<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 23, 1998
1933 ACT FILE NO. 2-27962
1940 ACT FILE NO. 811-1545
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER
SECURITIES ACT OF 1933 [X]
POST-EFFECTIVE AMENDMENT NO. 51 [X]
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 38 [X]
EATON VANCE SPECIAL INVESTMENT TRUST
--------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
24 FEDERAL STREET, BOSTON, MASSACHUSETTS 02110
----------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
617-482-8260
-----------------------
(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 [ ] on (date) pursuant to paragraph (a)(1)
pursuant to paragraph (b)
[X] on May 1, 1998 pursuant to [ ] 75 days after filing purusant to
paragraph (b) paragraph (a)(2)
[ ] 60 days after filing
pursuant to paragraph (a)(1) [ ] on (date) pursuant to paragraph (a)(2).
If appropriate, check the following box:
[ ] this post effective amendment designates a new effective date for a
previously filed post- effective amendment.
TITLE OF SECURITIES BEING REGISTERED: Shares of Beneficial Interest
Emerging Markets Portfolio, Investors Portfolio, South Asia Portfolio,
Special Investment Portfolio, Stock Portfolio and Total Return Portfolio have
also executed this Registration Statement.
===============================================================================
<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 combined Prospectus of:
Eaton Vance Balanced Fund
Eaton Vance Growth & Income Fund
Eaton Vance Special Equities Fund
Eaton Vance Utilities Fund
The Prospectuses of:
Eaton Vance Emerging Markets Fund
Eaton Vance Greater India Fund
EV Traditional Emerging Growth Fund
Part B -- The combined Statement of Additional Information of:
Eaton Vance Balanced Fund
Eaton Vance Growth & Income Fund
Eaton Vance Special Equities Fund
Eaton Vance Utilities Fund
The Statements of Additional Information of:
Eaton Vance Emerging Markets Fund
Eaton Vance Greater India Fund
EV Traditional Emerging Growth 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 GROWTH TRUST
EATON VANCE BALANCED FUND EATON VANCE EMERGING MARKETS FUND
EATON VANCE GROWTH & INCOME FUND EATON VANCE GREATER INDIA FUND
EATON VANCE SPECIAL EQUITIES FUND EV TRADITIONAL EMERGING GROWTH FUND
EATON VANCE UTILITIES FUND
<TABLE>
CROSS REFERENCE SHEET
ITEMS REQUIRED BY FORM N-1A
---------------------------
<CAPTION>
PART A
ITEM NO. ITEM CAPTION PROSPECTUS CAPTION
- -------- ------------ ------------------------------------------------------------
<S> <C> <C>
1. ............ Cover Page Cover Page
2. ............ Synopsis Shareholder and Fund Expenses
3. ............ Condensed Financial Information The Fund's (or Funds') Financial Highlights; Performance
Information
4. ............ General Description of Registrant The Fund's (or Funds') Investment Objective; Investment
Policies and Risks; Investment Opportunities in India and
the Indian Subcontinent (for Greater India Fund only);
Investment Opportunities in Emerging Markets (for Emerging
Markets Fund only); Organization of the Fund and the
Portfolio (or Organization of the Funds and the
Portfolios) (for Balanced, Growth & Income, Special
Equities, Utilities, Emerging Markets and Greater India
Funds); Organization of the Fund (Emerging Growth Fund)
5. ............ Management of the Fund Management of the Fund and the Portfolio (or Management of
Funds and the Portfolios) (for Balanced, Growth & Income,
Special Equities, Utilities, Emerging Markets and Greater
India Funds); Management of the Fund (Emerging Growth
Fund)
5A............. Management's Discussion of Fund Not Applicable
Performance
6. ............ Capital Stock and Other Securities Organization of the Fund and the Portfolio (or Organization
of the Funds and the Portfolios) (for Balanced, Growth &
Income, Special Equities, Utilities, Emerging Markets and
Greater India Funds); Organization of the Fund (Emerging
Growth Fund); Reports to Shareholders; The Lifetime
Investing Account/Distribution Options; Distributions and
Taxes
7. ............ Purchase of Securities Being Valuing Shares; How to Buy Shares; Distribution and Service
Offered Plans (for Balanced, Growth & Income, Special Equities,
Utilities, Emerging Markets and Greater India Funds);
Service Plan (Emerging Growth Fund); 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
</TABLE>
<PAGE>
<TABLE>
CROSS REFERENCE SHEET -- CONTINUED
<CAPTION>
PART B
ITEM NO. ITEM CAPTION STATEMENT OF ADDITIONAL INFORMATION CAPTION
- ------ -------- ------------------------------------------------------------
<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 Control Persons and Principal Holders of Securities
Holders of Securities
16. ............ Investment Advisory and Other Investment Adviser and Administrator (for Balanced, Growth &
Services Income, Special Equities and Utilities and Emerging Growth
Funds); Management of the Funds and the Portfolios (for
Emerging Markets and Greater India Funds); Service Plan
(Emerging Growth Fund); Service Plan -- Class A Shares
(for Balanced, Growth & Income, Special Equities and
Utilities Funds); Distribution Plans -- Class A (for
Emerging Markets and Greater India Funds), Class B and
Class C Shares (for Balanced, Growth & Income, Special
Equities, Utilities, Emerging Markets and Greater India
Funds); Custodian; Independent Accountants (for Balanced,
Growth & Income, Special Equities, Utilities and Emerging
Growth Funds); Independent Certified Public Accountants
(for Emerging Markets and Greater India Funds); Other
Information
17. ............ Brokerage Allocation and Other Portfolio Security Transactions
Practices
18. ............ Capital Stock and Other Securities Other Information
19. ............ Purchase, Redemption and Pricing Determination of Net Asset Value; Principal Underwriter;
of Securities Being Offered Services for Accumulation (Emerging Growth Fund); Services
for Accumulation -- Class A Shares (for Balanced, Growth &
Income, Special Equities, Utilities, Emerging Markets and
Greater India Funds); Service for Withdrawal; Service Plan
(Emerging Growth Fund); Service Plan -- Class A Shares
(for Balanced, Growth & Income, Special Equities and
Utilities Funds only); Distribution Plans -- Class A (for
Emerging Markets and Greater India Funds), Class B and
Class C Shares (for Balanced, Growth & Income, Special
Equities, Utilities, Emerging Markets and Greater India
Funds)
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
[GRAPHIC OMITTED] Investing
EATON VANCE for the
- ---------------- 21st
MUTUAL FUNDS Century
Eaton Vance Balanced Fund
Eaton Vance Growth & Income Fund
Eaton Vance Special Equities Fund
Eaton Vance Utilities Fund
EATON VANCE BALANCED FUND ("Balanced Fund") is a mutual fund seeking to
provide current income and long-term growth of capital.
EATON VANCE GROWTH & INCOME FUND ("Growth & Income Fund") is a mutual fund
seeking growth of principal and income.
EATON VANCE SPECIAL EQUITIES FUND ("Special Equities Fund") is a mutual fund
seeking growth of capital.
EATON VANCE UTILITIES FUND ("Utilities Fund") is a mutual fund seeking high
total return from relatively predictable income in conjunction with capital
appreciation, consistent with prudent management and preservation of capital.
Each Fund invests its assets in a corresponding diversified open-end
investment company (a "Portfolio") having the same investment objective as the
Fund, rather than by directly investing in and managing its own portfolio of
securities. Each Fund is a series of Eaton Vance Special Investment Trust (the
"Trust").
FUND SHARES 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. FUND SHARES INVOLVE INVESTMENT RISKS,
INCLUDING FLUCTUATIONS IN VALUE AND THE POSSIBLE LOSS OF SOME OR ALL OF THE
PRINCIPAL INVESTMENT.
This combined Prospectus is designed to provide you with information you
should know before investing. Please retain this document for future
reference. A combined Statement of Additional Information dated May 1, 1998
for the Funds, as supplemented from time to time, has been filed with the
Securities and Exchange Commission (the "Commission") and is incorporated
herein by reference. This Statement of Additional Information is available
without charge from the Funds' principal underwriter, Eaton Vance
Distributors, Inc. (the "Principal Underwriter") (telephone (800) 225-6265).
Boston Management and Research (the "Investment Adviser"), a wholly-owned
subsidiary of Eaton Vance Management, serves as each Portfolio's investment
adviser and Eaton Vance Management is each Fund's administrator (the
"Administrator"). The offices of the Principal Underwriter, Investment Adviser
and Administrator are located at 24 Federal Street, Boston, MA 02110.
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.
CONTENTS
<TABLE>
<CAPTION>
Page Page
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Shareholder and Fund Expenses 2 How to Buy Shares 15
The Funds' Financial Highlights 4 How to Redeem Shares 17
The Funds' Investment Objectives 8 Reports to Shareholders 18
Investment Policies and Risks 8 The Lifetime Investing Account/Distribution Options 18
Organization of the Funds and the Portfolios 11 The Eaton Vance Exchange Privilege 19
Management of the Funds and the Portfolios 12 Eaton Vance Shareholder Services 20
Distribution and Service Plans 14 Distributions and Taxes 21
Valuing Shares 15 Performance Information 21
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
Prospectus dated May 1, 1998
<PAGE>
SHAREHOLDER AND FUND EXPENSES
SHAREHOLDER TRANSACTION EXPENSES
Class A Class B Class C
Shares Shares Shares
- --------------------------------------------------------------------------------
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) 5.75% None None
Sales Charge Imposed on Reinvested
Distributions None None None
Fees to Exchange Shares None None None
Maximum Contingent Deferred Sales Charge None 5.00% 1.00%
Annual Fund and Allocated Portfolio Operating Expenses (as a percentage of
average daily net assets)
Rule 12b-1
Investment Distribution Total
Adviser and/or Other Operating
Fees Service Fees Expenses Expenses
- --------------------------------------------------------------------------------
Balanced Fund
Class A shares 0.63% 0.11% 0.24% 0.98%
Class B shares 0.63 0.97 0.24 1.84
Class C shares 0.63 1.00 0.24 1.87
Growth & Income Fund
Class A shares 0.63% 0.13% 0.28% 1.04%
Class B shares 0.63 0.98 0.28 1.89
Class C shares 0.63 1.00 0.28 1.91
Special Equities Fund
Class A shares 0.63% 0.11% 0.38% 1.12%
Class B shares 0.63 0.93 0.38 1.94
Class C shares 0.63 1.00 0.38 2.01
Utilities Fund
Class A shares 0.65% 0.22% 0.27% 1.14%
Class B shares 0.65 0.96 0.27 1.88
Class C shares 0.65 1.00 0.27 1.92
EXAMPLE
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 and
Class C shares, the applicable contingent deferred sales charge on a
$1,000 investment, assuming (a) 5% annual return and (b) redemption at
the end of each period (and, for Class B and Class C shares, no
redemption):
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Balanced Fund
Class A shares $67 $ 87 $109 $171
Class B shares 69 98 120 216
Class B shares (no
redemption) 19 58 100 216
Class C shares 29 59 101 219
Class C shares (no
redemption) 19 59 101 219
Growth & Income Fund
Class A shares $67 $ 89 $112 $177
Class B shares 69 99 122 221
Class B shares (no
redemption) 19 59 102 221
Class C shares 29 60 103 223
Class C shares (no
redemption) 19 60 103 223
Special Equities Fund
Class A shares $68 $ 91 $116 $186
Class B shares 70 101 125 226
Class B shares (no
redemption) 20 61 105 226
Class C shares 30 63 108 234
Class C shares (no
redemption) 20 63 108 234
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Utilities Fund
Class A shares $68 $ 92 $117 $188
Class B shares 69 99 122 220
Class B shares (no
redemption) 19 59 102 220
Class C shares 29 60 104 224
Class C shares (no
redemption) 19 60 104 224
NOTES: The table and Example summarize the aggregate expenses of the
Portfolios and each Class of shares of the Funds and are designed to help
investors understand the costs and expenses they will bear, directly or
indirectly, by investing in a Fund. Information for Class A shares is based on
the most recent fiscal year. Information for Class B and C shares is estimated
based upon the most recent fiscal year of its predecessor fund adjusted for
the multiple-class structure.
THE EXAMPLE 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 Example to assume a 5% annual return, but actual
return will vary. Long-term shareholders in Class B and Class C shares 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 Funds and the
Portfolios see "The Funds" Financial Highlights," "Management of the Funds
and the Portfolios," "Distribution and Service Plans" and "How to Redeem
Shares."
Each Fund offers multiple 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 and Class C shares are sold
subject to a 1% CDSC if redeemed within one year of purchase. The CDSC does
not apply in certain circumstances. See "How to Buy Shares" and "How to Redeem
Shares."
Each Fund invests exclusively in its corresponding Portfolio. Other investors
with different distribution arrangements and fees may invest in the Portfolios
in the future. See "Organization of the Funds and the Portfolios."
THE FUNDS' FINANCIAL HIGHLIGHTS
The following information should be read in conjunction with the audited
financial statements that appear in the Funds' annual reports to shareholders.
The Funds' financial statements have been audited by Coopers & Lybrand L.L.P.,
independent accountants, as experts in accounting and auditing. The financial
statements and the report of independent accountants are incorporated by
reference into the Statement of Additional Information. The Financial
Highlights for Balanced Fund, Growth & Income Fund, Special Equities Fund and
Utilities Fund for each of the four years in the periods ended January 31,
1992, December 31, 1991, December 31, 1991 and December 31, 1991,
respectively, presented here, were audited by other auditors whose reports
dated March 2, 1992, January 21, 1992, January 21, 1992 and February 7, 1992,
respectively, expressed an unqualified opinion on such financial highlights.
Further information regarding the performance of a Fund is contained in its
annual report to shareholders which may be obtained without charge by
contacting the Principal Underwriter. The financial information for each of
the periods presented in the Funds' Financial Highlights is for a Fund prior
to reclassification as a separate Class of shares on January 1, 1998.
Information for the new Classes of shares is not presented because these
classes did not exist prior to January 1, 1998. The Financial Highlights for
Class B and Class C shares will differ from the Financial Highlights for Class
A shares due to the different fees imposed on Class A shares.
<TABLE>
<CAPTION>
Balanced Fund (Class A Shares)
-------------------------------------------------------------------------------------------------------------
Year Ended December 31, Year Ended January 31,
-------------------------------- --------------------------------------------------------------------------
1997 1996 1995* 1995 1994 1993 1992+ 1991+ 1990+ 1989+
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period $ 8.090 $ 8.150 $ 6.840 $ 7.600 $ 7.390 $ 7.500 $ 7.060 $ 7.180 $ 7.330 $ 6.940
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Income (loss)
from operations:
Net investment
income $ 0.208 $ 0.254 $ 0.254 $ 0.283 $ 0.217 $ 0.342 $ 0.364 $ 0.417 $ 0.427 $ 0.390
Net realized and
unrealized gain
(loss) on
investments 1.492 0.821 1.641 (0.623) 0.833 0.318 0.736 0.103 0.303 0.500
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total income
(loss) from
operations $ 1.700 $ 1.075 $ 1.895 $ (0.340) $ 1.050 $ 0.660 $ 1.100 $ 0.520 $ 0.730 $ 0.890
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Less distributions:
From net investment
investment income $ (0.200) $ (0.254) $ (0.248) $ (0.275) $ (0.307) $ (0.360) $ (0.360) $ (0.430) $ (0.420) $ (0.370)
In excess of net
investment
income(3) -- (0.001) -- -- (0.008) -- -- -- -- --
From realized gain
on investments (0.890) (0.880) (0.337) (0.145) (0.525) (0.410) (0.300) (0.198) (0.460) (0.130)
From paid in
capital -- -- -- -- -- -- -- (0.012) -- --
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total
distributions $ (1.090) $ (1.135) $ (0.585) $ (0.420) $ (0.840) $ (0.770) $ (0.660) $(0.640) $ (0.880) $ (0.500)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net asset value, end
of period $ 8.700 $ 8.090 $ 8.150 $ 6.840 $ 7.600 $ 7.390 $ 7.500 $ 7.060 $ 7.180 $ 7.330
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
Total Return(2) 21.60% 13.61% 28.36% (4.45)% 15.13% 9.30% 16.26% 7.78% 10.27% 13.40%
Ratios/Supplemental Data:
Net assets, end of
period
(000's omitted) $263,730 $240,217 $236,870 $200,419 $227,402 $212,545 $210,197 $198,066 $204,030 $209,544
Ratio of net
expenses to
average daily
net assets** 0.97% 0.93% 0.95%++ 0.91% 0.90% 0.89% 0.86% 0.89% 0.92% 0.93%
Ratio of net
investment
income to
average daily
net assets 2.35% 3.03% 3.60%++ 4.05% 4.07% 4.62% 4.96% 5.99% 5.73% 5.54%
Portfolio Turnover
of the Fund*** -- -- -- -- 44% 32% 51% 66% 56% 53%
Portfolio Turnover
of the Portfolio*** 37% 64% 47% 28% 15% -- -- -- -- --
(See footnotes on page 7)
</TABLE>
<PAGE>
THE FUNDS' FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
Growth & Income Fund (Class A Shares)
----------------------------------------------------------------------------------------------------------
Year Ended December 31,
----------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991+ 1990+ 1989+ 1988+
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year $ 13.560 $ 12.760 $10.900 $12.490 $13.480 $14.030 $13.070 $14.710 $12.690 $12.240
--------- --------- ------- ------- ------- ------- ------- ------- ------- -------
Income (loss) from investment operations:
Net investment
income $ 0.163 $ 0.228 $ 0.250 $ 0.250 $ 0.270+++$ 0.312 $ 0.449 $ 0.564 $ 0.525 $ 0.475
Net realized and
unrealized gain
(loss) on
investments 3.827 2.272 3.255 (0.765) 0.270+++ 0.658 2.191 (0.504) 3.035 1.325
--------- --------- ------- ------- ------- ------- ------- ------- ------- -------
Total income
(loss) from
investment
operations $ 3.990 $ 2.500 $ 3.505 $(0.515) $ 0.540 $ 0.970 $ 2.640 $ 0.060 $ 3.560 $ 1.800
--------- --------- ------- ------- ------- ------- ------- ------- ------- -------
Less distributions:
From net investment
income $ (0.170) $ (0.220) $(0.251) $(0.250) $(0.270) $(0.320) $(0.460) $(0.630) $(0.500) $(0.450)
From net realized
gain on
investments (3.602) (1.480) (1.394) (0.765) (1.260) (1.200) (1.220) (1.070) (1.040) (0.900)
In excess of net
realized gain on
investments(3) (0.018) -- -- (0.060) -- -- -- -- -- --
--------- --------- ------- ------- ------- ------- ------- ------- ------- -------
Total
distributions $ (3.790) $ (1.700) $ (1.645) $(1.075) $(1.530) $(1.520) $(1.680) $(1.700) $(1.540) $(1.350)
--------- --------- -------- ------- ------- ------- ------- ------- ------- -------
Net asset value, end
of year $ 13.760 $ 13.560 $12.760 $10.900 $12.490 $13.480 $14.030 $13.070 $14.710 $12.690
========= ========= ======= ======= ======= ======= ======= ======= ======= =======
Total Return(2) 30.93% 20.20% 32.77% (4.12)% 4.19% 6.93% 21.45% 0.59% 28.92% 15.01%
Ratios/Supplemental Data:
Net assets, end of
year (000's
omitted) $ 124,569 $ 106,775 $99,375 $84,299 $97,513 $91,299 $91,844 $80,642 $89,809 $76,761
Ratio of expenses to
average daily net
assets** 1.04% 1.00% 1.04%+++ 0.98% 0.96% 0.92% 0.94% 0.99% 0.90% 0.96%
Ratio of net
investment income
to average daily
net assets 1.07% 1.70% 2.02%+++ 2.09% 2.01% 2.29% 3.23% 4.02% 3.66% 3.64%
Portfolio Turnover of
the Fund*** -- -- -- 66% 105% 59% 42% 42% 14% 29%
Portfolio Turnover of
the Portfolio*** 93% 114% 108% 28% -- -- -- -- -- --
(See footnotes on page 7)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE FUNDS' FINANCIAL HIGHLIGHTS (continued)
Special Equities Fund (Class A Shares)
---------------------------------------------------------------------------------------------------------
Year Ended December 31,
---------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991+ 1990+ 1989+ 1988+
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 8.950 $ 7.980 $ 6.880 $ 8.430 $ 8.990 $ 9.520 $ 6.810 $ 7.050 $ 6.080 $ 5.470
-------- --------- ------- ------- ------- ------- ------- ------- ------- -------
Income (loss) from operations:
Net investment
income (loss) $ (0.032) $ (0.009) $(0.009) $(0.013) $(0.018) $ 0.006 $ 0.004 $ 0.033 $ 0.032 $ 0.050
Net realized and
unrealized gain
(loss) on
investments 0.922 1.874 1.599 (0.807) 0.108 0.239 3.776 0.130 1.382 0.560
--------- --------- ------- ------- ------- ------- ------- ------- ------- -------
Total income
(loss) from
operations $ 0.890 $ 1.865 $ 1.590 $(0.820) $ 0.090 $ 0.245 $ 3.780 $ 0.163 $ 1.414 $ 0.610
--------- --------- ------- ------- ------- ------- ------- ------- ------- -------
Less distributions:
From net realized
gain on
investments $ (2.706) $ (0.895) $(0.490) $(0.727) $(0.650) $(0.775) $(1.070) $(0.403) $(0.444) --
In excess of net
realized gain on
investments(3) (0.144) -- -- -- -- -- -- -- -- --
From tax return of
capital -- -- -- (0.003) -- -- -- -- -- --
--------- --------- -------- ------- ------- ------- ------- ------- ------- -------
Total
distributions $ (2.850) $ (0.895) $ 0.490) $(0.730) $(0.650) $(0.775) $(1.070) $(0.403) $(0.444) --
--------- --------- ------- ------- ------- ------- ------- ------- ------- -------
Net asset value, end
of period $ 6.990 $ 8.950 $ 7.980 $ 6.880 $ 8.430 $ 8.990 $ 9.520 $ 6.810 $ 7.050 $ 6.080
========= ========= ======= ======= ======= ======= ======= ======= ======= =======
Total Return(2) 14.18% 23.76% 23.31% (9.60)% 1.14% 2.71% 57.33% 2.50% 23.57% 11.21%
Ratios/Supplemental Data:
Net assets, end of
period (000's
omitted) $ 73,144 $ 76,999 $70,456 $63,852 $78,132 $76,544 $77,324 $50,094 $53,488 $34,231
Ratio of expenses to
average daily net
assets** 1.12% 1.04% 1.08% 1.02% 1.01% 0.96% 0.94% 1.06% 1.22% 1.24%
Ratio of net
investment income
(loss) to average
daily net assets (0.46)% (0.10)% (0.12)% (0.17)% (0.30)% 0.07% 0.05% 0.48% 0.45% 0.87%
Portfolio Turnover of
the Fund*** -- -- -- 37% 73% 48% 41% 47% 57% 33%
Portfolio Turnover of
the Portfolio*** 156% 91% 81% 19% -- -- -- -- -- --
(See footnotes on page 7)
</TABLE>
<PAGE>
THE FUNDS' FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
Utilities Fund (Class A Shares)
----------------------------------------------------------------------------------------------------------
Year Ended December 31,
----------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991+ 1990+ 1989+ 1988+
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year $ 8.7700 $ 9.1300 $7.6300 $9.1400 $9.3600 $ 9.7500 $ 9.0700 $ 9.9400 $7.9200 $7.6000
--------- --------- ------- ------- ------- -------- -------- ------- ------- -------
Income (loss) from operations:
Net investment
income $ 0.409 $ 0.6260 $ 0.5235 $ 0.5458 $ 0.3626 $ 0.5113 $ 0.5204 $$0.5026 $ 0.5202 $ 0.5400
Net realized and
unrealized gain
(loss) on
investments 0.887 (0.0140)++++ 1.5195 (1.6678) 0.5524 0.0937 1.4896 (0.5226) 2.0498 0.3500
--------- --------- -------- -------- -------- -------- -------- -------- -------- --------
Total income
(loss) from
operations $ 1.296 $ 0.6120 $ 2.0430 $(1.1220) $ 0.9150 $ 0.6050 $ 2.0100 $(0.0200) $ 2.5700 $ 0.8900
Less distributions:
From net
investment income (0.331) (0.5220) (0.3641) (0.3880) (0.4650) (0.5200) (0.5200) (0.5500) (0.5500) (0.5200)
In excess of net
investment
income(3) -- -- (0.0389) -- -- -- -- -- -- --
From net realized
gain on investments (1.243) (0.4500) (0.0775) -- (0.6544) (0.4750) (0.8100) (0.3000) -- (0.0500)
In excess of net
realized gain on
investments(3) (0.042) -- (0.0625) -- (0.0156) -- -- -- -- --
--------- --------- -------- -------- -------- -------- ------- -------- -------- --------
Total
distributions $ (1.616) $ (0.9720) $(0.5430) $(0.3880) $(1.1350) $(0.9950) $(1.3300) $(0.8500) $(0.5500) $(0.5700)
--------- --------- -------- -------- -------- -------- -------- -------- -------- --------
Net asset value, end
of year $ 8.450 $ 8.7700 $ 9.1300 $ 7.6300 $ 9.1400 $ 9.3600 $ 9.7500 $ 9.0700 $ 9.9400 $ 7.9200
Total Return(2) 16.18% 7.00% 27.52% (12.28)% 9.49% 6.60% 23.61% 0.15% 33.46% 11.94%
Ratios/Supplemental
Data:
Net assets, end of
year (000's
omitted) $ 370,457 $ 401,974 $457,879 $445,133 $629,514 $564,912 $545,731 $491,253 $536,954 $472,774
Ratio of interest
expense to
average daily
net assets** -- -- -- -- 0.20% 0.29% 0.38% 0.08% 0.17% 0.03%
Ratio of other
expenses to
average daily
net assets** 1.13% 1.23% 1.19% 1.18% 1.11% 1.10% 1.13% 1.19% 1.15% 1.17%
Ratio of net
investment
income to
average daily
net assets 4.06% 5.59% 4.49% 4.90% 4.64% 5.43% 5.60% 5.49% 5.90% 6.81%
Portfolio Turnover
of the Fund*** -- -- -- -- 63% 54% 69% 52% 60% 78%
Portfolio Turnover
of the Portfolio*** 169% 166% 103% 107% 16% -- -- -- -- --
Leverage Analysis:(1)
Amount of debt
outstanding at
end of period
(000's omitted) -- -- -- -- -- $ 47,045 $ 56,370 -- $ 15,000 --
Average daily
balance of debt
outstanding
during period
(000's omitted) -- -- -- -- $ 29,906(1) 27,764 $ 25,901 $ 3,793 $ 6,364 $ 2,965
Average weekly
balance of
shares
outstanding
during period
(000's omitted) -- -- -- -- $ 61,377(1) 57,280 $ 53,281 $ 53,078 $ 55,398 $ 64,459
Average amount of
debt per share
during period -- -- -- -- $ 0.487(1)$ 0.485 $ 0.486 $ 0.071 $ 0.115 $ 0.046
* For the eleven-month period ended December 31, 1995.
** Includes the Fund's share of the Portfolio's allocated expenses for the periods since the Fund transferred its assets to
the Portfolio (October 28, 1993 for Balanced Fund and Utilities Fund, and August 1, 1994 for Special Equities Fund and
Growth & Income Fund).
*** Portfolio Turnover of the Fund represents the rate of portfolio activity for the period while the Fund was making
investments directly in securities. The Portfolio Turnover of the Portfolio represents the period when a Fund began
investing in the Portfolio as follows: October 23, 1993 for the Balanced and Utilities Funds; and August 1, 1994 for
the Special Equities and Growth & Income Funds.
+ Audited by previous auditors.
++ Computed on an annualized basis.
+++ Computed on an average share basis.
++++ The per share amount is not in accord with the net realized and unrealized gain (loss) for the period because of the
timing of sales of Fund shares and the amount of the per share realized and unrealized gains and losses at such time.
(1) The Leverage Analysis is for the period January 1 to October 27, 1993 when the Fund transferred the line of credit to the
Portfolio. The analysis for the years ended December 31, 1995 and 1994 and the period from October 28, 1993 to
December 31, 1993 is shown in the Portfolio's financial statements, which are included in the Fund's annual report.
(2) Total return is calculated assuming a purchase at the net asset value on the first day and a sale at the net asset value
on the last day of each period reported. Distributions, if any, are assumed to be reinvested at the net asset value on the
ex-dividend date. Total return is calculated on a non-annualized basis.
(3) Distributions from paid-in capital for the years ended September 30, 1986 through 1992 have been restated to conform with
the treatment permitted under current financial reporting standards. During the year ended December 31, 1993, the Fund
adopted the Statement of Position (SOP) 93-2: Determination, Disclosure and Financial Statement Presentation of Income,
Capital Gain, and Return of Capital Distribution by Investment Companies. The SOP requires that differences in the
recognition or classification of income between the financial statements and tax earnings and profits that result in
temporary over-distributions for financial statement purposes, are classified as distributions in excess of net investment
income or accumulated net realized gains.
</TABLE>
<PAGE>
THE FUNDS' INVESTMENT OBJECTIVES
BALANCED FUND'S INVESTMENT OBJECTIVES ARE TO PROVIDE CURRENT INCOME AND LONG-
TERM GROWTH OF CAPITAL. Balanced Fund currently seeks to meet its investment
objective by investing its assets in Balanced Portfolio, a separate registered
investment company which has the same investment objective and policies.
GROWTH & INCOME FUND'S INVESTMENT OBJECTIVE IS TO PROVIDE GROWTH OF PRINCIPAL
AND INCOME FOR ITS SHAREHOLDERS. Growth & Income Fund currently seeks to meet
its investment objective by investing its assets in Growth & Income Portfolio,
a separate registered investment company which has the same investment
objective and policies.
SPECIAL EQUITIES FUND'S INVESTMENT OBJECTIVE IS TO PROVIDE GROWTH OF CAPITAL.
Special Equities Fund currently seeks to meet its investment objective by
investing its assets in Special Investment Portfolio, a separate registered
investment company which has the same investment objective and policies.
UTILITIES FUND'S INVESTMENT OBJECTIVE IS TO SEEK FOR ITS SHAREHOLDERS A HIGH
LEVEL OF TOTAL RETURN, CONSISTING OF RELATIVELY PREDICTABLE INCOME IN
CONJUNCTION WITH CAPITAL APPRECIATION, CONSISTENT WITH PRUDENT MANAGEMENT AND
PRESERVATION OF CAPITAL. Utilities Fund currently seeks to meet its investment
objective by investing its assets in Utilities Portfolio, a separate
registered investment company which has the same investment objective and
policies.
No Fund can assure achievement of its investment objective. No Fund is
intended to be a complete investment program, and prospective investors should
take into account their objectives and other investments when considering the
purchase of Fund shares.
INVESTMENT POLICIES AND RISKS
BALANCED PORTFOLIO. It is Balanced Portfolio's current policy that investments
in equity securities will generally not exceed 75% nor be less than 25% of the
Portfolio's net assets. The policy of Balanced Portfolio is to invest in a
broadly diversified list of seasoned securities representing a number of
different industries. The Portfolio's management will place emphasis on equity
securities considered to be of high or improving quality. It is the policy of
Balanced Portfolio not to concentrate its investments in any particular
industry or group of industries. Electric utility companies, gas utility
companies, natural gas producing companies, transmission companies, telephone
companies and water works companies will for the purpose of this policy be
considered separate industries. Balanced Portfolio may not invest more than
25% of the value of its total assets at the time of acquisition in any one
industry, with public utility companies, as segregated above, being considered
separate industries. The policies set forth in this paragraph are fundamental
policies of both Balanced Fund and Balanced Portfolio and may not be changed
unless authorized by a vote of the shareholders of the Fund and the investors
in the Portfolio.
Balanced Portfolio will also invest in fixed-income securities such as
preferred stocks, bonds, debentures, notes or money market instruments in
order to maintain a reasonable level of current income, preserve capital or
create a buying reserve. The Portfolio may also invest in various kinds and
types of debt securities from time to time, including without limitation,
obligations issued, guaranteed or otherwise backed by U.S. Government agencies
and instrumentalities, collateralized mortgage obligations and various other
mortgage-backed securities, and other types of asset-backed obligations and
collateralized securities. (Balanced Portfolio will not, however, invest in
residual interests in real estate mortgage investment conduits.) The Portfolio
currently limits its investments in lower quality debt securities to 5% or
less of its assets.
Balanced Portfolio may sell a security short if it owns at least an equal
amount of the security sold short or another security convertible or
exchangeable for an equal amount of the security sold short without payment of
further compensation (a short sale against-the-box). A short sale against-the-
box requires that the short seller absorb certain costs so long as the
position is open. In a short sale against-the-box, the short seller is exposed
to the risk of being forced to deliver appreciated stock to close the position
if the borrowed stock is called in, causing a taxable gain to be recognized.
No more than 20% of Balanced Portfolio's assets will be subject to short sales
at any one time.
GROWTH & INCOME PORTFOLIO. To achieve Growth & Income Portfolio's objective,
primary emphasis will be placed on common stocks of companies which appear to
offer good prospects for increases in both earnings and dividends. Growth &
Income Portfolio will invest primarily (i.e., at least 65% of its total assets
during normal investment conditions) in equity securities (common and
preferred stocks, and securities convertible into common stocks). The
Portfolio's investments in convertible debt securities will be limited to 20%
of net assets. The criteria for acquiring convertible debt are the same as
those used for the common stock of the issuer and, accordingly, such
investments may be of any credit quality (including below investment grade).
Growth & Income Portfolio purchases securities primarily for investment,
rather than with a view to realizing trading profits. Nevertheless, portfolio
changes are made whenever considered advisable in the pursuit of the
Portfolio's investment objective.
In seeking to achieve its investment objective, or to consolidate growth
previously attained, Growth & Income Portfolio may from time to time purchase
bonds, U.S. Government obligations and other securities. Bonds will constitute
5% or less of net assets and will be of investment grade quality (which are
those rated Baa or higher by Moody's Investors Service, Inc. ("Moody's") or
BBB or higher by either Standard & Poor's Rating Group ("S&P") or Fitch/IBCA
("Fitch") at the time of investment.
SPECIAL INVESTMENT PORTFOLIO. Special Investment Portfolio invests primarily
in quality growth securities. Although there is no formula as to the
percentage of assets that will be invested in any one type of security, the
policy of Special Investment Portfolio is to invest primarily (i.e., at least
65% of its total assets during normal investment conditions) in equity
securities, including common stocks and securities convertible into common
stocks, of publicly-held companies combining characteristics of both growth
and quality sought by the Portfolio. Any income received will be incidental to
Special Investment Portfolio's objective of capital growth. The criteria for
investments in convertible debt are the same as those used for the common
stock of the issuer. Special Investment Portfolio may invest in companies that
have market capitalizations of $250 million or less. Investment in the
securities of such companies may involve greater relative risk due to their
smaller size. From time to time, Special Investment Portfolio may also invest
in bonds, notes and certificates of indebtedness if, in the Investment
Adviser's judgment, such investments are consistent with the Portfolio's
objective.
Realization of Special Investment Portfolio's objective will depend to a large
extent on the accuracy of earnings projections, which are not subject to exact
prediction. If, in the opinion of the Investment Adviser, market conditions
are such that a more conservative approach to investments is deemed desirable,
the Portfolio may temporarily make substantial investments in investment grade
fixed-income obligations of all types and U.S. Government obligations, or in
bonds, notes or other certificates of indebtedness.
In the view of the Investment Adviser, a growth security is an equity security
of a company which has shown relative gains in earning power over a period of
years substantially above that achieved by the economy as a whole and which,
the Investment Adviser expects, will continue to show such gains. It is the
intention of Special Investment Portfolio that its portfolio will be
concentrated in securities of companies which, in the Investment Adviser's
judgment, seem likely to double their earning power within a five-year period.
To achieve this objective, a company would require minimum average annual
compound rates of growth over such period of at least 15%. There is, of
course, no assurance that the Investment Adviser will be successful in
selecting securities of companies which meet these standards. In recommending
portfolio investments on behalf of Special Investment Portfolio, the
Investment Adviser will consider that the quality of a security depends upon
the ability, motivation, depth and integrity of the issuer's management, the
importance of the enterprise in its industry and the relative importance of
the industry within the broad economic framework, the current financial
strength of the enterprise in terms of ability to cushion adversity and to
fund the expansion of activities, and the reliability of final demand
characteristics for products or services. Special Investment Portfolio would
generally expect to hold its securities until the Investment Adviser's
judgment of the issuing company's prospects is altered and/or the price of the
company's securities appears to over-discount prospective earnings progress as
compared with other issues with similar characteristics.
UTILITIES PORTFOLIO. Utilities Portfolio seeks to achieve its objective by
investing principally in dividend-paying common stocks with the potential to
increase dividends in the future. Utilities Portfolio concentrates its
investments in common stocks of utilities ("utility stocks"), principally
electric, gas and telephone companies. "Utilities" are companies engaged in
the manufacture, production, generation, transmission, sale and distribution
of water, gas and electric energy, or who manufacture or supply equipment for
such companies, as well as companies engaged in the communications field and
the companies which manufacture or supply equipment for such companies,
including telephone, telegraph, satellite, cable, microwave, radio-telephone,
computer, mobile communication and cellular paging, electronic mail, videotext
and teletext and other new or emerging technology companies. A company will be
considered to be in the utilities industry if, during the most recent twelve-
month period, at least 50% of the company's gross revenues, on a consolidated
basis, are derived from the utilities industry. Under ordinary circumstances,
at least 65% of the Portfolio's total assets will be invested in utility
stocks. The Portfolio may also invest a significant portion of its assets in
the securities of real estate investment trust ("REITs"), which are affected
by conditions in the real estate industry, interest rate changes and, in the
case of REITs investing in health care facilities, events affecting the health
care industry.
In addition, Utilities Portfolio may invest in preferred stocks and may hold
non-income-producing securities. Utilities Portfolio may also from time to
time invest in fixed-income debt securities when the Investment Adviser
believes that their total return potential is consistent with the objective of
the Fund and the Portfolio. Utilities Portfolio may invest its cash reserves
in high quality money market securities, which include securities of the U.S.
Government and its agencies or instrumentalities maturing in one year or less,
commercial paper, and bankers' acceptances and certificates of deposit of
domestic banks or savings and loan associations having total assets of $1
billion or more. Utilities Portfolio may also invest in longer-term debt
securities that at the time of purchase are rated Aaa, Aa or A by Moody's or
AAA, AA or A by S&P, Fitch or Duff & Phelps, Inc. ("Duff"), or that at the
time of purchase are issued, guaranteed, backed or secured by the U.S.
Government or any of its agencies or instrumentalities. Utilities Portfolio
currently intends to limit its investments in fixed-income debt securities to
20% or less of its net assets. Subject to such limitation, Utilities Portfolio
may invest up to 10% of its net assets in fixed-income debt securities that at
the time of purchase are rated investment grade or below investment grade.
In view of Utilities Portfolio's policy of concentrating its investments in
utility stocks, an investment in shares of Utilities Fund should be made with
an understanding of the characteristics of the utility industry and the
potential risks of such an investment. Industry-wide problems include the
effects of fluctuating economic conditions, energy conservation practices,
environmental regulations, high capital expenditures, construction delays due
to pollution control and environmental considerations, uncertainties as to
fuel availability and costs, increased competition in deregulated sectors of
the industry, and difficulties in obtaining timely and adequate rate relief
from regulatory commissions. If applications for rate increases are not
granted or are not acted upon promptly, the market prices of and dividend
payments on utility stocks may be adversely affected. Utilities Portfolio's
policy of concentrating in utility stocks is a fundamental policy and may not
be changed unless authorized by an investor vote.
COMMON INVESTMENT POLICIES AND RISKS
DERIVATIVE INSTRUMENTS. Balanced Portfolio may purchase and sell exchange-
traded futures contracts on stock indices and options thereon to hedge against
fluctuations in securities prices or as a substitute for the purchase or sale
of securities. Utilities Portfolio may purchase or sell various 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.
Utilities Portfolio's transactions in derivative instruments may include the
purchase or sale of futures contracts on securities (such as U.S. Government
securities), securities indices, other indices, other financial instruments or
currencies; options on futures contracts; exchange-traded options on
securities, indices or currencies; and forward foreign currency exchange
contracts.
For income purposes, Growth & Income Portfolio may write (sell) covered
exchange-traded call options on portfolio securities with respect to 25% of
its net assets. Utilities Portfolio may write (sell) covered call and put
options on securities, currencies and indices with respect to up to 50% of its
net assets, as measured by the aggregate value of the securities underlying
such written call and put options. If a written covered call option is
exercised, the Portfolio will be unable to realize further price appreciation
on the underlying securities and portfolio turnover will increase, resulting
in higher brokerage costs. Utilities Portfolio may purchase call and put
options on any securities in which it may invest or options on any securities
index composed of securities in which it may invest. Utilities Portfolio does
not intend to purchase an option on any security if, after such transaction,
more than 5% of its net assets, as measured by the aggregate of all premiums
paid for all such options it holds, would be so invested.
Forward contracts are individually negotiated and privately traded by currency
traders and their customers. A forward contract involves an obligation to
purchase or sell a specific currency (or basket of currencies) for an agreed
price at a future date, which may be any fixed number of days from the date of
the contract. Utilities Portfolio may engage in cross-hedging by using forward
contracts in one currency (or basket of currencies) to hedge against
fluctuations in the value of securities denominated in a different currency if
the Investment Adviser determines that there is an established historical
pattern of correlation between the two currencies (or the basket of currencies
and the underlying currency). Use of a different foreign currency magnifies
Utilities Portfolio's exposure to foreign currency exchange rate fluctuations.
Utilities Portfolio may also use forward contracts to shift its exposure to
foreign currency exchange rate changes from one currency to another.
Transactions in derivative instruments involve a risk of loss or depreciation
due to: unanticipated adverse changes in securities prices, interest rates,
the other financial instruments' prices or currency exchange rates; the
inability to close out a position; default by the counterparty; imperfect
correlation between a position and the desired hedge; tax constraints on
closing out positions; and portfolio management constraints on securities
subject to such transactions. The loss on derivative instruments (other than
purchased options) may substantially exceed a Portfolio's initial investment
in these instruments. In addition, a Portfolio may lose the entire premium
paid for purchased options that expire before they can be profitably
exercised. Transaction costs are incurred in opening and closing positions in
derivative instruments. The use of derivatives are highly specialized
activities that involve skills different from conducting ordinary portfolio
securities transactions. Under regulations of the Commodity Futures Trading
Commission, the use of futures transactions for nonhedging purposes is
limited. There can be no assurance that the Investment Adviser's use of
derivative instruments will be advantageous to a Portfolio.
FOREIGN SECURITIES. Balanced Portfolio and Utilities Portfolio may each
invest up to 20% of their total assets, and Growth & Income Portfolio may
invest up to 25% of its total assets, in foreign securities. Special
Investment Portfolio is not limited in the amount of its assets that it may
invest in foreign securities, although its investment in such securities is
not currently expected to exceed 20% of total assets. Investing in such
securities (including depository receipts) involves considerations and
possible risks not typically associated with investing in securities issued by
domestic corporations. The values of foreign investments are affected by
changes in currency rates or exchange control regulations, application of
foreign tax laws (including withholding tax), changes in governmental
administration or economic or monetary policy (in this country or abroad), or
changed circumstances in dealings between nations. Foreign currency exchange
rates may fluctuate significantly over short periods of time causing a
Portfolio's net asset value to fluctuate as well. Costs are incurred in
connection with conversions between various currencies. In addition, foreign
brokerage commissions, custody fees and other costs of investing are generally
higher than in the United States, and foreign securities markets may be less
liquid, more volatile and less subject to governmental supervision than in the
United States. Investments in foreign issuers could be adversely affected by
other factors not present in the United States including expropriation,
confiscatory taxation, lack of uniform accounting and auditing standards,
delays in settlements of transactions, less publicly-available financial and
other information, armed conflict and potential difficulties in enforcing
contractual obligations. In order to hedge against possible variations in
foreign exchange rates pending the settlement of foreign securities
transactions, each Portfolio may buy or sell foreign currencies. In addition,
Utilities Portfolio may buy or sell foreign currency futures and options, and
Balanced Portfolio and Utilities Portfolio may enter into forward foreign
currency exchange contracts. Utilities Portfolio's investments in depository
receipts traded on a U.S. exchange are not subject to the foregoing 20% limit.
ADDITIONAL RISK FACTORS. An investment in a Fund entails the risk that the
principal value of Fund shares and any income earned thereon may not increase
or may decline. The Portfolios' investments in equity securities are subject
to the risk of adverse developments affecting particular companies or
industries and the stock market generally. Investments in fixed-income
securities are subject to the risk that the issuer may default on its
obligations to pay principal and interest. The value of fixed-income
securities tends to increase during periods of falling interest rates and to
decline during periods of rising interest rates. By investing in a diversified
portfolio of securities, each Portfolio seeks both to reduce the risks
ordinarily inherent in holding one security or securities of a single issuer
and to improve the prospects for possible growth by investing in a substantial
number of prudently selected securities. Attainment of a Portfolio's objective
cannot, of course, be assured since its asset value fluctuates with changes in
the market value of its investments and dividends paid depend upon income
received by the Portfolio.
Debt securities of below investment grade quality (commonly called "junk
bonds") bear special risks. The lowest investment grade, lower rated and
comparable unrated debt securities will have speculative characteristics in
varying degrees. While such securities may have some quality and protective
characteristics, these characteristics can be expected to be offset or
outweighed by uncertainties or major risk exposures to adverse conditions.
Lower rated and comparable unrated securities are subject to the risk of an
issuer's inability to meet principal and interest payments on the securities
(credit risk) and may also be subject to price volatility due to such factors
as interest rate sensitivity, market perception of the creditworthiness of the
issuer and general market liquidity (market risk). Lower rated and comparable
unrated securities are also more likely to react to real or perceived
developments affecting markets and credit risk than are more highly rated
securities, which react primarily to movements in the general level of
interest rates. Lack of liquidity may make such securities difficult to value.
During periods of deteriorating economic conditions and contraction in the
credit markets, the ability of issuers of such securities to service their
debt, meet projected goals or obtain additional financing may be impaired. A
Portfolio may retain defaulted securities when such is considered desirable by
the Investment Adviser. In the case of a defaulted security, a Portfolio may
incur additional expenses seeking recovery of its investment. In the event the
rating of a security held by a Portfolio is downgraded, the Investment Adviser
will consider disposing of such security, but is not obligated to do so.
OTHER INFORMATION. The Funds and the Portfolios have adopted certain
fundamental investment restrictions which are enumerated in the Statement of
Additional Information and which may not be changed unless authorized by a
shareholder vote and an interestholder vote, respectively. Except for such
enumerated restrictions and as otherwise indicated in this Prospectus, the
investment objective and policies of the Funds and the Portfolios are not
fundamental and accordingly may be changed by the Trustees of the Trust and
the Portfolios without obtaining the approval of the shareholders of the Funds
or the interestholders in the Portfolios, as the case may be. The Trustees of
the Trust have no present intention to change the objectives of the Funds and
intend to submit any material change in the investment objective of a Fund to
shareholders in advance for their approval. Each Portfolio may temporarily
borrow up to 5% of the value of its total assets to satisfy redemption
requests or settle securities transactions.
ORGANIZATION OF THE FUNDS AND THE PORTFOLIOS
THE FUNDS ARE 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 Funds). The Trustees of
the Trust have divided the shares of each Fund into multiple classes,
including Class A, Class B and Class C shares. Each class represents an
interest in a Fund, but is subject to different expenses, rights and
privileges. See "Distribution and Service 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 a Fund will be voted together
except that only shareholders of a particular class may vote on matters
affecting only that Class. Shares have no preemptive or conversion rights and
are freely transferable. In the event of the liquidation of the Fund,
shareholders are entitled to share pro rata in the net assets of the Fund
available for distribution to shareholders.
The Trustees of the Trust have considered the advantages and disadvantages of
investing the assets of each Fund in its corresponding Portfolio, as well as
the advantages and disadvantages of the two-tier format. The Trustees believe
that the structure may offer opportunities for growth in the assets of a
Portfolio, may afford the potential for economies of scale for each Fund and
over time may result in lower expenses for a Fund.
EACH 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 its corresponding Fund, a Portfolio may
sell interests to other affiliated and non-affiliated mutual funds or
institutional investors. Such investors will invest in a Portfolio on the same
terms and conditions and will pay a proportionate share of the Portfolio's
expenses. However, the other investors investing in a Portfolio are not
required to sell their shares at the same public offering price as the
corresponding 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 its corresponding
Portfolio. Such differences in returns are also present in other mutual fund
structures, including funds that have multiple classes of shares. Information
regarding other pooled investment entities or funds which invest in a
Portfolio may be obtained by contacting the Principal Underwriter, 24 Federal
Street, Boston, MA 02110, (617) 482-8260.
Whenever a Fund as an investor in a Portfolio is requested to vote on matters
pertaining to the Portfolio (other than the termination of the Portfolio's
business, which may be determined by the Trustees of the Portfolio without
investor approval), the Fund will hold a meeting of Fund shareholders and will
vote its interest in the Portfolio for or against such matters proportionately
to the instructions to vote for or against such matters received from Fund
shareholders. A Fund shall vote shares for which it receives no voting
instructions in the same proportion as the shares for which it receives voting
instructions. Other investors in a Portfolio may alone or collectively acquire
sufficient voting interests in the Portfolio to control matters relating to
the operation of the Portfolio, which may require the corresponding Fund to
withdraw its investment in the Portfolio or take other appropriate action. Any
such withdrawal could result in a distribution "in kind" of portfolio
securities (as opposed to a cash distribution from the Portfolio). If
securities are distributed, a Fund could incur brokerage, tax or other charges
in converting the securities to cash. In addition, the distribution in kind
may result in a less diversified portfolio of investments or adversely affect
the liquidity of a Fund. Notwithstanding the above, there are other means for
meeting shareholder redemption requests, such as borrowing.
A Fund may withdraw (completely redeem) all its assets from its corresponding
Portfolio at any time if the Board of Trustees of the Trust determines that it
is in the best interest of that Fund to do so. In the event a Fund withdraws
all of its assets from its corresponding Portfolio, or the Board of Trustees
of the Trust determines that the investment objective of such Portfolio is no
longer consistent with the investment objective of the Fund, the Trustees
would consider what action might be taken, including investing the assets of
such Fund in another pooled investment entity or retaining an investment
adviser to manage the Fund's assets in accordance with its investment
objective. A Fund's investment performance may be affected by a withdrawal of
all its assets (or the assets of another investor in the Portfolio) from its
corresponding Portfolio.
Although each Fund offers only its own shares of beneficial interest, it is
possible that a Fund or class might become liable for a misstatement or
omission in the Prospectus regarding another Fund or class because the Funds
use this combined Prospectus. The Trustees of the Trust have considered this
factor in approving the use of a combined Prospectus.
MANAGEMENT OF THE FUNDS AND THE PORTFOLIOS
EACH PORTFOLIO ENGAGES BOSTON MANAGEMENT AND RESEARCH ("BMR"), A WHOLLY-OWNED
SUBSIDIARY OF EATON VANCE MANAGEMENT ("EATON VANCE"), AS ITS INVESTMENT
ADVISER. EATON VANCE, ITS AFFILIATES AND ITS PREDECESSOR COMPANIES HAVE BEEN
MANAGING ASSETS OF INDIVIDUALS AND INSTITUTIONS SINCE 1924 AND MANAGING
INVESTMENT COMPANIES SINCE 1931.
Acting under the general supervision of the Board of Trustees of each
Portfolio, BMR manages the Portfolio's investments and affairs. BMR also
furnishes for the use of the Portfolio office space and all necessary office
facilities, equipment and personnel for servicing the investments of the
Portfolio.
Under its investment advisory agreement with Balanced Portfolio, BMR receives
a monthly advisory fee of 5/96 of 1% (equivalent to 0.625% annually) of the
average daily net assets of Balanced Portfolio up to and including $300
million, and 1/24 of 1% (equivalent to 0.50% annually) of the average daily
net assets over $300 million. For the fiscal year ended December 31, 1997, the
Portfolio paid BMR advisory fees equivalent to 0.61% of Balanced Portfolio's
average daily net assets for such year.
Under its investment advisory agreement with Growth & Income Portfolio and
Special Investment Portfolio, BMR receives a monthly advisory fee of 5/96 of
1% (equivalent to 0.625% annually) of the average daily net assets of each
such Portfolio. For the fiscal year ended December 31, 1997, Growth & Income
Portfolio and Special Investment Portfolio paid BMR advisory fees equivalent
to 0.625% of such Portfolio's average daily net assets for such year.
Under its investment advisory agreement with Utilities Portfolio, BMR is
entitled to receive a monthly advisory fee of .0625% (equivalent to .75%
annually) of the average daily net assets of the Portfolio up to $500 million,
and .06875% of average daily net assets on net assets of $500 million and
more, which fee is further reduced on assets of $1 billion and over. In
February, 1997, the Trustees of Utilities Portfolio voted to accept a waiver
of BMR's compensation so that the advisory fees paid by Utilities Portfolio
during any fiscal year or portion thereof will not exceed on an annual basis
0.65% of average daily net assets up to $500 million and 0.625% on average
daily net assets of $500 million and more, which fee declines further on
assets of $1 billion and over. For the fiscal year ended December 31, 1997,
the Portfolio paid BMR advisory fees equivalent to 0.66% of Utilities
Portfolio's average daily net assets for such year.
BMR OR EATON VANCE ACTS AS INVESTMENT ADVISER TO INVESTMENT COMPANIES AND
VARIOUS INDIVIDUAL AND INSTITUTIONAL CLIENTS WITH ASSETS UNDER MANAGEMENT OF
APPROXIMATELY $25 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.
Thomas E. Faust, Jr. has acted as the portfolio manager of the Balanced
Portfolio since it commenced operations. Mr. Faust is a Vice President of
Eaton Vance and of BMR and manages other Eaton Vance portfolios.
Timothy O'Brien has acted as the portfolio manager of the Utilities Portfolio
since January 1995. Mr. O'Brien joined Eaton Vance as a Vice President on
April 25, 1994. Prior to joining Eaton Vance, he served as a Vice President of
Loomis, Sayles & Co.
Duncan W. Richardson has acted as the portfolio manager of the Growth & Income
Portfolio since it commenced operations. Mr. Richardson is a Vice President of
Eaton Vance and of BMR and manages other Eaton Vance portfolios.
Edward E. Smiley, Jr. became the portfolio manager of the Special Investment
Portfolio as well as a Vice President of Eaton Vance and BMR on November 1,
1996. Prior to joining Eaton Vance, Mr. Smiley was a Senior Product Manager,
Equity Management for Trade-Street Investment Associates, Inc., a wholly-owned
subsidiary of NationsBank.
BMR places the portfolio transactions of the Portfolios for execution with
many broker-dealer firms and uses its best efforts to obtain execution of such
transactions at prices which are advantageous to a Portfolio and at reasonably
competitive commission rates. Subject to the foregoing, BMR may consider sales
of shares of the Funds or of other investment companies sponsored by BMR or
Eaton Vance as a factor in the selection of broker-dealer firms to execute
portfolio transactions. The Trust, each Portfolio and BMR have adopted Codes
of Ethics relating to personal securities transactions. The Codes permit Eaton
Vance personnel to invest in securities (including securities that may be
purchased or held by a Portfolio) for their own accounts, subject to certain
pre-clearance, reporting and other restrictions and procedures contained in
such Codes.
The Trust has retained the services of Eaton Vance to act as Administrator of
the Funds. The Trust has not retained the services of an investment adviser
since the Trust seeks to achieve each Fund's investment objective by investing
the Fund's assets in the corresponding Portfolio. As Administrator, Eaton
Vance provides the Funds with general office facilities and supervises the
overall Fund administration. For these services Eaton Vance currently receives
no compensation. The Trustees of the Trust may determine, in the future, to
compensate Eaton Vance for such services.
Like most mutual funds, the Funds and the Portfolios rely on computers in
conducting daily business and processing information. There is a concern that
on January 1, 2000 some computer programs will be unable to recognize the new
year and as a consequence computer malfunctions will occur. The Administrator
is taking steps that it believes are reasonably designed to address this
potential problem and to obtain satisfactory assurance from other service
providers to the Funds and Portfolios that they are also taking steps to
address the issue. There can, however, be no assurance that these steps will
be sufficient to avoid any adverse impact on the Funds, the Portfolios or
shareholders.
The Portfolios and the Funds, as the case may be, will each be responsible for
all respective costs and expenses not expressly stated to be payable by BMR
under the investment advisory agreement, by Eaton Vance under the
administrative services agreement, or by the Principal Underwriter under the
distribution agreement.
DISTRIBUTION AND SERVICE PLANS
The Trust has adopted a Service Plan (the "Class A Plan") for each Fund's
Class A shares that is designed to meet the service fee requirements of the
sales charge rule of the National Association of Securities Dealers, Inc. THE
CLASS A PLAN PROVIDES THAT CLASS A MAY MAKE SERVICE FEE PAYMENTS FOR PERSONAL
SERVICES AND/OR THE MAINTENANCE OF SHAREHOLDER ACCOUNTS TO THE PRINCIPAL
UNDERWRITER, FINANCIAL SERVICE FIRMS ("AUTHORIZED FIRMS") AND OTHER PERSONS IN
AMOUNTS NOT EXCEEDING .25% OF ITS AVERAGE DAILY NET ASSETS FOR ANY FISCAL
YEAR. The Trustees of the Trust have initially implemented the Class A Plan by
authorizing Class A to make quarterly service fee payments to the Principal
Underwriter and Authorized Firms in amounts not expected to exceed .25% of its
average daily net assets for any fiscal year which is based on the value of
Class A shares sold by such persons and remaining outstanding for at least
twelve months. During the fiscal year ended December 31, 1997, each Fund's
Class A (which was then a separate series fund) paid or accrued service fees
as follows (as an annualized percentage of average daily net assets): Balanced
Fund (0.098%); Growth & Income Fund (0.11%); Special Equities Fund (0.104%);
and Utilities Fund (0.23%).
The Trust has also adopted compensation-type Distribution Plans ("Class B
Plan" and "Class C Plan") pursuant to Rule 12b-1 under the Investment Company
Act of 1940 ("1940 Act") for each Fund's Class B and Class C shares. Each 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 PLANS, CLASS B AND CLASS C EACH PAYS THE PRINCIPAL UNDERWRITER A
FEE, ACCRUED DAILY AND PAID MONTHLY, AT AN ANNUAL RATE NOT EXCEEDING .75% OF
ITS AVERAGE DAILY NET ASSETS TO FINANCE THE DISTRIBUTION OF ITS SHARES. Such
fees compensate the Principal Underwriter for sales commissions paid by it to
Authorized Firms on the sale of Class B and Class C shares and for interest
expenses. Under the Class B Plan, 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. Under the Class C Plan, the Principal
Underwriter currently expects to pay to an Authorized Firm (a) sales
commissions (except on exchange transactions and reinvestments) at the time of
sale equal to .75% of the purchase price of the shares sold by such Firm, and
(b) monthly sales commissions approximately equivalent to 1/12 of .75% of the
value of Class C shares sold by such Firm and remaining outstanding for at
least one year. During the first year after a purchase of Class C shares, the
Principal Underwriter will retain the sales commission as reimbursement for
the sales commissions paid to Authorized Firms at the time of sale. CDSCs paid
to the Principal Underwriter will be used to reduce amounts owed to it.
Because payments to the Principal Underwriter under the two Plans are limited,
uncovered distribution charges (sales commissions due the Principal
Underwriter plus interest, less CDSCs received by it) may exist indefinitely.
THE CLASS B AND CLASS C PLANS ALSO AUTHORIZE EACH 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. Under the Class B
Plan, 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. Under the Class C Plan, the Principal Underwriter currently expects to
pay to an Authorized Firm (a) a service fee (except on exchange transactions
and reinvestments) at the time of sale equal to .25% of the purchase price of
the Class C shares sold by such Firm, and (b) monthly service fees
approximately equivalent to 1/12 of .25% of the value of Class C shares sold
by such Firm and remaining outstanding for at least one year. During the first
year after a purchase of Class C shares, the Principal Underwriter will retain
the service fee as reimbursement for the service fee payment made to
Authorized Firms at the time of sale.
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 also at times allow
discounts on the sale of Class A shares 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 its shares at any time. In
determining whether any such action should be taken, the Trust's management
intends to consider all relevant factors, including (without limitation) the
size of the Fund or class, the investment climate and market conditions, the
volume of sales and redemptions of shares, and, in the case of Class B and
Class C shares, the amount of uncovered distribution charges of the Principal
Underwriter. The 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.
VALUING SHARES
EACH FUND VALUES ITS SHARES ONCE 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 each Fund's total assets, less its
liabilities, by the number of shares of that Class outstanding. Because each
Fund invests its assets in an interest in its corresponding Portfolio, each
Class's net asset value will reflect the value of each 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. Each 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).
Each Portfolio's net asset value is also determined as of the close of regular
trading on the Exchange by IBT (as custodian and agent for the Portfolio) in
the manner authorized by the Trustees of the Portfolio. Net asset value is
computed by subtracting the liabilities of a 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 and Class C
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."
In connection with employee benefit or other continuous group purchase plans,
a Fund may accept initial investments of less than $1,000 on the part of an
individual participant. In the event a shareholder who is a participant of
such a plan terminates participation in the plan, his or her shares will be
transferred to a regular individual account. However, such account will be
subject to the right of redemption by the 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 shares 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:
Sales Sales Dealer
Charge Charge Commission
as Percentage as Percentage as Percentage
of Offering of Amount of Offering
Amount of Purchase Price Invested Price
- ---------------------------------------------------------------------------
Less than $50,000 5.75% 6.10% 5.00%
$50,000 but less than $100,000 4.75 4.99 4.00
$100,000 but less than $250,000 3.75 3.90 3.00
$250,000 but less than $500,000 3.00 3.09 2.55
$500,000 but less than $1,000,000 2.00 2.04 1.75
$1,000,000 or more 0.00* 0.00* See Below**
*No sales charge is payable at the time of purchase on investments of
$1 million or more. A CDSC of 1% will be imposed on such investments
in the event of certain redemptions within 12 months of purchase.
**A commission 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 officers 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
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
the Investment Adviser provides multiple investment services, such as
management, brokerage and custody, and (3) to investment advisors, financial
planners or other intermediaries who place trades for their own accounts or
the accounts of their clients and who charge a management, consulting or other
fee for their services; clients of such investment advisors, financial
planners or other intermediaries who place trades for their own accounts if
the accounts are linked to the master account of such investment advisor,
financial planner or other intermediary on the books and records of the broker
or agent; and 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") ("Eligible Plans"), 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.
ACQUIRING FUND SHARES IN EXCHANGE FOR SECURITIES. IBT, as escrow agent, will
receive securities acceptable to Eaton Vance, as Administrator, in exchange
for Fund shares. The minimum value of securities (or securities and cash)
accepted for deposit is $5,000. Securities accepted will be sold on the day of
their receipt or as soon thereafter as possible. The number of Fund shares to
be issued in exchange for securities will be the aggregate proceeds from the
sale of such securities divided by the applicable public offering price of
Class A shares or net asst value of Class B and Class C shares on the day such
proceeds are received. Eaton Vance will use reasonable efforts to obtain the
then current market price for such securities, but does not guarantee the best
available price. Eaton Vance will absorb any transaction costs, such as
commissions, on the sale of the securities.
Securities determined to be acceptable should be transferred via book entry or
physically delivered, in proper form for transfer, through an Authorized Firm,
together with a completed and signed Letter of Transmittal in approved form
(available from Authorized Firms), as follows:
<TABLE>
<CAPTION>
<S> <C>
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 [indicate Fund name and
Investors Bank & Trust Company Class]
For A/C Eaton Vance [indicate Fund name and Class] Physical Securities Processing Settlement Area
200 Clarendon Street
Boston, MA 02116
</TABLE>
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.
HOW TO REDEEM SHARES
A SHAREHOLDER MAY REDEEM FUND 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 Transfer Agent, 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 federal income tax required to be withheld.
REDEMPTION BY MAIL. Shares may be 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
Principal Underwriter, as the Trust's agent, receives the order. 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.
While normally payments will be made in cash for redeemed shares, the Trust,
subject to compliance with applicable regulations, has reserved the right to
pay the redemption price of shares of a Fund, either totally or partially, by
a distribution in kind of readily marketable securities withdrawn from its
corresponding Portfolio. The securities so distributed would be valued
pursuant to the Portfolio's valuation procedures. If a shareholder received a
distribution in kind, the shareholder could incur brokerage or other charges
in converting the securities to cash.
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 redemptions would be required if the
cause of the low account balance was a reduction in the net asset value of
shares. No CDSC will be imposed with respect to such involuntary redemptions.
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 is $1 million or more, they will be subject to a 1% 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%
Class B CDSC is waived for redemptions (1) pursuant to a Withdrawal Plan (see
"Eaton Vance Shareholder Services"), (2) as part of a required minimum
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).
CLASS C SHARES. Class C Shares will be subject to a 1% CDSC if redeemed
within 12 months of purchase. The Class C CDSC is waived for redemptions (1)
pursuant to a Withdrawal Plan (see "Eaton Vance Shareholder Service"), (2) as
part of a distribution from a retirement plan qualified under Section 401,
403(b) or 457 of the Code, or (3) as part of a required minimum distribution
from other tax-sheltered retirement plans.
REPORTS TO SHAREHOLDERS
EACH 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 FUND 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. In the case of Total
Return Fund, statements will be sent at least 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 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.
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 Fund 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 each 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"). Class C shares may also be exchanged for shares of
Eaton Vance Money Market Fund and EV Classic Senior Floating-Rate 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.
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 the 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
redemption of shares acquired in an exchange, the CDSC 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 the Class B
shares (except Class B shares of the Limited Maturity Funds and Prime Rate
Reserves), see "How to Redeem Shares." The CDSC or early withdrawal charge
schedule applicable to Class B shares of the Limited Maturity Funds and Prime
Rate Reserves 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.
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 applicable Fund as an expense to all
shareholders.
INVEST-BY-MAIL -- FOR PERIODIC SHARE ACCUMULATION: Once the $1,000 minimum
investment has been made, checks of $50 or more payable to the order of the
Fund and specify the Class being purchased may be mailed directly to the
Transfer Agent, First Data Investor Services Group, P.O. Box 5123,
Westborough, MA 01581-5123 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 and Class C 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 not be subject
to the Class B or Class C 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 purchases.
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 under a
Statement of Intention. 5% of the amount to be purchased will be held in
escrow in the form of shares registered in the investor's name until the
Statement is satisfied or the 13-month period expires. See the Account
Application for details.
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 CDSC 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 redemption, some or all of the
loss generally will not be allowed as a tax deduction. Shareholders should
consult their tax advisers concerning the tax consequences of reinvestments.
TAX-SHELTERED RETIREMENT PLANS: Class A and Class C shares of each 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 each Fund to distribute substantially all of the
net investment income allocated to that Fund by its corresponding Portfolio
(less the Fund's direct and allocated expenses and class-specific expenses).
Utilities Fund makes such distributions monthly, Balanced Fund and Growth &
Income Fund make such distributions quarterly, and Special Equities Fund makes
such distributions annually. Each Fund distributes at least annually all if
its net realized capital gains. A portion of distributions from Balanced Fund,
Growth & Income Fund and Utilities Fund will be eligible for the dividends-
received deduction for corporations.
Distributions from net investment income, net-short-term gains, and (if
applicable) certain foreign exchange gains are taxable to shareholders as
ordinary income, whether paid in cash or reinvested in additional Fund shares.
Distributions from net long-term gains are taxable to shareholders as such,
whether paid in cash or reinvested in additional Fund shares and regardless of
the length of time Fund shares have been owned by the shareholder. If shares
are purchased shortly before the record date for a distribution, the
shareholder will pay full price for the shares and then receive some portion
of the price back as a taxable distribution. Certain distributions declared in
October, November or December and paid in the following January will be
taxable as if received on December 31 of the year in which declared.
Sales charges paid upon a purchase of Class A shares cannot be taken into
account for purposes of determining gain or loss on a redemption or exchange
of the shares before the 91st day after their purchase to the extent a sales
charge is reduced or eliminated in a subsequent acquisition of shares of a
Fund or of another fund pursuant to a 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.
Shareholders will receive annually 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.
Each Fund intends to qualify as a regulated investment company under the Code
and to satisfy all requirements necessary to avoid paying federal income taxes
on the part of its investment company taxable income (consisting generally of
net investment income and net short-term capital gains) and net capital gains
that it distributed to shareholders. In satisfying these requirements, each
Fund will treat itself as owning its proportionate share of each of its
corresponding Portfolio's assets and as entitled to the income of the
Portfolio properly attributable to such share.
As a regulated investment company under the Code, a Fund does not pay federal
income or excise taxes to the extent that it distributes to shareholders
substantially all of its ordinary income and capital gain net income in
accordance with the timing requirements imposed by the Code. As partnerships
under the Code, the Portfolios do not pay federal income or excise taxes.
Shareholders should consult with their tax advisers concerning the
applicability of state, local or other taxes to an investment in a Fund.
PERFORMANCE INFORMATION
FROM TIME TO TIME, YIELD AND/OR AVERAGE ANNUAL TOTAL RETURN MAY BE ADVERTISED.
Current yield is calculated separately for each Class by dividing the net
investment income per share during a recent 30-day period by the maximum
offering price per share on the last day of the period and annualizing the
resulting figure. Average annual total return is determined separately for
each Class by computing the average annual percentage change in value of
$1,000 invested at the maximum public offering price (including the maximum
sales charge for Class A shares; net asset value for Class B and Class C
shares) for specified periods, assuming reinvestment of all distributions.
Each Fund may also publish annual and cumulative total return figures from
time to time.
Each Fund may also furnish total return calculations 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. A 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.
Investors should note that investment results will fluctuate over time, and
any presentation of the current yield or total return for any prior periods
should not be considered as a representation of what an investment may earn or
what the yield or total return may be in any future period.
The following charts reflect the annual investment returns of the Class A
shares of each Fund for one-year periods ending December 31 and does not take
into account any sales charge which investors may bear. The performance of the
predecessor funds of Class B and Class C shares was lower.
<PAGE>
BALANCED FUND
5 YEAR AVERAGE ANNUAL TOTAL RETURN -- 14.36%
10 YEAR AVERAGE ANNUAL TOTAL RETURN -- 13.05%
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
10.68% 20.76% 1.02% 21.28% 6.45% 11.19% (1.82)% 29.69% 13.61% 21.60%
GROWTH & INCOME FUND
5 YEAR AVERAGE ANNUAL TOTAL RETURN -- 15.86%
10 YEAR AVERAGE ANNUAL TOTAL RETURN -- 14.99%
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
15.01% 28.92% 0.59% 21.45% 6.93% 4.19% (4.12)% 32.77% 20.20% 30.93%
SPECIAL EQUITIES FUND
5 YEAR AVERAGE ANNUAL TOTAL RETURN -- 9.76%
10 YEAR AVERAGE ANNUAL TOTAL RETURN -- 13.75%
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
11.21% 23.57% 2.50% 57.33% 2.71% 1.14% (9.60)% 23.31% 23.76% 14.18%
UTILITIES FUND
5 YEAR AVERAGE ANNUAL TOTAL RETURN -- 8.77%
10 YEAR AVERAGE ANNUAL TOTAL RETURN -- 11.62%
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
11.94% 33.46% 0.15% 23.61% 6.60% 9.49% (12.28)% 27.54% 7.00% 16.18%
<PAGE>
[LOGO] Investing
EATON VANCE for the
================= 21st
Mutual Funds Century
- -------------------------------------------------------------------------------
EATON VANCE BALANCED FUND
EATON VANCE GROWTH & INCOME FUND
EATON VANCE SPECIAL EQUITIES FUND
EATON VANCE UTILITIES FUND
PROSPECTUS
MAY 1, 1998
- -------------------------------------------------------------------------------
PORTFOLIO INVESTMENT ADVISER
Boston Management and Research, 24 Federal Street, Boston, MA 02110
ADMINISTRATOR
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 200 Clarendon Street, Boston, MA 02116
TRANSFER AGENT
First Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123
(800) 262-1122
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P., One Post Office Square, Boston, MA02109
COMBEQP5/1
<PAGE>
PART A
Information Required in a Prospectus
[GRAPHIC OMITTED]
Investing
EATON VANCE for the
- ------------------ 21st
Mutual Funds Century
EATON VANCE
EMERGING MARKETS FUND
Eaton Vance Emerging Markets Fund (the "Fund") is a mutual fund seeking long-
term capital appreciation through investment in equity securities of
companies in countries with emerging markets ("Emerging Market Countries").
Emerging Market Countries are located in Asia, Latin America, the Middle
East, Southern Europe, Eastern Europe, Africa and the region comprising the
former Soviet Union. The Fund invests its assets in Emerging Markets
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. Investments in Emerging
Market Countries can involve significant risks that are not normally involved
in investments in securities of U.S. Companies, and therefore the Fund may
not be suitable for all investors. The Fund is a series of Eaton Vance
Special Investment Trust (the "Trust").
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK OR OTHER INSURED DEPOSITORY INSTITUTION, AND ARE NOT
FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY. SHARES OF THE FUND INVOLVE
INVESTMENT RISKS, INCLUDING FLUCTUATIONS IN VALUE AND THE POSSIBLE LOSS OF
SOME OR ALL OF THE PRINCIPAL INVESTMENT.
This Prospectus is designed to provide you with information you should know
before investing. Please retain this document for future reference. A
Statement of Additional Information dated May 1, 1998 for the Fund, as
supplemented from time to time, has been filed with the Securities and
Exchange Commission (the "Commission") and is incorporated herein by
reference. This Statement of Additional Information is available without
charge from the Fund's principal underwriter, Eaton Vance Distributors, Inc.
(the "Principal Underwriter"), 24 Federal Street, Boston, MA 02110 (telephone
(800) 225-6265). The 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"). The principal business address
of the Adviser is 3808 One Exchange Square, Central, Hong Kong.
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.
<TABLE>
<CAPTION>
CONTENTS
Page Page
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Shareholder and Fund Expenses 2 How to Buy Shares 11
The Fund's Financial Highlights 3 How to Redeem Shares 13
The Fund's Investment Objective 4 Reports to Shareholders 14
Investment Opportunities in Emerging Markets 4 The Lifetime Investing Account/Distribution Options 14
Investment Policies and Risks 4 The Eaton Vance Exchange Privilege 15
Organization of the Fund and the Portfolio 7 Eaton Vance Shareholder Services 16
Management of the Fund and the Portfolio 8 Distributions and Taxes 16
Distribution Plans 9 Performance Information 17
Valuing Shares 11
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
Prospectus dated May 1, 1998
<PAGE>
SHAREHOLDER AND FUND EXPENSES
SHAREHOLDER TRANSACTION EXPENSES Class A Class B
Shares Shares
- ------------------------------------------------------------------------
Maximum Sales Charge Imposd on Purchases (as a
percentage of offering price) 5.75% None
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 OPERATING EXPENSES (AS A
PERCENTAGE OF AVERAGE DAILY NET ASSETS)
Class A Class B
Shares Shares
- ------------------------------------------------------------------------
Management Fees (after fee reduction) 0.96% 0.96%
Rule 12b-1 Distribution and Service Fees 0.50 0.93
Other Expenses (after expense allocations) 1.61 1.61
---- ----
Total Operating Expenses (after reductions) 3.07% 3.50%
==== ====
EXAMPLE
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, the
applicable 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 $ 87 $ 85
3 Years 147 147
5 Years 209 202
10 Years 376 377
An investor would pay the following expenses on the same investment,
assuming (a) 5% annual return and (b) no redemtpions:
Class A Class B
Shares Shares
- ------------------------------------------------------------------------
1 Year $ 87 $ 35
3 Years 147 107
5 Years 209 182
10 Years 376 377
NOTES: The table and Example 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 Class B shares is based on its expenses
for the most recent fiscal year. Information for Class A shares is estimated
based upon the most recent fiscal year of its predecessor fund adjusted for
the multiple-class structure. Absent an expected fee reduction and expense
allocation for the current fiscal year, Management Fees and Total Operating
Expenses would be estimated to be 1.25% and 3.79% for Class B and 1.25% and
3.36% for Class A, respectively. Management Fees include management fees paid
by each Class and investment advisory and administration fees paid by the
Portfolio of 0.25%, 0.75% and 0.25%, respectively.
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 redemtpions 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 EXAMPLE 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 Example 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 "The
Fund's Financial Highlights", "Management of the Fund and the Portfolio",
"Distribution Plans" and "How to Redeem Shares".
The Fund invests exclusively in the Portfolio. Other investment companies and
investors with different distribution arrangements are investing in the
Portfolio and others may do so in the future. See "Organization of the Fund
and the Portfolio".
THE FUND'S FINANCIAL HIGHLIGHTS
The following information should be read in conjunction with the audited
financial statements that appear in the Fund's annual report to shareholders.
The Fund's financial statements have been audited by Deloitte & Touche LLP,
independent certified public accountants, as experts in accounting and auditing.
The financial statements and the independent auditors' report are incorporated
by reference into the Statement of Additional Information. Further information
regarding the performance of the Fund is contained in its annual report to
shareholders which may be obtained without charge by contacting the Principal
Underwriter. The financial information for each of the periods presented in the
Fund's Financial Highlights are for the Fund prior to reclassification as Class
B shares on January 1, 1998. Information for Class A shares is not presented
because this class did not exist prior to January 1, 1998. The Financial
Highlights for Class A shares will differ from the Financial Highlights for
Class B shares due to the different fees imposed on Class A shares.
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------------------
1997 1996 1995 1994*
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value -- beginning of year $ $12.720 $ $10.050 $ 9.960 $ 10.000
--------- --------- --------- --------
Income (loss) from operations:
Net investment loss $ (0.012) $ (0.143) $ (0.268) $ (0.003)
Net realized and unrealized gain (loss) on
investments (0.436) 2.988 0.358 (0.037)
--------- --------- --------- --------
Total income (loss) from operations $ (0.448) $ 2.845 $ 0.090 $ (0.040)
--------- --------- --------- --------
Less distributions:
From net realized gain on investments -- $ (0.175) -- --
In excess of net realized gain on
investments (0.362) -- -- --
Total distributions $ (0.362) $ (0.175) -- --
--------- --------- --------- --------
Net asset value -- End of year $ 11,910 $ 12.720 $ 10.050 $ 9.96
========= ========= ========= =======
Total Return(1) (3.48) 28.49% 0.90% (0.40)%
Ratios/Supplemental Data**:
Net assets, end of year (000 omitted) $ 9,074 $ 6,725 $ 1,801 $ 229
Ratio of net expenses to average daily net
assets(2)(3) 3.50% 3.41% 6.19% 0.75%+
Ratio of net expenses to average daily net
assets after custodian fee reduction(2)(3) 3.32% 3.19% 6.19% --
Ratio of net investment loss to average
daily net assets (1.92)% (1.76)% (4.64)% (0.75)%+
**The expenses related to the operation of the Fund reflect a waiver
of Management Fees, an assumption of expenses by the Manager,
Administrator and the Adviser. Had such action not been taken, net
investment loss per share and the ratios would have been as follows:
Net investment loss per share $ (0.014) $ (0.233) $ (0.566) $ (0.037)
Ratios (as a percentage of average daily net assets):
Expenses(2)(3) 3.79% 4.52% 11.35% 9.14%+
Expenses after custodian fee reduction(2)(3) 3.61% 4.30% 11.35% --
Net investment loss (2.21)% (2.87)% (9.80)% (9.14)%+
Portfolio Turnover of the Fund(4) -- -- -- --
Portfolio Turnover of the Portfolio(4) 160% 125% 98% 0%
+ Computed on an annualized basis.
* For the period from the start of business, November 30,1994, to December 31, 1994.
(1) Total return is calculated assuming a purchase at the net asset value on the first day and a sale at the net
asset value on the last day of each period reported. Income dividends are assumed to be reinvested at the net
asset value on the ex-dividend date. Total return is computed on a non-annualized basis. Capital gain distributions,
if any, are assumed to be reinvested at the net asset value on the ex-dividend date.
(2) Includes the Fund's share of the Portfolio's allocated expenses.
(3) The expense ratios for the years ended December 31, 1997, 1996 and 1995 have been adjusted to reflect a change in
reporting requirements. The new reporting guidelines require the Fund to increase its expense ratio by the effect
of any expense offset arrangements with its service providers. The expense ratios for the period ended December 31,
1994 have not been adjusted to reflect this change.
(4) Portfolio turnover of the Fund represents the rate of portfolio activity for the period while the Fund was making
investments directly in securities. The Fund began investing in the Portfolio on November 30, 1994.
</TABLE>
THE FUND'S INVESTMENT OBJECTIVE
THE FUND'S INVESTMENT OBJECTIVE IS TO SEEK LONG-TERM CAPITAL APPRECIATION. It
currently seeks to meet its investment objective by investing its assets in
Emerging Markets Portfolio (the "Portfolio"), a separate registered investment
company which has the same investment objective and policies as the Fund. The
Portfolio invests in equity securities of companies in countries with emerging
markets ("Emerging Market Countries"). Emerging Market Countries are located
in Asia, Latin America, the Middle East, Southern Europe, Eastern Europe,
Africa and the region comprising the former Soviet Union. The Fund considers
countries with emerging markets to be all countries that are generally
considered to be developing or emerging countries by the International Bank
for Reconstruction and Development (more commonly referred to as the "World
Bank") or the International Finance Corporation, as well as countries that are
classified by the United Nations or otherwise regarded by their own
authorities as developing. 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, respectively, without obtaining
the approval of the Fund's shareholders or the investors in the Portfolio, as
the case may be.
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 and is not intended to be a complete investment program.
Prospective investors should take into account their objectives and other
investments when considering the purchase of Fund shares. The Fund cannot
assure achievement of its investment objective. In addition, investments in
Emerging Market Countries can be considered speculative, and therefore may
offer higher potential for gains and losses than investments in the developed
markets of the world.
INVESTMENT OPPORTUNITIES IN EMERGING MARKETS
THE FOLLOWING IS A GENERAL DISCUSSION OF CERTAIN FEATURES OF THE EMERGING
MARKET COUNTRIES ECONOMIES IN WHICH THE PORTFOLIO INTENDS TO 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").
The Adviser believes that the long-term growth rates of the economies of
certain Emerging Market Countries may be substantially higher than those of
developed countries. The Adviser believes that factors favoring investment in
the economies of many Emerging Market Countries include:
POLITICAL CHANGES in governments which favor a shift from socialism and
government involvement in the private sector to a market-driven economy.
Emerging Market Countries in Asia, Latin America, the Middle East,
Southern Europe, Eastern Europe, Africa, and the region comprising the
former Soviet Union are in the process of implementing broad market
reforms to revitalize their economies. The Adviser believes that these
reforms have helped lead to significantly higher levels of economic
activity.
PRIVATIZATIONS of government-owned and operated companies in certain
Emerging Market Countries, which provide a source of capital for
government budgets and can result in improved operating efficiencies and
services. The Adviser believes that many privatized companies may have
significant growth potential arising from the demand created by increasing
economic activity.
A FAVORABLE REGULATORY CLIMATE. Given the essential role of private
enterprise in economic growth, many Emerging Market Country governments
have in the past provided support to help companies to finance the
considerable capital expenditures they need to expand. This support has
taken a variety of forms, including tax concessions, more favorable rate
or tariff structures, and limited monopolies on services.
As a result of such factors, the Adviser believes that substantial opportunities
for long-term capital appreciation will be presented by investments in the
equity securities of companies in Emerging Market Countries. World Bank data
indicates that developing countries are experiencing more rapid economic growth
than industrialized countries.
INVESTMENT POLICIES AND RISKS
THE PORTFOLIO SEEKS TO ACHIEVE ITS OBJECTIVE BY INVESTING IN A CAREFULLY
SELECTED AND CONTINUOUSLY MANAGED PORTFOLIO CONSISTING PRIMARILY OF EQUITY
SECURITIES OF COMPANIES IN EMERGING MARKET COUNTRIES. A company will be
considered to be in an Emerging Market Country if it is domiciled or has
significant operations in that country. The Portfolio will, under normal
market conditions, invest at least 65% of its total assets in such securities
("Emerging Market investments"). The Portfolio will ordinarily be invested in
at least three Emerging Market Countries.
Equity securities, for purposes of the 65% policy, will be limited to common
and preferred stocks; equity interests in trusts, partnerships, joint
ventures and other unincorporated entities or enterprises; special classes of
shares available only to foreign investors in markets that restrict ownership
by foreign investors to certain classes of equity securities; convertible
preferred stocks; and other convertible instruments. The convertible
instruments 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. and lower than BBB by Standard & Poor's
Ratings Group). Convertible 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. Such debt securities will not exceed 20% of total assets.
When consistent with its investment objective, the Portfolio may also invest
in equity securities of companies not in Emerging Market Countries, as well
as warrants, options on equity securities and indices, options on currency,
futures contracts, options on futures contracts, forward foreign currency
exchange contracts, currency swaps and other non-equity investments.
During temporary defensive periods, such as during abnormal market or
economic conditions, the Portfolio may invest some or all of its total assets
in high grade debt securities of foreign and United States companies, foreign
governments and the U.S. Government, and their respective agencies,
instrumentalities, political subdivisions and authorities, as well as in high
quality money market instruments denominated in U.S. dollars or a foreign
currency. The Portfolio may borrow up to 5% of the value of its total assets
to satisfy redemption requests or settle securities transactions.
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 currency rates or exchange control regulations,
application of foreign tax laws (including withholding tax), changes in
governmental administration or economic or monetary policy (in this country
or abroad) or changed circumstances in dealings between nations. Foreign
currency exchange rates may fluctuate significantly over short periods of
time causing the Portfolio's net asset value to fluctuate as well. Costs are
incurred in connection with conversions between various currencies. In
addition, foreign brokerage commissions, custody fees and other costs of
investing are generally higher than in the United States, and foreign
securities markets may be less liquid, more volatile and less subject to
governmental supervision than in the United States. Investments in foreign
issuers could be 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. 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.
Since the Portfolio will, under normal market conditions, invest at least 65%
of its total assets in Emerging Market investments, its investment
performance will be especially affected by events affecting companies in
Emerging Market Countries. The value and liquidity of Emerging Market
investments may be affected favorably or unfavorably by political, economic,
fiscal, regulatory or other developments in Emerging Market Countries.
Foreign investment in the securities of issuers in Emerging Market Countries
is usually restricted or controlled to some degree. The extent of economic
development, political stability and market depth of different Emerging
Market Countries varies widely. Certain Emerging Market Countries are either
comparatively underdeveloped or are in the process of becoming developed.
Emerging Market investments typically involve greater potential for gain or
loss than investments in securities of issuers in developed countries. In
comparison to the United States and other developed countries, Emerging
Market Countries may have relatively unstable governments and economies based
on only a few industries. Given the Portfolio's investments, the Portfolio
will likely be particularly sensitive to changes in the economies of Emerging
Market Countries as the result of any reversals of economic liberalization in
those countries, political unrest or changes in trading status.
SECURITIES TRADING MARKETS. The securities markets in Emerging Market
Countries are substantially smaller, less liquid and more volatile than the
major securities markets in the United States. 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. Emerging Market
Country securities markets are susceptible to being influenced by large
investors trading significant blocks of securities. Similarly, volume and
liquidity in the bond markets in Emerging Market Countries are less than in
the United States and, at times, price volatility can be greater than in the
United States. The limited liquidity of securities markets in Emerging Market
Countries may also affect the Portfolio's ability to acquire or dispose of
securities at the price and time it wishes to do so.
The stock markets in many Emerging Market Countries 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 laws and regulations. The securities
industries in these countries are comparatively underdeveloped, and
stockbrokers and other intermediaries may not perform as well as their
counterparts in the United States and other more developed securities
markets.
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. In addition, disruptions due to work stoppages and
trading improprieties in these securities markets have caused such markets to
close. If extended closings were to occur in stock markets where the
Portfolio was heavily invested, the Fund's ability to redeem Fund shares
could become correspondingly impaired. To mitigate these risks, the Portfolio
may maintain a higher cash position than it otherwise would, thereby possibly
diluting its return, or the Portfolio may have to sell 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 or settle securities transactions. Such borrowings would
result in increased expense to the Fund.
THE PORTFOLIO WILL INVEST IN EMERGING MARKET COUNTRIES, IN WHICH POLITICAL
AND ECONOMIC STRUCTURES MAY BE UNDERGOING SIGNIFICANT EVOLUTION AND RAPID
DEVELOPMENT. Such countries may lack the social, political and economic
stability characteristics of the United States. Certain of such countries may
have in the past failed to recognize private property rights and have at
times nationalized or expropriated the assets of private companies. The laws
of Emerging Market Countries relating to limited liability of corporate
shareholders, fiduciary duties of officers and directors, and the bankruptcy
of state enterprises may be less well developed than or different from such
laws in the United States. It may be more difficult to obtain a judgment in a
court of an Emerging Market Country than it is in the United States. In
addition, unanticipated political or social developments may affect the
values of the Portfolio's investments in those countries and the availability
to the Portfolio of additional investments in those countries.
Governmental actions can have a significant effect on the economic conditions
in Emerging Market Countries, which could adversely affect the value and
liquidity of the Portfolio's investments. Although some governments in
Emerging Market Countries have recently begun to institute economic reform
policies, there can be no assurances that they will continue to pursue such
policies or, if they do, that such policies will succeed.
UNLISTED SECURITIES. The Portfolio may invest in securities of companies that
are neither listed on a stock exchange nor traded over the counter. Unlisted
securities may include investments in 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.
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; or 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 the Adviser's use of
derivative instruments will be advantageous to the Portfolio.
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.
Investment restrictions are considered at the time of acquisition of assets;
the sale of portfolio assets generally is not required in the event of a
subsequent change in circumstances. As a matter of fundamental policy the
Portfolio will not invest more than 25% of its total assets in the securities,
other than U.S. Government securities, of issuers in any one industry.
However, the Portfolio is permitted to invest 25% or more of its total assets
in (i) the securities of issuers located in any one Emerging Market Country
and (ii) securities denominated in the currency of any one country.
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 Fund's
shareholders 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 (THE
"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. As a result of a
reorganization with separate series of the Trust, the Fund commenced offering
Class A and Class B shares on January 1, 1998.
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 or remove 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 are entitled to share pro rata in the net assets
attributable to that class available for distribution to shareholders.
The Trustees of the Trust have considered the advantages and disadvantages of
investing the assets of the Fund in the Portfolio, as well as the advantages
and disadvantages of the two-tier format. The Trustees believe that the
structure may offer opportunities for growth in the assets of the Portfolio,
may afford the potential for economies of scale for the Fund and may over time
result in lower expenses for the Fund.
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 or class 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.
The Fund may withdraw (completely redeem) all its assets from the Portfolio at
any time if the Board of Trustees of the Trust determines that it is in the
best interest of the Fund to do so. In the event the Fund withdraws all of
its assets from the Portfolio, or the Board of Trustees of the Trust
determines that the investment objective of the Portfolio is no longer
consistent with the investment objective of the Fund, the Trustees would
consider what action might be taken, including investing the assets of the
Fund in another pooled investment entity or retaining an investment adviser to
manage the Fund's assets in accordance with its investment objective. The
Fund's investment performance may be affected by a withdrawal of all its
assets (or the assets of another investor in the Portfolio) from the
Portfolio.
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, acting under the general supervision of the Portfolio's
Trustees, manages the Portfolio's investments and affairs. The Portfolio is
managed by Kiersten Christensen.
The Adviser is registered as an investment adviser with the Commission and 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 $1.5 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 Asian securities markets,
especially those of emerging markets. LGM currently manages principally
Pacific Basin and Asian 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 Pacific Basin and Asian stock
markets. The team has a unique knowledge of, and experience with, Pacific
Basin and Asian 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 disciplined 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, 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. Personnel of the Adviser
include the following:
THE HONOURABLE ROBERT LLOYD GEORGE. Chairman. 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. Previously, 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. Mr.
Lloyd George is the author of numerous published articles and three books --
"A Guide to Asian Stock Markets" (Longmans, Hong Kong, 1989), "The East West
Pendulum" (Woodhead-Faulkner, Cambridge, 1991) and "North South -- an Emerging
Markets Handbook" (Probus, England, 1994).
WILLIAM WALTER RALEIGH KERR. Finance Director and Chief Operating Officer.
Born in 1950 and educated at Ampleforth and Oxford. Mr. Kerr qualified as a
Chartered Accountant at Thomson McLintock & Co. before joining The Oldham
Estate Company plc as Financial Controller. Prior to joining LGM, Mr. Kerr was
a Director of Banque Indosuez's corporate finance subsidiary, Financiere
Indosuez Limited, in London. Prior to that Mr. Kerr worked for First Chicago
Limited.
SCOBIE DICKINSON WARD. Director and Chief Investment Officer. Born in 1966 and
a cum laude graduate of both Phillips Academy Andover, and Harvard University.
Mr. Ward joined Indosuez Asia Investment Services in 1989, where he managed
the $100 million Himalayan Fund, and the Indosuez Tasman Fund, investing in
Australia and New Zealand. Mr. Ward joined LGM on its formation and has
extensive experience with the markets and listed companies of Asia.
KIERSTEN CHRISTENSEN. Graduated from Georgetown University in Washington D.C.
She joined Chartwell Information in 1992, a consulting company in Washington
D.C. She joined LGM in 1993. Ms. Christensen has been the portfolio manager of
the Portfolio since May 1, 1996.
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 of 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. For the fiscal year ended December
31, 1997, the Portfolio paid the Adviser advisory fees equivalent to 0.56% of
the Portfolio's average daily net assets for such year.
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 $25 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 Boards 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.
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. For the fiscal year ended December 31, 1997, the
Fund paid Eaton Vance management fees equivalent to 0.25% of the Fund's
average daily net assets for such year. 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. For the fiscal year ended December 31, 1997, the
Portfolio paid Eaton Vance administration fees equivalent to 0.25% of the
Portfolio's average daily net assets for such year.
Like most mutual funds, the Fund and the Portfolio rely on computers in
conducting daily business and processing information. There is a concern that
on January 1, 2000 some computer programs will be unable to recognize the new
year and as a consequence computer malfunctions will occur. The Administrator
is taking steps that it believes are reasonably designed to address this
potential problem and to obtain satisfactory assurance from other service
providers to the Fund and Portfolio that they are also taking steps to address
the issue. There can, however, be no assurance that these steps will be
sufficient to avoid any adverse impact on the Fund, the Portfolio or
shareholders.
The Portfolio and the Fund, as the case may be, will each be responsible for
all respective costs and expenses not expressly stated to be payable by 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.
DISTRIBUTION PLANS
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.
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.
The Trust has also adopted a compensation-type 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 PLANS, THE FUND PAYS THE PRINCIPAL
UNDERWRITER A FEE, ACCRUED DAILY AND PAID MONTHLY, AT AN ANNUAL RATE NOT
EXCEEDING .75% OF CLASS B 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. Under the Class B Plan, 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 Plan are limited, uncovered
distribution charges (sales commissions due the Principal Underwriter plus
interest, less the above fees and CDSCs received by it) may exist
indefinitely. During the fiscal year ended December 31, 1997, Class B (which
was then a separate series fund) paid or accrued sales commissions equivalent
to .75% of average daily net assets. As at December 31, 1997, the outstanding
uncovered distribution charges of the Principal Underwriter on such day
calculated under the Class B Plan amounted to approximately $315,000
(equivalent to 3.4% of net assets on such day). For more information see the
Statement of Additional Information.
THE CLASS B PLAN ALSO AUTHORIZES CLASS B 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. Under the Class B Plan, this fee is
paid quarterly in arrears based on the value of Class B shares sold by such
persons and remaining outstanding for at least twelve months. For the fiscal
year ended December 31, 1997, Class B paid or accrued service fees under its
Plan equivalent to 0.17% of average daily net assets for such year.
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's 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 on the sale of Class A shares 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.
VALUING SHARES
THE FUND VALUES ITS SHARES ONCE 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) in
the manner authorized by the Trustees of the Portfolio. Net asset value is
computed by subtracting the liabilities of the Portfolio from the value of its
total assets. Exchange-listed securities are valued at closing sale prices;
however, the Adviser may provide the fair value of such securities if events
occuring since the close of an exchange would materially affect the
Portfolio's net asset value.
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 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 Fund 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".
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 the existence of 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>
<CAPTION>
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.
**A commission 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 officers 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
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
the Principal Underwriter provides multiple investment services, such as
management, brokerage and custody, and (3) to investment advisors, financial
planners or other intermediaries who place trades for their own accounts or
the accounts of their clients and who charge a management, consulting or other
fee for their services; clients of such investment advisors, financial
planners or other intermediaries who place trades for their own accounts if
the accounts are linked to the master account of such investment advisor,
financial planner or other intermediary on the books and records of the broker
or agent; and 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") ("Eligible Plans") 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.
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 at their net asset value as determined above. The minimum value of
securities (or securities and cash) accepted for deposit is $5,000. Securities
accepted will be sold 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:
<TABLE>
<CAPTION>
<S> <C>
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 Emerging Markets Fund (state
Investors Bank & Trust Company Class)
For A/C Eaton Vance Emerging Markets Fund (state Class) Physical Securities Processing Settlement Area
200 Clarendon Street
Boston, MA 02116
</TABLE>
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.
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 Transfer Agent, 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 be 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 received 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.
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 if the
cause of the low account balance was a reduction in the net asset value
of shares. No CDSC will be imposed with respect to such involuntary
redemptions.
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 is $1 million or more, they will be subject to a 1% 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%
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 minimum
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.
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.
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
Funds (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.
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 of 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 01581-5123 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 the
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 not 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 under a Statement
of Intention. 5% of the dollar amount to be purchased will be held in escrow in
the form of shares registered in the Investor's name until the Statement is
satisfied or the 13- month period expires. See the Account Application for
details.
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 CDSC 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.
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 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 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 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 taxpayer identification number and other
required certifications, may be subject to "backup" federal tax withholding of
31%.
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.
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 (including maximum sales charge for Class
A shares, net asset value for Class B shares) for specified periods, assuming
reinvestment of all distributions. 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 also publish annual and
cumulative total return figures from time to time. Total return may be quoted
for the period prior to commencement of operations which would reflect the
Class' total return (or that of its predecessor) adjusted to reflect any
applicable sales charge.
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.
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. 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 investment results to those
of other mutual funds and other investment vehicles. If the expenses of the
Fund or the Portfolio are allocated to Eaton Vance or the Adviser, the Fund's
performance will be higher.
The following chart reflects the annual investment returns of Class B of the
Fund for one-year periods ending December 31 and does not take into account
any sales charge which investors may bear. The performance of the predecessor
fund of Class A was different.
LIFE OF FUND AVERAGE ANNUAL TOTAL RETURN -- 7.35%
1994(1)* 1995* 1996* 1997*
(0.40%) 0.90% 28.49% (3.48%)
(1)From the start of business, November 30, 1994 to December 31, 1994.
*If a portion of the Fund's expenses had not been subsidized, the Fund would
have had lower returns.
<PAGE>
[LOGO] Investing
EATON VANCE for the
================= 21st
Mutual Funds Century
- -------------------------------------------------------------------------------
Eaton Vance
Emerging Markets Fund
PROSPECTUS
MAY 1, 1998
- -------------------------------------------------------------------------------
SPONSOR AND MANAGER OF EATON VANCE EMERGING MARKETS FUND
Administrator of Emerging Markets Portfolio
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
ADVISER OF EMERGING MARKETS PORTFOLIO
Lloyd George Investment Management (Bermuda) Limited, 3808 One Exchange Square,
Central, Hong Kong
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, MA 02110
EMP
<PAGE>
[LOGO] Investing
EATON VANCE for the
================= 21st
Mutual Funds Century
PART A
INFORMATION REQUIRED IN A PROSPECTUS
EATON VANCE
GREATER INDIA FUND
EATON VANCE GREATER INDIA FUND (THE "FUND") IS A MUTUAL FUND SEEKING LONG-TERM
CAPITAL APPRECIATION THROUGH INVESTMENT IN EQUITY SECURITIES OF COMPANIES IN
INDIA AND SURROUNDING COUNTRIES OF THE INDIAN SUBCONTINENT. THE FUND INVESTS
ITS ASSETS IN SOUTH ASIA 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.
INVESTMENTS IN INDIA AND THE INDIAN SUBCONTINENT CAN INVOLVE SIGNIFICANT RISKS
THAT ARE NOT NORMALLY INVOLVED IN INVESTMENT IN SECURITIES OF U.S. COMPANIES,
AND THEREFORE THE FUND MAY NOT BE SUITABLE FOR ALL INVESTORS. THE FUND IS A
SERIES OF EATON VANCE SPECIAL INVESTMENT TRUST (THE "TRUST").
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK OR OTHER INSURED DEPOSITORY INSTITUTION, AND ARE NOT
FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY. SHARES OF THE FUND INVOLVE
INVESTMENT RISKS, INCLUDING FLUCTUATIONS IN VALUE AND THE POSSIBLE LOSS OF
SOME OR ALL OF THE PRINCIPAL INVESTMENT.
This Prospectus is designed to provide you with information you should know
before investing. Please retain this document for future reference. A
Statement of Additional Information dated May 1, 1998 for the Fund, as
supplemented from time to time, has been filed with the Securities and
Exchange Commission (the "Commission") and is incorporated herein by
reference. This Statement of Additional Information is available without
charge from the Fund's principal underwriter, Eaton Vance Distributors, Inc.
(the "Principal Underwriter"), 24 Federal Street, Boston, MA 02110 (telephone
(800) 225-6265). The 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"). The principal business address
of the Adviser is 3808 One Exchange Square, Central, Hong Kong.
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.
CONTENTS
<TABLE>
Page Page
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Shareholder and Fund Expenses 2 How to Buy Shares 13
The Fund's Financial Highlights 3 How to Redeem Shares 15
The Fund's Investment Objective 4 Reports to Shareholders 16
Investment Opportunities in India and the Indian The Lifetime Investing Account/ Distribution Options 16
Subcontinent 4 The Eaton Vance Exchange Privilege 17
Investment Policies and Risks 5 Eaton Vance Shareholder Services 18
Organization of the Fund and the Portfolio 9 Distributions and Taxes 19
Management of the Fund and the Portfolio 10 Performance Information 19
Distribution Plans 12
Valuing Shares 13
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
Prospectus dated May 1, 1998
<PAGE>
SHAREHOLDER AND FUND EXPENSES
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
Class A Class B
Shares Shares
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge Imposed on Purchases of Shares (as a percentage of offering
price) 5.75% None
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 Operating Expenses (as a percentage of average daily net assets)
<CAPTION>
Class A Class B
Shares Shares
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Management Fees 1.25% 1.25%
Rule 12b-1 Distribution and Service Fees 0.50 0.91
Other Expenses 0.92 0.92
--- ---
Total Operating Expenses 2.67% 3.08%
==== ====
Example
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, the applicable contingent deferred sales charge on a $1,000 investment,
assuming (a) 5% annual return and (b) redemption at the end of each period:
<CAPTION>
Class A Class B
Shares Shares
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
1 Year $ 83 $ 81
3 Years 136 135
5 Years 191 182
10 Years 340 339
An investor would pay the following expenses on the same investment, assuming (a) 5% annual return and (b) no
redemptions:
<CAPTION>
Class A Class B
Shares Shares
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1 Year $ 83 $ 31
3 Years 136 95
5 Years 191 162
10 Years 340 339
NOTES: The table and Example 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 Class B shares is based on its expenses for the most
recent fiscal year. Information for Class A shares is estimated based upon the most recent fiscal year of its
predecessor fund adjusted for the multiple-class structure. 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.
</TABLE>
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 EXAMPLE 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 Example to assume a 5% annual return, but actual
return will vary. A long-term shareholder may pay more than the economic
equivalent of the maximum front-end sales charge permitted by a rule of the
National Association of Securities Dealers, Inc. For further information
regarding the expenses of the Fund and the Portfolio, see "The Fund's
Financial Highlights", "Management of the Fund and the Portfolio",
"Distribution Plans" and "How to Redeem Shares".
The Fund invests exclusively in the Portfolio. Other investment companies and
investors with different distribution arrangements and fees are investing in
the Portfolio and others may do so in the future. See "Organization of the
Fund and the Portfolio".
THE FUND'S FINANCIAL HIGHLIGHTS
The following information should be read in conjunction with the financial
statements that appear in the Fund's annual report to shareholders. The Fund's
financial statements have been audited by Deloitte & Touche LLP, independent
certified public accountants, as experts in accounting and auditing. The
financial statements and the independent auditors' report are incorporated by
reference into the Statement of Additional Information. Further information
regarding the performance of the Fund is contained in its annual report to
shareholders which may be obtained without charge by contacting the Principal
Underwriter. The financial information for each of the periods presented in the
Fund's Financial Highlights are for the Fund prior to reclassification as Class
B shares on January 1, 1998. Information for Class A shares is not presented
because this class did not exist prior to January 1, 1998. The Financial
Highlights for Class A shares will differ from the Financial Highlights for
Class B shares due to the different fees imposed on Class A shares.
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------------------
1997 1996 1995 1994*
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value -- beginning of year $ 5.910 $ 6.550 $ 9.840 $10.000
------- -------- -------- --------
Income (loss) from operations:
Net investment loss $(0.126) $ (0.099)++ $ (0.176) $ (0.065)
Net realized and unrealized gain
(loss) on investments 0.446 (0.541) (3.114) (0.095)
------- -------- -------- --------
Total income (loss) from
operations $ 0.320 $ (0.640) $ (3.290) $ (0.160)
------- -------- -------- --------
Net asset value -- end of year $ 6.230 $ 5.910 $ 6.550 $ 9.840
======= ======== ======== ========
Total Return(1) 5.42% (9.77)% (33.43)% (1.60)%
Ratios/Supplemental Data:
Net assets, end of year (000 omitted) $68,812 $ 74,661 $ 21,041 $ 38,925
Ratio of net expenses to average
daily net assets(2)(3) 3.08% 2.88% 3.31% 2.54%+
Ratio of net expenses to average
daily net assets after custodian fee
reduction(2) 3.05% 2.65% 2.90% --
Ratio of net investment loss to
average daily net assets (1.67)% (1.46)% (1.74)% (1.42)%+
Portfolio Turnover of the Fund(4) -- -- -- --
Portfolio Turnover of the Portfolio(4) 48% 46% 38% 1%
+ Computed on an annualized basis.
++ Computed using average shares outstanding.
* For the period from the start of business, May 2, 1994, to December 31, 1994.
(1) Total return is calculated assuming a purchase at the net asset value on the first day and a sale at the net asset value on
the last day of each period reported. Income dividends are assumed to be reinvested at the net asset value on the ex-dividend
date. Capital gain distributions, if any, are assumed to be reinvested at the net asset value on the ex-dividend date. Total
return is computed on a non-annualized basis.
(2) Includes the Fund's share of the Portfolio's allocated expenses.
(3) The expense ratios for the years ended December 31, 1997, 1996 and 1995 have been adjusted to reflect a change in reporting
requirements. The new reporting guidelines require the Fund to increase its expense ratio by the effect of any expense offset
arrangements with its service providers. The expense ratios for the period ended December 31, 1994 have not been adjusted to
reflect this change.
(4) Portfolio turnover of the Fund represents the rate of portfolio activity for the period while the Fund was making investments
directly in securities. The Fund began investing in the Portfolio on May 2, 1994.
</TABLE>
<PAGE>
THE FUND'S INVESTMENT OBJECTIVE
THE FUND'S INVESTMENT OBJECTIVE IS TO SEEK LONG-TERM CAPITAL APPRECIATION. It
currently seeks to meet its investment objective by investing its assets in
South Asia Portfolio (the "Portfolio"), a separate registered investment
company which has the same investment objective and policies as the Fund. The
Portfolio invests primarily in equity securities of companies in India and
surrounding countries of the Indian subcontinent. The Portfolio will normally
invest at least 50% of its total assets in equity securities of Indian
companies. 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, respectively, without obtaining the approval of
the Fund's shareholders or the investors in the Portfolio, as the case may be.
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 and is not intended to be a complete investment program.
Prospective investors should take into account their objectives and other
investments when considering the purchase of Fund shares. The Fund cannot
assure achievement of its investment objective. In addition, investments in
India and the Indian subcontinent can be considered speculative, and therefore
may offer higher potential for gains and losses than investments in the
developed markets of the world.
INVESTMENT OPPORTUNITIES IN INDIA AND THE INDIAN SUBCONTINENT
THE FOLLOWING IS A GENERAL DISCUSSION OF CERTAIN FEATURES OF THE ECONOMIES OF
INDIA, PAKISTAN AND SRI LANKA. 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.
India is the seventh largest country in the world, covering an area of
approximately 3,300,000 square kilometers. It is situated in South Asia and is
bordered by Nepal, Bhutan and China in the north, Myanmar and Bangladesh in
the east, Pakistan in the west and Sri Lanka in the south.
India's population is currently estimated at approximately 1.054 million; the
figure in 1991, according to the official census, was 846 million. Most of the
population still lives in rural areas. Approximately 84 percent are Hindus, 11
percent Muslims, 2 percent Sikhs, 2 percent Christians and 1 percent
Buddhists. The official language is Hindi, with English also being used widely
in official and business communications. With a middle class of approximately
150 million people, India constitutes one of the largest markets in the world.
Unlike certain other emerging market countries, India has a long tradition of
trade and markets, despite the central planning of the economy carried out by
the Indian government in the first decades after India's independence. The
Bombay Stock Exchange, for example, was founded over 120 years ago, is the
oldest stock exchange in Asia and currently lists almost 5,700 companies, more
than the New York Stock Exchange.
India became independent from the United Kingdom in 1947. It is governed by a
parliamentary democracy under the Constitution of India, under which the
executive, legislative and judicial functions are separated. India has been
engaged in a policy of gradual economic reform since the mid-1980's. In 1991,
the Government of Prime Minister Narasimha Rao had introduced far-reaching
measures with the goal of reducing government intervention in the economy,
strengthening India's industrial base, expanding exports and increasing
economic efficiency. The main focus of the policy was to place more authority
for making business decisions in the hands of those who operate the
businesses. The system of industrial licenses known as the "License Raj", by
means of which the government controlled many private sector investment
decisions, was substantially modified. Government approvals required to
increase, reduce or change production have been greatly reduced.
Modern economic development in India began in the mid-1940's with the
publication of the Bombay Plan. The Planning Commission was established in
1950 to assess the country's available resources and to identify growth areas.
A centrally planned economic model was adopted, and in order to control the
direction of private investment, most investment and major economic decisions
required government approval. Foreign investment was allowed only selectively.
This protectionist regime held back development of India's economy until the
mid-1980's when there began a gradual move towards the liberalization and
market orientation of the economy. After the liberalization measures, which
began in 1985, the annual growth of the country's real gross domestic product
has risen from an average 3-4% since the 1940's to an average 5.7% between
1991 and 1997.
Since 1991, the Indian government has continued to adopt measures to further
open the economy to private investment, attract foreign capital and speed up
the country's industrial growth rate. For example, the banking industry has
recently been opened to the private sector, including to foreign investors.
Most banks were nationalized in 1969, and no new privately owned banks had
been permitted. The Government is now granting new banking licenses. The
Government also has recently permitted foreign brokerage firms to operate in
India on behalf of Foreign Institutional Investors ("FIIs"), and has permitted
foreign investors to own majority stakes in Indian asset management companies.
In 1992, it was announced that FIIs would be able to invest directly in the
Indian capital markets. In September 1992, the guidelines for FIIs were
published and a number of such investors have been registered by the
Securities and Exchange Board of India, including the Adviser. In 1995, FII
regulations were supplemented and the Parliament approved the establishment of
central share depositories. Beginning in September 1995, several measures have
been adopted to establish securities depositories and permit trading without
share certificates. Such trading in selected securities has begun, but the
process is not yet well-defined.
The government has also cut subsidies to ailing public sector businesses.
Further cuts, and privatizations, are expected, although resistance by labor
unions and other interest groups may hinder this process. Continuing the
reform process, recent budgets have implemented tax cuts for the corporate
sector and reductions in import duties. In sum, the government's new policies
seek to expand opportunities for entrepreneurship in India. The recently
concluded mid term elections of 1998 to the Indian parliament has resulted in
a fragmented verdict with no single party able to muster the required
majority. The right wing Bharatiya Janata Party (BJP) has formed a coalition
government with the support of a number of small, regional parties. Mr. Atai
Bihari Vaypayee is the new Prime Minister and Mr. Yashwant Sinha the new
Finance Minister. It is unclear to what extent the new government will endorse
these policies.
Foreign investors have responded to these trends by putting resources into the
Indian economy. According to the Reserve Bank of India, total inflows,
including both foreign direct and foreign portfolio investment, rose from
about $150 million in fiscal year 1992 to over $4.6 billion in fiscal year
1997. India's foreign exchange reserves, which had fallen to about $1 billion
in 1991, were over $28 billion in November, 1997. Future direction of foreign
investment flows, however is dependent on clear cut policy thrust from the new
government.
In view of these trends, the Adviser believes that India now represents one of
the Asian economies most likely to experience significant growth in the next
several years. This growth may be expected to manifest itself in rising share
prices of many companies participating in the Indian economy.
Pakistan and Sri Lanka have also taken steps to liberalize their economies and
improve economic growth. In Pakistan, Prime Minister Mohammad Nawaz Sharif,
although involved in political controversy in late 1997, has attempted to
continue many of the liberalization policies already established. In Sri
Lanka, the government continues to review and revise laws, regulations and
procedures with the goal of promoting a competitive business environment and
reducing unnecessary government regulation. As a result, international
investors have showed increasing interest in Pakistan and Sri Lanka. The
Portfolio has no current intention to invest more than 5% of its assets in
companies in the Indian subcontinent located in other than India, Pakistan or
Sri Lanka.
INVESTMENT POLICIES AND RISKS
THE PORTFOLIO SEEKS TO ACHIEVE ITS OBJECTIVE BY INVESTING IN A CAREFULLY
SELECTED AND CONTINUOUSLY MANAGED PORTFOLIO CONSISTING PRIMARILY OF EQUITY
SECURITIES OF COMPANIES IN INDIA AND SURROUNDING COUNTRIES OF THE INDIAN
SUBCONTINENT. A company will be considered to be in India or another country
if it is domiciled or has significant operations in that country. The
Portfolio will, under normal market conditions, invest at least 65% of its
total assets in such securities ("Greater India investments") and at least 50%
of its total assets in equity securities of Indian companies. Greater India
investments are typically listed on stock exchanges or traded in the over-the-
counter markets in countries of the Indian subcontinent, but also include
securities traded in markets outside these countries, including securities
trading in the form of Global Depositary Receipts and American Depositary
Receipts.
Equity securities, for purposes of the 65% policy, will be limited to common
and preferred stocks; equity interests in trusts, partnerships, joint ventures
and other unincorporated entities or enterprises; special classes of shares
available only to foreign investors in markets that restrict ownership by
foreign investors to certain classes of equity securities; convertible
preferred stocks; and other convertible instruments. The convertible
instruments 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. and lower than BBB by Standard & Poor's Ratings
Group). Convertible 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. Such
debt securities will not exceed 20% of total assets.
When consistent with its investment objective, the Portfolio may also invest
in equity securities of companies not in the Indian subcontinent, as well as
warrants, options on equity securities and indices, options on currency,
futures contracts, options on futures contracts, forward foreign currency
exchange contracts, currency swaps and other non-equity investments. The
issuers of these equity securities may be located in neighboring countries
outside the region, such as Indonesia and Malaysia, as well as more developed
countries.
During temporary defensive periods, such as during abnormal market or economic
conditions, the Portfolio may invest some or all of its total assets in high
grade debt securities of foreign and United States companies, foreign
governments and the U.S. Government, and their respective agencies,
instrumentalities, political subdivisions and authorities, as well as in high
quality money market instruments denominated in U.S. dollars or a foreign
currency. The Portfolio may borrow up to 5% of the value of its total assets
to satisfy redemption requests or settle securities transactions.
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 currency rates or exchange control regulations,
application of foreign tax laws (including withholding tax), changes in
governmental administration or economic or monetary policy (in this country or
abroad) or changed circumstances in dealings between nations. Foreign currency
exchange rates may fluctuate significantly over short periods of time causing
the Portfolio's net asset value to fluctuate as well. Costs are incurred in
connection with conversions between various currencies. In addition, foreign
brokerage commissions, custody fees and other costs of investing are generally
higher than in the United States, and foreign securities markets may be less
liquid, more volatile and less subject to governmental supervision than in the
United States. Investments in foreign issuers could be 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. 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.
Since the Portfolio will, under normal market conditions, invest at least 65%
of its total assets in Greater India investments, its investment performance
will be especially affected by events affecting companies in the Indian
subcontinent and particularly India. The value and liquidity of Greater India
investments may be affected favorably or unfavorably by political, economic,
fiscal, regulatory or other developments in the Indian subcontinent or
neighboring regions. Economic conditions, political stability and market depth
in the region are comparatively underdeveloped. Greater India investments
typically involve greater potential for gain or loss than investments in
securities of issuers in developed countries. In comparison to the United
States and other developed countries, countries in the Indian subcontinent
have relatively unstable governments and economies based on only a few
industries. 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 Indian subcontinent
are substantially smaller, less liquid and more volatile than the major
securities markets in the United States. 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 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. 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.
The stock markets in the 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 laws and regulations. The securities industries in these countries
are comparatively underdeveloped, and stockbrokers and other intermediaries
may not perform as well as their counterparts in the United States and other
more developed securities markets. Physical delivery of securities in small
lots generally has been required in India and a shortage of vault capacity and
trained personnel has existed among qualified custodial Indian banks. The
Portfolio may be unable to sell securities where the registration process is
incomplete and may experience delays in receipt of dividends. If trading
volume is limited by operational difficulties, the ability of the Portfolio to
invest its assets may be impaired.
Settlement of securities transactions in the Indian subcontinent may be
delayed and is generally less frequent than in the United States, which could
affect the liquidity of the Portfolio's assets. In addition, disruptions due
to work stoppages and trading improprieties in these securities markets have
caused such markets to close. If extended closings were to occur in stock
markets where the Portfolio was heavily invested, the Fund's ability to redeem
Fund shares could become correspondingly impaired. To mitigate these risks,
the Portfolio may maintain a higher cash position than it otherwise would,
thereby possibly diluting its return, or the Portfolio may have to sell more
liquid securities which it would not otherwise choose to sell. 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 or settle securities transactions.
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.
Securities in which the Portfolio invests may have their principal trading
markets in other developing countries. Such securities markets are generally
subject to risks similar to those of the Indian subcontinent.
INVESTMENT CONTROLS. Foreign investment in the securities of issuers in
Greater India countries is usually restricted or controlled to some degree. In
India, FIIs may predominately invest in exchange-traded securities (and
securities to be listed, or those approved on the over-the-counter exchange of
India) subject to the conditions specified in the Guidelines for Direct
Foreign Investment by FIIs in India, (the "Guidelines") published in a Press
Note dated September 14, 1992, issued by the Government of India, Ministry of
Finance, Investment Division. FIIs have to apply for registration to the
Securities and Exchange Board of India ("SEBI") and to the Reserve Bank of
India for permission to trade in Indian securities. The Guidelines require
SEBI to take into account the track record of the FII, its professional
competence, financial soundness, experience and other relevant criteria. SEBI
must also be satisfied that suitable custodial arrangements are in place for
the Indian securities. The Adviser is a registered FII and the inclusion of
the Portfolio in the Adviser's registration was approved by SEBI. FIIs are
required to observe certain investment restrictions, including an account
ownership ceiling of 5% of the total issued share capital of any one company.
In addition, the shareholdings of all registered FIIs, together with the
shareholdings of non-resident Indian individuals and foreign bodies corporate
substantially owned by non-resident Indians, may not exceed 30% of the issued
share capital of any one company. Only registered FIIs and non-Indian mutual
funds that comply with certain statutory conditions may make direct portfolio
investments in exchange-traded Indian securities. Income, gains and initial
capital with respect to such investments are freely repatriable, subject to
payment of applicable Indian taxes. See "Regional Taxes".
In Pakistan, the Portfolio may invest in the shares of issuers listed on any
of the stock exchanges in the country provided that the purchase price as
certified by a local stock exchange broker is paid in foreign exchange
transferred into Pakistan through a commercial bank and, in the case of an
off-exchange sale of listed shares, that the sale price is not less than the
price quoted on any of the local stock exchanges on the date of the sale. In
addition, the issuer's shares held by the Portfolio must be registered with
the State Bank of Pakistan for purposes of repatriation of income, gains and
initial capital. The Portfolio may also invest in the shares of unlisted and
closely-held manufacturing companies provided that the sale price is certified
by a Pakistani chartered accountant to be not less than the break-up value of
the shares, and is paid in foreign exchange transferred into Pakistan through
a commercial bank. If local procedures are complied with, income, gains and
initial capital are freely repatriable after payment of any applicable
Pakistani withholding taxes. In Sri Lanka, the Portfolio may invest in the
shares of exchange-listed issuers, subject to certain limitations for specific
sectors of the economy.
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. Similar risks and considerations will be
applicable to the extent the Portfolio invests in other countries.
REGIONAL TAXES. The Fund and the Portfolio each intends to conduct its
respective affairs in such a manner that it will not be resident in India or
any other country in the Indian subcontinent for local tax purposes. The
Portfolio's income from certain regional sources will be subject to tax by
those countries as described below.
India imposes withholding tax on interest and dividends at a rate of 20%.
Withholding tax of 10% is currently imposed on gains from sales of shares held
one year or more and 30% on gains from sales of shares held less than one
year. The withholding rate on gains from sales of debt securities is currently
10% if the securities have been held 12 months or more and 30% if the
securities have been held less than 12 months. The Portfolio is considering
investing in India through a Republic of Mauritius company to take advantage
of the favorable tax treaty between the countries. There can be no assurance
such an investment structure would be effective.
Pakistan currently imposes withholding tax on dividends at rates of between
7.5% and 20%. There is currently no withholding tax on capital gains from
listed shares. This exemption will expire in June 2000. Sri Lanka imposes 15%
withholding tax on dividends and interest, but does not impose withholding tax
on capital gains of listed shares.
GREATER INDIA COUNTRY CONSIDERATIONS. Political and economic structures in
India and other countries of the Indian subcontinent generally lack the
social, political and economic stability characteristic of the United States.
Governmental actions can have a significant effect on the economic conditions
in such countries, which could adversely affect the value and liquidity of the
Portfolio's investments. ALTHOUGH THE GOVERNMENTS OF INDIA, PAKISTAN AND SRI
LANKA HAVE RECENTLY BEGUN TO INSTITUTE ECONOMIC 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 at times nationalized or
expropriated the assets of private companies.
The laws of countries in the region relating to limited liability of corporate
shareholders, fiduciary duties of officers and directors, and the bankruptcy
of state enterprises are generally less well developed than or different from
such laws in the United States. It may be more difficult to obtain a judgment
in the courts of these countries than it is in the United States. In addition,
unanticipated political or social developments may affect the value of the
Portfolio's investments in these countries and the availability to the
Portfolio of additional investments. Monsoons and natural disasters also can
affect the value of Portfolio investments.
INDIA. The Indian population is comprised of diverse religious and linguistic
groups. Despite this diversity, India is the world's largest democracy and has
had one of the more stable political systems among the world's developing
nations. However, periodic sectarian conflict among India's religious and
linguistic groups could adversely affect Indian businesses, temporarily close
stock exchanges or other institutions, or undermine or distract from
government efforts to liberalize the Indian economy.
PAKISTAN. The military has been, and continues to be, an important factor in
Pakistani government and politics, and the civilian government continues to
rely on the support of the army. Ethnic unrest and troubled relations with
India are also continuing problems. In 1996, political uncertainty caused the
economy to slow down. In early 1997, with a popularly elected Government in
place, plans for faster economic reforms were established. Certain principals
of Islam, the official State religion, may affect the ability to implement
free market reforms.
SRI LANKA. Insurrection and political violence among Sri Lanka's ethnic
groups, including terrorist actions by the Tamil Tigers separatist
organization have periodically disrupted Sri Lanka's government and economy.
Although Sri Lanka's government is currently fairly stable, there can be no
assurance that such stability will continue.
UNLISTED SECURITIES. The Portfolio may invest in securities of companies that
are neither listed on a stock exchange nor traded over the counter. Unlisted
securities may include investments in 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.
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; or 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. The use of futures for nonhedging
purposes is limited by regulations of the Commodity Futures Trading
Commission. There can be no assurance that the Adviser's use of derivative
instruments will be advantageous to the Portfolio.
The Portfolio may purchase call and put options on any securities in which the
Portfolio may invest or options on any securities index composed of securities
in which the Portfolio may invest. The Portfolio does not intend to write a
covered option on any security if after such transaction more than 15% of its
net assets, as measured by the aggregate value of the securities underlying
all covered calls and puts written by the Portfolio, would be subject to such
options. The Portfolio does not intend to purchase an option on any security
if, after such transaction, more than 5% of its net assets, as measured by the
aggregate of all premiums paid for all such options held by the Portfolio,
would be so invested.
Forward foreign currency exchange contracts are individually negotiated and
privately traded by currency traders and their customers. A forward contract
involves an obligation to purchase or sell a specific currency (or basket of
currencies) for an agreed price at a future date, which may be any fixed
number of days from the date of the contract. The Portfolio may engage in
cross-hedging by using forward contracts in one currency (or basket of
currencies) to hedge against fluctuations in the value of securities
denominated in a different currency if the Adviser determines that there is an
established historical pattern of correlation between the two currencies (or
the basket of currencies and the underlying currency). Use of a different
foreign currency magnifies the Portfolio's exposure to foreign currency
exchange rate fluctuations. The Portfolio may also use forward contracts to
shift its exposure to foreign currency exchange rate changes from one currency
to another.
The 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.
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.
OTHER INVESTMENT COMPANIES. The Portfolio reserves the right to invest up to
10% of its total assets, calculated at the time of purchase, in the securities
of other investment companies unaffiliated with the Adviser or the Manager
that have the characteristics of closed-end investment companies. The
Portfolio will indirectly bear its proportionate share of any management fees
paid by investment companies in which it invests in addition to the advisory
fee paid by the Portfolio. The value of closed-end investment company
securities, which are usually traded on an exchange, is affected by demand for
the securities themselves, independent of the demand for the underlying
portfolio assets and, accordingly, such securities can trade at a discount
from their net asset values.
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.
Investment restrictions are considered at the time of acquisition of assets;
the sale of portfolio assets generally is not required in the event of a
subsequent change in circumstances. As a matter of fundamental policy the
Portfolio will not invest more than 25% of its total assets in the securities,
other than U.S. Government securities, of issuers in any one industry.
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 Fund's
shareholders 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 (THE
"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. As a result of a
reorganization with separate series of the Trust, the Fund commenced offering
Class A and B shares on January 1, 1998.
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 or remove 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 are entitled to share pro rata in the net assets
attributable to that class available for distribution to shareholders.
The Trustees of the Trust have considered the advantages and disadvantages of
investing the assets of the Fund in the Portfolio, as well as the advantages
and disadvantages of the two-tier format. The Trustees believe that the
structure may offer opportunities for growth in the assets of the Portfolio, may
afford the potential for economies of scale for the Fund and may over time
result in lower expenses for the Fund.
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 or class 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.
The Fund may withdraw (completely redeem) all its assets from the Portfolio at
any time if the Board of Trustees of the Trust determines that it is in the
best interest of the Fund to do so. In the event the Fund withdraws all of its
assets from the Portfolio, or the Board of Trustees of the Trust determines
that the investment objective of the Portfolio is no longer consistent with
the investment objective of the Fund, the Trustees would consider what action
might be taken, including investing the assets of the Fund in another pooled
investment entity or retaining an investment adviser to manage the Fund's
assets in accordance with its investment objective. The Fund's investment
performance may be affected by a withdrawal of all its assets (or the assets
of another investor in the Portfolio) from the Portfolio.
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, acting under the general supervision of the Portfolio's
Trustees, manages the Portfolio's investments and affairs.
The Adviser is registered as an investment adviser with the Commission and is
a subsidiary of Lloyd George Management (B.V.I.) Limited ("LGM"). The Adviser
employs two full-time investment professionals in its Mumbai office, who
provide investment research and advice on Greater India investments. LGM and
its subsidiaries act as investment adviser to various individual and
institutional clients with total assets under management of approximately $1.5
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 Asian securities markets,
especially those of emerging markets. LGM currently manages principally
Pacific Basin and Asian 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 Pacific Basin and Asian stock
markets. The team has a unique knowledge of, and experience with Pacific Basin
and Asian emerging markets. The Adviser is registered as a FII with the
Securities and Exchange Board of India. 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 disciplined 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, 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 co-managed by
Robert Lloyd George and Scobie Dickinson Ward.
THE HONOURABLE ROBERT LLOYD GEORGE. Chairman of the Adviser. 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. Previously, 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. Mr. Lloyd George is the author of numerous published articles and three
books -- "A Guide to Asian Stock Markets" (Longmans, Hong Kong, 1989), "The
East West Pendulum" (Woodhead-Faulkner, Cambridge, 1991) and "North South --
an Emerging Markets Handbook" (Probus, England, 1994).
SCOBIE DICKINSON WARD. Director and Chief Investment Officer of the Adviser.
Born in 1966 and a cum laude graduate of both Phillips Academy Andover, and
Harvard University. Mr. Ward joined Indosuez Asia Investment Services in 1989,
where he managed the $100 million Himalayan Fund, and the Indosuez Tasman
Fund, investing in Australia and New Zealand. Mr. Ward joined LGM on its
formation and has extensive experience with the markets and listed companies
of Asia.
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. As at December 31, 1997, the
Portfolio had net assets of $84,174,749. For the fiscal year ended December
31, 1997, the Portfolio paid the Adviser advisory fees equivalent to 0.75% of
the Portfolio's average daily net assets for such year.
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 $25 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 Boards 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.
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. For the fiscal year ended December 31, 1997 the
Fund paid Eaton Vance management fees equivalent to 0.25% of the Fund's
average daily net assets for such year. 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. For the fiscal year ended December 31, 1997, the
Portfolio paid Eaton Vance administration fees equivalent to 0.25% of the
Portfolio's average daily net assets for such year.
Like most mutual funds, the Fund and the Portfolio rely on computers in
conducting daily business and processing information. There is a concern that
on January 1, 2000 some computer programs will be unable to recognize the new
year and as a consequence computer malfunctions will occur. The Administrator
is taking steps that it believes are reasonably designed to address this
potential problem and to obtain satisfactory assurance from other service
providers to the Fund and Portfolio that they are also taking steps to address
the issue. There can, however, be no assurance that these steps will be
sufficient to avoid any adverse impact on the Fund, the Portfolio or
shareholders.
The Portfolio and the Fund, as the case may be, will each be responsible for
all respective costs and expenses not expressly stated to be payable by 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.
DISTRIBUTION PLANS
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.
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.
The Trust has also adopted a compensation-type 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 EXCEEDING .75% OF
ITS AVERAGE DAILY NET ASSETS TO FINANCE THE DISTRIBUTION OF ITS SHARES. Such
fees compensate the Principal Underwriter for sales commissions paid by it to
Authorized Firms on the sale of Class B shares and for interest expenses.
Under the Class B Plan, 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 Plan are limited, uncovered distribution charges (sales
commissions due the Principal Underwriter plus interest, less the above fees
and CDSCs and Adviser distribution payouts received by it) may exist
indefinitely. During the fiscal year ended December 31, 1997, Class B (which
was then a separate series fund) paid or accrued sales commissions equivalent
to .75% of average daily net assets. As at December 31, 1997, the outstanding
uncovered distribution charges of the Principal Underwriter on such day
calculated under the Class B Plan amounted to approximately $3,761,000
(equivalent to 5.5% of net assets on such day).
THE CLASS B PLAN ALSO AUTHORIZES EACH CLASS B 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. Under the Class B Plan, this fee
is paid quarterly in arrears based on the value of Class B shares sold by such
persons and remaining outstanding for at least twelve months. For the fiscal
year ended December 31, 1997, Class B paid or accrued service fees under its
Plan equivalent to 0.16% of average daily net assets.
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's 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 on the sale of Class A shares 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.
VALUING SHARES
THE FUND VALUES ITS SHARES ONCE 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) in
the manner authorized by the Trustees of the Portfolio. Net asset value is
computed by subtracting the liabilities of the Portfolio from the value of its
total assets. Exchange-listed securities are valued at closing sale prices;
however, the Adviser may provide the fair value of such securities if events
occurring since the close of an exchange would materially affect the
Portfolio's net asset value.
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 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".
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 the existence of 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>
<CAPTION>
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 3.09 2.50
$500,000 but less than $1,000,000 2.00 2.04 1.75
$1,000,000 or more 0.00* 0.00* See Below**
</TABLE>
*No sales charge is payable at the time of purchase on investments of
$1 million or more. A CDSC of 1% will be imposed on such investments in
the event of certain redemptions within 12 months of purchase.
**A commission 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 officers 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
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
the Principal Underwriter provides multiple investment services, such as
management, brokerage and custody, and (3) to investment advisors, financial
planners or other intermediaries who place trades for their own accounts or
the accounts of their clients and who charge a management, consulting or other
fee for their services; clients of such investment advisors, financial
planners or other intermediaries who place trades for their own accounts if
the accounts are linked to the master account of such investment advisor,
financial planner or other intermediary on the books and records of the broker
or agent; and 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") ("Eligible Plans") 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.
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 at their net asset value as determined above. The minimum value of
securities (or securities and cash) accepted for deposit is $5,000. Securities
accepted will be sold 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 net asset value of Class B shares or public offering price of
Class A 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:
<TABLE>
<CAPTION>
IN THE CASE OF BOOK ENTRY: IN THE CASE OF PHYSICAL DELIVERY:
<S> <C>
Deliver through Depository Trust Co. Investors Bank & Trust Company
Broker #2212 Attention: Eaton Vance Greater India Fund (state Class)
Investors Bank & Trust Company Physical Securities Processing Settlement Area
For A/C Eaton Vance Greater India Fund (state Class) 200 Clarendon Street
Boston, MA 02116
</TABLE>
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.
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 Transfer Agent, 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 CDSCs (described
below) and any federal income tax required to be withheld.
REDEMPTION BY MAIL. Shares may be 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
redemption 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 received 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.
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 if the
cause of the low account balance was a reduction in the net asset value
of shares. No CDSC will be imposed with respect to such involuntary
redemptions.
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 exchanges 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 is $1 million or more, they will be subject to a 1% 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%
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.
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.
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.
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 of 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 01581-5123 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 the
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 not 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 under a Statement
of Intention. 5% of the dollar amount to be purchased will be held in escrow in
the form of shares registered in the investor's name until the Statement is
satisfied or the 13- month period expires. See the Account Application for
details.
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.
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.
REINVESTMENT PRIVILEGE. A shareholder who has redeemed shares may reinvest,
with credit for any CDSC 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.
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 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 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 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 taxpayer identification number and other
required certifications, may be subject to "backup" federal tax withholding of
31%.
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.
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 (including maximum sales charge for Class A
shares; net asset value for Class B shares) for specified periods, assuming
reinvestment of all distributions. 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 also publish annual and
cumulative total return figures from time to time. Total return may be
quoted for the period prior to commencement of operations which would reflect
the Class' total return (or that of its predecessor) adjusted to reflect any
applicable sales charge.
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.
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. 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 investment results to those
of other mutual funds and other investment vehicles.
The following chart reflects the annual investment returns of Class B for one-
year periods ending December 31 and does not take into account any sales
charge which investors may bear. The performance of the predecessor fund of
Class A was different.
LIFE OF FUND AVERAGE ANNUAL TOTAL RETURN --(12.10)%
1994(1) (1.60)%
1995 (33.43)%
1996 (9.77)%
1997 5.42%
(1) From the start of business, May 2, 1994, to December 31, 1994.
<PAGE>
[LOGO] Investing
EATON VANCE for the
================= 21st
Mutual Funds Century
- -------------------------------------------------------------------------------
EATON VANCE
GREATER INDIA FUND
PROSPECTUS
May 1, 1998
- -------------------------------------------------------------------------------
SPONSOR AND MANAGER OF EATON VANCE GREATER INDIA FUND
Administrator of South Asia Portfolio
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
ADVISER OF SOUTH ASIA PORTFOLIO
Lloyd George Investment Management (Bermuda) Limited, 3808 One Exchange Square,
Central, Hong Kong
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, MA 02110
GIP
<PAGE>
PART A
INFORMATION REQUIRED IN A PROSPECTUS
EV TRADITIONAL EMERGING GROWTH FUND
EV TRADITIONAL EMERGING GROWTH FUND (THE "FUND") IS A MUTUAL FUND SEEKING
LONG-TERM CAPITAL APPRECIATION BY INVESTING IN A DIVERSIFIED PORTFOLIO OF
EMERGING GROWTH COMPANIES THAT ARE BELIEVED TO HAVE SUPERIOR LONG-TERM EARNINGS
GROWTH PROSPECTS. 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 in the Fund. Please retain this document for future reference.
A Statement of Additional Information for the Fund dated May 1, 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 Fund's investment adviser is Eaton Vance Management (the "Investment
Adviser") which is located at the same address. Eaton Vance Management also acts
as the administrator to the Fund (the "Administrator").
- --------------------------------------------------------------------------------
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.....2 How to Redeem Shares....................12
The Fund's Financial Highlights...3 Reports to Shareholders.................13
The Fund's Investment Objective...4 The Lifetime Investing Account/
Investment Policies and Risks.....4 Distribution Options....................14
Organization of the Fund .........7 The Eaton Vance Exchange
Management of the Fund ...........8 Privilege.............................15
Service Plan......................9 Eaton Vance Shareholder Services........16
Valuing Shares....................9 Distributions and Taxes.................17
How to Buy Shares................10 Performance Information.................18
- --------------------------------------------------------------------------------
PROSPECTUS DATED MAY 1, 1998
<PAGE>
SHAREHOLDER AND FUND EXPENSES
- --------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charges Imposed on Purchases (as a
percentage of offering price) 5.75%
Sales Charges Imposed on Reinvested
Distributions None
Fees to Exchange Shares None
ANNUAL FUND OPERATING EXPENSES (as a percentage of average daily net assets)
Investment Adviser Fee (after expense reduction) 0.00%
Other Expenses (after expense allocation) 0.00%
Total Operating Expenses (after reductions) 0.00%
EXAMPLE
An investor would pay the following
maximum initial sales charge and
expenses on a $1,000 investment, 1 Year 3 Years 5 Years 10 Years
assuming (a) 5% annual return and ------ ------- ------- --------
(b) redemption at the end of each
period: $58 $58 $58 $58
Notes:
The table and Example summarize the aggregate expenses 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 the Fund is based on its expenses for the period from the start of
business, January 2, 1997, to December 31, 1997. Absent an expense
reduction and allocation, the Investment Adviser Fee, Other Expenses
and Total Operating Expenses would have been 0.75%, 9.38% and 10.13%,
respectively.
THE EXAMPLE 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 Example to assume a 5% annual return,
but actual return will vary. For further information regarding the
expenses of the Fund see "The Fund's Financial Highlights," "Management
of the Fund" and "Service Plan."
No sales charge is payable at the time of purchase on investments 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. See "How to Buy Shares" and
"How to Redeem Shares."
For 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 began making service
fee payments during the quarter ended March 31, 1998.
-2-
<PAGE>
THE FUND'S FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following information should be read in conjunction with the audited
financial statements that appear in the Fund's annual report to shareholders.
The Fund's financial statements have been audited by Coopers & Lybrand L.L.P.,
independent accountants, as experts in accounting and auditing. The financial
statements and the report of independent accountants are incorporated by
reference into the Statement of Additional Information. Further information
regarding the performance of the Fund is contained in its annual report to
shareholders which may be obtained without charge by contacting the Principal
Underwriter.
- --------------------------------------------------------------------------------
NET ASSET VALUE, beginning of period $10.000
-------
INCOME FROM OPERATIONS:
Net investment income $ 0.017
Net realized and unrealized gain on investments 1.871
---------
Total income from operations $ 1.888
---------
LESS DISTRIBUTIONS:
From net realized gains on investments $ (0.956)
In excess of net realized gain on investments (0.102)
Total distributions ---------
$ (1.058)
---------
NET ASSET VALUE, end of period $ 10.830
=========
TOTAL RETURN(1) 19.26%
RATIOS/SUPPLEMENTAL DATA:*
Net assets, end of period (000's omitted) $307
Ratio of net expenses to average net assets 0.00%
Ratio of net investment income to average net assets 0.18%
PORTFOLIO TURNOVER 2.15%
AVERAGE COMMISSION RATE PAID** $0.0588
* For the year ended December 31, 1997, the operating expenses of the
Fund reflect a waiver of the investment adviser fee and an allocation
of expenses to the Investment Adviser. Had such actions not been
taken, net investment income (loss) per share and the ratios would
have been as follows:
NET INVESTMENT LOSS PER SHARE $(0.90)
Ratios (as a percentage of average net assets):
Expenses 10.13%
Net investment loss (9.95)%
** Average commission rate paid is computed by dividing the total dollar
amount of commissions paid during the fiscal year by the total number
of shares purchased and sold during the fiscal year for which
commissions were charged.
(1) Total return is calculated assuming a purchase at the net asset value
on the first day and a sale at the net asset value on the last day of
each period reported. Distributions, if any, are assumed to be
reinvested at the net asset value on the ex-dividend date. Total
return is computed on a non-annualized basis.
-3-
<PAGE>
THE FUND'S INVESTMENT OBJECTIVE
- --------------------------------------------------------------------------------
EV TRADITIONAL EMERGING GROWTH FUND (THE "FUND") IS A DIVERSIFIED SERIES OF
EATON VANCE SPECIAL INVESTMENT TRUST (THE "TRUST"). THE FUND'S INVESTMENT
OBJECTIVE IS TO SEEK LONG-TERM CAPITAL APPRECIATION. THE FUND INTENDS TO ACHIEVE
ITS OBJECTIVE BY INVESTING IN A DIVERSIFIED PORTFOLIO OF EMERGING GROWTH
COMPANIES THAT ARE BELIEVED TO HAVE SUPERIOR LONG-TERM EARNINGS GROWTH
PROSPECTS.
The Fund is designed for long-term investors. The Fund is not intended to
be a complete investment program. Prospective investors should take into account
their objectives and other investments when considering the purchase of Fund
shares. The Fund cannot assure achievement of its investment objective. The
Fund's investment objective is fundamental and may not be changed without
obtaining the approval of the Fund's shareholders.
INVESTMENT POLICIES AND RISKS
- --------------------------------------------------------------------------------
The Fund invests in a broadly diversified selection of publicly-traded equity
securities of emerging growth companies. In the view of the Adviser, "emerging
growth companies" are companies that are expected to demonstrate earnings growth
rates and profit margins that are substantially in excess of the average of all
publicly-traded companies in the U.S. It is expected that most emerging growth
companies invested in by the Fund will have annual revenues of between $50
million and $2 billion, but the Fund may also invest in larger and smaller
companies identified as having characteristics of emerging growth. The Adviser
believes that investing in emerging growth companies offers significant
opportunities for long-term capital appreciation, particularly if the Fund can
invest in such companies before their potential is broadly recognized by
investors.
UNDER NORMAL MARKET CONDITIONS, THE FUND WILL INVEST AT LEAST 65% OF ITS
TOTAL ASSETS IN EQUITY SECURITIES OF EMERGING GROWTH COMPANIES. For this
purpose, equity securities include common stocks and securities convertible into
common stocks. In selecting companies for investment, the Investment Adviser may
consider overall growth prospects, financial condition, competitive position,
technology, marketing expertise, profit margins, return on investment, capital
resources, management and other factors. The Fund may also invest in preferred
stocks, warrants, money market instruments (to meet anticipated redemption
requests or while investment of cash is pending) and other securities and
instruments described in this Prospectus.
For temporary defensive purposes, such as during abnormal market or
economic conditions, the Fund may also invest without limitation in various
money market instruments and high grade debt obligations. The Fund may also
temporarily borrow up to 5% of the value of its total assets 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 Fund's investments will include
investments in smaller, less seasoned companies for which there is less publicly
available information than larger, more established companies. The securities of
these companies, which may include legally restricted securities, are generally
-4-
<PAGE>
subject to greater price fluctuations, limited liquidity, higher transaction
costs and higher investment risk. These companies may have limited product
lines, markets or financial resources, or they may be dependent on a limited
management group. Investments in smaller companies may involve a higher degree
of business and financial risk that can result in substantial losses.
The Fund may invest up to 20% of its assets in securities issued by foreign
companies. Investing in such securities (including depository receipts) involves
considerations and possible risks not typically associated with investing in
securities issued by domestic corporations. The value of foreign investments are
affected by changes in currency rates or exchange control regulations,
application of foreign tax laws (including withholding tax), changes in
governmental administration or economic or monetary policy (in this country or
abroad), or changed circumstances in dealings between nations. Foreign currency
exchange rates may fluctuate significantly over short periods of time causing
the Fund'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 government 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, delays
in settlements of transactions, less publicly-available financial and other
information, armed conflict and potential difficulties in enforcing contractual
obligations.
RESTRICTED SECURITIES. Securities that are not freely tradable or which are
subject to restrictions on sale under the Securities Act of 1933 are considered
restricted. Such securities may be illiquid and may be difficult to value
properly. The Fund's holdings of illiquid securities may not exceed 15% of its
net assets. Illiquid securities include securities legally restricted as to
resale such as commercial paper issued pursuant to Section 4(2) of the
Securities Act of 1933 and securities eligible for resale pursuant to Rule 144A
thereunder. Section 4(2) and Rule 144A securities may, however, be treated as
liquid by the Investment Adviser pursuant to procedures adopted by the Trustees,
which require consideration of factors such as trading activity, availability of
market quotations and number of dealers willing to purchase the security. Such
securities may increase the level of fund illiquidity to the extent qualified
institutional buyers become uninterested in purchasing such securities.
DERIVATIVE INSTRUMENTS. The Fund may purchase or sell derivative instruments to
hedge against securities price declines and currency movements. The Fund may
engage in transactions in derivative instruments (which derive their value by
reference to other securities, indices, instruments, or currencies) in the U.S.
and abroad. Such transactions may include the purchase and sale of stock index
futures contracts and options on stock index futures; the purchase of put
options and the sale of call options on securities (including index options) and
options on foreign currency; equity and currency swaps; and the purchase and
sale of forward currency exchange contracts and currency futures. The Fund'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
Fund may use transactions in derivative instruments as a substitute for the
purchase and sale of securities. Derivative transactions may be more
advantageous in a given circumstance than transactions involving securities due
to more favorable current tax treatment, lower transaction costs, or greater
liquidity. While many derivative instruments have built-in leveraging
characteristics, the Fund will not use them to leverage its net assets.
-5-
<PAGE>
The purchase and sale of derivative instruments is a highly specialized
activity that can expose the Fund to a significant risk of loss. The built-in
leveraging inherent to many derivative instruments can result in losses that
substantially exceed the initial amount paid or received. Equity swaps and
over-the-counter options are private contracts in which there is a risk of loss
in the event of a default on an obligation to pay by a counterparty. Derivative
instruments may be difficult to value, may be illiquid, and may be subject to
wide swings in valuation caused by changes in the value of an underlying
security, index, instrument, or currency. There can be no assurance that the use
of derivative instruments will be advantageous to the Fund.
The Fund will only enter into equity swaps and over-the-counter options
contracts with counterparties whose credit quality or claims paying ability are
considered to be investment grade by the Investment Adviser. Some of the Fund's
investment in equity swaps and over-the-counter options may be treated as
illiquid assets. All futures contracts entered into by the Fund will be traded
on exchanges or boards of trade that are licensed and regulated by the
Commodities Futures Trading Commission and must be executed through a futures
commission merchant or brokerage firm that is a member of the relevant exchange.
Currency swaps involve the exchange of rights to make or receive payments
in specified currencies. Since currency swaps are individually negotiated, the
Fund 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. If the Investment Adviser
is incorrect in its forecasts of market values and currency exchange rates, the
Fund's performance will be adversely affected.
SHORT SALES AGAINST-THE-BOX. The Fund may sell securities short if it owns at
least an equal amount of the security sold short or another security convertible
or exchangeable for an equal amount of the security sold short without payment
of further compensation (a short sale against-the-box). Under current tax law,
short sales against-the-box enable the Fund to hedge its exposure to securities
that it holds without selling the securities and recognizing gains. A short sale
against-the-box requires that the short seller absorb certain costs so long as
the position is open. In a short sale against-the-box, the short seller is
exposed to the risk of being forced to deliver appreciated stock to close the
position if the borrowed stock is called in, causing a taxable gain to be
recognized. The Fund expects normally to close its short sales against-the-box
by delivering newly-acquired stock. The Fund's ability to utilize short sales
may be limited if proposed tax legislation is enacted. No more than 20% of the
Fund's assets will be subject to short sales at any one time.
LENDING OF PORTFOLIO SECURITIES. The Fund may seek to earn income by lending
portfolio securities to broker-dealers or other institutional borrowers. As with
other extensions of credit there are risks of delay in recovery or even loss of
rights in the securities loaned if the borrower of the securities fails
financially. However, the loans will be made only to organizations deemed by the
Investment Adviser to be sufficiently creditworthy and when, in the judgment of
the Investment Adviser, the consideration which can be earned from securities
loans of this type, net of administrative expenses and any finders fees,
justifies the attendant risk.
-6-
<PAGE>
CERTAIN INVESTMENT POLICIES. The Fund has 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. Among the fundamental restrictions, the Fund may not (a)
borrow money, except as permitted by the Investment Company Act of 1940 (the
"1940 Act"), (b) invest 25% or more of its assets in securities of companies in
any one industry, or (c) with respect to 75% of its total assets, invest more
than 5% of 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. Except with respect to the borrowing restriction, 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.
Except for the investment objective and the fundamental investment
restrictions and policies specifically identified above and enumerated in the
Statement of Additional Information, the policies of the Fund are not
fundamental policies and accordingly may be changed by the Trustees of the Trust
without obtaining the approval of the shareholders of the Fund.
ORGANIZATION OF THE FUND
- --------------------------------------------------------------------------------
THE FUND IS A DIVERSIFIED SERIES OF EATON VANCE SPECIAL INVESTMENT TRUST (THE
"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). Each share represents
an equal proportionate beneficial interest in the Fund. When issued and
outstanding, the shares are fully paid and nonassessable by the Trust and
redeemable as described under "How to Redeem 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 have no preemptive or conversion rights and are freely
transferable. In the event of the liquidation of the Fund, shareholders are
entitled to share pro rata in the net assets of the Fund available for
distribution to shareholders. Eaton Vance may be deemed a control person of the
Fund because as of March 31, 1998 it was the record owner of approximately 70.4%
of Fund shares.
The Fund's investment policies include a fundamental investment provision
allowing the Fund to invest its assets in an open-end management investment
company having substantially the same investment policies and restrictions as
the Fund. This investment company would be advised by the Investment Adviser (or
an affiliate) and pay an advisory fee no higher than the advisory fee paid by
the Fund. The Board of Trustees may implement the new investment policy without
shareholder approval at any time. This structure is commonly referred to as
"master-feeder."
-7-
<PAGE>
MANAGEMENT OF THE FUND
- --------------------------------------------------------------------------------
THE TRUST ENGAGES EATON VANCE MANAGEMENT ("EATON VANCE") AS THE FUND'S
INVESTMENT ADVISER. EATON VANCE, ITS AFFILIATES AND ITS PREDECESSOR COMPANIES
HAVE BEEN MANAGING ASSETS OF INDIVIDUALS AND INSTITUTIONS SINCE 1924 AND
MANAGING INVESTMENT COMPANIES SINCE 1931.
Acting under the general supervision of the Board of Trustees of the Trust,
Eaton Vance manages the Fund's investments and affairs. Eaton Vance also
furnishes for the use of the Fund office space and all necessary office
facilities, equipment and personnel for servicing the investments of the Fund.
Under the investment advisory agreement with the Trust on behalf of the Fund,
Eaton Vance receives a monthly advisory fee of .0625% (equivalent to .75%
annually) of the average daily net assets of the Fund up to $500 million; the
fee will be reduced at various asset levels over $500 million.
For the period from the start of business, January 2, 1997, to December 31,
1997, Eaton Vance reduced its advisory fee and the Fund paid no advisory fees.
Absent the fee reduction, the Fund would have paid Eaton Vance advisory fees
equivalent to 0.75% (annualized) of the Fund's average daily net assets for such
period.
EATON VANCE ACTS AS INVESTMENT ADVISER TO INVESTMENT COMPANIES AND VARIOUS
INDIVIDUAL AND INSTITUTIONAL CLIENTS WITH ASSETS UNDER MANAGEMENT OF
APPROXIMATELY $25 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.
Edward E. Smiley, Jr. has acted as the portfolio manager of the Fund since
it commenced operations. He has been a Vice President of Eaton Vance and BMR
since 1996. Prior to joining Eaton Vance, he was a Senior Product Manager,
Equity Management for TradeStreet Investment Associates, Inc., a wholly-owned
subsidiary of Nations Bank.
Mr. Smiley was a portfolio manager of a mutual fund with his prior
employer. The total return of that fund for the one-year period ended September
19, 1996 and for the entire period during which Mr. Smiley managed the fund was
as follows:
One Year 18.60%
December 10, 1992 (inception of fund)
through September 19, 1996 15.31% (average annual)
The foregoing information is provided to illustrate past performance of Mr.
Smiley in managing a portfolio similar to the Fund. The foregoing information is
considered relevant because the other mutual fund was managed by Mr. Smiley
using substantially the same investment objective, policies and strategies as
those of the Fund. Of course, past performance is not indicative of future
performance and investment returns will fluctuate reflecting market conditions
and changes in company-specific fundamentals of portfolio securities.
Total return of the Fund for the fiscal year ended December 31, 1997 was
19.26%.
-8-
<PAGE>
Eaton Vance places the portfolio securities transactions of the Fund with
many broker-dealer firms and uses its best efforts to obtain execution of such
transactions at prices which are advantageous to the Fund and at reasonably
competitive commission rates. Subject to the foregoing, Eaton Vance may consider
sales of shares of the Fund or of other investment companies sponsored by Eaton
Vance as a factor in the selection of broker-dealer firms to execute portfolio
transactions. The Fund and Eaton Vance have adopted Codes of Ethics relating to
personal securities transactions. The Codes permit Eaton Vance personnel to
invest in securities (including securities that may be purchased or held by the
Fund) for their own accounts, subject to certain pre-clearance, reporting and
other restrictions and procedures contained in such Codes.
The Trust has retained the services of Eaton Vance to act as Administrator
of the Fund. As Administrator, Eaton Vance supervises the overall administration
of the Fund. For these services Eaton Vance currently receives no compensation.
The Trustees of the Trust may determine, in the future, to compensate Eaton
Vance for such services.
Like most mutual funds, the Fund relies on computers in conducting daily
business and processing information. There is a concern that on January 1, 2000
some computer programs will be unable to recognize the new year and as a
consequence computer malfunctions will occur. The Administrator is taking steps
that it believes are reasonably designed to address this potential problem and
to obtain satisfactory assurance from other service providers to the Fund that
they are also taking steps to address the issue. There can, however, be no
assurance that these steps will be sufficient to avoid any adverse impact on the
Fund or its shareholders.
SERVICE PLAN
- --------------------------------------------------------------------------------
In addition to advisory fees and other expenses, the Fund pays service fees
pursuant to a Service Plan (the "Plan") designed to meet the service fee
requirements of the sales charge rule of the National Association of Securities
Dealers, Inc. THE PLAN PROVIDES THAT THE FUND MAY MAKE SERVICE FEE PAYMENTS FOR
PERSONAL SERVICES AND/OR THE MAINTENANCE OF SHAREHOLDER ACCOUNTS TO THE
PRINCIPAL UNDERWRITER, FINANCIAL SERVICE FIRMS ("AUTHORIZED FIRMS") AND OTHER
PERSONS IN AMOUNTS NOT EXCEEDING .25% OF THE FUND'S AVERAGE DAILY NET ASSETS FOR
ANY FISCAL YEAR. The Trustees of the Trust have initially implemented the Plan
by authorizing the Fund to make quarterly service fee payments to the Principal
Underwriter and Authorized Firms in amounts not expected to exceed .25% of the
Fund's average daily net assets for any fiscal year based on the value of Fund
shares sold by such persons and remaining outstanding for at least twelve
months. The Fund began making service fee payments during the quarter ended
March 31, 1998.
VALUING SHARES
- --------------------------------------------------------------------------------
THE FUND VALUES ITS SHARES ONCE ON EACH DAY THE NEW YORK STOCK EXCHANGE (THE
"EXCHANGE") IS OPEN FOR TRADING, as of the close of regular trading on the
Exchange (normally 4:00 p.m. New York time). The Fund's net asset value per
share is determined by its custodian, Investors Bank & Trust Company ("IBT") (as
agent for the Fund), in the manner authorized by the Trustees of the Trust. Net
asset value is computed by dividing the value of the Fund's total assets, less
its liabilities, by the number of Fund shares outstanding. Securities listed on
securities exchanges or in the NASDAQ National Market are valued at closing sale
prices.
-9-
<PAGE>
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).
SHAREHOLDERS MAY DETERMINE THE VALUE OF THEIR INVESTMENT BY MULTIPLYING THE
NUMBER OF FUND SHARES OWNED BY THE CURRENT NET ASSET VALUE PER SHARE.
HOW TO BUY SHARES
- --------------------------------------------------------------------------------
SHARES OF THE FUND MAY BE PURCHASED FOR CASH OR MAY BE ACQUIRED IN EXCHANGE FOR
ACCEPTABLE SECURITIES. Investors may purchase shares of the Fund through
Authorized Firms at the effective public offering price, which price is based on
the effective net asset value per share plus the applicable sales charge. The
Fund receives the net asset value, while the sales charge is divided between the
Authorized Firm and the Principal Underwriter. An Authorized Firm may charge its
customers a fee in connection with transactions executed by that Firm. The Fund
may suspend the offering of shares at any time and may refuse an order for the
purchase of shares.
The sales charge may vary depending on the size of the purchase and the
number of 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, Right of Accumulation, or
various employee benefit plans are available from Authorized Firms or the
Principal Underwriter.
The sales charges and dealer commissions for purchases 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% 3.09% 2.50%
$500,000 but less than $1,000,000......... 2.00% 2.04% 1.75%
$1,000,000 or more........................ 0.00%* 0.00%* See Below**
</TABLE>
* No sales charge is payable at the time of purchase on investments of $1
million or more. A CDSC of 1% will be imposed on such investments in
the event of certain redemptions within 12 months of purchase.
** A commission 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.
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 Principal Underwriter may, from time to time, at its
own expense, provide additional incentives to Authorized Firms which employ
-10-
<PAGE>
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.
An initial investment in the Fund must be at least $1,000. Once an account
has been established the investor may send investments of $50 or more at any
time directly to the Fund's transfer agent (the "Transfer Agent") as follows:
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."
Shares of the Fund may be sold at net asset value to current and retired
Directors and Trustees of Eaton Vance funds; 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,
employees of Authorized Firms and to bank employees who refer customers to
registered representatives of Authorized Firms; to officers and employees of IBT
and the Transfer Agent; and to such persons' spouses and children under the age
of 21 and their beneficial accounts. Shares may also be issued at net asset
value (1) in connection with the merger of an investment company 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 investment 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") ("Eligible Plans")
and "rabbi trusts." The Principal Underwriter may pay commissions to Authorized
Firms who initiate and are responsible for purchases of shares of the Fund by
Eligible Plans of up to 1.00% of the amount invested in such shares.
ACQUIRING FUND SHARES IN EXCHANGE FOR SECURITIES. IBT, as escrow agent, will
receive securities acceptable to Eaton Vance, as Administrator, in exchange for
Fund shares at the applicable public offering price as determined above. 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 per Fund share on the day such
proceeds are received. Eaton Vance will use reasonable efforts to obtain the
then current market price for such securities, but does not guarantee the best
available price. Eaton Vance will absorb any transaction costs, such as
commissions, on the sale of the securities.
Securities determined to be acceptable should be transferred via book entry
or physically delivered, in proper form for transfer, through an Authorized
Firm, together with a completed and signed Letter of Transmittal in approved
form (available from Authorized Firms), as follows:
-11-
<PAGE>
IN THE CASE OF BOOK ENTRY: IN THE CASE OF PHYSICAL DELIVERY:
Deliver through Depository Trust Co. Investors Bank & Trust Company
Broker #2212 Attention: EV Traditional Emerging
Investors Bank & Trust Company Growth Fund
For A/C EV Traditional Emerging Growth Fund Physical Securities Processing
Settlement Area
200 Clarendon Street
Boston, MA 02116
Investors who are contemplating an exchange of securities for shares of the
Fund, 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 Fund
shares may create a taxable gain or loss. Each investor should consult his or
her tax adviser with respect to the particular federal, state and local tax
consequences of exchanging securities for Fund shares.
IF YOU DON'T HAVE AN AUTHORIZED FIRM, EATON VANCE CAN RECOMMEND ONE.
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
A SHAREHOLDER MAY REDEEM FUND 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 Fund share next computed after a redemption request is
received in the proper form as described below.
REDEMPTION BY MAIL: Shares may be 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 Fund, 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.
-12-
<PAGE>
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
received by the Fund or the Principal Underwriter, as the Fund's agent. It is
the Authorized Firm's responsibility to transmit promptly repurchase orders to
Principal Underwriter. Throughout this Prospectus, the word "redemption" is
generally meant to include a repurchase.
Within seven days after receipt of a redemption request in good order by
the Transfer Agent, the Fund will make payment in cash for the net asset value
of the shares as of the date determined above, reduced by the amount of any
federal income tax required to be withheld.
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 Fund 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 Fund
if the cause of the low account balance was a reduction in the net asset value
of Fund shares.
If shares have been purchased at net asset value with no initial sale
charge by virtue of the purchase having been in the amount of $1 million or more
and are redeemed within 12 months of purchase, a CDSC of 1% will be imposed on
such redemption. The CDSC will be imposed on an amount equal to the lesser of
the current market value or the original purchase price of the shares redeemed.
Accordingly, no CDSC will be imposed on increases in account value above the
initial purchase price, including any distributions that have been reinvested in
additional shares. In determining whether a CDSC is applicable to a redemption,
it will be assumed that redemptions are made first from any shares in the
shareholder's account that are not subject to a CDSC. The CDSC will be retained
by the Principal Underwriter.
The CDSC is waived for redemptions involving certain liquidation,
merger or acquisition transactions involving other investment companies. If a
shareholder reinvests redemption proceeds in accordance with the conditions set
forth under "Eaton Vance Shareholder Services -- Reinvestment Privilege," the
shareholder's account will be credited with the amount of any CDSC paid on such
redeemed shares.
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 income 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.
-13-
<PAGE>
THE LIFETIME INVESTING ACCOUNT/DISTRIBUTION OPTIONS
- --------------------------------------------------------------------------------
AFTER AN INVESTOR MAKES AN INITIAL PURCHASE OF FUND SHARES, THE TRANSFER AGENT
WILL SET UP A LIFETIME INVESTING ACCOUNT FOR THE INVESTOR ON THE FUND'S RECORDS.
This account is a complete record of all transactions between the investor and
the Fund, which at all times shows the balance of shares owned. The Fund will
not issue share certificates except upon request.
Each time a transaction takes place in a shareholder's account, the
shareholder will receive a statement showing complete details of the transaction
and the current balance in the account. (Under certain investment plans,
statements may be sent only quarterly.) THE LIFETIME INVESTING ACCOUNT 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 the account number).
THE FOLLOWING DISTRIBUTION OPTIONS WILL BE AVAILABLE TO ALL LIFETIME
INVESTING ACCOUNTS and may be changed as often as desired by written notice to
the Fund's dividend disbursing agent, 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 the federal income tax laws.
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 of the Fund are held in a "street name"
account with an Authorized Firm, all recordkeeping, transaction processing and
payments of distributions relating to the beneficial owner's account will be
performed by the Authorized Firm, and not by the Fund and its Transfer Agent.
-14-
<PAGE>
Since the Fund will have no record of the beneficial owner's transactions, a
beneficial owner should contact the Authorized Firm to purchase, redeem or
exchange shares, to make changes in or give instructions concerning the account,
or to obtain information about the account. The transfer of shares in a "street
name" account to an account with another Authorized Firm or to an account
directly with the Fund involves special procedures and will require the
beneficial owner to obtain historical purchase information about the shares in
the account from the Authorized Firm. Before establishing a "street name"
account with an 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 Class A shares of one or
more other funds in the Eaton Vance Group of Funds and Eaton Vance Cash
Management Fund, Eaton Vance Income Fund of Boston and Eaton Vance Tax Free
Reserves. 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.
Each exchange must involve shares which have a net asset value of at least
$1,000. The exchange privilege may be changed or discontinued without penalty.
Shareholders will be given sixty (60) days' notice prior to any termination or
material amendment of the exchange privilege. The Fund does not permit the
exchange privilege to be used for "Market Timing" and may terminate the exchange
privilege for any shareholder account engaged in Market Timing activity. Any
shareholder account for which more than two round-trip exchanges are made within
any twelve-month period will be deemed to be engaged in Market Timing.
Furthermore, a group of unrelated accounts for which exchanges are entered
contemporaneously by a financial intermediary will be considered to be engaged
in Market Timing.
Shares of the Fund which are subject to a CDSC may be exchanged into any of
the above funds without incurring the CDSC. The shares acquired in an exchange
may be subject to a CDSC upon redemption. For purposes of computing the CDSC
payable upon the redemption of shares acquired in an exchange, the holding
period of the original shares is added to the holding period of the shares
acquired in the exchange.
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.
Shares of certain other funds for which Eaton Vance acts as investment
adviser or administrator may be exchanged for Fund shares on the basis of the
net asset value per share of each fund at the time of the exchange (plus, in the
-15-
<PAGE>
case of an exchange made within six months of the date of purchase of 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). Any such exchange is subject
to any restrictions or qualifications set forth in the current prospectus of any
such fund.
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 Fund, 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.
EATON VANCE SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------
THE FUND OFFERS THE FOLLOWING SERVICES, WHICH ARE VOLUNTARY, INVOLVE NO EXTRA
CHARGE, AND MAY BE CHANGED OR DISCONTINUED WITHOUT PENALTY AT ANY TIME. Full
information on each of the services described below and an application, where
required, are available from Authorized Firms or the Principal Underwriter. The
cost of administering such services for the benefit of shareholders who
participate in them is borne by the Fund as an expense to all shareholders.
INVEST-BY-MAIL -- FOR PERIODIC SHARE ACCUMULATION: Once the $1,000 minimum
investment has been made, checks of $50 or more payable to the order of EV
Traditional Emerging Growth Fund may be mailed directly to the Transfer Agent,
First Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123 at
any time -- whether or not distributions are reinvested. The name of the
shareholder, the Fund 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 the
shareholder's bank account. The $1,000 minimum initial investment and small
account redemption policy are waived for these accounts.
STATEMENT OF INTENTION: Purchases of $100,000 or more made over a 13-month
period are eligible for reduced sales charges. Under a Statement of Intention,
.5% of the dollar amount to be purchased will be held in escrow in the form of
shares registered in the investor's name until the Statement is satisfied or the
13-month period expires. See the Account Application for details.
RIGHT OF ACCUMULATION: Purchases may qualify for reduced sales charges when the
current market value of holdings (shares at current offering price), plus new
purchases, reaches $100,000 or more. 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.
WITHDRAWAL PLAN: A shareholder may draw on shareholdings systematically with
monthly or quarterly checks in an amount specified by the shareholder. A minimum
deposit of $5,000 in shares is required. The maintenance of a withdrawal plan
concurrently with purchases of additional shares would be disadvantageous
because of the sales charge included in such purchases.
-16-
<PAGE>
REINVESTMENT PRIVILEGE: A shareholder who has redeemed shares may reinvest at
net asset value 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 shares of the Fund, or, provided that the shares redeemed have
been held for at least 60 days, in shares of any of the other funds offered by
the Principal Underwriter subject to an initial sales charge, 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 fund
the shares of which are being purchased (or by such fund's transfer agent). The
privilege is also available to shareholders of the funds listed under "The Eaton
Vance Exchange Privilege" who wish to reinvest such redemption proceeds in
shares of the Fund. If a shareholder reinvests redemption proceeds within the
60-day period, the shareholder's account will be credited with the amount of any
CDSC paid on such redeemed shares. To the extent that any shares of the Fund are
sold at a loss and the proceeds are reinvested in shares of the Fund (or other
shares of the Fund are acquired) within the period beginning 30 days before and
ending 30 days after the date of the redemption, some or all of the loss
generally will not be allowed as a tax deduction. Shareholders should consult
their tax advisers concerning the tax consequences of reinvestments.
TAX-SHELTERED RETIREMENT PLANS: Shares of the Fund are available for purchase in
connection with 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
record-keepers and not by the Principal Underwriter. Under all plans,
distributions will be automatically reinvested in additional shares.
DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
DISTRIBUTIONS. The Fund makes distributions of any net investment income at
least annually (usually in December) and any net realized capital gains
(including net short-term capital gains) at least annually. Distributions from
capital gains are made after applying any available capital loss carryovers.
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 for the distribution.
The Fund's net investment income consists of all income accrued on the
Fund's assets, less all actual and accrued expenses of the Fund determined in
accordance with generally accepted accounting principles. The Fund's net
realized capital gains, if any, consist of the net realized capital gains (if
any) allocated to the Fund for tax purposes, after taking into account any
available capital loss carryovers.
TAXES. Distributions by the Fund which are derived from net investment income,
net short-term capital gains and certain foreign exchange gains are taxable to
shareholders as ordinary income, whether received in cash or reinvested in
additional shares of the Fund. Distributions by the Fund of long-term capital
gains are taxable to shareholders as long-term capital gains, whether paid in
cash or reinvested in additional shares of the Fund and regardless of the length
of time Fund shares have been owned by the shareholder.
-17-
<PAGE>
If shares are purchased shortly before the record date of a distribution,
the shareholder will pay the full price for the shares and then receive some
portion of the price back as a taxable distribution. The amount, timing and
character of the Fund's distributions to shareholders may be affected by special
tax rules governing its activities in options, futures and forward foreign
currency exchange transactions or certain other investments. Certain
distributions, if declared by the Fund in October, November or December and paid
the following January, will be taxable to shareholders as if received on
December 31 of the year in which they are declared.
Sales charges paid upon a purchase of Fund shares cannot be taken into
account for purposes of determining gain or loss on a redemption or exchange of
the shares before the 91st day after their purchase to the extent a sales charge
is reduced or eliminated in a subsequent acquisition of shares of the Fund or of
another fund pursuant to the 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.
The Fund intends to qualify as a regulated investment company under the
Code and to satisfy all requirements necessary to avoid paying federal income
taxes on the part of its investment company taxable income (consisting generally
of taxable net investment income and net short-term capital gains) and net
capital gain it distributes to shareholders.
As a regulated investment company under the Code, the Fund does not pay
federal income or excise taxes to the extent that it distributes to shareholders
substantially all of its ordinary income and capital gain net income in
accordance with the timing requirements imposed by the Code.
The Fund will provide its shareholders annually with tax information
notices and Forms 1099 to assist in the preparation of their federal and state
tax returns for the prior calendar year's distributions, proceeds from the
redemption or exchange of Fund shares, and federal income tax (if any) withheld
by the Transfer Agent.
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, THE FUND'S AVERAGE ANNUAL TOTAL RETURN MAY BE ADVERTISED. The
Fund's average annual total return is determined by computing the average annual
percentage change in value of $1,000 invested at the maximum public offering
price (which includes the maximum sales charge) for specified periods, assuming
reinvestment of all distributions. The Fund may also publish annual and
cumulative total return figures from time to time. The Fund may use such total
return figures, together with comparisons with the Consumer Price Index, various
domestic and foreign securities indices and performance studies prepared by
independent organizations, in advertisements and in information furnished to
present or prospective shareholders.
The Fund may also furnish total return calculations based on investments at
various sales charge levels or at net asset value. Any performance data which is
based on the Fund's net asset value per share would be lower if a sales charge
-18-
<PAGE>
were taken into account. 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.
Investors should note that the investment results of the Fund will
fluctuate over time, and any presentation of the Fund's total return for any
prior period should not be considered a representation of what an investment may
earn or what the Fund's total return may be in any future period. The Fund's
investment results are based on many factors, including market conditions, the
composition of the security holdings of the Fund and the operating expenses of
the Fund. Investment results also often reflect the risks associated with the
particular investment objective and policies of the Fund. Among others, these
factors should be considered when comparing the Fund's investment results to
those of other mutual funds and other investment vehicles. If the expenses
related to the operation of the Fund are allocated to Eaton Vance or Eaton Vance
waives its fees, the Fund's performance will be higher.
-19-
<PAGE>
INVESTMENT ADVISER AND
ADMINISTRATOR
Eaton Vance Management
24 Federal Street
Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc. EV TRADITIONAL EMERGING
24 Federal Street GROWTH FUND
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
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, MA 02109
PROSPECTUS
MAY 1, 1998
EV TRADITIONAL EMERGING GROWTH FUND
24 FEDERAL STREET
BOSTON, MA 02110
T-EGP
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL INFORMATION
May 1, 1998
EATON VANCE BALANCED FUND
EATON VANCE GROWTH & INCOME FUND
EATON VANCE SPECIAL EQUITIES FUND
EATON VANCE UTILITIES FUND
24 Federal Street
Boston, Massachusetts 02110
(800) 225-6265
This Statement of Additional Information provides general information
about the Funds listed above and their corresponding Portfolios. This
Statement of Additional Information is sometimes referred to herein as the
"SAI."
TABLE OF CONTENTS
Page
Additional Information About Investment Policies .......................... 1
Investment Restrictions ................................................... 4
Trustees and Officers ..................................................... 6
Investment Adviser and Administrator ...................................... 8
Custodian ................................................................. 11
Services for Accumulation -- Class A Shares ............................... 12
Service for Withdrawal .................................................... 12
Determination of Net Asset Value .......................................... 12
Investment Perf
ormance .................................................... 13
Taxes ..................................................................... 15
Principal Underwriter ..................................................... 17
Service Plan -- Class A Shares ............................................ 18
Distribution Plans -- Class B and Class C Shares .......................... 18
Portfolio Security Transactions ........................................... 20
Other Information ......................................................... 22
Independent Accountants ................................................... 23
Financial Statements ...................................................... 23
Appendix A: Class A Shares ................................................ a-1
Appendix B: Class B Shares ................................................ b-1
Appendix C: Class C Shares ................................................ c-1
Although each Fund offers only its shares of beneficial interest, it is
possible that a Fund (or Class) might become liable for a misstatement or
omission in this Statement of Additional Information regarding another Fund
(or Class) because the Funds use this combined Statement of Additional
Information. The Trustees of the Trust have considered this factor in
approving the use of a combined Statement of Additional Information.
THIS COMBINED STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND
IS AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY THE FUNDS' PROSPECTUS DATED MAY 1, 1998, AS SUPPLEMENTED FROM
TIME TO TIME, WHICH IS INCORPORATED HEREIN BY REFERENCE. THIS COMBINED
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).
This SAI provides information about the Funds and the Portfolios.
Capitalized terms used in this SAI and not otherwise defined have the meanings
given them in the Prospectus. The Funds are subject to the same investment
policies as those of the Portfolios. Each Fund currently seeks to achieve its
objective by investing in its corresponding Portfolio.
ADDITIONAL INFORMATION ABOUT INVESTMENT POLICIES
BALANCED FUND
Balanced Fund is intended to provide an "all-in-one" portfolio for a
sensible approach to asset allocation: stocks for growth; stocks and bonds for
current income; and money market securities, when necessary, to provide
stability. The Investment Adviser believes Balanced Fund offers a way to
participate in the stock market without full exposure to downside
fluctuations. Balanced Portfolio is a flexibly managed account seeking to
provide current income and long-term growth of capital through careful
selection of securities considered to be of high or improving quality. The net
asset value of the classes of Balanced Fund will fluctuate in response to
changes in the value of the securities held by the Portfolio. When the
Portfolio sells securities held by it, it may realize a gain or loss depending
on whether it sells them for more or less than their cost. As in any
investment which fluctuates in value, the management of the Balanced Portfolio
cannot, of course, assure the achievement of the objectives or eliminate risk.
It is believed, however, that through selective diversification and continuous
supervision, the risks of investing will be reduced and the shareholder's
opportunities for rewarding investment results over the long term may be
enhanced.
FOREIGN INVESTMENTS
Because investments in companies whose principal business activities are
located outside of the United States will frequently be denominated in foreign
currencies, and because assets of a Portfolio may temporarily be held in bank
deposits in foreign currencies during the completion of investment programs,
the value of the assets of a Portfolio as measured in U.S. dollars may be
affected favorably or unfavorably by changes in foreign currency exchange
rates and exchange control regulations. A Portfolio may conduct its foreign
currency exchange transactions on a spot (i.e., cash) basis at the spot rate
prevailing in the foreign currency exchange market.
Balanced and Utilities Portfolios may enter into forward foreign currency
exchange contracts. Forward contracts are traded in the interbank market
conducted directly between currency traders (usually large commercial banks)
and their customers. Although a forward contract will minimize the risk of
loss due to a decline in the value of the hedged currency, it also limits any
potential gain which might result should the value of such currency increase.
FUTURES CONTRACTS AND OPTIONS
Utilities and Balanced Portfolios may enter into futures contracts, and
options on futures contracts, traded on an exchange regulated by the CFTC, and
on foreign exchanges if the Investment Adviser determines that trading on each
such foreign exchange does not subject the Portfolios to risks, including
credit and liquidity risks, that are materially greater than the risks
associated with trading on CFTC-regulated exchanges. Transactions in futures
contracts and options thereon (other than purchased options) exposes a
Portfolio to an obligation to another party.
The Utilities Portfolio may only write a put option on a security that it
intends ultimately to acquire for its investment portfolio.
To the extent that a Portfolio enters into futures contracts, options on
futures contracts and options on foreign currencies traded on an exchange
regulated by the Commodity Futures Trading Commission (the "CFTC") 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 investments, after taking into account unrealized
profits and unrealized losses on any contracts the Portfolio has entered into.
RISKS ASSOCIATED WITH DERIVATIVE INSTRUMENTS
Entering into a derivative instrument involves the 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 a Portfolio's exposure to a particular market risk.
Leverage enhances a Portfolio's exposure to the price volatility of derivative
instruments it holds. A Portfolio's success in using derivative instruments to
hedge portfolio assets depends on the degree of price correlation between the
derivative instruments and the hedged asset. Imperfect correlation may be
caused by several factors, including temporary price disparities among the
trading markets for the derivative instrument, the assets underlying the
derivative instrument and the Portfolio's assets. During periods of market
volatility, a commodity exchange may suspend or limit trading in an exchange-
traded derivative instrument, which may make the contract temporarily illiquid
and difficult to price. Commodity exchanges may also establish daily limits on
the amount that the price of a futures contract or futures option can vary
from the previous day's settlement price. Once the daily limit is reached, no
trades may be made that day at a price beyond the limit. This may prevent a
Portfolio from closing out positions and limiting its losses. A Portfolio will
engage in transactions in futures contracts and related options only to the
extent such transactions are consistent with the requirements of the Code for
maintaining the qualification of the corresponding Fund as a regulated
investment company for federal income tax purposes. See "Taxes."
Over-the-counter ("OTC") derivative instruments in which the Utilities
Portfolio may invest 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. The staff of the Commission takes the position that purchased OTC
options, and assets used as cover for written OTC options, are subject to the
Portfolio's 15% limit on illiquid investments. The Portfolio's ability to
terminate OTC derivative instruments may depend on the cooperation of the
counterparties to such contracts. The Portfolio expects to purchase and write
only exchange-traded options until such time as the Investment Adviser
determines that the OTC options market is sufficiently developed and the
Utilities Fund has amended its prospectus so that appropriate disclosure is
furnished to prospective and existing shareholders. For thinly traded
derivative instruments, the only source of price quotations may be the selling
dealer or counterparty.
ASSET COVERAGE REQUIREMENTS
Transactions involving when-issued securities, forward contracts, futures
contracts and options (other than options that a Portfolio has purchased)
expose a Portfolio to an obligation to another party. A Portfolio will not
enter into any such transactions unless it owns either (1) an offsetting
("covered") position in securities or other options, forward contracts or
futures 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 Portfolios 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 a Portfolio's assets
to segregated accounts or to cover could impede portfolio management or the
Portfolio's ability to meet redemption requests or other current obligations.
WRITING COVERED CALL OPTIONS
The Special Investment Portfolio may engage in the writing of call option
contracts on securities which are owned by the Portfolio ("covered call
options") when, in the opinion of the Trustees of the Portfolio, such activity
is advisable and appropriate. The Portfolios do not intend to write a covered
option on any security if after such transaction more than 25% of its net
assets, as measured by the aggregate value of the securities underlying all
covered calls written by the Portfolio, would be subject to such options.
Each of Growth & Income, Special Investment and Utilities Portfolios may
terminate its obligations under a call option by engaging in "closing purchase
transactions." In the event no market for such a transaction exists, Portfolio
would have to exercise its options in order to realize any profit and would
incur transaction costs upon the sale of underlying securities pursuant to the
exercise of put options. Reasons for the absence of a liquid secondary market
on an exchange include the following: (i) there may be insufficient trading
interest in certain options; (ii) restrictions may be imposed by an exchange
on opening transactions or closing transactions or both; (iii) trading halts,
suspensions or other restrictions may be imposed with respect to particular
classes or series of options or underlying securities; (iv) unusual or
unforeseen circumstances may interrupt normal operations on an exchange; (v)
the facilities of an exchange or the Options Clearing Corporation may not at
all times be adequate to handle current trading volume; or (vi) one or more
exchanges could, for economic or other reasons, decide or be compelled at some
future date to discontinue the trading of options (or a particular class or
series of options), in which event the secondary market on that exchange (or
in that class or series of options) would cease to exist, although outstanding
options on that exchange that had been issued by the Options Clearing
Corporation as a result of trades on that exchange would continue to be
exercisable in accordance with their terms.
The writing of options could result in significant increases in the
portfolio turnover rate, especially during periods when market prices of the
underlying securities appreciate.
WHEN-ISSUED SECURITIES
Each Portfolio may purchase debt securities on a when-issued basis; that
is, delivery and payment for the securities normally take place up to 90 days
after the date of the transaction. The payment obligation and the interest
rate that will be received on the securities are fixed at the time the
Portfolio enters into the purchase commitment. Securities purchased on a when-
issued basis are subject to changes in value. Therefore, to the extent that a
Portfolio remains substantially fully invested at the same time that it has
purchased securities on a when-issued basis, there will be greater
fluctuations in the Portfolio's net asset value than if it solely set aside
cash to pay for when-issued securities.
LENDING OF SECURITIES
The Growth & Income, Special Investment and Utilities Portfolios may each
seek to increase their income by lending portfolio securities. Under present
regulatory policies, including those of the Board of Governors of the Federal
Reserve System and the Commission, such loans may be made to member firms of
the New York Stock Exchange and would be required to be secured continuously
by collateral in cash, cash equivalents or U.S. Government securities held by
a Portfolio's custodian and maintained on a current basis at an amount at
least equal to the market value of the securities loaned which will be marked
to market daily. Each Portfolio would have the right to call a loan and obtain
the securities loaned at any time on five days' notice. During the existence
of a loan, a Portfolio will continue to receive the equivalent of the interest
or dividends paid by the issuer on the securities loaned and would also
receive interest on investment of the collateral. The Portfolio would not,
however, have the right to vote any securities having voting rights during the
existence of the loan, but would call the loan in anticipation of an important
vote to be taken among holders of the securities or the giving or withholding
of their consent on a material matter affecting the investment. As with other
extensions of credit there are risks of delay in recovery or even loss of
rights in the securities loan, if the borrower of the securities fails
financially. However, the loans would be made only to organizations deemed by
the Investment Adviser to be of good standing and, when, in its judgment, the
consideration which can be earned from securities loans of this type justifies
the attendant risk. Securities lending involves administration expenses,
including finders' fees. If the Investment Adviser determines to make
securities loans, it is intended that the value of the securities loaned would
not exceed 30% of the Portfolio's total assets. At the present time, the
Trustees of such Portfolios have not made a determination to engage in this
activity, and have no present intention of making such a determination during
the current fiscal year.
LEVERAGE THROUGH BORROWING
Upon trustee approval, the Utilities Portfolio may from time to time
increase its ownership of portfolio securities above the amounts otherwise
possible by borrowing from banks on an unsecured basis at fixed or variable
rates of interest and investing the borrowed funds. The Investment Adviser
currently anticipates that the Utilities Portfolio would incur borrowings for
the purpose of acquiring additional income-producing securities when it is
believed that the interest payable with respect to such borrowings will be
exceeded by (a) the income payable on the securities acquired with such
borrowings or (b) the anticipated total return (a combination of income and
appreciation) on such securities. Such borrowings might be made, for example,
when short-term interest rates fall below the yields available from the
securities acquired with the borrowed funds or the total return anticipated
from such securities.
The Utilities Portfolio is required to maintain asset coverage of at least
300% with respect to such borrowings, which means that the Portfolio may
borrow an amount up to 50% of the value of its net assets (not including such
borrowings). The Portfolio may be required to dispose of securities held by it
on unfavorable terms if market fluctuations or other factors reduce such asset
coverage to less than 300%.
Leveraging will exaggerate any increase or decrease in the market value of
the securities held by the Utilities Portfolio. Money borrowed for leveraging
will be subject to interest costs which may or may not exceed the income from
the securities purchased. The Utilities Portfolio may also be required to
maintain minimum average balances in connection with such borrowing or to pay
a commitment or other fee to maintain a line of credit; either of these
requirements will increase the cost of borrowing over the stated interest
rate. Unless the income and appreciation, if any, on assets acquired with
borrowed funds exceeds the cost of borrowing, the use of leverage will
diminish the investment performance of the Portfolio compared with what it
would have been without leverage.
Successful use of a leveraging strategy depends on the Investment
Adviser's ability to predict correctly interest rates and market movements,
and there is no assurance that a leverage strategy will be successful during
any period in which it is employed. Leverage may be viewed as a speculative
activity.
The ability of the Utilities Portfolio to borrow could be partially or
entirely curtailed in the event that the Credit Control Act of 1969 were to be
invoked and the Federal Reserve Board were to limit or prohibit certain
extensions of credit. This Act empowers the Federal Reserve Board, when
authorized by the President, to regulate directly the costs and allocation of
funds in the credit market.
REPURCHASE AGREEMENTS
The Utilities Portfolio may enter into repurchase agreements with respect
to 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. The Portfolio will treat repurchase agreements maturing in
more than seven days as illiquid.
PORTFOLIO TURNOVER
While it is not the policy of the Portfolios to purchase securities with a
view to short-term profits, the Portfolios will dispose of securities without
regard to the time they have been held if such action seems advisable. The
Balanced Portfolio, Growth & Income Portfolio and the Special Investment
Portfolio anticipate that under normal market conditions, each Portfolio's
annual turnover rate will generally not exceed 100% (excluding turnover of
securities having a maturity of one year or less), although the Growth &
Income and Special Investment Portfolios' annual portfolio turnover rate has
exceeded 100% in the past. The Portfolio turnover rate of the Utilities
Portfolio is likely to exceed 100%, but under normal conditions is not likely
to exceed 250%. A 100% turnover rate could occur if all of the securities held
by a Portfolio are sold and either repurchased or replaced within one year.
High portfolio turnover involves correspondingly greater brokerage commissions
and other transaction costs, which will be borne directly by a Portfolio. It
may also result in the realization of capital gains. See "Portfolio Security
Transactions" for a discussion of the Portfolios' brokerage practices. For the
fiscal years ended December 31, 1997 and 1996, the portfolio turnover rates of
the Balanced Portfolio, Growth & Income Portfolio, Special Investment
Portfolio and Utilities Portfolio were 37% and 64%, 93% and 114%, 156% and 91%
and 169% and 166%, respectively.
INVESTMENT RESTRICTIONS
The following investment restrictions of each Fund are designated as
fundamental policies and as such cannot be changed without the approval of the
holders of a majority of the relevant Fund's outstanding voting securities,
which as used in this SAI means the lesser of (a) 67% of the shares of the
Fund present or represented by proxy at a meeting if the holders of more than
50% of the shares are present or represented at the meeting or (b) more than
50% of the shares of the Fund.
As a matter of fundamental investment policy, a Fund may not:
(1) With respect to 75% of its total assets, invest more than 5% of
its total assets taken at market value in the securities of any one issuer
or in more than 10% of the outstanding voting securities of any one
issuer, except obligations issued or guaranteed by the U.S. Government,
its agencies or instrumentalities and except securities of other
investment companies;
(2) Borrow money or issue senior securities, except as permitted by
the Investment Company Act of 1940;
(3) Purchase securities on margin (but the Fund may obtain such short-
term credits as may be necessary for the clearance of purchases and sales
of securities);
(4) Invest in real estate (although it may purchase and sell
securities which are secured by real estate and securities of companies
which invest or deal in real estate);
(5) Invest in physical commodities or commodity contracts for the
purchase and sale of physical commodities; or
(6) Make loans to any person except by (a) the acquisition of debt
securities and making portfolio investments, (b) entering into repurchase
agreements or (c) lending portfolio securities.
In addition, Balanced Fund may not:
(7) Invest more than 25% of the value of its total assets at the time
of acquisition in any one industry with public utility companies (being
electric utility companies, natural gas producing companies, transmission
companies, telephone companies, and water works companies) being
considered separate industries.
In addition, Growth & Income Fund and Special Equities Fund may not:
(8) Underwrite securities of other issuers; or
(9) Concentrate 25% of more of its assets in any one industry
(provided that there is no limitation with respect to obligations issued
or guaranteed by the U.S. Government or any of its agencies or
instrumentalities).
In addition, Utilities Fund may not:
(10) Underwrite or participate in the marketing of securities of
others, except insofar as it may technically be deemed to be an
underwriter in selling a portfolio security under circumstances which may
require the registration of the same under the Securities Act of 1933; or
(11) Make an investment in any one industry if such investment would
cause investments in such industry to exceed 25% of the Fund's total
assets (taken at market value) except that the Fund will concentrate at
least 25% of its investments in utility stocks (i.e., principally
electric, gas and telephone companies).
Notwithstanding the investment policies and restrictions of a Fund, each
Fund may invest its assets in an open-end management investment company with
substantially the same investment objective, policies and restrictions as the
Fund. For purposes of Restriction (9) above, not more than 25% of the total
assets of the Growth & Income and Special Equities Funds will be concentrated
in any one industry.
The corresponding Portfolio of each Fund has adopted substantially the
same fundamental investment restrictions as the foregoing investment
restrictions; such restrictions cannot be changed without the approval of a
majority of the outstanding voting securities of the corresponding Portfolio.
Each Fund and its corresponding Portfolio have each adopted the following
investment policies which may be changed with respect to a Fund by the
Trustees of the Trust without approval by the Fund's shareholders or with
respect to the Portfolio by the Trustees of the Portfolio with or without the
approval of the Fund or its other investors. As a matter of nonfundamental
policy, none of the Fund nor the Portfolios may:
(a) invest more than 15% of net assets in investments which are not
readily marketable, including restricted securities and repurchase
agreements maturing in more than seven days. Restricted securities for the
purposes of this limitation do not include securities eligible for resale
pursuant to Rule 144A 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;
(b) make short sales of securities or maintain a short position,
unless at all times when a short position is open the Fund or the
Portfolio either owns an equal amount of such securities or owns
securities convertible into or exchangeable for securities of the same
issue as, and equal in amount to, the securities sold short. In the case
of each of Total Return Fund and Portfolio, no more than 25% of its net
assets (taken at current value) may be held as collateral for such sales
at any one time; or
(c) 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 the Portfolio or is a member,
officer, director or trustee of or person interested in 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).
In addition, Balanced Fund and Balanced Portfolio may not:
(d) invest in put or call options or straddles or spreads;
In addition, Special Equities Fund and Special Investment Portfolio
may not:
(e) invest in put or call options, except that the Fund or the
Portfolio is authorized to engage in the writing and sale of call option
contracts and the purchase of call options as described in the Fund's
prospectus and statement of additional information and may invest in
warrants where the grantor thereof is the issuer of the underlying
securities; or
(f) purchase warrants in excess of 2% of net assets, except that if
such warrants are listed on the New York or American Stock Exchanges, the
percentage restriction is 5% of net assets. Any such warrants shall be
valued at the lower of cost or market except that warrants acquired by the
Fund or the Portfolio attached to portfolio securities shall be deemed to
be without value for the purpose of this restriction.
In addition, Growth & Income Fund and Growth & Income Portfolio may
not:
(g) deal with the Trustees of the Trust or the Portfolio, the
Investment Adviser or the Principal Underwriter as principals in making
security purchases or sales. Neither the Trustees nor the Investment
Adviser nor any officer or trustee of the Investment Adviser may make any
profit on any transactions for the Fund or the Portfolio.
In addition, Utilities Fund and Utilities Portfolio may not:
(h) purchase warrants in excess of 5% of its net assets, of which 2%
may be warrants which are not listed on the New York or American Stock
Exchange; or
(i) invest more than 20% of its net assets in the securities of
foreign issuers (with U.S. dollar denominated American Depositary Receipts
and Global Depositary Receipts traded on a U.S. exchange not deemed
foreign securities).
Whenever an investment policy or investment restriction set forth in the
Prospectus or this SAI states a maximum percentage of assets that may be
invested in any security or other asset, or describes a policy regarding
quality standards, such percentage limitation or standard shall be determined
immediately after and as a result of the Fund's or the Portfolio's acquisition
of such security or 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 in securities corresponding to its name as set
forth in the Prospectus. Moreover, each Fund and Portfolio must always be in
compliance with the borrowing policies set forth above and may not invest more
than 15% of net assets in illiquid securities.
TRUSTEES AND OFFICERS
The Trustees and officers of the Trust and the Portfolios are listed
below. Except as indicated, each individual has held the office shown or other
offices in the same company for the last five years. Unless otherwise noted,
the business address of each Trustee and officer is 24 Federal Street, Boston,
Massachusetts 02110, which is also the address of the Investment Adviser, BMR,
a wholly-owned subsidiary of Eaton Vance; of Eaton Vance's parent, Eaton Vance
Corp. ("EVC"); and of BMR's and Eaton Vance's trustee, Eaton Vance, Inc.
("EV"). Eaton Vance and EV are both wholly-owned subsidiaries of EVC. Those
Trustees who are "interested persons" of the Trust or the Portfolios as
defined in the Investment Company Act of 1940 (the "1940 Act"), by virtue of
their affiliation with BMR, Eaton Vance, EVC or EV, are indicated by an
asterisk(*).
TRUSTEES OF THE TRUST AND THE PORTFOLIOS
M. DOZIER GARDNER (64), President of Balanced and Utilities Portfolios;
Trustee of the Trust and Balanced, Special Investment and Utilities
Portfolios*
Vice Chairman of BMR, Eaton Vance, EVC and EV, and Director of EVC and EV.
Director, Trustee and officer of various investment companies managed by
Eaton Vance or BMR.
JAMES B. HAWKES (56), President of the Trust and Growth & Income and Special
Investment Portfolios; Vice President of Balanced and Utilities Portfolios;
Trustee*
President and Chief Executive Officer of BMR, Eaton Vance, EVC and EV, and a
Director of EVC and EV. Director, Trustee and officer of various investment
companies managed by Eaton Vance or BMR. Mr. Hawkes was elected Trustee of
the Trust and Vice President of the Portfolio on June 14, 1993.
DONALD R. DWIGHT (67), Trustee
President of Dwight Partners, Inc. (a corporate relations and communications
company). 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 (63), Trustee
Jacob H. Schiff Professor of Investment Banking, Harvard University Graduate
School of Business Administration; Trustee of the Kubrick Funds (mutual
funds). 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
Chairman of the Board and Chief Executive Officer, 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 (68), 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 PORTFOLIOS
THOMAS E. FAUST, JR. (39), Vice President of Balanced Portfolio
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR. Mr. Faust was elected a Vice
President of the Portfolio on December 13, 1993.
TIMOTHY P. O'BRIEN (43), Vice President of Utilities Portfolio
Vice President of Eaton Vance, BMR and EV since April 25, 1994. Vice
President of Loomis, Sayles & Co. (1986-1994). Mr. O'Brien was elected Vice
President of the Portfolio on June 19, 1995.
DUNCAN W. RICHARDSON (40), Vice President of the Growth & Income Portfolio
Vice President of Eaton Vance and EV and of BMR. Officer of various investment
companies managed by Eaton Vance or BMR.
EDWARD E. SMILEY, JR. (53), Vice President of the Trust and Special Investment
Portfolio
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). Officer of various
investment companies managed by Eaton Vance or BMR. Mr. Smiley was elected
Vice President of the Trust on October 18, 1996.
MICHAEL B. TERRY (55), Vice President of Balanced Portfolio
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
JAMES L. O'CONNOR (53), Treasurer
Vice President of BMR, Eaton Vance 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 and the
Portfolios on June 23, 1997.
JANET E. SANDERS (62), Assistant Treasurer and Assistant Secretary
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
A. JOHN MURPHY (35), Assistant Secretary
Assistant Vice President of BMR, Eaton Vance 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 on
March 27, 1995.
ERIC G. WOODBURY (40), Assistant Secretary
Vice President of Eaton Vance 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
on June 19, 1995.
Messrs. Hayes (Chairman), Reamer and Thorndike are members of the Special
Committee of the Board of Trustees of the Trust and of the Portfolios. The
purpose of the Special Committee is to consider, evaluate and make
recommendations to the full Board of Trustees concerning (i) all contractual
arrangements with service providers to the Funds and the Portfolios, including
investment advisory (Portfolio only), administrative, transfer agency,
custodial and fund accounting and distribution services, and (ii) all other
matters in which Eaton Vance or its affiliates has any actual or potential
conflict of interest with the Funds, the Portfolios or its investors therein.
The Nominating Committee of the Board of Trustees of the Trust and the
Portfolios 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 and its affiliates.
Messrs. Treynor (Chairman) and Dwight are members of the Audit Committee
of the Board of Trustees of the Trust and of the Portfolios. The Audit
Committee's functions include making recommendations to the Trustees regarding
the selection of the independent 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 Portfolios.
Trustees of the Portfolios that are not affiliated with the Investment
Adviser may elect to defer receipt of all or a percentage of their annual fees
in accordance with the terms of a Trustees Deferred Compensation Plan (the
"Trustees" Plan"). Under the Trustees' Plan, an eligible Trustee may elect to
have his deferred fees invested by a Portfolio in the shares of one or more
funds in the Eaton Vance Family of Funds, and the amount paid to the Trustees
under the Trustees' Plan will be determined based upon the performance of such
investments. Deferral of Trustees' fees in accordance with the Trustees' Plan
will have a negligible effect on the Portfolios' assets, liabilities, and net
income per share, and will not obligate the Portfolio to retain the services
of any Trustees or obligate a Portfolio to pay any particular level of
compensation to the Trustees. Neither the Portfolios nor the Trust has a
retirement plan for its Trustees.
The fees and expenses of the noninterested Trustees of the Trust and the
Portfolios are paid by the Funds (and the other series of the Trust) and the
Portfolios, respectively. (The Trustees of the Trust and the Portfolios who
are members of the Eaton Vance organization receive no compensation from the
Trust or the Portfolios). During the fiscal year ended December 31, 1997, the
noninterested Trustees of the Trust and the Portfolios earned the following
compensation in their capacities as Trustees from the Trust, the Portfolios
and the funds in the Eaton Vance fund complex(1):
<TABLE>
<CAPTION>
DONALD R. SAMUEL L. NORTON H. JOHN L. JACK L.
SOURCE OF COMPENSATION DWIGHT(3) HAYES, III(4) REAMER THORNDIKE(5) TREYNOR
- ---------------------- --------- ------------- ---------- ------------- ---------
<S> <C> <C> <C> <C> <C>
Trust(2) $ 3,147 $ 2,894 $ 2,819 $ 2,947 $ 3,166
Balanced Portfolio 3,260 3,449 3,233 3,349 3,526
Growth & Income Portfolio 1,542 1,869 1,694 1,740 1,798
Special Investment Portfolio 1,121 1,483 1,317 1,346 1,375
Utilities Portfolio 3,785 3,932 3,704 3,841 4,055
Trust and Fund Complex 145,000(6) 155,000(7) 145,000 150,000(8) 150,000
</TABLE>
- ----------
(1) As of May 1, 1998, the Eaton Vance fund complex consists of 143 registered
investment companies or series thereof.
(2) The Trust consisted of 6 Funds as of December 31, 1997.
(3) Mr. Dwight received deferred compensation from each Portfolio as follows:
Balanced -- $1,441; Growth & Income -- $682; Special Investment -- $496;
Utilities -- $1,674.
(4) Mr. Hayes received deferred compensation from each Portfolio as follows:
Balanced -- $1,186; Growth & Income -- $643; Special Investment -- $510;
Utilities -- $1,353.
(5) Mr. Thorndike received deferred compensation from each Portfolio as
follows: Balanced -- $3,352; Growth & Income -- $1,741; Special Investment
-- $1,347; Utilities -- $3,844.
(6) Includes $45,000 of deferred compensation.
(7) Includes $38,750 of deferred compensation.
(8) Includes $107,925 of deferred compensation.
INVESTMENT ADVISER AND ADMINISTRATOR
Each Portfolio engages BMR as its investment adviser pursuant to
Investment Advisory Agreements which are substantially the same for each
Portfolio. BMR or Eaton Vance acts as investment adviser to investment
companies and various individual and institutional clients with combined
assets under management of approximately $25 billion.
Eaton Vance, its affiliates and its predecessor companies have been
managing assets of individuals and institutions since 1924 and managing
investment companies since 1931. They maintain a large staff of experienced
fixed-income and equity investment professionals to service the needs of their
clients. The fixed-income division focuses on all kinds of taxable investment-
grade and high-yield securities, tax-exempt investment-grade and high-yield
securities, and U.S. Government securities. The equity division covers stocks
ranging from blue chip to emerging growth companies.
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.
Eaton Vance and its affiliates act as adviser to a family of mutual funds,
and individual and various institutional accounts, including corporations,
hospitals, retirement plans, universities, foundations and trusts. Eaton Vance
mutual funds feature international equities, domestic equities, tax-free
municipal bonds, and U.S. Government and corporate bonds. Lloyd George
Management has advised Eaton Vance's international equity funds since 1992.
Founded in 1991, Lloyd George is headquartered in Hong Kong with offices in
London and Mumbai, India. It has established itself as a leader in investment
management in Asian equities and other global markets. Lloyd George features
an experienced team of investment professionals that began working together in
the mid-1980s. Lloyd George analysts cover East Asia, the India subcontinent,
Russia and Eastern Europe, Latin America, Australia and New Zealand from
offices in Hong Kong, London and Mumbai. Together Eaton Vance and Lloyd George
manage over $21 billion in assets. 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 help you decide when to buy, sell or persevere
with your investments. A professional investment representative can provide
you with tailored financial advice.
BMR manages the investments and affairs of each Portfolio subject to the
supervision of the Portfolio's Board of Trustees. BMR furnishes to the
Portfolios investment research, advice and supervision, furnishes an
investment program and determines what securities will be purchased, held or
sold by each Portfolio and what portion, if any, of the Portfolio's assets
will be held uninvested. Each Investment Advisory Agreement requires BMR to
pay the salaries and fees of all officers and Trustees of the Portfolios who
are members of the BMR organization and all personnel of BMR performing
services relating to research and investment activities. A Portfolio is
responsible for all expenses not expressly stated to be payable by BMR under
its Investment Advisory Agreement, including, without implied limitation, (i)
expenses of maintaining the Portfolio and continuing its existence, (ii)
registration of the Portfolio under the 1940 Act, (iii) commissions, fees and
other expenses connected with the acquisition, holding and disposition of
securities and other investments, (iv) auditing, accounting and legal
expenses, (v) taxes and interest, (vi) governmental fees, (vii) expenses of
issue, sale and redemption of interests in the Portfolio, (viii) expenses of
registering and qualifying the Portfolio and interests in the Portfolio under
federal and state securities laws and of preparing and printing registration
statements or other offering statements or memoranda for such purposes and for
distributing the same to investors, and fees and expenses of registering and
maintaining registrations of the Portfolio and of the Portfolio's placement
agent as broker-dealer or agent under state securities laws, (ix) expenses of
reports and notices to investors and of meetings of investors and proxy
solicitations therefor, (x) expenses of reports to governmental officers and
commissions, (xi) insurance expenses, (xii) association membership dues,
(xiii) fees, expenses and disbursements of custodians and subcustodians for
all services to the Portfolio (including without limitation safekeeping of
funds, securities and other investments, keeping of books, accounts and
records, and determination of net asset values, book capital account balances
and tax capital account balances), (xiv) fees, expenses and disbursements of
transfer agents, dividend disbursing agents, investor servicing agents and
registrars for all services to the Portfolio, (xv) expenses for servicing the
accounts of investors, (xvi) any direct charges to investors approved by the
Trustees of the Portfolio, (xvii) compensation and expenses of Trustees of the
Portfolio who are not members of BMR's organization, and (xviii) such non-
recurring items as may arise, including expenses incurred in connection with
litigation, proceedings and claims and any legal obligation of the Portfolio
to indemnify its Trustees, officers and investors with respect thereto, to the
extent not covered by insurance.
The Utilities Portfolio has agreed to pay BMR under the Investment
Advisory Agreement the following fee rate, which fee has been waived by BMR as
follows:
<TABLE>
<CAPTION>
CURRENT CONTRACTUAL
AVERAGE DAILY NET ASSETS FOR THE MONTH ANNUALIZED FEE RATE ANNUALIZED FEE RATE
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Up to $500 million 0.6500% 0.7500%
$500 million but less than $1 billion 0.6250% 0.6875%
$1 billion but less than $1.5 billion 0.6000% 0.6250%
$1.5 billion but less than $2 billion 0.5500% 0.5625%
$2 billion but less than $3 billion 0.5000% 0.5000%
$3 billion and over 0.4375% 0.4375%
</TABLE>
As at December 31, 1997, the Utilities Portfolio had net assets of
$413,408,899. For the fiscal years ended December 31, 1997, 1996 and 1995, the
Utilities Portfolio paid BMR advisory fees of $2,839,559, $3,690,566 and
$3,772,142, respectively (equivalent to 0.66%, 0.75%, 0.74%, respectively, of
the Utilities Portfolio's average daily net assets for such period).
For a description of the compensation that the Balanced, Growth & Income
and Special Investment Portfolios pay BMR under each Investment Advisory
Agreement, see the Prospectus.
As of December 31, 1997, the Balanced Portfolio had net assets of
$329,707,242. For the fiscal years ended December 31, 1997 and 1996, and the
eleven months ended December 31, 1995, the Balanced Portfolio paid BMR
advisory fees of $1,964,597, $1,794,096 and $1,418,502, respectively
(equivalent to 0.61%, 0.625% and 0.625%, respectively (annualized) of the
Balanced Portfolio's average daily net assets for each such period).
As of December 31, 1997, the Special Investment Portfolio had net assets
of $77,969,089. For the fiscal years ended December 31, 1997, 1996 and 1995,
the Special Investment Portfolio paid BMR advisory fees of $488,529, $477,560
and $435,400, respectively (equivalent to 0.625% of the Special Investment
Portfolio's average daily net assets for each such year).
As at December 31, 1997, the Growth & Income Portfolio had net assets of
$143,347,835. For the fiscal years ended December 31, 1997, 1996 and 1995, the
Growth & Income Portfolio paid BMR advisory fees of $856,583, $706,803 and
$606,215, respectively (equivalent to 0.625% of the Growth & Income
Portfolio's average daily net assets for each such period).
Each Investment Advisory Agreement continues 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 a Portfolio cast in person at a
meeting specifically called for the purpose of voting on such approval and
(ii) by the Board of Trustees of a Portfolio or by vote of a majority of the
outstanding voting securities of a Portfolio. Each Agreement may be terminated
at any time without penalty on sixty (60) days' written notice by the Board of
Trustees of either party, or by vote of the majority of the outstanding voting
securities of a Portfolio, and each Agreement will terminate automatically in
the event of its assignment. Each Agreement provides that BMR may render
services to others. Each Agreement also provides that BMR shall not be liable
for any loss incurred in connection with the performance of its duties, or
action taken or omitted under that Agreement, in the absence of willful
misfeasance, bad faith, gross negligence in the performance of its duties or
by reason of its reckless disregard of its obligations and duties thereunder,
or for any losses sustained in the acquisition, holding or disposition of any
security or other investment.
As indicated in the Prospectus, Eaton Vance serves as Administrator of
each Funds, but currently receives no compensation for providing
administrative services to the Funds. Under its agreements with each Fund,
Eaton Vance has been engaged to administer each Fund's affairs, subject to the
supervision of the Trustees of the Trust, and shall furnish for the use of the
Funds office space and all necessary office facilities, equipment and
personnel for administering the affairs of the Funds.
Each Fund pays all of its own expenses including, without limitation, (i)
expenses of maintaining each Fund and continuing its existence, (ii) its pro
rata share of the Trust's registration under the 1940 Act, (iii) commissions,
fees and other expenses connected with the purchase or sale of securities and
other investments, (iv) auditing, accounting and legal expenses, (v) taxes and
interest, (vi) governmental fees, (vii) expenses of issue, sale, repurchase
and redemption of shares, (viii) expenses of registering and qualifying each
Fund and its shares under federal and state securities laws and of preparing
and printing prospectuses for such purposes and for distributing the same to
shareholders and investors, and fees and expenses of registering and
maintaining registrations of each Fund and of such Fund's principal
underwriter, if any, as broker-dealer or agent under state securities laws,
(ix) expenses of reports and notices to shareholders and of meetings of
shareholders and proxy solicitations therefor, (x) expenses of reports to
governmental officers and commissions, (xi) insurance expenses, (xii)
association membership dues, (xiii) fees, expenses and disbursements of
custodians and subcustodians for all services to each Fund (including without
limitation safekeeping of funds, securities and other investments, keeping of
books and accounts and determination of net asset values), (xiv) fees,
expenses and disbursements of transfer agents, dividend disbursing agents,
shareholder servicing agents and registrars for all services to each Fund,
(xv) expenses for servicing shareholder accounts, (xvi) any direct charges to
shareholders approved by the Trustees of the Trust, (xvii) compensation and
expenses of Trustees of the Trust who are not members of the Eaton Vance
organization, and (xviii) such non-recurring items as may arise, including
expenses incurred in connection with litigation, proceedings and claims and
any legal obligation of the Trust to indemnify its Trustees and officers with
respect thereto, to the extent not covered by insurance.
BMR is a wholly-owned subsidiary of Eaton Vance. Eaton Vance and EV are
both wholly-owned subsidiaries of EVC. BMR and Eaton Vance are both
Massachusetts business trusts, and EV is the trustee of BMR and Eaton Vance.
The Directors of EV are 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, John M. Nelson, Vincent M. O'Reilly and Ralph Z. Sorenson. Mr. Hawkes
is chairman, president and chief executive officer and Mr. Gardner is vice
chairman of EVC, BMR, Eaton Vance and EV. All of the issued and outstanding
shares of Eaton Vance and 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 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 BMR and Eaton Vance who are also
officers or officers and Directors of EVC and EV. As of April 30, 1998,
Messrs. Gardner and Hawkes each owned 24% of such voting trust receipts,
Messrs. Rowland and Faust owned 15% and 13%, respectively, and Messrs. Dynner,
Steul and Whitaker each owned 8%. Messrs. Gardner, Hawkes and Dynner are
officers or Trustees of the Trust and/or the Portfolio and are members of the
EVC, BMR, Eaton Vance and EV organizations. Messrs. Faust, Murphy, O'Brien,
O'Connor, Richardson, Smiley, Terry and Woodbury and Ms. Sanders are officers
of the Trust and/or the Portfolio and are also members of the BMR, Eaton Vance
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 of Lloyd George Management (B.V.I.) Limited, a registered
investment adviser. EVC owns all of the stock of Fulcrum Management, Inc. and
MinVen, Inc., which are engaged in precious metal mining venture investment
and management. BMR, EVC, Eaton Vance 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 Funds
and the Portfolios, 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 Funds or
the Portfolios and such banks.
CUSTODIAN
IBT acts as custodian for the Trust and the Portfolios. IBT has the
custody of all cash and securities representing a Fund's interest in a
Portfolio, has custody of each Portfolio's assets, maintains the general
ledger of each Portfolio and each Fund, and computes the daily net asset value
of interests in each Portfolio and the net asset value of shares of each Fund.
In such capacity it attends to details in connection with the sale, exchange,
substitution, transfer or other dealings with a Portfolio's investments,
receives and disburses all funds and performs various other ministerial duties
upon receipt of proper instructions from the Trust and a Portfolio. 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 for which Eaton Vance acts as adviser or administrator at the time
of purchase. 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. Corfirmation 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 gain
distributions in connection with withdrawal accounts will be credited at net
asset value as of the record date for each distribution. Continued withdrawals
in excess of current income will eventually use up principal, particularly in
a period of declining market prices. 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 Funds and the Portfolios will be closed for business and will not
price their respective shares or interests on the following business holidays:
New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
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
available bid and asked prices on the principal market where the security was
traded. An option is valued at the last sale price as quoted on the principal
exchange or board of trade on which such option or contract is traded or, in
the absence of a sale, at the mean between the last bid and asked prices.
Futures positions on securities or currencies are generally valued at closing
settlement prices. Short-term debt securities with a remaining maturity of 60
days or less are valued at amortized cost. If securities were acquired with a
remaining maturity of more than 60 days, their amortized cost value will be
based on their value on the sixty-first day prior to maturity. Other fixed
income and debt securities, including listed securities and securities for
which price quotations are available, will normally be valued on the basis of
valuations furnished by a pricing service. Securities for which market
quotations are unavailable, including any security the disposition of which is
restricted under the Securities Act of 1933, and other assets will be
appraised at their fair value as determined in good faith by or at the
direction of the Trustees of a Portfolio.
Generally, trading in the foreign securities owned by a Portfolio is
substantially completed each day at various times prior to the close of the
Exchange. The values of these securities used in detemining the net asset
value of a Portfolio's share 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 a Portfolio's net asset value (unless a 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 a 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 a 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 a
percentage equal to a fraction (i) the numerator of which is the value of such
investor's investment in the Portfolio as of the Portfolio Valuation Time on
the prior Portfolio Business Day plus or minus, as the case may be, the amount
of any additions to or withdrawals from the investor's investment in the
Portfolio on the current Portfolio Business Day and (ii) the denominator of
which is the aggregate net asset value of the Portfolio as of the Portfolio
Valuation Time on the prior Portfolio Business Day plus or minus, as the case
may be, the amount of the net additions to or withdrawals from the aggregate
investment in the Portfolio on the current Portfolio Business Day by all
investors in the Portfolio. The percentage so determined will then be applied
to determine the value of the investor's interest in the Portfolio for the
current Portfolio Business Day.
INVESTMENT PERFORMANCE
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 result. The calculation assumes (i) that all distributions are
reinvested at net asset value on the reinvestment dates during the period,
(ii) the deduction of the maximum sales charge from the initial $1,000
purchase order for Class A shares, (iii) a complete redemption of the
investment and, (iv) the deduction of the CDSC at the end of the period. For
information concerning the total return of the Classes of a Fund, see Appendix
A, Appendix B and Appendix C.
For Utilities Portfolio, yield is also computed separately for each Class
of the Fund pursuant to a standardized formula by dividing net investment
income per share earned during a recent thirty-day period by the maximum
offering price (including, if applicable, the maximum sales charge) per share
on the last day of the period and annualizing the resulting figure. Net
investment income per share is calculated from the yields to maturity of all
debt obligations held by the Portfolio based on prescribed methods, reduced by
accrued Fund expenses for the period with the resulting number being divided
by the average daily number of Fund shares outstanding and entitled to receive
distributions during the period. The yield figure does not reflect the
deduction of any CDSC which (if applicable) are imposed on certain redemptions
at the rate set forth under "How to Redeem Shares" in the Prospectus. Yield
calculations assume the current maximum sales charge for Class A shares (if
applicable) set forth under "How to Buy Shares" in the Prospectus. (Actual
yield may be affected by variations in sales charges on investments.) For the
yield of the Classes of the Fund, see Appendix A, Appendix B and Appendix C.
Utilities Fund's yield may be compared to relevant indices, such as the
Consumer Price Index and various domestic securities indices. A Fund's total
return, yield and comparisons with these indices may be used in advertisements
and in information furnished to present or prospective shareholders. In
addition, evaluations of a Fund's performance or rankings or ratings of mutual
funds (which include a Fund) made by independent sources may be used in
advertisements and in information furnished to present or prospective
shareholders. A Fund's performance may differ from that of other investors in
its corresponding Portfolio, including any other investment companies.
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.
Each Fund may provide information to investors concerning the volatility
or beta of the Fund. Beta is a measure of risk which shows a Fund's volatility
relative to the Standard & Poor's 500 Composite Index, an unmanaged index of
common stocks (and a commonly used measure of U.S. stock market performance).
A fund with a beta of 1 would perform exactly like the market index; a beta of
2 would mean its performance was twice as volatile as the index, positive or
negative. Each Fund may also provide information concerning its portfolio
turnover rate and dividend paying record (or the record of issuers in which a
Fund may invest) in information provided to investors. Each Fund may also
provide information on the utilities industry in general and the demand for
utility services.
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 also include a discussion of the nature of stocks, bonds, or
other investments. This information may be used to illustrate the benefits of
long-term investments in common stocks and fixed-income securities. This
diversification is commonly referred to as "asset allocation." Information
about the portfolio allocation, portfolio turnover rate 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 a Fund over various time periods;
and results of diversifying assets among several investments with varying
performance. Information in advertisements and materials furnished to present
and prospective investors may also include quotations (including editorial
comments) and statistics concerning investing in securities, as well as
investing in particular types of securities and the performance of such
securities.
The Trust (or Principal Underwriter) may provide information about Eaton
Vance, its affiliates and other investment advisers to the funds in the Eaton
Vance Family of Funds in sales material or advertisements provided to
investors or prospective investors. Such material or advertisements may also
provide information on the use of investment professionals by such investors.
TAXES
Each series of the Trust is treated as a separate entity for federal
income tax purposes. Each Fund has elected to be treated, has qualified, and
intends to continue to qualify each year as a regulated investment company
("RIC") under the Code. Accordingly, each Fund intends to satisfy certain
requirements relating to sources of its income and diversification of its
assets and to distribute 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. Each Fund
so qualified for its taxable year ended December 31, 1997. Because each Fund
invests its assets in a Portfolio, the Portfolio normally must satisfy the
applicable source of income and diversification requirements in order for each
Fund to also satisfy these requirements. The Portfolio will allocate at least
annually among its investors, including a Fund, the Portfolio's net investment
income, net realized capital gains, and any other items of income, gain, loss,
deduction or credit. The Portfolio will make allocations to a Fund in
accordance with the Code and applicable regulations and will make moneys
available for withdrawal at appropriate times and in sufficient amounts to
enable the Fund to satisfy the tax distribution requirements that apply to the
Fund and that must be satisfied in order to avoid federal income and/or excise
tax on the Fund. For purposes of applying the requirements of the Code
regarding qualification as a RIC, each Fund (i) will be deemed to own its
proportionate share of each of the assets of the corresponding Portfolio and
(ii) will be entitled to the gross income of that Portfolio attributable to
such share.
In order to avoid incurring a federal excise tax obligation, the Code
requires that each Fund distribute (or be deemed to have distributed) by
December 31 of each calendar year at least 98% of its ordinary income (not
including tax-exempt income) for such year, at least 98% of the 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 from the prior year (as previously
computed) that was not paid out during such year and on which the Fund paid no
federal income tax. Under current law, provided that a Fund qualifies as a RIC
and a Portfolio is treated as a partnership for Massachusetts and federal tax
purposes, neither the Fund nor the Portfolio should be liable for any income,
corporate excise or franchise tax in the Commonwealth of Massachusetts.
Each Fund's distributions of net investment income and the excess of net
short-term capital gain over net long-term capital loss and certain foreign
exchange gains earned by its corresponding Portfolio and allocated to the
Fund are taxable to shareholders of the Fund as ordinary income whether
received in cash or reinvested in additional shares. Each Fund's distributions
of the excess of net long-term capital gain over net short-term capital loss
(including any capital loss carried forward from prior years) earned by its
corresponding Portfolio and allocated to the Fund are taxable to shareholders
of the Fund as long-term capital gains, whether received in cash or reinvested
in additional shares, and regardless of the length of time their shares have
been held.
Distributions by a Fund reduce the net asset value of the Fund's shares.
Should a distribution reduce the net asset value below a shareholder's cost
basis, such distribution would be taxable to the shareholder even though, from
an investment standpoint, it may constitute a return of capital. Therefore,
investors should consider the tax implications of buying shares immediately
before a distribution.
A portion of distributions made by a Fund which are derived from dividends
received by its corresponding Portfolio from domestic corporations and
allocated to the Fund may qualify for the dividends-received deduction for
corporations. The dividends-received deduction for corporate shareholders is
reduced to the extent the shares of a Fund with respect to which the dividends
are received are treated as debt-financed under federal income tax law and is
eliminated if the shares are deemed to have been held for less than a minimum
period, generally 46 days. Receipt of certain distributions qualifying for the
deduction may result in reduction of the tax basis of the corporate
shareholder's shares. Distributions eligible for the dividends-received
deduction may give rise to or increase an alternative minimum tax for
corporations.
Any loss realized upon the redemption or exchange of shares of a 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. In addition, all or a portion of a loss realized
on a redemption or other disposition of Fund shares may be disallowed under
"wash sale" rules if other Fund shares are acquired (whether through
reinvestment of dividends or otherwise) within a period beginning 30 days
before and ending 30 days after the date of such redemption or other
disposition. Any disallowed loss will result in an adjustment to the
shareholder's tax basis in some or all of the other shares acquired.
Investments in lower-rated or unrated securities may present special tax
issues for a Portfolio and hence for its corresponding Fund to the extent
actual or anticipated defaults may be more likely with respect to such
securities. Tax rules are not entirely clear about issues such as when a
Portfolio may cease to accrue interest, original issue discount, or market
discount; when and to what extent deductions may be taken for bad debts or
worthless securities; how payments received on obligations in default should
be allocated between principal and income; and whether exchanges of debt
obligations in a workout context are taxable.
A Portfolio's transactions in options, futures contracts and forward
contracts will be subject to special tax rules that may affect the amount,
timing and character of Fund distributions to shareholders. For example,
certain positions held by a Portfolio on the last business day of each taxable
year will be "marked to market" (i.e., treated as if closed out on such day),
and any resulting gain or loss will generally be treated as 60% long-term and
40% short-term capital gain or loss. Certain positions held by a Portfolio
that substantially diminish the Portfolio's risk of loss with respect to other
positions in its portfolio may constitute "straddles," which are subject to
tax rules that may cause deferral of Portfolio losses, adjustments in the
holding period of Portfolio securities, and conversion of short-term capital
losses into long-term capital losses. A Portfolio may make certain elections
to mitigate adverse consequences of these tax rules and may have to limit its
activities in options, futures contracts and forward contracts in order to
enable each Fund to maintain its RIC status for federal income tax purposes.
The Portfolio may be subject to foreign withholding or other foreign taxes
with respect to income (possibly including, in some cases, capital gains) on
certain foreign securities. As it is not expected that more than 50% of the
value 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,
will consist of securities issued by foreign corporations, the Fund will not
be eligible to pass through to shareholders their proportionate share of
foreign taxes paid by the Portfolio and allocated to the Fund, with the result
that shareholders will not include in income, and will not be entitled to take
any foreign tax credits or deductions for, foreign taxes paid by the Portfolio
and allocated to the Fund. However, the Fund may deduct such taxes in
calculating its distributable income earned by the Portfolio and allocated to
the Fund. These taxes may be reduced or eliminated under the terms of an
applicable U.S. income tax treaty. Certain foreign exchange gains and losses
realized by the Portfolio and allocated to the Fund will be treated as
ordinary income and losses. Certain uses of foreign currency and related
options, futures or forward contracts and investment by the Portfolio in the
stock of certain "passive foreign investment companies" may be limited or a
tax election may be made, if available, in order to preserve the Fund's
qualification as a RIC and/or avoid imposition of a tax on the Fund.
Special tax rules apply to Individual Retirement Accounts ("IRAs") and
other retirement plans and shareholders investing through IRAs or such plans
should consult their tax advisers for more information.
Amounts paid by a Fund to individuals and certain other shareholders who
have not provided a Fund with their correct taxpayer identification number
("TIN") and certain certifications required by the Internal Revenue Service
(the "IRS"), as well as shareholders with respect to whom a Fund has received
certain information from the IRS or a broker, may be subject to "backup"
withholding of federal income tax arising from a Fund's taxable dividends and
other distributions as well as the proceeds of redemption transactions
(including repurchases and exchanges), at a rate of 31%. An individual's TIN
is generally his or her social security number.
Non-resident alien individuals, foreign corporations and certain other
foreign entities generally will be subject to a U.S. withholding tax at a rate
of 30% on a Fund's distributions from its ordinary income and the excess of
its net short-term capital gain over its net long-term capital loss, unless
the tax is reduced or eliminated by an applicable tax convention.
Distributions from the excess of a Fund's net long-term capital gain over its
net short-term capital loss received by such shareholders and any gain from
the sale or other disposition of shares of a Fund generally will not be
subject to U.S. federal income taxation, provided that non-resident alien
status has been certified by the shareholder. Different U.S. tax consequences
may arise if: (i) the shareholder is engaged in a trade or business in the
United States; (ii) the shareholder is present in the United States for a
sufficient period of time during a taxable year to be treated as a U.S.
resident (generally 180 days or more); or (iii) the shareholder fails to
provide any required certifications regarding its status as a non-resident
alien investor. Foreign shareholders should consult their tax advisers
regarding the U.S. and foreign tax consequences of an investment in a Fund.
The foregoing discussion does not address the special tax rules applicable
to certain classes of investors, such as IRAs and other retirement plans, tax-
exempt entities, insurance companies and financial institutions. Shareholders
should consult their own tax advisers with respect to special tax rules that
may apply in their particular situations, as well as the state, local, and,
where applicable, foreign tax consequences of investing in a Fund.
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. For the amount paid by the Trust to the
Principal Underwriter for acting as repurchase agent, see Appendix A.
CLASS A SHARES. Class A shares of a 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 or her spouse and their children under the age of twenty-one,
purchasing shares for his, her or their own account, and (ii) a trustee,
guardian 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 or 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 certain Authorized
Firms and to such persons' spouses and children under the age of 21 and their
beneficial accounts.
The Principal Underwriter acts as principal in selling Class A shares
under the 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 is borne by the Principal
Underwriter. The fees and expenses of qualifying and registering and
maintaining qualifications and registrations of a Fund and its shares under
federal and state securities laws are borne by the Fund. The Distribution
Agreement is renewable annually by the Trust's Board of Trustees (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 AND CLASS C SHARES. Under a Distribution Agreement, the Principal
Underwriter acts as principal in selling Class B and Class C 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 a Fund and its shares
under federal and state securities laws are borne by the Fund. In addition,
each Class B and Class C 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 and Class C
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.
SERVICE PLAN -- CLASS A SHARES
The Trust on behalf of each Class A share has adopted a Service Plan (the
"Plan") designed to meet the service fee requirements of the sales charge rule
of the NASD. (Management believes service fee payments are not distribution
expenses governed by Rule 12b-1 under the 1940 Act, but has chosen to have the
Plan approved as if that Rule were applicable.) The following supplements the
discussion of the Plan contained in the Prospectus.
The Plan continues in effect from year to year for so long as such
continuance is approved by a vote of both a majority of (i) the noninterested
Trustees who have no direct or indirect financial interest in the operation of
the Plan or any agreements related to it (the "Plan Trustees") and (ii) all of
the Trustees then in office, cast in person at a meeting (or meetings) called
for the purpose of voting on this Plan. The Plan may be terminated any time by
vote of the Plan Trustees or by a vote of a majority of the outstanding Class
A shares. The Plan was approved by the Trustees, including the Plan Trustees,
on June 23, 1997.
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 herein without approval of the affected shareholders of Class A
shares, and all material amendments of the Plan must also be approved by the
Trustees of the Trust in the manner described above. 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 each Fund and its Class A shareholders. For the service fees paid
under the Plan, see Appendix A.
DISTRIBUTION PLANS -- CLASS B AND CLASS C SHARES
The Trust has adopted Distribution Plans (the "Plans") on behalf of its
Class B and Class C 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 each
Plan, is to compensate the Principal Underwriter for its distribution services
and facilities provided with respect to Class B and Class C shares.
The Plans provide that each Fund will pay sales commissions and
distribution fees to the Principal Underwriter only after and as a result of
the sale of Class B or Class C shares of the Fund. On each sale of Fund shares
(excluding reinvestment of distributions) the Fund will pay the Principal
Underwriter amounts representing (i) sales commissions equal to 5% of Class B
sales and 6.25% of Class C sales 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 Funds respective Class and will
accordingly reduce the Class' net assets upon such accrual, all in accordance
with generally accepted accounting principles. The amount payable on each day
is limited to 1/365 of .75% of a Class's net assets on such day. The level of
a Class' 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 a Class' current
net assets in respect of unknown amounts which may become payable under the
Plans in the future because the standards for accrual of such a liability
under accounting principles have not been satisfied.
The Plans provide 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 Plans since their inception. Payments theretofore paid or
payable under the Plans by the Trust to the Principal Underwriter and CDSCs
theretofore paid or payable to the Principal Underwriter will be subtracted
from such distribution charges; if the result of such subtraction is positive,
a distribution fee (computed at 1% over the prime rate then reported in The
Wall Street Journal) will be computed on such amount and added thereto, with
the resulting sum constituting the amount of outstanding uncovered
distribution charges with respect to such day. The amount of outstanding
uncovered distribution charges of the Principal Underwriter calculated on any
day does not constitute a liability recorded on the financial statements of
the Fund.
The amount of uncovered distribution charges of the Principal Underwriter
at any particular time depends upon various changing factors, including the
level and timing of sales of shares, the nature of such sales (i.e., whether
they result from exchange transactions, reinvestments or from cash sales
through 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 Plans. 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's average daily net assets per annum.
For actual payments made and the outstanding uncovered distribution charges of
the Principal Underwriter, see Appendix B. 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 and service fees
for Class C sales and sales commissions for Class B sales at the time of sale,
it is anticipated that the Eaton Vance organization will profit by reason of
the operation of the Plans through an increase in the Fund's assets (thereby
increasing the advisory fee payable to BMR by the Portfolio) resulting from
sale of Fund shares and through the amounts paid to the Principal Underwriter,
including CDSCs, pursuant to the Plans. The Eaton Vance organization may be
considered to have realized a profit under the Plans if at any point in time
the aggregate amounts theretofore received by the Principal Underwriter
pursuant to the Plans and from CDSCs have exceeded the total expenses
theretofore incurred by such organization in distributing Class B and Class C
shares of the Fund. Total expenses for this purpose will include an allocable
portion of the overhead costs of such organization and its branch offices,
which costs will include without limitation leasing expense, depreciation of
building and equipment, utilities, communication and postage expense,
compensation and benefits of personnel, travel and promotional expense,
stationery and supplies, literature and sales aids, interest expense, data
processing fees, consulting and temporary help costs, insurance, taxes other
than income taxes, legal and auditing expense and other miscellaneous overhead
items. Overhead is calculated and allocated for such purpose by the Eaton
Vance organization in a manner deemed equitable to the Trust.
The Plans continue in effect from year to year 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 Plans
and Distribution Agreements may be terminated at any time by vote of a
majority of the Rule 12b-1 Trustees or by a vote of a majority of the
outstanding voting securities of the applicable Class. The Plans require
quarterly Trustee review of a written report of the amount expended under the
Plans and the purposes for which such expenditures were made. The Plans may
not be amended to increase materially the payments described therein without
approval of the shareholders of the affected Class and the Trustees. So long
as the Plans are in effect, the selection and nomination of the noninterested
Trustees shall be committed to the discretion of such Trustees. Each Plan was
approved by the Trustees, including the 12b-1 Trustees, on June 23, 1997.
The Trustees of the Trust believe that the Plans will be a significant
factor in the expected growth of the Fund's assets, and will result in
increased investment flexibility and advantages which have benefitted and will
continue to benefit the Fund and its Class B and Class C shareholders.
Payments for sales commissions and distribution fees made to the Principal
Underwriter under the Plans will compensate the Principal Underwriter for its
services and expenses in distributing Class B and Class C shares of the Fund.
Service fee payments made to the Principal Underwriter and Authorized Firms
under the Plans 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 Plans are
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 and
Class C shareholders.
PORTFOLIO SECURITY TRANSACTIONS
Decisions concerning the execution of portfolio security transactions of
the Portfolios, including the selection of the market and the broker-dealer
firm, are made by BMR.
BMR places the portfolio security transactions of a Portfolio and of all
other accounts managed by it for execution with many broker-dealer firms. BMR
uses its best efforts to obtain execution of portfolio security transactions
at prices which are advantageous to the relevant Portfolio and (when a
disclosed commission is being charged) at reasonably competitive commission
rates. In seeking such execution, BMR will use its best judgment in evaluating
the terms of a transaction, and will give consideration to various relevant
factors, including without limitation the size and type of the transaction,
the general execution and operational capabilities of the broker-dealer, the
nature and character of the market for the security, the confidentiality,
speed and certainty of effective execution required for the transaction, the
reputation, reliability, experience and financial condition of the broker-
dealer, the value and quality of services rendered by the broker-dealer in
other transactions, and the reasonableness of the commission or spread, if
any. Transactions on United States stock exchanges and other agency
transactions involve the payment by a Portfolio of negotiated brokerage
commissions. Such commissions vary among different broker-dealer firms, and a
particular broker-dealer may charge different commissions according to such
factors as the difficulty and size of the transaction and the volume of
business done with such broker-dealer. Transactions in foreign securities
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 a Portfolio usually includes an undisclosed
dealer markup or markdown. In an underwritten offering the price paid by a
Portfolio includes a disclosed fixed commission or discount retained by the
underwriter or dealer. Although commissions paid on portfolio security
transactions will, in the judgment of BMR, be reasonable in relation to the
value of the services provided, commissions exceeding those which another firm
might charge may be paid to broker-dealers who were selected to execute
transactions on behalf of the Portfolios and BMR's other clients in part for
providing brokerage and research services to BMR.
The following table shows for each of the fiscal years ended December 31,
1997, 1996 and 1995, brokerage commissions paid by each Portfolio:
<TABLE>
<CAPTION>
PORTFOLIO 12/31/97 12/31/96 12/31/95*
- --------- ---------- ---------- ----------
<S> <C> <C> <C>
Balanced ............................................... $ 150,611 $ 214,373 $ 146,171
Growth & Income ........................................ 311,584 360,161 294,955
Special Investment ..................................... 200,452 158,360 152,998
Utilities .............................................. 1,341,755 1,611,869 1,473,872
</TABLE>
- ------------
*For Balanced Portfolio, eleven months ended December 31, 1995.
All of such portfolio security transactions were directed to firms which
provided some research services to BMR or its affiliates (although many of
such firms may have been selected in any particular transaction primarily
because of their execution capabilities), and the amounts of such transactions
for the fiscal years ended December 31, 1997, 1996 and 1995, respectively,
were as follows: Balanced -- $101,577,000, $127,306,565 and $77,448,304;
Growth & Income -- $194,723,039, $186,550,857 and $140,665,403; Special
Investment -- $83,316,207, $70,221,501 and $51,754,919; and Utilities --
$765,570,460, $509,690,960 and $493,598,587.
As authorized in Section 28(e) of the Securities Exchange Act of 1934, a
broker or dealer who executes a portfolio transaction on behalf of the
Portfolio may receive a commission which is in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction if BMR determines in good faith that such compensation was
reasonable in relation to the value of the brokerage and research services
provided. This determination may be made on the basis of either that
particular transaction or on the basis of the overall responsibilities which
BMR and its affiliates have for accounts over which they exercise investment
discretion. In making any such determination, BMR will not attempt to place a
specific dollar value on the brokerage and research services provided or to
determine what portion of the commission should be related to such services.
Brokerage and research services may include advice as to the value of
securities, the advisability of investing in, purchasing, or selling
securities, and the availability of securities or purchasers or sellers of
securities; furnishing analyses and reports concerning issuers, industries,
securities, economic factors and trends, portfolio strategy and the
performance of accounts; and effecting securities transactions and performing
functions incidental thereto (such as clearance and settlement); and the
"Research Services" referred to in the next paragraph.
It is a common practice in the investment advisory industry for the
advisers of investment companies, institutions and other investors to receive
research, statistical and quotation services, data, information and other
services, products and materials which assist such advisers in the performance
of their investment responsibilities ("Research Services") from broker-dealer
firms which execute portfolio transactions for the clients of such advisers
and from third parties with which such broker-dealers have arrangements.
Consistent with this practice, BMR receives Research Services from many
broker-dealer firms with which BMR places the Portfolio transactions and from
third parties with which these broker-dealers have arrangements. These
Research Services include such matters as general economic and market reviews,
industry and company reviews, evaluations of securities and portfolio
strategies and transactions, recommendations as to the purchase and sale of
securities and other portfolio transactions, financial, industry and trade
publications, news and information services, pricing and quotation equipment
and services, and research oriented computer hardware, software, data bases
and services. Any particular Research Service obtained through a broker-dealer
may be used by BMR in connection with client accounts other than those
accounts which pay commissions to such broker-dealer. Any such Research
Service may be broadly useful and of value to BMR in rendering investment
advisory services to all or a significant portion of its clients, or may be
relevant and useful for the management of only one client's account or of a
few clients' accounts, or may be useful for the management of merely a segment
of certain clients' accounts, regardless of whether any such account or
accounts paid commissions to the broker-dealer through which such Research
Service was obtained. The advisory fee paid by each Portfolio is not reduced
because BMR receives such Research Services. BMR evaluates the nature and
quality of the various Research Services obtained through broker-dealer firms
and attempts to allocate sufficient commissions to such firms to ensure the
continued receipt of Research Services which BMR believes are useful or of
value to it in rendering investment advisory services to its clients.
Subject to the requirement that BMR shall use its best efforts to seek to
execute portfolio security transactions at advantageous prices and at
reasonably competitive commission rates. BMR is authorized to consider as a
factor in the selection of any broker-dealer firm with whom portfolio orders
may be placed the fact that such firm has sold or is selling shares of the
Funds or of other investment companies sponsored by BMR or Eaton Vance. This
policy is not inconsistent with a rule of the National Association of
Securities Dealers, Inc. ("NASD"), which rule provides that no firm which is a
member of the NASD shall favor or disfavor the distribution of shares of any
particular investment company or group of investment companies on the basis of
brokerage commissions received or expected by such firm from any source.
Securities considered as investments for the Portfolio may also be
appropriate for other investment accounts managed by BMR or its affiliates.
Whenever decisions are made to buy or sell securities by the Portfolio and one
or more of such other accounts simultaneously, BMR will allocate the security
transactions (including "hot" issues) in a manner which it believes to be
equitable under the circumstances. As a result of such allocations, there may
be instances where a Portfolio will not participate in a transaction that is
allocated among other accounts. If an aggregated order cannot be filled
completely, allocations will generally be made on a pro rata basis. An order
may not be allocated on a pro rata basis where, for example: (i) consideration
is given to portfolio managers who have been instrumental in developing or
negotiating a particular investment; (ii) consideration is given to an account
with specialized investment policies that coincide with the particulars of a
specific investment; (iii) pro rata allocation would result in odd-lot or de
minimis amounts being allocated to a portfolio or other client; or (iv) where
BMR reasonably determines that departure from a pro rata allocation is
advisable. While these aggregation and allocation policies could have a
detrimental effect on the price or amount of the securities available to the
Portfolios from time to time, it is the opinion of the Trustees of the Trust
and the Portfolios that the benefits from the BMR 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. On May 1, 1998, Eaton Vance Investors Fund changed its name
to Eaton Vance Balanced Fund, Eaton Vance Stock Fund changed its name to Eaton
Vance Growth & Income Fund and Eaton Vance Total Return Fund changed its name
to Eaton Vance Utilities Fund. On July 21, 1992, the Trust changed its name
from Eaton Vance Special Equities Fund to Eaton Vance Special Investment
Trust. The Funds were reorganized as Class A shares (formerly EV Traditional
Investors Fund, EV Traditional Special Equities Fund, EV Traditional Stock
Fund and EV Traditional Total Return Fund), Class B shares (formerly EV
Marathon Investors Fund, EV Marathon Special Equities Fund, EV Marathon Stock
Fund and EV Marathon Total Return Fund) and Class C shares (formerly EV
Classic Investors Fund, EV Classic Special Equities Fund, EV Classic Stock
Fund and EV Classic Total Return Fund) of Eaton Vance Special Investment Trust
on January 1, 1998, so information herein prior to such date is for the Funds
when they were separate series of the Trust (or a separate corporation) and
before they became multiple-class funds. Eaton Vance, pursuant to its
agreement with the Trust, controls the use of the words "Eaton Vance" and "EV"
in the Fund's name and may use the words "Eaton Vance" or "EV" in other
connections and for other purposes.
The Declaration of Trust may be amended by the Trustees when authorized by
vote of a majority of the outstanding voting securities of the Trust affected
by the amendment. The Trustees may also amend the Declaration of Trust without
the vote or consent of shareholders to change the name of the Trust or 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 shareholders. (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
liability exceeding its assets, and therefore the shareholder's risk of
personal liability, is extremely remote.
As permitted by Massachusetts law, there will normally be no meetings of
shareholders for the purpose of electing Trustees unless and until such time
as less than a majority of the Trustees of the Trust holding office have been
elected by shareholders. In such an event the Trustees then in office will
call a shareholders' meeting for the election of Trustees. Except for the
foregoing circumstances and unless removed by action of the shareholders in
accordance with the Trust's By-laws, the Trustees shall continue to hold
office and may appoint successor Trustees.
The Trust's By-laws provide that no person shall serve as a Trustee if
shareholders holding two-thirds of the outstanding shares have removed him
from that office either by a written declaration filed with the Trust's
custodian or by votes cast at a meeting called for that purpose. The By-laws
further provide that under certain circumstances the shareholders may call a
meeting to remove a Trustee and that the Trust is required to provide
assistance in communicating with shareholders about such a meeting.
In accordance with the Declaration of Trust of the Portfolio, there will
normally be no meetings of the investors for the purpose of electing Trustees
unless and until such time as less than a majority of the Trustees of the
Portfolio holding office have been elected by investors. In such an event the
Trustees 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.
In connection with telephone redemptions and exchanges, the Trust, the
Principal Underwriter and the Transfer Agent generally will verify personal
account information in order to determine that instructions communicated are
genuine.
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 ACCOUNTANTS
Coopers & Lybrand L.L.P., One Post Office Square, Boston, Massachusetts,
are the independent accountants for the Funds, and the Portfolios, 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 report of independent
accountants for, the Funds and the Portfolios appear in each Fund's most
recent annual report to shareholders and are incorporated by reference into
this SAI. A copy of each annual report accompanies this SAI.
Registrant incorporates by reference the audited financial information for
the fiscal year ended December 31, 1997 for the Funds and Portfolios listed
below, all as previously filed electronically with the Commission.
EV Traditional Investors Fund
Investors Portfolio
(Accession No. 0000950109-98-001814)
EV Traditional Special Equities Fund
Special Investment Portfolio
(Accession No. 0000950109-98-001452)
EV Traditional Stock Fund
Stock Portfolio
(Accession No. 0000950109-98-001819)
EV Traditional Total Return Fund
Total Return Portfolio
(Accession No. 0000950109-98-001844)
<PAGE>
APPENDIX A
CLASS A SHARES
FEES AND EXPENSES
SERVICE PLANS
During the fiscal year ended December 31, 1997, each Fund made service fee
payments under the Plans to the Principal Underwriter as follows: Balanced
Fund -- $258,263; Growth & Income Fund -- $137,160; Special Equities Fund --
$75,782; and Utilities Fund -- $869,009. Of these amounts, the following was
paid to Authorized Firms and the balance of which was retained by the
Principal Underwriter: Balanced Fund -- $143,215; Growth & Income Fund --
$88,453; Special Equities Fund -- $43,304; and Utilities Fund -- $822,982.
PRINCIPAL UNDERWRITER
For the fiscal year ended December 31, 1997, each Fund paid the Principal
Underwriter $2.50 for repurchase transactions handled by it which aggregate as
follows: Balanced Fund -- $1,820; Growth & Income Fund -- $0; Special Equities
Fund -- $0; and Utilitlies Fund -- $8,020.
The following table shows, for the fiscal years ended December 31, 1997,
1996 and 1995, (1) total sales charges paid in connection with sales of Class
B shares, and (2) sales charges paid to the Principal Underwriter (the balance
of which was paid to Authorized Firms).
<TABLE>
<CAPTION>
SALES CHARGES PAID TO
FUND AND FISCAL YEAR ENDED TOTAL SALES CHARGES PRINCIPAL UNDERWRITER
- -------------------------- ------------------- ---------------------
<S> <C> <C>
Balanced Fund
December 31, 1997 $ 99,860 $ 17,650
December 31, 1996 177,591 27,563
December 31, 1995* 147,343 23,018
Growth & Income Fund
December 31, 1997 $ 34,726 $ 5,522
December 31, 1996 23,928 4,468
December 31, 1995 15,447 2,932
Special Equities Fund
December 31, 1997 $ 0 $ 1,361
December 31, 1996 11,071 1,905
December 31, 1995 18,543 2,962
Utilities Fund
December 31, 1997 $ 57,041 $ 10,096
December 31, 1996 65,149 12,115
December 31, 1995 126,340 23,225
</TABLE>
- ----------
*Eleven months ended December 31, 1995.
PERFORMANCE INFORMATION
The tables below indicate the cumulative and average total return on a
hypothetical investment of $1,000 in Class A shares for the periods shown in
each table. The "Value of Initial Investment" reflects the deduction of the
maximum sales charge of 5.75%. Past performance is not indicative of future
results. Investment return and principal value will fluctuate; shares, when
redeemed, may be worth more or less than their original cost.
VALUE OF A $1,000 INVESTMENT -- BALANCED FUND
<TABLE>
<CAPTION>
TOTAL RETURN TOTAL RETURN
EXCLUDING MAXIMUM INCLUDING MAXIMUM
VALUE OF VALUE OF SALES CHARGE SALES CHARGE
INVESTMENT INVESTMENT INITIAL INVESTMENT -------------------------- --------------------------
PERIOD DATE INVESTMENT ON 12/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------------------------- ---------- ---------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
10 Years ended
12/31/97 12/31/87 $943.13 $3,215.77 240.97% 13.05% 221.58% 10.65%
5 Years Ended
12/31/97 12/31/92 $942.45 $1,843.48 95.61% 14.36% 84.35% 13.01%
1 Year Ended
12/31/97 12/31/96 $942.89 $1,146.61 21.60% 21.60% 14.66% 14.66%
</TABLE>
VALUE OF A $1,000 INVESTMENT -- GROWTH & INCOME FUND
<TABLE>
<CAPTION>
TOTAL RETURN TOTAL RETURN
EXCLUDING MAXIMUM INCLUDING MAXIMUM
VALUE OF VALUE OF SALES CHARGE SALES CHARGE
INVESTMENT INVESTMENT INITIAL INVESTMENT -------------------------- -------------------------
PERIOD DATE INVESTMENT ON 12/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------------------------- ---------- ---------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
10 Years Ended
12/31/97 12/31/87 $942.26 $3,809.33 304.29% 14.99% 280.93% 14.31%
5 Years Ended
12/31/97 12/31/92 $942.66 $1,967.62 108.74% 15.86% 96.76% 14.50%
1 Year Ended
12/31/97 12/31/96 $942.33 $1,233.76 30.93% 30.93% 23.38% 23.38%
</TABLE>
VALUE OF A $1,000 INVESTMENT -- SPECIAL EQUITIES FUND
<TABLE>
<CAPTION>
TOTAL RETURN TOTAL RETURN
EXCLUDING MAXIMUM INCLUDING MAXIMUM
VALUE OF VALUE OF SALES CHARGE SALES CHARGE
INVESTMENT INVESTMENT INITIAL INVESTMENT -------------------------- -------------------------
PERIOD DATE INVESTMENT ON 12/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------------------------- ---------- ---------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
10 Years Ended
12/31/97 12/31/87 $943.10 $3,419.94 262.63% 13.75% 241.99% 13.08%
5 Years Ended
12/31/97 12/31/92 $942.35 $1,501.28 59.31% 9.76% 50.13% 8.47%
1 Year Ended
12/31/97 12/31/96 $942.10 $1,075.65 14.18% 14.18% 7.56% 7.56%
</TABLE>
VALUE OF A $1,000 INVESTMENT -- UTILITIES FUND
<TABLE>
<CAPTION>
TOTAL RETURN TOTAL RETURN
EXCLUDING MAXIMUM INCLUDING MAXIMUM
VALUE OF VALUE OF SALES CHARGE SALES CHARGE
INVESTMENT INVESTMENT INITIAL INVESTMENT -------------------------- -------------------------
PERIOD DATE INVESTMENT ON 12/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------------------------- ---------- ---------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
10 Years Ended
12/31/97 12/31/87 $942.25 $2,830.34 200.17% 11.62% 183.03% 10.96%
5 Years Ended
12/31/97 12/31/92 $942.97 $1,435.25 52.26% 8.77% 43.52% 7.49%
1 Year Ended
12/31/97 12/31/96 $942.83 $1,094.35 16.18% 16.18% 9.44% 9.44%
</TABLE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of April 1, 1998, the Trustees and officers of the Trust, as a group,
owned in the aggregate less than 1% of the outstanding shares of each Class A
and of each Fund. As of April 1, 1998, Merrill Lynch, Pierce, Fenner & Smith,
Inc., Jacksonville, FL 32246 was the record owner of 19.6% of the Class A
shares of Utilities Fund, which are held on behalf of its customers who are
the beneficial owners of such shares, and as to which it had voting power
under certain limited circumstances. As of the same date, the Profit Sharing
Retirement Plan of Eaton Vance Management Inc. was the record owner of 5.1% of
the Class A shares of Balanced Fund, which are held on behalf of its customers
who are the beneficial owners of such shares and as to which it had voting
power under certain limited circumstances. To the knowledge of the Trust, no
other person owned of record or beneficially 5% or more of any Fund's
outstanding Class A shares on such date.
<PAGE>
APPENDIX B
CLASS B SHARES
PERFORMANCE INFORMATION
The tables below indicate the cumulative and average annual total return
on a hypothetical investment in shares of $1,000. Total return for the period
prior to January 1, 1998 reflects the total return of the predecessor to Class
B. Total return prior to the Predecessor Fund's commencement of operations
reflects the total return of Class A, adjusted to reflect the Class B sales
charge. The Class A total return has not been adjusted to reflect certain
other expenses (such as distribution and/or service fees). If such adjustments
were made, the Class B total return would be different. Past performance is
not indicative of future results. Investment return and principal value will
fluctuate; shares, when redeemed, may be worth more or less than their
original cost. Information presented with two asterisks (**) includes the
effect of subsidizing expenses. Return would have been lower without
subsidies.
VALUE OF A $1,000 INVESTMENT -- BALANCED FUND
<TABLE>
<CAPTION>
VALUE OF VALUE OF TOTAL RETURN BEFORE TOTAL RETURN AFTER
INVESTMENT INVESTMENT DEDUCTING DEDUCTING
BEFORE DEDUCTING AFTER DEDUCTING THE MAXIMUM CDSC THE MAXIMUM CDSC
INVESTMENT* INVESTMENT AMOUNT OF THE MAXIMUM THE MAXIMUM ------------------------ -----------------------
PERIOD DATE INVESTMENT CDSC ON 12/31/97 CDSC ON 12/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
------------ ---------- ---------- ---------------- ---------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
10 Years
Ended
12/31/97 12/31/87 $1,000 $3,261.50 $3,261.50 226.15% 12.55% 226.15% 12.55%
5 Years
Ended
12/31/97 12/31/92 $1,000 $1,871.05 $1,851.05 87.10% 13.35% 85.10% 13.11%
1 Year
Ended
12/31/97 12/31/96 $1,000 $1,204.33 $1,154.33 20.43% 20.43% 15.43% 15.43%
</TABLE>
- ------------------
*Predecessor Fund commenced operations on November 2, 1993.
VALUE OF A $1,000 INVESTMENT -- GROWTH & INCOME FUND
<TABLE>
<CAPTION>
VALUE OF VALUE OF TOTAL RETURN BEFORE TOTAL RETURN AFTER
INVESTMENT INVESTMENT DEDUCTING DEDUCTING
BEFORE DEDUCTING AFTER DEDUCTING THE MAXIMUM CDSC THE MAXIMUM CDSC
INVESTMENT* INVESTMENT AMOUNT OF THE MAXIMUM THE MAXIMUM ------------------------ -----------------------
PERIOD DATE INVESTMENT CDSC ON 12/31/97 CDSC ON 12/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
------------ ---------- ---------- ---------------- ---------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
10 Years
Ended
12/31/97 12/31/87 $1,000 $3,837.03 $3,837.03 283.70% 14.39% 283.70% 14.39%
5 Years
Ended
12/31/97 12/31/92 $1,000 $1,981.06 $1,961.06 98.11% 14.65% 96.11% 14.42%
1 Year
Ended
12/31/97** 12/31/96 $1,000 $1,294.72 $1,244.72 29.47% 29.47% 24.47% 24.47%
</TABLE>
- ------------------
*Predecessor Fund commenced operations on August 17, 1994.
VALUE OF A $1,000 INVESTMENT -- SPECIAL EQUITIES FUND
<TABLE>
<CAPTION>
VALUE OF VALUE OF TOTAL RETURN BEFORE TOTAL RETURN AFTER
INVESTMENT INVESTMENT DEDUCTING DEDUCTING
BEFORE DEDUCTING AFTER DEDUCTING THE MAXIMUM CDSC THE MAXIMUM CDSC
INVESTMENT* INVESTMENT AMOUNT OF THE MAXIMUM THE MAXIMUM ------------------------ -----------------------
PERIOD DATE INVESTMENT CDSC ON 12/31/97 CDSC ON 12/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
------------ ---------- ---------- ---------------- ---------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
10 Years
Ended
12/31/97 12/31/87 $1,000 $3,266.96 $3,266.96 226.70% 12.57% 226.70% 12.57%
5 Years
Ended
12/31/97 12/31/92 $1,000 $1,435.28 $1,415.28 43.53% 7.49% 41.53% 7.19%
1 Year
Ended
12/31/97** 12/31/96 $1,000 $1,115.90 $1,067.50 11.59% 11.59% 6.75% 6.75%
</TABLE>
- ------------------
*Predecessor Fund commenced operations on August 22, 1994.
VALUE OF A $1,000 INVESTMENT -- UTILITIES FUND
<TABLE>
<CAPTION>
VALUE OF VALUE OF TOTAL RETURN BEFORE TOTAL RETURN AFTER
INVESTMENT INVESTMENT DEDUCTING DEDUCTING
BEFORE DEDUCTING AFTER DEDUCTING THE MAXIMUM CDSC THE MAXIMUM CDSC
INVESTMENT* INVESTMENT AMOUNT OF THE MAXIMUM THE MAXIMUM ------------------------ -----------------------
PERIOD DATE INVESTMENT CDSC ON 12/31/97 CDSC ON 12/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
------------ ---------- ---------- ---------------- ---------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
10 Years
Ended
12/31/97 12/31/87 $1,000 $3,063.71 $3,063.71 206.37% 11.85% 206.37% 11.85%
5 Years
Ended
12/31/97 12/31/92 $1,000 $1,553.98 $1,533.98 55.40% 9.22% 53.40% 8.93%
1 Year
Ended
12/31/97 12/31/96 $1,000 $1,152.72 $1,104.85 15.27% 15.27% 10.48% 10.48%
</TABLE>
- ------------------
*Predecessor Fund commenced operations on November 1, 1993.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of April 1, 1998, the Trustees and officers of the Trust, as a group,
owned in the aggregate less than 1% of the outstanding shares of each Class B
and of each Fund. As of April 1, 1998, Merrill Lynch, Pierce, Fenner & Smith,
Inc., Jacksonville, FL 32246 was the record owner of 16.3%, 15.2%, 21.4% and
18.2% of the Class B shares of Balanced Fund, Growth & Income Fund, Special
Equities Fund and Utilities Fund, respectively, which are held on behalf of
its customers who are the beneficial owners of such shares, and as to which it
had voting power under certain limited circumstances. As of the same date,
Corelink Financial Inc., Concord, CA 94520 and Donaldson Lufkin Jenrette
Securities Corporation Inc., Jersey City, NJ 07303-9998 were the record owners
of 6.7% and 7%, respectively, of the Class B shares of Balanced Fund and
Special Equities Fund, respectively, which are held on behalf of its customers
who are the beneficial owners of such shares and as to which it had voting
power under certain limited circumstances. To the knowledge of the Trust, no
other person owned of record or beneficially 5% or more of any Fund's
outstanding Class B shares on such date.
<PAGE>
APPENDIX C
CLASS C SHARES
PERFORMANCE INFORMATION
The tables below indicate the cumulative and average annual total return
on a hypothetical investment in shares of $1,000. Total return for the period
prior to January 1, 1998 reflects the total return of the predecessor to Class
C. Total return prior to the Predecessor Fund's commencement of operations
reflects the total return of Class B, adjusted to reflect the Class C sales
charge. The Class B total return has not been adjusted to reflect certain
other expenses (such as distribution and/or service fees). If such adjustments
were made, the Class C total return would be different. Past performance is
not indicative of future results. Investment return and principal value will
fluctuate; shares, when redeemed, may be worth more or less than their
original cost. Information presented with two asterisks (**) includes the
effect of subsidizing expenses. Return would have been lower without
subsidies.
VALUE OF A $1,000 INVESTMENT -- BALANCED FUND
<TABLE>
<CAPTION>
VALUE OF VALUE OF TOTAL RETURN BEFORE TOTAL RETURN AFTER
INVESTMENT INVESTMENT DEDUCTING DEDUCTING
BEFORE DEDUCTING AFTER DEDUCTING THE MAXIMUM CDSC THE MAXIMUM CDSC
INVESTMENT* INVESTMENT AMOUNT OF THE MAXIMUM THE MAXIMUM ------------------------ -----------------------
PERIOD DATE INVESTMENT CDSC ON 12/31/97 CDSC ON 12/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
------------ ---------- ---------- ---------------- ---------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
10 Years
Ended
12/31/97 12/31/87 $1,000 $3,179.14 $3,179.14 217.91% 12.26% 217.91% 12.26%
5 Years
Ended
12/31/97 12/31/92 $1,000 $1,823.84 $1,823.84 82.38% 12.77% 82.38% 12.77%
1 Year
Ended
12/31/97 12/31/97 $1,000 $1,197.51 $1,187.51 19.75% 19.75% 18.75% 18.75%
</TABLE>
- ------------------
*Predecessor Fund commenced operations on November 2, 1993.
VALUE OF A $1,000 INVESTMENT -- GROWTH & INCOME FUND
<TABLE>
<CAPTION>
VALUE OF VALUE OF TOTAL RETURN BEFORE TOTAL RETURN AFTER
INVESTMENT INVESTMENT DEDUCTING DEDUCTING
BEFORE DEDUCTING AFTER DEDUCTING THE MAXIMUM CDSC THE MAXIMUM CDSC
INVESTMENT* INVESTMENT AMOUNT OF THE MAXIMUM THE MAXIMUM ------------------------ -----------------------
PERIOD DATE INVESTMENT CDSC ON 12/31/97 CDSC ON 12/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
------------ ---------- ---------- ---------------- ---------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
10 Years
Ended
12/31/97 12/31/87 $1,000 $3,767.35 $3,767.35 276.74% 14.18% 276.74% 14.18%
5 Years
Ended
12/31/97 12/31/92 $1,000 $1,944.97 $1,944.97 94.50% 13.82% 94.50% 13.82%
1 Year
Ended
12/31/97** 12/31/96 $1,000 $1,288.34 $1,278.34 28.83% 28.83% 27.83% 27.83%
</TABLE>
- ------------------
*Predecessor Fund commenced operations on November 4, 1994.
VALUE OF A $1,000 INVESTMENT -- SPECIAL EQUITIES FUND
<TABLE>
<CAPTION>
VALUE OF VALUE OF TOTAL RETURN BEFORE TOTAL RETURN AFTER
INVESTMENT INVESTMENT DEDUCTING DEDUCTING
BEFORE DEDUCTING AFTER DEDUCTING THE MAXIMUM CDSC THE MAXIMUM CDSC
INVESTMENT* INVESTMENT AMOUNT OF THE MAXIMUM THE MAXIMUM ------------------------ -----------------------
PERIOD DATE INVESTMENT CDSC ON 12/31/97 CDSC ON 12/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
------------ ---------- ---------- ---------------- ---------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
10 Years
Ended
12/31/97 12/31/87 $1,000 $3,292.63 $3,292.63 229.26% 12.66% 229.26% 12.66%
5 Years
Ended
12/31/97 12/31/92 $1,000 $1,446.58 $1,446.58 44.66% 7.66% 44.66% 7.66%
1 Year
Ended
12/31/97 12/31/96 $1,000 $1,109.79 $1,102.33 10.98% 10.98% 10.23% 10.23%
</TABLE>
- ------------------
*Predecessor Fund commenced operations on November 17, 1994.
VALUE OF A $1,000 INVESTMENT -- UTILITIES FUND
<TABLE>
<CAPTION>
VALUE OF VALUE OF TOTAL RETURN BEFORE TOTAL RETURN AFTER
INVESTMENT INVESTMENT DEDUCTING DEDUCTING
BEFORE DEDUCTING AFTER DEDUCTING THE MAXIMUM CDSC THE MAXIMUM CDSC
INVESTMENT* INVESTMENT AMOUNT OF THE MAXIMUM THE MAXIMUM ------------------------ -----------------------
PERIOD DATE INVESTMENT CDSC ON 12/31/97 CDSC ON 12/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
------------ ---------- ---------- ---------------- ---------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
10 Years
Ended
12/31/97 12/31/87 $1,000 $3,002.94 $3,002.94 200.29% 11.62% 200.29% 11.62%
5 Years
Ended
12/31/97 12/31/92 $1,000 $1,523.22 $1,523.22 52.32% 8.78% 52.32% 8.78%
1 Year
Ended
12/31/97 12/31/96 $1,000 $1,143.75 $1,133.78 14.38% 14.38% 13.38% 13.38%
</TABLE>
- ------------------
*Predecessor Fund commenced operations on November 1, 1993.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of April 1, 1998, the Trustees and officers of the Trust, as a group,
owned in the aggregate less than 1% of the outstanding shares of each Class C
and of each Fund. In addition, as of the same date, the following
recordowners held the amounts of Class C shares indicated below, which were
held either individually or on behalf of its customers who are the beneficial
owners of such shares, and as to which it had voting power under certain
limited circumstances:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
BALANCED FUND -- Frontier Trust Co. FBO Ameriquest Technologies 401(k) Ambler, PA 13.2%
Savings & Retirement Plan
Merrill Lynch, Pierce, Fenner & Smith, Inc. Jacksonville, FL 10.8%
GROWTH & INCOME Frontier Trust Co. FBO Industrial Information Resources Ambler, PA 27.1%
FUND -- 401(k) Savings & Retirement Plan
Frontier Trust Co. FBO West Florida Pharmacies Inc. Ambler, PA 20.4%
401(k) Savings & Retirement Plan
Frontier Trust Co. FBO Panama Pharmacy Inc. 401(k) Ambler, PA 9.4%
Savings & Retirement Plan
SPECIAL EQUITIES FUND -- Frontier Trust Co. FBO Ameriquest Technologies 401(k) Ambler, PA 67.6%
Savings & Retirement Plan
Frontier Trust Co. FBO MWI Broward Inc. 401(k) Ambler, PA 11.0%
Savings & Retirement Plan
Frontier Trust Co. FBO Silikal North America Inc. Ambler, PA 7.1%
401(k) Savings & Retirement Plan
UTILITIES FUND -- Merrill Lynch, Pierce, Fenner & Smith, Inc. Jacksonville, FL 24.2%
</TABLE>
To the knowledge of the Trust, no other person owned of record or
beneficially 5% or more of any Fund's outstanding Class C shares on such date.
<PAGE>
[LOGO] Investing
EATON VANCE for the
================= 21st
Mutual Funds Century
- -------------------------------------------------------------------------------
Eaton Vance Balanced Fund
Eaton Vance Growth & Income Fund
Eaton Vance Special Equities Fund
Eaton Vance Utilities Fund
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1998
- -------------------------------------------------------------------------------
PORTFOLIO INVESTMENT ADVISER
Boston Management and Research, 24 Federal Street, Boston, MA 02110
ADMINISTRATOR
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 200 Clarendon Street, Boston, MA 02116
TRANSFER AGENT
First Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123
(800) 262-1122
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P., One Post Office Square, Boston, MA 02109
COMBEQSAI 5/1
<PAGE>
PART B
INFORMATION REQUIRED IN STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL INFORMATION
May 1, 1998
EATON VANCE EMERGING MARKETS FUND
24 Federal Street
Boston, Massachusetts 02110
(800) 225-6265
This Statement of Additional Information provides information about Eaton
Vance Emerging Markets Fund (the "Fund") and Emerging Markets Portfolio (the
"Portfolio"). This Statement of Additional Information is sometimes referred
to herein as the "SAI".
- ------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
Additional Information about Investment Policies ....................... 2
Investment Restrictions ................................................ 4
Trustees and Officers .................................................. 6
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 ....................................... 12
Investment Performance ................................................. 13
Taxes .................................................................. 14
Principal Underwriter .................................................. 15
Distribution Plans ..................................................... 16
Portfolio Security Transactions ........................................ 18
Other Information ...................................................... 20
Independent Certified Public Accountants ............................... 21
Financial Statements ................................................... 21
Appendix A: Class A Shares ............................................. a-1
Appendix B: Class B Shares ............................................. b-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 MAY 1, 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 FOR ADDRESS AND
PHONE NUMBER).
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
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.
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. 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 Portfolio may engage in cross-hedging by using
forward contracts in one currency (or basket of currencies) to hedge against
fluctuations in the value of securities denominated in a different currency if
the Adviser determines that there is an established historical pattern or
correlation between the two currencies (or the basket of currencies and the
underlying currency).
OTHER INVESTMENT COMPANIES. The Portfolio reserves the right to invest up
to 10% of its total assets, calculated at the time of purchase, in the
securities of other investment companies unaffiliated with the Adviser or the
Manager that have the characteristics of closed-end investment companies. The
Portfolio will indirectly bear its proportionate share of any management fees
paid by investment companies in which it invests in addition to the advisory
fee paid by the Portfolio. The value of closed-end investment company
securities, which are usually traded on an exchange, is affected by demand for
the securities themselves, independent of the demand for the underlying
portfolio assets, and, accordingly, such securities can trade at a discount
from their net asset values.
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."
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 on futures contracts,
traded on a foreign exchange only if the Adviser determines that trading on
each such foreign exchange does not subject the Portfolio to risks, including
credit and liquidity risks, that are materially greater than the risks
associated with trading on United States CFTC-regulated exchanges.
To the extent that the Portfolio enters into futures contracts, options on
futures contracts and options on foreign currencies traded on an exchange
regulated by the Commodity Futures Trading Commission ("CFTC"), in each case
that are not for bona fide hedging purposes (as defined by the CFTC), the
aggregate initial margin and premiums required to establish these positions
(excluding the amount by which options are "in-the-money") may not exceed 5%
of the liquidation value of the Portfolio's investments, after taking into
account unrealized profits and unrealized losses on any contracts the
Portfolio has entered into.
REPURCHASE AGREEMENTS. 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. 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.
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.
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. (Only
the net obligation of a swap will be covered.) The Portfolio will comply with
Commission guidelines regarding cover for these instruments and, if the
guidelines so require, set aside cash or liquid securities in a segregated
account with its custodian in the prescribed amount. The securities in the
segregated account will be marked to market daily.
Assets used as cover or held in a segregated account maintained by the
Portfolio's custodian cannot be sold while the position requiring coverage or
segregation is outstanding unless they are replaced with other appropriate
assets. As a result, the commitment of a large portion of the Portfolio's
assets to segregated accounts or to cover could impede portfolio management or
the Portfolio's ability to meet redemption requests or other current
obligations.
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 could 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. For the fiscal years
ended December 31, 1997 and December 31, 1996, the Portfolio's turnover rate
was 160% and 125%, respectively. Portfolio turnover in the Portfolio has
exceeded 100% since, given recent market volatility, the manager has found
trading opportunities which have added value to the Portfolio. It is not
currently anticipated that the turnover rate will continue to exceed 100%.
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, net of administrative
expenses and any finders fees, justifies the attendant risk.
INVESTMENT RESTRICTIONS
The Fund and the Portfolio have each adopted the following investment
restrictions which may not be changed without the approval by the holders of a
majority of the outstanding voting securities of the Fund or the Portfolio, as
the case may be, which as used in this SAI means the lesser of (a) 67% or more
of the outstanding voting securities of the Fund or the Portfolio, as the case
may be, present or represented by proxy at a meeting if the holders of more
than 50% of the outstanding voting securities of the Fund or the Portfolio are
present or represented at the meeting or (b) more than 50% of the outstanding
voting securities of the Fund or the Portfolio. Neither the Fund nor the
Portfolio may:
(1) Borrow money or issue senior securities except as permitted by the
Investment Company Act of 1940;
(2) Purchase any securities on margin (but the Fund and the Portfolio may
obtain such short-term credits as may be necessary for the clearance of
purchases and sales of securities);
(3) Underwrite securities of other issuers;
(4) Invest in real estate including interests in real estate limited
partnerships (although it may purchase and sell securities which are secured
by real estate and securities of companies which invest or deal in real
estate) or in commodities or commodity 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 assets in an open-end management investment company with
substantially the same investment objective, policies and restrictions as the
Fund. Notwithstanding the investment policies and restrictions of the
Portfolio, the Portfolio may invest part of its assets in another investment
company consistent with the 1940 Act.
For as long as a feeder fund of the Portfolio has registered shares in
Hong Kong, the Portfolio may not (i) invest more than 10% of its net assets in
the securities of any one issuer or, purchase more than 10% of any class of
security of any one issuer, provided, however, up to 30% of the Portfolio's
net asset value may be invested in Government and public securities of the
same issue; and the Portfolio may invest all of its assets in Government and
other public securities in at least six different issues, (ii) invest more
than 15% of net assets in securities which are not listed or quoted on any
stock exchange, over-the-counter market or other organized securities market
that is open to the international public and on which such securities are
regularly traded (a "Market"), (iii) invest more than 15% of net assets in
warrants and options for non-hedging purposes, (iv) write call options on
Portfolio investments exceeding 25% of its total net asset value in terms of
exercise price, (v) enter into futures contracts on an unhedged basis where
the net total aggregate value of contract prices, whether payable by or to the
Portfolio under all outstanding futures contracts, together with the aggregate
value of holdings under (vi) below exceeds 20% of the net asset value of the
Portfolio, (vi) invest in physical commodities (including gold, silver,
platinum or other bullion) and commodity based investments (other than shares
in companies engaged in producing, processing or trading in commodities) which
value together with the net aggregate value of the holdings described in (v)
above, exceeds 20% of the Portfolio's net asset value, (vii) purchase shares
of other investment companies exceeding 10% of net assets. In addition, the
investment objective of any scheme in which the Portfolio invests must not be
to invest in investments prohibited by this undertaking and where the scheme's
investment objective is to invest primarily in investments which are
restricted by this undertaking, such holdings must not be in contravention of
the relevant limitation, (viii) borrow more than 25% of its net assets
(provided that for the purposes of this paragraph, back to back loans are not
to be categorized as borrowings), (ix) write uncovered options, (x) invest in
real estate (including options, rights or interests therein but excluding
shares in real estate companies), (xi) assume, guarantee, endorse or otherwise
become directly or contingently liable for, or in connection with, any
obligation or indebtedness of any person in respect of borrowed money without
the prior written consent of the custodian of the Portfolio, (xii) engage in
short sales involving a liability to deliver securities exceeding 10% of its
net assets provided that any security which the Portfolio does sell short must
be actively traded on a market, (xiii) subject to paragraph (v) above,
purchase an investment with unlimited liability or (xiv) purchase any nil or
partly-paid securities unless any call thereon could be met in full out of
cash or near cash held by it in the amount of which has not already been taken
into account for the purposes of (ix) above.
The Fund and the Portfolio have each 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 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 65% of total assets in Emerging Market
investments. Moreover, the Fund and Portfolio must always be in compliance
with the borrowing policies set forth above and may not hold more than 15% of
net assets in illiquid securities.
Although permissible under the Fund's investment restrictions, the Fund
has no present intention during the coming fiscal year to: borrow money;
pledge its assets; underwrite securities issued by other persons; or make
loans to other persons.
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 3808 One Exchange Square, Central, Hong Kong. Those Trustees and
officers 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*
Chairman, 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 on November 20, 1995.
EDWARD K.Y. CHEN (53), 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, Asia Satellite Telecommunications Holdings Ltd. and a
Board Member of the Mass Transit Railway Corporation. Member of the
Executive Council of the Hong Kong Government from 1992-1997 and Chairman of
the Consumer Council from 1991-1997.
Address: President's Office, Lingnan College, Tuen Mun, Hong Kong
DONALD R. DWIGHT (67), Trustee
President of Dwight Partners, Inc. (a corporate relations and communications
company). Director or Trustee of various investment companies managed by
Eaton Vance or BMR. Mr. Dwight was elected Trustee of the Portfolio on May
13, 1996.
Address: Clover Mill Lane, Lyme, New Hampshire 03768
SAMUEL L. HAYES, III (63), Trustee
Jacob H. Schiff Professor of Investment Banking, Harvard University Graduate
School of Business Administration; Trustee, Kubrick Funds (mutual funds).
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
Chairman of the Board and Chief Executive Officer -- 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.
Mr. Reamer was elected Trustee of the Portfolio on May 13, 1996.
Address: One International Place, Boston, Massachusetts 02110
JOHN L. THORNDIKE (71), Trustee of the Trust
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 (68), Trustee of the Trust
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 DICKINSON WARD (32), Vice President, Assistant Secretary and Assistant
Treasurer of the Portfolio
Director of LGM and Chief Operating Officer of 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, BMR and EV 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 on October 18, 1996.
JAMES L. O'CONNOR (53), 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, Mr. Dynner 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 and the
Portfolio on June 23, 1997.
JANET E. SANDERS (62), Assistant Treasurer of the Trust 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 BMR, Eaton Vance 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 or BMR. Mr. Murphy was elected Assistant Secretary of the Trust on
March 27, 1995 and of the Portfolio on May 29, 1995.
ERIC G. WOODBURY (40), Assistant Secretary
Vice President of BMR, Eaton Vance 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 and of the Portfolio on May 29, 1995.
Messrs. Hayes (Chairman), Reamer and Thorndike are members of the Special
Committee of the Board of Trustees of the Trust and Messrs. Hayes, Dwight and
Reamer, are members of the Special Committee of the Board of Trustees of the
Portfolio. The purpose of the Special Committee is to consider, evaluate and
make recommendations to the full Board of Trustees concerning (i) all
contractual arrangements with service providers to the Fund and the Portfolio,
including investment advisory (Portfolio only), administrative, transfer
agency, custodial and fund accounting and distribution services, and (ii) all
other matters in which Eaton Vance, the Adviser or its 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 its affiliates.
Messrs. Treynor 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 participates 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.) During the fiscal year ended December 31, 1997, the
noninterested Trustees of the Trust and the Portfolio earned the following
compensation in their capacities as Trustees from the Trust, the Portfolio and
the funds in the Eaton Vance fund complex(1):
<TABLE>
<CAPTION>
EDWARD DONALD R. SAMUEL L. NORTON H. JOHN L. JACK L.
SOURCE OF COMPENSATION K.Y. CHEN DWIGHT HAYES, III REAMER THORNDIKE TREYNOR
- -------------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Trust(2) ............................... $ 0 $ 3,147(3) $ 2,894(4) $ 2,819 $ 2,947(5) $ 3,166
Emerging Markets Portfolio ............. 5,000 35 32 31 33 35
Trust and Fund Complex ................. 21,575 145,000(6) 155,000(7) 145,000 145,000(8) 150,000
- ------------
(1)As of May 1, 1998, the Eaton Vance fund complex consists of 143 registered
investment companies or series thereof.
(2)The Trust consisted of 7 Funds as of December 31, 1997.
(3)Includes $496 deferred compensation.
(4)Includes $510 deferred compensation.
(5)Includes $1,347 deferred compensation.
(6)Includes $45,000 deferred compensation.
(7)Includes $38,750 deferred compensation.
(8)Includes $107,925 deferred compensation.
</TABLE>
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
As of December 31, 1997, the Portfolio had net assets of $18,553,605. For
the fiscal year ended December 31, 1997, absent a fee reduction, the Adviser
would have earned advisory fees of $143,776 (equivalent to 0.75% of the
Portfolio's average daily net assets for such year). To enhance the net income
of the Portfolio, the Adviser made a reduction of its advisory fee in the
amount of $36,117. For the fiscal year ended December 31, 1996, absent a fee
reduction, the Adviser would have earned advisory fees of $62,401 (equivalent
to 0.75% of the Portfolio's average daily net assets for such year). To
enhance the net income of the Portfolio, the Adviser made a reduction of its
advisory fee in the amount of $44,320. For the fiscal year ended December 31,
1995, the Portfolio paid the Adviser advisory fees of $17,297 (equivalent to
0.75% of the Portfolio's average daily net assets for such year).
Eaton Vance is among the oldest mutual fund 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 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 Asian securities markets, and
also those of emerging markets. LGM currently manages portfolios for both
private clients and institutional investors seeking long-term capital growth
and has advised Eaton Vance's international equity funds since 1992. LGM's
core investment team consists of thirteen experienced investment professionals
who have worked together over a number of years successfully managing client
portfolios in non-U.S. stock markets. The team has a unique knowledge of, and
experience with, Asian and emerging markets. LGM analysts cover Asia, the
India subcontinent, Russia and Eastern Europe, Latin America, Australia and
New Zealand from offices in Hong Kong, London and Mumbai. Together, Eaton
Vance and Lloyd George manage over $26 billion in assets. LGM is ultimately
controlled by the Hon. Robert Lloyd George, President and Trustee 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, M.F. Tang, Scobie Dickinson Ward, Pamela Chan,
Adaline Mang-Yee Ko, Peter Bubenzer and Judith Collis. The Hon. Robert Lloyd
George is Chairman and Chief Executive Officer of the Adviser and Mr. Kerr is
Chief Operating 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.
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
Under Eaton Vance's management contract with the Fund and administration
agreement with the Portfolio, Eaton Vance receives a monthly management fee
from the Fund and a monthly administration fee from the Portfolio. Each fee is
computed by applying the annual asset rate applicable to that portion of the
average daily net assets of the Fund or the Portfolio throughout the month in
each Category as indicated below:
ANNUAL
CATEGORY AVERAGE DAILY NET ASSETS ASSET RATE
- -------------------------------------------------------------------------------
1 less than $500 million 0.25%
2 $500 million but less than $1 billion 0.23333
3 $1 billion but less than $1.5 billion 0.21667
4 $1.5 billion but less than $2 billion 0.20
5 $2 billion but less than $3 billion 0.18333
6 $3 billion and over 0.16667
As of December 31, 1997, the Portfolio had net assets of $18,553,605. For
the fiscal year ended December 31, 1997, Eaton Vance earned administration
fees of $47,925 (equivalent to 0.25% of the Portfolio's average daily net
assets for such year). To enhance the net income of the Portfolio, the Adviser
made a reduction of its administration fee in the amount of $17,039. For the
fiscal year ended December 31, 1996, Eaton Vance earned administration fees of
$20,096 (equivalent to 0.25% of the Portfolio's average daily net assets for
such year). To enhance the net income of the Portfolio, Eaton Vance was
allocated expenses related to the operation of the Portfolio in the amount of
$14,221. For the fiscal year ended December 31, 1995, Eaton Vance earned
administration fees of $5,762 (equivalent to 0.25% of the Portfolio's average
daily net assets for such year). To enhance the net income of the Portfolio,
Eaton Vance was allocated expenses related to the operation of the Portfolio
in the amount of $61,361.
For the management fees that the Fund paid to Eaton Vance, see Appendix B.
Eaton Vance's management contract with the Fund and its administration
agreement with the Portfolio 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 each Class under its Rule 12b-1 distribution plan; 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 any 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, John Nelson, Vincent M. O'Reilly 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 April 30, 1998,
Messrs. Gardner and Hawkes each owned 24% of such voting trust receipts,
Messrs. Rowland and Faust, owned 15% and 13%, respectively, and Messrs.
Dynner, Steul and Whitaker each owned 8%. Messrs. Gardner, Hawkes and Dynner
are officers or Trustees of the Trust and the Portfolio 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 the stock of Northeast Properties, Inc., which is
engaged in real estate investment. EVC owns all the stock of Fulcrum
Management, Inc. and MinVen, Inc., which are engaged in precious metal mining
venture investment and management. EVC also owns approximately 21% of the
Class A shares issued by LGM, the parent of the Adviser. 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 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 Trust 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 Trust
and the Portfolio. IBT also provides services in connection with the
preparation of shareholder reports and the electronic filing of such reports
with the Commission.
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.
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. 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. The sales charge on the shares being
purchased will then be at the rate applicable to the aggregate. Shares
purchased (i) by an individual, his or her spouse and their children under the
age of twenty-one, and (ii) by a trustee, guardian or other fiduciary of a
single trust estate or a single fiduciary account, will be combined for the
purpose of determining whether a purchase will qualify for the Right of
Accumulation and if qualifying, the applicable sales charge level.
For any such discount to be made available, at the time of purchase a
purchaser or his or her 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 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 gain
distributions in connection with withdrawal accounts will be credited at net
asset value as of the record date for each distribution. Continued withdrawals
in excess of current income will eventually use up principal, particularly in
a period of declining market prices. 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 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.
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 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 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 may 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 interests in the Portfolio will then be recomputed as the
percentage equal to the 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.
INVESTMENT PERFORMANCE
Average annual total return is determined seperately 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 result. The calculation assumes (i) that all distributions are
reinvested at net asset value on the reinvestment dates during the period,
(ii) the deduction of the maximum sales charge from the initial $1,000
purchase order for Class A shares, (iii) a complete redemption of the
investment and, (iv) the deduction of any Class B CDSC at the end of the
period. For information concerning the total return of the Classes of the
Fund, see Appendix A and Appendix B.
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 material 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 material 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 material furnished to
present and prospective investors may also include quotations (including
editorial comments) and statistics concerning investing in securities, as well
as investing in particular types of securities and the performance of such
securities.
The Trust (or Principal Underwriter) may provide investors with
information on global investing, which may include descriptions, comparisons,
charts and/or illustrations of foreign and domestic equity market
capitalizations; returns obtained by foreign and domestic securities; and the
effects of globally diversifying an investment portfolio (including volatility
analysis and performance information). Such information may be provided for a
variety of countries over varying time periods.
The Trust (or Principal Underwriter) may provide information about Eaton
Vance, its affiliates and other investment advisers to the funds in the Eaton
Vance Family of Funds in sales material or advertisements provided to
investors or prospective investors. Such material or advertisements may also
provide information on the use of investment professionals by such investors.
TAXES
Each series of the Trust is treated as a separate entity for accounting
and tax purposes. The Fund has elected to be treated, has qualified and
intends to continue 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 any federal income or excise tax. The
Fund qualified as a RIC under the Code for its taxable year ended December 31,
1997. 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.
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 on the holding periods of Portfolio securities,
and other changes in the short-term or long-term characterization of capital
gains or 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 qualification 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. 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 taxable dividends actually
received) their pro rata shares of foreign income taxes paid by the Portfolio
and allocated to the Fund even though not actually received, 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 separate category 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 its investment company taxable income.
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
taxable 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.
PRINCIPAL UNDERWRITER
The Trust has authorized the Principal Underwriter to act as its agent in
repurchasing shares at the rate of $2.50 for each repurchase transaction
handled by the Principal Underwriter. For the amount paid by the Trust to the
Principal Underwriter for acting as repurchase agent for Class B shares, see
Appendix B.
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. 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, the 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 shares under
federal and state securities laws are borne by the Fund. 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 the 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 Fund. 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. The Class A 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 was approved by the Trustees, including the Rule
12b-1 Trustees, on June 23, 1997. 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 Class B Plan provides that the Fund will pay sales
commissions and distribution fees to the Principal Underwriter only after and
as a result of the sale of 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 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 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.
Currently, payments of sales commissions and distribution fees and of
service fees may equal 1% of a Class' average daily net assets per annum. For
actual payments made by the Fund and the outstanding uncovered distribution
charges of the Principal Underwriter, see Appendix B. 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 fees payable to Eaton Vance by the Portfolio) resulting
from sale of Fund 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 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 Plan was approved by the
Trustees, including the Rule 12b-1 Trustees, on June 23, 1997.
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 have benefitted and will
continue to benefit the Fund and its Class B shareholders. Payments for sales
commissions and distribution fees made to the Principal Underwriter under the
Plans 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 Plans 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.
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.
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
broker-dealer 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 compensation was
reasonable in relation to the value of the brokerage and research services
provided. This determination may be made on the basis of either that
particular transaction or on the basis of the overall responsibilities which
the Adviser and its affiliates have for accounts over which they exercise
investment discretion. In making any such determination, the Adviser will not
attempt to place a specific dollar value on the brokerage and research
services provided or to determine what portion of the commission should be
related to such services. Brokerage and research services may include advice
as to the value of securities, the advisability of investing in, purchasing,
or selling securities, and the availability of securities or purchasers or
sellers of securities; furnishing analyses and reports concerning issuers,
industries, securities, economic factors and trends, portfolio strategy and
the performance of accounts; and effecting securities transactions and
performing functions incidental thereto (such as clearance and settlement);
and the "Research Services" referred to in the next paragraph.
It is a common practice in the investment advisory industry for the
advisers of investment companies, institutions and other investors to receive
research, statistical and quotation services, data, information and other
services, products and materials which assist such advisers in the performance
of their investment responsibilities ("Research Services") from broker-dealers
which execute portfolio transactions for the clients of such advisers and from
third parties with which such broker-dealers have arrangements. Consistent
with this practice, the Adviser may receive Research Services from broker-
dealer firms with which the Adviser places the portfolio transactions of the
Portfolio and from third parties with which these broker-dealers have
arrangements. These Research Services may include such matters as general
economic and market reviews, industry and company reviews, evaluations of
securities and portfolio strategies and transactions, 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 National Association of Securities Dealers, Inc. (the "NASD"),
which rule provides that no firm which is a member of the NASD shall favor or
disfavor the distribution of shares of any particular investment company or
group of investment companies on the basis of brokerage commissions received
or expected by such firm from any source.
Securities considered as investments for the Portfolio may also be
appropriate for other investment accounts managed by the Adviser or its
affiliates. Whenever decisions are made to buy or sell securities by the
Portfolio and one or more of such other accounts simultaneously, the Adviser
will allocate the security transactions (including "hot" issues) in a manner
which it believes to be equitable under the circumstances. As a result of such
allocations, there may be instances where the Portfolio will not participate
in a transaction that is allocated among other accounts. If an aggregated
order cannot be filled completely, allocations will generally be made on a pro
rata basis. An order may not be allocated on a pro rata basis where, for
example: (i) consideration is given to portfolio managers who have been
instrumental in developing or negotiating a particular investment; (ii)
consideration is given to an account with specialized investment policies that
coincide with the particulars of a specific investment; (iii) pro rata
allocation would result in odd-lot or de minimis amounts being allocated to a
portfolio or other client; or (iv) where the Adviser reasonably determines
that departure from a pro rata allocation is advisable. While these
aggregation and allocation policies could have a detrimental effect on the
price or amount of the securities available to the Portfolio from time to
time, it is the opinion of the Trustees of the Trust and the Portfolio that
the benefits from the Adviser's organization outweigh any disadvantage that
may arise from exposure to simultaneous transactions.
For the fiscal years ended December 31, 1997, 1996 and 1995, the Portfolio
paid brokerage commissions of $248,818, $129,070 and $28,313, respectively,
with respect to portfolio security transactions. Of this amount, approximately
$145,648, $116,154 and $23,739, respectively, was paid in respect of portfolio
security transactions aggregating approximately $25,034,388, $16,622,828 and
$3,720,149, respectively, to firms which provided some Research Services to
the Adviser's organization (although many of such firms may have been selected
in any particular transaction primarily because of their execution
capabilities).
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. On July 21, 1992, the Trust changed its name from Eaton
Vance Special Equities Fund to Eaton Vance Special Investment Trust. The Fund
established multiple classes of shares on January 1, 1998. The operations of
Class B reflect the operations of the Fund prior to such date. Class A is the
successor to the operations of a separate series of the Trust. 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 Declaration of Trust may be amended by the Trustees when authorized by
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 of its
shareholders by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office.
Under Massachusetts law, if certain conditions prevail, shareholders of a
Massachusetts business trust (such as the Trust) could be deemed to have
personal liability for the obligations of the Trust. Numerous investment
companies registered under the 1940 Act have been formed as Massachusetts
business trusts, and management is not aware of an instance where such
liability has been imposed. The Trust's Declaration of Trust contains an
express disclaimer of liability on the part of the Fund shareholders and the
Trust's By-laws provide that the Trust shall assume the defense on behalf of
any Fund shareholders. (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
liability exceeding its assets, and therefore the shareholder's risk of
personal liability, is 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 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.
In connection with telephone redemptions and exchanges, the Trust, the
Principal Underwriter and the Transfer Agent generally will verify personal
account information in order to determine that instructions communicated are
genuine.
The right to redeem can be suspended and the payment of the redemption
price deferred when the Exchange is closed (other than for customary weekend
and holiday closings), during periods when trading on the Exchange is
restricted as determined by the 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' reports
for the Fund and the Portfolio, appear in the Fund's most recent annual report
to shareholders which is incorporated by reference into this SAI. A copy of
the Fund's annual report accompanies this SAI.
Registrant incorporates by reference the audited financial information for
the Fund and the Portfolio for the fiscal year ended December 31, 1997, as
previously filed electronically with the Commission (Accession No.
0000950109-98-001865).
<PAGE>
APPENDIX A: CLASS A SHARES
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return
on a hypothetical investment in shares of $1,000. Total return for the period
prior to January 1, 1998 reflects the total return of the predecessor to Class
A. Total return prior to December 8, 1994 reflects the total return of Class
B, adjusted to reflect the Class A sales charge. The Class B total return has
not been adjusted reflect certain other expenses (such as distribution and/or
service fees). If such adjustments were made the Class A total return would be
different. The Value of Initial Investment reflects the deduction of the
maximum sales charge of 5.75%. Past performance is not indicative of future
results. Investment return and principal value will fluctuate; shares, when
redeemed, may be worth more or less than their original cost. Two asterisks
(**) indicates subsidized expenses. Return would have been lower without
subsidies.
VALUE OF $1,000 INVESTMENT
<TABLE>
<CAPTION>
TOTAL RETURN TOTAL RETURN
EXCLUDING MAXIMUM INCLUDING MAXIMUM
VALUE OF VALUE OF SALES CHARGE SALES CHARGE
INVESTMENT INVESTMENT INITIAL INVESTMENT ---------------------------- ----------------------------
PERIOD DATE INVESTMENT ON 12/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
------ ------ ------- ------ ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of the Fund** 11/30/94* $942.51 $1,200.38 27.36% 8.14% 20.04% 6.09%
1 Year Ended
12/31/97** 12/31/96 $942.42 $ 912.04 (3.18)% (3.18)% (8.80)% (8.80)%
</TABLE>
* Predecessor Fund commenced operations on November 30, 1994.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of March 31, 1998, the Trustees and officers of the Trust, as a group,
owned in the aggregate less than 1% of the outstanding Class A shares of the
Fund. As of March 31, 1998, Merrill Lynch, Pierce, Fenner & Smith, Inc.,
Jacksonville, FL 32246 was the record owner of approximately 9.4% of the
outstanding Class A shares which were held on behalf of its customers who are
beneficial owners of such shares, and as to which it had voting power under
certain limited circumstances. In addition, as of the same date, the Profit
Sharing Retirement Plan and the Savings Plan and Trust of Eaton Vance were the
record owners of 20.8% and 6.0%, respectively, of the Class A shares of the
Fund. To the knowledge of the Trust, no other person owned of record or
beneficially 5% or more of the Fund's outstanding Class A shares as of such
date.
<PAGE>
APPENDIX B: CLASS B SHARES
FEES AND EXPENSES
MANAGER
As of December 31, 1997, the Fund had net assets of $9,074,209. For the
fiscal year ended December 31, 1997, Eaton Vance earned management fees of
$24,909 (equivalent to 0.25% of the fund's average daily net assets for such
year). For the fiscal year ended December 31, 1996, absent a fee reduction,
Eaton Vance would have earned management fees of $10,732 (equivalent to 0.25%
of the Fund's average daily net assets for such year). To enhance the net
income of the Fund, Eaton Vance made a reduction of the full amount of its
management fee and Eaton Vance was allocated a portion of expenses related to
the operation of the Fund in the amount of $7,616. For the fiscal year ended
December 31, 1995, Eaton Vance earned management fees of $2,604 (equivalent to
0.25% of the Fund's average daily net assets for such year.) To enhance the
net income of the Fund, Eaton Vance was allocated expenses in the amount of
$27,937.
DISTRIBUTION PLAN
During the fiscal year ended December 31, 1997, the Principal Underwriter
paid to Authorized Firms sales commissions of $130,131 on sales of Fund
shares. During the same period, the Fund made sales commission payments under
the Plan to the Principal Underwriter aggregating $74,541 and the Principal
Underwriter received approximately $26,000 in CDSCs imposed on early redeeming
shareholders. These sales commissions and CDSC payments reduced uncovered
distribution charges under the Plan. As at December 31, 1997, the outstanding
uncovered distribution charges of the Principal Underwriter calculated under
the Plan amounted to approximately $315,000. During the fiscal year ended
December 31, 1997, the Fund made service fee payments under the Plan
aggregating $14,656, of which $14,626 was paid to Authorized Firms and the
balance of which was retained by the Principal Underwriter.
PRINCIPAL UNDERWRITER
For the fiscal year ended December 31, 1997, the Fund paid the Principal
Underwriter $322.50 for repurchase transactions handled by the Principal
Underwriter.
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return
on a hypothetical investment of $1,000 in Class B shares for the periods shown
in the table. Past performance is not indicative of future results. Investment
return and principal value will fluctuate; shares, when redeemed, may be worth
more or less than their original cost. Information presented with two
asterisks(**) includes the effect of subsidizing expenses. Return would have
been lower without subsidies.
VALUE OF A $1,000 INVESTMENT
<TABLE>
<CAPTION>
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN BEFORE TOTAL RETURN AFTER
DEDUCTING THE DEDUCTING THE DEDUCTING THE DEDUCING THE
MAXIMUM MAXIMUM MAXIMUM CDSC MAXIMUM CDSC**
INVESTMENT INVESTMENT AMOUNT OF CDSC CDSC ------------------------- -------------------------
PERIOD DATE INVESTMENT ON 12/31/97 ON 12/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
---------- ---------- ---------- ------------- ------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of the
Fund** 11/30/94* $1,000 $1,245.11 $1,215.11 21.51% 7.35% 21.51% 6.51%
1 Year Ended
12/31/97** 12/31/96 $1,000 $ 965.16 $ 918.34 (3.48)% (3.48)% (8.17)% (8.17)%
</TABLE>
* Fund commenced operations on November 30, 1994.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of March 31, 1998, the Trustees and officers of the Trust, as a group,
owned in the aggregate less than 1% of the outstanding Class B shares of the
Fund. As of March 31, 1998, Merrill, Lynch, Pierce, Fenner & Smith, Inc.,
Jacksonville, FL 32246 was the record owner of approximately 24.6% of the
outstanding Class B shares which were held on behalf of its customers who are
beneficial owners of such shares, and as to which it had voting power under
certain limited circumstances. To the knowledge of the Trust, no other person
owned of record or beneficially 5% or more of the Fund's outstanding Class B
shares as of such date.
<PAGE>
[LOGO] Investing
EATON VANCE for the
================= 21st
Mutual Funds Century
- -------------------------------------------------------------------------------
EATON VANCE
EMERGING MARKETS FUND
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1998
- -------------------------------------------------------------------------------
SPONSOR AND MANAGER OF EATON VANCE EMERGING MARKETS FUND
Administrator of Emerging Markets Portfolio
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
ADVISER OF EMERGING MARKETS PORTFOLIO
Lloyd George Investment Management (Bermuda) Limited, 3808 One Exchange Square,
Central, Hong Kong
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
INDEPENDENT ACCOUNTANTS
Deloitte & Touche LLP, 125 Summer Street, Boston, MA 02110
EMSAI
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL INFORMATION
May 1, 1998
EATON VANCE GREATER INDIA FUND
24 Federal Street
Boston, Massachusetts 02110
(800) 225-6265
This Statement of Additional Information provides general information
about Eaton Vance Greater India Fund (the "Fund") and South Asia Portfolio
(the "Portfolio"). This Statement of Additional Information is sometimes
referred to herein as the "SAI".
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
Additional Information about Investment Policies .......................... 1
Investment Restrictions ................................................... 3
Trustees and Officers ..................................................... 5
Management of the Fund and the Portfolio .................................. 7
Custodian ................................................................. 10
Services for Accumulation -- Class A Shares ............................... 11
Service for Withdrawal .................................................... 11
Determination of Net Asset Value .......................................... 11
Investment Performance .................................................... 12
Taxes ..................................................................... 13
Principal Underwriter ..................................................... 14
Distribution Plans ........................................................ 15
Portfolio Security Transactions ........................................... 17
Other Information ......................................................... 19
Independent Certified Public Accountants .................................. 20
Financial Statements ...................................................... 20
Appendix A -- Class A Shares .............................................. a-1
Appendix B -- Class B Shares .............................................. b-1
Appendix C -- Country Information ......................................... c-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 MAY 1, 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
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.
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. 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 Portfolio may engage in cross-hedging by using
forward contracts in one currency (or basket of currencies) to hedge against
fluctuations in the value of securities denominated in a different currency if
the Adviser determines that there is an established historical pattern of
correlation between the two currencies (or the basket of currencies and the
underlying currency).
OTHER INVESTMENT COMPANIES. The Portfolio reserves the right to invest up to
10% of its total assets, calculated at the time of purchase, in the securities
of other investment companies unaffiliated with the Adviser or the Manager
that have the characteristics of closed-end investment companies. The
Portfolio will indirectly bear its proportionate share of any management fees
paid by investment companies in which it invests in addition to the advisory
fee paid by the Portfolio. The value of closed-end investment company
securities, which are usually traded on an exchange, is affected by demand for
the securities themselves, independent of the demand for the underlying
portfolio assets and, accordingly, such securities can trade at a discount
from their net asset values.
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."
LIMITATIONS ON FUTURES CONTRACTS AND 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 on
futures contracts, traded on a foreign exchange, only if the Adviser
determines that trading on each such foreign exchange does not subject the
Portfolio to risks, including credit and liquidity risks, that are materially
greater than the risks associated with trading on United States CFTC-regulated
exchanges.
To the extent that the Portfolio enters into futures contracts, options on
futures contracts and options on foreign currencies traded on an exchange
regulated by the Commodity Futures Trading Commission ("CFTC"), in each case
that are not for bona fide hedging purposes (as defined by the CFTC), the
aggregate initial margin and premiums required to establish these positions
(excluding the amount by which options are "in-the-money") may not exceed 5%
of the liquidation value of the Portfolio's investments, after taking into
account unrealized profits and unrealized losses on any contracts the
Portfolio has entered into.
REPURCHASE AGREEMENTS. 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. 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.
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,
anyfluctuations 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.
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. (Only
the net obligation of a swap will be covered.) The Portfolio will comply with
Commission guidelines regarding cover for these instruments and, if the
guidelines so require, set aside cash or liquid securities in a segregated
account with its custodian in the prescribed amount. The securities in the
segregated account will be marked to market daily.
Assets used as cover or held in a segregated account maintained by the
Portfolio's custodian cannot be sold while the position requiring coverage or
segregation is outstanding unless they are replaced with other appropriate
assets. As a result, the commitment of a large portion of the Portfolio's
assets to segregated accounts or to cover could impede portfolio management or
the Portfolio's ability to meet redemption requests or other current
obligations.
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 could 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. For the fiscal years
ended December 31, 1997 and December 31, 1996, the Portfolio's turnover rate
was 48% and 46%, respectively.
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 withholding 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, net of administrative
expenses and any finders fees, justifies the attendant risk.
INVESTMENT RESTRICTIONS
The Fund and the Portfolio have each adopted the following investment
restrictions which may not be changed without the approval by the holders of a
majority of the outstanding voting securities of the Fund or the Portfolio, as
the case may be, which as used in this SAI means the lesser of (a) 67% or more
of the outstanding voting securities of the Fund or the Portfolio, as the case
may be, present or represented by proxy at a meeting if the holders of more
than 50% of the outstanding voting securities of the Fund or the Portfolio are
present or represented at the meeting or (b) more than 50% of the outstanding
voting securities of the Fund or the Portfolio. Neither the Fund nor the
Portfolio may:
(1) Borrow money or issue senior securities except as permitted by the
Investment Company Act of 1940.
(2) Purchase any securities on margin (but the Fund and the Portfolio may
obtain such short-term credits as may be necessary for the clearance of
purchases and sales of securities).
(3) Underwrite securities of other issuers.
(4) Invest in real estate including interests in real estate limited
partnerships (although it may purchase and sell securities which are secured
by real estate and securities of companies which invest or deal in real
estate) or in commodities or commodity 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.
(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 assets in an open-end management investment company with
substantially the same investment objective, policies and restrictions as the
Fund. Notwithstanding the investment policies and restrictions of the
Portfolio, the Portfolio may invest part of its assets in another investment
company consistent with the 1940 Act.
For as long as a feeder fund of the Portfolio has registered shares in
Hong Kong, the Portfolio may not (i) invest more than 10% of its net assets in
the securities of any one issuer or, purchase more than 10% of any class of
security of any one issuer, provided, however, up to 30% of the Portfolio's
net asset value may be invested in Government and public securities of the
same issue; and the Portfolio may invest all of its assets in Government and
other public securities in at least six different issues, (ii) invest more
than 15% of net assets in securities which are not listed or quoted on any
stock exchange, over-the-counter market or other organized securities market
that is open to the international public and on which such securities are
regularly traded (a "Market"), (iii) invest more than 15% of net assets in
warrants and options for non-hedging purposes, (iv) write call options on
Portfolio investments exceeding 25% of its total net asset value in terms of
exercise price, (v) enter into futures contracts on an unhedged basis where
the net total aggregate value of contract prices, whether payable by or to the
Portfolio under all outstanding futures contracts, together with the aggregate
value of holdings under (vi) below exceeds 20% of the net asset value of the
Portfolio, (vi) invest in physical commodities (including gold, silver,
platinum or other bullion) and commodity based investments (other than shares
in companies engaged in producing, processing or trading in commodities) which
value together with the net aggregate value of the holdings described in (v)
above, exceeds 20% of the Portfolio's net asset value, (vii) purchase shares
of other investment companies exceeding 10% of net assets. In addition, the
investment objective of any scheme in which the Portfolio invests must not be
to invest in investments prohibited by this undertaking and where the scheme's
investment objective is to invest primarily in investments which are
restricted by this undertaking, such holdings must not be in contravention of
the relevant limitation, (viii) borrow more than 25% of its net assets
(provided that for the purposes of this paragraph, back to back loans are not
to be categorized as borrowings), (ix) write uncovered options, (x) invest in
real estate (including options, rights or interests therein but excluding
shares in real estate companies), (xi) assume, guarantee, endorse or otherwise
become directly or contingently liable for, or in connection with, any
obligation or indebtedness of any person in respect of borrowed money without
the prior written consent of the custodian of the Portfolio, (xii) engage in
short sales involving a liability to deliver securities exceeding 10% of its
net assets provided that any security which the Portfolio does sell short must
be actively traded on a market, (xiii) subject to paragraph (v) above,
purchase an investment with unlimited liability or (xiv) purchase any nil or
partly-paid securities unless any call thereon could be met in full out of
cash or near cash held by it in the amount of which has not already been taken
into account for the purposes of (ix) above.
The Fund and the Portfolio have each 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 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 65% of total assets in Greater India
investments. Moreover, the Fund and Portfolio must always be in compliance
with the borrowing policies set forth above and may not hold more than 15% of
net assets in illiquid securities.
Although permissible under the Fund's investment restrictions, the Fund
has no present intention during the coming fiscal year to: borrow money;
pledge its assets; underwrite securities issued by other persons; or make
loans to other persons.
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 3808 One Exchange Square, Central, Hong Kong. Those Trustees who
are "interested persons" of the Trust or the Portfolio as defined in the 1940
Act 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*
Chairman, 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 and 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 a 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.
EDWARD K.Y. CHEN (53), 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, Asia Satellite Telecommunications Holdings Ltd. and a
Board Member of the Mass Transit Railway Corporation. Member of the
Executive Council of the Hong Kong Government from 1992-1997 and Chairman of
the Consumer Council from 1991-1997.
Address: President's Office, Lingnan College, Tuen Mun, Hong Kong
DONALD R. DWIGHT (67), Trustee
President of Dwight Partners, Inc. (a corporate relations and communications
company). Director or Trustee of various investment companies managed by
Eaton Vance or BMR. Mr. Dwight was elected Trustee of the Portfolio on May
13, 1996.
Address: Clover Mill Lane, Lyme, New Hampshire 03768
SAMUEL L. HAYES, III (63), Trustee
Jacob H. Schiff Professor of Investment Banking, Harvard University Graduate
School of Business Administration; Trustee, Kubrick Funds (mutual funds).
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
Chairman and Chief Executive Officer -- 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. Mr.
Reamer was elected Trustee of the Portfolio on May 13, 1996.
Address: One International Place, Boston, Massachusetts 02110
JOHN L. THORNDIKE (71), Trustee of the Trust
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 (68), Trustee of the Trust
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 DICKINSON WARD (32), Vice President, Assistant Secretary and Assistant
Treasurer of the Portfolio
Director of LGM and Chief Investment Officer of the Adviser.
Address: 3808 One Exchange Square, Central, Hong Kong
WILLIAM WALTER RALEIGH KERR (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, BMR and EV 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 (53), 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, Mr. Dynner 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 and the
Portfolio on June 23, 1997.
JANET E. SANDERS (62), Assistant Treasurer of the Trust 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 BMR, Eaton Vance 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 and of the Portfolio on May 29, 1995.
ERIC G. WOODBURY (40), Assistant Secretary
Vice President of BMR, Eaton Vance 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 and of the Portfolio on May 29,
1995.
Messrs. Hayes (Chairman), Reamer and Thorndike are members of the Special
Committee of the Board of Trustees of the Trust and Messrs. Hayes, Dwight and
Reamer, are members of the Special Committee of the Board of Trustees of the
Portfolio. The purpose of the Special Committee is to consider, evaluate and
make recommendations to the full Board of Trustees concerning (i) all
contractual arrangements with service providers to the Fund and the Portfolio,
including investment advisory (Portfolio only), administrative, transfer
agency, custodial and fund accounting and distribution services, and (ii) all
other matters in which Eaton Vance, the Adviser or its 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 its affiliates.
Messrs. Treynor 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 participates 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.) During the fiscal year ended December 31, 1997, the
noninterested Trustees of the Trust and the Portfolio earned the following
compensation in their capacities as Trustees from the Trust, the Portfolio and
the funds in the Eaton Vance fund complex(1):
<TABLE>
<CAPTION>
EDWARD DONALD R. SAMUEL L. NORTON H. JOHN L. JACK L.
SOURCE OF COMPENSATION K.Y. CHEN DWIGHT HAYES, III REAMER THORNDIKE TREYNOR
- ---------------------- --------- ------ ---------- ------ --------- -------
<S> <C> <C> <C> <C> <C> <C>
Trust(2) ............................... $ -- $ 3,147 $ 2,894 $ 2,819 $ 2,947 $ 3,166
South Asia Portfolio ................... 5,000 1,437 1,773 1,604 -- --
Trust and Fund Complex ................. 21,575 145,000(3) 155,000(4) 145,000 145,000(5) 150,000
</TABLE>
- ------------
(1)As of May 1, 1998, the Eaton Vance Fund complex consists of 143 registered
investment companies or series thereof.
(2)The Trust consisted of 7 Funds as of December 31, 1997.
(3)Includes $45,000 of deferred compensation.
(4)Includes $38,750 of deferred compensation.
(5)Includes $107,925 of deferred compensation.
MANAGEMENT OF THE FUND AND THE PORTFOLIO
Eaton Vance acts as 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
As of December 31, 1997, the Portfolio had net assets of $84,174,749. For
the fiscal years ended December 31, 1997, 1996 and 1995, the Adviser earned
advisory fees of $817,285, $807,758 and $336,008, respectively, (equivalent to
0.75% of the Portfolio's average daily net assets for each such year).
Eaton Vance is among the oldest mutual fund 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/earnings 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 Asian securities markets, and
also those of emerging markets. LGM currently manages portfolios for both
private clients and institutional investors seeking long-term capital growth
and has advised Eaton Vance's international equity funds since 1992. LGM's
core investment team consists of thirteen experienced investment professionals
who have worked together over a number of years successfully managing client
portfolios in non-U.S. stock markets. The team has a unique knowledge of, and
experience with, Asian and emerging markets. LGM analysts cover Asia, the
India subcontinent, Russia and Eastern Europe, Latin America, Australia and
New Zealand from offices in Hong Kong, London and Mumbai. Together, Eaton
Vance and Lloyd George manage over $26 billion in assets. LGM is ultimately
controlled by the Hon. Robert Lloyd George, President and Trustee 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, M.F. Tang, Scobie Dickinson Ward, Pamela Chan,
Adaline Mang-Yee Ko, Peter Bubenzer and Judith Collis. The Hon. Robert Lloyd
George is Chairman and Chief Executive Officer of the Adviser and Mr. Kerr is
Chief Operating 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.
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
Under Eaton Vance's management contract with the Fund and administration
agreement with the Portfolio, Eaton Vance receives a monthly management fee
from the Fund and a monthly administration fee from the Portfolio. Each fee is
computed by applying the annual asset rate applicable to that portion of the
average daily net assets of the Fund or the Portfolio throughout the month in
each Category as indicated below:
ANNUAL
CATEGORY AVERAGE DAILY NET ASSETS ASSET RATE
------------------------------------------------------------------------
1 less than $500 million ........................ 0.25%
2 $500 million but less than $1 billion ......... 0.23333
3 $1 billion but less than $1.5 billion ......... 0.21667
4 $1.5 billion but less than $2 billion ......... 0.20
5 $2 billion but less than $3 billion ........... 0.18333
6 $3 billion and over ........................... 0.16667
As of December 31, 1997, the Portfolio had net assets of $84,174,749. For
the fiscal years ended December 31, 1997, 1996 and 1995, Eaton Vance earned
administration fees of $272,397, $269,055 and $112,256, respectively,
(equivalent to 0.25% of the Portfolio's average daily net assets for each such
year).
For the management fees that the Fund paid to Eaton Vance, see Appendix B.
Eaton Vance's management contract with the Fund and its administration
agreement with the Portfolio 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 each Class under its Rule 12b-1 distribution plan; 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 any 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, John Nelson, Vincent M. O'Reilly 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 April 30, 1998,
Messrs. Gardner and Hawkes each owned 24% of such voting trust receipts,
Messrs. Rowland and Faust, owned 15% and 13%, respectively and Messrs. Dynner,
Steul and Whitaker each owned 8%. Messrs. Gardner, Hawkes and Dynner, who are
officers or Trustees of the Trust and the Portfolio, 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 the stock of Northeast Properties, Inc., which is
engaged in real estate investment. EVC owns all the stock of Fulcrum
Management, Inc. and MinVen, Inc., which are engaged in precious metal mining
venture investment and management. EVC also owns approximately 21% of the
Class A shares issued by LGM, the parent of the Adviser. 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 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 Trust and the
Portfolio, respectively. IBT also provides services in connection with the
preparation of shareholder reports and the electronic filing of such reports
with the Commission.
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.
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. 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. The sales charge on the shares being
purchased will then be at the rate applicable to the aggregate. Shares
purchased (i) by an individual, his or her spouse and their children under the
age of twenty-one, and (ii) by a trustee, guardian or other fiduciary of a
single trust estate or a single fiduciary account, will be combined for the
purpose of determining whether a purchase will qualify for the Right of
Accumulation and if qualifying, the applicable sales charge level.
For any such discount to be made available, at the time of purchase a
purchaser or his or her 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 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 gain
distributions in connection with withdrawal accounts will be credited at net
asset value as of the record date for each distribution. Continued withdrawals
in excess of current income will eventually use up principal, particularly in
a period of declining market prices. 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 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 such
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 may 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 interests in the Portfolio will then be recomputed as the
percentage equal to the 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 result. The calculation assumes (i) that all
distributions are reinvested at net asset value on the reinvestment dates during
the period, (ii) the deduction of the maximum sales charge from the initial
$1,000 purchase order for Class A shares, (iii) a complete redemption of the
investment and (iv) the deduction of any CDSC at the end of the period. For
information concerning the total return of the Classes of the Fund, see Appendix
A and Appendix B.
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 Trust (or Principal Underwriter) may provide investors with information
on global investing, which may include descriptions, comparisons, charts and/
or illustrations of foreign and domestic equity market capitalizations;
returns obtained by foreign and domestic securities; and the effects of
globally diversifying an investment portfolio (including volatility analysis
and performance information). Such information may be provided for a variety
of countries over varying time periods.
The Trust (or Principal Underwriter) may provide information about Eaton
Vance, its affiliates and other investment advisers to the funds in the Eaton
Vance Family of Funds in sales material or advertisements provided to
investors or prospective investors. Such material or advertisements may also
provide information on the use of investment professionals by such investors.
TAXES
Each series of the Trust is treated as a separate entity for accounting and
tax purposes. The Fund has elected to be treated, and intends to qualify each
year as a regulated investment company ("RIC") under the Code. Accordingly, the
Fund intends to satisfy certain requirements relating to sources of its income
and diversification of its assets and to distribute substantially all of its
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. The Fund qualified as a RIC under the Code for its
taxable year ended December 31, 1997. 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.
Under current law, provided that the Fund qualifies as a RIC for federal
income tax purposes and the Portfolio is treated as a partnership for
Massachusetts and federal tax purposes, neither the Fund nor the Portfolio
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 or 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 qualification 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. 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 taxable dividends actually
received) their pro rata shares of foreign income taxes paid by the Portfolio
and allocated to the Fund even though not actually received, 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 its investment company taxable income.
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
taxable 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 taxable dividends and other distributions
as well as the proceeds of redemption transactions (including repurchases and
exchanges) at a rate of 31%. An individual's TIN is generally his or her
social security number.
PRINCIPAL UNDERWRITER
The Trust has authorized the Principal Underwriter to act as its agent in
repurchasing shares at the rate of $2.50 for each repurchase transaction
handled by the Principal Underwriter. For the amount paid by the Trust to the
Principal Underwriter for acting as repurchase agent for Class B shares, see
Appendix B.
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. 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, the 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 shares under
federal and state securities laws are borne by the Fund. 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 the 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 Fund. 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. The Class A 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 was approved by the Trustees, including the Rule
12b-1 Trustees, on June 23, 1997. 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 Class B Plan provides that the Fund will pay sales
commissions and distribution fees to the Principal Underwriter only after and
as a result of the sale of 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 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.
Currently, payments of sales commissions and distribution fees and of
service fees may equal 1% of a Class' average daily net assets per annum. For
actual payments made by the Fund and the outstanding uncovered distribution
charges of the Principal Underwriter, see Appendix B. 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 administrative fees payable to Eaton Vance by the Portfolio) resulting
from sale of Fund 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 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 Plans 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 Plan was approved by the
Trustees, including the Rule 12b-1 Trustees on June 23, 1997.
The Trustees of the Trust believe that the Plan will be a significant
factor in the growth of the Fund's assets, and will result in increased
investment flexibility and advantages which have benefitted and will continue
to benefit the Fund and its Class B shareholders. Payments for sales
commissions and distribution fees made to the Principal Underwriter under the
Plans 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 Plans 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.
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.
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
broker-dealer 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 compensation was
reasonable in relation to the value of the brokerage and research services
provided. This determination may be made on the basis of either that
particular transaction or on the basis of the overall responsibilities which
the Adviser and its affiliates have for accounts over which they exercise
investment discretion. In making any such determination, the Adviser will not
attempt to place a specific dollar value on the brokerage and research
services provided or to determine what portion of the commission should be
related to such services. Brokerage and research services may include advice
as to the value of securities, the advisability of investing in, purchasing,
or selling securities, and the availability of securities or purchasers or
sellers of securities; furnishing analyses and reports concerning issuers,
industries, securities, economic factors and trends, portfolio strategy and
the performance of accounts; and effecting securities transactions and
performing functions incidental thereto (such as clearance and settlement);
and the "Research Services" referred to in the next paragraph.
It is a common practice in the investment advisory industry for the
advisers of investment companies, institutions and other investors to receive
research, statistical and quotation services, data, information and other
services, products and materials which assist such advisers in the performance
of their investment responsibilities ("Research Services") from broker-dealers
which execute portfolio transactions for the clients of such advisers and from
third parties with which such broker-dealers have arrangements. Consistent
with this practice, the Adviser may receive Research Services from broker-
dealer firms with which the Adviser places the portfolio transactions of the
Portfolio and from third parties with which these broker-dealers have
arrangements. These Research Services may include such matters as general
economic and market reviews, industry and company reviews, evaluations of
securities and portfolio strategies and transactions, 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 National Association of Securities Dealers, Inc. (the "NASD"),
which rule provides that no firm which is a member of the NASD shall favor or
disfavor the distribution of shares of any particular investment company or
group of investment companies on the basis of brokerage commissions received
or expected by such firm from any source.
Securities considered as investments for the portfolio may also be
appropriate for other investment accounts managed by the Adviser or its
affiliates. Whenever decisions are made to buy or sell securities by the
Portfolio and one or more of such other accounts simultaneously, the Adviser
will allocate the security transactions (including "hot" issues) in a manner
which it believes to be equitable under the circumstances. As a result of such
allocations, there may be instances where the Portfolio will not participate
in a transaction that is allocated among other accounts. If an aggregated
order cannot be filled completely, allocations will generally be made on a pro
rata basis. An order may not be allocated on a pro rata basis where, for
example: (i) consideration is given to portfolio managers who have been
instrumental in developing or negotiating a particular investment; (ii)
consideration is given to an account with specialized investment policies that
coincide with the particulars of a specific investment; (iii) pro rata
allocation would result in odd-lot or de minimis amounts being allocated to a
portfolio or other client; or (iv) where the Adviser reasonably determines
that departure from a pro rata allocation is advisable. While these
aggregation and allocation policies could have a detrimental effect on the
price or amount of the securities available to the Portfolio from time to
time, it is the opinion of the Trustees of the Trust and the Portfolio that
the benefits from the Adviser's organization outweigh any disadvantage that
may arise from exposure to simultaneous transactions.
For the fiscal years ended December 31, 1997, 1996 and 1995, the Portfolio
paid brokerage commissions of $870,799, $886,617 and $135,247 respectively,
with respect to portfolio security transactions. Of this amount, approximately
$766,327, $625,933 and $105,300, respectively, was paid in respect of
portfolio security transactions aggregating approximately $77,750,525,
$63,550,449 and $10,639,332, respectively, to firms which provided some
Research Services to the Adviser's organization (although many of such firms
may have been selected in any particular transaction primarily because of
their execution capabilities).
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. The Fund established multiple classes of shares on January
1, 1998. The operations of Class B reflect the operations of the Fund prior to
such date. Class A is a successor to the operation of a separate series of the
Trust. 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 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 shareholders. (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
liability exceeding its assets, and therefore the shareholder's risk of
personal liability, is 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 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 consent 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.
In connection with telephone redemptions and exchanges, the Trust, the
Principal Underwriter and the Transfer Agent generally will verify personal
account information in order to determine that instructions communicated are
genuine.
The right to redeem can be suspended and the payment of the redemption
price deferred when the Exchange is closed (other than for customary weekend
and holiday closings), during periods when trading on the Exchange is
restricted as determined by the 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' reports
for the Fund and the Portfolio, appear in the Fund's most recent annual report
to shareholders which is incorporated by reference into this SAI. A copy of
the Fund's annual report accompanies this SAI.
Registrant incorporates by reference the audited financial information for
the Fund and the Portfolio for the fiscal year ended December 31, 1997, as
previously filed electronically with the Commission (Accession No.
0000950109-98-002344).
<PAGE>
APPENDIX A: CLASS A SHARES
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return
on a hypothetical investment in shares of $1,000. Total return for the period
prior to January 1, 1998 reflects the total return of the predecessor to Class
A. Total return prior to May 2, 1994 reflects the total return of Class B,
adjusted to reflect the Class A sales charge. The Class B total return has not
been adjusted to reflect certain other expenses (such as distribution and/or
service fees). If such adjustments were made, the Class A total return would
be different. The "Value of Initial Investment" reflects the deduction of the
maximum sales charge of 5.75%. Past performance is not indicative of future
results. Investment return and principal value will fluctuate; shares, when
redeemed, may be worth more or less than their original cost.
VALUE OF A $1,000 INVESTMENT
<TABLE>
<CAPTION>
TOTAL RETURN TOTAL RETURN
EXCLUDING MAXIMUM INCLUDING MAXIMUM
VALUE OF VALUE OF SALES CHARGE SALES CHARGE
INVESTMENT INVESTMENT INITIAL INVESTMENT --------------------------- ---------------------------
PERIOD DATE INVESTMENT ON 12/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------------------- ---------- --------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of the Fund 5/2/94* $942.51 $597.55 (36.60)% (11.68)% (40.24)% (13.09)%
1 Year Ended
12/31/97 12/31/96 $942.46 $986.00 4.62% 4.62% (1.40)% (1.40)%
</TABLE>
* Predecessor Fund commenced operations on May 2, 1994.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of March 31, 1998, the Trustees and officers of the Trust, as a group,
owned in the aggregate less than 1% of the outstanding Class A shares of the
Fund. As of March 31, 1998, Merrill Lynch, Pierce, Fenner & Smith, Inc.,
Jacksonville, FL 32246 and Charles Schwab & Co., Inc. were the record owners of
approximately 16.3% and 5.3%, respectively, of the Class A shares of the Fund,
which were held on behalf of their customers who are the beneficial owners of
such shares, and as to which they had voting power under certain limited
circumstances. As of the same date, the Profit Sharing Retirement Plan of Eaton
Vance was the record owner of 6.4% of the Class A shares of the Fund. To the
knowledge of the Trust, no other person owned of record or beneficially 5% or
more of the Fund's outstanding Class A shares as of such date.
<PAGE>
APPENDIX B: CLASS B SHARES
FEES AND EXPENSES
MANAGER
As of December 31, 1997, the Fund had net assets of $68,812,494. For the
fiscal years ended December 31, 1997, 1996, and 1995, Eaton Vance earned
management fees of $208,205, $191,631 and $74,568, respectively, (equivalent
to 0.25% of the Fund's average daily net assets for each such year).
DISTRIBUTION PLAN
During the fiscal year ended December 31, 1997, the Principal Underwriter
paid to Authorized Firms sales commissions of $380,959 on sales of Fund
shares. During the same period, the Fund made sales commission payments under
the Plan to the Principal Underwriter aggregating $624,616 and the Principal
Underwriter received approximately $649,000 in CDSCs imposed on early
redeeming shareholders. These sales commissions and CDSC payments reduced
uncovered distribution charges under the Plan. As at December 31, 1997, the
outstanding uncovered distribution charges of the Principal Underwriter
calculated under the Plan amounted to approximately $3,761,000. During the
fiscal year ended December 31, 1996, the Fund made service fee payments under
the Plan aggregating $119,205, of which $109,067 was paid to Authorized Firms
and the balance of which was retained by the Principal Underwriter.
PRINCIPAL UNDERWRITER
For the fiscal year ended December 31, 1997, the Fund paid the Principal
Underwriter $4,367.50 for repurchase transactions handled by the Principal
Underwriter.
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return
on a hypothetical investment of $1,000 in Class B shares for the periods shown
in the table. Past performance is not indicative of future results. Investment
return and principal value will fluctuate; shares, when redeemed, may be worth
more or less than their original cost.
VALUE OF A $1,000 INVESTMENT
<TABLE>
<CAPTION>
VALUE OF VALUE OF
INVESTMENT INVESTMENT
BEFORE AFTER TOTAL RETURN TOTAL RETURN
DEDUCTING DEDUCTING BEFORE DEDUCTING THE AFTER DEDUCTING
MAXIMUM MAXIMUM MAXIMUM CDSC THE MAXIMUM CDSC
INVESTMENT AMOUNT OF CDSC CDSC ------------------------ ------------------------
INVESTMENT PERIOD DATE INVESTMENT ON 12/31/97 ON 12/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
----------------- ---- ---------- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of the Fund 5/2/94* $1,000 $ 623.00 $ 604.31 (37.70)% (12.10)% (39.57)% (12.82)%
1 Year Ended
12/31/97 12/31/96 $1,000 $1,054.15 $1,004.15 5.42% 5.42% 0.42% 0.42%
</TABLE>
* Fund commenced operations on May 2, 1994.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of March 31, 1998, the Trustees and officers of the Trust, as a group,
owned in the aggregate less than 1% of the outstanding Class B shares of the
Fund. As of March 31, 1998, Merrill Lynch, Pierce, Fenner & Smith, Inc.,
Jacksonville, FL 32246 was the record owner of approximately 11.1% of the
outstanding Class B shares which were held on behalf of its customers who are
beneficial owners of such shares, and as to which it had voting power under
certain limited circumstances. To the knowledge of the Trust, no other person
owned of record or beneficially 5% or more of the Fund's outstanding Class B
shares as of such date.
<PAGE>
APPENDIX C
COUNTRY INFORMATION
The information set forth in this Appendix has been extracted from various
government and private publications. The Trust's Board of Trustees make no
representation as to the accuracy of the information, nor has the Board of
Trustees attempted to verify it. No representation is made that any
correlation will exist between the economies or stock markets of REE Region
countries and the Fund's performance.
INDIA
India's Parliament consists of the Lok Sabha (House of the People) and the
Rajya Sabha (Council of States). The Lok Sabha is elected directly by
universal suffrage for a period of five years while the Rajya Sabha comprises
members indirectly elected by the States and Union Territories for a six-year
term and members nominated by the President of India.
The President of India is the constitutional head of the executive branch
of government and exercises powers under the Constitution with the advice of
the Council of Ministers, headed by the Prime Minister. The Prime Minister and
the Council of Ministers, who are responsible to the Lok Sabha, hold effective
executive power. The present Prime Minister Mr. IK Gujral, who took office in
May 1997 to lead the United Front, a coalition of 13 different parties
resigned in late 1997 following withdrawal of support by the Congress party.
Following these developments mid-term elections have been called and are
likely to be held in February/March 1998. Changes in Indian government
policies or future developments in the Indian economy could have an adverse
effect on the operations of the Fund.
India comprises 6 Union Territories and 26 States. Each state has a
governor, a council of ministers and a legislature. The Union Territories are
administered by the central government in New Delhi. There is a general system
of local government throughout the country.
The Judiciary consists of the Supreme Court of India, located at New
Delhi, and High Courts located in each State. The Judiciary is independent of
the Executive and the Legislature. The Supreme Court is vested with powers to
determine disputes between the Union Territories and the States or between
States, to enforce fundamental rights and to act as the guardian of the
Constitution. All judges of the Supreme Court and High Courts are appointed by
the President of India. The Constitution provides that the judges cannot be
removed from office unless impeached by both Houses of Parliament.
With a rising oil import bill, adverse balance of payments and a large
foreign debt, India had reached a position where it was unable to obtain
further commercial borrowings. In July 1991, the Finance Minister, Dr.
Manmohan Singh, presented his first budget and announced a "New Industrial
Policy". In consequence, for many industrial sectors, it became no longer
necessary to obtain government approval for new investments. Foreign companies
could now hold up to 51% of an Indian company (and in some cases up to 74%) as
opposed to 40% previously.
The process of liberalization was taken further with the budget of
February 1992 when the Rupee was made partially convertible and import tariffs
were reduced. Personal tax rates were brought down. The office of the
Controller of Capital Issues which had determined the pricing of shares issued
by companies was abolished.
The budgets for 1995 and 1996 further rationalized indirect taxes regime
by reducing excise duties on a variety of items and slashing peak import
tariffs down to 50%. The 1997 budget reduced the peak rate of custom duty from
50% to 40%, and lowered corporate and personal income taxes. For the year
ended March 31, 1997, GDP grew 5.3%. Inflation, however, was 10.3%.
PAKISTAN
Pakistan, occupying an area of about 800,000 square kilometers, is bounded
in the south by the Arabian Sea and India and in the north by China and
Afghanistan. To the west and northwest are Iran and Afghanistan and to the
east is India. The capital is Islamabad. Karachi is the biggest commercial and
industrial city.
Pakistan is the world's ninth most populous country. The population is
currently estimated at approximately 137 million, with an annual population
growth rate of 3.0%. The national language is Urdu, although English is widely
spoken and understood throughout the country.
Pakistan was created in 1947, in response to the demands of Indian Muslims
for an independent homeland, by the partition from British India of two Muslim
majority areas. In 1971, a civil war in East Pakistan culminated in
independence for East Pakistan (now Bangladesh). Over the past 50 years,
Pakistan and India have gone to war two times, and intermittent border
exchanges occur at times. In particular, relations with India remain
unfriendly over the disputed territory of Kashmir, with its majority Muslim
population.
Pakistan has a federal parliamentary system in which its provinces enjoy
considerable autonomy. The head of state is the President, who has certain
important executive powers but is generally required by the Constitution to
act on the advice of the Prime Minister. The President is elected for a period
of five years by the members of the National Assembly, the Senate and the four
provincial assemblies. The Prime Minister may remain in office as long as he
or she has the support of the National Assembly but not beyond the five-year
term of Parliament. The Prime Minister is currently Mr. Mohammad Nawaz Sharif,
of the Pakistan Muslim League.
Mr. Nawaz Sharif was preceded as Prime Minister by Mr. Meraj Khalid who
was named to head an interim government until the new government could be
elected following the Presidential removal of the Ms. Benazir Bhutto's
Government on November 3, 1996. Mr. Nawaz Sharif was elected on February 3,
1997 to a five year term. The caretaker government of Prime Minister Meraj
Khalid in consultation with President Farooq Leghari introduced certain
structural reforms into the Pakistan economy in order to reduce the budget
deficit, including the reduction of non-developmental projects and government
spending by reducing the number of government agencies and by making the State
Bank of Pakistan ("Central Bank") largely autonomous. Mr. Nawaz Sharif's
government is expected to continue the implementation of most of these
reforms, alongside accelerating the process of privatization and deregulation
of the economy to enhance industrial, commercial and export activities.
Periodic civil unrest witnessed in 1995 appears to have largely subsided
and the metropolitan city of Karachi, the commercial heart of Pakistan, has
largely regained its stability and economic vibrance. Therefore, in addition
to the ongoing international investment in infrastructure projects, foreign
and national private investments may gain momentum in other sectors of the
economy.
The Federal Shariat Court, a constitutionally established body which has
exclusive jurisdiction to determine whether any law in Pakistan violates the
principles of Islam, the official State religion, ruled in November 1991 that
a number of legal provisions in Pakistan violated Islamic principles relating
to Riba (an Islamic term generally accepted as being analogous to interest)
and instructed the Government of Pakistan to conform these provisions to
Islamic principles. It is believed that strict conformity with the ruling of
the Shariat Court would substantially disrupt a variety of commercial
relationships in Pakistan involving the payment of interest, although the
extent and nature of any such disruption on the Pakistani economy, or any
segment thereof (other than the banking system), is uncertain. The ruling of
the Shariat Court has been appealed and will have no effect until the Shariat
Appellate Bench of the Supreme Court of Pakistan renders a decision on the
appeal. A hearing on the appeal was held in November 1993 but, in early 1994
at the request of the Government of Pakistan, the appeal is still continuing.
In addition, pursuant to the Enforcement of Shariat Act, 1991 (the "Shariat
Act"), the Government of Pakistan has appointed a commission to recommend
steps to be taken to introduce suitable alternatives by which an economic
system in Pakistan conforming to Islamic principles could be established.
Since the current popularly elected government favors a free market economy,
the commission may propose a pragmatic approach to the requirements of the
Constitution and the Shariat Act with a view to avoiding any substantial
disruption to the economy of Pakistan. There can be no assurance, however,
that the commission will propose such an approach or that implementation of
the steps recommended by the commission or the effect of the ultimate decision
of the courts in Pakistan on this issue will not adversely affect the economy
in Pakistan.
OVERVIEW OF THE ECONOMY AND RECENT DEVELOPMENTS
Economic development since 1955 has taken place within the framework of
successive five-year plans which established growth targets and allocations of
public sector investment. In addition, annual development plans are prepared
indicating yearly allocation of investment and the program for economic
development in the public and private sectors.
For most of the 1980's, the Pakistani economy showed strong growth, with
GDP increasing at over 6% per annum. Over the past decade, despite a rapid
increase in the labor force, real wages in both rural and urban areas rose
substantially. However, the latter part of the decade was characterized by
increasing fiscal and external deficits, infrastructure deficiencies and
disruptions in production. In 1989, the government initiated a three year
structural adjustment program with the assistance of the International
Monetary Fund. The program sought to redress the growing macroeconomic
imbalances resulting from the large fiscal deficits and to increase
productivity through major structural reforms in the industrial and financial
sectors.
The government of Pakistan has been heavily involved in the economy
through ownership of financial and industrial enterprises, investment policies
and incentives, and taxation programs established in the five-year economic
plans. Recent governments, however, have announced various liberalization
measures, including banking reforms and a number of measures designed to
encourage the private sector.
In February 1991, the government announced a twenty-five point
liberalization and reform package. In particular, no approval would be
required for the issue and transfer of shares and the issue of capital by
companies in all but a few specified industries, and Pakistanis residing
overseas and foreign investors would be permitted to purchase listed shares
and to transfer capital and dividends without approval. The government has
also embarked on a major privatization program and a large number of public
sector entities have been offered for sale. Government owned banks,
telecommunications and power generation and gas distribution companies are
scheduled for privatization.
Pakistan's GDP growth for 1997 is approximately 5.2%. The projection for
economic growth for 1998 is approximately 6.5%. Inflation in 1997 was in
excess of 10%.
SRI LANKA
Sri Lanka, historically known as Ceylon, is an island of about 65,000
square kilometers, situated off the southeast coast of India. It has a
relatively well-educated population, with nearly 25% of the 17 million Sri
Lankans speaking English and a literacy rate (in Sinhalese and Tamil) of
nearly 90%.
A former British colony, Ceylon became an independent Commonwealth in 1948
and became the Democratic Socialist Republic of Sri Lanka in 1972. Sri Lanka
is governed by a popularly elected President and unicameral Parliament.
In the parliamentary elections held in August 1994, the People's Alliance
led by Mrs. Chandrika Kumaratunga managed to form the government ending the
17-year regime of the United National Party. The People's Alliance has further
consolidated its position by the victory of Mrs. Chandrika Kumaratunga in the
presidential elections held in November 1994. The new government has accorded
top priority for settling the ethnic conflict with the Tamils in the north and
had initiated peace talks with the LTTE. In 1997, however, hostility with the
Tamil Tigers was continuing.
OVERVIEW OF THE ECONOMY AND RECENT DEVELOPMENTS
The Sri Lankan government recently has reviewed and revised laws,
regulations and procedures to promote a competitive business environment,
remove distortions, and reduce unnecessary government regulation. The
government has liberalized trade and encourages private ownership, including
foreign investment. Laws pertaining to tax, labor standards, customs and
environmental norms have been designed to attract more investment. There are
now few exchange controls, a fairly stable currency, and many incentives for
private investors. With guidance from the World Bank, IMF and U.S. advisers,
government enterprises are being privatized, financial services liberalized,
manufacturing for exports encouraged, a stock exchange formed, and foreign
investment actively sought. About eighty percent of the land in Sri Lanka is
still owned by the government, including most tea, rubber and coconut
plantations. The government did privatize the management of these estates
recently, however.
Sri Lanka's economy is primarily agricultural, but the manufacturing and
service sectors have grown greatly in the past decade, partly in response to
the Sri Lankan government's efforts to diversify and liberalize its economy.
In 1991 gross foreign exchange earnings from apparel exports exceeded earnings
from the entire agricultural sector (tea, rubber and coconut) for the first
time.
The financial system is reasonably sophisticated, and basic legislation
for private corporations is in place. Commercial banks are the principal
source of finance. However, the increase in net government borrowing (because
of budget deficits) has reduced credit to the private sector. Inflation, which
was about 21% in 1990, has come down to approximately 10-11%, but remains a
concern.
Sri Lanka is actively working to improve its basic infrastructure. A $500
million expansion of the telecommunications network has begun. The Colombo
container port -- the 25th busiest in the world -- is expected to increase its
capacity soon, and new dry dock services are under construction.
The economic statement announced by the new government in January 1995
attempts a careful balance between the compulsions for welfare measures and
the need for attracting fresh investments. The privatization program is
scheduled to continue with the private sector given a major role in
infrastructure development. The new government has also presented its maiden
budget in February 1995 in which it has tried to do a delicate balancing act
between an extensive array of consumer subsidies on wheat, diesel and
fertilizers with a steep cut in import tariffs on consumer goods. Defense
spending increased to 14% of total government expenditures in 1996.
Although tourism has been adversely affected by the conflict with the
Tamils, GDP growth was more than 5% in 1997.
<PAGE>
[LOGO] Investing
EATON VANCE for the
================= 21st
Mutual Funds Century
- -------------------------------------------------------------------------------
EATON VANCE
GREATER INDIA FUND
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1998
- -------------------------------------------------------------------------------
SPONSOR AND MANAGER OF EATON VANCE GREATER INDIA FUND
Administrator of South Asia Portfolio
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
ADVISER OF SOUTH ASIA PORTFOLIO
Lloyd George Investment Management (Bermuda) Limited, 3808 One Exchange Square,
Central, Hong Kong
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, MA 02110
GISAI
<PAGE>
PART B
INFORMATION REQUIRED IN A
STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL
INFORMATION
May 1, 1998
EV TRADITIONAL EMERGING GROWTH FUND
24 Federal Street
Boston, Massachusetts 02110
(800) 225-6265
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
PAGE
Additional Information about Investment Policies...............................2
Investment Restrictions........................................................4
Trustees and Officers..........................................................5
Control Persons and Principal Holders of Securities............................8
Investment Adviser and Administrator...........................................8
Custodian.....................................................................11
Services for Accumulation.....................................................11
Service for Withdrawal........................................................12
Determination of Net Asset Value..............................................12
Investment Performance........................................................13
Taxes.........................................................................14
Principal Underwriter.........................................................16
Service Plan..................................................................17
Portfolio Security Transactions...............................................18
Other Information.............................................................20
Independent Accountants.......................................................21
Financial Statements..........................................................21
- --------------------------------------------------------------------------------
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 MAY 1, 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>
ADDITIONAL INFORMATION ABOUT INVESTMENT POLICIES
Capitalized terms used in this Statement of Additional Information ("SAI")
and not otherwise defined have the meanings given to them in the Fund's
Prospectus.
FOREIGN SECURITIES. 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 Fund, 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. Settlement practices are
less developed and entail the risk of loss.
FOREIGN CURRENCY TRANSACTIONS. The value of foreign assets of the Fund 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 Fund may
conduct its foreign currency exchange transactions on a spot (I.E., cash) basis
at the spot rate prevailing in the foreign currency exchange market or through
entering into swaps, forward contracts, options or futures on currency. On spot
transactions, foreign exchange dealers do not charge a fee for conversion, but
they do realize a profit based on the difference (the "spread") between the
prices at which they are buying and selling various currencies. Thus, a dealer
may offer to sell a foreign currency to the Fund at one rate, while offering a
lesser rate of exchange should the Fund desire to resell that currency to the
dealer.
RISKS ASSOCIATED WITH DERIVATIVE INSTRUMENTS. Entering into a derivative
instrument involves a risk that the applicable market will move against the
Fund's position and that the Fund 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 Fund. Derivative instruments may
sometimes increase or leverage the Fund's exposure to a particular market risk.
Leverage enhances the Fund's exposure to the price volatility of derivative
instruments it holds. The Fund'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
-2-
<PAGE>
markets for the derivative instrument, the assets underlying the derivative
instrument and the Fund 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 Fund from closing out positions and limiting its losses.
Certain OTC options, and assets used as cover for written OTC options, are
subject to the Fund's 15% limit on illiquid investments. The Fund's ability to
terminate OTC derivative instruments may depend on the cooperation of the
counterparties to such contracts. The Fund expects to purchase and write only
exchange-traded options until such time as the Fund's management determines that
the OTC options market is sufficiently developed and the Fund has amended its
prospectus so that appropriate disclosure is furnished to prospective and
existing shareholders. 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 Fund may purchase
and sell derivative instruments. The Fund 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 FOR DERIVATIVE INSTRUMENTS. Transactions using forward contracts,
swaps, futures contracts and options (other than options that the Fund has
purchased) expose the Fund to an obligation to another party. The Fund will not
enter into any such transactions unless it owns either (1) an offsetting
("covered") position in securities, currencies, swaps or other options or
futures contracts or forward contracts, or (2) cash and 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. (Only the net obligation of a swap will be covered.)
Assets used as cover or held in a segregated account maintained by the Fund's
custodian cannot be sold while the position in the corresponding instrument is
open, unless they are replaced with other appropriate assets. As a result, the
commitment of a large portion of the Fund's assets to cover or segregated
accounts could impede portfolio management or the Fund's ability to meet
redemption requests or other current obligations.
LIMITATIONS ON FUTURES CONTRACTS AND OPTIONS. The Fund may enter into futures
contracts, and options on futures contracts, traded on an exchange regulated by
the CFTC and on foreign exchanges, but, with respect to foreign exchange-traded
futures contracts and options on such futures contracts, only if the Investment
Adviser determines that trading on each such foreign exchange does not subject
the Fund to risks, including credit and liquidity risks, that are materially
greater than the risks associated with trading on CFTC-regulated exchanges.
In order to hedge its current or anticipated portfolio positions, the Fund
may use futures contracts on securities held in its portfolio or on securities
with characteristics similar to those of the securities held by the Fund. If, in
the opinion of the Investment Adviser, there is a sufficient degree of
correlation between price trends for the securities held by the Fund and futures
contracts based on other financial instruments, securities indices or other
indices, the Fund may also enter into such futures contracts as part of its
hedging strategy.
LENDING PORTFOLIO SECURITIES. The Fund may seek to increase its income by
lending portfolio securities. Under present regulatory policies, including those
of the Board of Governors of the Federal Reserve System and the Commission, such
loans may be made to member firms of the Exchange, and would be required to be
-3-
<PAGE>
secured continuously by collateral in cash or cash equivalents maintained on a
current basis at an amount at least equal to the market value of the securities
loaned. The Fund would have the right to call a loan and obtain the securities
loaned at any time on five days' notice. During the existence of a loan, the
Fund would continue to receive the equivalent of the interest or dividends paid
by the issuer on the securities loaned and would also receive the interest on
investment of the collateral. The Fund would not, however, have the right to
vote any securities having voting rights during the existence of the loan, but
would call the loan in anticipation of an important vote to be taken among
holders of the securities or of the giving or withholding of their consent on a
material matter affecting the investment. As with other extensions of credit
there are risks of delay in recovery or even loss of rights in the collateral
should the borrower of the securities fail financially. However, the loans would
be made only to firms deemed by the Investment Adviser to be of good standing,
and when, in its judgment, the consideration which can be earned currently from
securities loans of this type justifies the attendant risk. Securities lending
involves administration expenses, including finders' fees. If the Investment
Adviser determines to make securities loans, it is not intended that the value
of the securities loaned would exceed 30% of the Fund's total assets.
PORTFOLIO TURNOVER. The Fund cannot accurately predict its portfolio turnover
rate, but it is anticipated that the annual turnover rate will generally note
exceed 100% (excluding turnover of securities having a maturity of one year or
less). A 100% annual turnover rate could occur, for example, if all the
securities in the portfolio were replaced once in a period of one year. A high
turnover rate could occur, for example, if all the securities in the portfolio
were replaced more than once in a period of one year. A high turnover rate (100%
or more) necessarily involves greater expenses to the Fund. The Fund 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 directly by increasing income or indirectly by enhancing the Fund's net
asset value. For the fiscal year ended December 31, 1997, the portfolio turnover
rate of the Fund was 2.15%.
INVESTMENT RESTRICTIONS
The following investment restrictions of the Fund are designated as
fundamental policies and as such cannot be changed without the approval of the
holders of a majority of the Fund's outstanding voting securities, which as used
in this SAI means the lesser of (a) 67% of the shares of the Fund, present or
represented by proxy at a meeting if the holders of more than 50% of the 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) With respect to 75% of its total assets, invest more than 5% of its
total assets (taken at current value) in the securities of any one issuer, or in
more than 10% of the outstanding voting securities of any one issuer, except
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities and except securities of other investment companies;
(2) Borrow money or issue senior securities except as permitted by the
Investment Company Act of 1940;
(3) Purchase any securities on margin, (but the Fund may obtain such
short-term credits as may be necessary for the clearance of purchases and sales
of securities);
(4) Underwrite securities of other issuers;
-4-
<PAGE>
(5) Invest more than 25% of its assets in any particular industry, but, if
deemed appropriate for the Fund's objective, up to 25% of the value of its
assets may be invested in securities of companies in any one industry (although
more than 25% may be invested in securities issued or guaranteed by the U.S.
Government or its agencies or instrumentalities);
(6) Invest in real estate (although it may purchase and sell securities
which are secured by real estate and securities of companies which invest or
deal in real estate);
(7) Invest in commodities or commodity contracts for the purchase or sale
of physical commodities; or
(8) Make loans to any person except by (a) the acquisition of debt
securities and making portfolio investments, (b) entering into repurchase
agreements and (c) lending portfolio securities.
Notwithstanding the investment policies and restrictions of the Fund, the
Fund may invest its investable assets in an open-end management investment
company with substantially the same investment objective, policies and
restrictions as the Fund.
The Fund has adopted the following investment policies which may be changed
without shareholder approval. As a matter of nonfundamental policy, the Fund
will not: (a) invest more than 15% of 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 its
delegate, determines to be liquid; or (b) sell or contract to sell a security
which it does not own unless by virtue of its ownership of other securities it
has at the time of sale a right to obtain securities equivalent in kind and
amount to the securities sold and provided that if such right is conditional the
sale is made upon the same conditions.
Whenever an investment policy or investment restriction set forth in the
Prospectus or this SAI states a maximum percentage of assets that may be
invested in any security or other asset, such percentage limitation shall be
determined immediately after and as a result of the Fund's acquisition of such
security or asset. Accordingly, any later increase or decrease resulting from a
change in values, assets or other circumstances, will not compel the Fund to
dispose of such security or other asset. Notwithstanding the foregoing, under
normal market conditions the Fund must take actions necessary to comply with the
policies of investing at least 65% of total assets in equity securities of
emerging growth companies and not investing more than 15% of net assets in
illiquid securities. Moreover, the Fund must always be in compliance with the
borrowing policies set forth above.
TRUSTEES AND OFFICERS
The Trustees and officers of the Trust 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 Investment Adviser, Eaton Vance; Eaton
Vance's wholly-owned subsidiary, Boston Management and Research ("BMR"); Eaton
Vance's parent, Eaton Vance Corp. ("EVC"); and of Eaton Vance's and BMR's
-5-
<PAGE>
trustee, Eaton Vance, Inc. ("EV"). Eaton Vance and EV are both wholly-owned
subsidiaries of EVC. Those Trustees who are "interested persons" of the Trust,
as defined in the 1940 Act by virtue of their affiliation with Eaton Vance, BMR,
EVC or EV, are indicated by an asterisk(*).
JAMES B. HAWKES (56), President 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.
M. DOZIER GARDNER (64), Trustee*
Vice Chairman of BMR, Eaton Vance, EVC and EV, and a Director of EVC and EV.
Director or Trustee and officer of various investment companies managed by Eaton
Vance or BMR.
DONALD R. DWIGHT (67), Trustee
President of Dwight Partners, Inc. (a corporate relations and communications
company). 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 (63), Trustee
Jacob H. Schiff Professor of Investment Banking, Harvard University Graduate
School of Business Administration; Trustee of the Kubrick Funds (mutual funds).
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
Chairman of the Board and Chief Executive Officer, 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
Former 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 (68), 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
EDWARD E. SMILEY, JR. (53), Vice President
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 (53), Treasurer
Vice President of Eaton Vance, BMR and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
-6-
<PAGE>
ALAN R. DYNNER (57), Secretary
Vice President and Chief Legal Officer of Eaton Vance, BMR, 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 BMR, Eaton Vance 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 BMR, Eaton Vance and EV since February 1993; formerly,
associate attorney at Dechert, Price & Rhoads. Mr. Woodbury was elected
Assistant Secretary of the Trust on June 19, 1995.
Messrs. Hayes (Chairman), Reamer and Thorndike are members of the Special
Committee of the Board of Trustees of the Trust. 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, including administrative, transfer agency, custodial and fund
accounting and distribution services, and (ii) all other matters in which Eaton
Vance or its affiliates has any actual or potential conflict of interest with
the Fund or its shareholders.
The Nominating Committee of the Board of Trustees of the Trust 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 and its
affiliates.
Messrs. Treynor (Chairman) and Dwight are members of the Audit Committee of
the Board of Trustees of the Trust. The Audit Committee's functions include
making recommendations to the Board of Trustees regarding the selection of the
independent 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.
The fees and expenses of the noninterested Trustees of the Trust are paid
by the Fund (and the other series of the Trust). (The Trustees of the Trust who
are members of the Eaton Vance organization receive no compensation from the
Fund.) For the fiscal year ending December 31, 1997, the noninterested Trustees
of the Trust earned the following compensation in their capacities as Trustees
from the Fund and as Trustees of the funds in the Eaton Vance fund complex(1):
-7-
<PAGE>
ESTIMATED
AGGREGATE TOTAL COMPENSATION
COMPENSATION FROM TRUST AND
NAME FROM FUND FUND COMPLEX
- ---- --------- ------------
Donald R. Dwight.................. $6 $145,000(2)
Samuel L. Hayes, III.............. 8 155,000(3)
Norton H. Reamer.................. 8 145,000
John L. Thorndike................. 8 145,000(4)
Jack L. Treynor................... 9 150,000
- ----------------------------
(1) As of May 1, 1998, the Eaton Vance fund complex consists of 143 registered
investment companies or series thereof.
(2) Includes $45,000 of deferred compensation.
(3) Includes $38,750 of deferred compensation.
(4) Includes $107,925 of deferred compensation.
Trustees of the Trust who not affiliated with the Investment Adviser may
elect to defer receipt of all or a percentage of their annual fees in accordance
with the terms of a Trustees Deferred Compensation Plan (the "Trustees' Plan").
Under the Trustees' Plan, an eligible Trustee may elect to have his deferred
fees invested by the Fund in the shares of one or more funds in the Eaton Vance
Family of Funds, and the amount paid to the Trustees under the Trustees' Plan
will be determined based upon the performance of such investments. Deferral of
Trustees' fees in accordance with the Trustees' Plan will have a negligible
effect on the Fund's assets, liabilities, and net income per share, and will not
obligate the Fund to retain the services of any Trustee or obligate the Fund to
pay any particular level of compensation to the Trustee. The Trust does not have
retirement plan for its Trustees.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As at March 31, 1998, the Trustees and officers of the Trust, as a group,
owned in the aggregate less than 1% of the outstanding shares of the Fund. As of
March 31, 1998, Eaton Vance Management, Boston, MA was the record owner of
approximately 70.4% of the outstanding shares and Brian Jacobs, Cohasset, MA
held of record and beneficially owned 5.9% of the outstanding shares of the
Fund. To the knowledge of the Trust, no other person owned of record or
beneficially 5% or more of the Fund's outstanding shares as of such date.
INVESTMENT ADVISER AND ADMINISTRATOR
The Trust on behalf of the Fund engages Eaton Vance as investment adviser
pursuant to an Investment Advisory Agreement dated December 31, 1996. Eaton
Vance or its affiliates acts as investment adviser to investment companies and
various individual and institutional clients with combined assets under
management of approximately $25 billion.
Eaton Vance, its affiliates and its predecessor companies have been
managing assets of individuals and institutions since 1924 and managing
investment companies since 1931. They maintain a large staff of experienced
fixed-income and equity investment professionals to service the needs of their
clients. The fixed-income division focuses on all kinds of taxable
investment-grade and high-yield securities, tax-exempt investment-grade and
high-yield securities, and U.S. Government securities. The equity division cover
stocks ranging from blue chip to emerging growth companies.
-8-
<PAGE>
Eaton Vance and its affiliates act as adviser to a family of mutual funds
and individual and various institutional accounts, including corporations,
hospitals, retirement plans, universities, foundations and trusts. Eaton Vance
mutual funds feature international equities, domestic equities, tax-free
municipal bonds and U.S. government and corporate bonds. Lloyd George Management
has advised Eaton Vance's international equity funds since 1992. Founded in
1991, Lloyd George is headquartered in Hong Kong with offices in London and
Mumbai, India. It has established itself as a leader in investment management in
Asian equities and other global markets. Lloyd George features an experienced
team of investment professionals that began working together in the mid-1980s.
Lloyd George analysts cover East Asia, the India subcontinent, Russia and
Eastern Europe, Latin America, Australia and New Zealand from offices in Hong
Kong, London and Mumbai. Together Eaton Vance and Lloyd George manage over $21
billion in assets. 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.
Eaton Vance manages the investments and affairs of the Fund subject to the
supervision of the Trust's Board of Trustees. Eaton Vance furnishes to the Fund
investment research, advice and assistance, administrative services, office
space, equipment and clerical personnel, and investment advisory, statistical
and research facilities, and has arranged for certain members of the Eaton Vance
organization to serve without salary as officers or Trustees of the Trust. The
Fund is responsible for all expenses not expressly stated to be payable by Eaton
Vance under the Investment Advisory Agreement, including, without limitation,
the fees and expenses of its custodian and transfer agent, including those
incurred for determining the Fund's net asset value and keeping its books; the
cost of share certificates; membership dues in investment company organizations;
brokerage commissions and fees; fees and expenses of registering its shares;
expenses of reports to shareholders, proxy statements, and other expenses of
shareholders' meetings; insurance premiums; printing and mailing expenses;
interest, taxes and corporate fees; legal and accounting expenses; and
compensation and expenses of Trustees not affiliated with Eaton Vance. The Fund
will also bear expenses incurred in connection with litigation, proceedings and
claims and any legal obligation of the Trust to indemnify its officers and
Trustees with respect thereto, to the extent not covered by insurance.
The Fund pays Eaton Vance as compensation under the Investment Advisory
Agreement a monthly fee based on average daily net assets as follows:
Average Daily Net Annualized Fee Rate Monthly Fee Rate
Assets for the Month (For Each Level) (For Each Level)
-------------------- ---------------- ----------------
Up to $500 million..................... 0.7500% 1/16 of 1%
$500 million but less than $1 billion.. 0.6875% 11/192 of 1%
$1 billion but less than $1.5 billion.. 0.6250% 5/96 of 1%
$1.5 billion but less than $2 billion.. 0.5625% 3/64 of 1%
$2 billion but less than $3 billion.... 0.5000% 1/24 of 1%
$3 billion and over.................... 0.4375% 7/192 of 1%
-9-
<PAGE>
As of December 31, 1997, the Fund had net assets of $306,611. For the
period from the start of business, January 2, 1997, to December 31, 1997, absent
a fee reduction, the Fund would have paid Eaton Vance advisory fees of $1,896
(equivalent to 0.75% (annualized) of the Fund's average daily net assets for
such period). To enhance the net income of the Fund, Eaton Vance made a
reduction of the full amount of its advisory fee and Eaton Vance was allocated a
portion of expenses related to the operation of the Fund in the amount of
$24,157.
The Investment Advisory Agreement with Eaton Vance continues 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 Trust 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 Trust or by vote of a majority
of the outstanding voting securities of the Fund. The Agreement may be
terminated at any time without penalty on sixty (60) days' written notice by the
Board of Trustees of either party, or by vote of the majority of the outstanding
voting securities of the Fund, and the Agreement will terminate automatically in
the event of its assignment. The Agreement provides that Eaton Vance may render
services to others. The Agreement also provides that Eaton Vance shall not be
liable for any loss incurred in connection with the performance of its duties,
or action taken or omitted under that Agreement, in the absence of willful
misfeasance, bad faith, gross negligence in the performance of its duties or by
reason of its reckless disregard of its obligations and duties thereunder, or
for any losses sustained in the acquisition, holding or disposition of any
security or other investment.
As indicated in the Prospectus, Eaton Vance serves as Administrator of the
Fund, but currently receives no compensation for providing administrative
services to the Fund. Under its agreement with the Fund, Eaton Vance has been
engaged to administer the Fund's affairs, subject to the supervision of the
Trustees of the Trust, and shall furnish for the use of the Fund office space
and all necessary office facilities, equipment and personnel for administering
the affairs of the Fund.
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, John
M. Nelson, Vincent M. O'Reilly 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 April 30, 1998, Messrs. Gardner and Hawkes each owned 24% of such
voting trust receipts, Messrs. Rowland and Faust owned 15% and 13%,
respectively, and Messrs. Dynner, Steul and Whitaker each owned 8%. Messrs.
Dynner, Gardner and Hawkes, who are officers or Trustees of the Trust, 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 are
also members of the Eaton Vance, BMR and EV organizations.
Eaton Vance owns all the stock of Northeast Properties, Inc., which is
engaged in real estate investment. EVC also owns approximately 21% of the Class
-10-
<PAGE>
A shares of Lloyd George Management (B.V.I.) Limited, a registered investment
adviser. EVC owns all of 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, IBT.
It is Eaton Vance's opinion that the terms and conditions of such transactions
will not be influenced by existing or potential custodial or other relationships
between the Trust and such banks.
CUSTODIAN
IBT acts as custodian for the Fund. IBT has the custody of all cash and
securities of the Fund, maintains the Fund's general ledger and computes the
daily net asset value of shares of the Fund. In such capacity it attends to
details in connection with the sale, exchange, substitution, transfer or other
dealings with the Fund's investments, receives and disburses all funds and
performs various other ministerial duties upon receipt of proper instruction
from the Fund. IBT also provides services in connection with the preparation of
shareholder reports and the electronic filing of such reports with the
Commission.
SERVICES FOR ACCUMULATION
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 $100,000 or more of Fund shares and shares of the other continuously
offered open-end funds 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
the 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 Fund 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 in the other continuously offered open-end funds
listed under "The Eaton Vance Exchange Privilege" in the Prospectus for which
Eaton Vance acts as adviser or administrator at the time of purchase. The sales
charge on the shares being purchase will then be at the rate applicable to the
aggregate. For sales charges on quantity purchases, see "How to Buy Shares" in
-11-
<PAGE>
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 Fund's current
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
gain 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, 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 Trust have established the following procedures for the
fair valuation of the Fund'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 on the principal
market where the security was traded. An option is valued at the last sale price
as quoted on the principal exchange or board of trade on which such option or
contract is traded or, in the absence of a sale, at the mean between the last
bid and asked prices. Futures positions on securities or currencies are
generally valued at closing settlement prices. Short-term debt securities with a
remaining maturity of 60 days or less are valued at amortized cost. If
securities were acquired with a remaining maturity of more than 60 days, their
amortized cost value will be based on their value on the sixty-first day prior
to maturity. Other fixed income and debt securities, including listed securities
and securities for which price quotations are available, will normally be valued
on the basis of valuations furnished by a pricing service. All other securities
are valued at fair value as determined in good faith by or at the direction of
the Trustees. The Fund will be closed for business and will not price its 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.
-12-
<PAGE>
Short term debt securities are valued at amortized cost, which approximates
value. Other fixed income and debt securities, including listed securities and
securities for which price quotations are available, will normally be valued on
the basis of valuations furnished by a pricing service.
Generally, trading in the foreign securities owned by the Fund 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 Fund'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
Fund's net asset value (unless the Fund 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 Fund
will be valued in U.S. dollars; such values will be computed by the custodian
based on foreign currency exchange rate quotations.
INVESTMENT PERFORMANCE
Average annual total return is determined by multiplying a hypothetical
initial purchase order of $1,000 by the average annual compound rate of return
(including capital appreciation/depreciation, and distributions paid and
reinvested) for the stated period and annualizing the result. The calculation
assumes the maximum initial sales charge is deducted from the initial $1,000
purchase order and that all distributions are reinvested at net asset value on
the reinvestment dates during the period.
The table below indicates the total return (capital changes plus
reinvestment of all distributions) on a hypothetical investment of $1,000 in the
Fund covering the life of the Fund from January 2, 1997 through December 31,
1997. The "Value of Initial Investment" reflects the deduction of the maximum
sales charge of 5.75%. Past performance is not indicative of future results.
Investment return and principal value will fluctuate; shares, when redeemed, may
be worth more or less than their original cost. Information presented with two
asterisks (**) includes the effect of subsidizing expenses. Returns would have
been lower without subsidies.
<TABLE>
VALUE OF A $1,000 INVESTMENT
Total Return Excluding Total Return Including
Investment Investment Value of Value of Maximum Sales Charge Maximum Sales Charge
Investment Investment Initial Investment ------------------------ ----------------------
Period Date Investment on 12/31/97 Cumulative Annualized Cumulative Annualized
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of Fund** 1/2/97 $942.51 $1,123.98 19.26% ---- 12.40% ----
</TABLE>
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 investment
companies. In addition, evaluations of the Fund's performance or rankings or
ratings of mutual funds (which include the Fund) made by independent sources may
be used in advertisements and in information furnished to present or prospective
shareholders. Information, charts and illustrations showing the effect of
compounding interest or relating to inflation and taxes (including their effects
on the dollar and the return on stocks and other investment vehicles) may also
be included in advertisements and materials furnished to present and prospective
investors.
-13-
<PAGE>
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 allocation and holdings of investments in the Fund's
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).
The Fund (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 has elected to be treated, and intends to qualify
each year as a regulated investment company ("RIC") under the Code. Accordingly,
the Fund intends to satisfy certain requirements relating to sources of its
income and diversification of its assets and to distribute substantially all of
its 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.
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
-14-
<PAGE>
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 was not taxed. Under current law, provided that the Fund qualifies as a
RIC, the Fund should not be liable for any income, excise or franchise tax in
the Commonwealth of Massachusetts.
Foreign exchange gains and losses realized by the Fund in connection with
the its investments in foreign securities and certain 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 Fund 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. Positions of the Fund in securities and offsetting
options, swaps, futures or forward contracts may be treated as "straddles" and
be subject to other special rules that may affect 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 Fund in certain "passive foreign
investment companies" may be limited or a tax election may be made, if
available, in order to preserve the Fund's qualification as a RIC or avoid
imposition of a tax on the Fund.
Distributions of the excess of net long-term capital gains over short-term
capital losses earned by the Fund, taking into account any capital loss
carryforwards that may be available to the Fund in years after its first taxable
year, are taxable to shareholders of the Fund as long-term capital gains,
whether received in cash or in additional shares and regardless of the length of
time their shares have been held. Certain distributions, if declared in October,
November or December and paid the following January, will be taxed to
shareholders as if received on December 31 of the year in which they are
declared.
Any loss realized upon the redemption or exchange of shares of the Fund
with a tax holding period of 6 months or less will be treated as a long-term
capital loss to the extent of any distribution of net long-term capital gains
with respect to such shares. In addition, a loss realized on a redemption of
Fund shares may be disallowed under certain "wash sale" rules if other Fund
shares are acquired (whether through reinvestment of dividends or otherwise)
within a period beginning 30 days before and ending 30 days after the date of
such redemption. Any disallowed loss will result in an adjustment to the
shareholder's tax basis in some or all of the other shares acquired.
Amounts paid by the Fund to individuals and certain other shareholders who
have not provided the Fund with their correct taxpayer identification number
("TIN") and certain certifications required by the Internal Revenue Service (the
"IRS"), as well as shareholders with respect to whom the Fund has received
certain information from the IRS or a broker, may be subject to "backup"
withholding of federal income tax arising from the Fund's taxable dividends and
other distributions as well as the proceeds of redemption transactions
(including repurchases and exchanges) at a rate of 31%. An individual's TIN is
generally his or her social security number.
Non-resident alien individuals, foreign corporations and certain other
foreign entities generally will be subject to a U.S. withholding tax at a rate
of 30% on the Fund's distributions from its ordinary income and the excess of
its net short-term capital gain over its net long-term capital loss, unless the
tax is reduced or eliminated by an applicable tax convention. Distributions from
the excess of the Fund's net long-term capital gain over its net short-term
capital loss received by such shareholders and any gain from the sale or other
disposition of shares of the Fund generally will not be subject to U.S. federal
-15-
<PAGE>
income taxation, provided that non-resident alien status has been certified by
the shareholder. Different U.S. tax consequences may arise if: (i) the
shareholder is engaged in a trade or business in the United States; (ii) the
shareholder is present in the United States for a sufficient period of time
during a taxable year to be treated as a U.S. resident (generally 180 days or
more); or (iii) the shareholder fails to provide any required certifications
regarding its status as a non-resident alien investor. Foreign shareholders
should consult their tax advisers regarding the U.S. and foreign tax
consequences of an investment in the Fund.
The foregoing discussion does not describe many of the tax rules applicable
to IRAs nor does it address the special tax rules applicable to certain other
classes of investors, such as other retirement plans, tax-exempt entities,
insurance companies and financial institutions. Shareholders should consult
their own tax advisers with respect to these or other special tax rules that may
apply in their particular situations, as well as the state, local, and, where
applicable, foreign tax consequences of investing in the Fund.
PRINCIPAL UNDERWRITER
Shares of the Fund may be continuously purchased at the public offering
price through Authorized Firms which have agreements with the Principal
Underwriter. 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 Fund's current Prospectus (see "How to Buy Shares"). Such
table is applicable to purchases of the Fund alone or in combination with
purchases of certain other funds offered by the Principal Underwriter, made at a
single time by (i) an individual, or an individual, his or her spouse and their
children under the age of twenty-one, purchasing shares for his or her 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 Fund shares,
alone or in combination with purchases of any of the other funds offered by the
Principal Underwriter through one dealer aggregating $100,000 or more made by
any of the persons enumerated above within a thirteen-month period starting with
the first purchase pursuant to a written Statement of Intention, in the form
provided by the Principal Underwriter, which includes provisions for a price
adjustment depending upon the amount actually purchased within such period (a
purchase not made pursuant to such Statement may be included thereunder if the
Statement if filed within 90 days of such purchase); or (2) purchases of the
Fund 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 Fund may issue
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 Fund. Normally no sales charges will be
paid in connection with an exchange of Fund shares for the assets of such
investment company. Shares may also be sold at net asset value to any officer,
director, trustee, general partner or employee of the Fund or any investment
company for which Eaton Vance or its affiliates 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, trustee 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. Shares of
the Fund may also be sold at net asset value to registered representatives and
employees of certain Authorized Firms and to such persons' spouses and children
under the age of 21 and their beneficial accounts.
-16-
<PAGE>
The Trust reserves the right to suspend or limit the offering of shares of
the Fund to the public at any time.
The Principal Underwriter acts as principal in selling shares of the Fund
under the Distribution Agreement with the Trust on behalf of the Fund. The
expenses of printing copies of prospectuses used to offer shares to Authorized
Firms or investors and other selling literature and of advertising are borne by
the Principal Underwriter. The fees and expenses of qualifying and registering
and maintaining qualifications and registrations of the Fund and its shares
under federal and state securities laws are borne by the Fund. The Distribution
Agreement is renewable annually by the Trust's Board of Trustees (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 Fund shares on a "best efforts" basis under which it is
required to take and pay for only such shares as may be sold. The 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. The total sales charges paid in connection with
sales of shares of the Fund for the period from the start of business, January
2, 1997, to December 31, 1997, was $32, of which $6 was received by the
Principal Underwriter and $26 was received by Authorized Firms.
The Fund has authorized the Principal Underwriter to act as its agent in
repurchasing shares and will pay the Principal Underwriter $2.50 for each
repurchase transaction handled by the Principal Underwriter. The Principal
Underwriter estimates that the expenses incurred by it in acting as repurchase
agent for the Fund will exceed the amounts paid therefor by the Fund. For the
period from the start of business, January 2, 1997, to December 31, 1997, there
were no repurchase transactions of the Fund handled by the Principal
Underwriter.
SERVICE PLAN
The Trust on behalf of the Fund has adopted a Service Plan (the "Plan")
designed to meet the service fee requirements of the sales charge rule of the
NASD (Management believes service fee payments are not distribution expenses
governed by Rule 12b-1 under the 1940 Act, but has chosen to have the Plan
approved as if that Rule were applicable.) The following supplements the
discussion of the Plan contained in the Fund's Prospectus.
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 who have no direct or indirect financial interest in
the operation of the Plan or any agreements related to it (the "Plan Trustees")
and (ii) all of the Trustees then in office, cast in person at a meeting (or
meetings) called for the purpose of voting on the Plan. The Plan may be
terminated any time by vote of the Plan Trustees or by vote of a majority of the
outstanding voting securities of the Fund. The Plan was approved by the
Trustees, including the Plan Trustees, on June 23, 1997.
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
herein without approval of the shareholders of the Fund, and the Trustees. So
-17-
<PAGE>
long as the Plan is in effect, the selection and nomination of the noninterested
Trustees shall be committed to the discretion 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.
PORTFOLIO SECURITY TRANSACTIONS
Decisions concerning the execution of Fund portfolio security transactions,
including the selection of the market and the broker-dealer firm, are made by
Eaton Vance. Eaton Vance is also responsible for the execution of transactions
for all other accounts managed by it.
Eaton Vance places the portfolio security transactions of the Fund and of
certain other accounts managed by it for execution with many broker-dealer
firms. Eaton Vance uses its best efforts to obtain execution of portfolio
transactions at prices which are advantageous to the Fund and (when a disclosed
commission is being charged) at reasonably competitive commission rates. In
seeking such execution, Eaton Vance 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 Fund 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 Fund
usually includes an undisclosed dealer markup or markdown. In an underwritten
offering the price paid by the Fund includes a disclosed fixed commission or
discount retained by the underwriter or dealer. Although commissions paid on
portfolio transactions will, in the judgment of Eaton Vance, 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 Fund and Eaton Vance's other clients in
part for providing brokerage and research services to Eaton Vance.
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 Fund 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 Eaton
Vance determines in good faith that such compensation was reasonable in relation
to the value of the brokerage and research services provided. This determination
may be made on the basis of either that particular transaction or on the basis
of overall responsibilities which Eaton Vance and its affiliates have for
accounts over which it exercises investment discretion. In making any such
determination, Eaton Vance 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.
-18-
<PAGE>
It is a common practice of 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, Eaton Vance may receive Research Services from broker-dealer
firms with which Eaton Vance places the portfolio transactions of the Fund 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 Eaton Vance 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 Eaton Vance 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 Fund is not reduced because Eaton Vance
receives such Research Services. Eaton Vance 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 Eaton Vance believes are useful or of value to it in
rendering investment advisory services to its clients.
Subject to the requirement that Eaton Vance shall use its best efforts to
seek to execute portfolio security transactions at advantageous prices and at
reasonably competitive commission rates or spreads, Eaton Vance is authorized to
consider as a factor in the selection of any broker-dealer firm with whom Fund
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 Fund may also be appropriate
for other investment accounts managed by Eaton Vance or its affiliates. Whenever
decisions are made to buy or sell securities by the Fund and one or more of such
other accounts simultaneously, Eaton Vance will allocate the security
transactions (including "hot" issues) in a manner which it believes to be
equitable under the circumstances. As a result of such allocations, there may be
instances where the Fund will not participate in a transaction that is allocated
among other accounts. If an aggregated order cannot be filled completely,
allocations will generally be made on a pro rata basis. An order may not be
allocated on a pro rata basis where, for example (i) consideration is given to
portfolio managers who have been instrumental in developing or negotiating a
particular investment; (ii) consideration is given to an account with
specialized investment policies that coincide with the particulars of a specific
investment; (iii) pro rata allocation would result in odd-lot or de minimis
-19-
<PAGE>
amounts being allocated to a portfolio or other client; or (iv) where Eaton
Vance reasonably determines that departure from a pro rata allocation is
advisable. While these aggregation and allocation policies could have a
detrimental effect on the price or amount of the securities available to the
Fund from time to time, it is the opinion of the Trustees of the Trust that the
benefits available from the Eaton Vance organization outweigh any disadvantage
that may arise from exposure to simultaneous transactions.
For the period from the start of business, January 2, 1997, to December 31,
1997, Eaton Vance paid brokerage commissions of $17,708, all of which was paid
in respect of portfolio security transactions aggregating approximately
$513,711, to firms which provided some research services to Eaton Vance or its
affiliates (although many of such firms may have been selected in any particular
transaction primarily because of their execution capabilities).
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. On July 21, 1992, the Trust changed its name from Eaton Vance
Special Equities Fund to Eaton Vance Special Investment Trust. Eaton Vance,
pursuant to its agreement with the Trust, controls the use of the words "Eaton
Vance" and "EV" in the Fund's name and may use the words "Eaton Vance" or "EV"
in other connections and for other purposes.
The Declaration of Trust may be amended by the Trustees when authorized by
a majority of the outstanding voting securities of the Trust affected by the
amendment. The Trustees may also amend the Declaration of Trust without the vote
or consent of shareholders to change the name of the Trust, or 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
shareholders. (The Declaration of Trust also contains provisions limiting the
liability of a series or class to that series or class.) Moreover, the Trust's
By-laws also provide for indemnification out of the property of the Fund of any
shareholder held personally liable solely by reason of being or having been a
shareholder for all loss or expense arising from such liability. The assets of
the Fund are readily marketable and will ordinarily substantially exceed its
liabilities. In light of the nature of the Fund's business and the nature of its
assets, management believes that the possibility of the Fund's liability
exceeding its assets, and therefore the shareholder's risk of personal
liability, is 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
-20-
<PAGE>
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 connection with telephone redemptions and exchanges, the Fund, the
Principal Underwriter and the Transfer Agent generally will verify personal
account information in order to determine that instructions communicated are
genuine.
The right to redeem can be suspended and the payment of the redemption
price deferred when the Exchange is closed (other than for customary weekend and
holiday closings), during periods when trading on the Exchange is restricted as
determined by the Commission, or during any emergency as determined by the
Commission which makes it impracticable for the Fund to dispose of its
securities or value its assets, or during any other period permitted by order of
the Commission for the protection of investors.
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L. P., One Post Office Square, Boston, Massachusetts,
are the independent accountants of the Fund, 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 report of independent
accountants for, the Fund appear in the Fund's most recent annual report to
shareholders, which is incorporated by reference into this SAI. A copy of the
annual report accompanies this SAI.
Registrant incorporates by reference the audited financial information
for the Fund for the fiscal year ended December 31, 1997 (Accession No.
0000928816-98-000070), as previously filed electronically with the Commission.
-21-
<PAGE>
INVESTMENT ADVISER AND EV TRADITIONAL
ADMINISTRATOR
Eaton Vance Management EMERGING GROWTH FUND
24 Federal Street
Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc.
24 Federal Street
Boston, MA 02110
(800) 225-6265
CUSTODIAN STATEMENT OF ADDITIONAL
Investors Bank & Trust Company
200 Clarendon Street INFORMATION
Boston, MA 02116
TRANSFER AGENT
First Data Investor Services Group MAY 1, 1998
P.O. Box 5123
Westborough, MA 01581-5123
(800) 262-1122
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, MA 02109
EV TRADITIONAL EMERGING GROWTH FUND
24 FEDERAL STREET
BOSTON, MA 02110 T-EGSAI
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS*
INCORPORATED BY REFERENCE INTO PART B ARE THE FINANCIAL STATEMENTS
CONTAINED IN THE ANNUAL REPORTS FOR THE FUNDS DATED DECEMBER 31, 1997
(WHICH WERE PREVIOUSLY FILED ELECTRONICALLY PURSUANT TO SECTION
30(b)(2) OF THE INVESTMENT COMPANY ACT OF 1940):
Eaton Vance Balanced Fund (Accession No. 0000950109-98-001814)
Eaton Vance Emerging Markets Fund (Accession No.
0000950109-98-001865)
Eaton Vance Greater India Fund (Accession No.
0000950109-98-002344)
Eaton Vance Growth & Income Fund (Accession No.
0000950109-98-001819)
Eaton Vance Special Equities Fund (Accession No.
0000950109-98-001876)
Eaton Vance Utilities Fund (Accession No. 0000950109-98-001844)
EV Traditional Emerging Growth Fund (Accession No.
0000928816-98-000070)
THE FINANCIAL STATEMENTS CONTAINED IN EACH FUND'S ANNUAL REPORT
INCLUDE:
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Financial Highlights
Notes to Financial Statements
Independent Auditors' Report (for Eaton Vance Greater India Fund
and Eaton Vance Emerging Markets Fund)
Report of Independent Accountants (for Eaton Vance Balanced Fund,
Eaton Vance Growth & Income Fund, Eaton Vance Special Equities
Fund, Eaton Vance Utilities Fund and EV Traditional Emerging
Growth Fund)
ALSO INCORPORATED BY REFERENCE INTO PART B ARE THE FOLLOWING FINANCIAL
STATEMENTS OF EMERGING MARKETS PORTFOLIO, INVESTORS PORTFOLIO, SOUTH
ASIA PORTFOLIO, SPECIAL INVESTMENT PORTFOLIO, STOCK PORTFOLIO AND
TOTAL RETURN PORTFOLIO WHICH ARE CONTAINED IN THE ANNUAL REPORTS
DATED DECEMBER 31, 1997 OF THE CORRESPONDING FUNDS:
Portfolio of Investments
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Supplementary Data
Notes to Financial Statements
Independent Auditors' Report (for Eaton Vance Emerging Markets
Fund and Eaton Vance Greater India Fund)
Report of Independent Accountants (for Eaton Vance Balanced Fund,
Eaton Vance Growth & Income Fund, Eaton Vance Special Equities
Fund, Eaton Vance Utilities Fund and EV Traditional Emerging
Growth Fund)
(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 as Exhibit No.
(1)(c) to Post-Effective Amendment No. 49 and incorporated
herein by reference.
(d) Form of Amendment and Restatement of Establishment and
Designation of Series of Shares effective May 1, 1998 filed
herewith.
- -------------
*Eaton Vance Balanced Fund was previously known as EV Traditional Investors
Fund; Eaton Vance Growth & Income Fund was previously known as EV Traditional
Stock Fund; and Eaton Vance Utilities Fund was previously known as EV
Traditional Total Return Fund.
(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 as Exhibit
No. (5)(a)(2) to Post- Effective Amendment No. 49 and
incorporated herein by reference.
(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) Distribution Agreement between the Trust and Eaton Vance
Distributors, Inc. dated June 23, 1997 filed as
Exhibit(6)(a)(4) to Post-Effective Amendment No. 48 and
incorporated herein by reference.
(1) Amended Schedule A-1 dated November 17, 1997 filed as Exhibit
No. (6)(a)(4)(a) to Post- Effective Amendment No. 49 and
incorporated herein by reference.
(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 January 1, 1998 filed as
Exhibit (k)(b) to the Registration Statement on Form N-2 of
Eaton Vance Advisers Senior Floating-Rate Fund (File Nos.
333-46853, 811-08671) (Accession No. 0000950156-98-000172) and
incorporated herein by reference.
(10) Opinion of Internal Counsel filed herewith.
(11)(a) Consent of Independent Accountants for Eaton Vance Balanced
Fund filed herewith.
(b) Consent of Independent Auditors for Eaton Vance Emerging
Markets Fund filed herewith.
(c) Consent of Independent Auditors for Eaton Vance Greater India
Fund filed herewith.
(d) Consent of Independent Accountants for Eaton Vance Growth &
Income Fund filed herewith.
(e) Consent of Independent Accountants for Eaton Vance Special
Equities Fund filed herewith.
(f) Consent of Independent Accountants for Eaton Vance Utilities
Fund filed herewith.
(g) Consent of Independent Accountants of EV Traditional Emerging
Growth Fund filed herewith.
(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
adopted June 23, 1997 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
adopted June 23, 1997 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 as Exhibit
No. (15)(b)(1) to Post- Effective Amendment No. 49 and
incorporated herein by reference.
(c) Eaton Vance Special Investment Trust Class B Distribution Plan
adopted June 23, 1997 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 as Exhibit
No. (15)(c)(1) to Post- Effective Amendment No. 49 and
incorporated herein by reference.
(d) Eaton Vance Special Investment Trust Class C Distribution Plan
adopted June 23, 1997 filed as Exhibit (15)(d) to
Post-Effective Amendment No. 48 and incorporated herein by
reference.
(16) Schedules for Computation of Performance Quotations filed
herewith.
(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 as Exhibit No. (17)(h) to Post-Effective
Amendment No. 49 and incorporated herein by reference.
(18) Multiple Class Plan for Eaton Vance Funds dated June 23, 1997
filed as Exhibit No. (18) to Post-Effective Amendment No. 49
and incorporated herein by reference.
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 April 1, 1998
without par value
CLASS A CLASS B CLASS C
------- ------- -------
EV Traditional Emerging Growth Fund 26 -- --
Eaton Vance Emerging Markets Fund 565 836 --
Eaton Vance Greater India Fund 1,540 8,146 --
Eaton Vance Investors Fund 12,463 2,453 498
Eaton Vance Special Equities Fund 5,872 228 88
Eaton Vance Stock Fund 5,338 966 194
Eaton Vance Total Return Fund 14,189 2,346 199
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 Mutual Funds Trust
Eaton Vance Income Fund of Boston Eaton Vance Prime Rate Reserves
Eaton Vance Investment Trust Eaton Vance Special Investment Trust
Eaton Vance Municipals Trust EV Classic Senior Floating-Rate Fund
Eaton Vance Municipals Trust II
(b)
(1) (2) (3)
NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICES
BUSINESS ADDRESS* WITH PRINCIPAL UNDERWRITER WITH REGISTRANT
------------------ -------------------------- ---------------------
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
- ----------
*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 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 20th day of April, 1998.
EATON VANCE SPECIAL INVESTMENT TRUST
By 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
JAMES B. HAWKES* and Trustee April 20, 1998
- --------------------------------------
JAMES B. HAWKES
Treasurer and Principal
Financial and
/s/ JAMES L. O'CONNOR Accounting Officer April 20, 1998
----------------------------------
JAMES L. O'CONNOR
/s/ M. DOZIER GARDNER Trustee April 20, 1998
- --------------------------------------
M. DOZIER GARDNER
DONALD R. DWIGHT* Trustee April 20, 1998
- --------------------------------------
DONALD R. DWIGHT
SAMUEL L. HAYES, III* Trustee April 20, 1998
- --------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee April 20, 1998
- --------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee April 20, 1998
- --------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee April 20, 1998
- --------------------------------------
JACK L. TREYNOR
*By: /s/ ALAN R. DYNNER
-----------------------------
ALAN R. DYNNER
As Attorney-in-fact
<PAGE>
SIGNATURES
Emerging Markets 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 20th day of April, 1998.
EMERGING MARKETS 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 April 20, 1998
- --------------------------------------
HON. ROBERT LLOYD GEORGE
Treasurer and Principal
Financial and
/s/ JAMES L. O'CONNOR Accounting Officer April 20, 1998
- --------------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee April 20, 1998
- --------------------------------------
DONALD R. DWIGHT
JAMES B. HAWKES* Trustee April 20, 1998
- --------------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee April 20, 1998
- --------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee April 20, 1998
- --------------------------------------
NORTON H. REAMER
HON. EDWARD K.Y. CHEN* Trustee April 20, 1998
- --------------------------------------
HON. EDWARD K.Y. CHEN
*By: /s/ ALAN R. DYNNER
-----------------------------
ALAN R. DYNNER
As Attorney-in-fact
<PAGE>
SIGNATURES
Investors 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
20th day of April, 1998.
INVESTORS PORTFOLIO
By: /s/ M. DOZIER GARDNER
--------------------------------------
M. DOZIER GARDNER, 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
/s/ M. DOZIER GARDNER Executive Officer April 20, 1998
- --------------------------------------
M. DOZIER GARDNER
Treasurer and Principal
Financial and
/s/ JAMES L. O'CONNOR Accounting Officer April 20, 1998
- --------------------------------------
JAMES L. O'CONNOR
JAMES B. HAWKES* Trustee April 20, 1998
- --------------------------------------
JAMES B. HAWKES
DONALD R. DWIGHT* Trustee April 20, 1998
- --------------------------------------
DONALD R. DWIGHT
SAMUEL L. HAYES, III* Trustee April 20, 1998
- --------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee April 20, 1998
- --------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee April 20, 1998
- --------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee April 20, 1998
- --------------------------------------
JACK L. TREYNOR
*By: /s/ ALAN R. DYNNER
-----------------------------
ALAN R. DYNNER
As Attorney-in-fact
<PAGE>
SIGNATURES
South Asia 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
20th day of April, 1998.
SOUTH ASIA 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 April 20, 1998
- --------------------------------------
HON. ROBERT LLOYD GEORGE
Treasurer and Principal
Financial and
/s/ JAMES L. O'CONNOR Accounting Officer April 20, 1998
- --------------------------------------
JAMES L. O'CONNOR
JAMES B. HAWKES* Trustee April 20, 1998
- --------------------------------------
JAMES B. HAWKES
DONALD R. DWIGHT* Trustee April 20, 1998
- --------------------------------------
DONALD R. DWIGHT
SAMUEL L. HAYES, III* Trustee April 20, 1998
- --------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee April 20, 1998
- --------------------------------------
NORTON H. REAMER
HON. EDWARD K.Y. CHEN* Trustee April 20, 1998
- --------------------------------------
HON. EDWARD K.Y. CHEN
*By: /s/ ALAN R. DYNNER
-----------------------------
ALAN R. DYNNER
As Attorney-in-fact
<PAGE>
SIGNATURES
Special Investment 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 20th day of April, 1998.
SPECIAL INVESTMENT PORTFOLIO
By: JAMES B. HAWKES*
----------------------------
JAMES B. HAWKES, 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
JAMES B. HAWKES* Executive Officer April 20, 1998
- --------------------------------------
JAMES B. HAWKES
Treasurer and Principal
Financial and
/s/ JAMES L. O'CONNOR Accounting Officer April 20, 1998
- --------------------------------------
JAMES L. O'CONNOR
/s/ M. DOZIER GARDNER Trustee April 20, 1998
- --------------------------------------
M. DOZIER GARDNER
DONALD R. DWIGHT* Trustee April 20, 1998
- --------------------------------------
DONALD R. DWIGHT
SAMUEL L. HAYES, III* Trustee April 20, 1998
- --------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee April 20, 1998
- --------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee April 20, 1998
- --------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee April 20, 1998
- --------------------------------------
JACK L. TREYNOR
*By: /s/ ALAN R. DYNNER
-----------------------------
ALAN R. DYNNER
As Attorney-in-fact
<PAGE>
SIGNATURES
Stock 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
20th day of April, 1998.
STOCK PORTFOLIO
By: JAMES B. HAWKES*
--------------------------------
JAMES B. HAWKES, 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
JAMES B. HAWKES* Executive Office April 20, 1998
- --------------------------------------
JAMES B. HAWKES
Treasurer and Principal
Financial and
/s/ JAMES L. O'CONNOR Accounting Officer April 20, 1998
- --------------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee April 20, 1998
- --------------------------------------
DONALD R. DWIGHT
SAMUEL L. HAYES, III* Trustee April 20, 1998
- --------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee April 20, 1998
- --------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee April 20, 1998
- --------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee April 20, 1998
- --------------------------------------
JACK L. TREYNOR
*By: /s/ ALAN R. DYNNER
-----------------------------
ALAN R. DYNNER
As Attorney-in-fact
<PAGE>
SIGNATURES
Total Return 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
20th day of April, 1998.
TOTAL RETURN PORTFOLIO
By: /s/ M. DOZIER GARDNER
--------------------------------------
M. DOZIER GARDNER, 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
/s/ M. DOZIER GARDNER Executive Officer April 20, 1998
- --------------------------------------
M. DOZIER GARDNER
Treasurer and Principal
Financial and
/s/ JAMES L. O'CONNOR Accounting Officer April 20, 1998
- --------------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee April 20, 1998
- --------------------------------------
DONALD R. DWIGHT
JAMES B. HAWKES* Trustee April 20, 1998
- --------------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee April 20, 1998
- --------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee April 20, 1998
- --------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee April 20, 1998
- --------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee April 20, 1998
- --------------------------------------
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)(d) Form of Amendment and Restatement of
Establishment and Designation of Series of
Shares effective May 1, 1998.
(10) Opinion of Internal Counsel.
(11)(a) Consent of Independent Accountants for Eaton
Vance Balanced Fund dated April 20, 1998.
(b) Consent of Independent Auditors for Eaton Vance
Emerging Markets Fund dated April 20, 1998.
(c) Consent of Independent Auditors for Eaton Vance
Greater India Fund dated April 20, 1998.
(d) Consent of Independent Accountants for Eaton
Vance Growth & Income Fund dated April 20, 1998.
(e) Consent of Independent Accountants for Eaton
Vance Special Equities Fund dated April 20,
1998.
(f) Consent of Independent Accountants for Eaton
Vance Utilities Fund dated April 20, 1998.
(g) Consent of Independent Accountants for EV
Traditional Emerging Growth Fund dated April 20,
1998.
(16) Schedules for Computation of Performance
Quotations.
<PAGE>
Exhibit 1(d)
FORM OF
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 effective May 1, 1998)
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 change the name of three existing
series and to redesignate 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 the following separate
series ("Funds"), each Fund to have the following special and relative rights:
1. The Funds shall be designated as follows effective May 1, 1998:
Eaton Vance Balanced Fund
Eaton Vance Emerging Markets Fund
Eaton Vance Greater India Fund
Eaton Vance Growth & Income Fund
Eaton Vance Russia and Eastern Europe Fund
Eaton Vance Special Equities Fund
Eaton Vance Utilities Fund
EV Traditional Emerging Growth 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.
<PAGE>
(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.
Each Fund (except EV Traditional Emerging Growth 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.
Dated: April 27, 1998
_____________________________ ________________________________
Donald R. Dwight Samuel L. Hayes, III
_____________________________ ________________________________
M. Dozier Gardner Norton H. Reamer
_____________________________ ________________________________
James B. Hawkes John L. Thorndike
______________________________
Jack L. Treynor
<PAGE>
Exhibit 10
Eaton Vance Management
24 Federal Street
Boston, MA 02110
Telephone: (617) 482-8260
Telecopy: (617) 338-8054
April 20, 1998
Eaton Vance Special Investment Trust
24 Federal Street
Boston, MA 02110
Ladies and Gentlemen:
Eaton Vance Special Investment Trust (the "Trust") is a voluntary
association (commonly referred to as a "business trust") established under
Massachusetts law with the powers and authority set forth under its Declaration
of Trust dated March 27, 1989, as amended (the "Declaration of Trust").
I am of the opinion that all legal requirements have been complied with
in the creation of the Trust, and that said Declaration of Trust is legal and
valid.
The Trustees of the Trust have the powers set forth in the Declaration
of Trust, subject to the terms, provisions and conditions therein provided. As
provided in the Declaration of Trust, the Trustees may authorize one or more
series or classes of shares, without par value, and the number of shares of each
series or class authorized is unlimited. The series and classes of shares
established and designated as of the date hereof are identified on Appendix A
hereto.
Under the Declaration of Trust, the Trustees may from time to time
issue and sell or cause to be issued and sold shares of the Trust for cash or
for property. All such shares, when so issued, shall be fully paid and
nonassessable by the Trust.
I have examined originals, or copies, certified or otherwise identified
to my satisfaction, of such certificates, records and other documents as we have
deemed necessary or appropriate for the purpose of this opinion.
Based upon the foregoing, and with respect to Massachusetts law (other
than the Massachusetts Uniform Securities Act), only to the extent that
Massachusetts law may be applicable and without reference to the laws of the
other several states or of the United States of America, I am of the opinion
that under existing law:
1. The Trust is a trust with transferable shares of beneficial interest
organized in compliance with the laws of the Commonwealth of Massachusetts, and
the Declaration of Trust is legal and valid under the laws of the Commonwealth
of Massachusetts.
2. Shares of beneficial interest of the Trust registered by Form N-1A
may be legally and validly issued in accordance with the Declaration of Trust
upon receipt of payment in compliance with the Declaration of Trust and, when so
issued and sold, will be fully paid and nonassessable by the Trust.
I am a member of the Massachusetts bar and have acted as internal legal
counsel to the Trust in connection with the registration of shares.
I hereby consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to Post-Effective Amendment No. 51 to the
Trust's Registration Statement on Form N-1A pursuant to the Securities Act of
1933, as amended.
Very truly yours,
/s/ Maureen A. Gemma
------------------------
Maureen A. Gemma, Esq.
Vice President
<PAGE>
Appendix A
Established and Designated Series* of the Trust
Eaton Vance Balanced Fund
(formerly Eaton Vance Investors Fund)
Eaton Vance Emerging Markets Fund
Eaton Vance Greater India Fund
Eaton Vance Growth & Income Fund
(formerly Eaton Vance Stock Fund)
Eaton Vance Russia and Eastern Europe Fund
Eaton Vance Special Equities Fund
Eaton Vance Utilities Fund
(formerly Eaton Vance Total Return Fund)
EV Traditional Emerging Growth Fund
- --------------------
* Each Series is authorized to issue Class A, Class B, Class C and Class I
shares.
<PAGE>
EXHIBIT 11(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in Post-Effective Amendment No. 51 to the
Registration Statement of Eaton Vance Special Investment Trust (1933 Act File
Number 2-27962) on behalf of Eaton Vance Balanced Fund of our report dated
February 6, 1998 relating to Eaton Vance Balanced Fund (formerly EV
Traditional Investors Fund), and of our report dated February 6, 1998 relating
to Investors Portfolio, which reports are included in the Annual Report to
Shareholders for the year ended December 31, 1997, which is incorporated by
reference in the Statement of Additional Information which is part of such
Registration Statement.
We also consent to the reference to our Firm under the heading "The Fund's
Financial Highlights" in the Prospectus and under the caption "Independent
Accountants" in the Statement of Additional Information of the Registration
Statement.
/s/COOPERS & LYBRAND L.L.P.
------------------------------------
COOPERS & LYBRAND L.L.P.
April 20, 1998
Boston, Massachusetts
<PAGE>
EXHIBIT 11(b)
CONSENT OF INDEPENDENT AUDITORS
We consent to the inclusion in Post-Effective Amendment No. 51 to the
Registration Statement of Eaton Vance Special Investment Trust (1933 Act File
Number 2-27962) on behalf of Eaton Vance Emerging Markets Fund of our report
dated February 6, 1998 relating to Eaton Vance Emerging Markets Fund (formerly
EV Marathon Emerging Markets Fund), and of our report dated February 6, 1998
relating to Emerging Markets Portfolio, which reports are included in the
Annual Report to Shareholders for the year ended December 31, 1997, which is
incorporated by reference in the Statement of Additional Information, which is
part of such Registration Statement.
We also consent to the reference to our Firm under the heading "The Fund's
Financial Highlights" in the Prospectus and under the caption "Independent
Certified Public Accountants" in the Statement of Additional Information of
the Registration Statement.
/s/DELOITTE & TOUCHE LLP
------------------------------------
DELOITTE & TOUCHE LLP
April 20, 1998
Boston, Massachusetts
<PAGE>
EXHIBIT 11(c)
CONSENT OF INDEPENDENT AUDITORS
We consent to the inclusion in Post-Effective Amendment No. 51 to the
Registration Statement of Eaton Vance Special Investment Trust (1933 Act File
Number 2-27962) on behalf of Eaton Vance Greater India Fund of our report
dated February 6, 1998 relating to Eaton Vance Greater India Fund (formerly EV
Marathon Greater India Fund), and of our report dated February 6, 1998
relating to South Asia Portfolio, which reports are included in the Annual
Report to Shareholders for the year ended December 31, 1997, which is
incorporated by reference in the Statement of Additional Information, which is
part of such Registration Statement.
We also consent to the reference to our Firm under the heading "The Fund's
Financial Highlights" in the Prospectus and under the caption "Independent
Certified Public Accountants" in the Statement of Additional Information of
the Registration Statement.
/s/DELOITTE & TOUCHE LLP
------------------------------------
DELOITTE & TOUCHE LLP
April 20, 1998
Boston, Massachusetts
<PAGE>
EXHIBIT 11(d)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in Post-Effective Amendment No. 51 to the
Registration Statement of Eaton Vance Special Investment Trust (1933 Act File
Number 2-27962) on behalf of Eaton Vance Growth & Income Fund of our report
dated February 6, 1998 relating to Eaton Vance Growth & Income Fund (formerly EV
Traditional Stock Fund) dated February 6, 1998 relating to Stock Portfolio,
which reports are included in the Annual Report to Shareholders for the year
ended December 31, 1997, which is incorporated by reference in the Statement of
Additional Information, which is part of such Registration Statement.
We also consent to the reference to our Firm under the heading "The Fund's
Financial Highlights" in the Prospectus and under the caption "Independent
Accountants" in the Statement of Additional Information of the Registration
Statement.
/s/COOPERS & LYBRAND L.L.P.
------------------------------------
COOPERS & LYBRAND L.L.P.
April 20, 1998
Boston, Massachusetts
<PAGE>
EXHIBIT 11(e)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in Post-Effective Amendment No. 51 to the
Registration Statement of Eaton Vance Special Investment Trust (1933 Act File
Number 2-27962) on behalf of Eaton Vance Special Equities Fund of our report
dated February 6, 1998 relating to Eaton Vance Special Equities Fund (formerly
EV Traditional Special Equities Fund), and of our report dated February 6, 1998
relating to Special Investment Portfolio, which reports are included in the
Annual Report to Shareholders for the year ended December 31, 1997, which is
incorporated by reference in the Statement of Additional Information, which is
part of such Registration Statement.
We also consent to the reference to our Firm under the heading "The Fund's
Financial Highlights" in the Prospectus and under the caption "Independent
Accountants" in the Statement of Additional Information of the Registration
Statement.
/s/COOPERS & LYBRAND L.L.P.
------------------------------------
COOPERS & LYBRAND L.L.P.
April 20, 1998
Boston, Massachusetts
<PAGE>
EXHIBIT 11(f)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in Post-Effective Amendment No. 51 to the
Registration Statement of Eaton Vance Special Investment Trust (1933 Act File
Number 2-27962) on behalf of Eaton Vance Utilities Fund of our report dated
February 6, 1998 relating to Eaton Vance Utilities Fund (formerly EV
Traditional Total Return Fund), and of our report dated February 6, 1998
relating to Total Return Portfolio, which reports are included in the Annual
Report to Shareholders for the year ended December 31, 1997, which is
incorporated by reference in the Statement of Additional Information, which is
part of such Registration Statement.
We also consent to the reference to our Firm under the heading "The Fund's
Financial Highlights" in the Prospectus and under the caption "Independent
Accountants" in the Statement of Additional Information of the Registration
Statement.
/s/COOPERS & LYBRAND L.L.P.
------------------------------------
COOPERS & LYBRAND L.L.P.
April 20, 1998
Boston, Massachusetts
<PAGE>
EXHIBIT 11(g)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in Post-Effective Amendment No. 51 to the
Registration Statement of Eaton Vance Special Investment Trust (1933 Act File
Number 2-27962) on behalf of EV Traditional Emerging Growth Fund of our report
dated February 6, 1998 relating to EV Traditional Emerging Growth Fund, which
report is included in the Annual Report to Shareholders for the year ended
December 31, 1997, which is incorporated by reference in the Statement of
Additional Information, which is part of such Registration Statement.
We also consent to the reference to our Firm under the heading "The Fund's
Financial Highlights" in the Prospectus and under the caption "Independent
Accountants" in the Statement of Additional Information of the Registration
Statement.
/s/COOPERS & LYBRAND L.L.P.
------------------------------------
COOPERS & LYBRAND L.L.P.
April 20, 1998
Boston, Massachusetts
<PAGE>
Exhibit 16
<TABLE>
INVESTMENT PERFORMANCE -- EATON VANCE INVESTORS FUND - CLASS A SHARES
The table below indicates the total return (capital changes plus reinvestment of all distributions) on a hypothetical investment of
$1,000 in the Fund covering the 1, 5, and 10 year periods ended December 31, 1997.
<CAPTION>
VALUE OF A $1,000 INVESTMENT
TOTAL RETURN TOTAL RETURN
VALUE OF VALUE OF EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
INVESTMENT INVESTMENT INITIAL INVESTMENT ---------------------- ----------------------
PERIOD DATE INVESTMENT* ON 12/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------- ---------- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
10 YEARS ENDED
12/31/97 12/31/87 $943.13 $3,215.77 240.97% 13.05% 221.58% 12.39%
5 YEARS ENDED
12/31/97 12/31/92 $942.45 $1,843.48 95.61% 14.36% 84.35% 13.01%
1 YEAR ENDED
12/31/97 12/31/96 $942.89 $1,146.61 21.60% 21.60% 14.66% 14.66%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000 **
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period
Cumulative total return is calculated using the following formula:
T = (ERV / P) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period
P = an initial investment of $1,000 ***
* Initial investment less the current maximum sales charge of 5.75%.
** The average annual total return including the sales charge is calculated based on an initial investment of $1,000 less the
maximum initial sales charge of 5.75%.
*** The cumulative total return including the sales charge is calculated based on an initial investment of $1,000 less
maximum initial sales charge of 5.75%.
</TABLE>
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EATON VANCE INVESTORS FUND - CLASS B SHARES
The table below indicates the total return (capital changes plus reinvestment of all distributions) on a hypothetical investment of
$1,000 in the Fund covering the 1, 5, and 10 year periods ended December 31, 1997. Total return for the period prior to the
Fund's commencement of operations is for the Portfolio (or its predecessor) adjusted for the Fund's sales charge.
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE DEDUCTING CDSC AFTER DEDUCTING CDSC
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC ---------------------- ----------------------
PERIOD DATE ON 12/31/97 ON 12/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------- ---------- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
10 YEARS ENDED
12/31/97 12/31/87 $3,261.50 $3,261.50 226.15% 12.55% 226.15% 12.55%
5 YEARS ENDED
12/31/97 12/31/92 $1,871.05 $1,851.05 87.10% 13.35% 85.10% 13.11%
1 YEAR ENDED
12/31/97 12/31/96 $1,204.33 $1,154.33 20.43% 20.43% 15.43% 15.43%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC *
Cumulative total return is calculated using the following formula:
T = ( ERV / P ) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC **
P = an initial investment of $1,000
* The average annual total return not including the CDSC is calculated based on the ending investment value
before deducting the CDSC.
** The cumulative total return not including the CDSC is calculated based on the ending investment value before
deducting the CDSC.
</TABLE>
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EATON VANCE INVESTORS FUND - CLASS C SHARES
The table below indicates the total return (capital changes plus reinvestment of all distributions) on a hypothetical investment of
$1,000 in the Fund covering the 1, 5, and 10 year periods ended December 31, 1997. Total return for the period prior to the
Fund's commencement of operations is for the Portfolio (or its predecessor) adjusted for the Fund's sales charge.
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE DEDUCTING CDSC AFTER DEDUCTING CDSC
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC ---------------------- ----------------------
PERIOD DATE ON 12/31/97 ON 12/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------- ---------- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
10 YEARS ENDED
12/31/97 12/31/87 $3,179.14 $3,179.14 217.91% 12.26% 217.91% 12.26%
5 YEARS ENDED
12/31/97 12/31/92 $1,823.84 $1,823.84 82.38% 12.77% 82.38% 12.77%
1 YEAR ENDED
12/31/97 12/31/96 $1,197.51 $1,187.51 19.75% 19.75% 18.75% 18.75%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC *
Cumulative total return is calculated using the following formula:
T = (ERV / P) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC **
P = an initial investment of $1,000
* The average annual total return not including the CDSC is calculated based on the ending investment value
before deducting the CDSC.
** The cumulative total return not including the CDSC is calculated based on the ending investment value before
deducting the CDSC.
</TABLE>
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EATON VANCE SPECIAL EQUITIES FUND - CLASS A SHARES
The table below indicates the total return (capital changes plus reinvestment of all distributions) on a hypothetical investment of
$1,000 in the Fund covering the 1, 5, and 10 year periods ended December 31, 1997.
<CAPTION>
VALUE OF A $1,000 INVESTMENT
TOTAL RETURN TOTAL RETURN
VALUE OF VALUE OF EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
INVESTMENT INVESTMENT INITIAL INVESTMENT ---------------------- ----------------------
PERIOD DATE INVESTMENT* ON 12/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------- ---------- ---------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
10 YEARS ENDED
12/31/97 12/31/87 $943.10 $3,419.94 262.63% 13.75% 241.99% 13.08%
5 YEARS ENDED
12/31/97 12/31/92 $942.35 $1,501.28 59.31% 9.76% 50.13% 8.47%
1 YEAR ENDED
12/31/97 12/31/96 $942.10 $1,075.65 14.18% 14.18% 7.56% 7.56%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000 **
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period
Cumulative total return is calculated using the following formula:
T = (ERV / P) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period
P = an initial investment of $1,000 ***
* Initial investment less the current maximum sales charge of 5.75%.
** The average annual total return including the sales charge is calculated based on an initial investment of $1,000 less the
maximum initial sales charge of 5.75%.
*** The cumulative total return including the sales charge is calculated based on an initial investment of $1,000 less
maximum initial sales charge of 5.75%.
</TABLE>
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EATON VANCE SPECIAL EQUITIES FUND - CLASS B SHARES
The table below indicates the total return (capital changes plus reinvestment of all distributions) on a hypothetical investment of
$1,000 in the Fund covering the 1, 5, and 10 year periods ended December 31, 1997. Total return for the period prior to the
Fund's commencement of operations is for the Portfolio (or its predecessor) adjusted for the Fund's sales charge.
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE DEDUCTING CDSC AFTER DEDUCTING CDSC
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC ---------------------- ----------------------
PERIOD DATE ON 12/31/97 ON 12/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------- ---------- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
10 YEARS ENDED
12/31/97 12/31/87 $3,266.96 $3,266.96 226.70% 12.57% 226.70% 12.57%
5 YEARS ENDED
12/31/97 12/31/92 $1,435.28 $1,415.28 43.53% 7.49% 41.53% 7.19%
1 YEAR ENDED
12/31/97 12/31/96 $1,115.90 $1,067.50 11.59% 11.59% 6.75% 6.75%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC *
Cumulative total return is calculated using the following formula:
T = (ERV / P) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC **
P = an initial investment of $1,000
* The average annual total return not including the CDSC is calculated based on the ending investment value
before deducting the CDSC.
** The cumulative total return not including the CDSC is calculated based on the ending investment value before
deducting the CDSC.
</TABLE>
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EATON VANCE SPECIAL EQUITIES FUND - CLASS C SHARES
The table below indicates the total return (capital changes plus reinvestment of all distributions) on a hypothetical investment of
$1,000 in the Fund covering the 1, 5, and 10 year periods ended December 31, 1997. Total return for the period prior to the
Fund's commencement of operations is for the Portfolio (or its predecessor) adjusted for the Fund's sales charge.
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE DEDUCTING CDSC AFTER DEDUCTING CDSC
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC ---------------------- ----------------------
PERIOD DATE ON 12/31/97 ON 12/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------- ---------- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
10 YEARS ENDED
12/31/97 12/31/87 $3,292.63 $3,292.63 229.26% 12.66% 229.26% 12.66%
5 YEARS ENDED
12/31/97 12/31/92 $1,446.58 $1,446.58 44.66% 7.66% 44.66% 7.66%
1 YEAR ENDED
12/31/97 12/31/96 $1,109.79 $1,102.33 10.98% 10.98% 10.23% 10.23%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC *
Cumulative total return is calculated using the following formula:
T = (ERV / P) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC **
P = an initial investment of $1,000
* The average annual total return not including the CDSC is calculated based on the ending investment value
before deducting the CDSC.
** The cumulative total return not including the CDSC is calculated based on the ending investment value before
deducting the CDSC.
</TABLE>
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EATON VANCE STOCK FUND - CLASS A SHARES
The table below indicates the total return (capital changes plus reinvestment of all distributions) on a hypothetical investment of
$1,000 in the Fund covering the 1, 5, and 10 year periods ended December 31, 1997.
<CAPTION>
VALUE OF A $1,000 INVESTMENT
TOTAL RETURN TOTAL RETURN
VALUE OF VALUE OF EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
INVESTMENT INVESTMENT INITIAL INVESTMENT ---------------------- ----------------------
PERIOD DATE INVESTMENT* ON 12/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------- ---------- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
10 YEARS ENDED
12/31/97 12/31/87 $942.26 $3,809.33 304.29% 14.99% 280.93% 14.31%
5 YEARS ENDED
12/31/97 12/31/92 $942.66 $1,967.62 108.74% 15.86% 96.76% 14.50%
1 YEAR ENDED
12/31/97 12/31/96 $942.33 $1,233.76 30.93% 30.93% 23.38% 23.38%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000 **
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period
Cumulative total return is calculated using the following formula:
T = (ERV / P) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period
P = an initial investment of $1,000 ***
* Initial investment less the current maximum sales charge of 5.75%.
** The average annual total return including the sales charge is calculated based on an initial investment of $1,000 less the
maximum initial sales charge of 5.75%.
*** The cumulative total return including the sales charge is calculated based on an initial investment of $1,000 less
maximum initial sales charge of 5.75%.
</TABLE>
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EATON VANCE STOCK FUND - CLASS B SHARES
The table below indicates the total return (capital changes plus reinvestment of all distributions) on a hypothetical investment of
$1,000 in the Fund covering the 1, 5, and 10 year periods ended December 31, 1997. Total return for the period prior to the
Fund's commencement of operations is for the Portfolio (or its predecessor) adjusted for the Fund's sales charge.
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE DEDUCTING CDSC AFTER DEDUCTING CDSC
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC ---------------------- ----------------------
PERIOD DATE ON 12/31/97 ON 12/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------- ---------- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
10 YEARS ENDED
12/31/97 12/31/87 $3,837.03 $3,837.03 283.70% 14.39% 283.70% 14.39%
5 YEARS ENDED
12/31/97 12/31/92 $1,981.06 $1,961.06 98.11% 14.65% 96.11% 14.42%
1 YEAR ENDED
12/31/97 12/31/96 $1,294.72 $1,244.72 29.47% 29.47% 24.47% 24.47%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC *
Cumulative total return is calculated using the following formula:
T = (ERV / P) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC **
P = an initial investment of $1,000
* The average annual total return not including the CDSC is calculated based on the ending investment value
before deducting the CDSC.
** The cumulative total return not including the CDSC is calculated based on the ending investment value before
deducting the CDSC.
</TABLE>
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EATON VANCE STOCK FUND - CLASS C SHARES
The table below indicates the total return (capital changes plus reinvestment of all distributions) on a hypothetical investment of
$1,000 in the Fund covering the 1, 5, and 10 year periods ended December 31, 1997. Total return for the period prior to the
Fund's commencement of operations is for the Portfolio (or its predecessor) adjusted for the Fund's sales charge.
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE DEDUCTING CDSC AFTER DEDUCTING CDSC
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC ---------------------- ----------------------
PERIOD DATE ON 12/31/97 ON 12/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------- ---------- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
10 YEARS ENDED
12/31/97 12/31/87 $3,767.35 $3,767.35 276.74% 14.18% 276.74% 14.18%
5 YEARS ENDED
12/31/97 12/31/92 $1,944.97 $1,944.97 94.50% 14.23% 94.50% 14.23%
1 YEAR ENDED
12/31/97 12/31/96 $1,288.34 $1,278.34 28.83% 28.83% 27.83% 27.83%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC *
Cumulative total return is calculated using the following formula:
T = (ERV / P) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC **
P = an initial investment of $1,000
* The average annual total return not including the CDSC is calculated based on the ending investment value
before deducting the CDSC.
** The cumulative total return not including the CDSC is calculated based on the ending investment value before
deducting the CDSC.
</TABLE>
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EATON VANCE TOTAL RETURN FUND - CLASS A SHARES
The table below indicates the total return (capital changes plus reinvestment of all distributions) on a hypothetical investment of
$1,000 in the Fund covering the 1, 5, and 10 year periods ended December 31, 1997.
<CAPTION>
VALUE OF A $1,000 INVESTMENT
TOTAL RETURN TOTAL RETURN
VALUE OF VALUE OF EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
INVESTMENT INVESTMENT INITIAL INVESTMENT ---------------------- ----------------------
PERIOD DATE INVESTMENT* ON 12/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------- ---------- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
10 YEARS ENDED
12/31/97 12/31/87 $942.92 $2,830.34 200.17% 11.62% 183.03% 10.96%
5 YEARS ENDED
12/31/97 12/31/92 $942.60 $1,435.25 52.26% 8.77% 43.52% 7.49%
1 YEAR ENDED
12/31/97 12/31/96 $941.99 $1,094.35 16.18% 16.18% 9.44% 9.44%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000 **
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period
Cumulative total return is calculated using the following formula:
T = (ERV / P) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period
P = an initial investment of $1,000 ***
* Initial investment less the current maximum sales charge of 5.75%.
** The average annual total return including the sales charge is calculated based on an initial investment of $1,000 less the
maximum initial sales charge of 5.75%.
*** The cumulative total return including the sales charge is calculated based on an initial investment of $1,000 less
maximum initial sales charge of 5.75%.
</TABLE>
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EATON VANCE TOTAL RETURN FUND - CLASS B SHARES
The table below indicates the total return (capital changes plus reinvestment of all distributions) on a hypothetical investment of
$1,000 in the Fund covering the 1, 5, and 10 year periods ended December 31, 1997. Total return for the period prior to the
Fund's commencement of operations is for the Portfolio (or its predecessor) adjusted for the Fund's sales charge.
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE DEDUCTING CDSC AFTER DEDUCTING CDSC
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC ---------------------- ----------------------
PERIOD DATE ON 12/31/97 ON 12/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------- ---------- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
10 YEARS ENDED
12/31/97 12/31/87 $3,063.71 $3,063.71 206.37% 11.85% 206.37% 11.85%
5 YEARS ENDED
12/31/97 12/31/92 $1,553.98 $1,533.98 55.40% 9.22% 53.40% 8.93%
1 YEAR ENDED
12/31/97 12/31/96 $1,152.72 $1,104.85 15.27% 15.27% 10.48% 10.48%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC *
Cumulative total return is calculated using the following formula:
T = (ERV / P) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC **
P = an initial investment of $1,000
* The average annual total return not including the CDSC is calculated based on the ending investment value
before deducting the CDSC.
** The cumulative total return not including the CDSC is calculated based on the ending investment value before
deducting the CDSC.
</TABLE>
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EATON VANCE TOTAL RETURN FUND - CLASS C SHARES
The table below indicates the total return (capital changes plus reinvestment of all distributions) on a hypothetical investment of
$1,000 in the Fund covering the 1, 5, and 10 year periods ended December 31, 1997. Total return for the period prior to the
Fund's commencement of operations is for the Portfolio (or its predecessor) adjusted for the Fund's sales charge.
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC BEFORE DEDUCTING CDSC AFTER DEDUCTING CDSC
PERIOD DATE ON 12/31/97 ON 12/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------- ---------- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
10 YEARS ENDED
12/31/97 12/31/87 $3,002.94 $3,002.94 200.29% 11.62% 200.29% 11.62%
5 YEARS ENDED
12/31/97 12/31/92 $1,523.22 $1,523.22 52.32% 8.78% 52.32% 8.78%
1 YEAR ENDED
12/31/97 12/31/96 $1,143.75 $1,133.78 14.38% 14.38% 13.38% 13.38%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC *
Cumulative total return is calculated using the following formula:
T = (ERV / P) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC **
P = an initial investment of $1,000
* The average annual total return not including the CDSC is calculated based on the ending investment value
before deducting the CDSC.
** The cumulative total return not including the CDSC is calculated based on the ending investment value before
deducting the CDSC.
</TABLE>
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EATON VANCE EMERGING MARKETS FUND - CLASS A SHARES
The table below indicates the total return (capital changes plus reinvestment of all distributions) on a hypothetical investment of
$1,000 in the Fund covering the period from November 30, 1994 through December 31, 1997 and for the 1 year period ended
December 31, 1997. Total return for the period prior to the Fund's commencement of operations is for the Portfolio (or its
predecessor) adjusted for the Fund's sales charge.
<CAPTION>
VALUE OF A $1,000 INVESTMENT
TOTAL RETURN TOTAL RETURN
VALUE OF VALUE OF EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
INVESTMENT INVESTMENT INITIAL INVESTMENT ---------------------- ----------------------
PERIOD DATE INVESTMENT* ON 12/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------- ---------- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 11/30/94 $942.51 $1,200.38 27.36% 8.14% 20.04% 6.09%
1 YEAR ENDED
12/31/97 12/31/96 $942.42 $912.04 -3.30% -3.30% -8.80% -8.80%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000 **
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period
Cumulative total return is calculated using the following formula:
T = (ERV / P) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period
P = an initial investment of $1,000 ***
* Initial investment less the current maximum sales charge of 5.75%.
** The average annual total return including the sales charge is calculated based on an initial investment of $1,000 less the
maximum initial sales charge of 5.75%.
*** The cumulative total return including the sales charge is calculated based on an initial investment of $1,000 less
maximum initial sales charge of 5.75%.
</TABLE>
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EATON VANCE EMERGING MARKETS FUND - CLASS B
The table below indicates the total return (capital changes plus reinvestment of all distributions) on a hypothetical investment of
$1,000 in the Fund covering the period from November 30, 1994 through December 31, 1997 and for the 1 year period ended
December 31, 1997.
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE DEDUCTING CDSC AFTER DEDUCTING CDSC
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC ---------------------- ----------------------
PERIOD DATE ON 12/31/97 ON 12/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------- ---------- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 11/30/94 $1,245.11 $1,215.11 24.51% 7.35% 21.51% 6.51%
1 YEAR ENDED
12/31/97 12/31/96 $ 965.16 $ 918.34 -3.48% -3.48% -8.17% -8.17%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC *
Cumulative total return is calculated using the following formula:
T = (ERV / P) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC **
P = an initial investment of $1,000
* The average annual total return not including the CDSC is calculated based on the ending investment value
before deducting the CDSC.
** The cumulative total return not including the CDSC is calculated based on the ending investment value before
deducting the CDSC.
</TABLE>
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EATON VANCE GREATER INDIA FUND - CLASS A SHARES
The table below indicates the total return (capital changes plus reinvestment of all distributions) on a hypothetical investment of
$1,000 in the Fund covering the period from May 2, 1994 through December 31, 1997 and for the 1 year period ended
December 31, 1997.
<CAPTION>
VALUE OF A $1,000 INVESTMENT
TOTAL RETURN TOTAL RETURN
VALUE OF VALUE OF EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
INVESTMENT INVESTMENT INITIAL INVESTMENT ---------------------- ----------------------
PERIOD DATE INVESTMENT* ON 12/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------- ---------- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 05/02/94 $942.51 $597.55 -36.60% -11.68% -40.24% -13.09%
1 YEAR ENDED
12/31/97 12/31/96 $942.46 $986.00 4.62% 4.62% -1.40% -1.40%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000 **
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period
Cumulative total return is calculated using the following formula:
T = (ERV / P) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period
P = an initial investment of $1,000 ***
* Initial investment less the current maximum sales charge of 5.75%.
** The average annual total return including the sales charge is calculated based on an initial investment of $1,000 less the
maximum initial sales charge of 5.75%.
*** The cumulative total return including the sales charge is calculated based on an initial investment of $1,000 less
maximum initial sales charge of 5.75%.
</TABLE>
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EATON VANCE GREATER INDIA FUND - CLASS B SHARES
The table below indicates the total return (capital changes plus reinvestment of all distributions) on a hypothetical investment of
$1,000 in the Fund covering the period from May 2, 1994 through December 31, 1997 and for the 1 year period ended
December 31, 1997.
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE DEDUCTING CDSC AFTER DEDUCTING CDSC
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC ---------------------- ----------------------
PERIOD DATE ON 12/31/97 ON 12/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------- ---------- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 05/02/94 $ 623.00 $ 604.31 -37.70% -12.10% -39.57% -12.82%
1 YEAR ENDED
12/31/97 12/31/96 $1,054.15 $1,004.15 5.42% 5.42% 0.42% 0.42%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC *
Cumulative total return is calculated using the following formula:
T = (ERV / P) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC **
P = an initial investment of $1,000
* The average annual total return not including the CDSC is calculated based on the ending investment value
before deducting the CDSC.
** The cumulative total return not including the CDSC is calculated based on the ending investment value before
deducting the CDSC.
</TABLE>
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EV TRADITIONAL EMERGING GROWTH FUND
The table below indicates the total return (capital changes plus reinvestment of all distributions) on a hypothetical investment of
$1,000 in the Fund covering the period from January 2, 1997 through December 31, 1997.
<CAPTION>
VALUE OF A $1,000 INVESTMENT
TOTAL RETURN TOTAL RETURN
VALUE OF VALUE OF EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
INVESTMENT INVESTMENT INITIAL INVESTMENT ---------------------- ----------------------
PERIOD DATE INVESTMENT* ON 12/31/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------- ---------- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 01/02/97 $942.51 $1,123.98 19.26% NA 12.40% NA
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000 **
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period
Cumulative total return is calculated using the following formula:
T = (ERV / P) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period
P = an initial investment of $1,000 ***
* Initial investment less the current maximum sales charge of 5.75%.
** The average annual total return including the sales charge is calculated based on an initial investment of $1,000 less the
maximum initial sales charge of 5.75%.
*** The cumulative total return including the sales charge is calculated based on an initial investment of $1,000 less
maximum initial sales charge of 5.75%.
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000031266
<NAME> EATON VANCE SPECIAL EQUITIES TRUST
<SERIES>
<NUMBER> 14
<NAME> EV TRADITIONAL INVESTORS FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 182,926,986
<INVESTMENTS-AT-VALUE> 263,354,839
<RECEIVABLES> 504,268
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 263,859,107
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 129,289
<TOTAL-LIABILITIES> 129,289
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 183,056,539
<SHARES-COMMON-STOCK> 30,307,019
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 551,169
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (305,743)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 80,427,853
<NET-ASSETS> 263,729,818
<DIVIDEND-INCOME> 3,118,235
<INTEREST-INCOME> 5,411,952
<OTHER-INCOME> (1,773,717)
<EXPENSES-NET> 712,525
<NET-INVESTMENT-INCOME> 6,043,945
<REALIZED-GAINS-CURRENT> 20,676,352
<APPREC-INCREASE-CURRENT> 23,123,556
<NET-CHANGE-FROM-OPS> 49,843,853
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 5,802,058
<DISTRIBUTIONS-OF-GAINS> 25,427,692
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,006,180
<NUMBER-OF-SHARES-REDEEMED> 3,051,117
<SHARES-REINVESTED> 2,664,443
<NET-CHANGE-IN-ASSETS> 23,512,420
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 712,525
<AVERAGE-NET-ASSETS> 257,403,951
<PER-SHARE-NAV-BEGIN> 8.09
<PER-SHARE-NII> 0.208
<PER-SHARE-GAIN-APPREC> 1.492
<PER-SHARE-DIVIDEND> (0.200)
<PER-SHARE-DISTRIBUTIONS> (0.890)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.70
<EXPENSE-RATIO> 0.97
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000031266
<NAME> EATON VANCE SPECIAL INVESTMENT TRUST
<SERIES>
<NUMBER> 1
<NAME> EV TRADITIONAL SPECIAL EQUITIES FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 57,478,724
<INVESTMENTS-AT-VALUE> 73,160,533
<RECEIVABLES> 39,356
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 73,199,889
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 56,302
<TOTAL-LIABILITIES> 56,302
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 58,980,960
<SHARES-COMMON-STOCK> 10,468,996
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,519,182)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 15,681,809
<NET-ASSETS> 73,143,587
<DIVIDEND-INCOME> 127,569
<INTEREST-INCOME> 349,323
<OTHER-INCOME> (547,730)
<EXPENSES-NET> 267,561
<NET-INVESTMENT-INCOME> (338,399)
<REALIZED-GAINS-CURRENT> 12,638,422
<APPREC-INCREASE-CURRENT> (2,467,352)
<NET-CHANGE-FROM-OPS> 9,832,671
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 24,213,128
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,415,029
<NUMBER-OF-SHARES-REDEEMED> 5,649,305
<SHARES-REINVESTED> 3,097,585
<NET-CHANGE-IN-ASSETS> (3,855,002)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 267,561
<AVERAGE-NET-ASSETS> 73,232,569
<PER-SHARE-NAV-BEGIN> 8.95
<PER-SHARE-NII> (0.032)
<PER-SHARE-GAIN-APPREC> 0.922
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (2.85)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 6.99
<EXPENSE-RATIO> 1.12
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000031266
<NAME> EATON VANCE SPECIAL EQUITIES TRUST
<SERIES>
<NUMBER> 8
<NAME> EV TRADITIONAL STOCK FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 94,490,672
<INVESTMENTS-AT-VALUE> 124,107,423
<RECEIVABLES> 602,878
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 124,710,301
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 141,307
<TOTAL-LIABILITIES> 141,307
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 95,012,355
<SHARES-COMMON-STOCK> 9,051,839
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 12,250
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (72,362)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 29,616,751
<NET-ASSETS> 124,568,994
<DIVIDEND-INCOME> 2,150,052
<INTEREST-INCOME> 376,456
<OTHER-INCOME> (873,121)
<EXPENSES-NET> 372,758
<NET-INVESTMENT-INCOME> 1,280,629
<REALIZED-GAINS-CURRENT> 24,451,482
<APPREC-INCREASE-CURRENT> 6,072,917
<NET-CHANGE-FROM-OPS> 31,805,028
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,325,315
<DISTRIBUTIONS-OF-GAINS> 27,738,547
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 222,388
<NUMBER-OF-SHARES-REDEEMED> 723,746
<SHARES-REINVESTED> 1,677,473
<NET-CHANGE-IN-ASSETS> 17,793,751
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 372,758
<AVERAGE-NET-ASSETS> 119,900,817
<PER-SHARE-NAV-BEGIN> 13.56
<PER-SHARE-NII> 0.163
<PER-SHARE-GAIN-APPREC> 3.827
<PER-SHARE-DIVIDEND> (0.170)
<PER-SHARE-DISTRIBUTIONS> (3.620)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.76
<EXPENSE-RATIO> 1.10
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000031266
<NAME> EATON VANCE SPECIAL EQUITIES TRUST
<SERIES>
<NUMBER> 11
<NAME> EV TRADITIONAL TOTAL RETURN FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 308,293,604
<INVESTMENTS-AT-VALUE> 367,763,853
<RECEIVABLES> 4,159,983
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 371,923,836
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,466,409
<TOTAL-LIABILITIES> 1,466,409
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 258,912,623
<SHARES-COMMON-STOCK> 43,821,871
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 53,129,951
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,055,396)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 59,470,249
<NET-ASSETS> 370,457,427
<DIVIDEND-INCOME> 16,240,535
<INTEREST-INCOME> 3,361,735
<OTHER-INCOME> (2,844,772)
<EXPENSES-NET> 1,423,533
<NET-INVESTMENT-INCOME> 15,333,965
<REALIZED-GAINS-CURRENT> 30,321,475
<APPREC-INCREASE-CURRENT> 10,978,552
<NET-CHANGE-FROM-OPS> 56,543,992
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 14,226,568
<DISTRIBUTIONS-OF-GAINS> 53,777,139
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,081,005
<NUMBER-OF-SHARES-REDEEMED> 12,559,429
<SHARES-REINVESTED> 6,457,940
<NET-CHANGE-IN-ASSETS> (31,516,488)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,423,533
<AVERAGE-NET-ASSETS> 377,553,980
<PER-SHARE-NAV-BEGIN> 8.77
<PER-SHARE-NII> 0.409
<PER-SHARE-GAIN-APPREC> 0.887
<PER-SHARE-DIVIDEND> (0.331)
<PER-SHARE-DISTRIBUTIONS> (1.285)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.45
<EXPENSE-RATIO> 1.13
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000031266
<NAME> EATON VANCE SPECIAL EQUITIES TRUST
<SERIES>
<NUMBER> 6
<NAME> EV MARATHON EMERGING MARKETS FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 8,987,422
<INVESTMENTS-AT-VALUE> 9,393,979
<RECEIVABLES> 63,929
<ASSETS-OTHER> 28,124
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 9,486,032
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 411,823
<TOTAL-LIABILITIES> 411,823
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 9,185,674
<SHARES-COMMON-STOCK> 761,842
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (12,112)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (505,910)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 406,557
<NET-ASSETS> 9,074,209
<DIVIDEND-INCOME> 138,697
<INTEREST-INCOME> 635
<OTHER-INCOME> (132,901)
<EXPENSES-NET> 197,390
<NET-INVESTMENT-INCOME> (190,959)
<REALIZED-GAINS-CURRENT> (168,823)
<APPREC-INCREASE-CURRENT> (571,715)
<NET-CHANGE-FROM-OPS> (931,497)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 279,016
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 478,265
<NUMBER-OF-SHARES-REDEEMED> 266,016
<SHARES-REINVESTED> 21,003
<NET-CHANGE-IN-ASSETS> 2,349,576
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 197,390
<AVERAGE-NET-ASSETS> 9,946,336
<PER-SHARE-NAV-BEGIN> 12.72
<PER-SHARE-NII> (0.012)
<PER-SHARE-GAIN-APPREC> (0.436)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (0.362)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.91
<EXPENSE-RATIO> 3.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000031266
<NAME> EATON VANCE SPECIAL INVESTMENT TRUST
<SERIES>
<NUMBER> 2
<NAME> EV MARATHON GREATER INDIA FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 69,024,485
<INVESTMENTS-AT-VALUE> 69,428,245
<RECEIVABLES> 21,169
<ASSETS-OTHER> 18,796
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 69,468,210
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 655,716
<TOTAL-LIABILITIES> 655,716
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 82,819,681
<SHARES-COMMON-STOCK> 11,048,237
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (345,915)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (14,065,032)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 403,760
<NET-ASSETS> 68,812,494
<DIVIDEND-INCOME> 1,127,585
<INTEREST-INCOME> 20,491
<OTHER-INCOME> (1,322,958)
<EXPENSES-NET> 1,212,815
<NET-INVESTMENT-INCOME> (1,387,697)
<REALIZED-GAINS-CURRENT> (5,155,543)
<APPREC-INCREASE-CURRENT> 11,444,170
<NET-CHANGE-FROM-OPS> 4,900,930
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,278,392
<NUMBER-OF-SHARES-REDEEMED> (3,854,049)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (5,848,591)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,212,815
<AVERAGE-NET-ASSETS> 83,266,925
<PER-SHARE-NAV-BEGIN> (0.126)
<PER-SHARE-NII> 0.446
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 6.23
<EXPENSE-RATIO> 3.08
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000031266
<NAME> EATON VANCE SPECIAL EQUITIES TRUST
<SERIES>
<NUMBER> 17
<NAME> EV TRADITIONAL EMERGING GROWTH FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 281,495
<INVESTMENTS-AT-VALUE> 301,709
<RECEIVABLES> 32,203
<ASSETS-OTHER> 3,996
<OTHER-ITEMS-ASSETS> 811
<TOTAL-ASSETS> 338,719
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 32,108
<TOTAL-LIABILITIES> 32,108
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 288,729
<SHARES-COMMON-STOCK> 28,312
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 107
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (2,439)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 20,214
<NET-ASSETS> 306,611
<DIVIDEND-INCOME> 475
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 475
<REALIZED-GAINS-CURRENT> 26,340
<APPREC-INCREASE-CURRENT> 20,214
<NET-CHANGE-FROM-OPS> 47,029
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 29,147
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 29,657
<NUMBER-OF-SHARES-REDEEMED> 2,108
<SHARES-REINVESTED> 763
<NET-CHANGE-IN-ASSETS> 206,611
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,896
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 26,053
<AVERAGE-NET-ASSETS> 258,963
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.017
<PER-SHARE-GAIN-APPREC> 1.871
<PER-SHARE-DIVIDEND> (0.956)
<PER-SHARE-DISTRIBUTIONS> (0.102)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.83
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000912749
<NAME> INVESTORS PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 234,225,248
<INVESTMENTS-AT-VALUE> 328,158,807
<RECEIVABLES> 1,594,421
<ASSETS-OTHER> 2,113
<OTHER-ITEMS-ASSETS> 627
<TOTAL-ASSETS> 329,755,968
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 48,726
<TOTAL-LIABILITIES> 48,726
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 235,773,683
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 93,933,559
<NET-ASSETS> 329,707,242
<DIVIDEND-INCOME> 3,858,950
<INTEREST-INCOME> 6,702,834
<OTHER-INCOME> 0
<EXPENSES-NET> 2,196,708
<NET-INVESTMENT-INCOME> 8,365,076
<REALIZED-GAINS-CURRENT> 24,802,364
<APPREC-INCREASE-CURRENT> 29,330,948
<NET-CHANGE-FROM-OPS> 62,498,388
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 28,146,460
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,965,597
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,196,708
<AVERAGE-NET-ASSETS> 319,460,757
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0.69
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000925760
<NAME> SPECIAL INVESTMENT PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 61,539,960
<INVESTMENTS-AT-VALUE> 78,199,540
<RECEIVABLES> 6,787
<ASSETS-OTHER> 5,021
<OTHER-ITEMS-ASSETS> 2,021
<TOTAL-ASSETS> 78,213,369
<PAYABLE-FOR-SECURITIES> 223,688
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 20,592
<TOTAL-LIABILITIES> 244,280
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 61,309,509
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 16,659,580
<NET-ASSETS> 77,969,089
<DIVIDEND-INCOME> 136,228
<INTEREST-INCOME> 372,912
<OTHER-INCOME> 5,155
<EXPENSES-NET> 590,413
<NET-INVESTMENT-INCOME> (76,118)
<REALIZED-GAINS-CURRENT> 13,086,809
<APPREC-INCREASE-CURRENT> (2,245,462)
<NET-CHANGE-FROM-OPS> 10,765,229
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (4,978,185)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 488,529
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 590,413
<AVERAGE-NET-ASSETS> 78,396,691
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0.75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000925460
<NAME> STOCK PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 109,912,001
<INVESTMENTS-AT-VALUE> 143,149,655
<RECEIVABLES> 400,136
<ASSETS-OTHER> 5,195
<OTHER-ITEMS-ASSETS> 174
<TOTAL-ASSETS> 143,555,160
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 207,325
<TOTAL-LIABILITIES> 207,325
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 110,110,181
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 33,237,654
<NET-ASSETS> 143,347,835
<DIVIDEND-INCOME> 2,449,371
<INTEREST-INCOME> 429,090
<OTHER-INCOME> 0
<EXPENSES-NET> 995,494
<NET-INVESTMENT-INCOME> 1,882,967
<REALIZED-GAINS-CURRENT> 27,091,353
<APPREC-INCREASE-CURRENT> 7,613,963
<NET-CHANGE-FROM-OPS> 36,588,283
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 36,588,283
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 856,583
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 995,494
<AVERAGE-NET-ASSETS> 137,213,754
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0.73
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000912751
<NAME> TOTAL RETURN PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 370,284,624
<INVESTMENTS-AT-VALUE> 437,161,305
<RECEIVABLES> 2,735,570
<ASSETS-OTHER> 2,592
<OTHER-ITEMS-ASSETS> 2,897
<TOTAL-ASSETS> 439,902,364
<PAYABLE-FOR-SECURITIES> 26,418,623
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 74,842
<TOTAL-LIABILITIES> 26,493,465
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 346,511,992
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 66,896,907
<NET-ASSETS> 413,408,899
<DIVIDEND-INCOME> 18,358,463
<INTEREST-INCOME> 3,800,498
<OTHER-INCOME> 0
<EXPENSES-NET> 3,215,326
<NET-INVESTMENT-INCOME> 18,943,635
<REALIZED-GAINS-CURRENT> 34,486,025
<APPREC-INCREASE-CURRENT> 12,004,904
<NET-CHANGE-FROM-OPS> 65,434,564
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (41,658,096)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,839,559
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,215,326
<AVERAGE-NET-ASSETS> 428,562,778
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0.75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000918685
<NAME> EMERGING MARKETS PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 15,243,449
<INVESTMENTS-AT-VALUE> 15,956,475
<RECEIVABLES> 276,174
<ASSETS-OTHER> 7,298
<OTHER-ITEMS-ASSETS> 2,349,699
<TOTAL-ASSETS> 18,589,646
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 36,041
<TOTAL-LIABILITIES> 36,041
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 17,899,892
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 653,713
<NET-ASSETS> 18,553,605
<DIVIDEND-INCOME> 272,694
<INTEREST-INCOME> 1,196
<OTHER-INCOME> 0
<EXPENSES-NET> 258,555
<NET-INVESTMENT-INCOME> 15,335
<REALIZED-GAINS-CURRENT> (593,013)
<APPREC-INCREASE-CURRENT> (1,182,400)
<NET-CHANGE-FROM-OPS> (1,760,078)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 7,895,078
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 143,776
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 346,618
<AVERAGE-NET-ASSETS> 19,192,140
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 1.53
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 155
<NAME> SOUTH ASIA PORTFOLIO
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 79419
<INVESTMENTS-AT-VALUE> 80657
<RECEIVABLES> 1963
<ASSETS-OTHER> 1795
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 84415
<PAYABLE-FOR-SECURITIES> 1
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 237
<TOTAL-LIABILITIES> 238
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 82934
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1240
<NET-ASSETS> 84175
<DIVIDEND-INCOME> 1475
<INTEREST-INCOME> 27
<OTHER-INCOME> 0
<EXPENSES-NET> 1725
<NET-INVESTMENT-INCOME> (223)
<REALIZED-GAINS-CURRENT> (6060)
<APPREC-INCREASE-CURRENT> 15209
<NET-CHANGE-FROM-OPS> 8926
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (19749)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 817
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1759
<AVERAGE-NET-ASSETS> 108917
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 1.61
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
