sales charges
aggregating approximately $62 were imposed on early redeeming shareholders and
paid to the Principal Underwriter to partially defray sales commissions. As at
December 31, 1994, the outstanding uncovered distribution charges of the
Principal Underwriter calculated under the Plan amounted to approximately
$21,676 (which amount was equivalent to 3.5% of the Fund's net assets on such
day). For the period ended December 31, 1994, the Fund made no service fee
payments under the Plan. The Fund expects to begin accruing for its service fee
payments during the quarter ending September 30, 1995.
PRINCIPAL UNDERWRITER
For the period from the start of business, August 22, 1994, to December 31,
1994, the Fund paid no repurchase transaction fees to the Principal Underwriter.
CUSTODIAN
For the period from the start of business, August 22, 1994, to December 31,
1994, the Fund paid IBT $249.
TRUSTEES
The fees and expenses of those Trustees of the Trust and of the Portfolio
who are not members of the Eaton Vance organization are paid by the Fund (and
the other series of the Trust) and the Portfolio, respectively. During the
fiscal year ended December 31, 1994, the Trustees of the Trust and the Portfolio
earned the following compensation in their capacities as Trustees from the
Trust, the Portfolio and the other funds in the Eaton Vance fund complex\1/:
<TABLE>
<CAPTION>
AGGREGATE AGGREGATE RETIREMENT TOTAL COMPENSATION
COMPENSATION COMPENSATION BENEFIT ACCRUED FROM TRUST AND
NAME FROM FUND FROM PORTFOLIO FROM FUND COMPLEX FUND COMPLEX
- ---- ---------------- ---------------- --------------------- ----------------------
<S> <C> <C> <C> <C>
Donald R. Dwight $-- 0 -- $297<F2> $8,750 $135,000
Samuel L. Hayes, III -- 0 -- 302<F3> 8,865 142,500
Norton H. Reamer -- 0 -- 318 -- 0 -- 135,000
John L. Thorndike -- 0 -- 338 -- 0 -- 140,000
Jack L. Treynor -- 0 -- 301 -- 0 -- 140,000
<FN>
<F1> The Eaton Vance fund complex consists of 201 registered investment companies or series thereof.
<F2> Includes $98 of deferred compensation.
<F3> Includes $101 of deferred compensation.
</TABLE>
<PAGE>
PRINCIPAL UNDERWRITER
Under the Distribution Agreement the Principal Underwriter acts as principal
in selling shares of the Fund. The expenses of printing copies of prospectuses
used to offer shares to Authorized Firms or investors and other selling
literature and of advertising is borne by the Principal Underwriter. The fees
and expenses of qualifying and registering and maintaining qualifications and
registrations of the Fund and its shares under Federal and state securities laws
is borne by the Fund. In addition, the Fund makes payments to the Principal
Underwriter pursuant to its Distribution Plan as described in the Fund's current
Prospectus; the provisions of the plan relating to such payments are included in
the Distribution Agreement. The Distribution Agreement is renewable annually by
the Trust's Board of Trustees (including a majority of its Trustees who are not
interested persons of the Trust and who have no direct or indirect financial
interest in the operation of the Fund's Distribution Plan or the Distribution
Agreement), may be terminated on sixty days' notice either by such Trustees or
by vote of a majority of the outstanding voting securities of the Fund or on six
months' notice by the Principal Underwriter and is automatically terminated upon
assignment. The Principal Underwriter distributes Fund shares on a "best
efforts" basis under which it is required to take and pay for only such shares
as may be sold.
The Fund has authorized Eaton Vance Distributors, Inc. (the "Principal
Underwriter") to act as its agent in repurchasing shares at the rate of $2.50
for each repurchase transaction handled by the Principal Underwriter. The
Principal Underwriter estimates that the expenses incurred by it in acting as
repurchase agent for the Fund will exceed the amounts paid therefor by the Fund.
DISTRIBUTION PLAN
The Distribution Plan ("the Plan") is described in the Prospectus and is
designed to meet the requirements of Rule 12b-1 under the 1940 Act and the sales
charge rule of the National Association of Securities Dealers, Inc. (the "NASD
Rule"). The purpose of the Plan is to compensate the Principal Underwriter for
its distribution services and facilities provided to the Fund by paying the
Principal Underwriter sales commissions and a separate distribution fee in
connection with sales of Fund shares. The following supplements the discussion
of the Plan contained in the Fund's Prospectus.
In calculating daily the amount of uncovered distribution charges,
distribution charges will include the aggregate amount of sales commissions and
distribution fees theretofore paid plus the aggregate amount of sales
commissions and distribution fees which the Principal Underwriter is entitled to
be paid under the Plan since its inception. Payments theretofore paid or payable
under the Plan by the Fund to the Principal Underwriter and contingent deferred
sales charges theretofore paid or payable to the Principal Underwriter will be
subtracted from such distribution charges; if the result of such subtraction is
positive, a distribution fee (computed at 1% over the prime rate then reported
in The Wall Street Journal) will be computed on such amount and added thereto,
with the resulting sum constituting the amount of outstanding uncovered
distribution charges with respect to such day. The amount of outstanding
uncovered distribution charges of the Principal Underwriter calculated on any
day does not constitute a liability recorded on the financial statements of the
Fund.
It is anticipated that the Eaton Vance organization will profit by reason of
the operation of the Plan through an increase in the Fund's assets (thereby
increasing the advisory fee payable to BMR by the Portfolio) resulting from sale
of Fund shares and through the amounts paid to the Principal Underwriter,
including contingent deferred sales charges, pursuant to the Plan. The Eaton
Vance organization may be considered to have realized a profit under the Plan if
at any point in time the aggregate amounts theretofore received by the Principal
Underwriter pursuant to the Plan and from contingent deferred sales charges have
exceeded the total expenses theretofore incurred by such organization in
distributing shares of the Fund. Total expenses for this purpose will include an
allocable portion of the overhead costs of such organization and its branch
offices, which costs will include without limitation leasing expense,
depreciation of building and equipment, utilities, communication and postage
expense, compensation and benefits of personnel, travel and promotional expense,
stationery and supplies, literature and sales aids, interest expense, data
processing fees, consulting and temporary help costs, insurance, taxes other
than income taxes, legal and auditing expense and other miscellaneous overhead
items. Overhead is calculated and allocated for such purpose by the Eaton Vance
organization in a manner deemed equitable to the Fund.
The amount of uncovered distribution charges of the Principal Underwriter at
any particular time depends upon various changing factors, including the level
and timing of sales of Fund shares, the nature of such sales (i.e., whether they
result from exchange transactions, reinvestments or from cash sales through
Authorized Firms), the level and timing of redemptions of Fund shares upon which
a contingent deferred sales charge will be imposed, the level and timing of
redemptions of Fund shares upon which no contingent deferred sales charge will
be imposed (including redemptions involving exchanges of Fund shares for shares
of another fund in the Eaton Vance Marathon Group of Funds which result in a
reduction of uncovered distribution charges), changes in the level of the net
assets of the Fund, and changes in the interest rate used in the calculation of
the distribution fee under the Plan. For the sales commission payments made by
the Fund and the outstanding uncovered distribution charges of the Principal
Underwriter, see "Fees and Expenses -- Distribution Plan" in this Part II. The
Plan also authorizes the Fund to make payments of service fees. For additional
information concerning the service fees, see "Fees and Expenses -- Distribution
Plan" in this Part II.
Under the Plan the President or a Vice President of the Trust shall provide
to the Trustees for their review, and the Trustees shall review at least
quarterly, a written report of the amount expended under the Plan and the
purposes for which such expenditures were made. The Plan may not be amended to
increase materially the payments described therein without approval of the
shareholders of the Fund, and all material amendments of the Plan must also be
approved by the Trustees as required by Rule 12b-1. So long as the Plan is in
effect, the selection and nomination of Trustees who are not interested persons
of the Trust shall be committed to the discretion of the Trustees who are not
such interested persons.
The Trustees of the Trust believe that the Plan will be a significant factor
in the expected growth of the Fund's assets, and will result in increased
investment flexibility and advantages which will benefit the Fund and its
shareholders. Payments for sales commissions and distribution fees made to the
Principal Underwriter under the Plan will compensate the Principal Underwriter
for its services and expenses in distributing shares of the Fund. Service fee
payments made to the Principal Underwriter and Authorized Firms under the Plan
provide incentives to provide continuing personal services to investors and the
maintenance of shareholder accounts. By providing incentives to the Principal
Underwriter and Authorized Firms, the Plan is expected to result in the
maintenance of, and possible future growth in, the assets of the Fund. Based on
the foregoing and other relevant factors, the Trustees of the Trust have
determined that in their judgment there is a reasonable likelihood that the Plan
will benefit the Fund and its shareholders.
PERFORMANCE INFORMATION
The tables below indicate the total return (capital changes plus
reinvestment of all distributions) on a hypothetical investment of $1,000 in the
Fund covering the life of the Fund from August 22, 1994 to December 31, 1994.
VALUE OF A $1,000 INVESTMENT
<TABLE>
<CAPTION>
Value of Invest- Value of Invest- Total Return Total Return after
ment before de- ment after deduct- before deducting the deducting the
ducting the con- ing the contingent contingent deferred contingent deferred
tingent deferred deferred sales sales charge sales charge<F2>
Investment Investment Amount of sales charge on charge<F2> ------------------------ -----------------------
Period Date Investment 12/31/94 on 12/31/94 Cumulative Annualized Cumulative Annualized
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of the
Fund<F1> 8/22/94 $1,000 $981.00<F3> $931.95<F3> -1.90%<F3> -- -6.80%<F3> --
<CAPTION>
PERCENTAGE CHANGES 8/22/94 -- 12/31/94
Net asset value to net asset value Net asset value to net asset value
before deducting the contingent deferred after deducting the contingent deferred
sales charge with all distributions reinvested sales charge<F2> with all distributions reinvested
---------------------------------------------- --------------------------------------------------
Period Ended Annual Cumulative Average Annual Annual Cumulative Average Annual
- ------------ ------ ---------- -------------- ------ ---------- --------------
12/31/94<F1> -- -1.90%<F3> -- -- -6.80%<F3> --
Past performance is not indicative of future results. Investment return and principal value will fluctuate; shares, when
redeemed, may be worth more or less than their original cost.
<FN>
<F1> Investment operations began on August 22, 1994.
<F2>No contingent deferred sales charge is imposed on shares purchased more than six years prior to the redemption, shares
acquired through the reinvestment of distributions, or any appreciation in value of other shares in the account, and no such
charge is imposed on exchanges of Fund shares for shares of one or more other funds listed under "The Eaton Vance Exchange
Privilege" in the Prospectus.
<F3> If a portion of the Fund's expenses had not been subsidized, the Fund would have had lower returns.
</TABLE>
ADDITIONAL TAX MATTERS
The Fund qualified as a regulated investment company under the Code for its
fiscal year ended December 31, 1994 (see the Notes to Financial Statements).
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES As of February
28, 1995, the Trustees and officers of the Trust, as a group,
owned in the aggregate less than 1% of the outstanding shares of the Fund. As of
February 28, 1995, Merrill Lynch, Pierce, Fenner & Smith, Inc., New Brunswick,
NJ was the record owner of approximately 21.8% of the outstanding shares, which
were held on behalf of its customers who are the beneficial owners of such
shares, and as to which it had voting power under certain limited circumstances.
In addition, as of February 28, 1995, the following shareholders owned
beneficially and of record the percentages of outstanding shares of the Fund
indicated after their names: Ralph Buddy Blair, Jr., Fort Smith, AR (11.8%);
Nancy Marks, Boca Raton, FL (6.9%); Themy Chakeris and Nena Chakeris JTWROS,
Charleston, SC (6.1%); and Thomas J. Clark, Omaha, NE (5.7%). To the Trust's
knowledge, no other person owned of record or beneficially 5% or more of the
Fund's outstanding shares on such date.
<PAGE>
- ------------------------------------------------------------------------------
EV MARATHON SPECIAL EQUITIES FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
- ------------------------------------------------------------------------------
December 31, 1994
- ------------------------------------------------------------------------------
ASSETS:
Investment in Special Investment Portfolio (Portfolio),
at value (Note 1A) $558,119
Receivable for Fund shares sold 57,137
Deferred organization expenses (Note 1D) 35,223
Receivable from Administrator (Note 6) 4,325
--------
Total assets 654,804
LIABILITIES:
Accrued organization expenses $31,095
Accrued expenses 1,139
-------
Total liabilities 32,234
--------
NET ASSETS for 63,443 shares of beneficial interest outstanding $622,570
--------
--------
SOURCES OF NET ASSETS:
Proceeds from sales of shares (including shares issued to shareholders
electing to receive payment of distributions in shares), less cost of shares
redeemed $613,954
Unrealized appreciation of investments 9,138
Accumulated net realized loss on investments (522)
--------
Total net assets $622,570
--------
--------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($622,570 / 63,443 shares of beneficial interest) $9.81
----
----
The accompanying notes are an integral part of the financial statements
<PAGE>
FINANCIAL STATEMENTS (Continued)
STATEMENT OF OPERATIONS
- -------------------------------------------------------------------------------
For the period from the start of business August 22, 1994 to December 31, 1994
- -------------------------------------------------------------------------------
INVESTMENT INCOME (NOTE 1B):
Dividend income allocated from Portfolio $ 371
Interest income allocated from Portfolio 329
Expenses allocated from Portfolio (486)
-------
Total investment income 214
Expenses --
Distribution fees (Note 4) $ 486
Custodian fees 249
Registration fees 600
Transfer and dividend disbursing agent fees 599
Amortization of organization expenses (Note 1D) 2,772
Miscellaneous 1,328
-------
Total expenses 6,034
Deduct --
Allocation of expenses by the Administrator (Note 6) 4,325
-------
Net expenses 1,709
-------
Net investment loss (1,495)
REALIZED AND UNREALIZED GAIN (LOSS) FROM PORTFOLIO:
Net realized loss on investments (identified cost basis) (949)
Change in unrealized appreciation of investments 9,138
-------
Net realized and unrealized gain on investments 8,189
-------
Net increase in net assets resulting from operations $ 6,694
-------
-------
The accompanying notes are an integral part of the financial statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------
For the period from the start of business August 22, 1994 to December 31, 1994
- -------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
From operations --
Net investment loss $ (1,495)
Net realized loss from Portfolio (949)
Unrealized appreciation from Portfolio 9,138
--------
Net increase in net assets resulting from operations 6,694
Net increase in net assets from Fund share transactions (Note 2) 615,876
--------
Net increase in net assets 622,570
NET ASSETS:
Beginning of period --
--------
End of period (including undistributed net
investment loss of $522) $622,570
--------
--------
The accompanying notes are an integral part of the financial statements
<PAGE>
FINANCIAL STATEMENTS (Continued)
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------
For the period from the start of business August 22, 1994 to December 31, 1994
- ------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (for a share outstanding throughout the period):
NET ASSET VALUE -- Beginning of period $10.000
-------
Income from investment operations:
Net investment loss $(0.021)
Net realized and unrealized gain on investments (0.169)
-------
Total loss from investment operations $(0.190)
-------
NET ASSET VALUE -- End of period $ 9.810
-------
-------
TOTAL RETURN (1.90)%
RATIOS/SUPPLEMENTAL DATA: (to average daily net assets)**
Expenses* 3.05% +
Net investment income (2.00%)+
NET ASSETS AT END OF PERIOD (000'S OMITTED) $ 623
+ Computed on an annualized basis.
*Includes the Fund's share of Special Investment Portfolio's allocated expenses
for the period from August 22, 1994 to December 31, 1994.
**The expenses related to the operation of the Fund reflect an assumption of
expenses by the administrator. Had such action not been taken, the ratios
would have been as follows:
Ratios (to average daily net assets)
Expenses 9.55% +
Net investment (loss) (8.50%)+
The accompanying notes are an integral part of the financial statements
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES
EV Marathon Special Equities Fund (the Fund) a Massachusetts business trust is
registered under the Investment Company Act of 1940, as amended, as a
diversified open-end management investment company. The Fund is a series in the
Eaton Vance Special Investment Trust. The Fund invests all of its investable
assets in interests in the Special Investment Portfolio (the Portfolio), a New
York Trust, having the same investment objective as the Fund. The value of the
Fund's investment in the Portfolio reflects the Fund's proportionate interest in
the net assets of the Portfolio (0.9% at December 31, 1994). The performance of
the Fund is directly affected by the performance of the Portfolio. The financial
statements of the Portfolio, including the portfolio of investments, are
included elsewhere in this report and should be read in conjunction with the
Fund's financial statements. The following is a summary of significant
accounting policies consistently followed by the Fund in the preparation of its
financial statements. The policies are in conformity with generally accepted
accounting principles.
A. INVESTMENT VALUATIONS -- Valuations of securities by the Portfolio is
discussed in Note 1 of the Portfolio's Notes to Financial Statements which are
included elsewhere in this report.
B. INCOME -- The Fund's net investment income consists of the Fund's pro rata
share of the net investment income of the Portfolio, less all actual and accrued
expenses of the Fund.
C. FEDERAL TAXES -- The Fund's policy is to comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute to shareholders each year all of its taxable income, including any
net realized gain on investments, option and financial futures transactions.
Accordingly, no provision for federal income or excise tax is necessary.
D. DEFERRED ORGANIZATION EXPENSES -- Costs incurred by the Fund in connection
with its organization are being amortized on the straight-line basis over five
years.
E. OTHER -- Investment transactions are accounted for on the date the
investments are purchased or sold. Distributions to shareholders are recorded on
the ex-dividend date.
F. DISTRIBUTION COSTS -- For book purposes, commissions paid on the sale of Fund
shares and other distribution costs are charged to operations. For tax purposes,
commissions paid were charged to paid-in capital prior to November 16, 1994 and
subsequently charged to operations. The change in the tax accounting practice
was prompted by a recent Internal Revenue Service ruling and has no effect on
either the Fund's current yield or total return (Note 4).
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
- --------------------------------------------------------------------------------
(2) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares from the start of business, August 22, 1994 to
December 31, 1994 were as follows:
SHARES AMOUNT
------ -------
Sales 64,218 $623,694
Issued to shareholders electing to receive payment of
distribution in Fund shares -- --
Redemptions (775) (7,818)
------ --------
Net increase 63,443 $615,876
------ --------
------ --------
- --------------------------------------------------------------------------------
(3) INVESTMENT TRANSACTIONS
Increases and decreases in the Fund's investment in the Portfolio aggregated
$566,567 and $16,841, respectively.
- --------------------------------------------------------------------------------
(4) DISTRIBUTION PLAN
The Fund has adopted a distribution plan (the Plan) pursuant to Rule 12b-1 under
the Investment Company Act of 1940. The Plan requires the Fund to accrue amounts
daily to the principal underwriter, Eaton Vance Distributors, Inc. (EVD), equal
to 1/365th of 0.75% of the Fund's average daily net assets, for providing
ongoing distribution services and facilities to the Fund. The Fund will
automatically discontinue accruals to EVD during any period in which there are
no outstanding Uncovered Distribution Charges, which are approximately
equivalent to the sum of (i) 5% of the aggregate amount received by the Fund for
shares sold plus (ii) distribution fees calculated by applying the rate of 1%
over the prevailing prime rate to the outstanding balance of Uncovered
Distribution Charges of EVD, reduced by the aggregate amount of contingent
deferred sales charges (see Note 5) and amounts theretofore paid to EVD.
The amount payable to EVD with respect to each day is accrued on such day as a
liability of the Fund and, accordingly, reduces the Fund's net assets. Such
payments would cease upon termination of the distribution agreement (unless made
in accordance with another distribution agreement). As a result, the Fund does
not accrue amounts which may become payable to EVD in the future because the
conditions for recording any contingent liability under generally accepted
accounting principles have not been satisfied. EVD earned $486 for the period
from the start of business, August 22, 1994 to December 31, 1994, representing
0.75% (annualized) of average daily net assets. At December 31, 1994, the amount
of Uncovered Distribution Charges of EVD calculated under the Plan was
approximately $21,676.
In addition, the Plan authorizes the Fund to make payments of service fees to
the Principal Underwriter, Authorized Firms and other persons in amounts not
exceeding 0.25% of the Fund's average daily net assets for each fiscal year. The
Trustees have implemented the Plan by authorizing the Fund to make quarterly
payments of service fees to the Principal Underwriter and Authorized Firms in
amounts not expected to exceed 0.25% of the Fund's average daily net assets for
each fiscal year based on the value of Fund shares sold by such persons and
remaining outstanding for at least twelve months, and that payments of these
service fees shall commence with the quarter ending September 30, 1995. Service
fees are separate and distinct from the sales commissions and distribution fees
payable by the Fund to EVD, and, as such, are not subject to automatic
discontinuance where there are no outstanding Uncovered Distribution Charges of
EVD.
Certain of the officers of the Fund and Directors of the Corporation are
officers and directors of EVD.
<PAGE>
- --------------------------------------------------------------------------------
(5) CONTINGENT DEFERRED SALES CHARGES
A contingent deferred sales charge (CDSC) is imposed on any redemption of Fund
shares made within six years of purchase. Generally, the CDSC is based upon the
lower of the net asset value at date of redemption or date of purchase. No
charge is levied on shares acquired by reinvestment of dividends or capital gain
distributions. The CDSC is imposed at declining rates that begin at 5% in the
first and second year or redemption after purchase, declining one percentage
point each year. No CDSC is levied on shares which have been sold to EVM or its
affiliates or to their respective employees or clients. CDSC charges are paid to
EVD to reduce the amount of Uncovered Distribution Charges calculated under the
Fund's Distribution Plan. CDSC charges received when no Uncovered Distribution
Charges exist will be retained by the Fund. EVD received approximately $62 of
CDSC paid by shareholders for the period from the start of business, August 22,
1994 to December 31, 1994.
- --------------------------------------------------------------------------------
(6) ADMINISTRATOR
The administrator assumed $4,325 of the Funds expenses in the period from August
22, 1994, to December 31, 1994. Investment Adviser fee and other transactions
with affiliates is discussed in Note 3 of the Portfolio's Notes to Financial
Statements which are included elsewhere in this report.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Trustees of
EV Marathon Special Equities Fund, a series of Eaton Vance Special Investment
Trust:
We have audited the accompanying statement of assets and liabilities of EV
Marathon Special Equities Fund, a series of Eaton Vance Special Investment
Trust, as of December 31, 1994, the related statements of operations, changes in
net assets and financial highlights for the period from August 22, 1994 (start
of business) to December 31, 1994. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of December 31, 1994 by
correspondence with the custodian. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of EV
Marathon Special Equities Fund, a series of Eaton Vance Special Investment
Trust, as of December 31, 1994, the results of its operations, changes in its
net assets and financial highlights for the period from August 22, 1994 (start
of business) to December 31, 1994, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
February 3, 1995
<PAGE>
- --------------------------------------------------------------------------------
SPECIAL INVESTMENT PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1994
- --------------------------------------------------------------------------------
COMMON STOCKS - 93.3%
- --------------------------------------------------------------------------------
NAME OF COMPANY SHARES VALUE
- --------------------------------------------------------------------------------
BUSINESS SERVICES - 6.8%
Accustaff Inc.* 20,000 $ 277,500
Provider of specialized temporary staffing
services to major corporations.
BISYS Corp.* 40,000 885,000
Services financial institutions with
computer, administrative and marketing
support data processing services.
Danka Business Systems PLC, ADR 20,000 432,500
An independent provider of maintenance and
service for office copying machines.
FIserv Incorporated* 103,500 2,225,250
Provider of data processing services to
banks and savings institutions, benefiting
from outsourcing trend.
G&K Services, Inc. 35,000 581,875
Rents and launders uniforms and other
textile products.
-----------
$ 4,402,125
-----------
COMMUNICATIONS - 6.2%
Comcast Corp. 55,000 $ 862,812
Cable TV and cellular telephone operator.
Comcast UK Cable Partners 40,000 640,000
Operator of integrated cable television, residential telephone and business
telecommunications services in the United Kingdom.
Intelcom Group, Inc.* 17,300 229,030
Provider of alternative access
telecommunication services and
international satellite uplink teleports.
MFS Communications Co., Inc* 45,000 1,473,750
Provider of fiber-optic based
telecommunications services primarily to
businesses.
Paging Network, Inc.* 10,000 340,000
Provider of paging services in U.S.
Telephone & Data Systems, Inc. 10,000 461,250
A provider of local telephone service in
smaller communities, as well as
cellular and paging services.
-----------
$ 4,006,842
-----------
<PAGE>
PORTFOLIO OF INVESTMENTS (Continued)
COMMON STOCKS - (Continued)
- --------------------------------------------------------------------------------
NAME OF COMPANY SHARES VALUE
- --------------------------------------------------------------------------------
COMPUTER EQUIPMENT - 2.7%
EMC Corp. Mass. 55,000 $ 1,189,375
Manufacturer of data storage products for
midrange and mainframe computer systems.
Motorola Inc. 10,000 578,750
Leading worldwide producer of wireless
communication systems and equipment,major
manufacturer of semiconductors.
-----------
$ 1,768,125
-----------
CONSUMER SOFTWARE - 6.4%
Banyan Inc.* 70,000 $ 1,251,250
Provider of networking software products for
large, complex computer networks.
Lotus Development Corp.* 10,000 411,250
Provider of business application software
including (1-2-3), graphics (Freelance)
and communications (Notes) products.
Novell, Inc.* 70,000 1,198,750
Leading provider of network software
systems.
Silicon Graphics, Inc.* 40,000 1,235,000
Produces computer systems used for the
design analysis and simulation of three
dimensional objects.
-----------
$ 4,096,250
-----------
CONSUMER PRODUCTS - 2.2%
Sunbeam Oster, Inc. 55,000 $ 1,416,250
Manufacturer of outdoor, household, and -----------
specialty consumer products under Sunbeam
and Oster brand names.
ELECTRONICS & INSTRUMENTATION - 7.3%
Cisco Systems, Inc.* 35,000 $ 1,229,375
Manufacturer of routers that connect
computer networks.
Dallas Semiconductor Corp.* 110,000 1,828,750
Specialty semiconductor supplier focusing on
CMOS integrated circuits.
Linear Technology Corp. 15,000 742,500
Manufacturer of high performance linear
integrated circuits.
Xilinx Inc.* 15,000 888,750
Leading world-wide supplier of CMOS
programmable logic semiconductors.
-----------
$ 4,689,375
-----------
<PAGE>
COMMON STOCKS - (Continued)
- --------------------------------------------------------------------------------
NAME OF COMPANY SHARES VALUE
- --------------------------------------------------------------------------------
ENTERTAINMENT - 2.5%
Carnival Corp. 60,000 $ 1,275,000
World's largest cruise ship company
operating primarily as Carnival and
Holland America cruise lines.
Gaylord Entertainment 16,000 364,000
Diversified cable entertainment/broadcasting
company focused in the country music
industry.
-----------
$ 1,639,000
-----------
ENVIRONMENTAL SERVICES - 0.4%
United Waste Systems, Inc.* 10,000 $ 250,000
Integrated provider of solid waste -----------
management services to residential,
commercial and industrial customers.
FINANCE - 7.5%
Federal National Mortgage Association 30,000 $ 2,186,250
Leading factor in the secondary mortgage
market.
Franklin Resources, Inc. 45,000 1,603,125
One of the largest mutual fund organizations
in the U.S.
T. Rowe Price Associates, Inc. 35,000 1,050,000
Investment adviser to mutual funds,
institutions and individuals.
-----------
$ 4,839,375
-----------
HEALTHCARE - 11.9%
Boston Scientific Corp.* 134,000 $ 2,328,250
Medical device manufacturer focusing
primarily on disposable products in less
invasive surgery procedures.
Genesis Health Ventures, Inc.* 35,000 1,106,875
Provider of geriatric health services.
Horizon Healthcare Corp.* 25,000 700,000
Manager of long-term care and specialty healthcare facilities focusing on
geriatric care.
Mylan Laboratories, Inc. 75,000 2,025,000
Leading manufacturer of generic drugs.
U.S. Healthcare, Inc. 15,000 618,750
Operates health management organization
serving over 1.5 million members.
Ventritex Inc.* 25,500 688,500
Developer of new generation implantable
heart defibrillator.
Vitalink Pharmacy Services, Inc.* 12,500 178,125
Provider of pharmacy services to nursing
homes and sub-acute care medical
facilities.
-----------
$ 7,645,500
-----------
<PAGE>
PORTFOLIO OF INVESTMENTS (Continued)
COMMON STOCKS - (Continued)
- --------------------------------------------------------------------------------
NAME OF COMPANY SHARES VALUE
- --------------------------------------------------------------------------------
INDUSTRIAL PRODUCTS - 9.8%
J & L Specialty Steel, Inc. 40,000 $ 785,000
Manufacturer of stainless steel.
Loctite Corp. 34,400 1,599,600
International manufacturer of adhesives, sealants and related products.
Union Switch & Signal, Inc.* 45,000 613,125
Manufacturer of advanced signaling, control
and automatic systems for railroads and
transit authorities.
Wabash National Corp. 85,000 3,315,000
Manufacturer of specialy truck trailers
benefiting from innovative new products.
-----------
$ 6,312,725
-----------
INSURANCE - 7.1%
American International Group 10,000 $ 980,000
One of the world's leading insurance
companies, operating in 130 countries.
HCC Insurance Holdings, Inc.* 47,700 1,001,700
Specialty insurer focusing on complex
international markets.
Mutual Risk Management Ltd. 55,000 1,443,750
Specialty insurer focusing on workmen's
compensation.
UNUM Corp. 30,000 1,132,500
Leading provider of long-term disability
insurance.
-----------
$ 4,557,950
-----------
PUBLISHING -1.2%
Scholastic Corp.* 15,000 $ 765,000
Publisher/distributor of children's books, -----------
magazines and related educational
materials.
RESTAURANTS - 5.5%
Bertucci's Holding Corp.* 95,000 $ 1,045,000
Rapidly growing operator of Italian style
restaurants featuring wood burning brick
ovens.
Brinker International, Inc.* 70,000 1,268,750
Operator of Chili's, Grady's and other
dinnerhouse restaurants growing through
new unit expansion.
Buffets Inc.* 100,000 987,500
Chain of value-oriented Old Country Buffet
restaurants growing through new unit
expansion.
Quality Dining, Inc.* 16,900 209,138
Midwestern U.S. franchise operator of Burger
King and Chili's restaurants.
-----------
$ 3,510,388
-----------
<PAGE>
COMMON STOCKS - (Continued)
- --------------------------------------------------------------------------------
NAME OF COMPANY SHARES VALUE
- --------------------------------------------------------------------------------
RETAILING - 9.3%
Ann Taylor Stores Corp.* 20,000 $ 687,500
Specialty retailer of better quality women's
apparel, shoes and accessories.
Consolidated Stores Corp.* 95,000 1,769,375
Chain of close-out merchandise stores
operating primarily under the Odd/Big Lots
name.
Gap (The) Inc. 25,000 762,500
Specialty apparel retailer offering high-
quality, modestly priced private-label
sportswear under six brand names.
Home Depot Inc. 35,000 1,610,000
Operator of a chain of retail warehouse-type
stores selling building supply and home
improvement products.
Michaels Stores Inc.* 30,000 1,042,500
Leading arts and crafts retailer in the U.S.
Sports Authority (The)* 6,600 138,600
Largest operator of large-format sporting
goods stores in the United States.
-----------
$ 6,010,475
-----------
SPECIALTY CHEMICALS - 2.9%
Great Lakes Chemical Corp. 20,000 $ 1,140,000
Leading producer of flame retardant and
specialty intermediate chemicals.
Millipore Corp. 15,000 725,625
Manufacturer of membrane technology products
used for chemical analysis and
purification.
-----------
$ 1,865,625
-----------
TRANSPORTATION - 3.6%
Greenbrier Companies,Inc. 45,500 $ 750,750
Leading manufacturer of intermodal railcars
used to transport container freight.
M.S. Carriers, Inc.* 40,000 870,000
Irregular route truckload carrier.
Werner Enterprises, Inc. 30,000 708,750
Nationwide truckload transportation carrier.
-----------
$ 2,329,500
-----------
TOTAL COMMON STOCKS
IDENTIFIED COST, $49,823,351) $60,104,505
-----------
<PAGE>
PORTFOLIO OF INVESTMENTS (Continued)
- --------------------------------------------------------------------------------
PREFERRED STOCK - 0.1%
- --------------------------------------------------------------------------------
NAME OF COMPANY SHARES VALUE
- --------------------------------------------------------------------------------
Concentric Data Systems, Inc.
1983 Class B Pfd.+
Software company providing data management
programs for microcomputers. 43,750 $ 87,500
------------
TOTAL PREFERRED STOCK
(IDENTIFIED COST, $175,000) $ 87,500
------------
- --------------------------------------------------------------------------------
SHORT-TERM OBLIGATIONS - 6.9%
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
(000
OMITTED)
- --------------------------------------------------------------------------------
CXC Inc., 5.95s, 1/3/95 $2,958 $ 2,956,842
General Electric Capital Corp., 5.82s, 1/9/95 1,485 1,483,080
-----------
TOTAL SHORT-TERM OBLIGATIONS, AT
AMORTIZED COST $ 4,439,922
-----------
TOTAL INVESTMENTS (IDENTIFIED COST,
$54,438,273) $64,631,927
OTHER ASSETS, LESS LIABILITIES - (0.3%) $ (189,555)
-----------
TOTAL NET ASSETS - 100% $64,442,372
===========
*Non-income producing security.
+Not readily marketable security.
The accompanying notes are an integral part of the financial statements
<PAGE>
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
December 31, 1994
- --------------------------------------------------------------------------------
ASSETS:
Investments, at value (Note 1A) (identified cost,
$54,438,273) $64,631,927
Cash 1,875
Dividends receivable 28,262
Deferred organization expenses (Note 1D) 14,476
-----------
Total assets $64,676,540
LIABILITIES:
Payable for investments purchased $229,889
Custodian fee payable 1,929
Accrued expenses 2,350
--------
Total liabilities 234,168
-----------
NET ASSETS applicable to investors' interest
in Portfolio $64,442,372
===========
SOURCES OF NET ASSETS:
Net proceeds from capital contributions and withdrawals $54,248,718
Unrealized appreciation of investments (identified
cost) 10,193,654
-----------
Total net assets $64,442,372
===========
The accompanying notes are an integral part of the financial statements
<PAGE>
FINANCIAL STATEMENTS (Continued)
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
For the period from the start of business,
August 1, 1994, to December 31, 1994
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividend income $ 130,332
Interest income 133,617
----------
Total income 263,949
Expenses --
Investment adviser fee (Note 3) $ 175,012
Custodian fee (Note 3) 20,710
Legal and accounting 8,231
Registration fees 2,642
Amortization of organization expenses (Note 1D) 1,196
Printing 173
Miscellaneous 348
----------
Total expenses 208,312
----------
Net investment income 55,637
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized loss on investments (identified cost
basis) $ (986,284)
Change in unrealized appreciation on investments 4,288,639
----------
Net realized and unrealized gain on
investments 3,302,355
----------
Net increase in net assets resulting from operations $3,357,992
==========
The accompanying notes are an integral part of the financial statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
For the period from the start of business,
August 1, 1994, to December 31, 1994
- --------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
From operations --
Net investment income $ 55,637
Net realized loss on investment transactions (986,284)
Increase in unrealized appreciation of investments 4,288,639
------------
Net increase in net assets from operations $ 3,357,992
------------
Capital transactions--
Contributions $104,495,403
Withdrawals (43,411,023)
------------
Increase in net assets resulting from capital transactions $ 61,084,380
------------
Total increase in net assets $ 64,442,372
NET ASSETS:
At beginning of period --
------------
At end of period $ 64,442,372
============
- --------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
RATIOS (As a percentage of average net assets):
Expenses 0.74%+
Net investment income 0.20%+
PORTFOLIO TURNOVER 19%
+Computed on an annualized basis.
The accompanying notes are an integral part of the financial statements
<PAGE>
(1) SIGNIFICANT ACCOUNTING POLICIES
Special Investment Portfolio (the Portfolio) is registered under the Investment
Company Act of 1940 as a diversified open-end investment company which was
organized as a trust under the laws of the State of New York on May 1, 1992. The
Declaration of Trust permits the Trustees to issue beneficial interests in the
Portfolio. Investment operations began on August 1, 1994, with the acquisition
of net assets of $69,001,817 in exchange for an interest in the Portfolio by one
of the Portfolio's investors. The following is a summary of significant
accounting policies of the Portfolio. The policies are in conformity with
generally accepted accounting principles.
A. SECURITY VALUATIONS -- Investments in securities traded on a national
securities exchange or in the NASDAQ National Market are valued on the basis of
the last reported sales prices on the last business day of the period. If no
sale is reported on that date, a security is valued, if quoted on such a day, at
not lower than the old bid price nor higher than the asked prices. Prices on
such exchanges will not be used for valuing debt securities if in the Trustees
judgment, some other valuation method more accurately reflects the fair market
value of such a security. Securities for which over-the-counter market
quotations are readily available are valued on the basis of the mean between the
last bid and asked prices. Short-term securities are valued at cost, which
approximates market value. All other securities and assets are appraised to
reflect their fair value as determined in good faith by the Trustees.
B. INCOME TAXES -- The Portfolio is treated as a partnership for federal tax
purposes. No provision is made by the Portfolio for federal or state taxes on
any taxable income of the Portfolio because each investor in the Portfolio is
ultimately responsible for the payment of any taxes. Since some of the
Portfolio's investors are regulated investment companies that invest all or
substantially all of their assets in the Portfolio, the Portfolio normally must
satisfy the applicable source of income and diversification requirements (under
the Code) in order for its investors to satisfy them. The Portfolio will
allocate at least annually among its investors each investors' distributive
share of the Portfolio's net investment income, net realized capital gains, and
any other items of income, gain, loss, deduction or credit.
C. OTHER -- Investment transactions are accounted for on the date the
investments are purchased or sold. Dividend income is recorded on the ex-
dividend date. Realized gains and losses on the sale of investments are
determined on the identified cost basis.
D. DEFERRED ORGANIZATION EXPENSES -- Costs incurred by the Portfolio in
connection with its organization are being amortized on the straight-line basis
over five years.
- --------------------------------------------------------------------------------
(2) INVESTMENT TRANSACTIONS
Purchases and sales of investments, other than short-term obligations,
aggregrated $11,947,002 and $14,500,376, respectively.
- --------------------------------------------------------------------------------
(3) INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES The investment
adviser fee is earned by Boston Management and Research (BMR), a wholly-owned
subsidiary of Eaton Vance Management (EVM), as compensation for management and
investment advisory services rendered to the Portfolio. The fee is at the annual
rate of 5/8 of 1% of average daily net assets. For the period from the start of
business, August 1, 1994 to December 31, 1994, the fee amounted to $175,012.
Except as to Trustees of the Portfolio who are not members of EVM's or BMR's
organization, officers and Trustees receive remuneration for their services to
the Portfolio out of such investment adviser fee. Investors Bank & Trust Company
(IBT), an affiliate of EVM and BMR, serves as custodian of the Portfolio.
Pursuant to the custodian agreement, IBT receives a fee reduced by credits which
are determined based on the average daily cash balances the Portfolio maintains
with IBT. Certain of the officers and Trustees of the Portfolio are officers and
directors/trustees of the above organizations.
- --------------------------------------------------------------------------------
(4) LINE OF CREDIT
The Portfolio participates with other portfolios and funds managed by BMR and
EVM and its affiliates in a $120 million unsecured line of credit agreement with
a bank. The line of credit consists of $20 million committed facility and a $100
million discretionary facility. Borrowings will be made by the Portfolio solely
to facilitate the handling of unusual and/or unanticipated short-term cash
requirements. Interest is charged to each portfolio based on its borrowings at
an amount above either the bank's adjusted certificate of deposit rate, a
variable adjusted certificate of deposit rate, or a federal funds effective
rate. In addition, a fee computed at an annual rate of 1/4 of 1% on the $20
million committed facility and on the daily unused portion of the $100 million
discretionary facility is allocated among the participating funds and portfolios
at the end of each quarter. The Portfolio did not have any significant
borrowings or allocated fees during the period. At December 31, 1994, the Fund
did not have an outstanding balance pursuant to the line of credit.
- --------------------------------------------------------------------------------
(5) FEDERAL INCOME TAX BASIS OF INVESTMENTS
The cost and unrealized appreciation/depreciation in value of the investments
owned at December 31, 1994, as computed on a federal income tax basis, are as
follows:
Aggregate cost $54,436,173
===========
Gross unrealized appreciation $12,351,693
Gross unrealized depreciation 2,158,039
-----------
Net unrealized appreciation $10,193,654
===========
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Trustees and Investors of
Special Investment Portfolio:
We have audited the accompanying statement of assets and liabilities of Special
Investment Portfolio, including the portfolio of investments, as of December 31,
1994, the related statement of operations, changes in net assets and
supplementary data for the period from August 1, 1994 (start of business) to
December 31, 1994. These financial statements and supplementary data are the
responsibility of the Portfolio's management. Our responsibility is to express
an opinion on these financial statements and supplementary data based on our
audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and supplementary data are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of December 31, 1994 by
correspondence with the custodian and brokers. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and supplementary data referred to
above present fairly, in all material respects, the financial position of
Special Investment Portfolio as of December 31, 1994, the results of its
operations, changes in its net assets and supplementary data for the period from
August 1, 1994 (start of business) to December 31, 1994, in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
February 3, 1995
<PAGE>
INVESTMENT ADVISER OF
SPECIAL INVESTMENT PORTFOLIO
Boston Management and Research
24 Federal Street
Boston, MA 02110
ADMINISTRATOR OF
EV MARATHON SPECIAL EQUITIES FUND
Eaton Vance Management
24 Federal Street
Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc.
24 Federal Street
Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company
24 Federal Street
Boston, MA 02110
TRANSFER AGENT
The Shareholder Services Group, Inc.
BOS725
P.O. Box 1559
Boston, MA 02104
(800) 262-1122
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, MA 02109
EV MARATHON SPECIAL EQUITIES FUND
24 FEDERAL STREET
BOSTON, MA 02110
M-SESAI
[Logo]
EV MARATHON
SPECIAL EQUITIES
FUND
STATEMENT OF ADDITIONAL INFORMATION
APRIL 1, 1995
