<PAGE>
As filed with the Securities and Exchange Commission on April 26, 1999
1933 Act File No. 2-27962
1940 Act File No. 811-1545
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933 [X]
POST-EFFECTIVE AMENDMENT NO. 55 [X]
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 42 [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 pursuant to paragraph (b)
[X] on May 1, 1999 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] 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.
Balanced Portfolio, Emerging Markets Portfolio, Growth & Income Portfolio,
South Asia Portfolio, Special Investment Portfolio and Utilities Portfolio have
also executed this Registration Statement.
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<PAGE>
LOGO
Investing
for the
21st
Century(R)
EATON VANCE BALANCED FUND
A mutual fund seeking current income and long-term capital growth
EATON VANCE GROWTH & INCOME FUND
A mutual fund seeking growth of principal and income
EATON VANCE SPECIAL EQUITIES FUND
A mutual fund seeking growth of capital
EATON VANCE UTILITIES FUND
A mutual fund seeking high total return and preservation of capital
Prospectus Dated
May 1, 1999
The Securities and Exchange Commission has not approved or disapproved these
securities or determined whether this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
Information in this prospectus
Page Page
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Fund Summaries 2 Sales Charges 13
Investment Objectives & Principal Redeeming Shares 15
Policies and Risks 10 Shareholder Account
Management and Organization 12 Features 15
Valuing Shares 13 Tax Information 16
Purchasing Shares 13 Financial Highlights 17
- -------------------------------------------------------------------------------
This prospectus contains important information about the funds and the service
available to shareholders. Please save it for reference.
<PAGE>
FUND SUMMARIES
EATON VANCE BALANCED FUND
INVESTMENT OBJECTIVE AND PRINCIPAL STRATEGIES. The Fund's investment objective
is to provide current income and long-term growth of capital. The Fund allocates
its assets between common stocks and fixed-income securities. The Fund usually
invests between 50% and 70% of net assets in a diversified portfolio of common
stocks of seasoned companies and between 30% and 50% of net assets in
fixed-income securities (primarily corporate bonds, U.S. Government securities
and short-term investments). Fixed-income securities may be of any investment
quality, but investment in securities rated below investment grade will be
limited to not more than 5% of total assets. The Fund may invest up to 20% of
its total assets in foreign securities. The Fund at times may engage in
derivative transactions (such as futures contracts and options) to protect
against price declines, to enhance returns or as a substitute for purchasing or
selling securities.
When choosing common stocks, the portfolio manager generally seeks to invest in
established growth companies with attractive financial characteristics,
reasonable valuations and an identified catalyst for future growth. The
portfolio manager generally acquires fixed-income securities in order to
maintain a reasonable level of current income, to build or preserve capital, or
to create a buying reserve. The manager relies on the investment adviser's
research staff in making investment decisions, and will generally sell a
security when the fundamentals of the company deteriorate or to pursue more
attractive investment opportunities.
The Fund currently invests its assets in a separate registered investment
company with the same objective and policies as the Fund.
PRINCIPAL RISK FACTORS. The value of Fund shares is sensitive to stock market
volatility. If there is a general decline in the value of U.S. stocks, the value
of Fund shares will also likely decline. Changes in stock market values can be
sudden and unpredictable. Also, although stock values can rebound, there is no
assurance that values will return to previous levels. The Fund has recently held
fewer than 75 stocks; therefore, the Fund's value is more sensitive to
developments affecting particular stocks than would be a more broadly
diversified fund. To minimize this risk, the Fund normally invests in a variety
of industries.
Because the Fund invests in fixed-income securities, the value of Fund shares is
sensitive to increases in prevailing interest rates. The use of derivative
transactions is subject to certain limitations and may expose the Fund to
increased risk of principal loss. Because the Fund invests a portion of its
assets in foreign securities, the value of Fund shares may be affected by
changes in currency exchange rates and developments abroad.
The Fund is not a complete investment program and you may lose money by
investing. An investment in the Fund is not a deposit in a bank and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
2
<PAGE>
EATON VANCE BALANCED FUND
PERFORMANCE INFORMATION. The following bar chart and table provide information
about Balanced Fund's performance, including a comparison of the Fund's
performance to the performance of a broad-based index of domestic equity stocks
and a diversified, unmanaged index of corporate and U.S. government bonds.
Although past performance is no guarantee of future results, this performance
information demonstrates the risk that the value of your investment will change.
The following returns are for Class A shares for each calendar year through
December 31, 1998 and do not reflect sales charges. If the sales charge was
reflected, the returns would be lower.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
20.8% 1.0% 21.3% 6.5% 11.2% -1.8% 29.7% 13.6% 21.6% 13.4%
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
</TABLE>
The Fund's highest quarterly total return was 11.2% for the quarter ended June
30, 1997, and its lowest quarterly return was -5.5% for the quarter ended
September 30, 1990.
<TABLE>
<CAPTION>
One Five Ten
Average Annual Total Return as of December 31, 1998 Year Years Years
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A Shares 6.9% 13.5% 12.7%
Class B Shares 7.6% 13.4% 12.7%
Class C Shares 11.5% 12.9% 12.5%
Standard & Poor's 500 Index 28.5% 24.0% 19.2%
Lehman Brothers Government/Corporate Bond Index 9.5% 7.3% 9.3%
</TABLE>
These returns reflect the maximum sales charge for Class A (5.75%) and any
applicable CDSC for Class B and Class C. The Class B and Class C performance
shown above for the period prior to November 2, 1993 is the performance of Class
A shares, adjusted for the sales charge that applies to Class B or Class C
shares (but not adjusted for any other differences in the expenses of the
classes). The S&P 500 Index is an unmanaged index commonly used as a measure of
U.S. stock market performance. The Lehman Brothers Government/Corporate Index is
a diversified, unmanaged index of corporate and U.S. government bonds. Investors
cannot invest directly in an Index. (Source for S&P 500 Index and Lehman Bros.
Government/Corporate Index: Lipper Inc.)
BALANCED FUND FEES AND EXPENSES. These tables describe the fees and expenses
that you may pay if you buy and hold shares.
<TABLE>
<CAPTION>
Shareholder Fees
(fees paid directly from your Class A Class B Class C
investment)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge (Load) (as a percentage of offering price) 5.75% None None
Maximum Deferred Sales Charge (as a percentage of the lower of net
asset value at time of purchase or time of redemption) None 5.00% 1.00%
Sales Charge Imposed on Reinvested Distributions None None None
Exchange Fee None None None
</TABLE>
<TABLE>
<CAPTION>
Annual Fund Operating Expenses (expenses that are deducted from Fund assets) Class A Class B Class C
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Management Fees 0.61% 0.61% 0.61%
Distribution and Service (12b-1) Fees* 0.00% 0.96% 1.00%
Other Expenses** 0.37% 0.24% 0.24%
----- ----- -----
Total Annual Fund Operating Expenses 0.98% 1.81% 1.85%
</TABLE>
* Long-term shareholders of Class B and Class C shares may pay more than the
economic equivalent of the front-end sales charge permitted by the National
Association of Securities Dealers, Inc.
** Other Expenses for Class A shares includes a service fee of 0.13%.
EXAMPLE. This Example is intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The Example also assumes
that your investment has a 5% return each year and that the operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A shares $ 669 $ 869 $ 1,086 $ 1,707
Class B shares $ 684 $ 969 $ 1,180 $ 2,127
Class C shares $ 288 $ 582 $ 1,001 $ 2,169
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A shares $ 669 $ 869 $ 1,086 $ 1,707
Class B shares $ 184 $ 569 $ 980 $ 2,127
Class C shares $ 188 $ 582 $ 1,001 $ 2,169
</TABLE>
3
<PAGE>
EATON VANCE GROWTH & INCOME FUND
INVESTMENT OBJECTIVE AND PRINCIPAL STRATEGIES. The Fund's investment objective
is to provide growth of principal and income. The Fund invests primarily in
common stocks of companies that appear to offer good prospects for increases in
both earnings and dividends. The Fund may invest up to 20% of its total assets
in foreign companies and up to 20% of net assets in convertible debt securities
(including securities rated below investment grade). The Fund at times may
engage in derivative transactions (such as futures contracts and options) to
protect against price declines, to enhance return or as a substitute for
purchasing or selling securities.
The portfolio manager seeks to purchase securities that are favorably priced in
relation to their fundamental value. The manager relies on the investment
adviser's research staff in making investment decisions and will generally sell
a security when the price objective for the stock is reached or the fundamentals
of the company deteriorate, or to pursue more attractive investment
opportunities. Dividends received by the Fund from its investments are generally
expected to equal or exceed the prevailing dividend level of stocks included in
the Standard & Poor's 500 Index. If, however, Fund (and class) expenses exceed
income, Fund shareholders will not receive distributions.
The Fund currently invests its assets in a separate registered investment
company with the same objective and policies as the Fund.
PRINCIPAL RISK FACTORS. The value of Fund shares is sensitive to stock market
volatility. If there is a general decline in the value of U.S. stocks, the value
of the Fund's shares will also likely decline. Changes in stock market values
can be sudden and unpredictable. Also, although stock values can rebound, there
is no assurance that values will return to previous levels. The Fund has
historically held fewer than 75 stocks at any one time; therefore, the Fund's
value is more sensitive to developments affecting particular stocks than would
be a more broadly diversified fund. To minimize this risk, the Fund normally
invests in a variety of industries.
The use of derivative transactions is subject to certain limitations and may
expose the Fund to increased risk of principal loss. Because the Fund invests a
portion of its assets in foreign securities, the value of Fund shares may be
affected by changes in currency exchange rates and developments abroad.
Convertible debt securities rated below investment grade may have speculative
characteristics.
The Fund is not a complete investment program and you may lose money by
investing in the Fund. An investment in the Fund is not a deposit in a bank and
is not insured or guaranteed by the Federal Deposit Insurance Corporation or any
other government agency.
4
<PAGE>
EATON VANCE GROWTH & INCOME FUND
PERFORMANCE INFORMATION. The following bar chart and table provide information
about Growth & Income Fund's performance, including a comparison of the Fund's
performance to the performance of a broad-based index of domestic equity stocks.
Although past performance is no guarantee of future results, this performance
information demonstrates the risk that the value of your investment will change.
The following returns are for Class A shares for each calendar year through
December 31, 1998 and do not reflect sales charges. If the sales charge was
reflected, the returns would be lower.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
28.9% 0.6% 21.5% 6.9% 4.2% -4.1% 32.8% 20.2% 30.9% 21.8%
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
</TABLE>
The Fund's highest quarterly total return was 17.9% for the quarter ended
December 31, 1998, and its lowest quarterly return was -10.3% for the quarter
ended September 30, 1990.
<TABLE>
<CAPTION>
One Five Ten
Average Annual Total Return as of December 31, 1998 Year Years Years
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A Shares 14.8% 18.1% 15.0%
Class B Shares 15.9% 17.9% 15.0%
Class C Shares 19.8% 17.7% 14.7%
Standard & Poor's 500 Index 28.5% 24.0% 19.2%
</TABLE>
These returns reflect the maximum sales charge for Class A (5.75%) and any
applicable CDSC for Class B and Class C. The Class B and Class C performance
shown above for the period prior to August 17, 1994 and November 4, 1994,
respectively, is the performance of Class A shares, adjusted for the sales
charge that applies to Class B or Class C shares (but not adjusted for any other
differences in the expenses of the classes). The S&P 500 Index is an unmanaged
index commonly used as a measure of U.S. stock market performance. Investors
cannot invest directly in an Index. (Source for S&P 500 Index: Lipper Inc.)
GROWTH & INCOME FUND FEES AND EXPENSES. These tables describe the fees and
expenses that you may pay if you buy and hold shares.
<TABLE>
<CAPTION>
Shareholder Fees (fees paid directly from your investment) Class A Class B Class C
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge (Load) (as a percentage of offering price) 5.75% None None
Maximum Deferred Sales Charge (as a percentage of the lower of net
asset value at time of purchase or time of redemption) None 5.00% 1.00%
Sales Charge Imposed on Reinvested Distributions None None None
Exchange Fee None None None
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Annual Fund Operating Expenses (expenses that are deducted from Fund assets) Class A Class B Class C
- --------------------------------------------------------------------------------------------------------------
Management Fees 0.625% 0.625% 0.625%
Distribution and Service (12b-1) Fees* 0.000% 0.960% 1.000%
Other Expenses** 0.445% 0.315% 0.315%
------ ------ ------
Total Annual Fund Operating Expenses 1.070% 1.900% 1.940%
</TABLE>
* Long-term shareholders of Class B and Class C shares may pay more than the
economic equivalent of the front-end sales charge permitted by the National
Association of Securities Dealers, Inc.
** Other Expenses for Class A shares includes a service fee of 0.13%.
EXAMPLE. This Example is intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The Example also assumes
that your investment has a 5% return each year and that the operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A shares $ 678 $ 896 $ 1,131 $ 1,806
Class B shares $ 693 $ 997 $ 1,226 $ 2,222
Class C shares $ 297 $ 609 $ 1,047 $ 2,264
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A shares $ 678 $ 896 $ 1,131 $ 1,806
Class B shares $ 193 $ 597 $ 1,026 $ 2,222
Class C shares $ 197 $ 609 $ 1,047 $ 2,264
</TABLE>
5
<PAGE>
EATON VANCE SPECIAL EQUITIES FUND
INVESTMENT OBJECTIVE AND PRINCIPAL STRATEGIES. The Fund's investment objective
is to provide growth of capital. The Fund invests primarily in common stocks of
emerging growth companies. Emerging growth companies are companies that are
expected to achieve earnings growth over the long-term that substantially
exceeds the average of all publicly traded stocks in the United States. The Fund
may invest up to 20% of its total assets in foreign companies. The Fund at times
may engage in derivative transactions (such as futures contracts and options) to
protect against price declines, to enhance returns or as a substitute for
purchasing or selling securities.
Many emerging growth companies acquired by the Fund will have annual revenues of
$1 billion or less at the time they are acquired, but the Fund may also invest
in larger or smaller companies having emerging growth characteristics. In making
investment decisions, the portfolio manager relies on the investment adviser's
research staff and will generally sell a security when the price objective for
the stock is reached or the fundamentals of the company deteriorate, or to
pursue more attractive investment opportunities.
The Fund currently invests its assets in a separate registered investment
company with the same objective and policies as the Fund.
PRINCIPAL RISK FACTORS. Shares of the Fund are sensitive to factors affecting
emerging growth companies. The securities of emerging growth companies are
generally subject to greater price fluctuation and investment risk than
securities of more established companies. The value of Fund shares is also
sensitive to stock market volatility. If there is a general decline in the value
of U.S. stocks, the value of the Fund's shares will also likely decline. Changes
in stock market values can be sudden and unpredictable. Also, although stock
values can rebound, there is no assurance that values will return to previous
levels.
The use of derivative transactions is subject to certain limitations and may
expose the Fund to increased risk of principal loss. Because the Fund invests a
portion of its assets in foreign securities, the value of Fund shares may be
affected by changes in currency exchange rates and developments abroad.
The Fund is not a complete investment program and you may lose money by
investing in the Fund. An investment in the Fund is not a deposit in a bank and
is not insured or guaranteed by the Federal Deposit Insurance Corporation or any
other government agency.
6
<PAGE>
EATON VANCE SPECIAL EQUITIES FUND
PERFORMANCE INFORMATION. The following bar chart and table provide information
about Special Equities Fund's performance, including a comparison of the Fund's
performance to the performance of a broad-based index of domestic small
capitalization equity stocks. Although past performance is no guarantee of
future results, this performance information demonstrates the risk that the
value of your investment will change. The following returns are for Class A
shares for each calendar year through December 31, 1998 and do not reflect sales
charges. If the sales charge was reflected, the returns would be lower.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
23.6% 2.5% 57.3% 2.7% 1.1% -9.6% 23.3% 23.8% 14.2% 15.8%
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
</TABLE>
The Fund's highest quarterly total return was 26.9% for the quarter ended March
31, 1991, and its lowest quarterly return was -20.5% for the quarter ended
September 30, 1990.
<TABLE>
<CAPTION>
One Five Ten
Average Annual Total Return as of December 31, 1998 Year Years Years
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A Shares 9.1% 11.5% 13.6%
Class B Shares 10.7% 10.2% 13.0%
Class C Shares 15.4% 10.7% 13.2%
Standard & Poor's Small Cap 600 Index -1.3% 13.2% 13.9%
</TABLE>
These returns reflect the maximum sales charge for Class A (5.75%) and any
applicable CDSC for Class B and Class C. The Class B and Class C performance
shown above for the period prior to August 22, 1994 and November 17, 1994,
respectively, is the performance of Class A shares, adjusted for the sales
charge that applies to Class B or Class C shares (but not adjusted for any other
differences in the expenses of the classes). The S&P Small Cap 600 Index is an
unmanaged index of common stocks of small capitalization companies trading in
the U.S. Investors cannot invest directly in an Index. (Source for S&P Small Cap
600 Index: Lipper Inc.)
SPECIAL EQUITIES FUND FEES AND EXPENSES. These tables describe the fees and
expenses that you may pay if you buy and hold shares.
<TABLE>
<CAPTION>
Shareholder Fees (fees paid directly from your investment) Class A Class B Class C
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge (Load) (as a percentage of offering price) 5.75% None None
Maximum Deferred Sales Charge (as a percentage of the lower of net
asset value at time of purchase or time of redemption) None 5.00% 1.00%
Sales Charge Imposed on Reinvested Distributions None None None
Exchange Fee None None None
</TABLE>
<TABLE>
<CAPTION>
Annual Fund Operating Expenses (expenses that are deducted from Fund assets) Class A Class B Class C
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Management Fees 0.63% 0.63% 0.63%
Distribution and Service (12b-1) Fees* 0.00% 0.98% 1.00%
Other Expenses** 0.60% 0.48% 0.48%
----- ----- -----
Total Annual Fund Operating Expenses 1.23% 2.09% 2.11%
</TABLE>
* Long-term shareholders of Class B and Class C shares may pay more than the
economic equivalent of the front-end sales charge permitted by the National
Association of Securities Dealers, Inc.
** Other Expenses for Class A shares includes a service fee of 0.12%.
EXAMPLE. This Example is intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The Example also assumes
that your investment has a 5% return each year and that the operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Class A shares $ 693 $ 943 $ 1,212 $ 1,978
Class B shares $ 712 $ 1,055 $ 1,324 $ 2,421
Class C shares $ 314 $ 661 $ 1,134 $ 2,441
You would pay the following expenses if you did not redeem your shares:
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Class A shares $ 693 $ 943 $ 1,212 $ 1,978
Class B shares $ 212 $ 655 $ 1,124 $ 2,241
Class C shares $ 214 $ 661 $ 1,134 $ 2,441
7
<PAGE>
EATON VANCE UTILITIES FUND
INVESTMENT OBJECTIVE AND PRINCIPAL STRATEGIES. The Fund's investment objective
is to provide a high level of total return, consisting of capital appreciation
and relatively predictable income. The Fund seeks high total return consistent
with prudent management and preservation of capital. The Fund invests
principally in dividend-paying common stocks of utilities companies, including
(among others) producers and distributors of gas power and electric energy, and
communications service providers. The Fund may also invest up to 20% of its net
assets in fixed-income securities (including up to 10% of net assets in lower
rated fixed-income securities), and up to 20% of its total assets in foreign
securities. The Fund at times may engage in derivative transactions (such as
futures contracts and options) to protect against price declines, to enhance
returns or as a substitute for purchasing or selling securities. The Fund may
also invest in real estate investment trusts ("REITs").
The portfolio manager seeks to purchase securities that are favorably priced in
relation to their fundamental value and which will grow in value over time. The
issuer's dividend payment record is also considered. The manager relies on the
investment adviser's research staff in making investment decisions, and will
generally sell a security when the price objective for the stock is reached or
the fundamentals of the company deteriorate, or to pursue more attractive
investment opportunities.
The Fund currently invests its assets in a separate registered investment
company with the same objective and policies as the Fund.
PRINCIPAL RISK FACTORS. The Fund concentrates in the utilities industries, so
the value of Fund shares will be affected by events that adversely affect those
industries. Utility companies are sensitive to changes in interest rates and
other economic conditions, governmental regulation, the price and availability
of fuel, environmental protection or energy conservation practices, the level
and demand for services, increased competition in deregulated sectors, and the
cost and delay of technological developments. Changes in the utilities
industries and in the dividend policies of utility companies could make it
difficult for the Fund to provide a meaningful level of income. Because the Fund
concentrates its investments, the value of Fund shares may fluctuate more than
if the Fund invested in a broader variety of industries.
The value of Fund shares is also sensitive to stock market volatility. If there
is a general decline in the value of U.S. stocks, the value of the Fund's shares
will also likely decline. Changes in stock market values can be sudden and
unpredictable. Also, although stock values can rebound, there is no assurance
that values will return to previous levels. The Fund has recently held fewer
than 50 stocks; therefore, the Fund's value is more sensitive to developments
affecting particular stocks than would be a more broadly diversified fund.
Because the Fund may invest in fixed-income securities, the value of Fund shares
may be sensitive to increases in interest rates. Fixed-income securities rated
below investment grade may have speculative characteristics. The use of
derivative transactions is subject to certain limitations and may expose the
Fund to increased risk of principal loss. Because the Fund invests a portion of
its assets in foreign securities, the value of Fund shares may be affected by
changes in currency exchange rates and developments abroad. Some of the
securities held by the Fund may be subject to restrictions on resale, making
them less liquid and more difficult to value. Investing in REITs exposes the
Fund to real estate-related and other risks.
The Fund is not a complete investment program and you may lose money by
investing in the Fund. An investment in the Fund is not a deposit in a bank and
is not insured or guaranteed by the Federal Deposit Insurance Corporation or any
other government agency.
8
<PAGE>
EATON VANCE UTILITIES FUND
PERFORMANCE INFORMATION. The following bar chart and table provide information
about Utilities Fund's performance, including a comparison of the Fund's
performance to the performance of a broad-based index of certain utilities
stocks. Although past performance is no guarantee of future results, this
performance information demonstrates the risk that the value of your investment
will change. The following returns are for Class A shares for each calendar year
through December 31, 1998 and do not reflect sales charges. If the sales charge
was reflected, the returns would be lower.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
33.5% 0.2% 23.6% 6.6% 9.5% -12.3% 27.5% 7.0% 16.2% 23.8%
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
</TABLE>
The Fund's highest quarterly total return was 14.4% for the quarter ended
December 31, 1998, and its lowest quarterly return was -7.7% for the quarter
ended March 31, 1994.
<TABLE>
<CAPTION>
One Five Ten
Average Annual Total Return as of December 31, 1998 Year Years Years
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A Shares 16.6% 10.2% 12.1%
Class B Shares 17.9% 10.4% 12.9%
Class C Shares 21.9% 10.0% 12.7%
Standard & Poor's Utilities Index 14.8% 13.9% 14.6%
</TABLE>
These returns reflect the maximum sales charge for Class A (5.75%) and any
applicable CDSC for Class B and Class C. The Class B and Class C performance
shown above for the period prior to November 1, 1993 is the performance of Class
A shares, adjusted for the sales charge that applies to Class B or Class C
shares (but not adjusted for any other differences in the expenses of the
classes). The S&P Utilities Index is an unmanaged index of certain utilities
stocks. Investors cannot invest directly in an Index. (Source of S&P Utilities
Index: Lipper Inc.)
UTILITIES FUND FEES AND EXPENSES. These tables describe the fees and expenses
that you may pay if you buy and hold shares.
<TABLE>
<CAPTION>
Shareholder Fees (fees paid directly from your investment) Class A Class B Class C
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge (Load) (as a percentage of offering price) 5.75% None None
Maximum Deferred Sales Charge (as a percentage of the lower of net
asset value at time of purchase or time of redemption) None 5.00% 1.00%
Sales Charge Imposed on Reinvested Distributions None None None
Exchange Fee None None None
</TABLE>
<TABLE>
<CAPTION>
Annual Fund Operating Expenses (expenses that are deducted from Fund assets) Class A Class B Class C
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Management Fees 0.75% 0.75% 0.75%
Distribution and Service (12b-1) Fees* 0.00% 0.96% 1.00%
Other Expenses** 0.62% 0.40% 0.40%
---- ---- ----
Total Annual Fund Operating Expenses 1.37% 2.11% 2.15%
Management Fee Waiver*** (0.10%) (0.10%) (0.10%)
------- ------- -------
Total Annual Fund Operating Expenses (net waiver) 1.27% 2.01% 2.05%
</TABLE>
* Long-term shareholders of Class B and Class C shares may pay more than the
economic equivalent of the front-end sales charge permitted by the National
Association of Securities Dealers, Inc.
** Other Expenses for Class A shares includes a service fee of 0.22%.
*** The investment adviser has agreed to reduce the advisory fee to 0.65%
annually of average daily net assets up to $500 million and 0.625% annually
on average daily net assets of $500 million and more. The fee declines
further on assets of $1 billion or more.
EXAMPLE. This Example is intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The Example also assumes
that your investment has a 5% return each year and that the operating expenses
continue to reflect the Management Fee waiver described above. Although your
actual costs may be higher or lower, based on these assumptions your costs would
be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A shares $706 $ 984 $ 1,282 $ 2,127
Class B shares $714 $ 1,061 $ 1,334 $ 2,441
Class C shares $318 $ 673 $ 1,154 $ 2,483
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A shares $ 706 $ 984 $ 1,282 $ 2,127
Class B shares $ 214 $ 661 $ 1,134 $ 2,441
Class C shares $ 218 $ 673 $ 1,154 $ 2,483
</TABLE>
9
<PAGE>
INVESTMENT OBJECTIVES & PRINCIPAL POLICIES AND RISKS
The investment objectives and prinicipal policies and risks of the Funds are set
forth below. Each Fund's investment objective may not be changed without
shareholder approval. Certain of a Fund's investment policies may be changed by
the Trustees without shareholder approval. Each Fund currently seeks to meet its
investment objective by investing in a separate open-end investment company that
has the same objective and policies as the Fund.
BALANCED FUND. Balanced Fund's investment objective is to provide current income
and long-term capital growth. The Fund currently invests in Balanced Portfolio.
Balanced Portfolio's investment in equity securities will generally not exceed
75% nor be less than 25% of net assets. The Portfolio invests in a broadly
diversified list of seasoned securities representing a number of different
industries. The portfolio manager places emphasis on equity securities
considered to be of high or improving quality. The foregoing policies cannot be
changed without shareholder approval. Balanced Portfolio also invests at least
25% of its net assets in fixed-income securities, which may include preferred
stocks, corporate bonds, U.S. Government securities, money market instruments
and mortgage-backed obligations. Balanced Portfolio may invest in fixed-income
securities of any credit quality but will limit investment in fixed-income
securities rated below investment grade to not more than 5% of total assets.
GROWTH & INCOME FUND. Growth & Income Fund's investment objective is to provide
growth of principal and income. The Fund currently invests in Growth & Income
Portfolio. Under normal circumstances, Growth & Income Portfolio will invest at
least 65% of its total assets in equity securities. The Portfolio may also
invest up to 20% of its net assets in convertible debt securities of any credit
quality (including securities rated below investment grade).
Dividends received by the Fund from its investments are generally expected to
equal or exceed the prevailing dividend level of stocks included in the Standard
& Poor's 500 Index. The Fund's ability to distribute income to shareholders,
however, depends on the yields available on common stocks and Fund (and class)
expenses. If Fund (and class) expenses exceed income, Fund shareholders will not
receive distributions. The Portfolio may invest in non-income producing stocks.
Growth & Income Portfolio's annual portfolio turnover rate may exceed 100%. A
fund with high turnover (100% or more) pays more commissions and may generate
more capital gains than a fund with a lower rate. Brokerage commissions are an
expense which reduce returns. Capital gains distributions will reduce after tax
returns for shareholders holding Fund shares in taxable accounts.
SPECIAL EQUITIES FUND. Special Equities Fund's investment objective is to
provide growth of capital. The Fund currently invests in Special Equities
Portfolio. Special Equities Portfolio invests primarily in common stocks of
emerging growth companies. Many emerging growth companies acquired by the
Portfolio will have annual revenues of $1 billion or less at the time they are
acquired, but the Portfolio may also invest in larger or smaller companies
having emerging growth characteristics. Many emerging growth companies are in
the early stages of their development, are more dependent on fewer products,
services or product markets than more established companies, may have limited
financial resources or may rely upon a limited management group, may lack
substantial capital reserves and do not have established performance records.
Emerging growth stocks frequently have lower trading volume and tend to be more
sensitive to changes in earnings projections than stocks of more established
companies, making them more volatile and possibly more difficult to value. Under
normal circumstances, Special Equities Portfolio invests at least 65% of its
total assets in equity securities.
Special Equities Portfolio's annual portfolio turnover rate may exceed 100%. A
fund with high turnover (100% or more) pays more commissions and may generate
more capital gains than a fund with a lower rate. Brokerage commissions are an
expense which reduce returns. Capital gains distributions will reduce after tax
returns for shareholders holding Fund shares in taxable accounts.
UTILITIES FUND. Utilities Fund's investment objective is to provide a high level
of total return, consisting of capital appreciation and relatively predictable
income. The Fund seeks high total return consistent with prudent management and
preservation of capital. The Fund currently invests in Utilities Portfolio.
Utilities Portfolio invests principally in dividend-paying common stocks and,
under normal circumstances, invests at least 65% of its total assets in common
stocks of utilities. In recent years, dividend payments by certain utilities
companies have grown more slowly than in the past (or have been reduced) due, in
part, to industry deregulation (increasing price competition) and
diversification into less established lines of business with greater capital
requirements.
"Utilities" are companies engaged in the manufacture, production, generation,
transmission, sale and distribution of water, gas and electric energy, as well
as companies engaged in the communications field, including telephone,
telegraph, satellite, cable, microwave, radio-telephone, mobile communication
and cellular paging, electronic mail, videotext and teletext. A company will be
considered to be in the utilities industry if, during the most recent 12-month
period, at least 50% of the
10
<PAGE>
company's gross revenues, on a consolidated basis, are derived from utilities
industries. The Portfolio's policy of concentrating in utility stocks may not be
changed without shareholder approval.
When consistent with achieving total return, Utilities Portfolio may invest up
to 20% of its net assets in fixed-income securities, including (with respect to
up to 10% of net assets) securities BBB or Baa or below. The Portfolio may also
invest in non-income producing securities and in real estate investment trusts.
REITs are sensitive to the real estate market, interest rates and, in the case
of REITs investing in health care facilities, the health care industry.
Utilities Portfolio's annual portfolio turnover rate may exceed 100%. A fund
with high turnover (100% or more) pays more commissions and may generate more
capital gains than a fund with a lower rate. Brokerage commissions are an
expense which reduce returns. Capital gains distributions will reduce after tax
returns for shareholders holding Fund shares in taxable accounts.
COMMON INVESTMENT PRACTICES. Each Portfolio may invest up to 20% of its total
assets in securities of foreign companies located in developed countries and
traded in established markets. The value of foreign securities is affected by
changes in currency rates, foreign tax laws (including withholding tax),
government policies (in this country or abroad), relations between nations, and
trading, settlement, custodial and other operational risks. In addition, the
costs of investing abroad are generally higher than in the United States, and
foreign securities markets may be less liquid, more volatile and less subject to
governmental supervision than markets in the United States. Each Portfolio may
also invest in depositary receipts which evidence ownership in underlying
foreign securities. Depositary receipts are not subject to the 20% limit set
forth above.
Balanced Portfolio, Growth & Income Portfolio and Utilities Portfolio may invest
a portion of their assets in fixed-income and/or convertible debt securities
that are, at the time of investment, rated ivestment grade or below (which are
those rated Baa or lower by Moody's Investors Service, Inc., or BBB or lower by
Standard & Poor's Ratings Group). Securities rated Baa or BBB or below have
speculative characteristics. Also, changes in economic conditions or other
circumstances are more likely to reduce the capacity of issuers of lower rated
securities to make principal and interest payments. Lower rated securities also
may be subject to greater price volatility than higher rated obligations. The
Portfolios may invest in securities in any rating category, including those in
default.
Each Portfolio at times may engage in derivative transactions (such as options,
futures contracts and options thereon, forward currency exchange contracts and,
in the case of Balanced Portfolio, short sales against-the-box) to protect
against stock price, interest rate or currency rate declines, to enhance return
or as a substitute for the purchase or sale of securities or currencies. The use
of derivatives is highly specialized. The built-in leverage inherent to many
derivative instruments can result in losses that substantially exceed the
initial amount paid or received by the Portfolio. 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 the underlying security or currency.
Derivative hedging transactions may not be effective because of imperfect
correlations and other factors.
Each Portfolio may invest not more than 15% of its net assets in illiquid
securities, which may be difficult to value properly and may involve greater
risks. Illiquid securities include those legally restricted as to resale, and
may include commercial paper issued pursuant to Section 4(2) of the Securities
Act of 1933 and securities eligible for resale pursuant to Rule 144A thereunder.
Certain Section 4(2) and Rule 144A securities may be treated as liquid
securities if the investment adviser determines that such treatment is
warranted. Even if determined to be liquid, holdings of these securities may
increase the level of Portfolio illiquidity if eligible buyers become
uninterested in purchasing them.
Each Portfolio may borrow amounts up to one-third of the value of its total
assets (including borrowings), but it will not borrow more than 5% of the value
of its total assets except to satisfy redemption requests or for other temporary
purposes. Such borrowings would result in increased expense to a Fund and, while
they are outstanding, would magnify increases or decreases in the value of Fund
shares. None of the Portfolios will purchase additional investment securities
while outstanding borrowings exceed 5% of the value of its total assets. During
unusual market conditions, each Portfolio may temporarily invest up to 100% of
its assets in cash or cash equivalents. While temporarily invested, a Portfolio
may not achieve its investment objective.
Like most mutual funds, the Funds and 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. Eaton Vance 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 the
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 and the Portfolios or shareholders. The Year 2000
concern may also adversely impact issuers of securities held by a Portfolio and
the markets on which these securities trade. The foregoing
11
<PAGE>
statement is subject to the Year 2000 Information and Readiness Disclosure Act,
which may protect Eaton Vance and the Funds and the Portfolios from liability
arising from the statement.
MANAGEMENT AND ORGANIZATION
MANAGEMENT. Each Portfolio's investment adviser is Boston Management and
Research ("BMR"), a subsidiary of Eaton Vance Management, 255 State Street,
Boston, Massachusetts 02109. Eaton Vance has been managing assets since 1924 and
managing mutual funds since 1931. Eaton Vance and its subsidiaries currently
manage over $36 billion on behalf of mutual funds, institutional clients and
individuals.
The investment adviser manages the investments of each Portfolio and provides
related office facilities and personnel. 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, 1998, the Balanced Portfolio paid BMR advisory fees
equivalent to 0.61% of its average daily net assets.
Under its investment advisory agreements with Growth & Income Portfolio and
Special Equities 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, 1998, the Growth & Income
Portfolio and Special Equities Portfolio each paid BMR advisory fees equivalent
to 0.625% of average daily net assets.
Under its investment advisory agreement with Utilities Portfolio, BMR is
entitled to receive a monthly advisory fee of .0625% (equivalent to 0.75%
annually) of the average daily net assets of Utilities Portfolio up to $500
million, and .06875% of the average daily net assets of $500 million and more,
which fee is further reduced on assets of $1 billion or more. 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 or more. For the fiscal year ended December 31, 1998, the Utilities
Portfolio paid BMR advisory fees equivalent to 0.65% of its average daily net
assets.
Thomas E. Faust, Jr. is the portfolio manager of the Balanced Portfolio (since
it commenced operations). He also manages another Eaton Vance portfolio, has
been an Eaton Vance portfolio manager for more than 5 years, and is a Vice
President of Eaton Vance and BMR.
Duncan W. Richardson is the portfolio manager of the Growth & Income Portfolio
(since it commenced operations). He also manages other Eaton Vance portfolios,
has been an Eaton Vance portfolio manager for more than 5 years, and is a Vice
President of Eaton Vance and BMR.
Judith P. Saryan is the portfolio manager of the Utilities Portfolio (since
March 1999). She has been an Eaton Vance portfolio manager since March 1999 and
is a Vice President of Eaton Vance and BMR. Prior to joining Eaton Vance, Ms.
Saryan was a portfolio manager and equity analyst for State Street Global
Advisors.
Edward E. Smiley, Jr. is the portfolio manager of the Special Equities Portfolio
(since November 1996). He also manages other Eaton Vance portfolios, has been an
employee of Eaton Vance since November 1996, and is a Vice President of Eaton
Vance and BMR. 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.
The investment adviser and each Fund and Portfolio have adopted Codes of Ethics
governing personal securities transactions. Under the Codes, Eaton Vance
employees may purchase and sell securities (including securities held by a
Portfolio) subject to certain pre-clearance and reporting requirements and other
procedures.
Eaton Vance serves as administrator of each Fund, providing the Fund with
administrative services and related office facilities. Eaton Vance does not
currently receive a fee for serving as administrator.
ORGANIZATION. Each Fund is a series of Eaton Vance Special Investment Trust, a
Massachusetts business trust. The Funds do not hold annual shareholder meetings,
but may hold special meetings for matters that require shareholder approval
(like electing or removing trustees, approving management contracts or changing
investment policies that may only be changed with shareholder approval). Because
a Fund invests in a Portfolio, it may be asked to vote on certain Portfolio
matters (like changes in certain Portfolio investment restrictions). When
necessary, a Fund will hold a meeting of its shareholders to consider the
Portfolio matter and then vote its interest in the Portfolio in proportion to
the votes cast by its shareholders. A Fund can withdraw from a Portfolio at any
time.
12
<PAGE>
Because the Funds use this combined prospectus, a Fund could be held liable for
a misstatement or omission made about another Fund. The Trust's Trustees
considered this in approving the use of a combined prospectus.
VALUING SHARES
Each Fund values its shares once each day only when the New York Stock Exchange
is open for trading (typically Monday through Friday), as of the close of
regular trading on the Exchange (normally 4:00 p.m. eastern time). The price of
Fund shares is their net asset value (plus a sales charge for Class A), which is
derived from Portfolio holdings. Exchange-listed securities are generally valued
at closing sale prices.
When purchasing or redeeming Fund shares, your investment dealer must
communicate your order to the principal underwriter by a specific time each day
in order for the purchase price or the redemption price to be based on that
day's net asset value per share. It is the investment dealer's responsibility to
transmit orders promptly. Each Fund may accept purchase and redemption orders as
of the time of their receipt by certain investment dealers (or their designated
intermediaries).
PURCHASING SHARES
You may purchase Fund shares through your investment dealer or by mailing the
account application form included in this prospectus to the transfer agent (see
back cover for address). Your initial investment must be at least $1,000. The
price of Class A shares is the net asset value plus a sales charge. The price of
Class B and Class C shares is the net asset value; however, you may be subject
to a sales charge (called a "contingent deferred sales charge" or "CDSC") if you
redeem Class B shares within six years of purchase or Class C shares within one
year of purchase. The sales charges are described below. Your investment dealer
can help you decide which class of shares suits your investment needs.
After your initial investment, additional investments of $50 or more may be made
at any time by sending a check payable to the order of the Fund or the transfer
agent directly to the transfer agent (see back cover for address). Please
include your name and account number and the name of the Fund and Class with
each investment.
You may also make automatic investments of $50 or more each month or each
quarter from your bank account. You can establish bank automated investing on
the account application or by calling 1-800-262-1122. The minimum initial
investment amount and Fund policy of redeeming accounts with low account
balances are waived for bank automated investing accounts and certain group
purchase plans.
You may purchase Fund shares in exchange for securities. Please call
1-800-225-6265 for information about exchanging securities for Fund shares. If
you purchase shares through an investment dealer (which includes brokers,
dealers and other financial institutions), that dealer may charge you a fee for
executing the purchase for you. A Fund may suspend the sale of its shares at any
time and any purchase order may be refused.
SALES CHARGES
FRONT-END SALES CHARGE. Class A shares are offered at net asset value per share
plus a sales charge that is determined by the amount of your investment. The
current sales charge schedule is:
<TABLE>
<CAPTION>
Sales Charge Sales Charge Dealer Commission
as Percentage of as Percentage of Net as a Percentage of
Amount of Purchase Offering Price Amount Invested Offering Price
- ----------------------------------------------------------------------------------------------------------------
<S> <C>
Less than $50,000 5.75% 6.10% 5.00%
$50,000 but less than $100,000 4.75% 4.99% 4.00%
$100,000 but less than $250,000 3.75% 3.90% 3.00%
$250,000 but less than $500,000 3.00% 3.09% 2.50%
$500,000 but less than $1,000,000 2.00% 2.04% 1.75%
$1,000,000 or more 0.00* 0.00* See Below
</TABLE>
* No sales charge is payable at the time of purchase on investments of $1
million or more. A CDSC of 1.00% will be imposed on such investments (as
described below) in the event of r edemptions within 12 months of purchase.
The principal underwriter will pay a commission to investment dealers on sales
of $1 million or more as follows: 1.00% on amounts of $1 million or more but
less than $3 million; plus 0.50% on amounts over $3 million but less than $5
million; plus 0.25% on amounts over $5 million. Purchases of $1 million or more
will be aggregated over a 12-month period for
13
<PAGE>
purposes of determining the commission. The principal underwriter may also pay
commissions of up to 1.00% on sales of Class A shares to certain tax-deferred
retirement plans.
CONTINGENT DEFERRED SALES CHARGE. Each class of shares is subject to a CDSC on
certain redemptions. If Class A shares are purchased at net asset value because
the purchase amount is $1 million or more, they are subject to a 1.00% CDSC if
redeemed within 12 months of purchase. Class C shares are subject to a 1.00%
CDSC if redeemed within 12 months of purchase. Class B shares are subject to the
following CDSC schedule:
Year of Redemption After Purchase CDSC
- ------------------------------------------------
First or Second 5%
Third 4%
Fourth 3%
Fifth 2%
Sixth 1%
Seventh or following 0%
The CDSC is based on the lower of the net asset value at the time of purchase or
the time of redemption. Shares acquired through the reinvestment of
distributions are exempt from the CDSC. Redemptions are made first from shares
that are not subject to a CDSC.
REDUCING OR ELIMINATING SALES CHARGES. Front-end sales charges may be reduced
under the right of accumulation or under a statement of intention. Under the
right of accumulation, sales charges are reduced if the current market value of
your current holdings (shares at current offering price), plus your new
purchases, reach $50,000 or more. Class A shares of other Eaton Vance funds
owned by you can be included as part of your current holdings for this purpose.
Under a statement of intention, purchases of $50,000 or more made over a
13-month period are eligible for reduced sales charges. The principal
underwriter may hold 5% of the dollar amount to be purchased in escrow in the
form of shares registered in your name until the statement is satisfied or the
13-month period expires. See the account application for details.
Class A shares are offered at net asset value to clients of financial
intermediaries who charge a fee for their services; accounts affiliated with
those financial intermediaries; tax-deferred retirement plans; investment
clients of Eaton Vance; certain persons affiliated with Eaton Vance; and certain
Eaton Vance and fund service providers. Ask your investment dealer for details.
Class B and Class C CDSCs are waived for redemptions pursuant to a Withdrawal
Plan (see "Shareholder Account Features") and in connection with certain
redemptions from tax-sheltered retirement plans. Call 1-800-225-6265 for
details. The Class B CDSC is also waived following the death of all beneficial
owners of shares, but only if the redemption is requested within one year after
death (a death certificate and other applicable documents may be required).
If you redeem shares, you may reinvest at net asset value any portion or all of
the redemption proceeds in the same class of shares of the Fund (or, for Class A
shares, in Class A shares of any other Eaton Vance fund), provided that the
reinvestment occurs within 60 days of the redemption, and the privilege has not
been used more than once in the prior 12 months. Your account will be credited
with any CDSC paid in connection with the redemption. Reinvestment requests must
be in writing. If you reinvest, you will be sold shares at the next determined
net asset value following receipt of your request.
DISTRIBUTION AND SERVICE FEES. Class B and Class C shares have adopted a plan
under Rule 12b-1 that allows the Fund to pay distribution fees for the sale and
distribution of shares (so-called "12b-1 fees"). Class B and Class C shares pay
distribution fees of .75% of average daily net assets annually. Because these
fees are paid from Fund assets on an ongoing basis, they will increase your cost
over time and may cost you more than paying other types of sales charges. All
classes pay service fees for personal and/or account services not exceeding
0.25% of average daily net assets annually. Class A and Class B only pay service
fees on shares that have been outstanding for 12 months.
14
<PAGE>
REDEEMING SHARES
You can redeem shares in any of the following ways:
By Mail Send your request to the transfer agent along
with any certificates and stock powers. The
request must be signed exactly as your
account is registered and signature
guaranteed. You can obtain a signature
guarantee at certain banks, savings and loan
institutions, credit unions, securities
dealers, securities exchanges, clearing
agencies and registered securities
associations. You may be asked to provide
additional documents if your shares are
registered in the name of a corporation,
partnership or fiduciary.
By Telephone You can redeem up to $50,000 by calling
the transfer agent at 1-800-262-1122 on
Monday through Friday, 9:00 a.m. to 4:00 p.m.
(eastern time). Proceeds of a telephone
redemption can be mailed only to the account
address. Shares held by corporations, trusts
or certain other entities, or subject to
fiduciary arrangements, cannot be redeemed by
telephone.
Through an Investment Dealer Your investment dealer is responsible for
transmitting the order promptly. A dealer
may charge a fee for this service.
If you redeem shares, your redemption price will be based on the net asset value
per share next computed after the redemption request is received. Your
redemption proceeds will be paid in cash within seven days, reduced by the
amount of any applicable CDSC and any federal income tax required to be
withheld. Payments will be sent by mail unless you complete the Bank Wire
Redemptions section of the account application.
If you recently purchased shares, the proceeds of a redemption will not be sent
until the purchase check (including a certified or cashier's check) has cleared.
If the purchase check has not cleared, redemption proceeds may be delayed up to
15 days from the purchase date. If your account value falls below $750 (other
than due to market decline), you may be asked to either add to your account or
redeem it within 60 days. If you take no action, your account will be redeemed
and the proceeds sent to you.
While redemption proceeds are normally paid in cash, redemptions may be paid by
distributing marketable securities. If you receive securities, you could incur
brokerage or other charges in converting the securities to cash.
SHAREHOLDER ACCOUNT FEATURES
Once you purchase shares, the transfer agent establishes a Lifetime Investing
Account(R) for you. Share certificates are issued only on request.
DISTRIBUTIONS. You may have your Fund distributions paid in one of the following
ways:
.Full Reinvest Option Dividends and capital gains are reinvested in
additional shares. This option will be assigned
if you do not specify an option.
.Partial Reinvest Option Dividends are paid in cash and capital gains are
reinvested in additional shares.
.Cash Option Dividends and capital gains are paid in cash.
.Exchange Option Dividends and/or capital gains are reinvested in
additional shares of another Eaton Vance fund
chosen by you. Before selecting this option,
you must obtain a prospectus of the other fund and
consider its objectives and policies carefully.
INFORMATION FROM THE FUND. From time to time, you may be mailed the following:
.Annual and Semi-Annual Reports, containing performance information and
financial statements.
.Periodic account statements, showing recent activity and total share
balance.
.Form 1099 and tax information needed to prepare your income tax returns.
.Proxy materials, in the event a shareholder vote is required.
.Special notices about significant events affecting your Fund.
15
<PAGE>
WITHDRAWAL PLAN. You may redeem shares on a regular monthly or quarterly basis
by establishing a systematic withdrawal plan. Withdrawals will not be subject to
any applicable CDSC if they do not in the aggregate exceed 12% annually of the
account balance at the time the plan is established. A minimum account size of
$5,000 is required to establish a systematic withdrawal plan. Because purchases
of Class A shares are subject to an initial sales charge, you should not make
withdrawals from your account while you are making purchases.
TAX-SHELTERED RETIREMENT PLANS. Class A and Class C shares are available for
purchase in connection with certain tax-sheltered retirement plans. Call
1-800-225-6265 for information. Distributions will be invested in additional
shares for all tax-sheltered retirement plans.
EXCHANGE PRIVILEGE. You may exchange your Fund shares for shares of the same
class of another Eaton Vance fund. Exchanges are generally made at net asset
value. If you hold Class A shares for less than six months and exchange them for
shares subject to a higher sales charge, you will be charged the difference
between the two sales charges. If your shares are subject to a CDSC, the CDSC
will continue to apply to your new shares at the same CDSC rate. For purposes of
the CDSC, your shares will continue to age from the date of your original
purchase.
Before exchanging, you should read the prospectus of the new fund carefully. If
you wish to exchange shares, you may write to the transfer agent (address on
back cover) or call 1-800-262-1122. Periodic automatic exchanges are also
available. The exchange privilege may be changed or discontinued at any time.
You will receive 60 days' notice of any material change to the privilege. This
privilege may not be used for "market timing". If an account (or group of
accounts) makes more than two round-trip exchanges within 12 months, it will be
deemed to be market timing. The exchange privilege may be terminated for market
timing accounts.
TELEPHONE TRANSACTIONS. You can redeem or exchange shares by telephone as
described in this prospectus. The transfer agent and the principal underwriter
have procedures in place to authenticate telephone instructions (such as
verifying personal account information). As long as the transfer agent and
principal underwriter follow these procedures, they will not be responsible for
unauthorized telephone transactions and you bear the risk of possible loss
resulting from telephone transactions. You may decline the telephone redemption
option on the account application. Telephone instructions are tape recorded.
"STREET NAME" ACCOUNTS. If your shares are held in a "street name" account at an
investment dealer, that dealer (and not the Fund or its transfer agent) will
perform all recordkeeping, transaction processing and distribution payments.
Because the Fund will have no record of your transactions, you should contact
your investment dealer to purchase, redeem or exchange shares, to make changes
in your account, or to obtain account information. The transfer of shares in a
"street name" account to an account with another investment dealer or to an
account directly with the Fund involves special procedures and you will be
required to obtain historical information about your shares prior to the
transfer. Before establishing a "street name" account with an investment dealer,
you should determine whether that dealer allows reinvestment of distributions in
"street name" accounts.
ACCOUNT QUESTIONS. If you have any questions about your account or the services
available, please call Eaton Vance Shareholder Services at 1-800-225-6265, or
write to the transfer agent (see back cover for address).
TAX INFORMATION
Utilities Fund pays dividends monthly, Balanced Fund and Growth & Income Fund
pay dividends quarterly, and Special Equities Fund pays dividends annually.
Dividends may not be paid if Fund (and class) expenses exceed Fund income for
the period. Different classes of a Fund will generally distribute different
dividend amounts. Each Fund makes distributions of net realized capital gains,
if any, at least annually. Distributions of income and net short-term capital
gains are taxable as ordinary income. Distributions of any long-term capital
gains are taxable as long-term gains. Over time, distributions by each Fund can
generally be expected to include both dividends taxable as ordinary income and
capital gain distributions taxable as long-term gains. A portion of each Fund's
income distributions may be eligible for the corporate dividends-received
deduction.
Investors who purchase shares shortly before the record date of a distribution
will pay the full price for the shares and then receive some portion of the
price back as a taxable distribution. Certain distributions paid in January will
be taxable to shareholders as if received on December 31 of the prior year. A
redemption of Fund shares, including an exchange for shares of another fund, is
a taxable transaction.
Shareholders should consult with their advisers concerning the applicability of
state, local and other taxes to an investment.
16
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights are intended to help you understand a Fund's financial
performance for the past five years. Certain information in the tables reflects
the financial results for a single Fund share. The total returns in the tables
represent the rate an investor would have earned (or lost) on an investment in
the Fund (assuming reinvestment of all distributions and not taking into account
a sales charge). This information has been audited by PricewaterhouseCoopers
LLP, independent accountants. The report of PricewaterhouseCoopers LLP and each
Fund's financial statements are incorporated herein by reference and included in
the annual report, which is available on request. Each Fund began offering three
classes of shares on January 1, 1998. Prior to that date, each Fund offered only
Class A shares and Class B and C existed as separate funds.
<TABLE>
<CAPTION>
BALANCED FUND
------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED JANUARY 31,
------------------------------------------------------------------------------------------
1998 1997 1996 1995* 1995 1994
------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS A CLASS A CLASS A CLASS A CLASS A
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value - Beginning of year $ 8.700 $13.680 $13.240 $ 8.090 $ 8.150 $ 6.840 $ 7.600 $ 7.390
-------- ------- ------- -------- -------- -------- -------- --------
Income (loss) from operations
Net investment income $ 0.226 $ 0.231 $ 0.216 $ 0.208 $ 0.254 $ 0.254 $ 0.283 $ 0.217
Net realized and unrealized gain
(loss) 0.901 1.451 1.401 1.492 0.821 1.641 (0.623) 0.833
-------- ------- ------- -------- -------- -------- -------- --------
Total income (loss) from operations $ 1.127 $ 1.682 $ 1.617 $ 1.700 $ 1.075 $ 1.895 $ (0.340) $ 1.050
-------- ------- ------- -------- -------- -------- -------- --------
Less distributions
From net investment income $ (0.220) $(0.215) $(0.220) $ (0.200) $ (0.254) $ (0.248) $ (0.275) $ (0.307)
In excess of net investment income -- -- -- -- (0.001) -- -- (0.008)
From net realized gain (1.467) (1.467) (1.467) (0.890) (0.880) (0.337) (0.145) (0.525)
-------- ------- ------- -------- -------- -------- -------- --------
Total distributions $ (1.687) $(1.682) $(1.687) $ (1.090) $ (1.135) $ (0.585) $ (0.420) $ (0.840)
-------- ------- ------- -------- -------- -------- -------- --------
Net asset value - End of year $ 8.140 $13.680 $13.170 $ 8.700 $ 8.090 $ 8.150 $ 6.840 $ 7.600
======== ======= ======= ======== ======== ======== ======== ========
Total return(1) 13.43% 12.59% 12.51% 21.60% 13.61% 28.36% (4.45)% 15.13%
Ratios/Supplemental Data
Net assets, end of year (000's
omitted) $270,277 $72,836 $10,742 $263,730 $240,217 $236,870 $200,419 $227,402
Ratios (as a percentage of average
daily net assets):
Expenses(2) 0.98% 1.81% 1.85% 0.97% 0.93% 0.95%+ 0.91% 0.90%
Net investment income 2.45% 1.62% 1.58% 2.35% 3.03% 3.60%+ 4.05% 4.07%
Portfolio turnover of the
Fund(3) -- -- -- -- -- -- -- 44%
Portfolio turnover of the
Portfolio(3) 49% 49% 49% 37% 64% 47% 28% 15%
</TABLE>
(See footnotes on last page.)
17
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
GROWTH & INCOME FUND
----------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------
1998 1997 1996 1995 1994
----------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS A CLASS A CLASS A CLASS A
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value - Beginning
of year $ 13.760 $15.400 $13.020 $ 13.560 $ 12.760 $10.900 $12.490
-------- ------- ------- -------- -------- ------- -------
Income (loss) from
operations
Net investment income $ 0.088 $(0.031) $(0.033) $ 0.163 $ 0.228 $ 0.250 $ 0.250
Net realized and unrealized
gain (loss) 2.879 3.218 2.715 3.827 2.272 3.255 (0.765)
-------- ------- ------- -------- -------- ------- -------
Total income (loss) from
operations $ 2.967 $ 3.187 $ 2.682 $ 3.990 $ 2.500 $ 3.505 $(0.515)
-------- ------- ------- -------- -------- ------- -------
Less distributions
From net investment income $ (0.090) $(0.001) $(0.005) $ (0.170) $ (0.220) $(0.251) $(0.250)
In excess of net investment
income ---(4) (0.009) -- -- -- -- --
From net realized gain (0.587) (0.587) (0.582) (3.602) (1.480) (1.394) (0.765)
In excess of net realized
gain -- -- (0.005) (0.018) -- -- (0.060)
-------- ------- ------- -------- -------- ------- -------
Total distributions $ (0.677) $(0.597) $(0.592) $ (3.790) $ (1.700) $(1.645) $(1.075)
-------- ------- ------- -------- -------- ------- -------
Net asset value - End of
year $ 16.050 $17.990 $15.110 $ 13.760 $ 13.560 $12.760 $10.900
======== ======= ======= ======== ======== ======= =======
Total return(1) 21.81% 20.85% 20.77% 30.93% 20.20% 32.77% (4.12)%
Ratios/Supplemental Data
Net assets, end of year
(000's omitted) $141,985 $26,708 $ 2,344 $124,569 $106,775 $99,375 $84,299
Ratios (as a percentage of
average daily net assets):
Expenses(2) 1.07% 1.90% 1.94% 1.04% 1.00% 1.04% 0.98%
Net investment income 0.60% (0.22)% (0.24)% 1.07% 1.70% 2.02% 2.09%
Portfolio turnover of the
Fund(3) -- -- -- -- -- -- 66%
Portfolio turnover of the
Portfolio(3) 95% 95% 95% 93% 114% 108% 28%
</TABLE>
(See footnotes on last page.)
18
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
SPECIAL EQUITIES FUND
-----------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------
1998 1997 1996 1995 1994
-----------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS A CLASS A CLASS A CLASS A
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value - Beginning
of year $ 6.990 $13.320 $ 9.960 $ 8.950 $ 7.980 $ 6.880 $ 8.430
------- ------- ------- ------- ------- ------- -------
Income (loss) from
operations
Net investment income $(0.055) $(0.162) $(0.241) $(0.032) $(0.009) $(0.009) $(0.013)
Net realized and unrealized
gain (loss) 1.126 2.223 1.842 0.922 1.874 1.599 (0.807)
------- ------- ------- ------- ------- ------- -------
Total income (loss) from
operations $ 1.071 $ 2.061 $ 1.601 $ 0.890 $ 1.865 $ 1.590 $(0.820)
------- ------- ------- ------- ------- ------- -------
Less distributions
From net realized gain $(0.561) $(0.561) $(0.561) $(2.706) $(0.895) $(0.490) $(0.727)
In excess of net realized
gain -- -- -- (0.144) -- -- --
From total return of capital -- -- -- -- -- -- (0.003)
------- ------- ------- ------- ------- ------- -------
Total distributions $(0.561) $(0.561) $(0.561) $(2.850) $(0.895) $(0.490) $(0.730)
------- ------- ------- ------- ------- ------- -------
Net asset value - End of
year $ 7.500 $14.820 $11.000 $ 6.990 $ 8.950 $ 7.980 $ 6.880
======= ======= ======= ======= ======= ======= =======
Total return(1) 15.82% 15.74% 16.44% 14.18% 23.76% 23.31% (9.60)%
Ratios/Supplemental Data
Net assets, end of year
(000's omitted) $73,896 $ 3,946 $ 709 $73,144 $76,999 $70,456 $63,852
Ratios (as a percentage of
average daily net assets):
Expenses(2) 1.23% 2.09% 2.11% 1.12% 1.04% 1.08% 1.02%
Net investment income (0.76)% (1.25)% (1.24)% (0.46)% (0.10)% (0.12)% (0.17)%
Portfolio turnover of the
Fund(3) -- -- -- -- -- -- 37%
Portfolio turnover of the
Portfolio(3) 116% 116% 116% 156% 91% 81% 19%
</TABLE>
(See footnotes on last page.)
19
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
UTILITIES FUND
------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------------
1998** 1997 1996 1995 1994
------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS A CLASS A CLASS A CLASS A
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value - Beginning
of year $ 8.450 $ 9.670 $10.190 $ 8.770 $ 9.130 $ 7.630 $ 9.140
-------- ------- ------- -------- -------- -------- --------
Income (loss) from
operations
Net investment income $ 0.251 $ 0.209 $ 0.220 $ 0.409 $ 0.626 $ 0.523 $ 0.545
Net realized and unrealized
gain (loss) 1.721 1.970 2.082 0.887 (0.014)++ 1.520 (1.667)
-------- ------- ------- -------- -------- -------- --------
Total income (loss) from
operations $ 1.972 $ 2.179 $ 2.302 $ 1.296 $ 0.612 $ 2.043 $ (1.122)
-------- ------- ------- -------- -------- -------- --------
Less distributions
From net investment income $ (0.235) $(0.202) $(0.185) $ (0.331) $ (0.522) $ (0.364) $ (0.388)
In excess of net investment
income -- -- -- -- -- (0.039) --
From net realized gain (0.037) (0.037) (0.037) (1.243) (0.450) (0.078) --
In excess of net realized
gain -- -- -- (0.042) -- (0.062) --
-------- ------- ------- -------- -------- -------- --------
Total distributions $ (0.272) $(0.239) $(0.222) $ (1.616) $ (0.972) $ (0.543) $ (0.388)
-------- ------- ------- -------- -------- -------- --------
Net asset value - End of
year $ 10.150 $11.610 $12.270 $ 8.450 $ 8.770 $ 9.130 $ 7.630
======== ======= ======= ======== ======== ======== ========
Total return(1) 23.78% 22.89% 22.88% 16.18% 7.00% 27.52% (12.28)%
Ratios/Supplemental Data
Net assets, end of year
(000's omitted) $409,178 $45,958 $ 3,736 $370,457 $401,974 $457,879 $445,133
Ratios (as a percentage of
average daily net assets):
Expenses(2) 1.27% 2.01% 2.05% 1.13% 1.23% 1.19% 1.18%
Net investment income 2.75% 2.01% 1.99% 4.06% 5.59% 4.49% 4.90%
Portfolio turnover of the
Portfolio(3) 78% 78% 78% 169% 166% 103% 107%
</TABLE>
* For the eleven-month period ended December 31, 1995.
** Net investment income per share was computed using average shares
outstanding.
+ Computed on an annualized 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) Total return is calculated assuming a purchase at the net asset value on
the first day and a sale at the net asset value on the last day of each
period reported. Distributions, if any, are assumed to be reinvested at the
net asset value on the reinvestment date. Total return is not computed on
an annualized basis.
(2) For the Balanced Fund, includes the Fund's share of the Portfolio's
allocated expenses for the eleven months ended December 31, 1995, the year
ended January 31, 1995 and for the period from October 28, 1993 to January
31, 1994. For the Growth & Income Fund and Special Equities Fund, includes
the Funds' share of the Portfolios' allocated expenses for the years ended
December 31, 1996 and 1995, and for the period from August 1, 1994 to
December 31, 1994. For the Utilities Fund, includes the Fund's share of the
Portfolio's allocated expenses for the years ended December 31, 1996, 1995
and 1994.
(3) 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 the Fund began investing in the Portfolio as follows: October 28, 1993
for the Balanced and Utilities Funds; and August 1, 1994 for the Growth &
Income and Special Equities Funds.
(4) Distributions in excess of net investment income are less than $0.001 per
share.
20
<PAGE>
LOGO
Investing
for the
21st
Century(R)
MORE INFORMATION
- --------------------------------------------------------------------------------
ABOUT THE FUNDS: More information is available in the statement of
additional information. The statement of additional information is
incorporated by reference into this prospectus. Additional information
about each Portfolio's investments is available in the annual and
semi-annual reports to shareholders. In the annual report, you will
find a discussion of the market conditions and investment strategies
that significantly affected each Fund's performance during the past
year. You may obtain free copies of the statement of additional
information and the shareholder reports by contacting:
Eaton Vance Distributors, Inc.
255 State Street
Boston, MA 02109
1-800-225-6265
website: www.eatonvance.com
You will find and may copy information about each Fund at the
Securities and Exchange Commission's public reference room in
Washington, DC (call 1-800-SEC-0330 for information); on the SEC's
Internet site (http://www.sec.gov); or upon payment of copying fees by
writing to the SEC's public reference room in Washington, DC
20549-6009.
ABOUT SHAREHOLDER ACCOUNTS: You can obtain more information from Eaton
Vance Shareholder Services (1-800-225-6265). If you own shares and
would like to add to, redeem or change your account, please write or
call the transfer agent:
----------------------------------------------------------------------
First Data Investor Services Group
P.O. Box 5123
Westborough, MA 01581-5123
1-800-262-1122
SEC File No. 811-1545 COMBEQP
<PAGE>
LOGO
Investing
for the
21st
Century(R)
EATON VANCE
EMERGING GROWTH FUND
A mutual fund seeking long-term capital appreciation
Prospectus Dated
May 1, 1999
The Securities and Exchange Commission has not approved or disapproved these
securities or determined whether this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
Information in this prospectus
Page Page
- -------------------------------------------------------------------------------
Fund Summary 2 Sales Charges 6
Investment Objective & Principal Redeeming Shares 7
Policies and Risks 4 Shareholder Account
Management and Organization 5 Features 7
Valuing Shares 5 Tax Information 8
Purchasing Shares 5 Financial Highlights 9
- -------------------------------------------------------------------------------
This prospectus contains important information about the Fund and the services
available to shareholders. Please save it for reference.
<PAGE>
FUND SUMMARY
INVESTMENT OBJECTIVE AND PRINCIPAL STRATEGIES. The Fund's investment objective
is to seek long-term capital appreciation. The Fund invests primarily in common
stocks of emerging growth companies that are believed to have superior long-term
earnings growth prospects. Emerging growth companies are companies that are
expected to achieve earnings growth and profit margins over the long-term that
substantially exceed the average of all publicly traded stocks in the United
States. The Fund may invest up to 20% of its assets in foreign companies. The
Fund may also at times engage in derivative transactions to protect against
price declines, to enhance returns or as a substitute for purchasing or selling
securities.
Many emerging growth companies acquired by the Fund will have annual revenues of
$1 billion or less at the time they are acquired, but the Fund may also invest
in larger or smaller companies having emerging growth characteristics. In making
investment decisions, the portfolio manager relies on the investment adviser's
research staff and will generally sell a security when the price objective for
the stock is reached or the fundamentals of the company change, or to pursue
more attractive investment opportunities.
PRINCIPAL RISK FACTORS. Shares of the Fund are sensitive to factors affecting
emerging growth companies. The securities of emerging growth companies are
generally subject to greater price fluctuation and investment risk than
securities of more established companies. The value of Fund shares is also
sensitive to stock market volatility. If there is a general decline in the value
of U.S. stocks, the value of the Fund's shares will also likely decline. Changes
in stock market values can be sudden and unpredictable. Also, although stock
values can rebound, there is no assurance that values will return to previous
levels.
The use of derivative transactions is subject to certain limitations and may
expose the Fund to increased risk of principal loss. Because the Fund invests a
portion of its assets in foreign securities, the value of Fund shares may be
affected by changes in currency exchange rates and developments abroad. Some of
the securities held by the Fund may be subject to restrictions on resale, making
them less liquid and more difficult to value.
The Fund is not a complete investment program and you may lose money by
investing in the Fund. An investment in the Fund is not a deposit in a bank and
is not insured or guaranteed by the Federal Deposit Insurance Corporation or any
other government agency.
2
<PAGE>
PERFORMANCE INFORMATION. The following bar chart and table provide information
about the Fund's performance including a comparision of the Fund's performance
to the performance of an index of 600 small capitalization companies. Although
past performance is no guarantee of future results, this performance information
demonstrates that the value of your investment will change from year-to-year.
These returns are for each calendar year through December 31, 1998 and do not
reflect a sales charge. If the sales charge was reflected, the returns would be
lower.
19.3% 15.3%
1997 1998
The Fund's highest quarterly total return was 24.7% for the quarter ended
December 31, 1998, and its lowest quarterly total return was -17.2% for the
quarter ended September 30, 1998.
<TABLE>
<CAPTION>
One
Average Annual Total Return as of December 31, 1998 Year Life of Fund
- --------------------------------------------------------------------------------------
<S> <C> <C>
Fund Shares 8.6% 13.8%
Standard & Poor's Small Cap 600 Index -1.3% N/A
</TABLE>
These returns reflect the maximum sales charge (5.75%). Life of Fund returns are
calculated from January 31, 1997. The Fund commenced operations on January 2,
1997. The S&P Small Cap 600 Index is an unmanaged index of common stocks of
small capitalization companies trading in the U.S. Investors cannot invest
directly in an index. (Source for S&P Small Cap 600 Index: Lipper Inc.)
FEES AND EXPENSES OF THE FUND. These tables describe the fees and expenses that
you may pay if you buy and hold shares.
Shareholder Fees (fees paid directly from your investment)
- -------------------------------------------------------------------------------
Maximum Sales Charge (Load) (as a percentage of offering price) 5.75%
Maximum Deferred Sales Charge (as a percentage of the lower of
net asset value at time of purchase or time of redemption) None
Sales Charge Imposed on Reinvested Distributions None
Exchange Fee None
Annual Fund Operating Expenses (expenses that are deducted from Fund assets)
- --------------------------------------------------------------------------------
Management Fees* 0.75%
Other Expenses** 9.06%
-----
Total Annual Fund Operating Expenses* 9.81%
* For the fiscal year ended December 31, 1998, the investment adviser waived
the entire amount of the Management Fee and reimbursed the Fund for all of
its Other Expenses. As a result, the Fund paid no expenses.
** Other Expenses includes service fees of 0.23%.
EXAMPLE. This Example is intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The Example also assumes
that your investment has a 5% return each year and that the operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
$ 1,477 $ 3,154 $ 4,673 $ 7,876
3
<PAGE>
INVESTMENT OBJECTIVE & PRINCIPAL POLICIES AND RISKS
The Fund's investment objective is to seek long-term capital appreciation. The
Fund's investment objective may not be changed without shareholder approval.
Certain of the Fund's investment policies may be changed by the Trustees without
shareholder approval.
The Fund invests in a diversified portfolio of publicly-traded emerging growth
companies. Many emerging growth companies acquired by the Fund will have annual
revenues of $1 billion or less at the time they are acquired, but the Fund may
also invest in larger or smaller companies having emerging growth
characteristics. Many emerging growth companies are in the early stages of their
development, are more dependent on fewer products, services or product markets
than more established companies, have limited financial resources or may rely
upon a limited management group, may lack substantial capital reserves and do
not have established performance records. Emerging growth stocks frequently have
lower trading volume and tend to be more sensitive to earnings projections than
stocks of more established companies, making them more volatile and possibly
more difficult to value. Under normal circumstances, the Fund invests at least
65% of its total assets in equity securities of emerging growth companies.
The Fund at times may engage in derivative transactions (such as futures
contracts and options thereon, forward currency exchange contracts, and equity
and currency swaps) to protect against stock price, interest rate or currency
rate declines, or as a substitute for the purchase or sale of securities or
currencies. The use of derivatives is highly specialized. The built-in leverage
inherent to many derivative instruments can result in losses that substantially
exceed the initial amount paid or received by the Fund. 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 the underlying security or currency.
Derivative hedging transactions may not be effective because of imperfect
correlations and other factors.
The Fund may invest up to 20% of assets in securities of foreign companies
located in developed countries and traded in established markets. The value of
foreign securities is affected by changes in currency rates, foreign tax laws
(including withholding tax), government policies (in this country or abroad) and
relations between nations. In addition, the costs of investing abroad are
generally higher than in the United States, and foreign securities markets may
be less liquid, more volatile and less subject to governmental supervision than
markets in the United States. The Fund may also invest in depositary receipts
which evidence ownership in underlying foreign securities.
The Fund may invest not more than 15% of its net assets in illiquid securities,
which may be difficult to value properly and may involve greater risks. Illiquid
securities include those legally restricted as to resale, and may include
commercial paper issued pursuant to Section 4(2) of the Securities Act of 1933
and securities eligible for resale pursuant to Rule 144A thereunder. Certain
Section 4(2) and Rule 144A securities may be treated as liquid securities if the
investment adviser determines that such treatment is warranted. Even if
determined to be liquid, holdings of these securities may increase the level of
Fund illiquidity if eligible buyers become uninterested in purchasing them.
The Fund's annual portfolio turnover rate may exceed 100%. A fund with high
turnover (100% or more) pays more commissions and may generate more capital
gains than a fund with a lower rate. Brokerage commissions are an expense which
also reduces return. Capital gains distributions will reduce after tax returns
for shareholders holding Fund shares in taxable accounts.
The Fund may borrow amounts up to one-third of the value of its total assets
(including borrowings), but it will not borrow more than 5% of the value of its
total assets except to satisfy redemption requests or for other temporary
purposes. Such borrowings would result in increased expense to the Fund and,
while they are outstanding, would magnify increases or decreases in the value of
Fund shares. The Fund will not purchase additional investment securities while
outstanding borrowings exceed 5% of the value of its total assets. During
unusual market conditions, the Fund may temporarily invest up to 100% of its
assets in cash or cash equivalents. While temporarily invested, the Fund may not
achieve its investment objective.
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. Eaton Vance 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
shareholders. The Year 2000 concern may also adversely impact issuers of
securities held by the Fund and the markets on which these securities trade. The
foregoing statement is subject to the Year 2000 Information and Readiness
Disclosure Act, which may protect Eaton Vance and the Fund from liability
arising from the statement.
4
<PAGE>
MANAGEMENT AND ORGANIZATION
MANAGEMENT. The Fund's investment adviser is Eaton Vance Management ("Eaton
Vance"), 255 State Street, Boston, MA 02109. Eaton Vance has been managing
assets since 1924 and managing mutual funds since 1931. Eaton Vance and its
subsidiaries currently manage over $36 billion on behalf of mutual funds,
institutional clients and individuals.
The investment adviser manages the investments of the Fund and provides related
office facilities and personnel. Under its investment advisory agreement with
the Fund, Eaton Vance receives a monthly advisory fee of .0625% (equivalent to
0.75% annually) of the average daily net assets of the Fund up to $500 million.
On net assets of $500 million and over, the annual fee is reduced. For the
fiscal year ended December 31, 1998, 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% of its average daily net
assets.
Edward E. Smiley, Jr. is the portfolio manager of the Fund (since inception). He
also manages other Eaton Vance portfolios, has been an employee of Eaton Vance
since November 1996, and is a Vice President of Eaton Vance. 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.
Manager's Past Performance of Similar Fund. 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) 15.31% (average annual)
through September 19, 1996
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.
ORGANIZATION. The Fund is a series of Eaton Vance Special Investment Trust, a
Massachusetts business trust. The Fund does not hold annual shareholder
meetings, but may hold special meetings for matters that require shareholder
approval (like electing or removing trustees, approving management contracts or
changing investment policies that may only be changed with shareholder
approval).
VALUING SHARES
The Fund values its shares once each day only when the New York Stock Exchange
is open for trading (typically Monday through Friday), as of the close of
regular trading on the Exchange (normally 4:00 p.m. eastern time). The price of
Fund shares is their net asset value (plus a sales charge). Exchange-listed
securities are generally valued at closing sale prices.
When purchasing or redeeming Fund shares, your investment dealer must
communicate your order to the principal underwriter by a specific time each day
in order for the purchase price or redemption price to be based on that day's
net asset value per share. It is the investment dealer's responsibility to
transmit orders promptly. The Fund may accept purchase and redemption orders as
of the time of their receipt by certain investment dealers (or their designated
intermediaries).
PURCHASING SHARES
You may purchase Fund shares through your investment dealer or by mailing the
account application form included in this prospectus to the transfer agent (see
back cover for address). Your initial investment must be at least $1,000. The
price of Fund shares is the net asset value plus a sales charge.
After your initial investment, additional investments of $50 or more may be made
at any time by sending a check payable to the order of the Fund or the transfer
agent directly to the transfer agent (see back cover for address). Please
include your name and account number and the name of the Fund with each
investment.
You may also make automatic investments of $50 or more each month or each
quarter from your bank account. You can establish bank automated investing on
the account application or by calling 1-800-262-1122. The minimum initial
5
<PAGE>
investment amount and Fund policy of redeeming accounts with low account
balances are waived for bank automated investing accounts and certain group
purchase plans.
You may purchase Fund shares in exchange for securities. Please call
1-800-225-6265 for information about exchanging securities for Fund shares. If
you purchase shares through an investment dealer (which includes brokers,
dealers and other financial institutions), that dealer may charge you a fee for
executing the purchase for you. The Fund may suspend the sale of its shares at
any time and any purchase order may be refused.
SALES CHARGES
Fund shares are offered at net asset value per share plus a sales charge that is
determined by the amount of your investment. The current sales charge schedule
is:
<TABLE>
<CAPTION>
Sales Charge Sales Charge Dealer Commission
as Percentage of as Percentage of Net as a Percentage of
Amount of Purchase Offering Price Amount Invested Offering Price
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Less than $50,000 5.75% 6.10% 5.00%
$50,000 but less than $100,000 4.75% 4.99% 4.00%
$100,000 but less than $250,000 3.75% 3.90% 3.00%
$250,000 but less than $500,000 3.00% 3.09% 2.50%
$500,000 but less than $1,000,000 2.00% 2.04% 1.75%
$1,000,000 or more 0.00* 0.00* See Below
</TABLE>
* No sales charge is payable at the time of purchase on investments of $1
million or more. A CDSC of 1.00% will be imposed on such investments (as
described below) in the event of r edemptions within 12 months of purchase.
The principal underwriter will pay a commission to investment dealers on sales
of $1 million or more as follows: 1.00% on amounts of $1 million or more but
less than $3 million; plus 0.50% on amounts over $3 million but less than $5
million; plus 0.25% on amounts over $5 million. Purchases of $1 million or more
will be aggregated over a 12-month period for purposes of determining the
commission. The principal underwriter may also pay commissions of up to 1.00% on
sales of Fund shares to certain tax-deferred retirement plans.
REDUCING OR ELIMINATING SALES CHARGES. Front-end sales charges may be reduced
under the right of accumulation or under a statement of intention. Under the
right of accumulation, sales charges are reduced if the current market value of
your current holdings (shares at current offering price), plus your new
purchases, reach $50,000 or more. Class A shares of other Eaton Vance funds
owned by you can be included as part of your current holdings for this purpose.
Under a statement of intention, purchases of $50,000 or more made over a
13-month period are eligible for reduced sales charges. The principal
underwriter may hold 5% of the dollar amount to be purchased in escrow in the
form of shares registered in your name until the statement is satisfied or the
13-month period expires. See the account application for details.
Fund shares are offered at net asset value to clients of financial
intermediaries who charge a fee for their services; accounts affiliated with
those financial intermediaries; tax-deferred retirement plans; investment
clients of Eaton Vance; certain persons affiliated with Eaton Vance; and certain
Eaton Vance and fund service providers. Ask your investment dealer for details.
If Fund shares are purchased at net asset value because the purchase amount is
$1 million or more, they are subject to a 1.00% contigent deferred sales charge
("CDSC") if redeemed within 12 months of purchase. The CDSC is 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 which are not subject to a CDSC.
If you redeem shares, you may reinvest at net asset value any portion or all of
the redemption proceeds in shares of the Fund (or in Class A shares of any other
Eaton Vance fund), provided that the reinvestment occurs within 60 days of the
redemption, and the privilege has not been used more than once in the prior 12
months. Your account will be credited with any CDSC paid in connection with the
redemption. Reinvestment requests must be in writing. If you reinvest, you will
be sold shares at the next determined net asset value following receipt of your
request.
SERVICE FEES. The Fund pays service fees for personal and/or account services
not exceeding .25% of average daily net assets annually. Service fees are paid
on Fund shares only after they have been outstanding for 12 months.
6
<PAGE>
REDEEMING SHARES
You can redeem shares in any of the following ways:
By Mail Send your request to the transfer agent along
with any certificates and stock powers. The
request must be signed exactly as your
account is registered and signature
guaranteed. You can obtain a signature
guarantee at certain banks, savings and loan
institutions, credit unions, securities
dealers, securities exchanges, clearing
agencies and registered securities
associations. You may be asked to provide
additional documents if your shares are
registered in the name of a corporation,
partnership or fiduciary.
By Telephone You can redeem up to $50,000 by calling the
transfer agent at 1-800-262-1122 on Monday
through Friday, 9:00 a.m. to 4:00 p.m.
(eastern time). Proceeds of a telephone
redemption can be mailed only to the account
address. Shares held by corporations, trusts
or certain other entities, or subject to
fiduciary arrangements, cannot be redeemed by
telephone.
Through an Investment Dealer Your investment dealer is responsible for
transmitting the order promptly. A dealer
may charge a fee for this service.
If you redeem shares, your redemption price will be based on the net asset value
per share next computed after the redemption request is received. Your
redemption proceeds will be paid in cash within seven days, reduced by the
amount of any applicable CDSC and any federal income tax required to be
withheld. Payments will be sent by mail unless you complete the Bank Wire
Redemptions section of the account application.
If you recently purchased shares, the proceeds of a redemption will not be sent
until the purchase check (including a certified or cashier's check) has cleared.
If the purchase check has not cleared, redemption proceeds may be delayed up to
15 days from the purchase date. If your account value falls below $750 (other
than due to market decline), you may be asked to either add to your account or
redeem it within 60 days. If you take no action, your account will be redeemed
and the proceeds sent to you.
While redemption proceeds are normally paid in cash, redemptions may be paid by
distributing marketable securities. If you receive securities, you could incur
brokerage or other charges in converting the securities to cash.
SHAREHOLDER ACCOUNT FEATURES
Once you purchase shares, the transfer agent establishes a Lifetime Investing
Account(R) for you. Share certificates are issued only on request.
DISTRIBUTIONS. You may have your Fund distributions paid in one of the following
ways:
.Full Reinvest Option Dividends and capital gains are reinvested in
additional shares. This option will be assigned
if you do not specify an option.
.Partial Reinvest Option Dividends are paid in cash and capital gains are
reinvested in additional shares.
.Cash Option Dividends and capital gains are paid in cash.
.Exchange Option Dividends and/or capital gains are reinvested in
additional shares of another Eaton Vance fund
chosen by you. Before selecting this option,
you must obtain a prospectus of the other fund
and consider its objectives and policies carefully.
INFORMATION FROM THE FUND. From time to time, you may be mailed the following:
.Annual and Semi-Annual Reports, containing performance information and
financial statements.
.Periodic account statements, showing recent activity and total share
balance.
.Form 1099 and tax information needed to prepare your income tax returns.
.Proxy materials, in the event a shareholder vote is required.
.Special notices about significant events affecting your Fund.
7
<PAGE>
WITHDRAWAL PLAN. You may redeem shares on a regular monthly or quarterly basis
by establishing a systematic withdrawal plan. Withdrawals will not be subject to
any applicable CDSC is they do not in the aggregate exceed 12% annually of the
account balance at the time the plan is established. A minimum account size of
$5,000 is required to establish a systematic withdrawal plan. Because purchases
of Fund shares are subject to an initial sales charge, you should not make
withdrawals from your account while you are making purchases.
TAX-SHELTERED RETIREMENT PLANS. Fund shares are available for purchase in
connection with certain tax-sheltered retirement plans. Call 1-800-225-6265 for
information. Distributions will be invested in additional shares for all
tax-sheltered retirement plans.
EXCHANGE PRIVILEGE. You may exchange your Fund shares for Class A shares of
another Eaton Vance fund. Exchanges are generally made at net asset value. If
you hold Fund shares for less than six months and exchange them for shares
subject to a higher sales charge, you will be charged the difference between the
two sales charges. If your shares are subject to a CDSC, the CDSC will continue
to apply to your new shares at the same CDSC rate. For purposes of the CDSC,
your shares will continue to age from the date of your original purchase.
Before exchanging, you should read the prospectus of the new fund carefully. If
you wish to exchange shares, you may write to the transfer agent (address on
back cover) or call 1-800-262-1122. Periodic automatic exchanges are also
available. The exchange privilege may be changed or discontinued at any time.
You will receive 60 days' notice of any material change to the privilege. This
privilege may not be used for "market timing". If an account (or group of
accounts) makes more than two round-trip exchanges within 12 months, it will be
deemed to be market timing. The exchange privilege may be terminated for market
timing accounts.
TELEPHONE TRANSACTIONS. You can redeem or exchange shares by telephone as
described in this prospectus. The transfer agent and the principal underwriter
have procedures in place to authenticate telephone instructions (such as
verifying personal account information). As long as the transfer agent and
principal underwriter follow these procedures, they will not be responsible for
unauthorized telephone transactions and you bear the risk of possible loss
resulting from telephone transactions. You may decline the telephone redemption
option on the account application. Telephone instructions are tape recorded.
"STREET NAME" ACCOUNTS. If your shares are held in a "street name" account at an
investment dealer, that dealer (and not the Fund or its transfer agent) will
perform all recordkeeping, transaction processing and distribution payments.
Because the Fund will have no record of your transactions, you should contact
your investment dealer to purchase, redeem or exchange shares, to make changes
in your account, or to obtain account information. The transfer of shares in a
"street name" account to an account with another investment dealer or to an
account directly with the Fund involves special procedures and you will be
required to obtain historical information about your shares prior to the
transfer. Before establishing a "street name" account with an investment dealer,
you should determine whether that dealer allows reinvestment of distributions in
"street name" accounts.
ACCOUNT QUESTIONS. If you have any questions about your account or the services
available, please call Eaton Vance Shareholder Services at 1-800-225-6265, or
write to the transfer agent (see back cover for address).
TAX INFORMATION
The Fund pays dividends at least once annually and intends to pay capital gains
annually. Distributions of income and net short-term capital gains are taxable
as ordinary income. Distributions of any long-term capital gains are taxable as
long-term gains. The Fund expects that its distributions will consist primarily
of capital gains. The Fund's distributions will be taxable as described above
whether they are paid in cash or reinvested in additional shares. Investors who
purchase shares shortly before the record date of a distribution will pay the
full price for the shares and then receive some portion of the price back as a
taxable distribution. Certain distributions paid in January will be taxable to
shareholders as if received on December 31 of the prior year. A redemption of
Fund shares, including an exchange for shares of another fund, is a taxable
transaction.
Shareholders should consult with their advisers concerning the applicability of
state, local and other taxes to an investment.
8
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights are intended to help you understand the Fund's
financial performance for the past five years. Certain information in the table
reflects the financial results for a single Fund share. The total returns in the
table represent the rate an investor would have earned (or lost) on an
investment in the Fund (assuming reinvestment of all distributions and not
taking into account a sales charge). This information has been audited by
PricewaterhouseCoopers LLP, independent accountants. The report of
PricewaterhouseCoopers LLP and the Fund's financial statements are incorporated
by reference and included in the annual report, which is available on request.
YEAR ENDED DECEMBER 31,
--------------------------
1998(1) 1997
- -------------------------------------------------------------------------------
Net asset value - Beginning of year $10.830 $ 10.000
------- --------
Income (loss) from operations
Net investment income $ 0.028 $ 0.017
Net realized and unrealized gain (loss) 1.612 1.871
------- --------
Total income (loss) from operations $ 1.640 $ 1.888
------- --------
Less distributions
From net investment income $(0.030) $ --
From net realized gain -- (0.956)
In excess of net realized gain(2) -- (0.102)
------- --------
Total distributions $(0.030) $ (1.058)
Net asset value - End of year $12.440 $ 10.830
------- --------
Total return(3) 15.16% 19.26%
Ratios/Supplemental Data+:
Net assets, end of year (000's omitted) $ 368 $ 307
Ratios (as a percentage of average daily net assets):
Expenses 0.13% 0.18%
Expenses after custodian fee reduction 0.00% 0.00%
Net investment income 0.25% 0.18%
Portfolio turnover 122% 2%
+ The operating expenses of the Fund reflect a reduction of the investment
adviser fee, an allocation of expenses to the manager or administrator, or
both. Had such action not been taken, the ratios and investment income per
share would have been as follows:
Ratios (as a percentage of average daily net assets):
Expenses(2)(3) 9.93% 10.13%
Expenses after custodian fee reduction(2) 9.81% 10.13%
Net investment income (9.56)% (9.95)%
Net investment loss per share $(1.30) $(0.90)
(1) Certain per share amounts are based on average shares outstanding.
(2) The Fund has followed 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.
(3) Total return is calculated assuming a purchase at the net asset value on
the first day and a sale at the net asset value on the last day of each
period reported. Distributions, if any, are assumed to be reinvested at the
net asset value on the reinvestment date. Total return is not computed on
an annualized basis.
9
<PAGE>
LOGO
Investing
for the
21st
Century(R)
MORE INFORMATION
- --------------------------------------------------------------------------------
ABOUT THE FUND: More information is available in the statement of
additional information. The statement of additional information
is incorporated by reference into this prospectus. Additional
information about the Fund's investments is available in the
annual and semi-annual reports to shareholders. In the annual
report, you will find a discussion of the market conditions and
investment strategies that significantly affected the Fund's
performance during the past year. You may obtain free copies of
the statement of additional information and the shareholder
reports by contacting:
Eaton Vance Distributors, Inc.
255 State Street
Boston, MA 02109
1-800-225-6265
website: www.eatonvance.com
You will find and may copy information about the Fund at the
Securities and Exchange Commission's public reference room in
Washington, DC (call 1-800-SEC-0330 for information); on the
SEC's Internet site (http://www.sec.gov); or upon payment of
copying fees by writing to the SEC's public reference room in
Washington, DC 20549-6009.
ABOUT SHAREHOLDER ACCOUNTS: You can obtain more information from
Eaton Vance Shareholder Services (1-800-225-6265). If you own
shares and would like to add to, redeem or change your account,
please write or call the transfer agent:
-----------------------------------------------------------------
First Data Investor Services Group
P.O. Box 5123
Westborough, MA 01581-5123
1-800-262-1122
SEC File No. 811-1545 EMGP
<PAGE>
LOGO
Investing
for the
21st
Century(R)
EATON VANCE
EMERGING MARKETS FUND
A diversified mutual fund investing in emerging market stocks
Prospectus Dated
May 1, 1999
The Securities and Exchange Commission has not approved or disapproved these
securities or determined whether this prospectus is truthful or complete.
Any representation to the contrary is a criminal offense.
Information in this prospectus
Page Page
- -------------------------------------------------------------------------------
Fund Summary 2 Sales Charges 6
Investment Objective & Principal Policies Redeeming Shares 8
and Risks 4 Shareholder Account
Management and Organization 5 Features 8
Valuing Shares 6 Tax Information 9
Purchasing Shares 6 Financial Highlights 10
- -------------------------------------------------------------------------------
This prospectus contains important information about the Fund and the services
available to shareholders. Please save it for reference.
<PAGE>
FUND SUMMARY
INVESTMENT OBJECTIVE AND PRINCIPAL STRATEGIES. The Fund's investment objective
is to seek long-term capital appreciation. The Fund invests in equity securities
(primarily common stocks) of companies located in emerging market countries,
which are those considered to be developing. Emerging market countries include
countries in Asia, Latin America, the Middle East, Southern Europe, Eastern
Europe, Africa and the region comprising the former Soviet Union. The Fund
invests in companies with a broad range of market capitalizations, including
smaller companies. The Fund may make direct investments in companies. In
managing the portfolio, the portfolio manager looks for stocks that will grow in
value over time, regardless of short-term market fluctuations. Stocks will be
sold when they have achieved their perceived value or when a country's stock
market is expected to be depressed for an extended period. The portfolio manager
may use such investments as forward contracts and options to attempt to mitigate
the adverse effects of foreign currency fluctuations.
The Fund currently invests its assets in a separate registered investment
company with the same objective and policies as the Fund.
PRINCIPAL RISK FACTORS. The value of Fund shares is sensitive to stock market
volatility. If there is a decline in the value of exchange-listed stocks in
emerging market countries, the value of Fund shares will also likely decline.
Changes in stock market values can be sudden and unpredictable. Also, although
stock values can rebound, there is no assurance that values will return to
previous levels. Because the Fund invests predominantly in foreign securities,
the value of Fund shares can also be adversely affected by changes in currency
exchange rates and political and economic developments abroad. In emerging
market countries, these risks can be significant. The securities of smaller
companies are generally subject to greater price fluctuation and investment risk
than securities of more established companies.
Because securities markets in emerging market countries are substantially
smaller, less liquid and more volatile than the major securities markets in the
United States, Fund share values will be more volatile. Emerging market
countries are either comparatively underdeveloped or in the process of becoming
developed. Investment in emerging market countries typically involves greater
potential for gain or loss than investments in securities of issuers in
developed countries. Emerging market countries may have relatively unstable
governments and economies based on only a few industries. The value of Fund
shares will likely be particularly sensitive to changes in the economies of such
countries (such as reversals of economic liberalization, political unrest or
changes in trading status).
The Fund is not a complete investment program and you may lose money by
investing in the Fund. An investment in the Fund is not a deposit in a bank and
is not insured or guaranteed by the Federal Deposit Insurance Corporation or any
other government agency. Shareholders may realize substantial losses and should
invest for the long-term.
2
<PAGE>
PERFORMANCE INFORMATION. The following bar chart and table provide information
about the Fund's performance including a comparison of the Fund's performance to
the performance of an index of stocks in emerging markets. Although past
performance is no guarantee of future results, this performance information
demonstrates the risk that the value of your investment will change. The
following returns are for Class B shares for each calendar quarter through
December 31, 1998 and do not reflect sales charges. If the sales charge was
reflected, returns would be lower.
0.9% 28.4% -3.5% -32.9%
1995 1996 1997 1998
The Fund's highest quarterly total return was 13.0% for the quarter ended June
30, 1996, and its lowest quarterly total return was -26.0% for the quarter ended
September 30, 1998.
<TABLE>
<CAPTION>
One Life of
Average Annual Total Return as of December 31, 1998 Year Fund
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Class A Shares -36.5% -5.0%
Class B Shares -36.2% -4.7%
Morgan Stanley Capital International Emerging Markets Index -23.2% -11.5%
</TABLE>
These returns reflect the maximum sales charge for Class A (5.75%) and any
applicable CDSC for Class B. Life of Fund returns are calculated from November
30, 1994. The Morgan Stanley Capital International Emerging Markets Index is an
unmanaged index of stocks traded in emerging markets. Investors cannot invest
directly in an index. (Source for Morgan Stanley Capital International Emerging
Markets Index returns: Lipper, Inc.)
FUND FEES AND EXPENSES. These tables describe the fees and expenses that you may
pay if you buy and hold shares.
<TABLE>
<CAPTION>
Shareholder Fees (fees paid directly from your investment) Class A Class B
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge (Load) (as a percentage of offering price) 5.75% None
Maximum Deferred Sales Charge (as a percentage of the lower of
net asset value at time of purchase or time of redemption) None 5.00%
Sales Charge Imposed on Reinvested Distributions None None
Exchange Fee None None
</TABLE>
<TABLE>
<CAPTION>
Annual Fund Operating Expenses (expenses that are deducted from Fund assets) Class A Class B
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Management Fees 1.25% 1.25%
Distribution and Service (12b-1) Fees* 0.50% 0.95%
Other Expenses 1.90% 1.90%
----- -----
Total Annual Fund Operating Expenses** 3.65% 4.10%
</TABLE>
* Long-term shareholders may pay more than the economic equivalent of the
front-end sales charge permitted by the National Association of Securities
Dealers, Inc.
**During the fiscal year ended December 31, 1998, Total Annual Fund Operating
Expenses were 3.25% for Class A and 3.70% for Class B due to fee reductions
and expense reimbursements by the investment adviser and administrator.
EXAMPLE. This Example is intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The Example also assumes
that your investment has a 5% return each year and that the operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Class A shares $ 921 $ 1,628 $ 2,354 $ 4,257
Class B shares $ 912 $ 1,647 $ 2,297 $ 4,289
You would pay the following expenses if you did not redeem your shares:
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Class A shares $ 921 $ 1,628 $ 2,354 $ 4,257
Class B shares $ 412 $ 1,247 $ 2,097 $ 4,289
3
<PAGE>
INVESTMENT OBJECTIVE & PRINCIPAL POLICIES AND RISKs
The Fund's investment objective is to seek long-term capital appreciation. The
Fund currently seeks to meet its investment objective by investing in Emerging
Markets Portfolio (the "Portfolio"), a separate registered investment company
which has the same objective and policies as the Fund. The Fund's investment
objective and nonfundamental policies may be changed by the Trustees of the
Trust without shareholder approval. The Trustees have no present intention to
make such change and intend to submit any proposed material change in investment
objective to shareholders in advance for their approval.
Under normal market conditions, the Portfolio will invest at least 65% of its
total assets in equity securities of companies domiciled in or deriving more
than 50% of their revenues or profits from emerging market countries. Emerging
market countries are 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 Portfolio
ordinarily invests in at least three emerging market countries at all times.
More than 25% of the Portfolio's total assets may be denominated in any single
currency. Although not a common practice, the portfolio manager may use hedging
techniques (such as forward contracts and options) to attempt to mitigate
adverse effects of foreign currency fluctuations.
The Portfolio's annual portfolio turnover rate may exceed 100%. A fund with high
turnover (100% or more) pays more commissions and may generate more capital
gains than a fund with a lower rate. Paying more commissions may also reduce
return. Capital gains distributions will reduce after tax returns for
shareholders holding the Fund in taxable accounts.
Investments in emerging market countries can be considered speculative, and
therefore may offer higher potential for gains and losses than investments in
developed markets of the world. Political and economic structures in emerging
market countries generally lack the social, political and economic stability
characteristics of the United States. Governmental actions can have a
significant effect on the economic conditions in such countries, which could
adversely affect the value and liquidity of the Portfolio's investments. The
laws of countries in the region relating to limited liability of corporate
shareholders, fiduciary duties of officers and directors, and the bankruptcy of
state enterprises are generally less well developed than or different from such
laws in the United States. It may be more difficult to obtain a judgment in the
courts of these countries than it is in the United States. In addition,
unanticipated political or social developments may affect the value of the
Portfolio's investments in these countries and the availability to the Portfolio
of additional investments.
Settlement of securities transactions in emerging market countries are subject
to risk of loss, may be delayed and are generally less frequent than in the
United States, which could affect the liquidity of the Portfolio's assets. In
addition, disruptions due to work stoppages and trading improprieties in these
securities markets have caused such markets to close. If extended closings were
to occur in stock markets where the Portfolio was heavily invested, the Fund's
ability to redeem Fund shares could become correspondingly impaired. To mitigate
these risks, the Portfolio may maintain a higher cash position than it otherwise
would, thereby possibly diluting its return, or the Portfolio may have to sell
more liquid securities which it would not otherwise choose to sell. The
Portfolio may also borrow amounts up to 25% of the value of its net assets, but
it will not borrow more than 5% of the value of its total assets except to
satisfy redemption requests or for other temporary purposes. Such borrowings
would result in increased expense to the Fund and, while they are outstanding,
would magnify increases or decreases in the value of Fund shares. The Portfolio
will not purchase additional investment securities while outstanding borrowings
exceed 5% of the value of its total assets. The Fund may suspend redemption
privileges or postpone the date of payment for more than seven days after a
redemption order is received under certain circumstances.
The values of foreign investments are affected by changes in currency rates or
exchange control regulations, application of foreign tax laws (including
withholding tax), changes in governmental administration or economic or monetary
policy (in this country or abroad) or changed circumstances in dealings between
nations. Exchange rates may fluctuate significantly over short periods of time
causing the Portfolio's net asset value to fluctuate as well. Costs are incurred
in connection with conversions between various currencies. In addition, foreign
brokerage commissions, custody fees and other costs of investing in foreign
securities are generally higher than in the United States, and foreign
securities markets may be less liquid, more volatile and less subject to
governmental supervision than in the United States. Investments in foreign
issuers could be affected by other factors not present in the United States,
including expropriation, armed conflict, confiscatory taxation, lack of uniform
accounting and auditing standards, less publicly available financial and other
information and potential difficulties in enforcing contractual obligations. As
a result, the Portfolio may be exposed to greater risk and will be more
dependent on the investment adviser's ability to assess such risk than if the
Portfolio invested solely in more developed countries.
4
<PAGE>
The Portfolio may invest in securities of smaller, less seasoned companies. Such
securities are generally subject to greater price fluctuations, limited
liquidity, higher transaction costs and higher investment risk. Smaller
companies may have limited product lines, markets or financial resources, and
they may be dependent on a limited management group. There is generally less
publicly available information about such companies than larger, more
established companies. The Portfolio may make direct investments in companies in
private placement transactions. Because of the absence of any public trading
market for some of these investments (such as those that are legally restricted)
it may take longer to liquidate these positions at fair value than would be the
case for publicly traded securities.
During unusual market conditions, the Portfolio may temporarily invest up to
100% of its assets in cash or cash equivalents. While temporarily invested, the
Portfolio may not achieve its investment objective.
Like most mutual funds, the Fund and 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. Eaton Vance 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 the
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 and the Portfolio or shareholders. The Year 2000
concern may also adversely impact issuers of securities held by the Portfolio
and the market on which these securities trade, and may be more difficult to
address in less-developed countries where access to advanced technology may be
limited. The foregoing statement is subject to the Year 2000 Information and
Readiness Disclosure Act, which may protect Eaton Vance and the Fund and the
Portfolio from liability arising from the statement.
MANAGEMENT AND ORGANIZATION
MANAGEMENT. The Portfolio's investment adviser is Lloyd George Investment
Management (Bermuda) Limited ("Lloyd George"), 3808 One Exchange Square,
Central, Hong Kong. The investment adviser manages Portfolio investments and
provides related office facilities and personnel. Lloyd George receives a
monthly advisory fee of .0625% (equivalent to 0.75% annually) of the Portfolio's
average daily net assets up to $500 million. This fee declines at intervals
above $500 million. For the fiscal year ended December 31, 1998, absent a fee
reduction the Portfolio would have paid advisory fees of 0.75% of its average
daily net assets.
Kiersten Christensen is the portfolio manager of the Portfolio (since May 1,
1996). She has been a portfolio manger at Lloyd George since December,1994 and
was previously an analyst at Lloyd George beginning in January, 1993. Ms.
Christensen is supported by a team of investment professionals at Lloyd George.
In particular, Robert Lloyd George, Scobie Dickinson Ward, John Stainsby and
Pamela Chan set macro-economic and general investment strategy, and provide
investment research and ideas for all of Lloyd George's managed accounts and
funds.
Lloyd George and its affiliates act as investment adviser to various individual
and institutional clients and manage $1.3 billion in assets. A team of Lloyd
George analysts currently monitor over 400 emerging markets stocks. These stocks
are screened from a 2000 stock universe based on a variety of criteria. The
Lloyd George global emerging markets team communicates weekly on stock specific
and macroeconomic issues. Eaton Vance's corporate parent owns 21% of Lloyd
George's corporate parent. Lloyd George, its affiliates and two of the
Portfolio's Trustees are domiciled outside of the United States. Because of
this, it would be difficult for the Portfolio to bring a claim or enforce a
judgment against them.
Eaton Vance manages the business affairs of the Fund and administers the
business affairs of the Portfolio. For these services, Eaton Vance receives a
monthly fee from each of the Fund and Portfolio of 1/48 of 1% (equal to 0.25%
annually) of average daily net assets up to $500 million. This fee declines at
intervals above $500 million. For the fiscal year ended December 31, 1998,
absent a fee reduction Eaton Vance would have earned management fees of 0.25% of
the Fund's average daily net assets and administration fees of 0.25% of the
Portfolio's average daily net assets. Eaton Vance has been managing assets since
1924 and managing mutual funds since 1931. Eaton Vance and its subsidiaries
currently manage over $36 billion on behalf of mutual funds, institutional
clients and individuals.
The investment adviser, Eaton Vance and the Fund and Portfolio have adopted
Codes of Ethics governing personal securities transactions. Under the Codes,
employees of the investment adviser and Eaton Vance may purchase and sell
securities (including securities held by the Portfolio) subject to certain
reporting requirements and other procedures.
ORGANIZATION. The Fund is a series of Eaton Vance Special Investment Trust, a
Massachusetts business trust. The Fund does not hold annual shareholder
meetings, but may hold special meetings for matters that require shareholder
approval (like electing or removing trustees, approving management contracts or
changing investment policies that may only be changed with shareholder
approval). Because the Fund invests in the Portfolio, it may be asked to vote on
certain Portfolio
5
<PAGE>
matters (like changes in certain Portfolio investment restrictions). When
necessary, the Fund will hold a meeting of its shareholders to consider the
Portfolio matter and then vote its interest in the Portfolio in proportion to
the votes cast by its shareholders. The Fund can withdraw from the Portfolio at
any time.
VALUING SHARES
The Fund values its shares once each day only when the New York Stock Exchange
is open for trading (typically Monday through Friday), as of the close of
regular trading on the Exchange (normally 4:00 p.m. eastern time). The price of
Fund shares is their net asset value (plus a sales charge for Class A), which is
derived from Portfolio holdings. Exchange-listed securities are valued at
closing sale prices; however, the investment adviser may use the fair value of a
security if events occurring after the close of an exchange would materially
affect net asset value. Because foreign securities trade on days when Fund
shares are not priced, net asset value can change at times when Fund shares
cannot be redeemed.
When purchasing or redeeming Fund shares, your investment dealer must
communicate your order to the principal underwriter by a specific time each day
in order for the purchase price or the redemption price to be based on that
day's net asset value per share. It is the investment dealer's responsibility to
transmit orders promptly. The Fund may accept purchase and redemption orders as
of the time of their receipt by certain investment dealers (or their designated
intermediaries).
PURCHASING SHARES
You may purchase Fund shares through your investment dealer or by mailing the
account application form included in this prospectus to the transfer agent (see
back cover for address). Your initial investment must be at least $1,000. The
price of Class A shares is the net asset value plus a sales charge. The price of
Class B shares is the net asset value; however, you may be subject to a sales
charge (called a "contingent deferred sales charge" or "CDSC") if you redeem
within six years of purchase. The sales charges are described below. Your
investment dealer can help you decide which class of shares suits your
investment needs.
After your initial investment, additional investments of $50 or more may be made
at any time by sending a check payable to the order of the Fund or the transfer
agent directly to the transfer agent (see back cover for address). Please
include your name and account number and the name of the Fund and Class with
each investment.
You may also make automatic investments of $50 or more each month or each
quarter from your bank account. You can establish bank automated investing on
the account application or by calling 1-800-262-1122. The minimum initial
investment amount and Fund policy of redeeming accounts with low account
balances are waived for bank automated investing accounts and certain group
purchase plans.
You may purchase Fund shares in exchange for securities. Please call
1-800-225-6265 for information about exchanging securities for Fund shares. If
you purchase shares through an investment dealer (which includes brokers,
dealers and other financial institutions), that dealer may charge you a fee for
executing the purchase for you. The Fund may suspend the sale of its shares at
any time and any purchase order may be refused.
SALES CHARGES
FRONT-END SALES CHARGE. Class A shares are offered at net asset value per share
plus a sales charge that is determined by the amount of your investment. The
current sales charge schedule is:
<TABLE>
<CAPTION>
Sales Charge Sales Charge Dealer Commission
as Percentage of as Percentage of Net as a Percentage of
Amount of Purchase Offering Price Amount Invested Offering Price
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000 5.75% 6.10% 5.00%
$50,000 but less than $100,000 4.75% 4.99% 4.00%
$100,000 but less than $250,000 3.75% 3.90% 3.00%
$250,000 but less than $500,000 3.00% 3.09% 2.50%
$500,000 but less than $1,000,000 2.00% 2.04% 1.75%
$1,000,000 or more 0.00* 0.00* See Below
</TABLE>
* No sales charge is payable at the time of purchase on investments of $1
million or more. A CDSC of 1.00% will be imposed on such investments (as
described below) in the event of redemptions within 12 months of purchase.
6
<PAGE>
The principal underwriter will pay a commission to investment dealers on sales
of $1 million or more as follows: 1.00% on amounts of $1 million or more but
less than $3 million; plus 0.50% on amounts over $3 million but less than $5
million; plus 0.25% on amounts over $5 million. Purchases of $1 million or more
will be aggregated over a 12-month period for purposes of determining the
commission. The principal underwriter may also pay commissions of up to 1.00% on
sales of Class A shares to certain tax-deferred retirement plans.
CONTINGENT DEFERRED SALES CHARGE. Each Class of shares is subject to a CDSC on
certain redemptions. If Class A shares are purchased at net asset value because
the purchase amount is $1 million or more, they are subject to a 1% CDSC if
redeemed within 12 months of purchase. Class B shares are subject to the
following CDSC schedule:
Year of Redemption After Purchase CDSC
- --------------------------------------------
First or Second 5%
Third 4%
Fourth 3%
Fifth 2%
Sixth 1%
Seventh or following 0%
The CDSC is based on the lower of the net asset value at the time of purchase or
the time of redemption. Shares acquired through the reinvestment of
distributions are exempt from the CDSC. Redemptions are made first from shares
that are not subject to a CDSC.
REDUCING OR ELIMINATING SALES CHARGES. Front-end sales charges may be reduced
under the right of accumulation or under a statement of intention. Under the
right of accumulation, sales charges are reduced if the current market value of
your current holdings (shares at current offering price), plus your new
purchases, reach $50,000 or more. Class A shares of other Eaton Vance funds
owned by you can be included as part of your current holdings for this purpose.
Under a statement of intention, purchases of $50,000 or more made over a
13-month period are eligible for reduced sales charges. The principal
underwriter may hold 5% of the dollar amount to be purchased in escrow in the
form of shares registered in your name until the statement is satisfied or the
13-month period expires. See the account application for details.
Class A shares are offered at net asset value to clients of financial
intermediaries who charge a fee for their services; accounts affiliated with
those financial intermediaries; tax-deferred retirement plans; investment
clients of Eaton Vance; certain persons affiliated with Eaton Vance; and certain
Eaton Vance and fund service providers. Ask your investment dealer for details.
The Class B CDSC is waived for redemptions pursuant to a Withdrawal Plan (see
"Shareholder Account Features") and in connection with certain redemptions from
tax-sheltered retirement plans. Call 1-800-225-6265 for details. The Class B
CDSC is also waived following the death of all beneficial owners of shares, but
only if the redemption is requested within one year after death (a death
certificate and other applicable documents may be required).
If you redeem shares, you may reinvest at net asset value any portion or all of
the redemption proceeds in the same class of shares of the Fund (or, for Class A
shares, in Class A shares of any other Eaton Vance fund), provided that the
reinvestment occurs within 60 days of the redemption, and the privilege has not
been used more than once in the prior 12 months. Your account will be credited
with any CDSC paid in connection with the redemption. Reinvestment requests must
be in writing. If you reinvest, you will be sold shares at the next determined
net asset value following receipt of your request.
DISTRIBUTION AND SERVICE FEES. The Fund has adopted a plan under Rule 12b-1 that
allows the Fund to pay distribution fees for the sale and distribution of shares
(so called "12b-1 fees"). Class B shares pay distribution fees of 0.75% of
average daily net assets annually. Class A shares pay a distribution fee of
0.50% of average daily net assets on shares outstanding for less than twelve
months and a distribution fee of 0.25% on shares outstanding for more than
twelve months. Because these fees are paid from Fund assets on an ongoing basis,
they will increase your cost over time and may cost you more than paying other
types of sales charges. Both classes pay service fees for personal and/or
account services not exceeding 0.25% of average daily net assets annually. Class
A and Class B shares only pay service fees on shares that have been outstanding
for twelve months.
7
<PAGE>
REDEEMING SHARES
You can redeem shares in any of the following ways:
By Mail Send your request to the transfer agent along
with any certificates and stock powers. The
request must be signed exactly as your
account is registered and signature
guaranteed. You can obtain a signature
guarantee at certain banks, savings and loan
institutions, credit unions, securities
dealers, securities exchanges, clearing
agencies and registered securities
associations. You may be asked to provide
additional documents if your shares are
registered in the name of a corporation,
partnership or fiduciary.
By Telephone You can redeem up to $50,000 b y calling the
transfer agent at 1-800-262-1122 on Monday
through Friday, 9:00 a.m. to 4:00 p.m.
(eastern time). Proceeds of a telephone
redemption can be mailed only to the account
address. Shares held by corporations, trusts
or certain other entities, or subject to
fiduciary arrangements, cannot be redeemed by
telephone.
Through an Investment Dealer Your investment dealer is responsible for
transmitting the order promptly. A dealer
may charge a fee for this service.
If you redeem shares, your redemption price will be based on the net asset value
per share next computed after the redemption request is received. Your
redemption proceeds will be paid in cash within seven days, reduced by the
amount of any applicable CDSC and any federal income tax required to be
withheld. Payments will be sent by mail unless you complete the Bank Wire
Redemptions section of the account application.
If you recently purchased shares, the proceeds of a redemption will not be sent
until the purchase check (including a certified or cashier's check) has cleared.
If the purchase check has not cleared, redemption proceeds may be delayed up to
15 days from the purchase date. If your account value falls below $750 (other
than due to market decline), you may be asked to either add to your account or
redeem it within 60 days. If you take no action, your account will be redeemed
and the proceeds sent to you.
While redemption proceeds are normally paid in cash, redemptions may be paid by
distributing marketable securities. If you receive securities, you could incur
brokerage or other charges in converting the securities to cash.
SHAREHOLDER ACCOUNT FEATURES
Once you purchase shares, the transfer agent establishes a Lifetime Investing
Account(R) for you. Share certificates are issued only on request.
DISTRIBUTIONS. You may have your Fund distributions paid in one of the following
ways:
.Full Reinvest Option Dividends and capital gains are reinvested in
additional shares. This option will be assigned
if you do not specify an option.
.Partial Reinvest Option Dividends are paid in cash and capital gains are
reinvested in additional shares.
.Cash Option Dividends and capital gains are paid in cash.
.Exchange Option Dividends and/or capital gains are reinvested in
additional shares of another Eaton Vance fund
chosen by you. Before selecting this option, you
must obtain a prospectus of the other fund and
consider its objectives and policies carefully.
INFORMATION FROM THE FUND. From time to time, you may be mailed the following:
.Annual and Semi-Annual Reports, containing performance information and
financial statements.
.Periodic account statements, showing recent activity and total share
balance.
.Form 1099 and tax information needed to prepare your income tax returns.
.Proxy materials, in the event a shareholder vote is required.
.Special notices about significant events affecting your Fund.
8
<PAGE>
WITHDRAWAL PLAN. You may redeem shares on a regular monthly or quarterly basis
by establishing a systematic withdrawal plan. Withdrawals will not be subject to
applicable CDSC if they do not in the aggregate exceed 12% annually of the
account balance at the time the plan is established. A minimum account size of
$5,000 is required to establish a systematic withdrawal plan. Because purchases
of Class A shares are subject to an initial sales charge, you should not make
withdrawals from your account while you are making purchases.
TAX-SHELTERED RETIREMENT PLANS. Class A shares are available for purchase in
connection with certain tax-sheltered retirement plans. Call 1-800-225-6265 for
information. Distributions will be invested in additional shares for all
tax-sheltered retirement plans.
EXCHANGE PRIVILEGE. You may exchange your Fund shares for shares of the same
class of another Eaton Vance fund. Exchanges are generally made at net asset
value. If you hold Class A shares for less than six months and exchange them for
shares subject to a higher sales charge, you will be charged the difference
between the two sales charges. If your shares are subject to a CDSC, the CDSC
will continue to apply to your new shares at the same CDSC rate. For purposes of
the CDSC, your shares will continue to age from the date of your original
purchase.
Before exchanging, you should read the prospectus of the new fund carefully. If
you wish to exchange shares, you may write to the transfer agent (address on
back cover) or call 1-800-262-1122. Periodic automatic exchanges are also
available. The exchange privilege may be changed or discontinued at any time.
You will receive 60 days' notice of any material change to the privilege. This
privilege may not be used for "market timing". If an account (or group of
accounts) makes more than two round-trip exchanges within 12 months, it will be
deemed to be market timing. The exchange privilege may be terminated for market
timing accounts.
TELEPHONE TRANSACTIONS. You can redeem or exchange shares by telephone as
described in this prospectus. The transfer agent and the principal underwriter
have procedures in place to authenticate telephone instructions (such as
verifying personal account information). As long as the transfer agent and
principal underwriter follow these procedures, they will not be responsible for
unauthorized telephone transactions and you bear the risk of possible loss
resulting from telephone transactions. You may decline the telephone redemption
option on the account application. Telephone instructions are tape recorded.
"STREET NAME" ACCOUNTS. If your shares are held in a "street name" account at an
investment dealer, that dealer (and not the Fund or its transfer agent) will
perform all recordkeeping, transaction processing and distribution payments.
Because the Fund will have no record of your transactions, you should contact
your investment dealer to purchase, redeem or exchange shares, to make changes
in your account, or to obtain account information. The transfer of shares in a
"street name" account to an account with another investment dealer or to an
account directly with the Fund involves special procedures and you will be
required to obtain historical information about your shares prior to the
transfer. Before establishing a "street name" account with an investment dealer,
you should determine whether that dealer allows reinvestment of distributions in
"street name" accounts.
ACCOUNT QUESTIONS. If you have any questions about your account or the services
available, please call Eaton Vance Shareholder Services at 1-800-225-6265, or
write to the transfer agent (see back cover for address).
TAX INFORMATION
The Fund pays dividends at least once annually and intends to pay capital gains
(if any) annually. Distributions of income and net short-term capital gains will
be taxable as ordinary income. Distributions of any long-term capital gains are
taxable as long-term gains. The Fund expects that its distributions will consist
primarily of capital gains. The Fund's distributions will be taxable as
described above whether they are paid in cash or reinvested in additional
shares. The Fund's distributions will generally not qualify for the
dividends-received deduction for corporations.
Investors who purchase shares shortly before the record date of a distribution
will pay the full price for the shares and then receive some portion of the
price back as a taxable distribution. Certain distributions paid in January will
be taxable to shareholders as if received on December 31 of the prior year. A
redemption of Fund shares, including an exchange for shares of another fund, is
a taxable transaction.
Shareholders should consult with their advisers concerning the applicability of
state, local and other taxes to an investment.
9
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights are intended to help you understand the Fund's
financial performance for the past five years. Certain information in the table
reflects the financial results for a single Fund share. The total returns in the
table represent the rate an investor would have earned (or lost) on an
investment in the Fund (assuming reinvestment of all distributions and not
taking into account a sales charge). This information has been audited by
Deloitte & Touche LLP, independent accountants. The report of Deloitte & Touche
LLP and the Fund's financial statements are incorporated herein by reference and
included in the annual report, which is available on request. The Fund began
offering two classes of shares on January 1, 1998. Prior to that date, the Fund
offered only Class B shares and Class A existed as a separate fund.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------
1998 1997 1996 1995 1994*
-----------------------------------------------------------------------
CLASS A CLASS B CLASS B CLASS B CLASS B CLASS B
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value -
Beginning of year $11.970 $11.910 $12.720 $10.050 $ 9.960 $10.000
------- ------- ------- ------- ------- -------
Income (loss) from
operations:
Net investment loss $(0.146) $(0.236) $(0.012) $(0.143) $(0.268) $(0.003)
Net realized and
unrealized gain
(loss) on
investments (3.764) $(3.684) (0.436) 2.988 0.358 (0.037)
------- ------- ------- ------- ------- -------
Total income (loss)
from operations $(3.910) $(3.920) $(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 $ 8.060 $ 7.990 $11.910 $12.720 $10.050 $ 9.96
======= ======= ======= ======= ======= =======
Total Return(1) (32.66)% (32.91)% (3.48)% 28.49% 0.90% (0.40)%
Ratios/Supplemental
Data+:
Net assets, end of
year (000's omitted) $ 3,066 $ 4,064 $ 9,074 $ 6,725 $ 1,801 $ 229
Ratios (as a
percentage of
average daily net
assets):
Expenses (2)(3) 3.25% 3.70% 3.50% 3.41% 6.19% 0.75+
Expenses after
custodian fee
reduction (2) 2.95% 3.40% 3.32% 3.19% 6.19% --
Net investment loss (1.34)% (1.79%) (1.92)% (1.76)% (4.64)% (0.75)%+
Portfolio turnover 117% 117% 160% 125% 98% 0%
</TABLE>
+ The operating expenses of the Fund reflect a reduction of the investment
adviser fee, an allocation of expenses to the adviser or administrator, or
both. Had such action not been taken, the ratios and investment income per
share would have been as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Ratios (as a percentage of average daily net assets):
Expenses (2)(3) 3.65% 4.10% 3.79% 4.52% 11.35% 9.14%+
Expenses after custodian fee reduction (2) 3.35% 3.80% 3.61% 4.30% 11.35% --
Net investment loss (1.74)% (2.19)% (2.21)% (2.87)% (9.80)% (9.14)%+
Net investment loss per share $(0.188) $(0.289) $(0.014) $(0.233) $(0.566) $(0.037)
</TABLE>
+ 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. Distributions, if any, are assumed to be reinvested at the
net asset value on the reinvestment date. Total return is not computed on
an annualized basis.
(2) Includes the Fund's share of its corresponding Portfolio's allocated
expenses.
(3) The expense ratios for the year ended December 31, 1995 and the periods
thereafter, have been adjusted to reflect a change in reporting
requirements. The new reporting guidelines require the Fund, as well as the
Portfolio, to increase its expense ratio by the effect of any expense
offset arrangements with its service providers. The expense ratios for the
prior period has not been adjusted to reflect this change.
10
<PAGE>
LOGO
Investing
for the
21st
Century(R)
MORE INFORMATION
- --------------------------------------------------------------------------------
ABOUT THE FUND: More information is available in the statement of
additional information. The statement of additional information
is incorporated by reference into this prospectus. Additional
information about the Portfolio's investments is available in the
annual and semi-annual reports to shareholders. In the annual
report, you will find a discussion of the market conditions and
investment strategies that significantly affected the Fund's
performance during the past year. You may obtain free copies of
the statement of additional information and the shareholder
reports by contacting:
Eaton Vance Distributors, Inc.
255 State Street
Boston, MA 02109
1-800-225-6265
website: www.eatonvance.com
You will find and may copy information about the Fund at the
Securities and Exchange Commission's public reference room in
Washington, DC (call 1-800-SEC-0330 for information); on the
SEC's Internet site (http://www.sec.gov); or upon payment of
copying fees by writing to the SEC's public reference room in
Washington, DC 20549-6009.
ABOUT SHAREHOLDER ACCOUNTS: You can obtain more information from
Eaton Vance Share- holder Services (1-800-225-6265). If you own
shares and would like to add to, redeem or change your account,
please write or call the transfer agent:
-----------------------------------------------------------------
First Data Investor Services Group
P.O. Box 5123
Westborough, MA 01581-5123
1-800-262-1122
SEC File No. 811-1545 EMP
<PAGE>
LOGO
Investing
for the
21st
Century(R)
EATON VANCE INSTITUTIONAL
EMERGING MARKETS FUND
A diversified mutual fund investing in emerging market stocks
Prospectus Dated
May 1, 1999
The Securities and Exchange Commission has not approved or disapproved these
securities or determined whether this prospectus is truthful or complete.
Any representation to the contrary is a criminal offense.
Information in this prospectus
Page Page
- -------------------------------------------------------------------------------
Fund Summary 2 Purchasing Shares 6
Investment Objective & Principal Policies Redeeming Shares 7
and Risks 4 Shareholder Account
Management and Organization 5 Features 7
Valuing Shares 6 Tax Information 8
- -------------------------------------------------------------------------------
This prospectus contains important information about the Fund and the services
available to shareholders. Please save it for reference.
<PAGE>
Fund Summary
INVESTMENT OBJECTIVE AND PRINCIPAL STRATEGIES. The Fund's investment objective
is to seek long-term capital appreciation. The Fund invests in equity securities
(primarily common stocks) of companies located in emerging market countries,
which are those considered to be developing. Emerging market countries include
countries in Asia, Latin America, the Middle East, Southern Europe, Eastern
Europe, Africa and the region comprising the former Soviet Union. The Fund
invests in companies with a broad range of market capitalizations, including
smaller companies. The Fund may make direct investments in companies. In
managing the portfolio, the portfolio manager looks for stocks that will grow in
value over time, regardless of short-term market fluctuations. Stocks will be
sold when they have achieved their perceived value or when a country's stock
market is expected to be depressed for an extended period. The portfolio manager
may use such investments as forward contracts and options to attempt to mitigate
the adverse effects of foreign currency fluctuations.
The Fund currently invests its assets in Emerging Markets Portfolio, a separate
registered investment company with the same objective and policies as the Fund.
PRINCIPAL RISK FACTORS. The value of Fund shares is sensitive to stock market
volatility. If there is a decline in the value of exchange-listed stocks in
emerging market countries, the value of Fund shares will also likely decline.
Changes in stock market values can be sudden and unpredictable. Also, although
stock values can rebound, there is no assurance that values will return to
previous levels. Because the Fund invests predominantly in foreign securities,
the value of Fund shares can also be adversely affected by changes in currency
exchange rates and political and economic developments abroad. In emerging
market countries, these risks can be significant. The securities of smaller
companies are generally subject to greater price fluctuation and investment risk
than securities of more established companies.
Because securities markets in emerging market countries are substantially
smaller, less liquid and more volatile than the major securities markets in the
United States, Fund share values will be more volatile. Emerging market
countries are either comparatively underdeveloped or in the process of becoming
developed. Investment in emerging market countries typically involves greater
potential for gain or loss than investments in securities of issuers in
developed countries. Emerging market countries may have relatively unstable
governments and economies based on only a few industries. The value of Fund
shares will likely be particularly sensitive to changes in the economies of such
countries (such as reversals of economic liberalization, political unrest or
changes in trading status).
The Fund is not a complete investment program and you may lose money by
investing in the Fund. An investment in the Fund is not a deposit in a bank and
is not insured or guaranteed by the Federal Deposit Insurance Corporation or any
other government agency. Shareholders may realize substantial losses and should
invest for the long-term.
2
<PAGE>
PERFORMANCE INFORMATION. The following bar chart and table provide information
about the investment performance of another mutual fund that also invests in
Emerging Markets Portfolio. This mutual fund (the "Retail Fund") is distributed
through retail distribution channels and is subject to higher expenses than the
Fund. The returns are adjusted to eliminate the Retail Fund's sales charge, but
they are not adjusted to reflect other differences in expenses between the Fund
and the Retail Fund. The returns in the bar chart and the table are for each
calendar year of the Retail Fund's operations through December 31, 1998. The
table below also contains a comparison of the Retail Fund's performance to the
performance of an index of stocks traded in emerging markets. Although past
performance is no guarantee of future results, the Retail Fund's performance
demonstrates the risk that the value of your investment will change.
Annual Total Returns of a Similar Eaton Vance Fund
0.9% 28.4% -3.5% -32.9%
1995 1996 1997 1998
The Retail Fund's highest quarterly total return was 13.0% for the quarter ended
June 30, 1996, and its lowest quarterly total return was -26.0% for the quarter
ended September 30, 1998.
<TABLE>
<CAPTION>
One Life of
Average Annual Total Return as of December 31, 1998 Year Fund
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Retail Fund Shares -36.5% -5.0%
Morgan Stanley Capital International Emerging Markets Index -23.2% -11.5%
</TABLE>
Returns are calculated from November 30, 1994. The Morgan Stanley Capital
International Emerging Markets Index is an unmanaged index of stocks traded in
emerging markets. Investors cannot invest directly in an index. (Source for
Morgan Stanley Capital International Emerging Markets Index returns: Lipper,
Inc.)
FUND FEES AND EXPENSES. These tables describe the fees and expenses that you may
pay if you buy and hold shares.
Shareholder Fees (fees paid directly from your investment)
- -------------------------------------------------------------------------------
Maximum Sales Charge (Load) (as a percentage of offering price) None
Maximum Deferred Sales Charge None
Sales Charge Imposed on Reinvested Distributions None
Exchange Fee None
Annual Fund Operating Expenses (expenses that are deducted from Fund assets)
- --------------------------------------------------------------------------------
Management Fees 1.00%
Other Expenses* 1.50%
-----
Total Annual Fund Operating Expenses 2.50%
Expense Reimbursement** (1.00)%
-------
Total Annual Fund Operating Expenses (net reimbursement) 1.50%
* Other Expenses is estimated.
** For the first 12 months of operations, Eaton Vance will reimburse the Fund
pursuant to contractual reimbursement to the extent Other Expenses exceeds
0.50% of average daily net assets.
EXAMPLE. This Example is intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The expense reimbursement
is reflected only in expenses for the first year. The Example also assumes that
your investment has a 5% return each year and that the operating expenses are
reduced in the first year of operations as described above. Although your actual
costs may be higher or lower, based on these assumptions your costs would
be:
1 Year 3 Years
- --------------------------------------------------------------------------------
Fund Shares $15 $78
3
<PAGE>
INVESTMENT OBJECTIVE & PRINCIPAL POLICIES AND RISKS
The Fund's investment objective is to seek long-term capital appreciation. The
Fund currently seeks to meet its investment objective by investing in Emerging
Markets Portfolio (the "Portfolio"), a separate registered investment company
which has the same objective and policies as the Fund. The Fund's investment
objective and nonfundamental policies may be changed by the Trustees of the
Trust without shareholder approval. The Trustees have no present intention to
make such change and intend to submit any proposed material change in investment
objective to shareholders in advance for their approval.
Under normal market conditions, the Portfolio will invest at least 65% of its
total assets in equity securities of companies domiciled in or deriving more
than 50% of their revenues or profits from emerging market countries. Emerging
market countries are 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 Portfolio
ordinarily invests in at least three emerging market countries at all times.
More than 25% of the Portfolio's total assets may be denominated in any single
currency. Although not a common practice, the portfolio manager may use hedging
techniques (such as forward contracts and options) to attempt to mitigate
adverse effects of foreign currency fluctuations.
The Portfolio's annual portfolio turnover rate may exceed 100%. A fund with high
turnover (100% or more) pays more commissions and may generate more capital
gains than a fund with a lower rate. Paying more commissions may also reduce
return. Capital gains distributions will reduce after tax returns for
shareholders holding the Fund in taxable accounts.
Investments in emerging market countries can be considered speculative, and
therefore may offer higher potential for gains and losses than investments in
developed markets of the world. Political and economic structures in emerging
market countries generally lack the social, political and economic stability
characteristics of the United States. Governmental actions can have a
significant effect on the economic conditions in such countries, which could
adversely affect the value and liquidity of the Portfolio's investments. The
laws of countries in the region relating to limited liability of corporate
shareholders, fiduciary duties of officers and directors, and the bankruptcy of
state enterprises are generally less well developed than or different from such
laws in the United States. It may be more difficult to obtain a judgment in the
courts of these countries than it is in the United States. In addition,
unanticipated political or social developments may affect the value of the
Portfolio's investments in these countries and the availability to the Portfolio
of additional investments.
Settlement of securities transactions in emerging market countries are subject
to risk of loss, may be delayed and are generally less frequent than in the
United States, which could affect the liquidity of the Portfolio's assets. In
addition, disruptions due to work stoppages and trading improprieties in these
securities markets have caused such markets to close. If extended closings were
to occur in stock markets where the Portfolio was heavily invested, the Fund's
ability to redeem Fund shares could become correspondingly impaired. To mitigate
these risks, the Portfolio may maintain a higher cash position than it otherwise
would, thereby possibly diluting its return, or the Portfolio may have to sell
more liquid securities which it would not otherwise choose to sell. The
Portfolio may also borrow amounts up to 25% of the value of its net assets, but
it will not borrow more than 5% of the value of its total assets except to
satisfy redemption requests or for other temporary purposes. Such borrowings
would result in increased expense to the Fund and, while they are outstanding,
would magnify increases or decreases in the value of Fund shares. The Portfolio
will not purchase additional investment securities while outstanding borrowings
exceed 5% of the value of its total assets. The Fund may suspend redemption
privileges or postpone the date of payment for more than seven days after a
redemption order is received under certain circumstances.
The values of foreign investments are affected by changes in currency rates or
exchange control regulations, application of foreign tax laws (including
withholding tax), changes in governmental administration or economic or monetary
policy (in this country or abroad) or changed circumstances in dealings between
nations. Exchange rates may fluctuate significantly over short periods of time
causing the Portfolio's net asset value to fluctuate as well. Costs are incurred
in connection with conversions between various currencies. In addition, foreign
brokerage commissions, custody fees and other costs of investing in foreign
securities are generally higher than in the United States, and foreign
securities markets may be less liquid, more volatile and less subject to
governmental supervision than in the United States. Investments in foreign
issuers could be affected by other factors not present in the United States,
including expropriation, armed conflict, confiscatory taxation, lack of uniform
accounting and auditing standards, less publicly available financial and other
information and potential difficulties in enforcing contractual obligations. As
a result, the Portfolio may be exposed to greater risk and will be more
dependent on the investment adviser's ability to assess such risk than if the
Portfolio invested solely in more developed countries.
4
<PAGE>
The Portfolio may invest in securities of smaller, less seasoned companies. Such
securities are generally subject to greater price fluctuations, limited
liquidity, higher transaction costs and higher investment risk. Smaller
companies may have limited product lines, markets or financial resources, and
they may be dependent on a limited management group. There is generally less
publicly available information about such companies than larger, more
established companies. The Portfolio may make direct investments in companies in
private placement transactions. Because of the absence of any public trading
market for some of these investments (such as those that are legally restricted)
it may take longer to liquidate these positions at fair value than would be the
case for publicly traded securities.
During unusual market conditions, the Portfolio may temporarily invest up to
100% of its assets in cash or cash equivalents. While temporarily invested, the
Portfolio may not achieve its investment objective.
Like most mutual funds, the Fund and 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. Eaton Vance 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 the
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 and the Portfolio or shareholders. The Year 2000
concern may also adversely impact issuers of securities held by the Portfolio
and the market on which these securities trade, and may be more difficult to
address in less-developed countries where access to advanced technology may be
limited. The foregoing statement is subject to the Year 2000 Information and
Readiness Disclosure Act, which may protect Eaton Vance and the Fund and the
Portfolio from liability arising from the statement.
MANAGEMENT AND ORGANIZATION
MANAGEMENT. The Portfolio's investment adviser is Lloyd George Investment
Management (Bermuda) Limited ("Lloyd George"), 3808 One Exchange Square,
Central, Hong Kong. The investment adviser manages Portfolio investments and
provides related office facilities and personnel. Lloyd George receives a
monthly advisory fee of .0625% (equivalent to 0.75% annually) of the Portfolio's
average daily net assets up to $500 million. This fee declines at intervals
above $500 million.
Kiersten Christensen is the portfolio manager of the Portfolio (since May 1,
1996). She has been a portfolio manger at Lloyd George since December,1994 and
was previously an analyst at Lloyd George beginning in January, 1993. Ms.
Christensen is supported by a team of investment professionals at Lloyd George.
In particular, Robert Lloyd George, Scobie Dickinson Ward, John Stainsby and
Pamela Chan set macro-economic and general investment strategy, and provide
investment research and ideas for all of Lloyd George's managed accounts and
funds.
Lloyd George and its affiliates act as investment adviser to various individual
and institutional clients and manage $1.3 billion in assets. A team of Lloyd
George analysts currently monitor over 400 emerging markets stocks. These stocks
are screened from a 2000 stock universe based on a variety of criteria. The
Lloyd George global emerging markets team communicates weekly on stock specific
and macroeconomic issues. Eaton Vance's corporate parent owns 21% of Lloyd
George's corporate parent. Lloyd George, its affiliates and two of the
Portfolio's Trustees are domiciled outside of the United States. Because of
this, it would be difficult for the Portfolio to bring a claim or enforce a
judgment against them.
Eaton Vance administers the business affairs of the Portfolio. For these
services, Eaton Vance receives a monthly fee from the Portfolio of 1/48 of 1%
(equal to 0.25% annually) of average daily net assets up to $500 million. This
fee declines at intervals above $500 million. Eaton Vance has been managing
assets since 1924 and managing mutual funds since 1931. Eaton Vance and its
subsidiaries currently manage over $36 billion on behalf of mutual funds,
institutional clients and individuals.
The investment adviser, Eaton Vance and the Fund and Portfolio have adopted
Codes of Ethics governing personal securities transactions. Under the Codes,
employees of the investment adviser and Eaton Vance may purchase and sell
securities (including securities held by the Portfolio) subject to certain
reporting requirements and other procedures.
ORGANIZATION. The Fund is a series of Eaton Vance Special Investment Trust, a
Massachusetts business trust. The Fund does not hold annual shareholder
meetings, but may hold special meetings for matters that require shareholder
approval (like electing or removing trustees, approving management contracts or
changing investment policies that may only be changed with shareholder
approval). Because the Fund invests in the Portfolio, it may be asked to vote on
certain Portfolio matters (like changes in certain Portfolio investment
restrictions). When necessary, the Fund will hold a meeting of its shareholders
to consider the Portfolio matter and then vote its interest in the Portfolio in
proportion to the votes cast by its shareholders. The Fund can withdraw from the
Portfolio at any time.
5
<PAGE>
VALUING SHARES
The Fund values its shares once each day only when the New York Stock Exchange
is open for trading (typically Monday through Friday), as of the close of
regular trading on the Exchange (normally 4:00 p.m. eastern time). The price of
Fund shares is their net asset value, which is derived from Portfolio holdings.
Exchange-listed securities are valued at closing sale prices; however, the
investment adviser may use the fair value of a security if events occurring
after the close of an exchange would materially affect net asset value. Because
foreign securities trade on days when Fund shares are not priced, net asset
value can change at times when Fund shares cannot be redeemed.
When purchasing or redeeming Fund shares, your investment dealer must
communicate your order to the principal underwriter by a specific time each day
in order for the purchase price or the redemption price to be based on that
day's net asset value per share. It is the investment dealer's responsibility to
transmit orders promptly. The Fund may accept purchase and redemption orders as
of the time of their receipt by certain investment dealers (or their designated
intermediaries).
PURCHASING SHARES
Fund shares are offered to clients of financial intermediaries who charge an
advisory, management, consulting or similar fee for their services; accounts
affiliated with those financial intermediaries; investment clients of Eaton
Vance; certain persons affiliated with Eaton Vance; and certain Eaton Vance and
fund service providers. Your initial investment must be at least $250,000.
Subsequent investments may be made at any time. The investment minimum is waived
for persons affiliated with Eaton Vance and its service providers.
The Fund provides shareholders ease of investment by allowing same day wire
purchases. You may purchase Fund shares through your investment dealer or by
requesting your bank to transmit immediately available funds (Federal Funds) by
wire to the address set forth below. To make an initial investment by wire, you
must first telephone the Fund Order Department at 800-225-6265 (extension 7805)
to advise of your action and to be assigned an account number. Failure to call
will delay the order. The Account Application form which accompanies this
prospectus must be promptly forwarded to the transfer agent. Additional
investments may be made at any time through the same wire procedure. The Fund
Order Department must be advised by telephone of each transmission. Wire funds
to:
Boston Safe Deposit & Trust Co.
ABA #011001234
Account Number 080411
Further Credit Eaton Vance Institutional Emerging Markets Fund - Fund #481
---
Your Account Number [Insert your account number - see below]
The Fund intends at all times to be as fully invested as is feasible in order to
maximize its earnings. Accordingly, purchase orders will be executed at the net
asset value next determined after their receipt by the Fund only if the Fund has
received payment in cash or in Federal Funds. If you purchase shares through an
investment dealer, that dealer may charge you a fee for executing the purchase
for you.
From time to time the Fund may suspend the continuous offering of its shares.
During any such suspension, shareholders who reinvest their distributions in
additional shares will be permitted to continue such reinvestments, and the Fund
may permit tax sheltered retirement plans which own shares to purchase
additional shares of the Fund. The Fund may also refuse any order for the
purchase of shares.
6
<PAGE>
REDEEMING SHARES
You can redeem shares in one of two ways:
By Wire If you have given complete written
authorization in advance you may request that
redemption proceeds be wired directly to your
bank account. The bank designated may be any
bank in the United States. The redemption
request may be made by calling the Eaton
Vance Fund Order Department at 800-225-6265
(extension 3) or by sending a signature
guaranteed letter of instruction to the
transfer agent (see back cover for address).
You may be required to pay the costs of
redeeming by wire; however, no costs are
currently charged. The Fund may suspend or
terminate this expedited payment procedure
upon at least 30 days notice.
Through an Investment Dealer Your investment dealer is responsible for
transmitting the order promptly. A dealer
may charge a fee for this service.
If you redeem shares, your redemption price will be based on the net asset value
per share next computed after the redemption request is received. Your
redemption proceeds will be paid in cash within seven days, reduced by the
amount of any federal income tax required to be withheld. Payments will be sent
by mail unless you complete the Bank Wire Redemptions section of the account
application.
SHAREHOLDER ACCOUNT FEATURES
DISTRIBUTIONS. You may have your Fund distributions paid in one of the following
ways:
.Full Reinvest Option Dividends and capital gains are reinvested in
additional shares. This option will be assigned if
you do not specify an option.
.Partial Reinvest Option Dividends are paid in cash and capital gains are
reinvested in additional shares.
.Cash Option Dividends and capital gains are paid in cash.
INFORMATION FROM THE FUND. From time to time, you may be mailed the following:
.Annual and Semi-Annual Reports, containing performance information and
financial statements.
.Periodic account statements, showing recent activity and total share
balance.
.Form 1099 and tax information needed to prepare your income tax returns.
.Proxy materials, in the event a shareholder vote is required.
.Special notices about significant events affecting your Fund.
EXCHANGE PRIVILEGE. You may exchange your Fund shares for shares of another
Eaton Vance Institutional fund. Exchanges are made at net asset value. Before
exchanging, you should read the prospectus of the new fund carefully. The
exchange privilege may be changed or discontinued at any time. You will receive
60 days' notice of any material change to the privilege. This privilege may not
be used for "market timing". If an account (or group of accounts) makes more
than two round-trip exchanges within twelve months, it will be deemed to be
market timing. The exchange privilege may be terminated for market timing
accounts.
TELEPHONE TRANSACTIONS. The transfer agent and the principal underwriter have
procedures in place to authenticate telephone instructions (such as verifying
personal account information). As long as the transfer agent and principal
underwriter follow these procedures, they will not be responsible for
unauthorized telephone transactions and you bear the risk of possible loss
resulting from telephone transactions. You may decline the telephone redemption
option on the account application. Telephone instructions are tape recorded.
ACCOUNT QUESTIONS. If you have any questions about your account or the services
available, please call Eaton Vance Shareholder Services at 1-800-225-6265, or
write to the transfer agent (see back cover for address).
TAX-SHELTERED RETIREMENT PLANS. Fund shares are available for purchase in
connection with certain tax-sheltered retirement plans. Call 1-800-225-6265 for
information. Distributions will be invested in additional shares for all
tax-sheltered retirement plans.
7
<PAGE>
TAX INFORMATION
The Fund pays dividends at least once annually and intends to pay capital gains
(if any) annually. Distributions of income and net short-term capital gains will
be taxable as ordinary income. Distributions of any long-term capital gains are
taxable as long-term gains. The Fund expects that its distributions will consist
primarily of capital gains. The Fund's distributions will be taxable as
described above whether they are paid in cash or reinvested in additional
shares. The Fund's distributions will generally not qualify for the
dividends-received deduction for corporations.
Investors who purchase shares shortly before the record date of a distribution
will pay the full price for the shares and then receive some portion of the
price back as a taxable distribution. Certain distributions paid in January will
be taxable to shareholders as if received on December 31 of the prior year. A
redemption of Fund shares, including an exchange for shares of another fund, is
a taxable transaction.
Shareholders should consult with their advisers concerning the applicability of
state, local and other taxes to an investment.
8
<PAGE>
LOGO
Investing
for the
21st
Century(R)
MORE INFORMATION
- --------------------------------------------------------------------------------
ABOUT THE FUND: More information is available in the statement of
additional information. The statement of additional information is
incorporated by reference into this prospectus. Additional information
about the Portfolio's investments is available in the annual and
semi-annual reports to shareholders. In the annual report, you will
find a discussion of the market conditions and investment strategies
that significantly affected the Fund's performance during the past
year. You may obtain free copies of the statement of additional
information and the shareholder reports by contacting:
EATON VANCE DISTRIBUTORS, INC.
255 State Street
Boston, MA 02109
1-800-225-6265
website: www.eatonvance.com
You will find and may copy information about the Fund at the
Securities and Exchange Commission's public reference room in
Washington, DC (call 1-800-SEC-0330 for information); on the SEC's
Internet site (http://www.sec.gov); or upon payment of copying fees by
writing to the SEC's public reference room in Washington, DC
20549-6009.
ABOUT SHAREHOLDER ACCOUNTS: You can obtain more information from Eaton
Vance Share- holder Services (1-800-225-6265). If you own shares and
would like to add to, redeem or change your account, please write or
call the transfer agent:
----------------------------------------------------------------------
FIRST DATA INVESTOR SERVICES GROUP
P.O. Box 5123
Westborough, MA 01581-5123
1-800-262-1122
SEC File No. 811-1545 IEMP
<PAGE>
LOGO
Investing
for the
21st
Century(R)
Eaton Vance
Greater India Fund
A diversified mutual fund investing in companies in India
Prospectus Dated
May 1, 1999
The Securities and Exchange Commission has not approved or disapproved these
securities or determined whether this prospectus is truthful or complete.
Any representation to the contrary is a criminal offense.
<TABLE>
<CAPTION>
Information in this prospectus
Page Page
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fund Summary 2 Sales Charges 7
Investment Objective & Principal Policies and Risks 4 Redeeming Shares 8
Management and Organization 5 Shareholder Account Features 9
Valuing Shares 6 Tax Information 10
Purchasing Shares 6 Financial Highlights 11
- ------------------------------------------------------------------------------------------------
</TABLE>
This prospectus contains important information about the Fund and the services
available to shareholders. Please save it for reference.
<PAGE>
FUND SUMMARY
INVESTMENT OBJECTIVE AND PRINCIPAL STRATEGIES. The Fund's investment objective
is to seek long-term capital appreciation. The Fund invests primarily in equity
securities (primarily common stocks) of companies in India and surrounding
countries of the Indian subcontinent. Greater India investments are typically
listed on stock exchanges in countries of the Indian subcontinent, but also
include securities traded in markets outside these countries, including
securities trading in the form of depositary receipts. The Fund invests in
companies with a broad range of market capitalizations, including smaller
companies. The Fund may make direct investments in companies. Under normal
market conditions, at least 50% of total assets will be invested in equity
securities of Indian companies, and no more than 5% of assets will be invested
in companies located in other than India, Pakistan or Sri Lanka. The portfolio
manager may use investments such as forward contracts and options to attempt to
mitigate the adverse effects of foreign currency fluctuations.
The Fund currently invests its assets in a separate registered investment
company with the same objective and policies as the Fund.
PRINCIPAL RISK FACTORS. The value of Fund shares is sensitive to stock market
volatility. If there is a decline in the value of exchange-listed stocks in the
Indian subcontinent, the value of Fund shares will also likely decline. Changes
in stock market values can be sudden and unpredictable. Also, although stock
values can rebound, there is no assurance that values will return to previous
levels. Because the Fund invests predominantly in foreign securities, the value
of Fund shares can also be adversely affected by changes in currency exchange
rates and political and economic developments abroad. In countries in the Indian
subcontinent these risks can be significant. The securities of smaller companies
are generally subject to greater price fluctuation and investment risk than
securities of more established companies.
Because securities markets in the Indian subcontinent are substantially smaller,
less liquid and more volatile than the major securities markets in the United
States, Fund share values will be more volatile. The value of Fund shares will
be affected by political, economic, fiscal, regulatory or other developments in
the Indian subcontinent and particularly India. The extent of economic
development, political stability and market depth of different countries in the
region varies widely. 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 may have relatively unstable
governments and economies based on only a few industries. The Fund will likely
be particularly sensitive to changes in the economies of such countries (such as
reversals of economic liberalization, political unrest or changes in trading
status). Although depository receipts have risks similar to the foregoing,
unsponsored receipts may involve higher expenses, may not pass-through voting
and other shareholder rights, and may be less liquid than receipts sponsored by
issuers of the underlying securities.
The Fund is not a complete investment program and you may lose money by
investing in the Fund. An investment in the Fund is not a deposit in a bank and
is not insured or guaranteed by the Federal Deposit Insurance Corporation or any
other government agency. Shareholders may realize substantial losses and should
invest for the long-term.
2
<PAGE>
PERFORMANCE INFORMATION. The following bar chart and table provide information
about the Fund's performance including a comparison of the Fund's performance to
the performance of an index of common stocks traded in the India market.
Although past performance is no guarantee of future results, this performance
information demonstrates the risk that the value of your investment will change.
The following returns are for Class B shares for each calendar quarter through
December 31, 1998 and do not reflect sales charges. If the sales charge was
reflected, returns would be lower.
-33.4% -9.8% 5.4% -9.2%
1995 1996 1997 1998
The Fund's highest quarterly total return was 18.1% for the quarter ended June
30, 1997, and its lowest quarterly total return was -18.7% for the quarter ended
September 30, 1996.
<TABLE>
<CAPTION>
One Life of
Average Annual Total Return as of December 31, 1998 Year Fund
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Class A Shares -14.1% -12.4%
Class B Shares -13.7% -12.1%
Bombay Stock Exchange Index -20.3% -12.3%
</TABLE>
These returns reflect the maximum sales charge for Class A (5.75%) and any
applicable CDSC for Class B. Life of Fund returns are calculated from May 31,
1994. The Bombay Stock Exchange Index is an unmanaged index of 100 common stocks
traded in the India market. Investors cannot invest directly in an index.
(Source for the Bombay Stock Exchange Index returns: Datastream International)
FUND FEES AND EXPENSES. These tables describe the fees and expenses that you
may pay if you buy and hold shares.
<TABLE>
<CAPTION>
Shareholder Fees
(fees paid directly from your investment) Class A Class B
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge (Load) (as a percentage of offering price) 5.75% None
Maximum Deferred Sales Charge (as a percentage of the lower of net
asset value at time of purchase or time of redemption) None 5.00%
Sales Charge Imposed on Reinvested Distributions None None
Exchange Fee None None
</TABLE>
<TABLE>
<CAPTION>
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets) Class A Class B
- ------------------------------------------------------------------
<S> <C> <C>
Management Fees 1.25% 1.25%
Distribution and Service (12b-1) Fees* 0.50% 1.00%
Other Expenses 1.44% 1.44%
----- -----
Total Annual Fund Operating Expenses 3.19% 3.69%
</TABLE>
*Long-term shareholders may pay more than the economic equivalent of the
front-end sales charge permitted by the National Association of Securities
Dealers, Inc.
EXAMPLE. This Example is intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The Example also assumes
that your investment has a 5% return each year and that the operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A shares $ 878 $ 1,502 $ 2,147 $ 3,868
Class B shares $ 871 $ 1,529 $ 2,106 $ 3,941
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A shares $ 878 $ 1,502 $ 2,147 $ 3,868
Class B shares $ 371 $ 1,129 $ 1,906 $ 3,941
</TABLE>
3
<PAGE>
INVESTMENT OBJECTIVE & PRINCIPAL POLICIES AND RISKS
The Fund's investment objective is to seek long-term capital appreciation. The
Fund currently seeks to meet its investment objective by investing 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 Fund's
investment objective and nonfundamental policies may be changed by the Trustees
of the Trust without shareholder approval. The Trustees have no present
intention to make such change and intend to submit any proposed material change
in investment objective to shareholders in advance for their approval.
The Portfolio 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 in or derives more than 50% of its revenue or profits from 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. More
than 25% of the Portfolio's total assets may be denominated in any single
currency. Although not a common practice, the portfolio manager may use hedging
techniques (such as forward contracts and options) to attempt to mitigate the
adverse effects of foreign currency fluctuations.
Investments in India and the Indian subcontinent can be considered speculative,
and therefore may offer higher potential for gains and losses than investments
in developed markets of the world. Political and economic structures in India
and other countries of the Indian subcontinent generally lack the social,
political and economic stability characteristics of the United States.
Governmental actions can have a significant effect on the economic conditions in
such countries, which could adversely affect the value and liquidity of the
Portfolio's investments. 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. 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.
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 are subject to
risk of loss, may be delayed and are generally less frequent than in the United
States, which could affect the liquidity of the Portfolio's assets. In addition,
disruptions due to work stoppages and trading improprieties in these securities
markets have caused such markets to close. If extended closings were to occur in
stock markets where the Portfolio was heavily invested, the Fund's ability to
redeem Fund shares could become correspondingly impaired. To mitigate these
risks, the Portfolio may maintain a higher cash position than it otherwise
would, thereby possibly diluting its return, or the Portfolio may have to sell
more liquid securities which it would not otherwise choose to sell. The
Portfolio may also borrow amounts up to 25% of the value of its net assets, but
it will not borrow more than 5% of the value of its total assets except to
satisfy redemption requests or for other temporary purposes. Such borrowings
would result in increased expense to the Fund and, while they are outstanding,
would magnify increases or decreases in the value of Fund shares. The Portfolio
will not purchase additional investment securities while outstanding borrowings
exceed 5% of the value of its total assets. The Fund may suspend redemption
privileges or postpone the date of payment for more than seven days after a
redemption order is received under certain circumstances.
The 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. Because investment in Greater India companies will usually involve
4
<PAGE>
currencies of foreign countries, the value of assets of the Portfolio as
measured by U.S. dollars may be adversely affected by changes in currency
exchange rates. Such rates may fluctuate significantly over short periods of
time causing the Portfolio's net asset value to fluctuate as well. Costs are
incurred in connection with conversions between various currencies. In addition,
foreign brokerage commissions, custody fees and other costs of investing in
foreign securities are generally higher than in the United States, and foreign
securities markets may be less liquid, more volatile and less subject to
governmental supervision than in the United States. Investments in foreign
issuers could be affected by other factors not present in the United States,
including expropriation, armed conflict, confiscatory taxation, lack of uniform
accounting and auditing standards, less publicly available financial and other
information and potential difficulties in enforcing contractual obligations. As
a result, the Portfolio may be exposed to greater risk and will be more
dependent on the investment adviser's ability to assess such risk than if the
Portfolio invested solely in more developed countries.
The Portfolio may invest in securities of smaller, less seasoned companies. Such
securities are generally subject to greater price fluctuations, limited
liquidity, higher transaction costs and higher investment risk. Smaller
companies may have limited product lines, markets or financial resources, and
they may be dependent on a limited management group. There is generally less
publicly available information about such companies than larger, more
established companies. The Portfolio may make direct investments in companies in
private placement transactions. Because of the absence of any public trading
market for some of these investments (such as those that are legally restricted)
it may take longer to liquidate these positions at fair value than would be the
case for publicly traded securities.
During unusual market conditions, the Portfolio may temporarily invest up to
100% of its assets in cash or cash equivalents. While temporarily invested, the
Portfolio may not achieve its investment objective.
Like most mutual funds, the Fund and 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. Eaton Vance 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 the
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 and the Portfolio or shareholders. The Year 2000
concern may also adversely impact issuers of securities held by the Portfolio
and the market on which these securities trade, and may be more difficult to
address in less-developed countries where access to advanced technology may be
limited. The foregoing statement is subject to the Year 2000 Information and
Readiness Disclosure Act, which may protect Eaton Vance and the Fund and the
Portfolio from liability arising from the statement.
MANAGEMENT AND ORGANIZATION
MANAGEMENT. The Portfolio's investment adviser is Lloyd George Investment
Management (Bermuda) Limited ("Lloyd George"), 3808 One Exchange Square,
Central, Hong Kong. The investment adviser manages Portfolio investments and
provides related office facilities and personnel. Lloyd George receives a
monthly advisory fee of 0.0625% (equivalent to 0.75% annually) of the
Portfolio's average daily net assets up to $500 million. This fee declines at
intervals above $500 million. For the fiscal year ended December 31, 1998, the
Portfolio paid advisory fees of 0.75% of its average daily net assets.
Scobie Dickenson Ward is the portfolio manager of the Portfolio (since
inception). Mr. Ward is a Director of Lloyd George and has been a portfolio
manager at Lloyd George for more than five years.
Lloyd George and its affiliates act as investment adviser to various individual
and institutional clients and manage $1.3 billion in assets. Eaton Vance's
corporate parent owns 21% of Lloyd George's corporate parent. Lloyd George, its
affiliates and two of the Portfolio's Trustees are domiciled outside of the
United States. Because of this, it would be difficult for the Portfolio to
bring a claim or enforce a judgment against them.
Eaton Vance manages the business affairs of the Fund and administers the
business affairs of the Portfolio. For these services, Eaton Vance receives a
monthly fee from each of the Fund and Portfolio of 1/48 of 1% (equal to 0.25%
annually) of average daily net assets up to $500 million. This fee declines at
intervals above $500 million. For the fiscal year ended December 31, 1998,
Eaton Vance earned management fees of 0.25% of the Fund's average daily net
assets and administration fees of 0.25% of the Portfolio's average daily net
assets. Eaton Vance has been managing assets since 1924 and managing mutual
funds since 1931. Eaton Vance and its subsidiaries currently manage over $36
billion on behalf of mutual funds, institutional clients and individuals.
The investment adviser, Eaton Vance and the Fund and Portfolio have adopted
Codes of Ethics governing personal securities transactions. Under the Codes,
employees of the investment adviser and Eaton Vance may purchase and sell
securities (including securities held by the Portfolio) subject to certain
reporting requirements and other procedures.
5
<PAGE>
ORGANIZATION. The Fund is a series of Eaton Vance Special Investment Trust, a
Massachusetts business trust. The Fund does not hold annual shareholder
meetings, but may hold special meetings for matters that require shareholder
approval (like electing or removing trustees, approving management contracts or
changing investment policies that may only be changed with shareholder
approval). Because the Fund invests in the Portfolio, it may be asked to vote
on certain Portfolio matters (like changes in certain Portfolio investment
restrictions). When necessary, the Fund will hold a meeting of its shareholders
to consider the Portfolio matter and then vote its interest in the Portfolio in
proportion to the votes cast by its shareholders. The Fund can withdraw from the
Portfolio at any time.
VALUING SHARES
The Fund values its shares once each day only when the New York Stock Exchange
is open for trading (typically Monday through Friday), as of the close of
regular trading on the Exchange (normally 4:00 p.m. eastern time). The price of
Fund shares is their net asset value (plus a sales charge for Class A), which is
derived from Portfolio holdings. Exchange-listed securities are valued at
closing sale prices; however, the investment adviser may use the fair value of a
security if events occurring after the close of an exchange would materially
affect net asset value. Because foreign securities trade on days when Fund
shares are not priced, net asset value can change at times when Fund shares
cannot be redeemed.
When purchasing or redeeming Fund shares, your investment dealer must
communicate your order to the principal underwriter by a specific time each day
in order for the purchase price or the redemption price to be based on that
day's net asset value per share. It is the investment dealer's responsibility
to transmit orders promptly. The Fund may accept purchase and redemption orders
as of the time of their receipt by certain investment dealers (or their
designated intermediaries).
PURCHASING SHARES
You may purchase Fund shares through your investment dealer or by mailing the
account application form included in this prospectus to the transfer agent (see
back cover for address). Your initial investment must be at least $1,000. The
price of Class A shares is the net asset value plus a sales charge. The price
of Class B shares is the net asset value; however, you may be subject to a sales
charge (called a "contingent deferred sales charge" or "CDSC") if you redeem
within six years of purchase. The sales charges are described below. Your
investment dealer can help you decide which class of shares suits your
investment needs.
After your initial investment, additional investments of $50 or more may be made
at any time by sending a check payable to the order of the Fund or the transfer
agent directly to the transfer agent (see back cover for address). Please
include your name and account number and the name of the Fund and Class with
each investment.
You may also make automatic investments of $50 or more each month or each
quarter from your bank account. You can establish bank automated investing on
the account application or by calling 1-800-262-1122. The minimum initial
investment amount and Fund policy of redeeming accounts with low account
balances are waived for bank automated investing accounts and certain group
purchase plans.
You may purchase Fund shares in exchange for securities. Please call
1-800-225-6265 for information about exchanging securities for Fund shares. If
you purchase shares through an investment dealer (which includes brokers,
dealers and other financial institutions), that dealer may charge you a fee for
executing the purchase for you. The Fund may suspend the sale of its shares at
any time and any purchase order may be refused.
6
<PAGE>
SALES CHARGES
FRONT-END SALES CHARGE. Class A shares are offered at net asset value per share
plus a sales charge that is determined by the amount of your investment. The
current sales charge schedule is:
<TABLE>
<CAPTION>
Sales Charge Sales Charge Dealer Commission
as Percentage of as Percentage of Net as a Percentage of
Amount of Purchase Offering Price Amount Invested Offering Price
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000 5.75% 6.10% 5.00%
$50,000 but less than $100,000 4.75% 4.99% 4.00%
$100,000 but less than $250,000 3.75% 3.90% 3.00%
$250,000 but less than $500,000 3.00% 3.09% 2.50%
$500,000 but less than $1,000,000 2.00% 2.04% 1.75%
$1,000,000 or more 0.00* 0.00* See Below
* No sales charge is payable at the time of purchase on investments of $1 million or more.
A CDSC of 1.00% will be imposed on such investments (as described below) in the event of r
edemptions within 12 months of purchase.
</TABLE>
The principal underwriter will pay a commission to investment dealers on sales
of $1 million or more as follows: 1.00% on amounts of $1 million or more but
less than $3 million; plus 0.50% on amounts over $3 million but less than $5
million; plus 0.25% on amounts over $5 million. Purchases of $1 million or more
will be aggregated over a 12-month period for purposes of determining the
commission. The principal underwriter may also pay commissions of up to 1.00%
on sales of Class A shares to certain tax-deferred retirement plans.
CONTINGENT DEFERRED SALES CHARGE. Each Class of shares is subject to a CDSC on
certain redemptions. If Class A shares are purchased at net asset value
because the purchase amount is $1 million or more, they are subject to a 1% CDSC
if redeemed within 12 months of purchase. Class B shares are subject to the
following CDSC schedule:
<TABLE>
<CAPTION>
Year of Redemption After Purchase CDSC
- ----------------------------------------------
<S> <C> <C>
First or Second 5% The CDSC is based on the lower of the net asset value at
Third 4% the time of purchase or the time of redemption. Shares
Fourth 3% acquired through the reinvestment of distributions are
Fifth 2% exempt from the CDSC. Redemptions are made first from
Sixth 1% shares that are not subject to a CDSC.
Seventh or following 0%
</TABLE>
REDUCING OR ELIMINATING SALES CHARGES. Front-end sales charges may be reduced
under the right of accumulation or under a statement of intention. Under the
right of accumulation, sales charges are reduced if the current market value of
your current holdings (shares at current offering price), plus your new
purchases, reach $50,000 or more. Class A shares of other Eaton Vance funds
owned by you can be included as part of your current holdings for this purpose.
Under a statement of intention, purchases of $50,000 or more made over a
13-month period are eligible for reduced sales charges. The principal
underwriter may hold 5% of the dollar amount to be purchased in escrow in the
form of shares registered in your name until the statement is satisfied or the
13-month period expires. See the account application for details.
Class A shares are offered at net asset value to clients of financial
intermediaries who charge a fee for their services; accounts affiliated with
those financial intermediaries; tax-deferred retirement plans; investment
clients of Eaton Vance; certain persons affiliated with Eaton Vance; and certain
Eaton Vance and fund service providers. Ask your investment dealer for details.
The Class B CDSC is waived for redemptions pursuant to a Withdrawal Plan (see
"Shareholder Account Features") and in connection with certain redemptions from
tax-sheltered retirement plans. Call 1-800-225-6265 for details. The Class B
CDSC is also waived following the death of all beneficial owners of shares, but
only if the redemption is requested within one year after death (a death
certificate and other applicable documents may be required).
If you redeem shares, you may reinvest at net asset value any portion or all of
the redemption proceeds in the same class of shares of the Fund (or, for Class A
shares, in Class A shares of any other Eaton Vance fund), provided that the
7
<PAGE>
reinvestment occurs within 60 days of the redemption, and the privilege has not
been used more than once in the prior 12 months. Your account will be credited
with any CDSC paid in connection with the redemption. Reinvestment requests must
be in writing. If you reinvest, you will be sold shares at the next determined
net asset value following receipt of your request.
DISTRIBUTION AND SERVICE FEES. The Fund has adopted a plan under Rule 12b-1 that
allows the Fund to pay distribution fees for the sale and distribution of shares
(so called "12b-1 fees"). Class B shares pay distribution fees of 0.75% of
average daily net assets annually. Class A shares pay a distribution fee of
0.50% of average daily net assets on shares outstanding for less than twelve
months and a distribution fee of 0.25% on shares outstanding for more than
twelve months. Because these fees are paid from Fund assets on an ongoing
basis, they will increase your cost over time and may cost you more than paying
other types of sales charges. Both classes pay service fees for personal and/or
account services not exceeding 0.25% of average daily net assets annually.
Class A and Class B shares only pay service fees on shares that have been
outstanding for twelve months.
REDEEMING SHARES
You can redeem shares in any of the following ways:
By Mail Send your request to the transfer agent along with any
certificates and stock powers. The request must be
signed exactly as your account is registered and
signature guaranteed. You can obtain a signature
guarantee at certain banks, savings and loan
institutions, credit unions, securities dealers,
securities exchanges, clearing agencies and registered
securities associations. You may be asked to provide
additional documents if your shares are registered in
the name of a corporation, partnership or fiduciary.
By Telephone You can redeem up to $50,000 b y calling the transfer
agent at 1-800-262-1122 on Monday through Friday, 9:00
a.m. to 4:00 p.m. (eastern time). Proceeds of a
telephone redemption can be mailed only to the account
address. Shares held by corporations, trusts or certain
other entities, or subject to fiduciary arrangements,
cannot be redeemed by telephone.
Through an Investment
Dealer Your investment dealer is responsible for
transmitting the order promptly. A dealer may charge a
fee for this service.
If you redeem shares, your redemption price will be based on the net asset value
per share next computed after the redemption request is received. Your
redemption proceeds will be paid in cash within seven days, reduced by the
amount of any applicable CDSC and any federal income tax required to be
withheld. Payments will be sent by mail unless you complete the Bank Wire
Redemptions section of the account application.
If you recently purchased shares, the proceeds of a redemption will not be sent
until the purchase check (including a certified or cashier's check) has cleared.
If the purchase check has not cleared, redemption proceeds may be delayed up to
15 days from the purchase date. If your account value falls below $750 (other
than due to market decline), you may be asked to either add to your account or
redeem it within 60 days. If you take no action, your account will be redeemed
and the proceeds sent to you.
While redemption proceeds are normally paid in cash, redemptions may be paid by
distributing marketable securities. If you receive securities, you could incur
brokerage or other charges in converting the securities to cash.
8
<PAGE>
SHAREHOLDER ACCOUNT FEATURES
Once you purchase shares, the transfer agent establishes a Lifetime Investing
Account(R) for you. Share certificates are issued only on request.
DISTRIBUTIONS. You may have your Fund distributions paid in one of the
following ways:
*Full Reinvest Option Dividends and capital gains are reinvested in
additional shares. This option will be assigned if
you do not specify an option.
*Partial Reinvest Option Dividends are paid in cash and capital gains are
reinvested in additional shares.
*Cash Option Dividends and capital gains are paid in cash.
*Exchange Option Dividends and/or capital gains are reinvested in
additional shares of another Eaton Vance fund
chosen by you. Before selecting this option, you
must obtain a prospectus of the other fund and
consider its objectives and policies carefully.
INFORMATION FROM THE FUND. From time to time, you may be mailed the following:
* Annual and Semi-Annual Reports, containing performance information and
financial statements.
* Periodic account statements, showing recent activity and total share
balance.
* Form 1099 and tax information needed to prepare your income tax returns.
* Proxy materials, in the event a shareholder vote is required.
* Special notices about significant events affecting your Fund.
WITHDRAWAL PLAN. You may redeem shares on a regular monthly or quarterly basis
by establishing a systematic withdrawal plan. Withdrawals will not be subject to
applicable CDSC if they do not in the aggregate exceed 12% annually of the
account balance at the time the plan is established. A minimum account size of
$5,000 is required to establish a systematic withdrawal plan. Because purchases
of Class A shares are subject to an initial sales charge, you should not make
withdrawals from your account while you are making purchases.
TAX-SHELTERED RETIREMENT PLANS. Class A shares are available for purchase in
connection with certain tax-sheltered retirement plans. Call 1-800-225-6265 for
information. Distributions will be invested in additional shares for all
tax-sheltered retirement plans.
EXCHANGE PRIVILEGE. You may exchange your Fund shares for shares of the same
class of another Eaton Vance fund. Exchanges are generally made at net asset
value. If you hold Class A shares for less than six months and exchange them
for shares subject to a higher sales charge, you will be charged the difference
between the two sales charges. If your shares are subject to a CDSC, the CDSC
will continue to apply to your new shares at the same CDSC rate. For purposes
of the CDSC, your shares will continue to age from the date of your original
purchase.
Before exchanging, you should read the prospectus of the new fund carefully. If
you wish to exchange shares, you may write to the transfer agent (address on
back cover) or call 1-800-262-1122. Periodic automatic exchanges are also
available. The exchange privilege may be changed or discontinued at any time.
You will receive 60 days' notice of any material change to the privilege. This
privilege may not be used for "market timing". If an account (or group of
accounts) makes more than two round-trip exchanges within 12 months, it will be
deemed to be market timing. The exchange privilege may be terminated for market
timing accounts.
TELEPHONE TRANSACTIONS. You can redeem or exchange shares by telephone as
described in this prospectus. The transfer agent and the principal underwriter
have procedures in place to authenticate telephone instructions (such as
verifying personal account information). As long as the transfer agent and
principal underwriter follow these procedures, they will not be responsible for
unauthorized telephone transactions and you bear the risk of possible loss
resulting from telephone transactions. You may decline the telephone redemption
option on the account application. Telephone instructions are tape recorded.
"STREET NAME" ACCOUNTS. If your shares are held in a "street name" account at
an investment dealer, that dealer (and not the Fund or its transfer agent) will
perform all recordkeeping, transaction processing and distribution payments.
Because the Fund will have no record of your transactions, you should contact
your investment dealer to purchase, redeem or exchange shares, to make changes
9
<PAGE>
in your account, or to obtain account information. The transfer of shares in a
"street name" account to an account with another investment dealer or to an
account directly with the Fund involves special procedures and you will be
required to obtain historical information about your shares prior to the
transfer. Before establishing a "street name" account with an investment dealer,
you should determine whether that dealer allows reinvestment of distributions in
"street name" accounts.
ACCOUNT QUESTIONS. If you have any questions about your account or the services
available, please call Eaton Vance Shareholder Services at 1-800-225-6265, or
write to the transfer agent (see back cover for address).
TAX INFORMATION
The Fund pays dividends at least once annually and intends to pay capital gains
(if any) annually. Distributions of income and net short-term capital gains
will be taxable as ordinary income. Distributions of any long-term capital
gains are taxable as long-term gains. The Fund expects that its distributions
will consist primarily of capital gains. The Fund's distributions will be
taxable as described above whether they are paid in cash or reinvested in
additional shares. The Fund's distributions will generally not qualify for the
dividends-received deduction for corporations.
Investors who purchase shares shortly before the record date of a distribution
will pay the full price for the shares and then receive some portion of the
price back as a taxable distribution. Certain distributions paid in January will
be taxable to shareholders as if received on December 31 of the prior year. A
redemption of Fund shares, including an exchange for shares of another fund, is
a taxable transaction.
Shareholders should consult with their advisers concerning the applicability of
state, local and other taxes to an investment.
10
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights are intended to help you understand the Fund's
financial performance for the past five years. Certain information in the table
reflects the financial results for a single Fund share. The total returns in
the table represent the rate an investor would have earned (or lost) on an
investment in the Fund (assuming reinvestment of all distributions and not
taking into account a sales charge). This information has been audited by
Deloitte & Touche LLP, independent accountants. The report of Deloitte & Touche
LLP and the Fund's financial statements are incorporated herein by reference and
included in the annual report, which is available on request. The Fund began
offering two classes of shares on January 1, 1998. Prior to that date, the Fund
offered only Class B shares and Class A existed as a separate fund.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------
1998++ 1997 1996++ 1995 1994*
-----------------------------------------------------------------------
CLASS A CLASS B CLASS B CLASS B CLASS B CLASS B
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE - BEGINNING OF YEAR $ 6.340 $ 6.230 $ 5.910 $ 6.550 $ 9.840 $10.000
------- ------- ------- ------- ------- -------
Income (loss) from operations:
Net investment loss $(0.082) $(0.110) $(0.126) $(0.099) $(0.176) $(0.065)
Net realized and unrealized gain (loss) on investments (0.478) (0.460) 0.446 (0.541) (3.114) (0.095)
------- ------- ------- ------- ------- -------
Total income (loss) from operations $(0.560) $(0.570) $ 0.320 $(0.640) $(3.290) $(0.160)
------- ------- ------- ------- ------- -------
NET ASSET VALUE - END OF YEAR $ 5.780 $ 5.660 $ 6.230 $ 5.910 $ 6.550 $ 9.840
======= ======= ======= ======= ======= =======
Total return(1) (8.83)% (9.15)% 5.42% (9.77)% (33.43)% (1.60)%
Ratios/Supplemental Data:
Net assets, end of year (000's omitted) $ 8,031 $43,063 $68,812 $74,661 $21,041 $38,925
Ratios (as a percentage of average daily net assets):
Expenses(2)(3) 3.18% 3.69% 3.08% 2.88% 3.31% 2.54%+
Expenses after custodian fee reduction(2) 3.08% 3.59% 3.05% 2.65% 2.90% --
Net investment loss (1.38)% (1.87)% (1.67)% (1.46)% (1.74)% (1.42)%+
Portfolio turnover of the Portfolio 60% 60% 48% 46% 38% 1%
</TABLE>
+ 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. Distributions, if any, are assumed to be reinvested at the
net asset value on the reinvestment date. Total return is not computed on
an annualized basis.
(2) Includes the Fund's share of its corresponding Portfolio's allocated
expenses.
(3) The expense ratios for the year ended December 31, 1995 and the periods
thereafter, have been adjusted to reflect a change in reporting
requirements. The new reporting guidelines require the Fund, as well as the
Portfolio, to increase its expense ratio by the effect of any expense
offset arrangements with its service providers. The expense ratios for the
prior period has not been adjusted to reflect this change.
11
<PAGE>
LOGO
Investing
for the
21st
Century(R)
More Information
- --------------------------------------------------------------------------------
About the Fund: More information is available in the statement of
additional information. The statement of additional information is
incorporated by reference into this prospectus. Additional
information about the Portfolio's investments is available in the
annual and semi-annual reports to shareholders. In the annual
report, you will find a discussion of the market conditions and
investment strategies that significantly affected the Fund's
performance during the past year. You may obtain free copies of the
statement of additional information and the shareholder reports by
contacting:
EATON VANCE DISTRIBUTORS, INC.
255 State Street
Boston, MA 02109
1-800-225-6265
website: www.eatonvance.com
You will find and may copy information about the Fund at the
Securities and Exchange Commission's public reference room in
Washington, DC (call 1-800-SEC-0330 for information); on the SEC's
Internet site (http://www.sec.gov); or upon payment of copying fees
by writing to the SEC's public reference room in Washington, DC
20549-6009.
About Shareholder Accounts: You can obtain more information from
Eaton Vance Share- holder Services (1-800-225-6265). If you own
shares and would like to add to, redeem or change your account,
please write or call the transfer agent:
- --------------------------------------------------------------------------------
FIRST DATA INVESTOR SERVICES GROUP
P.O. BOX 5123
WESTBOROUGH, MA 01581-5123
1-800-262-1122
SEC File No. 811-1545 GIP
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL INFORMATION
May 1, 1999
EATON VANCE BALANCED FUND
EATON VANCE GROWTH & INCOME FUND
EATON VANCE SPECIAL EQUITIES FUND
EATON VANCE UTILITIES FUND
255 State Street
Boston, Massachusetts 02109
(800) 225-6265
This Statement of Additional Information ("SAI") provides general
information about the Funds listed above and their corresponding Portfolios.
Each Fund is a series of Eaton Vance Special Investment Trust. Capitalized
terms used in this SAI and not otherwise defined have the meanings given them
in the prospectus. This SAI contains additional information about:
Page
Strategies and Risks .................................................... 1
Investment Restrictions ................................................. 4
Management and Organization ............................................. 6
Investment Advisory and Administrative Services ......................... 10
Other Service Providers ................................................. 12
Purchasing and Redeeming Shares ......................................... 12
Sales Charges ........................................................... 14
Performance ............................................................. 17
Taxes ................................................................... 19
Portfolio Security Transactions ......................................... 21
Financial Statements .................................................... 23
Appendices:
A: Class A Fees, Performance and Ownership .............................. a-1
B: Class B Fees, Performance and Ownership .............................. b-1
C: Class C Fees, Performance and Ownership .............................. c-1
Although each Fund offers only its shares of beneficial interest, it is
possible that a Fund (or Class) might become liable for a misstatement or
omission in this SAI regarding another Fund (or Class) because the Funds use
this combined SAI. The Trustees of the Trust have considered this factor in
approving the use of a combined SAI.
THIS IS NOT A PROSPECTUS AND IS AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE
INVESTORS ONLY IF PRECEDED OR ACCOMPANIED BY THE FUNDS' PROSPECTUS DATED MAY
1, 1999, AS SUPPLEMENTED FROM TIME TO TIME, WHICH IS INCORPORATED HEREIN BY
REFERENCE. THIS SAI SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS, WHICH
MAY BE OBTAINED BY CALLING 1-800-225-6265.
<PAGE>
STRATEGIES AND RISKS
FOREIGN INVESTMENTS. Investing in foreign 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 difficulities 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. Utilities Portfolio's investments in depository receipts
traded on a U.S. exchange are not subject to that Portfolio's 20% limitation
on foreign investing.
Because investments in companies domiciled 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.
Each Portfolio may also invest in American Depositary Receipts, European
Depositary Receipts and Global Depositary Receipts. ADRs, EDRs and GDRs may be
sponsored or unsponsored. Unsponsored receipts are established without the
participation of the issuer. Unsponsored receipts differ from receipts
sponsored by an issuer in that they may involve higher expenses, they may not
pass-through voting and other shareholder rights, and they may be less liquid.
Each Portfolio 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.
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. A 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 a Portfolio's exposure to foreign
currency exchange rate fluctuations. A Portfolio may also use forward
contracts to shift its exposure to foreign currency exchange rate changes from
one currency to another. 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. The Portfolios may enter into futures contracts
and options on futures contracts, traded on an exchange regulated by the
Commodity Futures Trading Commission (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.
To the extent that a Portfolio enters into futures contracts, options on
futures contracts and options on foreign currencies traded on an exchange
regulated by the CFTC 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.
OPTIONS. Each Portfolio (except Balanced Fund) may write (sell) call options
on securities, currencies and indices. A call option gives the buyer the right
to buy, for example, a security at a fixed price at a specified future date.
Call options written on securities, currencies and indices will be "covered",
meaning the Portfolio will own the security or currency underlying the option
or have segregated cash or liquid securities in an amount sufficient to cover
the Portfolio's obligation to the counterparty to the option. No Portfolio
intends to write a covered call option on any security if after such
transaction more than 25% of its net assets (50% in the case of Utilities
Portfolio), as measured by the aggregate value of the securities underlying
all covered calls written by the Portfolio, would be subject to such options.
The Special Equities Portfolio may write covered call options when, in the
opinion of the Trustees of the Portfolio, such activity is advisable and
appropriate. 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.
A Portfolio may terminate its obligations under a call option by engaging
in "closing purchase transactions." In the event no market for such a
transaction exists, a 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.
Each Portfolio (except Balanced Portfolio and Special Equities Portfolio)
may also write put options on securities, currencies and indices. A put option
gives the buyer the right to sell, for example, a security at a fixed price at
a specified future date. A Portfolio may only write a put option on a security
it owns or intends ultimately to acquire for its investment portfolio. Each
Portfolio (except Balanced Portfolio) may purchase call and (except Special
Equities Portfolio) put options on any securities in which it may invest or
options on any securities index composed of securities in which it may invest.
No Portfolio intends 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.
SHORT SALES AGAINST-THE-BOX. 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. These transactions may also require the current
recognition of taxable gain under certain tax rules applicable to constructive
sales. No more than 20% of Balanced Portfolio's assets will be subject to
short sales at any one time.
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 Portfolios may each seek to increase their income
by lending portfolio securities to broker-dealers or other institutional
borrowers. 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. Securities lending involves risks of delay in
recovery or even loss of rights on the securities loaned if the borrower fails
financially. The Portfolios have no present intention of engaging in
securities lending.
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 Securities and Exchange
Commission ("SEC") guidelines regarding cover for these instruments and, if
the guidelines so require, set aside cash or liquid securities in a segregated
account with its custodian in the prescribed amount. The securities in the
segregated account will be marked to market daily.
Assets used as cover or held in a segregated account maintained by the
Portfolio's custodian cannot be sold while the position requiring coverage or
segregation is outstanding unless they are replaced with other appropriate
assets. As a result, the commitment of a large portion of a Portfolio's assets
to segregated accounts or to cover could impede portfolio management or the
Portfolio's ability to meet redemption requests or other current obligations.
RISKS ASSOCIATED WITH DERIVATIVE INSTRUMENTS. 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.
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. The use of derivatives are highly
specialized activities that involve skills different from conducting ordinary
portfolio securities transactions. Under regulations of the CFTC, 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. 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.
The Utilities Portfolio expects to purchase and write only exchange-traded
options until such time as the investment adviser determines that the over-
the-counter ("OTC") options market is sufficiently developed and, if
required, the Utilities Fund has amended its prospectus so that appropriate
disclosure is furnished to prospective and existing shareholders. 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 SEC takes the position that purchased OTC options, and assets used as
cover for written OTC options, may be subject to the Portfolio's 15% limit on
illiquid investments. Utilities 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.
FIXED INCOME SECURITIES. Fixed income securities include preferred stocks,
bonds, debentures, notes and other types of debt securities (such as
collateralized mortgage obligations, mortgage-backed securities and other
types of asset-backed and collateralized obligations). 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 or BBB or higher by either S&P or Fitch at the time of
investment.
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 invesment adviser
will consider disposing of such security, but is not obligated to do so.
REPURCHASE AGREEMENTS. A 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, a 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. Each Portfolio will treat repurchase agreements maturing in
more than seven days as illiquid.
TEMPORARY INVESTMENTS. Under unusual market conditions, each Portfolio may
invest temporarily in cash or cash equivalents. Cash equivalents are highly
liquid, short-term securities such as commercial paper, certificates of
deposit, short-term notes and short-term U.S. Government obligations.
PORTFOLIO TURNOVER. 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 and the Special Equities 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 Special Equities Portfolio's
annual portfolio turnover rate has exceeded 100% in the past. The Portfolio
turnover rate of the Utilities Portfolio may exceed 100%, but under normal
conditions is not likely to exceed 250%. The annual turnover rate of Growth &
Income Portfolio may exceed 100%.
INVESTMENT RESTRICTIONS
The following investment restrictions of each Fund are designated as
fundamental policies and as such cannot be changed without the approval of the
holders of a majority of a Fund's outstanding voting securities, which as used
in this SAI means the lesser of (a) 67% of the shares of a Fund present or
represented by proxy at a meeting if the holders of more than 50% of the
outstanding shares are present or represented at the meeting or (b) more than
50% of the outstanding shares of a Fund. Accordingly, each Fund may not:
(1) 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 each Fund, a
Fund may invest all of its investable assets in an open-end management
investment company with substantially the same investment objective, policies
and restrictions as the Fund. In addition, Balanced Fund and Balanced
Portfolio may not underwrite securities of other issuers. 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.
Each Portfolio has adopted substantially the same fundamental investment
restrictions as the foregoing investment restrictions adopted by each Fund;
such restrictions cannot be changed without the approval of a "majority of the
outstanding voting securities" of a Portfolio.
The Funds and the Portfolios have each adopted the following investment
policies which may be changed by the Trustees with respect to a Fund without
approval by that Fund's shareholders or with respect to the Portfolio without
approval of a Fund or its other investors. Each Fund and each Portfolio will
not:
(a) invest more than 15% of 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. Any such determination by a delegate will be made pursuant to
procedures adopted by the Board. If the Fund or Portfolio invests in Rule
144A securities, the level of portfolio illiquidity may be increased to
the extent that eligible buyers become uninterested in purchasing such
securities; or
(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 Utilities 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.
In addition, Balanced Fund and Balanced Portfolio may not:
(c) invest in put or call options or straddles or spreads.
In addition, Special Equities Fund and Special Equities Portfolio may
not:
(d) 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.
In addition, Growth & Income Fund and Growth & Income Portfolio may
not:
(e) 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. Where applicable and 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 limitation on investing in illiquid
securities and the borrowing policies set forth above.
MANAGEMENT AND ORGANIZATION
FUND MANAGEMENT. The Trustees of the Trust are responsible for the
overall management and supervision of the Trust's affairs. The Trustees and
officers of the Trust and the 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 255 State Street, Boston, Massachusetts
02109. Those Trustees who are "interested persons" of the Trust or a Portfolio
as defined in the 1940 Act are indicated by an asterisk(*).
JESSICA M. BIBLIOWICZ (39), Trustee
Chief Executive Officer of National Financial Partners (a financial services
company) (since April 1999). President and Chief Operating Officer of John
A. Levin & Co. (a registered investment advisor) (July 1997 to April 1999)
and a Director of Baker, Fentress & Company which owns John A. Levin & Co.
(July 1997 to April 1999). Executive Vice President of Smith Barney Mutual
Funds (from July 1994 to June 1997). Elected Trustee October 30, 1998.
Trustee of various investment companies managed by Eaton Vance or BMR since
October 30, 1998.
Address: 1301 Avenue of the Americas, New York, NY 10019
DONALD R. DWIGHT (68), Trustee
President of Dwight Partners, Inc. (a corporate relations and communications
company). Trustee/Director of the Royce Funds (mutual funds). Trustee of
various investment companies managed by Eaton Vance or BMR.
Address: Clover Mill Lane, Lyme, New Hampshire 03768
JAMES B. HAWKES (57), President and Trustee*
Chairman, President and Chief Executive Officer of BMR, Eaton Vance and their
corporate parent and trustee (EVC and EV); Director of EVC and EV. Trustee
and officer of various investment companies managed by Eaton Vance or BMR.
SAMUEL L. HAYES, III (64), Trustee
Jacob H. Schiff Professor of Investment Banking Emeritus, Harvard University
Graduate School of Business Administration. Trustee of the Kobrick-Cendant
Investment Trust (mutual funds). Trustee of various investment companies
managed by Eaton Vance or BMR.
Address: 345 Nahatan Road, Westwood, Massachusetts 02090
NORTON H. REAMER (63), 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). Trustee
of various investment companies managed by Eaton Vance or BMR.
Address: One International Place, Boston, Massachusetts 02110
LYNN A. STOUT (41), Trustee
Professor of Law, Georgetown University Law Center. Elected Trustee October
30, 1998. Trustee of various investment companies managed by Eaton Vance or
BMR since October 30, 1998.
Address: 600 New Jersey Avenue, NW, Washington, DC 20001
JOHN L. THORNDIKE (72), Trustee
Formerly Director of Fiduciary Company Incorporated. Trustee of various
investment companies managed by Eaton Vance or BMR. Mr. Thorndike will be
retiring from the Board of Trustees in July 1999.
Address: 175 Federal Street, Boston, Massachusetts 02110
JACK L. TREYNOR (69), Trustee
Investment Adviser and Consultant. Trustee of various investment companies
managed by Eaton Vance or BMR.
Address: 504 Via Almar, Palos Verdes Estates, California 90274
THOMAS E. FAUST, JR. (40), Vice President of Balanced Portfolio
Vice President of BMR and Eaton Vance. Officer of various investment companies
managed by Eaton Vance or BMR.
DUNCAN W. RICHARDSON (41), Vice President of the Growth & Income Portfolio
Vice President of BMR and Eaton Vance. Officer of various investment companies
managed by Eaton Vance or BMR.
JUDITH P. SARYAN (44), Vice President of Utilities Portfolio
Vice President of BMR and Eaton Vance since March 31, 1999. Portfolio Manager
and Equity Analyst for State Street Global Advisors (1980-1999).
EDWARD E. SMILEY, JR. (54), Vice President of the Trust and Special Equities
Portfolio
Vice President of BMR and Eaton Vance since November 1, 1996. Senior Product
Manager, Equity Management for TradeStreet Investment Associates, Inc., a
wholly-owned subsidiary of NationsBank (1992-1996). Officer of various
investment companies managed by Eaton Vance or BMR.
MICHAEL B. TERRY (56), Vice President of the Trust and Balanced Portfolio
Vice President of BMR and Eaton Vance. Officer of various investment companies
managed by Eaton Vance or BMR.
JAMES L. O'CONNOR (54), Treasurer
Vice President of BMR and Eaton Vance. Officer of various investment companies
managed by Eaton Vance or BMR.
ALAN R. DYNNER (58), Secretary
Vice President and Chief Legal Officer of BMR, Eaton Vance and EVC 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.
JANET E. SANDERS (63), Assistant Treasurer and Assistant Secretary
Vice President of BMR and Eaton Vance. Officer of various investment companies
managed by Eaton Vance or BMR.
A. JOHN MURPHY (36), Assistant Secretary
Vice President of BMR and Eaton Vance. Officer of various investment companies
managed by Eaton Vance or BMR.
ERIC G. WOODBURY (41), Assistant Secretary
Vice President of BMR and Eaton Vance. Officer of various investment companies
managed by Eaton Vance or BMR.
The Nominating Committee of the Board of Trustees of the Trust and the
Portfolios is comprised of the Trustees (except Mr. Thorndike) who are not
"interested persons" as that term is defined under the 1940 Act
("noninterested Trustees"). The purpose of the Committee is to recommend to
the Board nominees for the position of noninterested Trustee and to assure
that at least a majority of the Board of Trustees is independent of Eaton
Vance and its affiliates.
Messrs. Hayes (Chairman), Dwight and Reamer and Ms. Stout are members of
the Special Committee of the Board of Trustees of the Trust and of 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.
Messrs. Treynor (Chairman) and Dwight and Ms. Bibliowicz 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 a Portfolio to retain the services of
any Trustee 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 of
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, 1998,
the noninterested Trustees of the Trust and the Portfolios earned the
following compensation in their capacities as Trustees from the Trust and the
Portfolios and for the year ended December 31, 1998, earned the following
compensation in their capacities as Trustees of the funds in the Eaton Vance
fund complex(1):
<TABLE>
<CAPTION>
JESSICA M. DONALD R. SAMUEL L. NORTON H. LYNN A. JOHN L. JACK L.
SOURCE OF COMPENSATION BIBLIOWICZ(9) DWIGHT(3) HAYES, III(4) REAMER STOUT(9) THORNDIKE(5) TREYNOR
- ---------------------- ------------- --------- ------------- ------ -------- ------------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
Trust(2) $ 548 $ 2,666 $ 2,639 $ 2,526 $ 386 $ 2,568 $ 3,216
Balanced Portfolio 822 3,713 3,922 3,697 887 3,779 4,104
Growth & Income Portfolio 347 2,036 2,259 2,113 386 2,165 2,302
Special Equities Portfolio 237 1,276 1,509 1,387 270 1,431 1,477
Utilities Portfolio 931 4,170 4,374 4,130 1,002 4,219 4,597
Trust and Fund Complex 33,334 160,000(6) 170,000(7) 160,000 32,842 160,000(8) 170,000
</TABLE>
- ----------
(1) As of May 1, 1999, the Eaton Vance fund complex consists of 154 registered
investment companies or series thereof.
(2) The Trust consisted of 8 Funds as of December 31, 1998.
(3) Mr. Dwight received deferred compensation from each Portfolio as follows:
Balanced -- $1,925; Growth & Income -- $1,059; Special Equities -- $661;
Utilities -- $2,162.
(4) Mr. Hayes received deferred compensation from each Portfolio as follows:
Balanced -- $1,300; Growth & Income -- $763; Special Equities -- $511;
Utilities -- $1,448.
(5) Mr. Thorndike received deferred compensation from each Portfolio as
follows: Balanced -- $3,747; Growth & Income -- $2,149; Special Equities
-- $1,741; Utilities -- $4,184.
(6) Includes $60,000 of deferred compensation.
(7) Includes $41,563 of deferred compensation.
(8) Includes $119,091 of deferred compensation.
(9) Ms. Bibliowicz and Ms. Stout were elected as Trustees on October 30, 1998.
ORGANIZATION. Each Fund is a series of the Trust, which is organized under
Massachusetts law as a business trust, and is operated as an open-end
management investment company. 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. 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.
The Trust may issue an unlimited number of shares of beneficial interest
(no par value per share) in one or more series (such as the Funds). The
Trustees of the Trust have divided the shares of each Fund into multiple
classes. Each class represents an interest in a Fund, but is subject to
different expenses, rights and privileges. The Trustees have the authority
under the Declaration of Trust to create additional classes of shares with
differing rights and privileges. When issued and outstanding, shares are fully
paid and nonassessable by the Trust. Shareholders are entitled to one vote for
each full share held. Fractional shares may be voted proportionately. Shares
of a Fund will be voted together except that only shareholders of a particular
class may vote on matters affecting only that class. Shares have no preemptive
or conversion rights and are freely transferable. In the event of the
liquidation of a Fund, shareholders of each class are entitled to share pro
rata in the net assets attributable to that class available for distribution
to shareholders.
The Trustees of the Trust have considered the advantages and disadvantages
of investing the assets of each Fund in its corresponding Portfolio, as well
as the advantages and disadvantages of the two-tier format. The Trustees
believe that the structure offers opportunities for growth in the assets of
the Portfolios, may afford the potential for economies of scale for each Fund
and may over time result in lower expenses for a Fund.
As permitted by Massachusetts law, there will normally be no meetings of
shareholders for the purpose of electing Trustees unless and until such time
as less than a majority of the Trustees of the Trust holding office have been
elected by shareholders. In such an event the Trustees then in office will
call a shareholders' meeting for the election of Trustees. Except for the
foregoing circumstances and unless removed by action of the shareholders in
accordance with the Trust's By-laws, the Trustees shall continue to hold
office and may appoint successor Trustees.
The Trust's By-laws provide that no person shall serve as a Trustee if
shareholders holding two-thirds of the outstanding shares have removed him
from that office either by a written declaration filed with the Trust's
custodian or by votes cast at a meeting called for that purpose. The By-laws
further provide that under certain circumstances the shareholders may call a
meeting to remove a Trustee and that the Trust is required to provide
assistance in communication with shareholders about such a meeting.
The Trust's Declaration of Trust may be amended by the Trustees when
authorized by vote of a majority of the outstanding voting securities of the
Trust, the financial interests of which are affected by the amendment. The
Trustees may also amend the Declaration of Trust without the vote or consent
of shareholders to change the name of the Trust or any series or to make such
other changes (such as reclassifying series of classes of shares or
restructuring the Trust) as do not have a materially adverse effect on the
financial interests of shareholders or if they deem it necessary to conform it
to applicable federal or state laws or regulations. The Trust or any series or
class thereof may be terminated by: (1) the affirmative vote of the holders of
not less than two-thirds of the shares outstanding and entitled to vote at any
meeting of shareholders of the Trust or the appropriate series or class
thereof, or by an instrument or instruments in writing without a meeting,
consented to by the holders of two-thirds of the shares of the Trust or a
series or class thereof, provided, however, that, if such termination is
recommended by the Trustees, the vote of a majority of the outstanding voting
securities of the Trust or a series or class thereof entitled to vote thereon
shall be sufficient authorization; or (2) by means of an instrument in writing
signed by a majority of the Trustees, to be followed by a written notice to
shareholders stating that a majority of the Trustees has determined that the
continuation of the Trust or a series or a class thereof is not in the best
interest of the Trust, such series or class or of their respective
shareholders.
The Declaration of Trust further provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law; but nothing in the
Declaration of Trust protects a Trustee against any liability to which he
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of his
office.
Under Massachusetts law, if certain conditions prevail, shareholders of a
Massachusetts business trust (such as the Trust) could be deemed to have
personal liability for the obligations of the Trust. Numerous investment
companies registered under the 1940 Act have been formed as Massachusetts
business trusts, and management is not aware of an instance where such
liability has been imposed. The Trust's Declaration of Trust contains an
express disclaimer of liability on the part of the Fund shareholders and the
Trust's By-laws provide that the Trust shall assume the defense on behalf of
any Fund shareholders. The Declaration of Trust also contains provisions
limiting the liability of a series or class to that series or class. Moreover,
the Trust's By-laws also provide for indemnification out of the property of
the Fund of any shareholder held personally liable solely by reason of being
or having been a shareholder for all loss or expense arising from such
liability. The assets of the Fund are readily marketable and will ordinarily
substantially exceed its liabilities. In light of the nature of the Fund's
business and the nature of its assets, management believes that the
possibility of the Fund's liability exceeding its assets, and therefore the
shareholder's risk of personal liability, is remote.
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
accordance with the Declaration of Trust of each Portfolio, there will
normally be no meetings of the investors for the purpose of electing Trustees
unless and until such time as less than a majority of the Trustees of the
Portfolio holding office have been elected by investors. In such an event the
Trustees of the Portfolio then in office will call an investors' meeting for
the election of Trustees. Except for the foregoing circumstances and unless
removed by action of the investors in accordance with the Portfolio's
Declaration of Trust, the Trustees shall continue to hold office and may
appoint successor Trustees.
The Declaration of Trust of each Portfolio provides that no person shall
serve as a Trustee if investors holding two-thirds of the outstanding interest
have removed him from that office either by a written declaration filed with
the Portfolio's custodian or by votes cast at a meeting called for that
purpose. The Declaration of Trust further provides that under certain
circumstances the investors may call a meeting to remove a Trustee and that
the Portfolio is required to provide assistance in communicating with
investors about such a meeting.
Each Portfolio's Declaration of Trust provides that a Fund and other
entities permitted to invest in the Portfolio (e.g., other U.S. and foreign
investment companies, and common and commingled trust funds) will each be
liable for all obligations of the Portfolio. However, the risk of the Fund
incurring financial loss on account of such liability is limited to
circumstances in which both inadequate insurance exists and the Portfolio
itself is unable to meet its obligations. Accordingly, the Trustees of the
Trust believe that neither the Fund nor its shareholders will be adversely
affected by reason of the Fund investing in the Portfolio.
Whenever a Fund as an investor in a Portfolio is requested to vote on
matters pertaining to the Portfolio (other than the termination of the
Portfolio's business, which may be determined by the Trustees of the Portfolio
without investor approval), the Fund will hold a meeting of Fund shareholders
and will vote its interest in the Portfolio for or against such matters
proportionately to the instructions to vote for or against such matters
received from Fund shareholders. A Fund shall vote shares for which it
receives no voting instructions in the same proportion as the shares for which
it receives voting instructions. Other investors in a Portfolio may alone or
collectively acquire sufficient voting interests in the Portfolio to control
matters relating to the operation of the Portfolio, which may require the Fund
to withdraw its investment in the Portfolio or take other appropriate action.
Any such withdrawal could result in a distribution "in kind" of portfolio
securities (as opposed to a cash distribution from the Portfolio). If
securities are distributed, a Fund could incur brokerage, tax or other charges
in converting the securities to cash. In addition, the distribution in kind
may result in a less diversified portfolio of investments or adversely affect
the liquidity of a Fund. Notwithstanding the above, there are other means for
meeting shareholder redemption requests, such as borrowing.
A Fund may withdraw (completely redeem) all its assets from its
corresponding Portfolio at any time if the Board of Trustees of the Trust
determines that it is in the best interest of that Fund to do so. In the event
a Fund withdraws all of its assets from its corresponding Portfolio, or the
Board of Trustees of the Trust determines that the investment objective of
such Portfolio is no longer consistent with the investment objective of the
Fund, the Trustees would consider what action might be taken, including
investing the assets of such Fund in another pooled investment entity or
retaining an investment adviser to manage the Fund's assets in accordance with
its investment objective. A Fund's investment performance may be affected by a
withdrawal of all its assets (or the assets of another investor in the
Portfolio) from its corresponding Portfolio.
INVESTMENT ADVISORY AND ADMINISTRATIVE SERVICES
INVESTMENT ADVISORY SERVICES. 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 the 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 Portfolio who are members of the BMR organization and all
personnel of BMR performing services relating to research and investment
activities.
BMR has agreed to waive a portion of its management fee under the
Investment Advisory Agreement as follows:
ANNUALIZED FEE RATE CONTRACTUAL
AVERAGE DAILY NET ASSETS FOR THE MONTH WITH WAIVER ANNUALIZED FEE RATE
- --------------------------------------------------------------------------------
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%
As at December 31, 1998, the Utilities Portfolio had net assets of
$459,616,085. For the fiscal years ended December 31, 1998, 1997 and 1996, the
Utilities Portfolio paid BMR advisory fees of $2,793,965, $2,839,559 and
$3,690,566, respectively (equivalent to 0.65%, 0.66% and 0.75%, 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 Equities Portfolios pay BMR under each Investment Advisory
Agreement, see the prospectus.
As of December 31, 1998, the Balanced Portfolio had net assets of
$355,353,058. For the fiscal years ended December 31, 1998, 1997 and 1996, the
Balanced Portfolio paid BMR advisory fees of $2,132,133, $1,964,597 and
$1,794,096, respectively (equivalent to 0.61%, 0.61% and 0.625%, respectively,
of the Balanced Portfolio's average daily net assets for each such period).
As of December 31, 1998, the Special Equities Portfolio had net assets of
$78,750,325. For the fiscal years ended December 31, 1998, 1997 and 1996, the
Special Equities Portfolio paid BMR advisory fees of $477,657, $488,529 and
$477,560, respectively (equivalent to 0.625% of the Special Equities
Portfolio's average daily net assets for each such year).
As of December 31, 1998, the Growth & Income Portfolio had net assets of
$171,116,760. For the fiscal years ended December 31, 1998, 1997 and 1996, the
Growth & Income Portfolio paid BMR advisory fees of $969,883, $856,583 and
$706,803, respectively (equivalent to 0.625% of the Growth & Income
Portfolio's average daily net assets for each such period).
Each Investment Advisory Agreement with BMR 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.
ADMINISTRATIVE SERVICES. As indicated in the prospectus, Eaton Vance serves as
administrator of each Fund, but currently receives no compensation for
providing administrative services to the Fund. Under its Administrative
Services Agreement with the Trust, Eaton Vance has been engaged to administer
the Funds' 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.
INFORMATION ABOUT BMR AND EATON VANCE. BMR and Eaton Vance are business trusts
organized under Massachusetts law. Eaton Vance, Inc. ("EV") serves as trustee
of BMR and Eaton Vance. BMR, Eaton Vance and EV are wholly-owned subsidiaries
of Eaton Vance Corporation ("EVC"), a Maryland corporation and publicly-held
holding company, EVC through its subsidiaries and affiliates engages primarily
in investment management, administration and marketing activities. The
Directors of EVC are James B. Hawkes, Benjamin A. Rowland, Jr., John G.L.
Cabot, John M. Nelson, Vincent M. O'Reilly and Ralph Z. Sorenson. All of the
issued and outstanding shares of Eaton Vance are owned by EVC. All of the
issued and outstanding shares of BMR are owned by Eaton Vance. All shares of
the outstanding Voting Common Stock of EVC are deposited in a Voting Trust,
the Voting Trustees of which are Messrs. Hawkes and Rowland, Alan R. Dynner,
Thomas E. Faust, Jr., Thomas J. Fetter, Duncan W. Richardson, William M. Steul
and Wharton P. Whitaker (all of whom are officers of Eaton Vance). The Voting
Trustees have unrestricted voting rights for the election of Directors of EVC.
All of the outstanding voting trust receipts issued under said Voting Trust
are owned by certain of the officers of BMR and Eaton Vance who are also
officers or officers and Directors of EVC and EV. As indicated under
"Management Organization," all of the officers of the Trust (as well as Mr.
Hawkes who is also a Trustee), hold positions in the Eaton Vance organization.
EXPENSES. Each Fund and Portfolio is responsible for all expenses not
expressly stated to be payable by another party (such as the investment
adviser under the Investment Advisory Agreement, Eaton Vance under the
Administrative Services Agreement or the principal underwriter under the
Distribution Agreement). In the case of expenses incurred by the Trust, each
Fund is responsible for its pro rata share of those expenses. The only
expenses of a Fund allocated to a particular class are those incurred under
the Distribution or Service Plan applicable to that class and those resulting
from the fee paid to the principal underwriter for repurchase transactions.
OTHER SERVICE PROVIDERS
PRINCIPAL UNDERWRITER. Eaton Vance Distributors, Inc. ("EVD"), 255 State
Street, Boston, MA 02109, is the Funds' principal underwriter. The principal
underwriter acts as principal in selling shares under a Distribution Agreement
with the Trust. The expenses of printing copies of prospectuses used to offer
shares and other selling literature and of advertising are borne by the
principal underwriter. The fees and expenses of qualifying and registering and
maintaining qualifications and registrations of a Fund and its shares under
federal and state securities laws are borne by that Fund. The Distribution
Agreement as it applies to Class A shares is renewable annually by the Board of
Trustees of the Trust (including a majority of the noninterested Trustees) may
be terminated on six months' notice by either party and is automatically
terminated upon assignment. The Distribution Agreement as it applies to Class B
and Class C shares is renewable annually by the Trust's Board of Trustees
(including a majority of the noninterested Trustees who have no direct or
indirect financial interest in the operation of the Distribution Plan or the
Distribution Agreement), may be terminated on sixty days' notice either by such
Trustees or by vote of a majority of the outstanding shares of the relevant
class or on six months' notice by the principal underwriter and is automatically
terminated upon assignment. The principal underwriter distributes shares on a
"best efforts" basis under which it is required to take and pay for only such
shares as may be sold. The principal underwriter allows investment dealers
discounts from the applicable public offering price which are alike for all
investment dealers. See "Sales Charges." EVD is a wholly-owned subsidiary of
EVC. Mr. Hawkes is a Vice President and Director and Messrs. Dynner and O'Connor
are Vice Presidents of EVD.
CUSTODIAN. Investors Bank & Trust Company ("IBT"), 200 Clarendon Street,
Boston, MA 02116, serves as custodian to the Funds and Portfolios. IBT has the
custody of all cash and securities representing a Fund's interest in a
Portfolio, has custody of each Portfolio's assets, maintains the general
ledger of each Portfolio and each Fund, and computes the daily net asset value
of interests in each Portfolio and the net asset value of shares of each Fund.
In such capacity it attends to details in connection with the sale, exchange,
substitution, transfer or other dealings with the Portfolios' investments,
receives and disburses all funds and performs various other ministerial duties
upon receipt of proper instructions from the Trust and the Portfolios. IBT
also provides services in connection with the preparation of shareholder
reports and the electronic filing of such reports with the SEC. EVC and its
affiliates and their officers and employees from time to time have
transactions with various banks, including IBT. It is Eaton Vance's opinion
that the terms and conditions of such transactions were not and will not be
influenced by existing or potential custodial or other relationships between
the Fund or the Portfolio and such banks.
INDEPENDENT ACCOUNTANTS. PricewaterhouseCoopers LLP, One Post Office Square,
Boston, Massachusetts 02109, are the independent accountants of the Funds and
the Portfolios, providing audit services, tax return preparation, and
assistance and consultation with respect to the preparation of filings with
the SEC.
TRANSFER AGENT. First Data Investor Services Group, P.O. Box 5123,
Westborough, MA 01581-5123, serves as transfer and dividend disbursing agent
for the Funds.
PURCHASING AND REDEEMING SHARES
CALCULATION OF NET ASSET VALUE. The net asset value of each Portfolio is
computed by IBT (as agent and custodian for the Portfolio) by subtracting the
liabilities of the Portfolio from the value of its total assets. The Funds and
the Portfolios will be closed for business and will not price their respective
shares or interests on the following business holidays: New Year's Day, Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day.
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 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 determining 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 a Fund, may add to or reduce its
investment in the Portfolio on each day the New York Stock Exchange (the
"Exchange") is open for trading ("Portfolio Business Day") as of the close of
regular trading on the Exchange (the "Portfolio Valuation Time"). The value of
each investor's interest in the Portfolio will be determined by multiplying
the net asset value of the Portfolio by the percentage, determined on the
prior Portfolio Business Day, which represented that investor's share of the
aggregate interests in the Portfolio on such prior day. Any additions or
withdrawals for the current Portfolio Business Day will then be recorded. Each
investor's percentage of the aggregate interest in the Portfolio will then be
recomputed as a percentage equal to a fraction (i) the numerator of which is
the value of such investor's investment in the Portfolio as of the Portfolio
Valuation Time on the prior Portfolio Business Day plus or minus, as the case
may be, the amount of any additions to or withdrawals from the investor's
investment in the Portfolio on the current Portfolio Business Day and (ii) the
denominator of which is the aggregate net asset value of the Portfolio as of
the Portfolio Valuation Time on the prior Portfolio Business Day plus or
minus, as the case may be, the amount of the net additions to or withdrawals
from the aggregate investment in the Portfolio on the current Portfolio
Business Day by all investors in the Portfolio. The percentage so determined
will then be applied to determine the value of the investor's interest in the
Portfolio for the current Portfolio Business Day.
ADDITIONAL INFORMATION ABOUT PURCHASES. Fund shares are continuously offered
through investment dealers which have entered agreements with the principal
underwriter. The public offering price is the net asset value next computed
after receipt of the order, plus, in the case of Class A shares, a variable
percentage (sales charge) depending upon the amount of purchase as indicated
by the sales charge table set forth in the prospectus. The sales charge is
divided between the principal underwriter and the investment dealer. The
sales charge table is applicable to purchases of a Fund alone or in
combination with purchases of certain other funds offered by the principal
underwriter, made at a single time by (i) an individual, or an individual, his
spouse and their children under the age of twenty-one, purchasing shares for
his or their own account, and (ii) a trustee or other fiduciary purchasing
shares for a single trust estate or a single fiduciary account. The table is
also presently applicable to (1) purchases of Class A shares pursuant to a
written Statement of Intention; or (2) purchases of Class A shares pursuant to
the Right of Accumulation and declared as such at the time of purchase. See
"Sales Charges."
In connection with employee benefit or other continuous group purchase
plans, the Funds may accept initial investments of less than $1,000 on the
part of an individual participant. In the event a shareholder who is a
participant of such a plan terminates participation in the plan, his or her
shares will be transferred to a regular individual account. However, such
account will be subject to the right of redemption by the Funds as described
below.
SUSPENSION OF SALES. The Trust may, in its absolute discretion, suspend,
discontinue or limit the offering of one or more of its classes of shares at
any time. In determining whether any such action should be taken, the Trust's
management intends to consider all relevant factors, including (without
limitation) the size of a Fund or class, the investment climate and market
conditions, the volume of sales and redemptions of shares, and in the case of
Class B and Class C shares, the amount of uncovered distribution charges of
the principal underwriter. The Class B and Class C Distribution Plans may
continue in effect and payments may be made under the Plans following any such
suspension, discontinuance or limitation of the offering of shares; however,
there is no contractual obligation to continue any Plan for any particular
period of time. Suspension of the offering of shares would not, of course,
affect a shareholder's ability to redeem shares.
ACQUIRING FUND SHARES IN EXCHANGE FOR SECURITIES. IBT, as escrow agent, will
receive securities acceptable to Eaton Vance, as administrator, in exchange
for Fund shares. The minimum value of securities (or securities and cash)
accepted for deposit is $5,000. Securities accepted will be sold on the day of
their receipt or as soon thereafter as possible. The number of Fund shares to
be issued in exchange for securities will be the aggregate proceeds from the
sale of such securities, divided by the applicable public offering price of
Class A shares or net asset value of Class B and Class C shares on the day
such proceeds are received. Eaton Vance will use reasonable efforts to obtain
the then current market price for such securities but does not guarantee the
best available price. Eaton Vance will absorb any transaction costs, such as
commissions, on the sale of the securities. Securities determined to be
acceptable should be transferred via book entry or physically delivered, in
proper form for transfer, through investment dealers, together with a
completed and signed Letter of Transmittal in approved form (available from
investment dealers). Investors who are contemplating an exchange of securities
for shares, or their representatives, must contact Eaton Vance to determine
whether the securities are acceptable before forwarding such securities. Eaton
Vance reserves the right to reject any securities. Exchanging securities for
shares may create a taxable gain or loss. Each investor should consult his or
her tax adviser with respect to the particular federal, state and local tax
consequences of exchanging securities.
ADDITIONAL INFORMATION ABOUT REDEMPTIONS. The right to redeem shares of a Fund
can be suspended and the payment of the redemption price deferred when the
Exchange is closed (other than for customary weekend and holiday closings),
during periods when trading on the Exchange is restricted as determined by the
SEC, or during any emergency as determined by the SEC which makes it
impracticable for a Portfolio to dispose of its securities or value its
assets, or during any other period permitted by order of the SEC for the
protection of investors.
While normally payments will be made in cash for redeemed shares, the
Trust, subject to compliance with applicable regulations, has reserved the
right to pay the redemption price of shares of a Fund, either totally or
partially, by a distribution in kind of readily marketable securities
withdrawn from its corresponding Portfolio. The securities so distributed
would be valued pursuant to the Portfolio's valuation procedures. If a
shareholder received a distribution in kind, the shareholder could incur
brokerage or other charges in converting the securities to cash.
Due to the high cost of maintaining small accounts, the Trust reserves the
right to redeem accounts with balances of less than $750. Prior to such a
redemption, shareholders will be given 60 days' written notice to make an
additional purchase. However, no such redemption would be required by the
Trust if the cause of the low account balance was a reduction in the net asset
value of shares. No CDSC will be imposed with respect to such involuntary
redemptions.
SYSTEMATIC WITHDRAWAL PLAN. The transfer agent will send to the shareholder
regular monthly or quarterly payments of any permitted amount designated by
the shareholder based upon the value of the shares held. The checks will be
drawn from share redemptions and hence, may require the recognition of taxable
gain or loss. Income dividends and capital gains distributions in connection
with withdrawal plan accounts will be credited at net asset value as of the
record date for each distribution. Continued withdrawals in excess of current
income will eventually use up principal, particularly in a period of declining
market prices. A shareholder may not have a withdrawal plan in effect at the
same time he or she has authorized Bank Automated Investing or is otherwise
making regular purchases of Fund shares. The shareholder, the transfer agent
or the principal underwriter will be able to terminate the withdrawal plan at
any time without penalty.
SALES CHARGES
DEALER COMMISSIONS. The principal underwriter may, from time to time, at its
own expense, provide additional incentives to investment dealers which employ
registered representatives who sell Fund shares and/or shares of other funds
distributed by the principal underwriter. In some instances, such additional
incentives may be offered only to certain investment dealers whose
representatives sell or are expected to sell significant amounts of shares. In
addition, the principal underwriter may from time to time increase or decrease
the sales commissions payable to investment dealers. The principal underwriter
may allow, upon notice to all investment dealers with whom it has agreements,
discounts up to the full sales charge during the periods specified in the
notice. During periods when the discount includes the full sales charge, such
investment dealers may be deemed to be underwriters as that term is defined in
the Securities Act of 1933.
SALES CHARGE WAIVERS. Class A shares may be sold at net asset value to current
and retired Directors and Trustees of Eaton Vance funds, including the
Portfolios; to clients and current and retired officers and employees of Eaton
Vance, its affiliates and other investment advisers of Eaton Vance sponsored
funds; to registered representatives and employees of investment dealers and
bank employees who refer customers to registered representatives of investment
dealers; to officers and employees of IBT and the transfer agent; persons
associated with law firms providing services to Eaton Vance and the Eaton Vance
funds; and to such persons' spouses, parents, siblings and children 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 a
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") and "rabbi trusts". 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 investment advisory, agency,
custodial or trust account managed or administered by Eaton Vance or by any
parent, subsidiary or other affiliate of Eaton Vance. Class A shares are offered
at net asset value to the foregoing persons and in the foregoing situations
because either (i) there is no sales effort involved in the sale of shares or
(ii) the investor is paying a fee (other than the sales charge) to the
investment dealer involved in the sale.
The CDSC applicable to Class B shares will be waived in connection with
minimum required distributions from tax-sheltered retirement plans by applying
the rate required to be withdrawn under the applicable rules and regulations
of the Internal Revenue Service to the balance of Class B shares in your
account.
STATEMENT OF INTENTION. If it is anticipated that $50,000 or more of Class A
shares and shares of other funds exchangeable for Class A shares of another
Eaton Vance fund will be purchased within a 13-month period, 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. The applicable sales charge level for the purchase of
Class A shares is calculated by taking the dollar amount of the current
purchase and adding it to the value (calculated at the maximum current
offering price) of the Class A shares the shareholder owns in his or her
account(s) in the Fund, and shares of other funds exchangeable for Class A
shares. The sales charge on the shares being purchased will then be at the
rate applicable to the aggregate. Shares purchased (i) by an individual, his
or her spouse and their children under the age of twenty-one, and (ii) by a
trustee, guardian or other fiduciary of a single trust estate or a single
fiduciary account, will be combined for the purpose of determining whether a
purchase will qualify for the Right of Accumulation and if qualifying, the
applicable sales charge level. For any such discount to be made available, at
the time of purchase a purchaser or his or her investment dealer must provide
the principal underwriter (in the case of a purchase made through an
investment dealer) or the transfer agent (in the case of an investment made by
mail) with sufficient information to permit verification that the purchase
order qualifies for the accumulation privilege. Confirmation of the order is
subject to such verification. The Right of Accumulation privilege may be
amended or terminated at any time as to purchases occurring thereafter.
TAX-SHELTERED RETIREMENT PLANS. Class A and Class C shares are available for
purchase in connection with certain tax-sheltered retirement plans. Detailed
information concerning these plans, including certain exceptions to minimum
investment requirements, and copies of the plans are available from the
principal underwriter. This information should be read carefully and
consultation with an attorney or tax adviser may be advisable. The information
sets forth the service fee charged for retirement plans and describes the
federal income tax consequences of establishing a plan. Participant accounting
services (including trust fund reconciliation services) will be offered only
through third party recordkeepers and not by the principal underwriter. Under
all plans, dividends and distributions will be automatically reinvested in
additional shares.
DISTRIBUTION 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 "NASD"). (Management believes service fee
payments are not distribution expenses governed by Rule 12b-1 under the 1940
Act, but has chosen to have the Plan approved as if that Rule were
applicable.) The Class A Plan provides that each Class A may make service fee
payments for personal services and/or the maintenance of shareholder accounts
to the principal underwriter, investment dealers and other persons in amounts
not exceeding .25% of its average daily net assets for any fiscal year. For
the service fees paid by Class A shares, see Appendix A.
The Trust has also adopted compensation-type Distribution Plans (the
"Class B and Class C Plans") pursuant to Rule 12b-1 under the 1940 Act for
each Fund's Class B and Class C shares. The Class B and Class C Plans are
designed to permit an investor to purchase shares through an investment dealer
without incurring an initial sales charge and at the same time permit the
principal underwriter to compensate investment dealers in connection
therewith. The Class B and Class C Plans provide that each Fund will pay sales
commissions and distribution fees to the principal underwriter only after and
as a result of the sale of shares. On each sale of shares (excluding
reinvestment of distributions), each Fund will pay the principal underwriter
amounts representing (i) sales commissions equal to 5% for Class B shares and
6.25% for Class C shares of the amount received by the Fund for each share
sold and (ii) distribution fees calculated by applying the rate of 1% over the
prime rate then reported in The Wall Street Journal to the outstanding balance
of uncovered distribution charges (as described below) of the principal
underwriter. To pay these amounts, each Class pays the principal underwriter a
fee, accrued daily and paid monthly, at an annual rate not exceeding .75% of
its average daily net assets to finance the distribution of its shares. Such
fees compensate the principal underwriter for sales commissions paid by it to
investment dealers on the sale of shares and for interest expenses. For sales
of Class B shares, the principal underwriter uses its own funds to pay sales
commissions (except on exchange transactions and reinvestments) to investment
dealers at the time of sale equal to 4% of the purchase price of the Class B
shares sold by such dealers. For Class C shares, the principal underwriter
currently expects to pay to an investment dealer (a) sales commissions (except
on exchange transactions and reinvestments) at the time of sale equal to .75%
of the purchase price of the shares sold by such dealer, and (b) monthly sales
commissions approximately equivalent to 1/12 of .75% of the value of shares
sold by such dealer and remaining outstanding for at least one year. During
the first year after a purchase of Class C shares, the principal underwriter
will retain the sales commission as reimbursement for the sales commissions
paid to investment dealers at the time of sale. CDSCs paid to the principal
underwriter will be used to reduce amounts owed to it. The Class B and Class C
Plans provide that the Fund will make no payments to the principal underwriter
in respect of any day on which there are no outstanding uncovered distribution
charges of the principal underwriter. CDSCs and accrued amounts will be paid
by the Trust to the principal underwriter whenever there exist uncovered
distribution charges. Because payments to the principal underwriter under the
Class B and Class C Plans are limited, uncovered distribution charges (sales
commissions paid by the principal underwriter plus interest, less the above
fees and CDSCs received by it) may exist indefinitely. For the sales
commissions and CDSCs paid on (and uncovered distribution charges of) Class B
and Class C shares, see Appendix B and Appendix C, respectively.
In calculating daily the amount of uncovered distribution charges,
distribution charges will include the aggregate amount of sales commissions
and distribution fees theretofore paid plus the aggregate amount of sales
commissions and distribution fees which the principal underwriter is entitled
to be paid under the Plan since its inception. Payments theretofore paid or
payable under the Class B and Class C Plans by the Trust to the principal
underwriter and CDSCs theretofore paid or payable to the principal underwriter
will be subtracted from such distribution charges; if the result of such
subtraction is positive, a distribution fee (computed at 1% over the prime
rate then reported in The Wall Street Journal) will be computed on such amount
and added thereto, with the resulting sum constituting the amount of
outstanding uncovered distribution charges with respect to such day. The
amount of outstanding uncovered distribution charges of the principal
underwriter calculated on any day does not constitute a liability recorded on
the financial statements of the Fund.
The amount of uncovered distribution charges of the principal underwriter
at any particular time depends upon various changing factors, including the
level and timing of sales of shares, the nature of such sales (i.e., whether
they result from exchange transactions, reinvestments or from cash sales
through investment dealers), the level and timing of redemptions of shares
upon which a CDSC will be imposed, the level and timing of redemptions of
shares upon which no CDSC will be imposed (including redemptions of shares
pursuant to the exchange privilege which result in a reduction of uncovered
distribution charges), changes in the level of the net assets of the Class,
and changes in the interest rate used in the calculation of the distribution
fee under the Class B and Class C Plans.
The Class B and Class C Plans also authorize each Class to make payments
of service fees to the principal underwriter, investment dealers and other
persons in amounts not exceeding .25% of its average daily net assets for
personal services, and/or the maintenance of shareholder accounts. This fee is
paid quarterly in arrears based on the value of Class B shares sold by such
persons and remaining outstanding for at least twelve months. For Class C,
investment dealers currently receive (a) a service fee (except on exchange
transactions and reinvestments) at the time of sale equal to .25% of the
purchase price of the Class C shares sold by such dealer, and (b) monthly
service fees approximately equivalent to 1/12 of .25% of the value of Class C
shares sold by such dealer and remaining outstanding for at least one year.
During the first year after a purchase of Class C shares, the principal
underwriter will retain the service fee as reimbursement for the service fee
payment made to investment dealers at the time of sale. For the service fees
paid by Class B and Class C shares, see Appendix B and Appendix C,
respectively.
Currently, payments of sales commissions and distribution fees and of
service fees may equal 1% of a Class's average daily net assets per annum. The
Trust believes that the combined rate of all these payments may be higher than
the rate of payments made under distribution plans adopted by other investment
companies pursuant to Rule 12b-1. Although the principal underwriter will use
its own funds (which may be borrowed from banks) to pay sales commissions at
the time of sale, it is anticipated that the Eaton Vance organization will
profit by reason of the operation of the Class B and Class C Plans through an
increase in the Fund's assets (thereby increasing the advisory fee payable to
BMR by the Portfolio) resulting from sale of shares and through the amounts
paid to the principal underwriter, including CDSCs, pursuant to the Plans. The
Eaton Vance organization may be considered to have realized a profit under the
Class B and Class C Plans if at any point in time the aggregate amounts
theretofore received by the principal underwriter pursuant to the Class B or
Class C Plan and from CDSCs have exceeded the total expenses theretofore
incurred by such organization in distributing shares. Total expenses for this
purpose will include an allocable portion of the overhead costs of such
organization and its branch offices, which costs will include without
limitation leasing expense, depreciation of building and equipment, utilities,
communication and postage expense, compensation and benefits of personnel,
travel and promotional expense, stationery and supplies, literature and sales
aids, interest expense, data processing fees, consulting and temporary help
costs, insurance, taxes other than income taxes, legal and auditing expense
and other miscellaneous overhead items. Overhead is calculated and allocated
for such purpose by the Eaton Vance organization in a manner deemed equitable
to the Trust.
The Class A, Class B and Class C Plans continue in effect from year to
year so long as such continuance is approved at least annually by the vote of
both a majority of (i) the noninterested Trustees of the Trust who have no
direct or indirect financial interest in the operation of the Plan or any
agreements related to the Plan (the "Plan Trustees") and (ii) all of the
Trustees then in office. Each Plan may be terminated at any time by vote of a
majority of the Plan Trustees or by a vote of a majority of the outstanding
voting securities of the applicable Class. Each Plan requires quarterly
Trustee review of a written report of the amount expended under the Plan and
the purposes for which such expenditures were made. The Plans may not be
amended to increase materially the payments described therein without approval
of the shareholders of the affected Class and the Trustees. So long as a Plan
is in effect, the selection and nomination of the noninterested Trustees shall
be committed to the discretion of such Trustees. The Class A, Class B and
Class C Plans were initially approved by the Trustees, including the Plan
Trustees, on June 23, 1997.
The Trustees of the Trust believe that each Plan will be a significant
factor in the expected growth of each Fund's assets, and will result in
increased investment flexibility and advantages which have benefitted and will
continue to benefit the Fund and its shareholders. Payments for sales
commissions and distribution fees made to the principal underwriter under the
Class B and Class C Plans will compensate the principal underwriter for its
services and expenses in distributing those classes of shares. Service fee
payments made to the principal underwriter and investment dealers provide
incentives to provide continuing personal services to investors and the
maintenance of shareholder accounts. By providing incentives to the principal
underwriter and investment dealers, each Plan is expected to result in the
maintenance of, and possible future growth in, the assets of the Fund. Based
on the foregoing and other relevant factors, the Trustees of the Trust have
determined that in their judgment there is a reasonable likelihood that each
Plan will benefit the Fund and its shareholders.
PERFORMANCE
Average annual total return is determined separately for each Class of a
Fund by multiplying a hypothetical initial purchase order of $1,000 by the
average annual compound rate of return (including capital appreciation/
depreciation, and distributions paid and reinvested) for the stated period and
annualizing the result. The calculation assumes (i) that all distributions are
reinvested at net asset value on the reinvestment dates during the period,
(ii) the deduction of the maximum sales charge from the initial $1,000
purchase order for Class A shares, (iii) a complete redemption of the
investment and, (iv) the deduction of the CDSC at the end of the period. A
Fund may also publish total return figures for each class based on reduced
sales charges or a net asset value. These returns would be lower if the full
sales charge was imposed. For information concerning the total return of the
Classes of a Fund, see Appendix A, Appendix B and Appendix C.
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 in materials provided to present
and prospective shareholders may include descriptions of Eaton Vance and other
Fund and Portfolio service providers, their investment styles, other
investment products, personnel and Fund distribution channels.
Information used in advertisements and materials furnished to present and
prospective investors may include statements or illustrations relating to the
appropriateness of certain types of securities and/or mutual funds to meet
specific financial goals. Such information may address:
-- cost associated with aging parents;
-- funding a college education (including its actual and estimated cost);
-- health care expenses (including actual and projected expenses);
-- long-term disabilities (including the availability of, and coverage
provided by, disability insurance); and
-- retirement (including the availability of social security benefits, the
tax treatment of such benefits and statistics and other information
relating to maintaining a particular standard of living and outliving
existing assets).
Such information may also address different methods for saving money and
the results of such methods, as well as the benefits of investing in equity
securities. Such information may describe: the potential for growth; the
performance of equities as compared to other investment vehicles; and the
value of investing as early as possible and regularly, as well as staying
invested. The benefits of investing in equity securities by means of a mutual
fund may also be included (such benefits may include diversification,
professional management and the variety of equity mutual fund products).
Information in advertisements and materials furnished to present and
prospective investors may include profiles of different types of investors
(i.e., investors with different goals and assets) and different investment
strategies for meeting specific financial goals. Such information may provide
hypothetical illustrations which include: results of various investment
strategies; performance of an investment in 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 net income and net short-term and long-
term capital gains 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,
1998. 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 its capital gain
net income, which is the excess of its realized capital gains over its
realized capital losses, generally computed on the basis of the one-year
period ending on October 31 of such year, after reduction by (i) any available
capital loss carryforwards, and (ii) 100% of any income 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 a portion of the
purchase price. 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, which must be satisfied separately for each
dividend during a specified period. Receipt of certain distributions
qualifying for the deduction may result in reduction of the tax basis of the
corporate shareholder's shares and require current income recognition to the
extent in excess of such basis. 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 shares of the same Fund 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.
Sales charges paid upon a purchase of shares of a Fund cannot be taken
into account for purposes of determining gain or loss on a redemption or
exchange of the shares before 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.
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.
Certain foreign exchange gains and losses realized by a Portfolio and
allocated to the corresponding Fund in connection with the Portfolio's
investments in foreign securities, foreign currency, and foreign currency-
related options, futures or forward contracts may be treated as ordinary
income and losses under special tax rules. Additionally, a Portfolio's
transactions in options, futures contracts and forward contracts will be
subject to other 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 or, in the case of certain currency-related
positions as described above, recharacterized as ordinary income 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.
A 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 a 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, each 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, a 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 in some cases. Certain uses of foreign currency and related
options, futures or forward contracts and investment by a 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 a Fund's
qualification as a RIC and/or avoid imposition of a tax on the Fund.
A Portfolio's investment in securities acquired at a market discount may,
or in zero coupon and certain other securities with original issue discount
generally will, cause it to realize income prior to the receipt of cash
payments with respect to these securities. Such income will be allocated daily
to interests in the Portfolio and, in order to enable the corresponding Fund
to distribute its proportionate share of this income and avoid a tax payable
by the Fund, the Portfolio may be required to liquidate portfolio securities
that it might otherwise have continued to hold in order to generate cash that
the Fund may withdraw from the Portfolio for subsequent distribution to Fund
shareholders.
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; or (iii) the shareholder fails to provide, or renew after
expiration, 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.
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
full range and quality of the broker-dealers services, the value of the
brokerage and research services provided, the responsiveness of the broker-
dealer to BMR, 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 this and 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 often involve the payment of brokerage
commissions, which may be higher than those in the United States. There is
generally no stated commission in the case of securities traded in the over-
the-counter markets, but the price paid or received by a Portfolio usually
includes an undisclosed dealer markup or markdown. In an underwritten offering
the price paid by a Portfolio 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.
For the fiscal years ended December 31, 1998, 1997 and 1996, Balanced
Portfolio paid brokerage commisions of $225,542, $150,611 and $214,373,
respectively, with respect to portfolio transactions. Of these amounts,
approximately $157,179, $122,849 and $184,250, respectively, were paid in
respect of portfolio security transactions aggregating approximately
$129,051,550, $101,577,000 and $127,306,565, respectively, to firms which
provide some Research Services to the investment adviser's organization
(although many of such firms may have been selected in any particular
transaction primarily because of their execution capabilities).
For the fiscal years ended December 31, 1998, 1997 and 1996, Growth &
Income Portfolio paid brokerage commissions of $355,926, $311,584 and
$360,161, respectively, with respect to portfolio transactions. Of these
amounts, approximately $240,996, $262,030 and $287,791, respectively, were
paid in respect of portfolio security transactions aggregating $189,828,471,
$194,723,039 and $186,550,857, respectively, to firms which provide some
Research Services to the investment adviser's organization (although many of
such firms may have been selected in any particular transaction primarily
because of their execution capabilities).
For the fiscal years ended December 31, 1998, 1997 and 1996, Special
Equities Portfolio paid brokerage commissions of $129,036, $200,452 and
$158,360, respectively, with respect to portfolio transactions. Of these
amounts, approximately $115,881, $181,345 and $136,198, respectively, were
paid in respect of portfolio security transactions aggregating approximately
$56,931,864, $83,316,207 and $70,221,501, respectively, to firms which provide
some Research Services to the investment adviser's organization (although many
of such firms may have been selected in any particular transaction primarily
because of their execution capabilities).
For the fiscal years ended December 31, 1998, 1997 and 1996, Utilities
Portfolio paid brokerage commissions of $707,649, $1,341,755 and $1,611,869,
respectively, with respect to portfolio transactions. Of these amounts,
approximately $572,321, $1,122,289 and $939,409, respectively, were paid in
respect of portfolio security transactions aggregating approximately
$398,037,287, $765,570,460 and $509,690,960, respectively, to firms which
provide some Research Services to the investment adviser's organization
(although many of such firms may have been selected in any particular
transaction primarily because of their execution capabilities).
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, analytical, statistical and quotation services, data, information
and other services, products and materials which assist such advisers in the
performance of their investment responsibilities ("Research Services") from
broker-dealer firms which execute portfolio transactions for the clients of
such advisers and from third parties with which such broker-dealers have
arrangements. Consistent with this practice, BMR receives Research Services
from many broker-dealer firms with which BMR places the Portfolio transactions
and from third parties with which these broker-dealers have arrangements.
These Research Services include such matters as general economic, political,
business and market information, industry and company reviews, evaluations of
securities and portfolio strategies and transactions, recommendations as to
the purchase and sale of securities and other portfolio transactions, proxy
voting data and analysis services, technical analysis of various aspects of
the securities markets, 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 portfolio security transactions to such firms to ensure the
continued receipt of Research Services which BMR believes are useful or of
value to it in rendering investment advisory services to its clients.
The Portfolio and BMR may also receive Research Services from underwriters
and dealers in fixed price offerings, which Research Services are reviewed and
evaluated by BMR in connection with its investment responsibilities. The
investment companies sponsored by BMR or Eaton Vance may allocate brokerage
commissions to acquire information relating to performance, fees and expenses
of such companies and other mutual funds, which information is used by the
Trustees of such companies to fulfill their responsibility to oversee the
quality of the services provided by various entities, including BMR. Such
companies may also pay cash for such information.
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.
FINANCIAL STATEMENTS
The audited financial statements of and the independent accountants'
report for the Funds and the Portfolios appear in the Funds' most recent
annual report to shareholders and are incorporated by reference into this SAI.
A copy of the Funds' annual report accompanies this SAI. Consistent with
applicable law, duplicate mailings of shareholder reports and certain other
Fund information to shareholders residing at the same address may be
eliminated.
Registrant incorporates by reference the audited financial information for
the fiscal year ended December 31, 1998 for the Funds and the Portfolios
listed below, all as previously filed electronically with the SEC:
Eaton Vance Balanced Fund
Balanced Portfolio
(Accession No. 0000950109-99-000687)
Eaton Vance Growth & Income Fund
Growth & Income Portfolio
(Accession No. 0000927016-99-000823)
Eaton Vance Special Equities Fund
Special Equities Portfolio
(formerly Special Investment Portfolio)
(Accession No. 0000950109-99-000873)
Eaton Vance Utilities Fund
Utilities Portfolio
(Accession No. 0000927016-99-000784)
<PAGE>
APPENDIX A
CLASS A FEES, PERFORMANCE AND OWNERSHIP
SERVICE PLANS
For the fiscal year ended December 31, 1998, Class A made service fee
payments under the Plans to the principal underwriter as follows: Balanced
Fund -- $331,732; Growth & Income Fund -- $166,807; Special Equities Fund --
$82,694; and Utilities Fund -- $816,815. Of these amounts, the following was
paid to investment dealers and the balance of which was retained by the
principal underwriter: Balanced Fund -- $181,018; Growth & Income Fund --
$110,903; Special Equities Fund -- $46,995; and Utilities Fund -- $791,465.
PRINCIPAL UNDERWRITER
The following table shows, for the fiscal years ended December 31, 1998,
1997 and 1996, (1) total sales charges paid in connection with sales of Class
A shares, and (2) sales charges paid to the principal underwriter (the balance
of which was paid to investment dealers).
<TABLE>
<CAPTION>
SALES CHARGES PAID TO
FUND AND FISCAL YEAR ENDED TOTAL SALES CHARGES PRINCIPAL UNDERWRITER
- -------------------------- ------------------- ---------------------
<S> <C> <C>
Balanced Fund
December 31, 1998 $179,034 $25,178
December 31, 1997 117,510 17,650
December 31, 1996 177,591 27,563
Growth & Income Fund
December 31, 1998 $ 72,706 $10,109
December 31, 1997 40,247 5,522
December 31, 1996 23,928 4,468
Special Equities Fund
December 31, 1998 $ 9,336 $ 1,119
December 31, 1997 0 0
December 31, 1996 11,071 1,905
Utilities Fund
December 31, 1998 $128,114 $18,943
December 31, 1997 67,137 18,096
December 31, 1996 65,149 12,115
</TABLE>
The Trust has authorized the principal underwriter to act as its agent in
repurchasing shares of Balanced Fund and Utilities Fund at the rate of $2.50
for each repurchase transaction handled by the principal underwriter. For the
fiscal year ended December 31, 1998, Class A paid the principal underwriter
for repurchase transactions handled by it $2.50 for each such transaction
which aggregated as follows: Balanced Fund -- $1,875; and Utilities Fund --
$5,047.50.
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.
<TABLE>
VALUE OF A $1,000 INVESTMENT -- BALANCED FUND
<CAPTION>
TOTAL RETURN TOTAL RETURN
EXCLUDING MAXIMUM INCLUDING MAXIMUM
VALUE OF VALUE OF SALES CHARGE SALES CHARGE
INVESTMENT INVESTMENT INITIAL INVESTMENT ---------------------------- -------------------------
PERIOD DATE INVESTMENT ON 12/31/98 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------------- ---------- ---------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
10 Years ended
12/31/98 12/31/88 $942.21 $3,292.22 249.42% 13.33% 229.22% 12.65%
5 Years Ended
12/31/98 12/31/93 $942.08 $1,879.84 99.54% 14.82% 87.98% 13.46%
1 Year Ended
12/31/98 12/31/97 $942.58 $1,069.12 13.42% 13.42% 6.91% 6.91%
</TABLE>
<TABLE>
VALUE OF A $1,000 INVESTMENT -- GROWTH & INCOME FUND
<CAPTION>
TOTAL RETURN TOTAL RETURN
EXCLUDING MAXIMUM INCLUDING MAXIMUM
VALUE OF VALUE OF SALES CHARGE SALES CHARGE
INVESTMENT INVESTMENT INITIAL INVESTMENT ---------------------------- -------------------------
PERIOD DATE INVESTMENT ON 12/31/98 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------------- ---------- ---------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
10 Years Ended
12/31/98 12/31/88 $942.79 $4,037.14 328.20% 15.66% 303.71% 14.98%
5 Years Ended
12/31/98 12/31/93 $942.65 $2,300.25 144.03% 19.53% 130.02% 18.13%
1 Year Ended
12/31/98 12/31/97 $942.46 $1,148.02 21.81% 21.81% 14.80% 14.80%
</TABLE>
<TABLE>
VALUE OF A $1,000 INVESTMENT -- SPECIAL EQUITIES FUND
<CAPTION>
TOTAL RETURN TOTAL RETURN
EXCLUDING MAXIMUM INCLUDING MAXIMUM
VALUE OF VALUE OF SALES CHARGE SALES CHARGE
INVESTMENT INVESTMENT INITIAL INVESTMENT ---------------------------- ---------------------------
PERIOD DATE INVESTMENT ON 12/31/98 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------------- ---------- ---------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
10 Years Ended
12/31/98 12/31/88 $943.15 $3,561.90 277.66% 14.21% 256.19% 13.55%
5 Years Ended
12/31/98 12/31/93 $942.95 $1,720.34 82.44% 12.78% 72.03% 11.46%
1 Year Ended
12/31/98 12/31/97 $942.05 $1,091.09 15.82% 15.82% 9.11% 9.11%
</TABLE>
<TABLE>
VALUE OF A $1,000 INVESTMENT -- UTILITIES FUND
<CAPTION>
TOTAL RETURN TOTAL RETURN
EXCLUDING MAXIMUM INCLUDING MAXIMUM
VALUE OF VALUE OF SALES CHARGE SALES CHARGE
INVESTMENT INVESTMENT INITIAL INVESTMENT ---------------------------- ---------------------------
PERIOD DATE INVESTMENT ON 12/31/98 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------------- ---------- ---------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
10 Years Ended
12/31/98 12/31/88 $942.86 $3,129.85 231.94% 12.75% 212.98% 12.09%
5 Years Ended
12/31/98 12/31/93 $942.21 $1,621.86 72.14% 11.47% 62.19% 10.15%
1 Year Ended
12/31/98 12/31/97 $942.03 $1,166.09 23.78% 23.78% 16.61% 16.61%
</TABLE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of April 1, 1999, 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, 1999, Merrill Lynch, Pierce, Fenner & Smith,
Inc., Jacksonville, FL 32246 was the record owner of 20.2% 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 was the record owner of 5.7% 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 FEES, PERFORMANCE AND OWNERSHIP
DISTRIBUTION AND SERVICE FEES
For the fiscal year ended December 31, 1998, the following table shows,
(1) sales commissions paid by the principal underwriter to investment dealers
on sales of Class B shares, (2) distribution payments to the principal
underwriter under the Distribution Plan, (3) CDSC payments to the principal
underwriter, (4) uncovered distribution charges under the Plan (dollar amount
and as a percentage of the class), (5) service fees on Class B shares, and (6)
the amount of service fees on Class B shares paid to investment dealers. The
service fees paid by the Funds that were not paid to investment dealers were
retained by the principal underwriter. Distribution payments and CDSC payments
reduce uncovered distribution charges under the Plan.
<TABLE>
<CAPTION>
DISTRIBUTION CDSC SERVICE
PAYMENTS TO PAYMENTS TO AMOUNT OF UNCOVERED FEES TO
SALES THE PRINCIPAL THE PRINCIPAL DISTRIBUTION CHARGES SERVICE INVESTMENT
CLASS B COMMISSIONS UNDERWRITER UNDERWRITER (AS A % OF NET ASSETS) FEES DEALERS
- ------- ----------- ------------- ------------- ---------------------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balanced .. $537,505 $503,630 $106,000 $1,718,000 (2.4%) $134,756 $134,258
Growth &
Income .... $ 97,010 $165,474 $ 48,000 $ 493,000 (1.8%) $ 51,515 $ 51,391
Special
Equities .. $ 22,971 $ 25,820 $ 7,000 $ 79,000 (2.0%) $ 8,899 $ 8,882
Utilities . $ 74,105 $323,601 $ 72,000 $ 408,000 (.9%) $ 89,240 $ 88,795
</TABLE>
PRINCIPAL UNDERWRITER
The Trust has authorized the principal underwriter to act as its agent in
repurchasing shares at the rate of $2.50 for each repurchase transaction
handled by the principal underwriter. For the fiscal year ended December 31,
1998, Class B paid the principal underwriter for repurchase transactions
handled by it $2.50 for each such transaction which aggregated as follows:
Balanced Fund -- $3,112.50; Growth & Income Fund -- $1,042.50; Special
Equities Fund -- $252.50; and Utilities Fund -- $1,610.
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 lower. 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.
<TABLE>
VALUE OF A $1,000 INVESTMENT -- BALANCED FUND
<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 12/31/98 CDSC ON 12/31/98 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ------------- ---------- ---------- ---------------- ---------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
10 Years
Ended
12/31/98 12/31/88 $1,000 $3,317.81 $3,317.81 231.78% 12.74% 231.78% 12.74%
5 Years
Ended
12/31/98 12/31/93 $1,000 $1,892.92 $1,872.92 89.29% 13.61% 87.29% 13.37%
1 Year
Ended
12/31/98 12/31/97 $1,000 $1,125.89 $1,075.89 12.59% 12.59% 7.59% 7.59%
</TABLE>
- ------------------
*Predecessor Fund commenced operations on November 2, 1993.
<TABLE>
VALUE OF A $1,000 INVESTMENT -- GROWTH & INCOME FUND
<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 12/31/98 CDSC ON 12/31/98 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ------------- ---------- ---------- ---------------- ---------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
10 Years
Ended
12/31/98 12/31/88 $1,000 $4,031.81 $4,031.81 303.18% 14.96% 303.18% 14.96%
5 Years
Ended
12/31/98 12/31/93 $1,000 $2,297.59 $2,277.59 129.76% 18.10% 127.76% 17.89%
1 Year
Ended
12/31/98** 12/31/97 $1,000 $1,208.48 $1,158.48 20.85% 20.85% 15.85% 15.85%
- ------------------
*Predecessor Fund commenced operations on August 17, 1994.
</TABLE>
<TABLE>
VALUE OF A $1,000 INVESTMENT -- SPECIAL EQUITIES FUND
<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 12/31/98 CDSC ON 12/31/98 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ------------- ---------- ---------- ---------------- ---------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
10 Years
Ended
12/31/98 12/31/88 $1,000 $3,399.99 $3,399.99 239.77% 13.01% 240.00% 13.02%
5 Years
Ended
12/31/98 12/31/93 $1,000 $1,642.47 $1,622.47 64.14% 10.42% 62.25% 10.16%
1 Year
Ended
12/31/98** 12/31/97 $1,000 $1,157.43 $1,107.43 15.74% 15.74% 10.74% 10.74%
</TABLE>
- ------------------
*Predecessor Fund commenced operations on August 22, 1994.
<TABLE>
VALUE OF A $1,000 INVESTMENT -- UTILITIES FUND
<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 12/31/98 CDSC ON 12/31/98 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ------------- ---------- ---------- ---------------- ---------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
10 Years
Ended
12/31/98 12/31/88 $1,000 $3,363.29 $3,363.29 236.33% 12.90% 236.33% 12.90%
5 Years
Ended
12/31/98 12/31/93 $1,000 $1,657.58 $1,637.58 65.76% 10.64% 63.76% 10.37%
1 Year
Ended
12/31/98 12/31/97 $1,000 $1,228.84 $1,178.84 22.88% 22.88% 17.88% 17.88%
</TABLE>
- ------------------
*Predecessor Fund commenced operations on November 1, 1993.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of April 1, 1999, 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. In addition, as of the same date, the following recordowners
held the amounts of Class B 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>
<S> <C> <C> <C>
BALANCED FUND -- Merrill Lynch, Pierce, Fenner & Smith, Inc. Jacksonville, FL 13.7%
BISYS Brokerage Services Inc. Concord, CA 10.1%
GROWTH & INCOME Merrill Lynch, Pierce, Fenner & Smith, Inc. Jacksonville, FL 14.6%
FUND --
SPECIAL EQUITIES FUND Merrill Lynch, Pierce, Fenner & Smith, Inc. Jacksonville, FL 26.7%
Donaldson Lufkin Jenrette Securities Corporation Inc. Jersey City, NJ 8.0%
UTILITIES FUND -- Merrill Lynch, Pierce, Fenner & Smith, Inc. Jacksonville, FL 17.8%
</TABLE>
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 FEES, PERFORMANCE AND OWNERSHIP
DISTRIBUTION AND SERVICE FEES
For the fiscal year ended December 31, 1998, the following table shows,
(1) sales commissions paid by the principal underwriter to investment dealers
on sales of Class C shares, (2) distribution payments to the principal
underwriter under the Distribution Plan, (3) CDSC payments to the principal
underwriter, (4) uncovered distribution charges under the Plan (dollar amount
and as a percentage of the class), (5) service fees on Class C shares, and (6)
the amount of service fees on Class C shares paid to investment dealers. The
service fees paid by the Funds that were not paid to investment dealers were
retained by the principal underwriter. Distribution payments and CDSC payments
reduce uncovered distribution charges under the Plan.
<TABLE>
<CAPTION>
DISTRIBUTION CDSC SERVICE
PAYMENTS TO PAYMENTS TO AMOUNT OF UNCOVERED FEES TO
SALES THE PRINCIPAL THE PRINCIPAL DISTRIBUTION CHARGES SERVICE INVESTMENT
CLASS C COMMISSIONS UNDERWRITER UNDERWRITER (AS A % OF NET ASSETS) FEES DEALERS
- ------- ----------- ------------- ------------ ---------------------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balanced .. $39,428 $64,354 $3,000 $1,271,000 (11.8%) $21,575 $13,273
Growth &
Income .... $ 6,163 $13,694 $1,000 $ 346,000 (14.8%) $ 4,580 $ 2,071
Special
Equities .. $ 4,766 $ 9,399 $ 900 $ 247,000 (34.8%) $ 3,181 $ 1,580
Utilities . $21,732 $27,260 $3,000 $ 787,000 (21.1%) $ 9,194 $ 7,246
</TABLE>
PRINCIPAL UNDERWRITER
The Trust has authorized the principal underwriter to act as its agent in
repurchasing shares at the rate of $2.50 for each repurchase transaction
handled by the principal underwriter. For the fiscal year ended September 30,
1998, Class C paid the principal underwriter for repurchase transactions
handled by it $2.50 for each such transaction which aggregated as follows:
Balanced Fund -- $207.50; Growth & Income Fund -- $90; Special Equities Fund
- -- $17.50; and Utilities Fund -- $210.
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 A, adjusted to reflect the Class C sales
charge. The Class A total return has not been adjusted to reflect certain
other expenses (such as distribution and/or service fees). If such adjustments
were made, the Class C total return would be lower. 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.
<TABLE>
VALUE OF A $1,000 INVESTMENT -- BALANCED FUND
<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 12/31/98 CDSC ON 12/31/98 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ------------ ---------- ---------- ---------------- ---------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
10 Years
Ended
12/31/98 12/31/88 $1,000 $3,231.88 $3,231.88 223.19% 12.45% 223.19% 12.45%
5 Years
Ended
12/31/98 12/31/93 $1,000 $1,834.67 $1,834.67 83.47% 12.90% 83.47% 12.90%
1 Year
Ended
12/31/98 12/31/97 $1,000 $1,125.10 $1,115.15 12.51% 12.51% 11.52% 11.52%
- ------------------
*Predecessor Fund commenced operations on November 2, 1993.
</TABLE>
<TABLE>
VALUE OF A $1,000 INVESTMENT -- GROWTH & INCOME FUND
<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 12/31/98 CDSC ON 12/31/98 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ------------ ---------- ---------- ---------------- ---------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
10 Years
Ended
12/31/98 12/31/88 $1,000 $3,955.84 $3,955.84 295.58% 14.74% 295.58% 14.74%
5 Years
Ended
12/31/98 12/31/93 $1,000 $2,254.43 $2,254.43 125.44% 17.65% 125.44% 17.65%
1 Year
Ended
12/31/98** 12/31/97 $1,000 $1,207.70 $1,197.70 20.77% 20.77% 19.77% 19.77%
- ------------------
*Predecessor Fund commenced operations on November 4, 1994.
</TABLE>
<TABLE>
VALUE OF A $1,000 INVESTMENT -- SPECIAL EQUITIES FUND
<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 12/31/98 CDSC ON 12/31/98 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ------------ ---------- ---------- ---------------- ---------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
10 Years
Ended
12/31/98 12/31/88 $1,000 $3,447.20 $3,447.20 244.72% 13.17% 244.72% 13.17%
5 Years
Ended
12/31/98 12/31/93 $1,000 $1,665.28 $1,665.28 66.53% 10.74% 66.53% 10.74%
1 Year
Ended
12/31/98 12/31/97 $1,000 $1,164.35 $1,154.35 16.44% 16.44% 15.44% 15.44%
- ------------------
*Predecessor Fund commenced operations on November 17, 1994.
</TABLE>
<TABLE>
VALUE OF A $1,000 INVESTMENT -- UTILITIES FUND
<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 12/31/98 CDSC ON 12/31/98 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ------------ ---------- ---------- ---------------- ---------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
10 Years
Ended
12/31/98 12/31/88 $1,000 $3,296.34 $3,296.34 229.63% 12.67% 229.63% 12.67%
5 Years
Ended
12/31/98 12/31/93 $1,000 $1,608.85 $1,608.85 60.88% 9.98% 60.88% 9.98%
1 Year
Ended
12/31/98 12/31/97 $1,000 $1,228.75 $1,218.75 22.88% 22.88% 21.88% 21.88%
- ------------------
*Predecessor Fund commenced operations on November 1, 1993.
</TABLE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of April 1, 1999, 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>
<S> <C> <C> <C>
BALANCED FUND -- Merrill Lynch, Pierce, Fenner & Smith, Inc. Jacksonville, FL 14.3%
GROWTH & INCOME FUND -- Merrill Lynch, Pierce, Fenner & Smith Inc. Jacksonville, FL 12.4%
Frontier Trust Co. FBO West Florida Pharmacies Inc. Ambler, PA 11.4%
401(k) Savings & Retirement Plan
Donaldson Lufkin Jenrette Securities Corporation, Inc. Jersey City, NJ 5.2%
Dain Rauscher Inc. FBO Midland, TX 5.1%
Bill O. Simmons, Jr. & Pamela S. Simmons
JTTEN/WROS
SPECIAL EQUITIES FUND -- Frontier Trust Co. FBO MWI Broward Inc. 401(k) Ambler, PA 23.5%
Savings & Retirement Plan
Merrill Lynch, Pierce, Fenner & Smith, Inc. Jacksonville, FL 15.6%
Frontier Trust Co. FBO Silikal North America Inc. Ambler, PA 15.2%
401(k) Savings & Retirement Plan
UTILITIES FUND -- Merrill Lynch, Pierce, Fenner & Smith, Inc. Jacksonville, FL 21.5%
Frontier Trust Co. FBO Paper & Chemical Supply 401(k) Ambler, PA 5.3%
Savings & Retirement Plan
</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>
Part B
Information Required in a Statement of Additional Information
STATEMENT OF
ADDITIONAL INFORMATION
May 1, 1999
EATON VANCE EMERGING GROWTH FUND
255 State Street
Boston, Massachusetts 02109
(800) 225-6265
This Statement of Additional Information ("SAI") provides general
information about the Fund. The Fund is a series of Eaton Vance Special
Investment Trust. Capitalized terms used in this SAI and not otherwise defined
have the meanings given to them in the prospectus. This SAI contains additional
information about:
PAGE
Strategies and Risks..................................................2
Investment Restrictions...............................................5
Management and Organization...........................................6
Investment Advisory and Administrative Services......................11
Other Service Providers..............................................12
Purchasing and Redeeming Shares......................................13
Sales Charges........................................................15
Performance..........................................................17
Certain Holders of Fund Shares.......................................19
Taxes................................................................19
Portfolio Security Transactions......................................21
Financial Statements.................................................23
THIS 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,
1999, AS SUPPLEMENTED FROM TIME TO TIME, WHICH IS INCORPORATED HEREIN BY
REFERENCE. THIS SAI SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS, WHICH MAY
BE OBTAINED BY CALLING 1-800-225-6265.
<PAGE>
STRATEGIES AND RISKS
The Fund invests primarily in publicly-traded equity securities of emerging
growth companies. Equity securities include common stocks and securities
convertible into common stocks. The Fund may also invest in preferred stocks and
money market instruments (to meet anticipated redemption requests or while
investment of cash is pending).
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. 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.
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.
-2-
<PAGE>
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. While many derivative
instruments have built-in leveraging characteristics, the Fund will not use them
to leverage its net assets. 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
markets for the derivative instrument, the assets underlying the derivative
instrument and the Fund's assets.
Equity swaps and over-the-counter ("OTC") 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. The Fund will only enter into equity swaps and OTC 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 OTC 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 ("CFTC") 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.
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, may be 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 tax 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.
-3-
<PAGE>
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.) The
Portfolios will comply with Securities and Exchange Commission ("SEC")
guidelines regarding cover for these instruments and, if the guidelines so
require, set aside cash or liquid securities in a segregated account with its
custodian in the prescribed amount. The securities in the segregated account
will be marked to market daily. Assets used as cover or held in a segregated
account maintained by the 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.
SHORT SALES AGAINST-THE-BOX. The Fund 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. These transactions may also require the current recognition of
taxable gain under certain tax rules applicable to constructive sales. No more
than 20% of the Fund's assets will be subject to short sales at any one time.
CONVERTIBLE SECURITIES. The Fund may invest in convertible securities rated
below investment grade at the time of investment (which are those rated Baa or
lower by Moody's Investors Service, Inc., or BBB or lower by either Standard &
Poor's Ratings Group or Fitch/IBCA). Securities rated Baa or BBB or below have
speculative characteristics. Also, changes in economic conditions or other
circumstances are more likely to reduce the capacity of issuers of lower-rated
securities to make principal and interest payments. Lower rated obligations also
may be subject to greater price volatility than higher rated obligations. There
is no minimum rating for investment. Securities rated in the lowest category are
in default.
-4-
<PAGE>
LENDING PORTFOLIO SECURITIES. The Fund may seek to increase its income by
lending portfolio securities to broker-dealers or other institutional borrowers.
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 Fund's total
assets. Securities lending involves risks of delay in recovery or even loss of
rights on the securities loaned if the borrower fails financially. The Fund has
represent intention of engaging in securities lending.
TEMPORARY INVESTMENTS. Under unusual market conditions, the Portfolio may invest
temporarily in cash or cash equivalents. Cash equivalents are highly liquid,
short-term securities such as commercial paper, certificates of deposit,
short-term notes and short-term U.S. Government obligations.
DIVERSIFIED STATUS. Each Portfolio is a "diversified" investment company under
the 1940 Act. This means that with respect to 75% of its total assets (1) a
Portfolio may not invest more than 5% of its total assets in the securities of
any one issuer (except U.S. Government obligations) and (2) a Portfolio may not
own more than 10% of the outstanding voting securities of any one issuer.
PORTFOLIO TURNOVER. The Fund cannot accurately predict its portfolio turnover
rate, but the annual turnover rate may exceed 100% (excluding turnover of
securities having a maturity of one year or less). A high turnover rate (100% or
more) necessarily involves greater expenses to the Fund.
INVESTMENT RESTRICTIONS
The following investment restrictions of the Fund are designated as
fundamental policies and as such cannot be changed without the approval of the
holders of a majority of the Fund's outstanding voting securities, which as used
in this SAI means the lesser of (a) 67% of the shares of the Fund present or
represented by proxy at a meeting if the holders of more than 50% of the
outstanding shares are present or represented at the meeting or (b) more than
50% of the outstanding shares of the Fund. Accordingly, the Fund may not:
(1) With respect to 75% of its total assets, invest more than 5% of
its total assets (taken at current value) in the securities of any one
issuer, or in more than 10% of the outstanding voting securities of any one
issuer, except obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities and except securities of other investment
companies;
(2) Borrow money or issue senior securities except as permitted by the
Investment Company Act of 1940;
(3) Purchase any securities on margin, (but the Fund may obtain such
short-term credits as may be necessary for the clearance of purchases and
sales of securities);
(4) Underwrite securities of other issuers;
(5) 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);
-5-
<PAGE>
(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 all of its investable assets in an open-end management
investment company with substantially the same investment objective, policies
and restrictions as the Fund.
The Fund has adopted the following investment policies which may be changed
by the Trustees with respect to the Fund without approval by the Fund's
shareholders. 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. Any
such determination by a delegate will be made pursuant to procedures
adopted by the Board. If the Fund invests in Rule 144A securities, the
level of portfolio illiquidity may be increased to the extent that eligible
buyers become uninterested in purchasing such securities; 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.
MANAGEMENT AND ORGANIZATION
FUND MANAGEMENT. The Trustees of the Trust are responsible for the overall
supervision of the Trust's affairs. The Trustees and officers of the Trust and
Fund 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 255 State
Street, Boston, Massachusetts 02109. Those Trustees who are "interested persons"
of the Trust or the Fund, as defined in the 1940 Act, are indicated by an
asterisk(*).
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<PAGE>
JESSICA M. BIBLIOWICZ (39), Trustee
Chief Executive Officer of National Financial Partners (a financial services
company) (since April 1999). President and Chief Operating Officer of John A.
Levin & Co. (a registered investment advisor) (July 1997 to April 1999) and a
Director of Baker, Fentress & Company which owns John A. Levin & Co. (July
1997 to April 1999). Executive Vice President of Smith Barney Mutual Funds
(from July 1994 to June 1997). Elected Trustee October 30, 1998. Trustee of
various investment companies managed by Eaton Vance or Boston Management &
Research ("BMR"), a wholly-owned subsidiary of Eaton Vance, since October 30,
1998.
Address: 1301 Avenue of the Americas, New York, New York 10019
DONALD R. DWIGHT (68), Trustee
President of Dwight Partners, Inc. (a corporate relations and communications
company). Trustee/Director of the Royce Funds (mutual funds). Trustee of
various investment companies managed by Eaton Vance or BMR.
Address: Clover Mill Lane, Lyme, New Hampshire 03768
JAMES B. HAWKES (57), President and Trustee*
Chairman, President and Chief Executive Officer of BMR, Eaton Vance and their
corporate parent and trustee (EVC and EV); Director of EVC and EV. Trustee
and officer of various investment companies managed by Eaton Vance or BMR.
SAMUEL L. HAYES, III (64), Trustee
Jacob H. Schiff Professor of Investment Banking Emeritus, Harvard University
Graduate School of Business Administration. Trustee of the Kobrick-Cendant
Investment Trust (mutual funds). Trustee of various investment companies
managed by Eaton Vance or BMR.
Address: 345 Nahatan Road, Westwood, Massachusetts 02090
NORTON H. REAMER (63), 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).
Trustee of various investment companies managed by Eaton Vance or BMR.
Address: One International Place, Boston, Massachusetts 02110
LYNN A. STOUT (41), Trustee
Professor of Law, Georgetown University Law Center. Elected Trustee October 30,
1998. Trustee of various investment companies managed by Eaton Vance or BMR
since October 30, 1998.
Address: 600 New Jersey Avenue, NW, Washington, DC 20001
JOHN L. THORNDIKE (72), Trustee
Formerly Director of Fiduciary Company Incorporated. Trustee of various
investment companies managed by Eaton Vance or BMR. Mr. Thorndike will be
retiring from the Board of Trustees in July, 1999.
Address: 175 Federal Street, Boston, Massachusetts 02110
JACK L. TREYNOR (69), Trustee
Investment adviser and Consultant. Trustee of various investment companies
managed by Eaton Vance or BMR.
Address: 504 Via Almar, Palos Verdes Estates, California 90274
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<PAGE>
EDWARD E. SMILEY, JR. (54), 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 NationsBank (1992-1996). Officer of various
investment companies managed by Eaton Vance or BMR.
MICHAEL B. TERRY (56), Vice President
Vice President of BMR and Eaton Vance. Officer of various investment companies
managed by Eaton Vance or BMR.
JAMES L. O'CONNOR (54), Treasurer
Vice President of BMR and Eaton Vance. Officer of various investment companies
managed by Eaton Vance or BMR.
ALAN R. DYNNER (58), Secretary
Vice President and Chief Legal Officer of BMR, Eaton Vance and EVC 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.
JANET E. SANDERS (63), Assistant Treasurer and Assistant Secretary
Vice President of BMR and Eaton Vance. Officer of various investment companies
managed by Eaton Vance or BMR.
A. JOHN MURPHY (36), Assistant Secretary
Vice President of BMR and Eaton Vance. Officer of various investment companies
managed by Eaton Vance or BMR.
ERIC G. WOODBURY (41), Assistant Secretary
Vice President of BMR and Eaton Vance. Officer of various investment companies
managed by Eaton Vance or BMR.
The Nominating Committee of the Board of Trustees of the Trust is comprised
of the Trustees (except Mr. Thorndike) who are not "interested persons" as that
term is defined under the 1940 Act ("noninterested Trustees"). The purpose of
the Committee is to recommend to the Board nominees for the position of
noninterested Trustee and to assure that at least a majority of the Board of
Trustees is independent of Eaton Vance and its affiliates.
Messrs. Hayes (Chairman), Dwight and Reamer and Ms. Stout are members of
the Special Committee of the Board of Trustees of the Trust. 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.
-8-
<PAGE>
Messrs. Treynor (Chairman) and Dwight and Ms. Bibliowicz 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.
Trustees of the Trust who are not affiliated with the investment adviser
may elect to defer receipt of all or a percentage of their annual fees in
accordance with the terms of a Trustees Deferred Compensation Plan (the
"Trustees' Plan"). Under the Trustees' Plan, an eligible Trustee may elect to
have his deferred fees invested by the 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.
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.) During the fiscal year ending December 31, 1998, the noninterested
Trustees of the Trust earned the following compensation in their capacities as
Trustees from the Fund and for the year ended December 31, 1998, earned the
following compensation in their capacities as Trustees of the funds in the Eaton
Vance fund complex(1):
<TABLE>
<CAPTION>
<S> <C> <C>
AGGREGATE AGGREGATE TOTAL COMPENSATION
COMPENSATION COMPENSATION FROM TRUST AND
NAME FROM TRUST(2) FROM FUND FUND COMPLEX
- ---- ---------- --------- ------------
Jessica M. Bibliowicz(6)............................. $ 548 $183 $ 33,334
Donald R. Dwight..................................... 2,666 -- 160,000(3)
Samuel L. Hayes, III................................. 2,639 -- 170,000(4)
Lynn A. Stout(6)..................................... 386 192 32,842
John L. Thorndike.................................... 2,568 -- 160,000(5)
Jack L. Treynor...................................... 3,216 -- 170,000
</TABLE>
(1) As of May 1, 1999, the Eaton Vance fund complex consists of 154 registered
investment companies or series thereof.
(2) The Trust consisted of 8 Funds as of December 31, 1998.
(3) Includes $60,000 of deferred compensation.
(4) Includes $41,563 of deferred compensation.
(5) Includes $119,091 of deferred compensation.
(6) Ms. Bibliowicz and Ms. Stout were elected as Trustees on October 30, 1998.
ORGANIZATION. The Fund is a series of the Trust, which is organized under
Massachusetts law as a business trust and is operated as an open-end management
investment company. On May 1, 1999, the Fund changed it name from EV Traditional
Emerging Growth Fund to Eaton Vance Emerging Growth Fund. 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.
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<PAGE>
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 than 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
the office either by a written declaration filed with the Trust's custodian or
by votes cast at a meeting called for that purpose. The By-laws further provide
that under certain circumstances the shareholders may call a meeting to remove a
Trustee and that the Trust is required to provide assistance in communication
with shareholders about such a meeting.
The Trust's Declaration of Trust may be amended by the Trustees when
authorized by vote of a majority of the outstanding voting securities of the
Trust, the financial interests of which are affected by the amendment. The
Trustees may also amend the Declaration of Trust without the vote or consent of
shareholders to change the name of the Trust or any series or to make such other
changes (such as reclassifying series of classes of shares or restructuring the
Trust) as do not have a materially adverse effect on the financial interests of
shareholders or if they deem it necessary to conform it to applicable federal or
state laws or regulations. The Trust or any series or class thereof may be
terminated by: (1) the affirmative vote of the holders of not less than
two-thirds of the shares of the outstanding voting securities and entitled to
vote at any meeting of shareholders of the Trust, or by an instrument or
instruments in writing without a meeting, consented to by the holders of
two-thirds of the shares of the Trust or a series or class thereof, provided,
however, that, if such termination is recommended by the Trustees, the vote of a
majority of the outstanding voting securities of the Trust or a series or class
thereof entitled to vote thereon shall be sufficient authorization; or (2) by
means of an instrument in writing signed by a majority of the Trustees, to be
followed by a written notice to shareholders stating that a majority of the
Trustees has determined that the continuation of the Trust or a series or a
class thereof is not in the best interest of the Trust, such series or class or
of their respective shareholders.
The Declaration of Trust further provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law; but nothing in the
Declaration of Trust protects a Trustee against any liability to which he would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of his
office.
Under Massachusetts law, if certain conditions prevail, shareholders of a
Massachusetts business trust (such as the Trust) could be deemed to have
personal liability for the obligations of the Trust. Numerous investment
companies registered under the 1940 Act have been formed as Massachusetts
business trusts, and management is not aware of an instance where such liability
has been imposed. The Trust's Declaration of Trust contains an express
disclaimer of liability on the part of the Fund shareholders and the Trust's
By-laws provide that the Trust shall assume the defense on behalf of any Fund
shareholders. The Declaration of Trust also contains provisions limiting the
liability of a series or class to that series or class. Moreover, the Trust's
By-laws also provide for indemnification out of the property of the Fund or 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.
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<PAGE>
INVESTMENT ADVISORY AND ADMINISTRATIVE SERVICES
INVESTMENT ADVISORY SERVICES. The Trust on behalf of the Fund engages Eaton
Vance as investment adviser pursuant to an Investment Advisory Agreement dated
December 31, 1996.
The Fund pays Eaton Vance as compensation under the Investment Advisory
Agreement a monthly fee based on average daily net assets as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
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%
</TABLE>
As of December 31, 1998, the Fund had net assets of $368,447. For the
fiscal year ended December 31, 1998, and 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 $2,439 and $1,896,
respectively (each 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 $29,456 and $24,157, respectively.
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.
ADMINISTRATIVE SERVICES. As indicated in the prospectus, Eaton Vance serves as
administrator of the Fund, but currently receives no compensation for providing
administrative services to the Fund. Under its Administrative Services Agreement
with the 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.
-11-
<PAGE>
INFORMATION ABOUT EATON VANCE. Eaton Vance and EV are both wholly-owned
subsidiaries of EVC. Eaton Vance is a Massachusetts business trust, and EV is
the trustee of Eaton Vance. The Directors of EV are 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 of EVC, Eaton Vance and EV. All
of the issued and outstanding shares of Eaton Vance and of EV are owned by EVC.
All shares of the outstanding Voting Common Stock of EVC are deposited in a
Voting Trust, the Voting Trustees of which are Messrs. Hawkes and Rowland and
Alan R. Dynner, Thomas E. Faust, Jr., Thomas J. Fetter, Duncan W. Richardson,
William M. Steul and Wharton P. Whitaker (all of whom are officers of Eaton
Vance). The Voting Trustees have unrestricted voting rights for the election of
Directors of EVC. All of the outstanding voting trust receipts issued under said
Voting Trust are owned by certain of the officers of Eaton Vance who are also
officers or officers and Directors of EVC and EV. As indicated under "Management
and Organization," all of the officers of the Trust (as well as Mr. Hawkes who
is also a Trustee) hold positions in the Eaton Vance organization.
EXPENSES. The Fund is responsible for all expenses not expressly stated to be
payable by another party (such as the investment adviser under the Investment
Advisory Agreement, Eaton Vance under the Administrative Services Agreement or
the principal underwriter under the Distribution Agreement). In the case of
expenses incurred by the Trust, the Fund is responsible for its pro rata share
of those expenses.
OTHER SERVICE PROVIDERS
PRINCIPAL UNDERWRITER. Eaton Vance Distributors, Inc. ("EVD"), 255 State Street,
Boston, Massachusetts 02109, is the Fund's principal underwriter. 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 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 investment dealer
discounts from the applicable public offering price which are alike for all
investment dealers. The principal underwriter may allow, upon notice to all
investment dealers with whom it has agreements, discounts up to the full sales
charge during the periods specified in the notice. During periods when the
discount includes the full sales charge, such investment dealers may be deemed
to be underwriters as that term is defined in the Securities Act of 1933. The
total sales charges paid in connection with sales of shares of the Fund for the
fiscal year ended December 31, 1998 and for the period from the start of
business, January 2, 1997, to December 31, 1997, was $137 and $32, respectively,
of which $18 and $6, respectively, was received by the principal underwriter and
$119 and $26, respectively, was received by investment dealers.
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
fiscal year ended December 31, 1998 and 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.
-12-
<PAGE>
CUSTODIAN. Investors Bank & Trust Company ("IBT"), 200 Clarendon Street, Boston,
Massachusetts 02116, serves as custodian to 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 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 instructions
from the Fund. IBT also provides services in connection with the preparation of
shareholder reports and the electronic filing of such reports with the SEC. EVC
and its affiliates and their officers and employees from time to time have
transactions with various banks, including IBT. It is Eaton Vance's opinion that
the terms and conditions of such transactions were not and will not be
influenced by existing or potential custodial or other relationships between the
Fund and such banks.
INDEPENDENT ACCOUNTANTS. PricewaterhouseCoopers LLP, One Post Office Square,
Boston, Massachusetts 02109, 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 SEC.
TRANSFER AGENT. First Data Investor Services Group, P.O. Box 5123, Westborough,
Massachusetts 01581-5123, serves as transfer and dividend disbursing agent for
the Fund.
PURCHASING AND REDEEMING SHARES
CALCULATION OF NET ASSET VALUE. The net asset value of the Fund is computed by
IBT (as agent and custodian for the Fund) by subtracting the liabilities of the
Fund from the value of its total assets. 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.
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.
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
-13-
<PAGE>
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 supplied by an independent pricing service.
ADDITIONAL INFORMATION ABOUT PURCHASES. Fund shares are continuously offered
through investment dealers which have entered agreements with the principal
underwriter. The public offering price is the net asset value next computed
after receipt of the order, plus, a variable percentage (sale charge) depending
upon the amount of purchase as indicated by the sales charge table set forth in
the prospectus. The sales charge is divided between the principal underwriter
and the investment dealer. The sales charge table is applicable to purchases of
the Fund alone or in combination with purchases of certain other funds offered
by the principal underwriter, made at a single time by (i) an individual, or an
individual, his spouse and their children under the age of twenty-one,
purchasing shares for his or their own account, and (ii) a trustee or other
fiduciary purchasing shares for a single trust estate or a single fiduciary
account. The table is also presently applicable to (1) purchases of Fund shares
pursuant to a written Statement of Intention; or (2) purchases of Fund shares
pursuant to the Right of Accumulation and declared as such at the time of
purchase. See "Sales Charges".
In connection with employee benefit or other continuous group purchase
plans, the Fund may accept initial investments of less than $1,000 on the part
of an individual participant. In the event a shareholder who is a participant of
such a plan terminates participation in the plan, his or her shares will be
transferred to a regular individual account. However, such account will be
subject to the right of redemption by the Fund as described below.
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 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 investment dealer, together with a
completed and signed Letter of Transmittal in approved form (available from
investment dealers). Investors who are contemplating an exchange of securities
for shares, or their representatives, must contact Eaton Vance to determine
whether the securities are acceptable before forwarding such securities. Eaton
Vance reserves the right to reject any securities. Exchanging securities for
shares may create a taxable gain or loss. Each investor should consult his or
her tax adviser with respect to the particular federal, state and local tax
consequences of exchanging securities.
SUSPENSION OF SALES. The Fund may, in its absolute discretion, suspend,
discontinue or limit the offering of shares at any time. In determining whether
any such action should be taken, the Fund's management intends to consider all
relevant factors, including (without limitation) the size of the Fund, the
investment climate and market conditions, and the volume of sales and
redemptions of shares. Suspension of the offering of shares would not, of
course, affect a shareholder's ability to redeem shares.
-14
<PAGE>
ADDITIONAL INFORMATION ABOUT REDEMPTIONS. The right to redeem shares of the Fund
can be suspended and the payment of the redemption price deferred when the
Exchange is closed (other than for customary weekend and holiday closings),
during periods when trading on the Exchange is restricted as determined by the
SEC, or during any emergency as determined by the SEC which makes it
impracticable for the Fund to dispose of its securities or value its assets, or
during any other period permitted by order of the SEC for the protection of
investors.
While normally payments will be made in cash for redeemed shares, the
Trust, subject to compliance with applicable regulations, has reserved the right
to pay the redemption price of shares of the Fund, either totally or partially,
by a distribution in kind of readily marketable securities. The securities so
distributed would be valued pursuant to the Fund's valuation procedures. If a
shareholder received a distribution in kind, the shareholder could incur
brokerage or other charges in converting the securities to cash.
Due to the high cost of maintaining small accounts, the Trust reserves the
right to redeem accounts with balances of less than $750. Prior to such a
redemption, shareholders will be given 60 days' written notice to make an
additional purchase. However, no such redemption would be required by the Trust
if the cause of the low account balance was a reduction in the net asset value
of shares. No CDSC will be imposed with respect to such involuntary redemptions.
SYSTEMATIC WITHDRAWAL PLAN. The transfer agent will send to the shareholder
regular monthly or quarterly payments of any permitted amount designated by the
shareholder based upon the value of the shares held. The checks will be drawn
from share redemptions and hence, 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.
SALES CHARGES
DEALER COMMISSIONS. The principal underwriter may, from time to time, at its own
expense, provide additional incentives to investment dealers which employ
registered representatives who sell Fund shares and/or shares of other funds
distributed by the principal underwriter. In some instances, such additional
incentives may be offered only to certain investment dealers whose
representatives sell or are expected to sell significant amounts of shares. In
addition, the principal underwriter may from time to time increase or decrease
the sales commissions payable to investment dealers. The principal underwriter
may allow, upon notice to all investment dealers with whom it has agreements,
discounts up to the full sales charge during the periods specified in the
notice. During periods when the discount includes the full sales charge, such
investment dealers may be deemed to be underwriters as that term is defined in
the Securities Act of 1933.
SALES CHARGE WAIVERS. Fund shares 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 and employees of investment dealers and bank employees who refer
customers to registered representatives of investment dealers; to officers and
employees of IBT and the transfer agent; persons
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associated with law firms providing services to Eaton Vance and the Eaton Vance
funds; and to such persons' spouses, parents, siblings and children and their
beneficial accounts. Fund 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 Sections 401(a), 403(b) or 457 of the Internal Revenue Code of 1986,
as amended (the "Code") and "rabbi trusts". Subject to the applicable provisions
of the 1940 Act, the Trust may issue Fund 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. Fund shares may be sold
at net asset value to any investment advisory, agency, custodial or trust
account managed or administered by Eaton Vance or by any parent, subsidiary or
other affiliate of Eaton Vance. Fund shares are offered at net asset value to
the foregoing persons and in the foregoing situations because either (i) there
is no sales effort involved in the sale of shares or (ii) the investor is paying
a fee (other than the sales charge) to the investment dealer involved in the
sale.
STATEMENT OF INTENTION. If it is anticipated that $50,000 or more of Fund shares
and shares of other funds exchangeable for Class A shares of another Eaton Vance
fund 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. 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 Fund shares the shareholder owns in his or her account(s) in the Fund, and
shares of other funds exchangeable for Fund shares. The sales charge on the
shares being purchased will then be at the rate applicable to the aggregate.
Shares purchased (i) by an individual, his or her spouse and their children
under the age of twenty-one, and (ii) by a trustee, guardian or other fiduciary
of a single trust estate or a single fiduciary account, will be combined for the
purpose of determining whether a purchase will qualify for the Right of
Accumulation and if qualifying, the applicable sales charge level. For any such
discount to be made available, at the time of purchase a purchaser or his or her
investment dealer must provide the principal underwriter (in the case of a
purchase made through an investment
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<PAGE>
dealer) or the transfer agent (in the case of an investment made by mail) with
sufficient information to permit verification that the purchase order qualifies
for the accumulation privilege. Confirmation of the order is subject to such
verification. The Right of Accumulation privilege may be amended or terminated
at any time as to purchases occurring thereafter.
TAX-SHELTERED RETIREMENT PLANS. Fund shares are available for purchase in
connection with certain tax-sheltered retirement plans. Detailed information
concerning these plans, including certain exceptions to minimum investment
requirements, and copies of the plans are available from the principal
underwriter. This information should be read carefully and consultation with an
attorney or tax adviser may be advisable. The information sets forth the service
fee charged for retirement plans and describes the federal income tax
consequences of establishing a plan. Participant accounting services (including
trust fund reconciliation services) will be offered only through third party
recordkeepers and not by the principal underwriter. Under all plans, dividends
and distributions will be automatically reinvested in additional shares.
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 remains 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
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.
During the fiscal year ended December 31, 1998, the Fund made service fee
payments under the Plan aggregating $576, all of which was retained by the
principal underwriter.
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 Fund may also publish total return
figures for the Fund based on reduced sales charges or at net asset value. These
returns would be lower if the full sales charge was imposed.
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<PAGE>
The table below indicates the cumulative and average total return on a
hypothetical investment of $1,000 in the Fund covering the one-year period ended
December 31, 1998, and the life of the Fund from January 2, 1997 through
December 31, 1998. 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.
VALUE OF A $1,000 INVESTMENT
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
VALUE OF VALUE OF TOTAL RETURN EXCLUDING TOTAL RETURN INCLUDING
INVESTMENT INVESTMENT INITIAL INVESTMENT MAXIMUM SALES CHARGE MAXIMUM SALES CHARGE
PERIOD DATE INVESTMENT ON 12/31/98 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
------ ---- ---------- ----------- ---------- ---------- ---------- ----------
Life of Fund** 1/2/97 $942.51 $1,295.41 37.44% 17.24% 29.54% 13.82%
1 Year Ended
12/31/98 12/31/97 $942.56 $1,086.32 15.25% 15.25% 8.63% 8.63%
</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.
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 in materials provided to present and
prospective shareholders may include descriptions of Eaton Vance and other Fund
and Portfolio service providers, their investment styles, other investment
products, personnel and Fund distribution channels.
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<PAGE>
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.
CERTAIN HOLDERS OF FUND SHARES
As of April 1, 1999, 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
the same date, Eaton Vance Management, Boston, MA was the record owner of
approximately 67.6% of the outstanding shares and Robert A. Chisholm, Melrose,
MA and Brian Jacobs, Cohasset, MA held of record and beneficially owned 6.7% and
5.7%, respectively, 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.
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 net
income and net short-term and long-term capital gains 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
losses, generally computed on the basis of the one-year period ending on October
31 of such year, after reduction by (i) any available
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<PAGE>
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.
Certain foreign exchange gains and losses realized by the Fund in
connection with its investments in foreign securities, foreign currency, and
foreign currency-related options, futures or forward contracts 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, or, in the case of certain
currency-related positions as described above, recharacterized as ordinary
income 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.
Sales charges paid upon a purchase of shares of a Fund cannot be taken into
account for purposes of determining gain or loss on a redemption or exchange of
the shares before 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.
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.
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<PAGE>
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
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; or (iii) the shareholder
fails to provide, or renew after expiration, 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.
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.
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<PAGE>
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.
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.
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<PAGE>
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
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 fiscal year ended December 31, 1998, the Fund paid brokerage
commissions of $563 with respect to portfolio transactions. Of this amount,
approximately $507 was paid in respect of portfolio security transactions
aggregating approximately $228,677 to firms which provided some Research
Services to the investment adviser's organization (although many of such firms
may have been selected in any particular transaction primarily because of their
execution capabilities).
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).
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 and is incorporated by reference into this SAI. A copy of the
Fund's annual report accompanies this SAI. Consistent with applicable law,
duplicate mailings of shareholder reports and certain other Fund information to
shareholders residing at the same address may be eliminated.
Registrant incorporates by reference the audited financial information for
the fiscal year ended December 31, 1998 for the Fund (Accession No.
0000928816-99-000059) as previously filed electronically with the Commission.
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PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL INFORMATION
May 1, 1999
EATON VANCE EMERGING MARKETS FUND
EATON VANCE
INSTITUTIONAL EMERGING MARKETS FUND
255 State Street
Boston, Massachusetts 02109
(800) 225-6265
This Statement of Additional Information ("SAI") provides general
information about Eaton Vance Emerging Markets Fund (the "Emerging Markets
Fund"), Eaton Vance Institutional Emerging Markets Fund (the "Institutional
Emerging Markets Fund") (each a "Fund") and the Portfolio. Each Fund is a
series of Eaton Vance Special Investment Trust. Capitalized terms used in this
SAI and not otherwise defined have the meanings given to them in the
prospectus. This SAI contains additional information about:
Page
Strategies and Risks ................................................ 2
Investment Restrictions ............................................. 6
Management and Organization ......................................... 8
Investment Advisory and Administrative Services ..................... 12
Other Service Providers ............................................. 14
Purchasing and Redeeming Shares ..................................... 14
Sales Charges ....................................................... 17
Performance ......................................................... 20
Taxes ............................................................... 21
Portfolio Security Transactions ..................................... 22
Financial Statements ................................................ 24
Appendices:
A: Emerging Markets Fund Class A Fees, Performance and Ownership a-1
B: Emerging Markets Fund Class B Fees, Performance and Ownership b-1
C: Institutional Emerging Markets Fund Performance and Ownership c-1
Although each Fund offers only its shares of beneficial interest, it is
possible that a Fund (or Class) might become liable for a misstatement or
omission in this SAI regarding another Fund (or Class) because the Funds use
this combined SAI. The Trustees of the Trust have considered this factor in
approving the use of a combined SAI.
THIS SAI IS NOT A PROSPECTUS AND IS AUTHORIZED FOR DISTRIBUTION TO
PROSPECTIVE INVESTORS ONLY IF PRECEDED OR ACCOMPANIED BY THE RELEVANT FUND'S
PROSPECTUS DATED MAY 1, 1999, AS SUPPLEMENTED FROM TIME TO TIME, WHICH IS
INCORPORATED HEREIN BY REFERENCE. THIS SAI SHOULD BE READ IN CONJUNCTION WITH
THE PROSPECTUS, WHICH MAY BE OBTAINED BY CALLING 1-800-225-6265.
<PAGE>
STRATEGIES AND RISKS
EMERGING MARKETS PORTFOLIO. Under normal market conditions, the Portfolio will
invest at least 65% of its total assets in equity securities of companies in
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.
FOREIGN INVESTMENTS. Investing in securities issued by companies whose
principal business activities are outside the United States may involve
significant risks not present in domestic investments. For example, there is
generally less publicly available information about foreign companies,
particularly those not subject to the disclosure and reporting requirements of
the U.S. securities laws. Foreign issuers are generally not bound by uniform
accounting, auditing, and financial reporting requirements and standards of
practice comparable to those applicable to domestic issuers. Investments in
foreign securities also involve the risk of possible adverse changes in
investment or exchange control regulations, expropriation or confiscatory
taxation, limitation on the removal of funds or other assets of the Portfolio,
political or financial instability or diplomatic and other developments which
could affect such investments. Further, economies of particular countries or
areas of the world may differ favorably or unfavorably from the economy of the
United States. It is anticipated that in most cases the best available market
for foreign securities will be on exchanges or in over-the-counter markets
located outside of the United States. Foreign stock markets, while growing in
volume and sophistication, are generally not as developed as those in the
United States, and securities of some foreign issuers (particularly those
located in developing countries) may be less liquid and more volatile than
securities of comparable U.S. companies. In addition, foreign brokerage
commissions are generally higher than commissions on securities traded in the
United States and may be non-negotiable. In general, there is less overall
governmental supervision and regulation of foreign securities markets, broker-
dealers, and issuers than in the United States.
The Portfolio may also invest in American Depositary Receipts (ADRs),
European Depositary Receipts (EDRs) and Global Depositary Receipts (GDRs).
ADRs as well as other "hybrid" forms of ADRs, including EDRs and GDRs, are
certificates evidencing ownership of shares of a foreign issuer. These
certificates are issued by depository banks and generally trade on an
established market in the United States or elsewhere. The underlying shares
are held in trust by a custodian bank or similar financial institution in the
issuer's home country. The depository bank may not have physical custody of
the underlying securities at all times and may charge fees for various
services, including forwarding dividends and interest and corporate actions.
ADRs are alternatives to directly purchasing the underlying foreign securities
in their national markets and currencies. However, ADRs continue to be subject
to many of the risks associated with investing directly in foreign securities.
These risks include foreign exchange risk as well as the political and
economic risks of the underlying issuer's country. ADRs, EDRs and GDRs may be
sponsored or unsponsored. Unsponsored receipts are established without the
participation of the issuer. Unsponsored receipts differ from receipts
sponsored by an issuer in that they may involve higher expenses, they may not
pass-through voting and other shareholder rights, and they may be less liquid.
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.
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.
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 investment
adviser believes that the currency of a particular foreign country may suffer
a substantial decline against the U.S. dollar, it may enter into a forward
contract to sell, for a fixed amount of dollars, the amount of foreign
currency approximating the value of some or all of the securities held 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 investment 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 investment adviser or the
Manager that have the characteristics of closed-end investment companies. The
Portfolio will indirectly bear its proportionate share of any management fees
paid by investment companies in which it invests in addition to the advisory
fee paid by the Portfolio. The value of closed-end investment company
securities, which are usually traded on an exchange, is affected by demand for
the securities themselves, independent of the demand for the underlying
portfolio assets, and, accordingly, such securities can trade at a discount
from their net asset values.
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.
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.
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 investment adviser determines that
trading on each such foreign exchange does not subject the Portfolio to risks,
including credit and liquidity risks, that are materially greater than the
risks associated with trading on 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 investment 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.
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 foreign taxation
than taxes payable on the sale of listed securities.
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 Securities and Exchange
Commission (the "SEC"), 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 investment 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 investment
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 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.
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
SEC guidelines regarding cover for these instruments and, if the guidelines so
require, set aside cash or liquid securities in a segregated account with its
custodian in the prescribed amount. The securities in the segregated account
will be marked to market daily.
Assets used as cover or held in a segregated account maintained by the
Portfolio's custodian cannot be sold while the position requiring coverage or
segregation is outstanding unless they are replaced with other appropriate
assets. As a result, the commitment of a large portion of 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 200% (excluding turnover of securities having a maturity
of one year or less). While it is not the policy of the Portfolio to purchase
securities with a view to short-term profits, the Portfolio will dispose of
securities without regard to the time they have been held if such action seems
advisable. A high turnover rate (100% or more) necessarily involves greater
expenses to the Portfolio. Short-term trading may be advisable in light of a
change in circumstances of a particular company or within a particular
industry, or in light of general market, economic or political conditions.
High portfolio turnover may also result in the realization of substantial net
short-term capital gains.
TEMPORARY INVESTMENTS. Under unusual market conditions, the Portfolio may
invest temporarily in cash or cash equivalents. Cash equivalents are highly
liquid, short-term securities such as commercial paper, certificates of
deposit, short-term notes and short-term U.S. Government obligations.
INVESTMENT RESTRICTIONS
The following investment restrictions of each Fund are designated as
fundamental and as such cannot be changed without the approval by the holders
of a majority of that Fund's outstanding voting securities which as used in
this SAI means the lesser of (a) 67% of the shares of the Fund present or
represented by proxy at a meeting if the holders of more than 50% of the
outstanding shares are present or represented at the meeting or (b) more than
50% of the outstanding shares of the Fund. Accordingly each Fund may not:
(1) Borrow money or issue senior securities except as permitted by the
Investment Company Act of 1940;
(2) Purchase any securities on margin (but the Fund and the Portfolio may
obtain such short-term credits as may be necessary for the clearance
of purchases and sales of securities);
(3) Underwrite securities of other issuers;
(4) Invest in real estate including interests in real estate limited
partnerships (although it may purchase and sell securities which are
secured by real estate and securities of companies which invest or
deal in real estate) or in commodities or commodity 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 its investment policies and restrictions 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. Notwithstanding the investment policies and restrictions of the
Portfolio, the Portfolio may invest part of its assets in another investment
company consistent with the 1940 Act.
The Portfolio has adopted substantially the same fundamental investment
restrictions as the foregoing investment restrictions adopted by each Fund;
such restrictions cannot be changed without the approval of a "majority of the
outstanding voting securities" of the Portfolio.
For as long as a feeder fund of the Portfolio has registered shares in
Hong Kong (and for so long as Hong Kong requires the following restrictions),
the Portfolio may not (i) invest 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 Funds and the Portfolio have adopted the following investment policies
which may be changed without shareholder or investor approval. Each Fund and
the Portfolio will not:
(a) invest more than 15% of its net assets in investments which are not
readily marketable, including restricted securities and repurchase
agreements with a maturity longer than seven days. Restricted
securities for the purposes of this limitation do not include
securities eligible for resale pursuant to Rule 144A under the
Securities Act of 1933 and commercial paper issued pursuant to Section
4(2) of said Act that the Board of Trustees of the Trust or the
Portfolio, or its delegate, determines to be liquid. Any such
determination by a delegate will be made pursuant to procedures
adopted by the Board. If the Fund or Portfolio invests in Rule 144A
securities, the level of portfolio illiquidity may be increased to the
extent that eligible buyers become uninterested in purchasing such
securities; or
(b) 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.
Whenever an investment policy or investment restriction set forth in the
prospectus or this SAI states a maximum percentage of assets that may be
invested in any security or other asset, or describes a policy regarding
quality standards, such percentage limitation or standard shall be determined
immediately after and as a result of a Fund's or 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 a 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 Funds 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 Funds and Portfolio must always be in compliance
with the limitation on investing in illiquid securities and the borrowing
policies set forth above.
MANAGEMENT AND ORGANIZATION
FUND MANAGEMENT. The Trustees of the Trust are responsible for the overall
management and supervision of the Trust's affairs. The Trustees and officers
of the Trust and the Portfolio are listed below. Except as indicated, each
individual has held the office shown or other offices in the same company for
the last five years. Unless otherwise noted, the business address of each
Trustee and officer is 255 State Street, Boston, Massachusetts 02109. The
business address of the investment adviser is 3808 One Exchange Square,
Central, Hong Kong. Those Trustees who are "interested persons" of the Trust
or the Portfolio, as defined in the 1940 Act, are indicated by an asterisk(*).
JAMES B. HAWKES (57), President of the Trust, Vice President of the Portfolio
and Trustee*
Chairman, President and Chief Executive Officer of Eaton Vance, BMR and their
corporate parent and trustee (EVC and EV); Director of EVC and EV. Trustee
and officer of various investment companies managed by Eaton Vance or BMR.
Director of LGM.
HON. ROBERT LLOYD GEORGE (46), President and Trustee of the Portfolio*
Chairman and Chief Executive Officer of LGM. Chairman and Chief Executive
Officer of the investment adviser
Address: 3808 One Exchange Square, Central, Hong Kong
JESSICA M. BIBLIOWICZ (39), Trustee of the Trust
Chief Executive Officer of National Financial Partners (a financial services
company) (since April, 1999). President and Chief Operating Officer of John
A. Levin & Co. (a registered investment advisor) (July, 1997 to April, 1999)
and a Director of Baker, Fentress & Company which owns John A. Levin & Co.
(July, 1997 to April, 1999). Formerly Executive Vice President of Smith
Barney Mutual Funds (from July, 1994 to June, 1997). Elected Trustee October
30, 1998. Trustee of various investment companies managed by Eaton Vance or
BMR since October 30, 1998.
Address: 1301 Avenue of the Americas, 30th floor, New York, NY 10019
EDWARD K.Y. CHEN (54), 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 (68), Trustee
President of Dwight Partners, Inc. (a corporate relations and communications
company). Trustee/Director of the Royce Funds (mutual funds). Trustee of
various investment companies managed by Eaton Vance or BMR.
Address: Clover Mill Lane, Lyme, New Hampshire 03768
SAMUEL L. HAYES, III (64), Trustee
Jacob H. Schiff Professor of Investment Banking Emeritus, Harvard University
Graduate School of Business Administration. Trustee of the Kobrick-Cendant
Investment Trust (mutual funds). Trustee of various investment companies
managed by Eaton Vance or BMR.
Address: 345 Nahatan Road, Westwood, Massachusetts 02190
NORTON H. REAMER (63), 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). Trustee
of various investment companies managed by Eaton Vance or BMR.
Address: One International Place, Boston, Massachusetts 02110
LYNN A. STOUT (41), Trustee of the Trust
Professor of Law, Georgetown University Law Center, Elected Trustee October
30, 1998. Trustee of various investment companies managed by Eaton Vance or
BMR since October 30, 1998.
Address: 600 New Jersey Avenue, NW, Washington, DC 20001
JOHN L. THORNDIKE (72), Trustee of the Trust
Formerly Director of Fiduciary Company Incorporated. Trustee of various
investment companies managed by Eaton Vance or BMR. Mr. Thorndike will be
retiring from the Board of Trustees in July, 1999.
Address: 175 Federal Street, Boston, Massachusetts 02110.
JACK L. TREYNOR (69), Trustee of the Trust
Investment adviser and Consultant. Trustee of various investment companies
managed by Eaton Vance or BMR.
Address: 504 Via Almar, Palos Verdes Estates, California 90274
SCOBIE DICKINSON WARD (33), Vice President, Assistant Secretary and Assistant
Treasurer of the Portfolio
Director of LGM and Chief Investment Officer of the investment adviser.
Address: 3808 One Exchange Square, Central, Hong Kong
WILLIAM WALTER RALEIGH KERR (48), Vice President and Assistant Treasurer of
the Portfolio
Director, Finance Director and Chief Operating Officer of the investment
adviser. Director of LGM.
Address: 3808 One Exchange Square, Central, Hong Kong
EDWARD E. SMILEY, JR. (54), Vice President of the Trust
Vice President of Eaton Vance and BMR since November 1, 1996; Senior Product
Manager, Equity Management for TradeStreet Investment Associates, Inc., a
wholly-owned subsidiary of Nations Bank (1992-1996).
JAMES L. O'CONNOR (54), Vice President of the Portfolio and Treasurer
Vice President of Eaton Vance and BMR. Officer of various investment companies
managed by Eaton Vance or BMR.
ALAN R. DYNNER (58), Secretary
Vice President and Chief Legal Officer of BMR, Eaton Vance and EVC 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.
JANET E. SANDERS (63), Assistant Treasurer of the Trust and Assistant
Secretary
Vice President of Eaton Vance and BMR. Officer of various investment companies
managed by Eaton Vance or BMR.
A. JOHN MURPHY (36), Assistant Secretary
Vice President of BMR and Eaton Vance. Officer of various investment companies
managed by Eaton Vance or BMR.
ERIC G. WOODBURY (41), Assistant Secretary
Vice President of BMR and Eaton Vance. Officer of various investment companies
managed by Eaton Vance or BMR.
Messrs. Hayes (Chairman), Dwight and Reamer 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 Funds 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 investment adviser or its
affiliates has any actual or potential conflict of interest with the Funds,
the Portfolio or investors therein.
The Nominating Committee of the Board of Trustees of the Trust and the
Portfolio is comprised of the Trustees who (except Mr. Thorndike) are not
"interested persons" as that term is defined under the 1940 Act
("noninterested Trustees"). The purpose of the Committee is to recommend to
the Board nominees for the position of noninterested Trustee and to assure
that at least a majority of the Board of Trustees is independent of Eaton
Vance, the investment adviser or its affiliates.
Messrs. Treynor (Chairman) and Dwight and Ms. Bibliowicz are members of
the Audit Committee of the Board of Trustees of the Trust and Messrs. Dwight
(Chairman), Hayes and Chen 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
Eaton Vance 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 has a retirement plan for its Trustees.
The Portfolio does not participate in the Trustees' Plan.
The fees and expenses of the noninterested Trustees of the Trust and the
Portfolio are paid by the Funds (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, 1998, 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>
JESSICA M. EDWARD DONALD R. SAMUEL L. NORTON H. LYNN A. JOHN L. JACK L.
SOURCE OF COMPENSATION BIBLIOWICZ(6) K.Y. CHEN DWIGHT HAYES, III REAMER STOUT(6) THORNDIKE TREYNOR
- ---------------------- ------------- --------- ------ ---------- ------ -------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Trust(2) .................. $ 548 $ -- $ 2,666 $ 2,639 $ 2,526 $ 386 $ 2,568 $ 3,216
Portfolio ................. -- 5,000 365 416 403 -- -- 1,669
Trust and Fund Complex .... 33,334 25,525 160,000(3) 170,000(4) 160,000 32,842 160,000(5) 170,000
- ------------
(1) As of May 1, 1999, the Eaton Vance fund complex consists of 154 registered investment companies or series thereof.
(2) The Trust consisted of 7 Funds as of December 31, 1998.
(3) Includes $60,000 deferred compensation.
(4) Includes $41,563 deferred compensation.
(5) Includes $119,091 deferred compensation.
(6) Ms. Bibliowicz and Ms. Stout were elected Trustees on October 30, 1998.
</TABLE>
ORGANIZATION. Each Fund is a series of the Trust, which is organized under
Massachusetts law and is operated as an open-end management investment
company. The Emerging Markets Fund (formerly EV Marathon Emerging Markets
Fund) established two classes of shares on January 1, 1998--Class A shares
(formerly EV Traditional Emerging Markets Fund) and Class B shares of the
Fund. Information herein prior to such date is for the Emerging Markets Fund
before it became a multiple-class fund.
The Trust may issue an unlimited number of shares of beneficial interest
(no par value per share) in one or more series (such as the Funds). The
Trustees have the authority under the Declaration of Trust to create
additional classes of shares with differing rights and privileges. When issued
and outstanding, shares are fully paid and nonassessable by the Trust.
Shareholders are entitled to one vote for each full share held. Fractional
shares may be voted proportionately. Shares of a Fund will be voted together
except that only shareholders of a particular class may vote on matters
affecting only that class. Shares have no preemptive or conversion rights and
are freely transferable. In the event of the liquidation of a Fund,
shareholders of each class are entitled to share pro rata in the net assets
attributable to that class available for distribution to shareholders.
The Trustees of the Trust have considered the advantages and disadvantages
of investing the assets of each Fund in the Portfolio, as well as the
advantages and disadvantages of the two-tier format. The Trustees believe that
the structure offers opportunities for growth in the assets of the Portfolio,
may afford the potential for economies of scale for each Fund and may over
time result in lower expenses for a Fund.
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 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 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 a 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
underlying assets of each Fund are readily marketable and will ordinarily
substantially exceed its liabilities. In light of the nature of each Fund's
business and the nature of its assets, management believes that the
possibility of a 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.
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
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 Funds 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 a Fund
incurring financial loss on account of such liability is limited to
circumstances in which both inadequate insurance exists and the Portfolio
itself is unable to meet its obligations. Accordingly, the Trustees of the
Trust believe that neither the Fund nor its shareholders will be adversely
affected by reason of the Fund investing in the Portfolio.
Whenever a Fund as an investor in a Portfolio is requested to vote on
matters pertaining to the Portfolio (other than the termination of the
Portfolio's business, which may be determined by the Trustees of the Portfolio
without investor approval), the Fund will hold a meeting of Fund shareholders
and will vote its interest in the Portfolio for or against such matters
proportionately to the instructions to vote for or against such matters
received from Fund shareholders. 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.
Each Fund may withdraw (completely redeem) all its assets from the
Portfolio at any time if the Board of Trustees of the Trust determines that it
is in the best interest of the Fund to do so. In the event a Fund withdraws
all of its assets from the Portfolio, or the Board of Trustees of the Trust
determines that the investment objective of the Portfolio is no longer
consistent with the investment objective of the Fund, the Trustees would
consider what action might be taken, including investing the assets of the
Fund in another pooled investment entity or retaining an investment adviser to
manage the Fund's assets in accordance with its investment objective. 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 the Portfolio.
INVESTMENT ADVISORY AND ADMINISTRATIVE SERVICES
INVESTMENT ADVISORY SERVICES. The Portfolio has engaged Lloyd George
Investment Management (Bermuda) Limited as its investment adviser. The
investment adviser acting under the general supervision of the Portfolio's
Board of Trustees, is responsible for managing the Portfolio's investments.
The investment adviser is also responsible for effecting all security
transactions on behalf of the Portfolio, including the allocation of principal
transactions and portfolio brokerage and the negotiation of commissions.
Under the investment advisory agreement, the investment adviser is entitled to
receive a monthly advisory fee computed by applying the annual asset rate
applicable to that portion of the average daily net assets of the Portfolio
throughout the month in each Category as indicated below:
ANNUAL
CATEGORY AVERAGE DAILY NET ASSETS ASSET RATE
-------- ------------------------ ----------
1 less than $500 million ............................ 0.75%
2 $500 million but less than $1 billion ............. 0.70
3 $1 billion but less than $1.5 billion ............. 0.65
4 $1.5 billion but less than $2 billion ............. 0.60
5 $2 billion but less than $3 billion ............... 0.55
6 $3 billion and over ............................... 0.50
As of December 31, 1998, the Portfolio had net assets of $7,876,848. For
the fiscal year ended December 31, 1998, absent a fee reduction, the
investment adviser would have earned advisory fees of $91,137 (equivalent to
0.75% of the Portfolio's average daily net assets for such year). In addition,
the investment adviser was allocated a portion of investment advisory fees
related to the management of the Fund in the amount of $21,446. To enhance the
net income of the Portfolio, the investment adviser made a reduction of its
advisory fee in the amount of $14,847. For the fiscal years ended December 31,
1997 and 1996, absent a fee reduction, the investment adviser would have
earned advisory fees of $143,776 and $62,401, respectively (equivalent to
0.75% of the Portfolio's average daily net assets for such year). To enhance
the net income of the Portfolio, the investment adviser made a reduction of
its advisory fee in the amount of $36,117 and $44,320, respectively.
The Portfolio's investment advisory agreement with the investment 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 investment 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 investment 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.
While the Portfolio is a New York trust, the investment 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 the individuals identified
above, or to realize judgments of courts of the United States predicated upon
civil liabilities of the investment 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 investment adviser and such individuals reside of such civil
remedies and criminal penalties as are afforded by the federal securities laws
of the United States.
INFORMATION ABOUT LLOYD GEORGE. LGM is ultimately controlled by the Hon.
Robert Lloyd George, President of the Portfolio and Chairman and Chief
Executive Officer of the investment adviser. LGM's only business is portfolio
management. Eaton Vance's parent is a shareholder of LGM. The directors of the
investment adviser are the Honourable Robert Lloyd George, William Walter
Raleigh Kerr, Scobie Dickinson Ward, M.F. Tang, Pamela Chan, Adaline Mang-Yee
Ko, Peter Bubenzer and Judith Collis. The Hon. Robert Lloyd George is Chairman
and Chief Executive Officer of the investment adviser and Mr. Kerr is Chief
Operating Officer of the investment 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 HM 12, Bermuda.
ADMINISTRATIVE SERVICES. Under Eaton Vance's management contract with Emerging
Markets Fund and its administration agreement with the Portfolio, Eaton Vance
receives a monthly management fee from Emerging Markets 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 Emerging Markets 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, 1998, the Emerging Markets Fund had net assets of
$7,129,797. For the fiscal year ended December 31, 1998, absent a fee
reduction, Eaton Vance would have earned management fees of $26,612
(equivalent to 0.25% of the Emerging Markets Fund's average daily net assets
for such year). To enhance the Fund's net income, Eaton Vance made a reduction
of its management fee in the amount of $4,569. For the fiscal year ended
December 31, 1997, Eaton Vance earned management fees of $24,909 (equivalent
to 0.25% of the Emerging Markets 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 Emerging Markets Fund's average daily net assets for such year). To
enhance the Fund's net income, 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.
As of December 31, 1998, the Portfolio had net assets of $7,876,848. For
the fiscal years ended December 31, 1998, 1997 and 1996, Eaton Vance earned
administration fees of $30,396, $47,925 and $20,096, respectively (equivalent
to 0.25% of the Portfolio's average daily net assets for each such year). For
the fiscal year ended December 31, 1998, to enhance the net income of the
Portfolio, Eaton Vance made a reduction of its administration fee of $4,950.
For the fiscal years ended December 31, 1997 and 1996, to enhance the
Portfolio's net income, Eaton Vance was allocated expenses related to the
operation of the Portfolio in the amount of $17,039 and $14,221, respectively.
Eaton Vance's management contract with Emerging Markets Fund and
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 Emerging Markets 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 Emerging Markets Fund or Portfolio
under such contract or agreement, Eaton Vance will not be liable to Emerging
Markets Fund or the Portfolio for any loss incurred.
INFORMATION ABOUT EATON VANCE. Eaton Vance is a business trust organized under
Massachusetts law. Eaton Vance, Inc. ("EV") serves as trustee of Eaton Vance.
Eaton Vance and EV are wholly-owned subsidiaries of Eaton Vance Corporation
("EVC"), a Maryland corporation and publicly-held holding company. EVC through
its subsidiaries and affiliates engages primarily in investment management,
administration and marketing activities. The Directors of EVC are James B.
Hawkes, Benjamin A. Rowland, Jr., John G.L. Cabot, John M. Nelson, Vincent M.
O'Reilly and Ralph Z. Sorenson. All of the issued and outstanding shares of
Eaton Vance are owned by EVC. All of the issued and outstanding shares of BMR
are owned by Eaton Vance. All shares of the outstanding Voting Common Stock of
EVC are deposited in a Voting Trust, the Voting Trustees of which are Messrs.
Hawkes, and Rowland, Alan R. Dynner, Thomas E. Faust, Jr., Thomas J. Fetter,
Duncan W. Richardson, William M. Steul, and Wharton P. Whitaker (all of whom
are officers of Eaton Vance). The Voting Trustees have unrestricted voting
rights for the election of Directors of EVC. All of the outstanding voting
trust receipts issued under said Voting Trust are owned by certain of the
officers of BMR and Eaton Vance who are also officers, or officers and
Directors of EVC and EV. As indicated under "Management and Organization", all
of the officers of the Trust (as well as Mr. Hawkes who is also a Trustee)
hold positions in the Eaton Vance organization.
EXPENSES. Each Fund and the Portfolio are responsible for all expenses not
expressly stated to be payable by another party (such as the investment
adviser under the Investment Advisory Agreement, Eaton Vance under the
management contract and administration agreement or the principal underwriter
under the Distribution Agreement). In the case of expenses incurred by the
Trust, each Fund is responsible for its pro rata share of those expenses. The
only expenses of Emerging Markets Fund allocated to a particular class are
those incurred under the Distribution Plan applicable to that class and those
resulting from the fee paid to the principal underwriter for repurchase
transactions.
OTHER SERVICE PROVIDERS
PRINCIPAL UNDERWRITER. Eaton Vance Distributors, Inc. ("EVD"), 255 State
Street, Boston, MA 02109, is the Funds' principal underwriter. The principal
underwriter acts as principal in selling shares under a Distribution Agreement
with the Trust. The expenses of printing copies of prospectuses used to offer
shares and other selling literature and of advertising are borne by the
principal underwriter. The fees and expenses of qualifying and registering and
maintaining qualifications and registrations of a Fund and its shares under
federal and state securities laws are borne by that Fund. The Distribution
Agreement 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 (in the case of
the Emerging Markets Fund only) or the Distribution Agreement), may be
terminated on sixty days' notice either by such Trustees or by vote of a
majority of the outstanding shares of the relevant class or on six months'
notice by the principal underwriter and is automatically terminated upon
assignment. The principal underwriter distributes shares on a "best efforts"
basis under which it is required to take and pay for only such shares as may
be sold. The principal underwriter allows investment dealers discounts from
the applicable public offering price which are alike for all investment
dealers. See "Sales Charges." EVD is a wholly-owned subsidiary of EVC. Mr.
Hawkes is a Vice President and Director and Messrs. Dynner and O'Connor are
Vice Presidents of EVD.
CUSTODIAN. Investors Bank & Trust Company ("IBT"), 200 Clarendon Street,
Boston, MA 02116, serves as custodian to the Funds and Portfolio. IBT has the
custody of all cash and securities representing the Funds' interest in the
Portfolio, has custody of the Portfolio's assets, maintains the general ledger
of the Portfolio and the Funds and computes the daily net asset value of
interests in the Portfolio and the net asset value of shares of the Funds. In
such capacity it attends to details in connection with the sale, exchange,
substitution, transfer or other dealings with the Portfolio's investments,
receives and disburses all funds and performs various other ministerial duties
upon receipt of proper instructions from the Trust and the Portfolio. IBT also
provides services in connection with the preparation of shareholder reports
and the electronic filing of such reports with the SEC. EVC and its affiliates
and their officers and employees from time to time have transactions with
various banks, including IBT. It is Eaton Vance's opinion that the terms and
conditions of such transactions were not and will not be influenced by
existing or potential custodial or other relationships between a Fund or the
Portfolio and such banks.
INDEPENDENT ACCOUNTANTS. Deloitte & Touche LLP, 125 Summer Street, Boston,
Massachusetts, are the independent accountants of the Funds and the Portfolio,
providing audit services, tax return preparation, and assistance and
consultation with respect to the preparation of filings with the SEC.
TRANSFER AGENT. First Data Investor Services Group, P.O. Box 5123,
Westborough, MA 01581-5123, serves as transfer and dividend disbursing agent
for the Funds.
PURCHASING AND REDEEMING SHARES
CALCULATION OF NET ASSET VALUE. The net asset value of the Portfolio is
computed by IBT (as agent and custodian for the Portfolio) by subtracting the
liabilities of the Portfolio from the value of its total assets. The Funds and
the Portfolio will be closed for business and will not price their respective
shares or interests on the following business holidays: New Year's Day, Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day.
Each investor in the Portfolio, including a Fund, may add to or reduce its
investment in the Portfolio on each day the Exchange is open for trading
("Portfolio Business Day") as of the close of regular trading on the Exchange
(the "Portfolio Valuation Time"). The value of each investor's interest in the
Portfolio will be determined by multiplying the net asset value of the
Portfolio by the percentage, determined on the prior Portfolio Business Day,
which represented that investor's share of the aggregate interests in the
Portfolio on such prior day. Any additions or withdrawals for the current
Portfolio Business Day will then be recorded. Each investor's percentage of
the aggregate interest in the Portfolio will then be recomputed as the
percentage equal to a fraction (i) the numerator of which is the value of such
investor's investment in the Portfolio as of the close of Portfolio Valuation
Time on the prior Portfolio Business Day plus or minus, as the case may be,
that amount of any additions to or withdrawals from the investor's investment
in the Portfolio on the current Portfolio Business Day, and (ii) the
denominator of which is the aggregate net asset value of the Portfolio as of
the Portfolio Valuation Time on the prior Portfolio Business Day plus or
minus, as the case may be, the amount of the net additions to or withdrawals
from the aggregate investment in the Portfolio on the current Portfolio
Business Day by all investors in the Portfolio. The percentage so determined
will then be applied to determine the value of the investor's interest in the
Portfolio for the current Portfolio Business Day.
The Trustees of the Portfolio have established the following procedures
for the fair valuation of the Portfolio's assets under normal market
conditions. Marketable securities listed on foreign or U.S. securities
exchanges or in the NASDAQ National Market System generally are valued at
closing sale prices or, if there were no sales, at the mean between the
closing bid and asked prices therefor on the exchange where such securities
are principally traded or on such National Market System (such prices may not
be used, however, where an active over-the-counter market in an exchange
listed security better reflects current market value). Unlisted or listed
securities for which closing sale prices are not available are valued at the
mean between the latest bid and asked prices. An option is valued at the last
sale price as quoted on the principal exchange or board of trade on which such
option or contract is traded, or in the absence of a sale, the mean between
the last bid and asked price. Futures positions on securities or currencies
are generally valued at closing settlement prices. Short term debt securities
with a remaining maturity of 60 days or less are valued at amortized cost. If
securities were acquired with a remaining maturity of more than 60 days, their
amortized cost value will be based on their value on the sixty-first day prior
to maturity. Other fixed income and debt securities, including listed
securities and securities for which price quotations are available, will
normally be valued on the basis of valuations furnished by a pricing service.
All other securities are valued at fair value as determined in good faith by
or at the direction of the Trustees.
Generally, trading in the foreign securities owned by the Portfolio is
substantially completed each day at various times prior to the close of the
Exchange. The values of these securities used in determining the net asset
value of the Portfolio's shares generally are computed as of such times.
Occasionally, events affecting the value of foreign securities may occur
between such times and the close of the Exchange which will not be reflected
in the computation of the Portfolio's net asset value (unless the Portfolio
deems that such events would materially affect its net asset value, in which
case an adjustment would be made and reflected in such computation). Foreign
securities and currency held by the Portfolio will be valued in U.S. dollars;
such values will be computed by the custodian based on foreign currency
exchange rate quotations supplied by Reuters Information Service.
ADDITIONAL INFORMATION ABOUT PURCHASES. Each Fund's shares are continuously
offered through investment dealers which have entered agreements with the
principal underwriter. The public offering price is the net asset value next
computed after receipt of the order, plus, in the case of Class A shares of
Emerging Markets Fund, a variable percentage (sales charge) depending upon the
amount of purchase as indicated by the sales charge table set forth in the
prospectus. This Class A sales charge is divided between the principal
underwriter and the investment dealer. The Class A sales charge table is
applicable to purchases of the Emerging Markets 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 of Emerging Markets Fund,
pursuant to a written Statement of Intention; or (2) purchases of Class A
shares of Emerging Markets Fund, pursuant to the Right of Accumulation and
declared as such at the time of purchase. See "Sales Charges".
In connection with employee benefit or other continuous group purchase
plans, Emerging Markets 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 each Fund as
described below.
ACQUIRING FUND SHARES IN EXCHANGE FOR SECURITIES. IBT, as escrow agent, will
receive securities acceptable to Eaton Vance, as administrator, in exchange
for Fund shares. The minimum value of securities (or securities and cash)
accepted for deposit is $5,000 or the minimum initial investment, whichever is
higher. 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
of Emerging Markets Fund or net asset value of Class B shares or Institutional
Emerging Markets Fund on the day such proceeds are received. Eaton Vance will
use reasonable efforts to obtain the then current market price for such
securities but does not guarantee the best available price. Eaton Vance will
absorb any transaction costs, such as commissions, on the sale of securities.
Securities determined to be acceptable should be transferred via book entry or
physically delivered, in proper form for transfer, through an investment
dealer, together with a completed and signed Letter of Transmittal in approved
form (available from investment dealers). Investors who are contemplating an
exchange of securities for shares, or their representatives, must contact
Eaton Vance to determine whether the securities are acceptable before
forwarding such securities. Eaton Vance reserves the right to reject any
securities. Exchanging securities for shares may create a taxable gain or
loss. Each investor should consult his or her tax adviser with respect to the
particular federal, state and local tax consequences of exchanging securities.
SUSPENSION OF SALES. The Trust may, in its absolute discretion, suspend,
discontinue or limit the offering of one or more of its classes of shares at
any time. In determining whether any such action should be taken, the Trust's
management intends to consider all relevant factors, including (without
limitation) the size of a Fund or class, the investment climate and market
conditions, the volume of sales and redemptions of shares, and in the case of
Class B shares of Emerging Markets Fund, the amount of uncovered distribution
charges of the principal underwriter. The Emerging Markets Fund Class B
Distribution Plan may continue in effect and payments may be made under the
Plan following any such suspension, discontinuance or limitation of the
offering of shares; however, there is no contractual obligation to continue
the 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.
TAX-SHELTERED RETIREMENT PLANS. Each Fund's shares are available for purchase
in connection with certain tax-sheltered retirement plans. Detailed
information concerning these plans, including certain exceptions to minimum
investment requirements, and copies of the plans are available from the
principal underwriter. This information should be read carefully and
consultation with an attorney or tax adviser may be advisable. The information
sets forth the service fee charged for retirement plans and describes the
federal income tax consequences of establishing a plan. Participant accounting
services (including trust fund reconciliation services) will be offered only
through third party recordkeepers and not by the principal underwriter. Under
all plans, dividends and distributions will be automatically reinvested in
additional shares.
ADDITIONAL INFORMATION ABOUT REDEMPTIONS. The right to redeem shares of a Fund
can be suspended and the payment of the redemption price deferred when the
Exchange is closed (other than for customary weekend and holiday closings),
during periods when trading on the Exchange is restricted as determined by the
SEC, or during any emergency as determined by the SEC which makes it
impracticable for the Portfolio to dispose of its securities or value its
assets, or during any other period permitted by order of the SEC for the
protection of investors.
While normally payments will be made in cash for redeemed shares, the
Trust, subject to compliance with applicable regulations, has reserved the
right to pay the redemption price of shares of a Fund, either totally or
partially, by a distribution in kind of readily marketable securities
withdrawn from the Portfolio. The securities so distributed would be valued
pursuant to the Portfolio's valuation procedures. If a shareholder received a
distribution in kind, the shareholder could incur brokerage or other charges
in converting the securities to cash.
Due to the high cost of maintaining small accounts, the Trust reserves the
right to redeem accounts of Emerging Markets Fund with balances of less than
$750. Prior to such a redemption, shareholders will be given 60 days' written
notice to make an additional purchase. However, no such redemption would be
required by the Trust if the cause of the low account balance was a reduction
in the net asset value of shares. No CDSC will be imposed with respect to such
involuntary redemptions.
SYSTEMATIC WITHDRAWAL PLAN. Under the Emerging Markets Fund's systematic
withdrawal plan, the transfer agent will send to the shareholder regular
monthly or quarterly payments of any permitted amount designated by the
shareholder based upon the value of the shares held. The checks will be drawn
from share redemptions and hence, may require the recognition of taxable gain
or loss. Income dividends and capital gains distributions in connection with
withdrawal plan accounts will be credited at net asset value as of the record
date for each distribution. Continued withdrawals in excess of current income
will eventually use up principal, particularly in a period of declining market
prices. A shareholder may not have a withdrawal plan in effect at the same
time he or she has authorized Bank Automated Investing or is otherwise making
regular purchases of Fund shares. The shareholder, the transfer agent or the
principal underwriter will be able to terminate the withdrawal plan at any
time without penalty.
SALES CHARGES
DEALER COMMISSIONS. The principal underwriter may, from time to time, at its
own expense, provide additional incentives to investment dealers which employ
registered representatives who sell Fund shares and/or shares of other funds
distributed by the principal underwriter. In some instances, such additional
incentives may be offered only to certain investment dealers whose
representatives sell or are expected to sell significant amounts of shares. In
addition, the principal underwriter may from time to time increase or decrease
the sales commissions payable to investment dealers. The principal underwriter
may allow, upon notice to all investment dealers with whom it has agreements,
discounts up to the full sales charge during the periods specified in the
notice. During periods when the discount includes the full sales charge, such
investment dealers may be deemed to be underwriters as that term is defined in
the Securities Act of 1933.
SALES CHARGE WAIVERS. Class A shares and Class I shares may be sold at net
asset value to current and retired Directors and Trustees of Eaton Vance
funds, including the Portfolio; to clients and current and retired officers
and employees of Eaton Vance, its affiliates and other investment advisers of
Eaton Vance sponsored funds; to officers and employees of IBT and the transfer
agent; persons associated with law firms, accounting firms and consulting
firms providing services to Eaton Vance and Eaton Vance funds; and to such
persons' spouses, parents, siblings and children and their beneficial
accounts. Such shares may also be issued at net asset value (1) in connection
with the merger of an investment company or series 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. Class A shares are also offered at
net asset value to registered representatives and employees of investment
dealers and bank employees who refer customers to registered representatives
of investment dealers; and to retirement and deferred compensation plans and
trusts used to fund those plans, including, but not limited to, those defined
in Section 401(a), 403(b) or 457 of the Internal Revenue Code of 1986, as
amended (the "Code") and "rabbi trusts". 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 and Class I shares may be sold at net asset value to any
investment advisory, agency, custodial or trust account managed or
administered by Eaton Vance or by any parent, subsidiary or other affiliate of
Eaton Vance. Class A shares are offered at net asset value to the foregoing
persons and in the foregoing situations because either (i) there is no sales
effort involved in the sale of shares or (ii) the investor is paying a fee
(other than the sales charge) to the investment dealer involved in the sale.
The CDSC applicable to Class B shares will be waived in connection with
minimum required distributions from tax-sheltered retirement plans by applying
the rate required to be withdrawn under the applicable rules and regulations
of the Internal Revenue Service to the balance of Class B shares in your
account.
STATEMENT OF INTENTION. If it is anticipated that $50,000 or more of Class A
shares of Emerging Markets Fund and shares of other funds exchangeable for
Class A shares of another Eaton Vance fund 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. The applicable sales charge level for the purchase of
Class A shares of Emerging Markets Fund is calculated by taking the dollar
amount of the current purchase and adding it to the value (calculated at the
maximum current offering price) of the Class A shares the shareholder owns in
his or her account(s) in the Fund, and shares of other funds exchangeable for
Class A shares. The sales charge on the shares being purchased will then be at
the rate applicable to the aggregate. Shares purchased (i) by an individual,
his or her spouse and their children under the age of twenty-one, and (ii) by
a trustee, guardian or other fiduciary of a single trust estate or a single
fiduciary account, will be combined for the purpose of determining whether a
purchase will qualify for the Right of Accumulation and if qualifying, the
applicable sales charge level. For any such discount to be made available, at
the time of purchase a purchaser or his or her investment dealer must provide
the principal underwriter (in the case of a purchase made through an
investment dealer) or the transfer agent (in the case of an investment made by
mail) with sufficient information to permit verification that the purchase
order qualifies for the accumulation privilege. Confirmation of the order is
subject to such verification. The Right of Accumulation privilege may be
amended or terminated at any time as to purchases occurring thereafter.
EMERGING MARKETS FUND'S DISTRIBUTION PLANS. The Trust has adopted a
compensation-type Distribution Plan (the "Class A Plan") for the Emerging
Markets Fund's Class A shares pursuant to Rule 12b-1 under the 1940 Act. The
Class A Plan provides for the payment of a monthly distribution fee to the
principal underwriter in an amount equal to the aggregate of (a) .50% of that
portion of Class A average daily net assets for any fiscal year which is
attributable to its shares which have remained outstanding for less than one
year and (b) .25% of that portion of Class A average daily net assets for any
fiscal year which is attributable to its shares which have remained
outstanding for more than one year. Aggregate payments to the principal
underwriter under the Class A Plan are limited to those permissible, pursuant
to a rule of the National Association of Securities Dealers, Inc.
The Class A Plan also provides that the Class will pay a quarterly service
fee to the principal underwriter in an amount equal on an annual basis to .25%
of that portion of its average daily net assets for any fiscal year which is
attributable to Class A shares which have remained outstanding for more than
one year; from such service fee the principal underwriter expects to pay a
quarterly service fee to investment dealers, as compensation for providing
personal services and/or the maintenance of shareholder accounts, with respect
to shares sold by such dealers which have remained outstanding for more than
one year. Service fee payments to investment dealers will be in addition to
sales charges on Class A shares which are reallowed to investment dealers. If
the Class A Plan is terminated or not continued in effect, the Class has no
obligation to reimburse the principal underwriter for amounts expended by the
principal underwriter in distributing Class A shares. For the distribution
fees paid by Class A shares, see Appendix A.
The Trust has also adopted a compensation-type Distribution Plan (the
"Class B Plan") pursuant to Rule 12b-1 under the 1940 Act for the Emerging
Markets Fund's Class B shares. The Class B Plan is designed to permit an
investor to purchase shares through an investment dealer without incurring an
initial sales charge and at the same time permit the principal underwriter to
compensate investment dealers in connection therewith. The Class B Plan
provides that the Fund will pay sales commissions and distribution fees to the
principal underwriter only after and as a result of the sale of shares. On
each sale of shares (excluding reinvestment of distributions), the Fund will
pay the principal underwriter amounts representing (i) sales commissions equal
to 5% of the amount received by the Fund for each share sold and (ii)
distribution fees calculated by applying the rate of 1% over the prime rate
then reported in The Wall Street Journal to the outstanding balance of
uncovered distribution charges (as described below) of the principal
underwriter. To pay these amounts, Class B pays the principal underwriter a
fee, accrued daily and paid monthly, at an annual rate not exceeding .75% of
its average daily net assets to finance the distribution of its shares. Such
fees compensate the principal underwriter for sales commissions paid by it to
investment dealers on the sale of shares and for interest expenses. For sales
of Class B shares, the principal underwriter uses its own funds to pay sales
commissions (except on exchange transactions and reinvestments) to investment
dealers at the time of sale equal to 4% of the purchase price of the Class B
shares sold by such dealers. CDSCs paid to the principal underwriter will be
used to reduce amounts owed to it. The Class B Plan provides that the Fund
will make no payments to the principal underwriter in respect of any day on
which there are no outstanding uncovered distribution charges of the principal
underwriter. CDSCs and accrued amounts will be paid by the Trust to the
principal underwriter whenever there exist uncovered distribution charges.
Because payments to the principal underwriter under the Class B Plan are
limited, uncovered distribution charges (sales commissions paid by the
principal underwriter plus interest, less the above fees and CDSCs received by
it) may exist indefinitely. For the sales commissions and CDSCs paid on (and
uncovered distribution charges of) Class B shares, see Appendix B.
In calculating daily the amount of uncovered distribution charges,
distribution charges will include the aggregate amount of sales commissions
and distribution fees theretofore paid plus the aggregate amount of sales
commissions and distribution fees which the principal underwriter is entitled
to be paid under the Plan since its inception. Payments theretofore paid or
payable under the Class B Plan by the Trust to the principal underwriter and
CDSCs theretofore paid or payable to the principal underwriter will be
subtracted from such distribution charges; if the result of such subtraction
is positive, a distribution fee (computed at 1% over the prime rate then
reported in The Wall Street Journal) will be computed on such amount and added
thereto, with the resulting sum constituting the amount of outstanding
uncovered distribution charges with respect to such day. The amount of
outstanding uncovered distribution charges of the principal underwriter
calculated on any day does not constitute a liability recorded on the
financial statements of the Fund.
The amount of uncovered distribution charges of the principal underwriter
at any particular time depends upon various changing factors, including the
level and timing of sales of shares, the nature of such sales (i.e., whether
they result from exchange transactions, reinvestments or from cash sales
through investment dealers), the level and timing of redemptions of shares
upon which a CDSC will be imposed, the level and timing of redemptions of
shares upon which no CDSC will be imposed (including redemptions of shares
pursuant to the exchange privilege which result in a reduction of uncovered
distribution charges), changes in the level of the net assets of the Class,
and changes in the interest rate used in the calculation of the distribution
fee under the Class B Plan.
Distribution of Class B shares of the Fund by the principal underwriter
will also be encouraged by the payment by the investment adviser to the
principal underwriter of amounts equivalent to .15% of the annual average
daily net assets for Class B. The aggregate amounts of such payments are a
deduction in calculating the outstanding uncovered distribution charges of the
principal underwriter under the Class B Plan and, therefore, will benefit
shareholders when such charges exist. Such payments will be made in
consideration of the principal underwriter's distribution efforts.
The Class B Plan also authorize the Class to make payments of service fees
to the principal underwriter, investment dealers and other persons in amounts
not exceeding .25% of its average daily net assets for personal services, and/
or the maintenance of shareholder accounts. This fee is paid quarterly in
arrears based on the value of Class B shares sold by such persons and
remaining outstanding for at least twelve months. For the service fees paid by
Class B shares, see Appendix B.
Currently, payments of sales commissions and distribution fees and of
service fees may equal 1% of a Class's average daily net assets per annum. The
Trust believes that the combined rate of all these payments may be higher than
the rate of payments made under distribution plans adopted by other investment
companies pursuant to Rule 12b-1. Although the principal underwriter will use
its own funds (which may be borrowed from banks) to pay sales commissions at
the time of sale, it is anticipated that the Eaton Vance organization will
profit by reason of the operation of the Class B Plan through an increase in
the Fund's assets (thereby increasing the advisory fee payable to Lloyd George
by the Portfolio) resulting from sale of shares and through the amounts paid
to the principal underwriter, including CDSCs, pursuant to the Plans. The
Eaton Vance organization may be considered to have realized a profit under the
Class B Plan if at any point in time the aggregate amounts theretofore
received by the principal underwriter pursuant to the Class B Plan and from
CDSCs have exceeded the total expenses theretofore incurred by such
organization in distributing shares. Total expenses for this purpose will
include an allocable portion of the overhead costs of such organization and
its branch offices, which costs will include without limitation leasing
expense, depreciation of building and equipment, utilities, communication and
postage expense, compensation and benefits of personnel, travel and
promotional expense, stationery and supplies, literature and sales aids,
interest expense, data processing fees, consulting and temporary help costs,
insurance, taxes other than income taxes, legal and auditing expense and other
miscellaneous overhead items. Overhead is calculated and allocated for such
purpose by the Eaton Vance organization in a manner deemed equitable to the
Trust.
The Class A and Class B Plans continue in effect from year to year so long
as such continuance is approved at least annually by the vote of both a
majority of (i) the noninterested Trustees of the Trust who have no direct or
indirect financial interest in the operation of the Plan or any agreements
related to the Plan (the "Plan Trustees") and (ii) all of the Trustees then in
office. Each Plan may be terminated at any time by vote of a majority of the
Plan Trustees or by a vote of a majority of the outstanding voting securities
of the applicable Class. Each Plan requires quarterly Trustee review of a
written report of the amount expended under the Plan and the purposes for
which such expenditures were made. The Plans may not be amended to increase
materially the payments described therein without approval of the shareholders
of the affected Class and the Trustees. So long as a Plan is in effect, the
selection and nomination of the noninterested Trustees shall be committed to
the discretion of such Trustees. The Class A and Class B Plans were initially
approved by the Trustees, including the Plan Trustees, on June 23, 1997.
The Trustees of the Trust believe that each Plan will be a significant
factor in the expected growth of each Fund's assets, and will result in
increased investment flexibility and advantages which have benefitted and will
continue to benefit the Fund and its shareholders. Payments for sales
commissions and distribution fees made to the principal underwriter under the
Class B Plan will compensate the principal underwriter for its services and
expenses in distributing those classes of shares. Service fee payments made to
the principal underwriter and investment dealers provide incentives to provide
continuing personal services to investors and the maintenance of shareholder
accounts. By providing incentives to the principal underwriter and investment
dealers, each Plan is expected to result in the maintenance of, and possible
future growth in, the assets of the Fund. Based on the foregoing and other
relevant factors, the Trustees of the Trust have determined that in their
judgment there is a reasonable likelihood that each Plan will benefit the Fund
and its shareholders.
PERFORMANCE
Average annual total return is determined separately for each Class of a
Fund by multiplying a hypothetical initial purchase order of $1,000 by the
average annual compound rate of return (including capital appreciation/
depreciation, and distributions paid and reinvested) for the stated period and
annualizing the result. The calculation assumes (i) that all distributions are
reinvested at net asset value on the reinvestment dates during the period,
(ii) the deduction of the maximum sales charge from the initial $1,000
purchase order for Class A shares, (iii) a complete redemption of the
investment at the end of the period, and (iv) the deduction of any CDSC at the
end of the period. Emerging Markets 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. For information concerning the
total return of the Funds, see Appendix A, Appendix B and Appendix C.
Total return may be compared to relevant indices, such as the Consumer
Price Index and various domestic and foreign securities indices. Each Fund's
total return and comparisons with these indices may be used in advertisements
and in information furnished to present or prospective shareholders. Each
Fund's performance may differ from that of other investors in the Portfolio
including the other investment companies. In addition, evaluations of each
Fund's performance or rankings and/or ratings of mutual funds (which include
each 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 in materials provided to present
and prospective shareholders may include descriptions of Lloyd George, Eaton
Vance and other Fund and Portfolio service providers, their investment styles,
other investment products, personnel and Fund distribution channels.
Information used in advertisements and materials furnished to present and
prospective investors may include statements or illustrations relating to the
appropriateness of certain types of securities and/or mutual funds to meet
specific financial goals. Such information may address:
-- cost associated with aging parents;
-- funding a college education (including its actual and estimated cost);
-- health care expenses (including actual and projected expenses);
-- long-term disabilities (including the availability of, and coverage
provided by, disability insurance); and
-- retirement (including the availability of social security benefits, the
tax treatment of such benefits and statistics and other information
relating to maintaining a particular standard of living and outliving
existing assets).
Such information may also address different methods for saving money and
the results of such methods, as well as the benefits of investing in equity
securities. Such information may describe: the potential for growth; the
performance of equities as compared to other investment vehicles; and the
value of investing as early as possible and regularly, as well as staying
invested. The benefits of investing in equity securities by means of a mutual
fund may also be included (such benefits may include diversification,
professional management and the variety of equity mutual fund products).
Information in advertisements and 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 each 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. Each Fund has elected to be treated, and intends to qualify
each year, as a regulated investment company ("RIC") under the Code.
Accordingly, each Fund intends to satisfy certain requirements relating to
sources of its income and diversification of its assets and to distribute
substantially all of its net income and net short-term and long-term capital
gains 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
Emerging Markets Fund qualified as a RIC under the Code for its taxable year
ended December 31, 1998. Because each 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 each Fund qualifies as a RIC and the
Portfolio is treated as a partnership for Massachusetts and federal tax
purposes, neither the Fund's 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 each 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 capital 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 each 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 each Fund's
qualification as a RIC or avoid imposition of a tax on each 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 a 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 qualified 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 qualified foreign
income taxes in computing their taxable incomes, or, alternatively, use them
as foreign tax credits, subject to applicable limitations, against their U.S.
federal 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 their 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 a Fund as 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 a 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 a 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 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. 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.
Sales charges paid upon a purchase of shares of the Emerging Markets Fund
cannot be taken into account for purposes of determining gain or loss on a
redemption or exchange of the shares before 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.
Amounts paid by a Fund to individuals and certain other shareholders who
have not provided the Fund with their correct taxpayer identification number
("TIN") and certain certifications required by the IRS, as well as
shareholders with respect to whom the Fund has received certain information
from the IRS or a broker, may be subject to "backup" withholding of federal
income tax arising from the Fund's dividends and other distributions as well
as the proceeds of redemption transactions (including repurchases and
exchanges) at a rate of 31%. An individual's TIN is generally his or her
social security number.
The foregoing discussion does not address the special tax rules applicable
to certain classes of investors, such as IRAs and other retirement plans, tax-
exempt entities, insurance companies, financial institutions and nonresident
aliens or foreign entities. 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 a Fund.
PORTFOLIO SECURITY TRANSACTIONS
Decisions concerning the execution of portfolio security transactions by
the Portfolio, including the selection of the market and the broker-dealer
firm, are made by the investment adviser. The investment adviser places the
portfolio security transactions of the Portfolio and of certain other accounts
managed by the investment adviser for execution with many broker-dealer firms.
The investment 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 investment adviser will use
its best judgment in evaluating the terms of a transaction, and will give
consideration to various relevant factors, including without limitation the
full range and quality of the broker-dealer's services, the value of the
brokerage and research services provided the responsiveness of the broker-
dealer to the investment adviser, the size and type of the transaction, the
general execution and operational capabilities of the broker-dealer, the
nature and character of the market for the security, the confidentiality,
speed and certainty of effective execution required for the transaction, the
reputation, reliability, experience and financial condition of the broker-
dealer, the value and quality of services rendered by the broker-dealer in
this and other transactions, and the reasonableness of the commission or
spread, if any. Transactions on stock exchanges and other agency transactions
involve the payment by the Portfolio of negotiated brokerage commissions. Such
commissions vary among different broker-dealer firms, and a particular broker-
dealer may charge different commissions according to such factors as the
difficulty and size of the transaction and the volume of business done with
such broker-dealer. Transactions in foreign securities often involve the
payment of brokerage commissions, which may be higher than those in the United
States. There is generally no stated commission in the case of securities
traded in the over-the-counter markets, but the price paid or received by the
Portfolio usually includes an undisclosed dealer markup or markdown. In an
underwritten offering the price paid by the Portfolio includes a disclosed
fixed commission or discount retained by the underwriter or dealer. Although
commissions paid on portfolio transactions will, in the judgment of the
investment adviser, be reasonable in relation to the value of the services
provided, commissions exceeding those which another firm might charge may be
paid to broker-dealers who were selected to execute transactions on behalf of
the Portfolio and the investment adviser's other clients in part for providing
brokerage and research services to the investment adviser.
As authorized in Section 28(e) of the Securities Exchange Act of 1934, a
broker or dealer who executes a portfolio transaction on behalf of the
Portfolio may receive a commission which is in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction if the investment adviser determines in good faith that such
compensation was reasonable in relation to the value of the brokerage and
research services provided. This determination may be made on the basis of
either that particular transaction or on the basis of the overall
responsibilities which the investment adviser and its affiliates have for
accounts over which they exercise investment discretion. In making any such
determination, the investment adviser will not attempt to place a specific
dollar value on the brokerage and research services provided or to determine
what portion of the commission should be related to such services. Brokerage
and research services may include advice as to the value of securities, the
advisability of investing in, purchasing, or selling securities, and the
availability of securities or purchasers or sellers of securities; furnishing
analyses and reports concerning issuers, industries, securities, economic
factors and trends, portfolio strategy and the performance of accounts; and
effecting securities transactions and performing functions incidental thereto
(such as clearance and settlement); and the "Research Services" referred to in
the next paragraph.
It is a common practice in the investment advisory industry for the
advisers of investment companies, institutions and other investors to receive
research, analytical, statistical and quotation services, data, information
and other services, products and materials which assist such advisers in the
performance of their investment responsibilities ("Research Services") from
broker-dealers which execute portfolio transactions for the clients of such
advisers and from third parties with which such broker-dealers have
arrangements. Consistent with this practice, the investment adviser may
receive Research Services from broker-dealer firms with which the investment
adviser places the portfolio transactions of the Portfolio and from third
parties with which these broker-dealers have arrangements. These Research
Services include such matters as general economic, political, business and
market information, industry and company reviews, evaluations of securities
and portfolio strategies and transactions, proxy voting data and analysis
services, technical analysis of various aspects of the securities markets,
recommendations as to the purchase and sale of securities and other portfolio
transactions, financial, industry and trade publications, news and information
services, pricing and quotation equipment and services, and research oriented
computer hardware, software, data bases and services. Any particular Research
Service obtained through a broker-dealer may be used by the investment adviser
in connection with client accounts other than those accounts which pay
commissions to such broker-dealer. Any such Research Service may be broadly
useful and of value to the investment adviser in rendering investment advisory
services to all or a significant portion of its clients, or may be relevant
and useful for the management of only one client's account or of a few
clients' accounts, or may be useful for the management of merely a segment of
certain clients' accounts, regardless of whether any such account or accounts
paid commissions to the broker-dealer through which such Research Service was
obtained. The advisory fee paid by the Portfolio is not reduced because the
investment adviser receives such Research Services. The investment adviser
evaluates the nature and quality of the various Research Services obtained
through broker-dealer firms and attempts to allocate sufficient portfolio
security transactions to such firms to ensure the continued receipt of
Research Services which the investment adviser believes are useful or of value
to it in rendering investment advisory services to its clients.
The Portfolio and the investment adviser may also receive Research
Services from underwriters and dealers in fixed price offerings, which
Research Services are reviewed and evaluated by the investment adviser in
connection with its investment responsibilities. The investment companies
sponsored by the investment adviser or Eaton Vance may allocate brokerage
commissions to acquire information relating to the performance, fees and
expenses of such companies and other mutual funds, which information is used
by the Trustees of such companies to fulfill their responsibility to oversee
the quality of the services provided by various entities, including the
investment adviser, to such companies. Such companies may also pay cash for
such information.
Subject to the requirement that the investment adviser shall use its best
efforts to seek to execute portfolio security transactions of the Portfolio at
advantageous prices and at reasonably competitive commission rates or spreads,
the investment adviser is authorized to consider as a factor in the selection
of any broker-dealer firm with whom Portfolio orders may be placed the fact
that such firm has sold or is selling shares of the Fund or of other
investment companies sponsored by Eaton Vance. This policy is not inconsistent
with a rule of the NASD, which rule provides that no firm which is a member of
the NASD shall favor or disfavor the distribution of shares of any particular
investment company or group of investment companies on the basis of brokerage
commissions received or expected by such firm from any source.
Securities considered as investments for the Portfolio may also be
appropriate for other investment accounts managed by the investment adviser or
its affiliates. Whenever decisions are made to buy or sell securities by the
Portfolio and one or more of such other accounts simultaneously, the
investment adviser will allocate the security transactions (including "hot"
issues) in a manner which it believes to be equitable under the circumstances.
As a result of such allocations, there may be instances where the Portfolio
will not participate in a transaction that is allocated among other accounts.
If an aggregated order cannot be filled completely, allocations will generally
be made on a pro rata basis. An order may not be allocated on a pro rata basis
where, for example: (i) consideration is given to portfolio managers who have
been instrumental in developing or negotiating a particular investment; (ii)
consideration is given to an account with specialized investment policies that
coincide with the particulars of a specific investment; (iii) pro rata
allocation would result in odd-lot or de minimis amounts being allocated to a
portfolio or other client; or (iv) where the investment adviser reasonably
determines that departure from a pro rata allocation is advisable. While these
aggregation and allocation policies could have a detrimental effect on the
price or amount of the securities available to the Portfolio from time to
time, it is the opinion of the Trustees of the Trust and the Portfolio that
the benefits from the investment adviser's organization outweigh any
disadvantage that may arise from exposure to simultaneous transactions.
For the fiscal years ended December 31, 1998, 1997 and 1996, the Portfolio
paid brokerage commissions of $111,199, $248,818 and $129,070, respectively,
with respect to portfolio security transactions. Of this amount, approximately
$72,379, $145,648 and $116,154, respectively, was paid in respect of portfolio
security transactions aggregating approximately $23,069,461, $25,034,388 and
$16,622,828, 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).
FINANCIAL STATEMENTS
The audited financial statements of, and the independent auditors' reports
for the Emerging Markets Fund and the Portfolio, appear in the Emerging
Markets Fund's most recent annual report to shareholders which is incorporated
by reference into this SAI. A copy of the Emerging Markets Fund's annual
report accompanies this SAI. Consistent with applicable law, duplicate
mailings of shareholder reports and certain other Fund information to
shareholders residing at the same address may be eliminated.
Registrant incorporates by reference the audited financial information for
the Emerging Markets Fund and the Portfolio for the fiscal year ended December
31, 1998, as previously filed electronically with the Commission (Accession
No. 0000950109-99-000814).
<PAGE>
APPENDIX A
EMERGING MARKETS FUND
CLASS A FEES, PERFORMANCE AND OWNERSHIP
DISTRIBUTION AND SERVICE FEES
During the fiscal year ended December 31, 1998, Class A paid distribution
fees under the Plan to the prinicpal underwriter aggregating $14,990. During
the fiscal year ended December 31, 1998, Class A made service fee payments to
the principal underwriter and investment dealers aggregating $5,758, of which
$2,382 was paid to investment dealers and the balance of which was retained by
the principal underwriter.
PRINCIPAL UNDERWRITER
The total sales charges paid in connection with sales of Class A shares
during the fiscal year ended December 31, 1998, was $10,863, of which $1,275
was received by the principal underwriter. For the fiscal year ended December
31, 1998, investment dealers received $9,588 from the total sales charges.
The Trust has authorized the principal underwriter to act as its agent in
repurchasing shares at the rate of $2.50 for each repurchase transaction
handled by the principal underwriter. For the fiscal year ended December 31,
1998, Class A paid the principal underwriter $307.50 for repurchase
transactions handled by it.
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return
on a hypothetical investment of $1,000 in Class A shares for the periods shown
in the table. 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 12/31/98 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
------ ---- ---------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of the Fund** 11/30/94* $942.51 $808.51 -14.22% -3.68% -19.55% -5.06%
1 Year Ended 12/31/98** 12/31/96 $942.52 $634.54 -32.66% -32.66% -36.54% -36.54%
</TABLE>
- ----------
*Predecessor Fund commenced operations on November 30, 1994.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of April 1, 1999, 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 April 1, 1999, Merrill Lynch, Pierce, Fenner & Smith, Inc.,
Jacksonville, FL 32246 was the record owner of approximately 5.0% 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 Eaton
Vance Profit Sharing Retirement Plan, the Eaton Vance Savings Plan and Trust,
and Mars & Co., each of Boston, MA were the record owners of 25.0%, 9.7% and
6.1%, 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
EMERGING MARKETS FUND
CLASS B FEES, PERFORMANCE AND OWNERSHIP
DISTRIBUTION AND SERVICE FEES
During the fiscal year ended December 31, 1998, the principal underwriter
paid to investment dealers sales commissions of $39,474 on sales of Class B
shares. During the same period, the Fund made distribution payments to the
principal underwriter aggregating $48,738 and the principal underwriter
received approximately $66,000 in CDSCs imposed on early redeeming
shareholders. These sales commissions and CDSC payments reduced uncovered
distribution charges under the Plan. As at December 31, 1998, the outstanding
uncovered distribution charges of the principal underwriter calculated under
the Plan amounted to approximately $229,000 (which amount was equivalent to
5.6% of Class B's net assets on such day). During the fiscal year ended
December 31, 1998, the Fund made service fee payments under the Plan
aggregating $13,753, of which $13,723 was paid to investment dealers and the
balance of which was retained by the principal underwriter.
PRINCIPAL UNDERWRITER
The Trust has authorized the principal underwriter to act as its agent in
repurchasing shares at the rate of $2.50 for each repurchase transaction
handled by the principal underwriter. For the fiscal year ended December 31,
1998, Class B paid the principal underwriter $552.50 for repurchase
transactions handled by it.
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return
on a hypothetical investment of $1,000 in Class 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
BEFORE AFTER TOTAL RETURN BEFORE TOTAL RETURN AFTER
DEDUCTING THE DEDUCTING THE DEDUCTING THE DEDUCTING THE
MAXIMUM MAXIMUM MAXIMUM CDSC MAXIMUM CDSC
INVESTMENT INVESTMENT AMOUNT OF CDSC CDSC ------------------------- -------------------------
PERIOD DATE INVESTMENT ON 12/31/98 ON 12/31/98 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
------ ---- ---------- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of the
Fund** 11/30/94 $1,000 $835.49 $819.51 -16.45% -4.30% -18.05% -4.75%
1 Year Ended
12/31/98** 12/31/97 $1,000 $670.86 $637.32 -32.91% -32.91% -36.27% -36.27%
- ----------
</TABLE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of April 1, 1999, 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 April 1, 1999, Merrill Lynch, Pierce, Fenner & Smith, Inc.,
Jacksonville, FL 32246 was the record owner of approximately 18.0% 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
INSTITUTIONAL EMERGING MARKETS FUND
PERFORMANCE AND OWNERSHIP
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return
on a hypothetical investment of $1,000 in another mutual fund that invests in
the Portfolio, adjusted to eliminate the sales charge applicable to that
fund's shares (but not adjusted to reflect certain other differences in
expenses). 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
VALUE OF
VALUE OF INVESTMENT CUMULATIVE ANNUALIZED
INVESTMENT INVESTMENT INITIAL ON TOTAL TOTAL
PERIOD DATE INVESTMENT 12/31/98 RETURN RETURN
------ ------ ------- ------ ----------- -----------
Life of the Fund** 11/30/94* $1,000.00 $857.83 -19.55% -5.06%
1 Year Ended
12/31/98** 12/31/97 $1000.00 $673.35 -36.54% -36.54%
- ----------
*Predecessor Fund commenced operations on November 30, 1994.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of May 1, 1999, Eaton Vance owned one share of the Eaton Vance
Institutional Emerging Markets Fund, being the only shares of the Fund
outstanding on such date. Eaton Vance is a Massachusetts business trust and a
wholly-owned subsidiary of EVC.
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL INFORMATION
May 1, 1999
EATON VANCE GREATER INDIA FUND
255 State Street
Boston, Massachusetts 02109
(800) 225-6265
This Statement of Additional Information ("SAI") provides general
information about the Fund and the Portfolio. The Fund is a series of Eaton
Vance Special Investment Trust. Capitalized terms used in this SAI and not
otherwise defined have the meanings given them in the prospectus. This SAI
contains additional information about:
Page
Strategies and Risks .................................................... 1
Investment Restrictions ................................................. 5
Management and Organization ............................................. 7
Investment Advisory and Administrative Services ......................... 11
Other Service Providers ................................................. 13
Purchasing and Redeeming Shares ......................................... 13
Sales Charges ........................................................... 15
Performance ............................................................. 19
Taxes ................................................................... 20
Portfolio Security Transactions ......................................... 21
Financial Statements .................................................... 23
Appendices:
A: Class A Fees, Performance and Ownership .............................. a-1
B: Class B Fees, Performance and Ownership .............................. b-1
C: Country Information .................................................. c-1
THIS SAI IS NOT A PROSPECTUS AND IS AUTHORIZED FOR DISTRIBUTION TO
PROSPECTIVE INVESTORS ONLY IF PRECEDED OR ACCOMPANIED BY THE FUND'S PROSPECTUS
DATED MAY 1, 1999, AS SUPPLEMENTED FROM TIME TO TIME, WHICH IS INCORPORATED
HEREIN BY REFERENCE. THIS SAI SHOULD BE READ IN CONJUNCTION WITH SUCH
PROSPECTUS, WHICH MAY BE OBTAINED BY CALLING 1-800-225-6265.
<PAGE>
STRATEGIES AND RISKS
SOUTH ASIA PORTFOLIO. 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.
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 investment in the securities of issuers in Greater India countries
is usually restricted or controlled to some degree. In India, FIIs ("Foreign
Institutional Investors") 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.
The Portfolio may also invest in American Depositary Receipts, (ADRs)
European Depositary Receipts (EDRs) and Global Depositary Receipts (GDRs).
ADRs as well as other "hybrid" forms of ADRs, including EDRs and GDRs, are
certificates evidencing ownership of shares of a foreign issuer. These
certificates are issued by depository banks and generally trade on an
established market in the United States or elsewhere. The underlying shares
are held in trust by a custodian bank or similar financial institution in the
issuer's home country. The depository bank may not have physical custody of
the underlying securities at all times and may charge fees for various
services, including forwarding dividends and interest and corporate actions.
ADRs are alternatives to directly purchasing the underlying foreign securities
in their national markets and currencies. However, ADRs continue to be subject
to many of the risks associated with investing directly in foreign securities.
These risks include foreign exchange risk as well as the political and
economic risks of the underlying issuer's country. ADRs, EDRs and GDRs may be
sponsored or unsponsored. Unsponsored receipts are established without the
participation of the issuer. Unsponsored receipts differ from receipts
sponsored by an issuer in that they may involve higher expenses, they may not
pass-through voting and other shareholder rights, and they may be less liquid.
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. Currently, no such
arrangement has been made. 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.
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 investment
adviser believes that the currency of a particular foreign country may suffer
a substantial decline against the U.S. dollar, it may enter into a forward
contract to sell, for a fixed amount of dollars, the amount of foreign
currency approximating the value of some or all of the securities held 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 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).
OTHER INVESTMENT COMPANIES. The Portfolio reserves the right to invest up to
10% of its total assets, calculated at the time of purchase, in the securities
of other investment companies unaffiliated with the investment adviser or the
Manager that have the characteristics of closed-end investment companies. The
Portfolio will indirectly bear its proportionate share of any management fees
paid by investment companies in which it invests in addition to the advisory
fee paid by the Portfolio. The value of closed-end investment company
securities, which are usually traded on an exchange, is affected by demand for
the securities themselves, independent of the demand for the underlying
portfolio assets and, accordingly, such securities can trade at a discount
from their net asset values.
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.
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.
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 investment
adviser determines that trading on each such foreign exchange does not subject
the Portfolio to risks, including credit and liquidity risks, that are
materially greater than the risks associated with trading on 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 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 investment 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.
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 foreign taxation
than taxes payable on the sale of listed securities.
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 Securities and Exchange
Commission (the "SEC"), 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 investment 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 investment
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 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.
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
SEC guidelines regarding cover for these instruments and, if the guidelines so
require, set aside cash or liquid securities in a segregated account with its
custodian in the prescribed amount. The securities in the segregated account
will be marked to market daily.
Assets used as cover or held in a segregated account maintained by the
Portfolio's custodian cannot be sold while the position requiring coverage or
segregation is outstanding unless they are replaced with other appropriate
assets. As a result, the commitment of a large portion of 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.
DIVERSIFIED STATUS. The Portfolio is a "diversified" investment company under
the 1940 Act. This means that with respect to 75% of its total assets (1) the
Portfolio may not invest more than 5% of its total assets in the securities of
any one issuer (except U.S. Government obligations) and (2) the Portfolio may
not own more than 10% of the outstanding voting securities of any one issuer.
PORTFOLIO TURNOVER. The Portfolio cannot accurately predict its portfolio
turnover rate, but it is anticipated that the annual turnover rate will
generally not exceed 100% (excluding turnover of securities having a maturity
of one year or less). A high turnover rate (100% or more) necessarily involves
greater expenses to the Portfolio. Short-term trading may be advisable in
light of a change in circumstances of a particular company or within a
particular industry, or in light of general market, economic or political
conditions. High portfolio turnover may also result in the realization of
substantial net short-term capital gains.
TEMPORARY INVESTMENTS. Under unusual market conditions, the Portfolio may
invest temporarily in cash or cash equivalents. Cash equivalents are highly
liquid, short-term securities such as commercial paper, certificates of
deposit, short-term notes and short-term U.S. Government obligations.
INVESTMENT RESTRICTIONS
The following investment restrictions of the Fund are designed as
fundamental and as such cannot be changed without the approval by the holders
of a majority of the Fund's outstanding voting securities, which as used in
this SAI means the lesser of (a) 67% or more of the shares of the Fund present
or represented by proxy at a meeting if the holders of more than 50% of the
outstanding shares present or represented at the meeting or (b) more than 50%
of the outstanding shares of the Fund. Accordingly, the Fund may not:
(1) Borrow money or issue senior securities except as permitted by the
Investment Company Act of 1940.
(2) Purchase any securities on margin (but the Fund and the Portfolio may
obtain such short-term credits as may be necessary for the clearance of
purchases and sales of securities).
(3) Underwrite securities of other issuers.
(4) Invest in real estate including interests in real estate limited
partnerships (although it may purchase and sell securities which are secured
by real estate and securities of companies which invest or deal in real
estate) or in commodities or commodity 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 purposes of Restriction (7) above,
not more than 25% of the Fund's total assets will be concentrated in any one
industry.
For as long as a feeder fund of the Portfolio has registered shares in
Hong Kong (and for so long as Hong Kong requires the following restrictions),
the Portfolio may not (i) invest 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 by the Trustees with respect to the Fund without
shareholder approval or with respect to the Portfolio without approval of the
Fund or its other investors. The Fund and the Portfolio will not:
(a) invest more than 15% of its net assets in investments which are
not readily marketable, including restricted securities and
repurchase agreements with a maturity longer than seven days.
Restricted securities for the purposes of this limitation do not
include securities eligible for resale pursuant to Rule 144A under
the Securities Act of 1933 and commercial paper issued pursuant to
Section 4(2) of said Act that the Board of Trustees of the Trust
or the Portfolio, or its delegate, determines to be liquid. Any
such determination by a delegate will be made pursuant to
procedures adopted by the Board. If the Fund or Portfolio invests
in Rule 144A securities, the level of portfolio illiquidity may be
increased to the extent that eligible buyers become uninterested
in purchasing such securities; or
(b) 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.
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 limitation on investing in illiquid securities and the borrowing
policies set forth above.
MANAGEMENT AND ORGANIZATION
FUND MANAGEMENT. The Trustees of the Trust are responsible for the overall
management and supervision of the Trust's affairs. The Trustees and officers
of the Trust and the Portfolio are listed below. Except as indicated, each
individual has held the office shown or other offices in the same company for
the last five years. Unless otherwise noted, the business address of each
Trustee and officer is 255 State Street, Boston, Massachusetts 02109. The
business address of the investment adviser is 3808 One Exchange Square,
Central, Hong Kong. Those Trustees who are "interested persons" of the Trust
or the Portfolio as defined in the 1940 Act are indicated by an asterisk (*).
JAMES B. HAWKES (57), President of the Trust, Vice President of the Portfolio
and Trustee*
Chairman, President and Chief Executive Officer of Eaton Vance, BMR and their
corporate parent and trustee (EVC and EV); Director of EVC and EV. Trustee
and officer of various investment companies managed by Eaton Vance or BMR.
Director of LGM.
HON. ROBERT LLOYD GEORGE (46), President and Trustee of the Portfolio*
Chairman and Chief Executive Officer of LGM and of the investment adviser.
Address: 3808 One Exchange Square, Central, Hong Kong
JESSICA M. BIBLIOWICZ (39), Trustee of the Trust
Chief Executive Officer of National Financial Partners (a financial services
company) (since April 1999). President and Chief Operating Officer of John
A. Levin & Co. (a registered investment advisor) (July, 1997 to April, 1999)
and a Director of Baker, Fentress & Company which owns John A. Levin & Co.
(since July, 1997). Formerly Executive Vice President of Smith Barney Mutual
Funds (from July, 1994 to June, 1997). Elected Trustee October 30, 1998.
Trustee of various investment companies managed by Eaton Vance or BMR since
October 30, 1998.
Address: 1301 Avenue of the Americas, 30th floor, New York, NY 10019
EDWARD K.Y. CHEN (54), Trustee of the Portfolio
President of Lingnan College in Hong Kong. Professor and Director of Centre of
Asian Studies at the University of Hong Kong from 1979-1995. Director of
First Pacific Company and Asia Satellite Telecommunications Holdings Ltd.
and a Board Member of the Mass Transit Railway Corporation. Member of the
Executive Council of the Hong Kong Government from 1992-1997 and Chairman of
the Consumer Council from 1991-1997.
Address: President's Office, Lingnan College, Tuen Mun, Hong Kong
DONALD R. DWIGHT (68), Trustee
President of Dwight Partners, Inc. (a corporate relations and communications
company). Trustee/Director of the Royce Funds (mutual funds). Trustee of
various investment companies managed by Eaton Vance or BMR.
Address: Clover Mill Lane, Lyme, New Hampshire 03768
SAMUEL L. HAYES, III (64), Trustee
Jacob H. Schiff Professor of Investment Banking Emeritus, Harvard University
Graduate School of Business Administration. Trustee of the Kobrick-Cedant
Investment Trust (mutual funds). Trustee of various investment companies
managed by Eaton Vance or BMR.
Address: 345 Nahatan Road, Westwood, Massachusetts 02190
NORTON H. REAMER (63), 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). Trustee
of various investment companies managed by Eaton Vance or BMR.
Address: One International Place, Boston, Massachusetts 02110
LYNN A. STOUT (41), Trustee of the Trust
Professor of Law, Georgetown University Law Center. Elected Trustee October
30, 1998. Trustee of various investment companies managed by Eaton Vance or
BMR since October 30, 1998.
Address: 600 New Jersey Avenue, NW, Washington, DC 20001
JOHN L. THORNDIKE (72), Trustee of the Trust
Formerly Director of Fiduciary Company Incorporated. Trustee of various
investment companies managed by Eaton Vance or BMR.
Mr. Thorndike will be retiring from the Board of Trustees in July, 1999.
Address: 175 Federal Street, Boston, Massachusetts 02110
JACK L. TREYNOR (69), Trustee of the Trust
Investment adviser and Consultant. Trustee of various investment companies
managed by Eaton Vance or BMR.
Address: 504 Via Almar, Palos Verdes Estates, California 90274
SCOBIE DICKINSON WARD (33), Vice President, Assistant Secretary and Assistant
Treasurer of the Portfolio
Director of LGM and Chief Investment Officer of the investment adviser.
Address: 3808 One Exchange Square, Central, Hong Kong
WILLIAM WALTER RALEIGH KERR (48), Vice President and Assistant Treasurer of
the Portfolio
Director, Finance Director and Chief Operating Officer of the investment
adviser. Director of LGM.
Address: 3808 One Exchange Square, Central, Hong Kong
EDWARD E. SMILEY, JR. (54), 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 (54), 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 (58), 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.
JANET E. SANDERS (63), Assistant Treasurer of the Trust and Assistant
Secretary
Vice President of Eaton Vance and BMR. Officer of various investment companies
managed by Eaton Vance or BMR.
A. JOHN MURPHY (36), Assistant Secretary
Vice President of BMR and Eaton Vance. Officer of various investment companies
managed by Eaton Vance or BMR.
ERIC G. WOODBURY (41), Assistant Secretary
Vice President of BMR and Eaton Vance. Officer of various investment
companies managed by Eaton Vance or BMR.
The Nominating Committee of the Board of Trustees of the Trust and the
Portfolio is comprised of the Trustees (except Mr. Thorndike) who are not
"interested persons" as that term is defined under the 1940 Act
("noninterested Trustees"). The purpose of the Committee is to recommend to
the Board nominees for the position of noninterested Trustee and to assure
that at least a majority of the Board of Trustees is independent of Eaton
Vance, the investment adviser or its affiliates.
Messrs. Hayes (Chairman), Dwight and Reamer 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 investment adviser or its affiliates
has any actual or potential conflict of interest with the Fund, the Portfolio
or investors therein.
Messrs. Treynor (Chairman) and Dwight and Ms. Bibliowicz are members of
the Audit Committee of the Board of Trustees of the Trust and Messrs. Dwight
(Chairman), Hayes and Chen 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
Eaton Vance 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 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, 1998, 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>
SOURCE OF JESSICA M. EDWARD DONALD R. SAMUEL L. NORTON H. LYNN A. JOHN L. JACK L.
COMPENSATION BIBLIOWICZ(6) K.Y. CHEN DWIGHT HAYES, III REAMER STOUT(6) THORNDIKE TREYNOR
------------ ------------- --------- ------ ---------- ------ -------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Trust(2) ................. $ 548 $ -- $ 2,666 $ 2,639 $ 2,526 $ 386 $ 2,568 $ 3,216
South Asia Portfolio -- 5,000 844 1,027 923 -- -- --
Trust and Fund
Complex ................ 33,334 20,525 160,000(3) 170,000(4) 160,000 32,842 160,000(5) 170,000
</TABLE>
- ------------
(1) As of May 1, 1999, the Eaton Vance Fund complex consists of 154 registered
investment companies or series thereof.
(2) The Trust consisted of 8 Funds as of December 31, 1998.
(3) Includes $60,000 of deferred compensation.
(4) Includes $41,563 of deferred compensation.
(5) Includes $119,091 of deferred compensation.
(6) Ms. Bibliowicz and Ms. Stout were elected Trustees on October 30, 1998.
ORGANIZATION. The Fund is a series of the Trust, which is organized under
Massachusetts law and is operated as an open-end management investment
company. The Fund (formerly EV Marathon Greater India Fund) established two
classes of shares on January 1, 1998 -- Class A shares (formerly EV
Traditional Greater India Fund) and Class B shares of Eaton Vance Greater
India Fund. Information herein prior to such date is for the Fund before it
became a multiple-class fund.
The Trust may issue an unlimited number of shares of beneficial interest
(no par value per share) in one or more series (such as the Fund). The
Trustees of the Trust have divided the shares of the Fund into multiple
classes. Each class represents an interest in the Fund, but is subject to
different expenses, rights and privileges. The Trustees have the authority
under the Declaration of Trust to create additional classes of shares with
differing rights and privileges. When issued and outstanding, shares are fully
paid and nonassessable by the Trust. Shareholders are entitled to one vote for
each full share held. Fractional shares may be voted proportionately. Shares
of the Fund will be voted together except that only shareholders of a
particular class may vote on matters affecting only that class. Shares have no
preemptive or conversion rights and are freely transferable. In the event of
the liquidation of the Fund, shareholders of each class are entitled to share
pro rata in the net assets attributable to that class available for
distribution to shareholders.
The Trustees of the Trust have considered the advantages and disadvantages
of investing the assets of the Fund in the Portfolio, as well as the
advantages and disadvantages of the two-tier format. The Trustees believe that
the structure offers opportunities for growth in the assets of the Portfolio,
may afford the potential for economies of scale for the Fund and may over time
result in lower expenses for the Fund.
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.
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
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.
Whenever the 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. The Fund shall vote shares for which it
receives no voting instructions in the same proportion as the shares for which
it receives voting instructions. Other investors in the Portfolio may alone or
collectively acquire sufficient voting interests in the Portfolio to control
matters relating to the operation of the Portfolio, which may require the Fund
to withdraw its investment in the Portfolio or take other appropriate action.
Any such withdrawal could result in a distribution "in kind" of portfolio
securities (as opposed to a cash distribution from the Portfolio). If
securities are distributed, the Fund could incur brokerage, tax or other
charges in converting the securities to cash. In addition, the distribution in
kind may result in a less diversified portfolio of investments or adversely
affect the liquidity of the Fund. Notwithstanding the above, there are other
means for meeting shareholder redemption requests, such as borrowing.
The Fund may withdraw (completely redeem) all its assets from the
Portfolio at any time if the Board of Trustees of the Trust determines that it
is in the best interest of the Fund to do so. In the event the Fund withdraws
all of its assets from the Portfolio, or the Board of Trustees of the Trust
determines that the investment objective of the Portfolio is no longer
consistent with the investment objective of the Fund, the Trustees would
consider what action might be taken, including investing the assets of the
Fund in another pooled investment entity or retaining an investment adviser to
manage the Fund's assets in accordance with its investment objective. The
Fund's investment performance may be affected by a withdrawal of all its
assets (or the assets of another investor in the Portfolio) from the
Portfolio.
INVESTMENT ADVISORY AND ADMINISTRATIVE SERVICES
INVESTMENT ADVISORY SERVICES. The Portfolio has engaged Lloyd George
Investment Management (Bermuda) Limited as its investment adviser. The
investment adviser acting under the general supervision of the Portfolio's
Board of Trustees, is responsible for managing the Portfolio's investments.
The investment adviser is also responsible for effecting all security
transactions on behalf of the Portfolio, including the allocation of principal
transactions and portfolio brokerage and the negotiation of commissions.
Under the investment advisory agreement, the investment adviser is entitled to
receive a monthly advisory fee computed by applying the annual asset rate
applicable to that portion of the average daily net assets of the Portfolio
throughout the month in each Category as indicated below:
ANNUAL
CATEGORY AVERAGE DAILY NET ASSETS ASSET RATE
- -----------------------------------------------------------------------------
1 less than $500 million ......................... 0.75%
2 $500 million but less than $1 billion .......... 0.70
3 $1 billion but less than $1.5 billion .......... 0.65
4 $1.5 billion but less than $2 billion .......... 0.60
5 $2 billion but less than $3 billion ............ 0.55
6 $3 billion and over ............................ 0.50
As of December 31, 1998, the Portfolio had net assets of $52,733,749. For
the fiscal years ended December 31, 1998, 1997 and 1996, the investment
adviser earned advisory fees of $500,819, $817,285 and $807,758, respectively,
(equivalent to 0.75% of the Portfolio's average daily net assets for each such
year).
The Portfolio's investment advisory agreement with the investment 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 investment 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 investment 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.
While the Portfolio is a New York trust, the investment 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 the individuals identified
above, or to realize judgments of courts of the United States predicated upon
civil liabilities of the investment 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 investment adviser and such individuals reside of such civil
remedies and criminal penalties as are afforded by the federal securities laws
of the United States.
INFORMATION ABOUT LLOYD GEORGE. LGM is ultimately controlled by the Hon.
Robert Lloyd George, President and Trustee of the Portfolio and Chairman and
Chief Executive Officer of the investment adviser. LGM's only business is
portfolio management. Eaton Vance's parent is a shareholder of LGM. The
directors of the investment 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 investment adviser and
Mr. Kerr is Chief Operating Officer of the investment 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.
ADMINISTRATIVE SERVICES. Under Eaton Vance's management contract with the Fund
and administration agreement with the Portfolio, Eaton Vance receives a
monthly management fee from the Fund and a monthly administration fee from the
Portfolio. Each fee is computed by applying the annual asset rate applicable
to that portion of the average daily net assets of the Fund or the Portfolio
throughout the month in each Category as indicated below:
ANNUAL
CATEGORY AVERAGE DAILY NET ASSETS ASSET RATE
------------------------------------------------------------------------
1 less than $500 million .......................... 0.25%
2 $500 million but less than $1 billion ........... 0.23333
3 $1 billion but less than $1.5 billion ........... 0.21667
4 $1.5 billion but less than $2 billion ........... 0.20
5 $2 billion but less than $3 billion ............. 0.18333
6 $3 billion and over ............................. 0.16667
As of December 31, 1998, the Fund had net assets of $51,094,505. For the
fiscal years ended December 31, 1998, 1997 and 1996, Eaton Vance earned
management fees of $161,806, $208,205 and $191,631, respectively, (equivalent
to 0.25% of the Fund's average daily net assets for each such year).
As of December 31, 1998, the Portfolio had net assets of $52,733,749. For
the fiscal years ended December 31, 1997, 1996 and 1995, Eaton Vance earned
administration fees of $166,923, $272,397 and $269,055, respectively,
(equivalent to 0.25% of the Portfolio's average daily net assets for each such
year).
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.
INFORMATION ABOUT EATON VANCE. Eaton Vance is a business trust organized under
Massachusetts law. Eaton Vance, Inc. ("EV") serves as trustee of Eaton Vance.
Eaton Vance and EV are wholly-owned subsidiaries of Eaton Vance Corporation
("EVC"), a Maryland corporation and publicly-held holding company. EVC through
its subsidiaries and affiliates engages primarily in investment management,
administration and marketing activities. Eaton Vance and BMR are both
Massachusetts business trusts, and EV is the trustee of Eaton Vance and BMR.
The Directors of EV are 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. 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. Hawkes and Rowland and Alan R. Dynner,
Thomas E. Faust, Jr., Thomas J. Fetter, Duncan W. Richardson, William M. Steul
and Wharton P. Whitaker (all of whom are officers of Eaton Vance). The Voting
Trustees have unrestricted voting rights for the election of Directors of EVC.
All of the outstanding voting trust receipts issued under said Voting Trust
are owned by certain of the officers of Eaton Vance and BMR who are also
officers or officers and Directors of EVC and EV. As indicated under
"Management and Organization", all of the officers of the Trust (as well as
Mr. Hawkes who is also a Trustee) hold positions in the Eaton Vance
organization.
EXPENSES. The Fund and the Portfolio are responsible for all expenses not
expressly stated to be payable by another party (such as the investment
adviser under the Investment Advisory Agreement, Eaton Vance under the
management contract and administration agreement or the principal underwriter
under the Distribution Agreement). In the case of expenses incurred by the
Trust, the Fund is responsible for its pro rata share of those expenses. The
only expenses of the Fund allocated to a particular class are those incurred
under the Distribution Plan applicable to that class and those resulting from
the fee paid to the principal underwriter for repurchase transactions.
OTHER SERVICE PROVIDERS
PRINCIPAL UNDERWRITER. Eaton Vance Distributors, Inc. ("EVD"), 255 State
Street, Boston, MA 02109, is the Fund's principal underwriter. The principal
underwriter acts as principal in selling shares under a Distribution Agreement
with the Trust. The expenses of printing copies of prospectuses used to offer
shares and other selling literature and of advertising are borne by the
principal underwriter. The fees and expenses of qualifying and registering and
maintaining qualifications and registrations of the Fund and its shares under
federal and state securities laws are borne by the Fund. The Distribution
Agreement is renewable annually by the Trust's Board of Trustees (including a
majority of the noninterested Trustees who have no direct or indirect
financial interest in the operation of the Distribution Plan or the
Distribution Agreement), may be terminated on sixty days' notice either by
such Trustees or by vote of a majority of the outstanding shares of the
relevant class or on six months' notice by the principal underwriter and is
automatically terminated upon assignment. The principal underwriter
distributes shares on a "best efforts" basis under which it is required to
take and pay for only such shares as may be sold. The principal underwriter
allows investment dealers discounts from the applicable public offering price
which are alike for all investment dealers. See "Sales Charges." EVD is a
wholly-owned subsidiary of EVC. Mr. Hawkes is a Vice President and Director
and Messrs. Dynner and O'Connor are Vice Presidents of EVD.
CUSTODIAN. Investors Bank & Trust Company ("IBT"), 200 Clarendon Street,
Boston, MA 02116, serves as custodian to the Fund and Portfolio. IBT has the
custody of all cash and securities representing the Fund's interest in the
Portfolio, has custody of the Portfolio's assets, maintains the general ledger
of the Portfolio and the Fund and computes the daily net asset value of
interests in the Portfolio and the net asset value of shares of the Fund. In
such capacity it attends to details in connection with the sale, exchange,
substitution, transfer or other dealings with the Portfolio's investments,
receives and disburses all funds and performs various other ministerial duties
upon receipt of proper instructions from the Trust and the Portfolio. IBT also
provides services in connection with the preparation of shareholder reports
and the electronic filing of such reports with the SEC. EVC and its affiliates
and their officers and employees from time to time have transactions with
various banks, including IBT. It is Eaton Vance's opinion that the terms and
conditions of such transactions were not and will not be influenced by
existing or potential custodial or other relationships between the Fund or the
Portfolio and such banks.
INDEPENDENT ACCOUNTANTS. Deloitte & Touche LLP, 125 Summer Street, Boston,
Massachusetts, are the independent accountants of the Fund and the Portfolio,
providing audit services, tax return preparation, and assistance and
consultation with respect to the preparation of filings with the SEC.
TRANSFER AGENT. First Data Investor Services Group, P.O. Box 5123,
Westborough, MA 01581-5123, serves as transfer and dividend disbursing agent
for the Fund.
PURCHASING AND REDEEMING SHARES
CALCULATION OF NET ASSET VALUE. The net asset value of the Portfolio is
computed by IBT (as agent and custodian for the Portfolio) by subtracting the
liabilities of the Portfolio from the value of its total assets. The Fund and
the Portfolio will be closed for business and will not price their respective
shares or interests on the following business holidays: New Year's Day, Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day.
Each investor in the Portfolio, including the Fund, may add to or reduce
its investment in the Portfolio on each day the Exchange is open for trading
("Portfolio Business Day") as of the close of regular trading on the Exchange
(the "Portfolio Valuation Time"). The value of each investor's interest in the
Portfolio will be determined by multiplying the net asset value of the
Portfolio by the percentage, determined on the prior Portfolio Business Day,
which represented that investor's share of the aggregate interests in the
Portfolio on such prior day. Any additions or withdrawals for the current
Portfolio Business Day will then be recorded. Each investor's percentage of
the aggregate interest in the Portfolio will then be recomputed as the
percentage equal to a fraction (i) the numerator of which is the value of such
investor's investment in the Portfolio as of the close of Portfolio Valuation
Time on the prior Portfolio Business Day plus or minus, as the case may be,
that amount of any additions to or withdrawals from the investor's investment
in the Portfolio on the current Portfolio Business Day, and (ii) the
denominator of which is the aggregate net asset value of the Portfolio as of
the Portfolio Valuation Time on the prior Portfolio Business Day plus or
minus, as the case may be, the amount of the net additions to or withdrawals
from the aggregate investment in the Portfolio on the current Portfolio
Business Day by all investors in the Portfolio. The percentage so determined
will then be applied to determine the value of the investor's interest in the
Portfolio for the current Portfolio Business Day.
The Trustees of the Portfolio have established the following procedures
for the fair valuation of the Portfolio's assets under normal market
conditions. Marketable securities listed on foreign or U.S. securities
exchanges or in the NASDAQ National Market System generally are valued at
closing sale prices or, if there were no sales, at the mean between the
closing bid and asked prices therefor on the exchange where such securities
are principally traded or on such National Market System (such prices may not
be used, however, where an active over-the-counter market in an exchange
listed security better reflects current market value). Unlisted or listed
securities for which closing sale prices are not available are valued at the
mean between the latest bid and asked prices. An option is valued at the last
sale price as quoted on the principal exchange or board of trade on which such
option or contract is traded, or in the absence of a sale, the mean between
the last bid and asked price. Futures positions on securities or currencies
are generally valued at closing settlement prices. Short term debt securities
with a remaining maturity of 60 days or less are valued at amortized cost. If
securities were acquired with a remaining maturity of more than 60 days, their
amortized cost value will be based on their value on the sixty-first day prior
to maturity. Other fixed income and debt securities, including listed
securities and securities for which price quotations are available, will
normally be valued on the basis of valuations furnished by a pricing service.
All other securities are valued at fair value as determined in good faith by
or at the direction of the Trustees.
Generally, trading in the foreign securities owned by the Portfolio is
substantially completed each day at various times prior to the close of the
Exchange. The values of these securities used in determining the net asset
value of the Portfolio's shares generally are computed as of such times.
Occasionally, events affecting the value of foreign securities may occur
between such times and the close of the Exchange which will not be reflected
in the computation of the Portfolio's net asset value (unless the Portfolio
deems that such events would materially affect its net asset value, in which
case an adjustment would be made and reflected in such computation). Foreign
securities and currency held by the Portfolio will be valued in U.S. dollars;
such values will be computed by the custodian based on foreign currency
exchange rate quotations supplied by Reuters Information Service.
ADDITIONAL INFORMATION ABOUT PURCHASES. Fund shares are continuously offered
through investment dealers which have entered agreements with the principal
underwriter. The public offering price is the net asset value next computed
after receipt of the order, plus, in the case of Class A shares, a variable
percentage (sales charge) depending upon the amount of purchase as indicated
by the sales charge table set forth in the prospectus. The sales charge is
divided between the principal underwriter and the investment dealer. The
sales charge table is applicable to purchases of the Fund alone or in
combination with purchases of certain other funds offered by the principal
underwriter, made at a single time by (i) an individual, or an individual, his
spouse and their children under the age of twenty-one, purchasing shares for
his or their own account, and (ii) a trustee or other fiduciary purchasing
shares for a single trust estate or a single fiduciary account. The table is
also presently applicable to (1) purchases of Class A shares pursuant to a
written Statement of Intention; or (2) purchases of Class A shares pursuant to
the Right of Accumulation and declared as such at the time of purchase. See
"Sales Charges".
SUSPENSION OF SALES. The Trust may, in its absolute discretion, suspend,
discontinue or limit the offering of one or more of its classes of shares at
any time. In determining whether any such action should be taken, the Trust's
management intends to consider all relevant factors, including (without
limitation) the size of the Fund or class, the investment climate and market
conditions, the volume of sales and redemptions of shares, and in the case of
Class B shares, the amount of uncovered distribution charges of the principal
underwriter. The Class B Distribution Plan may continue in effect and payments
may be made under the Plan following any such suspension, discontinuance or
limitation of the offering of shares; however, there is no contractual
obligation to continue the 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.
In connection with employee benefit or other continuous group purchase
plans, the Fund may accept initial investments of less than $1,000 on the part
of an individual participant. In the event a shareholder who is a participant
of such a plan terminates participation in the plan, his or her shares will be
transferred to a regular individual account. However, such account will be
subject to the right of redemption by the Fund as described below.
ACQUIRING FUND SHARES IN EXCHANGE FOR SECURITIES. IBT, as escrow agent, will
receive securities acceptable to Eaton Vance, as administrator, in exchange
for Fund shares. The minimum value of securities (or securities and cash)
accepted for deposit is $5,000. Securities accepted will be sold on the day of
their receipt or as soon thereafter as possible. The number of Fund shares to
be issued in exchange for securities will be the aggregate proceeds from the
sale of such securities, divided by the applicable public offering price of
Class A shares or net asset value of Class B shares on the day such proceeds
are received. Eaton Vance will use reasonable efforts to obtain the then
current market price for such securities but does not guarantee the best
available price. Eaton Vance will absorb any transaction costs, such as
commissions, on the sale of securities. Securities determined to be acceptable
should be transferred via book entry or physically delivered, in proper form
for transfer, through an investment dealer, together with a completed and
signed Letter of Transmittal in approved form (available from investment
dealers). Investors who are contemplating an exchange of securities for
shares, or their representatives, must contact Eaton Vance to determine
whether the securities are acceptable before forwarding such securities. Eaton
Vance reserves the right to reject any securities. Exchanging securities for
shares may create a taxable gain or loss. Each investor should consult his or
her tax adviser with respect to the particular federal, state and local tax
consequences of exchanging securities.
ADDITIONAL INFORMATION ABOUT REDEMPTIONS. The right to redeem shares of the
Fund can be suspended and the payment of the redemption price deferred when
the Exchange is closed (other than for customary weekend and holiday
closings), during periods when trading on the Exchange is restricted as
determined by the SEC, or during any emergency as determined by the SEC which
makes it impracticable for the Portfolio to dispose of its securities or value
its assets, or during any other period permitted by order of the SEC for the
protection of investors.
While normally payments will be made in cash for redeemed shares, the
Trust, subject to compliance with applicable regulations, has reserved the
right to pay the redemption price of shares of the Fund, either totally or
partially, by a distribution in kind of readily marketable securities
withdrawn from the Fund's portfolio. The securities so distributed would be
valued pursuant to the Fund's valuation procedures. If a shareholder received
a distribution in kind, the shareholder could incur brokerage or other charges
in converting the securities to cash.
Due to the high cost of maintaining small accounts, the Trust reserves the
right to redeem accounts with balances of less than $750. Prior to such a
redemption, shareholders will be given 60 days' written notice to make an
additional purchase. However, no such redemption would be required by the
Trust if the cause of the low account balance was a reduction in the net asset
value of shares. No CDSC will be imposed with respect to such involuntary
redemptions.
SYSTEMATIC WITHDRAWAL PLAN. The transfer agent will send to the shareholder
regular monthly or quarterly payments of any permitted amount designated by
the shareholder based upon the value of the shares held. The checks will be
drawn from share redemptions and hence, may require the recognition of taxable
gain or loss. Income dividends and capital gains distributions in connection
with withdrawal plan accounts will be credited at net asset value as of the
record date for each distribution. Continued withdrawals in excess of current
income will eventually use up principal, particularly in a period of declining
market prices. A shareholder may not have a withdrawal plan in effect at the
same time he or she has authorized Bank Automated Investing or is otherwise
making regular purchases of Fund shares. The shareholder, the transfer agent
or the principal underwriter will be able to terminate the withdrawal plan at
any time without penalty.
SALES CHARGES
DEALER COMMISSIONS. The principal underwriter may, from time to time, at its
own expense, provide additional incentives to investment dealers which employ
registered representatives who sell Fund shares and/or shares of other funds
distributed by the principal underwriter. In some instances, such additional
incentives may be offered only to certain investment dealers whose
representatives sell or are expected to sell significant amounts of shares. In
addition, the principal underwriter may from time to time increase or decrease
the sales commissions payable to investment dealers. The principal underwriter
may allow, upon notice to all investment dealers with whom it has agreements,
discounts up to the full sales charge during the periods specified in the
notice. During periods when the discount includes the full sales charge, such
investment dealers may be deemed to be underwriters as that term is defined in
the Securities Act of 1933.
SALES CHARGE WAIVERS. Class A shares may be sold at net asset value to current
and retired Directors and Trustees of Eaton Vance funds, including the
Portfolio; to clients and current and retired officers and employees of Eaton
Vance, its affiliates and other investment advisers of Eaton Vance sponsored
funds; to officers and employees of IBT and the transfer agent; persons
associated with law firms, accounting firms and consulting firms providing
services to Eaton Vance and the Eaton Vance funds; and to such persons'
spouses, parents, siblings and children and their beneficial accounts. Such
shares may also be issued at net asset value (1) in connection with the merger
of an investment company or series 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. Class A shares may also be sold at
net asset value to registered representatives and employees of investment
dealers and bank employees who refer customers to registered representatives
of investment dealers; and to retirement and deferred compensation plans and
trusts used to fund those plans, including, but not limited to, those defined
in Section 401(a), 403(b) or 457 of the Internal Revenue Code of 1986, as
amended (the "Code") and "rabbi trusts". 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 investment advisory,
agency, custodial or trust account managed or administered by Eaton Vance or
by any parent, subsidiary or other affiliate of Eaton Vance. Class A shares
are offered at net asset value to the foregoing persons and in the foregoing
situations because either (i) there is no sales effort involved in the sale of
shares or (ii) the investor is paying a fee (other than the sales charge) to
the investment dealer involved in the sale.
The CDSC applicable to Class B shares will be waived in connection with
minimum required distributions from tax-sheltered retirement plans by applying
the rate required to be withdrawn under the applicable rules and regulations
of the Internal Revenue Service to the balance of Class B shares in your
account.
STATEMENT OF INTENTION. If it is anticipated that $50,000 or more of Class A
shares and shares of other funds exchangeable for Class A shares of another
Eaton Vance fund will be purchased within a 13-month period, 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. The applicable sales charge level for the purchase of
Class A shares is calculated by taking the dollar amount of the current
purchase and adding it to the value (calculated at the maximum current
offering price) of the Class A shares the shareholder owns in his or her
account(s) in the Fund, and shares of other funds exchangeable for Class A
shares. The sales charge on the shares being purchased will then be at the
rate applicable to the aggregate. Shares purchased (i) by an individual, his
or her spouse and their children under the age of twenty-one, and (ii) by a
trustee, guardian or other fiduciary of a single trust estate or a single
fiduciary account, will be combined for the purpose of determining whether a
purchase will qualify for the Right of Accumulation and if qualifying, the
applicable sales charge level. For any such discount to be made available, at
the time of purchase a purchaser or his or her investment dealer must provide
the principal underwriter (in the case of a purchase made through an
investment dealer) or the transfer agent (in the case of an investment made by
mail) with sufficient information to permit verification that the purchase
order qualifies for the accumulation privilege. Confirmation of the order is
subject to such verification. The Right of Accumulation privilege may be
amended or terminated at any time as to purchases occurring thereafter.
TAX-SHELTERED RETIREMENT PLANS. Class A shares are available for purchase in
connection with certain tax-sheltered retirement plans. Detailed information
concerning these plans, including certain exceptions to minimum investment
requirements, and copies of the plans are available from the principal
underwriter. This information should be read carefully and consultation with
an attorney or tax adviser may be advisable. The information sets forth the
service fee charged for retirement plans and describes the federal income tax
consequences of establishing a plan. Participant accounting services
(including trust fund reconciliation services) will be offered only through
third party recordkeepers and not by the principal underwriter. Under all
plans, dividends and distributions will be automatically reinvested in
additional shares.
DISTRIBUTION PLANS. The Trust has adopted a compensation-type Distribution
Plan (the "Class A Plan") for the Fund's Class A shares pursuant to Rule 12b-1
under the 1940 Act. The Class A Plan provides for the payment of a monthly
distribution fee to the principal underwriter in an amount equal to the
aggregate of (a) .50% of that portion of Class A average daily net assets for
any fiscal year which is attributable to its shares which have remained
outstanding for less than one year and (b) .25% of that portion of Class A
average daily net assets for any fiscal year which is attributable to its
shares which have remained outstanding for more than one year. Aggregate
payments to the principal underwriter under the Class A Plan are limited to
those permissible, pursuant to a rule of the National Association of
Securities Dealers, Inc.
The Class A Plan also provides that the Class will pay a quarterly service
fee to the principal underwriter in an amount equal on an annual basis to .25%
of that portion of its average daily net assets for any fiscal year which is
attributable to Class A shares which have remained outstanding for more than
one year; from such service fee the principal underwriter expects to pay a
quarterly service fee to investment dealers, as compensation for providing
personal services and/or the maintenance of shareholder accounts, with respect
to shares sold by such dealers which have remained outstanding for more than
one year. Service fee payments to investment dealers will be in addition to
sales charges on Class A shares which are reallowed to investment dealers. If
the Class A Plan is terminated or not continued in effect, the Class has no
obligation to reimburse the principal underwriter for amounts expended by the
principal underwriter in distributing Class A shares. For the distribution
fees paid by Class A shares, see Appendix A.
The Trust has also adopted a compensation-type Distribution Plan (the
"Class B Plan") pursuant to Rule 12b-1 under the 1940 Act for the Fund's Class
B shares. The Class B Plan is designed to permit an investor to purchase
shares through an investment dealer without incurring an initial sales charge
and at the same time permit the principal underwriter to compensate investment
dealers in connection therewith. The Class B Plan provides that the Fund will
pay sales commissions and distribution fees to the principal underwriter only
after and as a result of the sale of shares. On each sale of shares (excluding
reinvestment of distributions), the Fund will pay the principal underwriter
amounts representing (i) sales commissions equal to 5% of the amount received
by the Fund for each share sold and (ii) distribution fees calculated by
applying the rate of 1% over the prime rate then reported in The Wall Street
Journal to the outstanding balance of uncovered distribution charges (as
described below) of the principal underwriter. To pay these amounts, Class B
pays the principal underwriter a fee, accrued daily and paid monthly, at an
annual rate not exceeding .75% of its average daily net assets to finance the
distribution of its shares. Such fees compensate the principal underwriter for
sales commissions paid by it to investment dealers on the sale of shares and
for interest expenses. For sales of Class B shares, the principal underwriter
uses its own funds to pay sales commissions (except on exchange transactions
and reinvestments) to investment dealers at the time of sale equal to 4% of
the purchase price of the Class B shares sold by such dealers. CDSCs paid to
the principal underwriter will be used to reduce amounts owed to it. The Class
B Plan provide that the Fund will make no payments to the principal
underwriter in respect of any day on which there are no outstanding uncovered
distribution charges of the principal underwriter. CDSCs and accrued amounts
will be paid by the Trust to the principal underwriter whenever there exist
uncovered distribution charges. Because payments to the principal underwriter
under the Class B Plan are limited, uncovered distribution charges (sales
commissions paid by the principal underwriter plus interest, less the above
fees and CDSCs received by it) may exist indefinitely. For the sales
commissions and CDSCs paid on (and uncovered distribution charges of) Class B
shares, see Appendix B.
In calculating daily the amount of uncovered distribution charges,
distribution charges will include the aggregate amount of sales commissions
and distribution fees theretofore paid plus the aggregate amount of sales
commissions and distribution fees which the principal underwriter is entitled
to be paid under the Plan since its inception. Payments theretofore paid or
payable under the Class B Plan by the Trust to the principal underwriter and
CDSCs theretofore paid or payable to the principal underwriter will be
subtracted from such distribution charges; if the result of such subtraction
is positive, a distribution fee (computed at 1% over the prime rate then
reported in The Wall Street Journal) will be computed on such amount and added
thereto, with the resulting sum constituting the amount of outstanding
uncovered distribution charges with respect to such day. The amount of
outstanding uncovered distribution charges of the principal underwriter
calculated on any day does not constitute a liability recorded on the
financial statements of the Fund.
The amount of uncovered distribution charges of the principal underwriter
at any particular time depends upon various changing factors, including the
level and timing of sales of shares, the nature of such sales (i.e., whether
they result from exchange transactions, reinvestments or from cash sales
through investment dealers), the level and timing of redemptions of shares
upon which a CDSC will be imposed, the level and timing of redemptions of
shares upon which no CDSC will be imposed (including redemptions of shares
pursuant to the exchange privilege which result in a reduction of uncovered
distribution charges), changes in the level of the net assets of the Class,
and changes in the interest rate used in the calculation of the distribution
fee under the Class B Plan.
Distribution of Class B shares of the Fund by the principal underwriter
will also be encouraged by the payment by the investment adviser to the
principal underwriter of amounts equivalent to .15% of the annual average
daily net assets for Class B. The aggregate amounts of such payments are a
deduction in calculating the outstanding uncovered distribution charges of the
principal underwriter under the Class B Plan and, therefore, will benefit
shareholders when such charges exist. Such payments will be made in
consideration of the principal underwriter's distribution efforts.
The Class B Plan also authorize the Class to make payments of service fees
to the principal underwriter, investment dealers and other persons in amounts
not exceeding .25% of its average daily net assets for personal services, and/
or the maintenance of shareholder accounts. This fee is paid quarterly in
arrears based on the value of Class B shares sold by such persons and
remaining outstanding for at least twelve months. For the service fees paid by
Class B shares, see Appendix B.
Currently, payments of sales commissions and distribution fees and of
service fees may equal 1% of a Class's average daily net assets per annum. The
Trust believes that the combined rate of all these payments may be higher than
the rate of payments made under distribution plans adopted by other investment
companies pursuant to Rule 12b-1. Although the principal underwriter will use
its own funds (which may be borrowed from banks) to pay sales commissions at
the time of sale, it is anticipated that the Eaton Vance organization will
profit by reason of the operation of the Class B Plan through an increase in
the Fund's assets (thereby increasing the advisory fee payable to Lloyd George
by the Portfolio) resulting from sale of shares and through the amounts paid
to the principal underwriter, including CDSCs, pursuant to the Plans. The
Eaton Vance organization may be considered to have realized a profit under the
Class B Plan if at any point in time the aggregate amounts theretofore
received by the principal underwriter pursuant to the Class B Plan and from
CDSCs have exceeded the total expenses theretofore incurred by such
organization in distributing shares. Total expenses for this purpose will
include an allocable portion of the overhead costs of such organization and
its branch offices, which costs will include without limitation leasing
expense, depreciation of building and equipment, utilities, communication and
postage expense, compensation and benefits of personnel, travel and
promotional expense, stationery and supplies, literature and sales aids,
interest expense, data processing fees, consulting and temporary help costs,
insurance, taxes other than income taxes, legal and auditing expense and other
miscellaneous overhead items. Overhead is calculated and allocated for such
purpose by the Eaton Vance organization in a manner deemed equitable to the
Trust.
The Class A and Class B Plans continue in effect from year to year so long
as such continuance is approved at least annually by the vote of both a
majority of (i) the noninterested Trustees of the Trust who have no direct or
indirect financial interest in the operation of the Plan or any agreements
related to the Plan (the "Plan Trustees") and (ii) all of the Trustees then in
office. Each Plan may be terminated at any time by vote of a majority of the
Plan Trustees or by a vote of a majority of the outstanding voting securities
of the applicable Class. Each Plan requires quarterly Trustee review of a
written report of the amount expended under the Plan and the purposes for
which such expenditures were made. The Plans may not be amended to increase
materially the payments described therein without approval of the shareholders
of the affected Class and the Trustees. So long as a Plan is in effect, the
selection and nomination of the noninterested Trustees shall be committed to
the discretion of such Trustees. The Class A and Class B Plans were initially
approved by the Trustees, including the Plan Trustees, on June 23, 1997.
The Trustees of the Trust believe that each Plan will be a significant
factor in the expected growth of each Fund's assets, and will result in
increased investment flexibility and advantages which have benefitted and will
continue to benefit the Fund and its shareholders. Payments for sales
commissions and distribution fees made to the principal underwriter under the
Class B Plan will compensate the principal underwriter for its services and
expenses in distributing those classes of shares. Service fee payments made to
the principal underwriter and investment dealers provide incentives to provide
continuing personal services to investors and the maintenance of shareholder
accounts. By providing incentives to the principal underwriter and investment
dealers, each Plan is expected to result in the maintenance of, and possible
future growth in, the assets of the Fund. Based on the foregoing and other
relevant factors, the Trustees of the Trust have determined that in their
judgment there is a reasonable likelihood that each Plan will benefit the Fund
and its shareholders.
PERFORMANCE
Average annual total return is determined separately for each Class of the
Fund by multiplying a hypothetical initial purchase order of $1,000 by the
average annual compound rate of return (including capital appreciation/
depreciation, and distributions paid and reinvested) for the stated period and
annualizing the 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. 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.
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 and/or ratings of mutual funds (which include
the Fund) made by independent sources may be used in advertisements and in
information furnished to present or prospective shareholders. Information,
charts and illustrations showing the effect of compounding interest or
relating to inflation and taxes (including their effects on the dollar and the
return on stocks and other investment vehicles) may also be included in
advertisements and materials furnished to present and prospective investors.
Information used in advertisements and in materials furnished to present
or prospective shareholders may include statistics, data and performance
studies prepared by independent organizations or included in various
publications reflecting the investment performance or return achieved by
various classes and types of investments (e.g. common stocks, small company
stocks, long-term corporate bonds, long-term government bonds, intermediate-
term government bonds, U.S. Treasury bills) over various periods of time. This
information may be used to illustrate the benefits of long-term investments in
common stocks. Information about the portfolio allocation, portfolio turnover
and holdings of the Portfolio may be included in advertisements and other
material furnished to present and prospective shareholders.
Information used in advertisements and in materials provided to present
and prospective shareholders may include descriptions of Lloyd George, Eaton
Vance and other Fund and Portfolio service providers, their investment styles,
other investment products, personnel and Fund distribution channels.
Information used in advertisements and materials furnished to present and
prospective investors may include statements or illustrations relating to the
appropriateness of certain types of securities and/or mutual funds to meet
specific financial goals. Such information may address:
--cost associated with aging parents;
--funding a college education (including its actual and estimated cost);
--health care expenses (including actual and projected expenses);
--long-term disabilities (including the availability of, and coverage
provided by, disability insurance); and
--retirement (including the availability of social security benefits, the
tax treatment of such benefits and statistics and other information
relating to maintaining a particular standard of living and outliving
existing assets).
Such information may also address different methods for saving money and
the results of such methods, as well as the benefits of investing in equity
securities. Such information may describe: the potential for growth; the
performance of equities as compared to other investment vehicles; and the
value of investing as early as possible and regularly, as well as staying
invested. The benefits of investing in equity securities by means of a mutual
fund may also be included (such benefits may include diversification,
professional management and the variety of equity mutual fund products).
Information in advertisements and materials furnished to present and
prospective investors may include profiles of different types of investors
(i.e., investors with different goals and assets) and different investment
strategies for meeting specific financial goals. Such information may provide
hypothetical illustrations which include: results of various investment
strategies; performance of an investment in the Fund over various time
periods; and results of diversifying assets among several investments with
varying performance. Information in advertisements and materials furnished to
present and prospective investors may also include quotations (including
editorial comments) and statistics concerning investing in securities, as well
as investing in particular types of securities and the performance of such
securities.
The Trust (or principal underwriter) may provide investors with
information on global investing, which may include descriptions, comparisons,
charts and/or illustrations of foreign and domestic equity market
capitalizations; returns obtained by foreign and domestic securities; and the
effects of globally diversifying an investment portfolio (including volatility
analysis and performance information). Such information may be provided for a
variety of countries over varying time periods.
The Trust (or principal underwriter) may provide information about Eaton
Vance, its affiliates and other investment advisers to the funds in the Eaton
Vance Family of Funds in sales material or advertisements provided to
investors or prospective investors. Such material or advertisements may also
provide information on the use of investment professionals by such investors.
TAXES
Each series of the Trust is treated as a separate entity for 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 net income and net short-term and long-term capital
gains 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, 1998. 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 capital 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 qualified 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 qualified foreign
income taxes in computing their taxable incomes, or, alternatively, use them
as foreign tax credits, subject to applicable limitations, against their U.S.
federal 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.
Sales charges paid upon a purchase of shares of the Fund cannot be taken
into account for purposes of determining gain or loss on a redemption or
exchange of the shares before 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.
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.
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, financial institutions, and nonresident
aliens or foreign entities. 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.
PORTFOLIO SECURITY TRANSACTIONS
Decisions concerning the execution of portfolio security transactions by
the Portfolio, including the selection of the market and the broker-dealer
firm, are made by the investment adviser. The investment adviser places the
portfolio security transactions of the Portfolio and of certain other accounts
managed by the investment adviser for execution with many broker-dealer firms.
The investment 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 investment adviser will use
its best judgment in evaluating the terms of a transaction, and will give
consideration to various relevant factors, including without limitation the
full range and quality of the broker-dealer's services, the value of the
brokerage and research services provided, the responsiveness of the broker-
dealer to the investment adviser, the size and type of the transaction, the
general execution and operational capabilities of the broker-dealer, the
nature and character of the market for the security, the confidentiality,
speed and certainty of effective execution required for the transaction, the
reputation, reliability, experience and financial condition of the broker-
dealer, the value and quality of services rendered by the broker-dealer in
this and other transactions, and the reasonableness of the commission or
spread, if any. Transactions on stock exchanges and other agency transactions
involve the payment by the Portfolio of negotiated brokerage commissions. Such
commissions vary among different broker-dealer firms, and a particular broker-
dealer may charge different commissions according to such factors as the
difficulty and size of the transaction and the volume of business done with
such broker-dealer. Transactions in foreign securities often involve the
payment of brokerage commissions, which may be higher than those in the United
States. There is generally no stated commission in the case of securities
traded in the over-the-counter markets, but the price paid or received by the
Portfolio usually includes an undisclosed dealer markup or markdown. In an
underwritten offering the price paid by the Portfolio includes a disclosed
fixed commission or discount retained by the underwriter or dealer. Although
commissions paid on portfolio transactions will, in the judgment of the
investment adviser, be reasonable in relation to the value of the services
provided, commissions exceeding those which another firm might charge may be
paid to broker-dealers who were selected to execute transactions on behalf of
the Portfolio and the investment adviser's other clients in part for providing
brokerage and research services to the investment adviser.
As authorized in Section 28(e) of the Securities Exchange Act of 1934, a
broker or dealer who executes a portfolio transaction on behalf of the
Portfolio may receive a commission which is in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction if the investment adviser determines in good faith that such
compensation was reasonable in relation to the value of the brokerage and
research services provided. This determination may be made on the basis of
either that particular transaction or on the basis of the overall
responsibilities which the investment adviser and its affiliates have for
accounts over which they exercise investment discretion. In making any such
determination, the investment adviser will not attempt to place a specific
dollar value on the brokerage and research services provided or to determine
what portion of the commission should be related to such services. Brokerage
and research services may include advice as to the value of securities, the
advisability of investing in, purchasing, or selling securities, and the
availability of securities or purchasers or sellers of securities; furnishing
analyses and reports concerning issuers, industries, securities, economic
factors and trends, portfolio strategy and the performance of accounts; and
effecting securities transactions and performing functions incidental thereto
(such as clearance and settlement); and the "Research Services" referred to in
the next paragraph.
It is a common practice in the investment advisory industry for the
advisers of investment companies, institutions and other investors to receive
research, analytical, statistical and quotation services, data, information
and other services, products and materials which assist such advisers in the
performance of their investment responsibilities ("Research Services") from
broker-dealers which execute portfolio transactions for the clients of such
advisers and from third parties with which such broker-dealers have
arrangements. Consistent with this practice, the investment adviser may
receive Research Services from broker-dealer firms with which the investment
adviser places the portfolio transactions of the Portfolio and from third
parties with which these broker-dealers have arrangements. These Research
Services may include such matters as general economic, political, business and
market information, 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, proxy voting data and
analysis services, technical analysis of various aspects of the securities
markets, financial, industry and trade publications, news and information
services, pricing and quotation equipment and services, and research oriented
computer hardware, software, data bases and services. Any particular Research
Service obtained through a broker-dealer may be used by the investment adviser
in connection with client accounts other than those accounts which pay
commissions to such broker-dealer. Any such Research Service may be broadly
useful and of value to the investment adviser in rendering investment advisory
services to all or a significant portion of its clients, or may be relevant
and useful for the management of only one client's account or of a few
clients' accounts, or may be useful for the management of merely a segment of
certain clients' accounts, regardless of whether any such account or accounts
paid commissions to the broker-dealer through which such Research Service was
obtained. The advisory fee paid by the Portfolio is not reduced because the
investment adviser receives such Research Services. The investment adviser
evaluates the nature and quality of the various Research Services obtained
through broker-dealer firms and attempts to allocate sufficient commissions to
such firms to ensure the continued receipt of Research Services which the
investment adviser believes are useful or of value to it in rendering
investment advisory services to its clients.
The Portfolio and the adviser may also receive Research Services from
underwriters and dealers in fixed price offerings, which Research Services are
reviewed and evaluated by the investment adviser in connection with its
investment responsibilities. The investment companies sponsored by the
investment adviser or Eaton Vance may allocate brokerage commissions to
acquire information relating to the performance, fees and expenses of such
companies and other mutual funds, which information is used by the Trustees of
such companies to fulfill their responsibility to oversee the quality of the
services provided by various entities, including the investment adviser, to
such companies. Such companies may also pay cash for such information.
Subject to the requirement that the investment adviser shall use its best
efforts to seek to execute portfolio security transactions of the Portfolio at
advantageous prices and at reasonably competitive commission rates or spreads,
the investment adviser is authorized to consider as a factor in the selection
of any broker-dealer firm with whom Portfolio orders may be placed the fact
that such firm has sold or is selling shares of the Fund or of other
investment companies sponsored by Eaton Vance. This policy is not inconsistent
with a rule of the NASD, which rule provides that no firm which is a member of
the NASD shall favor or disfavor the distribution of shares of any particular
investment company or group of investment companies on the basis of brokerage
commissions received or expected by such firm from any source.
Securities considered as investments for the portfolio may also be
appropriate for other investment accounts managed by the investment adviser or
its affiliates. Whenever decisions are made to buy or sell securities by the
Portfolio and one or more of such other accounts simultaneously, the
investment adviser will allocate the security transactions (including "hot"
issues) in a manner which it believes to be equitable under the circumstances.
As a result of such allocations, there may be instances where the Portfolio
will not participate in a transaction that is allocated among other accounts.
If an aggregated order cannot be filled completely, allocations will generally
be made on a pro rata basis. An order may not be allocated on a pro rata basis
where, for example: (i) consideration is given to portfolio managers who have
been instrumental in developing or negotiating a particular investment; (ii)
consideration is given to an account with specialized investment policies that
coincide with the particulars of a specific investment; (iii) pro rata
allocation would result in odd-lot or de minimis amounts being allocated to a
portfolio or other client; or (iv) where the investment adviser reasonably
determines that departure from a pro rata allocation is advisable. While these
aggregation and allocation policies could have a detrimental effect on the
price or amount of the securities available to the Portfolio from time to
time, it is the opinion of the Trustees of the Trust and the Portfolio that
the benefits from the investment adviser's organization outweigh any
disadvantage that may arise from exposure to simultaneous transactions.
For the fiscal years ended December 31, 1998, 1997 and 1996, the Portfolio
paid brokerage commissions of $616,266, $870,799 and $886,617 respectively, with
respect to portfolio security transactions. Of this amount, approximately
$616,266, $766,327 and $625,933, respectively, was paid in respect of portfolio
security transactions aggregating approximately $70,137,914, $77,750,525 and
$63,550,449, respectively, to firms which provided some Research Services to the
investment adviser's organization (although many of such firms may have been
selected in any particular transaction primarily because of their execution
capabilities).
FINANCIAL STATEMENTS
The audited financial statements of, and the independent auditors' 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. Consistent with applicable law,
duplicate mailings of shareholder reports and certain other Fund information
to shareholders residing at the same address may be eliminated.
Registrant incorporates by reference the audited financial information for
the Fund and the Portfolio for the fiscal year ended December 31, 1998, as
previously filed electronically with the Commission (Accession No.
0000950109-99-000886).
<PAGE>
APPENDIX A
CLASS A FEES, PERFORMANCE AND OWNERSHIP
DISTRIBUTION AND SERVICE FEES
During the fiscal year ended December 31, 1998, Class A paid distribution
fees under the Plan to the prinicpal underwriter aggregating $31,464. During
the fiscal year ended December 31, 1998, Class A made service fee payments to
the principal underwriter and investment dealers aggregating $18,904, of which
$15,578 was paid to investment dealers and the balance of which was retained
by the principal underwriter.
PRINCIPAL UNDERWRITER
The total sales charges paid in connection with sales of Class A shares
during the fiscal year ended December 31, 1998, was $26,771, of which $3,937,
was received by the principal underwriter. For the fiscal year ended December
31, 1998, investment dealers received $22,834 from the total sales charges.
The Trust has authorized the principal underwriter to act as its agent in
repurchasing shares at the rate of $2.50 for each repurchase transaction
handled by the principal underwriter. For the fiscal year ended December 31,
1998, Class A paid the principal underwriter $1,352.50 for repurchase
transactions handled by it.
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return
on a hypothetical investment of $1,000 in Class A shares for the period shown
in the table. 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.
<TABLE>
VALUE OF A $1,000 INVESTMENT
<CAPTION>
TOTAL RETURN TOTAL RETURN
EXCLUDING MAXIMUM INCLUDING MAXIMUM
VALUE OF VALUE OF SALES CHARGE SALES CHARGE
INVESTMENT INVESTMENT INITIAL INVESTMENT --------------------------- --------------------------
PERIOD DATE INVESTMENT ON 12/31/98 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ------------------------- --------- ---------- ----------- ---------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Life of the Fund 5/2/94 $942.51 $544.77 -42.20% -11.08% -45.52% -12.20%
1 Year Ended
12/31/98 12/31/97 $942.05 $858.84 -8.83% -8.83% -14.12% -14.12%
</TABLE>
- ----------
*Predecessor Fund commenced operations on May 2, 1994.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of April 1, 1999, 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 April 1, 1999, Merrill Lynch, Pierce, Fenner & Smith, Inc.,
Jacksonville, FL 32246 were the record owner of approximately 11.3% of the Class
A shares of the Fund, which was held on behalf of its customers who are the
beneficial owners of such shares, and as to which they had voting power under
certain limited circumstances. As of the same date, the Eaton Vance Profit
Sharing Retirement Plan was the record owner of 7.5% 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
FEES, PERFORMANCE AND OWNERSHIP
DISTRIBUTION AND SERVICE FEES
During the fiscal year ended December 31, 1998, the principal underwriter
paid to investment dealers sales commissions of $77,616 on sales of Class B
shares. During the same period, the Fund made distribution payments to the
Principal Underwriter under the Distribution Plan aggregating $409,963 and the
principal underwriter received approximately $650,000 in CDSCs imposed on
early redeeming shareholders. These sales commissions and CDSC payments
reduced uncovered distribution charges under the Plan. As at December 31,
1998, the outstanding uncovered distribution charges of the principal
underwriter calculated under the Plan amounted to approximately $2,847,000
(which amount was equivalent to 6.6% of Class B's net assets on such day).
During the fiscal year ended December 31, 1998, the Fund made service fee
payments under the Plan aggregating $134,246, of which $119,767 was paid to
Authorized Firms and the balance of which was retained by the principal
underwriter.
PRINCIPAL UNDERWRITER
The Trust has authorized the principal underwriter to act as its agent in
repurchasing shares at the rate of $2.50 for each repurchase transaction
handled by the principal underwriter. For the fiscal year ended December 31,
1998, Class B paid the principal underwriter $5,130.00 for repurchase
transactions handled by it.
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return
on a hypothetical investment of $1,000 in 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.
<TABLE>
VALUE OF A $1,000 INVESTMENT
<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 12/31/98 ON 12/31/98 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ----------------- ---------- ---------- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of the Fund 5/2/94 $1,000 $566.00 $554.68 -43.40% -11.47% -44.53% -11.86%
1 Year Ended
12/31/98 12/31/97 $1,000 $908.51 $863.08 -9.15% -9.15% -13.69% -13.69%
</TABLE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of April 1, 1999, 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 April 1, 1999, Merrill Lynch, Pierce, Fenner & Smith, Inc.,
Jacksonville, FL 32246 was the record owner of approximately 11.6% 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>
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. Moreover, the information is as of the date
of this SAI (or such other date as set forth below). This information is
expected to change substantially during the period in which this SAI is in
use. No representation is made that any correlation will exist between the
economies or stock markets of REE ("The Rupee Region") Region countries and
the Fund's performance.
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
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 $27 billion in December, 1998. Future direction of foreign
investment flows, however is dependent on clear cut policy thrust from the new
government.
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.
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
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 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.
The Federal Shariat Court, a constitutionally established body which has
exclusive jurisdiction to determine whether any law in Pakistan violates the
principles of Islam, the official State religion, ruled in November 1991 that
a number of legal provisions in Pakistan violated Islamic principles relating
to Riba (an Islamic term generally accepted as being analogous to interest)
and instructed the Government of Pakistan to conform these provisions to
Islamic principles. It is believed that strict conformity with the ruling of
the Shariat Court would substantially disrupt a variety of commercial
relationships in Pakistan involving the payment of interest, although the
extent and nature of any such disruption on the Pakistani economy, or any
segment thereof (other than the banking system), is uncertain. The ruling of
the Shariat Court has been appealed and will have no effect until the Shariat
Appellate Bench of the Supreme Court of Pakistan renders a decision on the
appeal. A hearing on the appeal was held in November 1993 but, in early 1994
at the request of the Government of Pakistan, the appeal is still continuing.
In addition, pursuant to the Enforcement of Shariat Act, 1991 (the "Shariat
Act"), the Government of Pakistan has appointed a commission to recommend
steps to be taken to introduce suitable alternatives by which an economic
system in Pakistan conforming to Islamic principles could be established.
Since the current popularly elected government favors a free market economy,
the commission may propose a pragmatic approach to the requirements of the
Constitution and the Shariat Act with a view to avoiding any substantial
disruption to the economy of Pakistan. There can be no assurance, however,
that the commission will propose such an approach or that implementation of
the steps recommended by the commission or the effect of the ultimate decision
of the courts in Pakistan on this issue will not adversely affect the economy
in Pakistan.
Economic development since 1955 has taken place within the framework of
successive five-year plans which established growth targets and allocations of
public sector investment. In addition, annual development plans are prepared
indicating yearly allocation of investment and the program for economic
development in the public and private sectors.
For most of the 1980's, the Pakistani economy showed strong growth, with
GDP increasing at over 6% per annum. Over the past decade, despite a rapid
increase in the labor force, real wages in both rural and urban areas rose
substantially. However, the latter part of the decade was characterized by
increasing fiscal and external deficits, infrastructure deficiencies and
disruptions in production. In 1989, the government initiated a three year
structural adjustment program with the assistance of the International
Monetary Fund. The program sought to redress the growing macroeconomic
imbalances resulting from the large fiscal deficits and to increase
productivity through major structural reforms in the industrial and financial
sectors.
The government of Pakistan has been heavily involved in the economy
through ownership of financial and industrial enterprises, investment policies
and incentives, and taxation programs established in the five-year economic
plans. Recent governments, however, have announced various liberalization
measures, including banking reforms and a number of measures designed to
encourage the private sector.
In February 1991, the government announced a twenty-five point
liberalization and reform package. In particular, no approval would be
required for the issue and transfer of shares and the issue of capital by
companies in all but a few specified industries, and Pakistanis residing
overseas and foreign investors would be permitted to purchase listed shares
and to transfer capital and dividends without approval. The government has
also embarked on a major privatization program and a large number of public
sector entities have been offered for sale. Government owned banks,
telecommunications and power generation and gas distribution companies are
scheduled for privatization.
Pakistan's GDP growth for 1999 is approximately 5.4%. The projection for
economic growth for 1999 is approximately 3.3%. Inflation in 1997 was in
excess of 9%.
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 1998, however, hostility with the
Tamil Tigers was continuing.
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.
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.
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 approximately 4.7% in 1998.
<PAGE>
PART C - OTHER INFORMATION
ITEM 23. EXHIBITS
- -------- --------
(a)(1) Amended and Restated Declaration of Trust dated September 27, 1993,
filed as Exhibit (1)(a) to Post-Effective Amendment No. 42 and
incorporated herein by reference.
(2) Amendment to the Declaration of Trust dated June 23, 1997 filed as
Exhibit (1)(b) to Post-Effective Amendment No. 48 and incorporated
herein by reference.
(3) Amendment and Restatement of Establishment and Designation of Series
of Shares dated October 19, 1998 filed as Exhibit (a)(3) to
Post-Effective Amendment No. 52 and incorporated herein by
reference.
(4) Amendment and Restatement of Establishment and Designation of Series
of Shares dated February 22, 1999 filed as Exhibit (a)(4) to Post
Effective Amendment No. 54 and incorporated herein by reference.
(b)(1) By-Laws filed as Exhibit (2)(a) to Post-Effective Amendment No. 42
and incorporated herein by reference.
(2) Amendment to By-Laws dated December 13, 1993 filed as Exhibit (2)(b)
to Post-Effective Amendment No. 42 and incorporated herein by
reference.
(c) Reference is made to Item 23(a) and 23(b) above.
(d) Investment Advisory Agreement with Eaton Vance Management for EV
Traditional Emerging Growth Fund dated December 31, 1996 filed as
Exhibit (5)(e) to Post-Effective Amendment No. 45 and incorporated
herein by reference.
(e)(1)(a) Distribution Agreement between Eaton Vance Special Investment Trust
and Eaton Vance Distributors, Inc. effective June 23, 1997 with
attached Schedule A filed as Exhibit (6)(a)(4) to Post-Effective
Amendment No. 48 and incorporated herein by reference.
(b) Schedule A-1 dated November 17, 1997 filed as Exhibit (6)(a)(4)(a)
to Post-Effective Amendment No. 49 and incorporated herein by
reference.
(c) Schedule A-2 dated December 31, 1998 filed as Exhibit (e)(1)(c) to
Post-Effective Amendment No. 53 and incorporated herein by
reference.
(d) Schedule A-3 dated February 22, 1999 filed as Exhibit (e)(1)(d) to
Post-Effective Amendment No. 54 and incorporated herein by
reference.
(2) Selling Group Agreement between Eaton Vance Distributors, Inc. and
Authorized Dealers filed as Exhibit (6)(b) to the Post-Effective
Amendment No. 61 and incorporated herein by reference.
(f) The Securities and Exchange Commission has granted the Registrant an
exemptive order that permits the Registrant to enter into deferred
compensation arrangements with its independent Trustees. See in the
Matter of Capital Exchange Fund, Inc., Release No. IC-20671
(November 1, 1994).
C-1
<PAGE>
(g)(1) Custodian Agreement with Investors Bank & Trust Company dated March
24, 1994 filed as Exhibit (8) to Post-Effective Amendment No. 42 and
incorporated herein by reference.
(2) Amendment to Custodian Agreement with Investors Bank & Trust Company
dated October 23, 1995 filed as Exhibit (8)(b) to Post-Effective
Amendment No. 43 and incorporated herein by reference.
(3) Amendment to Master Custodian Agreement with Investors Bank & Trust
Company dated December 21, 1998 filed as Exhibit (g)(3) to the
Registration Statement of Eaton Vance Municipals Trust (File Nos.
33-572, 811-4409) (Accession No. 0000950156-99-000050) and
incorporated herein by reference.
(h)(1)(a) Management Contract between Eaton Vance Special Investment Trust (on
behalf of certain of its series) and Eaton Vance Management filed as
Exhibit (5)(a)(1) to Post-Effective Amendment No. 48 and
incorporated herein by reference.
(b) 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.
(2) Management Agreement between Eaton Vance Special Investment Trust on
behalf of Eaton Vance Institutional Short Term Treasury Fund and
Eaton Vance Management filed as Exhibit (h)(2) to Post-Effective
Amendment No. 52 and incorporated herein by reference.
(3)(a) Amended Administrative Services Agreement between Eaton Vance
Special Investment Trust (on behalf of each of its series listed on
Schedule A) and Eaton Vance Management dated June 19, 1995 filed as
Exhibit (9) to Post-Effective Amendment No. 42 and incorporated
herein by reference.
(b) Amendment to Schedule A dated June 23, 1997 to the Amended
Administrative Services Agreement filed as Exhibit (9)(a)(2) to
Post-Effective Amendment No. 48 and incorporated herein by
reference.
(4) 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.
(i)(1) Opinion of Internal Counsel filed as Exhibit (i) to Post-Effective
Amendment No. 53 and incorporated herein by reference.
(2) Consent of Counsel filed herewith.
(j)(1) Consent of Independent Accountants for Eaton Vance Balanced Fund
filed herewith.
(2) Consent of Independent Auditors for Eaton Vance Emerging Markets
Fund filed herewith.
(3) Consent of Independent Auditors for Eaton Vance Greater India Fund
filed herewith.
(4) Consent of Independent Accountants for Eaton Vance Growth & Income
Fund filed herewith.
(5) Consent of Independent Auditors for Eaton Vance Institutional
Emerging Markets Fund filed herewith.
C-2
<PAGE>
(6) Consent of Independent Accountants for Eaton Vance Special Equities
Fund filed herewith.
(7) Consent of Independent Accountants for Eaton Vance Utilities Fund
filed herewith.
(8) Consent of Independent Accountants for EV Traditional Emerging
Growth Fund filed herewith.
(k) Not applicable
(l) Not applicable
(m)(1) Eaton Vance Special Investment Trust Class A Service Plan adopted
June 23, 1997 with attached Schedule A effective June 23, 1997 filed
as Exhibit (15)(a) to Post-Effective Amendment No. 48 and
incorporated herein by reference.
(a) Amended Schedule A effective December 31, 1998 filed as Exhibit
(m)(1)(a) to Post-Effective Amendment No. 52 and incorporated herein
by reference.
(2)(a) Eaton Vance Special Investment Trust Class A Distribution Plan
adopted June 23, 1997 with attached Schedule A effective June 23,
1997 filed as Exhibit (15)(b) to Post-Effective Amendment No. 48 and
incorporated herein by reference.
(b) Amended Schedule A-1 dated November 17, 1997 filed as Exhibit
(15)(b)(1) to Post-Effective Amendment No. 49 and incorporated
herein by reference.
(3)(a) Eaton Vance Special Investment Trust Class B Distribution Plan
adopted June 23, 1997 with attached Schedule A effective June 23,
1997 filed as Exhibit (15)(c) to Post-Effective Amendment No. 48 and
incorporated herein by reference.
(b) Amended Schedule A-1 dated November 17, 1997 filed as Exhibit
(15)(c)(1) to Post-Effective Amendment No. 49 and incorporated
herein by reference.
(4) Eaton Vance Special Investment Trust Class C Distribution Plan
adopted June 23, 1997 with attached Schedule A effective June 23,
1997 filed as Exhibit (15)(d) to Post-Effective Amendment No. 48 and
incorporated herein by reference.
(n)(1) Financial Data Schedule for the fiscal year ended December 31, 1998
for Eaton Vance Balanced Fund-Class A filed herewith.
(2) Financial Data Schedule for the fiscal year ended December 31, 1998
for Eaton Vance Balanced Fund-Class B filed herewith.
(3) Financial Data Schedule for the fiscal year ended December 31, 1998
for Eaton Vance Balanced Fund-Class C filed herewith.
(4) Financial Data Schedule for the fiscal year ended December 31, 1998
for Eaton Vance Emerging Markets Fund-Class A filed herewith.
(5) Financial Data Schedule for the fiscal year ended December 31, 1998
for Eaton Vance Emerging Markets Fund-Class B filed herewith.
C-3
<PAGE>
(6) Financial Data Schedule for the fiscal year ended December 31, 1998
for Eaton Vance Greater India Fund-Class A filed herewith.
(7) Financial Data Schedule for the fiscal year ended December 31, 1998
for Eaton Vance Greater India Fund-Class B filed herewith.
(8) Financial Data Schedule for the fiscal year ended December 31, 1998
for Eaton Vance Growth & Income Fund-Class A filed herewith.
(9) Financial Data Schedule for the fiscal year ended December 31, 1998
for Eaton Vance Growth & Income Fund-Class B filed herewith.
(10) Financial Data Schedule for the fiscal year ended December 31, 1998
for Eaton Vance Growth & Income Fund-Class C filed herewith.
(11) Financial Data Schedule for the fiscal year ended December 31, 1998
for Eaton Vance Special Equities Fund-Class A filed herewith.
(12) Financial Data Schedule for the fiscal year ended December 31, 1998
for Eaton Vance Special Equities Fund-Class B filed herewith.
(13) Financial Data Schedule for the fiscal year ended December 31, 1998
for Eaton Vance Special Equities Fund-Class C filed herewith.
(14) Financial Data Schedule for the fiscal year ended December 31, 1998
for Eaton Vance Utilities Fund-Class A filed herewith.
(15) Financial Data Schedule for the fiscal year ended December 31, 1998
for Eaton Vance Utilities Fund-Class B filed herewith.
(16) Financial Data Schedule for the fiscal year ended December 31, 1998
for Eaton Vance Utilities Fund-Class C filed herewith.
(17) Financial Data Schedule for the fiscal year ended December 31, 1998
for EV Traditional Emerging Growth Fund filed herewith.
(18) Financial Data Schedule for the fiscal year ended December 31, 1998
for Balanced Portfolio filed herewith.
(19) Financial Data Schedule for the fiscal year ended December 31, 1998
for Emerging Markets Portfolio filed herewith.
(20) Financial Data Schedule for the fiscal year ended December 31, 1998
for Growth & Income Portfolio filed herewith.
(21) Financial Data Schedule for the fiscal year ended December 31, 1998
for South Asia Portfolio filed herewith.
(22) Financial Data Schedule for the fiscal year ended December 31, 1998
for Special Investment Portfolio filed herewith.
(23) Financial Data Schedule for the fiscal year ended December 31, 1998
for Utilities Portfolio
C-4
<PAGE>
filed herewith.
(o) Multiple Class Plan for Eaton Vance Funds dated June 23, 1997 filed
as Exhibit (18) to Post-Effective Amendment No. 49 and incorporated
herein by reference.
(p)(1) Power of Attorney for Eaton Vance Special Investment Trust dated
June 23, 1997 filed as Exhibit (17)(a) to Post-Effective Amendment
No. 47 and incorporated herein by reference.
(a) Power of Attorney for Eaton Vance Special Investment Trust dated
November 16, 1998 filed as Exhibit No. (p)(1)(a) to Post-Effective
Amendment No. 54.
(2) Power of Attorney for Emerging Markets Portfolio dated February 14,
1997 filed as Exhibit (17)(b) to Post-Effective Amendment No. 46 and
incorporated herein by reference.
(3) Power of Attorney for South Asia Portfolio dated February 14, 1997
filed as Exhibit (17)(c) to Post-Effective Amendment No. 46 and
incorporated herein by reference.
(4) 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.
(a) Power of Attorney for Special Investment Portfolio dated November
16, 1998 filed as Exhibit No. (p)(4)(a) to Post-Effective Amendment
No. 54.
(5) 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.
(a) Power of Attorney for Balanced Portfolio (formerly Investors
Portfolio) dated November 16, 1998 filed as Exhibit No. (p)(5)(a) to
Post-Effective Amendment No. 54.
(6) 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.
(a) Power of Attorney for Growth & Income Portfolio (formerly Stock
Portfolio) dated November 16, 1998 filed as Exhibit No. (p)(6)(a) to
Post-Effective Amendment No. 54.
(7) 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.
(a) Power of Attorney for Utilities Portfolio (formerly Total Return
Portfolio) dated November 16, 1998 filed as Exhibit No. (p)(7)(a) to
Post-Effective Amendment No. 54.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL
Not applicable
ITEM 25. INDEMNIFICATION
Article IV of the Registrant's Amended and Restated Declaration of Trust
permits Trustee and officer indemnification by By-law, contract and vote.
Article XI of the By-Laws contains indemnification provisions. Registrant's
Trustees and officers are insured under a standard mutual fund errors and
omissions insurance policy covering loss incurred by reason of negligent errors
and omissions committed in their capacities as such.
C-5
<PAGE>
The distribution agreements of the Registrant also provide for reciprocal
indemnity of the principal underwriter, on the one hand, and the Trustees and
officers, on the other.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISERS
Reference is made to: (i) the information set forth under the caption
"Management and Organization" in the Statement of Additional Information; (ii)
the Eaton Vance Corp. 10-K filed under the Securities Exchange Act of 1934
(File No. 1-8100); and (iii) the Form ADV of Eaton Vance (File No. 801-15930),
BMR (File No. 43127) and Lloyd George (File No. 801-40889) filed with the
Commission, all of which are incorporated herein by reference.
ITEM 27. PRINCIPAL UNDERWRITERS
(a) Registrant's principal underwriter, Eaton Vance Distributors, Inc., a
wholly-owned subsidiary of Eaton Vance Management, is the principal
underwriter for each of the investment companies named below:
<TABLE>
<CAPTION>
<S> <C>
Eaton Vance Advisers Senior Floating-Rate Fund Eaton Vance Municipals Trust II
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
</TABLE>
(b)
<TABLE>
<CAPTION>
<S> <C> <C>
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address* with Principal Underwriter with Registrant
----------------- -------------------------- ---------------
Albert F. Barbaro Vice President None
Chris Berg Vice President None
Kate B. Bradshaw Vice President None
Mark Carlson Vice President None
Daniel C. Cataldo Vice President None
Raymond Cox Vice President None
Peter Crowley Vice President None
Mark P. Doman Vice President None
Alan R. Dynner Vice President Secretary
Richard A. 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
James B. Hawkes Vice President and Director President and Trustee
Perry D. Hooker Vice President None
Brian Jacobs Senior Vice President None
Thomas P. Luka Vice President None
John Macejka Vice President None
Stephen Marks Vice President None
Joseph T. McMenamin Vice President None
Morgan C. Mohrman Senior Vice President None
James A. Naughton Vice President None
Joseph Nelson Vice President None
Mark D. Nelson Vice President None
Linda D. Newkirk Vice President None
James L. O'Connor Vice President Treasurer
Andrew Ogren Vice President None
Thomas Otis Secretary and Clerk None
George D. Owen, II Vice President None
Enrique M. Pineda Vice President None
C-6
<PAGE>
F. Anthony Robinson Vice President None
Frances Rogell 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
Kevin Schrader Vice President None
George V.F. Schwab, Jr. Vice President None
Teresa A. Sheehan Vice President None
William M. Steul Vice President and Director None
Cornelius J. Sullivan Senior Vice President None
Peter Sykes Vice President None
David M. Thill Vice President None
John M. Trotsky Vice President None
Jerry Vainisi Vice President None
Chris Volf Vice President None
Wharton P. Whitaker President and Director None
Sue Wilder Vice President None
</TABLE>
- ------------------------------------------
* Address is 24 Federal Street, Boston, MA 02110
(c) Not applicable
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS
All applicable accounts, books and documents required to be maintained by
the Registrant by Section 31(a) of the Investment Company Act of 1940 and the
Rules promulgated thereunder are in the possession and custody of the
Registrant's custodian, Investors Bank & Trust Company, 200 Clarendon Street,
16th Floor, Mail Code ADM27, Boston, MA 02116, and its transfer agent, 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, Eaton Vance Management, 24
Federal Street, Boston, MA 02110. 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 and Boston
Management and Research.
ITEM 29. MANAGEMENT SERVICES
Not applicable
ITEM 30. UNDERTAKINGS
Not applicable
C-7
<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 April 22, 1999.
EATON VANCE SPECIAL INVESTMENT TRUST
By: /s/ JAMES B. HAWKES
-------------------------------------
James B. Hawkes, President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement has been signed below by
the following persons in the capacities indicated on April 22, 1999.
<TABLE>
<CAPTION>
<S> <C>
SIGNATURE TITLE
--------- -----
/s/ James B. Hawkes President (Chief Executive Officer) and Trustee
- -----------------------
James B. Hawkes
/s/ James L. O'Connor Treasurer (and Principal Financial and Accounting Officer)
- -------------------
James L. O'Connor
Jessica M. Bibliowicz*
- ---------------------- Trustee
Jessica M. Bibliowicz
Donald R. Dwight*
- ----------------- Trustee
Donald R. Dwight
Samuel L. Hayes, III*
- --------------------- Trustee
Samuel L. Hayes
Norton H. Reamer*
- ----------------- Trustee
Norton H. Reamer
Lynn A. Stout*
- --------------
Lynn A. Stout Trustee
John L. Thorndike*
- ------------------ Trustee
John L. Thorndike
Jack L. Treynor*
- ----------------- Trustee
Jack L. Treynor
*By: /s/ Alan R. Dynner
-----------------------------------
Alan R. Dynner (As attorney-in-fact)
</TABLE>
C-8
<PAGE>
SIGNATURES
Balanced 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 April
22, 1999.
BALANCED PORTFOLIO
By: /s/ 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 indicated on April 22, 1999.
<TABLE>
<CAPTION>
<S> <C>
SIGNATURE TITLE
--------- -----
/s/ James B. Hawkes President (Chief Executive Officer) and Trustee
- -----------------------
James B. Hawkes
/s/ James L. O'Connor Treasurer (and Principal Financial and Accounting Officer)
- -------------------
James L. O'Connor
Jessica M. Bibliowicz*
- ---------------------- Trustee
Jessica M. Bibliowicz
Donald R. Dwight*
- ----------------- Trustee
Donald R. Dwight
Samuel L. Hayes, III*
- --------------------- Trustee
Samuel L. Hayes
Norton H. Reamer*
- ----------------- Trustee
Norton H. Reamer
Lynn A. Stout*
- --------------
Lynn A. Stout Trustee
John L. Thorndike*
- ------------------ Trustee
John L. Thorndike
Jack L. Treynor*
- ----------------- Trustee
Jack L. Treynor
*By: /s/ Alan R. Dynner
-----------------------------------
Alan R. Dynner (As attorney-in-fact)
</TABLE>
C-9
<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 April
22, 1999.
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 indicated on April 22, 1999.
<TABLE>
<CAPTION>
<S> <C>
SIGNATURE TITLE
--------- -----
Hon. Robert Lloyd George* President (Chief Executive Officer) and Trustee
- -------------------------
Hon. Robert Lloyd George
/s/ James L. O'Connor Treasurer (Principal Financial and Accounting Officer)
- -------------------
James L. O'Connor
Hon. Edward K.Y. Chen*
- ---------------------- Trustee
Hon. Edward K.Y. Chen
Donald R. Dwight*
- ----------------- Trustee
Donald R. Dwight
/s/ James B. Hawkes
- ------------------- Trustee
James B. Hawkes
Samuel L. Hayes, III*
- --------------------- Trustee
Samuel L. Hayes
Norton H. Reamer*
- ----------------- Trustee
Norton H. Reamer
*By: /s/ Alan R. Dynner
---------------------------------
Alan R. Dynner (As attorney-in-fact)
</TABLE>
C-10
<PAGE>
SIGNATURES
Growth & Income 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 April
22, 1999.
GROWTH & INCOME PORTFOLIO
By: /s/ 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 indicated on April 22, 1999.
<TABLE>
<CAPTION>
<S> <C>
SIGNATURE TITLE
--------- -----
/s/ James B. Hawkes President (Chief Executive Officer) and Trustee
- -----------------------
James B. Hawkes
/s/ James L. O'Connor Treasurer (and Principal Financial and Accounting Officer)
- -------------------
James L. O'Connor
Jessica M. Bibliowicz*
- ---------------------- Trustee
Jessica M. Bibliowicz
Donald R. Dwight*
- ----------------- Trustee
Donald R. Dwight
Samuel L. Hayes, III*
- --------------------- Trustee
Samuel L. Hayes
Norton H. Reamer*
- ----------------- Trustee
Norton H. Reamer
Lynn A. Stout*
- --------------
Lynn A. Stout Trustee
John L. Thorndike*
- ------------------ Trustee
John L. Thorndike
Jack L. Treynor*
- ----------------- Trustee
Jack L. Treynor
*By: /s/ Alan R. Dynner
-----------------------------------
Alan R. Dynner (As attorney-in-fact)
</TABLE>
C-11
<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
April 22, 1999.
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 indicated on April 22, 1999.
<TABLE>
<CAPTION>
<S> <C>
SIGNATURE TITLE
--------- -----
Hon. Robert Lloyd George* President (Chief Executive Officer) and Trustee
- -------------------------
Hon. Robert Lloyd George
/s/ James L. O'Connor Treasurer (Principal Financial and Accounting Officer)
- -------------------
James L. O'Connor
Hon. Edward K.Y. Chen*
- ---------------------- Trustee
Hon. Edward K.Y. Chen
Donald R. Dwight*
- ----------------- Trustee
Donald R. Dwight
/s/ James B. Hawkes
- ------------------- Trustee
James B. Hawkes
Samuel L. Hayes, III*
- --------------------- Trustee
Samuel L. Hayes
Norton H. Reamer*
- ----------------- Trustee
Norton H. Reamer
*By: /s/ Alan R. Dynner
---------------------------------
Alan R. Dynner (As attorney-in-fact)
</TABLE>
C-12
<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 April
22, 1999.
SPECIAL INVESTMENT PORTFOLIO
By: /s/ 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 indicated on April 22, 1999.
<TABLE>
<CAPTION>
<S> <C>
SIGNATURE TITLE
--------- -----
/s/ James B. Hawkes President (Chief Executive Officer) and Trustee
- -----------------------
James B. Hawkes
/s/ James L. O'Connor Treasurer (and Principal Financial and Accounting Officer)
- -------------------
James L. O'Connor
Jessica M. Bibliowicz*
- ---------------------- Trustee
Jessica M. Bibliowicz
Donald R. Dwight*
- ----------------- Trustee
Donald R. Dwight
Samuel L. Hayes, III*
- --------------------- Trustee
Samuel L. Hayes
Norton H. Reamer*
- ----------------- Trustee
Norton H. Reamer
Lynn A. Stout*
- --------------
Lynn A. Stout Trustee
John L. Thorndike*
- ------------------ Trustee
John L. Thorndike
Jack L. Treynor*
- ----------------- Trustee
Jack L. Treynor
*By: /s/ Alan R. Dynner
-----------------------------------
Alan R. Dynner (As attorney-in-fact)
</TABLE>
C-13
<PAGE>
SIGNATURES
Utilities 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 April
22, 1999.
UTILITIES PORTFOLIO
By: /s/ 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 indicated on April 22, 1999.
<TABLE>
<CAPTION>
<S> <C>
SIGNATURE TITLE
--------- -----
/s/ James B. Hawkes President (Chief Executive Officer) and Trustee
- -----------------------
James B. Hawkes
/s/ James L. O'Connor Treasurer (and Principal Financial and Accounting Officer)
- -------------------
James L. O'Connor
Jessica M. Bibliowicz*
- ---------------------- Trustee
Jessica M. Bibliowicz
Donald R. Dwight*
- ----------------- Trustee
Donald R. Dwight
Samuel L. Hayes, III*
- --------------------- Trustee
Samuel L. Hayes
Norton H. Reamer*
- ----------------- Trustee
Norton H. Reamer
Lynn A. Stout*
- --------------
Lynn A. Stout Trustee
John L. Thorndike*
- ------------------ Trustee
John L. Thorndike
Jack L. Treynor*
- ----------------- Trustee
Jack L. Treynor
*By: /s/ Alan R. Dynner
-----------------------------------
Alan R. Dynner (As attorney-in-fact)
</TABLE>
C-14
<PAGE>
EXHIBIT INDEX
The following exhibits are filed as part of this amendment to the
Registration Statement pursuant to Rule 483 of Regulation C.
Exhibit No. Description
- ----------- -----------
(i)(2) Consent of Counsel to Opinion dated February 12, 1999.
(j)(1) Consent of Independent Accountants for Eaton Vance Balanced
Fund.
(2) Consent of Independent Auditors for Eaton Vance Emerging
Markets Fund.
(3) Consent of Independent Auditors for Eaton Vance Greater
India Fund.
(4) Consent of Independent Accountants for Eaton Vance Growth &
Income Fund.
(5) Consent of Independent Auditors for Eaton Vance Insitutional
Emerging Markets Fund.
(6) Consent of Independent Accountants for Eaton Vance Special
Equities Fund.
(7) Consent of Independent Accountants for Eaton Vance Utilities
Fund.
(8) Consent of Independent Accountants for EV Traditional
Emerging Growth Fund.
(n)(1) Financial Data Schedule for the fiscal year ended December
31, 1998 for Eaton Vance Balanced Fund-Class A.
(2) Financial Data Schedule for the fiscal year ended December
31, 1998 for Eaton Vance Balanced Fund-Class B.
(3) Financial Data Schedule for the fiscal year ended December
31, 1998 for Eaton Vance Balanced Fund-Class C.
(4) Financial Data Schedule for the fiscal year ended December
31, 1998 for Eaton Vance Emerging Markets Fund-Class A.
(5) Financial Data Schedule for the fiscal year ended December
31, 1998 for Eaton Vance Emerging Markets Fund-Class B.
(6) Financial Data Schedule for the fiscal year ended December
31, 1998 for Eaton Vance Greater India Fund-Class A.
(7) Financial Data Schedule for the fiscal year ended December
31, 1998 for Eaton Vance Greater India Fund-Class B.
(8) Financial Data Schedule for the fiscal year ended December
31, 1998 for Eaton Vance Growth & Income Fund-Class A.
(9) Financial Data Schedule for the fiscal year ended December
31, 1998 for Eaton Vance Growth & Income Fund-Class B.
C-15
<PAGE>
(10) Financial Data Schedule for the fiscal year ended December
31, 1998 for Eaton Vance Growth & Income Fund-Class C.
(11) Financial Data Schedule for the fiscal year ended December
31, 1998 for Eaton Vance Special Equities Fund-Class A.
(12) Financial Data Schedule for the fiscal year ended December
31, 1998 for Eaton Vance Special Equities Fund-Class B.
(13) Financial Data Schedule for the fiscal year ended December
31, 1998 for Eaton Vance Special Equities Fund-Class C.
(14) Financial Data Schedule for the fiscal year ended December
31, 1998 for Eaton Vance Utilities Fund-Class A.
(15) Financial Data Schedule for the fiscal year ended December
31, 1998 for Eaton Vance Utilities Fund-Class B.
(16) Financial Data Schedule for the fiscal year ended December
31, 1998 for Eaton Vance Utilities Fund-Class C.
(17) Financial Data Schedule for the fiscal year ended December
31, 1998 for EV Traditional Emerging Growth Fund.
(18) Financial Data Schedule for the fiscal year ended December
31, 1998 for Balanced Portfolio.
(19) Financial Data Schedule for the fiscal year ended December
31, 1998 for Emerging Markets Portfolio.
(20) Financial Data Schedule for the fiscal year ended December
31, 1998 for Growth & Income Portfolio.
(21) Financial Data Schedule for the fiscal year ended December
31, 1998 for South Asia Portfolio.
(22) Financial Data Schedule for the fiscal year ended December
31, 1998 for Special Investment Portfolio.
(23) Financial Data Schedule for the fiscal year ended December
31, 1998 for Utilities Portfolio.
C-16
<PAGE>
EXHIBIT (i)(2)
CONSENT OF COUNSEL
I consent to the incorporation by reference in this Post-Effective
Amendment No. 55 to the Registration Statement of Eaton Vance Special Investment
Trust (1933 Act File No. 2-27962) of my opinion dated February 12, 1999, which
was filed as Exhibit (i) to Post-Effective Amendment No. 53.
/s/ Maureen A. Gemma
Maureen A. Gemma, Esq.
April 26, 1999
Boston, Massachusetts
<PAGE>
EXHIBIT (j)(1)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the use in this Post-Effective Amendment No. 55 to the
Registration Statement of Eaton Vance Special Investment Trust (1933 Act File
No. 2-27962) on behalf of Eaton Vance Balanced Fund of our report dated February
5, 1999, relating to the Fund referenced above and of our report dated February
5, 1999, relating to Balanced Portfolio, which reports are included in the
Annual Report to Shareholders for the year ended December 31, 1998, 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 "Financial
Highlights" in the Prospectus and under the caption "Other Service Providers" in
the Statement of Additional Information of the Registration Statement.
/s/ PricewaterhouseCoopers LLP
PRICEWATERHOUSECOOPERS LLP
April 22, 1999
Boston, Massachusetts
<PAGE>
EXHIBIT (j)(2)
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 55 to the
Registration Statement of Eaton Vance Special Investment Trust (1933 Act File
No. 2-27962) on behalf of Eaton Vance Emerging Markets Fund of our report dated
February 12, 1999, relating to the Fund referenced above and of our report dated
February 12, 1999, relating to Emerging Markets Portfolio, which reports are
included in the Annual Report to Shareholders for the year ended December 31,
1998, 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 "Financial
Highlights" in the Prospectus and under the caption "Other Service Providers" in
the Statement of Additional Information of the Registration Statement.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
April 22, 1999
Boston, Massachusetts
<PAGE>
EXHIBIT (j)(3)
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 55 to the
Registration Statement of Eaton Vance Special Investment Trust (1933 Act File
No. 2-27962) on behalf of Eaton Vance Greater India Fund of our report dated
February 12, 1999, relating to the Fund referenced above and of our report dated
February 12, 1999, relating to South Asia Portfolio, which reports are included
in the Annual Report to Shareholders for the year ended December 31, 1998, 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 "Financial
Highlights" in the Prospectus and under the caption "Other Service Providers" in
the Statement of Additional Information of the Registration Statement.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
April 22, 1999
Boston, Massachusetts
<PAGE>
EXHIBIT (j)(4)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the use in this Post-Effective Amendment No. 55 to the
Registration Statement of Eaton Vance Special Investment Trust (1933 Act File
No. 2-27962) on behalf of Eaton Vance Growth & Income Fund of our report dated
February 5, 1999, relating to the Fund referenced above and of our report dated
February 5, 1999, relating to Growth & Income Portfolio, which reports are
included in the Annual Report to Shareholders for the year ended December 31,
1998, 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 "Financial
Highlights" in the Prospectus and under the caption "Other Service Providers" in
the Statement of Additional Information of the Registration Statement.
/s/ PricewaterhouseCoopers LLP
PRICEWATERHOUSECOOPERS LLP
April 22, 1999
Boston, Massachusetts
<PAGE>
EXHIBIT (j)(5)
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 55 to the
Registration Statement of Eaton Vance Special Investment Trust (1933 Act File
No. 2-27962) on behalf of Eaton Vance Institutional Emerging Markets Fund of our
report dated February 12, 1999, relating to Emerging Markets Portfolio 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 caption "Other
Service Providers" in the Statement of Additional Information of the
Registration Statement.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
April 22, 1999
Boston, Massachusetts
<PAGE>
EXHIBIT (j)(6)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the use in this Post-Effective Amendment No. 55 to the
Registration Statement of Eaton Vance Special Investment Trust (1933 Act File
No. 2-27962) on behalf of Eaton Vance Special Equities Fund of our report dated
February 5, 1999, relating to the Fund referenced above and of our report dated
February 5, 1999, relating to Special Investment Portfolio, which reports are
included in the Annual Report to Shareholders for the year ended December 31,
1998, 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 "Financial
Highlights" in the Prospectus and under the caption "Other Service Providers" in
the Statement of Additional Information of the Registration Statement.
/s/ PricewaterhouseCoopers LLP
PRICEWATERHOUSECOOPERS LLP
April 22, 1999
Boston, Massachusetts
<PAGE>
EXHIBIT (j)(7)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the use in this Post-Effective Amendment No. 55 to the
Registration Statement of Eaton Vance Special Investment Trust (1933 Act File
No. 2-27962) on behalf of Eaton Vance Utilities Fund of our report dated
February 5, 1999, relating to the Fund referenced above and of our report dated
February 5, 1999, relating to Utilities Portfolio, which reports are included in
the Annual Report to Shareholders for the year ended December 31, 1998, 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 "Financial
Highlights" in the Prospectus and under the caption "Other Service Providers" in
the Statement of Additional Information of the Registration Statement.
/s/ PricewaterhouseCoopers LLP
PRICEWATERHOUSECOOPERS LLP
April 22, 1999
Boston, Massachusetts
<PAGE>
EXHIBIT (j)(8)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the use in this Post-Effective Amendment No. 55 to the
Registration Statement of Eaton Vance Special Investment Trust (1933 Act File
No. 2-27962) on behalf of EV Traditional Emerging Growth Fund of our report
dated February 5, 1999, relating to such Fund, which report is included in the
Annual Report to Shareholders for the year ended December 31, 1998, 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 "Financial
Highlights" in the Prospectus and under the caption "Other Service Providers" in
the Statement of Additional Information of the Registration Statement.
/s/ PricewaterhouseCoopers LLP
PRICEWATERHOUSECOOPERS LLP
April 22, 1999
Boston, Massachusetts
[ARTICLE] 6
[SERIES]
[NUMBER] 014
[NAME] EATON VANCE BALANCED FUND - CLASS A
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1998
[PERIOD-END] DEC-31-1998
[INVESTMENTS-AT-COST] 282,393,927
[INVESTMENTS-AT-VALUE] 355,353,036
[RECEIVABLES] 207,543
[ASSETS-OTHER] 180
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 355,560,759
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 1,706,160
[TOTAL-LIABILITIES] 1,706,160
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 275,372,390
[SHARES-COMMON-STOCK] 33,199,411
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 340,840
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 5,182,260
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 72,959,109
[NET-ASSETS] 270,276,766
[DIVIDEND-INCOME] 4,082,039
[INTEREST-INCOME] 7,922,884
[OTHER-INCOME] (2,359,218)
[EXPENSES-NET] 1,708,161
[NET-INVESTMENT-INCOME] 7,937,544
[REALIZED-GAINS-CURRENT] 56,088,133
[APPREC-INCREASE-CURRENT] (20,974,299)
[NET-CHANGE-FROM-OPS] 43,051,378
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 6,508,416
[DISTRIBUTIONS-OF-GAINS] 42,983,323
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 1,343,770
[NUMBER-OF-SHARES-REDEEMED] 2,907,747
[SHARES-REINVESTED] 4,456,369
[NET-CHANGE-IN-ASSETS] 21,836,877
[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] 1,708,161
[AVERAGE-NET-ASSETS] 274,218,789
[PER-SHARE-NAV-BEGIN] 8.70
[PER-SHARE-NII] 0.226
[PER-SHARE-GAIN-APPREC] 0.901
[PER-SHARE-DIVIDEND] (0.220)
[PER-SHARE-DISTRIBUTIONS] (1.467)
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 8.14
[EXPENSE-RATIO] 0.98
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
[SERIES]
[NUMBER] 014
[NAME] EATON VANCE BALANCED FUND - CLASS B
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1998
[PERIOD-END] DEC-31-1998
[INVESTMENTS-AT-COST] 282,393,927
[INVESTMENTS-AT-VALUE] 355,353,036
[RECEIVABLES] 207,543
[ASSETS-OTHER] 180
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 355,560,759
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 1,706,160
[TOTAL-LIABILITIES] 1,706,160
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 275,372,390
[SHARES-COMMON-STOCK] 5,323,658
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 340,840
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 5,182,260
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 72,959,109
[NET-ASSETS] 72,835,536
[DIVIDEND-INCOME] 4,082,039
[INTEREST-INCOME] 7,922,884
[OTHER-INCOME] (2,359,218)
[EXPENSES-NET] 1,708,161
[NET-INVESTMENT-INCOME] 7,937,544
[REALIZED-GAINS-CURRENT] 56,088,133
[APPREC-INCREASE-CURRENT] (20,974,299)
[NET-CHANGE-FROM-OPS] 43,051,378
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 993,141
[DISTRIBUTIONS-OF-GAINS] 7,093,638
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 1,253,930
[NUMBER-OF-SHARES-REDEEMED] 815,682
[SHARES-REINVESTED] 535,537
[NET-CHANGE-IN-ASSETS] 13,626,520
[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] 1,708,161
[AVERAGE-NET-ASSETS] 67,193,843
[PER-SHARE-NAV-BEGIN] 13.68
[PER-SHARE-NII] 0.231
[PER-SHARE-GAIN-APPREC] 1.451
[PER-SHARE-DIVIDEND] (0.215)
[PER-SHARE-DISTRIBUTIONS] (1.467)
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 1.682
[EXPENSE-RATIO] 1.81
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
[SERIES]
[NUMBER] 014
[NAME] EATON VANCE BALANCED FUND - CLASS C
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1998
[PERIOD-END] DEC-31-1998
[INVESTMENTS-AT-COST] 282,393,927
[INVESTMENTS-AT-VALUE] 355,353,036
[RECEIVABLES] 207,543
[ASSETS-OTHER] 180
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 355,560,759
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 1,706,160
[TOTAL-LIABILITIES] 1,706,160
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 275,372,390
[SHARES-COMMON-STOCK] 815,945
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 340,840
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 5,182,260
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 72,959,109
[NET-ASSETS] 10,742,297
[DIVIDEND-INCOME] 4,082,039
[INTEREST-INCOME] 7,922,884
[OTHER-INCOME] (2,359,218)
[EXPENSES-NET] 1,708,161
[NET-INVESTMENT-INCOME] 7,937,544
[REALIZED-GAINS-CURRENT] 56,088,133
[APPREC-INCREASE-CURRENT] (20,974,299)
[NET-CHANGE-FROM-OPS] 43,051,378
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 137,056
[DISTRIBUTIONS-OF-GAINS] 1,058,761
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 399,045
[NUMBER-OF-SHARES-REDEEMED] 222,406
[SHARES-REINVESTED] 87,300
[NET-CHANGE-IN-ASSETS] 3,574,843
[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] 1,708,161
[AVERAGE-NET-ASSETS] 8,590,006
[PER-SHARE-NAV-BEGIN] 13.24
[PER-SHARE-NII] 0.216
[PER-SHARE-GAIN-APPREC] 1.401
[PER-SHARE-DIVIDEND] (0.220)
[PER-SHARE-DISTRIBUTIONS] (1.467)
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 13.17
[EXPENSE-RATIO] 1.85
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
[SERIES]
[NUMBER] 6
[NAME] EATON VANCE EMERGING MARKETS FUND - CLASS A
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1998
[PERIOD-END] DEC-31-1998
[INVESTMENTS-AT-COST] 7252
[INVESTMENTS-AT-VALUE] 7252
[RECEIVABLES] 122
[ASSETS-OTHER] 26
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 7400
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 270
[TOTAL-LIABILITIES] 270
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 10960
[SHARES-COMMON-STOCK] 380
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] (3)
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (3461)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] (366)
[NET-ASSETS] 3066
[DIVIDEND-INCOME] 170
[INTEREST-INCOME] 0
[OTHER-INCOME] (149)
[EXPENSES-NET] 192
[NET-INVESTMENT-INCOME] 21
[REALIZED-GAINS-CURRENT] (2936)
[APPREC-INCREASE-CURRENT] (1070)
[NET-CHANGE-FROM-OPS] (4110)
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 196
[NUMBER-OF-SHARES-REDEEMED] (233)
[SHARES-REINVESTED] 0
[NET-CHANGE-IN-ASSETS] (1944)
[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] 235
[AVERAGE-NET-ASSETS] 4112
[PER-SHARE-NAV-BEGIN] 11.97
[PER-SHARE-NII] (.146)
[PER-SHARE-GAIN-APPREC] (3.764)
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 8.06
[EXPENSE-RATIO] 3.25
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
[SERIES]
[NUMBER] 6
[NAME] EATON VANCE EMERGING MARKETS FUND - CLASS B
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1998
[PERIOD-END] DEC-31-1998
[INVESTMENTS-AT-COST] 7252
[INVESTMENTS-AT-VALUE] 7252
[RECEIVABLES] 122
[ASSETS-OTHER] 26
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 7400
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 270
[TOTAL-LIABILITIES] 270
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 10960
[SHARES-COMMON-STOCK] 509
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] (3)
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (3461)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] (366)
[NET-ASSETS] 4064
[DIVIDEND-INCOME] 170
[INTEREST-INCOME] 0
[OTHER-INCOME] (149)
[EXPENSES-NET] 192
[NET-INVESTMENT-INCOME] 21
[REALIZED-GAINS-CURRENT] (2936)
[APPREC-INCREASE-CURRENT] (1070)
[NET-CHANGE-FROM-OPS] (4110)
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 155
[NUMBER-OF-SHARES-REDEEMED] (408)
[SHARES-REINVESTED] 0
[NET-CHANGE-IN-ASSETS] (1944)
[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] 235
[AVERAGE-NET-ASSETS] 6483
[PER-SHARE-NAV-BEGIN] 11.91
[PER-SHARE-NII] (.236)
[PER-SHARE-GAIN-APPREC] (3.684)
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 7.99
[EXPENSE-RATIO] 3.70
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
[SERIES]
[NUMBER] 002
[NAME] EATON VANCE GREATER INDIA FUND - CLASS A
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1998
[PERIOD-END] DEC-31-1998
[INVESTMENTS-AT-COST] 42,720,467
[INVESTMENTS-AT-VALUE] 51,415,422
[RECEIVABLES] 69,126
[ASSETS-OTHER] 9,676
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 51,494,224
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 399,719
[TOTAL-LIABILITIES] 399,719
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 75,198,697
[SHARES-COMMON-STOCK] 1,389,589
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] (1,575,124)
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (31,224,023)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 8,694,955
[NET-ASSETS] 8,031,335
[DIVIDEND-INCOME] 1,112,834
[INTEREST-INCOME] 0
[OTHER-INCOME] (1,214,299)
[EXPENSES-NET] 1,062,406
[NET-INVESTMENT-INCOME] (1,163,871)
[REALIZED-GAINS-CURRENT] (12,408,787)
[APPREC-INCREASE-CURRENT] 7,546,895
[NET-CHANGE-FROM-OPS] (6,025,763)
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 416,410
[NUMBER-OF-SHARES-REDEEMED] 999,941
[SHARES-REINVESTED] 0
[NET-CHANGE-IN-ASSETS] (3,624,524)
[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] 1,062,406
[AVERAGE-NET-ASSETS] 10,096,896
[PER-SHARE-NAV-BEGIN] 6.34
[PER-SHARE-NII] (0.082)
[PER-SHARE-GAIN-APPREC] (0.478)
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 5.78
[EXPENSE-RATIO] 3.18
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
[SERIES]
[NUMBER] 002
[NAME] EATON VANCE GREATER INDIA FUND - CLASS B
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1998
[PERIOD-END] DEC-31-1998
[INVESTMENTS-AT-COST] 42,720,467
[INVESTMENTS-AT-VALUE] 51,415,422
[RECEIVABLES] 69,126
[ASSETS-OTHER] 9,676
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 51,494,224
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 399,719
[TOTAL-LIABILITIES] 399,719
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 75,198,697
[SHARES-COMMON-STOCK] 7,607,077
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] (1,575,124)
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (31,224,023)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 8,694,955
[NET-ASSETS] 43,063,170
[DIVIDEND-INCOME] 1,112,834
[INTEREST-INCOME] 0
[OTHER-INCOME] (1,214,299)
[EXPENSES-NET] 1,062,406
[NET-INVESTMENT-INCOME] (1,163,871)
[REALIZED-GAINS-CURRENT] (12,408,787)
[APPREC-INCREASE-CURRENT] 7,546,895
[NET-CHANGE-FROM-OPS] (6,025,763)
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 557,166
[NUMBER-OF-SHARES-REDEEMED] 3,998,326
[SHARES-REINVESTED] 0
[NET-CHANGE-IN-ASSETS] (20,596,342)
[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] 1,062,406
[AVERAGE-NET-ASSETS] 54,772,275
[PER-SHARE-NAV-BEGIN] 6.23
[PER-SHARE-NII] (0.110)
[PER-SHARE-GAIN-APPREC] (0.460)
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 5.66
[EXPENSE-RATIO] 3.69
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
[SERIES]
[NUMBER] 008
[NAME] EATON VANCE GROWTH & INCOME FUND - CLASS A
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1998
[PERIOD-END] DEC-31-1998
[INVESTMENTS-AT-COST] 116,183,967
[INVESTMENTS-AT-VALUE] 171,116,736
[RECEIVABLES] 136,455
[ASSETS-OTHER] 14,175
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 171,267,366
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 229,972
[TOTAL-LIABILITIES] 229,972
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 113,887,309
[SHARES-COMMON-STOCK] 8,844,813
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] (1,342)
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 2,218,658
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 54,932,769
[NET-ASSETS] 141,984,960
[DIVIDEND-INCOME] 2,145,440
[INTEREST-INCOME] 426,706
[OTHER-INCOME] (1,098,513)
[EXPENSES-NET] 741,887
[NET-INVESTMENT-INCOME] 731,746
[REALIZED-GAINS-CURRENT] 8,344,501
[APPREC-INCREASE-CURRENT] 21,695,115
[NET-CHANGE-FROM-OPS] 30,771,362
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 798,226
[DISTRIBUTIONS-OF-GAINS] 5,044,374
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 334,710
[NUMBER-OF-SHARES-REDEEMED] 836,835
[SHARES-REINVESTED] 295,099
[NET-CHANGE-IN-ASSETS] (2,957,389)
[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] 741,887
[AVERAGE-NET-ASSETS] 131,300,905
[PER-SHARE-NAV-BEGIN] 13.76
[PER-SHARE-NII] 0.088
[PER-SHARE-GAIN-APPREC] 2.879
[PER-SHARE-DIVIDEND] (0.090)
[PER-SHARE-DISTRIBUTIONS] (0.587)
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 16.05
[EXPENSE-RATIO] 1.07
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
[SERIES]
[NUMBER] 008
[NAME] EATON VANCE GROWTH & INCOME FUND - CLASS B
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1998
[PERIOD-END] DEC-31-1998
[INVESTMENTS-AT-COST] 116,183,967
[INVESTMENTS-AT-VALUE] 171,116,736
[RECEIVABLES] 136,455
[ASSETS-OTHER] 14,175
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 171,267,366
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 229,972
[TOTAL-LIABILITIES] 229,972
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 113,887,309
[SHARES-COMMON-STOCK] 1,484,377
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] (1,342)
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 2,218,658
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 54,932,769
[NET-ASSETS] 171,037,394
[DIVIDEND-INCOME] 2,145,440
[INTEREST-INCOME] 426,706
[OTHER-INCOME] (1,098,513)
[EXPENSES-NET] 741,887
[NET-INVESTMENT-INCOME] 731,746
[REALIZED-GAINS-CURRENT] 8,344,501
[APPREC-INCREASE-CURRENT] 21,695,115
[NET-CHANGE-FROM-OPS] 30,771,362
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 11,971
[DISTRIBUTIONS-OF-GAINS] 840,876
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 576,032
[NUMBER-OF-SHARES-REDEEMED] 323,607
[SHARES-REINVESTED] 43,175
[NET-CHANGE-IN-ASSETS] 5,087,143
[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] 741,887
[AVERAGE-NET-ASSETS] 22,141,879
[PER-SHARE-NAV-BEGIN] 15.40
[PER-SHARE-NII] (0.031)
[PER-SHARE-GAIN-APPREC] 3.218
[PER-SHARE-DIVIDEND] (0.010)
[PER-SHARE-DISTRIBUTIONS] (0.587)
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 17.99
[EXPENSE-RATIO] 1.90
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
[SERIES]
[NUMBER] 008
[NAME] EATON VANCE GROWTH & INCOME FUND - CLASS C
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1998
[PERIOD-END] DEC-31-1998
[INVESTMENTS-AT-COST] 116,183,967
[INVESTMENTS-AT-VALUE] 171,116,736
[RECEIVABLES] 136,455
[ASSETS-OTHER] 14,175
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 171,267,366
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 229,972
[TOTAL-LIABILITIES] 229,972
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 113,887,309
[SHARES-COMMON-STOCK] 155,172
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] (1,342)
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 2,218,658
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 54,932,769
[NET-ASSETS] 171,037,394
[DIVIDEND-INCOME] 2,145,440
[INTEREST-INCOME] 426,706
[OTHER-INCOME] (1,098,513)
[EXPENSES-NET] 741,887
[NET-INVESTMENT-INCOME] 731,746
[REALIZED-GAINS-CURRENT] 8,344,501
[APPREC-INCREASE-CURRENT] 21,695,115
[NET-CHANGE-FROM-OPS] 30,771,362
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 540
[DISTRIBUTIONS-OF-GAINS] 86,652
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 214,678
[NUMBER-OF-SHARES-REDEEMED] 172,306
[SHARES-REINVESTED] 5,511
[NET-CHANGE-IN-ASSETS] 1,959,241
[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] 741,887
[AVERAGE-NET-ASSETS] 1,832,270
[PER-SHARE-NAV-BEGIN] 13.02
[PER-SHARE-NII] (0.033)
[PER-SHARE-GAIN-APPREC] 2.715
[PER-SHARE-DIVIDEND] (0.005)
[PER-SHARE-DISTRIBUTIONS] (0.587)
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 15.11
[EXPENSE-RATIO] 1.94
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
[SERIES]
[NUMBER] 001
[NAME] EATON VANCE SPECIAL EQUIITES FUND - CLASS A
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1998
[PERIOD-END] DEC-31-1998
[INVESTMENTS-AT-COST] 58,867,260
[INVESTMENTS-AT-VALUE] 78,750,301
[RECEIVABLES] 47,855
[ASSETS-OTHER] 13,754
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 78,811,910
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 261,520
[TOTAL-LIABILITIES] 261,520
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 57,053,792
[SHARES-COMMON-STOCK] 9,848,682
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 1,613,557
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 19,883,041
[NET-ASSETS] 73,895,717
[DIVIDEND-INCOME] 187,592
[INTEREST-INCOME] 194,778
[OTHER-INCOME] (580,885)
[EXPENSES-NET] 401,829
[NET-INVESTMENT-INCOME] (600,344)
[REALIZED-GAINS-CURRENT] 8,602,335
[APPREC-INCREASE-CURRENT] 3,223,462
[NET-CHANGE-FROM-OPS] 11,225,453
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 5,187,831
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 256,223
[NUMBER-OF-SHARES-REDEEMED] 1,529,766
[SHARES-REINVESTED] 653,229
[NET-CHANGE-IN-ASSETS] (4,715,446)
[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] 401,829
[AVERAGE-NET-ASSETS] 71,686,139
[PER-SHARE-NAV-BEGIN] 6.99
[PER-SHARE-NII] (0.55)
[PER-SHARE-GAIN-APPREC] 1.126
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] (0.561)
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 7.50
[EXPENSE-RATIO] 1.23
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
[SERIES]
[NUMBER] 001
[NAME] EATON VANCE SPECIAL EQUITIES FUND - CLASS B
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1998
[PERIOD-END] DEC-31-1998
[INVESTMENTS-AT-COST] 58,867,260
[INVESTMENTS-AT-VALUE] 78,750,301
[RECEIVABLES] 47,855
[ASSETS-OTHER] 13,754
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 78,811,910
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 261,520
[TOTAL-LIABILITIES] 261,520
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 57,053,792
[SHARES-COMMON-STOCK] 266,287
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 1,613,557
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 19,883,041
[NET-ASSETS] 3,945,880
[DIVIDEND-INCOME] 187,592
[INTEREST-INCOME] 194,778
[OTHER-INCOME] (580,885)
[EXPENSES-NET] 401,829
[NET-INVESTMENT-INCOME] (600,344)
[REALIZED-GAINS-CURRENT] 8,602,335
[APPREC-INCREASE-CURRENT] 3,223,462
[NET-CHANGE-FROM-OPS] 11,225,453
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 142,469
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 120,423
[NUMBER-OF-SHARES-REDEEMED] 126,187
[SHARES-REINVESTED] 9,385
[NET-CHANGE-IN-ASSETS] 65,534
[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] 401,829
[AVERAGE-NET-ASSETS] 3,445,809
[PER-SHARE-NAV-BEGIN] 13.32
[PER-SHARE-NII] (0.162)
[PER-SHARE-GAIN-APPREC] 2.223
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] (0.561)
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 14.82
[EXPENSE-RATIO] 2.09
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
[SERIES]
[NUMBER] 001
[NAME] EATON VANCE SPECIAL EQUITIES FUND - CLASS C
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1998
[PERIOD-END] DEC-31-1998
[INVESTMENTS-AT-COST] 58,867,260
[INVESTMENTS-AT-VALUE] 78,750,301
[RECEIVABLES] 47,855
[ASSETS-OTHER] 13,754
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 78,811,910
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 261,520
[TOTAL-LIABILITIES] 261,520
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 57,053,792
[SHARES-COMMON-STOCK] 64,465
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 1,613,557
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 19,883,041
[NET-ASSETS] 708,793
[DIVIDEND-INCOME] 187,592
[INTEREST-INCOME] 194,778
[OTHER-INCOME] (580,885)
[EXPENSES-NET] 401,829
[NET-INVESTMENT-INCOME] (600,344)
[REALIZED-GAINS-CURRENT] 8,602,335
[APPREC-INCREASE-CURRENT] 3,223,462
[NET-CHANGE-FROM-OPS] 11,225,453
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 33,753
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 172,684
[NUMBER-OF-SHARES-REDEEMED] 252,164
[SHARES-REINVESTED] 3,262
[NET-CHANGE-IN-ASSETS] (705,064)
[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] 401,829
[AVERAGE-NET-ASSETS] 1,251,349
[PER-SHARE-NAV-BEGIN] 9.96
[PER-SHARE-NII] (0.241)
[PER-SHARE-GAIN-APPREC] 1.842
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] (0.561)
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 11.00
[EXPENSE-RATIO] 2.11
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
[SERIES]
[NUMBER] 011
[NAME] EATON VANCE UTILITIES FUND - CLASS A
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1998
[PERIOD-END] DEC-31-1998
[INVESTMENTS-AT-COST] 317,490,165
[INVESTMENTS-AT-VALUE] 459,616,060
[RECEIVABLES] 36,875
[ASSETS-OTHER] 7,906
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 459,660,841
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 789,221
[TOTAL-LIABILITIES] 789,221
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 260,418,634
[SHARES-COMMON-STOCK] 40,293,378
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 52,951,704
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 3,375,387
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 142,125,895
[NET-ASSETS] 409,178,428
[DIVIDEND-INCOME] 13,962,407
[INTEREST-INCOME] 3,278,743
[OTHER-INCOME] (3,783,490)
[EXPENSES-NET] 2,012,328
[NET-INVESTMENT-INCOME] 11,445,332
[REALIZED-GAINS-CURRENT] 5,496,806
[APPREC-INCREASE-CURRENT] 75,228,988
[NET-CHANGE-FROM-OPS] 92,171,126
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 9,905,578
[DISTRIBUTIONS-OF-GAINS] 1,582,078
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 513,278
[NUMBER-OF-SHARES-REDEEMED] 5,003,117
[SHARES-REINVESTED] 961,346
[NET-CHANGE-IN-ASSETS] (32,199,473)
[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] 2,012,328
[AVERAGE-NET-ASSETS] 382,624,357
[PER-SHARE-NAV-BEGIN] 8.45
[PER-SHARE-NII] 0.251
[PER-SHARE-GAIN-APPREC] 1.721
[PER-SHARE-DIVIDEND] (0.235)
[PER-SHARE-DISTRIBUTIONS] (0.037)
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 10.15
[EXPENSE-RATIO] 1.27
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
[SERIES]
[NUMBER] 011
[NAME] EATON VANCE UTILITIES FUND - CLASS B
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1998
[PERIOD-END] DEC-31-1998
[INVESTMENTS-AT-COST] 317,490,165
[INVESTMENTS-AT-VALUE] 459,616,060
[RECEIVABLES] 36,875
[ASSETS-OTHER] 7,906
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 459,660,841
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 789,221
[TOTAL-LIABILITIES] 789,221
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 260,418,634
[SHARES-COMMON-STOCK] 3,958,288
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 52,951,704
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 3,375,387
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 142,125,895
[NET-ASSETS] 45,957,604
[DIVIDEND-INCOME] 13,962,407
[INTEREST-INCOME] 3,278,743
[OTHER-INCOME] (504,747)
[EXPENSES-NET] 2,012,328
[NET-INVESTMENT-INCOME] 11,445,332
[REALIZED-GAINS-CURRENT] 5,496,806
[APPREC-INCREASE-CURRENT] 75,228,988
[NET-CHANGE-FROM-OPS] 92,171,126
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 845,623
[DISTRIBUTIONS-OF-GAINS] 157,576
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 354,812
[NUMBER-OF-SHARES-REDEEMED] (839,996)
[SHARES-REINVESTED] 78,426
[NET-CHANGE-IN-ASSETS] (4,272,767)
[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] 2,012,328
[AVERAGE-NET-ASSETS] 43,273,656
[PER-SHARE-NAV-BEGIN] 9.67
[PER-SHARE-NII] 0.209
[PER-SHARE-GAIN-APPREC] 1.970
[PER-SHARE-DIVIDEND] (0.202)
[PER-SHARE-DISTRIBUTIONS] (0.037)
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 11.61
[EXPENSE-RATIO] 2.01
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
[SERIES]
[NUMBER] 011
[NAME] EATON VANCE UTILITIES FUND - CLASS C
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1998
[PERIOD-END] DEC-31-1998
[INVESTMENTS-AT-COST] 317,490,165
[INVESTMENTS-AT-VALUE] 459,616,060
[RECEIVABLES] 36,875
[ASSETS-OTHER] 7,906
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 459,660,841
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 789,221
[TOTAL-LIABILITIES] 789,221
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 260,418,634
[SHARES-COMMON-STOCK] 304,462
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 52,951,704
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 3,375,387
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 142,125,895
[NET-ASSETS] 3,735,588
[DIVIDEND-INCOME] 13,962,407
[INTEREST-INCOME] 3,278,743
[OTHER-INCOME] (3,783,490)
[EXPENSES-NET] 2,012,328
[NET-INVESTMENT-INCOME] 11,445,332
[REALIZED-GAINS-CURRENT] 5,496,806
[APPREC-INCREASE-CURRENT] 75,228,988
[NET-CHANGE-FROM-OPS] 92,171,126
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 61,649
[DISTRIBUTIONS-OF-GAINS] 12,962
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 54,891
[NUMBER-OF-SHARES-REDEEMED] 121,642
[SHARES-REINVESTED] 5,721
[NET-CHANGE-IN-ASSETS] 3,644,851
[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] 2,012,328
[AVERAGE-NET-ASSETS] 3,644,851
[PER-SHARE-NAV-BEGIN] 10.19
[PER-SHARE-NII] 0.220
[PER-SHARE-GAIN-APPREC] 2.082
[PER-SHARE-DIVIDEND] (0.185)
[PER-SHARE-DISTRIBUTIONS] (0.037)
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 12.27
[EXPENSE-RATIO] 2.05
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
[SERIES]
[NUMBER] 017
[NAME] EV TRADITIONAL EMERGING GROWTH FUND
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1998
[PERIOD-END] DEC-31-1998
[INVESTMENTS-AT-COST] 245,380
[INVESTMENTS-AT-VALUE] 326,699
[RECEIVABLES] 32,129
[ASSETS-OTHER] 13,384
[OTHER-ITEMS-ASSETS] 848
[TOTAL-ASSETS] 373,060
[PAYABLE-FOR-SECURITIES] 2,966
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 1,647
[TOTAL-LIABILITIES] 4,613
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 302,820
[SHARES-COMMON-STOCK] 29,607
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (15,692)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 81,319
[NET-ASSETS] 368,447
[DIVIDEND-INCOME] 815
[INTEREST-INCOME] 0
[OTHER-INCOME] 0
[EXPENSES-NET] 0
[NET-INVESTMENT-INCOME] 815
[REALIZED-GAINS-CURRENT] (13,361)
[APPREC-INCREASE-CURRENT] 61,105
[NET-CHANGE-FROM-OPS] 48,559
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 887
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 1,831
[NUMBER-OF-SHARES-REDEEMED] 558
[SHARES-REINVESTED] 22
[NET-CHANGE-IN-ASSETS] 61,836
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 2,439
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 32,306
[AVERAGE-NET-ASSETS] 325,407
[PER-SHARE-NAV-BEGIN] 10.83
[PER-SHARE-NII] 0.028
[PER-SHARE-GAIN-APPREC] 1.612
[PER-SHARE-DIVIDEND] (0.030)
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 12.44
[EXPENSE-RATIO] 0.13
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
[SERIES]
[NUMBER] 156
[NAME] BALANCED PORTFOLIO
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1998
[PERIOD-END] DEC-31-1998
[INVESTMENTS-AT-COST] 269,741,581
[INVESTMENTS-AT-VALUE] 352,700,839
[RECEIVABLES] 2,286,616
[ASSETS-OTHER] 0
[OTHER-ITEMS-ASSETS] 392,256
[TOTAL-ASSETS] 355,379,711
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 26,653
[TOTAL-LIABILITIES] 26,653
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 282,393,800
[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] 72,959,258
[NET-ASSETS] 355,353,058
[DIVIDEND-INCOME] 4,082,039
[INTEREST-INCOME] 7,922,884
[OTHER-INCOME] 0
[EXPENSES-NET] 2,359,218
[NET-INVESTMENT-INCOME] 9,645,705
[REALIZED-GAINS-CURRENT] 56,088,137
[APPREC-INCREASE-CURRENT] (20,974,301)
[NET-CHANGE-FROM-OPS] 44,759,541
[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] 25,645,816
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 2,132,133
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 2,359,218
[AVERAGE-NET-ASSETS] 350,554,789
[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] 0.67
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
[SERIES]
[NUMBER] 154
[NAME] EMERGING MARKETS PORTFOLIO
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1998
[PERIOD-END] DEC-31-1998
[INVESTMENTS-AT-COST] 7870
[INVESTMENTS-AT-VALUE] 7870
[RECEIVABLES] 14
[ASSETS-OTHER] 385
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 8270
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 393
[TOTAL-LIABILITIES] 393
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 7876
[SHARES-COMMON-STOCK] 8363
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] (1141)
[NET-ASSETS] 7876
[DIVIDEND-INCOME] 216
[INTEREST-INCOME] 0
[OTHER-INCOME] 0
[EXPENSES-NET] 171
[NET-INVESTMENT-INCOME] 45
[REALIZED-GAINS-CURRENT] (4784)
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] (4739)
[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] (10677)
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 91
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 227
[AVERAGE-NET-ASSETS] 12129
[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] 1.87
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
[SERIES]
[NUMBER] 158
[NAME] GROWTH & INCOME PORTFOLIO
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1998
[PERIOD-END] DEC-31-1998
[INVESTMENTS-AT-COST] 117,111,200
[INVESTMENTS-AT-VALUE] 172,043,970
[RECEIVABLES] 1,394,096
[ASSETS-OTHER] 1,946
[OTHER-ITEMS-ASSETS] 3,689
[TOTAL-ASSETS] 173,443,701
[PAYABLE-FOR-SECURITIES] 2,311,726
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 15,215
[TOTAL-LIABILITIES] 2,326,941
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 116,183,990
[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] 54,932,770
[NET-ASSETS] 171,116,760
[DIVIDEND-INCOME] 2,145,440
[INTEREST-INCOME] 426,706
[OTHER-INCOME] 14,252
[EXPENSES-NET] 1,112,765
[NET-INVESTMENT-INCOME] 1,473,633
[REALIZED-GAINS-CURRENT] 8,344,503
[APPREC-INCREASE-CURRENT] 21,695,116
[NET-CHANGE-FROM-OPS] 31,513,252
[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] 27,768,925
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 969,883
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 1,112,765
[AVERAGE-NET-ASSETS] 155,381,928
[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] 0.72
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
[SERIES]
[NUMBER] 155
[NAME] SOUTH ASIA PORTFOLIO
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1998
[PERIOD-END] DEC-31-1998
[INVESTMENTS-AT-COST] 35,123
[INVESTMENTS-AT-VALUE] 44,071
[RECEIVABLES] 3,994
[ASSETS-OTHER] 5
[OTHER-ITEMS-ASSETS] 4,519
[TOTAL-ASSETS] 53,706
[PAYABLE-FOR-SECURITIES] 767
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 206
[TOTAL-LIABILITIES] 973
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 0
[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] 8967
[NET-ASSETS] 52744
[DIVIDEND-INCOME] 1141
[INTEREST-INCOME] 0
[OTHER-INCOME] 0
[EXPENSES-NET] 1314
[NET-INVESTMENT-INCOME] (104)
[REALIZED-GAINS-CURRENT] (12728)
[APPREC-INCREASE-CURRENT] 7726
[NET-CHANGE-FROM-OPS] (5105)
[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] (5105)
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 501
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 1314
[AVERAGE-NET-ASSETS] 66690
[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] 1.97
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
[SERIES]
[NUMBER] 157
[NAME] SPECIAL INVESTMENT PORTFOLIO
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1998
[PERIOD-END] DEC-31-1998
[INVESTMENTS-AT-COST] 58,640,469
[INVESTMENTS-AT-VALUE] 78,523,513
[RECEIVABLES] 864,784
[ASSETS-OTHER] 105,545
[OTHER-ITEMS-ASSETS] 1,855
[TOTAL-ASSETS] 79,495,697
[PAYABLE-FOR-SECURITIES] 729,915
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 15,457
[TOTAL-LIABILITIES] 745,372
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 58,867,281
[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] 19,883,044
[NET-ASSETS] 78,750,325
[DIVIDEND-INCOME] 187,592
[INTEREST-INCOME] 194,778
[OTHER-INCOME] 0
[EXPENSES-NET] 580,885
[NET-INVESTMENT-INCOME] (198,515)
[REALIZED-GAINS-CURRENT] 8,602,338
[APPREC-INCREASE-CURRENT] 3,223,464
[NET-CHANGE-FROM-OPS] 11,627,287
[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] 781,236
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 477,657
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 580,885
[AVERAGE-NET-ASSETS] 76,425,119
[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] 0.76
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
[SERIES]
[NUMBER] 159
[NAME] UTILITIES PORTFOLIO
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1998
[PERIOD-END] DEC-31-1998
[INVESTMENTS-AT-COST] 313,215,232
[INVESTMENTS-AT-VALUE] 455,339,610
[RECEIVABLES] 4,300,255
[ASSETS-OTHER] 0
[OTHER-ITEMS-ASSETS] 11,318
[TOTAL-ASSETS] 459,651,183
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 35,098
[TOTAL-LIABILITIES] 35,098
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 317,490,185
[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] 142,125,900
[NET-ASSETS] 459,616,085
[DIVIDEND-INCOME] 13,962,407
[INTEREST-INCOME] 3,278,743
[OTHER-INCOME] 0
[EXPENSES-NET] 3,783,490
[NET-INVESTMENT-INCOME] 13,457,660
[REALIZED-GAINS-CURRENT] 5,496,806
[APPREC-INCREASE-CURRENT] 75,228,993
[NET-CHANGE-FROM-OPS] 94,183,459
[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] 46,207,186
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 2,793,965
[INTEREST-EXPENSE] 673,374
[GROSS-EXPENSE] 3,783,490
[AVERAGE-NET-ASSETS] 430,166,800
[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] 0.88
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
