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{LOGO} Investing
EATON VANCE for the
Mutual Funds 21st
Century
Eaton Vance Institutional
Short Term Treasury Fund
Prospectus Dated
January 4, 1999
A Fund for investors seeking current income and liquidity
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 Summary 2 Purchasing Shares 5
Investment Objective, Redeeming Shares 5
Policies and Risks 3 Shareholder Account
Management and Organization 3 Features 6
Shareholder Servicing 4 Distributions and Taxes 6
Valuing Shares 4
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This prospectus contains important information about the Fund and the services
available to shareholders. Please save it for reference.
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Fund Summary
Investment Objective and Strategies. The purpose of the Fund is to seek current
income and liquidity. The Fund is a no-load non-diversified mutual fund which
continuously offers its shares of beneficial interest to institutional
investors.
The Fund invests exclusively in U.S. Treasury obligations (bills, notes and
bonds) with a remaining maturity of up to five years and repurchase agreements
collateralized exclusively by U.S. Treasury obligations. The Fund will maintain
a dollar weighted average portfolio maturity of not more than one year.
Risk Factors. The net asset value of the Fund's shares will change in response
to interest rate fluctuations. When interest rates decline, the value of a
portfolio primarily invested in debt securities can be expected to rise.
Conversely, when interest rates rise, the value of a portfolio primarily
invested in debt securities can be expected to decline. However, a shorter
maturity is generally associated with a lower level of market value volatility.
Accordingly, the Investment Adviser expects that the net asset value of the
Fund's shares normally will fluctuate significantly less than that of a
longer-term bond fund since the dollar weighted average portfolio maturity of
the Fund will not exceed one year.
The Fund is a "non-diversified" investment company, and under applicable federal
income tax rules, with respect to 50% of its total assets, the Fund will be able
to invest more than 5%, but no greater than 25%, of its total assets in
repurchase agreements with any one counterparty. Because the Fund may engage in
repurchase agreement transactions with a limited number of counterparties, the
Fund is more likely than a diversified fund to lose value as a result of an
adverse corporate, economic, regulatory or other occurrence affecting a
counterparty.
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.
Fees and Expenses of the Fund. These tables describe the fees and expenses that
you may pay if you buy and hold Fund shares.
Shareholder Fees (fees paid directly fromyour investment)
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Maximum Sales Charge (as a percentage
of offering price) None
Sales Charge Imposed on Reinvested
Distributions None
Exchange Fee None
Annual Fund Operating Expenses (expenses that are deducted from Fund assets)
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Management Fees 0.35%
Other Expenses (see note below) 0.25%*
Total Annual Fund Operating Expenses 0.60%*
*Eaton Vance has agreed to pay all ordinary operating expenses of the Fund
(excluding service fees) from its management fees. Total Fund expenses generally
will not exceed .60% of average daily net assets. Other Expenses includes a
service fee of 0.25%
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
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$61 $192
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Investment Objective, Policies and Risks
The Fund's investment objective is to seek current income and liquidity. The
Fund currently seeks to meet its investment objective by investing exclusively
in U.S. Treasury obligations (bills, notes and bonds) with a remaining maturity
of up to five years and repurchase agreements collateralized by U.S. Treasury
obligations.
The Fund invests exclusively in U.S. Treasury obligations with a remaining
maturity of up to five years. U.S. Treasury obligations include the following
(which differ in their interest rates, initial maturities and times of
issuance): U.S. Treasury bills (maturities of one year or less), U.S. Treasury
notes (maturities of one to ten years) and U.S. Treasury bonds (generally
maturities of greater than ten years). U.S. Treasury bills, notes and bonds, are
supported by the full faith and credit of the United States.
The Fund will maintain a dollar weighted average portfolio maturity of not more
than one year. In measuring the dollar weighted average portfolio maturity of
the Fund, repurchase agreements will have a maturity equal to their term rather
than the remaining maturities of underlying collateral.
The Fund may enter into repurchase agreements collateralized exclusively by U.S.
Treasury obligations involving any or all of its assets with banks and
broker-dealers determined to be creditworthy by the Investment Adviser. Under a
repurchase agreement the Fund buys a security at one price and simultaneously
promises to sell that same security back to the seller at a higher price for
settlement at a later date. The Fund'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. The repurchase
date is usually overnight, but may be within seven days of the original purchase
date. In the event of the bankruptcy of the counterparty or a third party
custodian, the Fund might experience delays in recovering its cash or experience
a loss.
The Fund has adopted certain fundamental investment restrictions and policies
which are enumerated in detail in the Statement of Additional Information and
which may not be changed unless authorized by a shareholder vote. Except for
such enumerated restrictions and policies, the investment objective and policies
of the Fund are not fundamental policies and accordingly may be changed by the
Trustees without obtaining the approval of the Fund's shareholders. The
Trustees, however, intend to submit any material change in the investment
objective to shareholders for their approval.
Like most mutual funds, the Fund relys 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 issuer's of
securities held by the Fund.
Management and Organization
Management. The Fund's manager is Eaton Vance Management ("Eaton Vance"), which
is located at 24 Federal Street, Boston, Massachusetts 02110. Eaton Vance has
been managing assets since 1924 and managing mutual funds since 1931. Eaton
Vance and its subsidiaries currently manage over $30 billion on behalf of mutual
funds, institutional clients and individuals.
Eaton Vance manages the investments of the Fund and provides related office
facilities, administrative services and personnel. Eaton Vance also provides
administrative services and pays all ordinary operating expenses of the Fund
(except service and management fees). Under its management contract with the
Fund, Eaton Vance receives an annual management fee equal to 0.35% of the
average daily net assets of the Fund.
Michael B. Terry is the portfolio manager of the Fund (since inception). Mr.
Terry also manages other Eaton Vance portfolios, has been an employee of Eaton
Vance for at least 5 years, and is a Vice President of Eaton Vance and Eaton
Vance's subsidiary Boston Management and Research ("BMR").
Mr. Terry was a portfolio manager of a mutual fund with substantially the same
investment objective, policies and restrictions which was sponsored by Eaton
Vance from February, 1991 to December, 1998. The average annual total return of
that fund for the one year, five year and life of fund periods ended December
31, 1997 was as follows: 5.00%, 4.46% and 4.39%.
3
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The following chart illustrates the total return of such other fund. The Fund's
return will differ
4.9% 3.2% 2.4% 3.5% 6.8% 4.7% 5.0%
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1991 1992 1993 1994 1995 1996 1997
These returns are for each calendar year through December 31, 1997. The Fund's
highest total return for a quarter was 2.00% for the quarter ended March 31,
1995, and its lowest return for a quarter was 0.52% for the quarter ended
December 31, 1993. The 1998 total return through the end of September 30, 1998)
was 1.48%.
The foregoing information is provided to illustrate past performance of Mr.
Terry in managing a portfolio similar to the Fund. Of course, past performance
is not indicative of future performance and investment returns will fluctuate
reflecting market conditions and changes in portfolio securities.
Eaton Vance and the Fund have adopted Codes of Ethics governing personal
securities transactions. Under the Codes, Eaton Vance employees may purchase and
sell securities (including securities held by the Fund) subject to certain
pre-clearance and 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).
Shareholder Servicing
Fund assets bear a service fee for personal and/or account services paid to the
Principal Underwriter not exceeding .25% of average daily net assets annually.
The Principal Underwriter may pay up to the entire amount of the service fee to
investment dealers and their employees, or to employees of the Principal
Underwriter for providing services to the Fund or its shareholders. Service fee
payments from the Principal Underwriter to investment dealers and others will be
made on new accounts only if the Principal Underwriter has previously authorized
in writing such payments for identified accounts.
Valuing Shares
The Fund values its shares twice each day only when the New York Stock Exchange
is open for trading (typically Monday through Friday), at noon and 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. Net asset value is computed by dividing the value of the Fund's total
assets, less its liabilities, by the number of shares outstanding. Debt
securities will normally be valued on the basis of market valuations provided by
a pricing service. Repurchase agreements will be valued at cost plus accrued
interest. The net asset value so determined is effective for orders received by
the principal underwriter prior to the next price determination. It is each
investment dealer's responsibility to transmit orders promptly to the principal
underwriter.
4
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Purchasing Shares
No commissions or redemption fees are charged on Fund purchases or redemptions.
The Fund provides shareholders ease of investment and redemption by allowing
same day wire purchases and redemptions.
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. Your initial investment must be at least $1,000,000. To
make an initial investment by wire, you must first telephone the Fund Order
Department at 800-225-6265 (extension 3) 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 (see back cover for address). 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:
ABA #011001438
Federal Reserve Bank of Boston
A/C Investors Bank & Trust Company
Further Credit Eaton Vance Institutional Short Term Treasury Fund - Fund
#796570802
A/C # [Insert your account number - see below]
Transactions in the U.S. Treasury obligations in which the Fund invests require
immediate settlement in Federal Funds. 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.
The Fund is currently available only to corporations, banks and other
institutional investors that do not constitute personal holding companies for
federal income tax purposes. If you purchase shares through an investment
dealer, 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.
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 request may be made by letter or
telephone to the Fund Order Department at 800-225-6265
(extension 3). You may be required to pay any costs of such
transaction; however, no such costs are currently charged.
The Fund may suspend or terminate the 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, you receive the net asset value per share next computed
after the redemption request is received. Proceeds of redemption requests
received before noon on any business day will be wired that same day, if
requested. Redemption requests received between noon and 4:00 p.m. on any
business day will be processed at 4:00 p.m. and the proceeds will be wired on
the next business day.
If the Fund determines that it may be treated as a personal holding company for
federal income tax purposes at any time, it may involuntarily redeem all
accounts it determines is necessary as soon as practicable.
5
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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.
Telephone Transactions. The transfer agent and the principal underwriter have
procedures in place (such as verifying personal account information) to
authenticate telephone instructions. 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 such transactions. Telephone instructions are tape recorded.
Distributions and Taxes
The Fund pays dividends and capital gains annually, normally in December. The
Fund's distributions will not be eligible for the corporate dividends-received
deduction. Under current law, the Fund intends on its tax return to treat as a
distribution of investment company taxable income and net capital gain the
portion of redemption proceeds paid to redeeming shareholders that represents
the redeeming shareholders' portion of the Fund's undistributed investment
company taxable income and net capital gain. This practice, which involves the
use of equalization accounting, will have the effect of reducing the amount of
income and gains that the Fund is required to distribute as dividends to
shareholders in order for the Fund to avoid federal income tax and excise tax.
This practice may also reduce the amount of distributions required to be made to
nonredeeming shareholders and defer the recognition of taxable income by such
shareholders. However, since the amount of any undistributed income will be
reflected in the value of the Fund's shares, the total return on a shareholder's
investment will not be reduced as a result of the Fund's distribution policy.
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 (if
any) will be taxable to shareholders as if received on December 31 of the prior
year. Shareholders should consult with their tax advisers concerning special tax
rules, such as Section 1258 of the Internal Revenue Code of 1986, as amended,
that may apply to their transactions in Fund shares.
State, Local and Foreign Taxes. Distributions of the Fund which are derived from
interest on obligations of the U.S. Government will be exempt from personal
and/or corporate income taxes in most states. Repurchase agreement income,
however, is not exempt. The Fund will inform shareholders of the proportion of
its distributions which are derived from interest on such obligations.
Shareholders should consult their tax advisers concerning the applicability of
state, local, or other taxes to an investment in the Fund.
6
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{LOGO} Investing
EATON VANCE for the
Mutual Funds 21st
Century
More Information
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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
report by contacting:
Eaton Vance Distributors, Inc.
24 Federal Street
Boston, MA 02110
1-800-225-6265
website: www.eatonvance.com
You will find and may copy information about the Funds 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:
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First Data Investor Services Group
P.O. Box 5123
Westborough, MA 01581-5123
1-800-262-1122
SEC File No. 811-1545 ISTTP
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STATEMENT OF
ADDITIONAL INFORMATION
January 4, 1999
EATON VANCE INSTITUTIONAL SHORT TERM
TREASURY FUND
24 Federal Street
Boston, Massachusetts 02110
(800) 225-6265
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TABLE OF CONTENTS Page
Investment Restrictions ............................................. 2
Trustees and Officers ............................................... 3
Control Persons and Principal Holders of Securities ................. 5
Manager ............................................................. 5
Custodian ........................................................... 6
Determination of Net Asset Value .................................... 6
Investment Performance .............................................. 6
Taxes ............................................................... 7
Principal Underwriter ............................................... 8
Service Plan ........................................................ 8
Portfolio Security Transactions ..................................... 8
Other Information ................................................... 10
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THIS IS NOT A PROSPECTUS AND IS AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE
INVESTORS ONLY IF PRECEDED OR ACCOMPANIED BY THE FUND'S PROSPECTUS DATED
JANUARY 4, 1999, AS SUPPLEMENTED FROM TIME TO TIME, WHICH IS INCORPORATED
HEREIN BY REFERENCE. THIS STATEMENT OF ADDITIONAL INFORMATION SHOULD BE READ
IN CONJUNCTION WITH SUCH PROSPECTUS, WHICH MAY BE OBTAINED WITHOUT CHARGE BY
CALLING 1-800-225-6265.
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This Statement of Additional Information ("SAI") provides information about
the Fund. Capitalized terms used in this SAI and not otherwise defined herein
have the meanings given them in the Prospectus.
INVESTMENT RESTRICTIONS
The following investment restrictions 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
Statement of Additional Information 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.
As a matter of fundamental investment policy, the Fund may not:
(1) Borrow money or issue senior securities except as permitted by the
Investment Company Act of 1940;
(2) 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;
(3) Purchase or sell real estate, although it may purchase and sell
securities which are secured by real estate and securities of companies which
invest or deal in real estate;
(4) Purchase or sell physical commodities or futures contracts for the
purchase or sale of physical commodities, provided that the Fund may enter
into all types of futures and forward contracts on currency, securities and
securities, economic and other indices and may purchase and sell options on
such futures contracts;
(5) 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;
(6) 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). The deposit or payment by the Fund of initial, maintenance or
variation margin in connection with all types of options and futures contract
transactions is not considered the purchase of a security on margin; or
(7) Invest 25% or more of its total assets in any single industry
(provided there is no limitation with respect to obligations issued or
guaranteed by the U.S. Government or any of its agencies or
instrumentalities).
Notwithstanding the investment policies and restrictions of the Fund, the
Fund may invest, upon Trustee approval, its assets in one or more open-end
investment companies to the extent permitted by the 1940 Act.
The Fund has adopted the following nonfundamental investment policies
which may be changed by the Trustees of the Trust without approval by the
Fund's shareholders. As a matter of nonfundamental policy, the Fund may 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 their delegate, determines to be liquid. 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) make short sales of securities or maintain a short position, unless at
all times when a short position is open the Fund owns an equal amount of such
securities or securities convertible into or exchangeable, without payment of
any further consideration, for securities of the same issue as, and equal in
amount to, the securities sold short, and unless not more than 25% of the
Fund's net assets (taken at current value) is held as collateral for such
sales at any time.
Whenever an investment policy or investment restriction set forth in the
Prospectus or this Statement of Additional Information 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, the Fund must always be in compliance
with the borrowing policy set forth above and may not hold more than 15% of
net assets in illiquid securities.
TRUSTEES AND OFFICERS
The Trustees and officers of the Trust are listed below. Except as
indicated, each individual has held the office shown or other offices in the
same company for the last five years. Unless otherwise noted, the business
address of each Trustee and officer is 24 Federal Street, Boston,
Massachusetts 02110, which is also the address of the Fund's Investment
Adviser, Eaton Vance; of Eaton Vance's wholly-owned subsidiary, Boston
Management and Research ("BMR"); of Eaton Vance's parent, Eaton Vance Corp.
("EVC"); and of Eaton Vance's and BMR's trustee, Eaton Vance, Inc. ("EV").
Eaton Vance and EV are both wholly-owned subsidiaries of EVC. Those Trustees
who are "interested persons" of the Trust, as defined in the 1940 Act, by
virtue of their affiliation with any one or more of Eaton Vance, BMR, EVC or
EV, are indicated by an asterisk(*).
JAMES B. HAWKES (57), President 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.
JESSICA M. BIBLIOWICZ (38), Trustee
President and Chief Operating Officer of John A. Levin & Co. (a registered
investment advisor) (since July, 1997) 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: One Rockefeller Plaza, New York, New York 10020
DONALD R. DWIGHT (67), Trustee
President of Dwight Partners, Inc. (a corporate relations and communications
company). Trustee of various investment companies managed by Eaton Vance or
BMR.
Address: Clover Mill Lane, Lyme, New Hampshire 03768
SAMUEL L. HAYES, III (63), Trustee
Jacob H. Schiff Professor of Investment Banking 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 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.
Address: 175 Federal Street, Boston, Massachusetts 02110
JACK L. TREYNOR (68), 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
MICHAEL B. TERRY (56), Vice President
Vice President of Eaton Vance and BMR. Officer of various investment companies
managed by Eaton Vance or BMR.
EDWARD E. SMILEY, JR. (53), Vice President
Vice President of Eaton Vance and BMR since November 1, 1996, Senior Product
Manager, Equity Management for TradeStreet Investment Associates, Inc., a
wholly-owned subsidiary of Nations Bank (1992-1996). Officer of various
investment companies managed by Eaton Vance or BMR.
JAMES L. O'CONNOR (53), 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 Eaton Vance, BMR 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 Eaton Vance and BMR. Officer of various investment companies
managed by Eaton Vance or BMR.
A. JOHN MURPHY (36), Assistant Secretary
Vice President of Eaton Vance and BMR. Officer of various investment companies
managed by Eaton Vance or BMR.
ERIC G. WOODBURY (41), Assistant Secretary
Vice President of Eaton Vance and BMR. Officer of various investment companies
managed by Eaton Vance or BMR.
Messrs. Hayes (Chairman), Reamer and Thorndike are members of the Special
Committee of the Board of Trustees of the Trust. The purpose of the Special
Committee is to consider, evaluate and make recommendations to the full Board
of Trustees concerning (i) all contractual arrangements with service providers
to the Fund, including investment advisory, 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 investors therein.
The Nominating Committee of the Board of Trustees of the Trust is
comprised of four Trustees who are not "interested persons" as that term is
defined under the 1940 Act ("noninterested Trustees"). The Committee has four-
year staggered terms, with one member rotating off the Committee to be
replaced by another noninterested Trustee. The purpose of the Committee is to
recommend to the Board nominees for the position of noninterested Trustee and
to assure that at least a majority of the Board of Trustees is independent of
Eaton Vance and its affiliates.
Messrs. Treynor (Chairman) and Dwight are members of the Audit Committee
of the Board of Trustees of the Trust. The Audit Committee's functions include
making recommendations to the Board 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 Trust 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 Trust to retain the services of
any Trustee or obligate the Trust to pay any particular level of compensation
to the Trustee. The Trust does not have a 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 Trust.) During the fiscal year ended December 31, 1997, the noninterested
Trustees of the Trust earned the following compensation in their capacities as
Trustees from the Trust and the funds in the Eaton Vance fund complex(1):
AGGREGATE TOTAL COMPENSATION
COMPENSATION FROM TRUST AND
NAME FROM TRUST(2) FUND COMPLEX
- ---- ------------- ------------
Jessica M. Bibliowicz(6) ............ $ -- $ --
Donald R. Dwight .................... 3,147 145,000(3)
Samuel L. Hayes, III ................ 2,894 155,000(4)
Norton H. Reamer .................... 2,819 145,000
Lynn A. Stout(6) .................... -- --
John L. Thorndike ................... 2,947 150,000(5)
Jack L. Treynor ..................... 3,166 150,000
- ----------
(1) As of January 1, 1999, the Eaton Vance fund complex consists of 143
registered investment companies or series thereof.
(2) The Trust consisted of 16 Funds as of December 31, 1998.
(3) Includes $45,000 of deferred compensation.
(4) Includes $38,750 of deferred compensation.
(5) Includes $107,925 of deferred compensation.
(6) Ms. Bibliowicz and Ms. Stout were elected as Trustees on October 30, 1998
and will receive compensation approximating the other Trustees after November
1, 1998.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of December 31, 1998, Eaton Vance owned one share of the 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.
MANAGER
The Fund engages Eaton Vance as its manager pursuant to a management
agreement dated October 19, 1998. Eaton Vance or its affiliates act as
investment adviser to investment companies and various individual and
institutional clients with combined assets under management of over $30
billion.
Eaton Vance, its affiliates and its predecessor companies have been
managing assets of individuals and institutions since 1924 and managing
investment companies since 1931. They maintain a large staff of experienced
fixed-income and equity investment professionals to service the needs of their
clients. The fixed-income division focuses on all kinds of taxable investment-
grade and high-yield securities, tax-exempt investment-grade and high-yield
securities, and U.S. Government securities. The equity division covers stocks
ranging from blue chip to emerging growth companies.
Eaton Vance and its affiliates act as adviser to a family of mutual funds,
and individual and various institutional accounts, including corporations,
hospitals, retirement plans, universities, foundations and trusts. Eaton Vance
mutual funds feature international equities, domestic equities, tax-free
municipal bonds, and U.S. government and corporate bonds. Lloyd George
Management has advised Eaton Vance's international equity funds since 1992.
Founded in 1991, Lloyd George is headquartered in Hong Kong with offices in
London and Mumbai, India. It has established itself as a leader in investment
management in Asian equities and other global markets. Lloyd George features
an experienced team of investment professionals that began working together in
the mid-1980s. Lloyd George analysts cover East Asia, the India subcontinent,
Russia and Eastern Europe, Latin America, Australia and New Zealand from
offices in Hong Kong, London and Mumbai. Together Eaton Vance and Lloyd George
manage over $31 billion in assets. Eaton Vance mutual funds are distributed by
the Principal Underwriter both within the United States and offshore.
Eaton Vance manages the investments and affairs of the Fund subject to the
supervision of the Trust's Board of Trustees. Eaton Vance furnishes to the
Fund investment advice and assistance, administrative services, office space,
equipment and personnel, and has arranged for certain members of the Eaton
Vance organization to serve without salary as officers or Trustees of the
Trust.
The Management 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 cast in person at 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 and may permit other fund clients and other corporations and
organizations to use the words "Eaton Vance" in their names. 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 Eaton Vance, Eaton Vance shall not be liable to the Fund 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.
The Fund will be responsible for all costs and expenses not expressly
stated to be payable by Eaton Vance under the Management Agreement or by the
Principal Underwriter under its Distribution Agreement with the Fund. Such
costs and expenses to be borne by the Fund include, without limitation, the
fees and expenses of the Fund's custodian and transfer agent, including those
incurred for determining the Fund's net asset value and keeping the Fund's
books; expenses of pricing and valuation services; the cost of share
certificates; membership dues in investment company organizations; brokerage
commissions and fees; fees and expenses of registering its shares; expenses of
reports to shareholders, proxy statements, and other expenses of shareholders'
meetings; insurance premiums; printing and mailing expenses; interest, taxes
and corporate fees; legal and accounting expenses; compensation and expenses
of Trustees not affiliated with Eaton Vance; and investment advisory fees. The
Fund will also bear expenses incurred in connection with litigation in which
the Fund is a party and any legal obligation the Fund may have to indemnify
the Trust's officers and Trustees with respect thereto, to the extent not
covered by insurance.
Eaton Vance and EV are both wholly-owned subsidiaries of EVC. BMR is a
wholly-owned subsidiary of Eaton Vance. Eaton Vance and BMR are both
Massachusetts business trusts, and EV is the trustee of Eaton Vance and BMR.
The Directors of 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 and EV are owned by EVC. All of
the issued and outstanding shares of BMR are owned by Eaton Vance. All shares
of the outstanding Voting Common Stock of EVC are deposited in a Voting Trust,
the Voting Trustees of which are Messrs. Hawkes and Rowland and Alan R.
Dynner, Thomas E. Faust, Jr., Thomas J. Fetter, Duncan W. Richardson, William
M. Steul and Wharton P. Whitaker. The Voting Trustees have unrestricted voting
rights for the election of Directors of EVC. All of the outstanding voting
trust receipts issued under said Voting Trust are owned by certain of the
officers of Eaton Vance and BMR who are also officers or officers and
Directors of EVC and EV. As indicated under "Trustees and Officers," all of
the officers of the Trust (as well as Mr. Hawkes who is also a Trustee) hold
positions in the Eaton Vance organization.
Eaton Vance owns all of the stock of Northeast Properties, Inc., which is
engaged in real estate investment. EVC owns all of the stock of Fulcrum
Management, Inc. and MinVen, Inc., which are engaged in precious metal mining
venture investment and management. EVC also owns 21% of the Class A shares of
Lloyd George Management (B.V.I.) Limited, a registered investment adviser.
EVC, Eaton Vance, BMR and EV may also enter into other businesses.
EVC and its affiliates and their officers and employees from time to time
have transactions with various banks, including the Fund's custodian, 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.
CUSTODIAN
IBT acts as custodian for the Fund. IBT has the custody of all cash and
securities of the Fund, maintains the Fund's general ledger, and computes the
daily per share net asset value. 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
Trust. IBT also provides services in connection with the preparation of
shareholder reports and the electronic filing of such reports with the
Commission.
DETERMINATION OF NET ASSET VALUE
The Fund's net asset value is determined by IBT (as agent for the Fund) in
the manner described under "Valuing Shares" in the Fund's current Prospectus.
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.
INVESTMENT PERFORMANCE
The Fund's 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 that all distributions are reinvested at net asset value
on the reinvestment dates during the period, and a complete redemption of the
investment at the end of the period.
The Fund's yield is computed pursuant to a standardized formula by
dividing its net investment income per share earned during a recent thirty-day
period by the net asset value per share on the last day of the period and
annualizing the resulting figure. Net investment income per share is
calculated from the yields to maturity of all debt obligations in the Fund's
portfolio based on prescribed methods, reduced by accrued Fund expenses for
the period, with the resulting number being divided by the average daily
number of Fund shares outstanding and entitled to receive dividends during the
period.
The Fund's yield and total return may be compared to the Consumer Price
Index and various domestic, international and global securities indices. The
Fund's yield and total return and comparisons with these indices may be used
in advertisements and in information furnished to present or prospective
shareholders.
In addition, evaluations of the Fund's performance or rankings of mutual
funds (which include the Fund) made by independent sources may be used in
advertisements and in information furnished to present or prospective
shareholders.
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.
Information used in advertisements and in materials furnished to present
and prospective shareholders may include statements or illustrations relating
to the appropriateness of types of securities and/or mutual funds which may be
employed to meet specific financial goals. Such 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).
TAXES
Each series of the Trust is treated as a separate entity for federal
income tax purposes. The Fund intends to elect to be treated and to qualify
each year as a regulated investment company ("RIC") under the Code.
Accordingly, the Fund intends to satisfy certain requirements relating to
sources of its income and diversification of its assets and to distribute a
sufficient amount of its investment company taxable income so as to effect
such qualification. The Fund may also distribute part or all of its net
investment income and net realized capital gains in accordance with the timing
requirements imposed by the Code, so as to reduce or avoid any federal income
or excise tax to the Fund. Provided the Fund qualifies as a RIC for federal
tax purposes, the Fund is not liable for any income, corporate excise or
franchise tax in the Commonwealth of Massachusetts.
Under the Code, the redemption or exchange of shares of a regulated
investment company normally results in capital gain or loss if such shares are
held as capital assets. Section 1258 of the Code recharacterizes all or a
portion of any capital gain from the disposition or other termination of a
position held as part of a "conversion transaction" as ordinary income.
Conversion transactions include, among other things, certain transactions
which are marketed or sold as producing a capital gain. Investors should
consult their own tax advisers concerning whether Section 1258 may apply to
their transactions in Fund shares.
Any loss realized upon the redemption or exchanges 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 or
other disposition of Fund shares may be disallowed under certain "wash sale"
rules if other shares of the Fund are acquired within a period beginning 30
days before and ending 30 days after the date of such redemption 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.
Amounts paid by the Fund to individuals and certain other shareholders who
have not provided the Fund with their correct taxpayer identification number
and certain certifications required by the Internal Revenue Service ("IRS"),
as well as shareholders with respect to whom the Fund has received
notification from the IRS or a broker, may be subject to "backup" withholding
of federal income tax from the Fund's taxable dividends and distributions and
the proceeds of redemptions (including repurchases and exchanges), at a rate
of 31%. An individual's taxpayer identification number is generally his or her
social security number.
Non-resident alien individuals, 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 treaty. Distributions
from the excess of the Fund's net long-term capital gain over its net short-
term capital loss received by such shareholders and any gain from the sale or
other disposition of shares of the Fund generally will not be subject to U.S.
federal income taxation, provided that non-resident alien status has been
certified by the shareholder. Different U.S. tax consequences may result if
the shareholder is engaged in a trade or business in the United States, is
present in the United States for a sufficient period of time during a taxable
year to be treated as a U.S. resident, or fails to provide any required
certifications regarding status as a non-resident alien investor. Foreign
shareholders should consult their tax advisers regarding the U.S. and foreign
tax consequences of an investment in the Fund.
The foregoing discussion does not address the special tax rules applicable
to certain classes of investors, such as retirement plans, tax-exempt
entities, insurance companies and financial institutions. Shareholders should
consult their own tax advisers with respect to special tax rules that may
apply in their particular situations, as well as the state, local or foreign
tax consequences of investing in the Fund.
PRINCIPAL UNDERWRITER
Under the Distribution Agreement the Principal Underwriter acts as
principal in selling shares of the Fund. The expenses of printing copies of
prospectuses used to offer shares to Authorized Firms or investors and other
selling literature and of advertising is borne by the Principal Underwriter.
The fees and expenses of qualifying and registering and maintaining
qualifications and registrations of the Fund and its shares under federal and
state securities laws are borne by the Fund. In addition, the Fund makes
payments to the Principal Underwriter pursuant to its Service Plan as
described in the Fund's current Prospectus. 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 Fund's Service Plan or the Distribution Agreement),
may be terminated on sixty days' notice either by such Trustees or by vote of
a majority of the outstanding voting securities of the Fund or on six months'
notice by the Principal Underwriter, and is automatically terminated upon
assignment. The Principal Underwriter distributes Fund shares on a "best
efforts" basis under which it is required to take and pay for only such shares
as may be sold.
The Principal Underwriter believes that an investment professional can
provide valuable services to you to help you reach your investment goals.
Meeting investment goals requires time, objectivity and investment savvy.
Before making an investment recommendation, a representative can help you
carefully consider your short- and long-term financial goals, your tolerance
for investment risk, your investment time frame, and other investments you may
already own. Your professional investment representatives are knowledgeable
about financial markets, as well as the wide range of investment opportunities
available. A representative can provide you with tailored financial advice and
help you decide when to buy, sell or persevere with your investments.
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
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 following supplements the discussion of the Plan
contained in the Prospectus.
The Plan remains in effect from year to year provided such continuance is
approved by a vote of both a majority of (i) the noninterested Trustees who
have no direct or indirect financial interest in the operation of the Plan or
any agreements related to it (the "Plan Trustees") and (ii) all of the
Trustees then in office, cast in person at a meeting (or meetings) called for
the purpose of voting on this Plan. The Plan may be terminated any time by
vote of the Plan Trustees or by a vote of a majority of the outstanding shares
of the Fund. The Plan was approved, with respect to the Fund, by the Trustees,
including the Plan Trustees, on October 19, 1998.
The Plan requires quarterly Trustee review of a written report of the
amount expended under the Plan and the purposes for which such expenditures
were made. The Plan may not be amended to increase materially the payments
described herein without approval of the affected shareholders and the
Trustees. So long as the Plan is in effect, the selection and nomination of
the noninterested Trustees shall be committed to the discretion of such
Trustees. The Trustees have determined that in their judgment there is a
reasonable likelihood that the Plan will benefit the Fund and its
shareholders.
PORTFOLIO SECURITY TRANSACTIONS
Decisions concerning the execution of Fund portfolio security
transactions, including the selection of the market and the executing 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
all other accounts managed by it for execution with many firms. Eaton Vance
uses its best efforts to obtain execution of portfolio security 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 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 Eaton Vance, the size and type of the transaction, the
general execution and operational capabilities of the executing firm, 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 firm, the
value and quality of services rendered by the firm in this and other
transactions, and the reasonableness of the commission or spread, if any. The
U.S. Treasury bills, notes and bonds purchased and sold by the Fund are
generally traded in the over-the-counter market on a net basis (i.e., without
commission) through dealers and banks acting for their own account rather than
as brokers, and the Fund may also acquire such obligations in the periodic
auctions of the U.S. Treasury. Firms acting for their own account attempt to
profit from such transactions by buying at the bid price and selling at a
higher asked price for such obligations, and the difference between such
prices is customarily referred to as the spread. While it is anticipated that
the Fund will not pay significant brokerage commissions in connection with
such portfolio security transactions, on occasion it may be necessary or
appropriate to purchase or sell a security through a broker on an agency
basis, in which case the Fund will incur a brokerage commission. Although
spreads or commissions on portfolio security transactions will, in the
judgment of Eaton Vance, be reasonable in relation to the value of the
services provided, spreads or commissions exceeding those which another firm
might charge may be paid to firms who were selected to execute transactions on
behalf of the Fund and Eaton Vance's other clients for providing brokerage and
research services to Eaton Vance.
As authorized in Section 28(e) of the Securities Exchange Act of 1934, a
broker or dealer who executes a portfolio transaction on behalf of the Fund
may receive a commission which is in excess of the amount of commission
another broker or dealer would have charged for effecting that transaction if
Eaton Vance determines in good faith that such compensation was reasonable in
relation to the value of the brokerage and research services provided. This
determination may be made on the basis of either that particular transaction
or on the basis of overall responsibilities which Eaton Vance and its
affiliates have for accounts over which they exercise 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; 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, Eaton Vance receives Research
Services from many broker-dealer firms with which Eaton Vance places the
Fund's 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, 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 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 management 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 portfolio
security transactions 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.
The Fund and Eaton Vance may also receive Research Services from
underwriters and dealers in fixed price offerings, which Research Services are
reviewed and evaluated by Eaton Vance in connection with its investment
responsibilities. The investment companies sponsored by Eaton Vance or BMR 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 Eaton Vance, to such companies. Such companies may also
pay cash for such information.
Subject to the requirement that Eaton Vance shall use its best efforts to
seek to execute Fund 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 National
Association of Securities Dealers, Inc. (the "NASD"), which rule provides that
no firm which is a member of the NASD shall favor or disfavor the distribution
of shares of any particular investment company or group of investment
companies on the basis of brokerage commissions received or expected by such
firm from any source.
Securities considered as investments for the 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 and the Fund that the benefits from the Eaton Vance
organization outweigh any disadvantage that may arise from exposure to
simultaneous transactions.
PORTFOLIO TURNOVER
The Fund cannot accurately predict its portfolio turnover rate, but it is
anticipated that the annual turnover rate will generally not exceed 25%
(excluding maturity of securities). The Fund engages in portfolio trading
(including short-term trading) if it believes that a transaction including all
costs will help in achieving its investment objective either directly by
increasing income or indirectly by enhancing the Fund's net asset value.
OTHER INFORMATION
The Trust is organized as a business trust under the laws of the
Commonwealth of Massachusetts under a Declaration of Trust dated March 27,
1989, as amended. On July 21, 1992, the Trust changed its name from Eaton
Vance Special Equities Fund to Eaton Vance Special Investment Trust. Eaton
Vance, pursuant to its agreement with the Trust, controls the use of the words
"Eaton Vance" and "EV" in the Fund's name and may use the words "Eaton Vance"
or "EV" in other connections and for other purposes.
The Declaration of Trust may be amended by the Trustees when authorized by
vote of a majority of the outstanding voting securities of the Trust affected
by the amendment. The Trustees may also amend the Declaration of Trust without
the vote or consent of shareholders to change the name of the Trust or any
series or to make such other changes (such as reclassifying series or classes
of shares or restructuring the Trust) as do not have a materially adverse
effect on the rights or interests of shareholders or if they deem it necessary
to conform the Declaration to the requirements of applicable federal laws or
regulations. The Trust's By-laws provide that the Trust will indemnify its
Trustees and officers against liabilities and expenses incurred in connection
with any litigation or proceeding in which they may be involved because of
their offices with the Trust. However, no indemnification will be provided to
any Trustee or officer for any liability to the Trust or its shareholdes 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 shareholders' meeting for the election of Trustees. Except for the
foregoing circumstances and unless removed by action of the shareholders in
accordance with the Trust's By-Laws, the Trustees shall continue to hold
office and may appoint successor Trustees.
The Trust's By-laws provide that no person shall serve as a Trustee if
shareholders holding two-thirds of the outstanding shares have removed him
from that office either by a written declaration filed with the Trust's
custodian or by votes cast at a meeting called for that purpose. The By-laws
further provide that under certain circumstances the shareholders may call a
meeting to remove a Trustee and that the Trust is required to provide
assistance in communicating with shareholders about such a meeting.
In connection with telephone redemptions and exchanges, the Trust, the
Principal Underwriter and the Transfer Agent will verify personal account
information in order to determine that instructions communicated are genuine.
The right to redeem shares of the Fund can be suspended and the payment of
the redemption price deferred when the Exchange is closed (other than for
customary weekend and holiday closings), during periods when trading on the
Exchange is restricted as determined by the Commission, or during any
emergency as determined by the Commission which makes it impracticable for the
Fund to dispose of its securities or value its assets, or during any other
period permitted by order of the Commission for the protection of investors.
