<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 15, 1997
1933 ACT FILE NO. 2-27962
1940 ACT FILE NO. 811-1545
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER
SECURITIES ACT OF 1933 [X]
POST-EFFECTIVE AMENDMENT NO. 49 [X]
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 36 [X]
EATON VANCE SPECIAL INVESTMENT TRUST
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
24 FEDERAL STREET, BOSTON, MASSACHUSETTS 02110
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
617-482-8260
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(REGISTRANT'S TELEPHONE NUMBER)
ALAN R. DYNNER
24 FEDERAL STREET, BOSTON, MASSACHUSETTS 02110
----------------------------------------------
(NAME AND ADDRESS OF AGENT FOR SERVICE)
It is proposed that this filing will become effective pursuant to Rule 485
(check appropriate box):
[ ] immediately upon filing pursuant to [ ] on (date) pursuant to
paragraph (b) paragraph (a)(1)
[X] on December 23, 1997 pursuant to [ ] 75 days after filing pursuant to
paragraph (b) paragraph (a)(2)
[ ] 60 days after filing pursuant to [ ] on (date) pursuant to
paragraph (a)(1) paragraph (a)(2).
If appropriate, check the following box:
[ ] this post effective amendment designates a new effective date for a
previously filed post-effective amendment.
TITLE OF SECURITIES BEING REGISTERED: Shares of Beneficial Interest
Russia and Eastern Europe Portfolio has also executed this Registration
Statement.
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<PAGE>
This Amendment to the registration statement on Form N-1A consists of the
following documents and papers:
Cross Reference Sheets required by Rule 481(a) under the Securities Act
of 1933
Part A--The Prospectus of:
Eaton Vance Russia and Eastern Europe Fund
Part B--The Statement of Additional Information of:
Eaton Vance Russia and Eastern Europe Fund
Part C--Other Information
Signatures
Exhibit Index Required by Rule 483(a) under the Securities Act of 1933
Exhibits
This Amendment is not intended to amend the Prospectus and Statement of
Additional Information of any series of the Registrant not identified above.
<PAGE>
EATON VANCE SPECIAL INVESTMENT TRUST
CROSS REFERENCE SHEET FOR
EATON VANCE RUSSIA AND EASTERN EUROPE FUND
ITEMS REQUIRED BY FORM N-1A
---------------------------
<TABLE>
<CAPTION>
PART A
ITEM NO. ITEM CAPTION PROSPECTUS CAPTION
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<S> <C> <C>
1. .............. Cover Page Cover Page
2. .............. Synopsis Shareholder and Fund Expenses
3. .............. Condensed Financial Information Performance Information
4. .............. General Description of Registrant The Fund's Investment Objective; Investment Policies
and Risks; Russia and the Eastern European Region;
Organization of the Fund and the Portfolio
5. .............. Management of the Fund Management of the Fund and the Portfolio
5A............... Management's Discussion of Fund Not Applicable
Performance
6. .............. Capital Stock and Other Securities Organization of the Fund and the Portfolio; Reports to
Shareholders; The Lifetime Investing Account/
Distribution Options; Distributions and Taxes
7. .............. Purchase of Securities Being Offered Valuing Shares; How to Buy Shares; Distribution Plans;
The Lifetime Investing Account/Distribution Options;
The Eaton Vance Exchange Privilege; Eaton Vance
Shareholder Services
8. .............. Redemption or Repurchase How to Redeem Shares
9. .............. Pending Legal Proceedings Not Applicable
<CAPTION>
PART B
ITEM NO. ITEM CAPTION STATEMENT OF ADDITIONAL INFORMATION CAPTION
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<S> <C> <C>
10. .............. Cover Page Cover Page
11. .............. Table of Contents Table of Contents
12. .............. General Information and History Other Information
13. .............. Investment Objective and Policies Additional Information about Investment Policies;
Investment Restrictions
14. .............. Management of the Fund Trustees and Officers
15. .............. Control Persons and Principal Holders Control Persons and Principal Holders of Securities
of Securities
16. .............. Investment Advisory and Other Management of the Fund and the Portfolio; Distribution
Services Plans; Custodian; Independent Certified Public
Accountants; Other Information
17. .............. Brokerage Allocation and Other Portfolio Security Transactions
Practices
18. .............. Capital Stock and Other Securities Other Information
19. .............. Purchase, Redemption and Pricing of Determination of Net Asset Value; Principal
Securities Being Offered Underwriter; Services for Accumulation -- Class A
Shares; Service for Withdrawal; Distribution Plans
20. .............. Tax Status Taxes
21. .............. Underwriters Principal Underwriter
22. .............. Calculation of Performance Data Investment Performance
23. .............. Financial Statements Financial Statements
</TABLE>
<PAGE>
PART A
INFORMATION REQUIRED IN A PROSPECTUS
EATON VANCE RUSSIA AND EASTERN EUROPE FUND
EATON VANCE RUSSIA AND EASTERN EUROPE FUND (THE "FUND") IS A MUTUAL FUND SEEKING
LONG-TERM CAPITAL GROWTH THROUGH INVESTMENT IN EQUITY SECURITIES OF COMPANIES
OPERATING IN RUSSIA OR EASTERN EUROPE. THE FUND INVESTS ITS ASSETS IN THE RUSSIA
AND EASTERN EUROPE 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. SUCH
INVESTMENTS CAN INVOLVE SIGNIFICANT RISKS THAT ARE NOT NORMALLY INVOLVED IN
INVESTMENT IN U.S. COMPANIES, AND THEREFORE THE FUND MAY NOT BE SUITABLE FOR ALL
INVESTORS. THE FUND IS A SEPARATE 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 for the Fund, dated January ____, 1998, as
supplemented from time to time, has been filed with the Securities and Exchange
Commission (the "Commission") and is incorporated herein by reference. The
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 sponsor and manager of the Fund and the administrator of the Portfolio is
Eaton Vance Management, 24 Federal Street, Boston, MA 02110 (the "Manager"). The
Portfolio's investment adviser is Lloyd George Investment Management (Bermuda)
Limited (the "Adviser"), 25 Grosvenor Street, London, W1X 9FE, England.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES 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 PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
PAGE PAGE
Shareholder and Fund Expenses ........... How to Buy Shares ..................
Russia and the Eastern How to Redeem Shares ...............
European Region ....................... Reports to Shareholders ............
The Fund's Investment Objective ......... The Lifetime Investing Account/
Investment Policies and Risks ........... Distribution Options .............
Organization of the Fund and The Eaton Vance Exchange
the Portfolio ......................... Privilege ........................
Management of the Fund and Eaton Vance Shareholder Services ...
the Portfolio ......................... Distribution and Taxes .............
Distribution Plans ...................... Performance Information ............
Valuing Shares .........................
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PROSPECTUS DATED JANUARY ____, 1998
<PAGE>
SHAREHOLDER AND FUND EXPENSES
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SHAREHOLDER TRANSACTION EXPENSES
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CLASS A CLASS B
SHARES SHARES
------ ------
Maximum Sales Charge Imposed on Purchases 5.75% None
(as a percentage of offering price)
Sales Charges Imposed on Reinvested Distributions None None
Fees to Exchange Shares None None
Maximum Contingent Deferred Sales Charge None 5.00%
ANNUAL FUND AND ALLOCATED PORTFOLIO EXPENSES (as a percentage of average
daily net assets)
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CLASS A CLASS B
SHARES SHARES
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Management Fees 1.25% 1.25%
Rule 12b-1 Distribution and/or Service Fees 0.50% 0.75%
Other Expenses 1.25% 1.25%
Total Operating Expenses 3.00% 3.25%
===== =====
EXAMPLES
An investor would pay the following expenses and, in the case of Class A
shares, maximum initial sales charge or, in the case of Class B shares,
contingent deferred sales charge on a $1,000 investment, assuming (a) 5%
annual return and (b) redemption at the end of each period:
CLASS A CLASS B
SHARES SHARES
------ ------
1 Year $ 86 $ 83
3 Years $ 145 $ 140
An investors would pay the following expenses on the same investment,
assuming (a) 5% annual return and (b) no redemptions:
CLASS A CLASS B
SHARES SHARES
------ ------
1 Year $ 86 $ 33
3 Years $ 145 $ 100
NOTES:
The table and Examples summarize the aggregate expenses of the Portfolio and
each Class of shares of the Fund and are designed to help investors understand
the costs and expenses they will bear, directly or indirectly, by investing in
the Fund. Information for each Class is based on its estimated expenses for the
current fiscal year because the Fund has only recently been organized.
Management Fees include management fees paid by the Fund and investment advisory
and administration fees paid by the Portfolio of 0.25%, 0.75% and 0.25%,
respectively.
-2-
<PAGE>
The Fund offers two classes of shares. Class A shares are sold subject to a
sales charge imposed at the time of purchase. No sales charge is payable at the
time of purchase on investments in Class A shares of $1 million or more.
However, a contingent deferred sales charge ("CDSC") of 1% will be imposed on
such investments in the event of certain redemptions within 12 months of
purchase. Class B shares are sold subject to a declining CDSC (5% maximum) if
redeemed within six years of purchase. The CDSC does not apply in certain
circumstances. See "How to Buy Shares" and "How to Redeem Shares".
THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. Federal
regulations require the Examples to assume a 5% annual return, but actual return
will vary. Long-term holders of Class B shares 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. For further information
regarding the expenses of both the Fund and the Portfolio see "Management of the
Fund and the Portfolio", "Distribution Plans" and "How to Redeem Shares".
For Class B shares sold by Authorized Firms and remaining outstanding for at
least one year, the Fund will pay service fees not exceeding .25% per annum of
its average daily net assets. The Fund expects to begin making service fee
payments during the quarter ending June, 1999. Therefore, expenses after year
one will be higher. See "Distribution and Service Plans".
The Fund invests exclusively in the Portfolio. Other investment companies and
investors with different distribution arrangement 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".
-3-
<PAGE>
RUSSIA AND THE EASTERN EUROPEAN ("REE") REGION
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THE FOLLOWING IS A GENERAL DISCUSSION OF CERTAIN FEATURES OF THE ECONOMIES AND
SECURITIES MARKETS IN WHICH THE PORTFOLIO MAY INVEST. There can be no assurance
that the Portfolio will be able to capitalize on the factors described herein.
Opinions expressed herein are the good faith opinions of the Portfolio's
investment adviser, Lloyd George Investment Management (Bermuda) Limited (the
"Adviser"). Unless otherwise indicated, all amounts are expressed in United
States dollars.
The collapse in the late 1980s of the centrally planned economies in REE Region
Countries and the rise of market driven economies in their place, together with
the rebirth of securities markets in the Czech Republic, Hungary, Poland and in
the Russian Federation, provide a new and potentially favorable environment for
investment in the REE Region. The Adviser believes that the conditions in REE
Region Countries are conducive to strong economic growth, offering the potential
for long-term capital appreciation from investment in equity securities of REE
Region companies. These conditions include: an improving economic outlook and a
growing demand for consumer goods and services, relatively low wage rates and a
well-educated workforce, the privatization of many state-owned enterprises, an
increasing degree of political stability, the adoption of policies generally
favorable to foreign investment, the development of the REE Region countries'
international and trade relations, particularly with Western European markets
and in the case of certain countries, abundant natural resources. The REE Region
is strategically located between Western Europe, which can provide capital and
technology, and Asia, which has a large and growing consumer population. As such
the REE may become a major trading region between Western Europe and Asia. The
Adviser believes that there now exists a significant opportunity to participate
in investments in the REE Region which can take advantage of its economic
revitalization.
Russia is the dominant country in the REE Region. At the beginning of the 20th
century, the Russian Empire, ruled by the Romanov dynasty, extended throughout
Eastern Europe and much of Asia. After abdication of the Czar in 1917, the
county came under rule of a communist dictatorship. Economic decisions were
centralized and trading outside Warsaw Pact countries was limited. Beginning in
the 1980s, political and economic reforms designed to create a market orientated
economy were begun. At the same time, various territories of the former Soviet
Union, such as the Ukraine, declared their sovereignty. Today, the size of the
Russian Federation is about 6.6 million square miles. By the end of 1997, Russia
appeared to offer a particularly attractive climate for investment. Inflation
appeared stable and no higher than 15%; interest rates were continuing to fall;
exchange rates had stabilized; consumer good shortages had disappeared;
employment among younger workers was strong and growing; economic growth had
become positive; and property and other laws were becoming more refined.
These trends are evident elsewhere in the REE Region as well. The Czech
Republic, Poland and Hungary each came under the influence of the Soviet Union
after World War II. In the 1990s, political autonomy was achieved and
privatization programs have been implemented. The Prague, Warsaw and Budapest
Stock Exchanges have been reopened. Legal structures and free trade policies
have been adopted to promote free enterprise.
-4-
<PAGE>
The Adviser expects that initially it will consider making investments for the
Portfolio in the following countries:
Bulgaria Croatia Czech Republic
Estonia Hungary Latvia
Lithuania Poland Romania
Russia Slovakia Slovenia
Turkey Ukraine
("Russia" refers to the Russian Federation, which does not include other
countries that formerly comprised the Soviet Union.)
[map of REE Region to be included here]
THE FUND'S INVESTMENT OBJECTIVE
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THE FUND'S INVESTMENT OBJECTIVE IS LONG-TERM CAPITAL GROWTH. It currently seeks
to meet its investment objective by investing its assets in the Russia and
Eastern Europe Portfolio (the "Portfolio"), a separate registered investment
company that invests primarily in equity securities of companies operating in
Russia or Eastern Europe (the "REE Region").
Investments in the REE Region can involve significant risks that are generally
not involved with investments in U.S. companies. The Fund is intended for
long-term investors who can accept international investment risk, little or no
current income, and volatility in the value of their investment. The Fund is not
intended to be a complete investment program. Prospective investors should take
into account their personal objectives and other investments when considering
the purchase of Fund shares. The Fund cannot assure achievement of its
investment objective. The investment objective of the Fund and the Portfolio are
nonfundamental and may be changed when authorized by a vote of the Trustees of
the Trust or the Portfolio without obtaining the approval of the Fund's
shareholders or the investors in the Portfolio, as the case may be. Investments
in Russia and Eastern Europe can be considered speculative, and, therefore, may
offer higher potential for gains and losses than investments in the developed
markets of the world. See "Investment Policies and Risks" for further
information.
INVESTMENT POLICIES AND RISKS
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THE PORTFOLIO SEEKS TO ACHIEVE ITS OBJECTIVE THROUGH INVESTING IN A CAREFULLY
SELECTED AND CONTINUOUSLY MANAGED PORTFOLIO CONSISTING PRIMARILY OF EQUITY
SECURITIES OF COMPANIES OPERATING IN THE REE REGION. The Portfolio will, under
normal market conditions, invest at least 80% of its total assets in equity
securities of REE Region companies. Substantially all of the Portfolio's assets,
however, will normally be invested in equity securities, warrants and options on
equity securities and indices. As used in this Prospectus, a company is
operating in the REE Region if it (a) is organized under the laws of, or
maintains its principal place of business in, a REE country, (b) has its
securities traded primarily in a REE country or (c) derives at least 50% of its
gross sales revenues or profits from goods produced or sold, investments made,
or services performed in the REE Region, or that has at least 50% of its assets
located in the REE Region. REE Region investments are typically listed on stock
exchanges or traded in an over-the-counter market.
The Portfolio will invest no more than 50% of its assets in the securities of
issuers located in any one country other than Russia. The Portfolio initially is
likely to concentrate investments in Russia, the Czech Republic, Hungary and
Poland.
-5-
<PAGE>
Equity securities, for purposes of the 80% policy, will be limited to common and
preferred stocks; equity interest in trusts, partnerships, joint ventures and
other unincorporated entities or enterprises; special classes of shares
available only to foreign investors in markets that restrict ownership by
foreign investors to certain classes of equity securities; American, Global and
other Depository Receipts; convertible preferred stocks; and other convertible
instruments. With respect to 20% of its net assets, the Portfolio may invest in
equity securities of issuers outside the REE Region which are anticipated to
benefit from the economic development of the REE Region. In addition, the
Portfolio may invest up to 15% of its total assets in debt obligations of
governmental and private issuers in the REE Region which, in the opinion of the
Adviser, have the potential for long-term capital appreciation based on such
factors as relative interest rate levels and foreign exchange rates.
The Portfolio anticipates that any debt investments made by the Portfolio
initially will consist of debt securities issued or guaranteed by REE Region
governments or governmental entities. The Portfolio may also invest in debt
securities acquired in conjunction with an equity investment by the Portfolio in
a related issuer. Warrants may not exceed 5% of the Portfolio's net assets. The
convertible instruments and debt securities in which the Portfolio will invest
will generally not be rated, but will typically be equivalent in credit quality
to securities rated below investment grade (I.E., credit quality equivalent to
lower than Baa by Moody's Investors Service, Inc. ("Moody's") or lower than BBB
by Standard & Poor's Ratings Group ("S&P")). Debt securities that are not
investment grade are commonly called "junk bonds" and have risks similar to
equity securities; they have speculative characteristics and changes in economic
conditions or other circumstances are more likely to lead to a weakened capacity
to make principal and interest payments than is the case with higher grade debt
securities. Below investment grade debt securities, which may include those of
the lowest credit quality and are in default, will not exceed 20% of total
assets.
For temporary defensive purposes, such as abnormal market or economic
conditions, the Portfolio may invest without limit in high grade debt securities
of foreign and United States companies, foreign governments and the U.S.
Government, and their respective agencies, instrumentalities, political
subdivisions and authorities, as well as in high quality money market
instruments. The Portfolio may borrow to satisfy redemption requests or settle
securities transactions.
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 are subject
to the risk of adverse developments affecting particular companies or industries
and securities markets generally. In addition, the REE Region poses numerous
special risks.
INVESTING IN FOREIGN SECURITIES. Investing in securities issued by foreign
companies and governments involves considerations and possible risks not
typically associated with investing in securities issued by the U.S. Government
and domestic corporations. The values of foreign investments are affected by
changes in exchange control regulations, application of foreign tax laws,
including withholding tax changes in governmental administration or economic or
monetary policy (in this country or abroad) or changed circumstances in dealings
between nations. Because investment in REE Region issuers will usually involve
currencies of foreign countries, the value of the assets of the Portfolio as
measured in U.S. dollars may be adversely affected by changes in foreign
-6-
<PAGE>
currency exchange rates. Such rates may fluctuate significantly over short
periods of time causing the Portfolio's net asset value to fluctuate as well.
Costs are incurred in connection with conversions between various currencies. In
addition, foreign brokerage commissions, custody fees and other costs of
investing are generally higher than in the United States, and foreign securities
markets may be less liquid, more volatile and less subject to governmental
supervision than in the United States. Investments in foreign issuers could be
adversely affected by other factors not present in the United States, including
expropriation, confiscatory taxation, lack of uniform accounting and auditing
standards, less publicly available financial and other information, armed
conflict, and potential difficulties in enforcing contractual obligations.
Transactions in the securities of foreign issuers could be subject to settlement
delays and risk of loss.
More than 25% of the Portfolio's total assets, adjusted to reflect currency
transactions and positions, may be denominated in any single currency.
Concentration in a particular currency will increase the Portfolio's exposure to
adverse developments affecting the value of such currency, including
governmental devaluation. An issuer of securities purchased by the Portfolio may
be domiciled in a country other than the country in whose currency the
securities are denominated.
The Portfolio's investment performance will be especially affected by events
affecting companies in the REE Region. The value and liquidity of REE Region
investments may be affected favorably or unfavorably by political, economic,
fiscal, regulatory or other developments in it or neighboring regions. Economic
conditions, political stability and market depth in the region are comparatively
underdeveloped. REE Region investments typically involve greater potential for
gain or loss than investments in securities of issuers in developed countries.
Given the Portfolio's investments, the Portfolio will likely be particularly
sensitive to changes in the economies of such countries as a result of any
reversals of economic liberalization in those countries, political unrest or
changes in trading status.
SECURITIES TRADING MARKETS. The securities markets in the REE Region are
substantially smaller, less liquid and more volatile than the major securities
markets in the United States. The stock markets have only recently been
reestablished after decades of communist rule. A high proportion of the shares
of many issuers may be held by a limited number of persons and financial
institutions, which may limit the number of shares available for investment by
the Portfolio. The prices at which the Portfolio may acquire investments may be
affected by trading by persons with material non-public information and by
securities transactions by brokers in anticipation of transactions by the
Portfolio in particular securities. The securities markets in the REE Region are
susceptible to being influenced by large investors trading significant blocks of
securities. Similarly, volume and liquidity in the bond markets in these
countries are less than in the United States and, at times, price volatility can
be greater than in the United States. Some exchanges are not open daily. The
limited liquidity of these securities markets may also affect the Portfolio's
ability to acquire or dispose of securities at the price and time it wishes to
do so. Precise valuation of securities may be problematic.
The stock markets in the REE Region are undergoing a period of growth and
change, which may result in trading or price volatility and difficulties in the
settlement and recording of transactions, and in interpreting and applying the
relevant law and regulations. The securities industries in these countries are
comparatively underdeveloped and less regulated, and stockbrokers and other
intermediaries, which often are lacking in experience, technology and capital,
may not perform as well as their counterparts in the United States and other
more developed securities markets. Investment in a country will be delayed until
-7-
<PAGE>
a custodian that is qualified under U.S. regulations has a contractual
relationship with the Portfolio. In many countries, no qualified custodian
currently exists. The securities registration systems are newly established and
not highly regulated. In some countries, such as Russia, there is no central
registration system and fraud, corruption or negligence may lead to losses.
Postal and banking systems generally are less reliable than in the United
States, which may result in lost dividends or other distributions. Amounts lost
through insolvency of a financial institution may not be guaranteed by a
sovereign.
Settlement of securities transactions may be delayed and is generally less
frequent than in the United States, which could affect the liquidity of the
Portfolio's assets. To mitigate these risks, the Portfolio may maintain a higher
cash position than it otherwise would, thereby possibly diluting its return, or
the Portfolio may have to sell liquid securities that it would not otherwise
choose to sell. In some cases, the Portfolio may find it necessary or desirable
to borrow funds on a short-term basis, within the limits of the Investment
Company Act of 1940 (the "1940 Act"), to help meet redemption requests. Such
borrowings would result in increased expense to the Fund. THE FUND MAY SUSPEND
REDEMPTION PRIVILEGES OR POSTPONE THE DATE OF PAYMENT FOR MORE THAN SEVEN DAYS
AFTER A REDEMPTION ORDER IS RECEIVED UNDER CERTAIN CIRCUMSTANCES.
INVESTMENT CONTROLS. Foreign investment in the securities of issuers in REE
Region countries is usually restricted or controlled to some degree. Investment
in REE Region countries may require the procurement of a substantial number of
regulatory consents, certificates and approvals, including licenses for the
Portfolio or Adviser to operate in a country, consents to making investments in
particular companies or types of industries, certificates from tax authorities,
licenses for a custodian, and consents required by local legislation. The
inability to obtain a particular license, consent or approval could adversely
impact the Fund's operations.
Participation in privatization by foreign investors in certain enterprises
(including enterprises whose defense orders exceed a certain percentage of
production, or which affect food supply, consumers services, construction, the
oil and gas sector, the extraction and processing of the ore of strategic
materials, precious and semi-precious stones and precious metals, radioactive
and rare elements, and transport and communication enterprises) may require the
consent of the government. Foreign investors may not participate in the
privatization of enterprises situated within certain closed territories.
There can be no assurance that these investment control regimes will not change
in a way that makes it more difficult or impossible for the Portfolio to
implement its investment objective or repatriate its income, gains and initial
capital from these countries.
REE REGION TAXES. The Fund and the Portfolio each intends to conduct its
respective affairs in such a manner that it will not be resident in the REE
Region for local tax purposes. The Portfolio's income from certain regional
sources will be subject to tax by REE countries, subject to tax treaties with
the United States. For example, the Income Tax Convention between the Russian
Federation and the United States reduces Russian withholding on dividends from
15% to 10% and on capital gains from 20% to 0. Russia also has securities
transfer taxes of up to 0.6%. Fund shareholders may be entitled to a deduction
or credit on foreign taxes paid by the Fund. New taxes, interpretations of
existing law or treaty changes could occur and be applied retroactively, which
may adversely affect the Fund.
-8-
<PAGE>
COUNTRY CONSIDERATIONS. Political and economic structures in the REE Region
generally lack the social, political and economic stability characteristic of
the United States. REE Region countries have had centrally planned socialist
economies for most of this century. Governmental actions can have a significant
effect on the economic conditions in such countries, which could adversely
affect the value and liquidity of the Portfolio's investments. ALTHOUGH THE
GOVERNMENTS OF THE REE REGION HAVE RECENTLY BEGUN TO INSTITUTE DEMOCRATIC AND
FREE MARKET REFORM POLICIES, THERE CAN BE NO ASSURANCE THAT THEY WILL CONTINUE
TO PURSUE SUCH POLICIES OR, IF THEY DO, THAT SUCH POLICIES WILL SUCCEED. SUCH
COUNTRIES HAVE IN THE PAST FAILED TO RECOGNIZE PRIVATE PROPERTY RIGHTS AND HAVE
NATIONALIZED OR EXPROPRIATED THE ASSETS OF PRIVATE COMPANIES, INCLUDING
SECURITIES.
The laws of countries in the REE Region relating to private property, limited
liability of corporate shareholders, fiduciary duties of officers and directors,
foreign investment, and the bankruptcy of state enterprises are new and
generally less developed than and different from such laws in the United States.
Uniform application of legal principles may not occur, and it may be difficult
to obtain and enforce a judgment in the courts of these countries. Legislative
developments are expected and may further complicate the administration of law.
In addition to the foregoing, investing in the REE Region involves certain other
considerations not typically associated with investment in developed capital
markets, including the possibility of ethnic or civil conflict, involvement by
the military in political decisions, attempted coup d'etates, social unrest due
to hyperinflation, employment dislocation or other strained economic conditions,
and corruption and crime in the securities industry. In many industries there is
a current lack of management personnel, technology or capital to compete in an
international economy. REE Region governments may be constrained in the level of
support they can provide private enterprise because of additional factors such
as the need to service foreign debt, curb environmental pollution and address
social ills.
REE Region countries are heavily dependent on international trade which can be
adversely affected by trade barriers, exchange rate changes and negotiated
protectionist measures. Stability of international financial assistance may also
be essential to a country's prospects.
UNLISTED SECURITIES. The Portfolio may invest up to 15% of its net assets in
securities of companies that are neither listed on a stock exchange nor traded
over the counter. Unlisted securities may include new and early stage companies,
which may involve a high degree of business and financial risk that can result
in substantial losses and may be considered speculative. Such securities will
generally be deemed to be illiquid. Because of the absence of any public trading
market for these investments, the Portfolio may take longer to liquidate these
positions than would be the case for publicly traded securities. Although these
securities may be resold in privately negotiated transactions, the prices
realized from these sales could be less than those originally paid by the
Portfolio or less than what may be considered the fair value of such securities.
Furthermore, issuers whose securities are not publicly traded may not be subject
to public disclosure and other investor protection requirements applicable to
publicly traded securities. If such securities are required to be registered
under the securities laws of one or more jurisdictions before being resold, the
Portfolio may be required to bear the expenses of registration. In addition, any
capital gains realized on the sale of such securities may be subject to higher
rates of taxation than taxes payable on the sale of listed securities.
-9-
<PAGE>
DERIVATIVE INSTRUMENTS. The Portfolio may purchase or sell derivative
instruments (which are instruments that derive their value from another
instrument, security, index or currency) to enhance return, to hedge against
fluctuations in securities prices, interest rates or currency exchange rates, or
as a substitute for the purchase or sale of securities or currencies. The
Portfolio's transactions in derivative instruments may be in the U.S. or abroad
and may include the purchase or sale of futures contracts on securities,
securities indices, other indices, other financial instruments or currencies;
options on futures contracts; exchange-traded and over-the-counter options on
securities, indices or currencies; currency swaps and forward foreign currency
exchange contracts. The Portfolio's transactions in derivative instruments
involve a risk of loss or depreciation due to unanticipated adverse changes in
securities prices, interest rates, the other financial instruments' prices or
currency exchange rates; the inability to close out a position; default by the
counterparty; imperfect correlation between a position and the desired hedge;
tax constraints on closing out positions; and portfolio management constraints
on securities subject to such transactions. The loss on derivative instruments
(other than purchased options) may substantially exceed the Portfolio's initial
investment in these instruments. In addition, the Portfolio may lose the entire
premium paid for purchased options that expire before they can be profitably
exercised by the Portfolio. The Portfolio incurs transaction costs in opening
and closing positions in derivative instruments. Under regulations of the
Commodity Futures Trading Commission, the use of futures transactions for
nonhedging purposes is limited. There can be no assurance that an Adviser's use
of derivative instruments will be advantageous to the Portfolio.
Forward foreign currency exchange contracts are individually negotiated and
privately traded by currency traders and their customers. A forward contract
involves an obligation to purchase or sell a specific currency (or basket of
currencies) for an agreed price at a future date, which may be any fixed number
of days from the date of the contract. The Portfolio may engage in cross-hedging
by using forward contracts in one currency (or basket of currencies) to hedge
against fluctuations in the value of securities denominated in a different
currency if an Adviser determines that there is an established historical
pattern or correlation between the two currencies (or the basket of currencies
and the underlying currency). Use of a different foreign currency magnifies the
Portfolio's exposure to foreign currency exchange rate fluctuations. The
Portfolio may also use forward contracts to shift its exposure to foreign
currency exchange rate changes from one currency to another.
CURRENCY SWAPS. The Portfolio may enter into currency swaps for both hedging and
non-hedging purposes. Currency swaps involve the exchange of rights to make or
receive payments in specified currencies. Since currency swaps are individually
negotiated, the Portfolio expects to achieve an acceptable degree of correlation
between its portfolio investments and its currency swap positions. Currency
swaps usually involve the delivery of the entire principal value of one
designated currency in exchange for the other designated currency. Therefore,
the entire principal value of a currency swap is subject to the risk that the
other party to the swap will default on its contractual delivery obligations.
The use of currency swaps is a highly specialized activity which involves
special investment techniques and risks. If the Adviser is incorrect in its
forecasts of market values and currency exchange rates, the Portfolio's
performance will be adversely affected.
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<PAGE>
LENDING OF PORTFOLIO SECURITIES. The Portfolio may seek to earn additional
income by lending portfolio securities to broker-dealers or other institutional
borrowers. As with other extensions of credit there are risks of delay in
recovery or even loss of rights in the securities loaned if the borrower of the
securities fails financially. However, the loans will be made only to
organizations deemed by an Adviser to be sufficiently creditworthy and when, in
the judgment of the Adviser, the consideration which can be earned from
securities loans of this type justifies the attendant risk.
REPURCHASE AGREEMENTS. The Portfolio may enter into repurchase agreements (the
purchase of a security coupled with an agreement to resell at a higher price)
with respect to its permitted investments, but currently intends to do so only
with member banks of the Federal Reserve System or with primary dealers in U.S.
Government securities. In the event of the bankruptcy of the other party to a
repurchase agreement, the Portfolio might experience delays in recovering its
cash. To the extent that, in the meantime, the value of the securities the
Portfolio purchased may have decreased, the Portfolio could experience a loss.
At no time will the Portfolio commit more than 15% of its net assets to
repurchase agreements which mature in more than seven days and other illiquid
securities. The Portfolio does not expect to invest more than 5% of its total
assets in repurchase agreements, under normal circumstances.
OTHER INVESTMENT COMPANIES. The Portfolio reserves the right to invest up to 10%
of its total assets in the securities of other investment companies unaffiliated
with an Adviser or the Manager that have the characteristics of closed-end
investment companies. The Portfolio will indirectly bear its proportionate share
of any management fees paid by investment companies in which it invests in
addition to the advisory fee paid by the Portfolio. The value of closed-end
investment company securities, which are usually traded on an exchange, is
affected by demand for the securities themselves, independent of the demand for
the underlying portfolio assets, and, accordingly, such securities can trade at
a discount from their net asset values.
CERTAIN INVESTMENT POLICIES. The Fund and the Portfolio have adopted certain
fundamental investment restrictions and policies 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. Among the
fundamental restrictions, neither the Fund nor the Portfolio may (1) borrow
money, except as permitted by the 1940 Act; (2) purchase any securities on
margin (but the Fund and the Portfolio may obtain such short-term credits as may
be necessary for the clearance of purchases and sales of securities); or (3)
with respect to 75% of its total assets, invest more than 5% of its total assets
(taken at current value) in the securities of any one issuer, or invest in more
than 10% of the outstanding voting securities of any one issuer, except
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities and except securities of other investment companies.
Investment restrictions are considered at the time of acquisition of assets; the
sale of portfolio assets is not required in the event of a subsequent change in
circumstances. As a matter of fundamental policy the Portfolio will not invest
25% or more of its total assets in the securities, other than U.S. Government
securities, of issuers in any one industry. However, the Portfolio is permitted
to invest 25% or more of its total assets in (i) the securities of issuers
located in any one country and (ii) securities denominated in the currency of
any one country.
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<PAGE>
Under the 1940 Act and the rules promulgated thereunder, the Portfolio's
investments in the securities of any company that, in its most recent fiscal
year, derived more than 15% of its gross revenues from securities-related
activities is limited to 5% of any class of the issuer's equity securities and
10% of the outstanding principal amount of the issuer's debt securities,
provided that the Portfolio's aggregate investments in the securities of any
such issuer does not exceed 5% of the Portfolio's total assets. Some of the
companies available for investment in the REE Region, including enterprises
being privatized by such countries, may be financial services businesses that
engage in securities-related activities. The Portfolio's ability to invest in
such enterprises may thus be limited.
The Fund's investment policies include a provision allowing the Fund to invest
part of its assets in one or more open-end management investment companies other
than the Portfolio (in the same group of investment companies that are advised
by the Adviser) if, with respect to such assets, the other company's permitted
investments are substantially the same as those of the Fund.
Except for the fundamental investment restrictions and policies specifically
identified above and enumerated in the Statement of Additional Information, the
investment objective and policies of the Fund and the Portfolio are not
fundamental policies and accordingly may be changed by the Trustees of the Trust
and the Portfolio without obtaining the approval of the shareholders of the Fund
or the investors in the Portfolio, as the case may be.
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. 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 (such as the Fund). The Trustees of the Trust have
divided the shares of the Fund into multiple classes, including Class A and
Class B shares. Each class represents an interest in the Fund, but is subject to
different expenses, rights and privileges. See "Distribution Plans" and "How to
Buy Shares". The Trustees have the authority under the Declaration of Trust to
create additional classes of shares with differing rights and privileges.
When issued and outstanding, the shares are fully paid and nonassessable by the
Trust and redeemable as described under "How to Redeem Shares". There are no
annual meetings of shareholders, but special meetings may be held as required by
law to elect Trustees and consider certain other matters. Shareholders are
entitled to one vote for each full share held. Fractional shares may be voted
proportionately. Shares of the Fund will be voted together except that only
shareholders of a particular class may vote on matters affecting only that
class. Shares have no preemptive or conversion rights and are freely
transferable. In the event of the liquidation of the Fund, shareholders of each
class are entitled to share pro rata in the net assets attributable to that
class available for distribution to shareholders.
-12-
<PAGE>
The Trustees of the Trust have considered the advantages and disadvantages of
investing the assets of the Fund in the Portfolio, as well as the advantages and
disadvantages of the two-tier format. The Trustees believe that the structure
offers opportunities for growth in the assets of the Portfolio, affords the
potential for economies of scale for the Fund and may over time result in lower
expenses for the Fund.
THE PORTFOLIO IS ORGANIZED AS A TRUST UNDER THE LAWS OF THE STATE OF NEW YORK
AND INTENDS TO BE TREATED AS A PARTNERSHIP FOR FEDERAL TAX PURPOSES. In 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, these differences may
result in differences in returns experienced by investors in the various funds
that invest in the Portfolio. Information regarding other pooled investment
entities or funds which invest in the Portfolio may be obtained by contacting
the Principal Underwriter, 24 Federal Street, Boston, MA 02110 (617) 482-8260.
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.
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<PAGE>
The Fund may withdraw (completely redeem) all its assets from the Portfolio at
any time if the Board of Trustees of the Trust determines that it is in the best
interest of the Fund to do so. In the event the Fund withdraws all of its assets
from the Portfolio, or the Board of Trustees of the Trust determines that the
investment objective of the Portfolio is no longer consistent with the
investment objective of the Fund, 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 (or the assets of another
investor in the Portfolio) from the Portfolio.
MANAGEMENT OF THE FUND AND THE PORTFOLIO
- --------------------------------------------------------------------------------
EATON VANCE MANAGEMENT ("EATON VANCE") ACTS AS THE SPONSOR AND MANAGER OF THE
FUND AND AS THE ADMINISTRATOR OF THE PORTFOLIO. THE PORTFOLIO HAS ENGAGED LLOYD
GEORGE INVESTMENT MANAGEMENT (BERMUDA) LIMITED AS ITS INVESTMENT ADVISER.
The Adviser is registered as an investment adviser with the Commission. The
Adviser is a subsidiary of Lloyd George Management (B.V.I.) Limited ("LGM"). LGM
and its subsidiaries act as investment adviser to various individual and
institutional clients with total assets under management of approximately $2
billion. Eaton Vance's parent, Eaton Vance Corp., owns approximately 21% of the
Class A shares issued by LGM.
LGM was established in 1991 to provide investment management services with
respect to equity securities of companies trading in foreign securities markets,
especially those of emerging markets. LGM currently manages portfolios for both
private clients and institutional investors seeking long-term capital growth.
LGM's core investment team consists of thirteen experienced investment
professionals based in Hong Kong, London and Mumbai, who have worked together
over a number of years successfully managing client portfolios in non-U.S. stock
markets. The team has a unique knowledge of, and experience with, foreign
emerging markets. LGM is ultimately controlled by the Hon. Robert J.D. Lloyd
George, President and Trustee of the Portfolio and Chairman and Chief Executive
Officer of the Adviser. LGM's only activity is portfolio management.
LGM and the Adviser have adopted a conservative management style, providing a
blend of multinational expertise with the most rigorous international standards
of fundamental security analysis. LGM and the Adviser maintain a network of
international contacts in order to monitor international economic and stock
market trends and offer clients a global management service. The Portfolio is
managed by Stephen Miles Wood.
STEPHEN MILES WOOD. Director of the Adviser. Born in 1952 and educated at
Manchester Business School where he received his MBA. Mr. Wood has over eighteen
years experience in global fund management and eight years experience in the
development of Eastern European businesses. From 1983 - 1985, he worked for
Scott Goff Layton & Co. as a Senior Investment Analyst. In 1985, Mr. Wood
transferred to Caviapen Investments Ltd. (CAA Pension Fund) where he was
promoted to Investment Director in 1986. Mr. Wood joined John Govett & Co. Ltd
in February of 1989 and served as a fund manager in Central and Eastern Europe
since 1990.
-14-
<PAGE>
While the Portfolio is a New York trust, the Adviser, together with certain
Trustees and officers of the Portfolio, are not residents of the United States,
and substantially all of their respective assets may be located outside the
United States. It may be difficult for investors to effect service of process
within the United States upon such individuals, or to realize judgments of
courts of the United States predicated upon civil liabilities of the Adviser and
such individuals under the federal securities laws of the United States. The
Portfolio has been advised that there is substantial doubt as to the
enforceability in the countries in which the Adviser and such individuals reside
of such civil remedies and criminal penalties as are afforded by the federal
securities laws of the United States.
Under its investment advisory agreement with the Portfolio, the Adviser receives
a monthly advisory fee of 0.0625% (equivalent to 0.75% annually) of the average
daily net assets of the Portfolio up to $500 million, which fee declines at
intervals above $500 million.
The Adviser 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. The Adviser 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, the
Adviser may consider sales of shares of the Fund as a factor in the selection of
firms to execute portfolio transactions. The Fund, the Portfolio, the Manager
and the Adviser have adopted Codes of Ethics relating to personal securities
transactions. The Codes permit the Manager's and the Adviser's personnel to
invest in securities (including securities that may be purchased or held by the
Portfolio) for their own accounts, subject to certain reporting and other
restrictions and procedures contained in such Codes.
EATON VANCE, ITS AFFILIATES AND ITS PREDECESSOR COMPANIES HAVE BEEN MANAGING
ASSETS OF INDIVIDUALS AND INSTITUTIONS SINCE 1924 AND MANAGING INVESTMENT
COMPANIES SINCE 1931. EATON VANCE ACTS AS INVESTMENT ADVISER TO INVESTMENT
COMPANIES AND VARIOUS INDIVIDUAL AND INSTITUTIONAL CLIENTS WITH ASSETS UNDER
MANAGEMENT OF APPROXIMATELY $20 BILLION. Eaton Vance is a wholly-owned
subsidiary of Eaton Vance Corp., a publicly-held holding company which through
its subsidiaries and affiliates engages primarily in investment management,
administration and marketing activities. The Principal Underwriter is a
wholly-owned subsidiary of Eaton Vance.
Eaton Vance, acting under the general supervision of the Board of Trustees of
the Trust and the Portfolio, manages and administers the business affairs of the
Fund and the Portfolio. Eaton Vance's services include monitoring and providing
reports to the Trustees of the Trust and the Portfolio concerning the investment
performance achieved by the Adviser for the Portfolio, recordkeeping,
preparation and filing of documents required to comply with federal and state
securities laws, supervising the activities of the transfer agent of the Fund
and the custodian of the Portfolio, providing assistance in connection with
Trustees' and shareholders' meetings and other management and administrative
services necessary to conduct the business of the Fund and the Portfolio. Eaton
Vance does not provide any investment management or advisory services to the
Portfolio or the Fund. Eaton Vance also furnishes for the use of the Fund and
the Portfolio office space and all necessary office facilities, equipment and
personnel for managing and administering the business affairs of the Fund and
the Portfolio.
-15-
<PAGE>
Under its management contract with the Fund, Eaton Vance receives a monthly
management fee in the amount of 1/48 of 1% (equal to 0.25% annually) of the
average daily net assets of the Fund up to $500 million, which fee declines at
intervals above $500 million. In addition, under its administration agreement
with the Portfolio, Eaton Vance receives a monthly administration fee in the
amount of 1/48 of 1% (equal to 0.25% annually) of the average daily net assets
of the Portfolio up to $500 million, which fee declines at intervals above $500
million.
The Fund and the Portfolio, as the case may be, will each be responsible for all
respective costs and expenses not expressly stated to be payable by the Adviser
under the investment advisory agreement, by Eaton Vance under the management
contract or the administration agreement, or by the Principal Underwriter under
the distribution agreement. Such costs and expenses to be borne by each of the
Fund or the Portfolio, as the case may be, include, without limitation: custody
and transfer agency fees and expenses, including those incurred for determining
net asset value and keeping accounting books and records; expenses of pricing
and valuation services; the cost of share certificates; membership dues in
investment company organizations; brokerage commissions and fees; fees and
expenses of registering under the securities laws; expenses of reports 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 Eaton Vance or the
Adviser; and investment advisory, management and administration fees. The Fund
and the Portfolio, as the case may be, will also each bear expenses incurred in
connection with litigation in which the Fund or the Portfolio, as the case may
be, is a party and any legal obligation to indemnify its respective officers and
Trustees with respect thereto, to the extent not covered by insurance.
DISTRIBUTION PLAN
- --------------------------------------------------------------------------------
The Trust has adopted a Distribution Plan (the "Class A Plan") for the Fund's
Class A shares that is designed to meet the requirements of Rule 12b-1 under the
1940 Act. THE CLASS A PLAN PROVIDES FOR THE PAYMENT OF A MONTHLY DISTRIBUTION
FEE TO THE PRINCIPAL UNDERWRITER IN AN AMOUNT EQUAL TO THE AGGREGATE OF (A) .50%
OF THAT PORTION OF CLASS A AVERAGE DAILY NET ASSETS FOR ANY FISCAL YEAR WHICH IS
ATTRIBUTABLE TO ITS SHARES WHICH HAVE REMAINED OUTSTANDING FOR LESS THAN ONE
YEAR AND (B) .25% OF THAT PORTION OF CLASS A AVERAGE DAILY NET ASSETS FOR ANY
FISCAL YEAR WHICH IS ATTRIBUTABLE TO ITS SHARES WHICH HAVE REMAINED OUTSTANDING
FOR MORE THAN ONE YEAR. Aggregate payments to the Principal Underwriter under
the Class A Plan are limited to those permissible, pursuant to a rule of the
National Association of Securities Dealers, Inc ("NASD").
The Class A Plan also provides that the Class will pay a quarterly service fee
to the Principal Underwriter in an amount equal on an annual basis to .25% of
that portion of its average daily net assets for any fiscal year which is
attributable to Class A shares which have remained outstanding for more than one
year; from such service fee the Principal Underwriter expects to pay a quarterly
service fee to Authorized Firms, as compensation for providing personal services
and/or the maintenance of shareholder accounts, with respect to shares sold by
such Firms which have remained outstanding for more than one year. Service fee
payments to Authorized Firms will be in addition to sales charges on Class A
shares which are reallowed to Authorized Firms. If the Class A Plan is
terminated or not continued in effect, the Class has no obligation to reimburse
the Principal Underwriter for amounts expended by the Principal Underwriter in
distributing Class A shares.
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<PAGE>
The Trust has also adopted a Distribution Plan ("Class B Plan") pursuant to Rule
12b-1 under the 1940 Act for the Fund's Class B shares. The Plan is designed to
permit an investor to purchase shares through an Authorized Firm without
incurring an initial sales charge and at the same time permit the Principal
Underwriter to compensate Authorized Firms in connection therewith. UNDER SUCH
PLAN, CLASS B PAYS THE PRINCIPAL UNDERWRITER A FEE, ACCRUED DAILY AND PAID
MONTHLY, AT AN ANNUAL RATE NOT EXCEED .75% OF ITS AVERAGE DAILY NET ASSETS TO
FINANCE THE DISTRIBUTION OF ITS SHARES. Such fees compensate the Principal
Underwriter for sales commissions paid by it to Authorized Firms on the sale of
Class B shares and for interest expenses. The Principal Underwriter uses its own
funds to pay sales commissions (except on exchange transactions and
reinvestments) to Authorized Firms at the time of sale equal to 4% of the
purchase price of the Class B shares sold by such Firms. CDSCs paid to the
Principal Underwriter will be used to reduce amounts owed to it. Because
payments to the Principal Underwriter under the Class B Plan are limited,
uncovered distribution charges (sales commissions due the Principal Underwriter
plus interest, less the above fees and CDSCs and Adviser distribution payments
received by it) may exist indefinitely.
THE CLASS B PLAN ALSO AUTHORIZES THE CLASS TO MAKE PAYMENTS OF SERVICE FEES TO
THE PRINCIPAL UNDERWRITER, AUTHORIZED FIRMS AND OTHER PERSONS IN AMOUNTS NOT
EXCEEDING .25% OF ITS AVERAGE DAILY NET ASSETS FOR PERSONAL SERVICES, AND/OR THE
MAINTENANCE OF SHAREHOLDER ACCOUNTS. This fee is paid quarterly in arrears based
on the value of Class B shares sold by such persons and remaining outstanding
for at least twelve months. Class B expects to begin accruing for its service
fees during the quarter ending March 31, 1999.
Distribution of Class B shares by the Principal Underwriter will also be
encouraged by the payment by the Adviser to the Principal Underwriter of amounts
equivalent to .15% of Class B annual average daily net assets. Such payments
will be made from the Adviser's own resources, not Class assets, in
consideration of the Principal Underwriter's distribution efforts.
The Principal Underwriter may, from time to time, at its own expense, provide
additional incentives to Authorized Firms which employ registered
representatives who sell Fund shares and/or shares of other funds distributed by
the Principal Underwriter. In some instances, such additional incentives may be
offered only to certain Authorized Firms whose representatives sell or are
expected to sell significant amounts of shares. In addition, the Principal
Underwriter may from time to time increase or decrease the sales commissions
payable to Authorized Firms. The Principal Underwriter may at times allow
discounts up to the full sales charge. During periods when the discount includes
the full sales charge, Authorized Firms may be deemed to be underwriters as that
term is defined in the Securities Act of 1933.
The Trust may, in its absolute discretion, suspend, discontinue or limit the
offering of one or more of its classes of shares at any time. In determining
whether any such action should be taken, the Trust's management intends to
consider all relevant factors, including (without limitation) the size of the
Fund or class, the investment climate and market conditions, the volume of sales
and redemptions of shares, and in the case of Class B shares, the amount of
uncovered distribution charges of the Principal Underwriter. The Plans may
continue in effect and payments may be made under the Plans following any such
suspension, discontinuance or limitation of the offering of shares; however,
there is no contractual obligation to continue any Plan for any particular
period of time. Suspension of the offering of shares would not, of course,
affect a shareholder's ability to redeem shares.
-17-
<PAGE>
VALUING SHARES
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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). Each Class's net asset value per
share is determined by the Trust's custodian, Investors Bank & Trust Company
("IBT"), (as agent for the Trust) in the manner authorized by the Trustees of
the Trust. The net asset value of each Class is computed by dividing the value
of that Class's pro rata share of the Fund's total assets, less its liabilities,
by the number of shares of that Class outstanding. Because the Fund invests its
assets in an interest in the Portfolio, each Class's net asset value will
reflect the value of the Fund's 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 by a specific time each day to receive that day's public offering
price per share. It is the Authorized Firms' responsibility to transmit orders
promptly to the Principal Underwriter. The Fund has approved the acceptance of
purchase and redemption orders as of the time of their receipt by certain
Authorized Firms (or their designated intermediaries).
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) based
on market or fair value in the manner authorized by the Trustees of the
Portfolio. Exchange listed securities are generally valued at closing sales
prices. Net asset value is computed by subtracting the liabilities of the
Portfolio from the value of its total assets.
SHAREHOLDERS MAY DETERMINE THE VALUE OF THEIR INVESTMENT BY MULTIPLYING
THE NUMBER OF SHARES OWNED BY THE CURRENT NET ASSET VALUE PER SHARE.
HOW TO BUY SHARES
- --------------------------------------------------------------------------------
SHARES OF THE FUND MAY BE PURCHASED FOR CASH OR MAY BE ACQUIRED IN EXCHANGE FOR
ACCEPTABLE SECURITIES. Class A shares are purchased at the effective public
offering price, which price is based on the effective net asset value per share
plus the applicable sales charge. The sales charge is divided between the
Authorized Firm and the Principal Underwriter. Class B shares are purchased at
the net asset value per share next determined after an order is effective. An
Authorized Firm may charge its customers a fee in connection with transactions
executed by that Firm. The Trust may suspend the offering of shares at any time
and may refuse an order for the purchase of shares.
An initial investment 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 Trust's transfer agent (the "Transfer Agent") as follows: First
Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123. 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".
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<PAGE>
In connection with employee benefit or other continuous group purchase plans,
the Trust 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 Trust as described below under "How to
Redeem Shares".
CLASS A SHARES. The sales charge may vary depending on the size of the purchase
and the number of Class A shares of Eaton Vance funds the investor may already
own, any arrangement to purchase additional shares during a 13-month period or
special purchase programs. Complete details of how investors may purchase shares
at reduced sales charges under a Statement of Intention or Right of Accumulation
are available from Authorized Firms or the Principal Underwriter.
The current sales charges and dealer commissions are:
<TABLE>
SALES CHARGE SALES CHARGE DEALER COMMISSION
AS PERCENTAGE OF AS PERCENTAGE OF AS PERCENTAGE OF
AMOUNT OF PURCHASE OFFERING PRICE AMOUNT INVESTED OFFERING PRICE
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000 5.75% 6.10% 5.00%
$50,000 but less than $100,000 4.75 4.99 4.00
$100,000 but less than $250,000 3.75 3.90 3.00
$250,000 but less than $500,000 3.00 3.10 2.50
$500,000 but less than $1,000,000 2.00 2.04 1.75
$1,000,000 or more 0.00* 0.00* See Below**
</TABLE>
* No sales charge is payable at the time of purchase on investments of $1
million or more. A CDSC of 1% will be imposed on such investments in the
event of certain redemptions within 12 months of purchase.
**Acommission on sales of $1 million or more will be paid as follows: 1.00% on
amounts of $1 million or more but less than $3 million; plus 0.50% on amounts
from $3 million but less than $5 million; plus 0.25% on amounts of $5 million
or more. Purchases of $1 million or more will be aggregated over a 12-month
period for purposes of determining the commission to be paid.
Class A shares may be sold at net asset value to current and retired Directors
and Trustees of Eaton Vance funds, including the Portfolio; to clients and
current and retired officers and employees of Eaton Vance, its affiliates and
other investment advisers of Eaton Vance sponsored funds; to registered
representatives and employees of Authorized Firms and bank employees who refer
customers to registered representatives of Authorized Firms; to officer and
employees of IBT and the Transfer Agent; and to such persons' spouses and
children under the age of 21 and their beneficial accounts. Class A shares may
-19-
<PAGE>
also be issued at net asset value (1) in connection with the merger of an
investment company or series thereof with the Fund, (2) to investors making an
investment as part of a fixed fee program whereby an entity unaffiliated with
Eaton Vance provides multiple investment services, such as management, brokerage
and custody, and (3) to investment advisors, financial planners or other
intermediaries who place trades for their own accounts or the accounts of their
clients and who charge a management, consulting or other fee for their services;
clients of such investment advisors, financial planners or other intermediaries
who place trades for their own accounts if the accounts are linked to the master
account of such advisor, financial planner or other intermediary on the books
and records of the broker or agent; and retirement and deferred compensation
plans and trusts used to fund those plans, including, but not limited to, those
defined in Section 401(a), 403(b) or 457 of the Internal Revenue Code of 1986,
as amended (the "Code") and "rabbi trusts". The Trust's Principal Underwriter
may pay commissions to Authorized Firms who initiate and are responsible for
purchases of Class A shares of the Fund by Eligible Plans of up to 1.00% of the
amount invested in such shares.
Until March 31, 1998, no sales charge is payable at the time of purchase where
the amount invested represents redemption proceeds from a mutual fund
unaffiliated with Eaton Vance if the redemption occurred no more than 60 days
prior to the purchase of Class A shares and the redeemed shares were potentially
subject to a sales charge. A CDSC of 0.50% will be imposed on such investments
in the event of certain redemptions within 12 months of purchase and the
Authorized Firm will be paid a commission on such sales of 0.50% of the amount
invested.
STATEMENT OF INTENTION AND ESCROW AGREEMENT. If the investor, on an application,
makes a Statement of Intention to invest a specified amount over a
thirteen-month period in Class A shares, then out of the initial purchase (or
subsequent purchases if necessary) 5% of the dollar amount specified on the
application shall be held in escrow by the escrow agent in the form of such
shares (computed to the nearest full share at the public offering price
applicable to the initial purchase hereunder) registered in the investor's name.
All income dividends and capital gains distributions on escrowed shares will be
paid to the investor or to the investor's order. When the minimum investment so
specified is completed, the escrowed shares will be delivered to the investor.
If the investor has an accumulation account the shares will remain on deposit
under the investor's account.
If total purchases under this Statement of Intention are less than the amount
specified, the investor will promptly remit to the Principal Underwriter any
difference between the sales charge on the amount specified and on the amount
actually purchased. If the investor does not within 20 days after written
request by the Principal Underwriter or the Authorized Firm pay such difference
in sales charge, the escrow agent will redeem an appropriate number of the
escrowed shares in order to realize such difference. Full shares remaining after
any such redemption together with any excess cash proceeds of the shares so
redeemed will be delivered to the investor or to the investor's order by the
escrow agent.
-20-
<PAGE>
It total purchases made under this Statement are large enough to qualify for a
lower sales charge than that applicable to the amount specified, all
transactions will be computed at the expiration date of this Statement to give
effect to the lower charge. Any difference in sales charge will be refunded to
the investor in cash, or applied to the purchase of additional shares at the
lower charge if specified by the investor. This refund will be made by the
Authorized Firm and by the Principal Underwriter. If at the time of the
recomputation an Authorized Firm other than the original Firm is placing the
orders, the adjustments will be made only on those shares purchased through the
Firm then handling the investor's account.
ACQUIRING FUND SHARES IN EXCHANGE FOR SECURITIES. IBT, as escrow agent, will
receive securities acceptable to Eaton Vance, as Manager, in exchange for Fund
shares. The minimum value of securities (or securities and cash) accepted for
deposit is $5,000. Securities accepted will be sold on the day of their receipt
or as soon thereafter as possible. The number of Fund shares to be issued in
exchange for securities will be the aggregate proceeds from the sale of such
securities, divided by the applicable public offering price of Class A shares or
net asset value of Class B shares on the day such proceeds are received. Eaton
Vance will use reasonable efforts to obtain the then current market price for
such securities, but does not guarantee the best available price. Eaton Vance
will absorb any transaction costs, such as commissions, on the sale of 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: IN THE CASE OF PHYSICAL DELIVERY:
Deliver through Depository Trust Co. Investors Bank & Trust Company
Broker #2212 Attention: Eaton Vance Russia and
Investors Bank & Trust Company Eastern Europe Fund (state Class)
For A/C Eaton Vance Russia and Physical Securities Processing
Eastern Europe Fund (state Class) Settlement Area
200 Clarendon Street
Boston, MA 02116
Investors who are contemplating an exchange of securities for shares, or their
representatives, must contact Eaton Vance to determine whether the securities
are acceptable before forwarding such securities. Eaton Vance reserves the right
to reject any securities. Exchanging securities for shares may create a taxable
gain or loss. Each investor should consult his or her tax adviser with respect
to the particular federal, state and local tax consequences of exchanging
securities.
IF YOU DON'T HAVE AN AUTHORIZED FIRM, EATON VANCE CAN RECOMMEND ONE.
-21-
<PAGE>
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
A SHAREHOLDER MAY REDEEM SHARES IN ONE OF THREE WAYS - BY MAIL, BY TELEPHONE OR
THROUGH AN AUTHORIZED FIRM. The redemption price will be based on the net asset
value per share next computed after a redemption request is received in the
proper form as described below. Within seven days after receipt of a redemption
request in good order by the Trust 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 CDSC (described below) and any federal income tax required to be
withheld.
REDEMPTION BY MAIL: Shares may redeemed by delivering to the Transfer Agent,
First Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123,
during its business hours a written request for redemption in good order, plus
any share certificates with executed stock powers. 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 Commission regulation and
acceptable to the Transfer Agent. 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.
REDEMPTION BY TELEPHONE: Shares may be redeemed by telephone provided the
investor has not disclaimed in writing the use of the privilege. Such
redemptions can be effected by calling the Transfer Agent at 800-262-1122,
Monday through Friday, 9:00 a.m. to 4:00 p.m. (Eastern Standard Time). The
proceeds of a telephone redemption may be no greater than the maximum amount
established by the Principal Underwriter (currently $50,000) and may be mailed
only to the account address of record. Shares held by corporations, trusts or
certain other entities, or subject to fiduciary arrangements, may not be
redeemed by telephone. Neither the Trust, the Principal Underwriter nor the
Transfer Agent will be responsible for the authenticity of redemption
instructions received by telephone, provided that reasonable procedures to
confirm that instructions communicated by telephone are genuine have been
followed. Telephone instructions will be tape recorded. In times of drastic
economic or market changes, a telephone redemption may be difficult to
implement.
REDEMPTION THROUGH AN AUTHORIZED FIRM. 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 the order is deemed to be
required by the Trust or the Principal Underwriter, as the Trust's agent. It is
the Authorized Firm's responsibility to transmit promptly repurchase orders to
the Principal Underwriter. Throughout this Prospectus, the word "redemption" is
generally meant to include a repurchase.
-22-
<PAGE>
While normally payments will be made in cash for redeemed shares, the Trust,
subject to compliance with applicable regulations, has reserved the right to pay
the redemption price of shares of the Fund, either totally or partially, by a
distribution in kind of readily marketable securities withdrawn from the
Portfolio. The securities so distributed would be valued pursuant to the
Portfolio's valuation procedures. If a shareholder received a distribution in
kind, the shareholder could incur brokerage or other charges in converting the
securities to cash.
If shares were recently purchased, the proceeds of a redemption 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 may result in a taxable gain or loss.
Due to the high cost of maintaining small accounts, the Trust reserves the right
to redeem accounts with balances of less than $750. Prior to such a redemption,
shareholders will be given 60 days' written notice to make an additional
purchase. However, no such redemption would be required by the Trust if the
cause of the low account balance was a reduction in the net asset value of
shares. No CDSC will be imposed with respect to involuntary redemptions.
CONTINGENT DEFERRED SALES CHARGE. Each class of shares is subject to a CDSC on
certain redemptions. The CDSC is calculated based on the lower of the net asset
value at the time of purchase or the time of redemption. Shares acquired through
the reinvestment of distributions are exempt. Redemptions are made first from
shares in the account which are not subject to a CDSC.
In calculating a CDSC upon the redemption of shares acquired in an exchange, the
shares are deemed to have been acquired at the time of the original purchase of
the exchanged shares and, in the case of Class B shares, the CDSC schedule
applicable to the exchanged shares will apply to the acquired shares. No CDSC is
imposed on shares sold to Eaton Vance or its affiliates, or to their respective
employees or clients. Shares acquired as the result of a merger or liquidation
of another Eaton Vance sponsored fund generally will be subject to the same CDSC
rate imposed by the prior fund.
CLASS A SHARES. If Class A shares are purchased at net asset value because the
purchase amount was $1 million or more, they will be subject to a 1% CDSC if
redeemed within 12 months of purchase. If Class A Shares are purchased prior to
April 1, 1998 at net asset value because the amount invested represents
redemption proceeds from an unaffiliated mutual fund (as described under "How to
Buy Shares"), they will be subject to a .50% CDSC if redeemed within 12 months
of purchase.
CLASS B SHARES. Class B shares will be subject to the following CDSC schedule:
Year of Redemption
After Purchase CDSC
-------------- ----
First or Second 5%
Third 4%
Fourth 3%
Fifth 2%
Sixth 1%
Seventh and following 0
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<PAGE>
The Class B CDSC is waived for redemptions (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 shares, provided the redemption is requested within one
year of death (a death certificate and other applicable documents may be
required).
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 independent accountants. Shortly after the end of each
calendar year, shareholders will be furnished with information necessary for
preparing federal and state tax returns. Consistent with applicable law,
duplicate mailings of shareholder reports and certain other Fund information to
shareholders residing at the same address may be eliminated.
THE LIFETIME INVESTING ACCOUNT/DISTRIBUTION OPTIONS
- --------------------------------------------------------------------------------
AFTER AN INVESTOR MAKES AN INITIAL PURCHASE OF SHARES, THE TRANSFER AGENT WILL
SET UP A LIFETIME INVESTING ACCOUNT FOR THE INVESTOR ON THE TRUST'S RECORDS.
This account is a complete record of all transactions which at all times shows
the balance of shares owned. The Trust 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 Transfer Agent.
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 Transfer Agent, First Data Investor Services
Group, P.O. Box 5123, Westborough, MA 01581-5123 (please provide the name of the
shareholder, the Fund and Class, 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 Trust's
dividend disbursing agent, First Data Investor Services Group, P.O. Box 5123,
Westborough, MA 01581-5123. The currently effective option will appear on each
account 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.
-24-
<PAGE>
If shareholder communications are returned by the United States Postal Service
or other delivery service as not deliverable, the distribution option on the
account will be automatically changed to the SHARE OPTION until such time as the
shareholder selects a different option. No interest will accrue on amounts
represented by uncashed distribution or redemption checks.
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 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 Trust and its Transfer Agent. Since the
Trust 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 Authorized Firm or to an account directly with the
Trust 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 Authorized
Firm, or transferring the account to another Authorized Firm, an investor
wishing to reinvest distributions should determine whether the Authorized Firm
which will hold the shares allows reinvestment of distributions in "street name"
accounts.
THE EATON VANCE EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
Shares of the Fund currently may be exchanged for shares of the same class of
one or more other funds in the Eaton Vance Group of Funds. Class A shares may
also be exchanged for shares of Eaton Vance Cash Management Fund, Eaton Vance
Income Fund of Boston and Eaton Vance Tax Free Reserves. Class B shares may also
be exchanged for shares of Eaton Vance Prime Rate Reserves, which are subject to
an early withdrawal charge, or shares of Eaton Vance Money Market Fund, which
are subject to a CDSC, and shares of a money market fund sponsored by an
Authorized Firm and approved by the Principal Underwriter (an "Authorized Firm
fund"). Any such exchange will be made on the basis of the net asset value per
share of each fund/class at the time of the exchange (plus, in the case of an
exchange made within six months of the date of purchase of Class A shares
subject to an initial sales charge, an amount equal to the difference, if any,
between the sales charge previously paid on the shares being exchanged and the
sales charge payable on the shares being acquired). Exchange offers are
available only in States where shares of the fund being acquired may be legally
sold. Exchanges are subject to any restrictions or qualifications set forth in
the current prospectus of any such fund.
-25-
<PAGE>
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 Trust 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 Transfer Agent makes exchanges at the next determined net asset value after
receiving an exchange request in good order (see "How to Redeem Shares").
Consult the Transfer Agent 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 CDSC is imposed on exchanges. For purposes of calculating the CDSC upon the
redemption of shares acquired in an exchange, the CDSC 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, except that time during which shares
are held in an Authorized Firm fund will not be credited toward completion of
the CDSC period. For the CDSC schedule applicable to Class B shares (except
Prime Rate Reserves and Class B shares of the Limited Maturity Funds), see "How
to Redeem Shares". The CDSC or early withdrawal charge schedule applicable to
Prime Rate Reserves and Class B shares of the Limited Maturity Funds 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.
Telephone exchanges are accepted by the Transfer Agent provided that the
investor has not disclaimed in writing the use of the privilege. To effect such
exchanges, call the Transfer Agent at 800-262-1122, 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 Trust, the Principal Underwriter nor the Transfer
Agent 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.
-26-
<PAGE>
EATON VANCE SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------
THE TRUST 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 or Class 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 the Fund
and specifying the Class being purchased may be mailed directly to the Transfer
Agent, First Data Investor Services Group, P.O. Box 5123, Westborough, MA
0158-5123 at any time whether or not distributions are reinvested. The name of
the shareholder, the Fund and Class and the account number should accompany each
investment.
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.
WITHDRAWAL PLAN: A shareholder may draw on shareholdings systematically with
monthly or quarterly checks. For Class B shares, any such withdrawals may not in
the aggregate exceed 12% annually of the account balance at the time the plan is
established. Such amount will be subject to the Class B CDSC. See "How to Redeem
Shares". A minimum deposit of $5,000 in shares is required. The maintenance of a
withdrawal plan concurrently with purchases of additional Class A shares would
be disadvantageous because of the sales charge included in such purchase.
STATEMENT OF INTENTION: Purchases of $50,000 or more of Class A shares made over
a 13-month period are eligible for reduced sales charges. See "How to Buy Shares
- - Statement of Intention and Escrow Agreement".
RIGHT OF ACCUMULATION: Purchases may qualify for reduced sales charges on Class
A shares when the current market value of holdings (shares at current offering
price), plus new purchases, reaches $50,000 or more. Class A shares of the Eaton
Vance funds listed under "The Eaton Vance Exchange Privilege" may be combined
under the Statement of Intention and Right of Accumulation.
REINVESTMENT PRIVILEGE: A shareholder who has redeemed shares may reinvest, with
credit for any CDSCs paid on the redeemed shares, any portion or all of the
redemption proceeds (plus that amount necessary to acquire a fractional share to
round off the purchase to the nearest full share) in the same shares (or for
Class A shares in Class A shares of any other Eaton Vance fund), provided that
the reinvestment is effected within 60 days after such redemption, and the
privilege has not been used more than once in the prior 12 months. Shares are
sold to a reinvesting shareholder at the next determined net asset value
following timely receipt of a written purchase order by the Principal
Underwriter or by the Trust (or by the Trust's Transfer Agent). To the extent
that any shares are sold at a loss and the proceeds are reinvested in shares (or
other shares 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.
-27-
<PAGE>
TAX-SHELTERED RETIREMENT PLANS: Class A shares of the Fund are available for
purchase in connection with certain tax-sheltered retirement plans. Detailed
information concerning these plans, including certain exceptions to minimum
investment requirements, and copies of the plans are available from the
Principal Underwriter. This information should be read carefully and
consultation with an attorney or tax adviser may be advisable. The information
sets forth the service fee charged for retirement plans and describes the
federal income tax consequences of establishing a plan. Participant accounting
services (including trust fund reconciliation services) will be offered only
through third party recordkeepers and not by the Principal Underwriter. Under
all plans, dividends and distributions will be automatically reinvested in
additional shares.
DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
It is the present policy of the Fund to make (A) at least one distribution
annually (normally in December) of all or substantially all of the investment
income (if any) allocated to the Fund by the Portfolio, less the Fund's direct
and allocated expenses and class-specific expenses, and (B) at least one
distribution annually of all or substantially all of the net realized capital
gains (if any) allocated to the Fund by the Portfolio (reduced by any available
capital loss carryforwards from prior years). Shareholders may reinvest all
distributions in shares of the Fund without a sales charge at the net asset
value per share as of the close of business on the ex-dividend date.
The Fund intends to distribute each year substantially all of its net investment
company taxable income (consisting generally of taxable net investment income),
net short-term capital gain and certain foreign net gains from certain foreign
currency transactions and net capital gains. The Fund's distributions will
generally not qualify for the dividends-received deduction for corporations.
Distributions of investment company taxable income are taxable to shareholders
as ordinary income, whether paid in cash or additional shares. Distributions of
net capital gain are taxable to shareholders as long-term capital gain, whether
paid in cash or additional shares and regardless of the length of time shares
have been owned by the shareholder. Long-term capital gain is separated into
different tax rate groups depending on the length of time the asset is held by
the Portfolio prior to sale. Current IRS rules permit the Fund to designate net
capital gain distributions as "28% rate gain distributions" or "20% rate gain
distributions," and require shareholders to treat such distributions
accordingly.
Investors who purchase shares shortly before the record date of a distribution
will pay the full price for the shares and then receive some portion of the
price back as a taxable distribution. Certain distributions paid in January will
be taxable to shareholders as if received on December 31 of the prior year.
The redemption of shares of the Fund may result in a taxable gain or loss to the
redeeming shareholder, depending on whether the amount received is greater or
less than such shareholder's adjusted tax basis in the shares redeemed. An
exchange of shares of the Fund for shares of another Eaton Vance fund generally
will have similar tax consequences. Sales charges paid upon a purchase of Class
A shares cannot be taken into account for purposes of determining gain or loss
-28-
<PAGE>
on a redemption or exchange of the shares before the 91st day after their
purchase to the extent a sales charge is reduced or eliminated in a subsequent
acquisition of shares of the Fund or of another fund pursuant to the Fund's
reinvestment or exchange privilege. Any disregarded or disallowed amounts will
result in an adjustment to the shareholder's tax basis in some or all of any
other shares acquired.
Taxable distributions to certain shareholders, including those who have not
provided the Fund with their correct taxable identification number and other
required certifications, may be subject to "backup" federal tax withholding of
31%.
Shareholders will receive one or more 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 Transfer Agent.
The foregoing only summarizes some of the federal tax consequences to
shareholders of investing in shares of the Fund, and does not address special
tax rules applicable to certain types of investors, such as corporate and
foreign investors, individual retirement accounts and other retirement plans.
Investors should consult their tax advisers. Shareholders should consult with
their tax advisers concerning the applicability of state, local or other taxes
to an investment in the Fund.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
FROM TIME TO TIME, AVERAGE ANNUAL TOTAL RETURN MAY BE ADVERTISED. Average annual
total return is determined separately for each Class of the Fund by computing
the average annual percentage change in value of $1,000 invested at the maximum
public offering price (net asset value for Class B shares; including maximum
sales charge for Class A shares) for specified periods, assuming reinvestment of
all distributions. The Fund may also publish annual and cumulative total return
figures from time to time. The average annual total return calculation assumes a
complete redemption of the investment and the deduction of any applicable CDSC
at the end of the period. The Fund may publish annual and cumulative total
return figures from time to time.
The Fund may also publish total return figures for each Class which do not take
into account any sales charge. Any performance figure which does not take into
account a sales charge would be reduced to the extent such charge is imposed.
The Fund's performance may be compared in publications to the performance of
various indices and investments for which reliable data is available, and to
averages, performance rankings, or other information prepared by recognized
mutual fund statistical services.
-29-
<PAGE>
Investors should note that investment results will fluctuate over time, and any
presentation of the total return for any prior period should not be considered a
representation of what an investment may earn or what the total return may be in
any future period.
Investors should note that the investment results will fluctuate over time, and
any presentation of the total return for any prior period should not be
considered a representation of what an investment may earn or what the total
return may be in any future period. Investment results are based on many
factors, including market conditions, the composition of the security holdings
of the Portfolio and the operating expenses of the Fund and the Portfolio.
Investment results also often reflect the risks associated with the particular
investment objective and policies of the Fund and the Portfolio. Among others,
these factors should be considered when comparing the Fund's investment results
to those of other mutual funds and other investment vehicles.
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<PAGE>
EATON VANCE
RUSSIA AND EASTERN EUROPE FUND
PROSPECTUS
JANUARY __, 1998
EATON VANCE RUSSIA AND EASTERN EUROPE FUND
24 FEDERAL STREET
BOSTON, MA 02110
- --------------------------------------------------------------------------------
SPONSOR AND MANAGER OF EATON VANCE RUSSIA AND EASTERN EUROPE FUND
ADMINISTRATOR OF RUSSIA AND EASTERN EUROPE PORTFOLIO
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
ADVISER OF RUSSIA AND EASTERN EUROPE PORTFOLIO
Lloyd George Investment Management (Bermuda) Limited, 25 Grosvenor Street,
London, W1X 9FE, England
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 200 Clarendon Street, Boston, MA 02116
TRANSFER AGENT
First Data Investors Services Group, P.O. Box 5123, Westborough, MA 01581-5123
(800)262-1122
AUDITORS
Deloitte & Touche LLP, 125 Summer Street, Boston, MA 02110
RNEP
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL INFORMATION
January , 1998
EATON VANCE RUSSIA AND EASTERN EUROPE FUND
24 Federal Street
Boston, Massachusetts 02110
(800) 225-6265
This Statement of Additional Information provides general information about
Eaton Vance Russia and Eastern Europe Fund (the "Fund"), and Russia and Eastern
Europe Portfolio (the "Portfolio"). This Statement of Additional Information is
sometimes referred to herein as the "SAI".
TABLE OF CONTENTS
PART I
Additional Information about Investment Policies ..................... 1
Investment Restrictions .............................................. 5
Trustees and Officers ................................................ 6
Control Persons and Principal Holders of Securities .................. 8
Management of the Fund and the Portfolio ............................. 8
Custodian ............................................................ 11
Services for Accumulation -- Class A Shares .......................... 12
Service for Withdrawal ............................................... 12
Determination of Net Asset Value ..................................... 13
Investment Performance ............................................... 13
Taxes ................................................................ 14
Principal Underwriter ................................................ 16
Distribution Plans ................................................... 17
Portfolio Security Transactions ...................................... 19
Other Information .................................................... 21
Independent Certified Public Accountants ............................. 22
Financial Statements ................................................. 22
Appendix A -- REE Region Countries ................................... a-1
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY THE FUND'S PROSPECTUS DATED JANUARY , 1998, AS SUPPLEMENTED FROM
TIME TO TIME, WHICH IS INCORPORATED HEREIN BY REFERENCE. 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>
This SAI provides information about the Fund and the Portfolio. Capitalized
terms used in this SAI and not otherwise defined have the meanings given them in
the Prospectus. The Fund is subject to the same investment policies as those of
the Portfolio. The Fund currently seeks to achieve its objective by investing in
the Portfolio.
ADDITIONAL INFORMATION ABOUT INVESTMENT POLICIES
INVESTMENT IN REE REGION ISSUERS. The securities markets of REE Region
countries, to the extent they exist, have substantially less trading volume than
the securities markets of the United States, Japan and many countries elsewhere
in Europe. Further, securities of REE Region issuers are generally less liquid
and more volatile than securities of comparable issuers elsewhere in Europe. In
the securities markets of most REE Region countries, a few large companies
account for a substantial portion of such markets' total capitalization.
Because most of the REE Region countries in which the Portfolio intends to
invest have been governed by totalitarian communist governments, the legal
systems of property rights are newly established and untested. Accordingly, the
effective rights of an investor vis-a-vis his broker, bankruptcy law and other
laws applicable to commercial transactions are uncertain.
The current political situation in certain REE Region countries is unstable
and, in others, anarchistic. Long-term political stability may be a critical
prerequisite to the development of stable market economies and institutions for
the protection of private investment and ownership and, accordingly,
opportunities for capital appreciation. There can be no assurance that REE
Region countries will not experience political instability in the future which
could adversely affect the market values of portfolio securities and of the
Fund's shares. Moreover, there can be no assurance that any country in which the
Portfolio invests will not adopt policies, which may be retroactive, adversely
affecting its investments. There can be no assurance that any investments that
the Portfolio might make in such countries would not be expropriated,
nationalized or otherwise confiscated, through taxation or otherwise, at some
time in the future. In such an event, the Portfolio could lose its entire
investment in the market involved.
Many REE Region countries have experienced or are experiencing recessionary
conditions, high unemployment or hyper-inflation. Such conditions could affect
the market value of portfolio securities and the market value of Fund shares.
Some REE Region countries prohibit certain kinds of investment or impose
substantial restrictions on investments in their capital markets, particularly
their equity markets, by foreign entities such as the Portfolio. Some REE Region
countries may require governmental registration or approval for the repatriation
of investment income capital or the proceeds of sales of securities by foreign
investors. If for any reason the Portfolio was unable, through borrowing or
otherwise, to distribute an amount equal to substantially all of its investment
company taxable income (as defined for U.S. tax purposes) within applicable time
periods, the Fund would cease to qualify as a regulated investment company under
the Internal Revenue Code of 1986, as amended.
Custody and settlement practices in the REE Region are newly developed. In
Russia, there is no physical delivery of certificates; rather, approximately
3,000 registrars are employed separately by each issuer to maintain records of
ownership. Because of the possibility of error or fraud, the Trustees of the
Portfolio have established a registrar monitoring system through a subcustodian
in Russia. There can be no assurance the Portfolio will not realize losses
despite the use of the monitoring system.
Debt issued by issuers (including government issuers) located in the REE
Region generally is deemed to be the equivalent in terms of quality to
securities rated below investment grade by Moody's and S&P. Such securities are
regarded as predominantly speculative with respect to the issuer's capacity to
pay interest and repay principal in accordance with the terms of the obligations
and involve major risk exposure to adverse conditions. Some of such securities,
with respect to which the issuer currently may not be paying interest or may be
in payment default, may be comparable to securities rated D by S&P or C by
Moody's. The Portfolio may have difficulty disposing of and valuing certain debt
obligations because of a limited trading market for such securities.
The market values of lower grade debt securities tend to reflect individual
developments of the issuer to a greater extent than do higher quality
securities, which react primarily to fluctuations in the general level of
interest rates. In addition, lower grade debt securities tend to be more
sensitive to economic conditions and generally have more volatile prices than
higher quality securities. Similarly, certain governments that issue lower grade
debt securities are among the largest debtors to commercial banks, foreign
governments and supranational organizations such as the World Bank and may not
be able or willing to make principal and/or interest repayments as they come
due. The risk of loss due to default by the issuer is significantly greater for
the holders of lower grade securities because such securities are generally
unsecured and are often subordinated to other creditors of the issuer. The
Portfolio may also incur additional expenses to the extent it is required to
seek recovery upon a default in the payment of principal or interest on its
portfolio holdings. The Portfolio may have limited legal recourse in the event
of a default.
Investments in debt securities of REE Region governments involve special
risks. The issuer of the debt or the governmental authorities that control the
repayment of the debt may be unable or unwilling to repay principal or interest
when due in accordance with the terms of such debt. Political changes or a
deterioration of a country's domestic economy or balance of trade may affect the
willingness of countries to service their debt. Such debtors also may be
dependent on expected disbursements from foreign governments, multilateral
agencies and other entities abroad. Failure to implement such economic or other
reforms, achieve such levels of economic performance or repay principal or
interest when due, may result in the cancellation of such third parties'
commitments to lend funds to the government debtor, which may further impair
such debtor's ability or willingness to timely service its debts.
The ability of REE Region governments to make timely payments on their debt
is likely to be influenced strongly by a country's balance of trade and its
access to trade and other international credits. A country whose exports are
concentrated in a few commodities could be vulnerable to a decline in the
international prices of one or more of such commodities. Increased protectionism
on the part of a country's trading partners could also adversely affect its
exports.
FOREIGN INVESTMENTS. Investing in securities issued by companies whose principal
business activities are outside the United States may involve significant risks
not present in domestic investments. For example, there is generally less
publicly available information about foreign companies, particularly those not
subject to the disclosure and reporting requirements of the U.S. securities
laws. Foreign issuers are generally not bound by uniform accounting, auditing,
and financial reporting requirements and standards of practice comparable to
those applicable to domestic issuers. Investments in foreign securities also
involve the risk of possible adverse changes in investment or exchange control
regulations, expropriation or confiscatory taxation, limitation on the removal
of funds or other assets of the Portfolio, political or financial instability or
diplomatic and other developments which could affect such investments. Further,
economies of particular countries or areas of the world may differ favorably or
unfavorably from the economy of the United States. It is anticipated that in
most cases the best available market for foreign securities will be on exchanges
or in over-the-counter markets located outside of the United States. Foreign
stock markets, while growing in volume and sophistication, are generally not as
developed as those in the United States, and securities of some foreign issuers
(particularly those located in developing countries) may be less liquid and more
volatile than securities of comparable U.S. companies. In addition, foreign
brokerage commissions are generally higher than commissions on securities traded
in the United States and may be non-negotiable. In general, there is less
overall governmental supervision and regulation of foreign securities markets,
broker-dealers, and issuers than in the United States.
FOREIGN CURRENCY TRANSACTIONS. The value of the assets of the Portfolio as
measured in U.S. dollars may be affected favorably or unfavorably by changes in
foreign currency exchange rates and exchange control regulations. Currency
exchange rates can also be affected unpredictably by intervention by U.S. or
foreign governments or central banks, or the failure to intervene, or by
currency controls or political developments in the U.S. or abroad. The Portfolio
may conduct its foreign currency exchange transactions on a spot (i.e., cash)
basis at the spot rate prevailing in the foreign currency exchange market or
through entering into swaps, forward contracts, options or futures on currency.
In spot transactions, foreign exchange dealers do not charge a fee for
conversion, but they do realize a profit based on the difference (the "spread")
between the prices at which they are buying and selling various currencies.
Thus, a dealer may offer to sell a foreign currency to the Portfolio at one
rate, while offering a lesser rate of exchange should the Portfolio desire to
resell that currency to the dealer.
Currency swaps require maintenance of a segregated account as described
under "Asset Coverage Requirements" below. The Portfolio will not enter into any
currency swap unless the credit quality of the unsecured senior debt or the
claims-paying ability of the other party thereto is considered to be investment
grade by the Adviser.
The Portfolio may enter into forward foreign currency exchange contracts in
several circumstances. First, when the Portfolio enters into a contract for the
purchase or sale of a security denominated in a foreign currency, or when the
Portfolio anticipates the receipt in a foreign currency of dividend or interest
payments on such a security which it holds, the Portfolio may desire to "lock
in" the U.S. dollar price of the security or the U.S. dollar equivalent of such
dividend or interest payment, as the case may be. By entering into a forward
contract for the purchase or sale, for a fixed amount of dollars, of the amount
of foreign currency involved in the underlying transactions, the Portfolio will
attempt to protect itself against an adverse change in the relationship between
the U.S. dollar and the subject foreign currency during the period between the
date on which the security is purchased or sold, or on which the dividend or
interest payment is declared, and the date on which such payments are made or
received. Additionally, when the Adviser believes that the currency of a
particular foreign country may suffer a substantial decline against the U.S.
dollar, it may enter into a forward contract to sell, for a fixed amount of
dollars, the amount of foreign currency approximating the value of some or all
of the securities held by the Portfolio denominated in such foreign currency.
The precise matching of the forward contract amounts and the value of the
securities involved will not generally be possible because the future value of
such securities in foreign currencies will change as a consequence of market
movements in the value of those securities between the date on which the
contract is entered into and the date it matures. The precise projection of
short-term currency market movements is not possible, and short-term hedging
provides a means of fixing the dollar value of only a portion of the Portfolio's
foreign assets. The Portfolio generally will not enter into a forward contract
with a term of greater than one year.
RISKS ASSOCIATED WITH DERIVATIVE INSTRUMENTS. Entering into a derivative
instrument involves a risk that the applicable market will move against the
Portfolio's position and that the Portfolio will incur a loss. For derivative
instruments other than purchased options, this loss may exceed the amount of the
initial investment made or the premium received by the Portfolio. Derivative
instruments may sometimes increase or leverage the Portfolio's exposure to a
particular market risk. Leverage enhances the Portfolio's exposure to the price
volatility of derivative instruments it holds. The Portfolio's success in using
derivative instruments to hedge portfolio assets depends on the degree of price
correlation between the derivative instruments and the hedged asset. Imperfect
correlation may be caused by several factors, including temporary price
disparities among the trading markets for the derivative instrument, the assets
underlying the derivative instrument and the Portfolio assets. Over-the-counter
("OTC") derivative instruments involve an enhanced risk that the issuer or
counterparty will fail to perform its contractual obligations. Some derivative
instruments are not readily marketable or may become illiquid under adverse
market conditions. In addition, during periods of market volatility, a commodity
exchange may suspend or limit trading in an exchange-traded derivative
instrument, which may make the contract temporarily illiquid and difficult to
price. Commodity exchanges may also establish daily limits on the amount that
the price of a futures contract or futures option can vary from the previous
day's settlement price. Once the daily limit is reached, no trades may be made
that day at a price beyond the limit. This may prevent the Portfolio from
closing out positions and limiting its losses. The staff of the Commission takes
the position that certain OTC options, and assets used as cover for written OTC
options, are subject to the Portfolio's 15% limit on illiquid investments. The
Portfolio's ability to terminate OTC derivative instruments may depend on the
cooperation of the counterparties to such contracts. For thinly traded
derivative instruments, the only source of price quotations may be the selling
dealer or counterparty. In addition, certain provisions of the Code, limit the
extent to which the Portfolio may purchase and sell derivative instruments. The
Portfolio will engage in transactions in futures contracts and related options
only to the extent such transactions are consistent with the requirements of the
Code for maintaining the qualification of the Fund as a regulated investment
company for federal income tax purposes. See "Taxes."
ASSET COVERAGE REQUIREMENTS. Transactions involving reverse repurchase
agreements, currency swaps, forward contracts or futures contracts and options
(other than options that the Portfolio has purchased) expose the Portfolio to an
obligation to another party. The Portfolio will not enter into any such
transactions unless it owns either (1) an offsetting ("covered") position in
securities, currencies, swaps or other options, futures contracts or forward
contracts, or (2) cash or liquid securities (such as readily marketable common
stock and money market instruments) with a value sufficient at all times to
cover its potential obligations not covered as provided in (1) above. The
Portfolio will comply with Commission guidelines regarding cover for these
instruments and, if the guidelines so require, set aside cash or liquid
securities in a segregated account with its custodian in the prescribed amount.
The securities in the segregated account will be marked to market daily.
Assets used as cover or held in a segregated account maintained by the
Portfolio's custodian cannot be sold while the position requiring coverage or
segregation is outstanding unless they are replaced with other appropriate
assets. As a result, the commitment of a large portion of the Portfolio's assets
to segregated accounts or to cover could impede portfolio management or the
Portfolio's ability to meet redemption requests or other current obligations.
LIMITATIONS ON FUTURES CONTRACTS AND OPTIONS. The Portfolio does not intend to
write a covered option on any security if after such transaction more than 15%
of its net assets, as measured by the aggregate value of the securities
underlying all covered calls and puts written by the Portfolio, would be subject
to such options. The Portfolio will only write a put option on a security which
it intends to ultimately acquire for its portfolio. The Portfolio does not
intend to purchase any options if after such transaction more than 5% of its net
assets, as measured by the aggregate of all premiums paid for all such options
held by the Portfolio, would be so invested. The Portfolio may enter into
futures contracts (and options thereon) traded on a foreign exchange if it is
determined by the Adviser that trading on such foreign exchange does not subject
the Portfolio to risks, including credit and liquidity risks, that are
materially greater than the risks associated with trading on United States
exchanges regulated by the CFTC.
To the extent that the Portfolio enters into futures contracts, options on
futures contracts and options on foreign currencies traded on an exchange
regulated by the Commodity Futures Trading Commission ("CFTC"), in each case
that are not for bona fide hedging purposes (as defined by the CFTC), the
aggregate initial margin and premiums required to establish these positions
(excluding the amount by which options are "in-the-money") may not exceed 5% of
the liquidation value of the Portfolio's investments, after taking into account
unrealized profits and unrealized losses on any contracts the Portfolio has
entered into.
REPURCHASE AGREEMENTS. Under a repurchase agreement the Portfolio buys a
security at one price and simultaneously promises to sell that same security
back to the seller at a higher price. At no time will the Portfolio commit more
than 15% of its net assets to repurchase agreements which mature in more than
seven days and other illiquid securities. The Portfolio's repurchase agreements
will provide that the value of the collateral underlying the repurchase
agreement will always be at least equal to the repurchase price, including any
accrued interest earned on the repurchase agreement, and will be marked to
market daily.
REVERSE REPURCHASE AGREEMENTS. The Portfolio may enter into reverse repurchase
agreements. Under a reverse repurchase agreement, the Portfolio temporarily
transfers possession of a portfolio instrument to another party, such as a bank
or broker-dealer, in return for cash. At the same time, the Portfolio agrees to
repurchase the instrument at an agreed upon time (normally within seven days)
and price, which reflects an interest payment. The Portfolio expects that it
will enter into reverse repurchase agreements when it is able to invest the cash
so acquired at a rate higher than the cost of the agreement, which would
increase the income earned by the Portfolio. The Portfolio could also enter into
reverse repurchase agreements as a means of raising cash to satisfy redemption
requests without the necessity of selling portfolio assets.
When the Portfolio enters into a reverse repurchase agreement, any
fluctuations in the market value of either the securities transferred to another
party or the securities in which the proceeds may be invested would affect the
market value of the Portfolio's assets. As a result, such transactions may
increase fluctuations in the market value of the Portfolio's assets. While there
is a risk that large fluctuations in the market value of the Portfolio's assets
could affect the Portfolio's net asset value, this risk is not significantly
increased by entering into reverse repurchase agreements, in the opinion of the
Adviser. Because reverse repurchase agreements may be considered to be the
practical equivalent of borrowing funds, they constitute a form of leverage. If
the Portfolio reinvests the proceeds of a reverse repurchase agreement at a rate
lower than the cost of the agreement, entering into the agreement will lower the
Portfolio's yield.
PORTFOLIO TURNOVER. The Portfolio cannot accurately predict its portfolio
turnover rate, but it is anticipated that the annual turnover rate will
generally not exceed 100% (excluding turnover of securities having a maturity of
one year or less). A 100% annual turnover rate would occur, for example, if all
the securities in the portfolio were replaced once in a period of one year. A
high turnover rate (100% or more) necessarily involves greater expenses to the
Portfolio. The Portfolio engages in portfolio trading (including short-term
trading) if it believes that a transaction including all costs will help in
achieving its investment objective either by increasing income or by enhancing
the Portfolio's net asset value. Short-term trading may be advisable in light of
a change in circumstances of a particular company or within a particular
industry, or in light of general market, economic or political conditions. High
portfolio turnover may also result in the realization of substantial net
short-term capital gains.
LENDING PORTFOLIO SECURITIES. The Portfolio may seek to increase its income by
lending portfolio securities to broker-dealers or other institutional borrowers.
Under present regulatory policies of the Commission, such loans are required to
be secured continuously by collateral in cash, cash equivalents or U.S.
Government securities held by the Portfolio's custodian and maintained on a
current basis at an amount at least equal to market value of the securities
loaned, which will be marked to market daily. Cash equivalents include
certificates of deposit, commercial paper and other short-term money market
instruments. The financial condition of the borrower will be monitored by the
Adviser on an ongoing basis. The Portfolio would continue to receive the
equivalent of the interest or dividends paid by the issuer on the securities
loaned and would also receive a fee, or all or a portion of the interest on
investment of the collateral. The Portfolio would have the right to call a loan
and obtain the securities loaned at any time on up to five business days'
notice. The Portfolio would not have the right to vote any securities having
voting rights during the existence of a loan, but could call the loan in
anticipation of an important vote to be taken among holders of the securities or
the giving or holding of their consent on a material matter affecting the
investment. If the Adviser decides to make securities loans, it is intended that
the value of the securities loaned would not exceed one-third of the Portfolio's
total assets. As with other extensions of credit there are risks of delay in
recovery or even loss of rights in the securities loaned if the borrower of the
securities fails financially. However, the loans will be made only to
organizations deemed by the Adviser to be sufficiently creditworthy and when, in
the judgment of the Adviser, the consideration which can be earned from
securities loans of this type justifies the attendant risk. Securities lending
involves administration expenses, including finder's fees.
INVESTMENT RESTRICTIONS
The following investment restrictions of the Fund are designated as
fundamental and as such cannot be changed without the approval by the holders of
a majority of the Fund's outstanding voting securities, which as used in this
SAI means the lesser of (a) 67% or more of the outstanding voting securities of
the Fund present or represented by proxy at a meeting if the holders of more
than 50% of the shares are present or represented at the meeting or (b) more
than 50% of the shares of the Fund. Accordingly, the Fund may not:
(1) Borrow money or issue senior securities except as permitted by the
Investment Company Act of 1940;
(2) Purchase any securities on margin (but the Fund may obtain such
short-term credits as may be necessary for the clearance of purchases and sales
of securities);
(3) Underwrite securities of other issuers;
(4) Invest in real estate including interests in real estate limited
partnerships (although it may purchase and sell securities which are secured by
real estate and securities of companies which invest or deal in real estate) or
in commodities or commodity contracts for the purchase or sale of physical
commodities;
(5) Make loans to any person except by (a) the acquisition of debt
securities and making portfolio investments, (b) entering into repurchase
agreements and (c) lending portfolio securities;
(6) With respect to 75% of its total assets, invest more than 5% of its
total assets (taken at current value) in the securities of any one issuer, or
invest in more than 10% of the outstanding voting securities of any one issuer,
except obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities and except securities of other investment companies; or
(7) Concentrate its investments in any particular industry, but, if deemed
appropriate for the Fund's objective, up to 25% of the value of its assets may
be invested in securities of companies in any one industry (although more than
25% may be invested in securities issued or guaranteed by the U.S. Government or
its agencies or instrumentalities).
Notwithstanding the investment policies and restrictions of the Fund, the
Fund may invest its investable assets in an open-end management investment
company (a Portfolio) with substantially the same investment objective, policies
and restrictions as the Fund; moreover, subject to Trustee approval the Fund may
invest its investable assets in other open-end management investment companies
in the same group of investment companies with the same placement agent or
investment adviser as the Portfolio (or an affiliate) if, with respect to such
assets, the other companies' permitted investments are substantially the same as
those of the Fund.
The Portfolio has adopted substantially the same fundamental investment
restrictions as the foregoing investment restrictions adopted by the Fund; such
restrictions cannot be changed without the approval of a "majority of the
outstanding voting securities" of the Portfolio.
The Fund and the Portfolio have adopted the following investment policies
which may be changed without shareholder or investor approval. Neither the Fund
nor the Portfolio may invest more than 15% of its net assets in investments
which are not readily marketable, including restricted securities and repurchase
agreements with a maturity longer than seven days. Restricted securities for the
purposes of this limitation do not include securities eligible for resale
pursuant to Rule 144A under the Securities Act of 1933 and commercial paper
issued pursuant to Section 4(2) of said Act that the Board of Trustees of the
Trust or the Portfolio, or its delegate, determines to be liquid. Neither the
Fund nor the Portfolio will purchase warrants if, as a result of such purchase,
more than 5% of the Portfolio's or the Fund's net assets, as the case may be
(taken at current value), would be invested in warrants, and the value of such
warrants which are not listed on the New York or American Stock Exchange may not
exceed 2% of the Portfolio's or the Fund's net assets; this policy does not
apply to or restrict warrants acquired by the Portfolio or the Fund in units or
attached to securities, inasmuch as such warrants are deemed to be without
value. Neither the Fund nor the Portfolio will purchase any securities if at the
time of such purchase, permitted borrowings under investment restriction (1)
above exceed 5% of the value of the Portfolio's or the Fund's total assets, as
the case may be. Neither the Fund nor the Portfolio will purchase or retain in
its portfolio any securities issued by an issuer any of whose officers,
directors, trustees or security holders is an officer or Trustee of the Trust or
is a member, officer, director or trustee of any investment adviser of the Trust
or the Portfolio if after the purchase of the securities of such issuer by the
Fund or the Portfolio one or more of such persons owns beneficially more than
1/2 of 1% of the shares or securities or both (all taken at market value) of
such issuer and such persons owning more than 1/2 of 1% of such shares or
securities together own beneficially more than 5% of such shares or securities
or both (all taken at market value).
Whenever an investment policy or investment restriction set forth in the
Prospectus or this SAI states a maximum percentage of assets that may be
invested in any security or other asset or describes a policy regarding quality
standards, such percentage limitation or standard shall be determined
immediately after and as a result of the Fund's or the Portfolio's acquisition
of such security or other asset. Accordingly, any later increase or decrease
resulting from a change in values, assets or other circumstances, or any
subsequent rating change below investment grade made by a rating service, will
not compel the Fund or the Portfolio, as the case may be, to dispose of such
security or other asset. Notwithstanding the foregoing, under normal market
conditions the Fund and the Portfolio must take actions necessary to comply with
the policy of investing at least 80% of total assets in equity securities of REE
Region companies and not investing more than 15% of net assets in illiquid
securities. Moreover, the Fund and the Portfolio must always be in compliance
with the borrowing policies set forth above.
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 Fund's sponsor and
manager, Eaton Vance, of Eaton Vance's wholly-owned subsidiary, Boston
Management and Research ("BMR"), of Eaton Vance's parent, Eaton Vance Corp.
("EVC"), and of Eaton Vance's trustee, Eaton Vance, Inc. ("EV"). Eaton Vance and
EV are both wholly-owned subsidiaries of EVC. The business address of the
Adviser is 25 Grosvenor Street, London, W1X9FE, England. Those Trustees who are
"interested persons" of the Trust or the Portfolio, as defined in the 1940 Act
by virtue of their affiliation with the Adviser, Eaton Vance, BMR, EVC or EV,
are indicated by an asterisk (*).
TRUSTEES OF THE TRUST AND THE PORTFOLIO
JAMES B. HAWKES (56), President of the Trust, Vice President of the Portfolio
and Trustee*
President and Chief Executive Officer of Eaton Vance, BMR, 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. Director of LGM.
HON. ROBERT LLOYD GEORGE (45), President and Trustee of the Portfolio*
Chairman and Chief Executive Officer of LGM. Chairman and Chief Executive
Officer of the Adviser.
Address: 3808 One Exchange Square, Central, Hong Kong
M. DOZIER GARDNER (64), Trustee of the Trust
Vice Chairman of Eaton Vance, BMR, EVC and EV, and Director of EVC and EV.
Director or Trustee and officer of various investment companies managed by
Eaton Vance or BMR. Mr. Gardner was elected Trustee of the Trust on November
20, 1995.
HON. EDWARD K.Y. CHEN (52), Trustee of the Portfolio
President of Lingnan College in Hong Kong. Professor and Director of Centre of
Asian Studies at the University of Hong Kong from 1979-1995. Director of First
Pacific Company and a Board Member of the Mass Transit Railway Corporation.
Member of the Executive Council of the Hong Kong Government since 1992 and
Chairman of the Consumer Council since 1991.
Address: President's Office, Lingnan College, Tuen Mun, Hong Kong
DONALD R. DWIGHT (66), Trustee
President of Dwight Partners, Inc. (a corporate relations and communications
company); Chairman of the Board of Newspapers of New England, Inc. 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 (62), Trustee
Jacob H. 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 (62), Trustee
President and Director, United Asset Management Corporation (a holding company
owning institutional investment management firms); Chairman, President and
Director, UAM Funds (mutual funds). Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: One International Place, Boston, Massachusetts 02110
JOHN L. THORNDIKE (71), Trustee
Formerly 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 (67), 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
SCOBIE DICKENSON WARD (31), Vice President, Assistant Secretary and Assistant
Treasury of the Portfolio
Director of LGM and the Adviser.
Address: 3808 One Exchange Square, Central, Hong Kong
WILLIAM WALTER RALEIGH KERR (47), Vice President and Assistant Treasurer of the
Portfolio Director, Finance Director and Chief Operating Officer of the Adviser.
Director of LGM.
Address: 3808 One Exchange Square, Central, Hong Kong
EDWARD E. SMILEY, JR. (53), Vice President of the Trust
Vice President of Eaton Vance and BMR since November 1, 1996; Senior Product
Manager, Equity Management for TradeStreet Investment Associates, Inc., a
wholly-owned subsidiary of Nations Bank (1992-1996). Mr. Smiley was elected
Vice President of the Trust on October 18, 1996.
JAMES L. O'CONNOR (52), Vice President of the Portfolio and Treasurer
Vice President of Eaton Vance, BMR and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
ALAN R. DYNNER (57), Secretary
Vice President and Chief Legal Officer of BMR, Eaton Vance, EVC and EV since
November 1, 1996. Previously, he was a Partner of the law firm of Kirkpatrick
& Lockhart LLP, New York and Washington, D.C., and was Executive Vice
President of Neuberger & Berman Management, Inc., a mutual fund management
company. Officer of various investment companies managed by Eaton Vance or
BMR. Mr. Dynner was elected Secretary of the Trust on June 23, 1997.
JANET E. SANDERS (62), Assistant Treasurer and Assistant Secretary
Vice President of Eaton Vance, BMR and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
A. JOHN MURPHY (35), Assistant Secretary
Assistant Vice President of Eaton Vance, BMR and EV since March 1, 1994;
employee of Eaton Vance since March 1993. State Regulations Supervisor, The
Boston Company (1991-1993). Officer of various investment companies managed by
Eaton Vance or BMR. Mr. Murphy was elected Assistant Secretary of the Trust on
March 27, 1995.
ERIC G. WOODBURY (40), Assistant Secretary
Vice President of Eaton Vance, BMR and EV since February 1993; formerly,
associate attorney at Dechert, Price & Rhoads. Officer of various investment
companies managed by Eaton Vance or BMR. Mr. Woodbury was elected Assistant
Secretary of the Trust on June 19, 1995.
Messrs. Hayes, Reamer and Thorndike, are members of the Special Committee of
the Board of Trustees of the Trust and Messrs. Hayes (Chairman), Dwight and
Reamer, are members of the Special Committee of the Board of Trustees of the
Portfolio. The purpose of the Special Committee is to consider, evaluate and
make recommendations to the full Board of Trustees concerning (i) all
contractual arrangements with service providers to the Fund and the Portfolio,
including investment advisory (Portfolio only), administrative, transfer agency,
custodial and fund accounting and distribution services, and (ii) all other
matters in which Eaton Vance, the Adviser or their affiliates has any actual or
potential conflict of interest with the Fund, the Portfolio or investors
therein.
The Nominating Committee of the Board of Trustees of the Trust and the
Portfolio is comprised of four Trustees who are not "interested persons" as that
term is defined under the 1940 Act ("noninterested Trustees"). The Committee has
four-year staggered terms, with one member rotating off the Committee to be
replaced by another noninterested Trustee. The purpose of the Committee is to
recommend to the Board nominees for the position of noninterested Trustee and to
assure that at least a majority of the Board of Trustees is independent of Eaton
Vance, the Adviser or their affiliates.
Messrs. Treynor (Chairman) and Dwight are members of the Audit Committee of
the Board of Trustees of the Trust and Messrs. Hayes, Chen and Dwight are
members of the Audit Committee of the Board of Trustees of the Portfolio. The
Audit Committee's functions include making recommendations to the Trustees
regarding the selection of the independent certified public accountants, and
reviewing matters relative to trading and brokerage policies and practices,
accounting and auditing practices and procedures, accounting records, internal
accounting controls, and the functions performed by the custodian, transfer
agent and dividend disbursing agent of the Trust and of the Portfolio.
Trustees of the Portfolio (except Mr. Chen) who are not affiliated with the
Adviser may elect to defer receipt of all or a percentage of their annual fees
received from certain Eaton Vance sponsored funds, in accordance with the terms
of a Trustees Deferred Compensation Plan (the "Trustees" Plan"). Under the
Trustees' Plan, an eligible Trustee may elect to have his deferred fees invested
by the Portfolio in the shares of one or more funds in the Eaton Vance Family of
Funds, and the amount paid to the Trustees under the Trustees' Plan will be
determined based upon the performance of such investments. Neither the Portfolio
nor the Trust participate in the Trustees' Plan or has a retirement plan for its
Trustees.
The fees and expenses of the noninterested Trustees of the Trust and the
Portfolio are paid by the Fund (and the other series of the Trust) and the
Portfolio, respectively. (The Trustees of the Trust and the Portfolio who are
members of the Eaton Vance organization receive no compensation from the Trust
or the Portfolio.) For the fiscal year ending December 31, 1998, it is estimated
that the noninterested Trustees of the Trust and the Portfolio will receive the
following compensation in their capacities as Trustees from the Trust and the
Portfolio, and, for the year ended September 30, 1997, the non- interested
Trustees earned the following compensation in their capacities as Trustees of
the funds in the Eaton Vance fund complex(1):
AGGREGATE AGGREGATE TOTAL COMPENSATION
COMPENSATION COMPENSATION FROM TRUST AND
NAME FROM TRUST(2) FROM PORTFOLIO FUND COMPLEX
- ---- ------------- -------------- ------------
Hon. Edward K.Y. Chen $ -- $5,000 $ 23,300
Donald R. Dwight ..... 5,715 332 145,000(3)
Samuel L. Hayes, III . 5,817 332 152,500(4)
Norton H. Reamer ..... 5,622 332 145,000
John L. Thorndike .... 5,911 332 147,500(5)
Jack L. Treynor ...... 6,132 332 150,000
- ------------
(1) As of January 1, 1998 the Eaton Vance fund complex consists of 157
registered investment companies or series thereof.
(2) The Trust consists of 8 Funds as of December 31, 1997.
(3) Includes $45,000 of deferred compensation.
(4) Includes $28,750 of deferred compensation.
(5) Includes $1,748 of deferred compensation.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of the date of this SAI, there were no security holders of the Fund's
shares.
MANAGEMENT OF THE FUND AND THE PORTFOLIO
Eaton Vance acts as the sponsor and manager of the Fund and the
administrator of the Portfolio. The Portfolio has engaged Lloyd George
Investment Management (Bermuda) Limited as its investment adviser.
THE ADVISER
As investment adviser to the Portfolio, the Adviser manages the Portfolio's
investments, subject to the supervision of the Board of Trustees of the
Portfolio. The Adviser is also responsible for effecting all security
transactions on behalf of the Portfolio, including the allocation of principal
transactions and portfolio brokerage and the negotiation of commissions. See
"Portfolio Security Transactions". Under the investment advisory agreement, the
Adviser receives a monthly advisory fee computed by applying the annual asset
rate applicable to that portion of the average daily net assets of the Portfolio
throughout the month in each Category as indicated below:
ANNUAL
CATEGORY AVERAGE DAILY NET ASSETS ASSET RATE
-------- ------------------------ ----------
1 less than $500 million ..................... 0.75%
2 $500 million but less than $1 billion ...... 0.70
3 $1 billion but less than $1.5 billion ...... 0.65
4 $1.5 billion but less than $2 billion ...... 0.60
5 $2 billion but less than $3 billion ........ 0.55
6 $3 billion and over ........................ 0.50
Eaton Vance is among the oldest mutual funds organizations in the country.
As an experienced mutual fund provider, Eaton Vance has contributed to making
the securities market more widely accessible to investors. Eaton Vance equity
funds provide a way to take advantage of the potentially higher returns of
individual stocks. Eaton Vance has a staff of more than 25 investment
professionals specializing in security analysis and equity management.
The Eaton Vance investment process stresses intensive fundamental research.
Portfolios are built on a stock-by-stock basis and the process includes visits
to companies under consideration. The process also focuses on well-managed
companies with the following characteristics: strong underlying value or
franchise; solid earnings growth; steady cash flow, strong balance sheet;
innovative products or services; potential for sustained growth; seasoned,
creative management; or ability to survive variable market conditions.
By investing in diversified portfolios and employing prudent and
professional management, Eaton Vance mutual funds can provide attractive return,
while exposing shareholders to less risk than if they were to build investment
portfolios on their own. Eaton Vance employs rigorous buy and sell disciplines.
For instance, purchases are made with an eye to both relative and absolute
growth rates and price/earning ratios, and sales are made when a stock is fully
valued, fundamentals deteriorate, management fails to execute its strategy, or
more attractive alternatives are available.
LGM specializes in providing investment management services with respect to
equity securities of companies trading in foreign securities markets, especially
those of emerging markets. LGM currently manages portfolios for both private
clients and institutional investors seeking long-term capital growth and has
advised Eaton Vance's international equity funds since 1992. LGM's core
investment team consists of twelve experienced investment professionals who have
worked together over a number of years successfully managing client portfolios
in non-U.S. stock markets. The team has a unique knowledge of, and experience
with, Asian emerging markets. LGM analysts cover East Asia, the India
subcontinent, Russia and Eastern Europe, Latin America, Australia and New
Zealand from offices in Hong Kong, London and Mumbai. LGM is ultimately
controlled by the Hon. Robert Lloyd George, President of the Portfolio and
Chairman and Chief Executive Officer of the Adviser. LGM's only business is
portfolio management. Eaton Vance's parent is a shareholder of LGM.
The Adviser and LGM have adopted a conservative management style, providing
a blend of Asian and multinational expertise with the most rigorous
international standards of fundamental security analysis. Although focused
primarily in Asia, the Adviser and LGM maintain a network of international
contacts in order to monitor international economic and stock market trends and
offer clients a global management service.
The directors of the Adviser are the Honorable Robert Lloyd George, William
Walter Raleigh Kerr, Scobie Dickinson Ward, M.F. Tang, Pamela Chan, Adaline
Mang-Yee Ko, Peter Bubenzer and Judith Collins. The Hon. Robert Lloyd George is
Chairman and Chief Executive Officer of the Adviser and Mr. Kerr is an officer
of the Adviser. The business address of the first six individuals is 3808 One
Exchange Square, Central, Hong Kong and of the last two is Cedar House, 41 Cedar
Avenue, Hamilton HM12, Bermuda.
Mr. Lloyd George was born in London in 1952 and educated at Eton College,
where he was a King's Scholar, and at Oxford University. Prior to founding LGM,
Mr. Lloyd George was Managing Director of Indosuez Asia Investment Services Ltd.
In 1983 Mr. Lloyd George launched and managed the Henderson Japan Special
Situations Trust. Prior to that he spent four years with the Fiduciary Trust
Company of New York researching international securities, in the United States
and Europe, for the United Nations Pension Fund.
Eaton Vance and the Adviser follow a common investment philosophy, striving
to identify companies with outstanding management and earnings growth potential
by following a disciplined management style, adhering to the most rigorous
international standards of fundamental security analysis, placing heavy emphasis
on research, visiting every company owned, and closely monitoring political and
economic developments.
Eaton Vance mutual funds are distributed by the Principal Underwriter both
within the United States and offshore. The Principal Underwriter believes that
an investment professional can provide valuable services to you to help you
reach your investment goals. Meeting investment goals requires time, objectivity
and investment savvy. Before making an investment recommendation, a
representative can help you carefully consider your short- and long-term
financial goals, your tolerance for investment risk, your investment time frame,
and other investments you may already own. Your professional investment
representatives are knowledgeable about financial markets, as well as the wide
range of investment opportunities available. A representative can provide you
with tailored financial advice and help you decide when to buy, sell or
persevere with your investments.
The Portfolio's investment advisory agreement with the Adviser remains in
effect from year to year for so long as such continuance is approved at least
annually (i) by the vote of a majority of the noninterested Trustees of the
Portfolio cast in person at a meeting specifically called for the purpose of
voting on such approval and (ii) by the Board of Trustees of the Portfolio or by
vote of a majority of the outstanding voting securities of the Portfolio. The
Agreement may be terminated at any time without penalty on sixty days' written
notice by the Board of Trustees of either party or by vote of the majority of
the outstanding voting securities of the Portfolio, and the Agreement will
terminate automatically in the event of its assignment. The Agreement provides
that the Adviser may render services to others. The Agreement also provides
that, in the absence of willful misfeasance, bad faith, gross negligence or
reckless disregard of obligations or duties under the Agreement on the part of
the Adviser, the Adviser shall not be liable to the Portfolio or to any
shareholder for any act or omission in the course of or connected with rendering
services or for any losses sustained in the purchase, holding or sale of any
security.
MANAGER, SPONSOR AND ADMINISTRATOR
See "Management of the Fund and the Portfolio" in the Prospectus for a
description of the services Eaton Vance performs as the manager and sponsor of
the Fund and the administrator of the Portfolio. Under Eaton Vance's management
contract with the Fund and administration agreement with the Portfolio, Eaton
Vance receives a monthly management fee from the Fund and a monthly
administration fee from the Portfolio. Each fee is computed by applying the
annual asset rate applicable to that portion of the average daily net assets of
the Fund or the Portfolio throughout the month in each Category as indicated
below:
ANNUAL
CATEGORY AVERAGE DAILY NET ASSETS ASSET RATE
-------- ------------------------ ----------
1 less than $500 million ..................... 0.25%
2 $500 million but less than $1 billion ...... 0.23333
3 $1 billion but less than $1.5 billion ...... 0.21667
4 $1.5 billion but less than $2 billion ...... 0.20
5 $2 billion but less than $3 billion ........ 0.18333
6 $3 billion and over ........................ 0.16667
Eaton Vance's management contract with the Fund and its administration
agreement with the Portfolio will each continue in effect from year to year for
so long as such continuance is approved annually by the vote of a majority of
the Trustees of the Trust or the Portfolio, as the case may be. Each agreement
may be terminated at any time without penalty on sixty days' written notice by
the Board of Trustees of either party thereto, or by a vote of a majority of the
outstanding voting securities of the Fund or the Portfolio, as the case may be.
Each agreement will terminate automatically in the event of its assignment. Each
agreement provides that, in the absence of Eaton Vance's willful misfeasance,
bad faith, gross negligence or reckless disregard of its obligations or duties
to the Fund or the Portfolio under such contract or agreement, Eaton Vance will
not be liable to the Fund or the Portfolio for any loss incurred.
The Fund and the Portfolio, as the case may be, will each be responsible for
all of its respective costs and expenses not expressly stated to be payable by
the Adviser under the investment advisory agreement, by Eaton Vance under the
management contract or the administration agreement or by the Principal
Underwriter under the distribution agreement. Such costs and expenses to be
borne by each of the Fund or the Portfolio, as the case may be, include, without
limitation: custody and transfer agency fees and expenses, including those
incurred for determining net asset value and keeping accounting books and
records, expenses of pricing and valuation services; the cost of share
certificates; membership dues in investment company organizations; brokerage
commissions and fees; fees and expenses of registering under the securities
laws; expenses of reports 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
Eaton Vance or the Adviser; distribution and service fees payable by the Fund
under its Rule 12b-1 distribution plan; and investment advisory, management and
administration fees. The Fund or the Portfolio, as the case may be, will also
each bear expenses incurred in connection with litigation in which the Fund or
the Portfolio, as the case may be, is a party and any legal obligation to
indemnify its respective officers and Trustees with respect thereto, to the
extent not covered by insurance.
Eaton Vance and EV are both wholly-owned subsidiaries of EVC. BMR is a
wholly-owned subsidiary of Eaton Vance. Eaton Vance and BMR are both
Massachusetts business trusts, and EV is the trustee of Eaton Vance and BMR.
The Directors of EV are 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. Hawkes is chairman, president and chief
executive officer and Mr. Gardner is vice chairman, of EVC, Eaton Vance, BMR
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, the Voting Trustees of which are Messrs. Gardner,
Hawkes and Rowland, and Alan R. Dynner, Thomas E. Faust, Jr., William M.
Steul, and Wharton P. Whitaker. 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 Eaton Vance and BMR who are also officers, or officers and
Directors of EVC and EV. As of November 30, 1997, Messrs. Gardner and Hawkes
each owned 24% of such voting trust receipts, and Messrs. Roland and Faust
owned 15% and 13%, respectively, and Messrs. Dynner, Steul and Whitaker each
owned 8%. Messrs. Dynner, Gardner and Hawkes, who are officers and/or Trustees
of the Trust, and are members of the EVC, Eaton Vance, BMR and EV
organizations. Messrs. Murphy, O'Connor, Smiley and Woodbury and Ms. Sanders,
are officers of the Trust and/or the Portfolio, and are also members of the
Eaton Vance, BMR and EV organizations.
Eaton Vance owns all of the stock of Northeast Properties, Inc., which is
engaged in real estate investment. EVC also owns approximately 21% of the Class
A shares issued by LGM, parent of the Adviser. EVC owns all the stock of Fulcrum
Management, Inc. and MinVen, Inc., which are engaged in precious metal mining
venture investment and management. EVC, Eaton Vance, BMR and EV may also enter
into other businesses.
EVC and its affiliates and their officers and employees from time to time
have transactions with various banks, including the custodian of the Fund and
the Portfolio, IBT. It is Eaton Vance's opinion that the terms and conditions of
such transactions were not and will not be influenced by existing or potential
custodial or other relationships between the Fund or the Portfolio and such
banks.
CUSTODIAN
IBT acts as custodian for the Fund and the Portfolio. IBT has the custody of
all cash and securities of the Fund and all securities of the Portfolio
purchased in the United States, maintains the Fund's and the Portfolio's general
ledger and computes the daily net asset value of interests in the Portfolio and
the net asset value of shares of the Fund. In such capacities, IBT attends to
details in connection with the sale, exchange, substitution, transfer or other
dealings with the Fund's and the Portfolio's respective investments, receives
and disburses all funds, and performs various other ministerial duties upon
receipt of proper instructions from the Fund and the Portfolio, respectively.
Portfolio securities, if any, purchased by the Portfolio in the U.S. are
maintained in the custody of IBT or of other domestic banks or depositories.
Portfolio securities purchased outside of the U.S. are maintained in the custody
of foreign banks and trust companies that are members of IBT's Global Custody
Network, or foreign depositories used by such foreign banks and trust companies.
Each of the domestic and foreign custodial institutions holding portfolio
securities has been approved by the Board of Trustees of the Portfolio in
accordance with regulations under the 1940 Act.
IBT charges fees which are competitive within the industry. These fees for
the Portfolio relate to: (1) custody services based upon a percentage of the
market values of Portfolio securities; (2) bookkeeping and valuation services
provided at an annual rate; (3) activity charges, primarily the result of the
number of portfolio transactions; and (4) reimbursement of out-of-pocket
expenses. These fees are then reduced by a credit for cash balances of the
Portfolio at the custodian equal to 75% of the 91-day U.S. Treasury Bill auction
rate applied to the Portfolio's average daily collected balances. The portion of
the fee for the Fund related to bookkeeping and pricing services is based upon a
percentage of the Fund's net assets and the portion of the fee related to
financial statement preparation is a fixed amount. IBT also provides services in
connection with the preparation of shareholder reports and the electronic filing
of such reports with the Commission, for which it receives a separate fee.
SERVICES FOR ACCUMULATION -- CLASS A SHARES
The following services are voluntary, involve no extra charge, other than
the sales charge included in the offering price, and may be changed or
discontinued without penalty at any time.
Intended Quantity Investment -- Statement of Intention. If it is anticipated
that $50,000 or more of Class A shares and shares of other funds exchangeable
for Class A shares and listed under "The Eaton Vance Exchange Privilege" in the
Prospectus will be purchased within a 13-month period, a Statement of Intention
should be signed so that shares may be obtained at the same reduced sales charge
as though the total quantity were invested in one lump sum. Shares held under
Right of Accumulation (see below) as of the date of the Statement will be
included toward the completion of the Statement. The Statement authorizes the
Transfer Agent to hold in escrow sufficient shares (5% of the dollar amount
specified in the Statement) which can be redeemed to make up any difference in
sales charge on the amount intended to be invested and the amount actually
invested. Execution of a Statement does not obligate the shareholder to purchase
or the Fund to sell the full amount indicated in the Statement, and should the
amount actually purchased during the 13-month period be more or less than that
indicated on the Statement, price adjustments will be made. For sales charges
and other information on quantity purchases, see "How to Buy Shares" in the
Prospectus. Any investor considering signing a Statement of Intention should
read it carefully.
Right of Accumulation -- Cumulative Quantity Discount. The applicable sales
charge level for the purchase of Class A shares is calculated by taking the
dollar amount of the current purchase and adding it to the value (calculated at
the maximum current offering price) of the shares the shareholder owns in his or
her account(s) in the Fund and shares of other funds exchangeable for Class A
shares and listed under "The Eaton Vance Exchange Privilege" in the Prospectus.
The sales charge on the shares being purchased will then be at the rate
applicable to the aggregate. For sales charges on quantity purchases, see "How
to Buy Shares" in the Prospectus. Shares purchased (i) by an individual, his or
her spouse and their children under the age of twenty-one, and (ii) by a
trustee, guardian or other fiduciary of a single trust estate or a single
fiduciary account, will be combined for the purpose of determining whether a
purchase will qualify for the Right of Accumulation and if qualifying, the
applicable sales charge level.
For any such discount to be made available, at the time of purchase a
purchaser or his or her Authorized Firm must provide the Principal Underwriter
(in the case of a purchase made through an Authorized Firm) or the Transfer
Agent (in the case of an investment made by mail) with sufficient information to
permit verification that the purchase order qualifies for the accumulation
privilege. Confirmation of the order is subject to such verification. The Right
of Accumulation privilege may be amended or terminated at any time as to
purchases occurring thereafter.
SERVICE FOR WITHDRAWAL
The 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 Prospectus) based upon the value
of the shares held. The checks will be drawn from share redemptions and hence,
although they are a return of principal, may require the recognition of taxable
gain or loss. Income dividends and capital gains distributions in connection
with withdrawal plan accounts will be credited at net asset value as of the
record date for each distribution. Continued withdrawals in excess of current
income will eventually use up principal, particularly in a period of declining
market prices. A shareholder may not have a withdrawal plan in effect at the
same time he or she has authorized Bank Automated Investing or is otherwise
making regular purchases of Fund shares. The shareholder, the Transfer Agent or
the Principal Underwriter will be able to terminate the withdrawal plan at any
time without penalty.
DETERMINATION OF NET ASSET VALUE
The Trustees of the Portfolio have established the following procedures for
the fair valuation of the Portfolio's assets under normal market conditions.
Securities listed on foreign or U.S. securities exchanges or in the NASDAQ
National Market System generally are valued at closing sale prices or, if there
were no sales, at the mean between the closing bid and asked prices therefor on
the exchange where such securities are principally traded or on such National
Market System. Unlisted or listed securities for which closing sale prices are
not available are valued at the mean between the latest bid and asked prices. An
option is valued at the last sale price as quoted on the principal exchange or
board of trade on which such option or contract is traded, or in the absence of
a sale, the mean between the last bid and asked price. Futures positions on
securities or currencies are generally valued at closing settlement prices. All
other securities are valued at fair value as determined in good faith by or
pursuant to procedures established by the Trustees. Short term debt securities
with a remaining maturity of 60 days or less are valued at amortized cost. If
securities were acquired with a remaining maturity of more than 60 days, their
amortized cost value will be based on their value on the sixty-first day prior
to maturity. Other fixed income and debt securities, including listed securities
and securities for which price quotations are available, will normally be valued
on the basis of valuations furnished by a pricing service.
Generally, trading in the foreign securities owned by the Portfolio is
substantially completed each day at various times prior to the close of the
Exchange. The values of these securities used in determining the net asset value
of the Portfolio's shares are computed as of such times. Occasionally, events
affecting the value of foreign securities may occur between such times and the
close of the Exchange which will not be reflected in the computation of the
Portfolio's net asset value (unless the Portfolio deems that such events would
materially affect its net asset value, in which case an adjustment would be made
and reflected in such computation). Foreign securities and currency held by the
Portfolio will be valued in U.S. dollars; such values will be computed by the
custodian based on foreign currency exchange rate quotations.
Each investor in the Portfolio, including the Fund, may add to or reduce its
investment in the Portfolio on each day the Exchange is open for trading
("Portfolio Business Day") as of the close of regular trading on the Exchange
(the "Portfolio Valuation Time"). The value of each investor's interest in the
Portfolio will be determined by multiplying the net asset value of the Portfolio
by the percentage, determined on the prior Portfolio Business Day, which
represented that investor's share of the aggregate interests in the Portfolio on
such prior day. Any additions or withdrawals for the current Portfolio Business
Day will then be recorded. Each investor's percentage of the aggregate interest
in the Portfolio will then be recomputed as the percentage equal to a fraction
(i) the numerator of which is the value of such investor's investment in the
Portfolio as of the close of Portfolio Valuation Time on the prior Portfolio
Business Day plus or minus, as the case may be, that amount of any additions to
or withdrawals from the investor's investment in the Portfolio on the current
Portfolio Business Day, and (ii) the denominator of which is the aggregate net
asset value of the Portfolio as of the Portfolio Valuation Time on the prior
Portfolio Business Day plus or minus, as the case may be, the amount of the net
additions to or withdrawals from the aggregate investment in the Portfolio on
the current Portfolio Business Day by all investors in the Portfolio. The
percentage so determined will then be applied to determine the value of the
investor's interest in the Portfolio for the current Portfolio Business Day. The
Fund and Portfolio will be closed for business and will not price their shares
on the following business holidays: New Year's Day, Martin Luther King, Jr. Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
INVESTMENT PERFORMANCE
Average annual total return is determined separately for each Class of the
Fund by multiplying a hypothetical initial purchase order of $1,000 by the
average annual compound rate of return (including capital appreciation/
depreciation, and distributions paid and reinvested) for the stated period and
annualizing the results. The calculation assumes (i) that all distributions are
reinvested at net asset value on the reinvestment dates during the period, (ii)
the deduction of the maximum sales charge from the initial $1,000 purchase order
for Class A shares, (iii) a complete redemption of the investment, and (iv) the
deduction of any CDSC at the end of the period.
The Fund's total return may be compared to relevant indices, such as the
Consumer Price Index and various domestic and foreign securities indices. The
Fund's total return and comparisons with these indices may be used in
advertisements and in information furnished to present or prospective
shareholders. The Fund's performance may differ from that of other investors in
the Portfolio, including the other investment companies. In addition,
evaluations of the Fund's performance or rankings of mutual funds (which include
the Fund) made by independent sources may be used in advertisements and in
information furnished to present or prospective shareholders. Information,
charts and illustrations showing the effect of compounding interest or relating
to inflation and taxes (including their effects on the dollar and the return on
stocks and other investment vehicles) may also be included in advertisements and
materials furnished to present and prospective investors.
Information used in advertisements and in materials furnished to present or
prospective shareholders may include statistics, data and performance studies
prepared by independent organizations or included in various publications
reflecting the investment performance or return achieved by various classes and
types of investments (e.g. common stocks, small company stocks, long-term
corporate bonds, long-term government bonds, intermediate- term government
bonds, U.S. Treasury bills) over various periods of time. This information may
be used to illustrate the benefits of long-term investments in common stocks.
Information about the portfolio allocation, portfolio turnover and holdings of
the Portfolio may be included in advertisements and other material furnished to
present and prospective shareholders.
Information used in advertisements and materials furnished to present and
prospective investors may include statements or illustrations relating to the
appropriateness of certain types of securities and/or mutual funds to meet
specific financial goals. Such information may address:
-- cost associated with aging parents;
-- funding a college education (including its actual and estimated cost);
-- health care expenses (including actual and projected expenses);
-- long-term disabilities (including the availability of, and coverage
provided by, disability insurance); and
-- retirement (including the availability of social security benefits, the
tax treatment of such benefits and statistics and other information
relating to maintaining a particular standard of living and outliving
existing assets).
Such information may also address different methods for saving money and the
results of such methods, as well as the benefits of investing in equity
securities. Such information may describe: the potential for growth; the
performance of equities as compared to other investment vehicles; and the value
of investing as early as possible and regularly, as well as staying invested.
The benefits of investing in equity securities by means of a mutual fund may
also be included (such benefits may include diversification, professional
management and the variety of equity mutual fund products).
Information in advertisements and materials furnished to present and
prospective investors may include profiles of different types of investors
(i.e., investors with different goals and assets) and different investment
strategies for meeting specific financial goals. Such information may provide
hypothetical illustrations which include: results of various investment
strategies; performance of an investment in the Fund over various time periods;
and results of diversifying assets among several investments with varying
performance. Information in advertisements and materials furnished to present
and prospective investors may also include quotations (including editorial
comments) and statistics concerning investing in securities, as well as
investing in particular types of securities and the performance of such
securities.
The Principal Underwriter may provide investors with information on global
investing, which may include descriptions, comparisons, charts and/or
illustrations of foreign and domestic equity market capitalizations; returns
obtained by foreign and domestic securities; and the effects of globally
diversifying an investment portfolio (including volatility analysis and
performance information). Such information may be provided for a variety of
countries over varying time periods.
The Trust (or Principal Underwriter) may provide information about Eaton
Vance, its affiliates and other investment advisers to the funds in the Eaton
Vance Family of Funds in sales material or advertisements provided to investors
or prospective investors. Such material or advertisements may also provide
information on the use of investment professionals by such investors.
TAXES
Each series of the Trust is treated as a separate entity for accounting and
tax purposes. The Fund intends to elect to be treated, and to qualify each year
as a regulated investment company ("RIC") under the Code. Accordingly, the Fund
intends to satisfy certain requirements relating to sources of its income and
diversification of its assets and to distribute substantially all of its
ordinary income and net income in accordance with the timing requirements
imposed by the Code, so as to maintain its RIC status and to avoid paying any
federal income or excise tax. Because the Fund invests its assets in the
Portfolio, the Portfolio normally must satisfy the applicable source of income
and diversification requirements in order for the Fund to also satisfy these
requirements. The Portfolio will allocate at least annually among its investors,
including the Fund, the Portfolio's net investment income, net realized capital
gains, and any other items of income, gain, loss, deduction or credit. The
Portfolio will make allocations to the Fund in a manner intended to comply with
the Code and applicable regulations and will make moneys available for
withdrawal at appropriate times and in sufficient amounts to enable the Fund to
satisfy the tax distribution requirements that apply to the Fund and that must
be satisfied in order to avoid federal income and/or excise tax on the Fund. For
purposes of applying the requirements of the Code regarding qualification as a
RIC, the Fund (i) will be deemed to own its proportionate share of each of the
assets of the Portfolio and (ii) will be entitled to the gross income of the
Portfolio attributable to such share.
In order to avoid incurring a federal excise tax obligation, the Code
requires that the Fund distribute (or be deemed to have distributed) by December
31 of each calendar year at least 98% of its ordinary income (not including
tax-exempt income) for such year, at least 98% of its capital gain net income
(which is the excess of its realized capital gains over its realized capital
losses), generally computed on the basis of the one-year period ending on
October 31 of such year, after reduction by (i) any available capital loss
carryforwards and (ii) 100% of any income and capital gains from the prior year
(as previously computed) that was not paid out during such year and on which the
Fund paid no federal income tax. Under current law, provided that the Fund
qualifies as a RIC and the Portfolio is treated as a partnership for
Massachusetts and federal tax purposes, neither the Fund nor the Portfolio
should be liable for any income, corporate excise or franchise tax in the
Commonwealth of Massachusetts.
Certain foreign exchange gains and losses realized by the Portfolio and
allocated to the Fund in connection with the Portfolio's investments in foreign
securities and foreign currency related options, futures or forward contracts or
foreign currency may be treated as ordinary income and losses under special tax
rules. Certain options, futures or forward contracts of the Portfolio may be
required to be marked to market (i.e., treated as if closed out) on the last day
of each taxable year, and any gain or loss realized with respect to these
contracts may be required to be treated as 60% long-term and 40% short-term gain
or loss or, in the case of certain contracts relating to foreign currency, as
ordinary income or loss. Positions of the Portfolio in securities and offsetting
options, futures or forward contracts may be treated as "straddles", which are
subject to tax rules that may cause deferral of Portfolio losses, adjustments in
the holding periods of Portfolio securities, and other changes in the short-term
or long-term characterization of capital gains and losses, the effect of which
may be to change the amount, timing and character of the Fund's distributions to
shareholders. Certain uses of foreign currency and foreign currency derivatives
such as options, futures, forward contracts and swaps and investment by the
Portfolio in certain "passive foreign investment companies" may be limited or a
tax election may be made, if available, in order to preserve the Fund's ability
to qualify as a RIC or avoid imposition of a tax on the Fund.
The Portfolio anticipates that it will be subject to foreign taxes on its
income (including, in some cases, capital gains) from foreign securities. Tax
conventions between certain countries and the U.S. may reduce or eliminate such
taxes in some cases. If more than 50% of the Fund's total assets, taking into
account its allocable share of the Portfolio's total assets, at the close of any
taxable year of the Fund consists of stock or securities of foreign
corporations, the Fund may file an election with the Internal Revenue Service
(the "IRS") pursuant to which shareholders of the Fund will be required to (i)
include in ordinary gross income (in addition to dividends and distributions
actually received) their pro rata shares of foreign income taxes paid by the
Portfolio and allocated to the Fund even though not actually received by them,
and (ii) treat such respective pro rata portions as foreign income taxes paid by
them. Shareholders may then deduct such pro rata portions of foreign income
taxes in computing their taxable incomes, or, alternatively, use them as foreign
tax credits, subject to applicable limitations, against their U.S. income taxes.
Shareholders who do not itemize deductions for federal income tax purposes will
not, however, be able to deduct their pro rata portion of foreign taxes deemed
paid by the Fund, although such shareholders will be required to include their
shares of such taxes in gross income. Shareholders who claim a foreign tax
credit for such foreign taxes may be required to treat a portion of dividends
received from the Fund as a separate category of income for purposes of
computing the limitations on the foreign tax credit. Tax- exempt shareholders
will ordinarily not benefit from this election. Each year that the Fund files
the election described above, its shareholders will be notified of the amount of
(i) each shareholder's pro rata share of foreign income taxes paid by the
Portfolio and allocated to the Fund and (ii) the portion of Fund dividends which
represents income from each foreign country. If the Fund does not make this
election, it may deduct its allocated share of such taxes in computing the
income it is required to distribute.
The Portfolio will allocate at least annually to the Fund and its other
investors their respective distributive shares of any net investment income and
net capital gains which have been recognized for federal income tax purposes
(including unrealized gains at the end of the Portfolio's fiscal year on certain
options and futures transactions that are required to be marked-to- market).
Such amounts will be distributed by the Fund to its shareholders in cash or
additional shares, as they elect. Shareholders of the Fund will be advised of
the nature of the distributions.
Distributions by the Fund of the excess of net long-term capital gain over
net short-term capital loss earned by the Portfolio and allocated to the Fund,
taking into account any capital loss carryforwards that may be available, are
taxable to shareholders of the Fund as long-term capital gains, whether received
in cash or in additional shares and regardless of the length of time their
shares have been held.
Any loss realized upon the redemption or exchange of shares of the Fund with
a tax holding period of 6 months or less will be treated as a long-term capital
loss to the extent of any distribution of net long-term capital gains with
respect to such shares. All or a portion of a loss realized upon a redemption or
other disposition of Fund shares may be disallowed under "wash sale" rules if
other Fund shares are purchased (whether through reinvestment of dividends or
otherwise) within 30 days before or after the disposition. Any disallowed loss
will result in an adjustment to the shareholder's tax basis in some or all of
the other shares acquired.
Amounts paid by the Fund to individuals and certain other shareholders who
have not provided the Fund with their correct taxpayer identification number
("TIN") and certain certifications required by the IRS, as well as shareholders
with respect to whom the Fund has received certain information from the IRS or a
broker, may be subject to "backup" withholding of federal income tax arising
from the Fund's dividends and other distributions as well as the proceeds of
redemption transactions (including repurchases and exchanges), at a rate of 31%.
An individual's TIN is generally his or her social security number.
The foregoing discussion does not address the special tax rules applicable
to certain classes of investors, such as IRAs and other retirement plans,
tax-exempt entities, insurance companies and financial institutions.
Shareholders should consult their own tax advisers with respect to these or
other special tax rules that may apply in their particular situations, as well
as the state, local, and, when applicable, foreign tax consequences of investing
in the Fund.
PRINCIPAL UNDERWRITER
The Trust has authorized the Principal Underwriter to act as its agent in
repurchasing shares at the rate of $2.50 for each repurchase transaction handled
by the Principal Underwriter. The Principal Underwriter estimates that the
expenses incurred by it in acting as repurchase agent for the Trust will exceed
the amounts paid therefor.
CLASS A SHARES. Class A shares of the Fund may be continuously purchased at
the public offering price through Authorized Firms which have agreements with
the Principal Underwriter. The Trust reserves the right to suspend or limit the
offering of its shares to the public at any time. The public offering price is
the net asset value next computed after receipt of the order, plus, where
applicable, a variable percentage (sales charge) depending upon the amount of
purchase as indicated by the sales charge table set forth in the Prospectus (see
"How to Buy Shares"). Such table is applicable to purchases of a Fund alone or
in combination with purchases of certain other funds offered by the Principal
Underwriter, made at a single time by (i) an individual, or an individual, his
spouse and their children under the age of twenty-one, purchasing shares for his
or their own account, and (ii) a trustee or other fiduciary purchasing shares
for a single trust estate or a single fiduciary account. The table is also
presently applicable to (1) purchases of Class A shares pursuant to a written
Statement of Intention or (2) purchases of Class A shares pursuant to the Right
of Accumulation and declared as such at the time of purchase.
Subject to the applicable provisions of the 1940 Act, the Trust may issue
Class A shares at net asset value in the event that an investment company
(whether a regulated or private investment company or a personal holding
company) is merged or consolidated with or acquired by the Class. Normally no
sales charges will be paid in connection with an exchange of Class A shares for
the assets of such investment company. Class A shares may be sold at net asset
value to any officer, director, trustee, general partner or employee of the
Trust, a Portfolio or any investment company for which Eaton Vance or BMR acts
as investment adviser, any investment advisory, agency, custodial or trust
account managed or administered by Eaton Vance or by any parent, subsidiary or
other affiliate of Eaton Vance, or any officer, director or employee of any
parent, subsidiary or other affiliate of Eaton Vance. The terms "officer,"
"director," "trustee," "general partner" or "employee" as used in this paragraph
include any such person's spouse and minor children, and also retired officers,
directors, trustees, general partners and employees and their spouses and minor
children. Class A shares may also be sold at net asset value to registered
representatives and employees of Authorized Firms and to the spouses and
children under the age of 21 and beneficial accounts of such persons.
The Principal Underwriter acts as principal in selling Class A shares under
a Distribution Agreement with the Trust. The expenses of printing copies of
prospectuses used to offer shares to Authorized Firms or investors and other
selling literature and of advertising are borne by the Principal Underwriter.
The fees and expenses of qualifying and registering and maintaining
qualifications and registrations of the Fund and its Class A shares under
federal and state securities laws are borne by the Class. The Distribution
Agreement is renewable annually by the Board of Trustees of the Trust (including
a majority of the noninterested Trustees), may be terminated on six months'
notice by either party and is automatically terminated upon assignment. The
Principal Underwriter distributes Class A shares on a "best efforts" basis under
which it is required to take and pay for only such shares as may be sold. The
Principal Underwriter allows Authorized Firms discounts from the applicable
public offering price which are alike for all Authorized Firms. The Principal
Underwriter may allow, upon notice to all Authorized Firms with whom it has
agreements, discounts up to the full sales charge during the periods specified
in the notice. During periods when the discount includes the full sales charge,
such Authorized Firms may be deemed to be underwriters as that term is defined
in the Securities Act of 1933.
CLASS B SHARES. Under a Distribution Agreement, the Principal Underwriter
acts as principal in selling Class B shares. 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 Class B shares under federal and state
securities laws are borne by the Class. In addition, Class B makes payments to
the Principal Underwriter pursuant to a Distribution Plan as described in the
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 the noninterested
Trustees who have no direct or indirect financial interest in the operation of
the Distribution Plan or the Distribution Agreement), may be terminated on sixty
days' notice either by such Trustees or by vote of a majority of the outstanding
Class B shares or on six months' notice by the Principal Underwriter and is
automatically terminated upon assignment. The Principal Underwriter distributes
Class B shares on a "best efforts" basis under which it is required to take and
pay for only such shares as may be sold.
DISTRIBUTION PLANS
CLASS A SHARES
As described in the Prospectus, in addition to the fees and expenses
described herein, the Trust on behalf of its Class A shares finances
distribution activities and bears expenses associated with the distribution of
shares and the provision of certain personal and account maintenance services to
shareholders pursuant to a distribution plan (the "Plan") designed to meet the
requirements of Rule 12b-1 under the 1940 Act.
The Plan remains in effect from year to year provided such continuance is
approved at least annually by a vote of both a majority of (i) the noninterested
Trustees of the Trust who have no direct or indirect financial interest in the
operation of the Plan or any agreement related to the Plan (the "Rule 12b-1
Trustees") and (ii) all of the Trustees then in office. The Plan may be
terminated at any time by vote of a majority of the Rule 12b-1 Trustees or by
vote of a majority of the outstanding Class A shares of the Fund. The Plan
requires quarterly Trustee review of a written report of the amount expended
under the Plan and the purposes for which such expenditures were made. The Plan
may not be amended to increase materially the payments described therein without
approval of the affected shareholders of Class A shares and the Trustees. So
long as the Plan is in effect, the selection and nomination of the noninterested
Trustees shall be committed to the discretion of such Trustees. The Trustees
have determined that in their judgment there is a reasonable likelihood that the
Plan will benefit the Fund and its shareholders.
The Plan is intended to compensate the Principal Underwriter for its
distribution services to the Fund by paying the Principal Underwriter monthly
distribution fees in connection with the sale of Class A shares. The quarterly
service fee paid by the Class A shares under the Plan is intended to compensate
the Principal Underwriter for its personal and account maintenance services and
for the payment by the Principal Underwriter of service fees to Authorized
Firms.
CLASS B SHARES
The Trust has adopted a Distribution Plan (the "Plan") on behalf of its
Class B shares designed to meet the requirements of Rule 12b-1 under the 1940
Act and the sales charge rule of the NASD. The purpose of the Plan, is to
compensate the Principal Underwriter for its distribution services and
facilities provided with respect to Class B shares.
The Plan provide that the Fund will pay sales commissions and distribution
fees to the Principal Underwriter only after and as a result of the sale of
Class B 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 amount payable to the Principal Underwriter pursuant to the Plans as
sales commissions and distribution fees with respect to each day will be accrued
on such day as a liability of the respective Class and will accordingly reduce
the net assets of the Class 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 net assets of the Class on such day. The level of net
assets changes each day and depends upon the amount of sales and redemptions of
shares, the changes in the value of the investments held by the Portfolio, the
expenses of the Class, Fund and the Portfolio accrued and allocated to the Fund
and Class 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 Trust does not accrue possible future payments as a
liability of a Class or reduce current net assets in respect of unknown amounts
which may become payable under the Plan in the future because the standards for
accrual of such a liability under accounting principles have not been satisfied.
The Plan provides that the Class will receive all CDSCs 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.
CDSCs and accrued amounts will be paid by the Trust to the Principal Underwriter
whenever there exist uncovered distribution charges.
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 Trust to the Principal Underwriter and CDSCs theretofore
paid or payable to the Principal Underwriter less all amounts theretofore paid
or payable to the Principal Underwriter by the Adviser in consideration of the
former's distribution efforts, will be subtracted from such distribution
charges; if the result of such subtraction is positive, a distribution fee
(computed at 1% over the prime rate then reported in The Wall Street Journal)
will be computed on such amount and added thereto, with the resulting sum
constituting the amount of outstanding uncovered distribution charges with
respect to such day. The amount of outstanding uncovered distribution charges of
the Principal Underwriter calculated on any day does not constitute a liability
recorded on the financial statements of the Fund.
The amount of uncovered distribution charges of the Principal Underwriter at
any particular time depends upon various changing factors, including the level
and timing of sales of shares, the nature of such sales (i.e., whether they
result from exchange transactions, reinvestments or from cash sales through
Authorized Firms), the level and timing of redemptions of shares upon which a
CDSC will be imposed, the level and timing of redemptions of shares upon which
no CDSC will be imposed (including redemptions of shares pursuant to the
exchange privilege which result in a reduction of uncovered distribution
charges), changes in the level of the net assets of the Class, and changes in
the interest rate used in the calculation of the distribution fee under the
Plan. Periods with a high level of sales of Class shares accompanied by a low
level of early redemptions of Class shares resulting in the imposition of CDSCs
will tend to increase the time during which there will exist uncovered
distribution charges of the Principal Underwriter.
Currently, payments of sales commissions and distribution fees and of
service fees may equal, 1% of a Class' average daily net assets per annum. The
Trust believes that the combined rate of all these payments may be higher than
the rate of payments made under distribution plans adopted by other investment
companies pursuant to Rule 12b-1. Although the Principal Underwriter will use
its own funds (which may be borrowed from banks) to pay sales commissions at the
time of sale, it is anticipated that the Eaton Vance organization will profit by
reason of the operation of the Plan through an increase in the Fund's assets
(thereby increasing the management fee payable to Eaton Vance by the Fund and
the administration fee payable to Eaton Vance by the Portfolio) resulting from
sale of shares and through the amounts paid to the Principal Underwriter,
including CDSCs, pursuant to the 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, from the Adviser in consideration of the distribution efforts and from
CDSCs have exceeded the total expenses theretofore incurred by such organization
in distributing Class B shares of the Fund. Total expenses for this purpose will
include an allocable portion of the overhead costs of such organization and its
branch offices, which costs will include without limitation leasing expense,
depreciation of building and equipment, utilities, communication and postage
expense, compensation and benefits of personnel, travel and promotional expense,
stationery and supplies, literature and sales aids, interest expense, data
processing fees, consulting and temporary help costs, insurance, taxes other
than income taxes, legal and auditing expense and other miscellaneous overhead
items. Overhead is calculated and allocated for such purpose by the Eaton Vance
organization in a manner deemed equitable to the Trust.
The Plan continues in effect from year to year for so long as such
continuance is approved at least annually by the vote of both a majority of (i)
the noninterested Trustees of the Trust who have no direct or indirect financial
interest in the operation of the Plan or any agreements related to the Plan (the
"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 each 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 applicable Class. The Plan requires quarterly Trustee review of a written
report of the amount expended under the Plan and the purposes for which such
expenditures were made. The Plan may not be amended to increase materially the
payments described therein without approval of the shareholders of the affected
Class and the Trustees. So long as the Plan is in effect, the selection and
nomination of the noninterested Trustees shall be committed to the discretion of
such Trustees.
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 Class
B 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 Class B 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 Class B shareholders.
PORTFOLIO SECURITY TRANSACTIONS
Decisions concerning the execution of portfolio security transactions by the
Portfolio, including the selection of the market and the broker-dealer firm, are
made by the Adviser.
The Adviser places the portfolio security transactions of the Portfolio and
of certain other accounts managed by the Adviser for execution with many firms.
The Adviser uses its best efforts to obtain execution of portfolio security
transactions at prices which are advantageous to the Portfolio and (when a
disclosed commission is being charged) at reasonably competitive commission
rates. In seeking such execution, the Adviser will use its best judgment in
evaluating the terms of a transaction, and will give consideration to various
relevant factors, including without limitation the size and type of the
transaction, the general execution and operational capabilities of the
broker-dealer, the nature and character of the market for the security, the
confidentiality, speed and certainty of effective execution required for the
transaction, the reputation, reliability, experience and financial condition of
the broker-dealer, the value and quality of services rendered by the
broker-dealer in other transactions, and the reasonableness of the commission or
spread, if any. Transactions on stock exchanges and other agency transactions
involve the payment by the Portfolio of negotiated brokerage commissions. Such
commissions vary among different broker-dealer firms, and a particular
broker-dealer may charge different commissions according to such factors as the
difficulty and size of the transaction and the volume of business done with such
broker-dealer. Transactions in foreign securities usually involve the payment of
fixed brokerage commissions, which are generally higher than those in the United
States. There is generally no stated commission in the case of securities traded
in the over-the-counter markets, but the price paid or received by the Portfolio
usually includes an undisclosed dealer markup or markdown. In an underwritten
offering the price paid by the Portfolio includes a disclosed fixed commission
or discount retained by the underwriter or dealer. Although commissions paid on
portfolio transactions will, in the judgment of the Adviser, be reasonable in
relation to the value of the services provided, commissions exceeding those
which another firm might charge may be paid to broker-dealers who were selected
to execute transactions on behalf of the Portfolio and the Adviser's other
clients in part for providing brokerage and research services to the Adviser.
As authorized in Section 28(e) of the Securities Exchange Act of 1934, a
broker or dealer who executes a portfolio transaction on behalf of the Portfolio
may receive a commission which is in excess of the amount of commission another
broker or dealer would have charged for effecting that transaction if the
Adviser determines in good faith that such 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 the Adviser and its affiliates have for
accounts over which they exercise investment discretion. In making any such
determination, the Adviser will not attempt to place a specific dollar value on
the brokerage and research services provided or to determine what portion of the
commission should be related to such services. Brokerage and research services
may include advice as to the value of securities, the advisability of investing
in, purchasing, or selling securities, and the availability of securities or
purchasers or sellers of securities; furnishing analyses and reports concerning
issuers, industries, securities, economic factors and trends, portfolio strategy
and the performance of accounts; and effecting securities transactions and
performing functions incidental thereto (such as clearance and settlement); and
the "Research Services" referred to in the next paragraph.
It is a common practice in the investment advisory industry for the advisers
of investment companies, institutions and other investors to receive research,
statistical and quotation services, data, information and other services,
products and materials which assist such advisers in the performance of their
investment responsibilities ("Research Services") from broker-dealers which
execute portfolio transactions for the clients of such advisers and from third
parties with which such broker-dealers have arrangements. Consistent with this
practice, the Adviser may receive Research Services from broker-dealer firms
with which the Adviser places the portfolio transactions of the Portfolio and
from third parties with which these broker-dealers have arrangements. These
Research Services may include such matters as general economic and market
reviews, industry and company reviews, evaluations of securities and portfolio
strategies and transactions and recommendations as to the purchase and sale of
securities and other portfolio transactions, financial, industry and trade
publications, news and information services, pricing and quotation equipment and
services, and research oriented computer hardware, software, data bases and
services. Any particular Research Service obtained through a broker-dealer may
be used by the Adviser in connection with client accounts other than those
accounts which pay commissions to such broker-dealer. Any such Research Service
may be broadly useful and of value to the Adviser in rendering investment
advisory services to all or a significant portion of its clients, or may be
relevant and useful for the management of only one client's account or of a few
clients' accounts, or may be useful for the management of merely a segment of
certain clients' accounts, regardless of whether any such account or accounts
paid commissions to the broker-dealer through which such Research Service was
obtained. The advisory fee paid by the Portfolio is not reduced because the
Adviser receives such Research Services. The Adviser evaluates the nature and
quality of the various Research Services obtained through broker-dealer firms
and attempts to allocate sufficient commissions to such firms to ensure the
continued receipt of Research Services which the Adviser believes are useful or
of value to it in rendering investment advisory services to its clients.
Subject to the requirement that the Adviser shall use its best efforts to
seek to execute portfolio security transactions of the Portfolio at advantageous
prices and at reasonably competitive commission rates or spreads, the Adviser is
authorized to consider as a factor in the selection of any broker-dealer firm
with whom Portfolio orders may be placed the fact that such firm has sold or is
selling shares of the Fund or of other investment companies sponsored by Eaton
Vance. This policy is not inconsistent with a rule of the NASD, which rule
provides that no firm which is a member of the NASD shall favor or disfavor the
distribution of shares of any particular investment company or group of
investment companies on the basis of brokerage commissions received or expected
by such firm from any source.
Securities considered as investments for the Portfolio may also be
appropriate for other investment accounts managed by the Adviser or its
affiliates. The Adviser will attempt to allocate in a manner it deems equitable
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. However, there may be instances
when the Portfolio will not participate in a securities transaction that is
allocated among other accounts. While these procedures 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 Adviser's organization outweigh any
disadvantage that may arise from exposure to simultaneous transactions.
OTHER INFORMATION
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. Eaton Vance, pursuant to its agreement with the Trust, controls the
use of the words "Eaton Vance" and "EV" in the Trust's name and may use the
words "Eaton Vance" or "EV" 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, the financial interests of which are affected by the amendment. The
Trustees may also amend the Declaration of Trust without the vote or consent of
shareholders to change the name of the Trust or any series or to make such other
changes (such as reclassifying series or classes of shares or restructuring the
Trust) as do not have a materially adverse effect on the 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 Trust will indemnify its Trustees and officers against
liabilities and expenses incurred in connection with any litigation or
proceeding in which they may be involved because of their offices with the
Trust. However, no indemnification will be provided to any Trustee or officer
for any liability to the Trust or 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
shareholder. (The Declaration also contains provisions limiting the liability of
a series or class to that series or class.) Moreover, the Trust's By-laws also
provide for indemnification out of the property of the Fund of any shareholder
held personally liable solely by reason of being or having been a shareholder
for all loss or expense arising from such liability. The assets of the Fund are
readily marketable and will ordinarily substantially exceed its liabilities. In
light of the nature of the Fund's business and the nature of its assets,
management believes that the possibility of the Fund's liabilities 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 shareholder's 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 holding
office have been elected by investors. In such an event the Trustees of the
Portfolio then in office will call an investors' meeting for the election of
Trustees. Except for the foregoing circumstances and unless removed by action of
the investors in accordance with the Portfolio's Declaration of Trust, the
Trustees shall continue to hold office and may appoint successor Trustees.
The Declaration of Trust of the Portfolio provides that no person shall
serve as a Trustee if investors holding two-thirds of the outstanding 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 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.
The Portfolio's Declaration of Trust 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.
The right to redeem shares of the Fund can be suspended and the payment of
the redemption price deferred when the Exchange is closed (other than for
customary weekend and holiday closings), during periods when trading on the
Exchange is restricted as determined by the 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 CERTIFIED PUBLIC ACCOUNTANTS
Deloitte & Touche LLP, 125 Summer Street, Boston, Massachusetts, are the
independent certified public accountants of the Fund and the Portfolio,
providing audit services, tax return preparation, and assistance and
consultation with respect to the preparation of filings with the Commission.
FINANCIAL STATEMENTS
The audited financial statements of and the independent auditors' report for
the Portfolio appear herein.
<PAGE>
RUSSIA AND EASTERN EUROPE PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 17, 1997
ASSETS:
Cash .................................. $100,010
--------
Total assets .................... $100,010
LIABILITIES: 0
--------
NET ASSETS .................................. $100,010
========
NOTES:
(1) Russia and Eastern Europe Portfolio (the "Portfolio") was organized as a New
York Trust on October 17, 1997 and has been inactive since that date, except
for matters relating to its organization and registration as an investment
company under the Investment Company Act of 1940 and the sale of interests
therein at the purchase price of $100,000 to Boston Management and Research
and $10 to Eaton Vance Management (the "Initial Interests").
(2) At 4:00 p.m., New York City time, on each business day of the Portfolio, the
value of an investor's interest in the Portfolio is equal to the product of
(i) the aggregate net asset value of the Portfolio multiplied by (ii) the
percentage representing that investor's share of the aggregate interest in
the Portfolio effective for that day.
<PAGE>
REPORT OF INDEPENDENT AUDITORS'
To the Trustees and Investors of Russia and Eastern Europe Portfolio:
We have audited the accompanying statement of assets and liabilities of
Russia and Eastern Europe Portfolio (a New York Trust) as of October 17, 1997.
This financial statement is the responsibility of the Portfolio's management.
Our responsibility is to express an opinion on this financial statement 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 statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. 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 statement referred to above presents fairly,
in all material respects, the financial position of Russia and Eastern Europe
Portfolio as of October 17, 1997, in conformity with generally accepted
accounting principles.
Deloitte & Touche LLP
Boston, Massachusetts
October 20, 1997
<PAGE>
APPENDIX A
REE REGION COUNTRIES
The information set forth in this Appendix has been extracted from various
government and private publications. The Trust's Board of Trustees makes no
representation as to the accuracy of the information, nor has the Board of
Trustees attempted to verify it. No representation is made that any correlation
will exist between the economies or stock markets of REE Region countries and
the Fund's performance.
Over time the Portfolio may invest in the following countries in the Region:
Albania, Armenia, Azerbaijan, Belarus, People's Republic of Bulgaria, Croatia,
Czech Republic, Estonia, Georgia, Republic of Hungary, Kazakhstan, Kyrgyzstan,
Latvia, Lithuania, Macedonia, Moldova, Montenegro, Republic of Poland, Romania,
Russian Federation, Serbia, Slovakia, Slovenia, Tajikistan, Turkmenistan,
Turkey, Ukraine and Uazbekistan. Set forth below is selected information
regarding those countries with more developed securities markets.
RUSSIA
The Russian Federation has a land area of approximately 6.6 million square
miles. It has a population of approximately 150 million.
At the beginning of the 20th century, the Russian Empire extended throughout
vast territories in Eastern Europe and included most of northern and central
Asia. It was ruled as an autocracy by the Romanov dynasty. In February 1917, the
Czar abdicated. In 1922, the Bolsheviks formed the Union of Soviet Socialist
Republics (the "Soviet Union"). The Soviet Union experienced considerable
hardship as a result of the collectivization campaign in the early 1930s and the
widespread repression under Stalin, who established a dictatorship after the
death of Lenin in 1924. Shortly after the death of Stalin in 1953, Nikita
Khrushchev assumed predominance in the Soviet leadership. He instituted certain
political and economic reforms, but was overthrown in 1964 and replaced by
Leonid Brezhnev.
Throughout the 1970s, Soviet economic performance gradually worsened.
Brezhnev's successor, Yuri Andropov made some economic reforms, which were
continued and greatly expanded under Mikhail Gorbachev. In the early 1990s, the
Soviet Republics became, by stages, first states in a loose federation, then
fully independent states, some of which were constituted into the Commonwealth
of Independent States. The Soviet Union was dissolved in December 1992.
In June 1991, Boris Yeltsin was elected president of Russia. He implemented
a variety of political and economic reforms to transform Russia from a
centrally-planned economy to a market oriented system. In July 1996, Yeltsin
succeeded in winning re-election.
A civil war in Chechnya has highlighted the political tensions that exist
between the central government in Moscow and some of the regions within the
Russian Federation. The risk exists that armed conflict in Chechnya will
continue, which could deter foreign investment and international aid and weaken
the reformist government's control. Opposition parties to the reform process are
still a strong political force, particularly in the Russian parliament.
Although statistical indicators show that Russia's economy is improving,
Russia has suffered severe economic hardship over the past five years. The
economic reforms initiated by Yeltsin's government since January 1992 have
sought to liberalize most prices, reduce central government expenditures and
achieve lasting structural changes by means of the transfer to private ownership
of state enterprises. Privatization has resulted in almost 80% of the industrial
workforce shifting from the state to the private sector. The vast majority of
retail prices have been liberalized, which resulted in high but declining
inflation through 1995. The ruble has become freely convertible for trade
purposes, and, although it has suffered tremendous depreciation over the last
five years, it now trades within a managed "crawling band" against the U.S.
dollar. The International Monetary Fund ("IMF") has recognized Russia's progress
and in 1996 granted a further three year $10.1 billion loan program,
complementing its earlier standby facility of $6.8 billion in 1995. Russia's
economy did not display positive growth from 1990 through 1996.
After the 1990 law relating to the establishment of securities exchanges, a
significant number of exchanges were created throughout Russia. This number has
now fallen from over 200 to approximately 60 exchanges, the largest of which are
located in Moscow, St. Petersburg and Vladivostok. The vast majority of share
transactions are carried out in the over-the-counter market between Moscow
brokers. A screen based system known as the Russian Trading System ("RTS"),
modeled on NASDAQ, has been in existence since early 1995. Approximately 104
issues are listed on the RTS. In June 1996 the market capitalization of the top
50 stocks in Russia was approximately $19 billion.
Russia's securities markets are regulated by the Federal Securities Market
Commission. Legislation has been recently passed to help the Commission protect
shareholders' rights and also to ensure against securities fraud. Although
shareholder protection is increasing in Russia, nearly all of the legislation is
new and has not been implemented or tested. The Moscow over-the-counter market
is also self-regulated by its brokers, through a body known as PAUFOR.
Clearing and settlement procedures in Russia, while improving, are still
being developed. Transfer of share ownership generally may only be effected
through the traded company's share registry and there may be significant delays
and difficulties in getting shares properly issued and registered. Certain
organizations, such as the National Registry Company, sponsored by the IFC and
the European Bank of Reconstruction and Development ("EBRD"), have been set up
to help with these problems and are beginning to become integrated into the
market.
Russian companies, with few exceptions, generally have no meaningful
historical financial data, and shareholder reporting obligations are unclear.
Russian accounting differs significantly from Western accounting, and as a
result the current Russian accounts published by firms are unreliable. There are
limitations on private security ownership and foreign ownership of certain
strategic industries, particularly those associated with national defense.
THE CZECH REPUBLIC
The Czech Republic has a land area of approximately 30,000 square miles. It
has a population of approximately 10 million.
The Republic of Czechoslovakia was established in 1918, following the
collapse of the Austro-Hungarian Empire by the joining of the Czech lands of
Bohemia and Moravia, and Slovakia. From 1918 to 1939, a stable democratic system
of government existed and the economy was the most industrialized and prosperous
in Central and Eastern Europe. Czechoslovakia was occupied by German forces from
1939 to 1945. After their expulsion, a communist People's Republic was
established in 1948 under the Soviet Union's influence. In the 1960s, reforms
were undertaken; in response, Warsaw Pact forces invaded Czechoslovakia and
replaced the government in 1968.
Late in 1989, a new government was formed with a majority of non-Communist
members. In 1990, the first free legislative elections since 1946 were held. On
January 1,1993, Czechoslovakia officially became two separate nations, namely,
the Czech Republic and Slovakia.
Price controls in the former Czechoslovakia were removed in January 1991 and
this led to a steep rise in inflation. In 1995, however, the consumer price
index is estimated to have risen at an annual rate of 9.1%. A recovery in
domestic demand and a pronounced improvement in exports has caused the economy
to grow in real terms by 2.6% in 1994 and 4.8% in 1995. The Czech Republic has
been extremely successful at restricting state expenditures, and has run a
budget surplus.
Before the dissolution of Czechoslovakia, a large scale mass-privatization
program was implemented that distributed shares in almost 1,500 state owned
companies with an estimated market capitalization of $10 billion to the citizens
of Czechoslovakia. The program has resulted in the rapid transfer of the
majority of state enterprises into the private sector, which is speeding
economic restructuring and recovery. Foreign companies have been able to
participate, to some extent, in the privatization process. Nominally or wholly
private firms now produce over 60% of the country's output. However, through the
National Property Fund, the government continues to hold significant minority
positions in most large Czech enterprises. Germany and Austria are now the Czech
Republic's principal trading partners, due in part to their historic and
geographic links with the Czech Republic. The Czech government has entered into
agreements with the European Community as well as the European Free Trade
Association. The rate of unemployment stood at 2.9% in December 1995.
The Prague Stock Exchange ("PSE") was originally opened in 1871, but was
closed at the end of World War II. The PSE was reopened in June 1993. There are
only 65 companies that have satisfied the disclosure requirements of the PSE and
are officially "listed." There are over 1,600 companies eligible for
over-the-counter trading, with approximately 330-350 companies trading actively
each session. At the end of 1995, the market capitalization of the PSE was
approximately $15.7 billion. The Czech securities markets are regulated by a
Securities Commission established by the Ministry of Finance. The Securities
Commission administers and regulates the financial reporting system, supervises
participants in the securities markets and establishes guidelines for the
listing of securities. Clearing and settlement of trades occurs within three
business days and is effected through the Czech National Bank's Clearing Centre.
The Czech Commercial Code and the Accountancy Act, both promulgated in 1992,
establish requirements relating to the capitalization, books and records and
auditing of Czech companies.
Currently, there are no restrictions on foreign portfolio investment except
that certain restrictions exist with respect to securities offered in
privatizations or by financial or defense institutions. There are no
restrictions on the repatriation of the proceeds of securities transactions.
POLAND
Poland has a land area of approximately 121,000 square miles. It has a
population of approximately 39 million.
Poland was declared an independent republic in November 1918. The country
was ruled by a military regime from 1926 until 1939. It was invaded and occupied
by Germany in 1939 and subsequently by Soviet forces in 1945. A procommunist
provisional government was set up under Soviet auspices in 1946. The elections
in January 1947 were won by a communist-led bloc, which subsequently established
a People's Republic. In the 1980s, labor unrest grew, lead by Solidarity. In May
1990, the first fully free elections in more than 50 years were held.
The first post-communist government in Poland implemented a stabilization
and liberalization program in 1990 that expanded the reforms started during the
1980s. That program led to a drastic reduction in the money supply, higher
interest rates, elimination of the budget deficit and price liberalization. The
extreme austerity measures had profound economic and social repercussions. In
the first quarter of 1990, industrial production and officially recorded real
wages dropped by about 30% and 50% respectively. Unemployment, which was 6.3% at
the end of 1990, grew to 11.8% by the end of 1991 as the number of pensioners
grew by 12%. The government incurred high budget deficits, which reached more
than 6% of GDP in 1992.
GDP began to increase in 1992 with almost 7% growth in 1995. Industrial
output rose by 9.4% in real terms from 1994 to 1995 and Poland was the first
country in Central and Eastern Europe to achieve recovery of GDP to pre-
transition levels.
During the first months of 1990, inflation was more than 5% a month, but by
1995 it fell to 26.8% per annum. The unemployment rate rose during the early
1990s, reaching approximately 16.7% in the third quarter of 1994 and then
declined to 15% by the end of 1995.
Growth in exports has been an important component of Poland's economic
performance. In 1995, 38% of the country's exports went to Germany.
In March 1991, certain western creditor governments agreed to cancel 50% of
Poland's debt in two stages on the condition that the Polish economy stay within
IMF fiscal and economic guidelines. Since that time, Poland's external debt
situation has improved significantly. Total external hard currency debt was
$53.6 billion in 1991 and has fallen to an estimated $43.5 billion by 1995. As a
consequence of the debt reduction, Poland's government was able to issue a
five-year $250 million Eurobond in June 1995.
One of the government's most important economic achievements has been
privatization. In August 1992, the government designed a mass privatization
program that offered shares in 514 state-owned companies through a selection of
15 National Investment Funds (NIF). Every Polish citizen is entitled to a
voucher at a nominal fee that entitles the holder to one share of each NIF,
which are managed by both domestic and international investment managers.
Vouchers in the investment funds started trading on July 15, 1996 and the NIFs
are expected to list in 1997. It is estimated that the private sector in Poland
contributes 65% of GDP, compared to 31% in 1990.
The Warsaw Stock Exchange ("WSE") was re-opened by an act of the Polish
government in July 1991, 52 years after its close in 1939. The trading system is
similar to the French par casier method of quotation, the main features being
that it is order driven, centralized onto a single exchange floor and paperless.
On December 31, 1995, the market capitalization on the WSE was approximately
$4.6 billion. The government of Poland has established a Securities Commission
(the "Commission") as its main administrative body responsible for monitoring
the Polish securities market, supervising all public trading, including trading
on the WSE, and regulating brokers. In addition, a Brokers Association is
responsible for regulating the activities and conduct of brokers. Clearing and
settlement occurs within three business days through the National Depository for
Securities, which is operated by the WSE.
The Polish Commercial Code sets forth requirements regarding capitalization,
shareholders meetings, records and auditing for Polish companies.
Currently, there are no restriction on foreign investment in Polish
securities, except with respect to securities of issuers whose business relates
to management of sea or airports, real estate, the defense industry, wholesaling
of imported consumer goods or legal services. Permission must be sought from the
relevant licensing authority to purchase shares of issuers in industries where
licenses from the Polish government are required, such as the banking or
brokerage industry or a business involving the production of alcohol, cigarettes
or medicine.
Both the initial investment in and any profits resulting from business
activities may be freely repatriated, provided the currency exchange is made at
an authorized foreign exchange bank. In the case of dividends, repatriation is
only allowed after an audit certificate has been issued and the necessary taxes
have been paid. The National Bank of Poland is responsible for overseeing the
banking system in Poland and for controlling monetary policy and exchange rates.
HUNGARY
Hungary has a land area of approximately 36,000 square miles. It has a
population of approximately 10 million.
Hungary allied itself with Germany before World War II. Having sought to
break the alliance in 1944, Hungary was forcibly occupied by German forces. In
January 1945, Hungary was liberated by Soviet troops and it became a republic in
February 1946. In the 1947 elections, the communists became the largest single
party and by the end of the year emerged as the leading political force. A
People's Republic was established in 1949.
The first free multi-party elections were held in March and April 1990. The
resulting government declared its intention to withdraw from the Warsaw Pact,
seek membership in the European Community and effect a full transition to a
Western-style market economy.
Unemployment was 11.6% in February 1996. Economic growth in 1995 was 1.5%.
As a result of Hungary's progress toward macroeconomic stabilization, the
International Monetary Fund granted a standby credit and the country has been
officially admitted to the OECD.
Privatization receipts rose to $3.6 billion in 1995, more than the entire
amount raised during the period from 1990 to 1994. The government has encouraged
privatization by extending tax incentives, enacting legislation allowing
repatriation of profits and otherwise liberalizing foreign investment rules.
Hungary has attracted more foreign investment than any other Eastern European
country. By late 1995, the privatization process was unexpectedly accelerated.
The proceeds from the sale of companies such as the state oil and gas company
raised $3.5 billion, more than three times the sum originally budgeted by the
government, and foreign direct investment reached roughly $4.5 billion, an
all-time high. As a result, monetary reserves increased to about $12 billion in
1995.
The Budapest Stock Exchange ("BSE") was established in June 1990. On
December 31, 1995, capitalization on the BSE was approximately $2.4 billion.
Although currently only 42 companies are listed on the BSE, additional listings
are anticipated. The State Securities Supervision (SSS) is responsible for
monitoring the securities market and establishing guidelines for the regulation
of new issues, market participants and the BSE. Clearing and settlement occurs
within five business days and is effected through the Clearing Depository
Center, which is operated by the BSE.
The Hungarian Companies Act sets forth requirements regarding
capitalization, shareholders meetings, records and auditing for various legal
entities organized in Hungary.
Currently, there are no restrictions on foreign investment in Hungarian
securities, but investment in certain sectors, such as banking, defense,
utilities and insurance, may require prior approval from the government.
<PAGE>
[LOGO]
EATON VANCE
==================
Mutual Funds
EATON VANCE
RUSSIA AND EASTERN EUROPE
FUND
Statement of Additional Information
January , 1998
EATON VANCE
RUSSIA AND EASTERN EUROPE FUND
24 FEDERAL STREET
BOSTON, MA 02110
- --------------------------------------------------------------------------------
SPONSOR AND MANAGER OF EATON VANCE RUSSIA AND EASTERN EUROPE FUND
ADMINISTRATOR OF RUSSIA AND EASTERN EUROPE PORTFOLIO
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
ADVISER OF RUSSIA AND EASTERN EUROPE PORTFOLIO
Lloyd George Investment Management (Bermuda) Limited, 25 Grosvenor Street,
London, W1X9FE, England
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 200 Clarendon Street, Boston, MA 02116
TRANSFER AGENT
First Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123
(800) 262-1122
AUDITORS
Deloitte & Touche LLP, 125 Summer Street, Boston, MA02110
RNEPSAI
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS
INCLUDED IN PART A
Not applicable
INCLUDED IN PART B OF EATON VANCE RUSSIA AND EASTERN EUROPE FUND ARE THE
FOLLOWING FINANCIAL STATEMENTS FOR RUSSIA AND EASTERN EUROPE PORTFOLIO
Statement of Assets and Liabilities as of October 17, 1997
Report of Independent Auditors'
(b) EXHIBITS:
(1)(a) Amended and Restated Declaration of Trust dated September 27, 1993
filed as Exhibit No. (1)(a) to Post-Effective Amendment No. 42 and
incorporated herein by reference.
(b) Amendment dated June 23, 1997 to the Declaration of Trust filed as
Exhibit (1)(b) to Post-Effective Amendment No. 48 and incorporated
herein by reference.
(c) Amendment and Restatement of Establishment and Designation of Series
of Shares dated October 17, 1997 filed herewith.
(2)(a) By-Laws filed as Exhibit No. (2)(a) to Post-Effective Amendment
No. 42 and incorporated herein by reference.
(b) Amendment to By-Laws of Eaton Vance Special Investment Trust dated
December 13, 1993, filed as Exhibit No. (2)(b) to Post-Effective
Amendment No. 42 and incorporated herein by reference.
(3) Not applicable
(4) Not applicable
(5)(a)(1) Management Contract between the Trust and Eaton Vance Management
filed as Exhibit (5)(a) (1) to Post-Effective Amendment No. 48 and
incorporated herein by reference.
(2) Amended Schedule A-1 dated November 17, 1997 filed herewith.
(b) Investment Advisory Agreement with Eaton Vance Management for EV
Traditional Emerging Growth Fund dated December 31, 1996 filed as
Exhibit No. (5)(e) to Post-Effective Amendment No. 45 and
incorporated herein by reference.
(6)(a)(1) Distribution Agreement between Eaton Vance Special Investment Trust
(on behalf of its Classic Series) and Eaton Vance Distributors, Inc.
dated November 1, 1996 (with attached Schedule A effective November
1, 1996) filed as Exhibit No. (6)(a)(1) to Post-Effective Amendment
No. 46 and incorporated herein by reference.
(2) Distribution Agreement between Eaton Vance Special Investment Trust
(on behalf of its Marathon Series) and Eaton Vance Distributors,
Inc. dated November 1, 1996 (with attached Schedule A effective
November 1, 1996) filed as Exhibit No. (6)(a)(2) to Post- Effective
Amendment No. 46 and incorporated herein by reference.
(3) Distribution Agreement between Eaton Vance Special Investment Trust
(on behalf of its Traditional Series) and Eaton Vance Distributors,
Inc. dated November 1, 1996 (with attached Schedule A effective
November 1, 1996) filed as Exhibit No. (6)(a)(3) to Post- Effective
Amendment No. 46 and incorporated herein by reference .
(4) Distribution Agreement between the Trust and Eaton Vance
Distributors, Inc. filed as Exhibit(6)(a)(4) to Post-Effective
Amendment No. 48 and incorporated herein by reference.
(a) Amended Schedule A-1 dated November 17, 1997 filed herewith.
(b) Selling Group Agreement between Eaton Vance Distributors, Inc. and
Authorized Dealers filed as Exhibit No. (6)(b) to the Registration
Statement of Eaton Vance Growth Trust Post-Effective Amendment No.
61 and incorporated herein by reference.
(7) The Securities and Exchange Commission has granted the Registrant an
exemptive order that permits the Registrant to enter into deferred
compensation arrangements with its independent Trustees. See in the
Matter of Capital Exchange Fund, Inc., Release No. IC-20671
(November 1, 1994).
(8)(a) Custodian Agreement with Investors Bank & Trust Company dated March
24, 1994, filed as Exhibit No. (8) to Post-Effective Amendment No.
42 and incorporated herein by reference.
(b) Amendment to Custodian Agreement with Investors Bank & Trust Company
dated October 23, 1995, filed as Exhibit No. (8)(b) to
Post-Effective Amendment No. 43 and incorporated herein by
reference.
(9)(a)(1) Amended Administrative Services Agreement between Eaton Vance
Special Investment Trust (on behalf of each of its series) and Eaton
Vance Management dated June 19, 1995, with attached schedule
regarding each series of the Registrant, filed as Exhibit No. (9) to
Post-Effective Amendment No. 42 and incorporated herein by
reference.
(2) Amendment dated June 23, 1997 to Schedule A to the Administrative
Services Agreement filed as Exhibit (9)(a)(2) to Post-Effective
Amendment No. 48 and incorporated herein by reference.
(b) Transfer Agency Agreement dated June 7, 1989 filed as Exhibit (9)(b)
to Post-Effective Amendment No. 48 and incorporated herein by
reference.
(c) Amendment to Transfer Agency Agreement dated February 1, 1993 filed
as Exhibit (9)(c) to Post-Effective Amendment No. 48 and
incorporated herein by reference.
(10) Not applicable
(11) Consent of Independent Auditors for Eaton Vance Russia and Eastern
Europe Fund
(12) Not applicable
(13) Not applicable
(14)(a) Vance, Sanders Profit Sharing Retirement Plan for Self-Employed
Persons with Adoption Agreement and instructions, filed as Exhibit
No. (14)(1) to Post-Effective Amendment No. 22 to the Registration
Statement under the Securities Act of 1933 (File No. 2-28471) and
incorporated herein by reference.
(b) Eaton & Howard, Vance Sanders Defined Contribution Prototype Plan
and Trust with Adoption Agreement: (1) Basic Profit-Sharing
Retirement Plan; (2) Basic Money Purchase Pension Plan; (3) Thrift
Plan Qualifying as Profit-Sharing Plan; (4) Thrift Plan Qualifying
as Money Purchase Plan; (5) Integrated Profit-Sharing Retirement
Plan; and (6) Integrated Money Purchase Pension Plan, filed as
Exhibit No. (14)(2) to Post- Effective Amendment No. 29 to the
Registration Statement under the Securities Act of 1933 (File No.
2-22019) and incorporated herein by reference.
(c) Individual Retirement Custodian Account (Form 5305A) and
Instructions, filed as Exhibit No. (14)(3) to Post-Effective
Amendment No. 21 and incorporated herein by reference.
(d) Vance, Sanders Variable Pension Prototype Plan and Trust with
Adoption Agreement, filed as Exhibit No. (14)(4) to Post-Effective
Amendment No. 22 to the Registration Statement under the Securities
Act of 1933 (File No. 2-28471) and incorporated herein by reference.
(15)(a) Eaton Vance Special Investment Trust Class A Service Plan filed as
Exhibit (15)(a) to Post-Effective Amendment No. 48 and incorporated
herein by reference.
(b) Eaton Vance Special Investment Trust Class A Distribution Plan filed
as Exhibit (15)(b) to Post-Effective Amendment No. 48 and
incorporated herein by reference.
(1) Amended Schedule A-1 dated November 17, 1997 filed herewith.
(c) Eaton Vance Special Investment Trust Class B Distribution Plan filed
as Exhibit (15)(c) to Post-Effective Amendment No. 48 and
incorporated herein by reference.
(1) Amended Schedule A-1 dated November 17, 1997 filed herewith.
(d) Eaton Vance Special Investment Trust Class C Distribution Plan filed
as Exhibit (15)(d) to Post-Effective Amendment No. 48 and
incorporated herein by reference.
(e) Amended Distribution Plan pursuant to Rule 12b-1 under the
Investment Company Act of 1940, as amended, for Eaton Vance Special
Investment Trust (on behalf of its Classic Series that invest in
domestic Portfolios) dated June 19, 1995 (with attached Schedule A
regarding such Classic series of the Registrant), filed as Exhibit
No. (15)(a) to Post- Effective Amendment No. 42 and incorporated
herein by reference.
(1) Amendment to Amended Distribution Plan (on behalf of its Classic
Series that invest in domestic Portfolios) effective November 1,
1996, filed as Exhibit No. (15)(a)(1) to Post-Effective Amendment
No. 46 and incorporated herein by reference.
(f) Amended Distribution Plan pursuant to Rule 12b-1 under the
Investment Company Act of 1940, as amended, for Eaton Vance Special
Investment Trust (on behalf of its Marathon Series that invest in
domestic Portfolios) dated June 19, 1995 (with attached Schedule A
regarding such Marathon series of the Registrant), filed as Exhibit
No. (15)(b) to Post-Effective Amendment No. 42 and incprporated
herein by reference.
(1) Amendment to Amended Distribution Plan (on behalf of its Marathon
Series that invest in domestic Portfolios) effective November 1,
1996, filed as Exhibit No. (15)(b)(1) to Post-Effective Amendment
No. 46 and incorporated herein by reference.
(g) Amended Service Plan for Eaton Vance Special Investment Trust (on
behalf of its Traditional Series that invest in domestic Portfolios)
dated June 19, 1995 (with attached Schedule A regarding such
Traditional series of the Registrant), filed as Exhibit No. (15)(c)
to Post-Effective Amendment No. 42 and incorporated herein by
reference.
(1) Amendment to Service Plan (on behalf of its Traditional Series that
invest in domestic Portfolios) effective November 1, 1996, filed as
Exhibit No. (15)(c)(1) to Post- Effective Amendment No. 46 and
incorporated herein by reference.
(h) Distribution Plan dated March 24, 1994 for EV Traditional Emerging
Markets Fund pursuant to Rule 12b-1 under the Investment Company Act
of 1940, filed as Exhibit No. (15)(d) to Post-Effective Amendment
No. 42 and incorporated herein by reference.
(1) Amendment to Distribution Plan for EV Traditional Emerging Markets
Fund effective November 1, 1996, filed as Exhibit (15)(d)(1) to
Post-Effective Amendment No. 46 and incorporated herein by
reference.
(i) Distribution Plan dated March 24, 1994 for EV Marathon Emerging
Markets Fund pursuant to Rule 12b-1 under the Investment Company Act
of 1940, filed as Exhibit No. (15)(e) to Post-Effective Amendment
No. 42 and incorporated herein by reference.
(1) Amendment to Distribution Plan for EV Marathon Emerging Markets Fund
effective November 1, 1996, filed as Exhibit (15)(e)(1) to
Post-Effective Amendment No. 46 and incorporated herein by
reference.
(j) Distribution Plan dated March 24, 1994 for EV Traditional Greater
India Fund pursuant to Rule 12b-1 under the Investment Company Act
of 1940, filed as Exhibit No. (15)(f) to Post-Effective Amendment
No. 42 and incorporated herein by reference.
(1) Amendment to Distribution Plan for EV Traditional Greater India Fund
effective November 1, 1996, filed as Exhibit No. (15)(f)(1) to
Post-Effective Amendment No. 46 and incorporated herein by
reference.
(k) Distribution Plan dated March 24, 1994 for EV Marathon Greater India
Fund pursuant to Rule 12b-1 under the Investment Company Act of
1940, filed as Exhibit No. (15)(g) to Post-Effective Amendment No.
42 and incorporated herein by reference.
(1) Amendment to Distribution Plan for EV Marathon Greater India Fund
effective November 1, 1996, filed as Exhibit No. (15)(g)(1) to
Post-Effective Amendment No. 46 and incorporated herein by
reference.
(16) Not applicable
(17)(a) Power of Attorney dated June 23, 1997 for Eaton Vance Special
Investment Trust, filed as Exhibit (17)(a) to Post-Effective
Amendment No. 47 and incorporated herein by reference.
(b) Power of Attorney for Emerging Markets Portfolio dated February 14,
1997, filed as Exhibit No. (17)(b) to Post-Effective Amendment No.
46 and incorporated herein by reference.
(c) Power of Attorney for South Asia Portfolio dated February 14, 1997,
filed as Exhibit No. (17)(c) to Post-Effective Amendment No. 46 and
incorporated herein by reference.
(d) Power of Attorney for Special Investment Portfolio dated August 11,
1997 filed as Exhibit (17)(d) to Post-Effective Amendment No. 48 and
incorporated herein by reference.
(e) Power of Attorney for Investors Portfolio dated August 11, 1997
filed as Exhibit (17)(e) to Post-Effective Amendment No. 48 and
incorporated herein by reference.
(f) Power of Attorney for Stock Portfolio dated August 11, 1997 filed as
Exhibit (17)(f) to Post-Effective Amendment No. 48 and incorporated
herein by reference.
(g) Power of Attorney for Total Return Portfolio dated August 11, 1997
filed as Exhibit (17)(g) to Post-Effective Amendment No. 48 and
incorporated herein by reference.
(h) Power of Attorney for Russia and Eastern Europe Portfolio dated
October 17, 1997 filed herewith.
(18) Multiple Class Plan for Eaton Vance Funds dated June 23, 1997 filed
herewith.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Not applicable.
ITEM 26. NUMBERS OF HOLDERS OF SECURITIES
(2)
(1) NUMBER OF
TITLE OF CLASS RECORD HOLDERS
Shares of beneficial interest as of November 28, 1997
without par value
Traditional Emerging Growth Fund 27
EV Marathon Emerging Markets Fund 882
EV Traditional Emerging Markets Fund 497
EV Marathon Greater India Fund 8,642
EV Traditional Greater India Fund 1,683
EV Classic Investors Fund 396
EV Marathon Investors Fund 2,320
EV Traditional Investors Fund 12,602
EV Classic Special Equities Fund 63
EV Marathon Special Equities Fund 232
EV Traditional Special Equities Fund 5,983
EV Classic Stock Fund 117
EV Marathon Stock Fund 825
EV Traditional Stock Fund 5,268
EV Classic Total Return Fund 208
EV Marathon Total Return Fund 2,401
EV Traditional Total Return Fund 14,697
ITEM 27. INDEMNIFICATION
Article IV of the Trust's Declaration of Trust dated September 27, 1993, as
amended, permits Trustee and officer indemnification by By-Law, contract and
vote. Article XI of the By-Laws contains indemnification provisions.
Registrant's Trustees and officers are insured under a standard mutual fund
errors and omissions insurance policy covering loss incurred by reason of
negligent errors and omissions committed in their capacities as such.
The distribution agreements of the Trust also provide for reciprocal
indemnity of the Principal Underwriter on the one hand, and the Trustees and
officers, on the other.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Reference is made to the information set forth under the caption "Investment
Adviser and Administrator" or "Management of the Fund and the Portfolio" in the
Statement of Additional Information, which information is incorporated herein by
reference.
ITEM 29. PRINCIPAL UNDERWRITER
(a) Registrant's principal underwriter, Eaton Vance Distributors, Inc., a
wholly-owned subsidiary of Eaton Vance Management, is the principal
underwriter for each of the investment companies named below:
Eaton Vance Growth Trust Eaton Vance Municipal Bond Fund L.P.
Eaton Vance Income Fund of Boston Eaton Vance Mutual Funds Trust
Eaton Vance Investment Trust Eaton Vance Prime Rate Reserves
Eaton Vance Municipals Trust Eaton Vance Special Investment Trust
Eaton Vance Municipals Trust II EV Classic Senior Floating-Rate Fund
(b)
<TABLE>
<CAPTION>
(1) (2) (3)
NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICES
BUSINESS ADDRESS* WITH PRINCIPAL UNDERWRITER WITH REGISTRANT
----------------- -------------------------- ---------------
<S> <C> <C>
James B. Hawkes Vice President and Director President, Principal
Executive Officer
and Trustee
William M. Steul Vice President and Director None
Wharton P. Whitaker President and Director None
Albert F. Barbaro Vice President None
Chris Berg Vice President None
Kate B. Bradshaw Vice President None
David B. Carle Vice President None
Daniel C. Cataldo Vice President None
Raymond Cox Vice President None
Mark P. Doman Vice President None
Alan R. Dynner Vice President Secretary
Richard Finelli Vice President None
Kelly Flynn Vice President None
James Foley Vice President None
Michael A. Foster Vice President None
William M. Gillen Senior Vice President None
Hugh S. Gilmartin Vice President None
Perry D. Hooker Vice President None
Brian Jacobs Senior Vice President None
Thomas P. Luka Vice President None
John Macejka Vice President None
Timothy D. McCarthy Vice President None
Joseph T. McMenamin Vice President None
Morgan C. Mohrman Senior Vice President None
James A. Naughton Vice President None
Mark D. Nelson Vice President None
Linda D. Newkirk Vice President None
James L. O'Connor Vice President Treasurer
Thomas Otis Secretary and Clerk None
George D. Owen, II Vice President None
Enrique M. Pineda Vice President None
F. Anthony Robinson Vice President None
Jay S. Rosoff Vice President None
Benjamin A. Rowland, Jr. Vice President, Treasurer and Director None
Stephen M. Rudman Vice President None
John P. Rynne Vice President None
Kevin Schrader Vice President None
George V.F. Schwab, Jr. Vice President None
Teresa A. Sheehan Vice President None
David C. Sturgis Vice President None
Cornelius J. Sullivan Senior Vice President None
David M. Thill Vice President None
John M. Trotsky Vice President None
Chris Volf Vice President None
Sue Wilder Vice President None
</TABLE>
- ----------
*Address is 24 Federal Street, Boston, MA 02110
(c) Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
All applicable accounts, books and documents required to be maintained by
the Registrant by Section 31(a) of the Investment Company Act of 1940 and the
Rules promulgated thereunder are in the possession and custody of the
Registrant's custodian, Investors Bank & Trust Company, 200 Clarendon Street,
16th Floor Mail Code ADM 27, Boston, MA 02116, and its transfer agent, First
Data Investor Services Group, 4400 Computer Drive, Westborough, MA 01581-5120,
with the exception of certain corporate documents and portfolio trading
documents which are in the possession and custody of Eaton Vance Management, 24
Federal Street, Boston, MA 02110. The Registrant is informed that all applicable
accounts, books and documents required to be maintained by registered investment
advisers are in the custody and possession of Eaton Vance Management.
ITEM 31. MANAGEMENT SERVICES
Not applicable.
ITEM 32. UNDERTAKINGS
The Registrant undertakes to file a Post-Effective Amendment, using
financial statements which need not be certified, within four to six months from
the effective date of this Post-Effective Amendment No. 48 (or the commencement
of operations).
The Registrant undertakes to furnish to each person to whom a prospectus is
delivered, a copy of the latest annual report to shareholders, upon request and
without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Amendment to the Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly
caused this Amendment to its Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized in the City of Boston, and the
Commonwealth of Massachusetts, on the 11th day of December, 1997.
EATON VANCE SPECIAL INVESTMENT TRUST
By /s/ JAMES B. HAWKES
----------------------------
JAMES B. HAWKES, President
Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment to the Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
President, Principal
Executive Officer and
/s/ JAMES B. HAWKES Trustee December 11, 1997
- -------------------------------
JAMES B. HAWKES
Treasurer and Principal
Financial and Accounting
/s/ JAMES L. O'CONNOR Officer December 11, 1997
- -------------------------------
JAMES L. O'CONNOR
/s/ M. DOZIER GARDNER Trustee December 11, 1997
- -------------------------------
M. DOZIER GARDNER
DONALD R. DWIGHT* Trustee December 11, 1997
- -------------------------------
DONALD R. DWIGHT
SAMUEL L. HAYES, III* Trustee December 11, 1997
- -------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee December 11, 1997
- -------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee December 11, 1997
- -------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee December 11, 1997
- -------------------------------
JACK L. TREYNOR
*By: /s/ ALAN R. DYNNER
----------------------
ALAN R. DYNNER
As Attorney-in-fact
<PAGE>
SIGNATURES
Russia and Eastern Europe Portfolio has duly caused this Amendment to the
Registration Statement on Form N-1A of Eaton Vance Special Investment Trust
(File No. 2-27962) to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Boston and the Commonwealth of Massachusetts on the
11th of December, 1997.
RUSSIA AND EASTERN EUROPE PORTFOLIO
By: HON. ROBERT LLOYD GEORGE*
-----------------------------------
HON. ROBERT LLOYD GEORGE, President
This Amendment to the Registration Statement on Form N-1A of Eaton Vance
Special Investment Trust (File No. 2-27962) has been signed below by the
following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
Trustee, President
and Principal
HON. ROBERT LLOYD GEORGE* Executive Officer December 11, 1997
- -------------------------------
HON. ROBERT LLOYD GEORGE
Treasurer and
Principal Financial
/s/ JAMES L. O'CONNOR and Accounting Officer December 11, 1997
- -------------------------------
JAMES L. O'CONNOR
HON. EDWARD K.Y. CHEN* Trustee December 11, 1997
- -------------------------------
HON. EDWARD K.Y. CHEN
DONALD R. DWIGHT* Trustee December 11, 1997
- -------------------------------
DONALD R. DWIGHT
/s/ JAMES B. HAWKES Trustee December 11, 1997
- -------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee December 11, 1997
- -------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee December 11, 1997
- -------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee December 11, 1997
- -------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee December 11, 1997
- -------------------------------
JACK L. TREYNOR
*By: /s/ ALAN R. DYNNER
----------------------
ALAN R. DYNNER
As Attorney-in-fact
<PAGE>
EXHIBIT INDEX
PAGE IN SEQUENTIAL
EXHIBIT NO. DESCRIPTION NUMBERING SYSTEM
----------- ----------- ----------------
(1)(c) Amendment and Restatement of Establishment
and Designation of Series of Shares dated
October 17, 1997.
(5)(a)(2) Amended Schedule A-1 dated November 17, 1997.
(6)(a)(4)(a) Amended Schedule A-1 dated November 17, 1997.
(11) Consent of Independent Auditors.
(15)(b)(1) Amended Schedule A-1 dated November 17, 1997.
(15)(c)(1) Amended Schedule A-1 dated November 17, 1997.
(17)(h) Power of Attorney for Russian and Eastern Europe
Portfolio dated October 17, 1997.
(18) Multiple Class Plan for Eaton Vance Funds dated
June 23, 1997
<PAGE>
EXHIBIT (1)(c)
EATON VANCE SPECIAL INVESTMENT TRUST
Amendment and Restatement
of
Establishment and Designation of Series of Shares
of Beneficial Interest, Without Par Value
(as amended and restated October 17, 1997)
WHEREAS, the Trustees of Eaton Vance Special Investment Trust, a
Massachusetts business trust (the "Trust"), have previously designated separate
series (or "Funds"); and
WHEREAS, the Trustees now desire to add an additional series and
establish classes thereof (i.e., Eaton Vance Russia and Eastern Europe Fund) and
to redesignate further the series or Funds pursuant to Section 5.1 of Article V
of the Trust's Amended and Restated Declaration of Trust dated September 27,
1993 (as further Amended) (the "Declaration of Trust");
NOW, THEREFORE, the undersigned, being at least a majority of the duly
elected and qualified Trustees presently in office of the Trust, hereby divide
the shares of beneficial interest of the Trust into eighteen separate series
("Funds"), each Fund to have the following special and relative rights:
1. The Funds shall be designated as follows:
EV Marathon Emerging Markets Fund
EV Traditional Emerging Markets Fund
EV Marathon Greater India Fund
EV Traditional Greater India Fund
EV Classic Investors Fund
EV Marathon Investors Fund
EV Traditional Investors Fund
EV Classic Special Equities Fund
EV Marathon Special Equities Fund
EV Traditional Special Equities Fund
EV Classic Stock Fund
EV Marathon Stock Fund
EV Traditional Stock Fund
EV Classic Total Return Fund
EV Marathon Total Return Fund
EV Traditional Total Return Fund
EV Traditional Emerging Growth Fund
Eaton Vance Russia and Eastern Europe Fund
2. Each Fund shall be authorized to invest in cash, securities,
instruments and other property as from time to time described in the Trust's
then currently effective registration statements under the Securities Act of
1933 and the Investment Company Act of 1940. Each share of beneficial interest
of each Fund ("share") shall be redeemable, shall be entitled to one vote (or
fraction thereof in respect of a fractional share) on matters on which shares of
that Fund shall be entitled to vote and shall represent a pro rata beneficial
interest in the assets allocated to that Fund, all as provided in the
Declaration of Trust. The proceeds of sales of shares of each Fund, together
with any income and gain thereon, less any diminution or expenses thereof, shall
irrevocably belong to such Fund, unless otherwise required by law. Each share of
a Fund shall be entitled to receive its pro rata share of net assets of that
Fund upon liquidation of that Fund.
3. Shareholders of each Fund shall vote separately as a class to the
extent provided in Rule 18f-2, as from time to time in effect, under the
Investment Company Act of 1940.
4. The assets and liabilities of the Trust shall be allocated among the
above-referenced Funds as set forth in Section 5.5 of Article V of the
Declaration of Trust, except as provided below:
(a) Costs incurred by each Fund in connection with its organization and
start-up, including Federal and state registration and qualification fees and
expenses of the initial public offering of such Fund's shares, shall (if
applicable) be borne by such Fund and deferred and amortized over the five year
period beginning on the date that such Fund commences operations.
(b) Reimbursement required under any expense limitation applicable to
the Trust shall be allocated among those Funds whose expense ratios exceed such
limitation on the basis of the relative expense ratios of such Funds.
(c) The liabilities, expenses, costs, charges and reserves of the Trust
(other than the management and investment advisory fees or the organizational
expenses paid by the Trust) which are not readily identifiable as belonging to
any particular Fund shall be allocated among the Funds on an equitable basis as
determined by the Trustees.
5. The Trustees (including any successor Trustees) shall have the right
at any time and from time to time to reallocate assets and expenses or to change
the designation of any Fund now or hereafter created, or to otherwise change the
special and relative rights of any such Fund, and to terminate any Fund or add
additional Funds as provided in the Declaration of Trust.
6. Any Fund may merge or consolidate with any other corporation,
association, trust or other organization or may sell, lease or exchange all or
substantially all of its property, including its good will, upon such terms and
conditions and for such consideration when and as authorized by the Trustees;
and any such merger, consolidation, sale, lease or exchange shall be deemed for
all purposes to have been accomplished under and pursuant to the statutes of the
Commonwealth of Massachusetts. The Trustees may also at any time sell and
convert into money all the assets of any Fund. Upon making provision for the
payment of all outstanding obligations, taxes and other liabilities, accrued or
contingent, of such Fund, the Trustees shall distribute the remaining assets of
such Fund ratably among the holders of the outstanding shares. Upon completion
of the distribution of the remaining proceeds or the remaining assets as
provided in this paragraph 6, the Fund shall terminate and the Trustees shall be
discharged of any and all further liabilities and duties hereunder with respect
to such Fund and the right, title and interest of all parties with respect to
such Fund shall be canceled and discharged.
7. The Declaration of Trust authorizes the Trustees to divide each Fund
and any other series of shares into two or more classes and to fix and determine
the relative rights and preferences as between, and all provisions applicable
to, each of the different classes so established and designated by the Trustees.
Eaton Vance Russia and Eastern Europe Fund shall have classes of shares
established and designated as Class A, Class B, Class C and Class I shares, and
the Trustees may designate additional classes in the future. For purposes of
allocating liabilities among classes, each class of that Fund shall be treated
in the same manner as a separate series.
This Amended and Restated Establishment and Designation of Series is
subject to the Amendment to the Declaration of Trust dated June 23, 1997, which
amendment remains in full force and effect.
Dated: October 17, 1997
/s/ Donald R. Dwight /s/ Samuel L. Hayes, III
- --------------------------------- ---------------------------------
Donald R. Dwight Samuel L. Hayes, III
/s/ M. Dozier Gardner /s/ Norton H. Reamer
- --------------------------------- ---------------------------------
M. Dozier Gardner Norton H. Reamer
/s/ James B. Hawkes /s/ John L. Thorndike
- --------------------------------- ---------------------------------
James B. Hawkes John L. Thorndike
/s/ Jack L. Treynor
---------------------------
Jack L. Treynor
<PAGE>
EXHIBIT (5)(a)(2)
EATON VANCE SPECIAL INVESTMENT TRUST
MANAGEMENT CONTRACT
SCHEDULE A-1
Eaton Vance Russia and Eastern Europe Fund
Dated: November 17, 1997
<PAGE>
EXHIBIT 6(a)(4)(a)
SCHEDULE A-1
EATON VANCE SPECIAL INVESTMENT TRUST
DISTRIBUTION AGREEMENT
EFFECTIVE: NOVEMBER 17, 1997
<TABLE>
<CAPTION>
<S> <C>
Name of Fund Adopting this Agreement Prior Agreements Relating to Class B and/or Class C Assets
- ------------------------------------ ----------------------------------------------------------
Eaton Vance Russia and Eastern Europe Fund N/A
</TABLE>
<PAGE>
EXHIBIT (11)
CONSENT OF INDEPENDENT AUDITORS
We consent to the inclusion of Post-Effective Amendment No. 49 to the
Registration Statement on Form N-1A of Eaton Vance Special Investment Trust
(1933 Act File No. 2-27962) on behalf of Eaton Vance Russia and Eastern Europe
Fund (the "Fund") of our report dated October 17, 1997, relating to Russia and
Eastern Europe Portfolio appearing in the Fund's Statement of Additional
Information which is part of such Registration Statement.
We also consent to the reference to our Firm under the captions "Independent
Certified Public Accountants" and "Financial Statements" in the Fund's Statement
of Additional Information of the Registration Statement.
/s/ DELOITTE & TOUCHE LLP
-------------------------------
DELOITTE & TOUCHE LLP
December 11, 1997
Boston, Massachusetts
<PAGE>
EXHIBIT 15(b)(1)
SCHEDULE A-1
EATON VANCE SPECIAL INVESTMENT TRUST
CLASS A DISTRIBUTION PLAN
EFFECTIVE: NOVEMBER 17, 1997
Name of Fund Adopting this Plan
Eaton Vance Russia and Eastern Europe Fund
<PAGE>
EXHIBIT 15(c)(1)
SCHEDULE A-1
EATON VANCE SPECIAL INVESTMENT TRUST
CLASS B DISTRIBUTION PLAN
EFFECTIVE: NOVEMBER 17, 1997
Name of Fund Adopting This Plan
Eaton Vance Russia and Eastern Europe Fund
<PAGE>
EXHIBIT 17(h)
POWER OF ATTORNEY
We, the undersigned officers and Trustees of Russia and Eastern Europe
Portfolio, a New York trust, do hereby severally constitute and appoint Alan R.
Dynner, James B. Hawkes and Eric G. Woodbury, or any of them, to be true,
sufficient and lawful attorneys, or attorney for each of us, to sign for each of
us, in the name of each of us in the capacities indicated below, any and all
amendments (including post-effective amendments) to the Registration Statement
on Form N-1A filed by Eaton Vance Special Investment Trust with the Securities
and Exchange Commission in respect of shares of beneficial interest and other
documents and papers relating thereto.
IN WITNESS WHEREOF we have hereunto set our hands in Hamilton, Bermuda
on the dates set opposite our respective signatures.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
President, Principal
/s/ Robert Lloyd George * Executive Officer and October 17, 1997
- ------------------------------------ Trustee
Robert Lloyd George
Treasurer and
/s/ James L. O'Connor ** Principal Financial October 17, 1997
- ------------------------------------ and Accounting Officer
James L. O'Connor
/s/ Edward K.Y. Chen Trustee October 17, 1997
- ------------------------------------
Edward K.Y. Chen
/s/ Donald R. Dwight Trustee October 17, 1997
- ------------------------------------
Donald R. Dwight
/s/ James B. Hawkes Trustee October 17, 1997
- ------------------------------------
James B. Hawkes
/s/ Samuel L. Hayes, III Trustee October 17, 1997
- ------------------------------------
Samuel L. Hayes, III
/s/ Norton H. Reamer Trustee October 17, 1997
- ------------------------------------
Norton H. Reamer
/s/ John L. Thorndike ** Trustee October 17, 1997
- ------------------------------------
John L. Thorndike
/s/ Jack L. Treynor Trustee October 17, 1997
- ------------------------------------
Jack L. Treynor
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*Signed in Hong Kong
**Signed in Boston, Massachusetts
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EXHIBIT 18
MULTIPLE CLASS PLAN FOR EATON VANCE FUNDS
Dated June 23, 1997
WHEREAS, each trust (each a "Trust") listed on Schedule A engages in
business as an open-end investment company and is registered as such under the
Investment Company Act of 1940, as amended (the "Act");
WHEREAS, the Trustees (hereafter the "Trustees") of each Trust have
established four classes of shares of the series of the Trust (each a "Fund")
which series are listed on Schedule A hereto, such classes having been
designated Class A, Class B, Class C and Class I (the "Classes");
WHEREAS, each Fundis established in accordance with Section 18(f)(2)
of the Act, its shares are registered on Form N-1A under the Securities Act of
1933, and it is entitled to have a multiple class plan adopted on its behalf by
the Trust pursuant to Rule 18f-3 under the Act;
WHEREAS, the Trustees of the Trust desire to set forth herein the
separate arrangements, expense allocations, and any related conversion features
or exchange privileges of the Classes; and
WHEREAS, the Trustees of the Trust (including a majority of those
Trustees who are not interested persons of the Trust) have determined that
adoption of this Multiple Class Plan, including the expense allocations set
forth herein, is in the best interests of each Class individually and each Fund
as a whole.
NOW, THEREFORE, each Trust hereby adopts this Multiple Class Plan (the
"Plan") on behalf of each Fund in accordance with Rule 18f-3 under the Act and
containing the following terms and conditions:
1. Pursuant to each Fund's contractual arrangements and various actions
taken by the Trustees and as described in the Fund's prospectuses, each Class of
shares is subject to different distribution arrangements and accordingly is
subject to different expenses related thereto, including distribution fees and
shareholder service expenses. Class A shares are offered subject to an initial
sales charge and are subject to service fee payments in amounts not exceeding
.25% of the average daily net assets attributable to such Class for each fiscal
year. Class B shares are offered subject to a declining contingent deferred
sales charge, a distribution fee of .75% of its average daily net assets and
service fee payments in amounts not exceeding .25% of the average daily net
assets attributable to such Class for each fiscal year. Class C shares are
offered subject to a 1% contingent deferred sales charge for redemption within
the first year, a distribution fee of .75% of its average daily net assets and
service fee payments in amounts not exceeding .25% of the average daily net
assets attributable to such Class for each fiscal year. Class I shares are
offered at net asset value to certain investors and are not subject to
distribution or service fee payments. These fees and sales charges may change
over time. As described in the Fund's prospectuses, the sales charges described
above may be reduced or waived under certain circumstances.
2. At the discretion of the Treasurer of the Trust, each Class may pay
a different share of other expenses (not including advisory or custodial fees or
other expenses related to the management of the Fund's assets) that are actually
incurred in a different amount by that Class or if the Class receives services
of a different kind or to a different degree than another Class. Such expenses
include, but are not limited to, the following (a) transfer agency costs
(including entities performing account maintenance, dividend disbursing or
subaccounting activities and administration of dividend reinvestment, systematic
investment and withdrawal plans) attributable to a Class, (b) the cost of
preparing, printing and mailing materials such as shareholder reports,
prospectuses and proxy materials to current shareholders of a Class, (c) any
registration, notice or filing fees of the Securities and Exchange Commission
and state securities agencies, (d) the expense of administrative personnel and
services required to support the shareholders of a Class, (e) Trustees' fees or
expenses incurred as a result of issues or matters relating to a Class, and (f)
legal, auditing and accounting expenses relating to a Class. Such expense
allocation is subject to the continuing availability of a revenue procedure of
the Internal Revenue Service to the effect that the payments made under a Fund's
contractual arrangements and other Class specific expenses with respect to a
Class of shares do not result in such Fund's dividends or distributions
constituting "preferential dividends" under the Internal Revenue Code.
3. Income, realized and unrealized capital gains and losses, and
expenses of the Fund not allocated to a particular Class pursuant to the
foregoing shall be allocated to each Class on the basis of the net asset value
of that Class in relation to the net asset value of the Fund.
4. For shares purchased prior to April 26, 1996, Class I shares of an
EV Marathon series of Eaton Vance Investment Trust (to be renamed "Class B
shares") shall automatically convert to Class II shares of such series (to be
renamed "Class A shares") on the fourth anniversary on which Class I shares were
purchased. For shares purchased thereafter, such Class I shares held for the
longer of (i) four years or (ii) the time at which the contingent deferred sales
charge applicable to such shares expires will automatically convert to such
Class II shares. Such conversion will occur during the month following the
expiration of the holding period. Such conversion shall be effected on the basis
of the relative net asset values per share of the two Classes without the
imposition of any sales load, fee or other charge. For purposes of this
conversion, all distributions paid on such Class I shares which the shareholder
elects to reinvest in Class I shares will be considered to be held in a separate
sub-account. Upon the conversion of such Class I shares not acquired through the
reinvestment of distributions, a pro rata portion of the Class I shares held in
the sub-account will also convert to such Class II shares. This portion will be
determined by the ratio that such Class I shares being converted bear to the
total of Class I shares (excluding shares acquired through reinvestment) in the
account.
5. Each Class of shares may be exchanged for shares of the same type of
other funds in the Eaton Vance family of funds, which may change from time to
time, subject to terms, conditions and limitations set forth in the relevant
prospectuses.
6. This Plan shall not take effect until after it has been approved by
both a majority of Trustees and a majority of those Trustees who are not
interested persons of a Trust.
7. This Plan shall continue indefinitely, unless terminated or amended.
All material amendments to this Plan shall be approved in the manner provided
for Trustee approval of this Plan in Section 6. Additional series of a Trust
with Classes of shares may become subject to this Plan upon Trustee approval as
provided for in Section 6 and amendment of Schedule A hereto.
<PAGE>
<TABLE>
<CAPTION>
Schedule A
Eaton Vance Growth Trust
<S> <C>
Eaton Vance Asian Small Companies Fund Eaton Vance Information Age Fund
Eaton Vance Greater China Growth Fund Eaton Vance Worldwide Developing Resources Fund
Eaton Vance Growth Fund Eaton Vance Worldwide Health Sciences Fund
Eaton Vance Investment Trust
Eaton Vance California Limited Maturity Municipals Fund Eaton Vance National Limited Maturity Municipals Fund
Eaton Vance Connecticut Limited Maturity Municipals Fund Eaton Vance New Jersey Limited Maturity Municipals Fund
Eaton Vance Florida Limited Maturity Municipals Fund Eaton Vance New York Limited Maturity Municipals Fund
Eaton Vance Massachusetts Limited Maturity Municipals Fund Eaton Vance Ohio Limited Maturity Municipals Fund
Eaton Vance Michigan Limited Maturity Municipals Fund Eaton Vance Pennsylvania Limited Maturity Municipals Fund
Eaton Vance Municipals Trust
Eaton Vance Alabama Municipals Fund Eaton Vance Missouri Municipals Fund
Eaton Vance Arizona Municipals Fund Eaton Vance National Municipals Fund
Eaton Vance Arkansas Municipals Fund Eaton Vance New Jersey Municipals Fund
Eaton Vance California Municipals Fund Eaton Vance New York Municipals Fund
Eaton Vance Colorado Municipals Fund Eaton Vance North Carolina Municipals Fund
Eaton Vance Connecticut Municipals Fund Eaton Vance Ohio Municipals Fund
Eaton Vance Florida Municipals Fund Eaton Vance Oregon Municipals Fund
Eaton Vance Georgia Municipals Fund Eaton Vance Pennsylvania Municipals Fund
Eaton Vance Kentucky Municipals Fund Eaton Vance Rhode Island Municipals Fund
Eaton Vance Louisiana Municipals Fund Eaton Vance South Carolina Municipals Fund
Eaton Vance Maryland Municipals Fund Eaton Vance Tennessee Municipals Fund
Eaton Vance Massachusetts Municipals Fund Eaton Vance Texas Municipals Fund
Eaton Vance Michigan Municipals Fund Eaton Vance Virginia Municipals Fund
Eaton Vance Minnesota Municipals Fund Eaton Vance West Virginia Municipals Fund
Eaton Vance Mississippi Municipals Fund
Eaton Vance Municipals Trust II
Eaton Vance Florida Insured Municipals Fund Eaton Vance High Yield Municipals Fund
Eaton Vance Hawaii Municipals Fund Eaton Vance Kansas Municipals Fund
Eaton Vance Mutual Funds Trust
Eaton Vance Government Obligations Fund Eaton Vance Strategic Income Fund
Eaton Vance High Income Fund Eaton Vance Tax-Managed Growth Fund
Eaton Vance Special Investment Trust
Eaton Vance Emerging Markets Fund Eaton Vance Special Equities Fund
Eaton Vance Greater India Fund Eaton Vance Stock Fund
Eaton Vance Investors Fund Eaton Vance Total Return Fund
</TABLE>
<PAGE>
September 16, 1997
<TABLE>
<CAPTION>
Schedule A
Eaton Vance Growth Trust
<S> <C>
Eaton Vance Asian Small Companies Fund Eaton Vance Information Age Fund
Eaton Vance Greater China Growth Fund Eaton Vance Worldwide Developing Resources Fund
Eaton Vance Growth Fund Eaton Vance Worldwide Health Sciences Fund
Eaton Vance Investment Trust
Eaton Vance California Limited Maturity Municipals Fund Eaton Vance National Limited Maturity Municipals Fund
Eaton Vance Connecticut Limited Maturity Municipals Fund Eaton Vance New Jersey Limited Maturity Municipals Fund
Eaton Vance Florida Limited Maturity Municipals Fund Eaton Vance New York Limited Maturity Municipals Fund
Eaton Vance Massachusetts Limited Maturity Municipals Fund Eaton Vance Ohio Limited Maturity Municipals Fund
Eaton Vance Michigan Limited Maturity Municipals Fund Eaton Vance Pennsylvania Limited Maturity Municipals Fund
Eaton Vance Municipals Trust
Eaton Vance Alabama Municipals Fund Eaton Vance Missouri Municipals Fund
Eaton Vance Arizona Municipals Fund Eaton Vance National Municipals Fund
Eaton Vance Arkansas Municipals Fund Eaton Vance New Jersey Municipals Fund
Eaton Vance California Municipals Fund Eaton Vance New York Municipals Fund
Eaton Vance Colorado Municipals Fund Eaton Vance North Carolina Municipals Fund
Eaton Vance Connecticut Municipals Fund Eaton Vance Ohio Municipals Fund
Eaton Vance Florida Municipals Fund Eaton Vance Oregon Municipals Fund
Eaton Vance Georgia Municipals Fund Eaton Vance Pennsylvania Municipals Fund
Eaton Vance Kentucky Municipals Fund Eaton Vance Rhode Island Municipals Fund
Eaton Vance Louisiana Municipals Fund Eaton Vance South Carolina Municipals Fund
Eaton Vance Maryland Municipals Fund Eaton Vance Tennessee Municipals Fund
Eaton Vance Massachusetts Municipals Fund Eaton Vance Texas Municipals Fund
Eaton Vance Michigan Municipals Fund Eaton Vance Virginia Municipals Fund
Eaton Vance Minnesota Municipals Fund Eaton Vance West Virginia Municipals Fund
Eaton Vance Mississippi Municipals Fund
Eaton Vance Municipals Trust II
Eaton Vance Florida Insured Municipals Fund Eaton Vance High Yield Municipals Fund
Eaton Vance Hawaii Municipals Fund Eaton Vance Kansas Municipals Fund
Eaton Vance Mutual Funds Trust
Eaton Vance Government Obligations Fund Eaton Vance Strategic Income Fund
Eaton Vance High Income Fund Eaton Vance Tax-Managed Growth Fund
Eaton Vance Tax-Managed Emerging Growth Fund
Eaton Vance Special Investment Trust
Eaton Vance Emerging Markets Fund Eaton Vance Special Equities Fund
Eaton Vance Greater India Fund Eaton Vance Stock Fund
</TABLE>
<PAGE>
September 16, 1997
Schedule A-1
Eaton Vance Mutual Funds Trust
Eaton Vance Tax-Managed Emerging Growth Fund
<PAGE>
October 17, 1997
Schedule A-2
Eaton Vance Mutual Funds Trust
Eaton Vance Municipal Bond Fund
<PAGE>
November 17, 1997
Schedule A-3
Eaton Vance Special Investment Trust
Eaton Vance Russia and Eastern Europe Fund
